<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, 1999
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)
<TABLE>
<CAPTION>
WASHINGTON 91-1638901
- --------------------------------------------- ---------------------------------
<S> <C>
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
3650 131ST AVENUE S.E.,
BELLEVUE, WASHINGTON 98006
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
</TABLE>
(425) 586-8700
---------------------------------------------------
(Registrant's telephone number, including area code)
----------------------------------------------------
(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 30, 1999
----- -----------------------------------------
<S> <C>
Class A Common Stock, no par value 69,772,595
Class B Common Stock, no par value 7,290,501
</TABLE>
<PAGE> 2
WESTERN WIRELESS CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets
as of September 30, 1999 and December 31, 1998...............................................................3
Consolidated Statements of Operations and Comprehensive Income
for the Three and Nine Months Ended September 30, 1999, and September 30, 1998...............................4
Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1999, and September 30, 1998.........................................5
Notes to Consolidated Financial Statements...................................................................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS ..............................................................11
PART II -- OTHER INFORMATION.........................................................................................18
ITEM 1. LEGAL PROCEEDINGS...........................................................................................18
ITEM 2. CHANGES IN SECURITIES.......................................................................................18
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.............................................................................18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........................................................18
ITEM 5. OTHER INFORMATION...........................................................................................18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................................................................18
</TABLE>
2
<PAGE> 3
WESTERN WIRELESS CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
(Unaudited)
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,864 $ 2,192
Accounts receivable, net of allowance for doubtful accounts of
$9,795 and $7,629, respectively 72,663 45,327
Inventory 8,882 8,794
Prepaid expenses and other current assets 15,989 8,544
Receivable from VoiceStream Wireless 1,132
----------- -----------
Total current assets 107,530 64,857
Property and equipment, net of accumulated depreciation
of $260,289 and $208,776, respectively 318,941 272,317
Licensing costs and other intangible assets, net of accumulated
amortization of $95,047 and $81,209, respectively 614,737 518,789
Investments in and advances to unconsolidated affiliates 50,122 37,663
Other assets 104 12,912
Net assets from discontinued operations 314,762
----------- -----------
$ 1,091,434 $ 1,221,300
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
Accounts payable $ 16,405 $ 5,101
Accrued liabilities 58,351 70,718
Construction accounts payable 8,595 6,582
----------- -----------
Total current liabilities 83,351 82,401
----------- -----------
Long-term debt 1,195,000 1,045,000
----------- -----------
Minority interest in consolidated subsidiaries 1,338 639
----------- -----------
Commitments and contingencies (Note 7)
Shareholders' equity (net capital deficiency):
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, 57,242,850 and 38,710,893 shares issued and outstanding,
respectively, and; Class B, 19,794,310 and 37,312,477 shares issued
and outstanding, respectively 685,841 800,631
Deferred compensation (19,756) (1,211)
Foreign currency translation (2,518) (2,328)
Deficit (851,822) (703,832)
----------- -----------
Total shareholders' equity (net capital deficiency) (188,255) 93,260
----------- -----------
$ 1,091,434 $ 1,221,300
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE> 4
WESTERN WIRELESS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------------------- ---------------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Subscriber revenues $ 102,441 $ 84,942 $ 284,643 $ 241,802
Roamer revenues 46,461 20,972 104,142 44,669
Equipment sales and other revenues 8,142 5,450 20,673 13,927
------------ ------------ ------------ ------------
Total revenues 157,044 111,364 409,458 300,398
------------ ------------ ------------ ------------
Operating expenses:
Cost of service 17,765 14,415 48,717 40,013
Cost of equipment sales 10,030 9,247 25,854 24,224
General and administrative 30,341 22,313 85,893 64,361
Sales and marketing 27,188 21,964 71,094 58,899
Depreciation and amortization 27,020 19,199 76,065 54,241
Stock based compensation 3,850 70,346
------------ ------------ ------------ ------------
Total operating expenses 116,194 87,138 377,969 241,738
------------ ------------ ------------ ------------
Operating income from continuing operations 40,850 24,226 31,489 58,660
------------ ------------ ------------ ------------
Other income (expense):
Interest and financing expense, net (24,961) (24,191) (71,761) (68,488)
Equity in net loss of unconsolidated (3,857) (579) (11,542) (5,184)
affiliates
Other, net 1,001 103 3,028 1,422
------------ ------------ ------------ ------------
Total other income (expense) (27,817) (24,667) (80,275) (72,250)
------------ ------------ ------------ ------------
Minority interest in consolidated subsidiaries 509 1,448
------------ ------------
Net income (loss) from continuing operations 13,542 (441) (47,338) (13,590)
------------ ------------ ------------ ------------
Net loss from discontinued operations (49,232) (82,152) (153,273)
Cost of discontinuance (18,500)
------------ ------------ ------------
Total discontinued operations (49,232) (100,652) (153,273)
------------ ------------ ------------
Net income (loss) $ 13,542 $ (49,673) $ (147,990) $ (166,863)
============ ============ ============ ============
Basic earnings (loss) per share:
Continuing operations $ 0.18 $ (0.01) $ (0.62) $ (0.18)
Discontinued operations (0.64) (1.31) (2.02)
------------ ------------ ------------ ------------
Basic earnings (loss) per share $ 0.18 $ (0.65) $ (1.93) $ (2.20)
============ ============ ============ ============
Diluted earnings (loss) per share:
Continuing operations $ 0.17 $ (0.01) $ (0.62) $ (0.18)
Discontinued operations (0.64) (1.31) (2.02)
------------ ------------ ------------ ------------
Diluted earnings (loss) per share $ 0.17 $ (0.65) $ (1.93) $ (2.20)
============ ============ ============ ============
Weighted average shares outstanding:
Basic 76,892,000 75,877,000 76,585,000 75,828,000
============ ============ ============ ============
Diluted 79,642,000 75,877,000 76,585,000 75,828,000
============ ============ ============ ============
Comprehensive income (loss):
Net income (loss) $ 13,542 $ (147,990)
Other comprehensive income:
Foreign currency translation (9) (190)
------------ ------------
Total comprehensive income (loss) $ 13,533 $ (148,180)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE> 5
WESTERN WIRELESS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
-------------------------------
1999 1998
--------- ---------
<S> <C> <C>
Operating activities:
Net loss $(147,990) $(166,863)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Net loss from discontinued operations 82,152 153,273
Depreciation and amortization 76,065 54,241
Employee equity compensation 70,331 1,530
Equity in net loss of unconsolidated affiliates 11,542 5,184
Minority interest in net loss of consolidated subsidiary (1,448)
Other, net 5,122 2,720
Changes in operating assets and liabilities, net of effects
from consolidating acquired interests:
Accounts receivable, net (25,575) 174
Inventory (51) 4,391
Prepaid expenses and other current assets (7,445) (2,123)
Accounts payable 11,304 1,405
Accrued liabilities (5,138) 7,697
--------- ---------
Net cash provided by operating activities 68,869 61,629
--------- ---------
Investing activities:
Purchase of property and equipment (110,205) (49,465)
Additions to licensing costs and other intangible assets (2,508) (8,490)
Acquisition of wireless properties, net of cash acquired (124,318) (35,346)
Investments in and advances to unconsolidated affiliates (15,043) (6,849)
Repayment of advances to VoiceStream Wireless 15,420 96,839
Return of investment from VoiceStream Wireless 20,000
Other (943)
--------- ---------
Net cash used in investing activities (216,654) (4,254)
--------- ---------
Financing activities:
Proceeds from issuance of common stock, net 4,457 805
Additions to long-term debt 160,000 60,000
Repayment of debt (10,000) (110,000)
Net costs of private placement (1,080)
--------- ---------
Net cash provided by (used in) financing activities 154,457 (50,275)
--------- ---------
Change in cash and cash equivalents 6,672 7,100
Cash and cash equivalents, beginning of period 2,192 15,122
--------- ---------
Cash and cash equivalents, end of period $ 8,864 $ 22,222
========= =========
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE> 6
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION:
Western Wireless Corporation (the "Company") provides wireless
communications services in the western United States principally through the
ownership and operation of cellular systems in rural areas. As of September 30,
1999, the Company provides cellular services in 94 markets.
A wholly owned subsidiary of the Company, WWC Holding Co., Inc., ("Holding
Co.") owns 96% of Western Wireless International ("WWI") which holds
non-controlling interests in entities which own and operate wireless licenses in
certain foreign countries including Haiti, Georgia, Ghana, Croatia, Iceland, and
Latvia. Additionally, WWI holds approximately 67% of Meteor Mobile
Communications ("MMC"). Early in the fourth quarter of 1999, WWI was notified
that it's $15.3 million bid for a wireless license in Bolivia was accepted by
government regulators of that country.
The Company had an 80.1% controlling interest in VoiceStream Wireless
Corporation ("VoiceStream"), an entity which provides wireless communication
services through the ownership and operation of personal communication service
("PCS") licenses. On May 3, 1999, VoiceStream formally separated from Western
Wireless' other operations (the "Spin-off"). As of that date, Western Wireless
distributed all of its interest in VoiceStream to its shareholders. Although
VoiceStream has been operated separately from Western Wireless' other operations
and has been a separate legal entity since its inception, the Spin-off
established VoiceStream as a stand-alone entity with objectives separate from
those of Western Wireless. The accompanying consolidated financial statements
have been restated to report the discontinued operations of VoiceStream
separately from the continuing operations of the Company.
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, 1998, contained in the Company's Form 10-K dated March
31, 1999.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Supplemental cash flow disclosures:
Cash paid for interest was $69.1 million and $74.5 million for the nine
months ended September 30, 1999 and 1998, respectively.
Reclassifications:
Certain amounts in prior year's financial statements have been reclassified
to conform to the 1999 presentation.
Recently issued accounting standards:
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." It requires the
recognition of all derivatives as either assets or liabilities and the
measurement of those instruments at fair value. The required adoption period is
effective for the issuance of the Company's March 31, 2001, quarterly financial
statements. The implementation of SFAS No. 133 is not expected to have a
material impact on the Company's financial position or results of operations.
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of:
<TABLE>
<CAPTION>
(Dollars in thousands) SEPTEMBER 30, DECEMBER 31,
1999 1998
--------- ---------
<S> <C> <C>
Land, buildings, and improvements... $ 11,631 $ 12,748
Wireless communications systems .... 417,031 373,971
Furniture and equipment ............ 63,445 53,919
--------- ---------
492,107 440,638
Less accumulated depreciation ...... (260,289) (208,776)
--------- ---------
231,818 231,862
Construction in progress ........... 87,123 40,455
--------- ---------
$ 318,941 $ 272,317
========= =========
</TABLE>
Depreciation expense was $22.7 million and $16.2 million for the three
months ended September 30, 1999 and 1998, respectively, and $64.8 million and
$45.1 million for the nine months ended September 30, 1999 and 1998,
respectively.
6
<PAGE> 7
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. LICENSING COSTS AND OTHER INTANGIBLE ASSETS:
<TABLE>
<CAPTION>
(Dollars in thousands) SEPTEMBER 30, DECEMBER 31,
1999 1998
--------- ---------
<S> <C> <C>
License costs ................... $ 673,661 $ 564,157
Other intangible assets.......... 36,123 35,841
--------- ---------
709,784 599,998
Accumulated amortization......... (95,047) (81,209)
--------- ---------
$ 614,737 $ 518,789
========= =========
</TABLE>
Amortization expense was $4.4 million and $3.0 million for the three months
ended September 30, 1999 and 1998, respectively, and $11.3 million and $9.2
million for the nine months ended September 30, 1999 and 1998, respectively.
5. LONG-TERM DEBT:
<TABLE>
<CAPTION>
(Dollars in thousands) SEPTEMBER 30, DECEMBER 31,
1999 1998
--------- ---------
<S> <C> <C>
Credit Facility:
Revolver............................................. $ 595,000 $ 445,000
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
---------- ----------
$1,195,000 $1,045,000
========== ==========
</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").
Early in the fourth quarter of 1999, the Company received approval to
establish a $250 million additional facility (the "Additional Facility"), as
permitted under the Credit Facility. The Additional Facility is structured as a
term loan to be completely drawn by May 5, 2000, and bears interest at Libor
plus 2 1/2 percent. Other terms and conditions are similar to the existing Term
Loan.
The aggregate amounts of principal maturities of the Company's debt are as
follows (dollars in thousands):
<TABLE>
<S> <C>
Three months ending December 31, 1999..................$ 0
Year ending December 31,
2000................................................... 0
2001................................................... 61,000
2002................................................... 91,250
2003................................................... 150,750
Thereafter............................................. 892,000
----------
$1,195,000
==========
</TABLE>
6. ACCRUED LIABILITIES:
<TABLE>
<CAPTION>
(Dollars in thousands) SEPTEMBER 30, DECEMBER 31,
1999 1998
------------ -----------
<S> <C> <C>
Accrued payroll and benefits........................... $11,268 $14,667
Accrued interest expense .............................. 12,538 13,091
Accrued property taxes................................. 5,753 4,951
Accrued taxes (other than income)...................... 10,355 3,870
Accrued interconnect charges........................... 9,436 6,358
Other............................................... 9,001 27,781
------- -------
$58,351 $70,718
======= =======
</TABLE>
7
<PAGE> 8
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
7. COMMITMENTS AND CONTINGENCIES:
Future minimum payments required under operating leases and agreements that
have initial or remaining noncancellable terms in excess of one year as of
September 30, 1999, are summarized below (dollars in thousands):
<TABLE>
<S> <C>
Three months ending December 31, 1999........................$ 3,043
Year ending December 31,
2000......................................................... 11,142
2001......................................................... 9,563
2002......................................................... 8,065
2003......................................................... 5,434
Thereafter................................................... 6,239
-------
$43,486
=======
</TABLE>
Aggregate rental expense for all operating leases was approximately $3.7
million and $3.1 million for the three months ended September 30, 1999 and 1998,
respectively, and $10.5 million and $8.7 million for the nine months ended
September 30, 1999 and 1998, respectively.
The Company has entered into purchase agreements to buy hardware, software,
and consulting services in the aggregate of $18.5 million. As of September 30,
1999, no milestones of this commitment have been met and no payments have been
made.
The Company has various other purchase commitments for materials, supplies
and other items incidental 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.
On October 3, 1999, the Irish High Court remanded to the Office of the
Director of Telecommunication Regulation ("ODTR") its decision that ranked MMC
number one in a bid for a third mobile phone license in Ireland. The court found
that the ODTR may have shown bias in its decision to rank MMC number one in the
bid process and therefore the decision of the regulator may have been
unreasonable. MMC and the ODTR have appealed this ruling to the Irish Supreme
Court. If the ruling is upheld on appeal, then it is most likely that: (1) the
previous bids will be reviewed and re-ranked or (2) a new bidding process will
be implemented. Management remains committed to the Irish market and believes
that the attributes of its original bid that resulted in the initial number one
ranking will continue to be recognized as the best plan. However, pending the
outcome of the appeal, there is no assurance that the Company will retain its
current ranking.
During the period from which the Company's bid was ranked number one up
through the date of the recent court decision, WWI continued to invest in MMC.
However, since MMC may not be awarded the license, it is possible that the
investment underlying MMC may not be realized. If MMC is not successful in its
bid for this license, the estimated range of a potential loss to be recorded by
WWI would range from $6 to $10 million.
8. SHAREHOLDERS' EQUITY:
Stock issuances:
During the nine months ended September 30, 1999, the Company issued 908,790
shares of its Class A Common Stock as a result of employee stock options
exercises.
In January 1999, the Company issued an additional 105,000 Class A Common
Stock shares to certain key executives pursuant to an Executive Restricted Stock
Plan.
Other transactions:
During the second quarter, as a result of the Spin-off, the Company
recognized compensation expense on all options outstanding as of May 3, 1999. On
the date of the Spin-off, the Company cancelled and reissued all outstanding
stock options. All reissued stock options were granted in a manner that ensured
employees of both the Company and VoiceStream maintained the value of their
options, subject to normal fluctuations in the price of both companies stock,
after the Spin-off.
This reissuance did not accelerate benefits to option holders. The Company
believes this allows employees to continue to better participate in the success
of the Company for which they work. As outlined in the provisions of EITF 90-9
the company recorded deferred compensation of approximately $82.8 million and
compensation expense for those options in which the service period had passed.
8
<PAGE> 9
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
9. EARNINGS PER COMMON SHARE:
Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
requires two presentations of earnings per share -- "basic" and "diluted." Basic
earnings per share is computed by dividing income available to shareholders (the
numerator) by the weighted-average number of shares (the denominator) for the
period. The computation of diluted earnings per share is similar to basic
earnings per share, except that the denominator is increased to include the
number of additional shares that would have been outstanding if the potentially
dilutive shares, such as options, had been issued. The treasury stock method is
used to calculate dilutive shares which reduces the gross number of dilutive
shares by the number of shares purchasable from the proceeds of the options
assumed to be exercised.
Loss per share is calculated using the weighted average number of shares of
outstanding stock during the period. For those periods presented with a net
loss, the options outstanding are anti-dilutive, thus basic and diluted loss per
share are equal.
The components of basic and diluted earnings per share were as follows:
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------------- -------------------------------------
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Numerator:
Net income (loss) from $ 13,542 $ (441) $ (47,338) $ (13,590)
continuing operations
Total discontinued operations (49,232) (100,652) (153,273)
-------------- -------------- -------------- --------------
Net income (loss) $ 13,542 $ (49,673) $ (147,990) $ (166,863)
============== ============== ============== ==============
Denominator:
Weighted-average shares
Basic 76,892,000 75,877,000 76,585,000 75,828,000
Effect of dilutive securities:
Dilutive options 2,750,000
-------------- -------------- -------------- --------------
Weighted-average shares
Diluted 79,642,000 75,877,000 76,585,000 75,828,000
============== ============== ============== ==============
Basic earnings (loss) per share:
Continuing operations $ 0.18 $ (0.01) $ (0.62) $ (0.18)
Discontinued operations (0.64) (1.31) (2.02)
-------------- -------------- -------------- --------------
Basic earnings (loss) per share $ 0.18 $ (0.65) $ (1.93) $ (2.20)
============== ============== ============== ==============
Diluted earnings (loss) per share:
Continuing operations $ 0.17 $ (0.01) $ (0.62) $ (0.18)
Discontinued operations (0.64) (1.31) (2.02)
-------------- -------------- -------------- --------------
Diluted earnings (loss) per share $ 0.17 $ (0.65) $ (1.93) $ (2.20)
============== ============== ============== ==============
</TABLE>
10. ACQUISITIONS:
Early in the fourth quarter of 1999, the Company purchased the Texas 7 and
Arkansas 11 Rural Service Areas ("RSA") for approximately $165 million in cash.
This transaction will be accounted for using the purchase method.
In the third quarter of 1999, the Company entered into an agreement to
purchase the Utah 5 RSA for approximately $30 million in cash. This transaction
is awaiting Federal Communications Commission ("FCC") approval and is expected
to close during the fourth quarter of 1999.
In June 1999, the Company completed the purchase of the cellular licenses
and operations of the Brownsville, TX and McAllen, TX Metropolitan Statistical
Areas ("MSA") for an aggregate amount of approximately $96.0 million in cash.
This transaction was accounted for using the purchase method.
During February 1999, the Company completed the purchase of the cellular
license and operations of the Wyoming 4 and Oklahoma 1 RSA for $19 million in
cash. Prior to the purchase of the Wyoming 4 RSA, the Company operated this
market under an Interim Operating Authority ("IOA") from the FCC. This
transaction was accounted for using the purchase method.
9
<PAGE> 10
WESTERN WIRELESS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
11. RELATED PARTY TRANSACTIONS:
The financial statements include an allocation of certain centralized costs
to VoiceStream and its affiliates, prior to and subsequent to the Spin-off. Such
centralized items include the costs of shared senior management, customer care
operations and certain back office functions. These costs have been allocated to
VoiceStream and its affiliates in a manner that reflects the relative time
devoted to each. For the three months ended September 30, 1999 and 1998, the
Company allocated to VoiceStream and its affiliates costs of $1.4 million and
$4.4 million, respectively, and $8.6 million and $11 million for the nine months
ended September 30, 1999 and 1998, respectively.
After the Spin-off, the net operating loss ("NOL") carryforwards resulting
from VoiceStream's cumulative tax losses were transferred to VoiceStream.
Pursuant to a tax sharing agreement entered into at the time of the Hutchison
investment, VoiceStream paid the Company $20 million, the amount representative
of the tax benefit of NOLs generated while VoiceStream was a wholly-owned
subsidiary of the Company. This was accounted for as a return of capital to the
Company.
The Company, its Holding Co., WWI, and Bradley Horwitz, the Vice
President-International, have entered into an amendment of a subscription and
put and call agreement with respect to shares of common stock of WWI whereby Mr.
Horwitz's interest in WWI is decreased from 10% to 4.04% in consideration of the
Company's investment in WWI of an additional $29 million in 1996 and 1997.
Holding Co. continues to own the balance of the outstanding capital stock of
WWI. Any funds provided by the Company to WWI on or subsequent to January 1,
1998, shall be considered revolving debt loaned by the Company to WWI at an
interest rate of 10.5% per annum.
10
<PAGE> 11
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
LITIGATION REFORM ACT OF 1995. Statements contained herein that are not
based on historical fact, including without limitation statements containing the
words "believes," "may," "will," "estimate," "continue," "anticipates,"
"intends," "expects" and words of similar import, constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, events or
developments to be materially different from any future results, events or
developments expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions, both nationally and in the regions in which Western Wireless
Corporation (the "Company") operates; technology changes; competition; changes
in business strategy or development plans; the high leverage of the Company; the
ability to attract and retain qualified personnel; existing governmental
regulations and changes in, or the failure to comply with, governmental
regulations; liability and other claims asserted against the Company; the
Company's and its third-party suppliers' ability to take corrective action in a
timely manner with respect to the year 2000 issue; and other factors referenced
in the Company's filings with the Securities and Exchange Commission. Given
these uncertainties, readers are cautioned not to place undue reliance on such
forward-looking statements. The Company disclaims any obligation to update any
such factors or to publicly announce the result of any revisions to any of the
forward-looking statements contained herein to reflect future results, events or
developments.
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, 1998.
OVERVIEW
Western Wireless provides cellular communications services through the
ownership and operation of cellular communications systems in 94 Rural Service
Areas and Metropolitan Statistical Areas in the United States.
A wholly owned subsidiary of the Company, WWC Holding Co., Inc., ("Holding
Co.") owns 96% of Western Wireless International ("WWI") which holds
non-controlling interests in entities which own and operate wireless licenses in
certain foreign countries including Haiti, Georgia, Ghana, Croatia, Iceland, and
Latvia. Additionally, WWI holds approximately 67% of Meteor Mobile
Communications ("MMC"). Early in the fourth quarter of 1999, WWI was notified
that it's $15.3 million bid for a wireless license in Bolivia was accepted by
government regulators of that country.
On October 3, 1999, the Irish High Court remanded to the Office of the
Director of Telecommunication Regulation ("ODTR") its decision that ranked MMC
number one in a bid for a third mobile phone license in Ireland. The court found
that the ODTR may have shown bias in its decision to rank MMC number one in the
bid process and therefore the decision of the regulator may have been
unreasonable. MMC and the ODTR have appealed this ruling to the Irish Supreme
Court. If the ruling is upheld on appeal, then it is most likely that: (1) the
previous bids will be reviewed and re-ranked or (2) a new bidding process will
be implemented. Management remains committed to the Irish market and believes
that the attributes of its original bid that resulted in the initial number one
ranking will continue to be recognized as the best plan. However, pending the
outcome of the appeal, there is no assurance that the Company will retain its
current ranking.
During the period from which the Company's bid was ranked number one up
through the date of the recent court decision, WWI continued to invest in MMC.
However, since MMC may not be awarded the license, it is possible that the
investment underlying MMC may not be realized. If MMC is not successful in its
bid for this license, the estimated range of a potential loss to be recorded by
WWI would range from $6 to $10 million.
The Company had an 80.1% controlling interest in VoiceStream Wireless
Corporation ("VoiceStream"), an entity which provides wireless communication
services through the ownership and operation of personal communication services
("PCS") licenses. On May 3, 1999, VoiceStream was formally separated from
Western Wireless (the "Spin-off"). As of that date, Western Wireless distributed
all of its interest in VoiceStream to its shareholders. Although VoiceStream has
been operated separately from Western Wireless' other operations and has been a
separate legal entity since its inception, the Spin-off established VoiceStream
as a stand-alone entity with objectives separate from those of Western Wireless.
For additional information regarding the Spin-off, see the Company's information
statement filed with the SEC on Form 14-C dated April 12, 1999.
During the second quarter, as a result of the Spin-off, the Company
recognized compensation expense on all options outstanding as of May 3, 1999. On
the date of the Spin-off, the Company cancelled and reissued all outstanding
options. All reissued stock options were granted in a manner that ensured
employees of both the Company and VoiceStream maintained the value of their
options, subject to normal fluctuations in the price of both companies stock,
after the Spin-off. This reissuance did not accelerate any benefits to option
holders. The Company believes this allowed employees to continue to better
participate in the success of the Company for which they work. As outlined in
the provisions of EITF 90-9 the company recorded deferred compensation of
approximately $82.8 million and compensation expense for those options in which
the service period has passed.
11
<PAGE> 12
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
The Company had 774,000 subscribers at September 30, 1999, representing
an increase of 36,400 or 4.9% from June 30, 1999. The Company had 620,300
subscribers at September 30, 1998, representing an increase of 37,000 or 6.3%
from June 30, 1998.
The following table sets forth certain financial data as it relates to the
Company's operations:
<TABLE>
<CAPTION>
(Dollars in thousands) THREE MONTHS ENDED SEPTEMBER 30,
-------------------------------------------------
1999 % CHANGE 1998
--------- -------- ---------
Revenues:
<S> <C> <C> <C>
Subscriber revenues $ 102,441 20.6% $ 84,942
Roamer revenues 46,461 121.5% 20,972
Equipment sales and other
revenues 8,142 49.4% 5,450
---------- ---------
Total revenues $ 157,044 $ 111,364
Operating expenses:
Cost of service $ 17,765 23.2% $ 14,415
Cost of equipment sales 10,030 8.5% 9,247
General and administrative 30,341 36.0% 22,313
Sales and marketing 27,188 23.8% 21,964
Depreciation and amortization 27,020 40.7% 19,199
Stock based compensation 3,850 N.M.
---------- ---------
Total operating expenses $ 116,194 $ 87,138
Other income (expense) $ (27,817) (12.8)% $ (24,667)
Net income (loss) from continuing
operations $ 13,542 N.M. $ (441)
EBITDA $ 71,720 65.2% $ 43,425
Cash flows provided by (used in):
Operating activities $ 49,429 97.6% $ 25,010
========= =========
Investing activities $ (62,273) (50.6)% $ (41,360)
========= =========
Financing activities $ 16,368 (54.1)% $ 30,233
========= =========
</TABLE>
REVENUES
The increase in subscriber revenues is primarily due to the 26% growth in
the number of the Company's average subscribers for the quarter ended September
30, 1999, compared to the quarter ended September 30, 1998, offset by a decrease
in the average monthly subscriber revenue per average subscriber. Average
monthly subscriber revenue per average subscriber was $45.18 for the three
months ended September 30, 1999, a 4.0% decline from $47.05 for the three months
ended September 30, 1998, but is up slightly from the second quarter ended June
30, 1999. The Company continues to focus on attracting new customers with rate
plans that provide more value to the customer at a higher average access charge.
Management feels this strategy will provide relative stability in the average
monthly subscriber revenue per average subscriber in future periods.
The increase in roamer revenues is attributed to an increase in roaming
traffic on the Company's network and partially offset by a decrease in the rates
charged between carriers. A significant portion of the increase is driven by the
growth in roamer minutes with digital carriers as a result of the Company's
strategy, implemented in 1998, to become the roaming partner of choice for other
carriers. While the Company expects total roamer minutes to continue increasing,
the decline in the rates charged between carriers may limit the growth of roamer
revenues.
Equipment sales for the three months ended September 30, 1999, which
consists primarily of handset sales, increased primarily due to the growth in
subscriber additions. In addition, average phone and accessory revenue per item
sold increased compared to the same quarter one year ago. The mix of high-end
handsets with more features comprised a larger portion of overall handset
revenue during the third quarter of 1999 compared to the third quarter of 1998.
12
<PAGE> 13
OPERATING EXPENSES
The increase in cost of service is primarily attributable to the increased
costs of maintaining the Company's expanding wireless network to support the
larger subscriber base. Cost of service as a percentage of service revenues
decreased to 11.9% for the three months ended September 30, 1999 from 13.6% for
the three months ended September 30, 1998. The decrease as a percentage of
service revenues is due mainly to service revenues growing at a faster rate than
the fixed cost of service components. The Company expects cost of service
dollars to continue to increase in future periods as a result of the growing
subscriber base and the increase in other carriers' customers roaming on its
network. However, the cost of service as a percentage of service revenues is
expected to continue declining as greater economies of scale are realized.
Cost of equipment sales to the Company increased primarily due to the
increase in handsets sold, offset by a decrease in the average cost of handsets,
for the three months ended September 30, 1999 compared to the same period in
1998. The Company expects that the cost for its handsets, will decrease at a
slower rate or begin to level off in future periods.
The Company's general and administrative costs are principally variable
costs based on the average number of subscribers. The increase in total dollars
is primarily attributable to the increase in costs associated with supporting a
larger subscriber base. The general and administrative monthly cost per average
subscriber increased to $13.38 for the three months ended September 30, 1999,
from $12.36 for the same period in 1998. The increase is due partly to
additional headquarter costs resulting from lost cost efficiencies as a result
of the Spin-off. In addition, the Company incurred pre-operating costs related
to Ireland with no corresponding additions in subscribers as the Ireland market
is not yet operational. Management anticipates improved cost efficiencies to be
realized on a per subscriber basis in future periods due to cost reductions
expected with the implementation of a new billing system during the next fiscal
year.
The increase in sales and marketing costs is primarily due to the increase
in subscribers added during the three months ended September 30, 1999, compared
to the same period in 1998. Sales and marketing cost per net subscriber added,
including the loss on equipment sales, remained relatively flat at $835 for the
three months ended September 30, 1999, compared to $841 for the three months
ended September 30, 1998.
The increase in depreciation and amortization expenses is mainly
attributable to the acquisition of additional wireless communication system
assets. In addition the Company continues to expand and upgrade its wireless
systems. Management anticipates depreciation and amortization to increase in
future periods as a result of this expansion.
The stock based compensation results mainly from the amortization of
deferred compensation due to the cancellation and reissuance of employee stock
options as a result of the Spin-off, as previously discussed. The Company
anticipates future expenses related to this transaction to be approximately $17
million spread over the remainder of 1999, and continue through the year 2001.
OTHER INCOME (EXPENSE)
Interest and financing expense increased to $25.0 million for the three
months ended September 30, 1999, compared to $24.2 million for the same period
in 1998, due to a modest increase in the average long-term debt balance offset
by a lower applicable borrowing rate for the current quarter compared to the
comparative quarter last year. The weighted average interest rate was 8.41% for
the three months ended September 30, 1999, as compared to 9.20% for the same
period in 1998.
NET INCOME (LOSS) FROM CONTINUING OPERATIONS
The change from a net loss during the three months ended September 30, 1998
to net income during the three month period ended September 30, 1999 is mainly
attributable to increased service revenues combined with greater cost
efficiencies due to the larger subscriber base. The Company had no tax liability
for the current quarter due to net operating loss carryforwards ("NOLs") from
prior years.
EBITDA
EBITDA represents operating income (loss) before depreciation, amortization
and stock based compensation. Management believes EBITDA provides meaningful
additional information on the Company's operating results and on its ability to
service its long-term debt and other fixed obligations, and to fund the
Company's continued growth. EBITDA is considered by many financial analysts to
be a meaningful indicator of an entity's ability to meet its future financial
obligations, and growth in EBITDA is considered to be an indicator of future
profitability, especially in a capital-intensive industry such as wireless
telecommunications. EBITDA should not be construed as an alternative to
operating income (loss) as determined in accordance with United States GAAP, as
an alternate to cash flows from operating activities (as determined in
accordance with GAAP), or as a measure of liquidity. Because EBITDA is not
calculated in the same manner by all companies, the Company's presentation may
not be comparable to other similarly titled measures of other companies.
13
<PAGE> 14
EBITDA for the Company increased to $71.7 million for the three months
ended September 30, 1999, from $43.4 million for the same period in 1998. The
increase in EBITDA is primarily a result of increased revenues due to the
increased subscriber base and the related cost efficiencies gained.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
The Company had 774,000 subscribers at September 30, 1999, representing an
increase of 113,600 or 17.2% from December 31, 1998. The Company had 620,300
subscribers at September 30, 1998, representing an increase of 100,300 or 19.2%
from December 31, 1997.
The following table sets forth certain financial data as it relates to the
Company's operations:
<TABLE>
<CAPTION>
(Dollars in thousands) NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------
1999 % CHANGE 1998
--------- -------- --------
<S> <C> <C> <C>
Revenues:
Subscriber revenues $ 284,643 17.7% $241,802
Roamer revenues 104,142 133.2% 44,669
Equipment sales and other
revenues 20,673 48.4% 13,927
--------- --------
Total revenues $ 409,458 $300,398
Operating expenses:
Cost of service $ 48,717 21.8% 40,013
Cost of equipment sales 25,854 6.7% 24,224
General and administrative 85,893 33.5% 64,361
Sales and marketing 71,094 20.7% 58,899
Depreciation and amortization 76,065 40.2% 54,241
Stock based compensation 70,346 N.M.
--------- --------
Total operating expenses $ 377,969 $241,738
Other income (expense) $(80,275) (11.1)% $(72,250)
Net loss from continuing operations $(47,338) (248.3)% $(13,590)
EBITDA $ 177,900 57.6% $112,901
Cash flows provided by (used in):
Operating activities $ 68,869 11.7% $ 61,629
========= ========
Investing activities $(216,654) N.M. $ (4,254)
========= ========
Financing activities $ 154,457 N.M. $(50,275)
========= ========
</TABLE>
REVENUES
The increase in subscriber revenues is primarily due to a 26% growth in the
number of average subscribers for the nine months ended September 30, 1999,
compared to the nine months ended September 30, 1998, offset by a decrease in
the average monthly subscriber revenue per average subscriber. Average monthly
subscriber revenue per average subscriber was $44.10 for the nine months ended
September 30, 1999, a 6.4% decline from $47.11 for the nine months ended
September 30, 1998. The Company continues to focus on attracting new customers
with rate plans that provide more value to the customer at a higher average
access charge. Management feels this strategy will provide relative stability in
the average monthly subscriber revenue per average subscriber in future periods.
The increase in roamer revenues is attributed to an increase in roaming
traffic and partially offset by a decrease in the rates charged between
carriers. A significant portion of the increase is driven by the growth in
roamer minutes as a result of the Company's strategy, implemented in 1998, to
become the roaming partner of choice for other carriers. While the Company
expects total roamer minutes to continue increasing, the decline in the rates
charged between carriers may limit the growth of roamer revenues.
Equipment sales for the nine months ended September 30, 1999, which
consists primarily of handset sales, increased primarily due to the growth in
subscriber additions. In addition, average phone and accessory revenue per item
sold increased compared to the same period one year ago. The mix of high-end
handsets with more features comprised a larger portion of overall handset sales
during the nine months ended September 30, 1999 compared to the nine months
ended September 30, 1998.
14
<PAGE> 15
OPERATING EXPENSES
The increase in cost of service is primarily attributable to the increased
costs of maintaining the Company's expanding wireless network to support the
larger subscriber base. Cost of service as a percentage of service revenues
declined to 12.5% for the nine months ended September 30, 1999 from 14.0% for
the nine months ended September 30, 1998. The decrease as a percentage of
service revenues is due mainly to service revenues growing at a faster rate than
the fixed cost of service components. The Company expects cost of service
dollars to continue to increase in future periods as a result of the growing
subscriber base and the increase in other carriers' customers roaming on its
network. However, the cost of service as a percentage of service revenues is
expected to continue to decline as greater economies of scale are realized.
Cost of equipment sales to the Company increased primarily due to the
increase in handsets sold, offset by a decrease in the average cost of handsets,
for the nine months ended September 30, 1999 compared to the same period in
1998. The Company expects that the cost for its handsets will decrease at a
slower rate or level off in future periods.
The Company's general and administrative costs are principally variable
costs based on the average number of subscribers. The increase in total dollars
is primarily attributable to the increase in costs associated with supporting a
larger subscriber base. The general and administrative monthly cost per average
subscriber increased to $13.31 for the nine months ended September 30, 1999,
from $12.54 for the same period in 1998. The increase is due partly to
additional headquarter costs resulting from lost cost efficiencies as a result
of the Spin-off. In addition, the Company incurred pre-operating costs related
to Ireland with no corresponding additions in subscribers as the Ireland market
is not yet operational. Management anticipates improved cost efficiencies to be
realized on a per subscriber basis in future periods due to cost reductions
expected with the implementation of a new billing system in the next fiscal
year.
The increase in sales and marketing costs is primarily due to the increase
in subscribers added during the nine months ended September 30, 1999, compared
to the same period in 1998. Sales and marketing cost per net subscriber added,
including the loss on equipment sales, decreased to $740 for the nine months
ended September 30, 1999, from $767 for the nine months ended September 30,
1998. This decrease is attributable to the fixed costs being spread over a
larger number of net subscriber additions, which increased 13.9% during the nine
months ended September 30, 1999 compared to the nine months ended September 30,
1998.
The increase in depreciation and amortization expenses is mainly
attributable to the acquisition of additional wireless communication system
assets. In addition the Company continues to expand and upgrade its wireless
systems. Management anticipates depreciation and amortization to increase in
future periods as a result of this expansion.
The stock based compensation results mainly from the cancellation and
reissuance of employee stock options as a result of the Spin-off, as previously
discussed. The Company anticipates future expenses related to this transaction
to be approximately $17 million spread over the remainder of 1999, and continue
through the year 2001.
OTHER INCOME (EXPENSE)
Interest and financing expense, increased to $71.8 million for the nine
months ended September 30, 1999, compared to $68.5 million for the same period
in 1998, due to the increase in average long-term debt. Long-term debt was
incurred primarily to fund the Company's acquisition of wireless properties and
capital expenditures associated with the build out and enhancements of the
cellular systems. The weighted average interest rate, was 8.14% for the nine
months ended September 30, 1999, as compared to 8.77% for the same period in
1998.
NET INCOME (LOSS) FROM CONTINUING OPERATIONS
The net loss from continuing operations of $47.3 million for the nine
months ended September 30, 1999 is mainly attributable to the $70.4 million in
stock based compensation expense. This compares to a net loss from continuing
operations of $13.6 million for the same period in 1998.
EBITDA
EBITDA represents operating income (loss) before depreciation, amortization
and stock based compensation. Management believes EBITDA provides meaningful
additional information on the Company's operating results and on its ability to
service its long-term debt and other fixed obligations, and to fund the
Company's continued growth. EBITDA is considered by many financial analysts to
be a meaningful indicator of an entity's ability to meet its future financial
obligations, and growth in EBITDA is considered to be an indicator of future
profitability, especially in a capital-intensive industry such as wireless
telecommunications. EBITDA should not be construed as an alternative to
operating income (loss) as determined in accordance with United States GAAP, as
an alternate to cash flows from operating activities (as determined in
accordance with GAAP), or as a measure of liquidity. Because EBITDA is not
calculated in the same manner by all companies, the Company's presentation may
not be comparable to other similarly titled measures of other companies.
EBITDA for the Company increased to $177.9 million for the nine months
ended September 30, 1999, from $112.9 million for the same period in 1998. The
increase in EBITDA is directly related to continued revenue increases combined
with
15
<PAGE> 16
overall cost efficiencies gained from a growing subscriber base.
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. As of September 30, 1999, $795 million was outstanding under the
Credit Facility. The amount available for borrowing under the Credit Facility,
which is limited by certain financial covenants and other restrictions, was $155
million. Indebtedness under the Credit Facility matures on March 31, 2006. The
Credit Facility bears interest at variable rates. Substantially all the assets
of the Company are pledged as security for such indebtedness. The terms of the
Credit Facility restrict, among other things, the sale of assets, distribution
of dividends or other distributions and loans.
Early in the fourth quarter of 1999, the Company received approval to
establish a $250 million additional facility (the "Additional Facility"), as
permitted under the Credit Facility. The Additional Facility is structured as a
term loan to be completely drawn by May 5, 2000, and bears interest at Libor
plus 2 1/2 percent. Other terms and conditions are similar to the existing Term
Loan.
Western Wireless has issued $200 million principal amount of 10 1/2% Senior
Subordinated Notes Due 2006 (the "2006 Notes") at par and $200 million principal
amount of 10 1/2% Senior Subordinated Notes Due 2007 (the "2007" Notes") at par.
Indebtedness under the 2006 Notes and the 2007 Notes matures June 1, 2006 and
February 1, 2007, respectively. The Credit Facility prohibits the repayment of
all or any portion of the principal amounts of the 2006 Notes or 2007 Notes
prior to the repayment of all indebtedness under the Credit Facility. The 2006
and 2007 Notes contain certain restrictive covenants which impose limitations on
the operations and activities of the Company and certain of its subsidiaries,
including the issuance of other indebtedness, the creation of liens, the sale of
assets, issuance of preferred stock of subsidiaries and certain investments and
acquisitions. The Company obtained the appropriate waivers from the holders of
these notes prior to consummation of the Spin-off at a cost of $16 million.
In the fourth quarter of 1999, the Company expects to spend approximately
$35 million for the continued expansion of its wireless infrastructure and
approximately $195 million for the purchase of cellular licenses and operations
of the Texas 7, Arkansas 11 and Utah 5 RSAs. The Company will utilize operating
cash flow, the Credit Facility and the Additional Facility for purposes of
funding its wireless system expansion. The Company also expects to increase
capital spending during the coming year which will allow for anticipated minutes
of use growth from its own subscriber base as well as from other carriers'
customers roaming on its wireless network.
Net cash provided by operating activities was $68.9 million for the nine
months ended September 30, 1999. Adjustments to the $147.9 million net loss to
reconcile to net cash provided by operating activities included $82.2 million
loss from discontinued operations, $76.1 of depreciation and amortization, and
$70.3 for stock based compensation. Net cash provided by operating activities
was $61.6 million for the nine months ended September 30, 1998.
Net cash used in investing activities was $216.7 million for the nine
months ended September 30, 1999. Investing activities for such period consisted
primarily of $124.3 million in acquisitions of wireless properties, primarily
attributable to the purchase of the McAllen and Brownsville MSAs and Wyoming 4
and Oklahoma 1 RSAs. In addition, the Company purchased property and equipment
in the amount of $110.2 million. Net cash used in investing activities was $4.3
million for the nine months ended September 30, 1998.
Net cash provided by financing activities was $154.5 million for the nine
months ended September 30, 1999. Financing activities for such period consisted
primarily of additions to long-term debt mainly to finance the acquisition of
wireless properties. Net cash used in financing activities was $50.3 million for
the nine months ended September 30, 1998.
In the ordinary course of business, the Company continues to evaluate
acquisition opportunities, joint ventures and other potential business
transactions. Such acquisitions, joint ventures and business transactions may be
material. Such transactions may also require the Company to seek additional
sources of funding through the issuance of additional debt and/or additional
equity at the parent or subsidiary level. There can be no assurance that such
funds will be available to the Company on acceptable or favorable terms.
16
<PAGE> 17
YEAR 2000 ISSUES
The Company, like most businesses, will be required to modify significant
portions of its information technology ("IT") and non-IT systems so that they
will function properly in the year 2000. Any of the Company's, or its vendors',
IT and non-IT systems that have date-sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. The Company's IT and
non-IT systems that are being addressed include: its wireless networks; system
which interconnect its wireless networks with landline systems; systems which
allow verification and billing of roaming traffic; internal communication and
data processing systems; billing software an related elements; and systems of
third party suppliers, including those of financial institutions,
payroll/benefits processors and credit bureaus.
Much of the Company's technology, including technology associated with its
critical systems, is purchased from third parties. The Company is dependent on
those third parties to assess the impact of the year 2000 issue on the
technology and services they supply and to take any necessary corrective action.
The Company cannot assure that these third parties will have taken the necessary
corrective action prior to the year 2000.
The Company has adopted a remediation plan to become year 2000 compliant.
This plan consists of four key phases: (1) inventory of all systems, (2)
research, including obtaining information from third parties to determine
whether they have accurately assessed the problem and taken corrective action,
(3) implementation of and testing remediation efforts, and (4) development of
contingency plans. The Company has completed the first two phases of its plan
and has substantially completed the testing, remediation and contingency plans
to address the year 2000 issue. Critical systems are those whose failure poses a
risk of disruption to the Company's ability to provide wireless services, to
collect revenues, to meet safety standards, or to comply with legal
requirements. The Company has incurred internal staff costs as well as
consulting and other expenses related to infrastructure and facilities
enhancements necessary to complete the remediation of the systems for the year
2000. The incremental costs for the year 2000 remediation efforts have been, and
will be, insignificant.
Based on its current assessments and its remediation plan, which are based
in part upon certain representations of third parties, the Company expects that
it will not experience a disruption of its operations as a result of the change
to the year 2000. However, there can be no assurance that either the Company or
the third parties who have supplied technology used in the Company's critical
systems will be successful in taking corrective action in a timely manner. As
part of its plan, the Company has developed, and is continuing to develop,
contingency plans for its critical systems which include, among other things,
identifying a core system of cell sites that are being designed to operate for
extended periods for mobile to mobile service independent of external power
supplies and landline telephone services. The Company believes that these
contingency plans will mitigate service disruption; however, the Company cannot
guarantee this. The Company will continuously test and update these plans and
systems as long as necessary.
17
<PAGE> 18
WESTERN WIRELESS CORPORATION
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material, pending legal proceedings to which the Company or
any of its subsidiaries or affiliates is a party or of which any of their
property is subject which, if adversely decided, would have a material adverse
effect on the Company.
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. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) Exhibit Description
------- -----------
<S> <C>
10.89 Asset Purchase Agreement by and between KO
Communications, Inc., WWC Texas RSA Limited Partnership,
and Western Wireless Corporation dated August 25, 1999
10.90 Asset Purchase Agreement by and between NetWireless, LLC,
GCC License LLC, and Western Wireless Corporation dated
August 25, 1999
10.91 License and Services Agreement between Western Wireless
Corporation and AMDOCS (UK) Limited dated August 23, 1999
10.92 Employment Agreement by and between H. Stephen Burdette
and Western Wireless Corporation, dated July 12, 1999
27.1 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
A Form 8-K was filed on July 26, 1999, reporting Western Wireless
Corporation's financial and operating results for the second quarter
ended June 30, 1999.
A Form 8-K was filed on September 3, 1999, reporting that Western
Wireless Corporation had executed definitive agreements with K.O.
Communications, Inc., NetWireless L.L.C, and American Rural Cellular,
Inc. whereby Western Wireless Corporation will aquire Rural Service
Area (RSA) licenses and related assets for Texas 7, Arkansas 11 and
Utah 5.
A Form 8-K was filed on October 27, 1999, reporting Western Wireless
Corporation's financial and operating results for the third quarter
ended September 30, 1999.
18
<PAGE> 19
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/ Theresa E. Gillespie By /s/ Scott Soley
-------------------------- --------------------
Theresa E. Gillespie Scott Soley
Executive Vice President Director of Accounting
(Chief Accounting Officer)
Dated: November 9, 1999
19
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
- ------- -----------
<S> <C>
10.89 Asset Purchase Agreement by and between KO Communications, Inc.,
WWC Texas RSA Limited Partnership, and Western Wireless Corporation
dated August 25, 1999
10.90 Asset Purchase Agreement by and between NetWireless, LLC, GCC
License LLC, and Western Wireless Corporation dated August 25, 1999
10.91 License and Services Agreement between Western Wireless Corporation
and AMDOCS (UK) Limited dated August 23, 1999
10.92 Employment Agreement by and between H. Stephen Burdette and Western
Wireless Corporation, dated July 12, 1999
27.1 Financial Data Schedule
</TABLE>
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EXHIBIT 10.89
ASSET PURCHASE AGREEMENT
Texas-7 Rural Service Area
This Asset Purchase Agreement (this "Agreement") is entered into on
August 25, 1999 by and among KO Communications, Inc., a Texas Corporation
("Seller"), and WWC Texas RSA Limited Partnership, a Delaware Limited
Partnership ("Purchaser"), Western Wireless Corporation, a Delaware corporation,
as "Guarantor." Purchaser and Seller are sometimes referred to herein
collectively as the "Parties" and each as a "Party."
RECITALS
WHEREAS, Seller is he holder of the non-wireline cellular radio
telephone license granted by the Federal Communications Commission (the "FCC")
and certain assets necessary for the operation of the non-wireline cellular
radio telephone service system in the Texas-7 Rural Service Area (the "System");
WHEREAS, Purchaser desires to purchase the cellular radio telephone
service system, including the licenses necessary to operate such system, in the
Texas-7 Rural Service Area;
WHEREAS, the Parties desire that Purchaser acquire from Seller all of
the assets of the System including, among other things, all of the
authorizations issued by the FCC for the operation of the System, all in
accordance with the terms and conditions set forth in this Agreement; and
WHEREAS, the Parties have determined that it would further the
development of competitive cellular radio telephone service systems in the
United States to consummate the transactions contemplated hereby;
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:
ARTICLE 1.
DEFINITIONS
As used herein, the terms below shall have the following meanings:
"Action" shall have the meaning set forth in Section 5.11.
"Affiliate" of a Person shall mean any Person which directly or
indirectly, through one or more intermediaries, owns, controls, or is controlled
by, or is under common control with, such Person. The term "control" (including,
with correlative meaning, the terms "controlling," "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the
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management and policies of such Person, whether through the ownership of voting
securities, by contract or otherwise.
"Applicable Laws" shall mean all federal, state and local statutes,
ordinances, rules, and regulations of any Governmental Authority that govern,
regulate or otherwise apply to the Assets, the Business or operation of the
System.
"Assets" shall mean all assets, properties and rights, both tangible
and intangible, that are owned by, leased or licensed to, Seller for use in the
System, and are otherwise necessary for the operation of the Business in a
manner consistent with the present operations and with past practices of the
System, including, without limitation, the Real Property, Equipment,
Authorizations, Contracts, Subscriber Agreements, Intellectual Property and
Books and Records; provided, however, that the Assets shall not include the
Excluded Assets.
"Assignment Applications" shall mean those joint applications filed
with the FCC relating to the assignment of the FCC Authorizations to Purchaser
in the manner contemplated by this Agreement.
"Assumed Liabilities" shall have the meaning set forth in Section 3.2
hereof.
"Auditor" shall have the meaning set forth in Section 2.3.4 hereof.
"Authorizations" shall mean the approvals, consents, authorizations,
permits and licenses issued to Seller by any Governmental Authority relating to
the System.
"Books and Records" shall mean all the books and records related to
the Assets, the Business and the System, including without limitation, (a) books
and records relating to the purchase of materials and supplies, invoices,
Subscriber lists, supplier lists, personnel records, and Subscriber information,
and (b) computer software (to the extent such software is included in the
Assets) and data in computer readable and/or human readable form used to
maintain such books and records together with the media on which such software
and data are stored and all documentation relating thereto, but shall not
include books and records relating to the Excluded Assets or Seller's corporate
books and records or stock ledgers.
"Business" shall mean all of the business and operations relating to
the System as currently conducted by Seller.
"CERCLA" shall have the meaning set forth in the Section defining
Environmental Laws.
"Closing Date" shall mean the next business day that is ten or more
days after the date on which the FCC Consent becomes a Final Order; provided
that if such date is within five days of the end of a calendar month, the
Closing Date shall be the last business day of that calendar month.
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"Closing Place" shall mean such location agreed upon by the Parties or,
in the absence of such an agreement, the offices of Stokes Lawrence, P.S., 800
Fifth Avenue, Suite 4000, Seattle, Washington 98104-3179.
"Closing" shall mean the consummation of the assignment, transfer,
conveyance and delivery of the Assets and the Purchase Price as contemplated
hereunder.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Consents" shall mean any and all consents, approvals, authorizations
or waivers of any Governmental Authority, including, without limitation, the FCC
Consent, and any and all consents, approvals or waivers from parties to
Contracts that are (i) required for the consummation of the transactions
contemplated by this Agreement or (ii) necessary in order that Purchaser (or its
designee) can conduct the Business after the Closing Date substantially in the
same manner as before the Closing Date.
"Contracts" shall mean all leases, contracts, commitments, and other
binding agreements relating to the System to which Seller is a party and which
are set forth on SCHEDULE 5.7, whether written or oral.
"DOJ" shall mean the United States Department of Justice.
"Employees" shall mean all persons employed on a full or part-time
basis together with all persons retained as "independent contractors" who are
the functional equivalent of employees.
"Environmental Laws" shall mean Applicable Laws relating to pollution,
the environment or the Handling of Regulated Substances, including without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 ("CERCLA").
"Equipment" shall mean all of the furniture, fixtures, furnishings,
machinery, computer hardware, antennas, transmitters, and other personal
property used in connection with the Business and the System.
"ERISA" shall have the meaning set forth in Section 5.9 hereof.
"Escrow Agreement" shall have the meaning set forth in Section 11.2.2
hereof.
"Escrow Amount" shall have the meaning set forth in Section 2.2 hereof.
"Excluded Assets" shall mean those assets set forth on SCHEDULE 1
hereto.
"FCC" shall mean the Federal Communications Commission.
"FCC Authorization" shall mean the Authorizations from the FCC relating
to the operation of the System.
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"FCC Consent" shall mean the action of the FCC granting its consent to
the assignment of the FCC Authorization from Seller to Purchaser.
"FTC" shall mean the Federal Trade Commission.
"Final Order" shall mean a Preliminary Order which is not reversed,
stayed, enjoined, set aside, annulled, or suspended, and with respect to which
no timely request for stay, motion or petition for reconsideration or rehearing,
application or request for review, or notice of appeal or other judicial
petition for review is pending, and as to which the time for filing any such
request, motion, petition, application, appeal, or notice, and for the entry of
an order staying, reconsidering, or reviewing on the FCC's or other regulatory
authorities' own motion, has expired. If a Preliminary Order is subject to
conditions which may have a material adverse effect on a party, such party must
either timely file a petition for reconsideration with respect to such
conditions or accept such conditions. If such party timely files a petition for
reconsideration with respect to such conditions, the Preliminary Order shall not
become or be deemed a Final Order unless and until such conditions are removed
from the Preliminary Order or the party affected thereby has notified the other
Party in writing of its willingness to accept such conditions.
"Final Settlement" shall have the meaning set forth in Section 2.3.3
hereof.
"Financial Statements" shall have the meaning set forth in Section 5.10
hereof.
"Governmental Authority" shall mean any court or any federal, state,
county, or local governmental, legislative or regulatory body, agency,
department, authority, instrumentality or other subdivision thereof, including,
without limitation, the FCC and the PUC.
"Handling" shall mean the production, use, generation, storage,
treatment, recycling, disposal, discharge, release, or other handling or
disposition at any time on or prior to the Closing Date of any Regulated
Substance either in, on, or under any Operating Site.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Intellectual Property" shall mean all patents, trademarks, service
marks, trade names, copyrights, licenses, formulas, computer software,
advertising slogans, know-how, data and other intellectual property rights or
intangible property rights of Seller which are used or intended for use in
connection with the System.
"Inventory" shall mean all usable and non-obsolete merchandise owned
and intended for resale in connection with the Business, whether or not located
on the premises, on consignment to a third party, or in transit or storage.
"Liabilities" shall mean liabilities, obligations or commitments of any
nature, absolute, accrued, contingent or otherwise, known or unknown, whether
matured or unmatured.
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"Lien" shall mean any contract for sale (except for the sale of
cellular telephone service and rentals of cellular telephone equipment to
Subscribers), claim, lien, pledge, option, charge, covenant, restriction,
encroachment, easement, security interest, mortgage, deed of trust,
right-of-way, encumbrance or adverse interest of any kind or character of any
other Person.
"Losses" shall have the meaning set forth in Section 11.2.1 hereof.
"Operating Data Statements" shall have the meaning set forth in Section
5.10 hereof.
"Operating Site" shall mean any real property or facility owned, leased
or used at any time by Seller in connection with the System.
"Person" shall mean an individual, a corporation, a partnership, an
association, a joint-stock company, a trust, any unincorporated organization, or
a government or a political subdivision thereof.
"Preliminary Order" shall mean an action by the FCC and any other
applicable state regulatory authority consenting to or authorizing the
assignment of the FCC Authorization to Purchaser (or its designee), which action
has not yet become a Final Order.
"PUC" shall mean the Texas Public Utilities Commission.
"Purchase Price" shall have the meaning set forth in Section 2.2
hereof.
"Purchaser's Closing Certificate" shall have the meaning set forth in
Section 7.1 hereof.
"Real Property" shall mean all real property owned or leased by or
used, or intended by Seller for use, in connection with the System, together
with all buildings, improvements, fixtures, easements, licenses, options,
insurance proceeds and condemnation awards and all other rights of Seller in or
appurtenant thereto, but does not include the property listed on SCHEDULE 1.
"Regulated Substance" shall mean (i) any "hazardous substance" as
defined in CERCLA, (ii) any petroleum or petroleum substance, and (iii) any
other pollutant, waste, contaminant, or other substance regulated under
Environmental Laws.
"Representative" shall mean any officer, director, principal, attorney,
agent, employee or other representative of any Person.
"Seller's Closing Certificate" shall have the meaning set forth in
Section 8.1 hereof.
"Service" shall mean the provision of the System's cellular telephone
service to Subscribers.
"Subscribers" shall mean customers of Seller that subscribe to the
Service.
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"Subscriber Agreements" shall mean Contracts whereby Seller has agreed
to provide Service.
"Survival Period" shall have the meaning set forth in Section 11.1
hereof.
"Taxes" shall mean all taxes, charges, fees, levies or other
assessments or charges of any kind whatsoever, including without limitation,
income, excise, use, transfer, payroll, occupancy, property, sales, franchise,
unemployment and withholding taxes, imposed by any Governmental Authority, and
any assessments against Real Property together with any interest, penalties or
additional taxes attributable to such taxes and other assessments.
"To the knowledge" or "knowledge" of a Party (or similar phrases) shall
mean (i) with respect to Seller, to the extent of matters which are actually
known by any of the officers, directors or employees of Seller or which, based
on facts of which such parties are aware, would be known to a reasonable Person
in similar circumstances and (ii) with respect to Purchaser, to the extent of
matters which are actually known by any of the officers, directors or employees
of Purchaser, or which, based on facts of which such parties are aware, would be
known to a reasonable Person in similar circumstances.
ARTICLE 2.
PURCHASE OF ASSETS
2.1. Transfer of Assets. Subject to the terms and upon satisfaction of
the conditions contained in this Agreement, at the Closing, Seller shall sell,
convey, transfer, assign and deliver to Purchaser (or its designee), and
Purchaser (or its designee) will accept and acquire, the Assets.
2.1.1. The towers on which transmitting and receiving equipment
for the System are located are on land that is owned by Affiliates of Seller.
Such sites are leased to Seller on non-standard terms and conditions. The
parties acknowledge that Purchaser will not assume any such leases as a part of
the sale contemplated by this Agreement, but that Purchaser's acquisition of
rights to use such sites on terms substantially the same as those contained in
the form set forth in SCHEDULE 2.1.2 are a necessary part of the transactions
contemplated by this Agreement.
2.1.2. Purchaser and Seller agree to negotiate new leases for all
sites and properties that are owned by Affiliates of Seller, with the terms and
conditions of such leases to be in substantially the same form as attached as
SCHEDULE 2.1.2. All such new leases will take effect on or before the Closing
Date.
2.2. Purchase Price. The purchase price for the Assets shall be One
Hundred Forty Five Million Dollars ($145,000,000), subject to adjustment
pursuant to this Article (the "Purchase Price"), which shall be paid by
Purchaser to Seller (or its designee) on the Closing Date as follows: (i) Four
Million Dollars ($4,000,000) of such Purchase Price (the "Escrow Amount") shall
be delivered to the Escrow Agent as defined in Section 11.2.2 and held pursuant
to the terms
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of Section 11.2.2; and (iii) the balance of such Purchase Price shall be paid by
Purchaser to Seller by wire transfer of immediately available funds.
2.3. Other Adjustments and Prorations.
2.3.1. The Purchase Price shall be adjusted in accordance with
the following:
(a) The Purchase Price shall be increased by an amount equal
to any cash, adjusted accounts receivable, Inventory (valued at book value),
prepaid expenses and any other current assets transferred to Purchaser. For the
purposes of this Section the "adjusted accounts receivable" shall equal the sum
of the following:
(i) 90% of the accounts receivable from carriers (not
including any clearinghouse receivables) and resellers,
and of receivables from Subscribers which remain unpaid
by Subscribers for less than thirty-one (31) days from
the date such receivable first comes due
("Outstanding"); plus
(ii) 70% of the amount of all Subscriber accounts receivable
that are Outstanding for more than thirty (30) days but
less than sixty-one (61) days; plus
(iii) 50% of the amount of all Subscriber accounts receivable
that are Outstanding for more than sixty (60) days, but
less than ninety-one (91) days; and
(iv) There shall be no adjustment (i.e. 0%) for the amount
of any Subscriber accounts receivable that are
Outstanding more than ninety (90) days.
(b) The Purchase Price shall be decreased by an amount equal
to (x) amounts collected by Seller from Subscribers on or prior to the Closing
Date (net of liabilities associated with deferred access revenue included in
such amounts), which relate to Services to be provided after the Closing Date
(hereinafter referred to as "Advance Receipts"), and (y) liabilities associated
with deferred access revenue assumed by Purchaser.
2.3.2. Except as otherwise specifically provided for herein, all
revenues and all expenses arising from the Business and ownership of the Assets,
including resale charges and other expenses payable in respect to Service,
utility charges, Taxes levied against the Assets, property and equipment
rentals, sales and service charges, Taxes (except for Taxes arising from the
transfer of the Assets), and similar prepaid and deferred items, shall be
prorated between Seller and Purchaser in accordance with the principle that
Seller shall receive the benefit of all revenues, and be responsible for all
expenses, costs, obligations and Liabilities allocable to the Business and the
ownership of the Assets for the period on and prior to the Closing Date, and
Purchaser shall receive the benefit of all revenues, and be responsible for all
expenses, costs, obligations and Liabilities allocable to the Business and the
ownership of the Assets after the Closing Date.
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2.3.3. A final settlement (the "Final Settlement") of all
adjustments or prorations made under this Section, with payment being made by
the appropriate Party in cash (but without any interest thereon), shall occur no
later than one hundred twenty (120) days after the Closing Date.
2.3.4. In the event that the Parties cannot agree on the amount
of the Final Settlement, the determination shall be made by a mutually agreed
upon national accounting firm selected jointly by Purchaser and Seller that has
not, during the prior three (3) years, been employed by any of the Parties (the
"Auditor"). The Auditor shall make its determination of the Final Settlement
based on the express provisions of this Agreement; provided, however, that if
the Auditor finds that the express terms of this Agreement are not sufficient to
resolve any issue or issues, the Auditor shall rely upon generally accepted
accounting principles then in effect. Any Party may invoke the use of the
Auditor by notifying the other Party in writing, provided that a Party may not
invoke the use of the Auditor to determine the Final Settlement earlier than one
hundred eighty (180) days after the Closing Date. The Auditor shall be required
to render a decision within twenty-one (21) days after the Auditor is requested
to render a determination under this Section. The decision of the Auditor shall
be binding on the Parties and not subject to any judicial challenge by the
Parties. Within five (5) business days after the Auditor provides the
determination to the Parties, the payment of the Final Settlement shall be made
in accordance with that determination. The expenses of the Auditor shall be paid
by Seller and Purchaser in reverse proportion to the Auditor's determination
with respect to the allocation to Seller and Purchaser of the amount in
disagreement. For example, if the amount in disagreement is One Hundred Thousand
Dollars ($100,000) and the Auditor determines that the Seller should receive
Seventy Thousand Dollars ($70,000) and the Purchaser should receive Thirty
Thousand Dollars ($30,000), then Seller shall pay thirty percent (30%) of the
Auditor's expenses, and Purchaser shall pay seventy percent (70%).
ARTICLE 3.
ASSUMED OBLIGATIONS
3.1. No Assumption of Liabilities by Purchaser, Exceptions. Except as
set forth in Section 3.2 below, Purchaser expressly does not, and shall not,
assume or be deemed to have assumed under this Agreement or by reason of any
transactions contemplated hereunder, any Liabilities of any nature whatsoever
relating to the System or of Seller, or any of Seller's stockholders or
partners, as the case may be.
3.2. Assumed Liabilities. At the Closing, Purchaser shall assume and
shall timely pay, perform, fulfill and discharge all of Seller's liabilities and
obligations due after the Closing Date on those Contracts and Liabilities set
forth on SCHEDULE 3.2 (the "Assumed Liabilities").
ARTICLE 4.
COVENANTS AND AGREEMENTS
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4.1. Covenants of Seller. Seller covenants and agrees that from the
time of the execution and delivery of this Agreement until (and including) the
Closing Date:
4.1.1. Consummate Transactions. Seller shall use its best 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 best efforts to obtain all necessary approvals, consents,
permits, licenses and other authorizations required in connection with this
Agreement and the transactions contemplated hereby from Governmental
Authorities, and to make all filings with and to give all notices to third
parties, which may be necessary or reasonably required of Seller in order to
consummate the transactions contemplated hereby.
4.1.2. Full Access and Purchaser Due Diligence. Seller shall
allow Purchaser and its agents and representatives (including, without
limitation, its independent auditors and attorneys) reasonable access during
normal business hours to all of Seller's personnel, premises, properties,
assets, financial statements and records, books, contracts, documents and
commitments of or relating to the Business, and shall furnish Purchaser and its
agents and representatives with all such information concerning the affairs of
the System as Purchaser may reasonably request.
4.1.3. Ordinary Course. Seller shall cause the Business and
affairs of the System to be conducted only in the ordinary course and consistent
with past practices. Without limiting the foregoing, Seller shall continue to
pay its bills and other obligations, all in the ordinary course of business
consistent with past practices, but shall not, without the prior written consent
of Purchaser, perform or do any of the following if the same would have a
material adverse effect on the Business, the System or the Assets: (a) incur any
material Liability other than obligations to Seller's brokers, attorneys and
accountants, all of which shall be paid by Seller; (b) assume, guarantee, change
any existing guarantee, endorse, act as an accommodation party, or otherwise
become responsible for, the obligations of any other Person; (c) make any loans
or advances to any Person; (d) sell, transfer, convey, mortgage, pledge,
hypothecate or place any Liens on any of the Assets; (e) waive or compromise any
right or claim for any amount; (f) cancel any note, loan or other material
obligation owing to Seller; (g) enter into any Contract with any Person,
including, without limitation, the stockholders of Seller or any of its
Affiliates, consultants, agents or assigns; (h) except as otherwise provided in
this Agreement, increase or modify compensation of any type currently paid to
any of its employees, officers, directors, agents or consultants; (i) make any
new arrangement for any profit-sharing plan, retirement plan, bonus plan,
severance arrangement, employee benefit plan, or any similar plan except for
modifications of existing plans that are required by law, or contemplated to be
implemented at the time of the execution of this Agreement; (j) except as
required by law, enter into any collective bargaining agreement, or make any
commitment whatsoever to any union or other representative or party which
intends to represent any of Seller's employees subsequent to the Closing; (k)
except as permitted under Section 5.9 hereof, hire any employees; (l) except as
required by law, enter into any additional reseller agreements; or (m) enter
into any Contract involving payments, assets, or liabilities with a value
greater than $25,000 individually or $100,000 in the aggregate, excluding
noncapital expenditures incurred in the ordinary course of business consistent
with past practices. Notwithstanding the foregoing, nothing in this Section
shall prevent Seller from taking
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appropriate action as may be necessary to maintain its ability to control and
manage the System and to comply with the rules, regulations or directives of any
Governmental Authority.
4.1.4. Retention of Records. On the Closing Date, Seller shall
deliver to Purchaser all of the Books and Records relating to the System and the
Business. In addition, for a period of three (3) years after the Closing Date,
Seller shall retain and make available to Purchaser copies of any documents not
theretofore delivered to Purchaser relating to System, the Business or the
Assets.
4.1.5. No Amendments or Issuance of Additional Shares. Seller
shall not amend its charter, by-laws, or comparable governing instrument, which
amendment would have a material adverse effect on the Assets, the Business or
the transactions contemplated by this Agreement or which would require any
additional consents or approvals of the transactions contemplated by this
Agreement. Seller shall not issue or sell any shares of its capital stock or
other securities, or issue 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 stock-based or stock-related awards or other
equity-based awards, shares of its capital stock or other equity or other
securities, or enter into any arrangement or contract with respect to the
purchase or voting of shares of its capital stock or other equity, or adjust,
split, combine or reclassify any of its securities, or make any other changes in
its capital structure, if any such issuance, sale, contract, plan,
understanding, arrangement, adjustment, split, combination, reclassification or
changes would require any additional approvals of the transactions contemplated
by this Agreement or would otherwise have a material adverse effect on the
transactions contemplated by this Agreement.
4.1.6. No Termination or Settlement. Without the prior written
consent of Purchaser, which consent shall not be unreasonably withheld, Seller
shall not terminate any agent, or settle any dispute with any agent if such
termination or settlement would cause Purchaser to have any continuing
obligation after the Closing with respect thereto.
4.1.7. Preserve Business and Goodwill. Seller shall use its
diligent efforts to keep the System intact, to preserve and maintain the Assets,
to preserve the Business and to preserve the goodwill of suppliers, Subscribers
and others dealing with Seller.
4.1.8. Compliance with Law. Seller shall comply in all material
respects with Applicable Laws relating to the System, the Business and the
Assets.
4.1.9. Approvals; Consents. Seller shall obtain and maintain in
full force and effect, and shall not take any action which might have a material
adverse effect on, any Authorizations that are required for the operation of the
Business as presently conducted, except where such Authorizations are
administrative in nature, and the failure to obtain or maintain such
Authorizations would not adversely impact the continued operation of any part of
the System or any component thereof, as currently operated. The Parties shall
consult with one another as to the approach to be taken with any Governmental
Authority with respect to obtaining any Authorization 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
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Governmental Authority. Seller shall not make any material commitments with
respect to any Authorizations that would have a material adverse effect on the
Business, the System or the Assets without Purchaser's prior written consent.
4.1.10. Insurance. From the date hereof through the Closing Date,
Seller shall maintain in full force and effect (including necessary renewals
thereof), all of the insurance policies that Seller currently maintains relating
to System, or other functionally equivalent policies. The policies currently
maintained by Seller are set forth on SCHEDULE 4.1.10. From and after the
Closing Date, Seller shall take all actions that may be necessary to cause the
coverage under such policies to continue in full force and effect after the
Closing Date with respect to liability occurrences prior to the Closing Date and
shall take all actions necessary to preserve or protect rights under any such
policies with respect to any claim against Seller arising out of the Assets or
Business of Seller prior to the Closing Date. Seller will provide Purchaser with
information and records regarding all claims pending with respect to the Assets
or Business of Seller and agrees to provide to Purchaser any additional
information and records Purchaser may reasonably require regarding such claims.
4.1.11. Books and Records. Seller shall continue to maintain the
Books and Records in the manner and on a basis consistent with prior years.
4.1.12. Notice of Claims. Seller shall give written notice to
Purchaser promptly upon the commencement of any action, investigation,
arbitration or proceeding (including any proceeding before any Governmental
Authority), or promptly upon obtaining knowledge of any facts giving rise to a
threat of any such action, investigation, arbitration or proceeding which, if
adversely determined, would have a material adverse effect on (a) Seller's
ability to consummate the transactions contemplated hereby; (b) the Business; or
(c) the Assets.
4.1.13. Notice of Breaches. Seller 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 Seller contained in this
Agreement, give notice in writing of such event or occurrence or impending or
threatened event or occurrence, to Purchaser and use its diligent efforts to
prevent or to promptly remedy such breach.
4.1.14. Notice of Change. Except for events occurring in the
communications industry generally, Seller shall use reasonable efforts to notify
Purchaser promptly in writing of any event, condition or state of facts, which
has had or would reasonably be expected to have a material adverse effect on the
System, the Business, the Assets, or on the transaction contemplated by this
Agreement.
4.1.15. Training / Transition Assistance.
(a) Before the Closing, and at the request of Purchaser,
Seller hereby agrees to use commercially reasonable efforts to instruct
Purchaser's employees and agents in the use of Seller's billing system. Such
instruction will be provided at Seller's premises at mutually
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convenient times so as not to disrupt the operation of Seller's businesses and
shall be provided at no cost to Purchaser.
(b) The Parties agree to use diligent efforts and to direct
their respective employees, agents, and subcontractors to cooperate in the
conversion and transfer of the Subscribers to Purchaser's billing system so that
upon the Closing Date, or as soon thereafter as is reasonably practicable, all
of the System's customer billing information shall have been transferred and
converted to Purchaser's billing system. The costs associated with converting
and transferring the information to Purchaser's billing system shall be the sole
responsibility of Purchaser. In the event Purchaser desires to retain Seller's
assistance in such matters after the Closing, the parties agree to enter into an
agreement having terms substantially the same as those contained in the document
attached as SCHEDULE 4.1.15(b).
4.1.16. Interim Financial Statements and Statistical Summaries.
Between the date of this Agreement and the Closing Date, Seller shall deliver to
Purchaser (i) as soon as practicable, but no later than forty-five (45) days
after the end of each calendar month, unaudited financial statements ("Interim
Financial Statements") for the most recent month and the interim period then
ended, and (ii) as soon as practicable, but no later than forty-five (45) days
after the end of each calendar month, interim operating data summaries (the
"Interim Operating Data Statements") for the most recent month and interim
period then ended, which summaries will be in scope and format substantially
identical to the Operating Data Statements.
4.1.17. Material Contracts. Seller shall not (a) default in any
material respect under, or breach any term or provision of, or suffer or permit
to exist any condition or event which, after notice or lapse of time, or both,
would constitute a material default under, any material Contract, or (b) cause
or permit the termination, modification or amendment of any material Contract of
Seller.
4.1.18. Condition of Assets. Seller shall use diligent efforts to
preserve the Assets intact and, from time to time, make all necessary repairs
thereto, so that the Business may be conducted in the ordinary course consistent
with past practices.
4.2. Covenants of Purchaser. Purchaser covenants and agrees that from
the time of the execution and delivery of this Agreement until (and including)
the Closing Date:
4.2.1. Consummate Transaction. Purchaser shall use its best
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, to assist Seller in obtaining all necessary
Consents of third parties, including, without limitation, the approval of this
Agreement and the transactions contemplated hereby as required by any
Governmental Authority, and to make all filings with and to give all notices to
third parties which may be necessary or reasonably required of Purchaser in
order to consummate the transactions contemplated hereby.
4.2.2. Purchaser Not to Control. Notwithstanding any provision of
this Agreement that may be construed to the contrary, pending the consummation
of the Closing, Seller shall maintain actual (de facto) and legal (de jure)
control over the System. Specifically,
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and without limitation, the responsibility for the operation of the Business and
the System shall, pending the Closing Date, reside with the Board of Directors
and management of Seller, including, but not limited to, responsibility for the
following matters: (a) access to and the use of the facilities of and equipment
owned by Seller; (b) control of the daily operation of the System; (c) creation
and implementation of policy decisions; (d) employment and supervision of
employees; (e) payment of financing obligations and expenses incurred in the
operation of the System; (f) receipt and distribution of monies and profits
derived from the operation of the System; and (g) execution and approval of all
contracts and applications prepared and filed before Governmental Authorities.
4.2.3. Notice of Breaches. Purchaser 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 Purchaser contained
in this Agreement, give notice in writing of such event or occurrence or
impending or threatened event or occurrence, to Seller and use its diligent
efforts to prevent or to promptly remedy such breach.
4.2.4. Qualification to Hold Authorizations. Purchaser shall
remain an entity qualified to hold the Authorizations under the rules and
regulations of the FCC.
4.3. Mutual Covenants of Seller and Purchaser. Seller and Purchaser
have filed with the FCC, and, if necessary, will file with the PUC or any other
Governmental Authority, as soon as practicable following the date hereof, joint
applications requesting the approval of the assignment of the Authorizations to
Purchaser, and, if applicable, will file all necessary applications with the DOJ
and/or the FTC pursuant to the HSR Act. Seller and Purchaser agree to use their
best efforts to make all such filings as have not yet been made within ten (10)
business days of the execution of this Agreement. Seller and Purchaser 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. Purchaser shall the pay filing fees associated with the filings
required by this Section. Seller and Purchaser covenant and agree to undertake
all actions and file such material as shall be necessary or required in order to
obtain any necessary waivers or other authority in connection with the foregoing
applications.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby makes the following representations and warranties to
Purchaser, all of which have been relied upon by Purchaser in entering into this
Agreement and the truth and accuracy of which shall constitute a condition
precedent to the obligations of Purchaser hereunder:
5.1. Organization and Standing. Seller (a) is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Texas, (b) has full corporate power and authority to enter into and perform this
Agreement, to own and lease the Assets, and operate the System and to carry on
the Business as now being conducted and proposed to be conducted
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by it, and (c) is duly qualified to do business and is in good standing as a
foreign corporation in every jurisdiction in which the nature of the business
conducted by it requires such qualification, except where the failure to so
qualify would not have a material adverse effect on the System, the Business, or
the Assets.
5.2. Authorization and Binding Obligations. The execution, delivery and
performance of this Agreement by Seller has been duly and validly authorized by
all necessary corporate action, including approval of the entire transaction by
vote of its shareholders and Board of Directors. This Agreement has been duly
executed and delivered by Seller and constitutes a valid and binding obligation
of Seller enforceable against it in accordance with its terms, except as its
enforceability may be limited by bankruptcy, insolvency, moratorium or other
laws relating to or affecting creditors' rights generally and the exercise of
judicial discretion in accordance with general equitable principles.
5.3. No Contravention. Except as otherwise contemplated hereunder, the
execution, delivery and performance of this Agreement, the consummation of the
transactions contemplated hereby and the compliance with the provisions hereof
by Seller will not (a) violate any provisions of the corporate charter or
by-laws of Seller (b) result in the breach of, or constitute a default under, or
result in the creation of any Lien upon any of the Assets, under the provisions
of any agreement or other instrument to which Seller is a party or by which any
Asset is bound or affected or (c) with respect to Seller, violate any Applicable
Laws.
5.4. Title to Assets.
5.4.1. SCHEDULE 5.4.1 is a list of all tangible personal property
included in the Assets. Seller has good and marketable title to all the tangible
personal property to be transferred by it hereunder, free and clear of all
Liens, charges or any other encumbrances, except for and subject only to liens
for Taxes not yet due or payable ("Permitted Liens").
5.4.2. SCHEDULE 5.4.2 is a list of all the Real Property. Seller
has good and marketable title to all of the Real Property to be transferred by
it hereunder, free and clear of all Liens, and without reservation or exclusion
of any mineral, timber or other rights or interests, except for and subject only
to (a) Permitted Liens, (b) those matters set forth in SCHEDULE 5.4.2 including
the leases listed thereon (whether as lessor or lessee), none of which is
violated by existing structures or impairs Seller's use and none of which
materially impairs or pursuant to its terms would materially impair the present
operations of the System or the present use of such property, and (c) those
Liens set forth in SCHEDULE 5.4.2. The Liens set forth on SCHEDULE 5.4.2 will be
removed on or prior to the Closing Date.
5.4.3. The Assets include all assets (except the Excluded Assets)
which are used to conduct the Business and operations of the System as presently
conducted .
5.5. Condition of the Assets. All tangible Assets are in reasonable
operating condition and repair, ordinary wear and tear excepted, are reasonably
suitable for the uses and purposes for which they are being used, and are in
compliance with all Applicable Laws, except where failure of such compliance
would not have a material adverse effect on the Assets, the System, or the
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Business, and Seller has no knowledge and has received no notice that it or the
present use of the Assets is in violation in any material respect of any
Applicable Laws.
5.6. Authorizations. The Authorizations listed on SCHEDULE 5.6 are all
of the Authorizations necessary to operate the System, the Business and the
Assets as they are now operated. The Authorizations are validly issued in the
name of Seller and are in full force and effect. Except as set forth on SCHEDULE
5.6, all material Authorizations are unimpaired by any acts or omissions of
Seller (or any of its Representatives) and the Authorizations are free and clear
of any restrictions which might limit the full operation of the System. All
material ownership reports, employment reports, and other documents required to
be filed by Seller with the FCC with respect to the System have been filed or
the time period for such filing has not lapsed. All such reports and documents
since the date that Seller acquired the System are correct in all material
respects. The FCC actions granting the current FCC Authorization to operate the
System together with all underlying construction permits have not been reversed,
stayed, enjoined, set aside, annulled, or suspended, and no timely request for
stay, motion or petition for reconsideration or rehearing, application or
request for review, or notice of appeal or other judicial petition for review is
pending. The time for filing any such request, motion, petition, application,
appeal, or notice, and for the entry of an order staying, reconsidering, or
reviewing on the FCC's or other regulatory authorities' own motion, has expired.
5.7. Contracts. SCHEDULE 5.7 is a list of all Contracts, other than
Subscriber Agreements and Contracts with Seller's Affiliates which will not
survive the Closing. Each such Contract is in full force and effect, paid
currently, and has not been materially impaired by any acts or omissions of
Seller or any of its Representatives. Except as set forth on SCHEDULE 5.7, no
Contract requires the consent of any other party to the transactions
contemplated by this Agreement. Seller is not (and, to the best of its
knowledge, no other party is) in material breach or violation of, or default
under any of the Contracts. Seller is not aware of any intent by any party to
any Contract to terminate or amend the terms thereof or to refuse to renew any
Contract upon expiration of its term.
5.8. Intellectual Property. SCHEDULE 5.8 is a list of all Intellectual
Property. Except as indicated on SCHEDULE 5.8, Seller has properly licensed and
has the right to use all of the Intellectual Property. No person has a right to
receive a royalty or similar payment in respect of any Intellectual Property
other than as indicated on SCHEDULE 5.8. Seller has no licenses granted by or to
it, or any other agreements to which it is a party, relating in whole or in part
to any of the Intellectual Property other than as indicated on SCHEDULE 5.8. To
Seller's knowledge, except as disclosed on SCHEDULE 5.8, Seller's use of the
Intellectual Property is not infringing upon or otherwise violating the rights
of any third party, and no proceedings have been instituted against or notices
received by Seller alleging that such use of its Intellectual Property infringes
upon or otherwise violates any rights of a third party.
5.9. Employees; Employment Obligations. Seller and/or the System
currently employs those persons in those positions and at those salaries
(including benefits) as are listed on SCHEDULE 5.9 Seller shall hire no further
employees without the prior written consent of Purchaser, provided that Seller
may, as the need arises, hire employees to replace existing employees without
the consent of Purchaser. Except as otherwise set forth on such SCHEDULE 5.9,
Seller and the
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System are not bound, and at no time have been bound, by any oral or written
collective bargaining agreement, severance, pension, retirement, profit-sharing,
401(k), "employee benefit plan" (within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), or other
employment agreement (other than any agreements terminable on thirty (30) days'
or less notice without penalty or severance obligation) with any officer,
employee or consultant, nor does Seller or the System have any liability under
any such agreement which was terminated previously. Seller has complied in all
material respects with all applicable laws, rules and regulations which relate
to prices, wages, hours, discrimination in employment and collective bargaining
and is not liable for any arrears of wages or any taxes or penalties for failure
to comply with any of the foregoing. With respect to each "employee benefit
plan," if any, within the meaning of Section 3(3) of ERISA, which is now, or
ever has been, maintained, contributed to, or required to be contributed to by
Seller, such employee benefit plan has been established and maintained in all
material respects in accordance with its terms and in material compliance with
all applicable laws, statutes, orders, rules and regulations, including but not
limited to ERISA. Seller is not a party to, and is not affected by or threatened
with, any dispute or controversy with a union or with respect to unionization or
collective bargaining involving the Employees of Seller or the System.
5.10. Financial Statements. Attached hereto as SCHEDULE 5.10 are the
unaudited financial statements of Seller for the periods indicated on such
Schedule (the "Financial Statements"), which statements have been compiled by
L.M. Henderson & Co. SCHEDULE 5.10 also lists key statistical summary
information and other documents which set forth the subscriber history for the
last three years, and local and roaming minutes of use data of the System for a
designated calendar months (the "Operating Data Statements"). A sample Operating
Data Statement is attached hereto as SCHEDULE 5.10. All Financial Statements are
true and correct in all material respects, have been prepared from the Books and
Records and fairly represent the financial position of Seller in a manner
consistent with the prior periods prepared in accordance with generally accepted
accounting principles. To Seller's knowledge, Seller has not incurred nor is it
subject to any Liabilities, whether accrued or absolute, which are not disclosed
in the Financial Statements or elsewhere in this Agreement. All Operating Data
Statements listed on such SCHEDULE 5.10 are accurate in all material respects.
5.11. Litigation. Except as set forth on SCHEDULE 5.11, there is no
action, order, writ, injunction, judgment or decree outstanding or claim, suit,
litigation, proceeding, or labor dispute ("Action"), other than rule-making
proceedings affecting the cellular telephone industry generally, pending or, to
the knowledge of Seller, threatened, relating to or affecting (a) Seller, (b)
the Assets, (c) the Business, or (d) the transactions contemplated by this
Agreement which if adversely determined, could have a material adverse effect on
the Business. Seller is not in default with respect to any judgment, order,
writ, injunction or decree of any court or governmental agency, and there are no
unsatisfied judgments against Seller or the Assets. There is not a reasonable
likelihood of an adverse determination of any pending Action which would,
individually or in the aggregate, have a material adverse effect on the Assets
or the Business or the financial condition of Seller.
5.12. Complaints. There is not, to the best of Seller's knowledge, any
FCC investigation, notice of apparent liability or order of forfeiture pending
or outstanding against
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Seller or the System respecting any violation, or allegation thereof, of any FCC
rule, regulation or policy, or, to the best of Seller's knowledge, any complaint
before the FCC as a result of which an investigation, notice of apparent
liability or order of forfeiture may issue from the FCC relating to the System.
5.13. Reports. Except as set forth in SCHEDULE 5.13 hereto, all
material returns, reports and statements currently required to be filed by
Seller with the FCC or with any other Governmental Authority with respect to the
System have been filed and materially complied with and shall continue to be
filed and be in substantial compliance on a current basis until the Closing
Date. All such reports, returns and statements are (or will be, in the case of
future reports) substantially complete and materially correct as filed.
5.14. Taxes. Except as noted below, Seller has paid in full or
discharged all Taxes relating to the ownership and operation of the Assets and
all Taxes the non-payment of which could result in a Lien on the Assets in the
hands of the Purchaser, excepting in each case such Taxes which are not yet due
or which are being contested and for which adequate reserves have been made. No
event has occurred that could impose on Purchaser any liability for any Taxes,
due or to become due, from Seller to any taxing authority.
Seller has not yet paid state sales Taxes associated with certain
out collect revenues. Seller acknowledges that all such Taxes, and all penalties
and interest associated with such taxes, are and will remain Seller's
responsibility. Seller shall have paid all such Taxes, penalties and interest
before the Closing Date.
5.15. No Other Agreements to Sell the System or the Assets. Seller has
no other legal obligation, absolute or contingent, to any other Person to sell,
or offer to sell (including any right of first refusal or other similar
agreement) the Assets or any capital stock of Seller or to effect any merger,
consolidation or other reorganization of Seller or to enter into any contract
with respect thereto.
5.16. Resale and Roaming Agreements. SCHEDULE 5.16 contains a list of
all resale agreements to which Seller is a party, both as reseller and as a
provider of resale services to others. SCHEDULE 5.16 also contains a list of all
roaming agreements to which Seller is a party. All such resale and roaming
agreements are in full force and effect and, subject to rates which may be
imposed upon Seller beyond Seller's control, are on terms reasonable and
customary in the cellular telephone industry.
5.17. Environmental Matters. Except as set forth in SCHEDULE 5.17, to
Seller's knowledge the Operating Sites, and all existing and prior uses of the
Operating Sites, comply and have at all times complied with the Environmental
Laws. Except as set forth in SCHEDULE 5.17, Seller has not used, generated
manufactured, refined, transported, treated, stored, leaked, poured, emitted,
emptied, released, discharged, disposed, spilled or Handled any Regulated
Substance on or under any Operating Site. To Seller's knowledge (a) there is and
has been no Handling of any Regulated Substances at, on, or from any Operating
Site; (b) there is and has been no presence of Regulated Substances on or under
any Operating Site regardless of how the Regulated Substance or Regulated
Substances came to rest there; (c) no underground tanks, PCBs or
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asbestos-containing materials are or have been located on or under any Operating
Site; (d) no Liens have been, or are, imposed on any of the Assets under any
Environmental Laws; (e) no action, proceeding, revocation proceeding, amendment
procedure, writ, injunction or claim is pending, or threatened concerning any
environmental permit, Regulated Substance or activity related thereto. Neither
Seller nor any Person acting on behalf of Seller has released any other Person
from any claims Seller might have, or have had, for any matter relating to
presence or Handling of Regulated Substances at any Operating Site. Seller has
obtained all permits, licenses, registrations, and other approvals and has made
all reports and notifications required under any Environmental Laws in
connection with the Assets, and is in compliance in all material respects with
all applicable Environmental Laws. There are no present actions, activities,
circumstances, conditions, events, or incidents that would be expected to
involve Seller (or any Person whose liability Seller has retained or assumed,
either by contract or operation of law) in any litigation under the
Environmental Laws, or impose upon Seller (or any Person whose liability Seller
has retained or assumed, either by contract or operation of law) any
environmental liability including, without limitation, common law tort
liability. SCHEDULE 5.17 hereto also contains a list and brief description of
all Environmental Law filings by Seller with, notices to Seller from, and
related reports to all Governmental Authorities administering Environmental
Laws, within three years prior to the date hereof, including without limitation,
filings made, corrective action taken, or citations received by Seller.
5.18. Brokers. Seller has entered into a Contract with Daniels and
Associates which will result in the obligation of Seller to pay a brokerage
commission or similar payment in connection with the transactions contemplated
hereby. Seller shall be responsible for making any and all such payments, and
Purchaser shall have no obligation therefor.
5.19. No Material Adverse Change. Except as set forth on SCHEDULE 5.19,
since the date of the most recent Financial Statements, there has not been:
5.19.1. any material adverse change in the rate of Seller's
generation of cash flow from operations (as opposed to cash flow from financing
operations and investment activities) after giving effect to customary seasonal
fluctuations of cash flow generation;
5.19.2. any occurrence, assumption or guarantee by Seller of a
material indebtedness other than pursuant to Contracts in existence on the date
hereof and set forth or described on the Schedules annexed hereto;
5.19.3. any creation by Seller of any Lien or encumbrance on any
material Asset other than pursuant to Contracts in existence on the date hereof
and set forth or described on the Schedules annexed hereto;
5.19.4. any making of any material loan, advance or capital
contribution to or investment in any Person by Seller;
5.19.5. any damage, destruction or other casualty loss affecting
the Business or the Assets which, after giving effect to payments to Seller
under applicable insurance policies, has had or is likely to have a material
adverse effect on the financial condition of Seller or the System; or
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5.19.6. any change by Seller in accounting principles or methods
not required by law or year end changes.
5.20. Year 2000 Compliance. Seller has performed the necessary testing
to determine whether all material software and computer systems used in the
operation of the System are Year 2000 Compliant. To the extent that such testing
indicated that Seller's software or computer systems are not Year 2000
Compliant, such software and/or computer systems were modified or will be
modified prior to the Closing Date so they are Year 2000 Compliant. For purposes
of this Section, "Year 2000 Compliant" means that Seller's software or computer
systems receive, record, store, process, rout, transfer or present calendar
dates and any related information falling on or after January 1, 2000 with
similar functionality, in all material respects, as such software or computer
systems perform such functions for calendar dates and related information
falling prior to January 1, 2000.
5.21. Miscellaneous. No representation or warranty made by Seller in
this Agreement, and no statement made in any schedule, exhibit, certificate or
other document furnished pursuant to this Agreement, contains any untrue
statement of a material fact or knowingly omits or fails to state, or will
knowingly omit or fail to state, any material fact or information necessary to
make such representation or warranty or any such statement not materially
misleading; provided however, that nothing contained in this Section shall alter
the standard of those representations or warranties which are made "to Seller's
knowledge" or "to the best of Seller's knowledge" or phrases of similar import.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby makes the following representations and warranties to
Seller, all of which have been relied upon by Seller in entering into this
Agreement and the truth and accuracy of which shall constitute a condition
precedent to the obligations of Seller hereunder:
6.1. Organization and Standing. Purchaser (a) is a limited partnership
duly organized, validly existing and in good standing under the laws of the
state of its organization, (b) has full power and authority to enter into and
perform this Agreement, to own the Assets, and to carry on the Business upon
consummation of the transactions contemplated by this Agreement, and (c) is duly
qualified to do business and is in good standing as a foreign entity in every
jurisdiction in which the nature of the business conducted by it requires such
qualification, except where the failure to so qualify would not materially
adversely affect Purchaser or the transactions contemplated by this Agreement.
6.2. Authorization and Binding Obligations. The execution, delivery and
performance by Purchaser of this Agreement has been or will be within five (5)
business days of the date of this Agreement, duly and validly authorized by all
necessary partnership action, including approval of the entire transaction by
the general partner of Purchaser. This Agreement has been duly executed and
delivered by Purchaser and constitutes a valid and binding obligation of
Purchaser,
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enforceable against Purchaser in accordance with its terms except as its
enforceability may be limited by bankruptcy, insolvency, moratorium or other
laws relating to or affecting creditors' rights generally and the exercise of
judicial discretion in accordance with general equitable principles.
6.3. No Contravention. Except as otherwise contemplated hereunder, the
execution, delivery and performance of this Agreement, the consummation of the
transactions contemplated hereby and the compliance with the provisions hereof
by Purchaser will not (a) violate any provisions of the organizational documents
of Purchaser, (b) result in the breach of, or constitute a default under or
result in the creation of any Lien upon any assets of Purchaser, under the
provisions of any agreement or other instrument to which Purchaser is a party or
by which the property of Purchaser is bound or affected or (c) with respect to
Purchaser, violate any Applicable Laws.
6.4. Litigation. Except as set forth on SCHEDULE 6.4, there is no
Action, other than rule-making proceedings affecting the cellular telephone
industry generally, pending or, to the knowledge of Purchaser, threatened or
anticipated against, relating to or affecting Purchaser that would have a
material adverse effect on Purchaser or Purchaser's ability to consummate the
transactions contemplated by this Agreement. Purchaser is not in material
default with respect to any material judgment, order, writ, injunction or decree
of any court or governmental agency, and there are no unsatisfied judgments
against Purchaser. There is not a reasonable likelihood of an adverse
determination of any pending Action which would, individually or in the
aggregate, have a material adverse effect on Purchaser or Purchaser's ability to
consummate the transactions contemplated by this Agreement.
6.5. Authority to hold Authorizations. Purchaser is an entity that is
qualified to hold the Authorizations under the rules and regulations of the FCC.
6.6. No Brokers. Neither Purchaser nor any of its Affiliates has
entered into or will enter into any contract, agreement, arrangement or
understanding with any person or firm which will result in the obligation of
Seller to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
6.7. Financial Capacity. Purchaser has now, and will have on the
Closing Date, the financial capacity or resources to acquire and operate the
System and Assets as contemplated by this Agreement.
6.8. Miscellaneous. No representation or warranty made by Purchaser in
this Agreement, and no statement made in any schedule, exhibit, certificate or
other document furnished pursuant to this Agreement, contains any untrue
statement of a material fact or knowingly omits or fails to state, or will
knowingly omit or fail to state, any material fact or information necessary to
make such representation or warranty or any such statement not materially
misleading; provided however, that nothing contained in this Section shall alter
the standard of those representations or warranties which are made "to
Purchaser's knowledge" or "to the best of Purchaser's knowledge" or phrases of
similar import.
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ARTICLE 7.
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to sell the Assets and to otherwise
consummate the transactions contemplated by this Agreement are subject, in the
discretion of Seller, to the satisfaction or waiver, on or prior to the Closing
Date, of each of the following conditions:
7.1. Representations, Warranties and Covenants. All representations and
warranties of Purchaser contained in this Agreement that do not otherwise
reference a specific date shall be true and correct in all material respects at
and as of the Closing Date as if such representations and warranties were made
at and as of the Closing Date, and Purchaser shall have performed in all
material respects all agreements and covenants required hereby to be performed
by Purchaser prior to or at the Closing Date. There shall be delivered to Seller
a certificate (signed by an authorized Officer of Purchaser) to the foregoing
effect ("Purchaser's Closing Certificate").
7.2. Closing Documents. Seller shall have received from Purchaser the
documents and other items to be delivered by Purchaser pursuant to Section 9.2
of this Agreement.
7.3. Opinion of Purchaser's Counsel. Purchaser shall have delivered to
Seller an opinion of in-house counsel for Purchaser in substantially the form
attached hereto as SCHEDULE 7.3.
7.4. Compliance with Advance Agreement. Purchaser shall not be in
material default under the terms of the Advance Agreement.
7.5. Certificates. Purchaser shall furnish Seller with such
certificates of the officers of Purchaser and others to evidence compliance with
the conditions set forth in this Article as may be reasonably requested by
Seller.
7.6. Purchase Price. Seller shall have received payment of the Purchase
Price in accordance with Section 2.2.
7.7. HSR Waiting Period. Any waiting period required by the HSR Act
shall have lapsed or been terminated, and any investigation of the transactions
contemplated by this Agreement commenced by the DOJ and/or the FTC pursuant to
the HSR Act shall have been terminated.
7.8. No Restraint. There shall not be any pending suit or proceeding to
restrain or invalidate, in whole or in part, this Agreement or the transaction
contemplated herein.
7.9. Authorization. Purchaser shall have delivered evidence,
satisfactory to Seller, that the authorizations contemplated by Section 6.2
hereof has been timely obtained.
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7.10. FCC Consent. The FCC Consent to the assignment of the
Authorizations to Purchaser shall have been obtained.
ARTICLE 8.
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Purchaser to purchase the Assets and to otherwise
consummate the transactions contemplated by this Agreement are subject, in the
discretion of Purchaser, to the satisfaction or waiver, on or prior to the
Closing Date, of each of the following conditions:
8.1. Representations, Warranties and Covenants. All representations and
warranties of Seller contained in this Agreement that otherwise do not reference
a specified date shall be true and correct in all material respects at and as of
the Closing Date as if such representations and warranties were made at and as
of the Closing Date, and Seller shall have performed in all material respects
all agreements and covenants required hereby to be performed by Seller prior to
or at the Closing Date. There shall be delivered to Purchaser a certificate
(signed by an authorized officer of Seller) to the foregoing effect ("Seller's
Closing Certificate").
8.2. Consent. The FCC shall have consented to the transfer of the
Assets to Purchaser and such consents shall have become a Final Order.
8.3. Board / Stockholder Approval. The transactions contemplated herein
shall have been approved by the necessary number of stockholders and directors
of Seller.
8.4. Leases. The new leases referenced in Section 2.1.2 shall have been
entered into by Purchaser and Seller.
8.5. Closing Documents. Purchaser shall have received from Seller the
documents and other items to be delivered by Seller pursuant to Section 9.1
hereof.
8.6. Opinion of Seller's Corporate Counsel. Seller shall have delivered
to Purchaser an opinion or opinions of corporate counsel for Seller in
substantially the form attached hereto as SCHEDULE 8.6.
8.7. Opinion of Seller's FCC and PUC Counsel. Seller shall have
delivered to Purchaser an opinion or opinions of FCC and, if applicable, PUC
counsel for Seller in substantially the form attached hereto as SCHEDULE 8.7.
8.8. Certificates. Seller shall furnish Purchaser with such
certificates of the respective officers of Seller and others to evidence
compliance with the conditions set forth in this Article as may be reasonably
requested by Purchaser.
8.9. HSR Waiting Period. Any waiting period required by the HSR Act
shall have lapsed or been terminated, and any investigation of the transactions
contemplated by this
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Agreement commenced by the DOJ and/or the FTC pursuant to the HSR Act shall have
been terminated.
8.10. FCC Consent. The FCC Consent shall have become a Final Order;
provided that Purchaser may waive the condition that such Consent be by Final
Order.
ARTICLE 9.
THE CLOSING
On the Closing Date at the Closing Place:
9.1. Deliveries by Seller to Purchaser. Seller shall deliver to
Purchaser:
9.1.1. one or more assignments transferring to Purchaser (or its
designee) all of Seller's interest in and to the Authorizations;
9.1.2. one or more instruments of conveyance transferring to
Purchaser (or its designee) all of Seller's interest in and to the Equipment and
the Books and Records;
9.1.3. one or more assignments or other instruments of conveyance
that may be reasonably requested by Purchaser transferring to Purchaser (or its
designee) Seller's interest in and to the Intellectual Property;
9.1.4. one or more instruments of conveyance transferring to
Purchaser (or its designee) the Contracts in effect on the Closing Date;
9.1.5. one or more executed warranty deeds and assignments in
recordable form, transferring to Purchaser (or its designee) Seller's interest
in and to the Real Property;
9.1.6. one or more instruments of conveyance transferring to
Purchaser (or its designee) any of the other Assets not otherwise conveyed as
provided above;
9.1.7. the opinions of Seller's counsel referenced in Sections
8.6 and 8.7 hereof;
9.1.8. a lien and judgment search from (a) the offices of the
Secretaries of State of the state of incorporation of Seller and the state in
which Seller is conducting business, and (b) the office of the county clerk of
the applicable counties therein, dated not earlier than fifteen (15) business
days prior to the Closing Date, the results of which are consistent with
Seller's representations in this Agreement;
9.1.9. an affidavit certifying as to Seller's non-foreign status
in accordance with Section 1445(b)(2) of the Code;
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9.1.10. a copy of the resolutions of the board of directors and
the consent of all shareholders of Seller approving the transactions
contemplated by this Agreement certified by an appropriate officer of Seller,
together with copies of the Certificate of Incorporation and By-Laws of Seller,
certified by an appropriate officer of Seller;
9.1.11. Seller's Closing Certificate; and
9.1.12. an executed Escrow Agreement.
9.2. Deliveries by Purchaser to Seller. Purchaser shall deliver to
Seller (or its designee):
9.2.1. one or more agreements whereby Purchaser (or its designee)
assumes and agrees to perform Seller's obligations, liabilities and duties under
the Assumed Liabilities;
9.2.2. the opinion of Purchaser's counsel referenced in Sections
7.3 hereof;
9.2.3. copy of the resolutions of the board of directors of
Purchaser approving the transactions contemplated by this Agreement certified by
an appropriate officer of Purchaser;
9.2.4. Purchaser's Closing Certificate;
9.2.5. an executed Escrow Agreement; and
9.2.6. payment of the Purchase Price.
ARTICLE 10.
ACTIONS BY THE PARTIES AFTER THE CLOSING
10.1. Further Assurances. On and after the Closing Date, the Parties
will take all appropriate action and execute all documents, instruments, or
conveyances of any kind which may be reasonably necessary or advisable to carry
out any of the provisions hereof, including without limitation, putting
Purchaser (or its designee) in possession and operating control of the Assets
and the System.
10.2. Post-Closing Tax Covenant. Seller shall promptly pay Taxes
payable with respect to the operation of the System arising prior to Closing for
which Seller is responsible that become due or otherwise have given rise to, or
could give rise to, any Lien on the Assets.
10.3. Access to Records. For a period of three (3) years after the
Closing Purchaser shall retain and make available to Seller any and all records
provided to Purchaser by Seller within a reasonable period of time after receipt
of a written request for the same. Seller shall have the right to make copies of
the same at its own expense.
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ARTICLE 11.
INDEMNIFICATION
11.1. Survival. The several representations, warranties, covenants, and
agreements of the Parties contained in this Agreement (or in any document
delivered in connection herewith) shall be (i) deemed to have been made on the
date of this Agreement and on the Closing Date, (ii) shall be deemed to be
material and to have been relied upon by the Parties notwithstanding any
investigation made by the Parties, and (iii) shall survive the Closing Date (the
"Survival Period") for a period of two (2) years following the Closing Date;
provided, however, that the representations, warranties and agreements of Seller
contained in Sections 5.4 (Title to Assets), 5.6 (Authorizations), 5.14 and 10.2
(Taxes), and 5.17 (Environmental Matters) shall continue to survive for the
duration of any applicable statute of limitations. Any claim for breach of a
representation or warranty (an "Indemnity Claim") for which written notice shall
have been provided prior to the termination of the applicable survival period to
the Party which made such representation or warranty shall be deemed to be
timely made within the applicable indemnification period.
11.2. Seller's Indemnity.
11.2.1. During the indemnification Survival Period (or thereafter
solely with respect to any Indemnity Claim made prior to the expiration of the
applicable Survival Period), Seller shall indemnify and hold harmless Purchaser
and its Affiliates from and against any and all demands, claims, losses,
liabilities, actions or causes of action, assessments, damages, fines, Taxes,
penalties, reasonable costs and expenses (including, without limitation,
interest, reasonable 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 Purchaser against Seller or
asserted by third parties)) (collectively "Losses") incurred or suffered by
Purchaser, its Affiliates, and their respective officers, directors, employees,
agents and Representatives, arising out of, resulting from, or relating to:
(a) Any breach of any of the representations or warranties
made by Seller in this Agreement or in any agreement, certificate, exhibit or
other instrument delivered by the Seller pursuant to this Agreement;
(b) Any failure by Seller to perform any of its covenants or
agreements contained in this Agreement or in any agreement, certificate or other
instrument delivered by the Seller pursuant to this Agreement;
(c) Any violation by Seller or any of its Affiliates of any
Environmental Laws; and
(d) Any claims by third parties arising from, relating to or
out of the ownership or operation of the System or the Assets prior to the
Closing Date.
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11.2.2. Escrow. As collateral security for Seller's
indemnification obligations under this Agreement, at the Closing, in accordance
with Section 2.2 hereof, Purchaser shall deliver to the Escrow Agent, the Escrow
Amount (as defined in Section 2.2), to be held in an interest bearing account
pursuant to the terms of an escrow agreement, in substantially the form of
SCHEDULE 11.2.2 attached hereto (the "Escrow Agreement"). The Escrow Amount
shall be held by the Escrow Agent until the date that is eighteen (18) months
after the Closing Date, at which time the Escrow Amount, plus any accrued but
undistributed interest, shall be released to Seller, subject to a continuing
hold back of the Escrow Amount for any asserted and outstanding indemnification
claims at such time. Nothing contained in this Section or in the Escrow
Agreement shall limit in any way Seller's indemnification obligations under this
Agreement; it being understood that if the Escrow Amount is not sufficient to
satisfy such indemnifications obligations as set forth in this Agreement, then
Seller shall remain liable for such indemnification obligations until expiration
of the applicable Survival Periods and the absence of any pending Indemnity
Claims.
11.3. Purchaser's Indemnity.
11.3.1. During the Survival Period (or thereafter solely with
respect to any Indemnity Claim made prior to the expiration of the applicable
Survival Period), from and after the Closing Date, Purchaser shall indemnify and
hold harmless Seller and its Affiliates from and against any and all Losses
incurred or suffered by Seller, its Affiliates, and their respective officers,
directors, employees, agents and Representatives, arising out of, resulting
from, or relating to:
(a) Any breach of any of the representations or warranties
made by Purchaser in this Agreement or in any agreement, certificate or other
instrument delivered by Purchaser pursuant to this Agreement;
(b) Any failure by Purchaser to perform any of its covenants
or agreements contained in this Agreement or in any agreement, certificate or
other instrument delivered by Purchaser pursuant to this Agreement;
(c) Any claims by third parties arising from, relating to,
or out of the ownership or operation of the System or the Assets after the
Closing Date; or
(d) Any claims with respect to the Assumed Liabilities.
11.4. Procedure. 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, the Party seeking such indemnification (the
"Indemnitee") shall assert an Indemnification Claim by giving prompt written
notice thereof (the "Notice") which shall describe in reasonable detail the
facts and circumstances upon which the Indemnification Claim is based, along
with a copy of the claim or complaint, to the Party required to provide
indemnification (the "Indemnitor"), and shall thereafter keep the Indemnitor
reasonably and promptly informed with respect thereto; provided 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
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is materially prejudiced by such failure. For purposes of this paragraph, any
Notice which is sent within fifteen (15) days of the date upon which the
Indemnitee obtained actual knowledge of such Loss shall be deemed to have been a
"prompt notice."
11.4.1. If the Indemnitor wishes to defend any claim for any
Losses for which such Indemnitor is or may be liable, and such Indemnitor first
establishes (to the reasonable satisfaction of the Indemnitee) the Indemnitor's
financial ability to pay for any such Losses, then such Indemnitor may, at its
own expense, defend such claim; provided that the Indemnitee may retain counsel
(at the Indemnitee's expense) to monitor the defense of such claim, and may take
over such defense if, during the course thereof, it reasonably appears that the
Indemnitor has lost its ability to pay for any Losses threatened by such claim.
If an Indemnitor assumes the defense of such an action, no compromise or
settlement thereof may be effected by the Indemnitor without the Indemnitee's
consent, which consent shall not be unreasonably withheld. If an Indemnitor
fails, within thirty (30) days after the date of the Notice, to give notice to
the Indemnitee of said Indemnitor's election to assume the defense thereof, said
Indemnitor shall be bound by any determination made in such action or any
compromise or settlement thereof effected by the Indemnitee.
11.4.2. 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,
unless such Indemnification Claim is reasonably disputed by the Indemnitor.
11.5. Limitation on Indemnification. No Party shall be entitled to
indemnification in accordance with the provisions of this Article until such
time as the value of the aggregate loss or liability for which indemnification
is sought exceeds the sum of Fifty Thousand Dollars ($50,000). At such time as
the aggregate loss or liability for which indemnification may be sought exceeds
Fifty Thousand Dollars ($50,000), the Party to be indemnified may seek
indemnification for all such losses or liabilities, including the first Fifty
Thousand Dollars ($50,000). This limitation on claims shall not apply to any
indemnification for claims made by Purchaser relating to Purchaser's failure to
pay any taxes that were due and payable on or before the Closing Date. This
limitation shall not apply to any of the Taxes, penalties or interest referred
to in the second paragraph of Section 5.14.
11.6. Indemnification Payments in Cash. All payments in respect to any
undisputed or resolved Indemnification Claims shall be made in cash.
11.7. Investigations: Waivers. The Survival Periods and rights to
indemnification provided for in this Article 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.
ARTICLE 12.
DEFAULT AND REMEDIES
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12.1. Opportunity to Cure. If any Party believes another to be in
material default hereunder for breach of representations and warranties or any
other reason, such Party shall provide the other with written notice specifying
in reasonable detail the nature of such default. If the default has not been
cured by the earlier of: (a) the Closing Date, or (b) within thirty (30) days
after delivery of that notice, then the Party giving such notice may terminate
this Agreement by notifying the defaulting Party and/or exercise the remedies
available to such Party pursuant to this Article, subject to the right of the
other Party to contest either such action through appropriate proceedings;
provided, however, that if such breach is not capable of being cured within such
period and if the breaching Party shall have commenced action to cure such
breach within such period and is diligently attempting to cure such breach and
such breach can reasonably be expected to be cured during the additional time
period, the breaching Party shall be afforded an additional reasonable amount of
time to cure such breach but not to exceed an additional sixty (60) days;
provided, further, that Purchaser shall have no opportunity to cure the breach
of its obligation to deliver any required portion of the Purchase Price to be
delivered to Seller at Closing.
12.2. Remedies/Arbitration.
12.2.1. Any claim under this Agreement brought after the Closing
Date, and any claim under this Agreement brought prior to the Closing Date in
which the Party bringing the claim is praying solely for monetary damages, shall
be submitted to binding arbitration in accordance with the commercial
arbitration rules of the American Arbitration Association and the provisions
contained herein. The arbitration shall be conducted in Dallas, Texas by a panel
of three arbitrators. All claims between the Parties shall be arbitrated in a
single proceeding, to the full extent practicable.
12.2.2. The Party initiating arbitration shall give the other
Party written notice of the matter in dispute and the name of the arbitrator
appointed by it. Within fourteen (14) days after receipt of such notice, the
non-initiating Party shall give notice to the initiating Party of the arbitrator
appointed by it. If the non-initiating Party fails to designate its arbitrator
within the said fourteen (14) day period, the American Arbitration Association
shall select an arbitrator for such Party. Within fourteen (14) days after the
appointment of the second arbitrator, the two arbitrators so appointed shall
agree on a third arbitrator. If the two arbitrators are unable to agree on a
third arbitrator within said 14-day period, then the American Arbitration
Association shall appoint the third arbitrator.
12.2.3. All determinations in the final decision of the
arbitration panel shall be made by majority vote. The fees and expenses of the
arbitration panel shall be awarded by the arbitrators in their discretion as
part of their award. The arbitrators' award will be binding on the Parties
hereto and may be entered in any court of competent jurisdiction, and shall not
be subject to appeal.
12.2.4. Notwithstanding the foregoing, the Parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the Parties shall be entitled
to an injunction or injunctions to prevent breaches or this Agreement and
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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.
ARTICLE 13.
TERMINATION
13.1. Absence of FCC Consent. This Agreement may be terminated by
either Party by giving written notice thereof to the other if the Assignment
Applications have not been granted by Final Order within twelve (12) months
after the date of this Agreement. Neither Party may terminate this Agreement
pursuant to this Section if such Party is in material default hereunder.
13.2. Mutual Consent. This Agreement may be terminated by the mutual
consent of the Parties.
ARTICLE 14.
DAMAGE; RISK OF LOSS
14.1. Risk of Loss. The risk of loss or damage to the Assets shall be
upon Seller at all times prior to the Closing Date. In the event of material
loss or damage to the Assets prior to the Closing Date, Seller shall promptly
notify Purchaser thereof and, unless otherwise agreed by the Parties, Seller
shall use best efforts to repair, replace or restore the lost or damaged
property to its former condition as soon as practicable. If such repair,
replacement, or restoration has not been completed prior to the Closing Date,
Purchaser may, at its option:
14.1.1. elect to consummate the Closing and make such
arrangements as the Parties may reasonably agree upon to remedy such loss or
damage; or
14.1.2. elect to postpone the Closing Date, with prior consent of
the FCC if necessary, for such reasonable period of time (not to exceed ninety
(90) days) as is necessary for Seller to repair, replace, or restore (or to
cause to be repaired, replaced or restored) the lost or damaged property to its
former condition. If, after the expiration of that extension period, the lost or
damaged property has not been adequately repaired, replaced or restored,
Purchaser may terminate this Agreement or elect to consummate the Closing as
provided in Section 14.1.1.
For purposes of this Section, loss or damage shall be deemed "material"
if the reasonable cost to repair, replace, or restore the lost or damaged
property exceeds $100,000.00.
14.2. Resolution of Disagreements. If the Parties are unable to agree
upon the extent of any loss or damage, the cost to repair, replace or restore
any lost or damaged property, the adequacy of any repair, replacement, or
restoration of any lost or damaged property, or any other matter arising under
this Section, the disagreement shall be referred to a qualified consulting
communications engineer mutually acceptable to Seller and Purchaser who is a
member of the
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Association of Federal Communications Consulting Engineers, whose decision shall
be final, and whose fees and expenses shall be paid one-half by Seller and
one-half by Purchaser.
ARTICLE 15.
EMPLOYEES
15.1. Employees. For purposes of this Article, the term "Employees"
shall include all full-time and part-time employees, employees on workers'
compensation, military leave, maternity leave, leave under the Family and
Medical Leave Act of 1993, short-term and long-term disability (including a
disability pension), non-occupational disability, layoff with recall rights, and
employees on other approved leaves of absence with a legal or contractual right
to reinstatement.
15.2. Responsibility for Employees on or Before the Closing. All
medical, dental, vision, travel accident, accidental death and dismemberment,
and life insurance expenses incurred by Employees and their dependents on or
before the Closing Date, pursuant to any employee plan, irrespective of the time
such claims are presented, shall be the responsibility of Seller on the Closing
Date. Seller shall be responsible for any medical, dental or life insurance
coverage due to any Employees and their dependents who retired on or before the
Closing Date. Seller agrees to fulfill its obligations under continuation
coverage rules of COBRA with respect to a "qualifying event," with the meaning
or Section 4980B(f) of the Code or Section 603 or ERISA, occurring on or before
the Closing Date with respect to any Employees who are not hired by Purchaser
and their dependents. All short-term, long-term and extended disability benefits
payable to Employees and their dependents who became disabled on or before the
Closing Date are the responsibility of Seller and shall be paid directly by
Seller or their insurance carrier to such Employees and their dependents. If any
Employee is terminated from employment on or before the Closing Date by Seller
as result of the transactions contemplated by this Agreement or otherwise, any
obligations arising out of such termination, including severance, accrued
vacation pay, COBRA obligations, employment discrimination complaints, unfair
labor practice charges, grievance under any collective bargaining agreement,
wrongful termination and related tort claims and breach of contract claims shall
be the sole responsibility of Seller. Purchaser shall have the sole
responsibility for the items listed in the preceding sentences for any actions
taken by Purchaser with respect to Employees it hires after the Closing Date.
ARTICLE 16.
MISCELLANEOUS
16.1. Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by Seller or Purchaser without the prior
written consent of the others. Purchaser may assign its right, title and
interest in, to and under this Agreement to an Affiliate; provided that
Purchaser must first obtain Seller's consent to any such assignment (which
consent shall not be unreasonably withheld) if such assignment could reasonably
be expected to delay the Closing. Subject to the foregoing, this Agreement shall
be binding upon and inure to the benefit of the
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Parties hereto and their respective successors and assigns, and no other person
shall have any right, benefit or obligation hereunder.
16.2. Notices. Unless otherwise provided herein, any notice, request,
instruction or other document to be given hereunder by any Party to the other
shall be in writing and delivered in person or by courier, by facsimile
transmission, or mailed by registered or certified mail, postage prepaid, return
receipt requested or overnight courier, as follows:
If to Purchaser or Guarantor:
WWC Texas RSA Limited Partnership
3650 - 131st Avenue
Bellevue, Washington 98006
Attention: Scott A. Hopper
Fax No: (425) 586-8666
With a copy (which copy shall not constitute notice or service of
process) to:
Stokes Lawrence, P.S.
800 Fifth Avenue, Suite 4000
Seattle, WA 98104-3199
Attention: Douglas C. Lawrence, Esq.
Fax No: (206) 464-1496
If to Seller:
KO Communications Inc.
3300 West Foxridge Lane
Muncie, IN 47304
Attention: Paul L. Kozel
Fax No. (765) 741-4151
With a copy (which copy shall not constitute notice or service of
process) to:
Lukas, Nace, Gutierrez & Sachs
1111 - 19th Street, NW, Suite 1200
Washington, D.C. 20036
Attention: Thomas Gutierrez, Esq.
Fax No: (202) 828-8410
or to such other place and with such other copies as a Party may designate as to
itself by written notice to the others. All such notices and communications
shall be deemed to have been duly given at the time delivered by hand, if
personally delivered; three business days after being deposited in the mail as
provided above; when receipt confirmed, if sent by facsimile; and the next
business day after timely delivery to the courier, if sent by an over-night air
courier service guaranteeing next day delivery.
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16.3. Choice of Law. This Agreement shall be construed, interpreted and
the rights of the Parties determined in accordance with the laws of the State of
Delaware, except with respect to matters of law concerning the internal affairs
of any entity which is a Party to or the subject of this Agreement, and as to
those matters the law of the jurisdiction under which the respective entity
derives its powers shall govern.
16.4. Entire Agreement; Amendments and Waivers. This Agreement,
together with all exhibits and schedules hereto, constitutes the entire
agreement among the Parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties. No supplement, modification or waiver
of this Agreement shall be binding unless executed in writing by the Party to be
bound thereby. No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute, a waiver of any other provision hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
16.5. Allocation of the Purchase Price. The Purchase Price shall be
allocated in accordance with SCHEDULE 16.5, to be prepared on or before the
Closing, and Purchaser and Seller agree to cooperate reasonably in the
preparation of such Schedule. Each of the Parties agrees that (i) such
allocation represents the fair market value of the Assets and shall be binding
upon it; (ii) no filings made by it with any taxing or other authority shall
reflect an allocation other than in the manner agreed upon; and (iii) it shall
timely make all filings required by any taxing authority, including the filing
of Internal Revenue Service Form 8594.
16.6. Bulk Sales. Purchaser and Seller each waive any obligation of the
other Party which may arise under the provision of any applicable "Bulk Sales"
laws.
16.7. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16.8. Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or any other such instrument unless such
invalidity materially affects the benefit of the bargain of a Party as
originally contracted for in this Agreement.
16.9. Headings. The headings of the Articles and Sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
16.10. Expenses. Except as otherwise provided herein, Seller and
Purchaser shall bear equally any transfer or excise taxes arising from the
transactions contemplated herein. Seller shall pay the cost of any recording and
transfer fees arising from the purchase and sale of the Assets pursuant to this
Agreement. Seller and Purchaser will each be liable for its own expenses
incurred
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in connection with the negotiation, preparation, execution or performance of
this Agreement. Seller and Purchaser will each be liable for one-half of any
expenses incurred in obtaining the FCC Consent. Purchaser shall be responsible
for any filing fees associated with the HSR filing.
16.11. Schedules and Exhibits. The Schedules and Exhibits to this
Agreement are a material part hereof and shall be treated as if fully
incorporated into the body of the Agreement.
16.12. Publicity. Except as required by Applicable Law or on advice of
counsel, no Party shall issue any press release or make any public statement
regarding the transactions contemplated hereby without the prior approval of the
other Party. Any press release or the text of any public statement to be made by
one party shall be provided to the other in advance of its release, and no such
release or statement shall be made public without the consent of the other
party.
16.13. Confidential Information. The Parties acknowledge that the
transaction described herein is of a confidential nature and shall not be
disclosed except to Representatives, advisors and Affiliates, or as required by
law, until such time as the Parties make a public announcement regarding the
transaction as provided in Section 16.12. The Parties shall not make any public
disclosure of the specific terms of this Agreement, except as required by law.
In connection with the negotiation of this Agreement and the preparation for the
consummation of the transactions contemplated hereby, the Parties acknowledge
that they will have access to confidential information relating to the other
Parties. Each Party shall treat such information as confidential, preserve the
confidentiality thereof and not duplicate or use such information, except to
Representatives, consultants and Affiliates in connection with the transactions
contemplated hereby provided such advisors, Representatives and Affiliates also
agree to keep such information confidential. In the event of the termination of
this Agreement for any reason whatsoever, each Party shall return to the others
all documents, work papers and other material (including all copies thereof)
obtained in connection with the transactions contemplated hereby and will use
all reasonable efforts, including instructing any of its Employees and others
who have had access to such information, to keep confidential and not to use any
such information, unless such information is now, or is hereafter disclosed,
through no act or omission of such Party, in any manner making it available to
the general public.
16.14. No Third Party Beneficiaries. All of the rights and obligations
included in this Agreement are intended to inure to the benefit of the Parties
and their Affiliates alone. Nothing contained in this agreement shall be
construed as creating any rights in any other third parties.
16.15. Parent Guarantee. Guarantor hereby absolutely, unconditionally,
directly, irrevocably, completely, and immediately guarantees the performance of
Purchaser or any of its assignees with respect to the payment of the Purchase
Price at the time and in the manner called for in this Agreement. Guarantor's
obligation of payment and performance is not contingent upon Seller first
pursuing any remedies against Purchaser or any of its successors in interest. In
the event Purchaser or its assignee fails to make any such payment when due,
within five (5) business days of receipt of written notice from Seller of
Purchaser's failure to so perform Guarantor shall make such payment to Seller,
subject to all defenses and objections that might otherwise be available to
Purchaser. Except as expressly stated in this Section, Guarantor shall have no
other responsibility or obligation under this Agreement.
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed on its behalf by its officer thereunto duly authorized as of the
day and year first above written.
KO COMMUNICATIONS, INC.
By: /s/ Paul Kozel
--------------------------------
Its: President
-------------------------------
WWC TEXAS RSA LIMITED PARTNERSHIP
By: /s/ Scott Hopper
--------------------------------
Its: Vice President
-------------------------------
SOLELY AS GUARANTOR
UNDER THE PROVISIONS OF
SECTION 16.15 ABOVE
WESTERN WIRELESS CORPORATION
By: /s/ Scott Hopper
-------------------------------
Its: Vice President
------------------------------
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EXHIBIT 10.90
ASSET PURCHASE AGREEMENT
Arkansas-11 Rural Service Area
This Asset Purchase Agreement (this "Agreement") is entered into on August
25, 1999 by and among NetWireless, LLC, an Arkansas limited liability company
("Seller"), GCC Licenses LLC., a Delaware limited liability company
("Purchaser"), and Western Wireless Corporation, a Delaware corporation, as
"Guarantor." Purchaser and Seller are sometimes referred to herein collectively
as the "Parties" and each as a "Party."
RECITALS
WHEREAS, Seller is the holder of the non-wireline cellular radio telephone
license granted by the Federal Communications Commission (the "FCC") and certain
assets necessary for the operation of the non-wireline cellular radio telephone
system in the Arkansas-11 Rural Service Area (the "System");
WHEREAS, Purchaser desires to purchase the cellular radio telephone
system, including the licenses necessary to operate such system, in the
Arkansas-11 Rural Service Area;
WHEREAS, the Parties desire that Purchaser acquire from Seller all of the
assets of the System including, among other things, all of the authorizations
issued by the FCC for the operation of the System, all in accordance with the
terms and conditions set forth in this Agreement; and
WHEREAS, the Parties have determined that it would further the development
of competitive cellular radio telephone systems in the United States to
consummate the transactions contemplated hereby;
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:
ARTICLE 1.
DEFINITIONS
As used herein, the terms below shall have the following meanings:
"Action" shall have the meaning set forth in Section 5.11.
"Affiliate" of a Person shall mean any Person which directly or
indirectly, through one or more intermediaries, owns, controls, or is controlled
by, or is under common control with, such Person. The term "control" (including,
with correlative meaning, the terms "controlling," "controlled by" and "under
common control with"), as used with respect to any Person, shall
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mean the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Applicable Laws" shall mean all federal, state and local statutes,
ordinances, rules, and regulations of any Governmental Authority that govern,
regulate or otherwise apply to the Assets, the Business or operation of the
System.
"Assets" shall mean all assets, properties and rights, both tangible and
intangible, that are owned by, leased or licensed to, Seller for use in the
System, and are otherwise necessary for the operation of the Business in a
manner consistent with the present operations and with past practices of the
System, including, without limitation, the Real Property, Equipment,
Authorizations, Contracts, Subscriber Agreements, Intellectual Property and
Books and Records; provided, however, that the Assets shall not include the
Excluded Assets.
"Assignment Applications" shall mean that joint application filed with the
FCC relating to the assignment of the FCC Authorizations to Purchaser in the
manner contemplated by this Agreement.
"Assumed Liabilities" shall have the meaning set forth in Section 3.2
hereof.
"Auditor" shall have the meaning set forth in Section 2.3.4 hereof.
"Authorizations" shall mean the approvals, consents, authorizations,
permits and licenses issued to Seller by any Governmental Authority relating to
the System.
"Books and Records" shall mean all the books and records related to the
Assets, the Business and the System, including without limitation, (a) books and
records relating to the purchase of materials and supplies, invoices, Subscriber
lists, supplier lists, personnel records, and Subscriber information, and (b)
computer software (to the extent such software is included in the Assets) and
data in computer readable and/or human readable form used to maintain such books
and records together with the media on which such software and data are stored
and all documentation relating thereto, but shall not include books and records
relating to the Excluded Assets or Seller's limited liability company books and
records or stock ledgers.
"Business" shall mean all of the business and operations relating to the
System as currently conducted by Seller.
"CERCLA" shall have the meaning set forth in the Section defining
Environmental Laws.
"Closing Date" shall mean the next business day that is ten or more days
after the date on which the FCC Consent becomes a Final Order; provided that if
such date is within five days of the end of a calendar month, the Closing Date
shall be the last business day of that calendar month.
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"Closing Place" shall mean such location agreed upon by the Parties or, in
the absence of such an agreement, the offices of Stokes Lawrence, P.S., 800
Fifth Avenue, Suite 4000, Seattle, Washington 98104-3179.
"Closing" shall mean the consummation of the assignment, transfer,
conveyance and delivery of the Assets and the Purchase Price as contemplated
hereunder.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Consents" shall mean any and all consents, approvals, authorizations or
waivers of any Governmental Authority, including, without limitation, the FCC
Consent, and any and all consents, approvals or waivers from parties to
Contracts that are (i) required for the consummation of the transactions
contemplated by this Agreement or (ii) necessary in order that Purchaser (or its
designee) can conduct the Business after the Closing Date substantially in the
same manner as before the Closing Date.
"Contracts" shall mean all leases, contracts, commitments, and other
binding agreements relating to the System to which Seller is a party and which
are set forth on SCHEDULE 5.7, whether written or oral.
"DOJ" shall mean the United States Department of Justice.
"Employees" shall mean all persons employed on a full or part-time basis
together with all persons retained as "independent contractors" who are the
functional equivalent of employees.
"Environmental Laws" shall mean Applicable Laws relating to pollution,
the environment or the Handling of Regulated Substances, including without
limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA").
"Equipment" shall mean all of the furniture, fixtures, furnishings,
machinery, computer hardware, antennas, transmitters, and other personal
property used in connection with the Business and the System.
"ERISA" shall have the meaning set forth in Section 5.9 hereof.
"Escrow Agreement" shall have the meaning set forth in Section 11.2.2
hereof.
"Escrow Amount" shall have the meaning set forth in Section 2.2 hereof.
"Excluded Assets" shall mean those assets set forth on SCHEDULE 1 hereto.
"FCC" shall mean the Federal Communications Commission.
"FCC Authorization" shall mean the Authorizations from the FCC relating to
the operation of the System.
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"FCC Consent" shall mean the action of the FCC granting its consent to the
assignment of the FCC Authorization from Seller to Purchaser.
"FTC" shall mean the Federal Trade Commission.
"Final Order" shall mean a Preliminary Order which is not reversed,
stayed, enjoined, set aside, annulled, or suspended, and with respect to which
no timely request for stay, motion or petition for reconsideration or rehearing,
application or request for review, or notice of appeal or other judicial
petition for review is pending, and as to which the time for filing any such
request, motion, petition, application, appeal, or notice, and for the entry of
an order staying, reconsidering, or reviewing on the FCC's or other regulatory
authorities' own motion, has expired. If a Preliminary Order is subject to
conditions which may have a material adverse effect on a party, such party must
either timely file a petition for reconsideration with respect to such
conditions or accept such conditions. If such party timely files a petition for
reconsideration with respect to such conditions, the Preliminary Order shall not
become or be deemed a Final Order unless and until such conditions are removed
from the Preliminary Order or the party affected thereby has notified the other
Party in writing of its willingness to accept such conditions.
"Final Settlement" shall have the meaning set forth in Section 2.3.3
hereof.
"Financial Statements" shall have the meaning set forth in Section 5.10
hereof.
"Governmental Authority" shall mean any court or any federal, state,
county, or local governmental, legislative or regulatory body, agency,
department, authority, instrumentality or other subdivision thereof, including,
without limitation, the FCC and the PUC.
"Handling" shall mean the production, use, generation, storage, treatment,
recycling, disposal, discharge, release, or other handling or disposition at any
time on or prior to the Closing Date of any Regulated Substance either in, on,
or under any Operating Site.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Intellectual Property" shall mean all patents, trademarks, service marks,
trade names, copyrights, licenses, formulas, computer software, advertising
slogans, know-how, data and other intellectual property rights or intangible
property rights of Seller which are used or intended for use in connection with
the System.
"Inventory" shall mean all usable and non-obsolete merchandise owned and
intended for resale in connection with the Business, whether or not located on
the premises, on consignment to a third party, or in transit or storage.
"Liabilities" shall mean liabilities, obligations or commitments of any
nature, absolute, accrued, contingent or otherwise, known or unknown, whether
matured or unmatured.
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"Lien" shall mean any contract for sale (except for the sale of cellular
telephone service and rentals of cellular telephone equipment to Subscribers),
claim, lien, pledge, option, charge, covenant, restriction, encroachment,
easement, security interest, mortgage, deed of trust, right-of-way, encumbrance
or adverse interest of any kind or character of any other Person.
"Losses" shall have the meaning set forth in Section 11.2.1 hereof.
"Operating Data Statements" shall have the meaning set forth in Section
5.10 hereof.
"Operating Site" shall mean any real property or facility owned, leased or
used at any time by Seller in connection with the System.
"Person" shall mean an individual, a corporation, a partnership, an
association, a joint-stock company, a trust, any unincorporated organization, or
a government or a political subdivision thereof.
"Preliminary Order" shall mean an action by the FCC and any other
applicable state regulatory authority consenting to or authorizing the
assignment of the FCC Authorization to Purchaser (or its designee), which action
has not yet become a Final Order.
"PUC" shall mean the Arkansas Public Utilities Commission.
"Purchase Price" shall have the meaning set forth in Section 2.2 hereof.
"Purchaser's Closing Certificate" shall have the meaning set forth in
Section 7.1 hereof.
"Real Property" shall mean all real property owned or leased by or used,
or intended by Seller for use, in connection with the System, together with all
buildings, improvements, fixtures, easements, licenses, options, insurance
proceeds and condemnation awards and all other rights of Seller in or
appurtenant thereto, but does not include the property listed on SCHEDULE 1.
"Regulated Substance" shall mean (i) any "hazardous substance" as defined
in CERCLA, (ii) any petroleum or petroleum substance, and (iii) any other
pollutant, waste, contaminant, or other substance regulated under Environmental
Laws.
"Representative" shall mean any officer, director, principal, attorney,
agent, employee or other representative of any Person.
"Seller's Closing Certificate" shall have the meaning set forth in Section
8.1 hereof.
"Service" shall mean the provision of the System's cellular telephone
service to Subscribers.
"Subscribers" shall mean customers of Seller that subscribe to the
Service.
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"Subscriber Agreements" shall mean Contracts whereby Seller has agreed to
provide Service.
"Survival Period" shall have the meaning set forth in Section 11.1
hereof.
"Taxes" shall mean all taxes, charges, fees, levies or other assessments
or charges of any kind whatsoever, including without limitation, income, excise,
use, transfer, payroll, occupancy, property, sales, franchise, unemployment and
withholding taxes, imposed by any Governmental Authority, and any assessments
against Real Property together with any interest, penalties or additional taxes
attributable to such taxes and other assessments.
"Texas-7 APA" means that Asset Purchase Agreement entered into between
Purchaser and KO Communications, Inc., as Seller, under which Purchaser has
agreed to purchase, and KO Communications, Inc., has agreed to sell, certain of
the assets of the non-wireline cellular telephone system owned by KO
Communications, Inc., and operating in the Texas-7 rural service area.
"To the knowledge" or "knowledge" of a Party (or similar phrases) shall
mean (i) with respect to Seller, to the extent of matters which are actually
known by any of the officers, directors or employees of Seller or which, based
on facts of which such parties are aware, would be known to a reasonable Person
in similar circumstances and (ii) with respect to Purchaser, to the extent of
matters which are actually known by any of the officers, directors or employees
of Purchaser, or which, based on facts of which such parties are aware, would be
known to a reasonable Person in similar circumstances.
ARTICLE 2.
PURCHASE OF ASSETS
2.1. Transfer of Assets. Subject to the terms and upon satisfaction of
the conditions contained in this Agreement, at the Closing, Seller shall sell,
convey, transfer, assign and deliver to Purchaser (or its designee), and
Purchaser (or its designee) will accept and acquire, the Assets.
2.2. Purchase Price. The purchase price for the Assets shall be Twenty
Million Dollars ($20,000,000), subject to adjustment pursuant to this Article
(the "Purchase Price"), which shall be paid by Purchaser to Seller (or its
designee) on the Closing Date as follows: (a) One Million Dollars ($1,000,000)
of such Purchase Price (the "Escrow Amount") shall be delivered to the Escrow
Agent as defined in Section 11.2.2 and held pursuant to the terms of Section
11.2.2; and (b) the balance of such Purchase Price shall be paid by Purchaser to
Seller by wire transfer of immediately available funds.
2.3. Other Adjustments and Prorations.
2.3.1. The Purchase Price shall be adjusted in accordance with
the following:
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(a) The Purchase Price shall be increased by an amount equal
to any cash, adjusted accounts receivable, Inventory (valued at book value),
prepaid expenses and any other current assets transferred to Purchaser. For the
purposes of this Section the "adjusted accounts receivable" shall equal the sum
of the following:
(i) 90% of the accounts receivable from carriers (not
including any clearinghouse receivables) and resellers, and of receivables from
Subscribers which remain unpaid by Subscribers for less than thirty-one (31)
days from the date such receivable first comes due ("Outstanding"); plus
(ii) 70% of the amount of all Subscriber accounts receivable
that are Outstanding for more than thirty (30) days but less than sixty-one (61)
days; plus
(iii) 50% of the amount of all Subscriber accounts receivable
that are Outstanding for more than sixty (60) days, but less than ninety-one
(91) days; and
(iv) There shall be no adjustment (i.e. 0%) for the amount
of any Subscriber accounts receivable that are Outstanding more than ninety (90)
days.
(b) The Purchase Price shall be decreased by an amount equal
to (x) amounts collected by Seller from Subscribers on or prior to the Closing
Date (net of liabilities associated with deferred access revenue included in
such amounts), which relate to Services to be provided after the Closing Date
(hereinafter referred to as "Advance Receipts"), and (y) liabilities associated
with deferred access revenue assumed by Purchaser.
2.3.2. Except as otherwise specifically provided for herein, all
revenues and all expenses arising from the Business and ownership of the Assets,
including resale charges and other expenses payable in respect to Service,
utility charges, Taxes levied against the Assets, property and equipment
rentals, sales and service charges, Taxes (except for Taxes arising from the
transfer of the Assets ), and similar prepaid and deferred items, shall be
prorated between Seller and Purchaser in accordance with the principle that
Seller shall receive the benefit of all revenues, and be responsible for all
expenses, costs, obligations and Liabilities allocable to the Business and the
ownership of the Assets for the period on and prior to the Closing Date, and
Purchaser shall receive the benefit of all revenues, and be responsible for all
expenses, costs, obligations and Liabilities allocable to the Business and the
ownership of the Assets after the Closing Date.
2.3.3. A final settlement (the "Final Settlement") of all
adjustments or prorations made under this Section, with payment being made by
the appropriate Party in cash (but without any interest thereon), shall occur no
later than one hundred twenty (120) days after the Closing Date.
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2.3.4. In the event that the Parties cannot agree on the amount
of the Final Settlement, the determination shall be made by a mutually agreed
upon national accounting firm selected jointly by Purchaser and Seller that has
not, during the prior three (3) years, been employed by any of the Parties (the
"Auditor"). The Auditor shall make its determination of the Final Settlement
based on the express provisions of this Agreement; provided, however, that if
the Auditor finds that the express terms of this Agreement are not sufficient to
resolve any issue or issues, the Auditor shall rely upon generally accepted
accounting principles then in effect. Any Party may invoke the use of the
Auditor by notifying the other Party in writing, provided that a Party may not
invoke the use of the Auditor to determine the Final Settlement earlier than one
hundred eighty (180) days after the Closing Date. The Auditor shall be required
to render a decision within twenty-one (21) days after the Auditor is requested
to render a determination under this Section. The decision of the Auditor shall
be binding on the Parties and not subject to any judicial challenge by the
Parties. Within five (5) business days after the Auditor provides the
determination to the Parties, the payment of the Final Settlement shall be made
in accordance with that determination. The expenses of the Auditor shall be paid
by Seller and Purchaser in reverse proportion to the Auditor's determination
with respect to the allocation to Seller and Purchaser of the amount in
disagreement. For example, if the amount in disagreement is One Hundred Thousand
Dollars ($100,000) and the Auditor determines that the Seller should receive
Seventy Thousand Dollars ($70,000) and the Purchaser should receive Thirty
Thousand Dollars ($30,000), then Seller shall pay thirty percent (30%) of the
Auditor's expenses, and Purchaser shall pay seventy percent (70%).
ARTICLE 3.
ASSUMED OBLIGATIONS
3.1. No Assumption of Liabilities by Purchaser, Exceptions. Except as
set forth in Section 3.2 below, Purchaser expressly does not, and shall not,
assume or be deemed to have assumed under this Agreement or by reason of any
transactions contemplated hereunder, any Liabilities of any nature whatsoever
relating to the System or of Seller, or any of Seller's stockholders or
partners, as the case may be.
3.2. Assumed Liabilities. At the Closing, Purchaser shall assume and
shall timely pay, perform, fulfill and discharge all of Seller's liabilities and
obligations due after the Closing Date on those Contracts and Liabilities set
forth on SCHEDULE 3.2 (the "Assumed Liabilities").
ARTICLE 4.
COVENANTS AND AGREEMENTS
4.1. Covenants of Seller. Seller covenants and agrees that from the
time of the execution and delivery of this Agreement until (and including) the
Closing Date:
4.1.1. Consummate Transactions. Seller shall use its best efforts
to cause the transactions contemplated by this Agreement to be consummated in
accordance with the terms
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hereof, and, without limiting the generality of the foregoing, use best efforts
to obtain all necessary approvals, consents, permits, licenses and other
authorizations required in connection with this Agreement and the transactions
contemplated hereby from Governmental Authorities, and to make all filings with
and to give all notices to third parties, which may be necessary or reasonably
required of Seller in order to consummate the transactions contemplated hereby.
4.1.2. Full Access and Purchaser Due Diligence. Seller shall
allow Purchaser and its agents and representatives (including, without
limitation, its independent auditors and attorneys) reasonable access during
normal business hours to all of Seller's personnel, premises, properties,
assets, financial statements and records, books, contracts, documents and
commitments of or relating to the Business, and shall furnish Purchaser and its
agents and representatives with all such information concerning the affairs of
the System as Purchaser may reasonably request.
4.1.3. Ordinary Course. Seller shall cause the Business and
affairs of the System to be conducted only in the ordinary course and consistent
with past practices. Without limiting the foregoing, Seller shall continue to
pay its bills and other obligations, all in the ordinary course of business
consistent with past practices, but shall not, without the prior written consent
of Purchaser, perform or do any of the following if the same would have a
material adverse effect on the Business, the System or the Assets: (a) incur any
material Liability other than obligations to Seller's brokers, attorneys and
accountants, all of which shall be paid by Seller; (b) assume, guarantee, change
any existing guarantee, endorse, act as an accommodation party, or otherwise
become responsible for, the obligations of any other Person; (c) make any loans
or advances to any Person; (d) sell, transfer, convey, mortgage, pledge,
hypothecate or place any Liens on any of the Assets; (e) waive or compromise any
right or claim for any amount; (f) cancel any note, loan or other material
obligation owing to Seller; (g) enter into any Contract with any Person,
including, without limitation, the stockholders of Seller or any of its
Affiliates, consultants, agents or assigns; (h) except as otherwise provided in
this Agreement, increase or modify compensation of any type currently paid to
any of its employees, officers, directors, agents or consultants; (i) make any
new arrangement for any profit-sharing plan, retirement plan, bonus plan,
severance arrangement, employee benefit plan, or any similar plan except for
modifications of existing plans that are required by law, or contemplated to be
implemented at the time of the execution of this Agreement; (j) except as
required by law, enter into any collective bargaining agreement, or make any
commitment whatsoever to any union or other representative or party which
intends to represent any of Seller's employees subsequent to the Closing; (k)
except as permitted under Section 5.9 hereof, hire any employees; (l) except as
required by law, enter into any additional reseller agreements; or (m) enter
into any Contract involving payments, assets, or liabilities with a value
greater than $25,000 individually or $100,000 in the aggregate, excluding
noncapital expenditures incurred in the ordinary course of business consistent
with past practices. Notwithstanding the foregoing, nothing in this Section
shall prevent Seller from taking appropriate action as may be necessary to
maintain its ability to control and manage the System and to comply with the
rules, regulations or directives of any Governmental Authority.
4.1.4. Retention of Records. On the Closing Date, Seller shall
deliver to Purchaser all of the Books and Records relating to the System and the
Business. In addition, for a period of three (3) years after the Closing Date,
Seller shall retain and make available to Purchaser
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copies of any documents not theretofore delivered to Purchaser relating to
System, the Business or the Assets.
4.1.5. No Amendments or Issuance of Additional Shares. Seller
shall not amend its charter, by-laws, or comparable governing instrument, which
amendment would have a material adverse effect on the Assets, the Business or
the transactions contemplated by this Agreement or which would require any
additional consents or approvals of the transactions contemplated by this
Agreement. Seller shall not issue or sell any shares of its capital stock or
other securities, or issue 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 stock-based or stock-related awards or other
equity-based awards, shares of its capital stock or other equity or other
securities, or enter into any arrangement or contract with respect to the
purchase or voting of shares of its capital stock or other equity, or adjust,
split, combine or reclassify any of its securities, or make any other changes in
its capital structure, if any such issuance, sale, contract, plan,
understanding, arrangement, adjustment, split, combination, reclassification or
changes would require any additional approvals of the transactions contemplated
by this Agreement or would otherwise have a material adverse effect on the
transactions contemplated by this Agreement.
4.1.6. No Termination or Settlement. Without the prior written
consent of Purchaser, which consent shall not be unreasonably withheld, Seller
shall not terminate any agent, or settle any dispute with any agent if such
termination or settlement would cause Purchaser to have any continuing
obligation after the Closing with respect thereto.
4.1.7. Preserve Business and Goodwill. Seller shall use its
diligent efforts to keep the System intact, to preserve and maintain the Assets,
to preserve the Business and to preserve the goodwill of suppliers, Subscribers
and others dealing with Seller.
4.1.8. Compliance with Law. Seller shall comply in all material
respects with Applicable Laws relating to the System, the Business and the
Assets.
4.1.9. Approvals; Consents. Seller shall obtain and maintain in
full force and effect, and shall not take any action which might have a material
adverse effect on, any Authorizations that are required for the operation of the
Business as presently conducted, except where such Authorizations are
administrative in nature, and the failure to obtain or maintain such
Authorizations would not adversely impact the continued operation of any part of
the System or any component thereof, as currently operated. The Parties shall
consult with one another as to the approach to be taken with any Governmental
Authority with respect to obtaining any Authorization 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. Seller shall not make any material commitments with
respect to any Authorizations that would have a material adverse effect on the
Business, the System or the Assets without Purchaser's prior written consent.
4.1.10. Insurance. From the date hereof through the Closing Date,
Seller shall maintain in full force and effect (including necessary renewals
thereof), all of the insurance
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policies that Seller currently maintains relating to System, or other
functionally equivalent policies. The policies currently maintained by Seller
are set forth on SCHEDULE 4.1.10. From and after the Closing Date, Seller shall
take all actions that may be necessary to cause the coverage under such policies
to continue in full force and effect after the Closing Date with respect to
liability occurrences prior to the Closing Date and shall take all actions
necessary to preserve or protect rights under any such policies with respect to
any claim against Seller arising out of the Assets or Business of Seller prior
to the Closing Date. Seller will provide Purchaser with information and records
regarding all claims pending with respect to the Assets or Business of Seller
and agrees to provide to Purchaser any additional information and records
Purchaser may reasonably require regarding such claims.
4.1.11. Books and Records. Seller shall continue to maintain the
Books and Records in the manner and on a basis consistent with prior years.
4.1.12. Notice of Claims. Seller shall give written notice to
Purchaser promptly upon the commencement of any action, investigation,
arbitration or proceeding (including any proceeding before any Governmental
Authority), or promptly upon obtaining knowledge of any facts giving rise to a
threat of any such action, investigation, arbitration or proceeding which, if
adversely determined, would have a material adverse effect on (a) Seller's
ability to consummate the transactions contemplated hereby; (b) the Business; or
(c) the Assets.
4.1.13. Notice of Breaches. Seller 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 Seller contained in this
Agreement, give notice in writing of such event or occurrence or impending or
threatened event or occurrence, to Purchaser and use its diligent efforts to
prevent or to promptly remedy such breach.
4.1.14. Notice of Change. Except for events occurring in the
communications industry generally, Seller shall use reasonable efforts to notify
Purchaser promptly in writing of any event, condition or state of facts, which
has had or would reasonably be expected to have a material adverse effect on the
System, the Business, the Assets, or on the transaction contemplated by this
Agreement.
4.1.15. Training / Transition Assistance.
(a) Before the Closing, and at the request of Purchaser,
Seller hereby agrees to use commercially reasonable efforts to instruct
Purchaser's employees and agents in the use of Seller's billing system. Such
instruction will be provided at Seller's premises at mutually convenient times
so as not to disrupt the operation of Seller's businesses and shall be provided
at no cost to Purchaser.
(b) The Parties agree to use diligent efforts and to direct
their respective employees, agents, and subcontractors to cooperate in the
conversion and transfer of the Subscribers to Purchaser's billing system so that
upon the Closing Date, or as soon thereafter as is reasonably practicable, all
of the System's customer billing information shall have been transferred
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and converted to Purchaser's billing system. The costs associated with
converting and transferring the information to Purchaser's billing system shall
be the sole responsibility of Purchaser. In the event Purchaser desires to
retain Seller's assistance in such matters after the Closing, the parties agree
to enter into an agreement having terms substantially the same as those
contained in the document attached as SCHEDULE 4.1.15(b).
4.1.16. Interim Financial Statements and Statistical Summaries.
Between the date of this Agreement and the Closing Date, Seller shall deliver to
Purchaser (i) as soon as practicable, but no later than forty-five (45) days
after the end of each calendar month, unaudited financial statements ("Interim
Financial Statements") for the most recent month and the interim period then
ended, and (ii) as soon as practicable, but no later than forty-five (45) days
after the end of each calendar month, interim operating data summaries (the
"Interim Operating Data Statements") for the most recent month and interim
period then ended, which summaries will be in scope and format substantially
identical to the Operating Data Statements.
4.1.17. Material Contracts. Seller shall not (a) default in any
material respect under, or breach any term or provision of, or suffer or permit
to exist any condition or event which, after notice or lapse of time, or both,
would constitute a material default under, any material Contract, or (b) cause
or permit the termination, modification or amendment of any material Contract of
Seller.
4.1.18. Condition of Assets. Seller shall use diligent efforts to
preserve the Assets intact and, from time to time, make all necessary repairs
thereto, so that the Business may be conducted in the ordinary course consistent
with past practices.
4.2. Covenants of Purchaser. Purchaser covenants and agrees that from
the time of the execution and delivery of this Agreement until (and including)
the Closing Date:
4.2.1. Consummate Transaction. Purchaser shall use its best
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, to assist Seller in obtaining all necessary
Consents of third parties, including, without limitation, the approval of this
Agreement and the transactions contemplated hereby as required by any
Governmental Authority, and to make all filings with and to give all notices to
third parties which may be necessary or reasonably required of Purchaser in
order to consummate the transactions contemplated hereby.
4.2.2. Purchaser Not to Control. Notwithstanding any provision of
this Agreement that may be construed to the contrary, pending the consummation
of the Closing, Seller shall maintain actual (de facto) and legal (de jure)
control over the System. Specifically, and without limitation, the
responsibility for the operation of the Business and the System shall, pending
the Closing Date, reside with the Board of Directors and management of Seller,
including, but not limited to, responsibility for the following matters: (a)
access to and the use of the facilities of and equipment owned by Seller; (b)
control of the daily operation of the System; (c) creation and implementation of
policy decisions; (d) employment and supervision of employees; (e) payment of
financing obligations and expenses incurred in the operation of the System; (f)
receipt and distribution of monies and profits derived from the operation of the
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System; and (g) execution and approval of all contracts and applications
prepared and filed before Governmental Authorities.
4.2.3. Notice of Breaches. Purchaser 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 Purchaser contained
in this Agreement, give notice in writing of such event or occurrence or
impending or threatened event or occurrence, to Seller and use its diligent
efforts to prevent or to promptly remedy such breach.
4.2.4. Qualification to Hold Authorizations. Purchaser shall
remain an entity qualified to hold the Authorizations under the rules and
regulations of the FCC.
4.3. Mutual Covenants of Seller and Purchaser. Seller and Purchaser
have filed with the FCC, and, if necessary, will file with the PUC or any other
Governmental Authority, as soon as practicable following the date hereof, joint
applications requesting the approval of the assignment of the Authorizations to
Purchaser, and, if applicable, will file all necessary applications with the DOJ
and/or the FTC pursuant to the HSR Act. Seller and Purchaser agree to use their
best efforts to make all such filings as have not yet been made within ten (10)
business days of the execution of this Agreement. Seller and Purchaser 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. Purchaser shall the pay filing fees associated with the filings
required by this SECTION. Seller and Purchaser covenant and agree to undertake
all actions and file such material as shall be necessary or required in order to
obtain any necessary waivers or other authority in connection with the foregoing
applications.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby makes the following representations and warranties to
Purchaser, all of which have been relied upon by Purchaser in entering into this
Agreement and the truth and accuracy of which shall constitute a condition
precedent to the obligations of Purchaser hereunder:
5.1. Organization and Standing. Seller (a) is a limited liability
company duly organized, validly existing and in good standing under the laws of
the state of Arkansas, (b) has full power and authority to enter into and
perform this Agreement, to own and lease the Assets, and operate the System and
to carry on the Business as now being conducted and proposed to be conducted by
it, and (c) is duly qualified to do business and is in good standing as a
foreign entity in every jurisdiction in which the nature of the business
conducted by it requires such qualification, except where the failure to so
qualify would not have a material adverse effect on the System, the Business, or
the Assets.
5.2. Authorization and Binding Obligations. The execution, delivery
and performance of this Agreement by Seller has been duly and validly authorized
by all necessary action, including
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approval of the entire transaction by vote of its members. This Agreement has
been duly executed and delivered by Seller and constitutes a valid and binding
obligation of Seller enforceable against it in accordance with its terms, except
as its enforceability may be limited by bankruptcy, insolvency, moratorium or
other laws relating to or affecting creditors' rights generally and the exercise
of judicial discretion in accordance with general equitable principles.
5.3. No Contravention. Except as otherwise contemplated hereunder, the
execution, delivery and performance of this Agreement, the consummation of the
transactions contemplated hereby and the compliance with the provisions hereof
by Seller will not (a) violate any provisions of the organizational documents of
Seller (b) result in the breach of, or constitute a default under, or result in
the creation of any Lien upon any of the Assets, under the provisions of any
agreement or other instrument to which Seller is a party or by which any Asset
is bound or affected or (c) with respect to Seller, violate any Applicable Laws.
5.4. Title to Assets.
5.4.1. SCHEDULE 5.4.1 is a list of all tangible personal property
included in the Assets. Seller has good and marketable title to all the tangible
personal property to be transferred by it hereunder, free and clear of all
Liens, charges or any other encumbrances, except for and subject only to liens
for Taxes not yet due or payable ("Permitted Liens").
5.4.2. SCHEDULE 5.4.2 is a list of all the Real Property. Seller
has good and marketable title to all of the Real Property to be transferred by
it hereunder, free and clear of all Liens, and without reservation or exclusion
of any mineral, timber or other rights or interests, except for and subject only
to (a) Permitted Liens, (b) those matters set forth in SCHEDULE 5.4.2 including
the leases listed thereon (whether as lessor or lessee), none of which is
violated by existing structures or impairs Seller's use and none of which
materially impairs or pursuant to its terms would materially impair the present
operations of the System or the present use of such property, and (c) those
Liens set forth in SCHEDULE 5.4.2. The Liens set forth on SCHEDULE 5.4.2 will be
removed on or prior to the Closing Date.
5.4.3. The Assets include all assets (except the Excluded Assets)
which are used to conduct the Business and operations of the System as presently
conducted.
5.5. Condition of the Assets. All tangible Assets are in reasonable
operating condition and repair, ordinary wear and tear excepted, are reasonably
suitable for the uses and purposes for which they are being used, and are in
compliance with all Applicable Laws, except where failure of such compliance
would not have a material adverse effect on the Assets, the System, or the
Business, and Seller has no knowledge and has received no notice that it or the
present use of the Assets is in violation in any material respect of any
Applicable Laws.
5.6. Authorizations. The Authorizations listed on SCHEDULE 5.6 are all
of the Authorizations necessary to operate the System, the Business and the
Assets as they are now operated. The Authorizations are validly issued in the
name of Seller and are in full force and effect. Except as set forth on SCHEDULE
5.6, all material Authorizations are unimpaired by any acts or omissions of
Seller (or any of its Representatives) and the Authorizations are free and
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clear of any restrictions which might limit the full operation of the System.
All material ownership reports, employment reports, and other documents required
to be filed by Seller with the FCC with respect to the System have been filed or
the time period for such filing has not lapsed. All such reports and documents
since the date that Seller acquired the System are correct in all material
respects. The FCC actions granting the current FCC Authorization to operate the
System together with all underlying construction permits have not been reversed,
stayed, enjoined, set aside, annulled, or suspended, and no timely request for
stay, motion or petition for reconsideration or rehearing, application or
request for review, or notice of appeal or other judicial petition for review is
pending. The time for filing any such request, motion, petition, application,
appeal, or notice, and for the entry of an order staying, reconsidering, or
reviewing on the FCC's or other regulatory authorities' own motion, has expired.
5.7. Contracts. SCHEDULE 5.7 is a list of all Contracts, other than
Subscriber Agreements and Contracts with Seller's Affiliates which will not
survive the Closing. Each such Contract is in full force and effect, paid
currently, and has not been materially impaired by any acts or omissions of
Seller or any of its Representatives. Except as set forth on SCHEDULE 5.7, no
Contract requires the consent of any other party to the transactions
contemplated by this Agreement. Seller is not (and, to the best of its
knowledge, no other party is) in material breach or violation of, or default
under any of the Contracts. Seller is not aware of any intent by any party to
any Contract to terminate or amend the terms thereof or to refuse to renew any
Contract upon expiration of its term.
5.8. Intellectual Property. SCHEDULE 5.8 is a list of all Intellectual
Property. Except as indicated on SCHEDULE 5.8, Seller has properly licensed and
has the right to use all of the Intellectual Property. No person has a right to
receive a royalty or similar payment in respect of any Intellectual Property
other than as indicated on SCHEDULE 5.8. Seller has no licenses granted by or to
it, or any other agreements to which it is a party, relating in whole or in part
to any of the Intellectual Property other than as indicated on SCHEDULE 5.8. To
Seller's knowledge, except as disclosed on SCHEDULE 5.8, Seller's use of the
Intellectual Property is not infringing upon or otherwise violating the rights
of any third party, and no proceedings have been instituted against or notices
received by Seller alleging that such use of its Intellectual Property infringes
upon or otherwise violates any rights of a third party.
5.9. Employees; Employment Obligations. Seller and/or the System
currently employs those persons in those positions and at those salaries
(including benefits) as are listed on SCHEDULE 5.9 Seller shall hire no further
employees without the prior written consent of Purchaser, provided that Seller
may, as the need arises, hire employees to replace existing employees without
the consent of Purchaser. Except as otherwise set forth on such SCHEDULE 5.9,
Seller and the System are not bound, and at no time have been bound, by any oral
or written collective bargaining agreement, severance, pension, retirement,
profit-sharing, 401(k), "employee benefit plan" (within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), or other employment agreement (other than any agreements terminable
on thirty (30) days' or less notice without penalty or severance obligation)
with any officer, employee or consultant, nor does Seller or the System have any
liability under any such agreement which was terminated previously. Seller has
complied in all material respects with all applicable laws, rules and
regulations which relate to prices, wages, hours, discrimination in
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employment and collective bargaining and is not liable for any arrears of wages
or any taxes or penalties for failure to comply with any of the foregoing. With
respect to each "employee benefit plan," if any, within the meaning of Section
3(3) of ERISA, which is now, or ever has been, maintained, contributed to, or
required to be contributed to by Seller, such employee benefit plan has been
established and maintained in all material respects in accordance with its terms
and in material compliance with all applicable laws, statutes, orders, rules and
regulations, including but not limited to ERISA. Seller is not a party to, and
is not affected by or threatened with, any dispute or controversy with a union
or with respect to unionization or collective bargaining involving the Employees
of Seller or the System.
5.10. Financial Statements. Attached hereto as SCHEDULE 5.10 are the
unaudited financial statements of Seller for the periods indicated on such
Schedule (the "Financial Statements"). SCHEDULE 5.10 also lists key statistical
summary information and other documents which set forth the subscriber history
for the last three years, and local and roaming minutes of use data of the
System for a designated calendar months (the "Operating Data Statements"). A
sample Operating Data Statement is attached hereto as SCHEDULE 5.10. All
Financial Statements are true and correct in all material respects, have been
prepared from the Books and Records and fairly represent the financial position
of Seller in a manner consistent with the prior periods prepared in accordance
with generally accepted accounting principles. To Seller's knowledge, Seller has
not incurred nor is it subject to any Liabilities, whether accrued or absolute,
which are not disclosed in the Financial Statements or elsewhere in this
Agreement. All Operating Data Statements listed on such SCHEDULE 5.10 are
accurate in all material respects.
5.11. Litigation. Except as set forth on SCHEDULE 5.11, there is no
action, order, writ, injunction, judgment or decree outstanding or claim, suit,
litigation, proceeding, or labor dispute ("Action"), other than rule-making
proceedings affecting the cellular telephone industry generally, pending or, to
the knowledge of Seller, threatened, relating to or affecting (a) Seller, (b)
the Assets, (c) the Business, or (d) the transactions contemplated by this
Agreement which if adversely determined, could have a material adverse effect on
the Business. Seller is not in default with respect to any judgment, order,
writ, injunction or decree of any court or governmental agency, and there are no
unsatisfied judgments against Seller or the Assets. There is not a reasonable
likelihood of an adverse determination of any pending Action which would,
individually or in the aggregate, have a material adverse effect on the Assets
or the Business or the financial condition of Seller.
5.12. Complaints. There is not, to the best of Seller's knowledge, any
FCC investigation, notice of apparent liability or order of forfeiture pending
or outstanding against Seller or the System respecting any violation, or
allegation thereof, of any FCC rule, regulation or policy, or, to the best of
Seller's knowledge, any complaint before the FCC as a result of which an
investigation, notice of apparent liability or order of forfeiture may issue
from the FCC relating to the System.
5.13. Reports. Except as set forth in SCHEDULE 5.13 hereto, all
material returns, reports and statements currently required to be filed by
Seller with the FCC or with any other Governmental Authority with respect to the
System have been filed and materially complied with and shall continue to be
filed and be in substantial compliance on a current basis until the Closing
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Date. All such reports, returns and statements are (or will be, in the case of
future reports) substantially complete and materially correct as filed.
5.14. Taxes. Except as noted below, Seller has paid in full or
discharged all Taxes relating to the ownership and operation of the Assets and
all Taxes the non-payment of which could result in a Lien on the Assets in the
hands of the Purchaser, excepting in each case such Taxes which are not yet due
or which are being contested and for which adequate reserves have been made. No
event has occurred that could impose on Purchaser any liability for any Taxes,
due or to become due, from Seller to any taxing authority.
Seller may not have yet paid state sales Taxes associated with certain
out collect revenues. Seller acknowledges that all such Taxes, and all penalties
and interest associated with such Taxes, are and will remain Seller's
responsibility. Seller shall have paid all such Taxes, penalties and interest
before the Closing Date.
5.15. No Other Agreements to Sell the System or the Assets. Seller has
no other legal obligation, absolute or contingent, to any other Person to sell,
or offer to sell (including any right of first refusal or other similar
agreement) the Assets or any capital stock of Seller or to effect any merger,
consolidation or other reorganization of Seller or to enter into any contract
with respect thereto.
5.16. Resale and Roaming Agreements. SCHEDULE 5.16 contains a list of
all resale agreements to which Seller is a party, both as reseller and as a
provider of resale services to others. SCHEDULE 5.16 also contains a list of all
roaming agreements to which Seller is a party. All such resale and roaming
agreements are in full force and effect and, subject to rates which may be
imposed upon Seller beyond Seller's control, are on terms reasonable and
customary in the cellular telephone industry.
5.17. Environmental Matters. Except as set forth in SCHEDULE 5.17, to
Seller's knowledge the Operating Sites, and all existing and prior uses of the
Operating Sites, comply and have at all times complied with the Environmental
Laws. Except as set forth in SCHEDULE 5.17, Seller has not used, generated
manufactured, refined, transported, treated, stored, leaked, poured, emitted,
emptied, released, discharged, disposed, spilled or Handled any Regulated
Substance on or under any Operating Site. To Seller's knowledge (a) there is and
has been no Handling of any Regulated Substances at, on, or from any Operating
Site; (b) there is and has been no presence of Regulated Substances on or under
any Operating Site regardless of how the Regulated Substance or Regulated
Substances came to rest there; (c) no underground tanks, PCBs or
asbestos-containing materials are or have been located on or under any Operating
Site; (d) no Liens have been, or are, imposed on any of the Assets under any
Environmental Laws; (e) no action, proceeding, revocation proceeding, amendment
procedure, writ, injunction or claim is pending, or threatened concerning any
environmental permit, Regulated Substance or activity related thereto. Neither
Seller nor any Person acting on behalf of Seller has released any other Person
from any claims Seller might have, or have had, for any matter relating to
presence or Handling of Regulated Substances at any Operating Site. Seller has
obtained all permits, licenses, registrations, and other approvals and has made
all reports and notifications required under any Environmental Laws in
connection with the Assets, and is in compliance in all material respects
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with all applicable Environmental Laws. There are no present actions,
activities, circumstances, conditions, events, or incidents that would be
expected to involve Seller (or any Person whose liability Seller has retained or
assumed, either by contract or operation of law) in any litigation under the
Environmental Laws, or impose upon Seller (or any Person whose liability Seller
has retained or assumed, either by contract or operation of law) any
environmental liability including, without limitation, common law tort
liability. SCHEDULE 5.17 hereto also contains a list and brief description of
all Environmental Law filings by Seller with, notices to Seller from, and
related reports to all Governmental Authorities administering Environmental
Laws, within three years prior to the date hereof, including without limitation,
filings made, corrective action taken, or citations received by Seller.
5.18. Brokers. Seller has entered into a Contract with Daniels and
Associates which will result in the obligation of Seller to pay a brokerage
commission or similar payment in connection with the transactions contemplated
hereby. Seller shall be responsible for making any and all such payments, and
Purchaser shall have no obligation therefor.
5.19. No Material Adverse Change. Except as set forth on SCHEDULE 5.19,
since the date of the most recent Financial Statements, there has not been:
5.19.1. any material adverse change in the rate of Seller's
generation of cash flow from operations (as opposed to cash flow from financing
operations and investment activities) after giving effect to customary seasonal
fluctuations of cash flow generation;
5.19.2. any occurrence, assumption or guarantee by Seller of a
material indebtedness other than pursuant to Contracts in existence on the date
hereof and set forth or described on the Schedules annexed hereto;
5.19.3. any creation by Seller of any Lien or encumbrance on any
material Asset other than pursuant to Contracts in existence on the date hereof
and set forth or described on the Schedules annexed hereto;
5.19.4. any making of any material loan, advance or capital
contribution to or investment in any Person by Seller;
5.19.5. any damage, destruction or other casualty loss affecting
the Business or the Assets which, after giving effect to payments to Seller
under applicable insurance policies, has had or is likely to have a material
adverse effect on the financial condition of Seller or the System; or
5.19.6. any change by Seller in accounting principles or methods
not required by law or year end changes.
5.20. Year 2000 Compliance. Seller has performed the necessary testing
to determine whether all material software and computer systems used in the
operation of the System are Year 2000 Compliant. To the extent that such testing
indicated that Seller's software or computer systems are not Year 2000
Compliant, such software and/or computer systems were modified or will be
modified prior to the Closing Date so they are Year 2000 Compliant. For purposes
of this
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Section, "Year 2000 Compliant" means that Seller's software or computer systems
receive, record, store, process, rout, transfer or present calendar dates and
any related information falling on or after January 1, 2000 with similar
functionality, in all material respects, as such software or computer systems
perform such functions for calendar dates and related information falling prior
to January 1, 2000.
5.21. Miscellaneous. No representation or warranty made by Seller in
this Agreement, and no statement made in any schedule, exhibit, certificate or
other document furnished pursuant to this Agreement, contains any untrue
statement of a material fact or knowingly omits or fails to state, or will
knowingly omit or fail to state, any material fact or information necessary to
make such representation or warranty or any such statement not materially
misleading; provided however, that nothing contained in this Section shall alter
the standard of those representations or warranties which are made "to Seller's
knowledge" or "to the best of Seller's knowledge" or phrases of similar import.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby makes the following representations and warranties to
Seller, all of which have been relied upon by Seller in entering into this
Agreement and the truth and accuracy of which shall constitute a condition
precedent to the obligations of Seller hereunder:
6.1. Organization and Standing. Purchaser (a) is a limited liability
company duly organized, validly existing and in good standing under the laws of
the state of its organization, (b) has full power and authority to enter into
and perform this Agreement, to own the Assets, and to carry on the Business upon
consummation of the transactions contemplated by this Agreement, and (c) is duly
qualified to do business and is in good standing as a foreign entity in every
jurisdiction in which the nature of the business conducted by it requires such
qualification, except where the failure to so qualify would not materially
adversely affect Purchaser or the transactions contemplated by this Agreement.
6.2. Authorization and Binding Obligations. The execution, delivery and
performance by Purchaser of this Agreement has been or will be within five (5)
business days of the date of this Agreement, duly and validly authorized by all
necessary company action, including approval of the entire transaction by the
manager of Purchaser. This Agreement has been duly executed and delivered by
Purchaser and constitutes a valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms except as its
enforceability may be limited by bankruptcy, insolvency, moratorium or other
laws relating to or affecting creditors' rights generally and the exercise of
judicial discretion in accordance with general equitable principles.
6.3. No Contravention. Except as otherwise contemplated hereunder, the
execution, delivery and performance of this Agreement, the consummation of the
transactions contemplated hereby and the compliance with the provisions hereof
by Purchaser will not (a) violate any provisions of the organizational documents
of Purchaser, (b) result in the breach of, or constitute a default under or
result in the creation of any Lien upon any assets of Purchaser, under the
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provisions of any agreement or other instrument to which Purchaser is a party or
by which the property of Purchaser is bound or affected or (c) with respect to
Purchaser, violate any Applicable Laws.
6.4. Litigation. Except as set forth on SCHEDULE 6.4, there is no
Action, other than rule-making proceedings affecting the cellular telephone
industry generally, pending or, to the knowledge of Purchaser, threatened or
anticipated against, relating to or affecting Purchaser that would have a
material adverse effect on Purchaser or Purchaser's ability to consummate the
transactions contemplated by this Agreement. Purchaser is not in material
default with respect to any material judgment, order, writ, injunction or decree
of any court or governmental agency, and there are no unsatisfied judgments
against Purchaser. There is not a reasonable likelihood of an adverse
determination of any pending Action which would, individually or in the
aggregate, have a material adverse effect on Purchaser or Purchaser's ability to
consummate the transactions contemplated by this Agreement.
6.5. Authority to hold Authorizations. Purchaser is an entity that is
qualified to hold the Authorizations under the rules and regulations of the FCC.
6.6. No Brokers. Neither Purchaser nor any of its Affiliates has
entered into or will enter into any contract, agreement, arrangement or
understanding with any person or firm which will result in the obligation of
Seller to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
6.7. Financial Capacity. Purchaser has now, and will have on the
Closing Date, the financial capacity or resources to acquire and operate the
System and Assets as contemplated by this Agreement.
6.8. Miscellaneous. No representation or warranty made by Purchaser in
this Agreement, and no statement made in any schedule, exhibit, certificate or
other document furnished pursuant to this Agreement, contains any untrue
statement of a material fact or knowingly omits or fails to state, or will
knowingly omit or fail to state, any material fact or information necessary to
make such representation or warranty or any such statement not materially
misleading; provided however, that nothing contained in this Section shall alter
the standard of those representations or warranties which are made "to
Purchaser's knowledge" or "to the best of Purchaser's knowledge" or phrases of
similar import.
ARTICLE 7.
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to sell the Assets and to otherwise
consummate the transactions contemplated by this Agreement are subject, in the
discretion of Seller, to the satisfaction or waiver, on or prior to the Closing
Date, of each of the following conditions:
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7.1. Representations, Warranties and Covenants. All representations
and warranties of Purchaser contained in this Agreement that do not otherwise
reference a specific date shall be true and correct in all material respects at
and as of the Closing Date as if such representations and warranties were made
at and as of the Closing Date, and Purchaser shall have performed in all
material respects all agreements and covenants required hereby to be performed
by Purchaser prior to or at the Closing Date. There shall be delivered to Seller
a certificate (signed by an authorized Officer of Purchaser) to the foregoing
effect ("Purchaser's Closing Certificate").
7.2. Closing Documents. Seller shall have received from Purchaser the
documents and other items to be delivered by Purchaser pursuant to Section 9.2
of this Agreement.
7.3. Opinion of Purchaser's Counsel. Purchaser shall have delivered to
Seller an opinion of in-house counsel for Purchaser in substantially the form
attached hereto as SCHEDULE 7.3.
7.4. Compliance with Advance Agreement. Purchaser shall not be in
material default under the terms of the Advance Agreement.
7.5. Certificates. Purchaser shall furnish Seller with such
certificates of the officers of Purchaser and others to evidence compliance with
the conditions set forth in this Article as may be reasonably requested by
Seller.
7.6. Closing of Texas-7 Transaction. All of the terms and conditions
of the Texas-7 APA shall have been complied with by the parties thereto, and the
transactions contemplated by the Texas-7 APA shall be have been consummated, or
shall be consummated concurrently with the consummation of the transaction
contemplated by this Agreement.
7.7. Purchase Price. Seller shall have received payment of the
Purchase Price in accordance with Section 2.2.
7.8. HSR Waiting Period. Any waiting period required by the HSR Act
shall have lapsed or been terminated, and any investigation of the transactions
contemplated by this Agreement commenced by the DOJ and/or the FTC pursuant to
the HSR Act shall have been terminated.
7.9. No Restraint. There shall not be any pending suit or proceeding
to restrain or invalidate, in whole or in part, this Agreement or the
transaction contemplated herein.
7.10. Authorization. Purchaser shall have delivered evidence,
satisfactory to Seller, that the authorizations contemplated by Section 6.2
hereof has been timely obtained.
7.11. FCC Consent. The FCC Consent to the assignment of the
Authorizations to Purchaser shall have been obtained.
ARTICLE 8.
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CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Purchaser to purchase the Assets and to otherwise
consummate the transactions contemplated by this Agreement are subject, in the
discretion of Purchaser, to the satisfaction or waiver, on or prior to the
Closing Date, of each of the following conditions:
8.1. Representations, Warranties and Covenants. All representations
and warranties of Seller contained in this Agreement that otherwise do not
reference a specified date shall be true and correct in all material respects at
and as of the Closing Date as if such representations and warranties were made
at and as of the Closing Date, and Seller shall have performed in all material
respects all agreements and covenants required hereby to be performed by Seller
prior to or at the Closing Date. There shall be delivered to Purchaser a
certificate (signed by an authorized officer of Seller) to the foregoing effect
("Seller's Closing Certificate").
8.2. Consent. The FCC shall have consented to the transfer of the
Assets to Purchaser and such consents shall have become a Final Order.
8.3. Board / Stockholder Approval. The transactions contemplated
herein shall have been approved by the necessary number of stockholders and
directors of Seller.
8.4. Closing Documents. Purchaser shall have received from Seller the
documents and other items to be delivered by Seller pursuant to Section 9.1
hereof.
8.5. Opinion of Seller's Business Counsel. Seller shall have delivered
to Purchaser an opinion or opinions of counsel for Seller in substantially the
form attached hereto as SCHEDULE 8.5.
8.6. Opinion of Seller's FCC and PUC Counsel. Seller shall have
delivered to Purchaser an opinion or opinions of FCC and, if applicable, PUC
counsel for Seller in substantially the form attached hereto as SCHEDULE 8.6.
8.7. Certificates. Seller shall furnish Purchaser with such
certificates of the respective officers of Seller and others to evidence
compliance with the conditions set forth in this Article as may be reasonably
requested by Purchaser.
8.8. Closing of Texas-7 Transaction. All of the terms and conditions
of the Texas-7 APA shall have been complied with by the parties thereto, and the
transactions contemplated by the Texas-7 APA shall be have been consummated, or
shall be consummated concurrently with the consummation of the transaction
contemplated by this Agreement.
8.9. HSR Waiting Period. Any waiting period required by the HSR Act
shall have lapsed or been terminated, and any investigation of the transactions
contemplated by this Agreement commenced by the DOJ and/or the FTC pursuant to
the HSR Act shall have been terminated.
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8.10. FCC Consent. The FCC Consent shall have become a Final Order;
provided that Purchaser may waive the condition that such Consent be by Final
Order.
ARTICLE 9.
THE CLOSING
On the Closing Date at the Closing Place:
9.1. Deliveries by Seller to Purchaser. Seller shall deliver to
Purchaser:
9.1.1. one or more assignments transferring to Purchaser (or its
designee) all of Seller's interest in and to the Authorizations;
9.1.2. one or more instruments of conveyance transferring to
Purchaser (or its designee) all of Seller's interest in and to the Equipment and
the Books and Records;
9.1.3. one or more assignments or other instruments of conveyance
that may be reasonably requested by Purchaser transferring to Purchaser (or its
designee) Seller's interest in and to the Intellectual Property;
9.1.4. one or more instruments of conveyance transferring to
Purchaser (or its designee) the Contracts in effect on the Closing Date;
9.1.5. one or more executed warranty deeds and assignments in
recordable form, transferring to Purchaser (or its designee) Seller's interest
in and to the Real Property;
9.1.6. one or more instruments of conveyance transferring to
Purchaser (or its designee) any of the other Assets not otherwise conveyed as
provided above;
9.1.7. the opinions of Seller's counsel referenced in Sections
8.5 and 8.6 hereof;
9.1.8. a lien and judgment search from (a) the offices of the
Secretaries of State of the state of organization of Seller and the state in
which Seller is conducting business, and (b) the office of the county clerk of
the applicable counties therein, dated not earlier than fifteen (15) business
days prior to the Closing Date, the results of which are consistent with
Seller's representations in this Agreement;
9.1.9. an affidavit certifying as to Seller's non-foreign status
in accordance with Section 1445(b)(2) of the Code;
9.1.10. a copy of the resolutions of the board of directors and
the consent of all shareholders of Seller approving the transactions
contemplated by this Agreement certified by an appropriate officer of Seller,
together with copies of the operating agreement and certificate of formation of
Seller, certified by an appropriate officer of Seller;
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9.1.11. Seller's Closing Certificate; and
9.1.12. an executed Escrow Agreement.
9.2. Deliveries by Purchaser to Seller. Purchaser shall deliver to
Seller (or its designee):
9.2.1. one or more agreements whereby Purchaser (or its designee)
assumes and agrees to perform Seller's obligations, liabilities and duties under
the Assumed Liabilities;
9.2.2. the opinion of Purchaser's counsel referenced in Sections
7.3 hereof;
9.2.3. copy of the resolutions of the board of directors of
Purchaser approving the transactions contemplated by this Agreement certified by
an appropriate officer of Purchaser;
9.2.4. Purchaser's Closing Certificate;
9.2.5. an executed Escrow Agreement; and
9.2.6. payment of the Purchase Price.
ARTICLE 10.
ACTIONS BY THE PARTIES AFTER THE CLOSING
10.1. Further Assurances. On and after the Closing Date, the Parties
will take all appropriate action and execute all documents, instruments, or
conveyances of any kind which may be reasonably necessary or advisable to carry
out any of the provisions hereof, including without limitation, putting
Purchaser (or its designee) in possession and operating control of the Assets
and the System.
10.2. Post-Closing Tax Covenant. Seller shall promptly pay Taxes
payable with respect to the operation of the System arising prior to Closing for
which Seller is responsible that become due or otherwise have given rise to, or
could give rise to, any Lien on the Assets.
10.3. Access to Records. For a period of three (3) years after the
Closing Purchaser shall retain and make available to Seller any and all records
provided to Purchaser by Seller within a reasonable period of time after receipt
of a written request for the same. Seller shall have the right to make copies of
the same at its own expense.
ARTICLE 11.
INDEMNIFICATION
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11.1. Survival. The several representations, warranties, covenants, and
agreements of the Parties contained in this Agreement (or in any document
delivered in connection herewith) shall be (i) deemed to have been made on the
date of this Agreement and on the Closing Date, (ii) shall be deemed to be
material and to have been relied upon by the Parties notwithstanding any
investigation made by the Parties, and (iii) shall survive the Closing Date (the
"Survival Period") for a period of two (2) years following the Closing Date;
provided, however, that the representations, warranties and agreements of Seller
contained in Sections 5.4 (Title to Assets), 5.6 (Authorizations), 5.14 and 10.2
(Taxes), and 5.17 (Environmental Matters) shall continue to survive for the
duration of any applicable statute of limitations. Any claim for breach of a
representation or warranty (an "Indemnity Claim") for which written notice shall
have been provided prior to the termination of the applicable survival period to
the Party which made such representation or warranty shall be deemed to be
timely made within the applicable indemnification period.
11.2. Seller's Indemnity.
11.2.1. During the indemnification Survival Period (or thereafter
solely with respect to any Indemnity Claim made prior to the expiration of the
applicable Survival Period), Seller shall indemnify and hold harmless Purchaser
and its Affiliates from and against any and all demands, claims, losses,
liabilities, actions or causes of action, assessments, damages, fines, Taxes,
penalties, reasonable costs and expenses (including, without limitation,
interest, reasonable 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 Purchaser against Seller or
asserted by third parties)) (collectively "Losses") incurred or suffered by
Purchaser, its Affiliates, and their respective officers, directors, employees,
agents and Representatives, arising out of, resulting from, or relating to:
(a) Any breach of any of the representations or warranties
made by Seller in this Agreement or in any agreement, certificate, exhibit or
other instrument delivered by the Seller pursuant to this Agreement;
(b) Any failure by Seller to perform any of its covenants or
agreements contained in this Agreement or in any agreement, certificate or other
instrument delivered by the Seller pursuant to this Agreement;
(c) Any failure to properly license or register any of the
Assets (including Motorola software and hardware);
(d) Any violation by Seller or any of its Affiliates of any
Environmental Laws; and
(e) Any claims by third parties arising from, relating to or
out of the ownership or operation of the System or the Assets prior to the
Closing Date.
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11.2.2. Escrow. As collateral security for Seller's
indemnification obligations under this Agreement, at the Closing, in accordance
with Section 2.2 hereof, Purchaser shall deliver to the Escrow Agent, the Escrow
Amount (as defined in Section 2.2), to be held in an interest bearing account
pursuant to the terms of an escrow agreement, in substantially the form of
SCHEDULE 11.2.2 attached hereto (the "Escrow Agreement"). The Escrow Amount
shall be held by the Escrow Agent until the date that is eighteen (18) months
after the Closing Date, at which time the Escrow Amount, plus any accrued but
undistributed interest, shall be released to Seller, subject to a continuing
hold back of the Escrow Amount for any asserted and outstanding indemnification
claims at such time. Nothing contained in this Section or in the Escrow
Agreement shall limit in any way Seller's indemnification obligations under this
Agreement; it being understood that if the Escrow Amount is not sufficient to
satisfy such indemnifications obligations as set forth in this Agreement, then
Seller shall remain liable for such indemnification obligations until expiration
of the applicable Survival Periods and the absence of any pending Indemnity
Claims.
11.3. Purchaser's Indemnity.
11.3.1. During the Survival Period (or thereafter solely with
respect to any Indemnity Claim made prior to the expiration of the applicable
Survival Period), from and after the Closing Date, Purchaser shall indemnify and
hold harmless Seller and its Affiliates from and against any and all Losses
incurred or suffered by Seller, its Affiliates, and their respective officers,
directors, employees, agents and Representatives, arising out of, resulting
from, or relating to:
(a) Any breach of any of the representations or warranties
made by Purchaser in this Agreement or in any agreement, certificate or other
instrument delivered by Purchaser pursuant to this Agreement;
(b) Any failure by Purchaser to perform any of its covenants
or agreements contained in this Agreement or in any agreement, certificate or
other instrument delivered by Purchaser pursuant to this Agreement;
(c) Any claims by third parties arising from, relating to,
or out of the ownership or operation of the System or the Assets after the
Closing Date; or
(d) Any claims with respect to the Assumed Liabilities.
11.4. Procedure. 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, the Party seeking such indemnification (the
"Indemnitee") shall assert an Indemnification Claim by giving prompt written
notice thereof (the "Notice") which shall describe in reasonable detail the
facts and circumstances upon which the Indemnification Claim is based, along
with a copy of the claim or complaint, to the Party required to provide
indemnification (the "Indemnitor"), and shall thereafter keep the Indemnitor
reasonably and promptly informed with respect thereto; provided 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
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is materially prejudiced by such failure. For purposes of this paragraph, any
Notice which is sent within fifteen (15) days of the date upon which the
Indemnitee obtained actual knowledge of such Loss shall be deemed to have been a
"prompt notice."
11.4.1. If the Indemnitor wishes to defend any claim for any
Losses for which such Indemnitor is or may be liable, and such Indemnitor first
establishes (to the reasonable satisfaction of the Indemnitee) the Indemnitor's
financial ability to pay for any such Losses, then such Indemnitor may, at its
own expense, defend such claim; provided that the Indemnitee may retain counsel
(at the Indemnitee's expense) to monitor the defense of such claim, and may take
over such defense if, during the course thereof, it reasonably appears that the
Indemnitor has lost its ability to pay for any Losses threatened by such claim.
If an Indemnitor assumes the defense of such an action, no compromise or
settlement thereof may be effected by the Indemnitor without the Indemnitee's
consent, which consent shall not be unreasonably withheld. If an Indemnitor
fails, within thirty (30) days after the date of the Notice, to give notice to
the Indemnitee of said Indemnitor's election to assume the defense thereof, said
Indemnitor shall be bound by any determination made in such action or any
compromise or settlement thereof effected by the Indemnitee.
11.4.2. 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,
unless such Indemnification Claim is reasonably disputed by the Indemnitor.
11.5. Limitation on Indemnification. No Party shall be entitled to
indemnification in accordance with the provisions of this Article until such
time as the value of the aggregate loss or liability for which indemnification
is sought exceeds the sum of Fifty Thousand Dollars ($50,000). At such time as
the aggregate loss or liability for which indemnification may be sought exceeds
Fifty Thousand Dollars ($50,000), the Party to be indemnified may seek
indemnification for all such losses or liabilities, including the first Fifty
Thousand Dollars ($50,000). This limitation shall not apply to any of the Taxes,
penalties or interest referred to in the second paragraph of Section 5.14.
11.6. Indemnification Payments in Cash. All payments in respect to any
undisputed or resolved Indemnification Claims shall be made in cash.
11.7. Investigations: Waivers. The Survival Periods and rights to
indemnification provided for in this Article 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.
ARTICLE 12.
DEFAULT AND REMEDIES
12.1. Opportunity to Cure. If any Party believes another to be in
material default hereunder for breach of representations and warranties or any
other reason, such Party shall
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provide the other with written notice specifying in reasonable detail the nature
of such default. If the default has not been cured by the earlier of: (a) the
Closing Date, or (b) within thirty (30) days after delivery of that notice, then
the Party giving such notice may terminate this Agreement by notifying the
defaulting Party and/or exercise the remedies available to such Party pursuant
to this Article, subject to the right of the other Party to contest either such
action through appropriate proceedings; provided, however, that if such breach
is not capable of being cured within such period and if the breaching Party
shall have commenced action to cure such breach within such period and is
diligently attempting to cure such breach and such breach can reasonably be
expected to be cured during the additional time period, the breaching Party
shall be afforded an additional reasonable amount of time to cure such breach
but not to exceed an additional sixty (60) days; provided, further, that
Purchaser shall have no opportunity to cure the breach of its obligation to
deliver any required portion of the Purchase Price to be delivered to Seller at
Closing.
12.2. Remedies/Arbitration.
12.2.1. Any claim under this Agreement brought after the Closing
Date, and any claim under this Agreement brought prior to the Closing Date in
which the Party bringing the claim is praying solely for monetary damages, shall
be submitted to binding arbitration in accordance with the commercial
arbitration rules of the American Arbitration Association and the provisions
contained herein. The arbitration shall be conducted in Little Rock, Arkansas,
by a panel of three arbitrators. All claims between the Parties shall be
arbitrated in a single proceeding, to the full extent practicable.
12.2.2. The Party initiating arbitration shall give the other
Party written notice of the matter in dispute and the name of the arbitrator
appointed by it. Within fourteen (14) days after receipt of such notice, the
non-initiating Party shall give notice to the initiating Party of the arbitrator
appointed by it. If the non-initiating Party fails to designate its arbitrator
within the said fourteen (14) day period, the American Arbitration Association
shall select an arbitrator for such Party. Within fourteen (14) days after the
appointment of the second arbitrator, the two arbitrators so appointed shall
agree on a third arbitrator. If the two arbitrators are unable to agree on a
third arbitrator within said 14-day period, then the American Arbitration
Association shall appoint the third arbitrator.
12.2.3. All determinations in the final decision of the
arbitration panel shall be made by majority vote. The fees and expenses of the
arbitration panel shall be awarded by the arbitrators in their discretion as
part of their award. The arbitrators' award will be binding on the Parties
hereto and may be entered in any court of competent jurisdiction, and shall not
be subject to appeal.
12.2.4. Notwithstanding the foregoing, the Parties agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the Parties shall be entitled
to an injunction or injunctions to prevent breaches or 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
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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.
ARTICLE 13.
TERMINATION
13.1. Absence of FCC Consent. This Agreement may be terminated by
either Party by giving written notice thereof to the other if the Assignment
Applications have not been granted by Final Order within twelve (12) months
after the date of this Agreement. Neither Party may terminate this Agreement
pursuant to this Section if such Party is in material default hereunder.
13.2. Mutual Consent. This Agreement may be terminated by the mutual
consent of the Parties.
ARTICLE 14.
DAMAGE; RISK OF LOSS
14.1. Risk of Loss. The risk of loss or damage to the Assets shall be
upon Seller at all times prior to the Closing Date. In the event of material
loss or damage to the Assets prior to the Closing Date, Seller shall promptly
notify Purchaser thereof and, unless otherwise agreed by the Parties, Seller
shall use best efforts to repair, replace or restore the lost or damaged
property to its former condition as soon as practicable. If such repair,
replacement, or restoration has not been completed prior to the Closing Date,
Purchaser may, at its option:
14.1.1. elect to consummate the Closing and make such
arrangements as the Parties may reasonably agree upon to remedy such loss or
damage; or
14.1.2. elect to postpone the Closing Date, with prior consent of
the FCC if necessary, for such reasonable period of time (not to exceed ninety
(90) days) as is necessary for Seller to repair, replace, or restore (or to
cause to be repaired, replaced or restored) the lost or damaged property to its
former condition. If, after the expiration of that extension period, the lost or
damaged property has not been adequately repaired, replaced or restored,
Purchaser may terminate this Agreement or elect to consummate the Closing as
provided in Section 14.1.1.
For purposes of this Section, loss or damage shall be deemed "material"
if the reasonable cost to repair, replace, or restore the lost or damaged
property exceeds $100,000.00.
14.2. Resolution of Disagreements. If the Parties are unable to agree
upon the extent of any loss or damage, the cost to repair, replace or restore
any lost or damaged property, the adequacy of any repair, replacement, or
restoration of any lost or damaged property, or any other matter arising under
this Section, the disagreement shall be referred to a qualified consulting
communications engineer mutually acceptable to Seller and Purchaser who is a
member of the Association of Federal Communications Consulting Engineers, whose
decision shall be final, and whose fees and expenses shall be paid one-half by
Seller and one-half by Purchaser.
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ARTICLE 15.
EMPLOYEES
15.1. Employees. For purposes of this Article, the term "Employees"
shall include all full-time and part-time employees, employees on workers'
compensation, military leave, maternity leave, leave under the Family and
Medical Leave Act of 1993, short-term and long-term disability (including a
disability pension), non-occupational disability, layoff with recall rights, and
employees on other approved leaves of absence with a legal or contractual right
to reinstatement.
15.2. Responsibility for Employees on or Before the Closing. All
medical, dental, vision, travel accident, accidental death and dismemberment,
and life insurance expenses incurred by Employees and their dependents on or
before the Closing Date, pursuant to any employee plan, irrespective of the time
such claims are presented, shall be the responsibility of Seller on the Closing
Date. Seller shall be responsible for any medical, dental or life insurance
coverage due to any Employees and their dependents who retired on or before the
Closing Date. Seller agrees to fulfill its obligations under continuation
coverage rules of COBRA with respect to a "qualifying event," with the meaning
or Section 4980B(f) of the Code or Section 603 or ERISA, occurring on or before
the Closing Date with respect to any Employees who are not hired by Purchaser
and their dependents. All short-term, long-term and extended disability benefits
payable to Employees and their dependents who became disabled on or before the
Closing Date are the responsibility of Seller and shall be paid directly by
Seller or their insurance carrier to such Employees and their dependents. If any
Employee is terminated from employment on or before the Closing Date by Seller
as result of the transactions contemplated by this Agreement or otherwise, any
obligations arising out of such termination, including severance, accrued
vacation pay, COBRA obligations, employment discrimination complaints, unfair
labor practice charges, grievance under any collective bargaining agreement,
wrongful termination and related tort claims and breach of contract claims shall
be the sole responsibility of Seller. Purchaser shall have the sole
responsibility for the items listed in the preceding sentences for any actions
taken by Purchaser with respect to Employees it hires after the Closing Date.
ARTICLE 16.
MISCELLANEOUS
16.1. Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by Seller or Purchaser without the prior
written consent of the others. Purchaser may, without such consent, assign its
right, title and interest in, to and under this Agreement to an Affiliate;
provided that Purchaser must first obtain Seller's consent to any such
assignment (which consent shall not be unreasonably withheld) if such assignment
could reasonably be expected to delay the Closing. Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the Parties
hereto and their respective successors and assigns, and no other person shall
have any right, benefit or obligation hereunder.
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16.2. Notices. Unless otherwise provided herein, any notice, request,
instruction or other document to be given hereunder by any Party to the other
shall be in writing and delivered in person or by courier, by facsimile
transmission, or mailed by registered or certified mail, postage prepaid, return
receipt requested or overnight courier, as follows:
If to Purchaser or Guarantor:
Scott Hopper
GCC License LLC
Western Wireless Corporation
3650 - 131st Avenue
Bellevue, Washington 98006
Fax No: (425) 586-8666
With a copy (which copy shall not constitute notice or service of
process) to:
Stokes Lawrence, P.S.
800 Fifth Avenue, Suite 4000
Seattle, WA 98104-3199
Attention: Douglas C. Lawrence, Esq.
Fax No: (206) 464-1496
If to Seller:
NetWireless, LLC
3300 West Foxridge Lane
Muncie, IN 47304
Attention: Paul L. Kozel
Fax No. (765) 741-4151
With a copy (which copy shall not constitute notice or service of
process) to:
Lukas, Nace, Gutierrez & Sachs
1111 - 19th Street, NW, Suite 1200
Washington, D.C. 20036
Attention: Thomas Gutierrez, Esq.
Fax No: (202) 828-8410
or to such other place and with such other copies as a Party may designate as to
itself by written notice to the others. All such notices and communications
shall be deemed to have been duly given at the time delivered by hand, if
personally delivered; three business days after being deposited in the mail as
provided above; when receipt confirmed, if sent by facsimile; and the next
business day after timely delivery to the courier, if sent by an over-night air
courier service guaranteeing next day delivery.
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16.3. Choice of Law. This Agreement shall be construed, interpreted and
the rights of the Parties determined in accordance with the laws of the State of
Delaware, except with respect to matters of law concerning the internal affairs
of any entity which is a Party to or the subject of this Agreement, and as to
those matters the law of the jurisdiction under which the respective entity
derives its powers shall govern.
16.4. Entire Agreement; Amendments and Waivers. This Agreement,
together with all exhibits and schedules hereto, constitutes the entire
agreement among the Parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the Parties. No supplement, modification or waiver
of this Agreement shall be binding unless executed in writing by the Party to be
bound thereby. No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute, a waiver of any other provision hereof (whether or
not similar), nor shall such waiver constitute a continuing waiver unless
otherwise expressly provided.
16.5. Allocation of the Purchase Price. The Purchase Price shall be
allocated in accordance with SCHEDULE 16.5, to be prepared on or before the
Closing, and Purchaser and Seller agree to cooperate reasonably in the
preparation of such Schedule. Each of the Parties agrees that (i) such
allocation represents the fair market value of the Assets and shall be binding
upon it; (ii) no filings made by it with any taxing or other authority shall
reflect an allocation other than in the manner agreed upon; and (iii) it shall
timely make all filings required by any taxing authority, including the filing
of Internal Revenue Service Form 8594.
16.6. Bulk Sales. Purchaser and Seller each waive any obligation of the
other Party which may arise under the provision of any applicable "Bulk Sales"
laws.
16.7. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
16.8. Invalidity. In the event that any one or more of the provisions
contained in this Agreement or in any other instrument referred to herein,
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or any other such instrument unless such
invalidity materially affects the benefit of the bargain of a Party as
originally contracted for in this Agreement.
16.9. Headings. The headings of the Articles and Sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
16.10. Expenses. Except as expressly provided, Seller and Purchaser
shall bear equally any transfer or excise taxes arising from the transactions
contemplated herein. Seller shall pay the cost of any recording and transfer
fees arising from the purchase and sale of the Assets pursuant to this
Agreement. Seller and Purchaser will each be liable for its own expenses
incurred in connection with the negotiation, preparation, execution or
performance of this Agreement. Seller
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and Purchaser will each be liable for one-half of any expenses incurred in
obtaining consent or approval from any Governmental Authority to the assignment
the Authorizations.
16.11. Schedules and Exhibits. The Schedules and Exhibits to this
Agreement are a material part hereof and shall be treated as if fully
incorporated into the body of the Agreement.
16.12. Publicity. Except as required by Applicable Law or on advice of
counsel, no Party shall issue any press release or make any public statement
regarding the transactions contemplated hereby without the prior approval of the
other Party. Any press release or the text of any public statement to be made by
one party shall be provided to the other in advance of its release, and no such
release or statement shall be made public without the consent of the other party
16.13. Confidential Information. The Parties acknowledge that the
transaction described herein is of a confidential nature and shall not be
disclosed except to Representatives, advisors and Affiliates, or as required by
law, until such time as the Parties make a public announcement regarding the
transaction as provided in Section 16.12. The Parties shall not make any public
disclosure of the specific terms of this Agreement, except as required by law.
In connection with the negotiation of this Agreement and the preparation for the
consummation of the transactions contemplated hereby, the Parties acknowledges
that they will have access to confidential information relating to the other
Parties. Each Party shall treat such information as confidential, preserve the
confidentiality thereof and not duplicate or use such information, except to
Representatives, consultants and Affiliates in connection with the transactions
contemplated hereby provided such advisors, Representatives and Affiliates also
agree to keep such information confidential. In the event of the termination of
this Agreement for any reason whatsoever, each Party shall return to the others
all documents, work papers and other material (including all copies thereof)
obtained in connection with the transactions contemplated hereby and will use
all reasonable efforts, including instructing any of its Employees and others
who have had access to such information, to keep confidential and not to use any
such information, unless such information is now, or is hereafter disclosed,
through no act or omission of such Party, in any manner making it available to
the general public.
16.14. No Third Party Beneficiaries. All of the rights and obligations
included in this Agreement are intended to inure to the benefit of the Parties
and their Affiliates alone. Nothing contained in this agreement shall be
construed as creating any rights in any other third parties.
16.15. Parent Guarantee. Guarantor hereby absolutely, unconditionally,
directly, irrevocably, completely, and immediately guarantees the performance of
Purchaser or any of its assignees with respect to the payment of the Purchase
Price at the time and in the manner called for in this Agreement. Guarantor's
obligation of payment and performance is not contingent upon Seller first
pursuing any remedies against Purchaser or any of its successors in interest. In
the event Purchaser or its assignee fails to make any such payment when due,
within five (5) business days of receipt of written notice from Seller of
Purchaser's failure to so perform Guarantor shall make such payment to Seller,
subject to all defenses and objections that might otherwise be available to
Purchaser. Except as expressly stated in this Section, Guarantor shall have no
other responsibility or obligation under this Agreement.
33
<PAGE> 34
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed on its behalf by its officer thereunto duly authorized as of the
day and year first above written.
NETWIRELESS, LLC
By: /s/ Paul Kozel
-----------------------------------
Its: President
----------------------------------
GCC LICENSE LLC
By: /s/ Scott Hopper
-----------------------------------
Its: Vice President
----------------------------------
SOLELY AS GUARANTOR
UNDER THE PROVISIONS OF
SECTION 16.15 ABOVE:
WESTERN WIRELESS CORPORATION
By: /s/ Scott Hopper
------------------------------
Its: Vice President
-----------------------------
34
<PAGE> 35
EXHIBIT 10.92
July 12 1999
Steve Burdette
3023 S. Atlantic Ave. #505
Daytona Beach Shores, FL 32118
Dear Steve:
This letter (the "Letter Agreement") sets forth the terms of your employment
with Western Wireless Corporation ("WWC"), effective August 1, 1999.
1. Your title will be Senior Vice President. In that capacity you will
report to the President of WWC (the "President").
2. Your responsibilities will include supervision of all sales,
distribution, marketing and customer service functions, together with
such other duties as may be assigned to you by the President. In
addition, you agree to serve as a director and/or senior officer of any
subsidiary of WWC, if so elected, without any additional salary or other
compensation. You will devote substantially all of your business time
and attention to the obligations delineated in this Letter Agreement.
3. Your base compensation will be $150,000, payable in accordance with
standard payroll practices of WWC. In addition, you will have an
opportunity, as determined by WWC, to earn a performance bonus targeted
at $75,000 per year, to be paid quarterly, and to continue, during the
course of your employment, participation in the option program at a
level to be determined by WWC. Your options shall contain change of
control language consistent with other officers of WWC. It is understood
that nothing contained herein will prevent WWC, in its sole and absolute
discretion, from, at any time, increasing your compensation, either
permanently or for a limited period, whether in base compensation, by
bonus or otherwise, if WWC in its sole discretion, shall deem it
advisable to do so in order to recognize and fairly compensate you for
the value of your services to WWC; provided, however, that nothing
contained in this paragraph three shall in any manner obligate WWC to
make any such increase or provide any such additional compensation or
benefits.
4. WWC will reimburse you for all reasonable out-of-pocket business
expenses paid or incurred by you in connection with the performance of
your duties, upon submission of signed, itemized lists of such expenses
on general forms established for that purpose by WWC.
5. You will be entitled to participate in all group health and insurance
programs and all other fringe benefit or retirement plans or other plans
effective generally with respect to executives of WWC.
6. WWC will enter into an Indemnification Agreement with you pursuant to
which WWC will agree to indemnify you against certain liabilities
arising by reason of your affiliation with WWC.
7. (a) Notwithstanding any other provision of this Letter Agreement, your
employment by WWC may be terminated by WWC at any time, with or without
Cause, as defined below. In the event of a termination for Cause you
will have no rights to severance payments. Termination for "Cause" means
(i) your gross neglect or willful material breach of your principal
employment responsibilities or duties, (ii) a final judicial
adjudication that you are guilty of a felony, (iii) fraudulent conduct
as determined by a court of competent jurisdiction in the course of your
employment with WWC or any of its subsidiaries, (iv) the breach by you
of the covenant set forth in paragraph nine, below, or (v) the material
breach by you of any other provision of this Letter Agreement which
continues uncured for a period of thirty (30) days after notice thereof
by WWC. In the event of your voluntary
<PAGE> 36
Steve Burdette
Page 2
termination of employment with WWC, you will have no rights to severance
benefits.
(b) In the event of an involuntary termination for other than Cause
(which shall include your resignation as a direct result of (i) a
reduction in your base compensation and/or incentive bonus target
percentage, or (ii) the material breach by the Company of any provision
of this Letter Agreement which continues uncured for a period of thirty
(30) days after notice thereof by you), then (A) you will be entitled to
receive a severance payment in an amount equal to your accrued but
unpaid existing annual targeted incentive bonus through the date of
termination, 6 months of your then base compensation and an amount equal
to 6 months of your existing annual targeted incentive bonus; (B) WWC
will, at its expense, make all COBRA benefit payments on behalf of you
and your dependents for six (6) months following such involuntary
termination; and (C) with respect to any stock options previously
granted to you by WWC which remain unvested at the time of the
involuntary termination, notwithstanding the vesting language in the
stock option agreement pursuant to which such options were granted,
there shall be immediate vesting of that portion of each such grant of
unvested stock options as equals the product of the total number of such
options under such grant which remain unvested multiplied by a fraction
the numerator of which is the sum of (i) the number of days from the
date on which the last vesting of options under such grant took place to
and including the date on which the termination occurs plus (ii) 183 and
the denominator of which is the number of days remaining from the date
on which the last vesting of options under such grant took place to and
including the date on which the final vesting under such grant would
have occurred.
Your death or permanent disability will be deemed an involuntary
termination for other than Cause. "Permanent disability" shall mean your
inability substantially to render the services required hereunder for
eight (8) months in any eighteen (18) month period because of a physical
or mental condition, it being understood that until you have received
notice from WWC terminating this Letter Agreement, you will continue to
receive your base compensation and all other benefits to which you are
entitled under this Letter Agreement.
(c) You agree that upon termination of your employment by WWC for any
reason you will surrender to WWC all proprietary records, lists and
other documents obtained by you or entrusted to you during the course of
your employment by WWC, together with all copies of all such documents.
8. You agree not to disclose at any time, whether during the term of this
Letter Agreement or thereafter, any secret or confidential information
relating to WWC's or any of its subsidiaries' businesses, financial
condition or prospects, which information you have obtained while
employed by WWC or by any of its subsidiaries or any of the predecessors
in interest of any of them, except (i) as may be required in furtherance
of the businesses of WWC or of any of its subsidiaries, (ii) with WWC's
express prior written consent, (iii) if such information is made
generally available to the public through no fault of yours, or (iv) if
such disclosure is required by applicable law or regulation or by legal
process and then only with prompt written notice to WWC in advance of
any such disclosure.
9. You agree that, during the term of your employment by WWC and for a
period of one (1) year immediately following the termination of your
employment with WWC for any reason whatsoever, you will not, either
directly or indirectly, for compensation or any other consideration,
individually or as an employee, broker, agent, consultant, lender,
contractor, advisor, solicitor, stockholder (provided that ownership of
5% or less of the outstanding stock of any corporation listed on a
national securities exchange is not prohibited), proprietor, partner, or
person having any other material
<PAGE> 37
Steve Burdette
Page 3
economic interest in, affiliated with or rendering services to any other
entity, engage in or provide services to or for a business that is
substantially the same as or similar to WWC's or its subsidiaries'
businesses and which competes within the applicable commercial mobile
radio services markets serviced by WWC or its subsidiaries, directly or
indirectly.
10. This Letter Agreement contains the entire agreement between you and WWC
with respect to your employment by WWC, other than human resource and
corporate policies which are to be executed by all employees. This
Letter Agreement may not be amended, waived, changed, modified or
discharged except by an instrument in writing executed by or on behalf
of you and WWC.
11. All notices, requests, demands and other communications with respect to
this Letter Agreement will be in writing and will be deemed to have been
duly given if delivered by hand, registered or certified mail (first
class postage and fees prepaid, return receipt requested), telecopier or
overnight courier guaranteeing next-day delivery, as follows:
a) to WWC:
Western Wireless Corporation
3650 - 131st Avenue SE, #400
Bellevue, Washington 98006
Attention: President
Telecopier: (425) 586-8010
b) to you:
Steve Burdette
3023 S. Atlantic Ave. #505
Daytona Beach Shores, FL 32118
and/or to such other persons and addresses as either you or WWC has
specified in writing to the other by notice as aforesaid.
12. If any part of this Letter Agreement is hereafter construed to be
invalid or unenforceable in any jurisdiction, the same will not affect
the remainder of the Letter Agreement or the enforceability of such part
in any other jurisdiction, which will be given full effect, without
regard to the invalid portions or the enforceability in such other
jurisdiction. If any part of this Letter Agreement is held to be
unenforceable because of the scope thereof, you and WWC agree that the
court making such determination will have the power to reduce the
duration and/or area of such provision and, in its reduced form, said
provision shall be enforceable; provided, however, that such court's
determination will not affect the enforceability of this Letter
Agreement in any other jurisdiction beyond such court's authority.
13. This Letter Agreement will be governed by and construed and interpreted
in accordance with the laws of the State of Washington without reference
to conflicts of laws principles.
Please signify your acceptance of the terms of this Letter Agreement by signing
where indicated below.
<PAGE> 38
Steve Burdette
Page 4
Sincerely yours,
WESTERN WIRELESS CORPORATION
------------------------------------
/s/ Mikal Thomsen
Title: President
------------------------------
AGREED TO AND ACCEPTED:
- ----------------------------------
/s/ H. Stephen Burdette
<PAGE> 1
EXHIBIT 10.91
LICENSE AND SERVICES AGREEMENT
BETWEEN
WESTERN WIRELESS CORPORATION
AND
AMDOCS (UK) LIMITED
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. SCOPE AND DEFINITIONS..............................................................................2
1.1 SCOPE...........................................................................................2
1.2 DEFINITIONS.....................................................................................2
2. PURPOSE OF AGREEMENT...............................................................................6
2.1 PURPOSE OF AGREEMENT............................................................................6
3. PRODUCT LICENSE....................................................................................7
3.1 GRANT OF LICENSE................................................................................7
3.2 USE OF LICENSE..................................................................................7
3.3 SOURCE/OBJECT CODE..............................................................................7
3.4 DOCUMENTATION...................................................................................8
3.5 WARRANTIES......................................................................................8
3.7 MAINTENANCE....................................................................................10
3.8 LICENSE FEES...................................................................................10
3.9 PAYMENT OF THE LICENSE FEE.....................................................................12
4. PROJECT PLAN......................................................................................13
4.1 PHASES OF IMPLEMENTATION OF THE CUSTOMIZED PRODUCT.............................................13
4.2 DFD PROCEDURE..................................................................................13
4.3 CUSTOMIZATION AND CUSTOMIZATION ACTIVITIES.....................................................14
4.4 IMPLEMENTATION ACTIVITIES......................................................................15
4.5 SUPPORT SERVICES...............................................................................15
4.6 ACCEPTANCE TESTING.............................................................................15
4.7 ON-GOING SUPPORT...............................................................................16
4.8 CHANGE REQUEST PROCEDURE.......................................................................16
4.9 PROJECT MANAGEMENT.............................................................................17
5. MAINTENANCE SERVICES..............................................................................18
5.1 MAINTENANCE SERVICES...........................................................................18
5.2 MAINTENANCE FEE................................................................................19
6. HARDWARE AND THIRD PARTY SOFTWARE.................................................................20
6.1 PLATFORM.......................................................................................20
6.2 PLATFORM PURCHASE..............................................................................20
6.3 PLATFORM WARRANTY AND MAINTENANCE..............................................................20
7. PAYMENT...........................................................................................21
7.1 RATES AND RELATED PAYMENTS.....................................................................21
7.2 INVOICING STANDARD.............................................................................21
7.3 PAYMENT IN ARREARS.............................................................................21
7.4 PRICE PROTECTION...............................................................................22
7.6 TAXES..........................................................................................22
8. GENERAL TERMS AND CONDITIONS......................................................................23
8.1 TERM OF THE AGREEMENT..........................................................................23
8.2 ORDERS.........................................................................................23
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
8.3 INTELLECTUAL PROPERTY RIGHTS...................................................................24
8.4 TITLE..........................................................................................24
8.5 CONFIDENTIALITY................................................................................24
8.6 ENTICEMENT OF STAFF............................................................................25
8.7 WORK RULES AND ACCESS TO FACILITIES............................................................25
8.8 NO WAIVER......................................................................................26
8.9 LIABILITY......................................................................................26
8.10 CONFLICT OF INTEREST........................................................................27
8.11 FORCE MAJEURE...............................................................................27
8.12 SEVERABILITY................................................................................27
8.13 ENTIRE AGREEMENT AND CHANGES................................................................28
8.14 TERMINATION.................................................................................28
8.15 GOVERNING LAW, ESCALATION PROCEDURE AND ARBITRATION.........................................30
8.16 INDEPENDENT CONTRACTOR......................................................................31
8.17 ASSIGNMENT AND SUBCONTRACTS.................................................................31
8.18 INTELLECTUAL PROPERTY RIGHTS INDEMNITY......................................................33
8.19 SURVIVAL OF OBLIGATIONS.....................................................................33
8.20 HEADINGS NOT CONTROLLING....................................................................33
8.21 NOTICES.....................................................................................34
8.22 SUCCESSORS AND ASSIGNEES....................................................................34
8.23 NO THIRD PARTY BENEFICIARIES................................................................34
8.24 AUTHORITY...................................................................................35
8.25 EXECUTION OF THE AGREEMENT..................................................................35
</TABLE>
APPENDIX 1-- ORDER NO. 1 (LICENSE AND SERVICES)
APPENDIX 2 -- ORDER NO. 2 (MAINTENANCE SERVICES)
APPENDIX 3 -- FORM OF OGS SERVICES ORDER
EXHIBIT A -- RATES AND EXPENSES
EXHIBIT B -- CONFIDENTIALITY AGREEMENT BETWEEN AMDOCS AND COMPANY
EXHIBIT C -- CONFIDENTIALITY AGREEMENTS WITH THIRD PARTY SUBCONTRACTORS
<PAGE> 4
Ann. A to Exh. C
LICENSE AND SERVICES AGREEMENT
THIS LICENSE AND SERVICES AGREEMENT ("Agreement") is made as of the 2nd day of
August, 1999 by and between:
WESTERN WIRELESS CORPORATION, a corporation incorporated under the laws of the
State of Washington, having offices at 3650 131st Ave. SE, Ste. 400, Bellevue,
Washington 98006, USA (hereinafter referred to as "COMPANY"); and
AMDOCS (UK) LIMITED, a company incorporated under the laws of England, having
offices at Grand Building, 1-3 Strand, London WC2 N5EJ, England (hereinafter
referred to as "AMDOCS").
WHEREAS AMDOCS is interested in licensing to COMPANY the use of AMDOCS'
proprietary software products that are part of AMDOCS' sets of
information systems known as the Ensemble, in providing to COMPANY the
Customization Services, Support Services and Maintenance Services
related to such software products, and in providing to COMPANY related
third party hardware and software products, and has the right to do
so, all pursuant to the terms and subject to the conditions of this
Agreement; and
WHEREAS COMPANY is engaged in the business of providing wireless
telecommunications services, and wishes to enter into an agreement
with AMDOCS which will give COMPANY the right to purchase a license
for the use of software products that are part of the Ensemble, as
well as related Customization Services, Support Services and
Maintenance Services, and related third party hardware and software
products; and
WHEREAS in accordance with this Agreement and Order Nos. 1 and 2, attached
hereto as Appendices 1 and 2 and made an integral part hereof, AMDOCS
is providing to COMPANY, and COMPANY is acquiring from AMDOCS, the
licenses, Customization Services, Support Services and Maintenance
Services and third party hardware and software products specified in
those Orders; and
WHEREAS AMDOCS and COMPANY agree that this Agreement will also provide a
framework that will enable COMPANY to acquire from AMDOCS additional
licenses, services, and third party hardware and software products,
all pursuant to orders to be placed with AMDOCS in accordance with the
terms and subject to the conditions of this Agreement;
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
<PAGE> 5
1. SCOPE AND DEFINITIONS
1.1 SCOPE
For purposes of this Agreement, all terms defined herein shall have
the meanings so defined unless the context clearly indicates
otherwise. A term defined in the singular shall include the plural and
vice versa when the context so indicates. References to Sections,
Appendices and Exhibits are to sections, appendices and exhibits of
and to this Agreement, except in any Order when references to Sections
are to sections of the relevant Order, unless specified otherwise.
1.2 DEFINITIONS
1.2.1 ACCEPTANCE TEST; ACCEPTANCE TESTING; ACCEPTANCE
"Acceptance Tests", "Acceptance Testing" and "Acceptance" are as
defined in Section 4.6.
1.2.2 AMDOCS AFFILIATE
"Amdocs Affiliate" means a company that controls, is controlled by, or
is under common control with AMDOCS, where "control" means the holding
of more than fifty percent (50%) of equity ownership.
1.2.3 ARBITRATOR
"Arbitrator" is as defined in Section 8.15.3.
1.2.4 AUTHORIZED SUBCONTRACTORS
"Authorized Subcontractors" are as defined in Section 8.17.3.
1.2.5 BILLING PERIOD
"Billing Period" is as defined in Section 7.2.1.
1.2.6 COMPANY AFFILIATE
"COMPANY Affiliate" means a company that controls, is controlled by,
or is under common control with COMPANY, where "control" means the
holding of more than fifty percent (50%) of equity ownership, or a
joint venture or similar business relationship in which COMPANY has an
interest and in which COMPANY is responsible for producing bills.
<PAGE> 6
1.2.7 CUSTOMIZATION
"Customization" means the modifications, additions or changes to the
Licensed Products, as set forth in the DFS attached to or referenced
in the applicable Order, prior to Acceptance (as defined hereinbelow).
1.2.8 CUSTOMIZATION SERVICES
"Customization Services" are as defined in Section 4.3.1.
1.2.9 CUSTOMIZED PRODUCT
"Customized Product" means the software modules required for operation
of the Licensed Products to satisfy COMPANY's business needs and
purposes, as shall be specified in the relevant DFS documents annexed
to or referenced in applicable Orders from time to time, whether of
generic nature or as specifically developed for COMPANY. "Customized
Product" also refers to any part thereof.
1.2.10 DAD
"DAD" means Detailed Architectural Design.
1.2.11 DFD
"DFD" means the Detailed Functional Design phase of implementation of
the Licensed Product, in which the specifications of the Customized
Product designed to meet the business needs and requirements of
COMPANY will be identified and then detailed in the DFS documents.
1.2.12 DFS
"DFS" means the Detailed Functional Specifications, which are the
direct result of the DFD.
1.2.13 ENSEMBLE
"Ensemble" means AMDOCS' proprietary wireless, long-distance, paging,
and other software products that exist from time to time.
1.2.14 ILF
"ILF" means the Initial License Fee, as defined in Section 3.7.1 and
determined in accordance with Section 3.7.2.
<PAGE> 7
1.2.15 INDEX
"Index" is as defined in Section 7.4.
1.2.16 INSTALLATION SITE
"Installation Site" means the building location(s), specified by
COMPANY, at which the Customized Product will reside.
1.2.17 INTELLECTUAL PROPERTY RIGHTS
"Intellectual Property Rights" means patents, trademarks, trade names,
copyrights, trade secrets, rights of privacy, rights of publicity, and
other intellectual property and proprietary rights registered or
enforceable in North America. and/or the United Kingdom.
1.2.18 LICENSE FEES
"License Fees" means the license fees payable to AMDOCS in accordance
with Section 3.7 hereunder and the applicable Order.
1.2.19 LICENSED PRODUCTS
"Licensed Products" means the software modules which comprise the
generic software products of AMDOCS which are part of the Ensemble.
"Licensed Product" also refers to any part thereof when the context so
requires.
1.2.20 MAINTENANCE FEE
"Maintenance Fee" is as defined in Section 5.2.1.
1.2.21 MAINTENANCE PERIOD
"Maintenance Period" means, initially, the term commencing upon
expiration of the Warranty Period and ending one year later, and
thereafter, each subsequent term of one (1) year.
1.2.22 MAINTENANCE SERVICES
"Maintenance Services" means those services defined in Section 5.1.1
and to be provided by AMDOCS pursuant to Section 5 and an applicable
Order.
1.2.23 OGS
"OGS" means ongoing support, as defined in Section 4.7.1.
<PAGE> 8
1.2.24 OGS SERVICES
"OGS Services" are as defined in Section 4.7.3.
1.2.25 ORDER
"Order" means a COMPANY document issued under Section 8.2, executed,
confirmed or acknowledged in writing by both parties ordering a license
to use a Licensed Product, a Customized Product, Customization
Services, Support Services or Maintenance Services, or any combination
thereof.
1.2.26 PLATFORM
"Platform" means the hardware and any third party's system software,
upon and in conjunction with which the Customized Product, will operate
and which, pursuant to Section 6.1, will be installed by COMPANY in a
detailed configuration to be mutually agreed upon by AMDOCS and COMPANY
and to be specified in the DAD document.
1.2.27 SLF
"SLF" means Subsequent License Fee, as defined in Section 3.7.1 and
determined in accordance with Sections 3.7.4 and 3.7.5.
1.2.28 SUBSCRIBER
"Subscriber" means any person or entity that has been assigned,
directly or indirectly by COMPANY, a unique number for a wireless,
long-distance, CLEC, ISP, data, paging or other telecommunications
service (or combination thereof ) that is billed by COMPANY through the
Customized Products. Each Subscriber shall be counted only as one,
regardless of the number of services and type of service that COMPANY
provides to such Subscriber, unless such Subscriber is assigned,
directly or indirectly by COMPANY, more than one unique number for any
particular service, in which case the number of Subscribers shall equal
the number of unique numbers assigned by COMPANY. "Subscriber" shall
not include any prepaid service accounts, or subscription for a
service, telecommunications access line, service, or number that was
disconnected for more than one (1) month. Actual Subscriber count will
be verified by COMPANY's annual financial audit.
1.2.29 SUCCESSOR
"Successor" shall have the meaning set forth in Section 8.17.2.
1.2.30 SUPPORT SERVICES
"Support Services" are as defined in Section 4.5.1.
<PAGE> 9
1.2.31 TERMINATE OR TERMINATION
"Terminate" or "Termination" means the ending by COMPANY of this
Agreement or any Order issued hereunder in accordance with Section
8.14.
1.2.32 TERRITORY
"Territory" means North America.
1.2.33 VERIFICATION DATE
"Verification Date" is as defined in Section 3.7.4.
1.2.34 WARRANTY; WARRANTY PERIOD
"Warranty" and "Warranty Period" are as defined in Section 3.5.1.
2. PURPOSE OF AGREEMENT
2.1 PURPOSE OF AGREEMENT
2.1.1 The purpose of this Agreement is to provide a framework which will,
subject to the terms and conditions of this Agreement, give COMPANY the right to
acquire from AMDOCS licenses to the Licensed Products and the related Customized
Products, Customizations, Customization Services, Maintenance Services and
Support Services.
2.1.2 Licenses or services of AMDOCS hereunder will be provided pursuant to
Orders issued by COMPANY and accepted by AMDOCS (in accordance with the
procedures specified in Section 8.2 and the other applicable terms and the
conditions of this Agreement). Each Order will relate to the specific Licensed
Product(s), Customized Products, Customization Services, Support Services or
Maintenance Services as set out in Sections 3.1, 4.3, 4.5 and 5, respectively.
Accordingly, and pursuant thereto, AMDOCS will provide COMPANY with the ordered
license(s), Customization Services, Maintenance Services and Support Services as
requested by COMPANY.
2.1.3 In addition to the above, COMPANY shall, except as provided herein,
purchase, through AMDOCS, hardware components and standard third party's system
software comprising parts of the Platform, and AMDOCS shall sell the same in
accordance with and subject to the provisions of Section 6 and pursuant to an
Order to be issued by COMPANY and accepted by AMDOCS.
<PAGE> 10
3. PRODUCT LICENSE
3.1 GRANT OF LICENSE
Subject to the terms and conditions of this Agreement and the
applicable Order(s) issued by COMPANY hereunder, AMDOCS shall grant to
COMPANY a perpetual, non-exclusive and non-transferable (except as
provided herein) license to use the Licensed Product(s) and/or the
Customized Product(s) specified in such Order(s) in accordance with the
provisions of this Agreement and the applicable Order, provided that
the applicable fees are fully paid in accordance herewith. COMPANY has
ordered a license for the Licensed Products, the Customized Products,
and for related Customization Services and Support Services as
specified in Order No. 1 (attached hereto as Appendix 1).
3.2 USE OF LICENSE
3.2.1 COMPANY hereby agrees to accept the license granted by AMDOCS under the
specific Order(s) for the Licensed Product(s) and/or the Customized Product(s),
to pay the License Fees specified therein, and to exercise such license only in
accordance with the terms and conditions of this Agreement and the applicable
Order.
3.2.2 COMPANY shall use each Licensed Product(s) and/or Customized Product(s)
and all the information related thereto solely for COMPANY's businesses in
accordance with the terms and conditions of this Agreement. COMPANY shall not
use for or sublicense to any third party the Licensed Products, the Customized
Product or any part thereof, and shall not allow their use by any third party
without AMDOCS' prior written consent. Notwithstanding the foregoing, COMPANY
Affiliates and COMPANY's Successor shall be entitled to order and use the
Licensed Products and the Customized Products, subject to full compliance in
writing by such COMPANY Affiliates and Successor with all the applicable terms
and conditions of this Agreement.
3.2.3 Company may use the Licensed Products and the Customized Products from
any of Company's data centers within the Territory and/or the UK to render bills
for Subscribers located outside the Territory and, in such event, shall receive
the full protection of AMDOCS' indemnification obligations under Section 8.17
for all such activities. In addition, if, but only if, AMDOCS advises Company in
writing that it is able to extend such indemnification obligation to a location
outside the Territory, Company shall be entitled to use the Licensed Products in
such location outside the Territory to render bills to Subscribers with the full
benefit of such indemnification obligations.
3.3 SOURCE/OBJECT CODE
AMDOCS will provide COMPANY, upon Acceptance of the Customized Product,
with all relevant source and object code of the Licensed Products and
Customized Products delivered by AMDOCS (including all new releases and
<PAGE> 11
versions of the same as they become available, and all support files,
configuration, and related components, not including third party
software, necessary for the operation and maintenance of the Licensed
Products and Customized Products.
3.4 DOCUMENTATION
AMDOCS will provide COMPANY with the associated documentation for the
Customized Product delivered under the applicable Orders hereunder in a
computer-readable format in English, as shall be specified in an annex
to the applicable Order.
3.5 WARRANTIES
3.5.1 Unless otherwise specified in an Order, AMDOCS will provide COMPANY
with a warranty for each Licensed Product (the "Warranty") for a period of six
(6) months after Acceptance of the Customized Product by COMPANY (the "Warranty
Period") by providing, at no cost to COMPANY, Maintenance Services as specified
in Section 5.1.3 for defects reported by COMPANY in writing during the Warranty
Period.
3.5.2 Year 2000 Compliance
a) AMDOCS warrants that the Licensed Product and Customized Product,
as further specified in the DFS, is "Year 2000 Compliant", which
means the Licensed Product and Customized Product are able to:
(One) correctly and unambiguously handle and process date
information before, during and after January 1, 2000.
This includes, but is not limited to, accepting date
input, providing date output, storing and retrieving
dates and the ability to perform calculations on dates
or portions of dates;
(Two) correctly process functions that are programmed to
commence and/or end on a particular date, including,
but not limited to month-end, year-end, leap year and
any combination thereof, irrespective of the change in
the century identifier;
(Three) function accurately and without interruption before,
during, and after January 1, 2000 without any change in
operations and/or parameters associated with the advent
of the new century; and
(Four) respond, in the manner to be defined in the DFS, to
two-digit year date input in a way that resolves the
ambiguity as to the century in a disclosed, defined and
predetermined manner; and to store and provide output
of date information in ways that are unambiguous as to
the century.
<PAGE> 12
b) COMPANY shall provide AMDOCS with a suitable testing environment
and data to enable AMDOCS to test the conformity of the
Customized Product with such warranty, in accordance with a
timetable agreed between the parties. Such environment should be
identical or substantially similar to COMPANY's overall
environment for all of COMPANY's activities.
c) In the event of any breach of the foregoing warranty, AMDOCS will
promptly correct, at no charge, any problems with respect to the
foregoing to achieve compliance therewith, provided the error is
reported to AMDOCS within the Warranty Period.
iv) AMDOCS does not make any representations or warranties as to the
ability of the Customized Product to be Year 2000 Compliant when used
or interfaced with other system(s), software, hardware, data or
equipment which is not Year 2000 Compliant or which does not have a
properly functioning wrapper allowing correct exchange of date-related
data, unless such a wrapper is part of the Customized Product.
Operability with external interfaces is subject to be predefined in the
DFS and in accordance therewith. Furthermore, the Year 2000 warranties
above shall not apply in the event that the Platform or any module of
the Licensed Products or Customization is altered, modified or adjusted
in a manner that directly or indirectly affects Year 2000 compliance,
and such alteration, modification or adjustment is made by COMPANY or
any third party without AMDOCS' prior written consent.
AMDOCS will have no liability for the Year 2000 readiness of, or for
any Year 2000 defect or error or deficiency in any system, software or
service which is not provided by AMDOCS under this Agreement.
3.5.3 AMDOCS further represents and warrants to COMPANY as follows:
<PAGE> 13
3.5.3.1 AMDOCS owns or possesses all necessary licenses or other valid rights to
use and license all Licensed Products and Customized Products, and all Licensed
Products, Customized Products and Customizations shall not infringe or
misappropriate any Intellectual Property Right of any third party, and the
Customization Services, Maintenance Services and Support Services shall not
cause any such infringement or misappropriation or constitute unfair competition
of any kind.
3.5.3.2 The execution, delivery, and performance of this Agreement (i) have been
authorized by all necessary action, if any; (ii) do not violate any law, rule,
or regulation or the terms of any order, judgment, or decree to which AMDOCS is
subject, or the terms of any material agreement to which AMDOCS or any of its
assets may be subject; and (iii) are not subject to the consent, approval, or
other action of any third party.
3.5.3.3 This Agreement is a valid and binding obligation of AMDOCS, enforceable
against AMDOCS in accordance with its terms.
3.5.3.4 All Customization Services, Maintenance Services and Support Services
shall be performed in a professional manner, shall be of a high grade, nature,
and quality, and shall conform in all material respects with the requirements of
this Agreement and the Orders.
3.5.4 DISCLAIMER
THE FOREGOING WARRANTIES (AND ANY OTHER WARRANTIES EXPRESSLY SET FORTH
IN THIS AGREEMENT) ARE IN LIEU OF ALL OTHER WARRANTIES, WHETHER ORAL,
WRITTEN, EXPRESS, IMPLIED OR STATUTORY. THERE ARE NO OTHER WARRANTIES.
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND
ANY OTHER STATUTORY WARRANTIES OF ANY KIND ARE HEREBY WAIVED. COMPANY
EXPRESSLY AGREES THAT AMDOCS DOES NOT REPRESENT OR WARRANT THAT THE
LICENSED PRODUCTS OR THE CUSTOMIZED PRODUCTS WILL OPERATE ON COMPUTER
HARDWARE OR OPERATING SYSTEMS OTHER THAN THE PLATFORM.
3.6 MAINTENANCE
AMDOCS shall provide to COMPANY Maintenance Services in accordance with
the provisions of Section 5 and an applicable Order.
3.7 LICENSE FEES
3.7.1 The License Fee to be paid by COMPANY for the license to use a Licensed
Product and related Customized Product(s) will be specified in the applicable
Order. The License Fee shall be comprised of an Initial License Fee ("ILF") and
Subsequent License Fee ("SLF").
<PAGE> 14
3.7.2 The ILF for a use of a Licensed Product by COMPANY inside the Territory
and related Customized Product(s) will be determined based on the number of
Subscribers in the Territory for which COMPANY desires to acquire the right to
use such Licensed Product and related Customized Product(s) at the time an Order
for that Licensed Product and related Customized Product(s) is issued, but not
less than the actual number of COMPANY's Subscribers at such time, as
represented by COMPANY to AMDOCS and specified in the Order for the Licensed
Product and related Customized Products. The license fee is a cumulative fee
comprised of the relevant base fee and incremental fees for the relevant number
of Subscribers.
3.7.3 The ILF for a use of a Licensed Product by COMPANY in any market outside
the Territory will be based on the number of Subscribers in such market at the
time the Licensed Product is first used. In the event that such a market
contains more than 100,000 Subscribers, then COMPANY shall pay ILF as calculated
in Order No. 1 and shall pay SLF at a rate of 85% of the SLF table as specified
in Order No. 1. In the event that the number of Subscribers in such a market is
less than or equal to 100,000, then COMPANY: (i) shall not be required to pay
ILF, and (ii) shall pay SLF for the actual number of such Subscribers at the SLF
rate table in Order No. 1; provided, however, that such rates shall commence
from the first such Subscriber upwards, rather than commencing at 800,000
Subscribers, and shall be calculated in accordance with 85% of the SLF table in
Order No. 1, always commencing with a deemed 800,000 subscribers and adding the
actual number of Subscribers. The number of Subscribers shall be calculated
annually in accordance with Section 3.8.4.
3.7.4 COMPANY's number of Subscribers (as specified in the applicable Order for
a Licensed Product and related Customized Product(s) and/or Customizations) will
be reviewed annually, commencing on the first business day after issuance of
COMPANY's annual financial statements following execution of such Order but not
later than April 15th of each year (the "Verification Date"). The number of
Subscribers as of each Verification Date shall be notified by COMPANY to AMDOCS,
and certified to AMDOCS by COMPANY's independent auditors within sixty (60) days
of the Verification Date. COMPANY will ensure that such certification shall be
made directly by such auditors to AMDOCS within such sixty (60) day period.
3.7.5 If the number of COMPANY's Subscribers at the time of such annual review,
as compared to the number of Subscribers at the later of the time the Order for
the Licensed Product was issued or as at the previous Verification Date has
increased, then COMPANY will pay AMDOCS SLF in accordance with such increase
unless otherwise specified an applicable Order. The amount of SLF to be paid,
based on increments of increased numbers of Subscribers, will be specified in
such Order.
3.7.6 The license fees for a COMPANY Affiliate that uses a Licensed Product will
be based on the number of Subscribers of such COMPANY Affiliate on the date the
applicable Licensed Product is first used (the "Affiliate Subscribers"). If the
number of Affiliate Subscribers is greater than the number of COMPANY
Subscribers on the last
<PAGE> 15
Verification Date, then the COMPANY Affiliate shall be required to pay ILF and
SLF as specified in Order No. 1. If the number of Affiliate Subscribers is less
than or equal to the number of COMPANY Subscribers on the last Verification
Date, then such COMPANY Affiliate (i) shall not be required to pay ILF, and (ii)
shall pay SLF for the number of Affiliate Subscribers, as specified in Order No.
1.
3.7.7 A COMPANY Successor that uses a Licensed Product will not be required to
pay any additional license fees in order to continue to use the Licensed Product
(except for the normal Subsequent License Fees provided for herein); provided,
however, that such COMPANY Successor may only use such Licensed Product in the
locations in which COMPANY and its Affiliates are using the Licensed Product at
the time the rights of COMPANY under this Agreement are assigned to COMPANY
Successor. If COMPANY Successor desires to use the Licensed Product in locations
other than those used by COMPANY and its Affiliates at the time the rights of
COMPANY under this Agreement are assigned to COMPANY Successor, COMPANY
Successor will be required to pay an additional license fee as mutually agreed
between COMPANY Successor and AMDOCS.
3.7.8 Upon reasonable prior notice, AMDOCS shall have the right, once annually,
through an independent auditor to be appointed by AMDOCS at AMDOCS' expense, to
audit during normal business hours COMPANY's records relating to COMPANY's
number of Subscribers. If the number of Subscribers revealed by such annual
audit is five (5%) percent or more than the number provided to AMDOCS by
COMPANY's annual audit, then without derogating from AMDOCS' rights hereunder,
COMPANY shall pay SLF in accordance with the results and reimburse AMDOCS the
costs of such independent audit.
3.8 PAYMENT OF THE LICENSE FEE
3.8.1 The ILF for each Licensed Product will be paid by COMPANY pursuant to the
payment schedule specified in each applicable Order.
3.8.2 Unless otherwise specified in an applicable Order, COMPANY will pay SLF in
its entirety to AMDOCS no later than sixty (60) days following the Verification
Date, in accordance with the provisions of Sections 3.7.4 and 3.7.5.
3.8.3 Upon expiration or other termination of this Agreement, COMPANY's
obligation to pay ILF and SLF shall expire.
<PAGE> 16
4. PROJECT PLAN
4.1 PHASES OF IMPLEMENTATION OF THE CUSTOMIZED PRODUCT
4.1.1 The timetable and the phases for the implementation of the Customized
Product specified in an Order will be agreed upon between the parties and
specified in writing to be annexed to the DFS.
4.1.2 The parties will also agree
on an implementation plan, roles and responsibilities for tasks, dependencies
between tasks and time schedules. Specific implementation tasks will be
allocated to COMPANY and AMDOCS personnel as shall be agreed upon between the
parties. COMPANY acknowledges that its implementation work is a pre-condition
for AMDOCS' preparation of the Customized Product for installation and
Acceptance Testing.
4.2 DFD PROCEDURE
4.2.1 AMDOCS and COMPANY shall jointly carry out the DFD procedure. AMDOCS'
services with respect to the DFD shall be ordered by COMPANY by issuing an
Order.
4.2.2 During the DFD, the parties shall:
a) verify the functionalities for the Customized Product designed to
meet COMPANY's business needs. Such functionalities will be
specified in the DFS; and
b) determine the detailed hardware and third party's system software
configurations required to meet COMPANY performance needs from the
Customized Product in accordance with the DFS, based upon the
information provided by COMPANY to AMDOCS. Such configuration shall
be set forth in the DAD document.
4.2.3 At the conclusion of the DFD, AMDOCS shall submit the DFS to COMPANY for
COMPANY's approval. COMPANY agrees to respond to all of AMDOCS' requests in a
timely manner, and to review and make commercially reasonable efforts to either
approve or reject the DFS within fourteen (14) days of submission. In the event
that COMPANY rejects the DFS or any part thereof, COMPANY shall promptly provide
to AMDOCS a detailed written list of the rejected items and explanations for the
reasons for rejection of such items. The parties acknowledge that failure to
approve or reject the DFS within that time period may jeopardize compliance with
the project timetable agreed between the parties.
<PAGE> 17
4.3 CUSTOMIZATION AND CUSTOMIZATION ACTIVITIES
4.3.1 AMDOCS, as part of its services for providing COMPANY with the
Customization ("Customization Services," as specified in Section 4.3.2), shall
modify the Licensed Products to create the Customized Product in accordance with
the DFS and the applicable Order. Details of the Customization shall be
determined during the DFD and specified in the DFS. Customization Services shall
be ordered by COMPANY by issuing an Order. COMPANY has ordered Customization
Services pursuant to Order No. 1 (attached hereto as Appendix 1).
4.3.2 The Customization Services include the following activities:
a) Detailed Programming Design (DPD), which is the technical design for
implementing the functions specified for the Customized Product,
including the adjustments to the Database ERD and the Customized
Product documentation;
b) Programming, testing and documenting changes to the Licensed
Products as required to produce the Customized Product in accordance
with the DFS;
c) Programming, testing and documenting the Database ERD as required to
produce the Customized Product;
d) Preparation and delivery of software documentation for the
Customized Product on or before installation;
e) Provision of the source code of the Customized Product;
f) Designing, documenting and executing a modular test for each module
of the Customized Product;
g) Designing, documenting and executing an integration system test of
the Customized Product; and
h) Delivery of the Customized Product.
i) Configuring, optimizing, and documenting the production environment
for efficient operation of the system.
j) Development and delivery of technical and user training materials
suitable for the initial training of system users and technical
Information Technology support personnel.
<PAGE> 18
4.4 IMPLEMENTATION ACTIVITIES
AMDOCS will assume overall responsibility for the implementation
activities; provided, however, that COMPANY and AMDOCS will each
perform their respective tasks required for implementation of the
Customized Product at COMPANY, in accordance with the roles and
responsibilities document to be attached as an annex to each applicable
Order.
4.5 SUPPORT SERVICES
4.5.1 During the term of this Agreement, COMPANY shall be entitled to request
from AMDOCS support services required for the implementation activities, the OGS
Services and any other software-related services required by COMPANY ("Support
Services", as described in greater detail in Section 4.7.)
4.5.2 Support Services shall be ordered by COMPANY by issuing an Order. COMPANY
has ordered Support Services pursuant to Order No. 1 (attached hereto as
Appendix 1).
4.6 ACCEPTANCE TESTING
4.6.1 COMPANY will perform with respect to the Customized Product delivered
hereunder acceptance testing procedures ("Acceptance Testing" or "Acceptance
Tests"), during a period of thirty (30) consecutive days, to ascertain whether
the Customized Product operates in accordance with the DFS. COMPANY will develop
and define the Acceptance Testing procedures to be used. AMDOCS will assist
COMPANY in developing an applicable Acceptance Testing plan in accordance and
consistent with the DFS. Such user Acceptance Testing plan will be utilized
during the Acceptance Testing procedures and may be modified as necessary in the
COMPANY's reasonable judgement to determine if the Customized Product operates
in accordance with the DFS. Acceptance Testing will commence within ten (10)
days of the date AMDOCS notifies COMPANY of the installation of the Customized
Product.
4.6.2 On a date prior to performance of Acceptance Testing, to be agreed between
the parties, but no later than sixty (60) days prior to the scheduled
installation of the Customized Product for Acceptance Testing (unless otherwise
agreed by the parties), COMPANY will provide AMDOCS with data for conversion
purposes, and AMDOCS and COMPANY shall perform such conversion of data in
accordance with their respective activities as set forth in the roles and
responsibilities document attached to the applicable Order.
4.6.3 During the Acceptance Testing, COMPANY will notify AMDOCS promptly in
writing of any inconsistency(ies) with the DFS found by COMPANY, and AMDOCS, as
part of its Customization Services, will correct such inconsistency(ies) and
AMDOCS will deliver and implement the resulting corrections. The Customized
Product shall be
<PAGE> 19
accepted ("Accepted" or "Acceptance"):
(i) when COMPANY determines and notifies AMDOCS in writing that such
Customized Product meets the requirements of the user Acceptance
Testing plan referred to in Section 4.6.2 in all material aspects,
such Acceptance cannot be unreasonably withheld; or
(ii) if COMPANY commences operational use of the Customized Product,
then (a) COMPANY shall provide a list of errors to AMDOCS, and AMDOCS
shall correct such errors promptly; (b) Acceptance shall occur on the
earlier of the expiration of ninety (90) days of operational use or
upon AMDOCS' correction of substantially all such errors identified by
COMPANY; and (c) notwithstanding anything to the contrary in this
Agreement, the Warranty Period shall be extended by one half (1/2) of
the time between the commencement of operational use and Acceptance.
4.6.4 AMDOCS will assist COMPANY with respect to Acceptance Testing and
preparations thereto by providing Support Services as ordered by COMPANY in
accordance with the applicable Order.
4.7 ON-GOING SUPPORT
4.7.1 Prior to commencement of Acceptance Testing of the Customized Product,
COMPANY will set up an on-going support ("OGS") team to be chaired by the head
of COMPANY's Information Technology Department and comprised of COMPANY and
AMDOCS personnel who are acquainted with the Customized Product, subject to
Section 4.7.3.
4.7.2 The head of COMPANY's Information Technology Department will be
responsible for contact with AMDOCS in respect of AMDOCS' undertakings to
provide Maintenance Services and OGS activities as specified herein. It is the
parties' intention that the OGS team will function as an intermediary between
AMDOCS and the various persons/users in COMPANY, collecting and providing AMDOCS
with as much relevant information as reasonably possible regarding any reported
error, its occurrence and its impact.
4.7.3 During the term of this Agreement, COMPANY shall be entitled to request
from AMDOCS services with respect to OGS activities and personnel for the OGS
team ("OGS Services"). OGS Services shall be ordered by COMPANY by issuing an
Order in writing from COMPANY's head of Information Technology Department.
COMPANY shall be entitled to order OGS Services pursuant to the form of Order
attached hereto as Appendix 3.
4.8 CHANGE REQUEST PROCEDURE
The parties agree that it is in their mutual interest to minimize the
changes made to the Licensed Products. Requests by COMPANY for changes
to the Licensed
<PAGE> 20
Products not initially considered by the parties as part of the scope
of the Customized Product or Customization Services to be provided
hereunder or changes after the approval of the DFS will be deemed to
be a Change Request. For this purpose, the parties agree that Change
Requests may be made by COMPANY, but only subject to the following
procedure:
4.8.1 The parties will establish a joint committee to deal with any Change
Request;
4.8.2 Every Change Request will be submitted in writing by COMPANY to AMDOCS
including a detailed description of the change and the reason for it, and shall
be signed by the head of COMPANY's IT department;
4.8.3 AMDOCS will review such Change Request and provide COMPANY with an initial
cost estimate and anticipated schedule and Platform changes as a result of
implementing such change;
4.8.4 COMPANY will then decide whether to implement the change or ask AMDOCS to
perform a detailed design relating to such a change in order to provide COMPANY
with a more refined cost estimate and schedule change; and
4.8.5 All AMDOCS activities relating to Change Requests (including the
implementation of such changes) will be considered Support Services. AMDOCS
shall undertake no work unless authorized in writing by the head of COMPANY's
Information Technology Department.
4.9 PROJECT MANAGEMENT
COMPANY and AMDOCS will each designate a Project Manager to coordinate
the work to be performed under this Agreement and Orders issued and
accepted hereunder. With respect to each Order, AMDOCS may not replace
its Project Manager without the consent of COMPANY, which consent shall
not be unreasonably withheld. The Project Managers will meet on a
regular basis to discuss and review the progress of the work by both
parties under the applicable Orders.
<PAGE> 21
5. MAINTENANCE SERVICES
5.1 MAINTENANCE SERVICES
5.1.1 AMDOCS will provide maintenance services with respect to the Licensed
Products, consisting of correction of errors found in modules of the current
version of such products, provision of improvements, enhancements, modifications
and new releases (not including major new modules defined by AMDOCS as
separately priced components of the Licensed Product or the Ensemble modules),
and reasonable consultation by telephone ("Maintenance Services"), subject to
payment of the Maintenance Fees as set forth hereinafter. COMPANY shall order
Maintenance Services pursuant to an Order hereunder. COMPANY has ordered
Maintenance Services pursuant to Order No. 2 (attached hereto as Appendix 2).
5.1.2 Maintenance Services hereunder shall commence (provided an applicable
Order has been issued and accepted as aforesaid) upon expiration of the Warranty
Period. Maintenance Services hereunder shall be available during the term of
this Agreement, provided that all Maintenance Fees are duly paid, and further
provided there is no termination of the Maintenance Services during that period.
5.1.3 The procedure for error correction shall be as follows: the OGS team
(referred to in Section 4.7.1) shall be notified of the error condition
discovered; the OGS team will endeavor to determine the source of such error
condition, whether it is in the Platform, in one of the modules of the Licensed
Products, an operational error, or some other source; in the event that one of
the Licensed Products is the source for said error condition, the OGS team will
notify AMDOCS promptly of said error and provide AMDOCS, in reasonable detail,
with all the information obtained by it with respect to such error, in order to
assist AMDOCS to correct such error; AMDOCS will identify the cause for the
error and will provide the solution and programs required to correct such error
and to perform cleanup to the OGS team; the OGS team will run such programs to
(a) implement the correction and (b) implement any clean-up activity required.
If it is found that an error condition which was reported to AMDOCS is not an
error in the Licensed Product (unless otherwise specified in the applicable
Order, Maintenance Services are provided for the Licensed Product, only), AMDOCS
will have the right to charge COMPANY for the time spent in handling and
diagnosing the matter, at its hourly rates set out in Exhibit A.
5.1.4 The Warranty and the Maintenance Services shall apply to all modules of
the Licensed Products, including those that are altered, modified or adjusted in
any manner by COMPANY. In the event that any services are rendered by AMDOCS to
COMPANY resulting from or caused by modifications, alterations, or adjustments
of the Licensed Products that were not made by AMDOCS, then AMDOCS shall charge
COMPANY for such services at its hourly rates set out in Exhibit A. In the event
that COMPANY and AMDOCS enter into a joint project, then the portion of the
project for which AMDOCS shall provide Maintenance Services will be specified in
the Order.
<PAGE> 22
5.2 MAINTENANCE FEE
5.2.1 The consideration for the Maintenance Services ("Maintenance Fee") for
each Maintenance Period for which Maintenance Services are ordered by COMPANY
shall be an amount equal to the lower of: (i) fifteen percent (15%) of AMDOCS'
discounted License Fees for the applicable Licensed Product; or (ii) the
Maintenance Fee for the previous year plus ten percent (10%). The Maintenance
Fee for the first Maintenance Period shall be fifteen percent (15%) of AMDOCS'
discounted License Fees for the applicable Licensed Products. Notwithstanding
the foregoing, the annual Licensed Product Maintenance Fee for each COMPANY
Affiliate shall be an amount equal to fifteen percent (15%) of AMDOCS'
discounted License Fees for the applicable Licensed Product. On an ongoing
yearly basis, the calculation of the Maintenance Fee will take into account all
such License Fees, including ILF and SLF.
5.2.2 If under any applicable Order the Maintenance Services will include
services for the Customized Product, the Maintenance Fee will include, in
addition to the above annual Maintenance Fee, (i) ten (10%) percent of the
applicable Customization Services fees for the first three (3) years after the
end of the Warranty Period; and (ii) seven and one-half (7.5%) percent of the
applicable Customization Services fees for the next three (3) years; and (iii)
zero (0%) percent thereafter. The Maintenance Fees in this Section shall also
apply to separate modules of the Customized Product, until AMDOCS incorporates
such separate modules into the generic ENSEMBLE modules. At such time, even if
during the timeframes specified in sub-sections 5.2.2(i) and 5.2.2(ii), COMPANY
will not be required to pay Maintenance Fees for Maintenance Services for such
modules.
5.2.3 The Maintenance Fee for each Maintenance Period will be invoiced and paid
by COMPANY in advance in two (2) semi-annual equal installments, the first
payable on or before the commencement of the Maintenance Period and the second
within six (6) calendar months of the commencement of that Maintenance Period or
of the previous payment date, as the case may be.
5.2.4 If, for any reason, COMPANY did not request that Maintenance Services
commence upon conclusion of the Warranty or has terminated or not renewed a
Maintenance Services Order, or if, after some period of time during which
COMPANY does not request from AMDOCS Maintenance Services, COMPANY requests
AMDOCS to commence (or, as the case may be, to recommence) Maintenance Services,
AMDOCS, at its discretion and notwithstanding anything to the contrary herein,
may agree to provide such services.
<PAGE> 23
6. HARDWARE AND THIRD PARTY SOFTWARE
6.1 PLATFORM
COMPANY undertakes to install at the Installation Site(s) the Platform
as required for the installation and proper operation of the Customized
Product, in a detailed configuration to be mutually agreed upon by
AMDOCS and COMPANY and to be specified in an annex to the applicable
Order.
6.2 PLATFORM PURCHASE
COMPANY shall purchase through AMDOCS third party hardware and software
components comprising parts of the Platform; provided, however, that
AMDOCS shall not purchase such hardware and software without prior
written approval of COMPANY, and further provided that if COMPANY is
able to secure such hardware and software at a lower cost, COMPANY
shall have the option of making the purchase from the lower cost
provider. In the event that third party hardware and software
components are purchased through AMDOCS, AMDOCS will purchase
components through suppliers acceptable to COMPANY. Regardless of the
method of purchase, COMPANY shall retain title to all components
comprising the Platform.
6.3 PLATFORM WARRANTY AND MAINTENANCE
COMPANY acknowledges that the Platform warranty and maintenance are to
be supplied by the relevant manufacturers/vendors. All of the terms and
conditions governing the supply of such Platform, warranty and
maintenance shall be on such terms and conditions as agreed between
such manufacturers/vendors and COMPANY.
<PAGE> 24
7. PAYMENT
7.1 RATES AND RELATED PAYMENTS
7.1.1 Payment by COMPANY for all of AMDOCS' Licensed Products, Customization
Services and Support Services shall be as follows:
a) Licenses -- in accordance with Section 3.8;
b) Maintenance Services -- in accordance with Section 5.2.1
hereinabove; and
c) Customization Services and Support Services relating to the Licensed
Products to be used in the Territory-as specified in the applicable
Order, either on a fixed fee basis, or on a time and materials basis
in accordance with the rates specified in Section 1 of Exhibit A.
7.1.2 Unless otherwise specified in an applicable Order, COMPANY shall reimburse
AMDOCS for the travel and associated living expenses of AMDOCS' personnel
providing services relating to the Licensed Products to be used in the Territory
pursuant to this Agreement in accordance with the provisions of Sections 2 and 3
of Exhibit A to the extent that such expenses have been authorized in advance by
COMPANY.
7.2 INVOICING STANDARD
7.2.1 The License Fees and Maintenance Fee will be invoiced as provided for
hereinabove. Services provided by AMDOCS on a fixed fee basis will be invoiced
in accordance with the schedule contained in each applicable Order. Services
provided by AMDOCS on a time and materials basis will be invoiced in twelve (12)
invoices per year, each invoice to cover four (4) or five (5) whole weeks
("Billing Period").
7.2.2 At the end of each Billing Period, AMDOCS will submit to COMPANY an
invoice which will consist of the final amount due to AMDOCS for services
performed under this Agreement during the Billing Period. COMPANY will pay each
invoice submitted to it within sixty (60) days of its submission to COMPANY.
AMDOCS will issue invoices in U.S. dollars and all payments under this Agreement
will be made in U.S. dollars directly to AMDOCS' bank account (the details of
which will be provided in writing by AMDOCS to COMPANY).
7.3 PAYMENT IN ARREARS
Notwithstanding any other remedies available to AMDOCS under this
Agreement or under applicable law, payment in arrears shall bear
interest from the date invoice is received at the rate of two (2)
percent per annum above the prime rate of Chase Manhattan Bank as
quoted by the Wall Street Journal on the date of the applicable
invoice, unless the amount in arrears is disputed in good faith and
until such
<PAGE> 25
dispute is resolved. However, the undisputed amounts shall be paid by
COMPANY without delay as aforesaid and, if AMDOCS' claim for payment of
the disputed amount in arrears is resolved in favor of AMDOCS, COMPANY
shall pay AMDOCS said interest as if such unpaid amount was not
disputed at all. Additionally, and without affecting the foregoing,
COMPANY's failure to pay any undisputed payment under this Agreement
within one-hundred and twenty (120) days after such payment becomes due
shall be considered a material breach of this Agreement by COMPANY.
7.4 PRICE PROTECTION
The rates, payments and charges referred to in Section 7.1 and other
charges set forth in this Agreement and the Orders attached hereto are
fixed for one year from January 1st of each year. Upon ninety (90)
days' prior written notice to COMPANY, said rates, fees and charges may
be changed once in any period of one year in accordance with the annual
percentage change (related to the twelve month period preceding such
increase) in the U.S. Consumer Price Index-All Urban Consumers, U.S.
City Average, as published by the Bureau of Labor Statistics, U.S.
Department of Labor (the "Index") plus five percent (5%). However, if
the annual percentage change in the Bureau of Labor Statistics, U.S.
Department of Labor for computer software professionals will increase
fifteen (15%) percent above the Index, the parties will discuss a
larger increase. If the parties cannot agree on such larger increase,
the matter shall be resolved in the manner provided for in Section 8.15
for the settlement of disputes.
7.5 TAXES
AMDOCS' rates, fees and other charges set forth in the Agreement do not
include value added tax, sales tax, consumption tax and similar taxes
or duties as well as any city, municipal, state or corporate taxes or
any withholding taxes, whether currently imposed or to be imposed in
future, other than taxes due upon AMDOCS' net income or the Washington
State business and occupation tax. If any such tax or duty is found to
be applicable, the appropriate amount of tax or duty shall be invoiced
to and paid by COMPANY to AMDOCS at the same time and on the same
conditions as applied to the payment due.
<PAGE> 26
8. GENERAL TERMS AND CONDITIONS
8.1 TERM OF THE AGREEMENT
This Agreement shall become effective as of the date of execution
hereof by both parties and shall continue for a period of eight (8)
years unless terminated by mutual written consent of both parties or
ended otherwise as provided for in this Agreement.
8.2 ORDERS
8.2.1 The procurement by COMPANY from AMDOCS of licenses to use the Licensed
Products and related Customized Products, Customization Services, Maintenance
Services or Support Services hereunder shall be done by the issuance and
acceptance of Orders. Each Order shall be deemed to incorporate (1) the terms
and conditions of this Agreement, to the extent applicable; (2) the DFS
applicable to such Order, if any; and (3) any relevant subordinate documents
attached to or referenced in such Order.
8.2.2 Subject to the provisions of Section 8.13, each Order and this Agreement
shall constitute the entire agreement between COMPANY and AMDOCS relating to a
particular Order. However, in case of any inconsistency or contradiction between
the provisions of this Agreement and the provisions of an Order, the provisions
of the Order will prevail as to the subject matter of such inconsistency. An
Order may not be modified or amended except as mutually agreed in writing by
COMPANY and AMDOCS.
8.2.3 Each Order shall include such specific provisions as agreed upon by the
parties and as required by the applicable Sections of this Agreement and its
Exhibits. The parties agree that special provisions may be necessary to provide
for specific conditions associated with the Customized Product, Support
Services, Customization Services or Maintenance Services, and that the required
special provisions that the parties agree upon shall pertain solely to the
Customized Product, Support Services, Customization Services or Maintenance
Services respectively covered by such Order(s).
8.2.4 In the event that an Order is not accepted or rejected by AMDOCS within
thirty (30) days of its receipt by AMDOCS, such Order will be deemed rejected.
AMDOCS may reject an Order if it is not reasonably feasible or practical for
AMDOCS to accept such Order as a result of the time schedule for performance of
such Order, the nature of the services requested by COMPANY or the fees
proposed, or if such Order is not consistent with the provisions of this
Agreement. An Order will be binding upon the parties only if executed, confirmed
or acknowledged in writing by both parties. Execution, confirmation or
acknowledgment in writing of an Order by both parties will bind both parties to
honor dates, amounts and other ordering information shown on the Order,
including supplemental provisions contained therein.
<PAGE> 27
8.2.5 Order Nos. 1 and 2 are attached hereto as Appendices 1 and 2,
respectively. Such Orders are being accepted and executed by the parties
simultaneously with their execution of this Agreement.
8.3 INTELLECTUAL PROPERTY RIGHTS
8.3.1 COMPANY acknowledges AMDOCS' claim that copyright, trade secrets,
trademarks and any other intellectual property rights as the case may be,
subsists in the Ensemble, the Licensed Products, and that COMPANY shall have
neither copyright nor ownership or any such other intellectual property right in
the Ensemble, the Licensed Products and any enhancements thereto or derivatives
thereof (subject to Section 8.3.2 below). Notwithstanding the foregoing, COMPANY
shall retain all right, title and interest in and to all COMPANY Intellectual
Property Rights, and AMDOCS does not acquire any right, title or interest,
express or implied, in any COMPANY Intellectual Property Rights.
8.3.2 AMDOCS hereby assigns and will take all reasonable steps necessary to
assign its right, title and interest in and to the Customization to COMPANY.
Such Customization shall be deemed to be a work made for hire. Unless otherwise
specified in an Order, AMDOCS shall have no license or right to use, market,
sell, distribute or otherwise exploit any Customizations. AMDOCS shall have the
right to redevelop any part of the Customizations and to market, license, sell
and/or distribute such redevelopments to AMDOCS' customers.
8.4 TITLE
Title to the Licensed Products and any enhancements thereto or
derivatives thereof shall remain with and belong to AMDOCS and shall
not pass to COMPANY. COMPANY expressly acknowledges that its right to
use the Licensed Products and the Customized Product in accordance with
the terms of this Agreement, does not extend to, or encompass, title to
or ownership of such products, except as provided in Section 8.3.2.
8.5 CONFIDENTIALITY
8.5.1 The provisions of the Confidentiality Agreement between the parties dated
as of January 14, 1997, a copy of which is attached hereto as Exhibit B, shall
apply with regard to the performance of this Agreement by the parties hereto.
Such provisions shall survive the expiration of or termination of this Agreement
or any Order for any reason whatsoever. Any subcontractors of or other third
parties who have a need to know or may have access to AMDOCS' or COMPANY's
proprietary and confidential information shall first sign AMDOCS' or COMPANY's
non-disclosure agreement, as applicable, in the forms attached hereto as Exhibit
C, or a comparable document containing similar protections.
8.5.2 Prior to providing any third party with access to the source code of the
Customized
<PAGE> 28
Product, COMPANY shall first inform AMDOCS of the identity of such third party.
In the event that AMDOCS determines that such third party is an AMDOCS
Competitor (as defined hereinafter in this Section 8.5.2), AMDOCS shall so
inform COMPANY and COMPANY shall not provide such third party with access to the
source code of the Licensed Products and/or the Customized Product. For purposes
of this Section 8.5.2, an "AMDOCS Competitor" is any third party that licenses
and/or develops customer care and/or billing systems for telecommunications.
8.6 ENTICEMENT OF STAFF
Each of the parties agrees not to hire or employ any of the other
party's employees or their respective subcontractors' employees who are
assigned full or part-time to activities which are part of the
performance of this Agreement, except by mutual written consent of such
other party, within two (2) years of such employee or subcontractor's
employee ceasing to be employed by his/her respective employer. The
provisions of this Section 8.6 shall survive the expiration or
termination of this Agreement or any Order for any reason whatsoever
and shall remain in full force and effect for a period of two years
thereafter.
8.7 WORK RULES AND ACCESS TO FACILITIES
8.7.1 Each party's respective employees or representatives who use the other
party's premises or facilities hereunder will be subject to the reasonable
restrictions imposed by the other party. Such employees or representatives will
comply with all reasonable rules applicable to the host COMPANY's employees.
8.7.2 Each party acknowledges that the performance by the other party of such
other party's obligations hereunder requires information and cooperation between
the parties. Without limitation to each party's rights under this Agreement,
each party shall provide complete, timely and accurate information regarding its
requirements and all other data and information necessary for the performance by
the other party of its obligations hereunder and under the applicable Orders.
8.7.3 COMPANY shall, from time to time as reasonably required by AMDOCS, furnish
AMDOCS' personnel required to be at COMPANY's premises, at no charge to AMDOCS,
with space suitable for AMDOCS' needs and the following services: computer
terminals and associated peripherals including access to E-mail/Internet; a
communication line from COMPANY's data center to AMDOCS' development center in
St. Louis, Missouri; reasonable use of facsimile machine and telephone for
business purposes related to this Agreement only; and supplies, equipment and
consumables, and reasonable secretarial services in English, at COMPANY's normal
standards. All internal communications of AMDOCS using COMPANY's
e-mail/telephone/facsimile systems will be private, confidential and proprietary
to AMDOCS, and will be subject to COMPANY's standard policies and procedures.
<PAGE> 29
8.7.4 COMPANY shall grant the designated personnel of AMDOCS such access to the
premises and facilities of COMPANY as shall be reasonably necessary for the
performance of AMDOCS' obligations under this Agreement and the applicable
Orders.
8.7.5 AMDOCS shall indemnify, defend and hold harmless the COMPANY Indemnified
Parties (as defined in Section 8.18.1) harmless from and against all Claims (as
defined in Section 8.18.1) for personal injury or property damages resulting
from the wrongful or negligent acts of AMDOCS employees or agents (including
Authorized Subcontractors) while present at the premises and facilities of
COMPANY.
8.7.6 COMPANY is aware that it is required to have the necessary computer
equipment at its premises immediately upon the commencement of the provision of
services hereunder. COMPANY shall, therefore, obtain such computer systems and
provide AMDOCS upon the commencement of the Customization Services with
reasonable access to such equipment for the sole purpose of providing services
hereunder.
8.8 NO WAIVER
No waiver of any rights arising under this Agreement shall be effective
unless in writing and signed by the party against whom such waiver is
sought to be enforced. No failure or delay by either party in
exercising any right, power or remedy under this Agreement shall
operate as a waiver of any such right, power or remedy and/or prejudice
its rights to bring any action in respect thereof.
8.9 LIABILITY
8.9.1 IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR CLAIMS IN RESPECT OF OR
ARISING OUT OF THE PERFORMANCE OF ITS OBLIGATIONS HEREUNDER FOR ANY INDIRECT,
INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES (INCLUDING LOSS OF PROFITS,
REVENUE, DATA, OR USE), INCURRED BY THE OTHER PARTY OR BY ANY THIRD PARTY
WHETHER IN AN ACTION IN CONTRACT OR TORT, EVEN IF THAT PARTY OR ANY OTHER PERSON
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
8.9.2 EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, THE SOLE LIABILITY OF
AMDOCS IN CASE OF ANY LOSS OR DAMAGE RESULTING FROM ANY ERROR OR DEFECT IN THE
LICENSED PRODUCT(S) OR THE CUSTOMIZED PRODUCTS OR FROM THE SERVICES PROVIDED BY
AMDOCS HEREUNDER THAT CAUSE ERRORS OR DEFECTS, WILL BE TO CORRECT, AS SOON AS IS
REASONABLY POSSIBLE, SUCH ERROR OR DEFECT IN ACCORDANCE WITH AMDOCS' WARRANTY OR
MAINTENANCE OBLIGATIONS. IN THE EVENT OF AN ERROR OR DEFECT THAT RENDERS THE
LICENSED PRODUCT(S) OR CUSTOMIZED PRODUCTS INOPERATIVE OR HAS A MATERIAL ADVERSE
EFFECT ON THE FUNCTIONING OF SUCH
<PAGE> 30
PRODUCT(S), AMDOCS SHALL, AS SOON AS REASONABLY POSSIBLE, COMMENCE DIAGNOSTIC
AND CORRECTIVE MEASURES, AND TAKE SUCH REMEDIAL MEASURES (INCLUDING, BUT NOT
LIMITED TO, TEMPORARY FIXES, EMERGENCY BYPASSES AND/OR WORKAROUNDS) AS MAY BE
REQUIRED TO CORRECT SUCH ERROR OR DEFECT, TO RENDER THE PRODUCT(S) OPERATIVE,
AND/OR TO ELIMINATE SUCH MATERIAL ADVERSE EFFECT.
8.9.3 COMPANY SHALL HOLD AMDOCS HARMLESS IN CASE OF ANY SUIT OR CLAIM BY ANY
THIRD PARTY ARISING FROM SPECIFICATIONS OR INSTRUCTIONS GIVEN BY COMPANY TO
AMDOCS RELATING TO THE CUSTOMIZATIONS.
8.9.4 EXCEPT FOR AMDOCS' LIABILITY UNDER SECTIONS 8.7, 8.14 AND 8.18, AMDOCS'
LIABILITY FOR DIRECT DAMAGES UNDER THIS AGREEMENT AND ANY ORDER HEREUNDER FOR
ANY CAUSE(S) WHATSOEVER SHALL NOT EXCEED ONE AND ONE-HALF MILLION DOLLARS
($1,500,000) PER SINGLE EVENT OR FIVE MILLION DOLLARS ($5,000,000) IN THE
AGGREGATE, EXCEPT AS OTHERWISE SPECIFIED IN AN ORDER.
8.10 CONFLICT OF INTEREST
AMDOCS represents and warrants that no officer, employee or agent of
COMPANY has been or will be employed, retained, paid a fee, or
otherwise has received or will receive any personal compensation or
consideration, by or from AMDOCS, or any of AMDOCS' officers, employees
or agents, in connection with obtaining, arranging or negotiating this
Agreement or other documents entered into, or executed in connection
herewith.
8.11 FORCE MAJEURE
Each party will be excused for any delay in its performance resulting
from causes beyond its control which were not reasonably foreseeable on
the date of signing this Agreement including Acts of God, war, riot,
civil disorder, embargo, acts of authorities, fire, earthquake or flood
and only to the extent such event actually delays such performance. The
party so delayed must notify the other party of the occurrence and
cessation of such an event to be able to rely upon the terms of this
Section 8.11, unless the event itself prevents notice of occurrence
being given, in which case it shall be given as soon as reasonably
practicable. In no event, however, shall performance hereunder by
either party be excused under this Section for a period in excess of
three (3) months.
8.12 SEVERABILITY
If any provision of this Agreement is determined to be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate
or render unenforceable the
<PAGE> 31
entire Agreement, but rather the entire Agreement shall be construed as
if not containing the particular invalid or unenforceable provision or
provisions, and the rights and obligations of AMDOCS and COMPANY shall
be construed and enforced accordingly. In addition, the parties hereby
agree to cooperate with each other to replace the invalid or
unenforceable provision with a valid and enforceable one which will
achieve the same economic result (to the maximum legal extent) as the
provision determined to be invalid or unenforceable.
8.13 ENTIRE AGREEMENT AND CHANGES
With the exception of the Confidentiality Agreement referred to in
Section 8.5, the terms and conditions contained in this Agreement and
in any Orders issued and accepted hereunder constitute the entire
agreement between COMPANY and AMDOCS with respect to the subject matter
hereof and supersede all prior oral and written quotations,
communications, representations, agreements and understandings of the
parties with respect to the subject matter hereof. This Agreement may
not be altered, amended or modified except by a written instrument
signed by a duly authorized representative of each party. Any
pre-printed terms that may appear on any of AMDOCS' documents or any of
COMPANY's documents which add to, vary from or conflict with the
provisions of this Agreement shall be void.
8.14 TERMINATION
8.14.1 Either party may suspend performance and/or terminate this Agreement
immediately upon written notice at any time if:
(i) The other party shall file a petition seeking relief for itself
under the bankruptcy laws of any jurisdiction;
(ii) An order for relief shall be entered against the other party
under the bankruptcy laws of any jurisdiction, which order is not
stayed; or upon the expiration of sixty (60) days after the
filing of any involuntary bankruptcy petition against it without
the petition being dismissed prior to that time; or
(iii) The other party shall (a) make a general assignment for the
benefit of its creditors; or (b) consent to the appointment of or
taking possession by a receiver, liquidator, assignee, trustee,
or custodian of all or a substantial part of its property; or (c)
admit its insolvency or inability to pay its debts generally as
they become due; or (d) fail generally to pay its debts as they
become due; or (e) take any action (or suffer any action to be
taken by its director or shareholders) looking to its dissolution
or liquidation.
8.14.2 COMPANY may terminate for convenience any Order prior to Acceptance, or
any
<PAGE> 32
Support Services Order or Maintenance Order, upon thirty (30) days prior
written notice to AMDOCS. COMPANY shall pay to AMDOCS within thirty (30) days
following the effective date of such termination: (i) in the case of fixed price
Orders, the amounts due and payable under the payment installment immediately
following the date of notice of the termination, provided such notice is
received at least thirty (30) days prior to such payment installment, and (ii)
in the case of time and material Orders, all amounts due to AMDOCS under the
terminated Order until the effective date of such termination, plus, in the case
of this sub-Section (ii), a fee in an amount equal to the fees charged by AMDOCS
to COMPANY for such personnel during the month prior to termination.
8.14.3 COMPANY may, prior to Acceptance of a License or Customization Services
Order, or at any time for a Maintenance Services or Support Services Order,
provide notice of breach to AMDOCS if COMPANY reasonably determines that AMDOCS
has committed a material breach of an Order. Within fifteen days of receipt of
such notice, AMDOCS shall notify COMPANY in writing whether AMDOCS acknowledges
or disputes the occurrence of such material breach.
8.14.3.1 If AMDOCS provides notice to COMPANY acknowledging the occurrence of
such material breach and fails to cure the breach within thirty (30) days
thereafter, then COMPANY shall be entitled to Terminate the applicable Order.
8.14.3.2 If AMDOCS provides notice to COMPANY disputing the occurrence of such
material breach, then COMPANY shall be entitled to proceed with arbitration in
accordance with the provisions of Section 8.15.3. In the event that there is an
arbitral decision that AMDOCS has materially breached its obligations under the
applicable Order, and AMDOCS does not cure such breach within thirty (30) days
of the date of the arbitral decision, then COMPANY shall be entitled to
Terminate the applicable Order, without limiting any other rights and remedies
of COMPANY under this Agreement.
8.14.4 Upon Termination for breach, the following provisions will apply:
a) Each party shall return to the other party any information in
tangible form obtained in connection with the relevant Terminated
Order from the other party;
b) AMDOCS shall immediately cease performing work and incurring
costs in connection with the relevant Terminated Order;
c) COMPANY's licenses under the relevant Terminated Order will be
deemed immediately terminated;
(d) Within thirty (30) days of Termination, AMDOCS will return to
COMPANY all License Fees actually received by AMDOCS for said
terminated licenses; and
<PAGE> 33
(e) in the event that the Termination for breach consisted of AMDOCS'
decision to cease work on any Order, then AMDOCS shall return to
COMPANY all fees actually received by AMDOCS for licenses,
services, and hardware under such Order within thirty (30) days
of Termination.
8.14.5 Upon Termination for breach, COMPANY may exercise such remedies against
AMDOCS as are available under this Agreement, only, with no other remedies
available.
8.15 GOVERNING LAW, ESCALATION PROCEDURE AND ARBITRATION
8.15.1 The validity, performance, construction and effect of this Agreement
shall be governed by the laws of the State of Washington, without giving effect
to its choice-of-law rules.
8.15.2 COMPANY and AMDOCS will endeavor to resolve any controversy or claim
arising out of or relating to this Agreement or an Order through good faith
negotiations, as follows: If such a controversy or claim should arise, the
Project Managers of COMPANY and AMDOCS will attempt to resolve the matter within
nine (9) days of the matter being referred to them, or any other period agreed
upon by the parties; if the matter is not resolved by the project managers, it
will be referred to the head of COMPANY's IT Department and AMDOCS' Vice
President responsible for COMPANY; if the matter is not resolved by those
persons within nine (9) days of the matter being referred to them, or any other
period agreed upon by the parties, the matter will be referred to COMPANY's
President and AMDOCS' President for Customer Care and Billing Division
responsible for COMPANY/Senior Vice President. In the highly unlikely event that
those persons are unable to resolve the matter within nine (9) days of the
matter being referred to them, or any other period agreed upon, such matter will
be resolved exclusively by arbitration as provided in Section 8.15.3.
8.15.3 Any controversy or claim, whether based on contract, tort or other legal
theory (including, but not limited to, any claim of fraud or misrepresentation),
arising out or relating to this Agreement, including its interpretation,
performance, breach of or termination not resolved by good faith negotiations,
as provided in Section 8.15.2, shall be resolved exclusively by arbitration in
accordance with the following provisions:
a) The arbitration will be conducted in New York, New York by a sole
arbitrator ("Arbitrator") in accordance with the rules of the
American Arbitration Association (the "Rules"). The Arbitrator
shall be appointed by agreement of the parties; in the event that
the parties fail to agree upon the appointment of the Arbitrator
within thirty (30) days after a notice of arbitration is given by
either party to the other, then the Arbitrator shall be selected
and appointed in accordance with the Rules. The arbitration will
be governed by the United States Arbitration Act, 9 U.S.C.
Section 1, et seq.
<PAGE> 34
b) Prior to his appointment, the Arbitrator shall be made aware of
the terms of this Agreement and the relevant Order(s). The
Arbitrator will be bound by the provisions of this Agreement
including, but not limited to, the provisions of Section 3.5
(Warranty), Section 8.9 (Liability) and Section 8.14
(Termination). Prior to his appointment, selected Arbitrator
shall be made aware of the terms of this Agreement and the
relevant Order(s). Following his appointment, the Arbitrator
shall set forth the schedule and timing of the arbitration
proceedings.
c) The Arbitrator shall have the right to assess the costs incurred
by either party against the losing party or in such manner as he
deems just. That award rendered by such Arbitrator shall be final
and binding.
d) Upon rendering an award or a decision, the Arbitrator shall set
forth in writing the basis of such award or decision.
Notwithstanding anything to the contrary, each party retains the
right to request that a court of competent jurisdiction vacate
the Arbitrator's award or decision on the grounds of the
Arbitrator's failure to abide by the provisions of this Agreement
or any applicable Order.
e) Judgment on the award or any other final or interim decision
rendered by the Arbitrator may be entered, registered or filed
for enforcement purposes in any court having jurisdiction
thereof.
8.16 INDEPENDENT CONTRACTOR
AMDOCS undertakes the furnishing of services and performance of its
obligations under this Agreement as an independent contractor. AMDOCS'
personnel participating in the performance of this Agreement shall
remain AMDOCS' employees. There shall be no employer-employee
relationship between AMDOCS' employees and COMPANY, and COMPANY's
employees and AMDOCS.
8.17 ASSIGNMENT AND SUBCONTRACTS
8.17.1 Any assignment, sub-contract or other transfer of a party's rights or
obligations under this Agreement or under any Order issued hereunder requires
the prior written consent of the other party. Prior to any such assignments, the
assignee will be obliged to sign an undertaking to comply with all obligations
under this Agreement and the applicable Orders. Any attempted assignment not
complied with in the manner prescribed herein shall be null and void.
8.17.2 Notwithstanding the above, COMPANY may assign its rights and obligations
hereunder to (1) any corporation resulting from any merger or other
reorganization to which COMPANY is a party, (2) any corporation, partnership,
association, or other person or entity to which COMPANY may transfer all or
substantially all of its assets or
<PAGE> 35
business existing at such time, or (3) any COMPANY Affiliate Prior to any such
assignment, the assignee will be obliged to sign an undertaking to comply with
all obligations under this Agreement and the applicable Orders. Any attempted
assignment not complied with in the manner prescribed herein shall be null and
void. The entities referenced in sub-Sections 8.17.2(1) and 8.17.2(2) above are
referred to as "Successors"
8.17.3 AMDOCS' performance of this Agreement may involve participation of
sub-contractors. Thus, notwithstanding the above, the parties agree that AMDOCS
may subcontract any of the services to be provided by AMDOCS hereunder to any of
AMDOCS' Affiliates and/or to specialist subcontractors (all referred to in this
Agreement as the "Authorized Subcontractors"), however:
a) AMDOCS shall be responsible for the performance (or
non-performance, as the case may be) of any part of this
Agreement and any Order issued hereunder by the Authorized
Subcontractors to which such part was assigned or subcontracted;
b) the participation of the Authorized Subcontractors shall not
affect any liability imposed on AMDOCS under this Agreement;
c) AMDOCS' obligations under this Agreement and the Orders issued
hereunder shall remain in full force and effect despite any act
or omission of the Authorized Subcontractors; and
d) Specialist subcontractors shall not be assigned by AMDOCS to
COMPANY's facilities without the prior written consent of
COMPANY.
The applicable terms of this Agreement (including, without limitation,
those referred to in Section 8.19) shall also apply to the Authorized
Subcontractors. The parties agree that the Authorized Subcontractors
will require access to the premises and facilities of COMPANY for their
participation in the performance of this Agreement and the Orders
issued hereunder, and that if so requested by AMDOCS, COMPANY shall
deal with the personnel of the Authorized Subcontractors and with any
reasonable requests of the Authorized Subcontractors, in all respects,
as if such personnel were the personnel, and such requests were the
requests, of AMDOCS.
8.17.4 Subject to Section 8.5, Company may utilize employees or third party
consultants or contractors to perform modifications, enhancements, or
adjustments to the Licensed Products or Customized Products in a manner similar
to those provided by AMDOCS or an AMDOCS assignee.
<PAGE> 36
8.18 INTELLECTUAL PROPERTY RIGHTS INDEMNITY
8.18.1 AMDOCS agrees to indemnify, defend and hold harmless COMPANY and its
subsidiaries, affiliates, directors, officers, employees, agents and independent
contractors (collectively, the "COMPANY Indemnified Parties") from and against
from any and all actions, causes of action, claims, demands, costs, liabilities,
expenses and damages, including costs and reasonable attorneys' fees
(collectively, "Claims") by a third party alleging that its Intellectual
Property Rights have been infringed by COMPANY in the normal use or installation
of the Licensed Products, the Customized Products or the Customizations pursuant
to this Agreement; provided, however, that (i) AMDOCS is promptly notified in
writing of such claim, (ii) AMDOCS shall have the sole control of the defense
and/or settlement thereof, (iii) COMPANY furnishes to AMDOCS on request all
information reasonably available to COMPANY for such defense, and (iv) COMPANY
will not admit any such claim and/or make any payments with respect to such
claim without the prior written consent of AMDOCS, such consent not to be
unreasonably withheld or delayed.
8.18.2 The above indemnity shall not apply to Claims arising from or in
connection with: (1) modifications made by COMPANY, (2) the instructions,
specifications or requirements supplied by COMPANY for the Customized Product or
any services to be provided by AMDOCS, or (3) COMPANY's combination of the
Licensed Products or the Customized Product with other products not supplied by
AMDOCS.
8.18.3 If any injunction or order is obtained against COMPANY's use of the
Customized Product, AMDOCS, at its sole discretion and expense, and without
limiting its other obligations and liabilities hereunder or under any Order,
may:
(a) procure for COMPANY the right to continue using the Customized
Product; or
(b) replace or modify the Customized Product to make them
substantially similar, functionality equivalent, non-infringing
Customized Product.
8.19 SURVIVAL OF OBLIGATIONS
Obligations under this Agreement or any Order, which by their nature
would continue beyond the Termination, expiration or ending in any
other way of this Agreement or any Order, including by way of
illustration only and not limited to, those in the Sections entitled
Liability, Confidentiality and Warranty, shall survive the Termination,
expiration or ending in any other way of this Agreement or any Order.
8.20 HEADINGS NOT CONTROLLING
The headings of the Sections of this Agreement are inserted for
convenience only and are not intended to affect the meaning or
interpretation of this Agreement.
<PAGE> 37
8.21 NOTICES
8.21.1 Any notice, demand or communication which under the terms of this
Agreement or otherwise must or may be given or made by AMDOCS or COMPANY shall
be in writing and shall be given or made by any delivery (courier) services
requiring signature of receipt or fax addressed or transmitted, as the case may
be, to the respective parties as follows:
To: COMPANY To: AMDOCS
3650 131st Avenue SE, AMDOCS (UK) Limited
Suite 400 Grand Building
Bellevue, WA 98006 1-3 Strand
London WC2 N5EJ
England
Tel: Tel: +44 171 903 5169
Fax: Fax: +44 171 903 5172
Attention: Jim Medick, CIO Attention:
CC: Legal Department
Such notice, demand or other communications shall be deemed to have
been given on the date confirmed as the actual date of delivery by the
delivery service if sent by such service, or if sent by fax, on the
next working day after transmission and receipt by the sender of a
confirmation of transmission showing successful completion of the
transmission. Notice sent by fax must also be confirmed by sending
notice by delivery (courier) service (but shall be deemed to have been
given on the next working day after transmission by fax and receipt by
the sender of a confirmation of transmission showing successful
completion of the transmission).
The above addresses or fax numbers may be changed at any time by giving
fifteen (15) days' prior written notice as provided above.
8.22 SUCCESSORS AND ASSIGNEES
This Agreement shall be binding upon and inure to the benefit of the
parties hereof and to their permitted successors and assignees.
8.23 NO THIRD PARTY BENEFICIARIES
There are no third party beneficiaries to this Agreement, and nothing
herein contained shall be deemed to confer any right whatsoever in
favor of any party other than the direct parties hereto.
<PAGE> 38
8.24 AUTHORITY
Each party has full power and authority to enter into and perform this
Agreement and the person signing this Agreement on behalf of each party
has been properly authorized and empowered to enter into this
Agreement. Each party further acknowledges that it has read this
Agreement, understands it and agrees to be bound by it.
8.25 EXECUTION OF THE AGREEMENT
In the event that this Agreement is not signed simultaneously by both
parties, the Agreement will, unless otherwise agreed in writing, become
null and void if the party who is the second signatory of this
Agreement does not sign it and submit a signed copy to the party that
signed it first within forty-five (45) days of the date on which the
first party signed this Agreement. This Agreement may be executed in
duplicate counterparts and both together will constitute one and the
same document.
IN WITNESS WHEREOF, COMPANY and AMDOCS, pursuant to due corporate authority,
have caused this Agreement to be signed in their respective names on the date(s)
set forth below.
ACCEPTED: ACCEPTED:
WESTERN WIRELESS CORPORATION AMDOCS (UK) LIMITED
("COMPANY") ("AMDOCS")
By: /s/ Mikal J. Thomsen By: /s/ Simon Cassif
-------------------------------- ----------------------------------
(Signature) (Signature)
Title: President Title: President
----------------------------- -------------------------------
(Typed or Printed) (Typed or Printed)
Date: September 17, 1999 Date: October 1, 1999
------------------------------ --------------------------------
<PAGE> 1
EXHIBIT 10.92
July 12 1999
Steve Burdette
3023 S. Atlantic Ave. #505
Daytona Beach Shores, FL 32118
Dear Steve:
This letter (the "Letter Agreement") sets forth the terms of your employment
with Western Wireless Corporation ("WWC"), effective August 1, 1999.
1. Your title will be Senior Vice President. In that capacity you will
report to the President of WWC (the "President").
2. Your responsibilities will include supervision of all sales,
distribution, marketing and customer service functions, together with
such other duties as may be assigned to you by the President. In
addition, you agree to serve as a director and/or senior officer of any
subsidiary of WWC, if so elected, without any additional salary or other
compensation. You will devote substantially all of your business time
and attention to the obligations delineated in this Letter Agreement.
3. Your base compensation will be $150,000, payable in accordance with
standard payroll practices of WWC. In addition, you will have an
opportunity, as determined by WWC, to earn a performance bonus targeted
at $75,000 per year, to be paid quarterly, and to continue, during the
course of your employment, participation in the option program at a
level to be determined by WWC. Your options shall contain change of
control language consistent with other officers of WWC. It is understood
that nothing contained herein will prevent WWC, in its sole and absolute
discretion, from, at any time, increasing your compensation, either
permanently or for a limited period, whether in base compensation, by
bonus or otherwise, if WWC in its sole discretion, shall deem it
advisable to do so in order to recognize and fairly compensate you for
the value of your services to WWC; provided, however, that nothing
contained in this paragraph three shall in any manner obligate WWC to
make any such increase or provide any such additional compensation or
benefits.
4. WWC will reimburse you for all reasonable out-of-pocket business
expenses paid or incurred by you in connection with the performance of
your duties, upon submission of signed, itemized lists of such expenses
on general forms established for that purpose by WWC.
5. You will be entitled to participate in all group health and insurance
programs and all other fringe benefit or retirement plans or other plans
effective generally with respect to executives of WWC.
6. WWC will enter into an Indemnification Agreement with you pursuant to
which WWC will agree to indemnify you against certain liabilities
arising by reason of your affiliation with WWC.
7. (a) Notwithstanding any other provision of this Letter Agreement, your
employment by WWC may be terminated by WWC at any time, with or without
Cause, as defined below. In the event of a termination for Cause you
will have no rights to severance payments. Termination for "Cause" means
(i) your gross neglect or willful material breach of your principal
employment responsibilities or duties, (ii) a final judicial
adjudication that you are guilty of a felony, (iii) fraudulent conduct
as determined by a court of competent jurisdiction in the course of your
employment with WWC or any of its subsidiaries, (iv) the breach by you
of the covenant set forth in paragraph nine, below, or (v) the material
breach by you of any other provision of this Letter Agreement which
continues uncured for a period of thirty (30) days after notice thereof
by WWC. In the event of your voluntary
<PAGE> 2
Steve Burdette
Page 2
termination of employment with WWC, you will have no rights to severance
benefits.
(b) In the event of an involuntary termination for other than Cause
(which shall include your resignation as a direct result of (i) a
reduction in your base compensation and/or incentive bonus target
percentage, or (ii) the material breach by the Company of any provision
of this Letter Agreement which continues uncured for a period of thirty
(30) days after notice thereof by you), then (A) you will be entitled to
receive a severance payment in an amount equal to your accrued but
unpaid existing annual targeted incentive bonus through the date of
termination, 6 months of your then base compensation and an amount equal
to 6 months of your existing annual targeted incentive bonus; (B) WWC
will, at its expense, make all COBRA benefit payments on behalf of you
and your dependents for six (6) months following such involuntary
termination; and (C) with respect to any stock options previously
granted to you by WWC which remain unvested at the time of the
involuntary termination, notwithstanding the vesting language in the
stock option agreement pursuant to which such options were granted,
there shall be immediate vesting of that portion of each such grant of
unvested stock options as equals the product of the total number of such
options under such grant which remain unvested multiplied by a fraction
the numerator of which is the sum of (i) the number of days from the
date on which the last vesting of options under such grant took place to
and including the date on which the termination occurs plus (ii) 183 and
the denominator of which is the number of days remaining from the date
on which the last vesting of options under such grant took place to and
including the date on which the final vesting under such grant would
have occurred.
Your death or permanent disability will be deemed an involuntary
termination for other than Cause. "Permanent disability" shall mean your
inability substantially to render the services required hereunder for
eight (8) months in any eighteen (18) month period because of a physical
or mental condition, it being understood that until you have received
notice from WWC terminating this Letter Agreement, you will continue to
receive your base compensation and all other benefits to which you are
entitled under this Letter Agreement.
(c) You agree that upon termination of your employment by WWC for any
reason you will surrender to WWC all proprietary records, lists and
other documents obtained by you or entrusted to you during the course of
your employment by WWC, together with all copies of all such documents.
8. You agree not to disclose at any time, whether during the term of this
Letter Agreement or thereafter, any secret or confidential information
relating to WWC's or any of its subsidiaries' businesses, financial
condition or prospects, which information you have obtained while
employed by WWC or by any of its subsidiaries or any of the predecessors
in interest of any of them, except (i) as may be required in furtherance
of the businesses of WWC or of any of its subsidiaries, (ii) with WWC's
express prior written consent, (iii) if such information is made
generally available to the public through no fault of yours, or (iv) if
such disclosure is required by applicable law or regulation or by legal
process and then only with prompt written notice to WWC in advance of
any such disclosure.
9. You agree that, during the term of your employment by WWC and for a
period of one (1) year immediately following the termination of your
employment with WWC for any reason whatsoever, you will not, either
directly or indirectly, for compensation or any other consideration,
individually or as an employee, broker, agent, consultant, lender,
contractor, advisor, solicitor, stockholder (provided that ownership of
5% or less of the outstanding stock of any corporation listed on a
national securities exchange is not prohibited), proprietor, partner, or
person having any other material
<PAGE> 3
Steve Burdette
Page 3
economic interest in, affiliated with or rendering services to any other
entity, engage in or provide services to or for a business that is
substantially the same as or similar to WWC's or its subsidiaries'
businesses and which competes within the applicable commercial mobile
radio services markets serviced by WWC or its subsidiaries, directly or
indirectly.
10. This Letter Agreement contains the entire agreement between you and WWC
with respect to your employment by WWC, other than human resource and
corporate policies which are to be executed by all employees. This
Letter Agreement may not be amended, waived, changed, modified or
discharged except by an instrument in writing executed by or on behalf
of you and WWC.
11. All notices, requests, demands and other communications with respect to
this Letter Agreement will be in writing and will be deemed to have been
duly given if delivered by hand, registered or certified mail (first
class postage and fees prepaid, return receipt requested), telecopier or
overnight courier guaranteeing next-day delivery, as follows:
a) to WWC:
Western Wireless Corporation
3650 - 131st Avenue SE, #400
Bellevue, Washington 98006
Attention: President
Telecopier: (425) 586-8010
b) to you:
Steve Burdette
3023 S. Atlantic Ave. #505
Daytona Beach Shores, FL 32118
and/or to such other persons and addresses as either you or WWC has
specified in writing to the other by notice as aforesaid.
12. If any part of this Letter Agreement is hereafter construed to be
invalid or unenforceable in any jurisdiction, the same will not affect
the remainder of the Letter Agreement or the enforceability of such part
in any other jurisdiction, which will be given full effect, without
regard to the invalid portions or the enforceability in such other
jurisdiction. If any part of this Letter Agreement is held to be
unenforceable because of the scope thereof, you and WWC agree that the
court making such determination will have the power to reduce the
duration and/or area of such provision and, in its reduced form, said
provision shall be enforceable; provided, however, that such court's
determination will not affect the enforceability of this Letter
Agreement in any other jurisdiction beyond such court's authority.
13. This Letter Agreement will be governed by and construed and interpreted
in accordance with the laws of the State of Washington without reference
to conflicts of laws principles.
Please signify your acceptance of the terms of this Letter Agreement by signing
where indicated below.
<PAGE> 4
Steve Burdette
Page 4
Sincerely yours,
WESTERN WIRELESS CORPORATION
------------------------------------
/s/ Mikal Thomsen
Title: President
------------------------------
AGREED TO AND ACCEPTED:
- ----------------------------------
/s/ H. Stephen Burdette
<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, 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-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 8,864
<SECURITIES> 0
<RECEIVABLES> 82,458
<ALLOWANCES> 9,795
<INVENTORY> 8,882
<CURRENT-ASSETS> 107,530
<PP&E> 579,230
<DEPRECIATION> 260,289
<TOTAL-ASSETS> 1,091,434
<CURRENT-LIABILITIES> 83,351
<BONDS> 1,195,000
0
0
<COMMON> 685,841
<OTHER-SE> (874,096)
<TOTAL-LIABILITY-AND-EQUITY> 1,091,434
<SALES> 16,680
<TOTAL-REVENUES> 409,458
<CGS> 25,854
<TOTAL-COSTS> 377,969
<OTHER-EXPENSES> (80,275)
<LOSS-PROVISION> 13,748
<INTEREST-EXPENSE> 71,761
<INCOME-PRETAX> (147,990)
<INCOME-TAX> 0
<INCOME-CONTINUING> (47,338)
<DISCONTINUED> (100,652)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (147,990)
<EPS-BASIC> (1.93)
<EPS-DILUTED> (1.93)
</TABLE>
