<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,
1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________ TO _________________
COMMISSION FILE NUMBER 000-28160
WESTERN WIRELESS CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
WASHINGTON 91-1638901
- ---------------------------------------- -----------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2001 NW SAMMAMISH ROAD
ISSAQUAH, WASHINGTON 98027
- ---------------------------------------- -----------------------------------
(Address of principal executive offices) (Zip Code)
(425) 313-5200
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Title Shares Outstanding as of October 31, 1997
----- -----------------------------------------
<S> <C>
Class A Common Stock, no par value 17,988,582
Class B Common Stock, no par value 53,688,432
</TABLE>
1
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WESTERN WIRELESS CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets
as of September 30, 1997, and December 31, 1996.............................................3
Consolidated Statements of Operations
for the Three and Nine Months Ended September 30, 1997, and September 30, 1996..............4
Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1997, and September 30, 1996........................5
Notes to Consolidated Financial Statements..................................................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS..............................................13
PART II - OTHER INFORMATION........................................................................23
ITEM 1. LEGAL PROCEEDINGS..........................................................................23
ITEM 2. CHANGES IN SECURITIES......... ............................................................23
ITEM 3. DEFAULTS UPON SENIOR SECURITIES... ........................................................23
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................ .......................23
ITEM 5. OTHER INFORMATION................................................... ......................23
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K..................................... .....................23
</TABLE>
2
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WESTERN WIRELESS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents .............................................. $ 21,520 $ 54,885
Accounts receivable, net of allowance for doubtful accounts of
$8,361 and $4,266, respectively ................................... 43,514 28,958
Inventory .............................................................. 31,201 26,138
Prepaid expenses and other current assets .............................. 14,611 14,809
Deposit held by FCC .................................................... 25,000
---------- -----------
Total current assets .............................................. 110,846 149,790
Property and equipment, net of accumulated depreciation
of $193,691 and $107,685, respectively ................................ 663,194 538,617
Licensing costs and other intangible assets, net of accumulated
amortization of $68,072 and $55,363, respectively ..................... 614,213 540,482
Investments in and advances to unconsolidated affiliates .................. 54,458 12,655
Other assets .............................................................. 251 159
----------- -----------
$ 1,442,962 $ 1,241,703
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ....................................................... $ 16,558 $ 14,122
Accrued liabilities .................................................... 69,836 36,652
Construction accounts payable .......................................... 18,285 89,583
Unearned revenue and customer deposits ................................. 4,988 4,097
----------- -----------
Total current liabilities ......................................... 109,667 144,454
----------- -----------
Long-term debt ............................................................ 1,170,000 743,000
----------- -----------
Commitments (Note 8)
Shareholders' equity:
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,
16,209,551 and 14,540,691 shares issued and
outstanding, respectively; Class B, 53,857,700 and 55,239,157
shares issued and outstanding, respectively ....................... 571,855 569,278
Deferred compensation .................................................. (1,090) (800)
Deficit ................................................................ (407,470) (214,229)
----------- -----------
Total shareholders' equity ........................................ 163,295 354,249
----------- -----------
$ 1,442,962 $ 1,241,703
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
3
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WESTERN WIRELESS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
----------------------------- -----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Subscriber revenues ................................ $ 81,829 $ 48,724 $ 209,517 $ 127,875
Roamer revenues .................................... 12,243 10,419 27,810 26,290
Equipment sales and other revenues ................. 10,922 8,196 29,869 17,778
------------ ------------ ------------ ------------
Total revenues ................................. 104,994 67,339 267,196 171,943
------------ ------------ ------------ ------------
Operating expenses:
Cost of service .................................... 24,040 14,978 66,563 34,532
Cost of equipment sales ............................ 21,989 13,403 57,496 28,195
General and administrative ......................... 28,660 17,557 78,849 45,966
Sales and marketing ................................ 31,233 24,809 88,254 56,887
Depreciation and amortization ...................... 37,305 24,081 96,927 57,515
------------ ------------ ------------ ------------
Total operating expenses ....................... 143,227 94,828 388,089 223,095
------------ ------------ ------------ ------------
Operating loss ......................................... (38,233) (27,489) (120,893) (51,152)
------------ ------------ ------------ ------------
Other income (expense):
Interest and financing expense ..................... (27,289) (11,574) (67,797) (28,588)
Equity in net loss of unconsolidated
affiliates ....................................... (3,799) (33) (7,107) (86)
Other, net ......................................... 1,278 491 2,556 1,051
------------ ------------ ------------ ------------
Total other income (expense) ................... (29,810) (11,116) (72,348) (27,623)
------------ ------------ ------------ ------------
Net loss ....................................... $ (68,043) $ (38,605) $ (193,241) $ (78,775)
============ ============ ============ ============
Net loss per common share .............................. $ (0.97) $ (0.56) $ (2.76) $ (1.24)
============ ============ ============ ============
Weighted average common shares and common
equivalent shares outstanding ...................... 70,056,000 69,410,000 70,004,000 63,774,000
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
4
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WESTERN WIRELESS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
-------------------------
1997 1996
--------- ---------
<S> <C> <C>
Operating activities:
Net loss .................................................................... $(193,241) $ (78,775)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ........................................... 99,971 58,730
Employee equity compensation ............................................ 1,492 877
Equity in net loss of unconsolidated affiliates ......................... 7,107 86
Other, net .............................................................. 131 750
Changes in operating assets and liabilities, net of effects
from consolidating acquired interests:
Accounts receivable, net ............................................. (14,556) (10,029)
Inventory ............................................................ (5,063) (13,982)
Prepaid expenses and other current assets ............................ (214) (2,537)
Accounts payable ..................................................... 2,436 3,457
Accrued liabilities .................................................. 18,615 12,281
Unearned revenue and customer deposits ............................... 891 1,342
Other assets ......................................................... (212)
--------- ---------
Net cash used in operating activities ................................... (82,643) (27,800)
--------- ---------
Investing activities:
Purchases of property and equipment ......................................... (279,936) (199,925)
Purchases of wireless licenses and other .................................... (54,620) (82,118)
Acquisitions of wireless properties, net of cash acquired ................... (849) (40,079)
Investments in and advances to unconsolidated affiliates .................... (50,861) (2,432)
Deposit held by FCC ......................................................... (23,500)
Refund of deposit held by FCC ............................................... 7,749
--------- ---------
Net cash used in investing activities ................................... (378,517) (348,054)
--------- ---------
Financing activities:
Proceeds from issuance of common stock, net ................................. 795 235,044
Additions to long-term debt ................................................. 427,000 632,000
Payment of debt ............................................................. (465,026)
Deferred financing costs .................................................... (12,735)
--------- ---------
Net cash provided by financing activities ............................... 427,795 389,283
--------- ---------
Change in cash and cash equivalents ............................................. (33,365) 13,429
Cash and cash equivalents, beginning of period .................................. 54,885 8,572
--------- ---------
Cash and cash equivalents, end of period ........................................ $ 21,520 $ 22,001
========= =========
</TABLE>
See accompanying notes to consolidated financial statements
5
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WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION:
Western Wireless Corporation (the "Company") provides wireless
communications services in the western United States principally through the
ownership and operation of cellular and personal communications services ("PCS")
systems. In addition to the 75 cellular licenses owned and operated by the
Company, it also owns and operates 7 PCS licenses covering Major Trading Areas
("MTAs"). The Company has initiated service in all seven MTAs, including the
Denver MTA which initiated wireless services on May 1, 1997. During the first
three quarters of 1997, the Company was granted 100 additional PCS licenses in
the Federal Communication Commission's ("FCC") D and E Block auctions. Cook
Inlet Western Wireless PV/SS PCS, LP ("Cook Inlet PCS"), a partnership in which
the Company holds a 49.9% limited partnership interest, owns broadband PCS
licenses in 21 Basic Trading Areas ("BTAs") including 7 that were acquired in
the FCC F Block auction during the first quarter of 1997. Cook Inlet PCS
initiated service in the Tulsa, OK BTA in June 1997.
The Company expects to incur significant operating losses and to
generate negative cash flows from operating activities during the next several
years while it expands its PCS systems and builds a PCS customer base.
The accompanying interim consolidated financial statements and the
financial information included herein are unaudited, but reflect all adjustments
which are, in the opinion of management, necessary for 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. For further information, refer to
the Company's annual audited financial statements and footnotes thereto for the
year ended December 31, 1996, contained in the Company's Form 10-K dated March
28, 1997.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Licensing costs and other intangible assets and amortization:
Licensing costs primarily represent costs incurred to apply for or
acquire FCC wireless licenses, including cellular licenses obtained by the
Company, principally through acquisitions, and PCS licenses which were primarily
purchased from the FCC. Amortization of these licenses begins with the
commencement of service to customers and is computed using the straight-line
method over 40 years.
Other intangible assets consist primarily of deferred financing costs.
Deferred financing costs are amortized using the effective interest method over
the terms of the respective loans which have terms ranging from 9 to 10 years.
Capitalized interest:
During the three months ended September 30, 1997 and 1996, the Company
had interest expense of $27.3 million and $11.6 million, respectively. Interest
expense for the three months ended September 30, 1996, was net of capitalized
interest in the amount of $0.9 million pertaining to the build out of its PCS
markets. During the nine months ended September 30, 1997 and 1996, the Company
had interest expense of $67.8 million and $28.6 million, respectively, net of
capitalized interest in the amount of $4.0 million and $3.3 million,
respectively, pertaining to the build out of its PCS markets.
6
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WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (CONTINUED):
Recently issued accounting standards:
The Financial Accounting Standards Board ("FASB") has recently issued
Statement No. 128 "Earnings Per Share," Statement No. 129 "Disclosure of
Information about Capital Structure," Statement No. 130 "Reporting Comprehensive
Income," and Statement No. 131 "Disclosures about Segments of an Enterprise and
Related Information." The Company does not expect implementation of these
statements to have a material effect on the Company's financial statements.
Reclassifications:
Certain amounts in prior year's financial statements have been
reclassified to conform to the 1997 presentation.
Financial instruments:
As required under the Credit Facility (as defined in Note 7), the
Company enters into interest rate swap and cap agreements to manage interest
rate exposure pertaining to long-term debt. The Company has only limited
involvement with these financial instruments, and does not use them for trading
purposes. In addition, the Company has historically held derivative financial
instruments to maturity and has never recognized a gain or loss on disposal. It
is the Company's intent to hold existing derivatives to maturity. Interest rate
swaps are accounted for on an accrual basis, the income or expense of which is
included in interest expense. Premiums paid to purchase interest rate cap
agreements are classified as an asset and amortized to interest expense over the
terms of the agreements. 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.
Supplemental cash flow disclosure:
Cash paid for interest (net of amounts capitalized) was $59.7 million
and $22.7 million for the nine months ended September 30, 1997 and 1996,
respectively.
Non-cash investing and financing activities were as follows (in
thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------
1997 1996
-------- --------
<S> <C> <C>
Conversion of FCC deposit to wireless license .............. $ 17,251
Conversion of revolving debt to term debt .................. $200,000
Issuance of common stock in exchange for wireless properties 7,117
</TABLE>
7
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WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Land, buildings, and improvements ... $ 11,849 $ 8,433
Wireless communications systems ..... 633,663 370,628
Furniture and equipment ............. 72,716 49,351
--------- ---------
718,228 428,412
Less accumulated depreciation ....... (193,691) (107,685)
--------- ---------
524,537 320,727
Construction in progress ............ 138,657 217,890
========= =========
$ 663,194 $ 538,617
========= =========
</TABLE>
Depreciation expense was $33.6 million and $17.6 million for the three
months ended September 30, 1997 and 1996, respectively, and $86.6 million and
$39.0 million for the nine months ended September 30, 1997 and 1996,
respectively.
4. LICENSING COSTS AND OTHER INTANGIBLE ASSETS:
Licensing costs and other intangible assets consists of (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
License costs .................................. $ 648,465 $ 562,039
Other intangible assets ........................ 33,820 33,806
--------- ---------
682,285 595,845
Accumulated amortization ....................... (68,072) (55,363)
========= =========
$ 614,213 $ 540,482
========= =========
</TABLE>
5. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES:
During the first quarter of 1997, a subsidiary of the Company entered
into an international joint venture to form ACG Telesystems Ghana, LLC
("Ghana"). Ghana is the parent company to ACG Telesystems Ghana, LTD which owns
a cellular license in the Republic of Ghana. During the second quarter of 1997,
subsidiaries of the Company entered into two international joint ventures. The
first was to form Telcell Wireless LLC ("Georgia"). Georgia is a partner in
Magticom Ltd. which owns a cellular license in the Republic of Georgia. The
second joint venture entered into formed Icesco, Ltd. ("Iceland"). Iceland is
the parent company to Icelandic Mobile Phone Company which owns a cellular
license in Iceland.
At September 30, 1997, and December 31, 1996, the Company's investment
in and advances to Cook Inlet PCS was $30.7 million and $8.1 million,
respectively. All other investments in and advances to unconsolidated affiliates
were $23.8 million and $4.6 million at September 30, 1997, and December 31,
1996, respectively.
8
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WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
6. ACCRUED LIABILITIES:
Accrued liabilities consists of (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Accrued payroll and benefits ................. $10,641 $11,192
Accrued interest expense ..................... 15,340 10,265
Accrued taxes, other than income ............. 15,525 5,096
Other ........................................ 28,330 10,099
------- -------
$69,836 $36,652
======= =======
</TABLE>
During the third quarter of 1997 the last five licenses successfully bid
on by the Company in the FCC's D and E Block Auction were granted. These
licenses were paid in full in October 1997. The liability for such licenses is
included in other accrued liabilities at September 30, 1997.
7. LONG-TERM DEBT:
Long-term debt consists of (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Credit Facility:
Revolver ....................................... $ 270,000
Term Loan ...................................... 200,000 $ 200,000
10-1/2% Senior Subordinated Notes Due 2006 ........... 200,000 200,000
10-1/2% Senior Subordinated Notes Due 2007 ........... 200,000 200,000
PCS Vendor Facility .................................. 300,000 143,000
---------- ----------
$1,170,000 $ 743,000
========== ==========
</TABLE>
The Company has a $950 million credit facility with a consortium of
lenders (the "Credit Facility"), in the form of a $750 million revolving credit
loan (the "Revolver") and a $200 million term loan (the "Term Loan"). In
addition, a wholly owned subsidiary of the Company has a $300 million credit
facility (the "PCS Vendor Facility," formerly the "NORTEL Facility").
The aggregate amounts of principal maturities of the Company's debt are as
follows (in thousands):
<TABLE>
<S> <C>
Three months ending December 31, 1997 ............. $ 0
Year ending December 31,
1998 .............................................. 0
1999 .............................................. 0
2000 .............................................. 49,650
2001 .............................................. 108,100
Thereafter ........................................ 1,012,250
----------
$1,170,000
==========
</TABLE>
9
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WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
8. COMMITMENTS:
Future minimum payments required under operating leases and agreements
that have initial or remaining noncancellable terms in excess of one year as of
September 30, 1997, are summarized below (in thousands):
<TABLE>
<S> <C>
Three months ending December 31, 1997 ......... $ 5,554
Year ending December 31,
1998 .......................................... 21,243
1999 .......................................... 19,635
2000 .......................................... 18,100
2001 .......................................... 13,386
Thereafter .................................... 19,993
-------
$97,911
=======
</TABLE>
Aggregate rental expense for all operating leases was approximately $7.0
million and $3.9 million for the three months ended September 30, 1997 and 1996,
respectively, and $20.6 million and $8.8 million for the nine months ended
September 30, 1997 and 1996, respectively.
In order to ensure adequate supply and availability of certain inventory
requirements and service needs, the Company has committed to purchase from
various suppliers wireless communications equipment, handsets, and services.
These agreements expire at various dates through December 2005. The aggregate
amount of these commitments total approximately $401 million. At September 30,
1997, the Company has ordered approximately $249 million under all of these
agreements, of which approximately $23 million is outstanding.
The Company has various other purchase commitments for materials,
supplies and other items incident to the ordinary course of business which are
neither significant individually nor in the aggregate. Such commitments are not
at prices in excess of current market value.
9. SHAREHOLDERS' EQUITY:
During the nine months ended September 30, 1997, the Company issued
192,403 shares of its common stock and received $0.8 million of net proceeds as
a result of employee stock options that were exercised.
In January 1997, the Company granted 95,000 shares under its restricted
stock plan. Compensation expense recognized related to these shares was
approximately $0.9 million for the three months ended September 30, 1997, and
$1.8 million for the nine months ended September 30, 1997.
10. SUBSEQUENT EVENTS:
On September 30, 1997, a subsidiary of the Company ("Company Sub") and a
subsidiary ("INS Sub") of Iowa Network Services, Inc., formed a limited
partnership (the "Partnership") to build and operate a PCS network covering
certain metropolitan areas in Iowa and the major interstate and state highways
linking such areas. INS Sub is the general partner of the Partnership, with a
62% partnership interest, and Company Sub is the limited partner, with a 38%
partnership interest. Upon receipt of all required FCC and other governmental
approvals, and the receipt of financing by INS Sub in the amount of $20 million,
(1) Company Sub shall contribute to the Partnership 20 MHz of A Block PCS
spectrum in the Des Moines MTA (except for certain counties in the urban core of
the Des Moines BTA), and an additional 10 MHz of D Block PCS spectrum in the
Clinton-Sterling, Marshalltown and Mason City BTAs, all in the State of Iowa,
and (2) INS Sub shall contribute to the Partnership the sum of $5 million and
shall be committed to contribute an additional $15 million from time to time as
needed by the Partnership, which commitment shall be secured by an irrevocable
standby letter of credit. The Partnership
10
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WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
10. SUBSEQUENT EVENTS - (CONTINUED):
agreement grants Company Sub certain approval rights with respect to, among
other things, asset dispositions or acquisitions, mergers or other business
combinations, incurring indebtedness, additional capital contributions, approval
or amendment of annual operating or capital budgets, transactions with
affiliates, admission of new partners, and distributions and dividends. The
Partnership agreement contains various restrictions on the transfer of the
partnership interests of the partners, including rights of first offer, rights
of first refusal, tag-along rights and pre-emptive rights.
On October 14, 1997, the Company and its wholly-owned subsidiary,
Western PCS Corporation ("Western PCS"), entered into a Purchase Agreement with
Hutchison Telecommunications Limited ("HTL") and a subsidiary of HTL ("HTL Sub")
pursuant to which HTL Sub agreed to purchase 19.9% of the outstanding capital
stock of Western PCS for an aggregate purchase price of $248.4 million. The
closing of the purchase ("Closing") is subject to the satisfaction of certain
conditions including, among others (i) obtaining from the FCC a favorable
declaratory ruling granting a waiver from the indirect foreign ownership
restrictions under the Communications Act of 1934, as amended; and (ii) the
expiration or early termination of all applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Prior to the
Closing, the Company and Western PCS will be required to refinance or modify
certain outstanding financing agreements to which they are subject so that after
the Closing, unless otherwise agreed to by HTL Sub and the Company, neither the
Company nor Western PCS shall have any liability regarding any indebtedness of
the other. Prior to the Closing, the Company will cause all of the PCS licenses
or interests therein owned by the Company or its subsidiaries to be transferred
to Western PCS or Western PCS's subsidiaries, so that after the Closing all of
the Company's cellular operations will be conducted by the Company and its
subsidiaries (other than Western PCS and its subsidiaries) and all PCS
operations will be conducted by Western PCS and its subsidiaries. At the
Closing, Western PCS and the Company will enter into various intercompany
agreements, which will provide for, among other things, the allocation of
overhead costs and expenses, cash management and the tax sharing arrangements
between the Company and Western PCS, as well as roaming arrangements on each
other's systems. At the Closing, the Company and HTL Sub will enter into a
Shareholders Agreement which will provide, among other things, for the
following: (i) HTL Sub will have the right to designate two directors to a ten
person Board of Directors of Western PCS with such number of directors being
subject to increase or decrease depending upon increases or decreases in HTL
Sub's percentage ownership of Western PCS; (ii) each of the Company and HTL Sub
will have certain rights of first offer or first refusal in the event the other
proposes to sell its stock in Western PCS; (iii) HTL Sub will have certain tag
along rights to sell its shares, and be subject to certain drag along
obligations to sell its shares, if the Company proposes to sell its stock in
Western PCS; (iv) each of the Company and HTL Sub will have certain preemptive
rights in connection with issuances by Western PCS of equity securities; (v) HTL
Sub's consent will be required with respect to an initial public offering of
Western PCS stock during the eighteen (18) month period immediately following
the Closing; (vi) HTL Sub will have certain approval rights with respect to
Western PCS entering into employment contracts with certain members of senior
management of the Company and certain other transactions with affiliates; and
(vii) HTL Sub will have certain demand and piggy-back registration rights for
its shares of Western PCS stock. In addition, HTL Sub will have the right to
require a public sale of HTL Sub's equity interest in Western PCS or, in certain
cases, to sell HTL Sub's equity interest in Western PCS to the Company, if
Western PCS takes any of the following actions without HTL Sub's consent: (a)
any incurrence of indebtedness in excess of $10 million in a single instance or
$25 million in the aggregate in a fiscal year, other than pursuant to financing
arrangements in effect at the date of Closing or previously approved by HTL Sub;
(b) adoption of any annual capital expenditures budget, annual operating plan
and budget or any material amendment to either thereof; (c) any acquisition of a
PCS system or wireless telecommunications business (or interest therein) in a
transaction or auction involving an aggregate acquisition cost in excess of $100
million; and (d) any disposition of a PCS system or wireless telecommunications
business (or interest therein) in a transaction involving an aggregate sales
price in excess of $50 million. The Shareholders Agreement also sets forth the
events which will trigger a termination of some or all of the foregoing rights
and obligations, which events include a public sale of common stock of Western
PCS resulting in a public float of at least 15% of the outstanding stock of
Western PCS, certain transfers by HTL Sub of the Western PCS stock, dilution of
HTL Sub's ownership interest in Western PCS below certain specified levels and
certain mergers and other transactions.
11
<PAGE> 12
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(Unaudited)
10. SUBSEQUENT EVENTS - (CONTINUED):
Concurrently with the entering into of the Purchase Agreement, HTL and
another of its subsidiaries entered into an agreement with the Company pursuant
to which such other subsidiary agreed to acquire 3,888,888 shares of the
outstanding Class A Common Stock of the Company (approximately 5% of the
outstanding capital stock of the Company) for a purchase price of approximately
$19 per share (approximately $74 million). Such shares are being sold to the HTL
subsidiary pursuant to Regulation S under the Securities Act of 1933, as
amended. The Closing of the purchase is subject to, among other conditions, the
expiration or early termination of the waiting periods under the
Hart-Scott-Rodino Anti-Trust Improvements Act of 1976. The Closing of the
purchase of the Class A Common Stock of the Company is not conditioned upon the
closing of the investment by HTL Sub in Western PCS.
On October 31, 1997, the Company consummated the purchase from Triad
Cellular Corporation, Triad Cellular L.P. and certain of their affiliates
(collectively "Triad") of the cellular business and assets of Triad in the Rural
Service Areas ("RSAs") designated as Texas 1, 2, 4, and 5, Utah 3, 4 and 6,
Oklahoma 7 and 8 and Minnesota 7, 8 and 9, for an aggregate purchase price of
(i) approximately $180 million (excluding approximately $10 million in closing
adjustments, which amount is subject to further adjustment), plus (ii) 1,600,000
shares of the Company's Class A Common Stock. In accordance with its agreement
with Triad, the Company will shortly file a shelf Registration Statement on Form
S-3 covering future resales of such shares. Such agreement provides that in the
event such Registration Statement is not declared effective by the Securities
and Exchange Commission on or prior to January 30, 1998, Triad has the option of
receiving $20 million in lieu of such shares. The Company also acquired from
Triad certain D and E Block PCS licenses for an aggregate purchase price of
approximately $4.8 million, such amount being the aggregate amount Triad paid
the FCC in its successful bids for such licenses in the FCC's auction of such
licenses.
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. Statements contained in this
Quarterly Report that are not based on historical fact are "forward looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. The "Risk Factors" and cautionary statements identify important
factors, among others, that could cause actual results to differ materially from
those in the forward looking statements, where such factors are detailed in the
Company's 1996 prospectuses, as amended, filed with the Securities and Exchange
Commission.
The following is a discussion and analysis of the consolidated financial
condition and results of operations of the Company and should be read in
conjunction with the Company's consolidated financial statements and notes
thereto and other financial information included herein and in the Company's
annual report on Form 10-K for the year ended December 31, 1996. Due to the
phase of the business cycle of the Company's PCS operations, the Company's
operating results for prior periods may not be indicative of future performance.
OVERVIEW
The Company provides wireless communications services in the western
United States through the ownership and operation of cellular communications
systems in 75 Rural Service Areas and Metropolitan Statistical Areas. At
September 30, 1997, the Company owns broadband personal communications services
("PCS") licenses in seven Major Trading Areas ("MTAs"), each of which has
commenced commercial operations. During the first three quarters of 1997, the
Company was granted 100 additional PCS licenses in the Federal Communication
Commission's ("FCC") D and E Block auctions. Cook Inlet Western Wireless PV/SS
PCS, LP ("Cook Inlet PCS"), a partnership in which the Company holds a 49.9%
limited partnership interest, owns broadband PCS licenses in 21 Basic Trading
Areas ("BTAs") including 7 that were acquired in the FCC F Block auction during
the first quarter of 1997. The first of these BTAs commenced commercial
operations in June 1997.
The Company's revenues consist primarily 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 are included in other revenue and
accounted for less than 2% of the Company's total revenues in 1996, which is
expected to be the case throughout 1997. 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. As used herein, "service revenues" include
subscriber, roamer and other revenues.
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
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 centralized general and administrative costs, including customer
service, accounting and other centralized functions, benefit 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
such costs to be incurred.
As used herein, "EBITDA" represents operating loss before depreciation
and amortization. EBITDA is a measure commonly used in the industry and should
not be construed as an alternative to operating income (loss)
13
<PAGE> 14
(as determined in accordance with Generally Accepted Accounting Principles,
"GAAP"), as an alternative to cash flows from operating activities (as
determined in accordance with GAAP), or as a measure of liquidity. Cellular
EBITDA represents EBITDA from the Company's cellular operations and PCS EBITDA
represents EBITDA from the Company's PCS operations.
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
necessarily be indicative of future performance.
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 first PCS system
commenced operations during the first quarter of 1996.
RESULTS OF OPERATIONS
Results of Operations for the Three Months Ended September 30, 1997,
Compared to the Three Months Ended September 30, 1996
The Company had 426,300 cellular subscribers at September 30, 1997,
representing an increase of 36,400 or 9.3% from June 30, 1997. At September 30,
1996, the Company had 290,400 cellular subscribers representing a net increase
of 26,200 or 9.9% from June 30, 1996. The Company had 101,000 PCS subscribers at
September 30, 1997, representing an increase of 26,600 or 35.8% from June 30,
1997. The Company had 17,600 PCS subscribers at September 30, 1996, an increase
of 11,200 or 175% from June 30, 1996.
REVENUES
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------
1997 1996
-------------------- --------------------
CELLULAR PCS CELLULAR PCS
-------- ------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Subscriber revenues ...................... $65,588 $16,241 $46,475 $ 2,249
Roamer revenues .......................... 12,243 10,419
Equipment sales .......................... 2,488 7,051 3,093 3,866
Other revenues ........................... 1,383 1,237
------- ------- ------- -------
Total revenues ...................... $81,702 $23,292 $61,224 $ 6,115
======= ======= ======= =======
</TABLE>
Cellular subscriber revenues increased to $65.6 million for the three
months ended September 30, 1997, from $46.5 million for the three months ended
September 30, 1996. This $19.1 million or 41.1% increase is primarily due to the
growth in the number of subscribers partially offset by a decrease in the
average monthly cellular subscriber revenue per subscriber. Average monthly
cellular subscriber revenue per subscriber, calculated as the average of the
monthly averages, decreased 4.7% to $53.26 for the three months ended September
30, 1997, compared to $55.86 for the three months ended September 30, 1996. The
Company anticipates this downward trend to continue in the fourth quarter. Over
the past few years the cellular industry as a whole has also shown a decline in
the average monthly cellular subscriber revenue per subscriber.
14
<PAGE> 15
PCS subscriber revenues for the three months ended September 30, 1997,
were $16.2 million, representing operations in all seven of the Company's PCS
MTAs for the entire three months. PCS subscriber revenues for the three months
ended September 30, 1996, were $2.2 million, representing operations in four of
the Company's PCS MTAs for part of the quarter. Average monthly PCS subscriber
revenue per subscriber was $61.88 for the three months ended September 30, 1997,
compared to $64.63 for the three months ended September 30, 1996. As the
Company's PCS operations only began generating revenue during 1996, the year
over year trend is not necessarily representative of future trends.
Roamer revenues were $12.2 million for the three months ended September
30, 1997, compared to $10.4 million for the three months ended September 30,
1996, an increase of $1.8 million or 17.5%. The increase is attributed to
increased roaming traffic, partially offset by the decline in rates charged by
carriers between each other in the industry. Roamer revenues as a percentage of
total cellular revenues declined to 15.0% for the three months ended September
30, 1997, from 17.0% for the three months ended September 30, 1996. While the
Company expects total roamer minutes to continue to increase, the decline in the
rates charged between carriers will limit the growth of roamer revenues.
Cellular equipment sales, which consist primarily of handset sales,
decreased to $2.5 million for the three months ended September 30, 1997, from
$3.1 million for the three months ended September 30, 1996. This $0.6 million or
19.6% decrease is primarily due to a slight decrease in the average cellular
handset sales price as a result of competitive strategies chosen by the Company.
PCS equipment sales were $7.1 million for the three months ended September 30,
1997, compared to $3.9 million for the three months ended September 30, 1996.
This $3.2 million increase is due to the increase in handsets sold as a result
of commercial operations in seven of the Company's PCS MTAs during the entire
third quarter of 1997 compared to operations in four of the MTAs for the third
quarter of 1996. The higher revenue generated from PCS equipment sales as
compared to cellular equipment sales is the result of a higher average selling
price for PCS handsets.
Other revenues, which consists primarily of paging revenues, were $1.4
million for the three months ended September 30, 1997, compared to $1.2 million
for the three months ended September 30, 1996, primarily due to maintaining a
consistent subscriber base year over year.
OPERATING EXPENSES
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------
1997 1996
-------------------- --------------------
CELLULAR PCS CELLULAR PCS
-------- ------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cost of service ............. $12,105 $11,935 $10,981 $ 3,997
Cost of equipment sales ..... 7,092 14,897 6,334 7,069
General and administrative .. 15,873 12,787 12,400 5,157
Sales and marketing ......... 15,963 15,270 13,706 11,103
Depreciation and amortization 16,730 20,575 16,386 7,695
------- ------- ------- -------
Total operating expenses $67,763 $75,464 $59,807 $35,021
======= ======= ======= =======
</TABLE>
CELLULAR OPERATING EXPENSES
Cost of service increased to $12.1 million for the three months ended
September 30, 1997, from $11.0 million for the three months ended September 30,
1996. This increase is primarily attributable to the increased cost of
maintaining the Company's expanding wireless network to support the larger
subscriber base. While cost of service increased $1.1 million or 10.2%, it
decreased as a percentage of service revenues to 15.3% for the three months
ended September 30, 1997, from 18.9% for the three months ended September 30,
1996, which is due primarily to efficiencies gained from the growing subscriber
base.
15
<PAGE> 16
Cost of equipment sales increased to $7.1 million for the three months
ended September 30, 1997, from $6.3 million for the three months ended September
30, 1996. This $0.8 million or 12.0% increase is due primarily to the increase
in handsets sold for the three months ended September 30, 1997, compared to the
three months ended September 30, 1996.
General and administrative costs increased to $15.9 million for the
three months ended September 30, 1997, from $12.4 million for the three months
ended September 30, 1996, an increase of $3.5 million or 28.0%. The Company's
general and administrative costs are principally considered to be variable
costs, that is costs that will vary with the level of subscribers. The increase
is primarily attributable to the increase in costs associated with supporting
the increased subscriber base. 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.
Sales and marketing costs increased to $16.0 million for the three
months ended September 30, 1997, from $13.7 million for the three months ended
September 30, 1996, primarily due to net subscriber additions. Sales and
marketing costs per net subscriber added, excluding subscribers added from
acquisitions, decreased to $439 for the three months ended September 30, 1997,
from $523 for the three months ended September 30, 1996. This 16.1% decrease is
primarily a result of reduced advertising and efficiencies gained from the
growing subscriber base. Including the losses on equipment sales, the cost per
net subscriber added decreased to $565 for the three months ended September 30,
1997, from $647 for the three months ended September 30, 1996.
Depreciation expense increased to $14.6 million for the three months
ended September 30, 1997, from $10.6 million for the three months ended
September 30, 1996. This increase of $4.0 million or 37.7%, is attributable to
the continued expansion of the Company's cellular systems. Amortization expense
decreased to $2.1 million for the three months ended September 30, 1997, from
$5.8 million for the three months ended September 30, 1996. This $3.7 million or
63.8% decrease is primarily attributable to the Company prospectively changing
its amortization period for cellular licensing costs from 15 years to 40 years,
effective January 1, 1997, to conform more closely with industry practices.
PCS OPERATING EXPENSES
Total PCS operating expenses were $75.5 million for the three months
ended September 30, 1997, compared to $35.0 million for the three months ended
September 30, 1996. This 115.5% increase is due to seven PCS systems being
operational during the entire third quarter of 1997 while only four PCS system
were operational during the third quarter of 1996. A portion of each individual
component of PCS operating expenses were start-up costs incurred prior to the
commencement of operations in each PCS system. Approximately $1.2 million of
start-up costs were incurred for the three months ended September 30, 1997,
compared to $3.0 million for the three months ended September 30, 1996. As the
subscriber base continues to grow, the Company expects total operating expenses
to increase. Accordingly, the PCS operating expenses are not necessarily
representative of future operations.
Cost of service expenses and cost of equipment sales represents the
expenses incurred by the operational PCS systems. Seven of the PCS MTAs were
operational during the entire third quarter of 1997. Only four of the PCS MTAs
were operational during the third quarter of 1996. Accordingly, cost of service
increased to $11.9 million and cost of equipment sales increased to $14.9
million for the three months ended September 30, 1997, from $4.0 million and
$7.1 million, respectively, for the three months ended September 30, 1996.
General and administrative costs increased to $12.8 million for the three months
ended September 30, 1997, from $5.2 million for the three months ended September
30, 1996, due to the costs associated with supporting the additional markets in
which the Company has operations. Sales and marketing costs increased to $15.3
million for the three months ended September 30, 1997, from $11.1 million for
the three months ended September 30, 1996, as a result of the effort to increase
net subscriber additions. Depreciation expense and amortization expense
increased to $19.0 million and $1.6 million, respectively, for the three months
ended September 30, 1997, from $7.0 million and $0.7 million, respectively, for
the three months ended September 30, 1996. This increase is due to the increased
number of operational systems in 1997 compared to 1996.
16
<PAGE> 17
OPERATING INCOME (LOSS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------
1997 1996
-------------------- --------------------
CELLULAR(1) PCS CELLULAR(1) PCS
----------- ------- ----------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Operating Income (loss)...... $ 13,939 $ (52,172) $ 1,417 $ (28,906)
======== ========= ======= =========
</TABLE>
- ---------
(1) Includes paging operations
Although cellular operating income increased to $13.9 million for the
three months ended September 30, 1997, from $1.4 million for the three months
ended September 30, 1996, total operating loss increased to $38.2 million for
the three months ended September 30, 1997, from $27.5 million for the three
months ended September 30, 1996. This increase is primarily due to the increased
operating loss attributable to PCS of $52.2 million for the three months ended
September 30, 1997, from an operating loss of $28.9 million for the three months
ended September 30, 1996.
OTHER INCOME (EXPENSE)
Interest and financing expense, net of capitalized interest, increased
to $27.3 million for the three months ended September 30, 1997, from $11.6
million for the three months ended September 30, 1996. The increase of $15.7
million or 135.8%, is primarily attributable to an increase in long-term debt,
which increased to $1,170.0 million at September 30, 1997, from $529.7 million
at September 30, 1996, incurred primarily to fund the Company's capital
expenditures associated with the build-out of the Company's PCS systems.
Interest expense will continue to increase as a result of the increased
borrowings the Company has incurred, and will continue to incur, to fund its
expansion. The weighted average interest rate before the effect of capitalized
interest was 10.1% for the three months ended September 30, 1997, and 10.2% for
the three months ended September 30, 1996.
EBITDA
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------
1997 1996
-------------------- --------------------
CELLULAR PCS CELLULAR PCS
-------- ------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
EBITDA ......................... $ 30,669 $ (31,597) $ 17,803 $ (21,211)
======== ========= ======== =========
</TABLE>
EBITDA improved to a negative $0.9 million for the three months ended
September 30, 1997, from a negative $3.4 million for the three months ended
September 30, 1996, primarily due to the negative $31.6 million EBITDA
attributable to PCS operations offset by an increase in cellular EBITDA.
Cellular EBITDA increased 72.3% to $30.7 million for the three months ended
September 30, 1997, from $17.8 million for the three months ended September 30,
1996, primarily as a result of increased revenues due to the increased
subscriber base and the related cost efficiencies recognized. As a result,
cellular operating margin (cellular EBITDA as a percentage of cellular service
revenues) increased to 38.7% for the three months ended September 30, 1997, from
30.6% for the three months ended September 30, 1996.
Results of Operations for the Nine Months Ended September 30, 1997, Compared to
the Nine Months Ended September 30, 1996
The Company had 426,300 cellular subscribers at September 30, 1997,
representing an increase of 102,100 or 31.5% from December 31, 1996. At
September 30, 1996, the Company had 290,400 cellular subscribers representing a
net increase of 76,200 or 36.4% from December 31, 1995, generated through the
Company's distribution channels. For the nine months ended September 30, 1996,
the net number of cellular subscribers added through system acquisitions was
approximately 4,700. The Company had 101,000 PCS subscribers at September 30,
1997, representing an increase of 65,500 or 184.5% from December 31, 1996. At
September 30, 1996 the Company had 17,600 PCS subscribers.
17
<PAGE> 18
REVENUES
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------
1997 1996
---------------------- ----------------------
CELLULAR PCS CELLULAR PCS
--------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Subscriber revenues ...................... $173,460 $ 36,057 $124,772 $ 3,103
Roamer revenues .......................... 27,810 26,290
Equipment sales .......................... 8,405 17,407 9,092 5,499
Other revenues ........................... 4,057 3,187
-------- -------- -------- --------
Total revenues ...................... $213,732 $ 53,464 $163,341 $ 8,602
======== ======== ======== ========
</TABLE>
Cellular subscriber revenues increased to $173.5 million for the nine
months ended September 30, 1997, from $124.8 million for the nine months ended
September 30, 1996. This $48.7 million or 39.0% increase is primarily due to the
growth in the number of subscribers partially offset by a decrease in the
average monthly cellular subscriber revenue per subscriber. Average monthly
cellular subscriber revenue per subscriber, calculated as the average of the
monthly averages, declined 6.2% to $51.63 for the nine months ended September
30, 1997, compared to $55.06 for the nine months ended September 30, 1996. The
Company anticipates this downward trend to continue in the fourth quarter. Over
the past few years the cellular industry as a whole has also shown a decline in
the average monthly cellular subscriber revenue per subscriber.
PCS subscriber revenues for the nine months ended September 30, 1997,
were $36.1 million, representing operations in six of the Companies PCS MTAs for
the entire nine months and the Denver MTA for five months. PCS subscriber
revenues for the nine months ended September 30, 1996, were $3.1 million,
primarily representing operations in two of the PCS MTAs. Average monthly PCS
subscriber revenue per subscriber was $63.26 for the nine months ended September
30, 1997, compared to $63.33 for the nine months ended September 30, 1996. As
the Company's PCS operations only began generating revenue during 1996, the year
over year trend is not necessarily representative of future trends.
Roamer revenues were $27.8 million for the nine months ended September
30, 1997, compared to $26.3 million for the nine months ended September 30,
1996, an increase of $1.5 million or 5.8%. This increase is attributed to
increased roaming traffic, partially offset by the decline in rates charged by
carriers between each other in the industry. Roamer revenues as a percentage of
total cellular revenues declined to 13.0% for the nine months ended September
30, 1997, from 16.1% for the nine months ended September 30, 1996. While the
Company expects total roamer minutes to continue to increase, the decline in the
rates charged between carriers will limit the growth of roamer revenues.
Cellular equipment sales, which consist primarily of handset sales,
decreased to $8.4 million for the nine months ended September 30, 1997, from
$9.1 million for the nine months ended September 30, 1996. This $0.7 million or
7.6% decrease is primarily due to a slight decrease in the average cellular
handset sales price as a result of competitive strategies chosen by the Company.
PCS equipment sales were $17.4 million for the nine months ended September 30,
1997, compared to $5.5 million for the nine months ended September 30, 1996.
This $11.9 million increase is due to the increase in handsets sold as a result
of the commercial operations in six of the Company's PCS MTAs during the entire
nine months and the Denver MTA for five months of 1997 compared to operations in
four of the MTAs for part of the nine months ended September 30, 1996. The
Company anticipates continued growth in equipment sales as a result of increases
in PCS subscriber additions. The higher revenue generated from PCS equipment
sales as compared to cellular equipment sales is the result of a higher average
selling price for PCS handsets.
Other revenues, which consists primarily of paging revenues, were $4.1
million for the nine months ended September 30, 1997, compared to $3.2 million
for the nine months ended September 30, 1996. This increase is primarily due to
the additional month of operations in 1997 as compared to 1996 due to the
acquisition of paging operations in February of 1996.
18
<PAGE> 19
OPERATING EXPENSES
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------------------
1997 1996
---------------------- ----------------------
CELLULAR PCS CELLULAR PCS
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Cost of service ............. $ 34,577 $ 31,986 $ 28,958 $ 5,574
Cost of equipment sales ..... 20,044 37,452 17,886 10,309
General and administrative .. 42,449 36,400 33,202 12,764
Sales and marketing ......... 43,360 44,894 37,523 19,364
Depreciation and amortization 49,328 47,599 47,935 9,580
-------- -------- -------- --------
Total operating expenses $189,758 $198,331 $165,504 $ 57,591
======== ======== ======== ========
</TABLE>
CELLULAR OPERATING EXPENSES
Cost of service increased to $34.6 million for the nine months ended
September 30, 1997, from $29.0 million for the nine months ended September 30,
1996. This increase is primarily attributable to the increased cost to maintain
the Company's expanding wireless network to support the larger subscriber base.
While cost of service increased $5.6 million or 19.4%, it decreased as a
percentage of service revenues to 16.8% for the nine months ended September 30,
1997, from 18.8% for the nine months ended September 30, 1996, which is due
primarily to efficiencies gained from the growing subscriber base.
Cost of equipment sales increased to $20.0 million for the nine months
ended September 30, 1997, from $17.9 million for the nine months ended September
30, 1996. This $2.2 million or 12.1% increase is due primarily to the increase
in handsets sold, offset by a slight decline in the cost of handsets, for the
nine months ended September 30, 1997, compared to the nine months ended
September 30, 1996.
General and administrative costs increased to $42.4 million for the nine
months ended September 30, 1997, from $33.2 million for the nine months ended
September 30, 1996, an increase of $9.2 million or 27.9%. The Company's general
and administrative costs are principally considered to be variable costs, that
is costs that will vary with the level of subscribers. The increase is primarily
attributable to the increase in costs associated with supporting the increased
subscriber base. 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.
Sales and marketing costs increased to $43.4 million for the nine months
ended September 30, 1997, from $37.5 million for the nine months ended September
30, 1996, primarily due to net subscriber additions. Sales and marketing costs
per net subscriber added, excluding subscribers added from acquisitions,
decreased to $424 for the nine months ended September 30, 1997, from $492 for
the nine months ended September 30, 1996. This 13.8% decrease is primarily a
result of reduced advertising and high growth in subscriber additions. Including
the losses on equipment sales, the cost per net subscriber added decreased to
$538 for the nine months ended September 30, 1997, from $608 for the nine months
ended September 30, 1996.
Depreciation expense increased to $43.2 million for the nine months
ended September 30, 1997, from $30.4 million for the nine months ended September
30, 1996. This increase of $12.8 million or 42.1%, is attributable to the
continued expansion of the Company's cellular systems. Amortization expense
decreased to $6.1 million for the nine months ended September 30, 1997, from
$17.5 million for the nine months ended September 30, 1996. This $11.4 million
or 65.1% decrease is primarily attributable to the Company prospectively
changing its amortization period for cellular licensing costs from 15 years to
40 years, effective January 1, 1997, to conform more closely with industry
practices.
19
<PAGE> 20
PCS OPERATING EXPENSES
Total PCS operating expenses were $198.3 million for the nine months
ended September 30, 1997, compared to $57.6 million for the nine months ended
September 30, 1996. This 244.4% increase is due to six PCS systems being
operational for the entire nine months and the Denver MTA for five months of
1997, compared to operations in four of the MTAs for part of the nine months
ended September 30, 1996. A portion of each individual component of PCS
operating expenses were start-up costs incurred prior to the commencement of
operations in each PCS system. Approximately $5.1 million of start-up costs were
incurred for the nine months ended September 30, 1997, compared to $13.6 million
for the nine months ended September 30, 1996. As the subscriber base continues
to grow, the Company expects total operating expenses to increase. Accordingly,
the PCS operating expenses are not necessarily representative of future
operations.
Cost of service expenses and cost of equipment sales represents the
expenses incurred by the operational PCS systems. Six of the PCS MTAs were
operational during the entire nine months ended September 30, 1997, and the
Denver MTA was operational for five months of that period. Four of the PCS MTAs
were operational for part of the nine months ended September 30, 1996.
Accordingly, cost of service increased to $32.0 million and cost of equipment
sales increased to $37.5 million for the nine months ended September 30, 1997,
from $5.6 million and $10.3 million, respectively, for the nine months ended
September 30, 1996. General and administrative costs increased to $36.4 million
for the nine months ended September 30, 1997, from $12.8 million for the nine
months ended September 30, 1996, due to the costs associated with supporting the
additional markets in which the Company has operations. Sales and marketing
costs increased to $44.9 million for the nine months ended September 30, 1997,
from $19.4 million for the nine months ended September 30, 1996, as a result of
the effort to increase net subscriber additions. Depreciation expense and
amortization expense increased to $43.4 million and $4.2 million, respectively,
for the nine months ended September 30, 1997, from $8.6 million and $1.0
million, respectively, for the nine months ended September 30, 1996. This
increase is due to the increased number of operational systems in 1997 over
1996.
OPERATING INCOME (LOSS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------
1997 1996
----------------------- ----------------------
CELLULAR PCS CELLULAR PCS
--------- ---------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Operating Income (loss) $ 23,974 $ (144,867) $ (2,163) $ (48,989)
========= ========== ======== =========
</TABLE>
Although cellular operating income increased to $24.0 million for the
nine months ended September 30, 1997, from an operating loss of $2.2 million for
the nine months ended September 30, 1996, total operating loss increased to
$120.9 million for the nine months ended September 30, 1997, from $51.2 million
for the nine months ended September 30, 1996. This increase is primarily due to
the increased operating loss attributable to PCS of $144.9 million for the nine
months ended September 30, 1997, from an operating loss of $49.0 million for the
nine months ended September 30, 1996.
OTHER INCOME (EXPENSE)
Interest and financing expense, net of capitalized interest, increased
to $67.8 million for the nine months ended September 30, 1997, from $28.6
million for the nine months ended September 30, 1996. The increase of $39.2
million or 137.2%, is primarily attributable to an increase in long-term debt,
which increased to $1,170.0 million at September 30, 1997, from $529.7 million
at September 30, 1996, incurred primarily to fund the Company's capital
expenditures associated with the build-out of the Company's PCS systems.
Interest expense will continue to increase as a result of the increased
borrowings the Company has incurred, and will continue to incur, to fund its
expansion. The weighted average interest rate before the effect of capitalized
interest was 10.1% for the nine months ended September 30, 1997, and 9.1% for
the nine months ended September 30, 1996.
20
<PAGE> 21
EBITDA
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------
1997 1996
----------------------- ----------------------
CELLULAR PCS CELLULAR PCS
--------- ---------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
EBITDA......................... $ 73,302 $ (97,268) $ 45,772 $ (39,409)
======== ========= ======== =========
</TABLE>
EBITDA declined to negative $24.0 million for the nine months ended
September 30, 1997, from a negative $6.4 million for the nine months ended
September 30, 1996, primarily due to the negative $97.3 million EBITDA
attributable to PCS operations offset by an increase in cellular EBITDA.
Cellular EBITDA increased 60.1% to $73.3 million for the nine months ended
September 30, 1997, from $45.8 million for the nine months ended September 30,
1996, primarily as a result of increased revenues due to the increased
subscriber base and the related cost efficiencies recognized. As a result,
cellular operating margin (cellular EBITDA as a percentage of cellular service
revenues) increased to 35.7% for the nine months ended September 30, 1997, from
29.7% for the nine months ended September 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
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 $300 million credit
facility (the "PCS Vendor Facility" formerly the "NORTEL Facility" and, together
with the Credit Facility, the "Senior Secured Facilities"). As of September 30,
1997, $470 million and $300 million were outstanding under the Credit Facility
and the PCS Vendor Facility, respectively. The amount currently available at
September 30, 1997, for borrowing under the Credit Facility was $380 million and
the total unused portion of the Credit Facility was $480 million. Indebtedness
under the Credit Facility and the PCS Vendor 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.
On October 14, 1997, the Company and its wholly-owned subsidiary,
Western PCS Corporation ("Western PCS"), entered into an agreement with
Hutchinson Telecommunication Limited ("HTL") and a subsidiary of HTL ("HTL Sub")
pursuant to which HTL Sub agreed to purchase 19.9% of the outstanding capital
stock of Western PCS for an aggregate purchase price of $248.4 million. The
Company also entered into an agreement with HTL and another of HTL's
subsidiaries for the purchase of approximately 5% of the outstanding capital
stock of the Company by the HTL subsidiary for a purchase price of
approximately $74 million. Both purchase transactions are subject to certain
approvals and neither is conditioned upon the closing of the other.
On October 31, 1997, the Company consummated the purchase from Triad
Cellular Corporation, Triad Cellular L.P. and certain of their affiliates
(collectively "Triad") of the cellular business and assets of Triad in the Rural
Service Areas ("RSAs") designated as Texas 1,2, 4, and 5, Utah 3, 4 and 6,
Oklahoma 7 and 8 and Minnesota 7, 8 and 9, for an aggregate purchase price of
(i) approximately $180 million (excluding approximately $10 million in closing
adjustments, which amount is subject to further adjustment), plus (ii) 1,600,000
shares of the Company's Class A Common Stock. In accordance with its agreement
with Triad, the Company will shortly file a shelf Registration Statement on Form
S-3 covering future resales of such shares. Such agreement provides that in the
event such Registration Statement is not declared effective by the Securities
and Exchange Commission on or prior to January 30, 1998, Triad has the option of
receiving $20 million in lieu of such shares. The Company also acquired from
Triad certain D and E Block PCS licenses for an aggregate purchase price of
approximately $4.6 million, such amount being the aggregate amount Triad paid
the FCC in its successful bids for such licenses in the FCC's auction of such
licenses.
Over the next fifteen months the Company currently anticipates spending
approximately $200 million to expand the initial build-out of its PCS MTA
systems and to continue construction of the Seattle and Phoenix/Tucson BTA
systems. In October 1997, the Company paid approximately $14.6 million for the
acquisition of the five remaining D and E Block PCS licenses which the Company
was granted in the third quarter of 1997 and approximately $195 million to close
the acquisition of Triad. These payments were funded by additional borrowings on
the Credit Facility. In addition, further funds will be required to finance the
continued growth of its cellular and PCS operations (which may be significant),
provide for working capital, and service debt. The Company will utilize cash on
hand, funds available from investors and amounts available for borrowing under
the Credit Facility for
21
<PAGE> 22
such purposes. While the Company believes such sources will be sufficient, to
the extent that the build-out of the PCS systems or other costs associated with
the growth of its business are greater than expected, the Company will need to
seek additional financing. The Company continues to consider additional sources
of funding to meet those potential needs which may include the issuance of
additional indebtedness or the sale of additional equity. There can be no
assurance that such funds will be available to the Company on acceptable or
favorable terms.
Net cash used in operating activities for the nine months ended
September 30, 1997, was $82.6 million. Adjustments to the $193.2 million net
loss for such period to reconcile to net cash used in operating activities
primarily included $100.0 million of depreciation and amortization (including
the amortization of deferred financing costs). Other adjustments included
changes in operating assets and liabilities, net of effects from consolidating
acquired interests, consisting primarily of increases of $18.6 million in
accrued liabilities, primarily attributable to an increase in property taxes and
interest, and $14.6 million in accounts receivable, net, as a result of the
increase in total revenues, and a $7.1 million increase in equity in net loss of
unconsolidated affiliates as a result of increased activity in the Company's
investments in international ventures and Cook Inlet PCS. Net cash used in
operating activities was $27.8 million for the nine months ended September 30,
1996.
Net cash used in investing activities was $378.5 million for the nine
months ended September 30, 1997. Investing activities for such period consisted
primarily of purchases of property and equipment of $279.9 million, of which
$238.6 million was attributable to PCS capital expenditures, and purchases of
wireless licenses of $54.6 million as a result of the PCS licenses purchased by
the Company from the FCC's D and E Block auctions. Advances made to affiliates
increased $50.9 million primarily due to a revolving loan agreement with Cook
Inlet PCS and funding of international ventures. Net cash used in investing
activities was $348.1 million for the nine months ended September 30, 1996.
Net cash provided by financing activities was $427.8 million for the
nine months ended September 30, 1997. Financing activities for such period
consisted primarily of additions to long-term debt, which provided cash of $427
million. Net cash provided by financing activities was $389.3 million for the
nine months ended September 30, 1996.
Cook Inlet PCS owns licenses in 21 PCS BTAs, 7 of which were acquired in
the FCC F Block auction in the first quarter of 1997. Cook Inlet PCS is subject
to the FCC's build-out requirements and will require significant additional
amounts to complete the build-out of its PCS systems and to meet the government
debt service requirements on the license purchase prices. The potential sources
of such additional funding include vendor loans, loans or capital contributions
by the partners of the partnership or other third party financing. The Company
funded the operations of the partnership during the nine months ended September
30, 1997, and has entered into a loan agreement with the partnership whereby the
Company agreed to provide a revolver/term loan to the partnership at an interest
rate equal to the higher of fifteen percent or the London Interbank Offer Rate
("LIBOR") plus 5%. At September 30, 1997, the Company had advanced funds
totaling $27.4 million to the partnership.
In the ordinary course of business, the Company continues to evaluate
acquisition opportunities, joint ventures and other potential business
transactions. Any such prospective transactions would be financed with the
borrowings under the Credit Facility or through the issuance of additional
indebtedness or the sale of additional equity. There can be no assurance that
such funds will be available to the Company on acceptable or favorable terms.
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 its highest usage and revenue per
subscriber during the summer months. The Company expects these trends to
continue.
22
<PAGE> 23
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 29, 1997, Western PCS BTA I Corporation, a wholly-owned
subsidiary of the Company ("Western BTA"), received a civil investigative
demand from the Department of Justice ("DOJ") requiring production of certain
documents and responses to certain interrogatories in connection with the DOJ's
investigation of bid rigging and market allocation for PCS licenses auctioned
by the FCC. Western BTA understands that similar demands were issued to
numerous other participants in the FCC PCS auctions. Western BTA believes that
its conduct throughout the PCS auctions was consistent with all FCC regulations
and applicable laws and is cooperating fully with the DOJ's investigative
demand.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6.
<TABLE>
<CAPTION>
(a) Exhibits Description
-------- -----------
<S> <C>
10.52 Stock Subscription Agreement by and among Western Wireless
Corporation, Hutchison Telecommunications Limited and
Hutchison Telecommunications Holdings (USA) Limited dated
October 14, 1997.
10.53 Purchase Agreement by and among Western PCS Corporation,
Western Wireless Corporation, Hutchison Telecommunications
Limited and Hutchison Telecommunications PCS (USA) Limited
dated October 14, 1997.
10.54 Form of Cash Management Agreement by and between Western
Wireless Corporation and Western PCS Corporation.
10.55 Form of Roaming Agreement by and between Western Wireless
Corporation and Western PCS Corporation.
10.56 Form of Services Agreement by and between Western Wireless
Corporation and Western PCS Corporation.
10.57 Form of Shareholders Agreement by and among Western
Wireless Corporation, Hutchison Telecommunications PCS
(USA) Limited and Western PCS Corporation.
10.58 Form of Tax Sharing Agreement by and between Western
Wireless Corporation and Western PCS Corporation.
</TABLE>
23
<PAGE> 24
<TABLE>
<S> <C>
10.59 Agreement to Form Limited Partnership dated September 30,
1997, by and among Western PCS I Iowa Corporation, a
Delaware corporation, INS Wireless, Inc., an Iowa
corporation, Western PCS I Corporation, a Delaware
corporation, and Iowa Network Services, Inc., an Iowa
corporation.
10.60 Iowa Wireless Services, L.P. Limited Partnership Agreement
dated as of September 30, 1997, by and between INS
Wireless, Inc., as General Partner, and Western PCS I Iowa
Corporation, as Limited Partner.
27.1 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
None
24
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Western Wireless Corporation
By /s/ Donald Guthrie
---------------------------------
Donald Guthrie
Chief Financial Officer
Dated: November 6, 1997
25
<PAGE> 26
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
10.52 Stock Subscription Agreement by and among Western Wireless
Corporation, Hutchison Telecommunications Limited and Hutchison
Telecommunications Holdings (USA) Limited dated October 14, 1997.
10.53 Purchase Agreement by and among Western PCS Corporation, Western
Wireless Corporation, Hutchison Telecommunications Limited and
Hutchison Telecommunications PCS (USA) Limited dated October 14,
1997.
10.54 Form of Cash Management Agreement by and between Western Wireless
Corporation and Western PCS Corporation.
10.55 Form of Roaming Agreement by and between Western Wireless
Corporation and Western PCS Corporation.
10.56 Form of Services Agreement by and between Western Wireless
Corporation and Western PCS Corporation.
10.57 Form of Shareholders Agreement by and among Western Wireless
Corporation, Hutchison Telecommunications PCS (USA) Limited and
Western PCS Corporation.
10.58 Form of Tax Sharing Agreement by and between Western Wireless
Corporation and Western PCS Corporation.
10.59 Agreement to Form Limited Partnership dated September 30, 1997,
by and among Western PCS I Iowa Corporation, a Delaware
corporation, INS Wireless, Inc., an Iowa corporation, Western PCS
I Corporation, a Delaware corporation, and Iowa Network Services,
Inc., an Iowa corporation.
10.60 Iowa Wireless Services, L.P. Limited Partnership Agreement dated
as of September 30, 1997, by and between INS Wireless, Inc., as
General Partner, and Western PCS I Iowa Corporation, as Limited
Partner.
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
STOCK SUBSCRIPTION AGREEMENT
BY AND AMONG
WESTERN WIRELESS CORPORATION,
HUTCHISON TELECOMMUNICATIONS LIMITED
AND
HUTCHISON TELECOMMUNICATIONS HOLDINGS (USA) LIMITED
(formerly known as Better Profit International Limited)
DATED: October 14, 1997
<PAGE> 2
<TABLE>
<S> <C> <C>
ARTICLE 1 DEFINITIONS...................................................................1
ARTICLE 2 PURCHASE OF STOCK; CLOSING....................................................3
2.01 Purchase of Stock......................................................3
2.02 Closing................................................................3
ARTICLE 3 COVENANTS AND AGREEMENTS......................................................4
3.01 Covenants of the Company...............................................4
3.02 Covenants of the Investor..............................................4
3.03 HSR Act................................................................4
ARTICLE 4 REPRESENTATIONS AND WARRANTIES................................................4
4.01 Representations and Warranties of the Company..........................4
4.02 Representations and Warranties of the Investor.........................6
ARTICLE 5 CONDITIONS TO OBLIGATIONS.....................................................9
5.01 Conditions to the Obligation of the Company............................9
5.02 Conditions to the Obligation of the Investor...........................9
ARTICLE 6 MISCELLANEOUS................................................................10
6.01 Expenses..............................................................10
6.02 Equitable Remedies....................................................10
6.03 Notices...............................................................11
6.04 Entire Agreement......................................................12
6.05 Remedies Cumulative...................................................12
6.06 Governing Law.........................................................13
6.07 Counterparts..........................................................13
6.08 Waivers...............................................................13
6.09 Successors and Assigns................................................13
6.10 Further Assurances....................................................13
6.11 Disclosures...........................................................13
6.12 Termination...........................................................14
6.13 Jurisdiction; Consent to Service of Process...........................14
</TABLE>
1
<PAGE> 3
STOCK SUBSCRIPTION AGREEMENT
STOCK SUBSCRIPTION AGREEMENT, dated October 14, 1997 (the
"Agreement"), by and among Western Wireless Corporation, a Washington
corporation (the "Company"), Hutchison Telecommunications Limited, a Hong Kong
corporation ("HTL") and Hutchison Telecommunications Holdings (USA) Limited
(formerly known as Better Profit International Limited), a British Virgin
Islands corporation (the "Investor").
W I T N E S S E T H :
WHEREAS, the Company is engaged in the communications business in the
United States;
WHEREAS, Investor is a wholly-owned subsidiary of HTL, and HTL is
engaged directly or through Affiliates in the communications business in, among
other places, Hong Kong;
WHEREAS, the Company and HTL are among the leaders in their respective
countries in the provision of mobile telecommunications services and supporting
systems; and
WHEREAS, upon the terms and conditions set forth in this Agreement, the
Company has determined to issue and sell, and the Investor has determined to
purchase, 3,888,888 shares of the Company's Class A Common Stock, without par
value (the "Class A Common Stock").
NOW, THEREFORE, in consideration of the mutual covenants, conditions and
promises hereinafter set forth, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
Unless the context otherwise requires, the terms defined hereunder shall
have the meanings therein specified for all purposes of this Agreement,
applicable to both the singular and plural forms of any of the terms defined
herein. For purposes of this Agreement:
"Affiliate" shall mean, with respect to any party hereto, any
corporation or other business entity which directly or indirectly through stock
ownership or through any other arrangement either controls, is controlled by or
is under common control with, such party. The term "control" shall mean the
power to direct the affairs of such person by reason of ownership of voting
stock or other equity interests, by contract or otherwise.
"Agreement" shall have the meaning set forth in the preamble hereof.
1
<PAGE> 4
"Business Day" shall mean any day other than a Saturday, Sunday or a
legal holiday in New York, New York, Seattle, Washington or Hong Kong or any
other day on which commercial banks in those locations are authorized by law or
governmental decree to close.
"Class A Common Stock" shall have the meaning set forth in the preamble
hereof.
"Closing" shall have the meaning set forth in SECTION 2.02.
"Closing Date" shall have the meaning set forth in SECTION 2.02.
"Company" shall have the meaning set forth in the preamble hereof.
"Disclosures" shall have the meaning set forth in SECTION 6.11.
"Dollar" or "$" shall mean the basic unit of the lawful currency of the
United States of America.
"Exchange Act" shall mean the Securities Exchange Act of 1934, and any
similar or successor Federal statute, and the rules and regulations promulgated
thereunder, all as amended, and as the same may be in effect from time to time.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Investor" shall have the meaning set forth in the preamble hereof.
"Liens" shall mean any lien, claim, security interest, charge,
encumbrance or title retention agreement of any nature.
"Material Adverse Effect on the Company" shall mean a material adverse
effect on the financial condition, operations or business of the Company and its
subsidiaries, taken as a whole, or the ability of the Company to enter into and
consummate the transactions contemplated by this Agreement in accordance with
its terms.
"Person" shall mean any general or limited partnership, corporation,
joint venture, trust, business trust, governmental agency, cooperative,
association, individual or other entity, and heirs, executors, administrators,
legal representatives, successors and assigns of such person.
"Purchase Price" shall have the meaning set forth in Section 2.01.
"Purchased Shares" shall have the meaning set forth in SECTION 2.01.
"SEC" shall mean the Securities and Exchange Commission or its
successors.
2
<PAGE> 5
"Securities Act" shall mean the Securities Act of 1933, and any similar
or successor Federal statute, and the rules and regulations promulgated
thereunder, all as amended, and as the same may be in effect from time to time.
When a reference is made in this Agreement to a SECTION, such reference
shall be to a SECTION of this Agreement unless otherwise indicated. Whenever the
words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation." The use of a
gender herein shall be deemed to include the neuter, masculine and feminine
genders whenever necessary or appropriate. Whenever the word "herein" or
"hereof" is used in this Agreement, it shall be deemed to refer to this
Agreement and not to a particular SECTION of this Agreement unless expressly
stated otherwise.
ARTICLE 2
PURCHASE OF STOCK; CLOSING
2.1 Purchase of Stock. The Investor hereby subscribes for and agrees to
purchase from the Company, and the Company hereby accepts the Investor's
subscription for and agrees to sell to the Investor, 3,888,888 shares of Class A
Common Stock (the "Purchased Shares") for a purchase price (in Dollars) per
share equal to the average of the mean of the high and low sales prices of the
Class A Common Stock on the NASDAQ National Market on each of the 13 trading
days immediately preceding the public announcement of the transactions described
herein. HTL hereby irrevocably and unconditionally agrees to cause the Investor
to perform its obligations (including causing or enabling it to make the payment
of the Purchase Price) hereunder. The aggregate purchase price for all Purchased
Shares is hereinafter referred to as the "Purchase Price."
2.2 Closing.
(a) Closing Date. Consummation of the transactions contemplated
hereby (the "Closing") shall take place, subject to the satisfaction (or express
written waiver) of all conditions to the Closing under Article 5 hereof, on the
fifth (5th) Business Day after the day on which all applicable waiting periods
under the HSR Act shall have expired or been terminated without objection by the
Federal Trade Commission. The date on which the Closing takes place shall be
referred to herein as the "Closing Date."
(b) Location. The Closing shall take place at 11:00 A.M. on the
Closing Date, at the offices of the Company located at 2001 NW Sammamish Road,
Issaquah, Washington 98027 or at such other place as the parties hereto shall
agree. At the Closing the Company shall, upon receipt of the Purchase Price by
wire transfer of immediately available funds to the account specified therefor
by the Company, promptly deliver to the Investor duly executed and issued stock
certificates evidencing the Purchased Shares.
3
<PAGE> 6
ARTICLE 3
COVENANTS AND AGREEMENTS
3.1 Covenants of the Company. From and after the execution and delivery
of this Agreement to and including the Closing Date, the Company shall use its
best efforts to cause the transactions contemplated by this Agreement to be
consummated in accordance with the terms hereof.
3.2 Covenants of the Investor. From and after the execution and delivery
of this Agreement to and including the Closing Date, the Investor shall use its
best efforts to cause the transactions contemplated by this Agreement to be
consummated in accordance with the terms hereof.
3.3 HSR Act. It is understood that the consummation of this transaction
is subject to the filing with the Federal Trade Commission and the Antitrust
Division of the Department of Justice of all reports and notifications which are
required under the HSR Act and the expiration or termination of certain
applicable waiting periods under the HSR Act without objection by such
authorities. Within twenty-one (21) Business Days of the date of execution
hereof, HTL, the Investor and the Company shall file, or cause to be filed, with
the Federal Trade Commission and the Antitrust Division of the Department of
Justice any and all such reports or notifications and any other filings required
under any other Federal law or administrative regulations in connection with the
purchase of the Purchased Shares under this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Company. The Company
represents and warrants to the Investor, which representations and warranties
shall survive the execution and delivery of this Agreement and the consummation
of the transactions herein contemplated, as follows:
(a) Due Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Washington.
(b) Power and Authority; No Violation. The Company has full power
and authority to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. This Agreement
and all transactions contemplated hereby have been duly and validly authorized
by all necessary action on the part of the Company and this Agreement
constitutes a legal, valid and binding obligation of the
4
<PAGE> 7
Company enforceable in accordance with its terms except as such enforceability
may be limited by bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally. Neither the
execution, delivery or performance of this Agreement nor the consummation of the
transactions contemplated hereby by the Company will, with or without the giving
of notice or the passage of time, or both, (i) conflict with, result in a
default or loss of rights (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of any Lien,
pursuant to (A) any provision of the certificate of incorporation, by-laws,
stockholders agreements or other constituent documents of the Company; (B) any
material note, bond, indenture, mortgage, deed of trust, contract, agreement,
lease or other instrument or obligation to which the Company is a party or by
which the Company or its property may be bound or affected; or (C) any law,
order, judgment, ordinance, rule, regulation or decree to which the Company is a
party or by which it or its property is bound or affected; or (ii) give rise to
any right of first refusal or similar right with respect to any interest, or any
properties or assets, of the Company. Except for the filings under the HSR Act
and the expiration or termination of certain applicable waiting periods under
the HSR Act, no permit, consent, approval, authorization, qualification or
registration of, or declaration to or filing with any governmental or regulatory
authority or agency or third party is required to be obtained or made by the
Company in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby or thereby in order to (A)
render this Agreement or the transactions contemplated hereby or thereby valid
and effective and (B) enable the Company to sell the Purchased Shares.
(c) Legal Matters. Except as set forth on EXHIBIT 4.01(c) annexed
hereto, there is no claim, legal action, counterclaim, suit, arbitration,
governmental investigation or other legal, administrative or tax proceeding, nor
any order, decree or judgment, in progress or pending, or to the knowledge of
the Company threatened, against or relating to the right of the Company to
perform its obligations under this Agreement, nor does the Company know or have
reason to be aware of any basis for the same. There is outstanding no order,
writ, injunction, judgment or decree of any court, governmental agency or
arbitration tribunal which would individually or in the aggregate impair in any
material respect the performance of the obligations of the Company hereunder or
the consummation of the transactions contemplated by this Agreement other than
orders or decrees involving the wireless telephone industry in general.
(d) Truth and Correctness. No representation or warranty by the
Company in this Agreement contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary to make
the statements contained herein or therein, in light of the circumstances under
which such statements are made, not misleading.
(e) Purchased Shares. The Purchased Shares (i) have been duly
authorized by all necessary corporate action on the part of the Company, (ii)
shall be (when issued in accordance with the terms of this Agreement) validly
issued and outstanding, fully paid and nonassessable, and (iii) shall not be
subject to any preemptive rights of the holders of any other class or series of
the capital stock of the Company. Upon the issuance of the Purchased Shares to
5
<PAGE> 8
the Investor at the Closing, the Purchased Shares shall be free and clear of all
Liens, with the exception of any restrictions on transferability under the
Securities Act or any securities laws of any jurisdiction.
(f) Investment Company Act. The Company is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended.
(g) No Brokers. Except for Goldman, Sachs & Co., no agent, broker,
investment banker, Person or firm is or will be entitled to any broker's or
finder's fee or any other commission or similar fee directly or indirectly in
connection with the transactions contemplated by this Agreement based in any way
on any arrangements, agreements or understandings made by or on behalf of the
Company or an Affiliate thereof, and the Company hereby agrees to indemnify the
Investor and agrees to hold harmless the Investor against and in respect of any
claims (including those of Goldman, Sachs & Co.) for brokerage and other
commissions relating to such transactions based in any way on any arrangements,
agreements or understandings made by or on behalf of the Company or an Affiliate
thereof.
(h) Reports and Financial Statements. The Company has filed all
reports required to be filed with the SEC since June 30, 1996 (collectively,
including all exhibits thereto, the "SEC Reports"). None of such SEC Reports, as
of their respective dates (as amended through October 14, 1997), contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. Each of the
financial statements (including the related notes) included in the SEC Reports
presents fairly, in all material respects, the consolidated financial position
and consolidated results of operations and cash flows of the Company and its
subsidiaries as of the respective dates or for the respective periods set forth
therein, all in conformity with generally accepted accounting principles
consistently applied during the periods involved, subject, in the case of the
unaudited interim financial statements, to normal year-end adjustments and any
other adjustments described therein. All such SEC Reports, as of their
respective dates (as amended through October 14, 1997), complied in all material
respects with the requirements of the Exchange Act.
(i) No Material Adverse Effect on the Company. During the period
since June 30, 1997, there has not been any change or event which would have a
Material Adverse Effect on the Company.
4.2 Representations and Warranties of the Investor. Each of HTL and the
Investor, jointly and severally, represents and warrants to the Company, which
representations and warranties shall survive the execution and delivery of this
Agreement and the consummation of the transactions herein contemplated, as
follows:
(a) Due Organization. HTL is a corporation duly organized, validly
existing and in good standing under the laws of Hong Kong. The Investor is a
corporation duly
6
<PAGE> 9
organized, validly existing and in good standing under the laws of the British
Virgin Islands.
(b) Power and Authority; No Violation. Each of HTL and the Investor
has full power and authority to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions contemplated hereby.
This Agreement and all transactions contemplated hereby have been duly and
validly authorized by all necessary action on the part of HTL and the Investor
and this Agreement constitutes a legal, valid and binding obligation of HTL and
the Investor enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights
generally. Neither the execution, delivery or performance of this Agreement nor
the consummation of the transactions contemplated hereby by HTL or the Investor
will, with or without the giving of notice or the passage of time, or both, (i)
conflict with, result in a default or loss of rights (or give rise to any right
of termination, cancellation or acceleration) under, or result in the creation
of any Lien, pursuant to (A) any provision of the memorandum and articles of
association, certificate of incorporation, by-laws, stockholders agreements or
other constituent documents of HTL or the Investor; (B) any material note, bond,
indenture, mortgage, deed of trust, contract, agreement, lease or other
instrument or obligation to which HTL or the Investor is a party or by which it
or its property may be bound or affected; or (C) any law, order, judgment,
ordinance, rule, regulation or decree to which HTL or the Investor is a party or
by which it or its property is bound or affected; or (ii) give rise to any right
of first refusal or similar right with respect to any interest, or any
properties or assets, of HTL or the Investor. Except for the filings under the
HSR Act and the expiration or termination of certain applicable waiting periods
under the HSR Act, no permit, consent, approval, authorization, qualification or
registration of, or declaration to or filing with any governmental or regulatory
authority or agency or third party is required to be obtained or made by HTL or
the Investor in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby in order to (A) render
this Agreement or the transactions contemplated hereby valid and effective and
(B) enable the Investor to purchase the Purchased Shares.
(c) Legal Matters. There is no claim, legal action, counterclaim,
suit, arbitration, governmental investigation or other legal, administrative or
tax proceeding, nor any order, decree or judgment, in progress or pending, or to
the knowledge of HTL or the Investor threatened, against or relating to HTL's or
the Investor's right to perform its obligations under this Agreement, nor does
HTL or the Investor know or have reason to be aware of any basis for the same.
There is outstanding no order, writ, injunction, judgment or decree of any
court, governmental agency or arbitration tribunal which would individually or
in the aggregate impair in any material respect the performance of HTL's or the
Investor's obligations hereunder or the consummation of the transactions
contemplated by this Agreement other than orders or decrees involving the
wireless telephone industry in general.
(d) Securities Representation. Each of HTL and the Investor
acknowledges that: (i) it is not a United States person (as defined in
Regulation S under the Securities Act) and,
7
<PAGE> 10
in determining to make its purchase hereunder, has made its buying decision
outside the United States; (ii) it is an accredited investor (as defined in Rule
501 under the Securities Act); (iii) it has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risks of investing in the Company as contemplated hereby or, alternatively, that
it has engaged the services of a representative who has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of the proposed investment and who has reviewed the proposed
investment on its behalf; (iv) the Purchased Shares being delivered by the
Company to the Investor have not been registered under the Securities Act or
under the securities laws of any state in reliance upon Federal and state
exemptions for offshore transactions or transactions not involving a public
offering and are not being acquired with a view to the distribution thereof
except pursuant to a registration statement in compliance with Federal and state
securities laws or an exemption therefrom; (v) the Purchased Shares must be held
by the Investor indefinitely unless subsequently so registered or if an
exemption from such registration is available; and (vi) it has received
information concerning the Company and has had the opportunity to obtain
additional information as desired in order to evaluate the merits and risks
inherent in holding the Purchased Shares. The Investor agrees that the share
certificate(s) which the Investor receives from the Company shall be legended
with the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND NO
TRANSFER OR OTHER DISTRIBUTION THEREOF CAN BE MADE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT, OR AN
OPINION OF COUNSEL PRESENTED AND SATISFACTORY TO THE COMPANY AND ITS
COUNSEL PRIOR TO THE PROPOSED TRANSACTION THAT REGISTRATION IS NOT
REQUIRED UNDER THE ACT OR ANY APPLICABLE STATE SECURITIES LAWS."
(e) Investment Company Act. Neither HTL nor the Investor is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
(f) Truth and Correctness. No representation or warranty by HTL or
the Investor in this Agreement contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary to make
the statements contained herein or therein, in light of the circumstances under
which such statements are made, not misleading.
(g) No Brokers. Except for Donaldson, Lufkin & Jenrette, no agent,
broker, investment banker, Person or firm is or will be entitled to any broker's
or finder's fee or any other commission or similar fee directly or indirectly in
connection with the transactions contemplated by this Agreement based in any way
on any arrangements, agreements or understandings made by or on behalf of either
HTL or the Investor or an Affiliate thereof, and each of HTL and the Investor
hereby agrees to indemnify the Company and agrees to hold harmless the Company
8
<PAGE> 11
against and in respect of any claims (including those of Donaldson, Lufkin &
Jenrette) for brokerage and other commissions relating to such transactions
based in any way on any arrangements, agreements or understandings made by or on
behalf of either HTL or the Investor or an Affiliate of HTL or the Investor.
(h) No Interest in FCC Licenses. Neither HTL nor any of its
subsidiaries has any license to provide or is providing, or owns, directly or
indirectly, any interest in any entity which has a license to provide or which
is providing, commercial mobile radio services in the United States.
ARTICLE 5
CONDITIONS TO OBLIGATIONS
5.1 Conditions to the Obligation of the Company. The obligation of the
Company to perform, fulfill or carry out its agreements, undertakings and
obligations herein made or expressed to be performed, fulfilled or carried out
on the Closing Date is and shall be subject to fulfillment of or compliance
with, on or prior to the Closing Date, the following conditions precedent, any
of which may be waived by the Company in its sole discretion, in whole or in
part:
(a) Representations and Warranties True. Each of HTL's and the
Investor's representations and warranties contained in this Agreement shall be
deemed to have been made again at and as of the time of the Closing Date and
shall then be true in all material respects. Each of HTL and the Investor shall
have performed and complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it
prior to or at the Closing Date. The Company shall have been furnished with a
certificate of each of HTL and the Investor signed by one of its senior
executive officers, dated the Closing Date, certifying to the fulfillment of the
foregoing conditions by it and to the truth and correctness in all material
respects, except for changes contemplated by this Agreement, as of the Closing
Date, of the representations and warranties made by it contained herein and the
satisfaction on the part of HTL and the Investor of all conditions to the
obligations of the Company under this Section 5.01.
(b) HSR Act. The waiting periods, if applicable, of the HSR Act
shall have expired or been terminated.
(c) Purchase Price. The Investor shall have delivered the Purchase
Price to the Company as required hereunder.
(d) Resolutions. The Company shall have been furnished with
certified copies of the resolutions duly adopted by the boards of directors of
HTL and the Investor authorizing the execution, delivery and performance of this
Agreement.
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<PAGE> 12
(e) No New Statutes. No statute, rule or regulation shall have been
enacted by any state or Federal government or governmental agency in the United
States or Hong Kong which would render the consummation of this Agreement
unlawful.
5.2 Conditions to the Obligation of the Investor. The obligation of each
of HTL and the Investor to perform, fulfill or carry out its agreements,
undertakings and obligations herein made or expressed to be performed, fulfilled
or carried out on the Closing Date is and shall be subject to fulfillment of or
compliance with, on or prior to the Closing Date, the following conditions
precedent, any of which may be waived by HTL or the Investor, in its sole
discretion, in whole or in part:
(a) Representations and Warranties True. Each of the Company's
representations and warranties contained in this Agreement shall be deemed to
have been made again at and as of the time of the Closing Date and shall then be
true in all material respects. The Company shall have performed and complied in
all material respects, with all agreements and covenants required by this
Agreement to be performed or complied with by it prior to or at the Closing
Date. HTL and the Investor shall have been furnished with a certificate of the
Company signed by one of its senior executive officers, dated the Closing Date,
certifying to the fulfillment of the foregoing conditions by it and to the truth
and correctness in all material respects, except for changes contemplated by
this Agreement, as of the Closing Date, of the representations and warranties of
made by it contained herein and the satisfaction on the part of the Company of
all conditions to the obligations of the Investor under this Section 5.02.
(b) HSR Act. The waiting periods, if applicable, of the HSR Act
shall have expired or been terminated.
(c) Stock Certificates. The Company shall have delivered to the
Investor duly executed and issued stock certificates representing the Purchased
Shares.
(d) Resolutions. The Company shall have delivered to HTL and the
Investor a certified copy of the resolution or resolutions duly adopted by its
board of directors authorizing the execution, delivery and performance of this
Agreement.
(e) No New Statutes. No statute, rule or regulation shall have been
enacted by any state or Federal government or governmental agency in the United
States or Hong Kong which would render the consummation of this Agreement
unlawful.
ARTICLE 6
MISCELLANEOUS
6.1 Expenses. Each party shall bear its own expenses incident to the
negotiation,
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<PAGE> 13
preparation, authorization and consummation of this Agreement and the
transactions contemplated hereby, including all fees and expenses of its counsel
and accountants, whether or not such transactions are consummated.
6.2 Equitable Remedies. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with the specific terms of the provisions or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity. Each party agrees that it
will not assert, as a defense against a claim for specific performance, that the
party seeking specific performance has an adequate remedy at law.
6.3 Notices. All notices, claims and other communications hereunder
shall be in writing and shall be made by hand delivery, registered or certified
mail (postage prepaid, return receipt requested), facsimile, or overnight air
courier guaranteeing next day delivery
(a) if to the Company, to it at:
Western Wireless Corporation
2001 NW Sammamish Road
Issaquah, Washington 98027
Attention: Alan R. Bender, Esq.
Facsimile No.: 206-313-5547
with a copy (which shall not constitute notice) to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Attention: Barry A. Adelman, Esq.
Facsimile No.: 212-698-7825
(b) if to HTL, to it at :
Hutchison Telecommunications Limited
22nd Floor, Hutchison
10 Harcourt Road
Hong Kong
Attention: Ms. Edith Shih
Facsimile No.: 852-2128-1778
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<PAGE> 14
with a copy (which shall not constitute notice) to:
Dewey Ballantine, LLP
Suite 3907
Asia Pacific Finance Tower
Citibank Plaza, 3 Garden Road
Central Hong Kong
Attention: John A. Otoshi, Esq.
Facsimile No.: 852-2509-7088
(c) if to the Investor, to it at :
Hutchison Telecommunications Holdings (USA) Limited
22nd Floor, Hutchison
10 Harcourt Road
Hong Kong
Attention: Ms. Edith Shih
Facsimile No.: 852-2128-1778
with copies (which shall not constitute notice) to:
Hutchison Telecommunications Limited
22nd Floor, Hutchison
10 Harcourt Road
Hong Kong
Attention: Ms. Edith Shih
Facsimile No.: 852-2128-1778
Dewey Ballantine, LLP
Suite 3907
Asia Pacific Finance Tower
Citibank Plaza, 3 Garden Road
Central Hong Kong
Attention: John A. Otoshi, Esq.
Facsimile No.: 852-2509-7088
or at such other address as any party may from time to time furnish to the other
parties by a notice given in accordance with the provisions of this SECTION
6.03. All such notices and communications shall be deemed to have been duly
given at the time delivered by hand, if personally delivered; five (5) Business
Days after being deposited in the mail, first class postage prepaid, return
receipt requested, if mailed; when receipt is confirmed, if sent by facsimile;
and the next Business Day after timely delivery to the courier, if sent by an
overnight air courier service guaranteeing next day delivery.
12
<PAGE> 15
6.4 Entire Agreement. This Agreement, together with the Exhibits annexed
hereto, contains the entire understanding among the parties hereto concerning
the subject matter hereof and this Agreement may not be changed, modified,
altered or terminated except by an agreement in writing executed by the parties
hereto. Any waiver by any party of any of its rights under this Agreement or of
any breach of this Agreement shall not constitute a waiver of any other rights
or of any other or future breach.
6.5 Remedies Cumulative. Except as otherwise provided herein, each and
all of the rights and remedies in this Agreement provided, and each and all of
the rights and remedies allowed at law and in equity in like case, shall be
cumulative, and the exercise of one right or remedy shall not be exclusive of
the right to exercise or resort to any and all other rights or remedies provided
in this Agreement or at law or in equity.
6.6 Governing Law. This Agreement shall be construed in accordance with
and subject to the laws and decisions of the State of New York applicable to
contracts made and to be performed entirely therein.
6.7 Counterparts. This Agreement may be executed in several counterparts
hereof, and by the different parties hereto on separate counterparts hereof,
each of which shall be an original; but such counterparts shall together
constitute one and the same instrument.
6.8 Waivers. No provision in this Agreement shall be deemed waived
except by an instrument in writing signed by the party waiving such provision.
6.9 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and to their respective successors
and assigns; provided, however, that except as otherwise expressly set forth in
this Agreement neither the rights nor the obligations of either party may be
assigned or delegated without the prior written consent of the other parties.
6.10 Further Assurances. The Investor shall, at the request of the
Company, and the Company shall, at the request of the Investor, from time to
time, execute and deliver such other assignments, transfers, conveyances and
other instruments and documents and do and perform such other acts and things as
may be reasonably necessary or desirable for effecting complete consummation of
this Agreement and the transactions herein contemplated.
6.11 Disclosures.
(a) Confidentiality. Each of the Investor and the Company
acknowledges and confirms in connection with the negotiation of this Agreement
and the execution hereof, during the period from the date hereof through the
Closing Date, the parties hereto will have furnished to one another certain
materials, information, data and other documentation ("Disclosures")
13
<PAGE> 16
concerning their business, financial condition and operations which are
proprietary and confidential. Each party acknowledges the party disclosing such
Disclosures considers them secret and confidential and asserts a proprietary
interest therein. Accordingly, each of HTL and the Investor, on the one hand,
and the Company, on the other hand, covenants and agrees that it shall maintain
all Disclosures made by the other party in strict confidence and shall not use
such Disclosures for its own benefit or disclose them to third parties, except
to its agents, representatives, bankers, investment bankers, counsel and
employees involved in evaluating the transactions contemplated by this
Agreement, its partners (and the partners or other security holders thereof) or
as otherwise required by law (including the requirement of the Company to
disclose such terms under the Securities Act, the Exchange Act or under the
rules of any securities exchange on which the securities of the Company are
registered; and including the requirement of the Investor to disclose such terms
under the securities laws of the United States or Hong Kong, as applicable, or
under the rules of the Hong Kong Stock Exchange or NASDAQ).
(b) Public Announcements. No public announcement by any party hereto
with regard to the transactions contemplated hereby or the material terms hereof
shall be issued by any party without the mutual prior consent of the other
parties, except that in the event the parties are unable to agree on a press
release and legal counsel for one party is of the opinion that such press
release is required by law and such party furnishes the other party a written
opinion of outside legal counsel, or other counsel reasonably acceptable to the
party being furnished such opinion, to that effect, then such party may issue
the legally required press release.
(c) Non-Confidential Information. This Agreement shall not restrict
any party hereto from using information already known to it, to which it is
entitled under existing agreements, or information generally in the public
domain or any information coming into its possession after it becomes public
knowledge unless it became public knowledge through a breach of this Agreement.
6.12 Termination.
(a) Events Triggering Termination. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned, without further
obligation of the Company, HTL or the Investor, at any time prior to the Closing
Date as follows:
(i) by mutual written consent duly authorized by the boards of
directors of the Company, HTL and the Investor; or
(ii) by the Company, HTL or the Investor if the Closing Date
shall not have occurred on or before December 31, 1997 or such later date, if
any, as the Company, HTL and the Investor shall agree in writing; provided that
the party exercising such right is not in default of its obligations under this
Agreement in a manner which results in the failure to satisfy the conditions to
the transactions contemplated hereby of the other parties; or
14
<PAGE> 17
(iii) by the Company, HTL or the Investor if the consummation of
the transactions contemplated hereby shall be prohibited by a final,
non-appealable order, decree or injunction of a court of competent jurisdiction.
(b) No Further Obligation. In the event of a termination of this
Agreement, no party hereto shall have any liability or further obligation to any
other party to this Agreement except that nothing herein will relieve any party
from liability for any breach of this Agreement.
6.13 Jurisdiction; Consent to Service of Process. The Investor hereby
irrevocably appoints United Corporate Services, Inc., at its office at 10 Bank
Street, White Plains, New York 10606, United States of America, and the Company
hereby irrevocably appoints United Corporate Services, Inc., at its office at 10
Bank Street, White Plains, New York 10606, United States of America, its lawful
agent and attorney to accept and acknowledge service of any and all process
against it in any action, suit or proceeding arising in connection with this
Agreement, and upon whom such process may be served, with the same effect as if
such party were a resident of the State of New York and had been lawfully served
with such process in such jurisdiction, and waives all claim of error by reason
of such service, provided, however that in the case of any service upon such
agent and attorney, the party effecting such service shall also deliver a copy
thereof to the other party at the address and in the manner specified in SECTION
6.03. In the event that such agent and attorney resigns or otherwise becomes
incapable of acting as such, such party will appoint a successor agent and
attorney in New York, reasonably satisfactory to the other party, with like
powers. Each party hereby irrevocably submits to the exclusive jurisdiction of
the United States District Court for the Southern District of New York and any
court of the State of New York located in the City of New York in any such
action, suit or proceeding, and agrees that any such action, suit or proceeding
shall be brought only in such court (and waives any objection based on forum non
conveniens or any other objection to venue therein), provided, however, that
such consent to jurisdiction is solely for the purpose referred to in this
SECTION 6.13 and shall not be deemed to be a general submission to the
jurisdiction of said courts or the State of New York other than for such
purpose.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.
WESTERN WIRELESS CORPORATION
By: /s/ JOHN W. STANTON
------------------------------------
Chairman and Chief Executive
Officer
15
<PAGE> 18
HUTCHISON TELECOMMUNICATIONS LIMITED
By: /s/ CANNING FOK
-------------------------------------
DIRECTOR
HUTCHISON TELECOMMUNICATIONS
HOLDINGS (USA) LIMITED:
By: /s/ KHOO CHEK NGEE
-------------------------------------
DIRECTOR
16
<PAGE> 1
PURCHASE AGREEMENT
BY AND AMONG
WESTERN PCS CORPORATION,
WESTERN WIRELESS CORPORATION,
HUTCHISON TELECOMMUNICATIONS LIMITED
AND
HUTCHISON TELECOMMUNICATIONS PCS (USA) LIMITED
(formerly known as Eastern Pearl International Limited)
DATED: October 14, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1 - DEFINITIONS................................................................1
ARTICLE 2 - PURCHASE OF STOCK; CLOSING.................................................6
2.01 Purchase of Stock...............................................6
2.02 Closing.........................................................6
ARTICLE 3 - COVENANTS AND AGREEMENTS...................................................6
3.01 Covenants of WWC and the Company................................6
3.02 Covenant of the Investor.......................................10
3.03 Governmental Filings...........................................10
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES............................................11
4.01 Representations and Warranties of WWC..........................11
4.02 Representations and Warranties of HTL and the Investor.........15
ARTICLE 5 - CONDITIONS TO OBLIGATIONS.................................................18
5.01 Conditions to the Obligation of WWC and the Company............18
5.02 Conditions to the Obligation of HTL and the Investor...........20
ARTICLE 6 - SURVIVAL; INDEMNITY.......................................................22
6.01 Survival of Representations and Warranties.....................22
6.02 Indemnity by WWC...............................................22
6.03 Indemnity by HTL and the Investor..............................23
6.04 Procedure......................................................24
6.05 Indemnity Sole Remedy..........................................25
ARTICLE 7 - MISCELLANEOUS.............................................................25
7.01 Expenses.......................................................25
7.02 Equitable Remedies.............................................25
7.03 Notices........................................................25
7.04 Entire Agreement...............................................28
7.05 Remedies Cumulative............................................28
7.06 Governing Law..................................................28
7.07 Counterparts...................................................28
7.08 Waivers........................................................28
7.09 Successors and Assigns.........................................28
7.10 Further Assurances.............................................28
7.11 Disclosures....................................................29
7.12 Termination....................................................30
7.13 Jurisdiction; Consent to Service of Process....................30
</TABLE>
a
<PAGE> 3
PURCHASE AGREEMENT
PURCHASE AGREEMENT, dated October 14, 1997 (the "Agreement"), by and
among Western PCS Corporation, a Delaware corporation (the "Company"), Western
Wireless Corporation, a Washington corporation ("WWC"), Hutchison
Telecommunications Limited, a Hong Kong corporation ("HTL"), and Hutchison
Telecommunications PCS (USA) Limited (formerly known as Eastern Pearl
International Limited), a British Virgin Islands corporation (the "Investor").
W I T N E S S E T H :
WHEREAS, the Company is a wholly owned subsidiary of WWC, a company
engaged in the communications business in the United States, and the Company is
engaged in the PCS communications business in the United States;
WHEREAS, Investor is a wholly owned subsidiary of HTL, and HTL is
engaged directly or through Affiliates in the communications business in, among
other places, Hong Kong;
WHEREAS, WWC, the Company and HTL are among the leaders in their
respective countries in the provision of mobile telecommunications services and
supporting systems;
WHEREAS, WWC, the Company and HTL desire to cooperate to the benefit of
their respective customers in exchanging information, experience and knowledge
which will enable them to enhance the quality and variety of services they can
offer to their customers, and the parties also intend to explore the development
of specific programs in areas in support of mobile communications services; and
WHEREAS, as an integral part of this alliance, upon the terms and
conditions set forth in this Agreement, the Company has determined to issue and
sell, and the Investor has determined to purchase, an aggregate of 2,484 shares
of the Company's common stock, par value $0.001 per share (the "Common Stock"),
which upon the issuance of such shares of Common Stock shall constitute 19.9% of
the issued and outstanding Common Stock of the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, conditions and promises hereinafter set forth, the parties hereby
agree as follows:
ARTICLE 1
DEFINITIONS
Unless the context otherwise requires, the terms defined hereunder shall
have the meanings therein specified for all purposes of this Agreement,
applicable to both the singular and plural forms of any of the terms defined
herein. For purposes of this Agreement:
1
<PAGE> 4
"Additional Agreements" shall mean the Intercompany Agreements and the
Shareholders Agreement.
"Affiliate" shall mean, with respect to any party hereto, any
corporation or other business entity which directly or indirectly through stock
ownership or through any other arrangement either controls, is controlled by or
is under common control with, such party. The term "control" shall mean the
power to direct the affairs of such person by reason of ownership of voting
stock or other equity interests, by contract or otherwise.
"Agreement" shall have the meaning set forth in the preamble hereof.
"Authorization" shall mean any franchise, license, authorization,
consent, permit, waiver, approval, qualification or registration of, with or
from the FCC, any state public utility or public service commission, or any
other governmental authority, agency or instrumentality having jurisdiction over
the relevant party and matter.
"Business Day" shall mean any day other than a Saturday, Sunday or a
legal holiday in New York, New York, Seattle, Washington or Hong Kong or any
other day on which commercial banks in those locations are authorized by law or
governmental decree to close.
"Cash Management Agreement" shall mean the agreement attached hereto as
EXHIBIT 1.01.
"Closing" shall have the meaning set forth in SECTION 2.02.
"Closing Date" shall have the meaning set forth in SECTION 2.02.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall have the meaning set forth in the preamble hereof.
"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.
"Company" shall have the meaning set forth in the preamble hereof.
"Cook" shall mean Cook Inlet Western Wireless PV/SS PCS, L.P., a limited
partnership.
"Disclosures" shall have the meaning set forth in SECTION 7.11.
"Dollar" or "$" shall mean the basic unit of the lawful currency of the
United States of America.
2
<PAGE> 5
"Exchange Act" shall mean the Securities Exchange Act of 1934, and any
similar or successor Federal statute, and the rules and regulations promulgated
thereunder, all as amended, and as the same may be in effect from time to time.
"Favorable Declaratory Ruling" shall have the meaning set forth in
SECTION 3.03(a).
"FCC" shall mean the United States Federal Communications Commission, or
any other similar or successor agency of the Federal government administering
the Communications Act.
"Final Order" shall mean an action or decision as to which: (i) no
request for a stay is pending, no stay is in effect, and any deadline for filing
such request that may be designated by statute or regulation has passed; (ii) no
petition for rehearing or reconsideration or application for review is pending
and the time for filing any such petition or application has passed; (iii) the
FCC, public utility commission or public service commission (or comparable
bodies exercising jurisdiction over the Company or its communications
businesses) does not have the action or decision under reconsideration on its
own motion and the time for initiating such reconsideration has passed; and (iv)
no appeal is pending or in effect and any deadline for filing any such appeal
that may be designated by statute or rule has passed.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"HTL" shall have the meaning set forth in the preamble hereof.
"Indemnification Period" shall mean the period ending 60 days after the
delivery to the Investor of the Company's audited financial statements for the
year ended December 31, 1999; provided, that the "Indemnification Period" with
respect to representations and warranties relating to Taxes arising from the
assets and operations of the Company, WWC and their respective Subsidiaries
during the period prior to the Closing shall extend until the final expiration
of all applicable statutes of limitations with respect to any claims for Tax
liability arising from or related to matters covered by such representations and
warranties.
"Indemnitee" shall mean that party which has sustained or incurred
Losses and is seeking indemnification pursuant to Article 6.
"Indemnitor" shall mean that party which is providing indemnification
pursuant to Article 6.
"Indentures" shall mean, collectively, the Indenture, dated as of May
22, 1996, between WWC and Harris Trust Company of California, Trustee for the
$250,000,000 10-1/2% Senior Subordinated Notes Due 2006, and the Indenture,
dated as of October 24, 1996, between WWC and Harris Trust Company of
California, Trustee for the $200,000,000 10-1/2%
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Senior Subordinated Notes Due 2007.
"Intercompany Agreements" shall mean the Cash Management Agreement, the
Services Agreement, the Tax Sharing Agreement and the Roaming Agreement.
"Investor" shall have the meaning set forth in the preamble hereof.
"Liens" shall mean any lien, claim, security interest, charge,
encumbrance or title retention agreement of any nature.
"Losses" shall have the meaning set forth in SECTION 6.02(a).
"Material Adverse Effect on the Company" shall mean a material adverse
effect on the financial condition, operations or business of the Company Group
(as defined in the Shareholders Agreement), taken as a whole, or the ability of
the Company and WWC to enter into and consummate the transactions contemplated
by this Agreement and the Additional Agreements in accordance with their terms.
"Nortel Loan Agreement" shall mean the Loan Agreement, dated as of June
30, 1995, among Western PCS II Corporation, Northern Telecom Inc., NTFC Capital
Corporation and Export Development Corporation, as amended.
"Operating Financial Statements" shall have the meaning set forth in
SECTION 4.01(g).
"PCS Authorization" shall mean any FCC Authorization for providing
broadband PCS mobile communications services through the use of microcells with
low-power transmitters, each serving a small area operating in the 1850-1910 MHz
and the 1930-1990 MHz bands.
"Person" shall mean any general or limited partnership, corporation,
joint venture, trust, business trust, governmental agency, cooperative,
association, individual or other entity, and heirs, executors, administrators,
legal representatives, successors and assigns of such person.
"Purchase Price" shall have the meaning set forth in SECTION 2.01.
"Purchased Shares" shall have the meaning set forth in SECTION 2.01.
"Roaming Agreement" shall mean the agreement attached hereto as EXHIBIT
1.02.
"Securities Act" shall mean the Securities Act of 1933, and any similar
or successor Federal statute, and the rules and regulations promulgated
thereunder, all as amended, and as the same may be in effect from time to time.
"SEC" shall mean the United States Securities and Exchange Commission.
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"Services Agreement" shall mean the agreement attached hereto as EXHIBIT
1.03.
"Shareholders Agreement" shall mean the agreement attached hereto as
EXHIBIT 1.04.
"Subsidiary" of a Person shall mean a corporation as to which a majority
of the voting power is now or hereafter owned or controlled by such Person
either directly or indirectly; but any such corporation shall be deemed to be a
Subsidiary of such Person only as long as such ownership or control exists.
"Taxes" shall mean all taxes, charges, levies or other assessments of
any kind, including income, gross receipts, sales, use, ad valorem, franchise,
profits, license, withholding, payroll, employment, excise, severance, stamp,
occupation, premium, property or windfall profits taxes, customs duties or
similar fees, assessments or charges of any kind whatsoever, together with any
interest and penalties, additions to tax or additional amounts imposed by any
taxing authority, domestic or foreign and any expenses incurred in connection
with the determination, settlement or litigation of any liability for any of the
foregoing.
"Tax Return" shall mean a report, return or other information required
to be supplied to a taxing authority with respect to Taxes.
"Tax Sharing Agreement" shall mean the agreement attached hereto as
EXHIBIT 1.05.
"TD Loan Agreement" shall mean that Amended and Restated Loan Agreement,
dated as of May 6, 1996, among Western Wireless Corporation, The Financial
Institutions Whose Names Appear as Lenders on the Signature Pages Thereof; the
Toronto-Dominion Bank, Barclays Bank, PLC, and Morgan Guaranty Trust Company of
New York, as Managing Agents; The Chase Manhattan Bank, CIBC, Inc., Fleet
National Bank, Internationale Nederlanden (U.S.) Capital Corporation, PNC Bank,
National Association and SociJtJ GJnJrale, 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, as amended.
"WWC" shall have the meaning set forth in the preamble hereof.
When a reference is made in this Agreement to a SECTION, such reference
shall be to a SECTION of this Agreement unless otherwise indicated. Whenever the
words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation." The use of a
gender herein shall be deemed to include the neuter, masculine and feminine
genders whenever necessary or appropriate. Whenever the word "herein" or
"hereof" is used in this Agreement, it shall be deemed to refer to this
Agreement and not to a particular SECTION of this Agreement unless expressly
stated otherwise.
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ARTICLE 2
PURCHASE OF STOCK; CLOSING
2.1 Purchase of Stock. The Investor hereby subscribes for and agrees to
purchase from the Company, and the Company hereby accepts the Investor's
subscription for and agrees to sell to the Investor, 2,484 shares of Common
Stock (the "Purchased Shares") for a purchase price of One Hundred Thousand
($100,000) Dollars per share, which shall result in an aggregate purchase price
of $248,400,000 (the "Purchase Price"). HTL hereby irrevocably and
unconditionally agrees to cause the Investor to perform its obligations
(including causing or enabling it to make payment of the Purchase Price)
hereunder.
2.2 Closing.
(a) Closing Date. Consummation of the transactions contemplated
hereby (the "Closing") shall take place, subject to the satisfaction (or express
written waiver) of all conditions to the Closing under Article 5 hereof, on the
fifth (5th) Business Day after the later to occur of (i) the day on which all
FCC and state regulatory approvals, if any, including the Favorable Declaratory
Ruling, necessary in order to consummate lawfully the transactions contemplated
hereby have been received and shall have become Final Orders or (ii) the day on
which all applicable waiting periods under the HSR Act shall have expired or
been terminated without objection by the Federal Trade Commission. The date on
which the Closing takes place shall be referred to herein as the "Closing Date."
(b) Location. The Closing shall take place at 11:00 A.M. on the
Closing Date, at the offices of the Company located at 2001 NW Sammamish Road,
Issaquah, Washington 98027 or at such other place as the parties hereto shall
agree. At the Closing, the Company shall, upon receipt of the Purchase Price by
wire transfer of immediately available funds to the account specified therefor
by the Company, promptly deliver to the Investor duly executed and issued stock
certificates evidencing the Purchased Shares.
ARTICLE 3
COVENANTS AND AGREEMENTS
3.1 Covenants of WWC and the Company.
(a) Consummate Transactions. From and after the execution and
delivery of this Agreement to and including the Closing Date, WWC and the
Company shall use their best efforts to cause the transactions contemplated by
this Agreement to be consummated in accordance with the terms hereof, including
(i) using their best efforts to obtain all Authorizations of, and make all
filings with and give all notices to, all governmental authorities and agencies
having jurisdiction, including, without limitation, the FCC (including the
Favorable
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<PAGE> 9
Declaratory Ruling), and any state public utilities or public service
commission, and (ii) using commercially reasonable efforts to obtain all
approvals, consents, permits, licenses and other authorizations of, and making
all filings with, and giving all notices to, third parties, which in any such
case may be necessary or reasonably required of the Company in order to
consummate the transactions contemplated hereby.
(b) Full Access. From and after the execution and delivery of this
Agreement to and including the Closing Date, WWC and the Company shall give to
the Investor and its agents and representatives (including its independent
auditors and attorneys) reasonable access (such access not to interfere
unreasonably with WWC, the Company or their respective operations), during
normal business hours and upon reasonable notice as described below, to all of
WWC's and the Company's and their respective Subsidiaries' personnel, premises,
properties, assets, financial statements and records, books, contracts,
documents and commitments, in each case of or relating to or affecting the
Company and its Subsidiaries, and shall furnish the Investor and its agents and
representatives with all such information concerning the affairs of or relating
to or affecting the Company and its Subsidiaries, as the Investor may reasonably
request.
(c) Ordinary Course. From and after the execution and delivery of
this Agreement to and including the Closing Date, the Company will, and the
Company will cause its Subsidiaries to, and WWC will cause the Company and its
Subsidiaries to, except as otherwise contemplated or permitted by this
Agreement, conduct their respective businesses in the ordinary and normal course
thereof.
(d) Compliance with Law. From and after the execution and delivery
of this Agreement to and including the Closing Date, the Company and its
Subsidiaries shall comply with all applicable laws, rules, ordinances,
regulations, codes, orders, decrees, licenses and permits of all applicable
jurisdictions and governmental authorities or agencies relating to them, to
their properties or to the conduct of their businesses, except to the extent a
failure to comply would not have a Material Adverse Effect on the Company or a
material adverse effect on any PCS Authorizations.
(e) Approvals, Consents. From and after the execution and delivery
of this Agreement to and including the Closing Date, the Company and its
Subsidiaries shall obtain and maintain in full force and effect all
Authorizations from all appropriate Federal, state and local governmental
agencies or authorities necessary or required for the operation of their
businesses as presently conducted, as and when such Authorizations are necessary
or required, except, in the case of Authorizations other than PCS
Authorizations, where such failure would not have a Material Adverse Effect on
the Company. The parties shall consult with one another as to the general
approach to be taken with any governmental authority or agency with respect to
obtaining any necessary Authorization of such governmental agency or authority
to the transactions contemplated hereby and, if applicable, by any Additional
Agreement, and each of the parties shall keep each other party reasonably
informed as to the status of any such communications with any governmental
authority or agency.
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(f) No Amendments or Issuance of Additional Shares. On or prior to
the Closing Date, the Company shall amend its certificate of incorporation and
by-laws to be in the form of Exhibit 3.01(f) annexed hereto. From and after the
execution and delivery of this Agreement to and including the Closing Date,
except as contemplated hereby to cause WWC as of the Closing to own 10,000
shares of Common Stock, the Company shall not issue or sell any shares of its
capital stock, or options, warrants or rights of any kind to acquire, or any
securities convertible into, exchangeable for or representing a right to
purchase or receive, any shares of its capital stock, or enter into any
contract, plan, understanding or arrangement with respect to the issuance of any
stock-based or stock-related awards or other equity-based awards, or enter into
any arrangement or contract with respect to the purchase or voting of shares of
its capital stock, or adjust, split, combine or reclassify any of its
securities, or make any other changes in its capital structure.
(g) Books and Records. From and after the execution and delivery of
this Agreement to and including the Closing Date, the Company shall, and shall
cause each of its Subsidiaries to, maintain its books, accounts and records in
the usual manner, on a basis consistent with prior years and in accordance with
generally accepted accounting principles.
(h) Certain Actions. From and after the execution and delivery of
this Agreement to and including the Closing Date, neither the Company nor WWC
shall take any action or refrain from taking any action which would materially
interfere with or preclude the consummation of the transactions contemplated by
this Agreement or any Additional Agreement, result in any of the representations
and warranties of any party hereto contained herein being incorrect or
incomplete in any material respect, or result in any of the conditions to HTL's
and the Investor's obligations to consummate the transactions contemplated by
this Agreement as set forth in SECTION 5.02 being unsatisfied in accordance with
the terms hereof.
(i) Notice of Breaches. From and after the execution and delivery of
this Agreement to and including the Closing Date, WWC shall promptly after
obtaining knowledge of the occurrence of, or the impending or threatened
occurrence of, any event which would cause or constitute a breach of any
warranties, representations, covenants or agreements of the Company or WWC
contained in this Agreement, give notice in writing of such event or occurrence
or impending or threatened event or occurrence, to HTL and the Investor and use
its diligent efforts to prevent or promptly to remedy such breach.
(j) Quarterly Operating Statements. Between the date of this
Agreement and the Closing Date, the Company shall deliver to the Investor as
soon as practicable, but no later than forty-five (45) days after the end of
each calendar quarter, with respect to the Company and its Subsidiaries
unaudited operating statements ("Quarterly Operating Statements") for the most
recent quarter and the interim period then ended.
(k) Transfer of PCS Authorizations. Prior to or simultaneously with
the
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Closing, WWC shall take, or cause to be taken, all actions required to transfer
to the Company or its Subsidiaries (effective at or before the Closing) (i) all
PCS Authorizations held directly or indirectly by WWC, and all interests of the
WWC Non-Company Group (as defined in the Shareholders Agreement) in any PCS
Authorization (including the limited partnership interest of the WWC Non-Company
Group in Cook), whether or not listed on EXHIBIT 4.01(i) annexed hereto, and
(ii) all rights of the WWC Non-Company Group to acquire any PCS Authorization or
any interest in any PCS Authorization, including pursuant to the Agreements
dated April 24, 1997 among WWC and Triad Cellular Corporation, Triad Cellular
L.P. and/or certain of their Affiliates. Accordingly, at the Closing the Company
and its Subsidiaries will own all of the PCS Authorizations, and all interests
of WWC or its Subsidiaries in any PCS Authorization, owned by the WWC Group (as
defined in the Shareholders Agreement) immediately prior to the Closing.
(l) Capitalization of the Company at the Closing. Prior to or
simultaneously with the Closing, WWC shall take, or cause to be taken, all
actions necessary or required for (i) all liabilities or obligations of the
Company Group to the WWC Non-Company Group to be converted into Common Stock (or
additional paid-in capital in respect of Common Stock), so that immediately
after the Closing, no member of the Company Group shall have any liabilities or
obligations to any member of the WWC Non-Company Group, other than pursuant to
the Intercompany Agreements, and (ii) all liabilities or obligations of the WWC
Non-Company Group to the Company Group to be satisfied, so that immediately
after the Closing no member of the WWC Non-Company Group shall have any
liabilities or obligations to any member of the Company Group. If, at the
Closing, the total equity contributed by WWC, its shareholders and its
Subsidiaries (other than the Company or its Subsidiaries) to the Company and its
Subsidiaries in cash (including (i) any payments of interest or other amounts
paid by WWC on behalf of, or in connection with loans, the proceeds of which
were used for the benefit of the Company or its Subsidiaries, and (ii) the
amount of liabilities and obligations converted to Common Stock (or additional
paid-in capital in respect of Common Stock) as provided in this SECTION 3.01(l))
is less than Seven Hundred Fifty Million ($750,000,000) Dollars then, on the
Closing Date, WWC shall contribute in cash to the Company an amount equal to
such shortfall. If, at the Closing, the total equity so contributed by WWC, its
shareholders and its Subsidiaries (other than the Company or its Subsidiaries)
to the Company and its Subsidiaries (including the amount of liabilities and
obligations converted to Common Stock (or additional paid-in capital in respect
of Common Stock) as provided in this SECTION 3.01(1)) is greater than Seven
Hundred Fifty Million ($750,000,000) Dollars then, on the Closing Date, the
Company shall pay to WWC in cash an amount equal to such excess. The
contributions and repayments, if any, pursuant to this SECTION 3.01(l) shall not
have any dilutive effect on (A) the 19.9% interest in the Company's outstanding
Common Stock to be held by the Investor as a result of the Closing or (B) the
80.1% interest in the Company's outstanding Common Stock to be held by WWC as a
result of the Closing.
(m) Tax Filings. From and after the execution and delivery of this
Agreement to and including the Closing Date, the Company shall, and WWC shall
cause all members of its consolidated group to, timely file all Federal, state
and local Tax Returns and all information returns and reports required to be
filed by or with respect to it under the laws of the United States
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<PAGE> 12
or any state or other jurisdiction and pay as and when due all Taxes payable
thereunder.
3.2 Covenant of the Investor. Each of HTL and the Investor covenants and
agrees from and after the execution and delivery of this Agreement to and
including the Closing Date that it shall use its best efforts to cause the
transactions contemplated by this Agreement to be consummated in accordance with
the terms hereof, including (i) using its best efforts to obtain all
Authorizations of, and make all filings with and give all notices to, all
governmental authorities and agencies, having jurisdiction, including, without
limitation, the FCC (including the Favorable Declaratory Ruling), and any state
public utilities or public service commission, and, if required, by the Hong
Kong Stock Exchange, and (ii) using commercially reasonable efforts to obtain
all necessary approvals, consents, permits, licenses and other authorizations
of, and making all filings with, and giving all notices to, third parties, which
in any such case may be necessary or reasonably required of HTL or the Investor
in order to consummate the transactions contemplated hereby. In this regard, HTL
shall make all necessary filings with the Hong Kong Stock Exchange within thirty
(30) days after the date hereof.
3.3 Governmental Filings. Each of the parties hereto covenants and
agrees from and after the execution and delivery of this Agreement to and
including the Closing Date as follows:
(a) FCC. It is understood that the consummation of this transaction
is subject to obtaining from the FCC a Favorable Declaratory Ruling (as defined
below), which has become a Final Order, and may be subject to the prior approval
pursuant to Final Orders of one or more state regulatory commissions. As soon as
practicable following the date hereof and in no event later than ten (10)
Business Days from the date hereof, the parties shall use their best efforts to
file with (i) the FCC a petition for a declaratory ruling granting a waiver from
the indirect foreign ownership restrictions under SECTION 310(b)(4) of the
Communications Act to the effect that the transactions contemplated by this
Agreement, including the purchase by the Investor of the Purchased Shares, are
permissible in accordance with the terms hereof (the "Favorable Declaratory
Ruling"), and (ii) any relevant state agency(ies) a joint application(s)
requesting the approval of such agencies to the transactions contemplated
hereby. Each of the parties hereto shall diligently take or cooperate in the
taking of all steps which are necessary or appropriate to expedite the
prosecution and favorable consideration of such applications. The parties
covenant and agree to undertake all such actions and to file all such material
as may be reasonably requested by the FCC or other regulatory authority and to
obtain any necessary Authorization from the FCC or such state agency or agencies
in connection with the foregoing applications.
(b) HSR Act. It is understood that the consummation of this
transaction is subject to the filing with the Federal Trade Commission and the
Antitrust Division of the Department of Justice of all reports and notifications
which are required under the HSR Act and the expiration or termination of
certain applicable waiting periods under the HSR Act without objection by such
authorities. Within twenty-one (21) Business Days of the date of execution
hereof, HTL, the Investor, WWC and the Company shall file, or cause to be filed,
with the
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Federal Trade Commission and the Antitrust Division of the Department of Justice
any and all such reports or notifications and any other filings required under
any other Federal law or administrative regulations in connection with the
purchase of the Purchased Shares under this Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of WWC. WWC represents and warrants
to HTL and the Investor, which representations and warranties shall survive the
execution and delivery of this Agreement and the consummation of the
transactions herein contemplated, as follows:
(a) Due Organization. WWC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Washington. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Company is duly qualified to do
business and is in good standing in all jurisdictions where the conduct of its
business or the ownership of its properties makes such qualification necessary,
except where the failure to so qualify would not have a Material Adverse Effect
on the Company.
(b) Power and Authority; No Violation. Each of WWC and the Company
has full power and authority to execute, deliver and perform its obligations
under this Agreement and the Intercompany Agreements and the Shareholders
Agreement and to consummate the transactions contemplated hereby or thereby,
except that the Company shall be required to amend its certificate of
incorporation and by-laws to be in the form of Exhibit 3.01(f) annexed hereto
prior to the Closing Date. This Agreement and the Intercompany Agreements and
the Shareholders Agreement and all transactions contemplated hereby or thereby
have been duly and validly authorized by all necessary action on the part of WWC
and the Company and this Agreement constitutes, and upon execution by the
parties thereto each of the Intercompany Agreements and the Shareholders
Agreement shall constitute, a legal, valid and binding obligation of WWC and the
Company enforceable in accordance with its terms except as such enforceability
may be limited by bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally. Except as
described on EXHIBIT 4.01(b) annexed hereto, neither the execution, delivery or
performance of this Agreement or, upon their execution, the Intercompany
Agreements or the Shareholders Agreement, nor the consummation of the
transactions contemplated hereby or thereby by WWC and the Company will, with or
without the giving of notice or the passage of time, or both, (i) conflict with,
result in a default or loss of rights (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of any Lien,
pursuant to (A) any provision of the certificates of incorporation, by-laws,
stockholders agreements or other constituent documents of WWC or the Company (it
being understood that the Company will amend its certificate of incorporation
and by-laws to be in the form of Exhibit 3.01(f) annexed hereto prior to the
Closing Date) or any of their respective Subsidiaries or Cook; (B) any material
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note, bond, indenture, mortgage, deed of trust, contract, agreement, lease or
other instrument or obligation to which either WWC or the Company or any of
their respective Subsidiaries is a party or by which either WWC or the Company
or any of their respective Subsidiaries or Cook or their respective property may
be bound or affected; or (C) any law, order, judgment, ordinance, rule,
regulation or decree to which WWC or the Company or any of their Subsidiaries or
Cook is a party or by which they or their respective property is bound or
affected; or (ii) give rise to any right of first refusal or similar right with
respect to any interest, or any properties or assets, of WWC or the Company or
any of their respective Subsidiaries or Cook. Except as described on EXHIBIT
4.01(b) annexed hereto, no permit, consent, approval, authorization,
qualification or registration of, or declaration to or filing with any
governmental or regulatory authority or agency or third party is required to be
obtained or made by WWC or the Company or any of their respective Subsidiaries
in connection with the execution and delivery of this Agreement or the
Intercompany Agreements or the Shareholders Agreement or the consummation of the
transactions contemplated hereby or thereby in order to render this Agreement or
the Intercompany Agreements or the Shareholders Agreement or the transactions
contemplated hereby or thereby valid and effective.
(c) Legal Matters. Except as set forth on EXHIBIT 4.01(c) annexed
hereto, there is no claim, legal action, counterclaim, suit, arbitration,
governmental investigation or other legal, administrative or tax proceeding, nor
any order, decree or judgment, in progress or pending, or to the knowledge of
WWC and the Company threatened, against or relating to the right of WWC or the
Company to perform its obligations under this Agreement, any Intercompany
Agreement or the Shareholders Agreement, nor do WWC and the Company know or have
reason to be aware of any basis for the same. There is outstanding no order,
writ, injunction, judgment or decree of any court, governmental agency or
arbitration tribunal which would individually or in the aggregate impair in any
material respect the performance of the obligations of WWC and the Company
hereunder or under the Intercompany Agreements or the Shareholders Agreement or
the consummation of the transactions contemplated hereby or thereby other than
orders or decrees involving the wireless telephone industry in general.
(d) Truth and Correctness. No representation or warranty by WWC or
the Company in this Agreement, any Intercompany Agreement or the Shareholders
Agreement contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein, in light of the circumstances under which such
statements are made, not misleading.
(e) Purchased Shares. The Purchased Shares shall, at the Closing, be
duly authorized by all necessary corporate action on the part of the Company,
shall be (when issued in accordance with the terms of this Agreement) validly
issued and outstanding, fully paid and nonassessable, and shall not be subject
to any preemptive rights of the holders of any other class or series of the
capital stock of the Company. Upon the issuance of the Purchased Shares to the
Investor at the Closing, the Purchased Shares shall be free and clear of all
Liens of any nature whatsoever, with the exception of any restrictions on
transferability set forth in the Shareholders
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Agreement or under the Securities Act or any securities laws of any
jurisdiction.
(f) No Brokers. Except for Goldman, Sachs & Co., no agent, broker,
investment banker, Person or firm is or will be entitled to any broker's or
finder's fee or any other commission or similar fee directly or indirectly in
connection with the transactions contemplated by this Agreement based in any way
on any arrangements, agreements or understandings made by or on behalf of WWC or
the Company or an Affiliate of either thereof, and WWC and the Company hereby
jointly and severally agree to indemnify the Investor and agree to hold harmless
the Investor against and in respect of any claims (including those of Goldman,
Sachs & Co.) for brokerage and other commissions relating to such transactions
based in any way on any arrangements, agreements or understandings made by or on
behalf of WWC or the Company or an Affiliate of either thereof.
(g) Financial Statements. EXHIBIT 4.01(g) annexed hereto contains a
list of financial statements of the Company and its Subsidiaries for the periods
indicated on such EXHIBIT 4.01(g) (the "Operating Financial Statements"). True
and complete copies of each item listed thereon have previously been delivered
to the Investor. The Operating Financial Statements are, and the Quarterly
Operating Statements will be, prepared on a consistent basis in accordance with
generally accepted accounting principles and true and correct in all material
respects.
(h) Compliance with Laws. Except as set forth on EXHIBIT 4.01(c)
annexed hereto, each of WWC, the Company, each of their respective Subsidiaries
and Cook is in compliance with all applicable laws, regulations, administrative
orders and Authorizations of the United States and the states in which the
Company or its Subsidiaries or Cook transact business (including all applicable
rules, regulations and Authorizations of the FCC, any state public utilities or
public service commission, or any other Federal or state governmental agency or
instrumentality exercising jurisdiction over the Company), and of each
municipality, county or subdivision of any thereof, to which any of its
businesses or any of its properties may be subject, the non-compliance with
which would have a Material Adverse Effect upon the Company.
(i) Authorizations.
(i) Each of the Company, each of its Subsidiaries and Cook has
(A) all requisite Authorizations of the FCC (including all PCS Authorizations)
and of all state public utility or public service commissions and (B) all other
material Authorizations of governmental agencies exercising jurisdiction over
the Company or any Subsidiary or Cook required to carry on its or their business
as now conducted or as contemplated to be conducted, except for any
Authorizations, the failure of which to obtain would not have a Material Adverse
Effect on the Company or a material adverse effect on any PCS Authorization. All
PCS Authorizations (including those not now owned by the Company or its
Subsidiaries but which are to be transferred to the Company or its Subsidiaries
prior to the Closing Date in accordance with SECTION 3.01(k) hereof) which are
contemplated by this Agreement to be held, directly or
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indirectly, by the Company are listed on EXHIBIT 4.01(i) annexed hereto.
(ii) The Company's Authorizations are in full force and effect
and have not been suspended, modified in any material adverse respect, canceled
or revoked, and each of WWC, the Company, each of their respective Subsidiaries
and Cook has operated in compliance with all terms thereof or any renewals
thereof applicable to it except where failure to so comply would not have a
Material Adverse Effect on the Company or a material adverse effect on any PCS
Authorization. No event has occurred with respect to any of the Authorizations
which permits, or after notice or lapse of time or both would permit, revocation
or termination thereof or would result in any other material impairment of the
rights of the holder of any such Authorizations, except to the extent such
revocation, termination or impairment would not have a Material Adverse Effect
on the Company or a material adverse effect on any PCS Authorization. Except as
set forth on EXHIBIT 4.01(i) annexed hereto, there is not pending as of the date
hereof any application, petition, objection or other pleading with the FCC or
any public service commission or similar body having jurisdiction or authority
over the communications operations of the Company and its Subsidiaries which
questions the validity of, or which presents a substantial risk that, if
accepted or granted, would result in the revocation, cancellation, suspension or
any materially adverse modification of, any such Authorizations, except to the
extent such invalidity, revocation, cancellation, suspension or modification
would not have a Material Adverse Effect on the Company or a material adverse
effect on any PCS Authorization.
(j) Taxes. WWC, the Company and their respective Subsidiaries have
timely filed all Federal, state, county, local and foreign Tax Returns required
to be filed by them, and have paid all Taxes which have become due pursuant
thereto or otherwise, other than Taxes the liability for which is being
contested in good faith and appropriate reserves for which have been made in the
Company's financial statements. Except as set forth on EXHIBIT 4.01(j) annexed
hereto, there are no additional assessments or adjustments of Taxes pending or
threatened against WWC, the Company or their respective Subsidiaries for any
period.
(k) No Material Adverse Change. Since June 30, 1997, there has not
been any event or condition which has caused, or is reasonably likely to cause,
a Material Adverse Effect on the Company, other than as a result of conditions
affecting PCS systems generally.
(l) Employee Benefit Plans. All employee benefit or employee welfare
plans maintained by WWC, the Company or any of their respective Subsidiaries
which are subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), comply in all material respects with the requirements of
ERISA, and no such plan which is subject to Part 3 of Subtitle B of Title 1 of
ERISA has incurred any "Accumulated Funding Deficiency" within the meaning of
SECTION 302 of ERISA or SECTION 412 of the Code, and neither WWC nor the Company
has incurred any liability on account of such an "Accumulated Funding
Deficiency" with respect to any such employee benefit plan subject to ERISA. No
liability to the Pension Benefit Guaranty Corporation established under ERISA
has been incurred with respect to any such plan subject to ERISA and neither WWC
nor the Company has incurred any liability for
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<PAGE> 17
any tax implied by SECTION 4975 of the Code. As of the most recent valuation
date of any such plan, there are no "unfunded benefit liabilities" within the
meaning of SECTION 4001(a)(18) of ERISA. If WWC, the Company or any of their
respective Subsidiaries were to withdraw completely from any such plan that is a
multiemployer plan, within the meaning of SECTION 3(37) of ERISA, there would be
no "withdrawal liability" within the meaning of SECTION 4201 of ERISA.
(m) Compliance with other Instruments. Neither WWC, the Company nor
any of their respective Subsidiaries nor Cook is in violation of any term of (i)
any agreement or instrument related to indebtedness for borrowed money or any
other material agreement to which it is a party or by which it is bound, or (ii)
any applicable order, judgment or decree of any court, arbitrator or
governmental authority, the consequences of which violation, whether
individually or in the aggregate, would result in a Material Adverse Effect on
the Company.
(n) Organization of Subsidiaries. Each Subsidiary of the Company is
listed on Exhibit 4.01(n) annexed hereto and is a corporation or other legal
entity duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization and is duly qualified and has the full
power and authority in each applicable jurisdiction to own its properties and
conduct its business and operations as currently conducted, except to the extent
that any failure to qualify would not have a Material Adverse Effect on the
Company. Cook is a limited partnership duly organized, validly existing and in
good standing under the laws of Delaware and is duly qualified and has the full
power and authority in each applicable jurisdiction to own its properties and
conduct its business and operations as currently conducted, except to the extent
that any failure to qualify would not have a Material Adverse Effect on the
Company.
(o) Capital Stock. After giving effect to the Closing hereunder,
12,484 shares of Common Stock will be outstanding, of which 10,000 shares shall
have been issued to WWC, and 2,484 shares shall have been issued to the
Investor. All outstanding shares of the capital stock of the Company at the date
hereof are (and will after giving effect to the Closing be) duly authorized,
validly issued, fully paid and nonassessable, and no class of capital stock of
the Company will at the Closing be entitled to preemptive rights, other than as
set forth in the Shareholders Agreement. There are outstanding no options,
warrants or other rights to acquire capital stock from the Company.
(p) Investment Company Act. Neither WWC nor the Company is, or will
become after giving effect to the Closing, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
4.2 Representations and Warranties of HTL and the Investor. Each of HTL
and the Investor represents and warrants to the Company and WWC, which
representations and warranties shall survive the execution and delivery of this
Agreement and the consummation of the transactions herein contemplated, as
follows:
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<PAGE> 18
(a) Due Organization. HTL is a corporation duly organized, validly
existing and in good standing under the laws of Hong Kong and the Investor is a
corporation duly organized, validly existing and in good standing under the laws
of the British Virgin Islands. Each of HTL and the Investor is duly qualified to
do business and is in good standing in all jurisdictions where the conduct of
its business or the ownership of its properties makes such qualification
necessary, except where the failure to so qualify would not have a material
adverse effect on HTL or the Investor or its financial condition, or the
transactions contemplated hereby.
(b) Power and Authority; No Violation. Each of HTL and the Investor
has full power and authority to execute, deliver and perform its obligations
under this Agreement and the Shareholders Agreement and to consummate the
transactions contemplated hereby or thereby. This Agreement and the Shareholders
Agreement and all transactions contemplated hereby or thereby have been duly and
validly authorized by all necessary action on the part of each of HTL and the
Investor and this Agreement constitutes, and upon execution thereof by the
parties thereto the Shareholders Agreement shall constitute, a legal, valid and
binding obligation of each of HTL and the Investor, as applicable, enforceable
in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting or relating
to enforcement of creditors' rights generally. Except as described on EXHIBIT
4.02(b) annexed hereto, neither the execution, delivery or performance of this
Agreement or the Shareholders Agreement nor the consummation of the transactions
contemplated hereby or thereby by HTL or the Investor will, with or without the
giving of notice or the passage of time, or both, (i) conflict with, result in a
default or loss of rights (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of any Lien,
pursuant to (A) any provision of the memorandum and articles of association,
certificates of incorporation, by-laws, stockholders agreements or other
constituent documents of either HTL or the Investor; (B) any material note,
bond, indenture, mortgage, deed of trust, contract, agreement, lease or other
instrument or obligation to which either HTL or the Investor is a party or by
which either of them or their respective property may be bound or affected; or
(C) any law, order, judgment, ordinance, rule, regulation or decree to which
either HTL or the Investor is a party or by which either of them or their
respective property is bound or affected; or (ii) give rise to any right of
first refusal or similar right with respect to any interest, or any properties
or assets, of either HTL or the Investor. Except as described on EXHIBIT 4.02(b)
annexed hereto, no permit, consent, approval, authorization, qualification or
registration of, or declaration to or filing with any governmental or regulatory
authority or agency or third party is required to be obtained or made by either
HTL or the Investor in connection with the execution and delivery of this
Agreement or the Shareholders Agreement or the consummation of the transactions
contemplated hereby or thereby in order to (A) render this Agreement or the
Shareholders Agreement or the transactions contemplated hereby or thereby valid
and effective and (B) enable the Investor to purchase the Purchased Shares.
(c) Legal Matters. Except as set forth on EXHIBIT 4.02(c) annexed
hereto, there is no claim, legal action, counterclaim, suit, arbitration,
governmental investigation or other legal, administrative or tax proceeding, nor
any order, decree or judgment, in progress or
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<PAGE> 19
pending, or to the knowledge of HTL or the Investor threatened, against or
relating to either HTL's or the Investor's right to perform its obligations
under this Agreement or the Shareholders Agreement, nor do either HTL or the
Investor know or have reason to be aware of any basis for the same. There is
outstanding no order, writ, injunction, judgment or decree of any court,
governmental agency or arbitration tribunal which would individually or in the
aggregate impair in any material respect the performance of either HTL's or the
Investor's obligations hereunder or the consummation of the transactions
contemplated by this Agreement or the Shareholders Agreement other than orders
or decrees involving the wireless telephone industry in general.
(d) Securities Representation. Each of HTL and the Investor
acknowledges that: (i) it is an accredited investor (as defined in Rule 501
under the Securities Act; (ii) it has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks of
investing in the Company as contemplated hereby or, alternatively, that it has
engaged the services of a representative who has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of the proposed investment and who has reviewed the proposed investment on
its behalf; (iii) the Purchased Shares being delivered by the Company to the
Investor have not been registered under the Securities Act or under the
securities laws of any state in reliance upon Federal and state exemptions for
transactions not involving a public offering and are not being acquired with a
view to the distribution thereof except pursuant to a registration statement in
compliance with Federal and state securities laws or an exemption therefrom;
(iv) the Purchased Shares must be held by the Investor indefinitely unless
subsequently so registered or if an exemption from such registration is
available; and (v) it has received information concerning the Company and has
had the opportunity to obtain additional information as desired in order to
evaluate the merits and risks inherent in holding the Purchased Shares. The
Investor agrees that the share certificate(s) which the Investor receives from
the Company shall be legended with the following legends:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND NO
TRANSFER OR OTHER DISTRIBUTION THEREOF CAN BE MADE IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR THE SHARES UNDER THE ACT, OR
AN OPINION OF COUNSEL PRESENTED AND SATISFACTORY TO THE COMPANY AND
ITS COUNSEL PRIOR TO THE PROPOSED TRANSACTION THAT REGISTRATION IS
NOT REQUIRED UNDER THE ACT OR ANY APPLICABLE STATE SECURITIES LAWS."
AND
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER
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<PAGE> 20
AND VOTING SET FORTH IN A SHAREHOLDERS AGREEMENT DATED AS OF
_________, 19__. A COPY OF SUCH AGREEMENT MAY BE OBTAINED FROM THE
COMPANY UPON REQUEST."
(e) Investment Company Act. Neither of HTL or the Investor is an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
(f) Truth and Correctness. No representation or warranty by either
HTL or the Investor in this Agreement or the Shareholders Agreement contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary to make the statements contained herein or
therein, in light of the circumstances under which such statements are made, not
misleading.
(g) No Brokers. Except for Donaldson, Lufkin & Jenrette, no agent,
broker, investment banker, Person or firm is or will be entitled to any broker's
or finder's fee or any other commission or similar fee directly or indirectly in
connection with the transactions contemplated by this Agreement based in any way
on any arrangements, agreements or understandings made by or on behalf of either
HTL or the Investor or by an Affiliate thereof, and each of HTL and the Investor
hereby agrees to indemnify WWC and the Company and agrees to hold harmless WWC
and the Company against and in respect of any claims (including those of
Donaldson, Lufkin & Jenrette) for brokerage and other commissions relating to
such transactions based in any way on any arrangements, agreements or
understandings made by or on behalf of HTL or the Investor or by an Affiliate of
HTL or the Investor.
(h) No Interest in FCC Licenses. Neither HTL nor any of its
Subsidiaries has any license to provide or is providing, or owns, directly or
indirectly, any interest in any entity which has a license to provide or which
is providing, commercial mobile radio services in the United States.
ARTICLE 5
CONDITIONS TO OBLIGATIONS
5.1 Conditions to the Obligation of WWC and the Company. The obligation
of WWC and the Company to perform, fulfill or carry out their respective
agreements, undertakings and obligations herein made or expressed to be
performed, fulfilled or carried out on the Closing Date is and shall be subject
to fulfillment of or compliance with, on or prior to the Closing Date, the
following conditions precedent, any of which may be waived by WWC and the
Company in their sole discretion, in whole or in part:
(a) Representations and Warranties True. Each of HTL's and the
Investor's representations and warranties contained in this Agreement shall be
deemed to have been made
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<PAGE> 21
again at and as of the time of the Closing Date and shall then be true in all
material respects. Each of HTL and the Investor shall have performed and
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it prior to or at the Closing
Date. WWC and the Company shall have been furnished with a certificate of each
of HTL and the Investor signed by one of its senior executive officers, dated
the Closing Date, certifying to the fulfillment of the foregoing conditions by
it and to the truth and correctness in all material respects, except for changes
contemplated by this Agreement, as of the Closing Date, of the representations
and warranties made by it contained herein and the satisfaction on the part of
HTL and the Investor of all conditions to the obligations of WWC and the Company
under this SECTION 5.01.
(b) No Suit Pending. There shall not then be pending by any third
party any suit or proceeding to restrain or invalidate, in whole or in part,
this Agreement or the transactions herein contemplated.
(c) Opinions of Counsel. WWC and the Company shall have been
furnished with an opinion of Dewey Ballantine, counsel for HTL and the Investor,
dated the Closing Date and substantially in the form of EXHIBIT 5.01(c) annexed
hereto.
(d) HSR Act. The waiting periods, if applicable, of the HSR Act
shall have expired or been terminated.
(e) Consents Obtained. All consents, waivers, approvals and actions
of third parties including all necessary waivers and approvals from Federal,
state and local authorities (including the FCC and all public service
commissions and public utility commissions or comparable bodies exercising
jurisdiction over WWC, the Company, HTL, the Investor or their respective
Subsidiaries and including the Hong Kong Stock Exchange) as may be required for
the consummation of the transactions contemplated hereby, as of the Closing
Date, shall have been obtained (and in the case of FCC waivers or approvals
pursuant to a Final Order) or made (which consents, waivers and approvals shall
not contain any conditions or restrictions which, in the case of FCC waivers or
approvals, are not customary in transactions of this nature). Notwithstanding
anything to the contrary herein contained, it shall not be a condition to WWC
and the Company's obligations under this Agreement for the Company to obtain
each individual required waiver or consent (other than any waivers or consents
of the FCC, any public utility or public service commission (or comparable
bodies exercising jurisdiction over the Company) or under the TD Loan Agreement,
the Nortel Loan Agreement or the Indentures) so long as the failure to obtain
any such individual waiver or consent would not individually or together with
all such other failures to obtain waivers or consents have a Material Adverse
Effect on the Company.
(f) Purchase Price. The Investor shall have delivered the Purchase
Price to the Company as required hereunder.
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(g) Resolutions. WWC and the Company shall have been furnished with
certified copies of the resolutions duly adopted by the boards of directors of
HTL and the Investor authorizing the execution, delivery and performance of this
Agreement and, in the case of the Investor, the Shareholders Agreement.
(h) No New Statutes. No statute, rule or regulation shall have been
enacted by any state or Federal government or governmental agency in the United
States or Hong Kong which would render the consummation of this Agreement
unlawful.
(i) Shareholders Agreement. The Company, the Investor and WWC (and,
solely for purposes of acknowledging and agreeing to Section 7(b) thereof, John
W. Stanton) shall have executed and delivered the Shareholders Agreement.
(j) Other Agreements. Each of the Cash Management Agreement, Roaming
Agreement, Services Agreement and Tax-Sharing Agreement shall have been duly
executed and delivered by all parties thereto.
(k) Financings. The Company and its Subsidiaries shall have been
released from any and all obligations and liabilities under any loan agreements,
financing arrangements or other credit facilities (including the TD Loan
Agreement), other than the Nortel Loan Agreement, and all pledges or security
interests on any of the assets or shares of capital stock or equity securities
of the Company (except to the extent permitted under the Shareholders Agreement)
or its Subsidiaries (other than any pledges or security interests securing the
Nortel Loan Agreement) shall have been released and discharged. Likewise, WWC
and its Subsidiaries (other than the Company or its Subsidiaries) shall have
been released from any and all obligations and liabilities under the Nortel Loan
Agreement or any other loan agreement, financing arrangements or other credit
facilities binding upon the Company or its Subsidiaries after the Closing.
5.2 Conditions to the Obligation of HTL and the Investor. The obligation
of each of HTL and the Investor to perform, fulfill or carry out its agreements,
undertakings and obligations herein made or expressed to be performed, fulfilled
or carried out on the Closing Date is and shall be subject to fulfillment of or
compliance with, on or prior to the Closing Date, the following conditions
precedent, any of which may be waived by HTL or the Investor, in its sole
discretion, in whole or in part.
(a) Representations and Warranties True. Each of the representations
and warranties of the Company and WWC contained in this Agreement shall be
deemed to have been made again at and as of the time of the Closing Date and
shall then be true in all respects. The Company and WWC shall have performed and
complied in all material respects, with all agreements and covenants required by
this Agreement to be performed or complied with by each of them prior to or at
the Closing Date. HTL and the Investor shall have been furnished with a
certificate of each of WWC and the Company signed by one of its senior executive
officers, dated the Closing Date, certifying to the fulfillment of the foregoing
conditions by it and to the truth and correctness in all material respects,
except for changes contemplated by this
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<PAGE> 23
Agreement, as of the Closing Date, of the representations and warranties made by
it contained herein and the satisfaction on the part of WWC and the Company of
all conditions to the obligations of HTL and the Investor under this SECTION
5.02.
(b) No Suit Pending. There shall not then be pending by any third
party any suit or proceeding to restrain or invalidate, in whole or in part,
this Agreement or the transactions herein contemplated.
(c) Opinion of Counsel. HTL and the Investor shall have been
furnished with an opinion of Rubin Baum Levin Constant & Friedman, counsel for
WWC and the Company, dated the Closing Date, substantially in the form of
EXHIBIT 5.02(c) annexed hereto.
(d) Opinion of FCC Counsel. HTL and the Investor shall have been
furnished with an opinion of Gurman Blask & Freedman, FCC counsel for WWC and
the Company, dated the Closing Date, substantially in the form of EXHIBIT
5.02(d) annexed hereto.
(e) HSR Act. The waiting periods, if applicable, of the HSR Act
shall have expired or been terminated.
(f) Consents Obtained. All consents, waivers, approvals and actions
of third parties including all necessary waivers and approvals from Federal,
state and local authorities (including the FCC and all public service
commissions and public utility commissions or comparable bodies exercising
jurisdiction over WWC, the Company, their respective Subsidiaries, HTL or the
Investor, and including the Hong Kong Stock Exchange) as may be required for the
consummation of the transactions contemplated hereby by HTL and the Investor, as
of the Closing Date, shall have been obtained (and in the case of FCC waivers or
approvals pursuant to a Final Order), or made (which consents, waivers and
approvals shall not contain any conditions or restrictions which, in the case of
FCC waivers or approvals, are not customary in transactions of this nature).
Notwithstanding anything to the contrary herein contained, it shall not be a
condition to HTL's or the Investor's obligations under this Agreement for the
Company to obtain each individual required waiver or consent (other than any
waivers or consents of the FCC, any public utility or public service commission
(or comparable bodies exercising jurisdiction over the Company) or under the TD
Loan Agreement, the Nortel Loan Agreement or the Indentures) so long as the
failure to obtain any such individual waiver or consent would not individually
or together with all such other failures to obtain consents have a Material
Adverse Effect on the Company.
(g) Stock Certificates. The Company shall have delivered to the
Investor duly executed and issued stock certificates representing the Purchased
Shares.
(h) Resolutions. Each of WWC and the Company shall have delivered to
HTL and the Investor a certified copy of the resolution or resolutions duly
adopted by its board of directors authorizing the execution, delivery and
performance of this Agreement and the
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<PAGE> 24
Additional Agreements. The Company shall have delivered a certified copy of
resolutions duly adopted by its board of directors or by WWC as the Company's
sole shareholder electing the designees of the Investor to the Company's board
of directors effective as of the Closing in accordance with the Shareholders
Agreement.
(i) No New Statutes. No statute, rule or regulation shall have been
enacted by any state or Federal government or governmental agency in the United
States or Hong Kong which would render the consummation of this Agreement
unlawful.
(j) Shareholders Agreement. The Company, the Investor and WWC (and,
solely for purposes of acknowledging and agreeing to Section 7(b) thereof, John
W. Stanton) shall have executed and delivered the Shareholders Agreement.
(k) Other Agreements. Each of the Cash Management Agreement, Roaming
Agreement, Services Agreement and Tax-Sharing Agreement shall have been duly
executed and delivered by all parties thereto.
(l) Financings. The Company and its Subsidiaries shall have been
released from any and all obligations and liabilities under any loan agreements,
financing arrangements or other credit facilities (including the TD Loan
Agreement), other than the Nortel Loan Agreement, and all pledges or security
interests on any of the assets or shares of capital stock or equity securities
of the Company (except to the extent permitted under the Shareholders Agreement)
or its Subsidiaries (other than any pledges or security interests securing the
Nortel Loan Agreement) shall have been released and discharged, and instruments
reasonably satisfactory to the Investor evidencing the foregoing shall have been
delivered to the Investor.
(m) Absence of Certain Events. No event that would constitute a
Disposition Event (as defined in the Shareholders Agreement) shall have occurred
between the date hereof and the Closing Date, except for any action that is
required in order for WWC or the Company to satisfy any of its covenants or
agreements under this Agreement or otherwise required to consummate the
transactions contemplated hereby.
ARTICLE 6
SURVIVAL; INDEMNITY
6.1 Survival of Representations and Warranties. Notwithstanding any
investigation or review made at any time by or on behalf of any party hereto,
all representations and warranties contained in this Agreement or in the
EXHIBITS annexed hereto or in any of the agreements, certificates or instruments
delivered in connection herewith shall survive until the termination of the
applicable Indemnification Period and shall thereupon expire together with any
right to indemnification (except with respect to any claim for breach of any
such representation or
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warranty for which written notice shall have been given prior to the termination
of the Indemnification Period to the party which made such representation or
warranty).
6.2 Indemnity by WWC.
(a) (i) During the Indemnification Period (or thereafter solely with
respect to any claim for which indemnification has been made prior to the
expiration of the Indemnification Period), in addition to any other
indemnification provided for under this Agreement or any Additional Agreement,
the Company (and solely to the extent the Company is unable to do so, WWC) shall
indemnify and hold harmless HTL, the Investor and their respective officers,
directors, employees, stockholders, agents and representatives from and against
any and all demands, claims, losses, liabilities, actions or causes of action,
assessments, actual damages (but excluding consequential damages), fines, Taxes
(including excise and penalty taxes), penalties, costs and expenses, including
interest, expenses of investigation, reasonable fees and disbursements of
counsel, accountants and other experts (collectively "Losses") incurred or
suffered by any such indemnified Person arising out of, resulting from, or
relating to any breach of any of the representations or warranties made by WWC
or the Company in this Agreement or in any agreement, certificate, EXHIBIT or
other instrument delivered by WWC or the Company pursuant to this Agreement.
(ii) In addition to any other indemnification provided for under
this Agreement or any Additional Agreement, the Company (and solely to the
extent the Company is unable to do so, WWC) shall indemnify and hold harmless
HTL, the Investor and their respective officers, directors, employees,
stockholders, agents and representatives from and against any and all Losses
incurred or suffered by any such indemnified Person arising out of, resulting
from, or relating to any failure by WWC or the Company to perform any of their
covenants or agreements contained in this Agreement or in any agreement,
certificate or other instrument delivered by WWC or the Company pursuant to this
Agreement.
(iii) HTL and the Investor confirm and agree that if WWC
provides any indemnification under this SECTION 6.02, Losses shall be determined
by considering, among other things, that (A) no portion of the Purchase Price
was paid to WWC, but was paid in full to the Company; (B) the Company has not
made any payment (or has made only a partial payment) to the indemnified person
on account of the indemnification obligation under this SECTION 6.02; and (C)
accordingly, except to the extent that the Company has made any such payment,
there has been no diminution in value of the Company solely as a result of such
indemnification obligation nor has there been any diminution of the Investor's
interest in the Company.
(b) Notwithstanding anything to the contrary contained in this
SECTION 6.02, neither the Company nor WWC shall be required to pay or reimburse
either HTL or the Investor for Losses pursuant to any of the indemnification
obligations pursuant to this SECTION 6.02; unless the aggregate amount of HTL's
and the Investor's Losses claimed in respect of all such matters, exceeds
$5,000,000, in which event the Investor shall be entitled to seek
indemnification
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under this SECTION 6.02 for the amount of all such Losses.
6.3 Indemnity by HTL and the Investor.
(a) (i) During the Indemnification Period (or thereafter solely with
respect to any claim for which indemnification has been made prior to the
expiration of the Indemnification Period), in addition to any other
indemnification provided for under this Agreement or any Additional Agreement,
each of HTL and the Investor shall, jointly and severally, indemnify and hold
harmless WWC and the Company and their respective officers, directors,
employees, stockholders, agents and representatives from and against any and all
Losses incurred or suffered by any such indemnified person arising out of,
resulting from, or relating to any breach of any of the representations or
warranties made by HTL or the Investor in this Agreement or in any agreement,
certificate, EXHIBIT or other instrument delivered by HTL or the Investor
pursuant to this Agreement.
(ii) In addition to any other indemnification provided for under
this Agreement or any Additional Agreement, HTL and the Investor shall, jointly
and severally, indemnify and hold harmless WWC and the Company and their
respective officers, directors, employees, stockholders, agents and
representatives from and against any and all Losses incurred or suffered by any
such indemnified Person arising out of, resulting from, or relating to any
failure by HTL or the Investor to perform any of their covenants or agreements
contained in this Agreement or in any agreement, certificate or other instrument
delivered by HTL or the Investor pursuant to this Agreement.
(b) Notwithstanding anything to the contrary contained in this
SECTION 6.03, HTL and the Investors shall not be required to pay or reimburse
either WWC or the Company for Losses pursuant to any of HTL's or the Investor's
indemnification obligations pursuant to this SECTION 6.03; unless the aggregate
amount of WWC's and the Company's Losses claimed in respect of all such matters,
exceeds $5,000,000 in which event WWC and the Company shall be entitled to seek
indemnification under this SECTION 6.03 for the amount of all such Losses.
6.4 Procedure.
(a) Notice of Claim; Assumption of Defense by Indemnitor. In the
event that any Person hereto shall sustain or incur any Losses in respect of
which indemnification may be sought by such Person (the "Indemnitee") pursuant
to this Article 6, the Indemnitee shall assert a claim for indemnification by
giving prompt notice to the indemnifying party (the "Indemnitor") and shall
thereafter keep the Indemnitor reasonably informed with respect thereto;
provided that failure of the Indemnitee to give the Indemnitor notice as
provided herein shall not relieve the Indemnitor of any of its obligations
hereunder, except to the extent that the Indemnitor is materially prejudiced by
such failure. In case a claim is brought against any Indemnitee, the Indemnitor
shall have the right to assume, conduct and control the defense, compromise or
settlement thereof, by written notice to the Indemnitee of its intention to do
so within thirty (30)
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<PAGE> 27
days after receipt of the notice, with counsel reasonably satisfactory to the
Indemnitee, at the Indemnitor's own expense, and thereupon to prosecute in the
name and on behalf of the Indemnitee any available cross-claims, counter-claims
or third-party claims arising with respect to the claim. If the Indemnitor shall
assume the defense of such claim, it shall not settle such claim unless such
settlement includes as an unconditional term thereof the giving by the claimant
or the plaintiff of a release of the Indemnitee, reasonably satisfactory to the
Indemnitee, from all liability with respect to such claim. As long as the
Indemnitor is contesting any such claim in good faith and on a timely basis, the
Indemnitee shall not pay or settle any such claim. Notwithstanding the
assumption by the Indemnitor of the defense of any claim as provided in this
SECTION 6.04 and without limiting the Indemnitor's right to assume, conduct and
control the defense, compromise or settlement thereof, the Indemnitee shall be
permitted to join in the defense of such claim and to employ counsel at its own
expense. Assumption by the Indemnitor of the defense of any claim shall not be
deemed a concession by the Indemnitor that it is required to indemnify the
Indemnitee for the subject matter of such claim.
(b) Assumption of Defense by Indemnitee. If the Indemnitor shall
fail to notify the Indemnitee of its desire to assume the defense of any such
claim within the prescribed 30-day period set forth in SECTION 6.04(a), or shall
notify the Indemnitee that it will not assume the defense of any such claim,
then the Indemnitee may assume the defense of any such claim, in which event it
may do so in such manner as it may deem appropriate, and the Indemnitor shall be
bound by any determinations made in any litigation with respect to such claim or
any settlement thereof effected by the Indemnitee, provided that any such
determinations or settlement shall not affect the right of the Indemnitor to
dispute the Indemnitee's claim for indemnification.
(c) Payments. Amounts payable by the Indemnitor to the Indemnitee in
respect of any Losses for which any Person is entitled to indemnification
hereunder shall be payable by the Indemnitor as incurred by the Indemnitee. Any
payments by any Indemnitor in indemnification hereunder shall be treated as
adjustments to the Purchase Price.
6.5 Indemnity Sole Remedy. In the absence of fraud or of a suit seeking
specific performance as contemplated by this Agreement, the remedies provided to
WWC, the Company, HTL and the Investor by the foregoing provisions of this
Article 6 shall after the Closing Date be in lieu of any other remedies to which
the respective party is entitled at law or in equity for any breach or
noncompliance by a party with the provisions of this Agreement.
ARTICLE 7
MISCELLANEOUS
7.1 Expenses. Each party shall bear its own expenses incident to the
negotiation, preparation, authorization and consummation of this Agreement and
the transactions contemplated hereby, including all fees and expenses of its
counsel and accountants, whether or not such transactions are consummated.
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7.2 Equitable Remedies. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with the specific terms of the provisions or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity. Each party agrees that it
will not assert, as a defense against a claim for specific performance, that the
party seeking specific performance has an adequate remedy at law.
7.3 Notices. All notices, claims and other communications hereunder
shall be in writing and shall be made by hand delivery, registered or certified
mail (postage prepaid, return receipt requested), facsimile, or overnight air
courier guaranteeing next day delivery
(a) if to WWC, to it at:
Western Wireless Corporation
2001 NW Sammamish Road
Issaquah, Washington 98027
Attention: Alan R. Bender, Esq.
Facsimile No.: 206-313-5547
with a copy (which shall not constitute notice) to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Attention: Barry A. Adelman, Esq.
Facsimile No.: 212-698-7825
(b) if to the Company, to it at:
Western PCS Corporation
2001 NW Sammamish Road
Issaquah, Washington 98027
Attention: Alan R. Bender, Esq.
Facsimile No.: 206-313-5547
with a copy (which shall not constitute notice) to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
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<PAGE> 29
New York, New York 10112
Attention: Barry A. Adelman, Esq.
Facsimile No.: 212-698-7825
(c) if to HTL, to it at:
Hutchison Telecommunications Limited
22nd Floor, Hutchison House
10 Harcourt Road
Hong Kong
Attention: Ms. Edith Shih
Facsimile No.: 852-2128-1778
with a copy (which shall not constitute notice) to:
Dewey Ballantine LLP
Suite 3907
Asia Pacific Finance Tower
Citibank Plaza, 3 Garden Road
Central Hong Kong
Attention: John A. Otoshi
Facsimile No.: 852-2509-7088
(d) if to the Investor, to it at:
Hutchison Telecommunications PCS (USA) Limited
22nd Floor, Hutchison House
10 Harcourt Road
Hong Kong
Attention: Ms. Edith Shih
Facsimile No.: 852-2128-1778
with a copy (which shall not constitute notice) to:
Hutchison Telecommunications Limited
22nd Floor, Hutchison House
10 Harcourt Road
Hong Kong
Attention: Ms. Edith Shih
Facsimile No.: 852-2128-1778
and
Dewey Ballantine, LLP
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<PAGE> 30
Suite 3907
Asia Pacific Finance Tower
Citibank Plaza, 3 Garden Road
Central Hong Kong
Attention: John A. Otoshi
Facsimile No.: 852-2509-7088
or at such other address as any party may from time to time furnish to the other
parties by a notice given in accordance with the provisions of this SECTION
7.03. All such notices and communications shall be deemed to have been duly
given at the time delivered by hand, if personally delivered; five (5) Business
Days after being deposited in the mail, first class postage prepaid, return
receipt requested, if mailed; when receipt confirmed, if sent by facsimile; and
the next Business Day after timely delivery to the courier, if sent by an
overnight air courier service guaranteeing next day delivery.
7.4 Entire Agreement. This Agreement, together with the EXHIBITS annexed
hereto, contains the entire understanding among the parties hereto concerning
the subject matter hereof and this Agreement may not be changed, modified,
altered or terminated except by an agreement in writing executed by the parties
hereto. Any waiver by any party of any of its rights under this Agreement or of
any breach of this Agreement shall not constitute a waiver of any other rights
or of any other or future breach.
7.5 Remedies Cumulative. Except as otherwise provided herein, each and
all of the rights and remedies in this Agreement provided, and each and all of
the rights and remedies allowed at law and in equity in like case, shall be
cumulative, and the exercise of one right or remedy shall not be exclusive of
the right to exercise or resort to any and all other rights or remedies provided
in this Agreement or at law or in equity.
7.6 Governing Law. This Agreement shall be construed in accordance with
and subject to the laws and decisions of the State of New York applicable to
contracts made and to be performed entirely therein.
7.7 Counterparts. This Agreement may be executed in several counterparts
hereof, and by the different parties hereto on separate counterparts hereof,
each of which shall be an original; but such counterparts shall together
constitute one and the same instrument.
7.8 Waivers. No provision in this Agreement shall be deemed waived
except by an instrument in writing signed by the party waiving such provision.
7.9 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and to their respective successors
and assigns; provided, however, that except as set forth in the following
sentence or as otherwise expressly set forth in this
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<PAGE> 31
Agreement neither the rights nor the obligations of either party may be assigned
or delegated without the prior written consent of the other parties. Upon thirty
(30) days prior written notice to WWC and the Company and subject to receipt of
all necessary regulatory approvals (but only if such regulatory approvals will
not delay in any way the Closing), the Investor may assign all or any portion of
their rights and obligations under this Agreement to HTL or any Subsidiary of
HTL so long as such assignee agrees in writing to be bound by the provisions of
this Agreement and the Shareholders Agreement. For purposes of this Section
7.09, the "Subsidiaries" of HTL shall be deemed to include Orange plc and any
Subsidiaries of Orange plc, provided, that at the time of any such assignment,
HTL owns not less than 45% of the outstanding voting securities of Orange plc.
In the event of any such assignment, HTL shall not be relieved of any of its
obligations under this Agreement.
7.10 Further Assurances. Each of HTL and the Investor shall, at the
request of WWC or the Company, and WWC and the Company shall, at the request of
either of HTL or the Investor, from time to time, execute and deliver such other
assignments, transfers, conveyances and other instruments and documents and do
and perform such other acts and things as may be reasonably necessary or
desirable for effecting complete consummation of this Agreement and the
transactions herein contemplated.
7.11 Disclosures.
(a) Confidentiality. Each of HTL and the Investor and each of WWC
and the Company acknowledges and confirms in connection with the negotiation of
this Agreement and the execution hereof, during the period from the date hereof
through the Closing Date, the parties hereto will have furnished to one another
certain materials, information, data and other documentation ("Disclosures")
concerning their business, financial condition and operations which are
proprietary and confidential. Each party acknowledges the party disclosing such
Disclosures considers them secret and confidential and asserts a proprietary
interest therein. Accordingly, each of HTL and the Investor, on the one hand,
and each of WWC and the Company, on the other hand, covenants and agrees that it
shall maintain all Disclosures made by another party in strict confidence and
shall not use such Disclosures for its own benefit or disclose them to third
parties, except to its agents, representatives, bankers, investment bankers,
counsel and employees involved in evaluating the transactions contemplated by
this Agreement, its partners (and the partners or other security holders
thereof) or as otherwise required by law (including the requirement of WWC to
disclose such terms under the Securities Act, the Exchange Act or under the
rules of any securities exchange on which the securities of WWC are registered;
and including the requirement of HTL or any of its Affiliates to disclose such
terms under the securities laws of Hong Kong, or under the rules of the Hong
Kong Stock Exchange).
(b) Public Announcements. No public announcement by any party hereto
with regard to the transactions contemplated hereby or the material terms hereof
shall be issued by any party without the mutual prior consent of the other
parties, except in the event the parties are unable to agree on a press release
and legal counsel for one party is of the opinion that such
29
<PAGE> 32
press release is required by law and such party furnishes the other parties a
written opinion of outside legal counsel, or other counsel reasonably acceptable
to the party being furnished such opinion, to that effect, then such party may
issue the legally required press release.
(c) Non-Confidential Information. This Agreement shall not restrict
any party hereto from using information already known to it, to which it is
entitled under existing agreements, or information generally in the public
domain or any information coming into its possession after it becomes public
knowledge unless it became public knowledge through a breach of this Agreement.
7.12 Termination.
(a) Events Triggering Termination. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned, without further
obligation of WWC, the Company, HTL or the Investor, at any time prior to the
Closing Date as follows:
(i) by mutual written consent duly authorized by the boards of
directors of WWC, the Company, HTL and the Investor; or
(ii) by WWC, the Company, HTL or the Investor if the Closing
Date shall not have occurred on or before March 31, 1998 or such later date, if
any, as WWC, the Company, HTL and the Investor shall agree in writing; provided,
that the party exercising such right is not in default of its obligations under
this Agreement in a manner which results in the failure to satisfy the
conditions to the transactions contemplated hereby of the other parties; or
(iii) by WWC, the Company, HTL or the Investor if the
consummation of the transactions contemplated hereby shall be prohibited by a
final, non-appealable order, decree or injunction of a court of competent
jurisdiction, or if the FCC shall have by Final Order denied the application for
a Favorable Declaratory Ruling.
(b) No Further Obligation. In the event of a termination of this
Agreement, no party hereto shall have any liability or further obligation to any
other party to this Agreement except that nothing herein will relieve any party
from liability for any breach of this Agreement.
7.13 Jurisdiction; Consent to Service of Process. Each of HTL and the
Investor hereby irrevocably appoints United Corporate Services, Inc., at its
office at 10 Bank Street, White Plains, New York 10606, United States of
America, and the Company hereby irrevocably appoints United Corporate Services,
Inc., at its office at 10 Bank Street, White Plains, New York 10606 United
States of America, its lawful agent and attorney to accept and acknowledge
service of any and all process against it in any action, suit or proceeding
arising in connection with this Agreement or the Shareholders Agreement, and
upon whom such process may be served, with the same effect as if such party were
a resident of the State of New York and had been lawfully served with such
process in such jurisdiction, and waives all claim of error by reason of such
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<PAGE> 33
service, provided that in the case of any service upon such agent and attorney,
the party effecting such service shall also deliver a copy thereof to the other
party at the address and in the manner specified in SECTION 7.03. In the event
that such agent and attorney resigns or otherwise becomes incapable of acting as
such, such party will appoint a successor agent and attorney in New York,
reasonably satisfactory to the other party, with like powers. Each party hereby
irrevocable submits to the exclusive jurisdiction of the United States District
Court for the Southern District of New York and any court of the State of New
York located in the City of New York in any such action, suit or proceeding, and
agrees that any such action, suit or proceeding shall be brought only in such
court (and waives any objection based on forum non conveniens or any other
objection to venue therein), provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this SECTION 7.13 and
shall not be deemed to be a general submission to the jurisdiction of said
courts or the State of New York other than for such purpose.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
WESTERN PCS CORPORATION
By: /s/ JOHN W. STANTON
-----------------------------------------
Chief Executive Officer
WESTERN WIRELESS CORPORATION
By: /s/ JOHN W. STANTON
-----------------------------------------
Chairman and Chief Executive Officer
HUTCHISON TELECOMMUNICATIONS LIMITED
By: /s/ CANNING FOK
-----------------------------------------
Director
HUTCHISON TELECOMMUNICATIONS
PCS (USA) LIMITED
By: /s/ SUSAN CHOW
-----------------------------------------
Director
31
<PAGE> 1
EXHIBIT 1.01
Form of
CASH MANAGEMENT AGREEMENT
This CASH MANAGEMENT AGREEMENT (the "Agreement") is entered into as of
this _____ day of ________, 1997, by and between Western Wireless Corporation, a
Washington corporation ("WWC"), and Western PCS Corporation, a Delaware
corporation ("WPCS") (WWC and WPCS shall sometimes hereinafter be referred to
individually as a "Party" or collectively as the "Parties").
W I T N E S S E T H: WHEREAS, WWC owns at the date hereof 80.1% of the
issued and outstanding capital stock of WPCS;
WHEREAS, WWC has provided cash management services for WPCS through a
system of intercompany accounts;
WHEREAS, WWC and WPCS have agreed that WWC shall continue to provide
certain cash management services for WPCS on the terms and conditions herein set
forth; and
WHEREAS, in order to memorialize WWC's and WPCS's desires regarding the
cash management arrangements, WWC and WPCS have agreed to enter into this
Agreement.
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the parties hereto hereby agree as follows:
<PAGE> 2
1. Definitions. Unless the context otherwise requires, the terms
defined hereunder shall have the meanings specified herein for all purposes of
this Agreement, applicable to both the singular and plural forms of any of the
terms defined herein. For the purposes of this Agreement:
(a) "Advance" shall mean an advance of funds provided by WWC to
pay any Expenditures of WPCS and its Subsidiaries, whether by way of an Advance
to a Concentration Account or directly to pay such Expenditures.
(b) "Affiliate" shall mean, with respect to any Party hereto, any
corporation or other business entity which directly or indirectly through stock
ownership or through any other arrangement either controls, is controlled by or
is under common control with, such Party. The term "control" shall mean the
power to direct the affairs of such person by reason of ownership of voting
stock or other equity interests, by contract or otherwise.
(c) "Agreement" shall have the meaning set forth in the preamble
hereof.
(d) "Available Funds" shall mean funds which constitute good funds
available to a Party or such Party's Subsidiary (i) for withdrawal from such
Party's or such Party's Subsidiary's Depositary Accounts for transfer to such
Party's or such Party's Subsidiary's Investment Accounts or (ii) for withdrawal
from such Party's or such Party's Subsidiary's Investment Accounts to pay
Expenditures or to be transferred to a Concentration Account.
(e) "Business Day" shall mean any day other than a Saturday,
Sunday or a legal holiday in New York, New York or in Seattle, Washington or any
other day on which commercial banks in those cities are authorized by law or
governmental decree to close.
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<PAGE> 3
(f) "Concentration Account" shall mean each account of WWC in a
Concentration Bank to which WWC Required Funds or WPCS Required Funds are
deposited in accordance with Section 2(c).
(g) "Concentration Banks shall mean each bank, which WWC, in its
sole discretion, may select from time to time to maintain the Concentration
Account(s). (h) "Credits" shall have the meaning provided in Section 3(b)(iii).
(i) "Depositary Account" of a Party or a Party's Subsidiary shall
mean each account of such Party or of such Party's Subsidiary in a Depositary
Bank to which Depositary Funds are deposited and from which Available Funds are
remitted to the Investment Account(s).
(j) "Depositary Bank" of a Party or a Party's Subsidiary shall
mean each bank at which such Party or such Party's Subsidiary has a Depositary
Account.
(k) "Depositary Funds" of a Party or a Party's Subsidiary shall
mean all proceeds, remittances, amounts in respect of such Party's or any of
such Party's Subsidiaries' accounts receivables, cash, checks, receipts and
revenues of any kind, whether Available Funds or subject to collection.
(l) "Effective Date" shall mean the date of this Agreement set
forth above.
(m) "Expenditures" of a Party shall mean all expenditures, costs,
fees, expenses, obligations and liabilities incurred by such Party in the
ordinary course of its business, the amount of which shall be determined by WWC
in its sole discretion.
(n) "Inter-Company Account" shall have the meaning provided in
Section 4.
(o) "Investment Account" of a Party or a Party's Subsidiary shall
mean each account of such Party or of such Party's Subsidiary in an Investment
Bank to which Available
3
<PAGE> 4
Funds and Other Remittances of such Party or such Party's Subsidiary are
deposited or transferred from such Party's or such Party's Subsidiary's
Depositary Account, and from which Expenditures of such Party or such Party's
Subsidiaries are made directly or from which WWC Required Funds or WPCS Required
Funds are remitted to the Concentration Account.
(p) "Investment Bank" of a Party or a Party's Subsidiary shall
mean each bank or other financial institution at which such Party or such
Party's Subsidiary has an Investment Account.
(q) "Obligations" shall mean all amounts owing by WPCS and its
Subsidiaries to WWC under or in connection with this Agreement including the
Advances and all accrued and unpaid interest thereon and including any debt
balance of WPCS and its Subsidiaries reflected in the Inter-Company Account.
(r) "Other Remittances" means all proceeds, remittances, amounts,
receipts, cash, checks, payments, revenues and credit card receipts and all
other payments of any kind (in each case, other than Depositary Funds), whether
available or subject to collection, which are received or receivable by a Party
or deposited directly in the Investment Bank for credit to the Investment
Account.
(s) "Parties" shall have the meaning set forth in the preamble
hereof.
(t) "Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, public benefit corporation,
other entity or government (whether federal, state, county, city, municipal,
local, foreign, or otherwise, including any instrumentality, division, agency,
body or department thereof).
4
<PAGE> 5
(u) "Subsidiary" shall mean, with respect to any Person (a) any
corporation the majority of whose shares or other securities entitled to vote
for the election of directors is now or hereafter owned or controlled by such
Person, either directly or indirectly; or (b) any partnership or limited
liability company in which such Person and/or one more Subsidiaries of such
Person shall have an interest (whether in the form of voting or participation in
profits or capital contributions) of more than fifty percent (50%) or of which
such Person is a general partner, but any such entity shall be deemed to be a
Subsidiary of such Person only as long as such ownership or control exists;
provided, however, for purposes of this Agreement, WPCS and its Subsidiaries
shall not be considered Subsidiaries of WWC.
(v) "Termination Date" shall mean the date of termination of this
Agreement pursuant to Section 5 hereof.
(w) "WWC" shall have the meaning set forth in the preamble hereof.
(x) "WWC Required Funds" shall mean Available Funds of WWC and its
Subsidiaries to be transferred to a Concentration Account to settle or pay
Expenditures then due of WWC or its Subsidiaries being made out of a
Concentration Account.
(y) "WPCS" shall have the meaning set forth in the preamble
hereof.
(z) "WPCS Required Funds" shall mean Available Funds of WPCS and
its Subsidiaries to be transferred to a Concentration Account to settle or pay
Expenditures then due of WPCS or its Subsidiaries being made out of a
Concentration Account.
Whenever a reference is made in this Agreement to a Section, such
reference shall be to a Section of this Agreement unless otherwise indicated.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words
5
<PAGE> 6
"without limitation." The use of a gender herein shall be deemed to include the
neuter, masculine and feminine genders whenever necessary or appropriate.
Whenever the word "herein" or "hereof" is used in this Agreement, it shall be
deemed to refer to this Agreement and not to a particular Section of this
Agreement unless expressly stated otherwise.
2. Mechanics of Cash Sweeps.
(a) Deposits to Depositary Accounts.
(i) Until the termination of this Agreement and the
repayment in full of all of the Obligations, WPCS shall, and shall cause each of
its Subsidiaries to, on a daily basis, deposit, or cause to be deposited, all of
their Depositary Funds in one or more of their Depositary Accounts at the
Depositary Banks. WPCS's and each of its Subsidiaries' obligations to ensure
that all of its Depositary Funds are deposited directly in a Depositary Bank for
credit to one of its Depositary Accounts shall be a continuing obligation until
the Termination Date has occurred and the Obligations are paid in full, and any
Depositary Funds received by WPCS or any of its Subsidiaries must immediately be
turned over to its Depositary Bank in accordance with the provisions of this
Section 2(a)(i).
(ii) Until the termination of this Agreement and the
repayment in full of all of the Obligations, WWC shall, and shall cause each of
its Subsidiaries to, on a daily basis, deposit, or cause to be deposited, all of
their Depositary Funds in one or more of their Depositary Accounts at the
Depositary Banks. WWC's and each of its Subsidiaries' obligations to ensure that
all of its Depositary Funds are deposited directly in a Depositary Bank for
credit to one of its Depositary Accounts shall be a continuing obligation until
the Termination Date has occurred and the Obligations are paid in full, and any
Depositary Funds received by WWC or any of its
6
<PAGE> 7
Subsidiaries must immediately be turned over to its Depositary Bank in
accordance with the provisions of this Section 2(a)(ii).
(iii) The Depositary Accounts of WWC shall only include
Depositary Funds of WWC and its Subsidiaries and not of WPCS and its
Subsidiaries and the Depositary Accounts of WPCS and its Subsidiaries shall only
include Depositary Funds of WPCS and its Subsidiaries and not of WWC and its
Subsidiaries.
(b) Deposits to Investment Accounts.
(i) Until the termination of this Agreement and the
repayment in full of all of the Obligations, WPCS shall, and shall cause each of
its Subsidiaries to, deposit, or cause to be deposited, all Available Funds and
Other Remittances, or any portion thereof, in one or more of their Investment
Accounts at the Investment Banks, by, among other things, (A) directing each
Depositary Bank to transfer on a daily basis all or any portion of the Available
Funds on deposit in WPCS's or any of its Subsidiaries' Depositary Accounts as of
the close of business on the immediately preceding Business Day to one or more
of their Investment Accounts at the Investment Banks and (B) depositing Other
Remittances of WPCS and its Subsidiaries directly into one or more of their
Investment Accounts at the Investment Banks.
(ii) Until the termination of this Agreement and the
repayment in full of all of the Obligations, WWC shall, and shall cause each of
its Subsidiaries to, deposit, or cause to be deposited, all Available Funds and
Other Remittances, or any portion thereof, in one or more of their Investment
Accounts at the Investment Banks, by, among other things, (A) directing each
Depositary Bank to transfer on a daily basis all or any portion of the Available
Funds on deposit in WWC's or any of its Subsidiaries' Depositary Accounts as of
the close of
7
<PAGE> 8
business on the immediately preceding Business Day to one or more of their
Investment Accounts at the Investment Banks and (B) depositing Other Remittances
of WWC and its Subsidiaries directly into one or more of their Investment
Accounts at the Investment Banks.
(iii) The Investment Accounts of WWC shall only include
Available Funds or Other Remittances of WWC and its Subsidiaries and not of WPCS
and its Subsidiaries and the Investment Accounts of WPCS and its Subsidiaries
shall only include Available Funds or Other Remittances of WPCS and its
Subsidiaries and not of WWC and its Subsidiaries.
(iv) WWC shall manage the funds in the Investment Accounts of
WPCS and its Subsidiaries with the same standard of care it uses in managing the
Investment Accounts of WWC and its Subsidiaries.
(c) Payments of Expenditures; Deposit to Concentration Accounts.
(i) Until the termination of this Agreement and the
repayment in full of all of the Obligations, WPCS shall, and shall cause each of
its Subsidiaries to, as and when requested by WWC, (A) transfer WPCS Required
Funds on deposit in WPCS's or any of its Subsidiary's Investment Accounts to one
or more of the Concentration Accounts at the Concentration Banks, or (B) make
Expenditures on behalf of WPCS or its Subsidiaries directly from WPCS's or any
of its Subsidiaries' Investment Accounts.
(ii) Until the termination of this Agreement and the
repayment in full of all of the Obligations, WWC shall, and shall cause each of
its Subsidiaries to, at such times as WWC deems it appropriate, (A) transfer WWC
Required Funds on deposit in WWC's or any of its Subsidiary's Investment
Accounts to one or more of the Concentration Accounts at the Concentration
Banks, or (B) make Expenditures on behalf of WWC or its Subsidiaries directly
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from WWC's or any of its Subsidiaries' Investment Accounts.
(iii) The Concentration Accounts shall be maintained by WWC.
WWC is hereby authorized on a daily basis to use the funds of WWC and WPCS held
in the Concentration Accounts to meet the daily cash requirements of WWC and
WPCS and their Subsidiaries and to pay the Expenditures of WWC and WPCS and
their Subsidiaries incurred in the ordinary course of business. WWC shall,
consistent with prior practice, use the same standard of care with respect to
all funds deposited in the Concentration Accounts as WWC uses for its own funds.
(d) Proceeds of Offerings. Notwithstanding the provisions of
Section 2, the proceeds received by WWC or WPCS in connection with the sale of
any of their equity or debt securities, whether in a public or private offering,
private placement or otherwise, shall not be deposited daily in a Concentration
Account or in a Depositary Account, but rather shall be deposited in a separate
Investment Account of WWC or WPCS, as applicable.
3. Advances.
(a) Advances. Commencing on the Effective Date through but not
including the Termination Date, WWC, in its sole discretion, shall determine the
amount it believes is required for the daily cash requirements of WPCS and its
Subsidiaries and the payment of the Expenditures of WPCS and its Subsidiaries.
Such cash requirements shall be satisfied, and such Expenditures paid, either
directly out of Available Funds in WPCS's and its Subsidiaries' Investment
Accounts or in the Concentration Accounts. If the amount of Available Funds of
WPCS and its Subsidiaries in such accounts is not sufficient to satisfy such
cash requirements, or pay such Expenditures, WWC may (but shall not be required
to) provide Advances to WPCS and
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its Subsidiaries - it being understood and agreed that Advances shall only be
made if and to the extent that (i) a request has been made by WWC to WPCS and
its Subsidiaries to provide WPCS Required Funds or to pay Expenditures of WPCS
and its Subsidiaries directly, and (ii) WPCS and its Subsidiaries have not
provided such WPCS Required Funds and do not have Available Funds (including
from financings available to WPCS and its Subsidiaries) to make such payments
directly. Such Advances may be made by WWC by either (i) providing Advances to
the Concentration Accounts or (ii) paying Expenditures on behalf of WPCS and its
Subsidiaries from WWC's or any of its Subsidiaries' Investment Accounts. WPCS,
on behalf of itself and its Subsidiaries, irrevocably and unconditionally
promises to repay all Advances from time to time owing to WWC including any and
all accrued and unpaid interest thereon pursuant hereto.
(b) Repayments.
(i) Scheduled Repayment. All Obligations shall become due
and payable in full within five (5) Business Days following WWC's demand
therefor.
(ii) Repayment from Issuances of Indebtedness. All
Obligations shall be subject to immediate mandatory repayment from the net
proceeds of any indebtedness for borrowed money of WPCS and its Subsidiaries
incurred from and after the Effective Date, which repayments shall be made
immediately upon the receipt by WPCS and its Subsidiaries of the proceeds of
such indebtedness.
(iii) Inter-Company Account Repayments. To the extent that, on
any Business Day, the aggregate amount transferred on such date to the
Concentration Account under Section 2(c) by WPCS and its Subsidiaries exceeds
the amount which was required to pay the Expenditures of WPCS and its
Subsidiaries which were paid on such date, such excess shall be
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immediately credited on the Inter-Company Account as a payment by WPCS and its
Subsidiaries to be applied to any Obligations then owing by WPCS and its
Subsidiaries to WWC, and upon payment in full of all Obligations then
outstanding, any excess shall immediately constitute a credit to WPCS and its
Subsidiaries on the Inter-Company Account creating a positive balance for such
parties on the Inter-Company Account (collectively the "Credits"). On or before
the fifteenth (15th) day of every calendar month, WWC shall prepare and do a
reconciliation of the Obligations, Advances and Credits as of the end of the
prior calendar month and there shall be a "true up" of the Inter-Company
Account. To the extent that, following the Termination Date, and the payment in
full of all of the Obligations, there remain any Credits standing to the account
of WPCS and its Subsidiaries in the Inter-Company Account, WWC shall pay such
Credits to WPCS and its Subsidiaries within five (5) Business Days after any
determination thereof.
(c) Interest. Each outstanding Obligation and Credit shall accrue
interest on the daily average net balance thereof (net of funds transferred to
either Party and applied to the repayment of any Obligations pursuant to Section
3(b)(iii)), at a rate equal to the 1-month rate for Eurodollar deposits (as
reported on Federal Reserve statistical release G.13, or its successor) for the
month during which interest is to be accrued plus 100 basis points during which
any such Obligation or Credit is outstanding. If any Obligation remains
outstanding after the Termination Date, or if any Credits remain outstanding
after the Termination Date, interest shall accrue for such period subsequent to
the Termination Date at the same rate described above. All interest accruing
under this Section 3(c) shall be payable by WPCS or WWC, as the case may be, on
the date described in Section 3(b).
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4. Inter-Company Account. WWC shall maintain on its books and records
an account (the "Inter-Company Account") in which shall be recorded all
transfers of funds to and from the Concentration Account, and all Advances and
Credits hereunder, the interest rate applicable thereto and all payments made
with respect to such Advances. WWC shall, on each day when funds are transferred
to the Concentration Account or Advances are made, credit to each Party on the
books of the Inter-Company Account, all WPCS Required Funds or WWC Required
Funds which constitute good funds received on behalf of such Party and its
Subsidiaries on such day, debit to such Party the aggregate amount of all
Advances and Expenditures paid out on such day on behalf of such Party and its
Subsidiaries, and make all necessary banking corrections and other adjustments,
resulting from errors or otherwise. The date and amount of each Advance made by
WWC on behalf of WPCS and its Subsidiaries, each payment made (or credited in
accordance with Section 3(b)(iii)) on account of any Obligation, each Credit, as
well as all transfers to and from the Concentration Account, shall be recorded
promptly by WWC on the Inter-Company Account. It is understood and agreed that
the failure by WWC to make, or any error in making, any such record shall not
affect (i) WPCS's or its Subsidiaries' liability hereunder in respect of any of
the Obligations, or (ii) the discharge of WPCS and its Subsidiaries for any
payment actually made by WPCS and its Subsidiaries on account of any of the
Obligations, or (iii) WWC's liability hereunder in respect of any Credits owing
to WPCS or its Subsidiaries following the Termination Date.
5. Term of Agreement. This Agreement shall commence on the date hereof
and shall continue in full force and effect until the earliest to occur of any
of the following events:
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(a) notice to WPCS by WWC if WPCS breaches any material agreement,
undertaking or covenant contained in this Agreement, or defaults in the
performance of any material obligation hereunder, and the breach or default is
not cured within thirty (30) days following written notice thereof from WWC to
WPCS;
(b) notice to WWC by WPCS if WWC breaches any material agreement,
undertaking or covenant contained in this Agreement, or defaults in the
performance of any material obligation hereunder, and the breach or default is
not cured within thirty (30) days following written notice thereof from WPCS to
WWC;
(c) if WWC or WPCS applies for or consents to the appointment of a
receiver, trustee or liquidator for all or a substantial part of its assets or
makes a general assignment for the benefit of its creditors, or files a
voluntary petition in bankruptcy or a petition seeking reorganization,
composition, arrangement with creditors, liquidation or similar relief under any
present or future statute, law or regulation, or files any answer admitting the
material allegations of a petition filed against it in any such proceeding, or
is adjudicated as bankrupt or insolvent, or takes any action looking toward
dissolution;
(d) if any order, judgment or decree is entered without the
application, approval, or consent of WWC or WPCS by any court of competent
jurisdiction, approving a petition seeking reorganization, composition,
arrangement with creditors, liquidation or similar relief under any present or
future statute, law or regulation with respect to WWC or WPCS, or appointing a
receiver, trustee or liquidator for all or a substantial part of WWC's or WPCS's
assets and such order, judgment or decree continues unstayed and in effect for
an aggregate of sixty (60) consecutive days;
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(e) by mutual written consent duly authorized by the Boards of
Directors of each of WWC and WPCS; or
(f) upon one hundred twenty (120) days prior written notice by
either WWC or WPCS, which notice is duly authorized by the Board of Directors of
WWC or WPCS, as applicable, if WWC and its Affiliates cease to own at least a
majority of the issued and outstanding voting stock of WPCS.
6. Indemnification.
(a) WPCS and its Subsidiaries shall protect, defend, indemnify and
save harmless WWC and its Subsidiaries, Affiliates, officers, directors,
employees, representatives, independent contractors, consultants, outside
attorneys, accountants, bankers, investment bankers and agents (collectively the
"WWC Indemnified Persons") against and from all claims, damages, costs,
deficiencies, penalties, assessments, losses and expenses, including attorney's
fees and costs (collectively "Losses"), by reason of any suit, claim, demand,
judgment or cause of action initiated by any Person, arising or alleged to have
arisen out of any breach by WPCS or its Subsidiaries of any of its or their
obligations under this Agreement. In the event any action, suit or proceeding is
brought against any WWC Indemnified Person with respect to which WPCS and its
Subsidiaries may have liability under any indemnity contained herein, WPCS and
its Subsidiaries shall have the right, at their sole cost and expense, to defend
such action in the name and on behalf of the WWC Indemnified Person and in
connection with any such action, suit or proceeding, the parties hereto agree to
render to each other such assistance as may reasonably be required in order to
ensure the proper and adequate defense of any such action, suit or proceeding.
The WWC Indemnified Person shall have the right to participate, at its own
expense
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and with counsel of its choosing, in the defense of any claim against which it
is indemnified hereunder and it shall be kept fully informed with respect
thereto.
(b) WWC and its Subsidiaries shall protect, defend, indemnify and
save harmless WPCS and its Subsidiaries, Affiliates, officers, directors,
employees, representatives, independent contractors, consultants, outside
attorneys, accountants, bankers, investment bankers and agents (collectively the
"WPCS Indemnified Persons") against and from all claims, damages, costs,
deficiencies, penalties, assessments, losses and expenses, including attorney's
fees and costs (collectively "Losses"), by reason of any suit, claim, demand,
judgment or cause of action initiated by any Person, arising or alleged to have
arisen out of any breach by WWC or its Subsidiaries of any of its or their
obligations under this Agreement. In the event any action, suit or proceeding is
brought against any WPCS Indemnified Person with respect to which WWC and its
Subsidiaries may have liability under any indemnity contained herein, WWC and
its Subsidiaries shall have the right, at their sole cost and expense, to defend
such action in the name and on behalf of the WPCS Indemnified Person and in
connection with any such action, suit or proceeding, the parties hereto agree to
render to each other such assistance as may reasonably be required in order to
ensure the proper and adequate defense of any such action, suit or proceeding.
The WPCS Indemnified Person shall have the right to participate, at its own
expense and with counsel of its choosing, in the defense of any claim against
which it is indemnified hereunder and it shall be kept fully informed with
respect thereto.
7. Notices. All notices, claims and other communications hereunder
shall be in writing and shall be made by hand delivery, registered or certified
mail (first class postage prepaid, return receipt requested), facsimile, or
overnight air courier guaranteeing next day
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delivery
(a) if to WWC, to it at:
Western Wireless Corporation
2001 NW Sammamish Road
Issaquah, Washington 98027
Attention: Alan R. Bender, Esq.
Facsimile No.: 206-313-5547
with a copy (which shall not constitute notice) to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Attention: Barry A. Adelman, Esq.
Facsimile No.: 212-698-7825
(b) if to WPCS, to it at:
Western PCS Corporation
2001 NW Sammamish Road
Issaquah, Washington 98027
Attention: Alan R. Bender, Esq.
Facsimile No.: 206-313-5547
with a copy (which shall not constitute notice) to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Attention: Barry A. Adelman, Esq.
Facsimile No.: 212-698-7825
or at such other address as any party may from time to time furnish to the other
by a notice given in accordance with the provisions of this Section 7. All such
notices and communications shall be deemed to have been duly given at the time
delivered by hand, if personally delivered; five (5) Business Days after being
deposited in the mail, first class postage prepaid, return receipt requested, if
mailed; when receipt confirmed, if sent by facsimile; and the next Business Day
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after timely delivery to the courier, if sent by an overnight air courier
service guaranteeing next day delivery.
8. Entire Agreement. This Agreement contains the entire understanding
among the parties hereto concerning the subject matter hereof and this Agreement
may not be changed, modified, altered or terminated except by an agreement in
writing executed by the parties hereto. Any waiver by any party of any of its
rights under this Agreement or of any breach of this Agreement shall not
constitute a waiver of any other rights or of any other or future breach.
9. Remedies Cumulative. Except as otherwise provided herein, each and
all of the rights and remedies in this Agreement provided, and each and all of
the rights and remedies allowed at law and in equity in like case, shall be
cumulative, and the exercise of one right or remedy shall not be exclusive of
the right to exercise or resort to any and all other rights or remedies provided
in this Agreement or at law or in equity.
10. Governing Law. This Agreement shall be construed in accordance with
and shall be subject to the laws and decisions of the State of New York
applicable to contracts made and to be performed entirely therein.
11. Counterparts. This Agreement may be executed in several counterparts
hereof, and by the different parties hereto on separate counterparts hereof,
each of which shall be an original; but all such counterparts taken together
shall constitute one and the same instrument.
12. Waivers. No provision in this Agreement shall be deemed waived
except by an instrument in writing signed by the party waiving such provision.
13. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and to their respective successors
and assigns (and, in the case of the second sentence of Section 16 below, to the
benefit of the Investor (as hereinafter defined) as an express third party
beneficiary thereof); provided, however, that except as set forth in the
following sentence neither the rights nor the obligations of either
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party may be assigned or delegated without the prior written consent of the
other party. Upon thirty (30) days prior written notice to WPCS, WWC may assign
all or any portion of its rights and obligations under this Agreement to any of
its Subsidiaries so long as such Subsidiaries agree in writing to be bound by
all of the terms and conditions of this Agreement. In the event of any such
assignment, WWC shall not be relieved of any of its obligations under this
Agreement.
14. Further Assurances. Each of the parties shall, at the request of the
other, from time to time, execute and deliver such other assignments, transfers,
conveyances and other instruments and documents and do and perform such other
acts and things as may be reasonably necessary or desirable in order to
effectuate the complete consummation of this Agreement and the transactions
herein contemplated, including causing any of their Subsidiaries to execute an
agreement agreeing to be bound by the provisions of this Agreement.
15. Joint and Several Liability.
(a) The obligations of WPCS and its Subsidiaries hereunder shall
be the joint and several obligation of WPCS and its Subsidiaries.
(b) The obligations of WWC and its Subsidiaries hereunder shall be
the joint and several obligation of WWC and its Subsidiaries.
16. ARBITRATION. In the event of any dispute between WWC and Western
PCS arising out of this Agreement, such dispute shall be submitted to
arbitration in accordance (MUTATIS MUTANDIS) with the terms and procedures set
forth in Section 13(k) of the Shareholders Agreement of WPCS, of even date
herewith (the "Shareholders Agreement"), between WWC, WPCS and Hutchison
Telecommunications PCS (USA) Limited (the "Investor"). The Investor shall have
the right to participate in any pending arbitration and to consolidate any such
arbitration with any arbitration which may be pending under the Shareholders
Agreement and which relates to a dispute which involves in a material way
substantially similar issues.
IN WITNESS WHEREOF, the parties hereto have duly executed this Cash
Management Agreement on the day and year first above written.
WESTERN WIRELESS CORPORATION
By:______________________________________
Name:
Title:
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WESTERN PCS CORPORATION
By:______________________________________
Name:
Title:
19
<PAGE> 1
EXHIBIT 1.02
FORM OF
ROAMING AGREEMENT
This Agreement is entered into as of October 14, 1997, by and between Western
Wireless Corporation, a Washington corporation ("WWC"), and Western PCS
Corporation, a Delaware corporation ("WPCS").
WHEREAS, WWC and WPCS each anticipates providing roaming services to the other;
WHEREAS, WWC and WPCS anticipate entering into the industry standard
Intercarrier Roamer Service Agreement (the "Standard Agreement"), a copy of
which is attached hereto as Schedule A; and
WHEREAS, WWC and WPCS desire to provide roaming services to one another at rates
that are no less favorable than rates that each charges its own subsidiaries,
affiliates, and third parties;
NOW, THEREFORE, in consideration of the mutual covenants and promises contained
herein and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:
1. WWC and WPCS hereby warrant that each will provide roaming on its system (or
the systems of third parties, if possible) to the other on terms at least as
favorable as those offered by them to their other subsidiaries, affiliates, and
third parties.
2. WWC and WPCS agree to pass through any benefits received from third parties
to the other (if so permitted by the third party contracts) at cost.
3. WWC further agrees, if within the control of WWC, to use its reasonable best
efforts to provide roaming technology for the benefit of WPCS customers where
necessary.
4. WWC and WPCS agree that notwithstanding any terms to the contrary in the
Standard Agreement or any other related agreement, each will give the other no
less than six months written notice prior to termination of any such agreement.
5. WWC and WPCS agree that all roaming agreements between them shall be modified
by mutual consent to reflect industry technological changes applicable to PCS to
AMPS roaming and vice versa.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
on their behalf by their officers thereunto duly authorized as of the day and
year first above written.
WESTERN WIRELESS CORPORATION WESTERN PCS CORPORATION
By:_______________________________ By:_______________________________
Name:_____________________________ Name:_____________________________
Its:______________________________ Its:______________________________
<PAGE> 1
EXHIBIT 1.03
Form of
SERVICES AGREEMENT
This SERVICES AGREEMENT (the "Agreement") is entered into as of this _____
day of ________, 1997, by and between Western Wireless Corporation, a Washington
corporation ("WWC"), and Western PCS Corporation, a Delaware corporation
("WPCS").
W I T N E S S E T H:
WHEREAS, WPCS holds, directly or through its Subsidiaries, broadband
personal communications services licenses issued by the Federal Communications
Commission ("FCC") to construct and operate certain mobile communications
systems and is engaged in the construction and operation of wireless
telecommunications systems;
WHEREAS, WWC holds, directly or through its Subsidiaries, cellular
telephone licenses issued by the FCC and is engaged in the construction and
operation of wireless telecommunications systems;
WHEREAS, at the date hereof WWC owns 80.1% of the issued and outstanding
capital stock of WPCS and the Investor (as defined below) owns 19.9% of the
issued and outstanding capital stock of WPCS;
WHEREAS, prior to the date hereof, WWC has provided certain management and
operating services to WPCS in connection with the operation of WPCS's businesses
(including billing and collection services, bookkeeping and accounting services,
strategic planning, customer services, management services, supervisory
services, human resources, and legal,
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technical, engineering, construction, leasing and purchasing services);
WHEREAS, prior to the date hereof, WWC has charged WPCS for all of the
costs and expenses of providing such services, including charges for WPCS's
allocable share of common costs and expenses of WWC and WPCS; and
WHEREAS, WWC and WPCS desire to set forth the terms and conditions under
which (i) WWC will continue to provide management and operating services to
WPCS, its Subsidiaries and Joint Ventures; (ii) WPCS, its Subsidiaries and Joint
Ventures shall reimburse WWC for all of the costs, fees and expenses incurred by
WWC in rendering such services to WPCS, its Subsidiaries and Joint Ventures; and
(iii) WWC and WPCS shall share corporate overhead and other common costs, fees
and expenses.
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used but not defined herein shall
have the meanings given in the Purchase Agreement or, if not defined therein, in
the Shareholders Agreement. Unless the context otherwise requires, the terms
defined hereunder shall have the meanings specified herein for all purposes of
this Agreement, applicable to both the singular and plural forms of any of the
terms defined herein. For the purposes of this Agreement:
(a) "Affiliate" shall mean, with respect to any party hereto, any
corporation or other business entity which directly or indirectly through stock
ownership or through any other arrangement either controls, is controlled by or
is under common control with, such party. The term "control" shall mean the
power to direct the affairs of such person by reason of ownership of voting
stock or other equity interests, by contract or otherwise.
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(b) "Agreement" shall have the meaning set forth in the preamble
hereof.
(c) "Authorizations" shall mean all of the consents, permits,
approvals, authorizations and licenses issued or issuable to WPCS, its
Subsidiaries or Joint Ventures by the FCC or any other Governmental Authority
which are required for WPCS, its Subsidiaries or Joint Ventures to own, operate
and construct the PCS Systems in accordance with all applicable Legal
Requirements.
(d) "Calendar Quarters" shall mean during any Operating Year the
periods (i) January 1 - March 31, (ii) April 1 - June 30; (iii) July 1 -
September 30; and (iv) October 1 - December 31.
(e) "Capital Improvements" shall mean items of any nature (i)
incorporated into the PCS Systems owned by WPCS, its Subsidiaries or Joint
Ventures or otherwise relating to or used in the business of WPCS, its
Subsidiaries or Joint Ventures; or (ii) incorporated into WWC's "home office"
customer service facilities, warehouses, other shared facilities and joint
office spaces utilized for the benefit of both WWC and its Subsidiaries, on the
one hand, and WPCS, its Subsidiaries and Joint Ventures, on the other hand, in
each case which are not expensed but rather are, in accordance with WPCS's or
WWC's, as applicable, policies, capitalized.
(f) "Direct Costs and Expenses" shall mean all costs, fees and
operating and overhead expenses for personnel, goods, services and facilities
(including Capital Improvements described in clause (i) of the definition of
Capital Improvements) that are incurred for the sole benefit of WPCS, its
Subsidiaries or Joint Ventures, which costs, fees and expenses shall be charged
solely to WPCS, its Subsidiaries and Joint Ventures and shall either be paid
directly by
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WPCS, its Subsidiaries or Joint Ventures or, if paid by WWC on behalf of WPCS,
its Subsidiaries or Joint Ventures, shall be reimbursed by WPCS, its
Subsidiaries or Joint Ventures to WWC in accordance with Sections 10(c) and 11
hereof.
(g) "Employment Agreements" shall mean the employment agreements,
and any amendments or modifications thereto, which WWC has entered into or shall
enter into with the Senior Officers of WWC.
(h) "Governmental Authority" shall mean the United States of
America, any state, commonwealth, territory, or possession thereof and any
political subdivision or quasi-governmental authority of any of the same,
including but not limited to courts, tribunals, departments, commissions,
boards, bureaus, agencies, counties, municipalities, provinces and other
instrumentalities.
(i) "Investor" shall mean Hutchison Telecommunications PCS (USA)
Limited, a British Virgin Islands corporation, or its Permitted Affiliate
Transferees.
(j) "Joint Venture" shall mean an entity in which WPCS, directly
or through Subsidiaries, owns a non-controlling interest, which entity holds one
or more Authorizations and to which WPCS or its Subsidiaries has agreed to
provide management or operating services encompassed within the definition of
Management Services.
(k) "Legal Requirements" shall mean applicable common law and any
applicable statute, ordinance, code or other law, rule, regulation, order,
technical or other standard, requirement or procedure enacted, adopted,
promulgated, applied or followed by any Governmental Authority.
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(l) "Management Services" shall have the meaning set forth in
Section 2 hereof.
(m) "Operating Plan and Budget" shall have the meaning set forth
in Section 3 hereof.
(n) "Operating Year" shall mean each calendar year during the term
of this Agreement, and the appropriate portions of the calendar years for the
first and the last years of the term of this Agreement.
(o) "PCS Systems" shall mean all of the mobile communications
systems owned and operated by WPCS, its Subsidiaries and Joint Ventures.
(p) "PCS Systems Personnel" shall have the meaning set forth in
Section 5 hereof.
(q) "Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, public benefit corporation,
other entity or government (whether federal, state, county, city, municipal,
local, foreign, or otherwise, including any instrumentality, division, agency,
body or department thereof).
(r) "Purchase Agreement" shall mean the Purchase Agreement, dated
as of October 14, 1997, by and among WPCS, WWC, Investor and Hutchison
Telecommunications Limited.
(s) "Senior Officers" shall mean (a) any party serving as Chairman
and Chief Executive Officer of WWC, which positions are at the date hereof held
by John W. Stanton, (b) any party serving as Chief Financial Officer of WWC,
which position is at the date hereof held
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by Donald Guthrie, (c) any party serving as President of WWC, which position is
at the date hereof held by Robert R. Stapleton, (d) any party serving as Senior
Vice President of WWC, which position is at the date hereof held by Theresa E.
Gillespie, (e) any party serving as Chief Operating Officer of WWC, which
position is at the date hereof held by Mikal J. Thomsen, (f) any party serving
as Secretary, Senior Vice President and General Counsel of WWC, which position
is at the date hereof held by Alan R. Bender, (g) any party serving as Senior
Vice President - Corporate Development of WWC, which position is at the date
hereof held by Cregg B. Baumbaugh, (h) any party serving as Vice President
Engineering of WWC which position is at the date hereof held by Timothy R. Wong,
and (i) any party serving as Vice President - Marketing of WWC, which position
is at the date hereof held by Robert T. Dotson, and, in each such case, any
party serving in a comparable managerial role or title in WWC.
(t) "Shared Overhead Costs and Expenses" shall mean all costs,
fees and operating and overhead expenses for personnel, goods, services and
facilities (including Capital Improvements described in clause (ii) of the
definition of Capital Improvements) that are incurred for the benefit of both
WWC and its Subsidiaries, on the one hand, and WPCS, its Subsidiaries and Joint
Ventures, on the other hand, it being understood and agreed that such costs,
fees and expenses shall be allocated between WWC and WPCS pursuant to the
provisions of Sections 10(b) and 11 hereof in accordance with the Weighted Time
Method.
(u) "Shareholders Agreement" shall mean the Shareholders
Agreement, dated as of even date herewith, among WWC, WPCS and the Investor.
(v) "Subsidiary" shall mean, with respect to any Person (a) any
corporation the majority of whose shares or other securities entitled to vote
for the election of directors is
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now or hereafter owned or controlled by such Person, either directly or
indirectly; or (b) any partnership or limited liability company in which such
Person and/or one more Subsidiaries of such Person shall have an interest
(whether in the form of voting or participation in profits or capital
contributions) of more than fifty percent (50%) or of which such Person is a
general partner, but any such entity shall be deemed to be a Subsidiary of such
Person only as long as such ownership or control exists; provided, however, for
purposes of this Agreement WPCS and its Subsidiaries and Joint Ventures shall
not be considered Subsidiaries of WWC.
(w) "Weighted Time Method" shall mean the method of allocating the
Shared Overhead Costs and Expenses between WWC and its Subsidiaries, on the one
hand, and WPCS and its Subsidiaries and Joint Ventures, on the other hand, based
on a series of ratios derived from weighted time studies and analyses (copies of
which will be retained by WWC) conducted by WWC from time to time (at least
semi-annually) for the purposes of quantifying the amount of time, attention and
services during any applicable period that the Senior Officers, directors, other
management personnel, employees, agents, representatives, independent
contractors, consultants, outside legal counsel, accountants and investment
bankers of WWC devote to the business and affairs of WPCS and its Subsidiaries
and Joint Ventures in accordance with the terms hereof and the amount of time,
attention and services such parties devote to the business and affairs of WWC
and its Subsidiaries. Such ratios shall be calculated and applied on a basis
consistent with the financial reporting of WWC and WPCS and shall, in the
aggregate, be calculated and applied on a basis reasonably determined by the
boards of directors of WWC and WPCS to be commensurate on a fair and equitable
basis with the value of the associated Management Services provided to WPCS in
accordance with this Agreement and the expense of
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such services to WWC.
Whenever a reference is made in this Agreement to a SECTION, such
reference shall be to a SECTION of this Agreement unless otherwise indicated.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation." The use of a gender herein shall be deemed to include the neuter,
masculine and feminine genders whenever necessary or appropriate. Whenever the
word "herein" or "hereof" is used in this Agreement, it shall be deemed to refer
to this Agreement and not to a particular SECTION of this Agreement unless
expressly stated otherwise.
2. Management Duties. From and after the date hereof until this
Agreement expires or terminates in accordance with SECTION 14 hereof, WWC shall,
subject to the direction of the Boards of Directors of WPCS or its Subsidiaries,
as applicable, and in coordination with management employees of WPCS or its
Subsidiaries, as applicable, supervise and manage the business affairs and
operations of WPCS and its Subsidiaries with the same standard of care used in
managing the operations and business affairs of WWC and its Subsidiaries and
will use reasonable efforts to implement WPCS's then current business plan. Such
supervisory and management services shall include the following (collectively
the "Management Services"):
(a) the selection and retention of personnel of WPCS and its
Subsidiaries as provided in Section 5 hereof, and consulting with and assisting
such employees and personnel regarding the performance of the Management
Services;
(b) assisting WPCS and its Subsidiaries in preparing applications
for, obtaining and maintaining all Authorizations required in connection with
the business of WPCS and its Subsidiaries;
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(c) the selection of equipment and service vendors, negotiating
the terms of appropriate agreements therefor, ordering and purchasing on behalf
of WPCS and its Subsidiaries, at their sole cost and expense, equipment and
design, installation, repair and maintenance services, and otherwise providing
for, at the cost and expense of WPCS or its Subsidiaries, as applicable, the
construction, expansion and improvement of the businesses of WPCS and its
Subsidiaries;
(d) assisting WPCS personnel in the development of marketing and
sales policies and programs for WPCS and its Subsidiaries, and, in connection
therewith, the development and implementation of advertising and promotional
policies and programs;
(e) the implementation of billing procedures related to the
preparation and mailing, on behalf of WPCS and its Subsidiaries, of bills to
customers of WPCS and its Subsidiaries and the collection of revenues from such
customers (including referring any delinquent accounts to collection agencies or
attorneys as WWC deems appropriate);
(f) the provision of customer services, engineering and technical
services and related services to WPCS and its Subsidiaries;
(g) the supervision of repair, upkeep and maintenance of the
properties of WPCS and its Subsidiaries;
(h) the preparation, retention and review of all books, records,
accounting statements, financial statements and accounts maintained by WPCS and
its Subsidiaries;
(i) the establishment and maintenance in accordance with Section 4
hereof and the Cash Management Agreement of bank accounts in the name of WPCS or
its Subsidiaries, as appropriate, and the deposit therein of all revenues of
WPCS and its Subsidiaries, and the
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making of payments therefrom of expenses and costs of WPCS and its Subsidiaries;
(j) the rendering of accounting and legal services on behalf of
WPCS and its Subsidiaries;
(k) the rendering of corporate development, planning, human
resources, MIS, risk management and administrative services on behalf of WWC and
its Subsidiaries;
(l) the performance of such other services as WWC deems necessary
or appropriate in connection with the management and operation of the businesses
of WPCS and its Subsidiaries; and
(m) the performance of such other services as may reasonably be
requested by WPCS from time to time in connection with the management and
supervision of its business activities.
3. Operating Plan and Budget. To assist WPCS, its Subsidiaries and
Joint Ventures in their financial planning, WWC shall, on or before December 1
of each Operating Year, prepare and deliver to WPCS a preliminary operating plan
and budget for the next ensuing Operating Year (the "Operating Plan and Budget")
setting forth in reasonable detail an estimate of the income, expenses and cash
flows of WPCS and its Subsidiaries (and to the extent applicable the Joint
Ventures) for the next ensuing Operating Year, including estimated expenditures
for Capital Improvements. The Operating Plan and Budget shall be approved by the
Board of Directors of WPCS on or before February 1 of the Operating Year for
which the Operating Plan and Budget applies.
4. Books and Records and Financial Statements.
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(a) In accordance with WWC's standard procedures, WWC shall cause
books of account and other records relating to or reflecting the operations of
WPCS and its Subsidiaries to be kept in accordance with generally accepted
accounting principles applied on a consistent basis. Upon the termination of
this Agreement, all of the books of account and records of WPCS and its
Subsidiaries shall be turned over forthwith by WWC to WPCS so as to ensure the
orderly continuance of the operation of the businesses of WPCS and its
Subsidiaries; provided, however, that all of the books of accounts and records
for the period during which WWC has provided Management Services to WPCS and its
Subsidiaries shall be retained by WPCS and made available to WWC, at all
reasonable times on reasonable advance written notice, for inspection, audit,
examination and copying for at least seven (7) years subsequent to the later of
(i) the date of termination of this Agreement or (ii) the end of the last
taxable year for which the Tax Sharing Agreement is in effect, or for any longer
period during which WPCS chooses to retain the books and records; provided,
further however, that any of the books of accounts and records for the period
during which WWC has provided Management Services to WPCS and its Subsidiaries
which are retained by WWC shall be made available to WPCS, at all reasonable
times on reasonable advance written notice, for inspection, audit, examination
and copying for at least seven (7) years subsequent to the later of (i) the date
of termination of this Agreement or (ii) the end of the last taxable year for
which the Tax Sharing Agreement is in effect, or for any longer period during
which WWC chooses to retain the books and records.
(b) WWC shall cause to be prepared and delivered to WPCS, on or
before the forty-fifth (45th) day following the completion of each Calendar
Quarter during the term of this Agreement, a reasonably detailed quarterly
operating statement based on the information
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available to WWC which reflects the results of operations of WPCS, its
Subsidiaries and Joint Ventures for the most recently completed Calendar
Quarter. The statement shall be in a format which shall include no less than a
balance sheet, statement of operations, statement of changes in financial
position, and descriptions of any material events in the operation of the PCS
Systems, including Capital Improvements made at the PCS Systems, and shall be in
such detail as is necessary to allow WPCS, its Subsidiaries and Joint Ventures
to comply with any reporting requirements applicable to them. In addition within
thirty (30) days following the completion of each calendar month during the term
of this Agreement, WWC will provide WPCS with a balance sheet and statement of
operations for such month.
(c) No later than April 30 of each year, WWC shall cause to be
prepared and delivered to WPCS, at the sole cost and expense of WPCS, financial
statements for the preceding Operating Year, which shall consist of a balance
sheet, statement of operations and shareholders equity, and statement of changes
in financial position, and which shall be audited by Arthur Andersen LLP, or
another national firm of certified public accountants selected by WPCS.
5. Personnel.
(a) WWC shall, subject to the prior approval of the Board of
Directors of WPCS or its Subsidiaries, as applicable, select the senior
management personnel to be employed by WPCS and its Subsidiaries, and WWC shall
assist such senior management personnel in the hiring of all employees that WWC
and such senior management personnel determine to be necessary or advisable for
the business operations of WPCS and its Subsidiaries, either at the PCS Systems
or at WWC's "home office", customer service facilities, warehouses, other shared
facilities or joint office spaces utilized for the benefit of both WWC and its
Subsidiaries, on the
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one hand, and WPCS, its Subsidiaries and Joint Ventures, on the other hand
(collectively the "PCS Systems Personnel"). WWC shall give all reasonable
assistance, training and other support to senior management personnel of WPCS
and the PCS Systems Personnel to permit them to perform their respective
functions.
(b) All decisions with regard to the terms of employment,
including compensation, bonuses, health and welfare benefits, discharge and
replacement of all senior management personnel of WPCS and its Subsidiaries
shall be made by WWC, subject to the approval of the Board of Directors of WPCS
or its Subsidiaries, as applicable.
(c) All PCS Systems Personnel, whether located at the PCS Systems
or at WWC's "home office", customer service facilities, warehouses, other shared
facilities or joint office spaces utilized for the benefit of both WWC and its
Subsidiaries, on the one hand, and WPCS, its Subsidiaries and Joint Ventures, on
the other hand, shall be employed at the sole cost and expense of WPCS or its
Subsidiaries, as applicable.
(d) WWC shall cause to be prepared and filed on behalf of WPCS and
its Subsidiaries all tax returns and reports pertaining to withholding, FICA
payments and others required on account of the employment of any PCS Systems
Personnel by WPCS and its Subsidiaries pursuant to this SECTION 5.
6. WWC's Computer Services.
(a) General Services. In addition to performing all other
Management Services described in this Agreement, WWC shall perform and manage
certain data processing, accounting, auditing, telecommunications, word
processing, and computer services and functions (collectively the "Computer
Services"), as shall be determined by WWC and WPCS to be
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reasonably necessary to carry out the intentions of the parties hereto.
Additionally, in performing the Computer Services, WWC agrees to install, use
and maintain certain software specially developed by, or for, WWC and its
Subsidiaries for use in the management of all of its wireless communications
services systems (the "WWC Software"). WPCS, its Subsidiaries and Joint Ventures
will reimburse WWC for WPCS's, its Subsidiaries' and Joint Ventures' Shared
Overhead Costs and Expenses of the installation, use and maintenance (but not
development costs) of any WWC Software at the PCS Systems or at WWC's "home
office", customer service facilities, warehouses, other shared facilities or
joint office spaces utilized for the benefit of both WWC and its Subsidiaries,
on the one hand, and WPCS, its Subsidiaries and Joint Ventures, on the other
hand. WWC agrees that it will make available to WPCS the most recent and
advanced Computer Services systems and WWC Software used from time to time by
WWC and its Subsidiaries, to the extent applicable to the business and
operations of WPCS, and will use commercially reasonable efforts to develop,
implement and maintain such systems and software with a view to maximizing their
adaptability to, and utility and value in, the business and operations of WPCS.
(b) WWC is not hereby transferring any rights in the WWC Software
to WPCS, its Subsidiaries or Joint Ventures, whether by sale, lease, license,
rental, or otherwise. WWC is only agreeing to use, install and maintain the WWC
Software at the PCS Systems or at WWC's "home office", customer service
facilities, warehouses, other shared facilities or joint office spaces utilized
for the benefit of both WWC and its Subsidiaries, on the one hand, and WPCS, its
Subsidiaries and Joint
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Ventures, on the other hand, in fulfilling its obligations under this Agreement.
WPCS acknowledges and agrees, on behalf of itself, its Subsidiaries and Joint
Ventures, that the WWC Software shall at all times be used under the exclusive
control of WWC and its Subsidiaries. WWC may, at its sole option, update,
enhance, modify, or otherwise change any portion of the WWC Software. In
addition, WWC shall maintain and service the WWC Software as it deems
appropriate. Nothing in this Agreement shall in any way limit WWC's right to
sell, lease, license, rent, or otherwise transfer the WWC Software, in whole or
in part, or any rights in the WWC Software, to any other person or entity. WPCS
agrees that it and its Subsidiaries and Joint Ventures will not contest WWC's
exclusive ownership and control of the WWC Software. Upon any termination of
this Agreement, WWC agrees that WPCS shall have the option to retain a
non-exclusive, royalty-free license to continue its use of the then-current WWC
Software for such reasonable period of time after such termination as may be
required in order to make an orderly and prompt transition to comparable
software and systems without disruption to its operations and business.
7. Use of Affiliates by WWC. In fulfilling its obligations under this
Agreement, WWC may from time to time use the services of any Affiliate, provided
that such Affiliate shall be required to render such services in accordance with
all of the terms of this Agreement and WWC shall remain primarily liable for the
performance of its obligations under this Agreement.
8. Management Obligations. WWC shall hire and retain sufficient Senior
Officers and other management personnel, employees, agents, representatives,
independent contractors, outside attorneys, accountants and investment bankers
as may be necessary to enable it to supervise the PCS Systems Personnel to be
employed at the PCS Systems or at WWC's "home office", customer service
facilities, warehouses, other shared facilities or joint office spaces utilized
for the benefit of both WWC and its Subsidiaries, on the one hand, and WPCS, its
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Subsidiaries and Joint Ventures, on the other hand, and to otherwise fully
perform all of the Management Services required to be performed by it hereunder.
WWC shall direct its Senior Officers and other relevant and necessary employees
to devote such portion of their time and attention to the operations and
business of WPCS as WWC reasonably deems necessary to assure the due and timely
performance of the Management Services in accordance with the requirements of
this Agreement.
9. Management Services for Joint Ventures. WWC hereby agrees, during
the term of this Agreement, to provide the Management Services to any Joint
Venture with respect to which WPCS or its Subsidiaries have agreed to provide
such services, but only to the extent WPCS or its Subsidiaries has agreed to
provide such services, it being understood and agreed that WWC shall provide
such Management Services to such Joint Ventures pursuant to all of the terms and
conditions hereof and shall be reimbursed for the performance of such services
in accordance with the provisions of Sections 10 and 11 hereof.
10. Reimbursement Obligations.
(a) The parties hereto hereby agree that WWC shall not receive any
management fees or other compensation or consideration from WPCS or its
Subsidiaries or Joint Ventures for the performance of the Management Services
hereunder. WPCS shall, however, and shall cause its Subsidiaries and Joint
Ventures to, reimburse WWC on a monthly basis in accordance with SECTION 11
hereof for all Direct Costs and Expenses and for WPCS's, its Subsidiaries' and
Joint Ventures' allocable portion of all Shared Overhead Costs and Expenses paid
or payable by WWC in connection with the performance of its Management Services
hereunder.
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(b) The Shared Overhead Costs and Expenses which WPCS, its
Subsidiaries and Joint Ventures shall be responsible for directly paying or
reimbursing WWC or its Subsidiaries shall include the following:
(i) WPCS's, its Subsidiaries' and Joint Ventures' allocable
portion of all salary payments and bonuses (including payroll taxes), retirement
plan contributions, contributions to health and welfare benefit plans, car
allowances and other fringe benefits or other compensation (including any
severance or termination payments, but excluding any portion of such
compensation consisting of stock options, warrants or other securities of WWC),
provided by WWC or its Subsidiaries during any applicable period to its Senior
Officers pursuant to their Employment Agreements or otherwise, all of which
shall be allocated between WWC and its Subsidiaries, on the one hand, and WPCS,
its Subsidiaries and Joint Ventures, on the other hand, on the basis of the
Weighted Time Method;
(ii) WPCS's, its Subsidiaries' and Joint Ventures' allocable
portion of all salary payments and bonuses (including payroll taxes), retirement
plan contributions, contributions to health and welfare benefit plans, car
allowances and other fringe benefits or other compensation (including any
severance or termination payments, but excluding any portion of such
compensation consisting of stock options, warrants or other securities of WWC)
provided by WWC or its Subsidiaries during any applicable period to any of WWC's
management personnel (other than the Senior Officers), employees, agents,
representatives or independent contractors (collectively the "WWC/WPCS
Representatives") who render services on behalf of both WWC and its
Subsidiaries, on the one hand, and WPCS, its Subsidiaries and Joint Ventures, on
the other hand, all of which shall be allocated between WWC and its
Subsidiaries, on the one
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hand, and WPCS, its Subsidiaries and Joint Ventures, on the other hand, on the
basis of the Weighted Time Method;
(iii) WPCS's, its Subsidiaries' and Joint Ventures' allocable
portion of all compensation and fringe benefits provided by WWC or its
Subsidiaries during any applicable period to any director of WWC (in his or her
capacity as such) who also serves as a director of WPCS or in a comparable
position with any Joint Venture and who does not receive compensation from WPCS
in his or her capacity as a director of WPCS (collectively the "WWC/WPCS
Directors"), all of which shall be allocated between WWC and its Subsidiaries,
on the one hand, and WPCS, its Subsidiaries and Joint Ventures, on the other
hand, on the basis of the Weighted Time Method;
(iv) WPCS's, its Subsidiaries' and Joint Ventures' allocable
portion of all charges, costs, expenses and taxes incurred by WWC in connection
with all stock options, warrants or other securities issued by WWC during any
applicable period to the Senior Officers (whether pursuant to the Employment
Agreements or otherwise), the WWC/WPCS Representatives or the WWC/WPCS
Directors, all of which shall be allocated between WWC and its Subsidiaries, on
the one hand, and WPCS, its Subsidiaries and Joint Ventures, on the other hand,
on the basis of the Weighted Time Method; it being understood and agreed that
for the purposes of computing such charges, costs, expenses and taxes, the
aggregate value ascribed to any such options, warrants or other securities shall
be established by the Board of Directors of WWC, or the Compensation Committee
thereof, in its sole discretion consistent with WWC's financial reporting with
respect to such amounts.
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(v) WPCS's, its Subsidiaries' and Joint Ventures' allocable
portion of all costs, fees and expenses incurred by WWC or its Subsidiaries
during any applicable period in connection with the use and maintenance of WWC's
"home office", customer service facilities, warehouses, other shared facilities
or joint office spaces utilized for the benefit of both WWC and its
Subsidiaries, on the one hand, and WPCS, its Subsidiaries and Joint Ventures, on
the other hand, including costs, fees and expenses related to rent,
depreciation, utilities, Capital Improvements, equipment, furniture, motor
vehicles, telephones, fax and delivery services, computing and accounting
systems and software, office support staff and other overhead costs, the
depreciation or costs of which shall be allocated between WWC and its
Subsidiaries, on the one hand, and WPCS, its Subsidiaries and Joint Ventures, on
the other hand, on the basis of the Weighted Time Method;
(vi) WPCS's, its Subsidiaries' and Joint Ventures' allocable
portion of all insurance, legal, accounting, auditing, banking, investment
banking, engineering and consulting costs, fees and expenses (including travel,
hotel and other out-of-pocket expenses) paid or payable by WWC or its
Subsidiaries during any applicable period to third parties which perform
services on behalf of both WWC and its Subsidiaries, on the one hand, and WPCS,
its Subsidiaries and Joint Ventures, on the other hand, all of which shall be
allocated between WWC and its Subsidiaries, on the one hand, and WPCS, its
Subsidiaries and Joint Ventures, on the other hand, on the basis of the Weighted
Time Method to and only to the extent such third parties are unable to maintain
and provide WWC and its Subsidiaries, on the one hand, and WPCS, its
Subsidiaries and Joint Ventures, on the other hand, with separate time sheets,
records and billing statements in connection with the services such third
parties render on behalf of WWC and its
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Subsidiaries, on the one hand, and WPCS, its Subsidiaries and Joint Ventures, on
the other hand; and
(vii) WPCS's, its Subsidiaries' and Joint Ventures' allocable
portion of all costs, fees and expenses related to general expenses incurred in
connection with the operations of both WWC and its Subsidiaries, on the one
hand, and WPCS, its Subsidiaries and Joint Ventures, on the other hand,
including but not limited to postage, insurance, equipment rental, sales,
marketing, advertising and electronic data processing services costs, fees and
expenses, all of which shall be allocated between WWC and its Subsidiaries, on
the one hand, and WPCS, its Subsidiaries and Joint Ventures, on the other hand,
on the basis of the Weighted Time Method.
(c) The Direct Costs and Expenses which WPCS, its Subsidiaries and
Joint Ventures shall be responsible for directly paying or reimbursing WWC or
its Subsidiaries shall include the following:
(i) the daily per diem rate for those personnel of WWC or
its Subsidiaries assigned to perform special functions, projects or tasks for
WPCS, its Subsidiaries or Joint Ventures, whether at the PCS Systems, at WWC's
"home office", customer service facilities, warehouses, other shared facilities
or joint office spaces utilized for the benefit of both WWC and its
Subsidiaries, on the one hand, and WPCS, its Subsidiaries and Joint Ventures, on
the other hand (including work undertaken with respect to Capital Improvements,
engineering, technical or computer projects or accounting, auditing or legal
functions), which per diem rate shall be based upon each individual's rate of
pay;
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(ii) all other costs, fees and expenses incurred by WWC or
its Subsidiaries in connection with the performance of the Management Services
in accordance with the terms hereof, including all travel, hotel and other
out-of-pocket expenses incurred by WWC's or its Subsidiaries' directors, Senior
Officers and other management personnel, employees, agents, representatives and
independent contractors in connection with the rendering of any Management
Services provided by WWC or its Subsidiaries on behalf of WPCS, its Subsidiaries
or Joint Ventures in accordance with the terms hereof;
(iii) in addition to any obligations WPCS may have pursuant to
Section 10(b)(vi) hereof, all legal, accounting, insurance, auditing, banking,
investment banking, engineering and consulting costs, fees and expenses
(including travel, hotel and other out-of-pocket expenses) paid or payable to
third parties to the extent they have performed certain services solely for the
benefit of WPCS, its Subsidiaries or Joint Ventures;
(iv) all costs, fees and expenses incurred by WWC or its
Subsidiaries in connection with the acquisition, transportation, installation,
maintenance and repair of any Capital Improvements, equipment, supplies,
materials, tools and machinery used in the construction, operation and
maintenance of the PCS Systems or otherwise in connection with the business
operations and activities of WPCS, its Subsidiaries and Joint Ventures;
(v) all taxes and similar assessments levied against any
reimbursements payable to WWC and its Subsidiaries by WPCS and its Subsidiaries
under this Agreement for all Direct Costs and Expenses and Shared Overhead Costs
and Expenses incurred by WWC and its Subsidiaries for the account of WPCS and
its Subsidiaries and Joint Ventures, provided that any such reimbursement
payment will be net of any corresponding tax credit or
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benefit realized by WWC and its Subsidiaries and will be grossed-up for the
related tax impact on WWC and its Subsidiaries resulting from its receipt of the
reimbursement so that WPCS and its Subsidiaries shall be responsible for the net
economic loss suffered by WWC and its Subsidiaries as a result of the levy; and
(vi) all other Direct Costs and Expenses incurred by or on
behalf of WPCS, its Subsidiaries or Joint Ventures, including all salary
payments and bonuses (including payroll taxes), retirement plan contributions,
contributions to health and welfare benefit plans, car allowances, other fringe
benefits, any severance or termination payments or other compensation (including
compensation consisting of stock options, warrants or other securities of WWC or
WPCS, provided by WWC or WPCS to any of WPCS's management personnel, employees,
agents, representatives or independent contractors; it being understood and
agreed that for the purposes of computing such Direct Costs and Expenses, the
aggregate value ascribed to any such options, warrants or other securities shall
be established by the Board of Directors of WWC or WPCS, as applicable, or the
Compensation Committee thereof, in its sole discretion consistent with WWC's or
WPCS's, as applicable, financial reporting with respect to such amounts).
11. Monthly Reimbursement Payments and Quarterly Reports. Within thirty
(30) days after the completion of each calendar month during the term of this
Agreement, WWC shall provide WPCS with a preliminary estimate (the "Monthly
Estimate") setting forth in reasonable detail the calculation of the amount of
the various Direct Costs and Expenses and Shared Overhead Costs and Expenses
paid or payable by WWC, its Subsidiaries or Joint Ventures during the most
recently completed calendar month which are reimbursable by WPCS, its
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Subsidiaries or Joint Ventures to WWC or its Subsidiaries pursuant to Section 10
hereof. All payments due and payable to WWC or its Subsidiaries in accordance
with any such Monthly Estimate shall be provided by WPCS, its Subsidiaries or
Joint Ventures to WWC or its Subsidiaries within five (5) days of WPCS's receipt
of any such Monthly Estimate. WWC shall, during the term of this Agreement,
prepare and provide WPCS with quarterly reports (the "Quarterly Reimbursement
Reports"), no later than the forty-fifth (45th) day following the completion of
any Calendar Quarter, which shall specify the manner in which the Weighted Time
Method was computed during such completed Calendar Quarter and the various
Direct Costs and Expenses and Shared Overhead Costs and Expenses paid or payable
by WWC or its Subsidiaries during such completed Calendar Quarter which are
reimbursable by WPCS, its Subsidiaries or Joint Ventures to WWC or its
Subsidiaries pursuant to SECTION 10 hereof. All payments due and payable to WWC
or its Subsidiaries in accordance with any such Quarterly Reimbursement Report,
to and only to the extent such payments exceed any payments previously made to
WWC or its Subsidiaries in accordance with the Monthly Estimates furnished by
WWC or its Subsidiaries to WPCS with respect to the applicable calendar months
covered by such Quarterly Reimbursement Report, shall be provided by WPCS, its
Subsidiaries or Joint Ventures to WWC or its Subsidiaries within ten (10) days
of its receipt of any such Quarterly Reimbursement Report. If any Quarterly
Reimbursement Report reflects that WPCS or its Subsidiaries have made any
overpayments as a result of the Monthly Estimates furnished by WWC or its
Subsidiaries to WPCS or its Subsidiaries, WWC or its Subsidiaries shall refund
to WPCS and its Subsidiaries such overpayments within ten (10) days of its
receipt of any such Quarterly Reimbursement Report. The methods and bases used
to compute the Weighted Time
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Method and to calculate charges to WPCS for Direct Costs and Expenses and its
allocable share of Shared Overhead Costs and Expenses pursuant to this Agreement
shall be reviewed, at least annually by WWC and the Board of Directors of WPCS,
and shall be modified and adjusted by the mutual agreement of WWC and the Board
of Directors of WPCS where necessary or appropriate to ensure that such methods
and bases reflect a fair and equitable allocation of the charges for Direct
Costs and Expenses and Shared Overhead Costs and Expenses between WWC and WPCS.
In connection with the annual audit conducted by WWC's independent certified
public accountants, such accountants shall be required to, as part of their
audit, provide to WWC and WPCS a certification that the charges for Direct Costs
and Expenses and allocations of all Shared Overhead Costs and Expenses between
WPCS and WWC have been made in accordance with the terms of this Agreement.
12. Representations and Warranties.
(a) Representations and Warranties of WWC. WWC represents and
warrants to WPCS, which representations and warranties shall survive the
execution and delivery of this Agreement and the consummation of the
transactions herein contemplated, as follows:
(i) Due Organization. WWC is a corporation duly organized,
validly existing and in good standing under the laws of the State of Washington.
WWC has all requisite corporate power and authority to enter into this Agreement
and to perform all of its obligations hereunder. WWC is duly qualified to do
business and is in good standing in all jurisdictions where the conduct of its
business or the ownership of its properties makes such qualification necessary,
except where the failure to so qualify would not have a material adverse effect
on WWC or its financial condition, or the transactions contemplated hereby.
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(ii) Power and Authority; No Violation. WWC has full power
and authority to execute, deliver and perform all of its obligations under this
Agreement and to consummate the transactions contemplated hereby. This Agreement
and all transactions contemplated hereby have been duly and validly authorized
by all necessary action on the part of WWC and this Agreement constitutes a
legal, valid and binding obligation of WWC enforceable against WWC in accordance
with its terms except to the extent such enforceability may be limited by
bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization or
other similar laws from time to time in effect affecting or relating to the
enforcement of creditors' rights generally or by principles governing the
availability of equitable remedies. Neither the execution, delivery or
performance of this Agreement by WWC nor the consummation of the transactions
contemplated hereby by WWC will, with or without the giving of notice or the
passage of time, or both, conflict with, breach, result in a default or loss of
rights (or give rise to any right of termination, cancellation or acceleration)
under, or result in the creation of any lien, pursuant to (A) any provision of
the certificates of incorporation, by-laws, stockholders agreements or other
constituent documents of WWC or any of its Subsidiaries; (B) any material note,
bond, indenture, mortgage, deed of trust, contract, agreement, lease or other
instrument or obligation to which WWC or any of its Subsidiaries is a party or
by which WWC or any of its Subsidiaries or any of their respective properties
may be bound or affected; or (C) any law, order, judgment, ordinance, rule,
regulation or decree to which WWC or any of its Subsidiaries is a party or by
which it or any of their respective properties are bound or affected. No permit,
consent, approval, authorization, qualification or registration of, or
declaration to or filing with any governmental or regulatory authority or agency
or third party is required to be obtained or
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made by WWC or any of its Subsidiaries in connection with the execution and
delivery of this Agreement by WWC or the consummation by WWC of the transactions
contemplated hereby in order to render this Agreement or the transactions
contemplated hereby valid and effective.
(iii) Legal Matters. Except as set forth on EXHIBIT 12(a)(iii)
annexed hereto, there is no claim, legal action, counterclaim, suit,
arbitration, governmental investigation or other legal, administrative or tax
proceeding, nor any order, decree or judgment, in progress or pending, or to the
knowledge of WWC threatened, against or relating to the right of WWC to perform
its obligations under this Agreement, nor does WWC know or have reason to be
aware of any basis for the same. There is outstanding no order, writ,
injunction, judgment or decree of any court, governmental agency or arbitration
tribunal which would individually or in the aggregate have a material adverse
effect on the ability of WWC to perform its duties and obligations hereunder or
on the transactions contemplated by this Agreement other than orders or decrees
involving the wireless telephone industry in general.
(iv) Truth and Correctness. No representation or warranty
made by WWC in this Agreement contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary to make
the statements contained herein not misleading in light of the circumstances
under which such statements are made.
(b) Representations and Warranties of WPCS. WPCS represents and
warrants to WWC, which representations and warranties shall survive the
execution and delivery of this Agreement and the consummation of the
transactions herein contemplated, as follows:
(i) Due Organization. WPCS is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
WPCS has all requisite
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corporate power and authority to enter into this Agreement and to perform all of
its obligations hereunder. WPCS is duly qualified to do business and is in good
standing in all jurisdictions where the conduct of its business or the ownership
of its properties makes such qualification necessary, except where the failure
to so qualify would not have a material adverse effect on WPCS or its financial
condition, or the transactions contemplated hereby.
(ii) Power and Authority; No Violation. WPCS has full power
and authority to execute, deliver and perform all of its obligations under this
Agreement and to consummate the transactions contemplated hereby. This Agreement
and all transactions contemplated hereby have been duly and validly authorized
by all necessary action on the part of WPCS and this Agreement constitutes a
legal, valid and binding obligation of WPCS enforceable against WPCS in
accordance with its terms except to the extent such enforceability may be
limited by bankruptcy, insolvency, moratorium, fraudulent conveyance,
reorganization or other similar laws from time to time in effect affecting or
relating to the enforcement of creditors' rights generally or by principles
governing the availability of equitable remedies. Neither the execution,
delivery or performance of this Agreement by WPCS nor the consummation of the
transactions contemplated hereby by WPCS will, with or without the giving of
notice or the passage of time, or both, conflict with, breach, result in a
default or loss of rights (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of any lien,
pursuant to (A) any provision of the certificates of incorporation, by-laws,
stockholders agreements or other constituent documents of WPCS or any of its
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Subsidiaries; (B) any material note, bond, indenture, mortgage, deed of trust,
contract, agreement, lease or other instrument or obligation to which WPCS or
any of its Subsidiaries is a party or by which WPCS or any of its Subsidiaries
or any of their respective properties may be bound or affected; or (C) any law,
order, judgment, ordinance, rule, regulation or decree to which WPCS or any of
its Subsidiaries is a party or by which it or any of their respective properties
are bound or affected. No permit, consent, approval, authorization,
qualification or registration of, or declaration to or filing with any
governmental or regulatory authority or agency or third party is required to be
obtained or made by WPCS or any of its Subsidiaries in connection with the
execution and delivery of this Agreement by WPCS or the consummation by WPCS of
the transactions contemplated hereby in order to render this Agreement or the
transactions contemplated hereby valid and effective.
(iii) Legal Matters. Except as set forth on EXHIBIT 12(a)(iii)
annexed hereto, there is no claim, legal action, counterclaim, suit,
arbitration, governmental investigation or other legal, administrative or tax
proceeding, nor any order, decree or judgment, in progress or pending, or to the
knowledge of WPCS threatened, against or relating to the right of WPCS to
perform its obligations under this Agreement, nor does WPCS know or have reason
to be aware of any basis for the same. There is outstanding no order, writ,
injunction, judgment or decree of any court, governmental agency or arbitration
tribunal which would individually or in the aggregate have a material adverse
effect on the ability of WPCS to perform its duties and obligations hereunder or
on the transactions contemplated by this Agreement other than orders or decrees
involving the wireless telephone industry in general.
(iv) Truth and Correctness. No representation or warranty
made by WPCS in this Agreement contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary to make
the statements contained herein not misleading in light of the circumstances
under which such statements are made.
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<PAGE> 29
13. Indemnification.
(a) WPCS and its Subsidiaries shall protect, defend, indemnify and
save harmless WWC and its Subsidiaries, Affiliates, Senior Officers, directors,
other management personnel, employees, representatives, independent contractors,
consultants, outside attorneys, accountants, bankers, investment bankers and
agents (collectively the "WWC Indemnified Persons") against and from all claims,
damages, costs, deficiencies, penalties, assessments, losses and expenses,
including, without limitation, attorney's fees and costs (collectively
"Losses"), by reason of any suit, claim, demand, judgment or cause of action
initiated by any Person, arising or alleged to have arisen out of the
performance by the WWC Indemnified Persons of their duties and obligations under
and in accordance with this Agreement, except to the extent such Losses result
directly from the willful misconduct or gross negligence of any WWC Indemnified
Person or from the failure of WWC to exercise the same standard of care in
managing the operations and business affairs of WPCS and its Subsidiaries as WWC
uses in managing the operations and business affairs of WWC and its
Subsidiaries. In the event any action, suit or proceeding is brought against any
WWC Indemnified Person with respect to which WPCS and its Subsidiaries may have
liability under any indemnity contained herein, WPCS and its Subsidiaries shall
have the right, at their sole cost and expense, to defend such action in the
name and on behalf of the WWC Indemnified Person and in connection with any such
action, suit or proceeding, the parties hereto agree to render to each other
such assistance as may reasonably be required in order to insure the proper and
adequate defense of any such action, suit or proceeding. The WWC Indemnified
Person shall have the right to participate, at its own expense and with counsel
of its choosing, in the defense of any claim against which it is indemnified
hereunder and it shall be
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kept fully informed with respect thereto.
(b) WWC and its Subsidiaries shall protect, defend, indemnify and
save harmless WPCS and its Subsidiaries, Affiliates, Senior Officers, directors,
other management personnel, employees, representatives, independent contractors,
consultants, outside attorneys, accountants, bankers, investment bankers and
agents (collectively the "WPCS Indemnified Persons") against and from all
claims, damages, costs, deficiencies, penalties, assessments, losses and
expenses, including, without limitation, attorney's fees and costs (collectively
"Losses"), by reason of any suit, claim, demand, judgment or cause of action
initiated by any Person, resulting or alleged to have resulted directly from the
willful misconduct or gross negligence of a WWC Indemnified Person in the
performance of the duties and obligations of WWC under this Agreement or from
the failure of WWC to exercise the same standard of care in managing the
operations and business affairs of WPCS and its Subsidiaries as WWC uses in
managing the operations and business affairs of WWC and its Subsidiaries. In the
event any action, suit or proceeding is brought against any WPCS Indemnified
Person with respect to which WWC and its Subsidiaries may have liability under
any indemnity contained herein, WWC and its Subsidiaries shall have the right,
at their sole cost and expense, to defend such action in the name and on behalf
of the WPCS Indemnified Person and in connection with any such action, suit or
proceeding, the parties hereto agree to render to each other such assistance as
may reasonably be required in order to insure the proper and adequate defense of
any such action, suit or proceeding. The WPCS Indemnified Person shall have the
right to participate, at its own expense and with counsel of its choosing, in
the defense of any claim against which it is indemnified hereunder and it shall
be kept fully informed with respect thereto.
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14. Term of Agreement. This Agreement shall commence on the date hereof
and shall continue in full force and effect until the earliest to occur of any
of the following events:
(a) notice to WPCS by WWC if WPCS or any of its Subsidiaries or
Joint Ventures breaches any material agreement, undertaking or covenant
contained in this Agreement, or defaults in the performance of any material
obligation hereunder, and the breach or default is not cured within thirty (30)
days following written notice thereof from WWC to WPCS;
(b) notice to WWC by WPCS if WWC breaches any material agreement,
undertaking or covenant contained in this Agreement, or defaults in the
performance of any material obligation hereunder, and the breach or default is
not cured within thirty (30) days following written notice thereof from WPCS to
WWC;
(c) if WWC or WPCS applies for or consents to the appointment of a
receiver, trustee or liquidator for all or a substantial part of its assets or
makes a general assignment for the benefit of its creditors, or files a
voluntary petition in bankruptcy or a petition seeking reorganization,
composition, arrangement with creditors, liquidation or similar relief under any
present or future statute, law or regulation, or files any answer admitting the
material allegations of a petition filed against it in any such proceeding, or
is adjudicated as bankrupt or insolvent, or takes any action looking toward
dissolution;
(d) if any order, judgment or decree is entered without the
application, approval, or consent of WWC or WPCS by any court of competent
jurisdiction, approving a petition seeking reorganization, composition,
arrangement with creditors, liquidation or similar relief under any present or
future statute, law or regulation with respect to WWC or WPCS, or appointing a
receiver, trustee or liquidator for all or a substantial part of WWC's or WPCS's
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assets and such order, judgment or decree continues unstayed and in effect for
an aggregate of sixty (60) consecutive days;
(e) by mutual written consent duly authorized by the Boards of
Directors of each of WWC and WPCS; or
(f) upon one hundred twenty (120) days prior written notice by
either WWC or WPCS, which notice is duly authorized by the Board of Directors of
WWC or WPCS, as applicable, if WWC and its Affiliates cease to own at least a
majority of the issued and outstanding voting stock of WPCS; provided, however,
that such 120-day period shall be extended to the extent reasonably requested by
WPCS if this Agreement is so terminated by WWC in order to permit WPCS to make
an orderly and prompt transition to providing the Management Services through
its own personnel and/or through one or more third parties without disruption to
its operations and business.
15. Actions to be Taken on Termination. On any termination of this
Agreement, the following shall be applicable:
(i) Within thirty (30) days after the termination of this
Agreement, WPCS shall reimburse WWC for all payments due to it under the terms
of this Agreement;
(ii) WWC shall promptly deliver to WPCS all of the books and
records of WPCS and its Subsidiaries and Joint Ventures in the custody and
control of WWC; and
(iii) WWC shall enter into any license requested by WPCS under
Section 6(b) hereof.
Any termination of this Agreement will be without prejudice to or limitation of
any right or obligation of WWC or WPCS accrued prior to the effective date of
such termination or, subject
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to SECTION 16 hereof, any right or remedy, at law or in equity, of either party
in respect of any breach by the other party of its obligations hereunder.
16. Arbitration. In the event of any dispute between WWC and WPCS
arising out of this Agreement, such dispute shall be submitted to arbitration in
accordance (mutatis mutandis) with the terms and procedures set forth in Section
13(k) of the Shareholders Agreement. The Investor shall have the right to
participate in any pending arbitration and to consolidate any such arbitration
with any arbitration which may be pending under the Shareholders Agreement and
which relates to a dispute which involves in a material way substantially
similar issues.
17. Independent Contractor. Nothing contained herein shall be construed
or deemed to create a joint venture, contract of employment or partnership of
any kind between the parties hereto. All debts and liabilities to and contracts
or agreements with any Person incurred or entered into by WWC on behalf of WPCS
shall be the sole debt and liability of, and shall be binding upon WPCS, its
Subsidiaries or Joint Ventures; provided, that any Agreement that in accordance
with normal corporate procedures would require approval of the Board of
Directors of WPCS, its Subsidiaries or Joint Ventures, as applicable, shall be
submitted to such Board for approval. NEITHER WWC NOR ITS SUBSIDIARIES SHALL BE
LIABLE TO ANY PERSON FOR ANY DEBT, LIABILITY OR OBLIGATION OF WPCS, ITS
SUBSIDIARIES OR JOINT VENTURES SO INCURRED OR CREATED PURSUANT TO AND IN
ACCORDANCE WITH THE AUTHORITY GRANTED TO WWC OR SOLELY BY REASON OF ITS
PROVISION OF SERVICES HEREUNDER IN ACCORDANCE WITH THE TERMS HEREOF UNLESS WWC,
BY WRITTEN AGREEMENT, EXPRESSLY ASSUMES OR GUARANTEES ANY SUCH LIABILITY.
NEITHER WWC NOR ITS
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<PAGE> 34
SUBSIDIARIES SHALL BE REQUIRED, UNDER ANY CIRCUMSTANCES, TO GUARANTEE OR ASSUME
ANY OBLIGATION OR LIABILITY OF WPCS, ITS SUBSIDIARIES OR JOINT VENTURES.
18. Additional Activities.
(a) WPCS, its Subsidiaries and Joint Ventures, hereby acknowledge
that WWC and its Subsidiaries have, and shall be entitled to continue to have,
business interests, and engage in business activities, in addition to those
relating to WPCS and the PCS Systems, including business activities relating to
the construction and operation of wireless telecommunications systems. WPCS
acknowledges that during and subsequent to the term hereof, and subject to the
terms of the Shareholders Agreement, WWC shall be entitled to have business
interests and activities which may be in direct competition with the business
interests and activities of WPCS and the PCS Systems, for its own account and
for the account of others, without having or incurring any obligation or
responsibility to offer any interest in any such business activities or
opportunities to WPCS and its Subsidiaries and Joint Ventures. WPCS and its
Subsidiaries and Joint Ventures shall not have any rights by virtue of this
Agreement or the relationship created hereby in any such business activities or
opportunities.
(b) WWC and its Subsidiaries hereby acknowledge that WPCS, its
Subsidiaries and Joint Ventures have, and shall be entitled to continue to have,
business interests, and engage in business activities, in addition to those
relating to the PCS Systems, including business activities relating to the
construction and operation of wireless telecommunications systems. WWC
acknowledges that during and subsequent to the term hereof, and subject to the
terms of the Shareholders Agreement, WPCS shall be entitled to have business
interests and
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activities which may be in direct competition with the business interests and
activities of WWC, for its own account and for the account of others, without
having or incurring any obligation or responsibility to offer any interest in
any such business activities or opportunities to WWC and its Subsidiaries. WWC
and its Subsidiaries shall not have any rights by virtue of this Agreement or
the relationship created hereby in any such business activities or
opportunities.
19. Obligations of WPCS and its Subsidiaries. Each of the obligations of
WPCS and its Subsidiaries under this Agreement including the obligations under
Sections 10 and 11 shall be joint and several.
20. Notices. All notices, claims and other communications hereunder
shall be in writing and shall be made by hand delivery, registered or certified
mail (postage prepaid, return receipt requested), facsimile, or overnight air
courier guaranteeing next day delivery
(a) if to WWC, to it at:
Western Wireless Corporation
2001 NW Sammamish Road
Issaquah, Washington 98027
Attention: Alan R. Bender, Esq.
Facsimile No.: 206-313-5547
with a copy (which shall not constitute notice) to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Attention: Barry A. Adelman, Esq.
Facsimile No.: 212-698-7825
(b) if to WPCS, to it at:
Western PCS Corporation
2001 NW Sammamish Road
Issaquah, Washington 98027
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<PAGE> 36
Attention: Alan R. Bender, Esq.
Facsimile No.: 206-313-5547
or at such other address as any party may from time to time furnish to the other
by a notice given in accordance with the provisions of this SECTION 20. All such
notices and communications shall be deemed to have been duly given at the time
delivered by hand, if personally delivered; five (5) business days after being
deposited in the mail, first class postage prepaid, return receipt requested, if
mailed; when receipt confirmed, if sent by facsimile; and the next business day
after timely delivery to the courier, if sent by an overnight air courier
service guaranteeing next day delivery.
21. Entire Agreement. This Agreement contains the entire understanding
among the parties hereto concerning the subject matter hereof and this Agreement
may not be changed, modified, altered or terminated except by an agreement in
writing executed by the parties hereto and approved by the Investor. Any waiver
by any party of any of its rights under this Agreement or of any breach of this
Agreement shall not constitute a waiver of any other rights or of any other or
future breach.
22. Remedies Cumulative. Except as otherwise provided herein, each and
all of the rights and remedies in this Agreement provided, and each and all of
the rights and remedies allowed at law and in equity in like case, shall be
cumulative, and the exercise of one right or remedy shall not be exclusive of
the right to exercise or resort to any and all other rights or remedies provided
in this Agreement or at law or in equity.
23. Governing Law. This Agreement shall be construed in accordance with
and subject to the laws and decisions of the State of New York applicable to
contracts made and to be
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performed entirely therein.
24. Counterparts. This Agreement may be executed in several counterparts
hereof, and by the different parties hereto on separate counterparts hereof,
each of which shall be an original; but such counterparts shall together
constitute one and the same instrument.
25. Waivers. No provision in this Agreement shall be deemed waived
except by an instrument in writing signed by the party waiving such provision.
26. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and to their respective successors
and assigns (and, in the case of the second sentence of Section 16 above, to the
benefit of the Investor as an express third party beneficiary thereof);
provided, however, that except as set forth in the following sentence neither
the rights nor the obligations of either party may be assigned or delegated
without the prior written consent of the other party. Upon thirty (30) days
prior written notice to WPCS, WWC may assign all or any portion of its rights
and obligations under this Agreement to any of its Subsidiaries so long as such
Subsidiaries agree in writing to be bound by all of the terms and conditions of
this Agreement. In the event of any such assignment, WWC shall not be relieved
of any of its obligations under this Agreement.
27. Further Assurances. Each of the parties hereto shall, at the request
of the other party hereto, from time to time, execute and deliver such other
assignments, transfers, conveyances and other instruments and documents and do
and perform such other acts and things as may be reasonably necessary or
desirable in order to effectuate the complete consummation of this Agreement and
the transactions herein contemplated, including causing any of their
Subsidiaries, and in the case of WPCS any of its Joint Ventures, to execute an
agreement agreeing to be bound by the provisions of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Management
Services Agreement on the day and year first above written.
WESTERN WIRELESS CORPORATION
By:______________________________________
Name:
Title:
WESTERN PCS CORPORATION
By:______________________________________
Name:
Title:
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<PAGE> 1
EXHIBIT 1.04
- --------------------------------------------------------------------------------
FORM OF
SHAREHOLDERS AGREEMENT
OF
WESTERN PCS CORPORATION
BY AND BETWEEN
WESTERN WIRELESS CORPORATION,
a Washington corporation,
HUTCHISON TELECOMMUNICATIONS PCS (USA) LIMITED,
a British Virgin Islands corporation,
AND
WESTERN PCS CORPORATION,
a Delaware corporation
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. EFFECTIVE DATE OF AGREEMENT. ................................................................ 1
2. DEFINITIONS................................................................................... 1
3. BOARD COMPOSITION; ELECTION OF REPRESENTATIVES TO
THE BOARD; COMPENSATION COMMITTEE............................................................. 10
4. CERTAIN AFFILIATE TRANSACTIONS................................................................ 11
5. TRANSFER...................................................................................... 11
6. RIGHTS OF FIRST OFFER AND FIRST REFUSAL....................................................... 12
7. DRAG ALONG RIGHT.............................................................................. 17
8. TAG ALONG RIGHT. ............................................................................ 20
9. ISSUANCE OF COMPANY SECURITIES................................................................ 21
10. DISPOSITION TRANSACTIONS...................................................................... 24
11. REGISTRATION RIGHTS........................................................................... 28
12. CERTAIN COVENANTS OF THE COMPANY AND WWC...................................................... 41
13. MISCELLANEOUS................................................................................. 45
14. TERMINATION OF RIGHTS AND OBLIGATIONS......................................................... 51
15. INVESTOR 50% TRANSFEREE AND WWC 50% TRANSFEREE;
OTHER TRANSFEREES............................................................................. 53
</TABLE>
<PAGE> 3
SHAREHOLDERS AGREEMENT
This SHAREHOLDERS AGREEMENT OF WESTERN PCS CORPORATION (this
"Agreement") is made as of [__________], 199[_], by and between Western Wireless
Corporation, a Washington corporation ("WWC"), Hutchison Telecommunications PCS
(USA) Limited, a British Virgin Islands corporation (the "Investor"; WWC and the
Investor being referred to herein as the "Shareholders"), and Western PCS
Corporation, a Delaware corporation (the "Company").
WHEREAS, the Shareholders, Hutchison Telecommunications Limited, a Hong
Kong corporation ("HTL"), the owner of 100% of the issued and outstanding share
capital of the Investor, and the Company have entered into a Purchase Agreement
dated as of October 14, 1997 (the "Purchase Agreement"), pursuant to which the
Investor has agreed to purchase from the Company, and the Company has agreed to
issue and sell to the Investor, 2,484 shares of the Company's Common Stock,
$0.001 par value ("Common Stock"), representing 19.9% of the Company's
outstanding shares of Common Stock after giving effect to such issuance and
sale, all on the terms and subject to the conditions set forth in the Purchase
Agreement. WWC is the owner of 10,000 shares of Common Stock, which will
represent 80.1% of the outstanding shares of Common Stock after giving effect to
the issuance and sale of the foregoing shares of Common Stock to the Investor.
WHEREAS, the Shareholders and the Company wish to set forth certain
agreements concerning the management and control of the Company, the ownership
and transfer of shares of Common Stock, and certain other matters as provided
herein.
NOW, THEREFORE, in consideration of the mutual and dependent promises
set forth herein, each Shareholder hereby agrees with each other Shareholder and
with the Company, and the Company hereby agrees with each of the Shareholders,
as follows:
1. EFFECTIVE DATE OF AGREEMENT.
This Agreement shall become effective upon the Closing, pursuant to and
as defined in the Purchase Agreement.
2. DEFINITIONS.
(a) Unless the context requires otherwise, capitalized terms used but
not defined in this Agreement have the meanings given in the Purchase Agreement.
<PAGE> 4
(b) As used in this Agreement, the following terms have the respective
meanings set forth below (applicable to both the singular and plural forms of
such terms):
"$" means United States dollars.
"Affiliate Change of Ownership" has the meaning given in Section
10(b)(ii).
"Agreement" means this Shareholders Agreement of Western PCS
Corporation, as amended, modified, supplemented or restated from time to time in
accordance with the terms hereof.
"Appraisal Procedure" means a procedure whereby two independent
appraisers, one chosen by WWC and one by the Investor, shall mutually agree upon
the determination of the Private Market Value. Each party shall deliver a notice
to the other appointing its appraiser within ten Business Days after the
Appraisal Procedure is invoked. If, within 30 days after appointment of the two
appraisers, they are unable to agree upon the Private Market Value, then (i) if
the difference between the two appraisers' respective determinations is an
amount that is not greater than 20% of the average of such determinations, such
average shall be binding and conclusive on the Company and the Shareholders or
(ii) if the difference between the two appraisers' respective determinations is
an amount that is greater than 20% of such average, then a third independent
appraiser shall be chosen within five Business Days thereafter by the mutual
agreement of such first two appraisers or, if such first two appraisers fail to
agree upon the appointment of a third appraiser, such appointment shall be made
by the then-President of the American Arbitration Association within five
Business Days of request. The decision of the third appraiser so appointed and
chosen shall be given within 30 days after the selection of such third
appraiser. The decisions of the appraisers with the two closest determinations
shall be averaged and such average shall be binding and conclusive on the
Company and the Shareholders. Each appraiser selected shall have expertise in
mergers and acquisitions, valuation analysis and the Company's then-current
business activities and in arriving at its determination shall take into account
the terms of this Agreement and the amount a willing buyer would pay a willing
seller for 100% of the outstanding capital stock of the Company on the basis set
forth in the definition of "Private Market Value". In the case of any Appraisal
Procedure carried out pursuant to Section 10(a) or 10(c) or pursuant to an
exercise of the Demand Event Drag Along Right, the costs of all such appraisers
shall be borne by WWC; provided, that WWC shall not be required to pay any
amounts to the appraiser selected by the Investor in excess of the amounts paid
by WWC to the appraiser selected by WWC (or, if greater, an arm's length fee
payable to a comparable independent appraiser). In the case of any Appraisal
Procedure carried out pursuant to Section 10(b) or an exercise of the Demand
Event Tag Along Right, (i) the cost of the appraiser selected by WWC shall be
borne by WWC, (ii) the cost of the appraiser selected by the Investor shall be
borne by the Investor, and (iii) the cost of a third appraiser, if any, shall be
borne by the Company.
"Arbitrators" has the meaning set forth in Section 13(k) hereof.
2
<PAGE> 5
"Assignable Investor Rights" has the meaning given in Section 15(a)(i).
"Bid" has the meaning given in Section 6(c)(ii).
"Bid Closing Period" has the meaning given in Section 6(c)(iv).
"Blackout Period" has the meaning given in Section 11(e)(ii).
"Board" means the board of directors of the Company.
"Class A Stock" has the meaning given in Section 10(f)(i).
"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" means the Company's Common Stock, par value $0.001, and
shall include any new, substituted and additional securities issued at any time
in replacement of the Common Stock or issued or delivered with respect to the
Common Stock.
"Company" means Western PCS Corporation, a Delaware corporation, and
its successors and assigns.
"Company Debt" has the meaning given in Section 12(g).
"Company Group" means the Company, its Subsidiaries and Cook Inlet
Western Wireless PV/SS PCS L.P.
"Consideration Securities" has the meaning given in Section 7(c)(ii).
"Controlling WWC Shareholders" means John W. Stanton, Theresa
Gillespie, Hellman & Friedman, Goldman, Sachs & Co. and Providence Ventures,
Inc.
"Demand Event" means the acquisition in a single transaction or series
of related transactions by a third party or group of related third parties
(other than the Controlling WWC Shareholders or Affiliates of the Controlling
WWC Shareholders) of capital stock of WWC representing more than 50% of the
total number of issued and outstanding shares of Class A and Class B Common
Stock of WWC (after giving effect to such acquisition transaction), including
pursuant to an amalgamation, exchange offer, business combination, consolidation
or corporate reorganization.
"Demand Event Consideration" has the meaning given in Section
10(g)(ii).
"Demand Event Drag Along Right" has the meaning given in Section
10(g)(i).
"Demand Event Tag Along Right" has the meaning given in Section
10(g)(i).
"Demand Event Transaction" has the meaning given in Section 10(g)(i).
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"Disposition Event" means the occurrence before a Terminating Reduction
of any of the following without the prior approval of at least one of the
directors on the Board designated by the Investor (it being understood that
following a Terminating Reduction there shall be no further Disposition Events
or rights with respect thereto):
(a) Any incurrence (including in a refinancing or pursuant to a
guarantee or like undertaking of liability) of indebtedness for borrowed money
(including the issuance of non-voting, non-convertible preferred stock) in
excess of $10,000,000 in a single instance or $25,000,000 in the aggregate in a
fiscal year, other than pursuant to any loan or financing agreement of the
Company or any of its Subsidiaries in existence on the date hereof (it being
understood that as described in Section 9(a), the Company will first seek
capital when needed in the form of loans from, or debt offerings to, third
parties); provided, that there shall be no Disposition Event in respect of
individual borrowings (regardless of amount) under a loan or financing facility
if such loan or financing facility has been approved by at least one of the
Investor's designated directors.
(b) Adoption of any annual Operating Plan and Budget or any material
amendment or modification to a previously adopted annual Operating Plan and
Budget; provided that if at least one of the directors of the Board designated
by the Investor (i) does not approve an annual Operating Plan and Budget, the
prior year's Operating Plan and Budget shall be the Operating Plan and Budget
for the Company for the next year, in which case there shall be no Disposition
Event (unless the Board, without the approval of at least one of the Investor's
designated directors, adopts and implements a new Operating Plan and Budget) and
(ii) does not approve any material amendment or modification to an Operating
Plan and Budget, then the Operating Plan and Budget prior to such material
amendment or modification shall continue, in which case there shall be no
Disposition Event (unless the Board, without the approval of at least one of the
Investor's designated directors, adopts and implements the material amendment or
modification).
(c) Any acquisition (by means of a purchase of stock or assets, or a
merger, consolidation or otherwise, other than a transaction in which the Drag
Along Right is exercised) of a PCS system or wireless telecommunications
business (or interest therein) in a single transaction or series of related
transactions involving an aggregate acquisition cost in excess of $100,000,000,
provided, that there shall be no Disposition Event in respect of any individual
bid (regardless of amount) in an FCC auction or reauction of spectrum allocated
to wireless telecommunications so long as the maximum aggregate bids with
respect to such auction or reauction has been approved by at least one of the
Investor's designated directors.
(d) Any disposition by the Company (by means of a sale of stock or
assets, or a merger, consolidation or otherwise, but other than a transaction in
which the Drag Along Right is exercised) of a PCS system or wireless
telecommunications business (or interest therein) in a single transaction or
series of related transactions involving an aggregate sale price in excess of
$50,000,000.
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(e) Adoption of any annual capital expenditures budget, or (i) any
material variation with respect to any capital expenditure project or group of
related capital expenditure projects, which project or group of related projects
is material, or (ii) any amendment or modification to an approved annual capital
expenditures budget which amendment or modification is material to the annual
capital expenditures budget, taken as a whole; provided, that if at least one of
the directors of the Board designated by the Investor (i) does not approve an
annual capital expenditures budget, the prior year's capital expenditures budget
shall be the capital expenditures budget for the Company for the next year, in
which case there shall be no Disposition Event (unless the Board, without the
approval of at least one of the Investor's designated directors, adopts and
implements a new annual capital expenditure budget) or (ii) does not approve any
such material variation, amendment or modification, the capital expenditures
budget prior to such variation, amendment or modification shall be the capital
expenditures budget, in which case there shall be no Disposition Event (unless
the Board, without the approval of at least one of the Investor's designated
directors, adopts and implements such material variation, amendment or
modification).
"Disposition Transaction" has the meaning given in Section 10 of this
Agreement.
"Dispute" has the meaning given in Section 13(k).
"Drag Along Notice" has the meaning given in Section 7(d).
"Drag Along Right" has the meaning given in Section 7(a).
"Employment Agreement" has the meaning given in the Services Agreement.
"Excepted Transfer" means a Transfer of Common Stock which occurs in
(a) a Public Sale, (b) a transaction in which the Drag Along Right or Demand
Event Drag Along Right is exercised, (c) a transaction in which the Tag Along
Right or Demand Event Tag Along Right is exercised, (d) a merger or acquisition
in which the Company is not the surviving entity, or (e) in the case of WWC,
Transfers in an aggregate amount up to 10% of the outstanding shares of Common
Stock to transferees which are entities with substantial assets and business
operations in the telecommunications industry.
"Exercise Period" has the meaning given in Section 6(d)(iii).
"HTL" means Hutchison Telecommunications Limited, a corporation
organized under the laws of Hong Kong.
"Investor" means Hutchison Telecommunications PCS (USA) Limited, a
British Virgin Islands corporation, and, unless otherwise specified herein or
unless the context requires otherwise, includes its successors and all Permitted
Affiliate Transferees of the Investor which hold shares of Common Stock and any
Investor 50% Transferee to the extent such transferee becomes entitled to the
rights, and
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<PAGE> 8
subject to the obligations, of the Investor hereunder in accordance with the
express provisions of Section 15.
"Investor 50% Block" means a number of shares of Common Stock
representing a Percentage Ownership of 9.95% or more of the outstanding shares
of Common Stock.
"Investor 50% Transfer" means the Transfer by the Investor of an
Investor 50% Block to a third party or group of related third parties, other
than in an Excepted Transfer.
"Investor 50% Transferee" means a third party (or, collectively, a
group of related third parties) which is the transferee in an Investor 50%
Transfer.
"Investor Change of Ownership" has the meaning given in Section
10(b)(i).
"Investor Deemed Class A Shares" has the meaning given in Section
10(g)(ii).
"Mandatory WWC Rights" has the meaning given in Section 15(a)(ii)
"NASD" has the meaning given in Section 11(a)(iii).
"New Issue Securities" has the meaning given in Section 9(c)(i).
"Offer" has the meaning given in Section 6(c)(ii).
"Offeree-Shareholder" has the meaning given in Section 6(d)(ii).
"Offeror-Shareholder" has the meaning given in Section 6(d)(ii).
"Operating Plan and Budget" has the meaning given in the Services
Agreement.
"Order Period" has the meaning given in Section 6(c)(ii).
"Other Holder" has the meaning given in Section 12(e).
"Other Shareholders" has the meaning given in Section 11(b)(iii)(A).
"PCS" means broadband personal communications services operating in the
1850-1910 MHz and 1930-1990 MHz bands.
"Percentage Ownership" means, as to any Shareholder, the percentage of
the outstanding shares of Common Stock owned by such Shareholder, including for
this purpose, shares owned by such Shareholder's Permitted Affiliate
Transferees.
"Permitted Affiliate Transferee" means:
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<PAGE> 9
(a) in the case of the Investor, (i) HTL, (ii) any Subsidiary
of HTL, (iii) any other entity acceptable to WWC in which HTL owns, directly or
indirectly, more than 40% of the outstanding voting power, and (iv) in the case
of any Person referred to in clause (i), (ii) or (iii), the Investor;
(b) in the case of WWC, (i) any Subsidiary of WWC other than
the Company and its Subsidiaries and (ii) in the case of any Person referred to
in clause (i), WWC.
"Person" means an individual, partnership, joint-stock company,
corporation, trust or unincorporated organization, limited liability company, or
a government or agency or political subdivision thereof or any other entity.
"Private Market Value" means the fair private market value of the
Company as of the date of the event triggering the right to make or require a
Disposition Transaction under Section 10, as determined in accordance with the
Appraisal Procedure. The appraised Private Market Value shall be calculated as
the price an arm's length buyer would pay for 100% of the Company, without
application of any discount for the fact that the Company is or may be a
Subsidiary of any other Person or for the fact that any relevant Shareholder may
hold a minority interest in the Company. The Private Market Value of the Company
will include the value of the Company's accumulated tax attributes, including
from net operating losses, on a basis consistent with the Tax Sharing Agreement.
"Proposed Transfer" has the meaning given in Section 7(a).
"Proposed Transferee" has the meaning given in Section 7(a).
"public float" means the portion of the outstanding equity securities
(other than non-voting, non-convertible preferred stock) of a relevant issuer or
class which were obtained by the holders thereof (other than the Company, the
issuer thereof, WWC, the Investor, or any Affiliate or member of senior
management of any of the foregoing) in Public Sales of such securities.
"Public Sale" means a public offer and sale or other public
distribution of securities, including (i) pursuant to an effective registration
statement under the Securities Act, (ii) pursuant to Regulation S under the
Securities Act and any applicable securities or stock exchange regulations in
any non-United States market or stock exchange in which the Common Stock is
publicly traded, or (iii) pursuant to an exemption from registration under Rule
144 under the Securities Act, or (iv) in the case of WWC, a Spin-Off
Distribution.
"Qualifying IPO" means a Public Sale of the Common Stock (whether of
newly issued shares or in secondary Transfers) which results in a listing of the
Common Stock on a national securities exchange or quotation of the Common Stock
on the NASDAQ National Market System and an aggregate public float of the
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Common Stock of at least 15% of the Common Stock outstanding after giving effect
to such Public Sale.
"Registrable Securities" has the meaning given in Section 11(a)(ii).
"Registration Expenses" has the meaning given in Section 11(a)(iii).
"Representative" has the meaning given in Section 11(b)(iv).
"Repurchase" has the meaning given in Section 10(f)(i).
"Sale" has the meaning given in Section 6(c)(i).
"Sale Shares" has the meaning given in Section 6(a)(i).
"Sales Notice" has the meaning given in Section 6(c)(i).
"Sales Price" has the meaning given in Section 6(c)(i).
"Seller" has the meaning given in Section 6(c)(i).
"Selling Expenses" has the meaning given in Section 11(a)(iv).
"Senior Officers" has the meaning given in the Services Agreement.
"Shareholder" means, initially, the Investor and WWC, and shall include
any other shareholder of the Company who becomes entitled to the rights and
subject to the obligations of the Investor or WWC hereunder in accordance with
the express provisions of Section 15 hereof. Unless otherwise specified herein
or unless the context requires otherwise, references to any "Shareholder" shall
be deemed to include all Permitted Affiliate Transferees of such Shareholder
holding any shares of Common Stock.
"Shareholder Closing Period" has the meaning given in Section 6(d)(iv).
"Spin-Off Distribution" means a distribution by WWC to its shareholders
on a pro rata basis of the shares of Common Stock owned by WWC.
"Subsidiary" means, as to any Person, another Person which is an entity
as to which such Person owns more than 50% of the outstanding voting power.
"Tag Along Rights" shall mean the rights described in Section 8.
"Terminating Reduction" shall mean the earliest to occur of the
following: (A) the Investor's Percentage Ownership shall have fallen below 15%
as a result of the Transfer of shares of Common Stock to Persons other than its
Permitted Affiliate Transferees; (B) the Investor's Percentage Ownership shall
have fallen below 12% as
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a result of dilution due to new issuances of Common Stock by the Company or a
combination of dilution due to new issuances of Common Stock and Transfers of
Common Stock by the Investor to Persons other than its Permitted Affiliate
Transferees; (C) the Common Stock shall have become a registered class of equity
securities under Section 12 of the Exchange Act (or the Company shall have
become a reporting company under the Exchange Act by reason of Section 15(d) of
the Exchange Act), the Common Stock shall have become listed on a national
securities exchange or quoted on the NASDAQ National Market System and there
shall exist a public float of the Common Stock representing not less than 15% of
the issued and outstanding Common Stock, or (D) the Investor shall have made an
Investor 50% Transfer.
"third party" means a Person who is not a party to this Agreement or an
Affiliate (including a Permitted Affiliate Transferee) of any party to this
Agreement.
"Third-Party Closing Period" has the meaning given in Section
6(c)(iii).
"Third-Party Offer" has the meaning given in Section 6(c)(iii).
"Third-Party Offer Period" has the meaning given in Section 6(c)(iii).
"Transfer" means any sale, assignment, pledge, hypothecation, or other
transfer, disposition or encumbrance of any interest (and includes an exchange
of shares in a merger, consolidation or similar transaction).
"WWC" means Western Wireless Corporation, a Washington corporation,
and, unless the context requires otherwise, includes its successors and all
Permitted Affiliate Transferees of WWC which hold shares of Common Stock and any
WWC 50% Transferee to the extent such transferee may become entitled to the
rights, and subject to the obligations, of WWC hereunder in accordance with the
express provisions of Section 15 hereof.
"WWC Non-Company Group" means WWC and its Subsidiaries, other than the
Company Group.
"WWC 50% Block" means a number of shares of Common Stock representing a
Percentage Ownership of more than 50% of the outstanding shares of Common Stock.
"WWC 50% Transfer" means the Transfer by WWC of a WWC 50% Block to a
third party or group of related third parties, other than in an Excepted
Transfer.
"WWC 50% Transferee" means a third party (or, collectively, a group of
related third parties) which is the transferee in a WWC 50% Transfer.
"Unsolicited Bid" has the meaning given in Section 6(a)(ii).
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"Unsolicited Bid Notice" has the meaning given in Section 6(d)(i).
"Unsolicited Bidder Closing Period" has the meaning given in Section
6(d)(vi).
"U.S. GAAP" has the meaning given in Section 12(a).
"WWC Debt" has the meaning given in Section 12(g).
When a reference is made in this Agreement to a Section, such reference
shall be to a Section of this Agreement unless otherwise indicated. Whenever the
words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation". The use of a
gender herein shall be deemed to include the neuter, masculine and feminine
genders whenever necessary or appropriate. Whenever the word "herein,"
"hereunder" or "hereof" is used in this Agreement, it shall be deemed to refer
to this Agreement and not to a particular Section of this Agreement unless
expressly stated otherwise.
3. BOARD COMPOSITION; ELECTION OF REPRESENTATIVES TO THE BOARD; COMPENSATION
COMMITTEE.
(a) Pursuant to the Company's by-laws, the Board shall be constituted
of ten (10) directors, subject to increase as provided in this Section 3. The
Investor shall initially have the right to designate to the Board two directors
(its initial designees being Mr. Canning Fok and Mr. Hans Snook), which
directors will be appointed or elected to the Board effective as of the Closing.
Thereafter, the number of directors whom the Investor is entitled to designate
to the Board shall be adjusted in proportion with the aggregate Percentage
Ownership of the Investor. For purposes of this adjustment, the Investor shall
be entitled to retain the right to designate two directors until its aggregate
Percentage Ownership is less than 15% and the right to designate a single
director until its aggregate Percentage Ownership is less than 9.95%. The
Investor shall gain the right to designate an additional director (and the Board
shall in each case be expanded by one member to accommodate such new designee)
when the Investor's aggregate Percentage Ownership exceeds 27.25%, 33.33%,
38.5%, 42.9%, 46.67%, and 50%. Each Shareholder shall vote all of the Common
Stock over which such Shareholder has voting control (and shall take all other
necessary or desirable actions within such Shareholder's control, whether in the
capacity of a stockholder, director or member of a board committee of the
Company or otherwise, and including attendance at meetings in person or by proxy
for purposes of obtaining a quorum and execution of written consents in lieu of
meetings) for the election, removal and replacement of the Board designees named
by the Investor or WWC, as the case may be, all as directed by the Investor or
WWC, as the case may be, from time to time in accordance with this Section 3.
The rights and obligations of WWC and the Investor under this Section 3 shall
terminate when the Investor's Percentage Ownership exceeds 50% or otherwise as
set forth in Section 14 or 15.
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(b) Prior to the occurrence of a Terminating Reduction, the Company
shall maintain a compensation committee of the Board, a majority of the members
of which shall be directors who are not Senior Officers or senior executive
officers of the Company.
4. CERTAIN AFFILIATE TRANSACTIONS.
Prior to the occurrence of a Terminating Reduction, the Company shall
not, without the prior approval of at least one of the Investor's designated
directors, enter into:
(a) Any transaction or series of related transactions (other than those
in accordance with the terms of the Intercompany Agreements) involving the
Company or any of its Subsidiaries, on the one hand, and WWC or any of its
Affiliates (other than the Company and Subsidiaries of the Company), on the
other hand, that (i) is not provided for in the approved annual Operating Plan
and Budget then in effect and involves an amount in excess of $500,000, or (ii)
is not on terms at least as favorable to the Company as would be obtained in an
arm's length transaction with an independent third party.
(b) Any employment agreement with any Senior Officer who at the time
has an Employment Agreement.
5. TRANSFER.
The Common Stock may not be Transferred by any Shareholder except as
provided in this Section 5.
(a) Each Shareholder (and each Permitted Affiliate Transferee of such
Shareholder) shall have the unrestricted right to Transfer its Common Stock to
any Permitted Affiliate Transferee of such Shareholder, provided, that each such
transferee shall become bound by and entitled to all the rights and obligations
hereunder applicable to such Shareholder.
(b) The Investor and its Permitted Affiliate Transferees shall have the
right to Transfer shares of Common Stock to Persons other than Permitted
Affiliate Transferees of the Investor in a transaction other than an Excepted
Transfer, provided, that (i) such Transfer shall be subject to the rights of
first offer or, if applicable, first refusal under Section 6 hereof in favor of
WWC or its designees and (ii) the transferee shall be subject to the approval of
WWC (which approval will not be unreasonably withheld or delayed).
(c) WWC and its Permitted Affiliate Transferees shall have the right to
Transfer shares of Common Stock to Persons other than Permitted Affiliate
Transferees of WWC in transactions other than Excepted Transfers, subject to the
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rights of first offer or, if applicable, first refusal under Section 6 hereof in
favor of the Investor.
(d) No Shareholder shall effect any pledge, mortgage, assignment by way
of security, or other lien or encumbrance of any nature ("Lien") (other than
such as may be deemed to arise pursuant to this Agreement) on or with respect to
any shares of Common Stock owned by it, provided, that WWC shall be permitted,
when required under instruments governing its indebtedness for borrowed money,
to place Liens on shares of Common Stock owned by it to secure such indebtedness
if such Liens and all rights of the secured party thereunder with respect to the
Common Stock are subject to the rights and obligations of the Shareholders under
this Agreement, and provided further, that in connection with any foreclosure
or enforcement of remedies by such secured lender upon the shares subject to
such Lien, the Tag Along Right and the Drag Along Right (but not the other
rights and obligations of the parties hereunder) shall terminate. In connection
with any such Transfer by WWC to a secured lender by way of the granting of a
Lien (but not any action by such secured lender to foreclose or enforce remedies
on, or subsequently Transfer, the shares of Common Stock subject to its Lien),
no rights of first offer, first refusal, Tag Along Rights or other rights of any
other Shareholder hereunder shall be applicable.
(e) Notwithstanding anything to the contrary in this Section 5, but
subject, in the case of WWC, to Sections 12(h) and 12(j), each Shareholder shall
have the right to Transfer shares of Common Stock at any time in an Excepted
Transfer.
(f) The Shareholders and the Company each agree to cooperate in all
reasonable respects (without any obligation to incur any liability or expense)
in connection with any Transfer by a Shareholder permitted by this Section 5, so
as to enable such Transfer to be effected on an optimal basis for tax and other
applicable regulatory purposes.
6. RIGHTS OF FIRST OFFER AND FIRST REFUSAL.
(a) Investor.
(i) If the Investor proposes to Transfer shares of Common
Stock (the shares which are the subject of a proposed Transfer being hereinafter
referred to as "Sale Shares"), other than to a Permitted Affiliate Transferee
and other than by means of an Excepted Transfer, then the Investor shall first
offer to Transfer such Sale Shares to WWC or its designees in accordance with
the procedures for rights of first offer set forth in Section 6(c) hereof.
(ii) In the event such proposed Transfer by the Investor shall
arise as a result of the Investor's receipt of an unsolicited written offer from
a third party or group of related third parties to purchase shares of Common
Stock in a bona fide Transfer that would not be an Excepted Transfer (an
"Unsolicited Bid"), which the Investor intends to accept, the Investor shall
first offer to Transfer such Sale Shares to
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WWC (or its designees) in accordance with the procedures for rights of first
refusal set forth in Section 6(d) hereof.
(b) WWC.
(i) If WWC proposes to make a Transfer of Sale Shares (other
than to a Permitted Affiliate Transferee or by means of an Excepted Transfer
(subject to Sections 12(i) and 12(k) hereof)) WWC shall first offer to Transfer
such Sale Shares to the Investor in accordance with the procedures for rights of
first offer set forth in Section 6(c) hereof.
(ii) In the event such proposed Transfer by WWC shall arise as
a result of an Unsolicited Bid to WWC which WWC intends to accept, WWC shall
first offer to Transfer such Sale Shares to the Investor in accordance with the
procedures for rights of first refusal set forth in Section 6(d) hereof.
(c) Procedures for Rights of First Offer.
(i) Any Shareholder (the "Seller") desiring to Transfer any
Sale Shares held by such Seller in a transaction subject to rights of first
offer pursuant to Section 6(a)(i) or 6(b)(i) above shall give written notice (a
"Sales Notice") to the other Shareholders that the Seller desires to effect such
a Transfer (a "Sale") and setting forth the number of Sale Shares proposed to be
Transferred by the Seller in such Sale and the purchase price per share in cash
it desires for such Sale Shares (the "Sales Price").
(ii) The receipt of the Sales Notice by each other Shareholder
shall constitute an offer revocable only as provided below in this Section 6(c)
(the "Offer") by the Seller to sell to such Shareholder for cash the relevant
Sale Shares at the Sales Price. Each Shareholder, or any group of one or more
Shareholders, receiving an Offer shall have a 30-day period (the "Order Period")
in which to give a written notice (a "Bid") to the Seller, which written notice
shall state the number of Sale Shares that such Shareholder or group of
Shareholders proposes to purchase at the Sales Price; provided, however, that
all Bids must in the aggregate be for all of the Sale Shares the Seller proposes
to Transfer as stated in the Sales Notice, unless the Seller, in its sole
discretion, elects to accept Bids for less than all of the Sale Shares proposed
to be sold.
(iii) Upon the receipt of any Bids, which Bids in the
aggregate are for the purchase of not less than all the Sale Shares, the Seller
shall have the right to solicit offers for the Sale Shares from any third party
(a "Third-Party Offer") for a period of 90 days from the date the Order Period
expires (the "Third-Party Offer Period"). To the extent the Seller receives a
Third-Party Offer and such Third-Party Offer contains a proposed sales price in
excess of the Sales Price, then the Seller shall have the right to sell the Sale
Shares to the third party pursuant to its Third-Party Offer. If no Bids are
delivered during the Order Period, or if the Bids received are not in the
aggregate for all the Sale Shares, then the Seller shall be entitled to accept,
in its
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sole discretion, any Third-Party Offer it so chooses within the Third-Party
Offer Period at a sales price and on terms and conditions no less favorable to
the Seller than those set forth in the Sales Notice. If such sale pursuant to a
Third-Party Offer is not consummated within 60 days from the end of the
Third-Party Offer Period (the "Third Party Closing Period") (or such longer
period as may be provided pursuant to clause (v) below), then no such sale shall
be consummated without once again following the procedures under this Section 6.
(iv) The Shareholder or group of Shareholders providing a Bid
which is accepted by the Seller shall be under a binding obligation to purchase
and pay for all the Sale Shares accepted pursuant to their Bid within a 60-day
period (or such longer period as may be provided pursuant to clause (v) below)
from the date on which the purchasing Shareholder (or group of Shareholders)
receives written notice of the Seller's acceptance of their Bid (the "Bid
Closing Period"), which notice shall be given promptly after the expiration of
the Third-Party Offer Period if no qualifying Third-Party Offers have been
received or, if earlier, the Seller's determination to accept the Bid. At the
closing of any purchase of the Sale Shares by any purchasing Shareholders, the
Seller shall deliver to the purchasing Shareholders, against receipt of the
purchase price therefor by cash or certified or bank cashier's check, the
certificate or certificates representing the Sale Shares each such purchasing
Shareholder has elected to purchase, properly endorsed for transfer, with all
necessary transfer and documentary stamps affixed, and in a form such that upon
presentation to the Company, the Sale Shares represented thereby may be
registered in the names of the respective purchasers.
(v) If the purchase and sale of the Sale Shares pursuant to a
Third-Party Offer or any Bid, as the case may be, is subject to any prior
regulatory approval, consent, waiver, notice or like requirement, then, provided
that the third party or the purchasing Shareholder(s), as the case may be, shall
promptly make any necessary filings or applications for, and diligently pursue,
the satisfaction of such regulatory requirements, the time period during which
such purchase and sale must be consummated shall be extended until the earlier
of (i) five Business Days after all such regulatory requirements have been
satisfied and (ii) 90 days after the expiration of the Third-Party Closing
Period or the Bid Closing Period, as the case may be, provided, that such 90-day
period shall be extended by an additional 90 days upon written request of the
Seller or the third party or the purchasing Shareholder(s), as the case may be,
unless the Seller shall deliver to such third party or Shareholder(s), as the
case may be, an opinion of counsel experienced in the relevant area of law or
regulation that such regulatory requirements cannot be satisfied by such third
party or Shareholder(s), as the case may be.
(vi) If the aggregate number of shares offered to be purchased
in all Bids received by the Seller exceeds the number of Sale Shares, and if
such Bids are accepted, the Sale Shares shall be allocated among such Bids pro
rata based on the number of Sale Shares offered to be purchased in each Bid.
Each Bid shall be irrevocable, regardless of whether the number of Sale Shares
to be delivered upon acceptance of such Bid shall be reduced in accordance with
the foregoing, and shall be
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deemed to constitute a Bid to purchase such lesser number of Sale Shares as
shall be determined on such pro rata basis. Any Shareholder which fails to
deliver a Bid before the expiration of the Order Period shall be deemed to have
elected not to purchase any of the Sale Shares pursuant to the Sales Notice.
(d) Procedure for Rights of First Refusal.
(i) If at any time a Shareholder receives an Unsolicited Bid
to which Section 6(a)(ii) or 6(b)(ii) applies, and which such Shareholder
intends to accept, such Shareholder shall, prior to making any Transfer of Sale
Shares pursuant to such Unsolicited Bid, give written notice (the "Unsolicited
Bid Notice") to the other Shareholders, accompanied by a copy of such
Unsolicited Bid.
(ii) An Unsolicited Bid Notice shall constitute an irrevocable
offer of the Shareholder giving such notice to sell the Sale Shares to the other
Shareholders, on the terms and conditions and at the price specified in such
notice (including the exact form and type of consideration offered in the
Unsolicited Bid). A Shareholder making an offer to sell pursuant to an
Unsolicited Bid Notice is hereinafter referred to as an "Offeror-Shareholder",
and a Shareholder receiving such offer pursuant to an Unsolicited Bid Notice is
hereinafter referred to as an "Offeree-Shareholder".
(iii) Within 30 days after delivery of the Unsolicited Bid
Notice to the Offeree-Shareholders (the "Exercise Period"), each
Offeree-Shareholder shall have the right, subject to the pro rata allocation of
purchase rights set forth in clause (iv) below, to accept the offer pursuant to
an Unsolicited Bid Notice as to all or any portion of the Sale Shares, by notice
to the Offeror-Shareholder, with copies to each other Offeree- Shareholder and
the Company. Each Offeree-Shareholder shall specify in such notice any maximum
number of Sale Shares such Offeree-Shareholder is willing to purchase.
(iv) Each election to purchase Sale Shares pursuant to this
Section 6(d) shall be irrevocable, regardless of whether the number of Sale
Shares deliverable upon the exercise of such election shall be reduced in
accordance with the provisions of this clause (iv), and shall be deemed to
constitute an election to purchase such lesser number of Sale Shares as shall be
determined in accordance with this clause (iv). If an Offeree-Shareholder shall
fail to deliver notice of its election to purchase Sale Shares before the
expiration of the Exercise Period, it shall be deemed to have elected not to
purchase any Sale Shares pursuant to the relevant Unsolicited Bid Notice. If
elections to purchase more than 100% of the Sale Shares are made by the Offeree
Shareholders, the right to purchase Sale Shares shall be allocated among the
Offeree-Shareholder(s) electing to purchase Sale Shares pro rata based on the
number of Sale Shares each has elected to purchase. The Offeree-Shareholders
electing to purchase Sale Shares shall be under a binding obligation to purchase
and pay for all the Sale Shares accepted pursuant to their elections within 60
days after the expiration of the Exercise Period (the "Shareholder Closing
Period") (or such longer period as may be provided pursuant to clause (vii)
below).
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<PAGE> 18
(v) All timely elections by Offeree-Shareholders to purchase
Sale Shares shall be binding on the Offeror-Shareholder, provided, that such
elections shall not be binding on the Offeror-Shareholder if the
Offeree-Shareholders do not in the aggregate elect to purchase all of the Sale
Shares on the terms and conditions of the Unsolicited Bid Notice, including the
exact form and type of consideration. In such event, no sales pursuant to such
elections need be made by the Offeror-Shareholder, and the Offeror-Shareholder
shall be entitled to sell such Sale Shares to the Person(s) named in the
Unsolicited Bid Notice in accordance with clause (vi) (and, if applicable,
clause (vii)) below at a sales price and on terms and conditions (including the
form of consideration) no less favorable to the Offeror-Shareholder than those
in the Unsolicited Bid Notice. Notwithstanding the foregoing, the
Offeror-Shareholder may, by written notice to the Offeree-Shareholders within 10
days after the Offeree-Shareholders give notice of their elections to purchase
Sale Shares, waive its right not to sell that part of the Sale Shares for which
elections have been made, and accept and confirm all such elections so made, in
which case the time period set forth in clause (iv) above shall run from the
date such notice is delivered by the Offeror-Shareholder rather than the
expiration of the Exercise Period (or for such longer period as may be
applicable in accordance with clause (vii) below). If the form of consideration
to be paid by the Person(s) making the Unsolicited Bid shall differ from that
described in the Unsolicited Bid Notice in respect of any non-cash component
specified in the Unsolicited Bid Notice, and if the Offeree-Shareholders were
unable to deliver the exact form and type of non-cash consideration provided for
in such notice, but would be able to provide the new form of consideration, the
Sale Shares shall be required to be reoffered to the Offeree-Shareholders in
accordance with this Section 6(d).
(vi) Any Transfer of Sale Shares to the prospective transferee
named in the Unsolicited Bid Notice shall be consummated within a period of 60
days after the expiration of the Exercise Period (the "Unsolicited Bidder
Closing Period") (or such longer period as may be provided pursuant to clause
(vii) below).
(vii) If the purchase and sale of such Sale Shares pursuant to
an Unsolicited Bid or any election by an Offeree-Shareholder, as the case may
be, is subject to any prior regulatory approval, consent, waiver, notice or like
requirement, then, provided that the third party making such Unsolicited Bid or
such Offeree-Shareholder, as the case may be, shall promptly make any necessary
filings or applications for, and diligently pursue, the satisfaction of such
regulatory requirements, the time period during which such purchase and sale
must be consummated shall be extended until the earlier of (i) five Business
Days after all such regulatory requirements have been satisfied and (ii) 90 days
after the expiration of the Unsolicited Bidder Closing Period or Shareholder
Closing Period, as the case may be, provided, that such 90-day period shall be
extended by an additional 90 days upon written request of the
Offeror-Shareholder, the third party or the purchasing Offeree-Shareholder(s),
as the case may be, unless the Offeror-Shareholder shall deliver to such third
party or Offeree-Shareholder(s), as the case may be, an opinion of counsel
experienced in the relevant area of law or regulation that such regulatory
requirements cannot be satisfied by such third party or Offeree-Shareholder(s),
as the case may be.
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<PAGE> 19
(viii) At the closing of any purchase of the Sale Shares by
any Offeree-Shareholders, the Offeror-Shareholder shall deliver to the
Offeree-Shareholders, against receipt of the purchase price therefor by cash or
certified or bank cashier's check, in respect of the cash portion of such
purchase price and such other relevant instruments or securities as are required
to comprise the consideration offered in the Unsolicited Bid, the certificate or
certificates representing the Sale Shares each such Offeree-Shareholder has
elected to purchase, properly endorsed for transfer, with all necessary transfer
and documentary stamps affixed, and in a form such that upon presentation to the
Company the Sale Shares represented thereby may be registered in the names of
the respective purchasers.
(f) Exclusions. The provisions of this Section 6 shall not apply to:
(i) a Transfer permitted by the provisions of Section 5(a),
5(d) or 5(e) hereof;
(ii) a Transfer of shares of Common Stock between WWC and the
Investor;
(iii) a Transfer by WWC if the Investor is unable to purchase
or own all of the Sale Shares as a result of its inability to satisfy any
applicable legal or regulatory requirements for such purchase or ownership
within the time period specified in Sections 6(c)(v) or 6(d)(vii), as the case
may be.
(g) Tag Along Rights Unaffected. The Tag Along Rights of the Investor
shall not be deemed waived, limited or otherwise adversely affected by any
determination by the Investor not to exercise an applicable right of first offer
or first refusal under this Section 6 or any inability of the Investor to
deliver any required non-cash consideration in the exact form and type offered
in an Unsolicited Bid to WWC.
7. DRAG ALONG RIGHT.
(a) If at any time WWC proposes to make a bona fide Transfer (the
"Proposed Transfer") of all the shares of Common Stock owned by it and all other
shareholders of the Company which are subject to drag along rights in favor of
WWC to a third party or group of related third parties (the "Proposed
Transferee") WWC shall have the right (the "Drag Along Right"), subject to the
further requirements of this Section 7, to require all (but not less than all)
of the other Shareholders (which term includes, for purposes of this Section 7,
all other shareholders of the Company which are subject to drag along rights in
favor of WWC) to sell in the Proposed Transfer all (but not less than all) of
the shares of Common Stock then owned by such other Shareholders on the same
terms and conditions per share as are obtained by WWC. Each Shareholder agrees
to take all reasonable steps necessary to enable such Shareholder to comply with
the provisions of this Section 7, including executing and performing a purchase
and sale, merger or other applicable acquisition agreement on
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<PAGE> 20
the same terms as WWC. WWC and the Investor each agree to make full disclosure
to the other concerning the details of any relationship and dealings it may have
with the other party or parties to the Proposed Transfer. WWC shall keep each
other Shareholder advised in writing of, and consult on a timely basis with each
other Shareholder concerning, any Transfer with respect to which it has
exercised the Drag Along Right.
(b) The Investor, WWC and John W. Stanton each hereby agree that for a
period of one year after the closing of any transaction in which the Drag Along
Right is exercised and all the Common Stock of the Company subject to drag along
rights in favor of WWC is Transferred solely for cash, such Person shall not
acquire or hold, directly or indirectly, any equity interest in any entity
which, directly or indirectly, acquired in the transaction which gave rise to
the Drag Along Right the continuing business of the Company, other than in
nominal amounts of publicly traded securities.
(c) This Section 7 shall only apply to the Investor if the
consideration to be received by the shareholders of the Company in the Proposed
Transfer:
(i) comprises solely cash and the gross amount to be received
by the Investor is sufficient to provide it with a return of its invested
capital on the shares of Common Stock sold by it, together with an internal rate
of return thereon of at least 23%; or
(ii) comprises solely equity securities of the surviving
entity in such transaction ("Consideration Securities"), representing 50% or
less of the total outstanding voting power of such entity after giving effect to
the transaction, and (A) the value of such Consideration Securities to be
received by the Investor is sufficient to provide it with an implied return of
its invested capital on the shares of Common Stock sold by it, together with an
internal rate of return thereon of at least 15% (the value of the Consideration
Securities being measured for this purpose as of the date immediately preceding
the announcement of the Proposed Transfer transaction, (x) if there is a public
trading market for such Consideration Securities, as an amount equal to the
average of the mean of the high and low sales prices of such Consideration
Securities on the principal market on which such securities are traded on each
of the 30 consecutive trading days immediately preceding the announcement of the
transaction or (y) if there is no such public trading market, as mutually agreed
by WWC and the Investor within 14 days after the definitive terms of the
transaction have been announced or, if not mutually agreed within such period,
as determined pursuant to a private market value appraisal in the same manner as
the Appraisal Procedure (with the expense of such appraisal to be borne by WWC))
and (B) the Investor is provided with demand registration rights with respect to
the Consideration Securities received by it containing terms and conditions
substantially the same as those in Section 11, which rights shall be exercisable
twice in any 12-month period until all of the Consideration Securities received
by the Investor have been Transferred to transferees who would not be entitled
to the benefit of such registration rights under Section 15(a) or can be
Transferred in Public Sales to U.S. persons in the
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<PAGE> 21
United States without registration under the Securities Act and without
imposition of volume limitations under Rule 144 under the Securities Act; or
(iii) comprises solely Consideration Securities representing
more than 50% of the total outstanding voting power of the surviving entity
after giving effect to the transaction, and either (A) if such Consideration
Securities are not a class of equity securities which, after giving effect to
the transaction, has a public float representing at least 15% of the outstanding
equity securities of such class, the rights and obligations of the Investor
hereunder shall continue in effect and there is substantial management
continuity from the Company to such surviving entity, or (B) if the
Consideration Securities are a class of equity securities which, after giving
effect to the transaction, has a public float representing at least 15% of the
outstanding securities of such class, the only rights and obligations of the
Investor hereunder which continue in effect shall be those which survive after a
Qualifying IPO as provided in Section 14 hereof; or
(iv) comprises a combination of cash and Consideration
Securities, in which case, (A) if the Consideration Securities to be received by
the shareholders of the Company represent 50% or less of the total outstanding
voting power of the surviving entity after giving effect to the transaction,
then (1) the value of such consideration to be received by the Investor is
sufficient to provide it with an implied return of its invested capital on the
shares of Common Stock sold by it, together with an internal rate of return
thereon of at least the sum of (x) 15% and (y) 8% multiplied by the percentage
of the total consideration that is represented by cash, and (2) demand
registration rights are provided to the Investor with respect to such
Consideration Securities as provided in clause (ii) above, or (B) if the
Consideration Securities to be received by the shareholders of the Company
represent more than 50% of the total outstanding voting power of the surviving
entity after giving effect to the transaction, the provisions of (iii) above
shall apply to the Investor and no return of invested capital or internal rate
of return requirement shall apply.
(d) To exercise the Drag Along Right, WWC shall give each other
Shareholder and the Company a written notice (a "Drag Along Notice") containing
(i) confirmation that the Proposed Transferee proposes to acquire or make an
exchange for all the then outstanding shares of Common Stock owned by WWC and
the Investor (and all other shareholders of the Company which are subject to
drag along rights in favor of WWC), (ii) the name and address of the Proposed
Transferee and (iii) the proposed purchase price, terms of payment and other
material terms and conditions of the Proposed Transferee's offer. Each
Shareholder shall thereafter be obligated, subject, in the case of the Investor,
to Section 7(c) and the other requirements for the exercise of the Drag Along
Right under this Section 7, to sell all (but not less than all) of its shares of
Common Stock as provided in such Drag Along Notice, provided, that the
transaction is consummated within 180 days of delivery of the Drag Along Notice
(or such longer period as may reasonably be required for any applicable FCC
approval or waiver to be obtained and become final). If the sale is not
consummated within such 180-day (or longer) period, then each Shareholder shall
no longer be obligated to sell such Shareholder's shares of Common Stock
pursuant to
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that specific Drag Along Notice but shall remain subject to the provisions of
this Section 7 with respect to any subsequent Transfer to which the Drag Along
Right would apply.
(e) The Drag Along Right and the obligations of the Investor with
respect thereto, shall terminate when there shall be one or more shareholders of
the Company holding in the aggregate a Percentage Ownership of more than 10% of
the outstanding Common Stock, which shareholders are not subject to the Drag
Along Right.
8. TAG ALONG RIGHT.
(a) If at any time after the date of this Agreement WWC wishes to
Transfer, in one transaction or a series of related transactions, a majority of
the then issued and outstanding Common Stock to any third party or group of
related third parties (other than pursuant to (i) a Spin-Off Distribution or
(ii) a transaction to which the Drag Along Right is exercised), WWC shall notify
the Investor and the Company, in writing, of such Transfer and its terms and
conditions. Within 20 days after the date that such notice is delivered to the
Investor, the Investor shall notify WWC if it elects to participate in such
Transfer (which notice shall be irrevocable). The Investor, if it so notifies
WWC, shall have the right to sell up to all of the shares of Common Stock owned
by the Investor, as the Investor may elect in its notice to WWC. WWC shall cause
the transferee to purchase at the same time as the purchase from WWC all the
shares of Common Stock elected to be Transferred by the Investor in accordance
with the foregoing on the same terms and conditions per share as are obtained by
WWC and as were specified in WWC's notice to the Investor pursuant to this
Section 8(a).
(b) If at any time or from time to time after the date of this
Agreement WWC wishes to Transfer, in one transaction or a series of related
transactions, a number of shares of Common Stock representing more than 10% and
up to 50% of the then issued and outstanding Common Stock to any third party or
group of related third parties (other than pursuant to a Spin-Off Distribution),
WWC shall notify the Investor and the Company in writing of such Transfer and
its terms and conditions. Within 20 days of the date that such notice is
delivered to the Investor, the Investor shall notify WWC if it elects to
participate in such Transfer (which notice shall be irrevocable). The Investor,
if it so notifies WWC, shall have the right to Transfer up to the same
percentage of the shares of Common Stock owned by it as are being Transferred by
WWC. WWC shall cause the transferee to purchase at the same time as the purchase
from WWC all the shares of Common Stock elected to be Transferred by the
Investor in accordance with the foregoing on the same terms and conditions per
share as are obtained by WWC and as were specified in WWC's notice to the
Investor pursuant to this Section 8(b).
(c) WWC and the Investor each agree to make full disclosure to the
other concerning the details of any relationship and dealings it may have with
the proposed transferee in any transaction to which this Section 8 applies. WWC
shall keep the
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Investor advised in writing of, and consult on a timely basis with the Investor
concerning, any transfer it may propose to make with respect to which the tag
along rights under this Section 8 may apply.
9. ISSUANCE OF COMPANY SECURITIES.
(a) At such times as the Company requires additional funding, the
Company will be responsive to the then existing conditions in the capital
markets in determining how to raise such funding. As a general rule, the Company
will first seek such capital in the form of loans from, or debt offerings in the
capital markets to, third parties (it being understood that WWC and the Company
recognize the rights of the Investor as a result of the events described in
clause (a) of the definition of "Disposition Event"). The Company's second
source of funding shall be debt in the form of loans from its shareholders,
participation in which shall be offered to the Shareholders pro rata based on
their respective Percentage Ownerships in the same manner as under the
preemptive rights for equity offerings provided below in this Section 9. If
additional funding is still required, the Company's third source of funding
shall be equity offerings to the Shareholders pursuant to the preemptive rights
provided below in this Section 9. In no event will the Investor or WWC be
obligated to provide any further funding without their express prior written
consent. It is understood that, notwithstanding the foregoing priorities, the
Board will determine the appropriate timing of any public offerings of the
Company's equity securities, subject to Section 12(j) hereof.
(b) For purposes of this Section 9, the term "equity securities" shall
include any warrants, options or other rights to acquire equity securities or
debt securities convertible into equity securities, but shall not include
non-voting, non-convertible preferred stock or nominal equity features included
in the terms of a debt financing. This Section 9 shall not apply with respect to
issuances of the Company's equity securities in connection with (i) a Public
Sale by the Company, (ii) a conversion or exchange of any outstanding
securities, (iii) a stock dividend, (iv) a merger, amalgamation, acquisition,
reclassification or other reorganization in which the then-current shareholders
of the Company would continue to be the only shareholders of the Company or
which is effected to carry out an acquisition transaction or (v) the grant or
exercise of stock options or other grants or purchases of equity securities of
the Company pursuant to any stock option, stock purchase or other employee
benefit plan now or hereafter adopted for employees, directors or consultants of
the Company.
(c) If at any time after the date hereof, the Company proposes to issue
equity securities of any kind (except as provided in Section 9(b)), then, as to
each Shareholder who holds Common Stock at such time, the Company shall:
(i) give written notice setting forth in reasonable detail (A)
the designation and all of the terms and provisions of the equity securities
proposed to be issued (the "New Issue Securities"), including, where applicable,
the voting powers,
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preferences and relative participating, optional or other special rights, and
the qualifications, limitations or restrictions thereof and, if applicable, the
dividend rate and maturity; (B) the price and other terms of the proposed sale
of such securities; (C) the amount of such securities proposed to be issued; and
(D) such other material information as may reasonably be requested in order to
evaluate the proposed issuance; and
(ii) offer to issue to each such Shareholder a portion of the
New Issue Securities equal to such Shareholder's Percentage Ownership on the
terms and conditions stated in such notice.
(d) Each such Shareholder that wishes to exercise its purchase rights
hereunder must deliver a written notice to that effect to the Company within 15
days after the date the notice specified in Section 9(c) was delivered by the
Company. If all of the New Issue Securities offered to such Shareholders are not
fully subscribed by such Shareholders, the remaining New Issue Securities (other
than any which WWC or its Permitted Affiliate Transferees may have declined to
purchase as provided in Section 9(f)) will be reoffered (A) first to the
Investor, (whereupon the Investor shall have five days from the date notice of
such reoffer is delivered to the Investor to exercise its purchase right), and
(B) if not fully taken up by the Investor, to the other Shareholders purchasing
their full allotment upon the terms set forth in this Section 9 (whereupon such
Shareholders shall have five days from the date notice of such reoffer is
delivered to such Shareholders to exercise their purchase rights), until all
such New Issue Securities are fully subscribed for or until the Investor and all
such Shareholders have subscribed for all such New Issue Securities which they
desire to purchase. To the extent that the Company offers two or more securities
in units, Shareholders must purchase such units as a whole and will not be given
the opportunity to purchase only one of the securities making up such units.
Such Shareholders must complete the purchase of such New Issue Securities at the
same time in a single closing within five Business Days after the expiration of
the 15-day period referred to in the first sentence of this Section 9(d) (or, if
applicable, the expiration of the five-day period referred to in the second
sentence of this Section 9(d)). If the purchase and sale of such New Issue
Securities by a subscribing Shareholder is subject to any prior regulatory
approval, consent, waiver, notice or like requirement, then provided that such
Shareholder shall promptly make any necessary filings or applications for, and
diligently pursue, the satisfaction of such regulatory requirements, the time
period during which such purchase and sale must be consummated shall be extended
until the earlier of (i) five Business Days after all such regulatory
requirements have been satisfied and (ii) 90 days after the expiration of the
applicable period set forth above for the completion of a purchase by the
Investor or any other subscribing Shareholders, as the case may be, provided,
that such 90-day period shall be extended by an additional 90 days upon written
request of the Investor or such subscribing Shareholder, as the case may be,
unless the Company shall deliver to the Investor or such subscribing
Shareholder, as the case may be, an opinion of counsel experienced in the
relevant area of law or regulation that such regulatory requirements cannot be
satisfied by the Investor or such Shareholder, as the case may be. The closing
of all purchases of the New Issue Securities by
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Shareholders shall occur simultaneously, at which time the Company shall deliver
to the purchasing Shareholders, against receipt of the purchase price therefor
by cash or certified or bank cashier's check, duly issued certificate or
certificates representing the New Issue Securities that each such Shareholder
has elected to purchase.
(e) Upon the expiration of the offering periods described in the first
two sentences of Section 9(d), or upon any failure of any Shareholders to
complete the purchase of New Issue Securities in the time required under Section
9(d), the Company will be free to sell such New Issue Securities that the
Shareholders have not elected to purchase (or have failed to purchase within the
required time) during the 90 days (or applicable longer period under Section
9(d)) following such expiration (or failure) on terms and conditions per share
no more favorable to the purchasers thereof than those offered to the
Shareholders. Any New Issue Securities offered or proposed to be sold by the
Company after such 90-day period (or applicable longer period under Section
9(d)) or on more favorable terms and conditions per share to the purchaser must
be reoffered to the Shareholders pursuant to this Section 9. The election by a
Shareholder not to exercise its purchase rights under this Section 9 in any one
instance shall not affect its rights (other than in respect of a reduction in
its Percentage Ownership) as to any subsequent proposed issuance. Any sale of
such securities by the Company without first giving the Shareholders the rights
described in this Section 9 shall be void and of no force and effect and the
Company shall cause any required correction to the registration and transfer
books of the Company to be effected.
(f) The right of the Investor and any other Shareholder to purchase New
Issue Securities which have not been subscribed for by other Shareholders under
Section 9(d) shall not apply to New Issue Securities which are not subscribed
for by WWC and which constitute (or represent the right to acquire) an aggregate
of up to 10% of the Company's outstanding Common Stock (after giving effect to
the sale of the New Issue Securities, including pursuant to the exercise of
preemptive rights), provided, that each purchaser of such New Issue Securities
is an entity having substantial assets or business operations in the
telecommunications industry. If WWC shall so agree at the time, such New Issue
Securities may at any time and from time to time be offered and sold by the
Company to purchasers pursuant to the preceding sentence without being required
to be offered first to other Shareholders pursuant to this Section 9. The
provisions of this Section 9 shall not apply to the issuance of equity
securities by the Company if the Investor is unable to subscribe for or own its
portion of the New Issue Securities as a result of its inability to satisfy any
applicable legal or regulatory requirements for such subscription or ownership
within the time period specified in Section 9(d).
(g) The Company hereby agrees that it shall cause each of its
wholly-owned Subsidiaries to comply with the terms of this Section 9 with
respect to the issuance of any equity securities by such Subsidiary (except for
issuances of stock dividends or in connection with a merger, amalgamation,
reclassification or other reorganization resulting in no reduction in the
Company's direct or indirect equity interest in such Subsidiary).
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10. DISPOSITION TRANSACTIONS.
In the circumstances specified in this Section 10, WWC or the Company,
as applicable, shall have the right, or be subject to the obligation, as the
case may be, to effect in the manner provided in this Section 10 a Repurchase
(as defined below) or, if applicable, a Public Sale (such Repurchase or Public
Sale being referred to as a "Disposition Transaction") of all (or such portion
as may be specified in this Section 10) of the shares of Common Stock held by
the Investor.
(a) Upon delivery of notice by the Investor of any exercise of the
Investor's demand registration rights under Section 11(b)(i), the Company shall
proceed to register under the Securities Act, in accordance with Section 11(b),
the amount of Registrable Securities owned by the Investor specified in such
notice delivered by the Investor. WWC (or, if WWC so elects, the Company) will
have the right, exercisable by delivery of written notice to the Investor within
30 days from the Investor's delivery of its notice pursuant to Section 11(b)(i),
to require, concurrently with all actions necessary to effect the registration
of the specified amount of Registrable Securities, the determination of the
Private Market Value pursuant to the Appraisal Procedure. Upon determination of
the Private Market Value, the Company shall complete the registration of such
amount of Registrable Securities (which shall be pursuant to Section 11 and not
this Section 10, which shall not be applicable) unless WWC elects, in its sole
discretion, instead, to effect (or, if WWC so elects, to cause the Company to
effect) a Repurchase of said securities at the Private Market Value per share so
determined; provided, that any such Repurchase shall be completed within six
months of the Investor's delivery of the demand registration notice pursuant to
Section 11(b)(i).
(b) (i) If at any time Hutchison Whampoa Limited ("HWL"), currently the
100% indirect owner of HTL, shall not, directly or indirectly, (A) hold at least
40% of the outstanding voting power of HTL and the Investor, and (B) be the
single largest shareholder of HTL and the Investor, (the failure to maintain
either of (A) or (B) above being hereinafter referred to as an "Investor Change
of Ownership"), WWC (or, if WWC so elects, the Company) will have the right,
exercisable by delivery of written notice to the Investor within 90 days after
receipt of notice of the Investor Change of Ownership, to effect a Disposition
Transaction covering all (and not less than all) of the shares of Common Stock
owned by the Investor and its Subsidiaries. Such Disposition Transaction shall
be completed within six months of the delivery to the Investor of WWC's or the
Company's, as the case may be, notice of exercise of its right to effect such
Disposition Transaction under this Section 10(b)(i).
(ii) Subject to Section 10(d) hereof, if at any time HTL shall
not, directly or indirectly, (A) hold at least 40% of the outstanding voting
power of any Permitted Affiliate Transferee referred to in clause (a)(iii) of
the definition of "Permitted Affiliate Transferee", or (B) be the single largest
shareholder of such Permitted Affiliate Transferee (the failure to maintain
either of (A) or (B) above being hereinafter referred to as an "Affiliate Change
of Ownership"), WWC (or, if WWC so elects, the Company) will have the right,
exercisable by delivery of written notice to such Permitted Affiliate Transferee
within 90 days after receipt of notice of such
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Affiliate Change of Ownership, to effect a Disposition Transaction covering all
(and not less than all) of the shares of Common Stock owned by such Permitted
Affiliate Transferee and its Subsidiaries. Such Disposition Transaction shall be
completed within six months of the delivery to the Permitted Affiliate
Transferee of WWC's or the Company's notice of exercise of its right to effect
such Disposition Transaction under this Section 10(b)(ii).
(iii) The Investor will give prompt written notice to WWC and
the Company of any Investor Change of Ownership or Affiliate Change of
Ownership.
(c) Within 90 days after a Disposition Event, the Investor shall have
the right to deliver written notice to WWC demanding that WWC (or, at WWC's
election, the Company) effect a Repurchase. Upon receipt of such notice WWC (or,
at WWC's election; the Company) shall effect a Repurchase of all the shares of
Common Stock owned by the Investor within six months after the delivery to WWC
of such notice. It is understood that if no written notice is delivered within
said 90 day period, neither WWC nor the Company shall have any obligation to
effect a Repurchase with respect to such Disposition Event, nor shall the
Investor have any other rights solely as a result of such Disposition Event.
(d) In the event that WWC (or, at WWC's election, the Company) has
given notice that it is electing to effect a Disposition Transaction as a result
of an Affiliate Change of Ownership, and if no Investor Change of Ownership has
occurred with respect to HTL, then HTL shall have the prior right, within 30
days after delivery by WWC (or, at WWC's election, the Company) of notice to the
Permitted Affiliate Transferee of such election, to purchase all the shares of
Common Stock owned by the Permitted Affiliate Transferee (and its Subsidiaries)
that are the subject of such Affiliate Change of Ownership, such purchase to be
completed within 90 days after delivery of such notice by WWC (or, if WWC so
elects, the Company).
(e) (i) If WWC (or, at WWC's election, the Company) has delivered
written notice pursuant to Section 10(b)(i) or 10(b)(ii) hereof of its election
to effect a Disposition Transaction as a result of an Investor Change of
Ownership or an Affiliate Change of Ownership, then the Company shall cause to
be made a Public Sale, using the procedures under Section 11(b) hereof, of all
the shares of Common Stock owned by the Investor and its Subsidiaries, or
(subject to Section 10(d) hereof) by the Permitted Affiliate Transferee and its
Subsidiaries, as the case may be. WWC (or, if WWC so elects, the Company) will
have the right, exercisable by delivery of written notice to the Investor or the
Permitted Affiliate Transferee, as applicable, concurrently with the notice of
WWC's (or at WWC's election, the Company's) election to effect such Disposition
Transaction, to require, concurrently with all actions necessary to effect the
Public Sale of such shares of Common Stock, the determination of the Private
Market Value pursuant to the Appraisal Procedure. Upon determination of the
Private Market Value, the Company shall complete the Public Sale of such shares
of Common Stock unless WWC, in its sole discretion, elects, instead, to effect
(or, if WWC so elects, to cause the Company to effect) a Repurchase of such
Common Stock at the Private Market Value per share so determined; provided, that
any such
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Repurchase or Public Sale shall be completed within six months of WWC's (or, at
WWC's election, the Company's) notice of election to effect the Disposition
Transaction.
(ii) If the Investor has delivered to WWC written notice
demanding that WWC effect a Repurchase of the Investor's shares of Common Stock
pursuant to Section 10(c), then upon delivery of such notice an appraisal of the
Private Market Value shall be completed as soon as practicable pursuant to the
Appraisal Procedure. The closing of the Repurchase shall be effected promptly
after the determination of the Private Market Value, and in any event within six
months after the written demand for a Repurchase was delivered by the Investor
pursuant to Section 10(c). The Repurchase shall result in the repurchase of all
the relevant shares required to be repurchased at a purchase price per share of
Common Stock equal to the Private Market Value divided by the number of shares
of Common Stock outstanding (on a fully diluted basis) prior to giving effect to
the Repurchase.
(f) The Disposition Transaction shall be effected by one of the
following methods, as WWC (or at WWC's election, the Company) may elect:
(i) Repurchase. WWC (or, at WWC's election, the Company) may
repurchase all the relevant shares of Common Stock to be disposed of in
accordance with this Section 10 at a per share price equal to the Private Market
Value per share determined by dividing the Private Market Value by the number of
shares of Common Stock outstanding, on a fully diluted basis, prior to giving
effect to such transaction (a "Repurchase"). Such repurchase shall be made for
cash or, if WWC (or, at WWC's election, the Company) so elects by written notice
to the Investor for shares of WWC's Class A Common Stock ("Class A Stock"), the
value of which shall be measured as an amount equal to the average of the mean
of the high and low sales prices of the Class A Stock on the NASDAQ National
Market on each of the 30 consecutive Trading Days immediately preceding the
event which gave rise to the Company's right so to effect the Disposition
Transaction or the Disposition Event, as the case may be. At the closing of the
Disposition Transaction, any shares of Class A Stock to be delivered to the
Investor shall be delivered pursuant to an effective resale registration
statement on Form S-3 or other form under the Securities Act appropriate for a
delayed or continuous offering of such shares.
(ii) Public Sale. Except in the case of a Disposition
Transaction pursuant to Section 10(a) (with respect to which the Public Sale
shall be consummated pursuant to Section 11, without regard to this Section 10
unless WWC (or, at WWC's election, the Company) has elected to make a
Repurchase) or 10(c) (with respect to which only the provisions relating to
Repurchase are applicable), the Company may effect a Disposition Transaction by
means of a Public Sale of the relevant shares of Common Stock using the
procedures set forth in Section 11(b).
(g) (i) The Investor shall have the right (the "Demand Event Tag Along
Right"), by delivery of written notice to WWC and the Company within 30 days
after the announcement of a transaction which would give rise to a Demand
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Event (a "Demand Event Transaction"), which notice shall be revocable only if
such transaction is not completed, to require that the Investor be permitted to
participate in such transaction through the Transfer (including through an
exchange of shares in a merger) of all of the shares of Common Stock owned by
the Investor as provided in this Section 10(g). Notwithstanding the foregoing,
WWC shall have the right (the "Demand Event Drag Along Right"), by delivery of
written notice to the Investor within 30 days after the announcement of the
Demand Event Transaction (which notice shall be revocable only if such
transaction is not completed), to require the Investor to Transfer all the
shares of Common Stock owned by it in accordance with the following provisions
of this Section 10(g). The Investor agrees that if WWC shall so exercise the
Demand Event Drag Along Right, the Investor will so Transfer all the shares of
Common Stock owned by the Investor.
(ii) Upon delivery of the Investor's notice of exercise of the
Demand Event Tag Along Right (or WWC's notice of exercise of the Demand Event
Drag Along Right, as the case may be), an appraisal of the Private Market Value
shall be completed as soon as practicable pursuant to the Appraisal Procedure.
For purposes hereof, the Investor shall be treated as if there had been issued
to it the number of shares of Class A Stock that would have been issued to the
Investor pursuant to Section 10(f)(i) in a Repurchase at such Private Market
Value per share of all the Investor's shares of Common Stock in which WWC
elected to deliver shares of Class A Stock in lieu of cash (the "Investor Deemed
Class A Shares"). WWC shall cause the acquiror in the Demand Event Transaction
to deliver to the Investor, for each Investor Deemed Class A Share, the same
consideration per Investor Deemed Class A Share (including the exact form and
type of consideration) as is delivered to the shareholders of WWC for each share
of Class A Stock in the Demand Event Transaction (the "Demand Event
Consideration"), all on the same per share terms and conditions (other than any
delay in such delivery required for the determination of the Private Market
Value or for the satisfaction of any regulatory requirements applicable to the
Investor and the delivery of the Demand Event Consideration to it) as are
applicable to the outstanding shares of Class A Stock in the Demand Event
Transaction.
(iii) The delivery of the Demand Event Consideration shall be
made upon the closing of the Demand Event Transaction or, if later, as soon as
practicable after the Private Market Value has been determined pursuant to the
Appraisal Procedure and any regulatory requirements applicable to the Investor
and the delivery of the Demand Event Consideration to it have been satisfied.
Such delivery of the Demand Event Consideration shall be made against delivery
of all the Investor's shares of Common Stock to the Company, WWC or the acquiror
in the Demand Event Transaction, as such acquiror may specify.
11. REGISTRATION RIGHTS.
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The Investor shall have the right to have its Registrable Securities
(as hereinafter defined) registered under the Securities Act and applicable
United States state securities laws in accordance with the express terms of the
following provisions.
(a) Definitions. As used in this Section 11:
(i) the terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act (and any post-effective
amendments filed or required to be filed) and the declaration or ordering of
effectiveness of such registration statement;
(ii) the term "Registrable Securities" shall mean (A) Common
Stock issued to the Investor, (B) any additional Common Stock acquired by the
Investor from the Company or another Shareholder other than in a Public Sale,
and (C) any Common Stock issued as a dividend or other distribution with respect
to, or in exchange for or in replacement of, the Common Stock referred to in
clauses (A) and (B) above;
(iii) "Registration Expenses" shall mean all expenses incident
to the Company's performance of or compliance with its obligations under this
Section 11, including, without limitation, all Commission, National Association
of Securities Dealers ("NASD") and stock exchange or NASDAQ registration,
listing and filing fees and expenses, fees and expenses of compliance with
applicable state securities or "blue sky" laws (including, without limitation,
reasonable fees and disbursements of counsel for the underwriters in connection
with "blue sky" qualifications of Registrable Securities), printing expenses,
messenger and delivery expenses, fees and disbursements of counsel for the
Company and all independent certified public accountants (including the expenses
of any annual audit and "cold comfort" letters required by or incident to such
performance and compliance), the fees and disbursements of underwriters
customarily paid in connection with secondary registered Public Sales of
securities (including the fees and expenses of any "qualified independent
underwriter" required by the NASD), the reasonable fees of one U.S. counsel
plus, if reasonably required by the Investor, one local counsel retained by the
Investor in connection with each such registration pursuant to this Section 11
for purposes of obtaining advice concerning applicable securities laws and
securities exchange regulations, review of the registration statement and
prospectus and limited due diligence concerning the Company, the reasonable fees
and expenses of any special experts retained by the Company in connection with
such registration, and fees and expenses of other Persons retained by the
Company (but not including any underwriting discounts or commission or transfer
taxes, if any, attributable to the sale of Registrable Securities by the
Investor); and
(iv) "Selling Expenses" shall mean all underwriting discounts
and selling commissions applicable to the sale of Registrable Securities and
transfer tax, if any, attributable to the sale of Registrable Securities by the
Investor.
(b) Demand Registration.
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(i) Upon the earlier of (A) the third anniversary of the
Closing Date and (B) the occurrence of a Demand Event (but only if a Demand
Event Tag Along Right or Demand Event Drag Along Right has not been exercised),
the Investor shall have the right, upon delivery of written notice to the
Company (not more than twice in any 12-month period and subject, in each case,
to Section 10(a) hereof) to require the Company to register under the Securities
Act such amount of Registrable Securities owned by the Investor as may be
specified in such notice in accordance with the procedures set forth in this
Section 11(b), provided, that any such registration demanded by the Investor
under this Section 11(b)(i) must be for an amount of Common Stock having an
aggregate anticipated sales price of at least $25,000,000. The rights of the
Investor to demand the registration of its Registrable Securities shall continue
until (x) all the Registrable Securities owned by it shall have been Transferred
to transferees who are not entitled to the registration rights of the Investor
hereunder in accordance with Section 15 hereof or, if earlier, (y) all its
remaining Registrable Securities are already included in an effective resale
registration statement on Form S-3 or other appropriate form for continuous or
delayed offerings or are eligible to be Transferred in Public Sales to U.S.
persons in the United States without registration under the Securities Act and
without being subject to volume limitations under Rule 144 under the Securities
Act, provided, in the case of (y), that there is a public float of the Common
Stock equal to at least 15% of the total outstanding shares of Common Stock.
(ii) If, by the fifth anniversary of the Closing Date, the
Company has not completed one or more Public Sales which have resulted in a
public float of the Common Stock equal to at least 15% of the total outstanding
shares of Common Stock, then the Investor shall have the right to require the
Company to register and effect a Public Sale of a sufficient number of shares of
newly issued Common Stock which, together with shares of Common Stock being
resold by WWC or any Other Shareholders (as defined below) and shares of Common
Stock previously sold in Public Sales, will result in a public float of at least
15% of the total outstanding shares of Common Stock, all in accordance with the
procedures set forth in this Section 11(b) for the registration of Registrable
Securities.
(iii) If the Investor shall have demanded a registration of
Registrable Securities (which term will include for this purpose newly issued
shares of Common Stock referred to in Section 11(b)(ii) hereof) then the Company
will:
(A) promptly give written notice of the proposed registration
to all other shareholders entitled to piggyback registration rights
under Section 11(c) hereof or any other contractual agreement of the
Company (the "Other Shareholders") and
(B) as soon as practicable, use its best efforts to prepare
and file with the Commission and cause to become effective such
registration statement as would permit or facilitate the sale and
distribution of all the Registrable Securities required to be covered
thereby pursuant to the notice delivered by the Investor, together
(subject to Section 11(b)(iv) below) with all
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or such portion of the securities of any Other Shareholders joining in
such registration as are specified in written requests received by the
Company within ten Business Days after written notice from the Company
is delivered under Section 11(b)(iii)(A) above.
(iv) The Investor, at its election, shall have the Registrable
Securities covered by its request distributed by means of an underwritten public
offering with a single or managing underwriter selected by the Company and
reasonably acceptable to the Investor. If any Other Shareholders so request, the
securities of such Other Shareholders shall be included in the registration and
underwriting being effected pursuant to this Section 11(b), subject to this
Section 11(b)(iv). The Investor and the Company shall (together with all Other
Shareholders proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the representative
of the underwriter or underwriters selected for such underwriting by the Company
and reasonably acceptable to the Investor (the "Representative").
Notwithstanding any other provision of this Section 11(b), if the Representative
advises the Investor and the Company in writing that (x) marketing factors
require a limitation on the number of shares to be underwritten or (y) the
inclusion of shares held by officers and directors of the Company in the
offering could, in the Representative's best judgment, materially reduce the
offering price per share, then, in the case of the preceding clause (x), the
Common Stock held by Other Shareholders shall be excluded from such underwriting
to the extent so required by such limitations and, in the case of the preceding
clause (y), the Common Stock held by officers and directors of the Company shall
be excluded from such underwriting to the extent advised by the Representative.
If, after the exclusion of such shares, further reductions are required to meet
the limitation on the number of shares to be underwritten as advised by the
Representative, then the Investor may elect, in its sole discretion, to reduce
the number of shares that will be included in the underwriting by it by such
number of shares as is necessary to comply with such limitation, but in no event
to an amount which is below the minimum amount for a demand registration as
provided in Section 11(b)(i). If the Investor does not so elect, then the
registration of its shares under Section 11(b)(i) will not proceed and will be
terminated without liability to any other Person. If the Representative has not
limited the number of Registrable Securities or other securities to be
underwritten, the Company may include its securities for its own account in such
registration if the Representative so agrees and if the number of Registrable
Securities which would otherwise have been included in such registration and
underwriting will not thereby be limited.
(v) Notwithstanding the foregoing, if the Company shall
furnish to the Investor and the Other Shareholders a certificate signed by the
President or Chief Executive Officer of the Company stating that, in the good
faith judgment of the Board, it would be materially detrimental to the Company
and its shareholders for such registration statement to be filed and that it is
therefore essential to defer the filing of such registration statement, then the
Company shall have the right to defer such filing for a period of not more than
90 days after the delivery of such certificate, provided that the Investor shall
not be required to accept such a deferral more than twice in any 12-month
period.
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(c) Piggyback Registration.
(i) If the Company shall determine to register any of its
Common Stock either for its own account or for the account of any holder or
holders of Common Stock (other than a registration on Form S-8 (or similar or
successor form) relating solely to stock option, stock purchase or other
employee benefit plans, or a registration on Form S-4 (or similar or successor
form), or a registration on any registration form which does not permit
secondary sales or does not include substantially the same information as would
be required to be included in a registration statement covering the sale of
Registrable Securities), the Company will:
(A) promptly give to the Investor a written notice thereof
(which shall include a list of the jurisdictions in which the Company
intends to attempt to qualify such securities under the applicable blue
sky or other state securities laws); and
(B) subject to Section 11(c)(ii) below, include in such
registration (and any related qualification under blue sky laws or
other compliance), and in any underwriting involved therein, all the
Registrable Securities specified in a written request or requests made
by the Investor within fifteen (15) days after the date written notice
as described in Section 11(c)(i)(A) above is delivered by the Company.
Such written request may specify all or a part of the Registrable
Securities.
(ii) If the registration of which the Company gives notice is
for a Public Sale consisting of an underwritten public offering (in which event
the underwriter shall be selected by the Company, in its sole discretion), the
Company shall so advise the Investor as a part of the written notice given
pursuant to Section 11(c)(i)(A). In such event, the right of the Investor to
registration pursuant to this Section 11(c) shall be conditioned upon the
Investor's participation in such underwriting and the inclusion of the
Investor's Registrable Securities in the underwriting to the extent provided
herein. The Investor, if its shares are to be included in such registration,
shall (together with the Company and the Other Shareholders distributing their
Common Stock through such underwriting) enter into an underwriting agreement in
customary form with the Representative. Notwithstanding any other provision of
this Section 11(c), if the Representative advises the Investor or the Company in
writing that (x) the inclusion of shares held by the officers and directors of
the Company in the offering could, in the Representative's best judgment,
materially reduce the offering price per share, or (y) that marketing factors
require a limitation on the number of shares to be underwritten, then, in the
case of the preceding clause (x), the Common Stock held by officers and
directors of the Company shall be excluded from such underwriting to the extent
so advised by the Representative and, in the case of the preceding clause (y),
the number of shares that may be included in the underwriting by the Investor
and Other Shareholders requesting inclusion in such registration (but not the
Company or WWC) shall be reduced, on a pro rata basis (based on the number of
shares requested by the Investor and such Other Shareholders to be included in
such registration), by such minimum
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number of shares as is necessary to comply with such limitation. If the Investor
disapproves of the terms of any such underwriting, it may elect to withdraw
therefrom by written notice to the Company and the Representative, given a
reasonable period of time prior to the finalization of the underwriting
arrangements. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall not be included in such registration. If
at any time prior to the effective date of the registration statement, the
Company shall determine for any reason not to register such securities, the
Company may, at its election, give written notice of such determination to the
Investor and, thereupon, shall be relieved of its obligation under this Section
11(c) to register any of the Registrable Securities in connection with such
registration.
(iii) Number and Duration. The Investor shall be entitled to
have its shares included in an unlimited number of registrations pursuant to
this Section 11(c). The rights of the Investor to registration of its
Registrable Securities under this Section 11(c) shall continue until (x) all the
Registrable Securities owned by it shall have been Transferred to transferees
who are not entitled to the registration rights of the Investor hereunder in
accordance with Section 15 hereof or, if earlier, (y) all its remaining
Registrable Securities are already included in an effective resale registration
statement on Form S-3 or other appropriate form for continuous or delayed
offerings or are eligible to be Transferred in Public Sales to U.S. persons in
the United States without registration under the Securities Act and without
being subject to volume limitations under Rule 144 under the Securities Act,
provided, in the case of (y), that there is a public float of the Common Stock
equal to at least 15% of the total outstanding shares of Common Stock.
(d) Expenses of Registration. Upon the exercise of registration rights
set forth in this Section 11, the Company shall pay all Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to this Section 11, provided, that such expenses shall not include
Selling Expenses, which shall be borne by the Investor pro rata on the basis of
the number of its shares so registered.
(e) Registration Procedures. In the case of each registration effected
by the Company pursuant to this Section 11, the Company will keep the Investor
advised in writing as to the initiation of each registration and as to the
completion thereof. In connection with any offering of Registrable Securities
registered pursuant to clause (b) or (c) of this Section 11, at its expense, the
Company shall:
(i) prepare and file with the Commission, as promptly as
practical after receipt of a request for registration pursuant to this Section
11, a registration statement on any form for which the Company then qualifies,
and which form shall be available for the sale of the Registrable Securities in
accordance with the intended methods of distribution thereof, and use its best
efforts to cause such registration statement to become and remain effective as
provided herein; provided, that before filing with the Commission a registration
statement or prospectus or any amendments or supplements thereto, the Company
will (A) furnish to the Investor copies of all such documents proposed to be
filed for review and comment and (B) notify the
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Investor of any stop order issued or threatened by the Commission and take all
reasonable actions required to prevent the entry of such stop order or to remove
it if entered;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration effective (A) during the
ten Business Day period immediately following the date on which such
registration statement shall be declared effective, and (B) subject to any
obligation of the Investor to refrain from selling or offering to sell any
Registrable Securities during a Blackout Period (as defined below), for 120 days
after the date of effectiveness or (C) if earlier, until the Investor has
completed the distribution described in the registration statement relating
thereto (but not before the expiration of the time periods referred to in
Section 4(3) of the Securities Act and Rule 174 promulgated thereunder, or any
successor provisions, if applicable). The Company shall be entitled to elect
that a registration statement not be usable, for a reasonable period of time,
but not in excess of one hundred twenty (120) consecutive days (a "Blackout
Period"), if the Company determines in good faith that the use of such
registration statement or the related prospectus would interfere with any
pending financing, acquisition, corporate reorganization or any other material
corporate development involving the Company, WWC or any of their Subsidiaries or
would require premature disclosure thereof, and the Company promptly gives the
Investor written notice of such determination, containing a general statement of
the reasons for such postponement or restriction on use and an approximation of
the anticipated delay; provided, however, that (x) the Company shall not be
entitled to initiate a Blackout Period unless it shall concurrently forbid
purchases or sales in the open market by directors, senior executives and other
Affiliates of the Company, (y) the aggregate number of days included in all
Blackout Periods during any consecutive twelve (12) month period shall not
exceed two hundred forty (240) days, and (z) the period that the Company shall
be required to maintain the effectiveness of the registration statement shall be
increased by the aggregate number of days in the Blackout Periods. The Company
shall give written notice to each shareholder of record included in the
registration statement of the commencement and the termination of any Blackout
Period;
(iii) furnish to each underwriter, if any, and the Investor
such number of copies of such registration statement, each amendment and
supplement thereto (in each case including all exhibits thereto), and the
prospectus included in such registration statement (including each preliminary
prospectus) in conformity with the requirements of the Securities Act, and such
other documents incident thereto as the Investor may reasonably request from
time to time in order to facilitate the disposition of the Registrable
Securities owned by the Investor;
(iv) use its best efforts to register or qualify such
Registrable Securities under the state securities or "blue sky" laws of such
states as the Investor or the Representative reasonably request and do any and
all other acts and things that may be reasonably necessary or advisable to
enable the Investor and the underwriters to consummate the disposition in such
jurisdictions of the Registrable Securities
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owned by the Investor; provided, that the Company will not be required as a
result thereof to (A) qualify generally to do business in any jurisdiction where
it would not otherwise be required to qualify but for this clause (iv), (B)
subject itself to taxation or regulation of its business in any such
jurisdiction in which it would not otherwise be so subject or (C) consent to
general service of process in any jurisdiction in which it would not otherwise
be subject to general service of process;
(v) use its best efforts to cause the Registrable Securities
covered by such registration statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable the Investor to consummate the
disposition of such Registrable Securities;
(vi) immediately notify the Investor at any time when a
prospectus relating thereto is required to be delivered under the Securities Act
of the happening of any event that comes to the Company's attention, if as a
result of such event the prospectus included in such registration statement
contains an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading; and subject to the Blackout Period provisions in clause (ii)
above, the Company will promptly prepare and furnish to the Investor a
supplement or amendment to such prospectus so that, as thereafter delivered to
the purchasers of such Registrable Securities, such prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading;
(vii) use its best efforts to cause all such Registrable
Securities to be listed on a national securities exchange in the United States
or quoted on the NASDAQ National Market System and listed or quoted on each
securities exchange or automated quotation system on which similar securities
issued by the Company may then be listed or quoted, and enter into such
customary agreements including a listing application and indemnification
agreement in customary form, and, subject to applicable law, to provide a
transfer agent and registrar for such Registrable Securities covered by such
registration statement no later than the effective date of such registration
statement;
(viii) enter into such customary agreements (including an
underwriting agreement or qualified independent underwriting agreement, in each
case, in customary form) and take all such other actions as the Investor
requesting registration of the Registrable Securities being covered by such
registration statement or the underwriter reasonably requests in order to
expedite or facilitate the disposition of such Registrable Securities, including
customary representations, warranties, indemnities and agreements;
(ix) make available (after reasonable notice and execution of
customary confidentiality agreements satisfactory to the Company) for
inspection, during business hours of the Company, by the Investor or its
representatives (if it has
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requested registration of Registrable Securities) and any underwriter
participating in any disposition pursuant to such registration statement (to the
extent provided in the applicable underwriting agreement), (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and properties of the Company and its Subsidiaries (collectively, "Records"), if
any, as shall be reasonably necessary to enable them to exercise their due
diligence responsibility, and cause the Company's officers, directors and
employees, and those of the Company's Affiliates, to supply all information and
respond to all inquiries reasonably requested by any such Inspector in
connection with such registration statement;
(x) use its best efforts to obtain a "cold comfort" letter
from the Company's appointed auditors in customary form and covering such
matters of the type customarily covered by "cold comfort" letters as the
Representative reasonably requests; and
(xi) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and all conditions imposed by
relevant governmental authorities or under applicable law and make available to
the Investor, as soon as reasonably practicable, an earnings statement covering
a period of at least twelve months beginning after the effective date of the
registration statement (as the term "effective date" is defined in Rule 158(c)
under the Securities Act), which earnings statement shall satisfy the provisions
of Section 11(a) of the Securities Act and Rule 158 thereunder.
It shall be a condition precedent to the obligation of the Company to
take any action with respect to any Registrable Securities that the Investor
shall furnish to the Company such information regarding the Registrable
Securities and any other securities of the Company held by the Investor and the
intended method of disposition of the Registrable Securities held by the
Investor and such other information regarding the Investor as the Company shall
reasonably request and as shall be required in connection with the action taken
by the Company.
The Investor agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 11(e)(vi) hereof,
the Investor will forthwith discontinue disposition of Registrable Securities
pursuant to any prospectus or registration statement until the Investor's
receipt of the copies of the supplemented or amended prospectus contemplated by
Section 11(e)(vi) hereof, and, if so directed by the Company (at the Company's
expense), the Investor will deliver to the Company all copies (including,
without limitation, any and all drafts), other than permanent file copies, then
in the Investor's possession, of the prospectus covering such Registrable
Securities current at the time of receipt of such notice.
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(f) Indemnification.
(i) In the event of any registration of any shares of Common
Stock under the Securities Act pursuant to this Agreement, the Company will
indemnify and hold harmless the Investor, its directors and officers, each
Person who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls the Investor or any such
underwriter within the meaning of the Securities Act against any and all losses,
claims, damages and liabilities (or actions in respect thereof), joint or
several, and expenses (including any amounts paid in any settlement effected
with the Company's consent, which consent will not be unreasonably withheld) to
which the Investor, any such director or officer or any such underwriter or
controlling Person may become subject under the Securities Act, the Exchange
Act, United States state securities or "blue sky" laws, common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) or expenses arise out of or are based upon (A)
any untrue statement (or alleged untrue statement) of any material fact
contained in any registration statement under which such securities were
registered under the Securities Act, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, (B) any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, or
(C) any violation (or alleged violation) by the Company of any United States
federal, state or common law rule or regulation applicable to the Company and
relating to action required of or inaction by the Company in connection with any
such registration, qualification or compliance. The Company will reimburse the
Investor and each such director, officer, underwriter and controlling Person for
any legal and any other expenses reasonably incurred in connection with
investigating or defending such claim, loss, damage, liability or action, as
such expenses are incurred; provided, however, that the Company shall not be
liable in any such case to the extent that any such claim, loss, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based on any untrue statement (or alleged untrue statement) or omission
(or alleged omission) made in such registration statement or amendment or
supplement thereto or in any such preliminary, final or summary prospectus in
reliance upon and in conformity with written information furnished to the
Company by the Investor or any such director, officer, underwriter or
controlling Person specifically stating that it is for use therein; provided
further, however, that the Company shall not be liable to any of the foregoing
indemnitees pursuant to this Section 11(f) with respect to any untrue statement
or omission or alleged untrue statement or omission made in any preliminary
prospectus or the final prospectus or the final prospectus as amended or
supplemented, as the case may be, to the extent that any such loss, claim,
damage or liability of such indemnitee results from the fact that the Investor
or underwriter sold Registrable Securities (x) to a Person to whom there was not
sent or given, at or prior to the written confirmation of such sale, a copy of
the final prospectus or of the final prospectus as then amended or supplemented,
whichever is most recent, if the Company has previously furnished copies thereof
to the Investor or underwriter and such final prospectus, as then amended or
supplemented, had corrected any such misstatement or omission or (y) during a
Blackout Period or after receipt of a notice
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<PAGE> 39
pursuant to Section 11(e)(vi) hereof (prior to the amendment or supplement
thereunder having been furnished).
The indemnity provided for herein shall remain in full force and effect
regardless of any investigation made by or on behalf of the Investor or any such
director, officer, underwriter or controlling Person and shall survive the
transfer of such securities by the Investor or such underwriter.
(ii) The Investor will, if Registrable Securities held by it
are included in any registration statement filed in accordance with the
provisions hereof, (x) indemnify the Company, its directors, officers and
controlling Persons, all other prospective sellers, each person who participates
as an underwriter, and their respective directors, officers and controlling
Persons against all claims, losses, damages and liabilities (or actions in
respect thereof) and expenses to which any such Person may become subject under
the Securities Act, the Exchange Act, United States state securities or "blue
sky" laws, common law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) or expenses arise out
of or are based upon (A) any untrue statement (or alleged untrue statement) of a
material fact with respect to the Investor contained in any such registration
statement, preliminary, final or summary prospectus contained therein, or any
amendment or supplement thereto, in reliance on and in conformity with written
information furnished to the Company by the Investor specifically for use
therein, or (B) any omission (or alleged omission) to state therein a material
fact with respect to the Investor required to be stated therein or necessary to
make the statements made by the Investor therein not misleading and (y)
reimburse the Company and its directors, officers, controlling Persons and all
other prospective sellers, each person who participates as an underwriter, and
their respective directors, officers, and controlling Persons for any legal or
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in the case of both
clause (x) and clause (y), to the extent, and only to the extent, that such
untrue statement (or alleged untrue statement) or omission (or alleged omission)
is made in such registration statement, preliminary, final or summary prospectus
contained therein, or any amendment or supplement thereto in reliance upon and
in conformity with written information furnished to the Company by the Investor
with respect to the Investor specifically for use therein; provided, however,
that the obligations of the Investor hereunder shall be limited to an amount
equal to the proceeds to be received by the Investor from securities sold by the
Investor pursuant to such registration statement or prospectus.
The indemnity provided for herein shall remain in full force and effect
regardless of any investigation made by or on behalf of the Company or the
Investor, the underwriters or any of their respective directors, officers, or
controlling Persons and shall survive the transfer of such securities by the
Investor and such underwriters.
(iii) Each party entitled to indemnification under this
Section 11(f) (an "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual
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knowledge of any claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any litigation
resulting therefrom (it being understood that the Indemnifying Party shall not
be responsible for more than one counsel for all Indemnified Parties in any
single action or claim (or group of related actions or claims), unless the
Investor shall have reasonably concluded that it may have a conflict of interest
with one or more other Indemnified Parties with respect to any actions or
claims). Counsel for the Indemnifying Party, who shall conduct the defense of
such claim or any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be withheld or
delayed). The Indemnified Party may participate in such defense at the
Indemnified Party's expense (unless the Indemnified Party shall have reasonably
concluded that there may be a conflict of interest between the Indemnifying
Party and the Indemnified Party in such action, in which case the reasonable
fees and expenses of the Indemnified Party's counsel shall be at the expense of
the Indemnifying Party and shall be reimbursed as they are incurred). The
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 11 except
to the extent the Indemnifying Party is actually materially prejudiced thereby.
No Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as a term thereof
the giving by the claimant or plaintiff to such Indemnified Party of an
unconditional release from all liability with respect to such claim or
litigation. Each Indemnified Party shall promptly furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with the defense of such claim and litigation resulting therefrom.
(iv) In order to provide for just and equitable contribution
in circumstances in which the foregoing indemnities provided for in this Section
11(f) are for any reason held to be unenforceable although applicable in
accordance with their terms, the Company and the Investor shall contribute to
the aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnities in such proportion as shall be appropriate to
reflect (A) the relative benefits received by the Company, on the one hand, and
the Investor, on the other hand, from the offering of the Registrable Securities
and any other securities included in such offering, and (B) the relative fault
of the Company, on the one hand, and the Investor, on the other hand, with
respect to the statements or omissions that resulted in such loss, liability,
claim, damage or expense, or action in respect thereof, as well as any other
relevant equitable considerations; provided, however, that no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to a contribution from any Person who was not
guilty of such fraudulent misrepresentation. The relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or the Investor,
the intent of the parties and their relative knowledge, access to information
and opportunity to correct or prevent such statement or omission. The Company
and the Investor agree that it would not be just and equitable
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if a contribution pursuant to this Section 11(f) were to be determined by pro
rata allocation or by any other method of allocation that does not take into
account the equitable considerations referred to herein. Notwithstanding
anything to the contrary contained herein, the Company and the Investor agree
that any contribution required to be made by the Investor pursuant to this
Section 11(f) shall not exceed the net proceeds from the offering of Registrable
Securities (before deducting expenses) received by the Investor with respect to
such offering. For purposes of this Section 11(f), each Person, if any, who
controls the Investor within the meaning of Section 15 of the Securities Act
shall have the same rights to contribution as the Investor, and each director of
the Company, each officer of the Company who signed the registration statement,
and each Person, if any, who controls the Company within the meaning of Section
15 of the Securities Act shall have the same rights to contribution as the
Company.
(v) The foregoing indemnities of the Company and the Investor
are subject to the condition that, insofar as they relate to any untrue
statement (or alleged untrue statement) of a material fact contained in a
preliminary prospectus, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
contained therein not misleading, which was eliminated or remedied in the
amended prospectus on file with the Commission at the time the registration
statement in question became effective or the amended prospectus filed with the
Commission pursuant to Rule 424(b) under the Securities Act (the "Final
Prospectus"), such indemnities shall not inure to the benefit of any underwriter
if a copy of the Final Prospectus was furnished to the underwriter and was not
furnished to the Person asserting the loss, liability, claim or damage at or
prior to the time such action is required by the Securities Act.
(g) Information by the Investor. The Investor shall furnish to the
Company such information regarding the Investor and the distribution proposed by
the Investor as the Company may reasonably request in writing in connection with
any registration of Registrable Securities of the Investor and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Section 11.
(h) Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of the
restricted securities to the public without registration, the Company agrees to:
(A) make and keep public information available as those terms
are understood and defined in Rule 144 under the Securities Act, at all
times from and after the effective date of the first registration
statement under the Securities Act filed by the Company for an offering
of its securities to the general public;
(B) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company
under the Securities Act and the Exchange Act at any time after it has
become subject to such reporting requirements; and
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(C) so long as the Investor owns any Registrable Securities,
furnish to the Investor upon request a written statement by the Company
as to its compliance with the current information requirements of Rule
144 under the Securities Act (at any time from and after the effective
date of the first registration statement filed by the Company for an
offering of its securities to the general public), a copy of the most
recent annual or quarterly report of the Company, and such other
reports and documents filed with the Commission pursuant to the
reporting requirements of the Exchange Act as the Investor may
reasonably request in availing itself of any rule or regulation of the
Commission allowing the Investor to sell any such securities without
registration.
(i) "Market Stand-off" Agreement. (i) If any registration of Common
Stock (or other securities) of the Company shall be in connection with an
underwritten public offering, the Investor agrees not to effect any sale or
distribution of any Registrable Securities, including any private placement or
any sale pursuant to Rule 144A under the Securities Act (or any successor
provision) or otherwise or any sale pursuant to Rule 144 under the Securities
Act (or any successor provision), other than by pro-rata distribution to its
shareholders, partners or other beneficial holders, and not to effect any such
sale or distribution of any other equity security of the Company or of any
security convertible into or exchangeable or exercisable for any equity security
of the Company (in each case, other than as part of such underwritten public
offering) during the anticipated ten calendar days prior to, and during the 180
calendar day period (or such other period as may be agreed upon between the
Investor and the Representative) that begins on the effective date of such
registration statement, without the consent of the Representative; provided,
however, that written notice of such registration has been delivered to the
Investor at least two Business Days prior to the anticipated beginning of the
ten calendar day period referred to above.
(ii) If requested by the Representative the Investor shall
execute a separate agreement to the foregoing effect. The Company may impose
stop-transfer instructions with respect to the shares (or securities) subject to
the foregoing restriction until the end of said 180-day or other period. The
provisions of this Section 11(i) shall be binding upon any transferee who
acquires Registrable Securities, including, without limitation, any Permitted
Affiliate Transferee of the Investor, the Investor's shareholders, partners or
other beneficial holders, if such transferee is entitled to the registration
rights provided hereunder. The Company agrees that any agreement entered into
after the date hereof pursuant to which the Company issues or agrees to issue
any privately placed equity securities shall contain a provision under which the
holders of such securities agree not to effect any sale or distribution of any
such securities during the period and in the manner referred to in this Section
11(i)(ii).
(iii) If any registration of Registrable Securities shall be
in connection with an underwritten public offering, the Company agrees (A) not
to effect any Public Sale of any of its equity securities or of any security
convertible into or exchangeable or exercisable for any equity security of the
Company (other than any
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<PAGE> 43
such sale or distribution of such securities as part of such public offering, in
connection with any amalgamation, merger or consolidation by the Company or any
Subsidiary of the Company, the acquisition by the Company or a Subsidiary of the
Company of the shares or any assets of any other Person, or in connection with a
stock option, stock purchase or other employee benefit plan) during the ten days
prior to, and during the 180-day period (or such other period as may be agreed
upon between the Company and the Representative) which begins on the effective
date of such registration statement without the consent of the Representative.
(j) WWC agrees that it will cooperate in all reasonable respects in any
due diligence investigation contemplated under Section 11(e)(ix) hereof that is
required in connection with a registration and public offering pursuant to this
Section 11 and provide reasonable access to books, records and personnel of WWC
which are material to a customary due diligence investigation of the Company and
its business, assets and operations in connection with a registered public
offering.
12. CERTAIN COVENANTS OF THE COMPANY AND WWC.
(a) Auditors. The Company shall maintain a system of accounting
established and administered in accordance with United States generally accepted
accounting principles ("U.S. GAAP") and shall set aside on its books all such
proper reserves as shall be required by U.S. GAAP. The Company shall retain a
firm of independent certified public accountants of recognized standing (which
may be the auditors of WWC) to audit and report on the Company's annual
consolidated balance sheets and statements of operations, shareholders' equity
and cash flows and to report to the Board. All major accounting policies and
principles shall be determined by the Board in accordance with U.S. GAAP.
(b) Financial and Other Information.
(i) The Company shall prepare annual consolidated balance
sheets and statements of operations, shareholders' equity and cash flows of the
Company and its Subsidiaries, which shall be prepared in accordance with U.S.
GAAP, set forth in each case in comparative form the figures for the previous
year, and be audited by the auditors referred to in Section 12(a) hereof. The
Company shall also prepare quarterly unaudited consolidated balance sheets and
statements of operations, shareholders' equity and cash flows of the Company and
its Subsidiaries, certified by the Chief Financial Officer or the Chief
Executive Officer of the Company and prepared in accordance with U.S. GAAP and
setting forth in each case in comparative form the same figures for the
comparable period of the previous year and, in addition, year-to-date figures.
The Company will furnish to the Investor the following information within the
time specified: (i) as soon as practicable after the end of each fiscal quarter
and, in any event within 50 days thereafter, all of the quarterly financial
information referred
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to herein, (ii) as soon as practicable after the end of each fiscal year, and in
any event within 120 days thereafter, all of the annual financial information
referred to herein, and (iii) on a timely basis, such other monthly management
operational and financial reports and information as the Investor may reasonably
request.
(ii) As part of the annual audit of WWC, WWC's independent
public accountants shall provide to the Investor a certificate as to the
compliance by WWC and the Company with the allocation of credits, fees, charges
and expenses in accordance with the terms of the Intercompany Agreements.
(c) Inspection and Audit Rights.
(i) From and after the date hereof, the Company will permit
the Investor, or its representatives, to visit and inspect any of the properties
of the Company, to examine all its books of account, records, reports and other
papers which are not contractually required of the Company to be kept
confidential or secret, to discuss its affairs, finances and accounts with its
officers, directors, key employees and independent public accountants or any of
them (and by this provision the Company authorizes such accountants to discuss
with the Investor and its representatives the finances and affairs of the
Company and its Subsidiaries), and WWC will permit the Investor to discuss the
affairs of WWC, if material to the Company, with the Senior Officers all at such
reasonable times and as often as may be reasonably requested.
(ii) The Investor shall have the right to carry out an audit
(by its independent auditor) once each year to determine compliance by WWC and
the Company with the allocation of credits, fees, charges and expenses in
accordance with the terms of the Intercompany Agreements. Each such audit shall
be at the Investor's sole cost and expense unless it is determined that the
allocations made with respect to the Company differed from the allocations which
should have been made in accordance with the Intercompany Agreements by more
than 10%, in which event the cost of such audit shall be borne by WWC.
(d) PCS and Future Spectrum Allocations.
(i) WWC shall develop and conduct the United States domestic
PCS business (which shall include for this purpose any expansion spectrum
allocated by the FCC to broadband personal communications services), only
through the Company Group. WWC will transfer, or cause to be transferred, to the
Company Group any licenses (or interests therein) for United States domestic PCS
systems acquired by the WWC Non-Company Group promptly after such assets are
acquired, at WWC's cost therefor. For this purpose, to the extent WWC shall have
issued shares of its Class A Common Stock as all or any portion of the
consideration paid to acquire such assets, the cost of such assets to be paid to
WWC by the Company shall be measured based on the market price of such WWC
securities immediately before the announcement of such acquisition, measured as
provided in Section 7(c)(ii).
(ii) The Company and the Investor agree that WWC shall
continue to conduct cellular businesses (which shall mean for this purpose
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wireless telecommunications businesses using frequencies in the range of
800-900 MHz and include any expansion spectrum allocated by the FCC to cellular
services) through the WWC Non-Company Group. The Company will transfer, or
cause to be transferred, to the WWC Non-Company Group any licenses (or
interests therein) for cellular systems acquired by the Company Group promptly
after such assets are acquired, at the Company's cost therefor.
(iii) If additional frequencies are allocated to wireless
telecommunications which are not expansion spectrum for PCS or cellular
services, then the WWC Non-Company Group and the Company Group shall divide as
between them any business and acquisition opportunities for the provision of
services using such additional spectrum in accordance with the geographical
areas in which each then operates or has specific plans to begin operating
within 12 months under licenses then held. Subject to clause (iv) below, in the
case of overlapping geographic areas or areas in which neither WWC nor the
Company has operations, WWC and the Company shall mutually agree as to the
allocation of such opportunities, and if they are unable to agree, such
opportunities shall be shared equally by them pursuant to a joint venture or
arrangement which is mutually agreed (it being understood that the Company and
WWC recognize the rights of the Investor as a result of the events described in
clause (c) of the definition of "Disposition Event").
(iv) If either the Company or WWC determines not to pursue any
opportunity with respect to the application for or purchase of existing or newly
allocated spectrum, including either PCS spectrum or cellular spectrum (which
determination, in the case of the Company, shall be made by majority vote of the
Board with, prior to a Terminating Reduction, at least one of the Investor's
designees to the Board voting in the majority) and so confirms to the other
party, then the other party may make such application for or purchase such
existing or new spectrum for its own use free of any rights of the declining
party.
(e) Rights and Obligations of Other Holders. If the Company shall enter
into any agreement with a holder of equity securities of the Company (other than
WWC or the Investor) (an "Other Holder") which contains terms and conditions
with respect to corporate governance (including rights to designate directors to
the Board), liquidity (including transfer rights and restrictions, rights of
first offer or first refusal, and tag along and drag along rights), preemptive
rights, or other rights and obligations of such Other Holder as a shareholder of
the Company, the Company shall notify the Investor of such terms and conditions
in writing, which notice shall constitute an offer to the Investor to grant it
such terms and conditions in lieu of the terms and conditions of this Agreement.
The Investor shall have the right, by delivery of written notice to the Company
within 30 days after delivery of such notice from the Company, to accept such
terms and conditions in lieu of this Agreement, in which case the Company and
the Investor will enter into an agreement satisfactory to them in form and
substance to implement such complete substitution of terms and conditions.
(f) Dividends. Subject to compliance with the Company's and its
Subsidiaries' loan agreements, indentures and other financing agreements and
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subject to the retention by the Company of adequate working capital and
reserves for the needs of its and its Subsidiaries businesses (including
reserves for anticipated capital expenditures provided for in the Company's
approved annual Operating Plan and Budget and/or capital expenditures budget
and reserves for acquisitions), the Shareholders agree that the Company shall,
commencing as soon as practicable and in any event with the year beginning on
January 1, 2000, pay dividends pari passu to all its shareholders as and in
such amounts as are legally available for distribution.
(g) Liability for Indebtedness. After the Closing, unless the Investor
shall otherwise consent in writing, no member of the Company Group shall have
any liability under or in respect of any indebtedness of any member of the WWC
Non-Company Group ("WWC Debt"), and the assets of the Company Group shall not be
subject to any Lien under or in respect of any WWC Debt. After the Closing,
unless WWC shall otherwise consent in writing, no member of the WWC Non-Company
Group shall have any liability under or in respect of any indebtedness of any
member of the Company Group ("Company Debt"), and the assets of the WWC
Non-Company Group shall not be subject to any Lien under or in respect of any
Company Debt.
(h) Spin-Off Distribution. WWC agrees that it shall not effect any
Spin-Off Distribution unless, after giving effect thereto:
(i) there shall be a public float of the Common Stock of at
least 15% of the outstanding Common Stock;
(ii) the Common Stock is listed on a national securities
exchange or quoted on the NASDAQ National Market System;
(iii) the Roaming Agreement remains in full force and effect;
and
(iv) if the Investor then retains the right hereunder to
designate one or more directors to the Board, the Company implements either (A)
measures reasonably satisfactory to the Investor (which may include voting
agreements, or the issuance of a separate class of voting securities to the
Investor), or (B) cumulative voting, in either case effective at or before the
Spin-Off Distribution to assure the Investor of the election to the Board of its
designee(s) in accordance with Section 3 hereof.
(i) Performance of Intercompany Agreements. WWC and the Company agree
that they will duly and timely perform their respective obligations under the
Intercompany Agreements in accordance with their respective terms (subject to
any amendments, modifications or waivers with respect thereto in accordance with
the terms of the Intercompany Agreements), except in respects which are not
material and which would not, in accordance with the terms thereof, give rise to
the right to claim a breach or default thereunder. The Company agrees with the
Investor that it will use all reasonable and prudent efforts to cause WWC so to
perform the Intercompany Agreements.
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(j) IPO. Until the date that is 18 months after the Closing Date, the
Company and WWC will not effect any initial Public Sale of the Company's equity
securities (whether a primary offering of newly issued shares or a secondary
offering of shares owned by WWC) without the prior approval of at least one of
the Investor's designees to the Board; provided, that such approval will not be
required under this Section 12(j) for (1) any Public Sale of non-voting,
non-convertible preferred stock for which approval is obtained as referred to in
clause (a) of the definition of "Disposition Event", (2) any Spin-Off
Distribution by WWC which meets the requirements set forth in Section 12(h)
hereof, (3) subject to the rights of the Investor under Section 10(c) in respect
of clauses (c) and (d) of the definition of "Disposition Event", any merger,
acquisition or consolidation involving a Public Sale of the Company's or the
surviving entity's equity securities, or (4) any transaction giving rise to the
Drag Along Right under Section 7.
13. MISCELLANEOUS.
(a) Legends. In addition to any other legends required by applicable
law, the Company's By-laws or any other agreement restricting the Transfer of
the Common Stock, each certificate evidencing the Common Stock acquired by the
Shareholders will bear a legend reflecting the restrictions on the transfer of
such shares contained in this Agreement and in the Purchase Agreement.
(b) Waiver; Amendments. Except as expressly provided otherwise herein,
neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the Company and each of the Investor and WWC; provided, that if, at the time of
such proposed change, waiver, discharge or termination, any other Shareholder is
party to this Agreement, no change, waiver, discharge or termination that would
adversely affect the rights or alter the obligations of such other Shareholder
will be effective without the written approval of such Shareholder.
(c) Recapitalization, Exchanges, Etc. The provisions of this Agreement
shall apply to the full extent set forth herein with respect to shares or other
securities of the Company that may be issued to any Shareholder in respect of,
in exchange for, or in substitution of the Common Stock.
(d) Specific Performance. Each of the parties hereto acknowledges and
agrees that, in the event of any breach of this Agreement, the non-breaching
parties would be irreparably harmed and could not be made whole by monetary
damages. Accordingly, each of the parties hereto agrees that the other parties,
in addition to any other remedy to which they may be entitled at law or in
equity, shall be entitled to compel specific performance of this Agreement
pursuant to Section 13(k)(x).
(e) Notices. All notices, requests, demands and other communications
hereunder shall be in writing and, except to the extent otherwise expressly
provided in this Agreement, shall be deemed to have been duly given if delivered
by same day or
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next day courier (guaranteed delivery) or mailed, registered mail, return
receipt requested, or transmitted by telegram, telex or facsimile (i) if to a
Shareholder, at such Shareholder's address appearing below or at any other
address such Shareholder may have provided in writing to the Company and the
other Shareholders then party to this Agreement and (ii) if to the Company, at
2001 NW Sammamish Road, No. 100, Issaquah, WA 98027, U.S.A., Tel: (425)
313-7003, Fax: (206) 313-5547; Attention: Alan R. Bender, Esq., or such other
address as the Company may have furnished to the Shareholders in writing, with a
copy (which shall not constitute notice) to Rubin Baum Levin Constant &
Friedman, 30 Rockefeller Plaza, New York, NY 10112, USA, Tel: (212) 698-7700,
Fax: (212) 698-7825; Attention: Barry A. Adelman. If a notice hereunder is
transmitted by confirmed fax so as to arrive during normal business hours during
a Business Day at the place of receipt, then such notice shall be deemed to have
been given on such Business Day at the place of receipt or, if so transmitted to
arrive after normal business hours during a Business Day at the place of
receipt, then such notice shall be deemed to have been given on the following
Business Day at the place of receipt. If such notice is sent by next-day courier
it shall be deemed to have been given on the third Business Day at the place of
receipt following sending and, if by registered air mail, on the tenth Business
Day at the place of receipt following sending, provided, that the date of
sending shall be deemed to be the date at the place of receipt at the time such
notice is posted.
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The Investor:
Hutchison Telecommunications PCS (USA) Limited
c/o Offshore Incorporations Limited
P.O. Box 957
Offshore Incorporations Centre
Road Town, Tortola
British Virgin Islands
Tel: (809) 494-2233
Fax: (809) 494-4885
and
Hutchison Telecommunications PCS (USA) Limited
22nd Floor, Hutchison House
10 Harcourt Road
Hong Kong
Attention: Edith Shih
Tel: (852) 2128-1232
Fax: (852) 2128-1778
With a copy (which shall not constitute notice) to:
Dewey Ballantine LLP
Suite 3907, Asia Pacific Finance Tower
Citibank Plaza
3 Garden Road
Central, Hong Kong
Attention: John A. Otoshi
Tel: (852) 2509-7000
Fax: (852) 2509-7088
WWC:
2001 NW Sammamish Road, No. 100
Issaquah, WA 98027
U.S.A.
Attention: Alan R. Bender, Esq.
Tel: (425) 313-5200
Fax: (425) 313-5547
With a copy (which shall not constitute notice) to:
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<PAGE> 50
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, NY 10112
USA
Attention: Barry A. Adelman
Tel: (212) 698-7700
Fax: (212) 698-7825
(f) Successors and Assigns. Except as otherwise provided herein, this
Agreement shall inure to the benefit of, and be binding upon, the successors and
assigns of each of the parties; provided, however, that this Agreement may not
be assigned by any party hereto other than in compliance with the terms hereof,
including the restrictions on transfers of Common Stock as set forth in Section
5 and the transfer of the rights and obligations hereunder as set forth in
Section 15.
(g) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
(h) Entire Agreement. This Agreement constitutes the entire
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior understandings among such parties with respect to such
subject matter.
(i) Applicable Law. The validity of this Agreement, its construction,
interpretation and enforcement, and the rights of the parties hereunder, shall
be determined under, governed by and construed in accordance with the internal
laws of the State of New York applicable to contracts formed in such State. Each
party hereto agrees that, subject to Section 13(k) hereof, any suit, action or
other proceeding arising out of this Agreement shall be brought and litigated in
the courts of the State of New York or the United States District Court for the
Southern District of New York and each party hereto hereby irrevocably consents
to personal jurisdiction and venue in any such court and hereby waives any claim
it may have that such court is an inconvenient forum for the purposes of any
such suit, action or other proceeding.
(j) Section Headings. The headings of the sections and subsections of
this Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.
(k) Arbitration. Any and all disputes, controversies or claims (each a
"Dispute") between the Shareholders relating to the interpretation or
enforcement or performance of this Agreement shall be resolved by binding
arbitration by the Arbitration Institute of the Stockholm Chamber of Commerce in
accordance with its rules, subject to the following provisions:
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<PAGE> 51
(i) There shall be three arbitrators (the "Arbitrators"). Each
party shall appoint one arbitrator within 30 days after giving or receiving
notice of the submission of a Dispute to arbitration. The two arbitrators
appointed by the parties shall appoint the third arbitrator. If a party does not
appoint an arbitrator within such designated period, or if the two appointed
arbitrators fail to appoint a third arbitrator within 30 days after their
appointment, the relevant appointment shall be made by the Arbitration Institute
of the Stockholm Chamber of Commerce.
(ii) The expenses of the arbitration shall be borne equally by
WWC, on the one hand, and the Investor, on the other hand, and each party shall
bear its own legal fees and expenses; provided, however, that the Arbitrators
shall have discretion to require that one party pay all or a portion of the
expenses of arbitration or the other party's legal fees and expenses in
connection with any particular arbitration.
(iii) The Arbitrators shall determine whether and to what
extent any party shall be entitled to damages or equitable relief. No party
shall be entitled to punitive damages or consequential damages or shall be
required to post a bond in connection with equitable relief.
(iv) The Arbitrators shall not have the power to add to nor
modify any of the terms or conditions of this Agreement. The Arbitrators'
decision shall not go beyond what is necessary for the interpretation and
application of the provisions of this Agreement in respect of the issue before
the Arbitrators. The Arbitrators' decision and award or permitted remedy, if
any, shall be based upon the issue as drafted and submitted by the respective
parties and the relevant and competent evidence adduced at the hearing(s).
(v) The Arbitrators shall have the authority to award any
remedy or relief provided for in this Agreement, in addition to any other remedy
or relief (including provisional remedies and relief) that a court of competent
jurisdiction could order or grant (but subject to the remedial limitations
elsewhere set forth in this Agreement, including, but without limitation, the
aforesaid prohibition against punitive and consequential damages). The
Arbitrators written decision shall be rendered within sixty (60) days of the
hearing. The decision reached by the Arbitrators shall be final and binding upon
the parties as to the matter in dispute. To the extent that the relief or remedy
granted by the Arbitrators is relief or remedy on which a court could enter
judgement, a judgement upon the award rendered by the Arbitrators may be entered
in any court having jurisdiction thereof (unless in the case of an award of
damages, the full amount of the award is paid within ten (10) days of its
determination by the Arbitrators). Otherwise, the award shall be binding on the
parties in connection with their continuing performance of this Agreement and in
any subsequent arbitral or judicial proceeding between the parties.
(vi) The arbitration shall take place in Stockholm, Sweden,
unless otherwise agreed by the parties, and shall be conducted in the English
language.
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<PAGE> 52
(vii) The arbitration proceeding and all filing, testimony,
documents and information relating to or presented during the arbitration
proceeding shall be disclosed exclusively for the purpose of facilitating the
arbitration process and for no other purpose.
(viii) The parties shall continue performing their respective
obligations under this Agreement notwithstanding the existence of a Dispute
while the Dispute is being resolved unless and until such obligations are
terminated, expire or are suspended in accordance with the provisions hereof.
(ix) The Arbitrators may, in their sole discretion, order a
pre-hearing exchange of information including production of documents, exchange
of summaries of testimony or exchange of statements of position, and shall
schedule promptly all discovery and other procedural steps and otherwise assume
case management initiative and control to effect an efficient and expeditious
resolution of the Dispute. At any oral hearing of evidence in connection with an
arbitration proceeding, each party and its counsel shall have the right to
examine its witnesses and to cross-examine the witnesses of the other party. No
testimony of any witness shall be presented in written form unless the opposing
party or parties shall have the opportunity to cross-examine such witness,
except as the parties otherwise agree in writing.
(x) Notwithstanding the dispute resolution procedures
contained in this Section 13(k), either party may apply to any court having
jurisdiction (a) to enforce this Agreement to arbitrate, (b) to seek provisional
injunctive relief so as to maintain the status quo until the arbitration award
is rendered or the Dispute is otherwise resolved, or (c) to challenge or vacate
any final judgment, award or decision of the Arbitrators that does not comport
with the express provisions of this Section 13(k).
(l) Failure to Pursue Remedies. The failure of any party to seek
redress for violation of, or to insist upon the strict performance of, any
provision of this Agreement shall not prevent a subsequent act, which would have
originally constituted a violation, from having the effect of an original
violation.
(m) Cumulative Remedies. The rights and remedies provided by this
Agreement are cumulative and the use of any one right or remedy by any party
shall not preclude or waive its right to use any or all other remedies except as
otherwise expressly provided in this Agreement. Such rights and remedies are
given in addition to any other rights the parties may have by law, statute,
ordinance or otherwise.
(n) Severability. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof, and
this Agreement shall be construed in all respects as if such invalid or
unenforceable provision were omitted.
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(o) HTL. In the event the Investor shall elect to purchase Sale Shares
pursuant to its rights of first offer or, if applicable, first refusal under
Section 6 or to exercise its preemptive rights under Section 9, HTL agrees to
cause the Investor to perform its obligations under such Sections in accordance
with their respective terms in connection with any such purchases (including
causing or enabling the Investor to make payment).
14. TERMINATION OF RIGHTS AND OBLIGATIONS.
(a) Investor and WWC. Except as provided in Sections 14(b) and 14(c),
and except for any earlier termination in accordance with the express terms of
any provisions hereof with respect to any right or obligation of the Investor or
WWC under this Agreement, all rights and obligations of the Investor, WWC or any
other Shareholder hereunder shall terminate upon the earlier of (i) the
completion of a Qualifying IPO, the completion of a Spin-Off Distribution, the
completion of a transaction in which the Drag Along Right is exercised or a
merger or consolidation of the Company with another entity in which the Company
is not the surviving entity, (ii) in the case of the Investor, an Investor 50%
Transfer or any Transfer as a result of which the Investor's Percentage
Ownership falls to below 9.95%, and (iii) subject to the surviving rights of any
WWC 50% Transferee in the case of WWC, any Transfer (including a Spin-Off
Distribution) as a result of which WWC ceases to own any Common Stock.
(b) Investor's Surviving Rights.
(i) Qualifying IPO; Spin-Off Distribution; and Drag Along
Right Event. After a Qualifying IPO, the completion of a Spin-Off Distribution,
the completion of a transaction in which the Drag Along Right is exercised
(except as provided in Section 7(c)) or in connection with a merger or
consolidation of the Company with another entity in which the Company is not the
surviving entity, the following rights of the Investor shall survive (and all
other rights of the Investor hereunder shall terminate): (i) the right to
designate directors to the Board under Section 3, which shall survive until
terminated in accordance with Section 3; (ii) the Investor's preemptive right
under Section 9, which shall survive until the termination in its entirety of
the Investor's right to designate directors to the Board under Section 3 or, if
earlier, the completion of an Investor 50% Transfer; and (iii) the demand and
piggyback registration rights of the Investor under Section 11, which shall
survive until terminated in accordance with Section 11.
(ii) Investor 50% Transfer.
(A) After an Investor 50% Transfer, the following rights of
the Investor shall survive and the benefit thereof (subject to any diminution or
termination of such rights in accordance with their terms after giving effect to
such Transfer) shall be allocated between the Investor and the Investor 50%
Transferee in accordance with Section 15 (and all other rights of the Investor
or the Investor 50% Transferee
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<PAGE> 54
hereunder shall terminate): (i) the right to designate directors to the Board
under Section 3, which shall survive until terminated in accordance with Section
3; (ii) the Tag Along Right under Section 8 and Demand Event Tag Along Right
under Section 10(g), which shall survive until the Investor's right to designate
directors to the Board under Section 3 shall terminate or, if earlier, the
termination of the Tag Along Right and Demand Event Tag Along Right pursuant to
the provisions of Section 14(b)(i); and (iii) the demand and piggyback
registration rights under Section 11, which shall survive until terminated in
accordance with Section 11.
(B) After an Investor 50% Transfer, WWC shall retain all of
its rights under this Agreement, including the Drag Along Right under
Section 7 hereof and the Demand Event Drag Along Right under Section
10(g) hereof, however, such Drag Along Right shall be modified so that
regardless of whether the consideration to be received by all
Shareholders is cash, Consideration Securities or a combination
thereof, the Investor and any Investor 50% Transferee shall receive the
same per share consideration as WWC and there shall be no return of
invested capital or internal rate of return requirement.
(iii) Percentage Ownership Below 9.95%. After any Transfer
which results in the Investor's Percentage Ownership falling below 9.95%, the
Investor's demand and piggyback registration rights under Section 11 shall
survive until terminated in accordance with Section 11 (and all other rights of
the Investor shall terminate).
(iv) Further Assurances. The Investor agrees that it shall
enter into such further instruments in form and substance satisfactory to WWC,
the Company and any transferee of WWC which, pursuant to Section 15, becomes
subject to the rights and obligations of the Investor hereunder, as shall
reasonably be required or advisable to effectuate or evidence the termination of
the rights of the Investor (and the associated obligations of WWC, the Company
and such transferee) as provided in this Section 14.
(c) WWC's Surviving Rights.
(i) Qualifying IPO; Spin-Off Distribution; and Drag Along
Right Event. After a Qualifying IPO, the completion of a Spin-Off Distribution,
the completion of a transaction in which the Drag Along Right is exercised or in
connection with a merger or consolidation of the Company with another entity in
which the Company is not the surviving entity, the following rights of WWC shall
survive (and all other rights of WWC hereunder shall terminate): (A) the right
to require the Investor to vote in favor of WWC's designees to the Board under
Section 3, which shall survive until the Investor's right to designate directors
is terminated in accordance with Section 3; (B) WWC's preemptive rights under
Section 9, which shall survive until the termination of each other Shareholder's
preemptive rights under Section 9; (C) the right (but not the obligation) to
effect a Repurchase under Section 10(a), which shall survive until the demand
registration rights of the Investor are
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<PAGE> 55
terminated in accordance with Section 11; and (D) the right to effect a
Disposition Transaction under Section 10(b), which shall survive until the
termination of the Investor's right to designate directors under Section 3.
(ii) WWC 50% Transfer. After a WWC 50% Transfer, all the
rights of WWC hereunder shall survive and the benefit thereof (subject to any
termination or diminution thereof in accordance with their terms after giving
effect to such Transfer) shall be allocated between WWC and the WWC 50%
Transferee in accordance with Section 15.
(iii) Further Assurances. WWC agrees that it shall enter into
such further instruments in form and substance satisfactory to the Company, the
Investor and any transferee of the Investor which, pursuant to Section 15,
becomes subject to the rights of WWC, as shall reasonably be required or
advisable to effectuate or evidence the termination of the rights of WWC (and
the associated obligations of the Investor, the Company and such transferee) as
provided in this Section 14.
(d) Pledged Shares. In connection with any foreclosure or exercise of
remedies upon any shares of Common Stock subjected to a Lien for the benefit of
a lender (including pursuant to Section 5(d)), the Tag Along Right and the Drag
Along Right shall terminate automatically without further action of any party.
15. INVESTOR 50% TRANSFEREE AND WWC 50% TRANSFEREE; OTHER
TRANSFEREES.
(a) Investor.
(i) Investor 50% Transfer. If the Investor shall have made an
Investor 50% Transfer, and unless the Investor shall have agreed otherwise with
the Investor 50% Transferee, both the Investor and the Investor 50% Transferee
(including, for this purpose, such transferee's Permitted Affiliate Transferees)
shall remain entitled, as to the shares of Common Stock owned respectively by
each of them, to the rights which survive such Transfer as provided in Section
14(b)(ii) (the "Assignable Investor Rights") (and all other rights under this
Agreement of the Investor and any Investor 50% Transferee shall terminate). The
benefits of the Assignable Investor Rights shall be subject to any termination
or diminution thereof in accordance with their terms after giving effect to such
Transfer. Both the Investor and such transferee shall be deemed to be the
"Investor" and a "Shareholder" for purposes of the provisions of this Agreement
governing the rights so shared by them and shall remain subject to all the
rights of WWC hereunder. The Investor shall be permitted to Transfer the benefit
of the Assignable Investor Rights to an Investor 50% Transferee on one occasion
only.
(ii) Other Transfers. If the Investor shall make a Transfer of
shares of Common Stock representing less than a 50% Investor Block to a Person
or Persons other than its Permitted Affiliate Transferees, or if the Investor
shall have made an
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Investor 50% Transfer, but shall have agreed with the Investor 50% Transferee
not to share the Assignable Investor Rights, then (A) the Investor shall remain
entitled to all its rights, and subject to all its obligations, hereunder,
subject to any termination or diminution thereof in accordance with their
respective terms after giving effect to such Transfer, (B) no such transferee
shall receive any of the rights of the Investor hereunder or be deemed to become
the "Investor" or a "Shareholder" hereunder for purposes of any entitlement to
the rights of the Investor hereunder and (C) each such transferee shall be
required to become subject to (and the Investor shall remain subject to) the
obligations of the "Investor" and a "Shareholder" with respect to, (1) the
obligation to vote in favor of the designees of WWC to the Board under Section
3, (2) the approval rights of WWC under Section 5 as to transferees of such
transferees, (3) the first offer and first refusal rights of WWC under Section
6, (4) the Drag Along Right of WWC under Section 7 (except that with respect to
the transferee, the Drag Along Right provisions of Section 14(b)(ii)(B) shall be
applicable), (5) the preemptive rights of WWC under Section 9, and (6) the
Demand Event Drag Along Right under Section 10(g)(the "Mandatory WWC Rights").
(iii) Excepted Transfers. If the Investor shall make a
Transfer of Common Stock in an Excepted Transfer, no transferee in such Transfer
shall become entitled to the rights or subject to the obligations of the
Investor hereunder unless mutually agreed by the Investor and WWC.
(iv) Permitted Affiliate Transferees. If the Investor shall
make a Transfer of Common Stock to a Permitted Affiliate Transferee, such
Permitted Affiliate Transferee shall become entitled to all the rights of the
Investor hereunder (without any diminution of the Percentage Ownership deemed
held by the Investor hereunder), and subject to all the obligations of the
Investor hereunder, provided, that the Investor and its Permitted Affiliate
Transferees shall be treated, unless the context requires otherwise, as a single
collective party under this Agreement, and no Transfer to a Permitted Affiliate
Transferee shall relieve the Investor of any liability for its obligations
hereunder.
(b) WWC.
(i) WWC 50% Transfer. If WWC shall have made a WWC 50%
Transfer, and unless WWC shall have agreed with the WWC 50% Transferee not to
Transfer to such transferee the benefit of the rights of WWC hereunder (but
rather to retain all or a portion of such rights), the WWC 50% Transferee and
WWC shall be permitted to share only (A) the right to require the Investor to
vote in favor of WWC's designees to the Board under Section 3, which right of
WWC shall survive until the Investor's right to designate directors is
terminated in accordance with Section 3, and (B) WWC's preemptive rights under
Section 9, which shall survive until no other Shareholder has preemptive rights
under Section 9. In each case, the rights of WWC and such transferee shall be
subject to any termination or diminution thereof after giving effect to such
Transfer, in accordance with the terms of this Agreement. All other rights may
be either retained by WWC or transferred by WWC to a WWC 50% Transferee, with
WWC or such transferee, as the case may be; being the sole party
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<PAGE> 57
entitled to the benefit of such rights thereafter. Except where the context
requires otherwise, such transferee shall be deemed to be "WWC" and a
"Shareholder" for purposes of the provisions of this Agreement governing the
rights held exclusively by it, and both WWC and such transferee shall be deemed
to be "WWC" and a "Shareholder" for purposes of the provisions hereof governing
rights shared by them.
(ii) If WWC shall make a Transfer of shares of Common Stock
representing less than a 50% WWC Block to a Person or Persons other than its
Permitted Affiliate Transferees, or if WWC shall have made a Transfer of a 50%
Investor Block to a 50% WWC Transferee, but shall have elected not to Transfer
its rights to such transferee, then (A) WWC shall remain entitled to all its
rights, and subject to all its obligations, hereunder, subject to any
termination or diminution thereof in accordance with their respective terms
after giving effect to such Transfer, and (B) such transferee shall not be
entitled to any of the rights, or subject to any of the obligations of WWC
hereunder. other than the obligation to vote for the Investor's designees to the
Board under Section 3.
(iii) Excepted Transfers. If WWC shall make an Excepted
Transfer, no transferee in such Transfer shall become entitled to the rights, or
subject to the obligations, of the Investor hereunder unless mutually agreed by
the Investor and WWC.
(iv) Permitted Affiliate Transferees. If WWC shall make a
Transfer of Common Stock to a Permitted Affiliate Transferee, such Permitted
Affiliate Transferee shall become entitled to all the rights of WWC hereunder
(without diminution of the Percentage Ownership deemed held by WWC hereunder),
and subject to all the obligations of WWC hereunder, provided, that WWC and its
Permitted Affiliate Transferees shall be treated, unless the context requires
otherwise, as a single collective party under this Agreement, and no Transfer to
a Permitted Affiliate Transferee shall relieve WWC of liability for its
obligations hereunder.
(c) Further Assurances.
(i) The Investor agrees that each transferee of the Investor
(including any Permitted Affiliate Transferee), other than in an Excepted
Transfer, shall be required to enter into such further instruments in form and
substance satisfactory to WWC and the Company as shall reasonably be required or
advisable to effectuate or evidence any transfer or assumption of the rights and
obligations of the Investor to or by such transferee in accordance with this
Section 15 or Section 14.
(ii) WWC agrees that each transferee of WWC (including any
Permitted Affiliate Transferee), other than in an Excepted Transfer, shall be
required to enter into such further instruments in form and substance
satisfactory to the Investor and the Company as shall reasonably be required or
advisable to effectuate or evidence the transfer or assumption of the rights and
obligations of WWC to or by such transferee in accordance with this Section 15
or Section 14; provided, that upon a Transfer to any Person in a transaction
which gave rise to a right of first offer or right
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of first refusal in favor of the Investor and in which the Investor did not
exercise any such rights, the transferee shall not be subject to any obligations
or rights hereunder except to the extent agreed to between the transferee and
WWC.
IN WITNESS WHEREOF, the parties hereto have executed this Shareholders Agreement
of Western PCS Corporation as of the date first above written.
WESTERN WIRELESS CORPORATION
-------------------------------
Name:
Title:
HUTCHISON TELECOMMUNICATIONS
PCS (USA) LIMITED
-------------------------------
Name:
Title:
WESTERN PCS CORPORATION
-------------------------------
Name:
Title:
56
<PAGE> 59
The undersigned joins as a party to this Agreement in his individual
capacity solely for the purpose of acknowledging and becoming bound by the
provisions of Section 7(b) hereof but only to the extent such provision relates
to the undersigned. The undersigned shall have no further rights or obligations
in his individual capacity under this Agreement.
-------------------------------
JOHN W. STANTON
The undersigned joins as a party to this Agreement solely for the
purpose of acknowledging and becoming bound by the provisions of Section 13(o)
hereof. The undersigned shall have no further rights or obligations under this
Agreement (other than as a Permitted Affiliate Transferee of the Investor upon
any Transfer of shares of Common Stock to the undersigned by the Investor).
-------------------------------
HUTCHISON TELECOMMUNICATIONS
LIMITED
-------------------------------
Name:
Title:
57
<PAGE> 1
EXHIBIT 1.05
FORM OF
TAX SHARING AGREEMENT
Agreement dated this 14th day of October, 1997, by and among
Western Wireless Corporation, a Washington corporation ("WWC"), Western PCS
Corporation, a Delaware corporation ("Western PCS") and Hutchison
Telecommunications PCS (USA) Limited, a British Virgin Islands corporation (the
"Investor") (the "Agreement").
WHEREAS, WWC is the common parent of an affiliated group of
corporations that files a consolidated federal income tax return (the "WWC
Affiliated Group");
WHEREAS, prior to the date hereof, WWC owned all of the
outstanding stock of Western PCS;
WHEREAS, as of the date hereof, Investor will acquire from
Western PCS 19.9 percent of the outstanding common stock of Western PCS (the
"Purchase"); and
WHEREAS, WWC, Western PCS and Investor desire to establish an
arrangement whereby the income tax liabilities of Western PCS and its direct and
indirect subsidiaries (the "Western PCS Group") will be determined and paid by
WWC and rebilled to Western PCS for settlement, and the Western PCS Group will
be compensated by WWC for the use of certain Western PCS Group net operating
losses and other tax attributes;
NOW, THEREFORE, WWC, Western PCS and Investor agree as follows:
1
<PAGE> 2
ARTICLE I
1.01 Preparation and Filing of Tax Returns by WWC. WWC shall
prepare and timely file, or shall cause the preparation and timely filing of,
all federal, state, and other income tax returns ("Tax Returns") of the Western
PCS Group. With respect to the tax treatment of items affecting the Western PCS
Group, such Tax Returns shall be prepared (in the absence of a material change
in law or circumstance) in a manner that is consistent with past practices,
elections, accounting methods, conventions, and principles of taxation used for
the most recent taxable periods for which Tax Returns involving similar items
have been filed prior to the Purchase.
1.02 Payment of Taxes by WWC. Subject to Sections 1.05 and 1.08
and any rights of offset that WWC may have under this Agreement, WWC shall pay,
or cause to be paid, all income taxes, interest, and penalties due with respect
to income earned or recognized by the Western PCS Group.
1.03 Determination of Income Taxes of the Western PCS Group. WWC
shall determine and allocate to each member of the Western PCS Group its income
taxes and related penalties and interest as if it were a separate and
independent taxpayer. For purposes of this determination, WWC shall not give
effect to any federal net operating loss carryover or carryback that would be
available to any member of the Western PCS Group. The computations shall be
prepared from year to year (in the absence of a material change in law or
circumstance) in a manner consistent with past practices, elections, accounting
methods, conventions, and principles of taxation used for the most recent
taxable periods for which Tax Returns involving similar items have been filed
prior to the Purchase. In the event that the WWC Affiliated Group files its
consolidated
2
<PAGE> 3
federal income Tax Return on the basis of the alternative minimum tax, each
member of the Western PCS Group will be allocated tax by WWC based on its tax
calculated on a stand-alone basis. Items relating to intercompany transactions
shall be treated as provided under Treasury Reg. Section 1.1502-13.
WWC shall consult with Western PCS and Investor in the
determination of the Western PCS Group members' allocated income tax liabilities
and shall afford Western PCS and Investor reasonable opportunity to review such
determinations by making such determinations available to Western PCS and
Investor. Not later than the later of (i) 15 days after receipt of such
determinations by Western PCS and Investor and (ii) 15 days before the filing
due date of the relevant Tax Return, Investor or Western PCS shall notify WWC of
any determinations or allocations with which Investor or Western PCS disagrees,
including a reasonably detailed explanation of such disagreement. The parties
shall act in good faith to resolve such disagreement and if they cannot reach a
resolution, the matter shall be referred to an independent accounting firm
acceptable to all parties, whose resolution of the matter shall be binding on
the parties.
In addition to the other principles and policies set forth in
this Agreement, the parties have agreed that the determination and allocation of
taxes under this Section shall be computed on the basis that (i) the merger of
Western PCS III Corporation into Western PCS II Corporation during 1997 was a
qualifying tax-free reorganization under Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code") and (ii) any tax liability arising as a
result of any future spin-off by Western PCS of any direct or indirect
subsidiary of Western PCS shall not be allocated to any member of the Western
PCS Group.
3
<PAGE> 4
WWC and Western PCS shall cooperate to effectively monitor any
"excess loss accounts" (as defined in Treasury Reg. Section 1.1502-19) anywhere
within the Western PCS Group. Prior to any event (including, but not limited to,
debt cancellations and deconsolidation events) which may trigger recapture of
income due to any excess loss account, WWC and Western PCS shall cooperate and
use all commercially reasonably efforts to eliminate such excess loss account
recapture or otherwise avoid or minimize the impact thereof.
1.04 Determinations by WWC in Accordance with Allocation Policy
Objectives. In the event that it may be unclear as to the result of the
application of Section 1.03 to specific situations which may arise and which are
not expressly addressed in Section 1.03, the allocation of taxes by WWC to the
members of the Western PCS Group shall be made using the following tax
allocation policy objective as a guide: the tax allocation policy is meant to
fairly allocate federal, state, and local tax liabilities (without regard to
federal net operating loss carryovers or carrybacks, except as provided in
Sections 1.06 and 1.07) to the members of the Western PCS Group as if each such
corporation filed its Tax Return and paid its tax on a separate company basis.
1.05 Payment of Allocated Taxes. Subject to Sections 1.06 and
1.08, Western PCS shall pay to WWC on behalf of each of the members of the
Western PCS Group, within 30 days after the later of (i) the receipt of the
determinations referred to in Section 1.03 and (ii) the filing of the relevant
Tax Return, the tax liability allocated to such member pursuant to Section 1.03,
except for payments relating to disputed items under Section 1.03, which
payments shall be made within 30 days after the resolution thereof. The tax
liability of the WWC Affiliated Group, less the amount of tax liability
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allocated to the members of the Western PCS Group, shall be the sole
responsibility of WWC and the other members of the WWC Affiliated Group,
excluding the members of the Western PCS Group. The foregoing sentence shall not
affect any right to indemnification that WWC or other members of its Affiliated
Group may have from any person who is not a member of the WWC Affiliated Group
for any taxes (including penalties and interest thereon and expenses related
thereto) that are the responsibility of WWC. Western PCS may offset its
obligation to make payments to WWC under this Section against WWC's obligations
to make payments to Western PCS under the provisions of this Agreement.
1.06 Treatment of Post-1997 Net Operating Losses and Other Tax
Attributes. (a) If for any taxable year beginning on or after January 1, 1998,
any member of the Western PCS Group has a net operating loss (computed without
regard to any net operating loss carryover or carryback from any period) or
generates any other tax attribute (e.g., a credit) that reduces the federal
consolidated tax liability of the WWC Affiliated Group (excluding the Western
PCS Group) for the year in which such loss is incurred or such attribute is
generated, the amount of the net operating loss or tax attribute producing such
reduction in tax liability shall be treated as follows: (i) first, to the extent
of losses or attributes referred to in Section 1.12 (generally, Western PCS
Group Pre-1997 Losses), as reducing the amount of such losses or attributes;
(ii) then, to the extent of losses referred to in Section 1.07 (Western PCS
Group 1997 Losses), as reducing the amount of such losses; and (iii) thereafter,
as a utilization of a current year loss or attribute; all as further described
below in this Section.
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(b) With respect to the losses referred to in Section
1.06(a)(ii), WWC shall make such payment as provided in Section 1.07 by treating
such amount as a "1997 Reimbursable Loss."
(c) With respect to the losses and attributes referred to in
Section 1.06(a)(iii) above, the aggregate total of such losses and attributes
shall be maintained in a deferred account (the "Western PCS Deferred Account")
until the date upon which the Western PCS Group members (i) cease to file a
consolidated federal income Tax Return with WWC, or (ii) cease to have any net
operating loss carryovers computed on a stand-alone basis (taking into account
the provisions of this Section 1.06 and computed as of the end of a taxable
year). If the Western PCS Group members cease to file a consolidated federal
income Tax Return with WWC, WWC shall pay to Western PCS within 30 days
following the date of such deconsolidation an amount equal to the present value
of the aggregate balance of such Western PCS Deferred Account determined by
mutual agreement among WWC, Western PCS and Investor based on (i) the maximum
federal income tax rate for corporations applicable for the year during which
the deconsolidation becomes effective, (ii) reasonable projections for the
Western PCS Group with regard to the anticipated timing of the utilization by it
of such losses and attributes and (iii) commercially reasonable discount rate.
If there is a dispute between WWC, Western PCS and Investor with regard to the
preceding calculation, the matter shall be referred to an independent accounting
firm acceptable to all parties, whose resolution of the matter shall be binding
on the parties. In no event shall payment of any disputed amount be required to
be made prior to 30 days following resolution of such dispute. If, prior to any
time that the Western PCS Group members cease to file
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a consolidated federal income tax return with WWC, the Western PCS Group members
cease to have any net operating loss carryovers computed on a stand-alone basis
(taking into account the provisions of this Section 1.06 and computed as of the
end of a taxable year), WWC shall pay to Western PCS an amount equal to the
difference between (A) the sum of the Western PCS Group members' federal income
tax liabilities determined as if each such member were a separate and
independent taxpayer, and (B) the sum of the Western PCS Group members' federal
income tax liabilities determined as if each such member were a separate and
independent taxpayer and had available to it a part of the net operating losses
and other attributes in the Western PCS Deferred Account proportionate to its
taxable income. Thereafter, such calculation shall be performed annually (or
until the Western PCS Group members cease to file a consolidated federal income
tax return with WWC), and the amount in the Western PCS Deferred Account shall
be reduced by the amount of the net operating losses and other attributes
utilized in determining the federal income tax liabilities of the Western PCS
Group members in (B).
(d) The principles of Section 1.06(c) shall apply equally to
years in which the WWC Affiliated Group (excluding the members of the Western
PCS Group) has a net operating loss (computed without regard to any net
operating loss carryover or carryback from any period) or other tax attribute
which reduces the tax liability of the Western PCS Group. The deferred account
of the WWC Affiliated Group (excluding members of the Western PCS Group) (the
"WWC Deferred Account") shall be increased for all such current year losses and
other attributes referred to in this Section 1.06(d). No member of the Western
PCS Group shall be required to make any payment pursuant to Section 1.05 for any
taxable year to the extent that such payment which otherwise would
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be required under Section 1.05 is attributable to any amount added for that
taxable year to such WWC Deferred Account.
(e) WWC and Western PCS may each offset their obligations to make
payments pursuant to Section 1.06(c) and (d) against the other party's
obligations to make such payments.
(f) If for any taxable year beginning on or after January 1,
1998, any member of the Western PCS Group has a net operating loss (computed
without regard to any net operating loss carryover or carryback from any period)
or generates any other tax attribute (e.g., a credit) that reduces the federal
consolidated tax liability of the WWC Affiliated Group, for any year other than
the year in which such loss is incurred or such attribute is generated, below
the amount that would have been payable if such Western PCS Group member had not
incurred such loss or generated such attribute, WWC shall pay the amount of the
tax reduction so computed to Western PCS within 30 days after the filing of the
consolidated federal income Tax Return that reflects such tax reduction or, if
such tax reduction is due to the carryback of an item and refund of earlier
payment, within 30 days after the receipt by WWC of such refund payment. WWC may
offset its obligation to make payments to Western PCS under this Section 1.06(f)
against Western PCS's obligations to make payments to WWC under the provisions
of this Agreement.
(g) The principles of Section 1.06 shall be applied on the basis
that, if any member of the WWC Affiliated Group has a net operating loss
(computed without regard to any net operating loss carryover or carryback) or
generates any other tax attribute for any taxable year beginning on or after
January 1, 1998, such net operating loss or tax attribute shall be used first to
reduce the federal tax liability for such year of
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the other members of the Western PCS Group or WWC Affiliated Group (excluding
the Western PCS Group members) of which such member having such net operating
loss or tax attribute is a member.
1.07 Reimbursement for the Use of Western PCS Group 1997 Net
Operating Losses. If for the 1997 taxable year any member of the Western PCS
Group has a net operating loss (computed without regard to any net operating
loss carryover or carryback from any period) that reduces the federal
consolidated tax liability of the WWC Affiliated Group for any year below the
amount that would have been payable if such Western PCS Group member had not
incurred such loss (such net operating loss a "1997 Reimbursable Loss"), WWC
shall pay to Western PCS the amount of such tax reduction, computed as specified
in the next sentence. The amount of the tax reduction shall be an amount equal
to $20 million times a fraction, the numerator of which shall be the amount of
the Western PCS Group members' 1997 Reimbursable Losses utilized for the year of
tax reduction, and the denominator of which shall be the total amount of the
Western PCS Group members' 1997 net operating losses (computed without regard to
any net operating loss carryover or carryback from any period). In no event
shall (i) the total payments made by WWC to Western PCS under this Section
exceed $20 million or (ii) the payment for any particular year exceed the amount
of the tax reduction referred to in the first sentence of this Section 1.07. Any
payment by WWC required under this Section 1.07 shall be paid to Western PCS
within 30 days of WWC's filing of the consolidated federal income Tax Return
that reflects such tax reduction as determined under this Section. WWC may
offset its obligation to make payments to Western PCS under this Section
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against Western PCS's obligations to make payments to WWC under the provisions
of this Agreement.
The amount of losses and payments referred to in this Section
1.07 shall be reduced by the losses and payments determined in Section 1.06(b).
In any case where WWC would be required to make a payment under
Section 1.06(f) but for the existence of a Western PCS Group member 1997 net
operating loss (computed without regard to any net operating loss carryover or
carryback from any period), the WWC Affiliated Group's federal consolidated tax
liability shall be deemed to be reduced first by the 1997 loss and WWC shall
make a payment to Western PCS under this Section 1.07 accordingly.
1.08 Interim Estimated Payments. Within 30 days after each
request by WWC, Western PCS shall advance to WWC amounts computed consistently
with Sections 1.03, 1.04 and 1.06 necessary to reimburse WWC for the portion of
any estimated federal income tax payments attributable to the inclusion of the
members of the Western PCS Group in the WWC consolidated federal income Tax
Return. Any amounts so paid in any year shall operate to reduce the amount
payable to WWC following the end of such year pursuant to Section 1.05 above,
and any excess of payments made by Western PCS pursuant to this Section 1.08
shall promptly be refunded by WWC to Western PCS. Conversely, within 30 days
after the due date of any estimated federal income tax payments, WWC shall
advance to Western PCS amounts computed consistently with Sections 1.06 and 1.07
(and only if a current payment would be required pursuant to Sections 1.06 and
1.07) necessary to reimburse Western PCS for the reduction in estimated federal
income tax payments attributable to the inclusion of the
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Western PCS Group in the WWC consolidated federal income Tax Return. Any amounts
so paid in any year shall operate to reduce the amount payable to Western PCS
following the end of such year pursuant to Sections 1.06 and 1.07, and any
excess of payments made by WWC pursuant to this Section 1.08 shall promptly be
refunded to WWC by Western PCS.
1.09 State and Local Combined Reporting. In the event that any
Western PCS Group member, on the one hand, and WWC or any other member of the
WWC Affiliated Group (other than a member of the Western PCS Group), on the
other hand, compute their state or local income, franchise, net worth or similar
tax liabilities in any jurisdiction on a combined, consolidated or unitary
basis, this Agreement shall apply to such corporations with respect to such
taxes to the fullest extent possible, taking into account any differences
between the federal consolidated return system and the state or local combined,
consolidated or unitary return system.
1.10 Conduct of Tax Audits and Disputes; Tax Adjustments. Except
as otherwise provided in this Section 1.10, WWC and its duly appointed
representatives shall have the right on behalf of all members of the Western PCS
Group to supervise or otherwise coordinate any tax examination process and to
negotiate, resolve, settle, and contest any asserted tax deficiencies or assert
and prosecute any claim for tax refund. WWC shall consult with Western PCS and
Investor in connection with such matters as relate to the Western PCS Group,
shall give Investor a reasonable opportunity to participate therein (provided
that WWC shall retain ultimate control of such matters), and shall promptly
provide to Western PCS and Investor all information relating to such matters
received by WWC or its representatives, including providing copies of all
notices,
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assessments, or similar documents within 15 days of receipt. WWC shall not agree
to any audit adjustment or deficiency, settle any issue or amount, resolve any
issue, contest any claim, or take any other action in any legal proceeding that
pertains to the Western PCS Group except in good faith and based on the merits
thereof and without regard to any other audit adjustment, deficiency, issue,
amount, claim or proceeding relating to the WWC Affiliated Group (excluding the
Western PCS Group).
In the event of any adjustment to the Tax Returns of any member
of the Western PCS Group as filed (by reason of an amended return, claim for
refund, or an audit by the Internal Revenue Service or other tax authority), the
liability of each member of the Western PCS Group hereunder shall be
redetermined to give effect to any such adjustment as if it had been made as
part of the original determination and allocation of tax liability. Appropriate
payments between WWC and Western PCS shall be made in respect of any such
adjustment in accordance with the foregoing provisions of this Agreement within
30 days after any payments are made or refunds are received as a result of the
adjustment or, in the case of contested proceedings, within 30 days after a
final determination of the contest. Similar principles shall apply to the other
members of the WWC Affiliated Group.
1.11 Payment for Western PCS Group Post-1996 Losses and Other Tax
Attributes Retained by WWC. In the event the Western PCS Group members cease to
file a consolidated federal income Tax Return with WWC, WWC shall make a lump
sum payment to Western PCS, according to the provisions of the following
paragraph, within 30 days of the date that the Western PCS Group members leave
the WWC Affiliated Group, in compensation for any unused net operating losses
and other tax attributes
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arising after 1996 that are attributable to the Western PCS Group and that are
retained by WWC.
To the extent that Western PCS Group 1997 net operating losses
are retained by WWC at such time, WWC shall pay to Western PCS the remaining
unpaid balance of the $20 million due to Western PCS from WWC as provided in
Section 1.07, determined as if the amount of such retained losses were treated
as o1997 Reimbursable Losses." In no event shall any payment to Western PCS
under this Section in respect of net operating losses attributable to the
Western PCS Group arising in 1997 exceed $20 million. To the extent that Western
PCS Group post-1997 net operating losses or other attributes are retained by WWC
at such time, WWC shall pay to Western PCS an amount equal to the present value
of such retained net operating losses and other attributes determined by mutual
agreement among WWC, Western PCS and Investor based on (i) the maximum federal
income tax rate for corporations applicable for the year during which the
deconsolidation becomes effective, (ii) reasonable projections for the Western
PCS Group with regard to the anticipated timing of the utilization by it of such
losses and other attributes and (iii) a commercially reasonable discount rate.
If there is a dispute among WWC, Western PCS and Investor with regard to the
preceding calculation, the matter shall be referred to an independent accounting
firm acceptable to all parties, whose resolution of the matter shall be binding
on the parties. In no event shall payment of any disputed amount be required to
be made prior to 30 days following resolution of such dispute.
1.12 Payment for Western PCS Group Pre-1997 Losses and WWC Group
(Excluding Western PCS Group) Post-1997 Losses and Other Attributes Retained
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by Western PCS. In the event the Western PCS Group members cease to file a
consolidated federal income Tax Return with WWC, Western PCS shall make a lump
sum payment to WWC, at the time the Western PCS Group members leave the WWC
Affiliated Group, in consideration for (i) any unused net operating losses
arising before 1997 that are attributable to the Western PCS Group and that are
retained by the Western PCS Group members and (ii) any unused net operating
losses or other tax attributes arising after 1996 that are attributable to
members of the WWC Affiliated Group, other than members of the Western PCS
Group, and that are retained by Western PCS Group members. The amount of the
payment in respect of losses referred to in clause (i) of the preceding sentence
shall be equal to $20 million times a fraction, the numerator of which shall be
the retained losses in clause (i), and the denominator of which shall be the
total amount of the net operating losses arising before 1997 that are
attributable to the Western PCS Group as of the date of this Agreement. To the
extent that such losses and attributes referred to in clause (ii) above are
retained by Western PCS at such time, Western PCS shall pay to WWC an amount
equal to the present value of such retained net operating losses and attributes
determined by mutual agreement among WWC, Western PCS and Investor based on (i)
the maximum federal income tax rate for corporations applicable for the year
during which the deconsolidation becomes effective, (ii) reasonable projections
for the WWC Affiliated Group (excluding the Western PCS Group) with regard to
the anticipated timing of the utilization by it of such losses and attributes
and (iii) a commercially reasonable discount rate. If there is a dispute among
WWC, Western PCS and Investor with regard to the preceding calculation, the
matter shall be referred to an independent accounting firm acceptable to all
parties, whose resolution of the matter shall
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be binding on the parties. In no event shall payment of any disputed amount be
required to be made prior to 30 days following resolution of such dispute.
For purposes of determining the amount of any payment to be made
pursuant to this Section 1.12, the amount of pre-1997 losses and WWC Affiliated
Group (excluding Western PCS Group) post-1997 losses and other attributes
retained by the Western PCS Group members shall be reduced by losses and
attributes as provided in clause (i) of Section 1.06(a).
1.13 Ownership Change Loss Limitations. If a change of ownership
(as determined under Section 382 of the Code) occurs with respect to WWC which
causes the limitations of Section 382 to be applicable to any net operating loss
(including carryforward losses) of any member of the Western PCS Group, WWC
shall, at any time that the Western PCS Group (or any member thereof) ceases to
file a consolidated federal income Tax Return with WWC, allocate to the Western
PCS Group (or relevant member thereof) an equitable portion of any allowance for
limited use of NOLs that remains available. Such allocation shall be determined
based upon the proportion that the net operating losses (including carryforward
net operating losses) of each member of the WWC Affiliated Group represents of
the total of such losses (inclusive of such carryforward losses) of the entire
WWC Affiliated Group as of the date of the deconsolidation.
1.14 Indemnification of the Western PCS Group. WWC shall
indemnify and hold the Western PCS Group members harmless from and against all
federal, state, local, foreign and other taxes and penalties and interest
related thereto due or payable by WWC or any member of the WWC Affiliated Group
(other than taxes,
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penalties and interest allocable to members of the Western PCS Group pursuant to
Sections 1.01 through 1.10 of this Agreement and taxes, penalties and interest
of the members of the Western PCS Group where such items are not otherwise
subject to the provisions of the Agreement). If, upon receipt by WWC of a notice
of indemnification claim by Western PCS from Western PCS or Investor hereunder,
WWC disputes such claim, WWC shall notify Western PCS and Investor of its
disagreement and the basis therefor within 30 days of receipt of the notice of
claim. The parties shall act in good faith to resolve such disagreement and if
they cannot reach a resolution, the matter shall be referred to an independent
accounting firm acceptable to all parties, whose resolution of the matter shall
be binding on the parties. Any indemnification payment required hereunder shall
be paid within 30 days after the indemnifying party receives notice of such
required payment from the indemnified party or, if disputed, within 30 days
after the resolution of such dispute as provided in the preceding sentence. The
indemnifying party shall also pay the reasonable attorney's fees and other costs
incurred by the indemnified party with respect to the payment of such taxes and
other amounts and the pursuit of the indemnification claim.
1.15 Indemnification of WWC. Western PCS shall indemnify and hold
WWC and all members of its Affiliated Group (other than the members of the
Western PCS Group) harmless from and against all federal, state, local, foreign
and other taxes and penalties and interest related thereto allocable to any
member of the Western PCS Group pursuant to Sections 1.01 through 1.10 of this
Agreement and taxes, penalties and interest of the members of the Western PCS
Group where such items are not otherwise subject to the provisions of the
Agreement. Any indemnification claim by WWC shall be
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delivered to both Western PCS and Investor. If, upon receipt by Western PCS and
Investor of a notice of indemnification claim by WWC hereunder, Western PCS or
Investor disputes such claim, Western PCS or Investor shall notify WWC of its
disagreement and the basis therefor within 30 days of receipt of the notice of
claim. The parties shall act in good faith to resolve such disagreement and if
they cannot reach a resolution, the matter shall be referred to an independent
accounting firm acceptable to all parties, whose resolution of the matter shall
be binding on the parties. Any indemnification payment required hereunder shall
be paid within 30 days after the indemnifying party receives notice of such
required payment from the indemnified party or, if disputed, within 30 days of
the resolution of such dispute as provided in the preceding sentence. The
indemnifying party shall also pay the reasonable attorney's fees and other costs
incurred by the indemnified party with respect to the payment of such taxes and
other amounts and the pursuit of the indemnification claim.
1.16 Portion of Taxable Year. Whenever it is necessary under this
Agreement to determine liability for taxes for a portion of a taxable year or
period that begins before and ends after the Western PCS Group members cease to
file a consolidated federal income Tax Return with WWC, the determination shall
be made by assuming that each of the relevant corporations had a taxable year
which ended at the close of the date on which such corporations cease to file a
consolidated federal income Tax Return with WWC, except that exemptions,
allowances or deductions that are calculated on an annual basis, such as the
deduction for depreciation, shall be apportioned on a time basis.
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1.17 Payment Gross-up. Any payment required to be made under this
Agreement after the Western PCS Group members cease to file a consolidated
federal income Tax Return with WWC shall be increased so that the net amount
retained by the corporation to which payment is due, after deduction of any tax
due thereon, shall be equal to the amount otherwise due. All parties agree to
report payments to each other hereunder as non-includable and non-deductible to
the extent permitted under applicable law.
ARTICLE II
2.01 Limitation to Consolidated Return Years. The obligations of
the parties hereunder shall relate solely to taxes, net operating losses and tax
attributes arising during taxable years for which the Western PCS Group members
file a consolidated federal income Tax Return with WWC, except that if, in a
taxable year in which the Western PCS Group no longer files a consolidated
federal income Tax Return with WWC, the Western PCS Group generates a net
operating loss or other tax attribute which it carries back to a year in which
the Western PCS Group did file a consolidated federal income Tax Return with
WWC, WWC shall promptly apply for a refund upon notice of such carryback to WWC
and, upon receipt of such refund, shall promptly pay to Western PCS the amount
of the refund. Western PCS shall pay and indemnify WWC for all out-of-pocket
expenses including outside accountant's fees, attorney's fees and reasonable
overhead allocation incurred by WWC in making such refund claim and WWC shall be
entitled to offset any such expenses against the amount of any refund received.
2.02 Expenses. Except as otherwise stated herein, all costs and
expenses incurred in connection with this Agreement and transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses.
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2.03 Entire Agreement. This Agreement contains the entire
agreement among the parties and supersedes all prior agreements, arrangements,
and understandings relating to the subject matter hereof. There are no written
or oral agreements, understandings, representations or warranties between or
among the parties other than those set forth or referred to in this Agreement.
2.04 Section Headings. The Section and paragraph headings
contained in this Agreement are for reference purposes only and shall not in any
way affect the meaning or interpretation of this Agreement.
2.05 Notices. All notices, consents, requests, instructions,
approvals and other communications provided for herein and all legal process in
regard hereto shall be validly given when made, or served if in writing when
delivered personally (by courier service or otherwise), when delivered by
telecopy and confirmed by returned telecopy, addressed as follows, or, in each
case, to such other address as may be specified by a party in writing to another
party:
(a) if to WWC, to it at:
Western Wireless Corporation
2001 NW Sammamish Road
Issaquah, Washington 98027
Attention: Donald Guthrie
Facsimile No.: 425-313-7731
with copies (which shall not constitute notice) to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Attention: Barry A. Adelman, Esq.
Facsimile No.: 212-698-7825
and
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Jones, Day, Reavis & Pogue
1450 G Street, N.W.
Washington, D.C. 20005
Attention: Lester W. Droller, Esq.
Facsimile No.: 202-737-2832
(b) if to Western PCS, to it at:
Western PCS Corporation
2001 NW Sammamish Road
Issaquah, Washington 98027
Attention: Donald Guthrie
Facsimile No.: 425-313-7731
with copies (which shall not constitute notice) to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Attention: Barry A. Adelman, Esq.
Facsimile No.: 212-698-7825
and
Jones, Day, Reavis & Pogue
1450 G Street, N.W.
Washington, D.C. 20005
Attention: Lester W. Droller, Esq.
Facsimile No.: 202-737-2832
(c) if to Investor, to it at:
Hutchison Telecommunications PCS (USA) Limited
22nd Floor, Hutchison House
10 Harcourt Road
Hong Kong
Attention: Ms. Edith Shih
Facsimile No.: 852-2128-1778
with a copy (which shall not constitute notice) to:
Dewey Ballantine LLP
Suite 3907
Asia Pacific Finance Tower
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Citibank Plaza, 3 Garden Road
Central Hong Kong
Attention: John A. Otoshi
Facsimile No.: 852-2509-7088
2.06 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York without reference
to the choice of law principles thereof.
2.07 Illegality. In case any provision in this Agreement shall be
invalid, illegal or unenforceable the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby,
unless such remaining provisions are inconsistent with the policy objectives set
forth in Section 1.04.
2.08 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns (and, in the case of the second sentence of Section 2.09 below, to
the benefit of the Investor as an express third party beneficiary thereof);
provided, however, that no member of the Western PCS Group may assign any of its
rights or obligations under this Agreement without the prior written consent of
WWC.
2.09 Arbitration. In the event of any dispute between WWC and
Western PCS arising out of this Agreement, such dispute shall be submitted to
arbitration in accordance (mutatis mutandis) with the terms and procedures set
forth in Section 13(k) of the Shareholders Agreement of Western PCS, of even
date herewith (the "Shareholders Agreement"), between WWC, Investor and Western
PCS. The Investor shall have the right to participate in any pending
arbitration and to consolidate any such arbitration with any arbitration which
may be pending under the Shareholders Agreement and which relates to a dispute
which involves in a material way substantially similar issues.
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IN WITNESS WHEREOF, this Agreement has been signed on behalf of
each of the parties on the day set forth above.
WESTERN WIRELESS CORPORATION
By: ________________________________
Title:
WESTERN PCS CORPORATION
By: ________________________________
Title:
HUTCHISON TELECOMMUNICATIONS PCS
(USA) LIMITED
By: ________________________________
Title:
<PAGE> 1
EXHIBIT 10.59
AGREEMENT TO FORM LIMITED PARTNERSHIP
AGREEMENT, dated September 30, 1997 (the "Agreement"), by and among
WESTERN PCS I IOWA CORPORATION, a Delaware corporation having its principal
office at 2001 NW Sammamish Road, Issaquah, Washington 98027 ("WWC"), INS
WIRELESS, INC., an Iowa corporation having its principal office at 4201
Corporate Drive, West Des Moines, Iowa 50266 ("INS") (WWC and INS shall be
referred to herein sometimes individually as a "Partner" and collectively as the
"Partners"), WESTERN PCS I CORPORATION, a Delaware corporation having its
principal office at 2001 N.W. Sammamish Road, Issaquah, Washington 98027 ("WWC
Parent") and IOWA NETWORK SERVICES, INC., an Iowa corporation having its
principal office at 4201 Corporate Drive, West Des Moines, Iowa 50266 ("INS
Parent").
W I T N E S S E T H:
WHEREAS, the parties hereto desire to form a limited partnership to build
and operate a PCS network covering certain major metropolitan areas in Iowa and
to build and operate a PCS network along the major interstate and state highways
linking such areas (all of which activities shall be referred to herein as the
"Business"); and
WHEREAS, the parties hereto desire that such limited partnership be formed
as soon as practicable; and
WHEREAS, the parties hereto desire to state their respective rights and
obligations with respect to the limited partnership.
NOW, THEREFORE, in consideration of the premises and the mutual covenants,
conditions and promises hereinafter set forth, the parties hereby agree as
follows:
ARTICLE 1
FORMATION OF LIMITED PARTNERSHIP;
APPROVAL DATE
1.1 Formation of Limited Partnership. Subject to the terms and
conditions hereof and in reliance upon the representations, warranties,
covenants and agreements herein contained, within ten (10) Business Days (as
hereinafter defined) after the date hereof, WWC and INS will (a) form a Delaware
limited partnership to be named "Iowa Wireless Services, L.P." (the
"Partnership"), in accordance with the Revised Uniform Limited Partnership Act
of the State of Delaware (the "Act") and in that regard will file with the
Secretary of State of the State of Delaware a Certificate of Limited Partnership
in substantially the form of Exhibit 1.1(a) attached hereto, and (b) enter into
a limited partnership agreement in the form attached hereto as Exhibit 1.1(b)
(the "Partnership Agreement") governing the Partnership. As more particularly
set forth in the Partnership Agreement, and subject to the conditions set forth
herein, within ten (10) Business Days after the Approval Date (as hereinafter
defined) the Partners are required to make certain Required Capital
Contributions (as such term is defined in the Partnership Agreement) to
<PAGE> 2
the Partnership. The date on which such initial Required Capital Contributions
are made to the Partnership shall be referred to herein as the "Closing Date."
1.2 Approval Date. The "Approval Date" shall be the day on which all
Federal Communications Commission ("FCC") and state regulatory approvals (if
any) necessary in order to consummate lawfully the transactions contemplated
hereby have been received and shall have become Final Orders (as hereinafter
defined) (such FCC and state regulatory approvals shall be hereinafter referred
to as the "Regulatory Approvals"). As used herein the term "Business Day" shall
mean any day other than a Saturday, Sunday or a legal holiday in New York, New
York or in Seattle, Washington, or any other day on which commercial banks are
authorized by law or governmental decree to close. "Final Order" means an action
or decision as to which: (i) no request for a stay is pending, no stay is in
effect, and any deadline for filing such request that may be designated by
statute or regulation has passed; (ii) no petition for rehearing or
reconsideration or application for review is pending and the time for filing any
such petition or application has passed; (iii) the FCC, public utility
commission or public service commission (or comparable bodies exercising
jurisdiction over the parties) does not have the action or decision under
reconsideration on its own motion and the time for initiating such
reconsideration has passed; and (iv) no appeal is pending or in effect and any
deadline for filing any such appeal that may be designated by statute or rule
has passed.
ARTICLE 2
COVENANTS AND AGREEMENTS
2.1 Governmental Filings. Each of INS, INS Parent, WWC and WWC Parent
covenant and agree from and after the execution and delivery of this Agreement
to and including the Closing Date as follows:
(a) It is understood that the consummation of the transactions
contemplated hereby is subject to prior approval of the FCC and may be subject
to the prior approval of one or more state regulatory commissions. The parties
shall use their best efforts to file with the FCC and any relevant state agency
or agencies, as soon as practicable following the date hereof and in no event
later than thirty (30) Business Days from the date hereof, a joint application
requesting the approval of the FCC and, if applicable, the relevant state agency
or agencies, to the transactions contemplated hereby and by the Partnership
Agreement. Each of the parties hereto shall diligently take or cooperate in the
taking of all steps which are necessary or appropriate to expedite the
prosecution and favorable consideration of such applications. The parties
covenant and agree to undertake all actions reasonably requested by the FCC or
any other regulatory authority and to file such material as shall be necessary
or required to obtain any necessary waivers or other authority from the FCC or
such state agency or agencies in connection with the foregoing applications.
(b) Within thirty (30) Business Days after the date of execution
hereof, WWC
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and INS shall file, or cause to be filed any and all reports or notifications
which are required to be filed under any Federal law or administrative
regulations.
2.2 Covenants of INS and INS Parent. Each of INS and INS Parent, jointly
and severally, covenants and agrees from and after the execution and delivery of
this Agreement, which covenants shall survive the Closing Date, as follows:
(a) Consummate Transactions. Each of INS and INS Parent shall use
all commercially reasonable efforts to cause the transactions contemplated by
this Agreement to be consummated in accordance with the terms hereof, and,
without limiting the generality of the foregoing, use all commercially
reasonable efforts to obtain all necessary approvals, consents, permits,
licenses and other authorizations required in connection with this Agreement and
the transactions contemplated hereby of third parties including all governmental
authorities and agencies such as the FCC and any state public utilities or
public service commission, and to make all filings with and give all notices to
third parties which may be necessary or reasonably required of INS or INS Parent
in order to consummate the transactions contemplated hereby.
(b) Approvals, Consents. Each of INS and INS Parent shall obtain
and maintain in full force and effect all approvals, consents, permits, licenses
and other authorizations from all appropriate Federal, state and local
governmental agencies or authorities necessary or required for the consummation
of the transactions contemplated hereby. The parties shall consult with one
another as to the general approach to be taken with any governmental authority
or agency with respect to obtaining any necessary consent of such governmental
agency or authority to the transactions contemplated hereby, and each of the
parties shall keep each other party reasonably informed as to the status of any
such communications with any governmental authority or agency. Neither INS nor
INS Parent shall, with respect to the Business or the assets used or to be used
in connection with the Business, make any material commitments (other than those
typical in the wireless telephone industry) relating to any approval, consent,
permit or license to any governmental authority or agency without the prior
written consent of WWC and WWC Parent.
(c) RTFC Loan. INS Parent has filed an application and all other
necessary documents, and each of INS and INS Parent agrees to diligently pursue
and use its best efforts, to obtain a loan in the principal amount of
$20,000,000 from the Rural Telephone Finance Cooperative (the "RTFC") on rates,
terms and conditions prevailing at the time of the application.
(d) Notice of Claims. Each of INS and INS Parent shall give
written notice to WWC and WWC Parent promptly upon the commencement of any
action, investigation, arbitration or proceeding (including any proceeding
before any governmental agency), or promptly upon obtaining knowledge of any
facts giving rise to a threat of any such action, investigation, arbitration or
proceeding, which would, if adversely determined, materially and adversely
affect (i) the ability of any of the parties hereto to consummate the
transactions contemplated hereby or (ii) the business, prospects or financial
condition of the Business or the
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<PAGE> 4
assets to be used in connection with the operation of the Business.
(e) Certain Actions. Neither INS nor INS Parent shall take any
action or refrain from taking any action which would materially interfere with
or preclude the consummation of the transactions contemplated by this Agreement,
result in any of the representations and warranties of any party hereto
contained herein being incorrect or incomplete in any material respect, or
result in any of the conditions to any party's obligations to consummate the
transactions contemplated by this Agreement as set forth in Section 4.1 hereof
being unsatisfied in accordance with the terms hereof.
(f) Notice of Breaches. Each of INS and INS Parent shall, promptly
after obtaining knowledge of the occurrence of, or the impending or threatened
occurrence of, any event which would cause or constitute a breach of any
warranties, representations, covenants or agreements of INS or INS Parent, give
notice in writing to WWC and WWC Parent of such event or occurrence or impending
or threatened event or occurrence and use its diligent efforts to prevent or
promptly to remedy such breach.
(g) Notification of Change. Each of INS and INS Parent shall
advise WWC and WWC Parent promptly in writing of (i) any event, condition or
state of facts, including any action, suit or proceeding, which has had or would
have a material adverse effect on the business or financial condition of INS,
INS Parent or the Partnership, on the Business, on the assets used or to be used
in connection with the operation of the Business or on the transactions
contemplated by this Agreement or (ii) the commencement of any action, suit or
proceeding which seeks to enjoin the consummation of the transactions
contemplated hereby.
2.3 Covenants of WWC and WWC Parent. Each of WWC and WWC Parent, jointly
and severally, covenants and agrees from and after the execution and delivery of
this Agreement, which covenants shall survive the Closing Date, as follows:
(a) Consummate Transactions. Each of WWC and WWC Parent shall use
all commercially reasonable efforts to cause the transactions contemplated by
this Agreement to be consummated in accordance with the terms hereof, and,
without limiting the generality of the foregoing, use all commercially
reasonable efforts to obtain all necessary approvals, consents, permits,
licenses and other authorizations required in connection with this Agreement and
the transactions contemplated hereby of third parties including all governmental
authorities and agencies such as the FCC and any state public utilities or
public service commission, and to make all filings with and give all notices to
third parties which may be necessary or reasonably required of WWC or WWC Parent
in order to consummate the transactions contemplated hereby.
(b) Approvals, Consents. Each of WWC and WWC Parent shall obtain
and maintain in full force and effect all approvals, consents, permits, licenses
and other authorizations from all appropriate Federal, state and local
governmental agencies or authorities necessary or required for the consummation
of the transactions contemplated hereby. The parties
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<PAGE> 5
shall consult with one another as to the general approach to be taken with any
governmental authority or agency with respect to obtaining any necessary consent
of such governmental agency or authority to the transactions contemplated
hereby, and each of the parties shall keep each other party reasonably informed
as to the status of any such communications with any governmental authority or
agency. Neither WWC nor WWC Parent shall, with respect to the Business or the
assets used or to be used in connection with the Business, make any material
commitments (other than those typical in the wireless telephone industry)
relating to any approval, consent, permit or license to any governmental
authority or agency without the prior written consent of INS and INS Parent.
(c) Notice of Claims. Each of WWC and WWC Parent shall give
written notice to INS and INS Parent promptly upon the commencement of any
action, investigation, arbitration or proceeding (including any proceeding
before any governmental agency), or promptly upon obtaining knowledge of any
facts giving rise to a threat of any such action, investigation, arbitration or
proceeding, which would, if adversely determined, materially and adversely
affect (i) the ability of any of the parties hereto to consummate the
transactions contemplated hereby or (ii) the business, prospects or financial
condition of the Business or the assets to be used in connection with the
operation of the Business.
(d) Certain Actions. Neither WWC nor WWC Parent shall take any
action or refrain from taking any action which would materially interfere with
or preclude the consummation of the transactions contemplated by this Agreement,
result in any of the representations and warranties of any party hereto
contained herein being incorrect or incomplete in any material respect, or
result in any of the conditions to any party's obligations to consummate the
transactions contemplated by this Agreement as set forth in Section 4.2 hereof
being unsatisfied in accordance with the terms hereof.
(e) Notice of Breaches. Each of WWC and WWC Parent shall, promptly
after obtaining knowledge of the occurrence of, or the impending or threatened
occurrence of, any event which would cause or constitute a breach of any
warranties, representations, covenants or agreements of WWC or WWC Parent, give
notice in writing to INS and INS Parent of such event or occurrence or impending
or threatened event or occurrence and use its diligent efforts to prevent or
promptly to remedy such breach.
(f) Notification of Change. Each of WWC and WWC Parent shall
advise INS and INS Parent promptly in writing of (i) any event, condition or
state of facts, including any action, suit or proceeding, which has had or would
have a material adverse effect on the business or financial condition of WWC,
WWC Parent or the Partnership, on the Business, on the assets used or to be used
in connection with the operation of the Business or on the transactions
contemplated by this Agreement or (ii) the commencement of any action, suit or
proceeding which seeks to enjoin the consummation of the transactions
contemplated hereby.
(g) Repayment of Loans to Partnership. Pursuant to Section 3.5(b)
of the
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<PAGE> 6
Partnership Agreement, INS shall make non-interest-bearing loans (the "Funding
Loans") in an aggregate amount of up to $500,000 to operate the Partnership
prior to the Closing Date, in accordance with the terms of the Partnership
Agreement. In the event WWC fails, in breach of its obligations hereunder, to
make its Required Capital Contribution pursuant to Section 3.1(a) of the
Partnership Agreement, and as a consequence of such failure the Partnership is
terminated, WWC shall pay INS cash in the amount of 38% of (i) the outstanding
principal amount of the Funding Loans minus (ii) the amount of cash and the fair
market value of other assets held by the Partnership at the time of its
termination. In no event shall WWC's payment to INS pursuant to the terms of
this Section 2.3(g) exceed $190,000. Neither WWC nor WWC Parent, nor any of
their Affiliates, shall have any other obligation to the Partnership or to INS
with respect to the Funding Loans.
2.4 F Block Build-out. INS Parent has advised WWC and WWC Parent that it
is anticipated that Iowa L.P. 136 will transfer to INS Parent the F Block PCS
licenses for BTA 105, Davenport, Iowa -Moline, Illinois, BTA 205, Iowa City,
Iowa and BTA 70, Cedar Rapids, Iowa (the "Iowa 136 Licenses"). INS Parent
anticipates that, if and when the Iowa 136 Licenses are transferred to INS
Parent, the PCS Networks (as such term is defined in the Partnership Agreement)
may also be used by INS Parent (without any obligation of the Partnership to
modify, redesign or expand the PCS Networks or expend any costs therefor) to
satisfy a portion of INS Parent's build-out requirements relating to the Iowa
136 Licenses. If the PCS Networks as constructed cover a geographic area that
could also satisfy a portion of the build-out requirements of the Iowa 136
Licenses (without any obligation of the Partnership to modify, redesign or
expand the PCS Networks or expend any costs therefor), then the parties agree to
permit INS Parent to utilize the PCS Networks for the limited purpose of
satisfying such portion of the build-out requirements relating to the Iowa 136
Licenses; provided, however, that (a) the Partnership shall not be required to
revise its system design, expand or improve the PCS Networks or otherwise have
any obligation in connection with such satisfaction of such portion of the
build-out requirements of the Iowa 136 Licenses; (b) the Partnership shall not
be required to expend any additional amounts or incur any additional liabilities
as a result of such satisfaction of such portion of the build-out requirements
of the Iowa 136 Licenses; (c) neither INS nor INS Parent shall share in any of
the revenues of the Partnership or have any additional rights under this
Agreement or the Partnership Agreement as a result of such satisfaction of such
portion of the build-out requirements of the Iowa 136 Licenses beyond those
revenues and rights to which it would otherwise by entitled under this Agreement
and the Partnership Agreement; (d) WWC and WWC Parent shall have received a
satisfactory opinion of counsel to the effect that such satisfaction of such
portion of the build-out requirements of the Iowa 136 Licenses shall not have
any material adverse effect on the Partnership or its licenses or on WWC, WWC
Parent and their respective Affiliates (as hereinafter defined) or shareholders
or equity owners or any of their respective licenses or businesses, nor will
such satisfaction of such portion of the build-out requirements of the Iowa 136
Licenses impose any additional obligations, liabilities or restrictions upon the
Partnership or its licenses or on WWC, WWC Parent, their respective Affiliates
or shareholders or equity owners or any of their respective licenses or
businesses; (e) the terms and conditions of any switch-sharing, frequency
sharing or other similar arrangements
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<PAGE> 7
shall be on arms-length terms and conditions and shall be subject to approval by
WWC and WWC Parent; (f) INS and INS Parent shall, jointly and severally, agree
to indemnify and hold harmless the Partnership, WWC, WWC Parent and their
respective Affiliates from and against any and all additional costs or
liabilities arising as a result of the use by INS Parent of the PCS Networks to
satisfy such portion of the build-out requirements of the Iowa 136 Licenses; and
(g) such utilization of the PCS Networks by INS Parent shall not in any way
interfere with or adversely affect the services provided by the PCS Networks to
the Partnership's subscribers and other customers. Any waiver, amendment or
deviation from the terms of this Section 2.4 shall be subject to approval by WWC
and WWC Parent. Notwithstanding the foregoing, if INS or INS Parent requests the
Partnership to make any reasonable modifications or expansions to the PCS
Networks so that INS Parent may use the PCS Networks to satisfy a portion of the
build out requirements of the Iowa 136 Licenses and INS and INS Parent jointly
and severally agree to be directly responsible for all costs of such
modifications or expansions, and if, in the reasonable judgment of WWC Parent
and the Partnership, such modifications or expansions will not affect the
services provided by the PCS Networks to the Partnership's subscribers and other
customers, and will not expose the Partnership, or its Partners, to additional
liabilities, then the Partnership shall permit such modifications or expansions
at the sole cost and expense of INS and INS Parent.
2.5 Retained Spectrum Build-out. WWC Parent has advised INS and INS
Parent that WWC Parent anticipates that the PCS Networks may also be used by WWC
Parent (without any obligation of the Partnership to modify, redesign or expand
the PCS Networks or expend any costs therefor) to satisfy a portion of WWC
Parent's build-out requirements relating to the PCS spectrum retained by WWC
Parent in the Territory (as defined in the Partnership Agreement) and in the Des
Moines BTA and not being contributed to the Partnership (the "Retained
Spectrum"). If the PCS Networks as constructed cover a geographic area that
could also satisfy a portion of the build-out requirements of the Retained
Spectrum (without requiring any modification, redesign or expansion of the PCS
Networks), then the parties agree to permit WWC Parent to utilize the PCS
Networks for the limited purpose of satisfying such portion of the build-out
requirements relating to the Retained Spectrum; provided, however, that (a) the
Partnership shall not be required to revise its system design, expand or improve
the PCS Networks or otherwise have any obligation in connection with such
satisfaction of such portion of the build-out requirements of the Retained
Spectrum; (b) the Partnership shall not be required to expend any additional
amounts or incur any additional liabilities as a result of such satisfaction of
such portion of the build-out requirements of the Retained Spectrum; (c) Neither
WWC nor WWC Parent shall share in any of the revenues of the Partnership or have
any additional rights under this Agreement or the Partnership Agreement as a
result of such satisfaction of such portion of the build-out requirements of the
Retained Spectrum beyond those to which it would otherwise be entitled under
this Agreement and the Partnership Agreement; (d) INS and INS Parent shall have
received a satisfactory opinion of counsel to the effect that such satisfaction
of such portion of the build-out requirements of the Retained Spectrum shall not
have any material adverse effect on the Partnership or its licenses or on INS,
INS Parent or their respective Affiliates or shareholders or equity owners or
any of their respective licenses or businesses, nor will such
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<PAGE> 8
satisfaction of such portion of the build-out requirements of the Retained
Spectrum impose any additional obligations, liabilities or restrictions upon the
Partnership or its licenses or on INS, INS Parent and their respective
Affiliates or shareholders or equity owners or any of their respective licenses
or businesses; (e) the terms and conditions of any switch-sharing, frequency
sharing or other similar arrangements shall be on arms-length terms and
conditions and shall be subject to approval by INS and INS Parent; (f) WWC and
WWC Parent shall, jointly and severally, agree to indemnify and hold harmless
the Partnership, INS, INS Parent and their respective Affiliates from and
against any and all additional costs or liabilities arising as a result of the
use by WWC Parent of the PCS Networks to satisfy such portion of the build-out
requirements of the Retained Spectrum; and (g) such utilization of the PCS
Networks by WWC Parent shall not in any way interfere with or adversely affect
the services provided by the PCS Networks to the Partnership's subscribers and
other customers. Any waiver, amendment or deviation from the terms of this
Section 2.5 shall be subject to approval by INS and its Parent. Notwithstanding
the foregoing, if WWC or WWC Parent requests the Partnership to make any
reasonable modifications or expansions to the PCS Networks so that WWC Parent
may use the PCS Networks to satisfy a portion of the build out requirements of
the Retained Spectrum and WWC and WWC Parent jointly and severally agree to be
directly responsible for all costs of such modifications or expansions, and if,
in the reasonable judgment of INS Parent and the Partnership, such modifications
or expansions will not affect the services provided by the PCS Networks to the
Partnership's subscribers and other customers, and will not expose the
Partnership, or its Partners, to additional liabilities, then the Partnership
shall permit such modifications or expansions at the sole cost and expense of
WWC and WWC Parent.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of INS and INS Parent. INS and INS
Parent, jointly and severally, represent and warrant to WWC and WWC Parent,
which representations and warranties shall survive the execution and delivery of
this Agreement, the Closing Date and the consummation of the transactions herein
contemplated, as follows:
(a) Due Incorporation. Each of INS and INS Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Iowa. Each of INS and INS Parent has all requisite power and authority
to own, operate and lease its property and to carry on its business as now
conducted. Each of INS and INS Parent is duly qualified to do business and is in
good standing in all states where the conduct of its business or the ownership
of its properties makes such qualification necessary, except where the failure
to so qualify would not have a material adverse effect on either INS or INS
Parent, its financial condition or business, or the transactions contemplated
hereby.
(b) Power and Authority; No Violation. Each of INS and INS Parent
has full
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<PAGE> 9
power and authority to execute, deliver and perform its obligations under this
Agreement, and to consummate the transactions contemplated hereby. This
Agreement and all transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of each of INS and INS
Parent and this Agreement constitutes a legal, valid and binding obligation of
each of INS and INS Parent enforceable in accordance with its terms except as
such enforceability may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting or relating to enforcement of creditors' rights
generally. Except as described on Exhibit 3.1(b) attached hereto, neither the
execution, delivery or performance of this Agreement nor the consummation of the
transactions contemplated hereby by either INS or INS Parent will, with or
without the giving of notice or the passage of time, or both (i) conflict with,
result in a default or loss of rights (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of any lien,
claims, security interest or other encumbrance of any nature whatsoever
("Lien"), pursuant to (A) any provision of the certificate of incorporation,
by-laws or other constituent documents of INS or INS Parent; (B) any material
note, bond, indenture, mortgage, deed of trust, contract, agreement, lease or
other instrument or obligation to which either INS or INS Parent is a party or
by which it or its properties are bound or affected; or (C) any law, order,
judgment, ordinance, rule, regulation or decree to which either INS or INS
Parent is a party or by which it or its property is bound or affected; or (ii)
give rise to any right of first refusal or similar right with respect to any
interest in, or any properties or assets of, INS or INS Parent. Except as
described on Exhibit 3.1(b) attached hereto, no permit, consent, approval,
authorization, qualification or registration of, or declaration to or filing
with any governmental or regulatory authority or agency or third party is
required to be obtained or made by INS or INS Parent in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby in order to (A) render this Agreement and the transactions
contemplated hereby valid and effective and (B) enable INS and INS Parent to
consummate the transactions contemplated hereby.
(c) Legal Matters. There is no claim, legal action, counterclaim,
suit, arbitration, governmental investigation or other legal, administrative or
tax proceeding, nor any order, writ, injunction, decree or judgment, in progress
or pending, or to the knowledge of INS or INS Parent threatened, against or
relating to INS, INS Parent or the Business or the assets used or to be used in
connection with the operation of the Business, nor does INS or INS Parent know
or have reason to be aware of any basis for the same, which would individually
or in the aggregate have a material adverse effect on (i) INS, INS Parent or the
Business or the assets used or to be used in connection with the operation of
the Business or the ability of the parties hereto to consummate the transactions
described herein, (ii) the business or financial condition of INS or INS Parent,
or (iii) the transactions contemplated by this Agreement. There is outstanding
no order, writ, injunction, judgment or decree of any court, governmental agency
or arbitration tribunal which would individually or in the aggregate have a
material adverse effect on INS's or INS Parent's obligations hereunder or the
transactions contemplated by this Agreement other than orders or decrees
involving the wireless telephone industry in general.
(d) Compliance with Laws. INS and INS Parent are in compliance
with all
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<PAGE> 10
applicable laws, regulations and administrative orders of the United States and
the states in which INS or INS Parent transacts business (including all
applicable rules and regulations of the FCC, any state public utilities or
public service commission, and any other Federal or state governmental agency or
instrumentality exercising jurisdiction over INS, INS Parent or their respective
properties or businesses), and of each municipality, county or subdivision of
any thereof, to which any of its businesses or any of its properties may be
subject, the non-compliance with which would have a material adverse effect upon
the transactions contemplated hereby. Certification as to compliance with
certain specific FCC requirements is contained in Exhibit 3.1(d) attached
hereto.
(e) Financial Ability. INS expects to have, and INS Parent shall
cause INS to have, and at all times after the Approval Date until payment in
full of its Required Capital Contributions (as defined in the Partnership
Agreement) to the Partnership, to continue to have, the financial ability to
make its full capital contribution to the Partnership as set forth in the
Partnership Agreement, subject to approval of its loan application to the RTFC.
(f) Truth and Correctness. No representation or warranty by INS or
INS Parent herein, nor any written statement or certificate or other instrument
furnished to WWC or WWC Parent by INS or INS Parent pursuant hereto or in
connection with the transactions contemplated hereby, including the Exhibits
attached hereto, contains any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements contained
herein or therein, in light of the circumstances under which such statements are
made, not misleading.
3.2 Representations and Warranties of WWC and WWC Parent. WWC and WWC
Parent, jointly and severally, represent and warrant to INS and INS Parent,
which representations and warranties shall survive the execution and delivery of
this Agreement, the Closing Date and the consummation of the transactions herein
contemplated, as follows:
(a) Due Incorporation. Each of WWC and WWC Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Each of WWC and WWC Parent has all requisite power and
authority to own, operate and lease its property and to carry on its business as
now conducted. Each of WWC and WWC Parent is duly qualified to do business and
is in good standing in all states where the conduct of its business or the
ownership of its properties makes such qualification necessary, except where the
failure to so qualify would not have a material adverse effect on either WWC or
WWC Parent, its financial condition or business, or the transactions
contemplated hereby.
(b) Power and Authority; No Violation. Each of WWC and WWC Parent
has full power and authority to execute, deliver and perform its obligations
under this Agreement, and to consummate the transactions contemplated hereby.
This Agreement and all transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action on the part of WWC and WWC
Parent and this Agreement constitutes a legal, valid and binding
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<PAGE> 11
obligation of WWC and WWC Parent enforceable in accordance with its terms except
as such enforceability may be limited by bankruptcy, insolvency, moratorium or
other similar laws affecting or relating to enforcement of creditors' rights
generally. Except as described on Exhibit 3.2(b) attached hereof, neither the
execution, delivery or performance of this Agreement nor the consummation of the
transactions contemplated hereby by either WWC or WWC Parent will, with or
without the giving of notice or the passage of time, or both, (i) conflict with,
result in a default or loss of rights (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of any Lien,
pursuant to (A) any provision of the certificate of incorporation, by-laws or
other constituent documents of WWC or WWC Parent; (B) any material note, bond,
indenture, mortgage, deed of trust, contract, agreement, lease or other
instrument or obligation to which either WWC or WWC Parent is a party or by
which it or its properties or FCC licenses are bound or affected; or (C) any
law, order, judgment, ordinance, rule, regulation or decree to which either WWC
or WWC Parent is a party or by which it or its property is bound or affected; or
(ii) give rise to any right of first refusal or similar right with respect to
any interest in, or any properties or assets of, WWC or WWC Parent. Except as
described on Exhibit 3.2(b) attached hereto, no permit, consent, approval,
authorization, qualification or registration of, or declaration to or filing
with any governmental or regulatory authority or agency or third party is
required to be obtained or made by WWC or WWC Parent in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby in order to (A) render this Agreement or the transactions
contemplated hereby valid and effective and (B) enable WWC and WWC Parent to
consummate the transactions contemplated hereby.
(c) Legal Matters. Except as described on Exhibit 3.2(c) attached
hereto, there is no claim, legal action, counterclaim, suit, arbitration,
governmental investigation or other legal, administrative or tax proceeding, nor
any order, writ, injunction, decree or judgment, in progress or pending, or to
the knowledge of WWC or WWC Parent threatened, against or relating to WWC, WWC
Parent or the Business or the assets used or to be used in connection with the
operation of the Business, nor does WWC or WWC Parent know or have reason to be
aware of any basis for the same, which would individually or in the aggregate
have a material adverse effect on (i) WWC, WWC Parent or the Business or the FCC
licenses or the assets used or to be used in connection with the operation of
the Business or the ability of the parties hereto to consummate the transactions
described herein, (ii) the business or financial condition of WWC or WWC Parent,
or (iii) the transactions contemplated by this Agreement. Except as described
herein or on Exhibit 3.2(c) attached hereto, there is outstanding no order,
writ, injunction, judgment or decree of any court, governmental agency or
arbitration tribunal which would individually or in the aggregate have a
material adverse effect on WWC's or WWC Parent's obligations hereunder or the
transactions contemplated by this Agreement other than orders or decrees
involving the wireless telephone industry in general.
(d) Compliance with Laws. WWC and WWC Parent are in compliance
with all applicable laws, regulations and administrative orders of the United
States and the states in which WWC or WWC Parent transacts business (including
all applicable rules and regulations of
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the FCC, any state public utilities or public service commission, and any other
Federal or state governmental agency or instrumentality exercising jurisdiction
over WWC or WWC Parent or their respective properties or businesses), and of
each municipality, county or subdivision of any thereof, to which any of its
businesses or any of its properties may be subject, the non-compliance with
which would have a material adverse effect upon the transactions contemplated
hereby. Certification as to compliance with certain specific FCC requirements is
contained in Exhibit 3.2(d) attached hereto.
(e) Authorizations.
(i) WWC Parent has the franchises, licenses, authorizations,
consents, permits and approvals of the FCC listed on Exhibit 3.2(e) attached
hereto (all such franchises, licenses, authorizations, consents, permits and
approvals, as amended to the date hereof, are collectively referred to as the
"Authorizations").
(ii) The Authorizations are in full force and effect and have
not been suspended, modified in any material adverse respect, canceled or
revoked. Except as set forth on Exhibit 3.2(c) attached hereto, no event has
occurred with respect to any of the Authorizations which permits, or after
notice or lapse of time or both would permit, revocation or termination thereof
or would result in any other material impairment of the rights of the holder of
any such Authorizations. Except as set forth on Exhibits 3.2(c) and 3.2(e)
attached hereto, there is not pending as of the date hereof any application,
petition, objection or other pleading with the FCC or any public service
commission or similar body having jurisdiction or authority over the
communications operations of WWC Parent which questions the validity of or
contests any Authorization.
(iii) Except as set forth on Exhibit 3.2(e) annexed hereto, no
permit, consent, approval, authorization, qualification or registration of, or
declaration to or filing with, any governmental or regulatory authority or
agency is required to be obtained or made by any party hereto in connection with
the execution and delivery of this Agreement or with the consummation of the
transactions contemplated hereby in order to (A) render this Agreement and the
transactions contemplated hereby valid and effective and (B) enable the parties
hereto to consummate the transactions contemplated hereby.
(iv) The FCC licenses to be contributed by WWC to the
Partnership pursuant to Section 3.1(a) of the Limited Partnership Agreement
shall be contributed free and clear of all liens and encumbrances (except
restrictions imposed on such FCC licenses by the FCC).
(f) Truth and Correctness. No representation or warranty by WWC or
WWC Parent herein, nor any written statement or certificate or other instrument
furnished to INS or INS Parent by WWC or WWC Parent pursuant hereto or in
connection with the transactions contemplated hereby, including the Exhibits
attached hereto, contains any untrue statement of a
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material fact or omits or will omit to state a material fact necessary to make
the statements contained herein or therein, in light of the circumstances under
which such statements are made, not misleading.
3.3 Brokers. On the Closing Date, the Partnership shall pay two hundred
thousand ($200,000) dollars cash (the "Fee") to Anderson Pacific Corporation
("APC") and PCM, Inc. ("PCM"). WWC and WWC Parent, jointly and severally,
represent and warrant to INS and INS Parent that, with the exception of the Fee,
no agent, broker, investment banker, person or firm is or will be entitled to
any broker's or finder's fee or any other commission or similar fee directly or
indirectly in connection with the transactions contemplated by this Agreement
based in any way on any arrangements, agreements or understandings made by or on
behalf of WWC or WWC Parent, and WWC and WWC Parent hereby agree to indemnify
and hold harmless INS and INS Parent against and in respect of any claims for
brokerage and other commissions relating to such transactions, other than the
Fee, based in any way on any arrangements, agreements or understandings made by
or on behalf of WWC or WWC Parent. INS and INS Parent, jointly and severally,
represent and warrant to WWC and WWC Parent that, with the exception of the Fee,
no agent, broker, investment banker, person or firm is or will be entitled to
any broker's or finder's fee or any other commission or similar fee directly or
indirectly in connection with the transactions contemplated by this Agreement
based in any way on any arrangements, agreements or understandings made by or on
behalf of INS or INS Parent, and INS and INS Parent hereby agree to indemnify
and hold harmless WWC or WWC Parent against and in respect of any claims for
brokerage and other commissions relating to such transactions, other than the
Fee, based in any way on any arrangements, agreements or understandings made by
or on behalf of INS or INS Parent.
ARTICLE 4
CONDITIONS TO OBLIGATIONS
4.1 Conditions to Obligations of WWC and WWC Parent. The obligations of
WWC and WWC Parent to perform, fulfill or carry out their agreements,
undertakings and obligations herein made or expressed to be performed, fulfilled
or carried out on the Closing Date (including the obligation to make the
Required Capital Contribution in accordance with the Partnership Agreement) are
and shall be subject to fulfillment of or compliance with, on or prior to the
Closing Date, the following conditions precedent, any of which may be waived by
WWC and WWC Parent, in their sole discretion, in whole or in part:
(a) Each of the representations and warranties of INS and INS
Parent contained in this Agreement shall be deemed to have been made again at
and as of the Closing Date and shall then be true in all material respects,
except for changes contemplated by this Agreement. Each of INS and INS Parent
shall have performed and complied in all material respects with all agreements,
covenants and conditions required by this Agreement to be performed or complied
with by INS and INS Parent prior to or at the Closing Date. WWC and
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WWC Parent shall have been furnished with a certificate of INS and INS Parent
signed by their respective President, Chief Executive Officer or Vice President,
dated the Closing Date, certifying to the fulfillment of the foregoing
conditions by INS and INS Parent and to the truth and correctness in all
material respects, except for changes contemplated by this Agreement, as of the
Closing Date of the representations and warranties of INS or INS Parent
contained herein.
(b) There shall not then be pending by any third party any suit or
proceeding to restrain or invalidate, in whole or in part, this Agreement or the
transactions herein contemplated.
(c) WWC and WWC Parent shall have been furnished with an opinion
of Sullivan & Ward, P.C., counsel for INS and INS Parent, dated the Closing Date
in the form attached hereto as Exhibit 4.1(c).
(d) WWC and WWC Parent shall have been furnished with an opinion
of Arter & Hadden, FCC counsel for INS and INS Parent, dated the Closing Date in
the form attached hereto as Exhibit 4.1(d).
(e) All consents, approvals and actions of third parties,
including all approvals from Federal, state and local authorities (including the
FCC and all public service commissions and public utility commissions or
comparable bodies exercising jurisdiction over the Partnership, INS, INS Parent,
WWC or WWC Parent) as may be required for the consummation of the transactions
described herein, as of the Closing Date, shall have been obtained or made
pursuant to a Final Order, which consents and approvals shall not contain any
conditions or restrictions which, in the case of FCC approvals, are not
customary in transactions of this nature, and which in the case of third party
consents and approvals, materially adversely affect the Partnership, WWC, WWC
Parent or their respective businesses or financial condition, or the
consummation of the transactions contemplated hereby.
(f) INS and INS Parent shall have executed and delivered to WWC
and WWC Parent such documents, including the Partnership Agreement and the
agreements described in Article 6 hereof, all in form and substance reasonably
satisfactory to WWC's and WWC Parent's counsel, as shall be effective to
consummate the transactions contemplated hereby.
(g) INS shall have delivered to the Partnership five million
($5,000,000) dollars and the Letter of Credit as required under the Partnership
Agreement.
(h) No statute, rule or regulation shall have been enacted by any
state or Federal government or governmental agency in the United States which
would render the consummation of this Agreement unlawful.
(i) Each of WWC, WWC Parent and any Affiliate (as hereinafter
defined) thereof shall have obtained all required consents under its loan
agreements with senior lenders,
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indentures, and other material agreements to which it is a party or by which it
is bound. "Affiliate" means, with respect to any party hereto, any person or
entity which is controlled by, controls or is under common control with such
party.
(j) All corporate and other proceedings of each of INS and INS
Parent in connection with the transactions contemplated hereby, and all
documents and instruments incidental thereto, shall be reasonably satisfactory
in form and substance to WWC and WWC Parent, and each of INS and INS Parent
shall have delivered to WWC and WWC Parent all such receipts, documents,
instruments and certificates, in form and substance reasonably satisfactory to
WWC and WWC Parent, which WWC or WWC Parent shall have reasonably requested.
4.2 Conditions to Obligations of INS and INS Parent. The obligations of
INS and INS Parent to perform, fulfill or carry out its agreements, undertakings
and obligations herein made or expressed to be performed, fulfilled or carried
out on the Closing Date (including the obligation to make the Required Capital
Contribution in accordance with the Partnership Agreement) is and shall be
subject to fulfillment of or compliance with, on or prior to the Closing Date,
the following conditions precedent, any of which may be waived by INS and INS
Parent in their sole discretion, in whole or in part:
(a) Each of the representations and warranties of WWC and WWC
Parent contained in this Agreement shall be deemed to have been made again at
and as of the Closing Date and shall then be true in all material respects,
except for changes contemplated by this Agreement. Each of WWC and WWC Parent
shall have performed and complied in all material respects with all agreements,
covenants and conditions required by this Agreement to be performed or complied
with by WWC and WWC Parent prior to or at the Closing Date. INS and INS Parent
shall have been furnished with a certificate of WWC and WWC Parent signed by
their respective President, Chief Executive Officer and Vice President, dated
the Closing Date, certifying to the fulfillment of the foregoing conditions by
WWC and WWC Parent and to the truth and correctness in all material respects,
except for changes contemplated by this Agreement, as of the Closing Date of the
representations and warranties of WWC or WWC Parent contained herein.
(b) There shall not then be pending by any third party any suit or
proceeding to restrain or invalidate, in whole or in part, this Agreement or the
transactions herein contemplated.
(c) INS and INS Parent shall have been furnished with an opinion
of Rubin Baum Levin Constant & Friedman, counsel for WWC and WWC Parent, dated
the Closing Date, in the form attached hereto as Exhibit 4.2(c).
(d) INS and INS Parent shall have been furnished with an opinion
of Gurman Blask & Freedman, FCC counsel for WWC and WWC Parent, dated the
Closing Date, in the form attached hereto as Exhibit 4.2(d).
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(e) All consents, approvals and actions of third parties,
including all approvals from Federal, state and local authorities (including the
FCC and all public service commissions and public utility commissions or
comparable bodies exercising jurisdiction over the Partnership, INS, INS Parent,
WWC or WWC Parent) as may be required for the consummation of the transactions
described herein, as of the Closing Date, shall have been obtained or made
pursuant to a Final Order, which consents and approvals shall not contain any
conditions or restrictions which, in the case of FCC approvals, are not
customary in transactions of this nature, and which in the case of third party
consents and approvals, materially adversely affect the Partnership, INS, INS
Parent or their respective businesses or financial condition, or the
consummation of the transactions contemplated hereby.
(f) WWC and WWC Parent shall have executed and delivered to INS
and INS Parent such documents, including the Partnership Agreement and the
agreements described in Article 6 hereof, all in form and substance reasonably
satisfactory to INS's and INS Parent's counsel, as shall be effective to
consummate the transactions contemplated hereby.
(g) WWC Parent shall have assigned to the Partnership all rights
to the Authorizations as required under the Partnership Agreement.
(h) No statute, rule or regulation shall have been enacted by any
state or Federal government or governmental agency in the United States which
would render the consummation of this Agreement unlawful.
(i) The approval of INS Parent's loan application to RTFC shall
have been obtained.
(j) All corporate and other proceedings of each of WWC and WWC
Parent in connection with the transactions contemplated hereby, and all
documents and instruments incidental thereto, shall be reasonably satisfactory
in form and substance to INS and INS Parent, and each of WWC and WWC Parent
shall have delivered to INS and INS Parent all such receipts, documents,
instruments and certificates, in form and substance reasonably satisfactory to
INS and INS Parent, which INS or INS Parent shall have reasonably requested.
ARTICLE 5
SURVIVAL; INDEMNITY
5.1 Survival of Representations and Warranties. Notwithstanding any
investigation or review made at any time by or on behalf of any party hereto,
all representations and warranties contained in this Agreement or in the
Exhibits attached hereto or in any of the agreements, certificates or
instruments delivered in connection herewith shall survive the Closing Date for
a
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period of eighteen (18) months after the Closing Date (the "Indemnification
Period") and shall thereupon expire together with any right to indemnification
with respect to such representations and warranties (except to the extent a
written notice asserting a claim for breach of any such representation or
warranty shall have been given prior to the termination of the Indemnification
Period to the party which made such representation or warranty).
5.2 INS and INS Parent's Indemnity. During the Indemnification Period
(or thereafter solely with respect to any claim for which indemnification has
been made prior to the expiration of the Indemnification Period), in addition to
any other indemnification provided for under this Agreement, each of INS and INS
Parent shall, jointly and severally, indemnify and hold harmless WWC, WWC Parent
and their respective Affiliates from and against any and all demands, claims,
losses, liabilities, actions or causes of action, assessments, actual damages
(but excluding consequential damages), fines, taxes (including excise and
penalty taxes), penalties, costs and expenses (including interest, expenses of
investigation, reasonable fees and disbursements of counsel, accountants and
other experts (whether such reasonable fees and disbursements of counsel,
accountants and other experts relate to claims, actions or causes of action
asserted by WWC, WWC Parent or their respective Affiliates against INS or INS
Parent or asserted by third parties)) (collectively "Losses") incurred or
suffered by WWC, WWC Parent and their respective Affiliates and their respective
officers, directors, partners, employees, stockholders, agents and
representatives arising out of, resulting from, or relating to:
(a) any breach of any of the representations or warranties made by
INS or INS Parent in this Agreement, in the Partnership Agreement, or in any
agreement, certificate, Exhibit or other instrument delivered by INS or INS
Parent pursuant to this Agreement; and
(b) any failure by INS or INS Parent to perform any of its
covenants or agreements contained in this Agreement, in the Partnership
Agreement or in any agreement, certificate or other instrument delivered by INS
or INS Parent pursuant to this Agreement.
5.3 WWC and WWC Parent's Indemnity. During the Indemnification Period
(or thereafter solely with respect to any claim for which indemnification has
been made prior to expiration of the Indemnification Period), in addition to any
other indemnification provided for under this Agreement, each of WWC and WWC
Parent shall, jointly and severally, indemnify and hold harmless INS, INS Parent
and their respective Affiliates from and against any and all Losses (as defined
in Section 5.2, except that reasonable fees and disbursements of counsel,
accountants and other experts shall be included whether they relate to claims,
actions or causes of action asserted by INS, INS Parent or their respective
Affiliates against WWC or WWC Parent or asserted by third parties) incurred or
suffered by INS, INS Parent and their respective Affiliates and their respective
officers, directors, partners, employees, stockholders, agents and
representatives arising out of, resulting from, or relating to:
(a) any breach of any of the representations or warranties made by
WWC or WWC Parent in this Agreement, in the Partnership Agreement, or in any
agreement, certificate,
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Exhibit or other instrument delivered by WWC or WWC Parent pursuant to this
Agreement; and
(b) any failure by WWC or WWC Parent to perform any of its
covenants or agreements contained in this Agreement, in the Partnership
Agreement or in any agreement, certificate or other instrument delivered by WWC
or WWC Parent pursuant to this Agreement.
5.4 Procedure.
(a) In the event that any party hereto shall sustain or incur any
Losses in respect of which indemnification may be sought by such party pursuant
to this Article 5, the party seeking such indemnification (the "Indemnitee")
shall assert a claim for indemnification by giving prompt (in the event of
claims arising by reason of the commencement of litigation against an Indemnitee
by third parties, in no event later than ten (10) days after service of process,
which process expressly indicates a claim for which Indemnitor (as hereinafter
defined) may be liable) written notice thereof (the "Notice"), which shall
describe in reasonable detail the facts and circumstances upon which the
asserted claim for indemnification is based, to the party providing
indemnification (the "Indemnitor") and shall thereafter keep the Indemnitor
reasonably informed with respect thereto; provided, however, that failure of the
Indemnitee to give the Indemnitor prompt notice as provided herein shall not
relieve the Indemnitor of any of its obligations hereunder, except to the extent
that the Indemnitor is materially prejudiced by such failure. In case any third
party claim, action or proceeding (a "Claim") is brought against any Indemnitee,
the Indemnitor shall have the right to assume, conduct and control the defense,
compromise or settlement thereof, by written notice to the Indemnitee of its
intention to do so within thirty (30) days after receipt of the Notice, with
counsel reasonably satisfactory to the Indemnitee, at the Indemnitor's own
expense, and thereupon to prosecute in the name and on behalf of the Indemnitee
any available cross-claims, counter-claims or third-party claims arising with
respect to the Claim. If the Indemnitor shall assume the defense of such Claim,
it shall not settle such Claim unless such settlement includes as an
unconditional term thereof the giving by the claimant or the plaintiff of a
release of the Indemnitee, reasonably satisfactory to the Indemnitee, from all
liability with respect to such Claim. As long as the Indemnitor is contesting
any such Claim in good faith and on a timely basis, the Indemnitee shall not pay
or settle any such Claim. Notwithstanding the assumption by the Indemnitor of
the defense of any Claim as provided in this Section 5.4(a) and without limiting
the Indemnitor's right to assume, conduct and control the defense, compromise or
settlement thereof, the Indemnitee shall be permitted to join in the defense of
such Claim and to employ counsel at its own expense.
(b) If the Indemnitor shall fail to notify the Indemnitee of its
desire to assume the defense of any such Claim within the prescribed thirty (30)
day period set forth in Section 5.4(a) hereof, or shall notify the Indemnitee
that it will not assume the defense of any such Claim, then the Indemnitee may
assume the defense of any such Claim, in which event it may do so in such manner
as it may deem appropriate, and the Indemnitor shall be bound by any
determinations made in any litigation with respect to such Claim or any
settlement thereof effected by the Indemnitee; provided, however, that any such
determinations or settlement shall
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not affect the right of the Indemnitor to dispute the Indemnitee's claim for
indemnification. The failure of the Indemnitor to assume the defense of any
Claim shall not be deemed a concession by Indemnitor that it is required to
indemnify the Indemnitee for the subject matter of such Claim.
(c) Amounts payable by the Indemnitor to the Indemnitee in respect
of any Losses for which any party is entitled to indemnification hereunder shall
be payable by the Indemnitor as incurred by the Indemnitee.
5.5 Indemnification Payments in Cash. All payments by any party hereto
in respect of any indemnification obligation hereunder shall be made by such
party in cash.
5.6 Investigations; Waivers. The survival periods and rights to
indemnification provided for in this Article 5 shall remain in effect
notwithstanding any investigation at any time by or on behalf of any party
hereto or any waiver by any party hereto of any condition to such party's
obligations to consummate the transactions contemplated hereby.
5.7 Indemnity Sole Remedy. In the absence of fraud or of a suit seeking
specific performance as contemplated by this Agreement, the remedies provided to
the parties hereto of this Article 5 shall after the Closing Date be in lieu of
any other remedies to which the respective party is entitled at law or in equity
for any breach or noncompliance by a party with the provisions of this
Agreement.
ARTICLE 6
OTHER AGREEMENTS
6.1 Roaming Agreement. On the Closing Date, WWC Parent and the
Partnership shall enter into a roaming agreement to be negotiated in good faith
between the parties within ninety (90) days after the date hereof.
6.2 Other Operating Agreements. WWC Parent and the Partnership shall
negotiate in good faith a services agreement containing, among other provisions,
provisions relating to the use of the VoiceStream brand name, switching, billing
and customer care; provided, however, that the execution of such an agreement
shall not be a condition to any of the obligations of the parties hereunder and
neither party shall have any liabilities to the other as a result of any failure
to reach agreement on the terms of such an agreement.
6.3 Spectrum Call and Put Option. On the Closing Date, WWC Parent and
the Partnership shall enter into an agreement, to be negotiated in good faith
between the parties within ninety (90) days after the date hereof, pursuant to
the terms of which the Partnership shall have the right, under certain
circumstances, to purchase the Additional Spectrum (as defined in the
Partnership Agreement) upon the terms and conditions set forth therein, and WWC
Parent
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shall have the right to cause the Partnership to purchase the Additional
Spectrum and/or the Des Moines BTA Counties Spectrum (as defined in the
Partnership Agreement) upon the terms and conditions set forth therein.
ARTICLE 7
MISCELLANEOUS
7.1 Expenses. Each party hereto shall bear its own expenses incident to
the negotiation, preparation, authorization and consummation of this Agreement
and the transactions contemplated hereby, including all fees and expenses of its
counsel and accountants, whether or not such transactions are consummated.
7.2 Equitable Remedies. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with the specific terms of the provisions or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity. Each party agrees that it
will not assert, as a defense against a claim for specific performance, that the
party seeking specific performance has an adequate remedy at law.
7.3 Notices. All notices, claims and other communications hereunder
shall be in writing and shall be made by hand delivery, registered or certified
mail (postage prepaid, return receipt requested), facsimile, or overnight air
courier guaranteeing next day delivery (a) if to WWC or WWC Parent, to it at
Western Wireless Corporation, 2001 NW Sammamish Road, Issaquah, Washington
98027, Attention: General Counsel (Fax No. 206-313-7731), with a copy (which
shall not constitute notice) to Rubin Baum Levin Constant & Friedman, 30
Rockefeller Plaza, New York, New York 10112, Attention: Barry A. Adelman, Esq.
(Fax No. 212-698-7825), or (b) if to INS and INS Parent, to it at 4201 Corporate
Drive, West Des Moines, Iowa 50266, Attention: Charles Scott, Chief Executive
Officer (Fax No. 515-830-0123), with a copy (which shall not constitute notice)
to Sullivan & Ward, P.C., 801 Grand Avenue, Suite 3500, Des Moines, Iowa
50309-2719, Attention: Michael P. Joynt, Esq. (Fax No.: 515-244-3599), or at
such other address as any party may from time to time furnish to the other
parties by a notice given in accordance with the provisions of this Section 7.3
All such notices and communications shall be deemed to have been duly given at
the time delivered by hand, if personally delivered; five (5) Business Days
after being deposited in the mail, first class postage prepaid, return receipt
requested, if mailed; when receipt confirmed, if sent by facsimile; and the next
Business Day after timely delivery to the courier, if sent by an overnight air
courier service guaranteeing next day delivery.
7.4 Entire Agreement. This Agreement, together with the Exhibits
attached hereto,
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contains the entire understanding among the parties hereto concerning the
subject matter hereof and may not be changed, modified, altered or terminated
except by an agreement in writing executed by the parties hereto. Any waiver by
any party of any of its rights under this Agreement or of any breach of this
Agreement shall not constitute a waiver of any other rights or of any other or
future breach.
7.5 Remedies Cumulative. Except as otherwise provided herein, each and
all of the rights and remedies provided in this Agreement, and each and all of
the rights and remedies allowed at law and in equity in like case, shall be
cumulative, and the exercise of one right or remedy shall not be exclusive of
the right to exercise or resort to any and all other rights or remedies provided
in this Agreement or at law or in equity.
7.6 Governing Law. This Agreement shall be construed in accordance with
and subject to the laws and decisions of the State of Delaware applicable to
contracts made and to be performed entirely therein.
7.7 Counterparts. This Agreement may be executed in several counterparts
hereof, and by the different parties hereto on separate counterparts hereof,
each of which shall be an original; but such counterparts shall together
constitute one and the same instrument.
7.8 Waivers. No provision in this Agreement shall be deemed waived by
course of conduct, unless such waiver is in writing signed by the parties and
stating specifically that it was intended to modify this Agreement.
7.9 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and to their respective successors
and assigns. Except for assignments to affiliates of a party, neither party
hereto shall have the right to assign any of its rights or obligations under
this Agreement, without the prior written consent of the other party.
7.10 Further Assurances. Each of WWC and WWC Parent shall, at the request
of INS or INS Parent, and each of INS and INS Parent shall, at the request of
WWC or WWC Parent, from time to time, execute and deliver such other
assignments, transfers, conveyances and other instruments and documents and do
and perform such other acts and things as may be reasonably necessary or
desirable for effecting complete consummation of this Agreement and the
transactions herein contemplated.
7.11 Disclosures.
(a) Each of WWC, WWC Parent, INS and INS Parent acknowledges and
confirms in connection with the negotiation of this Agreement and the execution
hereof, during the period from the date hereof through the Closing Date, that
the parties hereto will have furnished to one another certain materials,
information, data and other documentation ("Disclosures") concerning their
business, financial condition and operations which are
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proprietary and confidential. Each party acknowledges the party disclosing such
Disclosures considers them secret and confidential and asserts a proprietary
interest therein. Accordingly, each of WWC, WWC Parent, INS and INS Parent
covenants and agrees that it shall maintain all Disclosures made by another
party in strict confidence and shall not use such Disclosures for its own
benefit or disclose them to third parties, except to its agents,
representatives, bankers, investment bankers, counsel and employees involved in
evaluating the transactions contemplated by this Agreement, its partners (and
the partners or other security holders thereof) or as otherwise required by law.
(b) No public announcement by any party hereto with regard to the
transactions contemplated hereby or the material terms hereof shall be issued by
any party hereto without the prior consent of the other party, except in the
event the parties are unable to agree on a press release and legal counsel for
one party is of the opinion that such press release is required by law and such
party furnishes the other parties a written opinion of outside legal counsel, or
other counsel reasonably acceptable to the party being furnished such opinion,
to that effect, then such party may issue the legally required press release.
(c) This Agreement shall not restrict any party hereto from using
information already known to it, to which it is entitled under existing
agreements, or information generally in the public domain or any information
coming into its possession after it becomes public knowledge unless it became
public knowledge through a breach of this Agreement.
7.12 Termination.
(a) This Agreement may be terminated and the transactions
contemplated hereby may be abandoned, without further obligation of WWC, WWC
Parent, INS or INS Parent, at any time prior to the Closing Date as follows:
(i) by mutual written consent duly authorized by the boards
of directors of WWC, WWC Parent, INS and INS Parent; or
(ii) by any party if the Closing Date shall not have occurred
on or before the first anniversary of the date hereof; provided, however, that
the party exercising such right has not failed to satisfy the conditions to the
transactions contemplated hereby or is not otherwise in default of its
obligations under this Agreement in a manner which results in the failure to
satisfy the conditions to the transactions contemplated hereby of the other
parties; or
(iii) by any party if the consummation of the transactions
contemplated hereby shall be prohibited by a final, non-appealable order, decree
or injunction of a court of competent jurisdiction.
(b) In the event of a termination of this Agreement, no party
hereto shall have any liability or further obligation to any other party to this
Agreement except that nothing herein
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will relieve any party from liability for any breach of this Agreement.
7.13 Amendment. This Agreement may be amended only in writing by an
instrument signed by all of the parties hereto.
7.14 Definitions; etc. Unless the context otherwise requires, the terms
defined in any Section of this Agreement shall have the meanings therein
specified for all purposes of this Agreement, applicable to both the singular
and plural forms of any of the terms defined herein. When a reference is made in
this Agreement to a Section, such reference shall be to a Section of this
Agreement unless otherwise indicated. Whenever the words "include", "includes"
or "including" are used in this Agreement, they shall be deemed to be followed
by the words "without limitation." The use of a gender herein shall be deemed to
include the neuter, masculine and feminine genders wherever necessary or
appropriate. Whenever the word "herein" or "hereof" is used in this Agreement,
it shall be deemed to refer to this Agreement and not to a particular Section of
this Agreement unless expressly stated otherwise. Capitalized terms used herein
which are not defined herein shall have the meaning set forth in the Partnership
Agreement unless the context otherwise requires.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.
WESTERN PCS I IOWA CORPORATION
By: s/Cregg B. Baumbaugh
---------------------------------------------------
Name: Cregg B. Baumbaugh
Title: Senior Vice President/Corporate Development
INS WIRELESS, INC.
By: s/Robert A. Halford
---------------------------------------------------
Name: Robert A. Halford
Title: President
WESTERN PCS I CORPORATION
By: s/Cregg B. Baumbaugh
---------------------------------------------------
Name: Cregg B. Baumbaugh
Title: Senior Vice President/Corporate Development
IOWA NETWORK SERVICES, INC.
By: s/Robert A. Halford
---------------------------------------------------
Name: Robert A. Halford
Title: President
-23-
<PAGE> 1
EXHIBIT 10.60
---------------------------------------------
IOWA WIRELESS SERVICES, L.P.
---------------------------------------------
LIMITED PARTNERSHIP AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1 - DEFINED TERMS....................................................................1
1.1 Defined Terms........................................................................1
1.2 Additional Definitions...............................................................8
1.3 Number and Gender....................................................................9
ARTICLE 2 - ORGANIZATION....................................................................10
2.1 Formation...........................................................................10
2.2 Principal Office....................................................................10
2.3 Purpose.............................................................................10
2.4 Term................................................................................12
ARTICLE 3 - CAPITAL CONTRIBUTIONS...........................................................12
3.1 Required Capital Contributions......................................................12
3.2 Additional Capital Contributions....................................................12
3.3 Capital Accounts; No Interest.......................................................13
3.4 Liability of Limited Partners and Special Limited Partners..........................13
3.5 Operations of Partnership Prior to Closing Date.....................................13
3.6 Adjustment of Percentage Interests..................................................14
ARTICLE 4 - MANAGEMENT......................................................................14
4.1 Exercise of Management..............................................................14
4.2 General Partner.....................................................................14
4.3 WWC Veto............................................................................16
4.4 Other Activities....................................................................18
4.5 Dealing with Affiliates.............................................................18
ARTICLE 5 - OPERATIONS......................................................................19
5.1 Technology..........................................................................19
5.2 Participation Agreement.............................................................19
5.3 Additional Spectrum; Des Moines BTA Counties Spectrum; Call and Put Options.........19
5.4 Microwave Relocation................................................................20
ARTICLE 6 - BOOKS, REPORTS, FISCAL YEAR AND REPORTS.........................................21
6.1 Books and Records...................................................................21
6.2 Delivery to Partners and Inspection.................................................21
6.3 Fiscal Year.........................................................................22
6.4 Financial Reports...................................................................22
6.5 Filings.............................................................................22
6.6 Monthly Reports to Partners. ......................................................22
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 7 - PROFITS AND LOSSES..............................................................23
7.1 Allocations of Profits and Losses...................................................23
7.2 Overriding Allocations of Profits and Losses........................................24
7.3 Certain Additional Allocations......................................................28
ARTICLE 8 - DISTRIBUTIONS...................................................................28
8.1 Distributions.......................................................................28
8.2 Distributions of Proceeds from Capital Transactions.................................29
ARTICLE 9 - INDEMNIFICATION.................................................................30
9.1 Indemnification by Partnership......................................................30
9.2 Indemnification by Partners.........................................................30
ARTICLE 10 - ASSIGNMENT OF PERCENTAGE INTEREST AND ADMISSION OF NEW PARTNERS................31
10.1 Assignment of a Percentage Interest.................................................31
10.2 Rights of First Offer...............................................................31
10.3 Right of First Refusal..............................................................32
10.4 Closing.............................................................................34
10.5 Tag-Along Rights....................................................................34
10.6 Liability of Assignor...............................................................35
10.7 Execution of Instruments by Substitute Partner or Additional Partner................35
10.8 Preemptive Rights...................................................................36
10.9 Assignments of Equity in WWC........................................................36
ARTICLE 11 - DISSOLUTION AND TERMINATION OF THE PARTNERSHIP.................................36
11.1 Events Causing Dissolution..........................................................36
11.2 Liquidation of the Partnership......................................................37
11.3 Statements on Liquidation...........................................................37
11.4 Distributions in Liquidation........................................................37
11.5 Orderly Liquidation.................................................................38
ARTICLE 12 - WITHDRAWAL OF THE GENERAL PARTNER..............................................39
12.1 No Withdrawal.......................................................................39
12.2 Involuntary Withdrawal..............................................................39
12.3 Continuation of the Business........................................................39
ARTICLE 13 - MISCELLANEOUS..................................................................40
13.1 Law Governing.......................................................................40
13.2 Counterparts........................................................................40
13.3 Severability of Provisions..........................................................40
13.4 Notices.............................................................................40
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
13.5 Titles and Captions.................................................................40
13.6 Entire Agreement....................................................................40
13.7 Agreement Binding...................................................................40
13.8 Parties In Interest.................................................................41
13.9 Amendments..........................................................................41
13.10 Further Assurances..................................................................41
13.11 Survival of Agreements..............................................................41
</TABLE>
<PAGE> 5
IOWA WIRELESS SERVICES, L.P.
LIMITED PARTNERSHIP AGREEMENT
LIMITED PARTNERSHIP AGREEMENT for Iowa Wireless Services, L.P.,
dated as of September 30, 1997, by and between INS WIRELESS, INC., an Iowa
corporation having its principal office at 4201 Corporate Drive, West Des
Moines, Iowa 50266 ("INS"), as General Partner, and WESTERN PCS I IOWA
CORPORATION, a Delaware corporation having its principal office at 2001 NW
Sammamish Road, Issaquah, Washington 98027 ("WWC"), as the Limited Partner, and
any Person(s) who from time to time hereafter executes a counterpart of this
Agreement and is admitted as a Limited Partner or Special Limited Partner in
accordance with the provisions hereof.
WHEREAS, the parties hereto desire to enter into this Limited
Partnership Agreement to provide for, among other things, (i) the formation of
the Partnership, (ii) the admission of the Partners into the Partnership, (iii)
the payment of Capital Contributions by the Partners to the Partnership, (iv)
the allocation of Profits, Losses, distributions and other proceeds of the
Partnership among the Partners, (v) the respective rights, obligations and
interests of the parties hereto to each other and to the Partnership and (vi)
certain other matters.
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, the parties hereto agree as follows:
ARTICLE 1
DEFINED TERMS
1.1 Defined Terms. Capitalized terms used in this Agreement shall,
unless the context otherwise requires, have the meanings specified in this
Section 1.1.
"Accountants" means Arthur Andersen & Co., or such other firm or
firms of independent public accountants of similar stature as may be selected by
the General Partner.
"Adjusted Capital Account Deficit" means, with respect to any
Partner, the deficit balance, if any, in such Partner's Capital Account as of
the end of any fiscal year of the Partnership (or at any other relevant time),
after giving effect to the following adjustments:
(i) credit to such Capital Account any amounts which such Partner
is obligated to restore thereto pursuant to any provision of this Agreement or
is deemed to be obligated to restore thereto pursuant to the penultimate
sentences of Sections 1.704-2(g)(l) and 1.704-2(i)(5) of the Regulations; and
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<PAGE> 6
(ii) debit to such Capital Account the items described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6) of
the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
"Affiliate" means, with respect to any Partner, any Person which is
controlled by, controls or is under common control with such Partner, or, if a
Partner is an individual, any member of the Immediate Family of such Partner.
"Agreement" means this Limited Partnership Agreement, as it may be
amended from time to time.
"Approval Date" means the day on which all Federal Communications
Commission ("FCC") and state regulatory approvals (if any) necessary in order to
permit WWC to make its Required Capital Contribution to the Partnership and to
otherwise permit the consummation lawfully of the transactions contemplated
hereby have been received and shall have become Final Orders
"Assignment" (including the verb forms "Assign" and "Assigned")
means a valid sale, exchange, transfer or other disposition of all or any
portion of a Percentage Interest by a Partner. "Assignor" means a Partner who
makes an Assignment and "Assignee" means a Person who receives an Assignment.
"Bankruptcy" (including the adjectival form "Bankrupt") means, with
respect to any Partner, such Partner making an assignment for the benefit of
creditors or admitting in writing its inability to pay its debts when due; if
any liquidation, dissolution, bankruptcy, reorganization, insolvency or other
proceeding for the relief of financially distressed debtors is commenced by or
against such Partner, or if a receiver, liquidator, custodian or trustee shall
be appointed for such Partner or a substantial part of such Partner's assets
and, if any of the foregoing occurs involuntarily, the same is not dismissed,
stayed or discharged within ninety (90) days; or the entry of an order for
relief against such Partner under Title 11 of the United States Code.
"BTA" means the unit of division (of which there are four hundred
ninety-three (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 Federal Communications Commission of a portion of the
Licenses for PCS Systems for Basic Trading Areas, as defined by the Federal
Communications Commission.
"Business Day" means any day other than a Saturday, Sunday or a
legal holiday in New York, New York or in Seattle, Washington, or any other day
on which commercial banks in
2
<PAGE> 7
those cities are authorized by law or governmental decree to close.
"Capital Account" means, with respect to any Partner, the Capital
Account maintained for such Partner in accordance with the following provisions:
(i) to each Partner's Capital Account there shall be credited such
Partner's Capital Contributions, such Partner's distributive share of Profits,
and any items in the nature of income or gain which are specially allocated
pursuant to Article 7 hereof, and the amount of any Partnership liabilities
assumed by such Partner or which are secured by any property distributed to such
Partner;
(ii) to each Partner's Capital Account there shall be debited the
amount of cash and the Gross Asset Value of any property distributed to such
Partner pursuant to any provision of this Agreement, such Partner's distributive
share of Losses, and any items in the nature of expenses or losses which are
specially allocated pursuant to Article 7 hereof, and the amount of any
liabilities of such Partner assumed by the Partnership or which are secured by
any property contributed by such Partner to the Partnership;
(iii) in the event any Percentage Interest is Assigned in accordance
with the terms of this Agreement, the Assignee shall succeed to the Capital
Account of the Assignor to the extent it relates to the Assigned Percentage
Interest; and
(iv) in determining the amount of any liability for purposes of
clauses (i) and (ii) above, there shall be taken into account Section 752(c) of
the Code and any other applicable provisions of the Code and the Regulations.
The foregoing provisions and the other provisions of this Agreement relating to
the maintenance of Capital Accounts are intended to comply with Section
1.704-1(b) of the Regulations, and shall be interpreted and applied in a manner
consistent with such Regulations.
"Capital Contribution" means the total amount of cash and the agreed
fair market value of other property, if any, contributed or agreed to be
contributed to the Partnership by each Partner in accordance with Article 3
hereof. Any reference in this Agreement to the Capital Contribution of a Partner
shall include the contributions to the capital of the Partnership made by any
predecessor in interest of such Partner.
"Capital Transaction" means a sale, transfer or other disposition of
all or substantially all of the assets of the Partnership.
"Code" means the Internal Revenue Code of 1986, as amended to date,
or any successor statute.
"Delaware RULPA" means the Revised Uniform Limited Partnership Act
of the
3
<PAGE> 8
State of Delaware.
"Depreciation" means, for each fiscal year of the Partnership or
other period, an amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such fiscal year or
other period, except that if the Gross Asset Value of an asset differs from its
adjusted basis for Federal income tax purposes at the beginning of such fiscal
year or other period, Depreciation shall be an amount which bears the same ratio
to such beginning Gross Asset Value as the Federal income tax depreciation,
amortization, or other cost recovery deduction for such fiscal year or other
period bears to such beginning adjusted tax basis; provided, however, that if
the Federal income tax depreciation, amortization, or other cost recovery
deduction for such fiscal year is zero, Depreciation shall be determined with
reference to such beginning Gross Asset Value using any reasonable method
selected by the General Partner.
"Des Moines BTA Counties" means the counties in the Des Moines BTA
set forth on Exhibit 1.1 attached hereto.
"Final Order" means an action or decision as to which: (i) no
request for a stay is pending, no stay is in effect, and any deadline for filing
such request that may be designated by statute or regulation has passed; (ii) no
petition for rehearing or reconsideration or application for review is pending
and the time for filing any such petition or application has passed; (iii) the
FCC, public utility commission or public service commission (or comparable
bodies exercising jurisdiction over the parties) does not have the action or
decision under reconsideration on its own motion and the time for initiating
such reconsideration has passed; and (iv) no appeal is pending or in effect and
any deadline for filing any such appeal that may be designated by statute or
rule has passed.
"General Partner" means INS initially and any successor or assign
thereto approved by the Limited Partners.
"Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for Federal income tax purposes, except as follows:
(i) the initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such asset,
as determined by the contributing Partner and the General Partner unless the
contributing Partner is the General Partner, in which case as determined by the
contributing Partner and the Limited Partners;
(ii) the Gross Asset Value of each asset shall be adjusted to equal
its respective gross fair market value, as determined by the General Partner, as
of the following times: (a) the acquisition of an additional Percentage Interest
by any new or existing Partner in exchange for more than a de minimis Capital
Contribution; (b) the distribution by the Partnership to a Partner of more than
a de minimis amount of property as consideration for a Percentage
4
<PAGE> 9
Interest; and (c) the liquidation of the Partnership within the meaning of
Section 1.704-1(b)(2)(ii)(g) of the Regulations; provided, however, that
adjustments pursuant to clauses (a) and (b) above shall be made only if the
General Partner reasonably determines that such adjustments are necessary or
appropriate to reflect the relative economic interests of the Partners in the
Partnership; (iii) the Gross Asset Value of any asset distributed to any Partner
shall be the gross fair market value of such asset on the date of distribution,
as determined by the distributee Partner and the General Partner; and
(iv) the Gross Asset Value of each asset shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such asset
pursuant to Section 734(b) or Section 743(b) of the Code, but only to the extent
that such adjustment is taken into account in determining Capital Accounts
pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations and Article 7
hereof; provided, however, that Gross Asset Values shall not be adjusted
pursuant to this clause (iv) to the extent the General Partner determines that
an adjustment pursuant to clause (ii) above is necessary or appropriate in
connection with a transaction that would otherwise result in an adjustment
pursuant to this clause (iv).
In each case that the Gross Asset Value is based in whole or in part on an
asset's fair market value, liabilities to which the asset is subject shall not
be taken into account. If the Gross Asset Value of an asset has been determined
or adjusted pursuant to clause (i), (ii) or (iv) above, such Gross Asset Value
shall thereafter be adjusted by the Depreciation taken into account with respect
to such asset for purposes of computing Profits and Losses.
"Immediate Family" means, with respect to any individual, his
spouse, children (including adopted children), parents, parents-in-law,
grandchildren, great grandchildren and other descendants, nephews, nieces,
brothers, sisters, and spouses of any of the foregoing, as well as trusts
created for the benefit of any of the foregoing.
"Involuntary Withdrawal" means any Withdrawal caused by the death,
adjudication of insanity or incompetence, or Bankruptcy of a General Partner, or
the removal of such General Partner pursuant to the provisions hereof.
"Limited Partner" means WWC, any other Person who is admitted as a
Limited Partner in accordance with the terms hereof, or any other Person who
succeeds to all or a portion of a Limited Partner's Percentage Interest in the
Partnership in accordance with the terms hereof.
"Liquidating Agent" means the Person who shall be designated by the
Partners pursuant to Section 11.2 hereof for the purpose of conducting and
supervising the liquidation of the Partnership.
"MTA" means any of the fifty-one (51) "major trading areas" into
which the United States of America is organized, as set forth in the Rand
McNally 1992 Commercial Atlas
5
<PAGE> 10
& Marketing Guide, 123d Edition, at pages 38-39.
"Nonrecourse Deductions" shall have the meaning set forth in Section
1.704-2(b)(l) of the Regulations.
"Nonrecourse Liability" shall have the meaning set forth in Section
1.704-2(b)(3) of the Regulations.
"Paid-In Capital Contributions" means at any moment in time the
amount of Capital Contributions to the Partnership pursuant to Article 3 hereof
that has actually been paid in cash, or the agreed fair market value of other
property contributed, by any Partner.
"Participation Agreement" means the Participation Agreement
described in Section 5.2 hereof.
"Partitioning Agreement" means the Partitioning Agreement described
in Section 5.2 hereof.
"Partner" or "Partners" means WWC and INS and any other Person
admitted as a Partner pursuant to Article 10 hereof or Section 4.6 hereof or any
Person who becomes a Substitute Partner in respect of any portion of the
Percentage Interest of a Partner as provided in Article 10 hereof.
"Partner Nonrecourse Debt" shall have the meaning set forth in
Section 1.704-2(b)(4) of the Regulations.
"Partner Nonrecourse Debt Minimum Gain" means an amount, with
respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain
that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse
Liability, determined in accordance with Section 1.704-2(i)(3) of the
Regulations.
"Partner Nonrecourse Deductions" shall have the meaning set forth in
Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Regulations.
"Partnership" means the Delaware limited partnership formed by WWC
and INS known as "Iowa Wireless Services, L.P." and governed by this Agreement,
as such Partnership may from time to time be reconstituted.
"Partnership Minimum Gain" shall have the meaning set forth in
Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations.
"PCS Networks" means the telecommunications networks to be operated
by the Partnership for communications services, utilizing the spectrum to be
contributed by WWC
6
<PAGE> 11
pursuant to Section 3.1 hereof, as such PCS Networks may be expanded or modified
in accordance with this Agreement.
"Per Percentage Interest Price" means the price for the Percentage
Interest in question divided by the number of percent that such Percentage
Interest represents.
"Percentage Interest" means, with respect to any Partner, its
percentage interest in the Partnership, which initially is, with respect to WWC,
38% and with respect to INS, 62%, as such percentages may be modified in
accordance with the terms of this Agreement.
"Person" means any general partnership, limited partnership,
corporation, limited liability company, joint venture, trust, business trust,
governmental agency, cooperative, association, individual or other entity, and
the heirs, executors, administrators, legal representatives, successors and
assigns of such person as the context may require.
"Profits" and "Losses" means, for each fiscal year of the
Partnership or other period, an amount equal to the Partnership's taxable income
or loss for such year or period, determined in accordance with Section 703(a) of
the Code (for this purpose, all items of income, gain, loss, deduction or credit
required to be stated separately pursuant to Section 703(a)(1) of the Code shall
be included in taxable income or loss), with the following adjustments:
(i) any income of the Partnership that is exempt from Federal
income tax and not otherwise taken into account in computing Profits or Losses
shall be added to such taxable income or loss;
(ii) any expenditures of the Partnership described in Section
705(a)(2)(B) of the Code or treated as Section 705(a)(2)(B) expenditures
pursuant to Section 1.704-1(b)(2)(iv)(i) of the Regulations and not otherwise
taken into account in computing Profits or Losses, shall be subtracted from such
taxable income or loss;
(iii) in the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to clause (ii) or (iii) of the definition thereof, the amount
of such adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Profits or Losses;
(iv) gain or loss resulting from any disposition of Partnership
property with respect to which gain or loss is recognized for Federal income tax
purposes shall be computed by reference to the Gross Asset Value of the property
disposed of, notwithstanding that the adjusted tax basis of such property
differs from its Gross Asset Value;
(v) in lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such fiscal year or other
period;
7
<PAGE> 12
(vi) to the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Section 734(b) or Section 743(b) of the Code is
required pursuant to Section 1.704-1(b)(2)(iv)(m)(4) of the Regulations to be
taken into account in determining Capital Accounts as a result of a distribution
other than in liquidation of a Partner's Percentage Interest, the amount of such
adjustment shall be treated as an item of gain (if the adjustment increases the
basis of the asset) or loss (if the adjustment decreases the basis of the asset)
from the disposition of the asset and shall be taken into account for purposes
of computing Profits and Losses; and
(vii) notwithstanding any other provisions hereof, any items of
income, gain, loss, deduction or credit which are specially allocated pursuant
to Article 7 hereof (other than Sections 7.1(a), 7.1(b) and 7.1(c) hereof) shall
not be taken into account in computing Profits or Losses.
"Regulations" means the Income Tax Regulations (including Temporary
Regulations) promulgated under the Code.
"Special Limited Partner" means any Person(s) who is admitted to the
Partnership in accordance with Section 4.6 hereof, or INS as a Special Limited
Partner in accordance with Section 4.2(b) hereof. Special Limited Partners shall
not be entitled to vote on any matter in which the Partners are entitled to vote
hereunder, nor shall the consent or approval of any Special Limited Partner be
required for the Partnership, the General Partner or the Partners to take any
action whatsoever, including the amendment of this Agreement or the admission of
new Partners. A Special Limited Partner shall have no rights under this
Agreement or otherwise as a Partner except to receive its share of Profits,
Losses and distributions as provided in Articles 7, 8 and 11 hereof.
"State" means the State of Delaware.
"Substitute Partner" means any person who is admitted to the
Partnership as a Partner under the provisions of Article 10 hereof.
"Territory" means all BTAs in the Des Moines MTA except for the Des
Moines BTA.
"Withdrawal" (including the verb form "Withdraw" and the adjectival
forms "Withdrawing" and "Withdrawn") means, as to the General Partner,
withdrawing from the Partnership either (i) voluntarily; (ii) involuntarily upon
the occurrence of its Bankruptcy, dissolution or liquidation; or (iii) by any
other means, including by Assignment of any portion of its Percentage Interest
in violation of the provisions of this Agreement.
1.2 Additional Definitions. In addition to the definitions set forth in
Section 1.1 hereof, the following terms defined elsewhere in this Agreement
shall have the respective
8
<PAGE> 13
meanings therein defined:
Term Section
---- -------
Additional Capital Contribution 3.2
Additional Percentage Interests 10.8
Additional Spectrum 5.3
Additional Spectrum Interest 5.3
Acquiring Partner 10.2
Assigning Partner 10.2
Closing Date 3.1
Des Moines BTA Counties Spectrum 5.3
Des Moines BTA Counties Spectrum Interest 5.3
Disposing Partner 10.5(a)
GSM 4.3(p)
INS Introductory paragraph
INS Parent 2.3(a)
Non-Assigning Partner 10.2
Non-Disposing Partner 10.5(a)
Non-Selling Partners 10.3(a)
Offered Percentage Interest 10.2
Preemptive Notice 10.8
Preemptive Right 10.8
Proposed Assigned Percentage Interest 10.3(a)
Purchase Offer 10.3(a)
Purchasing Partner 10.3(a)
Regulatory Allocations 7.2(e)
Required Capital Contributions 3.1
Sale Notice 10.2
Sale Offer 10.2
Selling Partner 10.3(a)
WWC Introductory paragraph
WWC Parent 2.3(f)
1.3 Number and Gender. Unless the context otherwise requires, the terms
defined in Section 1.1 hereof or in the Sections referred to in Section 1.2
hereof shall have the meanings therein specified for all purposes of this
Agreement, applicable to both the singular and plural forms of any of the terms
defined herein. When a reference is made in this Agreement to a Section, such
reference shall be to a Section of this Agreement unless otherwise indicated.
Whenever the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation". The use of the neuter gender herein shall be deemed to include the
masculine and feminine
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<PAGE> 14
genders wherever necessary or appropriate, the use of the masculine gender shall
be deemed to include the neuter and feminine genders and the use of the feminine
gender shall be deemed to include the neuter and masculine genders wherever
necessary or appropriate. Whenever the word "herein" is used in this Agreement,
it shall be deemed to refer to this Agreement and not to a particular Section of
this Agreement unless expressly stated otherwise.
ARTICLE 2
ORGANIZATION
2.1 Formation.
(a) The Partnership shall be a Delaware limited partnership under
the Delaware RULPA. The name of the Partnership shall be "Iowa Wireless
Services, L.P." or such other name selected by the General Partner with the
consent of the Limited Partner as may be acceptable to the appropriate recording
officials of the State. The name and address of the agent for service of process
on the Partnership and the registered office of Partnership is c/o United
Corporate Services, Inc. 15 East North Street, Dover, Delaware 19901. The
registered office of the Partnership may be changed by the General Partner to
any other location within the State, in which event written notice thereof shall
be given by the General Partner to each of the other Partners.
(b) Concurrently with the execution of this Agreement, the General
Partner shall file (if required by the Delaware RULPA) a Certificate of Limited
Partnership of the Partnership reflecting the provisions of this Agreement in
accordance with the Delaware RULPA. The General Partner shall from time to time
take all such other actions as may be deemed by it to be necessary or
appropriate to (i) effectuate and permit the formation of the Partnership as a
limited partnership under the laws of the State, (ii) enable the Partnership to
do business in the State and any other state in which an office of the
Partnership is located or the Partnership does business and (iii) protect the
limited liability of the Limited Partners under the laws of the State and any
other state in which an office of the Partnership is located or the Partnership
does business, including the preparation and filing of such amendments to this
Agreement, the Certificate of Limited Partnership of the Partnership, and any
other certificate, document or instrument as may be required under the laws of
the State and any other state in which an office of the Partnership is located
or the Partnership does business. The Partners shall execute such certificates,
documents and instruments and take such other action as may be necessary to
enable the General Partner to fulfill its responsibilities under this Section
2.1(b).
2.2 Principal Office. The principal office of the Partnership shall be
located at 4201 Corporate Drive, West Des Moines, Iowa 50266. The General
Partner may maintain such other offices as it may from time to time deem
advisable. The Partnership's books and records will be made available to the
Limited Partners or their representatives at the Partnership's principal office
at all times and for any purpose. The principal office of the Partnership may be
changed by the General Partner, in which event written notice thereof shall be
given by the General
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Partner to all the other Partners.
2.3 Purpose. The principal purpose of the Partnership is to engage in,
purchase, acquire, design, construct, improve, operate, manage, hold, own,
invest in, and dispose of, the PCS Networks, any assets of the PCS Networks, or
all or any portion of any securities of the PCS Networks, principally located in
the Territory and in the Des Moines BTA Counties, and to do all things
necessary, appropriate or advisable in connection with such business and which
may lawfully be done by a limited partnership formed pursuant to the Delaware
RULPA, including:
(a) to build and operate (i) a PCS network covering major
metropolitan areas in Iowa (excluding the Des Moines BTA except for the Des
Moines BTA Counties), provided, however, that nothing herein shall preclude the
Partnership from using INS's and/or WWC's, or any of their respective
Affiliates', transmission and switching facilities located in the Des Moines
BTA, subject to the provisions of Section 4.3 hereof and (ii) a PCS network
along the major interstate and state highways linking the aforementioned markets
(including the Des Moines BTA Counties, and up to the border of the other
counties in the Des Moines BTA), and to provide, on terms to be negotiated,
fee-based PCS switching, billing, marketing and other operations support
services for any equity holders of Iowa Network Services, Inc. an Iowa
corporation ("INS Parent"), who use the spectrum pursuant to a Participation
Agreement and Partitioning Agreement;
(b) to borrow or raise moneys for its PCS Networks, and in
connection therewith, from time to time without limitation as to amount or
manner and time of repayment, to issue, accept, endorse and execute promissory
notes, drafts, bills of exchange, warrants, bonds, debentures and other
negotiable or non-negotiable instruments and evidences of indebtedness, and to
secure the payment of such or other obligations of the Partnership by mortgage
upon, or hypothecation or pledge of, all or part of the property of the
Partnership, whether at the time owned or thereafter acquired;
(c) to acquire, manage and operate, directly or indirectly, any
business or related properties or assets or any real estate or personal property
or any interest therein for use in connection with the PCS Networks;
(d) to maintain for the conduct of the Partnership's affairs one
or more offices and in connection therewith rent or acquire office space, and do
such other acts as the General Partner may deem necessary or advisable in
connection with the maintenance and administration of such office or offices;
(e) to hire, compensate and terminate employees, agents,
independent contractors, attorneys, or such other Persons as the General Partner
may deem necessary or advisable;
(f) to operate as a reseller on the A Block spectrum retained by
Western PCS
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I Corporation ("WWC Parent") in the Des Moines BTA upon the same terms and
conditions as are made available by WWC Parent to its other resellers; and
(g) to bring and defend actions at law or in equity.
The Partnership shall engage in no activities other than those described in this
Section 2.3 without the consent of WWC in accordance with Section 4.3 hereof.
2.4 Term. The Partnership shall continue in full force and effect until
the dissolution and termination of the Partnership pursuant to Article 11
hereof.
ARTICLE 3
CAPITAL CONTRIBUTIONS
3.1 Required Capital Contributions. Within ten (10) Business Days after
the Approval Date, the Partners shall be required to make the following Capital
Contributions to the Partnership ("Required Capital Contributions"):
(a) WWC shall assign or cause to be assigned to the Partnership
the FCC licenses for, and contribute or cause to be contributed to the
Partnership all the rights to use and operate, twenty (20 MHz) megahertz of A
Block PCS spectrum in the Territory and in the Des Moines BTA Counties, and an
additional ten (10 MHz) megahertz of D Block PCS spectrum in the Burlington,
Clinton-Sterling, Marshalltown and Mason City BTAs, all as more fully described
in Exhibit 3.1(a) attached hereto. For purposes of establishing an opening
Capital Account balance for WWC, the Partners hereby agree that the Gross Asset
Value of the Contribution of such spectrum by WWC is $12,258,000.
(b) INS shall contribute twenty million ($20,000,000) dollars in
cash as follows: (i) five million ($5,000,000) dollars cash simultaneously with
WWC's contribution of the spectrum described in Section 3.1(a) hereof; and (ii)
the balance as needed to cover any cash requirements of the Partnership, such
balance to be called at any time or from time to time by either WWC or INS on
not less than five (5) Business Days' written notice to INS; provided, however,
to the extent that the entire twenty million ($20,000,000) dollars has not been
contributed within five hundred forty (540) days after the Closing Date, such
balance shall be contributed on such five hundred fortieth (540th) day. The
obligation of INS to contribute the balance of the Required Capital Contribution
pursuant to Section 3.1(b)(ii) hereof shall be secured by an irrevocable standby
letter of credit in an amount equal to the balance of INS's Required Capital
Contributions, which letter of credit shall be from a financial institution
satisfactory to WWC and in the form attached hereto as Exhibit 3.1(b), and shall
be delivered to the Partnership concurrently with the $5,000,000 referred to in
Section 3.1(b)(i) hereof. The letter of credit amount shall be reduced from time
to time by an amount equal to any Required
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Capital Contributions made by INS to the Partnership in cash (other than the
Required Capital Contribution made pursuant to Section 3.1(b)(i) hereof).
The date on which the initial Required Capital Contributions described in
Section 3.1(a) and 3.1(b)(i) are made to the Partnership shall be referred to
herein as the "Closing Date."
3.2 Additional Capital Contributions. In addition to the Required
Capital Contributions specified in Section 3.1 hereof, if approved by WWC in
accordance with Section 4.3 hereof, the Partners (other than Special Limited
Partners) may agree to make additional contributions from time to time to the
capital of the Partnership (each, an "Additional Capital Contribution"). If the
Partners agree to make Additional Capital Contributions pursuant to this Section
3.2, the amount that each Partner so agreed to contribute shall be treated as a
Required Capital Contribution with respect to that Partner for all purposes of
this Agreement, and the amount thereof shall increase the amount of the Required
Capital Contributions pursuant to Section 3.1 hereof, as the same may have
theretofore been increased.
3.3 Capital Accounts; No Interest. No Partner shall have the right to
demand a return of its Capital Contribution, except as otherwise provided
herein. No Partner shall have priority over any other Partner, either as to
return of its Capital Contribution or as to profits, losses or distributions,
except as otherwise specifically provided herein. Moreover, no Partner shall be
personally liable for the return of the Capital Contribution of any other
Partner, or any portion thereof, it being expressly understood that any such
return shall be made solely from assets of the Partnership, nor shall any
Partner be required to pay the Partnership or any Partner any deficit in its or
any other Partner's Capital Account upon dissolution or otherwise, it being
understood and agreed that any deficit in any Capital Account shall not be
treated as an asset of the Partnership. No interest shall be paid on any Capital
Account or Capital Contribution. No Partner shall have the right to demand or
receive property other than cash for its Percentage Interest. Except for
partitioning of the Partnership's FCC licenses pursuant to a Participation
Agreement and Partitioning Agreement attached hereto as Exhibit 5.2, each of the
Partners does hereby agree to, and does hereby, waive any right such Partner may
otherwise have to cause any asset or FCC license of the Partnership to be
partitioned or to be assigned or to file a complaint or institute any proceeding
at law or in equity seeking to have any such asset partitioned or assigned;
provided, however, that nothing herein shall preclude or restrict a Partner from
filing a petition or otherwise objecting to the Partnership's sale, transfer or
other disposition of spectrum to any Partner or Affiliate of a Partner or any
Person that directly or indirectly owns an equity interest in a Partner.
3.4 Liability of Limited Partners and Special Limited Partners. The
Limited Partners and Special Limited Partners shall not be liable for any debts,
liabilities, contracts or obligations of the Partnership, except as provided by
law. The Limited Partners and Special Limited Partners shall be liable only to
make payments of their Required Capital Contributions as and when due under this
Agreement.
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3.5 Operations of Partnership Prior to Closing Date.
(a) Prior to the Closing Date the only business of the Partnership
shall be to pursue FCC and other regulatory approvals for the transactions
contemplated by this Agreement and to take such other actions as the General
Partner deems appropriate to prepare for the business of the Partnership
following such approvals. In this regard the General Partner shall not be
permitted to expend or commit to expend or incur or commit to incur liabilities
in excess of an aggregate of $500,000 until after the Closing Date.
(b) The General Partner agrees to make non-interest-bearing loans
to the Partnership of all amounts necessary to operate prior to the Closing Date
up to a maximum of $500,000. Such loans shall be evidenced by promissory notes
in substantially the form attached hereto as Exhibit 3.5. Upon the Closing Date
such loans shall be credited against the Required Capital Contribution of the
General Partner.
3.6 Adjustment of Percentage Interests. In the event any Partner makes a
Capital Contribution in accordance with this Agreement (other than a Required
Capital Contribution pursuant to Section 3.1(a) or (b) hereof), including any
Additional Capital Contribution pursuant to Section 3.2 hereof, then the
Percentage Interests of each Partner (including each Special Limited Partner)
shall be adjusted so that each Partner's Percentage Interest shall be equal to
the percentage obtained by dividing such Partner's total Paid-In Capital
Contributions by the total Paid-In Contributions of all Partners. For purposes
of this computation, the Paid-In Capital Contributions of any Special Limited
Partner admitted pursuant to Section 4.6 hereof shall be deemed to be an amount
equal to the difference between (i) the result of dividing (a) the total Paid-In
Capital Contributions (including any amount covered by the letter of credit of
INS referred to in Section 3.1(b) hereof) of all Partners (other than such
Special Limited Partner) at the time such Special Limited Partner was admitted
by (b) the total Percentage Interests of all Partners (expressed as a
percentage) (other than such Special Limited Partner) after giving effect to the
admission of such Special Limited Partner and (ii) the total Paid-In Capital
Contributions (including any amount covered by the letter of credit of INS
referred to in Section 3.1(b) hereof) of all Partners (other than such Special
Limited Partner) at the time such Special Limited Partner was admitted.
ARTICLE 4
MANAGEMENT
4.1 Exercise of Management. Subject to the provisions of Sections 3.5,
4.2 and 4.3 hereof, the overall management and control of and conduct of the
business, assets and affairs of the Partnership shall be vested in the General
Partner, and the General Partner, in extension of and not in limitation of the
powers given it by law, shall have full, exclusive and complete charge of the
management of the business of the Partnership in accordance with its purpose
stated in
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Section 2.3 hereof. The Limited Partners and Special Limited Partners shall not
take part in the management or control of the business of the Partnership or
have authority to bind the Partnership or incur any liability for the
Partnership; provided, however, that the Limited Partners may exercise any and
all of the rights granted to them under this Agreement.
4.2 General Partner.
(a) Subject to the provisions of Section 3.5 and 4.3 hereof, the
General Partner shall have control of the day-to-day operations of the
Partnership, and shall have the authority to act on behalf of the Partnership,
including any actions expressly provided in this Agreement to be undertaken by
the General Partner, so long as such action shall not be inconsistent with (i)
any authorization theretofore granted by WWC in accordance with the provisions
of this Agreement or (ii) any capital budget or annual operating budget
theretofore approved by the General Partner and WWC. The General Partner shall
devote to the Partnership such time as may be necessary for the proper
performance of the duties of the General Partner. The General Partner shall at
all times exercise its responsibilities as General Partner in a fiduciary
manner. The signature of the General Partner shall be needed on any instrument,
document or agreement to bind the Partnership, and third parties may rely fully
on any such instrument, document or agreement signed by the General Partner.
Subject to the terms and conditions hereof, the General Partner shall be
obligated, and is hereby authorized and directed, to:
(i) Take all action that may be necessary or appropriate to
carry out the purposes of the Partnership as described in this Agreement;
(ii) Prepare or cause to be prepared in conformity with good
business practice all reports that are to be furnished to the Limited Partners
or that are required by taxing bodies or other governmental agencies, including
the financial statements and reports referred to in Article 6 hereof; and
(iii) Do all other things (subject to the restrictions
contained herein) that may be necessary or desirable in order properly and
efficiently to administer and carry on the affairs, assets and business of the
Partnership.
Title to all Partnership assets shall be held in the name of the
Partnership. No Limited Partner or Special Limited Partner shall take part in
the management or control of the business of the Partnership or have authority
to bind the Partnership.
(b) INS shall serve as the General Partner for so long as it
continues to own at least fifty (50%) percent of the Percentage Interest owned
by it on the date hereof; provided, however, that if INS ceases to own at least
fifty (50%) percent of the Percentage Interest owned by it on the date hereof,
then subject to FCC approval, INS shall immediately cease to be the General
Partner and a new General Partner shall be elected by the affirmative vote of
Partners (excluding Special Limited Partners) holding a majority of the
Percentage Interests; provided
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further that if the Partnership fails to (i) comply with all build-out
requirements and network performance standards on a timely basis as set forth on
and in accordance with Exhibit 4.2(b); (ii) comply with all GSM MOU standards
which WWC has implemented in its adjacent markets or which have been mutually
agreed upon by INS and WWC; (iii) comply with all North American Interest Group
standards which WWC has implemented in its adjacent markets or which have been
mutually agreed upon by INS and WWC, or (iv) comply with all North American GSM
Alliance Group standards which WWC has implemented in its adjacent markets or
which have been mutually agreed upon by INS and WWC; then in any of such events
referred to in this Section 4.2(b) WWC shall, subject to receipt of FCC
approval, have the right to become the General Partner or to designate a new
General Partner (unless such failure of the Partnership to so comply is a result
of the exercise by WWC of its veto power pursuant to Section 4.3 hereof) in
which case INS shall cease to be the General Partner and shall become a Special
Limited Partner.
4.3 WWC Veto.
Notwithstanding any provision to the contrary contained in this
Agreement, without the prior affirmative consent of WWC, the Partnership shall
not, and the General Partner shall not cause or permit the Partnership to, in
any single transaction or series of related transactions, take or commit to take
any of the following actions:
(a) a sale, exchange or other disposition of all or any
substantial portion of the property of the Partnership;
(b) a dissolution or liquidation of the Partnership;
(c) a merger or consolidation of the Partnership with or into, or
causing the Partnership to enter into any business combination or to acquire any
equity interest in, any corporation, partnership or other entity;
(d) entry by the Partnership into a partnership, joint venture or
similar relationship with others;
(e) an acquisition of any business or spectrum, except for the
business described in Section 2.3 hereof and the spectrum to be contributed
pursuant to Section 3.1 hereof;
(f) a purchase, lease or other acquisition of any properties or
assets during any twelve month period having a purchase price or annual rental
amount of in excess of fifty thousand ($50,000) dollars for all such properties;
(g) incurring indebtedness for borrowed money, capitalized leases,
deferred purchase price of goods or services, on notes, bonds or securities of
any nature, or any other
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types of indebtedness of any kind (other than performance bonds for build-out in
the ordinary course of business and current accounts payable incurred in the
ordinary course of business), or guaranteeing or being responsible for the
indebtedness of any other Person in excess of fifty thousand ($50,000) dollars
in the aggregate;
(h) an engagement in any business transaction with a Partner, any
Affiliate of any Partner, or any Person that directly or indirectly owns an
equity interest in any Partner, including use of INS's and/or WWC's, or any of
their respective Affiliates', transmission and switching facilities, except for
any Participation Agreement and Partitioning Agreement described in Section 5.2
hereof;
(i) a change in the Partnership's accounting methods other than in
accordance with generally accepted accounting principles, consistently applied,
or a change in the Partnership's fiscal year;
(j) approval of any Additional Capital Contribution or acceptance
of any capital contributions in any amount or in any form except as expressly
provided for herein, or a purchase or redemption of all or any portion of a
Percentage Interest or equity interest in the Partnership from any Partner;
(k) an offer or issuance of additional ownership interests in the
Partnership or in any entity in which the Partnership has an interest or
securities, warrants, options or other rights convertible or exchangeable into
ownership interests in the Partnership or in any entity in which the Partnership
has an interest;
(l) a distribution, dividend or other payment to any Partner in
its capacity as a Partner, except as expressly provided in Section 8.1(c)
hereof;
(m) an authorization or adoption of any amendment to this
Agreement or any constituent document of any entity in which the Partnership has
an interest;
(n) an approval or amendment to any annual budget, operating or
capital budget of the Partnership or any entity in which the Partnership has an
interest;
(o) approval of any plan or agreement by which the Partnership
disaggregates/partitions or assigns the FCC license to, or makes available
through a resale or use agreement, spectrum to any Person, including to
individual equity holders of INS Parent, except for the Participation Agreement
and Partitioning Agreement described in Section 5.2 hereof;
(p) changing from Global System for Mobile Communications ("GSM")
technology in the Partnership's operation of the PCS Networks or changing the
name under which the Partnership conducts business;
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(q) performance of any act which would knowingly subject any
Limited Partner to liability as a general partner under the then existing law of
any applicable jurisdiction;
(r) alteration of the purpose of the Partnership set forth in
Article 2 hereof;
(s) employment, or the permission of employment, of the funds or
assets of the Partnership in any manner except for the exclusive benefit of the
Partnership, except as otherwise provided herein;
(t) entry into or otherwise becoming bound by, or permitting any
assets to become subject to, or amending or modifying (other than amendments or
modifications that are not material), any contract, agreement or arrangement,
with an annual cost in excess of fifty thousand ($50,000) dollars in the
aggregate for all such contracts, agreements or arrangements;
(u) selling, leasing, pledging, granting a security interest in,
encumbering or otherwise disposing of any assets of the Partnership, except for
sales or leases of any of the Partnership's services or of PCS telephones in the
ordinary course of business or sales or other dispositions of assets which are
immaterial to the Business, no longer being used in the Business and for which
the aggregate market value of all such assets, in any twelve (12) month period
is less than fifty thousand ($50,000) dollars;
(v) performing any other act outside the ordinary course of
business of the Partnership; or
(w) entry into any agreement to do any of the foregoing.
4.4 Other Activities. It is understood that the Partners are and will be
engaged in other activities and occupations unrelated to the Partnership, and,
except to the extent otherwise agreed to or represented, each of the Partners
shall be required to devote only so much of its time as it in its sole
discretion may deem necessary to the affairs of the Partnership. Any Partner may
engage in and have an interest in other business ventures of every nature and
description, independently or with others, including the ownership, operation
and management of telecommunications services wherever located. Neither the
Partnership nor any Partner shall have any rights by virtue of this Agreement in
and to such independent ventures or the income or profits derived therefrom,
regardless of the location of such venture and whether or not such venture was
presented to such Partner as a direct or indirect result of its connection with
the Partnership.
4.5 Dealing with Affiliates.
The Partnership shall not be prohibited from or otherwise limited in
employing, contracting with or otherwise dealing with any Partner, or any Person
which is an Affiliate of any Partner, which has an interest in a Partner or in
which a Partner has an interest. However, the
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fact of any relationship, affiliation or interest shall be disclosed to all
Partners (other than Special Limited Partners), and the Partners (other than
Special Limited Partners) shall determine in good faith that the terms and
conditions of any employment, contract or other dealing are fair and reasonable
to the Partnership and any such arrangement shall be approved as set forth in
Section 4.3 hereof.
4.6 Special Limited Partners
The Partners (other than Special Limited Partners), if approved by
WWC and INS, may (i) admit as a Special Limited Partner an officer, director,
employee or agent of the Partnership or of any Partner who performs services for
the Partnership or (ii) agree to compensate any such Person in a manner which is
the substantial equivalent of owning a Percentage Interest in the Partnership,
provided, however, that the aggregate share of the Profits and Losses and cash
distributions of the Partnership which such admitted Special Limited Partners
are entitled to pursuant to this Section 4.6 shall not exceed five (5%) percent,
and such admitted Special Limited Partners shall not be entitled to vote on any
matter in which the Partners can vote hereunder nor shall such Special Limited
Partners' consent or approval be required for the Partnership, the General
Partner or the Partners to take any action whatsoever, including amendment of
this Agreement or admission of new Partners. Upon the admission of any Special
Limited Partner pursuant to this Section 4.6, the Percentage Interest of the
Persons who are Partners immediately before the admission of such Special
Limited Partner shall be adjusted pro rata.
4.7 Meetings of Partners. Meetings of the Partners will be held at the
principal office of the Partnership unless another place has been agreed upon by
the Partners. At least four meetings of the Partners shall be held during each
calendar year. Meetings shall be held on fifteen (15) Business Days' notice
given pursuant to Section 13.4 hereof. Notice delivered personally or by
telephone may be transmitted to a person at the Partner's office who can
reasonably be expected to deliver such notice promptly to the Partner.
Representatives of the Partners may participate in a meeting of the Partners by
means of conference telephone or similar communications equipment so long as all
persons participating in a meeting can hear each other. A Partner's
participation in a meeting by such means shall constitute presence in person at
such meeting. Presence by a Partner at a meeting of the Partners shall
constitute waiver by such Partner of any defect in the notice in respect of such
a meeting. Any action required or permitted to be taken by the Partners may be
taken without a meeting if the General Partner and WWC consent thereto in
writing.
ARTICLE 5
OPERATIONS
5.1 Technology. The Partnership shall use GSM technology in its
operation of the
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PCS Networks. Any successor to the Partnership or the Partnership's successor to
any portion of the spectrum being contributed by WWC shall be required to use
GSM technology; provided, however, that equity holders of INS Parent who use
spectrum pursuant to the Participation Agreement and Partitioning Agreement as
provided in Section 5.2 hereof shall not be required to use GSM technology.
5.2 Participation Agreement. Pursuant to the Participation Agreement and
Partitioning Agreement in the form attached hereto as Exhibit 5.2 and hereby
approved by WWC, the Partnership may disaggregate/partition and assign the FCC
license, make available through a resale agreement or otherwise permit the use
by the individual equity holders of INS Parent of up to ten (10 MHz) megahertz
of spectrum in the Territory and the Des Moines BTA Counties. This Section 5.2
shall be applicable only following the Closing Date.
5.3 Additional Spectrum; Des Moines BTA Counties Spectrum; Call and Put
Options. The FCC license for the ten (10 MHz) megahertz of A Block PCS spectrum
covering the Territory not assigned by WWC to the Partnership pursuant to
Section 3.1(a) hereof shall be referred to herein as the "Additional Spectrum."
The FCC license for the ten (10 MHz) megahertz of A Block PCS Spectrum covering
the Des Moines BTA Counties not assigned by WWC to the Partnership pursuant to
Section 3.1(a) hereof shall be referred to as the "Des Moines BTA Counties
Spectrum". Pursuant to a resale agreement to be negotiated in good faith between
the parties within ninety (90) days after the date hereof, the Partnership shall
be permitted to become a reseller on the Additional Spectrum and the Des Moines
BTA Counties Spectrum. On the Closing Date, WWC and the Partnership shall enter
into an agreement, to be negotiated in good faith between the parties within
ninety (90) days after the date hereof, which shall provide as follows:
(a) if at any time after the Closing Date and prior to any sale by
WWC of the Additional Spectrum to a third party there is a transfer of control
of ownership of WWC (which shall mean that the ownership of a majority of the
outstanding capital stock of WWC ceases to be owned, directly or indirectly, by
Western Wireless Corporation), the Partnership will have the right for a period
of sixty (60) days following such transfer of control of WWC to purchase all,
but not less than all, of the Additional Spectrum for a price equal to five
million five hundred thousand ($5,500,000) dollars plus Additional Spectrum
Interest ("Additional Spectrum Interest" shall be equal to the sum of forty-one
thousand two hundred fifty ($41,250) dollars times the number of months (or
portions thereof) between the date hereof and the date on which the Partnership
purchases the Additional Spectrum) paid in cash; and
(b) WWC will have the right at any time after the Closing Date to
cause the Partnership to purchase (i) the Additional Spectrum (provided that the
Partnership has not exercised its option to purchase the Additional Spectrum
pursuant to subsection (a) of this Section 5.3) for a price equal to five
million five hundred thousand ($5,500,000) dollars plus Additional Spectrum
Interest, calculated through the date on which the Partnership purchases the
Additional Spectrum, paid in cash and/or (ii) the Des Moines BTA Counties
Spectrum for a price
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equal to five hundred thousand ($500,000) dollars plus Des Moines BTA Counties
Interest ("Des Moines BTA Counties Interest" shall be equal to the sum of three
thousand seven hundred fifty ($3,750) dollars times the number of months (or
portions thereof) between the date hereof and the date on which the Partnership
purchases the Des Moines BTA Counties Spectrum), paid in cash.
This Section 5.3 shall be applicable only following the Closing Date.
5.4 Microwave Relocation. The Partnership shall arrange and pay for all
necessary microwave relocation in connection with the PCS Networks. This Section
5.4 shall be applicable only following the Closing Date.
ARTICLE 6
BOOKS, REPORTS, FISCAL YEAR AND REPORTS
6.1 Books and Records. The Partnership shall maintain at its principal
office all of the following:
(a) A current list of the full name and last known business or
residence address of each Partner set forth in alphabetical order together with
the Capital Contributions made and each Partner's Percentage Interest in the
Partnership;
(b) A copy of this Agreement and all amendments thereto, a copy of
the Certificate of Limited Partnership of the Partnership and all amendments
thereto, together with executed copies of any powers of attorney pursuant to
which any amendment to this Agreement, the Certificate of Limited Partnership of
the Partnership or any amendment thereto has been executed;
(c) Copies of the Partnership's Federal, state, and local income
tax or information returns and reports, if any, with respect to the six most
recent fiscal years, or for such longer period required by any waivers extending
periods of limitation to assess any such taxes;
(d) The audited financial statements of the Partnership for the
six most recent fiscal years, or for such longer period required by any waivers
extending periods of limitation to assess any Federal, state or local taxes; and
(e) The Partnership's books and records for the six most recent
fiscal years, or for such longer period required by any waivers extending
periods of limitation to assess any Federal, state or local taxes.
6.2 Delivery to Partners and Inspection.
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(a) Upon the request of a Partner (other than a Special Limited
Partner), the General Partner shall promptly deliver to the requesting Partner,
at the expense of the Partnership, a copy of any of the information required to
be maintained by Section 6.1 hereof except for Section 6.1(e) hereof.
(b) Each Partner (other than a Special Limited Partner) or its
duly authorized representative, has the right, upon reasonable notice and at
reasonable times during business hours, to do each of the following:
(i) Inspect and copy during normal business hours any of the
Partnership's books and records;
(ii) Obtain from the General Partner, promptly after becoming
available, a copy of the Partnership's Federal, state and local income tax or
information returns for each year, including the Partnership's Form 1065
(including any schedules and exhibits thereto); and
(iii) Have access to executive officers of the Partnership and
of the General Partner.
6.3 Fiscal Year. The fiscal year of the Partnership shall be the
calendar year.
6.4 Financial Reports. Within forty-five (45) days after the end of each
fiscal quarter and within ninety (90) days after the end of each fiscal year,
the General Partner shall cause to be prepared and delivered to each Partner a
financial statement which shall include a balance sheet, a profit and loss
statement, use of proceeds of the Capital Contributions and, with respect to the
annual statements, a report of the Profits and Losses, the share of the Profits
and Losses of each of the Partners, and any other information necessary for such
Partner to complete its Federal, state and local income tax returns. The annual
statements shall be certified by the Accountants for such period. Such firm
shall also prepare the Federal, state and local tax and information returns of
the Partnership, shall cause such tax and information returns to be filed on a
timely basis and shall, promptly after the filing of the same, transmit copies
thereof to each of the Partners. Anything herein contained to the contrary
notwithstanding, it is expressly understood and agreed that the Partners shall,
from time to time, review with the Accountants the accounting methods and
procedures to be used as the same may be mutually beneficial and advantageous to
the Partners. Subject to the provisions of Article 7 hereof, in connection with
such accounting methods, all decisions as to accounting principles, whether for
book or tax purposes, including any elections to be made by or for the
Partnership under the provisions of the Code or other applicable tax law, shall
be made for the mutual advantage of the Partners. The financial statements of
the Partnership shall be prepared in accordance with generally accepted
accounting principles as in effect in the United States.
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6.5 Filings. The General Partner, at Partnership expense, shall cause
the income tax and information returns for the Partnership to be prepared and
timely filed with the appropriate authorities within ninety (90) days of the end
of each fiscal year of the Partnership and shall not request any extensions for
filing such returns without the consent of the Partners (other than Special
Limited Partners). The General Partner, at Partnership expense, shall also cause
to be prepared and timely filed, with appropriate Federal and other regulatory
and administrative bodies, all reports required to be filed with those entities
under then current applicable laws, rules and regulations. Such reports shall be
prepared on the accounting or reporting basis required by such regulatory
bodies. Upon written request any Partner shall promptly be provided with a copy
of any of such reports without expense to it.
6.6 Monthly Reports to Partners. The General Partner shall cause to be
prepared, at Partnership expense, a monthly report covering such matters as it
reasonably deems appropriate, copies of which monthly report shall be
distributed to each Limited Partner within thirty (30) days after the close of
each calendar month.
ARTICLE 7
PROFITS AND LOSSES
7.1 Allocations of Profits and Losses. For tax and accounting purposes,
Profits and Losses of the Partnership for each fiscal year shall be allocated to
the Partners as follows:
(a) Subject to Section 7.2 hereof, Profits other than those
arising from a Capital Transaction shall be allocated (i) first to the extent of
prior allocations of Losses allocated to each Partner (as reduced by any Profits
previously allocated to such Partner pursuant to Sections 7.1(b)(i) and 7.2(a)
hereof and this Section 7.1(a)), in proportion to the amount of prior Losses
allocated to each Partner; provided, however, that if any Partner has a deficit
Capital Account balance, then such Profits shall be allocated to all such
Partners in proportion to their respective deficit Capital Account balances
until such time as the deficit Capital Account balance of each Partner is
eliminated, and (ii) then all remaining Profits shall be allocated among the
Partners in accordance with their respective Percentage Interests.
(b) Subject to Section 7.2 hereof, Profits arising from a Capital
Transaction shall be allocated as follows:
(i) To eliminate any deficit in each Partner's Capital
Account, with Profits being allocated in proportion to the negative balance in
each Partner's Capital Account; and
(ii) The balance so that, as nearly as possible after such
allocation, the Capital Account balance of each Partner shall be equal to the
proceeds from such Capital Transaction which would be distributable to such
Partner pursuant to the provisions of Section
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8.2 hereof.
(c) (i) Subject to Section 7.2 hereof, Losses shall be allocated
one hundred (100%) percent to INS until such time as INS shall have been
allocated Losses in an amount equal to its Paid-In Capital Contributions;
thereafter, Losses shall be allocated among the Partners in accordance with
their respective Percentage Interests.
(ii) The Losses allocated pursuant to this Section 7.1(c)
shall not exceed the maximum amount of Losses that can be so allocated without
causing any Limited Partner or Special Limited Partner to have an Adjusted
Capital Account Deficit at the end of any fiscal year of the Partnership. All
Losses in excess of the limitations set forth in this Section 7.1(c) shall be
allocated to the General Partner.
(d) Nonrecourse Liabilities of the Partnership shall be allocated
among the Partners in the same manner as Profits are allocated pursuant to
Section 7.1(b)(ii) hereof.
(e) (i) Nonrecourse Deductions for any fiscal year of the
Partnership or other period shall be specially allocated in the same manner as
Losses with respect to such fiscal year have been allocated pursuant to Section
7.1(c) hereof.
(ii) Any Partner Nonrecourse Deductions for any fiscal year
of the Partnership or other period shall be specially allocated to the Partner
who bears the risk of loss with respect to the Partner Nonrecourse Debt to which
such Partner Nonrecourse Deductions are attributable in accordance with Section
1.704-2(i) of the Regulations.
(f) Where a distribution of an asset is made in the manner
described in Section 734 of the Code, or where a transfer of a Percentage
Interest permitted by this Agreement is made in the manner described in Section
743 of the Code, the Partnership shall file, upon the request of any Partner, an
election under Section 754 of the Code, in accordance with the procedures set
forth in the applicable Regulations. To the extent an adjustment to the adjusted
tax basis of any Partnership asset pursuant to Section 734(b) or 743(b) of the
Code is required, pursuant to Section 1.704-1(b)(2)(iv)(m) of the Regulations,
to be taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis) and such gain or loss shall be specially allocated to the
Partners in a manner consistent with the manner in which their Capital Accounts
are required to be adjusted pursuant to such Section of the Regulations.
(g) Except as otherwise provided herein, each Partner shall be
allocated Profits and Losses in accordance with this Section 7.1 from the date
on which it is admitted to the Partnership. For purposes of determining the
Profits, Losses, or any other items allocable to any period, Profits, Losses,
and any such other items shall be determined on a daily, monthly, or other
basis, as determined by the General Partner using any permissible method under
Section
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706 of the Code and the Regulations promulgated thereunder. Notwithstanding
anything to the contrary contained herein, during any fiscal year allocations of
Profits or Losses which do not arise from a Capital Transaction pursuant to the
provisions contained herein shall be made before allocations of Profits or
Losses arising from a Capital Transaction.
(h) Except as otherwise provided in this Agreement, all items of
Partnership income, gain, loss, deduction, and any other allocations not
otherwise provided for herein shall be divided among the Partners in the same
proportions as they share Profits or Losses, as the case may be, for the fiscal
year of the Partnership.
7.2 Overriding Allocations of Profits and Losses.
(a) (i) Notwithstanding anything contained in Section 7.1 hereof
or this Section 7.2 to the contrary, if there is a net decrease in Partnership
Minimum Gain during a fiscal year of the Partnership, each Partner shall be
allocated, before any other allocation of any item of income, gain, loss,
deduction or credit is made for such fiscal year, items of income and gain for
such fiscal year (and, if necessary, for subsequent fiscal years), in the order
provided in Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the Regulations, in an
amount equal to such Partner's share of the net decrease in Partnership Minimum
Gain during such year as specified in Section 1.704-2(g)(2) of the Regulations,
unless an exception specified in Section 1.704-2(f) of the Regulations applies.
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant thereto.
The allocation contained in this Section 7.2(a)(i) is intended to comply with
the minimum gain charge back requirement in Section 1.704-2(f) of the
Regulations, and shall be interpreted consistently therewith. Thereafter,
subject to Section 7.2(f) hereof, all Profits and Losses shall be allocated as
provided for in Sections 7.1, 7.2(a)(ii), 7.2(b), 7.2(c), 7.2(d) and 7.2(e)
hereof.
(ii) Notwithstanding anything contained in Section 7.1 hereof
or this Section 7.2 to the contrary, except Section 7.2(a)(i) hereof, if there
is a net decrease in Partner Nonrecourse Debt Minimum Gain during a fiscal year
of the Partnership, each Partner who has a share of the Partner Nonrecourse Debt
Minimum Gain attributable to such Partner Nonrecourse Debt determined in
accordance with Section 1.704-2(i)(5) of the Regulations, shall be specially
allocated items of income and gain for such fiscal year (and, if necessary,
subsequent fiscal years), in the order provided in Sections 1.704-2(i)(4) and
1.704-2(j)(2) of the Regulations, in an amount equal to such Partner's share of
the net decrease in Partner Nonrecourse Debt Minimum Gain attributable to such
Partner Nonrecourse Debt during such year as specified in Section 1.704-2(i)(5)
of the Regulations, unless an exception specified in Section 1.704-2(i)(4) of
the Regulations applies. Allocations pursuant to the previous sentence shall be
made in proportion to the respective amounts required to be allocated to each
Partner pursuant thereto. The allocation contained in this Section 7.2(a)(ii) is
intended to comply with the minimum gain charge back requirement in Section
1.704-2(i)(4) of the Regulations, and shall be interpreted consistently
therewith. Thereafter, subject to Section 7.2(f) hereof, all Profits and Losses
shall be allocated as provided for in Sections 7.1, 7.2(b), 7.2(c), 7.2(d) and
7.2(e) hereof.
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(b) Notwithstanding any provisions of Section 7.1 hereof or this
Section 7.2 to the contrary, but subject to the provisions of Section 7.2(a)
hereof, in the event any Partner unexpectedly receives any adjustments,
allocations, or distributions described in Section 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of
Partnership income and gain (including gross income) shall be specially
allocated to each such Partner in an amount and manner sufficient to eliminate,
to the extent required by the Regulations, the Adjusted Capital Account Deficit
of such Partner as quickly as possible, provided that an allocation pursuant to
this Section 7.2(b) shall be made only if and to the extent that such Partner
would have an Adjusted Capital Account Deficit after all other allocations
provided for in this Article 7 have been tentatively made as if this Section
7.2(b) were not in this Agreement. In the event that any such adjustments,
allocations or distributions create an Adjusted Capital Account Deficit for more
than one Partner in any fiscal year of the Partnership, all such items of income
and gain of the Partnership for such fiscal year and all subsequent fiscal years
of the Partnership shall be allocated among all such Partners in proportion to
their respective Adjusted Capital Account Deficits in such amount and manner
sufficient to eliminate such Adjusted Capital Account Deficits as quickly as
possible. The allocation contained in this Section 7.2(b) is intended to comply
with the qualified income offset requirement in Section 1.704-1(b)(2)(ii)(d) of
the Regulations, and shall be interpreted consistently therewith. Thereafter,
subject to Section 7.2(f) hereof, all Profits and Losses shall be allocated as
provided for in Sections 7.1, 7.2(c), 7.2(d) and 7.2(e) hereof.
(c) Notwithstanding any provisions of Section 7.1 hereof or this
Section 7.2 to the contrary, but subject to the provisions of Section 7.2(a) and
7.2(b) hereof, there shall be allocated to each Partner in any taxable year of
the Partnership, before any other allocation of any item of income or gain is
made for such taxable year (other than an allocation pursuant to Sections 7.2(a)
and 7.2(b) hereof), an amount of gross income equal to the amount of
distributions that was distributed to such Partner pursuant to Section
8.1(c)(ii) hereof with respect to such taxable year (less the amount of taxable
income allocated to such Partner pursuant to Section 7.1(a) hereof with respect
to such taxable year). Thereafter, all Profits and Losses shall be allocated
provided for in Sections 7.1, 7.2(d) and 7.2(e) hereof.
(d) Notwithstanding any provisions of Section 7.1 hereof or this
Section 7.2 to the contrary, but subject to the provisions of Sections 7.2(a),
7.2(b) and 7.2(c) hereof:
(i) in accordance with Section 704(c) of the Code and the
Regulations promulgated thereunder, income, gain, loss, and deduction with
respect to any property contributed to the capital of the Partnership shall,
solely for tax purposes, be allocated among the Partners as provided in Section
704(c) of the Code so as to take account of any variation between the adjusted
basis of such property to the Partnership for Federal income tax purposes and
its initial Gross Asset Value;
(ii) depreciation, amortization or other cost recovery
deduction
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allowable for Federal income tax purposes with respect to any property specified
in the immediately preceding clause (i) shall be specially allocated so that, to
the extent possible, the Partners who did not contribute such property to the
Partnership shall not be disadvantaged by such contribution;
(iii) in the event the Gross Asset Value of any Partnership
asset is adjusted as provided herein, subsequent allocations of income, gain,
loss, and deduction with respect to such asset shall take account of any
variation between the adjusted basis of such asset for Federal income tax
purposes and its Gross Asset Value in the same manner as under Section 704(c) of
the Code and the Regulations promulgated thereunder;
(iv) any elections or other decisions relating to the
allocations provided in this Section 7.2(d) shall be made by the General Partner
as provided in Section 704(c) of the Code in any manner that reasonably reflects
the purpose and intention of this Agreement; allocations pursuant to this
Section 7.2(d) are solely for purposes of Federal, state, and local taxes and
shall not affect, or in any way be taken into account in computing, any
Partner's Capital Account or share of Profits, Losses, other items, or
distributions pursuant to any provision of this Agreement;
(v) in the event that the General Partner is allocated more
Losses pursuant to Section 7.1(c)(ii) hereof than its Percentage Interest
therein, the General Partner shall thereafter be allocated all Profits to the
extent that the aggregate Losses theretofore allocated to the General Partner
pursuant to Section 7.1(c)(ii) hereof shall have exceeded the Losses that would
have otherwise theretofore been allocated to the General Partner had the
provisions of Section 7.1(c)(ii) hereof not been given effect; and
(vi) in the event any Limited Partner or Special Limited
Partner has a deficit Capital Account balance at the end of any fiscal year of
the Partnership that is in excess of the sum of (a) the amount such Partner is
obligated to restore to its Capital Account (pursuant to the terms of this
Agreement or otherwise) and (b) the amount such Partner is deemed to be
obligated to restore to its Capital Account pursuant to the penultimate
sentences of Sections 1.704-2(g)(l) and 1.704-2(i)(5) of the Regulations, each
such Partner shall be specially allocated items of Partnership income and gain
in the amount of such excess as quickly as possible, provided that an allocation
pursuant to this Section 7.2(d)(vi) shall be made if and only to the extent that
such Partner would have a deficit Capital Account balance in excess of such sum
after all other allocations provided for in this Article 7 have been tentatively
made as if Section 7.2(b) hereof and this Section 7.2(d)(vi) were not in this
Agreement.
(e) The allocations set forth in Sections 7.1(c)(ii), 7.1(e),
7.1(f), 7.2(a), 7.2(b) and 7.2(d)(vi) hereof (the "Regulatory Allocations") are
intended to comply with certain requirements of the Regulations. It is the
intent of the Partners that, to the extent possible, all Regulatory Allocations
shall be offset either with other Regulatory Allocations or with special
allocations of other items of Partnership income, gain, loss or deduction
pursuant to this Section
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7.2(e). Therefore, notwithstanding any other provision of this Article 7 (other
than the Regulatory Allocations), the General Partner shall make such offsetting
special allocations of Partnership income, gain, loss or deduction in whatever
manner it determines appropriate so that, after such offsetting allocations are
made, each Partner's Capital Account balance is, to the extent possible, equal
to the Capital Account balance such Partner would have had if the Regulatory
Allocations were not part of this Agreement and all Partnership items were
allocated pursuant to Sections 7.1(a), 7.1(b) and 7.1(c)(i) hereof. In
exercising its discretion under this Section 7.2(e), the General Partner shall
take into account future Regulatory Allocations under Section 7.2(a) hereof
that, although not yet made, are likely to offset other Regulatory Allocations
previously made under Section 7.1(e) hereof.
(f) Notwithstanding anything to the contrary contained herein,
Sections 7.2(a) and 7.2(b) hereof shall be applied in the order provided in
Section 1.704-2 of the Regulations.
(g) Any allocations made pursuant to this Section 7.2 shall be
taken into account in the making of subsequent allocations under other sections
of this Article 7 in a manner that will, to the maximum extent possible, avoid
or eliminate duplicative or excessive allocations of income to any Partner.
7.3 Certain Additional Allocations.
(a) For income tax purposes, if the Partnership in any year
realizes income or is allowed a deduction (including additional depreciation or
amortization as a result of adding an item to its basis) as a result of the
transfer of a Percentage Interest or the transfer of an interest in property to
a Partner, the difference between the amount taken into account for tax purposes
and the amount otherwise taken into account under this Agreement shall be
allocated solely to such Partner.
(b) Solely for purposes of determining a Partner's proportionate
share of the "excess nonrecourse liabilities" of the Partnership within the
meaning of Section 1.752-3(a)(3) of the Regulations, the Partner's interests in
Partnership Profits are as provided in Section 7.1(b) hereof.
(c) To the extent permitted by Section 1.704-2(h)(3) of the
Regulations, the General Partner shall endeavor not to treat distributions as
having been made from the proceeds of a Nonrecourse Liability or a Partner
Nonrecourse Debt. To the extent permitted by Sections 1.704-2(h) and
1.704-2(i)(6) of the Regulations, if the provisions of the preceding sentence
cannot be satisfied, the General Partner shall endeavor to treat distributions
as having been made from the proceeds of a Nonrecourse Liability or a Partner
Nonrecourse Debt only to the extent that such distributions would cause or
increase an Adjusted Capital Account Deficit for each Partner on a pro rata
basis.
(d) The Partners are aware of the income tax consequences of the
allocations
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made by this Article 7 and hereby agree to be bound by the provisions of this
Article 7 in reporting their shares of Partnership income and loss for income
tax purposes
ARTICLE 8
DISTRIBUTIONS
8.1 Distributions.
(a) Except as otherwise provided by this Agreement or required by
law, distributions (other than distributions of the proceeds of any Capital
Transaction) shall be made to the Partners at such time and in such amounts as
the Partners shall determine.
(b) Distributions (other than distributions of the proceeds of any
Capital Transaction) shall be distributed to the Partners in the proportions of
their respective Percentage Interests at the time such distribution shall be
made.
(c) Notwithstanding the foregoing provisions of this Section 8.1,
within ninety (90) days after the end of each fiscal year of the Partnership,
the Partnership shall make an annual distribution to each of the Partners, in
accordance with each Partner's respective share of the Percentage Interests, in
an amount equal to the sum of (i) forty (40%) percent of the Profits allocated
to the Partners pursuant to Section 7.1(a)(ii) hereof with respect to the prior
fiscal year of the Partnership, and (ii) any cash or cash equivalents held by
the Partnership at the start of the fiscal year of the Partnership during which
such distribution takes place (after taking into account any distribution
pursuant to this Section 8.1(c) during such year)which is in excess of the
reasonable business needs of the Partnership, including the funding of any
reserves required in connection therewith.
8.2 Distributions of Proceeds from Capital Transactions.
(a) Subject to the provisions of Section 11.4 hereof, the proceeds
of any Capital Transaction shall be applied in the following order of priority:
(i) To the payment of liabilities of the Partnership then
due and owing to (a) persons other than the Partners and (b) the Partners if
such liabilities are for amounts owing to any Partner for services rendered to
the Partnership;
(ii) To the payment of any other liabilities of the
Partnership then due and owing to the Partners;
(iii) To establish such reserves as the General Partner
determines to be reasonably necessary for any contingent or foreseeable
liability or obligation of the Partnership; provided, however, that the balance
of any such reserve remaining at such time as the General
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Partner shall reasonably determine shall be distributed in accordance with
subsections (iv) and (v) of this Section 8.2(a);
(iv) To each Partner until it has received an amount pursuant
to this Section 8.2(a)(iv) equal to its Paid-In Capital Contributions, as
reduced by any prior distribution to such Partner pursuant to this Section
8.2(a)(iv); and
(v) The balance, if any, to the Partners in proportion to
their respective Percentage Interests at the time such distribution is made;
provided, however, that if it is not possible to allocate Profits and Losses
from a Capital Transaction so that the Capital Account balance of each Partner
is equal to the distribution such Partner would otherwise receive under the
provisions of this subsection (v), such proceeds shall instead be distributed to
each Partner until the ratio of its Capital Account balance to the Capital
Account balances of all the Partners is equal to its Percentage Interest, and
the balance if any, of such proceeds shall be distributed pursuant to the
provisions of this subsection (v) without regard to this proviso.
(b) The proceeds of any refinancing of any indebtedness of the
Partnership shall be distributed (i) to the full payment of the indebtedness
refinanced, and (ii) the balance to be distributed as agreed by the Partners.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification by Partnership. To the maximum extent permitted by
law, the Partnership, its receiver or its trustee, shall indemnify and hold
harmless a Partner and its Affiliates (and any officer, director, shareholder,
partner, employee or agent of any thereof) from and against any liability, loss
or damage incurred by them arising out of any acts, omissions, or alleged acts
or omissions, arising out of such person's activities as a Partner, a General
Partner, or Affiliate of any thereof (or as an officer, director, shareholder,
partner, employee or agent of any thereof) (including costs and reasonable
attorneys' fees, which attorneys' fees may be paid as incurred, subject to the
provisions of the penultimate sentence of this Section 9.1), and any amounts
expended in the settlement of any claim of liability, loss or damage; provided,
however, that (a) there shall be no obligation to indemnify or hold harmless any
such indemnitee if such liability, loss or damage arises out of any action or
omission of any such indemnitee which constitutes bad faith, fraud, gross
negligence, willful misconduct or violation of any of the terms, provisions and
conditions of this Agreement by such indemnitee; and (b) any such
indemnification shall be recoverable only from the assets of the Partnership and
not from the assets of any Partner. All judgments against the Partnership and
any such indemnitee, wherein an indemnitee is entitled to indemnification, must
first be satisfied from Partnership assets before such indemnitee is responsible
for these obligations. The Partnership shall not pay for any insurance covering
liability of any Partner or any of its Affiliates for actions or omissions for
which indemnification is not permitted hereunder; provided, however, that
nothing contained
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herein shall preclude the Partnership from purchasing and paying for such types
of insurance, including extended coverage liability and casualty and workers'
compensation, as would be customary for any person owning comparable assets and
engaged in a similar business, or from naming the Partners or any of their
Affiliates as additional insured parties thereunder, if such addition does not
add to the premiums payable by the Partnership. Nothing contained herein shall
constitute a waiver by any Partner of any right which it may have against any
party under Federal or state securities laws nor shall a Partner be permitted to
contract away the fiduciary duty owed to it by the other Partners or their
Affiliates under common law. The provision of advances from the Partnership to a
Partner or any of its Affiliates for legal expenses and other costs incurred as
a result of a legal action is permissible if the following three conditions are
satisfied: (i) the legal action relates to the performance of duties or services
by the Partner or any of its Affiliates on behalf of the Partnership; (ii) the
legal action is initiated by a third party who is not a Partner; and (iii) the
Partner or its Affiliates undertake to repay to the Partnership the funds so
advanced in cases in which they would not be entitled to indemnification
hereunder. Notwithstanding anything to the contrary contained herein, in no
event shall any indemnity under this Section 9.1 be applicable to any
expenditures or obligations of any Partner or any of its Affiliates which are
the subject of a separate obligation or guaranty to the Partnership by the
Partner or any of its Affiliates.
9.2 Indemnification by Partners. Notwithstanding the provisions of
Section 9.1 hereof, no Partner or any of its Affiliates (nor any officer,
director, shareholder, partner, employee or agent thereof) shall be indemnified
or held harmless pursuant to Section 9.1 hereof from any liability, loss or
damage incurred by them in connection with, and each such Person, in addition to
being subject to the other remedies and liabilities that may be imposed on it
therefor, shall indemnify and hold harmless the Partnership and the other
Partners from and against any liability, loss or damage incurred by them by
reason of (i) bad faith, fraud, gross negligence, willful misconduct or
violations of any of the terms, provisions and conditions of this Agreement; or
(ii) any claim or settlement involving allegations that Federal or state
securities laws associated with the offer and sale of a Percentage Interest were
violated by the Partner or any of its Affiliates unless: (a) the indemnitee is
successful in defending such action on the merits of each count involving
securities laws violations and such indemnification is specifically approved by
a court of competent jurisdiction; (b) such claims have been dismissed with
prejudice on the merits by a court of competent jurisdiction and the court
specifically approves such indemnification; or (c) a court of competent
jurisdiction approves a settlement of the claims against the entity seeking
indemnification involving securities law violations and finds that
indemnification of the settlement and related costs should be made.
ARTICLE 10
ASSIGNMENT OF PERCENTAGE INTEREST AND
ADMISSION OF NEW PARTNERS
10.1 Assignment of a Percentage Interest. No Partner may Assign any of
its
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Percentage Interest without first offering to sell such Percentage Interest
pursuant to the provisions of this Article 10. No Assignment of a Percentage
Interest shall be valid or effective unless it shall comply with the provisions
of this Article 10.
10.2 Rights of First Offer. In the event a Partner (an "Assigning
Partner") desires to Assign part or all of the Percentage Interest (the "Offered
Percentage Interest") owned by such Partner to a Person other than to a Person
which is an Affiliate of the Assigning Partner, such Assigning Partner shall
first give written notice (the "Sale Notice") in writing to each of the other
Partners other than any Special Limited Partners (the "Non-Assigning Partners").
Each Sale Notice shall describe in reasonable detail the amount of the Offered
Percentage Interest, the purchase price requested and all other material terms
and conditions of the proposed Assignment. The Non-Assigning Partners shall have
the first right and option, but not the obligation, to purchase the Offered
Percentage Interest at the price and upon the terms and conditions set forth in
the Sale Notice. The Sale Notice shall constitute an irrevocable offer (a "Sale
Offer") to sell the Offered Percentage Interest to the Non-Assigning Partners at
a price equal to the price contained in such Sale Notice and upon substantially
the same terms as the terms contained in such Sale Notice. The Sale Offer shall
expire thirty (30) days after the Sale Notice is received by the Non-Assigning
Partners. Any Non-Assigning Partner who desires to purchase part or all of the
Offered Percentage Interest (individually, an "Acquiring Partner," and
collectively, the "Acquiring Partners") shall give notice in writing of such
desire to the Assigning Partner, with a copy to each other Non-Assigning
Partner, within thirty (30) days after the giving of notice by the Assigning
Partner pursuant to the first sentence of this Section 10.2, which notice shall
set forth how much of the Offered Percentage Interest such Acquiring Partner
desires to purchase. If the Non-Assigning Partner(s) declines (which shall
include the failure to give timely notice of acceptance) to purchase all of the
Offered Percentage Interest within such thirty (30) day period, the Assigning
Partner shall have the right (for a period of sixty (60) days following the
expiration of such thirty (30) day period) to sell the Offered Percentage
Interest to a third party, subject to the right of refusal that exists pursuant
to Section 10.3 hereof, in a bona fide transaction or transactions; provided,
however, that (a) such sale may be only to a third party, pursuant to terms and
conditions not more favorable to such third party than those contained in the
Sale Offer and (b) the provisions of Section 10.7 hereof shall be applicable to
such third party and any Percentage Interest sold to such third party. If any
portion of the Offered Percentage Interest is not sold pursuant to the
provisions of this Section 10.2 prior to the expiration of the sixty (60) day
period specified in the immediately preceding sentence, such Offered Percentage
Interest shall become subject once again to the provisions and restrictions of
this Section 10.2. If two (2) or more Acquiring Partners notify the Assigning
Partner of their desire to acquire all or portions of the Offered Percentage
Interest, which in the aggregate exceed the Offered Percentage Interest, each
Acquiring Partner shall acquire that portion of such Offered Percentage Interest
determined by multiplying the Offered Percentage Interest by a fraction, the
numerator of which is the Percentage Interest of such Acquiring Partner, and the
denominator of which is the total Percentage Interests of all Acquiring
Partners, and each such Acquiring Partner shall be required to pay to the
Assigning Partner a portion of the purchase price for the Offered Percentage
Interest determined by multiplying the total purchase price by the same
fraction, unless any Acquiring
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Partner desires to purchase less than its full portion of such Offered
Percentage Interest as determined above, in which case the other Acquiring
Partners shall purchase the balance of such portion in proportion to their
respective Percentage Interests in series as each remaining Acquiring Partner
refuses to purchase its proportionate share of the Offered Percentage Interest.
10.3 Right of First Refusal.
(a) In addition to the right of first offer set forth in Section
10.2, in the event a Partner (a "Selling Partner") desires to Assign part or all
of the Percentage Interest owned by such Partner to a Person other than to a
Person which is an Affiliate of the Selling Partner or to a Non-Assigning
Partner pursuant to Section 10.2 hereof, such Selling Partner shall first obtain
an irrevocable and unconditional bona fide arms'-length written offer therefor
which such Selling Partner will accept (the "Purchase Offer"), and the Selling
Partner shall give notice in writing to each of the other Partners other than
any Special Limited Partners (the "Non-Selling Partners") that it wishes to
accept the Purchase Offer. Such notice shall contain a statement setting forth
the name and address of the maker of the Purchase Offer, and a true and correct
copy thereof. For a period of thirty (30) days following the giving of such
notice to the Non-Selling Partners, they shall have the first right to purchase
the portion of the Percentage Interest proposed to be Assigned (such portion
being hereinafter referred to as the "Proposed Assigned Percentage Interest") on
the same terms and conditions as the Purchase Offer accompanying such notice,
subject to the provisions of Section 10.3(b) hereof. Any Non-Selling Partner who
desires to purchase part or all of the Proposed Assigned Percentage Interest
(individually, a "Purchasing Partner", and collectively, the "Purchasing
Partners") shall give notice in writing of such desire to the Selling Partner,
with a copy to each other Non-Selling Partner, within thirty (30) days after the
giving of notice by the Selling Partner pursuant to the first sentence of this
Section 10.3(a), which notice shall set forth how much of the Proposed Assigned
Percentage Interest such Purchasing Partner desires to purchase. If two (2) or
more Purchasing Partners notify the Selling Partner of their desire to acquire
all or portions of the Proposed Assigned Percentage Interest, which in the
aggregate exceeds the Proposed Assigned Percentage Interest, each Purchasing
Partner shall acquire that portion of such Proposed Assigned Percentage Interest
determined by multiplying the Proposed Assigned Percentage Interest by a
fraction, the numerator of which is the Percentage Interest of such Purchasing
Partner, and the denominator of which is the total Percentage Interests of all
Purchasing Partners, and each such Purchasing Partner shall be required to pay
to the Selling Partner a portion of the purchase price for the Proposed Assigned
Percentage Interest determined by multiplying the total purchase price by the
same fraction, unless any Purchasing Partner desires to purchase less than its
full portion of such Proposed Assigned Percentage Interest as determined above,
in which case the other Purchasing Partners shall purchase the balance of such
portion in proportion to their respective Percentage Interests in series as each
remaining Purchasing Partner refuses to purchase its proportionate share of the
Proposed Assigned Percentage Interest. If the Purchasing Partners do not give
notice as aforesaid of their intention to purchase the entire Proposed Assigned
Percentage Interest, or if the Purchasing Partners fail to purchase such
Proposed Assigned Percentage Interest as provided in Section 10.4, the Selling
Partner may Assign such Proposed Assigned Percentage Interest to the
33
<PAGE> 38
maker of the Purchase Offer, for a price and upon terms and subject to
conditions not less favorable to the Selling Partner than those contained in the
Purchase Offer, at any time during the ninety (90) day period following the
later of (i) the end of the thirty (30) day period set forth in the third (3rd)
sentence of this Section 10.3(a) hereof or (ii) the date when the Purchasing
Partners so fail to purchase such Proposed Assigned Percentage Interest as
provided in Section 10.4; provided, however, that the provisions of Section 10.7
hereof shall be applicable to the maker of the Purchase Offer and to any
Percentage Interest sold to such maker of the Purchase Offer.
(b) If the consideration specified in the Purchase Offer is all
cash, a Purchasing Partner must pay all cash for its portion of the Proposed
Assigned Percentage Interest in any purchase pursuant to this Section 10.3. In
the event that the consideration specified in the Purchase Offer is other than
all-cash consideration, the following shall apply: (i) if the non-cash
consideration consists solely of obligations of the maker of the Purchase Offer
(either totally unsecured or secured either by the Proposed Assigned Percentage
Interest or by other security which a Purchasing Partner could reasonably
supply), a Purchasing Partner may consummate its purchase of its portion of the
Proposed Assigned Percentage Interest pursuant to this Section 10.3 by paying
the same amount of cash as specified in the Purchase Offer and by issuing its
own obligations to the Selling Partner upon the same terms and conditions and
with the same security as the obligations specified in the Purchase Offer; or
(ii) if the non-cash consideration consists of items which do not fall within
the ambit of the immediately preceding clause (i), a Purchasing Partner may
consummate its purchase of its portion of the Proposed Assigned Percentage
Interest pursuant to this Section 10.3 by electing either (A) to pay all cash
for the Proposed Assigned Percentage Interest in an amount equal to the present
value of the consideration specified in the Purchase Offer, such value to be
agreed upon by the Selling Partner and that Purchasing Partner, or (B) to
acquire its portion of the Proposed Assigned Percentage Interest on the same
terms and conditions as those contained in the Purchase Offer (substituting the
obligations of that Purchasing Partner for the maker of the Purchase Offer as
required and making any other adjustments thereto required by the circumstances
as the Selling Partner and that Purchasing Partner shall agree to). In the event
that the Selling Partner and a Purchasing Partner cannot agree as to a matter
specified in clause (ii) of the immediately preceding sentence within fifteen
(15) days after that Purchasing Partner gives the notice to the Selling Partner
specified in the fourth (4th) sentence of Section 10.3(a) hereof, each of the
Selling Partner and that Purchasing Partner shall designate as an arbitrator a
Person experienced in finance and business, and such two (2) arbitrators shall
designate a third (3rd) arbitrator (or if the first two (2) arbitrators cannot
agree upon a third (3rd) arbitrator within ten (10) days, such third (3rd)
arbitrator shall be chosen by the American Arbitration Association). The
designation of arbitrators hereunder shall automatically delay the due date for
payment of the purchase price for the portion of the Proposed Assigned
Percentage Interest pursuant to Section 10.4 hereof then involved until ten (10)
days after the conclusion of such arbitration. Such arbitrators shall be
directed to promptly conduct, at the expense of the Selling Partner and that
Purchasing Partner, an arbitration to determine by majority vote the matter in
dispute. Such arbitrators shall be directed to give notice of their
determination within thirty (30) days after the appointment of the third (3rd)
arbitrator,
34
<PAGE> 39
and the decision reached in such notice of determination as to the matter in
dispute shall be final, binding and conclusive upon the Selling Partner and that
Purchasing Partner for all purposes hereof.
10.4 Closing. The closing of the purchase of a portion of a Percentage
Interest under Section 10.2 or 10.3 hereof shall take place thirty (30) days
after the expiration of the thirty (30) day period set forth in the third (3rd)
sentence of Section 10.2 hereof or thirty (30) days after the expiration of the
thirty (30) day period set forth in Section 10.3(a) hereof, as the case may be,
which periods may be extended as necessary for the receipt of any FCC approval
which may be required for any such closing, at the offices of the Partnership,
unless an arbitration as specified in Section 10.3 hereof shall occur, in which
event the closing shall take place ten (10) days after the notice of
determination shall be issued in connection with such arbitration and any
required FCC approval has been obtained.
10.5 Tag-Along Rights.
(a) Subject to Sections 10.2 and 10.3 hereof, a Partner (a
"Disposing Partner") shall not Assign, or enter into any agreement, contract or
commitment to Assign, directly or indirectly, or through one or more
intermediaries, any portion of its Percentage Interest unless each other Partner
other than Special Limited Partners (each such Partner, a "Non-Disposing
Partner") is given the opportunity to Assign up to that amount of such
Non-Disposing Partner's Percentage Interest that bears the same proportion to
the total Percentage Interest of such Non-Disposing Partner as the Percentage
Interest proposed to be Assigned by the Disposing Partner bears to the total
Percentage Interest of such Disposing Partner, such Assignment to be concurrent
with the Assignment by the Disposing Partner and at a Per Percentage Interest
Price and on terms and subject to conditions that are not less favorable to that
Non-Disposing Partner than those to the Disposing Partner. A Non-Disposing
Partner may exercise such right by giving notice in writing of such exercise to
the Disposing Partner within thirty (30) days after the giving of notice by the
Disposing Partner pursuant to Section 10.5(b)(i) hereof.
(b) An Assignment specified in Section 10.5(a) hereof cannot be
consummated by the Disposing Partner unless (i) the Disposing Partner shall have
obtained from the Person or group of Persons to which the Disposing Partner
intends to Assign its Percentage Interest such Person's or group of Persons'
agreement to acquire the Percentage Interests of the Non-Disposing Partners as
set forth in Section 10.5(a) hereof; (ii) the Disposing Partner shall have given
notice of such Assignment to each Non-Disposing Partner, setting forth in detail
the name of the Person(s) to whom it intends to Assign and the Per Percentage
Interest Price, terms and conditions of such Assignment and each Non-Disposing
Partner shall have at least thirty (30) days after such notice is given within
which to exercise its rights contained in this Section 10.5 by notice thereof to
the Disposing Partner; (iii) if any Partner owns or holds any options, warrants
or subscription or other rights to acquire Percentage Interests, such Partner
shall have been permitted to exercise, convert or exchange such instruments
strictly in accordance with the terms thereof prior to the consummation of such
Assignment; (iv) the Per Percentage Interest
35
<PAGE> 40
Price, terms and conditions upon which the Disposing Partner Assigns its
Percentage Interest are no more favorable to such Disposing Partner than the
terms set forth in the notice given by it pursuant to clause (i) of this Section
10.5(b); (v) at the time of the Assignment of such Percentage Interest by the
Disposing Partner, the Person or group of Persons to which the Disposing Partner
Assigns its Percentage Interest shall purchase from each Non-Disposing Partner
that exercised its rights pursuant to Section 10.5(a) hereof such portion of
that Non-Disposing Partner's Percentage Interest as that Non-Disposing Partner
elected to Assign pursuant to Section 10.5(a) hereof; and (vi) any required FCC
approval has been obtained.
(c) For purposes of this Section 10.5: (i) any Assignment of a
Percentage Interest by a Partner to an Affiliate of such Partner shall not be
considered an Assignment of such Percentage Interest; and (ii) in calculating
the ownership of any Percentage Interest, a Partner and its Affiliates shall be
deemed to be one entity, owning a Percentage Interest equal to the aggregate
Percentage Interest then owned by all of such entities (so long as no Percentage
Interest shall be counted twice in any such calculation).
10.6 Liability of Assignor. Upon any Assignment of a Partner's Percentage
Interest to another Person, the Assignor shall remain liable for its obligations
to make its Required Capital Contribution in accordance with Section 3.1 hereof
to the extent that the Assignee fails to make such, unless the other Partners
unanimously agree to relieve the Assignee of such obligation.
10.7 Execution of Instruments by Substitute Partner or Additional
Partner. As a condition to the admission of (a) a Person as a Substitute Partner
under this Article 10 or (b) a person as a Special Limited Partner under Section
4.6 hereof, such person shall execute and acknowledge such instruments, in form
and substance reasonably satisfactory to counsel to the Partnership, as counsel
to the Partnership shall deem necessary or desirable to effectuate such
admission and to confirm the agreement of the Person being admitted to be bound
by all of the terms and provisions of this Agreement, as the same may have been
amended, and such Person shall pay all reasonable expenses in connection with
such admission.
10.8 Preemptive Rights. If, subject to Section 4.3 hereof, at any time
after the date hereof (other than by reason of the provisions of Section 4.6
hereof) the Partnership proposes to offer, issue or sell additional percentage
interests (including rights, options or warrants to purchase additional
Percentage Interests) in the Partnership (the "Additional Percentage
Interests"), the General Partner shall, prior to any such issuance or sale, give
written notice (a "Preemptive Notice") to each Partner (other than Special
Limited Partners) setting forth the purchase price of such Additional Percentage
Interests, the aggregate amount of such Additional Percentage Interests to be so
offered, issued or sold, the terms and conditions of such sale and the rights,
powers and duties of such Additional Percentage Interests. Thereafter, each
Partner (other than Special Limited Partners) shall have the right (the
"Preemptive Right") to acquire the percentage of such Additional Percentage
Interests equal to the proportion such Partner's Percentage Interest bears to
the Percentage Interest of all Partners (other than Special Limited Partners)
(without any adjustment by reason of the issuance of such Additional Percentage
36
<PAGE> 41
Interests). Any Partner (other than a Special Limited Partner) may exercise such
Preemptive Right, in whole or in part, on the terms and conditions and for the
purchase price set forth in the Preemptive Notice, by giving to the General
Partner written notice to such effect, within thirty (30) days after the giving
of the Preemptive Notice. After the expiration of such thirty (30) day period
and subject to the receipt of any FCC approval which may be required, the
Partnership shall have the power to issue and sell any or all of the Additional
Percentage Interests referred to in the applicable Preemptive Notice as to which
no Preemptive Right has been exercised, but only upon the terms and conditions,
and for a purchase price not lower than the purchase price, set forth in the
Preemptive Notice.
10.9 Assignments of Equity in WWC. Notwithstanding any other provision of
this Agreement, a sale or transfer of any of the equity interests in WWC or any
of its Affiliates, shall not trigger any right of first offer, right of first
refusal, or tag-along rights under this Agreement, or any other rights of the
other Partners and their Affiliates; provided, however, that nothing in this
Section 10.9 shall affect the right of INS pursuant to Section 5.3(a) to
purchase the Additional Spectrum in the event that the ownership of a majority
of the outstanding capital stock of WWC ceases to be owned, directly or
indirectly, by Western Wireless Corporation.
ARTICLE 11
DISSOLUTION AND TERMINATION OF THE PARTNERSHIP
11.1 Events Causing Dissolution. The Partnership shall continue in full
force and effect until the happening of any of the following events:
(a) An election to dissolve the Partnership made by the WWC and
INS;
(b) The Withdrawal of the General Partner unless the Partnership
shall be continued pursuant to Section 12.3 hereof;
(c) Any event which shall make it unlawful for the existence of
the Partnership to be continued;
(d) The sale or other disposition of all or substantially all of
the assets of the Partnership; or
(e) if the Closing Date shall not have occurred on or before the
first anniversary of the date hereof.
11.2 Liquidation of the Partnership. Upon the dissolution of the
Partnership, the Partnership shall be liquidated in accordance with this Article
11. The liquidation shall be conducted and supervised by the Liquidating Agent,
which shall be designated for such purpose by WWC and INS. The Liquidating Agent
shall have all of the rights in connection with the
37
<PAGE> 42
liquidation and termination of the Partnership that the Partners would have with
respect to the assets and liabilities of the Partnership during the term of the
Partnership, and the Liquidating Agent is hereby expressly authorized and
empowered to effectuate the liquidation and termination of the Partnership and
the transfer of any assets and liabilities of the Partnership. The Liquidating
Agent shall have the right from time to time, by revocable powers of attorney,
to delegate to one or more persons any and all of such rights and powers and the
authority and power to execute any documents in connection therewith, and to fix
the reasonable compensation of each such person, which compensation shall be
charged as an expense of liquidation. The Liquidating Agent is also expressly
authorized to distribute the Partnership's property to the Partners subject to
liens.
11.3 Statements on Liquidation. Each Partner shall be furnished with a
statement prepared by the Liquidating Agent which shall set forth the assets and
liabilities of the Partnership as at the date of complete liquidation, and each
Partner's share of such assets. Upon compliance with the distribution plan set
forth in Section 11.4 hereof, the Partners shall cease to be such, and the
Liquidating Agent shall execute, acknowledge and cause to be filed a certificate
of termination of the Partnership.
11.4 Distributions in Liquidation.
(a) The Liquidating Agent shall, to the extent feasible, liquidate
the assets of the Partnership as promptly as shall be practicable. To the extent
the proceeds are sufficient therefor, as the Liquidating Agent shall deem
appropriate, the proceeds of such liquidation shall be applied in accordance
with the provisions of Section 8.2(a)(i) through (iii) hereof, and the balance
of such proceeds shall be distributed by the Liquidating Agent to the Partners
pro rata in accordance with their respective Capital Accounts, as such accounts
are determined after all adjustments are made as required herein to such
accounts for the taxable year of the Partnership during which the liquidation
occurs.
(b) If, in the sole discretion of the Liquidating Agent, he shall
determine that it is not feasible to liquidate all or part of the assets of the
Partnership or that an immediate sale of all or part of such assets would cause
an undue loss to the Partners, the Liquidating Agent shall cause the fair market
value of the assets not so liquidated to be determined by independent appraisal.
Such assets, as so appraised, shall be retained or distributed by the
Liquidating Agent as follows:
(i) The Liquidating Agent shall retain assets having a value
(which value shall be equal to the fair market value of such assets less the
amount of any liability related thereto) equal to the amount by which the net
proceeds of the liquidated assets plus any cash on hand is insufficient to
satisfy the requirements of subsections (i) through (iii) of Section 8.2(a)
hereof; and
(ii) Thereafter the balance of such proceeds shall be
distributed by the
38
<PAGE> 43
Liquidating Agent to the Partners pro rata in accordance with their respective
Capital Accounts, as such accounts are determined after all adjustments are made
as required herein to such accounts for the taxable year of the Partnership
during which the liquidation occurs. Any distribution of assets in kind shall be
distributed on the basis of the fair market value thereof and any Partner
entitled to any interest in such assets shall receive such interest therein as a
tenant-in-common with all other Partners so entitled. If the Liquidating Agent,
in his sole discretion, deems it not feasible to distribute to each Partner an
aliquot share of each asset, the Liquidating Agent may allocate and distribute
specific assets to one or more Partners as tenants-in-common as the Liquidating
Agent shall determine to be fair and equitable, taking into consideration, inter
alia, the basis for tax purposes of each asset distributed and the effect of
crediting or charging the Capital Accounts for any unrealized appreciation or
unrealized depreciation.
(c) Notwithstanding any other provision of this Article 11, in the
event the Partnership is liquidated within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Regulations but no event specified in Section 11.1
hereof has occurred, the property of the Partnership shall not be liquidated,
the Partnership's liabilities shall not be paid or discharged, and the
Partnership's affairs shall not be wound up. Instead, the Partnership shall be
deemed to have contributed its property to a new limited partnership, which
shall be deemed to have assumed and taken such property subject to all
liabilities of the Partnership, and then distributed the interests in such new
limited partnership in kind to the Partners, in accordance with their respective
Capital Accounts.
11.5 Orderly Liquidation. A reasonable time shall be allowed for the
orderly liquidation of the assets of the Partnership and the discharge of
liabilities so as to minimize the losses normally attendant upon a liquidation.
ARTICLE 12
WITHDRAWAL OF THE GENERAL PARTNER
12.1 No Withdrawal.
(a) The General Partner may not Withdraw from the Partnership
without the consent of WWC.
(b) In the event of a Withdrawal or attempted Withdrawal of the
General Partner other than in compliance with this Article 12 and other than as
a result of Section 4.2(b) hereof, all rights of the General Partner under this
Agreement shall terminate and the General Partner shall not be entitled to any
further distributions from the Partnership in respect of the General Partner's
Percentage Interest. In the event that a successor General Partner is appointed
pursuant to Section 12.3 hereof (other than as a result of the events of Section
4.2(b) hereof), such successor shall succeed to such portion of the Capital
Account and Percentage Interest of
39
<PAGE> 44
the General Partner that has Withdrawn other than in compliance with this
Article 12 and other than as a result of Section 4.2(b) hereof, as WWC shall
determine in its sole discretion. Notwithstanding such Withdrawal or attempted
Withdrawal (including pursuant to Section 4.2(b) hereof), the General Partner
shall remain fully liable to the Partnership and the Limited Partners for all
obligations (i) under this Agreement which arose before or upon such Withdrawal
and (ii) to make its Required Capital Contributions in accordance with Section
3.1 hereof, whether such Capital Contributions are due before, on or after such
Withdrawal. Notwithstanding anything herein contained to the contrary and in
addition to the foregoing, the Limited Partners shall have all other rights and
remedies against the Withdrawing Partner as provided by law.
12.2 Involuntary Withdrawal. Upon the Involuntary Withdrawal (other than
pursuant to Section 4.2(b) hereof) of the General Partner, its Percentage
Interest shall vest in its trustee in bankruptcy or legal representative as that
of a Special Limited Partner.
12.3 Continuation of the Business. Upon the occurrence of an event giving
rise to a Withdrawal of the General Partner, the Withdrawing Partner or the
legal representative or other successor in interest of the Withdrawn Partner
shall promptly notify the Limited Partners of such event and the Partnership
shall be dissolved and terminated unless the remaining Limited Partners elect to
continue the business of the Partnership, in which case the Partnership shall
not dissolve. The Withdrawal of the General Partner shall not be deemed to be
effective until the expiration of ninety (90) days from the day on which such
notice has been mailed to the Limited Partners. A Withdrawn Partner shall remain
liable for obligations incurred by it under this Agreement through the effective
date of its Withdrawal, whether such Withdrawal shall be voluntary or
involuntary or whether in compliance with or in violation of this Agreement.
ARTICLE 13
MISCELLANEOUS
13.1 Law Governing. This Agreement shall be governed by and construed in
accordance with the laws of the State applicable to contracts executed and to be
performed entirely within the State, including the Delaware RULPA.
13.2 Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original for all purposes, but all of
which taken together shall constitute only one agreement. The production of any
executed counterpart of this Agreement shall be sufficient for all purposes
without producing or accounting for any other counterpart thereof.
13.3 Severability of Provisions. Each provision of this Agreement shall
be considered severable and if for any reason any provision or provisions herein
are determined to be invalid or contrary to any existing or future law of any
jurisdiction, such invalidity shall not impair the operation of or affect those
provisions in any other jurisdiction or any other provision hereof which are
valid.
40
<PAGE> 45
13.4 Notices. All notices, demands, solicitations of consent or approval,
and other communications hereunder required or permitted shall be in writing and
shall be deemed to have been given (a) on the day when personally delivered, (b)
when transmitted by facsimile upon confirmation of receipt, (c) on the next
Business Day after timely delivery, charges prepaid, to an overnight courier
service guaranteeing next-business-day delivery or (d) five (5) days after the
day when deposited in the United States mail and sent postage prepaid by
registered or certified mail, return receipt requested, addressed in each case
as follows: if intended for (i) the Partnership, to its principal place of
business, with a copy of all such items (which shall not constitute notice
hereunder) to Rubin Baum Levin Constant & Friedman, 30 Rockefeller Plaza, New
York, New York 10112; Attention: Barry A. Adelman, Esq.; or (ii) the Partners,
to their respective addresses and facsimile numbers set forth at the end of this
Agreement, or to such other address or facsimile number which any Partner shall
have given to the Partnership for such purpose by notice hereunder.
13.5 Titles and Captions. All article, section and paragraph titles or
captions contained in this Agreement are for convenience only and shall not be
deemed part of the text of this Agreement.
13.6 Entire Agreement. This Agreement contains the entire understanding
between and among the parties and supersedes any prior understandings and
agreements between and among them respecting the subject matter of this
Agreement; provided, however, that certain Agreement to Form Limited Partnership
dated as of the date hereof by and between the parties hereto contains certain
covenants, representations and warranties which shall survive the effective date
of this Agreement.
13.7 Agreement Binding. This Agreement shall be binding upon and inure to
the benefit of the legal representatives, successors and assigns of the parties
hereto; provided, however, that nothing contained in this Section 13.7 shall
give any party the right to Assign its Percentage Interest other than in
accordance with Article 10 hereof.
13.8 Parties In Interest. Nothing herein shall be construed to be to the
benefit of or enforceable by any third party, including any creditor of the
Partnership.
13.9 Amendments.
(a) This Agreement may be amended only in writing by an instrument
signed by all of the Partners (other than the Special Limited Partners).
(b) Notwithstanding any other provision of this Agreement, no
action may be taken under this Agreement unless such action is taken in
compliance with the provisions of the laws of the State. Any amendment made
pursuant to this Section 13.9 shall become effective in accordance with its
terms after such amendment is approved.
41
<PAGE> 46
13.10 Further Assurances. The Partners will execute and deliver such
further instruments and do such further acts and things as may be required to
carry out the intent and purposes of this Agreement.
13.11 Survival of Agreements. All agreements herein shall survive until
the dissolution and final liquidation of the Partnership, except to the extent
that an agreement expressly provides otherwise.
42
<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
WESTERN PCS I IOWA CORPORATION
By: Western PCS I Corporation
By: Western PCS Corporation
By: Western Wireless Corporation
By: s/Cregg B. Baumbaugh
--------------------------------------
Name: Cregg B. Baumbaugh
Title: Senior Vice President/Corporate Development
Address: 2001 NW Sammamish Road
Issaquah, Washington 98027
Attention: General Counsel
Fax: 425-313-7731
with a copy to:
Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza, 29th Floor
New York, New York 10112
Attention: Barry A. Adelman, Esq.
Fax: 212-698-7825
INS WIRELESS, INC.
By: s/Robert S. Halford
--------------------------------------
Name: Robert S. Halford
Title: President
Address: 4201 Corporate Drive
West Des Moines, Iowa 50266
Attention: Charles Scott, Chief Executive Officer
Fax: 515-830-0123
with a copy to:
Sullivan & Ward, P.C.
801 Grand Avenue, Suite 3500
Des Moines, Iowa 50309-2719
Attention: Michael P. Joynt, Esq.
Fax: 515-244-3599
43
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WESTERN
WIRELESS CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS AS OF AND FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 21,520
<SECURITIES> 0
<RECEIVABLES> 51,875
<ALLOWANCES> 8,361
<INVENTORY> 31,201
<CURRENT-ASSETS> 110,846
<PP&E> 856,885
<DEPRECIATION> 193,691
<TOTAL-ASSETS> 1,442,962
<CURRENT-LIABILITIES> 109,667
<BONDS> 1,170,000
0
0
<COMMON> 571,855
<OTHER-SE> (408,560)
<TOTAL-LIABILITY-AND-EQUITY> 1,442,962
<SALES> 25,812
<TOTAL-REVENUES> 267,196
<CGS> 57,496
<TOTAL-COSTS> 388,089
<OTHER-EXPENSES> 72,348
<LOSS-PROVISION> 10,002
<INTEREST-EXPENSE> 67,797
<INCOME-PRETAX> (193,241)
<INCOME-TAX> 0
<INCOME-CONTINUING> (193,241)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (193,241)
<EPS-PRIMARY> (2.76)
<EPS-DILUTED> 0
</TABLE>
