<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 15, 1996
REGISTRATION NO. 333-2432
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WESTERN WIRELESS CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
WASHINGTON 4812 91-1638901
(State or other jurisdiction of (Primary standard industrial (I.R.S. employer
incorporation or organization) classification code number) identification number)
</TABLE>
------------------------
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:
<TABLE>
<S> <C>
G. SCOTT GREENBURG, ESQ. ALISON S. RESSLER, ESQ.
GARY J. KOCHER, ESQ. SULLIVAN & CROMWELL
PRESTON GATES & ELLIS 444 SOUTH FLOWER STREET, SUITE 1200
5000 COLUMBIA CENTER LOS ANGELES, CALIFORNIA 90071
701 FIFTH AVENUE (213) 955-8000
SEATTLE, WASHINGTON 98104-7078
(206) 623-7580
</TABLE>
------------------------
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 being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 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
WESTERN WIRELESS CORPORATION
---------------------------
CROSS REFERENCE SHEET PURSUANT TO ITEM 501(b) OF REGULATION S-K
<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM AND HEADING PROSPECTUS CAPTION OR LOCATION
- ----------------------------------------------------- -----------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus......... Outside Front Cover Page of Registration
Statement; Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus..................................... Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information and Risk Factors........... Prospectus Summary; Risk Factors; The Company
4. Use of Proceeds................................ Use of Proceeds
5. Determination of Offering Price................ Underwriting
6. Dilution....................................... Risk Factors; Dilution
7. Selling Security Holders....................... Principal and Selling Shareholders
8. Plan of Distribution........................... Outside Front Cover Page of Prospectus;
Underwriting
9. Description of Securities to be Registered..... Dividend Policy; Description of Capital Stock
10. Interests of Named Experts and Counsel......... Validity of Class A Common Stock
11. Information with Respect to the Registrant..... Outside Front Cover Page of Prospectus;
Prospectus Summary; The Company; Dilution;
Dividend Policy; Capitalization; Selected
Consolidated Financial Data; Management's
Discussion and Analysis of Financial Condition
and Results of Operations; Business;
Management; Principal and Selling Shareholders;
Certain Transactions; Shares Eligible for
Future Sale; Consolidated Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.................................... Not Applicable
</TABLE>
<PAGE> 3
EXPLANATORY NOTE
The Prospectus relating to the Class A Common Stock being registered hereby
to be used in connection with a United States offering (the "U.S. Prospectus")
is set forth following this page. The Prospectus to be used in connection with
certain market-making transactions in the Class A Common Stock (the
"Market-Making Prospectus") will consist of alternate pages set forth following
the U.S. Prospectus and the balance of the pages included in the U.S.
Prospectus. The U.S. 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
"Underwriting" in the U.S. Prospectus and under the caption "Plan of
Distribution" in the Market-Making Prospectus). Alternate pages for the
Market-Making Prospectus are separately designated.
<PAGE> 4
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 MAY 15, 1996
11,000,000 SHARES
LOGO
WESTERN WIRELESS CORPORATION
CLASS A COMMON STOCK
(NO PAR VALUE PER SHARE)
---------------------
Of the 11,000,000 shares of Class A Common Stock offered, 8,800,000 shares
are being offered hereby in the United States and 2,200,000 shares are being
offered in a concurrent international offering outside the United States
(together, the "Offerings"). The initial public offering price and the aggregate
underwriting discount per share will be identical for both Offerings. See
"Underwriting."
Of the 11,000,000 shares of Class A Common Stock offered, 9,014,800 shares
are being sold by the Company and 1,985,200 shares are being sold by the Selling
Shareholders. The Company will not receive any of the proceeds from the sale of
the shares being sold by the Selling Shareholders. See "Principal and Selling
Shareholders."
Prior to the Offerings, there has been no public market for the Class A
Common Stock of the Company. It is currently estimated that the initial public
offering price will be between $21.00 and $24.00 per share. For factors to be
considered in determining the initial public offering price, see "Underwriting."
The Company has two classes of authorized Common Stock, Class A Common
Stock and Class B Common Stock. The holders of Class A Common Stock have
identical rights to holders of Class B Common Stock, except that holders of
Class A Common Stock are entitled to one vote per share and holders of Class B
Common Stock are entitled to ten votes per share. See "Description of Capital
Stock."
The Company is concurrently offering $150,000,000 principal amount of
% Senior Subordinated Notes Due 2006. The closing of the Debt Offering is
conditioned on the closing of the Offerings. The closing of the Offerings is not
conditioned on the closing of the Debt Offering and the Company may elect not to
consummate the Debt Offering.
SEE "RISK FACTORS" BEGINNING ON PAGE 12 HEREOF FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN THE CLASS A COMMON STOCK.
Application has been made to have the Class A Common Stock quoted on the
Nasdaq National Market under the symbol "WWCA."
---------------------
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.
---------------------
<TABLE>
<CAPTION>
PROCEEDS TO
INITIAL PUBLIC UNDERWRITING PROCEEDS SELLING
OFFERING PRICE DISCOUNT(1) TO COMPANY(2) SHAREHOLDERS
---------------- ------------------ ---------------- ------------------
<S> <C> <C> <C> <C>
Per Share...................... $ $ $ $
Total(3)....................... $ $ $ $
</TABLE>
- ---------------
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."
(2) Before deducting estimated expenses of $1,200,000 payable by the Company.
(3) The Company has granted the U.S. Underwriters an option for 30 days to
purchase up to an additional 1,320,000 shares of Class A Common Stock at the
initial public offering price per share, less the underwriting discount,
solely to cover over-allotments. Additionally, the Company has granted an
over-allotment option with respect to an additional 330,000 shares as part
of the International Offering. If such options are exercised in full, the
total initial public offering price, underwriting discount and proceeds to
Company will be $ , $ and $ , respectively. See
"Underwriting."
---------------------
The shares offered hereby are offered severally by the U.S. Underwriters,
as specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York on
or about , 1996, against payment therefor in immediately available
funds.
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
---------------------
The date of this Prospectus is , 1996.
<PAGE> 5
(WESTERN WIRELESS LOGO)
Western Wireless(R) is a registered service mark of the Company. CELLULAR
ONE(R) is a registered service mark of Cellular One Group. See
"Business -- Intellectual Property."
------------------------
The Company intends to furnish its shareholders with annual reports
containing audited financial statements and an opinion thereon expressed by
independent public accountants and with unaudited quarterly reports for the
first three quarters of each fiscal year containing unaudited summary financial
information.
------------------------
IN CONNECTION WITH THE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE CLASS A COMMON
STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 6
PROSPECTUS 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. 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 will be effected prior to
the consummation of the Offerings and the Debt Offering, and its subsidiaries
and predecessors. All share and per share data in this Prospectus assume no
exercise of the Underwriters' over-allotment options and the reclassification
prior to the Offerings and the Debt Offering 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 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 or has the right to acquire 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. The Company owns and
operates cellular communications systems in 57 Rural Service Areas ("RSAs"),
including one RSA which it has the right to acquire, 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 and currently serves over 240,000 subscribers.
Through the Federal Communications Commission ("FCC") auction concluded in
1995, the Company acquired broadband personal communications services ("PCS")
licenses for six Major Trading Areas ("MTAs") with an aggregate population of
approximately 15.1 million persons -- Honolulu, Salt Lake City, Portland, Des
Moines/Quad Cities, El Paso/Albuquerque and Oklahoma City -- for an aggregate
purchase price of $144 million. In January 1996, the Company agreed to acquire a
broadband PCS license for the Denver MTA from GTE Mobilnet Incorporated ("GTE")
for a purchase price of $66 million. The Company's seven PCS licenses cover
markets with an aggregate population of approximately 19.5 million persons,
including approximately 4.4 million persons covered by the Denver MTA. In all of
its PCS markets, the Company intends to use its proprietary VoiceStream(SM)
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. 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
3
<PAGE> 7
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.
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 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 is 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 entered
markets at a relatively low cost, having purchased cellular licenses for an
average of $45.68 per pop and 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.
4
<PAGE> 8
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 number of the Company's cellular subscribers grew to
239,200 at March 31, 1996 from 13,700 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. In addition, during the three year period ended December 31,
1995, the monthly subscriber revenue per subscriber in the industry declined
while the Company's monthly subscriber revenue per subscriber increased to
$57.25 for 1995 from $49.72 for 1993. The Company believes these results reflect
the strong demand for wireless services in its markets, the success of its
marketing strategy and its management capabilities. 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 108 retail
locations, as well as through a network of independent agents and national
retailers. In addition, the Company recently began providing replacement
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 system in the Honolulu MTA and is in the initial
construction phase of its PCS systems in the Portland, Salt Lake City and El
Paso/Albuquerque MTAs. Design and engineering have been initiated in the
Company's remaining PCS markets. 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. The Company expects to extend its PCS
systems based on economic factors, customer demand and FCC licensing
requirements. The Company believes its
5
<PAGE> 9
PCS service offerings will be broader than those currently offered by cellular
systems in the Company's PCS markets. PCS service offerings will initially
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. To date, the Company
has not derived significant revenues from its PCS operations.
The following table sets forth certain information regarding the MTAs in
which the Company intends to operate PCS systems:
<TABLE>
<CAPTION>
MTA POPULATION SYSTEM STATUS
----------------------------------------------- ---------- -----------------------
<S> <C> <C>
Honolulu....................................... 1,215,729 commercial service
Portland....................................... 3,460,182 construction
Salt Lake City................................. 2,999,636 construction
El Paso/Albuquerque............................ 2,387,710 construction
Denver......................................... 4,411,211 design and engineering
Des Moines/Quad Cities......................... 3,067,795 design and engineering
Oklahoma City.................................. 1,945,271 design and engineering
</TABLE>
The Company believes that being the first to offer PCS services in a market
will be 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 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 the internationally-proven Global System for Mobile
Communications ("GSM") as the network standard for its PCS systems. GSM is the
leading digital wireless standard worldwide, with approximately 120 systems
operating in 92 countries serving over 13 million subscribers. In the United
States, GSM has been chosen by six other companies as the network standard in
their 18 MTAs which, together with the Company's seven MTAs, cover markets
containing approximately 149.2 million persons, representing approximately 55.7%
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, when such systems are operational. As of March 31, 1996, the Company
also had 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."
6
<PAGE> 10
FINANCING PLAN
The Company believes that access to capital and financial flexibility are
necessary to successfully implement its strategy. The Company currently
anticipates that it will require approximately $500 million to finance the
build-out of its PCS systems through the end of 1998. The Company will require
additional funds to finance the continued growth of its cellular operations,
provide for working capital, service debt and finance potential acquisitions.
Such additional financing requirements will be dependent upon a variety of
factors including the rate of growth of the Company's cellular operations.
Historically, the Company has relied on a combination of private equity
financings and borrowings. Since January 1, 1993, the Company has raised over
$185.8 million of equity through issuances of capital stock. From inception
until the Business Combination, MCLP had raised $79.0 million of partner
capital. See "Certain Transactions." 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 March 31, 1996, $435.8 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."
The Company is offering 7,211,840 shares of Class A Common Stock in the
offering in the United States (together with the 1,588,160 shares of Class A
Common Stock offered by the Selling Shareholders, the "U.S. Offering"),
1,802,960 shares of Class A Common Stock in the offering outside the United
States (together with the 397,040 shares of Class A Common Stock offered by the
Selling Shareholders, the "International Offering" and, together with the U.S.
Offering, the "Offerings") and $150 million principal amount of Senior
Subordinated Notes Due 2006 (the "Senior Subordinated Notes") to be issued
pursuant to an indenture (the "Indenture"), between the Company and Harris Trust
Company of California, as Trustee, in the concurrent debt offering (the "Debt
Offering") for estimated aggregate net proceeds to the Company of $332.1 million
($367.1 million if the Underwriters' over-allotment options are exercised in
full). The Company believes these proceeds, in combination with the Senior
Secured Facilities, will be sufficient to fund operating losses, capital
expenditures and working capital necessary for the build-out of its PCS systems
and the continued growth of its cellular operations through December 31, 1998.
In the event the Debt Offering is not consummated, the Company would use its
existing Senior Secured Facilities, which consist of the Credit Facility and the
NORTEL Facility, to fund such expenditures. 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 additional acquisition opportunities,
including those that may arise through current or future FCC auctions, 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," "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" and "Use of Proceeds."
7
<PAGE> 11
THE OFFERINGS
<TABLE>
<S> <C>
Class A Common Stock offered by the Company(1):
U.S. Offering.......................................... 7,211,840 shares
International Offering................................. 1,802,960 shares
Total............................................... 9,014,800 shares
Class A Common Stock offered by the Selling Shareholders:
U.S. Offering.......................................... 1,588,160 shares
International Offering................................. 397,040 shares
Total............................................... 1,985,200 shares
Common Stock to be outstanding after the Offerings:
Class A Common Stock(1)(2)(3).......................... 11,000,000 shares
Class B Common Stock(2)(3)............................. 56,745,911 shares
Total(1)(2)......................................... 67,745,911 shares
Voting Rights............................................ The holders of Class A Common Stock
have identical rights to holders of
Class B Common Stock, except that
holders of Class A Common Stock are
entitled to one vote per share and
holders of Class B Common Stock are
entitled to ten votes per share. See
"Description of Capital Stock."
Use of proceeds.......................................... Estimated net proceeds to the
Company from the Offerings and Debt
Offering of approximately $187.4
million and $144.7 million,
respectively, will be used to
finance a portion of the Company's
PCS build-out, to fund the purchase
of the Denver MTA license, to fund
expansion of existing cellular
operations and for general corporate
purposes; and, pending such uses,
for working capital and to repay
revolving credit indebtedness under
the Credit Facility. See "Use of
Proceeds."
Nasdaq National Market Symbol............................ WWCA
</TABLE>
- ---------------
(1) Assumes no exercise of Underwriters' over-allotment options to purchase up
to an additional 1,650,000 shares of Class A Common Stock from the Company.
See "Underwriting."
(2) Does not include an aggregate of 3,992,760 shares of Class B Common Stock
issuable upon exercise of outstanding stock options and exchange rights and
an aggregate of 2,195,220 shares of Class A Common Stock reserved for
issuance pursuant to future option grants under the Company's stock option
plan and issuable under an agreement with an employee of the Company. See
"Dilution," "Certain Transactions," "Shares Eligible for Future Sale" and
Note 11 to the Company's consolidated financial statements.
(3) Shares of Class B Common Stock are convertible at any time into Class A
Common Stock on a one-for-one basis and generally convert automatically into
Class A Common Stock upon a transfer. See "Risk Factors -- Control by
Management and Existing Shareholders; Anti-Takeover Effect of Dual Classes
of Common Stock" and "Description of Capital Stock."
RISK FACTORS
Certain factors should be considered in connection with an investment in
the Class A Common Stock. See "Risk Factors."
8
<PAGE> 12
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 March 31, 1996
and for the three months ended March 31, 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 "Use of Proceeds," "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.
9
<PAGE> 13
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH
31, 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.................................. $ 46,035 $ 26,084 $ 146,555 $ 63,108 $ 20,734
-------- -------- -------- -------- ----------
Operating expenses:
Cost of service............................... 8,815 5,786 27,686 13,303 4,310
Cost of equipment sales....................... 6,354 3,870 20,705 11,446 3,533
General and administrative.................... 12,270 6,254 31,253 15,226 6,253
Sales and marketing........................... 13,491 7,164 41,390 18,553 6,101
Depreciation and amortization................. 15,610 10,776 49,456 25,670 5,399
Provision for restructuring costs............. 2,478
-------- -------- -------- -------- ----------
Total operating expenses.................... 56,540 33,850 170,490 86,676 25,596
-------- -------- -------- -------- ----------
Operating loss.................................. (10,505) (7,766) (23,935) (23,568) (4,862)
Interest and financing expense.................. (8,134) (5,027) (25,428) (10,659) (2,242)
Other, net(1)................................... 65 330 (6,591) 8,267 10,433
-------- -------- -------- -------- ----------
Net income (loss)............................. $ (18,574) $ (12,463) $ (55,954) $ (25,960) $ 3,329
======== ======== ======== ========= =========
Net income (loss) per share before extraordinary
item.......................................... $ (0.31) $ (0.24) $ (0.87) $ (0.59) $ 0.10
Net income (loss) per share(2).................. $ (0.31) $ (0.24) $ (0.99) $ (0.59) $ 0.10
======== ======== ======== ========= =========
Weighted average common shares and common
equivalent shares outstanding................. 59,486,512 52,363,838 56,469,990 43,949,101 32,253,303
======== ======== ======== ========= =========
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
---------------------------
ACTUAL AS ADJUSTED(3)
-------- --------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEETS DATA:
Working capital (deficiency)......................................................... $(27,006) $ 97,365
Property and equipment, net.......................................................... 231,488 231,488
Licensing costs and other intangible assets, net..................................... 455,371 466,358
Total assets......................................................................... 737,446 872,804
Long-term debt....................................................................... 438,480 386,480
Common stock and paid-in capital..................................................... 334,675 522,077
Total shareholders' equity........................................................... 230,263 417,665
</TABLE>
- ---------------
(1) Includes an extraordinary loss on early extinguishment of debt of $6.6
million for 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. See "Dividend
Policy."
(3) Adjusted to reflect (i) the sale of 9,014,800 shares of Class A Common Stock
offered by the Company at an assumed initial public offering price of $22.50
per share, which is the midpoint of the range stated on the cover page
hereof, and (ii) the sale of $150 million principal amount of the Senior
Subordinated Notes in the Debt Offering, and the application of the
estimated net proceeds therefrom for working capital and to repay revolving
credit indebtedness. See "Use of Proceeds."
10
<PAGE> 14
SUMMARY OPERATING DATA
The following table sets forth summary operating data of the Company for
its cellular operations.
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT MARCH 31, ----------------------------------------
1996 1995 1994 1993
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cellular pops(1)....................... 6,030,208 5,764,152 5,240,702 2,190,104
Cellular subscribers................... 239,200 209,500 112,800 30,000
Penetration level(2)................... 4.0% 3.6% 2.2% 1.4%
Average monthly cellular service
revenue
per subscriber(3).................... $ 63.04 $ 73.36 $ 77.79 $ 82.34
Average monthly cellular subscriber
revenue
per subscriber(4).................... $ 51.87 $ 57.25 $ 54.35 $ 49.72
Cellular EBITDA (thousands)(5)......... $ 11,449 $ 28,929 $ 2,102 $ 537
Cellular capital expenditures
(thousands).......................... $ 18,500 $ 62,573 $ 47,423 $ 25,113
Cellular cash flows provided by (used
in):
Operating activities.............. $ 6,670 $ 3,370 $ (988) $ (255)
Investing activities.............. $ (55,789) $ (140,332) $ (70,190) $ (32,535)
Financing activities.............. $ 46,503 $ 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.
11
<PAGE> 15
RISK FACTORS
In addition to the other information in this Prospectus, the following
should be considered carefully in evaluating the Company and its business before
investing in the Class A Common Stock.
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 March 31, 1996, on an
as adjusted basis after giving effect to the Offerings and the Debt Offering and
the application of the net proceeds therefrom for working capital and to
initially reduce revolving credit indebtedness under the Credit Facility, the
Company's total indebtedness would have been $386.5 million or approximately
48.1% 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. See "Use of
Proceeds," "Capitalization," "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" and
"Description of Indebtedness."
For the three months ended March 31, 1996 and the year ended December 31,
1995, the Company had negative ratios of earnings to fixed charges and earnings
coverage deficiencies of approximately $18.6 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.
The Company intends to continue pursuing opportunities to acquire
additional wireless communications systems that complement its existing systems.
The Company believes that borrowings available under the Senior Secured
Facilities and the proceeds from the Offerings and the Debt Offering will be
sufficient to fund operating losses, capital expenditures and working capital
necessary for the build-out of its PCS systems and the continued growth of its
cellular operations through December 31, 1998. At March 31, 1996, the amounts
available for borrowings under the Credit Facility and the NORTEL Facility were
$48.2 million and $43.0 million, respectively. In the event the Debt Offering is
not consummated, the Company would use its existing Senior Secured Facilities to
fund such expenditures. 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 contain, and the Indenture for the Senior
Subordinated Notes will contain, and any additional financing agreements may
contain, certain restrictive covenants. The Senior Secured Facilities require
and the Indenture will 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 and the Indenture will
affect, and in some cases will
12
<PAGE> 16
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). The
Indenture will contain a limitation, among others, on the incurrence of
indebtedness based on the ratio of the Company's indebtedness to EBITDA. See
"Description of Indebtedness" for a more detailed description of the restrictive
covenants and other terms of the Senior Secured Facilities and the Indenture. An
event of default under the Senior Secured Facilities or the Indenture would
allow the lenders thereunder to accelerate the maturity of the indebtedness
thereunder. In such event, it is likely that all of the Company's indebtedness,
which at March 31, 1996 amounted to $438.5 million, would become immediately due
and payable. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources" 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 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 and
Selling Shareholders" and "Certain Transactions."
The Company sustained operating losses of approximately $10.5 million
(including $6.8 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 three months ended March
31, 1996 and the years ended December 31, 1995, 1994 and 1993, respectively. At
March 31, 1996, the Company had an accumulated deficit of $102.7 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
13
<PAGE> 17
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 Cellular ("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
("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 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 PCS licensees (Pacific Telesis Mobile
Services Corp., American Portable Telecom, Inc. ("APT"), BellSouth Personal
Communications, Inc., InterCel, Inc., Omnipoint Corporation and American
Personal Communications, Inc. ("APC")) have announced that they intend to deploy
GSM-based PCS systems. These six companies and the Company together cover 25
MTAs awarded in the A and B Block auctions containing approximately 149.2
million persons, representing approximately 55.7% 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
14
<PAGE> 18
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 recently completed C Block auction and in
future auctions 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."
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 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
15
<PAGE> 19
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 is using in the
Honolulu MTA and intends to use in its remaining MTAs. 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
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. The payment of dividends and the repayment of
loans and advances by the Company to its subsidiaries are subject to statutory,
contractual and other restrictions, are dependent upon the earnings of such
subsidiaries and are subject to various business considerations. As of March 31,
1996, the total outstanding indebtedness of the Company's subsidiaries not
eliminated in the Company's consolidated financial statements was approximately
$36.5 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. See "Description of Indebtedness."
PCS BUILD-OUT AND CAPITAL EXPENDITURES
The Company is currently in the engineering, design and construction phase
of the initial build-out of its 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
the Honolulu MTA, the Company currently has sufficient coverage to satisfy the
10-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
16
<PAGE> 20
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 that borrowings available under the Senior Secured
Facilities and the proceeds from the Offerings and the Debt Offering will be
sufficient to fund operating losses, capital expenditures and working capital
necessary for the build-out of its PCS systems and the continued growth of its
cellular operations through December 31, 1998. The build-out of the Company's
PCS systems is currently in its early stages 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 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 and Nokia Telecommunications 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 initially will be higher than its
cost of cellular handsets. In order to compete effectively with sellers of
analog cellular handsets, the Company may have to subsidize the sale of its PCS
handsets to a greater extent than cellular 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 a transition plan to relocate such
microwave operators to other spectrum blocks. 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. There can be no assurance
that the Company will be successful in reaching timely agreements with the
existing
17
<PAGE> 21
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 105 microwave links.
Through May 1, 1996, the Company has relocated or reached agreement to relocate
67 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 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. 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 expires on October 1, 1996 and 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 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 cellular
licenses will be renewed.
All PCS licenses will be 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."
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."
18
<PAGE> 22
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 may have the effect of
discouraging the use of wireless handsets, which could have an adverse effect
upon the Company's business. The FCC has a rulemaking proceeding pending to
update the guidelines and methods it uses for evaluating RF emissions from radio
equipment, including wireless handsets. While the proposal would impose 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. 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
Through the FCC auction concluded in 1995, the Company acquired broadband
PCS licenses for the following MTAs: Honolulu, Salt Lake City, Portland, Des
Moines/Quad Cities, El Paso/Albuquerque and Oklahoma City. In January 1996, the
Company entered into an agreement to purchase a broadband PCS license for the
Denver MTA. Although 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 licenses
have not been issued by a grant that is "final" (i.e., not subject to
administrative reconsideration or administrative or judicial review) because of
certain actions before the FCC challenging the validity of the auction. These
actions fall into two categories: (i) those stemming from the November 9, 1995
decision of the United States Court of Appeals for the Sixth Circuit in
Cincinnati Bell Telephone Co. v. FCC, 69 F.3d 752 (which held that the FCC's
cellular eligibility restriction and twenty percent bright line cellular
attribution standard were arbitrary and remanded the rules to the FCC for
further proceedings) and (ii) those claiming that the delay in the C Block
auction gave the A and B Block PCS licensees an unfair headstart over subsequent
licensees. The Cincinnati Bell decision raises a possibility that all of the PCS
auctions could be invalidated, including the A and B Blocks. As to the actions
claiming unfair headstart, the FCC recently affirmed the grants of the A and B
Block licenses. The time for filing an appeal or petition for reconsideration of
the FCC's affirmance of the grants ended on May 1, 1996, and no appeals or
petitions for reconsideration have been filed in the appropriate court or with
the FCC. 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 recently completed C Block
auction are subject to completion of acquisition requirements and FCC grant. See
"The Company -- Recent Developments" and "Business -- Governmental Regulation."
19
<PAGE> 23
CONTROL BY MANAGEMENT AND EXISTING SHAREHOLDERS; ANTI-TAKEOVER EFFECT OF DUAL
CLASSES OF COMMON STOCK; CERTAIN CHARTER PROVISIONS AND WASHINGTON LAW
Holders of Class A Common Stock are entitled to one vote per share and
holders of Class B Common Stock are entitled to ten votes per share. Each share
of Class B Common Stock is convertible at any time into one share of Class A
Common Stock. Immediately after the Offerings, John W. Stanton and Theresa E.
Gillespie, the Company's Chairman and Chief Executive Officer, and Chief
Financial Officer, respectively, and certain other holders of shares of Class B
Common Stock who will be parties to an agreement (the "Shareholders Agreement"),
will beneficially own 47,386,040 shares of outstanding Class B Common Stock,
which will represent approximately 70.0% of the outstanding shares of Common
Stock and 82.0% of the combined voting power of the Common Stock. These
shareholders have agreed to vote their shares for each other's designees,
subject to certain ownership requirements, and initially will be able to control
the election of the entire Board of Directors. Such voting control by such
holders of Class B Common Stock, and certain provisions of Washington law
affecting acquisitions and business combinations, which have been incorporated
by the Company into its Articles of Incorporation, may discourage certain
transactions involving an actual or potential change of control of the Company,
including transactions in which the holders of Class A Common Stock might
receive a premium for their shares over the then-prevailing market price, and
may have a depressive effect on the market price for Class A Common Stock. See
"Principal and Selling Shareholders," "Certain Transactions" and "Description of
Capital Stock."
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 target 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 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 engaged 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."
20
<PAGE> 24
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."
NO PRIOR MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
There has been no public market for the shares of Class A Common Stock
prior to the Offerings, and there is no assurance that a significant public
market for the Class A Common Stock will develop or be sustained after the
Offerings. The initial public offering price of the Class A Common Stock will be
determined by negotiations among the Company and the representatives of the U.S.
Underwriters and the International Underwriters. See "Underwriting." The market
price of the Class A Common Stock may be extremely volatile. Factors such as
fluctuations in the valuation of wireless licenses, results of current and
future FCC auctions, acquisitions by the Company, significant announcements by
the Company and its competitors, quarterly fluctuations in the Company's
operating results and general conditions in the communications market may have a
significant impact on the market price of the Class A Common Stock. In addition,
in recent years the stock market has experienced extreme price and volume
fluctuations. These fluctuations have had a substantial effect on the market
prices for many high technology and communications companies, often unrelated to
the operating performance of the specific companies.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Class A Common Stock in the public market
after the Offerings could adversely affect prevailing market prices. Shares sold
in the Offerings will be freely tradable in the public market. Shares of Class B
Common Stock are convertible at any time into shares of Class A Common Stock on
a one-for-one basis and such shares generally convert automatically into Class A
Common Stock upon a transfer. In addition to the 11,000,000 shares (12,650,000
shares if the Underwriters' over-allotment options are exercised in full) of
Class A Common Stock offered by the Company and the Selling Shareholders in the
Offerings, beginning 90 days after the date of this Prospectus, 987,285
additional outstanding shares of Class A Common Stock (assuming the conversion
of Class B Common Stock into Class A Common Stock on a one-for-one basis) will
be eligible for sale in the public market and, beginning 180 days after the date
of this Prospectus, following the expiration of certain lock-up agreements
between the Underwriters, the Selling Shareholders, the Company's executive
officers and directors and certain other shareholders of the Company, 37,663,974
additional outstanding shares of Class A Common Stock (assuming the conversion
of Class B Common Stock into Class A Common Stock on a one-for-one basis) will
be eligible for sale in the public market. In addition, up to an aggregate of
22,096,272 shares of Class A Common Stock, including an aggregate of 4,001,620
shares (assuming the conversion of Class B Common Stock into Class A Common
Stock on a one-for-one basis) issuable upon exercise of outstanding stock
options ("Option Shares") and exchange rights, may become eligible for resale in
the public market at various times after the expiration of the 180 day lock-up
period, depending upon when such shares are actually issued, if at all, and
whether such shares are registered for resale under the Securities Act of 1933,
as amended (the "Securities Act"), or are subject to Rule 144 or Rule 701 under
the Securities Act. See "Description of Capital Stock" and "Shares Eligible for
Future Sale."
The Company intends to register all or a portion of the Option Shares for
resale in the public market 90 days after the effective date of the Offerings. A
portion of such Option Shares will be subject to the lock-up agreements with the
Underwriters. Options with respect to 1,636,356 of the
21
<PAGE> 25
Options Shares are currently exercisable. In addition, 2,186,360 additional
shares of Class A Common Stock are reserved for issuance pursuant to future
option grants under the Company's stock option plan. See
"Management -- Executive Compensation," "Principal and Selling Shareholders" and
"Shares Eligible for Future Sale."
DILUTION
Purchasers of the Class A Common Stock offered hereby will suffer immediate
dilution of $23.07 in the net tangible book value per share of the Class A
Common Stock from the initial public offering price (assuming an initial public
offering price of $22.50 per share). See "Dilution."
ABSENCE OF DIVIDENDS
The Company has never paid dividends on its Common Stock and does not
anticipate paying any such dividends in the foreseeable future. In addition, the
Senior Secured Facilities and the Indenture contain restrictions on the
Company's ability to declare and pay dividends on its Common Stock. See
"Description of Indebtedness" and "Dividend Policy."
22
<PAGE> 26
THE COMPANY
Western Wireless provides wireless communications services in the western
United States. The Company owns or has the right to acquire 80 cellular and PCS
licenses for a geographic area covering approximately 25.5 million pops and 41%
of the geography in the continental United States. The Company owns and operates
cellular communications systems in 57 RSAs, including one RSA which it has the
right to acquire, 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 and currently serves over 240,000 subscribers.
Through the FCC auction concluded in 1995, the Company acquired broadband
PCS licenses for six MTAs with an aggregate population of over 15.1 million
persons -- Honolulu, Salt Lake City, Portland, Des Moines/Quad Cities, El
Paso/Albuquerque and Oklahoma City -- for an aggregate purchase price of $144
million. In January 1996, the Company agreed to acquire a broadband PCS license
for the Denver MTA from GTE for a purchase price of $66 million. The Company's
seven PCS licenses cover markets with an aggregate population of approximately
19.5 million persons, including approximately 4.4 million persons covered by the
Denver MTA. In all of its PCS markets the Company intends to use its proprietary
VoiceStream brandname. 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.
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 239,200 at March 31, 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.
RECENT DEVELOPMENTS
On May 6, 1996, the FCC completed its C Block auction of licenses to
provide broadband PCS services in 493 Basic Trading Areas ("BTAs"). The Company
holds a 49.9% limited partnership interest in Cook Inlet Western Wireless PV/SS
PCS, L.P. ("Cook Inlet PCS") which was the high bidder for licenses for the
following BTAs: Tulsa, Oklahoma; Spokane, Washington; Yakima, Washington;
Wichita Falls, Texas; Wenatchee, Washington; Sherman-Denison, Texas; Walla
Walla, Washington/Pendleton, Oregon; Muskogee, Oklahoma; Worthington, Minnesota;
Aberdeen, Washington; Port Angeles, Washington; Coffeyville, Kansas and
Bartlesville, Oklahoma. The foregoing BTAs contain aggregate pops of
approximately 2.9 million (based on 1990 U.S. Census Bureau population figures)
and the licenses will be acquired by Cook Inlet PCS (subject to FCC grant) for
an aggregate cost of $67.7 million, or an average cost per pop of $23.65. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Business -- PCS Operations."
23
<PAGE> 27
USE OF PROCEEDS
Assuming an initial public offering price of $22.50 per share (the midpoint
of the range stated on the cover page hereof), the net proceeds to the Company
from the sale of the shares of Class A Common Stock in the Offerings are
estimated to be approximately $187.4 million ($222.4 million if the
Underwriters' over-allotment options are exercised in full), after deducting
estimated underwriting discounts and offering expenses payable by the Company.
The net proceeds to the Company from the Debt Offering are estimated to be
approximately $144.7 million, after deducting estimated underwriting discount
and offering expenses payable by the Company. The Company intends to use the
proceeds from the Offerings and the Debt Offering as follows: (i) to finance a
portion of the build-out of the Company's PCS business in its PCS markets in the
amount of approximately $202.7 million during the remainder of 1996; (ii) to pay
for the purchase of the Denver MTA license from GTE in the amount of $66.0
million (or $33.0 million if the Company exercises its right to pay $33.0
million of the purchase price by delivery of a promissory note having a maturity
date 18 months from the closing date); (iii) to fund expansion of the Company's
existing cellular operations in the amount of approximately $51.5 million during
the remainder of 1996; and (iv) the remainder for general corporate purposes,
including possible future acquisitions and working capital. Prior to their use,
$202.0 million of the net proceeds from the Offerings and the Debt Offering will
be used to repay revolving credit indebtedness under the Credit Facility. As of
March 31, 1996, approximately $402.0 million was outstanding under the Credit
Facility with a weighted average interest rate (including commitment fees) of
7.8% and a weighted average maturity of 6.3 years. Net proceeds from the
Offerings and the Debt Offering will be invested in short-term, investment
grade, interest-bearing securities pending such uses. See "Description of
Indebtedness." In the event the Debt Offering is not consummated, the Company
would use its existing Senior Secured Facilities, which include the Credit
Facility and the NORTEL Facility, to fund such expenditures.
The Company will not receive any proceeds from the sale of Class A Common
Stock by the Selling Shareholders in the Offerings. See "Principal and Selling
Shareholders."
DIVIDEND POLICY
The Company has never paid dividends on its Common Stock and does not
anticipate paying any dividends on its Common Stock in the foreseeable future.
The Company's Senior Secured Facilities and the Indenture contain certain
restrictions on the Company's ability to declare and pay dividends on the Common
Stock. See "Description of Indebtedness." The declaration and payment of
dividends by the Company are subject to the discretion of the Board of
Directors. Any determination as to the payment of dividends in the future will
depend upon results of operations, capital requirements, restrictions in loan
agreements, if any, and such other factors as the Board of Directors may deem
relevant.
24
<PAGE> 28
DILUTION
As of March 31, 1996, the net tangible book value (deficit) of the
Company's Common Stock was $(225.7) million, or $(3.84) per share. Net tangible
book value (deficit) per share represents the amount of the Company's tangible
net worth (total tangible assets less total liabilities) divided by the total
number of shares of Common Stock outstanding. The following table demonstrates
the increase in the net tangible book value (deficit) per share to the Company's
existing shareholders and the dilution to the new investors if the 9,014,800
shares of Class A Common Stock offered by the Company in the Offerings had been
sold at March 31, 1996, at the assumed initial public offering price of $22.50
per share, which is the midpoint of the range stated on the cover page hereof.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................ $ 22.50
Net tangible book value (deficit) per share before the
Offerings(2).............................................. $ (3.84)
Increase per share attributable to the Offerings(1).......... 3.27
-------
Net tangible book value (deficit) per share after the
Offerings(1)(2).............................................. (0.57)
-------
Dilution of net tangible book value (deficit) per share to new
investors.................................................... $ 23.07
=======
</TABLE>
- ---------------
(1) After deducting estimated underwriting discounts and expenses of the
Offerings.
(2) Does not include (i) 3,664,878 shares of Class B Common Stock issuable upon
exercise of outstanding stock options, (ii) 2,186,360 shares of Class A
Common Stock reserved for issuance pursuant to future option grants under
the Company's stock option plan, (iii) up to 327,882 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 (as defined in
"Business -- PCS Operations") or (iv) 8,860 shares of Class A Common Stock
(based on the fair market value of the stock of Western Wireless
International Corporation ("International") on the date hereof) issuable
under the Horwitz Agreement (as defined in "Certain Transactions"). See
"Certain Transactions" and "Shares Eligible for Future Sale."
The following table summarizes, as of March 31, 1996, the differences
between the existing shareholders and the new investors with respect to the
number of shares of Common Stock purchased from the Company, the total
consideration paid therefor and the average price per share paid by the existing
shareholders and the new investors, at the assumed initial public offering price
of $22.50 per share, which is the mid-point of the range stated on the cover
page hereof.
<TABLE>
<CAPTION>
SHARES PURCHASED(1)(2)
TOTAL CONSIDERATION AVERAGE
---------------------- ------------------------ PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ------- ------------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders... 58,731,111 86.7% $334,675,000 62.3% $ 5.70
New investors........... 9,014,800 13.3 202,833,000 37.7 $ 22.50
------ --- -------- ---
Total................... 67,745,911 100.0% $537,508,000 100.0% $ 7.93
====== === ======== ===
</TABLE>
- ---------------
(1) Sales by Selling Shareholders in the Offerings are expected to reduce the
number of shares held by existing shareholders to approximately 56,745,911
or 83.8% of the total shares of Common Stock outstanding, and will increase
the number of shares held by new investors to 11,000,000 or 16.2% of the
total shares of Common Stock outstanding after the Offerings. See "Principal
and Selling Shareholders."
(2) Does not include (i) 3,664,878 shares of Class B Common Stock issuable upon
exercise of outstanding stock options, (ii) 2,186,360 shares of Class A
Common Stock reserved for issuance pursuant to future option grants under
the Company's stock option plan, (iii) up to 327,882 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 International on the date hereof) issuable under the Horwitz Agreement.
See "Certain Transactions" and "Shares Eligible for Future Sale."
25
<PAGE> 29
CAPITALIZATION
The following table sets forth the capitalization of the Company at March
31, 1996, and as adjusted to give effect to the sale by the Company and the
Selling Shareholders of the shares of Class A Common Stock in the Offerings
(assuming an initial public offering price of $22.50 per share, the midpoint of
the range stated on the cover page hereof, and after deducting underwriting
discounts and offering expenses payable by the Company), the sale of the Senior
Subordinated Notes in the Debt Offering and the application of the net proceeds
therefrom for working capital and to repay revolving credit indebtedness. See
"Use of Proceeds." The Company will not receive any proceeds from the sale of
shares of Class A Common Stock by the Selling Shareholders. See "Principal and
Selling Shareholders."
<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------------
ACTUAL AS ADJUSTED(1)
--------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents....................................... $ 6,204 $ 130,619
========= =========
Long-term debt:
Credit Facility:
Revolver................................................... $ 402,000
Term....................................................... $ 200,000
NORTEL Facility............................................... 33,800 33,800
Senior Subordinated Notes..................................... 150,000
Other......................................................... 2,680 2,680
--------- ---------
Total long-term debt....................................... 438,480 386,480
--------- ---------
Shareholders' equity(2):
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, no shares issued and outstanding and 11,000,000 as
adjusted and Class B, 58,731,111 shares issued and
outstanding and 56,745,911 as adjusted................... 334,675 522,077
Deferred compensation......................................... (1,714) (1,257)
Deficit....................................................... (102,698) (103,155)
--------- ---------
Total shareholders' equity................................. 230,263 417,665
--------- ---------
Total capitalization............................................ $ 668,743 $ 804,145
========= =========
</TABLE>
- ---------------
(1) In the event the Debt Offering is not consummated, the Company would pay
down less revolving credit indebtedness under the Credit Facility and would
have substantially less cash and cash equivalents. See "Use of Proceeds."
(2) Does not include (i) 3,664,878 shares of Class B Common Stock issuable upon
exercise of outstanding options, (ii) 2,186,360 shares of Class A Common
Stock reserved for issuance pursuant to future option grants under the
Company's stock option plan, (iii) up to 327,882 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
International on the date hereof) issuable under the Horwitz Agreement.
Class B Common Stock actually outstanding at March 31, 1996 consists of
shares of common stock, par value $0.001 per share, which will be
reclassified into shares of Class B Common Stock, no par value, prior to the
Offerings. See "Certain Transactions," "Shares Eligible for Future Sale" and
"Description of Capital Stock."
26
<PAGE> 30
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 March 31, 1996 and for the three months ended March 31, 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 March 31, 1996 and for the three months ended March
31, 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>
THREE MONTHS NINE THREE
ENDED MONTHS MONTHS YEAR
MARCH 31, 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..... $ 35,337 $ 18,967 $105,430 $ 38,838 $ 11,105 $ 4,861 $ 1,072 $ 3,392
Roamer revenues......... 6,757 4,802 29,660 16,746 7,285 4,468 881 2,760
Equipment sales and
other revenue......... 3,941 2,315 11,465 7,524 2,344 1,208 262 883
-------- -------- -------- -------- -------- ------- ------- --------
Total revenues........ 46,035 26,084 146,555 63,108 20,734 10,537 2,215 7,035
-------- -------- -------- -------- -------- ------- ------- --------
Operating expenses:
Cost of service......... 8,815 5,786 27,686 13,303 4,310 2,730 655 2,840
Cost of equipment
sales................. 6,354 3,870 20,705 11,446 3,533 1,818 400 1,113
General and
administrative........ 12,270 6,254 31,253 15,226 6,253 5,048 1,156 5,226
Sales and marketing..... 13,491 7,164 41,390 18,553 6,101 3,074 812 2,948
Depreciation and
amortization.......... 15,610 10,776 49,456 25,670 5,399 3,746 2,787 12,276
Provision for
restructuring costs... 2,478 3,137
-------- -------- -------- -------- -------- ------- ------- --------
Total operating
expenses............ 56,540 33,850 170,490 86,676 25,596 16,416 5,810 27,540
-------- -------- -------- -------- -------- ------- ------- --------
Operating loss............ (10,505) (7,766) (23,935) (23,568) (4,862) (5,879) (3,595) (20,505)
-------- -------- -------- -------- -------- ------- ------- --------
Other income (expense):
Interest and financing
expense............... (8,134) (5,027) (25,428) (10,659) (2,242) (1,666) (169) (8,273)
Gain (loss) on
dispositions, net..... (573) 6,202 10,102 1,876 4,024 (14,404)
Other , net............. 65 330 627 2,065 331 130 (189) (1,116)
-------- -------- -------- -------- -------- ------- ------- --------
Income (loss) before
extraordinary
items................... (18,574) (12,463) (49,309) (25,960) 3,329 (5,539) 71 (44,298)
Extraordinary items....... (6,645) 63,569
-------- -------- -------- -------- -------- ------- ------- --------
Net income (loss)..... $(18,574) $(12,463) $(55,954) $(25,960) $ 3,329 $ (5,539) $63,640 $(44,298)
======== ======== ======== ======== ======== ======= ======= ========
</TABLE>
27
<PAGE> 31
<TABLE>
<CAPTION>
THREE MONTHS NINE THREE
ENDED MONTHS MONTHS YEAR
MARCH 31, 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 share
before extraordinary
item.................. $ (0.31) $ (0.24) $ (0.87) $ (0.59) $ 0.10 $ (0.22) * *
Per share effect of
extraordinary
item.................. (0.12) * *
-------- -------- -------- -------- -------- ------- ------- --------
Net income (loss) per
share(1)............ $ (0.31) $ (0.24) $ (0.99) $ (0.59) $ 0.10 $ (0.22) * *
======== ======== ======== ======== ======== ======= ======= ========
Weighted average common
shares and common
equivalent shares
outstanding........... 59,486,512 52,363,838 56,469,990 43,949,101 32,253,303 25,665,437 * *
======== ======== ======== ======== ======== ======= ======= ========
</TABLE>
- ---------------
* Not meaningful
(1) The Company has never paid dividends on its Common Stock and does not
anticipate paying any dividends in the foreseeable future. See "Dividend
Policy."
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ------------------------------------------------- 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........................ $ 41,697 $ 37,508 $ 36,769 $ 14,686 $ 8,098 $ 4,685 $ 2,469
Property and equipment, net........... 231,488 193,692 120,648 48,591 27,528 20,984 23,076
Licensing costs and other intangible
assets, net......................... 455,371 417,971 211,309 86,270 43,873 41,941 11,945
Other assets.......................... 8,890 9,857 1,468 6,219 5,522 2,083 8,133
-------- -------- -------- -------- --------- --------
Total assets...................... $737,446 $ 659,028 $ 370,194 $ 155,766 $ 85,021 $ 69,693 $ 45,623
======== ======== ======== ======== ========= ========
Current liabilities................... $ 68,703 $ 55,936 $ 39,214 $ 16,447 $ 5,806 $ 5,373 $ 19,580
Long-term debt, net of current
portion............................. 438,480 362,487 200,587 53,430 14,893 20,086 85,460
Minority interests in equity of
consolidated subsidiary............. 3,376
Shareholders' equity (deficiency)..... 230,263 240,605 127,017 85,889 64,322 44,234 (59,417)
-------- -------- -------- -------- --------- --------
Total liabilities and
shareholders' equity............ $737,446 $ 659,028 $ 370,194 $ 155,766 $ 85,021 $ 69,693 $ 45,623
======== ======== ======== ======== ========= ========
OTHER DATA:
Cellular pops(1)...................... 6,030,208 5,764,152 5,240,702 2,190,104 1,749,999 1,579,051 1,712,519
Ending cellular subscribers........... 239,200 209,500 112,800 30,000 13,700 8,300 7,700
EBITDA(2)............................. $ 5,105 $ 25,521 $ 2,102 $ 537 $ (2,133) $ (808) $ (8,229)
CASH FLOWS PROVIDED BY (USED IN):
Operating activities................ $ (219) $ (745) $ (988) $ (255) $ (1,490) $ (2,376) $ (11,284)
Investing activities................ $(78,949) $ (293,579) $ (70,190) $ (32,535) $ (13,159) $ 12,953 $ (7,412)
Financing activities................ $ 76,800 $ 295,109 $ 70,777 $ 36,212 $ 16,552 $ (8,131) $ 18,397
</TABLE>
- ---------------
(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.
28
<PAGE> 32
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, including one RSA which the Company has the right to acquire.
The Company has acquired PCS licenses in six MTAs. In January 1996, the Company
agreed to acquire a PCS license for the Denver MTA. 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.
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 approximately three years and has experienced rapid growth during such
periods. The Company's cellular subscribers and penetration were 239,200 and
4.0%, respectively, at March 31, 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
29
<PAGE> 33
factors, including the addition of new subscribers which may have lower usage
rates, potential price decreases and increased competition.
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.
QUARTER ENDED MARCH 31, 1996 COMPARED TO QUARTER ENDED MARCH 31, 1995
The Company had 239,200 cellular subscribers at March 31, 1996, an increase
of 29,700 or 14.2% from December 31, 1995. At March 31, 1995, the Company had
128,200 cellular subscribers, an increase of 15,400 or 13.7% from December 31,
1994. For the three months ended March 31, 1996 and March 31, 1995, the net
number of cellular subscribers added through cellular system acquisitions were
approximately 5,400 and 0, respectively. Excluding such acquired cellular
subscribers, the percentage of such net cellular subscriber additions through
independent agents and retailers increased to 34% for the three months ended
March 31, 1996 from 27% for the three months ended March 31, 1995 as a result of
the Company's efforts to further expand distribution channels. The Company had
2,200 PCS subscribers at March 31, 1996 as a result of initiating commercial
service in its Honolulu MTA on February 29, 1996.
30
<PAGE> 34
REVENUES
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1996 1995
----------------- --------
CELLULAR PCS CELLULAR
-------- ----- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Subscriber revenues.......................................... $35,188 $149 $18,967
Roamer revenues.............................................. 6,757 4,802
Equipment sales.............................................. 2,695 420 2,315
Other revenues(1)............................................ 826
-------- ----- --------
Total revenues............................................. $45,466 $569 $26,084
======== ===== ========
</TABLE>
- ---------------
(1) Primarily revenues from paging services.
Cellular subscriber revenues increased to $35.2 million for the three
months ended March 31, 1996 from $19.0 million for the three months ended March
31, 1995. This $16.2 million or 85.3% increase is primarily due to the increased
number of cellular subscribers in the 1996 period. Average monthly cellular
subscriber revenue per subscriber was $51.87 for the three months ended March
31, 1996 compared to $52.80 for the three months ended March 31, 1995. This 1.8%
decrease is a result of a decrease in minutes of use primarily due to unusually
severe weather in the month of January.
PCS subscriber revenues for the three months ended March 31, 1996 were $0.1
million. Due to the single month of operation, no average PCS revenue statistics
are reflected herein.
Roamer revenues were $6.8 million for the three months ended March 31, 1996
compared to $4.8 million for the three months ended March 31, 1995, an increase
of $2.0 million or 41.7%. Growth in the Company's roamer revenues generally
reflects increases in the Company's geographical coverage and market penetration
levels in adjacent markets and the cellular industry as a whole. Roamer revenues
as a percentage of total cellular revenues declined to 14.9% for the three
months ended March 31, 1996 from 18.4% for the three months ended March 31, 1995
as a result of the 85.3% growth in subscriber revenues, which exceeded the 41.7%
increase in roamer revenues. Although the Company expects total roamer revenues
to continue to increase as the Company and the cellular industry grow, it
expects its roamer revenues as a percentage of total revenues to continue to
decline as its subscriber base grows and it reduces roaming rates.
Cellular equipment sales, which consist primarily of handset sales,
increased to $2.7 million for the three months ended March 31, 1996 from $2.3
million for the three months ended March 31, 1995. This $0.4 million or 17.4%
increase is primarily due to the increase in net subscriber additions partially
offset by a decrease in the average handset sales price. PCS equipment sales
were $0.4 million as a result of the commencement of commercial operations in
the Honolulu MTA in February 1996. The Company anticipates continued growth in
equipment sales as a result of increases in net cellular and PCS subscriber
additions and the commencement of commercial operations in its remaining MTAs.
Other revenues, which consist primarily of paging revenues, were $0.8
million for the three months ended March 31, 1996, following the acquisition of
paging operations in February 1996.
31
<PAGE> 35
OPERATING EXPENSES
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------------
1996 1995
---------------------- -------
CELLULAR(1) PCS CELLULAR
----------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C>
Cost of service........................................... $ 8,407 $ 408 $ 5,786
Cost of equipment sales................................... 5,437 917 3,870
General and administrative................................ 9,169 3,101 6,254
Sales and marketing....................................... 11,004 2,487 7,164
Depreciation and amortization............................. 15,160 450 10,776
----------- ------ -------
Total operating expenses................................ $49,177 $7,363 $33,850
========= ====== ========
</TABLE>
- ---------------
(1) Includes expenses attributable to paging services.
PCS operating expenses of $7.4 million for the three months ended March 31,
1996 relate primarily to start-up costs in all of the Company's MTAs and to a
lesser extent to the one month of operations in the Honolulu MTA. Therefore, the
operating expenses for PCS are not representative of future operations.
The comparisons below only relate to the Company's cellular operations
(which include paging operations after February 1, 1996).
Cost of service increased to $8.4 million for the three months ended March
31, 1996 from $5.8 million for the three months ended March 31, 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 $2.6 million or 44.8%, it decreased as a percentage of service
revenues to 19.6% for the three months ended March 31, 1996 from 24.4% for the
three months ended March 31, 1995, which is primarily due to efficiencies gained
from the growing subscriber base. Service revenues includes subscriber, roamer
and other revenues.
General and administrative costs increased to $9.2 million for the three
months ended March 31, 1996 from $6.3 million for the three months ended March
31, 1995, an increase of $2.9 million or 46.0%, which is primarily attributable
to the increase in the costs associated with supporting the increased subscriber
base. However, these costs continue to decline as a percentage of service
revenues to 21.5% for the three months ended March 31, 1996 from 26.5% for the
three months ended March 31, 1995, primarily due to improved efficiency and as a
result of continuing economies of scale arising from the Business Combination.
Sales and marketing costs increased to $11.0 million for the three months
ended March 31, 1996 from $7.2 million for the three months ended March 31, 1995
primarily due to net subscriber additions. Sales and marketing costs per net
subscriber added decreased to $455 for the three months ended March 31, 1996
from $503 for the three months ended March 31, 1995 primarily attributable to
improved efficiencies. Including the losses on equipment sales, the costs per
net subscriber added decreased to $566 for the three months ended March 31, 1996
from $615 for the three months ended March 31, 1995.
Depreciation expense increased to $9.2 million for the three months ended
March 31, 1996 from $6.5 million for the three months ended March 31, 1995. This
$2.7 million or 41.5% increase is attributable to the expansion of the Company's
cellular systems. Amortization expense increased to $6.0 million for the three
months ended March 31, 1996 from $4.3 million for the three months ended March
31, 1995. This $1.7 million or 39.5% increase is primarily attributable to an
increase in gross
32
<PAGE> 36
cellular licensing costs and other intangible assets to $341.4 million at March
31, 1996 from $240.1 million at March 31, 1995.
OPERATING LOSS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------
1996 1995
------------------------ -------
CELLULAR(1) PCS CELLULAR
----------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating loss........................................... $(3,711) $(6,794) $(7,766)
</TABLE>
- ---------------
(1) Includes paging operations.
Total operating loss increased to $10.5 million for the three months ended
March 31, 1996 from $7.8 million for the three months ended March 31, 1995 as a
result of the $6.8 million operating loss attributable to PCS operations offset
by the reduced cellular operating loss. Cellular operating loss improved to $3.7
million for the three months ended March 31, 1996 from $7.8 million for the
three months ended March 31, 1995 due to increased revenues, which exceeded
increases in operating expenses.
OTHER INCOME (EXPENSE)
Interest and financing expense increased to $8.1 million for the three
months ended March 31, 1996 from $5.0 million for the three months ended March
31, 1995. The $3.1 million or 62.0% increase is primarily attributable to an
increase in borrowings, which increased to $438.5 million at March 31, 1996 from
$260.9 million at March 31, 1995, to fund the Company's expansion and capital
expenditures, partially offset by a decrease in the weighted average interest
rate to 8.1% for the three months ended March 31, 1996 from 9.1% for the three
months ended March 31, 1995.
EBITDA
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------------
1996 1995
------------------------ ------
CELLULAR(1) PCS CELLULAR
----------- -------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
EBITDA.................................................... $11,449 $(6,344) $3,010
</TABLE>
- ---------------
(1) Includes paging operations.
EBITDA improved to $5.1 million for the three months ended March 31, 1996
from $3.0 million for the three months ended March 31, 1995 as a result of
increased cellular EBITDA offset by the $(6.3) million EBITDA attributable to
PCS operations. Cellular EBITDA increased 280% to $11.4 million for the three
months ended March 31, 1996 from $3.0 million for the three months ended March
31, 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 26.6% for the three months ended March 31, 1996 from 12.6% for the
three months ended March 31, 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
33
<PAGE> 37
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.
34
<PAGE> 38
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.
35
<PAGE> 39
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
---------- ----------
<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
36
<PAGE> 40
subscriber was $54.35 in 1994, compared to $49.72 in 1993. This $4.63 or 9.3%
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 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
------- -------
<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.
37
<PAGE> 41
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,
--------------------------
1994 1993
-------- -------
<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
------ ----
<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 provision for
restructuring costs would have been $4.6 million in 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company currently anticipates that it will require approximately $500
million to finance the build-out of its PCS systems through the end of 1998, and
will require additional funds to finance the continued growth of its cellular
operations, provide for working capital, service debt and finance potential
acquisitions. Such additional financing requirements will be dependent upon a
variety of factors including the rate of growth of the Company's cellular
operations. Historically, the Company has relied on a combination of private
equity financings and borrowings. Since January 1, 1993, the Company raised over
$185.8 million of equity through issuances of capital stock. From January 1,
1993, until the Business Combination, MCLP had raised $79.0 million of partner
capital. Following the Offerings and the Debt Offering, the Company does not
currently intend to rely on private equity financings or shareholder loans as
sources of capital.
The Company's long-term borrowings during 1994 and 1995 were primarily made
under a prior credit facility, bore variable rates of interest which ranged from
7.7% to 9.1% and would have matured on June 30, 2002. The amount of outstanding
long-term debt increased to $438.5 million at March 31, 1996 from $53.4 million
at December 31, 1993. At March 31, 1996, $402.0 million and $33.8 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
38
<PAGE> 42
$48.2 million and $43.0 million, respectively. 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. 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 March 31, 1996, the Company had entered into interest rate caps and
swaps with a total notional amount of $390 million, of which $185 million is of
a short-term duration. The remaining $205 million had initial terms of three
years or more and effectively converted $205 million of variable rate debt to
fixed rate. Such caps and swaps expire between August 1997 and March 1999. The
amount of net unrealized loss attributable to changing interest rates at March
31, 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.
The Company believes the proceeds from the Offerings and the Debt Offering,
together with availability under the Credit Facility and the NORTEL Facility,
will be sufficient to fund operating losses, capital expenditures and working
capital necessary for the build-out of its PCS systems and the continued growth
of its cellular operations through December 31, 1998. In the event the Debt
Offering is not consummated, the Company would use its existing Senior Secured
Facilities, which includes the Credit Facility and the NORTEL Facility, to fund
such expenditures. 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. See "Risk Factors -- High Leverage; Debt
Service; Restrictive Covenants" and "Description of Indebtedness."
Net cash used in operating activities was $0.2 million for the three months
ended March 31, 1996. Adjustments to the $18.6 million net loss for such period
to reconcile to net cash used in operating activities consisted primarily of
$15.6 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 decrease of $1.7 million in
accounts receivable primarily as a result of increased collections, an increase
of $4.2 million in inventories primarily as a result of the purchase of PCS
handsets for sale in the Honolulu MTA, an increase of $3.2 million in prepaid
expenses and other current assets primarily as a result of prepaid costs for the
Honolulu MTA and an increase of $8.2 million in accounts payable primarily as a
result of purchases of PCS handsets and other PCS-related expenses. 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
39
<PAGE> 43
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 $78.9 million for the three
months ended March 31, 1996. Investing activities for such period consisted
primarily of cellular capital expenditures, which used cash of $18.5 million,
PCS capital expenditures, which used cash of $20.1 million, and the acquisition
of wireless properties, which used cash of $36.0 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 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 $76.8 million for the three
months ended March 31, 1996. Financing activities for such period consisted
primarily of additions to long-term debt, which provided cash of $75.8 million.
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 $51.5 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 prior to December 31,
1998 will total approximately $500 million. The build-out costs include
microwave relocation, site acquisition, 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."
In January 1996, the Company agreed to acquire from GTE a broadband PCS
license for the Denver MTA for $66 million. The Company has the right, by notice
given at any time prior to the closing date, to pay $33 million of such purchase
price by delivery of a promissory note having a final maturity 18 months from
the closing date and bearing an interest rate based on six month London
InterBank Offered Rate plus 1.5%. In addition, the Company holds a 49.9% limited
partnership interest in Cook Inlet PCS, an entity which was the high bidder for
licenses for 13 BTAs in the C Block auction. As a result of the high bids of
Cook Inlet PCS in the C Block auction, the Company is 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
40
<PAGE> 44
with respect thereto. See "The Company -- Recent Developments." 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 Offerings, the Debt 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.
41
<PAGE> 45
BUSINESS
INTRODUCTION
Western Wireless provides wireless communications services in the western
United States. The Company owns or has the right to acquire 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. The Company owns and
operates cellular communications systems in 57 RSAs, including one RSA which it
has the right to acquire, 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 and currently serves over 240,000 subscribers.
Through the FCC auction concluded in 1995, the Company acquired broadband
PCS licenses for six MTAs with an aggregate population of approximately 15.1
million persons -- Honolulu, Salt Lake City, Portland, Des Moines/Quad Cities,
El Paso/Albuquerque and Oklahoma City -- for an aggregate purchase price of $144
million. In January 1996, the Company agreed to acquire a broadband PCS license
for the Denver MTA from GTE for a purchase price of $66 million. The Company's
seven PCS licenses cover markets with an aggregate population of approximately
19.5 million persons, including approximately 4.4 million persons covered by the
Denver MTA. In all of its PCS markets, the Company intends to use its
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.
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 24,000
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.
42
<PAGE> 46
Since its introduction in 1983, cellular service has grown dramatically and
now dominates the wireless communications market. As of December 31, 1995, there
were over 33.8 million cellular subscribers in the United States. The following
chart illustrates the growth in United States cellular subscribers.
U.S. CELLULAR SUBSCRIBERS
<TABLE>
<S> <C> <C> <C> <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 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
43
<PAGE> 47
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), the first portion of which (the "A" and "B"
Blocks) was auctioned by the FCC in late 1994 and 1995. 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 and the first to offer mass
market all-digital mobile networks. In addition, PCS providers may be the first
to 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 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.
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<PAGE> 48
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 120
systems operating in 92 countries serving over 13 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
the only truly 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.
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 and cellular
markets are summarized in the following table:
<TABLE>
<CAPTION>
OWNERSHIP THE COMPANY'S
PCS MARKETS(1) POPULATION(2) PERCENTAGE POPS(2)
- ---------------------------------------------------------------- ------------- ----------- -------------
<S> <C> <C> <C>
Portland........................................................ 3,460,182 100 3,460,182
Salt Lake City.................................................. 2,999,636 100 2,999,636
El Paso/Albuquerque............................................. 2,387,710 100 2,387,710
Honolulu........................................................ 1,215,729 100 1,215,729
Des Moines/Quad Cities(3)....................................... 3,067,795 100 3,067,795
Oklahoma City................................................... 1,945,271 100 1,945,271
Denver(4)....................................................... 4,411,211 100 4,411,211
---------- ----------
PCS TOTAL................................................... 19,487,534 19,487,534
========== ==========
</TABLE>
45
<PAGE> 49
<TABLE>
<CAPTION>
OWNERSHIP THE COMPANY'S
CELLULAR MARKETS(5) POPULATION(2) PERCENTAGE POPS(2)
- ---------------------------------------------------------------- ------------- ----------- -------------
<S> <C> <C> <C>
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)(6)................................................ 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
---------- ----------
Montana
Billings........................................................ 129,956 96 125,031
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............................................... 870,154 865,229
---------- ----------
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
---------- ----------
</TABLE>
46
<PAGE> 50
<TABLE>
<CAPTION>
OWNERSHIP THE COMPANY'S
CELLULAR MARKETS(5) POPULATION(2) PERCENTAGE POPS(2)
- ---------------------------------------------------------------- ------------- ----------- -------------
<S> <C> <C> <C>
New Mexico
Lincoln (NM-6).................................................. 238,401 100 238,401
---------- ----------
New Mexico Total............................................ 238,401 238,401
---------- ----------
North Dakota
Bismarck........................................................ 88,606 99 87,968
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.......................................... 628,358 627,720
---------- ----------
South Dakota
Rapid City...................................................... 115,071 100 115,071
Sioux Falls..................................................... 137,655 98 135,232
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.......................................... 722,890 720,467
---------- ----------
Texas
Abilene......................................................... 153,207 100 153,207
Lubbock......................................................... 231,851 100 231,851
Midland......................................................... 121,145 92 111,078
Odessa.......................................................... 130,339 93 121,033
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 1,117,596
---------- ----------
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 6,030,208
========== ==========
PCS AND CELLULAR TOTAL...................................... 25,545,101 25,517,742
========== ==========
</TABLE>
- ---------------
(1) The FCC has not granted "final" PCS licenses. See "Risk Factors -- Finality
of PCS Auctions" and "The Company -- Recent Developments."
(2) Estimated 1996 populations 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) An acquisition agreement has been executed and initial FCC approval has been
obtained, but closing is subject to FCC approval by final order.
(5) Excludes six markets containing a population of 562,598 in which the Company
operates under an Interim Operating Authority ("IOA") and includes one
market in which the Company operates under an IOA where the Company has
entered into an agreement to acquire the license, subject to FCC approval.
See "-- Products and Services."
(6) Currently operating under IOA. Acquisition agreement has been executed, but
closing is subject to FCC approval.
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
47
<PAGE> 51
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 is 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 entered markets at a relatively low cost, having purchased
cellular licenses for an average of $45.68 per pop and 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 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 place-
48
<PAGE> 52
ment, 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 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 system in the Honolulu MTA and is in the initial
construction phase of its PCS systems in the Portland, Salt Lake City and El
Paso/Albuquerque MTAs. Design and engineering have been initiated in the
Company's remaining PCS markets. 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 will be broader
than those currently offered by cellular systems in the Company's PCS markets.
PCS service offerings will 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
will be 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 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. See " -- Products
and Services."
49
<PAGE> 53
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, 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 120 systems serving over 13 million
customers in 92 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 PCS licensees to date. Together, these PCS licensees and Western Wireless
cover PCS markets containing approximately 149.2 million persons, representing
55.7% of the population in the United States.
The Company has entered into roaming agreements or letters of intent with
all of the companies 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 "Basic Trading Areas" or "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"). 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 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 Company has acquired a 49.9% limited partnership interest in Cook Inlet
PCS, an entity 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 will allow the Company to participate as a
minority owner
50
<PAGE> 54
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 is 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
operating its wireless communications businesses. See "The Company -- Recent
Developments," " -- Governmental Regulation - Licensing of PCS Systems" and
"Certain Transactions."
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 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 six markets
containing 562,598 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 three 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
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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 a PCS system in the Honolulu MTA and
will offer PCS services in its six other MTAs using the GSM standard. The
Company currently offers in the Honolulu MTA, and will offer in each of its
other MTAs from the inception of commercial operations, several distinct
services and features, including:
- Enhanced Features -- The Company's PCS systems initially will 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 will 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, will 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 could 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 will be 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
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, which will significantly extend the
handset's battery performance. In addition, because the Company's PCS
systems will utilize tightly spaced, low power transmitters, less power
will be required to transmit calls, thereby further extending battery
performance.
The Company currently offers a number of rate plans in Honolulu 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 will likely include additional
features beyond those 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
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be commercially available in sufficient quantities in 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 systems 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 24,000 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. 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, Matrix Telecommunications
Limited in Indonesia and Sun Hung Kai Properties Ltd. and ABC Communications,
Ltd. in Taiwan. 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. See "Description of Indebtedness."
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
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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 Honolulu 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 110 local sales offices (which also
serve as retail sales locations) and utilizes a direct sales force of over 700
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.
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 110 local sales offices in the U.S., including 95 under the
CELLULAR ONE brand name, 13 under the Phones-To-Go brand name and two 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.
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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"),
currently an affiliate of AT&T, 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.
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
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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 PCS licensees have announced
that they intend to deploy GSM-based PCS systems, and one such licensee, APC,
has been operating a GSM system in the Washington/ Baltimore MTA since November
1995. Together, these PCS licensees and the Company hold licenses for 25 MTAs,
which cover markets containing approximately 149.2 million persons, representing
approximately 55.7% 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 or
plans to lease over 600 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 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.
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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 system operators to provide service to
"resellers." A reseller provides cellular service to customers but does not hold
an FCC cellular license or own cellular facilities. Instead, the reseller buys
blocks of cellular 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 cellular 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 may have to subsidize 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, 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
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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 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
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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 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 rules, there are three separate spectrum aggregation limits
affecting broadband PCS licensees. Under the first rule, a broadband PCS
licensee may own combinations of PCS licenses (e.g., one MTA (30 MHz) and one
BTA (10 MHz)) with total aggregate spectrum coverage of up to 40 MHz in a single
geographic area. The second rule provides that no cellular
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licensee will be allowed to own more than one 10 MHz PCS license (i.e.,
ownership of a 30 MHz PCS license is prohibited) covering territory, ten percent
or more of the population of which is within the CGSAs represented by that
entity's cellular licenses. This cellular/PCS cross-ownership restriction is
currently the subject of further rulemaking proceedings following a successful
court challenge described below. Finally, 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, which upon acquisition of the Denver MTA will
result in the Company exceeding the FCC's current cellular/PCS and 45 MHz CMRS
cross-ownership restrictions described above. The Company has a period of time
after acquisition of the Denver MTA in which to comply with these ownership
restrictions. In the event that these restrictions are imposed, the Company will
be obligated to divest sufficient portions of its PCS markets or its cellular
holdings to come into compliance with the rules. The Company does not believe
such restrictions 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 preferences for women and minority-owned and small businesses.
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. Although 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,
the licenses have not been issued by a grant that is "final" because of pending
actions before the FCC challenging the validity of the A and B Block auctions.
These actions fall into two categories: (i) those stemming from the November 9,
1995 decision of the United States Court of Appeals for the Sixth Circuit in
Cincinnati Bell Telephone Company, Inc. v. FCC, 69 F.3d 752, which held that the
FCC's cellular eligibility restriction and the twenty percent bright line
cellular attribution standard were arbitrary and remanded the rules to the FCC
for further proceedings, and (ii) those claiming that the delay in the C Block
broadband PCS auction gave the A and B Block PCS licensees an unfair headstart
over subsequent licensees. The Cincinnati Bell decision raises a possibility
that all of the PCS auctions could be invalidated, including the A and B Blocks.
As to the actions claiming unfair headstart, the FCC recently affirmed the
grants of the A and B Block licenses. The time for filing an appeal or petition
for reconsideration of the FCC's affirmance of the grants ended on May 1, 1996,
and no appeals or petitions for reconsideration have been filed in the
appropriate court or with the FCC. 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 of its PCS systems could have a material adverse
effect on the Company. See "Risk Factors -- Finality of PCS Auctions."
The auction of C Block licenses commenced on December 18, 1995 and was
completed on May 6, 1996. 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. The court
remanded the rules to the FCC for further consideration consistent with the
court's opinion. On
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March 20, 1996, the FCC released a Notice of Proposed Rule Making to reexamine
the cellular eligibility rules and certain other PCS rules. The Company cannot
predict the outcome of such reconsideration or its 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. No assignments or transfers affecting control are permitted during the
first three years of the license term. During the fourth and fifth years, any
proposed assignee or transferee must 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 the proposed assignee or
transferee must hold other licenses for C and F Blocks and, at the time of
receipt of such licenses, have 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. The FCC has a Notice of Proposed Rule Making
pending in which it is soliciting comment on the lifting of restrictions on
transfer and assignment, but only as to F Block licenses. 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 a transition plan to relocate such microwave
operators to other spectrum blocks. 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 an additional 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 incumbent microwave user is permitted to continue
its operations until final FCC resolution of the matter. 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. 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
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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
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 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.
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 recently terminated its inquiry into the imposition of equal access
requirements on CMRS providers.
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
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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 March 31, 1996, the Company employed a total of 1,372 people in
the following areas:
<TABLE>
<CAPTION>
NUMBER OF
CATEGORY EMPLOYEES
------------------------------------------------------------------------- ---------
<S> <C>
Sales and marketing...................................................... 791
Engineering.............................................................. 203
General and administration, including customer service................... 378
</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
61,000 square feet) located in Issaquah, Washington. The Company 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," "-- Governmental
Regulation," "The Company -- Recent Developments" and "Certain Transactions."
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DESCRIPTION OF INDEBTEDNESS
Set forth below is a description of certain terms of the Company's Senior
Secured Facilities and the Senior Subordinated Notes. 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, a copy of
which is filed as an exhibit to the Registration Statement of which this
Prospectus is a part.
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 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 five long-term interest rate swap and cap agreements with a total notional
amount of $205 million and one short-term interest rate swap with a notional
amount of $185 million. As of March 31, 1996, the weighted average interest rate
under these agreements was approximately 6.3%.
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
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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 the proceeds of the Offerings, other equity issuances by the Company after
May 6, 1996 and $14.0 million, provided, however, that the Credit Facility also
limits the total investment by the Company in its subsidiaries owning PCS
licenses to $100 million from and after May 6, 1996 plus the proceeds of the
Debt Offering, the Offerings, other equity issuances by the Company after May 6,
1996 and $14.0 million until the PCS licenses are final. See "Risk
Factors -- Finality of PCS Auctions."
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.
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. Western PCS II may
become the holder of the Company's license for the Denver MTA upon consummation
of the purchase thereof. 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
Corporation, a wholly owned subsidiary of the Company ("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, a copy of which is filed as an exhibit to
the Registration Statement of which this Prospectus is a part.
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. The NORTEL Facility currently limits borrowings to
$76.8 million until the PCS licenses are final. The Company expects to amend the
NORTEL Facility to remove such condition. See "Risk Factors -- Finality of PCS
Auctions."
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%.
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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.
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.
SENIOR SUBORDINATED NOTES
The Company is offering $150 million principal amount of Senior
Subordinated Notes Due 2006 in the Debt Offering for estimated net proceeds of
$144.7 million. The Senior Subordinated Notes will be issued pursuant to the
Indenture. See "Use of Proceeds."
The Senior Subordinated Notes mature in 2006. Interest on the Senior
Subordinated Notes will accrue and be payable semi-annually. The Senior
Subordinated 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 Senior Subordinated Notes prior to the repayment
of all indebtedness under the Credit Facility. See "Description of
Indebtedness -- Credit Facility."
The Indenture relating to the Senior Subordinated Notes contains, among
others, covenants with respect to incurrence of indebtedness, preferred stock of
subsidiaries, restricted payments, distributions and transfers by subsidiaries,
subordinated liens, 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 Senior Subordinated Notes are subordinate in right of payment to the
Credit Facility and the NORTEL Facility.
The closing of the Debt Offering is conditioned on the closing of the
Offerings and the Company may elect not to consummate the Debt Offering. The
closing of the Offerings is not conditioned on the closing of the Debt Offering.
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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.................................... 40 Chairman, Director and Chief
Executive Officer
Donald Guthrie..................................... 40 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................................. 39 Senior Vice President --
Corporate Development
Timothy R. Wong.................................... 40 Vice President -- Engineering
Bradley J. Horwitz................................. 40 Vice President -- International
Nastashia Stoneman Press........................... 35 Principal Accounting Officer
David A. Bayer..................................... 56 Director
John L. Bunce, Jr.................................. 37 Director
Mitchell R. Cohen.................................. 32 Director
Jonathan M. Nelson................................. 39 Director
Terence M. O'Toole................................. 37 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.
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 been the President and owner of dbX
Corporation. Mr. Bayer currently is a director of MobileMedia Corporation
("MobileMedia").
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<PAGE> 72
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, will terminate on the closing of the Offerings. Certain of such
shareholders will be 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 intends to enter into separate indemnification agreements
with each of its directors and officers to effectuate these provisions, and to
purchase director's 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
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<PAGE> 73
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> 74
(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> 75
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> 76
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 31, 1996, and as adjusted to
reflect the sale of the Class A Common Stock offered in the Offerings, by (i)
each Selling Shareholder, (ii) each person who is known by the Company to own
beneficially 5% or more of the Common Stock; (iii) each director of the Company;
(iv) each Named Executive Officer of the Company; and (v) 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. Prior to the Offerings, there were no shares of Class A
Common Stock outstanding and thus information relating to the number and
percentage of shares beneficially owned prior to the Offerings is based on
shares of Class B Common Stock only. Shares of Class B Common Stock sold by the
Selling Shareholders will convert to Class A Common Stock upon their sale in the
Offerings. Information relating to percentage beneficially owned following the
Offerings is based on shares of Class A Common Stock and Class B Common Stock.
See "Description of Capital Stock."
<TABLE>
<CAPTION>
PERCENTAGE
BENEFICIALLY OWNED
-----------------------------
SHARES SHARES PRIOR TO
BENEFICIALLY SOLD IN THE THE FOLLOWING THE
NAME AND ADDRESS OWNED(1) OFFERINGS OFFERINGS OFFERINGS(2)
- --------------------------------------- ------------ ----------- --------- ---------------
<S> <C> <C> <C> <C>
Hellman & Friedman(3)(6)............... 25,163,997 -- 42.9% 37.2%
One Maritime Plaza, 12th Floor
San Francisco, CA 94111
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
The Goldman Sachs Group, L.P. and
related investors(4)(6).............. 12,099,029 -- 20.6 17.9
85 Broad Street, 19th Floor
New York, New York 10004
John W. Stanton and
Theresa E. Gillespie(5)(6)(7)........ 6,236,423 -- 10.6 9.2
2001 NW Sammamish Road
Issaquah, Washington 98027
Providence Media Partners L.P.(6)...... 3,886,591 -- 6.6 5.7
c/o Providence Ventures, Inc.
900 Fleet Center
50 Kennedy Plaza
Providence, RI 02903
Robert A. Stapleton(7)................. 480,355 -- * *
Mikal J. Thomsen(7)(8)................. 411,141 -- * *
Alan R. Bender(7)...................... 206,417 -- * *
Cregg B. Baumbaugh(7).................. 200,158 -- * *
David A. Bayer(9)...................... 818,159 -- 1.4 1.2
John L. Bunce, Jr.(10)................. 25,163,997 -- 42.9 37.2
Mitchell R. Cohen(10).................. 25,163,997 -- 42.9 37.2
Terence M. O'Toole(11)................. 12,099,029 -- 20.6 17.9
Jonathan M. Nelson(12)................. 3,886,591 -- 6.6 5.7
All directors and executive officers as
a group (13 persons)(7).............. 49,641,575 -- 83.2 72.3
M.L. Media Opportunity Partners
L.P.(13)............................. 1,090,162 1,090,162 1.9 --
Media Communications Partners II
Limited Partnership(14).............. 2,543,957 848,700 4.3 2.5
Media Communications Investors
Limited Partnership(14).............. 120,318 40,138 * *
John C. Rathe Trust.................... 6,200 6,200 * --
</TABLE>
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<PAGE> 77
- ---------------
* 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) Assumes no exercise of the Underwriters' over-allotment options.
(3) 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. 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.
(4) 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.
(5) 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 joint
tenants, 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.
(6) 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."
(7) 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.
(8) 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
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<PAGE> 78
Mr. Thomsen through his ownership of approximately 10.2% of PN Cellular.
Mr. Thomsen does not have voting control over such shares.
(9) 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 shares of Class B Common Stock held by Bayer
Investment Group.
(10) 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 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.
(11) 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.
(12) 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.
(13) M.L. Media Opportunity Partners is an affiliate of Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch").
(14) Media Communications Partners II Limited Partnership ("Media Partners") and
Media Communications Investors Limited Partnership ("Media Investors") are
Delaware limited partnerships, the general partners of which are entities
controlled by David D. Croll, Richard C. Churchill, Jr., Stephen F. Gormley
and James F. Wade. Messrs. Croll, Churchill, Gormley and Wade each may be
deemed to be the owner of the 1,695,257 and 80,180 shares of Class B Common
Stock owned by Media Partners and Media Investors, respectively, following
the Offerings. Each of Messrs. Croll, Churchill, Gormley and Wade disclaim
beneficial ownership of shares held by Media Partners and Media Investors
to the extent interests in such entities are held by persons other than
such individual.
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<PAGE> 79
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 and Selling 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 interests 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 92% of the Company's outstanding Common Stock prior to the
Offerings. The provisions of the Stockholders Agreement, other than the
provisions relating to registration rights, will terminate at the closing of the
Offerings. See "Shares Eligible for Future Sale -- Registration Rights" and
"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 Offerings, the Hellman &
Friedman Entities, the Stanton Entities, the Goldman Sachs Entities and
Providence will enter into the Shareholders Agreement, which will be effective
only upon consummation of the U.S. Offering, will supersede the Voting Agreement
and, with respect to election of directors of the Company, will provide 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
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<PAGE> 80
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 Goldman Sachs, (iv) so
long as the Stanton Entities and Providence collectively beneficially own at
least 7 1/2% of the total 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 will agree 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 will further provide 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 will
have a term of 10 years. The Goldman Sachs Entities also are 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, 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 the 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 Goldman Sachs, terminated and distributed the 3,842,531 shares of Class B
Common Stock registered in its name to
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<PAGE> 81
its partners, GS Capital and GS Capital Partners Media Holding I, Inc., both of
which are affiliates of Goldman Sachs. 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 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> 82
An affiliate of Goldman Sachs 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 $36.5 million.
Under Schedule E to the By-Laws of the National Association of Securities
Dealers, Inc. (the "NASD"), the Company may be deemed to be an affiliate of
Goldman Sachs. The Offerings and the Debt Offering are being conducted in
accordance with Schedule E, which provides that, among other things, when an
NASD member participates in the underwriting of an affiliate's equity or debt
securities, the initial public offering price can be no higher, or the yield to
maturity can be no lower, as applicable, than that recommended by a "qualified
independent underwriter" meeting certain standards. In accordance with this
requirement, Donaldson, Lufkin & Jenrette Securities Corporation has served in
such role and will recommend a price and a minimum yield to maturity in
compliance with the requirements of Schedule E. Donaldson, Lufkin & Jenrette
Securities Corporation will receive compensation from the Company in the
aggregate amount of $10,000 for serving in such roles. In connection with the
Offerings, Donaldson, Lufkin & Jenrette Securities Corporation in its role as
qualified independent underwriter has performed due diligence investigations and
reviewed and participated in the preparation of this Prospectus and the
Registration Statement of which this Prospectus is a part. See "Underwriting."
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 and the Washington Business Act (as
hereinafter defined) contain, and the Indenture will contain, provisions which
limit the terms on which the Company may enter into transactions with its
affiliates.
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<PAGE> 83
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 300,000,000 shares
of Class A Common Stock and Class B Common Stock, no par value, and 50,000,000
shares of preferred stock, no par value (the "Preferred Stock"). As of March 31,
1996, there were 58,731,111 shares of Class B Common Stock and no shares of
Class A Common Stock issued and outstanding and the Company had 148 holders of
record of its Class B Common Stock.
COMMON STOCK
The Company has two classes of authorized Common Stock, Class A Common
Stock, which is being offered in the Offerings, and Class B Common Stock. Other
than with respect to voting rights, the Class A and Class B have identical
rights. The Class A Common Stock has one vote per share and the Class B Common
Stock has ten votes per share. Shares of Class B Common Stock generally convert
automatically into shares of Class A Common Stock on a share-for-share basis
immediately upon any transfer of the Class B Common Stock other than a transfer
from an original holder of Class B Common Stock to certain affiliates of such
holder.
Holders of Common Stock have no cumulative voting rights and no preemptive,
subscription or sinking fund rights. Subject to preferences that may be
applicable to any then outstanding Preferred Stock, holders of Common Stock will
be entitled to receive ratably such dividends as may be declared by the Board of
Directors out of funds legally available therefor. See "Dividend Policy." In the
event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock will be entitled to share ratably in all assets remaining after
payment of liabilities and the liquidation preference to any then outstanding
Preferred Stock.
The Company's Articles of Incorporation permit the redemption of the
Company's Common Stock from shareholders where necessary to protect the
Company's regulatory licenses. See "Business -- Governmental Regulation."
PREFERRED STOCK
Pursuant to its Articles of Incorporation, the Company is authorized to
issue 50,000,000 shares of Preferred Stock, which may be issued from time to
time in one or more classes or series or both upon authorization by the
Company's Board of Directors. The Board of Directors, without further approval
of the shareholders, is authorized to fix the dividend rights and terms,
conversion rights, voting rights, redemption rights and terms, liquidation
preferences and any other rights, preferences, privileges and restrictions
applicable to each class or series of Preferred Stock. The issuance of Preferred
Stock, while providing flexibility in connection with possible acquisitions and
other corporate purposes, could, among other things, adversely affect the voting
power of the holders of Common Stock and, under certain circumstances, make it
more difficult for a third party to gain control of the Company, discourage bids
for the Company's Common Stock at a premium or otherwise adversely affect the
market price of the Class A Common Stock.
The Company has no current plans to issue any Preferred Stock.
CERTAIN ARTICLES OF INCORPORATION, BYLAWS AND STATUTORY PROVISIONS AFFECTING
SHAREHOLDERS
SPECIAL MEETINGS OF SHAREHOLDERS; SHAREHOLDER ACTION BY WRITTEN CONSENT
The Company's Bylaws provide that any action required or permitted to be
taken by the Company's shareholders may be effected at a duly called annual or
special meeting of shareholders or by unanimous consent in writing.
Additionally, the Articles of Incorporation and Bylaws provide that special
meetings of the shareholders of the Company may be called only by a majority of
the Board of Directors or an authorized committee thereof.
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ADVANCE NOTICE REQUIREMENTS FOR SHAREHOLDER PROPOSALS AND DIRECTOR
NOMINATIONS
The Company's Bylaws provide that shareholders seeking to bring business
before or to nominate directors at any meeting of shareholders must provide
timely notice thereof in writing. To be timely, a shareholder's notice must be
delivered to, or mailed and received at, the principal executive offices of the
Company not less than (i) with respect to an annual meeting, 120 calendar days
in advance of the one-year anniversary of the date that the Company's proxy
statement was released to shareholders in connection with the previous year's
annual meeting, except that if no annual meeting was held in the previous year
or if the date of the annual meeting has been changed by more than 30 calendar
days from the date contemplated at the time of the previous year's proxy
statement, such notice must be received by the Company a reasonable time before
the Company's proxy statement is to be released and (ii) with respect to a
special meeting of shareholders, a reasonable time before the Company's proxy
statement is to be released. The Bylaws also specify certain requirements for a
shareholder's notice to be in proper written form. These provisions may preclude
some shareholders from bringing matters before the shareholders or from making
nominations for directors.
DIRECTOR AND OFFICER INDEMNIFICATION
The Washington Business Act provides that a Washington corporation may
include provisions in its articles of incorporation relieving each of its
directors of monetary liability arising out of his or her conduct as a director
for breach of his or her fiduciary duty except liability 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
Washington Business Act (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's Articles of Incorporation include such provisions.
The Company's Articles of Incorporation and Bylaws provide that the Company
shall, to the fullest extent permitted by the Washington Business Act, as
amended from time to time, indemnify and advance expenses to each of its
currently acting and former directors and officers, and may so indemnify and
advance expenses to each of its current and former employees and agents. The
Company believes the foregoing provisions are necessary to attract and retain
qualified persons as directors and officers. Prior to the consummation of the
Offerings, the Company intends to enter into separate indemnification agreements
with each of its directors and executive officers in order to effectuate such
provisions, which agreements will supersede prior indemnification agreements
entered into by the Company with each of its directors and executive officers.
REGULATED SHAREHOLDERS
The Articles of Incorporation contain provisions that would effectively
preclude each of Goldman Sachs and its affiliates and Merrill Lynch and its
affiliates from voting that number of shares of Common Stock which results in
either such shareholder or its affiliates having the right to vote more than
24.9% of the Company's total voting power.
PROVISIONS AFFECTING ACQUISITIONS AND BUSINESS COMBINATIONS
The Washington Business Act, Section 23B.19 of the Revised Code of
Washington, prohibits a "target corporation," with certain exceptions, from
engaging in certain "significant business transactions" (such as a merger or
sale of assets) with an "acquiring person" who acquires more than 10% of the
voting securities of the target corporation for a period of five years after
such acquisition, unless the transaction is approved by a majority of the
members of the target corporation's board of directors prior to the date of the
transaction or unless the aggregate amount of the cash and the market value of
non-cash consideration received by holders of outstanding shares of any class or
series of stock of the target corporation is equal to certain minimum amounts.
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<PAGE> 85
The Company's Articles of Incorporation provide that it will be subject to such
prohibitions and shall remain subject to such prohibitions even if they are ever
repealed. Such prohibitions do not apply to any shareholders who beneficially
own ten percent or more of the Company's outstanding voting securities prior to
the Offerings.
TRANSFER AGENT AND REGISTRAR
The Company's transfer agent and registrar for its Class A Common Stock is
Chemical Mellon Shareholder Services, New York, New York.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offerings, the Company will have outstanding
56,745,911 shares of Class B Common Stock and 11,000,000 shares of Class A
Common Stock (12,650,000 shares if the Underwriters' over-allotment options are
exercised in full). An aggregate of 5,851,238 shares of Class B Common Stock
have been reserved for issuance under the Company's stock option plan and
options to purchase 3,664,878 of such shares of Class B Common Stock are
currently outstanding and 2,186,360 shares of Class A Common Stock are reserved
for issuance pursuant to future option grants. In addition, up to 327,882 shares
of Class B Common Stock are reserved for issuance upon the exercise of exchange
rights exercisable no sooner than 2001 issued to the Company's partners in Cook
Inlet PCS and 8,860 shares of Class A Common Stock (based on the fair market
value of the stock of International on the date hereof) are issuable under the
Horwitz Agreement. See "Certain Transactions."
The shares of Class A Common Stock sold in the Offerings will be freely
tradeable without restriction or further registration under the Securities Act,
except for any shares purchased by an "affiliate" (as that term is defined under
the Securities Act) of the Company, which will be subject to the resale
limitations of Rule 144 promulgated under the Securities Act. All of such shares
of Class A Common Stock are "restricted securities" within the meaning of Rule
144 (the "Restricted Shares") and may not be publicly sold unless registered
under the Securities Act or sold in accordance with an applicable exemption from
registration, such as Rule 144.
In general, under Rule 144, as currently in effect, if two years have
elapsed since the later of the date of acquisition of Restricted Shares from the
Company or any affiliate of the Company, the acquirer or subsequent holder
(including an affiliate) is entitled to sell, within any three-month period,
that number of shares that does not exceed the greater of 1% of the then
outstanding shares of Class A Common Stock (approximately 110,000 shares
immediately after the Offerings) or the average weekly trading volume of the
shares of Class A Common Stock on all exchanges and/or reported through the
automated quotation system of a registered securities association during the
four calendar weeks preceding the date on which notice of the sale is filed with
the Securities and Exchange Commission (the "Commission"). Sales under Rule 144
are also subject to certain restrictions relating to manner of sale, notice
requirements and the availability of current public information about the
Company. If three years have elapsed since the later of the date of acquisition
of Restricted Shares from the Company or from any affiliate of the Company, and
the acquirer or subsequent holder thereof is deemed not to have been an
affiliate of the Company at any time during the 90 days preceding a sale, such
person would be entitled to sell such shares in the public market under Rule
144(k) without regard to the volume limitations, manner of sale provisions,
public information requirements or notice requirements. As defined in Rule 144,
an "affiliate" of an issuer is a person that directly, or indirectly through the
use of one or more intermediaries, controls, or is controlled by, or is under
common control with, such issuer. In general, under Rule 701 as currently in
effect, persons who purchase shares upon exercise of options that were granted
pursuant to Rule 701 are entitled to sell such shares in reliance on Rule 144
without regard to the holding period, public information, volume limitations or
notice provisions of Rule 144, if such persons are not affiliates of the
Company, and without regard to the holding period requirements of Rule 144, if
such persons are affiliates of the Company. Restricted Shares properly sold in
reliance on Rule 144 are
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<PAGE> 86
thereafter freely tradeable without restrictions or registration under the
Securities Act, unless thereafter held by an affiliate of the Company.
The Company, the Selling Shareholders, the Company's officers and directors
and certain other shareholders of the Company have agreed that, during the
period beginning from the date of this Prospectus and continuing to and
including the date 180 days after the date of this Prospectus, they will not
offer, sell, contract to sell or otherwise dispose of any securities of the
Company that are substantially similar to the shares of Common Stock or which
are convertible or exchangeable into securities which are substantially similar
to the shares of Common Stock, without the prior written consent of the
representatives of the U.S. Underwriters, except for the shares of Common Stock
offered in connection with the concurrent U.S. and International Offerings and
certain gift transactions.
Subject to certain limitations on the aggregate offering price of a
transaction and other conditions, Rule 701 may be relied upon with respect to
the resale of securities originally purchased from the Company by its employees,
directors, officers, consultants or advisors between May 20, 1988, the effective
date of Rule 701, and the date the issuer becomes subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), pursuant to written compensatory benefit plans or written contracts
relating to the compensation of such persons. In addition, the Commission has
indicated that Rule 701 will apply to typical stock options granted by an issuer
before it becomes subject to the reporting requirements of the Exchange Act
(including options granted before May 20, 1988, if made in accordance with the
Rule had it been in effect), along with the shares acquired upon exercise of
such options beginning May 20, 1988 (including exercises after the date of this
Prospectus). Securities issued in reliance on Rule 701 are Restricted Shares
and, subject to the contractual restrictions described above, beginning 90 days
after the date of this Prospectus, such securities may be sold (i) by persons
other than affiliates, subject only to the manner of sale provisions of Rule 144
and (ii) by affiliates under Rule 144 without compliance with its two-year
minimum holding period requirements.
The Company intends to file a registration statement under the Securities
Act covering 5,851,238 shares of Common Stock issued or issuable under the
Company's stock option plan. Such registration statement is expected to be filed
90 days after the date of this Prospectus and will automatically become
effective upon filing. Accordingly, shares registered under such registration
statement will, subject to Rule 144 volume limitations applicable to affiliates,
be available for sale in the open market, except to the extent that such shares
are subject to vesting restrictions with the Company or the contractual
restrictions described above.
REGISTRATION RIGHTS
Pursuant to the terms of the Stockholders Agreement, certain holders of the
Company's Common Stock have registration rights in defined circumstances and
such rights generally include, subject to certain restrictions, underwriter
cutbacks and pro rata inclusion provisions, the right to participate in both
demand registrations (i.e., those that are required by certain of the
shareholders pursuant to contract) and "piggyback" rights (i.e., the right to
join in any registrations undertaken by the Company). The provisions of the
Stockholders Agreement, other than provisions providing for registration rights,
will terminate at the closing of the Offerings. The Horwitz Agreement contains
"piggyback" rights for shares of Class A Common Stock issuable by the Company
thereunder. See "Certain Transactions."
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VALIDITY OF CLASS A COMMON STOCK
The validity of the shares of Class A Common Stock offered hereby will be
passed upon for the Company and the Selling Shareholders by Preston Gates &
Ellis, Seattle, Washington. G. Scott Greenburg, a partner of the firm,
beneficially owns 8,857 shares of Class B Common Stock. The validity of the
shares of Class A Common Stock offered hereby will be passed upon for the
Underwriters by Sullivan & Cromwell, Los Angeles, California. Sullivan &
Cromwell has represented and continues to represent Goldman Sachs in connection
with its investment in the Company.
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.
ADDITIONAL INFORMATION
The Company has filed with the Commission, Washington, D.C., a Registration
Statement on Form S-1 under the Act, with respect to the shares of Class A
Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain portions of which
have been omitted as permitted by the rules and regulations of the Commission.
For further information with respect to the Company and the Class A Common
Stock, reference is made to the Registration Statement, including the exhibits
and schedules thereto. Statements contained in this Prospectus as to the
contents of any contract, agreement or any other document referred to herein are
not necessarily complete; with respect to each such contract, agreement or
document filed as an exhibit to the Registration Statement, reference is made to
such exhibit for a more complete description of the matters involved, and each
such statement shall be deemed qualified in its entirety by such reference. The
Registration Statement, including the exhibits and schedules thereto, may be
inspected without charge at the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549 and copies of it or any part thereof may be
obtained from such office, upon payment of the fees prescribed by the
Commission.
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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 March 31, 1996, and December 31, 1995 and 1994..... F-3
Consolidated Statements of Operations for the quarters ended March 31, 1996 and 1995
and the years ended December 31, 1995, 1994 and 1993............................... F-4
Consolidated Statements of Shareholders' Equity for the quarter ended March 31, 1996
and the years ended December 31, 1995, 1994 and 1993............................... F-5
Consolidated Statements of Cash Flows for the quarters ended March 31, 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-26
MARKETS CELLULAR LIMITED PARTNERSHIP CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Public Accountants............................................. F-27
Consolidated Balance Sheets as of June 30, 1994, and December 31, 1993 and 1992...... F-28
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-29
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-30
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-31
Notes to Consolidated Financial Statements........................................... F-32
</TABLE>
F-1
<PAGE> 89
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.
/s/ ARTHUR ANDERSEN LLP
Seattle, Washington,
March 15, 1996
F-2
<PAGE> 90
WESTERN WIRELESS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
MARCH 31, --------- ---------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 6,204 $ 8,572 $ 7,787
Accounts receivable, net of allowance for doubtful
accounts of $2,405, $2,800 and $1,772,
respectively........................................ 16,908 18,074 11,635
Inventory.............................................. 9,803 5,361 4,978
Prepaid expenses and other current assets.............. 7,282 4,001 2,369
Deposit held by FCC.................................... 1,500 1,500 10,000
----------- --------- ---------
Total current assets........................... 41,697 37,508 36,769
Property and equipment, net of accumulated depreciation
of $62,802, $53,423 and $25,098, respectively.......... 231,488 193,692 120,648
Licensing costs and other intangible assets, net of
accumulated amortization of $34,836, $28,364 and
$11,701, respectively.................................. 455,371 417,971 211,309
Investments in unconsolidated affiliates................. 7,688 8,388 587
Other assets............................................. 1,202 1,469 881
----------- --------- ---------
$ 737,446 $ 659,028 $ 370,194
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable....................................... $ 16,522 $ 7,568 $ 7,840
Accrued liabilities.................................... 16,311 16,659 11,440
Construction accounts payable.......................... 31,530 28,408 5,102
Unearned revenue and customer deposits................. 4,340 3,301 3,891
Loans from shareholders................................ 10,000
Current portion of long-term debt...................... 941
----------- --------- ---------
Total current liabilities...................... 68,703 55,936 39,214
----------- --------- ---------
Long-term debt, net of current portion................... 438,480 362,487 200,587
----------- --------- ---------
Commitments and contingent liabilities (Notes 9 and 17)
Minority interests in equity of consolidated
subsidiary............................................. 3,376
---------
Shareholders' equity:
Common stock, $.001 par value, and paid-in capital;
300,000,000 shares authorized; 58,731,111
(unaudited), 58,047,235 and 42,983,360 issued and
outstanding, respectively........................... 334,675 324,729 155,187
Deferred compensation.................................. (1,714)
Deficit................................................ (102,698) (84,124) (28,170)
----------- --------- ---------
Total shareholders' equity..................... 230,263 240,605 127,017
----------- --------- ---------
$ 737,446 $ 659,028 $ 370,194
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 91
WESTERN WIRELESS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1995 1994 1993
QUARTER ENDED ---------- ---------- ----------
MARCH 31,
-------------------------
1996 1995
----------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Subscriber revenues............... $ 35,337 $ 18,967 $ 105,430 $ 38,838 $ 11,105
Roamer revenues................... 6,757 4,802 29,660 16,746 7,285
Equipment sales and
other revenue................... 3,941 2,315 11,465 7,524 2,344
----------- ----------- -----------
Total revenues............. 46,035 26,084 146,555 63,108 20,734
----------- ----------- -----------
Operating expenses:
Cost of service................... 8,815 5,786 27,686 13,303 4,310
Cost of equipment sales........... 6,354 3,870 20,705 11,446 3,533
General and administrative........ 12,270 6,254 31,253 15,226 6,253
Sales and marketing............... 13,491 7,164 41,390 18,553 6,101
Depreciation and amortization..... 15,610 10,776 49,456 25,670 5,399
Provision for restructuring
costs........................... 2,478
----------- ----------- -----------
Total operating expenses... 56,540 33,850 170,490 86,676 25,596
----------- ----------- -----------
Operating loss...................... (10,505) (7,766) (23,935) (23,568) (4,862)
----------- ----------- -----------
Other income (expense):
Interest and financing expense.... (8,134) (5,027) (25,428) (10,659) (2,242)
Gain (loss) on dispositions,
net............................. (573) 6,202 10,102
Other, net........................ 65 330 627 2,065 331
----------- ----------- -----------
Total other income
(expense)................ (8,069) (4,697) (25,374) (2,392) 8,191
----------- ----------- -----------
Income (loss) before extraordinary
item.............................. (18,574) (12,463) (49,309) (25,960) 3,329
Extraordinary loss on early
extinguishment of debt............ (6,645)
----------- ----------- -----------
Net income (loss).......... $ (18,574) $ (12,463) $ (55,954) $ (25,960) $ 3,329
=========== =========== ===========
Income (loss) per common share
before extraordinary item......... $ (0.31) $ (0.24) $ (0.87) $ (0.59) $ 0.10
Per common share effect of
extraordinary item................ (0.12)
----------- ----------- -----------
Net income (loss) per common share.. $ (0.31) $ (0.24) $ (0.99) $ (0.59) $ 0.10
=========== =========== ===========
Weighted average common shares and
common equivalent shares
outstanding....................... 59,486,512 52,363,838 56,469,990 43,949,101 32,253,303
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 92
WESTERN WIRELESS CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------- TOTAL
PAR VALUE AND DEFERRED SHAREHOLDERS'
SHARES PAID-IN CAPITAL COMPENSATION DEFICIT EQUITY
---------- --------------- ------------ --------- -------------
<S> <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....... 88,567 1,000 1,000
In exchange for wireless
assets..................... 595,309 7,117 7,117
Deferred compensation
(unaudited).................. 1,829 (1,714) 115
Net loss (unaudited)............ (18,574) (18,574)
---------- ------- -------- ---------- --------
Balance, March 31, 1996
(unaudited)..................... 58,731,111 $ 334,675 $ (1,714) $(102,698) $ 230,263
========== ======= ======== ========== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 93
WESTERN WIRELESS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
QUARTER ENDED YEAR ENDED DECEMBER 31,
MARCH 31, ---------------------------------
------------------------- 1995 1994 1993
1995 --------- --------- ---------
-----------
1996 (UNAUDITED)
-----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income (loss).................................. $ (18,574) $ (12,463) $ (55,954) $ (25,960) $ 3,329
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization.................. 15,610 10,776 49,456 25,670 5,399
Amortization of deferred interest.............. 1,465
Extraordinary loss on early extinguishment of
debt........................................ 6,645
(Gain) loss on dispositions, net............... 573 (6,202) (10,102)
Employee equity compensation................... 115 285 172
Other, net..................................... 248 (65) 527 163
Changes in operating assets and liabilities,
net of effects from consolidating acquired
interests:
Accounts receivable, net.................. 1,741 (926) (5,748) (2,249) (2,303)
Inventory................................. (4,158) 565 (239) (3,454) (150)
Prepaid expenses and other current
assets.................................. (3,190) (113) (1,284) 4,843 111
Accounts payable.......................... 8,171 (3,788) (272) (1,465) 354
Accrued liabilities....................... (735) 1,743 6,421 5,082 1,110
Unearned revenue and customer deposits.... 553 642 (870) 2,299 360
--------- --------- --------
Net cash used in operating activities.......... (219) (3,629) (745) (988) (255)
--------- --------- --------
Investing activities:
Purchase of property and equipment................. (38,587) (11,178) (79,464) (47,423) (25,113)
Purchase of wireless licenses and other............ (4,233) (19,907) (137,805)
Acquisition of wireless properties, net of cash
acquired......................................... (36,045) (16,078) (60,700) (30,566) (25,661)
Proceeds from disposition of assets, net........... 10,163 19,739
Investments in unconsolidated affiliates........... (84) (70) (8,268) (2,364) (1,500)
Purchase of subsidiary stock, including fees....... (1,325) (5,842)
Deposit held by FCC................................ (1,500)
--------- --------- --------
Net cash used in investing activities.......... (78,949) (48,558) (293,579) (70,190) (32,535)
--------- --------- --------
Financing activities:
Proceeds from issuance of common stock, net........ 1,000 143,080 17,008
Additions to long-term debt........................ 75,800 46,000 438,000 214,729 20,726
Payment of debt.................................... (475) (277,015) (135,264) (981)
Deferred financing costs........................... (470) (12,798) (8,688) (541)
Loans from shareholders............................ 3,842 3,842
--------- --------- --------
Net cash provided by financing activities...... 76,800 48,897 295,109 70,777 36,212
--------- --------- --------
Increase (decrease) in cash and cash equivalents..... (2,368) (3,290) 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............. $ 6,204 $ 4,497 $ 8,572 $ 7,787 $ 8,188
========= ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 94
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION:
Western Wireless Corporation (the "Company") is a wireless communications
company that owns and operates wireless communications systems in the western
United States. In 1995, the Company acquired six personal communications
services ("PCS") licenses in an auction administered by the Federal
Communications Commission ("FCC"). The Company plans to initiate wireless
services in these licensed areas by 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, reflect 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 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.
F-7
<PAGE> 95
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED):
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
cellular and PCS licenses. Amortization begins with the commencement of service
to customers and is computed using the straight-line method over 15 years. At
December 31, 1995, operations had not commenced in any of the Company's 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 Securities and Exchange Commission (the "Commission")
regulations, 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 all periods presented, the effect of which is anti-dilutive for
1995 and 1994.
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.
F-8
<PAGE> 96
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED):
Cash paid for interest was $7.9 million (unaudited) and $4.5 million
(unaudited) for the quarters ended March 31, 1996 and 1995, respectively.
Non-cash investing and financing activities were as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1995 1994 1993
QUARTER ENDED ------- ------- ------
--------------
MARCH 31, 1996
--------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Conversion of FCC deposit to wireless
license................................ $10,000
Issuance of common stock in exchange for
wireless assets........................ $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.
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
F-9
<PAGE> 97
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED):
Company does not anticipate any material impact on the financial position,
results of operations or cash flows of the Company upon adoption of these
standards in 1996.
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
MARCH 31, -------- --------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Land, buildings and improvements................ $ 4,277 $ 2,879 $ 2,328
Wireless communications systems................. 201,802 165,825 124,165
Furniture and equipment......................... 21,209 16,273 7,391
-------- --------
227,288 184,977 133,884
Less accumulated depreciation................... (62,802) (53,423) (25,098)
-------- --------
164,486 131,554 108,786
Construction in progress........................ 67,002 62,138 11,862
-------- --------
$ 231,488 $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 $9.4 million (unaudited) and $6.5 million
(unaudited) for the quarters ended March 31, 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 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.
The assets, liabilities and results of operations of Sawtooth and Cook
Inlet PCS are not material to the Company.
F-10
<PAGE> 98
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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,
---------------------
1995 1994
MARCH 31, -------- --------
1996
------------
(UNAUDITED)
<S> <C> <C> <C>
Credit Facility (a)......................... $402,000 $347,000 $197,000
NORTEL Facility (b)......................... 33,800 13,000
Other(c).................................... 2,680 2,487 4,528
-------- --------
438,480 362,487 201,528
Less current portion........................ 941
-------- --------
$438,480 $362,487 $200,587
======== ========
</TABLE>
(a) Credit Facility
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 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, at March
31, 1996 was 7.13% (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
F-11
<PAGE> 99
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. LONG-TERM DEBT -- (CONTINUED):
financial ratios, including among others, maximum leverage, debt service and
fixed charges. As of March 31, 1996 and December 31, 1995, the unused portion of
the commitment under the Credit Facility was $348 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.
(b) 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-12
<PAGE> 100
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 March 31, 1996, the unused portion of the commitment under the NORTEL
Facility was $166.2 million (unaudited). Outstanding borrowings at March 31,
1996 were drawn under the LIBOR rate option with a weighted average interest
rate of 8.00% (unaudited).
(c) Other
At December 31, 1995 and 1994, the Company had other debt of approximately
$2.5 million and $4.5 million, respectively.
The Company expects to amend 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 March 31, 1996 debt maturities reflected
below have been shown as if the proposed amendment is in effect.
The aggregate amounts of principal maturities of the Company's debt are as
follows (in thousands):
<TABLE>
<CAPTION>
TWELVE MONTH PERIODS ENDING
--------------------------------
DECEMBER 31,
MARCH 31, -------------
----------
(UNAUDITED)
<S> <C> <C>
1996..................................... $ 0 $ 0
1997..................................... 0 0
1998..................................... 2,564 2,487
1999..................................... 46 24,290
2000..................................... 7,084 46,410
Thereafter............................... 428,786 289,300
-------- --------
$ 438,480 $ 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. The amount of unrealized loss attributable to
changing interest rates at December 31, 1995 was immaterial.
F-13
<PAGE> 101
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
7. FINANCIAL INSTRUMENTS -- (CONTINUED):
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 March 31, 1996, the Company had interest rate swap and cap agreements
with a total notional amount of $390 million (unaudited), of which $205 million
(unaudited) is of a long-term nature. Total net expense incurred for the quarter
ended March 31, 1996 was approximately $0.2 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 at December
31, 1995, are summarized below (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------------------------------------------------
<S> <C>
1996......................................................... $ 5,429
1997......................................................... 4,914
1998......................................................... 4,261
1999......................................................... 3,388
2000......................................................... 2,604
Thereafter................................................... 5,828
-------
$26,424
=======
</TABLE>
Subsequent to year end, the Company has entered into new operating leases
resulting in additional future minimum payments not reflected above of
approximately $1 million per year through 2001.
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,
F-14
<PAGE> 102
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. COMMITMENTS AND CONTINGENT LIABILITIES -- (CONTINUED):
1995. At March 31, 1996 the Company, under this agreement, had purchased $3.2
million (unaudited) and had outstanding purchase orders totaling $15.8 million
(unaudited).
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 March 31, 1996 the
Company, under this agreement, had purchased $4.1 million (unaudited) and had
outstanding purchase orders totaling $10.4 million (unaudited).
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 March 31, 1996, the Company had purchased
approximately $26.0 million (unaudited) and had outstanding purchase orders
totaling approximately $10.1 million (unaudited).
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-15
<PAGE> 103
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-16
<PAGE> 104
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-17
<PAGE> 105
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
QUARTER ENDED ------------- ------------ ------------
-------------
MARCH 31,
1996
-------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Outstanding, beginning
of period............. 3,538,408 2,181,514 760,272 504,814
Options granted......... 137,320 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........ (10,850 ) (57,469) (13,671) (8,042)
------------- ------------- -------------
Outstanding, end of
period................ 3,664,878 3,538,408 2,181,514 760,272
============= ============= =============
Price of options:
Granted during period... $1.13-$12.90 $11.29-$12.90 $1.10-$ 9.68 $ 4.03
Exercised during
period................ N/A $ 1.61-$ 4.03 N/A N/A
Canceled during period.. $9.68-$12.90 $ 1.10-$ 9.68 $1.61-$ 3.23 $1.61-$ 4.03
Options exercisable..... 1,636,356 1,582,012 1,383,264 232,944
Options available for
future grant 2,186,360 2,312,830 3,708,486 5,129,728
Exercise price of
outstanding options... $1.10-$12.90 $ 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.
F-18
<PAGE> 106
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-19
<PAGE> 107
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-20
<PAGE> 108
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.
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
F-21
<PAGE> 109
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. OTHER ACQUISITIONS AND DISPOSITIONS -- (CONTINUED):
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.
The following table reflects the operating results of the above
transactions since the effective date of the transactions. 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
F-22
<PAGE> 110
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. OTHER ACQUISITIONS AND DISPOSITIONS -- (CONTINUED):
years ended December 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-23
<PAGE> 111
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)
======= ======= ======= =======
</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.
17. SUBSEQUENT EVENTS AND PENDING TRANSACTIONS:
The Company's common stock will be 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
F-24
<PAGE> 112
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
17. SUBSEQUENT EVENTS AND PENDING TRANSACTIONS -- (CONTINUED):
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.
On January 16, 1996, the Company entered into an agreement to purchase a
Denver MTA license for $66 million. The agreement permits the Company to pay up
to $33 million of the purchase price by delivery of a promissory note with a
final maturity 18 months after the closing date. This transaction is anticipated
to close in the second quarter of 1996.
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.
The Company has entered into an agreement to purchase the Kansas 3 RSA
market for approximately $4.1 million. The transaction is anticipated to close
in the second quarter of 1996.
18. REINCORPORATION AND COMMISSION REGISTRATION STATEMENT:
The Company intends to effect a recapitalization pursuant to which the
Company will be authorized to issue 300 million shares 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
intends to effect a reincorporation merger pursuant to which it will merge 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 Senior Subordinated Notes. An affiliate of the Company is expected to
act as an underwriter in the offerings.
F-25
<PAGE> 113
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-26
<PAGE> 114
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-27
<PAGE> 115
MARKETS CELLULAR LIMITED PARTNERSHIP AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER
JUNE 30, DECEMBER 31, 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-28
<PAGE> 116
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-29
<PAGE> 117
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-30
<PAGE> 118
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-31
<PAGE> 119
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-32
<PAGE> 120
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-33
<PAGE> 121
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-34
<PAGE> 122
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-35
<PAGE> 123
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-36
<PAGE> 124
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-37
<PAGE> 125
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-38
<PAGE> 126
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-39
<PAGE> 127
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-40
<PAGE> 128
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-41
<PAGE> 129
UNDERWRITING
Subject to the terms and conditions of the U.S. Underwriting Agreement, the
Company and the Selling Shareholders have agreed to sell to each of the U.S.
Underwriters named below, and each of such U.S. Underwriters, for whom Goldman,
Sachs & Co., Donaldson, Lufkin & Jenrette Securities Corporation, Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Salomon Brothers Inc are acting as
representatives, has severally agreed to purchase from the Company and the
Selling Shareholders, the respective number of shares of Class A Common Stock
set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
U.S. UNDERWRITER CLASS A COMMON STOCK
---------------------------------------------------------------- --------------------
<S> <C>
Goldman, Sachs & Co.............................................
Donaldson, Lufkin & Jenrette Securities Corporation.............
Merrill Lynch, Pierce, Fenner & Smith Incorporated..............
Salomon Brothers Inc............................................
----
Total...................................................... 8,800,000
====
</TABLE>
Under the terms and conditions of the U.S. Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The U.S. Underwriters propose to offer the shares of Class A Common Stock
in part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus, and in part to certain securities dealers at
such price less a concession of $ per share. The U.S. Underwriters may
allow, and such dealers may reallow, a concession not in excess of $
per share to certain brokers and dealers. After the shares of Class A Common
Stock are released for sale to the public, the offering price and other selling
terms may from time to time be varied by the representatives.
The Company has and the Selling Shareholders have entered into an
underwriting agreement (the "International Underwriting Agreement") with the
underwriters of the International Offering (the "International Underwriters")
providing for the concurrent offer and sale of 2,200,000 shares of Class A
Common Stock in the International Offering outside the United States. The
initial public offering price and aggregate underwriting discounts and
commissions per share for the Offerings are identical. The closing of the U.S.
Offering is a condition to the closing of the International Offering, and vice
versa. The representatives of the International Underwriters are Goldman Sachs
International, Donaldson, Lufkin & Jenrette Securities Corporation, Merrill
Lynch International and Salomon Brothers International Limited.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between Syndicates") relating to the Offerings, each
of the U.S. Underwriters named herein has agreed that, as a part of the
distribution of the shares offered hereby, and subject to certain exceptions, it
will offer, sell or deliver the shares offered hereby and the shares of Class A
Common Stock, directly or indirectly, only in the United States of America
(including the States and the District of Columbia), its territories, its
possessions and other areas subject to its jurisdiction (the "United States")
and to U.S. persons, which term shall mean, for purposes of this paragraph: (a)
any individual who is a resident of the United States or (b) any corporation,
partnership or other entity organized in or under the laws of the United States
or any political subdivision thereof and whose office most directly involved
with the purchase is located in the United States. Each of the International
Underwriters has agreed pursuant to the Agreement Between Syndicates that, as a
part of the distribution of the shares offered as a part of the International
Offering, and subject to certain exceptions, it will (i) not, directly or
indirectly, offer, sell or deliver shares of Class A Common Stock (a) in the
United States or to any U.S. persons or (b) to any persons whom it believes
intends to reoffer, resell or deliver the shares in the United States or to any
U.S. persons,
U-1
<PAGE> 130
and (ii) cause any dealer to whom it may sell such shares at any concession to
agree to observe a similar restriction.
Pursuant to the Agreement Between Syndicates, sales may be made between the
U.S. Underwriters and the International Underwriters of such number of shares of
Class A Common Stock as may be mutually agreed. The price of any shares so sold
shall be the initial pubic offering price, less an amount not greater than the
selling concession.
The Company has granted the U.S. Underwriters an option exercisable for 30
days after the date of this Prospectus to purchase up to an aggregate of
1,320,000 additional shares of Class A Common Stock to cover over-allotments, if
any, at the initial public offering price less the underwriting discount, as set
forth on the cover page of this Prospectus. If the U.S. Underwriters exercise
their over-allotment option, the U.S. Underwriters have severally agreed,
subject to certain conditions, to purchase approximately the same percentage
thereof that the number of shares to be purchased by each of them, as shown in
the foregoing table, bears to the 8,800,000 shares of Class A Common Stock
offered hereby. The U.S. Underwriters may exercise such option only to cover
over-allotments in connection with the sale of the 8,800,000 shares of Class A
Common Stock offered hereby. The Company has granted the International
Underwriters a similar option to purchase up to an aggregate of 330,000
additional shares of Class A Common Stock.
The Company, the Selling Shareholders, the Company's executive officers and
directors and certain other shareholders of the Company have agreed that, during
the period beginning from the date of this Prospectus and continuing to and
including the date 180 days after the date of the Prospectus, they will not
offer, sell, contract to sell or otherwise dispose of any securities of the
Company (other than pursuant to employee stock option plans existing on, or upon
the conversion or exchange of convertible or exchangeable securities outstanding
as of, the date of this Prospectus) that are substantially similar to the shares
of Common Stock or which are convertible or exchangeable into securities which
are substantially similar to the shares of Common Stock, without the prior
written consent of the representatives of the U.S. Underwriters, except for the
shares of Common Stock offered in connection with the concurrent U.S. and
International Offerings and certain gift transactions.
Prior to the Offerings, there has been no public market for the Class A
Common Stock. The initial public offering price will be negotiated among the
Company and the representatives of the U.S. Underwriters and the International
Underwriters. Among the factors to be considered in determining the initial
public offering price of the Class A Common Stock, in addition to prevailing
market conditions, are the Company's historical performance, estimates of the
business potential and earnings prospects of the Company, an assessment of the
Company's management and the consideration of the above factors in relation to
the market valuation of companies in related businesses.
Under Schedule E to the By-Laws of the National Association of Securities
Dealers, Inc. (the "NASD"), the Company may be deemed to be an affiliate of
Goldman Sachs. For a description of certain relationships between Goldman Sachs
and their affiliates and the Company, see "Management," "Certain Transactions"
and "Principal and Selling Shareholders." The Offerings are being conducted in
accordance with Schedule E, which provides that, among other things, when an
NASD member participates in the underwriting of an affiliate's equity
securities, the initial public offering price can be no higher than that
recommended by a "qualified independent underwriter" meeting certain standards.
In accordance with this requirement, Donaldson, Lufkin & Jenrette Securities
Corporation has served in such role and will recommend a price in compliance
with the requirements of Schedule E. Donaldson, Lufkin & Jenrette Securities
Corporation will receive compensation from the Company in the amount of $5,000
for serving in such role. In connection with the Offerings, Donaldson, Lufkin &
Jenrette Securities Corporation in its role as qualified independent underwriter
has performed due diligence investigations and reviewed and participated in the
preparation of this Prospectus and the Registration Statement of which this
Prospectus is a part. In
U-2
<PAGE> 131
addition, the Underwriters may not confirm sales to any accounts over which they
exercise discretionary authority without the prior specific written approval by
the customer. The representatives have informed the Company that they do not
expect sales to discretionary accounts by the U.S. Underwriters to exceed five
percent of the total number of shares of Class A Common Stock offered by them.
This Prospectus may be used by underwriters and dealers in connection with
offers and sales of the Class A Common Stock to persons located in the United
States.
Application has been made to have the Class A Common Stock quoted on the
Nasdaq National Market under the symbol "WWCA."
Settlement for the Class A Common Stock will be made in immediately
available funds, and all secondary trading will settle in immediately available
funds.
The Company and the Selling Shareholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act.
U-3
<PAGE> 132
- ------------------------------------------------------
- ------------------------------------------------------
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 AN 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>
Prospectus Summary......................... 3
Risk Factors............................... 12
The Company................................ 22
Use of Proceeds............................ 23
Dividend Policy............................ 23
Dilution................................... 24
Capitalization............................. 25
Selected Consolidated Financial Data....... 26
Management's Discussion and
Analysis of Financial Condition and
Results of Operations.................... 28
Business................................... 41
Description of Indebtedness................ 63
Management................................. 67
Principal and Selling Shareholders......... 73
Certain Transactions....................... 76
Description of Capital Stock............... 80
Shares Eligible for Future Sale............ 82
Validity of Class A Common Stock........... 84
Experts.................................... 84
Additional Information..................... 84
Index to Consolidated Financial
Statements............................... F-1
Underwriting............................... U-1
</TABLE>
------------------
THROUGH AND INCLUDING , 1996 (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE CLASS A COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
11,000,000 SHARES
WESTERN WIRELESS CORPORATION
CLASS A COMMON STOCK
(NO PAR VALUE PER SHARE)
------------------
LOGO
------------------
GOLDMAN, SACHS & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
MERRILL LYNCH & CO.
SALOMON BROTHERS INC
REPRESENTATIVES OF THE UNDERWRITERS
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 133
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the sale of Class A Common Stock being registered (all amounts are
estimated except the SEC Registration Fee, the Nasdaq Listing Fee and the NASD
Filing Fee):
<TABLE>
<S> <C>
SEC Registration Fee.................................... $ 104,690
Nasdaq Listing Fee...................................... 49,125
NASD Filing Fee......................................... 30,500
Blue Sky Qualification Fees and Expenses (including
Legal Fees)........................................... 25,000
Transfer Agent and Registrar Fees....................... 13,000
Legal Fees and Expenses................................. 300,000
Printing Expenses....................................... 250,000
Auditors' Fees and Expenses............................. 165,000
Miscellaneous Expenses.................................. 262,685
-------
TOTAL.............................................. $1,200,000
=======
</TABLE>
ITEM 14. 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 intends to enter 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.
II-1
<PAGE> 134
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The table below sets forth the sales of unregistered securities made by the
registrant or its subsidiaries since July 29, 1994. References to "Common Stock"
below are to the Company's Common Stock, par value $0.001 per share, which, upon
effectiveness of the recapitalization referred to in the Prospectus, will be
converted into shares of Class B Common Stock, no par value. The number of
shares set forth below reflects the 3.1-for-1 split to be effected in the
recapitalization.
<TABLE>
<CAPTION>
NUMBER OF
TITLE AND AMOUNT OF SECURITY DATE OF SALE PURCHASERS(1) EXEMPTION(1)
- -------------------------------------------- ------------------- ------------- ------------
<S> <C> <C> <C>
88,567 shares of Common Stock............... February 1996 1 (2)
515,561 shares of Common Stock.............. February 1996 3 (3)
79,748 shares of Common Stock............... February 1996 2 (4)
3,842,531 shares of Common Stock............ December 1995 1 (5)
217,000 shares of Common Stock.............. December 1995 2 (6)
Exchange Rights exchangeable into 327,882
shares the Common Stock................... November 1995 3 (7)
896,210 shares of Common Stock.............. June 1995 47 (8)
13,241,428 shares of Common Stock........... June 1995 13 (9)
670,475 shares of Common Stock.............. June 1995 23 (10)
38,762 shares of Common Stock............... June-December 1995 6 (11)
45,042,712 shares of Common Stock........... July 1994 74 (12)
</TABLE>
- ---------------
(1) All sales were made to accredited investors in private transactions not
involving any public offering made in reliance upon the exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as
amended (the "Securities Act"). No underwriters were involved. Unless
otherwise indicated, no purchaser was an officer or director of the Company
or holder of more than 5% of any class of the Company's voting securities
(a "5% shareholder"). Please refer to "Certain Transactions" in the
Prospectus for a more detailed description of the transactions in which the
Company's officers, directors and 5% shareholders participated.
(2) Issued to Donald Guthrie in consideration for $999,950.
(3) Issued to the shareholders of Palouse Paging, Inc. ("Palouse"), including
two officers of the Company (one of whom is also a director), in
consideration for all of the issued and outstanding stock of Palouse.
(4) Issued to the shareholders of Sawtooth Paging, Inc. ("Sawtooth"), including
two officers of the Company (one of whom is also a director), other than
the Company, in consideration for the shares of stock of Sawtooth
representing the 55% ownership interest in Sawtooth not held by the
Company.
(5) Issued to GS Capital Partners, L.P. ("GS Capital"), an affiliate of Goldman
Sachs, upon the termination of another Goldman Sachs affiliate, GS Capital
Partners Media Holding I, L.P. (the "Partnership"), which was the
registered owner of 3,842,531 shares of Common Stock that it acquired on
July 29, 1994. Following the distribution of the shares of Common Stock to
the Partnership's partners, GS Capital and GS Capital Partners Media
Holding I, Inc., GS Capital Partners Media Holding I, Inc. merged with and
into the Company and the 2,766,623 shares of Common Stock owned GS Capital
Partners Media Holding I, Inc. were canceled and a like number of shares of
Common Stock were issued to GS Capital. GS Capital reimbursed the Company
for all of the out-of-pocket expenses incurred by the Company in connection
with this transaction. No cash proceeds were received by the Company in
this transaction.
(6) Issued to the shareholders of Deadwood Cellular Telephone Company
("Deadwood"), the unaffiliated owner of the Harding (SD-1) cellular market,
in consideration for all the issued and outstanding stock of Deadwood.
(7) Issued to the general and limited partners of Cook Inlet PV/SS PCS
Partners, L.P., including Providence Media Partners, L.P., the general
partner of Cook Inlet Western Wireless PV/SS PCS, L.P., in which Western
PCS BTA I Corporation, a wholly-owned subsidiary of the Company, is the
sole limited partner.
II-2
<PAGE> 135
(8) Exchanged for 8,963 shares of common stock of GCC with purchasers including
three officers of the Company. A Form D with respect to such sale was filed
with the Securities and Exchange Commission under Regulation D under the
Securities Act.
(9) Issued in exchange for commitments to purchase 4,271,428 shares of Series A
Preferred Stock of Western PCS Corporation by the holders thereof including
the Hellmen Entities, the Goldman Sachs Entities, Providence Ventures,
L.P., and two directors (one of whom is also an officer) and one officer of
the Company. Commitments to purchase shares of Series A Preferred Stock in
the aggregate amount of $149.5 million were received by Western PCS
Corporation in April 1995. A Form D with respect to such sale was filed
with the Securities and Exchange Commission under Regulation D under the
Securities Act.
(10) Issued to certain then-existing shareholders for total proceeds of $7.6
million. A Form D with respect to such sale was filed with the Securities
and Exchange Commission under Regulation D under the Securities Act.
(11) Issued upon exercise of stock options for total proceeds of $78,000.
(12) Issued in connection with the Business Combination. A Form D with respect
to such sale was filed with the Securities and Exchange Commission under
Regulation D under the Securities Act. See "Certain Transactions."
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a)Exhibits:
<TABLE>
<S> <C> <C>
1.1++ -- Form of U.S. Underwriting Agreement
1.2++ -- Form of International Underwriting Agreement
3.1 -- Amended and Restated Articles of Incorporation of the Registrant
3.2 -- Bylaws of the Registrant
5.1 -- Opinion of Preston Gates & Ellis
10.1** -- Loan Agreement between Western PCS II Corporation and Northern Telecom
Inc., dated June 30, 1995
10.2***P -- PCS 1900 Project and Supply Agreement between Western PCS Corporation and
Northern Telecom Inc., dated June 30, 1995
10.3*P -- 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***P -- Supply Contract by and between Western PCS Corporation and Nokia
Telecommunications Inc., dated December 14, 1995
10.7***P -- 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
</TABLE>
II-3
<PAGE> 136
<TABLE>
<S> <C> <C>
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***P -- 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
</TABLE>
II-4
<PAGE> 137
<TABLE>
<S> <C> <C>
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+++ -- Form of Indenture relating to Senior Subordinated Notes due 2006
10.36++ -- Subscription and Put and Call Agreement with respect to shares of Common
Stock of Western Wireless International Corporation, dated as of January 1,
1996
10.37++ -- 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., SS PCS Corporation and
Providence Media Partners L.P. dated as of November 5, 1996
10.38++ -- 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
10.39++ -- 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 Partners L.P. dated as of April 8,
1996
10.40 -- 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
21++ -- List of material subsidiaries
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Preston Gates & Ellis (see Exhibit 5.1)
24++ -- Power of Attorney
</TABLE>
- ---------------
<TABLE>
<C> <S>
* Portions of this Exhibit (i) were filed previously with the Company's Registration
Statement on Form S-1 (Commission File No. 333-2432); (ii) are being filed in paper
format subject to a request under Rule 202(d) of Regulation S-T (the "Hardship
Exemption"); and (iii) have been omitted and filed separately with the Secretary of the
Commission pursuant to the Registrant's Application Requesting Confidential Treatment
under Rule 406 of the Act (the "Confidentiality Request").
** Filed previously with the Company's Registration Statement on Form S-1 (Commission File
No. 333-2432) and portions of this Exhibit were omitted and filed separately with the
Secretary of the Commission pursuant to the Confidentiality Request.
*** Portions of this Exhibit (i) are being filed in paper format subject to the Hardship
Exemption; and (ii) have been omitted and filed separately with the Secretary of the
Commission pursuant to the Confidentiality Request.
++ Filed previously with the Company's Registration Statement on Form S-1 (Commission File
No. 333-2432)
+++ Incorporated herein by reference to the exhibit filed with the Company's Registration
Statement on Form S-1 (Commission File No. 333-2688).
</TABLE>
(b) Financial Statement Schedule:
Schedule II -- Valuation and Qualifying Accounts and Reserves (see
F-26)
II-5
<PAGE> 138
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreements certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
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.
The undersigned registrant hereby undertakes that:
(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;
(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 and of the estimated
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 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, 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 the 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.
(4) 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.
(5) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-6
<PAGE> 139
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized on this 15th day of May,
1996.
WESTERN WIRELESS CORPORATION
By /s/ ALAN R. BENDER
------------------------------------
Alan R. Bender
Senior Vice President, General
Counsel
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed below on May 15, 1996 by the following
persons in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE
- --------------------------------------------- ---------------------------------------------
<C> <S>
* 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
* Director
- ---------------------------------------------
David A. Bayer
* Director
- ---------------------------------------------
John L. Bunce, Jr.
* Director
- ---------------------------------------------
Mitchell R. Cohen
* Director
- ---------------------------------------------
Jonathan M. Nelson
* Director
- ---------------------------------------------
Terence M. O'Toole
*By /s/ ALAN R. BENDER
- ---------------------------------------------
Alan R. Bender
Attorney-in-Fact
</TABLE>
II-7
<PAGE> 140
REGISTRATION NO. 333-2432
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
EXHIBITS
TO
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
WESTERN WIRELESS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 141
INDEX TO EXHIBITS
<TABLE>
<S> <C> <C>
1.1++ -- Form of U.S. Underwriting Agreement
1.2++ -- Form of International Underwriting Agreement
3.1 -- Amended and Restated Articles of Incorporation of the Registrant
3.2 -- Bylaws of the Registrant
5.1 -- Opinion of Preston Gates & Ellis
10.1** -- Loan Agreement between Western PCS II Corporation and Northern Telecom
Inc., dated June 30, 1995
10.2***P -- PCS 1900 Project and Supply Agreement between Western PCS Corporation and
Northern Telecom Inc., dated June 30, 1995
10.3*P -- 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***P -- Supply Contract by and between Western PCS Corporation and Nokia
Telecommunications Inc., dated December 14, 1995
10.7***P -- 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
</TABLE>
<PAGE> 142
<TABLE>
<S> <C> <C>
10.21***P -- 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 April 16, 1996.
10.35+++ -- Form of Indenture relating to Senior Subordinated Notes due 2006
10.36++ -- Subscription and Put and Call Agreement with respect to shares of Common
Stock of Western Wireless International Corporation, dated as of January
1, 1996
10.37++ -- 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
10.38++ -- 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
10.39++ -- 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, Providence Media Partners L.P. dated as of April 8,
1996
</TABLE>
<PAGE> 143
<TABLE>
<S> <C> <C>
10.40 -- 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.
21++ -- List of material subsidiaries
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Preston Gates & Ellis (see Exhibit 5.1)
24++ -- Power of Attorney
</TABLE>
- ---------------
<TABLE>
<C> <S>
* Portions of this Exhibit (i) were filed previously with the Company's Registration
Statement on Form S-1 (Commission File No. 333-2432); (ii) are being filed in paper
format subject to a request under Rule 202(d) of Regulation S-T (the "Hardship
Exemption"); and (iii) have been omitted and filed separately with the Secretary of the
Commission pursuant to the Registrant's Application Requesting Confidential Treatment
under Rule 406 of the Act (the "Confidentiality Request").
** Filed previously with the Company's Registration Statement on Form S-1 (Commission File
No. 333-2432) and portions of this Exhibit were omitted and filed separately with the
Secretary of the Commission pursuant to the Confidentiality Request.
*** Portions of this Exhibit (i) are being filed in paper format subject to the Hardship
Exemption; and (ii) have been omitted and filed separately with the Secretary of the
Commission pursuant to the Confidentiality Request.
++ Filed previously with the Company's Registration Statement on Form S-1 (Commission File
No. 333-2432).
+++ Incorporated herein by reference to the exhibit filed with the Company's Registration
Statement on Form S-1 (Commission File No. 333-2688).
</TABLE>
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
WESTERN WIRELESS CORPORATION II
ARTICLE I
The name of the corporation is WESTERN WIRELESS CORPORATION II.
ARTICLE II
2.1 Authorized Shares. The total number of shares of stock that the
corporation shall have authority to issue is three hundred fifty million
(350,000,000), which shall consist of three hundred million (300,000,000) shares
of Common Stock, no par value per share ("Common Stock"), and fifty million
(50,000,000) shares of Preferred Stock, no par value per share ("Preferred
Stock"). Of the Common Stock, two hundred thirty-seven million two hundred
seventy-six thousand one hundred twenty-nine (237,276,129) shares initially
shall be classified as Class A Common Stock, no par value per share ("Class A
Common Stock"), and sixty-two million seven hundred twenty-three thousand eight
hundred seventy-one (62,723,871) shares initially shall be classified as Class B
Common Stock, no par value per share ("Class B Common Stock"). As shares of
Class B Common Stock are converted into shares of Class A Common Stock as
specified in Section 2.2(c), the number of shares classified as Class B Common
Stock shall be reduced and the number of shares classified as Class A Common
Stock shall be increased on a one-for-one basis.
2.2 Rights and Preferences of Common Stock. Except as expressly
provided in this Article II, Class A Common Stock and Class B Common Stock shall
have the same rights and privileges and shall rank equally, share ratably and be
identical in all respects as to all matters. The holders of Class A Common Stock
and Class B Common Stock shall have the following rights and preferences,
subject to the rights and preferences of holders of Preferred Stock, as
determined by the Board of Directors pursuant to Section 2.3 of this Article II.
(a) Dividends. Holders of Class A Common Stock and Class B
Common Stock shall be entitled to receive such dividends, payable in cash or
otherwise, as may be declared thereon by the Board of Directors from time to
time out of assets or funds of the corporation that are legally available
therefor; provided, however, that the Board of Directors shall declare no
dividend, and no dividend shall be paid, with respect to any outstanding share
of Class A Common stock or Class B Common Stock, whether paid in cash or
property (including, without limitation, shares of Class A Common Stock paid on
or with respect to shares of Class A Common Stock or shares of Class B Common
Stock paid on or with respect to shares of Class B Common Stock (collectively,
"Stock Dividends")), unless, simultaneously, the same dividend (in the case of
Stock Dividends, stock of the class on or with respect to which the dividend is
paid in the same percentage, relative to the total number of shares of such
class issued and outstanding immediately prior to the payment of such dividend,
as the Stock Dividend on or with respect to the other class bears to the number
of shares issued and outstanding immediately prior to the
<PAGE> 2
payment of such dividend) is paid with respect to each share of Class A Common
Stock and Class B Common Stock, except that in the case of any dividend in the
form of capital stock of a subsidiary of the corporation, the capital stock of
the subsidiary distributed to holders of Class A Common Stock may differ from
the capital stock of the subsidiary distributed to holders of Class B Common
Stock to the extent and only to the extent that the Class A Common Stock and the
Class B Common Stock differ as provided herein. Stock Dividends with respect to
Class A Common Stock may only be paid with shares of Class A Common Stock and
Stock Dividends with respect to Class B Common Stock may only be paid with
shares of Class B Common Stock.
(b) Voting.
(i) On all matters upon which shareholders are entitled
to vote, every holder of Class A Common Stock shall be entitled to one (1) vote
in person or by proxy for each share of Class A Common Stock standing in its
name on the transfer books of the corporation and every holder of Class B Common
Stock shall be entitled to ten (10) votes in person or by proxy for each share
of Class B Common Stock standing in its name on the transfer books of the
corporation.
(ii) The holders of Class A Common Stock and Class B Common
Stock shall vote together as a single class.
(iii) (A) Notwithstanding anything to the contrary contained
in these Articles of Incorporation, if a Regulated Shareholder and its
Affiliates own and have the right to vote shares of Common Stock having
aggregate Voting Power in excess of 24.9% (the "Maximum Voting Percentage") of
the Total Voting Power, then, for so long as such Regulated Shareholder and its
Affiliates shall own and have the right to vote shares of Common Stock having
aggregate Voting Power in excess of the Maximum Voting Percentage, that number
of shares of Common Stock which results in such Regulated Shareholder and its
Affiliates having aggregate Voting Power in excess of the Maximum Voting
Percentage shall not be entitled to vote on any matter on which the shareholders
of the corporation shall be entitled to vote, and such number of shares shall
not be included in determining the number of shares voting or entitled to vote
on any such matters.
(B) As used in this Section 2.2(b)(iii) and Section
10.1, the following terms shall have the following meanings:
(1) "Affiliate" shall mean with respect to any
Person, any other Person, directly or indirectly controlling, controlled by or
under common control with such Person. For the purpose of the above definition,
the term "control" (including with correlative meaning, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or by contract or otherwise.
-2-
<PAGE> 3
(2) "Person" shall mean an individual, a
partnership, a corporation, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or a governmental entity or any
department, agency or political subdivision thereof.
(3) "Regulated Shareholder" shall mean any holder
of shares of capital stock of the Company that is, or an Affiliate of which is,
subject to the provisions of Rule 312(g) of the General Rules of the New York
Stock Exchange (or any successor to such Rule) and was, or its Affiliate was, a
holder of shares of capital stock of the Company at April 1, 1996.
(4) "Total Voting Power" shall mean the total
number of votes attributable to all shares of capital stock of the corporation
outstanding and entitled to vote on any particular matter, other than the number
of shares, if any, held by the Regulated Shareholders or their Affiliates which,
pursuant to this Section 2.2(b)(iii), are non-voting.
(5) "Voting Power" shall mean the number of votes
attributable to the total number of shares of capital stock of the corporation
owned by a Regulated Shareholder and its Affiliates and with respect to which
they shall have the right to vote on any particular matter before giving effect
to this Section 2.2(b)(iii).
(c) Conversion of Class B Common Stock.
(i) Each outstanding share of Class B Common Stock, at the
option of the holder thereof, may be converted at any time into one (1) share of
Class A Common Stock. Any such conversion shall be effected by the presentation
and surrender of the certificates that represent the shares of Class B Common
Stock to be converted, at the principal executive offices of the corporation or
at such other place as may from time to time be designated by the corporation,
in such form and accompanied by all transfer taxes (or proof of payment
thereof), if any, as shall be required for such transfer, and upon such
surrender, the holder of such shares shall be entitled to receive in exchange
therefor certificates for fully paid and nonassessable shares of Class A Common
Stock at the rate aforesaid, and such holder shall be registered as the holder
of such shares of Class A Common Stock.
(ii) In addition to and notwithstanding the foregoing, upon
any Transfer of shares of Class B Common Stock, such shares shall be converted
automatically into a like number of shares of Class A Common Stock. Immediately
upon the occurrence of a Transfer, and without any action on the part of any
shareholder whose shares are subject to automatic conversion hereunder, the
corporation or any other person or entity, the relevant shares of Class B Common
Stock shall be deemed converted into the same number of shares of Class A Common
Stock. From and after the time of the Transfer, any such certificates for Class
B Common Stock shall no longer represent shares of Class B Common Stock but
instead shall represent the sum of the number of shares of Class A Common Stock
and the right to have registered in the name of the transferee of such stock the
shares of Class A Common Stock issuable to such transferee as a result of such
conversion. The Class A Common Stock issuable upon any such conversion shall be
so registered and the certificates with respect to such stock shall be issued by
the corporation upon the surrender of the certificates that represent the Class
B
-3-
<PAGE> 4
Common Stock immediately prior to the Transfer, duly endorsed to the
corporation or in blank or accompanied by proper instruments of transfer to the
corporation or in blank (such endorsements or instruments of transfer to be in
form satisfactory to the corporation).
(iii) As used in this Section 2.2(c), the following
terms shall have the following meanings:
(A) "Affiliate" shall mean and be limited to the
following Persons: (1) with respect to any Original Shareholder who is a natural
person, that Original Shareholder's spouse, children (including adopted
children), grandchildren or parents or a trust for the benefit of, or a
partnership all of the partners of which are, such Original Shareholder or such
Original Shareholder's spouse, children (including adopted children),
grandchildren or parents; or (2) with respect to any Original Shareholder which
is a limited partnership, (a) any Person that, at the time the Original
Shareholder first obtained shares of Class B Common Stock, was the sole general
partner of such Original Shareholder or was the sole general partner of the sole
general partner of such Original Shareholder, or (b) another limited partnership
which has a sole general partner, the control of which sole general partner is
held, directly or indirectly, by five or fewer natural Persons, provided such
natural Persons had control of the sole general partner of such Original
Shareholder at the time such Original Shareholder first obtained shares of Class
B Common Stock.
(B) "Control" shall mean ownership of more than 50% of
the equity interest in, and more than 50% of the voting power on all matters of,
the sole general partner.
(C) "Original Shareholder" shall mean each Person to
whom the corporation originally issues shares of Class B Common Stock at the
initial issuance thereof.
(D) "Person" shall mean an individual, a partnership,
a corporation, an association, a joint stock company, a trust, a joint venture,
an unincorporated organization or a governmental entity or any department,
agency or political subdivision thereof.
(E) "Transfer" shall mean the sale, assignment,
transfer, gift, pledge or hypothecation (unless such pledge or hypothecation is
with full recourse against the transferor) or other disposition, whether
voluntary or involuntary, of Class B Common Stock to any person other than an
Affiliate of the Original Shareholder which initially held the shares being
transferred.
(d) Subdivisions and Combinations of Shares. If the corporation in
any manner subdivides or combines the outstanding shares of one class of Common
Stock, the outstanding shares of the other class of Common Stock will be
likewise subdivided or combined.
(e) Liquidation or Dissolution. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the corporation, holders
of Class A Common Stock and holders of Class B Common Stock shall receive an
equal per share distribution of any assets
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remaining after payment or provision for liabilities and the liquidation
preference on Preferred Stock, if any.
(f) Effective Time. Effective as of the filing of these Amended and
Restated Articles of Incorporation with the Secretary of State of the State of
Washington pursuant to the Washington Business Corporation Act (the "Act"), all
of the authorized shares of common stock, no par value per share, of the
corporation issued and outstanding immediately prior to such filing
("Outstanding Common Stock"), without any action on the part of the holders
thereof or any other person, shall be converted automatically into shares of
Class B Common Stock at a rate of one share of Class B Common Stock for each
share of Outstanding Common Stock, all of which shall be fully paid and
nonassessable. Upon the surrender of the certificates that represent shares of
Outstanding Common Stock, at the principal executive offices of the corporation
or at such other place as may from time to time be designated by the
corporation, in such form and accompanied by all transfer taxes (or proof of
payment thereof), if any, as shall be required for such transfer, and upon such
surrender, subject to Section 4.2(c)(ii), the holder of such shares shall be
entitled to receive in exchange therefor certificates for fully paid and
nonassessable shares of Class B Common Stock at the rate aforesaid, and such
holder shall be registered as the holder of such shares of Class B Common Stock.
2.3 Rights and Preferences of Preferred Stock. The Board of Directors
shall have the full authority permitted by law to divide the authorized and
unissued shares of Preferred Stock into series, and to provide for the issuance
of such shares in an aggregate amount not exceeding in the aggregate the number
of shares of Preferred Stock authorized by these Articles of Incorporation, as
amended from time to time, and to determine with respect to each such series the
voting powers, if any (which voting powers, if granted, may be full or limited),
designations, preferences and relative, participating, optional or other special
rights, and the qualifications, limitations or restrictions relating thereto,
including without limiting the generality of the foregoing, the voting rights
relating to shares of Preferred Stock of any series (which may be one or more
votes per share or a fraction of a vote per share, which may vary over time and
which may be applicable generally or only upon the happening and continuance of
stated events or conditions), the rate of dividend to which holders of Preferred
Stock of any series may be entitled (which may be cumulative or noncumulative),
the rights of holders of Preferred Stock of any series in the event of
liquidation, dissolution or winding up of the affairs of the corporation, the
rights, if any, of holders of Preferred Stock of any series to convert or
exchange such shares of Preferred Stock of such series for shares of any other
series of capital stock or for any other securities, property or assets of the
corporation (including the determination of the price or prices or the rate or
rates applicable to such rights to convert or exchange and the adjustment
thereof, the time or times during which the right to convert or exchange shall
be applicable and the time or times during which a particular price or rate
shall be applicable), whether or not the shares of that series shall be
redeemable, and if so, the terms and conditions of such redemption, including
the date or dates upon or after which they shall be redeemable, and the amount
per share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates, and whether any shares of that
series shall be redeemed pursuant to a retirement or sinking fund or otherwise
and the terms and conditions of such obligation.
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Before the corporation shall issue any shares of Preferred Stock of any
series, articles of amendment in a form meeting the requirements of the Act
setting forth the terms of the series and fixing the voting powers,
designations, preferences, the relative, participating, optional or other
special rights, if any, and the qualifications, limitations and restrictions, if
any, relating to the shares of Preferred Stock of such series, and the number of
shares of Preferred Stock of such series authorized by the Board of Directors to
be issued shall be filed with the Secretary of State of the State of Washington
in the manner prescribed by the Act, and shall become effective without any
shareholder action. The Board of Directors is further authorized to increase or
decrease (but not below the number of such shares of such series then
outstanding) the number of shares of any series subsequent to the issuance of
shares of that series.
2.4 Issuance of Stock. The shares of capital stock of the corporation
may be issued by the corporation from time to time for such consideration as
from time to time may be fixed by the Board of Directors of the corporation; and
all issued shares of the capital stock of the corporation shall be deemed fully
paid and non-assessable.
ARTICLE III
The street address of the registered office of the corporation in the
State of Washington is 520 Pike Street, Suite 1450, Seattle, Washington 98101
and the name of the registered agent of the corporation at such address is The
Prentice-Hall Corporation Systems, Inc.
ARTICLE IV
A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for conduct as a director,
except for:
a. Acts or omissions involving intentional misconduct by the director or
a knowing violation of law by the director;
b. Conduct violating Section 23B.08.310 of the Act (which involves
liability for unlawful distributions by the corporation);
c. Any transaction from which the director will personally receive a
benefit in money, property, or services to which the director is not legally
entitled.
If the Act is amended to authorize corporate action further eliminating or
limiting the personal liability of directors or officers, then the liability of
a director or officer of the corporation shall be eliminated or limited to the
fullest extent permitted by the Act, as so amended. The provisions of this
Article IV shall be deemed to be a contract with each director and officer of
the corporation who serves as such at any time while such provisions are in
effect, and each director and officer entitled to the benefits hereof shall be
deemed to be serving as such in reliance on the provisions of this Article IV.
Any repeal or modification of this Article IV by the shareholders of the
corporation shall not adversely affect any right or protection of a director or
officer of the corporation with respect to any acts or omissions of such
director or officer occurring prior to such repeal or modification.
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ARTICLE V
5.1 Indemnification. The corporation shall indemnify its directors and
officers to the full extent permitted by applicable law. The corporation shall
advance expenses for such persons pursuant to the terms set forth in the Bylaws,
or in a separate directors' resolution or contract.
5.2 Authorization. The Board of Directors may take such action as is
necessary to carry out these indemnification and expense advancement provisions.
It is expressly empowered to adopt, approve, and amend from time to time such
Bylaws, resolutions, contracts, or further indemnification and expense
advancement arrangements implementing these provisions as may be permitted by
law, including the purchase and maintenance of insurance. Such Bylaws,
resolutions, contracts, or further arrangements shall include but not be limited
to implementing the manner in which determinations as to any indemnity or
advancement of expenses shall be made.
5.3 Amendment. No amendment or repeal of this Article V shall apply to
or have any effect on any right to indemnification provided hereunder with
respect to acts or omissions occurring prior to such amendment or repeal.
ARTICLE VI
Shareholders of the corporation shall not have preemptive rights to acquire
additional shares issued by the corporation.
ARTICLE VII
Shareholders of the corporation shall not have cumulative voting
rights.
ARTICLE VIII
8.1 Number of Directors. The number of directors of the corporation
shall be specified in the Bylaws, and such number may from time to time be
increased or decreased in such manner as may be prescribed in the Bylaws.
8.2 Removal. Any director or the entire Board of Directors may be
removed from office at any time, at a duly called special meeting of
shareholders, by the affirmative vote of shareholders which satisfies the
requirements of Article X applicable to amendment, modification, or repeal of
these Articles.
8.3 Vacancies. Vacancies in the Board of Directors, including vacancies
resulting from an increase in the number of directors, shall be filled by a
majority of the directors then in office, though less than a quorum, by the sole
remaining director or by action of the shareholders. All directors elected to
fill vacancies shall hold office for a term expiring at the next annual meeting
of shareholders, but shall continue to serve despite the expiration of the
director's term until his or her successor shall have been elected and qualified
or until there is a decrease in the
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number of directors. No decrease in the number of directors constituting the
Board of Directors shall shorten or eliminate the term of any incumbent
director.
ARTICLE IX
9.1 Redemption. Notwithstanding any other provision of these Articles
of Incorporation to the contrary, outstanding shares of capital stock of the
corporation held by Disqualified Holders shall always be subject to redemption
by the corporation, by action of the Board of Directors, if, in the judgment of
the Board of Directors, such action should be taken, pursuant to RCW 23B.06.010
or any other applicable provision of law, to the extent necessary to prevent the
loss or secure the reinstatement of any license or franchise from any
governmental agency held by the corporation or any of its subsidiaries to
conduct any portion of the business of the corporation or any of its
subsidiaries, which license or franchise is conditioned upon some or all of the
holders of the corporation's stock possessing prescribed qualifications. The
terms and conditions of such redemption shall be as follows:
(a) the redemption price of the shares to be redeemed pursuant to
this Article IX shall be equal to the lesser of (i) the Fair Market Value or
(ii) if such stock was purchased by such Disqualified Holder within one year of
the Redemption Date, such Disqualified Holder's purchase price for such shares;
(b) the redemption price of such shares may be paid in cash,
Redemption Securities or any combination thereof;
(c) if less than all the shares held by Disqualified Holders are
to be redeemed, the shares to be redeemed shall be selected in such manner as
shall be determined by the Board of Directors, which may include selection first
of the most recently purchased shares thereof, selection by lot or selection in
any other manner determined by the Board of Directors;
(d) at least 30 days' written notice of the Redemption Date shall
be given to the record holders of the shares selected to be redeemed (unless
waived in writing by any such holder); provided, however, that only 10 days'
written notice of the Redemption Date shall be given to record holders if the
cash or Redemption Securities necessary to effect the redemption shall have been
deposited in trust for the benefit of such record holders and subject to
immediate withdrawal by them upon surrender of the stock certificates for their
shares to be redeemed; provided, further, that the record holders of the shares
selected to be redeemed may transfer such shares prior to the Redemption Date to
any holder that is not a Disqualified Holder and thereafter, for so long as such
shares are not held by a Disqualified Holder, such shares shall not be subject
to redemption by the corporation;
(e) from and after the Redemption Date, any and all rights of
whatever nature (including without limitation any rights to vote or participate
in dividends declared on stock of the same class or series as such shares) with
respect to the shares selected from redemption held by Disqualified Holders on
the Redemption Date shall cease and terminate and such Disqualified Holders
thenceforth shall be entitled only to receive the cash or Redemption Securities
payable upon redemption; and
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(f) such other terms and conditions as the Board of Directors
shall determine.
9.2 Definitions. For purposes of this Article IX:
(a) "Disqualified Holder" shall mean any holder of capital shares
of stock of the corporation whose holding of such stock, either individually or
when taken together with the holding of shares of capital stock of the
corporation by any other holders, may result, in the judgment of the Board of
Directors, in the loss of, or the failure to secure the reinstatement of, any
license or franchise from any governmental agency held by the corporation or any
of its subsidiaries or affiliates to conduct any portion of the business of the
corporation or any of its subsidiaries or affiliates.
(b) "Fair Market Value" of a share of the corporation's stock of
any class or series shall mean the average Closing Price for such a share for
each of the forty-five (45) most recent days on which shares of stock of such
class or series shall have been traded preceding the day on which notice of
redemption shall be given pursuant to Section 9.1(d) of this Article IX;
provided, however, that if shares of stock of such class or series are not
traded on any United States securities exchange registered under the Securities
Exchange Act of 1934 (a "Securities Exchange") or in the National Association of
Securities Dealers, Inc. Automated Quotations Systems or any other system then
in use (a "Quotation System"), "Fair Market Value" shall be determined by the
Board of Directors in good faith. For purposes of this definition "Closing
Price" on any day means the reported closing sales price or, in case no such
sale takes place, the average of the reported closing bid and asked prices on
the principal Securities Exchange on which such stock is listed, or, if such
stock is not listed on any such exchange, the highest closing sales price or bid
quotation for such stock on the applicable Quotation System.
(c) "Redemption Date" shall mean the date fixed by the Board of
Directors for the redemption of any shares of stock of the corporation pursuant
to this Article IX.
(d) "Redemption Securities" shall mean any debt or equity
securities of the corporation, any of its subsidiaries or affiliates or any
other corporation, or any combination thereof, having such terms and conditions
as shall be approved by the Board of Directors and which, together with any cash
to be paid as part of the redemption price, in the opinion of any nationally
recognized investment banking firm selected by the Board of Directors (which may
be a firm which provides other investment banking, brokerage or other services
to the corporation), has a value, at the time notice of redemption is given
pursuant to Section 9.1(d) of this Article IX, at least equal to the price
required to be paid pursuant to Section 9.1(a) of this Article IX (assuming, in
the case of Redemption Securities to be publicly traded, such Redemption
Securities were fully distributed and subject only to normal trading activity).
ARTICLE X
10.1 Repeal of and Amendment to Articles of Incorporation. Unless
otherwise provided herein, the provisions of these Articles of Incorporation may
be repealed or amended upon the affirmative vote of the holders of not less than
a majority of the Total Voting Power of
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the corporation. The provisions set forth in Article VI, Article VII, Article IX
and this sentence of Section 10.1 of Article X herein may not be repealed or
amended in any respect, unless such action is approved by the affirmative vote
of the holders of not less than 66-2/3% of the Total Voting Power.
10.2 Repeal of and Amendment to Bylaws. In furtherance and not in
limitation of the powers conferred by the Act, the Board of Directors is
expressly authorized to make, adopt, repeal, alter, amend, and rescind the
Bylaws of the corporation by a resolution adopted by a majority of the
directors. The shareholders shall also have the power to adopt, amend or repeal
the Bylaws of the corporation as set forth therein.
10.3 Special Meetings of Shareholders. Special meetings of the
shareholders of the corporation for any purpose may be called at any time by the
Board of Directors or an authorized committee of the Board of Directors, but
such special meetings may not be called by any other person or persons.
10.4 Conflicting Interests. The corporation may enter into contracts and
otherwise transact business as vendor, purchaser, or otherwise, with its
directors, officers, and shareholders and with corporations, associations, firms
and entities in which they are or may be or become interested as directors,
officers, shareholders, members, or otherwise, as freely as though such diverse
interests did not exist, even though the vote, action, or presence of such
director, officer, or shareholder may be necessary to obligate the corporation
upon such contracts or transactions. In accordance with the Bylaws and in
absence of fraud, and provided such contract or transaction is approved in
accordance with Chapter 23B.08 of the Revised Code of Washington, no such
contract or transaction shall be avoided and no such director, officer, or
shareholder shall be held liable to account to the corporation, by reason of
such conflicting interests or by reason of any fiduciary relationship to the
corporation arising out of such office or stock ownership, for any profit or
benefit realized by him through any such contract or transaction, provided that
in the case of directors, officers, and shareholders of the corporation, (a) the
existence and nature of the interest of such director, officer, or shareholder,
and (b) all facts known to such director, officer, or shareholder respecting the
subject matter of the transaction that an ordinarily prudent person would
reasonably believe to be material to judgment about whether or not to proceed
with the transaction, be disclosed or known to the Board of Directors of this
corporation, at the meeting thereof at which such contract or transaction is
authorized or confirmed.
10.5 Significant Transactions. The corporation shall be subject to the
provisions of Chapter 23B.19 of the Revised Code of Washington, as amended from
time to time, provided, however, that if such Chapter ever is amended to take
away the substantive rights conferred thereby or is repealed, the corporation
shall remain subject to the Chapter, and the Chapter, as it exists as of June
10, 1996, shall be incorporated into these Articles of Incorporation by this
reference.
XXXXXXXXXXXXXXXXXXXXXXXXXXX
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EXHIBIT 3.2
BYLAWS
OF
WESTERN WIRELESS CORPORATION II
ARTICLE I
SHAREHOLDERS
Section 1. Annual Meeting. An annual meeting of the shareholders for the
election of directors and for the transaction of such other business as may
properly come before the meeting shall be held each year on the date and at the
time determined by the Board of Directors. The failure to hold an annual meeting
at the time fixed in accordance with these Bylaws does not affect the validity
of any corporate action.
Section 2. Special Meetings. Except as otherwise provided by law,
special meetings of shareholders of this Corporation shall be held whenever
called by the Board of Directors or an authorized committee of the Board of
Directors in accordance with the provisions of these Bylaws.
Section 3. Place of Meetings. Meetings of shareholders shall be held at
such place within or without the State of Washington as determined by the Board
of Directors, pursuant to proper notice.
Section 4. Notice. Written notice of each shareholders' meeting stating
the date, time, and place and, in case of a special meeting, the purpose(s) for
which such meeting is called, shall be given by the Corporation not less than
ten (10) (unless a greater period of notice is required by law in a particular
case) nor more than sixty (60) days prior to the date of the meeting, to each
shareholder of record entitled to vote at such meeting unless required by law to
send notice to all shareholders regardless of whether or not such shareholders
are entitled to vote, to the shareholder's address as it appears on the current
record of shareholders of this Corporation.
Section 5. Waiver of Notice. A shareholder may waive any notice required
to be given by these Bylaws, the Articles of Incorporation of this Corporation,
as amended and restated from time to time (the "Articles of Incorporation"), or
the Washington Business Corporation Act, as amended from time to time (the
"Act"), before or after the meeting that is the subject of such notice. A valid
waiver is created by any of the following three methods: (a) in writing, signed
by the shareholder entitled to the notice and delivered to the Corporation for
inclusion in its corporate records; (b) attendance at the meeting, unless the
shareholder at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting; or (c) as to the consideration of a
particular matter that is not within the purpose or purposes described in the
meeting notice, the shareholders' failure to object at the time of presentation
of such matter for consideration.
<PAGE> 3
Section 6. Quorum of Shareholders. At any meeting of the shareholders,
holders of a majority of the Total Voting Power, represented by shareholders of
record in person or by proxy, shall constitute a quorum. For purposes of these
Bylaws, "Total Voting Power" shall mean the total number of votes attributable
to all shares of capital stock of the Corporation outstanding and entitled to
vote on any particular matter, other than the number of shares, if any, which
are non-voting.
Once a share is represented at a meeting, other than to object to holding
the meeting or transacting business, it is deemed to be present for quorum
purposes for the remainder of the meeting and for any adjournment of that
meeting unless a new record date is or must be set for the adjourned meeting. At
such reconvened meeting, any business may be transacted that might have been
transacted at the meeting as originally noticed.
If a quorum exists, action on a matter is approved if the votes cast
favoring the action exceed the votes cast opposing the action, unless the
question is one upon which by express provision of law or of the Articles of
Incorporation a different vote is required.
Section 7. Proxies. Shareholders of record may vote at any meeting
either in person or by proxy executed in writing. A proxy is effective when
received by the Secretary of the Corporation or another officer or agent of the
Corporation authorized to tabulate votes for the Corporation. A proxy is valid
for eleven (11) months unless a longer period is expressly provided in the
proxy.
Section 8. Voting. Unless otherwise provided in the Articles of
Incorporation, each outstanding share of Class A Common Stock is entitled to one
(1) vote, and each share of Class B Common Stock is entitled to ten (10) votes,
on each matter voted on at a shareholders' meeting, with all shares voting
together as a single class.
Section 9. Adjournment. A majority of the Total Voting Power represented
at the meeting, even if less than a quorum, may adjourn any meeting of the
shareholders from time to time. At a reconvened meeting at which a quorum is
present, any business may be transacted at the meeting as originally noticed. If
a meeting is adjourned to a different date, time, or place, notice need not be
given of the new date, time, or place if a new date, time, or place is announced
at the meeting before adjournment; however, if a new record date for the
adjourned meeting is or must be fixed in accordance with the Act, notice of the
adjourned meeting must be given to persons who are shareholders as of the new
record date.
Section 10. Advance Notice Requirements for Shareholder Proposals and
Director Nominations. Any shareholder seeking to bring business before or to
nominate a director or directors at any meeting of shareholders, must provide
written notice thereof in accordance with this Section 10. The notice must be
delivered to, or mailed and received at, the principal executive offices of the
Corporation not less than (i) with respect to an annual meeting of shareholders,
120 calendar days in advance of the one-year anniversary of the date that the
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Corporation's proxy statement was released to shareholders in connection with
the previous year's annual meeting, except that if no annual meeting of
shareholders was held in the previous year or if the date of the annual meeting
has been changed by more than 30 calendar days from the date contemplated at the
time of the previous year's proxy statement, such notice must be received by the
Corporation a reasonable time before the Corporation's proxy statement is to be
released, and (ii) with respect to a special meeting of shareholders, a
reasonable time before the Corporation's proxy statement is to be released.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Powers of Directors. All corporate powers shall be exercised
by or under the authority of, and the business and affairs of the Corporation
shall be managed under the direction of, the Board of Directors, except as
otherwise provided by the Articles of Incorporation.
Section 2. Number and Qualifications. The number of directors which
shall constitute the whole Board shall be not less than one (1) director nor
more than nine (9) directors. The number of directors may at any time be
increased or decreased within such range by the shareholders or by the Board of
Directors at any regular or special meeting. Directors must have reached the age
of majority. The Board of Directors shall initially consist of seven (7)
directors.
Section 3. Election - Term of Office. The directors shall be elected by
the shareholders at each annual shareholders' meeting to hold office until the
next annual meeting of the shareholders, but shall continue to serve despite the
expiration of the director's term until their respective successors are elected
and qualified or until there is a decrease in the number of directors. If, for
any reason, the directors shall not have been elected at any annual meeting,
they may be elected at a special meeting of shareholders called for that purpose
in the manner provided by these Bylaws.
Section 4. Regular Meetings. Regular meetings of the Board of Directors
shall be held immediately following each annual meeting of shareholders and at
such other times and at such places as the Board may determine.
Section 5. Special Meetings. Special meetings of the Board of Directors
may be held at any time, whenever called by the Chairman of the Board,
President, Chief Executive Officer, or any director, notice thereof being given
to each director by the officer calling or directed to call the meeting.
Section 6. Notice. No notice is required for regular meetings of the
Board of Directors. Notice of special meetings of the Board of Directors,
stating the date, time, and place thereof, shall be given at least three (3)
days prior to the date of the meeting. The purpose of the
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meeting need not be given in the notice. Such notice shall be given in the
manner provided by Section 3 of Article III of these Bylaws.
Section 7. Waiver of Notice. A director may waive notice of a special
meeting of the Board either before or after the meeting, and such waiver shall
be deemed to be the equivalent of giving such notice. Attendance of a director
at or participation in a meeting shall constitute waiver of notice of that
meeting unless said director, at the beginning of the meeting, or promptly upon
such director's arrival, objects to holding the meeting or transacting business
at the meeting and does not thereafter vote for or assent to action taken at the
meeting. Any waiver by a non-attending director must be in writing, signed by
the director entitled to the notice and delivered to the Corporation for
inclusion in its corporate records.
Section 8. Quorum of Directors. A majority of the members of the Board
of Directors shall constitute a quorum for the transaction of business. When a
quorum is present at any meeting, a majority of the members present thereat
shall decide any question brought before such meeting, except as otherwise
provided by the Articles of Incorporation or by these Bylaws.
Section 9. Adjournment. A majority of the directors present, even if
less than a quorum, may adjourn a meeting and continue it to a later time.
Notice of the adjourned meeting or of the business to be transacted thereat,
other than by announcement, shall not be necessary. At any adjourned meeting at
which a quorum is present, any business may be transacted which could have been
transacted at the meeting as originally called.
Section 10. Resignation and Removal. Any director of this Corporation
may resign at any time by giving written notice to the Board of Directors, its
Chairman, or the President or Secretary of this Corporation. Any such
resignation is effective when the notice is delivered, unless the notice
specifies a later effective date. A director or the entire Board of Directors
may be removed as prescribed in the Articles of Incorporation.
Section 11. Vacancies. Unless otherwise provided by law, vacancies in the
Board of Directors shall be filled by a majority of the directors then in
office, though less than a quorum, by the sole remaining director or by action
of the shareholders.
Section 12. Compensation. By resolution of the Board of Directors, each
director may be paid expenses, if any, of attendance at each meeting of the
Board of Directors (and each meeting of any committees thereof), and may be paid
a stated salary as director, or a fixed sum for attendance at each meeting of
the Board of Directors (and each meetings of any committee thereof), or both. No
such payment shall preclude any director from serving this Corporation in any
other capacity and receiving compensation therefor.
Section 13. Presumption of Assent. A director of this Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless:
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a. The director objects at the beginning of the meeting, or
promptly upon the director's arrival, to holding it or transacting business at
the meeting;
b. The director's dissent or abstention from the action
taken is entered in the minutes of the meeting; or
c. The director delivers written notice of dissent or
abstention to the presiding officer of the meeting before its adjournment or to
the Corporation within a reasonable time after adjournment.
The right of dissent or abstention is not available to a director who votes in
favor of the action taken.
Section 14. Committees of the Board of Directors. The Board of Directors
is expressly authorized to create one or more committees of directors in
accordance with the provisions of Section 23B.08.250 of the Act. Each committee
must have two or more members, who serve at the pleasure of the Board of
Directors. The creation of a committee and appointment of members to it must be
approved by a majority of all the directors in office when such action is taken
or such other number of directors as may be required by Section 23B.08.250(2) of
the Act. To the extent specified by the Board of Directors or in the Articles of
Incorporation or these Bylaws, each committee may exercise the authority of the
Board of Directors under Section 23B.08.010 of the Act; provided, however, a
committee may not: (a) authorize or approve a distribution except according to a
general formula or method prescribed by the Board of Directors, (b) approve or
propose to shareholders action that is required by the Act to be approved by
shareholders; (c) fill vacancies on the Board of Directors or on any of its
committees, (d) amend the Articles of Incorporation pursuant to Section
23B.10.020 of the Act, (e) adopt, amend or repeal these Bylaws, (f) approve a
plan of merger not requiring shareholder approval or (g) authorize or approve
the issuance or sale or contract for sale of shares, or determine the
designation and relative rights, preferences, and limitations of a class or
series of shares, except that, in the case of this clause (g), the Board of
Directors may authorize a committee, or a senior executive officer of the
corporation, to do so within limits specifically prescribed by the Board of
Directors.
ARTICLE III
SPECIAL MEASURES APPLYING TO
SHAREHOLDER AND/OR DIRECTOR ACTIONS
Section 1. Action by Written Consent. Any action required or permitted
to be taken at a meeting of the shareholders or the Board of Directors may be
accomplished without a meeting if the action is taken by all the shareholders
entitled to vote thereon, or all the members of the Board, as the case may be.
The action must be evidenced by one or more written consents describing the
action taken, signed by all the shareholders entitled to vote thereon, or by all
directors, as the case may be, either before or after the action is taken, and
delivered to the Corporation for inclusion in the minutes or filing with the
Corporation's records.
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Action taken by unanimous written consent of the shareholders is effective
when all consents have been delivered to the Corporation, unless the consent
specifies a later effective date. Action taken by unanimous written consent of
the Board of Directors is effective when the last director signs the consent,
unless the consent specifies a later effective date.
Section 2. Conference Telephone. Meetings of the shareholders and Board
of Directors may be effectuated by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other during the meeting. Participation by such means
shall constitute presence in person at such meeting.
Section 3. Oral and Written Notice. Oral notice of a meeting of the
Board of Directors may be communicated in person or by telephone, wire or
wireless equipment that does not transmit a facsimile of the notice. Oral notice
is effective when communicated if communicated in a comprehensible manner.
Written notice may be transmitted by mail, reputable overnight or express
delivery service, or personal delivery; telegraph or teletype; or telephone,
wire, or wireless equipment that transmits a facsimile of the notice. Written
notice in a comprehensible form is effective at the earliest of the following:
(a) when dispatched by telegraph, teletype or facsimile equipment,
if such notice is sent to the person's address, telephone number or other number
appearing on the records of the Corporation;
(b) when received;
(c) when mailed, if mailed with first-class postage prepaid and
correctly addressed to the shareholder's address shown in the Corporation's
current record of shareholders;
(d) the day of delivery as shown on the delivery receipt or
acknowledgment if delivered by reputable overnight or express delivery service;
or
(e) on the date shown on the return receipt, if sent by registered
or certified mail, return receipt requested, and the receipt is signed by or on
behalf of the addressee.
ARTICLE IV
OFFICERS
Section 1. Positions. The officers of this Corporation may consist of a
Chairman of the Board of Directors, President, Chief Executive Officer, Chief
Operating Officer, one or more Vice Chairmen, one or more Vice Presidents, a
Chief Financial Officer, a Secretary, one or more Assistant Secretaries, a
Controller and a Treasurer, as appointed by the Board.
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In addition, the Board of Directors may choose such other officers and
assistant officers to perform such duties as from time to time may be assigned
to them by the Board of Directors. The Board of Directors may delegate to any
other officer of the Corporation the power to choose such other officers and
assistant officers and to prescribe their respective duties and powers. No
officer need be a shareholder or a director of this Corporation. Any two or more
offices may be held by the same person.
Section 2. Appointment and Term of Office. The officers of this
Corporation shall be appointed annually by the Board of Directors at the first
meeting of the Board of Directors held after each annual meeting of the
shareholders. If officers are not appointed at such meeting, such appointment
shall occur as soon as possible thereafter. Each officer shall hold office until
a successor shall have been appointed and qualified or until said officer's
earlier death, resignation, or removal.
Section 3. Powers and Duties. If the Board of Directors appoints persons
to fill the following officer positions, such officer shall have the powers and
duties set forth below:
a. Chairman of the Board of Directors. The Chairman of the Board
of Directors shall preside at all meetings of the shareholders and of the Board
of Directors. The Chairman of the Board of Directors shall possess the same
power as the President to sign all bonds, deeds, mortgages and any other
agreements, and such signature shall be sufficient to bind this Corporation.
During the absence or disability of the President, the Chairman of the Board of
Directors shall exercise all the powers and discharge all the duties of the
President. The Chairman of the Board of Directors shall also perform such other
duties as the Board of Directors shall designate.
b. President. The President shall, subject to the direction and
control of the Board of Directors, have general supervision of the business of
this Corporation. Unless the Chairman of the Board of Directors has been
appointed and is present, the President shall preside at meetings of the
shareholders and of the Board of Directors.
The President, or such other persons as are specifically authorized by
resolution of the Board of Directors, shall possess the power to sign all bonds,
deeds, mortgages, and any other agreements, and such signatures shall be
sufficient to bind this Corporation. The President shall perform such other
duties as the Board of Directors shall designate.
c. Chief Executive Officer. The Chief Executive Officer shall,
together with the President, and subject to the direction and control of the
Board of Directors, have general supervision of the business of the Corporation.
The Chief Executive Officer shall, in the absence of the Chairman of the Board
of Directors and the President, preside at all meetings of shareholders and of
the Board of Directors.
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The Chief Executive Officer may sign all bonds, deeds, mortgages, and any
other agreements, and such signature shall be sufficient to bind this
Corporation. The Chief Executive Officer shall perform such other duties as the
Board of Directors shall designate.
d. Chief Operating Officer. The Chief Operating Officer shall,
subject to the direction and control of the Board of Directors, have general
supervision of the operations of the Corporation's income-producing assets. The
Chief Operating Officer may sign all bonds, deeds, mortgages, and any other
agreements, and such signature shall be sufficient to bind this Corporation. The
Chief Operating Officer shall perform such other duties as the Board of
Directors shall designate.
e. Vice Chairman. The Vice Chairman shall, together with the
President and Chief Executive Officer, and subject to the direction and control
of the Board of Directors, have general supervision of the business of the
Corporation. The Vice Chairman shall, in the absence of the Chairman of the
Board of Directors, the President and the Chief Executive Officer, preside at
all meetings of shareholders and of the Board of Directors.
The Vice Chairman may sign all bonds, deeds, mortgages, and any other
agreements, and such signature shall be sufficient to bind this Corporation. The
Vice Chairman shall perform such other duties as the Board of Directors shall
designate.
f. Vice Presidents. Each Vice President shall have such powers
and discharge such duties as may be assigned from time to time to such Vice
President by the Board of Directors, the Chairman of the Board of Directors, the
President or the Chief Executive Officer. The Board of Directors may select a
specific title for a Vice President of this Corporation, which such title shall
include the words "Vice President" together with such other term or terms which
may generally indicate such Vice President's rank and/or duties. During the
absence or disability of the Chairman of the Board of Directors (if one has been
elected), the President, and the Chief Executive Officer, the Vice President (or
in the event that there be more than one Vice President, the Vice Presidents in
the order designated by the Board of Directors) shall exercise all functions of
the Chairman of the Board of Directors, the President and the Chief Executive
Officer, except as limited by resolution of the Board of Directors.
g. Secretary. The Secretary shall:
(1) Prepare minutes of the directors' and shareholders'
meetings and keep them in one or more books provided for that purpose;
(2) Authenticate records of the Corporation;
(3) See that all notices are duly given in accordance with
the provisions of these Bylaws or as required by law;
(4) Be custodian of the corporate records and of the seal
of the Corporation (if any), and affix the seal of the Corporation to all
documents as may be required;
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<PAGE> 10
(5) Keep a register of the post office address of each
shareholder which shall be furnished to the Secretary by such shareholder;
(6) Sign with the Chairman of the Board of Directors, the
President, the Chief Executive Officer or a Vice President, certificates for
shares of the Corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors;
(7) Have general charge of the stock transfer books of the
Corporation; and
(8) In general, perform all the duties incident to the
office of Secretary and such other duties as from time to time may be assigned
to him or her by the Board of Directors, the Chairman of the Board of Directors,
the President or the Chief Executive Officer. In the Secretary's absence, an
Assistant Secretary shall perform the Secretary's duties.
h. Chief Financial Officer. The Chief Financial Officer shall
have custody of the funds and securities of the Corporation, shall keep full and
accurate accounts of receipts and disbursements of the Corporation in books
belonging to the Corporation and shall deposit all moneys and other valuable
effects of the Corporation in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors. The Chief
Financial Officer shall disburse the funds of the Corporation as may be ordered
by the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the Chairman of the Board, the President, the Chief Executive
Officer and the Board of Directors, at its regular meetings, or when the
Chairman of the Board, the President, the Chief Executive Officer or the Board
of Directors so requires, an account of all of his or her transactions as Chief
Financial Officer and of the financial condition of the Corporation If required
by the Board of Directors, the Chief Financial Officer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his or her office and for the restoration to the Corporation, in case
of his or her death, resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of whatever kind in his or her
possession or under his or her control belonging to the Corporation.
i. Controller. The Controller shall perform such duties and have
such powers as from time to time may be assigned to him or her by the Board of
Directors, the Chairman of the Board, the President, the Chief Executive
Officer, any Vice President, or the Chief Financial Officer, and in the absence
of the Chief Financial Officer or in the event of the Chief Financial Officer's
disability or refusal to act, shall perform the duties of the Chief Financial
Officer, and when so acting, shall have all the powers of and be subject to all
the restrictions upon the Chief Financial Officer. If required by the Board of
Directors, the Controller shall give the Corporation a bond in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his or her office and for the
restoration to the Corporation, in the case of his or her death, resignation,
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<PAGE> 11
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his or her possession or under his or her
control belonging to the Corporation.
j. Treasurer. The Treasurer shall perform such duties and have
such responsibilities as from time to time may be assigned by the Board of
Directors.
Section 4. Salaries and Contract Rights. The salaries, if any, of the
officers shall be fixed from time to time by the Board of Directors. The
appointment of an officer shall not of itself create contract rights.
Section 5. Resignation or Removal. Any officer of this Corporation may
resign at any time by giving written notice to the Board of Directors. Any such
resignation is effective when the notice is delivered, unless the notice
specifies a later date, and shall be without prejudice to the contract rights,
if any, of such officer.
The Board of Directors, by majority vote, may remove any officer or agent
appointed by it, with or without cause. The removal shall be without prejudice
to the contract rights, if any, of the person so removed.
Section 6. Vacancies. If any office becomes vacant by any reason, the
directors may appoint a successor or successors who shall hold office for the
unexpired term.
ARTICLE V
CERTIFICATES OF SHARES AND THEIR TRANSFER;
UNCERTIFICATED SHARES
Section 1. Issuance of Shares. No shares of this Corporation shall be
issued unless authorized by the Board of Directors. Such authorization shall
include the maximum number of shares to be issued and the consideration to be
received. A good faith determination by the Board that the consideration
received or to be received for the shares to be issued is adequate is conclusive
insofar as the adequacy of consideration relates to whether the shares are
validly issued, fully paid and nonassessable.
Section 2. Issuance of Certificated Shares. Unless the Board of
Directors determines that the Corporation's shares are to be uncertificated,
certificates for shares of the Corporation shall be in such form as is
consistent with the provisions of the Act. The certificate shall be signed by
original or facsimile signature of two officers of the Corporation, and the seal
of the Corporation may be affixed thereto.
Section 3. Transfer of Certificated Stock. Certificated shares of stock
may be transferred by delivery of the certificate accompanied by either an
assignment in writing on the back of the certificate or by a written power of
attorney to assign and transfer the same on the books of the Corporation, signed
by the record holder of the certificate. Shares shall be transferable on the
books of this Corporation upon surrender thereof so assigned or endorsed.
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Section 4. Loss or Destruction of Certificates. In case of the loss,
mutilation, or destruction of a certificate of stock, a duplicate certificate
may be issued upon such terms as the Board of Directors shall prescribe.
Section 5. Issuance of Uncertificated Shares. The Board of Directors may
authorize the issue of some or all of the shares of any or all of the
Corporation's classes or series of stock without certificates, provided,
however, that such authorization shall not affect shares already represented by
certificates until they are surrendered to the Corporation. Within a reasonable
time after the issue or transfer of shares without certificates, the Corporation
shall send the shareholders a written statement of the information required on
certificates by the Act. Said statement shall be informational to the
shareholder, and not incontrovertible evidence of stock ownership.
The statement shall be signed by original or facsimile signature of two
officers of the Corporation, and the seal of the Corporation may be affixed
thereto.
Section 6. Transfer of Uncertificated Stock. Transfer of uncertificated
shares of stock may be accomplished by delivery of an assignment in writing or
by a written power of attorney to assign and transfer the same on the books of
the Corporation, signed by the record holder of the shares. Surrender of the
written statement shall not be a requirement for transfer of the shares so
represented.
Section 7. Record Date and Transfer Books. For the purpose of
determining shareholders who are entitled to notice of or to vote at any meeting
of shareholders or any adjournment thereof, or entitled to receive payment of
any dividend, or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may fix in advance a record date for any
such determination of shareholders, such date in any case to be not more than
seventy (70) days and, in case of a meeting of shareholders, not less than ten
(10) days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken.
If no record date is fixed for such purposes, the date on which notice of
the meeting is mailed or the date on which the resolution of the Board of
Directors declaring such dividend is adopted, as the case may be, shall be the
record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this section, such determination shall
apply to any adjournment thereof, unless the Board of Directors fixes a new
record date, which it must do if the meeting is adjourned more than one hundred
twenty (120) days after the date fixed for the original meeting.
Section 8. Voting Record. The officer or agent having charge of the
stock transfer books for shares of this Corporation shall make at least ten (10)
days before each meeting of shareholders a complete record of the shareholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares
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held by each. Such record shall be produced and kept open at the time and place
of the meeting and shall be subject to the inspection of any shareholder during
the whole time of the meeting for the purposes thereof.
ARTICLE VI
BOOKS AND RECORDS
Section 1. Books of Accounts, Minutes, and Share Register. The
Corporation:
a. Shall keep as permanent records minutes of all meetings of
its shareholders and Board of Directors, a record of all actions taken by the
shareholders or Board of Directors without a meeting, and a record of all
actions taken by a committee of the Board of Directors exercising the authority
of the Board of Directors on behalf of the Corporation;
b. Shall maintain appropriate accounting records;
c. Or its agent shall maintain a record of its shareholders, in
a form that permits preparation of a list of the names and addresses of all
shareholders, in alphabetical order by class of shares showing the number and
class of shares held by each; and
d. Shall keep a copy of the following records at its principal
office:
(1) The Articles of Incorporation and all amendments to
them currently in effect;
(2) The Bylaws or Restated Bylaws and all amendments to
them currently in effect;
(3) The minutes of all shareholders' meetings, and records
of all actions taken by shareholders without a meeting, for the past three
(3) years;
(4) Its financial statements for the past three (3) years,
including balance sheets showing in reasonable detail the financial condition of
the Corporation as of the close of each fiscal year, and an income statement
showing the results of its operations during each fiscal year;
(5) All written communications to shareholders generally
within the past three (3) years;
(6) A list of the names and business addresses of its
current directors and officers; and
(7) Its most recent annual report delivered to the
Secretary of State of Washington.
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Section 2. Copies of Resolutions. Any person dealing with the
Corporation may rely upon a copy of any of the records of the proceedings,
resolutions, or votes of the Board of Directors or shareholders, when certified
by the President or Secretary.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
Section 1. Indemnification Rights of Directors, Officers, Employees and
Agents. The Corporation shall indemnify its directors and officers and may
indemnify its employees and agents (each an "Indemnified Party") to the full
extent permitted by the Act or other applicable law, as then in effect, and the
Articles of Incorporation, against liability arising out of a proceeding to
which each such Indemnified Party was made a party because the Indemnified Party
is or was a director, officer, employee or agent of the Corporation. The
Corporation shall advance expenses incurred by each such Indemnified Party who
is a party to a proceeding in advance of final disposition of the proceeding, as
provided by applicable law, the Articles of Incorporation, or by written
agreement, which written agreement may allow any required determinations to be
made by any appropriate person or body consisting of a member or members of the
Board of Directors, or any other person or body appointed by the Board of
Directors, who is not a party to the particular claim for which an Indemnified
Party is seeking indemnification, or independent legal counsel.
The Corporation is not obligated to indemnify an Indemnified Party for any
amounts paid in settlement of any proceeding without the Corporation's prior
written consent to such settlement and payment. The Corporation shall not settle
any proceeding in any manner which would impose any penalty or limitation on an
Indemnified Party without such Indemnified Party's prior written consent.
Neither the Corporation nor an Indemnified Party may unreasonably withhold its
consent to a proposed settlement.
Section 2. Contract and Related Rights.
a. Contract Rights. The right of an Indemnified Party to
indemnification and advancement of expenses is a contract right upon which the
Indemnified Party shall be presumed to have relied in determining to serve or to
continue to serve in his or her capacity with the Corporation. Such right shall
continue as long as the Indemnified Party shall be subject to any possible
proceeding. Any amendment to or repeal of this Article shall not adversely
affect any right or protection of an Indemnified Party with respect to any acts
or omissions of such Indemnified Party occurring prior to such amendment or
repeal.
b. Optional Insurance, Contracts, and Funding. The Corporation
may:
(1) Maintain insurance, at its expense, to protect itself
and any Indemnified Party against any liability, whether or not the Corporation
would have power to
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indemnify the Indemnified Party against the same liability
under Sections 23B.08.510 or .520 of the Act, or a successor section or statute;
(2) Enter into contracts with any Indemnified Party in
furtherance of this Article and consistent with the Act; and
(3) Create a trust fund, grant a security interest, or use
other means (including without limitation a letter of credit) to ensure the
payment of such amounts as may be necessary to effect indemnification as
provided in this Article.
Section 3. Exceptions. Any other provision herein to the contrary
notwithstanding, the Corporation shall not be obligated pursuant to the terms of
these Bylaws to indemnify or advance expenses to an Indemnified Party with
respect to any proceeding:
a. initiated or brought voluntarily by an Indemnified Party and
not by way of defense, except with respect to proceedings brought to establish
or enforce a right to indemnification under these Bylaws, the Articles of
Incorporation or any statute or law; but such indemnification or advancement of
expenses may be provided by the Corporation in specific cases if the Board of
Directors finds it to be appropriate;
b. instituted by an Indemnified Party to enforce or interpret
the provisions hereof or the Articles of Incorporation, if a court of competent
jurisdiction determines that each of the material assertions made by such
Indemnified Party in such proceeding was not made in good faith or was
frivolous;
c. to the extent such Indemnified Party has otherwise actually
received payment (under any insurance policy or otherwise) of the amounts
otherwise indemnifiable hereunder; or
d. if the Corporation is prohibited by the Articles of
Incorporation, the Act or other applicable law as then in effect from paying
such indemnification and/or advancement of expenses.
ARTICLE VIII
AMENDMENT OF BYLAWS
Section 1. By the Shareholders. These Bylaws may be amended or repealed
by a resolution duly adopted by not less than a majority of the Total Voting
Power.
Section 2. By the Board of Directors. These Bylaws may be amended or
repealed by a resolution duly adopted by a majority of the whole Board of
Directors. However, the directors may not modify the Bylaws relating to filling
Board of Directors vacancies resulting from a removal by action of the
shareholders as specified herein or in the Articles of Incorporation.
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EXHIBIT 5.1
[letterhead of Preston Gates & Ellis]
May 15, 1996
Western Wireless Corporation
2001 NW Sammamish Road
Issaquah, Washington 98027
Re: Registration Statement on Form S-1 of Western Wireless Corporation
(Commission File No. 333-2432)
Ladies and Gentlemen:
We have acted as counsel to Western Wireless Corporation (the
"Corporation") in connection with the filing of the above-referenced
Registration Statement (the "Registration Statement") relating to the
registration of shares (the "Shares") of Class A Common Stock, no par value per
share, of the Company. In connection therewith, we have reviewed the Company's
Articles of Incorporation, Bylaws, minutes of appropriate meetings, and such
other 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 Shares will be fully paid and non-assessable under the
Washington Business Corporation Act when (i) the Company's Board of Directors
shall have duly adopted final resolutions authorizing the issuance and sale of
the Shares to be sold by the Company as contemplated by the Registration
Statement; and (ii) certificates representing the Shares shall have been duly
executed, countersigned and registered and duly delivered to the purchasers
thereof against payment of the agreed consideration therefor.
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 Shares.
<PAGE> 2
May 15, 1996
Page 2
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to all references to our firm included in or made a
part of the Registration Statement.
Very truly your,
PRESTON GATES & ELLIS
By /s/ G. Scott Greenburg
G. Scott Greenburg
<PAGE> 1
Exhibit 10.14
VOTING AGREEMENT
BY AND AMONG
WESTERN WIRELESS CORPORATION,
HELLMAN & FRIEDMAN CAPITAL PARTNERS II, L.P.,
H&F ORCHARD PARTNERS, L.P., H&F INTERNATIONAL PARTNERS, L.P.,
JOHN W. STANTON and THERESA E. GILLESPIE,
PN CELLULAR, INC., STANTON FAMILY TRUST,
STANTON COMMUNICATIONS CORPORATION, GS
CAPITAL PARTNERS, L.P., THE GOLDMAN SACHS GROUP,
L.P., BRIDGE STREET FUND 1992, L.P., STONE STREET
FUND 1992, L.P.
AND PROVIDENCE MEDIA PARTNERS L.P.
DATED: May 13, 1996
<PAGE> 2
TABLE OF CONTENTS
SECTION PAGE
1. Certain Definitions.............................................. 3
2. Effectiveness.................................................... 6
3. Legend........................................................... 6
4. Management of the Corporation.................................... 7
4.1 Board of Directors................................. 7
4.2 Abstention from Voting............................. 10
5. Representations and Warranties................................... 11
6. Term............................................................. 12
7. Miscellaneous.................................................... 13
7.1 Successors, Assigns and Transferees................ 13
7.2 Specific Performance, Etc.......................... 14
7.3 Governing Law...................................... 14
7.4 Headings........................................... 14
7.5 Notices............................................ 14
7.6 Exchanges, Recapitalizations, Etc. Affecting the
Company's Common Stock............................. 16
7.7 Inspection and Compliance with Law................. 17
7.8 Waivers............................................ 17
7.9 Amendments......................................... 17
7.10 Multiple Counterparts.............................. 18
7.11 Severability....................................... 18
7.12 Obligations Several................................ 18
7.13 Entire Agreement................................... 18
i
<PAGE> 3
VOTING AGREEMENT
This VOTING AGREEMENT (this "Agreement") is made and entered into as of
this 13th day of May, 1996 by and among Western Wireless Corporation, a Delaware
corporation (the "Company"), Hellman & Friedman Capital Partners II, L.P., a
California limited partnership ("HFCP II"), H & F Orchard Partners, L.P., a
California limited partnership ("Orchard"), H & F International Partners, L.P.,
a California limited partnership ("International"; HFCP II, Orchard and
International are hereinafter referred to collectively as "H&F"), John W.
Stanton ("JWS"), Theresa E. Gillespie ("TEG"), PN Cellular, Inc., a Washington
corporation ("PN"), Stanton Family Trust, established November 1, 1990 by JWS
and TEG, as settlors f/b/o the settlors' children ("SFT"), Stanton
Communications Corporation, a Washington corporation ("SCC"; JWS, TEG, PN, SFT
and SCC are hereinafter referred to collectively as "Stanton"), GS Capital
Partners, L.P., a Delaware limited partnership ("GSCP"), The Goldman Sachs
Group, L.P., a Delaware limited partnership ("GS"), Bridge Street Fund 1992,
L.P., a Delaware limited partnership ("BSF"), Stone Street Fund 1992, L.P., a
Delaware limited partnership ("SSF"; GS, GSCP, BSF and SSF are hereinafter
referred to collectively as "GSC"), and Providence Media Partners L.P., a
Delaware limited partnership ("Providence") (each of H&F, Stanton, GSC and
Providence are hereinafter referred to individually as a "Shareholder" and
collectively as the "Shareholders").
<PAGE> 4
R E C I T A L S
WHEREAS, the Company is authorized to issue 300,000,000 shares of
Common Stock, par value $.001 per share (the "Common Stock"), of which
18,945,509 shares are issued and outstanding;
WHEREAS, each of the Shareholders owns the number of shares of Common
Stock set forth opposite its respective name on Schedule 1 annexed hereto;
WHEREAS, the Shareholders own collectively approximately 80.63% of the Total
Voting Power (as hereinafter defined); and
WHEREAS, certain of the Shareholders and certain other shareholders are
parties to a Stockholders Agreement, dated July 29, 1994, as amended by the
First Amendment to Stockholders Agreement, dated November 30, 1994 (as amended
the "Original Stockholders Agreement"), relating to, among other things, their
ownership of shares of Common Stock of the Company;
WHEREAS, the Company is considering (a) a firm commitment, underwritten
public offering ("Public Offering") of its Common Stock which would have
aggregate gross proceeds to the Company in excess of $10,000,000, and (b) a
migratory merger (the "Migratory Merger") of the Company with and into a
corporation formed under the laws of the State of Washington;
WHEREAS, the Original Stockholders Agreement terminates (except as
expressly set forth in SECTION 10.2 thereof with respect to the survival of
certain registration and other rights) on the consummation of a Public Offering.
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<PAGE> 5
WHEREAS, the Shareholders desire to enter into this Agreement in order
to provide for the management of the Company and the Shareholders' relationship
with regard to each other and the Company, which Agreement shall become
effective on the date of the consummation of the Public Offering (the "Effective
Date").
NOW THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the Shareholders and
the Company agree as follows:
1. Certain Definitions.
1.1 "Affiliated Assignee" shall mean (i) with respect to any
Shareholder who is a natural Person, any member of such Person's Immediate
Family, or any trust for the benefit of, or a partnership all of the partners of
which are, such natural Person and/or any member of such Person's Immediate
Family; or (ii) with respect to any Shareholder which is a limited partnership
(a) any Person that, at the date hereof, is the sole general partner of such
Shareholder or is the sole general partner of the sole general partner of such
Shareholder, or (b) another limited partnership which has a sole general
partner, the control of which sole general partner is held, directly or
indirectly, by five or fewer natural Persons, provided such natural Persons have
control at the date hereof of the sole general partner of such Shareholder. For
purposes of this definition, "control" shall mean ownership of at least 51% of
the equity interest in, and at least 51% of the voting power on all matters in,
the sole general partner.
-3-
<PAGE> 6
1.2 "Beneficially Own" shall have the meaning set forth in
Rule 13d-3 of the Securities and Exchange Act of 1934, as amended; except that
no broker or dealer or any affiliate thereof shall be deemed to Beneficially Own
shares of Capital Stock, the beneficial ownership of which is acquired in the
ordinary course of the activities of a broker or dealer registered under Section
15 of the Securities Exchange Act of 1934, as amended, including, but not
limited to, the acquisition of beneficial ownership of such securities as a
result of any market-making or underwriting activities (including any shares
acquired for the investment account of a broker or dealer in connection with
such underwriting activities), or the exercise of investment or voting
discretion authority over any of its customer accounts, or the acquisition in
good faith of such securities in connection with the enforcement of payment of a
debt previously contracted.
1.3 "Board" shall mean the Board of Directors of the
Company. 1.4 "Capital Stock" shall mean the Common Stock or any other class or
series of common stock or preferred stock of the Company or any other type of
voting equity security that the Company may issue.
1.5 "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act of 1933, as amended.
1.6 "Common Stock" shall have the meaning set forth in the
Recitals.
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<PAGE> 7
1.7 "Effective Date" shall have the meaning set forth in the
Recitals.
1.8 "Immediate Family" means an individual's spouse, children
(including adopted children), grandchildren and parents.
1.9 "Maximum Voting Percentage" shall have the meaning set forth
in SECTION 4.2.
1.10 "Migratory Merger" shall have the meaning set forth in the
Recitals.
1.11 "Person" shall mean an individual, corporation,
association, partnership, trust or estate, an unincorporated organization, a
joint venture, a government or any agency or political subdivision thereof, or
any other entity of whatever nature.
1.12 "Public Offering" shall have the meaning set forth in the
Recitals.
1.13 "Total Voting Power" shall mean the total number of votes
attributable to all shares of Capital Stock outstanding and entitled to vote on
any particular matter.
1.14 "Voting Power" shall have the meaning set forth in SECTION
4.2.
Each definition or pronoun herein shall be deemed to refer to
the singular, plural, masculine, feminine or neuter as the context requires.
Words such as "herein, "hereinafter," "hereof," "hereto" and "hereunder" refer
to this Agreement as a whole, unless the context otherwise requires.
-5-
<PAGE> 8
2. Effectiveness.
This Agreement shall become effective on the Effective Date, at
which time the Original Stockholders Agreement (except as expressly set forth in
SECTION 10.2 thereof with respect to the survival of certain registration and
other rights) shall by its terms terminate and be of no further force or effect
whatsoever. If the Effective Date does not occur on or before December 31, 1996,
this Agreement shall terminate and be of no further force or effect whatsoever
and the Original Stockholders Agreement shall continue in full force and effect
in accordance with its terms.
3. Legend.
All certificates representing shares of Capital Stock now or
hereafter issued by the Company to any of the Shareholders or their Affiliated
Assignees shall be subject to this Agreement and shall bear the following
legend:
"The shares evidenced by this certificate or any
certificate issued in exchange or transfer therefor are and
will be subject to, the terms of a certain Voting Agreement,
dated as of May 13, 1996, by and among certain shareholders of
the Company."
The requirement that the above legend be placed upon certificates evidencing any
such Capital Stock shall cease and terminate upon the earlier of (i) the
transfer of such Capital Stock to any Person other than an Affiliated Assignee
and (ii) the termination of this Agreement. Upon the occurrence of any event
requiring the removal of a legend hereunder, the Company, upon the surrender of
certificates containing such legend, shall, at its own expense, deliver to the
holder of any such Capital Stock as to which the
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<PAGE> 9
requirement for such legend shall have terminated, one or more new certificates
evidencing such Capital Stock not bearing such legend.
4. Management of the Corporation.
4.1 Board of Directors. All directors of the Company shall be
citizens of the United States. Except as provided in SECTION 4.2, each of the
Shareholders (and its Affiliated Assignees) agrees that, from and after the
Effective Date, it will vote, or cause to be voted, all of the shares of Capital
Stock Beneficially Owned by it (whether now owned or hereafter acquired), in
person or by proxy, so as to elect and thereafter to continue in office a Board
which shall include (but not necessarily be limited to) the following six (6)
members: the Chief Executive Officer of the Company, two designees of H&F (or,
if H&F has transferred all of its shares of Capital Stock to Affiliated
Assignees of H&F, two designees of such Affiliated Assignees), one designee of
GSCP (or, if GSC has transferred all of its shares of Capital Stock to
Affiliated Assignees of GSC, two designees of such Affiliated Assignees), and
one designee selected by a majority vote of Stanton (or, if Stanton has
transferred all of its shares of Capital Stock to Affiliated Assignees of
Stanton, of such Affiliated Assignees) and Providence (or, if Providence has
transferred all of its shares of Capital Stock to Affiliated Assignees of
Providence, of such Affiliated Assignees) (it being understood that such
designee is in addition to JWS for so long as JWS shall serve on the Board by
reason of his holding the office of Chief Executive Officer of the Company); and
one designee selected by a majority vote of the
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<PAGE> 10
persons selected as provided above. Stanton (and its Affiliated Assignees)
agrees with respect to the designee to the Board selected by the vote of Stanton
and Providence (or their respective Affiliated Assignees) that from and after
the date hereof and for so long as (i) JWS is serving as the Chief Executive
Officer of the Company, (ii) Stanton and Providence (and their respective
Affiliated Assignees) shall collectively Beneficially Own at least 7 1/2% of the
Total Voting Power, and (iii) Providence (or its Affiliated Assignees) shall
Beneficially Own at least 75% of the shares of Capital Stock set forth opposite
Providence's name on Schedule 1 annexed hereto, Stanton (and its Affiliated
Assignees) shall so vote, or cause to be voted, all of the shares of Capital
Stock owned or held of record by Stanton (and its Affiliated Assignees) for one
designee of Providence (and its Affiliated Assignees). No designee to the Board
shall be removed from the Board (except removal for cause under applicable law)
without the written consent of the Shareholder or group of Shareholders who has
the right to designate such Person to the Board (or, if such Shareholder or
group of Shareholders have transferred all of their shares of Capital Stock to
Affiliated Assignees of such Shareholder or group of Shareholders without the
written consent of Affiliated Assignees holding a majority of the shares owned
by all of such Affiliated Assignees). Any Shareholder or group of Shareholders
(or, if such Shareholder or group of Shareholders have transferred all of their
shares of Capital Stock to Affiliated Assignees of such Shareholder or group of
Shareholders, Affiliated Assignees
-8-
<PAGE> 11
holding a majority of the shares owned by all of such Affiliated Assignees) who
has the right to designate any member(s) of the Board shall have the right to
replace any member(s) so designated by it (whether or not such member is removed
from the Board with or without cause or ceases to be a member of the Board by
reason of death, disability or for any other reason) upon written notice to the
Company and the other members of the Board, which notice shall set forth the
name of the member(s) being replaced and the name of the new member(s). Each of
the Shareholders (and their respective Affiliated Assignees) agrees to vote its
shares of Capital Stock, or shall otherwise take any action as is necessary,
desirable or appropriate, so as to cause the election of any successor director
designated by any of the Shareholders (or any of such Shareholder's Affiliated
Assignees) pursuant to this SECTION 4.1. Notwithstanding the foregoing,
(a) if at any time H&F (and its Affiliated
Assignees) shall cease to Beneficially Own at least (i) 15% of the Total Voting
Power, then in such event, H&F (or, if H&F has transferred all of its shares of
Capital Stock to Affiliated Assignees of H&F, its Affiliated Assignees) shall be
entitled to designate only one member of the Board; and (ii) 7 1/2% of the Total
Voting Power, then in such event, H&F (or, if H&F has transferred all of its
shares of Capital Stock to Affiliated Assignees of H&F, its Affiliated
Assignees) shall not be entitled to designate any member of the Board;
-9-
<PAGE> 12
(b) if at any time GSC (or, if GSC has transferred
all of its shares of Capital Stock to Affiliated Assignees of GSC, its
Affiliated Assignees) shall cease to Beneficially Own at least 7 1/2% of the
Total Voting Power, then in such event, GSCP (or, if GSC has transferred all of
its shares of Capital Stock to Affiliated Assignees of GSC, its Affiliated
Assignees) shall not be entitled to designate any member of the Board; and
(c) if at any time Stanton and Providence (and
their respective Affiliated Assignees) shall cease collectively to Beneficially
Own at least 7 1/2% of the Total Voting Power, then in such event, they shall
not be entitled to designate any member of the Board (except that JWS shall
continue to serve on the Board for so long as he holds the office of Chief
Executive Officer of the Company).
Any vacancies on the Board created by reason of the provisions of subsections
(a) through (c) above shall be filled by a majority vote of the directors then
in office to serve until the next annual meeting of shareholders of the Company,
and at the next annual meeting shall be filled by a vote of a plurality of all
shareholders (including the Shareholders and their Affiliated Assignees) of the
Company.
The Company hereby agrees to use all reasonable efforts to
give effect to the provisions of this SECTION 4.1.
4.2 Abstention from Voting. In the event that at any time
after the Effective Date and until this Agreement terminates
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<PAGE> 13
in accordance with its terms H&F (and its Affiliated Assignees) holds shares of
Capital Stock having Voting Power in excess of 49.9% (the "Maximum Voting
Percentage") of the Total Voting Power, then for so long as H&F (and its
Affiliated Assignees) shall hold shares of Capital Stock having Voting Power in
excess of the Maximum Voting Percentage, it (and its Affiliated Assignees) shall
abstain from voting that number of shares of Capital Stock which gives it (and
its Affiliated Assignees) more votes than the Maximum Voting Percentage on such
matter. For purposes of this SECTION 4.2 only, the term "Total Voting Power"
shall mean the total number of votes attributable to all shares of Capital Stock
outstanding and entitled to vote on any particular matter, other than the number
of shares, if any, with respect to which H&F (and its Affiliated Assignees)
shall have agreed to abstain from voting as provided in this SECTION 4.2.
The term "Voting Power" shall mean, with respect to any Person, at the
time of determination, the number of votes attributable to the total number of
shares of Capital Stock held by such Person.
5. Representations and Warranties.
Each of the Company, HFCP II, Orchard, International, JWS,
TEG, PN, SFT, SCC, GS, GSCP, BSF, SSF and Providence hereby represents and
warrants to the other parties as follows:
(i) Such Person has full power and authority to
execute, deliver and perform its obligations under this Agreement;
-11-
<PAGE> 14
(ii) This Agreement and all transactions
contemplated hereby have been duly and validly authorized by all necessary
action on the part of such Person and this Agreement constitutes the legal,
valid and binding obligation of such Person enforceable against it in accordance
with its terms; and
(iii) Neither the execution, delivery or
performance of this Agreement by such Person, nor the consummation of the
transactions contemplated hereby will, with or without the giving of notice of
passage of time, or both conflict with, result in a default or loss of rights
(or give rise to any right of termination, cancellation or acceleration) under,
(A) any provision of the certificate of incorporation, by-laws, partnership
agreement or comparable constituent document of such Person, (B) any material
note, bond, indenture, mortgage, deed of trust, contract, agreement, lease or
other instrument or obligation to which any such Person is a party or by which
it or its properties may be bound or affected or (C) any law, order, judgment,
ordinance, rule, regulation or decree to which any such Person is a party or by
which it or any of its properties are bound or affected.
6. Term.
This Agreement shall terminate upon the earliest to occur of
any of the following events:
(a) The expiration of ten (10) years from the Effective
Date; or
(b) The filing by the Company of a petition in bankruptcy or
the expiration of sixty (60) days after a petition in
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<PAGE> 15
bankruptcy shall have been filed against the Company and such petition shall not
have been stayed or discharged during such sixty (60) day period; or upon the
expiration of sixty (60) days after the commencement of any proceeding under any
law for the relief of debtors seeking the relief or readjustment of the
Company's indebtedness either through reorganization, winding-up, extension or
otherwise, and such proceedings involving the Company as debtor shall not have
been vacated or stayed within such sixty (60) day period; or upon the
appointment of a receiver, custodian or trustee for all or substantially all of
the Company's property, or the making by the Company of any general assignment
for the benefit of creditors, or the admitting in writing by the Company of its
inability to pay its debts as they mature; or upon the voluntary or involuntary
liquidation or dissolution of the Company; or
(c) The beneficial ownership of all of the
Common Stock by only one Shareholder (including its Affiliated Assignees).
7. Miscellaneous.
7.1 Successors, Assigns and Transferees. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
Affiliated Assignees. Each of the Shareholders hereby agrees that prior to any
sale, transfer, conveyance, gift or any other disposition of any Capital Stock
to an Affiliated Assignee, such Affiliated Assignee shall execute a counterpart
of this Agreement agreeing to be bound by the provisions of this Agreement. No
sale, transfer, conveyance, gift or any other
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<PAGE> 16
disposition shall be effective unless such Affiliated Assignee has executed such
counterpart of this Agreement.
7.2 Specific Performance, Etc. The Company and each
Shareholder (and its Affiliated Assignees), in addition to being entitled to
exercise all of the rights provided herein or in the Company's Certificate of
Incorporation or granted by law, including recovery of damages, will be entitled
to specific performance of its rights under this Agreement. Each of the Company
and the Shareholders (and their Affiliated Assignees) agree that monetary
damages would not be adequate compensation for any loss incurred by it by reason
of a breach by any other party hereto of the provisions of this Agreement and
hereby agrees to waive the defense in any action for specific performance that a
remedy at law would be adequate.
7.3 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Washington as applied to
agreements entered into and wholly to be performed within the State of
Washington.
7.4 Headings. The captions in this Agreement are for
convenience only and shall not be considered a part of or affect the
construction or interpretation of any provision of this Agreement.
7.5 Notices. Any notice required or permitted hereunder shall
be given in writing and shall be conclusively deemed effectively received by the
addressee upon personal delivery, on the date of receipt if sent by facsimile or
overnight courier,
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<PAGE> 17
charges prepaid, or five days after deposit in the United States mail, by
registered or certified mail, postage prepaid, addressed as follows:
(a) if to the
Company: Western Wireless Corporation
330 120th Avenue, Northeast
Suite 200
Bellevue, Washington 98005
Attention: John W. Stanton
Facsimile: (206) 635-0126
Western Wireless Corporation
330 120th Avenue, Northeast
Suite 200
Bellevue, Washington 98005
Attention: Alan R. Bender
Facsimile: (206) 635-0126
with copies to: Preston Gates & Ellis
5000 Columbia Center
701 Fifth Avenue
Seattle, Washington 98104
Attention: G. Scott Greenburg
Facsimile: (206) 623-7022
(b) if to HFCP II,
Orchard or
International: c/o Hellman & Friedman
One Maritime Plaza, Suite 1200
San Francisco, California 94111
Attention: John L. Bunce, Jr.
General Partner
Facsimile: (415) 788-0176
(c) if to JWS, TEG
PN, SFT or SCC: c/o Stanton Communications, Inc.
330 120th Avenue, Northeast
Suite 200
Bellevue, Washington 98005
Attention: John W. Stanton
Facsimile: (206) 635-0126
with a copy to: Barry A. Adelman, Esq.
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Facsimile: (212) 698-7825
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<PAGE> 18
(d) if to GS, GSCP,
BSF or SSF: c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attention: Terence M. O'Toole
Facsimile: (212) 357-5505
with a copy to: Alison S. Ressler, Esq.
Sullivan & Cromwell
444 South Flower Street
Los Angeles, California 90071
Facsimile: (213) 683-0457
(e) if to Providence c/o Providence Ventures, Inc.
900 Fleet Center
50 Kennedy Plaza
Providence, Rhode Island 02903
Attention: Jonathan M. Nelson
Facsimile: (401) 751-1790
with a copy to: David K. Duffell, Esq.
Edwards & Angell
2700 Hospital Tower
Providence, Rhode Island 02903
Facsimile: (401) 276-6611
or to such other address or facsimile number as any party may have furnished in
writing to the other parties in the manner provided above.
7.6 Exchanges, Recapitalizations, Etc. Affecting the Company's
Common Stock. The provisions of this Agreement shall apply, to the full extent
set forth herein with respect to the shares of Capital Stock now or hereinafter
owned by each Shareholder (and its Affiliated Assignees), to any and all
securities of the Company or any successor or assign of the Company (whether by
merger, consolidation or otherwise including, without limitation, the surviving
corporation of the Migratory Merger if the Migratory Merger is consummated) that
may be issued in respect of, in exchange for, or in substitution of such shares
of Capital
-16-
<PAGE> 19
Stock, and shall be appropriately adjusted for any stock dividends, stock
splits, reverse splits, combinations, recapitalizations and the like occurring
after the date hereof.
7.7 Inspection and Compliance with Law. Copies of this
Agreement will be available for inspection or copying by any interested Person
at the offices of the Company through the Secretary of the Company. The Company
will otherwise take all actions as may be necessary or appropriate to comply
with any applicable law relating to the validity and enforceability of
shareholders agreements containing the provisions of this Agreement.
7.8 Waivers. The failure of any party hereto to give notice of
the breach or non-fulfillment of any term or condition of this Agreement shall
not constitute a waiver thereof, nor shall the waiver of any breach or
non-fulfillment of any term or condition of this Agreement constitute a waiver
of any other breach or non-ful- fillment of that term or condition or any other
term or condition of this Agreement.
7.9 Amendments. This Agreement may be amended or modified at
any time by a writing setting forth such amendment or modification, signed by
the Company and by Shareholders (or their Affiliated Assignees) owning in the
aggregate at least 90% of the aggregate Voting Power of the Shareholders (and
their Affiliated Assignees); provided, however, that, unless such amendment is
signed by the Company and by each Shareholder (or its Affiliated Assignees)
adversely affected by such amendment, no such amendment or modification shall
(i) eliminate any right of any Shareholder
-17-
<PAGE> 20
(or its Affiliated Assignees) to designate the member or members of the Board it
is entitled to designate in accordance with SECTION 4.1 hereof (it being
understood and agreed that this clause (i) shall not prohibit the enlargement of
the Board), (ii) amend SECTION 4.2 hereof or (iii) change the Effective Date.
7.10 Multiple Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed shall constitute an
original copy hereof, but all of which
together shall constitute one agreement.
7.11 Severability. In the event that any one or more of the
provisions contained in this Agreement or in any other document, instrument or
agreement referred to herein, shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement or any
other such document, instrument or agreement.
7.12 Obligations Several. The obligations of each of the
Shareholders under this Agreement shall be several with respect to each such
Shareholder.
7.13 Entire Agreement. From and after the Effective Date, this
Agreement shall (except as expressly set forth in SECTION 2 hereof) contain the
entire understanding among the parties hereto concerning the subject matter
hereof and shall supersede all prior agreements and undertakings whether written
or oral, with respect to the subject matter hereof. Without limiting the
generality of the forgoing, the Agreement, dated July 29, 1994,
-18-
<PAGE> 21
between H&F, Stanton and GSC relating to certain voting rights shall, on the
Effective Date, terminate and be of no further force or effect.
-19-
<PAGE> 22
IN WITNESS WHEREOF, each of the parties has executed or caused this
Agreement to be executed by its duly authorized officer as of the date first
above written.
WESTERN WIRELESS CORPORATION
By: /s/
------------------------------------
Name:
Title:
HELLMAN & FRIEDMAN CAPITAL PARTNERS
II, L.P., a California limited partnership
By: Hellman & Friedman Investors,
L.P., its general partner
By: Hellman & Friedman Investors,
Inc., its general partner
By: /s/
-----------------------------------
Name:
Title:
H & F ORCHARD PARTNERS, L.P.,
a California limited partnership
By: H & F Orchard Investors, L.P.,
its general partner
By: H & F Orchard Investors, Inc.,
its general partner
By: /s/
-----------------------------------
Name:
Title: Vice president
H & F INTERNATIONAL PARTNERS, L.P.,
a California limited partnership
By: H & F International Investors,
L.P., its general partner
By: H & F International Investors,
Inc., its general partner
By: /s/
-------------------------------------
Name:
Title:
-20-
<PAGE> 23
/s/
-----------------------------------------
JOHN W. STANTON
/s/
-----------------------------------------
THERESA E. GILLESPIE
PN CELLULAR, INC.
By: /s/
-------------------------------------
Name:
Title:
STANTON FAMILY TRUST
By: /s/
-------------------------------------
Name: , Trustee
STANTON COMMUNICATIONS CORPORATION
By: /s/
-------------------------------------
Name:
Title:
THE GOLDMAN SACHS GROUP, L.P.
By: /s/
-------------------------------------
Name:
Title:
GS CAPITAL PARTNERS, L.P.
By: GS Advisors L.P., General Partner
By: GS Advisors, Inc., General Partner
By: /s/
-------------------------------------
Name:
Title:
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<PAGE> 24
BRIDGE STREET FUND 1992, L.P.
By: Stone Street Performance Corp.,
Managing General Partner
By: /s/
-------------------------------------
Name:
Title:
STONE STREET FUND 1992, L.P.
By: Stone Street Performance Corp.,
General Partner
By: /s/
-------------------------------------
Name:
Title:
PROVIDENCE MEDIA PARTNERS L.P.
By: Providence Media GP Limited Partnership
Its: General Partner
By: Providence Ventures, L.P.
Its: General Partner
By: /s/
-------------------------------------
Name:
Title:
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<PAGE> 25
Schedule 1
to
Voting Agreement
<TABLE>
<CAPTION>
No. of Shares
of WWC Common Stock
Name of Shareholder Owned by Shareholders
- ------------------- ---------------------
<S> <C>
Hellman & Friedman Capital
Partners II, L.P. 7,331,464
H&F Orchard Partners, L.P. 655,814
H&F International Partners, L.P. 130,140
GS Capital Partners, L.P. 3,579,380
Bridge Street Fund 1992, L.P. 108,762
Stone Street Fund 1992, L.P. 187,359
The Goldman Sachs Group, L.P. 27,411
PN Cellular, Inc. 543,893
Stanton Communications Corporation 411,135
John W. Stanton & Theresa E. Gillespie 995,956
Stanton Family Trust 51,431
Providence Media Partners L.P. 1,253,739
</TABLE>
<PAGE> 1
Exhibit 10.34
SECOND AMENDMENT TO LOAN AGREEMENT
THIS SECOND AMENDMENT TO LOAN AGREEMENT, made as of this 16th day of
April, 1996 (the "Amendment"), by and among WESTERN WIRELESS CORPORATION, a
Delaware corporation (the "Borrower"), the financial institutions whose names
appear as Lenders on the signature pages thereto (collectively, the "Lenders"),
The Toronto-Dominion Bank, Barclays Bank PLC, and Morgan Guaranty Trust Company
of New York, as managing agents (collectively, the "Managing Agents"), Chemical
Bank, CIBC Inc., Fleet National Bank, Internationale Nederlanden (U.S.) Capital
Corporation, PNC Bank, National Association, and Societe Generale as agents
(collectively, the "Agents"), Union Bank, CoreStates Bank, N.A., Bank of Hawaii,
Pearl Street L.P., Credit Lyonnais Cayman Island Branch, and NTFC Capital
Corporation, as co-agents (collectively the "Co- Agents"), BZW, as documentation
agent (the "Documentation Agent"), J.P. Morgan Securities Inc., as syndication
agent (the "Syndication Agent") and Toronto Dominion (Texas), Inc., as
administrative agent (the "Administrative Agent"),
W I T N E S S E T H:
WHEREAS, the Borrower, the Administrative Agent, the Managing Agents,
the Agents, the Co-Agents, the Documentation Agent, the Syndication Agent, and
the Lenders are parties to that certain Loan Agreement dated as of June 30,
1995, as amended by that certain First Amendment to Loan Agreement dated as of
January 11, 1996, (the "Loan Agreement"); and
WHEREAS, the Borrower has requested the Administrative Agent, the
Managing Agents, the Agents, the Co-Agents, the Documentation Agent, the
Syndication Agent and the Lenders to agree to amend the Loan Agreement as set
forth herein;
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is acknowledged, the parties agree that all
capitalized terms used herein shall have the meanings ascribed thereto in the
Loan Agreement except as otherwise defined or limited herein, and further agree
as follows:
1. Amendment to Definition of "Allowable Cellular System". The
definition of "Allowable Cellular System" is hereby deleted in its entirety and
the following substituted in lieu thereof:
"'Allowable Cellular System' shall mean any Cellular System or
any PCS System (i) the geographical
<PAGE> 2
boundaries for any portion of which are contiguous to or within 50
miles from the geographical boundaries of (A) a Cellular System owned
by the Borrower or any Subsidiary of the Borrower or (B) a PCS System
owned by the Borrower or any of its Subsidiaries, (ii) which is located
in whole or in substantial part within any state in which is located
(A) a Cellular System owned by the Borrower or any Subsidiary of the
Borrower, or (B) a PCS System owned by the Borrower or any of its
Subsidiaries, (iii) which is otherwise located in the Designated Target
Area, or (iv) described on Schedule 1 attached hereto. In addition,
"Allowable Cellular System" shall include any Cellular System or PCS
System acquired by the Borrower or any of its Restricted Subsidiaries
as part of a single transaction, or a series of related transactions,
in which the Borrower or any of its Restricted Subsidiaries acquires an
'Allowable Cellular System,' as defined in the immediately preceding
sentence, provided that the fair market value of the latter Cellular
System or PCS System equals or exceeds the fair market value of the
former."
2. Amendment to Definition of "Maturity Date". The definition of
"Maturity Date" is hereby deleted in its entirety and the following is
substituted in lieu thereof:
"'Maturity Date' shall mean the earlier of (a) December 31,
2004, or (b) such earlier date on which the payment of all outstanding
Obligations shall be due (whether by acceleration or otherwise)."
3. Amendment of Definition of "Subordinated Debt". The definition
of "Subordinated Debt" is hereby deleted in its entirety and the following
substituted in lieu thereof:
"'Subordinated Debt' shall mean (a) any Seller Subordinated
Debt, and (b) up to $200,000,000 in gross proceeds (excluding fees or
underwriter discounts, but including additions to principal resulting
from in-kind payments, or deferrals, of interest) from the issuance of
other subordinated Indebtedness for Money Borrowed of the Borrower,
subject to the following: (i) the Borrower shall demonstrate pro forma
compliance with all financial covenants contained herein both before
and after the incurrence of such subordinated Indebtedness for Money
Borrowed; (ii) there shall be no repayment of the principal amount of
such subordinated Indebtedness for Money Borrowed until at least one
year and one day after the Maturity Date; (iii) the final
- 2 -
<PAGE> 3
maturity of such subordinated Indebtedness for Money Borrowed must be
at least one year and one day after the Maturity Date; (iv) such
subordinated Indebtedness for Money Borrowed shall contain no covenants
or provisions more restrictive on the Borrower and its Subsidiaries
than those contained herein; and (v) the terms of subordination shall
be as set forth in the Subordination Agreement or otherwise reasonably
acceptable to the Majority Lenders. The amount of Subordinated Debt
permitted under clause (b) of the first sentence of this definition may
be increased above $200,000,000 on a dollar-for-dollar basis with
additional equity raised by the Borrower or any of its Restricted
Subsidiaries."
4. Amendment of Definition of "Vendor Debt". The definition of
"Vendor Debt" is hereby deleted in its entirety and the following substituted in
lieu thereof:
"'Vendor Debt' shall mean, collectively, the Indebtedness for
Money Borrowed incurred (a) by VH1 under the Vendor Loan Agreement, and
(b) by VH2 under a loan agreement in form and substance acceptable to
the Majority Lenders and subject to such intercreditor agreement or
subordination agreement as may be required by the Majority Lenders."
5. Amendment of Definition of "Vendor Holdco". The definition of
"Vendor Holdco" is hereby deleted in its entirety and the following substituted
in lieu thereof:
"'Vendor Holdco' shall mean, collectively, (a) Western PCS II
Corporation, a Delaware corporation ("VH1"), which is an Unrestricted
Subsidiary of the Borrower, and a direct, wholly-owned Subsidiary of
WPCS, and (b) if the Borrower so elects, a second Unrestricted
Subsidiary of the Borrower, to be irrevocably designated in writing by
the Borrower ("VH2"). VH1 is the direct owner of the MTA Licenses and
PCS Systems for Salt Lake City, Honolulu, and El Paso. If so organized,
VH2 will be the direct owner of the MTA License for Denver, Colorado to
be acquired from GTE Mobilnet Incorporated. If VH2 is not so organized,
VH1 will be the direct owner of the MTA License for Denver, Colorado to
be acquired from GTE Mobilnet Incorporated. 'Vendor Holdco' shall mean
VH1 and, if VH2 is so organized, VH1 and VH2, collectively, together
with any Subsidiary formed by either of them as permitted under Section
7.16(c) hereof."
- 3 -
<PAGE> 4
6. Amendment to Section 2.4. Section 2.4, Repayment, is hereby
deleted in its entirety and the following substituted in lieu thereof:
"Section 2.4 Repayment. Commencing March 31, 2000 and at the
end of each calendar quarter thereafter, the outstanding principal
balance of the Loans as of the Conversion Date shall be repaid as set
forth below:
<TABLE>
<CAPTION>
Annual Percentage
Percentage of of Loans
Loans Outstanding Outstanding as of
as of the the Conversion Date
Conversion Date to to be Reduced Each
be Reduced Each Four-Quarter Period
Quarters Ending Quarter Ending December 31
- --------------- ------- ------------------
<S> <C> <C>
March 31, 2000 through 1.75% 7.00%
and including December
31, 2000
March 31, 2001 3.25% 13.00%
through and including
December 31, 2001
March 31, 2002 5.00% 20.00%
through and including
December 31, 2002
March 31, 2003 7.50% 30.00%
through and including
December 31, 2003
March 31, 2004 7.50% 30.00%
through and including
December 31, 2004
</TABLE>
Any unpaid principal and interest of the Loans and any other
outstanding Obligations shall be due and payable in full on the
Maturity Date."
7. Amendment to Section 2.8(a). Section 2.8(a) is hereby amended
by the deletion of the date "March 31, 1999" appearing in the second line
thereof and by substituting the date "March 31, 2000" therefor.
- 4 -
<PAGE> 5
8. Amendment to Sections 7.6(c) and 7.6(d). Sections 7.6(c) and
7.6(d) are hereby deleted in their entireties and the following substituted in
lieu thereof:
"(c) Investments in PCS Systems.
(i) The Borrower may make Investments in WPCS and its
Subsidiaries for the purpose of building and operating the PCS Systems
owned by Bank Holdco and Vendor Holdco in an aggregate amount not to
exceed:
(y) prior to the satisfaction of the conditions set forth in
subsection (ii) of this Section 7.6(c), the sum of (I)
$100,000,000, plus (II) the net proceeds (less $144,000,000)
of any equity or Subordinated Debt issued by the Borrower
after June 1, 1995, and
(z) after all of the conditions of subsection (ii) of this
Section 7.6(c) have been satisfied, the sum of (I)
$425,000,000, plus (II) the net proceeds (less $144,000,000)
of any equity issued by the Borrower after June 1, 1995;
provided, that WPCS may not contribute to Vendor Holdco and its Subsidiaries in
the form of equity or debt in excess at any time of fifty percent (50%) of all
amounts contributed to WPCS by the Borrower.
(ii) Except for the initial $100,000,000 of Permitted
Investment in WPCS and its Subsidiaries plus the net proceeds (less
$144,000,000) of any equity and Subordinated Debt issued by the
Borrower after June 1, 1995, the Investments otherwise permitted under
this Section 7.6(c) may not be made unless:
(A) the FCC shall have issued the PCS Licenses
to Vendor Holdco and Bank Holdco pursuant to a final order; and
(B) Section 5.13 of this Agreement has been
complied with in respect of Subsidiaries of Bank Holdco.
In addition, no Investment may be made in Vendor Holdco in excess of the sum of
$100,000,000 plus the net proceeds of any equity or Subordinated Debt issued by
the Borrower, unless Vendor Holdco shall have received a commitment for up to an
additional $200,000,000 in additional Vendor Debt.
- 5 -
<PAGE> 6
(d) Investments in other Unrestricted Subsidiaries.
(i) The Borrower and its Restricted Subsidiaries may (in
addition to any Investments or Acquisitions otherwise permitted under
this Section 7.6) make Investments in an amount not to exceed in the
aggregate $60,000,000, plus the net proceeds (less $144,000,000) of any
equity issued by the Borrower since June 1, 1995 (A) in Unrestricted
Subsidiaries (other than Vendor Holdco), in ventures which are engaged
primarily in the business of wireless communications outside the United
States and in PCS Systems and (B) in Vendor Holdco for the sole purpose
of permitting Vendor Holdco to acquire the Denver MTA license from GTE
Mobilnet Incorporated for a price of not more than $66 million.
(ii) No Investment otherwise permitted under this Section
7.6(d) may be consummated unless:
(A) the Borrower shall have demonstrated through
revised projections assuming the consummation of the Investment its pro
forma compliance with Sections 7.8, 7.9, 7.10 and 7.11 hereof, after
giving effect to the Advance of the Loans used for such Investment, and
shall have certified to the Administrative Agent and the Lenders that
such Investment shall not have a Materially Adverse Effect; and
(B) with respect to any Investment of more than
$10,000,000, the Borrower shall provide the Administrative Agent and
the Lenders with notice, not less than ten (10) days prior to the
proposed closing of the Investment, and with copies of all material
information pertaining to such Investment, and a certificate signed by
the chief financial officer of the Borrower certifying the Borrower's
pro forma compliance with the covenants listed in item (A) of this
subsection, together with any calculations necessary to demonstrate
such compliance."
- 6 -
<PAGE> 7
9. Amendment to Section 7.6(e)(ii). Section 7.6(e)(ii) is hereby
deleted in its entirety and the following substituted in lieu thereof:
" (ii) the aggregate amount of all such Investments during the
term of this Agreement shall be limited to the sum of $450,000,000,
plus the net proceeds (less $144,000,000) of any equity issued by the
Borrower since June 1, 1995."
10. Amendment to Section 7.7(b). Section 7.7(b) is hereby deleted
in its entirety and the following substituted in lieu thereof:
"(b) The Borrower may make current payments of interest and
principal on the Seller Subordinated Debt and scheduled payments of
interest on its Subordinated Debt."
11. Amendment to Section 7.8. Section 7.8, Ratio of Operating Cash
Flow to Cash Interest Expense, is hereby amended by the deletion of the table
set forth therein in its entirety with the following substituted in lieu
thereof:
<TABLE>
<CAPTION>
"Period Ratio
------- -----
<S> <C>
June 30, 1996 1.00:1
September 30, 1996 1.10:1
December 31, 1996 through March 31, 1997 1.20:1
June 30, 1997 through March 31, 1998 1.30:1
June 30, 1998 through March 31, 1999 1.50:1
June 30, 1999 and thereafter 2.00:1"
</TABLE>
12. Amendment to Section 7.10. Section 7.10, Leverage Ratios, is
hereby amended by the deletion of the table set forth therein (as well as the
following proviso) in its entirety with the following substituted in lieu
thereof:
- 7 -
<PAGE> 8
<TABLE>
<CAPTION>
A B
"Period Ratio Ratio
------- ----- -----
<S> <C> <C>
Agreement Date through 10.0:1 10.0:1
June 30, 1997
September 30, 1997 9.0:1 10.0:1
through and including
March 31, 1998
June 30, 1998 8.0:1 10.0:1
September 30, 1998 7.5:1 9.5:1
through and including
March 31, 1999
June 30, 1999 7.0:1 9.0:1
September 30, 1999 6.5:1 8.5:1
through December 31,
1999
March 31, 2000 through 6.0:1 8.0:1
June 30, 2000
September 30, 2000 5.5:1 7.5:1
through December 31,
2000
March 31, 2001 through 5.0:1 7.0:1
December 31, 2001
March 31, 2002 and 5.0:1 6.5:1"
Thereafter
</TABLE>
13. Amendment to Section 7.11. Section 7.11, Annualized Operating
Cash Flow to Pro Forma Debt Service Ratio, is hereby amended by replacing the
reference therein to the date "March 31, 1997" to "March 31, 1998."
14. Amendment to Section 7.16(a)(i). Section 7.16(a)(i) is hereby
deleted in its entirety and the following substituted in lieu thereof:
"(i) Vendor Holdco may incur up to $400,000,000 in Vendor Debt, subject
to the terms of the Vendor Loan Agreement, the Intercreditor Agreement
or any other intercreditor agreement in form and substance acceptable
to the Majority Lenders, which Vendor Debt may be secured by the stock
and assets of Vendor Holdco; and"
- 8 -
<PAGE> 9
15. Consent to Merger. The Administrative Agent on behalf of the
Managing Agents, the Agents, the Co-Agents, the Documentation Agent, the
Syndication Agent, and the Lenders hereby consent to the merger of the Borrower
into a wholly-owned Subsidiary of the Borrower, incorporated in the State of
Washington, to be completed on or before September 1, 1996, with such Subsidiary
to be the surviving corporation of such merger, so long as the Administrative
Agent shall have received, on or before the effective date of such merger, (a) a
certificate of the Borrower and such Subsidiary, certifying (i) as to the
agreement and plan of merger of the Borrower and such Subsidiary, (ii) that such
Subsidiary shall be responsible for all of the obligations of the Borrower under
the Loan Agreement and the other Loan Documents, and (iii) that no Default shall
then exist, both before and after giving effect to such merger, and (b) such
other opinions of counsel, certificates, documents and instruments as the
Administrative Agent may reasonably request.
16. Representations and Warranties. The Borrower hereby represents
and warrants in favor of the Administrative Agent on behalf of the Managing
Agents, the Agents, the Co-Agents, the Documentation Agent, the Syndication
Agent, and the Lenders as follows:
(a) Each representation and warranty set forth in Article
4 of the Loan Agreement is hereby restated and affirmed as true and correct as
of the date hereof;
(b) The Borrower has the corporate power and authority
(i) to enter into this Amendment, and (ii) to do all acts and things as are
required or contemplated hereunder to be done, observed and performed by it;
(c) This Amendment has been duly authorized, validly
executed and delivered by one or more Authorized Signatories, and the Loan
Agreement, as amended by this Amendment, constitutes the legal, valid and
binding obligation of the Borrower, enforceable against the Borrower in
accordance with its terms; and
(d) The execution and delivery of this Amendment and
performance by the Borrower of its Obligations under the Loan Agreement, as
amended hereby, do not and will not require the consent or approval of any
regulatory authority or governmental authority or agency having jurisdiction
over the Borrower which has not already been obtained, and are not and will not
be in contravention of or in conflict with the Certificate of Incorporation or
By-Laws of the Borrower,
- 9 -
<PAGE> 10
or the provision of any Applicable Law or any material indenture, agreement, or
other instrument, to which the Borrower or any Subsidiary is party or by which
their respective assets or properties are bound or affected.
17. Conditions Precedent to Effectiveness of Amendment. The
effectiveness of this Amendment is subject to the prior fulfillment of each of
the following conditions:
(a) the truth and accuracy of the representations and
warranties contained in Section 16 hereof; and
(b) the receipt by the Administrative Agent, the Managing
Agents, the Agents, the Co-Agents, the Documentation Agent, the Syndication
Agent, and the Lenders of a signed opinion of counsel to the Borrower in form
and substance satisfactory to the Administrative Agent and its special counsel;
(c) the receipt by the Administrative Agent, the Managing
Agents, the Agents, the Co-Agents, the Syndication Agent, the Documentation
Agent, and the Lenders of an incumbency certificate with respect to the officers
of the Borrower signing this Amendment on behalf of the Borrower, in form and
substance satisfactory to the Administrative Agent and its special counsel;
(d) the receipt by the Administrative Agent, on behalf of
the Lenders, of an amendment fee equal to 3/8% of the Commitment (such amount to
be allocated among the Lenders in accordance with their respective Commitment
Ratios); and
(e) the receipt by the Administrative Agent, the Managing
Agents, the Agents, the Co-Agents, the Syndication Agent, the Documentation
Agent and the Lenders of any other documents which any of them may reasonably
request, certified by an appropriate governmental official or officer of the
Borrower if so requested.
18. Counterparts. This Amendment may be executed in multiple
counterparts, each of which shall be deemed to be an original and all of which,
taken together, shall constitute one and the same agreement.
- 10 -
<PAGE> 11
19. Law of Contract. THIS AMENDMENT SHALL BE DEEMED TO BE MADE
PURSUANT TO THE INTERNAL LAWS OF THE STATE OF NEW YORK WITH RESPECT TO
AGREEMENTS MADE AND TO BE PERFORMED WHOLLY IN THE STATE OF NEW YORK, AND SHALL
BE CONSTRUED, INTERPRETED, PERFORMED AND ENFORCED IN ACCORDANCE THEREWITH.
20. Effective Date. Upon satisfaction of the conditions precedent
referred to in Section 17 above, this Amendment shall be effective as of the
date first set forth above.
21. Loan Document. This Amendment shall be deemed to be a Loan
Document for all purposes.
22. No Other Amendment or Waiver; Proviso. Except for the
amendments set forth above, the text of the Loan Agreement and all other Loan
Documents shall remain unchanged and in full force and effect. The amendments
agreed to herein shall not constitute a modification of the Loan Agreement or a
course of dealing with the Administrative Agent, the Managing Agents, the
Agents, the Co-Agents, the Syndication Agent, the Documentation Agent, and the
Lenders at variance with the Loan Agreement such as to require further notice by
the Administrative Agent, the Managing Agents, the Agents, the Co-Agents, the
Syndication Agent, the Documentation Agent, the Lenders or the Majority Lenders
to require strict compliance with the terms of the Loan Agreement, as amended by
this Amendment, and the other Loan Documents in the future. Notwithstanding the
foregoing, this Amendment is being executed and delivered in connection with and
immediately prior to a proposed amendment and restatement of the Loan Agreement.
As of the effective date of this Amendment, each of the Lenders (as well as the
Managing Agents, the Co-Agents, the Documentation Agent, the Syndication Agent
and the Administrative Agent) have issued their respective commitment letters to
such amended and restated Loan Agreement and the terms and provisions thereof,
as set forth in summary form in a certain Term Sheet dated as of March 27, 1996,
a copy of which is attached to this Amendment. By signing this Amendment, each
of the parties to this Amendment and to the Agreement acknowledge and agree (i)
the amended and restated Loan Agreement will contain provisions for additional
loans in the aggregate amount of $200,000,000, (denominated as Facility B, and
having the terms and conditions described, in the Term Sheet) and, in addition,
each of the Lenders agrees that such amended and restated Loan Agreement will
contain a provision permitting the Borrower to incur additional indebtedness in
the aggregate amount of $250,000,000 (denominated as Facility C
- 11 -
<PAGE> 12
in the Term Sheet), such Facility C to be secured pari passu with the Loans and
Facility B, to be offered pro rata to the existing Lenders and the terms of
which will be no more favorable to the Facility C lenders, than to the other
Lenders. The terms and conditions of Facility C loans shall be subject to the
prior consent of the Majority Lenders.
[Remainder of page intentionally left blank]
- 12 -
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused their respective
duly authorized officers or representatives to execute, deliver and seal this
Amendment as of the day and year first above written, to be effective as set
forth in Section 17 hereof.
BORROWER: WESTERN WIRELESS CORPORATION, A
DELAWARE CORPORATION
By: /s/
___________________________
Title:_________________________
Attest: /s/
_______________________
Title:_________________________
ADMINISTRATIVE AGENT: TORONTO DOMINION (TEXAS), INC.
By: /s/
___________________________
Title:_________________________
DOCUMENTATION AGENT: BZW
By: /s/
___________________________
Title:_________________________
SYNDICATION AGENT: J.P. MORGAN SECURITIES INC.
By: /s/
___________________________
Title:_________________________
MANAGING AGENTS: THE TORONTO-DOMINION BANK
By: /s/
___________________________
Title:_________________________
<PAGE> 14
BARCLAYS BANK PLC
By: /s/
____________________________
Title:_________________________
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/
____________________________
Title:_________________________
AGENTS: CHEMICAL BANK
By: /s/
____________________________
Title:_________________________
CIBC INC.
By: /s/
____________________________
Title:_________________________
FLEET NATIONAL BANK
By: /s/
____________________________
Title:_________________________
By: /s/
____________________________
Title:_________________________
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By: /s/
____________________________
Title:_________________________
<PAGE> 15
PNC BANK, NATIONAL ASSOCIATION
By: /s/
____________________________
Title:_________________________
SOCIETE GENERALE
By: /s/
____________________________
Title:_________________________
CO-AGENTS: UNION BANK
By: /s/
____________________________
Title:_________________________
CORESTATES BANK, N.A.
By: /s/
____________________________
Title:_________________________
BANK OF HAWAII
By: /s/
____________________________
Title:_________________________
PEARL STREET L.P.
By: /s/
____________________________
Title:_________________________
CREDIT LYONNAIS CAYMAN ISLANDS
BRANCH
By: /s/
____________________________
Title:_________________________
<PAGE> 16
NTFC CAPITAL CORPORATION
By: /s/
____________________________
Title:_________________________
LENDERS: TORONTO DOMINION (TEXAS), INC.
By: /s/
____________________________
Title:_________________________
BARCLAYS BANK PLC
By: /s/
____________________________
Title:_________________________
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/
____________________________
Title:_________________________
CHEMICAL BANK
By: /s/
____________________________
Title:_________________________
CIBC INC.
By: /s/
____________________________
Title:_________________________
FLEET NATIONAL BANK
By: /s/
____________________________
Title:_________________________
By: /s/
____________________________
Title:_________________________
<PAGE> 17
INTERNATIONALE NEDERLANDEN (U.S.)
CAPITAL CORPORATION
By: /s/
____________________________
Title:_________________________
PNC BANK, NATIONAL ASSOCIATION
By: /s/
____________________________
Title:_________________________
SOCIETE GENERALE
By: /s/
____________________________
Title:_________________________
BANK OF HAWAII
By: /s/
____________________________
Title:_________________________
CORESTATES BANK, N.A.
By: /s/
____________________________
Title:_________________________
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By: /s/
____________________________
Title:_________________________
PEARL STREET L.P.
By: /s/
____________________________
Title:_________________________
<PAGE> 18
NTFC CAPITAL CORPORATION
By: /s/
___________________________
Title:_________________________
BANK OF AMERICA NW, N.A., DOING
BUSINESS AS SEAFIRST, SUCCESSOR BY
NAME CHANGE TO SEATTLE FIRST
NATIONAL BANK
By: /s/
___________________________
Title:_________________________
UNION BANK
By: /s/
___________________________
Title:_________________________
THE LONG-TERM CREDIT BANK OF
JAPAN, LIMITED
By: /s/
___________________________
Title:_________________________
ABN AMRO BANK N.V., SEATTLE BRANCH
By: ABN AMRO NORTH AMERICA, INC.,
as Agent
By: /s/
___________________________
Title:_________________________
By: /s/
____________________________
Title:__________________________
BANK OF MONTREAL
By: /s/
___________________________
Title:_________________________
NATIONSBANK OF TEXAS, N.A.
By: /s/
___________________________
Title:_________________________
<PAGE> 19
THE ROYAL BANK OF SCOTLAND PLC
By: /s/
___________________________
Title:_________________________
STATE STREET BANK AND TRUST COMPANY
By: /s/
___________________________
Title:_________________________
THE SUMITOMO TRUST & BANKING CO.,
LTD., NEW YORK BRANCH
By: /s/
___________________________
Title:_________________________
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By: /s/
____________________________
Title:_________________________
MERITA BANK LTD
By: /s/
___________________________
Title:_________________________
By: /s/
___________________________
Title:_________________________
U.S. BANK OF WASHINGTON, N.A.
By: /s/
___________________________
Title:_________________________
BANK OF AMERICA, NT & SA
By: /s/
___________________________
Title:_________________________
<PAGE> 20
THE FUJI BANK LIMITED, LOS ANGELES
AGENCY
By: /s/
___________________________
Title:_________________________
THE BANK OF CALIFORNIA, N.A.
By: /s/
___________________________
Title:_________________________
MERRILL LYNCH SENIOR FLOATING
RATE FUND
By: /s/
___________________________
Title:_________________________
SILICON VALLEY BANK
By: /s/
___________________________
Title:_________________________
BANQUE NATIONALE DE PARIS
By: /s/
___________________________
Title:_________________________
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By: /s/
___________________________
Title:_________________________
SKANDINAVISKA ENSKILDA BANKEN
CORPORATION
By: /s/
___________________________
Title:_________________________
<PAGE> 1
EXHIBIT 10.40
AMENDED AND RESTATED
LOAN AGREEMENT
AMONG WESTERN WIRELESS CORPORATION;
THE FINANCIAL INSTITUTIONS WHOSE NAMES APPEAR AS LENDERS ON
THE SIGNATURE PAGES HEREOF;
THE TORONTO-DOMINION BANK, BARCLAYS BANK, PLC,
AND MORGAN GUARANTY TRUST COMPANY OF NEW YORK, AS
MANAGING AGENTS;
CHEMICAL BANK, CIBC INC., FLEET NATIONAL BANK,
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION,
PNC BANK, NATIONAL ASSOCIATION AND SOCIETE GENERALE,
AS AGENTS;
UNION BANK OF CALIFORNIA, N.A., CORESTATES BANK, N.A.,
BANK OF HAWAII, PEARL STREET L.P.,
AND CREDIT LYONNAIS NEW YORK BRANCH AS CO-AGENTS;
BZW, AS DOCUMENTATION AGENT;
J.P. MORGAN SECURITIES INC., AS SYNDICATION AGENT;
AND
TORONTO DOMINION (TEXAS), INC., AS
ADMINISTRATIVE AGENT;
DATED AS OF
MAY 6, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1 Definitions..................................................................... 3
ARTICLE 2 Loans........................................................................... 33
Section 2.1 The Loans........................................................... 33
Section 2.2 Manner of Borrowing and Disbursement................................ 34
Section 2.3 Interest............................................................ 38
Section 2.4 Repayment........................................................... 41
Section 2.5 Fees................................................................ 43
Section 2.6 Prepayments......................................................... 43
Section 2.7 Borrower's Optional Cancellation of
the Revolving Loan Commitment....................................... 44
Section 2.8 Mandatory Prepayments............................................... 45
Section 2.9 Notes; Loan Accounts................................................ 47
Section 2.10 Manner of Payment................................................... 48
Section 2.11 Reimbursement....................................................... 49
Section 2.12 Pro Rata Treatment.................................................. 50
Section 2.13 Capital Adequacy.................................................... 51
Section 2.14 Lender Tax Forms.................................................... 52
ARTICLE 3 Conditions Precedent............................................................ 53
Section 3.1 Conditions Precedent to Initial
Advance............................................................. 53
Section 3.2 Conditions Precedent to Each Advance................................ 56
ARTICLE 4 Representations and Warranties.................................................. 57
Section 4.1 Representations and Warranties...................................... 57
Section 4.2 Survival of Representations and
Warranties, etc..................................................... 67
ARTICLE 5 General Covenants............................................................... 67
Section 5.1 Preservation of Existence and
Similar Matters..................................................... 67
Section 5.2 Business; Compliance with Applicable
Law................................................................. 68
Section 5.3 Maintenance of Properties........................................... 68
Section 5.4 Accounting Methods and Financial
Records............................................................. 68
Section 5.5 Insurance........................................................... 69
Section 5.6 Payment of Taxes and Claims......................................... 70
Section 5.7 Visits and Inspections.............................................. 70
Section 5.8 Payment of Indebtedness; Loans...................................... 71
Section 5.9 Use of Proceeds..................................................... 71
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
Section 5.10 Real Estate......................................................... 71
Section 5.11 Indemnity........................................................... 72
Section 5.12 Interest Rate Hedging............................................... 73
Section 5.13 Covenants Regarding Formation of
Restricted Subsidiaries and the
Making of Investments and
Acquisitions........................................................ 73
Section 5.14 Designation of Unrestricted
Subsidiaries as Restricted
Subsidiaries; Designation of
Restricted Subsidiaries as
Consolidated Subsidiaries........................................... 75
Section 5.15 Payment of Wages.................................................... 76
Section 5.16 Key Man Policy...................................................... 76
ARTICLE 6 Information Covenants........................................................... 76
Section 6.1 Quarterly Financial Statements and
Information......................................................... 76
Section 6.2 Annual Financial Statements and
Information......................................................... 77
Section 6.3 Performance Certificates............................................ 78
Section 6.4 Copies of Other Reports............................................. 79
Section 6.5 Notice of Litigation and Other
Matters............................................................. 79
ARTICLE 7 Negative Covenants.............................................................. 81
Section 7.1 Indebtedness of the Borrower and its
Restricted Subsidiaries............................................. 81
Section 7.2 Limitation on Liens................................................. 82
Section 7.3 Amendment and Waiver................................................ 82
Section 7.4 Liquidation, Merger, Disposition of
Assets.............................................................. 82
Section 7.5 Limitation on Guaranties............................................ 83
Section 7.6 Investments and Acquisitions........................................ 84
Section 7.7 Restricted Payments and Purchases................................... 88
Section 7.8 Ratio of Operating Cash Flow to Cash
Interest Expense.................................................... 89
Section 7.9 Fixed Charge Coverage Ratio......................................... 90
Section 7.10 Leverage Ratios..................................................... 90
Section 7.11 Annualized Operating Cash Flow to
Pro Forma Debt Service Ratio........................................ 91
Section 7.12 Affiliate Transactions.............................................. 91
Section 7.13 Real Estate......................................................... 91
Section 7.14 ERISA Liabilities................................................... 91
Section 7.15 Limitation on Leases................................................ 92
Section 7.16 Special Provisions Pertaining to
Unrestricted Subsidiaries........................................... 92
</TABLE>
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<TABLE>
<S> <C>
Section 7.17 Limitation on Preferred Stock of
Restricted Subsidiaries............................................. 93
ARTICLE 8 Default......................................................................... 94
Section 8.1 Events of Default................................................... 94
Section 8.2 Remedies............................................................ 98
Section 8.3 Payments Subsequent to Declaration
of Event of Default................................................. 100
ARTICLE 9 The Administrative Agent ....................................................... 101
Section 9.1 Appointment and Authorization....................................... 101
Section 9.2 Interest Holders.................................................... 101
Section 9.3 Consultation with Counsel........................................... 101
Section 9.4 Documents........................................................... 101
Section 9.5 Administrative Agent and Affiliates................................. 102
Section 9.6 Responsibility of the Administrative
Agent............................................................... 102
Section 9.7 Security Documents.................................................. 102
Section 9.8 Action by the Administrative Agent.................................. 103
Section 9.9 Notice of Default or Event of
Default............................................................. 103
Section 9.10 Responsibility Disclaimed........................................... 104
Section 9.11 Indemnification..................................................... 105
Section 9.12 Credit Decision..................................................... 105
Section 9.13 Successor Administrative Agent...................................... 106
Section 9.14 Delegation of Duties................................................ 107
ARTICLE 10 Change in Circumstances Affecting Fixed
Rate Advances.................................................................. 107
Section 10.1 Fixed Rate Basis Determination
Inadequate or Unfair................................................ 107
Section 10.2 Illegality.......................................................... 108
Section 10.3 Increased Costs..................................................... 109
Section 10.4 Effect On Other Advances............................................ 110
ARTICLE 11 Miscellaneous.................................................................. 111
Section 11.1 Notices............................................................. 111
Section 11.2 Expenses............................................................ 113
Section 11.3 Waivers............................................................. 113
Section 11.4 Set-Off............................................................. 114
Section 11.5 Assignment.......................................................... 115
Section 11.6 Accounting Principles............................................... 116
Section 11.7 Counterparts........................................................ 117
Section 11.8 Governing Law....................................................... 117
Section 11.9 Severability........................................................ 118
Section 11.10 Interest.......................................................... 118
Section 11.11 Table of Contents and Headings.................................... 118
</TABLE>
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<TABLE>
<S> <C>
Section 11.12 Amendment and Waiver............................................. 118
Section 11.13 Entire Agreement................................................. 120
Section 11.14 Other Relationships.............................................. 120
Section 11.15 Directly or Indirectly........................................... 120
Section 11.16 Reliance on and Survival of Various
Provisions....................................................... 120
Section 11.17 Senior Debt...................................................... 120
Section 11.18 Obligations Several.............................................. 121
Section 11.19 Confidentiality.................................................. 121
ARTICLE 12 Waiver of Jury Trial.......................................................... 122
Section 12.1 Waiver of Jury Trial............................................. 122
</TABLE>
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EXHIBITS
Exhibit A - Form of Assignment of Rights by
Partner
Exhibit B - Form of Borrower's Pledge Agreement
Exhibit C - Form of Certificate of Financial
Condition
Exhibit D - Form of Intercreditor Agreement
Exhibit E Form of Performance Certificate
Exhibit F - Form of Request for Advance
Exhibit G - Form of Revolving Note
Exhibit H - Form of Security Agreement
Exhibit I - Form of Subordination Agreement
Exhibit J - Form of Subsidiary Guaranty
Exhibit K - Form of Subsidiary Pledge Agreement
Exhibit L - Form of Subsidiary Security
Agreement
Exhibit M - Form of Term Note
Exhibit N - Form of Use of Proceeds Letter
Exhibit O - Form of Vendor Loan Agreement
Exhibit P - Form of WPCS Guaranty
Exhibit Q - Form of Borrower's Loan Certificate
Exhibit R - Form of Subsidiary Loan Certificate
(Corporation)
Exhibit S - Form of Subsidiary Loan Certificate
(Partnership)
Exhibit T - Form of Assignment and Assumption
Agreement
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SCHEDULES
Schedule 1 - Proposed Acquisitions and Swaps of Allowable
Wireless Systems
Schedule 2-A - Allocation of Revolving Loan Commitment
among certain of the Lenders, Commitment
Ratios, and such Lenders' Addresses for
Notice
Schedule 2-B - Allocation of Term Loans among certain of
the Lenders and such Lenders' Addresses for
Notice
Schedule 3 - Subsidiaries (including designation of
Subsidiaries as Consolidated, Restricted and
Unrestricted Subsidiaries) and Investments
of the Borrower
Schedule 4 - Description of Designated Target Area
Schedule 5 - Licenses and IOAs
Schedule 6 - Liens of Record as of the Agreement Date
Schedule 7 - Listing and Description of Seller
Subordinated Debt
Schedule 8 - Shareholders of the Borrower as of the
Agreement Date
Schedule 9 - Compliance with Other Loan Documents and
Contemplated Transactions
Schedule 10 - Issues Pertaining to Necessary
Authorizations and Licenses
Schedule 11 - Litigation
Schedule 12 - Liabilities and Losses
Schedule 13 - Agreements with Affiliates, etc.
Schedule 14 - Real Estate
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<PAGE> 8
AMENDED AND RESTATED
LOAN AGREEMENT
AMONG WESTERN WIRELESS CORPORATION; THE FINANCIAL
INSTITUTIONS WHOSE NAMES APPEAR AS LENDERS ON THE SIGNATURE
PAGES HEREOF; THE TORONTO-DOMINION BANK, BARCLAYS BANK PLC
AND MORGAN GUARANTY TRUST COMPANY OF NEW YORK, AS MANAGING
AGENTS; CHEMICAL BANK, CIBC INC., FLEET NATIONAL BANK,
INTERNATIONALE NEDERLANDEN (U.S.) CAPITAL CORPORATION, PNC
BANK, NATIONAL ASSOCIATION, AND SOCIETE GENERALE, AS AGENTS;
UNION BANK OF CALIFORNIA, N.A., CORESTATES BANK, N.A.,
BANK OF HAWAII, PEARL STREET L.P., AND CREDIT LYONNAIS
NEW YORK BRANCH, AS CO-AGENTS; BZW, AS DOCUMENTATION
AGENT; J.P. MORGAN SECURITIES INC., AS SYNDICATION AGENT; AND
TORONTO DOMINION (TEXAS), INC., AS ADMINISTRATIVE AGENT
WHEREAS, Western Wireless Corporation, a Delaware corporation (the
"Borrower"), Toronto Dominion (Texas), Inc. (the "Administrative Agent"), the
lenders named therein and the other agents named therein are party to a certain
Loan Agreement dated as of June 30, 1995, as modified and amended by that
certain First Amendment to Loan Agreement dated as of January 11, 1996, and as
further modified and amended by that certain Second Amendment to Loan Agreement
dated as of April 16, 1996 (as amended, the "Existing Loan Agreement"); and
WHEREAS, the Administrative Agent and the Lenders (consisting of most
of the lenders under the Existing Loan Agreement, plus some additional lenders)
have agreed to permit the Revolving Loan Commitment to remain in place, and to
permit the Borrower to incur the Term Loans, all pursuant to the terms and
conditions set forth herein, and such parties and the Borrower have also agreed
in connection therewith to amend and restate the Existing Loan Agreement in its
entirety, as set forth herein; and
WHEREAS, the Borrower acknowledges and agrees that the Security
Interest (as defined in the Existing Loan Agreement) granted to the
Administrative Agent for the benefit of the Lenders pursuant to the Existing
Loan Agreement and the Security Documents (as defined in the Existing Loan
Agreement), shall remain outstanding and in full force and effect in accordance
with the Existing Loan Agreement and shall continue to secure the Obligations
(as defined herein); and
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<PAGE> 9
WHEREAS, the Borrower and all other parties hereto acknowledge and
agree that (i) the Obligations (as defined herein) represent, among other
things, the amendment, restatement, renewal, extension, consolidation and
modification of the Obligations (as defined in the Existing Loan Agreement)
arising in connection with the Existing Loan Agreement and the other Loan
Documents (as defined in the Existing Loan Agreement) executed in connection
therewith; (ii) the parties hereto intend that the Existing Loan Agreement and
the other Loan Documents (as defined in the Existing Loan Agreement) executed in
connection therewith and the collateral pledged thereunder shall secure, without
interruption or impairment of any kind, all existing Indebtedness under the
Existing Loan Agreement and the other Loan Documents (as defined in the Existing
Loan Agreement) executed in connection therewith as so amended, restated,
renewed, extended, consolidated and modified hereunder, together with all other
obligations hereunder; (iii) all Loans evidenced by the Existing Loan Agreement
and the other Loan Documents (as defined in the Existing Loan Agreement)
executed in connection therewith are hereby ratified, confirmed and continued;
and (iv) the Loan Documents (as defined herein) are intended to restate, renew,
extend, consolidate, amend and modify the Existing Loan Agreement and the other
Loan Documents (as defined in the Existing Loan Agreement) executed in
connection therewith; and
WHEREAS, the parties hereto intend that (i) the provisions of the
Existing Loan Agreement and the other Loan Documents (as defined in the Existing
Loan Agreement) executed in connection therewith, to the extent restated,
renewed, extended, consolidated, amended and modified hereby, be hereby
superseded and replaced by the provisions hereof and of the Loan Documents (as
defined herein); (ii) the Notes (as hereinafter defined) amend, renew, extend,
modify, replace, be substituted for and supersede in their entirety, but do not
extinguish, the Indebtedness arising under, the promissory notes issued pursuant
to the Existing Loan Agreement; and (iii) entering into, and performing their
respective obligations under, this transaction not constitute a novation;
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<PAGE> 10
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each of the parties hereto, the
parties hereby amend and restate in its entirety the Existing Loan Agreement as
follows as of the 6th day of May, 1996:
ARTICLE 1
Definitions
For the purposes of this Agreement:
"Acquisition" shall mean (whether by purchase, exchange, issuance of
stock or other equity or debt securities, merger, reorganization or any other
method) (i) any acquisition by the Borrower or any of its Subsidiaries of any
other Person, which Person shall then become consolidated with the Borrower or
any such Subsidiary in accordance with GAAP, or (ii) any acquisition by the
Borrower or any of its Subsidiaries of all or any substantial amount of the
assets of any other Person. For purposes of the preceding sentence, an amount of
assets shall be deemed to be "substantial" if such assets have a fair market
value in excess of $1,000,000; provided, however, that the purchase of equipment
and other goods and services in the ordinary course of business shall not be
deemed to be "Acquisitions."
"Additional Facility Indebtedness" shall mean additional Indebtedness
for Money Borrowed (as to which no commitment has been issued by any Lender as
of the Agreement Date) in a principal amount not to exceed $250,000,000 incurred
by the Borrower in accordance with this Agreement.
"Adjusted Annualized Operating Cash Flow" shall mean, as of any
calculation date, Annualized Operating Cash Flow adjusted by the Marketing
Expense Adjustment.
"Administrative Agent" shall mean Toronto Dominion (Texas), Inc., as
Administrative Agent for the Lenders, together with any successor Administrative
Agent hereunder.
"Administrative Agent's Office" shall mean the office of Toronto
Dominion (Texas), Inc., as Administrative Agent hereunder, located at 909 Fannin
Street, Suite 1700, Houston, Texas 77010, or such other office as may be
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<PAGE> 11
designated pursuant to the provisions of Section 11.1 of this Agreement.
"Advance" shall mean the aggregate amount advanced by the Lenders to
the Borrower pursuant to Article 2 hereof on the occasion of any borrowing.
"Affiliate" shall mean, with respect to a Person, any other Person
directly or indirectly controlling, controlled by, or under common control with,
such first Person. For purposes of this definition, "control" when used with
respect to any Person includes, without limitation, the direct or indirect
beneficial ownership of more than ten percent (10%) of the voting securities or
voting equity of such Person, or the power to direct or cause the direction of
the management and policies of such Person whether by contract or otherwise.
Unless otherwise specified, "Affiliate" shall mean an Affiliate of the Borrower,
and shall include the Unrestricted Subsidiaries.
"Agents" shall mean Chemical Bank, CIBC Inc., Fleet National Bank,
Internationale Nederlanden (U.S.) Capital Corporation, PNC Bank, National
Association, and Societe Generale; and "Agent" shall mean any one of the
foregoing Agents.
"Agreement" shall mean this Amended and Restated Loan Agreement.
"Agreement Date" shall mean the date as of which this Agreement is
dated.
"Allowable Wireless System" shall mean any Cellular System or PCS
System (i) the geographical boundaries for any portion of which are contiguous
to or within 50 miles from the geographical boundaries of (A) a Cellular System
owned by the Borrower or any Subsidiary of the Borrower or (B) a PCS System
owned by the Borrower or any of its Subsidiaries, (ii) which is located in whole
or in substantial part within any state in which is located (A) a Cellular
System owned by the Borrower or any Subsidiary of the Borrower, or (B) a PCS
System owned by the Borrower or any of its Subsidiaries, (iii) which is
otherwise located in the Designated Target Area, or (iv) described on Schedule 1
attached hereto. In addition, "Allowable Wireless System" shall include any
Cellular System or PCS System acquired by the Borrower or any of its Restricted
Subsidiaries as part of a single
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<PAGE> 12
transaction, or a series of related transactions, in which the Borrower or any
of its Restricted Subsidiaries acquires an 'Allowable Wireless System,' as
defined in the immediately preceding sentence, provided that the fair market
value of the latter Cellular System or PCS System equals or exceeds the fair
market value of the former.
"Annualized Operating Cash Flow" shall mean, as of any calculation
date, the product of (i) Operating Cash Flow for the most recently-completed
fiscal two-quarter period, multiplied by (ii) two (2).
"Applicable Law" shall mean, in respect of any Person, all provisions
of constitutions, statutes, rules, regulations and orders of governmental bodies
or regulatory agencies applicable to such Person, including, without limiting
the foregoing, the Licenses, the Communications Act and all Environmental Laws,
and all orders, decisions, judgments and decrees of all courts and arbitrators
in proceedings or actions to which the Person in question is a party or by which
it is bound.
"Applicable Margin" shall mean the interest rate margin applicable to
Advances hereunder as determined in accordance with Section 2.3(g) hereof.
"Assessment Rate" shall mean, for any Interest Period for a CD Rate
Advance, the maximum current annual assessment rate (rounded up to the nearest
one-hundredth (1/100th) of one percent) payable by The Toronto-Dominion Bank to
the Federal Deposit Insurance Corporation (or any successor) for insuring time
deposits in Dollars at the offices of The Toronto-Dominion Bank in the United
States, as determined on the first day of such Interest Period.
"Assignment of Rights By Partner" shall mean, collectively, any
Assignment of Rights by Partner between the Borrower or any Restricted
Subsidiary of the Borrower which is a general or limited partner of any
partnership, on the one hand, and the Administrative Agent, on the other hand,
each substantially in the form of Exhibit A attached hereto.
"Authorized Signatory" shall mean such senior officers of the Borrower
as may be duly authorized and designated in writing by the Borrower to execute
documents, agreements and instruments on behalf of the Borrower.
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<PAGE> 13
"Available Equity" shall mean the sum of $14,000,000, plus any cash
proceeds from public or private offerings of the capital stock of the Borrower
received after the Agreement Date.
"Bank Holdco" shall mean Western PCS I Corporation, a Delaware
corporation, which is a Restricted Subsidiary of the Borrower and a direct,
wholly-owned Subsidiary of WPCS. Bank Holdco is the direct owner of the MTA
Licenses and PCS Systems for Portland, Oklahoma City, and Des Moines.
"Base Rate" shall mean, at any time, the higher of (a) the rate of
interest adopted by the Administrative Agent as the reference rate for the
determination of interest rates for loans of varying maturities in Dollars to
United States residents of varying degrees of creditworthiness and being quoted
at such time by The Toronto-Dominion Bank, New York Branch as its "base rate" or
"prime rate," or (b) the Federal Funds Rate plus five-eighths of one percent
(5/8%). The Base Rate is not necessarily the lowest rate of interest charged to
borrowers of the Administrative Agent or its Affiliates.
"Base Rate Advance" shall mean an Advance which the Borrower requests
to be made as a Base Rate Advance or is reborrowed as a Base Rate Advance, and
which bears interest at the Base Rate Basis, in accordance with the provisions
of Section 2.2 hereof, and which shall be in a principal amount of at least
$5,000,000 and in an integral multiple of $1,000,000.
"Base Rate Basis" shall mean a simple interest rate equal to the sum of
(i) the Base Rate and (ii) the Applicable Margin. The Base Rate Basis shall be
adjusted automatically as of the opening of business on the effective date of
each change in the Base Rate to account for such change and shall also be
changed to reflect adjustments in the Applicable Margin.
"Basket" shall mean $15,000,000, and shall be the limitation at all
times on the aggregate dollar amount of Specified Transactions outstanding or in
effect at any time, entered into by the Borrower or any of its Restricted
Subsidiaries.
"Borrower" shall mean Western Wireless Corporation, a Delaware
corporation.
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<PAGE> 14
"Borrower's Pledge Agreement" shall mean that certain Borrower's Pledge
Agreement dated as of June 30, 1995 between the Borrower and the Administrative
Agent as modified and amended by that certain First Amendment to Borrower's
Pledge Agreement of even date herewith, substantially in the form of Exhibit B
attached hereto, pursuant to which the Borrower has pledged to the
Administrative Agent all stock owned by it.
"BTA" means the unit of division (of which there are 493) for the
United States of America, devised by Rand McNally based upon geography,
population and other factors, which units form the basis for the auction by the
FCC of a portion of the Licenses for PCS Systems for Basic Trading Areas, as
defined by the FCC.
"Business Day" shall mean a day on which banks and foreign exchange
markets are open for the transaction of business required for this Agreement in
London, Houston, and New York, as relevant to the determination to be made or
the action to be taken.
"Capital Expenditures" shall mean, in respect of any Person,
expenditures for the purchase of tangible assets of long-term use which are
capitalized in accordance with GAAP.
"Capitalized Lease Obligation" shall mean 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 GAAP.
"Cash Interest Expense" shall mean, for any period, for the Borrower
and its Consolidated Subsidiaries, on a consolidated basis, cash interest paid
or accrued in respect of Total Debt, together with fees associated therewith
(other than fees payable on or prior to the Agreement Date), all as determined
in accordance with GAAP and shall also include the interest component of
payments for such period in respect of Capitalized Lease Obligations.
"CD Rate" shall mean, for any Interest Period, the interest rate per
annum (rounded upward to the nearest hundredth (1/100th) of one percent)
determined by the Administrative Agent to be the average of prevailing rates bid
at 10:00 a.m. (New York time) or as soon thereafter as practicable, on the
Business Day on which the relevant Interest Period commences, by two or more New
York
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<PAGE> 15
certificate of deposit dealers of recognized standing for the purchase at face
value from the New York Branch of The Toronto-Dominion Bank of its certificates
of deposit having a maturity comparable to the duration of the Interest Period
sought, and in an amount comparable to the amount requested, by the Borrower.
"CD Rate Advance" shall mean an Advance which the Borrower requests to
be made as a CD Rate Advance or which is reborrowed as a CD Rate Advance, and
which bears interest at the CD Rate Basis, in accordance with the provisions of
Section 2.2 hereof, and which shall be in a principal amount of at least
$5,000,000 and in an integral multiple of $1,000,000.
"CD Rate Basis" shall mean a simple per annum interest rate (rounded
upward to the nearest one-hundredth (1/100th) of one percent) equal to the sum
of (a) the quotient of (i) the CD Rate divided by (ii) one minus the Domestic
Reserve Percentage, stated as a decimal, plus (b) the Assessment Rate, plus (c)
the Applicable Margin. The CD Rate Basis shall apply to Interest Periods of
thirty (30), sixty (60), ninety (90), and one hundred eighty (180) days, and,
subject to the final sentence of this paragraph, three hundred and sixty (360)
days, shall be subject to Article 10 hereof, and, once determined, shall remain
unchanged during the applicable Interest Period, except for changes to reflect
adjustments in the Domestic Reserve Percentage or the Assessment Rate, or in the
Applicable Margin pursuant to Section 2.3(g)(i) hereof. The Borrower may elect
an Interest Period for a CD Rate Advance of three hundred sixty (360) days
unless the Administrative Agent has been notified by at least one Lender that
(i) such Lender does not have available to it funds for such Lender's share of
the proposed Advance which are not required for other purposes, or (ii) such
funds are not available to such Lender at a rate (exclusive of reserves and
other adjustments) at or below the CD Rate for such proposed Advance and
Interest Period.
"Cellular System" means a cellular mobile radio telephone system
constructed and operated in an MSA or an RSA (or any successor territorial
designation) pursuant to a License therefor issued by the FCC.
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"Certificate of Financial Condition" shall mean a certificate,
substantially in the form of Exhibit C attached hereto, signed by the chief
financial officer of the Borrower, together with any schedules, exhibits or
annexes appended thereto.
"Change of Control" shall mean (i) directly or indirectly a sale,
transfer, or other conveyance of all or substantially all of the assets of the
Borrower, 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 Borrower's
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
the Person or group of Persons that, as of the date of this Agreement, are not
shareholders of the Borrower (or any Person or group of Persons that, as of the
Agreement Date, are Affiliates of such shareholders) own more than 50% of the
aggregate number of votes of all classes of capital stock of the Borrower which
ordinarily have voting power for 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 shareholders of the
Borrower as of the Agreement Date (or any Person or group of Persons that, as of
the Agreement Date, are Affiliates of such shareholders), 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 aggregate number of
votes of all classes of capital stock of the Borrower which ordinarily have
voting power for the election of directors of the Borrower, or (iii) during any
period of twenty-four (24) consecutive months, individuals who at the beginning
of such period constituted the board of directors of the Borrower, together with
any new directors whose election by such board or whose nomination for election
by the shareholders of the Borrower 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
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approved, cease for any reason to constitute a majority of the board of
directors of the Borrower then in office.
"Co-Agents" shall mean Union Bank of California, N.A., CoreStates Bank,
N.A., Bank of Hawaii, Pearl Street L.P., and Credit Lyonnais New York Branch;
and "Co-Agent" shall mean any one of the foregoing Co-Agents.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral" shall mean any property of any kind provided as collateral
for the Obligations under any of the Security Documents.
"Commitment Ratios" shall mean the percentages in which certain of the
Lenders are severally bound to make Advances to the Borrower under the Revolving
Loan Commitment, which percentages are set forth (together with dollar amounts)
on Schedule 2-A attached hereto as of the Agreement Date.
"Communications Act" shall mean the Communications Act of 1934, and any
similar or successor federal statute, and the rules and regulations of the FCC
thereunder, all as amended and as the same may be in effect from time to time.
"Consolidated Subsidiaries" shall mean the Subsidiaries of the Borrower
whose assets and capital stock are pledged as security for the Obligations which
are designated as Consolidated Subsidiaries on Schedule 3 attached hereto, each
of which is a Restricted Subsidiary and all of which are involved, as of the
Agreement Date, in the business of operating Cellular Systems, PCS Systems or
businesses ancillary thereto. "Consolidated Subsidiaries" shall also include
Restricted Subsidiaries of the Borrower designated by the Borrower as
Consolidated Subsidiaries after the Agreement Date, pursuant to the provisions
of Section 5.14(b) hereof.
"Conversion Date" shall mean December 31, 1999.
"Core Properties" shall mean (a) any Cellular System owned by the
Borrower or any of its Restricted Subsidiaries which is proposed to be sold,
assigned or otherwise transferred in a transaction in which such Cellular System
would generate Net Proceeds in excess of $10,000,000, and
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(b) any PCS System owned by the Borrower or any of its Restricted Subsidiaries.
"Debt Service" shall mean, for any period, the amount of Cash Interest
Expense, together with scheduled principal repayments (excluding any repayments
made or required to be made in accordance with Section 2.8 hereof) in respect of
Indebtedness for Money Borrowed, of the Borrower and its Consolidated
Subsidiaries on a consolidated basis. For purposes of this definition,
`principal' shall include the principal component of payments for such period in
respect of Capitalized Lease Obligations.
"Default" shall mean any Event of Default, and any of the events
specified in Section 8.1, regardless of whether there shall have occurred any
passage of time or giving of notice, or both, that would be necessary in order
to constitute such event an Event of Default.
"Default Rate" shall mean a simple per annum interest rate equal to the
sum of the otherwise applicable Interest Rate Basis plus two percent (2%). With
respect to amounts (other than principal) bearing interest at the Default Rate,
for purposes of the foregoing sentence, the words "otherwise applicable Interest
Rate Basis," shall be deemed to mean the Base Rate Basis.
"Designated Target Area" shall mean any Cellular Systems or PCS Systems
and the areas in which they are located, designated by reference to MSA and RSA
territories in the case of Cellular Systems, and designated by reference to MTA
and BTA territories in the case of PCS Systems, which constitute the Borrower's
target area for Allowable Wireless Systems to be acquired as permitted by this
Agreement. As of the Agreement Date, the Designated Target Area is set forth on
Schedule 4 to this Agreement.
"Dollars" or "$" shall mean the basic unit of the lawful currency of
the United States of America.
"Domestic Reserve Percentage" shall mean, for any day, the percentage
which is in effect on such day (rounded up to the nearest one-hundredth
(1/100th) of one percent) as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any basic, supplemental, emergency
or marginal reserves) for a
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<PAGE> 19
member bank of the Federal Reserve System with deposits exceeding five (5)
billion Dollars in respect of new, non-personal, time deposits in Dollars in the
United States having a maturity comparable to the duration of the Interest
Period requested and in an amount of $5,000,000 or more. The CD Rate Basis for
any CD Rate Advance shall be adjusted automatically on and as of the effective
date of any change in the Domestic Reserve Percentage.
"Environmental Laws" shall mean, with respect to any Person, all
applicable federal, state and local laws, statutes, rules, regulations and
ordinances, codes, common law, consent agreements to which such Person is a
party or by which it is bound, orders, decrees, judgments and injunctions
issued, promulgated, approved or entered thereunder affecting such Person or its
property and relating to public health, safety or the pollution or protection of
the environment, including, without limitation, those relating to releases,
discharges, emissions, spills, leaching, or disposals to, on, or in air, water,
land or ground water, to the withdrawal or use of ground water, to the use,
handling or disposal of polychlorinated biphenyls, asbestos or urea
formaldehyde, to the treatment, storage, disposal or management of hazardous
substances (including, without limitation, petroleum, crude oil or any fraction
thereof, or other hydrocarbons), pollutants or contaminants, to exposure to
toxic, hazardous or other controlled, prohibited, or regulated substances,
including, without limitation, any such provisions under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (42
U.S.C. Section 9601 et seq.), or the Resource Conservation and Recovery Act of
1976, as amended (42 U.S.C. Section 6901 et seq.).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as in effect from time to time.
"ERISA Affiliate" shall mean any Person, including a Subsidiary or an
Affiliate of the Borrower, that is a member of any group of organizations
(within the meaning of Code Sections 414(b), 414(c), 414(m), or 414(o)) of which
the Borrower is a member.
"Eurodollar Advance" shall mean an Advance which the Borrower requests
to be made as a Eurodollar Advance or which is reborrowed as a Eurodollar
Advance, and which bears interest at the Eurodollar Basis, in accordance with
the
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provisions of Section 2.2 hereof, and which shall be in a principal amount of at
least $5,000,000 and in an integral multiple of $1,000,000.
"Eurodollar Basis" shall mean a simple per annum interest rate (rounded
upward, if necessary, to the nearest one-hundredth (1/100th) of one percent)
equal to the sum of (a) the quotient of (i) the Eurodollar Rate divided by (ii)
one minus the Eurodollar Reserve Percentage, stated as a decimal, plus (b) the
Applicable Margin. The Eurodollar Basis shall apply to Interest Periods of one
(1), two (2), three (3), six (6), and, subject to availability, twelve (12)
months, and, once determined, shall remain unchanged during the applicable
Interest Period, except for changes to reflect adjustments in the Eurodollar
Reserve Percentage and the Applicable Margin pursuant to Section 2.3(g) hereof.
The Borrower may elect an Interest Period of twelve (12) months for a Eurodollar
Advance unless the Administrative Agent has been notified by at least one Lender
that (i) such Lender does not have available to it funds for its portion of the
proposed Advance which are not required for other purposes, or (ii) such funds
are not available to such Lender at a rate at or below the Eurodollar Rate for
such proposed Advance and Interest Period.
"Eurodollar Rate" shall mean, for any Interest Period, the average of
the interest rates per annum (rounded upward to the nearest one-sixteenth of one
percent (1/16%)) which appear on Telerate Page 3750 as of 11:00 a.m. (New York
time), or, if unavailable, any generally accepted successor rate selected by the
Administrative Agent, two (2) Business Days before the first day of such
Interest Period, in an amount approximately equal to the principal amount of,
and for a length of time approximately equal to the Interest Period for, the
Eurodollar Advance sought by the Borrower.
"Eurodollar Reserve Percentage" shall mean the percentage which is in
effect from time to time under Regulation D of the Board of Governors of the
Federal Reserve System, as such regulation may be amended from time to time, as
the maximum reserve requirement applicable with respect to Eurocurrency
liabilities (as that term is defined in Regulation D), whether or not any Lender
has any such Eurocurrency liabilities subject to such reserve requirement at
that time. The Eurodollar Basis for any Eurodollar Advance shall be adjusted as
of the effective date of any change in the Eurodollar Reserve Percentage.
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"Event of Default" shall mean any of the events specified in Section
8.1, provided that any requirement for notice or lapse of time or both has been
satisfied.
"Excess Cash Flow" shall mean, with respect to the Borrower and its
Consolidated Subsidiaries on a consolidated basis, as of the end of any fiscal
year of the Borrower and based on the audited financial statements required to
be provided under Section 6.2 hereof, the remainder of (a) Operating Cash Flow
for such fiscal year minus (b) the sum of the following items for such fiscal
year multiplied by 1.10 (provided that the use of such multiplication factor
shall not increase the sum of the items listed below for any fiscal year by more
than $10,000,000): (i) Capital Expenditures; (ii) cash income taxes paid; (iii)
Cash Interest Expense; and (iv) scheduled principal repayments on any
Indebtedness for Money Borrowed (including the principal component of any
Capitalized Lease Obligation, but not including any repayments required under
Section 2.8(a)) and permanent, voluntary prepayments of the Loans (accompanied
by permanent reduction in a like amount of the Revolving Loan Commitment, in the
case of such prepayment of the Revolving Loans) hereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as it
may be amended, and any successor act thereto.
"FCC" shall mean the Federal Communications Commission, or any other
similar or successor agency of the federal government administering the
Communications Act.
"Federal Funds Rate" shall mean, as of any date, the weighted average
of the rates on overnight federal funds transactions with the members of the
Federal Reserve System arranged by federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions received by the Administrative Agent or its Affiliate from
three (3) federal funds brokers of recognized standing selected by the
Administrative Agent or its Affiliate.
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"Fee Letters" shall mean, collectively, those certain agreements dated
as of the Agreement Date setting forth the applicable fees to be paid by the
Borrower to the other parties to this Agreement in connection with the Loans and
the Revolving Loan Commitment created hereunder.
"Fixed Charge Coverage Ratio" shall mean on any calculation date, for
the Borrower and its Consolidated Subsidiaries on a consolidated basis, the
ratio of (a) the sum (without double-counting) of (i) Operating Cash Flow for
the most recently-completed four fiscal quarter period, plus (ii) the unused
portion of the Revolving Loan Commitment which is available for borrowing as of
the calculation date without causing a Default hereunder, plus (iii) cash on
hand at the beginning of such fiscal period, plus (iv) the amount of any
increase in net borrowings hereunder for such fiscal period, to (b) Fixed
Charges.
"Fixed Charges" shall mean on any calculation date, for the Borrower
and its Consolidated Subsidiaries on a consolidated basis for the most recently
completed fiscal four-quarter period, the sum of (a) Debt Service, plus (b)
Capital Expenditures, plus (c) cash income taxes paid, plus (d) the amount of
any principal repaid under Section 2.8(a) hereof.
"Fixed Rate Advances" shall mean Eurodollar Advances and CD Rate
Advances.
"GAAP" shall mean generally accepted accounting principles in the
United States, consistently applied.
"Guaranty" or "Guaranteed," as applied to an obligation, shall mean and
include (a) a guaranty, direct or indirect, in any manner, of all or any part of
such obligation, and (b) any agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of non-performance) of all or
any part of such obligation, including, without limiting the foregoing, any
reimbursement obligations with respect to outstanding letters of credit.
"Indebtedness" shall mean, with respect to any Person, and without
duplication, (a) all items, except items of partners' equity or capital stock or
surplus or general contingency or deferred tax reserves, which in accordance
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with GAAP would be included in determining total liabilities as shown on the
liability side of a balance sheet of such Person, including, without limitation,
secured non-recourse obligations of such Person, (b) all direct or indirect
obligations of any other Person secured by any Lien to which any property or
asset owned by such Person is subject, but only to the extent of the lower of
(i) the face amount of such obligations or (ii) the higher of the fair market
value or the book value of the property or asset subject to such Lien if the
obligation secured thereby shall not have been assumed, (c) all Capitalized
Lease Obligations of such Person and all obligations of such Person with respect
to leases constituting part of a sale and lease-back arrangement, and (d) all
reimbursement obligations with respect to outstanding letters of credit.
"Indebtedness for Money Borrowed" shall mean, with respect to any
Person, Indebtedness for money borrowed and Indebtedness represented by notes
payable and drafts accepted representing extensions of credit, all obligations
evidenced by bonds, debentures, notes or other similar instruments, all
Indebtedness upon which interest charges are customarily paid, all Capitalized
Lease Obligations, all reimbursement obligations with respect to outstanding
letters of credit, all Indebtedness issued or assumed as full or partial payment
for property or services (other than trade payables arising in the ordinary
course of business, but only if and so long as such accounts are payable on
customary trade terms), whether or not any such notes, drafts, obligations or
Indebtedness represent Indebtedness for money borrowed, and, without
duplication, Guaranties of any of the foregoing. For purposes of this
definition, interest which is accrued but not paid on the scheduled due date for
such interest shall be deemed Indebtedness for Money Borrowed.
"Indemnitee" shall have the meaning ascribed to it in Section 5.11
hereof.
"Intercreditor Agreement" shall mean that certain Intercreditor
Agreement dated as of June 30, 1995 among the Administrative Agent, the
Borrower, WPCS, Vendor Holdco, and the Vendor, attached hereto as Exhibit D.
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"Interest Hedge Agreements" shall mean 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 Borrower, on the one hand, and
any one or more of the Lenders, or any other Person (other than an Affiliate of
the Borrower), on the other hand, as such agreement or arrangement may be
modified, supplemented and in effect from time to time.
"Interest Period" shall mean (a) in connection with any Base Rate
Advance, the period beginning on the date such Advance is made and ending on the
last Business Day of the calendar quarter in which such Advance is made,
provided, however, that if a Base Rate Advance is made on the last day of any
calendar quarter, it shall have an Interest Period ending on, and its Payment
Date shall be, the last day of the following calendar quarter, and (b) in
connection with any Fixed Rate Advance, the term of such Advance selected by the
Borrower or otherwise determined in accordance with this Agreement.
Notwithstanding the foregoing, however, (i) any applicable Interest Period which
would otherwise end on a day which is not a Business Day shall be extended to
the next succeeding Business Day unless, with respect to Eurodollar Advances
only, such Business Day falls in another calendar month, in which case such
Interest Period shall end on the next preceding Business Day, (ii) any
applicable Interest Period, with respect to Eurodollar Advances only, which
begins on a day for which there is no numerically corresponding day in the
calendar month during which such Interest Period is to end shall (subject to
clause (i) above) end on the last day of such calendar month, and (iii) no
Interest Period shall extend beyond the Revolving Loan Maturity Date with
respect to Interest Periods applicable to Revolving Loans, the Maturity Date
with respect to Interest Periods applicable to the Term Loans, or such earlier
date as would interfere with the Borrower's repayment obligations hereunder.
Interest shall be due and payable with respect to any Advance as provided in
Section 2.3 hereof.
"Interest Rate Basis" shall mean the Base Rate Basis, the Eurodollar
Basis, or the CD Rate Basis, as appropriate.
"Investment" shall mean, with respect to any Person, any loan, advance
or extension of credit (other than to customers in the ordinary course of
business) by such Person
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to, or any Guaranty or other contingent liability with respect to the capital
stock, Indebtedness or other obligations of, or any contributions to the capital
of, any other Person, or any ownership, purchase or other acquisition by such
Person of any interest in any capital stock, limited partnership interest,
general partnership interest, or other securities of any such other Person,
other than an Acquisition. "Investment" shall also include the total cost of any
future commitment or other obligation binding on any Person to make an
Investment or any subsequent Investment.
"IOA" shall mean any Interim Operations Authorization issued to the
Borrower or any of its Subsidiaries by the FCC, as listed on Schedule 5 hereto.
"Key Man Policy" shall mean a key-man life insurance policy on the life
of John Stanton, Chairman of the Borrower, and on the life of any successor
Chairman, in each case having a death benefit payable to the Borrower of not
less than $5,000,000.
"Lenders" shall mean the financial institutions whose names appear as
"Lenders" on the signature pages hereof and any other Person which becomes a
"Lender" hereunder after the Agreement Date; and "Lender" shall mean any one of
the foregoing Lenders.
"Leverage Ratio (Senior Debt)" shall mean, as of the end of any fiscal
quarter, the ratio of Senior Debt to Adjusted Annualized Operating Cash Flow.
"Leverage Ratio (Total Debt)" shall mean, as of the end of any fiscal
quarter, the ratio of Total Debt to Adjusted Annualized Operating Cash Flow.
"Licenses" shall mean any mobile telephone, cellular telephone,
microwave, paging, personal communications service, or other license,
authorization, certificate of compliance, franchise, approval or permit, other
than any IOA, whether for the construction or the operation of any Cellular
System or PCS System, granted or issued by the FCC and held by the Borrower or
any of its Subsidiaries, or by any Person in which the Borrower or any of its
Subsidiaries has an Investment, all of which are listed (together with IOAs so
designated) as of the Agreement Date on Schedule 5 hereto.
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"Lien" shall mean, with respect to any property, any mortgage, lien,
pledge, negative pledge or other agreement not to pledge, assignment, charge,
security interest, title retention agreement, levy, execution, seizure,
attachment, garnishment or other similar encumbrance of any kind in respect of
such property, whether created by statute, contract, the common law or
otherwise, and whether or not choate, vested or perfected.
"Loan Documents" shall mean this Agreement, the Notes, any Assignment
of Rights by Partner, the Borrower's Pledge Agreement, the Security Agreement,
the Subsidiary Security Agreement, the Subsidiary Guaranty, the Subsidiary
Pledge Agreement, the WPCS Guaranty, the Intercreditor Agreement, any
Subordination Agreement, all legal opinions issued by counsel to the Borrower or
any of its Subsidiaries, any reliance letters issued with respect to legal
opinions, the Fee Letters, all Requests for Advance, all Interest Hedge
Agreements between the Borrower, on the one hand, and the Administrative Agent
or its Affiliate and the Lenders, or any of them, on the other hand, including
any Interest Hedge Agreements entered into prior to the Agreement Date, and all
other material documents and agreements executed or delivered in connection with
or contemplated by this Agreement.
"Loans" shall mean, collectively, the Revolving Loans and the Term
Loans, which are evidenced by the Notes.
"Majority Lenders" shall mean (i) at any time that there exists no
Default hereunder, Lenders the sum of whose Revolving Loan Commitment amounts
plus Term Loans outstanding, as applicable, equals or exceeds fifty-one percent
(51%) of the sum of the then existing Revolving Loan Commitment amounts plus the
Term Loans outstanding on the date thereof, or (ii) at any time that there
exists a Default hereunder, Lenders the total of whose Loans outstanding equals
or exceeds fifty-one percent (51%) of the total principal amount of the Loans
then outstanding hereunder.
"Managing Agents" shall mean The Toronto-Dominion Bank, Barclays Bank,
PLC and Morgan Guaranty Trust Company of New York as managing agents for the
Lenders hereunder.
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"Marketing Expense Adjustment" shall mean the product (whether a
positive or a negative number) of (A) the remainder of (i) the quotient of
Marketing Expenses for the immediately preceding two-quarter period divided by
two (2), minus (ii) the average quarterly amount of Marketing Expenses for the
immediately preceding four-quarter period multiplied by (B) four (4).
"Marketing Expenses" shall mean, with respect to the Borrower and its
Consolidated Subsidiaries, the dollar amount of sales and marketing expenses,
including handset subsidies.
"Materially Adverse Effect" shall mean (i) any material adverse effect
upon the business, assets, liabilities, financial condition, results of
operations, properties, or business prospects of the Borrower and its
Subsidiaries taken as a whole, or (ii) a material adverse effect upon the
binding nature, validity, or enforceability of this Agreement, and the Notes,
and the other Loan Documents or upon the ability of the Borrower and its
Subsidiaries to perform the payment obligations or other material obligations
under this Agreement or any other Loan Document, or upon the value of the
Collateral, taken as a whole or upon the rights, benefits or interests of the
Lenders in and to the Loans or the rights of the Administrative Agent and the
Lenders in the Collateral taken as a whole; in either case, whether resulting
from any single act, omission, situation, status, event or undertaking, or taken
together with other such acts, omissions, situations, statuses, events or
undertakings.
"Maturity Date" shall mean the earlier of (a) March 31, 2005, or (b)
such earlier date on which the payment of all outstanding Obligations shall be
due (whether by acceleration or otherwise).
"MSA" shall mean any "metropolitan statistical area" as defined and
modified by the FCC for the purpose of licensing public cellular radio
telecommunications service systems.
"MTA" shall mean any of the 51 "major trading areas" into which the
United States of America is organized, as set forth in the Rand McNally 1992
Commercial Atlas & Marketing Guide, 123d Edition, at pages 38-39.
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"Multiemployer Plan" shall have the meaning set forth in Section
4001(a)(3) of ERISA.
"Necessary Authorizations" shall mean all approvals and licenses from,
and all filings and registrations with, any governmental or other regulatory
authority, including, without limiting the foregoing, the Licenses and all
grants, approvals, licenses, filings and registrations under the Communications
Act, necessary in order to enable the Borrower or any of its Subsidiaries to
own, construct, maintain and operate Cellular Systems and PCS Systems and to
make and hold Investments in other Persons who own, construct, maintain, and
operate Cellular Systems and PCS Systems.
"Net Income" shall mean, for the Borrower and its Consolidated
Subsidiaries on a consolidated basis, for any period, net income determined in
accordance with GAAP.
"Net Proceeds" shall mean, with respect to any sale, lease, transfer or
other disposition of assets or securities by the Borrower or any of its
Restricted Subsidiaries, the aggregate amount of cash received for such assets
or securities (including, without limitation, any payments received for
non-competition covenants, consulting or management fees, and any portion of the
amount received evidenced by a buyer promissory note or other evidence of
Indebtedness), net of (i) amounts reserved, if any, for taxes payable with
respect to any such sale (after application of any available losses, credits or
other offsets), (ii) reasonable and customary transaction costs properly
attributable to such transaction and payable by the Borrower or any of its
Restricted Subsidiaries (other than to an Affiliate if not on an arms length
basis) in connection with such sale, lease, transfer or other disposition of
assets or securities, (iii) until actually received by the Borrower or any of
its Restricted Subsidiaries, any portion of the amount received held in escrow
or evidenced by a buyer promissory note, or a non-compete agreement or covenant,
management agreement or consulting agreement, for which compensation is paid
over time, and (iv) any portion of the amount received which is used to
discharge or otherwise satisfy any Seller Subordinated Debt incurred in
connection with the initial acquisition of such assets or securities by the
Borrower or any of its Restricted Subsidiaries. Upon receipt by the Borrower or
any of its Restricted Subsidiaries of amounts
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referred to in item (iii) of the preceding sentence, such amounts shall then be
deemed to be "Net Proceeds."
"Net Proceeds Trust" shall have the meaning ascribed to such term in
Section 2.8(b)(ii) hereof.
"Notes" shall mean, collectively, the Revolving Notes and the Term
Notes.
"Obligations" shall mean (i) all payment and performance obligations of
every kind, nature and description of the Borrower, its Restricted Subsidiaries,
and any other obligors to the Lenders, the Administrative Agent, or any of them,
under this Agreement and the other Loan Documents (including any interest, fees
and other charges on the Loans or otherwise under the Loan Documents that would
accrue but for the filing of a bankruptcy action with respect to the Borrower,
any such Restricted Subsidiary, or any such other obligor, whether or not such
claim is allowed in such bankruptcy action), as they may be amended from time to
time, or as a result of making the Loans, whether such obligations are direct or
indirect, absolute or contingent, due or not due, contractual or tortious,
liquidated or unliquidated, arising by operation of law or otherwise, now
existing or hereafter arising, and (ii) the obligation to pay an amount equal to
the amount of any and all damage which the Lenders, the Administrative Agent, or
any of them, may suffer by reason of a breach by the Borrower, any of its
Restricted Subsidiaries, or any other obligor, of any obligation, covenant or
undertaking with respect to this Agreement or any other Loan Document.
"Operating Cash Flow" shall mean, for any fiscal quarter, for the
Borrower and its Consolidated Subsidiaries on a consolidated basis, Net Income
for such quarter (after eliminating any extraordinary gains and losses,
including gains and losses from the sale of assets, and minority interests, and
equity in earnings (losses) of non-consolidated entities), plus, to the extent
deducted or accrued in determining Net Income, the sum of each of the following
for such quarter: (i) depreciation, amortization, and other non-cash charges,
(ii) income tax expense, and (iii) interest expense.
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"Payment Date" shall mean the last day of any Interest Period.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"PCS Business" shall mean the business of providing mobile
communications services in BTA's and MTA's (or any successor territorial
designations) through the use of microcells on microwave frequencies with
numerous low-power transmitters, each serving a small area.
"PCS System" shall mean a mobile communications system constructed and
operated in a BTA or an MTA (or any successor territorial designations) pursuant
to a License therefor issued by the FCC.
"Performance Certificate" shall mean a certificate of the president or
chief financial officer of the Borrower as to its financial performance, in
substantially the form attached hereto as Exhibit E.
"Permitted Asset Sale" shall mean the sale by the Borrower or any of
its Restricted Subsidiaries of all or any substantial part of its or their
assets as and to the extent permitted under Section 7.4(a) hereof.
"Permitted Debt" shall mean Indebtedness for Money Borrowed permitted
to be incurred and to remain outstanding by the Borrower and its Restricted
Subsidiaries, pursuant to Section 7.1 hereof.
"Permitted Investments" shall mean Investments described in and
permitted to be made under Section 7.6 hereof.
"Permitted Liens" shall mean, as applied to any Person:
(a) Any Lien in favor of the Administrative Agent (for
itself and for the ratable benefit of the Lenders) given to secure the
Obligations;
(b) (i) Liens on real estate for real estate taxes not
yet delinquent and (ii) Liens for taxes, assessments, judgments, governmental
charges or levies or claims the non-payment of which is being diligently
contested in good faith by appropriate proceedings and for
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which adequate reserves have been set aside on such Person's books, but only so
long as no foreclosure, distraint, sale or similar proceedings have been
commenced with respect thereto and remain unstayed for a period of thirty (30)
days after their commencement;
(c) Liens of landlords, carriers, warehousemen,
mechanics, laborers and materialmen incurred in the ordinary course of business
for sums not yet due or being diligently contested in good faith, if reserves or
appropriate provisions shall have been made therefor;
(d) Liens incurred in the ordinary course of business in
connection with worker's compensation and unemployment insurance;
(e) Restrictions on the transfer of assets imposed by any
of the Licenses as now in effect or by the Communications Act, any state laws,
and any regulations thereunder;
(f) Easements, rights-of-way, restrictions and other
similar encumbrances on the use of real property which do not interfere with the
ordinary conduct of the business of such Person, or Liens incidental to the
conduct of the business of such Person or to the ownership of its properties
which were not incurred in connection with Indebtedness or other extensions of
credit and which do not in the aggregate materially detract from the value of
such properties or materially impair their use in the operation of the business
of such Person;
(g) Purchase money security interests, which are
perfected automatically by operation of law, only for the period (not to exceed
twenty (20) days) of automatic perfection under the law of the applicable
jurisdiction, and limited to Liens on assets so purchased;
(h) Liens reflected by Uniform Commercial Code financing
statements filed in respect of true leases; and
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(i) Any Liens of record which secure Indebtedness in an
aggregate amount outstanding at any time not to exceed, in the aggregate with
other Specified Transactions, the Basket. The Permitted Liens described in this
subsection (i) are listed as of the Agreement Date on Schedule 6 attached
hereto.
"Person" shall mean an individual, corporation, limited liability
company, association, partnership, joint venture, trust or estate, an
unincorporated organization, a government or any agency or political subdivision
thereof, or any other entity.
"Plan" shall mean, with respect to any Person, an employee benefit plan
within the meaning of Section 3(3) of ERISA or any other employee benefit plan
maintained for employees of such Person.
"Pro Forma Debt Service" shall mean projected Debt Service for the
Borrower and its Consolidated Subsidiaries on a consolidated basis with respect
to the next succeeding fiscal four-quarter period following the calculation
date, and after giving effect to any Interest Hedge Agreements and all Fixed
Rate Advances. For purposes of this definition, (i) it shall be assumed that the
Indebtedness for Money Borrowed with respect to which Debt Service is being
calculated shall remain at the level outstanding on the calculation date for the
entire succeeding four fiscal- quarter period, and (ii) where interest payments
on Indebtedness for Money Borrowed for the fiscal four-quarter period
immediately succeeding the calculation date are not fixed by way of Interest
Hedge Agreements, Fixed Rate Advances, or otherwise for the entire period,
interest shall be calculated on such Indebtedness for Money Borrowed for periods
for which interest payments are not so fixed at the lower of (y) the Base Rate
Basis on the calculation date, or (z) the Eurodollar Basis which would be in
effect on the calculation date for a Eurodollar Advance having a twelve-month
Interest Period.
"Reportable Event" shall have the meaning set forth in Title IV of
ERISA.
"Request for Advance" shall mean a certificate designated as a "Request
for Advance," signed by an Authorized Signatory requesting an Advance hereunder,
which shall be in substantially the form of Exhibit F attached
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hereto and shall, among other things, (i) specify the date of the Advance, which
shall be a Business Day, the amount of the Advance, the type of Advance, and,
with respect to a Fixed Rate Advance, the Interest Period selected by the
Borrower, (ii) state that there shall not exist, on the date of the requested
Advance both before and after giving effect thereto, a Default, and (iii) as to
an Advance which will increase the principal amount of the Loans then
outstanding, specify the use of the proceeds of the Advance being requested.
"Restricted Payment" shall mean (i) any direct or indirect
distribution, dividend or other cash payment by the Borrower or any of its
Restricted Subsidiaries or Vendor Holdco to any Person (other than to the
Borrower or any other Restricted Subsidiary of the Borrower or Vendor Holdco) on
account of any general or limited partnership interest in, or ownership of any
shares of capital stock or other securities of, the Borrower or any of its
Restricted Subsidiaries or Vendor Holdco; (ii) any payment in respect of
Subordinated Debt; or (iii) any payment by the Borrower or any of its Restricted
Subsidiaries or Vendor Holdco to a Person other than the Borrower or any of its
Restricted Subsidiaries or Vendor Holdco under any management or consulting
agreement or other similar agreement or arrangement not entered into in the
ordinary course of business.
"Restricted Purchase" shall mean any payment by the Borrower or any of
its Restricted Subsidiaries or Vendor Holdco on account of the purchase,
redemption or other acquisition or retirement of any general or limited
partnership interest in, or shares of capital stock or other securities of, the
Borrower or any of the Borrower's Restricted Subsidiaries or Vendor Holdco,
including, without limitation, any warrants or other rights or options to
acquire shares of capital stock or partnership interests of the Borrower or any
of the Borrower's Restricted Subsidiaries or Vendor Holdco.
"Restricted Subsidiaries" shall mean the Subsidiaries of the Borrower
whose assets and capital stock are pledged as security for the Obligations which
are designated as of the Agreement Date as Restricted Subsidiaries on Schedule 3
attached hereto, each of which shall be a signatory to the Subsidiary Guaranty
(other than WPCS, which shall sign the WPCS Guaranty) and the Subsidiary
Security Agreement.
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"Restricted Subsidiaries" shall also include Subsidiaries of the
Borrower designated by the Borrower as Restricted Subsidiaries after the
Agreement Date, pursuant to the provisions of Section 5.14(a) hereof.
"Revolving Loan Commitment" shall mean the several obligations of
certain of the Lenders to advance the sum of up to $750,000,000 to the Borrower
on or after the Agreement Date, in accordance with their respective Commitment
Ratios and as such amount may be reduced from time to time, all pursuant to the
terms hereof.
"Revolving Loan Maturity Date" shall mean the earlier of (a) December
31, 2004, or (b) such earlier date on which the payment of all outstanding
Obligations shall be due (whether by acceleration or otherwise).
"Revolving Loans" shall mean, collectively, the amount advanced by
certain of the Lenders to the Borrower under the Revolving Loan Commitment, not
to exceed the amount of the Revolving Loan Commitment, and evidenced by the
Revolving Notes.
"Revolving Notes" shall mean those certain revolving promissory notes
in the aggregate original principal amount of $750,000,000, one issued by the
Borrower to each of the Lenders issuing a Revolving Loan Commitment in
accordance with each such Lender's Commitment Ratio for the Revolving Loan
Commitment, each one substantially in the form of Exhibit G attached hereto, and
any extensions, modifications, renewals or replacements of or amendments to any
of the foregoing.
"RSA" shall mean any "rural service area" as defined and modified by
the FCC for the purpose of licensing public cellular radio telecommunications
service systems.
"Security Agreement" shall mean that certain Security Agreement dated
as of June 30, 1995 between the Borrower and the Administrative Agent, as
modified and amended by that certain First Amendment to Security Agreement of
even date herewith, substantially in the form of Exhibit H attached hereto.
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"Security Documents" shall mean the Borrower's Pledge Agreement, the
Subsidiary Guaranty, the Subsidiary Pledge Agreement, the Security Agreement,
the Subsidiary Security Agreement, the WPCS Guaranty, the Assignment of Rights
by Partner, any other agreement or instrument providing collateral for the
Obligations whether now or hereafter in existence, and any filings, instruments,
agreements, and documents related thereto or to this Agreement, and providing
the Administrative Agent, for itself and for the ratable benefit of the Lenders,
with Collateral for the Obligations.
"Security Interest" shall mean all Liens in favor of the Administrative
Agent, for itself and for the ratable benefit of the Lenders, created hereunder
or under any of the Security Documents to secure the Obligations.
"Seller Subordinated Debt" shall mean any Indebtedness for Money
Borrowed of the Borrower or any of its Restricted Subsidiaries in favor of any
Person who has sold to the Borrower or any of its Restricted Subsidiaries stock,
partnership interests or assets pertaining to any of the Cellular Systems or PCS
Systems owned by the Borrower and its Restricted Subsidiaries, such Indebtedness
for Money Borrowed (i) not to exceed $11,000,000 in principal amount in the
aggregate at any time outstanding, nor to exceed, together with the other
Specified Transactions, the Basket, and (ii) to be subject to a subordination
agreement or otherwise to have terms and conditions acceptable to the Majority
Lenders. "Seller Subordinated Debt" outstanding on the Agreement Date is
generally described on Schedule 7 attached hereto, including, without
limitation, a description of the holder, the principal amount, the payment
terms, and the maturity thereof.
"Senior Debt" shall mean for the Borrower and its Consolidated
Subsidiaries on a consolidated basis, the sum (without duplication) of their
Indebtedness for Money Borrowed, other than Subordinated Debt.
"Specified Transactions" shall mean each of the following, when entered
into by the Borrower or any of its Restricted Subsidiaries: (i) Seller
Subordinated Debt; (ii) Capitalized Lease Obligations; (iii) Indebtedness in the
form of a sale-leaseback transaction; and (iv) additional secured and unsecured
Indebtedness for Money Borrowed (other than the Obligations).
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"Subordinated Debt" shall mean (a) any Seller Subordinated Debt, and
(b) up to $200,000,000 in gross proceeds (excluding fees or underwriter
discounts, but including additions to principal resulting from in-kind payments,
or deferrals, of interest) from the issuance of other subordinated Indebtedness
for Money Borrowed of the Borrower, unsecured with respect to the Borrower and
its Restricted Subsidiaries, subject to the following: (i) the Borrower shall,
in a certificate provided on the date of incurrence of such subordinated
Indebtedness for Money Borrowed, demonstrate its projected pro forma compliance
(giving effect to the incurrence of such subordinated Indebtedness for Money
Borrowed) with Sections 7.8, 7.9, 7.10, and 7.11; (ii) there shall be no
repayment of the principal amount of such subordinated Indebtedness for Money
Borrowed including any sinking fund payments or other principal payments until
at least one year and one day after the Maturity Date; (iii) the final maturity
of such subordinated Indebtedness for Money Borrowed must be at least one year
and one day after the Maturity Date; (iv) such subordinated Indebtedness for
Money Borrowed shall contain no covenants or provisions more restrictive on the
Borrower and its Subsidiaries than those contained herein; and (v) the terms of
subordination shall be as set forth in the Subordination Agreement or otherwise
reasonably acceptable to the Majority Lenders. The amount of Subordinated Debt
permitted under clause (b) of the first sentence of this definition may be
increased above $200,000,000 on a dollar-for-dollar basis by additional equity
raised by the Borrower or any of its Restricted Subsidiaries after the Agreement
Date.
"Subordination Agreement" shall mean any Subordination Agreement
between certain holders of Subordinated Debt other than Seller Subordinated
Debt, on the one hand, and the Administrative Agent, on the other hand, such
Subordination Agreement to be substantially in the form of Exhibit I attached
hereto.
"Subsidiary" shall mean, as applied to any Person, (a) any corporation
of which more than fifty percent (50%) of the outstanding 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 partnership of
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which more than fifty percent (50%) of the outstanding partnership 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.
"Subsidiaries" as used herein, unless otherwise indicated, shall mean all
Subsidiaries of the Borrower, including Consolidated Subsidiaries, Restricted
Subsidiaries, and Unrestricted Subsidiaries. The Subsidiaries of the Borrower as
of the Agreement Date are set forth on Schedule 3 attached hereto.
"Subsidiary Guaranty" shall mean, collectively, that certain Subsidiary
Guaranty dated as of June 30, 1995 in favor of the Administrative Agent, for
itself and for the ratable benefit of the Lenders, given by each Restricted
Subsidiary of the Borrower (other than WPCS, which shall give the WPCS
Guaranty), as modified and amended by that certain First Amendment to Subsidiary
Guaranty of even date herewith, substantially in the form of Exhibit J attached
hereto, and any similar guaranty delivered pursuant to Section 5.13 hereof.
"Subsidiary Pledge Agreement" shall mean, collectively, that certain
Subsidiary Pledge Agreement dated as of June 30, 1995 between each Restricted
Subsidiary of the Borrower having one or more of its own corporate Restricted
Subsidiaries, on the one hand, and the Administrative Agent, on the other hand,
as modified and amended by that certain First Amendment to Subsidiary Pledge
Agreement of even date herewith, substantially in the form of Exhibit K attached
hereto, and any similar pledge agreement delivered pursuant to Section 5.13
hereof.
"Subsidiary Security Agreement" shall mean, collectively, that certain
Subsidiary Security Agreement dated as of June 30, 1995, between each of the
Borrower's Restricted Subsidiaries, on the one hand, and the Administrative
Agent, on the other hand, as modified and amended by that certain First
Amendment to Subsidiary Security Agreement of even date herewith, substantially
in the form of Exhibit L attached hereto, and any similar security agreement
delivered pursuant to Section 5.13 hereof.
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"Term Loans" shall mean, collectively, the amounts advanced by certain
of the Lenders to the Borrower in an aggregate amount of $200,000,000, evidenced
by the Term Notes, as set forth on Schedule 2-B attached hereto.
"Term Notes" shall mean those certain term promissory notes in the
aggregate original principal amount of $200,000,000, one issued to each of the
Lenders listed on Schedule 2-B hereto by the Borrower in the amount of each of
such Lender's Term Loan to the Borrower, each one substantially in the form of
Exhibit M attached hereto, and any extensions, modifications, renewals or
replacements of or amendments to any of the foregoing.
"Total Debt" shall mean, for the Borrower and the Consolidated
Subsidiaries of the Borrower, on a consolidated basis as of any calculation
date, the sum (without duplication) of (a) Senior Debt, plus (b) Subordinated
Debt.
"Unrestricted Subsidiaries" shall mean the Subsidiaries of the Borrower
designated as Unrestricted Subsidiaries on Schedule 3 attached hereto.
"Use of Proceeds Letter" shall mean that certain Use of Proceeds
Letter, substantially in the form of Exhibit N attached hereto, delivered to the
Administrative Agent and the Lenders on the Agreement Date pursuant to Article 3
hereof.
"Vendor" shall mean Northern Telecom, Inc., a Delaware corporation.
"Vendor Debt" shall mean, collectively, the Indebtedness for Money
Borrowed not to exceed $400,000,000 incurred (a) by VH1 under the Vendor Loan
Agreement, and (b) by VH2 under the Vendor Loan Agreement, and, in each case,
subject to such intercreditor agreement or subordination agreement as may be
required by the Administrative Agent.
"Vendor Holdco" shall mean, collectively, (a) Western PCS II
Corporation, a Delaware corporation ("VH1"), which is an Unrestricted Subsidiary
of the Borrower, and a direct, wholly-owned Subsidiary of WPCS, and (b) if the
Borrower so elects, a second Unrestricted Subsidiary of the Borrower which
promptly after the consummation of the purchase of the Denver MTA will become a
direct, wholly owned Subsidiary of
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WPCS, to be designated in writing by the Borrower ("VH2"). VH1 is the direct
owner of the MTA Licenses and PCS Systems for Salt Lake City, Honolulu, and El
Paso. If so organized, VH2 will be the direct owner of the MTA License for
Denver, Colorado to be acquired from GTE Mobilnet Incorporated. If VH2 is not so
organized, VH1 will be the direct owner of the MTA License for Denver, Colorado
to be acquired from GTE Mobilnet Incorporated. "Vendor Holdco" shall mean VH1
and, if VH2 is organized, VH1 and VH2, collectively, together with any
Subsidiary formed by either of them as permitted under Section 7.16(c) hereof.
"Vendor Loan Agreement" shall mean that certain Loan Agreement dated as
of June 30, 1995 between the Vendor and VH1, attached hereto as Exhibit O, as it
may be modified and amended to increase the indebtedness thereunder up to total
amount of $400,000,000, or, if such loan agreement is not so modified and
amended, any other loan agreement between VH2 and Vendor or another vendor
substantially identical to VH1's Vendor Loan Agreement, or otherwise on terms
reasonably acceptable to the Administrative Agent, in a total amount not to
exceed $200,000,000.
"VH1" shall have the meaning ascribed to such term in the definition of
Vendor Holdco.
"VH2" shall have the meaning ascribed to such term in the definition of
Vendor Holdco.
"WPCS" shall mean Western PCS Corporation, a Delaware corporation and a
wholly-owned Restricted Subsidiary of the Borrower.
"WPCS Excess Cash Flow" shall mean the "Excess Cash Flow" of WPCS,
determined as if WPCS were the Borrower for purposes of such definition of
"Excess Cash Flow"; provided, however, that prior to repayment in full of the
Vendor Debt, "WPCS Excess Cash Flow" shall mean the "Excess Cash Flow" of WPCS
and its Subsidiaries (other than Vendor Holdco and its Subsidiaries), determined
as if WPCS were the Borrower for purposes of such definition of "Excess Cash
Flow."
"WPCS Guaranty" shall mean that certain Guaranty of WPCS dated as of
June 30, 1995, as modified and amended by that certain First Amendment to WPCS
Guaranty of even date herewith, in substantially the form attached hereto as
Exhibit P, pursuant to which, in addition to its Guaranty,
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WPCS promised to pay not less than fifty percent (50%) of its WPCS Excess Cash
Flow to the Borrower on March 31 of each year for the preceding fiscal year,
beginning on March 31, 2002 for fiscal year 2001, during which WPCS is not a
Consolidated Subsidiary.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
Each definition of an agreement or instrument in this Article 1 shall
include such agreement or instrument as amended, modified, renewed or restated
from time to time in accordance herewith.
ARTICLE 2
Loans
Section 2.1 The Loans.
(a) The Lenders who have issued a Revolving Loan Commitment agree,
severally in accordance with their respective Commitment Ratios and not jointly,
upon the terms and subject to the conditions of this Agreement, to lend and
re-lend to the Borrower, on and after the Agreement Date, amounts requested by
the Borrower which, in the aggregate, do not exceed at any time the amount of
the Revolving Loan Commitment. Advances under the Revolving Loan Commitment may
be repaid and reborrowed as provided in Section 2.2 hereof in order to reborrow
Fixed Rate Advances for new Interest Periods or to otherwise effect changes in
the Interest Rate Bases applicable to the Advances hereunder, provided, however,
that there shall be no increase in the aggregate principal amount outstanding
under the Revolving Loan Commitment at any time after the Conversion Date.
(b) The Lenders who have agreed to make Term Loans agree, severally in
accordance with their respective Term Loan percentages as set forth on Schedule
2-B hereof and not jointly, upon the terms and subject to the conditions of this
Agreement, to lend to the Borrower, on the Agreement Date, an aggregate amount
not to exceed $200,000,000. After the Agreement Date, the Term Loans will bear
interest at the Eurodollar Basis as provided in Section 2.2 hereof.
(c) The Borrower may also borrow up to $250,000,000 of Additional
Facility Indebtedness, subject to the following conditions: (i) the Additional
Facility Indebtedness shall
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be acceptable to the Majority Lenders and on terms and conditions no more
favorable to the Borrower than the terms and conditions of the Revolving Loan
Commitment and shall have a final maturity no earlier than the Maturity Date;
(ii) each Lender hereunder shall be offered the opportunity (but shall not be
obligated) to issue a commitment for its pro rata share of such Additional
Facility Indebtedness; and (iii) the Additional Facility Indebtedness shall
constitute Obligations hereunder and shall rank pari passu with the other
Obligations.
Section 2.2 Manner of Borrowing and Disbursement.
(a) Choice of Interest Rate, Etc. Any Advance under the Revolving
Loan Commitment shall, at the option of the Borrower, be made as a Base Rate
Advance, or, subject to Article 10 hereof, a CD Rate Advance or a Eurodollar
Advance; provided, however, that at such time as there shall have occurred and
be continuing a Default hereunder, the Borrower shall not have the right to
borrow or to re-borrow any Fixed Rate Advances under the Revolving Loan
Commitment, and all subsequent Advances under the Revolving Loan Commitment
shall be made as Base Rate Advances. Subject to the provisions of Article 10
hereof, any Advance as a Term Loan shall be made as a Eurodollar Advance;
provided, however, that at such time as there shall have occurred and be
continuing a Default hereunder, subject to the rights of the Lenders under
Section 8.2 hereof, subsequent rollover Advances of the Term Loan shall have a
one month Interest Period; and provided further, that in the event that for any
reason Eurodollar Advances are not available, Advances of the Term Loan shall be
made, at the Borrower's election, as Base Rate Advances or CD Rate Advances. Any
notice given to the Administrative Agent in connection with a requested Advance
hereunder shall be given to the Administrative Agent prior to 11:30 a.m.
(Houston time) in order for such Business Day to count toward the minimum number
of Business Days required.
(b) Base Rate Advances.
(i) Initial Advances. The Borrower shall give the
Administrative Agent in the case of Base Rate Advances at least one (1)
Business Day's irrevocable prior written notice in the form of a
Request for Advance, or telephonic notice followed immediately by a
Request for Advance; provided, however, that the
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Borrower's failure to confirm any telephonic notice with a Request for
Advance shall not invalidate any notice so given.
(ii) Repayments and Reborrowings. Upon at least one (1),
with respect to items (A) and (C) of this sentence, or three (3), with
respect to item (B) of this sentence, Business Days' irrevocable prior
written notice to the Administrative Agent, the Borrower may repay or
prepay a Base Rate Advance without regard to its Payment Date and (A)
reborrow all or a portion of the principal amount thereof as one or
more Base Rate Advances, (B) reborrow all or a portion of the principal
thereof as one or more Fixed Rate Advances, or (C) not reborrow all or
any portion of such Base Rate Advance at that time. On the date
indicated by the Borrower, such Base Rate Advance shall be so repaid
and, as applicable, reborrowed.
(c) Eurodollar Advances.
(i) Initial Advances. The Borrower shall give the
Administrative Agent in the case of Eurodollar Advances at least three
(3) Business Days' irrevocable prior written notice in the form of a
Request for Advance, or telephonic notice followed immediately by a
Request for Advance; provided, however, that the Borrower's failure to
confirm any telephonic notice with a Request for Advance shall not
invalidate any notice so given. The Administrative Agent, whose
determination shall be conclusive absent manifest error, shall
determine the available Eurodollar Bases and shall notify the Borrower
of such Eurodollar Bases. The Borrower shall promptly notify the
Administrative Agent by telephone or telecopy, and shall immediately
confirm any such telephonic notice in writing, of its selection of a
Eurodollar Basis and Interest Period for such Advance; provided,
however, that the Borrower's failure to confirm any such telephonic
notice in writing shall not invalidate any notice so given.
(ii) Repayments and Reborrowings. At least three (3)
Business Days prior to the Payment Date for a Eurodollar Advance, the
Borrower shall give the Administrative Agent written notice specifying
whether all or a portion of such Eurodollar Advance outstanding on the
Payment Date (A) is to be repaid and then
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reborrowed in whole or in part as a Eurodollar Advance, and the
Interest Period selected, (B) is to be repaid and then reborrowed in
whole or in part as a Base Rate Advance or a CD Rate Advance, and the
Interest Period selected, or (C) is to be repaid and not reborrowed at
that time. Upon such Payment Date such Eurodollar Advance will, subject
to the provisions hereof, be so repaid and, as applicable, reborrowed.
(d) CD Rate Advances.
(i) Initial Advances. The Borrower shall give the
Administrative Agent in the case of CD Rate Advances at least three (3)
Business Days' irrevocable written notice in the form of a Request for
Advance, or telephonic notice followed immediately by a Request for
Advance; provided, however, that the Borrower's failure to confirm any
telephonic notice in writing shall not invalidate any notice so given.
The Administrative Agent, whose determination shall be conclusive
absent manifest error, shall determine the available CD Rate Bases and
shall notify the Borrower of such CD Rate Bases. The Borrower shall
promptly notify the Administrative Agent by telecopy or telephone, and
shall immediately confirm any such telephonic notice in writing, of its
selection of a CD Rate Basis and Interest Period for such Advance;
provided, however, that the Borrower's failure to confirm any such
telephonic notice in writing shall not invalidate any notice so given.
(ii) Repayments and Reborrowings. At least three (3)
Business Days prior to the Payment Date for a CD Rate Advance, the
Borrower shall give the Administrative Agent written notice specifying
whether all or a portion of such CD Rate Advance outstanding on the
Payment Date (A) is to be repaid and then reborrowed in whole or in
part as a CD Rate Advance, and the Interest Period selected, (B) is to
be repaid and then reborrowed in whole or in part as a Base Rate
Advance or a Eurodollar Advance, and the Interest Period selected, or
(C) is to be repaid and not reborrowed. Upon such Payment Date such CD
Rate Advance will, subject to the provisions hereof, be so repaid and,
as applicable, reborrowed at that time.
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(e) Notification of Lenders. Upon receipt of a Request for
Advance, or a notice from the Borrower with respect to a selection of an
Interest Period, or a notice from the Borrower with respect to any outstanding
Advance prior to the Payment Date for such Advance, the Administrative Agent
shall promptly notify each Lender by telephone or telecopy of the contents
thereof and the amount of such Lender's portion of the Advance. Each Lender
shall, not later than 1:30 p.m. (Houston time) on the date of borrowing
specified in such notice, make available to the Administrative Agent at the
Administrative Agent's Office, or at such account as the Administrative Agent
shall designate, the amount of its portion of any Advance which represents an
additional borrowing hereunder in immediately available funds.
(f) Disbursement.
(i) Prior to 3:00 p.m. (Houston time) on the date of an
Advance hereunder, the Administrative Agent shall, subject to the
satisfaction of any applicable conditions set forth in Article 3
hereof, disburse the amounts made available to it by the Lenders in
like funds by (a) transferring the amounts so made available by wire
transfer pursuant to the Borrower's instructions, or (b) in the absence
of such instructions, crediting the amounts so made available to the
account of the Borrower maintained with the Administrative Agent.
(ii) Unless the Administrative Agent shall have received
notice from a Lender prior to 2:00 p.m. (Houston time) on the date of
any Advance that such Lender will not make available to the
Administrative Agent such Lender's ratable portion of such Advance, the
Administrative Agent may assume that such Lender has made or will make
such portion available to the Administrative Agent on the date of such
Advance and the Administrative Agent may in its sole discretion and in
reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent the Lender does not
make such ratable portion available to the Administrative Agent, such
Lender agrees to repay to the Administrative Agent on demand such
corresponding amount together with interest thereon, for each day from
the date such amount is made available to the Borrower until the date
such amount is
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repaid to the Administrative Agent, at the Federal Funds Rate for the
first three (3) days and thereafter at the Federal Funds Rate plus one
percent (1%).
(iii) If such Lender shall repay to the Administrative
Agent such corresponding amount, such amount so repaid shall constitute
such Lender's portion of the applicable Advance for purposes of this
Agreement. If such Lender does not repay such corresponding amount
immediately upon the Administrative Agent's demand therefor, the
Administrative Agent shall notify the Borrower and the Borrower shall
immediately pay such corresponding amount to the Administrative Agent,
together with interest thereon. The failure of any Lender to fund its
portion of any Advance shall not relieve any other Lender of its
obligation hereunder to fund its respective portion of the Advance on
the date of such borrowing, but no Lender shall be responsible for any
such failure of any other Lender.
(iv) In the event that, at any time when the Borrower is
not in Default and has satisfied all applicable conditions set forth in
Article 3 hereof, a Lender for any reason fails or refuses to fund its
portion of an Advance, then, until such time as such Lender has funded
its portion of such Advance, or all other Lenders have received payment
in full (whether by repayment or prepayment) of the principal and
interest due in respect of such Advance, such non-funding Lender shall
not have the right (i) to vote regarding any issue on which voting is
required or advisable under this Agreement or any other Loan Document
and the amount of the Revolving Loan Commitment and Term Loan, as
applicable, or Loans, as applicable, held by such Lender shall not be
counted as outstanding for purposes of determining "Majority Lenders"
hereunder, and (ii) to receive payments of principal, interest or fees
from the Borrower in respect of its unfunded portion of Advances.
Section 2.3 Interest.
(a) On Base Rate Advances. Interest on each Base Rate Advance
shall be computed on the basis of a year of 365/366 days for the actual number
of days elapsed and shall be payable at the Base Rate Basis for such Advance, in
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arrears on the applicable Payment Date for the period through the date
immediately preceding such Payment Date. Interest on Base Rate Advances then
outstanding shall also be due and payable on the Revolving Loan Maturity Date
with respect to Revolving Loans and the Maturity Date with respect to the Term
Loans.
(b) On Eurodollar Advances. Interest on each Eurodollar Advance
shall be computed on the basis of a 360-day year for the actual number of days
elapsed and shall be payable at the Eurodollar Basis for such Advance, in
arrears on the applicable Payment Date for the period through the day
immediately preceding such Payment Date, and, in addition, if the Interest
Period for a Eurodollar Advance exceeds three (3) months, interest on such
Eurodollar Advance shall also be due and payable in arrears on every three-month
anniversary of the beginning of such Interest Period. Interest on Eurodollar
Advances then outstanding shall also be due and payable on the Revolving Loan
Maturity Date with respect to Revolving Loans and the Maturity Date with respect
to Term Loans.
(c) On CD Rate Advances. Interest on each CD Rate Advance shall be
computed on the basis of a 360-day year for the actual number of days elapsed
and shall be payable at the CD Rate Basis for such Advance, in arrears on the
applicable Payment Date for the period through the day immediately preceding
such Payment Date, and, in addition, if the Interest Period for a CD Rate
Advance exceeds ninety (90) days, interest on such CD Rate Advance shall also be
due and payable in arrears on the date of each ninety (90) day anniversary of
the beginning of such Interest Period. Interest on CD Rate Advances then
outstanding shall also be due and payable on the Revolving Loan Maturity Date.
(d) Interest if no Notice of Selection of Interest Rate Basis.
With respect to Revolving Loans, if the Borrower fails to give the
Administrative Agent timely notice of its selection of a Eurodollar Basis or a
CD Rate Basis, or if for any reason a determination of a Eurodollar Basis or a
CD Rate Basis for any Advance is not timely concluded, the Base Rate Basis shall
apply to such Advance. With respect to Term Loans, if the Borrower fails to give
the Administrative Agent timely notice of its selection of an Interest Period
for any rollover Advance, a one month Interest Period shall apply.
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(e) Interest Upon Default. Immediately upon the occurrence of an
Event of Default hereunder, the outstanding principal balance of the Loans,
together with accrued and unpaid interest and other unpaid sums, shall bear
interest at the Default Rate. Such interest shall be payable on demand and shall
accrue until the earliest of (a) waiver or cure (to the satisfaction of the
Lenders required under Section 11.12 hereof to waive or cure) of the applicable
Event of Default, or (b) agreement by the Majority Lenders to rescind the
charging of interest at the Default Rate, or (c) payment in full of the
Obligations.
(f) Fixed Rate Advances. At no time may the number of outstanding
Fixed Rate Advances exceed ten (10).
(g) Applicable Margin. (i) With respect to any Advance under the
Revolving Loan Commitment, the Applicable Margin shall be as of any calculation
date the interest rate margin determined by the Administrative Agent based upon
the ratio of (A) Total Debt to (B) Operating Cash Flow for the most recent
fiscal quarter, multiplied by four, adjusted by the Marketing Expense
Adjustment, determined for purposes of this Section 2.3(g)(i) as follows:
"Marketing Expense Adjustment" shall mean the product (whether a positive or a
negative number) of (x) the remainder of (i) Marketing Expenses for the most
recent quarter, minus (ii) the average quarterly amount of Marketing Expenses
for the most recent four-quarter period, multiplied by (y) four (4); all of the
foregoing determined for the most recent fiscal quarter end, effective as of the
second Business Day after the financial statements referred to in Section 6.1
hereof are required to be furnished by the Borrower to the Administrative Agent
and each Lender for the fiscal quarter most recently ended, expressed as a per
annum rate of interest as follows:
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<TABLE>
<CAPTION>
Eurodollar CD Rate
Base Rate Advance Advance Advance
Leverage Ratio Applicable Margin Applicable Margin Applicable Margin
-------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
9.00 or greater 1.50% 2.50% 2.75%
8.00 or greater but less than 1.25% 2.25% 2.50%
9.00
6.00 or greater but less than 1.00% 2.00% 2.25%
8.00
Less than 6.00 0.50% 1.50% 1.75%
</TABLE>
In the event that the Borrower fails to timely provide (i) the financial
statements referred to above in accordance with the terms of Section 6.1 hereof
or (ii) the Performance Certificate referred to in Section 6.3 hereof, and
without prejudice to any additional rights under Section 8.2 hereof, no downward
adjustment of the Applicable Margin in effect for the preceding quarter shall
occur until the actual delivery of such statements.
(ii) With respect to the Term Loan, the Applicable Margin shall be
2.75%; provided however, that in the event that Eurodollar Advances are not
available, the Applicable Margin for Base Rate Advances of the Term Loan shall
be 1.75% and the Applicable Margin for CD Rate Advances shall be 3.00%.
Section 2.4 Repayment. (a) Commencing March 31, 2000 and at the end of
each calendar quarter thereafter, the outstanding principal balance of the
Revolving Loans as of the Conversion Date shall be repaid as set forth below:
<TABLE>
<CAPTION>
Annual Percentage of
Revolving Loans
Percentage of Outstanding as of the
Revolving Loans Conversion Date to be
Outstanding as of the Reduced Each Four-
Conversion Date to be Quarter Period Ending
Quarters Ending Reduced Each Quarter: December 31:
- --------------- --------------------- ---------------------
<S> <C> <C>
March 31, 2000 1.75% 7.00%
through and
including
December 31, 2000
</TABLE>
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<PAGE> 49
<TABLE>
<S> <C> <C>
March 31, 2001 3.25% 13.00%
through and
including
December 31, 2001
March 31, 2002 5.00% 20.00%
through and
including
December 31, 2002
March 31, 2003 7.50% 30.00%
through and
including
December 31, 2003
March 31, 2004 7.50% 30.00%
through and
including
December 31, 2004
================================================================================================
</TABLE>
Any unpaid principal and interest of the Revolving Loans and any other
outstanding Obligations under the Revolving Loan Commitment shall be due and
payable in full on the Revolving Loan Maturity Date.
(b) Commencing June 30, 2000 and at the end of each calendar quarter
thereafter, the outstanding principal balance of the Term Loans as of the
opening of business on June 30, 2000 shall be repaid as set forth below:
<TABLE>
<CAPTION>
Percentage of Term Annual Percentage of
Loans Outstanding as Term Loans Outstanding
of the opening of as of June 30, 2000 to
business on June 30, be Reduced Each Four-
2000 to be Reduced Quarter Period Ending
Quarters Ending Each Quarter: March 31:
- --------------- -------------------- -----------------------
<S> <C> <C>
June 30, 2000 .125% .5%
through and
including March
31, 2001
June 30, 2001 .125% .5%
through and
including March
31, 2002
</TABLE>
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<PAGE> 50
<TABLE>
<S> <C> <C>
June 30, 2002 .125% .5%
through and
including March
31, 2003
June 30, 2003 .125% .5%
through and
including March
31, 2004
June 30, 2004 .167% .5%*
through and
including
December 31,
2004
March 31, 2005 97.5% 97.5%**
===============================================================================================
</TABLE>
* for three quarter period ending December 31
** for one quarter period ending March 31
Any unpaid principal and interest of the Term Loans and any other outstanding
Obligations shall be due and payable in full on the Maturity Date.
Section 2.5 Fees. (a) Fees Payable Under the Fee Letters. The Borrower
agrees to pay such fees as are mutually agreed upon and as are described in the
Fee Letters.
(b) Commitment Fee. In addition, the Borrower agrees to pay to the
Administrative Agent, for the benefit of each of the Lenders who have issued a
Revolving Loan Commitment in accordance with their respective Commitment Ratios
under the Revolving Loan Commitment, a commitment fee on the aggregate
unborrowed balance of the Revolving Loan Commitment, for each day from the
Agreement Date until the Conversion Date, at a rate of one-half of one percent
(1/2%) per annum. Such commitment fee shall be computed on the basis of a year
of 365/366 days for the actual number of days elapsed, shall be payable
quarterly in arrears on the last Business Day of each calendar quarter,
commencing June 30, 1996, shall be fully earned when due, and shall be
non-refundable when paid.
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<PAGE> 51
Section 2.6 Prepayments.
(a) Prepayment of Advances. The principal amount of any Base Rate
Advance may be prepaid in full or in part at any time, without penalty or
premium and without regard to the Payment Date for such Advance, upon not less
than three (3) Business Days' prior written notice to the Administrative Agent
of such prepayment. Fixed Rate Advances may be prepaid prior to the applicable
Payment Date, upon not less than three (3) Business Days' prior written notice
to the Administrative Agent, provided that the Borrower shall reimburse the
Lenders and the Administrative Agent, on demand, for any loss or out-of-pocket
expense incurred by any Lender or the Administrative Agent in connection with
such prepayment, as set forth in Section 2.11 hereof. Partial prepayments shall
be in a principal amount of not less than $5,000,000, and in an integral
multiple of $1,000,000.
(b) Prepayment of Loans. Amounts permanently prepaid on the
Revolving Loans whether by way of refinancing or prepayment of Advances under
the Revolving Loan Commitment accompanied, prior to the Conversion Date, by a
corresponding reduction in the Revolving Loan Commitment shall, unless otherwise
specified herein, be applied to interest and fees then outstanding hereunder on
account of Revolving Loans and under the Revolving Notes, and then to principal.
Amounts permanently prepaid on the Term Loans whether by way of refinancing or
prepayment of Advances under the Term Loans shall, unless otherwise specified
herein, be applied to interest then outstanding hereunder on account of the Term
Loans and under the Term Loan Notes, and then to principal. A notice of
prepayment shall be irrevocable. Upon receipt of any notice of prepayment or
reduction, the Administrative Agent shall promptly notify each Lender of the
contents thereof by telephone or telecopy and of such Lender's portion of the
prepayment. Any portion of the Loans which is permanently prepaid may not be
reborrowed. Prepayments of the Revolving Loans made after the Conversion Date
shall be applied to the repayment schedule set forth in Section 2.4(a) hereof in
inverse order of maturity. Prepayments of the Term Loans made after June 30,
2000 shall be applied to the repayment schedule set forth in Section 2.4(b)
hereof in inverse order of maturity.
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<PAGE> 52
Section 2.7 Borrower's Optional Cancellation of the Revolving Loan
Commitment. The Borrower shall have the right, on three (3) Business Days'
irrevocable notice to the Administrative Agent, to cancel all or a portion of
the Revolving Loan Commitment, on a pro rata basis among the Lenders, provided
that (i) any such cancellation shall be made in a principal amount of not less
than $5,000,000, and in an integral multiple of $1,000,000; (ii) as of the
effective date of such notice, the Revolving Loan Commitment shall be
permanently reduced to the amount stated in the Borrower's notice for all
purposes herein; and (iii) payment shall be made on or prior to the effective
date of such notice of any amount necessary to reduce the amount of the
Revolving Loans outstanding under the Revolving Loan Commitment to not more than
the amount of the Revolving Loan Commitment as reduced, together with any amount
required to be paid by the Borrower under Section 2.11 hereof.
Section 2.8 Mandatory Prepayments. In addition to the scheduled
repayments provided for in Section 2.4 hereof, the Borrower shall prepay the
Loans as follows:
(a) Repayment From Excess Cash Flow. On or prior to March 31,
2000, and on or prior to each March 31st thereafter during the term of this
Agreement, the Borrower shall make an additional prepayment of the outstanding
principal amount of the Loans in an amount equal to fifty percent (50%) of
Excess Cash Flow for the previous fiscal year. Amounts so prepaid shall be
applied to the repayment schedule set forth in Section 2.4(a) and Section 2.4(b)
hereof in inverse order of maturity and shall be allocated pro rata among the
Revolving Loans and the Term Loans. Accrued interest on the principal amount of
the Loans being prepaid pursuant to this Section 2.8(a) to the date of such
prepayment will be paid by the Borrower concurrently with such principal
prepayment.
(b) From Permitted Asset Sales. Net Proceeds from any Permitted
Asset Sale of one or more Core Properties shall be applied, on the Business Day
of receipt thereof by the Borrower or the affected Restricted Subsidiary, as
follows:
(i) Except as otherwise permitted in Section 2.8(b)(ii)
hereof, to permanently prepay the
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<PAGE> 53
outstanding principal amount of the Loans in order of maturity and
shall be allocated pro rata between the Revolving Loans and the Term
Loans, provided that, prior to the Conversion Date, as otherwise
permitted hereunder, such amounts prepaid with Net Proceeds and
allocated to Revolving Loans may be reborrowed by the Borrower in an
amount not to exceed, in the aggregate, the amount of the Revolving
Loan Commitment; or
(ii) At the Borrower's election, so long as no Default
then exists or would be caused thereby, by the Borrower or any
Restricted Subsidiary to purchase one or more Allowable Wireless
Systems, the aggregate purchase price of which does not exceed such Net
Proceeds, or the sum of such Net Proceeds plus Advances otherwise
available for Acquisitions hereunder plus other funds available to the
Borrower, so long as the Borrower shall have (i) entered into a
definitive contract for purchase within twelve (12) months from the
date of such Permitted Asset Sale, and (ii) concluded such purchase
within eighteen (18) months from the date of such Permitted Asset Sale.
In the event the Borrower elects to exercise its right under this
Section 2.8(b)(ii), the Borrower shall so notify the Administrative
Agent not less than five (5) Business Days prior to the proposed date
of the closing of the Permitted Asset Sale and shall, upon its or any
Restricted Subsidiary's receipt of any Net Proceeds with respect to
such Permitted Asset Sale, remit such Net Proceeds to the
Administrative Agent to reduce (prior to the Conversion Date) the
outstanding principal balance of the Revolving Loans (but not the Term
Loans nor the amount of the Revolving Loan Commitment). Subsequent to
the Conversion Date, any such amount shall be held in trust in an
interest-bearing account with the Administrative Agent or an Affiliate
thereof (the "Net Proceeds Trust") for the benefit of the Borrower, to
be applied to the ultimate purchase of the Allowable Wireless System or
Systems, as hereinafter provided. Amounts in any Net Proceeds Trust
shall also be subject to a valid and perfected first priority Lien in
favor of the Administrative Agent (for itself and for the ratable
benefit of the Lenders) to secure the Obligations, pursuant to a
deposit pledge agreement or other security agreement in
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<PAGE> 54
form and substance reasonably satisfactory to the Administrative Agent.
The Borrower shall consummate such purchase of the Allowable Wireless
System or Systems not later than eighteen (18) months after the date of
the applicable Permitted Asset Sale. To the extent that the Borrower
shall not have entered into a definitive contract for purchase within
twelve (12) months after the date of the Permitted Asset Sale, or
consummated any such purchase as of eighteen (18) months after the date
of such Permitted Asset Sale (for whatever reason, including the
occurrence of a Default hereunder), or the purchase price of such
purchase shall be less than the Net Proceeds of the Permitted Asset
Sale, any funds held in the Net Proceeds Trust relating to such sale
shall be applied in the manner set forth in Section 2.8(b)(i) hereof.
(c) From Sale of or by Vendor Holdco. The Borrower shall cause any
Net Proceeds from the sale by Vendor Holdco of a substantial amount of assets or
the sale by WPCS of a substantial amount of the stock of Vendor Holdco to be
applied, on the Business Day of receipt thereof (except to the extent provided
in the Intercreditor Agreement), as provided in Section 2.8(b)(i) hereof. For
purposes of the foregoing sentence, Net Proceeds shall be determined as if
Vendor Holdco were a Restricted Subsidiary, except that any such Net Proceeds
shall, in addition, be net of (i) any outstanding Vendor Debt or other
Indebtedness permitted pursuant to Section 7.16 hereof, and (ii) any portion of
such Net Proceeds that may be invested by WPCS or Vendor Holdco pursuant to
Section 2.7(b) of the Vendor Loan Agreement between VH1 and Vendor (or any
analogous provision of any other Vendor Loan Agreement) until such time as such
right to reinvest such Net Proceeds shall expire without reinvestment.
Section 2.9 Notes; Loan Accounts.
(a) The Loans shall be repayable in accordance with the terms and
provisions set forth herein, and shall be evidenced by the Notes. One Term Note
shall be issued by the Borrower and payable to the order of each Lender listed
on Schedule 2-B hereof, and one Revolving Note shall be issued by the Borrower
and payable to the order of each Lender issuing a Revolving Loan Commitment. The
Notes shall
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<PAGE> 55
be issued by the Borrower to the Lenders and shall be duly executed and
delivered by one or more Authorized Signatories.
(b) Each Lender may open and maintain on its books in the name of
the Borrower a loan account with respect to such Lender's portion of the Loans
and interest thereon. Each Lender which opens such a loan account shall debit
such loan account for the principal amount of its portion of each Advance made
and accrued interest thereon and shall credit such loan account for each payment
on account of principal of or interest on its Loan. The records of a Lender with
respect to the loan account maintained by it shall be prima facie evidence of
the Loans and accrued interest thereon, absent manifest error, but the failure
of any Lender to make any such notations or any error or mistake in such
notations shall not affect the Borrower's repayment obligations with respect to
the Loans.
Section 2.10 Manner of Payment.
(a) Each payment (including any prepayment) by the Borrower on
account of the principal of or interest on the Loans, commitment fees and any
other amount owed to the Lenders, the Administrative Agent or any of them under
this Agreement or the Notes shall be made not later than 2:00 p.m. (Houston
time) on the date specified for payment under this Agreement to the
Administrative Agent at the Administrative Agent's Office, for the account of
the Lenders, or the Administrative Agent, as the case may be, in lawful money of
the United States of America in immediately available funds. Any payment
received by the Administrative Agent after 2:00 p.m. (Houston time) shall be
deemed received on the next Business Day. Receipt by the Administrative Agent of
any payment hereunder at or prior to 2:00 p.m. (Houston time) on any Business
Day shall be deemed to constitute receipt on such Business Day. In the case of a
payment for the account of a Lender, the Administrative Agent will promptly
thereafter (and, if such amount is received before 2:00 p.m. (Houston time), on
the same day) distribute the amount so received in like funds to such Lender. If
the Administrative Agent shall not have received any payment from the Borrower
as and when due, the Administrative Agent will promptly notify the Lenders
accordingly.
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<PAGE> 56
(b) The Borrower agrees to pay principal, interest, fees and all
other Obligations due hereunder, under the Fee Letters, under the Notes, or
under the other Loan Documents without set-off or counterclaim or any deduction
whatsoever.
(c) Prior to the acceleration of the Loans under Section 8.2
hereof, if some but less than all amounts due from the Borrower are received by
the Administrative Agent with respect to the Obligations, the Administrative
Agent shall distribute such amounts in the following order of priority, all on a
pro rata basis to the Lenders: (i) to the payment on a pro rata basis of any
fees or expenses then due and payable to the Administrative Agent, the Lenders,
or any of them; (ii) to the payment of interest then due and payable on the
Loans; (iii) to the payment of all other amounts not otherwise referred to in
this Section 2.10(c) then due and payable to the Administrative Agent or the
Lenders, or any of them, hereunder or under the Notes; and (iv) to the payment
of principal then due and payable on the Notes.
(d) Subject to any contrary provisions in the definition of
Interest Period, if any payment under this Agreement or any of the other Loan
Documents is specified to be made on a day which is not a Business Day, it shall
be made on the next Business Day, and such extension of time shall in such case
be included in computing interest and fees, if any, in connection with such
payment.
Section 2.11 Reimbursement.
(a) Whenever any Lender shall sustain or incur any losses or
out-of-pocket expenses in connection with (i) failure by the Borrower to borrow
any Fixed Rate Advance after having given notice of its intention to borrow in
accordance with Section 2.2 hereof (whether by reason of the Borrower's election
not to proceed or the non-fulfillment of any of the conditions set forth in
Article 3), or (ii) prepayment of any Fixed Rate Advance in whole or in part for
any reason, the Borrower agrees to pay to such Lender, upon demand, an amount
sufficient to compensate such Lender for all such losses and reasonable
out-of-pocket expenses. Such Lender's good faith determination of the amount of
such losses or out-of-pocket expenses, as set forth in writing pursuant to
Section 2.11(b) hereof, and
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<PAGE> 57
accompanied by calculations in reasonable detail demonstrating the basis for its
demand, shall be presumptively correct.
(b) Losses subject to reimbursement hereunder shall be (i) any
loss incurred by any Lender in connection with the re-employment of funds
prepaid, repaid, not borrowed, or paid, as the case may be, and the amount of
such loss shall be the excess, if any, of (1) the interest or other cost to such
Lender of the deposit or other source of funding used to make any such Fixed
Rate Advance for the remainder of its Interest Period, over (2) the interest
earned (or to be earned) by such Lender upon the re-lending or other
redeployment of the amount of such Fixed Rate Advance for the remainder of its
putative Interest Period or (ii) any other expenses incurred by any Lender or
any participant of such Lender permitted hereunder in connection with the
re-employment of funds prepaid, repaid, not borrowed, or paid, as the case may
be.
Section 2.12 Pro Rata Treatment.
(a) Advances. Each Advance from the Lenders shall be made pro rata
on the basis of the respective Commitment Ratios of certain of the Lenders with
respect to the Revolving Loan Commitment and on the basis of the Term Loan
percentage as set forth on Schedule 2-B hereof with respect to the Lenders
making Term Loans hereunder.
(b) Payments. Except as provided in Section 2.2(f)(iv) or Article
10 hereof or elsewhere in this Agreement, each payment and prepayment of
principal of the Loans, and each payment of interest on the Loans, shall be made
to the Lenders pro rata on the basis of their respective unpaid principal
amounts outstanding immediately prior to such payment or prepayment. If any
Lender shall obtain any payment (whether involuntary, through the exercise of
any right of set-off, or otherwise) on account of the Loans made by it in excess
of its ratable share of the Term Loans or the Revolving Loans, as the case may
be, such Lender shall forthwith purchase from the other Lenders such interests
(whether by purchasing a participation or by assignment) in the applicable Loans
made by them as shall be necessary to cause such purchasing Lender to share the
excess payment ratably with each of them; provided, however,
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that if all or any portion of such excess payment is thereafter recovered from
such purchasing Lender, such purchase from each Lender shall be rescinded and
each such Lender shall repay to the purchasing Lender the purchase price to the
extent of such recovery. The Borrower agrees that any Lender so purchasing a
participation from another Lender pursuant to this Section 2.12(b) may, to the
fullest extent permitted by law, exercise all its rights of payment (including
the right of set-off) with respect to such participation as fully as if such
Lender were the direct creditor of the Borrower in the amount of such
participation.
(c) Delayed Permitted Asset Sale Prepayment. In the event proceeds
from a Permitted Asset Sale are used to reduce the outstanding principal balance
of the Revolving Loans (but not the Revolving Loan Commitment) in accordance
with Section 2.8(b)(ii) hereof and the Borrower fails to enter into a definitive
contract for purchase of an Allowable Wireless System or Systems within twelve
(12) months from the date of the Permitted Asset Sale or the Borrower shall not
have consummated any such purchase as of eighteen (18) months after the date of
such Permitted Asset Sale (for whatever reason, including a Default hereunder),
or the purchase price of such purchase shall be less than the Net Proceeds of
the Permitted Asset Sale, the proceeds of such Permitted Asset Sale, or
applicable portion thereof, shall be reallocated on the date twelve (12) months
or eighteen (18) months after the Permitted Asset Sale (as applicable) on a pro
rata basis in the manner set forth in Section 2.8(b)(i) hereof as if such
proceeds had been used to permanently reduce the Revolving Loans and the Term
Loans upon receipt thereof by the Borrower.
Section 2.13 Capital Adequacy. If, after the date hereof, the adoption
of any Applicable Law regarding the capital adequacy of banks or bank holding
companies, or any change in Applicable Law (whether adopted before or after the
Agreement Date) or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by such Lender with any
directive issued or adopted after the date hereof regarding capital adequacy
(whether or not having the force of law) of any such governmental authority,
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central bank or comparable agency, has or would have the effect of reducing the
rate of return on any Lender's capital as a consequence of its obligations
hereunder with respect to the Loans and the Revolving Loan Commitment to a level
below that which it could have achieved but for such adoption, change or
compliance (taking into consideration such Lender's policies with respect to
capital adequacy immediately before such adoption, change or compliance and
assuming that such Lender's capital was fully utilized prior to such adoption,
change or compliance) by an amount reasonably deemed by such Lender to be
material, then such Lender shall promptly notify the Borrower of such adoption,
compliance, or change. Upon demand by such Lender, the Borrower shall promptly
pay to such Lender such additional amounts as shall be sufficient to compensate
such Lender for such reduced return, together with interest on such amount from
the fourth (4th) day after the date of demand until payment in full thereof at
the Default Rate. A certificate of such Lender setting forth the amount to be
paid to such Lender by the Borrower as a result of any event referred to in this
paragraph and supporting calculations in reasonable detail shall be conclusive,
absent manifest error.
Section 2.14 Lender Tax Forms. On or prior to the first Payment Date
hereunder and on or prior to the first Business Day of each calendar year
thereafter, each Lender which is organized in a jurisdiction other than the
United States or a political subdivision thereof shall provide each of the
Administrative Agent and the Borrower with either (a) two (2) properly executed
originals of Form 4224 or Form 1001 (or any successor forms) prescribed by the
Internal Revenue Service or other documents satisfactory to the Borrower and the
Administrative Agent, and properly executed Internal Revenue Service Form W-8 or
Form W-9, as the case may be, certifying (i) as to such Lender's status for
purposes of determining exemption from United States withholding taxes with
respect to all payments to be made to such Lender hereunder and under the Notes
or (ii) that all payments to be made to such Lender hereunder and under the
Notes are subject to such taxes at a rate reduced to zero by an applicable tax
treaty, or (b)(i) a certificate executed by such Lender certifying that such
Lender is not a "bank" and that such Lender qualifies for the portfolio interest
exemption under Section 881(c) of the Internal Revenue Code of 1986, as amended,
and (ii) two (2) properly executed
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originals of Internal Revenue Service Form W-8 (or any successor form)
prescribed certifying such Lender's entitlement to an exemption from United
States withholding tax with respect to payments of interest to be made under
this Agreement and under any Note. Each such Lender agrees to provide the
Administrative Agent and the Borrower with new forms prescribed by the Internal
Revenue Service upon the expiration or obsolescence of any previously delivered
form, or after the occurrence of any event requiring a change in the most recent
forms delivered by it to the Administrative Agent and the Borrower.
ARTICLE 3
Conditions Precedent
Section 3.1 Conditions Precedent to Initial Advance. The obligation of
the Lenders to make the initial Advance hereunder is subject to the prior
fulfillment of each of the following conditions:
(a) The Administrative Agent shall have received each of the
following (with sufficient copies for each of the Lenders), in form and
substance satisfactory to the Administrative Agent and each of the Lenders:
(i) the loan certificate of the Borrower, in
substantially the form attached hereto as Exhibit Q, including a
certificate of incumbency with respect to each Authorized Signatory,
together with appropriate attachments which shall include without
limitation, the following items: (A) a copy of the certificate of
incorporation of the Borrower, certified to be true, complete and
correct by the Secretary of State of Delaware, and a true, complete and
correct copy of the by-laws of the Borrower, (B) certificates of good
standing for the Borrower issued by the Secretary of State or similar
state official for the State of Delaware and for each other state in
which the Borrower is required to qualify or has qualified to do
business, (C) a true, complete and correct copy of the appropriate
authorizing resolutions of the Borrower, authorizing the Borrower to
execute, deliver and perform this Agreement and the other Loan
Documents to which it is a party, and (D) a true, complete and
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correct copy of any agreement in effect with respect to the voting
rights, ownership interests, or management of the Borrower;
(ii) duly executed Notes;
(iii) duly executed First Amendment to Borrower's Pledge
Agreement, together with appropriate stock certificates and undated
stock powers executed in blank (including a pledge of all of the issued
and outstanding capital stock of WPCS);
(iv) duly executed First Amendment to Security Agreement,
together with evidence of the filing of appropriate UCC-1 financing
statement forms;
(v) duly executed First Amendment to Subsidiary Security
Agreement, executed and delivered by each Restricted Subsidiary of the
Borrower (including Bank Holdco), together with evidence of the filing
of appropriate UCC-l financing statement forms;
(vi) copies of insurance binders or certificates covering
the assets of the Borrower and its Restricted Subsidiaries, and
otherwise meeting the requirements of Section 5.5 hereof;
(vii) legal opinions of (i) Rubin Baum Levin Constant &
Friedman, general counsel to the Borrower, and (ii) Gurman, Blask &
Freedman, FCC counsel to the Borrower and its Subsidiaries; each as
counsel to the Borrower and its Subsidiaries, addressed to each Lender
and the Administrative Agent, in form and substance satisfactory to the
Administrative Agent and its special counsel, and dated as of the
Agreement Date;
(viii) duly executed Request for Advance for the initial
Advance of the Loans, which Request for Advance shall include
calculations demonstrating, as of the Agreement Date, the Borrower's
compliance with Section 2.1 and Section 7.10 hereof;
(ix) duly executed Use of Proceeds Letter;
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(x) duly executed Certificate of Financial Condition for
the Borrower and its Subsidiaries on a consolidated basis, given by the
chief financial officer of the Borrower which shall include a
certification that no event has occurred which could have a Materially
Adverse Effect since December 31, 1995;
(xi) audited financial statements of the Borrower and its
Subsidiaries on a consolidated basis for the fiscal year ended December
31, 1995;
(xii) any required FCC consents, Necessary Authorizations
(except as may be referred to in any Schedules hereto), or other
required consents to the closing of this Agreement or to the execution,
delivery and performance of this Agreement and the other Loan
Documents;
(xiii) duly executed First Amendment to Subsidiary Pledge
Agreement from each Restricted Subsidiary of the Borrower which has one
or more corporate Restricted Subsidiaries together with appropriate
stock certificates and undated stock powers executed in blank
(including a pledge by WPCS of all of the issued and outstanding
capital stock of Bank Holdco);
(xiv) duly executed First Amendment to Subsidiary Guaranty
executed and delivered by each Restricted Subsidiary of the Borrower
(other than WPCS), and duly executed and delivered First Amendment to
WPCS Guaranty;
(xv) a loan certificate from each Restricted Subsidiary of
the Borrower, in substantially the form attached hereto as Exhibit R,
with respect to corporations, and Exhibit S, with respect to
partnerships, including a certificate of incumbency with respect to
each officer or partner authorized to execute Loan Documents on behalf
of such Subsidiary, together with appropriate attachments which shall
include, without limitation, the following items, if a corporation, and
the analogous items, if a partnership: (A) a copy of the certificate or
articles of
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incorporation of such Subsidiary, certified to be true, complete and
correct by the Secretary of State from the jurisdiction of
incorporation of such Subsidiary, (B) certificates of good standing for
such Subsidiary issued by the Secretary of State or similar state
official for each state in which such Subsidiary is incorporated or
required to qualify to do business, (C) a true, complete and correct
copy of the By-Laws of such Subsidiary, and (D) a true, complete and
correct copy of the resolutions of such Subsidiary authorizing it to
execute, deliver and perform the Loan Documents to which it is a party;
(xvi) duly executed First Amendment to Assignment of Rights
by Partner from the Borrower, and from each Restricted Subsidiary which
is a general or limited partner of any partnership, together with
evidence of the filing of appropriate UCC-l financing statement forms;
(xvii) all such other documents as either the Administrative
Agent or any Lender may reasonably request, certified by an appropriate
governmental official or an Authorized Signatory if so requested.
(b) The Administrative Agent shall have received evidence
satisfactory to it that all Necessary Authorizations, including all necessary
consents to the execution, delivery and performance by the Borrower of this
Agreement and the other Loan Documents to which it is a party and by the
Restricted Subsidiaries of the Loan Documents to which they are parties, have
been obtained or made, are in full force and effect and are not subject to any
pending or threatened reversal or cancellation, and the Administrative Agent
shall have received a certificate of an Authorized Signatory so stating;
provided, however, that the parties acknowledge and agree that the Licenses for
the PCS Systems to be constructed by Bank Holdco and Vendor Holdco have not been
issued by the FCC by a final order as of the Agreement Date.
(c) The Lenders, the Administrative Agent, and Paul, Hastings,
Janofsky & Walker, special counsel to the Administrative Agent, shall receive
payment of all fees and
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expenses due and payable on the Agreement Date in respect of the transactions
contemplated hereby.
Section 3.2 Conditions Precedent to Each Advance. The obligation of the
Lenders to make each Advance (including the initial Advance hereunder) is
subject to the fulfillment of each of the following conditions immediately prior
to or contemporaneously with such Advance:
(a) All of the representations and warranties of the Borrower and
the Restricted Subsidiaries under this Agreement and the other Loan Documents
(including, without limitation, all representations and warranties with respect
to the Borrower's Subsidiaries), which, pursuant to Section 4.2 hereof, are made
at and as of the time of such Advance, shall be true and correct at such time in
all material respects, both before and after giving effect to the application of
the proceeds of such Advance, and after giving effect to any updates to
information provided to the Lenders in accordance with the terms of such
representations and warranties, and no Default hereunder shall then exist or be
caused thereby;
(b) With respect to Advances which, if funded, would increase the
aggregate principal amount of Loans outstanding hereunder, the Administrative
Agent shall have received a duly executed Request for Advance and in the case of
other Advances, notice as required by Article 2 hereof;
(c) Each of the Administrative Agent and the Lenders shall have
received all such other certificates, reports, statements, opinions of counsel
or other documents as the Administrative Agent or any Lender may reasonably
request;
(d) With respect to any Advance relating to any Acquisition,
Investment or the formation of any Restricted Subsidiary which is permitted
hereunder, the Administrative Agent and the Lenders shall have received such
documents and instruments relating to such Acquisition, Investment, or formation
of a new Restricted Subsidiary as are described in Section 5.13 hereof or
otherwise required herein; and
(e) There shall have occurred no event which could have a
Materially Adverse Effect.
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ARTICLE 4
Representations and Warranties
Section 4.1 Representations and Warranties. The Borrower hereby agrees,
represents and warrants in favor of the Administrative Agent and each Lender
that:
(a) Organization; Ownership; Power; Qualification. The Borrower is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, having the shareholders shown on
Schedule 8 attached hereto as its only shareholders of record as of the
Agreement Date who own five percent (5%) or more of the stock of the Borrower.
The Borrower has the corporate power and authority to own its properties and to
carry on its business as now being and hereafter proposed to be conducted. Each
Subsidiary of the Borrower is a corporation or a partnership duly organized,
validly existing and in good standing under the laws of the state of its
incorporation or formation, and has the corporate or partnership power and
authority, as the case may be, to own its properties and to carry on its
business as now being and hereafter proposed to be conducted. The Borrower and
each of its Subsidiaries are duly qualified, in good standing and authorized to
do business in each jurisdiction in which the character of their respective
properties or the nature of their respective businesses makes such qualification
or authorization prudent.
(b) Authorization; Enforceability. The Borrower has the corporate
power and has taken all necessary action to authorize it to borrow hereunder, to
execute, deliver and perform this Agreement and each of the other Loan Documents
to which it is a party in accordance with their respective terms, and to
consummate the transactions contemplated hereby and thereby. This Agreement has
been duly executed and delivered by the Borrower and is, and each of the other
Loan Documents to which the Borrower is party is, a legal, valid and binding
obligation of the Borrower enforceable against the Borrower in accordance with
its terms, subject, as to enforcement of remedies, to the following
qualifications: (i) an order of specific performance and an injunction are
discretionary remedies and, in particular,
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may not be available where damages are considered an adequate remedy at law,
(ii) enforcement may be limited by bankruptcy, insolvency, liquidation,
reorganization, reconstruction and other similar laws affecting enforcement of
creditors' rights generally (insofar as any such law relates to the bankruptcy,
insolvency or similar event of the Borrower), and (iii) enforcement may be
subject to general principles of equity (regardless of whether such enforcement
is considered in a proceeding in equity or at law) and may be limited by public
policies which may affect the enforcement of certain rights or remedies provided
for in this Agreement or the Security Documents.
(c) Subsidiaries; Authorization; Enforceability. The Borrower's
Subsidiaries (including its Unrestricted Subsidiaries) and Investments and its
direct and indirect ownership thereof are set forth as of the Agreement Date on
Schedule 3 attached hereto, and the Borrower has the unrestricted right to vote
the issued and outstanding shares of the corporate Subsidiaries, and the right
to vote its partnership interests in the partnership Subsidiaries in accordance
with the terms of the applicable partnership agreement, shown thereon; such
shares of such corporate Subsidiaries have been duly authorized and issued and
are fully paid and nonassessable. Each Subsidiary of the Borrower has the
corporate or partnership power and authority, as the case may be, and has taken
all necessary corporate or partnership action to authorize it to execute,
deliver and perform each of the Loan Documents to which it is a party in
accordance with their respective terms and to consummate the transactions
contemplated by this Agreement and by such Loan Documents. Each of the Loan
Documents to which any Subsidiary of the Borrower is party is a legal, valid and
binding obligation of such Subsidiary enforceable against such Subsidiary in
accordance with its terms, subject, as to enforcement of remedies, to the
following qualifications: (i) an order of specific performance and an injunction
are discretionary remedies and, in particular, may not be available where
damages are considered an adequate remedy at law, (ii) enforcement may be
limited by bankruptcy, insolvency, liquidation, reorganization, reconstruction
and other similar laws affecting enforcement of creditors' rights generally
(insofar as any such law relates to the bankruptcy, insolvency or similar event
of such Subsidiary), and (iii) enforcement may be subject to
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general principles of equity (regardless of whether such enforcement is
considered in a proceeding in equity or at law) and may be limited by public
policies which may affect the enforcement of certain rights or remedies provided
for in such Loan Documents.
(d) Compliance with Other Loan Documents and Contemplated
Transactions. Except as set forth on Schedule 9 hereto, the execution, delivery
and performance, in accordance with their respective terms, by the Borrower of
this Agreement and the Notes, and by the Borrower and its Subsidiaries of each
of the other Loan Documents to which they are respectively party, and the
consummation of the transactions contemplated hereby and thereby, do not and
will not (i) require any consent or approval, governmental or otherwise, not
already obtained, (ii) violate any Applicable Law respecting the Borrower or any
Subsidiary of the Borrower, (iii) conflict with, result in a breach of, or
constitute a default under the certificate or articles of incorporation or
by-laws, or the partnership agreement, as the case may be, as such documents are
amended, of the Borrower or of any Subsidiary of the Borrower, or under any
material indenture, agreement, or other instrument, to which the Borrower or any
of its Subsidiaries is a party or by which any of them or their respective
properties may be bound, (iv) conflict with, result in a breach of, or
constitute a default or violation of, the terms and conditions of any of the
material Licenses, or (v) result in or require the creation or imposition of any
Lien upon or with respect to any property now owned or hereafter acquired by the
Borrower or any of its Subsidiaries, except for Permitted Liens.
(e) Business. The Borrower is a holding company for its
Subsidiaries and, together with its Restricted Subsidiaries, is engaged in the
business of owning, operating, and investing in Cellular Systems, PCS Systems,
or otherwise providing wireless communications or telecommunications services
and in related business activities.
(f) Licenses, Etc. The Licenses and all IOAs have been duly
authorized by the grantors thereof and are in full force and effect. The
Borrower and its Subsidiaries are in compliance in all material respects with
all of the
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provisions thereof. Except as set forth on Schedule 10 attached hereto, the
Borrower and its Subsidiaries have secured all material Necessary Authorizations
and all such material Necessary Authorizations are in full force and effect.
Except as set forth on Schedule 10 attached hereto, neither any material License
nor any material Necessary Authorization is the subject of any pending or, to
the best of the Borrower's knowledge, threatened revocation.
(g) Compliance with Law. The Borrower and its Subsidiaries are in
substantial compliance with all material Applicable Law.
(h) Title to Assets. The Borrower has good, legal and marketable
title to, or a valid leasehold interest in, all of its assets. Each of the
Borrower's Subsidiaries has good, legal and marketable title to, or a valid
leasehold interest in, all of its assets. None of such properties or assets held
by the Borrower or any of its Restricted Subsidiaries is subject to any Liens,
except for Permitted Liens. Except for financing statements evidencing Permitted
Liens, no financing statement under the Uniform Commercial Code as in effect in
any jurisdiction and no other filing which names the Borrower or any of its
Restricted Subsidiaries as debtor or which covers or purports to cover any of
the assets of the Borrower or any of its Restricted Subsidiaries is currently
effective and on file in any state or other jurisdiction, and neither the
Borrower nor any of its Restricted Subsidiaries has signed any such financing
statement or filing or any security agreement authorizing any secured party
thereunder to file any such financing statement or filing.
(i) Litigation. There is no action, suit, revocation, proceeding
or investigation pending against, or, to the best of the Borrower's knowledge,
threatened against or in any other manner relating adversely to, the Borrower or
any of its Subsidiaries or any of their respective properties, including without
limitation any License or Necessary Authorization, in any court or before any
arbitrator of any kind or before or by any governmental body (including without
limitation the FCC), except as described on Schedule 11 attached hereto as of
the Agreement Date or as subsequently disclosed to the Administrative Agent and
the Lenders pursuant to Section 6.5 hereof; and, except as
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expressly set forth on Schedule 11 (or if disclosed pursuant to Section 6.5), no
such action, suit, proceeding or investigation could reasonably be expected to
have an adverse outcome which (i) calls into question the validity of this
Agreement or any other Loan Document, (ii) challenges the continued possession
and use of any License granted by the FCC, by the Borrower, any of its
Subsidiaries, or any Person in which the Borrower has, directly or indirectly,
an Investment and such challenge could result in a Default pursuant to Section
8.1(l) or Section 8.1(m) hereof, or (iii) could have a Materially Adverse
Effect.
(j) Taxes. All federal, state and other tax returns (including
information returns) of the Borrower and each of its Subsidiaries required by
law to be filed have been duly filed and all federal, state and other taxes,
including, without limitation, withholding taxes, assessments and other
governmental charges or levies required to be paid by the Borrower or any of its
Subsidiaries or imposed upon the Borrower or any of its Subsidiaries or any of
their respective properties, income, profits or assets, which are due and
payable, have been paid, except any such taxes (i) the payment of which the
Borrower or any of its Subsidiaries is diligently contesting in good faith by
appropriate proceedings, (ii) for which adequate reserves have been provided on
the books of the Borrower or the Subsidiary of the Borrower involved, and (iii)
as to which no Lien other than a Permitted Lien has attached and no foreclosure,
distraint, sale or similar proceedings have been commenced. The charges,
accruals and reserves on the books of the Borrower and each of its Subsidiaries
in respect of taxes are, in the judgment of the Borrower, adequate.
(k) Financial Statements. The Borrower has furnished or caused to
be furnished to the Administrative Agent and the Lenders its audited financial
statements on a consolidated basis with its Subsidiaries for the fiscal year
ended December 31, 1995, which, together with other financial statements
furnished to the Administrative Agent and the Lenders subsequent to the
Agreement Date, are complete and correct in all material respects and present
fairly in accordance with GAAP the financial position of the Borrower and its
Subsidiaries on a consolidated basis on and
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as at such dates and the results of operations for the periods then ended.
Except as provided on Schedule 12 attached hereto, neither the Borrower nor any
of its Subsidiaries has any material liabilities, contingent or otherwise, other
than as disclosed in the financial statements referred to in the preceding
sentence or as set forth or referred to in this Agreement, and there are no
material unrealized losses of the Borrower or any of its Subsidiaries and no
anticipated losses of the Borrower or any of its Subsidiaries other than those
which have been disclosed in writing to the Administrative Agent and the Lenders
prior to the Agreement Date and identified as such.
(l) No Adverse Change. Since December 31, 1995, there has occurred
no event which has had or which could have a Materially Adverse Effect.
(m) ERISA. The Borrower and each Subsidiary of the Borrower and
each of their respective Plans are in compliance in all material respects with
ERISA and the Code and neither the Borrower nor any of its Subsidiaries has
incurred any accumulated funding deficiency with respect to any such Plan within
the meaning of ERISA or the Code. The Borrower, each of its Subsidiaries, and
each other ERISA Affiliate have complied with all requirements of Sections 10001
and 10002 of the Consolidated Omnibus Budget Reconciliation Act of 1985 (Public
Law No. 99-272), Section 4980B of the Internal Revenue Code. Neither the
Borrower nor any of its Subsidiaries has made any promises of retirement or
other benefits to employees, except as set forth in their respective Plans, in
written agreements with such employees, or in the Borrower's employee handbook
and memoranda to employees. Neither the Borrower nor any of its Subsidiaries has
incurred any material liability to PBGC in connection with any such Plan. The
assets of each such Plan subject to Title IV of ERISA are sufficient to provide
the benefits under such Plan. Such assets are also sufficient to provide all
other "benefit liabilities" (as defined in Section 9313(a) of the Pension
Protection Act included in the Omnibus Budget Reconciliation Act of 1987, Pub.
L-100-203), Section 4001A(16) of ERISA, due under the Plan upon termination. No
Reportable Event has occurred and is continuing with respect to any such Plan.
No such Plan or trust created thereunder, or party in interest (as defined in
Section 3(14) of ERISA), or any fiduciary (as defined in
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Section 3(21) of ERISA), has engaged in a "prohibited transaction" (as such term
is defined in Section 406 of ERISA or Section 4975 of the Code) which would
subject such Plan or any other Plan of the Borrower or any of its Subsidiaries,
any trust created thereunder, or any such party in interest or fiduciary, or any
party dealing with any such Plan or any such trust, to the tax or penalty in any
material amount on "prohibited transactions" imposed by Section 502 of ERISA or
Section 4975 of the Code. Neither the Borrower nor any of its Subsidiaries is a
participant in or is obligated to make any payment to a Multiemployer Plan.
Neither the Borrower nor any of its Subsidiaries (1) has had either a complete
withdrawal or a partial withdrawal under Section 4201 et. seq. of ERISA from a
Multiemployer Plan which had "unfunded vested benefits" within the meaning of
Section 4211 of ERISA or (2) has ever received a notice and demand from the plan
sponsor of a Multiemployer Plan under Section 4219(b)(1) of ERISA.
(n) Compliance with Regulations G, T, U, and X. Neither the
Borrower nor any Subsidiary of the Borrower (including the Unrestricted
Subsidiaries) is engaged principally in or has as one of its important
activities the business of purchasing or carrying, or extending credit for the
purpose of purchasing or carrying, any margin stock within the meaning of
Regulations G, T, U, and X of the Board of Governors of the Federal Reserve
System; nor will any proceeds of the Loans be used for such purpose.
(o) Investment Company Act. Neither the Borrower nor any of its
Subsidiaries (including the Unrestricted Subsidiaries) is required to register
under the provisions of the Investment Company Act of 1940, as amended, and
neither the entering into or performance by the Borrower and its Subsidiaries of
this Agreement nor the issuance of the Notes violates any provision of such Act
or requires any consent, approval or authorization of, or registration with, the
Securities and Exchange Commission or any other governmental or public body or
authority pursuant to any provisions of such Act.
(p) Governmental Regulation. Neither the Borrower nor any of its
Subsidiaries is required to obtain any consent, approval, authorization, permit
or license which has not already been obtained from, or effect any filing or
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registration which has not already been effected with, any federal, state or
local regulatory authority in connection with the execution and delivery of this
Agreement. Neither the Borrower nor any of its Subsidiaries is required to
obtain any consent, approval, authorization, permit or license which has not
already been obtained from, or effect any filing or registration which has not
already been effected with, any federal, state or local regulatory authority in
connection with the performance, in accordance with their respective terms, of
this Agreement or any other Loan Document.
(q) Absence of Default, Etc. The Borrower and its Subsidiaries are
in compliance in all respects with all of the provisions of their respective
certificates or articles of incorporation and by-laws, or their partnership
agreements, as the case may be, and no event has occurred or failed to occur
(including, without limitation, any matter which could create a Default
hereunder by cross-default) which has not been remedied or waived, the
occurrence or non-occurrence of which constitutes, or with the passage of time
or giving of notice or both would constitute, (i) an Event of Default or (ii) a
material default by the Borrower or any of its Subsidiaries under any material
indenture, agreement or other instrument relating to Indebtedness of the
Borrower or any of its Subsidiaries in the amount of $1,000,000 or more, any
License, or any judgment, decree or order in the amount of $1,000,000 or more to
which the Borrower or any of its Subsidiaries is a party or by which the
Borrower or any of its Subsidiaries or any of their respective properties may be
bound or affected. Neither the Borrower nor any of its Subsidiaries is a party
to or bound by any contract or agreement continuing after the Agreement Date, or
bound by any Applicable Law, that could have a Materially Adverse Effect or
result in the loss of any License issued by the FCC.
(r) Accuracy and Completeness of Information. All information,
reports, prospectuses and other papers and data relating to the Borrower or any
of its Subsidiaries (including the Unrestricted Subsidiaries) and furnished by
or on behalf of the Borrower or any of its Subsidiaries (including the
Unrestricted Subsidiaries) to the Administrative Agent or the Lenders were, at
the time furnished, true, complete and correct in all material
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respects to the extent necessary to give the Administrative Agent and the
Lenders true and accurate knowledge of the subject matter. No fact or situation
is currently known to the Borrower which has had or could have a Materially
Adverse Effect other than any fact or situation known to and affecting the
cellular telephone or telecommunications industry generally.
(s) Agreements with Affiliates and Management Agreements. Except
as set forth on Schedule 13 attached hereto, neither the Borrower nor any of its
Subsidiaries has (i) to the best of its knowledge, any written agreements or
binding arrangements of any kind with any Affiliate or (ii) any material
management or consulting agreements of any kind, not entered into in the
ordinary course of business.
(t) Payment of Wages. The Borrower and each of its Subsidiaries
are in compliance with the Fair Labor Standards Act, as amended, in all material
respects, and the Borrower and each of its Subsidiaries have paid all minimum
and overtime wages required by law to be paid to their respective employees.
(u) Priority. The Security Interest is a valid and perfected first
priority security interest in the Collateral in favor of the Administrative
Agent, for itself and for the ratable benefit of the Lenders, securing, in
accordance with the terms of the Security Documents, the outstanding
Obligations, and the Collateral is subject to no Liens other than Permitted
Liens. The Liens created by the Security Documents are enforceable as security
for the outstanding Obligations in accordance with their terms with respect to
the Collateral subject, as to enforcement of remedies, to the following
qualifications: (i) an order of specific performance and an injunction are
discretionary remedies and, in particular, may not be available where damages
are considered an adequate remedy at law, (ii) enforcement may be limited by
bankruptcy, insolvency, liquidation, reorganization, reconstruction and other
similar laws affecting enforcement of creditors' rights generally (insofar as
any such law relates to the bankruptcy, insolvency or similar event of the
Borrower or any of its Restricted Subsidiaries, as the case may be), and (iii)
enforcement may be subject to general principles of equity (regardless of
whether such enforcement is considered
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in a proceeding in equity or at law) and may be limited by public policies which
may affect the enforcement of certain rights or remedies provided for in such
Loan Documents.
(v) Indebtedness. Except as permitted pursuant to Section 7.1
hereof, neither the Borrower nor any of its Restricted Subsidiaries has
outstanding, as of the Agreement Date, and after giving effect to the initial
Advance hereunder on the Agreement Date, any Indebtedness for Money Borrowed.
The Vendor Loan Agreement dated as of June 30, 1995 remains in full force and
effect without amendment or modification as of the Agreement Date.
(w) Investments. All Investments of the Borrower and its
Subsidiaries are shown as of the Agreement Date on Schedule 3 attached hereto.
(x) Real Estate. Other than as listed and described on Schedule 14
attached hereto, (i) neither the Borrower nor any of its Restricted Subsidiaries
owns any real property, and (ii) no single parcel of such real estate has a fair
market value on the Agreement Date in excess of $500,000.
Section 4.2 Survival of Representations and Warranties, etc. All
representations and warranties made under this Agreement and the other Loan
Documents shall be deemed to be made, and shall be true and correct, at and as
of the Agreement Date and on the date of each Advance except to the extent
expressly applicable only to the Agreement Date or previously fulfilled in
accordance with the terms hereof. All representations and warranties made under
this Agreement shall survive, and not be waived by, the execution hereof by the
Lenders and the Administrative Agent, any investigation or inquiry by any Lender
or the Administrative Agent, or the making of any Advance under this Agreement.
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ARTICLE 5
General Covenants
So long as any of the Obligations is outstanding and unpaid or the
Borrower shall have the right to borrow hereunder (whether or not the conditions
to borrowing have been or can be fulfilled), and unless the Majority Lenders, or
such greater number of Lenders as may be expressly provided herein, shall
otherwise consent in writing:
Section 5.1 Preservation of Existence and Similar Matters. The Borrower
will, and will cause each of its Restricted Subsidiaries and Vendor Holdco to:
(a) preserve and maintain its existence, rights, franchises,
licenses and privileges in the state of its incorporation and in each other
state in which it operates a material part of its business, including, without
limitation, the Licenses, all IOAs (in accordance with their respective terms)
and all other Necessary Authorizations (other than any such the loss of which
would not be materially disadvantageous to (i) the Lenders or (ii) the Borrower
and its Subsidiaries, taken as a whole); and
(b) qualify and remain qualified and authorized to do business in
each jurisdiction in which the character of its properties or the nature of its
business makes such qualification or authorization prudent.
Section 5.2 Business; Compliance with Applicable Law. The Borrower
will, and will cause each of its Subsidiaries to, (a) engage in the business of
owning, operating and investing in Cellular Systems, PCS Systems, or otherwise
providing wireless communication or telecommunication services and in related
business activities, and (b) substantially comply with the requirements of all
material Applicable Law.
Section 5.3 Maintenance of Properties. The Borrower will, and will
cause each of its Subsidiaries to, maintain or cause to be maintained in the
ordinary course of business in good repair, working order and condition
(reasonable wear and tear excepted) all properties used in their respective
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businesses (whether owned or held under lease), and from time to time make or
cause to be made all needed and appropriate repairs, renewals, replacements,
additions, betterments and improvements thereto.
Section 5.4 Accounting Methods and Financial Records. The Borrower
will, and will cause each of its Subsidiaries on a consolidated basis to,
maintain a system of accounting established and administered in accordance with
GAAP, keep adequate records and books of account in which complete entries will
be made in accordance with GAAP and reflecting all transactions required to be
reflected by GAAP and keep accurate and complete records of their respective
properties and assets. The Borrower and its Subsidiaries will maintain a fiscal
year ending on December 31.
Section 5.5 Insurance. The Borrower will, and will cause each of its
Subsidiaries to:
(a) Maintain insurance including, but not limited to, business
interruption coverage and public liability coverage insurance from responsible
companies in such amounts and against such risks to the Borrower and each of its
Subsidiaries as is prudent and satisfactory to the Administrative Agent
(including, without limitation, larceny, embezzlement, employee fidelity, and
other criminal misappropriation insurance).
(b) Keep their respective assets insured by responsible companies
on terms and in a manner reasonably acceptable to the Administrative Agent
against loss or damage by fire, theft, burglary, pilferage, loss in transit,
explosions and hazards insured against by extended coverage, in amounts which
are prudent for the cellular telephone industry, PCS and other wireless or
telecommunications service industry, in accordance with industry standards, and
satisfactory to the Administrative Agent, all premiums thereon to be paid by the
Borrower and its Subsidiaries.
(c) Require that each insurance policy for the Borrower and its
Restricted Subsidiaries provide for at least thirty (30) days' prior written
notice to the Administrative Agent of any termination of or proposed
cancellation or nonrenewal of such policy, or material reduction in coverage,
and name the Administrative Agent
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(for itself and for the ratable benefit of the Lenders) as additional named loss
payee to the extent of the Obligations and additional named insured.
(d) Subject to subsection (e), below, proceeds of insurance for
the Borrower and its Restricted Subsidiaries paid to the Administrative Agent
shall be applied to the payment or prepayment of the Obligations as provided
under Section 2.10(c) or Section 8.3 hereof, as applicable. Any balance thereof
remaining after payment in full of the Obligations shall be paid to the Borrower
or as otherwise required by law.
(e) If the Borrower or any one or more of its Restricted
Subsidiaries shall be entitled to receive proceeds from any policy for insurance
less than the lesser of $10,000,000 or ten percent (10%) of the gross revenues
of the Borrower and its Restricted Subsidiaries for the prior fiscal year, then
the Borrower or any one or more of its Restricted Subsidiaries shall have the
right to elect either to use such proceeds to repair or rebuild the affected
Cellular System or PCS System, as the case may be, or to remit such proceeds to
the Administrative Agent as provided under Section 5.5(d) hereof. In the event
such insurance proceeds exceed such threshold, the Administrative Agent shall
hold such proceeds pending its receipt from the Borrower of a plan for the use
of such proceeds and the approval of such plan by the Majority Lenders.
Section 5.6 Payment of Taxes and Claims. The Borrower will, and will
cause each of its Subsidiaries to, pay and discharge all taxes, including,
without limitation, withholding taxes, assessments and governmental charges or
levies required to be paid by them or imposed upon them or their income or
profits or upon any properties belonging to them, prior to the date on which
penalties attach thereto, and all lawful claims for labor, materials and
supplies which, if unpaid, might become a Lien or charge upon any of their
properties; except that no such tax, assessment, charge, levy or claim need be
paid which is being diligently contested in good faith by appropriate
proceedings and for which adequate reserves shall have been set aside on the
appropriate books, but only so long as such tax, assessment, charge, levy or
claim does not become a Lien or charge other than a Permitted Lien and no
foreclosure, distraint, sale or
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similar proceedings shall have been commenced. The Borrower will, and will cause
each of its Subsidiaries to, timely file all information returns required by
federal, state or local tax authorities.
Section 5.7 Visits and Inspections. The Borrower will, and will cause
each of its Restricted Subsidiaries and Vendor Holdco to, permit representatives
of the Administrative Agent and any of the Lenders, upon reasonable notice to
the Borrower or such Restricted Subsidiary or Vendor Holdco and during normal
business hours (i) visit and inspect the properties of the Borrower or such
Restricted Subsidiary or Vendor Holdco, (ii) inspect and make extracts from and
copies of their respective books and records, and (iii) discuss with their
respective principal officers their respective businesses, assets, liabilities,
financial positions, results of operations and business prospects. The Borrower
and each of its Restricted Subsidiaries and Vendor Holdco will also permit
representatives of the Administrative Agent and any of the Lenders to discuss
with their respective auditors their respective businesses, assets, liabilities,
financial positions, results of operations and business prospects.
Section 5.8 Payment of Indebtedness; Loans. Subject to any provisions
regarding subordination herein or as set forth in any other Loan Document, the
Borrower will, and will cause each of its Restricted Subsidiaries and Vendor
Holdco to, pay any and all of their respective Indebtedness when and as it
becomes due, other than amounts diligently disputed in good faith and for which
adequate reserves have been set aside in accordance with GAAP.
Section 5.9 Use of Proceeds. The Borrower will use the aggregate
proceeds of all Advances (i) to finance Permitted Investments in WPCS and its
Subsidiaries and, after WPCS has been designated a Consolidated Subsidiary
hereunder, to fund working capital and Capital Expenditure requirements of WPCS
and its Subsidiaries, (ii) to fund Capital Expenditures, (iii) to (directly or
indirectly through Restricted Subsidiaries) acquire Allowable Wireless Systems
as permitted hereunder, (iv) to make loans to and Investments in its
Subsidiaries, including as permitted hereunder its Unrestricted Subsidiaries,
and (v) for working capital and other general corporate purposes. No proceeds
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of Advances hereunder shall be used for the purchase or carrying or the
extension of credit for the purpose of purchasing or carrying any margin stock
within the meaning of Regulations G, T, U, and X of the Board of Governors of
the Federal Reserve System.
Section 5.10 Real Estate. The Borrower will, and will cause its
Restricted Subsidiaries to, grant a mortgage securing the Obligations to the
Administrative Agent, for itself and for the ratable benefit of the Lenders, in
form and substance satisfactory to the Administrative Agent, covering each
parcel of real estate having a fair market value, exclusive of equipment, in
excess of $500,000 acquired by the Borrower or any of its Restricted
Subsidiaries after the Agreement Date. The Borrower will, and will cause its
Restricted Subsidiaries to, deliver to the Administrative Agent all
documentation, including opinions of counsel and policies of title insurance,
which in the opinion of the Administrative Agent is appropriate with each such
grant, including any Phase I environmental audit requested by the Administrative
Agent or any Lender.
Section 5.11 Indemnity. The Borrower, for itself and on behalf of each
of its Restricted Subsidiaries agrees, jointly and severally, to indemnify and
hold harmless each Lender and the Administrative Agent and each of their
respective affiliates, employees, representatives, officers, trustees and
directors (any of the foregoing shall be an "Indemnitee") from and against any
and all claims, liabilities, losses, damages, actions, reasonable attorneys'
fees and expenses (as such fees and expenses are incurred) and demands by any
party, including the costs of investigating and defending such claims, whether
or not the Borrower, any Restricted Subsidiary of the Borrower, or the Person
seeking indemnification is the prevailing party (a) resulting from any breach or
alleged breach by the Borrower or any Restricted Subsidiary of the Borrower of
any representation, warranty, or covenant made hereunder or under any other Loan
Document; (b) arising out of or in connection with (i) the Revolving Loan
Commitment, the Loans or otherwise under this Agreement or any other Loan
Document (including the taking of Collateral for the Obligations), including the
use of the proceeds of Loans hereunder in any fashion by the Borrower or any of
its Restricted Subsidiaries or the performance of their respective
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obligations under the Loan Documents by the Borrower or any of its Restricted
Subsidiaries, (ii) allegations of any participation by the Lenders or the
Administrative Agent, or any of them, in the affairs of the Borrower or any of
its Restricted Subsidiaries, or allegations that any of them has any joint
liability with the Borrower or any of its Restricted Subsidiaries for any
reason, or (iii) any claims against the Lenders or the Administrative Agent, or
any of them, by any shareholder, partner, or other investor in or lender to the
Borrower or any Restricted Subsidiary, by any brokers or finders or investment
advisers or investment bankers retained by the Borrower or by any other third
party, arising out of the Revolving Loan Commitment, the Loans or otherwise
under this Agreement or any other Loan Document; or (c) in connection with taxes
(other than income taxes), fees, and other charges payable in connection with
the Loans, or the execution, delivery, and enforcement of this Agreement, the
Security Documents, the other Loan Documents, and any amendments thereto or
waivers of any of the provisions thereof; unless the Person seeking
indemnification hereunder is determined in such case to have acted with gross
negligence or willful misconduct, in any case by a final, non-appealable
judicial order. The obligations of the Borrower and the Restricted Subsidiaries
under this Section 5.11 are in addition to, and shall not otherwise limit, any
liabilities which the Borrower or any Restricted Subsidiary might otherwise have
in connection with any warranties or similar obligations of the Borrower or such
Restricted Subsidiary in any other agreement or instrument or for any other
reason.
Section 5.12 Interest Rate Hedging. Within ninety (90) days from the
Agreement Date, and at the end of each fiscal quarter thereafter, the Borrower
shall have entered into one or more Interest Hedge Agreements which result in
the fixing of a limit on the Borrower's interest obligations on an aggregate
principal amount of not less than fifty percent (50%) of the then outstanding
principal amount of the Loans. Such Interest Hedge Agreements shall provide
interest rate protection on terms reasonably acceptable to the Administrative
Agent for an average period of the lesser of three (3) years from the date of
such Interest Hedge Agreement or Agreements or the period remaining until the
Revolving Loan Maturity Date with respect to Interest Rate Hedge Agreements
entered into in connection with the
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Revolving Loans and the Maturity Date with respect to Interest Rate Hedge
Agreements entered into in connection with the Term Loans, such terms to include
consideration of the creditworthiness of the other party to the proposed
Interest Hedge Agreement. All Obligations of the Borrower to any of the Lenders
pursuant to any Interest Hedge Agreement shall rank pari passu with all other
Obligations.
Section 5.13 Covenants Regarding Formation of Restricted Subsidiaries
and the Making of Investments and Acquisitions. At the time of any Acquisition
permitted hereunder by the Borrower or any Restricted Subsidiary, or the
formation of any new Restricted Subsidiary of the Borrower or any of its
Restricted Subsidiaries (except for Restricted Subsidiaries which are then
inactive and which have no assets) which is permitted under this Agreement, the
Borrower will, and will cause its Restricted Subsidiaries, as appropriate, to
(a) in the case of the formation or Acquisition of a new Restricted Subsidiary,
provide to the Administrative Agent an executed Subsidiary Security Agreement
for such new Restricted Subsidiary, in substantially the form of Exhibit L
attached hereto, together with appropriate UCC-1 financing statements, as well
as an executed Subsidiary Guaranty for such new Restricted Subsidiary, in
substantially the form of Exhibit J attached hereto, which shall constitute both
Security Documents and Loan Documents for purposes of this Agreement, as well as
a loan certificate for such new Restricted Subsidiary, substantially in the form
of Exhibit R or Exhibit S attached hereto, as appropriate, together with
appropriate attachments; (b) in the case of any Acquisition by the Borrower or
any Restricted Subsidiary or the formation of any new Restricted Subsidiary,
pledge to the Administrative Agent all of the stock (or other instruments or
securities evidencing ownership) of such Restricted Subsidiary or Person which
is acquired or formed, beneficially owned by the Borrower or any of the
Borrower's Restricted Subsidiaries, as the case may be, as additional Collateral
for the Obligations to be held by the Administrative Agent in accordance with
the terms of the Borrower's Pledge Agreement, Subsidiary Pledge Agreement, or a
new Subsidiary Pledge Agreement in substantially the form of Exhibit K attached
hereto, and execute and deliver to the Administrative Agent all such
documentation for such pledge as, in the reasonable opinion of the
Administrative Agent,
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is appropriate; and (c) in any case, provide all other documentation, including
one or more opinions of counsel satisfactory to the Administrative Agent which
in the opinion of the Administrative Agent is appropriate with respect to such
Acquisition or the formation of such Restricted Subsidiary. Investments made by
the Borrower or any of its Restricted Subsidiaries after the Agreement Date
shall also be treated as additional Collateral (other than as provided in
Section 7.6(d) or Section 7.16(c)) and shall be subject to the provisions of
appropriate Security Documents. Any document, agreement or instrument executed
or issued pursuant to this Section 5.13 shall be a "Loan Document" for purposes
of this Agreement.
Section 5.14 Designation of Unrestricted Subsidiaries as Restricted
Subsidiaries; Designation of Restricted Subsidiaries as Consolidated
Subsidiaries.
(a) Unrestricted to Restricted. Upon not less than three (3) Business
Days' prior written notice by the Borrower to the Administrative Agent, any
Unrestricted Subsidiary of the Borrower may be designated as a Restricted
Subsidiary hereunder (whether or not such Subsidiary is also then designated as
a Consolidated Subsidiary), provided that (i) no Default then exists or would be
caused thereby, (ii) any such Subsidiary does not (at the time of such
designation) have outstanding any Indebtedness for Money Borrowed other than
Permitted Debt, or any Liens on its assets or properties other than Permitted
Liens, and (iii) such Subsidiary shall provide to the Administrative Agent an
executed Subsidiary Security Agreement, in substantially the form of Exhibit L
attached hereto, together with appropriate UCC-1 financing statements, an
executed Subsidiary Guaranty in substantially the form of Exhibit J attached
hereto, and a Subsidiary Pledge Agreement (given by itself if appropriate and,
if its stock or other securities are not then Collateral, given by its parent
company), in substantially the form attached hereto, as Exhibit K, together with
appropriate stock certificates and stock powers therefor, as well as an
appropriate loan certificate for such new Restricted Subsidiary, substantially
in the form of Exhibit R or Exhibit S, attached hereto, as appropriate. Such new
Restricted Subsidiary shall also provide all other documentation which in the
opinion of the Administrative Agent is appropriate
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with respect to the designation of such Unrestricted Subsidiary as a Restricted
Subsidiary, including legal opinions if advisable, all of which documents shall
constitute Security Documents and Loan Documents for purposes of this Agreement.
(b) Restricted to Consolidated. Upon not less than three (3)
Business Days' prior irrevocable written notice by the Borrower to the
Administrative Agent, any Subsidiary of the Borrower which is or is becoming a
Restricted Subsidiary may be designated as a Consolidated Subsidiary, provided
that (i) no Default then exists or would be caused thereby (unless such
designation would effect a cure of such Default), (ii) the prerequisites for a
Restricted Subsidiary set forth in Section 5.14(a) have been satisfied, and
(iii) the Borrower shall have demonstrated its continued compliance on a pro
forma basis through the Maturity Date with the financial covenants contained in
Section 7.8, 7.9, 7.10, 7.11, and 7.15 hereof.
(c) Other. The Borrower may not designate a Restricted Subsidiary
as an Unrestricted Subsidiary, nor may the Borrower designate a Consolidated
Subsidiary as a Subsidiary which is no longer a Consolidated Subsidiary.
Section 5.15 Payment of Wages. The Borrower and each of its
Subsidiaries shall at all times comply, in all material respects, with the
requirements of the Fair Labor Standards Act, as amended, including, without
limitation, the provisions of such Act relating to the payment of minimum and
overtime wages as the same may become due from time to time.
Section 5.16 Key Man Policy. The Borrower will maintain in full force
and effect at all times the Key Man Policy.
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ARTICLE 6
Information Covenants
So long as any of the Obligations is outstanding and unpaid or the
Borrower has a right to borrow hereunder (whether or not the conditions to
borrowing have been or can be fulfilled), and unless the Majority Lenders, or
such greater number of Lenders as may be expressly provided herein, shall
otherwise consent in writing, the Borrower will furnish or cause to be furnished
to each Lender and the Administrative Agent, at their respective offices:
Section 6.1 Quarterly Financial Statements and Information. Within
sixty (60) days after the last day of each quarter of each fiscal year of the
Borrower, unaudited balance sheets of the Borrower on a consolidated basis with
its Consolidated Subsidiaries, and on a consolidated basis with all of its
Subsidiaries, as at the end of such quarter and as of the end of the preceding
fiscal year, and the related statements of operations and the related statements
of cash flows of the Borrower on a consolidated basis with its Consolidated
Subsidiaries, and on a consolidated basis with all of its Subsidiaries, for such
quarter and for the elapsed portion of the year ended with the last day of such
quarter, which shall set forth in comparative form such figures as at the end of
and for such quarter and the appropriate prior period (but only for such quarter
and other periods for which such comparative figures are available) and shall be
certified by the chief financial officer of the Borrower, to be, in his or her
opinion, complete and correct in all material respects and to present fairly, in
accordance with GAAP (except as to the exclusion of certain Subsidiaries which
should be consolidated with the Borrower under GAAP), the financial position of
the Borrower on a consolidated basis with its Consolidated Subsidiaries and on a
consolidated basis with all of its Subsidiaries, as at the end of such period
and the results of operations for such period, and for the elapsed portion of
the year ended with the last day of such period, subject only to normal year-end
adjustments.
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Section 6.2 Annual Financial Statements and Information. Within one
hundred twenty (120) days after the end of each fiscal year of the Borrower, the
audited consolidated balance sheet of the Borrower and its Subsidiaries as of
the end of such fiscal year and the related audited consolidated statements of
operations for such fiscal year and, to the extent available, for the previous
two (2) fiscal years, the related audited consolidated statements of changes in
shareholders' equity for such fiscal year and, to the extent available, for the
previous two (2) fiscal years, and related audited consolidated statements of
cash flows of such fiscal year and, to the extent available, for the previous
two (2) fiscal years, which shall be accompanied by an opinion of Arthur
Anderson & Co., or other independent certified public accountants of recognized
national standing reasonably acceptable to the Administrative Agent, together
with a statement of such accountants that in connection with their audit,
nothing came to their attention that caused them to believe that the Borrower
was not in compliance with the terms, covenants, provisions or conditions of
Article 7 hereof.
Section 6.3 Performance Certificates. At the time the financial
statements are furnished pursuant to Sections 6.1 and 6.2 hereof, the
Performance Certificate:
(a) setting forth as at the end of such quarterly period or fiscal
year, as the case may be, the arithmetical calculations required to establish
(i) any interest rate adjustment, as provided for in Section 2.3(g) hereof, and
(ii) whether or not the Borrower was in compliance with the requirements of
Sections 7.8, 7.9, 7.10 and 7.11 hereof;
(b) setting forth on a consolidated basis for the Borrower and its
Consolidated Subsidiaries, and for each of Bank Holdco and Vendor Holdco, as
appropriate, for each such fiscal quarter or fiscal year, as the case may be,
(i) the number of Cellular System subscribers at the beginning of such period,
(ii) the number of PCS System subscribers at the beginning of such period, (iii)
the number of gross new Cellular System subscribers added and deactivated
Cellular System subscribers lost during such period, (iv) the number of gross
new PCS System subscribers added and deactivated PCS System subscribers lost
during such period, (v) the
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number of Cellular System subscribers at the end of such period and (vi) the
number of PCS System subscribers at the end of such period;
(c) stating that, to the best of his or her knowledge, no Default
or Event of Default has occurred as at the end of such quarterly period or year,
as the case may be, or, if a Default or an Event of Default has occurred,
disclosing each such Default or Event of Default and its nature, when it
occurred, whether it is continuing and the steps being taken by the Borrower
with respect to such Default or Event of Default; and
(d) setting forth, as of the end of such fiscal quarter or year, a
list of any IOAs pursuant to which the Borrower or any of its Restricted
Subsidiaries is then providing cellular telephone or other wireless
telecommunications services.
Section 6.4 Copies of Other Reports.
(a) Promptly upon receipt thereof, copies of all material reports,
if any, submitted to the Borrower by the Borrower's independent public
accountants regarding the Borrower, including, without limitation, any
management report prepared in connection with the annual audit referred to in
Section 6.2.
(b) Promptly upon receipt thereof, copies of any material adverse
notice or report regarding any License held by the Borrower, any Restricted
Subsidiary or Vendor Holdco, from the FCC.
(c) In connection with any proposed Acquisition by the Borrower or
any Restricted Subsidiary and promptly upon each request, such data,
certificates, reports, statements, opinions of counsel prepared for the
Administrative Agent and the Lenders, or any of them, documents or further
information regarding the business, assets, liabilities, financial position,
projections, results of operations or business prospects of the Borrower or any
of its Restricted Subsidiaries as the Administrative Agent or any Lender may
reasonably request.
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(d) Annually, a certificate of insurance indicating that the
requirements of Section 5.5 and Section 5.16 hereof remain satisfied for such
fiscal year.
(e) Annually, and in no event later than January 31 of any year, a
copy of the Borrower's annual financial projections for itself, its Restricted
Subsidiaries, and Vendor Holdco for such fiscal year.
Section 6.5 Notice of Litigation and Other Matters. Notice specifying
the nature and status of any of the following events, promptly, but in any event
not later than ten (10) days after any officer of the Borrower becomes aware of
the occurrence of any of the following events:
(a) the commencement of all material proceedings and
investigations by or before any governmental body and all actions and
proceedings in any court or before any arbitrator against, or to the extent
known to the Borrower, in any other way relating materially adversely to the
Borrower or any Restricted Subsidiary of the Borrower or Vendor Holdco, or any
of their respective properties, assets or businesses or any License;
(b) any material adverse change with respect to the business,
assets, liabilities, financial position, results of operations or business
prospects of the Borrower or any Restricted Subsidiary of the Borrower or Vendor
Holdco, other than changes in the ordinary course of business which have not had
and could not have a Materially Adverse Effect;
(c) any Default or the occurrence or non-occurrence of any event
(A) which constitutes, or which with the passage of time or giving of notice or
both would constitute a material default by the Borrower or any Restricted
Subsidiary of the Borrower or Vendor Holdco under any material agreement other
than this Agreement to which the Borrower or any Restricted Subsidiary of the
Borrower or Vendor Holdco is a party or by which any of their respective
properties may be bound, or (B) which could have a Materially Adverse Effect,
giving in each case the details thereof and specifying the action proposed to be
taken with respect thereto;
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(d) the occurrence of any Reportable Event or a "prohibited
transaction" (as such term is defined in Section 406 of ERISA or Section 4975 of
the Code) with respect to any Plan of the Borrower or any of its Subsidiaries or
the institution or threatened institution by PBGC of proceedings under ERISA to
terminate or to partially terminate any such Plan or the commencement or
threatened commencement of any litigation regarding any such Plan or naming it
or the trustee of any such Plan with respect to such Plan; and
(e) the occurrence of any event subsequent to the Agreement Date
which, if such event had occurred prior to the Agreement Date, would have
constituted an exception to the representation and warranty in Section 4.1(m) of
this Agreement.
ARTICLE 7
Negative Covenants
So long as any of the Obligations is outstanding and unpaid or the
Borrower has a right to borrow from the Lenders hereunder (whether or not the
conditions to borrowing have been or can be fulfilled), and unless the Majority
Lenders, or such greater number of Lenders as may be expressly provided herein,
shall otherwise consent in writing:
Section 7.1 Indebtedness of the Borrower and its Restricted
Subsidiaries.
The Borrower shall not, and shall cause each of its Restricted
Subsidiaries not to, create, assume, incur or otherwise become or remain
obligated in respect of, or permit to be outstanding, any Indebtedness except:
(a) The Obligations;
(b) Current accounts payable, accrued expenses and customer
advance payments incurred in the ordinary course of business;
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(c) Specified Transactions in the aggregate not to exceed the
Basket;
(d) Subordinated Debt (other than Seller Subordinated Debt),
including Subordinated Debt in a principal amount permitted hereunder if issued
pursuant to an Indenture containing provisions no less favorable to the Lenders
than those contained in a certain draft Indenture dated April 24, 1996, a copy
of which has been provided to each of the Lenders;
(e) Indebtedness secured by Permitted Liens (other than those
described in items (a) and (i) of the definition of Permitted Liens);
(f) Obligations under Interest Hedge Agreements;
(g) Indebtedness of the Borrower or any of its Restricted
Subsidiaries to the Borrower or any other Restricted Subsidiary, and
Indebtedness expressly permitted under Section 7.5 hereof; and
(h) Indebtedness representing extensions, renewals, refinancings
or replacements (but not increases in principal amounts) of the foregoing.
Section 7.2 Limitation on Liens. The Borrower shall not, and shall
cause each of its Restricted Subsidiaries not to, create, assume, incur or
permit to exist or to be created, assumed, incurred or permitted to exist,
directly or indirectly, any Lien on any of its properties or assets, whether now
owned or hereafter acquired, except for Permitted Liens.
Section 7.3 Amendment and Waiver. The Borrower shall not, and shall
cause each of its Restricted Subsidiaries not to, except in connection with a
transaction otherwise permitted hereunder, enter into any amendment of, or agree
to or accept or consent to any waiver of any of the material provisions of its
articles or certificate of incorporation or partnership agreement, as
appropriate.
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Section 7.4 Liquidation, Merger, Disposition of Assets.
(a) Disposition of Assets. The Borrower shall not, and shall cause
each of its Restricted Subsidiaries not to, at any time sell, lease, abandon, or
otherwise dispose of any of its or their Core Properties (other than swaps of
Cellular Systems or PCS Systems permitted under Section 7.6(b)(i) hereof) unless
(i) Net Proceeds therefrom are applied as provided in Section 2.8(b) hereof,
(ii) Section 7.6(g) hereof is complied with (if applicable), and (iii) no
Default then exists or would be caused thereby (unless such sale, lease,
abandonment or other disposal would cure any such Default). At the time of any
such Permitted Asset Sale hereunder, the Borrower shall provide the
Administrative Agent and the Lenders with projections assuming the consummation
of the Permitted Asset Sale and demonstrating pro forma compliance with Sections
7.8, 7.9, 7.10, 7.11, and 7.15 hereof for the remaining term of this Agreement.
(b) Liquidation or Merger. The Borrower shall not, and shall cause
each of its Restricted Subsidiaries not to, at any time liquidate or dissolve
itself (or suffer any liquidation or dissolution) or otherwise wind up, or enter
into any merger, provided that if no Default then exists or would be caused
thereby, the following such transactions are permitted: (i) a merger among the
Borrower and one or more Consolidated Subsidiaries, provided the Borrower is the
surviving corporation; (ii) a merger between or among two or more Consolidated
Subsidiaries; (iii) an Acquisition permitted hereunder effected by a merger in
which the Borrower or a Consolidated Subsidiary of the Borrower is the surviving
Person; (iv) a liquidation or dissolution of one or more Consolidated
Subsidiaries into its or their parent entity (provided the Borrower or one of
its Consolidated Subsidiaries is such parent entity); (v) a merger between or
among two or more Restricted Subsidiaries which are not Consolidated
Subsidiaries, and (vi) the Borrower may merge into a previously inactive
wholly-owned Subsidiary of the Borrower, incorporated in the State of Washington
which immediately prior to such merger shall not have any assets or liabilities,
and which Subsidiary shall be the surviving corporation of such merger, so long
as the Administrative Agent shall have received, on or before the effective date
of such merger, (A) a certificate of the Borrower and such
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Subsidiary, certifying (x) as to the agreement and plan of merger of the
Borrower and such Subsidiary, if any, and (y) that such Subsidiary shall be
responsible for all of the obligations of the Borrower under the Loan Agreement
and the other Loan Documents, and (B) such other opinions of counsel,
certificates, documents and instruments as the Administrative Agent may
reasonably request and as shall be reasonably acceptable to it.
Section 7.5 Limitation on Guaranties. The Borrower shall not, and shall
cause each of its Restricted Subsidiaries not to, at any time Guaranty, assume,
be obligated with respect to, or permit to be outstanding any Guaranty of, any
obligation of any other Person other than (a) a guaranty by endorsement of
negotiable instruments for collection in the ordinary course of business, or (b)
obligations under agreements of the Borrower or any of its Restricted
Subsidiaries entered into in connection with leases of real property or the
acquisition of services, supplies and equipment in the ordinary course of
business of the Borrower or any of its Restricted Subsidiaries, or (c) as may be
contained in any Loan Document including, without limitation, the Subsidiary
Guaranty and the WPCS Guaranty, or (d) a Guaranty of any obligation of any
employee of the Borrower or any of its Restricted Subsidiaries, provided that
the aggregate amount guaranteed under all such Guaranties shall not exceed
$1,000,000 at any time, or (e) a subordinated and unsecured Guaranty by the
Borrower of obligations of its Restricted Subsidiaries with respect to Seller
Subordinated Debt.
Section 7.6 Investments and Acquisitions. The Borrower shall not, and
shall cause each of its Restricted Subsidiaries not to, make any loan or
advance, or make any Investment or otherwise acquire for consideration evidences
of Indebtedness, capital stock or other securities of any Person, or make any
Acquisition, except that the Borrower may make Investments in its own
Consolidated Subsidiaries, and that, so long as no Default then exists or would
be caused thereby:
(a) Cash Equivalents. The Borrower and its Restricted Subsidiaries
may, directly or through a brokerage account (i) purchase marketable, direct
obligations of the United States of America, its agencies and instrumentalities
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maturing within three hundred sixty-five (365) days of the date of purchase,
(ii) purchase commercial paper issued by corporations, each of which shall have
a combined net worth of at least $100 million and each of which conducts a
substantial part of its business in the United States of America, maturing
within two hundred seventy (270) days from the date of the original issue
thereof, and rated "P-2" or better by Moody's Investors Service, Inc. or "A-2"
or better by Standard and Poor's Ratings Group, and (iii) purchase repurchase
agreements, bankers' acceptances, and certificates of deposit maturing within
three hundred sixty-five (365) days of the date of purchase which are issued by,
or time deposits maintained with, a United States national bank the deposits of
which are insured by the Federal Deposit Insurance Corporation and having
capital, surplus and undivided profits totaling more than $100 million and rated
"A" or better by Moody's Investors Service, Inc. or Standard and Poor's Ratings
Group;
(b) Acquisitions. (i) Subject to compliance with subsection (ii)
of this Section 7.6(b), the Borrower and its Restricted Subsidiaries may make
Acquisitions as follows:
(A) Acquisitions of Allowable Wireless Systems as
permitted by Section 2.8(b)(ii) hereof;
(B) Acquisitions of Allowable Wireless Systems, and
dispositions of Cellular Systems or PCS Systems, in connection with swap
transactions involving the trade of its Cellular Systems or PCS Systems for
those of other cellular operators (whether or not such swaps involve boot);
(C) Acquisitions of Allowable Wireless Systems listed on
Schedule 1 hereof;
(D) Acquisitions of Cellular Systems or PCS Systems other
than the Allowable Wireless Systems subject to the approval of and upon terms
and conditions satisfactory to the Majority Lenders; and
(E) Acquisitions by the Borrower, solely through the
issuance of its common stock, of additional Subsidiaries which are engaged in
the business described in Section 5.2(a) hereof.
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(ii) No Acquisitions otherwise permitted under Section 7.6(b)
hereof may be consummated unless:
(A) the Borrower shall have demonstrated through revised
projections assuming the consummation of the Acquisition its pro forma
compliance with Sections 7.8, 7.9, 7.10, and 7.11 hereof, after giving
effect to such Acquisition and shall have certified to the
Administrative Agent and the Lenders that such Acquisition shall not
have a Materially Adverse Effect;
(B) with respect to any Acquisition of more than
$10,000,000, the Borrower shall provide the Administrative Agent and
the Lenders with notice, not less than thirty (30) days prior to the
proposed closing thereof, and with copies of all material information
pertaining to such Acquisition, and a certificate signed by the chief
financial officer of the Borrower, certifying the Borrower's pro forma
compliance with the covenants listed in item (A) of this subsection,
together with any calculations necessary to demonstrate such
compliance; and
(C) Section 5.13 of this Agreement has been complied
with.
(c) Investments in PCS Systems. (i) The Borrower may make
Investments in WPCS and its Subsidiaries for the purpose of building and
operating the PCS Systems owned by Bank Holdco and Vendor Holdco in an aggregate
amount not to exceed:
(y) prior to the satisfaction of the conditions set forth in subsection
(ii) of this Section 7.6(c), the sum of (I) $100,000,000, plus (II)
Available Equity, plus (III) the proceeds of any Subordinated Debt
issued by the Borrower, and
(z) after all of the conditions of subsection (ii) of this Section
7.6(c) have been satisfied, the sum of (I) $425,000,000, plus (II)
Available Equity;
provided, that WPCS may not contribute to Vendor Holdco and its Subsidiaries in
the form of equity or debt an amount in
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excess at any time of fifty percent (50%) of all amounts contributed to WPCS by
the Borrower.
(ii) Except for the initial $100,000,000 of Permitted
Investment in WPCS and its Subsidiaries plus Available Equity plus the
proceeds of any Subordinated Debt issued by the Borrower, the
Investments otherwise permitted under this Section 7.6(c) may not be
made unless:
(A) the FCC shall have issued the Licenses for
their respective PCS Systems to Vendor Holdco and Bank Holdco pursuant
to a final order; and
(B) Section 5.13 of this Agreement has been
complied with in respect of Subsidiaries of Bank Holdco.
In addition, no Investment may be made in Vendor Holdco in excess of the sum of
$100,000,000 plus Available Equity plus the proceeds of Subordinated Debt issued
by the Borrower, unless Vendor Holdco shall have received a commitment for not
less than an additional $100,000,000 in additional Vendor Debt.
(d) Investments in Other Unrestricted Subsidiaries.
(i) The Borrower and its Restricted Subsidiaries may (in addition
to any Investments or Acquisitions otherwise permitted under this Section 7.6)
make Investments in an amount not to exceed in the aggregate $60,000,000, plus
Available Equity, (A) in Unrestricted Subsidiaries (other than Vendor Holdco)
engaged primarily in the business of wireless communications outside the United
States and in PCS Systems and (B) in Vendor Holdco for the sole purpose of
permitting Vendor Holdco to acquire the Denver MTA license from GTE Mobilnet
Incorporated for a price of $66,000,000.
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(ii) No Investment otherwise permitted under this Section 7.6(d)
hereof may be consummated unless:
(A) the Borrower shall have demonstrated through revised
projections assuming the consummation of the Investment its pro forma compliance
with Sections 7.8, 7.9, 7.10 and 7.11 hereof, after giving effect to the Advance
of the Loans used for such Investment, and shall have certified to the
Administrative Agent and the Lenders that such Investment shall not have a
Materially Adverse Effect; and
(B) with respect to any Investment of more than
$10,000,000, the Borrower shall provide the Administrative Agent and the Lenders
with notice, not less than ten (10) days prior to the proposed closing of the
Investment, and with copies of all material information pertaining to such
Investment, and a certificate signed by the chief financial officer of the
Borrower certifying the Borrower's pro forma compliance with the covenants
listed in item (A) of this subsection, together with any calculations necessary
to demonstrate such compliance.
(e) Aggregate Limitations. The Permitted Investments in WPCS,
Vendor Holdco and Bank Holdco permitted pursuant to Section 7.6(c) hereof, and
the Permitted Investments pursuant to Section 7.6(d) hereof in other
Unrestricted Subsidiaries, shall be limited to $450,000,000 plus Available
Equity.
(f) Employee Loans. The Borrower and its Restricted Subsidiaries
may make loans to employees, (i) in connection with stock option plans, provided
(x) such loans do not involve cash payments by the Borrower and (y) the Borrower
and its Restricted Subsidiaries incur no obligations at any time to repurchase
the stock so purchased, and (ii) for all other purposes in an amount not to
exceed, in the aggregate outstanding at any time, $1,000,000.
(g) Seller Paper. The Borrower and its Restricted Subsidiaries, in
connection with its receipt of Net Proceeds, may receive and hold one or more
promissory notes
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or other evidences of Indebtedness for Money Borrowed, provided that (i) such
promissory notes or other evidences of Indebtedness for Money Borrowed shall be
endorsed to the order of the Administrative Agent as additional Collateral for
the Obligations, and (ii) at no time shall the aggregate amount of such
outstanding Indebtedness held by the Borrower and its Restricted Subsidiaries
exceed $25,000,000.
Section 7.7 Restricted Payments and Purchases. The Borrower shall not,
and shall cause each of its Restricted Subsidiaries and Vendor Holdco not to,
directly or indirectly declare or make any Restricted Payment or Restricted
Purchase, except that so long as no Default hereunder then exists or would be
caused thereby:
(a) On March 31, 2000 and on each March 31st thereafter, the
Borrower may pay dividends or make other distributions to its shareholders,
provided that (i) the Borrower shall have prepaid the Loans from the Borrower's
Excess Cash Flow for the preceding fiscal year in the amount required by Section
2.8(a) hereof, (ii) the aggregate amount of such dividends and distributions
shall not exceed, in any year, the amount of the Borrower's Excess Cash Flow for
the preceding fiscal year remaining after payment of the amount required to be
prepaid on the Loans by the Borrower pursuant to Section 2.8(a) hereof, and
(iii) the Borrower shall provide the Lenders with a certificate, signed by the
chief financial officer of the Borrower, demonstrating pro forma compliance with
the terms of this Section 7.7, after giving effect to such dividend payments;
(b) The Borrower may make scheduled payments of interest and
principal on the Seller Subordinated Debt and scheduled payments of interest on
its Subordinated Debt;
(c) Any Restricted Subsidiary of the Borrower which is a
partnership may make payments to its partners which are not Affiliates, as
required by the partnership agreement of such Subsidiary, and any Restricted
Subsidiary of the Borrower which is a corporation may make payments to its
shareholders who are not Affiliates, as required by the articles of
incorporation or any shareholders agreement of such corporate Restricted
Subsidiary, provided, however, that the aggregate amount of all such payments in
any fiscal year shall not exceed the greater of (i) $1,000,000 or (ii)
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one percent (1%) of the Operating Cash Flow of the Borrower and its Consolidated
Subsidiaries for such fiscal year;
(d) The Borrower, its Restricted Subsidiaries, and Vendor Holdco
may make Restricted Payments and Restricted Purchases which are permitted to be
made under Section 7.6 hereof; and
(e) The Borrower and its Restricted Subsidiaries may make
Restricted Purchases of minority ownership interests in the Borrower and its
Restricted Subsidiaries from Persons who are not Affiliates of the Borrower,
provided that (i) the aggregate amount of money spent on such Restricted
Purchases shall not exceed $15,000,000 in the aggregate during the term of this
Agreement, and (ii) such minority ownership interests so purchased shall become
additional Collateral for the Obligations pursuant to the terms of one or more
of the Security Documents.
Section 7.8 Ratio of Operating Cash Flow to Cash Interest Expense. The
Borrower shall not at any time permit the ratio as of the end of any fiscal
quarter of (i) its Operating Cash Flow for the two (2) fiscal quarter period
then ended, to (ii) its Cash Interest Expense for such two (2) fiscal quarter
period, to be less than the ratio set forth below opposite the period during
which the last day of such two-quarter period ends:
<TABLE>
<CAPTION>
Quarter Ended: Ratio
-------------- -----
<S> <C>
June 30, 1996 1.00:1
September 30, 1996 1.10:1
December 31, 1996 through March 31, 1997 1.20:1
June 30, 1997 through March 31, 1998 1.30:1
June 30, 1998 through March 31, 1999 1.50:1
June 30, 1999 and thereafter 2.00:1
</TABLE>
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Section 7.9 Fixed Charge Coverage Ratio. The Borrower shall not at any
time permit the Fixed Charge Coverage Ratio for any fiscal quarter to be less
than 1.00:1.
Section 7.10 Leverage Ratios. The Borrower shall not at any time permit
the Leverage Ratio (Senior Debt) to exceed the ratio set forth below in column A
for any fiscal quarter ending during the periods indicated; nor shall the
Borrower permit the Leverage Ratio (Total Debt) to exceed the ratio set forth in
column B for any fiscal quarter ending during the periods indicated:
<TABLE>
<CAPTION>
A B
Senior Total
Period Debt Ratio Debt Ratio
------ ---------- ----------
<S> <C> <C>
Agreement Date through
June 30, 1997 10.0:1 10.0:1
September 30, 1997 through and
including March 31, 1998 9.0:1 10.0:1
June 30, 1998 8.0:1 10.0:1
September 30, 1998 through and
including March 31, 1999 7.5:1 9.5:1
June 30, 1999 7.0:1 9.0:1
September 30, 1999 through
December 31, 1999 6.5:1 8.5:1
March 31, 2000 through
June 30, 2000 6.0:1 8.0:1
September 30, 2000 through
December 31, 2000 5.5:1 7.5:1
March 31, 2001 through
December 31, 2001 5.0:1 7.0:1
March 31, 2002 and
Thereafter 5.0:1 6.5:1
</TABLE>
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Section 7.11 Annualized Operating Cash Flow to Pro Forma Debt Service
Ratio. The Borrower shall not permit the ratio of its Annualized Operating Cash
Flow to its Pro Forma Debt Service to be less than 1.00:1 for the fiscal quarter
ended March 31, 1998 and each fiscal quarter thereafter.
Section 7.12 Affiliate Transactions. Except as specifically provided
herein (including, without limitation, Section 7.7 hereof) and as may be
described on Schedule 13 attached hereto, the Borrower shall not, and shall
cause each of its Restricted Subsidiaries not to, at any time engage in any
material transaction with an Affiliate, or make an assignment or other transfer
of any of its properties or assets to any Affiliate, unless such transaction (i)
is determined by the board of directors of the Borrower or such Restricted
Subsidiary to be in the best interests of the Borrower or such Restricted
Subsidiary, and (ii) such transaction is on terms no less advantageous to the
Borrower or such Restricted Subsidiary than would be the case if such
transaction had been effected with a non-Affiliate.
Section 7.13 Real Estate. Neither the Borrower nor any of its
Restricted Subsidiaries shall purchase or become obligated to purchase any
single parcel of real estate having a purchase price in excess of $500,000
except in compliance with Section 5.10 hereof.
Section 7.14 ERISA Liabilities. The Borrower shall not, and shall cause
each of its Subsidiaries (including its Unrestricted Subsidiaries) not to, (i)
permit the assets of any of their respective Plans to be less than the amount
necessary to provide all accrued benefits under such Plans on an ongoing basis,
or (ii) enter into any Multiemployer Plan.
Section 7.15 Limitation on Leases. Neither the Borrower nor any of its
Restricted Subsidiaries shall make or be or become obligated to make any payment
in respect of any obligation as lessee under any lease for property or equipment
having an unexpired term (including any renewal terms under options available to
the lessor) of more than one year (excluding any lease permitting cancellation
at the option of the lessee within sixty (60) days or less) unless, after giving
effect to the occurrence of such lease
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liability, the aggregate rental amount for all such leases in any fiscal year
does not exceed the greater of $10,000,000 or seven percent (7%) of the gross
revenues for the Borrower and its Restricted Subsidiaries for the prior fiscal
year.
Section 7.16 Special Provisions Pertaining to Unrestricted
Subsidiaries.
(a) Indebtedness; Liens. The Borrower shall not permit any of its
Unrestricted Subsidiaries to incur Indebtedness or to create Liens (other than
Permitted Liens) upon their assets, except that:
(i) Vendor Holdco may incur up to $400,000,000 in Vendor
Debt, subject to the terms of the Vendor Loan Agreement, the
Intercreditor Agreement or any other intercreditor agreement
substantially in the form of the Intercreditor Agreement or otherwise
in form and substance reasonably acceptable to the Administrative
Agent, which Vendor Debt may be secured by the stock and assets of
Vendor Holdco; and
(ii) Unrestricted Subsidiaries (other than Vendor Holdco
and its Subsidiaries) may incur additional Indebtedness, which
Indebtedness may be secured by the assets or stock of such Unrestricted
Subsidiary (unless already pledged to the Administrative Agent pursuant
to Section 7.16(c) hereof), provided that any such Indebtedness
incurred by Vendor Holdco or any other Unrestricted Subsidiary shall be
without recourse to the Person or assets (other than the stock of
certain Unrestricted Subsidiaries) of the Borrower or any Restricted
Subsidiary or Vendor Holdco.
(b) Business. The Borrower shall not permit any of the
Unrestricted Subsidiaries to engage in business activities other than the
following:
(i) the business of owning, developing and operating one
or more PCS Systems pursuant to a BTA or MTA License; or
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(ii) the business of providing wireless telecommunications
services in the United States or abroad.
(c) New Unrestricted Subsidiaries. The Borrower shall cause all of
the stock of any new Unrestricted Subsidiary (which is a direct Subsidiary of
the Borrower, or a direct subsidiary of a Restricted Subsidiary) other than VH2,
to be pledged to the Administrative Agent pursuant to the terms of the Borrower
Pledge Agreement or the Subsidiary Pledge Agreement, as additional Collateral
for the Obligations. The Borrower shall not permit Vendor Holdco to create any
Subsidiaries, other than Subsidiaries formed to own and operate the MTA Licenses
and PCS Systems for Salt Lake City, Honolulu, El Paso and Denver.
(d) Sale or Other Disposition. In the event of the sale or other
disposition of the stock or assets of Vendor Holdco, the Borrower shall comply
with the prepayment provisions of Section 2.8(c) hereof.
Section 7.17 Limitation on Preferred Stock of Restricted Subsidiaries.
The Borrower shall not permit any Restricted Subsidiary to create or issue any
preferred stock except for (i) preferred stock outstanding on the Agreement
Date, (ii) preferred stock issued to and held by the Borrower or any other
Restricted Subsidiary, (iii) preferred stock issued by a Person prior to the
time such Person became a direct or indirect Restricted Subsidiary, (iv)
preferred stock issued by a Restricted Subsidiary, the proceeds of which are
used to refinance any outstanding preferred stock of such Restricted Subsidiary,
with 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
the agreement or instrument pursuant to which such preferred stock is issued,
does not provide for payments of liquidation values at its stated maturity or by
way of a sinking fund or by way of any mandatory redemption, defeasance,
retirement or repurchase, prior to the stated maturity of the preferred stock
being refinanced, or (v) preferred stock issued by a Restricted Subsidiary with
a
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cumulative liquidation preference in an amount which would be permitted
hereunder to be incurred as Indebtedness.
ARTICLE 8
Default
Section 8.1 Events of Default. Each of the following shall constitute
an Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
governmental or non-governmental body:
(a) Any representation or warranty made under this Agreement or
any other Loan Document shall prove to be incorrect or misleading in any
material respect when made or deemed to be made pursuant to Section 4.2 hereof;
(b) (i) The Borrower shall default in the payment of any principal
amount of the Notes, or (ii) the Borrower shall default in the payment of any
interest, fees or other amounts payable to the Lenders, the Administrative
Agent, or any of them, when due, and such Default shall not be cured by payment
in full within three (3) Business Days;
(c) The Borrower shall default in the performance or observance of
any agreement or covenant contained in Article 7 hereof;
(d) The Borrower shall default in the performance or observance of any
other agreement or covenant contained in this Agreement not specifically
referred to elsewhere in this Section 8.1, and such default shall not be cured
within a period of thirty (30) days from the date of occurrence of such default,
or, if later, the date on which an officer of the Borrower knew or should have
known of the occurrence of such default;
(e) There shall occur any default in the performance or observance of
any agreement or covenant or breach of any representation or warranty contained
in any of the Loan Documents (other than this Agreement or as otherwise provided
in this Section 8.1) by the Borrower, any
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of its Subsidiaries, or any other obligor thereunder, which shall not be cured
within a period of thirty (30) days from the occurrence of such default, or, if
later, the date on which an officer of the Borrower knew or should have known of
the occurrence of such default;
(f) There shall be entered and remain unstayed a decree or order
for relief in respect of the Borrower or any of its Subsidiaries under Title 11
of the United States Code as now constituted or hereafter amended, or any other
applicable Federal or state bankruptcy law or other similar law, or appointing a
receiver, liquidator, assignee, trustee, custodian, sequestrator or similar
official of the Borrower or any of its Subsidiaries, or of any substantial part
of their respective properties, or ordering the winding-up or liquidation of the
affairs of the Borrower or any of its Subsidiaries; or an involuntary petition
shall be filed against the Borrower or any of its Subsidiaries and a temporary
stay entered, and (i) such petition and stay shall not be diligently contested,
or (ii) such petition and stay shall continue undismissed for a period of
forty-five (45) consecutive days;
(g) The Borrower or any of its Subsidiaries shall file a petition,
answer or consent seeking relief under Title 11 of the United States Code, as
now constituted or hereafter amended, or any other applicable Federal or state
bankruptcy law or other similar law, or the Borrower or any of its Subsidiaries
shall consent to the institution of proceedings thereunder or to the filing of
any such petition or shall seek or consent to the appointment or taking of
possession of a receiver, liquidator, assignee, trustee, custodian, sequestrator
or other similar official of the Borrower or any of its Subsidiaries, or of any
substantial part of their respective properties, or the Borrower or any its
Subsidiaries shall fail generally to pay their respective debts as they become
due, or the Borrower or any of its Subsidiaries shall take any action in
furtherance of any such action;
(h) A judgment shall be entered by any court against the Borrower or
any of its Subsidiaries for the payment of money which exceeds singly or in the
aggregate with other such judgments, $1,000,000, or a warrant of attachment or
execution or similar process shall be issued
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or levied against property of the Borrower or any of its Subsidiaries which,
together with all other such property of the Borrower or any of its Subsidiaries
subject to other such process, exceeds in value $1,000,000 in the aggregate, and
if, within thirty (30) days after the entry, issue or levy thereof, such
judgment, warrant or process shall not have been paid or discharged or stayed
pending appeal, or if, after the expiration of any such stay, such judgment,
warrant or process shall not have been paid or discharged;
(i) There shall be at any time any "accumulated funding
deficiency," as defined in ERISA or in Section 412 of the Code, with respect to
any Plan maintained by the Borrower or any of its Subsidiaries, or to which the
Borrower or any of its Subsidiaries has any liabilities, or any trust created
thereunder; or a trustee shall be appointed by a United States District Court to
administer any such Plan; or PBGC shall institute proceedings to terminate any
such Plan; or the Borrower or any of its Subsidiaries shall incur any liability
to PBGC in connection with the termination of any such Plan; or any Plan or
trust created under any Plan of the Borrower or any of its Subsidiaries shall
engage in a "prohibited transaction" (as such term is defined in Section 406 of
ERISA or Section 4975 of the Code) which would subject any such Plan, any trust
created thereunder, any trustee or administrator thereof, or any party dealing
with any such Plan or trust to the tax or penalty in any material amount on
"prohibited transactions" imposed by Section 502 of ERISA or Section 4975 of the
Code and, in each case, such event or condition, together with other such events
or conditions, if any, would subject the Borrower and its Subsidiaries to any
tax, liability or penalty in excess of $1,000,000;
(j) Any event shall occur which has a Materially Adverse Effect;
(k) There shall occur (i) any default under any Indebtedness of
the Borrower or any of its Restricted Subsidiaries or Vendor Holdco in an
aggregate principal amount exceeding $1,000,000 at maturity or which default
allows the holder of such Indebtedness to accelerate the maturity of such
Indebtedness; (ii) any default under any Interest Hedge Agreement having a
notional principal amount of $1,000,000 or more or (iii) any defeasance or any
other
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action the result of which is to defease or repay any Subordinated Debt (other
than Seller Subordinated Debt) without payment in full of the Obligations;
(l) The FCC shall deliver to the Borrower or any of its
Subsidiaries an order to show cause why an order of revocation should not be
issued based upon any alleged attribution of alien ownership (within the meaning
of 47 U.S.C. Section 310(b) and any interpretation of the FCC thereunder) to the
Borrower or any of its Subsidiaries and such order shall not have been rescinded
within sixty (60) days after such delivery, with respect to any material
License;
(m) One or more Licenses shall be terminated or revoked such that
the Borrower and its Subsidiaries are no longer able to operate the related
Cellular System or PCS System or any portion thereof and retain the revenue
received therefrom or any such License shall fail to be renewed at the stated
expiration thereof such that the Borrower and its Subsidiaries are no longer
able to operate the related Cellular System or PCS System or any portion thereof
and retain the revenue received therefrom, except in the event that the
termination or revocation is with respect to any License that is not material;
(n) Any Security Document or any Note or any other Loan Document
or any material provision thereof shall at any time and for any reason be
declared by a court of competent jurisdiction to be null and void, or a
proceeding shall be commenced by the Borrower or any of its Subsidiaries, or by
any governmental authority having jurisdiction over the Borrower or any of its
Subsidiaries, seeking to establish the invalidity or unenforceability thereof
(exclusive of questions of interpretation of any provision thereof), or the
Borrower or any of its Subsidiaries shall deny that it has any liability or
obligation for the payment of principal or interest or other obligations
purported to be created under any Loan Document;
(o) Any Security Document shall for any reason fail or cease to
create a valid and first-priority Lien on or Security Interest in any material
portion of the Collateral purported to be covered thereby, subject to any
Permitted Lien, or any such Lien or Security Interest shall cease to
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be perfected, except if such failure results from the Administrative Agent's
failure to file any UCC-3 continuation statement in the appropriate
jurisdiction; or
(p) (i) John Stanton, Theresa Gillespie, the Stanton Family Trust,
and their Affiliates cease to own and control a minimum of 1,000,000 voting
shares in the Borrower (adjusted for stock splits, etc.) prior to December 31,
1996, or (ii) John Stanton, Theresa Gillespie, the Stanton Family Trust, and
their Affiliates cease to own and control a minimum of 500,000 voting shares in
the Borrower (adjusted for stock splits, etc.) thereafter, or (iii) John Stanton
ceases, for any reason, to serve as Chairman of the Borrower and a successor
Chairman acceptable to the Majority Lenders is not appointed or does not
commence to serve within sixty (60) days from the date Mr. Stanton ceases to
serve as Chairman, or (iv) there shall be a Change of Control, together with the
affirmative vote of the Majority Lenders that such Change in Control, together
with any results thereof, constitutes an Event of Default; provided, however,
that if a successor Chairman acceptable to the Majority Lenders is appointed and
commences to serve, subsections (i) and (ii) of this Section 8.1(p) shall no
longer have any force or effect, but subsection (iii) shall apply to Mr.
Stanton's successor and to each other successor Chairperson.
Section 8.2 Remedies.
(a) If an Event of Default specified in Section 8.1 (other than an
Event of Default under Section 8.1(f) or Section 8.1(g)) shall have occurred and
shall be continuing, the Administrative Agent, at the request of the Majority
Lenders, shall formally declare that an Event of Default has occurred and (i)
terminate the Revolving Loan Commitment and (ii) declare the principal of and
interest on the Loans and the Notes and all other amounts owed to the Lenders
and the Administrative Agent under this Agreement and the Notes and any other
Obligations to be forthwith due and payable without presentment, demand, protest
or notice of any kind, all of which are hereby expressly waived, anything in
this Agreement or in the Notes or any other Loan Document to the contrary
notwithstanding, and the Revolving Loan Commitment shall thereupon forthwith
terminate and all such amounts shall be immediately due and payable.
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(b) Upon the occurrence and continuance of an Event of Default
specified in Section 8.1(f) or Section 8.1(g), all principal, interest and other
amounts due hereunder and under the Notes, and all other Obligations, shall
thereupon and concurrently therewith become due and payable and the Revolving
Loan Commitment shall forthwith terminate and the principal amount of the Loans
outstanding hereunder shall bear interest at the Default Rate, all without any
action by the Administrative Agent, the Lenders or the Majority Lenders or any
of them and without presentment, demand, protest or other notice of any kind,
all of which are expressly waived, anything in this Agreement or in the other
Loan Documents to the contrary notwithstanding.
(c) Upon acceleration of the Notes, as provided in subsection (a)
or (b) of this Section 8.2, the Administrative Agent and the Lenders shall have
all of the post-default rights granted to them, or any of them, under the Loan
Documents and under Applicable Law.
(d) Upon acceleration of the Notes, as provided in subsection (a)
or (b) of this Section 8.2, the Administrative Agent, upon request of the
Majority Lenders, shall have the right to the appointment of a receiver for the
properties and assets of the Borrower and its Restricted Subsidiaries, both to
operate and to sell such properties and assets, and the Borrower, for itself and
on behalf of its Restricted Subsidiaries, hereby consents to such right and such
appointment and hereby waives any objection the Borrower or any Restricted
Subsidiary may have thereto or the right to have a bond or other security posted
by the Administrative Agent on behalf of the Lenders, in connection therewith.
The rights of the Administrative Agent under this Section 8.2(d) shall be
subject to its prior compliance with the Communications Act and the FCC rules
and policies promulgated thereunder to the extent applicable to the exercise of
such rights.
(e) The rights and remedies of the Administrative Agent and the
Lenders hereunder shall be cumulative and not exclusive.
Section 8.3 Payments Subsequent to Declaration of Event of Default.
Subsequent to the acceleration of the Loans under Section 8.2 hereof, payments
and prepayments
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under this Agreement made to any of the Administrative Agent, the Lenders or
otherwise received by any of such Persons (from realization on Collateral for
the Obligations or otherwise) shall be paid over to the Administrative Agent (if
necessary) and distributed by the Administrative Agent as follows: first, to the
reasonable costs and expenses, if any, incurred in connection with the
collection of such payment or prepayment including, without limitation, any
reasonable costs incurred by any of them in connection with the sale or
disposition of any Collateral for the Obligations; second, to the Lenders and
the Administrative Agent for any fees hereunder or under any of the other Loan
Documents then due and payable; third, to the Lenders pro rata on the basis of
their respective unpaid principal amounts (except as provided in Section
2.2(f)), to the payment of any unpaid interest which may have accrued on the
Obligations; fourth, to the Lenders pro rata until all Advances have been paid
in full (and, for purposes of this clause, obligations under Interest Hedge
Agreements with the Lenders or any of them shall be deemed to be Advances and
shall be paid on a pro rata basis with the Advances); fifth, to the Lenders pro
rata on the basis of their respective unpaid amounts, to the payment of any
other unpaid Obligations; sixth, to damages incurred by the Administrative Agent
or any Lender by reason of any breach hereof or of any other Loan Document; and
seventh, upon satisfaction in full of all Obligations, to the Borrower or as
otherwise required by law. Notwithstanding the foregoing, each Lender may
allocate amounts received by it pursuant to this Section 8.3 in its discretion
to the various Obligations held by it.
ARTICLE 9
The Administrative Agent
Section 9.1 Appointment and Authorization. Each Lender hereby
irrevocably appoints and authorizes, and hereby agrees that it will require any
transferee of any of its interest in its Loan and in its Note irrevocably to
appoint and authorize, the Administrative Agent to take such actions as its
agent on its behalf and to exercise such powers hereunder and under the Security
Documents as are delegated by the terms hereof and thereof, together with
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such powers as are reasonably incidental thereto. Neither the Administrative
Agent nor any of its respective directors, officers, employees or agents shall
be liable for any action taken or omitted to be taken by it or them hereunder or
in connection herewith, except for its or their own gross negligence or willful
misconduct.
Section 9.2 Interest Holders. The Administrative Agent may treat each
Lender, or the Person designated in the last notice filed with the
Administrative Agent, whether under Section 11.1, Section 11.5, or otherwise
hereunder, as the holder of all of the interests of such Lender in its Loan and
in its Note until written notice of transfer, signed by such Lender (or the
Person designated in the last notice filed with the Administrative Agent) and by
the Person designated in such written notice of transfer, in form and substance
satisfactory to the Administrative Agent, shall have been filed with the
Administrative Agent.
Section 9.3 Consultation with Counsel. The Administrative Agent may
consult with Paul, Hastings, Janofsky & Walker, Atlanta, Georgia, special
counsel to the Administrative Agent, or with other legal counsel selected by it
with due care and shall not be liable for any action taken or suffered by it in
good faith in consultation with the Majority Lenders and in reasonable reliance
on such consultations.
Section 9.4 Documents. The Administrative Agent shall be under no duty
to examine, inquire into, or pass upon the validity, effectiveness or
genuineness of this Agreement, any Note, any other Loan Document, or any other
instrument, document or communication furnished pursuant hereto or in connection
herewith, and the Administrative Agent shall be entitled to assume (absent
knowledge to the contrary) that they are valid, effective and genuine, have been
signed or sent by the proper parties and are what they purport to be.
Section 9.5 Administrative Agent and Affiliates. With respect to the
Revolving Loan Commitment and its Loans, Toronto Dominion (Texas), Inc. shall
have the same rights and powers hereunder and under the other Loan Documents as
any other Lender and Affiliates of the Administrative Agent may accept deposits
from, lend money to and generally engage in any kind of business with the
Borrower, any of its
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Subsidiaries or any Affiliates of, or Persons doing business with, the Borrower,
as if they were not affiliated with the Administrative Agent and without any
obligation to account therefor.
Section 9.6 Responsibility of the Administrative Agent. The duties and
obligations of the Administrative Agent under this Agreement and the Security
Documents are only those expressly set forth in this Agreement and the Security
Documents. The Administrative Agent shall be entitled to assume that no Default
has occurred and is continuing unless it has actual knowledge, or has been
notified by the Borrower, of such fact, or has been notified by a Lender in
writing that such Lender considers that a Default has occurred and is
continuing, and such Lender shall specify in detail the nature thereof in
writing. The Administrative Agent shall not be liable hereunder for any action
taken or omitted to be taken except for its own gross negligence or willful
misconduct. The Administrative Agent shall provide promptly each Lender with
copies of such documents received from the Borrower as such Lender may
reasonably request.
Section 9.7 Security Documents. The Administrative Agent, as collateral
agent hereunder and under the Security Documents, is hereby authorized to act on
behalf of the Lenders, in its own capacity and through other agents and
sub-agents appointed by it with due care, under the Security Documents, provided
that the Administrative Agent shall not agree to the release of any Collateral,
or any property encumbered by any mortgage, pledge or security interests except
in compliance with Section 11.12 hereof. In connection with its role as secured
party with respect to the Collateral hereunder, the Administrative Agent shall
act as collateral agent, for itself and for the ratable benefit of the Lenders,
and such role as administrative agent shall be disclosed on all appropriate
accounts, certificates, filings, mortgages, and other Collateral documentation.
Section 9.8 Action by the Administrative Agent.
(a) The Administrative Agent shall be entitled to use its discretion
with respect to exercising or refraining from exercising any rights which may be
vested in it by, and with respect to taking or refraining from taking any action
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or actions which it may be able to take under or in respect of, this Agreement,
unless the Administrative Agent shall have been instructed by the Majority
Lenders to exercise or refrain from exercising such rights or to take or refrain
from taking such action; provided that the Administrative Agent shall not
exercise any rights under Section 8.2(a) of this Agreement except upon the
request of the Majority Lenders or of all the Lenders, where expressly required
by this Agreement. The Administrative Agent shall incur no liability under or in
respect of this Agreement with respect to anything which it may do or refrain
from doing in the reasonable exercise of its judgment or which may seem to it to
be necessary or desirable in the circumstances for the protection of the
interests of the Lenders, except for its gross negligence or willful misconduct,
or conduct in breach of this Agreement as determined by a final, non-appealable
order of a court having jurisdiction over the subject matter.
(b) The Administrative Agent shall not be liable to the Lenders or
to any Lender in acting or refraining from acting under this Agreement or any
other Loan Document in accordance with the instructions of the Majority Lenders
or of all the Lenders, where expressly required by this Agreement, and any
action taken or failure to act pursuant to such instructions shall be binding on
all Lenders.
Section 9.9 Notice of Default or Event of Default. In the event that
the Administrative Agent or any Lender shall acquire actual knowledge, or shall
have been notified, of any Default (other than through a notice by one party
hereto to all other parties), the Administrative Agent or such Lender shall
promptly notify the Administrative Agent, and the Administrative Agent shall
take such action and assert such rights under this Agreement as the Majority
Lenders or of all the Lenders, where expressly required by this Agreement, shall
request in writing, and the Administrative Agent shall not be subject to any
liability by reason of its acting pursuant to any such request. If the Majority
Lenders shall fail to request the Administrative Agent to take action or to
assert rights under this Agreement in respect of any Default within ten (10)
days after their receipt of the notice of any Default from the Administrative
Agent or any Lender, or shall request inconsistent action with respect to such
Default, the Administrative Agent may,
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but shall not be required to, take such action and assert such rights (other
than rights under Article 8 hereof) as it deems in its discretion to be
advisable for the protection of the Lenders, except that, if the Majority
Lenders have instructed the Administrative Agent not to take such action or
assert such right, in no event shall the Administrative Agent act contrary to
such instructions.
Section 9.10 Responsibility Disclaimed. The Administrative Agent shall
not be under any liability or responsibility whatsoever as Administrative Agent:
(a) To the Borrower or any other Person as a consequence of any
failure or delay in performance by or any breach by, any Lender or Lenders of
any of its or their obligations under this Agreement;
(b) To any Lender or Lenders, as a consequence of any failure or
delay in performance by, or any breach by, (i) the Borrower of any of its
obligations under this Agreement or the Notes or any other Loan Document, or
(ii) any Subsidiary of the Borrower or any other obligor under any other Loan
Document; or
(c) To any Lender or Lenders, for any statements, representations
or warranties in this Agreement, or any other document contemplated by this
Agreement or any other Loan Document, or any information provided pursuant to
this Agreement, any other Loan Document, or any other document contemplated by
this Agreement, or for the validity, effectiveness, enforceability or
sufficiency of this Agreement, the Notes, any other Loan Document, or any other
document contemplated by this Agreement.
Section 9.11 Indemnification. The Lenders agree to indemnify the
Administrative Agent (to the extent not reimbursed by the Borrower) pro rata
according to their percentage of the outstanding principal amount of the Loans
from and against any and all liabilities, obligations, losses (other than in the
event of a bankruptcy or out-of- court 'work-out' of the Loans), damages,
penalties, actions, judgments, suits, costs, expenses (including reasonable fees
and expenses of experts, agents, consultants and counsel), or disbursements of
any kind or nature whatsoever which may be imposed on, incurred by or asserted
against the
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Administrative Agent in any way relating to or arising out of its role as
Administrative Agent under this Agreement, any other Loan Document, or any other
document contemplated by this Agreement or any action taken or omitted by the
Administrative Agent under this Agreement, any other Loan Document, or any other
document contemplated by this Agreement in its role as Administrative Agent,
except that no Lender shall be liable to the Administrative Agent for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses, or disbursements resulting from the gross
negligence or willful misconduct of the Administrative Agent as determined by a
final, non-appealable order of a court having jurisdiction over the subject
matter.
Section 9.12 Credit Decision. Each Lender represents and warrants to
each other Lender, to each Managing Agent, and to the Administrative Agent that:
(a) In making its decision to enter into this Agreement and to
make its Advances it has independently taken whatever steps it considers
necessary to evaluate the financial condition and affairs of the Borrower and
its Subsidiaries and that it has made an independent credit judgment, and that
it has not relied upon the Administrative Agent, any Managing Agent, or any
other Lender, or information provided by the Administrative Agent (other than
information provided to the Administrative Agent by the Borrower and forwarded
by the Administrative Agent to the Lenders); and
(b) So long as any portion of the Obligations remains outstanding,
it will continue to make its own independent evaluation of the financial
condition and affairs of the Borrower.
Section 9.13 Successor Administrative Agent.
(a) Resignation. Subject to the appointment and
acceptance of a successor Administrative Agent as provided below, the
Administrative Agent may resign at any time by giving written notice thereof to
the Lenders and the Borrower. Upon any such resignation, the Majority Lenders
shall have the right to appoint a successor Administrative Agent. If no
successor Administrative Agent shall have been
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so appointed by the Majority Lenders and shall have accepted such appointment
within thirty (30) days after the retiring Administrative Agent gives notice of
resignation, then the retiring Administrative Agent may, on behalf of the
Lenders, appoint a successor Administrative Agent which shall be any Lender or a
commercial bank organized under the laws of the United States of America or any
political subdivision thereof which has combined capital and reserves in excess
of $250,000,000. Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor Administrative Agent such successor Administrative
Agent shall thereupon succeed to and become vested with all the rights, powers,
privileges, duties and obligations of the retiring Administrative Agent and the
retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After any retiring Administrative Agent's resignation
hereunder as Administrative Agent, the provisions of this Article shall continue
in effect for its benefit in respect of any actions taken or omitted to be taken
by it while it was acting as the Administrative Agent. The resignation of the
Administrative Agent may not take effect until a successor Administrative Agent
is appointed.
(b) Removal. The Administrative Agent may be removed as
Administrative Agent hereunder at any time by written notice given to it by
Lenders holding not less than sixty-six and two-thirds percent (66-2/3%) of the
sum of the Revolving Loan Commitment plus outstanding principal balance of the
Term Loans. Upon any such removal, such Lenders shall have the right to appoint
a successor Administrative Agent, subject, at any such time as there is no
Default hereunder, to the prior written consent of the Borrower, such consent
not to be unreasonably withheld or delayed. Any such successor Administrative
Agent may be any Lender or a commercial bank organized under the laws of the
United States of America or any political subdivision thereof which has combined
capital and reserves in excess of $250,000,000. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges, duties and obligations of the
retiring Administrative Agent and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. After any retiring
Administrative Agent's resignation hereunder as
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Administrative Agent, the provisions of this Article shall continue in effect
for its benefit in respect of any actions taken or to be taken by it while it
was acting as the Administrative Agent.
Section 9.14 Delegation of Duties. The Administrative Agent may execute
any of its respective duties under the Loan Documents by or through agents or
attorneys selected by it using reasonable care, and shall be entitled to advice
of counsel concerning all matters pertaining to such duties.
ARTICLE 10
Change in Circumstances
Affecting Fixed Rate Advances
Section 10.1 Fixed Rate Basis Determination Inadequate or Unfair. If
with respect to any proposed Fixed Rate Advance for any Interest Period, the
Administrative Agent determines after consultation with the Lenders that
deposits in Dollars (in the applicable amount) are not being offered to each of
the Lenders in the relevant market for such Interest Period, the Administrative
Agent shall forthwith give notice thereof to the Borrower and the Lenders,
whereupon until the Administrative Agent notifies the Borrower that the
circumstances giving rise to such situation no longer exist, the obligations of
any affected Lender to make such type of Fixed Rate Advances shall be suspended.
Section 10.2 Illegality. If after the date hereof, the adoption of any
Applicable Law, or any change in any Applicable Law (whether adopted before or
after the Agreement Date), or any change in interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Lender
with any directive (whether or not having the force of law) of any such
authority, central bank or comparable agency, shall make it unlawful or
impossible for any Lender to make, maintain or fund either or both types of
Fixed Rate Advances, such Lender shall so notify the Administrative Agent, and
the Administrative Agent shall forthwith give notice thereof to the other
Lenders and the
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Borrower. Before giving any notice to the Administrative Agent pursuant to this
Section 10.2, such Lender shall designate a different lending office if such
designation will avoid the need for giving such notice and will not, in the sole
judgment of such Lender, be otherwise materially disadvantageous to such Lender.
Upon receipt of such notice, notwithstanding anything contained in Article 2
hereof, the Borrower shall repay in full the then outstanding principal amount
of each affected Fixed Rate Advance of such Lender, together with accrued
interest thereon and any reimbursement required under Section 2.11 hereof, on
either (a) the last day of the then current Interest Period applicable to such
affected Fixed Rate Advances if such Lender may lawfully continue to maintain
and fund such Fixed Rate Advances to such day or (b) immediately if such Lender
may not lawfully continue to fund and maintain such affected Fixed Rate Advances
to such day. Concurrently with repaying each affected Fixed Rate Advance of such
Lender, notwithstanding anything contained in Article 2 or Article 3 hereof, the
Borrower may borrow a Base Rate Advance (or the other type of Fixed Rate
Advance, if available) from such Lender, and such Lender shall make such
Advance, if so requested, in an amount such that the outstanding principal
amount of the Note held by such Lender shall equal the outstanding principal
amount of such Note immediately prior to such repayment.
Section 10.3 Increased Costs.
(a) If after the date hereof, the adoption of any Applicable Law,
or any change in any Applicable Law (whether adopted before or after the
Agreement Date), or any interpretation or change in interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof or compliance
by any Lender with any directive (whether or not having the force of law) of any
such authority, central bank or comparable agency:
(1) shall subject any Lender to any tax, duty or other
charge with respect to its obligation to make Fixed Rate Advances, or
its Fixed Rate Advances, or shall change the basis of taxation of
payments to any Lender of the principal of or interest on its Fixed
Rate Advances or in respect of any other amounts due
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under this Agreement, in respect of its Fixed Rate Advances or its
obligation to make Fixed Rate Advances (except for changes in the rate
or method of calculation of tax on the overall net income of such
Lender); or
(2) shall impose, modify or deem applicable any reserve
(including, without limitation, any imposed by the Board of Governors
of the Federal Reserve System, but excluding any included in an
applicable Eurodollar Reserve Percentage or Domestic Reserve
Percentage), special deposit, capital adequacy, assessment or other
requirement or condition against assets of, deposits with or for the
account of, or commitments or credit extended by, any Lender or shall
impose on any Lender or the London interbank borrowing market or the
New York certificate of deposit market any other condition affecting
its obligation to make Fixed Rate Advances or its Fixed Rate Advances;
and the result of any of the foregoing is to increase the cost to such Lender of
making or maintaining any such Fixed Rate Advances, or to reduce the amount of
any sum received or receivable by such Lender under this Agreement or under its
Note with respect thereto, then, within five (5) days after demand by such
Lender, the Borrower agrees to pay to such Lender such additional amount or
amounts as will compensate such Lender for such increased costs. Each Lender
will promptly notify the Borrower and the Administrative Agent of any event of
which it has knowledge, occurring after the date hereof, which will entitle such
Lender to compensation pursuant to this Section 10.3 and will designate a
different lending office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the sole judgment of such
Lender, be otherwise disadvantageous to such Lender.
(b) Any Lender claiming compensation under this Section 10.3 shall
provide the Borrower with a written certificate setting forth the additional
amount or amounts to be paid to it hereunder and calculations therefor in
reasonable detail. Such certificate shall be presumptively correct, absent
manifest error. In determining such amount, such Lender may use any reasonable
averaging and attribution methods. If any Lender demands compensation under this
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Section 10.3, the Borrower may at any time, upon at least five (5) Business
Days' prior notice to such Lender, prepay in full the then outstanding affected
Fixed Rate Advances of such Lender, together with accrued interest thereon to
the date of prepayment, along with any reimbursement required under Section 2.11
hereof. Concurrently with prepaying such Fixed Rate Advances, the Borrower may
borrow a Base Rate Advance from such Lender, and such Lender shall, if so
requested, make such Advance in an amount such that the outstanding principal
amount of the Note held by such Lender shall equal the outstanding principal
amount of such Note immediately prior to such prepayment.
Section 10.4 Effect On Other Advances. If notice has been given
pursuant to Section 10.1, 10.2 or 10.3 suspending the obligation of any Lender
to make either or both types of Fixed Rate Advances, or requiring either or both
types of Fixed Rate Advances of any Lender to be repaid or prepaid, then, unless
and until such Lender notifies the Borrower that the circumstances giving rise
to such repayment no longer apply, all Advances which would otherwise be made by
such Lender as either or both types of Fixed Rate Advances affected shall, at
the option of the Borrower, be made instead as Base Rate Advances or the
unaffected type of Fixed Rate Advances.
ARTICLE 11
Miscellaneous
Section 11.1 Notices.
(a) Unless otherwise specifically provided herein, all notices and
other communications under this Agreement shall be in writing and shall be
deemed to have been given three (3) days after deposit in the mail, designated
as certified mail, return receipt requested, postage-prepaid, or one (1) day
after being entrusted to a reputable commercial overnight delivery service, or
when sent by telecopy addressed to the party to which such notice is directed at
its address determined as provided in this Section 11.1, except that notices
under Article 2 shall be effective only upon receipt. All notices and other
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communications under this Agreement shall be given to the parties hereto at the
following addresses:
(i) If to the Borrower, to it at:
330 120th Avenue, N.E.
Suite 200
Bellevue, Washington 98005
Attn: John Stanton
Chairman
After May 31, 1996:
2001 NW Sammamish Road
Issaquah, Washington 98027
Attn: John Stanton
Chairman
with a copy to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Attn: Barry A. Adelman, Esq.
and to:
Alan R. Bender, Esq.
330 - 120th Avenue, N.E.
Suite 200
Bellevue, Washington 98005
(ii) If to the Administrative Agent, to it at:
Toronto Dominion (Texas), Inc.
909 Fannin, Suite 900
Houston, Texas 77010
Attn: Manager, Agency
with a copy to:
The Toronto-Dominion Bank
USA Division
31 West 52d Street
New York, NY 10019-6101
Attn: Managing Director,
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Communications Finance
and to:
Paul, Hastings, Janofsky & Walker
600 Peachtree Street, Suite 2400
Atlanta, Georgia 30308-2222
Attn: Kevin Conboy, Esq.
(iii) If to the Managing Agents, the Agents, the
Co-Agents, or the Lenders, to them at the addresses
set forth beside their names on Schedules 2-A and
2-B.
Copies shall be provided to Persons other than parties hereto only in the case
of notices under Article 8 hereof.
(b) Any party hereto may change the address to which notices shall
be directed under this Section 11.1 by giving ten (10) days' written notice of
such change to the other parties.
Section 11.2 Expenses. The Borrower will promptly pay, or reimburse:
(a) all reasonable out-of-pocket expenses of the Administrative
Agent in connection with the preparation, negotiation, execution and delivery of
this Agreement and the other Loan Documents, and the transactions contemplated
hereunder and thereunder and the making of the initial Advance hereunder
(whether or not such Advance is made), including, but not limited to, the fees
and disbursements of Paul, Hastings, Janofsky & Walker, special counsel for the
Administrative Agent and its Affiliates;
(b) all reasonable out-of-pocket expenses of the Administrative
Agent in connection with the administration of the transactions contemplated in
this Agreement or the other Loan Documents, the restructuring and "work out" of
such transactions, and the preparation, negotiation, execution and delivery of
any waiver, amendment or consent by the Administrative Agent and the Lenders
relating to this Agreement or the other Loan Documents, including, but not
limited to, the fees and disbursements of any experts, agents or consultants and
of special counsel for the Administrative Agent, but excluding any assignment
fee pursuant to Section 11.5(b) hereof; and
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(c) all out-of-pocket costs and expenses of obtaining performance
under this Agreement or the other Loan Documents and all out-of-pocket costs and
expenses of collection if an Event of Default occurs in the payment of the
Notes, which in each case shall include reasonable fees and out-of-pocket
expenses of special counsel for the Administrative Agent.
Section 11.3 Waivers. The rights and remedies of the Administrative
Agent and the Lenders under this Agreement and the other Loan Documents shall be
cumulative and not exclusive of any rights or remedies which they would
otherwise have. No failure or delay by the Administrative Agent or the Lenders,
or any of them, in exercising any right, shall operate as a waiver of such
right. The Administrative Agent and the Lenders expressly reserve the right to
require strict compliance with the terms of this Agreement in connection with
any future funding of a request for an Advance. In the event the Lenders decide
to fund an Advance at a time when the Borrower is not in strict compliance with
the terms of this Agreement, such decision by the Lenders shall not be deemed to
constitute an undertaking by the Lenders to fund any further Advances or
preclude the Lenders and the Administrative Agent from exercising any rights
available under the Loan Documents or at law or equity. Any waiver or indulgence
granted by the Administrative Agent, the Lenders or the Majority Lenders shall
not constitute a modification of this Agreement, except to the extent expressly
provided in such waiver or indulgence, or constitute a course of dealing at
variance with the terms of this Agreement such as to require further notice of
their intent to require strict adherence to the terms of this Agreement in the
future.
Section 11.4 Set-Off. In addition to any rights now or hereafter
granted under Applicable Law and not by way of limitation of any such rights,
upon the occurrence of an Event of Default and during the continuation thereof,
the Administrative Agent and the Lenders are hereby authorized by the Borrower
at any time or from time to time, without notice to the Borrower or to any other
Person, any such notice being hereby expressly waived, to set off and to
appropriate and to apply any and all deposits (general or special, time or
demand, including, but not limited to,
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Indebtedness evidenced by certificates of deposit, in each case whether matured
or unmatured) and any other Indebtedness at any time held or owing by any Lender
or the Administrative Agent to or for the credit or the account of the Borrower
or any of its Restricted Subsidiaries against and on account of the Obligations
irrespective of whether (a) any Lender or the Administrative Agent shall have
made any demand hereunder or (b) the Administrative Agent shall have declared
the principal of and interest on the Loans and other amounts due hereunder to be
due and payable as permitted by Section 8.2 and although such Obligations or any
of them, shall be contingent or unmatured. Upon direction by the Administrative
Agent with the consent of the Majority Lenders, each Lender holding deposits of
the Borrower or any of its Restricted Subsidiaries shall exercise its set-off
rights as so directed.
Section 11.5 Assignment.
(a) The Borrower may not assign or transfer any of its rights or
obligations hereunder without the prior written consent of each of the Lenders.
(b) Each Lender may enter freely into participation agreements
with respect to or otherwise grant participations in its Loans to one or more
banks or other lenders or financial institutions; provided, however, that (i)
such Lender's obligations hereunder shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for the performance
of such obligations, (iii) the participant shall not be entitled by the benefit
of its participation to vote or otherwise take action under this Agreement or
any other Loan Document, except with respect to the matters referred to in items
(a), (b), (c), (d), (e), and (g) of Section 11.12 hereof, and (iv) the Borrower
shall have the right to consent to a proposed participant (such consent not to
be unreasonably withheld or delayed) and shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations hereunder. In addition, each Lender may (x) sell or assign up to one
hundred percent (100%) of its rights hereunder and under the other Loan
Documents to any Federal Reserve Bank without limitation; and (y) sell or assign
up to one hundred percent (100%) of its rights hereunder and under the other
Loan Documents to any other
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Person on an assignment basis, provided that (A) (i) such assignment is to an
Affiliate of the assignor or another Lender, or (ii) the Borrower (unless there
exists at the time of such assignment an Event of Default hereunder) and the
Administrative Agent have given their prior written consent to the proposed
assignee of a Lender hereunder, which consents shall not be unreasonably delayed
or withheld, provided that such consents may be reasonably withheld if the
proposed assignee is subject to withholding tax of the sort referred to in
Section 2.14 hereof, (B) the assignee assumes a pro rata share of the assignor
Lender's obligations hereunder determined by the percentage of the Revolving
Loan Commitment or Term Loan assigned, as applicable, for the period from the
date of the assignment through the Revolving Loan Maturity Date with respect to
an assignment of a Revolving Loan Commitment or the Maturity Date with respect
to an assignment of a Term Loan, and (C) each such assignment shall be in a
principal amount of not less than the lesser of the entire amount of such
Lender's interest hereunder or $5,000,000, unless an assignment is from one
Lender to another, in which case there shall be no minimum assignment amount.
Each Lender who sells or assigns a portion of its Loans pursuant hereto shall
pay to the Administrative Agent an assignment fee of $2,500 with respect to each
assignment, such fee to be paid to the Administrative Agent not later than the
effective date of the assignment of the Loan relating thereto. Each Lender
agrees to provide the Administrative Agent and the Borrower with written notice
of the assignment of all or part of its rights hereunder, and the Administrative
Agent shall keep a record of all such assignments in order to be able to
calculate the Commitment Ratios of the Lenders as of any time. All assignments
by any of the Lenders of any interests hereunder shall be made pursuant to an
Assignment and Assumption Agreement substantially in the form attached hereto as
Exhibit T. Each Lender may provide any proposed participant or assignee with
confidential information provided to such Lender regarding the Borrower and its
Subsidiaries on a confidential basis, and such participant or assignee shall
agree to maintain such confidentiality. Further, each permitted assignee of any
portion of the Loans shall be entitled to the benefits of Sections 2.11 and 2.13
and Article 10 hereof and all other provisions hereof and of the other Loan
Documents as a 'Lender' hereunder.
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(c) Except as specifically set forth in Section 11.5(b) hereof,
nothing in this Agreement or the Notes, expressed or implied, is intended to or
shall confer on any Person other than the respective parties hereto and thereto
and their successors and assignees permitted hereunder and thereunder any
benefit or any legal or equitable right, remedy or other claim under this
Agreement or the Notes.
(d) The provisions of this Section 11.5 shall not apply to
any purchase of participations among the Lenders pursuant to Section 2.12
hereof.
Section 11.6 Accounting Principles.
(a) Except as set forth in the following sentence, references in
this Agreement to GAAP shall be to such principles as in effect from time to
time, and all accounting terms used herein without definition shall be used as
defined under GAAP. All references to Operating Cash Flow, Total Debt, Fixed
Charges, Debt Service, and other such terms shall be deemed to refer to such
items of the Borrower and its Consolidated Subsidiaries (excluding both
Restricted Subsidiaries which are not Consolidated Subsidiaries and Unrestricted
Subsidiaries) on a consolidated basis, consistently applied, unless otherwise
indicated herein.
(b) With respect to any determination of whether the Borrower
shall be permitted to make an Investment, Acquisition, Restricted Payment, or
the like, which determination depends upon whether the Borrower's aggregate
amount of such aforementioned items equals or exceeds a sum, one of whose
constituents is Available Equity or proceeds of Subordinated Debt, the Available
Equity or proceeds of Subordinated Debt used for such determination may not be
double-counted.
Section 11.7 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same instrument.
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Section 11.8 Governing Law. This Agreement and the Notes shall be
construed in accordance with and governed by the internal laws of the State of
New York applicable to agreements made and to be performed in New York. If any
action or proceeding shall be brought by the Administrative Agent or any Lender
in order to enforce any right or remedy under this Agreement or under any Note,
the Borrower hereby consents and will, and the Borrower will cause each
Subsidiary to, submit to the jurisdiction of any state or federal court of
competent jurisdiction sitting within the area comprising the Southern District
of New York on the date of this Agreement. The Borrower, for itself and on
behalf of its Subsidiaries, hereby agrees that service of the summons and
complaint and all other process which may be served in any such suit, action or
proceeding may be effected by mailing by registered mail a copy of such process
to the offices of the Borrower at the address given in Section 11.1 hereof and
that personal service of process shall not be required. Nothing herein shall be
construed to prohibit service of process by any other method permitted by law or
the bringing of any suit, action or proceeding in any other jurisdiction. The
Borrower agrees that final judgment in such suit, action or proceeding shall be
conclusive and may be enforced in any other jurisdiction by suit on the judgment
or in any other manner provided by Applicable Law.
Section 11.9 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof in that jurisdiction or affecting the validity or
enforceability of such provision in any other jurisdiction.
Section 11.10 Interest.
(a) In no event shall the amount of interest due or payable
hereunder or under the Notes exceed the maximum rate of interest allowed by
Applicable Law, and in the event any such payment is inadvertently made by the
Borrower or inadvertently received by any Lender, then such excess sum shall be
credited as a payment of principal, unless the Borrower shall notify the
Administrative Agent or such Lender in writing that it elects to have such
excess returned forthwith. It is the express intent hereof that
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the Borrower not pay and the Lenders not receive, directly or indirectly in any
manner whatsoever, interest in excess of that which may legally be paid by the
Borrower under Applicable Law.
(b) Notwithstanding the use by the Lenders of the Base Rate, the
Federal Funds Rate, the CD Rate, and the Eurodollar Rate as reference rates for
the determination of interest on the Loans, the Lenders shall be under no
obligation to obtain funds from any particular source in order to charge
interest to the Borrower at interest rates related to such reference rates.
Section 11.11 Table of Contents and Headings. The Table of Contents and
the headings of the various subdivisions used in this Agreement are for
convenience only and shall not in any way modify or amend any of the terms or
provisions hereof, nor be used in connection with the interpretation of any
provision hereof.
Section 11.12 Amendment and Waiver. Neither this Agreement nor any
other Loan Document nor any term hereof or thereof may be amended orally, nor
may any provision hereof or thereof be waived orally but only by an instrument
in writing signed by (or, in the case of Security Documents executed by the
Administrative Agent for itself and on behalf of the Lenders, signed by the
Administrative Agent and approved by) the Majority Lenders and, in the case of
an amendment, by the Borrower, except that in the event of (a) any increase in
the amount of the Revolving Loan Commitment, (b) any delay or extension in the
terms of repayment or change in the order of application of repayment of the
Loans provided in Section 2.4 or Section 2.8 hereof, (c) any reduction in
principal, interest or fees due hereunder or postponement of the payment
thereof, (d) any release of any substantial portion of the Collateral for the
Loans other than in connection with a sale or disposition otherwise permitted
hereunder, or any failure to take Collateral to which the Lenders are otherwise
entitled pursuant to Section 5.13 or 5.14 hereof, (e) any waiver of any Default
due to the failure by the Borrower to pay any sum due to any of the Lenders
hereunder, (f) any release of any Guaranty of all or any portion of the
Obligations, except in connection with a merger, sale or other disposition
otherwise permitted hereunder, or (g) any
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amendment of this Section 11.12, or of the definition of Majority Lenders, or of
any portion of Sections 2.10, 2.12, 5.11 or Article 10 as they relate to the
relative priority of payment among the Obligations, or any other provision of
this Agreement or any of the other Loan Documents specifically requiring the
consent or approval of each of the Lenders, any amendment or waiver or consent
may be made only by an instrument in writing signed by (or, in the case of
Security Documents executed by the Administrative Agent for itself and on behalf
of the Lenders, signed by the Administrative Agent and approved by) each of the
Lenders and, in the case of an amendment, by the Borrower. Any amendment to any
provision hereunder governing the rights, obligations, or liabilities of the
Administrative Agent in its capacity as such, may be made only by an instrument
in writing signed by the Administrative Agent and by each of the Lenders. For
purposes of determining whether the Majority Lenders or all Lenders have
consented or agreed to any action contemplated by this Agreement on which the
voting of the Lenders or the Majority Lenders is required, any Lender which is
also a lender under the Vendor Loan Agreement shall not have a vote hereunder,
and the consent or approval of the Lenders or the Majority Lenders at issue
shall be determined as if such Lender had no right to vote and no Revolving Loan
Commitment or Loans outstanding hereunder.
Section 11.13 Entire Agreement. Except as otherwise expressly provided
herein, this Agreement and the other documents described or contemplated herein
embody the entire agreement and understanding among the parties hereto and
thereto and supersede all prior agreements and understandings relating to the
subject matter hereof and thereof.
Section 11.14 Other Relationships. No relationship created hereunder or
under any other Loan Document shall in any way affect the ability of the
Administrative Agent or its Affiliates and each Lender or its respective
Affiliates to enter into or maintain business relationships with the Borrower or
any of its Affiliates beyond the relationships specifically contemplated by this
Agreement and the other Loan Documents.
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Section 11.15 Directly or Indirectly. If any provision in this
Agreement refers to any action taken or to be taken by any Person, or which such
Person is prohibited from taking, such provision shall be applicable whether
such action is taken directly or indirectly by such Person, whether or not
expressly specified in such provision.
Section 11.16 Reliance on and Survival of Various Provisions. All
covenants, agreements, statements, representations and warranties made herein or
in any certificate delivered pursuant hereto (i) shall be deemed to have been
relied upon by the Administrative Agent and each of the Lenders notwithstanding
any investigation heretofore or hereafter made by them, and (ii) shall survive
the execution and delivery of the Notes and shall continue in full force and
effect so long as any Note is outstanding and unpaid. Any right to
indemnification hereunder, including, without limitation, rights pursuant to
Sections 2.11, 2.13, 5.11, 9.11, 10.3 and 11.2 hereof, shall survive the
termination of this Agreement and the payment and performance of all other
Obligations.
Section 11.17 Senior Debt. The Indebtedness of the Borrower evidenced
by the Notes is secured by the Security Documents and is intended by the parties
hereto to be in parity with the Interest Hedge Agreements in effect from time to
time between the Borrower and any Lender and senior in right of payment to all
other Indebtedness for Money Borrowed of the Borrower.
Section 11.18 Obligations Several. The obligations of the
Administrative Agent and each of the Lenders hereunder are several, not joint.
Section 11.19 Confidentiality. The Lenders shall hold all non-public,
proprietary or confidential information (which has been identified as such by
the Borrower) obtained pursuant to the requirements of this Agreement in
accordance with their customary procedures for handling confidential information
of this nature and in accordance with safe and sound banking practices; however,
the Lenders may make disclosure of any such information to their examiners,
Affiliates, outside auditors, counsel, consultants, appraisers and other
professional advisors in connection with this Agreement or as reasonably
required by any
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<PAGE> 129
proposed syndicate member or any proposed transferee or participant in
connection with the contemplated transfer of any Note or participation therein
or as required or requested by any governmental authority or representative
thereof or in connection with the enforcement hereof or of any Loan Document or
related document or pursuant to legal process or with respect to any litigation
between or among the Borrower and any of the Lenders. In no event shall any
Lender be obligated or required to return any materials furnished to it by the
Borrower. The foregoing provisions shall not apply to a Lender with respect to
information that (i) is or becomes generally available to the public (other than
through a breach of this Section 11.19 by such Lender), (ii) is already in the
possession of such Lender on a nonconfidential basis, or (iii) comes into the
possession of such Lender in a manner not known to such Lender to involve a
breach of a duty of confidentiality owing to the Borrower.
ARTICLE 12
Waiver of Jury Trial
Section 12.1 Waiver of Jury Trial. THE BORROWER, FOR ITSELF AND ON
BEHALF OF ITS SUBSIDIARIES, AND THE ADMINISTRATIVE AGENT AND EACH OF THE
LENDERS, HEREBY AGREE TO WAIVE AND HEREBY WAIVE THE RIGHT TO A TRIAL BY JURY IN
ANY COURT AND IN ANY ACTION OR PROCEEDING OF ANY TYPE IN WHICH THE BORROWER, ANY
OF THE BORROWER'S SUBSIDIARIES, ANY OF THE LENDERS, OR THE ADMINISTRATIVE AGENT,
OR ANY OF THEIR RESPECTIVE SUCCESSORS OR ASSIGNS, IS A PARTY, AS TO ALL MATTERS
AND THINGS ARISING DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT, ANY OF THE
NOTES OR THE OTHER LOAN DOCUMENTS.
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<PAGE> 130
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first appearing above.
BORROWER: WESTERN WIRELESS CORPORATION,
A DELAWARE CORPORATION
By: /s/
___________________________
____
Title:________________________
Attest:_______________________
____
Title:________________________
ADMINISTRATIVE AGENT: TORONTO DOMINION (TEXAS), INC.
By: /s/
___________________________
____
Title:________________________
DOCUMENTATION AGENT: BZW
By:___________________________
____
Title:________________________
SYNDICATION AGENT: J.P. MORGAN SECURITIES INC.
By: /s/
___________________________
____
Title:________________________
MANAGING AGENTS: THE TORONTO-DOMINION BANK
By: /s/
___________________________
____
Title:________________________
<PAGE> 131
BARCLAYS BANK, PLC
By: /s/
___________________________
____
Title:________________________
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/
___________________________
____
Title:________________________
AGENTS: CHEMICAL BANK
By: /s/
___________________________
____
Title:________________________
CIBC INC.
By: /s/
___________________________
____
Title:________________________
FLEET NATIONAL BANK
By: /s/
___________________________
____
Title:________________________
By: /s/
___________________________
____
Title:________________________
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION
<PAGE> 132
By: /s/
__________________________
____
Title:________________________
PNC BANK, NATIONAL ASSOCIATION
By: /s/
__________________________
____
Title:________________________
SOCIETE GENERALE
By: /s/
__________________________
____
Title:________________________
CO-AGENTS: UNION BANK OF CALIFORNIA, N.A.
By: /s/
__________________________
____
Title:________________________
CORESTATES BANK, N.A.
By: /s/
__________________________
____
Title:________________________
BANK OF HAWAII
By: /s/
__________________________
____
Title:________________________
PEARL STREET L.P.
____
By: /s/
__________________________
<PAGE> 133
Title:________________________
CREDIT LYONNAIS NEW YORK
BRANCH
By: /s/
__________________________
____
Title:________________________
LENDERS: TORONTO DOMINION (TEXAS), INC.
By: /s/
__________________________
____
Title:________________________
BARCLAYS BANK, PLC
By: /s/
__________________________
____
Title:________________________
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: /s/
__________________________
____
Title:________________________
CHEMICAL BANK
By: /s/
__________________________
____
Title:________________________
CIBC INC.
By: /s/
__________________________
____
Title:________________________
<PAGE> 134
FLEET NATIONAL BANK
By: /s/
___________________________
____
Title:________________________
By: /s/
___________________________
____
Title:________________________
INTERNATIONALE NEDERLANDEN
(U.S.) CAPITAL CORPORATION
By: /s/
___________________________
____
Title:________________________
PNC BANK, NATIONAL ASSOCIATION
By: /s/
___________________________
____
Title:________________________
SOCIETE GENERALE
By: /s/
___________________________
____
Title:________________________
BANK OF HAWAII
By: /s/
___________________________
____
Title:________________________
CORESTATES BANK, N.A.
By: /s/
___________________________
____
Title:________________________
<PAGE> 135
CREDIT LYONNAIS NEW YORK
BRANCH
By: /s/
___________________________
____
Title:________________________
PEARL STREET L.P.
By: /s/
___________________________
____
Title:________________________
BANK OF AMERICA NW, N.A. DOING
BUSINESS AS SEAFIRST,
SUCCESSOR BY NAME CHANGE TO
SEATTLE FIRST NATIONAL BANK
By: /s/
___________________________
____
Title:________________________
UNION BANK OF CALIFORNIA, N.A.
By: /s/
___________________________
____
Title:________________________
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD., LOS ANGELES
AGENCY
By: /s/
___________________________
____
Title:________________________
ABN AMRO BANK N.V., SEATTLE
BRANCH
BY: ABN AMRO North America,
Inc., as Agent
<PAGE> 136
By: /s/
___________________________
Title:________________________
By: /s/
___________________________
Title:________________________
BANK OF MONTREAL, CHICAGO
BRANCH
By: /s/
___________________________
Title:________________________
NATIONSBANK OF TEXAS, N.A.
By: /s/
___________________________
Title:________________________
THE ROYAL BANK OF SCOTLAND PLC
By: /s/
___________________________
Title:________________________
STATE STREET BANK AND TRUST
COMPANY
By: /s/
___________________________
Title:________________________
<PAGE> 137
THE SUMITOMO TRUST & BANKING
CO., LTD., NEW YORK BRANCH
By: /s/
__________________________
Title:________________________
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By: /s/
__________________________
Title:________________________
MERITA BANK LTD
By: /s/
__________________________
Title:________________________
By: /s/
__________________________
Title:________________________
U.S. BANK OF WASHINGTON, N.A.
By: /s/
__________________________
Title:________________________
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/
__________________________
Title:________________________
THE FUJI BANK LIMITED, LOS
ANGELES AGENCY
By: /s/
__________________________
Title:________________________
<PAGE> 138
THE BANK OF CALIFORNIA, N.A.
By: /s/
__________________________
Title:________________________
MERRILL LYNCH SENIOR FLOATING
RATE FUND
By: /s/
__________________________
Title:________________________
SILICON VALLEY BANK
By: /s/
__________________________
Title:________________________
BANQUE NATIONALE DE PARIS
By: /s/
__________________________
Title:________________________
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By: /s/
__________________________
Title:________________________
SKANDINAVISKA ENSKILDA BANKEN
CORPORATION
By: /s/
__________________________
Title:________________________
<PAGE> 139
PROTECTIVE LIFE INSURANCE
COMPANY
By: /s/
___________________________
Title:________________________
PRIME INCOME TRUST, INC.
By: /s/
___________________________
Title:________________________
<PAGE> 1
[Arthur Andersen LLP letterhead]
Exhibit 23.1
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
May 15, 1996
