-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Jyg/mCsYBTNWpnLuiyqmGMZ3DpFvmiDuIeoZt1owRSpTurV9al6LrqmrBMnjpa1o D7Z0n7cr4uUs/uSDhl5VGQ== 0000891020-99-001771.txt : 19991028 0000891020-99-001771.hdr.sgml : 19991028 ACCESSION NUMBER: 0000891020-99-001771 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 18 FILED AS OF DATE: 19991027 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VOICESTREAM WIRELESS HOLDING CORP CENTRAL INDEX KEY: 0001097609 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 911983600 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-89735 FILM NUMBER: 99734288 BUSINESS ADDRESS: STREET 1: 3650 131ST AVENUE SE STREET 2: SUITE 400 CITY: BELLEVUE STATE: WA ZIP: 98006 BUSINESS PHONE: 4256504600 MAIL ADDRESS: STREET 1: 3650 131ST AVENUE SE STREET 2: SUITE 400 CITY: BELLEVUE STATE: WA ZIP: 98006 S-4 1 FORM S-4 1 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-4 ------------------------ REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ VOICESTREAM WIRELESS HOLDING CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 4812 91-1983600 (STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBERS) IDENTIFICATION NO.)
3650 131ST AVENUE S.E. BELLEVUE, WASHINGTON 98006 (425) 653-4600 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ALAN R. BENDER EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY VOICESTREAM WIRELESS HOLDING CORPORATION 3650 131ST AVENUE S.E. BELLEVUE, WASHINGTON 98006 (425) 653-4600 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) WITH COPIES TO: G. SCOTT GREENBURG BARRY A. ADELMAN EDWIN M. MARTIN, JR. MARK S. BRITTON GREGG S. LERNER JAY G. FINKELSTEIN PRESTON GATES & ELLIS LLP FRIEDMAN KAPLAN & SEILER LLP PIPER & MARBURY L.L.P. 5000 COLUMBIA CENTER 875 THIRD AVENUE 1200 19TH STREET, N.W. 701 5TH AVENUE NEW YORK, NEW YORK 10022 WASHINGTON, D.C. 20036 SEATTLE, WASHINGTON 98104
Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement becomes effective. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: [ ] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] If this form is a post-effective amendment filed pursuant to Rule 426(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [ ] - --------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------- PROPOSED PROPOSED MAXIMUM TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING AGGREGATE OFFERING AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER SHARE(2) PRICE(3) REGISTRATION FEE(4) - --------------------------------------------------------------------------------------------------------------------------- Common Stock, $.001 par value... 192,684,793 Shares $ $9,500,036,163 $655,174 - --------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------
(1) Represents the maximum number of shares of common stock of VoiceStream Wireless Holding Corporation to be issued in the reorganizations described in this registration statement, based upon an exchange ratio for shares of common stock of VoiceStream Wireless Corporation equal to 1 to 1, for shares of common stock of Omnipoint Corporation equal to 0.825 to 1, and for shares of common stock of Aerial Communications, Inc. equal to 0.455 to 1. (2) Not applicable. (3) Estimated solely for the purpose of determining the registration fee. In accordance with Rules 457(f)(1) and (3), the proposed maximum aggregate offering price of the common stock is based upon the sum of (a) the product of (i) $41.50 (the average of the high and low prices of VoiceStream common stock on August 31, 1999, which is the price VoiceStream used to calculate the filing fee paid with its preliminary joint proxy statement-prospectus filed with the Securities and Exchange Commission on September 2, 1999, pursuant to Rule 14a-6(e)(2), as quoted on the Nasdaq Stock Market) times (ii) 95,731,330 (the number of shares of VoiceStream common stock outstanding on that date), (b) the product of (i) $40.40 (the average of the high and low prices of Omnipoint common stock on August 30, 1999, which is the price Omnipoint used to calculate the fee paid with its preliminary joint proxy statement-prospectus filed with the Commission on September 2, 1999, pursuant to Rule 14a-6(e)(2), as quoted on the Nasdaq Stock Market) less $8.00 times (ii) 53,660,439 (the number of shares of Omnipoint common stock outstanding on that date) and (c) the product of (i) $32.72 (the average of the high and low prices of Aerial Communications, Inc. common stock on October 7, 1999, which is the price Aerial used to calculate the fee paid with its preliminary joint proxy statement-prospectus filed with the Commission on October 14, 1999, pursuant to Rule 14a-6(e)(2), as quoted on the Nasdaq Stock Market) times (ii) 115,788,134 (the number of securities of Aerial outstanding on that date convertible into shares of common stock of VoiceStream Wireless Holdings Corporation in connection with the reorganizations described in this registration statement). The sum of $9,500,036,163 was then multiplied by .000278 to determine the total registration fee of $2,641,010. (4) Pursuant to Rule 457(b), the total registration fee of $2,641,010 was reduced in amount by $1,985,836, the filing fee paid pursuant to Exchange Act Rule 0-11 in connection with the filing of the preliminary joint proxy statement-prospectus of VoiceStream and Omnipoint on September 2, 1999, and of VoiceStream, Omnipoint and Aerial on October 14, 1999. ------------------------ THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 VoiceStream Logo OmniPoint Logo Aerial Logo PROPOSED TRANSACTIONS -- YOUR VOTE IS VERY IMPORTANT Dear Fellow Stockholders: We are pleased to propose the merger of VoiceStream Wireless Corporation, Omnipoint Corporation and Aerial Communications, Inc., to the stockholders of each of the companies. This merger, accomplished through the reorganizations proposed in this joint proxy statement-prospectus, will bring together three major providers of PCS services in the United States. When the reorganizations are completed, the combined entity's licenses and pending licenses, together with those of joint ventures in which it will be an investor, will cover approximately 77% of the geography of the continental United States and over 200 million people, and will serve over 1.5 million customers. Through the reorganizations, VoiceStream, Omnipoint and Aerial will each become a subsidiary of VoiceStream Wireless Holding Corporation, which we refer to in this joint proxy statement-prospectus as "VoiceStream Holdings." Each company, as a subsidiary of VoiceStream Holdings, will principally operate its existing business under the VoiceStream brand name. VoiceStream Holdings will change its name to VoiceStream Wireless Corporation when the first reorganization is complete. The reorganizations contemplate the following consideration: - each share of Omnipoint common stock you own will be exchanged for 0.825 of a share of VoiceStream Holdings common stock plus $8.00 in cash or, if you so elect, subject to proration and adjustment under certain circumstances, all cash or all VoiceStream Holdings common stock, as described in this joint proxy statement-prospectus; - each share of Aerial common stock you own will be exchanged for 0.455 of a share of VoiceStream Holdings common stock, subject to adjustment under certain circumstances, or, if you so elect, cash in the amount of $18.00 per share of Aerial common stock, as described in this joint proxy statement-prospectus; and - each share of VoiceStream common stock you own will be exchanged for one share of VoiceStream Holdings common stock. Also, the reorganizations contemplate the following investments: - Hutchison Telecommunications PCS (USA) Limited will make a $957 million investment in VoiceStream Holdings; - Sonera Ltd. will make an aggregate $730 million investment in Aerial, an Aerial subsidiary and VoiceStream Holdings; and - Telephone and Data Systems, Inc., Aerial's parent, will replace $420 million of debt owed by an Aerial subsidiary to TDS with equity of Aerial. We cannot complete the reorganizations and certain of the related transactions unless we obtain the necessary governmental and stockholder approvals and certain other conditions are satisfied. Each company will hold a special meeting of its stockholders in connection with the reorganizations. VoiceStream stockholders will vote on both transactions; stockholders of Omnipoint and Aerial will vote only on their respective transactions. YOUR VOTE IS VERY IMPORTANT. We urge you to vote "FOR" the reorganization of your company. The board of directors of each company has voted unanimously in favor of these reorganizations. This joint proxy statement-prospectus gives you detailed information about the proposed reorganizations and includes the reorganization agreements as annexes. You can also obtain information about our companies from publicly available documents we have filed with the Securities and Exchange Commission. We encourage you to read this entire document carefully before you vote your shares. We enthusiastically support these reorganizations and join with the other members of our boards of directors in recommending that you vote in favor of the reorganizations. [signature] [signature] [signature] John W. Stanton Douglas G. Smith LeRoy T. Carlson, Jr. Chairman and Chief Executive Chairman and Chief Executive Chairman Officer Officer Aerial Communications, Inc. VoiceStream Wireless Corporation Omnipoint Corporation
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED UNDER THIS JOINT PROXY STATEMENT-PROSPECTUS OR DETERMINED IF THIS JOINT PROXY STATEMENT- PROSPECTUS IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. JOINT PROXY STATEMENT-PROSPECTUS DATED NOVEMBER , 1999 AND FIRST MAILED TO STOCKHOLDERS ON OR ABOUT NOVEMBER , 1999 CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY 3 VOICESTREAM LOGO ------------------------- VOICESTREAM WIRELESS CORPORATION NOTICE OF SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER , 1999 ------------------------- TO THE STOCKHOLDERS OF VOICESTREAM WIRELESS CORPORATION: NOTICE IS HEREBY GIVEN that a special meeting of stockholders of VoiceStream Wireless Corporation, a Washington corporation, will be held on , November , 1999, at :00 a.m. local time, at , Seattle, Washington, to: 1. Consider and vote upon a proposal to adopt, and approve the transactions contemplated by, the Agreement and Plan of Reorganization, dated as of June 23, 1999, by and among VoiceStream, Omnipoint Corporation, a Delaware corporation, and VoiceStream Wireless Holding Corporation, a Delaware corporation, by which, among other things, a wholly-owned subsidiary of VoiceStream Holdings will merge with and into Omnipoint, and VoiceStream Holdings will become the parent of both VoiceStream and Omnipoint, on the terms and subject to the conditions set forth in the Omnipoint reorganization agreement, as more fully described in this joint proxy statement-prospectus. A vote for this proposal also constitutes approval of the merger of a separate wholly-owned subsidiary of VoiceStream Holdings with and into VoiceStream. 2. Consider and vote upon a proposal to adopt, and approve the transactions contemplated by, the Agreement and Plan of Reorganization, dated as of September 17, 1999, by and among VoiceStream, Aerial Communications, Inc., a Delaware corporation, VoiceStream Holdings, Telephone and Data Systems, Inc., a Delaware corporation, and a wholly-owned subsidiary of VoiceStream Holdings by which, among other things, the VoiceStream Holdings subsidiary will merge with and into Aerial, and VoiceStream Holdings will become the parent of Aerial (and of VoiceStream, if it has not already become a subsidiary of VoiceStream Holdings as a result of the Omnipoint reorganization), on the terms and subject to the conditions set forth in the Aerial reorganization agreement, as more fully described in this joint proxy statement-prospectus. A vote for this proposal also constitutes approval of the merger of a separate wholly-owned subsidiary of VoiceStream Holdings with and into VoiceStream. 3. Transact such other business as may properly be brought before the special meeting or any adjournment or postponement of the special meeting. We have set October , 1999 as the record date for determining, as of the close of business on that date, which stockholders will be entitled to vote at the special meeting and any adjournments or postponements of the special meeting. Only stockholders of record on the record date are entitled to notice of, and to vote at, the special meeting and any adjournments or postponements of the special meeting. The adoption of, and approval of the transactions contemplated by, the Omnipoint reorganization agreement and the Aerial reorganization agreement will each require the affirmative vote of the holders of two-thirds of the outstanding shares of VoiceStream common stock. All stockholders of VoiceStream entitled to vote are cordially invited to attend the special meeting in person. However, to ensure your representation at the special meeting, you are urged to complete, date, sign and return the enclosed proxy card as promptly as possible in the enclosed postage-prepaid envelope. You may revoke your proxy in the manner described in this joint proxy statement-prospectus at any time before it is voted at the special meeting. Executed proxies with no instructions indicated will be voted "FOR" the adoption of, and approval of the transactions contemplated by, the Omnipoint reorganization agreement and adoption of, and approval of the transactions contemplated by, the Aerial reorganization agreement. If you fail to return a properly executed proxy card or to vote in person at the special meeting, the effect will be a vote against the Omnipoint reorganization agreement and against the Aerial reorganization agreement. By Order of the Board of Directors [signature] Alan R. Bender Secretary November , 1999 WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THE BOARD OF DIRECTORS OF VOICESTREAM RECOMMENDS UNANIMOUSLY THAT STOCKHOLDERS VOTE "FOR" THE ADOPTION OF, AND APPROVAL OF THE TRANSACTIONS CONTEMPLATED BY, EACH OF THE REORGANIZATION AGREEMENTS. 4 OmniPoint Logo ------------------------- OMNIPOINT CORPORATION NOTICE OF SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON NOVEMBER , 1999 ------------------------- TO THE STOCKHOLDERS OF OMNIPOINT CORPORATION: NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Omnipoint Corporation, a Delaware corporation, will be held on , November , 1999, at :00 a.m. local time, at the offices of Piper & Marbury L.L.P., 1200 Nineteenth Street, N.W., Washington, D.C., to: 1. Consider and vote upon a proposal to adopt, and approve the transactions contemplated by, the Agreement and Plan of Reorganization, dated as of June 23, 1999, by and among Omnipoint, VoiceStream Wireless Corporation, a Washington corporation, and VoiceStream Wireless Holding Corporation, a Delaware corporation, by which, among other things, separate subsidiaries of VoiceStream Holdings will merge with and into Omnipoint and VoiceStream, and VoiceStream Holdings will become the parent of both Omnipoint and VoiceStream, on the terms and subject to the conditions set forth in the Omnipoint reorganization agreement, as more fully described in this joint proxy statement-prospectus. 2. Transact such other business as may properly be brought before the special meeting or any adjournment or postponement of the special meeting. We have set October , 1999 as the record date for determining, as of the close of business on that date, which stockholders will be entitled to vote at the special meeting and any adjournments or postponements of the special meeting. Only stockholders of record on the record date are entitled to notice of, and to vote at, the special meeting and any adjournments or postponements of the special meeting. The adoption of, and approval of the transactions contemplated by, the Omnipoint reorganization agreement will require the affirmative vote of the holders of a majority of the outstanding shares of Omnipoint common stock. All stockholders of Omnipoint entitled to vote are cordially invited to attend the special meeting in person. However, to ensure your representation at the special meeting, you are urged to complete, date, sign and return the enclosed proxy card as promptly as possible in the enclosed postage-prepaid envelope. You may revoke your proxy in the manner described in this joint proxy statement-prospectus at any time before it is voted at the special meeting. Executed proxies with no instruction indicated will be voted "FOR" adoption of, and approval of the transactions contemplated by, the Omnipoint reorganization agreement. If you fail to return a properly executed proxy card or to vote in person at the special meeting, the effect will be a vote against the Omnipoint reorganization agreement. By Order of the Board of Directors [SIGNATURE] Edwin M. Martin, Jr. Secretary November , 1999 WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THE BOARD OF DIRECTORS OF OMNIPOINT RECOMMENDS UNANIMOUSLY THAT STOCKHOLDERS VOTE "FOR" ADOPTION OF, AND APPROVAL OF THE TRANSACTIONS CONTEMPLATED BY, THE OMNIPOINT REORGANIZATION AGREEMENT. 5 [AERIAL LOGO] AERIAL COMMUNICATIONS, INC. NOTICE OF SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON [ , ] TO THE STOCKHOLDERS OF AERIAL COMMUNICATIONS, INC.: NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Aerial Communications, Inc., a Delaware corporation, will be held on [ ], [ ], [ ], at :00 a.m. local time, at the offices of [ ], to: 1. Consider and vote upon a proposal to adopt, and approve the transactions contemplated by, the Agreement and Plan of Reorganization, dated as of September 17, 1999, by and among Aerial, VoiceStream Wireless Corporation, a Washington corporation, VoiceStream Wireless Holding Corporation, a Delaware corporation, Telephone and Data Systems, Inc., a Delaware corporation, and a wholly-owned subsidiary of VoiceStream Holdings by which, among other things, the subsidiary of VoiceStream Holdings will merge with and into Aerial and VoiceStream Holdings will become the parent of both Aerial and VoiceStream, on the terms and subject to the conditions set forth in the Aerial reorganization agreement, as more fully described in this joint proxy statement-prospectus. 2. Transact such other business as may properly be brought before the special meeting or any adjournment or postponement of the special meeting. We have set [ ], [ ] as the record date for determining, as of the close of business on that date, which stockholders will be entitled to vote at the special meeting and any adjournment or postponement of the special meeting. Only stockholders of record on the record date are entitled to notice of, and to vote at, the special meeting and any adjournment or postponement of the special meeting. The adoption of, and approval of the transactions contemplated by, the Aerial reorganization agreement will require the affirmative vote of the holders of a majority of the voting power of all classes of Aerial common stock. TDS, which controls approximately 98% of the relevant voting power of all shares of Aerial common stock, has agreed to vote for the proposal. Accordingly, the approval of stockholders is assured regardless of the vote of other stockholders. All stockholders of Aerial entitled to vote are cordially invited to attend the special meeting in person. However, to ensure your representation at the special meeting, you are urged to complete, date, sign and return the enclosed proxy card as promptly as possible in the enclosed postage-prepaid envelope. You may revoke your proxy in the manner described in this joint proxy statement-prospectus at any time before it is voted at the special meeting. Executed proxies with no instruction indicated will be voted "FOR" adoption of, and approval of the transactions contemplated by, the Aerial reorganization agreement. If you fail to return a properly executed proxy card or to vote in person at the special meeting, the effect will be a vote against the Aerial reorganization agreement. By Order of the Board of Directors [SIGNATURE] Michael G. Hron Secretary [ ], [ ] WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THE BOARD OF DIRECTORS OF AERIAL RECOMMENDS UNANIMOUSLY THAT STOCKHOLDERS VOTE "FOR" ADOPTION OF, AND APPROVAL OF THE TRANSACTIONS CONTEMPLATED BY, THE AERIAL REORGANIZATION AGREEMENT. 6 TABLE OF CONTENTS
PAGE ---- INTRODUCTION.......................... 1 QUESTIONS AND ANSWERS ABOUT THE PROPOSED REORGANIZATIONS............ 2 SUMMARY............................... 6 The Companies....................... 6 The Reorganizations................. 6 The Omnipoint Reorganization........ 7 The Aerial Reorganization........... 10 The Investments..................... 14 Material United States Federal Income Tax Consequences.......... 14 Dissenters' Rights of Appraisal..... 14 Selected Historical and Unaudited Pro Forma Financial Data......... 16 RISK FACTORS.......................... 22 THE OMNIPOINT REORGANIZATION.......... 31 The Omnipoint Reorganization Agreement........................ 31 Background of the Omnipoint Reorganization................... 41 Recommendations of the VoiceStream Board; Reasons for the Omnipoint Reorganization................... 44 VoiceStream Fairness Opinion........ 46 Fee Arrangement with Goldman Sachs............................ 52 Recommendations of the Omnipoint Board; Reasons for the Reorganization................... 52 Omnipoint Fairness Opinion.......... 53 Fee Arrangements with Lehman Brothers and Allen & Co. ........ 61 Agreement to Vote in Favor of the Omnipoint Reorganization......... 61 Hutchison Standstill Agreement...... 62 Timing of Closing................... 62 Accounting Treatment................ 62 Transaction Costs................... 62 Dissenters' Rights of Appraisal..... 63 CIRI Transactions................... 63 Hutchison Investments............... 64 Sonera-VoiceStream Investment....... 65 Material United States Federal Income Tax Consequences of the Omnipoint Reorganization......... 65 Consequences of the Omnipoint Reorganization Under the VoiceStream Tax Sharing Agreement........................ 73 Interests of Certain Persons in the Omnipoint Reorganization......... 76 Omnipoint Affiliated Persons..... 77 Miscellaneous.................... 77
PAGE ---- THE AERIAL REORGANIZATION............. 80 The Aerial Reorganization Agreement........................ 80 Background of the Aerial Reorganization................... 92 Recommendations of the VoiceStream Board; Reasons for the Aerial Reorganization................... 110 VoiceStream Fairness Opinion........ 112 Fee Arrangement with Goldman Sachs............................ 117 Recommendations of the Aerial Board; Reasons for the Reorganization... 117 Aerial Fairness Opinion............. 120 Fee Arrangements with Donaldson, Lufkin & Jenrette................ 127 Recommendations of the Aerial Special Committee................ 128 Aerial Special Committee Fairness Opinion.......................... 129 Fee Arrangements with Wasserstein Perella.......................... 140 Agreements Relating to the Aerial Reorganization................... 140 Sonera Settlement Agreement and Release.......................... 144 Timing of Closing................... 144 Accounting Treatment................ 145 Transaction Costs................... 145 Dissenters' Rights of Appraisal..... 145 Litigation.......................... 145 Material United States Federal Income Tax Consequences of the Aerial Reorganization............ 146 Consequences of the Aerial Reorganization under the VoiceStream Tax Sharing Agreement........................ 148 Interests of Certain Persons in the Aerial Reorganization............ 148 VOICESTREAM HOLDINGS VOTING AGREEMENT........................... 158 THE INVESTMENTS....................... 160 Hutchison Investments............... 160 Sonera-VoiceStream Investment....... 160 Sonera-Aerial Investment............ 161 TDS Debt Replacement................ 161 FINANCIAL INFORMATION................. 162 Unaudited Pro Forma Condensed Combined Financial Statements.... 162 Comparative Per Share Market Price and Dividend Information......... 179 THE SPECIAL MEETINGS.................. 180 VoiceStream Record Date; Quorum; Vote Required.................... 180
i 7
PAGE ---- Omnipoint Record Date; Quorum; Vote Required......................... 181 Aerial Record Date; Quorum; Vote Required......................... 181 Agreements to Vote in Favor of the Omnipoint Reorganization......... 182 Agreements to Vote in Favor of the Aerial Reorganization............ 182 Solicitation of Proxies............. 182 Dissenters' Rights of Appraisal..... 184 BUSINESS OF VOICESTREAM HOLDINGS...... 189 Background -- The Wireless Communications Industry.......... 189 The Business of VoiceStream Holdings After the Reorganizations........ 191 Executive Compensation.............. 225 Director Compensation............... 226 Director Committees................. 227 Employment Agreements............... 227 Indemnification Agreements.......... 228 Benefit and Compensation Plans...... 228 Business of VoiceStream, Omnipoint and Aerial....................... 234 CERTAIN LEGAL INFORMATION............. 235 Description of VoiceStream Holdings Capital Stock.................... 235 Comparison of Stockholder Rights.... 236 Opinions from Legal Counsel......... 255 Experts............................. 255 WHERE YOU CAN FIND MORE INFORMATION... 256 GLOSSARY.............................. 258
ANNEX A Agreement and Plan of Reorganization (Omnipoint reorganization) ANNEX B Opinion of Goldman, Sachs & Co. (Omnipoint reorganization) ANNEX C Opinion of Lehman Brothers, Inc. (Omnipoint reorganization) ANNEX D Agreement and Plan of Reorganization (Aerial reorganization) ANNEX E Opinion of Goldman, Sachs & Company (Aerial reorganization) ANNEX F Opinion of Donaldson, Lufkin & Jenrette (Aerial reorganization) ANNEX G Opinion of Wasserstein Perella & Co. (Aerial reorganization) ANNEX H Restated Certificate of Incorporation for VoiceStream Wireless Holding Corporation ANNEX I Washington Dissenters' Rights Statute ANNEX J Delaware Dissenters' Rights Statute
ii 8 INTRODUCTION The document you are reading is referred to as a "joint proxy statement-prospectus". This joint proxy statement-prospectus discusses two separate proposed combinations: (1) the combination of VoiceStream and Omnipoint, pursuant to an Agreement and Plan of Reorganization, dated as of June 23, 1999, through which Omnipoint will become a subsidiary of VoiceStream Holdings; and (2) the combination of VoiceStream and Aerial, pursuant to an Agreement and Plan of Reorganization, dated as of September 17, 1999, through which Aerial will become a subsidiary of VoiceStream Holdings. This joint proxy statement-prospectus also contemplates that upon the completion of the first to occur of the above reorganizations, a subsidiary of VoiceStream Holdings will merge with and into VoiceStream and VoiceStream will become a subsidiary of VoiceStream Holdings. VoiceStream Holdings will then change its name to VoiceStream Wireless Corporation. Except as otherwise described in this joint proxy statement-prospectus, we have assumed that the Omnipoint reorganization will occur prior to the Aerial reorganization. Each of VoiceStream, Omnipoint and Aerial is mailing to its common stockholders this joint proxy statement-prospectus in connection with its special meeting of stockholders. We discuss both the Omnipoint reorganization and the Aerial reorganization in this joint proxy statement-prospectus because it is important for the common stockholders of all three companies to have information about the terms of both proposed reorganizations. In order to present the information in an understandable manner, we have organized this document into the following sections which include the following information: - "QUESTIONS AND ANSWERS ABOUT THE PROPOSED REORGANIZATIONS" answers some common questions that you might have regarding the Omnipoint reorganization and the Aerial reorganization. - "SUMMARY" highlights selected information from this joint proxy statement-prospectus, including summary historical financial information of VoiceStream, Omnipoint and Aerial, and pro forma financial information of VoiceStream Holdings. - "RISK FACTORS" provides information about risks arising as a result of the proposed reorganizations and risks associated with the business operations of VoiceStream Holdings. - "THE OMNIPOINT REORGANIZATION" provides detailed information about the Omnipoint reorganization. - "THE AERIAL REORGANIZATION" provides detailed information about the Aerial reorganization. - "THE INVESTMENTS" provides detailed information about the $957 million Hutchison Investments, the $730 million Sonera Investments and the $420 million TDS Debt Replacement. - "THE VOICESTREAM HOLDINGS VOTING AGREEMENTS" describes the terms of one or more voting agreements that govern voting for certain VoiceStream Holdings directors. - "FINANCIAL INFORMATION" provides pro forma financial information and comparative per share information with respect to the reorganizations. - "THE SPECIAL MEETINGS" provides information about VoiceStream's, Omnipoint's and Aerial's special meetings. - "BUSINESS OF VOICESTREAM HOLDINGS" provides information regarding the pro forma business operations of VoiceStream Holdings. - "WHERE YOU CAN FIND MORE INFORMATION" explains where you can find more information about VoiceStream, Omnipoint and Aerial. - "GLOSSARY" explains the meaning of the defined terms used in this joint proxy statement-prospectus. 1 9 QUESTIONS AND ANSWERS ABOUT THE PROPOSED REORGANIZATIONS Q: WHY ARE VOICESTREAM, OMNIPOINT AND AERIAL PROPOSING TO COMBINE? A: VoiceStream, Omnipoint and Aerial are proposing to combine because we believe that the resulting company will be a strong national competitor in the wireless communications industry. As the wireless communications industry continues to grow, competition increases and new technologies emerge, we believe a combined company will be capable of achieving better performance and will have greater growth potential than any of the separate companies would be able to achieve on its own. We believe this to be true both for a combination of all three companies and a combination involving VoiceStream and either of Omnipoint or Aerial. With all three companies combined, our licenses and pending licenses, together with those of joint ventures in which we will be an investor, will cover 22 of the 25 largest markets in the continental United States and over 200 million people, and will serve over 1.5 million customers. We will be one of the largest companies in the world deploying GSM technology. Q: HOW WILL THE REORGANIZATIONS BE ACCOMPLISHED? A: We have formed VoiceStream Holdings to serve as the parent corporation of VoiceStream, Omnipoint and Aerial. The reorganizations will be accomplished by taking the following steps: Omnipoint Reorganization - the Omnipoint merger will occur, whereby a subsidiary of VoiceStream Holdings will merge with and into Omnipoint, resulting in Omnipoint becoming a subsidiary of VoiceStream Holdings; - the VoiceStream merger will occur, if it has not already occurred as a result of the Aerial reorganization, whereby a separate subsidiary of VoiceStream Holdings will merge with and into VoiceStream, resulting in VoiceStream becoming a subsidiary of VoiceStream Holdings; and - to satisfy FCC requirements, all Omnipoint C and F Block licenses and pending licenses, along with certain related assets and liabilities, will be transferred to joint venture entities controlled by Cook Inlet, in each of which VoiceStream Holdings will hold a 49.9% interest. Aerial Reorganization - the Aerial merger will occur, whereby a separate subsidiary of VoiceStream Holdings will merge with and into Aerial, resulting in Aerial becoming a subsidiary of VoiceStream Holdings; and - the VoiceStream merger will occur, if it has not already occurred as a result of the Omnipoint reorganization, whereby a subsidiary of VoiceStream Holdings will merge with and into VoiceStream, resulting in VoiceStream becoming a subsidiary of VoiceStream Holdings. After the first to occur of either the Omnipoint reorganization or the Aerial reorganization, VoiceStream Holdings will change its name to VoiceStream Wireless Corporation and its headquarters will be located in Bellevue, Washington, where VoiceStream's headquarters are presently located. 2 10 Q: HOW WILL THE INVESTMENTS BE ACCOMPLISHED? A: The investments will be accomplished as follows: Hutchison Investments - $150 million of Omnipoint securities, which were purchased by Hutchison as part of the Omnipoint reorganization, will be exchanged for shares of VoiceStream Holdings common stock at the time of the Omnipoint reorganization; - the balance of $807 million of the Hutchison Investments will be paid at the time of the Omnipoint reorganization; Sonera Investments - the full amount of the proceeds of the $230 million Sonera-Aerial Investment will be paid to Aerial and an Aerial subsidiary on November 1, 1999; - the full amount of the proceeds of the $500 million Sonera-VoiceStream Investment will be paid at the time of the Omnipoint reorganization; TDS Debt Replacement - the $420 million TDS Debt Replacement, whereby TDS will replace debt owed to TDS by an Aerial subsidiary with an equity investment in Aerial, will take place on November 1, 1999. Q: WHAT WILL I RECEIVE IN THE REORGANIZATIONS? A: VoiceStream stockholders: At the first to occur of the Omnipoint reorganization or the Aerial reorganization, you will receive one share of VoiceStream Holdings common stock for each share of VoiceStream common stock that you own. You will not need to exchange your stock certificates because your shares of VoiceStream will be treated as shares of VoiceStream Holdings. Omnipoint stockholders: You will have the opportunity to request: - the "Omnipoint Standard Election," which consists of 0.825 of a share of VoiceStream Holdings common stock plus $8.00 in cash for each share of Omnipoint common stock; - the "Omnipoint Stock Election," by which you ask to receive only VoiceStream Holdings common stock, the actual number of shares of which will be subject to proration and adjustment and determined at the closing of the Omnipoint reorganization pursuant to a formula established in the Omnipoint reorganization agreement; or - the "Omnipoint Cash Election" by which you ask to receive only cash, the actual amount of which will be subject to proration and adjustment and determined at the closing of the Omnipoint reorganization pursuant to a formula established in the Omnipoint reorganization agreement. If you make the Omnipoint Stock Election or the Omnipoint Cash Election, the consideration you actually receive may consist of a mix of VoiceStream Holdings common stock and cash, subject to proration and adjustment. If you fail to return the election form in a timely manner, you will receive the Omnipoint Standard Election. 3 11 Aerial stockholders: You will have the opportunity to request: - the "Aerial Stock Election," which consists of 0.455 of a share of VoiceStream Holdings common stock for each share of Aerial common stock, subject to adjustment under certain circumstances and determined at the closing of the Aerial reorganization pursuant to a formula established in the Aerial reorganization agreement; or - the "Aerial Cash Election" which consists of $18.00 per share in cash for each share of Aerial common stock. Aerial stockholders can make the Aerial Stock Election with respect to all or any portion of their shares of Aerial common stock and the Aerial Cash Election with respect to the balance of their shares. Aerial stockholders who do not timely or properly make the Aerial Cash Election for all or part of their shares of Aerial common stock will be deemed to have made the Aerial Stock Election in connection with such shares. Q: HOW DO I SUBMIT MY REQUEST FOR A PARTICULAR FORM OF PAYMENT FOR MY STOCK? A:Omnipoint stockholders: Following the closing of the Omnipoint reorganization, we will send you a letter of transmittal and an election form, with instructions for making an election as to your preference. Details of the election and exchange procedures are set forth in "The Omnipoint Reorganization -- Conversion of Omnipoint Common Stock to VoiceStream Holdings Common Stock -- Election Procedure; Exchange of Certificates." Aerial stockholders: Following the closing of the Aerial reorganization, we will send you a letter of transmittal and an election form, with instructions for making an election as to your preference. Details of the election and exchange procedures are set forth in "The Aerial Reorganization -- Conversion of Aerial Common Stock to VoiceStream Holdings Common Stock -- Election Procedure, Exchange of Certificates." Q: WHEN DO WE EXPECT TO COMPLETE THE REORGANIZATIONS? A:We plan to complete the Omnipoint reorganization during the fourth quarter of 1999 and the Aerial reorganization during the first quarter of 2000. However, completion of each reorganization is subject to separate governmental and stockholder approvals that we do not control. We therefore cannot predict with any certainty when we will complete the reorganizations. Q: ARE THE CLOSINGS OF THE OMNIPOINT AND AERIAL REORGANIZATIONS CONDITIONED ON EACH OTHER? A:The closing of the Omnipoint reorganization is not conditioned on the closing of the Aerial reorganization. The closing of the Aerial reorganization is subject to the condition that the Omnipoint reorganization has been consummated or terminated, provided that this condition will be deemed satisfied if the Omnipoint reorganization has not been consummated or terminated by June 30, 2000 or, under certain circumstances, March 31, 2000. Q: WHERE WILL I BE ABLE TO OBTAIN QUOTATIONS FOR THE VOICESTREAM HOLDINGS COMMON STOCK? A: After the closing of the first reorganization to occur, VoiceStream Holdings will be renamed VoiceStream Wireless Corporation, and its common stock will be listed for quotation on the Nasdaq Stock Market. The symbol for VoiceStream Holdings common stock will be the same as the current symbol for VoiceStream common stock, "VSTR." 4 12 Q: WHAT SHOULD I DO NOW? A:You should vote your shares by completing, dating and signing your proxy card and mailing it in the enclosed envelope. If you prefer, you may vote by attending your special meeting and voting in person instead of voting by proxy. Q: IF MY STOCK IS HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY STOCK FOR ME? A: Your broker will vote your stock for you only if you provide instructions to your broker on how to vote. You should follow the directions provided by your broker regarding how to instruct your broker to vote your stock. Without instructions, your stock will not be voted for or against any proposal as to which you are entitled to vote, which will have the same effect as voting against such proposal. Q: MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD? A: Yes. You may change your vote according to the proxy revocation procedures set forth in "The Special Meetings -- Solicitation of Proxies." If you execute a proxy, you will retain the right to revoke it at any time before it is voted. You may revoke or change your proxy before it is voted by: (1) sending a written revocation to ChaseMellon Shareholders Services, L.L.C., acting as inspector of elections; or (2) submitting a proxy with a later date that revokes any prior proxies. Your right to revoke your proxy is not limited to compliance with a specified formal procedure, but you should give written notice to the secretary of VoiceStream, Omnipoint or Aerial, as applicable, at or before your special meeting so that the number of shares represented by proxy can be recomputed. Simply attending your company's special meeting, or voting in person without revoking your proxy in writing, will not revoke your proxy. If you have instructed a broker to vote your shares, you must follow directions received from your broker to change your vote or to vote at your respective special meeting. Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW? A: VoiceStream stockholders: No. You will not be required to exchange your VoiceStream common stock certificates. Omnipoint stockholders: No. Following the closing of the Omnipoint reorganization, we will mail written instructions to you explaining how to exchange your Omnipoint certificates. Aerial stockholders: No. Following the closing of the Aerial reorganization, we will mail written instructions to you explaining how to exchange your Aerial certificates. Q: WHOM SHOULD I CALL IF I HAVE QUESTIONS? A: VoiceStream stockholders: If you have questions about the reorganizations or the proposed VoiceStream merger you may call, toll-free: 1-(800) 737-9864. Omnipoint stockholders: If you have questions about the reorganizations or the proposed Omnipoint merger you may call, toll-free: 1-(800) 737-9864. Aerial stockholders: If you have questions about the reorganizations or the proposed Aerial merger you may call, toll-free: 1-(800) 737-9864. 5 13 SUMMARY The following summary highlights selected information from this joint proxy statement-prospectus concerning the Omnipoint reorganization and the Aerial reorganization. You should read this entire joint proxy statement-prospectus carefully before you vote your shares. THE COMPANIES VOICESTREAM WIRELESS CORPORATION 3650 131st Avenue SE Bellevue, Washington 98006 (425) 653-4600 VoiceStream is a leading provider of personal communications services in the western United States. VoiceStream currently owns and operates fully digital PCS networks in 11 major markets. VoiceStream holds 107 broadband PCS licenses. VoiceStream's licenses, together with licenses held by joint ventures in which it is an investor, cover 58% of the geography of the continental United States and 89 million persons. OMNIPOINT CORPORATION 3 Bethesda Metro Center, Suite 400 Bethesda, Maryland 20814 (301) 951-2500 Omnipoint is a leading provider of personal communications services in the eastern United States. Omnipoint currently owns and operates fully digital PCS networks in five major markets. Omnipoint holds 156 broadband PCS licenses and pending licenses. Omnipoint's licenses, together with licenses held by joint ventures in which it is an investor, cover 16% of the geography of the continental United States and 98 million persons. Omnipoint, through its wholly owned subsidiary, Omnipoint Technologies, Inc., is also a developer and supplier of wireless communication technologies, products and engineering services. AERIAL COMMUNICATIONS, INC. 8410 West Bryn Mawr, Suite 1100 Chicago, Illinois 60631 (312) 399-4200 Aerial is a provider of personal communications services in several major markets in the United States. Aerial currently owns and operates fully digital PCS networks in six major markets. Aerial holds six broadband PCS licenses. Aerial's licenses, together with licenses held by joint ventures in which it is an investor, cover 12% of the geography of the continental United States and 28 million persons. THE REORGANIZATIONS We have summarized below certain information describing the Omnipoint reorganization and the Aerial reorganization. Although the reorganizations are separate transactions, they are related because the future operations of VoiceStream Holdings will depend directly upon whether one or both of the reorganizations are approved. Therefore, we believe it is important for the stockholders of 6 14 VoiceStream, Omnipoint and Aerial to understand both transactions prior to voting at their respective special meetings. VoiceStream stockholders. You will be entitled to vote on both the Omnipoint reorganization and the Aerial reorganization. Accordingly, you should read all of the information contained in this joint proxy statement-prospectus. Omnipoint stockholders. You will be entitled to vote on the Omnipoint reorganization. Unless you are also an Aerial stockholder, you will not be entitled to vote on the Aerial reorganization. However, you should carefully read all of the information contained in this joint proxy statement-prospectus because if the Aerial reorganization is approved and completed, Aerial will become a subsidiary of VoiceStream Holdings and its operations will have a direct impact on the future of VoiceStream Holdings. Aerial stockholders. You will be entitled to vote on the Aerial reorganization. Unless you are also an Omnipoint stockholder, you will not be entitled to vote on the Omnipoint reorganization. However, you should carefully read all of the information contained in this joint proxy statement-prospectus because if the Omnipoint reorganization is approved and completed, Omnipoint will become a subsidiary of VoiceStream Holdings and its operations will have a direct impact on the future of VoiceStream Holdings. THE OMNIPOINT REORGANIZATION We have attached the Omnipoint reorganization agreement to this joint proxy statement-prospectus as Annex A. We encourage you to read the Omnipoint reorganization agreement as it is the principal legal document that governs the Omnipoint reorganization. The transactions contemplated by the Omnipoint reorganization agreement encompass several distinct interconnected transactions: - the Omnipoint merger, whereby Omnipoint will become a subsidiary of VoiceStream Holdings; - the VoiceStream merger, whereby VoiceStream will become a subsidiary of VoiceStream Holdings; - the Hutchison Investments, whereby Hutchison PCS (USA) will invest a total of $957 million in VoiceStream Holdings; and - the CIRI Transactions, whereby in order to comply with FCC requirements, Omnipoint will contribute its C and F Block PCS licenses and pending licenses, along with certain related assets and liabilities, in exchange for 49.9% membership interests in each of two joint venture entities controlled by Cook Inlet. Separately, the Sonera-VoiceStream Investment, whereby Sonera will invest a total of $500 million in VoiceStream Holdings, will be made at the time of the Omnipoint reorganization. EXCHANGE CONSIDERATION FOR THE OMNIPOINT REORGANIZATION VoiceStream stockholders: You will receive one share of VoiceStream Holdings common stock in exchange for each share of VoiceStream common stock you own. However, even though you will own the same number of shares in VoiceStream Holdings, your shares will represent a smaller percentage of the outstanding shares of VoiceStream Holdings common stock than the percentage of the outstanding shares of VoiceStream common stock that you owned prior to the Omnipoint 7 15 reorganization. If the Aerial reorganization closes prior to the Omnipoint reorganization, you will receive VoiceStream Holdings common stock at the time of the Aerial reorganization and not at the time of the Omnipoint reorganization. Omnipoint stockholders: You will have the opportunity to request: - the Omnipoint Standard Election, which consists of 0.825 of a share of VoiceStream Holdings common stock plus $8.00 in cash for each share of Omnipoint common stock; - the Omnipoint Stock Election, by which you ask to receive only VoiceStream Holdings common stock, the actual number of shares of which will be subject to proration and adjustment and determined at the closing of the Omnipoint reorganization pursuant to a formula established in the Omnipoint reorganization agreement; or - the Omnipoint Cash Election, by which you ask to receive only cash, the actual amount of which will be subject to proration and adjustment and determined at the closing of the Omnipoint reorganization pursuant to a formula established in the Omnipoint reorganization agreement. In connection with the Omnipoint reorganization, VoiceStream Holdings will issue to Omnipoint common stockholders (1) a total number of shares equal to 0.825 times the number of shares of Omnipoint common stock outstanding at the closing of the Omnipoint reorganization and (2) a total amount of cash equal to $8.00 times the number of shares of Omnipoint common stock outstanding at the closing of the Omnipoint reorganization. If you make the Omnipoint Stock Election or the Omnipoint Cash Election, depending upon the elections of your fellow stockholders, you may receive some mixture of stock and cash instead of receiving only stock or only cash. Keep in mind that the mixture of stock and/or cash you receive could have important tax consequences to you. If you fail to return the election form in a timely manner, you will receive the Omnipoint Standard Election. You will also receive cash instead of any fractional share which results from the conversion of your Omnipoint common stock into VoiceStream Holdings common stock. This amount will reflect the market value of VoiceStream common stock at the closing of the Omnipoint reorganization. EXCHANGE PROCEDURES FOR OMNIPOINT STOCKHOLDERS Following the closing of the Omnipoint reorganization, we will send you a letter of transmittal and an election form, allowing you to choose among the three forms of consideration, along with exchange and share transmittal instructions. To request the form of payment you prefer, you must complete the letter of transmittal and election form. The fully completed election form, together with your certificates representing shares of Omnipoint common stock must be mailed to ChaseMellon Shareholders Services, L.L.C. before the election deadline we establish. If you do not make the Omnipoint Stock Election or the Omnipoint Cash Election prior to the election deadline, you will receive the Omnipoint Standard Election. VOTE REQUIRED FOR THE OMNIPOINT REORGANIZATION VoiceStream stockholders: Eligible holders of at least two-thirds of the outstanding shares of VoiceStream common stock must adopt, and approve the transactions contemplated by, the Omnipoint reorganization agreement. Approval of these transactions will constitute approval of the merger of a subsidiary of VoiceStream Holdings with and into VoiceStream. 8 16 Omnipoint stockholders: Eligible holders of a majority of the outstanding shares of Omnipoint common stock must adopt, and approve the transactions contemplated by, the Omnipoint reorganization agreement. RECOMMENDATIONS TO VOICESTREAM AND OMNIPOINT STOCKHOLDERS VoiceStream stockholders: The board of directors of VoiceStream has voted unanimously to approve the Omnipoint reorganization agreement and the transactions contemplated by that agreement. The VoiceStream board believes that the proposed transactions are in your best interests and recommends that you vote "FOR" the proposal to adopt, and approve the transactions contemplated by, the Omnipoint reorganization agreement. Omnipoint stockholders: The board of directors of Omnipoint has voted unanimously to approve the Omnipoint reorganization agreement and the transactions contemplated by that agreement. The Omnipoint board believes that the proposed transactions are in your best interests and recommends that you vote "FOR" the proposal to adopt, and approve the transactions contemplated by, the Omnipoint reorganization agreement. CONDITIONS TO THE OMNIPOINT REORGANIZATION The completion of the Omnipoint reorganization depends upon meeting a number of conditions, including: - adoption of, and approval of the transactions contemplated by, the Omnipoint reorganization agreement by the stockholders of each of VoiceStream and Omnipoint; - absence of any new law or any injunction that effectively prohibits the Omnipoint reorganization; - receipt of all requisite orders and approvals of the FCC; - effectiveness of the registration statement registering the shares of VoiceStream Holdings' common stock to be issued pursuant to the Omnipoint reorganization agreement; - consummation of the Hutchison Investments and CIRI Transactions; - receipt of legal opinions regarding certain federal income tax consequences of the Omnipoint reorganization; and - exercise of dissenters' rights with respect to no more than 10% of VoiceStream shares or Omnipoint shares. Further, VoiceStream is not required to complete the proposed transaction: - unless it receives a legal opinion that the completion of the Omnipoint reorganization should not cause the spin-off of VoiceStream from Western Wireless, which occurred on May 3, 1999, to fail to be a tax-free transaction to the holders of Western Wireless stock; or - if certain changes occur which prevent VoiceStream Holdings from refinancing certain Omnipoint indebtedness which will become due and payable or redeemable prior to its stated maturity as a result of the Omnipoint reorganization. 9 17 TERMINATION FEE IN CONNECTION WITH THE OMNIPOINT REORGANIZATION The Omnipoint reorganization agreement requires Omnipoint to pay VoiceStream a termination fee of $70 million if the Omnipoint reorganization agreement terminates under certain circumstances. INTERESTS OF EXECUTIVE OFFICERS AND DIRECTORS OF VOICESTREAM AND OMNIPOINT IN THE OMNIPOINT REORGANIZATION VoiceStream stockholders: In considering the recommendation of the VoiceStream board, you should be aware of the interests that executive officers and directors of VoiceStream have in the proposed transaction. See "The Omnipoint Reorganization -- Interests of Certain Persons in the Omnipoint Reorganization; VoiceStream Affiliated Persons." In determining the fairness of the proposed transaction to stockholders of VoiceStream, the VoiceStream board took into account these interests. These interests are different from and in addition to your and their interests as stockholders. Omnipoint stockholders: In considering the recommendation of the Omnipoint board, you should be aware of the interests that executive officers and directors of Omnipoint have in the proposed transaction. See "The Omnipoint Reorganization -- Interests of Certain Persons in the Omnipoint Reorganization; Omnipoint Affiliated Persons." In determining the fairness of the proposed transaction to stockholders of Omnipoint, the Omnipoint board took into account these interests. These interests are different from and in addition to your and their interests as stockholders. OPINIONS OF FINANCIAL ADVISORS IN THE OMNIPOINT REORGANIZATION In deciding to approve the Omnipoint reorganization agreement, the boards of VoiceStream and Omnipoint received opinions from their respective financial advisors as to the fairness of the Omnipoint reorganization consideration from a financial point of view. VoiceStream stockholders: VoiceStream received an opinion from its financial advisor, Goldman, Sachs & Co. The full text of this opinion, dated June 23, 1999, is attached as Annex B to this joint proxy statement-prospectus and should be read carefully in its entirety. Omnipoint stockholders: Omnipoint received an opinion from its financial advisor, Lehman Brothers. The full text of this opinion, dated June 23, 1999, is attached as Annex C to this joint proxy statement-prospectus and should be read carefully in its entirety. The opinions of Goldman Sachs and Lehman Brothers are directed to the boards of VoiceStream and Omnipoint, respectively, and do not constitute a recommendation to any stockholder with respect to any matters related to the Omnipoint reorganization. THE AERIAL REORGANIZATION We have attached the Aerial reorganization agreement to this joint proxy statement-prospectus as Annex D. We encourage you to read the Aerial reorganization agreement as it is the principal legal document that governs the Aerial reorganization. The transactions contemplated by the Aerial reorganization agreement encompass several interconnected transactions: - the Aerial merger, whereby Aerial will become a subsidiary of VoiceStream Holdings; - the VoiceStream merger, whereby VoiceStream, if it has not previously done so, will become a subsidiary of VoiceStream Holdings; 10 18 - the $420 million TDS Debt Replacement, whereby TDS will replace debt owed by an Aerial subsidiary with an equity investment in Aerial; and - the $230 million Sonera-Aerial Investment. EXCHANGE CONSIDERATION FOR THE AERIAL REORGANIZATION VoiceStream stockholders. In the event the Aerial reorganization occurs prior to the Omnipoint reorganization, you will receive, upon closing of the Aerial reorganization, one share of VoiceStream Holdings common stock in exchange for each share of VoiceStream common stock you own. However, even though you will own the same number of shares of VoiceStream Holdings common stock, your shares will represent a smaller percentage of the outstanding shares of VoiceStream Holdings common stock than the percentage of the outstanding shares of VoiceStream common stock that you owned prior to the Aerial reorganization. If, as anticipated, the Omnipoint reorganization has closed prior to the closing of the Aerial reorganization, you will have received VoiceStream Holdings common stock upon closing of the Omnipoint reorganization and will receive nothing further upon closing of the Aerial reorganization. Aerial stockholders: You will have the opportunity to request for each share of Aerial common stock which you own: - the Aerial Stock Election, which consists of 0.455 of a share of VoiceStream Holdings common stock, subject to adjustment under certain circumstances to be determined at the closing of the Aerial reorganization pursuant to the terms of the Aerial reorganization agreement; or - the Aerial Cash Election, which consists of $18.00 per share in cash. Aerial stockholders can make the Aerial Stock Election with respect to all or any portion of their shares of Aerial common stock and the Aerial Cash Election with respect to the balance of their shares. Aerial stockholders who do not timely or properly make the Aerial Cash Election for all or part of their shares of Aerial common stock will be deemed to have made the Aerial Stock Election in connection with such shares. Prior to making the Aerial Cash Election at $18.00 per Aerial Common Share, Aerial stockholders should consider carefully the then current market value of the VoiceStream common stock that will be received under the Aerial Stock Election. Based on the closing market price of VoiceStream common stock on , 1999, the Aerial Stock Election had a value of $ per Aerial Common Share. You will also receive cash instead of any fractional share that results from the conversion of your Aerial common stock into VoiceStream Holdings common stock. This amount will reflect the market value of VoiceStream common stock at the closing of the Aerial reorganization. EXCHANGE PROCEDURES FOR AERIAL STOCKHOLDERS Following the closing of the Aerial reorganization, we will send you a letter of transmittal and an election form, allowing you to choose among the two forms of consideration, along with exchange and share transmittal instructions. To request the form of payment you prefer, you must complete the letter of transmittal and election form. The fully completed election form, together with your certificates representing shares of Aerial common stock must be mailed to ChaseMellon Shareholders Services, L.L.C. before the 11 19 election deadline we establish. If you do not make the Aerial Cash Election prior to the election deadline, you will receive the Aerial Stock Election. VOTE REQUIRED FOR THE AERIAL REORGANIZATION VoiceStream stockholders: Eligible holders of two-thirds of the outstanding shares of VoiceStream common stock must adopt, and approve the transactions contemplated by, the Aerial reorganization agreement. Approval of these transactions will constitute approval of the merger of a subsidiary of VoiceStream Holdings with and into VoiceStream. Aerial stockholders: Eligible holders representing a majority of the voting power of the outstanding Aerial Common Shares and Aerial Series A Common Shares voting together as a single class must adopt, and approve the transactions contemplated by, the Aerial reorganization agreement. TDS, which holds approximately 98% of such combined voting power, has agreed to vote "FOR" approval of the Aerial reorganization and the other transactions contemplated by the Aerial reorganization agreement. Accordingly, the Aerial proposal will be approved regardless of the vote of other Aerial stockholders. RECOMMENDATIONS TO VOICESTREAM AND AERIAL STOCKHOLDERS VoiceStream stockholders: The board of directors of VoiceStream has voted unanimously to approve the Aerial reorganization agreement and the transactions contemplated by that agreement. The VoiceStream board believes that the proposed transactions are in your best interests and recommends that you vote "FOR" the proposal to adopt, and approve the transactions contemplated by, the Aerial reorganization agreement. Aerial stockholders: The board of directors of Aerial has voted unanimously to approve the Aerial reorganization agreement and the transactions contemplated by that agreement. The Aerial board believes that the proposed transactions are in your best interests and recommends that you vote "FOR" the proposal to adopt, and approve the transactions contemplated by, the Aerial reorganization agreement. CONDITIONS TO THE AERIAL REORGANIZATION The completion of the Aerial reorganization depends upon meeting a number of conditions, including: - adoption of, and approval of the transactions contemplated by, the Aerial reorganization agreement by the stockholders of each of VoiceStream and Aerial; - absence of any new law or any injunction that effectively prohibits the Aerial reorganization; - receipt of all requisite orders and approvals of the FCC; - effectiveness of the registration statement registering the shares of VoiceStream Holdings' common stock to be issued pursuant to the Aerial reorganization agreement; - consummation or termination of the Omnipoint reorganization, provided that this condition will be deemed satisfied if the Omnipoint reorganization has not been consummated or terminated by June 30, 2000 or, under certain circumstances, March 31, 2000; - consummation of the TDS Debt Replacement and the Sonera-Aerial Investment; - execution of certain agreements; - acquisition, repayment or amendment of certain Aerial debt; 12 20 - receipt of legal opinions regarding certain federal income tax consequences of the Aerial reorganization; and - exercise of dissenters' rights with respect to no more than 7.5% of VoiceStream common stock. TERMINATION FEE IN CONNECTION WITH THE AERIAL REORGANIZATION The Aerial reorganization agreement requires Aerial to pay VoiceStream a termination fee of $40 million if the Aerial reorganization agreement terminates under certain circumstances. INTERESTS OF EXECUTIVE OFFICERS AND DIRECTORS OF VOICESTREAM AND AERIAL IN THE AERIAL REORGANIZATION VoiceStream stockholders: In considering the recommendation of the VoiceStream board, you should be aware of the interests that executive officers and directors of VoiceStream have in the proposed transaction. See "The Aerial Reorganization -- Interests of Certain Persons in the Aerial Reorganization; VoiceStream Affiliated Persons." In determining the fairness of the proposed transaction to stockholders of VoiceStream, the VoiceStream board took into account these interests. These interests are different from and in addition to your and their interests as stockholders. Aerial stockholders: In considering the recommendations of the Aerial board, you should be aware of the interests that executive officers and directors of Aerial have in the proposed transaction. See "The Aerial Reorganization -- Interests of Certain Persons in the Aerial Reorganization; Aerial Affiliated Persons." Due to these interests, the Aerial board appointed a transaction committee and a special committee to review the fairness of the proposed transaction. In determining the fairness of the transaction to stockholders of Aerial, the Aerial board, the transaction committee and the special committee took into account these interests. These interests are different from and in addition to your and their interests as stockholders. OPINIONS OF FINANCIAL ADVISORS IN THE AERIAL REORGANIZATION In deciding to approve the Aerial reorganization agreement, the boards of VoiceStream and Aerial and the special committee of the Aerial board received opinions from their respective financial advisors as to the fairness of the Aerial reorganization consideration from a financial point of view. VoiceStream Stockholders: VoiceStream received an opinion from its financial advisor, Goldman Sachs. The full text of this opinion, dated September 17, 1999, is attached as Annex E to this joint proxy statement-prospectus and should be read carefully in its entirety. Aerial Stockholders: The Aerial board of directors received an opinion from Aerial's financial advisor, Donaldson, Lufkin & Jenrette. The full text of this opinion, dated September 17, 1999, is attached as Annex F to this joint proxy statement-prospectus and should be read carefully in its entirety. The special committee of the Aerial board of directors received an opinion from its financial advisor, Wasserstein Perella & Co. The full text of this opinion, dated September 17, 1999, is attached as Annex G to this joint proxy statement-prospectus and should be read carefully in its entirety. The opinions of Goldman Sachs, Donaldson, Lufkin & Jenrette, and Wasserstein Perella are directed to the VoiceStream board, the Aerial board and the special committee of the Aerial board, respectively, and do not constitute a recommendation to any stockholder with respect to any matters related to the Aerial reorganization. 13 21 THE INVESTMENTS In connection with the reorganizations, Hutchison Telecommunications and Hutchison PCS (USA), Sonera and TDS have agreed to make certain investments, as follows: Hutchison Investments. At the closing of the Omnipoint reorganization, $150 million of Omnipoint securities purchased previously by Hutchison PCS (USA) will be exchanged for shares of common stock of VoiceStream Holdings, and an additional $807 million will be invested by the Hutchison Entities directly in VoiceStream Holdings for a combination of VoiceStream Holdings common stock and convertible preferred stock, at an equivalent price of $29.00 per common share, for a total investment of $957 million. Sonera Investments. At the closing of the Omnipoint reorganization, in the Sonera-VoiceStream Investment, Sonera will invest $500 million directly in VoiceStream Holdings by purchasing shares of common stock at $57.00 per share. On November 1, 1999, in the Sonera-Aerial Investment, Sonera will invest $75 million in Aerial and $155 million in an Aerial subsidiary at an equivalent price of $22.00 per share of Aerial common stock. The shares received by Sonera in the Aerial subsidiary will be exchanged for shares of Aerial common stock immediately prior to the closing of the Aerial reorganization, resulting in a total investment of $230 million in Aerial. Sonera is not obligated to make this exchange unless and until all conditions to the closing of the Aerial reorganization have been satisfied or waived. TDS Debt Replacement. On November 1, 1999, TDS will replace $420 million of Aerial subsidiary debt owed to TDS with equity of Aerial at $22.00 per share of Aerial common stock. MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES VoiceStream stockholders: We expect that VoiceStream's stockholders will not recognize gain or loss for federal income tax purposes as a result of the Omnipoint reorganization or Aerial reorganization. Omnipoint stockholders: We expect that Omnipoint's stockholders will not recognize gain or loss for federal income tax purposes as a result of the Omnipoint reorganization to the extent they receive VoiceStream Holdings common stock, but that they will recognize gain on any cash they receive. Aerial stockholders: We expect that Aerial's stockholders will not recognize gain or loss for federal income tax purposes as a result of the Aerial reorganization to the extent they receive VoiceStream Holdings common stock, but that they will recognize gain on any cash they receive. Dissenting stockholders: VoiceStream and Omnipoint stockholders who exercise dissenters' rights will recognize gain or loss for federal income tax purposes on any cash they receive. Tax matters are very complicated, and the tax consequences of the reorganizations to you will depend on the facts of your own situation. You should consult your tax advisor for a full understanding of the tax consequences of the reorganizations to you. DISSENTERS' RIGHTS OF APPRAISAL VoiceStream stockholders: VoiceStream common stockholders who follow certain statutory procedures will have the right under Washington law to demand payment in cash for the fair value of their VoiceStream common stock instead of the shares of VoiceStream Holdings common stock they would otherwise receive as a result of the VoiceStream merger. The VoiceStream merger will occur at the time of the first to occur of the Omnipoint reorganization or the Aerial reorganization. Since it is uncertain which reorganization will occur first, you must vote against both reorganizations to ensure 14 22 that you will be able to exercise your dissenters' rights of appraisal in connection with the VoiceStream merger. Annex I contains the text of the applicable sections of Washington law. Omnipoint stockholders: Omnipoint common stockholders who follow certain statutory procedures and do not vote in favor of the Omnipoint reorganization agreement have appraisal rights under Delaware law that may allow them to receive cash in the amount of the fair market value of their Omnipoint common stock instead of the consideration they would otherwise receive as a result of the Omnipoint reorganization. Annex J contains the text of the applicable sections of Delaware law. Aerial stockholders: Aerial common stockholders do not have appraisal rights under Delaware law in connection with the Aerial reorganization. Annex J contains the text of the applicable sections of Delaware law. 15 23 SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA We are providing the following summary information to aid you in your analysis of the financial aspects of the reorganizations. We derived this information from the audited financial statements of VoiceStream, Omnipoint and Aerial as of and for each of the five years ended December 31, 1998, and the unaudited financial statements as of and for the six months ended June 30, 1999. The information is only a summary and you should read it together with: - the unaudited pro forma condensed combined financial statements, and accompanying notes, of VoiceStream Holdings; - the historical audited consolidated financial statements, and accompanying notes, of VoiceStream, Omnipoint and Aerial; and - "Management's Discussion and Analysis of Financial Condition and Results of Operations" for VoiceStream, Omnipoint and Aerial. All of the above information is included in or incorporated by reference into this joint proxy statement-prospectus. See "Where You Can Find More Information" for a list of the documents incorporated by reference. The unaudited pro forma combined data below is for illustrative purposes only. You should not rely on this information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that VoiceStream Holdings will experience after the reorganizations. The pro forma financial data and comparative per share data included in this section is based on the historical consolidated balance sheets and related historical consolidated statements of operations of VoiceStream, Omnipoint and Aerial giving effect to the reorganizations using the purchase method of accounting, and taking into account: - the CIRI Transactions; - the Hutchison Investments; - the assumed conversion and subsequent exchange of all outstanding shares of the Omnipoint 7% Convertible Preferred; - the TDS Debt Replacement; and - the Sonera Investments. 16 24 VOICESTREAM HOLDINGS UNAUDITED PRO FORMA FINANCIAL DATA The following unaudited pro forma condensed combined balance sheet data as of June 30, 1999, assumes that both the Omnipoint reorganization and the Aerial reorganization occurred on June 30, 1999 and the unaudited pro forma condensed combined statements of operations data assumes that both the Omnipoint reorganization and the Aerial reorganization occurred on January 1, 1998. For presentation of the pro forma financial aspects of each of these reorganizations, both individually and combined, see "Financial Information -- Unaudited Pro Forma Condensed Combined Financial Statements."
SIX MONTHS ENDED YEAR ENDED JUNE 30, 1999 DECEMBER 31, 1998 ---------------- ----------------- (DOLLARS IN THOUSANDS) PRO FORMA COMBINED STATEMENTS OF OPERATIONS DATA: Revenues: Subscriber revenues....................................... $ 328,692 $ 357,039 Roamer revenues........................................... 15,371 16,236 Equipment revenues........................................ 66,922 96,445 License fees and engineering services..................... 2,266 4,784 ----------- ----------- Total revenues.................................... 413,251 474,504 ----------- ----------- Operating Expenses: Cost of service........................................... 129,487 212,566 Cost of equipment sales................................... 151,470 254,866 Cost of engineering services.............................. 1,686 4,168 Research and development.................................. 171 16,639 General and administrative................................ 184,199 332,427 Sales and marketing....................................... 183,214 261,278 Depreciation and amortization............................. 312,710 542,381 Stock based compensation.................................. 48,879 ----------- ----------- Total operating expenses.......................... 1,011,816 1,624,325 ----------- ----------- Operating loss.............................................. (598,565) (1,149,821) Other income (expense): Interest and financing expense, net....................... (156,425) (214,854) Equity in net loss of unconsolidated affiliates........... (54,004) (97,515) Interest income and other, net............................ 12,801 14,410 ----------- ----------- Total other income (expense)...................... (197,628) (297,959) ----------- ----------- Loss before income taxes.......................... (796,193) (1,447,780) Income tax benefit (expense)................................ 113,230 (2,579) ----------- ----------- Net loss.......................................... $ (682,963) $(1,450,359) =========== =========== PRO FORMA COMBINED BALANCE SHEET DATA: Current assets.............................................. $ 1,622,060 Property and equipment, net................................. 2,137,765 Licensing costs and other intangible assets, net............ 6,797,863 Other assets................................................ 269,232 ----------- Total assets...................................... $10,826,920 =========== Current liabilities......................................... $ 616,009 Long-term debt.............................................. 3,628,202 Deferred tax liability, net................................. 17,456 VoiceStream Holdings Junior Preferred....................... 650,400 Shareholders' equity........................................ 5,914,853 ----------- Total liabilities and shareholders' equity........ $10,826,920 ===========
17 25 SELECTED VOICESTREAM CONSOLIDATED FINANCIAL DATA The following table sets forth certain selected consolidated financial and operating data for VoiceStream as of and for each of the five years in the period ended December 31, 1998 and as of and for the six months ended June 30, 1999. Financial data as of and for each of the five years in the period ended December 31, 1998, were derived from VoiceStream's audited consolidated financial statements and notes thereto. All the data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations of VoiceStream" and VoiceStream's consolidated financial statements and notes thereto, incorporated herein by reference. See "Where You Can Find More Information."
SIX MONTHS YEARS ENDED DECEMBER 31, ENDED JUNE 30, ---------------------------------------------------------------- 1999 1998 1997 1996 1995 1994 -------------- ----------- ----------- ----------- ----------- -------- (UNAUDITED) (DOLLARS IN THOUSANDS) CONSOLIDATED STATEMENTS OF OPERATIONS DATA: Revenues: Subscriber revenues..................... $ 137,971 $ 123,966 $ 52,360 $ 7,794 Roamer revenues......................... 3,560 3,506 227 Equipment revenues...................... 30,351 40,490 25,143 9,745 ----------- ----------- ----------- ----------- Total revenues...................... 171,882 167,962 77,730 17,539 ----------- ----------- ----------- ----------- Operating expenses: Cost of service......................... 37,469 50,978 43,183 12,470 Cost of equipment sales................. 60,908 77,071 53,469 20,789 General and administrative.............. 48,396 75,343 51,678 20,209 $ 3,069 Sales and marketing..................... 85,806 85,447 59,466 31,505 339 Depreciation and amortization........... 55,414 83,767 66,875 14,395 269 Stock based compensation................ 47,303 ----------- ----------- ----------- ----------- ----------- Total operating expenses............ 335,296 372,606 274,671 99,368 3,677 ----------- ----------- ----------- ----------- ----------- Operating loss............................ (163,414) (204,644) (196,941) (81,829) (3,677) Other income (expense): Interest and financing expense, net..... (31,881) (34,118) (57,558) (3,607) (40) Equity in net loss of unconsolidated affiliates............................ (21,696) (24,120) (9,327) (954) (11) Interest income and other, net.......... 6,988 8,616 11 40 ----------- ----------- ----------- ----------- ----------- Net loss............................ $ (210,003) $ (254,266) $ (263,815) $ (86,350) $ (3,728) =========== =========== =========== =========== =========== CONSOLIDATED BALANCE SHEET DATA: Current assets............................ $ 155,954 $ 59,398 $ 49,945 $ 59,515 $ 1,684 $ 10,000 Property and equipment, net............... 679,738 619,280 420,638 318,473 37,914 220 Licensing cost and other intangible assets, net............................. 323,185 312,040 315,653 227,997 145,728 Other assets.............................. 212,504 60,938 36,055 8,142 8,484 ----------- ----------- ----------- ----------- ----------- -------- Total assets........................ $ 1,371,381 $ 1,051,656 $ 822,291 $ 614,127 $ 193,810 $ 10,220 =========== =========== =========== =========== =========== ======== Current liabilities....................... $ 141,328 $ 125,026 $ 126,184 $ 155,769 $ 25,444 $ 10,158 Long-term debt............................ 1,025,000 540,000 300,000 143,000 13,000 Other long-term liabilities............... 173,705 7,613 Shareholders' equity...................... 205,053 386,630 396,107 141,653 147,753 62 ----------- ----------- ----------- ----------- ----------- -------- Total liabilities and shareholders' equity............................ $ 1,371,381 $ 1,051,656 $ 822,291 $ 614,127 $ 193,810 $ 10,220 =========== =========== =========== =========== =========== ======== OTHER DATA: Licensed population....................... 62,593,000 62,593,000 62,808,000 19,488,000 14,853,000 Covered population(1)..................... 19,718,000 16,121,000 12,529,000 6,133,000 Subscribers/Users: Subscribers............................. 553,200 322,400 128,600 35,500 Prepaid users........................... 10,000 10,400 EBITDA(2)................................. $ (60,697) $ (120,877) $ (130,066) $ (67,434) $ (3,408) CASH FLOWS PROVIDED BY (USED IN): Operating activities...................... $ (66,220) $ (112,931) $ (198,129) $ (81,272) $ (4,115) $(10,220) Investing activities...................... $ (304,027) $ (253,633) $ (370,202) $ (342,587) $ (145,632) $ (220) Financing activities...................... $ 442,046 $ 374,284 $ 563,254 $ 429,250 $ 149,770 $ 10,000
- ------------------------- (1) Represents population that is covered by our consolidated systems. (2) EBITDA represents operating loss before depreciation and amortization and non-cash stock based compensation. Management believes EBITDA provides meaningful additional information on VoiceStream's operating results and on its ability to service its long-term debt and other fixed obligations and to fund VoiceStream's continuing 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 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, VoiceStream's presentation may not be comparable to other similarly titled measures of other companies. 18 26 SELECTED OMNIPOINT CONSOLIDATED FINANCIAL DATA The following table sets forth certain selected consolidated financial and operating data for Omnipoint as of and for each of the five years ended December 31, 1998 and as of and for the six months ended June 30, 1999. Financial data as of and for each of the five years ended December 31, 1998, were derived from Omnipoint's audited consolidated financial statements and notes thereto. Certain reclassifications have been made to Omnipoint's historical presentation to conform to VoiceStream's presentation. These reclassifications do not have a material impact on the results of Omnipoint's operations or financial position for the periods presented. All the data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations of Omnipoint" and Omnipoint's consolidated financial statements and notes thereto, incorporated herein by reference. See "Where You Can Find More Information".
SIX MONTHS YEARS ENDED DECEMBER 31, ENDED ------------------------------------------------------------------- JUNE 30, 1999 1998 1997 1996 1995 1994 ------------- ----------- ----------- ----------- ----------- ----------- (UNAUDITED) (DOLLARS IN THOUSANDS) CONSOLIDATED STATEMENTS OF OPERATIONS DATA: Revenues: Subscriber revenues....................... $ 116,255 $ 127,594 $ 29,448 $ 269 Roamer revenues........................... 10,625 9,999 1,318 Equipment revenues........................ 26,838 26,616 11,611 262 License fees and engineering services..... 2,266 4,784 9,573 $ 3,000 ------------ ----------- ----------- ----------- ----------- Total revenues...................... 155,984 168,993 51,950 531 3,000 ------------ ----------- ----------- ----------- ----------- Operating expenses: Cost of service........................... 69,493 120,634 45,367 3,230 Cost of equipment sales................... 77,505 100,074 61,895 Cost of engineering services.............. 1,686 4,168 1,073 Research and development.................. 171 16,639 23,932 34,975 $ 14,345 7,018 General and administrative................ 73,252 128,031 38,246 24,407 Sales and marketing....................... 74,486 127,211 67,129 22,733 12,619 6,290 Depreciation and amortization............. 93,467 129,043 52,644 15,587 11,038 1,125 Stock based compensation.................. 1,576 ------------ ----------- ----------- ----------- ----------- ----------- Total operating expenses............ 391,636 625,800 290,286 100,932 38,002 14,433 ------------ ----------- ----------- ----------- ----------- ----------- Operating loss.............................. (235,652) (456,807) (238,336) (100,401) (38,002) (11,433) Other income (expense): Interest and financing expense............ (126,490) (187,187) (89,061) (37,226) (517) (1,519) Equity in loss of unconsolidated affiliates.............................. (3,006) (11,879) Interest income and other................. 4,824 3,206 12,978 10,697 749 428 Gain on sale of subsidiary stock.......... 3,194 ------------ ----------- ----------- ----------- ----------- ----------- Loss before extraordinary item...... (360,324) (652,667) (314,419) (126,930) (37,770) (9,330) Extraordinary loss.......................... (11,115) (6,591) ------------ ----------- ----------- ----------- ----------- ----------- Net loss............................ $ (360,324) $ (663,782) $ (321,010) $ (126,930) $ (37,770) $ (9,330) ============ =========== =========== =========== =========== =========== CONSOLIDATED BALANCE SHEET DATA: Current assets.............................. $ 349,577 $ 321,669 $ 197,279 $ 344,657 $ 64,134 $ 6,348 Property and equipment, net................. 1,051,150 1,013,225 579,050 186,851 18,957 3,015 Licensing cost and other intangible assets, net....................................... 728,127 711,823 995,187 751,965 391,020 347,090 Other assets................................ 28,617 13,402 6,937 135,999 879 4,492 ------------ ----------- ----------- ----------- ----------- ----------- Total assets........................ $ 2,157,471 $ 2,060,119 $ 1,778,453 $ 1,419,472 $ 474,990 $ 360,945 ============ =========== =========== =========== =========== =========== Current liabilities......................... $ 427,593 $ 362,969 $ 289,444 $ 98,342 $ 65,544 $ 3,253 Long-term debt.............................. 2,470,371 2,283,170 1,670,915 1,187,356 395,867 349,206 Preferred stock (mezzanine)................. 44,127 15,902 Shareholders' equity (deficit).............. (740,493) (586,020) (181,906) 133,774 (30,548) (7,416) ------------ ----------- ----------- ----------- ----------- ----------- Total liabilities and shareholders' equity (deficit).................. $ 2,157,471 $ 2,060,119 $ 1,778,453 $ 1,419,472 $ 474,990 $ 360,945 ============ =========== =========== =========== =========== =========== OTHER DATA: Licensed population......................... 100,000,000 95,000,000 96,500,000 40,200,000 26,800,000 26,800,000 Covered population(1)....................... 46,000,000 45,600,000 16,000,000 Subscribers................................. 579,200 370,000 139,800 EBITDA(2)................................... $ (140,609) $ (327,764) $ (185,692) $ (84,814) $ (26,964) $ (10,308) CASH FLOWS PROVIDED BY (USED IN): Operating activities........................ $ (176,494) $ (422,665) $ (217,666) $ (64,508) $ (19,747) $ (7,895) Investing activities........................ $ (158,361) $ (563,411) $ (441,503) $ (290,490) $ (43,991) $ 720 Financing activities........................ $ 354,725 $ 1,117,227 $ 507,721 $ 512,243 $ 115,979 $ (126)
- ------------------------- (1) Represents population that is covered by our consolidated, directly managed systems. (2) EBITDA represents operating loss before depreciation and amortization and non-cash stock based compensation. Management believes EBITDA provides meaningful additional information on Omnipoint's operating results and on its ability to service its long-term debt and other fixed obligations and to fund Omnipoint's continuing 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 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, Omnipoint's presentation may not be comparable to other similarly titled measures of other companies. 19 27 SELECTED AERIAL CONSOLIDATED FINANCIAL DATA The following table sets forth certain selected consolidated financial and operating data for Aerial as of and for each of the five years in the period ended December 31, 1998 and as of and for the six months ended June 30, 1999. Financial data as of and for each of the five years in the period ended December 31, 1998, were derived from Aerial's audited consolidated financial statements and notes thereto. Certain reclassifications have been made to Aerial's historical presentation to conform to VoiceStream's presentation. These reclassifications do not have a material impact on the results of Aerial's operations or financial position for the periods presented. All the data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations of Aerial" and Aerial's consolidated financial statements and notes thereto, incorporated herein by reference. See "Where You Can Find More Information".
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED ---------------------------------------------------------------- JUNE 30, 1999 1998 1997 1996 1995 1994 ---------------- ----------- ----------- ----------- ----------- -------- (UNAUDITED) (DOLLARS IN THOUSANDS) CONSOLIDATED STATEMENTS OF OPERATIONS DATA: Revenues: Subscriber revenues........................ $ 91,070 $ 121,160 $ 32,316 Roamer revenues............................ 2,300 3,231 Equipment revenues......................... 13,433 31,514 23,645 ----------- ----------- ----------- Total revenues....................... 106,803 155,905 55,961 ----------- ----------- ----------- Operating expenses: Cost of service............................ 33,845 57,396 23,210 Cost of equipment sales.................... 25,557 87,715 71,454 General and administrative................. 66,251 139,458 95,058 $ 28,843 $ 4,795 $ 858 Sales, and marketing....................... 34,122 67,920 38,077 Depreciation and amortization.............. 44,209 83,401 40,554 Development costs.......................... 5,773 15,107 2,767 1,119 ----------- ----------- ----------- ----------- ----------- -------- Total operating expenses............. 203,984 435,890 274,126 43,950 7,562 1,977 ----------- ----------- ----------- ----------- ----------- -------- Operating loss.............................. (97,181) (279,985) (218,165) (43,950) (7,562) (1,977) Other income (expense): Interest and financing expense -- affiliate..................... (33,568) (62,137) (21,558) (1,960) (1,051) (50) Interest and financing expense -- other.... (10,397) (18,010) (5,507) (802) Equity in loss of unconsolidated affiliates............................... (100) (128) (2,518) (304) Minority share of loss..................... 4,902 23,620 Interest income and other -- affiliate..... 95 4,488 49 2 Interest income and other -- other......... 489 1,324 2,402 1,158 Gain on sale of PCS licenses............... 2,582 ----------- ----------- ----------- ----------- ----------- -------- Loss before income taxes............. (135,855) (335,316) (245,251) (38,788) (8,564) (2,025) Income tax benefit (expense)................ 113,230 (2,579) (1,806) 867 2,096 742 ----------- ----------- ----------- ----------- ----------- -------- Net loss............................. $ (22,625) $ (337,895) $ (247,057) $ (37,921) $ (6,468) $ (1,283) =========== =========== =========== =========== =========== ======== CONSOLIDATED BALANCE SHEET DATA: Current assets.............................. $ 50,111 $ 48,724 $ 58,009 $ 109,131 $ 42,323 $ 254 Property and equipment, net................. 569,252 576,953 553,174 252,423 12,087 Licensing costs and other intangible assets, net........................................ 328,003 333,816 347,973 304,354 305,818 20,401 Investments in unconsolidated affiliates.... 1,902 1,444 1,298 6,771 Other assets................................ 810 410 194 148 216 665 ----------- ----------- ----------- ----------- ----------- -------- Total assets......................... $ 950,078 $ 961,347 $ 960,648 $ 672,827 $ 360,444 $ 21,320 =========== =========== =========== =========== =========== ======== Current liabilities......................... $ 686,130 $ 86,124 $ 109,769 $ 119,326 $ 9,182 $ 105 Long-term debt.............................. 241,501 827,953 644,673 103,743 60,238 22,659 Deferred tax liability, net................. 17,456 16,357 13,779 11,973 9,742 Minority interest........................... 479 5,835 Shareholders' equity........................ 4,512 25,078 192,427 437,785 281,282 (1,444) ----------- ----------- ----------- ----------- ----------- -------- Total liabilities and shareholders' equity............................. $ 950,078 $ 961,347 $ 960,648 $ 672,827 $ 360,444 $ 21,320 =========== =========== =========== =========== =========== ======== OTHER DATA: Licensed population......................... 27,500,000 27,700,000 27,600,000 27,600,000 27,300,000 Covered population(1)....................... 22,096,000 22,196,000 21,367,000 Subscribers................................. 346,600 311,900 125,000 EBITDA(2)................................... $ (52,972) $ (196,584) $ (177,611) $ (42,016) $ (7,515) $ (1,977) CASH FLOWS PROVIDED BY (USED IN): Operating activities........................ $ 6,885 $ (228,801) $ (206,863) $ (17,781) $ 126 $ (1,564) Investing activities........................ $ 29,060 $ 368,134 $ 568,333 $ 230,029 $ 297,397 $ 22,009 Financing activities........................ $ (36,443) $ (139,402) $ (391,642) $ (177,225) $ (297,812) $(20,439)
- ------------------------- (1) Represents population that is covered by our consolidated systems. (2) EBITDA represents operating loss before depreciation and amortization and non-cash stock based compensation. While Aerial was a development stage enterprise, amounts related to depreciation during 1996 and 1995, were included in general and administrative expense. Management believes EBITDA provides meaningful additional information on Aerial's operating results and on its ability to service its long-term debt and other fixed obligations and to fund Aerial's continuing 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 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. Aerial's presentation may not be comparable to other similarly titled measures of other companies. 20 28 COMPARATIVE PER SHARE DATA Set forth below are the net loss and book value per common share data presented separately for VoiceStream, Omnipoint and Aerial on a historic basis and for VoiceStream Holdings on a pro forma combined basis per equivalent common share. We have provided this information only for the six months ended June 30, 1999, as VoiceStream became a publicly traded entity in May 1999 and, therefore, comparative information prior to that date would not be meaningful to you. Historical per share loss for Omnipoint and Aerial for the periods prior to this date can be found in their annual reports to stockholders. See "Where You Can Find More Information." The exchange ratios assumed for the reorganizations are one share of VoiceStream Holdings common stock for each share of VoiceStream common stock; 0.825 of a share of VoiceStream Holdings common stock for each share of Omnipoint common stock; and 0.455 of a share of VoiceStream Holdings common stock for each share of Aerial common stock. The following information should be read in conjunction with the combined pro forma financial statements and notes thereto -- see "Pro Forma Financial Information."
SIX MONTHS ENDED JUNE 30, 1999 ------------- (UNAUDITED) VoiceStream historic per common share data: Net loss, basic and diluted.............................. $ (2.20) Book value............................................... $ 2.15 Omnipoint historic per common share data: Net loss, basic and diluted.............................. $ (6.97) Book value............................................... $(13.86) Aerial historic per common share data: Net loss, basic and diluted.............................. $ (0.31) Book value............................................... $ 0.07 VoiceStream, Omnipoint and Aerial unaudited pro forma combined per equivalent common share data: Pro forma net loss, basic and diluted.................... $ (3.44) Book value............................................... $ 29.87 VoiceStream and Omnipoint unaudited pro forma combined per equivalent common share data: Pro forma net loss, basic and diluted.................... $ (4.28) Book value............................................... $ 21.36 VoiceStream and Aerial unaudited pro forma combined per equivalent common share data: Pro forma net loss, basic and diluted.................... $ (1.83) Book value............................................... $ 21.56
21 29 RISK FACTORS You should carefully consider the risk factors described below before voting your stock. The risks described below are not the only ones facing VoiceStream Holdings. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. VoiceStream Holdings will face all of these risks whether either or both of the reorganizations have closed. WE FACE INTENSE COMPETITION, WHICH COULD ADVERSELY AFFECT OUR ABILITY TO GROW OUR SUBSCRIBER BASE AND REVENUES VoiceStream, Omnipoint and Aerial compete with providers of PCS, cellular and other wireless communications services. Under the current rules of the FCC, up to seven PCS licensees and two cellular licensees may operate in each geographic area. With so many companies targeting many of the same customers, competition is intense. VoiceStream, Omnipoint and Aerial compete against AT&T Wireless, Bell Atlantic Mobile Systems, Nextel, SBC Communications, Sprint PCS, and Vodafone AirTouch, among others. Many of these competitors have substantially greater financial resources than VoiceStream, Omnipoint or Aerial, and several operate in multiple segments of the industry. AT&T Wireless, Nextel and Sprint PCS operate substantially nationwide networks and Bell Atlantic Mobile Systems and Vodafone AirTouch, among others, through joint ventures and affiliation arrangements, operate or plan to operate substantially nationwide wireless systems throughout the continental United States. As a result of such competition, we cannot assure you that after either or both of the reorganizations, VoiceStream Holdings will be able to successfully attract and retain customers and grow its subscriber base and revenues. VOICESTREAM, OMNIPOINT AND AERIAL EACH HAS A LIMITED OPERATING HISTORY WITH SUBSTANTIAL OPERATING LOSSES AND NEGATIVE CASH FLOW AND VOICESTREAM HOLDINGS MAY NOT BECOME PROFITABLE VoiceStream sustained operating losses of approximately $163.4 million for the six months ended June 30, 1999, and $204.6 million in fiscal 1998, $196.9 million in fiscal 1997 and $81.8 million in fiscal 1996. At June 30, 1999, VoiceStream had an accumulated deficit of $818.2 million and equity, net of accumulated deficit, of $205.1 million. Omnipoint sustained operating losses of approximately $235.7 million for the six months ended June 30, 1999, and $456.8 million in fiscal 1998, $238.3 million in fiscal 1997 and $100.4 million in fiscal 1996. At June 30, 1999, Omnipoint had an accumulated deficit of $1.5 billion and negative equity, net of accumulated deficit, of $740.5 million. Aerial sustained operating losses of approximately $97.2 million for the six months ended June 30, 1999, and $280 million in fiscal 1998, $218.2 million in fiscal 1997 and $44 million in fiscal 1996. At June 30, 1999, Aerial had an accumulated deficit of $653.5 million and equity, net of accumulated deficit, of $4.5 million. We expect to incur significant operating losses and to generate negative cash flow from operating activities during the next several years while we continue to develop and construct our systems and grow our subscriber base. We cannot assure you that after either or both of the reorganizations we will achieve or sustain profitability or positive cash flow from operating activities in the future or that we will generate sufficient cash flow to service current or future debt requirements. OUR SUBSTANTIAL DEBT CREATES FINANCIAL AND OPERATING RISK After either or both of the reorganizations, we will be highly leveraged and subject to strict financial limitations because VoiceStream, Omnipoint and Aerial have incurred a significant amount of debt in building their systems and subscriber bases. As of June 30, 1999, VoiceStream had approximately $1 billion of total outstanding long-term debt, Omnipoint had approximately $2.5 billion of total outstanding long-term debt and Aerial had approximately $0.9 billion of total 22 30 outstanding long-term debt (including current portion). Our level of debt, and the incurrence of additional debt in the future, could have important consequences to you. For example, it could: - require us to dedicate a substantial portion of our cash flow from operations to paying principal and interest on our debt, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions of additional systems and other general corporate requirements; - limit our flexibility in reacting to changes in our business and the wireless industry generally; - limit our ability to borrow additional funds due to financial and restrictive covenants in such debt; and - make us more vulnerable to increases in prevailing interest rates because certain of our borrowings are and will continue to be at variable rates of interest. Additionally, we cannot guarantee that after the closing of either or both of the reorganizations we will be able to generate enough cash flow from operations or that we will be able to obtain enough capital to service our debt or fund our planned capital expenditures. We may also need to refinance some or all of our indebtedness on or before its maturity. We cannot guarantee, however, that we will be able to refinance our indebtedness on commercially reasonable terms or at all. Should VoiceStream Holdings be liquidated, VoiceStream Holdings stockholders' claims would be subordinated to the claims of the holders of any outstanding indebtedness. WE MAY NOT BE ABLE TO REFINANCE ON COMMERCIALLY REASONABLE TERMS OMNIPOINT DEBT THAT WILL MATURE OR THAT MAY HAVE TO BE REPURCHASED AS A RESULT OF THE OMNIPOINT REORGANIZATION After the Omnipoint reorganization, the holders of a substantial amount of Omnipoint's debt will have the right to either cause such debt to become due and payable prior to its stated maturity or to require Omnipoint to repurchase its debt. Failure to refinance such debt on commercially reasonable terms or to cause the lenders to waive their rights to accelerate repayment of this debt prior to the completion of the Omnipoint reorganization will materially and adversely affect VoiceStream Holdings' financial condition. IF WE CANNOT RAISE SUFFICIENT FUNDS TO MEET OUR SIGNIFICANT FUTURE CAPITAL REQUIREMENTS, WE WILL NOT BE ABLE TO COMPETE EFFECTIVELY IN THE WIRELESS COMMUNICATIONS INDUSTRY After either or both of the reorganizations, our systems and the systems of joint ventures in which we are an investor will not be completely built out and will not have nationwide coverage. The build-out of these systems and the development of new systems will require significant capital expenditures. We plan to meet our additional capital needs for the build-out of our systems with the proceeds from credit facilities and other borrowings, the proceeds from sales of additional debt securities, the sale or issuance of equity securities, financing arrangements with vendors and through joint ventures. We cannot guarantee that we will be able to raise sufficient additional capital on commercially reasonable terms or at all. If we do not raise sufficient funds, we may delay or abandon some or all of our planned build-out or expenditures, which could materially limit our ability to compete in the wireless communications industry. WE WILL HAVE TO RELY ON JOINT VENTURE ENTITIES THAT WE WILL NOT CONTROL TO MAINTAIN PCS COVERAGE AND EXPAND IN SELECTED MARKETS When implementing the PCS licensing scheme in the United States, the FCC established six PCS license Blocks, A, B, C, D, E and F, and adopted rules that granted a narrow category of defined "Designated Entities" the right to own and operate under the C and F Block PCS licenses. Although Omnipoint qualified as a Designated Entity under FCC rules and was therefore able to hold 23 31 and operate under C and F Block PCS licenses, VoiceStream Holdings does not qualify as a Designated Entity and therefore cannot own or operate under C or F Block PCS licenses. As a result, immediately prior to the Omnipoint reorganization, the C and F Block PCS licenses of Omnipoint and existing rights of Omnipoint to obtain pending C and F Block PCS licenses are being transferred in the CIRI Transactions to two new joint venture entities controlled by Cook Inlet. VoiceStream Holdings will have a 49.9% minority interest in each of such entities. VoiceStream is also a 49.9% minority joint venture owner of and technical services provider to two other joint venture entities controlled by Cook Inlet that hold or have rights to obtain C and F Block licenses. Following the Omnipoint reorganization, we will hold a 49.9% interest in and provide technical services to each of the joint venture entities that have agreed to purchase the C and F Block licenses of Omnipoint, and will also continue to hold VoiceStream's 49.9% interests in the two existing joint venture entities controlled by Cook Inlet. As a group, the four joint venture entities controlled by Cook Inlet will hold or have rights to acquire licenses for approximately 130 BTA markets, many of which are key urban markets. Among the markets previously owned and operated by Omnipoint that will be acquired by and subsequently owned and operated by these joint venture entities controlled by Cook Inlet are Philadelphia and Miami. In addition, one of the existing joint venture entities controlled by Cook Inlet was the winning bidder in the recent FCC re-auctions for licenses in Chicago and Dallas, and intends to own and operate PCS networks in those markets. We do not have control and will maintain limited investor protection rights in the existing Cook Inlet/VoiceStream joint venture entities and in the new joint venture entities to be formed at the time of the Omnipoint reorganization. We will have substantial financial commitments and must rely on corresponding financial commitments to the joint venture entities from Cook Inlet in the markets served by these joint venture entities. Also, many of the systems owned by these joint venture entities have not been built out and the joint ventures will have substantial capital needs in connection with such build-outs. We cannot guarantee that these joint venture entities will be able to raise sufficient capital, whether through bank borrowings or otherwise to complete the build-out of their systems. While we expect substantially all markets to be operated under the VoiceStream brand and to utilize our technical services, we cannot assure you that any of these joint venture entities will continue to use the VoiceStream brand or our technical services. While we have certain rights which may allow us to acquire the interests in these joint ventures that we do not control, we cannot assure you that third parties will not outbid us. Similarly, due to the licensing restrictions discussed above, and because of the scarcity of available PCS licenses covering United States urban markets, we may be required to rely on similar joint ventures that we do not control for expansion into new markets. We cannot assure you that we will be able to find acceptable joint venture partners. In the event that we do find acceptable joint venture partners, due to our lack of control over these joint ventures, we cannot assure you that they will operate in a manner that increases the value of our business. IF WE LOSE ANY MEMBER OF OUR MANAGEMENT TEAM, OUR BUSINESS COULD SUFFER After either or both of the reorganizations, we will depend on the continued services of our management team. If we fail to retain the services of any member of our senior management, our operating results may be adversely affected. 24 32 WE WILL BE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION, ANY CHANGE IN WHICH COULD AFFECT OUR BUILD-OUT PLAN OR FINANCIAL PERFORMANCE The licensing, construction, operation, sale and interconnection arrangements of wireless telecommunications systems are regulated to varying degrees by the FCC and, depending on the jurisdiction, also may be regulated by state and local governmental bodies. There can be no assurance that either the FCC or such state and local agencies will not adopt regulations or take other actions that would adversely affect our business. We cannot assure you that VoiceStream, Omnipoint and Aerial will be able to obtain and retain all necessary governmental authorizations and permits. Failure to do so could negatively affect our existing operations and delay or prevent proposed operations. REGULATORY AGENCIES MUST APPROVE THE REORGANIZATIONS AND COULD DELAY OR REFUSE TO APPROVE THE REORGANIZATIONS OR IMPOSE CONDITIONS THAT COULD ADVERSELY AFFECT OUR BUSINESS OR FINANCIAL CONDITION The Communications Act and FCC rules require the FCC's prior approval of the transfer of control of Omnipoint's, VoiceStream's and Aerial's PCS licenses to VoiceStream Holdings, as well as the assignment of Omnipoint's C and F Block PCS licenses to the two new Cook Inlet entities. VoiceStream and Omnipoint filed applications relating to the transfer and assignment of Omnipoint's PCS licenses to VoiceStream Holdings and the two new Cook Inlet entities, and the transfer of VoiceStream's licenses to VoiceStream Holdings, on July 15, 1999. On August 16, 1999, the FCC released a Public Notice announcing the acceptance for filing of the applications. In response, two petitions to deny were filed: one by Qualcomm asking the FCC to deny transfer of Omnipoint's New York MTA PCS license to VoiceStream, and one by NatTel asking the FCC to deny assignment of 11 C Block licenses from Omnipoint to CIVS III. (NatTel claimed it had standing to challenge the assignment because two petitions it had filed to deny grant of certain PCS licenses to Cook Inlet and an Omnipoint subsidiary remained pending. These petitions were dismissed October 4, 1999.) Oppositions to Qualcomm's petition to deny were filed by Omnipoint and VoiceStream on September 27, 1999, and oppositions to NatTel's petition to deny were filed by VoiceStream, Omnipoint and Cook Inlet on September 27, 1999. Qualcomm and NatTel filed replies on October 5, 1999. Closing on each of the reorganizations is conditioned among other factors upon grants of the requisite FCC consents becoming final. A "final" FCC order is one that has not been stayed and is no longer subject to review by the FCC or the courts because the statutory period for seeking such review has expired without any request for review or stay pending. Following the FCC's grants of consents to the reorganizations, we cannot assure you that there will not be any post-grant challenges by private parties or actions by the FCC or the courts that would delay or prevent finality. Though the parties to each reorganization may waive finality as a condition of closing, we cannot assure you that they will do so. The provisions of the Exon-Florio amendment to the Omnibus Trade and Competitiveness Act of 1988 empower the president of the United States to prohibit or suspend an acquisition of, or investment in, a United States company by a non-United States company if the president finds, after investigation, credible evidence that the non-United States company might take action that threatens to impair the national security of the United States and that provisions of existing law do not provide adequate and appropriate authority to protect the national security. Any determination that an investigation is called for must be made within 30 days of notice of the proposed transaction. If a determination is made, any investigation must be completed within 45 days of the determination and any decision to take action must be announced within 15 days of completion of the investigation. The Committee for Foreign Investment in the United States (CFIUS) is charged with reviewing certain investments by a non-United States company in a United States company, and to determine whether an investigation under the provisions of Exon-Florio should be conducted. 25 33 On October 5, 1999, the Federal Bureau of Investigation and the Department of Justice filed a petition with the FCC seeking the deferral by the FCC of action on VoiceStream's applications for transfer of control of the Omnipoint FCC licenses pending execution of an agreement between VoiceStream Holdings and the FBI and DOJ to address certain national security concerns of such agencies. Negotiations relating to this agreement have commenced and could take several months. During the course of the FCC process, VoiceStream will determine whether it needs to file a voluntary notice under Exon-Florio requesting confirmation that the Hutchison investments do not impair the national security of the United States. While VoiceStream believes it will be able to reach an agreement on these issues with these agencies in the context of the FCC review process, and that the agreement will satisfy any review undertaken by CFIUS, we cannot assure you that we will be able to satisfy the FBI, DOJ or CFIUS as to their national security concerns, or that they will not impose restrictions or conditions on the Hutchison Investments, or that there will be no delays caused thereby. VoiceStream and Aerial filed applications relating to the transfer and assignment of Aerial's PCS licenses to VoiceStream Holdings on October , 1999. On , 1999, the FCC released a Public Notice announcing the acceptance for filing of the applications. The , 1999 Public Notice also established a deadline of , 1999 for comment upon the applications. While we expect that the applications will be processed in accordance with the FCC's routine procedures and without conditions other than conditions that are consistent with those generally applicable to the transfer and assignment of PCS licenses, we cannot assure you that the FCC will grant the applications, that the FCC will grant the applications without conditions, or that there will be no delay caused by the filing of a challenge to the transfer and assignment applications. THERE IS A RISK THAT WE COULD LOSE ONE OR MORE LICENSES AS A RESULT OF COURT OR REGULATORY PROCEEDINGS Omnipoint's New York MTA A Block license was issued as a Pioneer's Preference, and as a consequence contains a condition that requires Omnipoint to construct a PCS system that "substantially uses" the design and technology upon which the Pioneer's Preference license was based. The FCC has never specifically defined the phrase "substantial use." In its petition to deny transfer of this license, Qualcomm claims that Omnipoint has failed to comply with the "substantial use" requirement. Omnipoint responded in its September 27, 1999 opposition that Omnipoint is in full compliance with the requirement. Although there can be no assurance as to whether or how the FCC will in the future construe the phrase "substantial use," Omnipoint believes, on the basis of prior FCC pronouncements, that its build-out plan in connection with the New York MTA has satisfied the "substantial use" condition and has so notified the FCC. None of Omnipoint's or VoiceStream's other licenses contains a similar condition. FCC restrictions on spectrum aggregation could require divestiture of certain spectrum licenses if waivers of the aggregation limits are not granted. The "spectrum cap" and its implications are discussed in more detail under "The Business of VoiceStream Holdings -- Government Regulation; Licensing of PCS Systems." All C Block licenses held by Cook Inlet entities could be affected by U.S. Airwaves, Inc. v FCC, which is pending in the U.S. Court of Appeals for the D.C. Circuit. U.S. Airwaves participated in the original C Block auction, which closed on May 6, 1996, but withdrew after the bids exceeded the maximum prices it was willing to pay. U.S. Airwaves is now seeking judicial review of two orders in the FCC's rulemaking proceeding on payment financing for PCS licenses: the Second Report and Further Notice of Proposed Rulemaking and the Order on Reconsideration of the Second Report and Order. Since these orders enabled initial C Block licensees to return licenses or modify the conditions of payment, there is a remote threat that if the orders are reversed, affected licenses could be 26 34 returned to the Commission for reauction. The court consolidated into this case similar petitions filed by seven other parties. The case has not been placed on the court's calendar. On June 25, 1999, U.S. Airwaves filed with the FCC an informal objection to several applications (including those of Cook Inlet and OPCS Three), arguing that if its challenge to the FCC's orders described in the preceding paragraph is successful, the Auction 22 winners may be required to return their licenses to the FCC. The objection was dismissed as moot on September 8, 1999. Additionally, 14 C Block licenses won by Cook Inlet/VoiceStream PCS LLC and 11 C Block licenses won by Omnipoint were issued subject to the outcome of the bankruptcy proceeding of the original licensee, a subsidiary of Pocket Communications Inc. which was conditionally granted 43 C Block licenses in 1996. Pursuant to an FCC order, the bankruptcy debtors elected to relinquish certain licenses, which subsequently were reauctioned, and the bankruptcy court issued an order making the election effective. Pacific Eagle, a secured creditor of the debtors, filed with the court a motion for reconsideration of the election order. The motion was denied, and Pacific Eagle appealed the denial to the U.S. District Court for Northern Maryland. As a result, the bankruptcy court stayed its order denying the motion for reconsideration pending appeal. Because the appeal of the election order is still pending there is uncertainty as to the referenced C Block licenses of the Cook Inlet entities. The district court could order the return of these licenses to the jurisdiction of the bankruptcy court. In the event that these licenses are so returned, it is unlikely that the Cook Inlet entities will be able to recoup any or all of the costs incurred by them in connection with the construction and development of systems related to such licenses. On September 8, 1999, the FCC rejected a request by Pacific Eagle to defer grant of the 31 licenses subject to possible return to the debtors' estate. According to the FCC, since grant of the licenses was already conditioned upon the outcome of pending litigation, such deference was not necessary. In addition, FCC licenses to provide PCS services are subject to renewal requirements and to revocation at any time for cause. Omnipoint's New York MTA A Block license will expire in December 2004 and its other licenses will expire beginning in 2006. VoiceStream's and Aerial's licenses will expire beginning in 2005. We cannot assure you that the FCC will renew the licenses of VoiceStream, Omnipoint and Aerial. AS A RESULT OF THE REORGANIZATIONS, VOICESTREAM MAY HAVE TO MAKE SUBSTANTIAL TAX INDEMNITY PAYMENTS TO WESTERN WIRELESS In a spin-off transaction effected on May 3, 1999, Western Wireless distributed its entire 80.1% interest in VoiceStream's common stock to its stockholders. Western Wireless will recognize gain as a result of the spin-off if the spin-off is considered to be part of a "prohibited plan," which is a plan or series of related transactions pursuant to which one or more persons acquire, directly or indirectly, 50% or more of VoiceStream's common stock. This is a risk because VoiceStream has agreed to indemnify Western Wireless on an after-tax basis for any taxes, penalties, and interest and various other expenses incurred by Western Wireless if it is required to recognize such gain. Under the Code, the reorganizations and the related transactions, combined with Hutchison's acquisition of its existing VoiceStream stock within two years prior to the spin-off, will give rise to a rebuttable presumption that the spin-off was effected pursuant to a prohibited plan and, thus, that Western Wireless recognized gain as a result of the spin-off. At present, there is no direct authority that specifies the precise standard that must be met by VoiceStream in order to rebut this presumption. The IRS recently proposed regulations dealing with this issue. However, these proposed regulations remain subject to revision by the IRS, and, in any event, will have a prospective effective 27 35 date when finalized and thus will not apply to the spin-off. Because the precise standard that must be met by VoiceStream to rebut the presumption is not presently clear, there is a risk that VoiceStream will be unable to rebut the presumption. In addition, no matter what the standard is for rebutting the presumption, there is a risk that the IRS would not agree that any facts that would be presented by VoiceStream would establish that the spin-off and the reorganizations and the related transactions, combined with Hutchison's acquisition of its existing VoiceStream stock within two years prior to the spin-off, are not pursuant to a prohibited plan. Although VoiceStream could contest such an IRS position in court, there is a risk that a court would agree with such an IRS position. As a result, Western Wireless would be required to recognize gain upon the spin-off and VoiceStream would be required to indemnify Western Wireless on an after-tax basis for its resulting taxes, penalties (if any), and interest, and various other expenses. Any such payment by VoiceStream could have a material adverse effect on VoiceStream Holdings. See "Pro Forma Financial Information -- Notes to Pro Forma Condensed Combined Financial Statements; Contingencies." BEFORE APPROVING YOUR REORGANIZATION AGREEMENT, YOU MUST WEIGH THE RISKS OF OWNING VOICESTREAM HOLDINGS COMMON STOCK By approving the Omnipoint reorganization agreement, every Omnipoint stockholder acknowledges that he or she may receive an amount of VoiceStream Holdings common stock in the Omnipoint reorganization even if he or she makes the Omnipoint Cash Election. See "The Omnipoint Reorganization -- Structure of the Omnipoint Reorganization; Conversion of Omnipoint Common Stock to VoiceStream Holdings Common Stock." Every Aerial stockholder, other than those who make the Aerial Cash Election, will receive VoiceStream Holdings common stock in the Aerial reorganization. VoiceStream Holdings common stock will be supported by a different mix of assets and personnel than that of either the VoiceStream common stock, Omnipoint common stock or Aerial common stock prior to either or both of the reorganizations. As a consequence, the VoiceStream Holdings common stock may perform differently in the stock market than the VoiceStream common stock, Omnipoint common stock or Aerial common stock has performed historically. Each stockholder must weigh the risks of this new equity ownership, understanding that the stock price of VoiceStream Holdings common stock may fluctuate significantly after either or both of the reorganizations and the value of cash will be less volatile than the value of VoiceStream Holdings common stock. THE STOCK PRICE OF VOICESTREAM HOLDINGS COMMON STOCK MAY FLUCTUATE SIGNIFICANTLY AFTER EITHER OR BOTH OF THE REORGANIZATIONS Prior to the first to occur of the reorganizations, there will be no public market for VoiceStream Holdings common stock. Our common stock will trade on the Nasdaq Stock Market after the first to occur of the reorganizations. The market price of our common stock could fluctuate significantly in response to various factors and events, including: - our success with integrating the operations of VoiceStream, Omnipoint and/or Aerial; - the perceived prospects of the combined company; - changes in our operating results; - changes in, or our failure to meet, financial estimates by securities analysts; - liquidity of our common stock; and - developments in the wireless communications industry. 28 36 In addition, the stock market in general and wireless industry stocks in particular have experienced extreme volatility that often has been unrelated to the operating performance of particular companies. These broad market and industry fluctuations may adversely affect the trading price of our common stock, regardless of our actual operating performance. CONCERNS ABOUT WIRELESS COMMUNICATIONS HEALTH AND SAFETY RISKS AND LEGISLATION MAY AFFECT OUR PROSPECTS Media reports have suggested that some radio frequency emissions from wireless handsets may raise various health concerns, including cancer, and may interfere with various electronic medical devices, including hearing aids and pacemakers. Concerns over radio frequency emissions may discourage the use of wireless handsets, which would adversely affect our business. The findings of studies like these could have an adverse effect on the wireless industry, our business, or the use of GSM technology. Such findings could lead to governmental regulations that may have an adverse effect on our business. Several states have proposed or enacted legislation which would limit or prohibit the use and/or possession of a mobile telephone while driving an automobile. If states adopt and strictly enforce such legislation, it may have an adverse effect on our business. OUR OPERATIONS MAY BE HARMED IF VOICESTREAM, OMNIPOINT, AERIAL OR THEIR VENDORS' COMPUTER PROGRAMS DO NOT FUNCTION PROPERLY BEFORE, DURING AND AFTER THE YEAR 2000 VoiceStream, Omnipoint and Aerial are in the process of modifying portions of their software so that it will function properly before, during and after the year 2000. Any computer programs of VoiceStream, Omnipoint, Aerial or their vendors that have date-sensitive software or embedded technology may recognize a date containing "00" as the year 1900 rather than the year 2000. VoiceStream, Omnipoint and Aerial currently are remediating their critical systems to address the year 2000 issue. Critical systems are those whose failure poses a risk of disruption to the ability to provide wireless services, collect revenues, meet safety standards, or comply with legal requirements. We expect that VoiceStream, Omnipoint and Aerial will incur ongoing internal staff costs as well as consulting and other expenses related to infrastructure and facilities enhancements necessary to prepare their systems for the year 2000. We cannot assure you that the remediation of these critical systems will be complete by the year 2000. VoiceStream, Omnipoint and Aerial purchase much of their technology, including technology associated with their critical systems, from third parties. VoiceStream, Omnipoint and Aerial are 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. We cannot assure you that these third parties will have taken the necessary corrective action prior to the year 2000. If these third parties do not take the necessary corrective action it may have an adverse effect on our business. VOICESTREAM HOLDINGS DOES NOT EXPECT TO PAY DIVIDENDS IN THE FORESEEABLE FUTURE For the foreseeable future, we expect to retain all earnings, if any, to service debt and for the growth and expansion of our business and do not expect to declare or pay dividends. Payment of any future dividends will depend upon our earnings and capital requirements, our debt facilities and other factors that our board considers appropriate. Our ability to declare and pay dividends on our common stock is also restricted by covenants in our debt instruments and by applicable law. YOUR ABILITY TO RESELL VOICESTREAM HOLDINGS COMMON STOCK MAY BE RESTRICTED All VoiceStream Holdings common stock that VoiceStream, Omnipoint and Aerial stockholders receive as a result of the reorganizations will be freely transferable, except for VoiceStream Holdings common stock received by stockholders who are deemed to be "affiliates" of VoiceStream, Omnipoint 29 37 or Aerial prior to the reorganizations. Affiliates may resell their VoiceStream Holdings common stock only in transactions permitted by the resale provisions and volume limitations of Rule 145 or Rule 144 of the Securities Act or as the Securities Act otherwise permits. THIS JOINT PROXY STATEMENT-PROSPECTUS INCLUDES FORWARD-LOOKING STATEMENTS AND WE CAUTION YOU NOT TO PLACE UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS This joint proxy statement-prospectus contains statements that are not based on historical fact, including the words "believes," "anticipates," "intends," "expects" and similar words. These statements 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 significantly different from any future results, events or developments expressed or implied by such forward-looking statements. Such factors include: - general economic and business conditions, both nationally and in the regions in which we operate; - technology changes; - competition; - changes in business strategy or development plans; - our high level of debt; - the ability to attract and retain qualified personnel; - existing governmental regulations and changes in, or the failure to comply with, governmental regulations; - product liability and other claims asserted against us; - our ability and the ability of our third-party suppliers to take corrective action in a timely manner with respect to the year 2000 issue; and - other factors referenced in this joint proxy statement-prospectus, including without limitation, factors discussed under the captions "Questions and Answers About the Proposed Reorganizations," "Summary," "Risk Factors" and "Financial Information" GIVEN THESE UNCERTAINTIES, WE CAUTION VOICESTREAM, OMNIPOINT AND AERIAL STOCKHOLDERS NOT TO PLACE UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS. We also disclaim any obligation to update any such factors or to publicly announce any revisions to any of the forward-looking statements contained in this joint proxy statement-prospectus to reflect future results, events or developments. 30 38 THE OMNIPOINT REORGANIZATION THE OMNIPOINT REORGANIZATION AGREEMENT In addition to the following summary of the Omnipoint reorganization agreement, you should read the entire Omnipoint reorganization agreement, which is hereby incorporated by reference and attached as Annex A. STRUCTURE OF THE OMNIPOINT REORGANIZATION Prior to the closing of both the Omnipoint reorganization and the Aerial reorganization, VoiceStream Holdings will own all the outstanding stock of three newly formed subsidiaries. At the closing of the Omnipoint reorganization, if it has not already done so, one of the newly formed subsidiaries will merge with and into VoiceStream and a second newly formed subsidiary will merge with and into Omnipoint, with VoiceStream and Omnipoint being the surviving entities. At the closing of the Aerial reorganization, the third subsidiary will be merged with and into Aerial, with Aerial being the surviving entity. See "The Aerial Reorganization." CONVERSION OF VOICESTREAM COMMON STOCK TO VOICESTREAM HOLDINGS COMMON STOCK At the closing of the Omnipoint reorganization, the following will occur, if they have not already occurred as a result of the earlier closing of the Aerial reorganization: - each outstanding share of VoiceStream common stock will be converted into one share of VoiceStream Holdings common stock; and - each certificate representing shares of VoiceStream common stock will be deemed to represent an equivalent number of shares of VoiceStream Holdings common stock. CONVERSION OF OMNIPOINT COMMON STOCK TO VOICESTREAM HOLDINGS COMMON STOCK At the closing of the Omnipoint reorganization, each share of Omnipoint common stock will be converted into the right to receive cash, shares of VoiceStream Holdings common stock or a combination of both cash and shares of VoiceStream Holdings common stock. Each Omnipoint stockholder will have the opportunity to indicate, on an election form, whether the stockholder wishes to make the Omnipoint Standard Election, the Omnipoint Stock Election or the Omnipoint Cash Election for each share of Omnipoint common stock held by the stockholder. The maximum number of shares of VoiceStream Holdings common stock to be issued to holders of Omnipoint common stock (including Omnipoint common stock subject to issuance upon the conversion of the Omnipoint 7% Convertible Preferred) (the "Maximum Share Issuance Number") will be equal to the product of (1) 0.825 and (2) the number of outstanding Omnipoint common shares (including Omnipoint common stock subject to issuance upon the conversion of the Omnipoint 7% Convertible Preferred). The maximum amount of cash to be issued (the "Maximum Cash Amount") will be equal to the product of (1) $8.00 and (2) the number of outstanding Omnipoint common shares (including Omnipoint common stock subject to issuance upon the conversion of the Omnipoint 7% Convertible Preferred). The allocation of cash and/or shares of VoiceStream Holdings common stock that a stockholder of Omnipoint may receive will depend on the stated preferences of the Omnipoint stockholders on the election forms and the proration procedures described below. For the purposes of the proration procedures, dissenting shares will be considered to have made the Omnipoint Standard Election. - The Omnipoint Standard Election. Stockholders of Omnipoint who make the Omnipoint Standard Election or who make no election, will receive, for each share of Omnipoint common stock for which such election is made or for which no election is made, (1) 0.825 of a share of 31 39 VoiceStream Holdings common stock, plus (2) $8.00 in cash. The number of shares of VoiceStream Holdings common stock and the amount of cash to be distributed to Omnipoint stockholders who make the Omnipoint Standard Election or who make no election, will not be affected by the proration procedures described below. - Omnipoint Stock Election. Stockholders of Omnipoint who make the Omnipoint Stock Election will be asking to receive (subject to the proration procedures described below), for each share of Omnipoint common stock for which such election is made, a number of shares of VoiceStream Holdings common stock equal to the sum of (1) $8.00 divided by the Closing Date Market Price and (2) 0.825. - Omnipoint Cash Election. Stockholders of Omnipoint who make the Omnipoint Cash Election will be asking to receive (subject to the proration procedures described below), for each share of Omnipoint common stock for which such election is made, cash in an amount equal to the sum of (1) the Closing Date Market Price multiplied by 0.825 and (2) $8.00. For example, if an Omnipoint stockholder holds 1,000 shares of Omnipoint common stock at the effective time and the Closing Date Market Price is $75.00, then such stockholder would be entitled to elect to receive one of the following: - the Omnipoint Standard Election which will consist of 825 shares of VoiceStream Holdings common stock plus $8,000 in cash; - the Omnipoint Stock Election which, assuming no proration or adjustment, will consist of 931 shares of VoiceStream Holdings common stock, plus $50.00 cash in lieu of a fractional share; or - the Omnipoint Cash Election which, assuming no proration or adjustment, will consist of cash in the amount of $69,875. PRORATION PROCEDURES In the event that the number of shares of VoiceStream Holdings common stock to be issued to holders of Omnipoint common stock in connection with the Omnipoint merger or to become subject to issuance upon conversion of the Omnipoint 7% Convertible Preferred exceeds the Maximum Share Issuance Number based on the elections of the Omnipoint stockholders (together with the conversions applicable to the Omnipoint 7% Convertible Preferred), then the number of shares of VoiceStream Holdings common stock to be issued to Omnipoint stockholders who chose the Omnipoint Stock Election will be less than the amount requested and such stockholders will receive an amount of cash equal to the value of the shares of VoiceStream Holdings common stock they did not receive as a result of the proration. The exact number of shares to be issued to such holders will be determined in accordance with a procedure that ensures that the reduction is accomplished pro-rata among all the Omnipoint stockholders making the Omnipoint Stock Election. In no event will the number of shares issued to an Omnipoint stockholder choosing the Omnipoint Stock Election be less than the number of shares such stockholder would have received had the stockholder chosen the Omnipoint Standard Election. Similarly, in no event will the cash received by an Omnipoint stockholder who chooses the Omnipoint Stock Election exceed the amount of cash which such stockholder would have received under the Omnipoint Standard Election. In the event that the amount of cash to be paid to holders of Omnipoint common stock in connection with the Omnipoint merger exceeds the Maximum Cash Amount based on the elections of the Omnipoint stockholders, then the amount of cash to be paid to Omnipoint stockholders who chose the Omnipoint Cash Election will be less than the amount requested and such stockholders will receive shares of VoiceStream Holdings common stock equal in value to the amount of cash they did not receive as a result of the proration. The exact amount of cash to be paid to such holders will be 32 40 determined in accordance with a procedure that ensures that the reduction is accomplished pro-rata among all the Omnipoint stockholders making the Omnipoint Cash Election. In no event will the amount of cash paid to an Omnipoint stockholder choosing the Omnipoint Cash Election be less than the amount of cash such stockholder would have received had the stockholder chosen the Omnipoint Standard Election, nor will the stock amount exceed 0.825 per share of Omnipoint common stock. NON-ELECTION If an Omnipoint stockholder has not made a proper election by the election deadline, he will be deemed to have made the Omnipoint Standard Election. FRACTIONAL SHARES No fractional shares of VoiceStream Holdings common stock will be issued pursuant to the Omnipoint reorganization. In lieu of the issuance of any fractional shares of VoiceStream Holdings common stock, cash equal to the product of such fractional share amount and the Closing Date Market Price will be paid to holders in respect of a fractional share of VoiceStream Holdings common stock that would otherwise be issuable. Payments with respect to fractional shares may come from the sale of the aggregate number of whole shares resulting from the foregoing. ELECTION PROCEDURE; EXCHANGE OF CERTIFICATES Following the closing of the Omnipoint reorganization, we will send a form of election and letter of transmittal to Omnipoint stockholders. Elections may be made by holders of Omnipoint common stock by delivering the form of election and letter of transmittal to the exchange agent, ChaseMellon Shareholder Services L.L.C. To be effective, a form of election and letter of transmittal must be properly completed, dated, signed and submitted in the return envelope mailed therewith to the exchange agent by the election deadline, which will be specified in the election form, and accompanied by (1) the certificates as to which the election is being made or (2) an appropriate guarantee of delivery of the certificates as set forth in the form of election from a firm that is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States, provided that such certificates are in fact delivered to the exchange agent within three trading days after the date of execution of the guarantee of delivery. Failure to deliver certificates covered by any guaranty of delivery within three trading days after the date of execution of such guaranty of delivery will be deemed to invalidate any otherwise properly made Omnipoint Cash Election or Omnipoint Stock Election and will be deemed to be an Omnipoint Standard Election. VoiceStream Holdings has the discretion, which it may delegate in whole or in part to the exchange agent, to determine whether any form of election and/or letter of transmittal has been properly completed, signed and submitted or revoked and to disregard immaterial defects in the form of election or letter of transmittal. The good faith decision of VoiceStream Holdings (or, if so delegated, the exchange agent) in such matters will be conclusive and binding. Neither VoiceStream Holdings nor the exchange agent is under any obligation to notify any person of any defect in a form of election or letter of transmittal submitted to the exchange agent. The exchange agent will also make all computations contemplated by the Omnipoint reorganization agreement, and all such computations will be conclusive and binding on the holders of Omnipoint common stock in the absence of manifest error. An Omnipoint stockholder who does not submit a form of election and letter of transmittal to the exchange agent prior to the election deadline, or who submits a form of election without the corresponding certificates or a guarantee of delivery, will be deemed to have made the Omnipoint Standard Election. If any form of election is defective in any manner such that the exchange agent 33 41 cannot reasonably determine the election preference of the Omnipoint stockholder submitting such form of election, the Omnipoint stockholder will also be deemed to have made the Omnipoint Standard Election. TREATMENT OF OMNIPOINT PREFERRED STOCK In addition to its common stock, Omnipoint will have outstanding immediately prior to the closing 6.5 million shares of Omnipoint 7% Convertible Preferred and 12,500 shares of Omnipoint Series A Preferred. Each outstanding share of Omnipoint 7% Convertible Preferred that has not been converted into Omnipoint common stock as of the closing of the Omnipoint reorganization will remain outstanding and will be convertible into VoiceStream Holdings common stock and cash in amounts equal to the Omnipoint Standard Election. All outstanding shares of Omnipoint Series A Preferred (or all shares of Omnipoint common stock issued on conversion of Omnipoint Series A Preferred) held by VoiceStream will remain outstanding after the closing of the Omnipoint reorganization. All outstanding shares of Omnipoint Series A Preferred (or all shares of Omnipoint common stock issued on conversion of the Omnipoint Series A Preferred) held by Hutchison PCS (USA) will be exchanged directly for VoiceStream Holdings common stock in connection with the closing of the Omnipoint reorganization. TREATMENT OF OMNIPOINT STOCK OPTIONS AND WARRANTS On the closing of the Omnipoint reorganization, each outstanding and unexercised option or warrant to purchase shares of Omnipoint common stock will be assumed by VoiceStream Holdings and converted, as the case may be, into an option or warrant to purchase shares of VoiceStream Holdings common stock. The number of shares of VoiceStream Holdings common stock that a holder will be entitled to purchase upon the exercise of such new option or warrant will be determined by multiplying: - the number of shares of Omnipoint common stock subject to the original option or warrant; and - the sum of (1) $8.00 divided by the closing price of VoiceStream common stock on the last day on which such shares are traded on the Nasdaq Stock Market immediately preceding the closing date and (2) 0.825. The exercise price for such options or warrants will be equal to: - the exercise price under the original option or warrant divided by - the sum of (1) $8.00 divided by the closing price of VoiceStream common stock on the last day on which such shares are traded on the Nasdaq Stock Market immediately preceding the closing date and (2) 0.825. The new option or warrant will otherwise have the same terms and conditions in effect immediately prior to the effective date of the Omnipoint reorganization except to the extent that the vesting of certain options will or may be accelerated as a result of the Omnipoint reorganization. TREATMENT OF VOICESTREAM STOCK OPTIONS AND WARRANTS On the closing of the Omnipoint reorganization, each outstanding and unexercised option or warrant to purchase shares of VoiceStream common stock will be assumed by VoiceStream Holdings and converted into an option or warrant, as the case may be, to purchase shares of VoiceStream Holdings common stock. The number of shares of VoiceStream Holdings common stock that a 34 42 holder will be entitled to purchase upon the exercise of such new option or warrant will be equal to the number of shares of VoiceStream common stock subject to the original option or warrant. The exercise price for such options or warrants will be equal to the exercise price under the original VoiceStream option or warrant. The new option or warrant will otherwise have the same terms and conditions in effect immediately prior to the date the Omnipoint reorganization becomes effective. VOICESTREAM HOLDINGS BOARD VoiceStream and VoiceStream Holdings have agreed to take the necessary corporate action so that, at the closing of the Omnipoint reorganization four members of the Omnipoint board, selected by Omnipoint, will join the VoiceStream Holdings board. See "The VoiceStream Holdings Voting Agreement" for a discussion of this agreement as well as other agreements relating to the election of the VoiceStream Holdings board. COVENANTS OF VOICESTREAM AND OMNIPOINT In the Omnipoint reorganization agreement, VoiceStream Holdings, VoiceStream and Omnipoint have agreed to take or not to take certain actions. The following summarizes these actions, however, these obligations are also set forth in detail in the Omnipoint reorganization agreement. NO SOLICITATION OF ALTERNATIVE ACQUISITION TRANSACTIONS BY OMNIPOINT Omnipoint has agreed that it and its subsidiaries and their officers, directors, employees, affiliates and advisors will not directly or indirectly: - take any action to solicit or encourage the submission of any alternative acquisition proposal; - other than in the ordinary course of business and not related to an alternative acquisition proposal, engage in any discussions or negotiate with, or provide any information or provide access to any other party who Omnipoint knows is considering an alternative acquisition proposal; - approve any transactions under the antitakeover statutes of the DGCL or approve any person becoming an "interested stockholder" under such statute; or - enter into any agreement with respect to an alternative acquisition proposal. BOARD RECOMMENDATION The VoiceStream board and the Omnipoint board have each agreed to recommend to their respective stockholders the adoption of, and approval of the transactions contemplated by, the Omnipoint reorganization agreement. However, the Omnipoint board may withdraw or modify in a manner adverse to VoiceStream this recommendation if: - the Omnipoint board by a majority vote determines in its good faith judgment that it is necessary to do so to comply with its fiduciary duty to stockholders under applicable law, after receiving the advice of outside legal counsel; and - Omnipoint and its subsidiaries, officers, directors, employees, affiliates and advisors have substantially complied with their obligations under the no solicitation covenant described above. The boards of Omnipoint and VoiceStream are each required to call a meeting of their respective stockholders to vote on the Omnipoint reorganization, even if such board has modified or withdrawn its recommendation of the Omnipoint reorganization. 35 43 CONDUCT OF OMNIPOINT'S BUSINESS PENDING THE OMNIPOINT REORGANIZATION In general, the Omnipoint reorganization agreement requires Omnipoint and its subsidiaries, until either the closing of the Omnipoint reorganization or the termination of the Omnipoint reorganization agreement, to conduct their business in the ordinary course consistent with past practice and to use their reasonable best efforts to preserve intact their business organizations and relationships with third parties. In addition, Omnipoint has agreed to specific restrictions, subject to certain exceptions described in the Omnipoint reorganization agreement and the schedules thereto. With certain exceptions, Omnipoint may not: - amend its organizational documents; - amend the terms of its outstanding securities; - enter into any merger, liquidation or other significant transaction; - split, combine or reclassify its capital stock; - issue or dispose of equity securities, options or other securities convertible into or exercisable for equity securities, except in connection with the exercise or conversion of options or convertible securities outstanding on the day of the Omnipoint reorganization agreement or the granting of options as permitted in the Omnipoint reorganization agreement; - encumber or transfer any assets having a fair market value exceeding $5,000,000, or $10,000,000 in the aggregate; - incur or assume any indebtedness; - make any guarantees; - make any loans, advances or capital contributions; - amend the terms of any outstanding stock options; - make capital expenditures; - increase termination or severance benefits; - commit to provide more than a limited amount of severance or termination payments; - enter into certain employment or other similar agreements; - establish or amend any of its bonus plans or benefits; - increase the total compensation or benefits payable; - acquire material assets; - change its accounting policies; - enter into or amend the terms of any joint venture, partnership, or other minority investment; - settle or propose to settle any litigation; - take any other action that would make any representation or warranty by Omnipoint inaccurate in any material respect; - make any material tax election or enter into a settlement with respect to any material tax liability; - incur any liens; - enter into or amend in a material respect any material agreement; or 36 44 - enter into any agreement that would materially limit the ability of Omnipoint, VoiceStream or VoiceStream Holdings to engage in the wireless communications business or any other business. CONDUCT OF VOICESTREAM'S BUSINESS PENDING THE OMNIPOINT REORGANIZATION VoiceStream also has agreed to certain restrictions on it and its subsidiaries until either the closing of the Omnipoint reorganization or the termination of the Omnipoint reorganization agreement. Among other things, these restrictions may affect VoiceStream's ability to: - amend its organizational documents; - amend the terms of its outstanding securities; - split, combine or reclassify its capital stock; - change its accounting policies; - take any action that would impair or materially delay the ability of Omnipoint or VoiceStream to complete the Omnipoint reorganization or the other transactions contemplated by the Omnipoint reorganization agreement; or - enter into a new line of business that is material to VoiceStream and not strategically related to its business. The Omnipoint reorganization agreement provides that, notwithstanding anything to the contrary, VoiceStream Holdings may enter into a subsequent transaction provided that such subsequent transaction would not reasonably be expected to prevent, impair or materially delay the transactions between VoiceStream, VoiceStream Holdings and Omnipoint. A subsequent transaction is defined in the Omnipoint reorganization agreement as any transaction whereby VoiceStream or its subsidiaries: - would acquire control or an investment in any entity in the business of providing wireless communication services; - would issue equity or debt in connection with such an acquisition or otherwise; - would enter into a strategic alliance or other commercial relationship; or - would be acting in the ordinary course of business consistent with past practices; provided, that in the case of the first three bullet points listed above, VoiceStream Holdings must receive an opinion from a national investment bank that the subsequent transaction is fair to VoiceStream Holdings stockholders or, if applicable, VoiceStream Holdings. The Aerial reorganization qualifies as a subsequent transaction under the Omnipoint reorganization agreement. BEST EFFORTS TO COMPLETE OMNIPOINT REORGANIZATION VoiceStream and Omnipoint have agreed to cooperate with each other and use their best efforts to take all actions and do all things necessary or advisable under the Omnipoint reorganization agreement and applicable laws to complete the Omnipoint reorganization and the other transactions contemplated by the Omnipoint reorganization agreement. EMPLOYEE BENEFITS MATTERS The Omnipoint reorganization agreement provides that VoiceStream Holdings, itself or through its subsidiaries, will honor all obligations under Omnipoint's various employee plans and benefit arrangements in effect as of the closing of the Omnipoint reorganization and provide a level of employee benefits and aggregate compensation that is substantially comparable in the aggregate with 37 45 that provided by Omnipoint until December 31, 2001. To the extent any employees of Omnipoint are included in any VoiceStream Holdings employee benefit plan or benefit arrangements, such employees will be vested in these plans to the same extent as they are vested in the comparable Omnipoint plans. Notwithstanding the foregoing, VoiceStream Holdings is not obligated to continue any specific plan or benefit arrangement, so long as any changes in any such plan or arrangement are permitted by applicable law. INDEMNIFICATION AND INSURANCE OF OMNIPOINT DIRECTORS AND OFFICERS VoiceStream Holdings has agreed that: - VoiceStream Holdings will indemnify former Omnipoint and VoiceStream directors and officers for liabilities from their acts or omissions in those capacities occurring prior to the closing of the Omnipoint reorganization to the extent provided under Omnipoint's or VoiceStream's, as applicable, charter and bylaws as in effect on June 23, 1999; and - For six years after closing, VoiceStream Holdings will provide officers' and directors' liability insurance covering acts or omissions occurring prior to closing by each person currently covered by Omnipoint's or VoiceStream's, as applicable, officers' and directors' liability insurance policy; provided, that this policy must be at least as favorable as the Omnipoint or VoiceStream, as applicable, policy in effect on June 23, 1999, except that VoiceStream Holdings will only be obligated to pay up to 200% of the annual premium paid by Omnipoint or VoiceStream, as applicable, for such insurance as of June 23, 1999. REPRESENTATIONS AND WARRANTIES OF VOICESTREAM, VOICESTREAM HOLDINGS AND OMNIPOINT The Omnipoint reorganization agreement contains substantially reciprocal representations and warranties made by VoiceStream Holdings and VoiceStream, on the one hand, and Omnipoint on the other. The most significant of these relate to: - corporate existence and power; - corporate authorization to enter into the transactions provided for in the Omnipoint reorganization agreement and authorization, execution, delivery and enforceability of the Omnipoint reorganization agreement and related matters; - required governmental approvals; - validity and sufficiency of FCC licenses and FCC requirements; - absence of conflicts under organizational documents, applicable law or certain material agreements; - capitalization; - ownership of subsidiaries and minority investments; - accuracy of filings with the SEC; - accuracy of financial statements; - absence of certain material changes since a specified balance sheet date; - absence of undisclosed material liabilities; - litigation; - tax matters; - employee and employee benefits matters; 38 46 - compliance with laws and court orders; - intellectual property; - material contracts; - the opinions received from financial advisors regarding the Omnipoint reorganization; - finders' or advisors' fees; and - environmental matters. In addition, Omnipoint has represented and warranted to VoiceStream Holdings and VoiceStream that the Delaware anti-takeover statute does not apply. The representations and warranties in the Omnipoint reorganization agreement will not survive the closing or termination of the Omnipoint reorganization agreement. CONDITIONS TO THE COMPLETION OF THE OMNIPOINT REORGANIZATION MUTUAL CLOSING CONDITIONS The obligations of VoiceStream Holdings and VoiceStream, on the one hand, and Omnipoint, on the other hand, to complete the transactions provided for in the Omnipoint reorganization agreement are subject to the satisfaction or, to the extent legally permissible, waiver of the following conditions: - receipt of all necessary approvals from the VoiceStream and Omnipoint stockholders; - expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976; - absence of legal prohibition on completion of the Omnipoint reorganization or the other transactions provided for in the Omnipoint reorganization agreement; - effectiveness of VoiceStream Holdings' registration statement on Form S-4; - approval for listing on the Nasdaq Stock Market of the shares of VoiceStream Holdings common stock to be issued in the Omnipoint reorganization; - receipt of opinions of counsel that the Omnipoint reorganization will qualify as a tax-free transaction (except with respect to any cash received); - receipt of all requisite orders and approvals of the FCC; - effectiveness of all governmental consents without limitations, restrictions or obligations that would have a material adverse effect on the business operations of VoiceStream or Omnipoint; - consummation of the Hutchison Investments at closing; - consummation of the CIRI Transactions prior to closing; - accuracy as of closing of the representations and warranties made by the parties to the extent specified in the Omnipoint reorganization agreement; and - performance in all material respects by the parties of their obligations required to be performed at or prior to closing. 39 47 ADDITIONAL VOICESTREAM CONDITIONS VoiceStream's obligation to complete the Omnipoint reorganization agreement is additionally conditioned upon the following: - its receipt of a legal opinion that the Omnipoint reorganization agreement and the transactions contemplated by the Omnipoint reorganization agreement should not cause the spin-off of VoiceStream, which occurred on May 3, 1999, to fail to be a tax-free transaction to the stockholders of Western Wireless; and - fewer than 10% of VoiceStream stockholders or Omnipoint stockholders electing dissenters' rights. Further, VoiceStream is not required to close the transaction if (1) a change shall occur in the United States financial, political, or economic conditions which would materially and adversely affect the ability of VoiceStream and Omnipoint to restructure or refinance the indebtedness of Omnipoint on such terms as would not have a material adverse effect on VoiceStream Holdings after the closing, and (2) more than $200 million of Omnipoint indebtedness either becomes due and payable prior to its stated maturity or is required to be redeemed or repurchased prior to its stated maturity. TERMINATION OF THE OMNIPOINT REORGANIZATION AGREEMENT RIGHT TO TERMINATE VoiceStream or Omnipoint may terminate the Omnipoint reorganization agreement at any time prior to the closing in any of the following ways: - by mutual written consent of VoiceStream and Omnipoint; - by either VoiceStream or Omnipoint if: - the Omnipoint reorganization has not been consummated by March 31, 2000, which may under some circumstances be extended to June 30, 2000 unless the terminating party has failed to fulfill its obligations under the Omnipoint reorganization agreement that resulted in the failure to timely complete the Omnipoint reorganization; or - there is a permanent legal prohibition to closing the Omnipoint reorganization; - by VoiceStream if: - the Omnipoint board fails to recommend, or withdraws or modifies in a manner adverse to VoiceStream, its approval or recommendation of the Omnipoint reorganization, or fails to call the Omnipoint meeting; - Omnipoint stockholders fail to give the necessary approvals at a duly held meeting; - Omnipoint willfully and materially breaches the no solicitation covenant of the Omnipoint reorganization agreement; - Omnipoint shall be incapable of satisfying, in all material respects, its obligations under the Omnipoint reorganization agreement; or - Omnipoint breaches any representation or warranty that would cause a representation or warranty to be incapable of being true and correct at and as of the closing; and 40 48 - by Omnipoint if: - the VoiceStream board fails to recommend, or withdraws or modifies in a manner adverse to Omnipoint, its approval or recommendation of the Omnipoint reorganization or fails to call the VoiceStream meeting; - VoiceStream shall be incapable of satisfying, in all material respects, its obligations under the Omnipoint reorganization agreement; or - VoiceStream breaches any representation or warranty that would cause a representation or warranty to be incapable of being true and correct at and as of the closing. If the Omnipoint reorganization agreement is terminated, it will become void without any liability on the part of any party unless that party is in willful breach of the Omnipoint reorganization agreement. However, the provisions of the Omnipoint reorganization agreement relating to expenses and termination fees, as well as the confidentiality agreement, will continue in effect notwithstanding termination of the Omnipoint reorganization agreement. TERMINATION FEE PAYABLE BY OMNIPOINT Omnipoint has agreed to pay VoiceStream a cash amount equal to $70 million in any of the following circumstances: - VoiceStream terminates the Omnipoint reorganization agreement because (1) the Omnipoint board fails to recommend or withdraws, or modifies in a manner adverse to VoiceStream, its approval of the Omnipoint reorganization, (2) the Omnipoint board fails to call a special meeting in accordance with the Omnipoint reorganization agreement or (3) Omnipoint materially and willfully breaches any obligation with respect to the non-solicitation of other acquisition proposals; or - VoiceStream terminates the Omnipoint reorganization agreement in circumstances where the following three conditions are met: - Omnipoint's stockholders do not approve the Omnipoint reorganization; - prior to Omnipoint's special meeting a third party makes a proposal for an alternative transaction; and - within 12 months of the special meeting Omnipoint enters into an agreement for an alternative transaction with that third party or any third party makes a tender offer for and obtains control of Omnipoint. BACKGROUND OF THE OMNIPOINT REORGANIZATION On September 28, 1998, Douglas Smith met with John Stanton to discuss developing trends in the telecommunications industry, consolidation in the GSM market and ways in which VoiceStream and Omnipoint could cooperate strategically. Mr. Smith advised Mr. Stanton that Omnipoint was looking to raise additional equity. A discussion ensued concerning the possibility of VoiceStream, or its affiliates, making an investment in Omnipoint. Mr. Smith also met with other members of VoiceStream and Western Wireless management. At the end of the meeting, they agreed to continue discussions. Over the next several weeks, VoiceStream and Omnipoint senior management each independently began their internal analyses of possible transactions between the companies. On October 7, 1998, VoiceStream retained Goldman Sachs as its financial advisor. 41 49 On October 7, 1998, Omnipoint publicly announced that it had been in discussions over the prior several weeks with potential strategic investors. Throughout this period until an agreement in principle was reached with VoiceStream in June 1999, discussions between Omnipoint and other potential strategic investors continued. On October 14, 1998, Western Wireless (on behalf of itself and its then affiliate, VoiceStream) and Omnipoint entered into a mutual non-disclosure agreement. On October 28, 1998, Omnipoint retained Lehman Brothers as a financial advisor concerning an investment in or sale of the company. On November 10, 1998, Mr. Stanton and other representatives of VoiceStream met with Mr. Smith and other representatives of Omnipoint, and discussed Omnipoint's financial requirements and a possible transaction with VoiceStream. On November 13, 1998, VoiceStream sent a draft term sheet to Omnipoint describing a possible transaction involving an initial investment by VoiceStream in Omnipoint as well as other terms. On November 17, 1998, representatives of VoiceStream and representatives of Omnipoint discussed the term sheet sent by VoiceStream to Omnipoint. On November 30, 1998, Omnipoint responded by sending to VoiceStream an alternative term sheet. On December 2, 1998, Mr. Stanton met with Canning Fok, a director of VoiceStream and a senior executive of Hutchison, to discuss the possible VoiceStream transaction with Omnipoint, and an investment by Hutchison in connection with such transaction. On December 3, 1998, representatives of VoiceStream, including Mr. Stanton, and representatives of Omnipoint, including Mr. Smith, met to discuss the two term sheets. In addition to differences between the parties with respect to structure, the parties also discussed differences with respect to the valuations ascribed to the respective companies. From December 8, 1998 until December 29, 1998 representatives of VoiceStream and Omnipoint, together with their investment bankers, had a series of meetings and discussions with respect to valuation and alternative structures. On December 31, 1998, VoiceStream sent a proposal to Omnipoint regarding an investment by VoiceStream in Omnipoint. On January 25, 1999, Omnipoint sent to VoiceStream a counter proposal on the respective valuations of Omnipoint and VoiceStream. On January 28, 1999, representatives of VoiceStream, including Mr. Stanton, and representatives of Omnipoint, including Mr. Smith, discussed valuation. No agreements were reached concerning valuation and the parties were at an impasse. On February 12, 1999, Omnipoint and Cook Inlet each filed an application to bid in the PCS reauction. VoiceStream also filed an application but did not make an upfront payment and thus did not participate in the re-auction. Between the time their applications were filed on February 12, 1999 and May 5, 1999, in accordance with FCC rules, there were no communications between Omnipoint and Cook Inlet or between Omnipoint and VoiceStream. During the period February 12 through June 7, 1999, Omnipoint engaged in active discussions with multiple potential strategic investors and exchanged term sheets with a number of them. 42 50 On April 26, 1999, representatives of VoiceStream and representatives of Hutchison held meetings to discuss Hutchison's possible investment in VoiceStream in connection with a possible deal with Omnipoint. In late April of 1999, VoiceStream advised Cook Inlet of VoiceStream's interest in exploring a possible transaction with Omnipoint and inquired as to Cook Inlet's interest in working with VoiceStream on a joint venture to acquire the C and F Block licenses of Omnipoint. On May 5, 1999, restrictions on discussions expired. During the subsequent weeks, representatives of VoiceStream and Omnipoint resumed discussions as did Mr. Stanton and Mr. Smith concerning a possible investment by VoiceStream into Omnipoint as well as a possible merger. On May 7, 1999, representatives of VoiceStream and Omnipoint, including Messrs. Stanton and Smith met and discussed alternative transactions including an investment by VoiceStream in Omnipoint and a merger of VoiceStream and Omnipoint. On May 26 and 27, 1999, meetings took place among representatives of VoiceStream and Hutchison regarding the possible transaction with Omnipoint, including the investment by Hutchison in VoiceStream and the possible merger of VoiceStream with Omnipoint. On May 27, 1999, VoiceStream sent a merger proposal to Omnipoint. The Omnipoint board, which held a regularly scheduled meeting later that day, agreed to continue discussions with VoiceStream. In the days after the merger proposal was sent, numerous calls among the parties took place regarding the proposal. On June 2, 1999, representatives of VoiceStream and Omnipoint met to discuss the status of the merger discussions and the relevant significant issues. On June 7, 1999, the VoiceStream board held a regularly scheduled meeting. Among other matters, the board discussed the possible transactions. On June 8, 1999, a series of phone calls among representatives of VoiceStream and Omnipoint took place during which time the parties agreed to merger pricing subject to approval of their respective boards. During the period of June 12 through signing on June 23, 1999, numerous meetings and phone conversations took place among representatives of VoiceStream and Omnipoint in connection with the preparation, negotiation and finalization of reorganization documents. Similarly, meetings and phone conversations took place among representatives of VoiceStream and Hutchison in connection with the preparation, negotiation and execution of documents associated with the Hutchison Investments, and among representatives of VoiceStream, Omnipoint and Cook Inlet in connection with preparation, negotiation and execution of documents associated with the CIRI Transactions. On June 21, 1999, VoiceStream held a meeting of its board. At such meeting Mr. Stanton reviewed the strategic rationale for the proposed merger and members of senior management presented further details. Goldman Sachs presented an analysis of the proposed transaction. A lengthy discussion ensued. On June 21, 1999, Omnipoint held a meeting of its board by phone. Attorneys from Piper & Marbury and representatives from Lehman Brothers were also present at this meeting. Lehman Brothers presented an analysis of the proposed transaction and delivered its opinion concerning the fairness of the proposed transaction from a financial point of view. The board reviewed the strategic rationale for, and had a lengthy discussion concerning, the proposed transaction. On June 22, 1999, the VoiceStream board held a meeting. Goldman Sachs delivered an oral opinion that, as of June 22, 1999, the merger consideration to be paid by VoiceStream pursuant to the Omnipoint reorganization agreement was fair from a financial point of view to VoiceStream. After 43 51 a discussion, the board approved the proposed merger and the execution and delivery of the Omnipoint reorganization agreement, and the transactions contemplated thereby, including the Hutchison Investments and the CIRI Transactions. On June 23, 1999, the Omnipoint board approved the Omnipoint reorganization and received copies of Lehman Brother's written fairness opinion, meetings with counsel for all parties continued, and the parties executed the Omnipoint reorganization agreement. RECOMMENDATIONS OF THE VOICESTREAM BOARD; REASONS FOR THE OMNIPOINT REORGANIZATION The VoiceStream board believes that combining VoiceStream's and Omnipoint's resources will enable the combined company to be a stronger competitor in the rapidly consolidating telecommunications industry. At various meetings of the VoiceStream board held between September 1998 and June 1999, members of VoiceStream's management made presentations concerning the business and prospects of Omnipoint and the potential combination of Omnipoint and VoiceStream. At a meeting held on June 21, 1999, VoiceStream's board received presentations concerning, and reviewed the terms of, the Omnipoint reorganization agreement and the related agreements with members of VoiceStream's management, its legal counsel and its financial advisors. At a meeting held on June 22, 1999, Goldman Sachs delivered its oral opinion, as of that date, that the merger consideration to be paid by VoiceStream pursuant to the Omnipoint reorganization agreement was fair from a financial point of view to VoiceStream and the VoiceStream board determined that the Omnipoint reorganization, the Omnipoint reorganization agreement and the related transactions were fair to, and in the bests interests of, VoiceStream stockholders. Accordingly, the VoiceStream board approved the Omnipoint reorganization, the Omnipoint reorganization agreement and the related transactions. The board unanimously recommends that VoiceStream stockholders adopt, and approve the transactions contemplated by, the Omnipoint reorganization agreement, at a special stockholders meeting. In reaching its determination to approve the Omnipoint reorganization, the Omnipoint reorganization agreement and the related transactions, the VoiceStream board consulted with VoiceStream's financial and legal advisers and senior management and considered a number of factors in addition to those set forth above. The following summarizes the material factors that the VoiceStream board considered: - the current conditions and trends in the telecommunications industry, including the likelihood that future mergers and acquisitions will increase the size and strength of competitors; - the extent and geographical scope of business operations, and VoiceStream's continuing ability to compete against larger wireless carriers; - the need for significant capital resources to build out the combined company's GSM systems; - the requirement that VoiceStream make an interim investment in Omnipoint; - the terms and availability of equity financing from the Hutchison Entities in connection with the Omnipoint reorganization and the impact of the corresponding increase in the equity ownership by the Hutchison Entities and the number of board members designated by the Hutchison Entities; - the consistency of the strategies that the two companies were pursuing; - the synergies which the combined company might realize, and the risks that the synergies would not all be realized; - the impact that the transaction would be expected to have on the combined company's balance sheet, earnings and cash flow; 44 52 - the likelihood that VoiceStream and Omnipoint would be able to obtain the necessary regulatory approvals to complete the Omnipoint reorganization, and the likelihood that regulatory authorities would insist on conditions to those approvals which could substantially reduce the benefits of the Omnipoint reorganization; - the impact the transaction would have on the tax-free status of the spin-off of VoiceStream from Western Wireless and VoiceStream's obligations under its tax sharing agreement with Western Wireless; - the impact of the transaction on the combined company's ability to maintain and enhance VoiceStream's reputation for delivering high-quality services to customers; - the impact of the transaction on the combined company's ability to maintain a high-quality, highly-motivated work force; - the advantages and potential disadvantages of the structure of the holding company; - a review of the historical operating results of Omnipoint and VoiceStream and the projected operating results of Omnipoint and VoiceStream, individually and in combination; - the fact that four seats on the holding company's board and one or more senior management positions in the holding company would be offered to the current directors or senior management of Omnipoint; - the other potential major transactions which might be available to VoiceStream either in addition to, or as alternatives to, the Omnipoint reorganization, and the effect of the Omnipoint reorganization on the ability of VoiceStream to pursue those transactions; and - the opinion of VoiceStream's financial advisors that, as of the date of such opinion, the consideration to be paid by VoiceStream pursuant to the Omnipoint reorganization agreement was fair from a financial point of view to VoiceStream. The foregoing summary addresses the material facts, matters and information considered by the VoiceStream board in connection with its deliberations on the combination of Omnipoint and VoiceStream. In view of the variety of factors considered, the VoiceStream board did not find it practical to and did not make a specific assessment of or otherwise assign relative weights to the specific facts, matters and information considered. The VoiceStream board adopted the Omnipoint reorganization agreement and approved the transactions contemplated thereby, in consideration of all of the facts, matters and information brought to its attention. Taking into account all of the material facts, matters and information, including those described above, the VoiceStream board believes that the terms of the Omnipoint reorganization agreement and the transactions provided for therein are fair to and in the best interest of VoiceStream's stockholders. THE VOICESTREAM BOARD UNANIMOUSLY RECOMMENDS THAT VOICESTREAM'S STOCKHOLDERS VOTE "FOR" ADOPTION OF, AND APPROVAL OF THE TRANSACTIONS CONTEMPLATED BY, THE OMNIPOINT REORGANIZATION AGREEMENT. 45 53 VOICESTREAM FAIRNESS OPINION Goldman Sachs has acted as financial advisor to VoiceStream in connection with the Omnipoint reorganization. On June 22, 1999, Goldman Sachs delivered its oral opinion, conditioned on the finalization of the Omnipoint reorganization agreement in substantially the form as reviewed by Goldman Sachs on June 22, 1999. Goldman Sachs subsequently confirmed its oral opinion in writing without such condition, that, as of June 22, 1999 with respect to the oral opinion and June 23, 1999 with respect to the written opinion, the merger consideration to be paid by VoiceStream for each share of Omnipoint of: - cash in an amount equal to the sum of (1) the average closing price (calculated on a weighted average based upon the volume of shares traded on each day) (the "Closing Date Market Price") for each share of VoiceStream common stock during the period of the 15 most recent trading days ending on the business day prior to the effective time multiplied by 0.825 and (2) $8.00; - a number of shares of VoiceStream Holdings common stock equal to the sum of (1) 0.825 and (2) $8.00 divided by the Closing Date Market Price; or - (1) 0.825 of a share of VoiceStream Holdings common stock and (2) $8.00 pursuant to the Omnipoint reorganization agreement was fair from a financial point of view to VoiceStream. The full text of the Goldman Sachs opinion is attached as Annex B to this joint proxy statement-prospectus and is incorporated into this joint proxy statement-prospectus by reference. Stockholders of VoiceStream are urged to, and should, read such opinion in its entirety. In connection with its opinion, Goldman Sachs reviewed: - the Omnipoint reorganization agreement; - the securities purchase agreement among Hutchison PCS (USA), Omnipoint and VoiceStream; - the stock subscription agreement among Hutchison PCS (USA), Hutchison Telecommunications and VoiceStream Holdings; - the registration statement on Form 10 of VoiceStream; - the annual reports to stockholders and annual reports on Form 10-K of Western Wireless for the three years ended December 31, 1998; - the annual reports to stockholders and annual reports on Form 10-K of Omnipoint for the three years ended December 31, 1998; - certain interim reports to stockholders and quarterly reports on Form 10-Q of VoiceStream, Western Wireless and Omnipoint; - certain other communications from VoiceStream, Western Wireless and Omnipoint to their respective stockholders; and - certain internal financial analyses and forecasts for VoiceStream prepared by the management of VoiceStream, certain financial analyses and forecasts for Omnipoint prepared by the management of VoiceStream and certain internal financial analyses and forecasts for Omnipoint prepared by the management of Omnipoint (collectively, the "Forecasts"). Goldman Sachs also held discussions with members of the senior management of VoiceStream and Omnipoint regarding the strategic rationale for, and the potential benefits of, the transactions 46 54 contemplated by the Omnipoint reorganization agreement and the past and current business operations, financial condition and future prospects of their respective companies. In addition, Goldman Sachs reviewed the reported price and trading activity for the VoiceStream and Omnipoint common stock, compared certain financial and stock market information for VoiceStream and Omnipoint with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the United States wireless communications industry specifically and in other industries generally and performed such other studies and analyses as it considered appropriate. Goldman Sachs assumed the accuracy and completeness of all of the financial and other information reviewed by it for purposes of rendering its opinion. Goldman Sachs assumed, with the consent of the VoiceStream board, that the Forecasts had been reasonably prepared on a basis reflecting the best currently available estimates and judgments of VoiceStream and Omnipoint, as the case may be. In addition, Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities of VoiceStream or Omnipoint or any of their subsidiaries and Goldman Sachs was not furnished with any such evaluation or appraisal. Goldman Sachs also took into account VoiceStream's view as to the possible tax consequences of the transactions contemplated by the Omnipoint reorganization agreement as described to Goldman Sachs by VoiceStream. Goldman Sachs assumed that all material governmental, regulatory or other consents and approvals necessary would be obtained without any adverse effect on VoiceStream or Omnipoint or on the contemplated benefits of the transactions contemplated by the Omnipoint reorganization agreement. The Goldman Sachs opinion was provided for the information and assistance of the VoiceStream board in connection with its consideration of the transactions contemplated by the Omnipoint reorganization agreement. The Goldman Sachs opinion does not constitute a recommendation as to how any holder of VoiceStream common stock should vote with respect to such transaction. The following is a summary of the material financial analyses presented by Goldman Sachs to the VoiceStream board on June 22, 1999, utilizing, however, the stock price information used by Goldman Sachs with respect to its written opinion dated June 23, 1999. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the text accompanying each summary. SELECTED COMPANIES ANALYSIS Goldman Sachs reviewed and compared certain financial and operating information relating to VoiceStream and Omnipoint to corresponding information for Aerial, Powertel and Sprint PCS. The selected companies were chosen because they are publicly traded companies with operations that for purposes of analysis may be considered similar to those of VoiceStream and Omnipoint. The analysis was performed using share prices as of June 23, 1999. Enterprise value for each of the companies is the sum of the market capitalization for that company and its total debt, preferred stock and minority interest, less cash and cash equivalents. Adjusted enterprise value for each of the companies is the enterprise value for that company less the value of its POPs not to be covered under the business plan for that company, valued at $5 per POP. "POPs" are the number of persons within a license's coverage area and are derived from management estimates and public sources. "Covered POPs" are the estimated number of POPs within the license area served by the operating network. Weighted POPs are determined by multiplying the number of POPs in a 10 MHz license area by 0.25, the number of POPs in a 20 MHz license area by 0.75 and the number of POPs in a 30 MHz license area by one, and reflect the fact that licenses with greater MHz provide greater bandwidth or capacity. License value for each of the companies is the difference between enterprise value and cumulative capital expenditures. Finally, invested capital is the sum of the cumulative capital expenditures and license costs based on public sources. 47 55 The following chart summarizes the results of that analysis:
COMBINED OMNIPOINT AT COMPANY DEAL PRICE VOICESTREAM OMNIPOINT POWERTEL AERIAL SPRINT PCS -------- ------------ ----------- --------- -------- ------ ---------- Adjusted Enterprise Value/2000 Covered POPs.... $90.08 $81.43 $103.84 $68.63 $97.19 $71.54 $186.46 License Value/2000 Covered POPs....................... 73.31 66.50 84.03 53.70 61.68 37.03 149.32 Adjusted Enterprise Value/Total POPs........... 44.05 40.43 49.65 34.50 85.71 64.08 149.40 License Value/Total POPs..... 33.65 30.83 37.96 24.90 54.00 32.88 118.82 License Value/Weighted POPs....................... 51.26 43.62 65.96 35.22 59.35 32.88 147.73 Adjusted Enterprise Value/ Weighted POPs.............. 67.11 57.20 86.27 48.81 94.21 64.08 185.74 PCS Enterprise Value/Invested Capital.................... 279% 251% 327% 214% 190% 173% 350%
DISCOUNTED CASH FLOW ANALYSIS Goldman Sachs performed a discounted cash flow analysis comparing the range of values for VoiceStream on a stand-alone basis based on VoiceStream management's internal model for VoiceStream to Omnipoint on a stand-alone basis based on (1) Omnipoint management's internal model for Omnipoint ("Case A"), (2) VoiceStream management's internal model for Omnipoint ("Case B") and (3) Goldman Sachs' adjustment of Omnipoint management's internal model for Omnipoint giving effect to VoiceStream's operating performance trend ("Case C"). VoiceStream's operating performance trend is based upon, among other things, VoiceStream's historical and projected incremental penetration of its covered POPs. The following table presents ranges of enterprise value and equity value for VoiceStream and each of the three Omnipoint cases and the resulting range of implied ownership of the combined company by VoiceStream stockholders, assuming an all-stock transaction, based on forward 2008 EBITDA multiples for VoiceStream ranging from 9.0x to 13.0x, forward 2006 EBITDA multiples for Omnipoint ranging from 9.0x to 13.0x and discount rates ranging from 12% to 16%. Equity value of each of the companies represents the company's enterprise value net of the book value of the company's outstanding net indebtedness. "EBITDA," for purposes of this opinion represents earnings before interest, taxes, depreciation and amortization.
OMNIPOINT OMNIPOINT OMNIPOINT VOICESTREAM CASE A CASE B CASE C --------------- --------------- --------------- --------------- (DOLLARS IN MILLIONS) Enterprise Value........... $3,220 - $6,096 $4,179 - $7,191 $3,231 - $6,283 $3,758 - $6,704 Equity Value............... 2,541 - 5,417 1,454 - 4,466 506 - 3,558 1,032 - 3,979 Implied VoiceStream Ownership................ N/A 55% - 64% 60% - 83% 58% - 71%
Goldman Sachs also performed a discounted cash flow analysis comparing the range of values for VoiceStream on a stand-alone basis based on VoiceStream management's internal model for VoiceStream to the combined company based on the three cases for Omnipoint described above. 48 56 The following table presents for the combined company a range of price per share, the implied value per 2004 covered POP and per weighted POP and the implied 2005 EBITDA multiple, based on forward EBITDA multiples ranging from 10.0x to 12.0x and a discount rate of 13%:
COMBINED COMPANY --------------------------------------------------------- CASE A CASE C CASE B VOICESTREAM STANDALONE OMNIPOINT WITH MANAGEMENT VOICESTREAM OMNIPOINT VOICESTREAM MODEL OF MANAGEMENT MANAGEMENT DRIVERS OMNIPOINT ----------------- ----------------- ----------------- ----------------- EBITDA Exit Multiple......... 10.0x 12.0x 11.0x 13.0x 11.0x 12.0x 11.0x 13.0x Discounted Cash Flow Value per Share.................. $ 82.76 $ 96.32 $ 94.61 $ 109.97 $ 92.15 $ 107.91 $ 81.05 $ 95.66 Value per 2004 Covered POP... $ 211.00 $ 241.00 $ 229.00 $ 259.00 $ 231.00 $ 262.00 $ 220.00 $ 248.00 Value per Weighted POP....... $ 163.00 $ 186.00 $ 158.00 $ 179.00 $ 159.00 $ 180.00 $ 152.00 $ 171.00 Implied 2005 EBITDA Multiple................... 12.7x 14.4x 13.5x 15.3x 14.8x 16.8x 14.1x 16.0x
Finally, Goldman Sachs performed the same analysis assuming a 10% decrease in average monthly revenue per subscriber and EBITDA margins for each of the companies, as summarized in the following table:
COMBINED COMPANY --------------------------------------------------------- CASE A CASE C CASE B VOICESTREAM STANDALONE OMNIPOINT WITH MANAGEMENT VOICESTREAM OMNIPOINT VOICESTREAM MODEL OF MANAGEMENT MANAGEMENT DRIVERS OMNIPOINT ----------------- ----------------- ----------------- ----------------- EBITDA Exit Multiple(e)...... 10.0x 12.0x 11.0x 13.0x 11.0x 13.0x 11.0x 13.0x Discounted Cash Flow Value per Share.................. $ 67.17 $ 78.90 $ 85.72 $ 100.08 $ 83.26 $ 98.02 $ 72.87 $ 86.48 Value per 2004 Covered POP... $ 182.00 $ 207.00 $ 214.00 $ 242.00 $ 215.00 $ 244.00 $ 204.00 $ 231.00 Value per Weighted POP....... $ 141.00 $ 207.00 $ 148.00 $ 167.00 $ 149.00 $ 141.00 $ 141.00 $ 159.00 Implied 2005 EBITDA Multiple................... 12.8x 14.5x 13.5x 15.2x 14.9x 16.9x 14.2x 16.0x
RELATIVE CONTRIBUTION ANALYSIS Goldman Sachs performed contribution analyses of VoiceStream and Omnipoint to the combined company based on various factors. The following table presents the contribution analysis of VoiceStream and Omnipoint for the year 2006 to the combined company's equity free cash flows based on three scenarios: (1) Omnipoint management's internal model for Omnipoint, (2) VoiceStream management's internal model for Omnipoint and (3) Goldman Sachs' adjustment for Omnipoint management's internal model for Omnipoint giving effect to VoiceStream's operating performance trend (Cases A, B and C described above). Equity free cash flows represent the combined company's EBITDA adjusted for changes in the combined company's working capital and less capital expenditures and financing costs.
VOICESTREAM OMNIPOINT ----------- --------- 2006 Case A............................................... 49% 51% 2006 Case B............................................... 60 40 2006 Case C............................................... 55 45
The following table presents the contribution analysis of VoiceStream and Omnipoint to the combined company's 1998 and estimated 1999 and 2000 revenue and subscribers and current total 49 57 and weighted POPs and estimated 2000 covered POPs. Revenue and subscriber information for 1999 and 2000 and 2000 covered POPs for VoiceStream are from VoiceStream management estimates and for Omnipoint are from Omnipoint management estimates. The analysis is based upon the enterprise value of VoiceStream and Omnipoint and, therefore, does not take into account the outstanding indebtedness of either company.
VOICESTREAM OMNIPOINT ----------- --------- 1998 Revenue.............................................. 49% 51% 1999E Revenue............................................. 51 49 2000E Revenue............................................. 50 50 1998 Subscribers.......................................... 46 54 1999E Subscribers......................................... 50 50 2000E Subscribers......................................... 49 51 Total POPs................................................ 38 62 Weighted POPs............................................. 34 66 2000E Covered POPs........................................ 38 62
TRANSACTION PREMIUM ANALYSIS Goldman Sachs compared the stock price of VoiceStream common stock and Omnipoint common stock on the basis of the respective closing prices on June 23, 1999. Based on those stock prices and an assumed consideration per share of Omnipoint common stock of a fraction of a share of VoiceStream common stock equal to 0.825 and $8.00 in cash, the implied transaction price per share of Omnipoint common stock was $32.34. Goldman Sachs also compared the historical stock prices of VoiceStream common stock and Omnipoint common stock on the basis of the respective closing stock prices per share on June 23, 1999, and the respective closing stock prices and period averages or highs for the prior 10 days, three months and 52 weeks. The following table presents the premiums over the Omnipoint common stock prices at such times or for such period implied by the merger consideration and the VoiceStream common stock price at June 23, 1999:
IMPLIED PRICE PER SHARE OF OMNIPOINT DATE/PERIOD COMMON STOCK PREMIUM PAID ----------- ---------------------- ------------ June 23, 1999.................................. $20.81 55% 10-day average................................. 18.31 77 3-month average................................ 16.06 101 52-week high................................... 25.38 27
The following table presents the premiums over the Omnipoint historical price per POP implied by the merger consideration for estimated 2000 covered POPs and current total and weighted POPs.
JUNE 23, JUNE 23, 1999 1999 PRICE IMPLIED DEAL PREMIUM TO PRICE PER OMNIPOINT PER PRICE PER JUNE 23, 1999 VOICESTREAM VOICE- POPS (IN OMNIPOINT OMNIPOINT OMNIPOINT POPS (IN STREAM MILLIONS) POP POP PRICE MILLIONS) POP --------- ---------- ------------ ------------- ----------- --------- 2000 Covered POPs....... 53.1 $68.63 $81.43 19% 32.2 $103.84 Total POPs.............. 114.6 34.50 40.43 17 71.3 49.65 Weighted Total POPs..... 81.0 48.81 57.20 17 41.0 86.27
50 58 The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analyses or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs' opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all such analyses. No company or transaction used in the above analyses as a comparison is directly comparable to VoiceStream or Omnipoint or the Omnipoint reorganization. The analyses were prepared solely for purposes of Goldman Sachs providing its opinion to the VoiceStream board that, as of the date of such opinion, the merger consideration to be paid by VoiceStream pursuant to the Omnipoint reorganization agreement was fair from a financial point of view to VoiceStream. The analyses do not purport to be appraisals or necessarily reflect the prices at which the business or securities actually may be sold. Analyses based upon forecasts of future results, which are inherently subject to uncertainty, are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by such analyses. As described above, Goldman Sachs' opinion to the VoiceStream board was one of many factors taken into consideration by the VoiceStream board in making its determination to approve the Omnipoint reorganization agreement. The foregoing summary describes material financial analyses used by Goldman Sachs in connection with providing its opinion to VoiceStream's board of directors on June 22, 1999, but does not purport to be a complete description of the analysis performed by Goldman Sachs in connection with that opinion. You should read the entire opinion of Goldman Sachs in Annex B. Goldman Sachs, as part of its investment banking business, is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. VoiceStream selected Goldman Sachs as its financial advisor because it is a nationally recognized investment banking firm that has substantial experience in transactions similar to the Omnipoint reorganization. Goldman Sachs is familiar with VoiceStream having provided certain investment banking services to VoiceStream and its former parent, Western Wireless, from time to time, including having acted as lead managing underwriter of the initial public offering of 12.65 million shares of Western Wireless common stock in May 1996; having acted as lead manager in the public offering of $200 million aggregate principal amount of 10.5% senior subordinated notes due June 2006 of Western Wireless in May 1996; having acted as lead manager in the private offering of $200 million aggregate principal amount of 10.5% senior subordinated notes due February 2007 of Western Wireless in October 1996; having acted as lead manager in the public offering of 13.915 million shares of Western Wireless common stock in April 1998; having acted as Western Wireless' financial advisor in connection with the sale of 19.9% of the outstanding shares of VoiceStream common stock to Hutchison (USA) in February 1998; and having acted as VoiceStream's financial advisor in connection with, and having participated in certain of the negotiations leading to, the Omnipoint reorganization agreement. Investment funds affiliated with Goldman Sachs have a principal investment in VoiceStream in the amount of 9,730,208 shares of VoiceStream common stock and have the right to designate a nominee for election to VoiceStream's board of directors. Terence O'Toole, a managing director of Goldman Sachs, is a director of VoiceStream. In addition, Goldman Sachs Credit Partners, L.P., an affiliate of Goldman Sachs, has offered to be lead arranger and syndication agent for a $3 billion credit facility in connection with the Omnipoint reorganization, and has offered a commitment to fully underwrite the facility. In addition, Goldman Sachs has provided certain investment banking services to Omnipoint from time to time, including having acted as co-manager in the public offering of 6 million shares of Omnipoint common stock in June 1996; having acted as co-manager in the private offering of $250 million aggregate principal amount of 11.625% senior notes due August 2006 in August 1996; and having acted as co-manager in the 51 59 private offering of $200 million aggregate principal amount of 11.625% senior notes due August 2006 in November 1996. Goldman Sachs provides a full range of financial, advisory and brokerage services and, in the course of its normal trading activities, may from time to time effect transactions and hold securities, including derivative securities, of VoiceStream and Omnipoint for its own accounts and for the account of customers. As of June 17, 1999, Goldman Sachs had a long position of $46.4 million of Omnipoint funded bank loans; a net long position of $7.1 million of Omnipoint unfunded bank loans; a net short position of 214,627 shares of Omnipoint common stock; a short position of 40,000 call options on Omnipoint common stock at an exercise price of $15.00; a long position of 100,000 put options on Omnipoint common stock at an exercise price of $5.00; a long position of $16.5 million face value of Omnipoint convertible preferred stock; and a net short position of $2.0 million aggregate principal amount of Omnipoint 11.652% senior notes due August 2006. As of the same date and in addition to the principal investment referred to above, Goldman Sachs had a long position of $8.5 million of VoiceStream bank loans. FEE ARRANGEMENT WITH GOLDMAN SACHS Pursuant to a letter agreement dated October 7, 1998, VoiceStream engaged Goldman Sachs to act as its financial advisor in connection with a potential transaction involving Omnipoint or another third party. VoiceStream has agreed to pay Goldman Sachs a transaction fee equal to $14,000,000 upon consummation of the Omnipoint reorganization. VoiceStream has agreed to reimburse Goldman Sachs for its reasonable out-of-pocket expenses, including attorney's fees, and to indemnify Goldman Sachs against certain liabilities, including certain liabilities under the federal securities laws. RECOMMENDATIONS OF THE OMNIPOINT BOARD; REASONS FOR THE OMNIPOINT REORGANIZATION The Omnipoint board has determined that the Omnipoint reorganization agreement and the Omnipoint merger are fair to and in the best interests of Omnipoint's stockholders, has approved the Omnipoint reorganization agreement, and unanimously recommends a vote "FOR" approval of, and adoption of the transactions contemplated by, the Omnipoint reorganization agreement. The Omnipoint board believes that the completion of the Omnipoint merger will substantially benefit both Omnipoint and its stockholders. In reaching its decision to approve the Omnipoint reorganization agreement, the Omnipoint board consulted with Omnipoint's financial and legal advisors and senior management and considered numerous factors, including: - the Omnipoint board's review of and familiarity with the business, assets, competitive position, and prospects of Omnipoint, including Omnipoint's prospects if it were to continue operating as an independent company; - the strategic and financial alternatives available to Omnipoint in the highly competitive wireless communications industry, as well as the attractiveness of a business combination with VoiceStream and the strategic fit between Omnipoint and VoiceStream; - the terms of proposed investments or strategic transactions with various third parties with whom Omnipoint had engaged in negotiations since the autumn of 1998; - benefits expected to be achieved as a result of combining Omnipoint and VoiceStream, including synergies relating to expanded in-network coverage, economies of scale, product procurement, and financing; - a review of the historical operating results of Omnipoint and VoiceStream and the projected operating results of Omnipoint and VoiceStream, individually and in combination; 52 60 - the opinions delivered by Lehman Brothers to the Omnipoint board verbally on June 21, 1999, and in writing on June 23, 1999, to the effect that the consideration offered by VoiceStream to Omnipoint's stockholders in the Omnipoint reorganization, as of those dates, was fair from a financial viewpoint; - the substantial per share premium over prevailing market prices for Omnipoint's common stock represented by the VoiceStream proposal; - the opportunity for Omnipoint's stockholders who elect to receive and hold VoiceStream Holdings common stock in the Omnipoint merger to continue to retain an interest in the wireless telecommunications market in general through a geographically more diverse and larger combined company; - the expectation that the Omnipoint reorganization would be accounted for as a purchase for accounting purposes and would be accomplished on a tax-free basis for federal income tax purposes, except for taxes payable on any cash consideration received by Omnipoint's stockholders in the Omnipoint merger or as a result of proration or of their exercise of dissenters' rights; - the arrangements proposed under the Omnipoint reorganization agreement for the expansion of the VoiceStream board of directors and the designation by Omnipoint of four new members to serve on the VoiceStream board; and - the anticipated purchase by VoiceStream and Hutchison PCS (USA) from Omnipoint of $300 million of Omnipoint equity securities prior to the Omnipoint reorganization. The foregoing summary addresses the material facts, matters and information considered by the Omnipoint board in connection with its deliberations on the combination of Omnipoint and VoiceStream. In view of the variety of factors considered, the Omnipoint board did not find it practical to and did not make a specific assessment of or otherwise assign relative weights to the specific facts, matters and information considered. The Omnipoint board adopted the Omnipoint reorganization agreement and approved the transactions contemplated thereby in consideration of all of the facts, matters and information brought to its attention. Taking into account all of the material facts, matters and information, including those described above, the Omnipoint board believes that the terms of the Omnipoint reorganization agreement and the transactions provided for therein are fair to and in the best interest of Omnipoint's stockholders. THE OMNIPOINT BOARD UNANIMOUSLY RECOMMENDS THAT OMNIPOINT'S STOCKHOLDERS VOTE "FOR" ADOPTION OF, AND APPROVAL OF THE TRANSACTIONS CONTEMPLATED BY, THE OMNIPOINT REORGANIZATION AGREEMENT. OMNIPOINT FAIRNESS OPINION Lehman Brothers acted as financial advisor to the Omnipoint board in connection with the Omnipoint reorganization and delivered its oral opinion to the Omnipoint board at the June 21, 1999 meeting of the Omnipoint board, which was confirmed in writing on June 23, 1999 to the effect that, as of the dates thereof, and based on and subject to the assumptions, limitations and qualifications set forth in the opinion, the consideration to be offered to the Omnipoint common stockholders in the Omnipoint reorganization is fair to such stockholders. The full text of Lehman Brothers' written opinion, dated June 23, 1999, is attached as Annex C to this joint proxy statement-prospectus. Stockholders may read the opinion for a discussion of assumptions made, matters considered and limitations of the review undertaken by Lehman Brothers in rendering its opinion. The summary of the Lehman Brothers opinion set forth in this joint proxy statement-prospectus is qualified in its entirety by reference to the full text of the opinion attached as 53 61 Annex C. The Lehman Brothers opinion was provided to the Omnipoint board for its use and benefit in connection with its consideration of the Omnipoint reorganization. This opinion was not intended to be and does not constitute a recommendation to any stockholder of Omnipoint with respect to: - how any stockholder should vote with respect to the Omnipoint reorganization; - the consideration to be offered in connection with the Omnipoint reorganization; or - which of the consideration election alternatives stockholders should make. No limitations were imposed by Omnipoint on the scope of Lehman Brothers' investigation or the procedures to be followed by Lehman Brothers in rendering its opinion. Lehman Brothers was not requested to and did not make any recommendation to the Omnipoint board as to the form or amount of the consideration to be received by Omnipoint common stockholders, which was determined through arms-length negotiations between the parties. In arriving at its opinion, Lehman Brothers did not ascribe a specific range of values to Omnipoint, but rather made its determination as to the fairness, from a financial point of view, of the consideration to be received by the holders of Omnipoint common stock in the Omnipoint reorganization on the basis of the financial and comparative analyses described below. Lehman Brothers' opinion is for the use and benefit of the Omnipoint board and was rendered to the Omnipoint board in connection with its consideration of the Omnipoint reorganization. Lehman Brothers was not requested to opine as to, and its opinion does not address, Omnipoint's underlying business decision to proceed with or effect the Omnipoint reorganization. In connection with the preparation and delivery of its opinion to the Omnipoint board, Lehman Brothers performed a variety of financial and comparative analyses, as described below. The preparation of a fairness opinion involves various determinations as to the most appropriate and relevant methods of financial and comparative analysis and the application of those methods to the particular circumstances and, therefore, such an opinion is not readily susceptible to summary description. Furthermore, in arriving at its opinion, Lehman Brothers did not attribute any particular weight to any analysis or factor considered by it, but, rather made qualitative judgements as to the significance and relevance of each analysis and factor. Accordingly, Lehman Brothers believes that its analyses must be considered as a whole and that considering any portion of such analyses and factors, without considering all analyses and factors, could create a misleading or incomplete view of the process underlying its opinion. In its analyses, Lehman Brothers made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of Omnipoint and VoiceStream. Any estimates or projections contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth therein. In addition, analyses relating to the value of a business do not purport to be appraisals or to reflect the prices at which businesses actually may be sold. In arriving at its opinion, Lehman Brothers reviewed and analyzed: - the draft Omnipoint reorganization agreement and the specific terms of the proposed Omnipoint reorganization; - publicly available information concerning Omnipoint and VoiceStream that Lehman Brothers believed to be relevant to its analysis; - financial and operating information with respect to the businesses, operations and prospects of Omnipoint and VoiceStream furnished to Lehman Brothers by Omnipoint and VoiceStream, respectively; 54 62 - a trading history of Omnipoint's common stock from June 17, 1998 to the present and a comparison of that trading history with those of other companies that Lehman Brothers deemed relevant; - a trading history of VoiceStream's common stock from May 3, 1999 (the date VoiceStream's common stock first began to trade independently from Western Wireless) to the present and a comparison of that trading history with those of other companies that Lehman Brothers deemed relevant; - a comparison of the historical financial and operating results and present financial condition of Omnipoint with those of other companies that Lehman Brothers deemed relevant; - a comparison of the historical financial and operating results and present financial condition of VoiceStream with those of other companies that Lehman Brothers deemed relevant; - a comparison of the financial terms of the proposed Omnipoint reorganization with the financial terms of certain other recent transactions that Lehman Brothers deemed relevant; - third party research analysts' estimates, valuation analyses, target prices and investment considerations for Omnipoint and VoiceStream; - the terms of the CIRI Transactions; - the terms of the Hutchison Investments; - Omnipoint's current cash flow forecast and limited cash position, its ability to meet its liquidity requirements in the future, and the potential alternatives available to Omnipoint to fund such requirements; - the results of Lehman Brothers' efforts to secure a strategic equity investor for Omnipoint and Omnipoint's negotiations with selected potential equity investors; and - the terms of interim investing available to Omnipoint in conjunction with the Omnipoint reorganization and a comparison of such terms with the terms of investments by other potential sources of equity available to Omnipoint. In addition, Lehman Brothers had discussions with the respective management of Omnipoint and VoiceStream concerning their businesses, operations, assets, financial condition and prospects and undertook such other studies, analyses and investigations as Lehman Brothers deemed appropriate. In arriving at its opinion, Lehman Brothers assumed and relied upon the accuracy and completeness of the financial and other information used by it without assuming any responsibility for independent verification of such information and further relied upon the assurances of members of management of Omnipoint that they were not aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the financial projections of Omnipoint, upon advice of Omnipoint, Lehman Brothers has assumed that such projections have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Omnipoint as to the future financial performance of Omnipoint and that Omnipoint will perform substantially in accordance with such projections. With respect to the financial projections of VoiceStream, upon advice of VoiceStream, Lehman Brothers has assumed that such projections have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of VoiceStream as to the future financial performance of VoiceStream and that VoiceStream will perform substantially in accordance with such projections. In arriving at its opinion, Lehman Brothers did not conduct a physical inspection of the properties and facilities of Omnipoint or VoiceStream and did not make or obtain any evaluations or appraisals of the assets or liabilities of Omnipoint or VoiceStream. Upon advice of Omnipoint and its legal advisors, Lehman Brothers has assumed that the exchange of shares of common stock of Omnipoint 55 63 pursuant to the Omnipoint reorganization will be pursuant to Section 351 of the Internal Revenue Code of 1986, as amended, and therefore will be tax free to the stockholders of Omnipoint who receive only VoiceStream Holdings common stock in exchange for their shares of common stock of Omnipoint. Lehman Brothers' opinion necessarily is based upon market, economic and other conditions as they exist on, and can be evaluated as of, the date of the opinion. In addition, Lehman Brothers expressed no opinion as to the prices at which shares of VoiceStream Holdings common stock actually will trade following consummation of the Omnipoint reorganization and this opinion should not be viewed as providing any assurance that the market value of the VoiceStream Holdings common stock to be held by stockholders of Omnipoint after the Omnipoint reorganization will be in excess of the market value of the shares of Omnipoint owned by such stockholders at any time prior to announcement or consummation of the Omnipoint reorganization. The following is a summary of certain financial and comparative analyses performed by Lehman Brothers and presented to the Omnipoint board. Certain of the analyses include information presented in tabular or graphic format. In order to fully understand the financial analyses used by Lehman Brothers, the tables and graphs must be read together with the text of each summary. The tables or graphs alone do not constitute a complete description of the financial analyses. PURCHASE PRICE ANALYSIS As of June 21, 1999, Lehman Brothers estimated that the price per share Omnipoint would receive in the Omnipoint reorganization would be $31.07, based on the VoiceStream 10-day volume-weighted average price as of June 18, 1999 of $27.97. This price per share represented a 64.1% premium over the Omnipoint June 18, 1999 closing price of $18.94. DISCOUNTED CASH FLOW ANALYSIS Lehman Brothers performed discounted cash flow analyses of the Omnipoint and VoiceStream businesses. A discounted cash flow analysis involves an analysis of the present value of projected cash flows and a terminal value using discount rates and terminal year EBITDA multiples as indicated below. Lehman Brothers performed two separate discounted cash flow cases for Omnipoint, the first based on management projections received on June 14, 1999 and the other based on Lehman Brothers' recent equity research model for Omnipoint. In the management discounted cash flow case, Lehman Brothers analyzed Omnipoint's PCS business using a management forecast for the period beginning January 1, 1999 and ending December 31, 2006. Lehman Brothers used discount rates ranging from 13% to 15% and terminal multiples of estimated 2006 EBITDA ranging from 8.0x to 10.0x. This analysis yielded a range of values for Omnipoint's PCS business of approximately $3.8 billion to $5.3 billion, implying a range of values for Omnipoint common stock of $19 to $43 per share. In the research discounted cash flow case, Lehman Brothers analyzed Omnipoint's PCS business using a forecast for the period beginning January 1, 1999, and ending December 31, 2007. Lehman Brothers applied the same discount rates and terminal multiples in the research discounted cash flow case as in the management discounted cash flow case. The research discounted cash flow case yielded an enterprise value range of approximately $3.4 billion to $4.9 billion and a range of values for Omnipoint common stock of $13 to $38 per share. Lehman Brothers analyzed VoiceStream's business using a management forecast for the period beginning January 1, 1999 and ending December 31, 2008. Lehman Brothers used discount rates ranging from 12% to 14% and terminal multiples of estimated 2008 EBITDA ranging from 8.0x to 56 64 10.0x. This analysis yielded a range of values for VoiceStream's business of approximately $3.1 billion to $4.6 billion, implying a range of values for VoiceStream common stock of $24 to $40 per share. PEER GROUP COMPARISON Lehman Brothers compared certain financial statistics of Omnipoint with corresponding financial statistics for the following six PCS companies: - Aerial - Microcell - Nextel - Powertel - Sprint PCS - VoiceStream Lehman Brothers compared certain financial statistics of VoiceStream with corresponding financial statistics for the following six PCS companies: - Aerial - Microcell - Nextel - Omnipoint - Powertel - Sprint PCS Lehman Brothers analyzed, among other things, firm value (market value of equity plus net debt) as a multiple of total POPs (the number of persons within the companies' license coverage areas); built POPs (the number of persons within the companies' built network coverage area); covered POPs (the number of persons within the companies' operating network coverage area); and weighted POPs (the total persons within the companies' license coverage area adjusted for MHz bandwidth capacity). As of June 18, 1999, the statistics derived from this analysis are set forth below:
OMNIPOINT PEER GROUP COMPARISON ------------------------------------------------------- MEAN MEAN EXCL. NEXTEL AND SPRINT PCS OMNIPOINT ---- -------------------------------- ----------- Firm Value/Total POPs................ $ 73 $ 50 $38 Firm Value/Built POPs................ $ 80 $ 61 $62 Firm Value/Covered POPs.............. $142 $108 $76 Firm Value/Weighted POPs............. $105 $ 61 $51
VOICESTREAM PEER GROUP COMPARISON ------------------------------------------------------- MEAN MEAN EXCL. NEXTEL AND SPRINT PCS VOICESTREAM ---- -------------------------------- ----------- Firm Value/Total POPs................ $ 71 $47 $ 50 Firm Value/Built POPs................ $ 78 $57 $ 75 Firm Value/Covered POPs.............. $122 $74 $177 Firm Value/Weighted POPs............. $ 99 $52 $ 88
Because of the inherent differences in the businesses, operations, financial conditions and prospects of Omnipoint and VoiceStream and the comparable companies, Lehman Brothers believed that it was inappropriate to, and therefore did not, rely solely on the quantitative results of the comparable companies analysis, and, accordingly, also made qualitative judgements concerning differences between the characteristics of the comparable companies and Omnipoint and 57 65 VoiceStream, respectively, that would affect the trading values of Omnipoint, VoiceStream and the comparable companies. The statistics contained in the center columns of the tables above omit data concerning Nextel and Sprint PCS. This data was omitted because of differences identified by Lehman Brothers in the businesses of Nextel and Sprint PCS on the one hand, and VoiceStream, Omnipoint and the other members of the peer group on the other. SELECTED COMPARABLE PRECEDENT TRANSACTION ANALYSIS As part of its analysis, Lehman Brothers reviewed the following ten transactions involving domestic PCS and wireless companies since 1996: - April 1999 -- Sprint PCS/Cox Communications - September 1998 -- Sonera/Aerial - April 1998 -- AirTouch/U.S. WEST (PrimeCo) - March 1999 -- Triton PCS/AT&T Wireless - February 1998 -- AT&T Wireless/Cincinnati Bell - January 1998 -- Sprint PCS/APC - October 1997 -- Hutchison Whampoa/Western Wireless - December 1996 -- Deutsche Telekom/APC - March 1996 -- Powertel (Intercel)/GTE Mobilnet - January 1996 -- Western Wireless/GTE Mobilnet For each of these, Lehman Brothers reviewed the prices paid and calculated the enterprise value as a multiple of total POPs. This analysis indicated multiples ranging from $17 to $158 per POP for these transactions, with an overall mean per POP multiple of $66. Lehman Brothers also evaluated the mean per POP multiples excluding the GTE transactions, and the mean per POP multiples excluding the GTE transactions, the Sprint PCS/Cox Communications transaction and the APC transactions, resulting in $77 and $43 mean per POP multiples, respectively. Because the reasons for and the circumstances surrounding each of the transactions analyzed were specific to each transaction and because of the inherent differences between the businesses, operations and prospects of Omnipoint and the businesses, operations and prospects of the acquired companies included in the selected transactions, Lehman Brothers believed that it was inappropriate to, and therefore did not, rely solely on the quantitative results of the precedent transactions analysis, and accordingly also made qualitative judgements concerning differences between the characteristics of these transactions and the Omnipoint reorganization that would affect the acquisition values of Omnipoint and such acquired companies. RELATIVE CONTRIBUTION ANALYSIS Lehman Brothers compared the pro forma contribution of each of Omnipoint and VoiceStream, based on historical information, to the resultant combined company upon completion of the Omnipoint reorganization. Under the terms of the Omnipoint reorganization, holders of Omnipoint common stock will receive in the aggregate 0.825 of a share of VoiceStream Holdings common stock plus $8.00 in cash for each share of Omnipoint common stock. Based on the VoiceStream 10-day volume-weighted average price as of June 18, 1999, Omnipoint stockholders would own approximately 30.6% of the combined company in addition to the cash they are to receive. As of June 18, 1999, Omnipoint would have contributed 61.6% of total POPs, 59.3% of built POPs, 69.9% of covered POPs and 20.7% of stockholders equity. For the three months ended March 31, 1999, Omnipoint 58 66 would have contributed 53.4% of subscribers, 49.8% of services revenue, 74.8% of net debt and 76.2% of total debt. HISTORICAL PUBLIC MARKET TRADING ANALYSIS Lehman Brothers reviewed the recent stock price performance of Omnipoint based on an analysis of the historical closing prices from June 18, 1998 to June 18, 1999. The following table lists the low, average and high daily closing prices of shares of Omnipoint common stock for the periods indicated.
HISTORICAL OMNIPOINT COMMON STOCK PRICES ---------------------------------------- Close (6/18/99)............................................. $18.94 52-Week Low................................................. $ 5.00 52-Week High................................................ $25.00
[GRAPH] Lehman Brothers also reviewed the recent stock price performance of VoiceStream based on an analysis of the historical closing prices from May 3, 1999 to June 18, 1999. The following table lists the low, average and high daily closing prices of shares of VoiceStream common stock for the periods indicated.
HISTORICAL VOICESTREAM COMMON STOCK PRICES ------------------------------------------ 10-Day June 7 to June 18 Volume-Weighted Average Price...... $27.97 Close (6/18/99)............................................. $30.00 52-Week Low................................................. $20.50 52-Week High................................................ $33.06
[GRAPH] 59 67 COMPARATIVE STOCK PRICE PERFORMANCE As part of its analysis, Lehman Brothers reviewed the recent price performance of Omnipoint common stock from June 18, 1998 to June 18, 1999 and compared this performance with that of a group of the following six PCS companies over the same time period: - Aerial - Microcell - Nextel - Powertel - Sprint PCS - VoiceStream [GRAPH] 60 68 As part of its analysis, Lehman Brothers also reviewed the recent price performance of VoiceStream common stock from May 3, 1999 to June 18, 1999 and compared this performance with that of a group of the following six PCS companies over the same time period: - Aerial - Microcell - Nextel - Omnipoint - Powertel - Sprint PCS [GRAPH] Lehman Brothers has acted as financial advisor to Omnipoint in connection with the Omnipoint reorganization and will receive a fee for its services which is contingent upon the consummation of the Omnipoint reorganization. In addition, Omnipoint has agreed to indemnify Lehman Brothers for certain liabilities that may arise out of the rendering of this opinion. In the ordinary course of its business, Lehman Brothers actively trades in the debt and equity securities of Omnipoint for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities. FEE ARRANGEMENTS WITH LEHMAN BROTHERS AND ALLEN & CO. Pursuant to a letter agreement dated October 28, 1998, Omnipoint engaged Lehman Brothers to act as its financial advisor in connection with any opportunities for investment in or sale of Omnipoint. Pursuant to a letter dated June 22, 1999, Omnipoint formalized the engagement of Allen & Co. whereby it had been acting as a financial advisor to Omnipoint since 1998 in connection with any opportunities for investment in or sale of Omnipoint. Omnipoint has agreed to pay Lehman Brothers and Allen & Co. an aggregate transaction fee equal to $11,000,000 upon consummation of the Omnipoint reorganization. Omnipoint also has agreed to reimburse Lehman Brothers and Allen & Co. for their reasonable out-of-pocket expenses, including attorney's fees, and to indemnify them against certain liabilities. AGREEMENT TO VOTE IN FAVOR OF THE OMNIPOINT REORGANIZATION Certain principal stockholders of VoiceStream and certain stockholders of Omnipoint have entered into an agreement to vote in favor of the Omnipoint reorganization. For a discussion of this 61 69 agreement, see "The Special Meetings -- Agreement to Vote in Favor of the Omnipoint Reorganization." HUTCHISON STANDSTILL AGREEMENT In connection with the Hutchison Investments certain of the Hutchison Entities entered into a standstill agreement with VoiceStream Holdings. With certain exceptions, this agreement provides that, for a period of five years after the completion of the Omnipoint reorganization, the beneficial ownership of VoiceStream Holdings common stock by the Hutchison Entities and their affiliates will not exceed: - 35% during the first two years after the Omnipoint reorganization (or 33% if the aggregate number of outstanding shares of VoiceStream Holdings common stock exceeds 200 million); - 36% during the third year after the Omnipoint reorganization; and - 40% during the fourth and fifth years after the Omnipoint reorganization. Among other things, this agreement also: - prohibits the Hutchison Entities and their affiliates from, in certain circumstances, participating in a proxy contest, tender offer, exchange offer or other transaction relating to a change of control of VoiceStream Holdings; - provides Hutchison PCS (USA) a preemptive right with respect to future VoiceStream Holdings equity issuances; and - entitles Hutchison PCS (USA) to maintain its percentage ownership level in VoiceStream Holdings and to certain registration rights. TIMING OF CLOSING The closing of the Omnipoint reorganization will occur on the fifth business day following the day on which the last of the conditions set forth in the Omnipoint reorganization agreement has been satisfied or waived, unless VoiceStream and Omnipoint agree to a different date. Upon closing of the VoiceStream and Omnipoint mergers, the parties will file required certificates of merger with the Secretary of State of Delaware and the Secretary of State of Washington, at which time the VoiceStream and Omnipoint mergers will be effective. ACCOUNTING TREATMENT The Omnipoint reorganization will be accounted for using the purchase method of accounting with VoiceStream Holdings becoming the successor company to VoiceStream and Omnipoint. Under the purchase method of accounting, the purchase price will be allocated among the Omnipoint assets and liabilities. The excess of purchase price over the fair value of the identifiable tangible assets and liabilities acquired will be recorded as intangible assets and amortized on a straight-line basis over a period not to exceed 40 years. The assets and liabilities of VoiceStream will be reflected in our financial statements at their historical cost basis. Earnings of VoiceStream Holdings subsequent to the date of the Omnipoint reorganization will be reduced by the amortization of intangible assets. See "VoiceStream Holdings Unaudited Pro Forma Condensed Combined Financial Statements." TRANSACTION COSTS Anticipated non-recurring charges to VoiceStream Holdings as a result of the Omnipoint reorganization are estimated to be approximately $30.5 million. This includes transaction costs to be paid by Omnipoint of approximately $11 million related to investment banking fees and $1.5 million related to legal, accounting and employee separation costs which will be expensed as incurred by 62 70 Omnipoint. This total also includes non-recurring costs to be paid by VoiceStream of $14 million related to investment banking fees, and $4 million related to legal, accounting and other transaction fees, which will be considered as part of the purchase price. DISSENTERS' RIGHTS OF APPRAISAL VoiceStream common stockholders who dissent from the VoiceStream merger and follow certain statutory procedures have the right under the WBCA to demand payment in cash for the fair value of their VoiceStream common stock, calculated as of the day prior to the effective time. The VoiceStream merger will occur at the time of the first to occur of the Omnipoint reorganization or the Aerial reorganization. Since it is uncertain which reorganization will occur first, VoiceStream common stockholders must vote against both reorganizations if they intend to exercise their dissenters' rights of appraisal in connection with the VoiceStream merger. Holders of Omnipoint common stock who dissent from the Omnipoint merger and follow certain statutory procedures have the right under the DGCL to receive payment in cash for the fair value of their Omnipoint common stock. See "The Special Meetings--Dissenters' Rights of Appraisal" and Annexes I and J hereto which set forth the text of the applicable sections of the WBCA and DGCL. CIRI TRANSACTIONS To satisfy FCC requirements, all Omnipoint C and F Block licenses and pending licenses, together with certain assets and liabilities, will be transferred to CIVS II and CIVS III at the closing of the Omnipoint reorganization pursuant to separate purchase agreements with Omnipoint (collectively, the "CIRI Transactions"). CIVS II and CIVS III are limited liability companies and are eligible to hold C and F Block licenses issued by the FCC. Cook Inlet, through its wholly owned subsidiary Cook Inlet GSM, Inc., is the managing member of each of CIVS II and CIVS III. Pursuant to the CIVS II purchase agreement, Omnipoint (prior to becoming a subsidiary of VoiceStream Holdings) will contribute to CIVS II C and F Block licenses for 54 BTA markets together with certain associated assets. In consideration for such licenses and assets, CIVS II will issue to Omnipoint Class B membership interests in CIVS II entitling Omnipoint to a 49.9% interest in CIVS II and an initial capital account of $85.7 million. CIVS II will also assume certain liabilities of Omnipoint associated with such licenses and assets. The CIVS II purchase agreement also provides as follows: - amounts payable to the FCC for licenses shall not exceed the total indebtedness incurred for the purchase of the licenses (approximately $220 million); - indebtedness to vendors shall not exceed approximately $130 million plus any indebtedness incurred after the date of the CIVS II purchase agreement in the ordinary course; - the liabilities of Omnipoint to be assumed by CIVS II shall not exceed the amount such that, when netted, together with other debt assumed by CIVS II, against the value of the licenses and assets, the value of the licenses and assets are less than $85.7 million; and - prior to the consummation of the sale by Omnipoint, Cook Inlet GSM, Inc. shall have contributed at least $60 million to CIVS II. In conjunction with the CIVS II purchase agreement and formation of CIVS II, VoiceStream Holdings agreed to grant to Cook Inlet certain rights to exchange Cook Inlet's interest in CIVS II for VoiceStream Holdings common stock during the 30-day period beginning five years after the issuance date of the licenses held by CIVS II. 63 71 Pursuant to the CIVS III purchase agreement, Omnipoint agreed to contribute to CIVS III certain pending C and F Block licenses for 34 BTA markets. In consideration for such contribution, CIVS III will issue to Omnipoint Class B membership interests in CIVS III entitling Omnipoint to a 49.9% interest in CIVS III and an initial capital account of $21.4 million. CIVS III will also assume certain of the liabilities of Omnipoint associated with such licenses. The CIVS III purchase agreement also provides as follows: - liabilities of Omnipoint to be assumed by CIVS III shall not exceed the amount such that, when netted against the actual price paid for the licenses (approximately $45 million), the value of the licenses are less than $21.4 million; - Omnipoint shall contribute cash to CIVS III in an amount equal to any amounts payable to the FCC for any FCC licenses that remain to be issued to Omnipoint's wholly-owned subsidiary, OPCS Three, LLC, as of the closing date of the Omnipoint reorganization; and - prior to the consummation of the sale by Omnipoint, Cook Inlet GSM, Inc. shall have contributed at least $15 million to CIVS III. In conjunction with the CIVS III purchase agreement and formation of CIVS III, VoiceStream Holdings agreed to grant to Cook Inlet certain rights to exchange Cook Inlet's interest in CIVS III for VoiceStream Holdings common stock during the 30-day period beginning five years after the issuance date of the licenses held by CIVS III. HUTCHISON INVESTMENTS At the same time that we entered into the Omnipoint reorganization agreement, Hutchison Telecommunications Limited, Hutchison PCS (USA) and VoiceStream Holdings entered into agreements providing for the Hutchison Investments. In the Hutchison Investments, Hutchison PCS (USA) agreed to purchase shares of VoiceStream Holdings common stock for a purchase price of $29 per share and shares of VoiceStream Holdings Junior Preferred, for a purchase price of $100,000 per share. The total purchase price of the VoiceStream Holdings common stock and the VoiceStream Holdings Junior Preferred will be $957 million, consisting of $807 million in cash and $150 million in shares of Omnipoint Series A Preferred purchased by Hutchison PCS (USA) from Omnipoint under a securities purchase agreement. The Omnipoint Series A Preferred (or all shares of Omnipoint common stock obtained prior to the Omnipoint reorganization on conversion of the Omnipoint Series A Preferred) will be exchanged in connection with the Omnipoint reorganization for VoiceStream Holdings common stock at a conversion price of $29.00 per share. Hutchison PCS (USA) has the right to determine the allocation between VoiceStream Holdings common stock and VoiceStream Holdings Junior Preferred that it will hold so long as it holds at least 18.6% of the total number of outstanding shares of VoiceStream Holdings common stock immediately after the closing of the Omnipoint reorganization. VoiceStream Holdings entered into the Hutchison Investments because it believed that in order to successfully merge with Omnipoint, which was and remains substantially leveraged, VoiceStream Holdings would need additional equity. If the entire $957 million is used to purchase (or is converted into) VoiceStream Holdings common stock, at the completion of the Omnipoint reorganization, the total number of shares of VoiceStream Holdings common stock purchased as part of the Hutchison Investments will be 33 million shares. After giving effect to the Omnipoint reorganization, Aerial reorganization, the Hutchison Investments and the Sonera-VoiceStream Investment, the Hutchison Entities would own 55,899,252 shares (approximately 23%) of VoiceStream Holdings common stock. The consummation of the purchases under this subscription agreement will take place in connection with the completion of the Omnipoint reorganization. 64 72 The VoiceStream Holdings Junior Preferred has no voting rights, ranks senior to the VoiceStream Holdings common stock but junior to any other series or class of VoiceStream Holdings preferred stock which may be issued, provides for a 2.5% cumulative dividend payable at maturity (40 years from the date of issuance), and may not be redeemed by VoiceStream Holdings (other than a mandatory redemption from a holder whose ownership of these shares may result in the loss of a license or franchise from any governmental agency). The Hutchison Entities cannot require VoiceStream Holdings to redeem these shares prior to maturity. Upon conversion of the VoiceStream Holdings Junior Preferred any cumulative dividend outstanding on the shares so converted will be canceled. Upon a change of control of VoiceStream Holdings, VoiceStream Holdings has the right to require the VoiceStream Holdings Junior Preferred to be converted into VoiceStream Holdings common stock. SONERA-VOICESTREAM INVESTMENT On September 17, 1999, VoiceStream Holdings and Sonera entered into an agreement providing for the Sonera-VoiceStream Investment. In the Sonera-VoiceStream Investment, Sonera agreed to purchase at the closing of the Omnipoint reorganization 8,771,930 shares of VoiceStream Holdings common stock for a purchase price of $500 million ($57.00 per share). The Sonera-VoiceStream Investment is desirable to us in light of the fact that Omnipoint is substantially leveraged, and the Sonera-VoiceStream Investment will provide us with additional equity. MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE OMNIPOINT REORGANIZATION CONSEQUENCES OF THE VOICESTREAM MERGER The following is a summary of the material United States federal income tax consequences of the VoiceStream merger to holders of VoiceStream common stock. It does not discuss all aspects of United States federal income taxation that may be important to you in light of your particular circumstances. For example, it does not discuss tax consequences that may apply to you if you are a taxpayer that is subject to special treatment under the federal income tax laws (for example, if you are a bank, financial institution, broker-dealer, insurance company, foreign person, or tax-exempt entity, or if you acquired your VoiceStream common stock by exercising employee stock options or otherwise as compensation or through a tax-qualified retirement plan). It also does not discuss any aspect of state, local or foreign taxation. The summary assumes that you will hold your VoiceStream common stock as a capital asset at the effective time. Jones, Day, Reavis & Pogue, tax counsel to VoiceStream, has delivered an opinion to the effect that the description of the federal income tax consequences to holders of VoiceStream common stock contained under this heading correctly summarizes the material federal income tax consequences for such holders. YOU ARE URGED TO CONSULT WITH YOUR OWN TAX ADVISOR CONCERNING THE TAX CONSEQUENCES OF THE VOICESTREAM MERGER TO YOU. Consummation of the VoiceStream merger is conditioned upon, among other things, VoiceStream having received the opinion of Jones, Day, Reavis & Pogue, dated the effective date of the Omnipoint reorganization, stating that on the basis of the facts, representations, and assumptions set forth in such opinion: - the VoiceStream merger will qualify as a reorganization described in section 368(a) of the Code, and each of VoiceStream, VoiceStream Holdings and, in the case of a reorganization described in section 368(a)(2)(E) of the Code, the VoiceStream Holdings subsidiary which is a party to the VoiceStream merger, will be a party to the reorganization within the meaning of section 368(b) of the Code, or 65 73 - the VoiceStream merger will be treated as a transfer of property by the VoiceStream stockholders, other than dissenting stockholders, to VoiceStream Holdings described in section 351(a) of the Code. Assuming that the VoiceStream merger is consummated in accordance with the terms of the Omnipoint reorganization agreement and as described in this joint proxy statement-prospectus, and assuming that the representations and assumptions set forth in the opinion referred to above will be true, correct, and complete at the effective time of the VoiceStream merger, it is the opinion of Jones, Day, Reavis & Pogue that under current law: - the VoiceStream merger will qualify as a reorganization described in section 368(a) of the Code, and each of VoiceStream, VoiceStream Holdings, and the VoiceStream Holdings subsidiary which is a party to the VoiceStream merger will be a party to the reorganization within the meaning of section 368(b) of the Code, or - the VoiceStream merger will be treated as a transfer of property by the VoiceStream stockholders, other than dissenting stockholders, to VoiceStream Holdings described in section 351(a) of the Code. This conclusion is based on the Code, Treasury regulations promulgated thereunder, administrative rulings and practice, and judicial precedent, all as of the date hereof. All of these authorities are subject to change, possibly with retroactive effect. Any change in any of these authorities or failure of the representations and assumptions to be true, correct and complete in all material respects at the effective time of the VoiceStream merger could alter the tax consequences to VoiceStream and VoiceStream's stockholders discussed herein. The parties will not request, and the VoiceStream merger is not conditioned upon, a ruling from the IRS as to any of the United States federal income tax consequences of the VoiceStream merger. As a result, there can be no assurance that the IRS will not disagree with or challenge any of the conclusions concerning the VoiceStream merger set forth in this discussion. Consistent with the VoiceStream merger qualifying as a reorganization described in section 368(a) of the Code or as a transfer of property by the VoiceStream stockholders to VoiceStream Holdings described in section 351(a) of the Code: - holders of VoiceStream common stock who exchange such common stock for VoiceStream Holdings common stock in the VoiceStream merger will not recognize gain or loss for United States federal income tax purposes; - each holder's aggregate tax basis in the VoiceStream Holdings common stock received in the VoiceStream merger will be the same as his or her aggregate tax basis in the VoiceStream common stock surrendered in the merger; - the holding period of the VoiceStream Holdings common stock received in the VoiceStream merger by a holder of VoiceStream common stock will include the holding period of the VoiceStream common stock that he or she surrendered in the VoiceStream merger; and - no gain or loss will be recognized by VoiceStream, VoiceStream Holdings, or the VoiceStream Holdings subsidiary which is a party to the VoiceStream merger as a result of the VoiceStream merger. A holder of VoiceStream common stock who receives cash in exchange for his VoiceStream common stock pursuant to the exercise of appraisal rights will recognize capital gain or loss equal to the difference between the tax basis of the VoiceStream common stock surrendered and the amount of cash received therefor. Such capital gain or loss will constitute long-term capital gain or loss if the VoiceStream common stock has been held for more than one year at the effective time of the VoiceStream merger. Gain or loss must be calculated separately for each block of VoiceStream 66 74 common stock surrendered (that is, for shares of VoiceStream common stock acquired at the same time in a single transaction). CONSEQUENCES OF THE OMNIPOINT MERGER The following is a summary of the material United States federal income tax consequences of the Omnipoint merger to holders of: - Omnipoint common stock; - certain warrants to acquire Omnipoint common stock; and - Omnipoint preferred stock. The summary does not discuss all aspects of United States federal income taxation that may be important to you in light of your particular circumstances. For example, it does not discuss tax consequences that may apply to you if you are a taxpayer that is subject to special treatment under the federal income tax laws (for example, if you are a bank, financial institution, broker-dealer, insurance company, foreign person, or tax-exempt entity, or if you acquired your Omnipoint common stock by exercising employee stock options or otherwise as compensation or through a tax-qualified retirement plan, or if you acquired your warrants to acquire Omnipoint common stock as compensation). It also does not address any aspect of state, local or foreign taxation. The summary assumes that you will hold your Omnipoint common stock, warrants to acquire Omnipoint common stock, and Omnipoint preferred stock as capital assets at all times. This summary also does not discuss any consequences to you if, in addition to holding stock in Omnipoint, you also own stock in VoiceStream or Aerial. Piper & Marbury L.L.P., counsel to Omnipoint, has delivered an opinion to the effect that the description of the federal income tax consequences to holders of Omnipoint common stock, including certain holders of warrants to acquire Omnipoint common stock, and Omnipoint preferred stock contained under this heading correctly summarizes the material federal income tax consequences for such holders. YOU ARE URGED TO CONSULT WITH YOUR OWN TAX ADVISOR CONCERNING THE TAX CONSEQUENCES OF THE OMNIPOINT MERGER TO YOU. Consummation of the Omnipoint merger is conditioned upon, among other things, Omnipoint having received the opinion of Piper & Marbury L.L.P., dated the effective date of the Omnipoint merger, stating that on the basis of the facts and assumptions set forth in such opinion: - the receipt of VoiceStream Holdings common stock by holders of Omnipoint common stock pursuant to the Omnipoint merger will be treated as described in section 351 of the Code, and - no gain or loss will be recognized for federal income tax purposes by Omnipoint in connection with the Omnipoint merger. This opinion will be based upon, among other things, certificates to be provided by officers of VoiceStream, Omnipoint, Aerial and VoiceStream Holdings, and by 5% or greater stockholders of VoiceStream, Omnipoint and Aerial containing customary statements relating to the absence of plans to dispose of shares of VoiceStream Holdings by the holders of Omnipoint common stock, VoiceStream common stock and Aerial common stock, and the absence of plans on the part of VoiceStream Holdings to undertake or cause Omnipoint, VoiceStream or Aerial to undertake transactions outside the ordinary course of business or to liquidate Omnipoint, VoiceStream or Aerial or dispose of their shares, as well as certain other technical requirements under the Code. 67 75 Assuming that: - the Omnipoint merger is consummated in accordance with the terms of the reorganization agreement and as described in this joint proxy statement-prospectus; - the certificates referred to above will be received and will be true, correct and complete at the effective time of the reorganization; - the assumptions set forth in the opinion referred to above will be true, correct and complete at the effective time of the reorganization; and - the Omnipoint reorganization is consummated prior to or simultaneously with the Aerial reorganization, it is the opinion of Piper & Marbury L.L.P. that, under current law: - the receipt of VoiceStream Holdings common stock by holders of Omnipoint common stock pursuant to the Omnipoint merger will be treated as described in section 351 of the Code; and - no gain or loss will be recognized for federal income tax purposes by Omnipoint in connection with the Omnipoint merger. This conclusion is based on the Code, Treasury regulations promulgated thereunder, administrative rulings and practice, and judicial precedent, all as of the date hereof. All of these authorities are subject to change, possibly with retroactive effect. Any change in any of these authorities or failure of the factual representations and assumptions to be true, correct and complete in all material respects at the effective time of the Omnipoint merger could alter the tax consequences to Omnipoint and Omnipoint's stockholders discussed herein. The parties will not request, and the Omnipoint merger is not conditioned upon, a ruling from the IRS as to any of the United States federal income tax consequences of the Omnipoint merger. As a result, there can be no assurance that the IRS will not disagree with or challenge any of the conclusions concerning the Omnipoint merger set forth in this discussion. TREATMENT OF HOLDERS OF OMNIPOINT COMMON STOCK Consistent with the receipt of VoiceStream Holdings common stock by holders of Omnipoint common stock pursuant to the Omnipoint merger being treated as described in section 351 of the Code, the treatment of holders of Omnipoint common stock would be as follows: Exchange of Omnipoint Common Stock Solely for VoiceStream Holdings Common Stock If you hold Omnipoint common stock and receive solely VoiceStream Holdings common stock in exchange for your Omnipoint common stock in the Omnipoint merger, you will not recognize gain or loss upon the exchange. The aggregate tax basis of the VoiceStream Holdings common stock you receive will be equal to the aggregate tax basis of the Omnipoint common stock you surrender, and the holding period of the VoiceStream Holdings common stock will include your holding period of the Omnipoint common stock surrendered. If you hold Omnipoint common stock and are considering making the Omnipoint Stock Election, you should note that there can be no assurance that you will receive only VoiceStream Holdings common stock (because of the possibility of proration) and, therefore, there can be no assurance that if you make the Omnipoint Stock Election you will recognize no taxable gain upon the exchange of Omnipoint common stock. Exchange of Omnipoint Common Stock Solely for Cash If you hold Omnipoint common stock and receive solely cash in exchange for Omnipoint common stock in the Omnipoint merger (or by reason of exercising appraisal rights under Delaware 68 76 Law), you will recognize capital gain or loss equal to the difference between your tax basis in the Omnipoint common stock you surrender and the amount of cash you receive in the exchange. Such capital gain or loss will be long-term capital gain or loss if you have held the Omnipoint common stock for more than one year as of the effective time of the reorganization. Gain or loss must be calculated separately for each block of Omnipoint common stock (i.e., shares of Omnipoint common stock acquired at the same time in a single transaction). If you hold Omnipoint common stock and are considering making the Omnipoint Cash Election, you should note that there can be no assurance that you will receive only cash (because of the possibility of proration) in exchange for your Omnipoint common stock. Exchange of Omnipoint Common Stock for a Combination of VoiceStream Holdings Common Stock and Cash If you hold Omnipoint common stock and you receive a combination of VoiceStream Holdings common stock and cash in exchange for your Omnipoint common stock (either because you make the Omnipoint Standard Election or because you make the Omnipoint Stock Election or the Omnipoint Cash Election but do not receive all stock or all cash, respectively, because of proration), you generally will recognize capital gain realized in the transaction but will not recognize any loss realized in the transaction. The amount of capital gain that you recognize generally will be calculated separately for each block of Omnipoint common stock surrendered (i.e., shares of Omnipoint common stock acquired at the same time in a single transaction) and will be equal to the lesser of: - the amount of gain realized in respect of such block (i.e., the excess of (1) the sum of the amount of cash and the fair market value of VoiceStream Holdings common stock you receive that is allocable to such block of Omnipoint common stock over (2) the tax basis of such block); and - the amount of cash you receive that is allocable to such block. Such capital gain will be long-term capital gain if you have held the block of Omnipoint common stock for more than one year as of the closing date of the Omnipoint reorganization. For this purpose, all of the cash and VoiceStream Holdings common stock that you receive generally will be allocated proportionately among the blocks of Omnipoint common stock that you surrender. The tax basis of the VoiceStream Holdings common stock that you receive in exchange for a block of Omnipoint common stock generally will be equal to your tax basis in the surrendered block of Omnipoint common stock, decreased by the amount of cash you receive in respect of such block and increased by the amount of gain you recognize in respect of such block. Your holding period of the VoiceStream Holdings common stock will include the holding period of such block of Omnipoint common stock surrendered. The tax treatment to you could be different than described above and you should consult your own tax advisor, if the Aerial reorganization and the Sonera Investments are not treated, for tax purposes, as part of the same transaction as the Omnipoint reorganization. In that case, it is likely that the common stockholders of Omnipoint, together with the Hutchison entities, would own at least 50 percent of the VoiceStream Holdings common stock outstanding immediately after the Omnipoint reorganization, which would mean that the tax treatment of the cash received would be governed by Section 304 of the Code (and not Section 351 of the Code). In such case, except as described under "Cash In Lieu of Fractional Shares," you would be treated as having exchanged (1) a portion of your Omnipoint common stock for VoiceStream Holdings common stock in a tax-free transaction and (2) a portion of your Omnipoint common stock for cash. You would generally recognize capital gain or loss equal to the difference between the amount of cash you receive and your basis in the portion of your Omnipoint common stock which is surrendered in exchange for cash. 69 77 Federal Income Tax Considerations in Choosing an Election If you are a stockholder of Omnipoint who makes the Omnipoint Stock Election for all of your Omnipoint common stock and you receive cash as a result of the proration procedures, or if you make the Omnipoint Cash Election for all of your Omnipoint common stock and you receive VoiceStream Holdings common stock as a result of the proration procedures, the tax consequences will be those described above under the heading "-- Exchange of Omnipoint Common Stock for a Combination of VoiceStream Holdings Common Stock and Cash." At the time you make an election, the actual federal income tax consequences of making the Omnipoint Cash Election or the Omnipoint Stock Election cannot be determined because you will not know at that time if, or to what extent, the proration procedures will apply. Cash in Lieu of Fractional Shares If you hold Omnipoint common stock and you receive cash in lieu of fractional shares of VoiceStream Holdings common stock, you will be treated as having received the fractional shares in the Omnipoint merger and then as having sold them, and you will recognize gain or loss equal to the difference between the ratable portion of your tax basis in the Omnipoint common stock that you surrendered in the Omnipoint merger that is allocated to such fractional shares, and the cash received in lieu thereof. Any gain or loss attributable to fractional shares generally will be capital gain or loss. Any such capital gain or loss will be long-term capital gain or loss if you have held the Omnipoint common stock for more than one year at the effective time of the reorganization. Treatment of Omnipoint Warrant Holders If you hold a warrant to acquire Omnipoint common stock (other than a warrant issued in connection with the performance of services) and you exercise the warrant before the effective time, you will not recognize gain or loss as a result of such exercise. When you then exchange the Omnipoint common stock which you received upon exercise in the Omnipoint merger, the federal income tax consequences will be the same as those described above for the holders of Omnipoint common stock. However, your holding period for the Omnipoint common stock received upon the exercise of the warrant will begin only upon such exercise. As a result, any capital gain recognized in the Omnipoint merger with respect to Omnipoint common stock acquired by exercise of a warrant is likely to be short-term. If you hold a warrant to acquire Omnipoint common stock and you do not exercise such warrant before the Effective Time you will recognize capital gain, and possibly capital loss, upon the conversion of such warrant into a new warrant to purchase shares of VoiceStream Holdings. If you are not also surrendering Omnipoint common stock in the Omnipoint merger, the amount of capital gain or loss that you must recognize with respect to the receipt of a VoiceStream Holdings warrant will be equal to the difference between your tax basis in the warrant surrendered and the fair market value of the VoiceStream Holdings warrant that you receive. Such gain or loss will be long term capital gain or loss if you have held the warrant surrendered for more than one year as of the effective time. Gain or loss must be allocated separately for each block of warrants surrendered (i.e., warrants to acquire Omnipoint common stock acquired in a single transaction). If you are surrendering Omnipoint common stock in the Omnipoint merger in addition to a warrant to acquire Omnipoint common stock, the method for determining the amount of capital gain or loss to be recognized upon surrender of the warrant is not entirely clear. One approach would be to allocate the fair market value of the VoiceStream Holdings warrants and any VoiceStream Holdings common stock and cash received in the exchange proportionately among the blocks of Omnipoint common stock and the blocks of warrants to acquire Omnipoint common stock surrendered to determine the amount of capital gain. Under this approach, the capital gain recognized in the 70 78 exchange will be calculated separately for each block of Omnipoint common stock and such block of warrants to acquire Omnipoint common stock surrendered and, with respect to each such block, will be equal to the lesser of: - the amount of capital gain realized in respect of such block (i.e., the excess of the sum of (1) any cash, the fair market value of VoiceStream Holdings common stock and the fair market value of VoiceStream Holdings warrants allocated to such block) over (2) the tax basis of such block); and - the amount of cash and the fair market value of the VoiceStream Holdings warrants allocated to such block. Such capital gain with respect to a block of Omnipoint common stock or a block of warrants to acquire Omnipoint common stock will be long-term capital gain if such block exchanged in the Omnipoint reorganization has been held for more than one year as of the closing of the Omnipoint reorganization. Under this approach, you would not recognize any loss. A second approach would be to treat the transaction as: - an exchange of Omnipoint common stock for any VoiceStream Holdings common stock plus any cash subject to the tax consequences described above under the heading "-- Exchange of Omnipoint Common Stock for a Combination of VoiceStream Holdings Common Stock and Cash," and - a separate, fully taxable, exchange of warrants to acquire Omnipoint common stock for VoiceStream Holdings warrants, subject to the tax consequences described above for a holder of a warrant to acquire Omnipoint common stock who is not also exchanging Omnipoint common stock in the Omnipoint merger. The tax treatment to you could be different from that described above, and you should consult your own tax advisor, if the Aerial reorganization and the Sonera Investments are not treated, for tax purposes, as part of the same transaction as the Omnipoint reorganization. In that case, it is likely that the common stockholders of Omnipoint, together with the Hutchison Entities, would own at least 50 percent of the VoiceStream Holdings common stock outstanding immediately after the Omnipoint reorganization, which would mean that the tax treatment of the cash received (but not the warrants) would be governed by section 304 of the Code (and not section 351 of the Code). It is not clear which of these two methods might be required by the IRS and it is possible that the IRS might require the use of another method. Either method could turn out to be more or less favorable for a particular holder, depending on the amount of overall gain or loss that such holder realized with respect to the Omnipoint common stock and warrants to acquire Omnipoint common stock, the amount of gain or loss recognized with respect to cash received, if any, by such holder in the Omnipoint merger and the amount of basis that such holder has in the warrants. Tax Consequences if Aerial Reorganization Occurs Before Omnipoint Reorganization. Under the terms of the Omnipoint reorganization agreement and the Aerial reorganization agreement, it is possible that the Aerial reorganization could take place before the Omnipoint reorganization. This could occur if - the Omnipoint reorganization has not occurred by June 30, 2000 (or, under certain circumstances, March 31, 2000); - neither Omnipoint nor VoiceStream elects to terminate the Omnipoint reorganization agreement; and 71 79 - all other conditions to the Aerial reorganization have been satisfied. If the Aerial reorganization were in fact to occur before the Omnipoint reorganization, the receipt of VoiceStream Holdings common stock by holders of Omnipoint common stock pursuant to the Omnipoint merger would be treated as described in Section 351 of the Code (and the tax consequences described above would apply) only if the Aerial reorganization, the VoiceStream merger, the Omnipoint reorganization, the Hutchison Investments and the Sonera Investments were all treated as parts of a single transaction for federal income tax purposes. Because of the inherently factual nature of this determination, if the Aerial reorganization were to close before the Omnipoint reorganization, it is likely that Piper & Marbury, L.L.P. would be unable to render the opinion described above, in which case Omnipoint would not be required to consummate the Omnipoint reorganization. If Omnipoint were nevertheless to consummate the Omnipoint reorganization, it is possible that Section 351 would not apply and (unless the parties were able to take and took action which would bring the transaction within another nonrecognition provision of the Code) that the Omnipoint reorganization would be a fully taxable transaction to holders of Omnipoint common stock. In that case, if you hold Omnipoint common stock, you would recognize gain or loss equal to the difference between - the sum of the fair market value of the VoiceStream Holdings common stock and the amount of cash (if any) that you receive in the Omnipoint reorganization, and - your tax basis in your Omnipoint common stock. TREATMENT OF HOLDERS OF OMNIPOINT PREFERRED STOCK Conversion of Omnipoint 7% Convertible Preferred Prior to the Omnipoint Merger If you hold Omnipoint 7% Convertible Preferred and you elect to convert such stock into Omnipoint common stock prior to the closing of the Omnipoint merger, you generally will not recognize gain or loss as a result of such conversion. The aggregate tax basis of the Omnipoint common stock you receive on conversion will generally be equal to your aggregate tax basis in the Omnipoint 7% Convertible Preferred converted and the holding period of the Omnipoint common stock received in the conversion will include the holding period of the Omnipoint 7% Convertible Preferred surrendered in the exchange. When you exchange the Omnipoint common stock received upon conversion in the Omnipoint merger, the federal income tax consequences will be the same as those described above for holders of Omnipoint common stock. Treatment of Omnipoint 7% Convertible Preferred Stock Outstanding as of the Closing of the Omnipoint Merger There will be no federal income tax consequences to a holder of Omnipoint 7% Convertible Preferred whose stock remains outstanding as of the closing of the Omnipoint merger, and such a holder will not recognize gain or loss, as a result of the Omnipoint merger. No other Omnipoint preferred stock will be outstanding as of the closing of the Omnipoint merger. Conversion of Omnipoint 7% Convertible Preferred Stock into VoiceStream Holdings Common Stock and Cash after the Closing of the Omnipoint Merger If you hold Omnipoint 7% Convertible Preferred and then convert such stock into VoiceStream Holdings common stock and cash after the effective time of the Omnipoint merger, you generally will recognize capital gain or loss, equal to the difference between the tax basis of the Omnipoint 7% Convertible Preferred surrendered and the amount of cash and the fair market value of the VoiceStream Holdings common stock received upon conversion. Such capital gain or loss will be long-term capital gain or loss if you have held the Omnipoint 7% Convertible Preferred for more than 72 80 one year as of the date of the conversion. Gain or loss must be calculated separately for each block of Omnipoint 7% Convertible Preferred (i.e., shares of Omnipoint 7% Convertible Preferred stock acquired at the same time in a single transaction). Reporting Requirements Each holder of Omnipoint common stock that receives VoiceStream Holdings common stock in exchange for Omnipoint common stock and each holder of Omnipoint 7% Convertible Preferred who exchanges such stock for Omnipoint common stock prior to the closing of the Omnipoint reorganization will be required to retain records and file with such holder's United States federal income tax return a statement setting forth certain facts relating to the exchange. CONSEQUENCES OF THE OMNIPOINT REORGANIZATION UNDER THE VOICESTREAM TAX SHARING AGREEMENT BACKGROUND On May 3, 1999, Western Wireless distributed to its stockholders in the spin-off all of its shares of VoiceStream's stock. Western Wireless had previously received a ruling from the IRS to the effect that the spin-off would not result in the recognition of income or gain by Western Wireless or its stockholders. At the time of the spin-off, VoiceStream generally agreed to indemnify Western Wireless on an after-tax basis for any taxes, penalties, and interest and various other expenses incurred by Western Wireless as a result of its recognition of gain upon the spin-off under section 355(e) of the Code, notwithstanding the IRS ruling. We call this indemnity agreement the "Tax Sharing Agreement." Under section 355(e) of the Code, Western Wireless would recognize gain upon the spin-off, notwithstanding the IRS ruling, if the spin-off were part of a "prohibited plan," that is, a plan or series of related transactions pursuant to which one or more persons acquire, directly or indirectly, 50 percent or more of VoiceStream's stock. For this purpose, if an existing VoiceStream stockholder did not acquire his existing VoiceStream stock pursuant to a prohibited plan, then additional direct or indirect acquisitions of VoiceStream's stock by that stockholder also are not part of a prohibited plan, to the extent there is no decrease in the percentage of stock owned directly or indirectly in VoiceStream by each VoiceStream stockholder immediately before the additional acquisitions. Acquisitions of 50% or more of VoiceStream's stock, in the aggregate, occurring during the four year period beginning two years before the spin-off would give rise to a rebuttable presumption that the spin-off was part of a prohibited plan. CONSEQUENCES OF THE OMNIPOINT REORGANIZATION VoiceStream Holdings' acquisition of VoiceStream's stock pursuant to the Omnipoint reorganization, in conjunction with the Hutchison Investments, the Sonera Investments, the Aerial reorganization (collectively, the "Other Transactions") and Hutchison's acquisition of its existing VoiceStream stock within two years prior to the spin-off, would give rise to a rebuttable presumption that the spin-off was part of a prohibited plan. (VoiceStream Holdings' acquisition of VoiceStream's stock, by itself, would not cause this result because each VoiceStream stockholder would continue to own indirectly, through VoiceStream Holdings, the same percentage of VoiceStream stock that he previously owned directly.) At present, there is no direct authority that specifies the precise standard that must be met by VoiceStream in order to rebut the presumption and establish that the spin-off was not part of a prohibited plan. The IRS recently proposed regulations dealing with this issue. However, these proposed regulations remain subject to IRS revision and, in any event, will have a prospective effective date when finalized and thus will not apply to the spin-off. 73 81 The proposed regulations are a strong indication, however, of what the IRS presently believes the standard should be for rebutting the presumption that a spin-off is part of a prohibited plan. In cases where the presumption arises because stock of a spun-off corporation was acquired within six months after the spin-off, the proposed regulations require, among other things, that two facts be established by clear and convincing evidence to rebut the presumption. First, it generally must be established that, at the time of the spin-off, the corporations participating in the spin-off (and their controlling stockholders) did not intend that a prohibited stock acquisition would occur. Second, it generally must be established that, at the time of the spin-off, the corporations participating in the spin-off (and their controlling stockholders) did not reasonably anticipate that a prohibited stock acquisition more likely than not would occur. The proposed regulations set forth certain other rules in cases where the presumption arises because stock of a spun-off corporation was acquired within two years prior to the spin-off. In the absence of direct authority, and although the issue is not free from doubt, VoiceStream believes that it should be able to establish that the spin-off and VoiceStream Holdings' acquisition of VoiceStream's stock pursuant to the Omnipoint reorganization, in conjunction with the Other Transactions and Hutchison's acquisition of its existing VoiceStream stock within two years prior to the spin-off, are not pursuant to a prohibited plan. A partial summary of the facts that VoiceStream believes it should be able to establish supporting this position is set forth in the next two paragraphs. Hutchison acquired its existing VoiceStream stock approximately 15 months before the spin-off (pursuant to a contract entered into approximately 19 months before the spin-off). VoiceStream believes that Hutchison's acquisition should not be considered to have been pursuant to a prohibited plan because it occurred long before it was clear that the spin-off would take place and long before VoiceStream had any plan to combine with Omnipoint or engage in the Other Transactions, and it had no effect on the spin-off (which would have taken place at the same time, and on the same terms, had Hutchison not made its acquisition). As a result, VoiceStream believes that Hutchison's proposed acquisitions of indirect interests in VoiceStream's stock pursuant to the Omnipoint reorganization and the Other Transactions also should not be considered to be pursuant to a prohibited plan, to the extent there is no decrease in the percentage of stock owned directly or indirectly in VoiceStream by each VoiceStream stockholder immediately before the acquisitions. Furthermore, VoiceStream presently expects that the stockholders of VoiceStream (including Hutchison) will receive interests in VoiceStream (through VoiceStream Holdings) as a result of the Omnipoint reorganization and the Other Transactions that represent more than 50% of VoiceStream's stock (excluding for this purpose any of Hutchison's percentage interest in VoiceStream that represents an increase over its percentage interest prior to the Omnipoint reorganization and the Other Transactions). Assuming that will be the case, VoiceStream thus believes that the Omnipoint reorganization and the Other Transactions should not be considered to be part of a prohibited plan. VoiceStream believes that the same result should arise if the Omnipoint reorganization is completed but the Aerial reorganization is not (and if the Aerial reorganization is completed but the Omnipoint reorganization is not). The IRS could disagree with VoiceStream's conclusions under the standards it has articulated in the proposed regulations, or otherwise. In addition, apart from whether Hutchison's existing VoiceStream stock was acquired pursuant to a prohibited plan, VoiceStream does not believe that the spin-off should be considered to be part of a prohibited plan. The spin-off was originally conceived by Western Wireless in late 1997. Thereafter, in discussions that took place during September 1998 through the beginning of February 1999, VoiceStream and Omnipoint considered the possibility of having VoiceStream make an equity investment in Omnipoint or combining their two companies. These discussions were terminated on February 12, 1999. At that time, no material term of a VoiceStream equity investment or VoiceStream-Omnipoint combination had been agreed upon, formally or informally. In particular, the parties' disagreement at that time over the relative values of the two companies appeared to be 74 82 irreconcilable, without a fundamental change in view by one of the parties. Beginning on February 12, 1999, and continuing until May 5, 1999 (two days after the spin-off), VoiceStream and Omnipoint were prohibited from speaking to each other (because each was participating directly or indirectly in an FCC auction of spectrum licenses and applicable FCC rules prohibited the participants from speaking to each other). During this period, Omnipoint engaged in active discussions with unrelated persons concerning a possible equity investment in Omnipoint or combination transaction with Omnipoint (in lieu of any such transaction with VoiceStream) and exchanged term sheets with a number of such persons. Thus, at the time the spin-off occurred, VoiceStream and Omnipoint had not spoken for approximately three months, any possible combination transaction between them was highly speculative, and it could not be anticipated with any reasonable degree of confidence that any combination transaction would occur. (Similarly, at the time the spin-off occurred, any possible combination transaction between VoiceStream and Aerial was highly speculative, Aerial was under a contractual obligation to negotiate exclusively with Sonera concerning any Aerial combination transaction, and it could not be anticipated with any reasonable degree of confidence that any such combination transaction would occur.) Conversely, the spin-off was conceived of apart from any combination transaction with Omnipoint or Aerial, was effected during the period that VoiceStream and Omnipoint were not speaking (and VoiceStream and Aerial were prohibited from negotiating), and was implemented entirely without regard to, and independent of, any possible combination transaction with Omnipoint or Aerial. Finally, at the time the spin-off occurred, VoiceStream was aware of the law concerning prohibited plans and did not intend to participate in a prohibited plan. No assurance can be given that the IRS would not successfully contend that VoiceStream has failed to establish one or more of the facts set forth in the prior two paragraphs. Furthermore, no assurance can be given that the IRS would not contend, in any event, that the spin-off and VoiceStream Holdings' acquisition of VoiceStream's stock pursuant to the Omnipoint reorganization, in conjunction with the Other Transactions and Hutchison's acquisition of its existing VoiceStream stock within two years prior to the spin-off, are pursuant to a prohibited plan. If the IRS were to assert that the spin-off was part of a prohibited plan, it also would likely seek to revoke retroactively its ruling that Western Wireless would not recognize gain as a result of the spin-off. No assurance can be given that a court would disagree with an IRS assertion that the spin-off and VoiceStream Holdings' acquisition of VoiceStream's stock pursuant to the Omnipoint reorganization, in conjunction with the Other Transactions and Hutchison's acquisition of its existing VoiceStream stock within two years prior to the spin-off, are pursuant to a prohibited plan. If a court were to agree with such an IRS assertion, Western Wireless would be required to recognize gain upon the spin-off under section 355(e) of the Code, and VoiceStream would be required to indemnify Western Wireless on an after tax basis for its resulting taxes, penalties (if any) and interest, and various other expenses, under the Tax Sharing Agreement. The amount of gain that Western Wireless would recognize under section 355(e) of the Code would be equal to the difference between the fair market value of VoiceStream's stock at the time of the spin-off and Western Wireless' adjusted tax basis in such stock at that time. See "Financial Information -- Notes to Pro Forma Condensed Combined Financial Statements; Contingencies." PROSPECTIVE OWNERS OF VOICESTREAM HOLDINGS COMMON STOCK ARE URGED TO CONSULT THEIR OWN TAX ADVISORS ABOUT THE APPLICATION OF THE TAX SHARING AGREEMENT TO VOICESTREAM AND THE MATERIAL, ADVERSE EFFECT ON VOICESTREAM THAT COULD ARISE IF VOICESTREAM IS UNABLE TO ESTABLISH THAT THE SPIN-OFF AND VOICESTREAM HOLDINGS' ACQUISITION OF VOICESTREAM'S STOCK PURSUANT TO THE OMNIPOINT REORGANIZATION, IN CONJUNCTION WITH THE OTHER TRANSACTIONS AND HUTCHISON'S ACQUISITION OF ITS EXISTING VOICESTREAM STOCK WITHIN TWO YEARS PRIOR TO THE SPIN-OFF ARE NOT PURSUANT TO A PROHIBITED PLAN. 75 83 INTERESTS OF CERTAIN PERSONS IN THE OMNIPOINT REORGANIZATION VOICESTREAM AFFILIATED PERSONS In considering the recommendation of the VoiceStream board with respect to approval and adoption of the Omnipoint reorganization agreement, stockholders of VoiceStream should be aware that some directors and officers of VoiceStream have interests, set forth below, relating to the VoiceStream merger that are in addition to their interests as stockholders of VoiceStream. VOICESTREAM DIRECTORS The current members of the VoiceStream board, John W. Stanton, Robert R. Stapleton, Donald Guthrie, John L. Bunce, Jr., Mitchell R. Cohen, Daniel J. Evans, Canning Fok, Jonathan M. Nelson, Terence M. O'Toole and Hans Snook, will become members of the VoiceStream Holdings board upon the closing of the Omnipoint reorganization. Mr. Bunce has advised the board that he will resign prior to the effective date of the Omnipoint reorganization. See "The VoiceStream Holdings Voting Agreement." HUTCHISON In connection with the Omnipoint reorganization, Hutchison will be entitled to designate two additional directors (for a total of four directors) of the VoiceStream Holdings board. INDEMNIFICATION AND INSURANCE The Omnipoint reorganization agreement requires VoiceStream Holdings to indemnify officers and directors of VoiceStream and its subsidiaries with respect to acts taken by them in their respective capacities on or prior to the effective time of the reorganization, to the same extent provided under VoiceStream's certificate of incorporation and bylaws. Additionally, the directors of VoiceStream selected to join the VoiceStream Holdings board will be entitled to the same indemnification as provided to other directors on the VoiceStream Holdings board, as provided in the VoiceStream Holdings certificate of incorporation and bylaws. VoiceStream Holdings also has agreed to provide, for six years following the effective time of the Omnipoint reorganization, ongoing directors' and officers' liability insurance relating to acts and omissions occurring prior to the completion of the Omnipoint reorganization for each person who was covered by the corresponding insurance maintained by VoiceStream as of June 23, 1999. The Omnipoint reorganization agreement provides that the insurance coverage to be maintained by VoiceStream Holdings must be no less favorable with respect to coverage and amount than that provided under VoiceStream's current policies as of June 23, 1999. If, however, VoiceStream Holdings cannot obtain comparable insurance for a price less than 200% of the yearly rate being paid by VoiceStream at June 23, 1999, then VoiceStream Holdings will only be obligated to provide a policy with the best coverage then available at 200% of that yearly rate. EQUITY BASED AWARDS In accordance with the terms of the stock option plans maintained by VoiceStream and the terms of the Omnipoint reorganization agreement, all awards of stock options outstanding at the time of the Omnipoint reorganization automatically will be converted into similar options exercisable for shares of VoiceStream Holdings common stock on a one-for-one basis. The vesting of these new VoiceStream Holdings options will not be accelerated as a result of the transactions described in the reorganization agreement. 76 84 OMNIPOINT AFFILIATED PERSONS In considering the recommendation of the Omnipoint board with respect to approval and adoption of the Omnipoint reorganization agreement, stockholders of Omnipoint should be aware that certain directors and officers of Omnipoint have interests, set forth below, relating to the Omnipoint merger that are in addition to their interests as stockholders of Omnipoint. OMNIPOINT DIRECTORS The Omnipoint reorganization agreement provides that four current members of the Omnipoint board designated by Omnipoint will become members of the VoiceStream Holdings board upon the closing of the Omnipoint reorganization. The persons designated by Omnipoint are Douglas G. Smith, Richard L. Fields, James N. Perry, Jr. and James J. Ross. See "Business of VoiceStream Holdings -- Directors and Executive Officers." INDEMNIFICATION AND INSURANCE The Omnipoint reorganization agreement requires VoiceStream Holdings to indemnify officers and directors of Omnipoint and its subsidiaries with respect to acts taken by them in their respective capacities on or prior to the effective time of the Omnipoint reorganization, to the same extent provided under Omnipoint's certificate of incorporation and bylaws. Additionally, the directors of Omnipoint selected to join the VoiceStream Holdings board will be entitled to the same indemnification as provided to other directors on the VoiceStream Holdings board, as provided in the VoiceStream Holdings certificate of incorporation and bylaws. VoiceStream Holdings also has agreed to provide, for six years following the effective time of the Reorganization, ongoing directors' and officers' liability insurance relating to acts and omissions occurring prior to the completion of the Omnipoint reorganization for each person who was covered by the corresponding insurance maintained by Omnipoint as of June 23, 1999. The Omnipoint reorganization agreement provides that the insurance coverage to be maintained by VoiceStream Holdings must be no less favorable with respect to coverage and amount than that provided under Omnipoint's coverage as of June 23, 1999. If, however, VoiceStream Holdings cannot obtain comparable insurance for a price less than 200% of the yearly rate being paid by Omnipoint at June 23, 1999, then VoiceStream Holdings will only be obligated to provide a policy with the best coverage then available at 200% of that yearly rate. EQUITY BASED AWARDS AND EMPLOYMENT AGREEMENTS In accordance with the terms of the stock option plans maintained by Omnipoint and the terms of the Omnipoint reorganization agreement, all stock options outstanding at the time of the Omnipoint reorganization automatically will be converted into similar options exercisable for shares of VoiceStream Holdings common stock, adjusted to reflect the exchange ratio of Omnipoint common stock in the Omnipoint reorganization. The vesting of these new VoiceStream Holdings options will not be accelerated as a result of the transactions described in the Omnipoint reorganization agreement, except (1) in the case of certain Omnipoint employees identified below whose employment or stock option agreements provide for acceleration of these options as a result of such transactions, and (2) in the case of all other Omnipoint employees, in the event of the termination or material reduction of their employment responsibilities within one year of the Omnipoint reorganization. Omnipoint has entered into an employment agreement with Douglas G. Smith, under which he currently serves as President, CEO and Chairman of Omnipoint. Among other things, this agreement provides that upon the completion of certain business combinations, dispositions or related transactions, Mr. Smith will, subject to certain limited restrictions, receive an incentive bonus of four 77 85 times his annual base salary and target bonus. Following the initial closing of the Interim Investment, Mr. Smith received a payment of approximately 63% of the incentive bonus. Also, if certain excess payment taxes apply to any payments or distributions made to him, Mr. Smith will be entitled to receive an additional tax "gross-up" payment, which will put him in the same financial position after- tax that he would have been in if that excise tax did not apply. The employment agreement between Omnipoint and George Schmitt, an Executive Vice President of Omnipoint and President of Omnipoint Communications, Inc., as amended, entitled Mr. Schmitt to purchase 50,000 restricted shares of Omnipoint common stock which he paid for with a $750,000 promissory note to Omnipoint. The restrictions lapse periodically over the five-year period ending October 1, 2000. The employment agreement provides that if Mr. Schmitt's employment terminates for any reason other than "cause" (as such term is defined in his employment agreement), any remaining restrictions on the shares lapse and the principal and accrued interest on the promissory note will be forgiven in proportion to the amount of the five-year employment term that has been served by Mr. Schmitt. Also, the employment agreement provides for severance pay equal to up to twice Mr. Schmitt's annual salary and target bonus, payable in the event of the termination of his employment without cause or his resignation for good reason, and continued medical benefits for one year. When the Omnipoint reorganization is completed, vesting will accelerate for 772,510 of Mr. Schmidt's stock options (adjusted to reflect the exchange ratio in the Omnipoint reorganization assuming the price of VoiceStream common stock is $75 per share at that time). The weighted average exercise price of these accelerated stock options would be $16.77 per share. Assuming that the per share price of VoiceStream common stock is $75 at the time the Omnipoint reorganization is completed, the aggregate value of the shares subject to the accelerated options would exceed the aggregate option exercise price by approximately $45 million at the time of the Omnipoint reorganization. The employment agreement between Omnipoint and Kjell S. Andersson, an Executive Vice President of Omnipoint and the President of Omnipoint Technology Holdings, Inc. entitled Mr. Andersson to purchase 60,000 restricted shares of Omnipoint common stock which he paid for with a $1,087,500 promissory note to Omnipoint. The restrictions lapse periodically over the five-year period ending November 3, 2001. The applicable stock restriction agreement provides that if Mr. Andersson's employment is terminated without cause (as such term is defined in his employment agreement) or he resigns with good reason following a change of control of Omnipoint, any remaining restrictions on the shares lapse and the principal and accrued interest on the promissory note will be forgiven. Also, the employment agreement provides for severance pay equal to twice Mr. Andersson's annual salary and bonus compensation, payable in the event of the termination of his employment without cause or resignation for good reason, and continued medical benefits for two years. When the Omnipoint reorganization is completed, vesting will accelerate for 107,328 of Mr. Andersson's stock options (adjusted to reflect the exchange ratio in the Omnipoint reorganization assuming the price of VoiceStream common stock is $75 per share at that time). The weighted average exercise price of these accelerated stock options would be $23.44 per share. Assuming that the price per share of VoiceStream common stock is $75 at the time the Omnipoint reorganization is completed, the aggregate value of the shares subject to the accelerated options would exceed the aggregate option exercise price by approximately $5.5 million at the time of the Omnipoint reorganization. The employment agreement between Omnipoint and Harry Plonskier, Omnipoint's Treasurer and acting Chief Financial Officer, provides for one year's severance pay upon his disability or the termination of his employment without cause. When the Omnipoint reorganization is completed, vesting will accelerate for 73,383 of Mr. Plonskier's stock options (adjusted to reflect the exchange ratio in the Omnipoint reorganization assuming the price of VoiceStream common stock is $75 per share at that time). The weighted average exercise price of these accelerated stock options would be $16.90 per share. Assuming that the price per share of VoiceStream common stock is $75 at the time 78 86 the Omnipoint reorganization is completed, the aggregate value of the shares subject to the accelerated options would exceed the aggregate option exercise price by approximately $4.2 million at the time of the Omnipoint reorganization. In June 1999, Omnipoint entered into an employment agreement with Evelyn Goldfine, Omnipoint's Chief Administrative Officer and a director, which provides for an increase in her salary to $150,000, effective retroactively to January 1, 1999; one year's severance pay payable in the event of her death, disability, termination of employment without cause or resignation for good reason; and the grant of 36,000 stock options, 6,000 of which have a one cent exercise price per share and 30,000 of which have a $16 exercise price per share. In addition, the options, to the extent not earlier vested, will vest in full one year after the Omnipoint reorganization. One year after the Omnipoint reorganization is completed, vesting will accelerate for 16,266 of Ms. Goldfine's stock options (adjusted to reflect the exchange ratio in the Omnipoint reorganization assuming the price of VoiceStream common stock is $75 per share when the Omnipoint reorganization is completed). The weighted average exercise price of these accelerated stock options would be $10.47 per share. Assuming that the price per share of VoiceStream common stock is $40 at the time the Omnipoint reorganization is completed, the aggregate value of the shares subject to the accelerated options would exceed the aggregate option exercise price by approximately $1 million at the time of the Omnipoint reorganization. MISCELLANEOUS In connection with its services as a financial advisor to Omnipoint with respect to various matters, including the Omnipoint reorganization, Allen & Co. is entitled to a financial advisory fee of $7,500,000 and reimbursement of certain fees and expenses from Omnipoint. Richard Fields, a director of Omnipoint who is expected to serve as a director of VoiceStream Holdings, is a Managing Director and an Executive Vice President of Allen & Co. 79 87 THE AERIAL REORGANIZATION THE AERIAL REORGANIZATION AGREEMENT The parties to the Aerial reorganization agreement are VoiceStream, VoiceStream Holdings, a subsidiary of VoiceStream Holdings, Aerial and TDS. In addition to the following summary of the Aerial reorganization agreement, you should read the entire Aerial reorganization agreement, which is hereby incorporated by reference into this document and attached as Annex D. STRUCTURE OF THE AERIAL REORGANIZATION Prior to the closing of both the Aerial reorganization and the Omnipoint reorganization, VoiceStream Holdings will own all of the outstanding stock of three newly formed subsidiaries. At the closing of the Aerial reorganization, one of the subsidiaries will merge with and into Aerial, with Aerial being the surviving entity and, if it has not already done so as a result of the earlier closing of the Omnipoint reorganization, another of the subsidiaries will be merged with and into VoiceStream with VoiceStream being the surviving entity. At the closing of the Omnipoint reorganization, whether it occurs before, after or simultaneously with the closing of the Aerial reorganization, the remaining subsidiary will be merged with and into Omnipoint, with Omnipoint being the surviving entity. CONVERSION OF VOICESTREAM COMMON STOCK TO VOICESTREAM HOLDINGS COMMON STOCK If the Omnipoint reorganization closes prior to the closing of the Aerial reorganization, the conversion of VoiceStream common stock into VoiceStream Holdings common stock will occur at the closing of the Omnipoint reorganization. In such event, there will be no change to the VoiceStream common stock or VoiceStream Holdings common stock at the closing of the Aerial reorganization. If the Omnipoint reorganization closes concurrently with the closing of the Aerial reorganization, the conversion of VoiceStream common stock into VoiceStream Holdings common stock will occur at the closing of the Omnipoint reorganization. If the Omnipoint reorganization has not closed prior to the closing of the Aerial reorganization, then at the closing of the Aerial reorganization: - each outstanding share of VoiceStream common stock will be converted into one share of VoiceStream Holdings common stock; and - each certificate representing shares of VoiceStream common stock will be deemed to represent an equivalent number of shares of VoiceStream Holdings common stock. CONVERSION OF AERIAL COMMON STOCK TO VOICESTREAM HOLDINGS COMMON STOCK At the closing of the Aerial reorganization, each share of Aerial common stock held by an Aerial stockholder will be converted into the right to receive shares of VoiceStream Holdings common stock. Each Aerial stockholder, except TDS and Sonera, will have the opportunity to elect to receive cash, stock or a combination of cash and stock for its shares of Aerial common stock. It is possible that the amount of cash to be received by an Aerial stockholder pursuant to the Aerial Cash Election may be higher or lower than the value of the shares of VoiceStream Holdings that such stockholder would receive pursuant to the Aerial Stock Election. - The Aerial Stock Election. An Aerial stockholder who elects to receive VoiceStream Holdings stock will be asking to receive shares of common stock of VoiceStream Holdings at an 80 88 exchange ratio of 0.455 per share of Aerial common stock, except as provided in the following two paragraphs. - Adjustment to the Aerial Stock Election relating to the Omnipoint Reorganization. If the Aerial reorganization closes prior to the Omnipoint reorganization and if the 15-day weighted average of the high and low trading prices of VoiceStream common stock immediately prior to the effective time of the Aerial reorganization is less than $39.56 per share, the exchange ratio described above will be determined by dividing $18.00 by this 15-day weighted average. However, the exchange ratio will not be more than 0.5 or less than 0.455, except as described in the next paragraph. - Adjustment to the Aerial Stock Election relating to the Number of Outstanding Shares of Aerial Common Stock. If the number of issued and outstanding shares of Aerial common stock exceeds 85,839,161 at the closing of the Aerial reorganization, excluding any shares of Aerial common stock issued pursuant to the TDS Debt Replacement or the Sonera-Aerial Investment and excluding shares issuable or issued pursuant to performance options, the exchange ratio will be decreased. The exchange ratio will be recalculated by dividing 39,056,818 by the number of Adjusted Fully Diluted Shares then issued and outstanding. If the exchange ratio is recalculated, the recalculated number will be substituted for 0.455 in the previous two paragraphs. - The Aerial Cash Election. Stockholders of Aerial who elect to receive cash will be asking to receive $18.00 for each share of Aerial common stock for which such election is made. Unlike the Aerial Stock Election, the amount of cash paid per share of Aerial common stock pursuant to the Aerial Cash Election is not subject to adjustment. - Non-Election. If a stockholder of Aerial has not made a proper election by the election deadline, he will be treated as having chosen the Aerial Stock Election. For example, if an Aerial stockholder, other than TDS or Sonera, holds 1,000 shares of Aerial common stock at the effective time, then such stockholder would be entitled to choose one of the following: - the Aerial Stock Election, which, assuming that no adjustment has been made to the exchange ratio, will consist of 455 shares of VoiceStream Holdings common stock; - the Aerial Cash Election, which, regardless of any adjustments to the exchange ratio, will consist of cash in the amount of $18.00 per share for a total of $18,000; or - a combination of the Aerial Stock Election and the Aerial Cash Election, each in proportion to the number of shares with respect to which such election is exercised. TREATMENT OF TDS, AS THE HOLDER OF AERIAL SERIES A COMMON SHARES TDS is the sole holder of all of the issued and outstanding Aerial Series A Common Shares. At the closing of the Aerial reorganization, each Aerial Series A Common Share will be converted, at the same exchange ratio as the Aerial Common Shares, into the right to receive shares of VoiceStream Holdings common stock. TDS will not receive a premium or a discount on the conversion of such Aerial Series A Common Shares into shares of VoiceStream Holdings common stock. Furthermore, TDS may not elect to receive cash for any of TDS's Aerial Common Shares or Aerial Series A Common Shares. FRACTIONAL SHARES No fractional shares of VoiceStream Holdings common stock will be issued pursuant to the Aerial reorganization. In lieu of the issuance of any fractional shares of VoiceStream Holdings 81 89 common stock, cash equal to the product of such fractional share amount and the closing price of VoiceStream Holdings common stock on the closing date of the Aerial reorganization will be paid to holders in respect of each fractional share of VoiceStream Holdings common stock that would otherwise be issuable. Payments with respect to fractional shares may come from the sale of the aggregate number of whole shares resulting from the foregoing. ELECTION PROCEDURE; EXCHANGE OF CERTIFICATES Following the closing of the Aerial reorganization, we will send a form of election and letter of transmittal to Aerial stockholders. Elections may be made by holders of Aerial Common Shares by delivering the form of election and letter of transmittal to the exchange agent, Chase Mellon Shareholder Services L.L.C. To be effective, a form of election and letter of transmittal must be properly completed, dated, signed and submitted in the return envelope mailed therewith to the exchange agent by the election deadline. The election deadline will be specified in the election form. The election form and letter of transmittal must be accompanied by (1) the certificates as to which the election is being made or (2) an appropriate guarantee of delivery of the certificates as set forth in the form of election from a firm that is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States, provided that such certificates are in fact delivered to the exchange agent within three trading days after the date of execution of the guaranty of delivery. Failure to deliver certificates covered by any guaranty of delivery within three trading days after the date of execution of such guaranty of delivery will be deemed to invalidate any otherwise properly made Aerial Cash Election and will be deemed to be an Aerial Stock Election. VoiceStream Holdings has the discretion, which it may delegate in whole or in part to the exchange agent, to determine whether any form of election and/or letter of transmittal has been properly completed, signed and submitted or revoked and to disregard immaterial defects in the form of election or letter of transmittal. The good faith decision of VoiceStream Holdings or, if so delegated, the exchange agent, in such matters will be conclusive and binding. Neither VoiceStream Holdings nor the exchange agent is under any obligation to notify any person of any defect in the form of election or letter of transmittal submitted to the exchange agent. The exchange agent will also make all computations contemplated by the Aerial reorganization agreement and, in the absence of manifest error, all such computations will be conclusive and binding on the holders of shares of Aerial common stock. An Aerial stockholder who does not submit a form of election and letter of transmittal to the exchange agent prior to the election deadline, or who submits a form of election without the corresponding certificates or a guarantee of delivery, will be deemed to have made the Aerial Stock Election. If any form of election is defective in any manner such that the exchange agent cannot reasonably determine the election preference of the Aerial stockholder submitting such form of election, the Aerial stockholder will also be deemed to have made the Aerial Stock Election. TREATMENT OF AERIAL STOCK OPTIONS Upon the approval by Aerial's stockholders of the Aerial reorganization, each outstanding and unexercised option to purchase shares of Aerial common stock will become immediately exercisable under its terms and such option will be converted in the Aerial reorganization into an option to acquire shares of VoiceStream Holdings common stock. Any such converted option will be fully vested, but otherwise will have the same terms as the original Aerial option. 82 90 The number of shares of VoiceStream Holdings common stock that a holder will be entitled to purchase upon the exercise of such new option will be determined by multiplying: - the number of shares of Aerial common stock subject to the original option; and - the exchange ratio of 0.455, or as adjusted pursuant to the Aerial reorganization agreement. The exercise price for such options will be equal to: - the exercise price under the original option, divided by - the exchange ratio of 0.455, or as adjusted pursuant to the Aerial reorganization agreement. TREATMENT OF AERIAL RESTRICTED STOCK UNITS Upon the approval by Aerial's stockholders of the Aerial reorganization agreement, each outstanding restricted stock unit will become immediately vested under its terms and will be paid promptly thereafter in cash or Aerial Common Shares, at the discretion of the Chairman of Aerial. TREATMENT OF VOICESTREAM STOCK OPTIONS If the Omnipoint reorganization has not closed prior to the closing of the Aerial reorganization, then upon the closing of the Aerial reorganization, each outstanding and unexercised option to purchase shares of VoiceStream common stock will be assumed by VoiceStream Holdings and converted into an option to purchase shares of VoiceStream Holdings common stock. The number of shares of VoiceStream Holdings common stock that a holder will be entitled to purchase upon the exercise of such new option will be equal to the number of shares of VoiceStream common stock subject to the original option. The exercise price for such options will be equal to the exercise price under the original VoiceStream option. The new option will be equal to the exercise price under the original VoiceStream option. The new option will otherwise have the same terms and conditions in effect immediately prior to the date the Aerial reorganization becomes effective. VOICESTREAM HOLDINGS BOARD VoiceStream and VoiceStream Holdings have agreed to take the necessary corporate action so that, at the closing of the Aerial reorganization, one designee of TDS and one designee of Sonera will join the VoiceStream Holdings board. See "VoiceStream Holdings Voting Agreements." COVENANTS OF VOICESTREAM, VOICESTREAM HOLDINGS AND AERIAL In the Aerial reorganization agreement, VoiceStream, VoiceStream Holdings, and Aerial have agreed to take or refrain from taking certain actions. The following summarizes these actions, which are also set forth in detail in the Aerial reorganization agreement. NO SOLICITATION OF ALTERNATIVE ACQUISITION PROPOSAL BY AERIAL Aerial has agreed that it and its subsidiaries and their respective officers, directors, employees, affiliates and advisors will not directly or indirectly: - take any action to solicit, initiate, facilitate or encourage any alternative acquisition proposal; - other than in the ordinary course of business and not related to an alternative acquisition proposal, engage in any discussions or negotiations with, or provide any non-public information or provide access to any other party who Aerial knows is considering an alternative acquisition proposal; 83 91 - approve any transaction under the anti-takeover statutes of the DGCL or approve any person becoming an "interested stockholder" under such statute; or - enter into any agreement with respect to an alternative acquisition proposal. The Aerial reorganization agreement does not prevent the Aerial board from complying with the applicable rules relating to tender offers under the Exchange Act; however, the Aerial board has agreed not to recommend that the Aerial stockholders tender their shares in connection with any alternative acquisition proposal consisting of a tender offer except to the extent the Aerial board by a majority vote determines that such a recommendation is required to comply with the fiduciary duties of the Aerial board under applicable Delaware law, after receiving the advice of outside legal counsel. TDS would be prohibited from tendering any of its shares pursuant to a tender offer. See "Special Meetings -- Agreements to Vote in Favor of the Aerial Reorganization." RECOMMENDATION BY AERIAL, VOICESTREAM AND VOICESTREAM HOLDINGS BOARDS The board of directors of each party to the Aerial reorganization agreement has agreed to recommend to its respective stockholders the adoption of, and approval of the transactions contemplated by, the Aerial reorganization agreement. Each board of directors has recommended unanimously that its respective stockholders approve and adopt the Aerial reorganization agreement. The Aerial board may modify or withdraw its recommendation of the Aerial reorganization agreement in a manner adverse to VoiceStream only if: - the Aerial board has determined in good faith that it is required to take such action to comply with its fiduciary duties under Delaware law based on advice of outside counsel; - Aerial has given VoiceStream three business days' prior written notice that it intends to take such action and has considered any changes proposed by VoiceStream to the Aerial reorganization agreement to avoid such action; - Aerial has fully and completely complied with the requirements contained in the Aerial reorganization agreement relating to non-solicitation of acquisition proposals by Aerial; and - Aerial has called a special Aerial stockholder meeting to vote on the Aerial reorganization agreement. The boards of Aerial and VoiceStream are each required to hold a meeting of stockholders of Aerial and VoiceStream, respectively, to vote on the Aerial reorganization, even if such board has modified or withdrawn its recommendation of the Aerial reorganization. CONDUCT OF AERIAL'S BUSINESS PENDING THE AERIAL REORGANIZATION In general, the Aerial reorganization agreement requires Aerial and its subsidiaries, until the earlier of the closing of the Aerial reorganization or the termination of the Aerial reorganization agreement, to conduct their business in the ordinary course consistent with past practice and to use their reasonable best efforts to preserve intact their business organizations and relationships with third parties. In addition, Aerial has agreed to some specific restrictions, subject to certain exceptions described in the Aerial reorganization agreement and the schedules thereto. With certain exceptions, Aerial may not, without the prior written consent of VoiceStream: - declare or pay dividends or make other similar distributions in respect of its capital stock; - redeem or repurchase any of its capital stock; - split, combine or reclassify any of its capital stock or authorize the issuance of any other securities; 84 92 - issue, sell, pledge or otherwise encumber any shares of its capital stock, other than pursuant to the Aerial long-term incentive plan, the Aerial restricted stock plan or the TDS tax deferred savings (401(k)) plan or pursuant to an investment agreement with Sonera; - amend its restated certificate of incorporation or by-laws; - acquire any business or assets other than (i) in the ordinary course of business which involve an aggregate purchase price not in excess of $5,000,000 and (ii) certain budgeted capital expenditures; - make any new capital expenditures other than those contemplated in Aerial's 1999 budget or 2000 business plan; - sell, lease, license or encumber any assets other than in the ordinary course of business and which involve assets having a current value not in excess of $5,000,000; - increase the salaries payable to Aerial's directors, officers and employees, except as required under employment agreements and except for such increases that are in the ordinary course of business consistent with past practices; - enter into or amend any employment or severance agreements (including any bonus, profit sharing, stock option, restricted stock or other deferred compensation agreement) except, in each case, in the ordinary course of business consistent with past practices; - change its accounting methods or fiscal year; - enter into or amend any material agreement; - amend any of its securities; - effect any corporate reorganization; - incur any indebtedness; - create any lien; - enter into guaranties of any obligations; - make any loan; - enter into any agreement that would materially limit VoiceStream Holdings from engaging in wireless business after the closing of the Aerial reorganization; - settle any material litigation or claim, except for the Sonera claim as described below in "Background of the Events Relating to Sonera"; - make any material tax election or settle a material tax liability; or - take any action which would make a representation or warranty untrue. CONDUCT OF VOICESTREAM'S AND VOICESTREAM HOLDINGS' BUSINESS PENDING THE AERIAL REORGANIZATION Each of VoiceStream and VoiceStream Holdings also has agreed to certain restrictions on it and its subsidiaries until either the closing of the Aerial reorganization or the termination of the Aerial reorganization agreement. These restrictions are independent of any restrictions imposed upon VoiceStream by the Omnipoint reorganization agreement. Among other things, the Aerial reorganization agreement includes restrictions on VoiceStream's and VoiceStream Holdings' ability to: - amend its organizational documents; - amend, reclassify or split VoiceStream's or VoiceStream Holdings' capital stock; 85 93 - take any action that would delay the consummation of the Aerial reorganization; - change its accounting methods; or - enter into or acquire any new material line of business that is not strategically related to VoiceStream's and VoiceStream Holdings' current business. The Aerial reorganization agreement provides that, notwithstanding anything in that agreement to the contrary, VoiceStream and VoiceStream Holdings may enter into a subsequent transaction provided that such subsequent transaction would not reasonably be expected to prevent, impair or materially delay the transactions among VoiceStream, VoiceStream Holdings and Aerial. A subsequent transaction is defined in the Aerial reorganization agreement as any transaction whereby VoiceStream Holdings, VoiceStream or its subsidiaries would: - acquire control or an investment in any entity in the wireless business; - issue equity in connection with such an acquisition; - enter into a strategic alliance or other commercial relationship; or - be acting in the ordinary course of business consistent with past practices; provided, that in the case of the first three bullet points listed above, VoiceStream or VoiceStream Holdings, as the case may be, must receive an opinion from a national investment bank that the subsequent transaction is fair to its stockholders, or to VoiceStream or VoiceStream Holdings. ENFORCEMENT OF THIRD PARTY STANDSTILL AGREEMENTS Subject to the fiduciary responsibilities of the Aerial board, Aerial has agreed to enforce and not terminate, amend, modify or waive any standstill provision of any confidentiality or standstill agreement between Aerial and other parties entered into prior to the date of the Aerial reorganization agreement in connection with the process previously conducted by Aerial to solicit acquisition proposals for Aerial. DISCLOSURE OF CERTAIN MATTERS Aerial, VoiceStream and VoiceStream Holdings have each agreed to advise the other of any event which results in the executive officers of Aerial, VoiceStream or VoiceStream Holdings having a good faith belief that such change or event has resulted in or is reasonably likely to result in a material adverse effect on them or prevent or materially delay the consummation of the Aerial reorganization. QUALIFICATION FOR TAX PURPOSES Each of VoiceStream, VoiceStream Holdings and Aerial has agreed to use its reasonable best efforts to cause the Aerial reorganization to qualify as a reorganization within the meaning of section 368(a) of the Code and/or as part of a transaction described in section 351(a) of the Code. STOCKHOLDER MEETINGS Unless waived by Aerial, VoiceStream or VoiceStream Holdings, as the case may be, must use its reasonable commercial efforts to coordinate the time and place of its stockholder meeting to approve the Aerial reorganization with its stockholder meeting being held to approve the Omnipoint reorganization. The stockholders of VoiceStream or VoiceStream Holdings would vote on the Omnipoint reorganization and the Aerial reorganization at this joint stockholder meeting. In addition, Aerial and VoiceStream or VoiceStream Holdings, as the case may be, will try to hold their respective stockholder meetings on the same day. 86 94 Unless the Aerial reorganization agreement is terminated in accordance with its terms, Aerial has agreed to submit the Aerial reorganization to a vote of its stockholders at a special stockholders meeting required to be called and held, even if Aerial's board determines at any time that the Aerial reorganization is no longer advisable or recommends that its stockholders reject the Aerial reorganization. At such stockholders meeting, pursuant to a stockholder voting agreement, TDS, which holds approximately 98% of the voting power of Aerial common stock, has agreed to vote for the Aerial reorganization even if the Aerial board withdraws its recommendation of the Aerial reorganization. Accordingly, the proposal to approve the Aerial reorganization will be approved without regard to the vote of any other Aerial stockholder. Unless the Aerial reorganization agreement is terminated in accordance with its terms, VoiceStream or VoiceStream Holdings, as the case may be, has agreed to submit the Aerial reorganization to a vote of its stockholders at a special stockholders meeting required to be called and held, even if the board of VoiceStream or VoiceStream Holdings, as the case may be, determines at any time that the Aerial reorganization is no longer advisable or recommends that its stockholders reject the Aerial reorganization. At this stockholders meeting, pursuant to a stockholder voting agreement, certain stockholders of VoiceStream and VoiceStream Holdings, who currently hold approximately 41% of the VoiceStream common stock, have agreed to vote for the Aerial reorganization even if the VoiceStream or VoiceStream Holdings board withdraws its recommendation of the Aerial reorganization. AERIAL SERIES A AND SERIES B NOTES, NOKIA CREDIT AGREEMENT AND NOKIA GUARANTY Prior to or at the closing of the Aerial reorganization, VoiceStream Holdings will, with the assistance of Aerial and TDS, acquire, repay and/or amend the Aerial Series A zero coupon notes, the Aerial Series B zero coupon notes and the Nokia credit agreement. In connection therewith, TDS will be released from its guaranties and all liabilities thereunder. BEST EFFORTS TO COMPLETE THE AERIAL REORGANIZATION VoiceStream, VoiceStream Holdings and Aerial have agreed to cooperate with each other and use their best efforts to take all actions and do all things necessary or advisable under the Aerial reorganization agreement and applicable laws to complete the Aerial reorganization and the other transactions contemplated by the Aerial reorganization agreement. EMPLOYEE BENEFITS MATTERS From the closing of the Aerial reorganization through at least September 30, 2000, each of VoiceStream and VoiceStream Holdings has agreed to maintain salaries and benefits for Aerial employees and officers at levels which are substantially comparable to the levels in effect immediately prior to the effective time of the Aerial reorganization. In addition, Aerial employees eligible for a bonus will receive a bonus equal to the greater of the target bonus level or the actual bonus earned through at least September 30 of the year in which the Aerial reorganization occurs. Each of VoiceStream and VoiceStream Holdings has also agreed to honor all severance, employment and similar agreements in force as of the effective time, subject to the right to amend or terminate such agreements in accordance with their terms. INDEMNIFICATION AND INSURANCE OF AERIAL DIRECTORS AND OFFICERS Each of VoiceStream and VoiceStream Holdings has agreed that, after the effectiveness of the Aerial reorganization, VoiceStream and VoiceStream Holdings will cause Aerial to: - continue to indemnify all past and present officers and directors of Aerial to the same extent that they are currently indemnified; and 87 95 - for at least six years, continue to carry directors' and officers' insurance covering the existing directors and officers of Aerial, except that Aerial will not be required to pay more than 200% of the last annual premium paid for such insurance. TAX INDEMNIFICATION The Aerial reorganization agreement provides that TDS will indemnify VoiceStream and VoiceStream Holdings, without limitation for time, for all taxes imposed on: - the TDS consolidated tax group (other than Aerial and its subsidiaries) for any taxable year; - Aerial or its subsidiaries for any period ending on and including the closing date; or - VoiceStream and VoiceStream Holdings or any of their subsidiaries as a result of any payment by TDS to VoiceStream or VoiceStream Holdings or any of their subsidiaries pursuant to such tax indemnity. Any indemnification payment made by TDS pursuant to its tax indemnification of VoiceStream and VoiceStream Holdings will be reported as an adjustment to purchase price, contribution to capital, or other nontaxable amount to the extent there is substantial authority for such reporting position. OTHER AGREEMENTS In the Aerial reorganization agreement, VoiceStream, VoiceStream Holdings, TDS, and/or Aerial have agreed to enter into several ancillary agreements, which are described in more detail elsewhere in this document. These ancillary agreements include the: - debt replacement agreement; - transition services agreement; - TDS registration rights agreement; - employee benefit plans separation agreement; - Aerial stockholder voting agreement; - Sonera indemnity agreement; - VoiceStream stockholder voting agreement; and - TDS investor agreement. TERMINATION OF CERTAIN AGREEMENTS BETWEEN AERIAL AND TDS In the Aerial reorganization agreement, Aerial has agreed to terminate the following intercompany agreements at or prior to the closing of the Aerial reorganization: - the cash management agreement; - the insurance cost sharing agreement; - the intercompany agreement; - the exchange agreement; - the employee benefit plan agreement; - the Aerial registration rights agreement; and - tax allocation agreement. 88 96 REPRESENTATIONS AND WARRANTIES OF VOICESTREAM, VOICESTREAM HOLDINGS AND AERIAL The Aerial reorganization agreement contains substantially reciprocal representations and warranties made by VoiceStream and VoiceStream Holdings, jointly, and Aerial to each other. The most significant of these relate to: - organization; - capital structure; - authority; - required consents and approvals; - SEC filed documents; - absence of any material adverse change; - information supplied; - permits and compliance with laws; - tax matters; - liabilities; - litigation; - inapplicability of state takeover statutes; - opinion of the respective financial advisors to VoiceStream and Aerial; - financial brokers; - requisite vote to approve the Aerial reorganization; and - transactions with affiliates. In addition, Aerial has made additional representations and warranties to VoiceStream and VoiceStream Holdings relating to: - subsidiaries; - benefit plans, employees and employment practices; - environmental matters; - intellectual property; and - material contracts. In addition, VoiceStream and VoiceStream Holdings have jointly made additional representations and warranties to Aerial relating to the ownership and interim operations of VoiceStream Holdings' merger subsidiary. The representations and warranties described above expire at the closing of the Aerial reorganization and will not survive, except with respect to tax indemnities as described in "Tax Indemnification" and with respect to the dispute with Sonera, as described in "Sonera Indemnity." 89 97 CONDITIONS TO THE COMPLETION OF THE AERIAL REORGANIZATION MUTUAL CLOSING CONDITIONS The obligations of VoiceStream and Aerial to complete the transactions provided for in the Aerial reorganization agreement are subject to the satisfaction or, to the extent legally permissible, waiver of the following conditions: - approval of the Aerial reorganization by the stockholders of Aerial; - approval of the Aerial reorganization by the stockholders of VoiceStream or VoiceStream Holdings, as the case may be; - absence of an injunction or restraining order preventing the consummation of the Aerial reorganization; - listing of VoiceStream Holdings shares on the Nasdaq Stock Market; - expiration or termination of the requisite waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976; - effectiveness of the VoiceStream Holdings Form S-4 registration statement; - receipt of all necessary regulatory consents and approvals and, in the case of the FCC consents and approvals, final orders; - execution and delivery of the investor agreement between TDS and VoiceStream Holdings; and - consummation or termination of the Omnipoint reorganization; provided that this condition will be deemed satisfied if the Omnipoint reorganization has not been consummated or terminated by June 30, 2000 or, under certain circumstances, March 31, 2000. ADDITIONAL AERIAL CONDITIONS The obligations of Aerial to complete the transactions provided for in the Aerial reorganization agreement are also subject to the satisfaction or, to the extent legally permissible, waiver of the following conditions: - performance by each of VoiceStream, VoiceStream Holdings and the merger subsidiary of VoiceStream Holdings of the agreements required to be performed by them pursuant to the Aerial reorganization agreement at or prior to the closing; - confirmation that at the closing, each of the representations and warranties of VoiceStream, VoiceStream Holdings and the merger subsidiary of VoiceStream Holdings contained in the Aerial reorganization agreement are true and correct, except as would not be expected to have a material adverse effect on Aerial, VoiceStream, VoiceStream Holdings or the transactions contemplated by the Aerial reorganization agreement; - receipt by Aerial of a tax opinion from its tax counsel; - receipt by VoiceStream and VoiceStream Holdings of all requisite consents or approvals under VoiceStream's, VoiceStream Holdings' and their affiliates' debt instruments; - termination of the intercompany services agreements; - consummation of the transactions contemplated by the TDS Debt Replacement; 90 98 - repurchase, repayment and/or amendment of the Aerial Series A zero coupon notes, the Series B zero coupon notes and the Nokia credit agreement and the release and discharge of TDS as a guarantor thereunder; - settlement and payment of all intercompany accounts; - termination of the tax allocation agreement; - execution and delivery of the VoiceStream Holdings voting agreement; - absence of any amendments to the Omnipoint reorganization agreement or transactions contemplated thereby, except for those which would not have a material adverse effect on VoiceStream, VoiceStream Holdings or on the transactions contemplated by the Aerial reorganization; - execution and delivery by VoiceStream and VoiceStream Holdings of the TDS registration rights agreement; - receipt by Aerial of a legal opinion from FCC counsel to VoiceStream and VoiceStream Holdings; - receipt by Aerial of a legal opinion from corporate and state and regulatory counsel to VoiceStream and VoiceStream Holdings; and - absence of any continuing material adverse effect with respect to VoiceStream and VoiceStream Holdings relating to the Year 2000 issues. ADDITIONAL VOICESTREAM AND VOICESTREAM HOLDINGS CONDITIONS The obligations of VoiceStream and VoiceStream Holdings to complete the transactions provided for in the Aerial reorganization agreement are also subject to the satisfaction or, to the extent legally permissible, waiver of the following conditions: - performance by Aerial of the agreements required to be performed by it pursuant to the Aerial reorganization agreement at or prior to the closing; - confirmation that at the closing, each of the representations and warranties of Aerial contained in the Aerial reorganization agreement are true and correct, except as would not be expected to have a material adverse effect on Aerial, VoiceStream and VoiceStream Holdings or the transactions contemplated by the Aerial reorganization agreement; - receipt by VoiceStream and VoiceStream Holdings of a tax opinion from its tax counsel; - receipt by VoiceStream and VoiceStream Holdings of a legal opinion from FCC counsel to Aerial; - receipt by VoiceStream and VoiceStream Holdings of a legal opinion from corporate and state regulatory counsel to Aerial; - receipt by Aerial of all requisite consents or approvals under Aerial's debt instruments; - receipt by VoiceStream and VoiceStream Holdings of tax certificates from Aerial, TDS and Sonera; - execution and delivery of the indemnity agreement; - absence of any continuing material adverse effect with respect to Aerial relating to the Year 2000 issues; and 91 99 - exercise of statutory dissenters' rights with respect to no more than 7.5% of the shares of VoiceStream. TERMINATION OF THE AERIAL REORGANIZATION AGREEMENT RIGHT TO TERMINATE The parties may terminate the Aerial reorganization agreement at any time prior to the closing of the Aerial reorganization in any of the following ways: - by the mutual written consent of VoiceStream, VoiceStream Holdings, the merger subsidiary of VoiceStream Holdings and Aerial; - by any of VoiceStream, VoiceStream Holdings or Aerial: - if the Aerial reorganization is not consummated prior to the close of business on September 17, 2000, provided that if the Aerial reorganization has not closed only because any regulatory consents have not been received, then such termination date shall be December 17, 2000; or - in the event that any governmental entity shall have taken action to permanently enjoin the Aerial reorganization; - by VoiceStream or VoiceStream Holdings if the Aerial stockholders do not approve the Aerial reorganization; - by Aerial if the stockholders of VoiceStream or VoiceStream Holdings, as the case may be, do not approve the Aerial reorganization; or - by either VoiceStream or VoiceStream Holdings, as the case may be, or Aerial for an uncured breach, following 30 days written notice thereof, by the other party of any representation, warranty or covenant, except for those that would not be expected to have a material adverse effect on Aerial, VoiceStream, VoiceStream Holdings or the transactions contemplated by the Aerial reorganization agreement. TERMINATION FEE PAYABLE BY AERIAL Aerial has agreed to pay VoiceStream and VoiceStream Holdings a cash amount equal to $40,000,000 in the event that VoiceStream or VoiceStream Holdings terminates the Aerial reorganization agreement due to an uncured breach, following 30 days written notice thereof, by Aerial of any representation, warranty or covenant, except for those that would not be expected to have a material adverse effect on Aerial or the transactions contemplated by the Aerial reorganization agreement. In the event that such a termination fee becomes payable and Aerial does not have sufficient funds at such time to pay the termination fee, TDS has agreed to allow Aerial to finance the termination fee through an increase in the TDS revolving credit agreement. BACKGROUND OF THE AERIAL REORGANIZATION The following describes certain background information that we believe is necessary or useful for an understanding of the Aerial reorganization and the related transactions, including the transactions involving the Series A zero coupon notes, the Series B zero coupon notes, the Nokia credit agreement, the TDS Debt Replacement, the TDS tax settlement agreement, the relationship between TDS and Aerial and the arrangements with Sonera. 92 100 BACKGROUND OF EVENTS RELATING TO FINANCING OF AERIAL In 1991, Aerial was incorporated under Delaware law as a wholly-owned subsidiary of TDS. In 1995, Aerial acquired eight licenses from the FCC to provide PCS services in the Minneapolis, Tampa-St. Petersburg-Orlando, Houston, Pittsburgh, Kansas City, Columbus, Alaska and Guam MTAs. Following its acquisition of PCS licenses, Aerial devoted its efforts to recruiting an experienced management team, developing and executing a business plan, designing and constructing a PCS network in each of its six MTAs and raising capital. Aerial sold its licenses covering the Guam and Alaska MTAs in 1996. The acquisition of the licenses and Aerial's initial development stage activities were funded by debt and equity financing from TDS. In April 1996, the Aerial certificate of incorporation was amended and restated and Aerial was recapitalized in preparation for a public offering of Aerial common stock. Immediately following the recapitalization and prior to the public offering, TDS owned 19,086,000 Aerial Common Shares and 40,000,000 Aerial Series A Common Shares, representing 100% of the Aerial common stock. Under the Aerial restated certificate of incorporation, the Aerial Common Shares are entitled to one vote per share and are entitled to elect 25% of the directors, rounded up to the nearest whole number, and the Aerial Series A Common Shares are entitled to 15 votes per share and are entitled to elect 75% of the directors, rounded down to the nearest whole number. In the public offering in April 1996, Aerial sold 12,250,000 Aerial Common Shares, representing 17.2% of the Aerial common stock, at an initial offering price of $17.00 per share. Immediately following the public offering, TDS owned 82.8% of the combined total of the outstanding Aerial common stock, including 60.9% of the outstanding Aerial Common Shares and 100% of the outstanding Aerial Series A Common Shares, and controlled 98.1% of the combined voting power of Aerial common stock. In connection with the initial public offering, Aerial Common Shares were listed on the Nasdaq Stock Market. There is no public market for the Aerial Series A Common Shares, but such shares are convertible on a share-for-share basis into Aerial Common Shares. Aerial realized approximately $195 million in connection with the public offering, after the payment of the underwriters' commission. The net proceeds to Aerial from the public offering were used to repay indebtedness to TDS and to partially finance the development, construction and operation of Aerial's business. In June 1996, Nokia Telecommunications Inc. provided Aerial with $200 million in financing for digital radio channel and switching infrastructure equipment. Pursuant to an agreement with Nokia, Aerial issued to investors, in tranches, 10-year unsecured zero coupon promissory notes, the proceeds of which were paid to Nokia in satisfaction of borrowings by Aerial under the Nokia agreement. On November 4, 1996, Aerial issued $226.2 million in aggregate principal amount at maturity of Series A zero coupon notes due in 2006 for an aggregate issue price of $100 million. On February 5, 1998, Aerial issued $220 million in aggregate principal amount at maturity of Series B zero coupon notes due in 2008 for an aggregate issue price of $100 million. The obligations of Aerial under the Series A zero coupon notes and the Series B zero coupon notes are fully and unconditionally guaranteed by TDS in consideration for an annual fee from Aerial of 3% of the amount guaranteed. All of Aerial's MTAs launched service during the first half of 1997. With the launch of service in its MTAs, Aerial transitioned from the development stage to being an operating enterprise. Following this transition, significant efforts to build out Aerial's network infrastructure and to establish a customer base continued throughout 1997 and 1998. On June 30, 1998, Aerial and Nokia entered into a credit agreement under which Nokia agreed to provide financing to Aerial of up to $150 million in two tranches of $75 million each for the purchase of network infrastructure equipment and services from Nokia. The obligations of Aerial under the Nokia credit agreement mature on June 30, 2000, and are fully and unconditionally 93 101 guaranteed by TDS in consideration for an annual fee from Aerial of 3% of the amount guaranteed. Any borrowings under the Nokia credit agreement must be used to prepay the amount due under the TDS revolving credit agreement and concurrently reduce by the same amount the authorized total line of credit available to Aerial Operating Company under the TDS revolving credit agreement. See "Arrangements and Transactions between TDS and Aerial -- TDS Revolving Credit Agreement." On September 8, 1998, pursuant to the terms of a purchase agreement dated June 1, 1998, Sonera made a $200 million investment in Aerial Operating Company. Sonera purchased approximately 2.4 million shares of common stock of Aerial Operating Company, which represented a 19.4% equity interest in Aerial Operating Company. See "Background of Events Relating to Sonera." The majority of Aerial's cash requirements have been provided by TDS under the TDS revolving credit agreement. See "Arrangements and Transactions between TDS and Aerial -- TDS Revolving Credit Agreement." Aerial anticipates that the continuing development of its PCS services will require substantial capital over the next few years. As a result, Aerial continues to have substantial financing requirements. These financing requirements have previously been funded by third parties and by TDS, as described above. As discussed below, beginning in the latter part of 1998, TDS began to consider whether Aerial's financing requirements and the development of its business should be financed entirely by parties other than TDS, and whether this goal could be facilitated by a spin-off, merger, sale, business combination transaction or other transaction or reorganization. BACKGROUND OF EVENTS LEADING TO AERIAL REORGANIZATION In the latter part of 1997, TDS developed a plan to reorganize TDS and its subsidiaries, including Aerial, through the issuance of tracking stock by TDS. In December 1997, TDS made an offer to acquire all of the Aerial Common Shares that it did not own in exchange for a class of TDS tracking stock that would represent the business of Aerial. Between January and September 1998, TDS representatives attempted to negotiate an agreement relating to its tracking stock offer with a special committee of the Aerial board of directors. Beginning in mid-September 1998, TDS management began to question the feasibility of the tracking stock proposal and began to explore other alternative transactions. In September and October 1998, TDS management held meetings and discussions with TDS's financial advisors relating to various alternatives, including a merger, sale or spin-off of Aerial. Based on these meetings, TDS developed a proposal relating to the possible spin-off of Aerial as an alternative to the tracking stock proposal, but left open the possibility for other alternatives, including the sale or merger of Aerial. As part of the spin-off proposal, TDS intended to discontinue providing additional financing to Aerial under the TDS revolving credit agreement and to cause Aerial to obtain financing from parties other than TDS on a stand-alone basis. On November 30, 1998, representatives of TDS and Sonera met with representatives of VoiceStream to discuss telecommunications industry trends, potential consolidation in the GSM market, and the strategic direction of their respective companies. TDS indicated to VoiceStream that it was considering various alternatives concerning its investment in Aerial. Over the next several weeks, VoiceStream, TDS, Aerial and Sonera each independently began an internal analysis of possible transactions involving VoiceStream, Aerial and Sonera. On December 17, 1998, the TDS board of directors approved the proposal to spin-off TDS's interest in Aerial and to consider other alternatives. On December 18, 1998, TDS issued a press release announcing that it was withdrawing its offer to exchange tracking stock for the outstanding Aerial Common Shares and was pursuing a tax-free 94 102 spin-off of its interest in Aerial, as well as reviewing other alternatives. After Sonera became aware of the proposed spin-off, Sonera raised certain claims relating to its investment in Aerial Operating Company. See "Background of Events Relating to Sonera." On December 28, 1998, VoiceStream and TDS, on behalf of itself and its affiliates and subsidiaries, including Aerial, entered into a mutual non-disclosure agreement. On December 28, 1998, VoiceStream and Sonera entered into a mutual non-disclosure agreement. In December 1998 and January 1999, TDS and Sonera held conversations with Omnipoint and another entity that might have a strategic interest in Aerial's business ("Entity One") in order to determine if these parties had any interest in a business combination transaction involving Aerial. Following these conversations, Omnipoint notified TDS that it had no interest in a business combination transaction with Aerial and, except for one additional conversation after this notice, all conversations between TDS and Omnipoint ceased. Representatives of TDS and Sonera held further discussions with representatives of Entity One, but did not identify any significant common interest in a business combination transaction. Also, during the latter part of 1998 and the early part of 1999, representatives of TDS and/or Aerial received unsolicited indications of interest from certain parties relating to the acquisition by those parties of individual markets from Aerial. Representatives of TDS and/or Aerial advised such parties that Aerial did not have an interest in piecemeal sales of individual markets, but invited such parties to sign a confidentiality agreement and to consider a business combination transaction involving all of Aerial. On January 28, 1999, as a result of TDS's announcement that it intended to spin off its interest in Aerial, the Aerial board of directors adopted resolutions establishing a special committee. The Aerial board of directors also adopted resolutions establishing a finance committee to consider financing matters in connection with the possible separation of Aerial from TDS through a spin-off. The Aerial board of directors believed that the appointment of the special committee was appropriate under the circumstances, including the fact that TDS owned over 80% of the common stock of Aerial, controlled approximately 98% of the voting power of Aerial and had the power to elect all of the directors of Aerial. The Aerial board also considered the fact that (1) eight of the 12 directors of Aerial are also directors and/or officers of, or are otherwise affiliated with, TDS or its subsidiaries, including Aerial, (2) three of the directors are trustees and/or beneficiaries of the TDS Voting Trust, which controls TDS and (3) two of the directors are representatives of Sonera. The members of the Aerial special committee were selected because they are neither directors or officers of TDS or any of its subsidiaries, except that they are independent directors of Aerial, nor beneficiaries or trustees of the TDS Voting Trust, and because they are also not affiliated with Sonera. The Aerial special committee was created to consider and make a recommendation to the full Aerial board of directors with respect to (1) the material aspects of any financing alternatives proposed by the Aerial finance committee; (2) the material agreements, arrangements and transactions between Aerial and TDS in connection with the financing alternatives and the spin-off; and (3) any proposed material changes to the arrangements with Sonera. The Aerial special committee was authorized to consider all material aspects of any financing alternatives proposed by the Aerial finance committee and to make its recommendation with respect thereto to the full board of directors together with the Aerial finance committee. The Aerial special committee is composed of Messrs. John D. Foster and Thomas W. Wilson, Jr. Messrs. Foster and Wilson are independent members of the Aerial board of directors. 95 103 Both Mr. Foster and Mr. Wilson have been directors of Aerial since 1996. Mr. Foster is the President of Vedra International Associates, a consulting firm based in Florida. Prior to his association with that firm, Mr. Foster held a number of senior management positions in domestic and international units of AT&T Corporation over a period of approximately 30 years. Mr. Wilson is Chairman of Information Resources, Inc., a Chicago based company which provides information services to the consumer packaged goods industry. Prior to his retirement in 1990, he was a Senior Partner of McKinsey & Company, where he was employed for 24 years. He also serves on the board of directors of Productivity Solutions, Inc. The Aerial board of directors approved the reimbursement of Messrs. Foster and Wilson for any out-of-pocket expenses incurred by them in connection with their duties on the special committee and a fee of $2,000 apiece for each day on which Mr. Foster and Mr. Wilson performed services in connection therewith. The Aerial special committee was authorized to engage independent counsel and financial advisors. Following its appointment, the Aerial special committee interviewed prospective investment banking firms to advise the special committee with respect to financial matters. The Aerial special committee engaged Wasserstein Perella & Co., Inc., as its financial advisor, and engaged Fried, Frank, Harris, Shriver & Jacobson as its legal advisor. Each of Wasserstein Perella and Fried, Frank was selected due to its reputation and experience. In addition, Fried, Frank was selected because it had also represented Messrs. Foster and Wilson on the special committee related to the tracking stock proposal. The Aerial special committee was invited to participate in all meetings of the Aerial finance committee and was kept apprised of the activities relating to the proposed refinancing of Aerial, the proposed spin-off and the consideration of alternate transactions, including a business combination involving Aerial. In connection with the proposed spin-off, TDS intended to replace a substantial amount of the debt owed by Aerial Operating Company to TDS with equity of Aerial, refinance Aerial's capital structure, including the release of TDS as guarantor of Aerial debt to third parties, amend or terminate various agreements between TDS and Aerial, and enter into various new agreements necessary in connection with the separation of TDS and Aerial, including arrangements relating to taxes. Although the anticipated debt replacement transaction would have provided Aerial with additional equity that Aerial's financial advisors advised Aerial was necessary in order for Aerial to complete a stand-alone financing, the anticipated debt replacement transaction would also have provided TDS with significant tax benefits by reducing its "excess loss account," or negative stock basis, in the stock of Aerial. In addition to the tax benefits which would have been provided to TDS, another consequence of the anticipated debt replacement transaction was that Sonera would have had rights to subscribe to additional equity of Aerial and of Aerial Operating Company at prices determined with reference to the market price of Aerial Common Shares. Beginning in early 1999, from time to time, representatives of TDS and Aerial held meetings and conversations with representatives of Sonera in an effort to resolve the claims raised by Sonera relating to its investment in Aerial Operating Company. See "Background of Events Relating to Sonera." Some of the meetings and conversations pertained solely to a settlement of such claims, while others involved a resolution of such claims in the context of a transaction involving Aerial, Sonera and VoiceStream. On February 2, 1999, representatives of VoiceStream met with representatives of TDS and Sonera and discussed the financial requirements of Aerial and VoiceStream and a possible transaction involving Aerial, VoiceStream and Sonera. 96 104 In early 1999, TDS, the Aerial finance committee and the Aerial special committee met many times for the purpose of exploring ways to finance Aerial on an interim and permanent basis from sources other than TDS. However, due to the unfavorable cost and terms of proposed interim financing alternatives, TDS and the Aerial special committee agreed that TDS and Aerial would determine and settle certain tax obligations from TDS to Aerial as a means of providing funds to Aerial to meet its interim financing requirements. Between February 22 and March 11, 1999, representatives of TDS and representatives of the Aerial special committee negotiated the terms of a tax settlement agreement that would determine and settle certain tax obligations from TDS to Aerial under the tax allocation agreement between TDS and Aerial. During the course of these negotiations, representatives of the Aerial special committee requested TDS to agree to negotiate a "tag-along" right for the public stockholders of Aerial in the event of a sale by TDS of its Aerial shares. TDS refused, but agreed to include as a condition to the tax settlement agreement that the Aerial board approve a resolution increasing the authority of the Aerial special committee to consider and make a recommendation to the Aerial board with respect to any proposal relating to the sale, merger, consolidation or other business combination involving substantially all of the common stock or assets of Aerial. On March 12, 1999, after consulting with its legal and financial advisors, the Aerial special committee approved the tax settlement agreement and recommended that it be approved by the Aerial board of directors. Based on the recommendation of the Aerial special committee and other factors, on March 12, 1999, the Aerial board of directors approved the tax settlement agreement. The Aerial board also approved a resolution increasing the authority of the Aerial special committee to consider any proposal relating to the sale, merger, consolidation or other business combination involving substantially all of the common stock or assets of Aerial, and to report to the Aerial board the recommendation of the Aerial special committee with respect thereto. On March 12, 1999, the TDS board of directors approved the tax settlement agreement. Thereafter, the tax settlement agreement was executed by TDS, Aerial and Aerial Operating Company, and TDS delivered the tax settlement payment of $114.5 million to Aerial on March 15, 1999. See "Arrangements and Transactions between TDS and Aerial -- Tax Allocation Agreement." On March 12, 1999, representatives of VoiceStream and TDS discussed valuation and financial requirements of VoiceStream and Aerial and a possible business combination transaction involving Aerial and VoiceStream pursuant to which stockholders of Aerial would receive VoiceStream common stock. No agreements were reached in this meeting. In its discussions with VoiceStream relating to a possible business combination, TDS advised VoiceStream that it desired to replace a substantial amount of the debt from Aerial Operating Company to TDS with equity of Aerial prior to a business combination transaction. TDS desired to do this to eliminate or reduce its excess loss account in the stock of Aerial for tax purposes. However, in contrast to its effect in the context of the spin-off alternative, this action would not result in a permanent tax savings to TDS in the context of a business combination. The debt replacement transaction would not increase TDS's aggregate tax basis in the stock and debt of Aerial and Aerial Operating Company, but would merely transfer tax basis from the debt to the stock. Accordingly, even if the debt replacement eliminated the excess loss account in the stock of Aerial so that TDS's gains on the business combination were entirely deferred, TDS would nonetheless have to recognize such gain on any subsequent taxable disposition of its stock in the surviving entity for an amount at least equal to the value received in the business combination. On March 19, 1999, in order to permit Aerial formally to consider a business combination transaction with various potential parties including VoiceStream, Aerial delivered a notice to Sonera under the investment agreement among Sonera, TDS, Aerial and Aerial Operating Company, stating 97 105 that Aerial desired to enter into a disposition transaction as described in the notice. Pursuant to the terms of the investment agreement, Sonera had a period of 10 days to determine if it desired to invoke certain provisions of the investment agreement requiring Aerial to negotiate exclusively with Sonera with respect to such a transaction. On March 29, 1999, Aerial received a notice from Sonera electing to invoke those provisions of the investment agreement that required Sonera and Aerial to negotiate exclusively with each other in good faith for 60 days with respect to a disposition transaction. As a result, representatives of Aerial began discussions with Sonera relating to a possible disposition transaction and ceased negotiations with VoiceStream and other potential parties. On March 31, 1999, representatives of VoiceStream and Sonera met to discuss Sonera's possible investment in VoiceStream as a result of a possible transaction with Aerial. On April 20, 21 and 24, 1999, representatives of VoiceStream and Sonera met and discussed strategic direction of their respective companies and the strategic direction of and valuations for Aerial. On April 29, 1999, Aerial entered into an engagement letter with Donaldson, Lufkin & Jenrette. Pursuant to the engagement letter, Donaldson, Lufkin & Jenrette agreed to provide financial advisory services to Aerial in connection with the preparation and implementation of a financing plan and capital structure for Aerial in the event of completion of the spin-off. In addition, Donaldson, Lufkin & Jenrette agreed to provide financial services to Aerial with respect to a sale, merger, consolidation or other business combination involving all or at least a majority of the business, securities or assets of Aerial. The services to be provided by Donaldson, Lufkin & Jenrette included the identification and contact by Donaldson, Lufkin & Jenrette of parties that might be interested in acquiring Aerial and the determination of the nature and extent of any such interest. See "Aerial Fairness Opinion." Following the execution of the engagement letter, discussions were held between representatives of TDS, Aerial management and Donaldson, Lufkin & Jenrette to identify parties that might be interested in a business combination transaction with Aerial. Donaldson, Lufkin & Jenrette identified a total of 30 potential purchasers to be contacted to determine whether such parties would be interested in pursuing discussions concerning an acquisition of Aerial. The companies to be contacted were selected based on, among other things, (1) their level of involvement in the wireless or telecommunications business, (2) the likelihood of their having an interest in acquiring Aerial, and (3) their ability to effect such an acquisition. The companies to be contacted included primarily logical strategic acquirors, including those that had been in contact with TDS and/or Aerial earlier, as discussed above. On May 28, 1999, the 60-day period during which Aerial was required to negotiate exclusively with Sonera with respect to a disposition transaction expired without receipt by Aerial of an offer from Sonera relating to such a transaction. As a result, Aerial was free to negotiate a disposition transaction with other potential parties. Although exclusive negotiations with Sonera ended and, as outlined below, negotiations began with other potential purchasers, TDS and Aerial continued to negotiate periodically with Sonera to resolve the claims raised by Sonera. These discussions with Sonera included proposals to resolve such claims in the context of a business combination transaction involving Aerial, Sonera and VoiceStream, which transaction would be structured to achieve the mutual goal of TDS and Sonera that TDS obtain an equity interest in Sonera and that Sonera obtain a significant equity interest in VoiceStream. 98 106 Following the expiration of Sonera's right of first negotiation on May 28, 1999, Donaldson, Lufkin & Jenrette contacted the 30 potential purchasers which it had identified. Twenty-one potential purchasers contacted by Donaldson, Lufkin & Jenrette indicated that they were not interested or did not respond to inquiries. Nine of the 30 potential purchasers contacted by Donaldson, Lufkin & Jenrette expressed an interest in receiving additional information about Aerial. Each of these nine parties executed a confidentiality agreement. In June 1999, following the receipt of executed confidentiality agreements, Donaldson, Lufkin & Jenrette distributed a confidential information memorandum to these nine parties. In the latter part of June and the early part of July 1999, representatives of Donaldson, Lufkin & Jenrette communicated with each of the nine potential purchasers in order to invite such potential purchasers to conduct due diligence with respect to Aerial, which included meetings with management, and to make a bid. Three of the nine potential purchasers that signed confidentiality agreements accepted the invitation to conduct due diligence and meet with management. Over the course of the next several weeks, Donaldson, Lufkin & Jenrette arranged for the three parties to conduct due diligence and meet with management in Chicago, Illinois. In early June 1999, representatives of VoiceStream and TDS, together with their financial advisors, met to discuss possible transaction structures and differences with respect to valuations of VoiceStream, Aerial and Sonera. On June 16, 1999, VoiceStream and Sonera sent a proposal to TDS that involved a complex, multi-step transaction pursuant to which, in effect, TDS would receive Sonera equity, Sonera would receive TDS's equity interest in Aerial, and VoiceStream would acquire Aerial, as a result of which Sonera would own a large amount of VoiceStream equity. That proposal contemplated an exchange ratio of 0.46 of a share of VoiceStream common stock per share of Aerial common stock. Based on the VoiceStream share closing price of $23.69 on June 15, 1999, the implicit transaction price per Aerial share in that proposal was approximately $10.90. This proposal also contemplated (1) that the public stockholders of Aerial would be entitled to elect to receive $14.00 in cash per Aerial share in lieu of VoiceStream equity, (2) that Aerial Operating Company's debt to TDS would be repaid within 18 months after closing, (3) that Sonera would obtain certain strategic rights vis-a-vis VoiceStream, and (4) that Sonera would provide a release of all of its claims against TDS and Aerial. Despite efforts to negotiate mutually satisfactory terms in connection with this and other proposals, TDS, Aerial and Sonera were unable to agree on a transaction structured to permit TDS to obtain an equity interest in Sonera in lieu of all or a portion of the equity interest that TDS would otherwise obtain in VoiceStream. On June 22, 1999, representatives of Sonera and VoiceStream met to discuss the possible transaction among Aerial, Sonera and VoiceStream. On June 23, 1999 Omnipoint and VoiceStream announced that they had executed the Omnipoint reorganization agreement. See "The Omnipoint Reorganization -- Background of the Omnipoint Reorganization." In the latter part of July 1999, Donaldson, Lufkin & Jenrette asked the three parties who conducted due diligence and Sonera and an additional party who expressed an interest in making a bid, to deliver bids relating to a business combination transaction with Aerial by August 12, 1999. Donaldson, Lufkin & Jenrette requested that the bids remain open until September 9, 1999. Initial drafts of a merger agreement and related transaction documents were delivered to the five bidders and the bidders were asked to submit their proposed changes to such documents along with their bids. Among other things, the draft merger agreement contemplated that a purchaser would be fully indemnified with respect to any loss or expense relating to the dispute with Sonera, on terms to be 99 107 negotiated. Representatives of the Aerial special committee had urged TDS to assume full responsibility for this indemnity. Due to the developments relating to a possible business combination transaction involving Aerial, other activities relating to the proposed refinancing and spin-off of Aerial were postponed pending the resolution of this process. As a result, Aerial was in need of additional financing pending the resolution of the process relating to the exploration of a possible business combination transaction. Accordingly, TDS, the Aerial finance committee and the Aerial special committee considered various alternatives for interim financing for Aerial. At the urging of the Aerial special committee, on July 22, 1999, TDS agreed to increase the maximum amount available for borrowing by Aerial Operating Company under the TDS revolving credit agreement from $650 million to $775 million. This was expected to provide sufficient funds to permit Aerial to meet its expected financing requirements into December 1999. On August 6, 1999, the Aerial board of directors met and was apprised of the activities and status relating to a possible business combination transaction and the discussions with Sonera. Due to the conflicts of interest raised by the possibility of Sonera making a bid relating to a possible business combination transaction and by the dispute with Sonera, the Aerial board of directors established a transaction committee consisting of all of its directors other than the directors affiliated with Sonera. The Aerial transaction committee was authorized to exercise the full authority of the Aerial board to the extent permitted by law with respect to matters relating to any possible business combination transaction and relating to the Sonera dispute. See "Background of Events Relating to Sonera." On August 12, 1999, VoiceStream and another party ("Entity Two") made submissions relating to a business combination transaction involving Aerial, which stated that they would remain open until September 9, 1999. Sonera and the other two parties did not submit bids. Entity Two submitted a letter of interest rather than a firm proposal. Entity Two also did not deliver a mark-up of the merger agreement or the related agreements, but promised to deliver these by August 18, 1999. VoiceStream delivered a firm proposal, including a mark-up of the merger agreement and related agreements. The August 12, 1999 Entity Two proposal contemplated, among other things, a conversion of all outstanding Aerial shares and share equivalents, other than Sonera's share equivalents, into cash in a merger. The Entity Two proposal indicated a per share price between the market value of Aerial's Common Shares and a premium of 47% above such price. Based on the closing price for the Aerial Common Shares of $13.25 on August 11, 1999, this implied a maximum per share price of approximately $20.00. The Entity Two proposal also indicated that the purchase price would be subject to adjustment for any changes in net debt between March 31, 1999 and the closing date. The proposed cash transaction would be taxable to stockholders. However, the Entity Two proposal indicated that Entity Two was willing to discuss a deal structure that might be more tax efficient to stockholders. The August 12, 1999 VoiceStream proposal contemplated the issuance of common stock of VoiceStream, or VoiceStream Holdings if the Aerial merger occurred after completion of the Omnipoint transaction. VoiceStream proposed to convert all outstanding shares of common stock of Aerial into shares of VoiceStream or VoiceStream Holdings in a merger, including Sonera's Aerial Operating Company shares if Sonera exercised its tag-along right under the investment agreement. VoiceStream proposed a transaction which would qualify as a tax-free reorganization. VoiceStream offered to exchange 0.4 of a share of VoiceStream or VoiceStream Holdings common stock per share of common stock of Aerial, or an aggregate of 34.4 million shares of VoiceStream or VoiceStream Holdings. Although VoiceStream, through Sonera, had offered an exchange ratio of 0.46 of a VoiceStream share per Aerial share on June 16, 1999, VoiceStream indicated that it believed the 100 108 exchange ratio of 0.4 provided an attractive value to Aerial stockholders, in light of recent developments. VoiceStream stated that, since the earlier discussions, VoiceStream had added customers at a significantly faster pace than Aerial and had entered into the agreement to acquire Omnipoint and that, as a result, the value of its business had improved substantially. Based on the closing price for VoiceStream common stock on August 11, 1999, the VoiceStream offer implied a price of $15.60 per Aerial Common Share. VoiceStream also proposed that between $300 million and $500 million of Aerial Operating Company's debt to TDS would be converted into equity at $17.00 per share of Aerial common stock. In addition, VoiceStream proposed that Aerial Operating Company would continue to owe approximately $300 million to TDS after the closing until this amount was refinanced within 18 months after the closing. VoiceStream also proposed that TDS solely provide an indemnity relating to the Sonera dispute, without any indemnity obligation by the public stockholders of Aerial. The two proposals were reviewed and discussed by representatives of TDS and Aerial and by the Aerial special committee and its representatives. The Aerial special committee indicated that it would like Donaldson, Lufkin & Jenrette to request VoiceStream to revise its proposal to include an election by the public stockholders of Aerial to receive cash in lieu of VoiceStream common stock in an amount per share of Aerial common stock equal to the product of the exchange ratio and the market price of the VoiceStream common stock at the time the transaction was announced. TDS and the Aerial special committee agreed that VoiceStream should be requested to revise its proposal to provide that the price for the debt replacement would also be based on the implied deal price based on the market price of VoiceStream common stock. TDS also requested Donaldson, Lufkin & Jenrette to advise VoiceStream that it should revise its proposal so that the debt from Aerial Operating Company to TDS that would remain outstanding would bear a market interest rate and be repaid within 12 months after the closing. TDS also indicated that it would not agree to be solely responsible for the indemnity relating to the Sonera dispute. The representatives of TDS and Aerial also agreed to ask VoiceStream to add a collar mechanism to its bid. On August 16, 1999, following review and discussions of the bids, Donaldson, Lufkin & Jenrette contacted representatives of VoiceStream and Entity Two. Donaldson, Lufkin & Jenrette advised representatives of VoiceStream that there was another bidder that had a competitive bid and encouraged VoiceStream to increase its bid and to make certain changes to its proposal, as described above. Donaldson, Lufkin & Jenrette advised Entity Two that there was another bidder and that Entity Two would have to make a more definitive proposal in order to continue participation in the auction. Entity Two was also asked to clarify aspects of its bid. Entity Two orally advised Donaldson, Lufkin & Jenrette that it would agree not to reduce the purchase price for increases in debt in the ordinary course and that its bid would be at least $20.00 per share, subject to due diligence. On August 17, 1999, VoiceStream delivered a letter which modified its proposal. The revised VoiceStream proposal included a collar mechanism with a fixed exchange ratio of 0.4 of a share of VoiceStream Holdings common stock per Aerial share within a range of 25% above and below the VoiceStream stock price of $40.875. Outside this range, the exchange ratio would float to a maximum of 0.45 and a minimum of 0.375, depending on VoiceStream's stock price, at which points the exchange ratio would become fixed. The revised VoiceStream bid also made other changes to its proposal. VoiceStream offered to shorten the term of the Aerial debt owed to TDS that was to remain outstanding to 12 months and proposed an interest rate for such debt of LIBOR plus 2.5%, subject to increase by 50 basis points every six months if not repaid in 12 months. The revised proposal also stated that VoiceStream required certainty that $300 million of the debt owed to TDS would be converted at the fixed price of $17.00. VoiceStream also objected to the complexity that would be involved in having the public 101 109 stockholders of Aerial contribute to the indemnity relating to the Sonera dispute and reaffirmed its position that TDS should be solely responsible for this obligation. On August 17, 1999, Entity Two delivered a mark-up of a merger agreement and related stockholder agreement. The mark-up of the merger agreement indicated that Entity Two would be willing to offer stock in a transaction which would be tax-free to Aerial stockholders. However, the letter accompanying the mark-up indicated a stock transaction would require approval by Entity Two stockholders and that this could not occur until mid-2000. The August 17 mark-up of the merger agreement by Entity Two also reflected the conversion of all of Aerial's common stock and common stock equivalents, including Sonera's shares if it exercised its tag-along right. On August 17, 1999, Donaldson, Lufkin & Jenrette prepared and presented an analysis of both bids to the transaction committee of the Aerial board of directors. Following discussion, the Aerial transaction committee asked Donaldson, Lufkin & Jenrette to negotiate with both bidders. At the encouragement of Donaldson, Lufkin & Jenrette, Entity Two accelerated its activities and attempted to complete its due diligence so as to be in a position to provide a firm offer and negotiate a transaction with Aerial more promptly. Entity Two conducted due diligence and made site visits over the next few days. On August 18 and 19, 1999, representatives of TDS and Aerial met with representatives of VoiceStream and made substantial progress in negotiating various issues. Among other things, TDS agreed that it would assume sole responsibility for the indemnity relating to the Sonera dispute. On August 19, 1999, representatives of VoiceStream made a revised proposal, which did not include any change in the exchange ratio or collar, and requested that TDS and Aerial agree to negotiate exclusively with VoiceStream. The representatives of TDS and Aerial responded that they could not recommend an exclusive arrangement based on the terms proposed by VoiceStream. In the evening of August 19, 1999, representatives of TDS and Aerial proposed that VoiceStream agree to a fixed exchange ratio of 0.45 of a share of VoiceStream Holdings common stock per Aerial share, without a collar. Based on the closing price of VoiceStream common stock on that date, the exchange ratio was equivalent to $18.62 per share of Aerial common stock. At the request of the Aerial special committee, representatives of TDS and Aerial also proposed that VoiceStream provide a cash election to the public stockholders. The Aerial special committee had requested that the cash election be an amount per share of Aerial common stock equal to the product of the exchange ratio and the value of the VoiceStream common stock at the time the transaction is announced. In the interest of reaching an agreement with VoiceStream, the representatives of TDS and Aerial proposed that the public stockholder cash election be rounded to $18.00 per share, which was slightly less than the then current implicit value of $18.62 per share of Aerial common stock at the proposed exchange ratio. Representatives of TDS and Aerial also proposed an alternative transaction with an asymmetrical collar mechanism if VoiceStream was unwilling to provide a cash option. Under the proposal made by representatives of TDS and Aerial, TDS would agree to replace approximately $400 million to $450 million of Aerial debt to TDS with Aerial equity at a price of $18.00 per share. Donaldson, Lufkin & Jenrette advised VoiceStream that it would be able to recommend that TDS and Aerial enter into exclusive negotiations with VoiceStream if VoiceStream agreed to such terms. Later that same evening, VoiceStream proposed that the exchange ratio be 0.41 of a share of VoiceStream Holdings common stock per Aerial share, which would have a value of approximately $17.00 per share of Aerial common stock based on the closing price of VoiceStream common stock on August 19, 1999. Representatives of VoiceStream also proposed that the cash option be $17.00 per Aerial share and that TDS pay $18.00 per share of Aerial common stock in the TDS Debt 102 110 Replacement. After this proposal was rejected by TDS and Aerial, representatives of VoiceStream broke off negotiations. The following day, on August 20, 1999, a representative of VoiceStream called a representative of TDS and indicated that VoiceStream might agree to a transaction at an exchange ratio of 0.425 of a share of VoiceStream Holdings common stock per Aerial share. The TDS representative advised the VoiceStream representative that this would not be sufficient to permit exclusive negotiations or to present the transaction for approval to Aerial's board of directors. The following week, representatives of VoiceStream and TDS agreed that it would be productive to continue exchanging and negotiating documents in order to facilitate a possible transaction if the parties were ultimately able to reach agreement on deal terms. Accordingly, counsel for VoiceStream and counsel for TDS exchanged documents and held discussions over the following week relating to a possible transaction. On August 27, 1999, Entity Two sent a letter to representatives of Aerial indicating a timetable for completing due diligence, obtaining approvals and submitting a binding offer by mid-September. Following the delivery of this letter, representatives of Entity Two and TDS held discussions in late August and early September 1999 and exchanged comments on documents. On September 7, 1999, a representative of Entity Two advised Donaldson, Lufkin & Jenrette that it would require another two to four weeks to deliver a firm proposal. This representative also indicated that the proposal would likely be in the low to mid $20's per share of Aerial common stock. Beginning on September 8, 1999, management and the legal and financial advisors of TDS, Aerial and VoiceStream met in Chicago to negotiate and discuss transaction structure issues. During this period, the parties negotiated the substance of the Aerial reorganization agreement and related transaction documents. During these discussions, the parties discussed, among other things, effecting the TDS Debt Replacement and pricing the Aerial Cash Election at $18.00 per share of Aerial common stock, even though the implicit value of a transaction had increased as a result of an increase in the market price of VoiceStream stock. On the evening of September 12, 1999, a representative of Aerial discussed the pricing of the TDS Debt Replacement with a representative of VoiceStream. The Aerial representative advised that TDS was willing to effect the TDS Debt Replacement at the price determined by multiplying the market price of the VoiceStream common stock by the agreed-upon exchange ratio, if VoiceStream would agree to increase the exchange ratio so that it would issue the same number of shares of VoiceStream common stock that would have been issued if TDS paid $18.00 per share of Aerial common stock in that transaction. This change would have had only a minor effect on the total value received by TDS in connection with the Aerial reorganization, including from the TDS Debt Replacement, because the higher exchange ratio as applied to the Aerial common stock owned by TDS would substantially offset the increased price which TDS would pay in the TDS Debt Replacement. Accordingly, TDS was indifferent to the alternatives of paying a lower price in the TDS Debt Replacement or receiving a higher exchange ratio. However, a higher exchange ratio would have increased the value of the transaction to the public stockholders and a higher investment price for Sonera would have made it less attractive to Sonera to provide additional funds to Aerial and agree to settle its claims. On the morning of September 13, 1999, representatives of VoiceStream advised the representatives of TDS and Aerial that VoiceStream was agreeable in concept to adjusting the exchange ratio in the manner suggested by the Aerial representative the prior evening in return for a higher price in the TDS Debt Replacement. 103 111 On the evening of September 13, 1999, representatives of TDS, Aerial and VoiceStream met and attempted to resolve open issues, including the exchange ratio and certain concerns relating to the Omnipoint reorganization. The representatives of TDS and Aerial proposed that the exchange ratio be adjusted in the event that the Omnipoint reorganization did not occur. At the same meeting, there was discussion about the price at which the TDS Debt Replacement should occur. Representatives of TDS repeated that TDS would be willing to pay the price determined by multiplying the market price of the VoiceStream common stock by the agreed-upon exchange ratio. The representatives of VoiceStream expressed the view that a debt replacement price higher than $18.00 per Aerial share but less than that offered by TDS might be more appropriate, particularly in light of the desirability of negotiating a settlement with Sonera pursuant to which Sonera would commit to investing additional funds in Aerial. The representatives of TDS also continued to request that VoiceStream agree to a cash election equal to the price determined by multiplying the market price of the VoiceStream common stock by the agreed-upon exchange ratio. The representatives of VoiceStream expressed the view that the cash election should be fixed at $18.00 rather than be equal to the implicit deal price. On the morning of September 14, 1999, representatives of TDS, Aerial and VoiceStream met again to attempt to resolve open issues, including the exchange ratio. At that meeting, the representatives of VoiceStream offered an exchange ratio of 0.449, which equated to a value of $25.14 per share of Aerial common stock based on the closing price of VoiceStream common stock on September 13, 1999, and a cash election for the public stockholders of $18.00. VoiceStream also proposed that the price of the TDS Debt Replacement be $22.00 per share of Aerial common stock. The VoiceStream representatives also (1) offered to agree to a formula pursuant to which the exchange ratio would be adjusted in the event that the Omnipoint reorganization was terminated, (2) proposed a reduction in the exchange ratio if there were more than a certain number of shares of common stock and stock equivalents of Aerial outstanding at the effective time of the merger, and (3) advised that all of the remaining open issues would need to be resolved in VoiceStream's favor. In addition, the representatives of VoiceStream advised that, if VoiceStream's proposal was not accepted, VoiceStream would reconsider the exchange ratio it was offering, in light of the recent significant increase in the market price of VoiceStream's stock. The representatives of TDS and Aerial did not accept the proposed terms. Later that day, Mr. LeRoy T. Carlson, Jr., President of TDS and Chairman of Aerial, and other representatives of TDS and Aerial held a telephone conversation with Mr. John W. Stanton, Chairman of VoiceStream, and other representatives of VoiceStream, to determine whether VoiceStream had submitted its best and final offer and to attempt to resolve the remaining open issues. During this conversation, representatives of TDS and Aerial proposed an exchange ratio of 0.46, which Mr. Stanton rejected. After further negotiation, Mr. Stanton advised Mr. Carlson and the other representatives of TDS and Aerial that VoiceStream would increase its offer to 0.455 of a share of VoiceStream common stock per share of Aerial common stock. The exchange ratio of 0.455 equated to a value of $25.48 per share of Aerial common stock based on the closing price of VoiceStream common stock on September 13, 1999. Mr. Carlson indicated he would present Mr. Stanton's proposal to the Aerial transaction committee. Following this discussion, on September 14, 1999, Sonera was advised that TDS, Aerial and VoiceStream were prepared to present the terms of a business combination transaction to their respective boards of directors and invited Sonera to consider entering into arrangements pursuant to which it would settle its dispute with TDS and Aerial. As an inducement to Sonera to commit to invest additional funds in Aerial, to settle its claims against TDS and Aerial, and to modify its contractual arrangements with TDS and Aerial, Sonera was advised that, in the context of such a settlement, it would be permitted to make its additional investment at a price equivalent to $22.00 104 112 per share of Aerial common stock, instead of at prices determined with reference to the future public market price of Aerial Common Shares under the terms of the investment agreement with Sonera. In addition, representatives of TDS and Aerial advised representatives of the Aerial special committee of the proposed terms of the Aerial reorganization. The representatives of the Aerial special committee objected to the proposal that TDS and Sonera would pay $22.00 per share of Aerial common stock in the TDS Debt Replacement and the Sonera-Aerial Investment, respectively. Instead, the representatives of the special committee suggested an increase in both the TDS and Sonera investment price, or in the TDS investment price alone, in each case with a corresponding increase in the exchange ratio or, alternatively, an increase in the cash election price provided to the Aerial public stockholders. The representatives of TDS decided to request once again that VoiceStream agree to an increase in the exchange ratio and an increase in the price at which the TDS Debt Replacement and the Sonera-Aerial Investment would be effected in a manner that would keep the aggregate number of shares to be issued by VoiceStream constant. In connection with these discussions, TDS indicated that, while it was prepared to pay a higher price in the TDS Debt Replacement if the Sonera investment were made at the same price and there were a corresponding increase in the exchange ratio, it was not prepared to pay more than Sonera and effectively transfer additional value to Sonera. TDS indicated that in view of, among other things, the cash election protection afforded to the public stockholders, TDS's commitment to effect the TDS Debt Replacement irrespective of the consummation of the merger at a price in excess of Aerial's historic and current market prices, and its willingness to indemnify VoiceStream if Sonera did not agree to settle its claims, it was not appropriate for TDS to transfer additional value to Sonera. Following this discussion, representatives of TDS and Aerial advised representatives of VoiceStream of the objections of the Aerial special committee. The representatives of TDS and Aerial suggested that VoiceStream agree to increase the exchange ratio and increase the price at which the TDS Debt Replacement and the Sonera-Aerial Investment would be effected in a manner that would keep the aggregate number of shares to be issued by VoiceStream constant. The representatives of VoiceStream refused. As a result, the representatives of VoiceStream agreed to discuss the terms proposed by VoiceStream directly with representatives of the Aerial special committee. On the evening of September 14, 1999, representatives of VoiceStream spoke to representatives of the Aerial special committee and explained VoiceStream's rationale for requiring that the debt replacement agreement provide that TDS and Sonera pay $22.00 per Aerial share and for refusing to further increase the exchange ratio. Although the representatives of VoiceStream agreed that such a change would not have any net effect on the number of shares or value being delivered by VoiceStream, they pointed out that it would have the effect of requiring Sonera to pay a higher price for its investment in the event that Sonera agreed to acquire additional shares in Aerial and Aerial Operating Company at the same price as TDS was investing under the debt replacement agreement. The representatives of VoiceStream expressed a strong desire to achieve a settlement of the dispute with Sonera pursuant to which Sonera would commit to investing additional funds in Aerial and expressed their view that allowing TDS to replace its Aerial Operating Company debt and Sonera to invest at a price of $22.00 per share would facilitate the negotiation of such a settlement. The representatives of VoiceStream also indicated that VoiceStream was not prepared to increase the cash election price provided to the public stockholders and that selling equity at a fixed price would be important in assisting the combined company in meeting its future financing needs. On September 15, 1999, representatives of Sonera met with representatives of VoiceStream and advised them that although Sonera had issues with TDS and Aerial, Sonera would be willing to go forward with a transaction and settle such issues if, in addition to the Aerial-Sonera Investment, VoiceStream would permit Sonera to acquire newly issued shares of VoiceStream Holdings common 105 113 stock at a purchase price of approximately the per share market value of VoiceStream common stock on September 15, 1999. Following additional discussions, on September 16, 1999, representatives of Sonera and VoiceStream agreed to present to their respective boards of directors an agreement whereby, upon the closing of the Omnipoint reorganization, Sonera would invest $500 million into VoiceStream Holdings by purchasing shares of VoiceStream Holdings common stock at $57.00 per share. Such agreement would be contingent upon the satisfactory settlement of the issues between Sonera, TDS and Aerial. On September 15, 1999, VoiceStream held a regularly scheduled meeting of its board of directors. Among other matters discussed, Mr. Stanton reviewed the strategic rationale for the proposed reorganization and members of senior management presented further details. Goldman Sachs presented an analysis of the proposed transaction. A lengthy discussion ensued. Between September 15, 1999 and September 17, 1999, representatives of TDS, Aerial and VoiceStream proceeded to complete the Aerial reorganization agreement and related transaction documents reflecting the understanding of Messrs. Carlson and Stanton. In addition, between September 15, 1999 and September 19, 1999, TDS, Aerial and Sonera negotiated the terms of the settlement agreement and release and Sonera and VoiceStream negotiated the terms of the Sonera stock subscription agreement, the Sonera investor agreement and the Sonera registration rights agreement. On the morning of September 17, 1999, the Aerial transaction committee met with its legal and financial advisors to consider the proposed reorganization agreement. The members of the Aerial special committee and their legal and financial advisors participated in this meeting. At that meeting, Donaldson, Lufkin & Jenrette made a financial presentation with respect to the proposed Aerial reorganization. The representatives of Donaldson, Lufkin & Jenrette discussed the status of the bid by Entity Two. Donaldson, Lufkin & Jenrette advised the participants of the meeting regarding the risk that Entity Two might ultimately not make a firm offer and the risk that VoiceStream might withdraw from the process if it was extended. Donaldson, Lufkin & Jenrette also discussed the terms of the TDS Debt Replacement, the Sonera Investments and the settlement agreement and release. Donaldson, Lufkin & Jenrette delivered an oral opinion, which was subsequently confirmed in writing, to the effect that, as of such date, the consideration, defined as the Aerial Stock Election and the Aerial Cash Election, to be received by the stockholders of Aerial, other than VoiceStream, VoiceStream Holdings and Omnipoint and any of their respective affiliates, in the Aerial reorganization was fair, from a financial point of view, to such stockholders. A copy of the opinion of Donaldson, Lufkin & Jenrette appears as Annex F hereto. At this meeting, the terms of the Aerial reorganization agreement, the other transaction documents and the settlement agreement and release with Sonera were reviewed with the Aerial transaction committee by legal counsel. The meeting of the Aerial transaction committee was then recessed to permit the Aerial special committee to meet and take action with respect to the Aerial reorganization. At that time, the Aerial special committee met with its legal and financial advisors to consider the proposed reorganization agreement. At that meeting, Wasserstein Perella made a financial presentation with respect to the proposed Aerial reorganization. Wasserstein Perella delivered an oral opinion, which was subsequently confirmed in writing, to the effect that, as of such date, the consideration to be paid in the Aerial reorganization to the stockholders of Aerial, other than TDS and Sonera, was fair to such stockholders from a financial point of view. A copy of the opinion of Wasserstein Perella appears as Annex G hereto. Following a number of questions from, and discussion among, the members of the Aerial special committee and its legal and financial advisors, the Aerial special committee determined to recommend that the Aerial transaction committee and the full Aerial board of directors approve and adopt the Aerial reorganization agreement. 106 114 Immediately following the meeting of the Aerial special committee, the meeting of the Aerial transaction committee was reconvened. The Aerial special committee advised the Aerial transaction committee of its recommendation. Following discussion, the Aerial transaction committee, among other things: - approved and adopted the Aerial reorganization agreement and determined that the Aerial reorganization was advisable and fair to and in the best interests of Aerial and its stockholders; - recommended that Aerial's board of directors approve and adopt the Aerial reorganization agreement and the Aerial reorganization; and - approved the other transaction documents related to the Aerial reorganization and recommended that Aerial's board of directors approve and adopt these documents. The Aerial transaction committee also approved the terms of a proposed settlement agreement and release with Sonera, as to which there was conceptual agreement but no final contract. The approvals relating to the Aerial reorganization agreement were independent of and not contingent on the execution of the settlement agreement and release. On September 17, 1999, following the meetings of the Aerial transaction committee and the Aerial special committee, the Aerial board of directors met with its legal and financial advisors to consider the proposed Aerial reorganization agreement. The members of the Aerial special committee and their legal and financial advisors participated in this meeting. At this meeting, Donaldson, Lufkin & Jenrette made a financial presentation with respect to the proposed Aerial reorganization. The representatives of Donaldson, Lufkin & Jenrette discussed the status of the bid by Entity Two. Donaldson, Lufkin & Jenrette advised the participants of the meeting regarding the risk that Entity Two might ultimately not make a firm offer and the risk that VoiceStream might withdraw from the process if it was extended. Donaldson, Lufkin & Jenrette also discussed the terms of the TDS Debt Replacement, the Sonera Investments and the settlement agreement and release. The Aerial board of directors received the recommendation of the Aerial transaction committee and the Aerial special committee and Donaldson, Lufkin & Jenrette delivered its oral opinion, which was subsequently confirmed in writing, to the effect that, as of such date, the consideration, defined as the Aerial Stock Election and the Aerial Cash Election, to be received by the stockholders of Aerial, other than VoiceStream, VoiceStream Holdings and Omnipoint and any of their respective affiliates, in the Aerial reorganization was fair, from a financial point of view, to such stockholders. A copy of the opinion of Donaldson, Lufkin & Jenrette appears as Annex F hereto. At this meeting, the terms of the Aerial reorganization agreement, the other Aerial reorganization transaction documents and the terms of the proposed settlement agreement and release with Sonera were reviewed with the Aerial board by legal counsel. Following a number of questions from, and discussion among, the directors, the Aerial board, among other things: - approved and adopted the Aerial reorganization agreement and determined that the Aerial reorganization was advisable and fair to and in the best interests of Aerial and its stockholders; - recommended that Aerial's stockholders approve and adopt the Aerial reorganization agreement and the Aerial reorganization; and - approved the other Aerial reorganization transaction documents. The Aerial board also approved and adopted the terms of the proposed settlement agreement and release with Sonera, with the representatives of Sonera on the board of directors abstaining with respect to action on this item due to the conflict of interest presented by it. The approvals relating to the Aerial reorganization agreement were independent of and not contingent on the execution of the settlement agreement and release. 107 115 Later in the day on September 17, 1999, the TDS board of directors also approved and adopted the Aerial reorganization agreement, the TDS stockholder agreement and the other Aerial reorganization transaction documents and approved and adopted the terms of the proposed settlement agreement and release with Sonera. Mr. Swanson abstained from the vote on the latter item due to the conflict of interest presented by the fact that he is the Managing Director of Sonera U.S., a subsidiary of Sonera. On September 17, 1999, the VoiceStream board of directors held a meeting. Goldman Sachs, investment advisors to VoiceStream, delivered its oral opinion, which was subsequently confirmed in writing, that, as of September 17, 1999, the consideration to be paid by VoiceStream pursuant to the Aerial reorganization agreement was fair from a financial point of view to VoiceStream. After a discussion, the board unanimously approved the proposed Aerial reorganization and the execution and delivery of the Aerial reorganization agreement, and the transactions contemplated thereby. The VoiceStream board also approved the Sonera-VoiceStream Investment. Following these meetings, after the close of trading on September 17, 1999, the Aerial reorganization agreement, the TDS stockholder agreement, the VoiceStream stockholder agreement, the debt replacement agreement and the indemnity agreement were executed by the parties thereto. The executed agreements were delivered on the evening of September 19, 1999, following the approval of the parent stockholder agreement by Hutchison. On September 20, 1999, prior to the commencement of trading on the Nasdaq Stock Market, the governing board of Sonera approved the settlement agreement and release, the Sonera investor agreement, the Sonera stock subscription agreement and the Sonera registration rights agreement, and these agreements were executed by the parties thereto as of September 17, 1999. On September 20, 1999, prior to the commencement of trading on the Nasdaq Stock Market, an announcement was made concerning the Aerial reorganization and the related transactions. BACKGROUND OF EVENTS RELATING TO SONERA On September 8, 1998, pursuant to a purchase agreement among Sonera, TDS, Aerial and Aerial Operating Company, Sonera purchased 2,410,482 shares of common stock of Aerial Operating Company, representing approximately a 19.4% equity interest in Aerial Operating Company, subject to adjustment under certain circumstances, for an aggregate purchase price of $200 million. Under a related investment agreement executed on September 8, 1998, Sonera has the right, subject to adjustment under certain circumstances, to exchange each share of Aerial Operating Company common stock which it owns for 6.72919 Aerial Common Shares. Upon the exchange of all of the originally purchased shares of Aerial Operating Company common stock, Sonera would have owned approximately an 18.4% equity interest in Aerial, reflecting an equivalent purchase price of $12.33 per Aerial Common Share. Under the purchase agreement, Sonera is required to return for cancellation shares of Aerial Operating Company common stock if the average price of the Aerial Common Shares, calculated as provided in the purchase agreement, exceeds certain threshold prices. This cancellation has the effect of increasing Sonera's purchase price for each share of Aerial Operating Company common stock purchased by Sonera and increasing Sonera's per share equivalent purchase price for Aerial Common Shares. On November 24, 1998, TDS advised Sonera of TDS's intention to proceed with a spin-off of Aerial. On December 18, 1998, TDS issued a press release announcing its intention to spin off its equity ownership interest in Aerial, as well as to review other alternatives, and to seek additional financing for Aerial from sources other than TDS. In a number of oral and written communications after Sonera became aware of the proposed spin-off, Sonera objected to the proposed spin-off of Aerial as inconsistent with the terms of Sonera's 108 116 contractual arrangements with TDS and Aerial and asserted that TDS and Aerial had misrepresented and failed to disclose certain material facts, as a result of which Sonera had been induced to pay an excessive price for the Aerial Operating Company common stock. As a result, Sonera requested the renegotiation of certain matters relating to Sonera's investment in Aerial Operating Company, including an adjustment in its purchase price. Beginning in early 1999 and continuing from time to time through September 19, 1999, representatives of TDS and Aerial held meetings and conversations with representatives of Sonera in an effort to resolve the claims raised by Sonera relating to its investment in Aerial Operating Company. Some of the meetings and conversations pertained solely to a settlement of such claims, while others involved a resolution of such claims in the context of a transaction involving Aerial, Sonera and VoiceStream. See "Background of the Aerial Reorganization." After several meetings in February and March 1999 that were unsuccessful in resolving the concerns raised by Sonera, counsel to Sonera raised the possibility of litigation in the event that these concerns were not resolved to Sonera's satisfaction. In order to permit Aerial to consider a possible business combination transaction, on March 19, 1999, Aerial delivered a notice to Sonera under the investment agreement stating that Aerial desired to enter into a disposition transaction as described in the notice. Pursuant to the terms of the investment agreement, Sonera had a period of ten days to determine if it desired to invoke certain provisions of the investment agreement requiring Aerial to negotiate exclusively with Sonera with respect to such a transaction. On March 29, 1999, Aerial received a notice from Sonera electing to invoke those provisions of the investment agreement that required Sonera and Aerial to negotiate exclusively with each other in good faith for 60 days with respect to a disposition transaction. Between March 29, 1999 and May 28, 1999, Aerial and Sonera held discussions and exchanged documents relating to a possible disposition transaction and a resolution of the claims by Sonera. On May 28, 1999, the 60-day period during which Aerial was required to negotiate exclusively with Sonera with respect to a disposition transaction expired without receipt by Aerial of an offer from Sonera relating to such a transaction. As a result, Aerial was free to negotiate a disposition transaction with other potential parties. Although exclusive negotiations with Sonera ended and negotiations began with other potential purchasers, including negotiations directly with VoiceStream, TDS and Aerial continued to negotiate periodically with Sonera to resolve the claims raised by Sonera. However, TDS, Aerial and Sonera were unable to reach a mutually satisfactory resolution of these claims prior to September 19, 1999. On March 31, 1999, pursuant to the provisions contained in the investment agreement, Sonera purchased 2,772 shares of Aerial Operating Company common stock, bringing its total ownership in Aerial Operating Company to 2,413,254 shares of common stock. The average price of Aerial Common Shares, calculated pursuant to the purchase agreement, exceeded the initial threshold price of $9.50 for the twenty consecutive trading day period ending on June 1, 1999. On June 8, 1999, Aerial delivered the required notice of this event to Sonera. As a result, Sonera was required to surrender 256,375 shares of Aerial Operating Company common stock for cancellation on or before June 22, 1999. On June 21, 1999, Sonera notified Aerial of its refusal to surrender for cancellation any of the shares of Aerial Operating Company common stock pursuant to the notice issued on June 8, 1999. The average price of Aerial Common Shares exceeded the second threshold price of $10.50 for the twenty consecutive trading day period ending on June 25, 1999. On July 7, 1999, Aerial delivered the required notice of this event to Sonera. As a result, Sonera was required to surrender an additional 207,082 shares of Aerial Operating Company common stock for cancellation on or before July 21, 1999. 109 117 The average price of Aerial Common Shares exceeded the third threshold price of $11.50 for the twenty consecutive trading day period ending on July 7, 1999. On July 14, 1999, Aerial delivered the required notice of this event to Sonera. As a result, Sonera was required to surrender an additional 170,759 shares of Aerial Operating Company common stock for cancellation on or before July 28, 1999. The effect of these events was to decrease the number of shares of Aerial Operating Company common stock that Sonera was entitled to own to 1,779,038 shares, which represents the equivalent of 11,971,485 Aerial Common Shares. On July 22, 1999, Sonera notified Aerial of its refusal to surrender for cancellation any of the shares of Aerial Operating Company common stock pursuant to the notices of July 7 and July 14, 1999. During the next several weeks, Aerial was involved in an auction process relating to a possible business combination, as described under "Background of Events Relating to Aerial Reorganization." As described in this section, Sonera was a participant in this process. As of September 17, 1999, Sonera, TDS, Aerial and Aerial Operating Company executed the settlement agreement and release. See "Agreements Relating to the Aerial Reorganization -- Settlement Agreement and Release." RECOMMENDATIONS OF THE VOICESTREAM BOARD; REASONS FOR THE AERIAL REORGANIZATION The VoiceStream board believes that combining VoiceStream's and Aerial's resources will enable the combined company to be a stronger competitor in the rapidly consolidating telecommunications industry. At various meetings of the VoiceStream board held between February 2, 1999, and September 17, 1999, members of VoiceStream's management made presentations concerning the business and prospects of Aerial and the potential combination of Aerial and VoiceStream. At a meeting held on September 17, 1999, VoiceStream's board received presentations concerning, and reviewed the terms of, the Aerial reorganization agreement and the related agreements with members of VoiceStream's management, its legal counsel and its financial advisors. At the meeting held on September 17, 1999, Goldman Sachs delivered its oral opinion, as of that date, that the merger consideration to be paid by VoiceStream pursuant to the Aerial reorganization agreement was fair from a financial point of view to VoiceStream and the VoiceStream board determined that the Aerial reorganization proposal, the Aerial reorganization agreement and the related transactions were fair to, and in the bests interests of, VoiceStream stockholders. Accordingly, the VoiceStream board approved the Aerial reorganization proposal, the Aerial reorganization agreement and the related transactions. The board unanimously recommends that VoiceStream stockholders approve the Aerial reorganization proposal at a special stockholders meeting. In reaching its determination to approve the VoiceStream merger proposal, the Aerial reorganization agreement and the related transactions, the VoiceStream board consulted with VoiceStream's financial and legal advisers and senior management and considered a number of factors in addition to those set forth above. The following summarizes the material factors that the VoiceStream board considered: - the current conditions and trends in the telecommunications industry, including the likelihood that future mergers and acquisitions will increase the size and strength of competitors; - the extent and geographical scope of business operations, and VoiceStream's continuing ability to compete against larger wireless carriers; - the need for significant capital resources to build out the combined company's GSM systems; - the consistency of the strategies that the two companies were pursuing; 110 118 - the synergies which the combined company might realize, and the risks that the synergies would not all be realized; - the impact that the transaction would be expected to have on the combined company's balance sheet, earnings and cash flow; - the likelihood that VoiceStream and Aerial would be able to obtain the necessary regulatory approvals to complete the Aerial reorganization, and the likelihood that regulatory authorities would insist on conditions to those approvals which could substantially reduce the benefits of the Aerial reorganization; - the impact the transaction would have on the tax-free status of the spin-off of VoiceStream from Western Wireless and VoiceStream's obligations under the tax sharing agreement with Western Wireless; - the impact of the transaction on the combined company's ability to maintain and enhance VoiceStream's reputation for delivering high-quality services to customers; - the impact of the transaction on the combined company's ability to maintain a high-quality, highly-motivated work force; - the impact of the transaction apart from and combined with the Omnipoint reorganization; - a review of the historical operating results of Aerial and VoiceStream and the projected operating results of Aerial and VoiceStream, individually and in combination; - the fact that one member of VoiceStream Holdings' board would be appointed by each of TDS and Sonera, subject to the approval of VoiceStream Holdings, which approval cannot be unreasonably withheld, and provided that the TDS appointee cannot be a director, officer or affiliate of TDS; - the effect of the TDS Debt Replacement and the assumption of certain Aerial or Aerial Operating Company debt by VoiceStream or VoiceStream Holdings, as the case may be; - the effect of the Sonera-VoiceStream Investment and the Sonera-Aerial Investment; - the other potential major transactions which might be available to VoiceStream either in addition to, or as alternatives to, the Aerial reorganization, and the effect of the Aerial reorganization on the ability of VoiceStream to pursue those transactions; and - the opinion of VoiceStream's financial advisors that, as of the date of such opinion, the consideration to be paid by VoiceStream pursuant to the Aerial reorganization agreement was fair from a financial point of view to VoiceStream stockholders. The foregoing summary addresses the material facts, matters and information considered by the VoiceStream board in connection with its deliberations on the combination of Aerial and VoiceStream. In view of the variety of factors considered, the VoiceStream board did not find it practical to and did not make a specific assessment of or otherwise assign relative weights to the specific facts, matters and information considered. The VoiceStream board adopted the Aerial reorganization agreement and approved the transactions contemplated thereby, in consideration of all of the facts, matters and information brought to its attention. Taking into account all of the material facts, matters and information, including those described above, the VoiceStream board believes that the terms of the Aerial reorganization agreement and the transactions provided for therein are fair to and in the best interest of VoiceStream's stockholders. THE VOICESTREAM BOARD UNANIMOUSLY RECOMMENDS THAT VOICESTREAM'S STOCKHOLDERS VOTE "FOR" ADOPTION OF, AND APPROVAL OF THE TRANSACTIONS CONTEMPLATED BY, THE AERIAL REORGANIZATION AGREEMENT. 111 119 VOICESTREAM FAIRNESS OPINION Goldman Sachs has acted as financial advisor to VoiceStream in connection with the Aerial reorganization. On September 17, 1999, Goldman Sachs delivered its opinion to the VoiceStream board, subsequently confirmed in writing, that as of the date of such opinion the Merger Consideration (as defined below) to be paid by VoiceStream pursuant to the Aerial reorganization agreement is fair from a financial point of view to VoiceStream stockholders. For purposes of this description, "Merger Consideration" means (1) in the case of TDS and Sonera, the right to receive the Conversion Number (as defined below) of shares of VoiceStream Holdings common stock and (2) in the case of stockholders of Aerial other than TDS or Sonera, the right to receive the Conversion Number of shares of VoiceStream Holdings common stock or, at the election of such stockholders, $18.00 in cash. The Conversion Number will be equal to 0.455; provided, however, (1) in the event that (a) the Omnipoint reorganization agreement is terminated or the transactions contemplated by the Omnipoint reorganization agreement are not consummated by the Omnipoint End Date (as defined in the Aerial reorganization agreement) and (b) the Closing Date Market Price (as defined in the Aerial reorganization agreement) is less than $39.56, the Conversion Number will be equal to the number determined by dividing $18.00 by the Closing Date Market Price, but will not be greater than 0.50 or less than 0.455 (or, if applicable, the quotient calculated as described in clause (2)); and (2) in the event that the number of Adjusted Fully Diluted Shares exceeds 85,839,161 as of the Effective Time (as defined in the Aerial reorganization agreement), the Conversion Number will be equal to the number determined by dividing 39,056,818 by such number of Adjusted Fully Diluted Shares as of the Effective Time (subject to further adjustment as described in clause (1), if applicable). In addition, pursuant to the debt replacement agreement, debt of Aerial Operating Company in the amount of $420 million held by TDS will be converted into shares of Aerial common stock at a conversion price of $22.00. In addition, VoiceStream has advised Goldman Sachs that Sonera will acquire 10.45 million shares of Aerial common stock at a price of $22.00 per share. The full text of the Goldman Sachs opinion is attached as Annex E to this joint proxy statement-prospectus and is incorporated into this joint proxy statement-prospectus by reference. Stockholders of VoiceStream are urged to, and should, read such opinion in its entirety. In connection with its opinion, Goldman Sachs reviewed: - the Aerial reorganization agreement; - the Omnipoint reorganization agreement; - the debt replacement agreement; - the registration statement on Form 10 of VoiceStream; - the annual reports to stockholders and annual reports on Form 10-K of Western Wireless for the three years ended December 31, 1998; - the annual reports to stockholders and annual reports on Form 10-K of Aerial for the two years ended December 31, 1998; - certain interim reports to stockholders and quarterly reports on Form 10-Q of VoiceStream, Western Wireless and Aerial; - certain other communications from VoiceStream, Western Wireless and Aerial to their respective stockholders; and - certain internal financial analyses and forecasts for VoiceStream prepared by the management of VoiceStream, certain financial analyses and forecasts for Aerial prepared by the 112 120 management of VoiceStream and certain internal financial analyses and forecasts for Aerial prepared by the management of Aerial (collectively, the "Forecasts"). Goldman Sachs also held discussions with members of the senior management of VoiceStream and Aerial regarding the strategic rationale for, and the potential benefits of, the transactions contemplated by the Aerial reorganization agreement and the past and current business operations, financial condition and future prospects of their respective companies. In addition, Goldman Sachs reviewed the reported price and trading activity for the VoiceStream and Aerial common stock, compared certain financial and stock market information for VoiceStream and Aerial with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the United States wireless communications industry specifically and in other industries generally and performed such other studies and analyses as it considered appropriate. Goldman Sachs assumed the accuracy and completeness of all of the financial and other information reviewed by it for purposes of rendering its opinion. Goldman Sachs assumed, with the consent of the VoiceStream board, that the Forecasts had been reasonably prepared on a basis reflecting the best currently available estimates and judgments of VoiceStream and Aerial, as the case may be. In addition, Goldman Sachs did not make an independent evaluation or appraisal of the assets and liabilities of VoiceStream or Aerial or any of their subsidiaries and Goldman Sachs was not furnished with any such evaluation or appraisal. Goldman Sachs also took into account VoiceStream's view as to the possible tax consequences of the transactions contemplated by the Aerial reorganization agreement as described to Goldman Sachs by VoiceStream. Goldman Sachs assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the transaction contemplated by the Aerial reorganization agreement will be obtained without any adverse effect on VoiceStream or Aerial or on the contemplated benefits of the transactions contemplated by the Aerial reorganization agreement. The Goldman Sachs opinion was provided for the information and assistance of the VoiceStream board in connection with its consideration of the transactions contemplated by the Aerial reorganization agreement. The Goldman Sachs opinion does not constitute a recommendation as to how any holder of VoiceStream common stock should vote with respect to such transactions. The following is a summary of the material financial analyses presented by Goldman Sachs to the VoiceStream board at the meeting of the VoiceStream board on September 15, 1999, utilizing, however, the stock price information used by Goldman Sachs with respect to its opinion dated September 17, 1999. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the text accompanying each summary. SELECTED COMPANIES ANALYSIS Goldman Sachs reviewed and compared certain financial and operating information relating to VoiceStream and Aerial to corresponding information for Microcell Telecommunications, Inc., Omnipoint, Powertel, Inc. and Sprint PCS. The selected companies were chosen because they are publicly traded companies with operations that for purposes of analysis may be considered similar to those of VoiceStream and Aerial. The analysis was performed using share prices as of September 17, 1999. Enterprise value for each of the companies is the sum of the market capitalization for that company and its total debt, preferred stock and minority interest, less cash and cash equivalents. Adjusted enterprise value for each of the companies is the enterprise value for that company less the value of its POPs not to be covered under the business plan for that company, valued at $5.00 per POP. "POPs" are the number of persons within a license's converge area and are derived from management estimates and public sources. "Covered POPs" are the estimated number of POPs within the license area served by the operating network. Weighted POPs are determined by 113 121 multiplying the number of POPs in a 10 MHz license area by 0.25, the number of POPs in a 20 MHz license area by 0.75 and the number of POPs in a 30 MHz license area by one, and reflect the fact that licenses with greater MHz provide greater bandwidth or capacity. License value for each of the companies is the difference between enterprise value and cumulative capital expenditures. Finally, invested capital is the sum of the cumulative capital expenditures and license costs based on public sources. The following chart summarizes the results of that analysis:
SPRINT AERIAL AERIAL* MICROCELL OMNIPOINT POWERTEL PCS VOICESTREAM ------- ------- --------- --------- -------- ------- ----------- Adjusted Enterprise Value/2000 Covered POPs............ $106.32 $130.11 $73.48 $106.30 $124.29 $220.85 $203.12 License Value/2000 Covered POPs....................... 70.36 94.14 52.62 90.36 87.00 181.41 181.21 Adjusted Enterprise Value/Total POPs............................... 91.07 111.44 45.90 51.96 109.44 176.76 83.35 License Value/Total POPs............. 60.27 80.64 31.43 41.89 76.17 144.36 71.66 Adjusted Enterprise Value/ Weighted POPs...................... 91.07 111.44 45.90 73.52 120.30 219.76 141.22 License Value/Weighted POPs.......... 60.27 80.64 31.43 59.27 83.73 179.48 121.42 PCS Enterprise Value/Invested Capital............................ 2.5x 3.0x N/A 3.0x 2.3x 3.7x 6.0x
- --------------- * Aerial at the deal price based on an exchange ratio of 0.455 and the issuance of an assumed 52.5 million shares of VoiceStream Holdings common stock. DISCOUNTED CASH FLOW ANALYSIS Goldman Sachs performed a discounted cash flow analysis comparing the range of values for VoiceStream on a stand-alone basis based on VoiceStream management's internal model for VoiceStream ("VoiceStream Case A") to a range of values for Aerial on a stand-alone basis based on (1) Aerial management's internal model for Aerial ("Aerial Case A") and (2) VoiceStream management's internal model for Aerial ("Aerial Case B"). This analysis also compared the range of values for VoiceStream on a stand-alone basis based on a model for VoiceStream based on Goldman Sachs research ("VoiceStream Case B") to a range of values for Aerial on a stand-alone basis based on a model for Aerial based on Goldman Sachs research ("Aerial Case C"). The following tables present ranges of enterprise value and equity value for each of the VoiceStream cases and each of the Aerial cases and the resulting range of implied ownership of the combined company by VoiceStream stockholders, assuming an all-stock transaction, based on forward 2008 EBITDA multiples for VoiceStream and Aerial ranging from 9.0x to 13.0x and discount rates ranging from 12% to 16%. Equity value of each of the companies represents the company's enterprise value net of the book value of the company's outstanding net indebtedness. "EBITDA," for purposes of the opinion, represents earnings before interest, taxes, depreciation and amortization.
VOICESTREAM AERIAL AERIAL CASE A CASE A CASE B --------------- --------------- --------------- Enterprise Value...................... $3,390 - $6,574 $2,147 - $3,808 $1,632 - $3,240 Equity Value.......................... 2,445 - 5,629 1,287 - 2,948 771 - 2,380 Implied VoiceStream Ownership......... N/A 65% - 66% 70% - 76%
114 122
VOICESTREAM AERIAL CASE B CASE C --------------- --------------- Enterprise Value....................................... $2,049 - $3,632 $1,087 - $2,076 Equity Value........................................... 1,104 - 2,687 226 - 1,216 Implied VoiceStream Ownership.......................... N/A 69% - 83%
RELATIVE CONTRIBUTION ANALYSIS Goldman Sachs performed contribution analyses of VoiceStream and Aerial to the combined company based on various factors. The following table presents the contribution analysis of VoiceStream and Aerial to the combined company's 1998 and estimated 1999 and 2000 revenue and subscribers and current total and weighted POPs and estimated 2000 covered POPs. Revenue and subscriber information for 1999 and 2000 and 2000 covered POPs for VoiceStream are from VoiceStream management estimates and for Aerial are from Aerial management estimates. The analysis is based upon the enterprise value of VoiceStream and Aerial and, therefore, does not take into account the outstanding indebtedness of either company.
VOICESTREAM AERIAL ----------- ------ 1998 Revenue................................................ 51% 49% 1999E Revenue............................................... 63 37 2000E Revenue............................................... 71 29 1998 Subscribers............................................ 51 49 1999E Subscribers........................................... 64 36 2000E Subscribers........................................... 67 33 Total POPs.................................................. 73 27 Weighted POPs............................................... 62 38 2000E Covered POPs.......................................... 56 44
TRANSACTION PREMIUM ANALYSIS Goldman Sachs compared the stock price of VoiceStream common stock and Aerial common stock on the basis of the respective closing prices on September 17, 1999. Based on those stock prices and an assumed consideration per share of Aerial common stock of a fraction of a share of VoiceStream common stock equal to 0.455, the implied transaction price per share of Aerial common stock was $25.51. Goldman Sachs also compared the historical stock prices of VoiceStream common stock and Aerial common stock on the basis of the respective closing stock prices per share on September 17, 1999, and the respective closing stock prices and period averages or highs for the prior 10 days, three months and 52 weeks. 115 123 The following table presents the premiums over the Aerial common stock prices at such times or for such period implied by the assumed exchange ratio of 0.455 and (1) the VoiceStream common stock price at September 17, 1999 and (2) the VoiceStream common stock price for comparable periods or dates:
PREMIUM PAID BASED ON PREMIUM PAID VOICESTREAM BASED ON SEPTEMBER 17, VOICESTREAM PRICE 1999 FOR COMPARABLE DATE/PERIOD PRICE PERIODS/DATE ----------- ------------- ----------------- September 17, 1999....................................... 27.5% 27.5% 10-day average........................................... 37.0 27.7 3-month average.......................................... 74.1 23.3 52-week high............................................. 27.5 31.2
The following table presents the premiums over the Aerial historical price per POP implied by the assumed exchange ratio of 0.455 for estimated 2000 covered POPs and current total and weighted POPs, and compares that information to the current price per VoiceStream POP:
SEPTEMBER 17, SEPTEMBER 17, IMPLIED PREMIUM TO 1999 AERIAL 1999 DEAL PRICE SEPTEMBER 17, VOICESTREAM PRICE PER POPS PRICE PER PER AERIAL 1999 POPS VOICESTREAM (IN MILLIONS) AERIAL POP POP AERIAL PRICE (IN MILLIONS) POP ------------- ------------- ---------- ------------- -------------- ------------- 2000 Covered POPs........ 24.2 $106.32 $130.11 22% 30.6 $203.12 Total POPs............... 28.3 91.07 111.44 22 77.3 83.35 Weighted Total POPs...... 28.3 91.07 111.44 22 45.6 141.22
The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Selecting portions of the analysis or of the summary set forth above, without considering the analyses as a whole, could create an incomplete view of the processes underlying Goldman Sachs' opinion. In arriving at its fairness determination, Goldman Sachs considered the results of all such analyses. No company or transaction used in the above analyses as a comparison is directly comparable to VoiceStream or Aerial or the Aerial reorganization. The analyses were prepared solely for purposes of Goldman Sachs' providing its opinion to the VoiceStream board that, as of the date of such opinion, the Merger Consideration to be paid by VoiceStream Holdings pursuant to the Aerial reorganization agreement was fair from a financial point of view to VoiceStream stockholders. The analyses do not purport to be appraisals or necessarily reflect the prices at which the business or securities actually may be sold. Analyses based upon forecasts of future results, which are inherently subject to uncertainty, are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by such analyses. As described above, Goldman Sachs' opinion to the VoiceStream board was one of many factors taken into consideration by the VoiceStream board in making its determination to approve the Aerial reorganization agreement. The foregoing summary describes material financial analyses used by Goldman Sachs in connection with providing its opinion to VoiceStream's board of directors on September 17, 1999, but does not purport to be a complete description of the analysis performed by Goldman Sachs in connection with that opinion. You should read the entire opinion of Goldman Sachs in Annex E. Goldman Sachs, as part of its investment banking business, is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. VoiceStream selected Goldman 116 124 Sachs as its financial advisor because it is a nationally recognized investment banking firm that has substantial experience in transactions similar to the Aerial reorganization. Goldman Sachs is familiar with VoiceStream having provided certain investment banking services to VoiceStream and its former parent, Western Wireless, from time to time, including having acted as lead managing underwriter of the initial public offering of 12.65 million shares of Western Wireless common stock in May 1996; having acted as lead manager in the public offering of $200 million aggregate principal amount of 10.5% senior subordinated notes due June 2006, of Western Wireless in May 1996; having acted as lead manager in the public offering of $200 million aggregate principal amount of 10.5% senior subordinated notes due February 2007 of Western Wireless in October 1996; having acted as lead manager in the public offering of 13.915 million shares of Western Wireless common stock in April 1998; having acted as Western Wireless' financial advisor in connection with the sale of 19.9% of the outstanding shares of VoiceStream common stock to Hutchison (USA) in February 1998; and having acted as VoiceStream's financial advisor in connection with, and having participated in certain of the negotiations leading to, the Aerial reorganization agreement and the Omnipoint reorganization agreement. Investment funds affiliated with Goldman Sachs have a principal investment in VoiceStream in the amount of 9,730,208 shares of VoiceStream common stock and have the right to designate a nominee for election to VoiceStream's board of directors. Terence O'Toole, a managing director of Goldman Sachs, is a director of VoiceStream. In addition, Goldman Sachs has provided certain investment banking services to Aerial from time to time, including having acted as co-manager in the initial public offering of 12.25 million shares of Aerial common stock in April 1996. Goldman Sachs provides a full range of financial, advisory and securities services and, in the course of its normal trading activities, may from time to time effect transactions and hold securities, including derivative securities, of VoiceStream and Aerial for its own account and for the accounts of customers. As of September 10, 1999, Goldman Sachs had a short position in 4,061 shares of Aerial common stock and a short position in 150 put contracts on Aerial common stock. As of the same date and in addition to the principal investment referred to above, Goldman Sachs had a long position of $8.5 million of VoiceStream bank loans. FEE ARRANGEMENT WITH GOLDMAN SACHS Pursuant to a letter agreement dated October 7, 1998, VoiceStream engaged Goldman Sachs to act as its financial advisor in connection with a potential transaction involving Aerial or another third party. VoiceStream has agreed to pay Goldman Sachs a transaction fee equal to $6,000,000 upon consummation of the Aerial reorganization. VoiceStream has agreed to reimburse Goldman Sachs for its reasonable out-of-pocket expenses, including attorney's fees, and to indemnify Goldman Sachs against certain liabilities, including certain liabilities under the federal securities laws. RECOMMENDATIONS OF THE AERIAL BOARD; REASONS FOR THE REORGANIZATION The Aerial board of directors has determined that the Aerial reorganization agreement and the Aerial reorganization are advisable and are fair to, and in the best interests of, Aerial and its stockholders. The Aerial board unanimously recommends that the Aerial stockholders vote "FOR" approval and adoption of the Aerial reorganization and the other transactions contemplated by the Aerial reorganization agreement, regardless of whether or not the Omnipoint reorganization is consummated. The Aerial board believes that the completion of the Aerial reorganization will substantially benefit both Aerial and its stockholders, whether or not the Omnipoint reorganization is completed. In reaching its determination to approve the Aerial reorganization, the Aerial board consulted with 117 125 Aerial's financial and legal advisors, members of Aerial's senior management, and representatives of TDS. In reaching its determination, the Aerial board considered numerous factors, including: - the equivalent cash value of $25.08 per share of Aerial common stock represented by the proposed conversion of one share of Aerial common stock into 0.455 share of VoiceStream common stock, as calculated based on the closing market price of $55.125 per share of common stock of VoiceStream on September 16, 1999; - the 31% premium represented by that $25.08 equivalent cash value over the closing market price of $19.125 per share of Aerial common stock on September 16, 1999; - the ability of Aerial's stockholders, other than TDS and Sonera, to elect to receive cash in the amount of $18.00 per share of Aerial common stock instead of receiving VoiceStream common stock; - the historical market price of the Aerial common stock and Aerial's book value and net asset value per share of Aerial common stock; - the likelihood that the proposed Aerial reorganization would be completed, considering, among other things, the likelihood of satisfaction of the conditions to the Aerial reorganization contained in the Aerial reorganization agreement, and the risks to Aerial if the Aerial reorganization were not completed; - the terms of the Omnipoint reorganization; - the likelihood that the Omnipoint reorganization will be completed, and the risks to Aerial if that transaction were not consummated; - the effects on the Aerial reorganization of VoiceStream completing, or failing to complete, the Omnipoint reorganization; - the potential adjustment to the number of shares of VoiceStream common stock to be received by those Aerial stockholders who elect to receive VoiceStream common stock in the Aerial reorganization if the Omnipoint reorganization does not close by June 30, 2000 and if the VoiceStream common stock trades below a certain price per share level; - the degree of consistency of the strategies that Aerial and VoiceStream, as well as Omnipoint, are pursuing; - the potential synergies that the combination of Aerial and VoiceStream, including Omnipoint in the event that VoiceStream acquires Omnipoint, might realize, and the risks that the synergies may not be fully realized; - the desirability of a business combination with VoiceStream and the similarities between Aerial and VoiceStream, including Omnipoint in the event that the Omnipoint reorganization is completed; - the benefits expected to be achieved as a result of the Aerial reorganization, including economies of scale, purchasing power, increased footprint and financing; - the impact that the Aerial reorganization would be expected to have on the balance sheet, earnings and cash flow of the combined company; - the impact of the Aerial reorganization on the ability of the combined company to deliver high-quality services to customers; - the impact of the Aerial reorganization on the ability of the combined company to maintain a high-quality, highly-motivated work force; 118 126 - the current extent and geographical scope of Aerial's business operations compared to that of the combined company, including Omnipoint in the event that the Omnipoint reorganization is completed; - Aerial's ability to compete against larger wireless carriers compared to the expected ability of the combined company, including Omnipoint in the event that the Omnipoint reorganization is completed, to compete against such carriers; - the opportunity for the Aerial's stockholders who elect to receive and hold VoiceStream common stock in the Aerial reorganization to continue to retain an interest in the wireless telecommunications market through a larger and more geographically diverse combined company; - the current conditions and trends in the highly competitive telecommunications and wireless industries, including the likelihood that consolidation will continue to increase the size and strength of competitors; - the current general economic and market conditions, overall and regionally; - the historical financial condition, results of operations, and cash flows of Aerial and the business and strategic objectives of Aerial; - the familiarity of the Aerial board with the projected financial condition, results of operations and cash flows and the business prospects of Aerial, as well as the risks involved in achieving those projections and prospects; - the continuing need for significant financial resources to execute Aerial's business plan and strategies and the likelihood that Aerial would be able to obtain the necessary resources on a stand-alone basis, as compared to the likelihood that the combined company would be able to obtain the necessary resources following a business combination; - the purchase by TDS, through the replacement of the debt of Aerial Operating Company to TDS, and by Sonera, of an aggregate of $650 million of stock from Aerial and Aerial Operating Company in connection with the debt replacement agreement and the settlement agreement and release, which would increase the capitalization of Aerial, regardless of whether or not the proposed transaction with VoiceStream is consummated; - the discussions of Aerial's management and financial and legal advisors with other parties and other proceedings and events relating to the consideration of a possible business combination involving Aerial; - Aerial's management's views, and Aerial's financial advisor's advice to the Aerial board, regarding the likelihood of a superior transaction; - the detailed financial and valuation analyses presented to the Aerial board by Aerial's financial advisor; - the written opinion dated September 17, 1999, of Aerial's financial advisor that, as of such date and based upon and subject to the various considerations set forth in its opinion, the consideration, defined as the Aerial Stock Election and the Aerial Cash Election, to be received by the holders of shares of Aerial common stock, other than VoiceStream, VoiceStream Holdings and Omnipoint and their respective affiliates, pursuant to the Aerial reorganization agreement is fair to such holders from a financial point of view; - the terms and conditions of the proposed Aerial reorganization and the course of the negotiations resulting in the execution thereof, including the terms of the Aerial reorganization agreement that require Aerial to call and hold a meeting of stockholders of Aerial even if the 119 127 Aerial board withdraws or modifies its recommendation with respect to the Aerial reorganization agreement; - the recognition by the Aerial board that, under the terms of the Aerial reorganization agreement, under certain circumstances in the event of termination of the reorganization agreement, Aerial would be obligated to pay VoiceStream a termination fee of $40,000,000; - the absence of any financing condition in the Aerial reorganization agreement; - the recommendation of Aerial's management with respect to the Aerial reorganization agreement; - the recommendation of the Aerial special committee, which was represented by independent legal counsel and independent financial advisors, and the recommendation of the Aerial transaction committee with respect to the Aerial reorganization; - the decision by TDS, Aerial's majority stockholder, to enter into the stockholder agreement with VoiceStream, and TDS's agreement in that stockholder agreement to vote in favor of the adoption of and approval of the Aerial reorganization; - the strategic and financial alternatives available to Aerial, including the alternative of operating as a separate company after a spin-off by TDS; - the tax treatment of the proposed Aerial reorganization to the stockholders of Aerial; - the careful consideration and extensive deliberations by the members of the Aerial board regarding all information reasonably available to them and which they believe is relevant to the Aerial reorganization agreement; and - the role of the special committee, and the active and direct role of the transaction committee and the Aerial board in connection with the Aerial reorganization agreement. The foregoing summary addresses the material facts, matters and information considered by the Aerial board in connection with its deliberations on the combination of Aerial and VoiceStream. In view of the variety of factors considered, the Aerial board did not find it practical to and did not make a specific assessment of or otherwise assign relative weights to the specific facts, matters and information considered. After considering all of the facts, matters and information brought to its attention, the Aerial board, unanimously by all directors participating in the meeting, adopted the Aerial reorganization agreement and approved the transactions contemplated thereby. Taking into account all of the material facts, matters and information, including those described above, the Aerial board believes that the terms of the Aerial reorganization agreement, including the related transactions, are fair to and in the best interest of Aerial's stockholders. THE AERIAL BOARD UNANIMOUSLY RECOMMENDS THAT AERIAL'S STOCKHOLDERS VOTE "FOR" ADOPTION AND APPROVAL OF THE AERIAL REORGANIZATION AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE AERIAL REORGANIZATION AGREEMENT. AERIAL FAIRNESS OPINION Aerial engaged Donaldson, Lufkin & Jenrette to act as Aerial's financial advisor in connection with the Aerial reorganization and to evaluate the fairness to Aerial common stockholders, other than VoiceStream, VoiceStream Holdings and Omnipoint, from a financial point of view, of the consideration to be received by such stockholders pursuant to the terms of the Aerial reorganization agreement. On September 17, 1999, Donaldson, Lufkin & Jenrette delivered to the Aerial board of directors its oral opinion, which was subsequently confirmed in writing, that, as of such date, and based on and subject to the assumptions, limitations and qualifications as set forth in the opinion, the 120 128 merger consideration, defined as the Aerial Stock Election and the Aerial Cash Election, to be received by the stockholders of Aerial other than VoiceStream, VoiceStream Holdings and Omnipoint and any of their respective affiliates, was fair to Aerial's stockholders from a financial point of view. THE FULL TEXT OF THE DONALDSON, LUFKIN & JENRETTE OPINION IS ATTACHED HERETO AS ANNEX F TO THIS JOINT PROXY STATEMENT-PROSPECTUS. THE SUMMARY OF THE DONALDSON, LUFKIN & JENRETTE OPINION SET FORTH IN THIS JOINT PROXY STATEMENT-PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE DONALDSON, LUFKIN & JENRETTE OPINION. AERIAL COMMON STOCKHOLDERS ARE URGED TO READ THE DONALDSON, LUFKIN & JENRETTE OPINION CAREFULLY AND IN ITS ENTIRETY FOR THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE, OTHER MATTERS CONSIDERED AND LIMITS OF THE REVIEW BY DONALDSON, LUFKIN & JENRETTE IN CONNECTION WITH SUCH OPINION. The Donaldson, Lufkin & Jenrette opinion was prepared for the Aerial board and was directed only to the fairness from a financial point of view, as of the date thereof, of the merger consideration to be received by the Aerial common stockholders other than VoiceStream, VoiceStream Holdings and Omnipoint and any of their respective affiliates, pursuant to the Aerial reorganization agreement. The Donaldson, Lufkin & Jenrette opinion does not address the relative merits of the Aerial reorganization, as contrasted with any other business strategies being considered by the Aerial board, nor does it express any opinion as to the Aerial board's decision to proceed with the Aerial reorganization. Donaldson, Lufkin & Jenrette expressed no opinion as to the prices at which the VoiceStream Holdings common stock will actually trade at any time. The Donaldson, Lufkin & Jenrette opinion does not constitute a recommendation to any Aerial common stockholder as to how such stockholder should vote on the Aerial reorganization or whether such stockholder should elect to receive cash or stock. Aerial selected Donaldson, Lufkin & Jenrette as its financial advisor because it is an internationally recognized investment banking firm that has substantial experience in the communications industry and is familiar with Aerial and its business. As part of its investment banking business, Donaldson, Lufkin & Jenrette is regularly engaged in the valuation of businesses and securities in connection with mergers, acquisitions, underwritings, sales and distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. In arriving at its opinion, Donaldson, Lufkin & Jenrette reviewed (1) the Aerial reorganization agreement, (2) the TDS stockholder voting agreement, dated the date of the Aerial reorganization agreement, among VoiceStream, TDS and VoiceStream Holdings, (3) the debt replacement agreement, dated the date of the Aerial reorganization agreement, among TDS, VoiceStream, VoiceStream Holdings, Aerial Operating Company, and Aerial, (4) the indemnity agreement, dated the date of the reorganization agreement, among TDS, Aerial Operating Company, VoiceStream, VoiceStream Holdings and Aerial, (5) the VoiceStream stockholder voting agreement, dated the date of the Aerial reorganization agreement, among certain stockholders of VoiceStream, (6) a draft of the investor agreement to be entered into by TDS, VoiceStream and VoiceStream Holdings at or prior to the effective time of the Aerial reorganization, (7) a draft of the registration rights agreement to be entered into by TDS and VoiceStream Holdings at or prior to the effective time of the Aerial reorganization, and (8) the exhibits thereto. Donaldson, Lufkin & Jenrette also reviewed financial and other information that was publicly available, including certain research analysts' projections for Aerial and VoiceStream (both on a standalone basis and pro forma for the Omnipoint reorganization), or furnished to Donaldson, Lufkin & Jenrette by Aerial and VoiceStream, including information provided during discussions with their respective managements (which with respect to VoiceStream includes VoiceStream management's comments on the research analyst projections referred to above (such research analyst's projections, as commented on by management of VoiceStream, the "Analyst Projections")). Included in the information provided during discussions with management of Aerial were certain financial projections of Aerial prepared by management of 121 129 Aerial. In addition, Donaldson, Lufkin & Jenrette compared certain financial and securities data of Aerial, VoiceStream and Omnipoint with various other companies whose securities are traded in public markets, reviewed the historical stock prices and trading volumes of Aerial common stock, VoiceStream common stock and Omnipoint common stock, reviewed prices and premiums paid in certain other business combinations and conducted such other financial studies, analyses and investigations as Donaldson, Lufkin & Jenrette deemed appropriate for purposes of rendering its opinion. In rendering its opinion, Donaldson, Lufkin & Jenrette relied upon and assumed the accuracy and completeness of all of the financial and other information that was available to Donaldson, Lufkin & Jenrette from public sources, that was provided to Donaldson, Lufkin & Jenrette by Aerial or VoiceStream and their respective representatives, or that was otherwise reviewed by Donaldson, Lufkin & Jenrette, and assumed that Aerial is not aware of any information prepared by it or its advisors that might be material to Donaldson, Lufkin & Jenrette's opinion that has not been made available to Donaldson, Lufkin & Jenrette. With respect to the financial projections supplied to Donaldson, Lufkin & Jenrette, Donaldson, Lufkin & Jenrette relied on representations that they were reasonably prepared on the basis reflecting the best currently available estimates and judgments of the management of Aerial as to the future operating and financial performance of Aerial. With respect to the Analyst Projections, Donaldson, Lufkin & Jenrette assumed that they were prepared on a basis that does not materially differ from the view of management of VoiceStream as to the future operating and financial performance of VoiceStream. Donaldson, Lufkin & Jenrette did not assume any responsibility for making any independent evaluation of any assets or liabilities or for making any independent verification of any of the information reviewed by Donaldson, Lufkin & Jenrette. Donaldson, Lufkin & Jenrette relied as to certain legal matters on advice of counsel to Aerial. The Donaldson, Lufkin & Jenrette opinion is necessarily based on economic, market, financial and other conditions as they exist on, and on the information made available to Donaldson, Lufkin & Jenrette as of, the date of the Donaldson, Lufkin & Jenrette opinion. Although subsequent developments may have affected or in the future may affect the Donaldson, Lufkin & Jenrette opinion, Donaldson, Lufkin & Jenrette is under no obligation to update, revise or reaffirm its opinion. In preparing its opinion, Donaldson, Lufkin & Jenrette examined the implied value of the Aerial common stock. In addition Donaldson, Lufkin & Jenrette compared the relative value of Aerial common stock to the relative value of VoiceStream common stock to evaluate the proposed exchange ratio. In analyzing the value of the Aerial common stock, Donaldson, Lufkin & Jenrette conducted several different analyses, including analyzing (1) the trading value of Aerial common stock over the preceding 52-week period, (2) research analysts' price targets, (3) public company equity comparables of Aerial, (4) comparable precedent transactions involving wireless companies, (5) premiums paid in previous mergers and acquisitions transactions, (6) the present value of discounted cash flows and (7) research analysts' private market values of Aerial. Donaldson, Lufkin & Jenrette's analysis of the exchange ratio involved comparing the relative value of the common stock of Aerial to the relative value of the common stock of VoiceStream pro forma for the Omnipoint reorganization and on a stand-alone basis. The techniques used in comparing the relative values included analyzing (1) market implied exchange ratios, (2) research analysts' price targets, (3) public company equity comparables, (4) comparable precedent transactions involving wireless companies, (5) the present value of discounted cash flows, (6) research analysts' private market values and (7) the relative contributions of Aerial and VoiceStream to a reorganized entity. Valuations for Aerial common stock were derived based on approximately $846.1 million of net debt and 85.9 million fully diluted shares as of June 30, 1999. Valuations for VoiceStream common stock were derived based on approximately $2.9 billion of net debt and 194.5 million fully diluted shares for VoiceStream pro forma for the Omnipoint reorganization and $957.9 million of net debt and 100.4 million fully diluted shares for VoiceStream on a stand-alone basis as of June 30, 1999. The 122 130 following is a summary of the analyses contained in the presentation made by Donaldson, Lufkin & Jenrette to the Aerial board on September 17, 1999 in connection with the preparation of the Donaldson, Lufkin & Jenrette opinion: ANALYSES OF AERIAL COMMON STOCK Donaldson, Lufkin & Jenrette conducted the following analyses in evaluating the consideration to be received by the public stockholders of Aerial. STOCK PRICE HISTORY To provide contextual data and comparative market data, Donaldson, Lufkin & Jenrette examined the history of the trading prices of the Aerial common stock and the trading prices of the Aerial common stock relative to an index of comparable companies, each for the one-year period from September 16, 1998 through September 16, 1999. During this period, the Aerial common stock price reached a high intra-day price of $20.25 and a low intra-day price of $1.63. Donaldson, Lufkin & Jenrette noted that the price of the Aerial common stock tracked the performance of an index of comparable companies during this period. The companies included in the comparable company index were VoiceStream, Omnipoint, Nextel, Sprint PCS, Powertel, Clearnet and Microcell. Finally, Donaldson, Lufkin & Jenrette noted that in April 1996 the initial public offering price of Aerial common stock was $17.00. RESEARCH ANALYST PRICE TARGETS Donaldson, Lufkin & Jenrette reviewed research published by Wall Street research analysts since the announcement of the Omnipoint reorganization and derived a range of implied equity values of $14.00 to $20.00 per Aerial share based on their target prices for Aerial common stock. PUBLIC COMPARABLES ANALYSIS Donaldson, Lufkin & Jenrette analyzed selected historical and projected operating information and valuation data for certain publicly traded wireless companies. In addition, Donaldson, Lufkin & Jenrette reviewed Wall Street research analyst comments on Aerial. Based on this analysis, Donaldson, Lufkin & Jenrette concluded that Aerial's most comparable companies include VoiceStream, on a stand-alone basis, Omnipoint, PowerTel, Clearnet and Microcell. Donaldson, Lufkin & Jenrette compared the PCS enterprise value of each of the comparable companies to the number of POPs and subscribers for each of the comparable companies to derive a per POP and per subscriber multiple range for the comparable companies. For purposes of Donaldson, Lufkin & Jenrette's analysis, POPs includes covered POPs and POPs that are intended to be built. Donaldson, Lufkin & Jenrette defined PCS enterprise value as the market value of fully-diluted common equity plus the book value of long-term debt and the liquidation value of outstanding preferred stock, if any, minus cash, the proceeds from the exercise of outstanding options and warrants and the value of certain other assets and investments. Donaldson, Lufkin & Jenrette then applied the comparable company per POP and per subscriber multiples to corresponding operating data for Aerial to derive implied PCS enterprise valuation ranges for Aerial. Based on the above analysis, Donaldson, Lufkin & Jenrette derived an implied equity reference range per share of Aerial common stock of $14.00 to $24.00. 123 131 COMPARABLE ACQUISITIONS ANALYSIS Donaldson, Lufkin & Jenrette reviewed five selected control and non-control acquisitions or proposed acquisitions involving wireless targets that Donaldson, Lufkin & Jenrette deemed to be comparable to Aerial: 1. VoiceStream's proposed acquisition of Omnipoint; 2. Microsoft Corporation's investment in Nextel; 3. Bell Canada International's investment in Hansol PCS Co. Ltd.; 4. AirTouch's acquisition of US West Media Group's stake in PCS PrimeCo; and 5. Hutchison Telecom Limited's acquisition of an interest in Western PCS (a division of Western Wireless Corp.). In examining these acquisitions, Donaldson, Lufkin & Jenrette derived a per POP and per subscriber multiple range for the acquired companies based on each company's PCS enterprise value as of the date of announcement of the acquisition. Donaldson, Lufkin & Jenrette then applied the per POP and per subscriber multiples to corresponding operating data for Aerial to derive implied PCS enterprise valuation ranges for Aerial. Based on the above analysis, Donaldson, Lufkin & Jenrette derived an implied equity reference range per share of Aerial common stock of $10.00 to $20.00. Based solely on the per POP and per subscriber multiples for the Omnipoint reorganization, which Donaldson, Lufkin & Jenrette believed to be the transaction most similar to the Aerial reorganization, Donaldson, Lufkin & Jenrette derived a reference range per share of Aerial common stock of $15.00 to $20.00. COMPARABLE PREMIUMS PAID ANALYSIS Donaldson, Lufkin & Jenrette determined the implied premium over the common stock trading prices as of one day, one week and four weeks prior to the announcement date of comparable acquisitions announced since January 1, 1997 with enterprise values between $2 and $3.5 billion. From this analysis Donaldson, Lufkin & Jenrette derived a reference range per share of Aerial common stock from $10.00 to $25.00. DISCOUNTED CASH FLOW ANALYSIS Donaldson, Lufkin & Jenrette performed a discounted cash flow analysis of Aerial for the period commencing December 31, 1999 and ending December 31, 2008 using projections and assumptions provided by Aerial's management. Donaldson, Lufkin & Jenrette's discounted cash flow calculation is an analysis of the present value of projected unlevered free cash flows and an estimated terminal year enterprise value using the discount rates and terminal year EBITDA multiples indicated below. The discounted cash flow value per share of Aerial common stock was estimated using weighted average cost of capital discount rates ranging from 11.5% to 13.5% and terminal multiples of estimated EBITDA for Aerial's fiscal year ending 2008 ranging from 9.0x to 11.0x. From this analysis Donaldson, Lufkin & Jenrette derived a reference range per share of Aerial common stock from $15.00 to $25.00. RESEARCH ANALYST PRIVATE MARKET VALUE Donaldson, Lufkin & Jenrette reviewed private market valuations of Aerial common stock as calculated by Wall Street research analysts since the announcement of the Omnipoint reorganization. The range of private market values derived for Aerial common stock was $16.00 to $22.00 per share. 124 132 ANALYSES OF EXCHANGE RATIO Donaldson, Lufkin & Jenrette conducted the following analyses in evaluating the proposed exchange ratio. MARKET IMPLIED EXCHANGE RATIO COMPARISON Donaldson, Lufkin & Jenrette compared the price levels of VoiceStream common stock to Aerial common stock from May 3, 1999 to September 16, 1999. The relative price levels implied an exchange ratio pre-Omnipoint reorganization announcement ranging from 0.299 to 0.449. The relative price levels implied an exchange ratio post-Omnipoint reorganization announcement ranging from 0.256 to 0.475. RELATIVE RESEARCH ANALYST PRICE TARGETS Donaldson, Lufkin & Jenrette compared research analysts' price targets for VoiceStream common stock to their price targets for Aerial common stock. With respect to price targets for VoiceStream and Aerial, Donaldson, Lufkin & Jenrette used price targets before and after the announcement of the Omnipoint reorganization. For VoiceStream common stock, DLJ derived a reference range of $30.00 to $44.00 pre-announcement and $50.00 to $65.00 post-announcement. For Aerial common stock, DLJ derived a reference range of $9.00 to $13.00 pre-announcement and $14.00 to $20.00 post-announcement. The relative price targets implied an exchange ratio pre-Omnipoint reorganization announcement ranging from 0.205 to 0.433. The relative price targets implied an exchange ratio post-Omnipoint reorganization announcement ranging from 0.215 to 0.4. PUBLIC COMPARABLES ANALYSIS Donaldson, Lufkin & Jenrette analyzed selected historical and projected operating information and valuation data for certain publicly traded wireless companies, including VoiceStream on a stand-alone basis and pro forma for the Omnipoint reorganization. In addition, Donaldson, Lufkin & Jenrette reviewed Wall Street research analyst comments on VoiceStream. Based on this analysis, Donaldson, Lufkin & Jenrette concluded that, analyzing VoiceStream on a pro forma basis, its most comparable companies are Sprint PCS and Nextel, which are national wireless companies. Donaldson, Lufkin & Jenrette concluded that, analyzing VoiceStream on a standalone basis, its most comparable companies include a broad wireless group comprised of Sprint PCS, Nextel, Omnipoint, Aerial, Powertel, Clearnet and Microcell. Using the same methodology used to determine the public comparables implied equity reference range per share of Aerial common stock, but using the companies that Donaldson, Lufkin & Jenrette concluded were comparable to VoiceStream pro forma for the Omnipoint reorganization, Donaldson, Lufkin & Jenrette derived an implied equity reference range per share of VoiceStream common stock of $50.00 to $65.00. Comparing this reference range to the public comparables implied equity reference range per share of Aerial common stock of $14.00 to $24.00, Donaldson, Lufkin & Jenrette derived an implied exchange ratio pro forma for the Omnipoint reorganization announcement ranging from 0.215 to 0.48. Using the same methodology but using the companies that Donaldson, Lufkin & Jenrette concluded were comparable to VoiceStream on a stand-alone basis and the valuation data prior to the announcement of the Omnipoint reorganization, Donaldson, Lufkin & Jenrette derived an implied equity reference range per share of VoiceStream common stock of $25.00 to $45.00. Comparing this reference range to the public comparables implied equity reference range per share of Aerial common stock of $12.00 to $16.00 for the same period, Donaldson, Lufkin & Jenrette derived an implied exchange ratio on a stand-alone basis ranging from 0.267 to 0.64. 125 133 RELATIVE VALUATION BASED ON PRECEDENT TRANSACTIONS Donaldson, Lufkin & Jenrette compared the implied equity reference range per share of Aerial common stock based on the comparable acquisitions analysis described above to the actual price of VoiceStream common stock both before and after the announcement of the Omnipoint reorganization. To determine a relative valuation on a pro forma basis, Donaldson, Lufkin & Jenrette compared the comparable acquisitions implied equity reference range per share of Aerial common stock of $10.00 to $20.00 to the price of VoiceStream common stock prior to the delivery of the Donaldson, Lufkin & Jenrette opinion. The relative price levels implied an exchange ratio ranging from 0.18 to 0.36 pro forma for the Omnipoint reorganization. To determine a relative valuation on a stand-alone basis, Donaldson, Lufkin & Jenrette compared the comparable acquisitions implied equity reference range per share of Aerial common stock of $10.00 to $20.00 to the trading price of VoiceStream common stock prior to the announcement of the Omnipoint reorganization. The relative price levels implied an exchange ratio ranging from 0.339 to 0.678 on a stand-alone basis. Comparing the price of VoiceStream common stock prior to the delivery of the Donaldson, Lufkin & Jenrette opinion to the implied equity range per share of Aerial common stock of $15.00 to $20.00 based solely on the Omnipoint reorganization, implied an exchange ratio ranging from 0.27 to 0.36 pro forma for the Omnipoint reorganization. Comparing the price of VoiceStream common stock prior to the announcement of the Omnipoint reorganization to the implied equity reference range per share of Aerial common stock of $15.00 to $20.00 based solely on the Omnipoint reorganization implied an exchange ratio ranging from 0.508 to 0.678. DISCOUNTED CASH FLOW ANALYSIS Donaldson, Lufkin & Jenrette performed a discounted cash flow analysis of VoiceStream both on a stand-alone basis and pro forma for the Omnipoint reorganization, for the period commencing December 31, 1999 and ending December 31, 2008, using the Analyst Projections. The discounted cash flow value per share of VoiceStream common stock pro forma for the Omnipoint reorganization was estimated using weighted average cost of capital discount rates ranging from 10.0% to 12.0% and terminal multiples of estimated EBITDA for VoiceStream's fiscal year ending December 31, 2008, ranging from 11.0x to 13.0x. This analysis yielded a range of implied per share values of $49.95 to $69.05. The discounted cash flow value per share of VoiceStream common stock on a stand-alone basis was estimated using weighted average cost of capital discount rates ranging from 10.0% to 12.0% and terminal multiples of estimated EBITDA for VoiceStream's fiscal year ending December 31, 2008, ranging from 9.0x to 11.0x. This analysis yielded a range of implied per share values of $45.59 to $61.82. The relative price levels implied exchange ratios ranging from 0.223 to 0.513 pro forma for the Omnipoint reorganization and from 0.249 to 0.563 on a stand-alone basis. RELATIVE VALUATION BASED ON RESEARCH ANALYST PRIVATE MARKET VALUE Donaldson, Lufkin & Jenrette compared the value of VoiceStream common stock to Aerial common stock based on research analysts' private market values for VoiceStream and Aerial. The relative price levels implied exchange ratios ranging from 0.287 to 0.396 pro forma for the Omnipoint reorganization and from 0.441 to 0.61 on a stand-alone basis. CONTRIBUTION ANALYSIS Donaldson, Lufkin & Jenrette conducted a contribution analysis which compared the projected revenue for the years 2000 and 2001, number of subscribers and intend-to-build, covered and total POPs Aerial is contributing to the combined company relative to the VoiceStream contribution to these items. Donaldson, Lufkin & Jenrette conducted this analysis for VoiceStream both pro forma 126 134 for the Omnipoint reorganization and on a stand-alone basis. Based on the contribution analyses, Donaldson, Lufkin & Jenrette determined the implied exchange ratios ranging from 0.35 to 0.7 pro forma for the Omnipoint reorganization and from 0.4 to 0.8 on a stand-alone basis. In addition to the above analysis, Donaldson, Lufkin & Jenrette noted to the Aerial board that the stock price of VoiceStream has recently been and may continue to be volatile. The summary set forth above does not purport to be a complete description of the analyses performed by Donaldson, Lufkin & Jenrette but describes, in summary form, the material elements of the presentation made by Donaldson, Lufkin & Jenrette to the Aerial board on September 17, 1999. The preparation of a fairness opinion involves various determinations as to the most appropriate and relevant methods of financial analysis and the application of these methods to the particular circumstances and, therefore, such an opinion is not readily susceptible to summary description. Each of the analyses conducted by Donaldson, Lufkin & Jenrette was carried out in order to provide a different perspective on the Aerial reorganization and to add to the total mix of information available. Donaldson, Lufkin & Jenrette did not form a conclusion as to whether any individual analysis, considered in isolation, supported or failed to support an opinion as to fairness from a financial point of view. Rather, in reaching its conclusions Donaldson, Lufkin & Jenrette considered the results of the analyses in light of each other and ultimately reached its opinion based on the results of all analyses undertaken in connection with its opinion taken together as a whole. Accordingly, notwithstanding the separate factors summarized above, Donaldson, Lufkin & Jenrette has indicated to Aerial that it believes that its analyses must be considered as a whole and that selecting portions of its analyses and the factors considered by it, without considering all analyses and factors, could create an incomplete view of the evaluation process underlying its opinion. The analyses performed by Donaldson, Lufkin & Jenrette are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by such analyses. FEE ARRANGEMENTS WITH DONALDSON, LUFKIN & JENRETTE Pursuant to the terms of an engagement agreement dated April 29, 1999, Aerial agreed to pay (1) a fee of $2.5 million, of which $500,000 was paid on June 30, 1999, and $2 million is payable on the earlier of December 31, 1999 or the termination of the engagement letter by Aerial, (2) a fee of $1 million upon delivery of the Donaldson, Lufkin & Jenrette opinion and an additional fee of $250,000 for each update of a prior opinion delivered by Donaldson, Lufkin & Jenrette and (3) additional cash compensation equal to 0.55% of the aggregate value of outstanding Aerial common stock, treating any shares issuable upon exercise of options, warrants or other rights of conversion as outstanding plus the total amount of any debt assumed, acquired, remaining outstanding, retired or defeased or preferred stock redeemed or remaining outstanding upon consummation of the sale, merger, consolidation or other business combination involving all or at least a majority of the business, securities or assets of Aerial net of any cash or cash equivalents and short-term investment securities with maturities less than 36 months, less the amounts payable pursuant to clauses (1) and (2) above. In addition, Aerial agreed to reimburse Donaldson, Lufkin & Jenrette, upon request by Donaldson, Lufkin & Jenrette from time to time, for all out-of-pocket expenses, including the reasonable fees and expenses of counsel, incurred by Donaldson, Lufkin & Jenrette in connection with its engagement, and to indemnify Donaldson, Lufkin & Jenrette and certain related persons against certain liabilities in connection with the engagement, including liabilities under U.S. federal securities laws. Donaldson, Lufkin & Jenrette and Aerial management negotiated the terms of the fee arrangement, and the Aerial board was aware of such arrangement, including the fact that a significant portion of the aggregate fee payable to Donaldson, Lufkin & Jenrette is contingent upon consummation of the Aerial reorganization. 127 135 In the ordinary course of business Donaldson, Lufkin & Jenrette actively trades the debt and equity securities of companies, including Aerial, TDS, VoiceStream and Omnipoint, for its own account and for the accounts of customers and may hold a long or short position in such securities at any time. Donaldson, Lufkin & Jenrette has performed investment banking and other services for Aerial, TDS, Omnipoint, Western Wireless and Hutchison in the past, including (1) acting as the lead manager for an offering of convertible preferred stock of Omnipoint in May 1998, (2) acting as a co-manager for an offering of Class A Shares of Western Wireless in April, 1998, (3) acting as a co-manager for an offering of Trust Originated Preferred Securities of TDS in February 1998, (4) arranging a senior secured credit facility for Omnipoint in February 1998 and (5) acting as financial advisor to Hutchison Telecom Limited in its purchase of common stock of Western Wireless Corp. in October 1997, and has received usual and customary compensation for such services. RECOMMENDATIONS OF THE AERIAL SPECIAL COMMITTEE The Aerial special committee, in determining to recommend approval of the Aerial reorganization to the Aerial transaction committee and the Aerial board, in addition to taking into account all of the factors considered by the Aerial transaction committee and the Aerial board, reviewed and considered a financial presentation by Wasserstein Perella to the Aerial special committee and the opinion of Wasserstein Perella with respect to the fairness from a financial point of view to the public stockholders of Aerial of the consideration provided for in the Aerial reorganization agreement. See "Recommendations of the Aerial Board; Reasons for the Aerial Reorganization." In reaching its recommendation to approve the Aerial reorganization, the Aerial special committee also considered the opportunity offered to TDS and Sonera to purchase up to an aggregate of $650 million of equity of Aerial and Aerial Operating Company at an equivalent price of $22.00 per share of Aerial common stock, as compared to the implied transaction price of $25.08 based on the exchange ratio and the closing market price of VoiceStream common stock on September 16, 1999 of $55.13. In that connection, the Aerial special committee took into account the following additional factors: - its understanding that TDS desired to purchase, through the replacement of a portion of Aerial Operating Company's outstanding indebtedness to TDS, additional shares of Aerial common stock prior to consummation of the Aerial reorganization, one effect of which would be to defer imposition of tax on income equal to the amount of TDS's additional investment in Aerial common stock until TDS disposed of shares of the combined company; - the fact that the Aerial reorganization is structured as a tax-free exchange for all shareholders except those who elect to receive cash; - its understanding that Sonera was interested in increasing its equity interest in the combined company, including through the purchase of Aerial and Aerial Operating Company common stock, and that in the event TDS replaced debt with equity, Sonera would have certain purchase rights to acquire, directly and indirectly, common equity in Aerial and Aerial Operating Company based on the average market price of Aerial common stock over two different periods subsequent to execution of the Aerial reorganization agreement; - the refusal of VoiceStream to price the TDS Debt Replacement and Sonera-Aerial Investment at the implied deal price based on the exchange ratio and the closing market price of VoiceStream common stock immediately prior to either the announcement of the Aerial reorganization or the effective date of the Aerial reorganization, with a corresponding increase in the exchange ratio so as to keep the aggregate number of shares of VoiceStream common stock to be issued in the Aerial reorganization constant; 128 136 - its understanding that had VoiceStream agreed to price the TDS Debt Replacement and Sonera-Aerial Investment based on the closing market price of VoiceStream common stock on September 16, 1999 and agreed to a corresponding increase in the exchange ratio, the increased value per share of Aerial common stock of such increased exchange ratio would have been $0.82 assuming that the price of the TDS Debt Replacement and the Sonera-Aerial Investment had been based on the closing market price of VoiceStream common stock on September 16, 1999 (or $0.46 and ($0.44) based on the respective 10-day and 30-day closing market price averages of VoiceStream common stock through that date); - the importance VoiceStream placed on settling of all of Sonera's claims against Aerial prior to the effectiveness of the Aerial reorganization, including Sonera's acceptance of the cancellation of a portion of its shares of Aerial Operating Company pursuant to the Sonera purchase agreement, and VoiceStream's view that the $22.00 price would induce Sonera to settle those claims; - the importance VoiceStream placed on the deleveraging effect that the TDS Debt Replacement and Sonera-Aerial Investment would have on the combined company, and VoiceStream's view that the $22.00 price would induce Sonera to make an additional investment in Aerial; - its understanding that, in view of, among other things, the cash election protection afforded to the public shareholders, TDS's commitment to effect the TDS Debt Replacement irrespective of the consummation of the Aerial reorganization at a price in excess of Aerial's historic and then current market prices, and TDS's willingness to indemnify VoiceStream and VoiceStream Holdings if Sonera did not agree to settle its claims, TDS was not prepared to pay a higher price in the TDS Debt Replacement than the price VoiceStream proposed to offer to Sonera in the Sonera-Aerial Investment, assuming a corresponding increase in the exchange ratio; - the agreement by TDS to indemnify VoiceStream and VoiceStream Holdings against all claims Sonera might assert against Aerial, including the effect of the share cancellation provision in the purchase agreement with Sonera, should Sonera not agree to settle those claims; - the Aerial Cash Election option which provides $18.00 cash floor protection to the Aerial public stockholders for each of their shares and is not available to TDS or Sonera; - the fact that VoiceStream insisted on, and TDS agreed to, an effective lock-up of the Aerial stockholder vote, which made downside price protection particularly important; - the view of Donaldson, Lufkin & Jenrette of the value of the cash election protection feature and the option valuation analysis presented by Wasserstein Perella which, depending on the length of time to consummation of the Aerial reorganization and various volatility assumptions, indicated theoretical valuations for the cash election protection feature; and - the fact that the TDS Debt Replacement and the Sonera-Aerial Investment is not conditioned upon consummation of the Aerial reorganization and, in the event the Aerial reorganization is not consummated, would meaningfully assist Aerial in meeting its future financing requirements. AERIAL SPECIAL COMMITTEE FAIRNESS OPINION Wasserstein Perella has acted as financial advisor to the Aerial special committee in connection with the Aerial reorganization. On September 17, 1999, Wasserstein Perella delivered its oral opinion to the Aerial special committee to the effect that, as of such date, and based upon and subject to the 129 137 assumptions and limitations set forth in the opinion, the merger consideration provided by the Aerial reorganization agreement is fair from a financial point of view to Aerial's public stockholders. Wasserstein Perella confirmed its oral opinion by delivery to the Aerial special committee of a written opinion dated September 17, 1999. THE FULL TEXT OF THE WRITTEN OPINION OF WASSERSTEIN PERELLA, DATED SEPTEMBER 17, 1999, IS ATTACHED AS ANNEX G TO THIS JOINT PROXY STATEMENT-PROSPECTUS AND IS INCORPORATED INTO THIS JOINT PROXY STATEMENT-PROSPECTUS BY REFERENCE. HOLDERS OF AERIAL'S COMMON STOCK ARE URGED TO, AND SHOULD, READ THIS OPINION IN ITS ENTIRETY. WASSERSTEIN PERELLA'S OPINION WAS DELIVERED FOR THE INFORMATION OF THE AERIAL SPECIAL COMMITTEE AND DOES NOT CONSTITUTE A RECOMMENDATION AS TO HOW ANY HOLDER OF AERIAL'S COMMON STOCK SHOULD VOTE WITH RESPECT TO THE AERIAL REORGANIZATION OR WHETHER ANY HOLDER OF AERIAL'S COMMON STOCK SHOULD ELECT TO RECEIVE CASH IN LIEU OF SHARES OF VOICESTREAM COMMON STOCK BASED ON THE EXCHANGE RATIO. THIS SUMMARY OF THE WASSERSTEIN PERELLA OPINION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION. In connection with rendering its opinion, Wasserstein Perella reviewed: - the Aerial reorganization agreement; - the Aerial stockholder voting agreement; - the TDS debt replacement agreement; - the VoiceStream stockholder voting agreement; - the Sonera indemnity agreement; - a draft of the TDS investor agreement; - a draft of the TDS registration rights agreement; - the exhibits to each of the agreements listed above; - publicly available business and financial information relating to Aerial, VoiceStream and Omnipoint for recent years and interim periods; and - internal financial and operating information of Aerial, including financial forecasts, analyses and projections prepared by or on behalf of Aerial. Wasserstein Perella also discussed with the Aerial special committee and the managements of Aerial and VoiceStream this information and the business, operations, assets, financial condition and future prospects of both companies. In addition, Wasserstein Perella reviewed financial and stock market data relating to Aerial, VoiceStream and Omnipoint and compared that data to similar data for other publicly traded companies. Wasserstein Perella also reviewed and considered the financial terms of recent acquisitions and business combination transactions that it believed to be reasonably comparable to the Aerial reorganization or otherwise relevant. Wasserstein Perella also performed other financial studies, analyses and investigations and reviewed other information it considered appropriate for purposes of its opinion. In its review and analysis and in the formulation of its opinion, Wasserstein Perella assumed and relied on the accuracy and completeness of all the financial and other information provided to or discussed with it or publicly available without assuming any responsibility for independent verification of any of this information. Wasserstein Perella also assumed and relied on the reasonableness and accuracy of the financial projections, forecasts and analyses provided to it and assumed that these projections, forecasts and analyses were reasonably prepared in good faith and on bases reflecting the best currently available judgments and estimates of Aerial's management with respect to the projections prepared by Aerial. VoiceStream did not provide forecasts or projections of expected future performance to Wasserstein Perella, and Wasserstein Perella's review of VoiceStream's 130 138 expected future performance was limited to discussions with VoiceStream's management of research analysts' projections of VoiceStream's future performance both on a stand-alone basis and pro forma for the Omnipoint reorganization. Wasserstein Perella assumed that these research analyst projections, as qualified by the comments of VoiceStream management, had been prepared on a basis that did not materially differ from the view of management of VoiceStream as to the future operating and financial performance of VoiceStream. Wasserstein Perella did not express any opinion with respect to these projections, forecasts and analyses or the assumptions upon which they were based. Wasserstein Perella did not review any of the books and records of Aerial or VoiceStream or conduct or assume any responsibility for conducting a physical inspection of the properties or facilities of Aerial or VoiceStream, or for making or obtaining an independent valuation or appraisal of the assets or liabilities of Aerial or VoiceStream, and no independent valuation or appraisal was provided to it. Wasserstein Perella assumed that the Aerial reorganization will qualify as a tax free reorganization for United States federal tax purposes and that obtaining all necessary regulatory and other approvals and third-party consents required for consummation of the merger will not have an adverse impact on Aerial or VoiceStream or on the anticipated benefits of the Aerial reorganization. Wasserstein Perella also assumed that the transactions described in the Aerial reorganization agreement will be consummated without waiver or modification of any of the material terms or conditions of the Aerial reorganization agreement and that the final terms of those documents reviewed by Wasserstein Perella in draft form will not differ in any material respect from the drafts provided to it. Wasserstein Perella's opinion was necessarily based on economic and market conditions and other circumstances as they existed and could be evaluated on September 17, 1999. Wasserstein Perella did not express any opinion as to the prices at which any securities of Aerial, VoiceStream or VoiceStream Holdings will actually trade at any time. Wasserstein Perella's opinion was directed only to the fairness from a financial point of view to the holders of common stock of Aerial other than TDS and Sonera of the merger consideration provided for by the Aerial reorganization agreement. Wasserstein Perella's opinion did not address Aerial's underlying business decision to effect the transactions contemplated by the Aerial reorganization agreement. The following is a summary of the material financial analyses presented by Wasserstein Perella to the Aerial special committee in connection with its opinion. Some of the summaries of the financial analyses include information presented in tabular format. The tables must be read together with the accompanying text. SUMMARY OF FINANCIAL ANALYSES STOCK PRICE RATIO ANALYSIS Wasserstein Perella calculated the ratios of the closing market price of Aerial common stock to the closing market price of VoiceStream common stock for each day in the period from May 3, 1999, the date on which VoiceStream became a public company, through September 16, 1999, the last trading day prior to the date of the Aerial reorganization agreement. Wasserstein Perella also compared the mean market ratio during this period of 0.37 and the current market ratio on September 16, 1999 of 0.35 to the exchange ratio of 0.455 provided for by the Aerial reorganization agreement. PURCHASE PRICE PREMIUM ANALYSIS Wasserstein Perella reviewed trading prices of Aerial's common stock for various dates and compared these trading prices to both the $18.00 per share Aerial Cash Election price available to Aerial's public stockholders and the $25.08 implied value of the VoiceStream common stock to be received by Aerial's public stockholders based on an exchange ratio of 0.455 shares of VoiceStream common stock per share of Aerial common stock and a closing price per share of VoiceStream common stock on September 16, 1999 of $55.13. The following table presents the results of this 131 139 analysis and shows the premiums and discounts represented by the cash election price and the implied value to the trading price of Aerial common stock on the dates shown:
PREMIUM/(DISCOUNT) OF $18.00 AERIAL CASH PREMIUM OF $25.08 ELECTION PRICE TO IMPLIED VALUE OVER DATE TRADING PRICE TRADING PRICE TRADING PRICE ---- ------------- --------------------- ------------------ September 16, 1999.................. $19.13 (5.9)% 31.1% August 31, 1999..................... 15.75 14.3 59.3 1 day prior to Omnipoint reorganization announcement (6/22/99)......................... 9.88 82.3 154.0 52-week high (9/2/99)............... 19.13 (5.9) 31.1 52-week low (10/8/98)............... 2.25 700.0 1014.8
ANALYSIS OF CONTRIBUTION AND VALUE DISTRIBUTION Wasserstein Perella analyzed the relative contributions of Aerial and VoiceStream both with and without taking account of the pending Omnipoint reorganization to the combined company utilizing various historical and projected financial and operating information and compared these relative contributions to the total enterprise values of Aerial and VoiceStream implied by the exchange ratio and by the closing market price of VoiceStream common stock on September 16, 1999 relative to the total enterprise value of the combined company. Wasserstein Perella noted that the total enterprise values of Aerial and VoiceStream on this basis were 32.5% and 67.5%, respectively, of the total enterprise value of the combined company without taking account of the pending Omnipoint reorganization. Wasserstein Perella also noted that the total enterprise values on this basis of Aerial and VoiceStream/Omnipoint on a combined basis were 19.8% and 80.2%, respectively, of the total enterprise value of the combined company. Wasserstein Perella based its contribution analyses on research analysts' estimates, as qualified by the comments of VoiceStream management, with respect to VoiceStream, research analysts' estimates with respect to Omnipoint, and with respect to Aerial, two sets of projections: the Aerial management case and the Aerial sensitivity case. The Aerial management case was based on projections provided to Wasserstein Perella by the management of Aerial. The Aerial sensitivity case was based on discussions between and among Wasserstein Perella and Aerial's management and the Aerial special committee. The Aerial sensitivity case reflects, among other things, lower revenues than projected by Aerial's management due to a lower number of gross subscriber additions and a higher percentage of Aerial subscribers that disconnect their service during a period. As used throughout this summary, "POPs" are the estimated number of persons within the coverage area of a license granted by the FCC or similar authorities in other jurisdictions. "Covered POPs" are the estimated number of POPs within the license area served by a company's operating network. "Subscribers" represent the number of persons who subscribe to the Company's services. "Service revenues" are gross revenues from the sale of wireless services and exclude revenues from the sale of equipment. "Enterprise value" for a company, unless otherwise noted, is the sum of the market capitalization for that company and its total debt, preferred stock and minority interest, less cash and cash equivalents. Items of financial and operating data for a company that are presented as being "proportionate" include, for entities which are less than wholly owned by the company, a proportion of the entity's financial and operating data equal to the company's ownership interest in the entity. 132 140 Wasserstein Perella's comparison of the relative shares of the combined entity's enterprise value to the relative contributions to the combined entity of the historical and projected operating and financial items indicated below (without taking account of the pending Omnipoint reorganization) is summarized as follows:
AERIAL MANAGEMENT CASE AERIAL SENSITIVITY CASE ----------------------- ----------------------- AERIAL VOICESTREAM AERIAL VOICESTREAM ------ ----------- ------ ----------- Total enterprise value................ 32.5% 67.5% 32.5% 67.5% 1999E proportionate POPs.............. 25.8 74.2 25.8 74.2 1999E proportionate covered POPs...... 52.5 47.5 52.5 47.5 2000E proportionate covered POPs...... 40.6 59.4 40.6 59.4 2001E proportionate covered POPs...... 33.8 66.2 33.8 66.2 6/30/99 proportionate subscribers..... 38.5 61.5 38.5 61.5 1999E proportionate subscribers....... 38.4 61.6 35.1 64.9 2000E proportionate subscribers....... 36.4 63.6 32.1 67.9 2001E proportionate subscribers....... 34.8 65.2 30.6 69.4 1999E proportionate service revenues............................ 37.3 62.7 37.0 63.0 2000E proportionate service revenues............................ 35.1 64.9 31.4 68.6 2001E proportionate service revenues............................ 33.8 66.2 29.8 70.2
Wasserstein Perella's comparison of the relative shares of the combined entity's enterprise value to the relative contributions to the combined entity of the historical and projected operating and financial items indicated below (taking account of the pending Omnipoint reorganization) is summarized as follows:
AERIAL AERIAL MANAGEMENT CASE SENSITIVITY CASE --------------------- --------------------- VOICESTREAM/ VOICESTREAM/ OMNIPOINT OMNIPOINT AERIAL COMBINED AERIAL COMBINED ------ ------------ ------ ------------ Total enterprise value............................ 19.8% 80.2% 19.8% 80.2% 1999E proportionate POPs.......................... 13.8 86.2 13.8 86.2 1999E proportionate covered POPs.................. 22.9 77.1 22.9 77.1 2000E proportionate covered POPs.................. 19.0 81.0 19.0 81.0 2001E proportionate covered POPs.................. 16.2 83.8 16.2 83.8 6/30/99 proportionate subscribers................. 25.1 74.9 25.1 74.9 1999E proportionate subscribers................... 21.6 78.4 19.2 80.8 2000E proportionate subscribers................... 17.9 82.1 15.3 84.7 2001E proportionate subscribers................... 18.4 81.6 15.7 84.3 1999E proportionate service revenues.............. 28.2 71.8 27.9 72.1 2000E proportionate service revenues.............. 22.4 77.6 19.6 80.4 2001E proportionate service revenues.............. 20.1 79.9 17.2 82.8
ANALYSIS OF VALUATION MULTIPLES Wasserstein Perella calculated the total enterprise value of Aerial based on both the $25.08 implied value at September 16, 1999 of the VoiceStream common stock to be received by Aerial stockholders and the $18.00 per share Aerial Cash Election price and then calculated the multiple of each of these enterprise values to the items of financial and operating data for Aerial set forth in the table below using projected revenue and EBITDA information from the Aerial management case. Wasserstein Perella also calculated multiples with respect to the same items of financial and operating data for Omnipoint using an enterprise value of Omnipoint implied by the exchange ratio 133 141 provided in the Omnipoint reorganization agreement and the stock price of VoiceStream immediately prior to announcement of the Omnipoint reorganization and an enterprise value of Omnipoint using trading multiples of Omnipoint at September 16, 1999 and, in each case, based on financial and operating information of Omnipoint derived from research analysts' estimates and other publicly available information with respect to its financial and operating performance. Wasserstein Perella also calculated multiples of enterprise value with respect to the same items of financial and operating data for four publicly traded companies in the wireless communications industry discussed below based on those companies' market prices at September 16, 1999 and research analysts' estimates and other publicly available information with respect to their financial and operating performance. These Aerial selected companies, consisting of Omnipoint, Powertel, Clearnet and Microcell were chosen by Wasserstein Perella because they are publicly traded companies with operations that for purposes of analysis may be considered similar to those of Aerial. Wasserstein Perella compared the low and high multiples of these Aerial selected companies and the valuation multiples for the Omnipoint reorganization and Omnipoint to valuation multiples for the Aerial reorganization. This comparison is set forth in the following table:
MULTIPLES BASED ON -------------------------------------------------------------------------------------- IMPLIED AERIAL AERIAL OMNIPOINT SELECTED SELECTED ENTERPRISE COMPANIES COMPANIES VALUE ENTERPRISE ENTERPRISE IMPLIED BASED VALUE VALUE IMPLIED AERIAL IMPLIED OMNIPOINT ON BASED BASED REORGANIZATION AERIAL CASH REORGANIZATION OMNIPOINT ON TRADING ON TRADING ENTERPRISE ELECTION ENTERPRISE TRADING PRICE PRICE VALUE (ON ENTERPRISE VALUE AT PRICE (9/16/99) - (9/16/99) - 9/16/99) VALUE ANNOUNCEMENT (9/16/99) LOW HIGH -------------- ----------- -------------- ---------- ----------- ----------- Proportionate POPs...... $107.1 $85.4 $46.5 $65.3 $43.3 $111.1 Covered proportionate 133.9 106.7 78.6 110.3 83.8 147.4 POPs.................. Proportionate 8,673.1 6,914.7 7,340.3 10,306.5 3,315.0 10,306.5 subscribers (6/30/99)............. 1999E service 14.1x 11.3x 15.0x 21.0x 8.1x 21.0x revenues.............. 2000E service 9.3 7.4 8.2 11.6 4.8 11.6 revenues.............. 2002E EBITDA............ 18.1 14.5 21.1 29.6 7.3 29.6
VALUATION OF AERIAL Wasserstein Perella analyzed the value of Aerial utilizing a number of different valuation methodologies as set forth below. Comparable Trading Analysis Wasserstein Perella calculated a range of implied values per share for Aerial by applying range of trading multiples at September 16, 1999 of historical and projected financial and operating data for the Aerial selected companies discussed above, derived from research analysts' estimates and other publicly available information, and adjusted by Wasserstein Perella for the purposes of this analysis, to operating and financial data for Aerial derived from the Aerial management case. The low and the 134 142 high of the range of implied values per share of Aerial common stock based on the adjusted multiples of the items of financial and operating data shown below are as follows:
RANGE OF IMPLIED VALUE PER AERIAL SHARE BASED ON AERIAL SELECTED COMPANIES ADJUSTED MULTIPLES ------------------ LOW HIGH ------- ------- Proportionate POPs.......................................... $ 7.98 $17.83 Covered proportionate POPs.................................. 16.19 24.07 Proportionate subscribers (6/30/99)......................... 10.19 22.35 2000E service revenues...................................... 12.60 23.94 2002E EBITDA................................................ 13.19 24.83
Original Sonera Investment In its valuation analysis of Aerial, Wasserstein Perella noted the original effective per share price of $12.33 at which Sonera invested in Aerial in September 1998 as well as the increased effective per share price of $16.68 resulting from cancellation of shares under the Sonera purchase agreement due to the increase in Aerial's public market price over pre-negotiated levels. VoiceStream/Omnipoint Transaction Analysis Wasserstein Perella also analyzed the proposed Omnipoint reorganization and calculated the implied value per share for Aerial based on applying the valuation multiples of proportionate POPs, covered proportionate POPs and proportionate subscribers for Omnipoint implied by the exchange ratio provided in the Omnipoint reorganization agreement and the stock price of VoiceStream immediately prior to announcement of the Omnipoint reorganization and implied by the trading multiples of Omnipoint at September 16, 1999. This analysis indicated an implied per Aerial share value based on multiples of proportionate POPs, covered proportionate POPs and proportionate subscribers of:
IMPLIED VALUE PER AERIAL SHARE BASED ON MULTIPLES OF --------------------------------------------- OMNIPOINT REORGANIZATION VALUE AT ANNOUNCEMENT OMNIPOINT TRADING (6/23/99) VALUE (9/16/99) ------------------------ ----------------- Proportionate POPs............................... $ 5.19 $11.37 Covered proportionate POPs....................... 10.57 18.90 Proportionate subscribers (6/30/99).............. 19.68 31.70
Discounted Cash Flow Analysis Wasserstein Perella performed a discounted cash flow analysis on Aerial under each of the Aerial management case and the Aerial sensitivity case. Wasserstein Perella calculated a net present value of free cash flows of Aerial for the second half of 1999 through the end of 2008 using discount rates ranging from 13% to 15%. Wasserstein Perella also calculated present values of implied terminal values in the year 2008 based on multiples ranging from 10x EBITDA to 12x EBITDA and the same 135 143 range of discount rates. Based on these calculations, Wasserstein Perella derived implied values per share of Aerial common stock. The results of this analysis are as follows:
IMPLIED VALUE PER AERIAL SHARE BASED ON DISCOUNTED CASH FLOW ANALYSIS ------------------------- LOW HIGH -------- -------- Management case............................................. $17.65 $28.00 Sensitivity case............................................ 11.40 19.94
VALUATION OF VOICESTREAM Wasserstein Perella analyzed the value of VoiceStream utilizing a number of different valuation methodologies as set forth below. Comparable Trading Analysis Wasserstein Perella calculated a range of implied values per share for VoiceStream and VoiceStream/Omnipoint on a combined pro forma basis by applying a range of trading multiples at September 16, 1999 of historical and projected financial and operating data for two publicly traded companies in the wireless communications industry discussed below, based on those companies' market prices at September 16, 1999 and research analysts' estimates and other publicly available information with respect to their financial and operating performance, and adjusted by Wasserstein Perella for purposes of this analysis, to operating and financial data for VoiceStream and VoiceStream/Omnipoint. The VoiceStream selected companies used for this analysis, consisting of Sprint PCS and Nextel, were chosen by Wasserstein Perella because they are publicly traded companies with operations that for purposes of analysis may be considered similar to those of VoiceStream and VoiceStream/Omnipoint on a combined basis. The VoiceStream and VoiceStream/Omnipoint operating and financial data were based on research analysts' estimates of VoiceStream and Omnipoint, as qualified in the case of VoiceStream by comments of VoiceStream management. The low and the high of the range of implied values per share based on the adjusted multiples of the items of financial and operating data shown below are as follows:
RANGE OF IMPLIED VALUE PER SHARE BASED ON VOICESTREAM SELECTED COMPANIES ADJUSTED MULTIPLES: VOICESTREAM (STAND-ALONE) ---------------------- LOW HIGH ------ ------- Proportionate POPs.......................................... $50.93 $103.31 Covered proportionate POPs.................................. 26.40 41.79 Proportionate subscribers (6/30/99)......................... 40.55 51.67 2000E service revenues...................................... 35.39 50.35 2002E EBITDA................................................ 19.13 47.75
136 144
RANGE OF IMPLIED VALUE PER SHARE BASED ON VOICESTREAM SELECTED COMPANIES ADJUSTED MULTIPLES: VOICESTREAM/OMNIPOINT (COMBINED) ---------------------- LOW HIGH --- ---- Proportionate POPs.......................................... $55.79 $124.99 Covered proportionate POPs.................................. 57.28 92.14 Proportionate subscribers (6/30/99)......................... 39.16 53.21 2000E service revenues...................................... 27.57 44.78 2002E EBITDA................................................ 12.40 48.86
Discounted Cash Flow Analysis Wasserstein Perella performed a discounted cash flow analysis on VoiceStream as a stand-alone company and on the basis of the proposed Omnipoint reorganization. The analysis was based on research analysts' estimates of VoiceStream and Omnipoint, as qualified in the case of VoiceStream by comments of VoiceStream management. Wasserstein Perella calculated a net present value of free cash flows of VoiceStream for the second half of 1999 through the end of 2007 using discount rates ranging from 13% to 15%. Wasserstein Perella also calculated present values of implied terminal values for the year 2007 based on multiples ranging from 10x EBITDA to 12x EBITDA and the same range of discount rates. Based on these calculations, Wasserstein Perella derived implied values per share of VoiceStream common stock. The results of this analysis are as follows:
IMPLIED VALUE PER VOICESTREAM SHARE BASED ON DISCOUNTED CASH FLOW ANALYSIS --------------------- LOW HIGH --- ---- VoiceStream (stand-alone)................................... $26.85 $39.85 VoiceStream/Omnipoint....................................... 42.06 60.98
ANALYSIS OF VARIOUS TERMS OF THE AERIAL REORGANIZATION AGREEMENT Wasserstein Perella performed a number of different analyses to compare the value of the Aerial Cash Election option to Aerial's public stockholders, the collar protection in the Aerial reorganization agreement to all Aerial stockholders, the TDS Debt Replacement price to TDS and the Sonera-Aerial Investment price to Sonera. Analysis of Stock Price History Wasserstein Perella reviewed the recent stock price performance of VoiceStream and Aerial based on an analysis of the average historical closing prices of each company's common stock over various periods and determined the value per share of Aerial common stock implied by the exchange 137 145 ratio of 0.455 and the average VoiceStream stock price over those periods in relation to the average Aerial stock price over the same periods. The results of this analysis are as follows:
VALUE PER AERIAL AERIAL VOICESTREAM SHARE IMPLIED BY STOCK PRICE STOCK PRICE EXCHANGE RATIO ----------- ----------- ----------------- 9/16/99......................................... $19.125 $55.125 $25.082 10-day average.................................. 18.519 52.009 23.664 30-day average.................................. 16.008 45.193 20.563 60-day average.................................. 14.935 40.390 18.377 Average since VoiceStream spin-off (5/3/99 - 96 trading days)................................. 13.012 35.530 16.166
Analysis of TDS Debt Replacement, Sonera-Aerial Investment, Aerial Cash Election and Collar Under the proposed terms of the TDS Debt Replacement transaction and the Sonera-Aerial Investment, an additional 29.55 million shares of Aerial common stock are to be issued to TDS and Sonera at $22.00 per share. As summarized in the following table, Wasserstein Perella analyzed the value per share of a potential change in the exchange ratio if the TDS Debt Replacement and Sonera-Aerial Investment were to be effected at the implied deal price based on the price at September 16, 1999 and the 10-day and 30-day averages of the VoiceStream stock price, rather than at $22.00, assuming that the exchange ratio was adjusted so that the same aggregate number of VoiceStream shares were issued in all cases. The results of this analysis are as follows:
DEAL PRICE BASED ON: ------------------------------------------------------------- VOICESTREAM VOICESTREAM VOICESTREAM STOCK 10-DAY STOCK PRICE 30-DAY STOCK PRICE PRICE ON 9/16/99 AVERAGE AVERAGE ----------------- ------------------ ------------------ Debt replacement/investment price per share.............................. $25.08 $23.66 $ 20.56 Aerial shares to be issued at implied deal conversion price (in millions).......................... 25.92 27.47 31.61 Difference in number of Aerial shares to be issued from 29.55 (in millions).......................... 3.63 2.08 (2.07) Potential change in exchange ratio to keep total number of shares fixed.............................. 0.015 0.008 (0.008) Value per Aerial share of potential change in exchange ratio........... $ 0.82 $ 0.46 $ (0.44)
Wasserstein Perella also analyzed and compared the value of the Aerial Cash Election option available to Aerial public stockholders to the value of the downside price protection collar available to all Aerial stockholders. Wasserstein Perella calculated a range of values representing the excess of the theoretical value of the cash election option over the theoretical value of the collar protection using Black Scholes option valuation methodology and assumptions with respect to volatility ranging from 55% to 75% assuming the Omnipoint reorganization merger closes and 75% to 95% assuming the Omnipoint reorganization does not close and assumptions with respect to the length of time until closing ranging from three to 15 months. Assuming consummation of the Omnipoint reorganization, 138 146 the collar protection is inapplicable and, therefore, has no value. The results of this analysis were as follows:
EXCESS OF VALUE PER AERIAL SHARE OF CASH ELECTION PROTECTION OVER COLLAR PROTECTION (ASSUMING CONSUMMATION OF OMNIPOINT REORGANIZATION) - ------------------------------------------------------------------------- RANGE OF VALUE (BASED ON A TIME UNTIL CLOSING VOLATILITY RANGE OF 55% TO 75%) ------------------ ------------------------------------ 3 months........................ $ .289 - $ .758 6 months........................ .778 - 1.623 9 months........................ 1.214 - 2.321 12 months....................... 1.592 - 2.901 15 months....................... 1.921 - 3.392
EXCESS OF VALUE PER AERIAL SHARE OF CASH ELECTION PROTECTION OVER COLLAR PROTECTION (ASSUMING NON-CONSUMMATION OF OMNIPOINT REORGANIZATION) - ------------------------------------------------------------------------- RANGE OF VALUE (BASED ON A TIME UNTIL CLOSING VOLATILITY RANGE OF 75% TO 95%) ------------------ ------------------------------------ 3 months........................ $ .487 - $ .991 6 months........................ 1.247 - 2.137 9 months........................ 1.909 - 3.060 12 months....................... 2.477 - 3.822 15 months....................... 2.969 - 4.466
Wasserstein Perella also analyzed and compared the potential benefit or cost to TDS from the TDS Debt Replacement and from the collar protection, the potential benefit or cost to Sonera from the Sonera-Aerial Investment and the collar protection, and the potential benefit to Aerial public stockholders of the Aerial Cash Election option, in various scenarios based on assumptions as to the trading price of VoiceStream common stock at closing of the merger ranging from $20.00 to $65.00. The per share benefits and costs were calculated for TDS and Sonera on a pro forma basis for their acquisitions of additional Aerial shares in the TDS Debt Replacement and Sonera-Aerial Investment, respectively, and for the Aerial public stockholders on an actual basis. A summary of this analysis is set forth below:
BENEFIT FROM BENEFIT (COST) COLLAR/CASH TOTAL BENEFIT PER SHARE FROM INVESTMENT ELECTION (COST) BENEFIT/(COST) ----------------- ------------ ----------------- ---------------- (IN MILLIONS, EXCEPT PER SHARE DATA) TDS....................... $(246.3) - $144.6 $ 70.4 - $0 $(175.9) - $144.6 $(2.25) - $1.85 Sonera.................... $(134.9) - $ 79.2 $ 20.2 - $0 $(114.7) - $ 79.2 $(5.11) - $3.53 Aerial public stockholders............ N/A $114.3 - $0 $ 114.3 - $ 0 $ 8.90 - $ 0
The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Wasserstein Perella believes that one must consider its opinion, this summary and its analyses as a whole. Selecting portions of this summary and the analyses, without considering the analyses as a whole, would create an incomplete view of the processes underlying the analyses and the opinion. In arriving at its opinion, Wasserstein Perella considered the results of all of the analyses as a whole. No company or transaction used in the above analyses as a comparison is directly comparable to Aerial, VoiceStream or VoiceStream/Omnipoint on a combined basis or the Aerial reorganization. The analyses were prepared solely for the purposes of Wasserstein Perella's providing its opinion to the Aerial special committee that as of such date, 139 147 and based upon and subject to the assumptions and limitations set forth in the opinion, the merger consideration provided by the Aerial reorganization agreement is fair from a financial point of view to Aerial's public stockholders. No single factor or analysis was determinative of Wasserstein Perella's fairness determination. Wasserstein Perella based the analyses on assumptions that it deemed reasonable, including assumptions concerning general business and economic conditions. Analyses based upon forecasts of future results, which are inherently subject to uncertainty, are not necessarily indicative of actual values or actual future results that any of the companies or any combination of the companies might achieve, which values or results may be significantly more or less favorable than suggested by such analyses. Wasserstein Perella does not assume responsibility if future results are materially different from those forecasted. Moreover, Wasserstein Perella's analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses or securities actually could be bought or sold. Wasserstein Perella is an internationally recognized investment banking firm and, as a customary part of its investment banking activities, is regularly engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, underwritings, private placements, and valuations for corporate and other purposes. The Aerial special committee selected Wasserstein Perella because of its expertise and reputation. In the ordinary course of its business, Wasserstein Perella may actively trade the debt and equity securities of Aerial, VoiceStream and VoiceStream Holdings for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in these securities. FEE ARRANGEMENTS WITH WASSERSTEIN PERELLA Pursuant to a letter agreement dated February 12, 1999, Aerial engaged Wasserstein Perella to act as the exclusive financial advisor to the Aerial special committee in connection with the then-proposed spin-off transaction and other possible transactions. Under the terms of this letter agreement, which was negotiated by the Aerial special committee and Wasserstein Perella, Aerial agreed to pay Wasserstein Perella (1) an initial advisory fee of $1 million, (2) an additional advisory fee of $1 million, payable in installments of $250,000 per two-month period until October 31, 1999, and (3) an additional financial advisory and opinion fee in connection with the rendering of an opinion related to the sale of Aerial equal to the greater of (1) $1 million (which amount became payable on September 17, 1999 when Wasserstein Perella informed the Aerial special committee that it was prepared to render its opinion), and (2) 1% of the consideration to be received by Aerial's public stockholders in the Aerial reorganization (which amount, to the extent it exceeds $1 million, is contingent upon and payable upon consummation of the Aerial reorganization). Based on the closing price of $55.13 per share of VoiceStream common stock on September 16, 1999 and the exchange ratio, this additional financial advisory and opinion fee would equal approximately $3.2 million. Aerial has also agreed to reimburse Wasserstein Perella for its reasonable out-of-pocket expenses, including fees and disbursements of its attorneys, and to indemnify Wasserstein Perella and related persons against certain liabilities, including certain liabilities under the federal securities laws. AGREEMENTS RELATING TO THE AERIAL REORGANIZATION VOICESTREAM STOCKHOLDERS VOTING AGREEMENT Pursuant to a stockholders voting agreement, stockholders who currently hold approximately 41% of the shares of VoiceStream Holdings common stock have agreed to vote for the Aerial reorganization, even if the VoiceStream Holdings board withdraws its support of the Aerial reorganization. See "The Special Meetings -- Agreements to Vote in Favor of the Aerial Reorganization." 140 148 AERIAL STOCKHOLDER VOTING AGREEMENT TDS, which holds approximately 98% of the total voting power of Aerial common stock, has entered into a stockholder voting agreement pursuant to which it has agreed to vote in favor of the Aerial reorganization even if the Aerial board withdraws its support of the Aerial reorganization. See "The Special Meetings -- Agreements to Vote in Favor of the Aerial Reorganization." TDS INVESTOR AGREEMENT In connection with the execution of the Aerial reorganization agreement, TDS will enter into an investment agreement with VoiceStream Holdings. With certain exceptions, this agreement will provide that, until September 17, 2004, the beneficial ownership of VoiceStream Holdings common stock held by TDS and its affiliates will not exceed 24.9% of the outstanding shares of VoiceStream Holdings common stock; provided, however, that if the Aerial reorganization occurs but the transactions contemplated by the Omnipoint reorganization have not occurred, such beneficial ownership shall not exceed 28%. Among other things, this agreement will also prohibit TDS and its affiliates from, in certain circumstances, participating in a proxy contest, tender offer, exchange offer or other transaction relating to a change of control of VoiceStream Holdings. TDS REGISTRATION RIGHTS AGREEMENT TDS will receive demand and piggyback registration rights for the shares of VoiceStream Holdings common stock it receives in the Aerial reorganization pursuant to a registration rights agreement. The registration rights agreement grants TDS or a holder of the registrable securities who agrees to be bound by the terms of the registration rights agreement the following registration rights: - four demand registrations, to occur not more than once every nine months; - one shelf registration per each holder of 15% or more of VoiceStream Holdings common shares; and - unlimited piggy-back registration rights. The registration rights agreement terminates when there are no registrable securities outstanding or if holders of such securities are provided with an opinion from VoiceStream counsel to the effect that the holders may sell the registrable securities without registration under the Securities Act. DEBT REPLACEMENT AGREEMENT. The debt replacement agreement provides for the replacement of a portion of the debt owed by Aerial Operating Company to TDS under the TDS revolving credit agreement with equity of Aerial, the issuance by Aerial Operating Company of additional equity to Aerial, the issuance by each of Aerial and Aerial Operating Company of additional equity to Sonera, the capitalization of certain receivables owed to Aerial Operating Company by its subsidiaries and certain modifications to the TDS revolving credit agreement. The settlement agreement and release supplements the debt replacement agreement to the extent that it specifies the amount of such equity issuances by Aerial and Aerial Operating Company and streamlines the process with respect thereto. Under the debt replacement agreement, as supplemented by the settlement agreement and release, on November 1, 1999, TDS will assign to Aerial as a contribution to capital $420 million of the debt owed by Aerial Operating Company to TDS under the TDS revolving credit agreement in exchange for an aggregate of 19,090,909 shares of Aerial common stock, at a purchase price of $22.00 per share. The shares of Aerial common stock will consist of 6,166,758 Aerial Common Shares and 12,924,151 Aerial Series A Common Shares. Concurrently with such issuance to TDS, 141 149 Aerial will issue 3,409,091 Aerial Common Shares to Sonera in exchange for a cash payment by Sonera to Aerial of $75 million, which also represents a per share purchase price of $22.00. Concurrently, certain modifications will be made to the TDS revolving credit agreement. Immediately after the completion of such equity issuances by Aerial, Aerial will assign to Aerial Operating Company as a contribution to capital the $420 million of debt received from TDS and the $75 million cash payment received from Sonera, in exchange for 3,343,642 shares of Aerial Operating Company common stock. At the same time as such issuance to Aerial, Aerial Operating Company will issue to Sonera 1,046,999 shares of Aerial Operating Company common stock in exchange for a cash payment by Sonera to Aerial Operating Company of $155 million. The per share price to be paid by each of Aerial and Sonera for such shares of Aerial Operating Company common stock will be $148.04, which represents the $22.00 price per Aerial share multiplied by the applicable exchange rate of 6.72919. Concurrently with such equity issuances by Aerial Operating Company, Aerial Operating Company will contribute to each of its subsidiaries, as a contribution to capital, all or a portion of the receivables owed by such subsidiary to Aerial Operating Company. Because Aerial Operating Company owns, directly or indirectly, 100% of each such subsidiary, no additional shares or partnership interests will be issued to Aerial Operating Company in exchange for such contributions. As a result of such transactions, Aerial will issue an aggregate of $495 million in new equity and Aerial Operating Company will issue an aggregate of $650 million in new equity, $420 million of debt previously owed by Aerial Operating Company to TDS will be extinguished, the maximum commitment under the TDS revolving credit agreement will be reduced from $775 million to $355 million and debt previously owed to Aerial Operating Company by subsidiaries of Aerial Operating Company will be extinguished. In addition, immediately after such transactions, each of the interest rate and the default interest rate under the TDS revolving credit agreement will be reduced and the guaranty issued by Aerial in favor of TDS with respect to Aerial Operating Company's obligations under the TDS revolving credit agreement will be terminated. At the closing of the Aerial reorganization, the TDS revolving credit agreement will be amended and restated to govern any debt owed by Aerial Operating Company to TDS at that time. See "Agreements Relating to the Aerial Reorganization -- Amended and Restated Credit Agreement." AMENDED AND RESTATED CREDIT AGREEMENT. Effective at the closing of the Aerial reorganization, TDS and Aerial Operating Company will amend the TDS revolving credit agreement by entering into the amended and restated credit agreement. The amended and restated credit agreement will evidence any loans outstanding under the TDS revolving credit agreement at that time and the maturity date of such loans will be one year after the effective date of the amended and restated credit agreement. TDS will have no commitment under the amended and restated credit agreement to make any further loans to Aerial Operating Company. Aerial Operating Company will pay interest in arrears on the unpaid principal amount of the loans at a per annum rate equal to three-month LIBOR as reported in The Wall Street Journal ("LIBOR") plus 3.50%, which interest will be due on the maturity date, or, if Aerial Operating Company becomes obligated to make cash interest payments on other indebtedness prior to the maturity date, on a quarterly basis. Overdue interest and principal will bear interest at LIBOR plus 5.50%. Aerial Operating Company may repay such loans under the amended and restated credit agreement without premium or penalty from time to time, provided that amounts repaid thereunder may not be reborrowed. In addition, the amended and restated credit agreement provides for mandatory repayments from time to time upon certain change of control events and to the extent of and concurrently with the receipt by Aerial or Aerial Operating Company of net proceeds of asset sales or certain other permitted dispositions to the extent such proceeds exceed $50,000,000 from and 142 150 after the effective date of the amended and restated credit agreement. Each subsidiary of Aerial Operating Company will unconditionally and irrevocably guarantee all of Aerial Operating Company's obligations under the amended and restated credit agreement. Aerial Operating Company's obligations under the amended and restated credit agreement and each subsidiary's obligations under its respective guarantee will be secured by a first-priority lien on and security interest in substantially all of the personal property of Aerial Operating Company and its subsidiaries. In addition, Aerial Operating Company may create one or more subsidiaries for the limited purpose of holding a portion of the collateral in which TDS will receive a security interest. The amended and restated credit agreement will contain covenants which, among other things, will restrict Aerial Operating Company's ability and the ability of its subsidiaries, with certain exceptions, to: purchase, redeem or declare dividends or distributions on stock; incur indebtedness; incur liens; transact business with affiliates; make loans and investments; engage in mergers, acquisitions or asset sales; and change the nature of their business. The amended and restated credit agreement also requires Aerial Operating Company and its subsidiaries to satisfy certain customary affirmative covenants and to make certain customary indemnifications to TDS. In addition, the amended and restated credit agreement contains customary events of default, including payment defaults, breach of representations or warranties, covenant defaults, defaults under or invalidity of collateral documents, certain material adverse events, certain events of bankruptcy and insolvency, judgment defaults and cross-default to certain other indebtedness. SONERA INDEMNITY VoiceStream, VoiceStream Holdings, Aerial, Aerial Operating Company and TDS are parties to an indemnity agreement whereby TDS has agreed to indemnify VoiceStream Holdings, its subsidiaries and affiliates, including Aerial, for certain losses and expenses resulting from certain claims or lawsuits (an "Indemnifiable Claim") existing now or in the future, asserted by Sonera or its affiliates against VoiceStream Holdings, Aerial, Aerial Operating Company, their respective affiliates or officers, directors, employees and agents, arising out of or resulting from any alleged act or failure to act occurring prior to the effective time of the Aerial merger, including certain losses and expenses relating to the disputed shares which Sonera has previously refused to return for cancellation or the number of shares of Aerial common stock which Sonera is entitled to receive in exchange for shares of Aerial Operating Company in connection with the exercise by Sonera of its tag-along right under the investor agreement. The public stockholders of Aerial will not be required to contribute to any indemnification payments made pursuant to the indemnity agreement. The indemnity agreement provides for the following: - TDS shall have no liability under the agreement for any claim or loss thirty days after the applicable statute of limitation period expires except for such claims or losses of which the indemnitees have given TDS notice prior to such time; - TDS has the right and obligation to control the litigation or settlement of any Indemnifiable Claim by Sonera arising out of or resulting from any alleged act or failure to act occurring prior to the effective time of the Aerial reorganization; - TDS has the right but not the obligation to control the litigation of any Indemnifiable Claim by Sonera arising out of or resulting from any alleged act or failure to act occurring prior to and after the effective time of the Aerial reorganization, provided that if TDS elects to control the litigation, it is responsible for the fees and costs of the litigation including attorneys' fees; and - TDS has the right to settle any Indemnifiable Claim or consent to any judgement without the consent of the indemnitee unless such settlement or judgement imposes a criminal penalty, 143 151 equitable remedy or a non-monetary condition which could reasonably expected to have a material adverse effect on the business of the indemnitee. The indemnity agreement will be terminated if all claims by Sonera arising out of or resulting from any alleged act or failure to act occurring through the effective time of the Aerial reorganization are released at such effective time. See "Sonera Settlement Agreement and Release" discussed below. SONERA SETTLEMENT AGREEMENT AND RELEASE Under the settlement agreement and release dated September 17, 1999 among Sonera, TDS, Aerial and Aerial Operating Company, Sonera agreed to surrender for cancellation 317,108 shares of Aerial Operating Company common stock, representing one-half of the 634,216 disputed shares, on November 1, 1999, in connection with the TDS Debt Replacement, without releasing its claims with respect to such surrendered shares. Upon satisfaction of all of the conditions to closing the Aerial reorganization, the remaining 317,108 shares of Aerial Operating Company common stock will be surrendered for cancellation immediately prior to the closing of the Aerial reorganization. At the closing of the Aerial reorganization, each of Sonera and Sonera U.S., on the one hand, and TDS, Aerial, Aerial Operating Company, VoiceStream and VoiceStream Holdings, on the other hand, will release each other from all claims relating to actions occurring through the date of the settlement agreement and release, including all claims by Sonera to all of the disputed shares and, subject to certain exceptions, will extend such release to actions occurring through the date of the closing of the Aerial reorganization. Also at the closing of the Aerial reorganization, each of the following agreements entered into in connection with Sonera's original investment in Aerial Operating Company will be terminated: (1) the purchase agreement, (2) the investment agreement, (3) the registration rights agreement, (4) the management side letter, (5) the joint venture agreement and (6) the supplemental agreement. Under the settlement agreement and release, Sonera has exercised its tag-along right in connection with the Aerial reorganization. As a result, immediately prior to the closing of the Aerial reorganization, Sonera will exchange 2,826,037 shares of Aerial Operating Company common stock for Aerial Common Shares based on the exchange rate provided in the investment agreement and after taking into account the cancellation of all of the disputed shares as indicated above. Sonera is not obligated to make this exchange unless and until all conditions to the closing of the Aerial reorganization have been satisfied or waived. At the closing of the Aerial reorganization, Sonera will then exchange 22,426,030 Aerial Common Shares, which includes the shares received by Sonera upon exchange of its shares of Aerial Operating Company common stock, for 10,203,844 shares of VoiceStream Holdings common stock. The settlement agreement and release also sets forth the agreement of the parties regarding certain matters relating to the debt replacement agreement. See "Agreements Relating to the Aerial Reorganization -- Debt Replacement Agreement." TIMING OF CLOSING The Aerial reorganization agreement provides that the closing of the Aerial reorganization will occur concurrently with the closing or as soon as practicable thereafter of the Omnipoint reorganization, subject to the satisfaction of the conditions set forth in the Aerial reorganization agreement. The Aerial reorganization agreement provides that if the Omnipoint reorganization has not been consummated or terminated by June 30, 2000, or, under certain circumstances, March 31, 2000, then the Aerial reorganization will close on the fifth business day following the day on which the last of the conditions set forth in the Aerial reorganization agreement has been satisfied or waived, unless VoiceStream and Aerial agree to a different date. Upon closing of the VoiceStream and Aerial mergers, the parties will file required certificates of merger with the Secretary of State of 144 152 Delaware and the Secretary of State of Washington, at which time the VoiceStream and Aerial mergers will be effective. ACCOUNTING TREATMENT The Aerial reorganization will be accounted for using the purchase method of accounting with VoiceStream Holdings becoming the successor company to VoiceStream and Aerial. Under the purchase method of accounting, the purchase price will be allocated among the Aerial assets and liabilities. The excess of purchase price over the fair value of the identifiable tangible assets and liabilities acquired will be recorded as intangible assets and amortized on a straight-line basis over a period not to exceed 40 years. The assets and liabilities of VoiceStream will be reflected in our financial statements at their historical cost basis. Earnings of VoiceStream Holdings subsequent to the date of the Aerial reorganization will be reduced by the amortization of intangible assets. See "VoiceStream Holdings Unaudited Pro Forma Condensed Combined Financial Statements." TRANSACTION COSTS Anticipated non-recurring charges to VoiceStream Holdings as a result of the Aerial reorganization are estimated to be approximately $41 million. This includes transaction costs to be paid by Aerial of approximately $24 million related to investment banking fees and $1.5 million related to legal, accounting and other transaction fees which will be expensed as incurred by Aerial. This total also includes non-recurring costs to be paid by VoiceStream of $6 million related to investment banking fees, and $9.5 million related to legal, accounting and employee separation costs, which will be considered as part of the purchase price. DISSENTERS' RIGHTS OF APPRAISAL Holders of VoiceStream common stock who dissent from the VoiceStream merger and follow certain statutory procedures have the right under the WBCA to demand payment in cash for the fair value of their VoiceStream common stock, calculated as of the day prior to the effective time. Aerial common stockholders do not have appraisal rights under Delaware law. See "The Special Meetings -- Dissenters' Rights of Appraisal" and Annexes I and J hereto which set forth the text of the applicable sections of the WBCA and DGCL. LITIGATION On September 21, 1999, a party purporting to be an Aerial stockholder filed a putative class action complaint on behalf of stockholders of Aerial in the Court of Chancery of the State of Delaware in New Castle County. The complaint names as defendants Aerial, TDS, certain directors of Aerial and TDS, and VoiceStream. The complaint alleges a breach of fiduciary duties by the defendants, including in connection with the proposed replacement of $420 million of debt owned by Aerial Operating Company to TDS with equity at $22.00 per share of Aerial common stock. The complaint alleges that TDS is receiving benefits at the expense of Aerial's public stockholders and seeks to have the Aerial reorganization enjoined or, if it is consummated, to have it rescinded and to recover unspecified damages, fees and expenses. The defendants believe that this lawsuit is without merit and intend to vigorously defend against this lawsuit. 145 153 MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE AERIAL REORGANIZATION CONSEQUENCES OF THE VOICESTREAM MERGER A summary of the material United States federal income tax consequences of the VoiceStream merger is set forth under "The Omnipoint Reorganization -- Material United States Federal Income Tax Consequences of the Omnipoint Reorganization." CONSEQUENCES OF THE AERIAL MERGER The following is a summary of the material United States federal income tax consequences of the Aerial merger to holders of Aerial common stock. It does not discuss all aspects of United States federal income taxation that may be important to you in light of your particular circumstances. For example, it does not discuss tax consequences that may apply to you if you are a taxpayer that is subject to special treatment under the federal income tax laws (for example, if you are a bank, financial institution, broker-dealer, insurance company, foreign person, or tax-exempt entity, or if you acquired your Aerial common stock by exercising employee stock options or otherwise as compensation or through a tax-qualified retirement plan). It also does not discuss any aspect of state, local or foreign taxation. The summary assumes that you will hold your Aerial common stock as a capital asset at the effective time of the Aerial merger, and does not consider the tax consequences to you if, in addition to owning Aerial common stock, you own stock of VoiceStream or of Omnipoint. Sidley & Austin, counsel to Aerial, has delivered an opinion to the effect that the description of the federal income tax consequences to holders of Aerial common stock contained under this heading correctly summarizes the material federal income tax consequences for such holders. YOU ARE URGED TO CONSULT WITH YOUR OWN TAX ADVISOR CONCERNING THE TAX CONSEQUENCES OF THE AERIAL MERGER TO YOU. Consummation of the Aerial merger is conditioned upon, among other things, Aerial having received the opinion of Sidley & Austin, dated the effective time of the merger, stating that, on the basis of the facts, representations, and assumptions set forth in such opinion, the merger will constitute either: - a reorganization within the meaning of section 368(a) of the Code, to which Aerial, VoiceStream Holdings and the VoiceStream subsidiary that is a party to the Aerial merger will each be a party within the meaning of section 368(b) of the Code, or - part of a transaction described in section 351(a) of the Code. This opinion will be based in part on certificates to be provided by officers of Aerial and of VoiceStream Holdings and by certain large stockholders of Aerial, VoiceStream and, in such counsel's discretion, Omnipoint. Assuming that: - the Aerial merger is consummated in accordance with the terms of the Aerial reorganization agreement and as described in this joint proxy statement-prospectus; - the certificates referred to above will be received and will be true, correct and complete at the effective time of the Aerial merger; and - the assumptions set forth in the opinion referred to above will be true, correct and complete at the effective time of the Aerial merger, 146 154 it is the opinion of Sidley & Austin that, under current law, the Aerial merger will constitute either: - a reorganization within the meaning of section 368(a) of the Code, to which Aerial, VoiceStream Holdings and the VoiceStream subsidiary that is a party to the Aerial merger will each be a party within the meaning of section 368(b) of the Code; or - part of a transaction described in section 351(a) of the Code. This conclusion is based on the Code, Treasury regulations promulgated thereunder, administrative rulings and practice, and judicial precedent, all as of the date hereof. All of these authorities are subject to change, possibly with retroactive effect. Any change in any of these authorities or failure to meet any of the conditions set forth above could alter the tax consequences to Aerial and Aerial's stockholders discussed herein. The parties will not request, and the Aerial merger is not conditioned upon, a ruling from the IRS as to any of the United States federal income tax consequences of the Aerial merger. As a result, there can be no assurance that the IRS will not disagree with or challenge any of the conclusions concerning the Aerial merger set forth in this discussion. Consistent with the Aerial merger qualifying either as a reorganization described in section 368(a) of the Code or as part of a transaction described in section 351(a) of the Code, for United States federal income tax purposes: - holders of Aerial common stock who do not elect to receive any cash in the Aerial merger will not recognize gain or loss solely as a result of the conversion of shares of Aerial common stock into shares of VoiceStream Holdings common stock in the merger, except with respect to cash, if any, received in lieu of fractional shares; - each such holder's aggregate tax basis in the VoiceStream Holdings common stock received in the Aerial merger (including any fractional share of VoiceStream Holdings common stock for which cash is received) will be the same as his or her aggregate tax basis in the Aerial common stock surrendered in the merger; - the holding period of the VoiceStream Holdings common stock received in the Aerial merger by a holder of Aerial common stock will include the holding period of Aerial common stock that he or she surrendered in the Aerial merger; and - no gain or loss will be recognized by Aerial, VoiceStream Holdings, or the VoiceStream Holdings subsidiary which is a party to the Aerial merger as a result of the Aerial merger. A holder of Aerial common stock that elects to receive cash in the Aerial merger will recognize gain, if any (but not loss, except as discussed below), for United States federal income tax purposes. The amount of recognized gain will be the lesser of: - the excess of the fair market value of the VoiceStream common stock and cash received in the Aerial merger over the stockholder's tax basis in Aerial common stock surrendered in the merger; or - the amount of cash the stockholder receives pursuant to the election to receive cash. This recognized gain will be capital gain and will be long-term capital gain if the stockholder has held the Aerial common stock exchanged for cash for more than one year at the effective time of the Aerial merger. The tax basis of the VoiceStream Holdings common stock received in the merger generally will equal the tax basis of the Aerial common stock surrendered, decreased by the amount of cash received and increased by the amount of gain recognized. As in the case of an Aerial stockholder who does not elect to receive cash, the holding period of the VoiceStream Holdings common stock received will include the holding period of the Aerial common stock surrendered. Determinations of the amount of recognized gain, tax basis and holding period must be made separately for each block of Aerial common stock surrendered. For this purpose, all of the cash and 147 155 VoiceStream Holdings common stock received will generally be allocated proportionately among the blocks of Aerial common stock surrendered. A holder of Aerial common stock that elects to receive only cash in the Aerial merger will generally recognize loss for United States federal income tax purposes, equal to the excess, if any, of the stockholder's tax basis in Aerial common stock surrendered in the merger over the amount of cash received. No loss will be recognized, however, if the Aerial stockholder elects to receive some VoiceStream Holdings common stock in addition to cash in the Aerial merger. CONSEQUENCES OF THE AERIAL REORGANIZATION UNDER THE VOICESTREAM TAX SHARING AGREEMENT VoiceStream believes that the consequences of the Aerial reorganization under the VoiceStream Tax Sharing Agreement should be the same as set forth under the heading, "The Omnipoint Reorganization -- Consequences of the Omnipoint Reorganization Under the VoiceStream Tax Sharing Agreement," whether or not the Omnipoint reorganization has been previously consummated. INTERESTS OF CERTAIN PERSONS IN THE AERIAL REORGANIZATION VOICESTREAM AFFILIATED PERSONS In considering the recommendation of the VoiceStream board with respect to approval and adoption of the Aerial reorganization agreement, stockholders of VoiceStream should be aware that some directors and officers of VoiceStream have interests, set forth below, relating to the Aerial Reorganization that are in addition to their interests as stockholders of VoiceStream. VOICESTREAM DIRECTORS Except for John L. Bunce, Jr., the current members of the VoiceStream board, John W. Stanton, Robert R. Stapleton, Donald Guthrie, Mitchell R. Cohen, Daniel J. Evans, Canning Fok, Jonathan M. Nelson, Terence M. O'Toole and Hans Snook, are expected to become members of the VoiceStream Holdings board upon the closing of the earlier of the Omnipoint reorganization or the Aerial reorganization. Mr. Bunce has advised the board that he will resign prior to the earlier of the closing of the Omnipoint reorganization and the closing of the Aerial reorganization. EQUITY BASED AWARDS If the VoiceStream merger takes place at the time of the Aerial reorganization, in accordance with the terms of the stock option plans maintained by VoiceStream, all awards of stock options outstanding at the time of the Aerial reorganization automatically will be converted into similar options exercisable for shares of VoiceStream Holdings common stock on a one-for-one basis. The vesting of these new VoiceStream Holdings options will not be accelerated as a result of the transactions described in the Aerial reorganization agreement. AERIAL AFFILIATED PERSONS In considering the recommendation of the Aerial board with respect to the approval and adoption of the Aerial reorganization agreement, stockholders of Aerial should be aware that certain directors and officers of Aerial have interests, set forth below, relating to the Aerial reorganization that are in addition to their interests as stockholders of Aerial. AERIAL DIRECTORS Certain directors of Aerial may be considered to have an interest in the Aerial reorganization and the related transactions as (1) directors and/or officers of TDS or its affiliates, (2) trustees or 148 156 beneficiaries of the TDS voting trust, (3) officers of Aerial and/or (4) officers or representatives of Sonera. Directors of Aerial who are directors of TDS and officers of TDS or its affiliates are: LeRoy T. Carlson, Chairman of TDS; LeRoy T. Carlson, Jr., President and CEO of TDS; Sandra L. Helton, Executive Vice President-Finance of TDS; and James Barr III, President of TDS Telecom; and Rudolph E. Hornacek, Vice President -- Engineering of TDS. TDS has an interest in the Aerial reorganization because TDS will receive a substantial number of shares of VoiceStream Holdings common stock in the Aerial reorganization. Taking into consideration the TDS Debt Replacement, TDS would receive 35,570,494 shares of VoiceStream Holdings common stock in the Aerial reorganization, representing approximately 27% of the shares of VoiceStream outstanding immediately following the Aerial reorganization, assuming the prior or concurrent completion of the Omnipoint reorganization. In addition, pursuant to the voting agreement to be entered into in connection with the Aerial reorganization, TDS will have the power to nominate at least one person for election as a director of VoiceStream Holdings. See "The VoiceStream Holdings Voting Agreement." TDS also has an interest in the Aerial reorganization pursuant to the transactions contemplated by the related transaction documents, including the TDS Debt Replacement. See also "Arrangements and Transactions between TDS and Aerial" below for other arrangements and transactions between TDS and Aerial which will be terminated, amended or entered into in connection with the Aerial reorganization agreement. LeRoy T. Carlson, Jr., a director and the President of TDS, a director and Chairman of Aerial and the son of LeRoy T. Carlson; and Walter C.D. Carlson, a director of TDS and Aerial and the son of LeRoy T. Carlson and the brother of LeRoy T. Carlson, Jr., are trustees and beneficiaries of the TDS voting trust. LeRoy T. Carlson, Chairman and a director of TDS and a director of Aerial, is a beneficiary of the TDS voting trust. Walter C.D. Carlson is a partner of the law firm of Sidley & Austin, which is counsel to TDS and which has advised TDS regarding the Aerial reorganization. The TDS voting trust and its trustees and beneficiaries have an interest in the Aerial reorganization because the TDS voting trust controls TDS, which has the interests described above. Directors of Aerial who are officers of Aerial or its affiliates are: LeRoy T. Carlson, Jr., Chairman of Aerial; Don W. Warkentin; President of Aerial; and J. Clarke Smith, Vice President -- Finance and Administration, and Treasurer and CFO of Aerial. See "Indemnification and Insurance" and "Equity Based Awards and Employment and Severance Agreements" below. Pertti Miettunen and Matti Makkonen are directors of Aerial who are representatives of Sonera. Sonera has an interest in the Aerial reorganization as explained under "Background of Events Leading to the Aerial Reorganization" and "Background of Events Relating to Sonera." You are urged to carefully study and consider the Aerial reorganization in light of the above interests. The Aerial board was aware of the above interests. As discussed under "Background of Events Leading to the Aerial Reorganization," in order to address such interests, the Aerial board created a transaction committee that included all directors other than the Sonera representatives and created a special committee that included only the directors who were not affiliated with TDS or Sonera. 149 157 INDEMNIFICATION AND INSURANCE OF AERIAL DIRECTORS AND OFFICERS The Aerial reorganization agreement requires VoiceStream Holdings to cause Aerial to: - continue to indemnify all past and present officers and directors of Aerial to the same extent that they are currently indemnified; and, - for at least six years following the effective time of the Aerial reorganization, continue to carry directors' and officers' insurance covering the existing directors and officers of Aerial that is no less favorable with respect to the coverage and amount than that provided under Aerial's existing insurance as of the effective time of the Aerial reorganization agreement, except that Aerial will not be required to pay more than 200% of the last annual premium for such insurance coverage. EQUITY BASED AWARD AND EMPLOYMENT AND SEVERANCE AGREEMENTS 1996 Long-Term Incentive Plan Under the terms of Aerial's 1996 long-term incentive plan, all outstanding options granted under this plan will become fully exercisable and vested upon a "change in control" of Aerial. In addition, upon a "change in control" Aerial may convert each outstanding option into a substitute option. The approval by Aerial stockholders of the Aerial reorganization will constitute a "change in control" under the 1996 long-term incentive plan. The Aerial reorganization agreement provides that each outstanding Aerial option will be converted into an option to purchase the number of shares of VoiceStream Holdings common stock determined by multiplying the number Aerial Common Shares subject to the option by 0.455, at an exercise price equal to the exercise price of the Aerial option divided by 0.455. However, if the exchange ratio is revised pursuant to the Aerial reorganization agreement, this number will also change. Retention Restricted Stock Unit Plan Under the terms of Aerial retention restricted stock unit plan, all outstanding stock unit awards granted under this plan will become fully vested upon a "change in control" of Aerial. The Aerial retention restricted stock unit plan provides that as of the date a participant's stock units become fully vested, the participant is entitled to receive a payment, in the form of cash or stock as determined by the chairman of Aerial, equal to (a) the closing price of one Aerial Common Share on the Nasdaq Stock Market multiplied by (b) the number of stock units awarded the participant. The approval by Aerial stockholders of the Aerial reorganization will constitute a "change in control" under the retention restricted stock unit plan and will cause all 431,000 restricted stock units to become fully vested. Assuming the "change in control" occurs, the amount payable to employees under the retention restricted stock unit plan will be calculated based on the fair market value of the Aerial Common Shares on the day that the Aerial reorganization agreement is approved by the Aerial stockholders in accordance with the terms of the retention restricted stock unit plan. Based on the market price of $26.66 per Aerial Common Share on September 20, 1999, the date of the announcement of the Aerial reorganization agreement, the aggregate amount that would have been payable to employees under the retention restricted stock unit plan would be approximately $11.5 million. The decision on the form of payment has not been made. Executive Severance Agreements Aerial has entered into severance agreements with each of the executives identified below which provide that in the event that the executive terminates employment with Aerial within two years after a "change in control" other than by reason of a "nonqualifying termination", the executive will be entitled to receive a cash payment equal to the total of (1) the executive's salary through the date of 150 158 his or her termination, if not yet paid, (2) the executive's prorated target bonus for the year in which the "change in control" occurs, if not yet paid, and (3) an amount equal to the executive's highest annual base salary during the 12-month period prior to his or her termination of employment plus the executive's target bonus for the year in which the "change in control" occurs, multiplied by the base/bonus multiple next to the executive's name below. In addition to this cash payment, Aerial is required to continue all medical, accident, disability and life insurance policies in effect for the executive and his or her dependents under the same terms in effect immediately prior to his or her date of termination for the extended benefit period specified next to the executive's name below. Finally, the executive will be entitled to outplacement services not to exceed $12,000 in total cost. The total amount of payments to be paid to an executive under a severance agreement will be reduced to the extent such payments, when added with other payments to the executive, would exceed the maximum amount deductible by Aerial, as determined under section 280G of the Code.
BASE/BONUS EXTENDED BENEFIT NAME MULTIPLE PERIOD ---- ---------- ---------------- D. Warkentin.................................... 2.25 27 months C. Smith........................................ 1.5 18 months D. Lowry........................................ 1.5 18 months G. Ballard...................................... 1.5 18 months C. Ogren........................................ 1.25 15 months A. Fountaine.................................... 1.0 12 months R. Rowe......................................... 1.0 12 months S. Dailey....................................... 1.0 12 months T. McDowell..................................... 1.0 12 months B. O'Connor..................................... 1.0 12 months D. Howe......................................... 1.0 12 months M. Guerrieri.................................... 1.0 12 months E. Branham...................................... 1.0 12 months
The Aerial reorganization will constitute a "change in control" under the severance agreements. For purposes of the severance agreements, a "nonqualifying termination" means a termination of employment: - by Aerial for "cause"; - by the executive for a reason other than "good reason"; - by reason of the executive's death; or - by reason of the executive's disability. "Cause" is defined as (1) a material breach by the executive of his or her duties which do not differ materially from the executive's duties during the 90-day period immediately before the "change in control" and which is willful, committed in bad faith or without the reasonable belief that such breach is in the best interest of Aerial and which is not remedied within a reasonable time, (2) the commission by the executive of a felony involving moral turpitude, (3) the commission by the executive of theft, fraud, breach of trust or any act of dishonesty involving Aerial or an affiliate of Aerial, or (4) a significant violation by the executive of a duty of loyalty to Aerial or an affiliate of Aerial. "Good reason" is defined as (1) the assignment of the executive to a materially lower level of responsibility or status, (2) the failure to reelect the executive to any significant officer or directorship with Aerial, (3) a reduction in the executive's base salary or bonus opportunity (as in effect immediately before the "change in control"), (4) the requirement that the executive be based more than 30 miles from the executive's office at the time of the "change in control" or the requirement that the executive increase his or her business travel by 20% or more than the executive's travel 151 159 obligations immediately prior to the "change in control", (5) the failure by Aerial to continue the employee benefit plans or compensation plans in effect immediately prior to the "change in control" or to establish substantially comparable plans to such plans and the failure by Aerial to provide the executive with welfare benefits substantially similar to those provided to the executive immediately prior to the "change in control' or those provided to peers of the executive employed by Aerial or its affiliates, or (6) the failure by Aerial to obtain agreement from any successor to Aerial to assume to the severance agreement from Aerial. Special Retention Plan The Aerial board has approved the special retention plan under which certain designated employees, in two separate categories, are eligible to receive certain specified benefits if they remain continuously employed by Aerial or an affiliate of Aerial after a "change in control". Under the terms of the special retention plan, a designated employee may receive the following benefits: - six-month retention bonus. If a designated employee remains employed by Aerial or an affiliate of Aerial for six months after a "change in control", the employee will receive a cash payment equal to one-half of an amount determined by multiplying the employee's annual base salary immediately before the "change in control" by either 75% or 50%, depending on the category of the employee. - twelve-month retention bonus. If a designated employee remains employed by Aerial or an affiliate of Aerial for twelve months after a "change in control", the employee will receive a cash payment equal to one-half of an amount determined by multiplying the employee's annual base salary immediately before the "change in control" by either 75% or 50%, depending on the category of the employee. - qualifying termination. If the employee is terminated by reason of a "qualifying termination" during the twelve-month period beginning on the "change in control" and the employee executes a general release, the employee will receive the six-month retention bonus and the twelve-month retention bonus to the extent such amounts have not already been paid to the employee. The employee will also be eligible to receive outplacement assistance services up to either $4,000 or $9,000, depending on the category of the employee. The Aerial reorganization will constitute a "change in control" under the special severance plan. For purposes of the special retention plan, a "qualifying termination" is a termination of the employee's employment for reasons other than: - by Aerial for "cause"; - by Aerial by reason of the employee's disability; - the employee's death; or - termination of employment by the employee for any reason other than "good reason". "Cause" is defined as (1) the refusal by the employee to perform his or her duties, other than by reason of physical or mental illness, that are not materially different from the employee's duties in the aggregate before the "change in control", (2) the commission by the employee of a felony involving moral turpitude, (3) the commission by the employee of theft, fraud, breach of trust or any act of dishonesty involving Aerial or an affiliate of Aerial, or (4) a significant violation by the employee of a duty of loyalty to Aerial or an affiliate of Aerial. "Good reason" is defined as (1) the assignment of the employee to a materially lower level of responsibility or status, (2) a reduction in the employee's base salary or bonus opportunity, as in effect immediately before the "change in control", or (3) the requirement that the employee be based more than 30 miles from the employee's office at the time of 152 160 the "change in control" or the requirement that the employee increase his or her business travel by 20% or more than the employee's travel obligations immediately prior to the "change in control". Special Severance Plan The Aerial board has approved the special severance plan under which full-time, non-seasonal employees who are not covered by a severance agreement or the special retention plan are eligible to receive a severance payment and outplacement assistance if they are terminated during the six-month period after a "change in control" by reason of a "qualifying termination". The amount of the severance payment will be determined by the employee's employment category, the employee's salary and the employee's years of service, up to a maximum of 26 weeks of the employee's salary. The Aerial reorganization will constitute a "change in control" under the special severance plan. For purposes of the special severance plan, a "qualifying termination" is a termination of the employee's employment for reasons other than: - by Aerial for "cause"; - by Aerial by reason of the employee's disability; - the employee's death; or - termination of employment by the employee for any reason other than "good reason". "Cause" is defined as (1) the refusal by the employee to perform his or her duties, other than by reason of physical or mental illness, that are not materially different from the employee's duties in the aggregate before the "change in control", (2) the commission by the employee of a felony involving moral turpitude, (3) the commission by the employee of theft, fraud, breach of trust or any act of dishonesty involving Aerial or an affiliate of Aerial, or (4) a significant violation by the employee of a duty of loyalty to Aerial or an affiliate of Aerial. "Good reason" is defined as (1) a reduction in the employee's base salary or bonus opportunity, as in effect immediately before the "change in control", or (2) the requirement that the employee be based more than 30 miles from the employee's office at the time of the "change in control". The combined estimated cost of the severance agreements, the special retention plan and the special severance plan is approximately $13 million. Non-Compete Agreements At the time of the Aerial reorganization, Aerial intends to enter into non-competition agreements with Donald Warkentin, President and CEO, and Gary Ballard, Vice President -- Sales of Aerial, pursuant to which Messrs. Warkentin and Ballard would agree not to compete with Aerial for a period of one year after the closing in consideration for an aggregate payment not to exceed $250,000. ARRANGEMENTS AND TRANSACTIONS BETWEEN TDS AND AERIAL Currently, TDS owns all of the Aerial Series A Common Shares and approximately 60% of the Aerial Common Shares, representing approximately 82.1% of the Aerial common stock. By virtue of this ownership, TDS has the voting power to elect all of the directors of Aerial and has approximately 98% of the voting power in matters other than the election of directors. In addition, TDS has a variety of contractual and other relationships with Aerial. Following the Aerial reorganization, Aerial will be a wholly-owned subsidiary of VoiceStream. However, TDS and Aerial have entered into, or will enter into, other arrangements to facilitate the Aerial Reorganization. These existing relationships and contemplated arrangements are described below. 153 161 AGREEMENTS RELATING TO THE AERIAL REORGANIZATION In contemplation of the Aerial reorganization, TDS and Aerial have entered or will enter into certain new arrangements. The following agreements have been negotiated among TDS, Aerial and VoiceStream. Employee Benefit Plans Separation Agreement The employee benefit plans separation agreement provides that (1) effective January 1, 2000, Aerial and its subsidiaries will establish, operate and maintain separate employee benefit programs and procedures, (2) subject to certain exceptions, TDS and Aerial will retain or assume any and all liabilities under various employee benefit plans and arrangements with respect to any person who, as of the time such liability was incurred, was an employee of TDS or Aerial, respectively and (3) Aerial will establish certain employee benefit plans corresponding to certain TDS employee benefit plans in which it participates and procedures will be established, in accordance with applicable fiduciary standards and laws, for the transfer of plan assets between the resulting plans of TDS and Aerial. Neither TDS nor Aerial is required to maintain any specific employee benefit plan and each such company may amend or terminate any employee benefit plan in accordance with its terms or applicable law. Transition Services Agreement After the Aerial reorganization, pursuant to a transition services agreement between TDS and Aerial, TDS will provide to Aerial and VoiceStream certain services and other benefits, including certain administrative and other services similar to those that were provided to Aerial by TDS prior to the Aerial reorganization. TDS will be compensated at rates negotiated between TDS and VoiceStream. Debt Replacement Agreement See "Agreements Relating to the Aerial Reorganization -- Debt Replacement Agreement." Amended and Restated Credit Agreement See "Agreements Relating to the Aerial Reorganization -- Amended and Restated Credit Agreement." CONTINUATION, AMENDMENT OR TERMINATION OF EXISTING AGREEMENTS BETWEEN TDS AND AERIAL The following paragraphs describe significant agreements that currently exist between Aerial and TDS, and indicate whether such agreements will be amended or terminated in connection with the Aerial reorganization. The amendment or termination of such agreements was negotiated among TDS, Aerial and VoiceStream and was approved by the Aerial special committee. Tax Allocation Agreement On September 8, 1998, Aerial, Aerial Operating Company and TDS entered into an amended and restated tax allocation agreement. Under the terms of this tax allocation agreement, Aerial and its subsidiaries agreed to continue to join in filing consolidated federal income tax returns with TDS and certain affiliates unless TDS's equity interest in Aerial falls below 80%. For tax years ended prior to January 1, 1996, TDS has reimbursed Aerial for the federal income tax savings reflected in the financial statements of the TDS affiliated group resulting from the inclusion of Aerial and its subsidiaries in that group. TDS has also reimbursed Aerial with respect to certain post-December 31, 1995, obligations as described below. 154 162 For tax years beginning after December 31, 1995, the tax allocation agreement provides that Aerial is required to pay to TDS an amount equal to the greater of the federal income tax liability of Aerial and its subsidiaries, calculated as if they were a separate affiliated group, or the tax obtained by applying the average federal income tax rate of the TDS affiliated group to the taxable income of Aerial and its subsidiaries, calculated as if they were a separate affiliated group. Under the tax allocation agreement, Aerial is compensated, by an offset to amounts Aerial would otherwise be required to pay to TDS for federal income taxes, for TDS's use of tax benefits at such time as Aerial and its subsidiaries could utilize such benefits as a separate affiliated group. The tax allocation agreement states that, if Aerial and its subsidiaries cease to be members of the TDS affiliated group and, for a subsequent year, Aerial and its subsidiaries are required to pay a greater amount of federal income tax than they would have paid if they had not been members of the TDS affiliated group after December 31, 1995, TDS will reimburse Aerial for the excess amount of tax, without interest. In determining the amount of reimbursement, the tax allocation agreement states that any profits or losses from new business activities acquired by Aerial or its subsidiaries after Aerial leaves the TDS affiliated group will be disregarded. In addition, the tax allocation agreement states that reimbursement will not be required if at any time in the future Aerial becomes a member of another affiliated group in which Aerial is not the common parent or fewer than 500,000 Series A Common Shares are outstanding. The tax allocation agreement also states that reimbursement will not be required on account of the income of any subsidiary of Aerial if more than 50% of the voting power or assets of such subsidiary is held by a person or group other than a person or group owning more than 50% of the voting power of TDS. Under the tax allocation agreement, rules similar to those described above apply to any state or local franchise or income tax liabilities to which TDS and Aerial and its subsidiaries are subject and which are required to be determined on a unitary, combined or consolidated basis. On March 12, 1999, Aerial and TDS entered into a tax settlement agreement pursuant to which TDS made a payment to Aerial of $114.5 million on March 15, 1999. This payment represents a settlement of amounts that were anticipated to be due from TDS to Aerial in the future under the tax allocation agreement due to the use of Aerial losses by the TDS affiliated group for all periods ending on or before December 31, 1999. The March 15, 1999, tax settlement payment to Aerial was used to repay a portion of the existing Aerial Operating Company indebtedness to TDS under the TDS revolving credit agreement, which facilitates Aerial's interim financing plans. See "Revolving Credit Agreement." TDS currently anticipates that it will owe to Aerial an additional amount of approximately $21 million plus interest as a result of adjustments provided for in the tax settlement agreement. In addition, Aerial has made a claim in the amount of approximately $4.9 million dollars under the tax settlement agreement on the grounds that the tax settlement agreement contains an error in the application of the tax law. TDS disputes this claim, which will be withdrawn under the Aerial reorganization agreement. It is currently anticipated that Aerial will continue to be included in the TDS affiliated group filing consolidated federal income tax returns of TDS through and including the date of the Aerial reorganization. After the Aerial reorganization, Aerial will no longer be a member of the TDS affiliated group. In connection with the Aerial reorganization, the tax allocation agreement will be terminated on the effective date of the Aerial reorganization. The tax settlement agreement will continue in full force and effect in accordance with its terms after the Aerial reorganization. Intercompany Agreement TDS and Aerial are parties to an intercompany agreement relating to certain services, transactions and relationships between TDS and Aerial. The intercompany agreement will be terminated in connection with the Aerial reorganization. However, many of the services currently 155 163 provided under the existing intercompany agreement will continue on a transitional basis following the Aerial reorganization pursuant to the transition services agreement. Cash Management Agreement Aerial is a party to a cash management agreement with TDS pursuant to which Aerial deposits its excess cash with TDS for investment under TDS's cash management programs. The cash management agreement will be terminated in connection with the Aerial reorganization. Insurance Cost Sharing Agreement Pursuant to an insurance cost sharing agreement between TDS and Aerial, Aerial and its subsidiaries, and their officers, directors and employees, are afforded coverage under certain insurance policies purchased by TDS. The insurance cost sharing agreement will be terminated in connection with the Aerial reorganization. Certain arrangements currently provided under the existing insurance cost sharing agreement will continue following the Aerial reorganization pursuant to the transition services agreement. Employee Benefit Plans Agreement TDS and Aerial are parties to an employee benefit plans agreement relating to certain arrangements between TDS and Aerial with respect to employee benefits. The employee benefit plans agreement will be terminated in connection with the Aerial reorganization. To the extent necessary, the arrangements under the existing employee benefit plans agreement have been addressed in the employee benefit plans separation agreement. Exchange Agreement Aerial and TDS are parties to an exchange agreement. The exchange agreement grants TDS certain rights to subscribe to any issuance of Aerial Common Shares or other securities of Aerial. The exchange agreement also restricts the circumstances under which Aerial is entitled to claim that an opportunity, transaction, agreement or other arrangement to which TDS or any person in which TDS, or any person in which TDS has or acquires a financial interest, is or shall become a party, should be the property of Aerial or its subsidiaries. In addition, the exchange agreement provides that TDS or one of its affiliates, other than Aerial, may acquire an FCC license to provide PCS services or acquire control of any entity which has such a license, but that TDS is obligated to offer to Aerial the opportunity to negotiate regarding the purchase by Aerial or one of its subsidiaries of such license or business entity if the relevant FCC license is for (1) an MTA or (2) a BTA which is located, in whole or in part, in an MTA in which Aerial or one of its subsidiaries has a direct or indirect interest. In addition, the exchange agreement gives Aerial a right of negotiation with respect to any PCS interest which any other TDS entity desires to sell. In connection with the Aerial reorganization, the exchange agreement will be terminated and cease to be of any effect. Registration Rights Agreement Under a registration rights agreement, Aerial has agreed, upon the request of TDS, to file one or more registration statements in order to permit TDS to offer and sell any debt or equity securities of Aerial that TDS may hold at any time. This registration rights agreement will be terminated in connection with the Aerial reorganization. 156 164 Revolving Credit Agreement All of the outstanding financial obligations of Aerial and its subsidiaries to TDS are incorporated under the revolving credit agreement between TDS and Aerial Operating Company, as amended. Aerial has guaranteed the obligations of Aerial Operating Company to TDS. Under the TDS revolving credit agreement, Aerial Operating Company may borrow up to a maximum amount from TDS, which amount is reduced by the amount of certain financing obtained by Aerial Operating Company or Aerial, including the amount of any borrowings under the Nokia credit agreement. As of September 30, 1999, the maximum commitment under the TDS revolving credit agreement was $775 million and the amount available for borrowing by Aerial Operating Company under the TDS revolving credit agreement was approximately $81 million. On November 1, 1999, pursuant to the debt replacement agreement, $420 million of the amount outstanding under the TDS revolving credit agreement will be replaced with equity and certain modifications will be made to the TDS revolving credit agreement. As a result, the maximum commitment under the TDS revolving credit agreement will be reduced from $775 million to $355 million. Also on November 1, 1999, Sonera will invest an aggregate amount of $230 million in Aerial and Aerial Operating Company. The funds invested by Sonera will be used to repay outstanding debt under the TDS revolving credit agreement and will be available to be drawn down by Aerial Operating Company under the TDS revolving credit agreement between November 1, 1999, and the closing of the Aerial reorganization. See "The Aerial Reorganization -- Agreements Relating to the Aerial Reorganization -- Debt Replacement Agreement." Any debt outstanding under the TDS revolving credit agreement at the closing of the Aerial reorganization will continue to remain outstanding after the Aerial reorganization pursuant to an amended and restated TDS revolving credit agreement. See "The Aerial Reorganization -- Agreements Relating to the Aerial Reorganization -- Amended and Restated Credit Agreement." 157 165 VOICESTREAM HOLDINGS VOTING AGREEMENT VoiceStream has an existing agreement which governs the voting of its principal stockholders. At the time the Omnipoint reorganization agreement was entered into, the parties to the VoiceStream voting agreement, which were the Hellman Entities, the Goldman Sachs Entities, the Stanton Entities, Providence and certain of the Hutchison Entities, and certain principal stockholders of Omnipoint, which were Allen & Co., MDCP, James J. Ross and entities affiliated with Douglas G. Smith, agreed to enter into a new voting agreement which would be effective on the closing of the Omnipoint reorganization and would apply to VoiceStream Holdings. Although the new VoiceStream Holdings voting agreement has not yet been entered into, it is anticipated that the new agreement will provide, assuming the Aerial reorganization has not been completed, that the parties thereto will agree to vote their shares of VoiceStream Holdings common stock for the election of 15 members of the VoiceStream Holdings board designated as follows: - Mr. Stanton, as long as he is the chief executive officer of VoiceStream Holdings or he beneficially owns at least 4,500,000 shares of VoiceStream Holdings common stock; - the following number of directors designated by the Hutchison Entities, so long as they hold an aggregate of at least the indicated percentage of outstanding, or number of shares, as applicable, of VoiceStream Holdings common stock specified below (including shares of VoiceStream Holdings common stock issuable to the Hutchison Entities upon conversion of the Voice Stream Holdings Junior Preferred)
PERCENTAGE OR NUMBER OF NUMBER OF MEMBERS SHARES ----------------- ---------- Four........................................................ 27.25% Three....................................................... 20% Two......................................................... 9,800,000 One......................................................... 4,500,000
The Hutchison Entities will be entitled to designate additional directors if the Hutchison Entities' aggregate ownership of VoiceStream Holdings common stock and VoiceStream Junior Preferred exceeds certain thresholds up to 50% board representation upon obtaining 50% equity ownership, subject to FCC limitations on ownership or control by foreign persons; - one member designated by the Goldman Sachs Entities, so long as the Goldman Sachs Entities beneficially own at least 4,500,000 shares of VoiceStream Holdings common stock; - one member designated by majority vote of the Stanton Entities and Providence (such designee being in addition to Mr. Stanton if he is then serving on the board by reason of being the chief executive officer of VoiceStream Holdings or the Stanton Entities' beneficial ownership of at least 4,500,000 shares of VoiceStream Holdings common stock), so long as the Stanton Entities and Providence collectively beneficially own at least 4,500,000 shares of VoiceStream Holdings common stock. The Stanton Entities have agreed that (1) so long as Mr. Stanton is serving as chief executive officer of VoiceStream Holdings or he beneficially owns at least 4,500,000 shares of VoiceStream Holdings common stock, (2) the Stanton Entities and Providence collectively beneficially own at least 4,500,000 shares of VoiceStream Holdings common stock, and (3) Providence beneficially owns at least 2,500,000 shares of VoiceStream Holdings common stock, such member shall be designated by Providence; - four members who were on the Omnipoint board prior to the Omnipoint reorganization and who are selected by Omnipoint to serve during the period from the closing of the Omnipoint 158 166 reorganization until and including the second annual meeting of stockholders of VoiceStream Holdings taking place after the closing of the Omnipoint reorganization; and - the remaining members of the board to be selected by a majority of the persons selected as described above. At the time the Aerial reorganization agreement was entered into, the parties to the VoiceStream voting agreement and TDS agreed to enter into an agreement which would be effective on the closing of the Aerial reorganization and would apply to VoiceStream Holdings. Although this agreement has not yet been entered into, it is anticipated that it will provide that the parties thereto will agree to vote their shares of VoiceStream Holdings common stock for a board constituted as described above, with an additional member to be designated by TDS so long as TDS owns at least 4,500,000 shares of VoiceStream Holdings common stock; however, if TDS owns more than 9,800,000 shares of VoiceStream Holdings common stock and Sonera owns less than 4,500,000 shares of VoiceStream Holdings common stock, TDS will be entitled to designate two additional members. This agreement would not cover, and TDS would not be required to vote in favor of, the four Omnipoint designees as directors unless the Omnipoint principal stockholders described above agree to enter into this agreement and the Omnipoint reorganization has been completed. At the time the stock purchase agreement for the Sonera-VoiceStream Investment was entered into, the parties to the VoiceStream voting agreement and Sonera agreed to enter into an agreement which would be effective on the closing of the Omnipoint reorganization and would apply to VoiceStream Holdings. Although this agreement has not yet been entered into, it is anticipated that it will provide that the parties thereto will agree to vote their shares of VoiceStream Holdings common stock for a board constituted as described above, with an additional member to be designated by Sonera, so long as Sonera owns at least 4,500,000 shares of VoiceStream Holdings common stock; however, if Sonera owns more than 9,800,000 shares of VoiceStream Holdings common stock and TDS owns less than 4,500,000 shares of VoiceStream Holdings common stock, Sonera will be entitled to designate two additional members. This agreement would not cover, and Sonera would not be required to vote in favor of, the four Omnipoint designees as directors unless the Omnipoint principal stockholders described above agree to enter into this agreement. The parties to the VoiceStream voting agreement, TDS and Sonera have also agreed to use reasonable efforts to include in one voting agreement among all of the parties all of the above described rights and obligations; however, if all the parties do not so agree to enter into one voting agreement, there will be separate voting agreements as described above between the parties to the VoiceStream voting agreement, on the one hand, and each of Sonera, TDS and the principal stockholders of Omnipoint, on the other hand. Prior to the Omnipoint reorganization, in connection with their acquisition of shares of Omnipoint Series A Preferred, under certain circumstances, VoiceStream and Hutchison PCS (USA) will have the right to jointly designate one person to serve on the Omnipoint board of directors. This right is exercisable only if they beneficially own at least 7 1/2% of Omnipoint's outstanding equity securities and they have converted the Omnipoint Series A Preferred owned by them into Omnipoint common stock. 159 167 THE INVESTMENTS HUTCHISON INVESTMENTS At the same time that we entered into the Omnipoint reorganization agreement, Hutchison Telecommunications, Hutchison PCS (USA) and VoiceStream Holdings entered into agreements providing for the Hutchison Investments. In the Hutchison Investments, Hutchison PCS (USA) agreed to purchase shares of VoiceStream Holdings common stock for a purchase price of $29.00 per share and shares of VoiceStream Holdings Junior Preferred, for a purchase price of $100,000 per share. The total purchase price of the VoiceStream Holdings common stock and the VoiceStream Holdings Junior Preferred will be $957 million, consisting of $807 million in cash and $150 million in shares of Omnipoint Series A Preferred purchased by Hutchison PCS (USA) from Omnipoint under a securities purchase agreement. The Omnipoint Series A Preferred (and all shares of Omnipoint common stock obtained prior to the Omnipoint reorganization on conversion of the Omnipoint Series A Preferred) will be exchanged at the closing of the Omnipoint reorganization for VoiceStream Holdings common stock at a conversion price of $29.00 per share. Hutchison PCS (USA) has the right to determine the allocation between VoiceStream Holdings common stock and VoiceStream Holdings Junior Preferred that it will hold so long as it holds at least 18.6% of the total number of outstanding shares of VoiceStream Holdings common stock immediately after the closing of the Omnipoint reorganization. VoiceStream Holdings entered into the Hutchison Investments because it believed that in order to successfully merge with Omnipoint, which was and remains substantially leveraged, VoiceStream Holdings would need additional equity. If the entire $957 million is used to purchase (or is converted into) VoiceStream Holdings common stock, at the completion of the Omnipoint reorganization, the total number of shares of VoiceStream Holdings common stock purchased as part of the Hutchison Investments will be 33 million shares. After giving effect to the Omnipoint reorganization, the Aerial reorganization, the Hutchison Investments and the Sonera-VoiceStream Investment, the Hutchison Entities would own 55,899,252 shares (approximately 25%) of VoiceStream Holdings common stock. The consummation of the purchases under this subscription agreement will take place in connection with the completion of the Omnipoint reorganization. The VoiceStream Holdings Junior Preferred has no voting rights, ranks senior to the VoiceStream Holdings common stock but junior to any other series or class of VoiceStream Holdings preferred stock which may be issued, provides for a 2.5% cumulative dividend payable at maturity (40 years from the date of issuance), and may not be redeemed by VoiceStream Holdings (other than a mandatory redemption from a holder whose ownership of these shares may result in the loss of a license or franchise from any governmental agency). The holders of VoiceStream Holdings Junior Preferred cannot require VoiceStream Holdings to redeem these shares prior to maturity. Upon conversion of the VoiceStream Holdings Junior Preferred any cumulative dividend outstanding on the shares so converted will be canceled. Upon a change of control of VoiceStream Holdings, VoiceStream Holdings has the right to require the VoiceStream Holdings Junior Preferred to be converted into VoiceStream Holdings common stock. SONERA-VOICESTREAM INVESTMENT On September 17, 1999, VoiceStream Holdings and Sonera entered into an agreement providing for the Sonera-VoiceStream Investment. In the Sonera-VoiceStream Investment, Sonera agreed to purchase at the closing of the Omnipoint reorganization 8,771,930 shares of VoiceStream Holdings common stock for an aggregate consideration of $500 million, at $57.00 per share. The Sonera- VoiceStream Investment is desirable to us in light of the fact that Omnipoint is substantially leveraged, and the Sonera-VoiceStream Investment will provide us with additional capital. 160 168 SONERA-AERIAL INVESTMENT As of September 17, 1999, TDS, Aerial, Aerial Operating Company and Sonera entered into the settlement agreement and release providing for the Sonera-Aerial Investment. In the Sonera-Aerial Investment, on November 1, 1999, Sonera will invest an aggregate of $230 million in Aerial and Aerial Operating Company at an equivalent price of $22.00 per share of Aerial common stock. In this transaction, (1) Aerial will issue to Sonera 3,409,091 Aerial Common Shares in consideration for $75 million, and (2) Aerial Operating Company will issue to Sonera 1,046,999 shares of Aerial Operating Company common stock in consideration for $155 million. See "Agreements Relating to the Aerial Reorganization -- Debt Replacement Agreement" and "Sonera Settlement Agreement and Release." TDS DEBT REPLACEMENT As of September 17, 1999, TDS, Aerial, Aerial Operating Company, VoiceStream and VoiceStream Holdings entered into the debt replacement agreement and TDS, Aerial, Aerial Operating Company and Sonera entered into the settlement agreement and release, providing for the TDS Debt Replacement. In the TDS Debt Replacement, on November 1, 1999, TDS will replace $420 million of debt owed by Aerial Operating Company to TDS under the TDS revolving credit agreement with Aerial equity at a price of $22.00 per share of Aerial common stock. In this transaction, Aerial will issue to TDS an aggregate of 19,090,909 shares of Aerial common stock in consideration for the assignment by TDS to Aerial of $420 million of debt under the TDS revolving credit agreement. See "Agreements Relating to the Aerial Reorganization -- Debt Replacement Agreement" and "Sonera Settlement Agreement and Release." 161 169 FINANCIAL INFORMATION UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS The following unaudited pro forma condensed combined financial statements combine the historical consolidated balance sheets and statements of operations of VoiceStream, Omnipoint and Aerial. These financial statements give effect to each of the Omnipoint reorganization and the Aerial reorganization using the purchase method of accounting for a business combination for both. To aid you in your analysis of the financial aspects of each of these reorganizations, both individually and combined, we have presented this set of pro forma condensed combined financial statements demonstrating first, the financial aspects of the Omnipoint reorganization on a stand-alone basis and then, adding in the effect of the Aerial reorganization to demonstrate the financial aspects of the combined reorganizations. We have also presented a set of pro forma condensed combined financial statements demonstrating the financial aspects of the Aerial reorganization on a stand-alone basis. We derived this information from the audited consolidated financial statements of VoiceStream, Omnipoint and Aerial for the year ended December 31, 1998 and from the unaudited consolidated financial statements of VoiceStream, Omnipoint and Aerial as of and for the six months ended June 30, 1999. This information is only a summary and you should read it in conjunction with the historical financial statements and related notes contained in the annual reports of VoiceStream, Omnipoint and Aerial and other information that has been filed with the SEC and incorporated by reference. See "Where You Can Find More Information." The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 1999 and for the year ended December 31, 1998, assume each reorganization was effected on January 1, 1998. The unaudited pro forma condensed combined balance sheet as of June 30, 1999 gives effect to each reorganization as if it had occurred on June 30, 1999. The accounting policies of VoiceStream, Omnipoint and Aerial are substantially comparable. Certain reclassifications have been made to Omnipoint's and Aerial's historical presentation to conform to VoiceStream's presentation. These reclassifications do not materially impact Omnipoint's or Aerial's operations or financial position for the periods presented. We are providing the unaudited pro forma condensed combined financial information for illustrative purposes only. The companies may have performed differently had they always been combined. You should not rely on the pro forma combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined company will experience after the reorganizations. 162 170 VOICESTREAM WIRELESS HOLDING CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET (OMNIPOINT REORGANIZATION ONLY AND OMNIPOINT REORGANIZATION AND AERIAL REORGANIZATION) JUNE 30, 1999 (IN THOUSANDS)
OMNIPOINT COOK INLET REORGANIZATION VOICESTREAM VOICESTREAM OMNIPOINT ADJUSTMENT ADJUSTMENTS AND OMNIPOINT AERIAL ----------- ----------- ---------- -------------- ------------- ---------- NOTE 1a NOTE 1b NOTE 2 NOTE 1c ASSETS Current assets: Cash and cash equivalents...... $ 32,360 $ 309,594 $ (513,008) Note 3 $1,354,146 $ 100,033 38,350 Note 3b (18,000) Note 3e 807,000 Note 4 500,000 Note 9 197,850 Note 10 Short-term investments......... 25,778 25,778 Accounts receivable, net....... 51,632 56,764 $ (3,500) 104,896 29,059 Inventory...................... 18,068 35,866 53,934 9,998 Prepaid expenses and other current assets............... 6,398 16,567 (1,400) 21,565 6,609 ---------- ----------- --------- ---------- ---------- ---------- Total current assets....... 108,458 444,569 (4,900) 1,012,192 1,560,319 145,699 ---------- ----------- --------- ---------- ---------- ---------- Property and equipment, net..... 679,738 1,051,150 (162,375) 1,568,513 569,252 Licensing costs and other intangible assets, net......... 323,185 728,127 (226,747) 3,300,652 Note 3 4,132,367 328,003 7,150 Note 10 Investment in and advances to unconsolidated affiliates...... 246,527 99,377 35,723 Note 3f 231,627 1,902 (150,000) Note 5, 8 Other assets.................... 13,473 28,617 (7,197) 34,893 810 ---------- ----------- --------- ---------- ---------- ---------- $1,371,381 $ 2,252,463 $(301,842) $4,205,717 $7,527,719 $1,045,666 ========== =========== ========= ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable............... $ 67,499 $ 115,851 $ (1,500) $ 181,850 $ 40,269 Accrued liabilities............ 73,829 177,289 (9,014) 242,104 22,991 Current portion of long-term debt......................... 134,453 (5,658) 128,795 68,458 ---------- ----------- --------- ---------- ---------- Total current liabilities.............. 141,328 427,593 (16,172) 552,749 131,718 ---------- ----------- --------- ---------- ---------- Long-term debt (Note 6)......... 1,025,000 2,470,371 (313,670) $ 205,000 Note 10 3,386,701 241,501 ---------- ----------- --------- ---------- ---------- ---------- Deferred tax liability, net..... 17,456 ---------- Contingencies (See Notes) Minority interest............... 479 ---------- VoiceStream Holdings Junior Preferred...................... $ 650,400 Note 4 650,400 ---------- ---------- Shareholders' equity (deficit): Common stock and paid-in capital...................... 1,039,926 312,712 28,000 1,534,216 Note 3 3,774,986 983,631 364,000 Note 3d 150,000 Note 5, 8 156,600 Note 4 (310,468) Note 7 500,000 Note 9 Series A Common Shares and paid-in capital.............. 324,331 Omnipoint 7% Convertible Preferred.................... 286,651 (286,651) Note 3b Series A Preferred............. 300,000 (300,000) Notes 5, 8 Deferred compensation.......... (16,711) (11,076) 11,076 Note 7 (16,711) Notes receivable from shareholders................. (2,244) (2,244) Accumulated deficit............ (818,162) (1,531,544) 1,531,544 Note 7 (818,162) (653,450) ---------- ----------- --------- ---------- ---------- ---------- Total shareholders' equity (deficit)................ 205,053 (645,501) 28,000 3,350,317 2,937,869 654,512 ---------- ----------- --------- ---------- ---------- ---------- $1,371,381 $ 2,252,463 $(301,842) $4,205,717 $7,527,719 $1,045,666 ========== =========== ========= ========== ========== ========== AERIAL VOICESTREAM, REORGANIZATION OMNIPOINT AND ADJUSTMENTS AERIAL -------------- ------------- ASSETS Current assets: Cash and cash equivalents...... $ (68,458) Note 13 $ 1,370,221 Note (15,500) 11h Short-term investments......... 25,778 Accounts receivable, net....... 133,955 Inventory...................... 63,932 Prepaid expenses and other current assets............... 28,174 ----------- ----------- Total current assets....... (83,958) 1,622,060 ----------- ----------- Property and equipment, net..... 2,137,765 Licensing costs and other intangible assets, net......... 2,337,493 Note 11 6,797,863 Investment in and advances to unconsolidated affiliates...... 233,529 Other assets.................... 35,703 ----------- ----------- $ 2,253,535 $10,826,920 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable............... $ 222,119 Accrued liabilities............ 265,095 Current portion of long-term debt......................... $ (68,458) Note 13 128,795 ----------- ----------- Total current liabilities.............. (68,458) 616,009 ----------- ----------- Long-term debt (Note 6)......... 3,628,202 ----------- Deferred tax liability, net..... 17,456 ----------- Contingencies (See Notes) Minority interest............... (479) Note 12 ----------- VoiceStream Holdings Junior Preferred...................... 650,400 ----------- Shareholders' equity (deficit): Common stock and paid-in capital...................... 2,953,284 Note 11 6,751,970 Note 23,700 11g (984,110) Note 12 479 Note 12 Series A Common Shares and paid-in capital.............. (324,331) Note 12 Omnipoint 7% Convertible Preferred.................... Series A Preferred............. Deferred compensation.......... (16,711) Notes receivable from shareholders................. (2,244) Accumulated deficit............ 653,450 Note 12 (818,162) ----------- ----------- Total shareholders' equity (deficit)................ 2,322,472 5,914,853 ----------- ----------- $ 2,253,535 $10,826,920 =========== ===========
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements 163 171 VOICESTREAM WIRELESS HOLDING CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (OMNIPOINT REORGANIZATION ONLY AND OMNIPOINT REORGANIZATION AND AERIAL REORGANIZATION) SIX MONTHS ENDED JUNE 30, 1999 (IN THOUSANDS, EXCEPT PER SHARE DATA)
OMNIPOINT VOICESTREAM COOK INLET REORGANIZATION AND VOICESTREAM OMNIPOINT ADJUSTMENT ADJUSTMENTS OMNIPOINT AERIAL ----------- --------- ------------- -------------- ----------- --------- NOTE 1a NOTE 1b NOTE 2 NOTE 1c Revenues: Subscriber revenues......... $ 137,971 $116,255 $(16,604) $ 237,622 $ 91,070 Roamer revenues............. 3,560 10,625 (1,114) 13,071 2,300 Equipment revenues.......... 30,351 26,838 (3,700) 53,489 13,433 License fees and engineering services.................. 2,266 2,266 --------- --------- -------- --------- --------- Total revenues........... 171,882 155,984 (21,418) 306,448 106,803 --------- --------- -------- --------- --------- Operating expenses: Cost of service............. 37,469 69,493 (11,320) 95,642 33,845 Cost of equipment sales..... 60,908 77,505 (12,500) 125,913 25,557 Cost of engineering services.................. 1,686 1,686 Research and development.... 171 171 General and administrative............ 48,396 73,252 (3,700) 117,948 66,251 Sales and marketing......... 85,806 74,486 (11,200) 149,092 34,122 Depreciation and amortization.............. 55,414 93,467 (14,310) $ 78,414 Note 14 212,985 44,209 Stock based compensation.... 47,303 1,576 48,879 --------- --------- -------- -------- --------- --------- Total operating expenses............... 335,296 391,636 (53,030) 78,414 752,316 203,984 --------- --------- -------- -------- --------- --------- Operating loss............... (163,414) (235,652) 31,612 (78,414) (445,868) (97,181) --------- --------- -------- -------- --------- --------- Other income (expense): Interest and financing expense, net.............. (38,352) (126,490) 16,111 6,471 Note 1a (142,260) (14,165) Equity in net loss of unconsolidated affiliates................ (21,696) (3,006) (28,421) (781) Note 2 (53,904) (100) Interest income and other, net....................... 6,988 4,824 500 12,312 489 Minority share of loss...... 4,902 --------- --------- -------- -------- --------- --------- Total other income (expense).............. (53,060) (124,672) (11,810) 5,690 (183,852) (8,874) --------- --------- -------- -------- --------- --------- Loss before income taxes.................. (216,474) (360,324) 19,802 (72,724) (629,720) (106,055) Income tax benefit........... 113,230 --------- --------- -------- -------- --------- --------- Net (loss) income........ $(216,474) $(360,324) $ 19,802 $(72,724) $(629,720) $ 7,175 ========= ========= ======== ======== ========= ========= AERIAL VOICESTREAM REORGANIZATION OMNIPOINT ADJUSTMENTS AND AERIAL -------------- ----------- Revenues: Subscriber revenues......... $ 328,692 Roamer revenues............. 15,371 Equipment revenues.......... 66,922 License fees and engineering services.................. 2,266 ---------- Total revenues........... 413,251 ---------- Operating expenses: Cost of service............. 129,487 Cost of equipment sales..... 151,470 Cost of engineering services.................. 1,686 Research and development.... 171 General and administrative............ 184,199 Sales and marketing......... 183,214 Depreciation and amortization.............. $ 55,516 Note 14 312,710 Stock based compensation.... 48,879 -------- ---------- Total operating expenses............... 55,516 1,011,816 -------- ---------- Operating loss............... (55,516) (598,565) -------- ---------- Other income (expense): Interest and financing expense, net.............. (156,425) Equity in net loss of unconsolidated affiliates................ (54,004) Interest income and other, net....................... 12,801 Minority share of loss...... (4,902) Note 16 -------- ---------- Total other income (expense).............. (4,902) (197,628) -------- ---------- Loss before income taxes.................. (60,418) (796,193) Income tax benefit........... 113,230 -------- ---------- Net (loss) income........ $(60,418) $ (682,963) ======== ==========
Pro forma loss per common share calculation (Note 17): Net loss................................................... $(629,720) $(682,963) Preferred dividends attributable to VoiceStream Holdings Junior Preferred......................................... (6,638) (6,638) --------- --------- Net loss attributable to common shareholders............... $(636,358) $(689,601) ========= ========= Weighted average common shares used in computing basic and diluted loss per common share............................ 148,584 200,396 ========= ========= Basic and diluted loss per common share.................... $ (4.28) $ (3.44) ========= =========
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements. 164 172 VOICESTREAM WIRELESS HOLDING CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (OMNIPOINT REORGANIZATION ONLY AND OMNIPOINT REORGANIZATION AND AERIAL REORGANIZATION) YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS, EXCEPT PER SHARE DATA)
OMNIPOINT VOICESTREAM COOK INLET REORGANIZATION AND VOICESTREAM OMNIPOINT ADJUSTMENT ADJUSTMENTS OMNIPOINT AERIAL ----------- ----------- ------------- -------------- ----------- ---------- NOTE 1A NOTE 1B NOTE 2 NOTE 1C Revenues: Subscriber revenues.......... $ 123,966 $ 127,594 $(15,681) $ 235,879 $ 121,160 Roamer revenues..... 3,506 9,999 (500) 13,005 3,231 Equipment revenues.......... 40,490 26,616 (2,175) 64,931 31,514 License fees and engineering services.......... 4,784 4,784 --------- --------- -------- ----------- ---------- Total revenues...... 167,962 168,993 (18,356) 318,599 155,905 --------- --------- -------- ----------- ---------- Operating expenses: Cost of service..... 50,978 120,634 (16,442) 155,170 57,396 Cost of equipment sales............. 77,071 100,074 (9,994) 167,151 87,715 Cost of engineering services.......... 4,168 4,168 Research and development....... 16,639 16,639 General and administrative.... 75,343 128,031 (10,405) 192,969 139,458 Sales and marketing......... 85,447 127,211 (19,300) 193,358 67,920 Depreciation and amortization...... 83,767 129,043 (21,690) $ 156,828 Note 14 347,948 83,401 --------- --------- -------- --------- ----------- ---------- Total operating expenses...... 372,606 625,800 (77,831) 156,828 1,077,403 435,890 --------- --------- -------- --------- ----------- ---------- Operating loss........ (204,644) (456,807) 59,475 (156,828) (758,804) (279,985) --------- --------- -------- --------- ----------- ---------- Other income (expense): Interest and financing expense, net............... (47,258) (187,187) 30,569 13,140 Note 1a (190,736) (24,118) Equity in net loss of unconsolidated affiliates........ (24,120) (11,879) (59,825) (1,563) Note 2 (97,387) (128) Interest income and other, net........ 8,616 3,206 1,264 13,086 1,324 Minority share of loss.............. 23,620 --------- --------- -------- --------- ----------- ---------- Total other income (expense)..... (62,762) (195,860) (27,992) 11,577 (275,037) 698 --------- --------- -------- --------- ----------- ---------- Loss before income taxes......... (267,406) (652,667) 31,483 (145,251) (1,033,841) (279,287) Income tax expense.... (2,579) --------- --------- -------- --------- ----------- ---------- Net (loss) income...... $(267,406) $(652,667) $ 31,483 $(145,251) $(1,033,841) (281,866) ========= ========= ======== ========= =========== ========== AERIAL VOICESTREAM, REORGANIZATION OMNIPOINT ADJUSTMENTS AND AERIAL -------------- ------------ Revenues: Subscriber revenues.......... $ 357,039 Roamer revenues..... 16,236 Equipment revenues.......... 96,445 License fees and engineering services.......... 4,784 ----------- Total revenues...... 474,504 ----------- Operating expenses: Cost of service..... 212,566 Cost of equipment sales............. 254,866 Cost of engineering services.......... 4,168 Research and development....... 16,639 General and administrative.... 332,427 Sales and marketing......... 261,278 Depreciation and amortization...... $ 111,032 Note 14 542,381 --------- ----------- Total operating expenses...... 111,032 1,624,325 --------- ----------- Operating loss........ (111,032) (1,149,821) --------- ----------- Other income (expense): Interest and financing expense, net............... (214,854) Equity in net loss of unconsolidated affiliates........ (97,515) Interest income and other, net........ 14,410 Minority share of loss.............. (23,620) Note 16 --------- ----------- Total other income (expense)..... (23,620) (297,959) --------- ----------- Loss before income taxes......... (134,652) (1,447,780) Income tax expense.... (2,579) --------- ----------- Net (loss) income...... $(134,652) $(1,450,359) ========= ===========
Pro forma loss per common share calculation (Note 17): Net loss.................................................. $(1,033,841) $(1,450,359) Preferred dividends attributable to VoiceStream Holdings Junior Preferred........................................ (13,275) (13,275) ----------- ----------- Net loss attributable to common shareholders.............. $(1,047,116) $(1,463,634) =========== =========== Weighted average common shares used in computing basic and diluted loss per common share........................... 145,291 197,103 =========== =========== Basic and diluted loss per common share................... $ (7.21) $ (7.43) =========== ===========
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements. 165 173 VOICESTREAM WIRELESS HOLDING CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET (AERIAL REORGANIZATION ONLY) JUNE 30, 1999 (IN THOUSANDS)
AERIAL REORGANIZATION VOICESTREAM VOICESTREAM AERIAL ADJUSTMENTS AND AERIAL ----------- ---------- -------------- ----------- NOTE 1a NOTE 1c ASSETS Current assets: Cash and cash equivalents........ $ 32,360 $ 100,033 $ (68,458) Note 13 $ 48,435 (15,500) Note 11h Accounts receivable, net......... 51,632 29,059 80,691 Inventory........................ 18,068 9,998 28,066 Prepaid expenses and other current assets................ 6,398 6,609 13,007 ---------- ---------- ---------- ---------- Total current assets..... 108,458 145,699 (83,958) 170,199 ---------- ---------- ---------- ---------- Property and equipment, net........ 679,738 569,252 1,248,990 Licensing costs and other intangible assets, net........... 323,185 328,003 2,337,493 Note 11 2,988,681 Investment in and advances to unconsolidated affiliates........ 246,527 1,902 248,429 Other assets....................... 13,473 810 14,283 ---------- ---------- ---------- ---------- $1,371,381 $1,045,666 $2,253,535 $4,670,582 ========== ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable................. $ 67,499 $ 40,269 $ $ 107,768 Accrued liabilities.............. 73,829 22,991 96,820 Current portion of long-term debt.......................... 68,458 $ (68,458) Note 13 ---------- ---------- ---------- ---------- Total current liabilities............ 141,328 131,718 (68,458) 204,588 ---------- ---------- ---------- ---------- Long-term debt (Note 6)............ 1,025,000 241,501 1,266,501 ---------- ---------- ---------- ---------- Deferred tax liability, net........ 17,456 17,456 ---------- ---------- Contingencies (See Notes) Minority interest.................. 479 (479) Note 12 ---------- ---------- Shareholders' equity: Common stock and paid-in capital....................... 1,039,926 983,631 2,953,284 Note 11 4,016,910 23,700 Note 11g (984,110) Note 12 479 Note 12 Series A Common Shares and paid-in capital............... 324,331 (324,331) Note 12 Deferred compensation............ (16,711) (16,711) Accumulated deficit.............. (818,162) (653,450) 653,450 Note 12 (818,162) ---------- ---------- ---------- ---------- Total shareholders' equity................. 205,053 654,512 2,322,472 3,182,037 ---------- ---------- ---------- ---------- $1,371,381 $1,045,666 $2,253,535 $4,670,582 ========== ========== ========== ==========
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements. 166 174 VOICESTREAM WIRELESS HOLDING CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (AERIAL REORGANIZATION ONLY) SIX MONTHS ENDED JUNE 30, 1999 (IN THOUSANDS, EXCEPT PER SHARE DATA)
AERIAL REORGANIZATION VOICESTREAM VOICESTREAM AERIAL ADJUSTMENTS AND AERIAL ----------- --------- -------------- ----------- NOTE 1a NOTE 1c Revenues: Subscriber revenues........... $ 137,971 $ 91,070 $ 229,041 Roamer revenues............... 3,560 2,300 5,860 Equipment revenues............ 30,351 13,433 43,784 --------- --------- --------- Total revenues........ 171,882 106,803 278,685 --------- --------- --------- Operating expenses: Cost of service............... 37,469 33,845 71,314 Cost of equipment sales....... 60,908 25,557 86,465 General and administrative.... 48,396 66,251 114,647 Sales and marketing........... 85,806 34,122 119,928 Depreciation and 55,414 44,209 $ 55,516 Note 14 155,139 amortization............... Stock based compensation...... 47,303 47,303 --------- --------- -------- --------- Total operating 335,296 203,984 55,516 594,796 expenses........... --------- --------- -------- --------- Operating loss.................. (163,414) (97,181) (55,516) (316,111) --------- --------- -------- --------- Other income (expense): Interest and financing (38,352) (14,165) (52,517) expense, net............... Equity in net loss of (21,696) (100) (21,796) unconsolidated affiliates................. Interest income and other, 6,988 489 7,477 net........................ Minority share of loss........ 4,902 (4,902) Note 16 --------- --------- -------- --------- Total other income (expense).......... (53,060) (8,874) (4,902) (66,836) --------- --------- -------- --------- Loss before income (216,474) (106,055) (60,418) (382,947) taxes.............. Income tax benefit.............. 113,230 113,230 --------- --------- -------- --------- Net (loss) income..... $(216,474) $ 7,175 $(60,418) $(269,717) ========= ========= ======== =========
Pro forma loss per common share calculation (Note 17): Net loss attributable to common shareholders................ $(269,717) ========= Weighted average common shares used in computing basic and diluted loss per common share..................................................... 147,357 ========= Basic and diluted loss per common share..................... $ (1.83) =========
See Note to Unaudited Pro Forma Condensed Combined Financial Statements. 167 175 VOICESTREAM WIRELESS HOLDING CORPORATION UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (AERIAL REORGANIZATION ONLY) YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS, EXCEPT PER SHARE DATA)
AERIAL REORGANIZATION VOICESTREAM VOICESTREAM AERIAL ADJUSTMENTS AND AERIAL ----------- ---------- -------------- ----------- NOTE 1a NOTE 1c Revenues: Subscriber revenues................ $ 123,966 $ 121,160 $ 245,126 Roamer revenues.................... 3,506 3,231 6,737 Equipment revenues................. 40,490 31,514 72,004 --------- --------- --------- Total revenues............. 167,962 155,905 323,867 --------- --------- --------- Operating expenses: Cost of services................... 50,978 57,396 108,374 Cost of equipment sales............ 77,071 87,715 164,786 General and administrative......... 75,343 139,458 214,801 Sales and marketing................ 85,447 67,920 153,367 Depreciation and amortization...... 83,767 83,401 $ 111,032 Note 14 278,200 --------- --------- --------- --------- Total operating expenses... 372,606 435,890 111,032 919,528 --------- --------- --------- --------- Operating loss....................... (204,644) (279,985) (111,032) (595,661) --------- --------- --------- --------- Other income (expense): Interest and financing expense, net............................. (47,258) (24,118) (71,376) Equity in net loss of unconsolidated affiliates....... (24,120) (128) (24,248) Interest income and other, net..... 8,616 1,324 9,940 Minority share of loss............. 23,620 (23,620) Note 16 --------- --------- --------- --------- Total other income (expense)............... (62,762) 698 (23,620) (85,684) --------- --------- --------- --------- Loss before income taxes... (267,406) (279,287) (134,652) (681,345) Income tax expense................... (2,579) (2,579) --------- --------- --------- --------- Net loss................... $(267,406) $(281,866) $(134,652) $(683,924) ========= ========= ========= =========
Pro forma loss per common share calculation (Note 17): Net loss attributable to common shareholders................ $(683,924) ========= Weighted average common shares used in computing basic and diluted loss per common share............................. 144,199 ========= Basic and diluted loss per common share..................... $ (4.74) =========
See Notes to Unaudited Pro Forma Condensed Combined Financial Statements. 168 176 VOICESTREAM WIRELESS HOLDING CORPORATION NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED) DESCRIPTION OF PRO FORMA REORGANIZATION TRANSACTIONS: 1a. Represents the historical financial position of VoiceStream adjusted for the remaining $47.5 million of the $150 million Interim Investment acquired by VoiceStream on October 1, 1999. The balance sheet has been adjusted for this cash payment as a decrease in cash and cash equivalents and an increase in investment in and advances to unconsolidated affiliates. The statements of operations have been adjusted for interest and financing expenses that would have been incurred due to the increase in borrowings of $150 million. This adjustment assumes that VoiceStream purchases Omnipoint Series A Preferred as of January 1, 1998 and incurs interest expense due to an increase in borrowings to fund such purchase. The interest expense is calculated on the total borrowing of $150 million for the six months ended June 30, 1999 and for the year ended December 31, 1998 at a market interest rate of 8.9% and 8.7%, respectively. This adjustment has been eliminated in the Omnipoint reorganization columns to reflect the impact of this transaction on a combined VoiceStream Holdings basis. In the event that the Omnipoint reorganization is not completed or is terminated, VoiceStream will continue to hold its shares of Omnipoint Series A Preferred and the conversion price will be reduced to $18.50 per share, under certain conditions. 1b. Represents the historical results of operations and financial position of Omnipoint adjusted for the remaining portion of the $300 million Interim Investment committed collectively by VoiceStream and Hutchison PCS (USA). Each company purchased an additional 1,979 shares of Series A Preferred on October 1, 1999 for an aggregate purchase price of $95 million which is convertible at their option into shares of Omnipoint common stock at a price of $24.00 per share. Therefore, this column includes the effects of the $95 million portion of Interim Investment as an increase to cash and cash equivalents and Series A Preferred. In addition to the adjustment for the Interim Investment, certain reclassifications have been made to the historical financial information for Omnipoint to conform to VoiceStream's financial statement presentation. These reclassifications do not materially impact Omnipoint's results of operations or financial position. 1c. Represents the historical financial position of Aerial adjusted for the $230 million Sonera-Aerial Investment at $22.00 per share, the use of these proceeds to pay down a portion of the Aerial debt to TDS and the TDS Debt Replacement at $22.00 per share. Therefore, this column includes the effects of these adjustments as follows (in thousands):
HISTORICAL AERIAL INTERIM AERIAL JUNE 30, 1999 TRANSACTIONS SUBTOTAL ------------- ------------ -------- Cash and cash equivalents...................... $ 4,445 $ 95,588 $100,033 Current portion of long-term debt.............. $622,870 $(554,412) $ 68,458 Common Shares and paid-in capital.............. $617,962 $ 365,669 $983,631 Series A Common Shares and paid-in capital..... $ 40,000 $ 284,331 $324,331
The $420 million in Aerial equity has been allocated between Aerial Common Shares ($135.7 million) and Aerial Series A Common Shares ($284.3 million) as required by the TDS Debt Replacement. The entire $230 million Sonera-Aerial Investment was assumed to be a purchase of Aerial common stock. 169 177 VOICESTREAM WIRELESS HOLDING CORPORATION NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) Interest expense for the six months ended June 30, 1999 and the twelve months ended December 31, 1998 has been reduced to reflect the TDS Debt Replacement and the repayment of the remaining debt to TDS with the proceeds of the Sonera-Aerial Investment. Certain reclassifications have been made to the historical financial information for Aerial to conform to VoiceStream's financial statement presentation. These reclassifications do not materially impact Aerial's results of operations or financial position. 2. These columns represent the deconsolidation and contribution of certain operations, assets and liabilities related to two new joint venture entities described below, which were previously consolidated in Omnipoint's historical balance sheet and statement of operations. These adjustments reflect a change to the equity method of accounting for the interest because VoiceStream Holdings will have only a 49.9% ownership in the two new joint venture entities. Under the Designated Entity rules set forth by the FCC, VoiceStream Holdings can not own or operate Omnipoint's C and F Block licenses. As a result, immediately prior to the reorganization, the C and F Block licenses and certain of the related operations, assets and liabilities are being transferred to two new joint venture entities controlled by Cook Inlet. Each of these joint venture entities, CIVS II and CIVS III, is expected to qualify as a Designated Entity. CIVS II will own all C and F Block licenses previously held by Omnipoint. CIVS III will own the C Block licenses acquired by Omnipoint in the May FCC re-auction. VoiceStream Holdings expects to enter into an agreement to provide technical services to each of these joint venture entities. Cook Inlet will contribute a total of $75 million in cash to these joint venture entities for its 50.1% ownership and exchange rights. VoiceStream Holdings will contribute a combination of non-cash assets and liabilities for its 49.9% ownership. Cook Inlet will hold the majority of voting power in each of these joint venture entities -- see also "Risk Factors -- We will have to rely on joint venture entities that we will not control to maintain PCS coverage and expand in selected markets." As part of this transaction, Cook Inlet has certain rights, but not the obligation, to exchange its joint venture interests into a total of 3,750,000 shares of VoiceStream Holdings common stock for a 30 day period beginning five years after the issuance date of the licenses held by CIVS II and III. For CIVS II, this date is in the second quarter of 2002, and for CIVS III this date is estimated to be not before 2004. These rights are conditioned upon the FCC's Designated Entity rules and VoiceStream Holdings' legal ability to own the C and F Block licenses at the time of the exchange under such rules. As mentioned above, each of the joint venture agreements, included rights whereby Cook has the ability to exchange its investment in the joint ventures for a fixed number of VoiceStream Holdings shares. Consistent with Emerging Issues Task Force (EITF) 98-5, the fair value of the exchange rights has been recorded as an increase to investment in and advances to unconsolidated affiliates and additional paid in capital as of June 30, 1999. The fair value will be amortized over the life of these exchange rights and such amortization has been reflected in the pro forma condensed combined financial statements for the periods ended June 30, 1999 and December 31, 1998. For purposes of this pro forma presentation, it has been assumed that all related vendor debt will be transferable to the joint ventures. 170 178 VOICESTREAM WIRELESS HOLDING CORPORATION NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 3. The Omnipoint reorganization is expected to result in an allocation of the purchase price to the tangible and intangible assets and liabilities of Omnipoint. The transaction is not expected to result in an incremental deferred tax liability. Such allocation reflects the estimated fair value of the assets and liabilities acquired by VoiceStream Holdings based upon information available at the date of the preparation of the accompanying pro forma condensed combined financial statements. Such allocation will be adjusted upon the final determination of such fair values. Management is not aware of any circumstances that would cause the final purchase price allocation to be significantly different from that which is reflected in the accompanying pro forma condensed combined balance sheet. However, actual valuations and allocations may differ from those reflected herein. The aggregate purchase price was calculated as follows (in thousands, except per share data): Total common shares outstanding of Omnipoint -- Note 3a... 53,681 Assumed conversion of Omnipoint 7% Convertible Preferred -- Note 3b.................................... 10,445 ---------- Total estimated Omnipoint shares outstanding........... 64,126 VoiceStream Holdings exchange ratio per share............. 0.825 ---------- Equivalent VoiceStream Holdings common shares............. 52,904 The Omnipoint conversion price -- Note 3c................ $ 29.00 ---------- Subtotal............................................... $1,534,216 Cash consideration of $8 per share........................ 513,008 Fair value of liabilities of Omnipoint at June 30, 1999... 2,568,122 Option/warrant conversion costs -- Note 3d................ 364,000 Reorganization related costs -- Note 3e................... 18,000 ---------- Total Consideration....................................... 4,997,346 Fair value of assets of Omnipoint acquired (excluding FCC licenses) -- Note 3f.................................... 1,195,314 Fair value of FCC licenses acquired (net book value of licenses equal to $501,380)............................. 829,560 ---------- Preliminary goodwill...................................... $2,972,472 ==========
3a. Outstanding shares of Omnipoint common stock used for purposes of this pro forma are as of August 31, 1999, the latest practicable date. 3b. For purposes of this pro forma presentation we have assumed that all of the 6,500,000 shares of Omnipoint 7% Convertible Preferred are converted into 10,445,000 shares of Omnipoint common stock just prior to the Omnipoint reorganization, and are exchanged as part of the Omnipoint reorganization for 8,617,000 shares of VoiceStream Holdings common stock. Assuming this conversion, the remaining amounts previously deposited by Omnipoint into escrow to pay dividends on these shares revert back to Omnipoint. As of June 30, 1999 the amount held in escrow was $38.4 million. Our assumption that the holders of Omnipoint's 7% Convertible Preferred would exercise their conversion option is based on the fact that such conversion likely would 171 179 VOICESTREAM WIRELESS HOLDING CORPORATION NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) result in more favorable tax treatment than conversion after closing of the reorganization. If the holders of the Omnipoint 7% Preferred were to choose to continue to hold their preferred stock in Omnipoint, VoiceStream Holdings would report a minority interest on its balance sheet and the accretion of dividends would be reported as minority interest expense. 3c. The conversion price is based on the average closing price of VoiceStream common stock a few days before and after the June 23, 1999 measurement date. 3d. Represents the fair value, based on a Black-Scholes valuation, associated with the conversion of outstanding Omnipoint options and warrants to equivalent options and warrants of VoiceStream Holdings at the time of the reorganization based on the number of options and warrants outstanding and the closing market price of VoiceStream as of August 31, 1999, the latest practicable date. At the closing of the Omnipoint reorganization, each outstanding and unexercised option or warrant to purchase shares of Omnipoint's common stock will be converted into an option or warrant to purchase shares of VoiceStream Holdings common stock. The number of options and the exercise prices will vary from the original grant based on conversion provisions in the Omnipoint reorganization agreement resulting in the intrinsic value of each option and warrant remaining unchanged. Accordingly, pursuant to the provisions of EITF 90-9, "Changes to Fixed Employee Stock Option Plans As a Result of Equity Restructuring," the estimated fair value of these options and warrants has been recorded as additional purchase price. 3e. Anticipated reorganization costs to VoiceStream as a result of the Omnipoint reorganization are estimated as follows (in thousands): Investment banking fees............................. $ 14,000 Legal, accounting and printing fees................. 1,500 Employee separation costs........................... 2,500 -------- $ 18,000 ========
3f. Includes an adjustment to reflect the step-up of the investment in the two new Cook Inlet joint venture entities, CIVS II and CIVS III, over the historical net book value of the net assets contributed. 4. This adjustment represents the additional investment in VoiceStream Holdings by Hutchison PCS (USA) pursuant to the subscription agreement dated as of June 23, 1999. Concurrent with the Omnipoint reorganization agreement, Hutchison PCS (USA) has agreed to purchase shares of VoiceStream Holdings common stock at $29.00 per share and VoiceStream Holdings Junior Preferred for $100,000 per share for an aggregate price of $807 million. Hutchison PCS (USA) has the right to determine the allocation between VoiceStream Holdings common stock and Junior Preferred that it will hold so long as it holds at least 18.6% of the total number of outstanding shares of VoiceStream Holdings common stock at the closing of the Omnipoint reorganization. For purposes of this pro forma presentation, we have assumed Hutchison PCS (USA) will purchase $650.4 million representing 6,504 shares of VoiceStream Holdings Junior 172 180 VOICESTREAM WIRELESS HOLDING CORPORATION NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) Preferred and $156.6 million, representing 5.4 million shares, of VoiceStream Holdings common stock. The VoiceStream Holdings Junior Preferred provides for a 2.5% cumulative dividend payable at maturity (40 years from the close of the Omnipoint reorganization). Since the redemption of the VoiceStream Holdings Junior Preferred is outside the control of VoiceStream Holdings, it has been classified as mezzanine financing and has been excluded from shareholders' equity. 5. Represents the elimination in consolidation of VoiceStream's $150 million investment in Omnipoint prior to the Omnipoint reorganization. 6. Certain of the long-term debt agreements of Omnipoint contain provisions which require Omnipoint to offer repayment of outstanding amounts when a change of control occurs. Under certain agreements, Omnipoint is required to offer to repay to the lenders amounts outstanding. Additionally, the holders of the debt issued under certain of these agreements are entitled to a prepayment premium. The pro forma condensed combined balance sheet assumes that the lenders will not exercise the offer for Omnipoint to repay amounts outstanding, and therefore, outstanding debt amounts have not been reclassified as current. The aggregate amount of principal maturities (including prepayment premiums, if any) of Omnipoint's long-term debt at June 30, 1999, that will be assumed by VoiceStream Holdings if the holders were to require or accept the offer of repayment are as follows (in thousands): Six months ending December 31, 1999..................... $2,121 Year ending December 31, 2000........................... 148 2001.................................................... 32 2002.................................................... 0 2003.................................................... 0 Thereafter.............................................. 0 ------ $2,301 ======
The remaining outstanding long-term debt originating from Aerial after the Aerial reorganization will consist only of the Aerial Series A zero coupon notes and Series B zero coupon notes which are due in 2006 and 2008, respectively. 7. Represents the elimination in consolidation of Omnipoint's historical common stock and paid-in capital of $312.7 million, the recording of the $2.2 million shareholder note receivable of Omnipoint to be carried forward to VoiceStream Holdings, the elimination of Omnipoint's historical deferred compensation of $11.1 million, and the elimination of Omnipoint's historical accumulated deficit of $1.5 billion. 8. Represents the elimination in consolidation of VoiceStream's $150 million Omnipoint Series A Preferred investment in Omnipoint and the conversion of Hutchison's $150 million Omnipoint Series A Preferred investment to VoiceStream Holdings common stock. 9. Represents the Sonera-VoiceStream Investment of $500 million in VoiceStream Holdings common stock at $57.00 per share. This investment is independent of the Aerial reorganization but contingent upon the closing of the Omnipoint reorganization. 173 181 VOICESTREAM WIRELESS HOLDING CORPORATION NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 10. Represents issuance by Omnipoint on September 17, 1999, of $205 million of 11 1/2% Senior Notes due September 15, 2009. Cash proceeds to Omnipoint of approximately $197.9 million were net of underwriting discounts, commissions and expenses of the offering. 11. The Aerial reorganization is expected to result in an allocation of the purchase price to the tangible and intangible assets and liabilities of Aerial. The transaction is not expected to result in an incremental deferred tax liability. Such allocation reflects the estimated fair value of the assets and liabilities acquired by VoiceStream Holdings based upon information available at the date of the preparation of the accompanying pro forma condensed combined financial statements. Such allocation will be adjusted upon the final determination of such fair values. Management is not aware of any circumstances that would cause the final purchase price allocation, other than the movement of VoiceStream's stock price prior to the closing of the reorganization and the resulting impacts, to be significantly different from that which is reflected in the accompanying pro forma condensed combined balance sheet. However, actual valuations and allocations may differ from those reflected herein. The aggregate purchase price was calculated as follows (in thousands, except per share data): Total Aerial common stock outstanding -- Note 11a........... 71,925 Additional Sonera-Aerial Investment -- Note 11b............. 10,455 TDS Debt Replacement -- Note 11c............................ 19,091 Conversion of Sonera shares of Aerial Operating Company to Aerial common stock -- Note 11d........................... 11,971 Aerial restricted common stock -- Note 11e.................. 431 ---------- Total estimated Aerial shares outstanding................. 113,873 VoiceStream Holdings exchange ratio per share............... 0.455 ---------- Equivalent VoiceStream Holdings common stock................ 51,812 The Aerial conversion price -- Note 11f..................... $ 57.00 ---------- Subtotal.................................................. $2,953,284 Fair value of liabilities of Aerial at June 30, 1999........ 390,675 Option conversion costs -- Note 11g......................... 23,700 Reorganization related costs -- Note 11h.................... 15,500 ---------- Total Consideration....................................... 3,383,159 Fair value of assets of Aerial acquired (excluding FCC licenses)................................................. 717,663 Fair value of FCC licenses acquired (net book value of licenses equal to $328,003)............................... 561,700 ---------- Preliminary goodwill........................................ $2,103,796 ==========
11a. Outstanding shares of Aerial common stock used for purposes of this pro forma are as of August 31, 1999, the latest practicable date. 11b. Represents the additional shares of Aerial common stock assumed to be purchased by Sonera in the $230 million Sonera-Aerial Investment at $22.00 per share (see Note 1c). 11c. In connection with the TDS Debt Replacement, $420 million of debt to TDS will be replaced with Aerial common stock at $22.00 per share (see Note 1c). 174 182 VOICESTREAM WIRELESS HOLDING CORPORATION NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 11d. Sonera's current investment in Aerial Operating Company of 1.8 million shares is converted prior to closing to Aerial shares using a defined conversion ratio of 6.72919. 11e. Represents 431,000 shares of restricted common stock assumed to be issued to certain Aerial employees upon shareholder approval of the reorganization. 11f. The conversion price is based on the average closing price of VoiceStream common stock a few days before and after September 20, 1999, the Aerial reorganization announcement date. 11g. Represents the fair value, based on a Black-Scholes valuation, associated with the conversion of outstanding Aerial options to equivalent options of VoiceStream Holdings at the time of the Aerial reorganization based on the number of options outstanding and the closing market price of VoiceStream as of August 31, 1999, the latest practicable date. Upon stockholder approval of the Aerial reorganization, each outstanding and unexercised Aerial option will vest. Pursuant, to the provisions of EITF 90-9, since all Aerial options vest upon the stockholder approval of the Aerial reorganization, the estimated fair value of these options has been recorded as additional purchase price. 11h. Anticipated reorganization costs to VoiceStream as a result of the Aerial reorganization are estimated as follows (in thousands): Investment banking fees................................ $ 6,000 Legal, accounting and printing fees.................... 1,400 Employee separation costs.............................. 8,100 ------- $15,500 =======
12. Represents the elimination in consolidation of Aerial's historical minority interest of $0.5 million, Aerial's Common Shares and paid-in capital of $984.1 million, Aerial's Series A Common Shares of $324.3 million, and Aerial's accumulated deficit of $653.4 million. 13. Current portion of long-term debt has been reduced to reflect the payoff of the Nokia credit agreement of $68.5 million. Additionally, interest expense for the six months ended June 30, 1999 and the 12 months ended December 31, 1998 has been reduced to reflect this payoff. 14. This adjustment represents the amortization of the additional purchase price allocated to the FCC licenses and goodwill. FCC licenses are amortized over a 40 year period and the goodwill is amortized over a 20-year period. 15. This adjustment represents the amortization of the difference between the underlying net book value of the investment in the new Cook Inlet joint venture entities and the fair value assigned to these investments. This difference has been allocated between FCC licenses and goodwill and is being amortized over 40 years and 20 years, respectively. 16. Represents the elimination of Aerial's historical minority interest loss, resulting from Sonera's conversion of its equity Aerial Operating Company to equity in Aerial prior to the Aerial reorganization. 175 183 VOICESTREAM WIRELESS HOLDING CORPORATION NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) 17. For purposes of calculating pro forma loss per share it has been assumed that the Omnipoint reorganization and the Aerial reorganization will be completed. Additionally, we have made the following assumptions: (A) the Omnipoint 7% Convertible Preferred stockholders have converted all of their shares to Omnipoint common stock as of January 1, 1998, which will subsequently convert to VoiceStream Holdings common stock at the 0.825 conversion rate; (B) Hutchison PCS (USA) has made only the initial $102.5 million investment in Omnipoint Series A Preferred as of June 23, 1999, which is exchangeable for 3.5 million shares of VoiceStream Holdings common stock; (C) Hutchison PCS (USA) will elect to purchase all VoiceStream Holdings Junior Preferred for its $807 million investment, which contains a 2.5% dividend. For pro forma purposes, $531 million of the total $807 million is considered factually supportable for the calculation of the accumulation of a 2.5% annual dividend payable at the end of 40 years; (D) the restricted stock awards will be paid out in Aerial shares immediately prior to the closing of the Aerial reorganization; and (E) all public shareholders of Aerial will elect to take the stock election. The following summarizes the pro forma calculation of loss per share based on these assumptions (in thousands, except per share data):
JUNE 30, DECEMBER 31, 1999 1998 --------- ------------ VoiceStream weighted average common shares.................. 95,545 92,387 Conversion of Omnipoint outstanding common stock(1)......... 44,287 44,287 Conversion of Omnipoint 7% Convertible Preferred............ 8,617 8,617 Exchange of Omnipoint Series A Preferred.................... 135 Conversion of Aerial shares................................. 51,616 51,616 Aerial restricted stock units............................... 196 196 --------- ----------- Total weighted average common shares.............. 200,396 197,103 ========= =========== VoiceStream Holdings pro forma net loss..................... $(682,963) $(1,450,359) VoiceStream Holdings Junior Preferred dividends............. (6,638) (13,275) --------- ----------- Pro forma net loss attributable to common shareholders...... $(689,601) $(1,463,634) ========= =========== Basic and diluted pro forma loss per common share........... $ (3.44) $ (7.43) ========= ===========
- ------------------------- (1) Shares outstanding as of August 31, 1999. 176 184 VOICESTREAM WIRELESS HOLDING CORPORATION NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) The following summarizes the impact of a change in assumption A or C (assumption B must occur based on the provisions of the subscription agreement):
ASSUMPTION C ASSUMPTION A CHANGES TO AN ELECTION DOES NOT OCCUR OF 100% COMMON STOCK(1) ------------------------ ------------------------ JUNE 30, DECEMBER 31, JUNE 30, DECEMBER 31, 1999 1998 1999 1998 --------- ------------ --------- ------------ VoiceStream weighted average common shares.................................. 95,545 92,387 95,545 92,387 Conversion of Omnipoint outstanding common stock................................... 44,287 44,287 44,287 44,287 Conversion of Omnipoint 7% Convertible Preferred............................... 8,617 8,617 Exchange of Omnipoint Series A Preferred............................... 135 135 Hutchison additional investment........... 18,311 18,311 Conversion of Aerial shares............... 51,616 51,616 51,616 51,616 Aerial restricted stock units............. 196 196 196 196 --------- ----------- --------- ----------- Total common shares............. 191,779 188,486 218,707 215,414 ========= =========== ========= =========== VoiceStream Holdings unadjusted pro forma net loss................................ $(682,963) $(1,450,359) $(682,963) $(1,450,359) Omnipoint 7% Convertible Preferred minority interest............. (10,459) (13,946) VoiceStream Holdings Junior Preferred dividend................................ (6,638) (13,275) --------- ----------- --------- ----------- Pro forma net loss attributable to common shareholders............................ $(700,060) $(1,477,580) $(682,963) $(1,450,359) ========= =========== ========= =========== Basic and diluted pro forma loss per common share............................ $ (3.65) $ (7.84) $ (3.12) $ (6.73) ========= =========== ========= ===========
- --------------- (1) For every 10% change in the amount of common stock elected to be taken by Hutchison, the pro forma impact on net loss attributable to common shareholders would increase by $6.0 million and $11.9 million for the periods ended June 30, 1999 and December 31, 1998, respectively, and loss per share would increase by $0.28 per share and $0.62 per share, respectively. In the event holders of Aerial restricted stock units receive cash instead of stock, the loss per share would be unchanged for each of the periods ended June 30, 1999 and December 31, 1998. In the event Aerial's public shareholders elect to receive cash at $18.00 per share in lieu of VoiceStream Holdings common stock, the loss per share would increase by $0.10 per share for the period ended June 30, 1999 and would increase by $0.22 per share for the period ended December 31, 1998. 177 185 VOICESTREAM WIRELESS HOLDING CORPORATION NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED) CONTINGENCIES: As a result of the reorganizations, VoiceStream may have to make substantial tax indemnity payments to Western Wireless. In a spin-off transaction effected on May 3, 1999, Western Wireless distributed its entire 80.1% interest in VoiceStream's common stock to its stockholders. Western Wireless will recognize gain as a result of the spin-off, if the spin-off is considered to be part of a plan or series of related transactions pursuant to which one or more persons acquire, directly or indirectly, 50% or more of VoiceStream's common stock -- a "prohibited plan." VoiceStream has agreed to indemnify Western Wireless on an after-tax basis for any taxes, penalties, interest and various other expenses incurred by Western Wireless if it is required to recognize such gain. The amount of such gain that Western Wireless would recognize would be equal to the difference between the fair market value of VoiceStream common stock at the time of the spin-off and Western Wireless' adjusted tax basis in such stock at that time. In the absence of direct authority, and although the issue is not free from doubt, VoiceStream believes that it should be able to establish that the spin-off and VoiceStream Holding's acquisition of VoiceStream's stock pursuant to the reorganizations, in conjunction with the related transactions and Hutchinson's acquisition of its existing VoiceStream stock within two years prior to the spin-off, are not pursuant to a prohibited plan. However, if the IRS were to take the position that a prohibited plan did occur, the estimated range of possible liability to VoiceStream Holdings, not including interest and penalties, if any, is from zero to $400 million. 178 186 COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION VoiceStream common stock, Omnipoint common stock and Aerial common stock are each listed on the Nasdaq Stock Market. Since the spin-off on May 3, 1999 VoiceStream common stock has traded under the ticker symbol "VSTR." Since its listing in January of 1996, Omnipoint common stock has traded under the ticker symbol "OMPT." Aerial Common Shares are traded under the ticker symbol "AERL" and have been listed since April 1996. The following table sets forth, for the periods indicated, the range of high and low closing prices of common stock.
VOICESTREAM OMNIPOINT AERIAL COMMON STOCK COMMON STOCK COMMON STOCK ---------------- ---------------- ---------------- HIGH LOW HIGH LOW HIGH LOW ------ ------ ------ ------ ------ ------ 1997 First Quarter................... n/a n/a $27.50 $ 9.75 $ 8.63 $ 5.38 Second Quarter.................. n/a n/a $16.63 $ 7.00 $ 9.50 $ 4.38 Third Quarter................... n/a n/a $23.75 $14.63 $ 9.63 $ 7.50 Fourth Quarter.................. n/a n/a $24.63 $19.00 $10.50 $ 7.13 1998 First Quarter................... n/a n/a $29.50 $21.38 $ 9.00 $ 6.69 Second Quarter.................. n/a n/a $29.75 $18.63 $ 7.81 $ 5.94 Third Quarter................... n/a n/a $25.00 $ 7.03 $ 6.75 $ 3.44 Fourth Quarter.................. n/a n/a $11.75 $ 5.00 $ 5.88 $ 2.25 1999 First Quarter................... n/a n/a $16.19 $10.00 $ 7.75 $ 5.25 Second Quarter.................. $33.06 $20.50 $29.00 $13.13 $13.50 $ 7.25 Third Quarter................... $68.75 $29.75 $62.19 $30.56 $29.44 $11.56
On June 22, 1999, the last full trading day before the public announcement of the proposed Omnipoint reorganization, the closing price of VoiceStream common stock was $29.375 and the closing price of Omnipoint common stock was $20.750. On September 17, 1999, the last full trading day before the public announcement of the proposed Aerial reorganization, the closing price of VoiceStream common stock was $56.06 and the closing price of Aerial common stock was $20.00. On , 1999, the most recent practicable date prior to the printing of this joint proxy statement-prospectus, the closing price was $ for VoiceStream common stock, $ for Omnipoint common stock and $ for Aerial common stock. We urge you to obtain current market quotations prior to making any decision with respect to the reorganization. Following the reorganization, VoiceStream Holdings common stock will be traded on the Nasdaq Stock Market under the ticker symbol "VSTR." VoiceStream, Omnipoint and Aerial have not historically paid dividends to their stockholders. VoiceStream Holdings does not anticipate paying dividends in the near future. 179 187 THE SPECIAL MEETINGS This joint proxy statement-prospectus is being furnished to VoiceStream, Omnipoint and Aerial stockholders in connection with the solicitation of proxies by the board of directors of each company for use at the special meetings to consider and vote upon the proposal to adopt, and approve the transactions contemplated by, the Omnipoint reorganization agreement and the Aerial reorganization agreement. - The special meeting of the VoiceStream stockholders will be held on , at , , at a.m., local time. - The special meeting of the Omnipoint stockholders will be held on , at the offices of Piper & Marbury L.L.P., at 1200 19th Street, N.W., Washington, D.C., at a.m., local time. - The special meeting of the Aerial stockholders will be held on , at , , at a.m., local time. The VoiceStream board and the Omnipoint board have approved the Omnipoint reorganization agreement. The VoiceStream board and the Aerial board have approved the Aerial reorganization agreement. Each board has determined that its reorganization is fair to, and in the best interests of, its stockholders. The VoiceStream board recommends that the stockholders of VoiceStream vote for the proposal to adopt, and approve the transactions contemplated by, the Omnipoint reorganization agreement and the Aerial reorganization agreement. The Omnipoint board recommends that the stockholders of Omnipoint vote for the proposal to adopt, and approve the transactions contemplated by, the Omnipoint reorganization agreement. The Aerial board recommends that the stockholders of Aerial vote for the proposal to adopt, and approve the transactions contemplated by, the Aerial reorganization agreement. The reorganizations have also been approved by the VoiceStream Holdings board. VOICESTREAM RECORD DATE; QUORUM; VOTE REQUIRED Only VoiceStream stockholders of record as of the close of business on , 1999 will be entitled to notice of, and to vote at, the VoiceStream special meeting. On the VoiceStream record date, there were outstanding shares of VoiceStream common stock. Each holder of VoiceStream common stock outstanding on the VoiceStream record date is entitled to one vote for each share so held, exercisable in person or by properly executed and delivered proxy, at the VoiceStream special meeting. The presence of the holders of at least a majority of the shares of VoiceStream common stock outstanding on the VoiceStream record date, whether present in person or by properly executed and delivered proxy, will constitute a quorum for the purposes of the VoiceStream special meeting. The holders of record of at least two-thirds of the outstanding shares of VoiceStream common stock must vote in favor of the proposal to adopt, and approve the transactions contemplated by, the reorganization agreement relating to the first to occur of the Omnipoint reorganization and the Aerial reorganization before the VoiceStream merger can be effected. Abstentions, failures to vote and broker non-votes will have the same effect as a vote against the proposal for purposes of determining whether VoiceStream obtains the requisite two-thirds vote. Stockholders of VoiceStream can dissent from the proposal and, subject to strict compliance with certain provisions of the WBCA receive in lieu of VoiceStream Holdings common stock the "fair value" of their VoiceStream common stock in cash. See "The Special Meetings -- Dissenters' Rights" and Annex I. 180 188 OMNIPOINT RECORD DATE; QUORUM; VOTE REQUIRED Only Omnipoint stockholders of record as of the close of business on , 1999 will be entitled to notice of, and to vote at, the Omnipoint special meeting. At the Omnipoint record date, there were outstanding shares of Omnipoint common stock. Each holder of shares of Omnipoint common stock outstanding on the Omnipoint record date is entitled to one vote for each share so held, exercisable in person or by properly executed and delivered proxy, at the Omnipoint special meeting. The presence of the holders of at least a majority of the Omnipoint common stock outstanding on the Omnipoint record date, whether present in person or by properly executed and delivered proxy, will constitute a quorum for the purposes of the Omnipoint special meeting. The holders of record of a majority of the outstanding shares of Omnipoint common stock must vote in favor of the proposal to adopt, and approve the transactions contemplated by, the Omnipoint reorganization agreement before the Omnipoint merger can be effected. Abstentions, failures to vote and broker non-votes will have the same effect as a vote against the proposal for purposes of determining whether Omnipoint obtains requisite majority. Certain stockholders of Omnipoint will have the right to dissent from the proposal and, subject to strict compliance with certain provisions of the DGCL, to receive in lieu of VoiceStream Holdings common stock the "fair value" of their Omnipoint common stock in cash. See "-- Dissenters' Rights of Appraisal" and Annex J. AERIAL RECORD DATE; QUORUM; VOTE REQUIRED Only Aerial stockholders of record as of the close of business on , will be entitled to notice of, and to vote at, the Aerial special meeting. At the Aerial record date, there were issued and outstanding Aerial Common Shares and Series A Common Shares. No Aerial Series B Common Shares or shares of preferred stock were outstanding. Each holder of Aerial Common Shares issued and outstanding on the Aerial record date is entitled to one vote for each share so held, exercisable in person or by properly executed and delivered proxy, at the Aerial special meeting. The holder of Aerial Series A Common Shares issued and outstanding on the Aerial record date is entitled to fifteen votes for each share so held, exercisable in person or by properly executed and delivered proxy, at the Aerial special meeting. Accordingly, the voting power of the shares of Aerial Series A Common Shares was votes, and the total voting power of all outstanding shares of Aerial capital stock was votes on the Aerial record date. The presence of the holders of at least a majority of the voting power on the Aerial Common Shares and Aerial Series Common Shares issued and outstanding on the Aerial record date, whether present in person or by properly executed and delivered proxy, will constitute a quorum for the purposes of the Aerial special meeting. The presence of TDS at the meeting will represent a quorum. The holders of record of a majority of the voting power of the outstanding Aerial Common Shares and Aerial Series A Common Shares, voting together as a single class, must vote in favor of the proposal to adopt, and approve the transactions contemplated by, the Aerial reorganization agreement before the Aerial merger can be effected. Abstentions, failures to vote and broker non-votes will have the same effect as a vote against the proposal for purposes of determining whether Aerial obtains the requisite majority. 181 189 AGREEMENTS TO VOTE IN FAVOR OF THE OMNIPOINT REORGANIZATION Concurrently with the execution of the Omnipoint reorganization agreement, VoiceStream, Omnipoint, certain stockholders of VoiceStream and certain stockholders of Omnipoint, entered into an agreement whereby (1) such Omnipoint stockholders have agreed to vote or cause to be voted the number of shares of Omnipoint common stock beneficially owned by them in favor of the proposal to adopt, and approve the transactions contemplated by, the Omnipoint reorganization agreement and against any alternative merger proposal or acquisition proposal representing 15% or more of the stock or assets of Omnipoint and its subsidiaries and (2) such VoiceStream stockholders have agreed to vote or cause to be voted a specified of shares of common stock of VoiceStream in favor of the proposal to adopt, and approve the transactions contemplated by, the Omnipoint reorganization agreement. From and after the date of such agreement through the earlier of the effective time and the termination of the Omnipoint reorganization agreement, each of the Omnipoint stockholders and the VoiceStream stockholders who signed such agreement, has agreed, except in limited circumstances, not to sell or otherwise dispose of more than 30% of the shares of Omnipoint common stock or VoiceStream common stock, as the case may be, that are subject to such agreement unless, as a condition to such sale, each transferee of any shares in excess of 30% of such shares agrees to be bound by certain provisions of the lock-up agreement. AGREEMENTS TO VOTE IN FAVOR OF THE AERIAL REORGANIZATION Concurrently with the execution of the Aerial reorganization agreement, TDS and VoiceStream entered into an agreement whereby TDS agreed to vote all shares of Aerial common stock beneficially owned by TDS in favor of the Aerial reorganization and against alternative transactions. Under this agreement, TDS has also agreed not to transfer its shares of Aerial common stock. As of the Aerial record date, TDS holds Aerial Common Shares and Aerial Series A Common Shares, representing votes or approximately 98% of the total voting power of the Aerial common stock. Accordingly, the Aerial reorganization will be approved regardless of the vote of other Aerial stockholders. Concurrently with the execution of the Aerial reorganization agreement, Aerial, VoiceStream, TDS and certain stockholders who currently hold approximately 41% of the outstanding shares of VoiceStream common stock entered into a stockholders voting agreement whereby such shareholders agreed to vote or cause to be voted the number of shares of VoiceStream common shares beneficially owned by them in favor of the Aerial reorganization, the approval and adoption of the Aerial reorganization agreement and each of the transactions contemplated in the Aerial reorganization agreement. Certain VoiceStream stockholders agreed not to transfer their shares except as a condition to the transfer, the transferee agreed to be bound by certain terms of the agreement. SOLICITATION OF PROXIES SOLICITATION OF VOICESTREAM PROXIES The VoiceStream board is soliciting the accompanying proxy for use in connection with the VoiceStream special meeting. See "-- VoiceStream Record Date; Quorum; Vote Required." VoiceStream will bear its own expenses in connection with the VoiceStream special meeting. In addition to solicitation of proxies by mail, directors, officers and employees of VoiceStream may solicit proxies for the VoiceStream special meeting either personally or by telephone, telegram or other forms of communication. Such directors, officers and employees will receive no special compensation for any solicitation. VoiceStream will request brokerage houses, nominees, fiduciaries 182 190 and other custodians to forward soliciting materials to beneficial owners and will reimburse them for their customary charges and expenses. We request VoiceStream stockholders to complete, date and sign the accompanying form of proxy and return it to VoiceStream in the enclosed postage-paid envelope. When the accompanying form of proxy is returned properly executed, the VoiceStream common stock represented thereby will be voted at the VoiceStream special meeting in accordance with the instructions received therein. If a stockholder executes and returns a proxy without an indication as to how the shares of VoiceStream common stock represented thereby are to be voted, such shares will be voted in favor of approval and adoption of the VoiceStream merger. VoiceStream stockholders should not send any stock certificates with their proxy cards. SOLICITATION OF OMNIPOINT PROXIES The Omnipoint board is soliciting the accompanying proxy for use in connection with the Omnipoint special meeting. See "Omnipoint Record Date; Quorum; Vote Required." Omnipoint will bear its own expenses in connection with the Omnipoint special meeting. In addition to solicitation of proxies by mail, directors, officers and employees of Omnipoint may solicit proxies for the Omnipoint special meeting either personally or by telephone, telegram or other forms of communication. Such directors, officers and employees will receive no special compensation for any solicitation. Omnipoint will request brokerage houses, nominees, fiduciaries and other custodians to forward soliciting materials to beneficial owners and will reimburse them for their customary charges and expenses. We request Omnipoint stockholders to complete, date and sign the accompanying form of proxy and return it to Omnipoint in the enclosed postage-paid envelope. When the accompanying form of proxy is returned properly executed, the Omnipoint common stock represented thereby will be voted at the Omnipoint special meeting in accordance with the instructions received therein. If a proxy is executed and returned without an indication as to how the shares of Omnipoint common stock represented thereby are to be voted, such shares will be voted in favor of approval and adoption of the Omnipoint merger. Omnipoint stockholders should not send any stock certificates with their proxy cards. SOLICITATION OF AERIAL PROXIES The Aerial board is soliciting the accompanying Aerial stockholder proxy for use in connection with the Aerial special meeting. See "Aerial Record Date; Quorum; Vote Required." Aerial will bear its own expenses in connection with the Aerial special meeting. In addition to solicitation of proxies by mail, directors, officers and employees of Aerial may solicit proxies for the Aerial special meeting either personally or by telephone, telegram or other forms of communication. Such directors, officers and employees will receive no special compensation for any solicitation. Aerial will request brokerage house, nominees, fiduciaries and other custodians to forward soliciting materials to beneficial owners and will reimburse them for their customary charges and expenses. The Aerial board requests that Aerial stockholders complete, date and sign the accompanying form of Aerial proxy and return it to Aerial in the enclosed postage-paid envelope. When the accompanying form of proxy is returned properly executed, the Aerial common stock represented thereby will be voted at the Aerial special meeting in accordance with the instructions received. If a proxy is executed and returned without an indication as to how the shares of Aerial common stock represented thereby are to be voted, such shares will be voted in favor of approval and adoption of the Aerial reorganization. Aerial stockholders should not send any stock certificates with their proxy cards. INFORMATION AGENT VoiceStream, Omnipoint and Aerial have retained ChaseMellon Consulting Services to aid in the solicitation of proxies and to verify certain records related to the solicitations. ChaseMellon Consulting Services will receive a fee of approximately $ as compensation for its services 183 191 and reimbursement for its related out-of-pocket expenses. ChaseMellon Consulting Services has been indemnified against certain liabilities arising out of or in connection with its engagement. OTHER MATTERS TO BE CONSIDERED None of the VoiceStream board, the Omnipoint board or the Aerial board is aware of any other matter which will be brought before the special meeting of their respective company. If, however, other matters are presented at one of the special meetings, proxies for that meeting will be voted in accordance with the discretion of the holders of such proxies. DISSENTERS' RIGHTS OF APPRAISAL DISSENTERS' RIGHTS OF APPRAISAL OF VOICESTREAM COMMON STOCKHOLDERS The following is a brief summary of the rights of VoiceStream common stockholders to dissent from the proposals to adopt, and approve the transactions contemplated by, the reorganization agreements, each of which contemplate a merger by which a subsidiary of VoiceStream Holdings is merged with and into VoiceStream and VoiceStream becomes a subsidiary of VoiceStream Holdings. Dissenters have the right to receive cash equal to the "fair value" of their VoiceStream common stock instead of receiving shares of VoiceStream Holdings. This summary is not exhaustive and we encourage VoiceStream common stockholders to read the applicable sections of Chapter 23B.13 of the WBCA, which we have attached as Annex I to this joint proxy statement-prospectus. ANY VOICESTREAM STOCKHOLDER CONTEMPLATING THE POSSIBILITY OF DISSENTING FROM THE PROPOSAL TO ADOPT, AND APPROVE THE TRANSACTIONS CONTEMPLATED BY, THE REORGANIZATION AGREEMENTS SHOULD CAREFULLY REVIEW THE TEXT OF ANNEX I, PARTICULARLY THE SPECIFIED PROCEDURAL STEPS REQUIRED TO PERFECT DISSENTERS' RIGHTS, WHICH ARE COMPLEX, AND SHOULD ALSO CONSULT SUCH STOCKHOLDER'S LEGAL COUNSEL. A STOCKHOLDER WHO DOES NOT FULLY AND PRECISELY SATISFY THE PROCEDURAL REQUIREMENTS OF THE WBCA WILL LOSE THESE RIGHTS. The VoiceStream merger will occur at the time of the first to occur of the Omnipoint reorganization or the Aerial reorganization. Since it is uncertain which reorganization will occur first, VoiceStream common stockholders must vote against both reorganizations if they intend to exercise their dissenters' rights of appraisal in connection with the VoiceStream merger. REQUIREMENTS FOR EXERCISING DISSENTERS' RIGHTS OF APPRAISAL To exercise dissenters' rights of appraisal, a VoiceStream stockholder must - file with VoiceStream before the vote is taken at the VoiceStream special meeting written notice of his or her intent to demand the fair value for his or her VoiceStream common stock if the VoiceStream merger is consummated and becomes effective; and - not vote his or her shares of VoiceStream common stock at the VoiceStream special meeting in favor of the proposal to approve either the Omnipoint reorganization agreement or the Aerial reorganization agreement. A VoiceStream stockholder who does not satisfy each of these requirements cannot exercise dissenters' rights and will be bound by the terms of the VoiceStream merger as set forth in the reorganization agreement pursuant to which the VoiceStream merger is effected. Submission of a proxy which does not direct how the VoiceStream common stock represented by that proxy is to be voted will constitute a vote in favor of the VoiceStream merger and a waiver of 184 192 statutory dissenters' rights. In addition, a VoiceStream stockholder's vote against the proposal to approve the VoiceStream merger will not satisfy the notice requirement referred to above. A stockholder must file the written notice of the intent to exercise dissenter's rights with VoiceStream at: VoiceStream Wireless Corporation, 3650 131st Ave. S.E., Bellevue, WA, 98006, Attn: Alan R. Bender, Secretary. APPRAISAL PROCEDURE Within 10 days after the proposed VoiceStream merger, whether as part of the Omnipoint reorganization or the Aerial reorganization, has been approved, VoiceStream will send written notice to all stockholders who have given written notice under the dissenters' rights provisions and not voted in favor of the VoiceStream merger as described above. The notice will contain: - the address where the demand for payment and certificates representing shares of VoiceStream common stock must be sent and the date by which they must be received; - any restrictions on transfer of uncertificated shares that will apply after the demand for payment is received; - a form for demanding payment that states the date of the first announcement to the news media or to stockholders of the proposed merger and requires certification of the date the stockholder, or the beneficial owner on whose behalf the stockholder dissents, acquired the VoiceStream common stock (or an interest in it); and - a copy of the provisions of the WBCA set forth in Annex I. A VoiceStream stockholder who receives this notice and who wishes to assert dissenters' rights must demand payment and deposit his or her VoiceStream certificates within 30 days after such notice is given. A STOCKHOLDER WHO FAILS TO MAKE DEMAND FOR PAYMENT OR DEPOSIT HIS OR HER VOICESTREAM CERTIFICATES WITHIN SUCH 30-DAY PERIOD WILL LOSE THE RIGHT TO RECEIVE FAIR VALUE FOR HIS OR HER SHARES UNDER THE DISSENTERS' RIGHTS PROVISIONS EVEN IF HE OR SHE FILED A TIMELY NOTICE OF INTENT TO DEMAND PAYMENT. Except as provided below, within 30 days of the later of the effective time or VoiceStream's receipt of a valid demand for payment, VoiceStream will remit to each dissenting stockholder who complied with the requirements of the WBCA the amount VoiceStream estimates to be the fair value of such stockholder's VoiceStream common stock, plus accrued interest. VoiceStream will include the following information with the payment: - certain financial data relating to VoiceStream; - VoiceStream's estimate of the fair value of the shares and a brief description of the method used to reach such estimate; - a copy of Chapter 23B.13 of the WBCA; and - a brief description of the procedures to be followed in demanding supplemental payment. For dissenting stockholders who were not the beneficial owner of the shares of VoiceStream common stock before , 1999, VoiceStream may withhold payment and instead send a statement setting forth its estimate of the fair value of their shares and offering to pay such amount, with interest, as a final settlement of such dissenting stockholder's demand for payment. Any dissenting VoiceStream stockholder who is dissatisfied with his or her payment or offer may, within 30 days of such payment or offer for payment, notify VoiceStream in writing of their estimate 185 193 of fair value of his or her shares and the amount of interest due and demand payment thereof. If any dissenting stockholder's demand for payment is not settled within 60 days after receipt by VoiceStream of his or her payment demand, Chapter 23B.13.300 of the WBCA requires that VoiceStream commence a proceeding in King County Superior Court and petition the court to determine the fair value of the shares and accrued interest, naming all the dissenting stockholders whose demands remain unsettled as parties to the proceeding. The court may appoint one or more appraisers to receive evidence and make recommendations to the court as to the amount of the fair value of the shares. The fair value of the shares as determined by the court is binding on all dissenting stockholders and may be less than, equal to or greater than the market price of the VoiceStream Holdings common stock to be issued to non- dissenting stockholders for their VoiceStream common stock if the VoiceStream merger is consummated. If the court determines that the fair value of the shares is in excess of the amount, if any, remitted by VoiceStream, then the court will enter a judgment for cash in favor of the dissenting stockholders in an amount by which the value determined by the court, plus interest, exceeds such amount previously remitted. The court shall determine the costs and expenses of the court proceeding and assess them against VoiceStream, except that the court may assess part or all of the costs against any dissenting stockholders whose actions in demanding supplemental payments are found by the court to be arbitrary, vexatious or not in good faith. If the court finds that VoiceStream did not substantially comply with the relevant provisions of sections 23B.13.200 through 23B.13.280 of the WBCA, the court may also assess the fees and expenses, if any, of attorneys or experts as the court deems equitable against VoiceStream. The court may also assess such fees and expenses against any party if the court finds that such party has acted arbitrarily, vexatiously or not in good faith in bringing the proceedings. The court may award, in its discretion, fees and expenses of an attorney for the dissenting stockholders out of the amount awarded to such stockholders, if it finds the services of the attorney were of substantial benefit to the other dissenting stockholders, and that such fees should not be assessed against VoiceStream. A stockholder of record may assert dissenters' rights as to fewer than all of the shares registered in such stockholder's name only if he or she dissents with respect to all shares beneficially owned by any one person and notifies VoiceStream in writing of the name and address of each person on whose behalf he or she asserts dissenters' rights. The rights of such a partial dissenting stockholder are determined as if the shares as to which he or she dissents and his or her other shares were registered in the names of different stockholders. Beneficial owners of VoiceStream common stock who desire to exercise dissenters' rights themselves must obtain and submit the registered owner's written consent at or before the time they file the notice of intent to demand fair value. For purposes of the WBCA, "fair value" means the value of VoiceStream common stock immediately before the effective time, excluding any appreciation or depreciation in anticipation of the reorganization, unless exclusion would be inequitable. Under section 23B.13.020 of the WBCA, a VoiceStream stockholder has no right, at law or in equity, to set aside the approval and adoption of the VoiceStream merger or the consummation of the reorganization except if such approval, adoption or consummation fails to comply with the procedural requirements of Chapter 23B.13 of the WBCA or Revised Code of Washington sections 25.10.900 through 25.10.955, VoiceStream's Articles of Incorporation, or Bylaws or was fraudulent with respect to such stockholder or VoiceStream. DISSENTERS' RIGHTS OF APPRAISAL OF OMNIPOINT STOCKHOLDERS The following is a summary of the principal steps that a stockholder of Omnipoint must take to exercise appraisal rights. This summary does not purport to be complete and we encourage all 186 194 Omnipoint stockholders to read section 262 of the DGCL, which we have attached as Annex J. Failure to take any one of the required steps may terminate the stockholder's appraisal rights under the DGCL. BECAUSE OF THE COMPLEXITY OF THE PROCEDURES IN EXERCISING APPRAISAL RIGHTS, STOCKHOLDERS WHO EXERCISE SUCH RIGHTS SHOULD SEEK THE ADVICE OF LEGAL COUNSEL. REQUIREMENTS FOR EXERCISING DISSENTERS' RIGHTS OF APPRAISAL In order to exercise dissenters' rights of appraisal, a stockholder must satisfy all of the following requirements. The stockholder: - must not vote in favor of the proposal to adopt, and approve the transactions contemplated by, the Omnipoint reorganization agreement; - must hold his or her shares continuously through the effective date of the Omnipoint merger; - within 20 days after receiving a notice of entitlement to appraisal rights, as described below, and before the taking of the vote on the Omnipoint merger, must demand in writing from the surviving corporation the appraisal of his or her shares; and - if required by the court hearing the appraisal petition, submit stock certificates representing the stockholder's Omnipoint common stock to the Chancery Court for notation thereon of the pendency of the appraisal proceedings. FAILURE BY ANY STOCKHOLDER TO FULLY COMPLY WITH THE ITEMS LISTED ABOVE, AND TO FOLLOW ALL INSTRUCTIONS IN THE APPRAISAL NOTICE AS DESCRIBED BELOW, MAY RESULT IN TERMINATION OR WAIVER OF SUCH STOCKHOLDER'S APPRAISAL RIGHTS. APPRAISAL PROCEDURE Either before the effective time or within 10 days thereafter, Omnipoint will notify each of the stockholders entitled to appraisal rights of the approval of the Omnipoint merger, the effective date of the Omnipoint merger (if notice is sent after the effective date) and that appraisal rights are available for any or all of the stockholder's shares of Omnipoint (the "Appraisal Notice"). The Appraisal Notice will include a copy of section 262 of the DGCL. Omnipoint will send the Appraisal Notice to the stockholder at his or her address as it appears on the records of Omnipoint. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of the Appraisal Notice, demand in writing from Omnipoint the appraisal of his or her shares. Such demand will be sufficient if it reasonably informs Omnipoint of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of his or her Omnipoint common stock. An Omnipoint stockholder who elects to exercise appraisal rights must mail or deliver the written demand for appraisal to Omnipoint at the address indicated in the Appraisal Notice. Within 120 days after the effective date of the Omnipoint merger, Omnipoint or any stockholder who has elected appraisal rights and satisfied the criteria listed above may file a petition in the Chancery Court demanding a determination of the value of the stock held by all dissenting stockholders. At any time within 60 days after the effective time, any stockholder shall have the right to withdraw the demand for appraisal and to accept the terms offered in the reorganization agreement. If, within the 120-day period, neither Omnipoint nor any stockholder has filed a petition, all rights to appraisal will cease and all of the dissenting stockholders who owned Omnipoint common stock will become entitled to receive the consideration to be received under the Omnipoint reorganization agreement, without interest. 187 195 Within 120 days after the effective time, each stockholder who has complied with the requirements of section 262(a) and (d) is, upon written request to Omnipoint, entitled to receive from Omnipoint a statement setting forth the aggregate number of shares not voted in favor of the Omnipoint merger and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Omnipoint must mail the information to the requesting stockholder by the later of (1) 10 days after receipt of the request by Omnipoint or (2) 130 days after the effective time. If a stockholder files a petition with the Chancery Court, Omnipoint will file a verified list of all stockholders who have demanded appraisal rights and with whom Omnipoint has not agreed as to the value of their shares. Thereafter, the Chancery Court will notify all those stockholders on the list as to the time and place of the hearing upon the petition to determine the stockholders who have become entitled to appraisal rights and thereafter to appraise the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the Omnipoint merger, plus a fair rate of interest, if any. In determining the fair value and rate of interest, the Chancery Court shall consider all relevant factors. The court may permit discovery. Any stockholder who appears on the list submitted by Omnipoint in the preceding paragraph may participate fully in all proceedings. The Chancery Court will direct the payment of the fair value of the shares, together with interest, if any, by Omnipoint to the stockholders who are entitled to such payment upon the surrender of the certificates representing such stock to Omnipoint. The costs of the proceeding may be determined by the Chancery Court and assessed against the parties as the Chancery Court deems equitable. From and after the effective time, any stockholder who has demanded appraisal rights shall thereafter neither be entitled to vote such stock for any purpose nor be entitled to the payment of dividends or other distributions on the stock (except those payable to stockholders of record at a date which is prior to the effective time). Omnipoint stockholders considering seeking appraisal should keep the following in mind: - the fair value of their Omnipoint common stock determined under section 262 could be more, the same, or less than the consideration receivable pursuant to the Omnipoint reorganization agreement; - Omnipoint stockholders who exercise dissenters' rights will not become stockholders of VoiceStream Holdings; and - Omnipoint stockholders receiving cash upon the exercise of appraisal rights may recognize gain or loss for income tax purposes. NO DISSENTERS' RIGHTS OF APPRAISAL FOR AERIAL STOCKHOLDERS Aerial stockholders will not have dissenters' rights of appraisal as a result of the Aerial reorganization. A copy of the relevant provisions of the DGCL is set forth in Annex J. 188 196 BUSINESS OF VOICESTREAM HOLDINGS VoiceStream Holdings was incorporated in June 1999 as a Delaware corporation to act as the parent company for certain business combinations involving VoiceStream. We have not conducted any activities other than in connection with our organization and the reorganizations. Upon consummation of both the Omnipoint reorganization and the Aerial reorganization, VoiceStream, Omnipoint and Aerial will be subsidiaries of VoiceStream Holdings. Upon the closing of the first to occur of the Omnipoint reorganization or the Aerial reorganization, we will change our name to VoiceStream Wireless Corporation. Our business initially will be the combined current businesses of VoiceStream and either or both of Aerial and Omnipoint, and our assets will be the current assets of VoiceStream, either or both of Omnipoint and Aerial and their subsidiaries, subject to the contribution of certain assets in the CIRI Transactions. The operations and assets of, and our relationship with, CIRI are more fully described in "The Business of VoiceStream Holdings After the Reorganizations; Relationship with Cook Inlet -- Joint Ventures in Which We Hold Interests" below. While we believe that the reorganizations will create a strong national competitor in the wireless communications industry, we will be subject to the same competition issues described in the most recent reports on Form 10-K of Omnipoint and Aerial and Form 10/A of VoiceStream, and subject to the risks detailed in "Risk Factors." Since the announcement of the reorganizations, we have been analyzing the operations of Aerial, Omnipoint and VoiceStream and developing strategies and plans to combine and integrate various aspects of the respective businesses of VoiceStream, Omnipoint and Aerial. BACKGROUND -- THE WIRELESS COMMUNICATIONS INDUSTRY OVERVIEW Wireless communications systems use a variety of radio frequencies to transmit voice and data. Broadly defined, the wireless communications industry includes one-way radio applications, such as paging or beeper services, and two-way radio applications, such as cellular, PCS and ESMR networks. Each such application is licensed in a distinct radio frequency block. Since its introduction in 1983, wireless service has grown dramatically. As of December 31, 1998, according to the CTIA there were over 69 million wireless subscribers in the United States, representing a penetration rate of 25.3%. In the wireless communications industry, there are two principal frequency bands licensed by the FCC for transmitting two way voice and data signals, "cellular" and "PCS." Cellular systems are generated at 824 to 899 MHz and can be either analog or digital. Although all cellular systems provide analog capabilities, digital technology has been introduced by most carriers in urban markets. Analog technology has several limitations, including lack of privacy and limited capacity. Digital systems convert voice or data signals into a stream of digits that is compressed before transmission, enabling a single radio channel to carry multiple simultaneous signal transmissions. This enhanced capacity, along with improvements in digital signaling, allows digital-based wireless technologies to offer new and enhanced services, such as greater call privacy, and robust data transmission features, such as "mobile office" applications (including facsimile, electronic mail and wireless connections to computer/data networks, including the Internet). See "-- Operation of Wireless Communications Systems." 189 197 PCS is a term commonly used in the United States to describe a portion of radio spectrum from 1850 to 1990 MHz. This portion of radio spectrum is to be used by PCS licensees to provide wireless communications services. PCS spectrum was auctioned by the FCC in six frequency blocks (A-F) beginning with the A and B Blocks in late 1994 and 1995. In late 1995 and in 1996 the C Block was auctioned and the FCC concluded simultaneous auctions of the D, E and F Blocks in 1997. In 1999, the FCC reauctioned portions of the C, D, E and F Blocks that were returned or not purchased in previous auctions. PCS competes directly with existing cellular telephone, paging and specialized mobile radio services. PCS also includes features that are not generally offered by analog cellular providers, such as data transmissions to and from portable computers, advanced paging services and facsimile services. In addition, wireless providers may eventually offer mass market wireless local loop applications in competition with wired local communications services. See "-- Governmental Regulation" for a discussion of the FCC auction process and allocation of wireless licenses. OPERATION OF WIRELESS COMMUNICATIONS SYSTEMS Wireless communications system service areas, whether cellular or PCS, are divided into multiple cells. Due to the frequencies on which they operate, a single cell in a cellular system generally transmits over a wider radius than a comparable PCS cell. In both cellular and PCS systems, each cell contains a transmitter, a receiver and signaling equipment (collectively referred to as the "cell site"). The cell site is connected by microwave or landline telephone lines to a switch that uses computers to control the operation of the wireless communications system for the entire service area. The system controls the transfer of calls from cell to cell as a subscriber's handset travels, coordinates calls to and from handsets, allocates calls among the cells within the system and connects calls to the local landline telephone system or to a long distance telephone carrier. Wireless communications providers establish interconnection agreements with local exchange carriers and interexchange carriers, thereby integrating their system with the existing landline communications system. Because the signal strength of a transmission between a handset and a cell site declines as the handset moves away from the cell site, the switching office and the cell site monitor the signal strength of calls in progress. When the signal strength of a call declines to a predetermined level, the switching office may "hand off" the call to another cell site where the signal strength is stronger. If a handset leaves the service area of a cellular or PCS system, the call is disconnected unless there is a technical connection with the adjacent system. Wireless system operators normally agree to provide service to subscribers from other compatible wireless systems who are temporarily located in or traveling through their service areas in a practice called "roaming." Agreements among system operators provide that the carrier that normally provides services to the roaming subscriber pays the serving carrier at rates prescribed by the serving carrier. Analog cellular handsets are functionally compatible with cellular systems in all markets within the United States. As a result, analog cellular handsets may be used wherever a subscriber is located, as long as a cellular system is operational in the area and necessary roaming arrangements exist. Although PCS and cellular systems utilize similar technologies and hardware, they operate on different frequencies and use different technical and network standards. Dual mode handsets, however, make it possible for users of one type of system to "roam" on a different type of system outside of their service area. PCS systems operate under one of three principal digital signal transmission technologies, or standards, that have been deployed by various operators and vendors for use in PCS systems: GSM, TDMA or CDMA. GSM is the most widely used digital wireless standard in the world, serving over 190 198 170 million subscribers in approximately 130 countries. A benefit associated with GSM technology is its use of an open system architecture that allows operators to purchase network equipment from a variety of vendors that share standard interfaces for operation. GSM and TDMA are both based upon time-division of spectrum and are currently incompatible with each other and with CDMA. Accordingly, a subscriber of a system that utilizes GSM technology is currently unable to use a GSM handset when traveling in an area not served by GSM-based PCS operators, unless the subscriber carries a dual-mode handset that permits the subscriber to use the analog cellular system in that area. Under a memorandum of understanding between GSM operators in the United States and Canada and the association of TDMA operators in the United States and Canada, there are plans to promote the interoperability of GSM and TDMA standards. The TDMA-based PCS standard offers the same features and services offered by the TDMA-based digital cellular standard currently in use by certain cellular operators in the United States, including AT&T Wireless. Both the CDMA- and TDMA-based PCS standards use a closed system architecture that will limit PCS operators' choices of equipment vendors. The CDMA standard is the most widely adopted digital standard in the United States. CDMA-based PCS systems offer the same features and services offered by CDMA-based cellular systems. THE BUSINESS OF VOICESTREAM HOLDINGS AFTER THE REORGANIZATIONS After the reorganizations, we will be a leading PCS provider in the United States, owning and operating fully digital PCS networks in 22 major markets as follows:
VOICESTREAM OMNIPOINT AERIAL ----------- --------- ------ Denver New York Houston Seattle/Tacoma Boston Tampa/Orlando Phoenix/Tucson Indianapolis Minneapolis Honolulu Detroit Kansas City Portland Miami Columbus Boise Pittsburgh Salt Lake City El Paso Albuquerque Oklahoma City Des Moines
In addition, VoiceStream is currently constructing PCS networks in San Antonio and Austin, which it expects to be operational in the fourth quarter of 1999. VoiceStream Holdings, through its subsidiaries, will also own equity interests in various joint venture entities that operate PCS networks using the VoiceStream brand or affiliation, including four joint venture entities controlled by Cook Inlet. Following the Omnipoint reorganization, these joint venture entities collectively will control 146 broadband PCS licenses which cover 90 million persons and operate in several major markets including Philadelphia and Tulsa. Five additional joint venture entities in which VoiceStream Holdings will hold equity interests will operate under local brand names. Together with joint venture entities in which we hold interests, after the reorganizations, we will have access to 333 licenses covering over 200 million persons and 77% of the geography of the continental United States, and we will serve more than 1.5 million customers through more than 6,200 operational cell sites. 191 199 Our goal is to establish our service offerings as one of the best values in wireless and achieve significant market penetration, particularly in the fast growing "new to wireless" segment. Our value message will continue to be delivered through VoiceStream's existing "Get More" marketing campaign, whereby customers get "more" airtime in the form of large bundled minutes, "more" meaningful features designed to complement today's lifestyles and "more" knowledgeable and responsive customer service. Our marketing message will use advertising media and direct marketing in an attempt to build a dominant brand and establish a reputation as a superior value service provider. This marketing message is delivered with a celebrity spokesperson -- Jamie Lee Curtis. VoiceStream believes her unique appeal crosses all major demographic groups. After the reorganizations, we will continue to offer the services offered by VoiceStream, Omnipoint and Aerial, which include advanced data capabilities, voice and text messaging, privacy and security using smart card technology, caller ID and global roaming. We also expect to continue providing and developing our prepaid wireless products. Our services will be sold through an extensive distribution network featuring national and local dealers, company-owned stores and a direct sales force. We will continue to employ the GSM digital standard for our PCS systems. We believe GSM has significant cost advantages over competing technologies, due in part to an open architecture that allows greater flexibility in selecting from a larger group of proven North American, European and Asian equipment vendors and options. VoiceStream, Omnipoint and Aerial collectively have entered into roaming agreements with substantially all of the licensees that have deployed the GSM standard in North America, and are members of the GSM Alliance, an organization of North American GSM service providers whose members hold licenses that cover substantially all of the United States population and serve over 2,400 North American cities. Such agreements allow our subscribers to roam on these carriers' PCS systems, and vice versa. In addition, VoiceStream has entered into roaming agreements with cellular carriers which, together with roaming agreements with GSM carriers, will permit our subscribers with dual-mode capability to roam in substantially all areas across the United States. VoiceStream, Omnipoint and Aerial also have reciprocal roaming agreements with a variety of international carriers which enable their subscribers with compatible handsets to roam in most countries of the world. STRATEGY Following completion of the reorganizations, our strategy will be to efficiently consolidate the operations and marketing of VoiceStream, Omnipoint and Aerial under the VoiceStream brand name, and to: - Penetrate the rapidly growing, broad consumer segment by offering the best value. We will seek to penetrate the consumer segment of the market, particularly in the fast growing "new to wireless" segment, by providing the best value in wireless with more minutes, more features and more services for the money than the competition at attractive price points, and establishing our compelling "Get More" marketing message. - Establish brand differentiation of our proprietary VoiceStream brand. We expect to gain brand differentiation and awareness of our marketing message by promoting the VoiceStream brand with our celebrity spokesperson, Jamie Lee Curtis. Our marketing employs the comprehensive use of television, radio, print, outdoor and sponsorship media to establish our reputation as a superior value service provider. 192 200 - Achieve cost efficiencies through centralization and size. We plan to continue to centralize key functions such as customer care and sales. Our size should also enable us to purchase network and subscriber equipment at favorable pricing and financing terms. - Build high quality networks with extensive coverage. We plan to continue to construct our networks to provide high capacity and excellent call quality. In addition, we will seek to launch VoiceStream branded networks with substantial geographic coverage in and around the metropolitan markets that we serve. - Offer robust features that capitalize on the advantages of GSM technology. We expect to continue to offer the most robust set of features available in connection with GSM technology. Users of GSM currently enjoy a feature set not currently available with other widely deployed broadband standards, that includes wireless e-mail, voice and text messaging, privacy and security using smart card technology, caller ID, and global roaming. - Sell through an extensive and balanced distribution network. We plan to sell our products and services through an extensive and balanced distribution network featuring national and local dealers, company owned stores and our sales force. - Acquire PCS licenses and systems opportunistically. VoiceStream, Omnipoint and Aerial have acquired their current licenses in a disciplined fashion, paying what they believe have been attractive prices. We will continue to seek opportunities to acquire additional PCS licenses, systems and/or operators which are additive to our current footprint or further the availability of GSM service in North America. MARKETS AND SYSTEMS If both the Omnipoint and Aerial reorganizations occur, we will own, collectively with joint venture entities in which we have interests, 333 broadband PCS licenses covering over 200 million persons and approximately 77% of the geography of the continental United States, and we will serve more than 1.5 million customers. See "-- Governmental Regulation; Licensing of PCS Systems." If only the Omnipoint reorganization is completed, we will own, collectively with joint venture entities in which we have interests, 327 licenses covering over 175 million persons and approximately 69% of the geography of the continental United States, and we will serve more than 1.1 million customers. If only the Aerial reorganization is completed, we will own, collectively with joint venture entities in which we have interests, 171 licenses covering over 116 million persons and approximately 66% of the geography of the continental United States, and we will serve more than 0.9 million customers. The following tables set forth the licenses we and the joint venture entities in which we have interests, will hold, together with the populations covered by such licenses, and distinguishes the licenses presently held by VoiceStream, Omnipoint and Aerial, and joint ventures in which VoiceStream, Omnipoint or Aerial hold interests or in which we will hold interests. Depending on the completion of either or both of the reorganizations, the licenses which we and the joint ventures in which we have interests hold will cover all or a mixture of the following license areas. Unless the context otherwise requires, when used herein, with respect to a licensed area, "persons" and "population" are interchangeable and refer to the aggregate number of persons located in such licensed area. Persons and population data are estimated for 1999 based upon 1998 estimates by Claritas adjusted by VoiceStream Holdings by applying Claritas' growth factors from 1997 to 1998. 193 201 VOICESTREAM LICENSES
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ -------------------- ---------- ----- --------- DENVER Casper-Gillette...................................... 140,000 B 30 MHz Cheyenne............................................. 109,000 B 30 MHz Colorado Springs..................................... 513,000 B 30 MHz Denver............................................... 2,478,000 B 30 MHz Fort Collins......................................... 231,000 B 30 MHz Grand Junction....................................... 233,000 B 30 MHz Greeley.............................................. 160,000 B 30 MHz Pueblo............................................... 299,000 B 30 MHz Rapid City........................................... 194,000 B 30 MHz Riverton............................................. 49,000 B 30 MHz Rock Springs......................................... 59,000 B 30 MHz Scottsbluff.......................................... 101,000 B 30 MHz ---------- 4,566,000 SEATTLE Olympia-Centralia.................................... 327,000 E 10 MHz Seattle-Tacoma....................................... 3,090,000 E 10 MHz ---------- 3,417,000 PHOENIX Flagstaff............................................ 119,000 D 10 MHz Nogales.............................................. 40,000 D 10 MHz Phoenix.............................................. 3,191,000 D 10 MHz Prescott............................................. 153,000 D 10 MHz Sierra Vista-Douglas................................. 114,000 D 10 MHz Tucson............................................... 807,000 D 10 MHz Yuma................................................. 126,000 D 10 MHz ---------- 4,550,000 PORTLAND Bend................................................. 141,000 A 30 MHz Coos Bay-North Bend.................................. 84,000 A 30 MHz Eugene-Springfield................................... 312,000 A 30 MHz Klamath Falls........................................ 81,000 A 30 MHz Longview............................................. 96,000 A 30 MHz Medford-Grants Pass.................................. 249,000 A 30 MHz Portland............................................. 2,041,000 A 30 MHz Roseburg............................................. 103,000 A 30 MHz Salem-Albany......................................... 514,000 A 30 MHz ---------- 3,621,000 SALT LAKE CITY Logan................................................ 101,000 A 30 MHz Provo-Orem........................................... 358,000 A 30 MHz Salt Lake City....................................... 1,554,000 A 30 MHz St. George........................................... 129,000 A, E 40 MHz Boise-Nampa.......................................... 538,000 A 30 MHz Idaho Falls.......................................... 211,000 A 30 MHz Pocatello............................................ 102,000 A 30 MHz Twin Falls........................................... 158,000 A 30 MHz ---------- 3,151,000
194 202
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ -------------------- ---------- ----- --------- EL PASO-ALBUQUERQUE Albuquerque.......................................... 792,000 A 30 MHz Carlsbad............................................. 54,000 A 30 MHz Farmington-Durango................................... 194,000 A 30 MHz Gallup............................................... 141,000 A 30 MHz Las Cruces........................................... 240,000 A 30 MHz Roswell.............................................. 79,000 A 30 MHz Santa Fe............................................. 204,000 A 30 MHz El Paso.............................................. 772,000 A 30 MHz ---------- 2,476,000 OKLAHOMA CITY Ada.................................................. 54,000 A 30 MHz Ardmore.............................................. 88,000 A 30 MHz Enid................................................. 85,000 A, E 40 MHz Lawton-Duncan........................................ 173,000 A 30 MHz McAlester............................................ 53,000 A 30 MHz Oklahoma City........................................ 1,391,000 A, E 40 MHz Ponca City........................................... 46,000 A, E 40 MHz Stillwater........................................... 76,000 A, E 40 MHz ---------- 1,966,000 DES MOINES-QUAD CITIES Burlington........................................... 137,000 A 10 MHz Cedar Rapids......................................... 280,000 A 10 MHz Clinton-Sterling..................................... 146,000 A 10 MHz Davenport-Moline..................................... 427,000 A 10 MHz Des Moines(1)........................................ 776,000 A 10/30 MHz Dubuque.............................................. 177,000 A 10 MHz Fort Dodge........................................... 126,000 A 10 MHz Iowa City............................................ 122,000 A 10 MHz Marshalltown......................................... 56,000 A 10 MHz Mason City........................................... 116,000 A 10 MHz Ottumwa.............................................. 123,000 A 10 MHz Sioux City........................................... 341,000 A 10 MHz Waterloo-Cedar Falls................................. 259,000 A 10 MHz ---------- 3,086,000 HONOLULU Hilo................................................. 142,000 A 30 MHz Honolulu............................................. 866,000 A 30 MHz Kahului-Wailuku-Lahaina.............................. 123,000 A 30 MHz Lihue................................................ 57,000 A 30 MHz ---------- 1,188,000 SAN ANTONIO San Antonio.......................................... 1,805,000 D 10 MHz DALLAS-FORT WORTH Abilene.............................................. 256,000 D 10 MHz Amarillo............................................. 407,000 D 10 MHz Austin............................................... 1,188,000 D 10 MHz Big Spring........................................... 35,000 D 10 MHz
195 203
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ -------------------- ---------- ----- --------- Brownwood............................................ 62,000 D 10 MHz Clovis............................................... 80,000 E 10 MHz Hobbs................................................ 56,000 D 10 MHz Lubbock.............................................. 404,000 E 10 MHz Midland.............................................. 122,000 D, E 20 MHz Odessa............................................... 217,000 D, E 20 MHz Paris................................................ 91,000 D 10 MHz San Angelo........................................... 165,000 D 10 MHz ---------- 3,083,000 ST. LOUIS Cape Girardeau....................................... 188,000 E 10 MHz Carbondale-Marion.................................... 218,000 E 10 MHz Columbia............................................. 208,000 E 10 MHz Jefferson City....................................... 156,000 D 10 MHz Kirksville........................................... 56,000 E 10 MHz Mount Vernon......................................... 122,000 D 10 MHz Poplar Bluff......................................... 155,000 D 10 MHz Quincy-Hannibal...................................... 180,000 D 10 MHz Rolla................................................ 93,000 D 10 MHz St. Louis............................................ 2,822,000 E 10 MHz West Plains.......................................... 75,000 D 10 MHz ---------- 4,273,000 TULSA Coffeyville.......................................... 61,000 D 10 MHz WICHITA Hutchinson........................................... 124,000 D 10 MHz Salina............................................... 143,000 D 10 MHz Wichita.............................................. 652,000 D 10 MHz ---------- 919,000 CHICAGO Jacksonville......................................... 71,000 E 10 MHz CINCINNATI-DAYTON Dayton-Springfield................................... 1,209,000 E 10 MHz CLEVELAND Ashtabula............................................ 102,000 E 10 MHz Canton-New Philadelphia.............................. 526,000 E 10 MHz Cleveland-Akron...................................... 2,964,000 E 10 MHz East Liverpool-Salem................................. 111,000 E 10 MHz Erie................................................. 278,000 E 10 MHz Mansfield............................................ 226,000 E 10 MHz Meadville............................................ 89,000 E 10 MHz Sandusky............................................. 140,000 E 10 MHz Sharon............................................... 122,000 E 10 MHz Youngstown-Warren.................................... 480,000 E 10 MHz ---------- 5,038,000 KANSAS CITY Manhattan-Junction City.............................. 110,000 D 10 MHz LITTLE ROCK Fayetteville-Springdale.............................. 292,000 E 10 MHz
196 204
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ -------------------- ---------- ----- --------- Fort Smith........................................... 311,000 D 10 MHz Harrison............................................. 87,000 D 10 MHz Hot Springs.......................................... 132,000 D 10 MHz Jonesboro-Paragould.................................. 174,000 E 10 MHz Little Rock.......................................... 920,000 D 10 MHz Pine Bluff........................................... 148,000 D 10 MHz Russellville......................................... 93,000 E 10 MHz ---------- 2,157,000 MILWAUKEE Milwaukee............................................ 1,789,000 D 10 MHz MINNEAPOLIS-ST. PAUL Aberdeen............................................. 87,000 D 10 MHz Bemidji.............................................. 64,000 D 10 MHz Bismarck............................................. 127,000 E 10 MHz Fargo................................................ 307,000 E 10 MHz Grand Forks.......................................... 208,000 D 10 MHz Huron................................................ 54,000 D 10 MHz Mitchell............................................. 84,000 D 10 MHz Sioux Falls.......................................... 232,000 D 10 MHz Watertown............................................ 76,000 D 10 MHz Willmar-Marshall..................................... 84,000 E 10 MHz Worthington.......................................... 96,000 D 10 MHz ---------- 1,419,000 OMAHA Grand Island......................................... 148,000 E 10 MHz Hastings............................................. 72,000 E 10 MHz Lincoln.............................................. 332,000 E 10 MHz McCook............................................... 34,000 E 10 MHz Norfolk.............................................. 112,000 E 10 MHz North Platte......................................... 85,000 E 10 MHz ---------- 783,000 RICHMOND-NORFOLK Danville............................................. 168,000 E 10 MHz Lynchburg............................................ 161,000 E 10 MHz Martinsville......................................... 90,000 E 10 MHz Norfolk-VA Beach..................................... 1,763,000 E 10 MHz Richmond-Petersburg.................................. 1,202,000 E 10 MHz Staunton-Waynesburo.................................. 107,000 E 10 MHz ---------- 3,491,000 SAN FRANCISCO-SAN JOSE San Francisco........................................ 6,965,000 E 10 MHz SPOKANE-BILLINGS Billings............................................. 307,000 E 10 MHz Bozeman.............................................. 77,000 E 10 MHz Butte................................................ 67,000 D 10 MHz Great Falls.......................................... 164,000 E 10 MHz Helena............................................... 67,000 D 10 MHz Kalispell............................................ 72,000 D 10 MHz Kennewick-Pasco...................................... 189,000 D 10 MHz Lewiston-Moscow...................................... 123,000 E 10 MHz Missoula............................................. 164,000 D 10 MHz
197 205
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ -------------------- ---------- ----- --------- Walla Walla-Pendleton................................ 169,000 D 10 MHz ---------- 1,399,000 ---------- VOICESTREAM TOTAL...................................... 62,593,000 ==========
- ------------------------- (1) VoiceStream contributed portions of the Des Moines MTA license to Iowa Wireless (defined below). As a result, we will own 30 MHz of the license for certain counties within the Des Moines BTA but only 10 MHz for the remainder of the Des Moines BTA. OMNIPOINT LICENSES
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ -------------------- ---------- ----- ------ NEW YORK New York............................................... 18,572,000 A, D 40 MHz Albany................................................. 1,042,000 A, E 40 MHz Hartford............................................... 1,103,000 A 30 MHz New Haven.............................................. 976,000 A 30 MHz Syracuse............................................... 782,000 A 30 MHz Allentown.............................................. 714,000 A 30 MHz Scranton............................................... 659,000 A 30 MHz Poughkeepsie........................................... 429,000 A 30 MHz Burlington............................................. 395,000 A 30 MHz New London............................................. 358,000 A 30 MHz Binghamton............................................. 338,000 A 30 MHz Elmira................................................. 313,000 A 30 MHz Watertown.............................................. 303,000 A 30 MHz Utica.................................................. 288,000 A 30 MHz Glens Falls............................................ 122,000 A, E 40 MHz Stroudsburg............................................ 128,000 A 30 MHz Plattsburgh............................................ 115,000 A 30 MHz Oneonta................................................ 108,000 A 30 MHz Rutland................................................ 99,000 A 30 MHz Ithaca................................................. 96,000 A 30 MHz ---------- 26,940,000 CHICAGO Elkhart................................................ 256,000 E 10 MHz Galesburg.............................................. 74,000 E 10 MHz ---------- 330,000 DETROIT Muskegon............................................... 221,000 E 10 MHz Adrian................................................. 99,000 E 10 MHz Detroit................................................ 5,020,000 E 10 MHz Flint.................................................. 513,000 E 10 MHz Grand Rapids........................................... 1,043,000 E 10 MHz Jackson................................................ 204,000 E 10 MHz Toledo................................................. 777,000 D 10 MHz Petoskey............................................... 100,000 D 10 MHz Findlay-Tiffin......................................... 152,000 D, E 20 MHz Lima................................................... 251,000 D, E 20 MHz Mt. Pleasant........................................... 129,000 E 10 MHz Saginaw-Bay City....................................... 636,000 E 10 MHz Lansing................................................ 519,000 E 10 MHz ---------- 9,664,000
198 206
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ -------------------- ---------- ----- ------ BOSTON-PROVIDENCE Springfield-Holyoke.................................... 659,000 D 10 MHz Bangor................................................. 321,000 E 10 MHz Pittsfield............................................. 134,000 E 10 MHz Hyannis................................................ 232,000 D 10 MHz Portland-Brunswick..................................... 495,000 D 10 MHz Manchester-Nashua-Concord.............................. 582,000 D, E 20 MHz Worcester-Fitchburg-Leominster......................... 726,000 D, E 20 MHz Waterville-Augusta..................................... 168,000 D, E 20 MHz Boston................................................. 4,259,000 D, E 20 MHz Keene.................................................. 115,000 D, E 20 MHz Presque Isle........................................... 75,000 D, E 20 MHz Providence-Pawtucket-New Bedford-Fall River............ 1,502,000 D 10 MHz Lewiston-Auburn........................................ 215,000 E 10 MHz ---------- 9,483,000 WASHINGTON-BALTIMORE Fredericksburg......................................... 159,000 D 10 MHz Hagerstown-Chambersburg-Martinsburg.................... 353,000 D 10 MHz Salisbury.............................................. 178,000 D, E 20 MHz Washington, DC......................................... 4,516,000 E 10 MHz Charlottesville........................................ 217,000 E 10 MHz Cumberland............................................. 159,000 E 10 MHz ---------- 5,582,000 MIAMI-FT. LAUDERDALE Miami-Ft. Lauderdale................................... 3,743,000 E 10 MHz ST. LOUIS St. Louis.............................................. 2,822,000 D 10 MHz Mt. Vernon-Centralia................................... 122,000 E 10 MHz Columbia............................................... 208,000 D 10 MHz Kirksville............................................. 56,000 D 10 MHz Quincy-Hannibal........................................ 180,000 E 10 MHz ---------- 3,388,000 INDIANAPOLIS Kokomo-Logansport...................................... 185,000 D 10 MHz Bloomington-Bedford.................................... 237,000 E 10 MHz Indianapolis........................................... 1,468,000 E 10 MHz Lafayette.............................................. 267,000 E 10 MHz Marion................................................. 107,000 E 10 MHz Terre Haute............................................ 246,000 E 10 MHz Vincennes-Washington................................... 94,000 E 10 MHz Columbus............................................... 154,000 E 10 MHz ---------- 2,758,000 BUFFALO-ROCHESTER Rochester.............................................. 1,143,000 D 10 MHz Olean-Bradford......................................... 243,000 D, E 20 MHz Jamestown-Dunkirk...................................... 183,000 E 10 MHz ---------- 1,569,000 LITTLE ROCK El Dorado-Magnolia-Camden.............................. 103,000 E 10 MHz
199 207
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ -------------------- ---------- ----- ------ WICHITA Salina................................................. 143,000 E 10 MHz Hutchinson............................................. 124,000 E 10 MHz ---------- 267,000 ---------- OMNIPOINT TOTAL........................................ 63,827,000 ==========
AERIAL LICENSES
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ -------------------- ---------- ----- ------ COLUMBUS Athens.................................................... 131,000 B 30 MHz Chillicothe............................................... 103,000 B 30 MHz Columbus.................................................. 1,622,000 B 30 MHz Marion.................................................... 96,000 B 30 MHz Parkersburg............................................... 181,000 B 30 MHz Zanesville................................................ 187,000 B 30 MHz ---------- 2,320,000 HOUSTON Beaumont.................................................. 457,000 A 30 MHz Bryan..................................................... 165,000 A 30 MHz Houston................................................... 4,793,000 A 30 MHz Lake Charles.............................................. 278,000 A 30 MHz Lufkin.................................................... 156,000 A 30 MHz Victoria.................................................. 164,000 A 30 MHz ---------- 6,013,000 KANSAS CITY Emporia................................................... 46,000 B 30 MHz Joplin.................................................... 235,000 B 30 MHz Kansas City............................................... 2,000,000 B 30 MHz Lawrence.................................................. 93,000 B 30 MHz Manhattan-Junction City................................... 110,000 B 30 MHz Pittsburg-Parsons......................................... 90,000 B 30 MHz St. Joseph................................................ 190,000 B 30 MHz Sedalia................................................... 89,000 B 30 MHz Topeka.................................................... 253,000 B 30 MHz ---------- 3,106,000 MINNEAPOLIS Aberdeen.................................................. 87,000 B 30 MHz Bemidji................................................... 64,000 B 30 MHz Bismarck.................................................. 127,000 B 30 MHz Brainerd.................................................. 94,000 B 30 MHz Dickinson................................................. 36,000 B 30 MHz Duluth.................................................... 408,000 B 30 MHz Eau Claire................................................ 189,000 B 30 MHz Fargo..................................................... 307,000 B 30 MHz Fergus Falls.............................................. 126,000 B 30 MHz Grand Forks............................................... 208,000 B 30 MHz Huron..................................................... 54,000 B 30 MHz Ironwood.................................................. 32,000 B 30 MHz
200 208
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ -------------------- ---------- ----- ------ Mankato................................................... 247,000 B 30 MHz Minneapolis............................................... 3,142,000 B 30 MHz Minot..................................................... 121,000 B 30 MHz Mitchell.................................................. 84,000 B 30 MHz Rochester................................................. 241,000 B 30 MHz St. Cloud................................................. 279,000 B 30 MHz Sioux Falls............................................... 232,000 B 30 MHz Watertown................................................. 76,000 B 30 MHz Williston................................................. 26,000 B 30 MHz Willmar-Marshall.......................................... 125,000 B 30 MHz Worthington............................................... 96,000 B 30 MHz ---------- 6,401,000 PITTSBURGH Altoona................................................... 225,000 B 30 MHz Clarksburg................................................ 193,000 B 30 MHz Du Bois................................................... 126,000 B 30 MHz Fairmont.................................................. 57,000 B 30 MHz Indiana................................................... 89,000 B 30 MHz Johnstown................................................. 235,000 B 30 MHz Morgantown................................................ 107,000 B 30 MHz New Castle................................................ 95,000 B 30 MHz Oil City.................................................. 105,000 B 30 MHz Pittsburgh................................................ 2,455,000 B 30 MHz Steubenville.............................................. 135,000 B 30 MHz Wheeling.................................................. 212,000 B 30 MHz ---------- 4,034,000 TAMPA Daytona Beach............................................. 476,000 A 30 MHz Lakeland.................................................. 456,000 A 30 MHz Melbourne................................................. 471,000 A 30 MHz Ocala..................................................... 243,000 A 30 MHz Orlando................................................... 1,528,000 A 30 MHz Sarasota.................................................. 571,000 A 30 MHz Tampa..................................................... 2,466,000 A 30 MHz ---------- 6,211,000 ---------- AERIAL TOTAL.............................................. 28,085,000 ==========
201 209 RELATIONSHIP WITH COOK INLET -- JOINT VENTURES IN WHICH WE HOLD INTERESTS Following completion of the Omnipoint reorganization, we will hold interests in four joint venture entities ultimately controlled by Cook Inlet. These entities will hold C and F Block PCS licenses to operate in a variety of markets, as described below. Because the C and F Block licenses issued by the FCC have been reserved initially for small businesses under current FCC rules, we are precluded under current FCC rules from holding controlling interests in such licenses until at least five years after issuance. Cook Inlet and its subsidiaries qualify to hold such licenses and also qualify for additional benefits available to a small business under FCC rules. Following completion of the Omnipoint reorganization, we will have agreements with each of the four joint venture entities that allow them to operate under the VoiceStream name with our technical assistance in all markets where we do not also hold PCS licenses. We expect that all markets owned by joint venture entities controlled by Cook Inlet will operate under the VoiceStream brand name. In markets where we also directly hold PCS licenses, we will have agreements with such entities allowing equipment leasing, resale and roaming, enabling each of us to operate on the systems constructed for the markets, and we expect that we will retain rights to operate using the VoiceStream brand name. In any markets where a joint venture entity controlled by Cook Inlet operates using the VoiceStream brand name and we subsequently obtain a license to operate in such market, we may not be able to operate under the VoiceStream brand name. For discussion of pending litigation that may affect Cook Inlet's C Block licenses, see "Risk Factors -- We will be subject to extensive government regulation, any changes in which could affect our build-out plan or financial performance." - Cook Inlet/VoiceStream PV/SS PCS, LP Cook Inlet/VoiceStream PV/SS PCS, LP ("Cook Inlet PCS"), formerly Cook Inlet/Western Wireless PV/SS PCS, LP, is a Delaware limited partnership formed in November 1995. We will hold a 49.9% limited partnership interest in Cook Inlet PCS. Cook Inlet PCS began operations in the Tulsa market in June 1997, in the Phoenix/Tucson market in November 1998 and in the Seattle/ Tacoma and Spokane markets in February 1999. Cook Inlet PCS has not yet finalized its construction plans for the other licenses it owns. Cook Inlet PCS owns FCC licenses to provide wireless communications services in the following 19 BTA license areas. See "-- Governmental Regulation; Licensing of PCS Systems."
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ -------------------- ---------- ----- ------ CINCINNATI-DAYTON Cincinnati.............................................. 2,139,000 F 10 MHz DALLAS-FORT WORTH Temple-Killeen.......................................... 354,000 F 10 MHz EL PASO-ALBUQUERQUE El Paso................................................. 772,000 F 10 MHz KANSAS CITY Pittsburg-Parsons....................................... 90,000 F 10 MHz PHOENIX Phoenix................................................. 3,191,000 F 10 MHz Tucson.................................................. 807,000 F 10 MHz ---------- 3,998,000
202 210
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ -------------------- ---------- ----- ------ SEATTLE Aberdeen................................................ 91,000 C 15 MHz Bellingham.............................................. 161,000 F 10 MHz Bremerton............................................... 242,000 C 15 MHz Port Angeles............................................ 93,000 C 15 MHz Seattle-Tacoma.......................................... 3,090,000 F 10 MHz Wenatchee............................................... 211,000 C 15 MHz Yakima.................................................. 259,000 C 15 MHz ---------- 4,147,000 SPOKANE-BILLINGS Spokane................................................. 733,000 C 15 MHz Walla Walla-Pendleton................................... 169,000 C 15 MHz ---------- 902,000 TULSA Bartlesville............................................ 47,000 C 15 MHz Coffeyville............................................. 61,000 C 15 MHz Muskogee................................................ 159,000 C 15 MHz Tulsa................................................... 910,000 C 15 MHz ---------- 1,177,000 ---------- COOK INLET PCS TOTAL...................................... 13,579,000 ==========
- Cook Inlet/VoiceStream PCS LLC CIVS was formed on February 12, 1999. We will hold a 49.9% membership interest in CIVS. CIVS participated in the recently completed FCC reauction of C, D, E and F Block licenses and was the high bidder on the following 28 BTA licenses.
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ -------------------- ---------- ----- ------ CHICAGO Chicago................................................. 8,617,000 C 30 MHz Champaign-Urbana........................................ 218,000 C 30 MHz Decatur-Effingham....................................... 247,000 C 30 MHz Jacksonville............................................ 71,000 C 15 MHz Kankakee................................................ 135,000 C 30 MHz Mattoon................................................. 62,000 C 30 MHz Michigan City-La Porte.................................. 109,000 C 30 MHz Rockford................................................ 444,000 C 30 MHz Springfield............................................. 278,000 C 30 MHz ---------- 10,181,000 DALLAS Dallas-Fort Worth....................................... 5,121,000 C 30 MHz Longview-Marshall....................................... 315,000 C 30 MHz Shreveport.............................................. 582,000 C 30 MHz Texarkana............................................... 263,000 C 30 MHz Tyler................................................... 301,000 C 30 MHz Waco.................................................... 293,000 C 30 MHz ---------- 6,875,000 LITTLE ROCK El Dorado-Magnolia...................................... 103,000 C 30 MHz
203 211
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ -------------------- ---------- ----- ------ MINNEAPOLIS Aberdeen................................................ 87,000 C 30 MHz NEW ORLEANS Baton Rouge............................................. 667,000 C 30 MHz Hammond................................................. 105,000 C 30 MHz Lafayette-New Iberia.................................... 530,000 C 30 MHz ---------- 1,302,000 OMAHA Omaha................................................... 965,000 C 15 MHz PHOENIX Flagstaff............................................... 119,000 C 30 MHz Prescott................................................ 153,000 C 30 MHz Sierra Vista-Douglas.................................... 114,000 C 30 MHz Yuma.................................................... 126,000 C 30 MHz ---------- 512,000 ST. LOUIS Cape Girardeau.......................................... 188,000 C 30 MHz Poplar Bluff............................................ 155,000 C 30 MHz Rolla................................................... 93,000 C 30 MHz ---------- 436,000 ---------- CIVS TOTAL................................................ 20,461,000 ==========
- Cook Inlet/VoiceStream GSM II PCS, LLC CIVS II was formed in anticipation of the Omnipoint reorganization. We will hold a 49.9% membership interest in CIVS II. Pursuant to the purchase agreement by and between CIVS II and Omnipoint, CIVS II will acquire BTA licenses and certain associated assets and liabilities for the following 54 BTA markets, as well as certain FCC Wireless Communications Services licenses:
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ -------------------- ---------- ----- ------ DETROIT Battle Creek............................................ 239,000 F 10 MHz Adrian.................................................. 99,000 F 10 MHz Detroit................................................. 5,020,000 F 10 MHz Flint................................................... 513,000 F 10 MHz Grand Rapids............................................ 1,043,000 F 10 MHz Jackson................................................. 204,000 F 10 MHz Lansing................................................. 519,000 F 10 MHz Toledo.................................................. 777,000 F 10 MHz ---------- 8,414,000 BOSTON-PROVIDENCE Presque Isle............................................ 75,000 F 10 MHz Providence-Pawtucket- New Bedford-Fall River.................................. 1,502,000 F 10 MHz ---------- 1,577,000 MIAMI-FT. LAUDERDALE Miami-Ft. Lauderdale.................................... 3,743,000 F 10 MHz W. Palm Beach-Boca Raton................................ 1,078,000 F 10 MHz ---------- 4,821,000
204 212
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ -------------------- ---------- ----- ------ INDIANAPOLIS Anderson................................................ 181,000 F 10 MHz Muncie.................................................. 180,000 F 10 MHz Richmond................................................ 104,000 F 10 MHz Columbus................................................ 154,000 F 10 MHz Terre Haute............................................. 246,000 F 10 MHz Vincennes-Washington.................................... 94,000 F 10 MHz ---------- 959,000 ST. LOUIS Cape Girardeau-Sikeston................................. 188,000 F 10 MHz Carbondale-Marion....................................... 218,000 F 10 MHz Jefferson City.......................................... 156,000 F 10 MHz Poplar Bluff............................................ 155,000 F 10 MHz Rolla................................................... 93,000 F 10 MHz Springfield............................................. 631,000 F 10 MHz West Plains............................................. 75,000 F 10 MHz ---------- 1,516,000 WICHITA Wichita................................................. 652,000 F 10 MHz CHARLOTTE-GREENSBORO-GREENVILLE-RALEIGH Goldsboro-Kinston....................................... 237,000 F 10 MHz DALLAS-FT. WORTH Waco.................................................... 293,000 F 10 MHz PHILADELPHIA Atlantic City........................................... 339,000 C 15 MHz Dover................................................... 293,000 C 15 MHz Philadelphia-Wilmington- Trenton................................................. 5,975,000 C 15 MHz Reading................................................. 355,000 C 15 MHz ---------- 6,962,000 ATLANTA Albany-Tifton........................................... 342,000 F 10 MHz Augusta................................................. 567,000 F 10 MHz Macon-Warner Robins..................................... 641,000 F 10 MHz Savannah................................................ 719,000 F 10 MHz ---------- 2,269,000 CINCINNATI-DAYTON Williamson-Pikeville.................................... 185,000 F 10 MHz DENVER Colorado Springs, CO.................................... 513,000 F 10 MHz RICHMOND-NORFOLK Norfolk-Virginia Beach- Newport News............................................ 1,763,000 F 10 MHz PUERTO RICO-USVI San Juan................................................ 2,170,000 F 10 MHz
205 213
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ -------------------- ---------- ----- ------ BIRMINGHAM Birmingham.............................................. 1,304,000 F 10 MHz Gadsden................................................. 184,000 F 10 MHz Decatur................................................. 143,000 F 10 MHz Huntsville.............................................. 511,000 F 10 MHz ---------- 2,142,000 PORTLAND Coos Bay-North Bend..................................... 84,000 F 10 MHz DES MOINES-QUAD CITIES Des Moines.............................................. 775,000 F 10 MHz SAN ANTONIO San Antonio............................................. 1,805,000 F 10 MHz NASHVILLE Nashville............................................... 1,665,000 F 10 MHz CHICAGO Benton Harbor........................................... 161,000 F 10 MHz Danville................................................ 110,000 F 10 MHz Ft. Wayne............................................... 684,000 F 10 MHz Peoria.................................................. 463,000 F 10 MHz South Bend-Mishawaka.................................... 350,000 F 10 MHz ---------- 1,768,000 WASHINGTON-BALTIMORE Baltimore............................................... 2,533,000 F 10 MHz ---------- CIVS II TOTAL............................................. 43,103,000 ==========
- Cook Inlet/VoiceStream GSM III PCS, LLC CIVS III was formed in anticipation of the Omnipoint reorganization. We will hold a 49.9% membership interest in CIVS III. Pursuant to the purchase agreement dated as of June 23, 1999, by and between CIVS III and Omnipoint, CIVS III will acquire licenses and license applications for the following 34 BTA markets:
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ -------------------- ---------- ----- ------ CHICAGO Elkhart................................................... 256,000 C 30 MHz Benton Harbor............................................. 161,000 C 30 MHz Ft. Wayne................................................. 684,000 C 30 MHz South Bend-Mishawaka...................................... 350,000 C 15 MHz ---------- 1,451,000
206 214
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ -------------------- ---------- ----- ------ DETROIT Adrian*................................................... 99,000 C 15 MHz Detroit*.................................................. 5,020,000 C 30 MHz Flint*.................................................... 513,000 C 30 MHz Grand Rapids*............................................. 1,043,000 C 15 MHz Jackson*.................................................. 204,000 C 15 MHz Kalamazoo*................................................ 371,000 C 30 MHz Muskegon*................................................. 221,000 C 15 MHz Alpena.................................................... 67,000 C 30 MHz Battle Creek*............................................. 239,000 C 15 MHz Sault Ste. Marie.......................................... 56,000 C 30 MHz ---------- 7,833,000 BOSTON-PROVIDENCE Bangor.................................................... 321,000 C 15 MHz Pittsfield................................................ 134,000 C 30 MHz Springfield-Holyoke....................................... 659,000 C 30 MHz Lebanon-Claremont......................................... 175,000 C 30 MHz ---------- 1,289,000 ST. LOUIS Mt. Vernon-Centralia*..................................... 122,000 C 30 MHz St. Louis*................................................ 2,822,000 C 30 MHz ---------- 2,944,000 INDIANAPOLIS Kokomo-Logansport......................................... 185,000 C 15 MHz BUFFALO-ROCHESTER Rochester................................................. 1,143,000 C 30 MHz Buffalo-Niagara Falls..................................... 1,200,000 C 30 MHz ---------- 2,343,000 WICHITA Salina.................................................... 143,000 C 30 MHz PHILADELPHIA Harrisburg................................................ 687,000 C 30 MHz Lancaster................................................. 456,000 C 30 MHz York-Hanover.............................................. 464,000 C 30 MHz ---------- 1,607,000 CLEVELAND Ashtabula................................................. 102,000 C 30 MHz Canton-New Philadelphia................................... 526,000 C 30 MHz E. Liverpool-Salem........................................ 111,000 C 30 MHz Erie...................................................... 278,000 C 30 MHz Mansfield................................................. 226,000 C 30 MHz Sandusky*................................................. 140,000 C 15 MHz Youngstown-Warren......................................... 480,000 C 30 MHz ---------- 1,863,000 ---------- CIVS III TOTAL.............................................. 19,658,000 ==========
- ------------------------- * License has not yet been issued by the FCC. 207 215 OTHER JOINT VENTURE ENTITIES IN WHICH WE WILL HOLD INTERESTS FOLLOWING THE FIRST TO OCCUR OF THE OMNIPOINT REORGANIZATION AND THE AERIAL REORGANIZATION Following the first to occur of the completion of the Omnipoint reorganization and the Aerial reorganization, we will hold interests in the following joint venture entities. - Iowa Wireless Iowa Wireless Services, L.P. ("Iowa Wireless") is a Delaware limited partnership ultimately controlled by Iowa Network Services, Inc., an Iowa corporation. We will hold a 38% limited partnership interest in Iowa Wireless. Iowa Wireless began operations in certain markets in 1998. Iowa Wireless owns FCC licenses to provide wireless communications services in the following 13 BTA license areas. See "-- Governmental Regulation; Licensing of PCS Systems."
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ -------------------- ---------- ----- ------ DES MOINES-QUAD CITIES Burlington............................................... 137,000 A, D 40 MHz Cedar Rapids............................................. 280,000 A 20 MHz Clinton-Sterling......................................... 146,000 A, D 40 MHz Davenport-Moline......................................... 427,000 A 20 MHz Des Moines(1)............................................ 207,000 A 20 MHz Dubuque.................................................. 177,000 A 20 MHz Fort Dodge............................................... 126,000 A 20 MHz Iowa City................................................ 122,000 A 20 MHz Marshalltown............................................. 56,000 A, D 40 MHz Mason City............................................... 116,000 A, D 40 MHz Ottumwa.................................................. 123,000 A 20 MHz Sioux City............................................... 341,000 A 20 MHz Waterloo-Cedar Falls..................................... 259,000 A 20 MHz --------- IOWA WIRELESS TOTAL........................................ 2,517,000 =========
- ------------------------- (1) VoiceStream contributed portions of the Des Moines MTA license to Iowa Wireless. As a result, we will own 30 MHz of the license for certain counties within the Des Moines BTA but only 10 MHz for the remainder of the Des Moines BTA. The remaining 20 MHz is owned by Iowa Wireless. - STPCS STPCS is a Delaware limited liability company ultimately controlled by STPCS Investment, LLC. We will hold an 18% membership interest in STPCS. STPCS, through its wholly owned subsidiaries, owns seven FCC licenses to provide wireless communications services in the following seven BTA markets. See "-- Governmental Regulation; Licensing of PCS Systems."
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ -------------------- ---------- ----- ------ SAN ANTONIO Brownsville-Harlingen.................................... 353,000 D, F 20 MHz Corpus Christi........................................... 556,000 D 10 MHz Eagle Pass-Del Rio....................................... 120,000 F 10 MHz Laredo................................................... 215,000 D 10 MHz McAllen.................................................. 594,000 D 10 MHz --------- 1,838,000
208 216
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ -------------------- ---------- ----- ------ HOUSTON Victoria................................................. 164,000 F 10 MHz --------- STPCS TOTAL................................................ 2,002,000 =========
OTHER JOINT VENTURES IN WHICH WE WILL HOLD AN INTEREST FOLLOWING THE OMNIPOINT REORGANIZATION - D&E/Omnipoint Wireless Joint Venture, LLC D&E/Omnipoint Wireless Joint Venture, LLC is a Delaware limited liability company formed in September 1997. We will hold a 50% interest in this entity to which Omnipoint has committed to contribute licenses for several western Pennsylvania BTA markets. The company launched service in the markets in September 1997.
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ -------------------- ---------- ----- ------ PHILADELPHIA York-Hanover............................................. 464,000 E 10 MHz Harrisburg............................................... 687,000 D 10 MHz Lancaster................................................ 456,000 E 10 MHz --------- 1,607,000
- NPI-Omnipoint Wireless, LLC NPI Omnipoint Wireless, LLC is a Delaware limited liability company formed in March 1999. We will hold a 30% interest in this joint venture entity to which Omnipoint has committed to contribute licenses for several central Michigan BTAs. The company launched service in the markets in the Spring of 1999.
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ -------------------- ---------- ----- ------ DETROIT Grand Rapids(1).......................................... 1,043,000 E 10 MHz Mount Pleasant........................................... 129,000 E 10 MHz Muskegon................................................. 221,000 E 10 MHz Saginaw-Bay City(1)...................................... 636,000 E 10 MHz --------- 2,029,000
- ------------------------- (1) Omnipoint has agreed to contribute portions of the Grand Rapids and Saginaw-Bay City BTA licenses to NPI-Omnipoint Wireless, LLC. As a result, Omnipoint will own the E Block licenses for certain counties within the Grand Rapids and Saginaw-Bay City BTAs, and NPI-Omnipoint Wireless, LLC will own the E block licenses for the remainder of the counties in the Grand Rapids and Saginaw-Bay City BTA. OTHER JOINT VENTURES IN WHICH WE WILL HOLD AN INTEREST FOLLOWING THE AERIAL REORGANIZATION Following completion of the Aerial reorganization, we will hold interests in the following joint venture entities: - Wireless Alliance, LLC Wireless Alliance, LLC ("WALLC") is a Minnesota limited liability company formed in November 1996. We will hold a 30% interest in WALLC. The company launched service in 1998. 209 217
MTA/BTA LICENSE AREA POPULATION BLOCK MHZ -------------------- ---------- ----- ------ MINNEAPOLIS (1) Duluth................................................... 408,000 B 20 MHz Grand Forks.............................................. 208,000 B 20 MHz Fargo.................................................... 307,000 B 20 MHz Sioux Falls.............................................. 232,000 B 20 MHz
- ------------------------- (1) Aerial contributed to WALLC 20 MHz of the 30 MHz of the above BTAs within the Minneapolis MTA license in exchange for its ownership interest in WALLC. - Access Plus, LLC A GSM infrastructure agreement between a wholly-owned subsidiary of Aerial Operating Company and Access Plus, LLC, provides for the build-out of the Brainerd BTA portion of Aerial's Minneapolis MTA and the sharing of revenues generated by this venture. PRODUCTS AND SERVICES We will continue to provide a variety of wireless products and services designed to match a range of needs for business and personal use. VoiceStream, Omnipoint and Aerial currently offer several distinct services and features in their PCS systems, including: - Enhanced Features. Our systems will continue to offer caller identification, call hold, call waiting, voice mail and alpha-numeric paging, as well as custom calling features such as conference calling and call forwarding. - Messaging and Wireless Data Transmission. Our systems will continue to allow for two-way messaging to and from subscribers' handsets. This facilitates a number of messaging and internet-related services which are currently offered by VoiceStream, Omnipoint and Aerial, such as the receipt of wireless e-mail, and which may be offered in the future, such as Web browsing. - Call Security and Privacy. Sophisticated encryption algorithms provide increased call security, encouraging users to make private, business and personal calls with significantly lower risk of eavesdropping than on analog-based systems. - Smart Card. "Smart" cards, programmed with the user's billing information and a specified service package, allow subscribers to obtain PCS connectivity automatically, simply by inserting their smart cards into compatible PCS handsets. - Prepaid Wireless. Our systems will continue to offer prepaid wireless services in many of our markets. - Over-the-Air Activation and Over-the-Air Subscriber Profile Management. VoiceStream, Omnipoint and Aerial are able to transmit changes in the subscriber's feature package, including mobile number assignment and personal directory numbers, directly to the subscriber's handset. - Roaming. Subscribers are able to roam throughout the United States and many countries in the world, on other GSM handsets. VoiceStream has entered into roaming agreements with many analog cellular carriers which allow customers with dual-mode handsets to roam on most cellular systems in the United States. Dual-mode handsets allow roaming onto analog cellular systems. 210 218 MARKETING, SALES AND CUSTOMER SERVICE Our sales and marketing strategy is to generate continued subscriber growth and increased subscriber revenues. In addition, we will continue to target a customer base which we believe is likely to generate higher monthly service revenues, while attempting to achieve a low cost of adding new subscribers. - Marketing. We will continue to market our PCS products and services under the proprietary VoiceStream brand name. Our objective is to develop brand recognition of VoiceStream through substantial advertising and direct marketing in each of our PCS markets. We may continue to use the Omnipoint brand for select services. In marketing our PCS services, we will concentrate our marketing efforts primarily on the consumer market that benefits from VoiceStream's existing "Get More" proposition. This emphasizes that consumers get more for their money from VoiceStream's enhanced features, privacy, customer service and competitive pricing of these services. We will also promote to businesses who benefit from integrated voice messaging, wireless data transmission, and enhanced features and services. We intend to feature our celebrity spokesperson -- Jamie Lee Curtis -- in our advertising campaign. - Sales. We will continue to sell our products and services through a combination of direct and indirect channels. As a combined entity, we will operate company-owned retail sales locations and utilize a direct sales force. Our training programs will provide our sales employees with an in-depth understanding of our system, products and services so that they, in turn, can provide extensive information to prospective customers. Sales commissions generally are linked both to subscriber revenue and subscriber retention, as well as to activation levels. We believe that our local sales offices will provide the physical presence in local markets necessary to position us as a quality local service provider, and give us greater control over both our costs and the sales process. We will also utilize indirect sales through an extensive network of national and local merchant and specialty retailers. We intend to continue to use a combination of direct and indirect sales channels, with the mix depending on the retail needs of each particular market. In addition, we will act as a retail distributor of handsets and maintain inventories of handsets. Although subscribers generally are responsible for purchasing or otherwise obtaining their own handsets, VoiceStream, Omnipoint and Aerial have historically sold handsets below cost to respond to competition and general industry practice and expect to continue to do so in the future. - Customer Service. Superior customer service is a significant element of our operating philosophy. We are committed to attracting and retaining subscribers by providing consistently superior customer service. We will continue to maintain a highly sophisticated monitoring and control system and a well-trained staff of customer service personnel to handle both routine and complex questions as they arise, 24 hours a day, 365 days a year. We will continue to implement credit check procedures at the time of sale and continuously monitor customer churn (the rate of subscriber attrition). We believe that we can minimize our churn rate through an outreach program implemented through our sales force and customer service personnel. This program will not only enhance subscriber loyalty, but also increase add-on sales and customer referrals. The outreach program will also allow the sales staff to check customer satisfaction, as well as to offer additional calling features, such as voice mail and call forwarding. 211 219 SUPPLIERS AND EQUIPMENT VENDORS We will not manufacture any of the handsets or network equipment used in our operations. The high degree of compatibility among different manufacturers' models of handsets and network equipment will allow us to continue to design, construct and operate our systems without being dependent upon any single source of such equipment. The handsets and network equipment used in VoiceStream's, Omnipoint's and Aerial's operations are available for purchase from multiple sources, and we anticipate that such equipment will continue to be available in the foreseeable future. VoiceStream, Omnipoint and Aerial currently purchase handsets primarily from Motorola Inc., Ericsson Inc., Mitsubishi Wireless Communications, Inc. and Nokia. We will deploy network equipment primarily from Ericsson, Nortel Networks Inc., Nokia and Siemens Information and Communications Networks, Inc. COMPETITION Competition for subscribers among wireless licensees is based principally upon the services and features offered, the technical quality of the wireless systems, customer service, system coverage, capacity and price. Under current FCC rules, there may be up to seven PCS licensees in each geographic area in addition to the two cellular licensees. Also, SMR dispatch system operators have constructed digital mobile communications systems on existing SMR frequencies, referred to as ESMR, in many cities throughout the United States, including some of the markets in which we will operate. We will operate in highly competitive markets. Our principal competitors will be the cellular service providers in our markets, many of which have been operational for a number of years, and national PCS providers, some of which offer service plans which may be difficult for us to compete against or offer on attractive terms. We will also compete with paging, dispatch and conventional mobile telephone companies, resellers and landline telephone service providers in our PCS markets. Many of our competitors have significantly greater financial and technical resources than those available to us and provide comparable services in competition with our PCS systems. These competitors include Vodafone AirTouch, AT&T Wireless, Bell Atlantic, GTE Mobilnet, Nextel, Sprint PCS and US West. Potential users of wireless systems may also find their communications needs satisfied by other current and developing technologies. One or two-way paging or beeper services that feature voice messaging and data display as well as tone only service may be adequate for potential subscribers who do not need to speak to the caller. In the future, wireless service may also compete more directly with traditional landline telephone service providers. GSM systems are not deployed in all areas of the United States. As a result, our subscribers may not be able to conveniently use PCS services while roaming in areas outside our markets. Further, our principal PCS competitors use standards other than GSM. For example, US West and Sprint PCS use the CDMA standard and AT&T Wireless uses the TDMA standard. Systems using the CDMA and TDMA standards cover more areas of the United States than do GSM systems. Therefore, our competitors deploying such systems have a competitive advantage in this regard. A reseller provides wireless service to customers but does not hold an FCC license or own facilities. The reseller buys blocks of wireless telephone numbers and capacity from a licensed carrier and resells service through its own distribution network to the public. Thus, a reseller is both a customer of a wireless licensee's services and also a competitor of that licensee. Several small resellers currently operate in competition with VoiceStream's, Omnipoint's and Aerial's systems. The resale requirement is set to expire November 24, 2002. 212 220 In the future, we expect to face increased competition from entities providing similar services using other communications technologies. While some of these technologies and services are currently operational, others are being developed or may be developed in the future. At the end of 1996, the FCC transferred 200 MHz of spectrum previously allocated to federal government use to the private sector. In April of 1997, the FCC auctioned 30 MHz of spectrum for wireless communications services, which can provide fixed or mobile telecommunications service. Omnipoint purchased nine licenses as a result of such auction, all of which will be contributed to CIVS II. In late 1997, the FCC also auctioned 10 MHz of spectrum for specialized mobile radio service, another competitor with PCS service. Moreover, in 1998, the FCC auctioned more than 1000 MHz of spectrum for local multipoint distribution service. VoiceStream acquired 16 licenses as a result of such auction. During 1998 and 1999, the FCC auctioned spectrum in the 220 MHz band. The FCC also has announced its intent to auction additional spectrum that may be used to provide fixed and mobile services, including 25 MHz of spectrum for the general wireless communications service plus spectrum in the 39 MHz band. We cannot foresee how technological progress or economic incentive will affect competition from this new spectrum. In all instances, the FCC reserves the right to amend or repeal its service regulations and auction schedule. INTELLECTUAL PROPERTY VoiceStream holds federal trademark registration of the marks "VoiceStream" and "VoiceStream and Design," and has registered or applied for various other trade and service marks with the United States Patent and Trademark Office. As of June 30, 1999, Omnipoint had 63 United States patents, 10 foreign patents, 57 United States and 73 foreign pending patent applications, 12 United States and 102 foreign trademarks, and 27 United States and 83 pending foreign trademark applications. As of September 17, 1999, Aerial had one pending United States patent, eight United States trademarks and six common law trademarks. Upon the closing of both reorganizations, we will hold all such intellectual property. ORGANIZATION We will hold our FCC licenses and conduct all operations through a number of direct and indirect wholly-owned subsidiaries and through certain affiliates. Indirect wholly-owned subsidiaries of VoiceStream are the 49.9% limited partner of Cook Inlet PCS, the 38% limited partner of Iowa Wireless, the 18% member of STPCS, and a 49.9% ownership in CIVS. In three BTAs, VoiceStream and Cook Inlet PCS each own a license for 10 MHz of PCS spectrum that are the subject of agreements allowing each of VoiceStream and Cook Inlet PCS to operate on the PCS systems built by VoiceStream in those BTAs. Wholly-owned subsidiaries of Omnipoint are the 50% member of D&E/Omnipoint Wireless Joint Venture, LLC and the 30% member of NPI-Omnipoint Wireless, LLC and will hold 49.9% membership interests in CIVS II and CIVS III. A wholly-owned subsidiary of Aerial Operating Company owns a 30% membership interest in Wireless Alliance, LLC. Additionally, a GSM infrastructure agreement between a wholly-owned subsidiary of Aerial Operating Company and Access Plus, LLC, provides for the build-out of a portion of Aerial's Minneapolis MTA and the sharing of the revenues generated by this venture. Furthermore, Aerial Operating Company owns 100 limited partnership interest units, representing, as of December 31, 1998, a 3.8% partnership interest, in GSM Capital Limited Partnership, a venture capital fund whose objective is to invest in early stage companies providing products and services to GSM PCS operators. Aerial Operating Company also has, as of December 31, 1998, a 9.6% membership interest in North American GSM Alliance, LLC. 213 221 GOVERNMENTAL REGULATION The FCC regulates the licensing, construction, operation, acquisition and sale of cellular and PCS systems in the United States pursuant to the Communications Act. LICENSING OF PCS SYSTEMS In order to increase competition in wireless communications, promote improved quality and service and make available the widest possible range of wireless services, federal legislation was enacted directing the FCC to allocate radio frequency spectrum for PCS by competitive bidding. A PCS system operates under a protected geographic service area license granted by the FCC for a particular market on one of six frequency blocks allocated for broadband PCS service. The FCC has divided the United States and its possessions and territories into PCS markets made up of 493 BTAs and 51 MTAs. Each MTA consists of at least two BTAs. As many as seven licenses are issued in each PCS service area. The FCC has allocated 120 MHz of radio spectrum in the 2 GHz band for licensed PCS services. The FCC divided the 120 MHz of spectrum into six individual blocks, each of which is allocated to serve either MTAs or BTAs. The spectrum allocation includes two 30 MHz blocks (A and B Blocks) licensed for each of the 51 MTAs, one 30 MHz block (C Block) (which has been split in some BTAs into two 15 MHz blocks) licensed for each of the 493 BTAs, and three 10 MHz blocks (D, E and F Blocks) licensed for each of the 493 BTAs. A PCS license has been or will be awarded for each MTA or BTA in every block, for a total of more than 2,000 licenses. Under the FCC's current rules specifying spectrum ownership limits affecting broadband PCS licensees, no person or entity may hold an attributable interest in licenses for more than 45 MHz of PCS, cellular and SMR services regulated as CMRS where there is significant overlap in any geographic area (significant overlap will occur when at least 10% of the population of the PCS licensed service area is within the CGSA and/or SMR service area, as defined by the FCC). In an order released September 22, 1999, the Commission raised the aggregation limit for licensees serving rural areas (defined as cellular RSAs) to 55 MHz. For purposes of this spectrum limit, any controlling ownership interest shall be "attributable," as will any equity interest of 20% or more (however, 40% or more applies (1) if the ownership interest is held by a small business, or (2) if the interest is held by an entity with a non-controlling interest in a PCS licensee that is a small business or (3) is held by a passive institutional investor). Furthermore, the officers and directors of any licensee shall be considered to have an attributable interest in each entity with which they are associated. This means that Western Wireless's ownership of cellular licenses will be attributed to VoiceStream Holdings (because of some common officers and directors) and Cook Inlet PCS's PCS licenses will be attributed to VoiceStream Holdings (because of VoiceStream's equity interest). Western Wireless owns cellular licenses serving markets that are wholly or partially within the Denver MTA and the Oklahoma City MTA, resulting in Western Wireless exceeding the FCC's spectrum cap restrictions described above. Western Wireless has filed waiver requests with the FCC with respect to both MTAs, both of which are pending, and has been allowed to delay compliance with the restriction until the FCC rules on the waiver requests. It may be necessary to supplement these waiver requests in light of the September 22, 1999 order. In the event that spectrum cap restrictions are not waived, either VoiceStream Holdings or Western Wireless will be obligated to divest sufficient portions of their markets in the Denver and Oklahoma City MTAs to come into compliance with the rules. The licenses of Omnipoint will also be attributed to VoiceStream after the Omnipoint reorganization, as will the Aerial licenses after the Aerial reorganization. This attribution will cause the spectrum cap to be exceeded in St. Louis, Rolla, Poplar Bluff and Cape Girardeau-Sikeston, Missouri, Salina, Kansas and Mt. Vernon, Illinois. Temporary waivers of the spectrum cap have been 214 222 sought by VoiceStream and Omnipoint in the context of their FCC applications for approval of the Omnipoint reorganization. If any of these waivers are not granted, either VoiceStream Holdings or Western Wireless will be obligated to divest sufficient portions of their spectrum in these markets to come into compliance with the rules. VoiceStream Holdings does not believe the spectrum cap or any action Western Wireless or VoiceStream Holdings may be required to take to comply therewith will have a material adverse effect on VoiceStream Holdings due to the relatively minor geographic overlaps. We do not expect that the Aerial reorganization will close prior to the Omnipoint reorganization. Should this occur, however, TDS's interest will rise to approximately 24%, assuming an exchange ratio of 0.455, making U.S. Cellular licenses attributable to VoiceStream Holdings and causing overlap problems which otherwise could be avoided. In this event, VoiceStream Holdings will seek temporary waivers of the spectrum cap for affected markets. If these waivers are not granted, other action will need to be taken to comply with the spectrum cap rules, including the possible sale by TDS of sufficient shares of VoiceStream common stock to reduce its interest below 20% or the divestiture of portions of spectrum in certain markets. All PCS licenses are granted for a ten-year term, at the end of which they must be renewed. The FCC has adopted specific standards to apply to PCS renewals, under which the FCC will award a renewal expectancy to a PCS licensee that (1) has provided substantial service during its past license term and (2) has substantially complied with applicable FCC rules and policies and the Communications Act. All 30 MHz PCS licensees, including VoiceStream and Omnipoint, must construct facilities with a signal level sufficient to provide adequate service to at least one-third of the population of their service area within five years of their initial license grants and to two-thirds of the population within ten years. All 10 MHz and 15 MHz PCS licensees, including VoiceStream and Omnipoint, must construct facilities with a signal level sufficient to provide adequate service to at least one-quarter of the population in their licensed service area within five years of their initial license grants, or make a showing of substantial service in their licensed service area within five years of their initial license grants. Licensees that fail to meet the coverage requirements may be subject to forfeiture of the license. FCC rules restrict the voluntary assignments or transfers of control of C and F Block licenses. During the first five years of the license term, assignments or transfers affecting control are permitted only to assignees or transferees that meet the eligibility criteria for participation in the entrepreneur block auction at the time the application for assignment or transfer of control is filed, or if the proposed assignee or transferee holds other licenses for C and F Blocks and, at the time of receipt of such licenses, met the same eligibility criteria. Any transfers or assignments during the entire ten year initial license term are subject to an unjust enrichment penalty of acceleration of any installment payment plans should the assignee or transferee not qualify for the same benefits. Any transfers or assignments during the first five years of the initial license term are subject to an unjust enrichment penalty of forfeiture of bidding credits. In the case of the C and F Blocks, the FCC will conduct random audits to ensure that licensees are in compliance with the FCC's eligibility rules. Violations of the Communications Act or the FCC's rules could result in license revocations, forfeitures or fines. For a period of up to 10 years after the grant of a PCS license (subject to extension), a PCS licensee will share spectrum with existing licensees that operate certain fixed microwave systems within its license area. To secure a sufficient amount of unencumbered spectrum to operate our PCS systems efficiently and with adequate population coverage, we will need to relocate many of these incumbent licensees. In an effort to balance the competing interests of existing microwave users and newly authorized PCS licensees, the FCC adopted (1) a transition plan to relocate such microwave operators to other spectrum blocks and (2) a cost sharing plan so that if the relocation of an incumbent benefits more than one PCS licensee, the benefiting PCS licensees will share the cost of 215 223 the relocation. Initially, this transition plan allowed most microwave users to operate in the PCS spectrum for a two-year voluntary negotiation period and an additional one-year mandatory negotiation period. The FCC has shortened the voluntary negotiation period by one year (without lengthening the mandatory negotiation period) for PCS licensees in the C, D, E and F Blocks. For public safety entities dedicating a majority of their system communications for police, fire or emergency medical services operations, the voluntary negotiation period is three years, with an additional two year mandatory negotiation period. Parties unable to reach agreement within these time periods may refer the matter to the FCC for resolution, but the incumbent microwave user is permitted to continue its operations until final FCC resolution of the matter. The transition and cost sharing plans expire on April 4, 2005, at which time remaining incumbents in the PCS spectrum will be responsible for their costs to relocate to alternate spectrum locations. Cellular and PCS systems are subject to certain Federal Aviation Administration regulations respecting the location, lighting and construction of transmitter towers and antennae and may be subject to regulation under the National Environmental Policy Act and the environmental regulations of the FCC. State or local zoning and land use regulations will also apply to our activities. We will use, among other facilities, common carrier point to point microwave facilities to connect cell sites and to link them to the main switching office. These facilities are separately licensed by the FCC and are subject to regulation as to technical parameters and service. VoiceStream, Omnipoint and Aerial have purchased their PCS licenses from private parties and the federal government. They have used a combination of debt and equity financing to acquire such licenses. Some joint ventures in which they hold an interest have utilized financing from the federal government to the extent available. TRANSFERS AND ASSIGNMENTS OF PCS LICENSES The Communications Act and FCC rules require the FCC's prior approval of the assignment or transfer of control of a license for a PCS system. In addition, the FCC has established transfer disclosure requirements that require licensees who transfer control of or assign a PCS license within the first three years of their license term to file associated contracts for sale, option agreements, management agreements or other documents disclosing the total consideration that the licensee would receive in return for the transfer or assignment of its license. Non-controlling interests in an entity that holds a PCS license or PCS system generally may be bought or sold without FCC approval. Any acquisition or sale by us of PCS interests may also require the prior approval of the Federal Trade Commission and the Department of Justice, if over a certain size, as well as state or local regulatory authorities having competent jurisdiction. FCC rules restrict the voluntary assignments or transfers of control of C and F Block licenses. During the first five years of the license term, assignments or transfers affecting control are permitted only to assignees or transferees that meet the eligibility criteria for participation in the C and F Block auctions at the time the application for assignment or transfer of control is filed, or if the proposed assignee or transferee holds other licenses for C and F Blocks and, at the time of receipt of such licenses, met the same eligibility criteria. Any transfers or assignments during the entire ten year initial license term are subject to an unjust enrichment penalty of acceleration of any installment payment plans should the assignee or transferee not qualify for the same benefits. Any transfers or assignments during the first five years of the initial license term are subject to an unjust enrichment penalty of forfeiture of bidding credits. In the case of the C and F Blocks, the FCC has authority to conduct random audits to ensure that licensees are in compliance with the FCC's eligibility rules. Violations of the Communications Act or the FCC's rules could result in license revocations, forfeitures or fines. 216 224 FOREIGN OWNERSHIP Under the Communications Act, no more than 25% of an FCC licensee's capital stock may be indirectly owned or voted by non-United States citizens or their representatives, by a foreign government, or by a foreign corporation, absent an FCC finding that a higher level of alien ownership is not inconsistent with the public interest. In November 1997, the FCC adopted new rules, effective in February 1998, in anticipation of implementation of the WTO Agreement. Formerly, potential licensees had to demonstrate that their markets offered effective competitive opportunities in order to obtain authorization to exceed the 25% indirect foreign ownership threshold. Under the new rules, this showing now only applies to non-WTO members. Applicants from WTO Agreement signatories have an "open entry" standard: they are presumed to offer effective competitive opportunities. However, the FCC reserves the right to attach additional conditions to a grant of authority, and, in the exceptional case in which an application poses a very high risk to competition, to deny the application. The limitation on direct foreign ownership in an FCC licensee remains fixed at 20%, with no opportunity to increase the percentage, and is unaffected by the FCC's new rules. VoiceStream has applied for and received FCC approval for foreign ownership of up to 49.9%. VoiceStream has requested from the FCC that they apply the level of permissible alien ownership in VoiceStream and its operating subsidiaries set forth in the June 4, 1999 Public Notice to VoiceStream Holdings and the additional operating subsidiaries that it will acquire as part of the reorganizations. Following the reorganizations, indirect foreign ownership of FCC licenses that we control will be less than 49.9%. The WTO Agreement also obligates signatories to open their domestic telecommunications markets to foreign investment and foreign corporations. The WTO Agreement will increase investment and competition in the United States, potentially leading to lower prices, enhanced innovation and better service. At the same time, market access commitments from WTO Agreement signatories will provide United States service suppliers opportunities to expand abroad. TELECOMMUNICATIONS ACT OF 1996 AND OTHER RECENT INDUSTRY DEVELOPMENTS On February 8, 1996, the Telecommunications Act was signed into law, substantially revising the regulation of communications. The goal of the Telecommunications Act is to enhance competition and remove barriers to market entry, while deregulating the communications industry to the greatest extent possible. To this end, local and long-distance communications providers will, for the first time, be able to compete in the other's market, and telephone and cable companies will likewise be able to compete in each other's markets. To facilitate the entry of new carriers into existing markets, the Telecommunications Act imposes certain interconnection requirements on incumbent carriers. Additionally, all telecommunications providers are required to make an equitable and nondiscriminatory contribution to the preservation and advancement of universal service. We cannot predict the outcome of the FCC's rulemaking proceedings to promulgate regulations to implement the new law or the effect of the new regulations on cellular service or PCS, and there can be no assurance that such regulations will not adversely affect our business or financial condition. The Telecommunications Act codifies the policy that non-regional Bell operating company CMRS providers will not be required to provide equal access to long distance carriers, and relieved such CMRS providers of their existing equal access obligations. The FCC, however, may require CMRS carriers to offer unblocked access (i.e., implemented by the subscriber's use of a carrier identification code or other mechanisms at the time of placing a call) to the long distance provider of a subscriber's choice. The FCC has terminated its inquiry into the imposition of equal access requirements on CMRS providers. On July 26, 1996, the FCC released a Report and Order establishing timetables for making emergency 911 services available by cellular, PCS and other mobile service providers, including 217 225 "enhanced 911" services that provide the caller's telephone number, location and other useful information. Cellular and PCS providers must be able to process and transmit 911 calls (without call validation), including those from callers with speech or hearing disabilities. If a cost recovery mechanism is in place and a Public Service Answering Point requests and is capable of processing the caller's telephone number and location information, cellular, PCS, and other mobile service providers must relay a caller's automatic number identification and cell site location, and by 2001 they must be able to identify the location of a 911 caller within 125 meters in 67% of all cases. State actions incompatible with the FCC rules are subject to preemption. On December 1, 1997, the FCC required wireless carriers to transmit all 911 calls without regard to validation procedures intended to identify and intercept calls from non-subscribers. Then, in an order released June 9, 1999, the FCC adopted rules requiring that analog cellular phones include a separate capability for processing 911 calls that permit these calls to be handled, where necessary, by either cellular carrier in the area. The new rule only applies to new analog cellular handsets not to existing handsets or to PCS or SMR services. On August 1, 1996, the FCC released a Report and Order expanding the flexibility of cellular, PCS and other CMRS providers to provide fixed as well as mobile services. Such fixed services include, but need not be limited to, "wireless local loop" services, e.g., to apartment and office buildings, and wireless backup to PBXs and local area networks, to be used in the event of interruptions due to weather or other emergencies. The FCC has not yet decided how such fixed services should be regulated, but it has proposed a presumption that they be regulated as CMRS services. On August 8, 1996, the FCC released its order implementing the interconnection provisions of the Telecommunications Act. The FCC's decision is lengthy and complex and is subject to petitions for reconsideration and judicial review (as described below), and its precise impact is difficult to predict with certainty. However, the FCC's order concludes that CMRS providers are entitled to reciprocal compensation arrangements with LECs and prohibits LECs from charging CMRS providers for terminating LEC-originated traffic. Under the rules adopted by the FCC, states must set arbitrated rates for interconnection and access to unbundled elements based upon the LECs' long-run incremental costs, plus a reasonable share of forward-looking joint and common costs. In lieu of such cost-based rates, the FCC has established proxy rates to be used by states to set interim interconnection rates pending the establishment of cost-based rates. The FCC has also permitted states to impose "bill and keep" arrangements, under which CMRS providers would make no payments for LEC termination of calls where LECs and CMRS providers have symmetrical termination costs and roughly balanced traffic flows. However, the FCC has found no evidence that these conditions presently exist. The relationship of these charges to the payment of access charges and universal service contributions has not yet been resolved by the FCC. LECs and state regulators filed appeals of the interconnection order, which were consolidated in the United States Court of Appeals for the Eighth Circuit. The Court vacated many of the rules adopted by the FCC, including those rules governing the pricing of interconnection services, but specifically affirmed the FCC rules governing interconnection with CMRS providers. In January 1998, the United States Supreme Court agreed to review the Eighth Circuit decision. In January 1999, the United States Supreme Court reversed many aspects of the Eighth Circuit's judgment, holding that: - the FCC has general jurisdiction to implement the Telecommunications Act's local competition provisions; - the FCC's rules governing unbundled access are consistent with the Telecommunications Act, except for Rule 319, which gives requesting carriers blanket access to network elements; and 218 226 - the "pick and choose" rule is a reasonable interpretation of the Telecommunications Act. The FCC on remand adopted a new standard for determining which network elements the incumbents must unbundle. Applying the revised standard, the FCC reaffirmed that incumbents must provide unbundled access to six of the original seven network elements that it required unbundled in its original order in 1996 (operator and directory assistance services are no longer required). As a result of the Supreme Court vacating and remanding the Eighth Circuit's ruling that the FCC lacked authority to set local pricing standards, the Eighth Circuit will have to decide whether the FCC's total-element long-run incremental cost methodology for setting interconnection and unbundled network element rates violates the Telecommunications Act. In its implementation of the Telecommunications Act, the FCC established new federal universal service rules, under which wireless service providers for the first time are eligible to receive universal service subsidies, but also are required to contribute to both federal and state universal service funds. For the third quarter of 1999, the FCC's universal service assessments amount to 0.99% of interstate and intrastate telecommunications revenues for schools and libraries and an additional 2.94% of interstate telecommunications revenues for high cost and low income support mechanisms. Various parties challenged the FCC's universal service rules, and the cases were consolidated in the United States Court of Appeals for the Fifth Circuit. The court affirmed most of the FCC's decisions regarding its implementation of the high-cost support system but remanded for further consideration the FCC's decision to assess contributions from carriers based on both international and interstate revenues. The court also reversed (1) the requirement that incumbent local exchange carriers recover their contributions from access charges and (2) the blanket prohibition on additional state eligibility requirements for carriers receiving high-cost support. Additionally, the Court reversed the rule prohibiting local telephone service providers from disconnecting low-income subscribers. Finally, the Court concluded that the FCC exceeded its jurisdictional authority when it assessed contributions for "schools and libraries" programs based on the combined intrastate and interstate revenues of interstate telecommunications providers and when it asserted its jurisdictional authority to do the same on behalf of high-cost support. The FCC has adopted rules on telephone number portability which will enable subscribers to migrate their landline and cellular telephone numbers to a PCS carrier and from a PCS carrier to another service provider. Various parties have challenged the number portability requirements as they apply to CMRS providers. These challenges are still pending at the FCC and in the courts. We cannot predict the outcome of such challenges. In February 1999, the FCC extended the deadline for CMRS carriers to implement service provider local number portability until November 24, 2002. EMPLOYEES AND LABOR RELATIONS VoiceStream, Omnipoint and Aerial consider their labor relations to be good and, to their knowledge, none of their employees is covered by a collective bargaining agreement. As of August 31, 1999, VoiceStream employed a total of 2,521 people in the following areas:
NUMBER OF CATEGORY EMPLOYEES -------- --------- Sales and marketing......................................... 766 Engineering................................................. 358 General and administrative, including customer service...... 1,397
Until early 2000, due to the spin-off, Western Wireless and VoiceStream are generally making their employees available to each other as necessary to support their activities in areas including 219 227 accounting, tax and legal advice and services and human resources. The party rendering these services will be entitled to receive from the other, upon the presentation of invoices therefor, payment for its reasonable costs and expenses incurred in providing such services. As of August 31, 1999, Omnipoint employed a total of 2,069 people in the following areas:
NUMBER OF CATEGORY EMPLOYEES -------- --------- Sales and marketing......................................... 514 Engineering................................................. 384 General and administrative, including customer service...... 1,171
As of August 31, 1999, Aerial employed a total of 1,976 people in the following areas:
NUMBER OF CATEGORY EMPLOYEES -------- --------- Sales and marketing......................................... 741 Engineering................................................. 290 General and administrative, including customer service...... 945
PROPERTIES In addition to the direct and attributable interests in PCS licenses and other similar assets discussed in this joint proxy statement-prospectus, we will maintain our principal executive offices on leased premises in Bellevue, Washington. We will also lease our customer service centers located in the following cities:
VOICESTREAM OMNIPOINT AERIAL ----------------------- ----------------------- ------------------- Albuquerque, New Mexico Bethlehem, Pennsylvania Kansas City, Kansas Fort Lauderdale, Bellingham, Washington Florida Tampa, Florida
We, along with our subsidiaries and affiliates, lease and own locations for inventory storage, microwave, cell site and switching equipment, sales and administrative offices, and retail stores. LEGAL PROCEEDINGS Except as otherwise described in this joint proxy statement-prospectus, we do not believe that there are any material, pending legal proceedings to which any of VoiceStream Holdings, VoiceStream, Omnipoint or Aerial or any of their subsidiaries or affiliates is a party or to which any of their property is subject which, if adversely decided, would have a material adverse effect on their financial position, results of operations or cash flows. For discussion of certain legal proceedings relating to FCC license grants, see "-- Government Regulation." For a discussion of certain legal proceedings relating to the Aerial reorganization, see "The Aerial Reorganization -- Litigation." EXECUTIVE OFFICERS AND DIRECTORS After the reorganizations, all executive officers of VoiceStream and one executive officer of Omnipoint will become executive officers of VoiceStream Holdings. VoiceStream Holdings will also have a board of directors consisting of 17 directors. Directors will be elected to serve until they resign or are removed, or are otherwise disqualified to serve, or until their successors are elected and qualified. The board of directors of VoiceStream Holdings will appoint the executive officers. No 220 228 family relationships exist among any of the anticipated executive officers and directors of VoiceStream Holdings. Certain stockholders of VoiceStream, Omnipoint and Aerial are also expected to enter into one or more voting agreements. See "VoiceStream Holdings Voting Agreement." The names, ages and positions of the anticipated executive officers and directors of VoiceStream Holdings are listed below along with their business experience for the past five years. Mr. Stanton, and, until May 3, 2002, Messrs. Guthrie and Bender, may serve as officers of VoiceStream Holdings, VoiceStream and Western Wireless. It is anticipated that they will divide their time between VoiceStream Holdings and VoiceStream, on the one hand, and Western Wireless, on the other.
NAME AGE POSITION ---- --- -------- John W. Stanton...................... 44 Chairman, Chief Executive Officer and Director Robert R. Stapleton.................. 41 President and Director Douglas G. Smith(1).................. 45 Vice Chairman and Director Donald Guthrie....................... 44 Vice Chairman and Director Cregg B. Baumbaugh................... 42 Executive Vice President -- Finance, Strategy and Development Alan R. Bender....................... 44 Executive Vice President, General Counsel and Secretary Robert P. Dotson..................... 39 Senior Vice President -- Marketing Timothy R. Wong...................... 43 Senior Vice President -- Engineering Patricia L. Miller................... 36 Vice President, Controller and Principal Accounting Officer Mitchell R. Cohen.................... 35 Director Daniel J. Evans...................... 74 Director Richard L. Fields(1)................. 43 Director Canning Fok.......................... 48 Director Jonathan M. Nelson................... 43 Director Terence M. O'Toole................... 41 Director James N. Perry, Jr.(1)............... 39 Director James J. Ross(1)..................... 61 Director Hans Snook........................... 51 Director Susan M.F.W. Chow(2)................. Director Frank J. Sixt(2)..................... Director [INSERT SONERA DIRECTOR](3).......... Director
- ------------------------ (1) To become a director upon completion of the Omnipoint reorganization. (2) To become a director upon the first to occur of the Omnipoint reorganization and the Aerial reorganization. (3) To become a director upon completion of the Omnipoint reorganization. In addition, pursuant to the TDS stockholder agreement, TDS will have the right to designate at least one director of VoiceStream Holdings, as described under "VoiceStream Holdings Voting Agreement." TDS has not at this time determined who it will propose to designate. John W. Stanton has been a director of VoiceStream since February 1998, and has been Chief Executive Officer and Chairman of VoiceStream since its formation in 1994. Mr. Stanton has also been a director, Chief Executive Officer and Chairman of Western Wireless and its predecessors since 1992. Mr. Stanton served as a director of McCaw Cellular from 1986 to 1994, and as a director of LIN Broadcasting from 1990 to 1994, during which time it was a publicly-traded company. From 1983 to 1991, Mr. Stanton served in various capacities with McCaw Cellular, serving as Vice- 221 229 Chairman of the Board of McCaw Cellular from 1988 to September 1991 and as Chief Operating Officer of McCaw Cellular from 1985 to 1988. Mr. Stanton is also a member of the board of directors of Advanced Digital Information Corporation and Columbia Sportswear, Inc. In addition, Mr. Stanton is a trustee of Whitman College, a private college. Robert R. Stapleton has been a director of VoiceStream since April 1999 and President of VoiceStream since its formation in 1994. Effective April 1998, Mr. Stapleton became responsible for all operations of VoiceStream. Mr. Stapleton was President of Western Wireless and one of its predecessors from 1992 to May 1999. From 1989 to 1992, he served in various positions with General Cellular, including Chief Operating Officer and Vice President of Operations. From 1984 to 1989, Mr. Stapleton was employed by mobile communications subsidiaries of Pacific Telesis, Inc., which now are affiliated with Vodafone AirTouch. Douglas G. Smith founded Omnipoint in June 1987 and has continuously served as its Chairman, President and Chief Executive Officer. From 1985 to 1987, he was one of four professionals in a small venture capital fund focusing on opportunities in the electronic information industry. From 1980 to 1985, he founded and managed the Investment Data Systems Division of Strategic Information (a division of Ziff-Davis Publishing). Donald Guthrie has been a director of VoiceStream since April 1999 and has been Vice Chairman since February 1998. He has also served as Vice Chairman of Western Wireless since November 1995. From February 1997 to April 1999, he also served as the Chief Financial Officer of Western Wireless. From 1986 to October 1995, he served as Senior Vice President and Treasurer of McCaw Cellular and, from 1990 to October 1995, he served as Senior Vice President -- Finance of LIN Broadcasting. Cregg B. Baumbaugh has been Executive Vice President -- Finance, Strategy and Development of VoiceStream since May 3, 1999. He served as Senior Vice President -- Corporate Development of VoiceStream and Western Wireless from 1994 to May 1999. From November 1989 through May 1999, he has served in various positions with Western Wireless and its predecessor, including Vice President -- Business Development. From 1986 to 1989, Mr. Baumbaugh was employed by The First Boston Corporation. Alan R. Bender has been Executive Vice President, General Counsel and Secretary of VoiceStream since May 3, 1999. He also holds such positions with Western Wireless. From 1990 to May 1999, he held various positions with Western Wireless, VoiceStream and their respective predecessors, including serving as Senior Vice President and General Counsel and Secretary since 1994. From 1988 to 1990, Mr. Bender was Vice President and Senior Counsel of Equitec Financial Group, Inc., a subsidiary of PacifiCorp Inc. Robert P. Dotson has been Senior Vice President -- Marketing and Sales of VoiceStream since May 3, 1999. From 1996 to May 1999, he served as Vice President -- Marketing of VoiceStream and Western Wireless. Previously, Mr. Dotson held various marketing positions with PepsiCo's KFC restaurant group, serving as Senior Director of Concept Development from 1994 to 1996, Director of International Marketing from 1993 to 1994, Divisional Marketing Director from 1991 to 1993 and Manager of New Product Development and Base Business Marketing from 1989 through 1991. Timothy R. Wong has been Senior Vice President -- Engineering of VoiceStream since May 3, 1999. From 1996 to May 1999, he served as Vice President -- Engineering of VoiceStream and Western Wireless. From 1990 to 1995, Mr. Wong held various positions at US WEST Cellular, serving as Executive Director -- Engineering and Operations from 1994 to 1995, Director of Wireless Systems Engineering in 1993, Manager of International Wireless Engineering in 1992 and Manager -- Systems Design from 1990 to 1991. 222 230 Patricia L. Miller has been Vice President, Controller and Principal Accounting Officer of VoiceStream since May 3, 1999. From 1998 to May 1999, she served as Controller and Principal Accounting Officer of VoiceStream and Western Wireless. From 1993 to 1997, Ms. Miller held various accounting positions with Western Wireless. Prior to 1993, Ms. Miller held various accounting positions with a subsidiary of Weyerhaeuser Company. Mitchell R. Cohen has been a director of VoiceStream since February 1998. He has also been a director of Western Wireless since its formation in 1994. Mr. Cohen was a director of General Cellular from March 1992 to December 1995. Mr. Cohen is a Managing Director of Hellman & Friedman, having joined Hellman & Friedman as an associate in July 1989. From 1986 to 1989, Mr. Cohen was employed by Shearson Lehman Hutton, Inc. Mr. Cohen currently is a director of Advanstar, Inc. Daniel J. Evans has been a director of VoiceStream since February 1998. He has also been a director of Western Wireless since 1997. Mr. Evans is the Chairman of Daniel J. Evans Associates, a consulting firm. From 1965 through 1977, Mr. Evans was Governor of the State of Washington. In 1983 he was appointed and then elected to the United States Senate to fill the seat of the late Senator Henry M. Jackson. He serves as a director of Flow International Corporation, Puget Sound Energy, Tera Computer Company, and serves on the Board of Regents of the University of Washington. Richard L. Fields has served as a Director of Omnipoint since September 1991. Since February 1994, Mr. Fields has been a Managing Director and Executive Vice President of Allen & Co., and prior to such time he was a Vice President of Allen & Co. Canning Fok has been a director of VoiceStream since February 1998. For more than five years, Mr. Fok has been Group Managing Director of Hutchison, and Chairman of Orange plc. Other appointments include Chairman of Hutchison Telecommunications (Australia) Limited, Deputy Chairman of Hongkong Electric Holdings Ltd. and Cheung Kong Infrastructure Holdings Ltd., and Director of Cheung Kong (Holdings) Ltd. Mr. Fok is a chartered accountant. Jonathan M. Nelson has been a director of VoiceStream since February 1998. He has also been a director of Western Wireless since its formation in 1994. Mr. Nelson has been President and Chief Executive Officer of Providence Equity Partners Inc., an investment advisor, since its inception in 1995 and is a Member of Providence Equity Partners L.L.C. which is the general partner of Providence Equity Partners L.P. and Providence Equity Partners II L.P. He is also Co-Chairman of Providence Ventures Inc., an investment advisor, and a managing general partner of Providence Ventures L.P. which is the general partner of the general partner of Providence Media Partners L.P., a venture capital fund. Since 1986, Mr. Nelson has been a Managing Director of Narragansett Capital, Inc., a private management company for three separate equity investment funds. Mr. Nelson is currently a director of AT&T Canada. Terence M. O'Toole has been a director of VoiceStream since February 1998. He has also been a director of Western Wireless since it was formed in 1994. Mr. O'Toole joined Goldman Sachs in 1983 and became a Vice President in 1987, a general partner in 1992 and a Managing Director in 1996. He is currently a director of AMF Bowling, Inc. and Amscan Holdings, Inc. James N. Perry, Jr. has been a Director of Omnipoint since August 1993. In January 1993, he became Vice President of MDCP. Previously, Mr. Perry served in various positions at First Capital Corporation of Chicago and its affiliates. Mr. Perry currently serves as a director of Allegiance Telecom, Inc. and Clearnet Communications, Inc. 223 231 James J. Ross has been Vice-Chairman of the Omnipoint board since 1989. Mr. Ross is a private venture investor. Since February 1995, Mr. Ross has been Of Counsel in the law firm of Becker Ross Stone DeStefano & Klein and prior to such time, he was a partner at such firm. Hans R. Snook has been a director of VoiceStream since February 1998. For more than five years, Mr. Snook has been Group Managing Director of Orange plc, a telecommunications service provider in the United Kingdom, and a director of a separate affiliate of Hutchison. Susan Mo Fong Woo Chow has been an Executive Director of Hutchison since 1993 and Deputy Group Managing Director since 1998 of Hutchinson. She is also a Director of Orange plc and Hongkong Electric Holdings Ltd. and an Executive Director of Cheung Kong Infrastructure Holdings Ltd. Frank John Sixt has been an Executive Director of Hutchison since 1991 and Group Finance Director since 1998 of Hutchison. He is also an Executive Director of Cheung Kong (Holdings) Limited and Cheung Kong Infrastructure Holdings Ltd. and a Director of Orange plc and Hongkong Electric Holdings Ltd. [INSERT NEW SONERA DIRECTOR] Each of the following individuals will be selected by Omnipoint to become members of the VoiceStream Holdings board pursuant to the reorganization agreement: Douglas G. Smith, Richard L. Fields, James J. Ross and James N. Perry. See "VoiceStream Holdings Voting Agreement." The remaining members of the VoiceStream Holdings board will be elected pursuant to a voting agreement. 224 232 EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE VoiceStream Holdings will assume all compensation for those executive officers of VoiceStream and Omnipoint who become executive officers of VoiceStream Holdings. The following table summarizes the compensation for services rendered during 1998 for VoiceStream's Chief Executive Officer and its next four most highly compensated executive officers, as well as Douglas G. Smith, in his capacity as Chairman, President and CEO of Omnipoint (collectively referred to herein as the "Named Executive Officers"). Prior to VoiceStream's spin-off from Western Wireless, Western Wireless paid, and VoiceStream reimbursed Western Wireless for, all such executive compensation which was attributable to time spent and services rendered for VoiceStream. Such compensation arrangement is expected to continue between VoiceStream Holdings and Western Wireless with respect to Messrs. Stanton, Guthrie and Bender for so long as they continue to split their time and responsibilities between VoiceStream Holdings, VoiceStream and Western Wireless.
LONG-TERM COMPENSATION AWARDS ------------------------- ANNUAL COMPENSATION RESTRICTED ALL OTHER ---------------------------------- STOCK COMPEN- NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY($) BONUS($) OPTIONS(1) AWARDS($)(2) SATION($) - --------------------------- ----------- --------- -------- ---------- ------------ --------- John W. Stanton(3)....... 1998 193,542 400,000 954 521,250 367,974(4) Chairman and Chief Executive Officer Robert R. Stapleton...... 1998 165,667 200,000 124,407 260,625 186,487(4) President and Director Douglas G. Smith......... 1998 262,115 129,375 n/a n/a 31,820(5) Vice Chairman and Director Donald Guthrie(3)........ 1998 165,667 150,000 57,263 260,625 186,487(4) Vice Chairman and Director Cregg B. Baumbaugh....... 1998 145,321 110,000 66,350 173,750 125,992(4) Executive Vice President -- Finance, Strategy and Development Alan R. Bender(3)........ 1998 145,321 110,000 38,175 173,750 125,992(4) Executive Vice President, General Counsel, and Secretary
- ------------------------- (1) The options were granted as a result of the conversion of Western Wireless options granted during 1998 to each of the VoiceStream Named Executive Officers, excluding Douglas G. Smith. Omnipoint did not grant any options to Mr. Smith during 1998. (2) The shares are restricted until predetermined performance goals are met, including achieving predetermined levels of subscribers and achieving predetermined levels of cash flow. (3) Mr. Stanton, and until May 3, 2002 Messrs. Guthrie and Bender, will divide their time and responsibilities between VoiceStream and Western Wireless, and their compensation will be shared appropriately. 225 233 (4) VoiceStream made payments to cover the taxes related to the grant of restricted shares and paid matching contributions to VoiceStream's 401(k) Profit Sharing Plan and Trust. (5) Includes amounts reimbursed in connection with a supplemental benefit program and premiums on life insurance. GRANTS OF STOCK OPTIONS As part of the spin-off, each of Messrs. Stanton, Guthrie and Bender and the VoiceStream directors (excluding Messrs. Fok and Snook) received a number of options to purchase VoiceStream common stock, based upon the number of options to purchase Western Wireless common stock held by each individual prior to the spin-off. Those who held vested options to purchase Western Wireless common stock received an equal number of vested options to purchase VoiceStream common stock which are governed by the VoiceStream 1999 Management Incentive Stock Option Plan (See "-- Stock Option Plan"). The following table summarizes VoiceStream options granted as a result of the conversion of Western Wireless options granted during 1998 to each of the VoiceStream Named Executive Officers, excluding Douglas G. Smith. Omnipoint did not grant any options to Mr. Smith during 1998.
POTENTIAL REALIZABLE VALUE AT ASSUMED % OF TOTAL ANNUAL RATES OF STOCK OPTIONS APPRECIATION FOR GRANTED TO EXERCISE OR OPTION TERM(2) OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION --------------------- NAME GRANTED(#)(1) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($) ---- ------------- ------------ ----------- --------------- -------- ---------- John W. Stanton....... 954 0.10% $9.25 January 1, 2008 $ 5,549 $ 14,064 Robert R. Stapleton... 124,407 13.7% $9.25 January 1, 2008 $723,710 $1,834,023 Donald Guthrie........ 57,263 6.3% $9.25 January 1, 2008 $333,115 $ 844,178 Cregg B. Baumbaugh.... 66,350 7.3% $9.25 January 1, 2008 $385,976 $ 978,140 Alan R. Bender........ 38,175 4.2% $9.25 January 1, 2008 $222,074 $ 562,780
- ------------------------- (1) These options have terms of ten years from the date of grant, January 1, 1998, and become exercisable as to 25% of the shares on the first anniversary and an additional 25% every year thereafter until such options are fully exercisable. (2) Potential realizable value is based on an assumption that the stock price of the VoiceStream common stock appreciates at the annual rate shown (compounded annually) from the date of grant until the end of the option term. These numbers are calculated based on the requirements of the Securities and Exchange Commission and do not reflect VoiceStream's estimate of future stock price performance. DIRECTOR COMPENSATION Following the completion of the first to occur of the reorganizations, each director of VoiceStream Holdings who is not also an employee of VoiceStream Holdings or any of its subsidiaries will receive an annual retainer fee of $ and an attendance fee of $ for each meeting of the VoiceStream Holdings board, and of each of the committees of the VoiceStream Holdings board he or she attends, other than committee meetings occurring on a date on which a board meeting is scheduled. All directors also will be reimbursed for reasonable travel and other out-of-pocket expenses incurred by them in attending board or committee meetings. 226 234 VoiceStream Holdings may, from time to time and in the sole discretion of the VoiceStream Holdings board, grant additional options to directors under VoiceStream Holdings' 1999 Management Incentive Stock Option Plan, which is described below. It is currently intended that all grants under such plan will be in addition to any annual fees to be paid to directors. DIRECTOR COMMITTEES VoiceStream Holdings intends to establish a Compensation Committee, Audit Committee and Executive Committee at the first meeting of the board of directors held following the closing of the first to occur of the reorganizations. EMPLOYMENT AGREEMENTS Mr. Stanton and, until May 3, 2002, Messrs. Guthrie and Bender, will divide their time and responsibilities between VoiceStream Holdings and Western Wireless pursuant to their existing employment agreements with Western Wireless. Their employment agreements and the existing employment agreements between VoiceStream and each of Messrs. Stapleton and Baumbaugh provide for annual base salaries of $295,000, $215,000, $170,000, $235,000 and $170,000, respectively, and provide each executive officer an opportunity to earn an annual bonus, as determined by the respective board of directors, targeted at 100%, 70%, 60%, 80% and 60%, respectively, of annual base compensation. It is expected that Western Wireless will pay, and VoiceStream Holdings will reimburse Western Wireless, for all executive compensation for Messrs. Stanton, Guthrie and Bender which is attributable to time spent and services rendered for VoiceStream Holdings. The foregoing employment agreements also provide that the contracting employee may be terminated by VoiceStream Holdings or Western Wireless, as the case may be, at any time, with or without cause (as such term is defined in the employment agreements); however, in the event of an involuntary termination (as defined therein) for other than cause (1) such executive officer will be entitled to receive a severance payment in an amount equal to any accrued but unpaid existing annual targeted incentive bonus through the date of termination, 12 months of such executive's then base compensation, and an amount equal to 12 months of such executive's existing annual targeted incentive bonus, (2) the employer will, at its expense, make all specified insurance payment benefits on behalf of such executive officer and his or her dependents for 12 months following such involuntary termination and (3) with respect to any stock options previously granted to each executive officer which remain unvested at the time of involuntary termination, there shall be immediate vesting of that portion of each such grant of any unvested stock options equal to the product of the total number of such unvested options under such grant multiplied by a fraction, the numerator of which is the sum of the number of days from the date on which the last vesting of options under such grant occurred to and including the date of termination plus 365, and the denominator of which is the number of days remaining from the date on which the last vesting of options under such grant occurred to and including the date on which the final vesting under such grant would have occurred absent the termination. Mr. Stapleton's agreement provides for an immediate vesting of all options upon his involuntary termination. Among other things, an executive officer's death or permanent disability will be deemed an involuntary termination for other than cause. In addition, each employment agreement provides for full vesting of all stock options granted upon a change of control (as such term is in the stock option agreements with the executive officer). Pursuant to the terms of each of these employment agreements, each executive officer agrees that during such executive officer's employment and for one year following the termination of such executive officer's employment for any reason, such executive officer will not engage in a business which is substantially the same as or similar to the business of his employer and which competes 227 235 within the applicable commercial mobile radio services markets serviced by his employer. Mr. Stanton's agreement provides that such prohibition shall not preclude Mr. Stanton's investment in other companies engaged in the wireless communications business or his ability to serve as a director of other companies engaged in the wireless communications business, in each case subject to his fiduciary duties as a director. Mr. Smith is party to an employment agreement with Omnipoint. This agreement will be assumed by VoiceStream Holdings as of the effective time of the reorganization. Mr. Smith's employment agreement currently provides for an annual base salary of $300,000, and a target bonus of up to $300,000. If Mr. Smith resigns from his position for good reason or is terminated without cause, he will be entitled to a lump sum severance payment equal to the sum of his full annual salary and target bonus for the 12 months preceding his resignation or termination. In such event, Mr. Smith also will be entitled to an additional amount, equivalent to the severance payment, but paid out in equal installments over the 12-month period that begins commencing one year after Mr. Smith's termination. All of Mr. Smith's outstanding options will vest upon the earliest of his termination without cause, resignation for good reason, or one year after the date that either the Omnipoint reorganization is completed or the Omnipoint reorganization agreement is terminated. Under the terms of Mr. Smith's employment agreement, Mr. Smith has agreed that during the term of his employment and for a period of up to two years after the cessation of his employment under this agreement, he will not directly or indirectly engage in the business of providing wireless personal communication or data services in any geographic area served by Omnipoint. INDEMNIFICATION AGREEMENTS VoiceStream Holdings intends to enter into an indemnification agreement with each of its executive officers and directors, which will be separate from such executive officer's employment agreement with VoiceStream, VoiceStream Holdings or Western Wireless, as the case may be. Pursuant to this indemnification agreement, VoiceStream Holdings will indemnify the executive officer or director against certain liabilities arising by reason of the executive officer's or the director's affiliation with VoiceStream Holdings. BENEFIT AND COMPENSATION PLANS VoiceStream Holdings will establish benefit and compensation plans substantially similar to those presently maintained by VoiceStream. These plans, which are described below, will replace and assume the obligations of (1) VoiceStream's management incentive stock option plan, employee stock purchase plan and restricted stock plan, (2) Omnipoint's stock option plan, amended and restated employee stock purchase plan and omnibus stock plan, and (3) Aerial's long-term incentive plan, employee stock purchase plan and retention restricted stock unit plan. Each of these plans will give VoiceStream, Omnipoint and Aerial employees credit for service as VoiceStream, Omnipoint or Aerial employees, as the case may be. 1999 MANAGEMENT INCENTIVE STOCK OPTION PLAN The management incentive plan will provide an incentive for key personnel of VoiceStream Holdings and its subsidiaries to generate stockholder value. The management incentive plan will provide for the granting to key employees of incentive stock options within the meaning of section 422 of the Code, and for the granting of nonqualified stock options to directors, key employees and/or consultants of VoiceStream Holdings and its subsidiaries. Unless terminated sooner, the management incentive plan will terminate automatically ten years from the date of the 228 236 closing of the reorganization. A total of approximately 20,000,000 shares of common stock will be reserved for issuance pursuant to the management incentive plan. If both reorganizations are completed, VoiceStream Holdings expects that options to acquire 13,415,319 shares of common stock will be outstanding under the management incentive plan. The management incentive plan will be administered by the VoiceStream Holdings board or a committee appointed by the VoiceStream Holdings board to administer the plan. The VoiceStream Holdings board or committee so appointed shall have full power and authority to administer and interpret the plan. Such powers will include authority to determine the directors, employees and consultants to be granted stock options under the plan, to determine the size, type, and applicable terms and conditions of grants to be made to such directors, employees and consultants and to determine a time when stock options will be granted. During all times in which VoiceStream Holdings is subject to the periodic reporting requirements of the Exchange Act, each member of the board who participates in administration must be a "non-employee director" as that term is defined in Rule 16b-3 of the Exchange Act. The exercise price of all nonqualified and incentive stock options granted under the management incentive plan shall be, unless otherwise determined by the VoiceStream Holdings board, the fair market value of the common stock prior to the date of grant, as determined by the VoiceStream Holdings board in accordance with the management incentive plan and any applicable option agreement. Payment of such exercise price may be made by cash, check, promissory note, surrender of common stock having a fair market value equal to the exercise price of the option, or in accordance with procedures for a "cashless exercise" as may be established from time to time by VoiceStream Holdings and the brokerage firm, if any, designated by VoiceStream Holdings to facilitate exercises of options and sales of common stock under the management incentive plan. 1999 EMPLOYEE STOCK PURCHASE PLAN It is anticipated that the purchase plan will authorize the issuance of 1,500,000 shares of common stock to participating employees. The purchase plan will consist of ten separate consecutive six-month offerings commencing on each November 1 and May 1. The purchase plan will terminate upon the earliest of the following: - 6 years from the date of the first to occur of the Omnipoint reorganization or the Aerial reorganization; - the date of the filing of a Statement of Intent to Dissolve (as defined in the purchase plan) by VoiceStream Holdings or the effective date of a merger or consolidation wherein VoiceStream Holdings is not to be the surviving corporation, which merger or consolidation is not between or among corporations related to VoiceStream Holdings; - the date the board acts to terminate the purchase plan; or - the date when all of the shares reserved for issuance under the purchase plan have been purchased. The purchase plan will be administered by the VoiceStream Holdings board, which may engage a designated stock brokerage or financial services firm to assist in the administration. The VoiceStream Holdings board will be vested with full authority to make, administer, and interpret rules and regulations necessary to administer the purchase plan. The VoiceStream Holdings board may delegate any or all of its administrative duties to a committee composed of two or more members of the VoiceStream Holdings board. 229 237 Persons regularly employed by VoiceStream Holdings or any of its subsidiaries on the commencement date of an offering period and who either (1) have been so employed for at least three months or (2) were employed by Omnipoint, Aerial or any of their subsidiaries on the closing date of the reorganization, will be eligible to participate in the purchase plan. Employees who would immediately after the grant own 5% or more of the total combined voting power or value of VoiceStream Holdings' capital stock or any subsidiary will not be eligible to participate in the purchase plan. No participant shall be allowed to subscribe for any shares under the purchase plan to accrue at a rate that exceeds $25,000 of the fair market value of such shares (determined at the time such right to subscribe is granted) for each calendar year in which such right to subscribe is outstanding. In addition, absent a contrary determination by the VoiceStream Holdings board, no employee may withhold payroll deductions for the purchase of common stock under the purchase plan in excess of either (1) $10,200 in any calendar year, or (2) 10% of such employee's total annual compensation. An employee's rights under the purchase plan terminate upon voluntary withdrawal from the purchase plan, or when the employee ceases employment for any reason. The VoiceStream Holdings board will set the purchase price per share at an amount not less than the lower of (1) 85% of the fair market value of the shares on the commencement date, or the nearest subsequent business day; (2) 85% of the fair market value of the shares on the ending date, or the nearest prior business day; or (3) 85% of the fair market value of the shares on the purchase date. In the absence of any other determination by the VoiceStream Holdings board, the purchase price will be 85% of the fair market value of the shares on the purchase date. At the time the enrollment agreement is filed by an eligible employee and for so long as the participant participates in the purchase plan, the participant shall authorize VoiceStream Holdings to make payroll deductions as specified in the enrollment agreement. A participant's payroll deductions shall be credited to that participant's account and on each of one or more purchase dates during an offering, each participant shall be deemed to have carried out the right to purchase, and shall be deemed to have purchased at the purchase price, the number of full shares that may be purchased with such participant's account. 1999 EXECUTIVE RESTRICTED STOCK PLAN The restricted stock plan will be created to promote the interests of VoiceStream Holdings by allowing the grant or sale of restricted VoiceStream Holdings common stock to key executives of VoiceStream Holdings. It is anticipated that 200,000 shares of restricted common stock will be authorized for issuance to selected executives of VoiceStream Holdings under the Restricted Stock Plan. Any stock issued under the plan that is forfeited by the grantee shall not be available for reissue under the plan. The restricted stock plan will terminate ten years after the closing of the reorganization, unless the VoiceStream Holdings board terminates it sooner. The VoiceStream Holdings board will administer the restricted stock plan. The VoiceStream Holdings board may delegate any or all of its administrative duties to a committee composed of three or more members of the VoiceStream Holdings board, provided that each member of such committee must be a "non-employee director" as defined in Rule 16b(3) of the Exchange Act and an "outside director" as defined in section 162(m) of the Code. The VoiceStream Holdings board or committee so appointed shall have full power and authority to administer and interpret the plan. Such powers include authority to determine to which employees to grant rights under the plan, to determine the size, type, and applicable terms and conditions of grants to be made to such employees and to determine the restrictions applicable to stock granted under the plan, subject to the terms of the plan. The VoiceStream Holdings board will set the purchase price per share of stock issued under the restricted stock plan. If there is no purchase price, the offer shall be treated as a restricted stock 230 238 bonus. The restrictions applicable to stock granted under the restricted stock plan are established in the discretion of the VoiceStream Holdings board, and may include forfeiture upon failure of certain conditions, including continued employment by VoiceStream Holdings for designated time periods and the meeting of designated performance goals. The determination of whether such conditions have been met will be made solely by the VoiceStream Holdings board. Offers of restricted stock to the five most highly compensated employees of VoiceStream Holdings may, in order to comply with section 162(m) of the Code, be designated "special performance awards" and if so designated shall be subject to specific performance goals specified in the plan. No employee may be granted restricted stock in excess of 33.33% of the remaining stock reserved for issuance under the plan. PRO FORMA BENEFICIAL OWNERSHIP OF VOICESTREAM HOLDINGS COMMON STOCK The following table sets forth certain information with respect to the pro forma beneficial ownership of VoiceStream Holdings taking into consideration three possible alternatives: (1) only the Omnipoint reorganization is completed; (2) only the Aerial reorganization is completed; and (3) both reorganizations are completed. The table shows the pro forma beneficial ownership for each of the three alternatives by (1) the holders of 5% or more of the outstanding VoiceStream Holdings common stock; (2) the individuals who will be directors of VoiceStream Holdings; (3) the Named Executive Officers; and (4) all VoiceStream Holdings executive officers and directors as a group. The columns labeled "Omnipoint" and "Both" assume that: (1) all VoiceStream common stock will be exchanged for VoiceStream Holdings common stock on a one-for-one basis; (2) all Omnipoint common stock will be exchanged for VoiceStream Holdings common stock based on the Omnipoint Standard Election; (3) all outstanding options and warrants to acquire Omnipoint or VoiceStream common stock will convert to VoiceStream Holdings options or VoiceStream Holdings warrants, respectively; and (4) the closing price of VoiceStream common stock on the last day is $75.00, which may or may not be the actual Closing Date Market Price. The columns labeled "Aerial" and "Both" assume that: (1) all VoiceStream common stock will be exchanged for VoiceStream Holdings common stock on a one-for-one basis; (2) all Aerial common stock will be exchanged for VoiceStream Holdings common stock based on the Aerial Stock Election and an exchange ratio of 0.455 of a share of VoiceStream Holdings common stock for each share of Aerial common stock; (3) all outstanding options to acquire VoiceStream common stock will convert to VoiceStream Holdings options; and (4) all outstanding options to acquire Aerial common stock will convert to immediately exercisable options to purchase shares of VoiceStream Holdings common stock based on an exchange ratio of 0.455 of a share of VoiceStream Holdings common stock for each share of Aerial common stock. A person or entity is considered to "beneficially own" any shares (1) over which such person or entity exercises sole or shared voting or investment power or (2) which such 231 239 person or entity has the right to acquire at any time within 60 days (e.g., through the exercise of options or warrants).
OMNIPOINT AERIAL BOTH --------------------------- --------------------------- --------------------------- SHARES OF SHARES OF SHARES OF COMMON STOCK PERCENT COMMON STOCK PERCENT COMMON STOCK PERCENT BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY BENEFICIALLY NAME AND ADDRESS OWNED OWNED OWNED OWNED OWNED OWNED ---------------- ------------ ------------ ------------ ------------ ------------ ------------ Hutchison Whampoa Limited 22nd Floor, Hutchison House 10 Harcourt Road Hong Kong(2)(3)(4)............ 55,899,252 29.35% 22,899,252 15.52% 55,899,252 23.08% The Goldman Sachs Group, L.P. and related investors(3)(4)(5) 85 Broad Street, 19th Floor New York, NY 10004............ 9,799,279 5.83 9,799,279 6.64 9,799,279 4.46 Telephone and Data Systems, Inc.(6) 30 N. LaSalle Street, Suite 4000 Chicago, IL 60602............. -- -- 35,570,494 24.10 35,570,494 16.18 Sonera Ltd.(7) Fin-00051-Tele Sturenkatu 16, Helsinki Finland....................... 8,771,930 5.22 10,203,844 6.92 18,975,774 8.63 John W. Stanton and Theresa E. Gillespie(3)(4)(8) 3650 131st Ave. SE Bellevue, WA 98006............ 6,555,411 3.90 6,561,463 4.44 6,561,463 2.98 Douglas G. Smith(9) 3 Metrocenter, Suite 400 Bethesda, MD 20814............ 6,180,945 3.67 -- -- 6,180,945 2.81 Richard L. Fields(10) 711 Fifth Avenue New York, New York 10022...... 2,607,857 1.54 -- -- 2,607,857 1.18 James N. Perry, Jr.(11) Three First National Plaza Suite 1330 Chicago, IL 60602............. 5,131,329 3.05 -- -- 5,131,329 2.33 Cregg B. Baumbaugh(4)........... 234,808 * 234.808 * 234,808 * Alan R. Bender(4)............... 224,938 * 224,938 * 224,938 * James J. Ross(12)............... 1,497,299 * -- -- 1,497,299 * Robert R. Stapleton(4).......... 644,269 * 644,269 * 644,269 * Donald Guthrie(4)............... 370,228 * 370,228 * 370,228 * Mitchell R. Cohen(4)............ 39,170 * 39,170 * 39,170 * Daniel J. Evans(4).............. 2,750 * 2,750 * 2,750 * Jonathan M. Nelson(4)........... 223,537 * 223,537 223,537 * Terence M. O'Toole(4)(13)....... 9,799,279 5.83 9,799,279 6.64 9,799,279 4.46 Canning Fok(2)(14).............. 55,899,252 29.35 22,899,252 15.52 55,899,252 23.08 Hans R. Snook(2)(14)(15)........ 55,899,252 29.35 22,901,982 15.52 55,901,982 23.08 Susan M.F.W. Chow(2)(14)........ 55,899,252 29.35 22,899,252 15.52 55,899,252 23.08 Frank J. Sixt(2)(14)............ 55,899,252 29.35 22,899,252 15.52 55,899,252 23.08 [Sonera director(10)]........... 8,771,930 5.22 10,203,844 6.92 18,975,744 8.63 All VoiceStream Holdings executive officers and directors as a group (22 persons)(4)(17)........... 98,315,633 51,338,889 108,528,259
- ------------------------- Notes to Beneficial Ownership Table * Less than 1% of the outstanding shares of common stock. (1) Computed in accordance with Rule 13d-3(d)(1) of the Exchange Act. 232 240 (2) Includes shares of common stock issuable upon conversion of VoiceStream Holdings Junior Preferred. (3) Parties or affiliates of parties to a voting agreement. See "The Special Meetings -- Agreement to Vote in Favor of the Reorganization." (4) Includes aggregate exercisable options, within 60 days of August 26, 1999, to purchase VoiceStream common stock; does not include unexercisable options. May include stock jointly or separately owned with or by a spouse. Options granted to Mr. Cohen are held for the benefit of HFCP; options granted to Mr. Nelson are held for the benefit of Providence; and options granted to Mr. O'Toole are held for the benefit of GS Group. (5) Based on (i) 8,986,738 shares of VoiceStream common stock held of record by GS Capital, (ii) 470,401 shares of VoiceStream common stock held of record by Stone Street, (iii) 273,069 shares of VoiceStream common stock held of record by Bridge Street Fund, and (iv) 68,821 shares of VoiceStream common stock held of record by the GS Group. Each of GS Capital, Stone Street and Bridge Street is an investment limited partnership, the general partner, the managing general partner or the managing partner of which is an affiliate of GS Group. GS Group disclaims beneficial ownership of shares held by such investment partnerships to the extent partnership interests in such partnerships are held by persons other than GS Group and its affiliates. (6) Includes shares of VoiceStream common stock issuable in exchange for Aerial common stock acquired in connection with the TDS Debt Replacement. (7) Includes shares of VoiceStream common stock acquired in the Sonera Investments. (8) Mr. Stanton and Ms. Gillespie are husband and wife. Their pro forma beneficial ownership takes into account (i) 1,686,069 shares of VoiceStream common stock held of record by PN Cellular, which is substantially owned and controlled by Mr. Stanton and Ms. Gillespie, (ii) 1,274,519 shares of VoiceStream common stock held of record by Stanton Communications Corporation which is substantially owned and controlled by Mr. Stanton and Ms. Gillespie, (iii) 3,152,774 shares of VoiceStream common stock held by Mr. Stanton and Ms. Gillespie, as tenants in common, (iv) 164,437 shares of VoiceStream common stock held of record by The Stanton Family Trust; (v) 90,000 shares and 15,000 shares of VoiceStream common stock held of record by each of Mr. Stanton and Ms. Gillespie, respectively, pursuant to Western Wireless' 1997 Executive Restricted Stock Plan. Mr. Stanton and Ms. Gillespie are married and share voting and investment power with respect to the shares jointly owned by them, as well as the shares held of record of PN Cellular, Stanton Communication Corporation and The Stanton Family Trust; and (vi) 13,300 shares of Aerial common stock held by Mr. Stanton and Ms. Gillespie as tenants in common. (9) Takes into account 279,510 shares of Omnipoint common stock issuable upon exercise of Mr. Smith's outstanding Omnipoint options, 26,169 shares of Omnipoint common stock owned by Mr. Smith's minor children, 3,942,069 shares of Omnipoint common stock held by Avance Capital, a sole proprietorship, and 544,301 shares held in a trust. Mr. Smith does not exercise voting or investment power over, and disclaims beneficial ownership of, the shares held in the trust. Mr. Smith has voting and investment power with respect to the other shares. (10) Takes into account 2,230,216 shares of Omnipoint common stock owned by Allen & Co. (including 1,211,771 shares issuable upon exercise of outstanding Omnipoint warrants held by Allen & Co.) and 115,297 shares of Omnipoint common stock issuable upon exercise of outstanding Omnipoint warrants. Mr. Fields is a Managing Director of Allen & Co. Of such 233 241 amounts, Mr. Fields does not exercise voting or investment power over, and disclaims beneficial ownership of the 1,211,771 shares issuable upon exercise of outstanding warrants which are held by Allen & Co. (11) Takes into account 213,514 shares of Omnipoint common stock issuable upon exercise of outstanding Omnipoint warrants. All of such shares and Omnipoint warrants are held of record by MDCP. Mr. Perry is a member of the L.P. Committee. which manages MDCP. Mr. Perry may therefore be deemed to share investment control with respect to the shares of Omnipoint common stock owned by MDCP and may therefore be deemed to have beneficial ownership of shares of Omnipoint common stock owned by MDCP. (12) Takes into account 782,977 shares of Omnipoint common stock issuable upon exercise of outstanding Omnipoint options held by Mr. Ross and 240,157 shares of Omnipoint common stock held in trust for Mr. Ross' children. As a result, Mr. Ross may be deemed to be the beneficial owner of such shares. (13) Mr. O'Toole, who is a managing director of Goldman Sachs, disclaims beneficial ownership of shares of VoiceStream common stock, which may be deemed to be beneficially owned by GS Group, except to the extent of his pecuniary interest therein. (14) Takes into account the fact that Messrs. Fok, Snook may each be deemed to be the owner of the 22,899,252 shares of VoiceStream common stock owned by Hutchison, as Mr. Fok is the Group Managing Director of Hutchison and Mr. Snook is the Group Managing Director of an affiliate of Hutchison and a Director of a separate affiliate of Hutchison [insert explanation for additional two Hutchison directors]. Each of Mr. Fok and Mr. Snook disclaim beneficial ownership of shares held by Hutchison to the extent interests in Hutchison are held by persons other than such individual. (15) Includes 6,000 shares of Aerial common stock held by members of Mr. Snook's immediate family. (16) Takes into account the fact that [Sonera director] may be deemed to be the owner of the shares of VoiceStream Holdings common stock that will be owned by Sonera in the event the Omnipoint reorganization and/or the Aerial reorganization is completed. (17) In determining the aggregate number of shares owned by VoiceStream Holdings executive officers and directors, shares of VoiceStream common stock, Omnipoint common stock and Aerial common stock as to which such executive officers and directors share voting or investment power have not been duplicated. BUSINESS OF VOICESTREAM, OMNIPOINT AND AERIAL For information regarding the historical operations of VoiceStream, Omnipoint and Aerial, see "Where You Can Find More Information." 234 242 CERTAIN LEGAL INFORMATION DESCRIPTION OF VOICESTREAM HOLDINGS CAPITAL STOCK The following is a description of the terms of the capital stock of VoiceStream Holdings based on and qualified in its entirety by its restated certificate of incorporation, which is attached to this joint proxy statement-prospectus as Annex H. At the closing of the reorganizations, the authorized capital stock of VoiceStream Holdings will consist of 400,000,000 shares of common stock, par value $0.001 per share, and 5,000,000 shares of preferred stock, par value $0.001. There is no VoiceStream Holdings preferred stock outstanding. As a result of the reorganization, following closing of the reorganization, assuming that the Hutchison Entities do not convert their shares of VoiceStream Holdings Junior Preferred there will be 139,880,716 shares of VoiceStream Holdings common stock outstanding, with approximately 550 holders of record, and shares of VoiceStream Holdings Junior Preferred by Hutchison. As of the effective time, VoiceStream Holdings will have issued options to acquire approximately 13 million shares of its common stock in exchange for options issued by VoiceStream and Omnipoint for VoiceStream and Omnipoint common stock, respectively. See "-- Benefit And Compensation Plans." There are no other rights outstanding to acquire VoiceStream Holdings' capital stock. VoiceStream Holdings has never declared a cash dividend with respect to its capital stock and does not anticipate paying any dividends on its capital stock in the foreseeable future. The declaration and payment of dividends by VoiceStream Holdings will be subject to the discretion of VoiceStream Holdings' board and certain restrictions on paying dividends contained in our debt instruments. Any determination as to the payment of dividends in the future will depend upon results of operations, capital requirements, restrictions in loan agreements or agreements issued in connection with the sale of VoiceStream Holdings' securities, if any, and such other factors as VoiceStream Holdings' board of directors may deem relevant. COMMON STOCK VoiceStream Holdings common stock has one vote per share. Holders of the common stock have no preemptive, subscription or sinking fund rights, except that pursuant to an agreement with VoiceStream Holdings, Hutchison PCS (USA) has a preemptive right entitling it to acquire a portion of any newly issued equity securities of VoiceStream Holdings on the same terms and conditions as such equity securities are being issued to other holders such that Hutchison PCS (USA) shall be able to retain the same percentage ownership of VoiceStream Holdings as existed immediately prior to such issuance. The preemptive right does not apply to any issuances of equity securities in connection with a public sale of equity securities by VoiceStream; stock dividends; mergers, acquisitions or other merger agreements in which the then-current stockholders of VoiceStream would continue to be the only stockholders of VoiceStream or which is effected to carry out an acquisition transaction; or issuances of equity to employees. Subject to preferences that may be applicable to any then-outstanding VoiceStream Holdings preferred stock, holders of VoiceStream Holdings common stock will be entitled to receive ratably such dividends as may be declared by the VoiceStream Holdings board out of funds legally available therefor. In the event of a liquidation, dissolution or winding up of VoiceStream Holdings, holders of VoiceStream Holdings common stock will be entitled to share ratably in all remaining assets after payment of liabilities and the liquidation preference of any then-outstanding VoiceStream Holdings preferred stock. 235 243 PREFERRED STOCK VoiceStream Holdings' Articles of Incorporation authorize it to issue 5,000,000 shares of its preferred stock, which may be issued from time to time in one or more classes or series or both upon authorization by the VoiceStream Holdings board. The VoiceStream Holdings board, without further approval of the stockholders, is authorized to fix the dividend rights and terms, conversion rights, voting rights, redemption rights and terms, liquidation preferences and any other rights, preferences, privileges and restrictions applicable to each class or series of VoiceStream Holdings preferred stock. The issuance of VoiceStream Holdings preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, adversely affect the voting power of the holders of VoiceStream Holdings common stock and, under certain circumstances, make it more difficult for a third party to gain control of VoiceStream Holdings, discourage bids for VoiceStream Holdings common stock at a premium or otherwise adversely affect the market price of the VoiceStream Holdings common stock. At the time of closing of the Omnipoint reorganization, VoiceStream Holdings will designate shares of preferred stock as VoiceStream Holdings Junior Preferred. shares of the VoiceStream Holdings Junior Preferred will be sold at $100,000 per share to Hutchison PCS (USA) as part of the Hutchison Investments. The VoiceStream Holdings Junior Preferred will have no par value, will be convertible to VoiceStream Holdings common stock at $29.00 per share, and will bear interest of 2.5% which is cumulative and payable 40 years from the date of issue if the VoiceStream Holdings Junior Preferred has not prior to that time been converted to VoiceStream common stock. VoiceStream Holdings has no current plans to issue any preferred stock other than shares of its Junior Preferred. Pursuant to an agreement with Hutchison PCS (USA), VoiceStream Holdings has agreed for a period of five years that it will not issue any equity security which provides the holders thereof with any extraordinary or special voting rights or any right to veto any action of VoiceStream Holdings, unless such issuance is approved in writing in advance by a director appointed by Hutchison PCS (USA). COMPARISON OF STOCKHOLDER RIGHTS VOICESTREAM STOCKHOLDERS Upon consummation of the Omnipoint Reorganization or the Aerial Reorganization, whichever occurs first, the stockholders of VoiceStream will become stockholders of VoiceStream Holdings whose rights will cease to be defined and governed by the WBCA, and instead will be defined and governed by the DGCL. In addition, VoiceStream stockholders' rights will no longer be defined and governed by VoiceStream's certificate of incorporation and bylaws. Instead, each VoiceStream stockholder will become a new stockholder of VoiceStream Holdings, whose rights as a stockholder will be defined and governed by VoiceStream Holdings' certificate of incorporation and bylaws, as amended from time to time. While the rights and privileges of stockholders of a Delaware corporation are, in many instances, comparable to those of a stockholder of a Washington corporation, there are certain differences. These differences, described below, arise from differences between Delaware and Washington law, between the DGCL and the WBCA, and between the VoiceStream articles of incorporation and bylaws and the VoiceStream Holdings certificate of incorporation and bylaws. 236 244
--------------------------------------- --------------------------------------- VOICESTREAM HOLDINGS VOICESTREAM COMMON STOCK COMMON STOCK --------------------------------------- --------------------------------------- AMENDMENT TO CERTIFICATE/ ARTICLES OF INCORPORATION....... Under the DGCL, amendments to a The WBCA authorizes a corporation's corporation's certificate of board of directors to make various incorporation require the approval of changes to its articles of the board of directors and stockholders incorporation without stockholder holding a majority of the outstanding action. These so-called housekeeping shares entitled to vote on such changes include changes of corporate amendment and a majority of the name, the number of outstanding shares outstanding stock of each class to effectuate a stock split or stock entitled to vote on such amendment as a dividend in the corporation's own class, unless a is specified in the shares, and the par value of its stock certificate of incorporation or by (the latter two only if there is one other provisions of the DGCL. class of stock). With respect to other VoiceStream Holdings' certificate of changes to the articles of incorporation does not specify a incorporation, the board of directors greater proportion, except that holders must recommend amendments to the of not less than two-thirds of the stockholders, unless the board of "Total Voting Power," as defined in the directors determines that because of a VoiceStream Holdings articles, must conflict of interest or other special approve an amendment if the amendment circumstances it should make no provides that: recommendation and communicates the basis for its determination to the - stockholders shall have preemptive stockholders with the amendment. In rights to acquire additional shares; addition, a majority of all the votes entitled to be cast by any voting group - stockholders shall have cumulative entitled to vote on the change must voting rights; approve the change unless another proportion is specified in the articles - VoiceStream Holdings cannot redeem of incorporation, by the board of shares when the holding of such directors as a condition to its shares may result in the loss of any recommendation or by provisions of the license or franchise from a WBCA. The VoiceStream articles do not governmental agency to conduct any specify another proportion, except that portion of VoiceStream's Holdings holders of not less than two-thirds of business; or the "Total Voting Power," as defined in the VoiceStream articles, must approve - less than two-thirds vote is enough an amendment if the amendment provides to approve any amendment listed in that: bullets one through three. - stockholders shall have preemptive rights to acquire additional shares; - stockholders shall have cumulative voting rights; - VoiceStream cannot redeem shares when the holding of such shares may result in the
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--------------------------------------- --------------------------------------- VOICESTREAM HOLDINGS VOICESTREAM COMMON STOCK COMMON STOCK --------------------------------------- --------------------------------------- loss of any license or franchise from a governmental agency to conduct any portion of VoiceStream's business; or - less than two-thirds vote is enough to approve any amendment listed in bullets one through three. RIGHT TO CALL SPECIAL MEETING OF STOCKHOLDERS......... Under the DGCL, the board of directors The WBCA provides that the board of or any other person authorized to do so directors, holders of at least 10% of in the corporation's certificate of all the votes entitled to be cast on incorporation or the bylaws may call a any issue proposed to be considered at special meeting of stockholders. The the proposed special meeting, or other VoiceStream Holdings bylaws authorize persons authorized to do so by the the president, the board or the articles of incorporation or bylaws of stockholders entitled to cast at least the corporation, may call a special one-fifth of the votes which all meeting of stockholders. However, the stockholders are entitled to cast at WBCA allows the right of stockholders such a meeting, to call a special to call a special meeting to be limited meeting. or denied to the extent provided in the articles of incorporation. The VoiceStream articles deny this right by providing that a special meeting of stockholders may only be called by the board of directors or by a duly designated committee of the board. ANTI-TAKEOVER PROVISIONS AND INTERESTED STOCKHOLDER.......... Section 203 of the DGCL prohibits a The WBCA prohibits a "target Delaware corporation from engaging in a corporation," with certain exceptions, "business combination" with an from engaging in certain "significant "interested stockholder" for three business transactions" with a person or years following the date that such group of persons who beneficially owns person becomes an interested 10% or more of the voting securities of stockholder. With certain exceptions, a target corporation (an "Acquiring an interested stockholder is a person Person") for a period of five years or group who or which owns 15% or more after the acquisition of such of the corporation's outstanding voting securities, unless the transaction or stock or is an affiliate or associate acquisition of shares is approved by a of the corporation and was the owner of majority of the members of the target 15% or more of such voting stock at corporation's board of directors prior to the date of the
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--------------------------------------- --------------------------------------- VOICESTREAM HOLDINGS VOICESTREAM COMMON STOCK COMMON STOCK --------------------------------------- --------------------------------------- any time within the three years prior acquisition. Significant business to the date on which it is sought to be transactions include, among others, determined whether such person is an merger or consolidation with, interested stockholder. disposition of assets to or with, or issuance or redemption of stock to or For purposes of Section 203, the term from, the Acquiring Person; termination "business combination" is defined of 5% or more of the employees of the broadly to include: target corporation employed in Washington State as a result of the - mergers of the corporation or any Acquiring Person's acquisition of 10% direct or indirect majority-owned or more of the shares; issuance, subsidiary (for purposes of this transfer or redemption of shares, section a "subsidiary") with or options, warrants or rights to acquire caused by the interested stockholder; shares to or by an Acquiring Person, except for a dividend, distribution or - sales or other dispositions to the redemption paid or made pro rata to all interested stockholder (except stockholders; liquidation or proportionately with the dissolution of a target corporation, corporation's other stockholders) of proposed by or pursuant to an agreement assets of the corporation or a with an Acquiring Person; a subsidiary equal to 10% or more of reclassification of securities proposed the aggregate market value of the by or recapitalization of a target corporation's consolidated assets or corporation proposed by or pursuant to its outstanding stock; an agreement with an Acquiring Person, that has the effect of increasing the - the issuance or transfer by the proportionate share of the outstanding corporation or a subsidiary of stock shares of a class of voting shares that of the corporation or such subsidiary is owned by an Acquiring Person; or to the interested stockholder (except allowing the Acquiring Person to for certain transfers in a conversion receive any disproportionate benefit of or exchange or a pro rata loans, advances, guarantees, pledges, distribution or certain other or other financial assistance or tax transactions, none of which increase credits or other tax advantages, as a the interested stockholder's stockholder. Target corporations proportionate ownership of any class include every domestic corporation, if: or series of the corporation's or such subsidiary's stock); - the corporation has a class of voting shares registered with the SEC - a transaction involving the pursuant to section 12 or 15 of the corporation or a subsidiary that Exchange Act; or directly or indirectly increases the interested stockholder's - the corporation's articles of proportionate share of the stock or incorporation have been amended to convertible securities of the provide that such a corporation shall corporation or such subsidiary; or be subject to the provisions of RCW Chapter 23B.19, if the corporation - receipt by the interested stockholder did not have a class (except proportionately as a stockholder), directly or
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--------------------------------------- --------------------------------------- VOICESTREAM HOLDINGS VOICESTREAM COMMON STOCK COMMON STOCK --------------------------------------- --------------------------------------- indirectly, of any loans, advances, of voting shares registered with the guarantees, pledges, or other SEC on the effective date of that financial benefits provided by or amendment. through the corporation or a subsidiary. VoiceStream currently meets these standards and is subject to this The three-year moratorium imposed on statute. A corporation may not "opt business combinations by Section 203 out" of this statute. The statute does not apply if: exempts shares acquired prior to March 23, 1988. - prior to the date on which such stockholder becomes an interested stockholder, the board of directors approves either the business combination or the transaction which resulted in the person becoming an interested stockholder; - the interested stockholder owns 85% of the corporation's voting stock outstanding upon consummation of the transaction which made him or her an interested stockholder (excluding from the 85% calculation shares owned by directors who are also officers of the corporation and shares held by employee stock plans which do not permit employees to decide confidentially whether to accept a tender or exchange offer); or - on or after the date on which such person becomes an interested stockholder, the board approves the business combination and it is also approved at a stockholder meeting by at least 66 2/3% of the voting stock not owned by the interested stockholder. The section does not apply if the business combination is proposed prior to the consummation or abandonment of and subsequent to the earlier of the public announcement or the notice required under Section 203 of a proposed transaction which: - constitutes certain (1) mergers
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--------------------------------------- --------------------------------------- VOICESTREAM HOLDINGS VOICESTREAM COMMON STOCK COMMON STOCK --------------------------------------- --------------------------------------- or consolidations, (2) sales or other transfers of assets having an aggregate market value equal to 50% or more of either the aggregate market value of the corporation's assets determined on a consolidated basis or the aggregate market value of all the corporation's outstanding stock, or (3) a proposed tender or exchange offer for 50% or more of the corporation's outstanding stock; - is with or by a person who was either not an interested stockholder during the last three years or who became an interested stockholder with the approval of the corporation's board of directors; and - is approved or not opposed by a majority of the board members elected prior to any person becoming an interested stockholder during the previous three years (or their chosen successors). The restrictions contained in this section also shall not apply if: - the corporation does not have a class of voting common stock listed on a national securities exchange, authorized for quotation on the Nasdaq Stock Market, or held of record by more than 2,000 stockholders, unless any of the foregoing results from action taken, directly or indirectly, by an interested stockholder or from a transaction in which the person becomes an interested stockholders; or - a stockholder becomes an interested stockholder inadvertently and as soon as practicable divests sufficient shares to no longer be an interested stockholder and
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--------------------------------------- --------------------------------------- VOICESTREAM HOLDINGS VOICESTREAM COMMON STOCK COMMON STOCK --------------------------------------- --------------------------------------- would not have been an interested stockholder but for the inadvertent acquisition. A Delaware corporation may elect not to be governed by Section 203 by a provision of its original certificate of incorporation or an amendment thereto or to the bylaws, which amendment must be approved by majority stockholder vote and may not be further amended by the board of directors. Such an amendment is not effective until 12 months following its adoption unless the corporation has never had a class of voting stock listed on a national securities exchange, authorized for quotation on the Nasdaq Stock Market, or held of record by more than 2,000 stockholders and has not elected in its original certificate or any amendment to be governed by this section. VoiceStream Holdings' Certificate of Incorporation and Bylaws do not contain an election not to be governed by Delaware's anti-takeover statute. MERGERS, SALES OF ASSETS AND OTHER TRANSACTIONS........... Under the DGCL, the board of directors Under the WBCA, a merger or share and the holders of a majority of the exchange of a corporation must be outstanding stock of the corporation approved by the affirmative vote of a entitled to vote thereon must approve a majority of directors when a quorum is merger or consolidation. The DGCL does present, and approved by each voting not require approval of stockholders of group entitled to vote separately on a constituent corporation surviving a the plan by two-thirds of all the votes merger (unless the corporation provides entitled to be cast on the plan by that otherwise in its certificate of voting group, unless another proportion incorporation) if: is specified in the articles of - the reorganization agreement does not incorporation. VoiceStream's Articles amend the certificate of do not specify another proportion. The incorporation of the surviving WBCA also provides that the corporation; stockholders of the surviving corporation need not approve certain - each share of stock of the surviving mergers if: corporation outstanding before the merger is an identical outstanding or - the articles of incorporation will treasury share of such corporation not change in the merger, except for after the merger; specified permitted amendments;
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--------------------------------------- --------------------------------------- VOICESTREAM HOLDINGS VOICESTREAM COMMON STOCK COMMON STOCK --------------------------------------- --------------------------------------- and - no change occurs in the number, - the number of shares to be issued by designations, preferences, the surviving corporation in the limitations, and relative rights of merger does not exceed 20% of the shares held by those stockholders who shares outstanding immediately prior were stockholders prior to the to the merger. merger; - the number of voting shares outstanding immediately after the merger, plus the voting shares issuable as a result of the merger, will not exceed the authorized voting shares specified in the surviving corporation's articles of incorporation immediately prior to the merger; and - the number of participating shares outstanding immediately after the merger, plus the number of participating shares issuable as a result of the merger, will not exceed the authorized participating shares specified in the corporation's articles of incorporation immediately prior to the merger. The WBCA also provides that, in general, a corporation may sell, lease, exchange, or otherwise dispose of all, or substantially all, of its property, other than in the usual and regular course of business or dissolve if the board of directors recommends the proposed transaction to the stockholders and the stockholders approve the transaction by two-thirds of all the votes entitled to be cast in the transaction, unless another proportion is specified in the articles of incorporation. The VoiceStream Articles do not specify another proportion.
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--------------------------------------- --------------------------------------- VOICESTREAM HOLDINGS VOICESTREAM COMMON STOCK COMMON STOCK --------------------------------------- --------------------------------------- TRANSACTIONS WITH OFFICERS OR DIRECTORS.............. Under the DGCL, certain contracts or The WBCA sets forth a safe harbor for transactions in which one or more of a transactions between a corporation and corporation's directors or officers has one or more of its directors. A an interest are not void or voidable conflicting interest transaction may solely because of such interest if not be enjoined, set aside or give rise either: to damages if: - the stockholders or the board of - it is approved by a majority of directors approve in good faith any qualified directors (but no fewer such contract or transaction after than two); full disclosure of the material facts; or - it is approved by the affirmative vote of the majority of all qualified - the contract or transaction is "fair" shares after notice and disclosure to as to the corporation at the time it the stockholders; or was approved. If board approval is sought, the contract or transaction - at the time of commitment, the must be approved by a majority of the transaction is established to have disinterested directors (even though been fair to the corporation. For less than a majority of a quorum). purposes of this provision, a "qualified director" is one who does not have either: (1) a conflicting interest respecting the transaction; or (2) a familial, financial, professional, or employment relationship with a second director who does have a conflicting interest respecting the transaction, which relationship would, in the circumstances, reasonably be expected to exert an influence on the first director's judgment when voting on the transaction. "Qualified shares" are defined generally as shares other than those beneficially owned, or the voting of which is controlled, by a director (or an affiliate of the director) who has a conflicting interest respecting the transaction. APPRAISAL OR DISSENTERS' RIGHTS..... Under the DGCL, a stockholder of a Under the WBCA, a stockholder is corporation participating in certain entitled to dissent from and, upon corporate mergers or consolidations perfection of his appraisal right, to may, under varying circumstances, be obtain fair value of his shares in the entitled to appraisal rights pursuant event of certain corporate actions. to which such stockholder may receive Among these actions are certain cash in the amount of the fair market mergers, consolidations, share value of his shares in lieu of the exchanges, sales of substantially all consideration he or assets of the corporation, and
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--------------------------------------- --------------------------------------- VOICESTREAM HOLDINGS VOICESTREAM COMMON STOCK COMMON STOCK --------------------------------------- --------------------------------------- she would otherwise receive in the amendments to the corporation's transaction. Such appraisal rights are articles of incorporation that not available: materially and adversely affect stockholder rights. - with respect to the sale, lease or exchange of all or substantially all of the assets of a corporation; - with respect to a merger or consolidation by a corporation the shares of which are either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Security Dealers, Inc. or are held of record by more than 2,000 holders if such stockholders receive only shares of the surviving corporation, or shares of any other corporation (which are either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more than 2,000 holders) plus cash in lieu of fractional shares, or any combination thereof; or - to stockholders of a corporation surviving a merger if no vote of the stockholders of the surviving corporation is required to approve the merger because the reorganization agreement does not amend the existing certificate or incorporation, each share of the surviving corporation outstanding prior to the merger is an identical outstanding or treasury share after the merger, and the number of shares to be issued in the merger does not exceed 20% of the shares of the surviving corporation outstanding immediately prior to the merger and if certain other conditions are met. DIVIDENDS.............. The DGCL permits a corporation to Under the WBCA, a corporation may make declare and pay dividends out of a distribution in cash or
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--------------------------------------- --------------------------------------- VOICESTREAM HOLDINGS VOICESTREAM COMMON STOCK COMMON STOCK --------------------------------------- --------------------------------------- statutory surplus or, if there is no in property to its stockholders upon surplus, out of net profits for the the authorization of its board of fiscal year in which the dividend is directors unless, after giving effect declared and/or for the preceding to such distribution: fiscal year as long as the amount of capital of the corporation following - the corporation would not be able to the declaration and payment of the pay its debts as they become due in dividend is not less than the aggregate the usual course of business; or amount of the capital represented by the issued and outstanding stock of all - the corporation's total assets would classes having a preference upon the be less than the sum of its total distribution of assets. In addition, liabilities plus, unless the articles Delaware law generally provides that a of incorporation permit otherwise, corporation may redeem or repurchase the amount that would be needed, if its shares only if such redemption or the corporation were to be dissolved repurchase would not impair the capital at the time of the distribution, to of the corporation. To date, satisfy the preferential rights upon VoiceStream Holdings has not paid cash dissolution of stockholders whose dividends on its capital stock. preferential rights are superior to those receiving the distribution. To date, VoiceStream has not paid cash dividends on its capital stock. LIMITATION OF LIABILITY OF DIRECTORS........... Under the DGCL, a corporation may adopt The WBCA provides that a corporation's a provision in its articles of articles of incorporation may include a incorporation eliminating or limiting, provision that eliminates or limits the with certain exceptions, the personal personal liability of a director to the liability of a director to the corporation or its stockholders for corporation or its stockholders for monetary damages for conduct as a monetary damages for breach of the director. However, the provision may director's fiduciary duty as a not eliminate or limit liability of a director. The VoiceStream Holdings director for acts or omissions that Certificate of Incorporation eliminates involve intentional misconduct by a the liability of directors to the director, a knowing violation of law by fullest extent permissible under a director, for unlawful distributions, Delaware law. Under Delaware law, or for any transaction from which the however, VoiceStream Holdings is not director will personally receive a allowed to eliminate or limit director benefit in money, property, or services monetary liability for: to which the director is not legally entitled. VoiceStream's Articles adopt - breaches of the director's duty of this standard. loyalty to the corporation or its stockholders; - acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law;
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--------------------------------------- --------------------------------------- VOICESTREAM HOLDINGS VOICESTREAM COMMON STOCK COMMON STOCK --------------------------------------- --------------------------------------- - unlawful dividends, stock repurchases or redemptions; or - transactions from which the director received an improper personal benefit. INDEMNIFICATION OF OFFICERS AND DIRECTORS.............. Under the DGCL, a corporation may not Under the WBCA, if authorized by the indemnify any director, officer, articles of incorporation, a bylaw employee or agent made or threatened to adopted or ratified by stockholders, or be made party to any threatened, a resolution adopted or ratified, pending, or completed proceeding unless before or after the event, by the such person acted in good faith and in stockholders, a corporation has the a manner such person reasonably power to indemnify a director or believed to be in or not opposed to the officer made a party to a proceeding, best interests of the corporation, and, or advance or reimburse expenses with respect to any criminal incurred in a proceeding, under any proceedings, had no reasonable cause to circumstances, except that no such believe that his or her conduct was indemnification shall be allowed on unlawful. The DGCL also establishes account of: several mandatory rules for indemnification. - acts or omissions of the directors finally adjudged to be intentional In the case of a proceeding by or in misconduct or a knowing violation of the right of the corporation to procure the law; a judgment in its favor (e.g., a stockholder derivative suit), a - conduct of the director finally corporation may indemnify an officer, adjudged to be an unlawful director, employee or agent if such distribution; or person acted in good faith and in a manner such person reasonably believed - any transaction with respect to which to be in or not opposed to the best it was finally adjudged that such interests of the corporation; provided, director personally received a however, that no person adjudged to be benefit in money, property, or liable to the corporation may be services to which the director was indemnified unless, and only to the not legally entitled. Written extent that, the Delaware Court of commentary by the drafters of the Chancery or the court in which such WBCA, which has the status of action or suit was brought determines legislative history, specifically upon application that, despite the indicates that a corporation may adjudication of liability but in view indemnify its directors and officers of all the circumstances of the case, for amounts paid in settlement of such person is fairly and reasonably derivative actions, provided that the entitled to indemnity for such expenses director's or officer's conduct does which such court deems proper. A not fall within one of the categories director, officer, employee, or agent set forth above. VoiceStream's who is successful, on the merits or articles provide that VoiceStream otherwise, in defense of any proceeding shall indemnify its directors and subject to the DGCL's indemnification officers to the fullest extent not provisions must be indemnified by the prohibited by law, including indemnification
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--------------------------------------- --------------------------------------- VOICESTREAM HOLDINGS VOICESTREAM COMMON STOCK COMMON STOCK --------------------------------------- --------------------------------------- corporation for reasonable expenses for payments in settlement of actions incurred therein, including attorneys' brought against the director or fees. VoiceStream Holdings' certificate officer in the name of the of incorporation provided that corporation, commonly referred to as VoiceStream Holdings will indemnify its a derivative action. Such limitation directors and officers to the fullest of liability, described above, also extent not prohibited by law. may not limit a director's liability for violation of, or otherwise In addition, VoiceStream Holdings has relieve VoiceStream or its directors entered into agreements indemnifying from the necessity of complying with, its officers and directors and certain federal or state securities laws, or other persons consistent with Delaware affect the availability of non- law. monetary remedies such as injunctive relief or rescission.
248 256 OMNIPOINT AND AERIAL STOCKHOLDERS Upon consummation of the Aerial reorganization, the stockholders of Aerial will become stockholders of VoiceStream Holdings and upon consummation of the Omnipoint reorganization, the stockholders of Omnipoint will become stockholders of VoiceStream Holdings. Since Aerial, Omnipoint and VoiceStream Holdings are each Delaware corporations, the rights of Aerial and Omnipoint stockholders will continue to be defined and governed by the DGCL. However, there are certain differences between the certificates of incorporation and bylaws of Aerial, Omnipoint and VoiceStream Holdings. The major differences are outlined below.
------------------------------- ------------------------------- ------------------------------- VOICESTREAM HOLDINGS OMNIPOINT AERIAL COMMON STOCK COMMON STOCK COMMON STOCK ------------------------------- ------------------------------- ------------------------------- AUTHORIZED SHARES.... The authorized capital stock of The authorized capital stock of The authorized capital stock of VoiceStream Holdings consists Omnipoint consists of Aerial consists of 100,000,000 of 400,000,000 shares of common 200,000,000 shares of common Common Shares, $1.00 par value; stock, par value $0.001 per stock, par value $0.01 per 60,000,000 Series A Common share; and 5,000,000 shares of share, 10,000,000 shares of Shares, $1.00 par value; preferred stock, par value preferred stock, par value 60,000,000 Series B Common $0.001 per share. $0.01 per share, of which Shares, $1.00 par value; and 325,000 have been designated 10,000,000 shares of Preferred shares of Omnipoint's 7% Stock, $1.00 par value, Cumulative Convertible issuable in series. Preferred Stock, and 12,500 have been designated shares of Omnipoint's Series A Non- Voting Convertible Preferred Stock. INCREASE IN AUTHORIZED SHARES.... An amendment to the VoiceStream An amendment to the Omnipoint The Aerial restated certificate Holdings restated certificate amended and restated of incorporation provides that of incorporation increasing or certificate of incorporation an increase or decrease in the decreasing the capital stock increasing or decreasing the number of Aerial Common Shares must be approved by a majority capital stock must be approved and Aerial Series B Common of the outstanding common by a majority of the Shares may be approved by the stock. outstanding common stock. holders of a majority of the Aerial Series A Common Shares. VOTING FOR DIRECTORS............ VoiceStream Holdings common The holders of Omnipoint common Aerial Common Shares vote in stock shall have one vote per stock are entitled to one vote the election of 25% of the share on all matters submitted per share held at all meetings directors of Aerial, rounded up to a vote of stockholders of of stockholders. to the nearest whole number, or VoiceStream Holdings. three directors based on an Aerial board of directors consisting of twelve directors. In such vote, each Aerial Common Share is entitled to one vote per share. The Aerial Series A Common Shares vote in the
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------------------------------- ------------------------------- ------------------------------- VOICESTREAM HOLDINGS OMNIPOINT AERIAL COMMON STOCK COMMON STOCK COMMON STOCK ------------------------------- ------------------------------- ------------------------------- election of 75% of the directors, rounded down to the nearest whole number, or nine directors based on an Aerial board of directors of twelve directors. In such vote, each Aerial Series A Common Share is entitled to fifteen votes per share. The Aerial Series B Common Shares, none of which are issued, have no vote in the election of directors or otherwise except as required by law. VOTING ON MATTERS OTHER THAN THE ELECTION OF DIRECTORS............ VoiceStream Holdings common The holders of Omnipoint common Aerial Common Shares have one stock shall have one vote per stock are entitled to one vote vote per share on all matters share on all matters submitted per share held at all meetings submitted to a vote of to a vote of stockholders of of stockholders. stockholders of Aerial. VoiceStream Holdings. The Aerial Series A Common Shares have fifteen votes on all matters submitted to a vote of stockholders of Aerial. The Aerial Series B Common Shares, if and when issued, would have no vote except as required by law. CLASS VOTES ON AMENDMENTS TO CHARTER.............. VoiceStream Holdings common The holders of Omnipoint common Holders of Aerial Common stock shall have one vote per stock are entitled to one vote Shares, Aerial Series A Common share on all matters submitted per share held at all meetings Shares and any issued Aerial to a vote of the stockholders of stockholders. Series B Common Shares are of VoiceStream Holdings. entitled to vote as a class on Holders of not less than a proposed amendment to the two-thirds of the "Total Voting Aerial restated certificate of Power," as defined in the incorporation if the amendment VoiceStream Holdings restated would increase or decrease the certificate of incorporation, par value or alter the powers, must approve an amendment if preferences or special rights the amendment provides that: of such class so as to affect them adversely. - stockholders shall have preemptive rights to
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------------------------------- ------------------------------- ------------------------------- VOICESTREAM HOLDINGS OMNIPOINT AERIAL COMMON STOCK COMMON STOCK COMMON STOCK ------------------------------- ------------------------------- ------------------------------- acquire additional shares; - stockholders shall have cumulative voting rights; - VoiceStream Holdings cannot redeem shares when the holding of such shares may result in the loss of any license or franchise from a governmental agency to conduct any portion of VoiceStream Holdings' business; or - less than two-thirds vote is enough to approve any amendment listed in bullets one through three. CLASS VOTES ON MERGERS.............. VoiceStream Holdings common The holders of Omnipoint common A merger or consolidation of stock shall have one vote per stock are entitled to one vote Aerial must be approved by the share on all matters submitted per share held at all meetings holders of a majority of the to a vote of the stockholders of stockholders. voting power of the outstanding of VoiceStream Holdings. Aerial Common Shares and Aerial Series A Common Shares, voting together as one group. The Aerial Series B Common Shares, if and when issued, would not have any vote with respect to a merger except as required by law. DIVIDEND RIGHTS...... The VoiceStream Holdings board The Omnipoint board may declare Except for stock dividends and may declare and pay dividends and pay dividends from funds dividends of subsidiary capital upon the outstanding shares of lawfully available therefor, stock, holders of Aerial Common the corporation from time to subject to any preferential Shares and Aerial Series B time and to such extent as it rights of any then outstanding Common Shares are entitled to deems advisable, in accordance shares of preferred stock. share equally, on a per share with the DGCL. basis, in all dividends. STOCK DIVIDENDS...... The VoiceStream Holdings board The Omnipoint amended and A stock dividend may be paid may declare and pay dividends restated certificate of only as follows: upon the outstanding shares of incorporation does not include the corporation from time to provisions relating to stock - Aerial Common Shares may be time and to such extent as it dividends. paid to the holders of Aerial deems advisable, in Common Shares and proportionately to
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------------------------------- ------------------------------- ------------------------------- VOICESTREAM HOLDINGS OMNIPOINT AERIAL COMMON STOCK COMMON STOCK COMMON STOCK ------------------------------- ------------------------------- ------------------------------- accordance with the DGCL. holders of Aerial Series A Common Shares and Aerial Series B Common Shares; - Aerial Common Shares may be paid to the holders of Aerial Common Shares at the same time that Aerial Series A Common Shares are paid proportionately to the holders of Aerial Series A Common Shares and Aerial Series B Common Shares are paid proportionately to holders of Aerial Series B Common Shares; - Aerial Series A Common Shares may be paid to holders of Aerial Series A Common Shares and proportionately to holders of Aerial Common Shares and Aerial Series B Common Shares; or - Aerial Series B Common Shares may be paid to holders of Aerial Series B Common Shares and proportionately to holders of Aerial Common Shares and Aerial Series A Common Shares. DIVIDENDS OF SUBSIDIARY STOCK..... The VoiceStream Holdings The Omnipoint amended and Aerial may distribute to restated certificate of restated certificate of holders of Aerial Common Shares incorporation does not include incorporation does not include and Aerial Series A Common provisions relating to provisions relating to Shares, and Aerial Series B dividends of subsidiary stock. dividends of subsidiary stock. Common Shares, if any are outstanding, shares of subsidiary capital stock
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------------------------------- ------------------------------- ------------------------------- VOICESTREAM HOLDINGS OMNIPOINT AERIAL COMMON STOCK COMMON STOCK COMMON STOCK ------------------------------- ------------------------------- ------------------------------- corresponding to Aerial Common Shares, Aerial Series A Common Shares and Aerial Series B Common Shares, respectively, with rights, preferences and limitations which, in the judgment of the Aerial board of directors, are similar in all material respects to the relative rights, preferences and limitations of the shares of common stock of Aerial. Thus, although it has no present intention to do so, Aerial could recapitalize any of its subsidiaries and then spin off the subsidiary to Aerial stockholders, with the holders of Aerial Series A Common Shares receiving the subsidiary's series A common shares, the holders of Aerial Common Shares receiving the subsidiary's common shares and the holders of Aerial Series B Common Shares receiving the subsidiary's series B common shares. LIQUIDATION.......... In the event of any In the event of the liquidation In the event of the liquidation liquidation, dissolution or or dissolution of Omnipoint, of Aerial, holders of Aerial winding-up of VoiceStream holders of common stock are Common Shares, Aerial Series A Holdings, holders of common entitled to receive all assets Common Shares and Aerial Series stock are entitled to a per available for distribution to B Common Shares, if and when share distribution of any stockholders, subject to any issued, would share pari passu assets remaining after payment preferential rights of any then any assets of Aerial remaining or provision for liabilities outstanding shares of preferred for distribution to holders of and any preferred stock stock. Aerial common stock. liquidation preferences. REDEMPTION OF SHARES TO PROTECT LICENSES............. The VoiceStream Holdings The Omnipoint amended and The Aerial restated certificate restated certificate of restated certificate of of incorporation permits shares incorporation provides that incorporation does not include of Aerial capital stock, outstanding shares of capital provisions relating to the including Aerial Common Shares, stock of the corporation shall redemption of shares to protect Aerial Series A Common Shares, be subject to redemption by the licenses. and Aerial Series B
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------------------------------- ------------------------------- ------------------------------- VOICESTREAM HOLDINGS OMNIPOINT AERIAL COMMON STOCK COMMON STOCK COMMON STOCK ------------------------------- ------------------------------- ------------------------------- corporation, by action of the Common Shares, to be redeemed board of directors, if, in the by Aerial, (a) at fair market judgment of the board of value or (b) at such holder's directors, such action should purchase price if purchased be taken, pursuant to any within a year of such applicable provision of law, to redemption, to the extent the extent necessary to prevent necessary to prevent the loss the loss or secure the or secure the reinstatement of, reinstatement of any license or or to prevent the denial of franchise from any governmental applications for or the renewal agency held by the corporation of any license or franchise or any of its subsidiaries to from any governmental agency. conduct any portion of the business of the corporation or any of its subsidiaries. PREEMPTIVE RIGHTS.... VoiceStream Holdings common Omnipoint common stock has no The Aerial Common Shares and stock has no preemptive rights preemptive rights enabling a the Aerial Series B Common enabling a holder to subscribe holder to subscribe for or Shares have no preemptive for or receive shares of any receive shares of any class of rights enabling a holder to class of stock of VoiceStream stock of Omnipoint or any other subscribe for or receive shares Holdings or any other securities convertible into of any class of stock of Aerial securities convertible into shares of any class of stock of or any other securities shares of any class of stock of Omnipoint under the Omnipoint convertible into shares of any VoiceStream Holdings under the amended and restated class of stock of Aerial under VoiceStream Holdings restated certificate of incorporation. the Aerial restated certificate certificate of incorporation. of incorporation. Under the Aerial restated certificate of incorporation, the holders of Aerial Series A Common Shares have preemptive rights to purchase any additional Aerial Series A Common Shares or securities convertible into or exchangeable for, or carrying a right to subscribe to or acquire, Aerial Series A Common Shares issued or sold by Aerial, including treasury shares, other than Aerial Series A Common Shares sold otherwise than for cash. REMOVAL OF DIRECTORS............ Any director or the entire The Omnipoint amended and Directors of Aerial may be board may be removed, with or restated certificate of removed by stockholders without cause, by the holders incorporation does not include entitled to vote in the of a majority of the shares provisions relating to the election of such directors only then entitled to removal of directors. for cause.
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------------------------------- ------------------------------- ------------------------------- VOICESTREAM HOLDINGS OMNIPOINT AERIAL COMMON STOCK COMMON STOCK COMMON STOCK ------------------------------- ------------------------------- ------------------------------- vote at an election of directors. MEETINGS OF STOCKHOLDERS......... A special meeting of A special meeting of A special meeting of stockholders may be called at stockholders may be called at stockholders may be called by any time by the president, the any time by the president or the president, a majority of board, or stockholders entitled the board. the board or holders of at to cast at least one-fifth of least a majority of the votes the votes that all stockholders of the stock issued and are entitled to cast at the outstanding and entitled to particular meeting. vote. STOCKHOLDER ACTION BY WRITTEN CONSENT...... Any action required to be, or Any action required or Stockholder action may be taken that may be, taken at any permitted to be taken by without a meeting or vote if a annual or special meeting of stockholders of Omnipoint may written consent is signed by stockholders, may be taken be taken by unanimous written the holders of outstanding without a meeting, without consent of the stockholders. shares having not less than the prior notice and without a minimum number of votes that vote, if a unanimous consent in would be necessary to authorize writing, setting forth the such action at a meeting at action so taken, shall be which all shares entitled to signed by the holders of a vote thereon were present and majority of the outstanding voted. stock. SECTION 203 OF DGCL................. VoiceStream Holdings is subject Omnipoint is subject to Section The Aerial restated certificate to section 203 of the DGCL. 203 of the DGCL. of incorporation expressly provides that Aerial elects not to be governed by section 203 of the DGCL.
255 263 OPINIONS FROM LEGAL COUNSEL The validity of the VoiceStream Holdings common stock to be issued to VoiceStream and Omnipoint stockholders pursuant to the reorganization will be passed upon by Preston Gates & Ellis LLP. It is a condition to the completion of the Omnipoint reorganization that VoiceStream and Omnipoint receive opinions from Jones, Day, Reavis & Pogue and Piper & Marbury LLP, respectively, with respect to the tax treatment of the Omnipoint reorganization. See "The Omnipoint Reorganization Agreement -- Conditions to the Omnipoint Reorganization" and "The Omnipoint Reorganization -- Material Federal Income Tax Consequences of the Omnipoint Reorganization." It is a condition to the completion of the Aerial reorganization that VoiceStream and Aerial receive opinions from Jones, Day, Reavis & Pogue and Sidley & Austin, respectively, with respect to the tax treatment of the Aerial reorganization. See "The Aerial Reorganization Agreement -- Conditions to the Reorganization" and "The Aerial Reorganization -- Material Income Tax Consequences of the Aerial Reorganization." EXPERTS The consolidated financial statements of VoiceStream and its subsidiaries for the year ended December 31, 1998, included in VoiceStream's Form 10/A, which is incorporated herein by reference, have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon their authority as experts in giving said reports. The consolidated financial statements of Omnipoint and its subsidiaries as of December 31, 1998 and 1997 and for each of the three years in the period ended December 31, 1998, incorporated by reference in this joint proxy statement - prospectus, have been so incorporated herein in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in accounting and auditing. The consolidated financial statements of Aerial and its subsidiaries as of December 31, 1998 and 1997 and for each of the three years in the period ended December 31, 1998, included in Aerial's Form 10-K, which are incorporated herein by reference, have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon their authority as experts in giving said reports. 256 264 WHERE YOU CAN FIND MORE INFORMATION VoiceStream, Omnipoint and Aerial file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other information we file at the SEC's public reference rooms in Washington, D.C., New York, New York and Chicago Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. VoiceStream's, Omnipoint's and Aerial's SEC filings are also available to the public from commercial document retrieval services and at the web site maintained by the SEC at "http://www.sec.gov." We have filed a registration statement on Form S-4 to register with the SEC the VoiceStream Holdings common stock to be issued to VoiceStream, Omnipoint and Aerial stockholders in the reorganizations. This joint proxy statement-prospectus is a part of that registration statement and constitutes a prospectus of VoiceStream Holdings in addition to being a proxy statement of VoiceStream, Omnipoint and Aerial for the special meetings. As allowed by SEC rules, this joint proxy statement-prospectus does not contain all the information you can find in the registration statement or the exhibits to the registration statement. The SEC allows us to "incorporate by reference" information into this joint proxy statement-prospectus, which means that we can disclose important information to you by referring you to another document filed separately with the SEC. The information incorporated by reference is deemed to be part of this joint proxy statement-prospectus, except for any information superseded by information in, or incorporated by reference in, this joint proxy statement-prospectus. This joint proxy statement-prospectus incorporates by reference the documents set forth below that we have previously filed with the SEC. These documents contain important information about VoiceStream, Omnipoint and Aerial and their finances.
VOICESTREAM SEC FILINGS (FILE NO. 0-25441) DATE FILED ------------------------------------------ ------------------ Form 10/A................................................... April 13, 1999 Form 10-Q for the Quarter Ended June 30, 1999............... August 9, 1999 Form 8-K.................................................... May 10, 1999 Form 8-K.................................................... May 27, 1999 Form 8-K.................................................... June 24, 1999 Form 8-K.................................................... July 7, 1999 Form 8-K.................................................... , 1999
OMNIPOINT SEC FILINGS (FILE NO. 0-27442) DATE FILED ---------------------------------------- ------------------ Form 10-K for the Year Ended December 31, 1998.............. April 6, 1999 1999 Proxy Statement........................................ April 27, 1999 Form 10-Q for the Quarter Ended June 30, 1999............... August 16, 1999 Form 10-Q for the Quarter Ended March 31, 1999.............. May 17, 1999 Form 8-K.................................................... July 2, 1999
AERIAL SEC FILINGS (FILE NO. 0-28262) DATE FILED ------------------------------------- ------------------ Form 10-K for the year Ended December 31, 1998.............. March 31, 1999 1999 Proxy Statement........................................ April 19, 1999 Form 10-Q for the Quarter Ended June 30, 1999............... August 13, 1999 Form 10-Q for the Quarter Ended March 31, 1999.............. May 14, 1999 Form 8-K.................................................... September 28, 1999
257 265 We are also incorporating by reference additional documents that VoiceStream, Omnipoint or Aerial file with the SEC between the date of this joint proxy statement-prospectus and the date of the meetings. Documents incorporated by reference by each company are available from them without charge, excluding all exhibits unless the company has specifically incorporated by reference an exhibit into this joint proxy statement-prospectus. Stockholders may obtain documents incorporated by reference in this joint proxy statement-prospectus by requesting them in writing or by telephone from the appropriate party at the following address: VoiceStream Wireless Corporation Attn: Investor Relations 3650 131st Avenue SE Bellevue, Washington 98006 Omnipoint Corporation Attn: Investor Relations Three Bethesda Metro Center, Suite 400 Bethesda, Maryland 20814 Aerial Communications, Inc. Attn: Investor Relations 8410 W. Bryn Mawr Avenue Suite 1100 Chicago, Illinois 60631 You should rely only on the information contained or incorporated by reference in this joint proxy statement-prospectus to vote on the Omnipoint reorganization or Aerial reorganization, as applicable. We have not authorized anyone to provide you with information that is different from what is contained in this joint proxy statement-prospectus. Please note that VoiceStream has supplied all information contained or incorporated by reference in this joint proxy statement-prospectus relating to VoiceStream, Omnipoint has supplied all such information relating to Omnipoint, and Aerial has supplied all such information relating to Aerial. This joint proxy statement-prospectus is dated November , 1999. You should not assume that the information contained in the joint proxy statement-prospectus is accurate as of any date other than such date, and neither the mailing of this joint proxy statement-prospectus to stockholders nor the issuance of VoiceStream Holdings common stock in the reorganizations shall create any implication to the contrary. 258 266 GLOSSARY* "Adjusted Fully Diluted Shares" means the aggregate number of issued and issuable shares of Aerial common stock and includes any stock appreciation rights, phantom stock rights or other contractual rights the value of which is determined in whole or in part by the value of shares of capital stock of Aerial or any of its subsidiaries. Adjusted Fully Diluted Shares does not include any shares issued or to be issued to TDS and Sonera pursuant to the debt replacement agreement or shares that are or may be issued pursuant to Aerial performance stock options. "Aerial" means Aerial Communications, Inc. "Aerial Cash Election" has the meaning set forth on page 4 of this joint proxy statement-prospectus. "Aerial Common Shares" means Aerial's common shares, par value $1.00 per share. "Aerial Series A Common Shares" means Aerial's Series A common shares, par value $1.00 per share. "Aerial Stock Election" has the meaning set forth on this page 4 of this joint proxy statement-prospectus. "Aerial reorganization" means the combination of VoiceStream and Aerial pursuant to the Aerial reorganization agreement. "Aerial reorganization agreement" means the Agreement and Plan of Reorganization, dated as of September 17, 1999, by and among Aerial, VoiceStream, VoiceStream Holdings and certain other parties thereto. "Allen & Co." means Allen & Co., Inc., a financial advisor to and investor in Omnipoint. "Appraisal Notice" has the meaning set forth on page 186 of this joint proxy statement-prospectus. "AT&T Wireless" means AT&T Wireless Services, Inc. "Block" means one of six blocks into which the FCC has divided 120 MHz of radio spectrum, each of which is allocated to serve either MTAs or BTAs. "Bridge Street" means Bridge Street Fund 1992, L.P. "BTA" means Basic Trading Area, a term used by the FCC to define licensed market areas based on the Rand McNally 1992 Commercial Atlas and Marketing Guide, 123rd Edition, at 38-39. "CDMA" means Code Division Multiple Access, a wireless communications standard. "cell site" has the meaning set forth on page 190 of this joint proxy statement-prospectus. "CGSA" means Cellular Geographic Service Area. "Chancery Court" means the State of Delaware Court of Chancery. "Chase Securities" means Chase Securities, Inc., financial advisor to the Hutchison Entities. "CIRI Transactions" means the transactions contemplated by the purchase agreements between Omnipoint and CIVS II and CIVS III, as summarily described on pages 63 and 64 of this joint proxy statement-prospectus. "CIVS" means Cook Inlet/VoiceStream PCS LLC, a Delaware limited liability company. "CIVS II" means Cook Inlet/VoiceStream GSM II PCS, LLC, a Delaware limited liability company. "CIVS III" means Cook Inlet/VoiceStream GSM III PCS, LLC, a Delaware limited liability company. "Claritas" means Claritas, Inc. "Clearnet" means Clearnet Communications. "Closing Date Market Price" means the average closing price of one share of VoiceStream common stock (calculated on a weighted average based upon the volume of shares traded on each day) during the period of the 15 most-recent trading days ending on the business day prior to the effective date of the reorganization. "CMRS" means Commercial Mobile Radio Service. "Code" means Internal Revenue Code of 1986, as amended. "Communications Act" means the Communications Act of 1934, as amended and the rules, regulations and policies promulgated by the FCC thereunder. "Cook Inlet" means Cook Inlet Region, Inc. "Cook Inlet PCS" has the meaning set forth on page 202 of this joint proxy statement-prospectus. "Covered POPs" has the meaning set forth on page 47 of this joint proxy statement-prospectus. "CTIA" means Cellular Telecommunications Industry Association. "Designated Entities" has the meaning set forth on page 23 of this joint proxy statement-prospectus. "DGCL" means the Delaware General Corporation Law. "Donaldson, Lufkin & Jenrette" means Donaldson, Lufkin & Jenrette Securities Corporation, financial advisor to Aerial. 259 267 "EBITDA" means operating income (loss) before depreciation and amortization and non-cash stock compensation expense. Management believes EBITDA provides meaningful additional information on a company's operating results and on its ability to service its long-term debt and other fixed obligations and to fund its continuing 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 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, a particular company's presentation may not be comparable to other similarly titled measures of other companies. "Entity One" has the meaning set forth on page 95 of this joint proxy statement-prospectus. "Entity Two" has the meaning set forth on page 100 of this joint proxy statement-prospectus. "ESMR" means Enhanced Specialized Mobile Radio. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "FCC" means the Federal Communications Commission. "GAAP" means United States generally accepted accounting principles. "General Cellular" means General Cellular Corporation. "Goldman Sachs" means Goldman, Sachs & Co., financial advisor to VoiceStream. "Goldman Sachs Entities" means, collectively, the GS Group, GS Capital, Stone Street and Bridge Street. "GS Capital" means GS Capital Partners, L.P. "GS Group" means The Goldman Sachs Group, L.P. "GSM" means Global System for Mobile Communications, a wireless communications system standard. "GTE Mobilnet" means GTE Mobilnet, Inc. "Hellman & Friedman" means Hellman & Friedman, a private investment firm. "Hellman Entities" means collectively, Hellman Trust, HFCP, HFOP, and HFIP. "Hellman Trust" means The Hellman Family Revocable Trust dated December 17, 1984. "HFCP" means Hellman & Friedman Capital Partners II, L.P. "HFIP" means H&F International Partners, L.P. "HFOP" means H&F Orchard Partners, L.P. "Hutchison" means Hutchison Whampoa Limited., a diversified Hong Kong-based corporation that includes interests in telecommunications businesses. "Hutchison Entities" means Hutchison Telecommunications, Hutchison PCS (USA) and Hutchison Holdings (USA). "Hutchison Holdings (USA)" means Hutchison Telecommunications Holdings (USA) Limited. "Hutchison Investments" means a series of investments whereby Hutchison PCS (USA) will invest a total of $957 million in VoiceStream Holdings, comprised of $150 million of securities purchased from Omnipoint prior to the closing of the reorganization and $807 million in cash for the purchase of a combination of shares of VoiceStream Holdings common stock at $29 per share, and shares of VoiceStream Holdings Junior Preferred at $100,000 per share (convertible into VoiceStream Holdings common stock at $29 per share), which will be used in part to pay the cash portion of the Omnipoint merger. "Hutchison PCS (USA)" means Hutchison Telecommunications PCS (USA) Limited. "Hutchison Telecommunications" means Hutchison Telecommunications Limited. "Interim Investment" means a $300 million joint investment in Omnipoint by VoiceStream and Hutchison PCS(USA) pursuant to the Securities Purchase Agreement dated June 23, 1999. Hutchison PCS(USA)'s $150 million portion of this investment will be rolled into the Hutchison Investments on the effective date of the reorganization. "Iowa Wireless" has the meaning set forth on page 208 of this joint proxy statement-prospectus. "IRS" means Internal Revenue Service. "LECs" means local exchange carriers. "Lehman Brothers" means Lehman Brothers Inc., a financial advisor to Omnipoint. "LIN Broadcasting" means LIN Broadcasting Corp. "Management Incentive Plan" means the VoiceStream Holdings 1999 Management Incentive Stock Option Plan. "Maximum Cash Amount" has the meaning set forth on page 31 of this joint proxy statement-prospectus. 260 268 "Maximum Share Issuance Number" has the meaning set forth on page 31 of this joint proxy statement-prospectus. "McCaw Cellular" means McCaw Cellular Communications, Inc. "MDCP" means Madison Dearborn Capital Partners, L.P. "Microcell" means Microcell Telecommunications, Inc. "MTA" means Major Trading Area, a term used by the FCC to define licensed market areas based on the Rand McNally 1992 Commercial Atlas and Marketing Guide, 123rd Edition, at 38-39. "Nasdaq" means the Nasdaq National Market. "Nextel" means Nextel Communications, Inc. and/or its affiliate, Nextel Partners, Inc. "NPI" means Noverr Publishing, Inc. "Omnipoint Cash Election" has the meaning set forth on page 3 of this joint proxy statement-prospectus. "Omnipoint merger" means the merger of Omnipoint with a subsidiary of VoiceStream Holdings pursuant to the Omnipoint reorganization agreement. "Omnipoint reorganization" means the combination of VoiceStream and Omnipoint pursuant to the Omnipoint reorganization agreement. "Omnipoint reorganization agreement" means the Agreement and Plan of Reorganization, dated June 23, 1999, among VoiceStream, Omnipoint and VoiceStream Holdings. "Omnipoint Series A Preferred" means Omnipoint's Series A preferred stock, $0.01 par value per share. "Omnipoint 7% Convertible Preferred" means Omnipoint 7% convertible preferred stock, no par value. "Omnipoint Standard Election" has the meaning set forth on page 3 of this joint proxy statement-prospectus. "Omnipoint Stock Election" has the meaning set forth on page 3 of this joint proxy statement-prospectus. "Other Transactions" has the meaning set forth on page 73 of this joint proxy statement-prospectus. "PBX" means Private Business Exchange. "PCS" means Personal Communications Service. "Pioneer Preference" license means a license granted by the FCC pursuant to its pioneer's preference program, which extended preferential licensing treatment to parties that developed new spectrum-using communications technologies, and resulted in the grant of the A Block licenses for New York, Los Angeles and Washington DC MTAs outside of the auction process. "PN Cellular" means PN Cellular, Inc. "POPs" has the meaning set forth on page 47 of the joint proxy statement-prospectus. "Powertel" means Powertel, Inc. "prohibited plan" has the meaning set forth on page 27 of this joint proxy statement-prospectus. "Providence" means Providence Media Partners L.P. "Purchase Plan" means the VoiceStream Holdings 1999 Employee Stock Purchase Plan. "Qualcomm" means Qualcomm Incorporated. "Restricted Stock Plan" means the VoiceStream Holdings 1999 Executive Restricted Stock Plan. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "SMR" means Specialized Mobile Radio. "Sonera" means Sonera, Ltd., a Finnish telecommunications company and stockholder of Aerial. "Sonera-Aerial Investment" means the investment by Sonera of $230 million in cash in Aerial and a subsidiary of Aerial on November 1, 1999, at an equivalent of $22 per share of Aerial common stock. "Sonera Investments" means the Sonera-Aerial Investment and the Sonera-VoiceStream Investment, collectively. "Sonera-VoiceStream Investment" means the investment by Sonera of $500 million in cash in VoiceStream Holdings, to occur upon the closing of the Omnipoint reorganization, at an equivalent of $57 per share of VoiceStream Holdings common stock. "Southwestern Bell" means Southwestern Bell Wireless. "Spin-off" means the transaction in which Western Wireless distributed its VoiceStream stock to its stockholders. "Sprint PCS" means Sprint Corp. (PCS Group). "Stanton Entities" means collectively, John Stanton, Theresa Gillespie, PN Cellular, Stanton Communications Corporation, and The Stanton Family Trust. "Stanton Family Trust" means a trust established by John Stanton and Theresa Gillespie for the benefit of their children. "Stone Street" means Stone Street Fund 1992. "Tax Sharing Agreement" has the meaning set forth on page 73 of this joint proxy statement-prospectus. 261 269 "TDMA" means Time Division Multiple Access, a wireless communications standard. "TDS" means Telephone and Data Systems, Inc., the parent of Aerial. "TDS Debt Replacement" means the replacement of certain debt owed to TDS by a subsidiary of Aerial with equity of Aerial, as described on page 161 of this joint proxy statement-prospectus. "Telecommunications Act" means the Telecommunications Act of 1996. "US West" means US West Wireless LLC. "Vodafone AirTouch" means Vodafone AirTouch Cellular Communications, Inc. "VoiceStream Holdings Junior Preferred" means VoiceStream Holdings 2.5% cumulative dividend convertible preferred stock, no par value. "WALLC" has the meaning set forth on page 209 of this joint proxy statement-prospectus. "Wasserstein Perella" means Wasserstein Perella & Co., Inc., financial advisor to the Aerial special committee. "WBCA" means the Washington Business Corporation Act. "Western Wireless" means Western Wireless Corporation, former parent of VoiceStream. "WTO Agreement" means World Trade Organization Basic Telecom Agreement. * Certain defined terms used in the sections of this joint proxy statement-prospectus relating to the fairness opinions of Goldman Sachs, Lehman Brothers, Donaldson, Lufkin & Jenrette, and Wasserstein Perella and not defined in this Glossary, have the meanings given to such terms in those sections. 262 270 ANNEX A EXECUTION COPY AGREEMENT AND PLAN OF REORGANIZATION DATED AS OF JUNE 23, 1999 BY AND AMONG VOICESTREAM WIRELESS CORPORATION, VOICESTREAM WIRELESS HOLDING CORPORATION AND OMNIPOINT CORPORATION A-i 271 TABLE OF CONTENTS
PAGE ---- ARTICLE 1 -- DEFINITIONS.................................... A-1 Section 1.1 Definitions................................... A-1 ARTICLE 2 -- FORMATION OF HOLDING COMPANY AND SUBSIDIARIES.............................................. A-9 Section 2.1 Organization of Holding Company.............. A-9 Section 2.2 Directors and Officers of Holding Company.... A-9 Section 2.3 Organization of Merger Subsidiaries.......... A-9 Section 2.4 Actions of Directors and Officers............ A-10 Section 2.5 Actions of Holding Company................... A-10 ARTICLE 2A -- THE MERGERS; CLOSING.......................... A-10 Section 2.1A The Mergers................................. A-10 Section 2.2A Directors................................... A-11 Section 2.3A Certificate of Incorporation and Bylaws..... A-11 Section 2.4A Officers.................................... A-11 ARTICLE 3 -- EFFECT OF THE MERGERS ON SECURITIES OF VOICESTREAM, OMNIPOINT AND THE MERGER SUBSIDIARIES........ A-11 Section 3.1 Conversion of Merger Subsidiaries Stock...... A-11 Section 3.2 Cancellation of Holding Company Capital Stock.................................................. A-12 Section 3.3 Conversion of Common Stock................... A-12 Section 3.4 Surrender and Payment........................ A-14 Section 3.5 Dissenting Shares............................ A-16 Section 3.6 Options, Warrants and Preferred Stock........ A-16 Section 3.7 Fractional Shares............................ A-18 Section 3.8 Withholding Rights........................... A-18 Section 3.9 Lost Certificates............................ A-18 ARTICLE 4 -- REPRESENTATIONS AND WARRANTIES OF OMNIPOINT.... A-18 Section 4.1 Corporate Existence and Power................ A-18 Section 4.2 Corporate Authorization...................... A-19 Section 4.3 Governmental Authorization................... A-19 Section 4.4 FCC Matters.................................. A-19 Section 4.5 Non-contravention............................ A-20 Section 4.6 Capitalization............................... A-20 Section 4.7 Subsidiaries; Investments.................... A-21 Section 4.8 SEC Filings.................................. A-22 Section 4.9 Financial Statements......................... A-23 Section 4.10 Absence of Certain Changes.................. A-23 Section 4.11 No Undisclosed Material Liabilities......... A-23 Section 4.12 Compliance with Laws and Court Orders....... A-23 Section 4.13 Litigation.................................. A-23 Section 4.14 Finders' Fees............................... A-23 Section 4.15 Opinion of Financial Advisor................ A-24 Section 4.16 Taxes....................................... A-24 Section 4.17 Tax Opinions................................ A-24 Section 4.18 Employee Benefit Plans and Labor Matters.... A-25 Section 4.19 Environmental Matters....................... A-26 Section 4.20 Intellectual Property....................... A-26 Section 4.21 Contracts................................... A-27 Section 4.22 Significant Omnipoint Employees............. A-27 Section 4.23 Employment Matters.......................... A-28
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PAGE ---- Section 4.24 Labor....................................... A-28 Section 4.25 Vote Required............................... A-28 Section 4.26 Antitakeover Statutes and Charter Provisions............................................. A-28 Section 4.27 Insurance................................... A-28 Section 4.28 Bank Accounts............................... A-28 Section 4.29 Transactions with Affiliates................ A-29 ARTICLE 5 -- REPRESENTATIONS AND WARRANTIES OF VOICESTREAM AND HOLDING COMPANY....................................... A-29 Section 5.1 Corporate Existence and Power................ A-29 Section 5.2 Corporate Authorization...................... A-29 Section 5.3 Governmental Authorization................... A-30 Section 5.4 FCC Matters.................................. A-30 Section 5.5 Non-contravention............................ A-31 Section 5.6 Capitalization............................... A-31 Section 5.7 Subsidiaries; Investments.................... A-32 Section 5.8 SEC Filings.................................. A-33 Section 5.9 Financial Statements......................... A-33 Section 5.10 Absence of Certain Changes.................. A-33 Section 5.11 No Undisclosed Material Liabilities......... A-33 Section 5.12 Compliance with Laws and Court Orders....... A-34 Section 5.13 Litigation.................................. A-34 Section 5.14 Finders' Fees............................... A-34 Section 5.15 Opinion of Financial Advisor................ A-34 Section 5.16 Taxes....................................... A-34 Section 5.17 Tax Opinions................................ A-35 Section 5.18 Employee Benefit Plans and Labor Matters.... A-35 Section 5.19 Environmental Matters....................... A-36 Section 5.20 Intellectual Property....................... A-37 Section 5.21 Contracts................................... A-37 Section 5.22 VoiceStream Employees....................... A-37 Section 5.23 Employment Matters.......................... A-38 Section 5.24 Labor....................................... A-38 Section 5.25 ............................................ A-38 Section 5.26 Vote Required............................... A-39 Section 5.27 Insurance................................... A-39 Section 5.28 Bank Accounts............................... A-39 Section 5.29 Transactions with Affiliates................ A-39 Section 5.30 Not an Interested Stockholder............... A-39 Section 5.31 Representations with Respect to Holding Company................................................ A-39 ARTICLE 6 -- COVENANTS OF OMNIPOINT......................... A-40 Section 6.1 Omnipoint Interim Operations................. A-40 Section 6.2 No Solicitation.............................. A-42 Section 6.3 Access to Information........................ A-43 Section 6.4 ............................................. A-43 ARTICLE 7 -- COVENANTS OF VOICESTREAM AND HOLDING COMPANY... A-44 Section 7.1 VoiceStream Interim Operations............... A-44 Section 7.2 Director and Officer Liability............... A-44 Section 7.3 Listing of Stock............................. A-45 Section 7.4 Holding Company Board of Directors........... A-45 Section 7.5 Employee Matters............................. A-45
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PAGE ---- Section 7.6 Access to Information........................ A-46 Section 7.7 Covenants with Respect to Holding Company.... A-46 Section 7.8 Registration Rights.......................... A-47 ARTICLE 8 -- COVENANTS OF VOICESTREAM AND OMNIPOINT......... A-47 Section 8.1 Best Efforts................................. A-47 Section 8.2 Registration Statement and Proxy Statement... A-49 Section 8.3 Public Announcements......................... A-50 Section 8.4 Further Assurances........................... A-50 Section 8.5 Notices of Certain Events.................... A-50 Section 8.6 Tax-free Treatment........................... A-50 Section 8.7 Affiliates................................... A-51 Section 8.8 Stockholders' Meeting........................ A-51 Section 8.9 Conduct of Business by Holding Company and the Merger Subsidiaries Pending the Mergers............ A-51 ARTICLE 9 -- CONDITIONS TO THE MERGER....................... A-52 Section 9.1 Conditions to the Obligations of Each Party.................................................. A-52 Section 9.2 Conditions to the Obligations of VoiceStream............................................ A-53 Section 9.3 Conditions to the Obligations of Omnipoint... A-53 ARTICLE 10 -- TERMINATION................................... A-54 Section 10.1 Termination................................. A-54 Section 10.2 Effect of Termination....................... A-56 Section 10.3 Fees and Expenses........................... A-56 ARTICLE 11 -- MISCELLANEOUS................................. A-57 Section 11.1 Notices..................................... A-57 Section 11.2 Reliance on Representations................. A-57 Section 11.3 Survival of Representations and Warranties............................................. A-57 Section 11.4 Amendments; No Waivers...................... A-58 Section 11.5 Successors and Assigns...................... A-58 Section 11.6 Governing Law............................... A-58 Section 11.7 Jurisdiction................................ A-58 Section 11.8 Waiver of Jury Trial........................ A-58 Section 11.9 Counterparts; Effectiveness................. A-58 Section 11.10 Entire Agreement; No Third Party Beneficiaries.......................................... A-58 Section 11.11 Captions................................... A-59 Section 11.12 Severability............................... A-59 Section 11.13 Specific Performance....................... A-59 Section 11.14 Schedules.................................. A-59
A-iv 274 EXHIBITS AND SCHEDULES Form of Purchase Agreement between Omnipoint and the Cook Exhibit A-1 Entity Form of Purchase Agreement between Omnipoint and the Cook Exhibit A-2 Entity Exhibit B Form of Omnipoint Rule 145 Affiliate Agreement Exhibit C Form of Officer's Certificate of VoiceStream Exhibit D Form of Officer's Certificate of Holding Company Exhibit E Form of Opinion Letter of Regulatory Counsel to VoiceStream Exhibit F-1 Form of Officer's Certificate of Omnipoint Exhibit F-2 Form of Officer's Certificate of VoiceStream Exhibit F-3 Form of Holding Company Officer's Certificate Exhibit F-4 Form of 5% Shareholders Certificate Exhibit F-5 Form of 5% Partnership-Shareholders Certificate Exhibit G Form of Opinion Letter of Regulatory Counsel to Omnipoint
Omnipoint Disclosure Schedule VoiceStream Disclosure Schedule A-v 275 AGREEMENT AND PLAN OF REORGANIZATION AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), dated as of June 23, 1999, by and among VoiceStream Wireless Corporation, a Washington corporation ("VoiceStream"), VoiceStream Wireless Holding Corporation, a Delaware corporation ("Holding Company"), and Omnipoint Corporation, a Delaware corporation ("Omnipoint"). RECITALS A. The Boards of Directors of VoiceStream and Omnipoint have approved, and deem it advisable and in the best interests of their respective companies and stockholders to consummate the reorganization (the "Reorganization") provided for herein, pursuant to which (i) Holding Company will acquire all of the common stock of each of VoiceStream and Omnipoint through mergers of Subsidiaries of Holding Company with and into each of VoiceStream and Omnipoint and (ii) Hutchison shall contribute $807,000,000 and Hutchison's Omnipoint Stock to Holding Company in exchange for shares of common stock and shares of preferred stock of Holding Company. B. For federal income tax purposes, it is intended that (i) the VoiceStream Merger qualify as a reorganization described in Section 368(a) of the United States Internal Revenue Code of 1986, as amended (the "Code"), and/or as an exchange described in Section 351(a) of the Code and (ii) the Omnipoint Merger, taken together with the VoiceStream Merger and the Hutchison Transaction, qualify as an exchange described in Section 351 of the Code. C. VoiceStream Holding Company and Omnipoint desire to make certain representations, warranties, covenants and agreements in connection with the Transactions. NOW, THEREFORE, in consideration of the foregoing, and of the representations, warranties, covenants and agreements contained herein, the parties hereto hereby agree as follows: ARTICLE 1 DEFINITIONS SECTION 1.1 Definitions. (a) The following terms, as used herein, have the following meanings: "Acquisition Proposal" means any offer or proposal for, or any indication of interest in (i) a merger, consolidation, share exchange, business combination, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving any member of the Omnipoint Group, (ii) the acquisition, directly or indirectly, in a single transaction or series of related transactions, (A) an equity interest representing greater than 15% of the voting securities of any member of the Omnipoint Group or (B) assets, securities or ownership interests representing an amount equal to or greater than 15% of the consolidated assets or earning power of the Omnipoint Group, other than the Transactions or (iii) the consummation of any other transaction or the entering into of any other agreement or arrangement with respect to any other transactions, the effect of which would have the same result as the occurrence of (i) or (ii). "Affiliate" means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person provided that, for purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise. A-1 276 "All Cash Amount" means the sum of (i) the Closing Date Market Price multiplied by .825 and (ii) $8.00. "All Stock Number" means the sum of (i) $8.00 divided by the Closing Date Market Price and (ii) .825. "Allen" means Allen & Company Inc. "Benefit Arrangement" means, with respect to any Person, any employment, severance or similar contract or arrangement, whether formal or informal, proposed or final, funded or unfunded, whether or not written, providing for compensation, bonus, profit-sharing, stock option, or other stock-related rights or other forms of incentive or deferred compensation, vacation benefits, insurance coverage (including any self-insured arrangements), health or medical benefits, disability benefits, workers' compensation, supplemental unemployment benefits, severance benefits and post-employment or retirement benefits (including compensation, pension, health, medical or life insurance or other benefits) that (i) is not an Employee Plan, (ii) is entered into, maintained, administered or contributed to, as the case may be, by such Person or any of its Affiliates (other than, in the case of VoiceStream, Western and its Subsidiaries) and (iii) covers any employee or former employee of such Person or any of its Subsidiaries employed in the United States. "Omnipoint Benefit Arrangements" means the Benefit Arrangements of any member of the Omnipoint Group. "VoiceStream Benefit Arrangements" means the Benefit Arrangements of any member of the VoiceStream Group. "Business Day" means a day other than a Saturday, Sunday or other day on which commercial banks in New York City or Seattle, Washington are authorized or required by law to close. "CIRI Agreements" means the Purchase Agreements, dated June 23, 1999 between Omnipoint and the Cook Entities, attached hereto as Exhibits A-1 and A-2. "CIRI Transaction" means the transactions contemplated by the CIRI Agreements. "Closing Date Market Price" means with respect to one share of VoiceStream Common Stock, the average Closing Price (calculated on a weighted average based upon the volume of shares traded on each day) for such share during the period of the 15 most recent trading days ending on the Business Day prior to the Effective Time. "Closing Price" means, on any day in which shares are traded on NASDAQ, the last reported price for which one share of VoiceStream Common Stock traded on NASDAQ. "Communications Act" means the Communications Act of 1934 and the Telecommunications Act of 1996 (together with the rules, regulations and published decisions of the FCC). "Confidentiality Agreement" means the confidentiality letter agreement, dated October 14, 1998, between Western and Omnipoint. "Cook Entities" means Cook Inlet/VS GSM II PCS, LLC, a Delaware limited liability company, and Cook Inlet/VS GSM III PCS, LLC, a Delaware limited liability company. "Default Event" means (i) the occurrence of a change in the U.S. financial, political or economic conditions the result of which would, in the reasonable judgment of VoiceStream, materially and adversely affect the ability of VoiceStream and Omnipoint to restructure or refinance any Indebtedness of any member of the Omnipoint Group on terms which would, at or after the Effective Time, not have a material adverse effect on the business, financial conditions, prospects, assets or results of operations of Holding Company, VoiceStream and Omnipoint and their respective Subsidiaries, taken as a whole, and (ii) (A) any default by any member of the Omnipoint Group in the observance or performance of any agreement or condition relating to its A-2 277 respective Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or the occurrence of any other event or the existence of any condition, the effect of which is to cause or permit the holder or holders of such Indebtedness (or trustee or agent on behalf of such holder or holders) to cause, with or without the passage of time or the giving of notice, such Indebtedness to become due or payable prior to its stated maturity or (B) the occurrence of any event or the existence of any condition, the effect of which is to cause or permit the holder or holders of such Indebtedness (or trustee or agent on behalf of such holder or holders) to require, with or without the passage of time or the giving of notice, any member of the Omnipoint Group to redeem or repurchase such Indebtedness prior to its stated maturity; provided, however, that no Default Event shall exist unless the aggregate amount of Indebtedness in respect of which either (A) or (B) shall have occurred is equal to at least $200,000,000. "Delaware Law" means the Delaware General Corporation Law. "Employee Plan" means, with respect to any Person, any "employee benefit plan", as defined in Section 3(3) of ERISA, that (i) is subject to any provision of ERISA, (ii) is maintained, administered or contributed to by such Person or any of its ERISA Affiliates (other than, in the case of VoiceStream, Western and Western's Subsidiaries) and (iii) covers any employee or former employee of such Person (other than, in the case of VoiceStream, Western and Western's Subsidiaries). "Omnipoint Employee Plan" means an Employee Plan of any member of the Omnipoint Group and "VoiceStream Employee Plan" means an Employee Plan of any member of the VoiceStream Group. "Environmental Laws" means the Comprehensive Environmental Response, Compensation, and Liability Act, the Resource Conservation and Recovery Act, the Emergency Planning and Community Right to Know Act, the Clean Water Act, the Safe Drinking Water Act, the Clean Air Act, any so-called "Superfund" or "Superlien" law, or any other federal, state or local statute, law, ordinance, code, rule, regulation, Order, decree or other requirement of any Governmental Body regulating, relating to or imposing liability or standards of conduct concerning, health, safety and any Hazardous Substance. "Environmental Permits" means, with respect to any Person, all permits, licenses, franchises, certificates, approvals and other similar authorizations of any Governmental Body relating to or required by Environmental Laws and affecting, or relating in any way to, the business of such Person or any of its Subsidiaries as currently conducted. "ERISA" means the Employee Retirement Income Security Act of 1974. "ERISA Affiliate" of any entity means any other entity that, together with such entity, would be treated as a single employer under Section 414 of the Code. "FAA" means the Federal Aviation Administration and any successor agency or body. "FCC" means the Federal Communications Commission and any successor agency or body. "FCC Consent" means an order of the FCC, or by the staff of the FCC acting pursuant to delegated authority, granting its consent to the applications referred to in Section 8.1(b) of this Agreement required to permit the consummation of the Transactions. "FCC Consent Date" means the date on which Public Notice is given of the FCC Consent pursuant to the rules and regulations of the FCC. "Final Order" means an action or decision that has been granted by the FCC as to which (i) no request for a stay or similar request is pending, no stay is in effect, the action or decision has not been vacated, reversed, set aside, annulled or suspended and any deadline for filing such request that may be designated by statute or regulation has passed, (ii) no petition for rehearing A-3 278 or reconsideration or application for review is pending and the time for the filing of any such petition or application has passed, (iii) the FCC does not have the action or decision under reconsideration on its own motion and the time within which it may effect such reconsideration has passed and (iv) no appeal is pending, including other administrative or judicial review, or in effect and any deadline for filing any such appeal that may be designated by statute or rule has passed. "Goldman" means Goldman, Sachs & Co. "Governmental Body" means any domestic or foreign national, state, multi-state or municipal or other local government, any subdivision, agency, commission or authority thereof, any court, or any quasi-governmental or private body exercising any regulatory or taxing authority thereunder. "Governmental Consents" means all authorizations, consents, approvals, exceptions or other actions by Governmental Bodies required to consummate the Transactions. "Group" means "group," as such term is defined in Rule 13d-3 of the 1934 Act. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976. "Hazardous Substance" means any hazardous substance, hazardous or toxic waste, hazardous material, pollutant or contaminant, as those or similar terms are used in the Environmental Laws, including, without limitation, asbestos and asbestos-related products, chlorofluorocarbons, oils or petroleum-derived compounds, polychlorinated biphenyls, pesticides and radon. "Hutchison" means Hutchison Telecommunications PCS (USA) Limited, a British Virgin Islands corporation. "Hutchison Agreement" means the Subscription Agreement, dated June 23, 1999, between Holding Company, Hutchison and Hutchison Telecommunications Limited, a Hong Kong corporation. "Hutchison's Omnipoint Stock" means the Omnipoint Non-Voting Convertible Preferred or the Omnipoint Common Stock into which it is convertible which is held by Hutchison. "Hutchison Transaction" means the transactions contemplated by the Hutchison Agreement. "Indebtedness" of any Person at any date means (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all obligations of such Person under financing leases, (d) all obligations of such Person in respect of acceptances issued or created for the account of such Person and with respect to unpaid reimbursement obligations related to letters of credit issued for the account of such Person and (e) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof. "Investment Interest" means a direct or indirect ownership of (i) capital stock, bonds, debentures, partnership, membership interests or other ownership interests or other securities of any Person; (ii) any deposit with or advance, loan or other extension of credit (including the purchase of property from another Person subject to an understanding or agreement, contingent or otherwise to resell such property to such other Person) to any other Person; (iii) any revenue or profit interests pursuant to any agreement or license or (iv) any agreement, commitment, A-4 279 right, understanding or arrangement with respect to any of the items referred to in (i), (ii) or (iii) of this definition. "IRS" means the Internal Revenue Service. "Jones Day" means Jones, Day, Reavis & Pogue. "knowledge" means, with respect to any fact, the conscious awareness of such fact by an executive officer (as defined under the 1933 Act) of the relevant Person. "Lehman" means Lehman Brothers Inc. "Lien" as to any Person, means any mortgage, lien, pledge, adverse claim, charge, security interest or other encumbrance (including, without limitation rights of first refusal, proxy rights and other similar rights) in or on, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention agreement or capital lease with respect to, any property or asset owned or held by such Person, or the signing or filing of a financing statement which names such Person as debtor, or the signing of any security agreement authorizing any other party as the secured party thereunder to file any financing statement other than those filed for informational purposes. "Multiemployer Plan" means each Employee Plan, including for this purpose any "employee pension benefit plan" (as defined in Section 3(2) of ERISA) of Western and its Subsidiaries, that is a multiemployer plan, as defined in Section 3(37) of ERISA. "NASDAQ" means The NASDAQ National Market. "1933 Act" means the Securities Act of 1933. "1934 Act" means the Securities Exchange Act of 1934. "Omnipoint Balance Sheet" means the Consolidated Balance Sheet of Omnipoint and its consolidated subsidiaries as of December 31, 1998 and the footnotes thereto set forth in the Omnipoint 10-K. "Omnipoint Balance Sheet Date" means December 31, 1998. "Omnipoint Common Stock" means Common Stock, par value $0.01 per share, of Omnipoint. "Omnipoint Disclosure Schedule" means the disclosure schedule of Omnipoint attached hereto. "Omnipoint Employee" means an employee of any member of the Omnipoint Group. "Omnipoint Group" means Omnipoint and the Omnipoint Subsidiaries. "Omnipoint Investment" means an entity in which any member of the Omnipoint Group has an Investment Interest. "Omnipoint Material Adverse Effect" means a material adverse effect on the business, financial condition, prospects, assets or results of operations of the Omnipoint Group taken as a whole, excluding any such effect resulting from or arising in connection with (i) this Agreement, the Transactions or the announcement thereof, (ii) changes or conditions generally affecting the industries in which the Omnipoint Group operates or (iii) changes in general economic, regulatory or political conditions. For the purposes of Section 9.1(f), item (i) of the previous sentence shall not be excluded from the definition of Omnipoint Material Adverse Effect. "Omnipoint Non-Voting Convertible Preferred Stock" means Omnipoint's Series A Non-Voting Convertible Preferred Stock, par value $0.01 per share. A-5 280 "Omnipoint Preferred Stock" means 7% Cumulative Convertible Preferred Stock, par value $1,000 per share, of Omnipoint. "Omnipoint Subsidiary" means a Subsidiary of Omnipoint. "Omnipoint 10-K" means Omnipoint's annual report on Form 10-K for the fiscal year ended December 31, 1998. "Order" means and includes any order, writ, injunction, decree, judgment, award, determination or written direction of any court, arbitrator or Governmental Body. "PBGC" means the Pension Benefit Guaranty Corporation. "Pension Plan" means, with respect to any Person, any plan (other than a Multiemployer Plan) that is subject to Title IV of ERISA and is maintained, administered or contributed to or required to be contributed to by such Person or any of its ERISA Affiliates. "Omnipoint Pension Plan" means a Pension Plan of Omnipoint or any of its ERISA Affiliates and "VoiceStream Pension Plan" means a Pension Plan of VoiceStream or any of its ERISA Affiliates other than Employee Plan. "Person" means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. "Piper Marbury" means Piper & Marbury L.L.P. "SEC" means the Securities and Exchange Commission and any successor agency or body. "Significant Employees" means any employee of a Person who (i) is an officer of such Person, (ii) owns any options to purchase capital stock of such Person which accelerate as a result of the Merger, (iii) has a written employment contract with such Person which calls for annual compensation in excess of $125,000 or (iv) is compensated by such Person at an annual rate greater than $125,000. "Significant Omnipoint Employees" means Significant Employees of any member of the Omnipoint Group. "Significant VoiceStream Employees" means Significant Employees of any member of the VoiceStream Group. "Subsequent Transaction" means any transaction whereby (i) any member of the VoiceStream Group or any VoiceStream Investment would acquire (by merger, consolidation, acquisition of stock or assets or otherwise) any corporation, limited liability company, partnership, other business organization or assets or division thereof, which is in the business of providing wireless communication services, (ii) any member of the VoiceStream Group or any VoiceStream Investment would acquire an Investment Interest in any of the foregoing, (iii) any member of the VoiceStream Group or VoiceStream Investment would issue any equity interest or incur any Indebtedness whether in connection with any item described in (i) or (ii) or otherwise, (iv) any member of the VoiceStream Group or any VoiceStream Investment enters into or engages in a strategic alliance or other commercial relationship or (v) any member of the VoiceStream Group or any VoiceStream Investment is acting in the ordinary course consistent with past practice; provided, however, in connection with a Subsequent Transaction described in items (i), (ii), (iii) or (iv) of this definition, VoiceStream must receive an opinion from a nationally recognized investment bank, acting as financial advisor to VoiceStream, to the effect that, from a financial point of view, such Subsequent Transaction is fair to the holders of VoiceStream Common Stock or, if applicable, VoiceStream. A-6 281 "Subsidiary" means, with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at any time directly or indirectly owned by such Person. "Transactions" means the transactions contemplated by this Agreement. "VoiceStream Balance Sheet" means the Consolidated Balance Sheet of VoiceStream and its consolidated subsidiaries as of December 31, 1998 and the footnotes thereto, as set forth in the VoiceStream 10-K. "VoiceStream Balance Sheet Date" means December 31, 1998. "VoiceStream Common Stock" means the Common Stock, no par value per share, of VoiceStream. "VoiceStream Disclosure Schedule" means the disclosure schedule of VoiceStream attached hereto. "VoiceStream Employee" means an employee of VoiceStream or a VoiceStream Subsidiary. "VoiceStream Group" means VoiceStream and the VoiceStream Subsidiaries. "VoiceStream Investment" means an entity in which VoiceStream has an Investment Interest. "VoiceStream Material Adverse Effect" means a material adverse effect on the business, financial condition, prospects, assets or results of operations of the VoiceStream Group taken as a whole, excluding any such effect resulting from or arising in connection with (i) this Agreement, the Transactions or the announcement thereof, (ii) changes or conditions generally affecting the industries in which the VoiceStream Group operates or (iii) changes in general economic, regulatory or political conditions. For the purposes of Section 9.1(f), item (i) of the previous sentence shall not be excluded from the definition of VoiceStream Material Adverse Effect. "VoiceStream Subsidiary" means a Subsidiary of VoiceStream. "VoiceStream 10-K" means VoiceStream's annual report on Form 10-K for the fiscal year ended December 31, 1998. "Washington Law" means the Washington Business Corporation Act. "Western" means Western Wireless Corporation, a Washington corporation. Any reference in this Agreement to a statute shall be to such statute, as amended from time to time, and to the rules and regulations promulgated thereunder. (b) Each of the following terms is defined in the Section set forth opposite such term: Affiliate Registration Statement............................ 7.8 Affiliate Shares............................................ 7.8 Benefits Maintenance Period................................. 7.5(a)(ii) Cash Election............................................... 3.3(c)(ii) Cash Election Consideration................................. 3.3(c)(ii) Cash Election Proration Factor.............................. 3.3(h) Certificate of Merger....................................... 2.1A(d) Certificates................................................ 3.4(a) Closing..................................................... 2.1A(c)
A-7 282 Closing Date................................................ 2.1A(c) Code........................................................ Preamble Dissenting Shares........................................... 3.5 Effective Time.............................................. 2.1A(d) Election Deadline........................................... 3.4(a) Election Form............................................... 3.4(a) End Date.................................................... 10.1(b)(i) Environmental Reports....................................... 4.19(b) Exchange Agent.............................................. 3.4(a) Exchange Fund............................................... 3.4(a) FCC Applications............................................ 8.1(b) Form S-4.................................................... 8.2 GAAP........................................................ 4.9 Holding Company............................................. Preamble Holding Company Common Stock................................ 2.1 Holding Company Share Issuance Number....................... 3.3(f) Indemnified Losses.......................................... 7.2(a) Indemnified Person.......................................... 7.2(a) Merger Agreements........................................... 2.1A Merger Consideration........................................ 3.3(c)(iii) Merger Sub A................................................ 2.3(i) Merger Sub B................................................ 2.3(ii) Merger Subsidiaries......................................... 2.3(ii) Mergers..................................................... 2.1A(b) New Director(s)............................................. 7.4 New Omnipoint Convertible Securities........................ 3.6 New Omnipoint Options....................................... 3.6(a) New Omnipoint Warrants...................................... 3.6 New VoiceStream Convertible Securities...................... 3.6(b) New VoiceStream Options..................................... 3.6(b) New VoiceStream Warrants.................................... 3.6(b) 1999 Omnipoint SEC Documents................................ 4.8(b) 1999 VoiceStream SEC Documents.............................. 5.8(b) Omnipoint................................................... Preamble Omnipoint FCC Licenses...................................... 4.4(a) Omnipoint Holders........................................... 3.4(b) Omnipoint Intellectual Property............................. 4.20 Omnipoint Merger............................................ 2.1A(b) Omnipoint Merger Agreement.................................. 2.1A Omnipoint Options........................................... 4.6(a) Omnipoint Pension Plan...................................... 1.1(a) Omnipoint Rule 145 Affiliate................................ 8.7 Omnipoint SEC Documents..................................... 4.8(b) Omnipoint Stockholders' Approval............................ 4.25 Omnipoint Stockholders' Meeting............................. 8.8(a) Omnipoint Warrants.......................................... 4.6(a) Proxy Statement/Prospectus.................................. 8.2 Reorganization.............................................. Preamble Spinoff..................................................... 9.2(c)
A-8 283 Standard Election........................................... 3.3(c)(i) Standard Election Consideration............................. 3.3(c)(iii) Standard Election Exchange Rate............................. 3.3(c)(iii) Stock Election.............................................. 3.3(c)(i) Stock Election Consideration................................ 3.3(c)(i) Stock Election Exchange Rate................................ 3.3(c)(i) Stock Election Proration Factor............................. 3.3(g) Successor Plan.............................................. 7.5(b) Tax Returns................................................. 4.16 Taxes....................................................... 4.16 Termination Fee............................................. 10.3(b) Transferred Employees....................................... 7.5(a)(ii) VoiceStream................................................. Preamble VoiceStream FCC Licenses.................................... 5.4(a) VoiceStream Intellectual Property........................... 5.20 VoiceStream Merger.......................................... 2.1A(a) VoiceStream Merger Agreement................................ 2.1A VoiceStream Pension Plan.................................... 1.1(a) VoiceStream SEC Documents................................... 5.8(b) VoiceStream Stockholders' Approval.......................... 5.26 VoiceStream Stockholders' Meeting........................... 8.8(a)
(c) Unless the context otherwise requires, the terms defined in this Article 1 or elsewhere in this Agreement shall have the meanings herein specified for all purposes of this Agreement, applicable to both the singular and plural forms of any of the terms defined herein. When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." The use of any gender herein shall be deemed to include the neuter, masculine and feminine genders wherever necessary or appropriate. ARTICLE 2 FORMATION OF HOLDING COMPANY AND SUBSIDIARIES SECTION 2.1 Organization of Holding Company. Prior to the execution of this Agreement, VoiceStream has organized Holding Company under Delaware Law. The authorized capital stock of Holding Company shall consist of 400,000,000 shares of common stock, par value $0.001 per share (the "Holding Company Common Stock"), of which one share shall be issued to VoiceStream at a price of $2.00, and 5,000,000 shares of preferred stock, par value $0.001 per share. SECTION 2.2 Directors and Officers of Holding Company. The directors and officers of Holding Company were and shall be designated by VoiceStream. Each such officer and director shall remain in office until his or her successors are elected. SECTION 2.3 Organization of Merger Subsidiaries. As promptly as practicable (but in any event no more than 30 days) following the execution of this Agreement, VoiceStream shall cause the following companies to be organized for the sole purpose of effectuating the VoiceStream Merger and the Omnipoint Merger contemplated herein: (i) VoiceStream Subsidiary I, a corporation organized under the laws of the State of Washington ("Merger Sub A"). The certificate of incorporation and bylaws of Merger Sub A A-9 284 shall be in such forms as shall be determined by VoiceStream as soon as practicable following the execution of this Agreement. The authorized capital stock of Merger Sub A shall initially consist of 100 shares of common stock, no par value per share, one share of which shall be issued to Holding Company at a price of $1.00 per share. (ii) VoiceStream Subsidiary II, a corporation organized under the laws of the State of Delaware ("Merger Sub B" and, together with Merger Sub A, the "Merger Subsidiaries"). The certificate of incorporation and bylaws of Merger Sub B shall be in such forms as shall be determined by VoiceStream as soon as practicable following the execution of this Agreement. The authorized capital stock of Merger Sub B shall initially consist of 100 shares of common stock, par value $.01 per share, one share of which shall be issued to Holding Company at a price of $1.00 per share. SECTION 2.4 Actions of Directors and Officers. As promptly as practicable (but not later than 30 days) following the execution of this Agreement, VoiceStream shall cause (i) Holding Company to elect the directors of the Merger Subsidiaries, (ii) the directors of Merger Sub A and Merger Sub B to elect their respective officers, (iii) the directors of Holding Company to ratify and approve this Agreement and to approve the forms of the Merger Agreements, (iv) the Merger Agreements to be executed on behalf of the parties thereto, and (v) the directors and officers of the Merger Subsidiaries to take such steps as may be necessary or appropriate to complete the organization of the Merger Subsidiaries and to approve the Merger Agreements. SECTION 2.5 Actions of Holding Company. As promptly as practicable (but in no event later than 15 days) following the execution of this Agreement, Holding Company shall cause the Merger Subsidiaries to adopt the Merger Agreements. ARTICLE 2A THE MERGERS; CLOSING SECTION 2.1A The Mergers. Pursuant to the Merger Agreements, in forms to be mutually agreed upon by VoiceStream and Omnipoint (sometimes hereinafter referred to individually as the "VoiceStream Merger Agreement" and the "Omnipoint Merger Agreement", respectively, and collectively as the "Merger Agreements"), upon the terms and subject to the conditions set forth in this Agreement and in the Merger Agreements: (a) Merger Sub A shall be merged with and into VoiceStream (the "VoiceStream Merger") in accordance with the applicable provisions of Washington Law. VoiceStream shall be the surviving corporation in the VoiceStream Merger and shall continue its corporate existence under Washington Law. As a result of the VoiceStream Merger, VoiceStream shall become a wholly owned Subsidiary of Holding Company. The effects and consequences of the VoiceStream Merger shall be as set forth in the VoiceStream Merger Agreement. (b) Merger Sub B will be merged with and into Omnipoint (the "Omnipoint Merger"), in accordance with the applicable provisions of Delaware Law. Omnipoint shall be the surviving corporation in the Omnipoint Merger and shall continue its corporate existence under Delaware Law. As a result of the Omnipoint Merger, Holding Company shall own, directly or indirectly, all of the outstanding shares of Omnipoint Common Stock. The effects and consequences of the Omnipoint Merger shall be as set forth in the Omnipoint Merger Agreement. The term "Mergers" shall mean the VoiceStream Merger and the Omnipoint Merger. (c) Subject to the terms and conditions of this Agreement, the closing of the Transactions (the "Closing") shall take place (a) at the offices of Friedman Kaplan & Seiler LLP, 875 Third Avenue, New York, NY, at 11:00 a.m., local time, on the fifth Business Day following the day A-10 285 on which the last to be fulfilled or waived of the conditions set forth in Article 9 (excluding conditions that, by their terms cannot be satisfied until the Closing Date, but subject to the fulfillment or waiver of such conditions) shall be fulfilled or waived in accordance herewith or (b) at such other time, date or place as VoiceStream and Omnipoint may agree. The date on which the Closing occurs is hereinafter referred to as the "Closing Date." (d) As soon as practicable following the Closing, the parties shall (i) file a certificate of merger with respect to each of the Mergers (the "Certificate of Merger") in such forms as are required by and executed in accordance with applicable Delaware Law (in the case of the Omnipoint Merger) and Washington Law (in the case of the VoiceStream Merger) and (ii) make all other filings or recordings required under applicable Delaware Law or Washington Law. The Mergers shall become effective at such time and date (the "Effective Time") which is the later of (i) the date and time of the filing of the Certificate of Merger with respect to the VoiceStream Merger (or such other date and time as may be specified in such certificate as may be permitted by Washington Law) and (ii) the date and time of the filing of the Certificate of Merger with respect to the Omnipoint Merger (or such other date and time as may be specified in such certificate as may be permitted by Delaware Law). (e) The consummation of the Omnipoint Merger shall be conditioned on the simultaneous consummation of the VoiceStream Merger, and the consummation of VoiceStream Merger shall be conditioned on the simultaneous consummation of the Omnipoint Merger. SECTION 2.2A Directors. The directors of VoiceStream and Merger Sub B, immediately prior to the Effective Time shall be the directors of the surviving corporation of the VoiceStream Merger and the Omnipoint Merger, respectively, as of the Effective Time and until their successors are duly appointed or elected in accordance with applicable Delaware Law (in the case of the Omnipoint Merger) and Washington Law (in the case of VoiceStream Merger). SECTION 2.3A Certificate of Incorporation and Bylaws. The certificate of incorporation and bylaws of VoiceStream and Omnipoint immediately prior to the Effective Time shall be the certificate of incorporation and bylaws of the surviving corporation of the VoiceStream Merger and the Omnipoint Merger, respectively, as of the Effective Time; provided, VoiceStream may change the name of VoiceStream. SECTION 2.4A Officers. The officers of VoiceStream and Omnipoint immediately prior to the Effective Time shall be the officers of the surviving corporations of the VoiceStream Merger and the Omnipoint Merger, respectively, as of the Effective Time and until their successors are duly appointed or elected in accordance with applicable Delaware Law (in the case of the Omnipoint Merger) and Washington Law (in the case of VoiceStream Merger). ARTICLE 3 EFFECT OF THE MERGERS ON SECURITIES OF VOICESTREAM, OMNIPOINT AND THE MERGER SUBSIDIARIES SECTION 3.1 Conversion of Merger Subsidiaries Stock. At the Effective Time, by virtue of the VoiceStream Merger and without any action on the part of any of the parties, each share of the common stock of Merger Sub A outstanding immediately prior to the Effective Time shall be converted into and shall become one share of common stock of the surviving corporation of the VoiceStream Merger. At the Effective Time, by virtue of the Omnipoint Merger and without any action on the part of any of the parties, each share of the common stock of Merger Sub B outstanding immediately prior to the Effective Time shall be converted into and shall become one share of common stock of the surviving corporation of the Omnipoint Merger. A-11 286 SECTION 3.2 Cancellation of Holding Company Capital Stock. At the Effective Time, the one share of the capital stock of Holding Company issued to VoiceStream and outstanding immediately prior to the Effective Time shall be canceled and cease to exist. SECTION 3.3 Conversion of Common Stock. (a) (i) Subject to the provisions of Sections 3.3 and 3.5, at the Effective Time, each share of VoiceStream Common Stock that is issued and outstanding immediately prior to the Effective Time shall be converted into one share of Holding Company Common Stock. Upon such conversion, all such shares of VoiceStream Common Stock shall be canceled and cease to exist, and each certificate theretofore representing any such shares shall, without any action on the part of the holder thereof, be deemed to represent an equivalent number of shares of Holding Company Common Stock. (ii) Subject to the provisions of Sections 3.3 and 3.5, at the Effective Time, each share of Omnipoint Common Stock that is issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive the Merger Consideration and cash for fractional shares of Holding Company Common Stock. Upon such conversion, all such shares of Omnipoint Common Stock shall be canceled and cease to exist, and each certificate theretofore representing any such shares shall, without any action on the part of the holder thereof, be deemed to represent the right to receive the Merger Consideration. (b) At the Effective Time, each share of VoiceStream Common Stock, Omnipoint Common Stock or Holding Company Common Stock which is held in the treasury of VoiceStream, Omnipoint or their respective Subsidiaries (provided, however, any Omnipoint Common Stock held by VoiceStream or Holding Company shall not be canceled pursuant to this Section 3.3(b)) immediately prior to the Effective Time shall, by virtue of the Mergers, cease to be outstanding and shall be canceled and retired without payment of any consideration therefor. (c) Subject to the provisions of Sections 3.3(g) and (h) and of Sections 3.5 and 3.7, each share of Omnipoint Common Stock that is issued and outstanding immediately prior to the Effective Time (excluding any Dissenting Shares or any share of Omnipoint Common Stock canceled pursuant to Section 3.3(b) or held by Holding Company or VoiceStream) shall be converted, at the election of the holder thereof in accordance with the procedures set forth herein, into one of the following: (i) for each such share of Omnipoint Common Stock with respect to which an election to receive only Holding Company Common Stock has been effectively made and not revoked or lost pursuant to Section 3.3(e) (a "Stock Election"), the right to receive the All Stock Number of shares (the "Stock Election Exchange Rate") of Holding Company Common Stock (the "Stock Election Consideration"); (ii) for each such share of Omnipoint Common Stock with respect to which an election to receive only cash has been effectively made and not revoked or lost pursuant to Section 3.3(e) (a "Cash Election"), the right to receive the All Cash Amount in cash, without interest (the "Cash Election Consideration"); and (iii) for each such share of Omnipoint Common Stock other than shares as to which a Stock Election or a Cash Election has been made, the right to receive (A) .825 shares (the "Standard Election Exchange Rate") of Holding Company Common Stock and (B) $8.00 in cash, ((A) and (B) being collectively referred to as the "Standard Election Consideration" and, together with the Stock Election Consideration and the Cash Election Consideration, the "Merger Consideration"). A-12 287 (d) If between the date of this Agreement and the Effective Time the outstanding shares of VoiceStream Common Stock shall have been changed into a different number of shares, by reason of any stock dividend, subdivision, split or combination of shares, the Cash Election Consideration, the Stock Election Consideration and the Standard Election Consideration, will be correspondingly adjusted to reflect such stock dividend, subdivision, split or combination of shares. (e) Each person who, at the Effective Time, is a record holder of shares of Omnipoint Common Stock (other than holders of shares of Omnipoint Common Stock to be canceled as set forth in Section 3.3(b)), shall have the right to submit an Election Form specifying the number of shares of Omnipoint Common Stock that such person desires to have converted into the right to receive Holding Company Common Stock pursuant to the Stock Election, the number of shares of Omnipoint Common Stock that such person desires to have converted into the right to receive cash pursuant to the Cash Election, or the number of shares of Omnipoint Common Stock that such person desires to have converted into the right to receive the Standard Election Consideration, pursuant to the Standard Election. Any such record holder (including without limitation any such record holder of Dissenting Shares) who fails properly to submit an Election Form on or prior to the Election Deadline in accordance with the procedures set forth in Section 3.4(a) shall be deemed to have made a Standard Election. Each person who, at the Effective Time, is a record holder of Omnipoint Preferred Stock, shall be deemed to have made a Standard Election. (f) The aggregate number of shares of Holding Company Common Stock to be issued to holders of Omnipoint Common Stock in connection with the Omnipoint Merger or to become subject to issuance upon the conversion of the Omnipoint Preferred Stock shall equal the product of (x) .825 and (y) the sum of (i) the total number of shares of Omnipoint Common Stock issued and outstanding immediately prior to the Effective Time, other than shares to be canceled pursuant to Section 3.3(b) and shares held by Holding Company or VoiceStream and (ii) the total number of shares of Omnipoint Common Stock issuable upon conversion of Omnipoint Preferred Stock outstanding immediately prior to the Effective Time (the product of (x) and (y) being referred to as the "Holding Company Share Issuance Number"). If between the date of this Agreement and the Effective Time the outstanding shares of VoiceStream Common Stock shall have been changed into a different number of shares, by reason of any stock dividend, subdivision, split or combination of shares, the Holding Company Share Issuance Number will be correspondingly adjusted to reflect such stock dividend, subdivision, split or combination of shares. (g) In the event that the number of shares of Holding Company Common Stock to be issued to holders of Omnipoint Common Stock in connection with Omnipoint Merger or to become subject to issuance upon conversion of Omnipoint Preferred Stock would exceed the Holding Company Share Issuance Number based on the elections of the holders of Omnipoint Common Stock (together with the conversion adjustments applicable to the Omnipoint Preferred Stock), (i) all shares of Omnipoint Common Stock subject to a Cash Election or a Standard Election will, as elected, be converted into the right to receive the Cash Election Consideration or the Standard Election Consideration, as the case may be, and (ii) each share of Omnipoint Common Stock subject to a Stock Election will be converted into the right to receive (A) a number of shares of Holding Company Common Stock equal to the Stock Election Exchange Rate times the Stock Election Proration Factor and (B) an amount of cash equal to (1) the All Cash Amount multiplied by (2) one minus the Stock Election Proration Factor. The "Stock Election Proration Factor" means a fraction (x) the numerator of which is the Holding Company Share Issuance Number minus the aggregate number of shares of Holding Company Common Stock to be issued in the Omnipoint Merger pursuant to the Standard Elections or to A-13 288 become subject to issuance upon conversion of Omnipoint Preferred Stock pursuant to elections corresponding to the Standard Elections deemed to have been made by holders of Omnipoint Preferred Stock, and (y) the denominator of which is the number of shares of Holding Company Common Stock that, but for this paragraph (g), would have been issued to holders of Omnipoint Common Stock in Transactions pursuant to the Stock Elections. (h) In the event that the number of shares of Holding Company Common Stock to be issued to holders of Omnipoint Common Stock in connection with the Omnipoint Merger or to become subject to issuance upon conversion of Omnipoint Preferred Stock would be less than the Holding Company Share Issuance Number based on the elections of the holders of Omnipoint Common Stock (together with the conversion adjustments applicable to the Omnipoint Preferred Stock), (i) all shares of Omnipoint Common Stock subject to a Stock Election or a Standard Election will, as elected, be converted into the right to receive the Stock Election Consideration or the Standard Election Consideration, as the case may be, and (ii) each share of Omnipoint Common Stock subject to a Cash Election will be converted into the right to receive (A) a number of shares of Holding Company Common Stock equal to the Cash Election Proration Factor and (B) an amount of cash equal to (1) the All Cash Amount multiplied by (2) (x) one minus (y) the Cash Election Proration Factor divided by the Stock Election Exchange Rate. The "Cash Election Proration Factor" means a fraction (x) the numerator of which is the Holding Company Share Issuance Number minus the aggregate number of shares of Holding Company Common Stock to be issued in the Merger pursuant to the Stock Elections and the Standard Elections or to become subject to issuance upon conversion of Omnipoint Preferred Stock pursuant to elections corresponding to the Standard Elections deemed to have been made by holders of Omnipoint Preferred Stock, and (y) the denominator of which is the number of shares of Omnipoint Common Stock subject to the Cash Elections. SECTION 3.4 Surrender and Payment. (a) Prior to the Effective Time, Holding Company shall appoint an agent to be designated by VoiceStream (the "Exchange Agent") for the purpose of exchanging certificates representing shares of Omnipoint Common Stock (the "Certificates") for the Merger Consideration. At the Effective Time, Holding Company will deposit (or cause to be deposited) with the Exchange Agent the Merger Consideration to be paid in respect of the shares (the "Exchange Fund"). Upon receipt, the Exchange Agent will invest the cash portion of the Exchange Fund in United States government securities maturing at the Election Deadline or such other investments as VoiceStream and Omnipoint may mutually agree. Promptly after the Effective Time, VoiceStream will send, or will cause the Exchange Agent to send, (A) to each holder of shares of Omnipoint Common Stock, at the Effective Time, a letter of transmittal and instructions (which shall specify that the delivery shall be effected, and risk of loss and title shall pass, only upon proper delivery of the Certificates to the Exchange Agent) for use in such exchange, and (B) to each holder of shares of Omnipoint Common Stock, an election form (the "Election Form") providing for such holders to make the Standard Election, the Cash Election or the Stock Election. Any Standard Election (other than a deemed Standard Election), Cash Election or Stock Election shall be validly made only if the Exchange Agent shall have received by 5:00 p.m., New York City time, on a date (the "Election Deadline") to be mutually agreed upon by VoiceStream and Omnipoint (which date shall not be later than the twentieth Business Day after the Effective Time), an Election Form properly completed and executed (with the signature or signatures thereon guaranteed to the extent required by the Election Form) by such holder accompanied by such holder's Certificates, or by an appropriate guarantee of delivery of such Certificates from a member of any registered national securities exchange or of the National Association of Securities Dealers, Inc. or a commercial bank or trust company in the A-14 289 United States as set forth in such Election Form. Any holder of Omnipoint Common Stock who has made an election by submitting an Election Form to the Exchange Agent may at any time prior to the Election Deadline change such holder's election by submitting a revised Election Form, properly completed and signed that is received by the Exchange Agent prior to the Election Deadline. Any holder of Omnipoint Common Stock may at any time prior to the Election Deadline revoke his election and withdraw his Certificates deposited with the Exchange Agent by written notice to the Exchange Agent received by the close of business on the day prior to the Election Deadline. VoiceStream shall have the right to make rules (which will be described in the Election Form), not inconsistent with the terms of this Agreement, governing the validity of Election Forms and the manner and extent to which Standard Elections, Cash Election or Stock Elections are to be taken into account in making the determinations prescribed by Sections 3.3(g) and 3.3(h). (b) Upon surrender to the Exchange Agent of its Certificate, together with a properly completed letter of transmittal, each holder of shares of Omnipoint Common Stock (the "Omnipoint Holders") will be entitled to receive promptly after the Election Deadline the Merger Consideration (elected or deemed elected by it, subject to Sections 3.3(g) and (h)) in respect of the shares of Omnipoint Common Stock represented by its Certificate. Until so surrendered, each such Certificate shall represent after the Effective Time, for all purposes, only the right to receive the Merger Consideration. (c) If any portion of the Merger Consideration is to be paid to a Person other than the Person in whose name the Certificate so surrendered is registered, it shall be a condition to such payment that such Certificate shall be properly endorsed or otherwise be in proper form for transfer and that the Person requesting such payment shall pay to the Exchange Agent any transfer or other taxes required as a result of such payment to a Person other than the registered holder of such Certificate, or establish to the satisfaction of the Exchange Agent that such tax has been paid or is not payable. (d) After the Effective Time, there shall be no further registration of transfers of shares of Omnipoint Common Stock. If, after the Effective Time, Certificates are presented to the Surviving Corporation, they shall be canceled and exchanged for the Stock Election Consideration provided for, and in accordance with the procedures set forth, in this Article 3. (e) Any portion of the Exchange Fund made available to the Exchange Agent pursuant to Section 3.4(a) that remains unclaimed by the Omnipoint Holders, one year after the Effective Time shall be returned to Holding Company, upon demand, and any such holder who has not exchanged its shares for the Merger Consideration in accordance with this Section 3.4 prior to that time shall thereafter look only to Holding Company for payment of such consideration, any dividends and distributions in respect of such shares, in each case without any interest thereon. Notwithstanding the foregoing, Holding Company shall not be liable to any Omnipoint Holder for any amounts paid to a public official pursuant to applicable abandoned property, escheat or similar laws. Any amounts remaining unclaimed by the Omnipoint Holders five years after the Effective Time (or such earlier date, immediately prior to such time when the amounts would otherwise escheat to or become property of any Governmental Body) shall become, to the extent permitted by applicable law, the property of Holding Company free and clear of any claims or interest of any Person previously entitled thereto. (f) No dividends or other distributions with respect to any Holding Company Common Stock and no cash payment in lieu of fractional shares as provided in Section 3.7, shall be paid to the holder of any unsurrendered Certificates until such Certificates are surrendered as provided in Section 3.4(b). Following such surrender, there shall be paid, without interest, to the Person in whose name such Holding Company Common Stock has been registered, (i) at the A-15 290 time of such surrender, (A) in the case of Certificates, the amount of any cash payable in lieu of fractional shares to which such Person is entitled pursuant to Section 3.7, and (B) the amount of all dividends or other distributions with a record date after the Effective Time previously paid or payable on the date of such surrender, with respect to such Holding Company Common Stock, and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to surrender, and with a payment date subsequent to surrender, payable with respect to such Holding Company Common Stock. (g) Any portion of the Merger Consideration made available to the Exchange Agent pursuant to Section 3.4(a) to pay for shares for which appraisal rights have been perfected shall be returned to Holding Company upon demand. SECTION 3.5 Dissenting Shares. Notwithstanding Section 3.3, Omnipoint Common Stock or VoiceStream Common Stock outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Transactions and has demanded appraisal for such shares in accordance with Delaware Law (in the case of Omnipoint) or Washington Law (in the case of VoiceStream) ("Dissenting Shares") shall not be converted into a right to receive shares of Holding Company Common Stock (in the case of VoiceStream Common Stock) or the Merger Consideration (in the case of Omnipoint Common Stock) unless such holder fails to perfect, withdraws or otherwise loses its right to appraisal. If, after the Effective Time, such holder fails to perfect, withdraws or loses its right to appraisal, such shares shall be treated as if they had been converted as of the Effective Time into a right to receive (i) in the case of Omnipoint, the Standard Election Consideration and (ii) in the case of VoiceStream, Holding Company Common Stock. Omnipoint shall give VoiceStream prompt notice of any demands received by Omnipoint for appraisal of shares, and VoiceStream shall have the right to participate in all negotiations and proceedings with respect to such demands. Except with the prior written consent of VoiceStream, Omnipoint shall not make any payment with respect to, or settle or offer to settle, any such demands. SECTION 3.6 Options, Warrants and Preferred Stock. (a) At the Effective Time, each option or warrant granted by Omnipoint to purchase shares of Omnipoint Common Stock which is outstanding and unexercised immediately prior to the Effective Time shall be assumed by Holding Company and converted into an option ("New Omnipoint Options") or warrant ("New Omnipoint Warrants" and, together with New Omnipoint Options, "New Omnipoint Convertible Securities") to purchase shares of Holding Company Common Stock in such amount and at such exercise price as provided below and otherwise having the same terms and conditions as are in effect immediately prior to the Effective Time (except to the extent that such terms, conditions and restrictions may be altered in accordance with their terms as a result of the Transactions): (i) the number of shares of Holding Company Common Stock to be subject to each New Omnipoint Convertible Security shall be equal to the product of (x) the number of shares of Omnipoint Common Stock subject to the original option or warrant and (y) the sum of (1) $8.00 divided by the Closing Price on the last day in which shares are traded on NASDAQ immediately preceding the Closing Date and (2) .825; (ii) the exercise price per share of Holding Company Common Stock under each New Omnipoint Convertible Security shall be equal to (x) the exercise price per share of Omnipoint Common Stock under the original option or warrant divided by (y) the sum of (1) $8.00 divided by the Closing Price on the last day in which shares are traded on NASDAQ immediately preceding the Closing Date and (2) .825; and (iii) upon each exercise of New Omnipoint Convertible Securities by a holder thereof, the aggregate number of shares of Holding Company Common Stock subject to a New Option shall be rounded down, if necessary, to the nearest whole share and the aggregate exercise price shall A-16 291 be rounded up, if necessary, to the nearest cent. The adjustments provided herein with respect to any options which are "incentive stock options" (as defined in Section 422 of the Code) shall be effected in a manner consistent with Section 424(a) of the Code. (a) At the Effective Time, each option or warrant granted by VoiceStream to purchase shares of VoiceStream Common Stock which is outstanding and unexercised immediately prior to the Effective Time shall be assumed by Holding Company and converted into an option ("New VoiceStream Options") or warrant ("New VoiceStream Warrants" and, together with New VoiceStream Options, "New VoiceStream Convertible Securities") as follows: (i) the number of shares of Holding Company Common Stock to be subject to the New VoiceStream Convertible Securities shall be equal to the the number of shares of VoiceStream Common Stock subject to the original option or warrant and (ii) the exercise price per share of VoiceStream Common Stock under the New VoiceStream Convertible Securities shall be equal to the exercise price per share of VoiceStream Common Stock under the original option or warrant. The adjustments provided herein with respect to any options which are "incentive stock options" (as defined in Section 422 of the Code) shall be effected in a manner consistent with Section 424(a) of the Code. (b) The parties shall take such actions as are necessary for the assumption of the Omnipoint and VoiceStream options and warrants pursuant to this Section 3.6 and any obligations to issue Omnipoint Common Stock or VoiceStream Common Stock under the existing terms of any other plans, agreements or arrangements of Omnipoint or VoiceStream covering any current or former employee or director of any member of the Omnipoint Group or any member of the VoiceStream Group including the reservation, issuance and listing of Holding Company Common Stock as is necessary to effectuate the transactions contemplated by this Section 3.6. Similarly, the parties shall take all actions required to be taken by it to effectuate such assumption. The parties shall cause Holding Company to prepare and file with the SEC a registration statement on Form S-8 (or any other appropriate form) or a post-effective amendment to a registration statement previously filed under the 1933 Act, with respect to the shares of Holding Company Common Stock subject to New Omnipoint Options and New VoiceStream Options and, where applicable, shall use its reasonable best efforts to have such registration statement declared effective as soon as practicable following the Effective Time and to maintain the effectiveness of such registration statement covering such New Omnipoint Options and New VoiceStream Options (and to maintain the current status of the prospectus contained therein) for so long as such New Omnipoint Options and New VoiceStream Options remain outstanding. With respect to those individuals, if any, who, subsequent to the Effective Time, will be subject to the reporting requirements under Section 16(a) of the 1934 Act, where applicable, the parties shall cause Holding Company to use all reasonable efforts to administer any New Omnipoint Options and New VoiceStream Options issued pursuant to this Section 3.6 in a manner that complies with Rule 16b-3 promulgated under the 1934 Act to the extent that the Omnipoint or VoiceStream stock options and warrants in respect of which such New Omnipoint Options and New VoiceStream Options have been issued and complied with such rule prior to the Transactions. (c) Omnipoint Preferred Stock. From and after the Effective Time, each share of Omnipoint Preferred Stock, which shall be outstanding as of the Effective Time, shall remain outstanding and, subject to the terms of the Certificate of Designation of the Omnipoint Preferred Stock, dated May 1, 1998, shall have the same privileges, rights and preferences as the Omnipoint Preferred Stock immediately prior to the Effective Time and, for purposes of Section 4.5(b) of the Certificate of Designation A-17 292 thereof, all holders of Omnipoint Common Stock will be deemed to have received pursuant to the Omnipoint Merger the Standard Election Consideration. (d) Omnipoint Non-Voting Convertible Preferred Stock. From and after the Effective Time, each share of the Omnipoint Non-Voting Convertible Preferred Stock (or shares of Common Stock into which they were converted) which shall be outstanding as of the Effective Time, shall remain outstanding and, subject to the terms of the Certificate of Designation of the Omnipoint Non-Voting Convertible Preferred Stock, dated June 23, 1999, shall have the same privileges, rights and preferences as the Omnipoint Non-Voting Convertible Preferred Stock. SECTION 3.7 Fractional Shares. No fractional shares of Holding Company Common Stock shall be issued in the Mergers. All fractional shares of Holding Company Common Stock that a holder of shares of Omnipoint Common Stock would otherwise be entitled to receive as a result of the Mergers shall be aggregated and if a fractional share results from such aggregation, such holder shall be entitled to receive, in lieu thereof, an amount in cash without interest determined by multiplying the Closing Date Market Price by the fraction of a share of Holding Company Common Stock to which such holder would otherwise have been entitled. SECTION 3.8 Withholding Rights. Holding Company shall be entitled to deduct and withhold from the consideration otherwise payable to any Person pursuant to this Article 3 such amounts as it is required to deduct and withhold with respect to the making of such payment under any provision of federal, state, local or foreign tax law. If Holding Company so withholds amounts, such amounts shall be treated for all purposes of this Agreement as having been paid to the Omnipoint Holder, as the case may be, in respect of which Holding Company made such deduction and withholding. SECTION 3.9 Lost Certificates. If any Certificate is lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and executing an indemnity reasonably satisfactory to VoiceStream (and, if required by VoiceStream in the case of a Certificate representing more than 1,000 shares, the posting by such Person of a bond, in such reasonable amount as VoiceStream may direct, as indemnity) indemnifying VoiceStream against any claim that may be made against VoiceStream with respect to the Certificate, the Exchange Agent will issue, in exchange for such lost, stolen or destroyed Certificate, (i) the Merger Consideration to be paid in respect of the shares represented by such Certificate. In addition, such Person will be entitled to receive any amounts payable pursuant to Section 3.4(f). ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF OMNIPOINT Except as set forth in the Omnipoint Disclosure Schedule or as disclosed in the Omnipoint SEC Documents filed prior to the date hereof, Omnipoint represents and warrants to VoiceStream as follows: SECTION 4.1 Corporate Existence and Power. Omnipoint is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all corporate powers and authority required to carry on its business as now conducted and to own, operate and lease its property. Omnipoint is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where failure to be so qualified, individually or in the aggregate, has not had and would not be reasonably expected to have a Omnipoint Material Adverse Effect. Omnipoint has heretofore delivered or made available to VoiceStream true and complete copies of the certificate of incorporation and bylaws of Omnipoint as currently in effect. A-18 293 SECTION 4.2 Corporate Authorization. (a) The execution, delivery and performance by Omnipoint of this Agreement and the consummation by Omnipoint of the Transactions are within Omnipoint's corporate powers and, except for the required approval of Omnipoint's stockholders of this Agreement and the Transactions, have been duly authorized by all necessary corporate action on the part of Omnipoint. This Agreement has been duly and validly executed and delivered by Omnipoint and, assuming the due and valid authorization, execution and delivery of this Agreement by VoiceStream and receipt of all required approvals by Omnipoint's stockholders in connection with the consummation of the Transactions, constitutes a valid and binding agreement of Omnipoint, enforceable against it in accordance with its terms except as may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights generally and by equitable principles of general applicability. (b) At a meeting duly called and held, Omnipoint's Board of Directors has: (i) determined that this Agreement and the Transactions are advisable and fair to and in the best interests of Omnipoint's stockholders; (ii) approved and adopted this Agreement and the Transactions; and (iii) resolved (subject to Section 8.8(b)) to recommend approval and adoption of this Agreement by its stockholders. No other corporate proceedings on the part of Omnipoint are necessary to authorize or approve this Agreement or to consummate the Transactions (other than, with respect to the Transactions, the approval and adoption of the Transactions and this Agreement by holders of the shares of Omnipoint Common Stock to the extent required by Omnipoint's certificate of incorporation and by applicable Delaware Law). SECTION 4.3 Governmental Authorization. (a) The execution, delivery and performance by Omnipoint of this Agreement and the consummation by Omnipoint of the Transactions require no action by or in respect of, or filing with, any Governmental Body, other than: (i) the filing of a certificate of merger in accordance with Delaware Law; (ii) compliance with any applicable requirements of the HSR Act; (iii) compliance with any applicable requirements of the 1934 Act; (iv) compliance with any applicable requirements of the Communications Act; (v) compliance with FAA regulations; (vi) compliance with any applicable requirements of state and local public utility commissions or similar entities; and (vii) any actions or filing, the absence of which would not in the aggregate prevent or delay consummation of the Transactions in any material respect, or otherwise prevent Omnipoint from performing its obligations under this Agreement in any material respect or would not in the aggregate have a Omnipoint Material Adverse Effect. (b) Omnipoint and the Omnipoint Subsidiaries have not made any material misstatements of fact, or omitted to disclose any fact, to any Government Body or in any report, document or certificate filed therewith, which misstatements or omissions, individually or in the aggregate, could subject any material licenses or authorizations to revocation or failure to renew. SECTION 4.4 FCC Matters. (a) Each member of the Omnipoint Group and each Omnipoint Investment holds, and is qualified and eligible to hold, all material licenses, permits and other authorizations issued or to be issued by the FCC (including "Winning Bids in Auction 22 Not yet Licenced by FCC," as referred to in the Omnipoint Disclosure Schedule) to such entity for the operation of their respective businesses, all of which are set forth in the Omnipoint Disclosure Schedule (the "Omnipoint FCC Licenses"). (b) The Omnipoint FCC Licenses are valid and in full force and effect and none of Omnipoint, any of the Omnipoint Subsidiaries or any Omnipoint Investment is or has been A-19 294 delinquent in payment on or in default under any installment obligation owed to the United States Treasury in connection with the Omnipoint FCC Licenses. (c) All material reports and applications required by the Communications Act or required to be filed with the FCC by any member of the Omnipoint Group or any Omnipoint Investment have been filed and are accurate and complete in all material respects. (d) Each member of the Omnipoint Group and each Omnipoint Investment is, and has been, in compliance in all material respects with, and the wireless communications systems operated pursuant to the Omnipoint FCC Licenses have been operated in compliance in all material respects with, the Communications Act. (e) There is not pending as of the date hereof any application, petition, objection, pleading or proceeding with the FCC or any public service commission or similar body having jurisdiction or authority over the communications operations of any member of the Omnipoint Group or any Omnipoint Investment which questions the validity of or contests any Omnipoint FCC License or which presents a substantial risk that, if accepted or granted, or concluded adversely, could result in (as applicable) the revocation, cancellation, suspension, dismissal, denial or any materially adverse modification of any Omnipoint FCC License or imposition of any substantial fine or forfeiture against any member of the Omnipoint Group or any Omnipoint Investment except as set forth on the Omnipoint Disclosure Statement. (f) No facts are known to any member of the Omnipoint Group which if known by a Governmental Body of competent jurisdiction would present a substantial risk that any Omnipoint FCC License could be revoked, canceled, suspended or materially adversely modified or that any substantial fine or forfeiture could be imposed against any member of the Omnipoint Group or any Omnipoint Investment. SECTION 4.5 Non-contravention. The execution, delivery and performance by Omnipoint of this Agreement and the consummation by Omnipoint of the Transactions do not and will not (i) contravene, conflict with, or result in any violation or breach of any provision of the certificate of incorporation, bylaws, stockholders agreement or other governing instrument of any member of the Omnipoint Group or any Omnipoint Investment; (ii) assuming compliance with the matters referred to in Section 4.3, contravene, conflict with or result in a violation or breach of any provision of any applicable law, statute, ordinance, rule, regulation, judgment, injunction, order, or decree; (iii) require any consent or other action by any Person under, constitute a default (or an event that, with or without notice or lapse of time or both, would constitute a default) under, or cause or permit the termination, cancellation, acceleration, triggering or other change of any right or obligation or the loss of any benefit to which any member of the Omnipoint Group or any Omnipoint Investment is entitled under (A) any provision of any agreement or other instrument binding upon any member of the Omnipoint Group or any Omnipoint Investment or (B) any license, franchise, permit, certificate, approval or other similar authorization held by, or affecting, or relating in any way to, the assets or business of, any member of the Omnipoint Group or any Omnipoint Investment; or (iv) result in the creation or imposition of any Lien on any asset of any member of the Omnipoint Group or any Omnipoint Investment, other than such exceptions in the case of clauses (ii), (iii) and (iv) as would not be, individually or in the aggregate, reasonably expected (A) to have a Omnipoint Material Adverse Effect, (B) materially impair or delay the ability of Omnipoint to consummate the Transactions or (C) to have a VoiceStream Material Adverse Effect. SECTION 4.6 Capitalization. (a) The authorized capital stock of Omnipoint consists of 200,000,000 shares of Omnipoint Common Stock and 10,000,000 shares of Omnipoint Preferred Stock. As of the close of business on June 18, 1999, there were outstanding (i) 53,235,393 shares of Omnipoint Common Stock A-20 295 (inclusive of all shares of restricted stock granted under any compensatory plans or arrangements), (ii) Omnipoint stock options to purchase an aggregate of 7,663,664 shares of Omnipoint Common Stock ("Omnipoint Options"), (iii) no phantom shares or stock units issued under any stock option, compensation or deferred compensation plan or arrangement, (iv) Omnipoint warrants to purchase an aggregate of 2,446,437 shares of Omnipoint Common Stock ("Omnipoint Warrants"), (v) 325,000 shares of Omnipoint Preferred Stock and (vi) $199,294,435 principal amount of Indebtedness, which is redeemable at the option of Omnipoint by issuing shares of Omnipoint Common Stock at a price equal to 90% of the fair market value of such Omnipoint Common Stock, in accordance with the terms of such Indebtedness. All outstanding shares of capital stock of Omnipoint have been, and all shares that may be issued pursuant to any compensatory plan or arrangement will be, when issued in accordance with the respective terms thereof, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. The Omnipoint Disclosure Schedule sets forth for each category of Omnipoint Options and Omnipoint Warrants the vesting schedule, the exercise price and the number of shares of Omnipoint Common Stock into which such Omnipoint Options or Omnipoint Warrants are exercisable. (b) Except as set forth in Section 4.6(a) or on the Omnipoint Disclosure Schedule, there are no outstanding subscriptions, options, warrants, rights or convertible or exchangeable securities issued by Omnipoint or any Omnipoint Subsidiary or other agreements or commitments to which any member of the Omnipoint Group or any Omnipoint Investment is a party of any character relating to the issued or unissued capital stock or other securities of Omnipoint, including any agreement or commitment obligating any member of the Omnipoint Group or any Omnipoint Investment to issue, deliver or sell, or cause to be issued, delivered or sold, shares of capital stock or other securities of Omnipoint, to grant, extend or enter into any subscription, option, warrant, right or convertible or exchangeable security or other similar agreement or commitment with respect to Omnipoint or obligating Omnipoint to make any payments pursuant to any stock based or stock related plan or award. There are no preemptive rights, rights of first refusal, rights of first offer or any similar rights granted with respect to the securities or any assets of any members of the Omnipoint Group. SECTION 4.7 Subsidiaries; Investments. (a) Each Omnipoint Subsidiary and each Omnipoint Investment is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has all corporate, partnership or other similar powers required to carry on its business as now conducted, other than such exceptions as, individually or in the aggregate, have not had and would not be reasonably expected to have a Omnipoint Material Adverse Effect. Each Omnipoint Subsidiary and each Omnipoint Investment is duly qualified to do business as a foreign corporation or other foreign legal entity and is in good standing in each jurisdiction where such qualification is necessary, with such exceptions, individually or in the aggregate, as have not had and would not be reasonably expected to have a Omnipoint Material Adverse Effect. The Omnipoint Disclosure Schedule sets forth a list of all Omnipoint Subsidiaries and all Omnipoint Investments and their respective jurisdictions of organization and identifies Omnipoint's (direct or indirect) percentage ownership interest therein. (b) All of the outstanding capital stock of, or other voting securities or ownership interests in, each Omnipoint Subsidiary and each Omnipoint Investment, is owned by Omnipoint or a Omnipoint Subsidiary, directly or indirectly, free and clear of any Lien and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other voting securities or ownership interests). A-21 296 (c) There are no outstanding subscriptions, options, warrants, rights or convertible or exchangeable securities issued by any member of the Omnipoint Group or any Omnipoint Investment or other agreements or commitments of any character relating to the issued or unissued capital stock or other securities or partnership interests or membership interests of any Omnipoint Subsidiary or any Omnipoint Investment, including, without limitation, any agreement or commitment obligating any member of the Omnipoint Group or any Omnipoint Investment to issue, deliver or sell, or cause to be issued, delivered or sold, shares of capital stock, other securities, partnership interests or membership interests of any Omnipoint Subsidiary or any Omnipoint Investment or obligating any member of the Omnipoint Group or any Omnipoint Investment to grant, extend or enter into any subscription, option, warrant, right or convertible or exchangeable security or other similar agreement or commitment with respect to any Omnipoint Subsidiary or any Omnipoint Investment, or obligating any Omnipoint Subsidiary or any Omnipoint Investment to make any payments pursuant to any stock based or stock related plan or award. No member of the Omnipoint Group is subject to any obligation or requirement to provide funds for or to make any investment (in the form of a loan, capital contribution or otherwise) to or in any Person (other than obligations to individuals who are employees, which obligations (i) are set forth in Section 4.22 of the Omnipoint Disclosure Schedule or (ii) are for de minimis amounts and are made in the ordinary course of business consistent with past practices), including, without limitation, any Omnipoint Investment. (d) Omnipoint has previously delivered or made available to VoiceStream true and complete copies of the organizational documents or comparable governing instruments (including all amendments to each of the foregoing), of each Omnipoint Subsidiary and each Omnipoint Investment as in effect on the date hereof. SECTION 4.8 SEC Filings. (a) Omnipoint has filed all required reports, schedules, forms, statements and other documents required to be filed by it with the SEC since January 1, 1997. (b) Omnipoint has delivered or made available to VoiceStream: (i) the Omnipoint 10-K; (ii) its proxy or information statements relating to meetings of, or actions taken without a meeting by, the stockholders of Omnipoint held since December 31, 1998; and (iii) all of its other reports, statements, schedules, forms, exhibits and registration statements and all other documents required to be filed with the SEC since December 31, 1998 (the "1999 Omnipoint SEC Documents") (the documents referred to in Sections 4.8(a) and (b), collectively, the "Omnipoint SEC Documents"). The Omnipoint Disclosure Schedule sets forth a list of all the 1999 Omnipoint SEC Documents. (c) As of its filing date, each Omnipoint SEC Document complied as to form in all material respects with the applicable requirements of the 1933 Act and the 1934 Act, as the case may be. (d) As of its filing date, each Omnipoint SEC Document filed pursuant to the 1934 Act did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. (e) Each Omnipoint SEC Document that is a registration statement, as amended or supplemented, if applicable, filed pursuant to the 1933 Act, as of the date such registration statement or amendment became effective, did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. A-22 297 SECTION 4.9 Financial Statements. The audited consolidated financial statements and unaudited consolidated interim financial statements of Omnipoint included in the Omnipoint SEC Documents fairly present, in all material respects, in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis (except as may be indicated in the notes thereto), the consolidated financial position of Omnipoint and its consolidated Subsidiaries as of the dates thereof and their consolidated results of operations and cash flows for the periods then ended (subject to normal year-end adjustments in the case of any unaudited interim financial statements). SECTION 4.10 Absence of Certain Changes. Since the Omnipoint Balance Sheet Date, the business of each member of the Omnipoint Group and each Omnipoint Investment has been conducted in the ordinary course consistent with past practices and there has not been any event, occurrence or development which, individually or in the aggregate, has had or would be reasonably expected to have a Omnipoint Material Adverse Effect. SECTION 4.11 No Undisclosed Material Liabilities. There are no liabilities or obligations of any member of the Omnipoint Group or any Omnipoint Investment of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of circumstances that would be reasonably expected to result in such a liability or obligation, other than for Taxes, if any, arising out of, or attributable to the Transactions (including the CIRI Transaction and the transactions described in Recital A hereof): (a) liabilities or obligations disclosed and provided for in the Omnipoint Balance Sheet or in the notes thereto or in Omnipoint SEC Documents filed prior to the date hereof or in the Omnipoint 10-K; and (b) liabilities or obligations that, individually or in the aggregate have not had and would not be reasonably expected to have a Omnipoint Material Adverse Effect. SECTION 4.12 Compliance with Laws and Court Orders. Each member of the Omnipoint Group and each Omnipoint Investment holds all licenses, franchises, certificates, consents, permits, qualifications and authorizations from all Governmental Bodies necessary for the lawful conduct of their business, except where the failure to hold any of the foregoing, individually or in the aggregate, has not had and would not be reasonably expected to have a Omnipoint Material Adverse Effect. Each member of the Omnipoint Group and each Omnipoint Investment is and has been in compliance with, and to the knowledge of Omnipoint, is not under investigation with respect to and has not been threatened to be charged with or given notice of any violation of, any such license, franchise, certificate, consent, permit, qualification or authorization, applicable law, statute, ordinance, rule, regulation, judgment, injunction, order or decree, except for failures to comply or violations that, individually or in the aggregate, have not had and would not be reasonably expected to have a Omnipoint Material Adverse Effect. SECTION 4.13 Litigation. There is no action, suit, investigation or proceeding (or any basis therefor) pending against, or, to the knowledge of Omnipoint, threatened against or affecting, any member of the Omnipoint Group, any Omnipoint Investment or any of their respective properties before any court or arbitrator or before or by any other Governmental Body, that, individually or in the aggregate, would be reasonably expected to have a Omnipoint Material Adverse Effect. SECTION 4.14 Finders' Fees. Except for fees payable to Allen and Lehman there is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of Omnipoint or any Omnipoint Subsidiary who might be entitled to any fee or commission from VoiceStream, any of the VoiceStream Subsidiaries, Omnipoint or any of the Omnipoint Subsidiaries in connection with the Transactions. Copies of the engagement agreements with Allen and Lehman have been provided to VoiceStream; except as set forth on such engagement agreements, no other fees are payable to Allen and Lehman. A-23 298 SECTION 4.15 Opinion of Financial Advisor. Omnipoint has received an opinion of Lehman, financial advisor to Omnipoint, to the effect that, as of June 23, 1999, from a financial point of view, the Merger Consideration is fair to the holders of Omnipoint Common Stock. SECTION 4.16 Taxes. (a) Except as set forth in the Omnipoint Disclosure Schedules and except as would not have a Omnipoint Material Adverse Effect, (i) all Omnipoint Tax Returns required to be filed with any taxing authority by, or with respect to, Omnipoint and the Omnipoint Subsidiaries have been filed in accordance with all applicable laws or an appropriate extension of time to file such Omnipoint Tax Returns has been obtained; (ii) Omnipoint and the Omnipoint Subsidiaries have timely paid all Taxes shown as due and payable on the Omnipoint Tax Returns that have been so filed, and, as of the time of filing, the Omnipoint Tax Returns correctly reflected the facts regarding the income, business, assets, operations, activities and the status of Omnipoint and the Omnipoint Subsidiaries (other than Taxes which are being contested in good faith by appropriate proceeding and for which adequate reserves are reflected on the Omnipoint Balance Sheet); (iii) Omnipoint and the Omnipoint Subsidiaries have made provision for all Taxes payable by Omnipoint and the Omnipoint Subsidiaries for which no Omnipoint Tax Return has yet been filed; (iv) the charges, accruals and reserves for Taxes with respect to Omnipoint and the Omnipoint Subsidiaries reflected on the Omnipoint Balance Sheet are adequate under GAAP to cover the Tax liabilities accruing through the date thereof; (v) there is no action, suit, proceeding, audit or claim now pending or, to the knowledge of Omnipoint, proposed against or with respect to Omnipoint or any Omnipoint Subsidiary in respect of any Tax where an adverse determination is reasonably likely; (vi) Omnipoint is not, and never has been the subject of a federal income tax examination; and (vii) there are no Liens or encumbrances for Taxes on any of the assets of Omnipoint or any Omnipoint Subsidiary except Liens for current Taxes not yet due. For purposes of this Agreement, "Taxes" shall mean any and all taxes, charges, fees, levies or other assessments, including, without limitation, all net income, gross income, gross receipts, excise, stamp, real or personal property, ad valorem, withholding, social security (or similar), unemployment, occupation, use, service, service use, license, net worth, payroll, franchise, severance, transfer, recording, employment, premium, windfall profits, environmental (including taxes under Section 59A of the Code), customs duties, capital stock, profits, disability, sales, registration, value added, alternative or add-on minimum, estimated or other taxes, assessments or charges imposed by any federal, state, local or foreign governmental body and any interest, penalties, or additions to tax attributable thereto; provided, however, that Taxes shall not include Taxes, if any, arising out of or attributable to the Transactions (including the CIRI Transaction and the transactions described in Recital A hereof). For purposes of this Agreement, "Tax Returns" shall mean any return, report, form or similar statement required to be filed with respect to any Tax (including any attached schedules), including, without limitation, any information return, claim for refund, amended return or declaration of estimated Tax. (b) To the knowledge of Omnipoint, there is no plan or intention on the part of any Omnipoint shareholder to sell, exchange, transfer or otherwise dispose of any stock of Holding Company received in the Transactions, except that such Omnipoint shareholders as are partnerships for U.S. federal income tax purposes may distribute such Holding Company stock to one or more of their partners (other than to a partner which would, immediately after such distribution, own 5 percent or more of Holding Company's stock, taking into account such partner's pro rata share of any Holding Company stock held by the partnership). SECTION 4.17 Tax Opinions. There are no facts or circumstances relating to Omnipoint that would, to Omnipoint's knowledge, prevent Piper Marbury from delivering the opinion referred to in Section 9.3(b) as of the date hereof. A-24 299 SECTION 4.18 Employee Benefit Plans and Labor Matters. (a) The Omnipoint Disclosure Schedule contains a true and complete list, as of the date hereof, of all Omnipoint Employee Plans and all Omnipoint Benefit Arrangements. Copies of each Omnipoint Employee Plan and each Omnipoint Benefit Arrangement (and, if applicable, related trust agreements) and all amendments thereto and written interpretations thereof have been made available to VoiceStream as of the date hereof or will have been made available to VoiceStream within thirty days after the date hereof, together with the three most recent annual reports (Form 5500 including, if applicable, Schedule B thereto) and the most recent actuarial valuation report prepared in connection with any Omnipoint Employee Plan. (b) No "accumulated funding deficiency," as defined in Section 412 of the Code, has been incurred with respect to any Omnipoint Employee Plan subject to such Section 412, whether or not waived. No "reportable event" within the meaning of Section 4043 of ERISA for which the reporting requirements have not been waived, and no event described in Section 4062 or 4063 of ERISA has occurred in connection with any Omnipoint Employee Plan. Neither Omnipoint nor to Omnipoint's knowledge any ERISA Affiliate of Omnipoint has (i) engaged in, or is a successor or parent corporation to an entity that has engaged in, a transaction described in Sections 4069 or 4212(c) of ERISA or (ii) incurred, or reasonably expects to incur prior to the Effective Time (A) any liability under Title IV of ERISA arising in connection with the termination of, or a complete or partial withdrawal from, any plan covered or previously covered by Title IV of ERISA or (B) any liability under Section 4971 of the Code that in either case could become a liability of Omnipoint, any Omnipoint Subsidiary, VoiceStream or any of their ERISA Affiliates after the Effective Time. If a "complete withdrawal" by Omnipoint and all of its ERISA Affiliates were to occur as of the Effective Time with respect to all Multiemployer Plans, neither Omnipoint nor any Omnipoint Subsidiary would incur any withdrawal liability under Title IV of ERISA. (c) As of December 31, 1998, the fair market value of the assets of each Omnipoint Pension Plan (excluding for these purposes any accrued but unpaid contributions) exceeded the present value of all benefits accrued under such Omnipoint Pension Plan calculated pursuant to FAS No. 87, "Employers' Accounting for Pensions." (d) Each Omnipoint Employee Plan that is intended to be qualified under Section 401(a) of the Code is the subject of a favorable qualification determination letter issued by the IRS and to Omnipoint's knowledge each such Omnipoint Employee Plan is so qualified. (e) There is no contract, plan or arrangement (written or otherwise) covering any employee or former employee of Omnipoint or any Omnipoint Subsidiary that, individually or collectively, could give rise to the payment of any amount that would not be deductible pursuant to the terms of Sections 162(m) or 280G of the Code. (f) As of December 31, 1998, there were no amounts accumulated for post-retirement benefit obligations under Omnipoint Employee Plans and Omnipoint Benefit Arrangements as determined in accordance with Statement of Financial Accounting Standards No. 106. (g) Each Omnipoint Employee Plan and each Omnipoint Benefit Arrangement has been maintained in material compliance with its terms and with the requirements prescribed by any and all applicable statutes, orders, rules and regulations (including any special provisions relating to registration or qualification where such Plan was intended so to be so registered or qualified) and has been maintained in good standing with applicable regulatory authorities. (h) No employee or former employee of Omnipoint or any Omnipoint Subsidiary will become entitled to any bonus, retirement, severance, job security or similar benefit or A-25 300 enhancement of such benefit (including acceleration of vesting or exercise of an incentive award) as a result of the Transactions (either alone or together with any other event). (i) Neither Omnipoint nor any of the Omnipoint Subsidiaries is, or has been, a party to any collective bargaining agreement or union contract. Neither Omnipoint nor any of the Omnipoint Subsidiaries is involved in or threatened with any labor dispute, work stoppage, labor strike, slowdown or grievance. To the knowledge of Omnipoint, there is no organizing effort or representation question at issue with respect to any employee of Omnipoint or any of the Omnipoint Subsidiaries. SECTION 4.19 Environmental Matters. (a) Except as have not had and would not be reasonably expected to have, individually or in the aggregate, a Omnipoint Material Adverse Effect: (A) no notice, notification, demand, request for information, citation, summons or order has been received, no complaint has been filed, no penalty has been assessed, and no investigation, action, claim, suit, proceeding or review (or any basis therefor) is pending or, to the knowledge of Omnipoint, is threatened by any Governmental Body or other Person relating to or arising out of any Environmental Law; (B) each member of the Omnipoint Group and each Omnipoint Investment is and has been in compliance with all Environmental Laws and all Environmental Permits; and (C) there are no liabilities of or relating to any member of the Omnipoint Group or any Omnipoint Investment of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise arising under or relating to any Environmental Law and there are no facts, conditions, situations or set of circumstances that could reasonably be expected to result in or be the basis for any such liability. (b) There have been no environmental assessments, investigations, studies, audits, tests, reviews or other analyses conducted (collectively, "Environmental Reports") of which Omnipoint has knowledge in relation to the current or prior business of any member of the Omnipoint Group or any Omnipoint Investment or any property or facility now or previously owned or leased by any member of the Omnipoint Group or any Omnipoint Investment that reveal matters that, individually or in the aggregate, have had or would reasonably be expected to have a Omnipoint Material Adverse Effect. (c) For purposes of this Section 4.19, the terms Omnipoint and Omnipoint Subsidiary shall include any entity that is, in whole or in part, a predecessor of any member of the Omnipoint Group or any Omnipoint Investment. SECTION 4.20 Intellectual Property. With such exceptions as, individually or in the aggregate, have not had and would not be reasonably expected to have a Omnipoint Material Adverse Effect, each member of the Omnipoint Group and each Omnipoint Investment own or have a valid license to use each trademark, service mark, trade name, invention, patent, trade secret, copyright, know-how (including any registrations or applications for registration of any of the foregoing) or any other similar type of proprietary intellectual property right (collectively, the "Omnipoint Intellectual Property") necessary to carry on its business substantially as currently conducted. No member of the Omnipoint Group or any Omnipoint Investment has received any notice of infringement of or conflict with, and to Omnipoint's knowledge, there are no infringements of or conflicts with, the rights of any Person with respect to the use of any Omnipoint Intellectual Property that, in either such case, individually or in the aggregate, have had or would be reasonably expected to have, a Omnipoint Material Adverse Effect. A-26 301 SECTION 4.21 Contracts. No member of the Omnipoint Group or any Omnipoint Investment is a party to or bound by (i) any "material contract" (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) or any agreement, contract or commitment that would be such a "material contract" but for the exception for contracts entered into in the ordinary course of business, (ii) any non-competition agreement or any other agreement or obligation which materially limits or will materially limit any member of the Omnipoint Group or any Investment Interest from engaging in the business of providing wireless communications services or from developing wireless communications technology anywhere in the world or (iii) any management agreement, technical services agreement or other agreement whereby any member of the Omnipoint Group or any Investment Interest is provided or is required to provide management or technical services to any other Person . With such exceptions as, individually or in the aggregate, have not had, and would not be reasonably expected to have, a Omnipoint Material Adverse Effect, (x) each of the contracts, agreements and commitments of the Omnipoint Group and the Omnipoint Investments is valid and in full force and effect and (y) neither any member of the Omnipoint Group nor any Omnipoint Investment has violated any provision of, or committed or failed to perform any act which, with or without notice, lapse of time, or both, would constitute a default under the provisions of any such contract, agreement or commitment. To the knowledge of Omnipoint, no counterparty to any such contract, agreement or commitment has violated any provision of, or committed or failed to perform any act which, with or without notice, lapse of time, or both would constitute a default or other breach under the provisions of, such contract, agreement or commitment, except for defaults or breaches which, individually or in the aggregate, have not had, or would not reasonably be expected to have, a Omnipoint Material Adverse Effect. Neither any member of the Omnipoint Group nor any Omnipoint Investment is a party to, or otherwise a guarantor of or liable with respect to, any interest rate, currency or other swap or derivative transaction, other than any such transactions which are not material to the business of the Omnipoint Group. Omnipoint has provided or made available to VoiceStream a copy of each agreement described in item (i), (ii) or (iii) above. SECTION 4.22 Significant Omnipoint Employees. The Omnipoint Disclosure Schedule contains a list setting forth the name and current annual salary and other compensation payable to each Significant Omnipoint Employee, and the profit sharing, bonus or other form of additional compensation paid or payable by Omnipoint to or for the benefit of each such person for the current fiscal year. Except as set forth on the Omnipoint Disclosure Schedule or under the employment, consulting or other agreements listed thereon, there are no oral or written contracts, agreements or arrangements obligating Omnipoint to increase the compensation or benefits presently being paid or hereafter payable to any Significant Omnipoint Employees. The Omnipoint Disclosure Schedule annexed hereto sets forth summaries of all oral employment or consulting or similar arrangements regarding any Significant Omnipoint Employee which are not terminable without liability on thirty (30) days' or less prior notice and lists all written employment and consulting agreements with respect to any Significant Omnipoint Employee, true and complete copies of which have been provided to VoiceStream. Except for severance obligations to Significant Omnipoint Employees set forth on the Omnipoint Disclosure Schedule, there is not due or owing and there will not be due and owing at the Effective Time to any Significant Omnipoint Employees, any sick pay, severance pay (whether arising out of the termination of an Significant Omnipoint Employee prior to, on, or subsequent to the Effective Time), compensable time or pay, including salary, commission and bonuses, personal time or pay or vacation time or vacation pay attributable to service rendered on or prior to the Effective Time. Except as disclosed in the Omnipoint Disclosure Schedule and other than claims made in the ordinary course of business consistent with past practice in an aggregate amount not to exceed $100,000, neither Omnipoint nor the Omnipoint Subsidiaries have, any liability arising out of claims made or suits brought (including workers' compensation claims and claims or suits for contribution to, or indemnification of, third parties, occupational health and safety, environmental, consumer protection or equal employment matters) for injury, sickness, disease, discrimination, death A-27 302 or termination of employment of any Significant Omnipoint Employee, or other employment matter to the extent attributable to an event occurring or a state of facts existing on or prior to the Effective Time. SECTION 4.23 Employment Matters. Omnipoint and each Omnipoint Subsidiary (A) is in compliance with all applicable Federal and state laws, rules and regulations respecting employment, employment practices, terms and conditions of employment and wages and hours, in each case, with respect to Omnipoint Employees, except where the failure to be in compliance would not, singly or in the aggregate, have a material adverse effect on Omnipoint, any Omnipoint Subsidiary or their financial condition or business; (B) has withheld all amounts required by law or by agreement to be withheld from the wages, salaries and other payments to Omnipoint Employees; (C) is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing, except as would reasonably be expected to not have a Omnipoint Material Adverse Effect; and (D) (other than routine payments to be made in the normal course of business and consistent with past practice) is not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, Social Security or other benefits for Omnipoint Employees. SECTION 4.24 Labor. No work stoppage or labor strike with respect to Omnipoint Employees is pending or, to the best knowledge of Omnipoint, is threatened. Except as set forth on the Omnipoint Disclosure Schedules, there is no involvement nor, to the best knowledge of Omnipoint, is there threatened, any labor dispute, grievance or litigation relating to labor, safety or discrimination matters involving any Omnipoint Employee including charges of unfair labor practices or discrimination complaints, which, if adversely determined, would reasonably be expected to have, individually or in the aggregate, a material adverse effect on its financial condition or business. There has been no engagement in any unfair labor practices within the meaning of the National Labor Relations Act which would reasonably be expected to have, individually or in the aggregate, a Omnipoint Material Adverse Effect. SECTION 4.25 Vote Required. The only vote of the holders of any class or series of capital stock of Omnipoint necessary to approve this Agreement and the Transactions is the affirmative vote of the holders of a majority of the outstanding shares of Omnipoint Common Stock (the "Omnipoint Stockholders' Approval"). SECTION 4.26 Antitakeover Statutes and Charter Provisions. Omnipoint has taken all action necessary to exempt the Omnipoint Merger and this Agreement and the Transactions from the restrictions of Section 203 of Delaware Law, and, accordingly, neither such Section nor any other antitakeover or similar statute or regulation applies or purports to apply to any such transactions. No other "control share acquisition," "fair price," "moratorium" or other antitakeover laws or regulations enacted under U.S. state or federal laws apply to this Agreement or any of the Transactions. SECTION 4.27 Insurance. The Omnipoint Disclosure Schedules set forth a list and brief description of all policies of fire, liability and other forms of insurance and material fidelity bonds held by the Omnipoint Group. The Omnipoint Group's assets, business, equipment, property and operations are adequately insured against loss or damage and all other hazards or risks of the character usually insured against by companies in the same or similar business and such insurance shall be continued in full force and effect through 11:59 p.m. on the Effective Time. Each such policy and fidelity bond is in full force and effect, all premiums due and payable under such policies and fidelity bonds have been and on the Effective Time will be paid in full, and there are no disputed claims arising under such policies or fidelity bonds. SECTION 4.28 Bank Accounts. The Disclosure Schedule sets forth a complete list of all bank accounts, savings deposits, money-market accounts, certificates of deposit, safety deposit boxes, and A-28 303 similar investment accounts with banks or other financial institutions maintained by or on behalf of the Omnipoint or any Omnipoint Subsidiary showing the depository bank or institution address, appropriate bank contact personnel, account number and names of signatories. SECTION 4.29 Transactions with Affiliates. No Affiliate of the Omnipoint Group or Omnipoint Investment nor any stockholder, officer, director, partner, member, consultant or employee of any thereof, is at the date hereof a party to any transaction with any member of the Omnipoint Group or Omnipoint Investment, including any contract or arrangement providing for the furnishing of services to or by, providing for rental of real or personal property (including intellectual property) to or from, or otherwise requiring payments to or from any member of the Omnipoint Group or any Omnipoint Investment, or any Affiliate thereof. ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF VOICESTREAM AND HOLDING COMPANY Except as set forth in the VoiceStream Disclosure Schedule or as disclosed in the VoiceStream SEC Documents filed prior to the date hereof, each of VoiceStream and Holding Company, represent and warrant to Omnipoint as follows: SECTION 5.1 Corporate Existence and Power. Each of VoiceStream and Holding Company is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all corporate powers and authority required to carry on its business as now conducted and to own, operate and lease its property. Each of VoiceStream and Holding Company is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where such qualification is necessary, except for those jurisdictions where failure to be so qualified, individually or in the aggregate, has not had and would not be reasonably expected to have a VoiceStream Material Adverse Effect. VoiceStream has heretofore delivered or made available to Omnipoint true and complete copies of the certificate of incorporation and bylaws of VoiceStream as currently in effect. SECTION 5.2 Corporate Authorization. (a) The execution, delivery and performance by each of VoiceStream and Holding Company of this Agreement and the consummation by VoiceStream and Holding Company of the Transactions are within VoiceStream's and Holding Company's respective corporate powers and, except for the required approval of VoiceStream's stockholders of this Agreement and the Transactions, have been duly authorized by all necessary corporate action on the part of VoiceStream and Holding Company. This Agreement has been duly and validly executed and delivered by VoiceStream and Holding Company and, assuming the due and valid authorization, execution and delivery of this Agreement by Omnipoint and receipt of all required approvals by VoiceStream's stockholders in connection with the consummation of the Transactions, constitutes a valid and binding agreement of VoiceStream and Holding Company, enforceable against it in accordance with its terms except as may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights generally and by equitable principles of general applicability. (b) At a meeting duly called and held, VoiceStream's Board of Directors has: (i) determined that this Agreement and the Transactions are advisable and fair to and in the best interests of VoiceStream's stockholders; (ii) approved and adopted this Agreement and the Transactions; and (iii) resolved (subject to Section 8.8(b)) to recommend approval and adoption of this Agreement by its stockholders. No other corporate proceedings on the part of VoiceStream are necessary to authorize or approve this Agreement or to consummate the Transactions (other than, with respect to the Transactions, the approval and adoption of the A-29 304 Transactions and this Agreement by holders of shares of VoiceStream to the extent required by VoiceStream's certificate of incorporation and by applicable Delaware Law and Washington Law. SECTION 5.3 Governmental Authorization. (a) The execution, delivery and performance by VoiceStream of this Agreement and the consummation by VoiceStream of the Transactions require no action by or in respect of, or filing with, any Governmental Body, other than: (i) the filing of a certificate of merger in accordance with Delaware Law; (ii) compliance with any applicable requirements of the HSR Act; (iii) compliance with any applicable requirements of the 1934 Act; (iv) compliance with any applicable requirements of the Communications Act; (v) compliance with FAA regulations; (vi) compliance with any applicable requirements of state and local public utility commissions or similar entities; and (vii) any actions or filing, the absence of which would not in the aggregate prevent or delay consummation of the Transactions in any material respect, or otherwise prevent VoiceStream from performing its obligations under this Agreement in any material respect or would not in the aggregate have a VoiceStream Material Adverse Effect. (b) VoiceStream and the VoiceStream Subsidiaries have not made any material misstatements of fact, or omitted to disclose any fact, to any Governmental Body, which misstatements or omissions, individually or in the aggregate, could subject any material licenses or authorizations to revocation or failure to renew. SECTION 5.4 FCC Matters. (a) Each member of the VoiceStream Group and each VoiceStream Investment holds, and is qualified and eligible to hold, all material licenses, permits and other authorizations issued by the FCC to such entity for the operation of their respective businesses, all of which are set forth in the VoiceStream Disclosure Schedule (the "VoiceStream FCC Licenses"). (b) The VoiceStream FCC Licenses are valid and in full force and effect and none of VoiceStream, any of the VoiceStream Subsidiaries or any VoiceStream Investment is or has been delinquent in payment on or in default under any installment obligation owed to the United States Treasury in connection with the VoiceStream FCC Licenses. (c) All material reports and applications required by the Communications Act or required to be filed with the FCC by any member of the VoiceStream Group or any VoiceStream Investment have been filed and are accurate and complete in all material respects. (d) Each member of the VoiceStream Group and each VoiceStream Investment is, and has been, in compliance in all material respects with, and the wireless communication systems operated pursuant to the VoiceStream FCC Licenses have been operated in compliance in all material respects with, the Communications Act. (e) There is not pending as of the date hereof any application, petition, objection, pleading or proceeding with the FCC or any public service commission or similar body having jurisdiction or authority over the communications operations of any member of the VoiceStream Group or any VoiceStream Investment which questions the validity of or contests any VoiceStream FCC License or which presents a substantial risk that, if accepted or granted, or concluded adversely, could result in the revocation, cancellation, suspension or any materially adverse modification of any VoiceStream FCC License or imposition of any substantial fine or forfeiture against any member of the VoiceStream Group or any VoiceStream Investment except as set forth in the VoiceStream Disclosure Statement. (f) No facts are known to any Member of the VoiceStream Group which if known by a Governmental Body of competent jurisdiction would present a substantial risk that any VoiceStream FCC License could be revoked, canceled, suspended or materially adversely A-30 305 modified or that any substantial fine or forfeiture could be imposed against any member of the VoiceStream Group or any VoiceStream Investment. SECTION 5.5 Non-contravention. The execution, delivery and performance by VoiceStream of this Agreement and the consummation by VoiceStream of the Transactions do not and will not (i) contravene, conflict with, or result in any violation or breach of any provision of the certificate of incorporation, bylaws, stockholders agreement or other governing instrument of any member of the VoiceStream Group or any VoiceStream Investment; (ii) assuming compliance with the matters referred to in Section 5.3, contravene, conflict with or result in a violation or breach of any provision of any applicable law, statute, ordinance, rule, regulation, judgment, injunction, order, or decree; (iii) require any consent or other action by any Person under, constitute a default (or an event that, with or without notice or lapse of time or both, would constitute a default) under, or cause or permit the termination, cancellation, acceleration, triggering or other change of any right or obligation or the loss of any benefit to which any member of the VoiceStream Group or any VoiceStream Investment is entitled under (A) any provision of any agreement or other instrument binding upon any member of the VoiceStream Group or any VoiceStream Investment or (B) any license, franchise, permit, certificate, approval or other similar authorization held by, or affecting, or relating in any way to, the assets or business of, any member of the VoiceStream Group or any VoiceStream Investment; or (iv) result in the creation or imposition of any Lien on any asset of any member of the VoiceStream Group or any VoiceStream Investment, other than such exceptions in the case of clauses (ii), (iii) and (iv) as would not be, individually or in the aggregate, reasonably expected to have a VoiceStream Material Adverse Effect or materially impair or delay the ability of VoiceStream to consummate the Transactions. SECTION 5.6 Capitalization. (a) The authorized capital stock of VoiceStream consists of 300,000,000 shares of VoiceStream Common Stock and 50,000,000 shares of Preferred Stock. As of the close of business on May 31, 1999, there were outstanding (i) 95,549,998 shares of VoiceStream Common Stock (inclusive of all shares of restricted stock granted under any compensatory plans or arrangements), (ii) VoiceStream stock options to purchase an aggregate of 4,067,090 shares of VoiceStream Common Stock (of which options to purchase an aggregate of 2,417,170 shares of VoiceStream Common Stock were exercisable), (iii) no phantom shares or stock units issued under any stock option, compensation or deferred compensation plan or arrangement with respect to VoiceStream Common Stock, (iv) no VoiceStream warrants to VoiceStream Common Stock and (v) no shares of VoiceStream Preferred Stock. All outstanding shares of capital stock of VoiceStream have been, and all shares that may be issued pursuant to any compensatory plan or arrangement will be, when issued in accordance with the respective terms thereof, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. (b) Except as set forth in Section 5.6(a) or on the VoiceStream Disclosure Schedules, there are no outstanding subscriptions, options, warrants, rights or convertible or exchangeable securities issued by VoiceStream or any VoiceStream Subsidiary or other agreements or commitments to which any member of the VoiceStream Group or any VoiceStream Investment is a party of any character relating to the issued or unissued capital stock or other securities of VoiceStream or any VoiceStream Subsidiary, including any agreement or commitment obligating any member of the VoiceStream Group or any VoiceStream Investment to issue, deliver or sell, or cause to be issued, delivered or sold, shares of capital stock or other securities of VoiceStream or any VoiceStream Subsidiary, to grant, extend or enter into any subscription, option, warrant, right or convertible or exchangeable security or other similar agreement or commitment with respect to VoiceStream or any VoiceStream Subsidiary to make any payments pursuant to any stock based or stock related plan or award. There are no preemptive rights, rights of first refusal, A-31 306 rights of first offer or any similar rights granted with respect to the securities or any assets of any member of the VoiceStream Group. SECTION 5.7 Subsidiaries; Investments. (a) Each VoiceStream Subsidiary and each VoiceStream Investment is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and has all corporate, partnership or other similar powers required to carry on its business as now conducted, other than such exceptions as, individually or in the aggregate, have not had and would not be reasonably expected to have a VoiceStream Material Adverse Effect. Each VoiceStream Subsidiary and each VoiceStream Investment is duly qualified to do business as a foreign corporation or other foreign legal entity and is in good standing in each jurisdiction where such qualification is necessary, with such exceptions, individually or in the aggregate, as have not had and would not be reasonably expected to have a VoiceStream Material Adverse Effect. The VoiceStream Disclosure Schedule sets forth a list of all VoiceStream Subsidiaries and all VoiceStream Investments and their respective jurisdictions of organization and identifies VoiceStream's (direct or indirect) percentage ownership interest therein. (b) All of the outstanding capital stock of, or other voting securities or ownership interests in, each VoiceStream Subsidiary and each VoiceStream Investment, is owned by VoiceStream or a VoiceStream Subsidiary, directly or indirectly, free and clear of any Lien and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other voting securities or ownership interests). (c) There are no outstanding subscriptions, options, warrants, rights or convertible or exchangeable securities issued by any member of the VoiceStream Group or a VoiceStream Investment or other agreements or commitments of any character relating to the issued or unissued capital stock or other securities or partnership interests or membership interests of any VoiceStream Subsidiary or any VoiceStream Investment, including any agreement or commitment obligating any member of the VoiceStream Group or any VoiceStream Investment to issue, deliver or sell, or cause to be issued, delivered or sold, shares of capital stock, other securities, partnership interests or membership interests of any VoiceStream Subsidiary or any VoiceStream Investment or obligating any member of the VoiceStream Group or any VoiceStream Investment to grant, extend or enter into any subscription, option, warrant, right or convertible or exchangeable security or other similar agreement or commitment with respect to any VoiceStream Subsidiary or any VoiceStream Investment, or obligating any member of the VoiceStream Group or any VoiceStream Investment to make any payments pursuant to any stock based or stock related plan or award. No member of the VoiceStream Group is subject to any obligation or requirement to provide funds for or to make any investment (in the form of a loan, capital contribution or otherwise) to or in any Person, (other than obligations to individuals who are employees, which obligations (i) are set forth in Section 5.22 of the VoiceStream Disclosure Schedule or (ii) are for de minimis amounts and are made in the ordinary course of business consistent with past practices), including, without limitation, any VoiceStream Investment. (d) VoiceStream has previously delivered or made available to Omnipoint true and complete copies of the organizational documents or comparable governing instruments (including all amendments to each of the foregoing), of each VoiceStream Subsidiary and each VoiceStream Investment as in effect on the date hereof. A-32 307 SECTION 5.8 SEC Filings. (a) VoiceStream has filed all required reports, schedules, forms, statements and other documents required to be filed by it with the SEC since January 1, 1997. (b) VoiceStream has delivered or made available to Omnipoint: (i) the VoiceStream 10-K; (ii) its proxy or information statements relating to meetings of, or actions taken without a meeting by, the stockholders of VoiceStream held since December 31, 1998; and (iii) all of its other reports, statements, schedules, forms, exhibits and registration statements and all other documents required to be filed with the SEC since December 31, 1998 (the "1999 VoiceStream SEC Documents") (the documents referred to in Sections 5.8(a) and (b), collectively, the "VoiceStream SEC Documents"). The VoiceStream Disclosure Schedule sets forth a list of all the 1999 VoiceStream SEC Documents. (c) As of its filing date, each VoiceStream SEC Document complied as to form in all material respects with the applicable requirements of the 1933 Act and the 1934 Act, as the case may be. (d) As of its filing date, each VoiceStream SEC Document filed pursuant to the 1934 Act did not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. (e) Each VoiceStream SEC Document that is a registration statement, as amended or supplemented, if applicable, filed pursuant to the 1933 Act, as of the date such registration statement or amendment became effective, did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. SECTION 5.9 Financial Statements. The audited consolidated financial statements and unaudited consolidated interim financial statements of VoiceStream included in the VoiceStream SEC Documents fairly present, in all material respects, in conformity with GAAP applied on a consistent basis (except as may be indicated in the notes thereto), the consolidated financial position of VoiceStream and its consolidated Subsidiaries as of the dates thereof and their consolidated results of operations and cash flows for the periods then ended (subject to normal year-end adjustments in the case of any unaudited interim financial statements). SECTION 5.10 Absence of Certain Changes. Since the VoiceStream Balance Sheet Date, the business of each member of the VoiceStream Group and each VoiceStream Investment has been conducted in the ordinary course consistent with past practices and there has not been any event, occurrence or development which, individually or in the aggregate, has had or would be reasonably expected to have a VoiceStream Material Adverse Effect. SECTION 5.11 No Undisclosed Material Liabilities. There are no liabilities or obligations of any member of the VoiceStream Group or any VoiceStream Investment of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of circumstances that would be reasonably expected to result in such a liability or obligation, other than for taxes, if any, arising out of, or attributable to the Transactions (including the CIRI Transaction and the transactions described in Recital A hereof), or: (a) liabilities or obligations disclosed and provided for in the VoiceStream Balance Sheet or in the notes thereto or in VoiceStream SEC Documents filed prior to the date hereof or in the VoiceStream 10-K; and (b) liabilities or obligations that, individually or in the aggregate have not had and would not be reasonably expected to have a VoiceStream Material Adverse Effect. A-33 308 SECTION 5.12 Compliance with Laws and Court Orders. Each member of the VoiceStream Group and each VoiceStream Investment holds all licenses, franchises, certificates, consents, permits, qualifications and authorizations from all Governmental Bodies necessary for the lawful conduct of their business, except where the failure to hold any of the foregoing, individually or in the aggregate, has not had and would not be reasonably expected to have a VoiceStream Material Adverse Effect. Each member of the VoiceStream Group and each VoiceStream Investment is and has been in compliance with, and to the knowledge of VoiceStream, is not under investigation with respect to and has not been threatened to be charged with or given notice of any violation of, any such license, franchise, certificate, consent, permit, qualification or authorization, applicable law, statute, ordinance, rule, regulation, judgment, injunction, order or decree, except for failures to comply or violations that, individually or in the aggregate, have not had and would not be reasonably expected to have a VoiceStream Material Adverse Effect. SECTION 5.13 Litigation. There is no action, suit, investigation or proceeding (or any basis therefor) pending against, or, to the knowledge of VoiceStream, threatened against or affecting, any member of the VoiceStream Group or any VoiceStream Investment or any of their respective properties before any court or arbitrator or before or by any other Governmental Body, that, individually or in the aggregate, would be reasonably expected to have a VoiceStream Material Adverse Effect. SECTION 5.14 Finders' Fees. Except for fees payable to Goldman, there is no investment banker, broker, finder or other intermediary that has been retained by or is authorized to act on behalf of VoiceStream or any VoiceStream Subsidiary who might be entitled to any fee or commission from Omnipoint, any of the Omnipoint Subsidiaries, VoiceStream or any of the VoiceStream Subsidiaries in connection with the Transactions. A copy of the engagement agreement with Goldman has been provided to Omnipoint; except as set forth on such engagement agreement, no other fees are payable to Goldman. SECTION 5.15 Opinion of Financial Advisor. VoiceStream has received an opinion of Goldman, financial advisor to VoiceStream, to the effect that, as of June 23, 1999, from a financial point of view, the Merger Consideration is fair to the holders of VoiceStream Common Stock. SECTION 5.16 Taxes. (a) Except as set forth in the VoiceStream Disclosure Schedules and except as would not have a VoiceStream Material Adverse Effect, (i) all VoiceStream Tax Returns required to be filed with any taxing authority by, or with respect to, VoiceStream and the VoiceStream Subsidiaries have been filed in accordance with all applicable laws or an appropriate extension of time to file such VoiceStream Tax Return has been obtained; (ii) VoiceStream and the VoiceStream Subsidiaries have timely paid all Taxes shown as due and payable on the VoiceStream Tax Returns that have been so filed, and, as of the time of filing, the VoiceStream Tax Returns correctly reflected the facts regarding the income, business, assets, operations, activities and the status of VoiceStream and the VoiceStream Subsidiaries (other than Taxes which are being contested in good faith by appropriate proceeding and for which adequate reserves are reflected on the VoiceStream Balance Sheet); (iii) VoiceStream and the VoiceStream Subsidiaries have made provision for all Taxes payable by VoiceStream and the VoiceStream Subsidiaries for which no VoiceStream Tax Return has yet been filed; (iv) the charges, accruals and reserves for Taxes with respect to VoiceStream and the VoiceStream Subsidiaries reflected on the VoiceStream Balance Sheet are adequate under GAAP to cover the Tax liabilities accruing through the date thereof; (v) there is no action, suit, proceeding, audit or claim now pending or to the knowledge of VoiceStream, threatened against or with respect to VoiceStream or any VoiceStream Subsidiary in respect of any Tax where an adverse determination is reasonably likely; (vi) the federal income Tax Returns of VoiceStream and the VoiceStream Subsidiaries have been examined and settled with the IRS (or the applicable statutes of limitation for the assessment of federal income Taxes for such A-34 309 periods have expired) for all years through 1997; and (vii) there are no Liens or encumbrances for Taxes on any of the assets of VoiceStream or any VoiceStream Subsidiary except liens for current Taxes not yet due. (b) To the knowledge of VoiceStream, there is no plan or intention on the part of any VoiceStream shareholder to sell, exchange, transfer or otherwise dispose of any stock of Holding Company received in the Transactions, except that VoiceStream shareholders that are partnerships for U.S. federal income tax purposes may distribute such Holding Company stock to one or more of their partners (other than to a partner which would, immediately after such distribution, own 5 percent or more of Holding Company's stock, taking into account such partner's pro rata share of any Holding Company stock held by the partnership). (c) The maximum number of shares of Holding Company Common Stock which may be issued pursuant to conversion rights held by the Cook Entities (after consummation of the Transactions), including conversion rights under the CIRI Agreements, is 9,000,000. SECTION 5.17 Tax Opinions. There are no facts or circumstances relating to VoiceStream that would, to VoiceStream's knowledge, prevent Jones Day from delivering the opinions referred to in Sections 9.2(b) and 9.2(c) as of the date hereof. SECTION 5.18 Employee Benefit Plans and Labor Matters. (a) The VoiceStream Disclosure Schedule contains a true and complete list, as of the date hereof, of all VoiceStream Employee Plans and all VoiceStream Benefit Arrangements. Copies of each VoiceStream Employee Plan and each VoiceStream Benefit Arrangement (and, if applicable, related trust agreements) and all amendments thereto and written interpretations thereof have been made available to Omnipoint as of the date hereof or will have been made available to Omnipoint within thirty days after the date hereof, together with the three most recent annual reports (Form 5500 including, if applicable, Schedule B thereto) and the most recent actuarial valuation report prepared in connection with any VoiceStream Employee Plan. (b) No "accumulated funding deficiency," as defined in Section 412 of the Code, has been incurred with respect to any VoiceStream Employee Plan subject to such Section 412, whether or not waived. No "reportable event" within the meaning of Section 4043 of ERISA for which the reporting requirements have not been waived, and no event described in Section 4062 or 4063 of ERISA has occurred in connection with any VoiceStream Employee Plan. Neither VoiceStream nor to VoiceStream's knowledge any ERISA Affiliate of VoiceStream has (i) engaged in, or is a successor or parent corporation to an entity that has engaged in, a transaction described in Sections 4069 or 4212(c) of ERISA or (ii) incurred, or reasonably expects to incur prior to the Effective Time (A) any liability under Title IV of ERISA arising in connection with the termination of, or a complete or partial withdrawal from, any plan covered or previously covered by Title IV of ERISA or (B) any liability under Section 4971 of the Code that in either case could become a liability of VoiceStream, any VoiceStream Subsidiary, Omnipoint or any of their ERISA Affiliates after the Effective Time. If a "complete withdrawal" by VoiceStream and all of its ERISA Affiliates were to occur as of the Effective Time with respect to all Multiemployer Plans, neither of VoiceStream, nor any VoiceStream Subsidiary would incur any withdrawal liability under Title IV of ERISA. (c) As of December 31, 1998, the fair market value of the assets of each VoiceStream Pension Plan (excluding for these purposes any accrued but unpaid contributions) exceeded the present value of all benefits accrued under such VoiceStream Pension Plan calculated pursuant to FAS No. 87, "Employers' Accounting for Pensions." A-35 310 (d) Each VoiceStream Employee Plan that is intended to be qualified under Section 401(a) of the Code is the subject of a favorable qualification determination letter issued by the IRS and to VoiceStream's knowledge each such VoiceStream Employee Plan is so qualified. (e) There is no contract, plan or arrangement (written or otherwise) covering any employee or former employee of VoiceStream or any VoiceStream Subsidiary that, individually or collectively, could give rise to the payment of any amount that would not be deductible pursuant to the terms of Sections 162(m) or 280G of the Code. (f) As of December 31, 1998, there are no accumulated post-retirement benefit obligations under any of the VoiceStream Employee Plans and VoiceStream Benefit Arrangements as determined in accordance with Statement of Financial Accounting Standards No. 106. (g) Each VoiceStream Employee Plan and each VoiceStream Benefit Arrangement has been maintained in material compliance with its terms and with the requirements prescribed by any and all applicable statutes, orders, rules and regulations (including any special provisions relating to registration or qualification where such Plan was intended so to be so registered or qualified) and has been maintained in good standing with applicable regulatory authorities. (h) No employee or former employee of VoiceStream or any VoiceStream Subsidiary will become entitled to any bonus, retirement, severance, job security or similar benefit or enhancement of such benefit (including acceleration of vesting or exercise of an incentive award) as a result of the Transactions (either alone or together with any other event). (i) Neither VoiceStream nor any of the VoiceStream Subsidiaries is, or has been, a party to any collective bargaining agreement or union contract. Neither VoiceStream nor any of the VoiceStream Subsidiaries is involved in or threatened with any labor dispute, work stoppage, labor strike, slowdown or grievance. To the knowledge of VoiceStream, there is no organizing effort or representation question at issue with respect to any employee of VoiceStream or any of the VoiceStream Subsidiaries. SECTION 5.19 Environmental Matters. (a) Except as have not had and would not be reasonably expected to have, individually or in the aggregate, a VoiceStream Material Adverse Effect: (A) no notice, notification, demand, request for information, citation, summons or order has been received, no complaint has been filed, no penalty has been assessed, and no investigation, action, claim, suit, proceeding or review (or any basis therefor) is pending or, to the knowledge of VoiceStream, is threatened by any Governmental Body or other Person relating to or arising out of any Environmental Law; (B) each member of the VoiceStream Group and each VoiceStream Investment is and has been in compliance with all Environmental Laws and all Environmental Permits; and (C) there are no liabilities of or relating to any member of the VoiceStream Group or any VoiceStream Investment of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise arising under or relating to any Environmental Law and there are no facts, conditions, situations or set of circumstances that could reasonably be expected to result in or be the basis for any such liability. (b) There have been no Environmental Reports of which VoiceStream has knowledge in relation to the current or prior business of any member of the VoiceStream Group or any VoiceStream Investment or any property or facility now or previously owned or leased by any member of the VoiceStream Group or any VoiceStream Investment that reveal matters that, A-36 311 individually or in the aggregate, have had or would reasonably be expected to have a VoiceStream Material Adverse Effect; and (c) For purposes of this Section 5.19, the terms VoiceStream and VoiceStream Subsidiary shall include any entity that is, in whole or in part, a predecessor of any member of the VoiceStream Group or any VoiceStream Investment. SECTION 5.20 Intellectual Property. With such exceptions as, individually or in the aggregate, have not had and would not be reasonably expected to have a VoiceStream Material Adverse Effect, each member of the VoiceStream Group and each VoiceStream Investment owns or has a valid license to use each trademark, service mark, trade name, invention, patent, trade secret, copyright, know-how (including any registrations or applications for registration of any of the foregoing) or any other similar type of proprietary intellectual property right (collectively, the "VoiceStream Intellectual Property") necessary to carry on its business substantially as currently conducted. No member of the VoiceStream Group or any VoiceStream Investment has received any notice of infringement of or conflict with, and to VoiceStream's knowledge, there are no infringements of or conflicts with, the rights of any Person with respect to the use of any VoiceStream Intellectual Property that, in either such case, individually or in the aggregate, have had or would be reasonably expected to have, a VoiceStream Material Adverse Effect. SECTION 5.21 Contracts. No member of the VoiceStream Group nor any VoiceStream Investment is a party to or bound by (i) any "material contract" (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) or any agreement, contract or commitment that would be such a "material contract" but for the exception for contracts entered into in the ordinary course of business, (ii) any non-competition agreement or any other agreement or obligation which materially limits or will materially limit any member of the VoiceStream Group or any VoiceStream Investment Interest from engaging in the business of providing wireless communications services or from developing wireless communications technology anywhere in the world or (iii) any management agreement, technical services agreement or other agreement whereby any member of the VoiceStream Group or any of its Investment Interest is provided or is required to provide management or technical services to any other Person. With such exceptions as, individually or in the aggregate, have not had, and would not be reasonably expected to have, a VoiceStream Material Adverse Effect, (x) each of the contracts, agreements and commitments of the VoiceStream Group and the VoiceStream Investments is valid and in full force and effect and (y) neither any member of the VoiceStream Group nor any VoiceStream Investments has violated any provision of, or committed or failed to perform any act which, with or without notice, lapse of time, or both, would constitute a default under the provisions of any such contract, agreement or commitment. To the knowledge of VoiceStream, no counterparty to any such contract, agreement or commitment has violated any provision of, or committed or failed to perform any act which, with or without notice, lapse of time, or both would constitute a default or other breach under the provisions of, such contract, agreement or commitment, except for defaults or breaches which, individually or in the aggregate, have not had, or would not reasonably be expected to have, a VoiceStream Material Adverse Effect. Neither any member of the VoiceStream nor any VoiceStream Investment is a party to, or otherwise a guarantor of or liable with respect to, any interest rate, currency or other swap or derivative transaction, other than any such transactions which are not material to the business of the VoiceStream Group. VoiceStream has provided or made available to Omnipoint a copy of each agreement described in item (i), (ii) or (iii) above. SECTION 5.22 VoiceStream Employees. The VoiceStream Disclosure Schedule contains a list setting forth the name and current annual salary and other compensation payable to each Significant VoiceStream Employee, and the profit sharing, bonus or other form of additional compensation paid or payable by VoiceStream to or for the benefit of each such person for the current fiscal year. A-37 312 Except as set forth on the VoiceStream Disclosure Schedule or under the employment, consulting or other agreements listed thereon, there are no oral or written contracts, agreements or arrangements obligating VoiceStream to increase the compensation or benefits presently being paid or hereafter payable to any Significant VoiceStream Employees. The VoiceStream Disclosure Schedule annexed hereto sets forth summaries of all oral employment or consulting or similar arrangements regarding any Significant VoiceStream Employee which are not terminable without liability on thirty (30) days' or less prior notice and lists all written employment and consulting agreements with respect to any Significant VoiceStream Employee, true and complete copies of which have been provided to Omnipoint. Except for severance obligations to Significant VoiceStream Employees set forth on the VoiceStream Disclosure Schedule, there is not due or owing and there will not be due and owing at the Effective Time to any Significant VoiceStream Employees, any sick pay, severance pay (whether arising out of the termination of any Significant VoiceStream Employee prior to, on, or subsequent to the Effective Time), compensable time or pay, including salary, commission and bonuses, personal time or pay or vacation time or vacation pay attributable to service rendered on or prior to the Effective Time. Except as disclosed in the VoiceStream Disclosure Schedule, there is not now, and there will not be as of the Effective Time, any liability arising out of claims made or suits brought (including workers' compensation claims and claims or suits for contribution to, or indemnification of, third parties, occupational health and safety, environmental, consumer protection or equal employment matters) for injury, sickness, disease, discrimination, death or termination of employment of any Significant VoiceStream Employee, or other employment matter to the extent attributable to an event occurring or a state of facts existing on or prior to the Effective Time. SECTION 5.23 Employment Matters. VoiceStream and each VoiceStream Subsidiary (A) are in compliance with all applicable Federal and state laws, rules and regulations respecting employment, employment practices, terms and conditions of employment and wages and hours, in each case, with respect to VoiceStream Employees, except where the failure to be in compliance would not, singly or in the aggregate, a material adverse effect on VoiceStream, any VoiceStream Subsidiary or their financial condition or business; (B) have withheld all amounts required by law or by agreement to be withheld from the wages, salaries and other payments to VoiceStream Employees; (C) is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing, except as would not have a VoiceStream Material Adverse Effect; and (D) (other than routine payments to be made in the normal course of business and consistent with past practice) are not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, Social Security or other benefits for VoiceStream Employees. SECTION 5.24 Labor. No work stoppage or labor strike with respect to VoiceStream Employees is pending or, to the best knowledge of VoiceStream, is threatened. Except as set forth on the VoiceStream Disclosure Schedules, there is no involvement nor, to the best knowledge of VoiceStream, is there threatened, any labor dispute, grievance or litigation relating to labor, safety or discrimination matters involving any VoiceStream Employee including charges of unfair labor practices or discrimination complaints, which, if adversely determined, would reasonably be expected to have individually or in the aggregate, a material adverse effect on its financial condition or business. There has been no engagement in any unfair labor practices within the meaning of the National Labor Relations Act which would, individually or in the aggregate, a VoiceStream Material Adverse Effect. SECTION 5.25 There is not presently nor has there been in the past any collective bargaining agreement or union contract with respect to VoiceStream Employees and no collective bargaining agreement with respect to VoiceStream Employees is at the date hereof being negotiated. A-38 313 SECTION 5.26 Vote Required. The only vote of the holders of any class or series of capital stock of VoiceStream necessary to approve this Agreement and the Transactions is the affirmative vote of the holders of a majority of the outstanding shares of VoiceStream Common Stock (the "VoiceStream Stockholders' Approval"). SECTION 5.27 Insurance. The VoiceStream Disclosure Schedules set forth a list and brief description of all policies of fire, liability and other forms of insurance and material fidelity bonds held by the VoiceStream Group. The VoiceStream Group's assets, business, equipment, property and operations are adequately insured against loss or damage and all other hazards or risks of the character usually insured against by companies in the same or similar business and such insurance shall be continued in full force and effect through 11:59 p.m. on the Effective Time. Each such policy and fidelity bond is in full force and effect, all premiums due and payable under such policies and fidelity bonds have been and on the Effective Time will be paid in full, and there are no disputed claims arising under such policies or fidelity bonds. SECTION 5.28 Bank Accounts. The Disclosure Schedule sets forth a complete list of all bank accounts, savings deposits, money-market accounts, certificates of deposit, safety deposit boxes, and similar investment accounts with banks or other financial institutions maintained by or on behalf of the VoiceStream or any VoiceStream Subsidiary showing the depository bank or institution address, appropriate bank contact personnel, account number and names of signatories. SECTION 5.29 Transactions with Affiliates. No Affiliate of the VoiceStream Group or VoiceStream Investment nor any stockholder, officer, director, partner, member, consultant or employee of any thereof, is at the date hereof a party to any transaction with any member of the VoiceStream Group, or VoiceStream Investment including any contract or arrangement providing for the furnishing of services to or by, providing for rental of real or personal property (including intellectual property) to or from, or otherwise requiring payments to or from any member of the VoiceStream Group, VoiceStream Investment, or any Affiliate thereof. SECTION 5.30 Not an Interested Stockholder. As of the date of this Agreement, neither VoiceStream nor any of its Affiliates is an "Interested Stockholder" as such term is defined in Section 203 of the Delaware Law. SECTION 5.31 Representations with Respect to Holding Company. (a) There is currently no indebtedness between Omnipoint common shareholders and Holding Company, and none will be created as a result of the Transactions, other than Holding Company's obligation to pay cash to Omnipoint shareholders pursuant to Section 3.3. of the Agreement. (b) Immediately following the Transactions, Omnipoint shareholders and VoiceStream shareholders will collectively own at least 80 percent of the total combined voting power of all classes of Holding Company's stock entitled to vote and at least 80 percent of the total number of shares of all other classes of Holding Company's stock. (c) Each Omnipoint shareholder and VoiceStream shareholder will receive stock (and, in the case of Omnipoint shareholders, cash) of Holding Company with an aggregate value approximately equal to the fair market value of their stock transferred to Holding Company. (d) Holding Company is not, nor will it be, an investment company within the meaning of Section 351(e) of the Code immediately after the Transactions. (e) Holding Company, Omnipoint and VoiceStream will each remain in existence following the Transactions. Holding Company will retain the Omnipoint Shares and VoiceStream Shares, and there is no plan or intention on the part of Holding Company to liquidate Omnipoint or VoiceStream or otherwise dispose of such shares. A-39 314 (f) To the knowledge of Holding Company there is no plan or intention on the part of any Omnipoint shareholder or VoiceStream Shareholders to sell, exchange, transfer or otherwise dispose of any stock of Holding Company received in the Transactions, except that such Omnipoint shareholders and VoiceStream shareholders as are partnerships for U.S. federal income tax purposes may distribute such Holding Company stock to one or more of their partners (other than to a partner which would, immediately after such distribution, own 5 percent or more of Holding Company's stock, taking into account such partner's pro rata share of any Holding Company stock held by the partnership). ARTICLE 6 COVENANTS OF OMNIPOINT Omnipoint agrees that: SECTION 6.1 Omnipoint Interim Operations. Except as set forth in the Omnipoint Disclosure Schedule or as otherwise expressly contemplated hereby, without the prior written consent of VoiceStream, Omnipoint shall, and shall cause each member of the Omnipoint Group to, conduct its business in all material respects in the ordinary course consistent with past practice and use all reasonable efforts to: (i) preserve intact its present business organization; (ii) keep available the services of its key officers and key employees; (iii) maintain in effect all material foreign, federal, state and local licenses, approvals and authorizations, including, without limitation, the Omnipoint FCC Licenses, all material licenses and permits that are required for Omnipoint or any Omnipoint Subsidiary to carry on its business and (iv) preserve existing relationships with its material partners, lenders, suppliers and others having material business relationships with it so that the business of the Omnipoint Group shall not be adversely affected in any material respect as of the Effective Time. Further, and without limiting the generality of the foregoing, except as set forth in Section 6.1 of the Omnipoint Disclosure Schedule, from the date hereof until the Effective Time, without the prior written consent of VoiceStream, Omnipoint shall not, nor shall it permit any member of the Omnipoint Group or Omnipoint Investment to: (a) amend its certificate of incorporation or bylaws or other applicable governing instrument; (b) amend any term of any of its outstanding securities; (c) split, combine, subdivide or reclassify any shares of its capital stock or other equity interests or declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of its capital stock, or redeem, repurchase or otherwise acquire or offer to redeem, repurchase, or otherwise acquire any of its securities or any securities of any member of the Omnipoint Group or Omnipoint Investment except for dividends paid by any Omnipoint Subsidiary that is, directly or indirectly, wholly owned by Omnipoint; (d) adopt a plan or agreement of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other material reorganization (other than a merger or consolidation between wholly owned Omnipoint Subsidiaries); (e) issue, deliver or sell, or authorize the issuance, delivery or sale of, any shares of its capital stock of any class or other equity interests or any securities convertible into or exercisable for, or any rights, warrants or options to acquire, any such capital stock or other equity interests, other than (i) the issuance of shares of Omnipoint Common Stock upon the exercise of currently outstanding stock options or warrants in accordance with their present terms, (ii) issuances pursuant to the conversion of convertible securities outstanding on the date hereof in accordance with their present terms and (iii) the granting of options to acquire shares of A-40 315 Omnipoint Common Stock in accordance with Section 6.1 of the Omnipoint Disclosure Schedule; (f) incur any capital expenditures except as set forth in the Omnipoint Disclosure Schedule; (g) acquire (by merger, consolidation, acquisition of stock or assets or otherwise) any corporation, limited liability company, partnership, other business organization or division thereof, licenses or other assets except for (i) capital expenditures, which shall be governed by clause (f), (ii) pursuant to agreements in effect as of the date hereof and listed on the Omnipoint Disclosure Schedule, or (iii) tangible assets used in the ordinary course of business of Omnipoint and the Omnipoint Subsidiaries in a manner that is consistent with past practice; (h) other than pursuant to agreements in effect as of the date hereof and listed on the Omnipoint Disclosure Schedule, sell, lease, license, encumber or otherwise transfer any assets (including any licenses or Investment Interest) having a fair market value exceeding $5,000,000 in any one transaction or series of related transactions or $10,000,000 in the aggregate; (i) incur, assume or guarantee any Indebtedness other than pursuant to agreements in effect on the date hereof and listed on the Omnipoint Disclosure Schedule; (j) create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than Liens incurred in the ordinary course of business to secure indebtedness or other obligations permitted by this Agreement; (k) create, incur, assume or suffer to exist any obligation whereby Omnipoint or any Omnipoint Subsidiary guarantees any Indebtedness, leases, dividends or other obligations of any third party; (l) make any loan, advance or capital contributions to or investment in any Person, or acquire any Investment Interest, other than loans, advances or capital contributions to or investments in its wholly owned Subsidiaries; (m) except for capital expenditures, which shall be governed by clause (f), engage in or enter into any transaction or commitment, enter into any contract or agreement, or relinquish or amend in any material respect any contract or other right, in any case, material to the Omnipoint Group, taken as a whole, other than transactions and commitments in the ordinary course of business consistent with past practices and those contemplated by this Agreement; (n) enter into any agreement or arrangement that materially limits or otherwise materially restricts Omnipoint, any Omnipoint Subsidiary or any of their respective Affiliates or any successor thereto or that could, after the Effective Time, limit or restrict VoiceStream, any VoiceStream Subsidiary, the Surviving Corporation or any of their Affiliates, from engaging in the business of providing wireless communications services or developing wireless communications technology anywhere in the world or otherwise from engaging in any other business; (o) except as required pursuant to any written agreements listed on the Omnipoint Disclosure Schedule and existing on the date hereof or as otherwise mandated by law as of the date hereof (i) enter into any commitment to provide any severance or termination pay to (or amend any existing arrangement with) any director, officer or employee of Omnipoint or any Omnipoint Subsidiary that calls for payments in excess of $200,000 in the aggregate for all such directors, officers, or (ii) increase the benefits payable under any existing severance or termination pay policy or employment agreement (other than as may be increased by function of the existing terms of any such policy or agreement), (iii) enter into any employment, deferred compensation or other similar agreement (or amend any such existing agreement) with any director, officer or employee of Omnipoint or any Omnipoint Subsidiary that calls for annual payments in excess of $125,000, (iv) establish, adopt or amend (except as required by applicable A-41 316 law) any collective bargaining, bonus, profit-sharing, thrift, pension, retirement, deferred compensation, compensation, stock option, restricted stock or other benefit plan or arrangement covering any director, officer or employee of Omnipoint or any Omnipoint Subsidiary, except that Omnipoint and the Omnipoint Subsidiaries may amend any such existing agreement or plan or adopt a successor plan or arrangement to the extent mandated by applicable law or to the extent that such amendment would not result in a more than de minimis increase in the costs or liabilities under such agreement or plan, (v) increase the compensation, bonus or other benefits payable to any director, officer or employee of Omnipoint or any Omnipoint Subsidiary or (vi) amend the terms of any outstanding option or right to purchase shares of Omnipoint Common Stock; (p) change (i) its methods of accounting or accounting practices in any material respect, except as required by concurrent changes in U.S. GAAP or by Law or (ii) its fiscal year; (q) make, or amend in any respect the terms of any Investment Interest, which cannot be terminated within 30 days of the Effective Time without any penalty; (r) settle, or propose to settle, any material litigation, investigation, arbitration, proceeding or other claim; (s) make any material tax election or enter into any settlement or compromise of any material tax liability; (t) take any action, other than as expressly permitted by this Agreement, that would make any representation or warranty of Omnipoint hereunder inaccurate in any material respect at the Effective Time; or (u) agree or commit to do any of the foregoing; provided that the limitations set forth above shall not apply to any transaction exclusively between (i) Omnipoint and any Omnipoint Subsidiary that is wholly owned by Omnipoint or between any such wholly owned Omnipoint Subsidiaries and (ii) any member or members of the Omnipoint Group and any member or members of the VoiceStream Group. SECTION 6.2 No Solicitation. (a) From the date hereof until the termination hereof, Omnipoint will not, and will cause the Omnipoint Subsidiaries, Omnipoint Affiliates, and the officers, directors, employees, investment bankers, attorneys, accountants, consultants or other agents or advisors of Omnipoint, the Omnipoint Subsidiaries and the Omnipoint Affiliates not to, directly or indirectly: (i) take any action to solicit, initiate, facilitate or encourage the submission of any Acquisition Proposal; (ii) other than in the ordinary course of business and not related to an Acquisition Proposal, engage in any discussions or negotiations with, or disclose any non-public information relating to Omnipoint or any Omnipoint Subsidiary or afford access to the properties, books or records of Omnipoint or any Omnipoint Subsidiary to, any Person who is known by Omnipoint to be considering making, or has made, an Acquisition Proposal; (iii) (A) approve any transaction under Section 203 of the Delaware Law or (B) approve of any Person's becoming an "interested stockholder" under Section 203 of Delaware Law or (iv) enter into any agreement with respect to an Acquisition Proposal. Nothing contained in this Agreement shall prevent the Board of Directors of Omnipoint from complying with Rule 14e-2 and Rule 14d-9 under the 1934 Act with regard to an Acquisition Proposal; provided that the Board of Directors of Omnipoint shall not recommend that the stockholders of Omnipoint tender their shares in connection with a tender offer except to the extent the Board of Directors of Omnipoint by a majority vote determines in its good faith judgment that such a recommendation is required to comply with A-42 317 the fiduciary duties of the Board of Directors of Omnipoint to shareholders under applicable Delaware Law, after receiving the advice of outside legal counsel. (b) Omnipoint will notify VoiceStream promptly (but in no event later than 24 hours) after receipt by Omnipoint (or any of its advisors) of any Acquisition Proposal, or of any request (other than in the ordinary course of business and not related to an Acquisition Proposal) for non-public information relating to Omnipoint or any of the Omnipoint Subsidiaries or for access to the properties, books or records of Omnipoint or any Omnipoint Subsidiary by any Person who is known to be considering making, or has made, an Acquisition Proposal. Omnipoint shall provide such notice orally and in writing and shall identify the Person making, and the terms and conditions of, any such Acquisition Proposal, indication or request. Omnipoint shall keep VoiceStream fully informed, on a prompt basis (but in any event no later than 24 hours), of the status and details of any such Acquisition Proposal, indication or request. Omnipoint shall, and shall cause the Omnipoint Subsidiaries and the directors, employees and other agents of Omnipoint and the Omnipoint Subsidiaries to, cease immediately and cause to be terminated all activities, discussions or negotiations, if any, with any Persons conducted prior to the date hereof with respect to any Acquisition Proposal. SECTION 6.3 Access to Information. Omnipoint shall (i) give to VoiceStream and VoiceStream's counsel, financial advisors, auditors and other authorized representatives unlimited access during normal business hours to the offices, properties, books and records of Omnipoint and the Omnipoint Subsidiaries, (ii) at VoiceStream's request, furnish to VoiceStream and VoiceStream's counsel, financial advisors, auditors and other authorized representatives all financial and operating data (including without limitation, all subscriber information (including a breakdown of all additions and disconnections) and all information concerning all capital expenditures) and other information to which the Omnipoint Board of Directors or the senior executives of Omnipoint are provided or have access to (all of the foregoing to be furnished to VoiceStream simultaneously with the same being furnished to any member of Omnipoint's Board of Directors or the senior executives of Omnipoint), and (iii) instruct its employees, counsel, financial advisors, auditors and other authorized representatives to cooperate with the other party in VoiceStream's investigation. Any investigation pursuant to this Section 6.3 shall be conducted in such manner as not to interfere unreasonably with the conduct of the business of Omnipoint and the Omnipoint Subsidiaries. The foregoing information shall be held in confidence to the extent required by, and in accordance with, the provisions of the Confidentiality Agreement. SECTION 6.4 Omnipoint shall use its reasonable best efforts to take, or cause to be taken, all actions and do, or cause to be done, all things necessary, proper or advisable under applicable law and regulations to consummate the closing under the CIRI Agreements pursuant to the terms thereof. Prior to the Effective Time, upon the satisfaction or waiver by VoiceStream or Omnipoint, as applicable of all the conditions for the consummation of the Transactions, Omnipoint shall in accordance with the CIRI Agreements sell, assign, transfer, convey and deliver to each Purchaser (as defined in each of the CIRI Agreements) the FCC Licenses and Schedule I, Schedule II and Schedule III Assets and Assumed Liabilities (as defined in each of the CIRI Agreements). A-43 318 ARTICLE 7 COVENANTS OF VOICESTREAM AND HOLDING COMPANY VoiceStream and Holding Company agree that: SECTION 7.1 VoiceStream Interim Operations. Except as set forth in the VoiceStream Disclosure Schedule or as otherwise expressly contemplated hereby, without the prior consent of Omnipoint, from the date hereof until the Effective Time, VoiceStream shall not, nor shall it permit any members of the VoiceStream Group or any VoiceStream Investment to: (a) amend its certificate of incorporation, bylaws or other applicable governing instrument; (b) amend any material terms of the shares of VoiceStream Common Stock; (c) split, combine, subdivide or reclassify any shares of VoiceStream Common Stock or declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of VoiceStream Common Stock, except for (i) regular quarterly cash dividends, (ii) regular dividends on any future series of preferred stock pursuant to the terms of such securities, or (iii) dividends paid by any VoiceStream Subsidiary to VoiceStream or any VoiceStream Subsidiary that is, directly or indirectly, wholly owned by VoiceStream; (d) take any action that would or would reasonably be expected to prevent, impair or materially delay the ability of Omnipoint or VoiceStream to consummate the transactions contemplated by this Agreement; (e) change (i) its methods of accounting or accounting practices in any material respect except as required by concurrent changes in U.S. GAAP or by law or (ii) its fiscal year; (f) enter into or acquire any new line of business that (i) is material to the VoiceStream Group taken as a whole and (ii) is not strategically related to the current business or operations of the VoiceStream Group; or (g) agree or commit to do any of the foregoing. SECTION 7.2 Director and Officer Liability. (a) Holding Company shall indemnify and hold harmless and advance expenses to the present and former officers and directors of each member of the Omnipoint Group and the present and former officers and directors of each member of the VoiceStream Group, and each person who prior to the Effective Time becomes an officer or director of any member of the Omnipoint Group or any member of the VoiceStream Group (each an "Indemnified Person"), in respect of acts or omissions by them in their capacities as such occurring at or prior to the Effective Time (including, without limitation, for acts or omissions occurring in connection with this Agreement and the consummation of the Transactions) to the same extent provided under Omnipoint's certificate of incorporation and bylaws in effect on the date hereof (with respect to the officers and directors of the Omnipoint Group) or VoiceStream's certificate of incorporation and bylaws in effect on the date hereof (with respect to the officers and directors of the VoiceStream Group) (collectively, the "Indemnified Losses"); provided that such indemnification shall be subject to any limitation imposed from time to time under applicable law. Without limiting the generality of the foregoing, the Indemnified Losses shall include reasonable costs of prosecuting a claim under this Section 7.2(a). Holding Company shall periodically advance or reimburse each Indemnified Person for all reasonable fees and expenses of counsel constituting Indemnified Losses as such fees and expenses are incurred; provided that such Indemnified Person shall agree to promptly repay to Holding Company the amount of any such reimbursement if it shall be judicially determined by judgment or order not subject to further A-44 319 appeal or discretionary review that such Indemnified Person is not entitled to be indemnified by Holding Company in connection with such matter. (b) For six years after the Effective Time, Holding Company shall provide officers' and directors' liability insurance in respect of acts or omissions occurring prior to the Effective Time (including, without limitation, for acts or omissions occurring in connection with this Agreement and the consummation of the Transactions) covering each such Indemnified Person currently covered by Omnipoint's officers' and directors' liability insurance policy (with respect to officers and directors of the Omnipoint Group) or by VoiceStream's officers' and directors' liability insurance policy (with respect to officers and directors of the VoiceStream Group) on terms with respect to coverage and amount (including with respect to the payment of attorney's fees) no less favorable than those of such policy in effect on the date hereof (which policies have been made available by Omnipoint to VoiceStream and by VoiceStream to Omnipoint); provided that if the aggregate annual premiums for such insurance during such period shall exceed 200% of the per annum rate of premium paid by Omnipoint (with respect to the liability insurance policies of the officers and directors of Omnipoint) or VoiceStream (with respect to the liability insurance policies of the officers and directors of VoiceStream) as of the date hereof for such insurance, then Holding Company shall provide a policy with the best coverage as shall then be available at 200% of such rate. (c) The rights of each Indemnified Person and its heirs and legal representatives under this Section 7.2 shall be in addition to any rights such Person may have under the certificate of incorporation or bylaws of any member of the Omnipoint Group (with respect to the Omnipoint officers and directors) or the VoiceStream Group (with respect to the VoiceStream officers and directors), or under Delaware Law or any other applicable laws. These rights shall survive consummation of the Transactions and are intended to benefit, and shall be enforceable by, each Indemnified Person. SECTION 7.3 Listing of Stock. Holding Company shall use its reasonable best efforts to cause (i) the shares of Holding Company Common Stock to be issued in connection with the Transactions (and the shares of Holding Company Common Stock underlying the securities to be issued pursuant to Section 3.6) to be approved for listing on NASDAQ, subject to official notice of issuance, and (ii) the securities of Omnipoint to be de-listed from NASDAQ following the Transactions. SECTION 7.4 Holding Company Board of Directors. Immediately prior to the Effective Time, the Board of Directors of Holding Company will take all necessary action to expand the size of its Board of Directors of Holding Company to 14 members and to appoint to the Holding Company Board, as of the Effective Time, 4 current members of the Omnipoint Board selected by Omnipoint who agrees to serve in that capacity (the "New Directors"). From the Effective Time until and including the second annual meeting of the stockholders of Holding Company taking place after the Effective Time, the Board of Directors of Holding Company will nominate the New Directors for reelection to the Holding Company Board of Directors at each subsequent annual or special meeting of the stockholders of Holding Company at which the New Directors' term expires. The provisions of this Section 7.4 shall survive the consummation of the Transactions and are intended to benefit, and shall be enforceable by, the New Directors. SECTION 7.5 Employee Matters. (a) Holding Company shall, or shall cause its Subsidiaries to: (i) honor the terms of all Omnipoint Employee Plans and Omnipoint Benefit Arrangements as in effect on the date hereof (or as amended with the prior consent of VoiceStream) and to pay the benefits required under such terms of such plans and arrangements, in each case subject to Section 7.5(c); and A-45 320 (ii) until December 31, 2001 (the "Benefits Maintenance Period"), with respect to employees of Omnipoint or any of Omnipoint Subsidiaries at the Effective Time ("Transferred Employees"), provide a level of employee benefits and aggregate compensation which is substantially comparable in the aggregate to the level of employee benefits and aggregate compensation provided by Omnipoint and Omnipoint Subsidiaries as of the Effective Time (other than the benefits provided under any severance or termination benefit plans and arrangements of Omnipoint or any Omnipoint Subsidiary). (b) If Transferred Employees are included in any VoiceStream Benefit Arrangement or VoiceStream Employee Plan, including without limitation, any plan or arrangement providing vacation benefits, the Transferred Employees shall receive credit for service prior to the Effective Time with Omnipoint and the Omnipoint Subsidiaries and their predecessors to the same extent such service was counted under similar Omnipoint Employee Plans and Omnipoint Benefit Arrangements for purposes of determining eligibility to participate, vesting and the level of benefits provided. If Transferred Employees or their dependents are included in any medical, dental or health plan other than the plan or plans they participated in at the Effective Time (a "Successor Plan"), any such Successor Plan shall (i) waive all limitations as to pre-existing conditions, exclusions and waiting periods, except to the extent such limitations, exclusions or waiting periods were applicable to such employees or dependents under any corresponding Omnipoint Employee Plan at the Effective Time, and (ii) provide each such employee or dependent with credit for any copayments and deductibles paid prior to the date of inclusion in the Successor Plan in satisfying any applicable deductible or out-of-pocket requirements under such Successor Plan. (c) Notwithstanding any of the above, nothing contained herein shall be construed as requiring VoiceStream or any VoiceStream Subsidiary to continue any specific Employee Plan or Benefit Arrangement or to continue the employment of any specific person, provided, however, that any changes that VoiceStream or any VoiceStream Subsidiary may make to any such Employee Plan or Benefit Arrangement are permitted by the terms of the applicable Employee Plan or Benefit Arrangement under any applicable Law. SECTION 7.6 Access to Information. VoiceStream, between the date hereof and the earlier of the effective time of the termination of this Agreement, between the date hereof and the earlier of the Effective Time or the Termination of this Agreement, shall (i) give to Omnipoint and Omnipoint's counsel, financial advisors, auditors and other authorized representatives reasonable access during normal business hours to the offices, properties, books and records of VoiceStream and the VoiceStream Subsidiaries, (ii) furnish to Omnipoint and Omnipoint's counsel, financial advisors, auditors and other authorized representatives such financial and operating data and other information as Omnipoint may reasonably request and (iii) instruct its employees, counsel, financial advisors, auditors and other authorized representatives to cooperate with Omnipoint's investigation. Any investigation pursuant to this Section 7.6 shall be conducted in such manner as not to interfere unreasonably with the conduct of the business of VoiceStream. SECTION 7.7 Covenants with Respect to Holding Company. (a) Holding Company will not issue any stock as compensation for services in connection with the Transactions or take any other action which may cause such Transactions not to qualify as an exchange under Section 351 of the Code. (b) Holding Company will retain the VoiceStream and Omnipoint shares following the Transactions and Holding Company will not liquidate Omnipoint or VoiceStream or otherwise dispose of such shares unless it obtains an opinion of counsel to the effect that such liquidation A-46 321 or disposition will not cause the Transactions to fail to qualify as an exchange under Section 351 of the Code. (c) Holding Company will not take any action, or cause VoiceStream or Omnipoint to take any action, which may cause the Transactions not to qualify as an exchange under Section 351 of the Code. SECTION 7.8 Registration Rights. Not later than 15 days after the Closing Date, Holding Company shall prepare and file with the SEC a registration statement (the "Affiliate Registration Statement") on Form S-1, S-3, if the Holding Company is eligible to use such form, or any other filing form which Holding Company shall deem appropriate, with respect to the sale of the shares of Holding Company Common Stock to be held by any "affiliate" (as such term is defined under Rule 145 of the 1933 Act) (and their limited partners) of either Omnipoint or VoiceStream immediately following the Effective Time (the "Affiliate Shares"). Holding Company shall take all reasonable steps necessary to ensure that the Affiliate Registration Statement does not, as of its effective date, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Holding Company shall use its best efforts to have the Affiliate Registration Statement declared effective as soon as practicable after the Closing Date and shall keep the Affiliate Registration Statement effective subject to appropriate "blackout" periods and other exceptions and limitations as the Board of Directors of Holding Company determines in good faith to be customary and appropriate until the earlier of (i) one year after its effective date, (ii) all Affiliate Shares have been sold thereunder, or (iii) all Affiliate Shares may be sold without registration under the 1933 Act. ARTICLE 8 COVENANTS OF VOICESTREAM AND OMNIPOINT Each of the parties hereto agree that: SECTION 8.1 Best Efforts. (a) Subject to the terms and conditions of this Agreement, each of the parties will use its reasonable best efforts to promptly (i) take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the Transactions as soon as practicable, including preparing and filing as promptly as practicable all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of information, applications and other documents, and (ii) obtain and maintain all approvals, consents, registrations, permits, authorizations and other confirmations required to be obtained from any third party (including consents of the FAA and other Governmental Bodies) that are necessary, proper or advisable to consummate the Transactions. In connection with the foregoing, Omnipoint will cooperate with and assist VoiceStream, and, with respect to matters that are within Omnipoint's power or control, will use its best efforts to promptly (i) take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the Transactions as soon as practicable, including preparing and filing as promptly as practicable all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of information, applications and other documents, (ii) obtain and maintain all approvals, consents, registrations, permits, authorizations and other confirmations required to be obtained from any third party that are necessary, proper or advisable to consummate the Transactions; provided, however, no member of the VoiceStream Group or any VoiceStream Subsidiary shall be required to divest or hold separate or otherwise take or commit to take any action that limits its freedom of action with respect to (or Holding Company's ability to retain) A-47 322 any member of the Omnipoint Group or any Omnipoint Investment or any material portion of the assets of the VoiceStream Group or any of the VoiceStream Group's business, product lines, or assets of the Omnipoint Group, (iii) consummate the CIRI Transactions, and (iv) consummate the Hutchison Transaction. At VoiceStream's request, Omnipoint will commit to and implement any divestiture, hold separate or similar transaction or action with respect to any asset or business of the Omnipoint Group or any Omnipoint Investment, which commitment and implementation may, at Omnipoint's option, be conditioned upon 4nd effective as of the Effective Time. Subject to applicable laws relating to the exchange of information, VoiceStream and Omnipoint shall have the right to review in advance, and to the extent practicable to consult with each other on, all the information relating to any member of the Omnipoint Group or any Omnipoint Investment or any member of the VoiceStream Group or VoiceStream Investment, as applicable, that appears in any filing made with, or written materials submitted to, any third party and/or any Governmental Bodies in connection with the Transactions. (b) As promptly as practicable after the execution and delivery of this Agreement, VoiceStream and Omnipoint shall prepare all appropriate applications for FCC approval, and such other documents as may be required, with respect to the transfer of control of Omnipoint and VoiceStream to Holding Company (collectively, the "FCC Applications"). Not later than the tenth business day following execution and delivery of this Agreement, Omnipoint and VoiceStream will exchange with each other their respective completed portions of the FCC Applications. Not later than the fifteenth Business Day following the execution and delivery of this Agreement, Omnipoint and VoiceStream shall file, or cause to be filed, the FCC Applications. If the Effective Time shall not have occurred for any reason within any applicable initial consummation period, and neither Omnipoint nor VoiceStream shall have terminated this Agreement pursuant to Section 10.1, VoiceStream and Omnipoint shall jointly request one or more extensions of the consummation period of such grant. No party hereto shall knowingly take, or fail to take, any action if the intent or reasonably anticipated consequence of such action or failure to act is, or would be, to cause the FCC not to grant approval of the FCC Applications or delay either such approval or the consummation of the transfer of control of Omnipoint. VoiceStream and Omnipoint shall each pay one-half ( 1/2) of any FCC fees, if applicable, in connection with the filing or granting of approval of the FCC Applications. Each of VoiceStream and Omnipoint shall bear its own expenses in connection with the preparation and prosecution of the FCC Applications. VoiceStream and Omnipoint shall each use all reasonable efforts to prosecute the FCC Applications in good faith and with due diligence before the FCC and in connection therewith shall take such action or actions as may be necessary or reasonably required in connection with the FCC Applications, including furnishing to the FCC any documents, materials or other information requested by the FCC in order to obtain such FCC approval as expeditiously as practicable. (c) Promptly after the date hereof, VoiceStream and Omnipoint (as may be required pursuant to the HSR Act) will complete all documents required to be filed with the Federal Trade Commission and the Department of Justice in order to comply with the HSR Act and, not later than 10 Business Days after the date hereof, together with the Persons who are required to join in such filings, shall file the same with the appropriate Governmental Bodies. VoiceStream and Omnipoint shall each pay one-half ( 1/2) of any fees that may be payable in connection with the filing pursuant to the HSR Act. VoiceStream, and Omnipoint shall promptly furnish all materials thereafter required by any of the Governmental Bodies having jurisdiction over such filings, and shall take all reasonable actions and shall file and use all reasonable efforts to have declared effective or approved all documents and notifications with any such Governmental Bodies, as may be required under the HSR Act or other federal antitrust laws for the consummation of the Transactions and any other transactions contemplated hereby. A-48 323 (d) In addition to the filings required by the HSR Act and the Communications Act, the Parties shall (i) as promptly as possible and in any event within 15 days after the date hereof file with any other applicable Governmental Bodies (including, but not limited to the FAA) the applications and related documents required to be filed by such Governmental Bodies (and prosecute diligently any such applications, including providing such information as such Governmental Bodies may reasonably request) in order to consummate the Transactions, (ii) cooperate with each other as may reasonably be requested in connection with the foregoing, and (iii) otherwise use their best efforts to obtain promptly the requested consent and approval of the applications by any applicable Governmental Bodies. VoiceStream and Omnipoint shall each pay one half (1/2) of all filing or other Governmental Body filing or grant fees in connection with the applications requesting its consent to the consummation of the Transactions. SECTION 8.2 Registration Statement and Proxy Statement. VoiceStream and Omnipoint shall cooperate and promptly prepare and file with the SEC as soon as practicable a Registration Statement on Form S-4 (the "Form S-4") under the 1933 Act, with respect to the Holding Company Common Stock issuable in the Mergers, a portion of which Registration Statement shall also serve as the joint proxy statement with respect to the meetings of stockholders of Omnipoint and of VoiceStream in connection with the Transactions (the "Proxy Statement/Prospectus"). The respective parties shall cause the Proxy Statement/Prospectus and the Form S-4 to comply as to form in all material respects with the applicable provisions of the 1933 Act, the 1934 Act and the rules and regulations thereunder. VoiceStream shall use all reasonable efforts, and Omnipoint shall cooperate with VoiceStream, to have the Form S-4 declared effective by the SEC as promptly as practicable and to keep the Form S-4 effective as long as is necessary to consummate the Transactions. VoiceStream shall, as promptly as practicable, provide copies of any written comments received from the SEC with respect to the Form S-4 to Omnipoint and advise Omnipoint of any verbal comments with respect to the Form S-4 received from the SEC. VoiceStream shall use its best efforts to obtain, prior to the effective date of the Form S-4, all necessary state securities laws or "Blue Sky" permits or approvals required to carry out the Transactions and shall pay all expenses incident thereto. VoiceStream agrees that the Proxy Statement/Prospectus and each amendment or supplement thereto at the time of mailing thereof and at the time of the respective meetings of stockholders of Omnipoint and VoiceStream, or, in the case of the Form S-4 and each amendment or supplement thereto, at the time it is filed or becomes effective, shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that the foregoing shall not apply to the extent that any such untrue statement of a material fact or omission to state a material fact was made by VoiceStream in reliance upon and in conformity with written information concerning Omnipoint furnished to VoiceStream by Omnipoint specifically for use in the Proxy Statement/Prospectus. Omnipoint agrees that the written information concerning Omnipoint provided by it for inclusion in the Proxy Statement/Prospectus and each amendment or supplement thereto, at the time of mailing thereof and at the time of the respective meetings of stockholders of Omnipoint and VoiceStream, or, in the case of written information concerning Omnipoint provided by Omnipoint for inclusion in the Form S-4 or any amendment or supplement thereto, at the time it is filed or becomes effective, shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. No amendment or supplement to the Proxy Statement/Prospectus shall be made by VoiceStream or Omnipoint without the approval of the other party. VoiceStream shall advise Omnipoint, promptly after it receives notice thereof, of the time when the Form S-4 has become effective or any supplement or amendment has been filed, the issuance of any stop order, the suspension of the qualification of VoiceStream Common Stock issuable in connection with the Transactions for offering or sale in any jurisdiction, or any request by the SEC for amendment of the Proxy Statement/ A-49 324 Prospectus or the Form S-4 or comments thereon and responses thereto or requests by the SEC for additional information. SECTION 8.3 Public Announcements. So long as this Agreement is in effect, Omnipoint and VoiceStream will consult with each other before issuing any press release or making any public statement with respect to the Transactions and except as may be required by applicable law or any listing agreement with any national securities exchange, will not issue any such press release or make any such public statement without the prior consent of the other party, which consent shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, any such press release or public statement as may be required by applicable law or any listing agreement with any national securities exchange or NASDAQ may be issued without such consent, if the party making such release or statement has used its reasonable efforts to consult with the other party. SECTION 8.4 Further Assurances. At and after the Effective Time, the officers and directors of Holding Company will be authorized to execute and deliver, in the name and on behalf of Omnipoint or VoiceStream, any deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of Omnipoint or VoiceStream, any other actions and things to vest, perfect or confirm of record in Holding Company any and all right, title and interest in, to and under any of the rights, properties or assets of Omnipoint or VoiceStream acquired or to be acquired by Holding Company as a result of, or in connection with, the Transactions. SECTION 8.5 Notices of Certain Events. Each of Omnipoint and VoiceStream shall promptly notify the other of: (a) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the Transactions; (b) any notice or other communication from any Governmental Body in connection with the Transactions; (c) the occurrence, or non-occurrence, of any event the occurrence, or non-occurrence, of which would be reasonably expected to cause any representation or warranty made by it and contained herein to be untrue or inaccurate in any material respect at any time during the period commencing on the date hereof and ending at the Effective Time; provided, however, that the delivery of any notice pursuant to this Section 8.5 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice; (d) any failure of such party to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 8.5 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice; (e) any actions, suits, claims, investigations or proceedings commenced or, to its knowledge threatened against such party which, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 4.13, in the case of Omnipoint, or Section 5.13, in the case of VoiceStream, or which relate to the consummation of the Transactions; and (f) any event, condition or state of facts which could have a Material Adverse Effect on such party. SECTION 8.6 Tax-free Treatment. Prior to the Effective Time, each party shall use its best efforts to cause (i) the VoiceStream Merger to qualify as a reorganization described in Section 368(a) of the Code and/or as an exchange described in Section 351 of the Code and (ii) the Omnipoint Merger, taken together with the VoiceStream Merger and the Hutchison Transaction, to qualify as an exchange described in Section 351 of the Code, to obtain the opinions of counsel A-50 325 referred to in Sections 9.2(b), 9.2(c) and 9.3(b), including the execution of the letters of representation referred to therein, and will not take any action reasonably likely to cause the Mergers not to so qualify. SECTION 8.7 Affiliates. Within 30 days following the date of this Agreement, Omnipoint shall deliver to VoiceStream a letter identifying all known Persons who may be deemed "affiliates" of Omnipoint under Rule 145 of the 1933 Act (a "Omnipoint Rule 145 Affiliate"). Omnipoint shall use its best efforts to obtain a written agreement from each Omnipoint Rule 145 Affiliate as soon as practicable and, in any event, at least 30 days prior to the Effective Time, substantially in the form of Exhibit B hereto. Holding Company shall be entitled to place legends as specified in such Omnipoint Rule 145 Affiliate letters on the certificates evidencing any Holding Company Common Stock to be received by such Affiliates pursuant to the terms of this Agreement, and to issue appropriate stop transfer instructions to the transfer agent for the Holding Company Common Stock, consistent with the terms of such Affiliate letters. SECTION 8.8 Stockholders' Meeting. (a) Each of Omnipoint and VoiceStream shall cause a meeting of its respective stockholders (the "Omnipoint Stockholders' Meeting" and the "VoiceStream Stockholders' Meeting" respectively) to be duly called and held as soon as reasonably practicable for the purpose of voting on the approval and adoption of (i) in the case of VoiceStream, this Agreement, the VoiceStream Merger Agreement and the VoiceStream Merger and (ii) in the case of Omnipoint, this Agreement, the Omnipoint Merger Agreement and the Omnipoint Merger. In connection with each party's respective meeting, each party will, (i) subject to Section 8.8(b), use its reasonable best efforts to obtain such approvals from its respective stockholders and (ii) otherwise comply with all legal requirements applicable to such meeting. (b) Except as provided below, the Board of Directors of each party shall unanimously recommend approval and adoption of this Agreement and the Transactions by its respective stockholders and VoiceStream and Omnipoint shall each take all lawful action to solicit such approval, including timely mailing of the Proxy Statement/Prospectus. Omnipoint shall be permitted to withdraw, or modify in a manner adverse to VoiceStream, its recommendation to its stockholders, but only if (i) the Board of Directors of Omnipoint determines in good faith by majority vote, on the basis of the advice of Omnipoint's outside counsel that it must take such action in order for the Board of Directors to comply with its fiduciary duties under applicable Delaware Law, (ii) Omnipoint shall have delivered to VoiceStream three business days' prior written notice advising Voicestream that it intends to take such action and Omnipoint's Board of Directors has considered any proposed changes to this Agreement (if any) proposed by VoiceStream and (iii) Omnipoint has fully and completely complied with Sections 6.2 and 8.5. Unless this Agreement is previously terminated in accordance with Article 10, each party shall submit this Agreement to its stockholders at the meeting required to be called and held pursuant to Section 8.8(a), even if such party's Board of Directors determines at any time after the date hereof that it is no longer advisable or recommends that its stockholders reject it. SECTION 8.9 Conduct of Business by Holding Company and the Merger Subsidiaries Pending the Mergers. Prior to the Effective Time, the parties shall cause Holding Company and the Merger Subsidiaries to (a) perform their respective obligations under this Agreement and the Merger Agreements in accordance with the terms hereof and thereof and take all other actions necessary or appropriate for the consummation of the Transactions, (b) not incur directly or indirectly any liabilities or obligations except those incurred in connection with the consummation of this Agreement, the Merger Agreements and the Transactions (c) not engage directly or indirectly in any business or activities of any type or kind whatsoever and not enter into any agreements or arrangements with any person or entity, or be subject to or be bound by any obligation or undertaking A-51 326 which is not contemplated by this Agreement or the Merger Agreements and (d) not create, grant or suffer to exist any Lien upon their respective properties or assets which would attach to any properties or assets of VoiceStream or Omnipoint after the Effective Time. ARTICLE 9 CONDITIONS TO THE MERGER SECTION 9.1 Conditions to the Obligations of Each Party. The obligations of Omnipoint, Holding Company and VoiceStream to consummate the Transactions are subject to the satisfaction of the following conditions: (a) the Omnipoint Stockholders' Approval shall have been obtained; (b) any applicable waiting period under the HSR Act relating to the Transactions shall have expired or been terminated; (c) no provision of any applicable law or regulation and no judgment, injunction, order or decree shall prohibit the consummation of the Transactions; (d) the shares of Holding Company Common Stock to be issued in the Transactions shall have been approved for listing on the NASDAQ, subject to official notice of issuance; (e) all Governmental Consents shall have been obtained and be in effect, and be subject to no limitations, conditions, restrictions or obligations, except for such consents the failure to obtain would not, and such limitations, conditions, restrictions or obligation as would not, individually or in the aggregate, be reasonably expected to have a Omnipoint Material Adverse Effect or VoiceStream Material Adverse Effect; (f) no court, arbitrator or Governmental Body shall have issued any order, and there shall not be any statute, rule or regulation restraining or prohibiting the effective operation of the business of VoiceStream and the VoiceStream Subsidiaries or Omnipoint and the Omnipoint Subsidiaries after the Effective Time that would be reasonably expected to have a VoiceStream Material Adverse Effect or Omnipoint Material Averse Effect (after giving effect to the Transactions); (g) the CIRI Transactions shall have been consummated prior to the Effective Time; (h) the VoiceStream Stockholders' Approval shall have been obtained; (i) the Form S-4 shall have become effective and shall be effective at the Effective Time, and no stop order suspending effectiveness of the Form S-4 shall have been issued, no action, suit, proceeding or investigation by the SEC to suspend the effectiveness thereof shall have been initiated and be continuing, or, to the knowledge of VoiceStream or Omnipoint, threatened, and all necessary approvals under state securities laws relating to the issuance or trading of Holding Company Common Stock to be issued to Omnipoint stockholders in connection with the Transactions shall have been received; (j) the Hutchison Transaction shall be consummated on, or prior to, the Effective Time; and (k) the FCC Consent shall have become a Final Order and shall not contain any conditions with respect to Omnipoint or VoiceStream, which conditions would have a VoiceStream Material Adverse Effect or Omnipoint Material Adverse Effect. A-52 327 SECTION 9.2 Conditions to the Obligations of VoiceStream. The obligations of VoiceStream to consummate the Transactions are subject to the satisfaction of the following further conditions: (a) (i) Omnipoint shall have performed in all material respects all of its obligations hereunder required to be performed by it at or prior to the Effective Time, (ii) the representations and warranties of Omnipoint contained in this Agreement and in any certificate or other writing delivered by Omnipoint pursuant hereto, disregarding all qualifications and exceptions contained therein relating to materiality or a Omnipoint Material Adverse Effect or any similar standard or qualification, shall be true and correct at and as of the Effective Time, as if made at and as of such time (other than representations or warranties that address matters only as of a certain date which shall be true and correct as of such date), with only such exceptions as, individually or in the aggregate, have not had and would not be reasonably expected to have a Omnipoint Material Adverse Effect, and (iii) VoiceStream shall have received a certificate signed by an executive officer of Omnipoint to the foregoing effect; (b) VoiceStream shall have received an opinion of Jones Day, in form and substance reasonably satisfactory to VoiceStream on the basis of certain facts, representations and assumptions set forth in the opinion, dated the Closing Date, to the effect that (i) the VoiceStream Merger will be treated for federal income tax purposes as a reorganization described in Section 368(a) of the Code, and (ii) each of VoiceStream, Holding Company and, in the case of a reorganization described in Section 368(a)(2)(E) of the Code, Merger Sub A, will be a party to the reorganization within the meaning of Section 368(b) of the Code; or to the effect that the VoiceStream Merger will be treated as a transfer of property by the VoiceStream stockholders, other than holders of Dissenting Shares, to Holding Company described in Section 351(a) of the Code. In rendering such opinion, such counsel shall be entitled to rely upon certain documentation including representations of officers of VoiceStream and Holding Company in substantially the same form as Exhibits C and D; (c) VoiceStream shall have received an opinion of Jones Day, in form and substance reasonably satisfactory to VoiceStream on the basis of certain facts, representations and assumptions set forth in the opinion, dated the Closing Date, to the effect that the Transactions should not cause the spinoff of VoiceStream on May 3, 1999 (the "Spinoff") to fail to be a transaction described in Section 355(a) of the Code with respect to the shareholders of Western. In rendering such opinion, such counsel shall be entitled to rely upon certain documentation, including representations of officers of VoiceStream; (d) no Default Event shall occur, or shall reasonably be expected to occur, as a result of the consummation of the Transactions; (e) VoiceStream shall have received an opinion of regulatory counsel of Omnipoint, dated the Effective Time, containing the items listed on Exhibit E; (f) VoiceStream shall have received an opinion of corporate counsel to Omnipoint in form and substance reasonably acceptable to VoiceStream; (g) no more than 10% of the shares of Omnipoint Common Stock outstanding immediately prior to the Effective Time shall be Dissenting Shares; and (h) no more than 10% of the shares of VoiceStream Common Stock outstanding immediately prior to the Effective Time shall be Dissenting Shares. SECTION 9.3 Conditions to the Obligations of Omnipoint. The obligations of Omnipoint to consummate the Transactions are subject to the satisfaction of the following further conditions: (a) VoiceStream shall have performed in all material respects all of its obligations hereunder required to be performed by it at or prior to the Effective Time; A-53 328 (b) Omnipoint shall have received the opinion of Piper Marbury, based upon reasonable requested representation letters and dated the Closing Date, to the effect that (i) the Omnipoint Merger will be treated as a transfer of property to Holding Company by the holders of Omnipoint Common Stock described in Section 351(a) or Section 351(b) of the Code and (ii) no gain or loss will be recognized for federal income tax purposes by Omnipoint in connection with the Transactions. In rendering such opinion, such counsel shall be entitled to rely upon certain documentation including representations of officers of Omnipoint, VoiceStream and Holding Company and of 5% or greater shareholders of Omnipoint and VoiceStream, in substantially the same form as Exhibits F-1 through F-5. (c) the representations and warranties of VoiceStream contained in this Agreement and in any certificate or other writing delivered by VoiceStream pursuant hereto, disregarding all qualifications and exceptions contained therein relating to materiality or VoiceStream Material Adverse Effect or any similar standard or qualification shall be true at and as of the Effective Time as if made at and as of such time (other than representations and warranties that address matters only as of a certain date, which shall be true as of such date), with only such exceptions as, individually or in the aggregate, have not had and would not be reasonably expected to have a VoiceStream Material Adverse Effect; (d) Omnipoint shall have received an opinion of regulatory counsel to VoiceStream, dated the Effective Time, containing the items listed on Exhibit G; (e) Omnipoint shall have received a certificate signed by an executive officer of VoiceStream certifying as to the matters set forth in (a) and (c); (f) Omnipoint shall have received an opinion of corporate counsel to VoiceStream in form and substance reasonably acceptable to Omnipoint; and (g) VoiceStream shall not have agreed to any modification of the exchange rights agreement with the Cook Entities which would increase the number of shares of Holding Company Common Stock issuable to the Cook Entities upon exercise of their exchange rights which they received in the CIRI Transactions. Notwithstanding anything contained to the contrary in Section 9.3(c) or anywhere else in this Agreement, VoiceStream may enter into any Subsequent Transaction, and neither any changes of any representation or warranty of VoiceStream contained in this Agreement as a result of any Subsequent Transaction, nor any amendments or exceptions to the VoiceStream Disclosure Schedule resulting from or related to any Subsequent Transaction, shall result in a failure of the conditions set forth in Section 9.3(c); provided, in each case, that any such Subsequent Transaction would not, or would reasonably not be expected to prevent, impair or materially delay the ability of Omnipoint or VoiceStream to consummate the Transactions. ARTICLE 10 TERMINATION SECTION 10.1 Termination. This Agreement may be terminated and the Transactions may be abandoned at any time prior to the Effective Time (notwithstanding any approval of this Agreement by the stockholders of Omnipoint or of VoiceStream): (a) by mutual written agreement of Omnipoint and VoiceStream; (b) by either Omnipoint or VoiceStream, if: (i) the Transactions have not been consummated on or before March 31, 2000 (the "End Date"); provided that if (A)(x) the Effective Time has not occurred by March 31, A-54 329 2000 by reason of the non-satisfaction of any of the conditions set forth in Sections 9.1(a), 9.1(b), 9.1(c), 9.1(d), 9.1(e), 9.1(f), 9.1(g), 9.1(i), 9.1(j) and 9.1(k) and (y) all other conditions in Article 9 have theretofore been satisfied or waived or are then capable of being promptly satisfied then, either party may, upon written notice to the other party given on or before March 31, 2000, extend the End Date to June 30, 2000; provided further that the right to terminate this Agreement pursuant to this Section 10.1(b)(i) shall not be available to any party whose breach of any provision of this Agreement results in the failure of the Transactions to be consummated by the End Date; or (ii) (A) there shall be any law or regulation that makes consummation of the Transactions illegal or otherwise prohibited or (B) any judgment, injunction, order or decree of any court or other Governmental Body having competent jurisdiction enjoining Omnipoint and VoiceStream from consummating the Transactions is entered and such judgment, injunction, order or decree shall have become final and non-appealable; (c) by VoiceStream, if: (i) the Board of Directors of Omnipoint shall have failed to recommend or withdrawn, or modified in a manner adverse to VoiceStream, its approval or recommendation of this Agreement and the Transactions, or shall have failed to call the Omnipoint Stockholders' Meeting in accordance with Section 8.8(a) (or the Board of Directors of Omnipoint resolves to do any of the foregoing); (ii) Omnipoint shall have willfully and materially breached any of its obligations under Sections 8.8(b) or 6.2; or (iii) Omnipoint Stockholders' Approval shall not have been obtained at the Omnipoint Stockholders' Meeting (or any adjournment or postponement thereof); (iv) a breach of any representation, warranty, covenant or agreement on the part of Omnipoint set forth in this Agreement shall have occurred that would cause the condition set forth in Section 9.2(a) not to be satisfied, and such condition shall be incapable of being satisfied by the End Date; or (d) by Omnipoint, if: (i) the Board of Directors of VoiceStream shall have failed to recommend or withdrawn, or modified in a manner adverse to VoiceStream, its approval or recommendation of this Agreement and the Transactions, or shall have failed to call the VoiceStream Stockholders' Meeting in accordance with Section 8.8(a) (or the Board of Directors of VoiceStream resolves to do any of the foregoing); (ii) VoiceStream shall have willfully and materially breached any of its obligations under Sections 8.8(b); (iii) VoiceStream Stockholders' Approval shall not have been obtained at the VoiceStream Stockholders' Meeting (or any adjournment or postponement thereof); or (iv) a breach of any representation, warranty, covenant or agreement on the part of VoiceStream set forth in this Agreement shall have occurred that would cause the condition set forth in Section 9.3(a) and (c) not to be satisfied, and such condition shall be incapable of being satisfied by the End Date. The party desiring to terminate this Agreement pursuant to this Section 10.1 (other than pursuant to Section 10.1(a)) shall give notice of such termination to the other party. A-55 330 SECTION 10.2 Effect of Termination. If this Agreement is terminated pursuant to Section 10.1, this Agreement shall become void and of no effect without liability, except as set forth in Section 10.3, of any party (or any stockholder, director, officer, employee, agent, consultant or representative of such party) to the other parties hereto, except that the agreements contained in this Section 10.2 and in the Confidentiality Agreement shall survive the termination hereof and (b) no such termination shall relieve any party of any liability or damages resulting from any breach by such party of this Agreement. SECTION 10.3 Fees and Expenses. (a) Except as otherwise provided in this Section 10.3 or Section 8.1(c), all costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense whether or not the Transactions are consummated; provided that Omnipoint and VoiceStream shall share equally all fees and expenses, other than attorneys' and accounting fees and expenses, incurred in relation to the printing and filing of the Proxy Statement/Prospectus and except as set forth on Section 8.1(c). (b) If this Agreement is terminated pursuant to Section 10.1(c)(i) or Section 10.1(c)(ii), Omnipoint shall pay to VoiceStream a termination fee of $70,000,000 in cash (the "Termination Fee"). (c) If (A) this Agreement is terminated pursuant to Section 10.1(c)(iii), (B) after the date hereof and prior to the Omnipoint Stockholders' Meeting, an Acquisition Proposal is made or continued or renewed by any Person and not withdrawn prior to such meeting and (C) within one year of the Omnipoint Stockholders' Meeting, either (1) Omnipoint or any Omnipoint Subsidiary enters into an agreement with such Person with respect to an Acquisition Proposal which provides for (x) transfer or issuance of securities representing more than 50% of the equity or voting interests in Omnipoint, (y) a merger, consolidation, recapitalization or another transaction resulting in the issuance of cash or securities of such Person (other than a reincorporation or a holding company merger that results in the Omnipoint stockholders owning all of the equity interests in the surviving corporation) to Omnipoint stockholders in exchange for more than 50% of the equity or voting interests in Omnipoint, or (z) transfer of assets, securities or ownership interests representing more than 50% of the consolidated assets or earning power of the Omnipoint Group, or (2) any Person or Group commences a tender offer that results in the acquisition by the Person making the tender offer of a majority of the Omnipoint Common Stock, then Omnipoint shall pay to VoiceStream the Termination Fee. (d) Any payment of the Termination Fee pursuant to this Section 10.3 shall be made within one Business Day after termination of this Agreement except that any payment of the Termination Fee pursuant to Section 10.3(c) shall be paid within one Business Day after it becomes payable. Any payment of the Termination Fee shall be made by wire transfer of immediately available funds. If one party fails to pay to the other promptly any fee or expense due hereunder (including the Termination Fee), the defaulting party shall pay the costs and expenses (including legal fees and expenses) in connection with any action, including the prosecution of any lawsuit or other legal action, taken to collect payment, together with interest on the amount of any unpaid fee at the publicly announced prime rate of The Bank of New York in New York City from the date such fee was required to be paid to the date it is paid. A-56 331 ARTICLE 11 MISCELLANEOUS SECTION 11.1 Notices. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission) and shall be given, if to VoiceStream or Holding Company, to: 3650 131 Avenue SE Bellevue, Washington 98006 Attention: Alan R. Bender, Esq. Fax: (425) 586-8080 with a copy to: Friedman Kaplan & Seiler LLP 875 Third Avenue New York, New York 10022 Attention: Barry A. Adelman, Esq. Fax: (212) 355-6401 if to Omnipoint, to: Omnipoint Corporation Three Bethesda Metro Center Suite 400 Bethesda, Maryland 20814 Attention: Doug G. Smith Fax: (301) 951-3591 with copies to: Piper & Marbury L.L.P. 1200 Nineteenth Street, N.W. Washington, D.C. 20036 Attention: Edwin M. Martin, Jr., Esq. Fax: (202) 233-2085 or such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5 p.m. on a Business Day, in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt. SECTION 11.2 Reliance on Representations. Notwithstanding any investigation, knowledge or review made at any time by or on behalf of any party hereto, the parties acknowledge and agree that all representations and warranties contained in this Agreement, or in the Exhibits or in any of the documents, certification or agreements delivered in connection therewith are being relied upon as a material inducement to enter into this Agreement and the Transactions. SECTION 11.3 Survival of Representations and Warranties. The representations and warranties contained herein and in any certificate or other writing delivered pursuant hereto shall not survive the Effective Time or, except as provided under Section 10.2 of this Agreement, the termination of this Agreement. A-57 332 SECTION 11.4 Amendments; No Waivers. (a) Subject to applicable law, any provision of this Agreement may be amended or waived prior to the Effective Time if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement or, in the case of a waiver, by each party against whom the waiver is to be effective; provided that, after the adoption of this Agreement by the stockholders of Omnipoint, no such amendment or waiver shall be made or given that requires the approval of the stockholders of Omnipoint unless the required approval is obtained. (b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 11.5 Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of each other party hereto. SECTION 11.6 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law rules of such state. SECTION 11.7 Jurisdiction. Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the Transactions shall be brought in any federal court located in the State of Delaware or any Delaware state court, and each of the parties hereby consents to the exclusive jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 11.1 shall be deemed effective service of process on such party. SECTION 11.8 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS. SECTION 11.9 Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations or liabilities hereunder upon any Person other than the parties hereto and their respective successors and assigns. SECTION 11.10 Entire Agreement; No Third Party Beneficiaries. This Agreement, together with the Confidentiality Agreement, constitutes the entire agreement between the parties with respect to the subject matter of this Agreement and supersedes all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter of this Agreement. Except as A-58 333 set forth in Sections 7.2 and 7.4 above, this Agreement is not intended to confer upon any Person other than the parties hereto any rights or remedies. SECTION 11.11 Captions. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. SECTION 11.12 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any party. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner so that the Transactions be consummated as originally contemplated to the fullest extent possible. SECTION 11.13 Specific Performance. The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof in any federal court located in the State of Delaware or any Delaware state court, in addition to any other remedy to which they are entitled at law or in equity. SECTION 11.14 Schedules. Each of Omnipoint and VoiceStream has set forth information in its respective Disclosure Schedule in a section thereof that corresponds to the section of this Agreement to which it relates. A matter set forth in one section of the Disclosure Schedules must be set forth in any other relevant section of the Disclosure Schedule irrespective of its relevance to the latter section of the Disclosure Schedule or section of the Agreement being apparent on the face of the information disclosed in the Disclosure Schedule. The fact that any item of information is disclosed in a Disclosure Schedule to this Agreement shall not be construed to mean that such information is required to be disclosed by this Agreement. Such information and the dollar thresholds set forth herein shall not be used as a basis for interpreting the terms "material" or "Material Adverse Effect" or other similar terms in this Agreement except as otherwise expressly set forth in such Disclosure Schedules. A-59 334 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. VOICESTREAM WIRELESS CORPORATION By: /s/ JOHN W. STANTON ------------------------------------ Name: John W. Stanton Title: Chairman OMNIPOINT CORPORATION By: /s/ DOUGLAS G. SMITH ------------------------------------ Name: Douglas G. Smith Title: Chairman, President & CEO VOICESTREAM WIRELESS HOLDING CORPORATION By: /s/ DONALD GUTHRIE ------------------------------------ Name: Donald Guthrie Title: Vice Chairman A-60 335 ANNEX B [OPINION OF GOLDMAN, SACHS & CO. (OMNIPOINT REORGANIZATION)] PERSONAL AND CONFIDENTIAL June 23, 1999 Board of Directors VoiceStream Wireless Corporation 3650 131st Avenue SE Suite 400 Bellevue, WA 98006 Gentlemen: You have requested our opinion as to the fairness from a financial point of view to VoiceStream Wireless Corporation ("VoiceStream") of the Merger Consideration (as defined below) to be paid by VoiceStream under the Agreement and Plan of Reorganization (the "Agreement"), dated as of June 23, 1999, among VoiceStream, VoiceStream Wireless Holding Corporation (the "Holding Company") and Omnipoint Corporation ("Omnipoint"), which provides for the merger of VoiceStream Subsidiary I, a to be formed wholly-owned subsidiary of Holding Company, with and into VoiceStream and the merger of VoiceStream Subsidiary II, a to be formed wholly-owned subsidiary of Holding Company, with and into Omnipoint in which, as more fully set forth in the Agreement, (x) each outstanding share of common stock, par value $0.01 per share ("Omnipoint Common Stock"), of Omnipoint will be converted into the right to receive, at the election of the holder of such share and subject to certain procedures and limitations contained in the Agreement, (i) cash in an amount equal to the sum of (A) the average closing price (calculated on a weighted average based upon the volume of shares traded on each day) (the "Closing Date Market Price") for each share of VoiceStream common stock, no par value (the "VoiceStream Common Stock"), during the period of the fifteen most recent trading days ending on the business day prior to the Effective Time (as defined in the Agreement) multiplied by 0.825 and (B) $8.00, (ii) a number of shares of Holding Company common stock, par value $0.001 per share ("Holding Company Common Stock"), equal to the sum of (A) 0.825 and (B) $8.00 divided by the Closing Date Market Price or (iii) (A) 0.825 of a share of Holding Company Common Stock and (B) $8.00 (the "Merger Consideration") and (y) each outstanding share of VoiceStream Common Stock will be converted into the right to receive one share of Holding Company Common Stock. Goldman, Sachs & Co., as part of its investment banking business, is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. We are familiar with VoiceStream, having provided certain investment banking services to VoiceStream and its former parent, Western Wireless Corporation ("Western"), from time to time, including having acted as lead manager in the initial public offering of 11 million shares of common stock, no par value (the "Western Common Stock"), of Western in May 1996; having acted as lead manager in the public offering of $200 million aggregate principal amount of 10.5% senior subordinated notes due June 2006, of Western in May 1996; having acted as lead manager in the private offering of $200 million aggregate principal amount of 10.5% senior subordinated notes due February 2007, of Western in B-1 336 October 1996; and having acted as lead manager in the public offering of 12.1 million shares of Western Common Stock in April 1998; having acted as Western's financial advisor in connection with the sale of 19.9% of the outstanding shares of VoiceStream Common Stock to Hutchison Telecommunications PCS (USA) Limited ("Hutchison") in February 1998; and having acted as VoiceStream's financial advisor in connection with, and having participated in certain of the negotiations leading to, the Agreement. Investment funds affiliated with Goldman, Sachs & Co. have a principal investment in VoiceStream in the amount of 9,730,208 shares of VoiceStream Common Stock and have the right to designate a nominee for election to VoiceStream's Board of Directors. Terrence O'Toole, a Managing Director of Goldman, Sachs & Co., is a director of VoiceStream. In addition, Goldman Sachs Credit Partners, L.P., an affiliate of Goldman, Sachs & Co., has offered to be Lead Arranger and Syndication Agent of a $3 billion credit facility (the "Facility") in connection with the Merger, and has offered a commitment to fully underwrite the Facility. In addition, we have provided certain investment banking services to Omnipoint from time to time, including having acted as co-manager in the public offering of 6 million shares of Omnipoint Common Stock in June 1996; having acted as co-manager in the private offering of $250 million aggregate principal amount of 11.625% senior notes due August 2006 in August 1996; and having acted as co-manager in the private offering of $200 million aggregate principal amount of 11.625% senior notes due August 2006 in November 1996. Goldman, Sachs & Co. provides a full range of financial advisory and securities services and, in the course of its normal trading activities, may from time to time effect transactions and hold securities, including derivative securities, of VoiceStream and Omnipoint for its own account and for the accounts of customers. As of June 17, 1999, Goldman, Sachs & Co. had a long position of $46.4 million of Omnipoint funded bank loans; a net long position of $7.1 million of Omnipoint unfunded bank loans; a net short position of 214,627 shares of Omnipoint Common Stock; a short position of 40,000 call options on Omnipoint Common Stock at an exercise price of $15.00; a long position of 100,000 put options on Omnipoint Common Stock at an exercise price of $5.00; a long position of $16.5 million face value of Omnipoint convertible preferred stock; and a net short position of $2.0 million aggregate principal amount of Omnipoint 11.625% senior notes due August 2006. As of the same date and in addition to the principal investment referred to above, Goldman, Sachs & Co. had a long position of $8.5 million of VoiceStream bank loans. In connection with this opinion, we have reviewed, among other things, the Agreement; the Securities Purchase Agreement dated June 23, 1999 among Omnipoint, VoiceStream and Hutchison; the Stock Subscription Agreement dated June 23, 1999 among Hutchison, Hutchison Telecommunications Limited and Holding Company; Registration Statement on Form 10 of VoiceStream dated April 13, 1999; Annual Reports to Stockholders and Annual Reports on Form 10-K of Western for the three years ended December 31, 1998; Annual Reports to Stockholders and Annual Reports on Form 10-K of Omnipoint for the three years ended December 31, 1998; certain interim reports to stockholders and Quarterly Reports on Form 10-Q of VoiceStream, Western and Omnipoint; certain other communications from VoiceStream, Western and Omnipoint to their respective stockholders; certain internal financial analyses and forecasts for VoiceStream prepared by the management of VoiceStream, certain financial analyses and forecasts for Omnipoint prepared by the management of VoiceStream, and certain internal financial analyses and forecasts for Omnipoint prepared by the management of Omnipoint (collectively, the "Forecasts"). We also have held discussions with members of senior management of VoiceStream and Omnipoint regarding the strategic rationale for, and the potential benefits of, the transactions contemplated by the Agreement and the past and current business operations, financial condition and future prospects of their respective companies. In addition, we have reviewed the reported price and trading activity for the VoiceStream Common Stock and Omnipoint Common Stock, compared certain financial and stock market information for VoiceStream and Omnipoint with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the B-2 337 U.S. wireless communications industry specifically and in other industries generally and performed such other studies and analyses as we considered appropriate. We have relied upon the accuracy and completeness of all of the financial and other information reviewed by us and have assumed such accuracy and completeness for purposes of rendering this opinion. In this regard, we have assumed with your consent that the Forecasts have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of VoiceStream and Omnipoint, as the case may be. In addition, we have not made an independent evaluation or appraisal of the assets and liabilities of VoiceStream or Omnipoint or any of their subsidiaries and we have not been furnished with any such evaluation or appraisal. We have also taken into account the Company's view as to the possible tax consequences of the transactions contemplated by the Agreement as described to us by the Company. We have assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the transaction contemplated by the Agreement will be obtained without any adverse effect on VoiceStream or Omnipoint or on the contemplated benefits of the transactions contemplated by the Agreement. Our advisory services and the opinion expressed herein are provided for the information and assistance of the Board of Directors of VoiceStream in connection with its consideration of the transactions contemplated by the Agreement and such opinion does not constitute a recommendation as to how any holder of shares of VoiceStream Common Stock should vote with respect to such transactions. Based upon and subject to the foregoing and based upon such other matters as we consider relevant, it is our opinion that as of the date hereof the Merger Consideration to be paid by VoiceStream pursuant to the Agreement is fair from a financial point of view to VoiceStream. Very truly yours, (GOLDMAN, SACHS & CO.) B-3 338 [OPINION OF LEHMAN BROTHERS (OMNIPOINT REORGANIZATION)] ANNEX C June 23, 1999 Board of Directors Omnipoint Corporation 3 Bethesda Metro Center Suite 400 Bethesda, MD 20814 Members of the Board: We understand that Omnipoint Corporation ("Omnipoint"), VoiceStream Wireless Corporation ("VoiceStream"), VoiceStream Acquisition Corp. ("VAC"), a newly-formed Washington company, and a wholly-owned subsidiary of Newco, Omnipoint Acquisition Corp. ("OAC"), a Delaware corporation and a wholly-owned subsidiary of Newco, and VoiceStream Holding Company ("Newco", and together with Omnipoint, VoiceStream, VAC and OAC, the "Companies") intend to enter into an Agreement and Plan of Merger to be dated June 23, 1999 (the "Merger Agreement") pursuant to which, among other things, (i) VAC will merge with VoiceStream with VoiceStream surviving as a subsidiary of Newco, and (ii) OAC will merge with Omnipoint with Omnipoint surviving as a subsidiary of Newco (together, the "Merger"). Upon effectiveness of the Merger, each outstanding share of common stock of Omnipoint will be exchanged into, at the election of each stockholder of Omnipoint: (i) 0.825 shares of common stock of Newco ("Newco Common Stock") and $8.00 in cash; or (ii) cash equal to 0.825 multiplied by the VoiceStream Price (as defined below) plus $8.00 (subject to proration); or (iii) a number of shares of Newco Common Stock equal to 0.825, plus $8.00 divided by the VoiceStream Price (subject to proration) (the "Proposed Transaction"). "VoiceStream Price" means the daily volume-weighted price per share of VoiceStream Common Stock averaged over the 15-trading-day period ending on the fifth business day prior to the effective date of the Merger. We further understand that (i) each share of convertible preferred stock of Omnipoint, when converted by the holders thereof, will be exchangeable into shares of Newco Common Stock and cash on an as-converted basis and (ii) each option or warrant convertible into common stock of Omnipoint will be assumed by Newco and converted to an option or warrant convertible into Newco Common Stock at an exchange ratio of 0.825, plus $8.00 divided by the VoiceStream Price. Concurrent with the Merger, Omnipoint will contribute certain assets to a newly-formed joint venture, 51% owned by Cook Inlet Region, Inc. ("Cook Inlet"), a corporation with current interests in two other joint ventures with VoiceStream, and 49% owned by Omnipoint. In consideration for the licenses transferred by Omnipoint to Cook Inlet, Cook Inlet will contribute approximately $75 million to the partnership to acquire its 51% stake therein (the "Cook Inlet Contribution"). In addition, upon the execution of the Merger Agreement, VoiceStream and Hutchison Whampoa ("Hutchison"), a Hong Kong-based property and telecom company with a 24% ownership stake in VoiceStream, have each agreed to invest approximately $102.5 million in Omnipoint in the form of a convertible preferred security (the "Initial Interim Investment"). VoiceStream and Hutchison also have agreed to jointly invest an additional $95 million in Omnipoint on October 1, 1999 on the same terms and conditions and in the same proportion as the initial $205 million investment (the "Subsequent Interim Investment" and, together with the Initial Interim Investment, the "Interim Investment"). Hutchison also has agreed to invest an additional $807 million in Newco upon the effectiveness of the Merger (the "Hutchison Investment"). The Hutchison Investment will be a combination of 6.1 million shares of Newco Common Stock at $29 per share and $426.1 million in a 40-year junior convertible security with a dividend rate of 2.2%, payable in kind, and with a conversion price of $29. C-1 339 The amount invested in each security will be dependent on the amount of the convertible security required to keep Hutchison's equity interest in Newco at no more than 19.9% of the fully diluted number of shares of Newco Common Stock. The terms and conditions of the Proposed Transaction are set forth in more detail in the Merger Agreement. We have been requested by the Board of Directors of Omnipoint to render our opinion with respect to the fairness, from a financial point of view, to Omnipoint's stockholders of the consideration to be offered to such stockholders in the Proposed Transaction. We have not been requested to opine as to, and our opinion does not in any manner address, Omnipoint's underlying business decision to proceed with or effect the Proposed Transaction nor the fairness (i) to Omnipoint of the terms of the Interim Investment or (ii) to Newco of the terms of the Cook Inlet Contribution or the Hutchison Investment. In arriving at our opinion, we reviewed and analyzed:(1) the Merger Agreement and the specific terms of the Proposed Transaction, (2) publicly available information concerning Omnipoint and VoiceStream that we believe to be relevant to our analysis, including Form 10-Ks for the fiscal year ended December 31, 1998 and 10-Qs for the quarter ended March 31, 1999, (3) financial and operating information with respect to the businesses, operations and prospects of Omnipoint and VoiceStream furnished to us by Omnipoint and Voicestream, respectively, (4) a trading history of Omnipoint's common stock from June 17, 1998 to the present and a comparison of that trading history with those of other companies that we deemed relevant, (5) a trading history of the VoiceStream's common stock from May 3, 1999 (the date VoiceStream's common stock first began to trade independently from Western Wireless Corporation, a predecessor company) to the present and a comparison of that trading history with those of other companies that we deemed relevant, (5) a comparison of the historical financial and operating results and present financial condition of Omnipoint with those of other companies that we deemed relevant, (6) a comparison of the historical financial and operating results and present financial condition of VoiceStream with those of other companies that we deemed relevant, (7) a comparison of the financial terms of the Proposed Transaction with the financial terms of certain other recent transactions that we deemed relevant, (8) third party research analysts' estimates, valuation analyses, target prices and investment considerations for Omnipoint and VoiceStream, (9) the terms of the Cook Inlet Contribution, (10) the terms of the Hutchison Investment, (11) Omnipoint's current cash flow forecast and limited cash position, its ability to meet its liquidity requirements in the future and the potential alternatives available to Omnipoint to fund such requirements, (12) the results of Lehman Brothers' efforts to secure a strategic equity investor for Omnipoint and Omnipoint's negotiations with selected potential equity investors, and (13) the terms of the Interim Investment and a comparison of such terms with the terms of investments by other potential sources of equity available to Omnipoint. In addition, we have had discussions with the respective managements of Omnipoint and VoiceStream concerning their businesses, operations, assets, financial condition and prospects and have undertaken such other studies, analyses and investigations as we deemed appropriate. In arriving at our opinion, we have assumed and relied upon the accuracy and completeness of the financial and other information used by us without assuming any responsibility for independent verification of such information and have further relied upon the assurances of management of Omnipoint that they are not aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the financial projections of Omnipoint, upon advice of Omnipoint we have assumed that such projections have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Omnipoint as to the future financial performance of Omnipoint. With respect to the financial projections of VoiceStream, upon advice of VoiceStream we have assumed that such projections have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of VoiceStream as to the future financial performance of VoiceStream and that VoiceStream will C-2 340 perform substantially in accordance with such projections. In arriving at our opinion, we have not conducted a physical inspection of the properties and facilities of Omnipoint and have not made or obtained any evaluations or appraisals of the assets or liabilities of Omnipoint. Upon advice of Omnipoint and its legal and accounting advisors, we have assumed that the exchange of shares Common Stock of Omnipoint pursuant to the Merger will be pursuant to Section 351 of the Internal Revenue Code of 1986, as amended, and therefore will be tax free to the stockholders of Omnipoint who receive only Newco Common Stock in exchange for their shares of common stock of Omnipoint. Our opinion necessarily is based upon market, economic and other conditions as they exist on, and can be evaluated as of, the date of this letter. In addition, we express no opinion as to the prices at which shares of Newco Common Stock actually will trade following consummation of the Merger and this opinion should not be viewed as providing any assurance that the market value of the Newco Common Stock to be held by shareholders of Omnipoint after the Merger will be in excess of the market value of the shares of Omnipoint owned by such shareholders at any time prior to announcement or consummation of the Proposed Transaction. Based upon and subject to the foregoing, we are of the opinion as of the date hereof that, from a financial point of view, the consideration to be offered to the stockholders of Omnipoint in the Proposed Transaction is fair to such stockholders. We have acted as financial advisor to Omnipoint in connection with the Proposed Transaction and will receive a fee for our services which is contingent upon the consummation of the Proposed Transaction. In addition, Omnipoint has agreed to indemnify us for certain liabilities that may arise out of the rendering of this opinion. In the ordinary course of our business, we actively trade in the debt and equity securities of Omnipoint for our own account and for the accounts of our customers and, accordingly, may at any time hold a long or short position in such securities. This opinion is for the use and benefit of the Board of Directors of Omnipoint and is rendered to the Board of Directors in connection with its consideration of the Proposed Transaction. This opinion is not intended to be and does not constitute a recommendation to any stockholder of Omnipoint as to how such stockholders should vote with respect to the Proposed Transaction or, with respect to the consideration to be offered to the stockholders of Omnipoint in the Proposed Transaction, which of the cash and stock alternatives such stockholders should elect. Very truly yours, LEHMAN BROTHERS By: /s/ PERRY HOFFMEISTER ------------------------------------ Managing Director C-3 341 ANNEX D AGREEMENT AND PLAN OF REORGANIZATION DATED AS OF SEPTEMBER 17, 1999 AMONG VOICESTREAM WIRELESS CORPORATION VOICESTREAM WIRELESS HOLDING CORPORATION VOICESTREAM SUBSIDIARY III CORPORATION AERIAL COMMUNICATIONS, INC. AND TELEPHONE AND DATA SYSTEMS, INC. D-i 342 TABLE OF CONTENTS
PAGE ----- Article I -- The Reorganization............................................. D-2 Section 1.0 The Reorganization.......................................... D-2 Section 1.1 The Merger.................................................. D-3 Section 1.2 Closing..................................................... D-3 Section 1.3 Effective Time.............................................. D-3 Section 1.4 Effects of the Merger....................................... D-4 Section 1.5 Restated Certificate of Incorporation and By-laws; Officers D-4 and Directors............................................... Article II -- Effect of the Merger on the Stock of the Constituent Corporations; Surrender of Certificates.............................................................. D-4 Section 2.1 Effect on Stock............................................. D-4 Section 2.2 Surrender of Certificates................................... D-6 Article III -- Representations and Warranties of the Company................ D-9 Section 3.1 Organization................................................ D-9 Section 3.2 Subsidiaries................................................ D-9 Section 3.3 Capital Structure........................................... D-9 Section 3.4 Authority................................................... D-10 Section 3.5 Consents and Approvals; No Violations....................... D-10 Section 3.6 SEC Documents and Other Reports............................. D-11 Section 3.7 Absence of Material Adverse Change.......................... D-11 Section 3.8 Information Supplied........................................ D-12 Section 3.9 Permits; Compliance with Laws............................... D-12 Section 3.10 Tax Matters................................................. D-13 Section 3.11 Liabilities................................................. D-14 Section 3.12 Benefit Plans; Employees and Employment Practices........... D-14 Section 3.13 Litigation.................................................. D-16 Section 3.14 Environmental Matters....................................... D-16 Section 3.15 Section 203 of DGCL......................................... D-17 Section 3.16 Intellectual Property....................................... D-17 Section 3.17 Opinion of Financial Advisor................................ D-18 Section 3.18 Brokers..................................................... D-18 Section 3.19 Tax Status.................................................. D-18 Section 3.20 Contracts................................................... D-18 Section 3.21 Vote Required............................................... D-19 Section 3.22 Transactions with Affiliates................................ D-19 Article IV -- Representations and Warranties of Parent and Sub.............. D-19 Section 4.1 Organization................................................ D-19 Section 4.2 Ownership of Merger Subs.................................... D-19 Section 4.3 Capital Structure........................................... D-19 Section 4.4 Authority................................................... D-20 Section 4.5 Consents and Approvals; No Violations....................... D-20 Section 4.6 SEC Documents and Other Reports............................. D-21 Section 4.7 Absence of Material Adverse Change.......................... D-21 Section 4.8 Information Supplied........................................ D-22 Section 4.9 Permits; Compliance with Laws............................... D-22 Section 4.10 Tax Matters................................................. D-23
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PAGE ----- Section 4.11 Liabilities................................................. D-23 Section 4.12 Litigation.................................................. D-24 Section 4.13 State Takeover Statutes..................................... D-24 Section 4.14 Brokers..................................................... D-24 Section 4.15 Tax Status.................................................. D-24 Section 4.16 Interim Operations of Sub................................... D-24 Section 4.17 Vote Required............................................... D-24 Section 4.18 Transactions with Affiliates................................ D-24 Section 4.19 Opinion of Goldman, Sachs & Co.............................. D-24 Article V -- Covenants Relating to Conduct of Business....................... D-25 Section 5.1 Conduct of Business by the Company Pending the Reorganization.............................................. D-25 Section 5.2 Conduct of Business by Parent Pending the Reorganization.... D-26 Section 5.3 No Solicitation............................................. D-27 Section 5.4 Third Party Standstill Agreements........................... D-28 Section 5.5 Disclosure of Certain Matters; Delivery of Certain Filings..................................................... D-28 Section 5.6 Tax Status.................................................. D-28 Article VI -- Additional Agreements.......................................... D-28 Section 6.1 Employee Benefits........................................... D-28 Section 6.2 Options; Restricted Stock Awards............................ D-30 Section 6.3 Company Stockholders Meeting................................ D-30 Section 6.4 Preparation of the Registration Statement and Joint Proxy D-31 Statement................................................... Section 6.5 Comfort Letters............................................. D-32 Section 6.6 Access to Information....................................... D-32 Section 6.7 Compliance with the Securities Act.......................... D-32 Section 6.8 Stock Exchange Listings..................................... D-33 Section 6.9 Fees and Expenses........................................... D-33 Section 6.10 Public Announcements........................................ D-33 Section 6.11 Real Estate Transfer Tax.................................... D-33 Section 6.12 State Takeover Laws......................................... D-33 Section 6.13 Indemnification; Directors and Officers Insurance........... D-34 Section 6.14 Best Efforts................................................ D-35 Section 6.15 Certain Litigation.......................................... D-36 Section 6.16 Transition Services Agreement............................... D-36 Section 6.17 Registration Rights Agreement............................... D-36 Section 6.18 Investor Claim.............................................. D-37 Section 6.19 Intercompany Service Agreements............................. D-37 Section 6.20 Revolving Credit Agreement.................................. D-37 Section 6.21 Series A and B Notes........................................ D-37 Section 6.22 Nokia Credit Agreement...................................... D-38 Section 6.23 Intercompany Accounts....................................... D-38 Section 6.24 Tax Allocation Agreement and Tax Settlement Agreement....... D-38 Section 6.25 Parent Stockholder Voting Agreement......................... D-38 Section 6.26 Agreements Regarding Taxes.................................. D-38
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PAGE ----- Article VII -- Conditions Precedent......................................... D-41 Section 7.1 Conditions to Each Party's Obligation to Effect the D-41 Reorganization.............................................. Section 7.2 Conditions to Obligation of the Company to Effect the D-42 Reorganization.............................................. Section 7.3 Conditions to Obligations of Parent and Merger Sub C to Effect the Reorganization................................... D-44 Article VIII -- Termination and Amendment.................................. D-46 Section 8.1 Termination................................................. D-46 Section 8.2 Effect of Termination....................................... D-47 Section 8.3 Amendment................................................... D-47 Section 8.4 Extension; Waiver........................................... D-47 Article IX -- General Provisions........................................... D-47 Section 9.1 Non-Survival of Representations and Warranties and Agreements................................................. D-47 Section 9.2 Notices.................................................... D-47 Section 9.3 Interpretation; Definitions................................ D-48 Section 9.4 Counterparts............................................... D-57 Section 9.5 Entire Agreement; No Third-Party Beneficiaries............. D-57 Section 9.6 Governing Law.............................................. D-58 Section 9.7 Assignment................................................. D-58 Section 9.8 Severability............................................... D-58 Section 9.9 Enforcement of this Agreement.............................. D-58 Section 9.10 Obligations of Subsidiaries................................ D-58 Section 9.11 Reliance on Representations................................ D-58 ANNEX A -- RESTATED CERTIFICATE OF INCORPORATION ANNEX B -- COMPANY'S RESTATED BYLAWS ANNEX C -- TRANSITION SERVICES AGREEMENT ANNEX D -- STOCKHOLDER AGREEMENT ANNEX E -- INDEMNITY AGREEMENT ANNEX F -- DEBT/EQUITY REPLACEMENT AGREEMENT ANNEX G -- PARENT STOCKHOLDER AGREEMENT ANNEX H -- INVESTOR AGREEMENT ANNEX I -- FORM OF PARENT FCC COUNSEL OPINION ANNEX J -- FORM OF PRESTON GATES & ELLIS LLP OPINION ANNEX K -- FORM OF COMPANY FCC COUNSEL OPINION ANNEX L -- FORM OF SIDLEY & AUSTIN OPINION ANNEX M -- TAX CERTIFICATES ANNEX N -- TAX CERTIFICATES ANNEX O -- STOCKHOLDER TAX CERTIFICATE
D-iv 345 AGREEMENT AND PLAN OF REORGANIZATION AGREEMENT AND PLAN OF REORGANIZATION, dated as of September 17, 1999 (this "Agreement") among VoiceStream Wireless Corporation, a Washington corporation ("VoiceStream"), VoiceStream Wireless Holding Corporation, a Delaware corporation ("Holding"), (VoiceStream and Holding are collectively referred to herein as "Parent" as explained below) VoiceStream Subsidiary III Corporation, a Delaware corporation ("Merger Sub C"), which shall be a wholly owned direct subsidiary of Holding as of the Effective Time, Aerial Communications, Inc., a Delaware corporation (the "Company") (Merger Sub C and the Company being hereinafter collectively referred to as the "Constituent Corporations"), and Telephone and Data Systems, Inc., a Delaware corporation ("Series A Stockholder"). Except as otherwise set forth herein, capitalized (and certain other) terms used herein shall have the meanings set forth in Section 9.3. WITNESSETH: WHEREAS, VoiceStream, Holding and Omnipoint Corporation, a Delaware corporation ("Omnipoint"), have entered into an Agreement and Plan of Reorganization dated as of June 23, 1999 (the "Omnipoint Agreement") providing for, among other things, the merger of a subsidiary of Holding ("Merger Sub A") into VoiceStream (the "VoiceStream Merger"), and the merger of another subsidiary of Holding ("Merger Sub B") into Omnipoint (the "Omnipoint Merger")(the VoiceStream Merger, the Omnipoint Merger and the other transactions contemplated by the Omnipoint Agreement are herein referred to as the "Omnipoint Reorganization"); WHEREAS, the reorganization provided herein (the "Reorganization") shall include the merger (the "Merger") of Merger Sub C with and into the Company and, if applicable, the other transactions described below; WHEREAS, if the Omnipoint Reorganization is consummated prior to the consummation of the transactions contemplated by this Agreement, and the other conditions to the Reorganization specified in Article VII are satisfied or waived, in the Reorganization, Holding shall be Parent and shall acquire all of the common stock of the Company through the Merger, in which case the Merger will occur as part of and concurrently with or promptly after the Omnipoint Reorganization; WHEREAS, if the transactions contemplated by the Omnipoint Agreement are terminated or not consummated by the Omnipoint End Date (as defined herein), and the other conditions to the Reorganization specified in Article VII are satisfied or waived by the Omnipoint End Date, in the Reorganization, Holding shall be Parent and shall concurrently acquire (i) all of the common stock of the Company through the Merger and (ii) all of the common stock of VoiceStream through the VoiceStream Merger; WHEREAS, the respective Boards of Directors of VoiceStream, Holding, Merger Sub C and the Company have approved and declared advisable the Reorganization, upon the terms and subject to the conditions herein set forth whereby each issued and outstanding Series A Common Share, $1.00 par value, of the Company ("Company Series A Common Shares") and each issued and outstanding Common Share, $1.00 par value of the Company ("Company Common Shares" and together with the Company Series A Common Shares, "Company Common Stock"), other than shares of Company Common Stock owned directly or indirectly by Parent or the Company, will be converted into shares of Common Stock, $0.001 par value, of Parent ("Parent Common Stock") or, to the extent provided herein, cash; WHEREAS, the respective Boards of Directors of VoiceStream, Holding and the Company have determined that the Reorganization is in furtherance of and consistent with their respective long-term business strategies and is fair to and in the best interests of their respective stockholders; D-1 346 WHEREAS, for federal income tax purposes, it is intended that the Reorganization shall qualify as a reorganization within the meaning of Section 368(a) of the United States Internal Revenue Code of 1986, as amended (the "Code"), and/or as an exchange described in Section 351(a) of the Code; WHEREAS, VoiceStream, Holding, Merger Sub C and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Reorganization and also to prescribe various conditions to the Reorganization. NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, VoiceStream, Holding, Merger Sub C and the Company hereby agree as follows: ARTICLE I THE REORGANIZATION SECTION 1.0 The Reorganization. (a) Holding has caused Merger Sub A, Merger Sub B and Merger Sub C to be organized for the purposes of effectuating the Omnipoint Merger, the VoiceStream Merger, and the Merger. Merger Sub A, Merger Sub B and Merger Sub C are collectively referred to as "Merger Subs". (b) If the Omnipoint Reorganization is consummated by the Omnipoint End Date, the Merger shall occur as specified herein as part of and concurrently with or promptly after the Omnipoint Reorganization. (c) If the transactions contemplated by the Omnipoint Agreement are terminated or not consummated by the Omnipoint End Date and the other conditions to the Reorganization specified in Article VII are satisfied or waived by the Omnipoint End Date, Holding shall concurrently acquire (i) all of the common stock of the Company through the Merger as specified herein, and (ii) all of the common stock of VoiceStream through the VoiceStream Merger as specified in this Section 1.0(c). In such event, pursuant to Articles of Merger and a Plan of Merger, in a form to be mutually agreed upon by VoiceStream and the Company (sometimes hereinafter referred to collectively as the "Merger Document" or "Merger Documents"), upon the terms and subject to the conditions set forth in this Agreement and in the Merger Documents: (i) In the VoiceStream Merger, Merger Sub A shall be merged with and into VoiceStream in accordance with the applicable provisions of Washington law. VoiceStream shall be the surviving corporation in the VoiceStream Merger and shall continue its corporate existence under Washington law. As a result of the VoiceStream Merger, VoiceStream shall become a wholly owned Subsidiary of Holding. The effects and consequences of the VoiceStream Merger shall be as set forth in the VoiceStream Merger Documents. (ii) The parties shall (i) file Merger Documents as are required by and executed in accordance with Washington law and (ii) make all other filings or recordings required under applicable Washington law. (iii) In the case of this Section 1.0(c), the Effective Time shall be the later of (i) the date and time of the filing of the Merger Documents with respect to the VoiceStream Merger (or such other date and time as may be specified in such documents as may be permitted by Washington law) and (ii) the date and time of the filing of the Certificate of Merger (as defined below) with respect to the Merger (or such other date and time as may be specified in such certificate as may be permitted by Delaware law). D-2 347 (iv) At the Effective Time, by virtue of the VoiceStream Merger and without any action on the part of any of the parties, each share of the common stock of Merger Sub A outstanding immediately prior to the Effective Time shall be converted into and shall become one share of common stock of the surviving corporation of the VoiceStream Merger. (v) At the Effective Time, the one share of the capital stock of Holding issued to VoiceStream and outstanding immediately prior to the Effective Time shall be cancelled and cease to exist. (vi) At the Effective Time, each share of VoiceStream Common Stock that is issued and outstanding immediately prior to the Effective Time shall be converted into one share of Holding Common Stock. Upon such conversion, all such shares of VoiceStream Common Stock shall be cancelled and cease to exist, and each certificate theretofore representing any such shares shall, without any action on the part of the holder thereof, be deemed to represent an equivalent number of shares of Holding Common Stock. (vii) Notwithstanding the foregoing, VoiceStream Common Stock outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Reorganization and has demanded appraisal for such shares in accordance with Washington law ("Dissenting Shares") shall not be converted into a right to receive shares of Holding Common Stock unless such holder fails to perfect, withdraws or otherwise loses its right to appraisal. If, after the Effective Time, such holder fails to perfect, withdraws or loses its right to appraisal, such shares shall be treated as if they had been converted as of the Effective Time into a right to receive Holding Common Stock. (d) All representations, warranties and covenants of Parent are hereby made on a joint and several basis by VoiceStream and Holding. SECTION 1.1 The Merger. Upon the terms and subject to the conditions hereof, and in accordance with the DGCL, in the Reorganization, Merger Sub C shall be merged with and into the Company at the Effective Time. Following the Effective Time, the separate corporate existence of Merger Sub C shall cease and the Company shall continue as the surviving corporation (the "Surviving Corporation") and shall succeed to and assume all the rights and obligations of Merger Sub C and the Company in accordance with the DGCL. SECTION 1.2 Closing. Unless waived by Parent, the Company and Parent shall use their reasonable commercial efforts to cause the closing of the transactions contemplated by this Agreement (the "Closing") to take place concurrently with the closing of the Omnipoint Reorganization or as soon as practicable thereafter, subject to the satisfaction or waiver of the conditions set forth in Article VII. If the Omnipoint Reorganization does not take place, the Closing will take place at 10:00 a.m. on the fifth Business Day after satisfaction or waiver of the conditions set forth in Article VII, at the offices of Sidley & Austin, One First National Plaza, Chicago, Illinois 60603, or, at the request of Parent, at the offices of Sidley & Austin, 873 Third Avenue, New York, New York 10022, unless another date, time or place is agreed to in writing by the parties hereto. The date on which the Closing takes place is herein referred to as the "Closing Date." SECTION 1.3 Effective Time. The Merger shall become effective when a Certificate of Merger (the "Certificate of Merger"), executed in accordance with the relevant provisions of the DGCL, is duly filed with the Secretary of State of the State of Delaware, or at such other time as Merger Sub C and the Company shall agree should be specified in the Certificate of Merger. Except as provided in Section 1.0(c)(iii), the term "Effective Time" shall mean the later of the date and time at which the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware or such later time established by the Certificate of Merger. The filing of the Certificate of Merger shall be made as soon as practicable after the satisfaction or waiver of the conditions set forth herein. D-3 348 SECTION 1.4 Effects of the Merger. The Merger shall have the effects set forth in the DGCL. SECTION 1.5 Restated Certificate of Incorporation and By-laws; Officers and Directors. (a) The Restated Certificate of Incorporation of the Company, as in effect immediately prior to the Effective Time, shall be amended as of the Effective Time as set forth on Annex A hereto. As so amended, such Restated Certificate of Incorporation shall be the Restated Certificate of Incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law. (b) The Restated By-laws of the Company, as in effect immediately prior to the Effective Time, shall be amended as of the Effective Time as set forth on Annex B. As so amended, such Restated By-laws shall be the By-laws of the Surviving Corporation until thereafter changed or amended as provided by the Restated Certificate of Incorporation of the Surviving Corporation or by applicable law. (c) Subject to Section 2.2 of the Investment Agreement, the directors of Merger Sub C immediately prior to the Effective Time shall be the directors of the Surviving Corporation, until the next annual meeting of stockholders (or the earlier of their resignation or removal) and until their respective successors are duly elected and qualified, as the case may be. (d) Subject to the Management Side Letter, the officers of Merger Sub C immediately prior to the Effective Time shall be the officers of the Surviving Corporation until the earlier of their resignation or removal and until their respective successors are duly elected and qualified, as the case may be. ARTICLE II EFFECT OF THE MERGER ON THE STOCK OF THE CONSTITUENT CORPORATIONS; SURRENDER OF CERTIFICATES SECTION 2.1 Effect on Stock. As of the Effective Time, by virtue of the Merger and without any action on the part of any of Sub, the Company or the holders of any securities of the Constituent Corporations: (a) Capital Stock of Sub. Each issued and outstanding share of capital stock of Merger Sub C shall be converted into and become one validly issued, fully paid and nonassessable share of Common Stock, no par value, of the Surviving Corporation. (b) Treasury Stock and Parent Owned Stock. Each share of Company Common Stock that is owned by the Company or by any Subsidiary of the Company and each share of Company Common Stock that is owned by Parent, Merger Sub C or any other Subsidiary of Parent shall automatically be cancelled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor. (c) Conversion of Company Common Stock. Except as set forth in Item 2.1(c) of the Company Letter, as of the date hereof, no shares of Company Common Stock or Stock Equivalents were issued, reserved for issuance or outstanding. Each share of Company Common Stock issued and outstanding (other than shares of Company Common Stock to be cancelled in accordance with Section 2.1(b)) shall be converted into .455 (the "Conversion Number") validly issued, fully paid and nonassessable shares of Parent Common Stock (the "Per Share Stock Consideration"); provided, that each share of Company Common Stock with respect to which an election to receive only cash has been effectively made by a Public Holder and not revoked or lost pursuant to Section 2.1(d) (a "Cash Election"), shall be converted into the right to receive $18.00 in cash, without interest (the "Per Share Cash Consideration"). Notwithstanding the foregoing, in the event that (i) the Omnipoint Agreement is terminated or the transactions contemplated by the Omnipoint Agreement are not consummated by the Omnipoint D-4 349 End Date and (ii) the Closing Date Market Price is less than $39.56, the Conversion Number shall be the amount determined by dividing $18.00 by the Closing Date Market Price, but shall not be greater than .50 or less than .455. In the event Investor exercises its right under Section 10.6 of the Investment Agreement ("Tag-Along Right"), the Operating Company Shares owned by Investor (as described in the Company Letter) shall be converted immediately prior to the Effective Time into such number of shares of Company Common Stock equal to the product of (i) such number of Operating Company Shares and (ii) the Exchange Rate, and the shares of Company Common Stock obtained by Investor through such conversion shall be converted into shares of Parent Common Stock pursuant to the Merger. In the event Investor does not exercise its Tag-Along Right, subject to the authorization, execution and delivery of the Indemnity Agreement, Parent hereby agrees to accept and be bound by all of the rights of Investor and its Affiliates under the Investment Agreement and the Joint Venture Agreement. As of the Effective Time, all such shares of Company Common Stock shall be converted in accordance with this paragraph, and when so converted, shall no longer be outstanding and shall automatically be retired and shall cease to exist, and each holder of a certificate representing any such shares of Company Common Stock shall cease to have any rights with respect thereto, except the right to receive (i) certificates representing the shares of Parent Common Stock into which such shares of Company Common Stock have been converted, (ii) any dividends and other distributions in accordance with Section 2.2(d) and (iii) any cash, without interest, to be paid in lieu of any fractional share of Parent Common Stock in accordance with Section 2.2(e). (d) Cash Election by Public Holders. Each person who, at the Effective Time, is a record holder of shares of Company Common Stock other than the Series A Stockholder, Investor (with respect to Operating Company Shares owned by Investor which are converted into Company Common Stock immediately prior to the Merger pursuant to the Tag-Along Right) and holders of shares of Company Common Stock to be cancelled as set forth in Section 2.1(b) (such eligible holders hereinafter being referred to as the "Public Holders"), shall have the right to submit an election form (the "Cash Election Form") specifying the number of shares of Company Common Stock that such person desires to have converted into the right to receive the Per Share Cash Consideration pursuant to the Cash Election. Any eligible record holder who fails properly to submit a Cash Election Form on or prior to the Election Deadline in accordance with the procedures set forth in this Section 2.1(d) shall be entitled to receive the Per Share Stock Consideration for each share of Company Common Stock registered in the name of such holder. Any Cash Election shall be validly made only if the Exchange Agent shall have received a Cash Election Form by 5:00 p.m., New York City time on the twentieth Business Day (the "Election Deadline") after the date on which the Letter of Transmittal and Cash Election Form are sent to the Public Holders pursuant to Section 2.2(b). For a Cash Election made by a Public Holder to be valid, a Cash Election Form properly completed and executed (with the signature or signatures thereon guaranteed to the extent required by the Cash Election Form) must be delivered by such holder accompanied by such holder's Certificates, or by an appropriate guarantee of delivery of such Certificates from a member of any registered national securities exchange or of the National Association of Securities Dealers, Inc. or a commercial bank or trust company in the United States as set forth in such Cash Election Form. Any holder of Company Common Stock who has made an election by submitting an Election Form to the Exchange Agent may at any time prior to the Election Deadline change such holder's election by submitting a revised Cash Election Form and/or a Letter of Transmittal, properly completed and signed, that is received by the Exchange Agent prior to the Election Deadline. Any holder of Company Common Stock may at any time prior to the Election Deadline revoke such holder's election by written notice to the Exchange Agent received by the close of business on the day prior to the Election Deadline, in which event such holder shall be entitled to receive only the Per Share Stock Consideration with respect to each share of Company Common Stock registered D-5 350 in the name of such holder immediately prior to the Effective Time. Parent shall have the right to make reasonable rules (which will be described in the Cash Election Form), not inconsistent with the terms of this Agreement, governing the validity of Cash Election Forms and the procedures for making Cash Elections. (e) Adjustment of Conversion Number. Except in connection with the Omnipoint Agreement, in the event of any reclassification, stock split or stock dividend with respect to Parent Common Stock, any change or conversion of Parent Common Stock into other securities or any other dividend or distribution with respect to Parent Common Stock (other than normal quarterly cash dividends as the same may be modified from time to time in the ordinary course), or if a record date with respect to any of the foregoing should occur, prior to the Effective Time, appropriate and proportionate adjustments, if any, shall be made to the Conversion Number and the Per Share Cash Election Consideration, and thereafter all references in this Agreement to the Conversion Number and the Per Share Cash Election Consideration shall be deemed to be to the Conversion Number and the Per Share Cash Election Consideration, respectively, as so adjusted. Notwithstanding the foregoing, in the event of any amendment of the Omnipoint Agreement that would result in a reclassification, stock split, or stock dividend with respect to Parent Common Stock, any change or conversion of Parent Common Shares into other securities or any other dividend or distribution with respect to Parent Common Stock, appropriate and proportionate adjustments, if any, shall be made to the Conversion Number and the Per Share Cash Election Consideration, and thereafter all references in this Agreement shall be deemed to be the Conversion Number and the Per Share Cash Election Consideration, respectively, as so adjusted. In the event that the aggregate number of shares of Company Common Stock and Stock Equivalents, not including shares issued or to be issued pursuant to the Debt/Equity Replacement Agreement and to TDS and Investor or shares which are or may be issued pursuant to Performance Options ("Adjusted Fully Diluted Shares") exceeds 85,839,161 shares as of the Effective Time, the Conversion Number shall be determined by dividing 39,056,818 by such number of Adjusted Fully Diluted Shares as of the Effective Time. The number of shares of Company Common Stock and Stock Equivalents for the purpose of such recalculation shall be determined in a manner consistent with the methodologies used in preparing Item 2.1(c) of the Company Letter including without limitation the shares of Company Common Stock actually outstanding and shares of Company Common Stock issuable (i) in exchange for the Operating Company Shares whether or not Investor exercises its Tag-Along Rights as set forth in Section 10.6 of the Investment Agreement, (ii) pursuant to Company Stock Options determined using the treasury stock method, (iii) pursuant to the Restricted Stock Plan regardless of whether payment for the Restricted Stock units is made in cash or Company Common Stock, (iv) pursuant to the Tax-Deferred Savings Plan, (v) pursuant to the Compensation Plan for Non-Employee Directors, and (vi) any other Company Common Stock and Stock Equivalents outstanding as of the Effective Time; provided, for the purpose of such recalculation the shares of Company Common Stock issued or issuable pursuant to Performance Options and the shares issued or issuable pursuant to the Debt/Equity Replacement Agreement and to TDS and Investor shall be disregarded for purpose of the recalculation. The Conversion Number shall be subject to further adjustment as provided in the third sentence of Section 2.1(c) in the event that the Omnipoint Agreement is terminated or the transactions contemplated by the Omnipoint Agreement are not consummated by the Omnipoint End Date, provided that the Conversion Number determined pursuant to this Section 2.1(e) shall be used in lieu of .455. SECTION 2.2 Surrender of Certificates. (a) Exchange Agent. ChaseMellon Shareholder Services LLC shall act as exchange agent in the Merger (the "Exchange Agent"). As and when needed, but no later than twenty-five Business Days after the Effective Time, Parent shall deposit with the D-6 351 Exchange Agent, in trust for the holders of certificates (the "Company Certificates") which immediately prior to the Effective Time represented shares of Company Common Stock converted in the Merger, (i) certificates (the "Parent Certificates") representing the shares of Parent Common Stock issuable pursuant to Section 2.1(c) with respect to shares of Company Common Stock which have been converted into the right to receive Parent Common Stock (such shares of Parent Common Stock, together with cash in lieu of fractional shares and any dividends or distributions with respect thereto in accordance with Section 2.2(d) being hereinafter referred to as the "Stock Consideration Fund"), and (ii) cash with respect to shares of Company Common Stock with respect to which a Cash Election has been properly made and not withdrawn or lost (the "Cash Consideration Fund") (the Stock Consideration Fund and the Cash Consideration Fund are hereinafter referred to as the "Exchange Fund"). (b) Exchange Procedure. As soon as reasonably practicable after the Effective Time, but no later than five Business Days after the Effective Time, the Surviving Corporation shall cause the Exchange Agent to mail to each holder of record of a Company Certificate, (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to a Company Certificate shall pass, only upon delivery of such Company Certificate to the Exchange Agent and shall be in a form and have such other provisions as Parent may reasonably specify), (ii) with respect to the Public Holders, the Cash Election Form and (iii) instructions for use in effecting the surrender of Company Certificates in exchange for the property described in the next sentence. Upon surrender for cancellation to the Exchange Agent of all Company Certificate(s) held by any holder of record of a Company Certificate, together with such letter of transmittal duly executed, such holder shall be entitled to receive in exchange therefor (x) the Per Share Cash Consideration if a Cash Election is properly and timely made or (y) a Parent Certificate (which shall not include any restrictive legends) representing the number of whole shares of Parent Common Stock into which the shares of Company Common Stock represented by the surrendered Company Certificate(s) shall have been converted at the Effective Time pursuant to Section 2.1(c), cash in lieu of any fractional share of Parent Common Stock in accordance with Section 2.2(e) and certain dividends and other distributions in accordance with Section 2.2(d); and the Company Certificate(s) so surrendered shall forthwith be cancelled. In the event of a transfer of ownership of shares of Company Common Stock that is not registered in the transfer records of the Company, cash or a Parent Certificate representing shares of Parent Common Stock may be paid to or issued in a name other than that in which the Company Certificate surrendered in exchange therefor is registered, if such Company Certificate shall be properly endorsed or otherwise be in proper form for transfer and the person requesting such payment shall pay any transfer or other Taxes required by reason of the payment to a person other than the registered holder of such Company Certificate or establish to the satisfaction of the Surviving Corporation that such Tax has been paid or is not applicable. Until surrendered as contemplated by this Section 2.2, each Company Certificate shall be deemed at any time after the Effective Time to represent only the right to receive (i) the Per Share Cash Consideration, subject to the delivery of a proper and timely Cash Election Form, or (ii)(A) certificates representing the shares of Parent Common Stock into which the shares of Company Common Stock represented by such Company Certificate have been converted, (B) any dividends and other distributions in accordance with Section 2.2(d) and (C) any cash, without interest, to be paid in lieu of any fractional share of Parent Common Stock in accordance with Section 2.2(e). Parent or the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of Company Common Stock such amounts as Parent or the Exchange Agent is required to deduct and withhold with respect to the making of such payment under the Code or under any provision of state, local or foreign Tax law. To the extent that amounts are so withheld by Parent or the Exchange Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the shares of Company Common Stock in respect of which such deduction and withholding was made by Parent or the Exchange Agent. D-7 352 (c) No Further Ownership Rights in Shares. All shares of Parent Common Stock issued and cash paid upon the surrender of Company Certificates in accordance with the terms of this Article II (including any cash paid pursuant to Section 2.2(d) or Section 2.2(e)) shall be deemed to have been issued (and paid) in full satisfaction of all rights pertaining to the shares of Company Common Stock theretofore represented by such Company Certificates. At the Effective Time, the stock transfer books of the Company shall be closed, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Company Common Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Company Certificates are presented to the Surviving Corporation or the Exchange Agent for any reason, they shall be cancelled and exchanged as provided in this Article II. (d) Dividends. No dividends or other distributions that are declared on or after the Effective Time on Parent Common Stock, or are payable to the holders of record thereof on or after the Effective Time, shall be paid to any person entitled by reason of the Merger to receive Parent Certificates, and no cash payment in lieu of any fractional share of Parent Common Stock shall be paid to any such person pursuant to Section 2.2(e), until such person shall have surrendered its Company Certificate(s) as provided in Section 2.2(b). Subject to applicable law, there shall be paid to each person receiving a Parent Certificate: (i) at the time of such surrender or as promptly as practicable thereafter, the amount of any dividends or other distributions theretofore paid with respect to the shares of Parent Common Stock represented by such Parent Certificate and having a record date on or after the Effective Time and a payment date prior to such surrender; and (ii) at the appropriate payment date or as promptly as practicable thereafter, the amount of any dividends or other distributions payable with respect to such shares of Parent Common Stock and having a record date on or after the Effective Time but prior to such surrender and a payment date on or subsequent to such surrender. In no event shall the person entitled to receive such dividends or other distributions be entitled to receive interest on such dividends or other distributions. (e) No Fractional Shares. No certificates or scrip representing fractional shares of Parent Common Stock shall be issued upon the surrender for exchange of Company Certificates pursuant to this Article II; no dividend or other distribution by Parent and no stock split shall relate to any such fractional share; and no such fractional share shall entitle the record or beneficial owner thereof to vote or to any other rights of a stockholder of Parent. In lieu of any such fractional share, each holder of shares of Company Common Stock who would otherwise have been entitled thereto upon the surrender of Company Certificate(s) for exchange pursuant to this Article II (other than with respect to shares of Company Common Stock for which an effective Cash Election has been made) will be paid an amount in cash (without interest), rounded to the nearest whole cent, determined by multiplying (i) the per share closing price on the Nasdaq National Market System ("Nasdaq") of Parent Common Stock (as reported on the Nasdaq) on the date on which the Effective Time shall occur (or, if Parent Common Stock shall not trade on the Nasdaq on such date, the first day of trading in Parent Common Stock on the Nasdaq thereafter) by (ii) the fractional share to which such holder would otherwise be entitled. (f) Termination of Exchange Fund. Any portion of the Exchange Fund which remains undistributed to holders of Company Common Stock for twelve months after the Effective Time shall be delivered to Parent, upon demand, and any holders of Company Common Stock who have not theretofore complied with this Article II and the instructions set forth in the letter of transmittal mailed to such holders after the Effective Time shall thereafter look only to the Surviving Corporation (subject to abandoned property, escheat or other similar laws) for payment of cash pursuant to the Cash Election or shares of Parent Common Stock, any cash in lieu of fractional shares of Parent Common Stock and any dividends or distributions with respect to such shares of Parent Common Stock to which they are entitled. D-8 353 (g) No Liability. None of Parent, Sub, the Company or the Exchange Agent shall be liable to any person in respect of any cash delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Parent and Merger Sub C as follows: SECTION 3.1 Organization. The Company and each of its Subsidiaries (collectively, the "Company Subsidiaries") is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has requisite corporate power and authority to carry on its business as now being conducted, except where the failure to be so organized, existing and in good standing or to have such power and authority has not had and would not reasonably be expected to have a Material Adverse Effect on the Company or prevent or materially delay the consummation of the Reorganization. The Company and each of the Company Subsidiaries is duly qualified or licensed to do business and in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification or licensing necessary, except in such jurisdictions where the failure to be so duly qualified or licensed and in good standing would not reasonably be expected to have a Material Adverse Effect on the Company or prevent or materially delay the consummation of the Reorganization. The Company has delivered to Parent complete and correct copies of its Restated Certificate of Incorporation and By-laws and has made available to Parent the Certificate of Incorporation and By-laws (or similar organizational documents) of each of the Company Subsidiaries. SECTION 3.2 Subsidiaries. Item 3.2 of the Company Letter lists each Company Subsidiary and any Investment Entities. All of the outstanding shares of capital stock of each Company Subsidiary that is a corporation have been validly issued and are fully paid and nonassessable. Except as set forth in Item 3.2 of the Company Letter, all of the outstanding shares of capital stock of each Subsidiary of the Company are owned by the Company, by Subsidiaries of the Company or by the Company and Subsidiaries of the Company, free and clear of all Liens. Except as set forth in Item 3.2 of the Company Letter, (i) the Company and its Subsidiaries have no on-going obligations, agreements, commitments, rights, understandings or arrangements with respect to any Investment Entities, including funding obligations; and (ii) all Investment Interests are owned by the Company or its Subsidiaries free and clear of all Liens. Except as set forth in Item 3.2 of the Company Letter and except for the capital stock owned by the Company in its Subsidiaries, neither the Company nor any of its Subsidiaries owns, directly or indirectly, any capital stock or other ownership interest in any corporation, partnership, joint venture, limited liability company or other entity. SECTION 3.3 Capital Structure. The authorized capital stock of the Company consists of 60,000,000 Company Series A Common Shares, 100,000,000 Company Common Shares, 60,000,000 Series B Common Shares, $1.00 par value (the "Company Series B Common Shares") and 10,000,000 shares of Preferred Stock, $1.00 par value (the "Company Preferred Stock"). At the close of business on September 16, 1999, (i) no shares of Company Preferred Stock and no Series B Common Shares were outstanding, (ii) 40,000,000 Company Series A Common Shares and 31,930,588 Company Common Shares were issued and outstanding, (iii) no shares of Company Common Stock were held by the Company in treasury, (iv) 40,000,000 Company Common Shares were reserved for issuance upon conversion of the Company Series A Common Shares, (v) 2,960,480 Company Common Shares were reserved for issuance pursuant to outstanding stock options (the "Company Stock Options") to purchase Company Common Shares under the Company's 1996 Long-Term Incentive Plan (the "Company Long-Term Incentive Plan"), (vi) 456,000 Company Common D-9 354 Shares were reserved for issuance pursuant to the Company's Retention Restricted Stock Unit Plan (the "Restricted Stock Plan"), (vii) 114,514 Company Common Shares were reserved for issuance pursuant to the Tax Deferred Savings Plan, (viii) 6,056 Company Common Shares were reserved for issuance pursuant to the Company's Compensation Plan for Non-Employee Directors and (ix) as described in Item 3.2 of the Company Letter, Company Common Shares were reserved for issuance to the Investor in Aerial Operating Company, Inc. ("Operating Company"). Except as set forth above and in Item 3.2 and 3.3 of the Company Letter, and except for Company Common Shares which are reserved for issuance in exchange for shares of Company Series A Common Shares in accordance with the Company's Restated Certificate of Incorporation, as of the date hereof, no shares of Company Common Stock or shares of capital stock of any Subsidiary of the Company were issued, reserved for issuance or outstanding and there are no stock appreciation rights, phantom stock rights or other contractual rights the value of which is determined in whole or in part by the value of any capital stock ("Stock Equivalents") of the Company or any Subsidiary of the Company. Each outstanding share of Company Common Stock is, and each share of Company Common Stock which may be issued pursuant to the Company Benefit Plans and the other agreements and instruments listed above will be, when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. There are no outstanding bonds, debentures, notes or other indebtedness of the Company or any Subsidiary of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matter on which the Company's stockholders may vote. Except as set forth above or in Item 3.3 of the Company Letter, as of the date of this Agreement, there are no securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind obligating the Company or any of the Company Subsidiaries to issue, deliver or sell or create, or cause to be issued, delivered or sold or created, additional shares of capital stock or other voting securities or Stock Equivalents of the Company or of any of the Company Subsidiaries or obligating the Company or any of the Company Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking. Except as set forth in Item 3.3 of the Company Letter, as of the date of this Agreement, there are no outstanding contractual obligations of the Company or any of the Company Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of the Company or any of the Company Subsidiaries. SECTION 3.4 Authority. The Board of Directors of the Company, at a meeting duly called and held, duly adopted resolutions approving this Agreement, the Reorganization and the Stockholder Agreement, determining that the Reorganization, including the Merger, is fair to, and in the best interests of, the Company's stockholders and recommending that the Company's stockholders adopt this Agreement. The Company has requisite corporate power and authority to execute and deliver this Agreement and, subject to approval by the Company's stockholders of the Reorganization, to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the Reorganization and of the other transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company, subject to approval by the Company's stockholders of this Agreement and the Reorganization. This Agreement has been duly executed and delivered by the Company and (assuming the valid authorization, execution and delivery of this Agreement by Parent and Sub) constitutes the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except that such enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting or relating to the enforcement of creditors' rights generally and (ii) is subject to general principles of equity. SECTION 3.5 Consents and Approvals; No Violations. Except as set forth in Item 3.5 of the Company Letter, except for filings, permits, authorizations, consents and approvals as may be D-10 355 required under the Securities Act, the Exchange Act, the Communications Act, the HSR Act, the DGCL, and under the rules, regulations and published decisions of the FAA, the FCC and state public utility or service commissions or similar agencies, and except as may be required in connection with the Transfer Taxes described in Section 6.11, neither the execution, delivery or performance of this Agreement by the Company nor the consummation by the Company of the transactions contemplated hereby will (i) conflict with or result in any breach of any provision of the Restated Certificate of Incorporation or By-laws of the Company or of the similar organizational documents of any of the Company Subsidiaries, (ii) require any filing with, or permit, authorization, consent or approval of, any Governmental Entity (except where the failure to obtain such permits, authorizations, consents or approvals or to make such filings would not reasonably be expected to have a Material Adverse Effect on the Company or prevent or materially delay the consummation of the Reorganization), (iii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, contract, agreement or other instrument or obligation to which the Company or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound, (iv) violate any order, writ, judgment, injunction, decree, statute, rule or regulation applicable to the Company, any of the Company Subsidiaries or any of their properties or assets, or (v) result in the creation or imposition of any Lien on any asset of the Company or its Subsidiaries except in the case of clauses (iii), (iv) or (v) for violations, breaches or defaults that would not reasonably be expected to have a Material Adverse Effect on the Company or prevent or materially delay the consummation of the Reorganization. SECTION 3.6 SEC Documents and Other Reports. The Company has filed with the SEC all documents required to be filed by it since April 25, 1996 under the Securities Act or the Exchange Act (the "Company SEC Documents"). As of their respective filing dates, the Company SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, each as in effect on the date so filed, and at the time filed with the SEC none of the Company SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the Company SEC Documents comply as of their respective dates in all material respects with the then applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles (except in the case of the unaudited statements, as permitted by Form 10-Q under the Exchange Act) applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto) and fairly present the consolidated financial position of the Company and its consolidated Subsidiaries as at the dates thereof and the consolidated results of their operations and their consolidated cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments and to any other adjustments described therein). The Company and its Subsidiaries have not made any material misstatements of fact, or omitted to disclose any fact, to any Government Entity or in any report, document or certificate filed therewith, which misstatements or omissions, individually or in the aggregate, could reasonably be expected to subject any material licenses or authorizations to revocation or failure to renew, except to the extent that such revocation or failure to renew would not have a Material Adverse Effect on the Company or the transactions contemplated by this Agreement. SECTION 3.7 Absence of Material Adverse Change. Except as disclosed in Item 3.7 of the Company Letter or in the documents filed by the Company with the SEC and publicly available prior to the date of this Agreement (the "Company Filed SEC Documents"), since December 31, 1998 the Company and its Subsidiaries have conducted their respective businesses in all material respects only D-11 356 in the ordinary course, consistent with past practices, and there has not been (i) any Material Adverse Change with respect to the Company, (ii) any declaration, setting aside or payment of any dividend or other distribution with respect to its capital stock or any redemption, purchase or other acquisition of any of its capital stock, (iii) any split, combination or reclassification of any of its capital stock or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, or (iv) any change in accounting methods, principles or practices by the Company affecting its assets, liabilities or business, except insofar as may have been required by a change in generally accepted accounting principles. SECTION 3.8 Information Supplied. None of the information supplied or to be supplied by the Company specifically for inclusion or incorporation by reference in (i) the Registration Statement or (ii) the proxy statement (together with any amendments or supplements thereto, the "Joint Proxy Statement") relating to the Stockholders Meetings, will, in the case of the Registration Statement, at the time it becomes effective, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading, or in the case of the Joint Proxy Statement, at the time of the mailing of the Joint Proxy Statement, the time of the Stockholders Meetings and at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Stockholders Meetings which has become false or misleading. The Registration Statement will comply (with respect to the Company) as to form in all material respects with the requirements of the Securities Act, and the Joint Proxy Statement will comply (with respect to the Company) as to form in all material respects with the requirements of the Exchange Act. SECTION 3.9 Permits; Compliance with Laws. (a) Each of the Company and its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents, certificates, approvals and orders of any Governmental Entity necessary for the Company or any of its Subsidiaries to own, lease and operate its properties or to carry on its business as it is now being conducted (the "Company Permits"), except where the failure to have any of the Company Permits would not, individually or in the aggregate, have a Material Adverse Effect on the Company, and, as of the date of this Agreement, no suspension or cancellation of any of the Company Permits is pending or, to the knowledge of the Company, threatened, except where the suspension or cancellation of any of the Company Permits would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect on the Company. The businesses of the Company and its Subsidiaries are not being conducted in violation of any law, ordinance or regulation of any Governmental Entity, except for possible violations that would not reasonably be expected to have a Material Adverse Effect on the Company or prevent, or result in a material delay in, the consummation of the Reorganization. (b)(i) The Company and each of its Subsidiaries holds, and is qualified and eligible to hold, all material licenses, permits and other authorizations issued or to be issued by the FCC to such entity for the operation of their respective businesses, all of which are set forth in Item 3.9(b)(i) of the Company Letter (the "Company FCC Licenses"). (ii) The Company FCC Licenses are valid and in full force and effect and neither the Company nor any of its Subsidiaries is or has been delinquent in payment on or in default under any installment obligation owed to the United States Treasury in connection with the Company FCC Licenses. As used herein, the term "full force and effect" means that (i) the orders issuing the Company FCC Licenses have become effective, (ii) no stay of effectiveness of such orders D-12 357 has been issued by the FCC, and (iii) the Company FCC Licenses have not been invalidated by any subsequent published FCC action. (iii) All material reports and applications required by the Communications Act or required to be filed with the FCC by the Company or any of its Subsidiaries have been filed and are accurate and complete in all material respects. (iv) The Company and its Subsidiaries are, and have been, in compliance in all material respects with, and the wireless communications systems operated pursuant to the Company FCC Licenses are and have been operated in compliance in all material respects with, the Communications Act. (v) There is not pending as of the date hereof any application, petition, objection, pleading or proceeding with the FCC or any public service commission or similar body having jurisdiction or authority over the communications operations of the Company or any of its Subsidiaries which questions the validity of or contests any Company FCC License or which presents a substantial risk that, if accepted or granted, or concluded adversely, could result in (as applicable) the revocation, cancellation, suspension, dismissal, denial or any materially adverse modification of any Company FCC License or imposition of any substantial fine or forfeiture against the Company or any of its Subsidiaries except as set forth in Item 3.9(b)(v) of the Company Letter. (vi) No facts are known to the Company or its Subsidiaries which if known by a Governmental Entity of competent jurisdiction would present a substantial risk that any Company FCC License could be revoked, cancelled, suspended or materially adversely modified or that any substantial fine or forfeiture could be imposed against the Company or any of its Subsidiaries. SECTION 3.10 Tax Matters. Except as set forth in Item 3.10 of the Company Letter or as would not have a Material Adverse Effect on the Company, (i) the Company and each of its Subsidiaries have timely filed (after taking into account any extensions to file) all Tax Returns required to be filed by them either on a separate or combined or consolidated basis; (ii) all such Tax Returns are complete and accurate and disclose all taxes required to be paid for the periods covered thereby; (iii) the Company and its Subsidiaries have paid or caused to be paid all taxes shown as due on such Tax Returns and all Taxes for which no Tax Return was required to be filed, and the financial statements contained in the most recent Company SEC Documents reflect an adequate reserve for all Taxes payable by the Company and its Subsidiaries for all taxable periods and portions thereof accrued through the date of such financial statements; (iv) none of the Company or any Subsidiary has waived in writing any statute of limitations in respect of Taxes; (v) the Tax Returns referred to in clause (i) relating to income Taxes have been examined by the appropriate taxing authority or the period for assessment of the Taxes in respect of which such Tax Returns were required to be filed has expired; (vi) there is no action, suit, investigation, audit, claim or assessment pending or proposed in writing with respect to taxes of the Company or any of its Subsidiaries; (vii) there are no liens for Taxes upon the assets of the Company or any Subsidiary except for liens relating to current Taxes not yet due; (viii) all Taxes which the Company or any Subsidiary is required by law to withhold or to collect for payment have been duly withheld and collected, and have been paid or accrued on the books of the Company or such Subsidiary; (ix) none of the Company or any Subsidiary has been a member of any group of corporations filing Tax Returns on a consolidated, combined, unitary or similar basis other than each such group of which it is currently a member; (x) no deduction of any amount that would otherwise be deductible by the Company or any of its Subsidiaries with respect to taxable periods ending on or before the Effective Time could be disallowed under Section 162(m) of the Code; (xi) neither the Company nor any of its Subsidiaries has constituted either a "distributing corporation" or a "controlled corporation" in a distribution of D-13 358 stock qualifying for tax-free treatment under Section 355 of the Code (a) in the two years prior to the date of this Agreement or (b) in a distribution which could otherwise constitute part of a "plan" or "series of related transactions" (within the meaning of Section 355(e) of the Code) in conjunction with the Reorganization; (xii) neither the Company nor any of its Subsidiaries is a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code; and (xiii) as a result of the Reorganization, neither the Company nor Parent will be obligated to make a payment to an individual that would be a "parachute payment" to a "disqualified individual" as those terms are defined in Section 280G of the Code without regard to whether such payment is reasonable compensation for personal services performed or to be performed in the future. SECTION 3.11 Liabilities. Except as set forth in the Company Filed SEC Documents or Item 3.11 of the Company Letter, neither the Company nor any of its Subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by generally accepted accounting principles to be set forth on a consolidated balance sheet of the Company and its Subsidiaries or in the notes thereto, other than liabilities and obligations incurred in the ordinary course of business since December 31, 1998 and liabilities which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. SECTION 3.12 Benefit Plans; Employees and Employment Practices. (a) Except as disclosed in the Company Filed SEC Documents or Item 3.12(a) of the Company Letter, neither the Company nor any of its Subsidiaries has adopted or amended in any material respect any Company ERISA Benefit Plan since the date of the most recent audited financial statements included in the Company Filed SEC Documents. Except as set forth in Item 3.12(a) of the Company Letter, the Company does not have any commitment to create, adopt or contribute to any additional plan covering any active, former or retired employees of the Company. Except as disclosed in Item 3.12(a) of the Company Letter or in the Company Filed SEC Documents, as of the date of this Agreement, there exist no material employment, consulting, severance, bonus, incentive or termination agreements between the Company or any of its Subsidiaries and any current or former employee, officer or director of the Company or any of its Subsidiaries. (b) Item 3.12(b) of the Company Letter contains a list of all ERISA Benefit Plans sponsored by the Company or its ERISA Affiliates. None of the Company, any of its Subsidiaries, any officer of the Company or any of its Subsidiaries or any of the ERISA Benefit Plans has on or before the date of this Agreement engaged in a "prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code) with respect to any ERISA Benefit Plan that could reasonably be expected to subject the Company, any of its Subsidiaries or any officer of the Company or any of its Subsidiaries to any material Tax on prohibited transactions imposed by Section 4975 of the Code or to any material liability under Section 502(i) or (l) of ERISA where the Tax or liability that would be reasonably expected to occur would have a Material Adverse Effect on the Company. Except as disclosed in Item 3.12(b) of the Company Letter, none of the Company, its Subsidiaries or any ERISA Affiliate has at any time during the five-year period preceding the date hereof contributed to any "multiemployer plan" (as defined in Section 3(37) of ERISA). (c) Except as disclosed in Item 3.12(c) of the Company Letter, and except for such matters as could not be reasonably expected to have a Material Adverse Effect on the Company, to the extent applicable, (i) each Company ERISA Benefit Plan complies with the requirements of ERISA and the Code, (ii) each Company ERISA Benefit Plan intended to be qualified under Section 401 (a) of the Code has been determined by the Internal Revenue Service to be so qualified and nothing has occurred since the date of that determination that could reasonably be expected to adversely affect the qualified status of such plan and its related trust is tax-exempt and has been so since its creation, and (iii) each Company ERISA Benefit Plan has been maintained and administered in compliance with its terms and with the requirements prescribed by any and all statutes, orders, rules and D-14 359 regulations, including but not limited to ERISA and the Code, which are applicable to such Company ERISA Benefit Plans. (d) Except as disclosed in Item 3.12(d) of the Company Letter, all material contributions, reserves or premium payments to the Company ERISA Benefit Plan, accrued to the date hereof have been made or provided for. (e) Except as disclosed in Item 3.12(e) of the Company Letter, and except for any liability as could not be reasonably expected to have a Material Adverse Effect on the Company, the Company has not incurred any liability under Subtitle C or D of Title IV of ERISA with respect to any "single-employer plan" within the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by Company, or any entity which is considered one employer with Company under Section 4001 of ERISA. (f) Except as disclosed in Item 3.12(f) of the Company Letter, the Company has no obligation for retiree health and life benefits under any Company ERISA Benefit Plan, except as required to avoid excise taxes under Section 4980(B) of the Code and the terms of the Company ERISA Benefit Plans permit the Company to amend or terminate such Company ERISA Benefit Plans without incurring liability thereunder. (g) Except as disclosed in Item 3.12 (g) of the Company Letter, the Company has not engaged in, nor is it a successor or parent corporation to an entity that has engaged in a transaction described in Section 4069 of ERISA. (h) Except as disclosed in Item 3.12(h) of the Company Letter or the Company Filed SEC Documents, neither the Company nor any of its ERISA Affiliates has any current or projected liability in respect of post employment or post retirement welfare benefits for retired or former employees of the Company. (i) Except as disclosed in Item 3.12(i) of the Company Letter, no tax under Section 4980B of the Code has been incurred in respect of any Company ERISA Benefit Plan that is a group health plan, as defined in Section 5000(b)(1) of the Code. (j) Except as disclosed in Item 3.12(j) of the Company Letter, as of the date of this Agreement there is no pending dispute, arbitration, claim, suit or grievance involving a Company Benefit Plan (other than routine claims for benefits payable under any such Company Benefit Plan) that would reasonably be expected to have a Material Adverse Effect on the Company. (k) Item 3.12(k) of the Company Letter contains a list setting forth the name and current annual salary and other compensation payable to each Significant Employee, and the profit sharing, bonus or other form of additional compensation paid or payable by the Company or its Subsidiaries to or for the benefit of each such person for the current fiscal year. Except as set forth in Item 3.12(k) of the Company Letter, there are no oral or written contracts, agreements or arrangements obligating the Company or any of its Subsidiaries to increase the compensation or benefits presently being paid or hereafter payable to any Significant Employees or any oral employment or consulting or similar arrangements regarding any Significant Employee which are not terminable without liability on thirty days' or less prior notice and lists all written employment and consulting agreements with respect to any Significant Employee. The Company has provided true and correct copies of all employment agreements listed on Item 3.12(k). Except for severance obligations to Significant Employees set forth in Item 3.12(k) of the Company Letter, there is not due or owing and there will not be due and owing at the Effective Time to any Significant Employees, any sick pay, severance pay (whether arising out of the termination of a Significant Employee prior to, on, or subsequent to the Effective Time), compensable time or pay, including salary, commission and bonuses, personal time or pay or vacation time or vacation pay attributable to service rendered on or D-15 360 prior to the Effective Time. Except as disclosed in Item 3.12(k) of the Company Letter and other than claims made in the ordinary course of business consistent with past practice in an aggregate amount not to exceed $500,000 neither the Company nor any of its Subsidiaries have any liability arising out of claims made or suits brought (including workers' compensation claims and claims or suits for contribution to, or indemnification of, third parties, occupational health and safety, environmental, consumer protection or equal employment matters) for injury, sickness, disease, discrimination, death or termination of employment of any Significant Employee, or other employment matter to the extent attributable to an event occurring or a state of facts existing on or prior to the Effective Time. (l) The Company and each of its Subsidiaries (i) is in compliance with all applicable Federal and state laws, rules and regulations respecting employment, employment practices, terms and conditions of employment and wages and hours, in each case, with respect to Company Employees, except where the failure to be in compliance would not, singly or in the aggregate, have a Material Adverse Effect on the Company or any of its Subsidiaries or their financial condition or business; (ii) has withheld all amounts required by law or by agreement to be withheld from the wages, salaries and other payments to Company Employees; (iii) is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing, except as would reasonably be expected to not have a Material Adverse Effect on the Company; and (iv) (other than routine payments to be made in the normal course of business and consistent with past practice) is not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, Social Security or other benefits for Company Employees. (m) Except as disclosed in Item 3.12(m) of the Company Letter, as of the date of this Agreement there are no material controversies, strikes, work stoppages or disputes pending between the Company or any of its Subsidiaries and any current or former employees, and no organizational effort by any labor union or other collective bargaining unit currently is under way with respect to any employee, which in any such case would reasonably be expected to have a Material Adverse Effect on the Company. None of the Company or any of its Subsidiaries is a party to a collective bargaining agreement. Except as set forth in Item 3.12(m) of the Company Letter, there is no, and there is not threatened, any labor dispute, grievance or litigation relating to labor, safety or discrimination matters involving any Company Employee including charges of unfair labor practices or discrimination complaints, which, if adversely determined, would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company. There has been no engagement in any unfair labor practices by the Company or its Subsidiaries within the meaning of the National Labor Relations Act which would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Company. SECTION 3.13 Litigation. Except with respect to the matters addressed in Annex E hereto or as disclosed in Item 3.13 of the Company Letter or in the Company Filed SEC Documents, as of the date of this Agreement, there is no suit, action, proceeding or investigation pending or, to the Company's knowledge, threatened, against the Company or any of its Subsidiaries that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on the Company or prevent or materially delay the consummation of the Reorganization. Except as disclosed in Item 3.13 of the Company Letter or in the Company Filed SEC Documents, neither the Company nor any of its Subsidiaries is subject to any outstanding judgment, order, writ, injunction or decree that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company or prevent or materially delay the consummation of the Reorganization. SECTION 3.14 Environmental Matters. Except as set forth in the Company Filed SEC Documents or in Item 3.14 of the Company Letter, neither the Company nor any of its Subsidiaries D-16 361 has (i) not been in compliance with any Environmental Laws or Environmental Permits, except for such non-compliance as, taken individually or in the aggregate, would not reasonably be expected to result in a Material Adverse Effect on the Company or its Subsidiaries; (ii) stored, released or disposed of any Hazardous Substances on, under or at any of the Company's or any of its Subsidiaries' properties or any other properties, other than in a manner that would not, in all such cases taken individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect on the Company, (iii) any knowledge of the presence of any Hazardous Substances that have been released into the environment on, under or at any of the Company's or any of its Subsidiaries' properties other than that which would not reasonably be expected to result in a Material Adverse Effect on the Company, or (iv) received any written notice (A) of any violation of any applicable Environmental Law that has not been resolved or settled with the relevant Governmental Entity and with respect to which there are no continuing material obligations, (B) of the institution or pendency of any suit, action, claim, proceeding or investigation by any Governmental Entity or any third party in connection with any such violation, (C) by any Governmental Entity requiring remediation of Hazardous Substances at or arising from any of the Company's or any of its Subsidiaries' properties or any other properties, (D) alleging noncompliance by the Company or any of its Subsidiaries with the terms of any permit required under any Environmental Law in any manner reasonably likely to require material expenditures or to result in material liability that has not been resolved or settled and with respect to which there are no continuing material obligations or (E) demanding payment for response to or remediation of Hazardous Substances at or arising from any of the Company's or any of its Subsidiaries' properties or any other properties, except in each case for the notices set forth in Item 3.14 of the Company Letter and except in each case for notices that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect on the Company. SECTION 3.15 Section 203 of DGCL. Under the Company's Restated Certificate of Incorporation, Section 203 of the DGCL is inapplicable to the Reorganization, this Agreement and the Stockholder Agreement and, accordingly, neither such Section nor, to the knowledge of the Company, any other antitakeover or similar statute or regulation applies to any such transactions. To the knowledge of the Company, no other "control share acquisition," "fair price," "moratorium" or other antitakeover laws or regulations enacted under U.S. federal or state laws applicable to the Company apply to this Agreement or any of the transactions related thereto. SECTION 3.16 Intellectual Property. Item 3.16 of the Company Letter sets forth a complete list of all Intellectual Property Rights. Except as set forth in the Company Filed SEC Documents or in Item 3.16 of the Company Letter, the Intellectual Property Rights consist solely of items and rights which are: (i) owned by the Company or its Subsidiaries, (ii) in the public domain, or (iii) rightfully used by Company or its Subsidiaries pursuant to a license, and, with respect to Intellectual Property Rights owned by the Company or its Subsidiaries, the Company or its Subsidiaries own the entire right, title and interest in and to such Intellectual Property Rights free and clear of any Liens. The Company and its Subsidiaries have all rights in the Intellectual Property Rights necessary to carry out the current and anticipated future (up to the Closing) activities of the Company and its Subsidiaries. The Intellectual Property Rights do not infringe on any proprietary right of any Person. No claims (x) challenging the validity, effectiveness, or ownership by the Company or its Subsidiaries of any of the Intellectual Property Rights, or (y) to the effect that the Intellectual Property Rights infringe or will infringe on any intellectual property or other proprietary right of any person have been asserted or, to the Company's knowledge, are threatened by any person nor to the Company's knowledge are there any valid grounds for any bona fide claim of any such kind. To the best of the Company's knowledge, there is no material unauthorized use, infringement or misappropriation of any of the Intellectual Property Rights by any third party, employee or former employee of the Company or its Subsidiaries. D-17 362 SECTION 3.17 Opinion of Financial Advisor. The Company has received the opinion of Donaldson Lufkin & Jenrette Securities Corporation ("Company Financial Advisor"), dated the date hereof, to the effect that, as of the date hereof, the consideration to be received in the Reorganization by the Company's stockholders is fair to the Company's stockholders from a financial point of view, a copy of which opinion has been delivered to Parent. SECTION 3.18 Brokers. Except for the Company Financial Advisor and Wasserstein Perella & Company, Inc., the financial advisor to the Special Committee of the Board of Directors of the Company, the fees and expenses of each of which will be paid by the Company (and are reflected in agreements with the Company, true and correct copies of which have been furnished to Parent), no broker, investment banker, financial advisor or other person, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of the Company. SECTION 3.19 Tax Status. To the knowledge of the Company after due investigation, neither the Company nor any of its Affiliates has taken any action or failed to take any action which action or failure would jeopardize the qualification of either the Merger or the VoiceStream Merger as a reorganization within the meaning of Section 368(a) of the Code and/or as part of a transaction described in Section 351(a) of the Code. To the knowledge of the Company after due investigation, there are no facts or circumstances relating to the Company or its Affiliates, including any covenants or undertakings of the Company pursuant to this Agreement, that would prevent Sidley & Austin from delivering the opinion referred to in Section 7.2(b) as of the date hereof. SECTION 3.20 Contracts. Except as set forth in the Company Filed SEC Documents or in Item 3.20 of the Company Letter, neither the Company nor any of its Subsidiaries is a party to or bound by (i) any "material contract" (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC) or any agreement, contract or commitment the loss or termination of which would have a Material Adverse Effect on the Company; (ii) any non-competition agreement or any other agreement or obligation which materially limits or will materially limit the Company or any of its Subsidiaries from engaging in the business of providing wireless communications services or from developing wireless communications technology anywhere in the world; or (iii) any management agreement, technical services agreement or other agreement whereby the Company or any of its Subsidiaries is provided or is required to provide management or technical services to any other Person. With such exceptions as, individually or in the aggregate, have not had, and would not be reasonably expected to have, a Material Adverse Effect on the Company or its Subsidiaries, (x) each of the contracts, agreements and commitments of the Company or its Subsidiaries is valid and in full force and effect and (y) neither the Company nor any of its Subsidiaries has violated any provision of, or committed or failed to perform any act which, with or without notice, lapse of time, or both, would constitute a default under the provisions of any such contract, agreement or commitment. To the knowledge of the Company, no counterparty to any such contract, agreement or commitment has violated any provision of, or committed or failed to perform any act which, with or without notice, lapse of time, or both would constitute a default or other breach under the provisions of, such contract, agreement or commitment, except for defaults or breaches which, individually or in the aggregate, have not had, or would not reasonably be expected to have, a Material Adverse Effect on the Company or its Subsidiaries. Neither the Company nor any of its Subsidiaries is a party to, or otherwise a guarantor of or liable with respect to, any interest rate, currency or other swap or derivative transaction, other than any such transactions which are not material to the business of the Company or its Subsidiaries. The Company has provided or made available to Parent a copy of each agreement described in item (i), (ii) and (iii) above. D-18 363 SECTION 3.21 Vote Required. The only vote of the holders of any class or series of capital stock of the Company necessary to approve this Agreement and the transactions contemplated hereby is the affirmative vote of the holders of a majority of the outstanding shares of Company Common Stock. SECTION 3.22 Transactions with Affiliates. Except as described in Item 3.22 of the Company Letter or the Company Filed SEC Documents, no Affiliate of the Company nor any stockholder, officer, director, partner, member, consultant or employee of any thereof, is at the date hereof a party to any transaction with the Company or any of its Subsidiaries, including any contract or arrangement providing for the furnishing of services to or by, providing for rental of real or personal property (including intellectual property) to or from, or otherwise requiring payments to or from the Company or any of its Subsidiaries, or any Affiliate thereof. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB Parent and Merger Sub C represent and warrant to the Company as follows: SECTION 4.1 Organization. Parent, Sub, Merger Sub A, Merger Sub B and each of Parent's Subsidiaries (collectively, the "Parent Subsidiaries") is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has requisite corporate or other organizational power and authority to carry on its business as now being conducted, except where the failure to be so organized, existing and in good standing or to have such power and authority has not had and would not reasonably be expected to have a Material Adverse Effect on Parent or prevent or materially delay the consummation of the Reorganization. Each of Parent and Merger Sub C is duly qualified or licensed to do business and in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification or licensing necessary, except in such jurisdictions where the failure to be so duly qualified or licensed and in good standing would not reasonably be expected to have a Material Adverse Effect on Parent or prevent or materially delay the consummation of the Reorganization. SECTION 4.2 Ownership of Merger Subs. All of the outstanding shares of capital stock of each Merger Sub have been validly issued and are fully paid and nonassessable. All of the outstanding shares of capital stock of each Merger Sub are owned by Holding. SECTION 4.3 Capital Structure. The authorized capital stock of Holding consists of 400,000,000 shares of common stock, par value $0.001 per share ("Holding Common Stock"), of which one share has been issued to VoiceStream at a price of $2.00 as of the date hereof, and 5,000,000 shares of preferred stock, par value $0.001 per share, none of which are outstanding as of the date hereof. The authorized capital stock of VoiceStream consists of 300,000,000 shares of VoiceStream common stock ("VoiceStream Common Stock") and 50,000,000 shares of VoiceStream preferred stock ("VoiceStream Preferred Stock"). As of the close of business on September 15, 1999, (i) there were outstanding 95,765,505 shares of VoiceStream Common Stock (inclusive of all shares of restricted stock granted under any compensatory plans or arrangements); (ii) 7,600,000 shares of VoiceStream common Stock had been authorized pursuant to the VoiceStream stock option plan (the "VoiceStream Option Plan"), of which 4,590,542 shares are issued and outstanding; (iii) 1,000,000 shares of VoiceStream Common Stock had been authorized pursuant to the VoiceStream employee stock purchase plan (the "VoiceStream ESPP"), of which 158,092 shares have been issued; (iv) 200,000 shares of VoiceStream Common Stock had been authorized under the VoiceStream executive restricted stock plan (the "VoiceStream ERSP"), of which no shares have been issued; (v) no phantom shares or stock units had been issued under any stock option, compensation or deferred compensation plan or arrangement with respect to VoiceStream Common Stock; and (vi) there were outstanding no VoiceStream warrants for VoiceStream Common Stock and no shares D-19 364 of VoiceStream Preferred Stock. Each outstanding share of VoiceStream Common Stock is, and each share of VoiceStream Common Stock which may be issued pursuant to the VoiceStream ESPP or VoiceStream ERSP will be, when issued in accordance with the respective terms thereof, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. There are no outstanding bonds, debentures, notes or other indebtedness of Parent or any Subsidiary of Parent having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matter on which Parent's stockholders may vote. Except for this Agreement, as set forth above or in Item 4.3 of the Parent Letter, as of the date of this Agreement, there are no securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind obligating Parent or any of the Parent Subsidiaries to issue, deliver or sell or create, or cause to be issued, delivered or sold or created, additional shares of capital stock or other voting securities or Stock Equivalents of Parent or of any of the Parent Subsidiaries or obligating Parent or any of the Parent Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking. As of the date of this Agreement, there are no outstanding contractual obligations of Parent or any of the Parent Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock of Parent or any of the Parent Subsidiaries. SECTION 4.4 Authority. The Board of Directors of Parent, at a meeting duly called and held, duly adopted resolutions approving this Agreement, the Reorganization and the Stockholder Agreement, determining that the Reorganization, including the Merger, and the issuance (the "Parent Share Issuance") of shares of Parent Common Stock in accordance with the Reorganization, is fair to, and in the best interests of, Parent's stockholders. The Board of Directors of Merger Sub C has declared the Reorganization advisable and approved this Agreement. Parent and Merger Sub C have the requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by Parent and Merger Sub C and the consummation by Parent and Merger Sub C of the Reorganization and of the other transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Parent and Merger Sub C subject, in the case of Parent, to the approval of the Reorganization and the Parent Share Issuance by Parent's stockholders. This Agreement has been duly executed and delivered by Parent and Merger Sub C and (assuming the valid authorization, execution and delivery of this Agreement by the Company) constitutes the valid and binding obligation of each of Parent and Merger Sub C enforceable against each of them in accordance with its terms, except that such enforceability (i) may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting or relating to the enforcement of creditors' rights generally and (ii) is subject to general principles of equity. The Parent Share Issuance, the filing of a registration statement on Form S-4 with the SEC by Parent under the Securities Act of 1933, as amended, for the purpose of registering the shares of Parent Common Stock to be issued in connection with the Reorganization (together with any amendments or supplements thereto, whether prior to or after the effective date thereof, the "Registration Statement") have been duly authorized by Parent's Board of Directors. SECTION 4.5 Consents and Approvals; No Violations. Except as set forth in Item 4.5 of the Parent Letter, except for filings, permits, authorizations, consents and approvals as may be required under, and other applicable requirements of, the Securities Act, the Exchange Act, the Communications Act, the HSR Act, the DGCL, and under the rules, regulations and published decisions of the FAA, the FCC and state public utility or service commissions or similar agencies, and except as may be required in connection with the Transfer Taxes described in Section 6.11, neither the execution, delivery or performance of this Agreement by Parent and Merger Sub C nor the consummation by Parent and Merger Sub C of the transactions contemplated hereby will (i) conflict with or result in any breach of any provision of the respective certificate of incorporation D-20 365 or By-laws of Parent and Sub, (ii) require any filing with, or permit, authorization, consent or approval of, any Governmental Entity (except where the failure to obtain such permits, authorizations, consents or approvals or to make such filings would not reasonably be expected to have a Material Adverse Effect on Parent or prevent or materially delay the consummation of the Reorganization), (iii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, amendment, cancellation or acceleration) under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, lease, contract, agreement or other instrument or obligation to which Parent or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound, (iv) violate any order, writ, judgment, injunction, decree, statute, rule or regulation applicable to Parent, any of its Subsidiaries or any of their properties or assets, or (v) result in the creation or imposition of any Lien on any asset of the Company or its Subsidiaries except in the case of clauses (iii), (iv) or (v) for violations, breaches or defaults that would not reasonably be expected to have a Material Adverse Effect on Parent or prevent or materially delay the consummation of the Reorganization. SECTION 4.6 SEC Documents and Other Reports. Parent has filed with the SEC all documents required to be filed by it since December 31, 1998 under the Securities Act or the Exchange Act (the "Parent SEC Documents"). As of their respective filing dates, the Parent SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, each as in effect on the date so filed, and at the time filed with the SEC none of the Parent SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of Parent included in the Parent SEC Documents comply as of their respective dates in all material respects with the then applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles (except in the case of the unaudited statements, as permitted by Form 10-Q under the Exchange Act) applied on a consistent basis during the periods involved (except as may be indicated therein or in the notes thereto) and fairly present the consolidated financial position of Parent and its consolidated Subsidiaries as at the dates thereof and the consolidated results of their operations and their consolidated cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments and to any other adjustments described therein). Parent and its Subsidiaries have not made any material misstatements of fact, or omitted to disclose any fact, to any Government Entity or in any report, document or certificate filed therewith, which misstatements or omissions, individually or in the aggregate, could reasonably be expected to subject any material licenses or authorizations to revocation or failure to renew, except to the extent that such revocation or failure to renew would not have a Material Adverse Effect on Parent or the transactions contemplated by this Agreement. SECTION 4.7 Absence of Material Adverse Change. Except as disclosed in Item 4.7 of the Parent Letter or in the documents filed by Parent with the SEC and publicly available prior to the date of this Agreement (the "Parent Filed SEC Documents"), since December 31, 1998 Parent and its Subsidiaries have conducted their respective businesses in all material respects only in the ordinary course, consistent with past practices, and there has not been (i) any Material Adverse Change with respect to Parent, (ii) any declaration, setting aside or payment of any dividend or other distribution with respect to its capital stock (other than regular quarterly cash dividends) or any redemption, purchase or other acquisition of any of its capital stock, (iii) any split, combination or reclassification of any of its capital stock or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, or (iv) any change in D-21 366 accounting methods, principles or practices by Parent affecting its assets, liabilities or business, except insofar as may have been required by a change in generally accepted accounting principles. SECTION 4.8 Information Supplied. None of the information supplied or to be supplied by Parent specifically for inclusion or incorporation by reference in (i) the Registration Statement or (ii) the Joint Proxy Statement, will, in the case of the Registration Statement, at the time it becomes effective, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading, or in the case of the Joint Proxy Statement, at the time of the mailing of the Joint Proxy Statement, the time of the Stockholders Meetings and at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Stockholders Meetings which has become false or misleading. The Registration Statement will comply (with respect to Parent) as to form in all material respects with the requirements of the Securities Act and the Joint Proxy Statement will comply (with respect to Parent) as to form in all material respects with the requirements of the Exchange Act. SECTION 4.9 Permits; Compliance with Laws. (a) Each of Parent and its Subsidiaries is in possession of all franchises, grants, authorizations, licenses, permits, charters, easements, variances, exceptions, consents, certificates, approvals and orders of any Governmental Entity necessary for Parent or any of its Subsidiaries to own, lease and operate its properties or to carry on its business as it is now being conducted (the "Parent Permits"), except where the failure to have any of the Parent Permits would not, individually or in the aggregate, have a Material Adverse Effect on Parent, and, as of the date of this Agreement, no suspension or cancellation of any of the Parent Permits is pending or, to the knowledge of Parent, threatened, except where the suspension or cancellation of any of the Parent Permits would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on Parent. The businesses of Parent and its Subsidiaries are not being conducted in violation of any law, ordinance or regulation of any Governmental Entity, except for possible violations that would not reasonably be expected to have a Material Adverse Effect on Parent or prevent or materially delay the consummation of the Reorganization. (b)(i) Parent and each of its Subsidiaries holds, and is qualified and eligible to hold, all material licenses, permits and other authorizations issued or to be issued by the FCC to such entity for the operation of their respective businesses, all of which are set forth in Item 4.9(b)(i) of Parent Letter (the "Parent FCC Licenses"). (ii) Parent FCC Licenses are valid and in full force and effect and neither Parent nor any of its Subsidiaries is or has been delinquent in payment on or in default under any installment obligation owed to the United States Treasury in connection with Parent FCC Licenses. As used herein, the term "full force and effect" means that (i) the orders issuing the Parent FCC Licenses have become effective, (ii) no stay of effectiveness of such orders has been issued by the FCC, and (iii) the Parent FCC Licenses have not been invalidated by any subsequent published FCC action. (iii) All material reports and applications required by the Communications Act or required to be filed with the FCC by Parent or any of its Subsidiaries have been filed and are accurate and complete in all material respects. (iv) Parent and its Subsidiaries are, and have been, in compliance in all material respects with, and the wireless communications systems operated pursuant to Parent FCC Licenses are and have been operated in compliance in all material respects with, the Communications Act. D-22 367 (v) There is not pending as of the date hereof any application, petition, objection, pleading or proceeding with the FCC or any public service commission or similar body having jurisdiction or authority over the communications operations of Parent or any of its Subsidiaries which questions the validity of or contests any Parent FCC License or which presents a substantial risk that, if accepted or granted, or concluded adversely, could result in (as applicable) the revocation, cancellation, suspension, dismissal, denial or any materially adverse modification of any Parent FCC License or imposition of any substantial fine or forfeiture against Parent or any of its Subsidiaries except as set forth in Item 4.9(b)(v) of Parent Letter. (vi) No facts are known to Parent or its Subsidiaries which if known by a Governmental Entity of competent jurisdiction would present a substantial risk that any Parent FCC License could be revoked, cancelled, suspended or materially adversely modified or that any substantial fine or forfeiture could be imposed against Parent or any of its Subsidiaries. SECTION 4.10 Tax Matters. Except as set forth in Item 4.10 of the Parent Letter or as would not have a Material Adverse Effect on Parent, (i) Parent and each of its Subsidiaries have timely filed (after taking into account any extensions to file) all Tax Returns required to be filed by them either on a separate or combined or consolidated basis; (ii) all such Tax Returns are complete and accurate and disclose all Taxes required to be paid for the periods covered thereby; (iii) Parent and its Subsidiaries have paid or caused to be paid all Taxes shown as due on such Tax Returns and all Taxes for which no Tax Return was required to be filed, and the financial statements contained in the most recent Parent SEC Documents reflect an adequate reserve for all Taxes payable by Parent and its Subsidiaries for all taxable periods and portions thereof accrued through the date of such financial statements; (iv) none of Parent or any Subsidiary has waived in writing any statute of limitations in respect of Taxes; (v) the Tax Returns referred to in clause (i) relating to income taxes have been examined by the appropriate taxing authority or the period for assessment of the Taxes in respect of which such Tax Returns were required to be filed has expired; (vi) there is no action, suit, investigation, audit, claim or assessment pending or proposed in writing with respect to Taxes of Parent or any of its Subsidiaries; (vii) there are no liens for Taxes upon the assets of Parent or any Subsidiary except for liens relating to current Taxes not yet due; (viii) all Taxes which Parent or any Subsidiary is required by law to withhold or to collect for payment have been duly withheld and collected, and have been paid or accrued on the books of Parent or such Subsidiary; (ix) none of Parent or any Subsidiary has been a member of any group of corporations filing Tax Returns on a consolidated, combined, unitary or similar basis other than each such group of which it is currently a member; (x) no deduction of any amount that would otherwise be deductible by Parent or any of its Subsidiaries with respect to taxable periods ending on or before the Effective Time could be disallowed under Section 162(m) of the Code; (xi) neither Parent nor any of its Subsidiaries is a "United States real property holding corporation" within the meaning of Section 897(c)(2) of the Code; and (xii) as a result of the Reorganization, Parent will not be obligated to make a payment to an individual that would be a "parachute payment" to a "disqualified individual" as those terms are defined in Section 280G of the Code without regard to whether such payment is reasonable compensation for personal services performed or to be performed in the future. SECTION 4.11 Liabilities. Except as set forth in the Parent Filed SEC Documents, to the knowledge of Parent, neither Parent nor any of its Subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) required by generally accepted accounting principles to be set forth on a consolidated balance sheet of Parent and its Subsidiaries or in the notes thereto, other than liabilities and obligations incurred in the ordinary course of business since December 31, 1998 and liabilities which would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Parent. D-23 368 SECTION 4.12 Litigation. Except as disclosed in Item 4.12 of the Parent Letter or in the Parent Filed SEC Documents, as of the date of this Agreement, there is no suit, action, proceeding or investigation pending or, to Parent's knowledge, threatened, against Parent or any of its Subsidiaries that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on Parent or prevent or materially delay the consummation of the Reorganization. Except as disclosed in Item 4.12 of the Parent Letter or in the Parent Filed SEC Documents, neither Parent nor any of its Subsidiaries is subject to any outstanding judgment, order, writ, injunction or decree that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on Parent or prevent or materially delay the consummation of the Reorganization. SECTION 4.13 State Takeover Statutes. To the knowledge of Parent, no state antitakeover statute or similar statute or regulation applicable to Parent is applicable to this Agreement or the transactions contemplated hereby. To the knowledge of Parent, no other "control share acquisition," "fair price," "moratorium" or other antitakeover laws or regulations enacted under U.S. federal or state laws applicable to Parent apply to this Agreement or any of the transactions related thereto. SECTION 4.14 Brokers. No broker, investment banker, financial advisor or other person, other than Goldman, Sachs & Co., the fees and expenses of which will be paid by Parent (and are reflected in an agreement between Goldman, Sachs & Co. and Parent, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Parent. SECTION 4.15 Tax Status. To the knowledge of Parent after due investigation, neither Parent nor any of its Affiliates has taken any action or failed to take any action which action or failure would jeopardize the qualification of either the Merger or the VoiceStream Merger as a reorganization within the meaning of Section 368(a) of the Code and/or as part of a transaction described in Section 351(a) of the Code. To the knowledge of Parent after due investigation, there are no facts or circumstances relating to Parent or its Affiliates, including any covenants or undertakings of the Company pursuant to this Agreement, that would prevent Jones, Day, Reavis & Pogue from delivering the opinion referred to in Section 7.3(b) as of the date hereof. SECTION 4.16 Interim Operations of Sub. Merger Sub C was formed solely for the purpose of engaging in the transactions contemplated hereby, has engaged in no other business activities and has conducted its operations only as contemplated hereby. SECTION 4.17 Vote Required. The only vote of the holders of any class or series of capital stock of Parent necessary to approve this Agreement and the transactions contemplated hereby is (i) with respect to the transactions contemplated by Sections 1.0(b) or 1.0(c), the affirmative vote of the holders of two-thirds of the outstanding shares of Parent Common Stock and (ii) with respect to the Parent Share Issuance, the affirmative vote of the holders of a majority of the outstanding shares of Parent Common Stock. SECTION 4.18 Transactions with Affiliates. Except as described in Item 4.18 of Parent Letter or the Parent SEC Documents, no Affiliate of Parent nor any stockholder, officer, director, partner, member, consultant or employee of any thereof, is at the date hereof a party to any transaction with Parent or any of its Subsidiaries, including any contract or arrangement providing for the furnishing of services to or by, providing for rental of real or personal property (including intellectual property) to or from, or otherwise requiring payments to or from Parent or any of its Subsidiaries, or any Affiliate thereof. SECTION 4.19 Opinion of Goldman, Sachs & Co. Parent has received the oral opinion of Goldman, Sachs & Co. on the date hereof to the effect that, as of the date hereof, the consideration to be paid by Parent in the Reorganization is fair to the Parent's stockholders from a financial point of view. D-24 369 ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS SECTION 5.1 Conduct of Business by the Company Pending the Reorganization. During the period from the date of this Agreement until the Effective Time, the Company shall, and shall cause each of its Subsidiaries to, in all material respects, except as contemplated by this Agreement, carry on its business in the ordinary course as currently conducted. Without limiting the generality of the foregoing, and except as otherwise contemplated by this Agreement (including the Annexes hereto) or as disclosed in the Company Letter, during such period, the Company shall not, and shall not permit any of its Subsidiaries to, without the prior written consent of Parent: (a) (i) declare, set aside or pay any dividends on, or make any other distributions in respect of, or redeem or repurchase, any of its capital stock or other equity interest, except for dividends by a Subsidiary of the Company to its parent or (ii) split, combine or reclassify any of its capital stock or other equity interest or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock; (b) issue, deliver, sell, pledge or otherwise encumber any shares of its capital stock or other equity interest, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities, other than the issuance of shares of Company Common Stock under the Company Long-Term Incentive Plan, Company Restricted Stock Plan or Tax Deferred Savings Plan in the ordinary course or pursuant to the Investment Agreement; (c) amend its Restated Certificate of Incorporation or By-laws or other similar organizational documents; (d) acquire, or agree to acquire, in a single transaction or in a series of related transactions, any business or assets, other than (i) transactions that are in the ordinary course of business, and which involve individually or in the aggregate a purchase price not in excess of $5,000,000 and (ii) capital expenditures described in paragraph (e) below; (e) make or agree to make any new capital expenditure other than expenditures contemplated by the Company's capital budget for fiscal 1999 and expenditures not in excess of the dollar amount included in the Company's business plan for fiscal 2000; (f) sell, lease, license, encumber or otherwise dispose of, or agree to sell, lease, license, encumber or otherwise dispose of, any of its assets, other than transactions that are in the ordinary course of business and which involve assets having a current value not in excess of $5,000,000 individually or in the aggregate; (g) increase the salary or wages payable or to become payable to its directors, officers or employees, except for increases required under employment agreements existing on the date hereof, and except for increases for officers and employees in the ordinary course of business consistent with past practices; or enter into any employment or severance agreement with, or establish, adopt, enter into or amend, or make any grants or awards under, any bonus, profit sharing, thrift, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination or severance plan, agreement, policy or arrangement for the benefit of, any director, officer or employee, except, in each case, in the ordinary course of business consistent with past practices (including those with respect to the timing and amount of, and persons entitled to, grants and awards), or as may be required by the terms of any such plan, agreement, policy or arrangement or to comply with applicable law; (h) except as may be required as a result of a change in law or in generally accepted accounting principles, make any change in its method of accounting or its fiscal year; D-25 370 (i) enter into, modify in any material respect, amend in any material respect or terminate any material contract or agreement to which the Company or any of its Subsidiaries is a party, or waive, release or assign any material rights or claims, in each case, in any manner adverse to the Company or any of its Subsidiaries; (j) amend any term of any of its outstanding securities in any material respect; (k) adopt a plan or agreement of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other material reorganization; (l) incur, assume or guarantee any material Indebtedness other than pursuant to agreements in effect on the date hereof and listed in the Company Letter; (m) create, incur, assume or suffer to exist any Lien upon any of its property, assets or revenues, whether now owned or hereafter acquired, other than Liens incurred in the ordinary course of business or to secure Indebtedness or other obligations permitted by this Agreement; (n) create, incur, assume or suffer to exist any obligation whereby the Company or its Subsidiaries guarantees any Indebtedness, leases, dividends or other obligations of any third party; (o) make any loan, advance or capital contributions to or investment in any Person, other than loans, advances or capital contributions to or investments in its wholly owned Subsidiaries; (p) enter into any agreement or arrangement that materially limits or otherwise materially restricts the Company, any of its Subsidiaries or any of their respective Affiliates or any successor thereto or that could, after the Effective Time, limit or restrict Parent, any of its Subsidiaries, the Surviving Corporation or any of their Affiliates, from engaging in the business of providing wireless communications services or developing wireless communications technology anywhere in the world or otherwise from engaging in any other business; (q) settle, or propose to settle, any material litigation, investigation, arbitration, proceeding or other claim; (r) make any material tax election or enter into any settlement or compromise of any material tax liability; (s) take any action, other than as expressly permitted by this Agreement, that would make any representation or warranty of the Company hereunder inaccurate in any material respect at the Effective Time; or (t) enter into any contract, agreement, commitment or arrangement to do any of the foregoing. SECTION 5.2 Conduct of Business by Parent Pending the Reorganization. During the period from the date of this Agreement until the Effective Time, except as contemplated by this Agreement or the Omnipoint Agreement, Parent shall not, and shall not permit any of its Subsidiaries to, without the prior written consent of the Company (which consent shall not be unreasonably withheld or delayed): (a) amend its articles or certificate of incorporation, bylaws or other applicable governing instrument; (b) amend any terms of the shares of Parent Common Stock in any material respect; (c) split, combine, subdivide or reclassify any shares of Parent Common Stock or declare, set aside or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of Parent Common Stock, except for (i) regular quarterly cash D-26 371 dividends, (ii) regular dividends on any future series of preferred stock pursuant to the terms of such securities, or (iii) dividends paid by any Parent Subsidiary to Parent or any Parent Subsidiary that is, directly or indirectly, wholly owned by Parent; (d) take any action that would or would reasonably be expected to prevent, impair or materially delay the ability of Parent to consummate the transactions contemplated by this Agreement; (e) change (i) its methods of accounting or accounting practices in any material respect except as required by concurrent changes in generally accepted accounting principles or by law or (ii) its fiscal year; (f) enter into or acquire any new line of business that (i) is material to Parent and (ii) is not strategically related to the current business or operations of Parent; (g) agree or commit to do any of the foregoing; provided, however, that nothing herein shall preclude or restrict Parent from consummating the transactions contemplated by the Omnipoint Agreement. SECTION 5.3 No Solicitation. (a) From the date hereof until the termination hereof, the Company will not, and will cause its Affiliates, and the officers, directors, employees, investment bankers, attorneys, accountants, consultants or other agents or advisors of the Company and its Affiliates, not to, directly or indirectly: (i) take any action to solicit, initiate, facilitate or encourage the submission of any Acquisition Proposal; (ii) other than in the ordinary course of business and not related to an Acquisition Proposal, engage in any discussions or negotiations with, or disclose any non-public information relating to the Company or any of its Subsidiaries or afford access to the properties, books or records of the Company or any of its Subsidiaries to, any Person who is known by the Company to be considering making, or has made, an Acquisition Proposal; (iii) (A) approve any transaction under Section 203 of the Delaware Law or (B) approve of any Person's becoming an "interested stockholder" under Section 203 of Delaware Law or (iv) enter into any agreement with respect to an Acquisition Proposal. Nothing contained in this Agreement shall prevent the Board of Directors of the Company from complying with Rule 14e-2 and Rule 14d-9 under the 1934 Act with regard to an Acquisition Proposal; provided, that the Board of Directors of the Company shall not recommend that the stockholders of the Company tender their shares in connection with a tender offer except to the extent the Board of Directors of the Company by a majority vote determines in its good faith judgment that such a recommendation is required to comply with the fiduciary duties of the Board of Directors of the Company to shareholders under applicable Delaware Law, after receiving the advice of outside legal counsel. (b) The Company will notify Parent promptly (but in no event later than 24 hours) after receipt by the Company (or any of its advisors) of any Acquisition Proposal, or of any request (other than in the ordinary course of business and not related to an Acquisition Proposal) for non-public information relating to the Company or any of its Subsidiaries or for access to the properties, books or records of the Company or any of its Subsidiaries by any Person who is known to be considering making, or has made, an Acquisition Proposal. The Company shall provide such notice orally and in writing and shall identify the Person making, and the terms and conditions of, any such Acquisition Proposal or request. The Company shall keep Parent fully informed, on a prompt basis (but in any event no later than 24 hours), of the status and details of any such Acquisition Proposal or request. The Company shall, and shall cause its Subsidiaries and the directors, employees and other agents of the Company and the Company Subsidiaries to, cease immediately and cause to be terminated all activities, discussions or negotiations, if any, with any Persons conducted prior to the date hereof with respect to any Acquisition Proposal. D-27 372 SECTION 5.4 Third Party Standstill Agreements. Subject to the fiduciary responsibilities of the Board of Directors of the Company, during the period from the date of this Agreement through the Effective Time, the Company shall enforce and shall not terminate, amend, modify or waive any standstill provision of any confidentiality or standstill agreement between the Company and other parties entered into prior to the date hereof in connection with the process conducted by the Company to solicit acquisition proposals for the Company. SECTION 5.5 Disclosure of Certain Matters; Delivery of Certain Filings. The Company shall promptly advise Parent orally and in writing if there occurs, to the knowledge of the Company, any change or event which results in the executive officers of the Company having a good faith belief that such change or event has resulted in or is reasonably likely to result in a Material Adverse Effect on the Company or prevent or materially delay the consummation of the Reorganization. Parent shall promptly advise the Company orally and in writing if there occurs, to the knowledge of Parent, any change or event which results in the executive officers of Parent having a good faith belief that such change or event has resulted in or is reasonably likely to result in a Material Adverse Effect on Parent. The Company shall provide to Parent, and Parent shall provide to the Company, copies of all filings made by the Company or Parent, as the case may be, with any Governmental Entity in connection with this Agreement and the transactions contemplated hereby. SECTION 5.6 Tax Status. During the period from the date of this Agreement through the Effective Time, each of Parent, the Company and their respective Affiliates shall use its reasonable best efforts (i) to cause each of the Merger and the VoiceStream Merger to qualify as a reorganization within the meaning of Section 368(a) of the Code and/or as part of a transaction described in Section 351(a) of the Code and (ii) to obtain the opinions of counsel referred to in Section 7.2(b) and Section 7.3(b), including the execution of the tax certificates referenced therein. ARTICLE VI ADDITIONAL AGREEMENTS SECTION 6.1 Employee Benefits. (a) Parent shall take all necessary action so that each person who is an employee of the Company or any of its Subsidiaries as of the Effective Time (including each such person who is on vacation, temporary layoff, approved leave of absence, sick leave or short-or long-term disability) (a "Retained Employee") shall remain an employee of the Company or the Surviving Corporation or a Subsidiary of the Company or of the Surviving Corporation, as the case may be, immediately following the Effective Time. If any person who (a) is receiving, as of the Effective Time, long-term disability benefits and (b) was employed by Aerial or any of its Subsidiaries immediately before becoming eligible to receive long-term disability benefits ceases to be totally and permanently disabled and is able to return to employment, Parent shall take all necessary action so that, to the extent required by law, such person becomes an employee of the Company or the Surviving Corporation or a Subsidiary of the Company or of the Surviving Corporation, as the case may be. Prior to the Effective Time, TDS and the Company shall enter into an Employee Benefit Plans Separation Agreement whereby certain TDS employee benefit plans in which the Company participates shall be spun-off to allow the Company to become the sole sponsor. The terms of the Employee Benefit Plans Separation Agreement shall provide, inter alia, for the termination (without the establishment of any similar plan) of the Company's participation in the Telephone and Data Systems, Inc. Wireless Companies' Pension Plan and Telephone and Data Systems, Inc. Supplemental Executive Retirement Plan. Parent shall not be subject to any liability with respect to the Telephone and Data Systems, Inc. Wireless Companies' Pension Plan. Parent shall take all necessary action so that each employee benefit plan maintained by the Company or any of its Subsidiaries immediately before the Effective Time shall be continued immediately following the Effective Time. Parent shall take all necessary action so that, throughout the period beginning at the D-28 373 Effective Time and ending on September 30, 2000, the Company, the Surviving Corporation and their Subsidiaries will provide for each Retained Employee and former employee of the Company and its Subsidiaries, a level of employee benefits and aggregate compensation that is substantially comparable in the aggregate with that provided by the Company immediately prior to the Effective Time. Parent shall take all necessary action so that each Retained Employee shall after the Effective Time continue to be credited with the unused vacation and sick leave credited to such employee through the Effective Time under the applicable vacation and sick leave policies of the Company and its Subsidiaries, and Parent shall permit or cause the Company, the Surviving Corporation and their Subsidiaries to permit such employees to use such vacation and sick leave. Parent shall take all necessary action so that, for all purposes under each employee benefit plan maintained by Parent or any of its Subsidiaries in which employees or former employees of the Company and its Subsidiaries become eligible to participate upon or after the Effective Time, each such person shall be given credit for all service with the Company and its Subsidiaries (or all service credited by the Company or its Subsidiaries) to the same extent as if rendered to Parent or any of its Subsidiaries. As of the Effective Time, the Company will have no Company Benefit Plans except for those Company Benefit Plans listed in Items 3.12(a) and 3.12(b) of the Company Letter. Item 6.1(a) of the Company Letter contains a true and complete list of each director, officer and employee of the Company and its Subsidiaries holding options under any Company Benefit Plan, and the dollar or share amounts thereof. (b) Except as otherwise provided in this Section or in Section 6.2, nothing in this Agreement shall be interpreted as limiting the power of the Surviving Corporation to amend or terminate any particular Company Benefit Plan or any other particular employee benefit plan, program, agreement or policy or as requiring the Surviving Corporation to offer to continue (other than as required by its terms) any written employment contract or to continue the employment of any specific person, provided, however, that no such termination or amendment may take away benefits or any other payments already accrued as of the time of such termination or amendment without the consent of such person, except as allowed by law. (c) As of the Effective Time and subject to the applicable time limitations contained herein, Parent shall honor or cause to be honored by the Company, the Surviving Corporation and their Subsidiaries all employment agreements, bonus agreements, severance agreements and non-competition agreements with the persons who are directors, officers and employees of the Company and its Subsidiaries. (d) Without limitation of Parent's or the Company's obligations under any existing employment agreement, bonus agreement, severance agreement or non-competition agreement, Parent shall maintain, or shall cause the Company and the Surviving Corporation to maintain, the Company's bonus programs through at least September 30 of the calendar year in which the Reorganization is consummated, with bonuses to be paid to each Retained Employee still employed at such time participating thereunder at the greater of (A) such employee's target level and (B) the bonus such employee would have earned under the applicable Company bonus program if the transactions contemplated by this Agreement had not occurred, in all events on a basis consistent with past practice, and in either case prorated on the basis of the portion of the calendar year elapsed as of the time of termination of the relevant bonus program. (e) Parent shall, or shall cause the Company and the Surviving Corporation to, (A) waive all limitations as to preexisting conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to the Retained Employees and former employees of the Company and its Subsidiaries under any welfare or fringe benefit plan in which such employees and former employees may be eligible to participate after the Effective Time, other than limitations or waiting periods that are in effect with respect to such employees and that have not been satisfied D-29 374 under the corresponding welfare or fringe benefit plan maintained by the Company for the Retained Employees and former employees prior to the Effective Time, and (B) provide each Retained Employee and former employee with credit under any welfare plans in which such employee or former employee becomes eligible to participate after the Effective Time for any co-payments and deductibles paid by such Retained Employee or former employee for the then current plan year under the corresponding welfare plans maintained by the Company prior to the Effective Time. SECTION 6.2 Options; Restricted Stock Awards. (a) Prior to the Effective Time, the Board of Directors of the Company (or the Stock Option Compensation Committee of the Board of Directors) shall adopt such resolutions or shall take such other actions as may be required, with respect to Company Stock Options and Company Restricted Stock Units, to specifically approve the transactions contemplated by this Section 6.2. The Company shall use reasonable efforts to obtain any necessary consents of the holders of such Company Stock Options and Company Restricted Stock Units to effect this Section 6.2. (b) At the Effective Time, each Company Stock Option which is outstanding immediately prior to the Effective Time pursuant to any Company Stock Plan shall become and represent an option to purchase the number of shares of Parent Common Stock (a "Substitute Option") determined by multiplying the number of Company Common Shares subject to such Company Stock Option immediately prior to the Effective Time by the Conversion Number, at an exercise price per share of Parent Common Stock (increased to the nearest whole cent) equal to the exercise price per Company Common Share subject to such Company Stock Option immediately prior to the Effective Time divided by the Conversion Number. All other terms and conditions applicable to the Company Stock Options, including vesting, shall remain unchanged with respect to the Substitute Options. No fractional shares of Parent Common Stock will be issued upon the exercise of Substitute Options. In lieu of such issuance, the shares of Parent Common Stock issued pursuant to the terms of this Agreement shall be rounded to the closest whole share of Parent Common Stock. After the Effective Time, except as otherwise provided in this Section 6.2, each Substitute Option shall be exercisable upon the same terms and conditions as were applicable to the related Company Stock Option immediately prior to the Effective Time, after giving effect to the resolutions and other actions described in this Section 6.2. Not later than ten days following the Effective Time, Parent shall file a registration statement on Form S-8 or otherwise included in an existing registration statement with respect to the shares of Parent Common Stock to be issued upon exercise of the Substitute Options and shall use its best efforts to maintain the effectiveness of such registration statement for so long as the Substitute Options shall remain outstanding. (c) Pursuant to the Company Restricted Stock Plan, as of the date of approval by the stockholders of the Company of this Agreement, each Company Restricted Stock Unit shall become fully vested and each holder of a Company Restricted Stock Unit shall be entitled to receive from the Company a payment in an amount equal to the Fair Market Value (as defined by the Restricted Stock Unit Plan) of such Restricted Stock Unit determined on such vesting date. Such payment shall be made in cash or Company Common Shares, as determined in the sole discretion of the Chairman of the Company. SECTION 6.3 Company Stockholders Meeting. (a) The Company shall call a meeting of the holders of Company Common Stock (the "Company Stockholders Meeting") to be held as promptly as practicable for the purpose of voting upon the Reorganization. Except as provided below, the Board of Directors of each party shall recommend approval and adoption of this Agreement and the transactions contemplated hereby by its respective stockholders and Parent and the Company shall each take all lawful action to solicit such approval, including timely mailing of the Proxy Statement/ Prospectus. The Board of Directors of the Company shall be permitted to withdraw, or modify in a manner adverse to Parent, its recommendation to its stockholders, but only if (i) the Board of D-30 375 Directors of the Company determines in good faith by majority vote of all directors entitled to vote on the approval of this Agreement, on the basis of the advice of the Company's outside counsel that it is required under Delaware law to take such action in order for the Board of Directors to comply with its fiduciary duties under applicable Delaware Law, (ii) the Company shall have delivered to Parent three Business Days' prior written notice advising Parent that it intends to take such action and the Company's Board of Directors has considered any proposed changes to this Agreement (if any) proposed by Parent and (iii) the Company has fully and completely complied with Section 5.3 and this Section. Unless this Agreement is previously terminated in accordance with Section 8.1, the Company shall submit this Agreement to its stockholders at the meeting required to be called and held pursuant to this Section 6.3(a), even if the Company's Board of Directors determines at any time after the date hereof that it is no longer advisable or recommends that its stockholders reject it. (b) Parent shall call a meeting of its stockholders (the "Parent Stockholder Meeting" and, together with the Company Stockholder Meeting, the "Stockholder Meetings"), to be held as promptly as practicable for the purpose of voting upon the Reorganization and Parent Share Issuance. Unless waived by the Company, Parent shall use its reasonable commercial efforts to cause the Parent Stockholder Meeting to be coordinated with and held at the same time and place as the vote of the Parent Stockholders, as defined below, with respect to the Omnipoint Agreement. Parent shall, though its Board of Directors, recommend to the holders of Parent Common Stock approval of the Reorganization and Parent Share Issuance. Unless this Agreement is previously terminated in accordance with Section 8.1, Parent shall submit the Reorganization and Parent Share Issuance to its stockholders at the meeting required to be called and held pursuant to this Section 6.3(a), even if Parent's Board of Directors determines at any time after the date hereof that it is no longer advisable or recommends that its stockholders reject it. (c) The Company and Parent shall coordinate and cooperate with respect to the timing of the Stockholder Meetings and shall use their reasonable commercial efforts to hold such meetings on the same day. Parent shall use its reasonable best efforts to cause the record date for the Parent Stockholder Meeting to be set as of a date prior to the consummation of the transactions contemplated by the Omnipoint Agreement. SECTION 6.4 Preparation of the Registration Statement and Joint Proxy Statement. The Company and Parent shall promptly prepare and file with the SEC the Joint Proxy Statement and Parent shall prepare and file with the SEC the Registration Statement, in which the Joint Proxy Statement will be included as a prospectus. Unless waived by the Company, the Company and Parent shall use their reasonable commercial efforts to cause the Joint Proxy Statement to be combined with the proxy statement of Parent and Omnipoint relating to the Omnipoint Agreement. Each of the Company and Parent shall use its reasonable efforts to have the Registration Statement declared effective under the Securities Act as promptly as practicable after such filing. Parent shall also take any reasonable action (other than qualifying to do business in any jurisdiction in which it is now not so qualified) required to be taken under any applicable state securities laws in connection with the issuance of Parent Common Stock in connection with the Reorganization and upon any exercise of the Substitute Options. The Company shall furnish all information concerning the Company and the holders of shares of Company Common Stock as may be reasonably requested by Parent in connection with any such action. Parent shall notify the Company promptly of the receipt of any comments from the SEC or its staff and of any request by the SEC or its staff for amendments or supplements to the Registration Statement or the Joint Proxy Statement or for additional information and will supply the Company with copies of all correspondence between Parent or any of its representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to the Registration Statement, the Joint Proxy Statement or the Reorganization. If at any time prior to the Company Stockholders Meeting there shall occur any event that should be set forth in an amendment or supplement to the Registration Statement or the Joint Proxy Statement, each of Parent and the D-31 376 Company shall promptly prepare and mail to the stockholders of the Company and Parent such an amendment or supplement. Parent and the Company shall cooperate in the preparation of the Registration Statement, the Joint Proxy Statement or any amendment or supplement thereto. SECTION 6.5 Comfort Letters. (a) The Company shall use reasonable efforts to cause to be delivered to Parent "comfort" letters of Arthur Andersen LLP, the Company's independent public accountants, dated the date on which the Registration Statement shall become effective and as of the Effective Time, and addressed to Parent and the Company, in form and substance reasonably satisfactory to Parent and as is reasonably customary in scope and substance for letters delivered by independent public accountants in connection with transactions such as those contemplated by this Agreement. (b) Parent shall use reasonable efforts to cause to be delivered to the Company "comfort" letters of Arthur Andersen LLP, Parent's independent public accountants, dated the date on which the Registration Statement shall become effective and as of the Effective Time, and addressed to the Company and Parent, in form and substance reasonably satisfactory to the Company and as is reasonably customary in scope and substance for letters delivered by independent public accountants in connection with transactions such as those contemplated by this Agreement. SECTION 6.6 Access to Information. Upon reasonable notice and subject to restrictions contained in confidentiality agreements to which the Company is subject and subject to the terms of the Reciprocal Non-Disclosure and Confidentiality Agreement dated December 28, 1998, between Series A Stockholder on behalf of itself and its Affiliates, including the Company, and Parent, as the same may be amended, supplemented or modified (the "Confidentiality Agreement"), (a) the Company shall, and shall cause each of its Subsidiaries to, afford to Parent and to the officers, employees, accountants, counsel and other representatives of Parent all reasonable access, during normal business hours during the period prior to the Effective Time, to all their respective lenders, agents and other representatives, properties, assets, books, contracts, commitments and records and, during such period, the Company shall (and shall cause each of its subsidiaries to) furnish promptly to Parent all information concerning its business, properties and personnel as Parent may reasonably request, including a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of the federal or state securities laws or the federal Tax laws and (b) Parent shall, and shall cause each of its Subsidiaries to, afford to the Company and to the officers, employees, accountants, counsel and other representatives of the Company all reasonable access, during normal business hours during the period prior to the Effective Time, to all their respective properties, books, contracts, commitments and records and, during such period, Parent shall (and shall cause each of its Subsidiaries to) furnish promptly to the Company all information concerning its business, properties and personnel as the Company may reasonably request, including a copy of each report, schedule, registration statement and other document filed or received by it during such period pursuant to the requirements of the federal or state securities laws or the federal Tax laws. SECTION 6.7 Compliance with the Securities Act. (a) No later than thirty days following the date of this Agreement, the Company shall cause to be prepared and delivered to Parent a list identifying all persons who, at the time of the Company Stockholders Meeting, may be deemed to be an "affiliate" of the Company, as such term is used in paragraphs (c) and (d) of Rule 145 under the Securities Act (the "Rule 145 Affiliates"). The Company shall use reasonable efforts to cause each person who is identified as a Rule 145 Affiliate in such list (except Series A Stockholder and Investor) to deliver to Parent on or prior to the Effective Time a written agreement, in a form to be approved by the parties hereto, that such Rule 145 Affiliate shall not sell, pledge, transfer or otherwise dispose of any shares of Parent Common Stock issued to such Rule 145 Affiliate in connection with the Reorganization, except pursuant to an effective registration statement or in D-32 377 compliance with such Rule 145 or another exemption from the registration requirements of the Securities Act. (b) Prior to the Effective Time, the Board of Directors of Parent (or the committee of the Board of Directors of Parent composed solely of two or more "Non-Employee Directors," as that term is defined in Rule 16b-3(b)(3)(i) under the Exchange Act, administering the stock plans of Parent) shall adopt such resolutions or shall take such other actions as are required to specifically approve the acquisitions of Parent Common Stock and Substitute Options at the Effective Time, as contemplated by Sections 2.1(c) and 6.2, by directors, officers or employees of the Company who may become directors or officers of Parent, such approvals to be given for the purpose of exempting such acquisitions under Rule 16b-3 under the Exchange Act, it being acknowledged that such approvals shall not adversely affect Parent's ability subsequently to determine that any such person has not in fact become a director or officer of Parent. SECTION 6.8 Stock Exchange Listings. Parent shall use reasonable efforts to be included on Nasdaq, upon notification of issuance, the shares of Parent Common Stock to be issued in connection with the Reorganization and upon any exercise of the Substitute Options. SECTION 6.9 Fees and Expenses. (a) Except as provided below in this Section 6.9, all fees and expenses incurred in connection with the Reorganization, this Agreement and the transactions contemplated hereby shall be paid by the party incurring such fees or expenses, whether or not the Reorganization is consummated. (b) In the event that Parent terminates this Agreement pursuant to Section 8.1(c)(i) or Section 8.1(e), the Company shall pay, or cause to be paid, in same day funds to Parent within five (5) Business Days of such termination, $40,000,000 (the "Termination Fee"). SECTION 6.10 Public Announcements. Parent and the Company will consult with each other before issuing any press release or otherwise making any public statements with respect to the transactions contemplated by this Agreement and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable law, fiduciary duties or by obligations pursuant to any listing agreement with any national securities exchange. SECTION 6.11 Real Estate Transfer Tax. Parent and the Company agree that either the Surviving Corporation or the Company (without any liability to any of the Company's stockholders) will pay any state or local Tax which is attributable to the transfer of the beneficial ownership of the Company's or its Subsidiaries' real property, if any (collectively, the "Transfer Taxes"), and any penalties or interest with respect to the Transfer Taxes, payable in connection with the consummation of the Reorganization. The Company agrees to cooperate with Parent in the filing of any returns with respect to the Transfer Taxes, including supplying in a timely manner a complete list of all real property interests held by the Company and its Subsidiaries and any information with respect to such property that is reasonably necessary to complete such returns. The portion of the consideration allocable to the real property of the Company and its Subsidiaries shall be determined by Parent in its reasonable discretion. To the extent permitted by law, the Company's stockholders shall be deemed to have agreed to be bound by the allocation established pursuant to this Section 6.11 in the preparation of any return with respect to the Transfer Taxes. SECTION 6.12 State Takeover Laws. If any "fair price" or "control share acquisition" statute or other similar statute or regulation shall become applicable to the transactions contemplated hereby, Parent and the Company and their respective Boards of Directors shall use reasonable efforts to grant such approvals and take such actions as are necessary so that the transactions contemplated hereby may be consummated as promptly as practicable on the terms contemplated hereby and otherwise act to minimize the effects of any such statute or regulation on the transactions contemplated hereby. D-33 378 SECTION 6.13 Indemnification; Directors and Officers Insurance. (a) Parent shall, or shall cause the Surviving Company to, continue to provide all rights to indemnification or exculpation, existing in favor of a director, officer, employee or agent (an "Indemnified Person") of the Company or any of its Subsidiaries (including, without limitation, rights relating to advancement of expenses and indemnification rights to which such persons are entitled because they are serving as a director, officer, agent or employee of another entity at the request of the Company or any of its Subsidiaries), as provided in the Restated Certificate of Incorporation of the Company, the By-laws of the Company or any indemnification agreement, in each case, as in effect on the date of this Agreement, and relating to actions or events through the Effective Time, and such rights to indemnification shall survive the Reorganization and shall continue in full force and effect, without any amendment thereto; provided, however, that neither Parent nor the Surviving Corporation shall be required to indemnify any Indemnified Person in connection with any proceeding (or portion thereof) to the extent involving any claim initiated by such Indemnified Person unless the initiation of such proceeding (or portion thereof) was authorized by the Board of Directors of the Company or unless such proceeding is brought by an Indemnified Person to enforce rights under this Section 6.13; provided further that any determination required to be made with respect to whether an Indemnified Person's conduct complies with the standards set forth under the DGCL, the Restated Certificate of Incorporation of the Company, the By-laws of the Company or any such agreement, as the case may be, shall be made by independent legal counsel selected by Parent and reasonably acceptable to such Indemnified Person; and provided further that nothing in this Section 6.13 shall impair any rights of any Indemnified Person. Without limiting the generality of the preceding sentence, in the event that any Indemnified Person becomes involved in any actual or threatened action, suit, claim, proceeding or investigation after the Effective Time relating to actions prior to the Effective Time, Parent shall, or shall cause the Surviving Corporation to, promptly advance to such Indemnified Person his or her legal and other expenses (including the cost of any investigation and preparation incurred in connection therewith), subject to the providing by such Indemnified Person of an undertaking to reimburse all amounts so advanced in the event of a non-appealable determination of a court of competent jurisdiction that such Indemnified Person is not entitled thereto. (b) Subject to the prior written approval by Parent, which shall not be unreasonably withheld, prior to the Effective Time, the Company shall have the right to obtain and pay for in full a "tail" coverage directors' and officers' liability insurance policy ("D&O Insurance") covering a period of not more than six years after the Effective Time and providing coverage in amounts and on terms consistent with the Company's existing D&O Insurance. In the event the Company does not obtain such insurance, Parent shall cause the Surviving Corporation to continue to provide D&O Insurance relating to actions or events through the Effective Time (through Series A Stockholder or directly with an insurance carrier), for a period of not more than six years after the Effective Time; provided, that the Surviving Corporation may substitute therefor policies of substantially similar coverage and amounts containing terms no less advantageous to such former directors or officers; provided further that if the existing D&O Insurance expires or is cancelled during such period, Parent or the Surviving Corporation shall make reasonable commercial efforts to obtain substantially similar D&O Insurance; and provided further that the Company shall not be required to expend, in order to maintain or procure an annual D&O Insurance policy, an amount in excess of 200% of the last annual premium paid prior to the date hereof, but in such case shall purchase as much coverage as possible for such amount. (c) The provisions of this Section 6.13 are intended to be for the benefit of, and shall be enforceable by, each Indemnified Person, his or her heirs and his or her personal representatives and shall be binding upon the successors and assigns of Parent, the Company and the Surviving Company. D-34 379 SECTION 6.14 Best Efforts. (a) Subject to the provisions hereof, each of the Company, Parent and Merger Sub C agrees to use best efforts to consummate and make effective, in the most expeditious manner practicable, the Reorganization and the other transactions contemplated by this Agreement; provided, however, that neither Parent nor any of its Subsidiaries shall be required, nor, without the consent of Parent, shall the Company or its Subsidiaries be permitted, to divest or hold separate or otherwise take or commit to take any action that limits its freedom of action with respect to the Company, Parent or any of their Subsidiaries or any material portion of the assets of the Company, Parent or any of their Subsidiaries or any of the business, product lines, or assets of the Company, Parent or any of their Subsidiaries. Without limiting the foregoing, (i) each of the Company, Parent and Merger Sub C agrees to use best efforts to take, or cause to be taken, all actions necessary to comply promptly with all legal requirements that may be imposed on itself with respect to the Reorganization (which actions shall include furnishing all information required under the HSR Act and all actions required in connection with approvals of or filings with the FCC, state public utility or service commissions or similar agencies and any other Governmental Entity) and shall promptly cooperate with and furnish information to each other in connection with any such requirements imposed upon any of them or any of their Subsidiaries in connection with the Reorganization and (ii) each of the Company, Parent and Merger Sub C shall, and shall cause its Subsidiaries to, use best efforts to obtain (and shall cooperate with each other in obtaining) any consent, authorization, order or approval of, or any exemption by, the FCC, state public utility or service commissions or similar agencies and any other Governmental Entity or other public or private third party required to be obtained or made by Parent, Sub, the Company or any of their Subsidiaries in connection with the Reorganization or the taking of any action contemplated thereby or by this Agreement. Notwithstanding anything to the contrary contained in this Agreement, in connection with any filing or submission required or action to be taken by Parent, the Company or any of its respective Subsidiaries to consummate the Reorganization or the other transactions contemplated in this Agreement, the Company shall not, without Parent's prior written consent, commit to any divestiture of assets or businesses of the Company and its Subsidiaries if such divested assets and/or businesses are material to the assets or profitability of the Company and its Subsidiaries taken as a whole. (b) As promptly as practicable after the execution and delivery of this Agreement, Parent and the Company shall prepare all appropriate applications for FCC approval, and such other documents as may be required, with respect to the transfer of control of the Company and Parent to Holding Company (collectively, the "FCC Applications"). Not later than the tenth Business Day following execution and delivery of this Agreement, the Company and Parent will exchange with each other their respective completed portions of the FCC Applications. Not later than the fifteenth Business Day following the execution and delivery of this Agreement, the Company and Parent shall file, or cause to be filed, the FCC Applications. If the Effective Time shall not have occurred for any reason within any applicable initial consummation period, and neither the Company nor Parent shall have terminated this Agreement pursuant to Section 8.1, Parent and the Company shall jointly request one or more extensions of the consummation period of such grant. No party hereto shall knowingly take, or fail to take, any action if the intent or reasonably anticipated consequence of such action or failure to act is, or would be, to cause the FCC not to grant approval of the FCC Applications or delay either such approval or the consummation of the transfer of control of the Company. Parent and the Company shall each pay one-half ( 1/2) of any FCC fees, if applicable, in connection with the filing or granting of approval of the FCC Applications. Each of Parent and the Company shall bear its own expenses in connection with the preparation and prosecution of the FCC Applications. Parent and the Company shall each use all commercially reasonable efforts to prosecute the FCC Applications in good faith and with due diligence before the FCC and in connection therewith shall take such action or actions as may be necessary or reasonably required in connection with the FCC Applications, D-35 380 including furnishing to the FCC any documents, materials or other information requested by the FCC in order to obtain such FCC approval as expeditiously as practicable. (c) Promptly after the date hereof, Parent and the Company (as may be required pursuant to the HSR Act) will complete all documents required to be filed with the Federal Trade Commission and the Department of Justice in order to comply with the HSR Act and, not later than 20 Business Days after the date hereof, together with the Persons who are required to join in such filings, shall file the same with the appropriate Governmental Entities. Parent and the Company shall each pay one-half ( 1/2) of any fees that may be payable in connection with the filing pursuant to the HSR Act. Parent and the Company shall promptly furnish all materials thereafter required by any of the Governmental Entities having jurisdiction over such filings and shall take all reasonable actions and shall file and use all reasonable efforts to have declared effective or approved all documents and notifications with any such Governmental Entities, as may be required under the HSR Act or other federal antitrust laws for the consummation of the Transactions and any other transactions contemplated hereby. (d) Each of the Company and Parent shall promptly notify the other of: (i) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement; (ii) any notice or other communication from any Governmental Entity in connection with the transactions contemplated by this Agreement; (iii) the occurrence, or non-occurrence, of any event the occurrence or non-occurrence of which would be reasonably be expected to cause any representation or warranty made by it and contained herein to be untrue or inaccurate in any material respect at any time during the period commencing on the date hereof and ending at the Effective Time; (iv) any failure of such party to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 6.14(d) shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice; (v) any actions, suits, claims, investigations or proceedings commenced or, to its knowledge threatened against such party which, if pending on the date of this Agreement, would have been required to have been disclosed pursuant to Section 3.13, in the case of the Company, or Section 4.12, in the case of Parent, or which relate to the consummation of the Transactions; and (vi) any event, condition or state of facts which could have a Material Adverse Effect on such party. SECTION 6.15 Certain Litigation. The Company agrees that it shall not settle any litigation commenced after the date hereof against the Company or any of its directors by any stockholder of the Company relating to the Reorganization, this Agreement or the Stockholder Agreement without the prior written consent of Parent, which consent shall not be unreasonably withheld or delayed. SECTION 6.16 Transition Services Agreement. Parent, Company and Series A Stockholder shall enter into the Transition Services Agreement in the form attached hereto as Annex C on or prior to the Effective Time. SECTION 6.17 Registration Rights Agreement. Parent and Series A Stockholder shall enter into the Registration Rights Agreement in the form attached hereto as Exhibit A to the Stockholder Agreement on or prior to the Effective Time. D-36 381 SECTION 6.18 Investor Claim. Matters relating to the investment and claim by the Investor are set forth on Annex E hereto. SECTION 6.19 Intercompany Service Agreements. Each of the following agreements ("Intercompany Service Agreements") and, except as provided in the Transition Services Agreement or in this Agreement, all other agreements between the Company and its Subsidiaries, on the one hand, and Series A Stockholder and its Subsidiaries (other than the Company and its Subsidiaries) on the other hand, shall be terminated as of the Effective Time and, as provided in Section 6.23, all amounts due from one party to another thereunder shall be settled in cash on or prior to the Effective Time: (i) Cash Management Agreement; (ii) Insurance Cost Sharing Agreement; (iii) Intercompany Agreement; (iv) Exchange Agreement; (v) Employee Benefit Plan Agreement; and (vi) Company Registration Rights Agreement. Following such termination, except as otherwise provided in this Agreement or the Transition Services Agreement, the Company and Series A Stockholder shall release each other with respect to any Loss relating to or arising from the foregoing agreements and all amounts due thereunder on and after the Effective Time. SECTION 6.20 Revolving Credit Agreement. On the date of this Agreement, the Company, Operating Company, Series A Stockholder and Parent shall enter into the Debt/Equity Replacement Agreement attached hereto as Annex F. SECTION 6.21 Series A and B Notes. Prior to the Effective Time, Parent shall, with the assistance of the Company, acquire all of the Series A Notes and Series B Notes. Any investment banking firm engaged in connection with such acquisition shall be selected by the Series A Stockholder subject to the consent of Parent (including such investment banking firm's fees and expenses), which shall not be unreasonably withheld. Unless otherwise determined pursuant to the preceding sentence, the parties hereto agree that Credit Suisse First Boston Corporation ("CSFB") shall be engaged to assist Parent in acquiring the Series A Notes and Series B Notes. Parent shall bear the fees and expenses of acquiring the Series A Notes and Series B Notes (including the fees and reasonable expenses of counsel and of CSFB or other investment banking firm selected pursuant to this Section), and shall be responsible for and pay any make-whole premium (the "Make-Whole Premium"), to the extent the amount of the Make-Whole Premium is less than or equal to the difference (the "Parent Cost") between the Redemption Present Value and accreted value of the Notes on the date such Notes are acquired. The Redemption Present Value of the Notes shall be computed by CSFB in accordance with standard market practice, and shall equal the present value of the redemption price of such Notes corresponding to the earliest Optional Redemption Date, as defined in the Series A Indenture and the Series B Indenture (November 1, 2001 in the case of the Series A Notes and February 1, 2003 in the case of the Series B Notes), discounted from such date to the date of acquisition, using a discount rate equal to a comparable Treasury rate with respect to such Note plus 50 basis points. Series A Stockholder shall be responsible for and shall pay the amount of any Make-Whole Premium in excess of the Parent Cost. Following the acquisition of the Series A Notes and Series B Notes, on or prior to the Effective Time, Series A Stockholder shall be released and discharged in full from the Series A Guaranty and the Series B Guaranty and such guarantees shall be terminated. D-37 382 SECTION 6.22 Nokia Credit Agreement. At the Effective Time, Parent shall cause all obligations, including accrued interest, under the Nokia Credit Agreement to be repaid in full and the Nokia Credit Agreement and the Nokia Guaranty shall be terminated, or Parent shall obtain an amendment to the Nokia Credit Agreement (including the substitution of Parent as guarantor thereunder and the release and discharge in full of the Series A Stockholder's obligations under the Nokia Guaranty), to permit the Reorganization to occur without resulting in a default under the Nokia Credit Agreement. Parent shall bear the expense of refinancing all borrowings under the Nokia Credit Agreement. Following such action, on or prior to the Effective Time, Series A Stockholder shall be released and discharged in full from the Nokia Guaranty. SECTION 6.23 Intercompany Accounts. All intercompany accounts payable, receivables, loans, including accrued interest and any penalties, accrued but unpaid guarantee fees and other intercompany accounts ("Intercompany Accounts")between the Company and its Subsidiaries, on the one hand, and Series A Stockholder and its Subsidiaries (other than the Company and its Subsidiaries), on the other hand, including amounts due from one party to another under the Intercompany Service Agreements, shall be settled and paid in cash on or prior to the Effective Time. To the extent necessary Parent shall advance funds to the Company on or prior to the Effective Time to permit the Company to settle all Intercompany Accounts with Series A Stockholder. The parties acknowledge and agree that the preparation of financial statements and accounts will necessarily require the parties to estimate the amounts of certain Intercompany Accounts and, accordingly, except as otherwise provided in the Transition Services Agreement, the parties agree that they will cooperate after the Effective Time to true-up such estimates considering actual experience or information learned after the Effective Time. The parties hereto agree to true-up and settle such estimates in cash within 30 days after notice from the other party specifying in reasonable detail the final amount of any such Intercompany Account. Following such settlement, the Company and Series A Stockholder shall release each other with respect to any Loss relating to or arising from any such intercompany accounts on and after the Effective Time. SECTION 6.24 Tax Allocation Agreement and Tax Settlement Agreement. The Tax Allocation Agreement shall terminate as of the Effective Time and none of the parties thereto shall have any liability to any other party thereunder following the Effective Time. The Tax Settlement Agreement shall remain in full force and effect in accordance with its terms following the Effective Time, and the Company shall withdraw its contention, made in a letter dated June 8, 1999 from the Company to the Series A Stockholder, that an error in the application of the federal income tax law was made in the tax settlement model referred to in Section 2 of the Tax Settlement Agreement. SECTION 6.25 Parent Stockholder Voting Agreement. Hellman & Friedman Investors, L.P., H & F Orchard Partners, L.P., H & F International Partners, L.P., John W. Stanton, Theresa E. Gillespie, PNCellular, Inc., Stanton Family Trust, Stanton Communications Corporation, GS Capital Partners, L.P., The Goldman Sachs Group, Inc., Bridge Street Fund 1992, L.P., Stone Street Fund 1992, L.P., Providence Media Partners, L.P., Hutchinson Telecommunications Holdings (USA) Limited and Hutchinson Telecommunications PCS (USA) Limited ("Parent Stockholders"), who hold 46% of the fully diluted voting power of the Parent Company Stock on the date hereof, shall enter into the Parent Stockholder Voting Agreement with the Company in the form attached hereto as Annex G pursuant to which such stockholders of Parent shall agree to vote for the Reorganization and Parent Share Issuance. SECTION 6.26 Agreements Regarding Taxes. (a) Series A Stockholder Liability for Taxes. The Series A Stockholder shall be liable for and shall indemnify Parent and the Company and its Subsidiaries for all Taxes (including any obligation to contribute to the payment of a Tax determined on a consolidated, combined or unitary basis with respect to a group of corporations that includes or included the Company or D-38 383 any of its Subsidiaries and Taxes resulting from the Company and its Subsidiaries ceasing to be a member of the Series A Stockholder's Group), (i) imposed on the Series A Stockholder's Group or any member thereof (other than the Company and its Subsidiaries) for any taxable year, (ii) imposed on the Company or any of its Subsidiaries or for which the Company or any of its Subsidiaries may otherwise be liable for any taxable year or period that ends on or before the date on which the Effective Time occurs (the "Effective Date"), and with respect to any taxable year or period beginning before and ending after the Effective Date, the portion of such taxable year ending on and including the Effective Date, or (iii) imposed on Parent or the Company or any of its Subsidiaries as a result of the receipt of any payment made to it pursuant to the provisions of this Section 6.26. Except as set forth in Section 6.26(d), the Series A Stockholder shall be entitled to any refund of Taxes of the Company and its Subsidiaries received for such periods. (b) Parent Liability for Taxes. Parent shall be liable for and indemnify the Series A Stockholder for (i) the Taxes of the Company and any of its Subsidiaries for any taxable year or period that begins after the Effective Date and, with respect to any taxable year or period beginning before and ending after the Effective Date, the portion of such taxable year beginning after the Effective Date and (ii) Taxes imposed on the Series A Stockholder as a result of any payment made to it pursuant to the provisions of this Section 6.26. Parent shall be entitled to any refund of Taxes of the Company and any of its Subsidiaries received for such periods. (c) Taxes for Short Taxable Year. For purposes of paragraphs (a) and (b), whenever it is necessary to determine the liability for Taxes of the Company or any of its Subsidiaries for a portion of a taxable year or period that begins before and ends after the Effective Date, the determination of the Taxes of such entity for the portion of the year or period ending on, and the portion of the year or period beginning after, the Effective Date shall be determined by assuming that the entity had a taxable year or period which ended at the close of the Effective Date, except that exemptions, allowances or deductions that are calculated on an annual basis, such as the deduction for depreciation, shall be apportioned on a time basis. (d) Refunds from Carrybacks. If the Series A Stockholder becomes entitled to a refund or credit of Taxes for any period for which it is liable under Section 6.26(a) to indemnify Parent and such Taxes are attributable solely to the carryback of losses, credits or similar items from a taxable year or period that begins after the Effective Date and attributable to the Company or any of its Subsidiaries, the Series A Stockholder shall promptly pay to Parent the amount of such refund or credit together with any interest thereon. In the event that any refund or credit of Taxes for which a payment has been made is subsequently reduced or disallowed, Parent shall indemnify and hold harmless the Series A Stockholder for any Tax liability, including interest and penalties, assessed against the Series A Stockholder by reason of the reduction or disallowance. (e) Tax Returns. The Series A Stockholder shall file or cause to be filed when due all Tax Returns with respect to Taxes that are required to be filed by or with respect to the Company and any of its Subsidiaries for taxable years or periods ending on or before the Effective Date and shall pay any Taxes due in respect of such Tax Returns, and Parent shall file or cause to be filed when due all Tax Returns with respect to Taxes that are required to be filed by or with respect to the Company and any of its Subsidiaries for taxable years or periods ending after the Effective Date and shall remit any Taxes due in respect of such Tax Returns. The Series A Stockholder shall pay Parent the Taxes for which the Series A Stockholder is liable pursuant to Section 6.26(a) but which are payable with Tax Returns to be filed by Parent pursuant to the previous sentence within 10 days prior to the due date for the filing of such Tax Returns. D-39 384 (f) Contest Provisions. Parent shall promptly notify the Series A Stockholder in writing upon receipt by Parent, any of its Affiliates or the Company or any of its Subsidiaries of notice of any pending or threatened federal, state, local or foreign income or franchise tax audit or assessment which may materially affect the Taxes of the Company or any of its Subsidiaries for which the Series A Stockholder would be required to indemnify Parent pursuant to Section 6.26(a), provided that failure to comply with this provision shall not affect Parent's right to indemnification hereunder. The Series A Stockholder shall have the sole right to represent the Company and its Subsidiaries' interests in any tax audit or administrative or court proceeding relating to taxable periods ending on or before the Effective Date, and to employ counsel of its choice at its expense. Notwithstanding the foregoing, the Series A Stockholder shall not be entitled to settle, either administratively or after the commencement of litigation, any claim for Taxes which would adversely affect the liability for Taxes of Parent or the Company or any of the Company's Subsidiaries for any period after the Effective Date to any extent (including the imposition of income tax deficiencies, the reduction of asset basis or cost adjustments, the lengthening of any amortization or depreciation periods, the denial of amortization or depreciation deductions, or the reduction of loss or credit carryforwards) without the prior written consent of Parent. Such consent shall not be unreasonably withheld, and shall not be necessary to the extent that the Series A Stockholder has indemnified Parent against the effects of any such settlement. (g) Assistance and Cooperation. After the Closing Date, each of the Series A Stockholder and Parent shall: (i) assist (and cause their respective Affiliates to assist) the other party in preparing any Tax Returns or reports which such other party is responsible for preparing and filing in accordance with this Section 6.26; (ii) cooperate fully in preparing for any audits of, or disputes with taxing authorities regarding, any Tax Returns of the Company or any of its Subsidiaries; (iii) make available to the other party and to any taxing authority as reasonably requested all information, records, and documents relating to Taxes of the Company and its Subsidiaries; (iv) provide timely notice to the other in writing of any pending or threatened tax audits or assessments of the Company or any of its Subsidiaries for taxable periods for which the other party may have a liability under this Section 6.26; and (v) furnish the other party with copies of all correspondence received from any taxing authority in connection with any tax audit or information request with respect to any such taxable period. (h) Payment. Any indemnity payment required to be made pursuant to this Section 6.26 shall be paid within 15 days after the indemnified party makes written demand upon the indemnifying party, but in no case earlier than five Business Days prior to the date on which the relevant Taxes are required to be paid to the relevant taxing authority (including estimated Tax payments). (i) Adjustment to Purchase Price. Parent and the Series A Stockholder agree to report any indemnification payment made by the Series A Stockholder under this Section 6.26 as an adjustment to purchase price, contribution to capital, or other non-taxable amount to the extent that there is substantial authority for such reporting position under applicable law, it being understood that if such reporting position is disallowed in any administrative or court proceeding, D-40 385 the Series A Stockholder shall indemnify Parent under Section 6.26(a) for the effects of such disallowance. (j) Survival of Obligations. The obligations of the parties set forth in this Section 6.26 shall be unconditional and absolute and shall remain in effect without limitation as to time. ARTICLE VII CONDITIONS PRECEDENT SECTION 7.1 Conditions to Each Party's Obligation to Effect the Reorganization. The respective obligations of each party hereto to effect the Reorganization shall be subject to the fulfillment at or prior to the Effective Time of the following conditions: (a) Stockholder Approval. The Reorganization shall have been duly approved by the requisite vote of the stockholders of the Company in accordance with applicable law and the Restated Certificate of Incorporation and By-laws of the Company and the Parent Share Issuance shall have been duly approved by the requisite vote of the stockholders of Parent in accordance with applicable law and the Certificate of Incorporation and Bylaws of Parent. (b) No Injunction or Restraint. No statute, rule, regulation, executive order, decree, temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other Governmental Entity preventing the consummation of the Reorganization or which could reasonably be expected to have a Material Adverse Effect on the Company shall be in effect; provided, however, that each of the parties shall have used their commercially reasonable efforts to prevent the entry of any such temporary restraining order, injunction or other order, including, without limitation, taking such action as is required to comply with Section 6.14, and to appeal as promptly as possible any injunction or other order that may be entered. (c) Stock Exchange Listings. The shares of Parent Common Stock issuable in accordance with the Reorganization and pursuant to Section 6.2 shall have been authorized for listing on the Nasdaq, subject to official notice of issuance. (d) HSR. Any waiting period (and any extension thereof) under the HSR Act applicable to the Reorganization shall have expired or been terminated. (e) Registration Statement. The Registration Statement shall have become effective in accordance with the provisions of the Securities Act. No stop order suspending the effectiveness of the Registration Statement shall have been issued by the SEC and no proceedings for that purpose shall have been initiated or, to the knowledge of Parent or the Company, threatened by the SEC. All necessary state securities authorizations (including state takeover approvals) shall have been received unless the failure to receive any such authorization would not have a Material Adverse Effect on the Company or Parent or the transactions contemplated by this Agreement. (f) Governmental Approvals. All necessary consents or authorizations from Governmental Entities which may be required in connection with the transactions contemplated hereby, including but not limited to the FCC and state public utility or service commissions or similar agencies, shall have been received and, in the case of the FCC, shall have become Final Orders, unless the failure to receive any such consent or authorization would not have a Material Adverse Effect on the Company or Parent or the transactions contemplated by this Agreement, and such consents or authorizations shall not contain any conditions which would reasonably be expected to have a Material Adverse Effect on the Company or Parent or the transactions contemplated by this Agreement. D-41 386 (g) Investor Agreement. Parent and the Series A Stockholder shall have executed and delivered the Investor Agreement attached hereto as Exhibit H. (h) Omnipoint Agreement. The transactions contemplated by the Omnipoint Agreement shall have been consummated or terminated, provided that this condition shall be deemed to have been satisfied on the Omnipoint End Date if the transactions contemplated by the Omnipoint Agreement shall have not been consummated or terminated by such date. (i) Public Announcement. In the event the Omnipoint Agreement shall have been terminated or the condition specified in Section 7.1(h) shall have been deemed to be satisfied pursuant to the proviso thereof, twenty business days shall have elapsed following public announcement of such event. SECTION 7.2 Conditions to Obligation of the Company to Effect the Reorganization. The obligation of the Company to effect the Reorganization shall be subject to the fulfillment at or prior to the Effective Time of the following additional conditions: (a) Performance of Obligations; Representations and Warranties. Each of Parent and Merger Sub C shall have performed each of its agreements contained in this Agreement required to be performed at or prior to the Effective Time, and each of the representations and warranties of Parent and Merger Sub C contained in this Agreement (disregarding all qualifications and exceptions contained therein relating to materiality or a Material Adverse Effect or any similar standard or qualification) shall be true and correct at and as of the Effective Time as if made at and as of the Effective Time in each case except as contemplated or permitted by this Agreement and except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company or Parent or the transactions contemplated by this Agreement; and the Company shall have received a certificate signed on behalf of Parent by its Chief Executive Officer and its Chief Financial Officer to such effect. (b) Tax Opinion. The Company shall have received an opinion of Sidley & Austin, in form and substance reasonably satisfactory to the Company, dated the Effective Time, substantially to the effect that, on the basis of facts, representations and assumptions set forth in such opinion which are consistent with the state of facts existing as of the Effective Time, for federal income tax purposes: (i) The Merger will constitute either (A) a "reorganization" within the meaning of Section 368(a) of the Code, to which the Company, Merger Sub C and Parent will each be a party, within the meaning of Section 368(b) of the Code or (B) part of a transaction described in Section 351(a) of the Code; (ii) No gain or loss will be recognized by Parent, Merger Sub C or the Company as a result of the Merger; (iii) A stockholder of the Company that does not elect to receive any cash pursuant to the Merger will recognize no gain or loss solely as a result of the conversion of shares of Company Common Stock into shares of Parent Common Stock pursuant to the Merger, except with respect to cash, if any, received in lieu of fractional shares of Parent Common Stock; (iv) A stockholder of the Company that elects to receive cash pursuant to the Merger will recognize any gain (but not loss) realized as a result of the Merger in an amount equal to the lesser of (A) the difference between (x) the fair market value of Parent Common Stock received pursuant to the Merger plus cash received pursuant to the Merger and (y) the basis of such stockholder's Company Common Stock surrendered in the Merger or (B) the amount of cash received pursuant to the election to receive cash; D-42 387 (v) The aggregate tax basis of the shares of Parent Common Stock received in exchange for shares of Company Common Stock pursuant to the Merger (including fractional shares of Parent Common Stock for which cash is received) will be the same as the aggregate tax basis of such shares of Company Common Stock, (A) decreased by the amount of cash received in exchange for shares of Company Common Stock pursuant to an election to receive cash and (B) increased by the amount of gain recognized (determined under clause (iv) above); (vi) The holding period for shares of Parent Common Stock received in exchange for shares of Company Common Stock pursuant to the Merger will include the period that such shares of Company Common Stock were held by the stockholder, provided such shares of Company Common Stock were held as capital assets by such stockholder at the Effective Time; and (vii) A stockholder of the Company who receives cash in lieu of a fractional share of Parent Common stock will recognize gain or loss equal to the difference, if any, between such stockholder's basis in such fractional share (as described in clause (v) above) and the amount of cash received. In rendering such opinion, Sidley & Austin may receive and rely upon representations from others, including representations from the Company and Holding contained in certificates substantially in the form of the Company Tax Certificate and the Tax Matters Certificate attached hereto as Annex M and Annex M-2, representations from Holding contained in a certificate substantially in the form of the Parent Tax Certificate attached hereto as Annex N, and representations in a certificate substantially in the form of the Tax Matters Certificate attached hereto as Annex O from certain persons who own, as of the Effective Time, five percent (5%) or more of the total number of shares of the Company or of VoiceStream (or, in such counsel's discretion, of Omnipoint). (c) Consents Under Agreements. Parent shall have obtained the consent or approval of each person whose consent or approval shall be required in connection with the transactions contemplated hereby under any indenture, mortgage, evidence of indebtedness, lease or other agreement or instrument to which Parent or one of its Subsidiaries is a party, except where the failure to obtain the same would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on Parent or the Company or upon the transactions contemplated by this Agreement. (d) Intercompany Services Agreements. The Intercompany Services Agreements shall have been terminated. (e) Debt/Equity Replacement Agreement. The transactions contemplated by the Debt/ Equity Replacement Agreement shall have been consummated. (f) Series A and B Notes. The Series A Notes and Series B Notes shall have been acquired by Parent and/or Parent shall have obtained consents from the requisite number of holders of Series A Notes and Series B Notes to the amendment of the Series A Indenture and Series B Indenture (including the substitution of Parent as guarantor thereunder and the elimination of Section 3.8 in such indentures), and Parent shall have taken such other action as may be necessary to permit the Reorganization to occur without resulting in a default under the Series A Indenture or the Series B Indenture, to cause the Series A Stockholder to be released and discharged in full from the Series A Guarantee and the Series B Guarantee and to terminate such guarantees on or prior to the Effective Time. D-43 388 (g) Nokia Credit Agreement. Parent shall have caused all obligations under the Nokia Credit Agreement to be repaid in full and the Nokia Credit Agreement and Nokia Guaranty shall have been terminated; or Parent shall have obtained an amendment to the Nokia Credit Agreement (including the substitution of Parent as guarantor thereunder and the release and discharge in full of the Nokia Guaranty), to permit the Reorganization to occur without resulting in a default under the Nokia Credit; and, in either event, the Series A Stockholder shall have been released and discharged in full from the Nokia Guaranty on or prior to the Effective Time. (h) Intercompany Accounts. All Intercompany Accounts shall have been settled and paid in cash based on financial information available at the Effective Time. (i) Tax Allocation Agreement. The Tax Allocation Agreement shall have been terminated. (j) Parent Stockholder Agreement. The Parent Stockholders shall have executed and delivered the Parent Stockholder Voting Agreement. (k) Omnipoint Agreement. There shall have been no amendments to the Omnipoint Agreement or the transactions contemplated thereby except for amendments which would not, individually or in the aggregate, have a Material Adverse Effect on Parent or on the transactions contemplated by this Agreement. (l) Registration Rights Agreement. Parent shall have executed and delivered the Registration Rights Agreement. (m) FCC Opinion. The Company shall have received an opinion of FCC counsel to Parent, dated the Effective Time, substantially in the form attached hereto as Annex I. (n) Corporate Opinion. The Company shall have received an opinion of corporate and state regulatory counsel to Parent, dated the Effective Time, in substantially the form attached hereto as Annex J. (o) Nasdaq. The shares of Parent Company Stock to be issued pursuant to Section 2.1(c) shall have been listed on the Nasdaq National Market. (p) Year 2000. There shall not have occurred and be continuing a Material Adverse Effect with respect to Parent relating to the Year 2000 Issue, provided, however, that for purposes of this condition, clauses (i) and (ii) of the definition of Material Adverse Effect shall be disregarded. Notwithstanding anything contained to the contrary in Section 7.2(a) or anywhere else in this Agreement, Parent may enter into any Subsequent Transaction, and no changes of any representation or warranty of Parent contained in this Agreement as a result of any Subsequent Transaction shall result in a failure of the conditions set forth in Section 7.2(a); provided, in each case, that any such Subsequent Transaction would not, or would reasonably not be expected to prevent, impair or materially delay the ability of the Company or Parent to consummate the transactions contemplated by this Agreement. SECTION 7.3 Conditions to Obligations of Parent and Merger Sub C to Effect the Reorganization. The obligation of Parent and Merger Sub C to effect the Reorganization shall be subject to the fulfillment at or prior to the Effective Time of the following additional conditions: (a) Performance of Obligations; Representations and Warranties. The Company shall have performed each of its agreements contained in this Agreement required to be performed at or prior to the Effective Time, and each of the representations and warranties of the Company contained in this Agreement (disregarding all qualifications and exceptions contained therein relating to materiality or a Material Adverse Effect or any similar standard or qualification) shall D-44 389 be true and correct at and as of the Effective Time as if made at and as of the Effective Time, in each case except as contemplated or permitted by this Agreement and except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company or Parent or the transactions contemplated by this Agreement; and Parent shall have received a certificate signed on behalf of the Company by its Chief Executive Officer and its Chief Financial Officer to such effect. (b) Tax Opinion. Parent shall have received an opinion of Jones, Day, Reavis & Pogue, in form and substance reasonably satisfactory to Parent, dated the Effective Time, substantially to the effect that, on the basis of facts, representations and assumptions set forth in such opinion which are consistent with the state of facts existing as of the Effective Time, (i) for federal income tax purposes, no gain or loss will be recognized by Holding, Merger Sub C or the Company solely as a result of the Reorganization; and (ii) in the case of the VoiceStream Merger, (x) such merger will be treated for federal income tax purposes as a reorganization described in section 368(a) of the Code, and each of VoiceStream, Holding and, in the case of a reorganization described in section 368(a)(2)(E) of the Code, Merger Sub A, will be a party to the reorganization within the meaning of section 368(b) of the Code, or (y) such merger will be treated as a transfer of property by the VoiceStream stockholders, other than holders of dissenting shares, to Holding described in section 351(a) of the Code. In rendering such opinion, Jones, Day, Reavis & Pogue may receive and rely upon representations from others, including representations from the Company and VoiceStream contained in certificates substantially in the form of the Company Tax Certificate, the VoiceStream Certificate and the Tax Matters Certificate attached hereto as Annex M, Annex M-1 and Annex M-2, representations from Holding contained in certificates substantially in the form of the Parent Tax Certificate and the VoiceStream Wireless Holding Certificate attached hereto as Annex N and Annex N-1, and representations substantially in the form of the Tax Matters Certificate attached hereto as Annex O from certain persons who own, as of the Effective Time, five percent (5%) or more of the total number of shares of the Company or of VoiceStream (or, in such counsel's discretion, of Omnipoint). (c) FCC Opinion. Parent shall have received an opinion of FCC counsel of the Company, dated the Effective Time substantially in the form attached hereto as Annex K. (d) Corporate Opinion. Parent shall have received an opinion of corporate and state regulatory counsel to the Company in form and substance reasonably acceptable to Parent substantially in the form attached hereto as Annex L. (e) Consents Under Agreements. The Company shall have obtained the consent or approval of each person whose consent or approval shall be required in connection with the transactions contemplated hereby under any indenture, mortgage, evidence of indebtedness, lease or other agreement or instrument to which the Company or one of its Subsidiaries is a party, except where the failure to obtain the same would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on the Company or Parent or upon the transactions contemplated by this Agreement. (f) Indemnity Agreement. The Indemnity Agreement shall have been authorized, executed and delivered by the parties thereto. (g) Year 2000. There shall not have occurred and be continuing a Material Adverse Effect with respect to the Company relating to the Year 2000 Issue, provided, however, that for D-45 390 purposes of this condition, clauses (i) and (ii) of the definition of Material Adverse Effect shall be disregarded. (h) Dissenting Shares. No more than 7.5% of the shares of VoiceStream Common Stock outstanding immediately prior to the Effective Time shall be Dissenting Shares. (i) Parent shall have received from the Company, the Series A Stockholder and the Investor, a Certificate, dated the Effective Date, in substantially the same form as Anne O (in the case of the Series A Stockholder and the Investor) or Annex M-2 (in the case of the Company). (j) Parent shall have received a written fairness opinion from Goldman, Sachs & Co. confirming its oral fairness opinion referred to in Section 4.19, within 5 Business Days of the execution of this Agreement. ARTICLE VIII TERMINATION AND AMENDMENT SECTION 8.1 Termination. This Agreement may be terminated at any time prior to the Effective Time, whether before or after any approval by the stockholders of Parent or the Company of the matters presented in connection with the Reorganization: (a) by mutual written consent of Parent, Merger Sub C and the Company; (b) by either Parent or the Company: (i) if the Reorganization has not been effected on or prior to the close of business on September 17, 2000 (the "Termination Date"); provided, however, that if the Reorganization has not occurred by such date due to the fact that the condition set forth in Section 7.1(f) has not been satisfied but all other conditions hereto have been satisfied or waived or are then capable of promptly being satisfied, the Termination Date shall be December 17, 2000; provided, further, that the right to terminate this Agreement pursuant to this Section 8.1(b)(i) shall not be available to any party whose failure to fulfill any obligation of this Agreement has been the cause of, or resulted in, the failure of the Reorganization to have occurred on or prior to such date; or (ii) if any Governmental Entity shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree or ruling or other action shall have become final and nonappealable; provided, however, that the right to terminate this Agreement pursuant to this Section 8.1(b)(ii) shall not be available to any party who has not used its best efforts to cause such order to be lifted or otherwise taken such action as is required to comply with Section 6.14; (c) by Parent if (i) the Company shall have failed to comply with any of its covenants or agreements contained in this Agreement required to be complied with prior to the date of such termination, except as would not reasonably be expected to have a Material Adverse Effect on the Company or Parent or the transactions contemplated by this Agreement, which failure to comply cannot be or has not been cured within 30 days after receipt by the Company of written notice of such failure to comply or (ii) the stockholders of the Company shall not approve the Reorganization at the Company Stockholders Meeting or any adjournment thereof; (d) by the Company if (i) Parent or Merger Sub C shall have failed to comply with any of its respective covenants or agreements contained in this Agreement required to be complied with prior to the date of such termination, except as would not reasonably be expected to have a D-46 391 Material Adverse Effect on the Company or Parent or the transactions contemplated by this Agreement, which failure to comply cannot be or has not been cured within 30 days after receipt by Parent of written notice of such failure to comply or (ii) the stockholders of Parent shall not approve the Parent Share Issuance at the Parent Stockholders Meeting or any adjournment thereof; or (e) by either Parent or the Company if there has been a breach by the other (or Merger Sub C if the Company is the terminating party) of any representation or warranty (disregarding all qualifications and exceptions contained therein relating to materiality or a Material Adverse Effect or any similar standard or qualification) except any breach that would not reasonably be expected to have a Material Adverse Effect on the Company or Parent or the transactions contemplated by this Agreement, in each case which breach cannot be or has not been cured within 30 days after receipt by the breaching party of written notice of the breach. SECTION 8.2 Effect of Termination. In the event of a termination of this Agreement by either the Company or Parent as provided in Section 8.1, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Parent, Merger Sub C or the Company or their respective officers or directors, except with respect to Section 3.18, Section 4.14, Section 6.9, this Section 8.2 and Article IX); provided, however, that nothing in this Article VIII shall relieve any party for liability for any breach of this Agreement; provided, further, that the parties hereto agree that any damages for a breach of this Agreement by the Company shall be reduced by the amount of any payment to Parent pursuant to Section 6.9(b)(ii). SECTION 8.3 Amendment. This Agreement may be amended by the parties hereto, by or pursuant to action taken by their respective Boards of Directors, at any time before or after approval by the stockholders of Parent and the Company of the matters presented to them in connection with the Reorganization; provided, however, that after any such approval, no amendment shall be made if applicable law would require further approval by such stockholders, unless such further approval shall be obtained. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. SECTION 8.4 Extension; Waiver. At any time prior to the Effective Time, the parties hereto, by action taken or authorized by their respective Board of Directors, may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto or (iii) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights. ARTICLE IX GENERAL PROVISIONS SECTION 9.1 Non-Survival of Representations and Warranties and Agreements. None of the representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time or, except as set forth in Section 8.2 hereof, the termination of this Agreement pursuant to the terms hereof. This Section 9.1 shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time of the Reorganization. SECTION 9.2 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, sent by overnight courier (providing proof of delivery) D-47 392 or telecopied (with a confirmatory copy sent by overnight courier) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to Parent or Sub, to: VoiceStream Wireless Corporation 3650 131st Avenue SE, Suite 400 Bellevue, WA 98006 Attn: General Counsel Telecopy No.: 425-586-8080 with a copy to: Preston Gates & Ellis LLP 5000 Columbia Center 701 Fifth Avenue Seattle, WA 98104 Attn: Richard B. Dodd, Esq. Telecopy No: 206-623-7022 (b) if to the Company, to: Aerial Communications, Inc. 8410 West Bryn Mawr, Suite 1100 Chicago, Illinois 60631 Attn: President Telecopy No.: 773-399-4147 with a copy to: Aerial Communications, Inc. c/o Telephone and Data Systems, Inc. 30 North LaSalle, Suite 4000 Chicago, Illinois 60602 Attn: Chairman Telecopy No.: 312-853-9299 with a copy to: Sidley & Austin One First National Plaza Chicago, Illinois 60603 Attn: Michael G. Hron, Esq. Telecopy No.: 312-853-7036 SECTION 9.3 Interpretation; Definitions. When a reference is made in this Agreement to an Article, Section, Schedule, Annex or Exhibit, such reference shall be to an Article, Section, Schedule, Annex or Exhibit of this Agreement unless otherwise indicated or unless the context otherwise requires. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." References to a Person are also references to its assigns and successors in interest (by means of merger, consolidation or sale of all or substantially all the assets of such Person or otherwise, as the case may be). References to a document are to such document as amended, waived and otherwise modified from time to time and references to a statute or other governmental rule are to such statute or rule as amended and D-48 393 otherwise modified from time to time (and references to any provision thereof shall include references to any successor provision). The definitions set forth herein are equally applicable both to the singular and plural forms and the feminine, masculine and neuter forms of the terms defined. The term "hereof" and similar terms refer to this Agreement as a whole. As used in this Agreement, the phrase "made available" shall mean that the information referred to has been made available if requested by the party to whom such information is to be made available. As used in this Agreement, the following terms have the meanings specified or referred to in this Section 9.3. "Acquisition Proposal" means any offer or proposal for, or any indication of interest in (i) a merger, consolidation, share exchange, business combination, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving the Company or any of its Subsidiaries; (ii) the acquisition, directly or indirectly, in a single transaction or series of related transactions, of (A) an equity interest representing greater than 15% of the voting power of the Company or any of its Subsidiaries or (B) assets, securities or ownership interests representing an amount equal to or greater than 15% of the consolidated assets or earning power of the Company and its Subsidiaries, other than the transactions contemplated by this Agreement; or (iii) the consummation of any other transaction or the entering into of any other agreement or arrangement with respect to any other transactions, the effect of which would have the same result as the occurrence of (i) or (ii). "Action" shall mean any action, suit, arbitration, inquiry, proceeding or investigation by or before any court, any governmental or other regulatory or administrative agency or commission or any arbitration tribunal. "Adjusted Fully Diluted Shares" shall have the meaning set forth in Section 2.1(e). "Affiliate" shall mean with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such Person provided that, for purposes of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise. "Agreement" shall mean this Agreement and Plan of Reorganization dated the date hereof among Parent, Merger Sub C and the Company and shall include the Schedules, Annexes, Exhibits and disclosure letters attached or related thereto. "Business Day" means a day other than a Saturday, Sunday or other day on which commercial banks in New York City, Chicago, Illinois or Seattle, Washington are authorized or required by law to close. "Cash Consideration Fund" shall have the meaning set forth in Section 2.2(a). "Cash Election" shall have the meaning set forth in Section 2.1(c). "Cash Election Form" shall have the meaning set forth in Section 2.1(d). "Cash Management Agreement" shall mean the Cash Management Agreement, dated April 15, 1996, between Series A Stockholder and the Company, as amended. "Certificate of Merger" shall have the meaning set forth in Section 1.3. "Closing" shall have the meaning set forth in Section 1.2. "Closing Date" shall have the meaning set forth in Section 1.2. D-49 394 "Closing Date Market Price" means with respect to one share of Parent Common Stock, the average of the Mean Price (calculated on a weighted average based upon the volume of shares traded on each day) for such share during the period of the 15 most recent trading days ending on the Business Day prior to the Effective Time. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Communications Act" shall mean the Communications Act of 1934, as amended, and the Telecommunications Act of 1996, as amended, together with the rules, regulations and published decisions of the FCC promulgated thereunder. "Company" shall have the meaning set forth in the introductory paragraph of this Agreement. "Company Benefit Plan" shall mean any bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical, life insurance, supplemental unemployment benefits, employee stock purchase, stock appreciation, restricted stock or other employee benefit plan, policy or arrangement providing benefits to any current or former employee, officer or director of the Company or any of its Subsidiaries. "Company Certificates" shall have the meaning set forth in Section 2.2(a). "Company Common Shares" shall have the meaning set forth in the first recital of this Agreement. "Company Common Stock" shall have the meaning set forth in the recital provision of this Agreement. "Company Employee" shall mean any employee of the Company or any of its Subsidiaries. "Company Filed SEC Documents" shall have the meaning set forth in Section 3.7. "Company Financial Advisor" shall have the meaning set forth in Section 3.17. "Company Letter" shall mean the letter from the Company to Parent dated the date hereof, which letter relates to this Agreement and is designated therein as the Company Letter. "Company Permits" shall have the meaning set forth in Section 3.9. "Company Preferred Stock" shall have the meaning set forth in Section 3.3. "Company Registration Rights Agreement" shall mean the Registration Rights Agreement, dated April 15, 1996, between Series A Stockholder and the Company, as amended. "Company Restricted Stock Units" shall mean restricted stock units granted under the Company Restricted Stock Unit Plan. "Company SEC Documents" shall have the meaning set forth in Section 3.6. "Company Series A Common Shares" shall have the meaning set forth in the first recital of this Agreement. "Company Stockholders Meeting" shall have the meaning set forth in Section 6.3. "Company Stock Options" shall have the meaning set forth in Section 3.3. "Company Subsidiaries" shall have the meaning set forth in Section 3.1. "Confidentiality Agreement" shall have the meaning set forth in Section 6.6. "Constituent Corporations" shall have the meaning set forth in the introductory paragraph of this Agreement. D-50 395 "Conversion Number" shall have the meaning set forth in Section 2.1(c). "D&O Insurance" shall have the meaning set forth in Section 6.13(b). "Debt/Equity Replacement Agreement" shall mean the Debt/Equity Replacement Agreement in the form attached hereto as Annex F. "DGCL" shall mean the General Corporation Law of the State of Delaware. "Dissenting Shares" shall have the meaning set forth in Section 1.0(c)(vii). "Effective Date" shall have the meaning set forth in Section 6.26(a). "Effective Time" shall have the meaning set forth in Section 1.3. "Election Deadline" shall have the meaning set forth in Section 2.1(e). "Employee Benefit Plans Agreement" shall mean the Employee Benefit Plans Agreement, dated April 15, 1996, between Series A Stockholder and the Company, as amended. "Employee Benefit Plans Separation Agreement" shall mean the Employee Benefit Plans Separation Agreement in the form attached hereto as Annex D. "Environmental Laws" shall mean any applicable statute, law, ordinance, regulation, rule, judgment, decree or order of any Governmental Entity relating to or regulating or imposing liability or standards of conduct with respect to pollution, protection of the environment or environmental regulation or control or regarding Hazardous Substances or occupational health or safety. "Environmental Permits" shall mean, with respect to any Person, all permits, licenses, franchises, certificates, approvals and other similar authorizations of any Governmental Entity relating to or required by Environmental Laws and affecting, or relating in any way to, the business of such Person or any of its Subsidiaries as currently conducted. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, together with the rules and regulations promulgated thereunder. "ERISA Affiliate" shall mean (i) any corporation which is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Code) as the Company; (ii) any partnership, trade or business (whether or not incorporated) which on the day before the Closing Date was under common control (within the meaning of Section 414(c) of the Code) with the Company; and (iii) any entity which is a member of the same affiliated service group (within the meaning of Section 414(m) of the Code as either the Company, any corporation described in clause (i) or any partnership, trade or business described in clause (ii). "ERISA Benefit Plan" shall mean a Company Benefit Plan maintained as of the date of this Agreement which is also an "employee pension benefit plan" (as defined in Section 3(2) of ERISA) or which is also an "employee welfare benefit plan" (as defined in Section 3(1) of ERISA). "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, together with the rules and regulations promulgated thereunder. "Exchange Agent" shall have the meaning set forth in Section 2.2(a). "Exchange Agreement" shall mean the Exchange Agreement, dated April 15, 1996, between Series A Stockholder and the Company, as amended. "Exchange Fund" shall have the meaning set forth in Section 2.2(a). D-51 396 "Exchange Rate" shall mean the "Exchange Rate Applicable to Aerial Common Shares" as defined in Section 7.2 of the Investment Agreement as adjusted pursuant to Section 7.3 of the Investment Agreement, as specified in Item 3.2 of the "Company Letter." "FAA" shall mean the Federal Aviation Administration and any successor agency or body. "FCC" shall mean the Federal Communications Commission and any successor agency or body. "Final Order" shall mean action by the applicable regulatory authority (the "Agency") which is in full force and effect, with respect to which no petition or other request for Agency or court stay, reconsideration or review of any kind is pending, and as to which all time periods have expired within which the Agency or a court may be asked to stay, reconsider or review the action or may stay, reconsider or review the action sua sponte. "Governmental Entity" shall mean any federal, state or local government or any court, tribunal, administrative agency or commission or other governmental or other regulatory authority or agency, domestic, foreign or supranational, including the FAA, FCC and any state public utility or service commission or similar agency. "Hazardous Substance" shall mean any material defined as toxic or hazardous, including any petroleum and petroleum products, under any applicable Environmental Law. "Holding" shall have the meaning set forth in the recitals hereto. "Holding Common Stock" shall have the meaning set forth in Section 4.3. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Indebtedness" of any Person at any date shall mean (a) all indebtedness of such Person for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), (b) any other indebtedness of such Person which is evidenced by a note, bond, debenture or similar instrument, (c) all obligations of such Person under financing leases, (d) all obligations of such Person in respect of acceptances issued or created for the account of such Person and with respect to unpaid reimbursement obligations related to letters of credit issued for the account of such Person and (e) all liabilities secured by any Lien on any property owned by such Person even though such Person has not assumed or otherwise become liable for the payment thereof. "Indemnified Person" shall have the meaning set forth in Section 6.13(a). "Insurance Cost Sharing Agreement" shall mean the Insurance Cost Sharing Agreement, dated April 15, 1996, between Series A Stockholder and the Company, as amended. "Intellectual Property Rights" shall mean any right to use, all patents, patent rights, trademarks, trade names, trade dress, logos, service marks, copyrights, know how and other proprietary intellectual property rights and computer programs held or used by the Company or any of its Subsidiaries. "Intercompany Accounts" shall have the meaning set forth in Section 6.23. "Intercompany Agreement" shall mean the Intercompany Agreement, dated April 15, 1996, by and between the Company and Series A Stockholder, as amended. "Intercompany Service Agreements" shall have the meaning set forth in Section 6.19. "Investment Agreement" shall mean the Investment Agreement, dated as of September 8, 1998, by and among the Company, Series A Stockholder, Operating Company and Investor, as amended. "Investment Entity" shall mean an entity in which the Company or any of its Subsidiaries has an Investment Interest. D-52 397 "Investment Interest" shall mean a direct or indirect ownership of (i) capital stock, bonds, debentures, partnership, membership interests or other ownership interests or other securities of any Person; (ii) any deposit with or advance, loan or other extension of credit (including the purchase of property from another Person subject to an understanding or agreement, contingent or otherwise to resell such property to such other Person) to any other Person; (iii) any revenue or profit interests pursuant to any agreement or license or (iv) any agreement, commitment, right, understanding or arrangement with respect to any of the items referred to in (i), (ii) or (iii) of this definition. "Investor" shall mean Sonera, Ltd., a Finnish limited liability company, which holds an investment in Operating Company. "Joint Proxy Statement" shall have the meaning set forth in Section 3.8. "Joint Venture Agreement" shall mean the Joint Venture Agreement dated as of September 8, 1998, by and among the Company, Operating Company and Sonera Corporation U.S. "knowledge" shall mean the actual knowledge of the executive officers of the Company or its Subsidiaries or the executive officers of Parent, as the case may be who have exercised reasonable due diligence with respect to the representation and warranty to which such knowledge statement is made. "Liabilities" shall mean any and all debts, liabilities and obligations, absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, whenever arising (unless otherwise specified in this Agreement), including all costs and expenses relating thereto, and including, without limitation, those debts, liabilities and obligations arising under any law, rule, regulation, Action, threatened Action, order or consent decree of any governmental entity or any award of any arbitrator of any kind, and those arising under any contract, commitment or undertaking. "Liens" shall mean any pledges, claims, liens, charges, encumbrances and security interests of any kind or nature whatsoever. "Long-Term Incentive Plan" shall mean the Company's 1996 Long-Term Incentive Plan. "Losses" shall mean losses, Liabilities, claims, damages, payments, absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown (including, without limitation, the costs and expenses of any and all Actions, threatened Actions, demands, assessments, judgments, settlements and compromises relating thereto and attorneys' fees and any and all expenses whatsoever reasonably incurred in investigating, preparing or defending against any such Actions or threatened Actions. "Management Side Letter" shall mean the letter dated September 8, 1998, among Series A Stockholder, the Company and Investor. "Material Adverse Change" or "Material Adverse Effect" shall mean, when used in connection with the Company or Parent, as the case may be, any change or effect (or any development that, insofar as can reasonably be foreseen, is likely to result in any change or effect) or fact or condition that is materially adverse to the business, properties, assets, financial condition or results of operations of the Company and its Subsidiaries taken as a whole, or Parent and its Subsidiaries taken as a whole, as the case may be, provided, however, that (i) any adverse change, effect or development that is primarily caused by conditions affecting the United States economy generally or the economy of any nation or region in which the Company or Parent, as the case may be, or its Subsidiaries conducts business that is material to the business of the Company or Parent, as the case may be, and its Subsidiaries, taken as a whole, shall not be taken into account in determining whether there has been (or whether there could reasonably be foreseen) a "Material Adverse Change" or "Material Adverse Effect" with respect to the Company or Parent, as the case may be, (ii) any adverse change, D-53 398 effect or development that is primarily caused by conditions generally affecting the industries in which the Company or Parent, as the case may be, conducts its business shall not be taken into account in determining whether there has been (or whether there could reasonably be foreseen) a "Material Adverse Change" or "Material Adverse Effect" with respect to the Company or Parent, as the case may be, and (iii) any adverse change, effect or development that is primarily caused by the announcement or pendency of this Agreement, the Reorganization or the transactions contemplated hereby shall not be taken into account in determining whether there has been (or whether there could reasonably be foreseen) a "Material Adverse Change" or "Material Adverse Effect" with respect to the Company or Parent, as the case may be; and a "Material Adverse Effect" with respect to the transactions contemplated by this Agreement shall mean any event, fact or condition which would reasonably be expected to materially delay, interfere with, impair or prevent the transactions contemplated by this agreement in a manner which would have a material adverse effect on such transactions taken as a whole considering the intentions and expectations of the parties hereto; provided, however, that for the purpose of Section 7.1(b), clause (iii) above shall not be excluded. "Mean Price" means, on any day in which shares are traded on Nasdaq, the average of the high and low trading prices for which one share of Parent Common Stock is traded on Nasdaq as reported by The Wall Street Journal. "Merger" shall have the meaning set forth in the recitals to this Agreement. "Merger Documents" shall have the meaning set forth in Section 1.0. "Merger Sub A" shall have the meaning set forth in the recitals to this Agreement. "Merger Sub B" shall have the meaning set forth in the recitals to this Agreement. "Merger Sub C" shall have the meaning set forth in the recitals to this Agreement. "Nasdaq" shall have the meaning set forth in Section 2.2(e). "Nokia" shall mean Nokia Telecommunications, Inc., a Delaware corporation. "Nokia Credit Agreement" shall mean the Credit Agreement dated as of June 30, 1998 among the Company, Nokia and the financial institutions named therein, as amended. "Nokia Guaranty" shall mean the Guaranty, dated June 30, 1998, by Series A Stockholder of the obligations of the Company to Nokia under the Nokia Credit Agreement. "Omnipoint Agreement" shall mean the transactions contemplated by the Agreement and Plan or Reorganization dated as of June 23, 1999 by and among Parent, VoiceStream Wireless Holding Corporation and Omnipoint Corporation. "Omnipoint Merger" shall have the meaning set forth in the recitals to this Agreement. "Omnipoint Reorganization" shall have the meaning set forth in the recitals hereto. "Omnipoint End Date" shall mean the "End Date", as defined in the Omnipoint Agreement, provided that such date shall be no later than June 30, 2000. "Operating Company" shall mean Aerial Operating Company, Inc., a Delaware corporation and Subsidiary of the Company. "Operating Company Shares" shall mean shares of common stock, $.001 par value, of Operating Company. "Parent" shall have the meaning set forth in Section 1.0. "Parent Certificates" shall have the meaning set forth in Section 2.2(a). D-54 399 "Parent Common Stock" shall have the meaning set forth in the recitals of this Agreement. "Parent Filed SEC Documents" shall have the meaning set forth in Section 4.7. "Parent Letter" shall mean the letter from Parent to the Company dated the date hereof, which letter relates to this Agreement and is designated therein as the Parent Letter. "Parent Permits" shall have the meaning set forth in Section 4.9. "Parent SEC Documents" shall have the meaning set forth in Section 4.6. "Parent Share Issuance" shall have the meaning set forth in Section 4.4. "Parent Stockholders" shall have the meaning set forth in Section 6.25. "Parent Stockholder Meeting" shall have the meaning set forth in Section 6.3(b). "Parent Subsidiaries" shall have the meaning set forth in Section 4.1. "Per Share Cash Consideration" shall have the meaning set forth in Section 2.1(c). "Per Share Cash Value" shall have the meaning set forth in Section 2.1(c). "Per Share Stock Consideration" shall have the meaning set forth in Section 2.1(d). "Person" shall mean an individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, unincorporated syndicate, unincorporated organization, trust, trustee, executor, administrator or other legal representative, governmental authority or agency, political subdivision, or any group of Persons acting in concert. "Public Holders" shall have the meaning set forth in Section 2.1(d). "Registration Rights Agreement" shall mean the Registration Rights Agreement attached to the Stockholder Agreement to be entered into between Series A Stockholder and Parent. "Registration Statement" shall have the meaning set forth in Section 4.4. "Reorganization" shall have the meaning set forth in the recitals to this Agreement. "Restricted Stock Plan" shall mean the Company's Retention Restricted Stock Unit Plan. "Retained Employee" shall have the meaning set forth in Section 6.1(a). "Revolving Credit Agreement" shall mean the Revolving Credit Agreement, dated August 31, 1998, between Series A Stockholder and Operating Company, as amended. "Revolving Credit Agreement Guaranty" shall mean the Guaranty dated August 31, 1998 by the Company of the obligations of Operating Company to Series A Stockholder under the Revolving Credit Agreement, as reaffirmed in connection with any amendment to the Revolving Credit Agreement. "Rule 145 Affiliates" shall have the meaning set forth in Section 6.7. "SEC" shall mean the Securities and Exchange Commission. "Securities Act" shall mean the Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder. "Series A Guaranty" shall mean the Guaranty by the Series A Stockholder of the obligations of the Company under the Series A Notes. D-55 400 "Series A Indenture" shall mean the Indenture dated as of November 4, 1996, among the Company, Series A Stockholder and The First National Bank of Chicago, as supplemented, relating to the Series A Notes. "Series A Notes" shall mean the Series A Zero Coupon Notes due 2006, of the Company. "Series A Stockholder" shall mean Telephone and Data Systems, Inc., a Delaware corporation, the parent of the Company. "Series A Stockholder's Group" shall mean any "affiliated group" (as defined in Section 1504 of the Code without regard to the limitations contained in Section 1504(b) of the Code) that includes the Series A Stockholder or any predecessor of or successor to the Series A Stockholder (or another such predecessor or successor). "Series B Guaranty" shall mean the Guaranty by the Series A Stockholder of the obligations of the Company under the Series B Notes. "Series B Indenture" shall mean the Indenture dated as of February 5, 1998 among the Company, Series A Stockholder and The First National Bank of Chicago, as supplemented, relating to the Series B Notes. "Series B Notes" shall mean the Series B Zero Coupon Notes due 2008, of the Company. "Significant Employee" shall mean any Employee of the Company or any of its Subsidiaries who (i) is an officer of the Company or any of its Subsidiaries, (ii) has a written employment contract with the Company or any of its Subsidiaries which calls for annual compensation in excess of $90,000, or (iii) is compensated by the Company and/or its Subsidiaries at an annual rate greater than $90,000. "Stock Consideration Fund" shall have the meaning set forth in Section 2.2(a). "Stock Equivalents" shall have the meaning set forth in Section 3.3. "Stockholder Agreement" shall mean the Stockholder Agreement to be entered into between Series A Stockholder and Parent attached hereto as Annex D. "Subsequent Transaction" shall mean any transaction, including the Omnipoint Transaction, whereby (i) Parent or any of its Subsidiaries would acquire (by merger, consolidation, acquisition of stock or assets or otherwise) any corporation, limited liability company, partnership, other business organization or assets or division thereof, which is in the business of providing wireless communication services, (ii) Parent or any of its Subsidiaries would acquire an Investment Interest in any of the foregoing, (iii) Parent or any of its Subsidiaries would issue any equity interest or incur any Indebtedness whether in connection with any item described in (i) or (ii) or otherwise, (iv) Parent or any of its Subsidiaries enters into or engages in a strategic alliance or other commercial relationship or (v) Parent or any of its Subsidiaries is acting in the ordinary course consistent with past practice; provided, however,in connection with a Subsequent Transaction described in items (i), (ii), (iii) or (iv) of this definition, Parent must receive an opinion from a nationally recognized investment bank, acting as financial advisor to Parent, to the effect that, from a financial point of view, such Subsequent Transaction is fair to the holders of Parent Common Stock or, if applicable, Parent. "Subsidiary" or "subsidiary" shall mean a person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by another Person. "Substitute Options" shall have the meaning set forth in Section 6.2(b). D-56 401 "Supplemental Agreement" shall mean the Supplemental Agreement, dated as of September 8, 1998, by and among the Company, Operating Company and Investor. "Surviving Corporation" shall have the meaning set forth in Section 1.1. "Tag-Along Right" shall have the meaning set forth in Section 2.1(c). "Tax" and "Taxes" shall mean any federal, state, local or foreign net income, gross income, gross receipts, windfall profit, severance, property, production, sales, use, license, excise, franchise, employment, payroll, withholding, alternative or add-on minimum or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or penalty, addition to Tax or additional amount imposed by any Governmental Entity. "Tax Allocation Agreement" shall mean the Tax Allocation Agreement, dated September 8, 1998, between Series A Stockholder and the Company, as amended. "Tax Deferred Savings Plan" shall mean the Telephone and Data Systems, Inc. Tax Deferred Savings Plan. "Tax Return" shall mean any return, report or similar statement required to be filed with respect to any Tax including, without limitation, any information return, claim for refund, amended return or declaration of estimated tax. "Tax Settlement Agreement" shall mean the Tax Settlement Agreement dated March 12, 1999 among Series A Stockholder, the Company and Operating Company, as amended. "Termination Fee" shall have the meaning set forth in Section 6.9(b). "Transfer Taxes" shall have the meaning set forth in Section 6.11. "Transition Services Agreement" shall mean the Transition Services Agreement in the form attached hereto as Annex C. "VoiceStream Common Stock" shall have the meaning set forth in Section 4.3. "VoiceStream ESPP" shall have the meaning set forth in Section 4.3. "VoiceStream ERSP" shall have the meaning set forth in Section 4.3. "VoiceStream Merger" shall have the meaning set forth in the recitals to this Agreement. "VoiceStream Option Plan" shall have the meaning set forth in Section 4.3. "VoiceStream Preferred Stock" shall have the meaning set forth in Section 4.3. "Year 2000 Issue" means a failure of a system to recognize and properly process date-sensitive functions involving dates prior to, on and after December 31, 1999 (including, but not limited to calculation, comparison and sequencing, and including, without limitation, leap year calculations). SECTION 9.4 Counterparts. This Agreement may be executed in counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. SECTION 9.5 Entire Agreement; No Third-Party Beneficiaries. Except for the Confidentiality Agreement, this Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. This Agreement, except for the provisions of Sections 6.1, 6.13, and 6.19 through 6.24, is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. D-57 402 SECTION 9.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS. SECTION 9.7 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns. SECTION 9.8 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic and legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement may be consummated as originally contemplated to the fullest extent possible. SECTION 9.9 Enforcement of this Agreement. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached in any material respect. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the material terms and provisions hereof in any court of the United States or any state having jurisdiction, such remedy being in addition to any other remedy to which any party is entitled at law or in equity. SECTION 9.10 Obligations of Subsidiaries. Whenever this Agreement requires any Subsidiary of Parent (including Sub) or of the Company to take any action, such requirement shall be deemed to include an undertaking on the part of Parent or the Company, as the case may be, to cause such Subsidiary to take such action. SECTION 9.11 Reliance on Representations. Notwithstanding any investigation, knowledge or review made at any time by or on behalf of any party hereto, the parties acknowledge and agree that all representations and warranties contained in this Agreement, the Annexes, the Company Letter, the Parent Letter or in any of the documents, certification or agreements delivered in connection therewith, are being relied upon as a material inducement to enter into this Agreement and the transactions contemplated hereby. D-58 403 In Witness Whereof, Parent, Merger Sub C and the Company have caused this Agreement to be signed by their respective officers thereunto duly authorized all as of the date first written above. VOICESTREAM WIRELESS CORPORATION By: /s/ CREGG B. BAUMBAUGH ------------------------------------ Name: Cregg B. Baumbaugh Title: Executive Vice President -- Strategy, Finance and Development VOICESTREAM WIRELESS HOLDING CORPORATION By: /s/ CREGG B. BAUMBAUGH ------------------------------------ Name: Cregg B. Baumbaugh Title: Executive Vice President -- Strategy, Finance and Development VOICESTREAM SUBSIDIARY III CORPORATION By: /s/ CREGG B. BAUMBAUGH ------------------------------------ Name: Cregg B. Baumbaugh Title: Executive Vice President -- Strategy, Finance and Development AERIAL COMMUNICATIONS, INC. By: /s/ LEROY T. CARLSON, JR. ------------------------------------ Name: LeRoy T. Carlson, Jr. Title: Chairman In addition, this Agreement is signed by the undersigned solely for the purposes of Sections 6.16, 6.17, 6.18, 6.19, 6.20, 6.21, 6.23, 6.24, and 6.26. TELEPHONE AND DATA SYSTEMS, INC. By: /s/ LEROY T. CARLSON ------------------------------------ Name: LeRoy T. Carlson Title: Chairman SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION D-59 404 [OPINION OF GOLDMAN, SACHS & CO. (AERIAL REORGANIZATION)] ANNEX E PERSONAL AND CONFIDENTIAL September 17, 1999 Board of Directors VoiceStream Wireless Corporation 3650 131st Avenue SE Suite 400 Bellevue, WA 98006 Gentlemen: You have requested our opinion as to the fairness from a financial point of view to VoiceStream Wireless Corporation ("VoiceStream") of the Merger Consideration (as defined below) to be paid by VoiceStream under the Agreement and Plan of Reorganization (the "Aerial Agreement"), dated as of September 17, 1999, among VoiceStream, VoiceStream Wireless Holding Corporation ("Holding"), VoiceStream Subsidiary III Corporation ("Merger Sub C"), a wholly-owned direct subsidiary of Holding, Aerial Communications, Inc. ("Aerial"), and Telephone and Data Systems, Inc. (the "Series A Stockholder"), which provides for the merger of Merger Sub C with and into Aerial and, if the transactions contemplated by the Omnipoint Agreement (as defined below) are terminated or not consummated by the Omnipoint End Date (as defined in the Aerial Agreement), for the merger of VoiceStream Subsidiary I, a wholly-owned subsidiary of Holding ("Merger Sub A"), with and into VoiceStream. We understand that VoiceStream has also entered into an Agreement and Plan of Reorganization (the "Omnipoint Agreement"), dated as of June 23, 1999, among VoiceStream, Holding and Omnipoint Corporation ("Omnipoint"), which provides for the merger of Merger Sub A with and into VoiceStream and the merger of VoiceStream Subsidiary II, a wholly-owned subsidiary of Holding, with and into Omnipoint (the "Omnipoint Reorganization"), whereby VoiceStream and Omnipoint will become wholly-owned subsidiaries of Holding. Pursuant to the Aerial Agreement, each outstanding share of Common Stock, no par value, of VoiceStream ("VoiceStream Common Stock"), will be converted into one share of Common Stock, $0.001 par value, of Holding ("Holding Common Stock"), and each outstanding Series A Common Share, par value $1.00, and each outstanding Common Share, par value $1.00, of Aerial (together, "Aerial Common Stock") will be converted into the following consideration (the "Merger Consideration"): (i) in the case of the Series A Stockholder and Sonera, Ltd. ("Sonera"), the right to receive the Conversion Number (as defined below) of shares of Holding Common Stock and (ii) in the case of stockholders of Aerial other than the Series A Stockholder or Sonera, the right to receive the Conversion Number of shares of Holding Common Stock or, at the election of such stockholders, $18.00 in cash. The Conversion Number will be equal to 0.455; provided, however, (i) in the event that (a) the Omnipoint Agreement is terminated or the transactions contemplated by the Omnipoint Agreement are not consummated by the Omnipoint End Date and (b) the Closing Date Market Price (as defined in the Aerial Agreement) is less than $39.56, the Conversion Number will be equal to the number determined by dividing $18.00 by the Closing Date Market Price, but will not be greater than 0.50 or less than 0.455 (or, if applicable, the quotient calculated as described in clause (ii)); and (ii) in the event that the number of Adjusted Fully Diluted Shares (as defined in the Aerial Agreement) exceeds 85,839,161 as of the Effective Time, the Conversion Number will be equal to the number determined by dividing 39,056,818 by such number of Adjusted Fully Diluted Shares as of the Effective Time (subject to further adjustment as described in clause (i), if applicable). In addition, pursuant to the Debt/Equity Replacement Agreement, to be entered into by and among the Series A Stockholder, Aerial, VoiceStream and Holding (the "Debt/Equity E-1 405 VoiceStream Wireless Corporation September 17, 1999 Page 2 Replacement Agreement"), debt of Aerial in the amount of $420,000,000 held by the Series A Stockholder will be converted into shares of Aerial Common Stock at a conversion price of $22.00. In addition, you have advised us that Sonera will acquire 10.45 million shares of Aerial Common Stock at a price of $22.00 per share. Goldman, Sachs & Co., as part of its investment banking business, is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. We are familiar with VoiceStream, having provided certain investment banking services to VoiceStream and its former parent, Western Wireless Corporation ("Western"), from time to time, including having acted as lead manager in the initial public offering of 11 million shares of common stock, no par value (the "Western Common Stock"), of Western in May 1996; having acted as lead manager in the public offering of $200 million aggregate principal amount of 10.5% senior subordinated notes due June 2006, of Western in May 1996; having acted as lead manager in the private offering of $200 million aggregate principal amount of 10.5% senior subordinated notes due February 2007, of Western in October 1996; having acted as lead manager in the public offering of 12.1 million shares of Western Common Stock in April 1998; having acted as Western's financial advisor in connection with the sale of 19.9% of the outstanding shares of VoiceStream Common Stock to Hutchison Telecommunications PCS (USA) Limited in February 1998; and having acted as VoiceStream's financial advisor in connection with, and having participated in certain of the negotiations leading to, the Aerial Agreement and the Omnipoint Agreement. Investment funds affiliated with Goldman, Sachs & Co. have a principal investment in VoiceStream in the amount of 9,730,208 shares of VoiceStream Common Stock and have the right to designate a nominee for election to VoiceStream's Board of Directors. Terrence O'Toole, a Managing Director of Goldman, Sachs & Co., is a director of VoiceStream. In addition, we have provided certain investment banking services to Aerial from time to time, including having acted as co-manager in the initial public offering of 12.25 million shares of Aerial Common Stock in April 1996. Goldman, Sachs & Co. provides a full range of financial advisory and securities services and, in the course of its normal trading activities, may from time to time effect transactions and hold securities, including derivative securities, of VoiceStream and Aerial for its own account and for the accounts of customers. As of September 10, 1999, Goldman, Sachs & Co. had a short position in 4,061 shares of Aerial Common Stock and a short position in 150 put contracts on Aerial Common Stock. As of the same date and in addition to the principal investment referred to above, Goldman, Sachs & Co. had a long position of $8.5 million of VoiceStream bank loans. In connection with this opinion, we have reviewed, among other things, the Aerial Agreement; the Omnipoint Agreement; the Debt/Equity Replacement Agreement; the Registration Statement on Form 10 of VoiceStream dated April 13, 1999; Annual Reports to Stockholders and Annual Reports on Form 10-K of Western for the three years ended December 31, 1998; Annual Reports to Stockholders and Annual Reports on Form 10-K of Aerial for the two years ended December 31, 1998; certain interim reports to stockholders and Quarterly Reports on Form 10-Q of VoiceStream, Western and Aerial; certain other communications from VoiceStream, Western and Aerial to their respective stockholders; certain internal financial analyses and forecasts for VoiceStream prepared by the management of VoiceStream, certain financial analyses and forecasts for Aerial prepared by the management of VoiceStream, and certain internal financial analyses and forecasts for Aerial prepared by the management of Aerial (collectively, the "Forecasts"). We also have held discussions with E-2 406 VoiceStream Wireless Corporation September 17, 1999 Page 3 members of senior management of VoiceStream and Aerial regarding the strategic rationale for, and the potential benefits of, the transactions contemplated by the Aerial Agreement and the past and current business operations, financial condition and future prospects of their respective companies. In addition, we have reviewed the reported price and trading activity for the VoiceStream Common Stock and Aerial Common Stock, compared certain financial and stock market information for VoiceStream and Aerial with similar information for certain other companies the securities of which are publicly traded, reviewed the financial terms of certain recent business combinations in the U.S. wireless communications industry specifically and in other industries generally and performed such other studies and analyses as we considered appropriate. We have relied upon the accuracy and completeness of all of the financial and other information reviewed by us and have assumed such accuracy and completeness for purposes of rendering this opinion. In this regard, we have assumed with your consent that the Forecasts have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of VoiceStream and Aerial, as the case may be. In addition, we have not made an independent evaluation or appraisal of the assets and liabilities of VoiceStream or Aerial or any of their subsidiaries and we have not been furnished with any such evaluation or appraisal. We have also taken into account VoiceStream's view as to the possible tax consequences of the transactions contemplated by the Aerial Agreement as described to us by VoiceStream. We have assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the transaction contemplated by the Aerial Agreement will be obtained without any adverse effect on VoiceStream or Aerial or on the contemplated benefits of the transactions contemplated by the Aerial Agreement. Our advisory services and the opinion expressed herein are provided for the information and assistance of the Board of Directors of VoiceStream in connection with its consideration of the transactions contemplated by the Aerial Agreement and such opinion does not constitute a recommendation as to how any holder of shares of VoiceStream Common Stock should vote with respect to such transactions. Based upon and subject to the foregoing and based upon such other matters as we consider relevant, it is our opinion that as of the date hereof the Merger Consideration to be paid by VoiceStream pursuant to the Aerial Agreement is fair from a financial point of view to VoiceStream stockholders. Very truly yours, (GOLDMAN, SACHS & CO.) E-3 407 ANNEX F [OPINION OF DONALDSON, LUFKIN & JENRETTE (AERIAL REORGANIZATION)] September 17, 1999 Board of Directors Aerial Communications, Inc. 8410 West Bryn Mawr Suite 1100 Chicago, Illinois 60631 Members of the Board: You have requested our opinion as to the fairness from a financial point of view to the stockholders of Aerial Communications, Inc. (the "Company") of the consideration to be received by such stockholders pursuant to the terms of the Agreement and Plan of Reorganization, dated September 17, 1999 (the "Agreement"), by and among VoiceStream Wireless Corporation, a Washington corporation ("VoiceStream"), VoiceStream Wireless Holding Corporation, a Delaware corporation ("Holding"), VoiceStream Subsidiary III Corporation, a Delaware corporation ("Sub"), which shall be a wholly-owned direct subsidiary of Holding as of the effective time of the Merger, the Company and Telephone and Data Systems, Inc., a Delaware Corporation ("TDS"), pursuant to which Sub will be merged (the "Merger") with and into the Company. The Merger is conditioned upon the consummation or termination of the acquisition of Omnipoint Corporation ("Omnipoint"), pursuant to the Agreement and Plan of Reorganization, dated as of June 23, 1999 (the "Omnipoint Reorganization Agreement"), among VoiceStream, Holding and Omnipoint (the "Omnipoint Acquisition"); provided, that such condition shall be deemed to have been satisfied on the earlier of the "End Date," as defined in the Omnipoint Reorganization Agreement, or June 30, 2000. Subsequent to the Merger, each of the Company, VoiceStream and, if the Omnipoint Acquisition is consummated, Omnipoint, will continue as a subsidiary of Holding. Pursuant to the Agreement, each share of common stock of the Company ("Company Common Stock") will be converted into the right to receive 0.455 shares of common stock, $.001 par value per share (the "Holding Common Stock") of Holding; provided, that if the Omnipoint Acquisition is terminated or not consummated prior to the Merger and the 15-day average of the high and low trading prices for Holding Common Stock or the common stock of VoiceStream, as applicable, immediately prior to the effective time of the Merger (the "Closing Date Market Price") is less than $39.56, then each share of Company Common Stock will be converted into the right to receive the amount determined by dividing $18.00 by the Closing Date Market Price, but shall not be greater than 0.500 or less than 0.455; and, provided, further, that any such exchange ratio shall be subject to adjustment below 0.455 by dividing 39,056,818 by the aggregate number of shares of Company Common Stock and stock appreciation rights, phantom stock rights or other contractual rights the value of which is determined in whole or in part by the value of any capital stock of the Company, not including shares issued or to be issued pursuant to the Debt/Equity Replacement Agreement (as defined below), to TDS and Sonera Ltd. ("Sonera") and pursuant to performance options (the "Adjusted Fully Diluted Shares"), if the aggregate number of Adjusted Fully Diluted Shares exceeds 85,839,161 at the effective time of the Merger (any such ratio whether or not the Omnipoint Acquisition is consummated prior to the Merger, the "Exchange Ratio"). Stockholders of the Company, other than TDS and Sonera, will have the option to receive $18.00 in cash in lieu of the Exchange Ratio (together with the Exchange Ratio, the "Merger Consideration"). The terms of the Merger are more fully set forth in the Agreement. F-1 408 Board of Directors Aerial Communications, Inc. Page 2 In arriving at our opinion, we have reviewed: (i) the Agreement; (ii) the Stockholder Agreement, dated the date of the Agreement, among VoiceStream, TDS and Holding; (iii) the Debt/Equity Replacement Agreement, dated the date of the Agreement, among TDS, VoiceStream, Holding, Aerial Operating Company, Inc., a majority-owned subsidiary of the Company ("Operating Company"), and the Company; (iv) the Indemnity Agreement, dated the date of the Agreement, among TDS, Operating Company, VoiceStream, Holding and the Company; (v) the Stockholder Agreement, dated the date of the Agreement, among certain stockholders of VoiceStream; (vi) a draft of the Investor Agreement to be entered into by TDS, VoiceStream and Holding at or prior to the effective time of the Merger; (vii) a draft of the Registration Rights Agreement to be entered into by TDS and Holding at or prior to the effective time of the Merger; and (viii) the exhibits thereto. We also have reviewed financial and other information that was publicly available, including certain research analysts' projections for VoiceStream (both on a standalone basis and pro forma for the Omnipoint Acquisition), or furnished to us by the Company and VoiceStream, including information provided during discussions with their respective managements (which, with respect to VoiceStream includes VoiceStream management's comments on the research analysts' projections referred to above) (such research analysts' projections, as commented on by management of VoiceStream, the "Analyst Projections"). Included in the information provided during discussions with the management of the Company were certain financial projections of the Company prepared by the management of the Company. In addition, we have compared certain financial and securities data of the Company, VoiceStream and Omnipoint with various other companies whose securities are traded in public markets, reviewed the historical stock prices and trading volumes of the common stock of the Company, VoiceStream and Omnipoint, reviewed prices and premiums paid in certain other business combinations and conducted such other financial studies, analyses and investigations as we deemed appropriate for purposes of this opinion. In rendering our opinion, we have relied upon and assumed without independent verification the accuracy and completeness of all of the financial and other information that was available to us from public sources, that was provided to us by the Company and VoiceStream and their respective representatives, or that was otherwise reviewed by us and have assumed that the Company is not aware of any information prepared by it or its advisors that might be material to our opinion that has not been made available to us. With respect to the financial projections supplied to us, we have relied on representations that they have been reasonably prepared on the basis reflecting the best currently available estimates and judgments of the management of the Company as to the future operating and financial performance of the Company. With respect to the Analyst Projections, we have assumed that they have been prepared on a basis that does not materially differ from the view of management of VoiceStream as to the future operating and financial performance of VoiceStream. We have not assumed any responsibility for making any independent evaluation of any assets or liabilities or for making any independent verification of any of the information reviewed by us. We have relied as to certain legal matters on advice of counsel to the Company. Our opinion is necessarily based on economic, market, financial and other conditions as they exist on, and on the information made available to us as of, the date of this letter. It should be understood that, although subsequent developments may affect this opinion, we do not have any obligation to update, revise or reaffirm this opinion. We are expressing no opinion herein as to the prices at which Holding Common Stock will actually trade at any time. Our opinion does not address the relative merits of the Merger, as contrasted with other business strategies being considered by the Company's Board of Directors, nor does it address the Board's decision to proceed with the Merger. F-2 409 Board of Directors Aerial Communications, Inc. Page 3 Our opinion does not constitute a recommendation to any stockholder as to how such stockholder should vote on the proposed transaction. This opinion is not to be quoted or referred to, in whole or in part, in any document, nor shall this opinion be used for any other purposes or publicly disclosed, without our prior written consent; provided, however, the Company is authorized to include this opinion in its entirety in the proxy materials specifically contemplated by the Agreement. We have acted as financial advisor to the Board of Directors of the Company in connection with the transactions contemplated by the Agreement and will receive a fee for our services, a substantial portion of which is contingent upon consummation of the transactions contemplated by the Agreement. Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its investment banking services, is regularly engaged in the valuation of businesses and securities in connection with mergers, acquisitions, underwritings, sales and distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. In the ordinary course of our business we actively trade the debt and equity securities of companies, including the Company, TDS, VoiceStream and Omnipoint, for our own account and for the accounts of customers and may hold a long or short position in such securities at any time. DLJ has performed investment banking and other services for the Company, TDS, Omnipoint, Western Wireless Corp. ("Western Wireless"), the former owner of VoiceStream, and Hutchison Whampoa Limited ("Hutchison") in the past, including (i) acting as the lead manager for an offering of convertible preferred stock of Omnipoint in May 1998, (ii) acting as a co-manager for an offering of Class A Shares of Western Wireless in April, 1998, (iii) acting as a co-manager for an offering of Trust Originated Preferred Securities of TDS in February 1998, (iv) arranging a senior secured credit facility for Omnipoint in February 1998 and (v) acting as financial advisor to Hutchison in its purchase of common stock of Western Wireless in October 1997, and has received usual and customary compensation for such services. Based upon the foregoing and such other factors as we deem relevant, we are of the opinion that the Merger Consideration to be received pursuant to the Agreement by the stockholders of the Company, other than VoiceStream, Holding and Omnipoint and any of their respective affiliates, is fair to such stockholders from a financial point of view. Very truly yours, DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION By: /s/ LOUIS P. FRIEDMAN ------------------------------------ Louis P. Friedman F-3 410 ANNEX G [OPINION WASSERSTEIN PERELLA & CO., INC (AERIAL REORGANIZATION)] September 17, 1999 Special Committee of the Board of Directors Aerial Communications, Inc. 8410 West Bryn Mawr Suite 1100 Chicago, IL 60631 Members of the Special Committee: You have asked us to advise you with respect to the fairness, from a financial point of view, to the stockholders of Aerial Communications, Inc. (the "Company") (other than Telephone and Data Systems, Inc. ("TDS") and Sonera Ltd. ("Sonera")) (the "Public Stockholders") of the Merger Consideration (as defined below) provided for pursuant to the terms of the Agreement and Plan of Reorganization (the "Reorganization Agreement"), among the Company, TDS, VoiceStream Wireless Corporation ("VoiceStream"), VoiceStream Wireless Holding Corporation ("Holding") and VoiceStream Subsidiary III Corporation, a wholly owned subsidiary of Holding ("Sub"). The Reorganization Agreement provides for, among other things, a merger of Sub with and into the Company (the "Merger"). The Merger is conditioned upon the consummation or termination of the acquisition of Omnipoint Corporation ("Omnipoint"), pursuant to the Agreement and Plan of Reorganization, dated as of June 23, 1999 (the "Omnipoint Reorganization Agreement"), among VoiceStream, Holding and Omnipoint (the "Omnipoint Acquisition"); provided, that such condition shall be deemed to have been satisfied on the earlier of the End Date (as defined in the Omnipoint Reorganization Agreement) or June 30, 2000 (the "Omnipoint End Date"). In the Merger, each outstanding Series A Common Share, $1.00 par value, of the Company and each outstanding Common Share, $1.00 par value, of the Company (other than any such shares held in the treasury of the Company or owned by VoiceStream, Holding or their respective subsidiaries) (collectively "Company Common Stock") will be converted into 0.455 shares (the "Exchange Ratio") of common stock, par value $0.001 per share, of Holding (the "Holding Common Stock"), subject to increase if the Omnipoint Acquisition is terminated or not consummated prior to the Omnipoint End Date and the 15-day average of the high and low trading prices for Holding Common Stock or the common stock of VoiceStream, as applicable, immediately prior to the effective time of the Merger (the "Closing Date Market Price") is less than $39.56, in which case each share of Company Common Stock will be converted into the right to receive the amount determined by dividing $18.00 by the Closing Date Market Price, but shall not be greater than 0.500 or less than 0.455, and subject to decrease if the Adjusted Fully Diluted Shares (as defined in the Reorganization Agreement) exceed a specified limit. Each Public Stockholder may elect to receive $18.00 cash in lieu of the Exchange Ratio (such cash election together with the Exchange Ratio, the "Merger Consideration"). The terms and conditions of the Merger are set forth in more detail in the Reorganization Agreement. In connection with rendering our opinion, we have reviewed (i) the Reorganization Agreement; (ii) the Stockholder Agreement, dated the date of the Reorganization Agreement, among VoiceStream, TDS and Holding; (iii) the Debt/Equity Replacement Agreement, dated the date of the Reorganization Agreement, among TDS, VoiceStream, Holding, Aerial Operating Company, Inc., a majority-owned subsidiary of the Company ("Operating Company"), and the Company; (iv) the Parent Stockholder Agreement, dated the date of the Reorganization Agreement, among the Company, TDS, VoiceStream, Holding and certain stockholders of VoiceStream; (v) a draft of the G-1 411 Investor Agreement to be entered into by TDS, VoiceStream and Holding at or prior to the effective time of the Merger; (vi) the Indemnity Agreement, dated the date of the Reorganization Agreement, among TDS, Operating Company, VoiceStream, Holding and the Company; (vii) a draft of the Registration Rights Agreement to be entered into by TDS and Holding at or prior to the effective time of the Merger; and (viii) the exhibits thereto, and for purposes hereof, we have assumed that the final forms of those documents reviewed by us in draft form will not differ in any material respect from the drafts provided to us. We have also reviewed and analyzed certain publicly available business and financial information relating to the Company, VoiceStream, and Omnipoint for recent years and interim periods to date, as well as certain internal financial and operating information of the Company, including financial forecasts, analyses and projections prepared by or on behalf of the Company and provided to us for purposes of our analysis, and we have discussed with the Special Committee and management of the Company and of VoiceStream such information and, among other matters, each of the Company's and VoiceStream's business, operations, assets, financial condition and future prospects. As you are aware, VoiceStream did not make available to us its projections of expected future performance. Accordingly, our review of such information for purposes of rendering our opinion was limited to discussions with management of VoiceStream of certain research analysts' projections of VoiceStream's future performance both on a stand alone basis and pro forma for the Omnipoint Acquisition (as commented on by management, the "Analyst Projections"). We have reviewed and considered certain financial and stock market data relating to the Company, VoiceStream and Omnipoint and we have compared that data with similar data for certain other companies, the securities of which are publicly traded, that we believe may be relevant or comparable in certain respects to the Company, VoiceStream and Omnipoint or one or more of their respective businesses or assets, and we have reviewed and considered the financial terms of certain recent acquisitions and business combination transactions in the wireless communications industry that we believe to be reasonably comparable to the Merger or otherwise relevant to our inquiry. We have also performed such other financial studies, analyses, and investigations and reviewed such other information as we considered appropriate for purposes of this opinion. In our review and analysis and in formulating our opinion, we have assumed and relied upon the accuracy and completeness of all of the financial and other information provided to or discussed with us or publicly available, and we have not assumed any responsibility for independent verification of any of such information. We have also assumed and relied upon the reasonableness and accuracy of the financial projections, forecasts and analyses provided to us, and we have assumed that such projections, forecasts and analyses were reasonably prepared in good faith and on bases reflecting the best currently available judgments and estimates of the Company's management with respect to the projections prepared by the Company. With respect to the Analyst Projections, we have assumed that they have been prepared on a basis that does not materially differ from the view of management of VoiceStream as to the future operating and financial performance of VoiceStream. We express no opinion with respect to such projections, forecasts and analyses or the assumptions upon which they are based. In addition, we have not reviewed any of the books and records of the Company or VoiceStream, or assumed any responsibility for conducting a physical inspection of the properties or facilities of the Company or VoiceStream, or for making or obtaining an independent valuation or appraisal of the assets or liabilities of the Company or VoiceStream, and no such independent valuation or appraisal was provided to us. We note that the Merger is intended to qualify as a tax free reorganization for United States Federal tax purposes, and we have assumed that the Merger will so qualify. We also have assumed that obtaining all regulatory and other approvals and third party consents required for consummation of the Merger will not have an adverse impact on the Company or VoiceStream or on the anticipated benefits of the Merger, and we have assumed that the transactions described in the Reorganization Agreement will be consummated without waiver or G-2 412 modification of any of the material terms or conditions contained therein by any party thereto. Our opinion is necessarily based on economic and market conditions and other circumstances as they exist and can be evaluated by us as of the date hereof. We are not expressing any opinion herein as to the prices at which any securities of Holding, VoiceStream or the Company will actually trade at any time. In the ordinary course of our business, we may actively trade the debt and equity securities of the Company, Holding and VoiceStream for our own account and for the accounts of customers and, accordingly, may at any time hold a long or short position in such securities. We are acting as financial advisor to the Special Committee in connection with the proposed Merger and will receive a fee for our services as well as a fee for rendering this opinion, a significant portion of which is contingent upon the consummation of the Merger. We have performed certain other financial advisory services for the Special Committee in the past and have received customary fees for rendering such services. Our opinion addresses only the fairness from a financial point of view to the Public Stockholders of the Merger Consideration provided for pursuant to the Reorganization Agreement. Our opinion does not address the Company's underlying business decision to effect the transactions contemplated by the Reorganization Agreement. It is understood that this letter is for the benefit and use of the Special Committee of the Board of Directors of the Company in its consideration of the Merger and, except for inclusion in its entirety in any registration statement or proxy statement required to be circulated to stockholders of the Company relating to the Merger, may not be quoted, referred to or reproduced at any time or in any manner without our prior written consent. This opinion does not constitute a recommendation to any stockholder or as to how such holder should vote with respect to the Merger or whether any Public Stockholder should elect to receive cash in lieu of the Exchange Ratio, and should not be relied upon by any stockholder as such. Based upon and subject to the foregoing, including the various assumptions and limitations set forth herein, it is our opinion that as of the date hereof the Merger Consideration provided for pursuant to the Reorganization Agreement is fair to the Public Stockholders from a financial point of view. Very truly yours, WASSERSTEIN PERELLA & CO., INC. /s/ WASSERSTEIN PERELLA & CO., INC. G-3 413 ANNEX H RESTATED CERTIFICATE OF INCORPORATION OF VOICESTREAM WIRELESS HOLDING CORPORATION VoiceStream Wireless Holding Corporation, a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: 1. The name of the corporation is VOICESTREAM WIRELESS HOLDING CORPORATION. The date of filing of its original Certificate of Incorporation with the Secretary of State was June 18, 1999. 2. This Restated Certificate of Incorporation restates and integrates and amends the Certificate of Incorporation of this corporation by revising such document in its entirety. The Certificate of Incorporation as amended or supplemented heretofore is further amended hereby to read as herein set forth in full: ARTICLE I. NAME The name of this corporation is VoiceStream Wireless Holding Corporation. ARTICLE II. REGISTERED OFFICE AND AGENT The address of the registered office of this corporation in the State of Delaware is 1013 Centre Road, Wilmington, Delaware 19805 in the City of Wilmington, County of New Castle, and the name of its registered agent at that address is Corporation Service Company. ARTICLE III. PURPOSE The purpose of this corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware. ARTICLE IV. DURATION This corporation is to have perpetual existence. ARTICLE V. AUTHORIZED SHARES 5.1 The total number of shares of stock that this corporation shall have authority to issue is four hundred five million (405,000,000), which shall consist of four hundred million (400,000,000) shares of Common Stock, par value $0.001 per share, and five million (5,000,000) shares of Preferred Stock, par value $0.001 per share. H-1 414 5.2 Rights and Preferences of Common Stock. The holders of Common Stock shall have the following rights and preferences, subject to the rights and preferences of holders of Preferred Stock, as determined by the Board of Directors pursuant to Section 5.3 of this Article V. (a) Dividends. Holders of Common Stock shall be entitled to receive such dividends, payable in cash or otherwise, as may be declared thereon by the Board of Directors from time to time out of assets or funds of the corporation that are legally available therefor. (b) Voting. (i) On all matters upon which shareholders are entitled to vote, every holder of Common Stock shall be entitled to one (1) vote in person or by proxy for each share of Common Stock standing in its name on the transfer books of the corporation. (ii) (A) Notwithstanding anything to the contrary contained in this Restated Certificate of Incorporation, if a Regulated Shareholder and its Affiliates own and have the right to vote shares of Common Stock having aggregate Voting Power in excess of 24.9% (the "Maximum Voting Percentage") of the Total Voting Power, then, for so long as such Regulated Shareholder and its Affiliates shall own and have the right to vote shares of Common Stock having aggregate Voting Power in excess of the Maximum Voting Percentage, that number of shares of Common Stock which results in such Regulated Shareholder and its Affiliates having aggregate Voting Power in excess of the Maximum Voting Percentage shall not be entitled to vote on any matter on which the stockholder of the corporation shall be entitled to vote, and such number of shares shall not be included in determining the number of shares voting or entitled to vote on any such matters. (B) As used in this Section 5.2(b)(ii) and Article XII, the following terms shall have the following meanings: (1) "Affiliate" shall mean with respect to any Person, any other Person, directly or indirectly controlling, controlled by or under common control with such Person. For the purpose of the above definition, the term "control" (including with correlative meaning, the terms "controlling," "controlled by," and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise. (2) "Person" shall mean an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof. (3) "Regulated Shareholder" shall mean any holder of shares of capital stock of the Company that is, or an Affiliate of which is, subject to the provisions of Rule 312(g) of the General Rules of the New York Stock Exchange (or any successor to such Rule) and was, or its Affiliate was, a holder of shares of capital stock of the Company on the date that capital stock is held by shareholders other than the shareholders on the date hereof. (4) "Total Voting Power" shall mean the total number of votes attributable to all shares of capital stock of the corporation outstanding and entitled to vote on any particular matter, other than the number of shares, if any, held by the Regulated Shareholders or their Affiliates which, pursuant to this Section 5.2(b)(ii), are non-voting. (5) "Voting Power" shall mean the number of votes attributable to the total number of shares of capital stock of the corporation owned by a Regulated Shareholder and its Affiliates and with respect to which they shall have the right to vote on any particular matter before giving effect to this Section 5.2(b)(ii). H-2 415 (c) Liquidation or Dissolution. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the corporation, holders of Common Stock shall receive a per share distribution of any assets remaining after payment or provision for liabilities and the liquidation preference on Preferred Stock, if any. 5.3 Rights and Preferences of Preferred Stock. The Board of Directors shall have the full authority permitted by law to divide the authorized and unissued shares of Preferred Stock into series, and to provide for the issuance of such shares in an aggregate amount not exceeding in the aggregate the number of shares of Preferred Stock authorized by this Restated Certificate of Incorporation, as amended from time to time, and to determine with respect to each such series the voting powers, if any (which voting powers, if granted, may be full or limited), designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions relating thereto, including without limiting the generality of the foregoing, the voting rights relating to shares of Preferred Stock of any series (which may be one or more votes per share or a fraction of a vote per share, which may vary over time and which may be applicable generally or only upon the happening and continuance of stated events or conditions), the rate of dividend to which holders of Preferred Stock of any series may be entitled (which may be cumulative or noncumulative), the rights of holders of Preferred Stock of any series in the event of liquidation, dissolution or winding up of the affairs of the corporation, the rights, if any, of holders of Preferred Stock of any series to convert or exchange such shares of Preferred Stock of such series for shares of any other series of capital stock or for any other securities, property or assets of the corporation (including the determination of the price or prices or the rate or rates applicable to such rights to convert or exchange and the adjustment thereof, the time or times during which the right to convert or exchange shall be applicable and the time or times during which a particular price or rate shall be applicable), whether or not the shares of that series shall be redeemable, and if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates, and whether any shares of that series shall be redeemed pursuant to a retirement or sinking fund or otherwise and the terms and conditions of such obligation. Before the corporation shall issue any shares of Preferred Stock of any series, it shall file with the Secretary of State of the State of Delaware in the manner prescribed by the General Corporation Law of Delaware an amendment to this Restated Certificate of Incorporation setting forth the terms of the series and fixing the voting powers, designations, preferences, the relative, participating, optional, or other special rights, if any, and the qualifications, limitations and restrictions, if any, relating to the shares of Preferred Stock of such series, and the number of shares of Preferred Stock of such series authorized by the Board of Directors to be issued. The Board of Directors is further authorized to increase or decrease (but not below the number of such shares of such series then outstanding) the number of shares of any series subsequent to the issuance of shares of that series. 5.4 Issuance of Stock. The shares of capital stock of the corporation may be issued by the corporation from time to time for such consideration as from time to time may be fixed by the Board of Directors of the corporation; and all issued shares of the capital stock of the corporation shall be deemed fully paid and non-assessable. ARTICLE VI. NUMBER OF DIRECTORS The number of directors which shall constitute the whole Board of Directors of this corporation shall be as specified in the Bylaws of this corporation. H-3 416 ARTICLE VII. LIMITATION OF DIRECTOR'S LIABILITY A director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of Title 8 of the Delaware Code, or (iv) for any transaction from which the director derived an improper personal benefit. Neither the amendment nor repeal of this Article VII, nor the adoption of any provision of this Restated Certificate of Incorporation or Bylaws or of any statute inconsistent with this Article VII, shall eliminate or reduce the effect of this Article VII in respect of any acts or omissions occurring, or any causes of action, suits or claims that, but for this Article VII would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision. ARTICLE VIII. INDEMNIFICATION OF DIRECTORS AND OFFICERS 8.1 Indemnification. The corporation shall indemnify its directors and officers to the full extent permitted by applicable law. The corporation shall advance expenses for such persons pursuant to the terms set forth in the Bylaws, or in a separate directors' resolution or contract. 8.2 Authorization. The Board of Directors may take such action as is necessary to carry out these indemnification and expense advancement provisions. It is expressly empowered to adopt, approve, and amend from time to time such Bylaws, resolutions, contracts, or further indemnification and expense advancement arrangements implementing these provisions as may be permitted by law, including the purchase and maintenance of insurance. Such Bylaws, resolutions, contracts, or further arrangements shall include but not be limited to implementing the manner in which determinations as to any indemnity, or advancement of expenses shall be made. 8.3 Amendment. No amendment or repeal of this Article VIII shall apply to or have any effect on any right to indemnification provided hereunder with respect to acts or omissions occurring prior to such amendment or repeal. ARTICLE IX. REDEMPTION 9.1 Redemption. Notwithstanding any other provision of this Restated Certificate of Incorporation to the contrary, outstanding shares of capital stock of the corporation held by Disqualified Holders shall always be subject to redemption by the corporation, by action of the Board of Directors, if, in the judgment of the Board of Directors, such action should be taken, pursuant to Section 105(b) of Title 8 of the Delaware Code or any other applicable provision of law, to the extent necessary to prevent the loss or secure the reinstatement of any license or franchise from any governmental agency held by the corporation or any of its subsidiaries to conduct any portion of the business of the corporation or any of its subsidiaries, which license or franchise is conditioned upon some or all of the holders of the corporation's stock possessing prescribed qualifications. The terms and conditions of such redemption shall be as follows: (a) the redemption price of the shares to be redeemed pursuant to this Article VIII shall be equal to the lesser of (i) the Fair Market Value or (ii) if such stock was purchased by such Disqualified Holder within one year of the Redemption Date, such Disqualified Holder's purchase price for such shares; H-4 417 (b) the redemption price of such shares may be paid in cash, Redemption Securities or any combination thereof; (c) if less than all the shares held by Disqualified Holders are to be redeemed, the shares to be redeemed shall be selected in such manner as shall be determined by the Board of Directors, which may include selection first of the most recently purchased shares thereof, selection by lot or selection in any other manner determined by the Board of Directors; (d) at least 30 days' written notice of the Redemption Date shall be given to the record holders of the shares selected to be redeemed (unless waived in writing by any such holder); provided, however, that only 10 days' written notice of the Redemption Date shall be given to record holders if the cash or Redemption Securities necessary to effect the redemption shall have been deposited in trust for the benefit of such record holders and subject to immediate withdrawal by them upon surrender of the stock certificates for their shares to be redeemed; provided, further, that the record holders of the shares selected to be redeemed may transfer such shares prior to the Redemption Date to any holder that is not a Disqualified Holder and thereafter, for so long as such shares are not held by a Disqualified Holder, such shares shall not be subject to redemption by the corporation; (e) from and after the Redemption Date; any and all rights of whatever nature (including without limitation any rights to vote or participate in dividends declared on stock of the same class or series as such shares) with respect to the shares selected from redemption held by Disqualified Holders on the Redemption Date shall cease and terminate and such Disqualified Holders thenceforth shall be entitled only to receive the cash or Redemption Securities payable upon redemption; and (f) such other terms and conditions as the Board of Directors shall determine. 9.2 Definitions. For purposes of this Article IX: (a) "Disqualified Holder" shall mean any holder of capital shares of stock of the corporation whose holding of such stock, either individually or when taken together with the holding of shares of capital stock of the corporation by any other holders, may result, in the judgment of the Board of Directors, in the loss of, or the failure to secure the reinstatement, of, any license or franchise from any governmental agency held by the corporation or any of its subsidiaries or affiliates to conduct any portion of the business of the corporation or any of its subsidiaries or affiliates. (b) "Fair Market Value" of a share of the corporation's stock of any class or series shall mean the average Closing Price for such a share for each of the forty-five (45) most recent days on which shares of stock of such class or series shall have been traded preceding the day on which notice of redemption shall be given pursuant to Section 9.1(d) of this Article IX; provided, however, that if shares of stock of such class or series are not traded on any United States securities exchange registered under the Securities Exchange Act of 1934 (a "Securities Exchange") or in the National Association of Securities Dealers, Inc. Automated Quotations Systems or any other system then in use (a "Quotation System"), "Fair Market Value" shall be determined by the Board of Directors in good faith. For purposes of this definition "Closing Price" on any day means the reported closing sales price or, in case no such sale takes place, the average of the reported closing bid and asked prices on the principal Securities Exchange on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing sales price or bid quotation for such stock on the applicable Quotation System. (c) "Redemption Date" shall mean the date fixed by the Board of Directors for the redemption of any shares of stock of the corporation pursuant to this Article IX. H-5 418 (d) "Redemption Securities" shall mean any debt or equity securities of the corporation, any of its subsidiaries or affiliates or any other corporation, or any combination thereof, having such terms and conditions as shall be approved by the Board of Directors and which, together with any cash to be paid as part of the redemption price, in the opinion of any nationally recognized investment banking firm selected by the Board of Directors (which may be a firm which provides other investment banking, brokerage or other services to the corporation),has a value, at the time notice of redemption is given pursuant to Section 9.1(d) of this Article IX, at least equal to the price required to be paid pursuant to Section 9.1(a) of this Article X (assuming, in the case of Redemption Securities to be publicly traded, such Redemption Securities were fully distributed and subject only to normal trading activity). ARTICLE X. NO PREEMPTIVE RIGHTS Stockholders of the corporation shall not have preemptive rights to acquire additional shares issued by the corporation. ARTICLE XI. NO CUMULATIVE VOTING Stockholders of the corporation shall not have cumulative voting rights. ARTICLE XII. REPEAL AND AMENDMENT 12.1 Repeal of and Amendment to Restated Certificate of Incorporation. Unless otherwise provided herein, the provisions of this Restated Certificate of Incorporation may be repealed or amended upon the affirmative vote of the holders of not less than a majority of the Total Voting Power of the corporation. The provisions set forth in Article IX, Article X, Article XI and this sentence of Section 12.1 of Article XII herein may not be repealed or amended in any respect, unless such action is approved by the affirmative vote of the holders of not less than 66 2/3% of the Total Voting Power. 12.2 Repeal of and Amendment to Bylaws. In furtherance and not in limitation of the powers conferred by the Act, the Board of Directors is expressly authorized to make, adopt, repeal, alter, amend, and rescind the Bylaws of the corporation by a resolution adopted by a majority of the directors. The shareholders shall also have the power to adopt, amend or repeal the Bylaws of the corporation as set forth therein. ARTICLE XIII. CONFLICTING INTERESTS A director or officer of the corporation shall not in the absence of fraud be disqualified by his office from dealing or contracting with the corporation either as a vendor, purchaser or otherwise, nor in the absence of fraud shall a director or officer of the corporation be liable to account to the corporation for any profit realized by him from or through any transaction or contract of the corporation by reason of the fact that he, or any firm of which he is a member, or any corporation of which he is an officer, director or stockholder, was interested in such transaction or contract if such transaction or contract has been authorized, approved or ratified in the manner provided in the H-6 419 General Corporation Law of Delaware for authorization, approval or ratification of transactions or contracts between the corporation and one or more of its directors or officers, or between the corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest. This Restated Certificate of Incorporation was duly adopted by the Board of Directors in accordance with Section 245 of the General Corporation Law of the State of Delaware. This Restated Certificate of Incorporation was duly adopted by unanimous written consent of the stockholders in accordance with the applicable provisions of Sections 228, 242 and 245 of the General Corporation Law of the Sate of Delaware. IN WITNESS WHEREOF, , of VOICESTREAM WIRELESS HOLDING CORPORATION has signed these Restated Articles of Incorporation as duplicate signed originals on , 1999. VOICESTREAM WIRELESS HOLDING CORPORATION , H-7 420 ANNEX I TITLE 23B. WASHINGTON BUSINESS CORPORATION ACT CHAPTER 23B.13. DISSENTERS' RIGHTS 23B.13.010. DEFINITIONS As used in this chapter: (1) "Corporation" means the issuer of the shares held by a dissenter before the corporate action, or the surviving or acquiring corporation by merger or share exchange of that issuer. (2) "Dissenter" means a shareholder who is entitled to dissent from corporate action under RCW 23B.13.020 and who exercises that right when and in the manner required by RCW 23B.13.200 through 23B.13.280. (3) "Fair value," with respect to a dissenter's shares, means the value of the shares immediately before the effective date of the corporate action to which the dissenter objects, excluding any appreciation or depreciation in anticipation of the corporate action unless exclusion would be inequitable. (4) "Interest" means interest from the effective date of the corporate action until the date of payment, at the average rate currently paid by the corporation on its principal bank loans or, if none, at a rate that is fair and equitable under all the circumstances. (5) "Record shareholder" means the person in whose name shares are registered in the records of a corporation or the beneficial owner of shares to the extent of the rights granted by a nominee certificate on file with a corporation. (6) "Beneficial shareholder" means the person who is a beneficial owner of shares held in a voting trust or by a nominee as the record shareholder. (7) "Shareholder" means the record shareholder or the beneficial shareholder. 23B.13.020. RIGHT TO DISSENT (1) A shareholder is entitled to dissent from, and obtain payment of the fair value of the shareholder's shares in the event of, any of the following corporate actions: (a) Consummation of a plan of merger to which the corporation is a party (i) if shareholder approval is required for the merger by RCW 23B.11.030, 23B.11.080, or the articles of incorporation and the shareholder is entitled to vote on the merger, or (ii) if the corporation is a subsidiary that is merged with its parent under RCW 23B.11.040; (b) Consummation of a plan of share exchange to which the corporation is a party as the corporation whose shares will be acquired, if the shareholder is entitled to vote on the plan; (c) Consummation of a sale or exchange of all, or substantially all, of the property of the corporation other than in the usual and regular course of business, if the shareholder is entitled to vote on the sale or exchange, including a sale in dissolution, but not including a sale pursuant to court order or a sale for cash pursuant to a plan by which all or substantially all of the net proceeds of the sale will be distributed to the shareholders within one year after the date of sale; (d) An amendment of the articles of incorporation that materially reduces the number of shares owned by the shareholder to a fraction of a share if the fractional share so created is to be acquired for cash under RCW 23B.06.040; or I-1 421 (e) Any corporate action taken pursuant to a shareholder vote to the extent the articles of incorporation, bylaws, or a resolution of the board of directors provides that voting or nonvoting shareholders are entitled to dissent and obtain payment for their shares. (2) A shareholder entitled to dissent and obtain payment for the shareholder's shares under this chapter may not challenge the corporate action creating the shareholder's entitlement unless the action fails to comply with the procedural requirements imposed by this title, RCW 25.10.900 through 25.10.955, the articles of incorporation, or the bylaws, or is fraudulent with respect to the shareholder or the corporation. (3) The right of a dissenting shareholder to obtain payment of the fair value of the shareholder's shares shall terminate upon the occurrence of any one of the following events: (a) The proposed corporate action is abandoned or rescinded; (b) A court having jurisdiction permanently enjoins or sets aside the corporate action; or (c) The shareholder's demand for payment is withdrawn with the written consent of the corporation. 23B.13.030. DISSENT BY NOMINEES AND BENEFICIAL OWNERS (1) A record shareholder may assert dissenters' rights as to fewer than all the shares registered in the shareholder's name only if the shareholder dissents with respect to all shares beneficially owned by any one person and notifies the corporation in writing of the name and address of each person on whose behalf the shareholder asserts dissenters' rights. The rights of a partial dissenter under this subsection are determined as if the shares as to which the dissenter dissents and the dissenter's other shares were registered in the names of different shareholders. (2) A beneficial shareholder may assert dissenters' rights as to shares held on the beneficial shareholder's behalf only if: (a) The beneficial shareholder submits to the corporation the record shareholder's written consent to the dissent not later than the time the beneficial shareholder asserts dissenters' rights; and (b) The beneficial shareholder does so with respect to all shares of which such shareholder is the beneficial shareholder or over which such shareholder has power to direct the vote. 23B.13.200. NOTICE OF DISSENTERS' RIGHTS (1) If proposed corporate action creating dissenters' rights under RCW 23B.13.020 is submitted to a vote at a shareholders' meeting, the meeting notice must state that shareholders are or may be entitled to assert dissenters' rights under this chapter and be accompanied by a copy of this chapter. (2) If corporate action creating dissenters' rights under RCW 23B.13.020 is taken without a vote of shareholders, the corporation, within ten days after [the] effective date of such corporate action, shall notify in writing all shareholders entitled to assert dissenters' rights that the action was taken and send them the dissenters' notice described in RCW 23B.13.220. 23B.13.210. NOTICE OF INTENT TO DEMAND PAYMENT (1) If proposed corporate action creating dissenters' rights under RCW 23B.13.020 is submitted to a vote at a shareholders' meeting, a shareholder who wishes to assert dissenters' rights must (a) deliver to the corporation before the vote is taken written notice of the shareholder's intent to demand payment for the shareholder's shares if the proposed action is effected, and (b) not vote such shares in favor of the proposed action. (2) A shareholder who does not satisfy the requirements of subsection (1) of this section is not entitled to payment for the shareholder's shares under this chapter. I-2 422 23B.13.220. DISSENTERS' NOTICE (1) If proposed corporate action creating dissenters' rights under RCW 23B.13.020 is authorized at a shareholders' meeting, the corporation shall deliver a written dissenters' notice to all shareholders who satisfied the requirements of RCW 23B.13.210. (2) The dissenters' notice must be sent within ten days after the effective date of the corporate action, and must: (a) State where the payment demand must be sent and where and when certificates for certificated shares must be deposited; (b) Inform holders of uncertificated shares to what extent transfer of the shares will be restricted after the payment demand is received; (c) Supply a form for demanding payment that includes the date of the first announcement to news media or to shareholders of the terms of the proposed corporate action and requires that the person asserting dissenters' rights certify whether or not the person acquired beneficial ownership of the shares before that date; (d) Set a date by which the corporation must receive the payment demand, which date may not be fewer than thirty nor more than sixty days after the date the notice in subsection (1) of this section is delivered; and (e) Be accompanied by a copy of this chapter. 23B.13.230. DUTY TO DEMAND PAYMENT (1) A shareholder sent a dissenters' notice described in RCW 23B.13.220 must demand payment, certify whether the shareholder acquired beneficial ownership of the shares before the date required to be set forth in the dissenters' notice pursuant to RCW 23B.13.220(2)(c), and deposit the shareholder's certificates in accordance with the terms of the notice. (2) The shareholder who demands payment and deposits the shareholder's share certificates under subsection (1) of this section retains all other rights of a shareholder until the proposed corporate action is effected. (3) A shareholder who does not demand payment or deposit the shareholder's share certificates where required, each by the date set in the dissenters' notice, is not entitled to payment for the shareholder's shares under this chapter. 23B.13.240. SHARE RESTRICTIONS (1) The corporation may restrict the transfer of uncertificated shares from the date the demand for their payment is received until the proposed corporate action is effected or the restriction is released under RCW 23B.13.260. (2) The person for whom dissenters' rights are asserted as to uncertificated shares retains all other rights of a shareholder until the effective date of the proposed corporate action. 23B.13.250. PAYMENT (1) Except as provided in RCW 23B.13.270, within thirty days of the later of the effective date of the proposed corporate action, or the date the payment demand is received, the corporation shall pay each dissenter who complied with RCW 23B.13.230 the amount the corporation estimates to be the fair value of the shareholder's shares, plus accrued interest. I-3 423 (2) The payment must be accompanied by: (a) The corporation's balance sheet as of the end of a fiscal year ending not more than sixteen months before the date of payment, an income statement for that year, a statement of changes in shareholders' equity for that year, and the latest available interim financial statements, if any; (b) An explanation of how the corporation estimated the fair value of the shares; (c) An explanation of how the interest was calculated; (d) A statement of the dissenter's right to demand payment under RCW 23B.13.280; and (e) A copy of this chapter. 23B.13.260. FAILURE TO TAKE ACTION (1) If the corporation does not effect the proposed action within sixty days after the date set for demanding payment and depositing share certificates, the corporation shall return the deposited certificates and release any transfer restrictions imposed on uncertificated shares. (2) If after returning deposited certificates and releasing transfer restrictions, the corporation wishes to undertake the proposed action, it must send a new dissenters' notice under RCW 23B.13.220 and repeat the payment demand procedure. 23B.13.270. AFTER-ACQUIRED SHARES (1) A corporation may elect to withhold payment required by RCW 23B.13.250 from a dissenter unless the dissenter was the beneficial owner of the shares before the date set forth in the dissenters' notice as the date of the first announcement to news media or to shareholders of the terms of the proposed corporate action. (2) To the extent the corporation elects to withhold payment under subsection (1) of this section, after taking the proposed corporate action, it shall estimate the fair value of the shares, plus accrued interest, and shall pay this amount to each dissenter who agrees to accept it in full satisfaction of the dissenter's demand. The corporation shall send with its offer an explanation of how it estimated the fair value of the shares, an explanation of how the interest was calculated, and a statement of the dissenter's right to demand payment under RCW 23B.13.280. 23B.13.280. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER (1) A dissenter may notify the corporation in writing of the dissenter's own estimate of the fair value of the dissenter's shares and amount of interest due, and demand payment of the dissenter's estimate, less any payment under RCW 23B.13.250, or reject the corporation's offer under RCW 23B.13.270 and demand payment of the dissenter's estimate of the fair value of the dissenter's shares and interest due, if: (a) The dissenter believes that the amount paid under RCW 23B.13.250 or offered under RCW 23B.13.270 is less than the fair value of the dissenter's shares or that the interest due is incorrectly calculated; (b) The corporation fails to make payment under RCW 23B.13.250 within sixty days after the date set for demanding payment; or I-4 424 (c) The corporation does not effect the proposed action and does not return the deposited certificates or release the transfer restrictions imposed on uncertificated shares within sixty days after the date set for demanding payment. (2) A dissenter waives the right to demand payment under this section unless the dissenter notifies the corporation of the dissenter's demand in writing under subsection (1) of this section within thirty days after the corporation made or offered payment for the dissenter's shares. 23B.13.300. COURT ACTION (1) If a demand for payment under RCW 23B.13.280 remains unsettled, the corporation shall commence a proceeding within sixty days after receiving the payment demand and petition the court to determine the fair value of the shares and accrued interest. If the corporation does not commence the proceeding within the sixty-day period, it shall pay each dissenter whose demand remains unsettled the amount demanded. (2) The corporation shall commence the proceeding in the superior court of the county where a corporation's principal office, or, if none in this state, its registered office, is located. If the corporation is a foreign corporation without a registered office in this state, it shall commence the proceeding in the county in this state where the registered office of the domestic corporation merged with or whose shares were acquired by the foreign corporation was located. (3) The corporation shall make all dissenters, whether or not residents of this state, whose demands remain unsettled, parties to the proceeding as in an action against their shares and all parties must be served with a copy of the petition. Nonresidents may be served by registered or certified mail or by publication as provided by law. (4) The corporation may join as a party to the proceeding any shareholder who claims to be a dissenter but who has not, in the opinion of the corporation, complied with the provisions of this chapter. If the court determines that such shareholder has not complied with the provisions of this chapter, the shareholder shall be dismissed as a party. (5) The jurisdiction of the court in which the proceeding is commenced under subsection (2) of this section is plenary and exclusive. The court may appoint one or more persons as appraisers to receive evidence and recommend decision on the question of fair value. The appraisers have the powers described in the order appointing them, or in any amendment to it. The dissenters are entitled to the same discovery rights as parties in other civil proceedings. (6) Each dissenter made a party to the proceeding is entitled to judgment (a) for the amount, if any, by which the court finds the fair value of the dissenter's shares, plus interest, exceeds the amount paid by the corporation, or (b) for the fair value, plus accrued interest, of the dissenter's after-acquired shares for which the corporation elected to withhold payment under RCW 23B.13.270. 23B.13.310. COURT COSTS AND COUNSEL FEES (1) The court in a proceeding commenced under RCW 23B.13.300 shall determine all costs of the proceeding, including the reasonable compensation and expenses of appraisers appointed by the court. The court shall assess the costs against the corporation, except that the court may assess the costs against all or some of the dissenters, in amounts the court finds equitable, to the extent the court finds the dissenters acted arbitrarily, vexatiously, or not in good faith in demanding payment under RCW 23B.13.280. I-5 425 (2) The court may also assess the fees and expenses of counsel and experts for the respective parties, in amounts the court finds equitable: (a) Against the corporation and in favor of any or all dissenters if the court finds the corporation did not substantially comply with the requirements of RCW 23B.13.200 through 23B.13.280; or (b) Against either the corporation or a dissenter, in favor of any other party, if the court finds that the party against whom the fees and expenses are assessed acted arbitrarily, vexatiously, or not in good faith with respect to the rights provided by chapter 23B.13 RCW. (3) If the court finds that the services of counsel for any dissenter were of substantial benefit to other dissenters similarly situated, and that the fees for those services should not be assessed against the corporation, the court may award to these counsel reasonable fees to be paid out of the amounts awarded the dissenters who were benefited. I-6 426 ANNEX J DELAWARE GENERAL CORPORATION LAW Section 262 Appraisal Rights. -- (a) Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has neither voted in favor of the merger or consolidation nor consented thereto in writing pursuant to ss. 228 of this title shall be entitled to an appraisal by the Court of Chancery of the fair value of his shares of stock under the circumstances described in subsections (b) and (c) of this section. As used in this section, the word "stockholder" means a holder of record of stock in a stock corporation and also a member of record of a nonstock corporation; the words "stock" and "share" mean and include what is ordinarily meant by those words and also membership or membership interest of a member of a nonstock corporation; and the words "depository receipt" mean a receipt or other instrument issued by a depository representing an interest in one or more shares, or fractions thereof, solely of stock of a corporation, which stock is deposited with the depository. (b) Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a merger or consolidation to be effected pursuant to ss. 251 (other than a merger effected pursuant to subsection (g) of Section 251), ss. 252, ss. 254, ss. 257, ss. 258, ss. 263 or ss. 264 of this title: (1) Provided, however, that no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders entitled to receive notice of and to vote at the meeting of stockholders to act upon the agreement of merger or consolidation, were either (i) listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders; and further provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the stockholders of the surviving corporation as provided in subsection (f) of ss. 251 of this title. (2) Notwithstanding paragraph (1) of this subsection, appraisal rights under this section shall be available for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to ss.ss. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock anything except: a. Shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof; b. Shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock (or depository receipts in respect thereof) or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, Inc. or held of record by more than 2,000 holders; c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a. and b. of this paragraph; or d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing subparagraphs a., b. and c. of this paragraph. J-1 427 (3) In the event all of the stock of a subsidiary Delaware corporation party to a merger effected under ss. 253 of this title is not owned by the parent corporation immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary Delaware corporation. (c) Any corporation may provide in its certificate of incorporation that appraisal rights under this section shall be available for the shares of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or substantially all of the assets of the corporation. If the certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as is practicable. (d) Appraisal rights shall be perfected as follows: (1) If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for such meeting with respect to shares for which appraisal rights are available pursuant to subsections (b) or (c) hereof that appraisal rights are available for any or all of the shares of the constituent corporations, and shall include in such notice a copy of this section. Each stockholder electing to demand the appraisal of such stockholder's shares shall deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholder's shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholder's shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or (2) If the merger or consolidation was approved pursuant to ss. 228 or ss. 253 of this title, each constituent corporation, either before the effective date of the merger or consolidation or within ten days thereafter, shall notify each of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy of this section; provided that, if the notice is given on or after the effective date of the merger or consolidation, such notice shall be given by the surviving or resulting corporation to all such holders of any class or series of stock of a constituent corporation that are entitled to appraisal rights. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of the notice, demand in writing from the surviving or resulting corporation the appraisal of his shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of his shares. If such notice did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of any class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all J-2 428 such holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice, such second notice need only be sent to each stockholder who is entitled to appraisal rights and who has demanded appraisal of such holder's shares in accordance with this subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date the notice is given; provided that, if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record date shall be the close of business on the day next proceeding the day on which the notice is given. (e) Within 120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with subsections (a) and (d) hereof and who is otherwise entitled to appraisal rights, may file a petition in the Court of Chancery demanding a determination of the value of the stock of all such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder shall have the right to withdraw such stockholder's demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the requirements of subsections (a) and (d) hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth the aggregate number of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the stockholder within 10 days after such stockholder's written request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) hereof, whichever is later. (f) Upon the filing of any such petition by a stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within 20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall by borne by the surviving or resulting corporation. (g) At the hearing on such petition, the Court shall determine the stockholders who have complied with this section and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder. J-3 429 (h) After determining the stockholders entitled to an appraisal, the Court shall appraise the shares, determining their fair value exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, together with a fair rate of interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all relevant factors. In determining the fair rate of interest, the Court may consider all relevant factors, including the rate of interest which the surviving or resulting corporation would have had to pay to borrow money during the pendency of the proceeding. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court may, in its discretion, permit discovery or other pretrial proceedings and may proceed to trial upon the appraisal prior to the final determination of the stockholder entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation pursuant to subsection (f) of this section and who has submitted such stockholder's certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal rights under this section. (i) The Court shall direct the payment of the fair value of the shares, together with interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Interest may be simple or compound, as the Court may direct. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the corporation of the certificates representing such stock. The Court's decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or resulting corporation be a corporation of this State or of any state. (j) The costs of the proceeding may be determined by the Court and taxed upon the parties as the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation, reasonable attorney's fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal. (k) From and after the effective date of the merger or consolidation, no stockholder who has demanded his appraisal rights as provided in subsection (d) of this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the surviving or resulting corporation a written withdrawal of such stockholder's demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection (e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just. (l) The shares of the surviving or resulting corporation to which the shares of such objecting stockholders would have been converted had they assented to the merger or consolation shall have the status of authorized and unissued shares of the surviving or resulting corporation. J-4 430 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Pursuant to the DGCL, a corporation may not indemnify any director, officer, employee or agent made or threatened to be made party to any threatened, pending, or completed proceeding unless such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal proceedings, had no reasonable cause to believe that his or her conduct was unlawful. The DGCL also establishes several mandatory rules for indemnification. In the case of a proceeding by or in the right of the corporation to procure a judgment in its favor (e.g., a stockholder derivative suit), a corporation may indemnify an officer, director, employee or agent if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation; provided, however, that no person adjudged to be liable to the corporation may be indemnified unless, and only to the extent that, the Delaware Court of Chancery or the court in which such action or suit was brought determines upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court deems proper. A director, officer, employee, or agent who is successful, on the merits or otherwise, in defense of any proceeding subject to the DGCL's indemnification provisions must be indemnified by the corporation for reasonable expenses incurred therein, including attorneys' fees. VoiceStream Holdings' bylaws provide for mandatory indemnification of VoiceStream Holdings' officers and directors and certain other persons to the fullest extent permissible under Delaware law. In addition, VoiceStream Holdings intends to enter into an indemnification agreement with each of its executive officers and directors. Pursuant to this indemnification agreement, VoiceStream Holdings will indemnify the executive officer or director against certain liabilities arising by reason of the executive officer's or the director's affiliation with VoiceStream Holdings. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits:
EXHIBIT DESCRIPTION ------- ----------- 2.1 -- Agreement and Plan of Reorganization by and among VoiceStream Wireless Holding Corporation, Omnipoint Corporation and VoiceStream Wireless Corporation, dated June 23, 1999 (included as Annex A to the joint proxy statement-prospectus).......................................................................... 2.2 -- Agreement and Plan of Reorganization dated September 17, 1999 among VoiceStream Wireless Corporation, VoiceStream Wireless Holding Corporation, VoiceStream Subsidiary III Corporation, Aerial Communications, Inc. and Telephone and Data Systems, Inc. (included as Annex D to the joint proxy statement--prospectus)....................................... 3.1 -- Restated Certificate of Incorporation (included as Annex H to the joint proxy statement-prospectus).......................................................................... 3.2 -- Bylaws of VoiceStream Wireless Holding Corporation................................................... 5.1 -- Opinion of Preston Gates & Ellis LLP.................................................................
431 INDEX TO EXHIBITS
EXHIBIT DESCRIPTION ------- ----------- 8.1* -- Opinion of Jones, Day, Reavis & Pogue as to certain tax matters................................. 8.2* -- Opinion of Piper Marbury LLP as to certain tax matters.......................................... 10.1(1) Agreement and Plan of Distribution between Western Wireless Corporation and VoiceStream Wireless Corporation, dated April 9, 1999. 10.2(2) Waiver Agreement by and among Western Wireless Corporation, Western PCS Corporation and certain of Western Wireless Corporation's shareholders, dated November 30, 1994. 10.3(2) Western PCS Corporation Series A Preferred Stock Purchase Agreement among Western Wireless Corporation, Western PCS Corporation and the Purchasers listed therein, dated April 10, 1995. 10.4(2) PCS 1900 Project and Supply Agreement between Western PCS Corporation and Northern Telecom Inc., dated June 30, 1995. 10.5(3) Amendment No. 1 to PCS 1900 Supply Agreement between Western PCS Corporation and Northern Telecom Inc., dated July 25, 1996. 10.6(3) Amendment No. 2 to PCS 1900 Supply Agreement between Western PCS Corporation and Northern Telecom Inc., dated July 25, 1996. 10.7(4) Amendment No. 3 to PCS Supply Agreement between Western PCS Corporation and Northern Telecom Inc., dated October 14, 1996. 10.8(5) Amendment Number 4 to PCS 1900 Project and Supply Agreement by and between Western PCS Corporation and Northern Telecom Inc., dated March 26, 1998. 10.9(6) Amendment Number 5 to PCS 1900 Project and Supply Agreement between VoiceStream Wireless Corporation and Northern Telecom Inc., dated September 17, 1998. 10.10(7) Amendment No. 6 to PCS 1900 Project and Supply Agreement by and between VoiceStream Wireless Corporation and Northern Telecom Inc. 10.11(8) Amendment No. 7 to PCS 10--Project and Supply Agreement by and between VoiceStream Wireless Corporation and Northern Telecom Inc., dated May 14, 1999. 10.12(2) PCS Block "C" Organization and Financing Agreement by and among Western PCS BTA I Corporation, Western Wireless Corporation, Cook Inlet PV/SS PCS Partners, L.P., Cook Inlet Telecommunications, Inc., SSPCS Corporation and Providence Media Partners L.P., dated as of November 5, 1995. 10.13(2) Limited Partnership Agreement by and between Cook Inlet PV/SS PCS Partners, L.P. and Western PCS BTA I Corporation, dated as of November 5, 1995. 10.14(2) First Amendment to Block "C" Organization and Financing Agreement and Cook Inlet Western Wireless PV/SS PCS, L.P. Limited Partnership Agreement by and among Western PCS BTA I Corporation, Western Wireless Corporation, Cook Inlet PV/SS PCS Partners, L.P., Cook Inlet Telecommunications, Inc., SSPCS Corporation and Providence Media Partners L.P., dated as of April 8, 1996. 10.15(3) Second Amendment to Block "C" Organization and Financing Agreement and Cook Inlet Western Wireless PV/SS PCS, L.P. Limited Partnership Agreement by and among Western PCS BTA I Corporation, Western Wireless Corporation, Cook Inlet PV/SS PCS Partners, L.P., Cook Inlet Telecommunications, Inc., SSPCS Corporation and Providence Media Partners L.P., dated as of June 27, 1996. 10.16(3) Third Amendment to Block "C" Organization and Financing Agreement and Cook Inlet Western Wireless PV/SS PCS, L.P. Limited Partnership Agreement and First Amendment to Technical Services Agreement by and among Western PCS BTA I Corporation, Western Wireless Corporation, Cook Inlet PV/SS PCS Partners, L.P., Cook Inlet Telecommunications, Inc., SSPCS Corporation, Providence Media Partners L.P. and Cook Inlet Western Wireless PV/SS PCS, L.P., dated July 30, 1996. 10.17(2) Asset Purchase Agreement between Western PCS III License Corporation as Buyer and GTE Mobilnet Incorporated as Seller, dated January 16, 1996. 10.18(2) Waiver Agreement by and among Western Wireless Corporation, Western PCS Corporation and certain of Western Wireless Corporation's shareholders, dated February 15, 1996. 10.19(9) Software License Maintenance and Subscriber Billing Services Agreement, dated June 1997. 10.20(9) First Amendment to Software License, Maintenance and Subscriber Billing Services Agreement dated December 1997, between CSC Intelicom, Inc., and Western Wireless Corporation.
432
EXHIBIT DESCRIPTION ------- ----------- 10.21(10) Iowa Wireless Services, L.P. Limited Partnership Agreement, dated as of September 30, 1997, by and between INS Wireless, Inc., as General Partner, and Western PCS I Iowa Corporation, as Limited Partnership. 10.22(10) Agreement to Form Limited Partnership dated September 30, 1997, by and among Western PCS Iowa Corporation, a Delaware corporation, INS Wireless, Inc., an Iowa corporation, Western PCS I Corporation, a Delaware corporation, and Iowa Network Services, Inc., an Iowa corporation. 10.23(10) Purchase Agreement by and among Western PCS Corporation, Western Wireless Corporation, Hutchison Telecommunications Limited and Hutchison Telecommunications PCS (USA) Limited dated October 14, 1997. 10.24(9) Letter Agreement dated December 16, 1997, between Western Wireless Corporation and Intelicom Services, Inc. to provide products and services pursuant to the Software License Maintenance and Subscriber Billing Services Agreements and First Amendment thereto. 10.25* Services Agreement by and between Western Wireless Corporation and Western PCS Corporation. 10.26 Shareholders Agreement by and among Western Wireless Corporation, Hutchison Telecommunications PCS (USA) Limited and Western PCS Corporation, dated February 17, 1998. 10.27 Tax Sharing Agreement by and between Western Wireless Corporation and Western PCS Corporation, dated February 17, 1998. 10.28 First Amendment to Tax Sharing Agreement by and between Western Wireless Corporation and Western PCS Corporation, dated May 3, 1999. 10.29(5) Supply Contract by and between Western PCS Corporation and Nokia Telecommunications Inc., dated March 9, 1998. 10.30(5) Purchase and Sale Agreement by and between Nokia Mobile Phones, Inc. and Western PCS Corporation, dated March 9, 1998. 10.31(5) Loan Agreement by and among Western PCS Holding Corporation, TD Securities (USA) Inc., NationsBanc Montgomery Securities LLC, Barclays Capital, J.P. Morgan Securities Inc., Chase Securities Inc., and Toronto Dominion (Texas), Inc., dated June 26, 1998. 10.32(6) First Amendment to Loan Agreement by and among Western PCS Holding Corporation, TD Securities (USA) Inc., Nationsbanc Montgomery Securities LLC, Barclays Capital, J.P. Morgan Securities Inc., Chase Securities Inc., and Toronto Dominion (Texas), Inc., dated November 25, 1998. 10.33* Second Amendment to Loan Agreement by and among Western PCS Holding Corporation, TD Securities (USA) Inc., Nationsbanc Montgomery Securities LLC, Barclays Capital, J.P. Morgan Securities Inc., Chase Securities Inc., and Toronto Dominion (Texas), Inc., dated April 26, 1999. 10.34(2) First Amendment to Stockholders Agreement between Western PCS Corporation and Northern Telecom Inc., dated June 30, 1998. 10.35(6) Exchange Rights and Grant Agreement by and among Western PCS BTA I Corporation, Western Wireless Corporation, Cook Inlet Telecommunications, Inc. and VoiceStream Wireless Corporation, dated December 17, 1998. 10.36(6) Exchange Rights and Grant Agreement by and among Western PCS BTA I Corporation, Western Wireless Corporation, SSPCS Corporation and VoiceStream Wireless Corporation, dated January 19, 1999. 10.37(1) Cook Inlet/VoiceStream PCS LLC Limited Liability Company Agreement by and between Cook Inlet GSM Company and Western PCS BTA I Corporation, dated February 11, 1999. 10.38 Voting Agreement by and among VoiceStream Wireless Corporation, Hellman & Friedman Capital Partners II, L.P., H&F Orchard Partners, L.P., H&F International Partners, L.P., John W. Stanton, Theresa E. Gillespie, PN Cellular, Inc., Stanton Family Trust, Stanton Communications Corporation, GS Capital Partners, L.P., The Goldman Sachs Group, L.P., Bridge Street Fund 1992, L.P., Stone Street Fund 1992, L.P., Providence Media Partners L.P., Hutchison Telecommunications Holdings and Hutchison Telecommunications PCS (USA) Limited (USA) Limited, dated May 3, 1999. 10.39 Registration Rights Agreement by and among VoiceStream Wireless Corporation, Hellman & Friedman Capital Partners II, L.P., H&F Orchard Partners, L.P., H&F International Partners, L.P., John W. Stanton, Theresa E. Gillespie, PN Cellular, Inc., Stanton Family Trust, Stanton Communications Corporation, GS Capital Partners, L.P., The Goldman Sachs Group, L.P., Bridge Street Fund 1992, L.P., Stone Street Fund 1992, L.P., and Providence Media Partners L.P., dated May 3, 1999. 10.40* Shareholders Agreement by and among VoiceStream Wireless Corporation, Western Wireless Corporation, Hutchison Telecommunications Holdings (USA) Limited and Hutchison Telecommunications PCS (USA) Limited, dated May 3, 1999.
433
EXHIBIT DESCRIPTION ------- ----------- 10.41 First Amendment to Shareholders Agreement by and among VoiceStream Wireless Corporation, Western Wireless Corporation, Hutchison Telecommunications Holdings (USA) Limited and Hutchison Telecommunications PCS (USA) Limited dated. 10.42 Roaming Agreement by and between Western Wireless Corporation and VoiceStream Wireless Corporation, dated May 3, 1999. 10.43(7) Purchase Agreement by and between VoiceStream Wireless Corporation and Nortel Networks Inc., dated May 14, 1999, relating to 12% Series A Senior Debentures due 2011. 10.44(7) Debenture Exchange and Registration Rights Agreement by and between VoiceStream Wireless Corporation and Nortel Networks Inc., dated May 14, 1999, relating to 12% Series A Senior Debentures due 2011. 10.45(7) Indenture by and between VoiceStream Wireless Corporation and Harris Trust Company, dated May 14, 1999, relating to 12% Series A Senior Debentures due 2011 and 12% Senior Debentures due 2011. 10.46(11) Purchase Agreement, dated as of June 23, 1999, between Omnipoint Corporation and Cook Inlet/VS GSM II PCS, LLC. 10.47(11) Purchase Agreement, dated as of June 23, 1999, between Omnipoint Corporation and Cook Inlet/VS GSM III PCS, LLC. 10.48(11) Stock Subscription Agreement, dated as of June 23, 1999, by and among VoiceStream Wireless Corporation, Hutchison Telecommunications Limited and Hutchison Telecommunications PCS (USA) Limited. 10.49(11) Voting Agreement, dated as of June 23, 1999, by and among Omnipoint Corporation, VoiceStream Wireless Corporation, the stockholders of Omnipoint and the stockholders of VoiceStream. 10.50(11) Securities Purchase Agreement, dated as of June 23, 1999, by and among VoiceStream Wireless Corporation, Hutchison Communications PCS (USA) Limited and Omnipoint Corporation. 10.51(2) Employment Agreement by and between Robert R. Stapleton and Western Wireless Corporation, dated March 12, 1996. 10.52(2) Employment Agreement by and between Cregg B. Baumbaugh and Western Wireless Corporation, dated March 12, 1996. 10.53(12) Employment Agreement by and between Timothy Wong and Western Wireless Corporation, dated February 10, 1998. 10.54(12) Employment Agreement by and between Robert Dotson and Western Wireless Corporation, dated February 10, 1998. 10.55 Assignment and Assumption Agreement by and between Western Wireless Corporation and VoiceStream Wireless Corporation with respect to the Employment Agreement of Robert R. Stapleton, dated May 3, 1999. 10.56 Assignment and Assumption Agreement by and between Western Wireless Corporation and VoiceStream Wireless Corporation with respect to the Employment Agreement of Cregg B. Baumbaugh, dated May 3, 1999. 10.57 Assignment and Assumption Agreement by and between Western Wireless Corporation and VoiceStream Wireless Corporation with respect to the Employment Agreement of Timothy Wong, dated May 3, 1999. 10.58 Assignment and Assumption Agreement by and between Western Wireless Corporation and VoiceStream Wireless Corporation with respect to the Employment Agreement of Robert Dotson, dated May 3, 1999. 10.59* Employment Agreement, dated as of January 1, 1999, by and between Omnipoint and Douglas G. Smith. 10.60(13) Employment Agreement, effective October 1, 1995, by and between Omnipoint, Omnipoint Communications Inc. and George F. Schmitt. 10.61(13) Promissory Note, dated October 1, 1995, by George F. Schmitt. 10.62(13) Stock Registration Agreement, dated October 1, 1995, by and between Omnipoint and George F. Schmitt. 10.63* First Amendment to Stock Restriction Agreement, dated as of June 21, 1999, by and between Omnipoint Communications, Inc. and George F. Schmitt. 10.64(14) Employment Agreement, dated November 3, 1996, by and between Omnipoint and Kjell S. Andersson. 10.65(14) Amendment to Employment Agreement dated as of February 24, 1997, between Omnipoint and Kjell S. Andersson. 10.66(14) Promissory Note, dated February 24, 1997, by Kjell S. Andersson.
434
EXHIBIT DESCRIPTION ------- ----------- 10.67(14) Stock Restriction Agreement, dated February 24, 1997, by and between Omnipoint and Kjell S. Andersson. 10.68* Employment Agreement, dated as of April 23, 1999, by and between Omnipoint and Harry Plonskier. 10.69(13) Amended and Restated Registration Rights Agreement, dated June 29, 1995, by and among Omnipoint and the parties named therein. 10.70(13) OEM Supply Agreement for Omnipoint PCS (Personal Communication Systems) Products, dated September 22, 1994, by and between Omnipoint and Northern Telecom Inc. 10.71(13) Manufacturing License and Escrow Agreement for Personal Communication Service Products, dated February 28, 1995, by and between Omnipoint and Northern Telecom Inc. 10.72(13) Collaborative Development Agreement, dated March 1, 1995, by and between Omnipoint and Northern Telecom Inc. 10.74(13) Supply Agreement, dated September 22, 1994, by and between Omnipoint Communications Inc. and Northern Telecom Inc. 10.73(13) Amendment No. 1 to Supply Agreement dated July 21, 1995, by and between Omnipoint Communications Inc. and Northern Telecom Inc. 10.75(13) Letter Agreement, dated January 24, 1996, by and between Omnipoint and Ericsson Inc. 10.76(15) Acquisition Agreement for Ericsson CMS 40 Personal Communications Systems (PCS) Infrastructure Equipment, dated as of April 16, 1996, by and between Ericsson Inc. and Omnipoint Communications. 10.77(15) Acquisition Supply and License Agreement for Omnipoint Personal Communications Systems (PCS) Infrastructure Equipment, dated as of April 16, 1996, by and between Ericsson Inc. and Omnipoint. 10.78(15) Agreement for Purchase and Sale of Ericsson Inc. Masko Terminal Units, dated as of April 16, 1996, by and between Ericsson, Inc. and Omnipoint Communications Inc. 10.79(16) Loan Agreement by and among PCS Philadelphia Holdings, Inc., Ericsson Inc. and certain other lenders named therein, dated July 25, 1997. 10.80(16) Loan Agreement by and among Omnipoint Midwest Holdings, LLC, Northern Telecom Inc. and certain other lenders named therein, dated January 30, 1998. 10.81(16) Loan Agreement by and among Omnipoint Corporation, Omnipoint Communications Inc., DLJ Capital Funding Inc. and certain other lenders named therein, dated February 17, 1998. 10.82(16) Note Purchase Agreement by and among Omnipoint Corporation, Omnipoint Communications Inc., IBJ Schroder Bank & Trust Company and certain other purchasers named therein, dated February 17, 1998. 10.83(17) Purchase Agreement by and among Omnipoint Corporation, Donaldson, Lufkin & Jenrette Securities Corporation, BancAmerica Robertson Stephens, Bear, Stearns & Co., Inc. and Smith Barney Inc., dated May 1, 1998. 10.84(17) Deposit Agreement by and among Omnipoint Corporation, Marine Midland Bank, and the Holders from time to time of the Depositary Shares, dated May 6, 1998. 10.85(17) Deposit Account Agreement by and between Omnipoint Corporation and The First National Bank of Maryland, dated May 6, 1998. 10.86(18) Loan Agreement, dated June 25, 1998, by and between Omnipoint MB Holdings, L.L.C. and Bank of America National Trust and Savings Association. 10.87(18) Amended and Restated Loan Agreement, dated June 25, 1998, by and between Omnipoint MB Holdings, L.L.C. and Ericsson Inc. 10.88(19) Capital Contribution Agreement dated, September 18, 1998, by and between Omnipoint Corporation and D&E Communications, Inc. 10.89(20) Note Purchase Agreement by and among Omnipoint Corporation, IBJ Schroder Bank & Trust Company, as paying agent, and certain initial purchasers named therein, dated December 21, 1998.
435
EXHIBIT DESCRIPTION ------- ----------- 10.90 Securities Purchase Agreement by and among VoiceStream Wireless Corporation, Hutchison Telecommunications PCS (USA) Limited and Omnipoint Corporation, dated as of June 23, 1999 10.91(21) PCS Infrastructure Supply Contract, dated as of March 1, 1996, between Aerial and Nokia Telecommunications, Inc. 10.92* Amended and Restated Revolving Credit Agreement dated _______________, by and between Telephone and Data Systems, Inc. and Aerial Operating Company, Inc. 10.93* Tax Settlement Agreement dated March 12, 1999, by and between Aerial, Aerial Operating Company, Inc. and Telephone and Data Systems, Inc. 10.94(22) Stockholder Agreement dated as of September 17, 1999, by and between Telephone and Data Systems, Inc. and stockholders of Aerial Communications, Inc., and VoiceStream Wireless Corporation, and VoiceStream Wireless Holding Corporation. 10.95(22) Indemnity Agreement, dated as of September 17, 1999, among VoiceStream Wireless Corporation, VoiceStream Wireless Holding Corporation, Aerial Communications, Inc., Aerial Operating Company, Inc., and Telephone and Data Systems, Inc. 10.96(22) Debt/Equity Replacement Agreement dated as of September 17, 1999, made by and among Telephone and Data Systems, Inc., Aerial Communications, Inc., Aerial Operating Company, Inc., VoiceStream Wireless Corporation, and VoiceStream Wireless Holding Corporation. 10.97(22) Parent Stockholder Agreement dated as of September 17, 1999, by and among Aerial Communications, Inc., Telephone and Data Systems, Inc., VoiceStream Wireless Corporation, VoiceStream Wireless Holding Corporation and the individuals and entities set forth on Schedule I thereto. 10.98(22) Settlement Agreement and Release, entered into as of September 17, 1999 by and among Sonera Ltd., Sonera Corporation U.S., Telephone and Data Systems, Inc., Aerial Communications, Inc., and Aerial Operating Company, Inc. 23.1 -- Consent of Preston Gates & Ellis LLP (included with Exhibit 5.1).................................... 23.2 -- Consent of Arthur Andersen LLP (independent public accountants for VoiceStream Wireless Corporation) 23.3 -- Consent of PricewaterhouseCoopers LLP (independent public accountants for Omnipoint Corporation)........ 23.4 -- Consent of Arthur Andersen LLP (independent public accountants for Aerial Communications Inc.)...... 24.1 -- Power of Attorney (See II-__)....................................................................... 99.1* -- Form of Form of Election for Omnipoint common stockholders.......................................... 99.2* -- Form of Letter of Transmittal for Omnipoint common stockholders..................................... 99.3* -- Form of Form of Election for Aerial common stockholders. 99.4* -- Form of Letter of Transmittal for Aerial common stockholders.
---------- * To be filed with subsequent amendment. 1 Incorporated by reference to the exhibit filed with VoiceStream Wireless Corporation Form 10/A filed with the SEC on April 13, 1999. 2 Incorporated by reference to the exhibit filed with the Western Wireless Corporation Registration Statement on Form S-1 (Commission File No. 333-2432) filed with the SEC on March 15, 1996. 3 Incorporated by reference to the exhibit filed with the Western Wireless Corporation Registration Statement on from S-4 (Commission File No. 333-14859) filed with the SEC on October 25, 1996. 4 Incorporated by reference to the exhibit filed with the Western Wireless Corporation Form 10-K for the year ended December 31, 1996 (Commission File No. 0-28160) filed with the SEC on March 31, 1997. 5 Incorporated by reference to the exhibit filed with the Western Wireless Corporation Form 10-Q/A for the quarter ended June 30, 1998 (Commission File No. 0-28160) filed with the SEC on August 17, 1998. 6 Incorporated by reference to the exhibit filed with the VoiceStream Wireless Corporation Form 10 (Commission File No. 0-25441) filed with the SEC on February 24, 1999. 7 Incorporated by reference to the exhibit filed with the VoiceStream Wireless Corporation form 8-K filed with the SEC on May 27, 1999. 8 Incorporated by reference to the exhibit filed with the VoiceStream Wireless Corporation Form 10-Q filed with the SEC on August 9, 1999. 436 9 Incorporated by reference to the exhibit filed with the Western Wireless Corporation Form 10-K for the year ended December 31, 1997 (Commission File No. 0-28160) filed with the SEC on March 27, 1998. 10 Incorporated by reference to the exhibit filed with the Western Wireless Corporation Form 10-Q for the quarter ended September 30, 1997 (Commission File No. 0-28160) filed with the SEC on November 6, 1997. 11 Incorporated by reference to the exhibit filed with the VoiceStream Wireless Corporation form 8-K filed with the SEC on July 7, 1999. 12 Incorporated by reference to the Western Wireless Corporation Form 10-Q for the quarter ended March 31, 1998 (Commission File No. 0-28160) filed with the SEC on May, 11, 1998. 13 Incorporated herein by reference to Omnipoint's Registration Statement on Form S-1 (Commission File No.33-98360). 14 Incorporated herein by reference to Omnipoint's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. 15 Incorporated herein by reference to Omnipoint's Current Report on form 8-K, filed May 3, 1996. Portions of this Exhibit were omitted and filed separately with the Secretary of the Commission pursuant to Omnipoint's application requesting confidential treatment under Rule 24b-2 of the Exchange Act of 1934, filed May 3, 1996. 16 Incorporated herein by reference to Omnipoint's Current Report on Form 8-K, filed March 26, 1998. Portions of the Exhibit were omitted and filed separately with the Secretary of the Commission pursuant to Omnipoint's application requesting confidential treatment under Rule 24b-2 of the Exchange Act of 1934, filed March 26, 1998. 17 Incorporated herein by reference to Omnipoint's Quarterly Report on Form 10-Q, filed May 15, 1998. 18 Incorporated herein by reference to Omnipoint's Quarterly Report on Form 10-Q, filed August 14, 1998. Portions of this Exhibit were omitted and filed separately with the Secretary of the Commission pursuant to Omnipoint's application requesting confidential treatment under Rule 24b-2 of the Exchange Act of 1934. 19 Incorporated herein by reference to Omnipoint's Quarterly Report on Form 10-Q, filed November 17, 1998. 20 Incorporated herein by reference to Omnipoint's Current Report on Form 8-K, filed December 29, 1998. 21 Incorporated by reference to Exhibit 10.13 to Aerial's Amendment No. 1 to Form S-1 (Commission File No. 333-1514). 22 Incorporated herein by reference to the Telephone and Data Systems, Inc. Form 8-K, filed September 17, 1999 (b) Financial Statement Schedule: Schedules for VoiceStream Wireless Holding Corporation are omitted because they are inapplicable as VoiceStream Wireless Holding Corporation has not conducted any activities other than in connection with its organization and the reorganizations. Relevant financial information is contained in the unaudited pro forma condensed combined financial statements and the notes thereto included in the joint proxy statement-prospectus. ITEM 22. UNDERTAKINGS The undersigned registrant hereby undertakes as follows: That prior to any public reoffering of the securities registered hereunder through use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will contain the information called for by the applicable registration form with respect to reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form. The undersigned registrant undertakes that every prospectus (i) that is filed pursuant to the immediately preceding paragraph, or (ii) that purports to meet the requirements of section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. The undersigned registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. 437 The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. 438 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Seattle, State of Washington, on this 26th day of October, 1999. VOICESTREAM WIRELESS HOLDING CORPORATION By /s/ ALAN R. BENDER ------------------------------------- Alan R. Bender [TITLE] POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints jointly and severally, John W. Stanton and Alan R. Bender or any of them, with full power to act alone, his true and lawful attorneys-in-fact, with full power of substitution, and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to the registration statement, and file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact or any of them may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed on October 26, 1999 by the following persons in the capacities indicated.
SIGNATURES TITLE ---------- ----- /s/ JOHN W. STANTON Chairman and Chief Executive Officer - ----------------------------------- John W. Stanton /s/ DONALD GUTHRIE Director, Vice Chairman - ----------------------------------- Donald Guthrie /s/ ALAN R. BENDER Director, Executive Vice President, - ----------------------------------- General Counsel and Secretary Alan R. Bender /s/ CREGG B. BAUMBAUGH Director, Executive Vice President-- - ----------------------------------- Finance, Strategy and Development Cregg B. Baumbaugh
439 INDEX TO EXHIBITS
EXHIBIT DESCRIPTION ------- ----------- 2.1 -- Agreement and Plan of Reorganization by and among VoiceStream Wireless Holding Corporation, Omnipoint Corporation and VoiceStream Wireless Corporation, dated June 23, 1999 (included as Annex A to the joint proxy statement-prospectus).......................................................................... 2.2 -- Agreement and Plan of Reorganization dated September 17, 1999 among VoiceStream Wireless Corporation, VoiceStream Wireless Holding Corporation, VoiceStream Subsidiary III Corporation, Aerial Communications, Inc. and Telephone and Data Systems, Inc. (included as Annex D to the joint proxy statement--prospectus)....................................... 3.1 -- Restated Certificate of Incorporation (included as Annex H to the joint proxy statement-prospectus).......................................................................... 3.2 -- Bylaws of VoiceStream Wireless Holding Corporation................................................... 5.1 -- Opinion of Preston Gates & Ellis LLP................................................................. 8.1* -- Opinion of Jones, Day, Reavis & Pogue as to certain tax matters................................. 8.2* -- Opinion of Piper Marbury LLP as to certain tax matters.......................................... 10.1(1) Agreement and Plan of Distribution between Western Wireless Corporation and VoiceStream Wireless Corporation, dated April 9, 1999. 10.2(2) Waiver Agreement by and among Western Wireless Corporation, Western PCS Corporation and certain of Western Wireless Corporation's shareholders, dated November 30, 1994. 10.3(2) Western PCS Corporation Series A Preferred Stock Purchase Agreement among Western Wireless Corporation, Western PCS Corporation and the Purchasers listed therein, dated April 10, 1995. 10.4(2) PCS 1900 Project and Supply Agreement between Western PCS Corporation and Northern Telecom Inc., dated June 30, 1995. 10.5(3) Amendment No. 1 to PCS 1900 Supply Agreement between Western PCS Corporation and Northern Telecom Inc., dated July 25, 1996. 10.6(3) Amendment No. 2 to PCS 1900 Supply Agreement between Western PCS Corporation and Northern Telecom Inc., dated July 25, 1996. 10.7(4) Amendment No. 3 to PCS Supply Agreement between Western PCS Corporation and Northern Telecom Inc., dated October 14, 1996. 10.8(5) Amendment Number 4 to PCS 1900 Project and Supply Agreement by and between Western PCS Corporation and Northern Telecom Inc., dated March 26, 1998. 10.9(6) Amendment Number 5 to PCS 1900 Project and Supply Agreement between VoiceStream Wireless Corporation and Northern Telecom Inc., dated September 17, 1998. 10.10(7) Amendment No. 6 to PCS 1900 Project and Supply Agreement by and between VoiceStream Wireless Corporation and Northern Telecom Inc. 10.11(8) Amendment No. 7 to PCS 10--Project and Supply Agreement by and between VoiceStream Wireless Corporation and Northern Telecom Inc., dated May 14, 1999. 10.12(2) PCS Block "C" Organization and Financing Agreement by and among Western PCS BTA I Corporation, Western Wireless Corporation, Cook Inlet PV/SS PCS Partners, L.P., Cook Inlet Telecommunications, Inc., SSPCS Corporation and Providence Media Partners L.P., dated as of November 5, 1995. 10.13(2) Limited Partnership Agreement by and between Cook Inlet PV/SS PCS Partners, L.P. and Western PCS BTA I Corporation, dated as of November 5, 1995. 10.14(2) First Amendment to Block "C" Organization and Financing Agreement and Cook Inlet Western Wireless PV/SS PCS, L.P. Limited Partnership Agreement by and among Western PCS BTA I Corporation, Western Wireless Corporation, Cook Inlet PV/SS PCS Partners, L.P., Cook Inlet Telecommunications, Inc., SSPCS Corporation and Providence Media Partners L.P., dated as of April 8, 1996. 10.15(3) Second Amendment to Block "C" Organization and Financing Agreement and Cook Inlet Western Wireless PV/SS PCS, L.P. Limited Partnership Agreement by and among Western PCS BTA I Corporation, Western Wireless Corporation, Cook Inlet PV/SS PCS Partners, L.P., Cook Inlet Telecommunications, Inc., SSPCS Corporation and Providence Media Partners L.P., dated as of June 27, 1996. 10.16(3) Third Amendment to Block "C" Organization and Financing Agreement and Cook Inlet Western Wireless PV/SS PCS, L.P. Limited Partnership Agreement and First Amendment to Technical Services Agreement by and among Western PCS BTA I Corporation, Western Wireless Corporation, Cook Inlet PV/SS PCS Partners, L.P., Cook Inlet Telecommunications, Inc., SSPCS Corporation, Providence Media Partners L.P. and Cook Inlet Western Wireless PV/SS PCS, L.P., dated July 30, 1996. 10.17(2) Asset Purchase Agreement between Western PCS III License Corporation as Buyer and GTE Mobilnet Incorporated as Seller, dated January 16, 1996. 10.18(2) Waiver Agreement by and among Western Wireless Corporation, Western PCS Corporation and certain of Western Wireless Corporation's shareholders, dated February 15, 1996. 10.19(9) Software License Maintenance and Subscriber Billing Services Agreement, dated June 1997. 10.20(9) First Amendment to Software License, Maintenance and Subscriber Billing Services Agreement dated December 1997, between CSC Intelicom, Inc., and Western Wireless Corporation.
440
EXHIBIT DESCRIPTION ------- ----------- 10.21(10) Iowa Wireless Services, L.P. Limited Partnership Agreement, dated as of September 30, 1997, by and between INS Wireless, Inc., as General Partner, and Western PCS I Iowa Corporation, as Limited Partnership. 10.22(10) Agreement to Form Limited Partnership dated September 30, 1997, by and among Western PCS Iowa Corporation, a Delaware corporation, INS Wireless, Inc., an Iowa corporation, Western PCS I Corporation, a Delaware corporation, and Iowa Network Services, Inc., an Iowa corporation. 10.23(10) Purchase Agreement by and among Western PCS Corporation, Western Wireless Corporation, Hutchison Telecommunications Limited and Hutchison Telecommunications PCS (USA) Limited dated October 14, 1997. 10.24(9) Letter Agreement dated December 16, 1997, between Western Wireless Corporation and Intelicom Services, Inc. to provide products and services pursuant to the Software License Maintenance and Subscriber Billing Services Agreements and First Amendment thereto. 10.25* Services Agreement by and between Western Wireless Corporation and Western PCS Corporation. 10.26 Shareholders Agreement by and among Western Wireless Corporation, Hutchison Telecommunications PCS (USA) Limited and Western PCS Corporation, dated February 17, 1998. 10.27 Tax Sharing Agreement by and between Western Wireless Corporation and Western PCS Corporation, dated February 17, 1998. 10.28 First Amendment to Tax Sharing Agreement by and between Western Wireless Corporation and Western PCS Corporation, dated May 3, 1999. 10.29(5) Supply Contract by and between Western PCS Corporation and Nokia Telecommunications Inc., dated March 9, 1998. 10.30(5) Purchase and Sale Agreement by and between Nokia Mobile Phones, Inc. and Western PCS Corporation, dated March 9, 1998. 10.31(5) Loan Agreement by and among Western PCS Holding Corporation, TD Securities (USA) Inc., NationsBanc Montgomery Securities LLC, Barclays Capital, J.P. Morgan Securities Inc., Chase Securities Inc., and Toronto Dominion (Texas), Inc., dated June 26, 1998. 10.32(6) First Amendment to Loan Agreement by and among Western PCS Holding Corporation, TD Securities (USA) Inc., Nationsbanc Montgomery Securities LLC, Barclays Capital, J.P. Morgan Securities Inc., Chase Securities Inc., and Toronto Dominion (Texas), Inc., dated November 25, 1998. 10.33* Second Amendment to Loan Agreement by and among Western PCS Holding Corporation, TD Securities (USA) Inc., Nationsbanc Montgomery Securities LLC, Barclays Capital, J.P. Morgan Securities Inc., Chase Securities Inc., and Toronto Dominion (Texas), Inc., dated April 26, 1999. 10.34(2) First Amendment to Stockholders Agreement between Western PCS Corporation and Northern Telecom Inc., dated June 30, 1998. 10.35(6) Exchange Rights and Grant Agreement by and among Western PCS BTA I Corporation, Western Wireless Corporation, Cook Inlet Telecommunications, Inc. and VoiceStream Wireless Corporation, dated December 17, 1998. 10.36(6) Exchange Rights and Grant Agreement by and among Western PCS BTA I Corporation, Western Wireless Corporation, SSPCS Corporation and VoiceStream Wireless Corporation, dated January 19, 1999. 10.37(1) Cook Inlet/VoiceStream PCS LLC Limited Liability Company Agreement by and between Cook Inlet GSM Company and Western PCS BTA I Corporation, dated February 11, 1999. 10.38 Voting Agreement by and among VoiceStream Wireless Corporation, Hellman & Friedman Capital Partners II, L.P., H&F Orchard Partners, L.P., H&F International Partners, L.P., John W. Stanton, Theresa E. Gillespie, PN Cellular, Inc., Stanton Family Trust, Stanton Communications Corporation, GS Capital Partners, L.P., The Goldman Sachs Group, L.P., Bridge Street Fund 1992, L.P., Stone Street Fund 1992, L.P., Providence Media Partners L.P., Hutchison Telecommunications Holdings and Hutchison Telecommunications PCS (USA) Limited (USA) Limited, dated May 3, 1999. 10.39 Registration Rights Agreement by and among VoiceStream Wireless Corporation, Hellman & Friedman Capital Partners II, L.P., H&F Orchard Partners, L.P., H&F International Partners, L.P., John W. Stanton, Theresa E. Gillespie, PN Cellular, Inc., Stanton Family Trust, Stanton Communications Corporation, GS Capital Partners, L.P., The Goldman Sachs Group, L.P., Bridge Street Fund 1992, L.P., Stone Street Fund 1992, L.P., and Providence Media Partners L.P., dated May 3, 1999. 10.40* Shareholders Agreement by and among VoiceStream Wireless Corporation, Western Wireless Corporation, Hutchison Telecommunications Holdings (USA) Limited and Hutchison Telecommunications PCS (USA) Limited, dated May 3, 1999.
441
EXHIBIT DESCRIPTION ------- ----------- 10.41 First Amendment to Shareholders Agreement by and among VoiceStream Wireless Corporation, Western Wireless Corporation, Hutchison Telecommunications Holdings (USA) Limited and Hutchison Telecommunications PCS (USA) Limited dated. 10.42 Roaming Agreement by and between Western Wireless Corporation and VoiceStream Wireless Corporation, dated May 3, 1999. 10.43(7) Purchase Agreement by and between VoiceStream Wireless Corporation and Nortel Networks Inc., dated May 14, 1999, relating to 12% Series A Senior Debentures due 2011. 10.44(7) Debenture Exchange and Registration Rights Agreement by and between VoiceStream Wireless Corporation and Nortel Networks Inc., dated May 14, 1999, relating to 12% Series A Senior Debentures due 2011. 10.45(7) Indenture by and between VoiceStream Wireless Corporation and Harris Trust Company, dated May 14, 1999, relating to 12% Series A Senior Debentures due 2011 and 12% Senior Debentures due 2011. 10.46(11) Purchase Agreement, dated as of June 23, 1999, between Omnipoint Corporation and Cook Inlet/VS GSM II PCS, LLC. 10.47(11) Purchase Agreement, dated as of June 23, 1999, between Omnipoint Corporation and Cook Inlet/VS GSM III PCS, LLC. 10.48(11) Stock Subscription Agreement, dated as of June 23, 1999, by and among VoiceStream Wireless Corporation, Hutchison Telecommunications Limited and Hutchison Telecommunications PCS (USA) Limited. 10.49(11) Voting Agreement, dated as of June 23, 1999, by and among Omnipoint Corporation, VoiceStream Wireless Corporation, the stockholders of Omnipoint and the stockholders of VoiceStream. 10.50(11) Securities Purchase Agreement, dated as of June 23, 1999, by and among VoiceStream Wireless Corporation, Hutchison Communications PCS (USA) Limited and Omnipoint Corporation. 10.51(2) Employment Agreement by and between Robert R. Stapleton and Western Wireless Corporation, dated March 12, 1996. 10.52(2) Employment Agreement by and between Cregg B. Baumbaugh and Western Wireless Corporation, dated March 12, 1996. 10.53(12) Employment Agreement by and between Timothy Wong and Western Wireless Corporation, dated February 10, 1998. 10.54(12) Employment Agreement by and between Robert Dotson and Western Wireless Corporation, dated February 10, 1998. 10.55 Assignment and Assumption Agreement by and between Western Wireless Corporation and VoiceStream Wireless Corporation with respect to the Employment Agreement of Robert R. Stapleton, dated May 3, 1999. 10.56 Assignment and Assumption Agreement by and between Western Wireless Corporation and VoiceStream Wireless Corporation with respect to the Employment Agreement of Cregg B. Baumbaugh, dated May 3, 1999. 10.57 Assignment and Assumption Agreement by and between Western Wireless Corporation and VoiceStream Wireless Corporation with respect to the Employment Agreement of Timothy Wong, dated May 3, 1999. 10.58 Assignment and Assumption Agreement by and between Western Wireless Corporation and VoiceStream Wireless Corporation with respect to the Employment Agreement of Robert Dotson, dated May 3, 1999. 10.59* Employment Agreement, dated as of January 1, 1999, by and between Omnipoint and Douglas G. Smith. 10.60(13) Employment Agreement, effective October 1, 1995, by and between Omnipoint, Omnipoint Communications Inc. and George F. Schmitt. 10.61(13) Promissory Note, dated October 1, 1995, by George F. Schmitt. 10.62(13) Stock Registration Agreement, dated October 1, 1995, by and between Omnipoint and George F. Schmitt. 10.63* First Amendment to Stock Restriction Agreement, dated as of June 21, 1999, by and between Omnipoint Communications, Inc. and George F. Schmitt. 10.64(14) Employment Agreement, dated November 3, 1996, by and between Omnipoint and Kjell S. Andersson. 10.65(14) Amendment to Employment Agreement dated as of February 24, 1997, between Omnipoint and Kjell S. Andersson. 10.66(14) Promissory Note, dated February 24, 1997, by Kjell S. Andersson.
442
EXHIBIT DESCRIPTION ------- ----------- 10.67(14) Stock Restriction Agreement, dated February 24, 1997, by and between Omnipoint and Kjell S. Andersson. 10.68* Employment Agreement, dated as of April 23, 1999, by and between Omnipoint and Harry Plonskier. 10.69(13) Amended and Restated Registration Rights Agreement, dated June 29, 1995, by and among Omnipoint and the parties named therein. 10.70(13) OEM Supply Agreement for Omnipoint PCS (Personal Communication Systems) Products, dated September 22, 1994, by and between Omnipoint and Northern Telecom Inc. 10.71(13) Manufacturing License and Escrow Agreement for Personal Communication Service Products, dated February 28, 1995, by and between Omnipoint and Northern Telecom Inc. 10.72(13) Collaborative Development Agreement, dated March 1, 1995, by and between Omnipoint and Northern Telecom Inc. 10.74(13) Supply Agreement, dated September 22, 1994, by and between Omnipoint Communications Inc. and Northern Telecom Inc. 10.73(13) Amendment No. 1 to Supply Agreement dated July 21, 1995, by and between Omnipoint Communications Inc. and Northern Telecom Inc. 10.75(13) Letter Agreement, dated January 24, 1996, by and between Omnipoint and Ericsson Inc. 10.76(15) Acquisition Agreement for Ericsson CMS 40 Personal Communications Systems (PCS) Infrastructure Equipment, dated as of April 16, 1996, by and between Ericsson Inc. and Omnipoint Communications. 10.77(15) Acquisition Supply and License Agreement for Omnipoint Personal Communications Systems (PCS) Infrastructure Equipment, dated as of April 16, 1996, by and between Ericsson Inc. and Omnipoint. 10.78(15) Agreement for Purchase and Sale of Ericsson Inc. Masko Terminal Units, dated as of April 16, 1996, by and between Ericsson, Inc. and Omnipoint Communications Inc. 10.79(16) Loan Agreement by and among PCS Philadelphia Holdings, Inc., Ericsson Inc. and certain other lenders named therein, dated July 25, 1997. 10.80(16) Loan Agreement by and among Omnipoint Midwest Holdings, LLC, Northern Telecom Inc. and certain other lenders named therein, dated January 30, 1998. 10.81(16) Loan Agreement by and among Omnipoint Corporation, Omnipoint Communications Inc., DLJ Capital Funding Inc. and certain other lenders named therein, dated February 17, 1998. 10.82(16) Note Purchase Agreement by and among Omnipoint Corporation, Omnipoint Communications Inc., IBJ Schroder Bank & Trust Company and certain other purchasers named therein, dated February 17, 1998. 10.83(17) Purchase Agreement by and among Omnipoint Corporation, Donaldson, Lufkin & Jenrette Securities Corporation, BancAmerica Robertson Stephens, Bear, Stearns & Co., Inc. and Smith Barney Inc., dated May 1, 1998. 10.84(17) Deposit Agreement by and among Omnipoint Corporation, Marine Midland Bank, and the Holders from time to time of the Depositary Shares, dated May 6, 1998. 10.85(17) Deposit Account Agreement by and between Omnipoint Corporation and The First National Bank of Maryland, dated May 6, 1998. 10.86(18) Loan Agreement, dated June 25, 1998, by and between Omnipoint MB Holdings, L.L.C. and Bank of America National Trust and Savings Association. 10.87(18) Amended and Restated Loan Agreement, dated June 25, 1998, by and between Omnipoint MB Holdings, L.L.C. and Ericsson Inc. 10.88(19) Capital Contribution Agreement dated, September 18, 1998, by and between Omnipoint Corporation and D&E Communications, Inc. 10.89(20) Note Purchase Agreement by and among Omnipoint Corporation, IBJ Schroder Bank & Trust Company, as paying agent, and certain initial purchasers named therein, dated December 21, 1998.
443
EXHIBIT DESCRIPTION ------- ----------- 10.90 Securities Purchase Agreement by and among VoiceStream Wireless Corporation, Hutchison Telecommunications PCS (USA) Limited and Omnipoint Corporation, dated as of June 23, 1999 10.91(21) PCS Infrastructure Supply Contract, dated as of March 1, 1996, between Aerial and Nokia Telecommunications, Inc. 10.92* Amended and Restated Revolving Credit Agreement dated _______________, by and between Telephone and Data Systems, Inc. and Aerial Operating Company, Inc. 10.93* Tax Settlement Agreement dated March 12, 1999, by and between Aerial, Aerial Operating Company, Inc. and Telephone and Data Systems, Inc. 10.94(22) Stockholder Agreement dated as of September 17, 1999, by and between Telephone and Data Systems, Inc. and stockholders of Aerial Communications, Inc., and VoiceStream Wireless Corporation, and VoiceStream Wireless Holding Corporation. 10.95(22) Indemnity Agreement, dated as of September 17, 1999, among VoiceStream Wireless Corporation, VoiceStream Wireless Holding Corporation, Aerial Communications, Inc., Aerial Operating Company, Inc., and Telephone and Data Systems, Inc. 10.96(22) Debt/Equity Replacement Agreement dated as of September 17, 1999, made by and among Telephone and Data Systems, Inc., Aerial Communications, Inc., Aerial Operating Company, Inc., VoiceStream Wireless Corporation, and VoiceStream Wireless Holding Corporation. 10.97(22) Parent Stockholder Agreement dated as of September 17, 1999, by and among Aerial Communications, Inc., Telephone and Data Systems, Inc., VoiceStream Wireless Corporation, VoiceStream Wireless Holding Corporation and the individuals and entities set forth on Schedule I thereto. 10.98(22) Settlement Agreement and Release, entered into as of September 17, 1999 by and among Sonera Ltd., Sonera Corporation U.S., Telephone and Data Systems, Inc., Aerial Communications, Inc., and Aerial Operating Company, Inc. 23.1 -- Consent of Preston Gates & Ellis LLP (included with Exhibit 5.1).................................... 23.2 -- Consent of Arthur Andersen LLP (independent public accountants for VoiceStream Wireless Corporation) 23.3 -- Consent of PricewaterhouseCoopers LLP (independent public accountants for Omnipoint Corporation)........ 23.4 -- Consent of Arthur Andersen LLP (independent public accountants for Aerial Communications Inc.)...... 24.1 -- Power of Attorney (See II-__)....................................................................... 99.1* -- Form of Form of Election for Omnipoint common stockholders.......................................... 99.2* -- Form of Letter of Transmittal for Omnipoint common stockholders..................................... 99.3* -- Form of Form of Election for Aerial common stockholders. 99.4* -- Form of Letter of Transmittal for Aerial common stockholders.
---------- * To be filed with subsequent amendment. 1 Incorporated by reference to the exhibit filed with VoiceStream Wireless Corporation Form 10/A filed with the SEC on April 13, 1999. 2 Incorporated by reference to the exhibit filed with the Western Wireless Corporation Registration Statement on Form S-1 (Commission File No. 333-2432) filed with the SEC on March 15, 1996. 3 Incorporated by reference to the exhibit filed with the Western Wireless Corporation Registration Statement on from S-4 (Commission File No. 333-14859) filed with the SEC on October 25, 1996. 4 Incorporated by reference to the exhibit filed with the Western Wireless Corporation Form 10-K for the year ended December 31, 1996 (Commission File No. 0-28160) filed with the SEC on March 31, 1997. 5 Incorporated by reference to the exhibit filed with the Western Wireless Corporation Form 10-Q/A for the quarter ended June 30, 1998 (Commission File No. 0-28160) filed with the SEC on August 17, 1998. 6 Incorporated by reference to the exhibit filed with the VoiceStream Wireless Corporation Form 10 (Commission File No. 0-25441) filed with the SEC on February 24, 1999. 7 Incorporated by reference to the exhibit filed with the VoiceStream Wireless Corporation form 8-K filed with the SEC on May 27, 1999. 8 Incorporated by reference to the exhibit filed with the VoiceStream Wireless Corporation Form 10-Q filed with the SEC on August 9, 1999. 444 9 Incorporated by reference to the exhibit filed with the Western Wireless Corporation Form 10-K for the year ended December 31, 1997 (Commission File No. 0-28160) filed with the SEC on March 27, 1998. 10 Incorporated by reference to the exhibit filed with the Western Wireless Corporation Form 10-Q for the quarter ended September 30, 1997 (Commission File No. 0-28160) filed with the SEC on November 6, 1997. 11 Incorporated by reference to the exhibit filed with the VoiceStream Wireless Corporation form 8-K filed with the SEC on July 7, 1999. 12 Incorporated by reference to the Western Wireless Corporation Form 10-Q for the quarter ended March 31, 1998 (Commission File No. 0-28160) filed with the SEC on May, 11, 1998. 13 Incorporated herein by reference to Omnipoint's Registration Statement on Form S-1 (Commission File No.33-98360). 14 Incorporated herein by reference to Omnipoint's Annual Report on Form 10-K for the fiscal year ended December 31, 1996. 15 Incorporated herein by reference to Omnipoint's Current Report on form 8-K, filed May 3, 1996. Portions of this Exhibit were omitted and filed separately with the Secretary of the Commission pursuant to Omnipoint's application requesting confidential treatment under Rule 24b-2 of the Exchange Act of 1934, filed May 3, 1996. 16 Incorporated herein by reference to Omnipoint's Current Report on Form 8-K, filed March 26, 1998. Portions of the Exhibit were omitted and filed separately with the Secretary of the Commission pursuant to Omnipoint's application requesting confidential treatment under Rule 24b-2 of the Exchange Act of 1934, filed March 26, 1998. 17 Incorporated herein by reference to Omnipoint's Quarterly Report on Form 10-Q, filed May 15, 1998. 18 Incorporated herein by reference to Omnipoint's Quarterly Report on Form 10-Q, filed August 14, 1998. Portions of this Exhibit were omitted and filed separately with the Secretary of the Commission pursuant to Omnipoint's application requesting confidential treatment under Rule 24b-2 of the Exchange Act of 1934. 19 Incorporated herein by reference to Omnipoint's Quarterly Report on Form 10-Q, filed November 17, 1998. 20 Incorporated herein by reference to Omnipoint's Current Report on Form 8-K, filed December 29, 1998. 21 Incorporated by reference to Exhibit 10.13 to Aerial's Amendment No. 1 to Form S-1 (Commission File No. 333-1514). 22 Incorporated herein by reference to the Telephone and Data Systems, Inc. Form 8-K, filed September 17, 1999. EX-3.2 2 BYLAWS OF THE REGISTRANT 1 EXHIBIT 3.2 BYLAWS OF VOICESTREAM WIRELESS HOLDING CORPORATION ARTICLE I OFFICES Section 1. The registered office of the corporation in the State of Delaware shall be at 1013 Centre Road, in the city of Wilmington, County of New Castle. The registered agent in charge thereof shall be The Prentice-Hall Corporation System, Inc. Section 2. The corporation may also have offices at such other places as the Board of Directors may from time to time appoint or the business of the corporation may require. ARTICLE II STOCKHOLDERS' MEETINGS Section 1. Place of Meetings: Meetings of stockholders shall be held at the registered office of the corporation in this state or at such place, either within or without this state, as may be selected from time to time by the Board of Directors. Section 2. Annual Meetings: The annual meeting of the stockholders shall be held on the second Tuesday of June in each year if not a legal holiday, and if a legal holiday, then on the next business day following at ten o'clock a.m., when they shall elect a Board of Directors and transact such other business as may properly be brought before the meeting. If the annual meeting for election of directors is not held on the date designated therefor, the directors shall cause the meeting to be held as soon thereafter as convenient. Section 3. Election of Directors: Elections of the directors of the corporation shall be by written ballot. Section 4. Special Meetings: Special Meetings of the stockholders may be called at any time by the President, or the Board of Directors, or stockholders entitled to cast at least one-fifth of the votes which all stockholders are entitled to cast at the particular meeting. At any time, upon written request of any person or persons who have duly called a special meeting, it shall be the duty of the Secretary to fix the date of the meeting, to be held not more than sixty days after receipt of the request, and to give due notice thereof. If the Secretary shall neglect or refuse to fix the date of the meeting and give notice thereof, the person or persons calling the meeting may do so. Business transacted at all special meetings shall be confined to the objects stated in the call and matters germane thereto, unless all stockholders entitled to vote are present and consent. 1 2 Section 5. Quorum: A majority of the outstanding shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders. If less than a majority of the outstanding shares entitled to vote is represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Section 6. Proxies: Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him or her by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally. All proxies shall be filed with the Secretary of the meeting before being voted upon. Section 7. Notice of Meetings: Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose for which the meeting is called. Unless otherwise provided by law, written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting. Section 8. Unanimous Written Consent in Lieu of Meetings: Any action required to be taken at any annual or special meeting of stockholders of a corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a unanimous consent in writing, setting forth the action so taken, shall be signed by the holders of a majority of the outstanding stock. Section 9. List of Stockholders: The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. No share of stock upon which any installment is due and unpaid shall be voted at any meeting. The list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified, or at the place where the meeting is to be held. The list shall also be produced and 2 3 kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. ARTICLE III DIRECTORS Section 1. General: The business and affairs of this corporation shall be managed by its Board of Directors, which shall have not less than one nor more than seventeen members. The directors need not be residents of this state or stockholders in the corporation. They shall be elected by the stockholders at the annual meeting of stockholders of the corporation, and each director shall be elected for the term of one year, and until his or her successor shall be elected and shall qualify or until his or her earlier resignation or removal. Section 2. Regular Meetings: Regular meetings of the Board shall be held with ten (10) days prior notice at such time and place as shall be determined by the Board. The Board may hold its meetings within or without the state of Delaware. Section 3. Special Meetings: Special meetings of the Board may be called by the President on two (2) days notice to each director, either personally or by mail or by telegram; special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of a majority of the directors in office. Section 4. Quorum: A majority of the total number of directors shall constitute a quorum for the transaction of business. Section 5. Written Consent in Lieu of Meeting: Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. Section 6. Conference Telephone: One or more directors may participate in a meeting of the Board, of a committee of the Board or of the stockholders, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other; participation in this manner shall constitute presence in person at such meeting. Section 7. Compensation: Directors as such, shall not receive any stated salary for their services, but by resolution of the Board, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board PROVIDED, that nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Section 8. Removal: Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of Directors, except that when cumulative voting is permitted, if less than the entire Board is to be 3 4 removed, no director may be removed without cause if the votes cast against his or her removal would be sufficient to elect him or her if then cumulatively voted at an election of the entire Board of Directors, or, if there be classes of directors, at an election of the class of directors of which he or she is a part. ARTICLE IV OFFICERS Section 1. Positions: The executive officers of the corporation shall be chosen by the directors and shall be a President, Secretary and Controller. The Board of Directors may also choose a Chairman, a Chief Executive Officer, a Chief Operating Officer, one or more Vice Presidents and such other officers as it shall deem necessary. Any number of offices may be held by the same person. Section 2. Salaries: Salaries of the officers and agents of the corporation shall be fixed by the Board of Directors. Section 3. Term of Office: The officers of the corporation shall hold office for one year and until their successors are chosen and have qualified. Any officer or agent elected or appointed by the Board may be removed by the Board of Directors whenever in its judgment the best interest of the corporation will be served thereby. Section 4. President: The President shall preside at all meetings of the stockholders and directors; he or she shall have general and active management of the business of the corporation, shall see that all orders and resolutions of the Board are carried into effect, subject, however, to the right of the directors to delegate any specific powers, except such as may be by statute exclusively conferred on the President, to any other officer or officers of the corporation. He or she shall execute bonds, mortgages, and other contracts requiring a seal, under the seal of the corporation. He or she shall be an EX-OFFICIO member of all committees, and shall have the general power and duties of supervision and management usually vested in the office of President of a corporation. Section 5. Secretary: The secretary shall attend all sessions of the Board and all meetings of the stockholders and act as clerk thereof, and record all the votes of the corporation and the minutes of all its transactions in a book to be kept for that purpose, and shall perform like duties for all committees of the Board of Directors when required. He or she shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, and under whose supervision he or she shall be. He or she shall keep in safe custody the corporate seal of the corporation, and when authorized by the Board, affix the same to any instrument requiring it. Section 6. Controller: The Controller shall have custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation, and shall keep the monies of the corporation in a separate account to the credit of the corporation. He or she shall disburse the funds of the corporation as may be 4 5 ordered by the Board, taking proper vouchers for such disbursements, and shall render to the President and directors, at the regular meetings of the Board, or whenever they may require it, an account of all his or her transactions as Controller and of the financial condition of the corporation. ARTICLE V VACANCIES Section 1. Vacancies by death, resignation, removal, or otherwise: Any vacancy occurring in any office of the corporation by death, resignation, removal or otherwise shall be filled by the Board of Directors. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of these Bylaws. Section 2. Resignations Effective at Future Date: When one or more directors shall resign from the Board, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective. ARTICLE VI CORPORATE RECORDS Any stockholder of record, in person or by attorney or other agent, shall upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in this state or at its principal place of business. ARTICLE VII STOCK CERTIFICATES, DIVIDENDS, ETC. Section 1. Certificates: The stock certificates of the corporation shall be numbered and registered in the share ledger and transfer books of the corporation as they are issued. They shall bear the corporate seal and shall be signed by the President, Chief Executive Officer or any Vice President and Secretary or Assistant Secretary. 5 6 Section 2. Transfers: Transfers of shares shall be made on the books of the corporation upon surrender of the certificates therefor, endorsed by the person named in the certificates or by attorney, lawfully constituted in writing. No transfer shall be made which is inconsistent with the law. Section 3. Lost Certificate: The corporation may issue a new certificate of stock in the place of any certificate theretofore signed by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or his or her legal representative to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. Section 4. Record Date: In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. 6 7 If no record is fixed: (a) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. (b) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in this state, its principal place of business, or an officer or agent of the corporation having custody of the book in which the proceedings of meetings of stockholders are recorded. (c) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. (d) A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 5. Dividends: The Board of Directors may declare and pay dividends upon the outstanding shares of the corporation from time to time and to such extent as they deem advisable, in the manner and upon the terms and conditions provided by statute and the Certificate of Incorporation. Section 6. Reserves: Before payment of any dividend there may be set aside out of the net profits of the corporation such sum or sums as the directors, from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interests of the corporation, and the directors may abolish any such reserve in the manner in which it was created. ARTICLE VIII INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS Section 1. Definitions. As used in this Article: a. "Act" means the Delaware General Corporation Law, now or hereafter in force. b. "Agent" means an individual who is or was an agent of the Corporation or an individual who, while an agent of the Corporation, is or was serving at the Corporation's request as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise. "Agent" includes, unless the context requires otherwise, the estate or personal representative of an agent. 7 8 c. "Corporation" means this Corporation, and any domestic or foreign predecessor entity which, in a merger or other transaction, ceased to exist. d. "Director" means an individual who is or was a director of the Corporation or an individual who, while a director of the Corporation, is or was serving Corporation's request as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise. "Director" includes, unless the context requires otherwise, the estate or personal representative of a director. e. "Employee" means an individual who is or was an employee of the Corporation or an individual, while an employee of the Corporation, is or was serving at the Corporation's request as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise. "Employee" includes, unless the context requires otherwise, the estate or personal representative of an employee. f. "Expenses" include counsel fees. g. "Indemnitee" means an individual made a party to a proceeding because the individual is or was a Director, Officer, Employee, or Agent of the Corporation, and who possesses indemnification rights pursuant to the Certificate of Incorporation, these Bylaws, or other corporate action. "Indemnitee" shall also include the heirs, executors, and other successors in interest of such individuals. h. "Liability" means the obligation to pay a judgment, settlement, penalty, fine, including an excise tax assessed with respect to an employee benefit plan, or reasonable expenses incurred with respect to a proceeding. i. "Officer" means an individual who is or was an officer of the Corporation or an individual who, while an officer of the Corporation, is or was serving at the Corporation's request as a director, officer, partner, trustee, employee, or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan, or other enterprise. "Officer" includes, unless the context requires otherwise, the estate or personal representative of an officer. j. "Party" includes an individual who was, is, or is threatened to be named a defendant or respondent in a proceeding. k. "Proceeding" means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, and whether formal or informal. Section 2. Indemnification Rights of Directors, Officers, Employees and Agents. The Corporation shall indemnify its Directors, Officers, Employees and Agents to the full extent permitted by applicable law as then in effect against liability arising out of a proceeding to which such individual was made a party because the individual is or was a Director, Officer, Employee or Agent of the Corporation. The Corporation shall advance expenses incurred by such persons who are parties to a proceeding in advance of final disposition of the proceeding, as provided herein. Section 3. Procedure for Seeking Indemnification and/or Advancement of Expenses. 8 9 a. Notification and Defense of Claim. Indemnitee shall promptly notify the Corporation in writing of any proceeding for which indemnification could be sought under this Article. In addition, Indemnitee shall give the Corporation such information and cooperation as it may reasonably require and as shall be within Indemnitee's power. With respect to any such proceeding as to which Indemnitee has notified the Corporation: (1) The Corporation will be entitled to participate therein at its own expense; (2) Except as otherwise provided below, to the extent that it may wish, the Corporation, jointly with any other indemnifying party similarly notified, will be entitled to assume the defense thereof, with counsel satisfactory to Indemnitee. Indemnitee's consent to such counsel may not be unreasonably withheld. After notice from the Corporation to Indemnitee of its election to assume the defense, the Corporation will not be liable to Indemnitee under this Article for any legal or other expenses subsequently incurred by Indemnitee in connection with such defense. However, Indemnitee shall continue to have the right to employ its counsel in such proceeding, at Indemnitee's expense; and if: (a) The employment of counsel by Indemnitee has been authorized by the Corporation; (b) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Corporation and Indemnitee in the conduct of such defense; or (c) The Corporation shall not in fact have employed counsel to assume the defense of such proceeding, the fees and expenses of Indemnitee's counsel shall be at the expense of the Corporation. The Corporation shall not be entitled to assume the defense of any proceeding brought by or on behalf of the Corporation or as to which Indemnitee shall reasonably have made the conclusion that a conflict of interest may exist between the Corporation and the Indemnitee in the conduct of the defense. b. Information to be Submitted and Method of Determination and Authorization of Indemnification. For the purpose of pursuing rights to indemnification under this Article, the Indemnitee shall submit to the Board a sworn statement requesting indemnification and reasonable evidence of all amounts for which such indemnification is requested (together, the sworn statement and the evidence constitutes an "Indemnification Statement"). Submission of an Indemnification Statement to the Board shall create a presumption that the Indemnitee is entitled to indemnification hereunder, and the Corporation shall, within sixty (60) calendar days thereafter, make the payments requested in the Indemnification Statement to or for the benefit of the Indemnitee, unless: (1) within such sixty (60) calendar day period it shall be determined by the Corporation that the Indemnitee is not entitled to indemnification under this Article; (2) such vote shall be based upon clear and convincing evidence (sufficient to rebut the foregoing presumption); and (3) the Indemnitee shall receive notice in writing of such 9 10 determination, which notice shall disclose with particularity the evidence upon which the determination is based. At the election of the President, the foregoing determination may be made by either: (1) the written consent of the stockholders owning a majority of the stock in the Corporation; (2) a committee chosen by written consent of a majority of the directors of the Corporation, and consisting solely of two (2) or more directors not at the time parties to the proceeding; or (3) as provided by Section 145 of the Delaware General Corporation Law. Any determination that the Indemnitee is not entitled to indemnification, and any failure to make the payments requested in the Indemnification Statement, shall be subject to judicial review by any court of competent jurisdiction. c. Special Procedure Regarding Advance for Expenses. An Indemnitee seeking payment of expenses in advance of a final disposition of the proceeding must furnish the Corporation, as part of the Indemnification Statement: (1) A written affirmation of the Indemnitee's good faith belief that the Indemnitee has met the standard of conduct required to be eligible for indemnification; and (2) A written undertaking, constituting an unlimited general obligation of the Indemnitee, to repay the advance if it is ultimately determined that the Indemnitee did not meet the required standard of conduct. If the Corporation determines that indemnification is authorized, the Indemnitee's request for advance of expenses shall be granted. d. Settlement. The Corporation is not liable to indemnify Indemnitee for any amounts paid in settlement of any proceeding without Corporation's written consent. The Corporation shall not settle any proceeding in any manner which would impose any penalty or limitation on Indemnitee without Indemnitee's written consent. Neither the Corporation nor Indemnitee may unreasonably withhold its consent to a proposed settlement. Section 4. Contract and Related Rights. a. Contract Rights. The right of an Indemnitee to indemnification and advancement of expenses is a contract right upon which the Indemnitee shall be presumed to have relied in determining to serve or to continue to serve in his or her capacity with the Corporation. Such right shall continue as long as the Indemnitee shall be subject to any possible proceeding. Any amendment to or repeal of this Article shall not adversely affect any right or protection of an Indemnitee with respect to any acts or omissions of such Indemnitee occurring prior to such amendment or repeal. b. Optional Insurance, Contracts, and Funding. The Corporation may: (1) Maintain insurance, at its expense, to protect itself and any Indemnitee against any liability, whether or not the Corporation would have power to indemnify the individual against the same liability; (2) Enter into contracts with any Indemnitee in furtherance of this Article and consistent with the Act; and 10 11 (3) Create a trust fund, grant a security interest, or use other means (including without limitation a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification as provided in this Article. c. Severability. If any provision or application of this Article shall be invalid or unenforceable, the remainder of this Article and its remaining applications shall not be affected thereby, and shall continue in full force and effect. d. Right of Indemnitee to Bring Suit. If (1) a claim under this Article for indemnification is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation; or (2) a claim under this Article for advancement of expenses is not paid in full by the Corporation within twenty (20) days after a written claim has been received by the Corporation, then the Indemnitee may, but need not, at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim. To the extent successful in whole or in part, the Indemnitee shall be entitled to also be paid the expense (to be proportionately prorated if the Indemnitee is only partially successful) of prosecuting such claim. Neither: (1) the failure of the Corporation (including its Board of Directors, its stockholders, or independent legal counsel) to have made a determination prior to the commencement of such proceeding that indemnification or reimbursement or advancement of expenses to the Indemnitee is proper in the circumstances; nor (2) an actual determination by the Corporation (including its Board of Directors, its stockholders, or independent legal counsel) that the Indemnitee is not entitled to indemnification or to the reimbursement or advancement of expenses, shall be a defense to the proceeding or create a presumption that the Indemnitee is not so entitled. Section 5. Exceptions. Any other provision herein to the contrary notwithstanding, the Corporation shall not be obligated pursuant to the terms of these Bylaws to indemnify or advance expenses to Indemnitee with respect to any proceeding: a. Claims Initiated by Indemnitee. Initiated or brought voluntarily by Indemnitee and not by way of defense, except with respect to proceedings brought to establish or enforce a right to indemnification under these Bylaws or any other statute or law or as otherwise required under the statute; but such indemnification or advancement of expenses may be provided by the Corporation in specific cases if the Board of Directors finds it to be appropriate. b. Lack of Good Faith. Instituted by Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by Indemnitee in such proceeding was not made in good faith or was frivolous. c. Insured Claims. For which any of the expenses or liabilities for indemnification is being sought have been paid directly to Indemnitee by an insurance carrier under a policy of officers' and directors' liability insurance maintained by the Corporation. d. Prohibited by Law. If the Corporation is prohibited by the Delaware General Corporation Law or other applicable law as then in effect from paying such indemnification and/or advancement of expenses. For example, the Corporation and Indemnitee acknowledge that the Securities and Exchange Commission ("SEC") has taken the position that indemnification is not possible for liabilities arising under certain 11 12 federal securities laws, and federal legislation prohibits indemnification for certain ERISA violations. Indemnitee understands and acknowledges that the Corporation has undertaken or may be required in the future to undertake with the SEC to submit the question of indemnification to a court in certain circumstances for a determination of the Corporation's right to indemnify Indemnitee. ARTICLE IX MISCELLANEOUS PROVISION Section 1. Checks: All checks or demands for money and notes of the corporation shall be signed by such officer or officers as the Board of Directors may from time to time designate. Section 2. Fiscal Year: The fiscal year shall end on December 31. Section 3. Notice: Whenever written notice is required to be given to any person, it may be given to such person, either personally or by sending a copy thereof through the mail, or by telegram, charges prepaid, to his or her address appearing on the books of the corporation, or supplied by him to the corporation for the purpose of notice. If the notice is sent by mail or by telegraph, it shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a telegraph office for transmission to such person. Such notice shall specify the place, day and hour of the meeting and, in the case of a special meeting of stockholders, the general nature of the business to be transacted. Section 4. Waiver of Notice: Whenever any written notice is required by statute, or by the certificate or by the Bylaws of this corporation a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Except in the case of a special meeting of stockholders neither the business to be transacted at nor the purpose of the meeting need be specified in the waiver of notice of such meeting. Attendance of a person either in person or by proxy, at any meeting shall constitute a waiver of notice of such meeting except where a person attends a meeting for the express purpose of objecting to the transaction of any business because the meeting was not lawfully called or convened. Section 5. Disallowed Compensation: Any payments made to an officer or employee of the corporation such as a salary, commission, bonus, interest, rent, travel or entertainment expense incurred by him or her, which shall be disallowed in whole or in part as a deductible expense by the Internal Revenue Service, shall be reimbursed by such officer or employee to the corporation to the full extent of such disallowance. It shall be the duty of the directors, as a Board, to enforce payment of each such amount disallowed. In lieu of payment by the officers or employee, subject to the determination of the directors, proportionate amounts may be withheld from his or her future compensation payments until the amount owed to the corporation has been recovered. Section 6. Resignations: Any director or other officer may resign at anytime, such resignation to be in writing, and to take effect from the time of its receipt by the corporation, unless such time is fixed in the resignation and then from that date. The acceptance of a resignation shall not be required to make it effective. 12 13 Section 7. Directors Held Harmless: Directors of the corporation shall not be liable to either the corporation or its stockholders for monetary damages for a breach of fiduciary duties unless the breach involves: (1) a director's duty of loyalty to the corporation or its stockholders; (2) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (3) liability for unlawful payments of dividends or unlawful stock purchases or redemption by the corporation; or (4) a transaction from which the director derived an improper personal benefit. Notwithstanding any of the foregoing, the directors reserve the right to adopt separate indemnification agreements for each officer and/or director which will not be construed to supersede any of the foregoing. ARTICLE X ANNUAL STATEMENT Section 1. The President and Board of Directors shall present at each annual meeting a full and complete statement of the business and affairs of the corporation for the preceding year. Such statement shall be prepared and presented in whatever manner the Board of Directors shall deem advisable and need not be verified by a certified public accountant. ARTICLE XI AMENDMENT OF BYLAWS Section 1. By the Stockholders. These Bylaws may be amended or repealed at any regular or special meeting of the stockholders if notice of the proposed amendment is contained in the notice of the meeting. Section 2. By the Board of Directors. These Bylaws may be amended or repealed by the affirmative vote of a majority of the whole Board of Directors of any meeting of the Board, if notice of the proposed amendment is contained in the notice of the meeting. However, the directors may not modify the Bylaws fixing their qualifications, classifications, or term of office. 13 EX-5.1 3 OPINION OF PRESTON GATES & ELLIS LLP 1 EXHIBIT 5.1 Opinion and Consent of Counsel October 22, 1999 VoiceStream Wireless Holdings Corporation 3650 131st Avenue S.E. Bellevue, Washington 98006 Re: Registration Statement on Form S-4 of VoiceStream Wireless Holdings Corporation Ladies and Gentlemen: We have acted as counsel to VoiceStream Wireless Holdings Corporation (the "Company") in connection with the filing of the above-referenced Registration Statement (the "Registration Statement") relating to the registration of shares (the "Shares") of Common Stock, no par value per share, of the Company that may be issued in exchange for shares of stock of VoiceStream Wireless Corporation, Omnipoint Corporation and Aerial Communications, Inc. in connection with certain transactions (the "Transactions") described in the Registration Statement. In connection therewith, we have reviewed the Company's Restated Certificate of Incorporation, Amended and Restated Bylaws and minutes of appropriate meetings, and we are familiar with the proceedings to date with respect to the Transactions and the proposed issuance of the Shares and have examined such records, documents and questions of law, and have satisfied ourselves as to matters of fact, as we have considered relevant and necessary as a basis for this opinion. Based on the foregoing, it is our opinion that: 1. The Company is duly incorporated and validly existing under the laws of the State of Delaware. 2. The Shares will be legally issued, fully paid and non-assessable under the Delaware General Corporation Law when certificates representing the Shares shall have been duly executed, countersigned and registered and duly delivered in exchange for the shares of stock of VoiceStream Wireless Corporation, Omnipoint Corporation and Aerial Communications, Inc. in connection with the Transactions. We do not find it necessary for the purposes of this opinion to cover, and accordingly we express no opinion as to, the application of the securities or blue sky laws of the various states to the sale of the Shares. We hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to all references to our firm included in or made a part of the Registration Statement. Very truly yours, PRESTON GATES & ELLIS LLP BY /s/ G. Scott Greenburg ------------------------- G. Scott Greenburg EX-10.26 4 SHAREHOLDERS AGREEMENT 1 EXHIBIT 10.26 EXECUTION COPY - -------------------------------------------------------------------------------- SHAREHOLDERS AGREEMENT OF WESTERN PCS CORPORATION BY AND BETWEEN WESTERN WIRELESS CORPORATION, a Washington corporation, HUTCHISON TELECOMMUNICATIONS PCS (USA) LIMITED, a British Virgin Islands corporation, AND WESTERN PCS CORPORATION, a Delaware corporation - -------------------------------------------------------------------------------- 2 TABLE OF CONTENTS
Page ---- 1. EFFECTIVE DATE OF AGREEMENT.................................................1 2. DEFINITIONS.................................................................1 3. BOARD COMPOSITION; ELECTION OF REPRESENTATIVES TO THE BOARD; COMPENSATION COMMITTEE. .............................................9 4. CERTAIN AFFILIATE TRANSACTIONS.............................................10 5. TRANSFER...................................................................10 6. RIGHTS OF FIRST OFFER AND FIRST REFUSAL....................................11 7. DRAG ALONG RIGHT...........................................................16 8. TAG ALONG RIGHT............................................................18 9. ISSUANCE OF COMPANY SECURITIES.............................................19 10. DISPOSITION TRANSACTIONS...................................................21 11. REGISTRATION RIGHTS........................................................25 12. CERTAIN COVENANTS OF THE COMPANY AND WWC...................................37 13. MISCELLANEOUS..............................................................40 14. TERMINATION OF RIGHTS AND OBLIGATIONS......................................45 15. INVESTOR 50% TRANSFEREE AND WWC 50% TRANSFEREE; OTHER TRANSFEREES ...............................................................47
3 SHAREHOLDERS AGREEMENT This SHAREHOLDERS AGREEMENT OF WESTERN PCS CORPORATION (this "Agreement") is made as of February 17, 1998, by and between Western Wireless Corporation, a Washington corporation ("WWC"), Hutchison Telecommunications PCS (USA) Limited, a British Virgin Islands corporation (the "Investor"; WWC and the Investor being referred to herein as the "Shareholders"), and Western PCS Corporation, a Delaware corporation (the "Company"). WHEREAS, the Shareholders, Hutchison Telecommunications Limited, a Hong Kong corporation ("HTL"), the owner of 100% of the issued and outstanding share capital of the Investor, and the Company have entered into a Purchase Agreement dated as of October 14, 1997 (the "Purchase Agreement"), pursuant to which the Investor has agreed to purchase from the Company, and the Company has agreed to issue and sell to the Investor, 2,484 shares of the Company's Common Stock, $0.001 par value ("Common Stock"), representing 19.9% of the Company's outstanding shares of Common Stock after giving effect to such issuance and sale, all on the terms and subject to the conditions set forth in the Purchase Agreement. WWC is the owner of 10,000 shares of Common Stock, which will represent 80.1% of the outstanding shares of Common Stock after giving effect to the issuance and sale of the foregoing shares of Common Stock to the Investor. WHEREAS, the Shareholders and the Company wish to set forth certain agreements concerning the management and control of the Company, the ownership and transfer of shares of Common Stock, and certain other matters as provided herein. NOW, THEREFORE, in consideration of the mutual and dependent promises set forth herein, each Shareholder hereby agrees with each other Shareholder and with the Company, and the Company hereby agrees with each of the Shareholders, as follows 1. EFFECTIVE DATE OF AGREEMENT. This Agreement shall become effective upon the Closing, pursuant to and as defined in the Purchase Agreement. 2. DEFINITIONS. (a) Unless the context requires otherwise, capitalized terms used but not defined in this Agreement have the meanings given in the Purchase Agreement. (b) As used in this Agreement, the following terms have the respective meanings set forth below (applicable to both the singular and plural forms of such terms): "$" means United States dollars. "Affiliate Change of Ownership" has the meaning given in Section 10(b)(ii). 1 4 "Agreement" means this Shareholders Agreement of Western PCS Corporation, as amended, modified, supplemented or restated from time to time in accordance with the terms hereof. "Appraisal Procedure" means a procedure whereby two independent appraisers, one chosen by WWC and one by the Investor, shall mutually agree upon the determination of the Private Market Value. Each party shall deliver a notice to the other appointing its appraiser within ten Business Days after the Appraisal Procedure is invoked. If, within 30 days after appointment of the two appraisers, they are unable to agree upon the Private Market Value, then (i) if the difference between the two appraisers' respective determinations is an amount that is not greater than 20% of the average of such determinations, such average shall be binding and conclusive on the Company and the Shareholders or (ii) if the difference between the two appraisers' respective determinations is an amount that is greater than 20% of such average, then a third independent appraiser shall be chosen within five Business Days thereafter by the mutual agreement of such first two appraisers or, if such first two appraisers fail to agree upon the appointment of a third appraiser, such appointment shall be made by the then-President of the American Arbitration Association within five Business Days of request. The decision of the third appraiser so appointed and chosen shall be given within 30 days after the selection of such third appraiser. The decisions of the appraisers with the two closest determinations shall be averaged and such average shall be binding and conclusive on the Company and the Shareholders. Each appraiser selected shall have expertise in mergers and acquisitions, valuation analysis and the Company's then-current business activities and in arriving at its determination shall take into account the terms of this Agreement and the amount a willing buyer would pay a willing seller for 100% of the outstanding capital stock of the Company on the basis set forth in the definition of "Private Market Value". In the case of any Appraisal Procedure carried out pursuant to Section 10(a) or 10(c) or pursuant to an exercise of the Demand Event Drag Along Right, the costs of all such appraisers shall be borne by WWC; provided, that WWC shall not be required to pay any amounts to the appraiser selected by the Investor in excess of the amounts paid by WWC to the appraiser selected by WWC (or, if greater, an arm's length fee payable to a comparable independent appraiser). In the case of any Appraisal Procedure carried out pursuant to Section 10(b) or an exercise of the Demand Event Tag Along Right, (i) the cost of the appraiser selected by WWC shall be borne by WWC, (ii) the cost of the appraiser selected by the Investor shall be borne by the Investor, and (iii) the cost of a third appraiser, if any, shall be borne by the Company. "Arbitrators" has the meaning set forth in Section 13(k) hereof. "Assignable Investor Rights" has the meaning given in Section 15(a)(i). "Bid" has the meaning given in Section 6(c)(ii). "Bid Closing Period" has the meaning given in Section 6(c)(iv). "Blackout Period" has the meaning given in Section 11(e)(ii). "Board" means the board of directors of the Company. "Class A Stock" has the meaning given in Section 10(f)(i). 2 5 "Commission" means the United States Securities and Exchange Commission. "Common Stock" means the Company's Common Stock, par value $0.001, and shall include any new, substituted and additional securities issued at any time in replacement of the Common Stock or issued or delivered with respect to the Common Stock. "Company" means Western PCS Corporation, a Delaware corporation, and its successors and assigns. "Company Debt" has the meaning given in Section 12(g). "Company Group" means the Company, its Subsidiaries and Cook Inlet Western Wireless PV/SS PCS L.P. "Consideration Securities" has the meaning given in Section 7(c)(ii). "Controlling WWC Shareholders" means John W. Stanton, Theresa Gillespie, Hellman & Friedman, Goldman, Sachs & Co. and Providence Ventures, Inc. "Demand Event" means the acquisition in a single transaction or series of related transactions by a third party or group of related third parties (other than the Controlling WWC Shareholders or Affiliates of the Controlling WWC Shareholders) of capital stock of WWC representing more than 50% of the total number of issued and outstanding shares of Class A and Class B Common Stock of WWC (after giving effect to such acquisition transaction), including pursuant to an amalgamation, exchange offer, business combination, consolidation or corporate reorganization. "Demand Event Consideration" has the meaning given in Section 10(g)(ii). "Demand Event Drag Along Right" has the meaning given in Section 10(g)(i). "Demand Event Tag Along Right" has the meaning given in Section 10(g)(i). "Demand Event Transaction" has the meaning given in Section 10(g)(i). "Disposition Event" means the occurrence before a Terminating Reduction of any of the following without the prior approval of at least one of the directors on the Board designated by the Investor (it being understood that following a Terminating Reduction there shall be no further Disposition Events or rights with respect thereto): (a) Any incurrence (including in a refinancing or pursuant to a guarantee or like undertaking of liability) of indebtedness for borrowed money (including the issuance of non-voting, non-convertible preferred stock) in excess of $10,000,000 in a single instance or $25,000,000 in the aggregate in a fiscal year, other than pursuant to any loan or financing agreement of the Company or any of its Subsidiaries in existence on the date hereof (it being understood that as described in Section 9(a), the Company will first seek capital when needed in the form of loans from, or debt offerings to, third parties); provided, that there shall be no Disposition Event in respect of individual borrowings (regardless of amount) under a loan or 3 6 financing facility if such loan or financing facility has been approved by at least one of the Investor's designated directors. (b) Adoption of any annual Operating Plan and Budget or any material amendment or modification to a previously adopted annual Operating Plan and Budget; provided, that if at least one of the directors of the Board designated by the Investor (i) does not approve an annual Operating Plan and Budget, the prior year's Operating Plan and Budget shall be the Operating Plan and Budget for the Company for the next year, in which case there shall be no Disposition Event (unless the Board, without the approval of at least one of the Investor's designated directors, adopts and implements a new Operating Plan and Budget) and (ii) does not approve any material amendment or modification to an Operating Plan and Budget, then the Operating Plan and Budget prior to such material amendment or modification shall continue, in which case there shall be no Disposition Event (unless the Board, without the approval of at least one of the Investor's designated directors, adopts and implements the material amendment or modification). (c) Any acquisition (by means of a purchase of stock or assets, or a merger, consolidation or otherwise, other than a transaction in which the Drag Along Right is exercised) of a PCS system or wireless telecommunications business (or interest therein) in a single transaction or series of related transactions involving an aggregate acquisition cost in excess of $100,000,000, provided, that there shall be no Disposition Event in respect of any individual bid (regardless of amount) in an FCC auction or reauction of spectrum allocated to wireless telecommunications so long as the maximum aggregate bids with respect to such auction or reauction has been approved by at least one of the Investor's designated directors. (d) Any disposition by the Company (by means of a sale of stock or assets, or a merger, consolidation or otherwise, but other than a transaction in which the Drag Along Right is exercised) of a PCS system or wireless telecommunications business (or interest therein) in a single transaction or series of related transactions involving an aggregate sale price in excess of $50,000,000. (e) Adoption of any annual capital expenditures budget, or (i) any material variation with respect to any capital expenditure project or group of related capital expenditure projects, which project or group of related projects is material, or (ii) any amendment or modification to an approved annual capital expenditures budget which amendment or modification is material to the annual capital expenditures budget, taken as a whole; provided, that if at least one of the directors of the Board designated by the Investor (i) does not approve an annual capital expenditures budget, the prior year's capital expenditures budget shall be the capital expenditures budget for the Company for the next year, in which case there shall be no Disposition Event (unless the Board, without the approval of at least one of the Investor's designated directors, adopts and implements a new annual capital expenditure budget) or (ii) does not approve any such material variation, amendment or modification, the capital expenditures budget prior to such variation, amendment or modification shall be the capital expenditures budget, in which case there shall be no Disposition Event (unless the Board, without the approval of at least one of the Investor's designated directors, adopts and implements such material variation, amendment or modification). "Disposition Transaction" has the meaning given in Section 10 of this Agreement. 4 7 "Dispute" has the meaning given in Section 13(k). "Drag Along Notice" has the meaning given in Section 7(d). "Drag Along Right" has the meaning given in Section 7(a). "Employment Agreement" has the meaning given in the Services Agreement. "Excepted Transfer" means a Transfer of Common Stock which occurs in (a) a Public Sale, (b) a transaction in which the Drag Along Right or Demand Event Drag Along Right is exercised, (c) a transaction in which the Tag Along Right or Demand Event Tag Along Right is exercised, (d) a merger or acquisition in which the Company is not the surviving entity, or (e) in the case of WWC, Transfers in an aggregate amount up to 10% of the outstanding shares of Common Stock to transferees which are entities with substantial assets and business operations in the telecommunications industry. "Exercise Period" has the meaning given in Section 6(d)(iii). "HTL" means Hutchison Telecommunications Limited, a corporation organized under the laws of Hong Kong. "Investor" means Hutchison Telecommunications PCS (USA) Limited, a British Virgin Islands corporation, and, unless otherwise specified herein or unless the context requires otherwise, includes its successors and all Permitted Affiliate Transferees of the Investor which hold shares of Common Stock and any Investor 50% Transferee to the extent such transferee becomes entitled to the rights, and subject to the obligations, of the Investor hereunder in accordance with the express provisions of Section 15. "Investor 50% Block" means a number of shares of Common Stock representing a Percentage Ownership of 9.95% or more of the outstanding shares of Common Stock. "Investor 50% Transfer" means the Transfer by the Investor of an Investor 50% Block to a third party or group of related third parties, other than in an Excepted Transfer. "Investor 50% Transferee" means a third party (or, collectively, a group of related third parties) which is the transferee in an Investor 50% Transfer. "Investor Change of Ownership" has the meaning given in Section 10(b)(i). "Investor Deemed Class A Shares" has the meaning given in Section 10(g)(ii). "Mandatory WWC Rights" has the meaning given in Section 15(a)(ii) "NASD" has the meaning given in Section 11(a)(iii). "New Issue Securities" has the meaning given in Section 9(c)(i). "Offer" has the meaning given in Section 6(c)(ii). 5 8 "Offeree-Shareholder" has the meaning given in Section 6(d)(ii). "Offeror-Shareholder" has the meaning given in Section 6(d)(ii). "Operating Plan and Budget" has the meaning given in the Services Agreement. "Order Period" has the meaning given in Section 6(c)(ii). "Other Holder" has the meaning given in Section 12(e). "Other Shareholders" has the meaning given in Section 11(b)(iii)(A). "PCS" means broadband personal communications services operating in the 1850-1910 MHz and 1930-1990 MHz bands. "Percentage Ownership" means, as to any Shareholder, the percentage of the outstanding shares of Common Stock owned by such Shareholder, including for this purpose, shares owned by such Shareholder's Permitted Affiliate Transferees. "Permitted Affiliate Transferee" means: (a) in the case of the Investor, (i) HTL, (ii) any Subsidiary of HTL, (iii) any other entity acceptable to WWC in which HTL owns, directly or indirectly, more than 40% of the outstanding voting power, and (iv) in the case of any Person referred to in clause (i), (ii) or (iii), the Investor; (b) in the case of WWC, (i) any Subsidiary of WWC other than the Company and its Subsidiaries and (ii) in the case of any Person referred to in clause (i), WWC. "Person" means an individual, partnership, joint-stock company, corporation, trust or unincorporated organization, limited liability company, or a government or agency or political subdivision thereof or any other entity. "Private Market Value" means the fair private market value of the Company as of the date of the event triggering the right to make or require a Disposition Transaction under Section 10, as determined in accordance with the Appraisal Procedure. The appraised Private Market Value shall be calculated as the price an arm's length buyer would pay for 100% of the Company, without application of any discount for the fact that the Company is or may be a Subsidiary of any other Person or for the fact that any relevant Shareholder may hold a minority interest in the Company. The Private Market Value of the Company will include the value of the Company's accumulated tax attributes, including from net operating losses, on a basis consistent with the Tax Sharing Agreement. "Proposed Transfer" has the meaning given in Section 7(a). "Proposed Transferee" has the meaning given in Section 7(a). 6 9 "public float" means the portion of the outstanding equity securities (other than non-voting, non-convertible preferred stock) of a relevant issuer or class which were obtained by the holders thereof (other than the Company, the issuer thereof, WWC, the Investor, or any Affiliate or member of senior management of any of the foregoing) in Public Sales of such securities. "Public Sale" means a public offer and sale or other public distribution of securities, including (i) pursuant to an effective registration statement under the Securities Act, (ii) pursuant to Regulation S under the Securities Act and any applicable securities or stock exchange regulations in any non-United States market or stock exchange in which the Common Stock is publicly traded, or (iii) pursuant to an exemption from registration under Rule 144 under the Securities Act, or (iv) in the case of WWC, a Spin-Off Distribution. "Qualifying IPO" means a Public Sale of the Common Stock (whether of newly issued shares or in secondary Transfers) which results in a listing of the Common Stock on a national securities exchange or quotation of the Common Stock on the NASDAQ National Market System and an aggregate public float of the Common Stock of at least 15% of the Common Stock outstanding after giving effect to such Public Sale. "Registrable Securities" has the meaning given in Section 11(a)(ii). "Registration Expenses" has the meaning given in Section 11(a)(iii). "Representative" has the meaning given in Section 11(b)(iv). "Repurchase" has the meaning given in Section 10(f)(i). "Sale" has the meaning given in Section 6(c)(i). "Sale Shares" has the meaning given in Section 6(a)(i). "Sales Notice" has the meaning given in Section 6(c)(i). "Sales Price" has the meaning given in Section 6(c)(i). "Seller" has the meaning given in Section 6(c)(i). "Selling Expenses" has the meaning given in Section 11(a)(iv). "Senior Officers" has the meaning given in the Services Agreement. "Shareholder" means, initially, the Investor and WWC, and shall include any other shareholder of the Company who becomes entitled to the rights and subject to the obligations of the Investor or WWC hereunder in accordance with the express provisions of Section 15 hereof. Unless otherwise specified herein or unless the context requires otherwise, references to any "Shareholder" shall be deemed to include all Permitted Affiliate Transferees of such Shareholder holding any shares of Common Stock. "Shareholder Closing Period" has the meaning given in Section 6(d)(iv). 7 10 "Spin-Off Distribution" means a distribution by WWC to its shareholders on a pro rata basis of the shares of Common Stock owned by WWC. "Subsidiary" means, as to any Person, another Person which is an entity as to which such Person owns more than 50% of the outstanding voting power. "Tag Along Rights" shall mean the rights described in Section 8. "Terminating Reduction" shall mean the earliest to occur of the following: (A) the Investor's Percentage Ownership shall have fallen below 15% as a result of the Transfer of shares of Common Stock to Persons other than its Permitted Affiliate Transferees; (B) the Investor's Percentage Ownership shall have fallen below 12% as a result of dilution due to new issuances of Common Stock by the Company or a combination of dilution due to new issuances of Common Stock and Transfers of Common Stock by the Investor to Persons other than its Permitted Affiliate Transferees; (C) the Common Stock shall have become a registered class of equity securities under Section 12 of the Exchange Act (or the Company shall have become a reporting company under the Exchange Act by reason of Section 15(d) of the Exchange Act), the Common Stock shall have become listed on a national securities exchange or quoted on the NASDAQ National Market System and there shall exist a public float of the Common Stock representing not less than 15% of the issued and outstanding Common Stock, or (D) the Investor shall have made an Investor 50% Transfer. "third party" means a Person who is not a party to this Agreement or an Affiliate (including a Permitted Affiliate Transferee) of any party to this Agreement. "Third-Party Closing Period" has the meaning given in Section 6(c)(iii). "Third-Party Offer" has the meaning given in Section 6(c)(iii). "Third-Party Offer Period" has the meaning given in Section 6(c)(iii). "Transfer" means any sale, assignment, pledge, hypothecation, or other transfer, disposition or encumbrance of any interest (and includes an exchange of shares in a merger, consolidation or similar transaction). "WWC" means Western Wireless Corporation, a Washington corporation, and, unless the context requires otherwise, includes its successors and all Permitted Affiliate Transferees of WWC which hold shares of Common Stock and any WWC 50% Transferee to the extent such transferee may become entitled to the rights, and subject to the obligations, of WWC hereunder in accordance with the express provisions of Section 15 hereof. "WWC Non-Company Group" means WWC and its Subsidiaries, other than the Company Group. "WWC 50% Block" means a number of shares of Common Stock representing a Percentage Ownership of more than 50% of the outstanding shares of Common Stock. 8 11 "WWC 50% Transfer" means the Transfer by WWC of a WWC 50% Block to a third party or group of related third parties, other than in an Excepted Transfer. "WWC 50% Transferee" means a third party (or, collectively, a group of related third parties) which is the transferee in a WWC 50% Transfer. "Unsolicited Bid" has the meaning given in Section 6(a)(ii). "Unsolicited Bid Notice" has the meaning given in Section 6(d)(i). "Unsolicited Bidder Closing Period" has the meaning given in Section 6(d)(vi). "U.S. GAAP" has the meaning given in Section 12(a). "WWC Debt" has the meaning given in Section 12(g). When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation". The use of a gender herein shall be deemed to include the neuter, masculine and feminine genders whenever necessary or appropriate. Whenever the word "herein," "hereunder" or "hereof" is used in this Agreement, it shall be deemed to refer to this Agreement and not to a particular Section of this Agreement unless expressly stated otherwise. 3. BOARD COMPOSITION; ELECTION OF REPRESENTATIVES TO THE BOARD; COMPENSATION COMMITTEE. (a) Pursuant to the Company's by-laws, the Board shall be constituted of ten (10) directors, subject to increase as provided in this Section 3. The Investor shall initially have the right to designate to the Board two directors (its initial designees being Mr. Canning Fok and Mr. Hans Snook), which directors will be appointed or elected to the Board effective as of the Closing. Thereafter, the number of directors whom the Investor is entitled to designate to the Board shall be adjusted in proportion with the aggregate Percentage Ownership of the Investor. For purposes of this adjustment, the Investor shall be entitled to retain the right to designate two directors until its aggregate Percentage Ownership is less than 15% and the right to designate a single director until its aggregate Percentage Ownership is less than 9.95%. The Investor shall gain the right to designate an additional director (and the Board shall in each case be expanded by one member to accommodate such new designee) when the Investor's aggregate Percentage Ownership exceeds 27.25%, 33.33%, 38.5%, 42.9%, 46.67%, and 50%. Each Shareholder shall vote all of the Common Stock over which such Shareholder has voting control (and shall take all other necessary or desirable actions within such Shareholder's control, whether in the capacity of a stockholder, director or member of a board committee of the Company or otherwise, and including attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings) for the election, removal and replacement of the Board designees named by the Investor or WWC, as the case may be, all as directed by the Investor or WWC, as the case may be, from time to time in accordance with this Section 3. The rights and obligations of 9 12 WWC and the Investor under this Section 3 shall terminate when the Investor's Percentage Ownership exceeds 50% or otherwise as set forth in Section 14 or 15. (b) Prior to the occurrence of a Terminating Reduction, the Company shall maintain a compensation committee of the Board, a majority of the members of which shall be directors who are not Senior Officers or senior executive officers of the Company. 4. CERTAIN AFFILIATE TRANSACTIONS. Prior to the occurrence of a Terminating Reduction, the Company shall not, without the prior approval of at least one of the Investor's designated directors, enter into: (a) Any transaction or series of related transactions (other than those in accordance with the terms of the Intercompany Agreements) involving the Company or any of its Subsidiaries, on the one hand, and WWC or any of its Affiliates (other than the Company and Subsidiaries of the Company), on the other hand, that (i) is not provided for in the approved annual Operating Plan and Budget then in effect and involves an amount in excess of $500,000, or (ii) is not on terms at least as favorable to the Company as would be obtained in an arm's length transaction with an independent third party. (b) Any employment agreement with any Senior Officer who at the time has an Employment Agreement. 5. TRANSFER. The Common Stock may not be Transferred by any Shareholder except as provided in this Section 5. (a) Each Shareholder (and each Permitted Affiliate Transferee of such Shareholder) shall have the unrestricted right to Transfer its Common Stock to any Permitted Affiliate Transferee of such Shareholder, provided, that each such transferee shall become bound by and entitled to all the rights and obligations hereunder applicable to such Shareholder. (b) The Investor and its Permitted Affiliate Transferees shall have the right to Transfer shares of Common Stock to Persons other than Permitted Affiliate Transferees of the Investor in a transaction other than an Excepted Transfer, provided, that (i) such Transfer shall be subject to the rights of first offer or, if applicable, first refusal under Section 6 hereof in favor of WWC or its designees and (ii) the transferee shall be subject to the approval of WWC (which approval will not be unreasonably withheld or delayed). (c) WWC and its Permitted Affiliate Transferees shall have the right to Transfer shares of Common Stock to Persons other than Permitted Affiliate Transferees of WWC in transactions other than Excepted Transfers, subject to the rights of first offer or, if applicable, first refusal under Section 6 hereof in favor of the Investor. 10 13 (d) No Shareholder shall effect any pledge, mortgage, assignment by way of security, or other lien or encumbrance of any nature ("Lien") (other than such as may be deemed to arise pursuant to this Agreement) on or with respect to any shares of Common Stock owned by it, provided, that WWC shall be permitted, when required under instruments governing its indebtedness for borrowed money, to place Liens on shares of Common Stock owned by it to secure such indebtedness if such Liens and all rights of the secured party thereunder with respect to the Common Stock are subject to the rights and obligations of the Shareholders under this Agreement, and provided further , that in connection with any foreclosure or enforcement of remedies by such secured lender upon the shares subject to such Lien, the Tag Along Right and the Drag Along Right (but not the other rights and obligations of the parties hereunder) shall terminate. In connection with any such Transfer by WWC to a secured lender by way of the granting of a Lien (but not any action by such secured lender to foreclose or enforce remedies on, or subsequently Transfer, the shares of Common Stock subject to its Lien), no rights of first offer, first refusal, Tag Along Rights or other rights of any other Shareholder hereunder shall be applicable. (e) Notwithstanding anything to the contrary in this Section 5, but subject, in the case of WWC, to Sections 12(h) and 12(j), each Shareholder shall have the right to Transfer shares of Common Stock at any time in an Excepted Transfer. (f) The Shareholders and the Company each agree to cooperate in all reasonable respects (without any obligation to incur any liability or expense) in connection with any Transfer by a Shareholder permitted by this Section 5, so as to enable such Transfer to be effected on an optimal basis for tax and other applicable regulatory purposes. 6. RIGHTS OF FIRST OFFER AND FIRST REFUSAL. (a) Investor. (i) If the Investor proposes to Transfer shares of Common Stock (the shares which are the subject of a proposed Transfer being hereinafter referred to as "Sale Shares"), other than to a Permitted Affiliate Transferee and other than by means of an Excepted Transfer, then the Investor shall first offer to Transfer such Sale Shares to WWC or its designees in accordance with the procedures for rights of first offer set forth in Section 6(c) hereof. (ii) In the event such proposed Transfer by the Investor shall arise as a result of the Investor's receipt of an unsolicited written offer from a third party or group of related third parties to purchase shares of Common Stock in a bona fide Transfer that would not be an Excepted Transfer (an "Unsolicited Bid"), which the Investor intends to accept, the Investor shall first offer to Transfer such Sale Shares to WWC (or its designees) in accordance with the procedures for rights of first refusal set forth in Section 6(d) hereof. (b) WWC. (i) If WWC proposes to make a Transfer of Sale Shares (other than to a Permitted Affiliate Transferee or by means of an Excepted Transfer (subject to Sections 11 14 12(h) and 12(j) hereof)) WWC shall first offer to Transfer such Sale Shares to the Investor in accordance with the procedures for rights of first offer set forth in Section 6(c) hereof. (ii) In the event such proposed Transfer by WWC shall arise as a result of an Unsolicited Bid to WWC which WWC intends to accept, WWC shall first offer to Transfer such Sale Shares to the Investor in accordance with the procedures for rights of first refusal set forth in Section 6(d) hereof. (c) Procedures for Rights of First Offer. (i) Any Shareholder (the "Seller") desiring to Transfer any Sale Shares held by such Seller in a transaction subject to rights of first offer pursuant to Section 6(a)(i) or 6(b)(i) above shall give written notice (a "Sales Notice") to the other Shareholders that the Seller desires to effect such a Transfer (a "Sale") and setting forth the number of Sale Shares proposed to be Transferred by the Seller in such Sale and the purchase price per share in cash it desires for such Sale Shares (the "Sales Price"). (ii) The receipt of the Sales Notice by each other Shareholder shall constitute an offer revocable only as provided below in this Section 6(c) (the "Offer") by the Seller to sell to such Shareholder for cash the relevant Sale Shares at the Sales Price. Each Shareholder, or any group of one or more Shareholders, receiving an Offer shall have a 30-day period (the "Order Period") in which to give a written notice (a "Bid") to the Seller, which written notice shall state the number of Sale Shares that such Shareholder or group of Shareholders proposes to purchase at the Sales Price; provided, however, that all Bids must in the aggregate be for all of the Sale Shares the Seller proposes to Transfer as stated in the Sales Notice, unless the Seller, in its sole discretion, elects to accept Bids for less than all of the Sale Shares proposed to be sold. (iii) Upon the receipt of any Bids, which Bids in the aggregate are for the purchase of not less than all the Sale Shares, the Seller shall have the right to solicit offers for the Sale Shares from any third party (a "Third-Party Offer") for a period of 90 days from the date the Order Period expires (the "Third-Party Offer Period"). To the extent the Seller receives a Third-Party Offer and such Third-Party Offer contains a proposed sales price in excess of the Sales Price, then the Seller shall have the right to sell the Sale Shares to the third party pursuant to its Third-Party Offer. If no Bids are delivered during the Order Period, or if the Bids received are not in the aggregate for all the Sale Shares, then the Seller shall be entitled to accept, in its sole discretion, any Third-Party Offer it so chooses within the Third-Party Offer Period at a sales price and on terms and conditions no less favorable to the Seller than those set forth in the Sales Notice. If such sale pursuant to a Third-Party Offer is not consummated within 60 days from the end of the Third-Party Offer Period (the "Third Party Closing Period") (or such longer period as may be provided pursuant to clause (v) below), then no such sale shall be consummated without once again following the procedures under this Section 6. (iv) The Shareholder or group of Shareholders providing a Bid which is accepted by the Seller shall be under a binding obligation to purchase and pay for all the Sale Shares accepted pursuant to their Bid within a 60-day period (or such longer period as may be provided pursuant to clause (v) below) from the date on which the purchasing Shareholder (or group of Shareholders) receives written notice of the Seller's acceptance of their Bid (the 12 15 "Bid Closing Period"), which notice shall be given promptly after the expiration of the Third-Party Offer Period if no qualifying Third-Party Offers have been received or, if earlier, the Seller's determination to accept the Bid. At the closing of any purchase of the Sale Shares by any purchasing Shareholders, the Seller shall deliver to the purchasing Shareholders, against receipt of the purchase price therefor by cash or certified or bank cashier's check, the certificate or certificates representing the Sale Shares each such purchasing Shareholder has elected to purchase, properly endorsed for transfer, with all necessary transfer and documentary stamps affixed, and in a form such that upon presentation to the Company, the Sale Shares represented thereby may be registered in the names of the respective purchasers. (v) If the purchase and sale of the Sale Shares pursuant to a Third-Party Offer or any Bid, as the case may be, is subject to any prior regulatory approval, consent, waiver, notice or like requirement, then, provided that the third party or the purchasing Shareholder(s), as the case may be, shall promptly make any necessary filings or applications for, and diligently pursue, the satisfaction of such regulatory requirements, the time period during which such purchase and sale must be consummated shall be extended until the earlier of (i) five Business Days after all such regulatory requirements have been satisfied and (ii) 90 days after the expiration of the Third-Party Closing Period or the Bid Closing Period, as the case may be, provided, that such 90-day period shall be extended by an additional 90 days upon written request of the Seller or the third party or the purchasing Shareholder(s), as the case may be, unless the Seller shall deliver to such third party or Shareholder(s), as the case may be, an opinion of counsel experienced in the relevant area of law or regulation that such regulatory requirements cannot be satisfied by such third party or Shareholder(s), as the case may be. (vi) If the aggregate number of shares offered to be purchased in all Bids received by the Seller exceeds the number of Sale Shares, and if such Bids are accepted, the Sale Shares shall be allocated among such Bids pro rata based on the number of Sale Shares offered to be purchased in each Bid. Each Bid shall be irrevocable, regardless of whether the number of Sale Shares to be delivered upon acceptance of such Bid shall be reduced in accordance with the foregoing, and shall be deemed to constitute a Bid to purchase such lesser number of Sale Shares as shall be determined on such pro rata basis. Any Shareholder which fails to deliver a Bid before the expiration of the Order Period shall be deemed to have elected not to purchase any of the Sale Shares pursuant to the Sales Notice. (d) Procedure for Rights of First Refusal. (i) If at any time a Shareholder receives an Unsolicited Bid to which Section 6(a)(ii) or 6(b)(ii) applies, and which such Shareholder intends to accept, such Shareholder shall, prior to making any Transfer of Sale Shares pursuant to such Unsolicited Bid, give written notice (the "Unsolicited Bid Notice") to the other Shareholders, accompanied by a copy of such Unsolicited Bid. (ii) An Unsolicited Bid Notice shall constitute an irrevocable offer of the Shareholder giving such notice to sell the Sale Shares to the other Shareholders, on the terms and conditions and at the price specified in such notice (including the exact form and type of consideration offered in the Unsolicited Bid). A Shareholder making an offer to sell pursuant to an Unsolicited Bid Notice is hereinafter referred to as an "Offeror-Shareholder", and a 13 16 Shareholder receiving such offer pursuant to an Unsolicited Bid Notice is hereinafter referred to as an "Offeree-Shareholder". (iii) Within 30 days after delivery of the Unsolicited Bid Notice to the Offeree-Shareholders (the "Exercise Period"), each Offeree-Shareholder shall have the right, subject to the pro rata allocation of purchase rights set forth in clause (iv) below, to accept the offer pursuant to an Unsolicited Bid Notice as to all or any portion of the Sale Shares, by notice to the Offeror-Shareholder, with copies to each other Offeree-Shareholder and the Company. Each Offeree-Shareholder shall specify in such notice any maximum number of Sale Shares such Offeree-Shareholder is willing to purchase. (iv) Each election to purchase Sale Shares pursuant to this Section 6(d) shall be irrevocable, regardless of whether the number of Sale Shares deliverable upon the exercise of such election shall be reduced in accordance with the provisions of this clause (iv), and shall be deemed to constitute an election to purchase such lesser number of Sale Shares as shall be determined in accordance with this clause (iv). If an Offeree-Shareholder shall fail to deliver notice of its election to purchase Sale Shares before the expiration of the Exercise Period, it shall be deemed to have elected not to purchase any Sale Shares pursuant to the relevant Unsolicited Bid Notice. If elections to purchase more than 100% of the Sale Shares are made by the Offeree Shareholders, the right to purchase Sale Shares shall be allocated among the Offeree-Shareholder(s) electing to purchase Sale Shares pro rata based on the number of Sale Shares each has elected to purchase. The Offeree-Shareholders electing to purchase Sale Shares shall be under a binding obligation to purchase and pay for all the Sale Shares accepted pursuant to their elections within 60 days after the expiration of the Exercise Period (the "Shareholder Closing Period") (or such longer period as may be provided pursuant to clause (vii) below). (v) All timely elections by Offeree-Shareholders to purchase Sale Shares shall be binding on the Offeror-Shareholder, provided, that such elections shall not be binding on the Offeror-Shareholder if the Offeree-Shareholders do not in the aggregate elect to purchase all of the Sale Shares on the terms and conditions of the Unsolicited Bid Notice, including the exact form and type of consideration. In such event, no sales pursuant to such elections need be made by the Offeror-Shareholder, and the Offeror-Shareholder shall be entitled to sell such Sale Shares to the Person(s) named in the Unsolicited Bid Notice in accordance with clause (vi) (and, if applicable, clause (vii)) below at a sales price and on terms and conditions (including the form of consideration) no less favorable to the Offeror-Shareholder than those in the Unsolicited Bid Notice. Notwithstanding the foregoing, the Offeror-Shareholder may, by written notice to the Offeree-Shareholders within 10 days after the Offeree-Shareholders give notice of their elections to purchase Sale Shares, waive its right not to sell that part of the Sale Shares for which elections have been made, and accept and confirm all such elections so made, in which case the time period set forth in clause (iv) above shall run from the date such notice is delivered by the Offeror-Shareholder rather than the expiration of the Exercise Period (or for such longer period as may be applicable in accordance with clause (vii) below). If the form of consideration to be paid by the Person(s) making the Unsolicited Bid shall differ from that described in the Unsolicited Bid Notice in respect of any non-cash component specified in the Unsolicited Bid Notice, and if the Offeree-Shareholders were unable to deliver the exact form and type of non-cash consideration provided for in such notice, but would be able to provide the new form of 14 17 consideration, the Sale Shares shall be required to be reoffered to the Offeree-Shareholders in accordance with this Section 6(d). (vi) Any Transfer of Sale Shares to the prospective transferee named in the Unsolicited Bid Notice shall be consummated within a period of 60 days after the expiration of the Exercise Period (the "Unsolicited Bidder Closing Period") (or such longer period as may be provided pursuant to clause (vii) below). (vii) If the purchase and sale of such Sale Shares pursuant to an Unsolicited Bid or any election by an Offeree-Shareholder, as the case may be, is subject to any prior regulatory approval, consent, waiver, notice or like requirement, then, provided that the third party making such Unsolicited Bid or such Offeree-Shareholder, as the case may be, shall promptly make any necessary filings or applications for, and diligently pursue, the satisfaction of such regulatory requirements, the time period during which such purchase and sale must be consummated shall be extended until the earlier of (i) five Business Days after all such regulatory requirements have been satisfied and (ii) 90 days after the expiration of the Unsolicited Bidder Closing Period or Shareholder Closing Period, as the case may be, provided, that such 90-day period shall be extended by an additional 90 days upon written request of the Offeror-Shareholder, the third party or the purchasing Offeree-Shareholder(s), as the case may be, unless the Offeror-Shareholder shall deliver to such third party or Offeree-Shareholder(s), as the case may be, an opinion of counsel experienced in the relevant area of law or regulation that such regulatory requirements cannot be satisfied by such third party or Offeree-Shareholder(s), as the case may be. (viii) At the closing of any purchase of the Sale Shares by any Offeree-Shareholders, the Offeror-Shareholder shall deliver to the Offeree-Shareholders, against receipt of the purchase price therefor by cash or certified or bank cashier's check, in respect of the cash portion of such purchase price and such other relevant instruments or securities as are required to comprise the consideration offered in the Unsolicited Bid, the certificate or certificates representing the Sale Shares each such Offeree-Shareholder has elected to purchase, properly endorsed for transfer, with all necessary transfer and documentary stamps affixed, and in a form such that upon presentation to the Company the Sale Shares represented thereby may be registered in the names of the respective purchasers. (f) Exclusions. The provisions of this Section 6 shall not apply to: (i) a Transfer permitted by the provisions of Section 5(a), 5(d) or 5(e) hereof; (ii) a Transfer of shares of Common Stock between WWC and the Investor; (iii) a Transfer by WWC if the Investor is unable to purchase or own all of the Sale Shares as a result of its inability to satisfy any applicable legal or regulatory requirements for such purchase or ownership within the time period specified in Sections 6(c)(v) or 6(d)(vii), as the case may be. (g) Tag Along Rights Unaffected. The Tag Along Rights of the Investor shall not be deemed waived, limited or otherwise adversely affected by any determination by the Investor not to exercise an applicable right of first offer or first refusal under this Section 6 or 15 18 any inability of the Investor to deliver any required non-cash consideration in the exact form and type offered in an Unsolicited Bid to WWC. 7. DRAG ALONG RIGHT. (a) If at any time WWC proposes to make a bona fide Transfer (the "Proposed Transfer") of all the shares of Common Stock owned by it and all other shareholders of the Company which are subject to drag along rights in favor of WWC to a third party or group of related third parties (the "Proposed Transferee") WWC shall have the right (the "Drag Along Right"), subject to the further requirements of this Section 7, to require all (but not less than all) of the other Shareholders (which term includes, for purposes of this Section 7, all other shareholders of the Company which are subject to drag along rights in favor of WWC) to sell in the Proposed Transfer all (but not less than all) of the shares of Common Stock then owned by such other Shareholders on the same terms and conditions per share as are obtained by WWC. Each Shareholder agrees to take all reasonable steps necessary to enable such Shareholder to comply with the provisions of this Section 7, including executing and performing a purchase and sale, merger or other applicable acquisition agreement on the same terms as WWC. WWC and the Investor each agree to make full disclosure to the other concerning the details of any relationship and dealings it may have with the other party or parties to the Proposed Transfer. WWC shall keep each other Shareholder advised in writing of, and consult on a timely basis with each other Shareholder concerning, any Transfer with respect to which it has exercised the Drag Along Right. (b) The Investor, WWC and John W. Stanton each hereby agree that for a period of one year after the closing of any transaction in which the Drag Along Right is exercised and all the Common Stock of the Company subject to drag along rights in favor of WWC is Transferred solely for cash, such Person shall not acquire or hold, directly or indirectly, any equity interest in any entity which, directly or indirectly, acquired in the transaction which gave rise to the Drag Along Right the continuing business of the Company, other than in nominal amounts of publicly traded securities. (c) This Section 7 shall only apply to the Investor if the consideration to be received by the shareholders of the Company in the Proposed Transfer: (i) comprises solely cash and the gross amount to be received by the Investor is sufficient to provide it with a return of its invested capital on the shares of Common Stock sold by it, together with an internal rate of return thereon of at least 23%; or (ii) comprises solely equity securities of the surviving entity in such transaction ("Consideration Securities"), representing 50% or less of the total outstanding voting power of such entity after giving effect to the transaction, and (A) the value of such Consideration Securities to be received by the Investor is sufficient to provide it with an implied return of its invested capital on the shares of Common Stock sold by it, together with an internal rate of return thereon of at least 15% (the value of the Consideration Securities being measured for this purpose as of the date immediately preceding the announcement of the Proposed Transfer transaction, (x) if there is a public trading market for such Consideration Securities, as an amount equal to the average of the mean of the high and low sales prices of such Consideration Securities on the principal market on which such securities 16 19 are traded on each of the 30 consecutive trading days immediately preceding the announcement of the transaction or (y) if there is no such public trading market, as mutually agreed by WWC and the Investor within 14 days after the definitive terms of the transaction have been announced or, if not mutually agreed within such period, as determined pursuant to a private market value appraisal in the same manner as the Appraisal Procedure (with the expense of such appraisal to be borne by WWC)) and (B) the Investor is provided with demand registration rights with respect to the Consideration Securities received by it containing terms and conditions substantially the same as those in Section 11, which rights shall be exercisable twice in any 12-month period until all of the Consideration Securities received by the Investor have been Transferred to transferees who would not be entitled to the benefit of such registration rights under Section 15(a) or can be Transferred in Public Sales to U.S. persons in the United States without registration under the Securities Act and without imposition of volume limitations under Rule 144 under the Securities Act; or (iii) comprises solely Consideration Securities representing more than 50% of the total outstanding voting power of the surviving entity after giving effect to the transaction, and either (A) if such Consideration Securities are not a class of equity securities which, after giving effect to the transaction, has a public float representing at least 15% of the outstanding equity securities of such class, the rights and obligations of the Investor hereunder shall continue in effect and there is substantial management continuity from the Company to such surviving entity, or (B) if the Consideration Securities are a class of equity securities which, after giving effect to the transaction, has a public float representing at least 15% of the outstanding securities of such class, the only rights and obligations of the Investor hereunder which continue in effect shall be those which survive after a Qualifying IPO as provided in Section 14 hereof; or (iv) comprises a combination of cash and Consideration Securities, in which case, (A) if the Consideration Securities to be received by the shareholders of the Company represent 50% or less of the total outstanding voting power of the surviving entity after giving effect to the transaction, then (1) the value of such consideration to be received by the Investor is sufficient to provide it with an implied return of its invested capital on the shares of Common Stock sold by it, together with an internal rate of return thereon of at least the sum of (x) 15% and (y) 8% multiplied by the percentage of the total consideration that is represented by cash, and (2) demand registration rights are provided to the Investor with respect to such Consideration Securities as provided in clause (ii) above, or (B) if the Consideration Securities to be received by the shareholders of the Company represent more than 50% of the total outstanding voting power of the surviving entity after giving effect to the transaction, the provisions of (iii) above shall apply to the Investor and no return of invested capital or internal rate of return requirement shall apply. (d) To exercise the Drag Along Right, WWC shall give each other Shareholder and the Company a written notice (a "Drag Along Notice") containing (i) confirmation that the Proposed Transferee proposes to acquire or make an exchange for all the then outstanding shares of Common Stock owned by WWC and the Investor (and all other shareholders of the Company which are subject to drag along rights in favor of WWC), (ii) the name and address of the Proposed Transferee and (iii) the proposed purchase price, terms of payment and other material terms and conditions of the Proposed Transferee's offer. Each Shareholder shall thereafter be obligated, subject, in the case of the Investor, to Section 7(c) and the other requirements for the exercise of the Drag Along Right under this Section 7, to sell all (but not 17 20 less than all) of its shares of Common Stock as provided in such Drag Along Notice, provided, that the transaction is consummated within 180 days of delivery of the Drag Along Notice (or such longer period as may reasonably be required for any applicable FCC approval or waiver to be obtained and become final). If the sale is not consummated within such 180-day (or longer) period, then each Shareholder shall no longer be obligated to sell such Shareholder's shares of Common Stock pursuant to that specific Drag Along Notice but shall remain subject to the provisions of this Section 7 with respect to any subsequent Transfer to which the Drag Along Right would apply. (e) The Drag Along Right and the obligations of the Investor with respect thereto, shall terminate when there shall be one or more shareholders of the Company holding in the aggregate a Percentage Ownership of more than 10% of the outstanding Common Stock, which shareholders are not subject to the Drag Along Right. 8. TAG ALONG RIGHT. (a) If at any time after the date of this Agreement WWC wishes to Transfer, in one transaction or a series of related transactions, a majority of the then issued and outstanding Common Stock to any third party or group of related third parties (other than pursuant to (i) a Spin-Off Distribution or (ii) a transaction to which the Drag Along Right is exercised), WWC shall notify the Investor and the Company, in writing, of such Transfer and its terms and conditions. Within 20 days after the date that such notice is delivered to the Investor, the Investor shall notify WWC if it elects to participate in such Transfer (which notice shall be irrevocable). The Investor, if it so notifies WWC, shall have the right to sell up to all of the shares of Common Stock owned by the Investor, as the Investor may elect in its notice to WWC. WWC shall cause the transferee to purchase at the same time as the purchase from WWC all the shares of Common Stock elected to be Transferred by the Investor in accordance with the foregoing on the same terms and conditions per share as are obtained by WWC and as were specified in WWC's notice to the Investor pursuant to this Section 8(a). (b) If at any time or from time to time after the date of this Agreement WWC wishes to Transfer, in one transaction or a series of related transactions, a number of shares of Common Stock representing more than 10% and up to 50% of the then issued and outstanding Common Stock to any third party or group of related third parties (other than pursuant to a Spin-Off Distribution), WWC shall notify the Investor and the Company in writing of such Transfer and its terms and conditions. Within 20 days of the date that such notice is delivered to the Investor, the Investor shall notify WWC if it elects to participate in such Transfer (which notice shall be irrevocable). The Investor, if it so notifies WWC, shall have the right to Transfer up to the same percentage of the shares of Common Stock owned by it as are being Transferred by WWC. WWC shall cause the transferee to purchase at the same time as the purchase from WWC all the shares of Common Stock elected to be Transferred by the Investor in accordance with the foregoing on the same terms and conditions per share as are obtained by WWC and as were specified in WWC's notice to the Investor pursuant to this Section 8(b). (c) WWC and the Investor each agree to make full disclosure to the other concerning the details of any relationship and dealings it may have with the proposed 18 21 transferee in any transaction to which this Section 8 applies. WWC shall keep the Investor advised in writing of, and consult on a timely basis with the Investor concerning, any transfer it may propose to make with respect to which the tag along rights under this Section 8 may apply. 9. ISSUANCE OF COMPANY SECURITIES. (a) At such times as the Company requires additional funding, the Company will be responsive to the then existing conditions in the capital markets in determining how to raise such funding. As a general rule, the Company will first seek such capital in the form of loans from, or debt offerings in the capital markets to, third parties (it being understood that WWC and the Company recognize the rights of the Investor as a result of the events described in clause (a) of the definition of "Disposition Event"). The Company's second source of funding shall be debt in the form of loans from its shareholders, participation in which shall be offered to the Shareholders pro rata based on their respective Percentage Ownerships in the same manner as under the preemptive rights for equity offerings provided below in this Section 9. If additional funding is still required, the Company's third source of funding shall be equity offerings to the Shareholders pursuant to the preemptive rights provided below in this Section 9. In no event will the Investor or WWC be obligated to provide any further funding without their express prior written consent. It is understood that, notwithstanding the foregoing priorities, the Board will determine the appropriate timing of any public offerings of the Company's equity securities, subject to Section 12(j) hereof. (b) For purposes of this Section 9, the term "equity securities" shall include any warrants, options or other rights to acquire equity securities or debt securities convertible into equity securities, but shall not include non-voting, non-convertible preferred stock or nominal equity features included in the terms of a debt financing. This Section 9 shall not apply with respect to issuances of the Company's equity securities in connection with (i) a Public Sale by the Company, (ii) a conversion or exchange of any outstanding securities, (iii) a stock dividend, (iv) a merger, amalgamation, acquisition, reclassification or other reorganization in which the then-current shareholders of the Company would continue to be the only shareholders of the Company or which is effected to carry out an acquisition transaction or (v) the grant or exercise of stock options or other grants or purchases of equity securities of the Company pursuant to any stock option, stock purchase or other employee benefit plan now or hereafter adopted for employees, directors or consultants of the Company. (c) If at any time after the date hereof, the Company proposes to issue equity securities of any kind (except as provided in Section 9(b)), then, as to each Shareholder who holds Common Stock at such time, the Company shall: (i) give written notice setting forth in reasonable detail (A) the designation and all of the terms and provisions of the equity securities proposed to be issued (the "New Issue Securities"), including, where applicable, the voting powers, preferences and relative participating, optional or other special rights, and the qualifications, limitations or restrictions thereof and, if applicable, the dividend rate and maturity; (B) the price and other terms of the proposed sale of such securities; (C) the amount of such securities proposed to be issued; and (D) such other material information as may reasonably be requested in order to evaluate the proposed issuance; and 19 22 (ii) offer to issue to each such Shareholder a portion of the New Issue Securities equal to such Shareholder's Percentage Ownership on the terms and conditions stated in such notice. (d) Each such Shareholder that wishes to exercise its purchase rights hereunder must deliver a written notice to that effect to the Company within 15 days after the date the notice specified in Section 9(c) was delivered by the Company. If all of the New Issue Securities offered to such Shareholders are not fully subscribed by such Shareholders, the remaining New Issue Securities (other than any which WWC or its Permitted Affiliate Transferees may have declined to purchase as provided in Section 9(f)) will be reoffered (A) first to the Investor, (whereupon the Investor shall have five days from the date notice of such reoffer is delivered to the Investor to exercise its purchase right), and (B) if not fully taken up by the Investor, to the other Shareholders purchasing their full allotment upon the terms set forth in this Section 9 (whereupon such Shareholders shall have five days from the date notice of such reoffer is delivered to such Shareholders to exercise their purchase rights), until all such New Issue Securities are fully subscribed for or until the Investor and all such Shareholders have subscribed for all such New Issue Securities which they desire to purchase. To the extent that the Company offers two or more securities in units, Shareholders must purchase such units as a whole and will not be given the opportunity to purchase only one of the securities making up such units. Such Shareholders must complete the purchase of such New Issue Securities at the same time in a single closing within five Business Days after the expiration of the 15-day period referred to in the first sentence of this Section 9(d) (or, if applicable, the expiration of the five-day period referred to in the second sentence of this Section 9(d)). If the purchase and sale of such New Issue Securities by a subscribing Shareholder is subject to any prior regulatory approval, consent, waiver, notice or like requirement, then provided that such Shareholder shall promptly make any necessary filings or applications for, and diligently pursue, the satisfaction of such regulatory requirements, the time period during which such purchase and sale must be consummated shall be extended until the earlier of (i) five Business Days after all such regulatory requirements have been satisfied and (ii) 90 days after the expiration of the applicable period set forth above for the completion of a purchase by the Investor or any other subscribing Shareholders, as the case may be, provided, that such 90-day period shall be extended by an additional 90 days upon written request of the Investor or such subscribing Shareholder, as the case may be, unless the Company shall deliver to the Investor or such subscribing Shareholder, as the case may be, an opinion of counsel experienced in the relevant area of law or regulation that such regulatory requirements cannot be satisfied by the Investor or such Shareholder, as the case may be. The closing of all purchases of the New Issue Securities by Shareholders shall occur simultaneously, at which time the Company shall deliver to the purchasing Shareholders, against receipt of the purchase price therefor by cash or certified or bank cashier's check, duly issued certificate or certificates representing the New Issue Securities that each such Shareholder has elected to purchase. (e) Upon the expiration of the offering periods described in the first two sentences of Section 9(d), or upon any failure of any Shareholders to complete the purchase of New Issue Securities in the time required under Section 9(d), the Company will be free to sell such New Issue Securities that the Shareholders have not elected to purchase (or have failed to purchase within the required time) during the 90 days (or applicable longer period under Section 9(d)) following such expiration (or failure) on terms and conditions per share 20 23 no more favorable to the purchasers thereof than those offered to the Shareholders. Any New Issue Securities offered or proposed to be sold by the Company after such 90-day period (or applicable longer period under Section 9(d)) or on more favorable terms and conditions per share to the purchaser must be reoffered to the Shareholders pursuant to this Section 9. The election by a Shareholder not to exercise its purchase rights under this Section 9 in any one instance shall not affect its rights (other than in respect of a reduction in its Percentage Ownership) as to any subsequent proposed issuance. Any sale of such securities by the Company without first giving the Shareholders the rights described in this Section 9 shall be void and of no force and effect and the Company shall cause any required correction to the registration and transfer books of the Company to be effected. (f) The right of the Investor and any other Shareholder to purchase New Issue Securities which have not been subscribed for by other Shareholders under Section 9(d) shall not apply to New Issue Securities which are not subscribed for by WWC and which constitute (or represent the right to acquire) an aggregate of up to 10% of the Company's outstanding Common Stock (after giving effect to the sale of the New Issue Securities, including pursuant to the exercise of preemptive rights), provided, that each purchaser of such New Issue Securities is an entity having substantial assets or business operations in the telecommunications industry. If WWC shall so agree at the time, such New Issue Securities may at any time and from time to time be offered and sold by the Company to purchasers pursuant to the preceding sentence without being required to be offered first to other Shareholders pursuant to this Section 9. The provisions of this Section 9 shall not apply to the issuance of equity securities by the Company if the Investor is unable to subscribe for or own its portion of the New Issue Securities as a result of its inability to satisfy any applicable legal or regulatory requirements for such subscription or ownership within the time period specified in Section 9(d). (g) The Company hereby agrees that it shall cause each of its wholly-owned Subsidiaries to comply with the terms of this Section 9 with respect to the issuance of any equity securities by such Subsidiary (except for issuances of stock dividends or in connection with a merger, amalgamation, reclassification or other reorganization resulting in no reduction in the Company's direct or indirect equity interest in such Subsidiary). 10. DISPOSITION TRANSACTIONS. In the circumstances specified in this Section 10, WWC or the Company, as applicable, shall have the right, or be subject to the obligation, as the case may be, to effect in the manner provided in this Section 10 a Repurchase (as defined below) or, if applicable, a Public Sale (such Repurchase or Public Sale being referred to as a "Disposition Transaction") of all (or such portion as may be specified in this Section 10) of the shares of Common Stock held by the Investor. (a) Upon delivery of notice by the Investor of any exercise of the Investor's demand registration rights under Section 11(b)(i), the Company shall proceed to register under the Securities Act, in accordance with Section 11(b), the amount of Registrable Securities owned by the Investor specified in such notice delivered by the Investor. WWC (or, if WWC so elects, the Company) will have the right, exercisable by delivery of written notice to the Investor within 30 days from the Investor's delivery of its notice pursuant to 21 24 Section 11(b)(i), to require, concurrently with all actions necessary to effect the registration of the specified amount of Registrable Securities, the determination of the Private Market Value pursuant to the Appraisal Procedure. Upon determination of the Private Market Value, the Company shall complete the registration of such amount of Registrable Securities (which shall be pursuant to Section 11 and not this Section 10, which shall not be applicable) unless WWC elects, in its sole discretion, instead, to effect (or, if WWC so elects, to cause the Company to effect) a Repurchase of said securities at the Private Market Value per share so determined; provided, that any such Repurchase shall be completed within six months of the Investor's delivery of the demand registration notice pursuant to Section 11(b)(i). (b) (i) If at any time Hutchison Whampoa Limited ("HWL"), currently the 100% indirect owner of HTL, shall not, directly or indirectly, (A) hold at least 40% of the outstanding voting power of HTL and the Investor, and (B) be the single largest shareholder of HTL and the Investor, (the failure to maintain either of (A) or (B) above being hereinafter referred to as an "Investor Change of Ownership"), WWC (or, if WWC so elects, the Company) will have the right, exercisable by delivery of written notice to the Investor within 90 days after receipt of notice of the Investor Change of Ownership, to effect a Disposition Transaction covering all (and not less than all) of the shares of Common Stock owned by the Investor and its Subsidiaries. Such Disposition Transaction shall be completed within six months of the delivery to the Investor of WWC's or the Company's, as the case may be, notice of exercise of its right to effect such Disposition Transaction under this Section 10(b)(i). (ii) Subject to Section 10(d) hereof, if at any time HTL shall not, directly or indirectly, (A) hold at least 40% of the outstanding voting power of any Permitted Affiliate Transferee referred to in clause (a)(iii) of the definition of "Permitted Affiliate Transferee", or (B) be the single largest shareholder of such Permitted Affiliate Transferee (the failure to maintain either of (A) or (B) above being hereinafter referred to as an "Affiliate Change of Ownership"), WWC (or, if WWC so elects, the Company) will have the right, exercisable by delivery of written notice to such Permitted Affiliate Transferee within 90 days after receipt of notice of such Affiliate Change of Ownership, to effect a Disposition Transaction covering all (and not less than all) of the shares of Common Stock owned by such Permitted Affiliate Transferee and its Subsidiaries. Such Disposition Transaction shall be completed within six months of the delivery to the Permitted Affiliate Transferee of WWC's or the Company's notice of exercise of its right to effect such Disposition Transaction under this Section 10(b)(ii). (iii) The Investor will give prompt written notice to WWC and the Company of any Investor Change of Ownership or Affiliate Change of Ownership. (c) Within 90 days after a Disposition Event, the Investor shall have the right to deliver written notice to WWC demanding that WWC (or, at WWC's election, the Company) effect a Repurchase. Upon receipt of such notice WWC (or, at WWC's election; the Company) shall effect a Repurchase of all the shares of Common Stock owned by the Investor within six months after the delivery to WWC of such notice. It is understood that if no written notice is delivered within said 90 day period, neither WWC nor the Company shall have any obligation to effect a Repurchase with respect to such Disposition Event, nor shall the Investor have any other rights solely as a result of such Disposition Event. 22 25 (d) In the event that WWC (or, at WWC's election, the Company) has given notice that it is electing to effect a Disposition Transaction as a result of an Affiliate Change of Ownership, and if no Investor Change of Ownership has occurred with respect to HTL, then HTL shall have the prior right, within 30 days after delivery by WWC (or, at WWC's election, the Company) of notice to the Permitted Affiliate Transferee of such election, to purchase all the shares of Common Stock owned by the Permitted Affiliate Transferee (and its Subsidiaries) that are the subject of such Affiliate Change of Ownership, such purchase to be completed within 90 days after delivery of such notice by WWC (or, if WWC so elects, the Company). (e) (i) If WWC (or, at WWC's election, the Company) has delivered written notice pursuant to Section 10(b)(i) or 10(b)(ii) hereof of its election to effect a Disposition Transaction as a result of an Investor Change of Ownership or an Affiliate Change of Ownership, then the Company shall cause to be made a Public Sale, using the procedures under Section 11(b) hereof, of all the shares of Common Stock owned by the Investor and its Subsidiaries, or (subject to Section 10(d) hereof) by the Permitted Affiliate Transferee and its Subsidiaries, as the case may be. WWC (or, if WWC so elects, the Company) will have the right, exercisable by delivery of written notice to the Investor or the Permitted Affiliate Transferee, as applicable, concurrently with the notice of WWC's (or at WWC's election, the Company's) election to effect such Disposition Transaction, to require, concurrently with all actions necessary to effect the Public Sale of such shares of Common Stock, the determination of the Private Market Value pursuant to the Appraisal Procedure. Upon determination of the Private Market Value, the Company shall complete the Public Sale of such shares of Common Stock unless WWC, in its sole discretion, elects, instead, to effect (or, if WWC so elects, to cause the Company to effect) a Repurchase of such Common Stock at the Private Market Value per share so determined; provided, that any such Repurchase or Public Sale shall be completed within six months of WWC's (or, at WWC's election, the Company's) notice of election to effect the Disposition Transaction. (ii) If the Investor has delivered to WWC written notice demanding that WWC effect a Repurchase of the Investor's shares of Common Stock pursuant to Section 10(c), then upon delivery of such notice an appraisal of the Private Market Value shall be completed as soon as practicable pursuant to the Appraisal Procedure. The closing of the Repurchase shall be effected promptly after the determination of the Private Market Value, and in any event within six months after the written demand for a Repurchase was delivered by the Investor pursuant to Section 10(c). The Repurchase shall result in the repurchase of all the relevant shares required to be repurchased at a purchase price per share of Common Stock equal to the Private Market Value divided by the number of shares of Common Stock outstanding (on a fully diluted basis) prior to giving effect to the Repurchase. (f) The Disposition Transaction shall be effected by one of the following methods, as WWC (or at WWC's election, the Company) may elect: (i) Repurchase. WWC (or, at WWC's election, the Company) may repurchase all the relevant shares of Common Stock to be disposed of in accordance with this Section 10 at a per share price equal to the Private Market Value per share determined by dividing the Private Market Value by the number of shares of Common Stock outstanding, on a fully diluted basis, prior to giving effect to such transaction (a "Repurchase"). Such repurchase shall be made for cash or, if WWC (or, at WWC's election, the Company) so 23 26 elects by written notice to the Investor for shares of WWC's Class A Common Stock ("Class A Stock"), the value of which shall be measured as an amount equal to the average of the mean of the high and low sales prices of the Class A Stock on the NASDAQ National Market on each of the 30 consecutive Trading Days immediately preceding the event which gave rise to the Company's right so to effect the Disposition Transaction or the Disposition Event, as the case may be. At the closing of the Disposition Transaction, any shares of Class A Stock to be delivered to the Investor shall be delivered pursuant to an effective resale registration statement on Form S-3 or other form under the Securities Act appropriate for a delayed or continuous offering of such shares. (ii) Public Sale. Except in the case of a Disposition Transaction pursuant to Section 10(a) (with respect to which the Public Sale shall be consummated pursuant to Section 11, without regard to this Section 10 unless WWC (or, at WWC's election, the Company) has elected to make a Repurchase) or 10(c) (with respect to which only the provisions relating to Repurchase are applicable), the Company may effect a Disposition Transaction by means of a Public Sale of the relevant shares of Common Stock using the procedures set forth in Section 11(b). (g) (i) The Investor shall have the right (the "Demand Event Tag Along Right"), by delivery of written notice to WWC and the Company within 30 days after the announcement of a transaction which would give rise to a Demand Event (a "Demand Event Transaction"), which notice shall be revocable only if such transaction is not completed, to require that the Investor be permitted to participate in such transaction through the Transfer (including through an exchange of shares in a merger) of all of the shares of Common Stock owned by the Investor as provided in this Section 10(g). Notwithstanding the foregoing, WWC shall have the right (the "Demand Event Drag Along Right"), by delivery of written notice to the Investor within 30 days after the announcement of the Demand Event Transaction (which notice shall be revocable only if such transaction is not completed), to require the Investor to Transfer all the shares of Common Stock owned by it in accordance with the following provisions of this Section 10(g). The Investor agrees that if WWC shall so exercise the Demand Event Drag Along Right, the Investor will so Transfer all the shares of Common Stock owned by the Investor. (ii) Upon delivery of the Investor's notice of exercise of the Demand Event Tag Along Right (or WWC's notice of exercise of the Demand Event Drag Along Right, as the case may be), an appraisal of the Private Market Value shall be completed as soon as practicable pursuant to the Appraisal Procedure. For purposes hereof, the Investor shall be treated as if there had been issued to it the number of shares of Class A Stock that would have been issued to the Investor pursuant to Section 10(f)(i) in a Repurchase at such Private Market Value per share of all the Investor's shares of Common Stock in which WWC elected to deliver shares of Class A Stock in lieu of cash (the "Investor Deemed Class A Shares"). WWC shall cause the acquiror in the Demand Event Transaction to deliver to the Investor, for each Investor Deemed Class A Share, the same consideration per Investor Deemed Class A Share (including the exact form and type of consideration) as is delivered to the shareholders of WWC for each share of Class A Stock in the Demand Event Transaction (the "Demand Event Consideration"), all on the same per share terms and conditions (other than any delay in such delivery required for the determination of the Private Market Value or for the satisfaction of any regulatory requirements applicable to the Investor and the delivery 24 27 of the Demand Event Consideration to it) as are applicable to the outstanding shares of Class A Stock in the Demand Event Transaction. (iii) The delivery of the Demand Event Consideration shall be made upon the closing of the Demand Event Transaction or, if later, as soon as practicable after the Private Market Value has been determined pursuant to the Appraisal Procedure and any regulatory requirements applicable to the Investor and the delivery of the Demand Event Consideration to it have been satisfied. Such delivery of the Demand Event Consideration shall be made against delivery of all the Investor's shares of Common Stock to the Company, WWC or the acquiror in the Demand Event Transaction, as such acquiror may specify. 11. REGISTRATION RIGHTS. The Investor shall have the right to have its Registrable Securities (as hereinafter defined) registered under the Securities Act and applicable United States state securities laws in accordance with the express terms of the following provisions. (a) Definitions. As used in this Section 11: (i) the terms "register," "registered" and "registration" refer to a registration effected by preparing and filing a registration statement in compliance with the Securities Act (and any post-effective amendments filed or required to be filed) and the declaration or ordering of effectiveness of such registration statement; (ii) the term "Registrable Securities" shall mean (A) Common Stock issued to the Investor, (B) any additional Common Stock acquired by the Investor from the Company or another Shareholder other than in a Public Sale, and (C) any Common Stock issued as a dividend or other distribution with respect to, or in exchange for or in replacement of, the Common Stock referred to in clauses (A) and (B) above; (iii) "Registration Expenses" shall mean all expenses incident to the Company's performance of or compliance with its obligations under this Section 11, including, without limitation, all Commission, National Association of Securities Dealers ("NASD") and stock exchange or NASDAQ registration, listing and filing fees and expenses, fees and expenses of compliance with applicable state securities or "blue sky" laws (including, without limitation, reasonable fees and disbursements of counsel for the underwriters in connection with "blue sky" qualifications of Registrable Securities), printing expenses, messenger and delivery expenses, fees and disbursements of counsel for the Company and all independent certified public accountants (including the expenses of any annual audit and "cold comfort" letters required by or incident to such performance and compliance), the fees and disbursements of underwriters customarily paid in connection with secondary registered Public Sales of securities (including the fees and expenses of any "qualified independent underwriter" required by the NASD), the reasonable fees of one U.S. counsel plus, if reasonably required by the Investor, one local counsel retained by the Investor in connection with each such registration pursuant to this Section 11 for purposes of obtaining advice concerning applicable securities laws and securities exchange regulations, review of the registration statement and prospectus and limited due diligence concerning the Company, the reasonable fees and expenses of any special experts retained by the Company 25 28 in connection with such registration, and fees and expenses of other Persons retained by the Company (but not including any underwriting discounts or commission or transfer taxes, if any, attributable to the sale of Registrable Securities by the Investor); and (iv) "Selling Expenses" shall mean all underwriting discounts and selling commissions applicable to the sale of Registrable Securities and transfer tax, if any, attributable to the sale of Registrable Securities by the Investor. (b) Demand Registration. (i) Upon the earlier of (A) the third anniversary of the Closing Date and (B) the occurrence of a Demand Event (but only if a Demand Event Tag Along Right or Demand Event Drag Along Right has not been exercised), the Investor shall have the right, upon delivery of written notice to the Company (not more than twice in any 12-month period and subject, in each case, to Section 10(a) hereof) to require the Company to register under the Securities Act such amount of Registrable Securities owned by the Investor as may be specified in such notice in accordance with the procedures set forth in this Section 11(b), provided, that any such registration demanded by the Investor under this Section 11(b)(i) must be for an amount of Common Stock having an aggregate anticipated sales price of at least $25,000,000. The rights of the Investor to demand the registration of its Registrable Securities shall continue until (x) all the Registrable Securities owned by it shall have been Transferred to transferees who are not entitled to the registration rights of the Investor hereunder in accordance with Section 15 hereof or, if earlier, (y) all its remaining Registrable Securities are already included in an effective resale registration statement on Form S-3 or other appropriate form for continuous or delayed offerings or are eligible to be Transferred in Public Sales to U.S. persons in the United States without registration under the Securities Act and without being subject to volume limitations under Rule 144 under the Securities Act, provided, in the case of (y), that there is a public float of the Common Stock equal to at least 15% of the total outstanding shares of Common Stock. (ii) If, by the fifth anniversary of the Closing Date, the Company has not completed one or more Public Sales which have resulted in a public float of the Common Stock equal to at least 15% of the total outstanding shares of Common Stock, then the Investor shall have the right to require the Company to register and effect a Public Sale of a sufficient number of shares of newly issued Common Stock which, together with shares of Common Stock being resold by WWC or any Other Shareholders (as defined below) and shares of Common Stock previously sold in Public Sales, will result in a public float of at least 15% of the total outstanding shares of Common Stock, all in accordance with the procedures set forth in this Section 11(b) for the registration of Registrable Securities. (iii) If the Investor shall have demanded a registration of Registrable Securities (which term will include for this purpose newly issued shares of Common Stock referred to in Section 11(b)(ii) hereof) then the Company will: (A) promptly give written notice of the proposed registration to all other shareholders entitled to piggyback registration rights under Section 11(c) hereof or any other contractual agreement of the Company (the "Other Shareholders") and 26 29 (B) as soon as practicable, use its best efforts to prepare and file with the Commission and cause to become effective such registration statement as would permit or facilitate the sale and distribution of all the Registrable Securities required to be covered thereby pursuant to the notice delivered by the Investor, together (subject to Section 11(b)(iv) below) with all or such portion of the securities of any Other Shareholders joining in such registration as are specified in written requests received by the Company within ten Business Days after written notice from the Company is delivered under Section 11(b)(iii)(A) above. (iv) The Investor, at its election, shall have the Registrable Securities covered by its request distributed by means of an underwritten public offering with a single or managing underwriter selected by the Company and reasonably acceptable to the Investor. If any Other Shareholders so request, the securities of such Other Shareholders shall be included in the registration and underwriting being effected pursuant to this Section 11(b), subject to this Section 11(b)(iv). The Investor and the Company shall (together with all Other Shareholders proposing to distribute their securities through such underwriting) enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters selected for such underwriting by the Company and reasonably acceptable to the Investor (the "Representative"). Notwithstanding any other provision of this Section 11(b), if the Representative advises the Investor and the Company in writing that (x) marketing factors require a limitation on the number of shares to be underwritten or (y) the inclusion of shares held by officers and directors of the Company in the offering could, in the Representative's best judgment, materially reduce the offering price per share, then, in the case of the preceding clause (x), the Common Stock held by Other Shareholders shall be excluded from such underwriting to the extent so required by such limitations and, in the case of the preceding clause (y), the Common Stock held by officers and directors of the Company shall be excluded from such underwriting to the extent advised by the Representative. If, after the exclusion of such shares, further reductions are required to meet the limitation on the number of shares to be underwritten as advised by the Representative, then the Investor may elect, in its sole discretion, to reduce the number of shares that will be included in the underwriting by it by such number of shares as is necessary to comply with such limitation, but in no event to an amount which is below the minimum amount for a demand registration as provided in Section 11(b)(i). If the Investor does not so elect, then the registration of its shares under Section 11(b)(i) will not proceed and will be terminated without liability to any other Person. If the Representative has not limited the number of Registrable Securities or other securities to be underwritten, the Company may include its securities for its own account in such registration if the Representative so agrees and if the number of Registrable Securities which would otherwise have been included in such registration and underwriting will not thereby be limited. (v) Notwithstanding the foregoing, if the Company shall furnish to the Investor and the Other Shareholders a certificate signed by the President or Chief Executive Officer of the Company stating that, in the good faith judgment of the Board, it would be materially detrimental to the Company and its shareholders for such registration statement to be filed and that it is therefore essential to defer the filing of such registration statement, then the Company shall have the right to defer such filing for a period of not more than 90 days after the delivery of such certificate, provided that the Investor shall not be required to accept such a deferral more than twice in any 12-month period. 27 30 (c) Piggyback Registration. (i) If the Company shall determine to register any of its Common Stock either for its own account or for the account of any holder or holders of Common Stock (other than a registration on Form S-8 (or similar or successor form) relating solely to stock option, stock purchase or other employee benefit plans, or a registration on Form S-4 (or similar or successor form), or a registration on any registration form which does not permit secondary sales or does not include substantially the same information as would be required to be included in a registration statement covering the sale of Registrable Securities), the Company will: (A) promptly give to the Investor a written notice thereof (which shall include a list of the jurisdictions in which the Company intends to attempt to qualify such securities under the applicable blue sky or other state securities laws); and (B) subject to Section 11(c)(ii) below, include in such registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all the Registrable Securities specified in a written request or requests made by the Investor within fifteen (15) days after the date written notice as described in Section 11(c)(i)(A) above is delivered by the Company. Such written request may specify all or a part of the Registrable Securities. (ii) If the registration of which the Company gives notice is for a Public Sale consisting of an underwritten public offering (in which event the underwriter shall be selected by the Company, in its sole discretion), the Company shall so advise the Investor as a part of the written notice given pursuant to Section 11(c)(i)(A). In such event, the right of the Investor to registration pursuant to this Section 11(c) shall be conditioned upon the Investor's participation in such underwriting and the inclusion of the Investor's Registrable Securities in the underwriting to the extent provided herein. The Investor, if its shares are to be included in such registration, shall (together with the Company and the Other Shareholders distributing their Common Stock through such underwriting) enter into an underwriting agreement in customary form with the Representative. Notwithstanding any other provision of this Section 11(c), if the Representative advises the Investor or the Company in writing that (x) the inclusion of shares held by the officers and directors of the Company in the offering could, in the Representative's best judgment, materially reduce the offering price per share, or (y) that marketing factors require a limitation on the number of shares to be underwritten, then, in the case of the preceding clause (x), the Common Stock held by officers and directors of the Company shall be excluded from such underwriting to the extent so advised by the Representative and, in the case of the preceding clause (y), the number of shares that may be included in the underwriting by the Investor and Other Shareholders requesting inclusion in such registration (but not the Company or WWC) shall be reduced, on a pro rata basis (based on the number of shares requested by the Investor and such Other Shareholders to be included in such registration), by such minimum number of shares as is necessary to comply with such limitation. If the Investor disapproves of the terms of any such underwriting, it may elect to withdraw therefrom by written notice to the Company and the Representative, given a reasonable period of time prior to the finalization of the underwriting arrangements. Any Registrable Securities or other securities excluded or withdrawn from such underwriting shall not be included in such registration. If at any time prior to the effective date of the registration statement, the Company shall determine for any reason not to register such securities, the Company may, at its election, give written notice of 28 31 such determination to the Investor and, thereupon, shall be relieved of its obligation under this Section 11(c) to register any of the Registrable Securities in connection with such registration. (iii) Number and Duration. The Investor shall be entitled to have its shares included in an unlimited number of registrations pursuant to this Section 11(c). The rights of the Investor to registration of its Registrable Securities under this Section 11(c) shall continue until (x) all the Registrable Securities owned by it shall have been Transferred to transferees who are not entitled to the registration rights of the Investor hereunder in accordance with Section 15 hereof or, if earlier, (y) all its remaining Registrable Securities are already included in an effective resale registration statement on Form S-3 or other appropriate form for continuous or delayed offerings or are eligible to be Transferred in Public Sales to U.S. persons in the United States without registration under the Securities Act and without being subject to volume limitations under Rule 144 under the Securities Act, provided, in the case of (y), that there is a public float of the Common Stock equal to at least 15% of the total outstanding shares of Common Stock. (d) Expenses of Registration. Upon the exercise of registration rights set forth in this Section 11, the Company shall pay all Registration Expenses incurred in connection with any registration, qualification or compliance pursuant to this Section 11, provided, that such expenses shall not include Selling Expenses, which shall be borne by the Investor pro rata on the basis of the number of its shares so registered. (e) Registration Procedures. In the case of each registration effected by the Company pursuant to this Section 11, the Company will keep the Investor advised in writing as to the initiation of each registration and as to the completion thereof. In connection with any offering of Registrable Securities registered pursuant to clause (b) or (c) of this Section 11, at its expense, the Company shall: (i) prepare and file with the Commission, as promptly as practical after receipt of a request for registration pursuant to this Section 11, a registration statement on any form for which the Company then qualifies, and which form shall be available for the sale of the Registrable Securities in accordance with the intended methods of distribution thereof, and use its best efforts to cause such registration statement to become and remain effective as provided herein; provided, that before filing with the Commission a registration statement or prospectus or any amendments or supplements thereto, the Company will (A) furnish to the Investor copies of all such documents proposed to be filed for review and comment and (B) notify the Investor of any stop order issued or threatened by the Commission and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered; (ii) prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration effective (A) during the ten Business Day period immediately following the date on which such registration statement shall be declared effective, and (B) subject to any obligation of the Investor to refrain from selling or offering to sell any Registrable Securities during a Blackout Period (as defined below), for 120 days after the date of effectiveness or (C) if earlier, until the Investor has completed the distribution described in the registration statement relating thereto (but not before the expiration of the time periods referred to in Section 4(3) of the Securities Act and Rule 174 29 32 promulgated thereunder, or any successor provisions, if applicable). The Company shall be entitled to elect that a registration statement not be usable, for a reasonable period of time, but not in excess of one hundred twenty (120) consecutive days (a "Blackout Period"), if the Company determines in good faith that the use of such registration statement or the related prospectus would interfere with any pending financing, acquisition, corporate reorganization or any other material corporate development involving the Company, WWC or any of their Subsidiaries or would require premature disclosure thereof, and the Company promptly gives the Investor written notice of such determination, containing a general statement of the reasons for such postponement or restriction on use and an approximation of the anticipated delay; provided, however, that (x) the Company shall not be entitled to initiate a Blackout Period unless it shall concurrently forbid purchases or sales in the open market by directors, senior executives and other Affiliates of the Company, (y) the aggregate number of days included in all Blackout Periods during any consecutive twelve (12) month period shall not exceed two hundred forty (240) days, and (z) the period that the Company shall be required to maintain the effectiveness of the registration statement shall be increased by the aggregate number of days in the Blackout Periods. The Company shall give written notice to each shareholder of record included in the registration statement of the commencement and the termination of any Blackout Period; (iii) furnish to each underwriter, if any, and the Investor such number of copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits thereto), and the prospectus included in such registration statement (including each preliminary prospectus) in conformity with the requirements of the Securities Act, and such other documents incident thereto as the Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by the Investor; (iv) use its best efforts to register or qualify such Registrable Securities under the state securities or "blue sky" laws of such states as the Investor or the Representative reasonably request and do any and all other acts and things that may be reasonably necessary or advisable to enable the Investor and the underwriters to consummate the disposition in such jurisdictions of the Registrable Securities owned by the Investor; provided, that the Company will not be required as a result thereof to (A) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this clause (iv), (B) subject itself to taxation or regulation of its business in any such jurisdiction in which it would not otherwise be so subject or (C) consent to general service of process in any jurisdiction in which it would not otherwise be subject to general service of process; (v) use its best efforts to cause the Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Investor to consummate the disposition of such Registrable Securities; (vi) immediately notify the Investor at any time when a prospectus relating thereto is required to be delivered under the Securities Act of the happening of any event that comes to the Company's attention, if as a result of such event the prospectus included in such registration statement contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the 30 33 statements therein not misleading; and subject to the Blackout Period provisions in clause (ii) above, the Company will promptly prepare and furnish to the Investor a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; (vii) use its best efforts to cause all such Registrable Securities to be listed on a national securities exchange in the United States or quoted on the NASDAQ National Market System and listed or quoted on each securities exchange or automated quotation system on which similar securities issued by the Company may then be listed or quoted, and enter into such customary agreements including a listing application and indemnification agreement in customary form, and, subject to applicable law, to provide a transfer agent and registrar for such Registrable Securities covered by such registration statement no later than the effective date of such registration statement; (viii) enter into such customary agreements (including an underwriting agreement or qualified independent underwriting agreement, in each case, in customary form) and take all such other actions as the Investor requesting registration of the Registrable Securities being covered by such registration statement or the underwriter reasonably requests in order to expedite or facilitate the disposition of such Registrable Securities, including customary representations, warranties, indemnities and agreements; (ix) make available (after reasonable notice and execution of customary confidentiality agreements satisfactory to the Company) for inspection, during business hours of the Company, by the Investor or its representatives (if it has requested registration of Registrable Securities) and any underwriter participating in any disposition pursuant to such registration statement (to the extent provided in the applicable underwriting agreement), (collectively, the "Inspectors"), all financial and other records, pertinent corporate documents and properties of the Company and its Subsidiaries (collectively, "Records"), if any, as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers, directors and employees, and those of the Company's Affiliates, to supply all information and respond to all inquiries reasonably requested by any such Inspector in connection with such registration statement; (x) use its best efforts to obtain a "cold comfort" letter from the Company's appointed auditors in customary form and covering such matters of the type customarily covered by "cold comfort" letters as the Representative reasonably requests; and (xi) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission and all conditions imposed by relevant governmental authorities or under applicable law and make available to the Investor, as soon as reasonably practicable, an earnings statement covering a period of at least twelve months beginning after the effective date of the registration statement (as the term "effective date" is defined in Rule 158(c) under the Securities Act), which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder. It shall be a condition precedent to the obligation of the Company to take any action with respect to any Registrable Securities that the Investor shall furnish to the Company such 31 34 information regarding the Registrable Securities and any other securities of the Company held by the Investor and the intended method of disposition of the Registrable Securities held by the Investor and such other information regarding the Investor as the Company shall reasonably request and as shall be required in connection with the action taken by the Company. The Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 11(e)(vi) hereof, the Investor will forthwith discontinue disposition of Registrable Securities pursuant to any prospectus or registration statement until the Investor's receipt of the copies of the supplemented or amended prospectus contemplated by Section 11(e)(vi) hereof, and, if so directed by the Company (at the Company's expense), the Investor will deliver to the Company all copies (including, without limitation, any and all drafts), other than permanent file copies, then in the Investor's possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice. (f) Indemnification. (i) In the event of any registration of any shares of Common Stock under the Securities Act pursuant to this Agreement, the Company will indemnify and hold harmless the Investor, its directors and officers, each Person who participates as an underwriter in the offering or sale of such securities and each other Person, if any, who controls the Investor or any such underwriter within the meaning of the Securities Act against any and all losses, claims, damages and liabilities (or actions in respect thereof), joint or several, and expenses (including any amounts paid in any settlement effected with the Company's consent, which consent will not be unreasonably withheld) to which the Investor, any such director or officer or any such underwriter or controlling Person may become subject under the Securities Act, the Exchange Act, United States state securities or "blue sky" laws, common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) or expenses arise out of or are based upon (A) any untrue statement (or alleged untrue statement) of any material fact contained in any registration statement under which such securities were registered under the Securities Act, any preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto, (B) any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (C) any violation (or alleged violation) by the Company of any United States federal, state or common law rule or regulation applicable to the Company and relating to action required of or inaction by the Company in connection with any such registration, qualification or compliance. The Company will reimburse the Investor and each such director, officer, underwriter and controlling Person for any legal and any other expenses reasonably incurred in connection with investigating or defending such claim, loss, damage, liability or action, as such expenses are incurred; provided, however, that the Company shall not be liable in any such case to the extent that any such claim, loss, damage, liability (or action or proceeding in respect thereof) or expense arises out of or is based on any untrue statement (or alleged untrue statement) or omission (or alleged omission) made in such registration statement or amendment or supplement thereto or in any such preliminary, final or summary prospectus in reliance upon and in conformity with written information furnished to the Company by the Investor or any such director, officer, underwriter or controlling Person specifically stating that it is for use therein; provided further, however, that the Company shall not be liable to 32 35 any of the foregoing indemnitees pursuant to this Section 11(f) with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus or the final prospectus or the final prospectus as amended or supplemented, as the case may be, to the extent that any such loss, claim, damage or liability of such indemnitee results from the fact that the Investor or underwriter sold Registrable Securities (x) to a Person to whom there was not sent or given, at or prior to the written confirmation of such sale, a copy of the final prospectus or of the final prospectus as then amended or supplemented, whichever is most recent, if the Company has previously furnished copies thereof to the Investor or underwriter and such final prospectus, as then amended or supplemented, had corrected any such misstatement or omission or (y) during a Blackout Period or after receipt of a notice pursuant to Section 11(e)(vi) hereof (prior to the amendment or supplement thereunder having been furnished). The indemnity provided for herein shall remain in full force and effect regardless of any investigation made by or on behalf of the Investor or any such director, officer, underwriter or controlling Person and shall survive the transfer of such securities by the Investor or such underwriter. (ii) The Investor will, if Registrable Securities held by it are included in any registration statement filed in accordance with the provisions hereof, (x) indemnify the Company, its directors, officers and controlling Persons, all other prospective sellers, each person who participates as an underwriter, and their respective directors, officers and controlling Persons against all claims, losses, damages and liabilities (or actions in respect thereof) and expenses to which any such Person may become subject under the Securities Act, the Exchange Act, United States state securities or "blue sky" laws, common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) or expenses arise out of or are based upon (A) any untrue statement (or alleged untrue statement) of a material fact with respect to the Investor contained in any such registration statement, preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto, in reliance on and in conformity with written information furnished to the Company by the Investor specifically for use therein, or (B) any omission (or alleged omission) to state therein a material fact with respect to the Investor required to be stated therein or necessary to make the statements made by the Investor therein not misleading and (y) reimburse the Company and its directors, officers, controlling Persons and all other prospective sellers, each person who participates as an underwriter, and their respective directors, officers, and controlling Persons for any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage, liability or action, in the case of both clause (x) and clause (y), to the extent, and only to the extent, that such untrue statement (or alleged untrue statement) or omission (or alleged omission) is made in such registration statement, preliminary, final or summary prospectus contained therein, or any amendment or supplement thereto in reliance upon and in conformity with written information furnished to the Company by the Investor with respect to the Investor specifically for use therein; provided, however, that the obligations of the Investor hereunder shall be limited to an amount equal to the proceeds to be received by the Investor from securities sold by the Investor pursuant to such registration statement or prospectus. The indemnity provided for herein shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or the Investor, the underwriters or 33 36 any of their respective directors, officers, or controlling Persons and shall survive the transfer of such securities by the Investor and such underwriters. (iii) Each party entitled to indemnification under this Section 11(f) (an "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom (it being understood that the Indemnifying Party shall not be responsible for more than one counsel for all Indemnified Parties in any single action or claim (or group of related actions or claims), unless the Investor shall have reasonably concluded that it may have a conflict of interest with one or more other Indemnified Parties with respect to any actions or claims). Counsel for the Indemnifying Party, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld or delayed). The Indemnified Party may participate in such defense at the Indemnified Party's expense (unless the Indemnified Party shall have reasonably concluded that there may be a conflict of interest between the Indemnifying Party and the Indemnified Party in such action, in which case the reasonable fees and expenses of the Indemnified Party's counsel shall be at the expense of the Indemnifying Party and shall be reimbursed as they are incurred). The failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 11 except to the extent the Indemnifying Party is actually materially prejudiced thereby. No Indemnifying Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include as a term thereof the giving by the claimant or plaintiff to such Indemnified Party of an unconditional release from all liability with respect to such claim or litigation. Each Indemnified Party shall promptly furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and litigation resulting therefrom. (iv) In order to provide for just and equitable contribution in circumstances in which the foregoing indemnities provided for in this Section 11(f) are for any reason held to be unenforceable although applicable in accordance with their terms, the Company and the Investor shall contribute to the aggregate losses, liabilities, claims, damages and expenses of the nature contemplated by such indemnities in such proportion as shall be appropriate to reflect (A) the relative benefits received by the Company, on the one hand, and the Investor, on the other hand, from the offering of the Registrable Securities and any other securities included in such offering, and (B) the relative fault of the Company, on the one hand, and the Investor, on the other hand, with respect to the statements or omissions that resulted in such loss, liability, claim, damage or expense, or action in respect thereof, as well as any other relevant equitable considerations; provided, however, that no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to a contribution from any Person who was not guilty of such fraudulent misrepresentation. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Investor, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Investor 34 37 agree that it would not be just and equitable if a contribution pursuant to this Section 11(f) were to be determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to herein. Notwithstanding anything to the contrary contained herein, the Company and the Investor agree that any contribution required to be made by the Investor pursuant to this Section 11(f) shall not exceed the net proceeds from the offering of Registrable Securities (before deducting expenses) received by the Investor with respect to such offering. For purposes of this Section 11(f), each Person, if any, who controls the Investor within the meaning of Section 15 of the Securities Act shall have the same rights to contribution as the Investor, and each director of the Company, each officer of the Company who signed the registration statement, and each Person, if any, who controls the Company within the meaning of Section 15 of the Securities Act shall have the same rights to contribution as the Company. (v) The foregoing indemnities of the Company and the Investor are subject to the condition that, insofar as they relate to any untrue statement (or alleged untrue statement) of a material fact contained in a preliminary prospectus, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements contained therein not misleading, which was eliminated or remedied in the amended prospectus on file with the Commission at the time the registration statement in question became effective or the amended prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act (the "Final Prospectus"), such indemnities shall not inure to the benefit of any underwriter if a copy of the Final Prospectus was furnished to the underwriter and was not furnished to the Person asserting the loss, liability, claim or damage at or prior to the time such action is required by the Securities Act. (g) Information by the Investor. The Investor shall furnish to the Company such information regarding the Investor and the distribution proposed by the Investor as the Company may reasonably request in writing in connection with any registration of Registrable Securities of the Investor and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Section 11. (h) Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the Commission which may permit the sale of the restricted securities to the public without registration, the Company agrees to: (A) make and keep public information available as those terms are understood and defined in Rule 144 under the Securities Act, at all times from and after the effective date of the first registration statement under the Securities Act filed by the Company for an offering of its securities to the general public; (B) use its best efforts to file with the Commission in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act at any time after it has become subject to such reporting requirements; and (C) so long as the Investor owns any Registrable Securities, furnish to the Investor upon request a written statement by the Company as to its compliance with the current information requirements of Rule 144 under the Securities Act (at any time from and after the effective date of the first registration statement filed by the 35 38 Company for an offering of its securities to the general public), a copy of the most recent annual or quarterly report of the Company, and such other reports and documents filed with the Commission pursuant to the reporting requirements of the Exchange Act as the Investor may reasonably request in availing itself of any rule or regulation of the Commission allowing the Investor to sell any such securities without registration. (i) "Market Stand-off" Agreement. (i) If any registration of Common Stock (or other securities) of the Company shall be in connection with an underwritten public offering, the Investor agrees not to effect any sale or distribution of any Registrable Securities, including any private placement or any sale pursuant to Rule 144A under the Securities Act (or any successor provision) or otherwise or any sale pursuant to Rule 144 under the Securities Act (or any successor provision), other than by pro-rata distribution to its shareholders, partners or other beneficial holders, and not to effect any such sale or distribution of any other equity security of the Company or of any security convertible into or exchangeable or exercisable for any equity security of the Company (in each case, other than as part of such underwritten public offering) during the anticipated ten calendar days prior to, and during the 180 calendar day period (or such other period as may be agreed upon between the Investor and the Representative) that begins on the effective date of such registration statement, without the consent of the Representative; provided, however, that written notice of such registration has been delivered to the Investor at least two Business Days prior to the anticipated beginning of the ten calendar day period referred to above. (ii) If requested by the Representative the Investor shall execute a separate agreement to the foregoing effect. The Company may impose stop-transfer instructions with respect to the shares (or securities) subject to the foregoing restriction until the end of said 180-day or other period. The provisions of this Section 11(i) shall be binding upon any transferee who acquires Registrable Securities, including, without limitation, any Permitted Affiliate Transferee of the Investor, the Investor's shareholders, partners or other beneficial holders, if such transferee is entitled to the registration rights provided hereunder. The Company agrees that any agreement entered into after the date hereof pursuant to which the Company issues or agrees to issue any privately placed equity securities shall contain a provision under which the holders of such securities agree not to effect any sale or distribution of any such securities during the period and in the manner referred to in this Section 11(i)(ii). (iii) If any registration of Registrable Securities shall be in connection with an underwritten public offering, the Company agrees (A) not to effect any Public Sale of any of its equity securities or of any security convertible into or exchangeable or exercisable for any equity security of the Company (other than any such sale or distribution of such securities as part of such public offering, in connection with any amalgamation, merger or consolidation by the Company or any Subsidiary of the Company, the acquisition by the Company or a Subsidiary of the Company of the shares or any assets of any other Person, or in connection with a stock option, stock purchase or other employee benefit plan) during the ten days prior to, and during the 180-day period (or such other period as may be agreed upon between the Company and the Representative) which begins on the effective date of such registration statement without the consent of the Representative. 36 39 (j) WWC agrees that it will cooperate in all reasonable respects in any due diligence investigation contemplated under Section 11(e)(ix) hereof that is required in connection with a registration and public offering pursuant to this Section 11 and provide reasonable access to books, records and personnel of WWC which are material to a customary due diligence investigation of the Company and its business, assets and operations in connection with a registered public offering. 12. CERTAIN COVENANTS OF THE COMPANY AND WWC. (a) Auditors. The Company shall maintain a system of accounting established and administered in accordance with United States generally accepted accounting principles ("U.S. GAAP") and shall set aside on its books all such proper reserves as shall be required by U.S. GAAP. The Company shall retain a firm of independent certified public accountants of recognized standing (which may be the auditors of WWC) to audit and report on the Company's annual consolidated balance sheets and statements of operations, shareholders' equity and cash flows and to report to the Board. All major accounting policies and principles shall be determined by the Board in accordance with U.S. GAAP. (b) Financial and Other Information. (i) The Company shall prepare annual consolidated balance sheets and statements of operations, shareholders' equity and cash flows of the Company and its Subsidiaries, which shall be prepared in accordance with U.S. GAAP, set forth in each case in comparative form the figures for the previous year, and be audited by the auditors referred to in Section 12(a) hereof. The Company shall also prepare quarterly unaudited consolidated balance sheets and statements of operations, shareholders' equity and cash flows of the Company and its Subsidiaries, certified by the Chief Financial Officer or the Chief Executive Officer of the Company and prepared in accordance with U.S. GAAP and setting forth in each case in comparative form the same figures for the comparable period of the previous year and, in addition, year-to-date figures. The Company will furnish to the Investor the following information within the time specified: (i) as soon as practicable after the end of each fiscal quarter and, in any event within 50 days thereafter, all of the quarterly financial information referred to herein, (ii) as soon as practicable after the end of each fiscal year, and in any event within 120 days thereafter, all of the annual financial information referred to herein, and (iii) on a timely basis, such other monthly management operational and financial reports and information as the Investor may reasonably request. (ii) As part of the annual audit of WWC, WWC's independent public accountants shall provide to the Investor a certificate as to the compliance by WWC and the Company with the allocation of credits, fees, charges and expenses in accordance with the terms of the Intercompany Agreements. (c) Inspection and Audit Rights. (i) From and after the date hereof, the Company will permit the Investor, or its representatives, to visit and inspect any of the properties of the Company, to examine all its books of account, records, reports and other papers which are not contractually 37 40 required of the Company to be kept confidential or secret, to discuss its affairs, finances and accounts with its officers, directors, key employees and independent public accountants or any of them (and by this provision the Company authorizes such accountants to discuss with the Investor and its representatives the finances and affairs of the Company and its Subsidiaries), and WWC will permit the Investor to discuss the affairs of WWC, if material to the Company, with the Senior Officers all at such reasonable times and as often as may be reasonably requested. (ii) The Investor shall have the right to carry out an audit (by its independent auditor) once each year to determine compliance by WWC and the Company with the allocation of credits, fees, charges and expenses in accordance with the terms of the Intercompany Agreements. Each such audit shall be at the Investor's sole cost and expense unless it is determined that the allocations made with respect to the Company differed from the allocations which should have been made in accordance with the Intercompany Agreements by more than 10%, in which event the cost of such audit shall be borne by WWC. (d) PCS and Future Spectrum Allocations. (i) WWC shall develop and conduct the United States domestic PCS business (which shall include for this purpose any expansion spectrum allocated by the FCC to broadband personal communications services), only through the Company Group. WWC will transfer, or cause to be transferred, to the Company Group any licenses (or interests therein) for United States domestic PCS systems acquired by the WWC Non-Company Group promptly after such assets are acquired, at WWC's cost therefor. For this purpose, to the extent WWC shall have issued shares of its Class A Stock as all or any portion of the consideration paid to acquire such assets, the cost of such assets to be paid to WWC by the Company shall be measured based on the market price of such WWC securities immediately before the announcement of such acquisition, measured as provided in Section 7(c)(ii). (ii) The Company and the Investor agree that WWC shall continue to conduct cellular businesses (which shall mean for this purpose wireless telecommunications businesses using frequencies in the range of 800-900 MHz and include any expansion spectrum allocated by the FCC to cellular services) through the WWC Non-Company Group. The Company will transfer, or cause to be transferred, to the WWC Non-Company Group any licenses (or interests therein) for cellular systems acquired by the Company Group promptly after such assets are acquired, at the Company's cost therefor. (iii) If additional frequencies are allocated to wireless telecommunications which are not expansion spectrum for PCS or cellular services, then the WWC Non-Company Group and the Company Group shall divide as between them any business and acquisition opportunities for the provision of services using such additional spectrum in accordance with the geographical areas in which each then operates or has specific plans to begin operating within 12 months under licenses then held. Subject to clause (iv) below, in the case of overlapping geographic areas or areas in which neither WWC nor the Company has operations, WWC and the Company shall mutually agree as to the allocation of such opportunities, and if they are unable to agree, such opportunities shall be shared equally by them pursuant to a joint venture or arrangement which is mutually agreed (it being 38 41 understood that the Company and WWC recognize the rights of the Investor as a result of the events described in clause (c) of the definition of "Disposition Event"). (iv) If either the Company or WWC determines not to pursue any opportunity with respect to the application for or purchase of existing or newly allocated spectrum, including either PCS spectrum or cellular spectrum (which determination, in the case of the Company, shall be made by majority vote of the Board with, prior to a Terminating Reduction, at least one of the Investor's designees to the Board voting in the majority) and so confirms to the other party, then the other party may make such application for or purchase such existing or new spectrum for its own use free of any rights of the declining party. (e) Rights and Obligations of Other Holders. If the Company shall enter into any agreement with a holder of equity securities of the Company (other than WWC or the Investor) (an "Other Holder") which contains terms and conditions with respect to corporate governance (including rights to designate directors to the Board), liquidity (including transfer rights and restrictions, rights of first offer or first refusal, and tag along and drag along rights), preemptive rights, or other rights and obligations of such Other Holder as a shareholder of the Company, the Company shall notify the Investor of such terms and conditions in writing, which notice shall constitute an offer to the Investor to grant it such terms and conditions in lieu of the terms and conditions of this Agreement. The Investor shall have the right, by delivery of written notice to the Company within 30 days after delivery of such notice from the Company, to accept such terms and conditions in lieu of this Agreement, in which case the Company and the Investor will enter into an agreement satisfactory to them in form and substance to implement such complete substitution of terms and conditions. (f) Dividends. Subject to compliance with the Company's and its Subsidiaries' loan agreements, indentures and other financing agreements and subject to the retention by the Company of adequate working capital and reserves for the needs of its and its Subsidiaries businesses (including reserves for anticipated capital expenditures provided for in the Company's approved annual Operating Plan and Budget and/or capital expenditures budget and reserves for acquisitions), the Shareholders agree that the Company shall, commencing as soon as practicable and in any event with the year beginning on January 1, 2000, pay dividends pari passu to all its shareholders as and in such amounts as are legally available for distribution. (g) Liability for Indebtedness. After the Closing, unless the Investor shall otherwise consent in writing, no member of the Company Group shall have any liability under or in respect of any indebtedness of any member of the WWC Non-Company Group ("WWC Debt"), and the assets of the Company Group shall not be subject to any Lien under or in respect of any WWC Debt. After the Closing, unless WWC shall otherwise consent in writing, no member of the WWC Non-Company Group shall have any liability under or in respect of any indebtedness of any member of the Company Group ("Company Debt"), and the assets of the WWC Non-Company Group shall not be subject to any Lien under or in respect of any Company Debt. (h) Spin-Off Distribution. WWC agrees that it shall not effect any Spin-Off Distribution unless, after giving effect thereto: 39 42 (i) there shall be a public float of the Common Stock of at least 15% of the outstanding Common Stock; (ii) the Common Stock is listed on a national securities exchange or quoted on the NASDAQ National Market System; (iii) the Roaming Agreement remains in full force and effect; and (iv) if the Investor then retains the right hereunder to designate one or more directors to the Board, the Company implements either (A) measures reasonably satisfactory to the Investor (which may include voting agreements, or the issuance of a separate class of voting securities to the Investor), or (B) cumulative voting, in either case effective at or before the Spin-Off Distribution to assure the Investor of the election to the Board of its designee(s) in accordance with Section 3 hereof. (i) Performance of Intercompany Agreements. WWC and the Company agree that they will duly and timely perform their respective obligations under the Intercompany Agreements in accordance with their respective terms (subject to any amendments, modifications or waivers with respect thereto in accordance with the terms of the Intercompany Agreements), except in respects which are not material and which would not, in accordance with the terms thereof, give rise to the right to claim a breach or default thereunder. The Company agrees with the Investor that it will use all reasonable and prudent efforts to cause WWC so to perform the Intercompany Agreements. (j) IPO. Until the date that is 18 months after the Closing Date, the Company and WWC will not effect any initial Public Sale of the Company's equity securities (whether a primary offering of newly issued shares or a secondary offering of shares owned by WWC) without the prior approval of at least one of the Investor's designees to the Board; provided, that such approval will not be required under this Section 12(j) for (1) any Public Sale of non-voting, non-convertible preferred stock for which approval is obtained as referred to in clause (a) of the definition of "Disposition Event", (2) any Spin-Off Distribution by WWC which meets the requirements set forth in Section 12(h) hereof, (3) subject to the rights of the Investor under Section 10(c) in respect of clauses (c) and (d) of the definition of "Disposition Event", any merger, acquisition or consolidation involving a Public Sale of the Company's or the surviving entity's equity securities, or (4) any transaction giving rise to the Drag Along Right under Section 7. 13. MISCELLANEOUS. (a) Legends. In addition to any other legends required by applicable law, the Company's By-laws or any other agreement restricting the Transfer of the Common Stock, each certificate evidencing the Common Stock acquired by the Shareholders will bear a legend reflecting the restrictions on the transfer of such shares contained in this Agreement and in the Purchase Agreement. (b) Waiver; Amendments. Except as expressly provided otherwise herein, neither this Agreement nor any provision hereof may be changed, waived, discharged or 40 43 terminated orally, but only by an instrument in writing signed by the Company and each of the Investor and WWC; provided, that if, at the time of such proposed change, waiver, discharge or termination, any other Shareholder is party to this Agreement, no change, waiver, discharge or termination that would adversely affect the rights or alter the obligations of such other Shareholder will be effective without the written approval of such Shareholder. (c) Recapitalization, Exchanges, Etc. The provisions of this Agreement shall apply to the full extent set forth herein with respect to shares or other securities of the Company that may be issued to any Shareholder in respect of, in exchange for, or in substitution of the Common Stock. (d) Specific Performance. Each of the parties hereto acknowledges and agrees that, in the event of any breach of this Agreement, the non-breaching parties would be irreparably harmed and could not be made whole by monetary damages. Accordingly, each of the parties hereto agrees that the other parties, in addition to any other remedy to which they may be entitled at law or in equity, shall be entitled to compel specific performance of this Agreement pursuant to Section 13(k)(x). (e) Notices. All notices, requests, demands and other communications hereunder shall be in writing and, except to the extent otherwise expressly provided in this Agreement, shall be deemed to have been duly given if delivered by same day or next day courier (guaranteed delivery) or mailed, registered mail, return receipt requested, or transmitted by telegram, telex or facsimile (i) if to a Shareholder, at such Shareholder's address appearing below or at any other address such Shareholder may have provided in writing to the Company and the other Shareholders then party to this Agreement and (ii) if to the Company, at 2001 NW Sammamish Road, No. 100, Issaquah, WA 98027, U.S.A., Tel: (425) 313-7003, Fax: (206) 313-5547; Attention: Alan R. Bender, Esq., or such other address as the Company may have furnished to the Shareholders in writing, with a copy (which shall not constitute notice) to Rubin Baum Levin Constant & Friedman, 30 Rockefeller Plaza, New York, NY 10112, USA, Tel: (212) 698-7700, Fax: (212) 698-7825; Attention: Barry A. Adelman. If a notice hereunder is transmitted by confirmed fax so as to arrive during normal business hours during a Business Day at the place of receipt, then such notice shall be deemed to have been given on such Business Day at the place of receipt or, if so transmitted to arrive after normal business hours during a Business Day at the place of receipt, then such notice shall be deemed to have been given on the following Business Day at the place of receipt. If such notice is sent by next-day courier it shall be deemed to have been given on the third Business Day at the place of receipt following sending and, if by registered air mail, on the tenth Business Day at the place of receipt following sending, provided, that the date of sending shall be deemed to be the date at the place of receipt at the time such notice is posted. 41 44 The Investor: Hutchison Telecommunications PCS (USA) Limited c/o Offshore Incorporations Limited P.O. Box 957 Offshore Incorporations Centre Road Town, Tortola British Virgin Islands Tel: (809) 494-2233 Fax: (809) 494-4885 and Hutchison Telecommunications PCS (USA) Limited 22nd Floor, Hutchison House 10 Harcourt Road Hong Kong Attention: Edith Shih Tel: (852) 2128-1232 Fax: (852) 2128-1778 With a copy (which shall not constitute notice) to: Dewey Ballantine LLP Suite 3907, Asia Pacific Finance Tower Citibank Plaza 3 Garden Road Central, Hong Kong Attention: John A. Otoshi Tel: (852) 2509-7000 Fax: (852) 2509-7088 WWC: 2001 NW Sammamish Road, No. 100 Issaquah, WA 98027 U.S.A. Attention: Alan R. Bender, Esq. Tel: (425) 313-5200 Fax: (425) 313-5547 With a copy (which shall not constitute notice) to: 42 45 Rubin Baum Levin Constant & Friedman 30 Rockefeller Plaza New York, NY 10112 USA Attention: Barry A. Adelman Tel: (212) 698-7700 Fax: (212) 698-7825 (f) Successors and Assigns. Except as otherwise provided herein, this Agreement shall inure to the benefit of, and be binding upon, the successors and assigns of each of the parties; provided, however, that this Agreement may not be assigned by any party hereto other than in compliance with the terms hereof, including the restrictions on transfers of Common Stock as set forth in Section 5 and the transfer of the rights and obligations hereunder as set forth in Section 15. (g) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement. (h) Entire Agreement. This Agreement constitutes the entire understanding of the parties hereto with respect to the subject matter hereof and supersedes all prior understandings among such parties with respect to such subject matter. (i) Applicable Law. The validity of this Agreement, its construction, interpretation and enforcement, and the rights of the parties hereunder, shall be determined under, governed by and construed in accordance with the internal laws of the State of New York applicable to contracts formed in such State. Each party hereto agrees that, subject to Section 13(k) hereof, any suit, action or other proceeding arising out of this Agreement shall be brought and litigated in the courts of the State of New York or the United States District Court for the Southern District of New York and each party hereto hereby irrevocably consents to personal jurisdiction and venue in any such court and hereby waives any claim it may have that such court is an inconvenient forum for the purposes of any such suit, action or other proceeding. (j) Section Headings. The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof. (k) Arbitration. Any and all disputes, controversies or claims (each a "Dispute") between the Shareholders relating to the interpretation or enforcement or performance of this Agreement shall be resolved by binding arbitration by the Arbitration Institute of the Stockholm Chamber of Commerce in accordance with its rules, subject to the following provisions: (i) There shall be three arbitrators (the "Arbitrators"). Each party shall appoint one arbitrator within 30 days after giving or receiving notice of the submission of a Dispute to arbitration. The two arbitrators appointed by the parties shall appoint the third arbitrator. If a party does not appoint an arbitrator within such designated period, or if the two 43 46 appointed arbitrators fail to appoint a third arbitrator within 30 days after their appointment, the relevant appointment shall be made by the Arbitration Institute of the Stockholm Chamber of Commerce. (ii) The expenses of the arbitration shall be borne equally by WWC, on the one hand, and the Investor, on the other hand, and each party shall bear its own legal fees and expenses; provided, however, that the Arbitrators shall have discretion to require that one party pay all or a portion of the expenses of arbitration or the other party's legal fees and expenses in connection with any particular arbitration. (iii) The Arbitrators shall determine whether and to what extent any party shall be entitled to damages or equitable relief. No party shall be entitled to punitive damages or consequential damages or shall be required to post a bond in connection with equitable relief. (iv) The Arbitrators shall not have the power to add to nor modify any of the terms or conditions of this Agreement. The Arbitrators' decision shall not go beyond what is necessary for the interpretation and application of the provisions of this Agreement in respect of the issue before the Arbitrators. The Arbitrators' decision and award or permitted remedy, if any, shall be based upon the issue as drafted and submitted by the respective parties and the relevant and competent evidence adduced at the hearing(s). (v) The Arbitrators shall have the authority to award any remedy or relief provided for in this Agreement, in addition to any other remedy or relief (including provisional remedies and relief) that a court of competent jurisdiction could order or grant (but subject to the remedial limitations elsewhere set forth in this Agreement, including, but without limitation, the aforesaid prohibition against punitive and consequential damages). The Arbitrators written decision shall be rendered within sixty (60) days of the hearing. The decision reached by the Arbitrators shall be final and binding upon the parties as to the matter in dispute. To the extent that the relief or remedy granted by the Arbitrators is relief or remedy on which a court could enter judgement, a judgement upon the award rendered by the Arbitrators may be entered in any court having jurisdiction thereof (unless in the case of an award of damages, the full amount of the award is paid within ten (10) days of its determination by the Arbitrators). Otherwise, the award shall be binding on the parties in connection with their continuing performance of this Agreement and in any subsequent arbitral or judicial proceeding between the parties. (vi) The arbitration shall take place in Stockholm, Sweden, unless otherwise agreed by the parties, and shall be conducted in the English language. (vii) The arbitration proceeding and all filing, testimony, documents and information relating to or presented during the arbitration proceeding shall be disclosed exclusively for the purpose of facilitating the arbitration process and for no other purpose. (viii) The parties shall continue performing their respective obligations under this Agreement notwithstanding the existence of a Dispute while the Dispute is being resolved unless and until such obligations are terminated, expire or are suspended in accordance with the provisions hereof. 44 47 (ix) The Arbitrators may, in their sole discretion, order a pre-hearing exchange of information including production of documents, exchange of summaries of testimony or exchange of statements of position, and shall schedule promptly all discovery and other procedural steps and otherwise assume case management initiative and control to effect an efficient and expeditious resolution of the Dispute. At any oral hearing of evidence in connection with an arbitration proceeding, each party and its counsel shall have the right to examine its witnesses and to cross-examine the witnesses of the other party. No testimony of any witness shall be presented in written form unless the opposing party or parties shall have the opportunity to cross-examine such witness, except as the parties otherwise agree in writing. (x) Notwithstanding the dispute resolution procedures contained in this Section 13(k), either party may apply to any court having jurisdiction (a) to enforce this Agreement to arbitrate, (b) to seek provisional injunctive relief so as to maintain the status quo until the arbitration award is rendered or the Dispute is otherwise resolved, or (c) to challenge or vacate any final judgment, award or decision of the Arbitrators that does not comport with the express provisions of this Section 13(k). (l) Failure to Pursue Remedies. The failure of any party to seek redress for violation of, or to insist upon the strict performance of, any provision of this Agreement shall not prevent a subsequent act, which would have originally constituted a violation, from having the effect of an original violation. (m) Cumulative Remedies. The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any party shall not preclude or waive its right to use any or all other remedies except as otherwise expressly provided in this Agreement. Such rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise. (n) Severability. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted. (o) HTL. In the event the Investor shall elect to purchase Sale Shares pursuant to its rights of first offer or, if applicable, first refusal under Section 6 or to exercise its preemptive rights under Section 9, HTL agrees to cause the Investor to perform its obligations under such Sections in accordance with their respective terms in connection with any such purchases (including causing or enabling the Investor to make payment). 14. TERMINATION OF RIGHTS AND OBLIGATIONS. (a) Investor and WWC. Except as provided in Sections 14(b) and 14(c), and except for any earlier termination in accordance with the express terms of any provisions hereof with respect to any right or obligation of the Investor or WWC under this Agreement, all rights and obligations of the Investor, WWC or any other Shareholder hereunder shall terminate upon the earlier of (i) the completion of a Qualifying IPO, the completion of a Spin-Off Distribution, the completion of a transaction in which the Drag Along Right is exercised or a merger or consolidation of the Company with another entity in which the 45 48 Company is not the surviving entity, (ii) in the case of the Investor, an Investor 50% Transfer or any Transfer as a result of which the Investor's Percentage Ownership falls to below 9.95%, and (iii) subject to the surviving rights of any WWC 50% Transferee in the case of WWC, any Transfer (including a Spin-Off Distribution) as a result of which WWC ceases to own any Common Stock. (b) Investor's Surviving Rights. (i) Qualifying IPO; Spin-Off Distribution; and Drag Along Right Event. After a Qualifying IPO, the completion of a Spin-Off Distribution, the completion of a transaction in which the Drag Along Right is exercised (except as provided in Section 7(c)) or in connection with a merger or consolidation of the Company with another entity in which the Company is not the surviving entity, the following rights of the Investor shall survive (and all other rights of the Investor hereunder shall terminate): (i) the right to designate directors to the Board under Section 3, which shall survive until terminated in accordance with Section 3; (ii) the Investor's preemptive right under Section 9, which shall survive until the termination in its entirety of the Investor's right to designate directors to the Board under Section 3 or, if earlier, the completion of an Investor 50% Transfer; and (iii) the demand and piggyback registration rights of the Investor under Section 11, which shall survive until terminated in accordance with Section 11. (ii) Investor 50% Transfer. (A) After an Investor 50% Transfer, the following rights of the Investor shall survive and the benefit thereof (subject to any diminution or termination of such rights in accordance with their terms after giving effect to such Transfer) shall be allocated between the Investor and the Investor 50% Transferee in accordance with Section 15 (and all other rights of the Investor or the Investor 50% Transferee hereunder shall terminate): (i) the right to designate directors to the Board under Section 3, which shall survive until terminated in accordance with Section 3; (ii) the Tag Along Right under Section 8 and Demand Event Tag Along Right under Section 10(g), which shall survive until the Investor's right to designate directors to the Board under Section 3 shall terminate or, if earlier, the termination of the Tag Along Right and Demand Event Tag Along Right pursuant to the provisions of Section 14(b)(i); and (iii) the demand and piggyback registration rights under Section 11, which shall survive until terminated in accordance with Section 11. (B) After an Investor 50% Transfer, WWC shall retain all of its rights under this Agreement, including the Drag Along Right under Section 7 hereof and the Demand Event Drag Along Right under Section 10(g) hereof, however, such Drag Along Right shall be modified so that regardless of whether the consideration to be received by all Shareholders is cash, Consideration Securities or a combination thereof, the Investor and any Investor 50% Transferee shall receive the same per share consideration as WWC and there shall be no return of invested capital or internal rate of return requirement. (iii) Percentage Ownership Below 9.95%. After any Transfer which results in the Investor's Percentage Ownership falling below 9.95%, the Investor's demand and piggyback registration rights under Section 11 shall survive until terminated in accordance with Section 11 (and all other rights of the Investor shall terminate). 46 49 (iv) Further Assurances. The Investor agrees that it shall enter into such further instruments in form and substance satisfactory to WWC, the Company and any transferee of WWC which, pursuant to Section 15, becomes subject to the rights and obligations of the Investor hereunder, as shall reasonably be required or advisable to effectuate or evidence the termination of the rights of the Investor (and the associated obligations of WWC, the Company and such transferee) as provided in this Section 14. (c) WWC's Surviving Rights. (i) Qualifying IPO; Spin-Off Distribution; and Drag Along Right Event. After a Qualifying IPO, the completion of a Spin-Off Distribution, the completion of a transaction in which the Drag Along Right is exercised or in connection with a merger or consolidation of the Company with another entity in which the Company is not the surviving entity, the following rights of WWC shall survive (and all other rights of WWC hereunder shall terminate): (A) the right to require the Investor to vote in favor of WWC's designees to the Board under Section 3, which shall survive until the Investor's right to designate directors is terminated in accordance with Section 3; (B) WWC's preemptive rights under Section 9, which shall survive until the termination of each other Shareholder's preemptive rights under Section 9; (C) the right (but not the obligation) to effect a Repurchase under Section 10(a), which shall survive until the demand registration rights of the Investor are terminated in accordance with Section 11; and (D) the right to effect a Disposition Transaction under Section 10(b), which shall survive until the termination of the Investor's right to designate directors under Section 3. (ii) WWC 50% Transfer. After a WWC 50% Transfer, all the rights of WWC hereunder shall survive and the benefit thereof (subject to any termination or diminution thereof in accordance with their terms after giving effect to such Transfer) shall be allocated between WWC and the WWC 50% Transferee in accordance with Section 15. (iii) Further Assurances. WWC agrees that it shall enter into such further instruments in form and substance satisfactory to the Company, the Investor and any transferee of the Investor which, pursuant to Section 15, becomes subject to the rights of WWC, as shall reasonably be required or advisable to effectuate or evidence the termination of the rights of WWC (and the associated obligations of the Investor, the Company and such transferee) as provided in this Section 14. (d) Pledged Shares. In connection with any foreclosure or exercise of remedies upon any shares of Common Stock subjected to a Lien for the benefit of a lender (including pursuant to Section 5(d)), the Tag Along Right and the Drag Along Right shall terminate automatically without further action of any party. 15. INVESTOR 50% TRANSFEREE AND WWC 50% TRANSFEREE; OTHER TRANSFEREES. (a) Investor. 47 50 (i) Investor 50% Transfer. If the Investor shall have made an Investor 50% Transfer, and unless the Investor shall have agreed otherwise with the Investor 50% Transferee, both the Investor and the Investor 50% Transferee (including, for this purpose, such transferee's Permitted Affiliate Transferees) shall remain entitled, as to the shares of Common Stock owned respectively by each of them, to the rights which survive such Transfer as provided in Section 14(b)(ii) (the "Assignable Investor Rights") (and all other rights under this Agreement of the Investor and any Investor 50% Transferee shall terminate). The benefits of the Assignable Investor Rights shall be subject to any termination or diminution thereof in accordance with their terms after giving effect to such Transfer. Both the Investor and such transferee shall be deemed to be the "Investor" and a "Shareholder" for purposes of the provisions of this Agreement governing the rights so shared by them and shall remain subject to all the rights of WWC hereunder. The Investor shall be permitted to Transfer the benefit of the Assignable Investor Rights to an Investor 50% Transferee on one occasion only. (ii) Other Transfers. If the Investor shall make a Transfer of shares of Common Stock representing less than an Investor 50% Block to a Person or Persons other than its Permitted Affiliate Transferees, or if the Investor shall have made an Investor 50% Transfer, but shall have agreed with the Investor 50% Transferee not to share the Assignable Investor Rights, then (A) the Investor shall remain entitled to all its rights, and subject to all its obligations, hereunder, subject to any termination or diminution thereof in accordance with their respective terms after giving effect to such Transfer, (B) no such transferee shall receive any of the rights of the Investor hereunder or be deemed to become the "Investor" or a "Shareholder" hereunder for purposes of any entitlement to the rights of the Investor hereunder and (C) each such transferee shall be required to become subject to (and the Investor shall remain subject to) the obligations of the "Investor" and a "Shareholder" with respect to, (1) the obligation to vote in favor of the designees of WWC to the Board under Section 3, (2) the approval rights of WWC under Section 5 as to transferees of such transferees, (3) the first offer and first refusal rights of WWC under Section 6, (4) the Drag Along Right of WWC under Section 7 (except that with respect to the transferee, the Drag Along Right provisions of Section 14(b)(ii)(B) shall be applicable), (5) the preemptive rights of WWC under Section 9, and (6) the Demand Event Drag Along Right under Section 10(g)(the "Mandatory WWC Rights"). (iii) Excepted Transfers. If the Investor shall make a Transfer of Common Stock in an Excepted Transfer, no transferee in such Transfer shall become entitled to the rights or subject to the obligations of the Investor hereunder unless mutually agreed by the Investor and WWC. (iv) Permitted Affiliate Transferees. If the Investor shall make a Transfer of Common Stock to a Permitted Affiliate Transferee, such Permitted Affiliate Transferee shall become entitled to all the rights of the Investor hereunder (without any diminution of the Percentage Ownership deemed held by the Investor hereunder), and subject to all the obligations of the Investor hereunder, provided, that the Investor and its Permitted Affiliate Transferees shall be treated, unless the context requires otherwise, as a single collective party under this Agreement, and no Transfer to a Permitted Affiliate Transferee shall relieve the Investor of any liability for its obligations hereunder. 48 51 (b) WWC. (i) WWC 50% Transfer. If WWC shall have made a WWC 50% Transfer, and unless WWC shall have agreed with the WWC 50% Transferee not to Transfer to such transferee the benefit of the rights of WWC hereunder (but rather to retain all or a portion of such rights), the WWC 50% Transferee and WWC shall be permitted to share only (A) the right to require the Investor to vote in favor of WWC's designees to the Board under Section 3, which right of WWC shall survive until the Investor's right to designate directors is terminated in accordance with Section 3, and (B) WWC's preemptive rights under Section 9, which shall survive until no other Shareholder has preemptive rights under Section 9. In each case, the rights of WWC and such transferee shall be subject to any termination or diminution thereof after giving effect to such Transfer, in accordance with the terms of this Agreement. All other rights may be either retained by WWC or transferred by WWC to a WWC 50% Transferee, with WWC or such transferee, as the case may be; being the sole party entitled to the benefit of such rights thereafter. Except where the context requires otherwise, such transferee shall be deemed to be "WWC" and a "Shareholder" for purposes of the provisions of this Agreement governing the rights held exclusively by it, and both WWC and such transferee shall be deemed to be "WWC" and a "Shareholder" for purposes of the provisions hereof governing rights shared by them. (ii) If WWC shall make a Transfer of shares of Common Stock representing less than a WWC 50% Block to a Person or Persons other than its Permitted Affiliate Transferees, or if WWC shall have made a Transfer of a WWC 50% Block to a WWC 50% Transferee, but shall have elected not to Transfer its rights to such transferee, then (A) WWC shall remain entitled to all its rights, and subject to all its obligations, hereunder, subject to any termination or diminution thereof in accordance with their respective terms after giving effect to such Transfer, and (B) such transferee shall not be entitled to any of the rights, or subject to any of the obligations of WWC hereunder. other than the obligation to vote for the Investor's designees to the Board under Section 3. (iii) Excepted Transfers. If WWC shall make an Excepted Transfer, no transferee in such Transfer shall become entitled to the rights, or subject to the obligations, of the Investor hereunder unless mutually agreed by the Investor and WWC. (iv) Permitted Affiliate Transferees. If WWC shall make a Transfer of Common Stock to a Permitted Affiliate Transferee, such Permitted Affiliate Transferee shall become entitled to all the rights of WWC hereunder (without diminution of the Percentage Ownership deemed held by WWC hereunder), and subject to all the obligations of WWC hereunder, provided, that WWC and its Permitted Affiliate Transferees shall be treated, unless the context requires otherwise, as a single collective party under this Agreement, and no Transfer to a Permitted Affiliate Transferee shall relieve WWC of liability for its obligations hereunder. (c) Further Assurances. (i) The Investor agrees that each transferee of the Investor (including any Permitted Affiliate Transferee), other than in an Excepted Transfer, shall be required to enter into such further instruments in form and substance satisfactory to WWC and the Company as shall reasonably be required or advisable to effectuate or evidence any transfer or 49 52 assumption of the rights and obligations of the Investor to or by such transferee in accordance with this Section 15 or Section 14. (ii) WWC agrees that each transferee of WWC (including any Permitted Affiliate Transferee), other than in an Excepted Transfer, shall be required to enter into such further instruments in form and substance satisfactory to the Investor and the Company as shall reasonably be required or advisable to effectuate or evidence the transfer or assumption of the rights and obligations of WWC to or by such transferee in accordance with this Section 15 or Section 14; provided, that upon a Transfer to any Person in a transaction which gave rise to a right of first offer or right of first refusal in favor of the Investor and in which the Investor did not exercise any such rights, the transferee shall not be subject to any obligations or rights hereunder except to the extent agreed to between the transferee and WWC. 50 53 IN WITNESS WHEREOF, the parties hereto have executed this Shareholders Agreement of Western PCS Corporation as of the date first above written. WESTERN WIRELESS CORPORATION /s/ Donald Guthrie ---------------------------------------- Name: Donald Guthrie Title: Vice Chairman and Chief Financial Officer HUTCHISON TELECOMMUNICATIONS PCS (USA) LIMITED /s/ Khoo Chek Ngee ---------------------------------------- Name: Khoo Chek Ngee Title: Director WESTERN PCS CORPORATION /s/ John W. Stanton ---------------------------------------- Name: John W. Stanton Title: Chief Executive Officer 51 54 The undersigned joins as a party to this Agreement in his individual capacity solely for the purpose of acknowledging and becoming bound by the provisions of Section 7(b) hereof but only to the extent such provision relates to the undersigned. The undersigned shall have no further rights or obligations in his individual capacity under this Agreement. /s/ John W. Stanton ---------------------------------------- JOHN W. STANTON The undersigned joins as a party to this Agreement solely for the purpose of acknowledging and becoming bound by the provisions of Section 13(o) hereof. The undersigned shall have no further rights or obligations under this Agreement (other than as a Permitted Affiliate Transferee of the Investor upon any Transfer of shares of Common Stock to the undersigned by the Investor). HUTCHISON TELECOMMUNICATIONS LIMITED /s/ Susan Chow ---------------------------------------- Name: Susan Chow Title: Director 52 EX-10.27 5 TAX SHARING AGREEMENT 1 EXHIBIT 10.27 EXECUTION COPY TAX SHARING AGREEMENT Agreement dated this 17th day of February, 1998, by and among Western Wireless Corporation, a Washington corporation ("WWC"), Western PCS Corporation, a Delaware corporation ("Western PCS") and Hutchison Telecommunications PCS (USA) Limited, a British Virgin Islands corporation (the "Investor") (the "Agreement"). WHEREAS, WWC is the common parent of an affiliated group of corporations that files a consolidated federal income tax return (the "WWC Affiliated Group"); WHEREAS, prior to the date hereof, WWC owned all of the outstanding stock of Western PCS; WHEREAS, as of the date hereof, Investor will acquire from Western PCS 19.9 percent of the outstanding common stock of Western PCS (the "Purchase"); and WHEREAS, WWC, Western PCS and Investor desire to establish an arrangement whereby the income tax liabilities of Western PCS and its direct and indirect subsidiaries (the "Western PCS Group") will be determined and paid by WWC and rebilled to Western PCS for settlement, and the Western PCS Group will be compensated by WWC for the use of certain Western PCS Group net operating losses and other tax attributes; NOW, THEREFORE, WWC, Western PCS and Investor agree as follows: 2 ARTICLE I 1.01 Preparation and Filing of Tax Returns by WWC. WWC shall prepare and timely file, or shall cause the preparation and timely filing of, all federal, state, and other income tax returns ("Tax Returns") of the Western PCS Group. With respect to the tax treatment of items affecting the Western PCS Group, such Tax Returns shall be prepared (in the absence of a material change in law or circumstance) in a manner that is consistent with past practices, elections, accounting methods, conventions, and principles of taxation used for the most recent taxable periods for which Tax Returns involving similar items have been filed prior to the Purchase. 1.02 Payment of Taxes by WWC. Subject to Sections 1.05 and 1.08 and any rights of offset that WWC may have under this Agreement, WWC shall pay, or cause to be paid, all income taxes, interest, and penalties due with respect to income earned or recognized by the Western PCS Group. 1.03 Determination of Income Taxes of the Western PCS Group. WWC shall determine and allocate to each member of the Western PCS Group its income taxes and related penalties and interest as if it were a separate and independent taxpayer. For purposes of this determination, WWC shall not give effect to any federal net operating loss carryover or carryback that would be available to any member of the Western PCS Group. The computations shall be prepared from year to year (in the absence of a material change in law or circumstance) in a manner consistent with past practices, elections, accounting methods, conventions, and principles of taxation used for the most recent taxable periods for which Tax Returns involving similar items have been filed prior to the Purchase. In the event that the WWC Affiliated Group files its consolidated federal income Tax Return on the basis of the alternative minimum tax, each 2 3 member of the Western PCS Group will be allocated tax by WWC based on its tax calculated on a stand-alone basis. Items relating to intercompany transactions shall be treated as provided under Treasury Reg. Section 1.1502-13. WWC shall consult with Western PCS and Investor in the determination of the Western PCS Group members' allocated income tax liabilities and shall afford Western PCS and Investor reasonable opportunity to review such determinations by making such determinations available to Western PCS and Investor. Not later than the later of (i) 15 days after receipt of such determinations by Western PCS and Investor and (ii) 15 days before the filing due date of the relevant Tax Return, Investor or Western PCS shall notify WWC of any determinations or allocations with which Investor or Western PCS disagrees, including a reasonably detailed explanation of such disagreement. The parties shall act in good faith to resolve such disagreement and if they cannot reach a resolution, the matter shall be referred to an independent accounting firm acceptable to all parties, whose resolution of the matter shall be binding on the parties. In addition to the other principles and policies set forth in this Agreement, the parties have agreed that the determination and allocation of taxes under this Section shall be computed on the basis that (i) the merger of Western PCS III Corporation into Western PCS II Corporation during 1997 was a qualifying tax-free reorganization under Section 368 of the Internal Revenue Code of 1986, as amended (the "Code") and (ii) any tax liability arising as a result of any future spin-off by Western PCS of any direct or indirect subsidiary of Western PCS shall not be allocated to any member of the Western PCS Group. 3 4 WWC and Western PCS shall cooperate to effectively monitor any "excess loss accounts" (as defined in Treasury Reg. Section 1.1502-19) anywhere within the Western PCS Group. Prior to any event (including, but not limited to, debt cancellations and deconsolidation events) which may trigger recapture of income due to any excess loss account, WWC and Western PCS shall cooperate and use all commercially reasonably efforts to eliminate such excess loss account recapture or otherwise avoid or minimize the impact thereof. 1.04 Determinations by WWC in Accordance with Allocation Policy Objectives. In the event that it may be unclear as to the result of the application of Section 1.03 to specific situations which may arise and which are not expressly addressed in Section 1.03, the allocation of taxes by WWC to the members of the Western PCS Group shall be made using the following tax allocation policy objective as a guide: the tax allocation policy is meant to fairly allocate federal, state, and local tax liabilities (without regard to federal net operating loss carryovers or carrybacks, except as provided in Sections 1.06 and 1.07) to the members of the Western PCS Group as if each such corporation filed its Tax Return and paid its tax on a separate company basis. 1.05 Payment of Allocated Taxes. Subject to Sections 1.06 and 1.08, Western PCS shall pay to WWC on behalf of each of the members of the Western PCS Group, within 30 days after the later of (i) the receipt of the determinations referred to in Section 1.03 and (ii) the filing of the relevant Tax Return, the tax liability allocated to such member pursuant to Section 1.03, except for payments relating to disputed items under Section 1.03, which payments shall be made within 30 days after the resolution thereof. The tax liability of the WWC Affiliated Group, less the amount of tax liability 4 5 allocated to the members of the Western PCS Group, shall be the sole responsibility of WWC and the other members of the WWC Affiliated Group, excluding the members of the Western PCS Group. The foregoing sentence shall not affect any right to indemnification that WWC or other members of its Affiliated Group may have from any person who is not a member of the WWC Affiliated Group for any taxes (including penalties and interest thereon and expenses related thereto) that are the responsibility of WWC. Western PCS may offset its obligation to make payments to WWC under this Section against WWC's obligations to make payments to Western PCS under the provisions of this Agreement. 1.06 Treatment of Post-1997 Net Operating Losses and Other Tax Attributes. (a) If for any taxable year beginning on or after January 1, 1998, any member of the Western PCS Group has a net operating loss (computed without regard to any net operating loss carryover or carryback from any period) or generates any other tax attribute (e.g., a credit) that reduces the federal consolidated tax liability of the WWC Affiliated Group (excluding the Western PCS Group) for the year in which such loss is incurred or such attribute is generated, the amount of the net operating loss or tax attribute producing such reduction in tax liability shall be treated as follows: (i) first, to the extent of losses or attributes referred to in Section 1.12 (generally, Western PCS Group Pre-1997 Losses), as reducing the amount of such losses or attributes; (ii) then, to the extent of losses referred to in Section 1.07 (Western PCS Group 1997 Losses), as reducing the amount of such losses; and (iii) thereafter, as a utilization of a current year loss or attribute; all as further described below in this Section. 5 6 (b) With respect to the losses referred to in Section 1.06(a)(ii), WWC shall make such payment as provided in Section 1.07 by treating such amount as a "1997 Reimbursable Loss". (c) With respect to the losses and attributes referred to in Section 1.06(a)(iii) above, the aggregate total of such losses and attributes shall be maintained in a deferred account (the "Western PCS Deferred Account") until the date upon which the Western PCS Group members (i) cease to file a consolidated federal income Tax Return with WWC, or (ii) cease to have any net operating loss carryovers computed on a stand-alone basis (taking into account the provisions of this Section 1.06 and computed as of the end of a taxable year). If the Western PCS Group members cease to file a consolidated federal income Tax Return with WWC, WWC shall pay to Western PCS within 30 days following the date of such deconsolidation an amount equal to the present value of the aggregate balance of such Western PCS Deferred Account determined by mutual agreement among WWC, Western PCS and Investor based on (i) the maximum federal income tax rate for corporations applicable for the year during which the deconsolidation becomes effective, (ii) reasonable projections for the Western PCS Group with regard to the anticipated timing of the utilization by it of such losses and 6 7 attributes and (iii) a commercially reasonable discount rate. If there is a dispute between WWC, Western PCS and Investor with regard to the preceding calculation, the matter shall be referred to an independent accounting firm acceptable to all parties, whose resolution of the matter shall be binding on the parties. In no event shall payment of any disputed amount be required to be made prior to 30 days following resolution of such dispute. If, prior to any time that the Western PCS Group members cease to file a consolidated federal income tax return with WWC, the Western PCS Group members cease to have any net operating loss carryovers computed on a stand-alone basis (taking into account the provisions of this Section 1.06 and computed as of the end of a taxable year), WWC shall pay to Western PCS an amount equal to the difference between (A) the sum of the Western PCS Group members' federal income tax liabilities determined as if each such member were a separate and independent taxpayer, and (B) the sum of the Western PCS Group members' federal income tax liabilities determined as if each such member were a separate and independent taxpayer and had available to it a part of the net operating losses and other attributes in the Western PCS Deferred Account proportionate to its taxable income. Thereafter, such calculation shall be performed annually (or until the Western PCS Group members cease to file a consolidated federal income tax 7 8 return with WWC), and the amount in the Western PCS Deferred Account shall be reduced by the amount of the net operating losses and other attributes utilized in determining the federal income tax liabilities of the Western PCS Group members in (B). (d) The principles of Section 1.06(c) shall apply equally to years in which the WWC Affiliated Group (excluding the members of the Western PCS Group) has a net operating loss (computed without regard to any net operating loss carryover or carryback from any period) or other tax attribute which reduces the tax liability of the Western PCS Group. The deferred account of the WWC Affiliated Group (excluding members of the Western PCS Group) (the "WWC Deferred Account") shall be increased for all such current year losses and other attributes referred to in this Section 1.06(d). No member of the Western PCS Group shall be required to make any payment pursuant to Section 1.05 for any taxable year to the extent that such payment which otherwise would be required under Section 1.05 is attributable to any amount added for that taxable year to such WWC Deferred Account. (e) WWC and Western PCS may each offset their obligations to make payments pursuant to Section 1.06(c) and (d) against the other party's obligations to make such payments. (f) If for any taxable year beginning on or after January 1, 1998, any member of the Western PCS Group has a net 8 9 operating loss (computed without regard to any net operating loss carryover or carryback from any period) or generates any other tax attribute (e.g., a credit) that reduces the federal consolidated tax liability of the WWC Affiliated Group, for any year other than the year in which such loss is incurred or such attribute is generated, below the amount that would have been payable if such Western PCS Group member had not incurred such loss or generated such attribute, WWC shall pay the amount of the tax reduction so computed to Western PCS within 30 days after the filing of the consolidated federal income Tax Return that reflects such tax reduction or, if such tax reduction is due to the carryback of an item and refund of earlier payment, within 30 days after the receipt by WWC of such refund payment. WWC may offset its obligation to make payments to Western PCS under this Section 1.06(f) against Western PCS's obligations to make payments to WWC under the provisions of this Agreement. (g) The principles of Section 1.06 shall be applied on the basis that, if any member of the WWC Affiliated Group has a net operating loss (computed without regard to any net operating loss carryover or carryback) or generates any other tax attribute for any taxable year beginning on or after January 1, 1998, such net operating loss or tax attribute shall be used first to reduce the federal tax liability for such year of the other members 9 10 of the Western PCS Group or WWC Affiliated Group (excluding the Western PCS Group members) of which such member having such net operating loss or tax attribute is a member. 1.07 Reimbursement for the Use of Western PCS Group 1997 Net Operating Losses. If for the 1997 taxable year any member of the Western PCS Group has a net operating loss (computed without regard to any net operating loss carryover or carryback from any period) that reduces the federal consolidated tax liability of the WWC Affiliated Group for any year below the amount that would have been payable if such Western PCS Group member had not incurred such loss (such net operating loss a "1997 Reimbursable Loss"), WWC shall pay to Western PCS the amount of such tax reduction, computed as specified in the next sentence. The amount of the tax reduction shall be an amount equal to $20 million times a fraction, the numerator of which shall be the amount of the Western PCS Group members' 1997 Reimbursable Losses utilized for the year of tax reduction, and the denominator of which shall be the total amount of the Western PCS Group members' 1997 net operating losses (computed without regard to any net operating loss carryover or carryback from any period). In no event shall (i) the total payments made by WWC to Western PCS under this Section exceed $20 million or (ii) the payment for any particular year exceed the amount of the tax reduction referred to in the first sentence of this Section 1.07. Any payment by WWC required under this Section 1.07 shall be paid to Western PCS within 30 days of WWC's filing of the consolidated federal income Tax Return that reflects such tax reduction as determined under this Section. WWC may offset its obligation to make payments to Western PCS 10 11 under this Section against Western PCS's obligations to make payments to WWC under the provisions of this Agreement. The amount of losses and payments referred to in this Section 1.07 shall be reduced by the losses and payments determined in Section 1.06(b). In any case where WWC would be required to make a payment under Section 1.06(f) but for the existence of a Western PCS Group member 1997 net operating loss (computed without regard to any net operating loss carryover or carryback from any period), the WWC Affiliated Group's federal consolidated tax liability shall be deemed to be reduced first by the 1997 loss and WWC shall make a payment to Western PCS under this Section 1.07 accordingly. 1.08 Interim Estimated Payments. Within 30 days after each request by WWC, Western PCS shall advance to WWC amounts computed consistently with Sections 1.03, 1.04 and 1.06 necessary to reimburse WWC for the portion of any estimated federal income tax payments attributable to the inclusion of the members of the Western PCS Group in the WWC consolidated federal income Tax Return. Any amounts so paid in any year shall operate to reduce the amount payable to WWC following the end of such year pursuant to Section 1.05 above, and any excess of payments made by Western PCS pursuant to this Section 1.08 shall promptly be refunded by WWC to Western PCS. Conversely, within 30 days after the due date of any estimated federal income tax payments, WWC shall advance to Western PCS amounts computed consistently with Sections 1.06 and 1.07 (and only if a current payment would be required pursuant to Sections 1.06 and 1.07) necessary to reimburse Western PCS for the reduction in estimated federal income tax payments attributable to the inclusion of the 11 12 Western PCS Group in the WWC consolidated federal income Tax Return. Any amounts so paid in any year shall operate to reduce the amount payable to Western PCS following the end of such year pursuant to Sections 1.06 and 1.07, and any excess of payments made by WWC pursuant to this Section 1.08 shall promptly be refunded to WWC by Western PCS. 1.09 State and Local Combined Reporting. In the event that any Western PCS Group member, on the one hand, and WWC or any other member of the WWC Affiliated Group (other than a member of the Western PCS Group), on the other hand, compute their state or local income, franchise, net worth or similar tax liabilities in any jurisdiction on a combined, consolidated or unitary basis, this Agreement shall apply to such corporations with respect to such taxes to the fullest extent possible, taking into account any differences between the federal consolidated return system and the state or local combined, consolidated or unitary return system. 1.10 Conduct of Tax Audits and Disputes; Tax Adjustments. Except as otherwise provided in this Section 1.10, WWC and its duly appointed representatives shall have the right on behalf of all members of the Western PCS Group to supervise or otherwise coordinate any tax examination process and to negotiate, resolve, settle, and contest any asserted tax deficiencies or assert and prosecute any claim for tax refund. WWC shall consult with Western PCS and Investor in connection with such matters as relate to the Western PCS Group, shall give Investor a reasonable opportunity to participate therein (provided that WWC shall retain ultimate control of such matters), and shall promptly provide to Western PCS and Investor all information relating to such matters received by WWC or its representatives, including providing copies of all 12 13 notices, assessments, or similar documents within 15 days of receipt. WWC shall not agree to any audit adjustment or deficiency, settle any issue or amount, resolve any issue, contest any claim, or take any other action in any legal proceeding that pertains to the Western PCS Group except in good faith and based on the merits thereof and without regard to any other audit adjustment, deficiency, issue, amount, claim or proceeding relating to the WWC Affiliated Group (excluding the Western PCS Group). In the event of any adjustment to the Tax Returns of any member of the Western PCS Group as filed (by reason of an amended return, claim for refund, or an audit by the Internal Revenue Service or other tax authority), the liability of each member of the Western PCS Group hereunder shall be redetermined to give effect to any such adjustment as if it had been made as part of the original determination and allocation of tax liability. Appropriate payments between WWC and Western PCS shall be made in respect of any such adjustment in accordance with the foregoing provisions of this Agreement within 30 days after any payments are made or refunds are received as a result of the adjustment or, in the case of contested proceedings, within 30 days after a final determination of the contest. Similar principles shall apply to the other members of the WWC Affiliated Group. 1.11 Payment for Western PCS Group Post-1996 Losses and Other Tax Attributes Retained by WWC. In the event the Western PCS Group members cease to file a consolidated federal income Tax Return with WWC, WWC shall make a lump sum payment to Western PCS, according to the provisions of the following paragraph, within 30 days of the date that the Western PCS Group members leave the WWC Affiliated Group, in compensation for any unused net operating losses and other tax attributes 13 14 arising after 1996 that are attributable to the Western PCS Group and that are retained by WWC. To the extent that Western PCS Group 1997 net operating losses are retained by WWC at such time, WWC shall pay to Western PCS the remaining unpaid balance of the $20 million due to Western PCS from WWC as provided in Section 1.07, determined as if the amount of such retained losses were treated as "1997 Reimbursable Losses." In no event shall any payment to Western PCS under this Section in respect of net operating losses attributable to the Western PCS Group arising in 1997 exceed $20 million. To the extent that Western PCS Group post-1997 net operating losses or other attributes are retained by WWC at such time, WWC shall pay to Western PCS an amount equal to the present value of such retained net operating losses and other attributes determined by mutual agreement among WWC, Western PCS and Investor based on (i) the maximum federal income tax rate for corporations applicable for the year during which the deconsolidation becomes effective, (ii) reasonable projections for the Western PCS Group with regard to the anticipated timing of the utilization by it of such losses and other attributes and (iii) a commercially reasonable discount rate. If there is a dispute among WWC, Western PCS and Investor with regard to the preceding calculation, the matter shall be referred to an independent accounting firm acceptable to all parties, whose resolution of the matter shall be binding on the parties. In no event shall payment of any disputed amount be required to be made prior to 30 days following resolution of such dispute. 1.12 Payment for Western PCS Group Pre-1997 Losses and WWC Group (Excluding Western PCS Group) Post-1997 Losses and Other Attributes Retained 14 15 by Western PCS. In the event the Western PCS Group members cease to file a consolidated federal income Tax Return with WWC, Western PCS shall make a lump sum payment to WWC, at the time the Western PCS Group members leave the WWC Affiliated Group, in consideration for (i) any unused net operating losses arising before 1997 that are attributable to the Western PCS Group and that are retained by the Western PCS Group members and (ii) any unused net operating losses or other tax attributes arising after 1996 that are attributable to members of the WWC Affiliated Group, other than members of the Western PCS Group, and that are retained by Western PCS Group members. The amount of the payment in respect of losses referred to in clause (i) of the preceding sentence shall be equal to $20 million times a fraction, the numerator of which shall be the retained losses in clause (i), and the denominator of which shall be the total amount of the net operating losses arising before 1997 that are attributable to the Western PCS Group as of the date of this Agreement. To the extent that such losses and attributes referred to in clause (ii) above are retained by Western PCS at such time, Western PCS shall pay to WWC an amount equal to the present value of such retained net operating losses and attributes determined by mutual agreement among WWC, Western PCS and Investor based on (i) the maximum federal income tax rate for corporations applicable for the year during which the deconsolidation becomes effective, (ii) reasonable projections for the WWC Affiliated Group (excluding the Western PCS Group) with regard to the anticipated timing of the utilization by it of such losses and attributes and (iii) a commercially reasonable discount rate. If there is a dispute among WWC, Western PCS and Investor with regard to the preceding calculation, the matter shall be referred to an independent accounting firm acceptable to all parties, whose resolution of the matter shall 15 16 be binding on the parties. In no event shall payment of any disputed amount be required to be made prior to 30 days following resolution of such dispute. For purposes of determining the amount of any payment to be made pursuant to this Section 1.12, the amount of pre-1997 losses and WWC Affiliated Group (excluding Western PCS Group) post-1997 losses and other attributes retained by the Western PCS Group members shall be reduced by losses and attributes as provided in clause (i) of Section 1.06(a). 1.13 Ownership Change Loss Limitations. If a change of ownership (as determined under Section 382 of the Code) occurs with respect to WWC which causes the limitations of Section 382 to be applicable to any net operating loss (including carryforward losses) of any member of the Western PCS Group, WWC shall, at any time that the Western PCS Group (or any member thereof) ceases to file a consolidated federal income Tax Return with WWC, allocate to the Western PCS Group (or relevant member thereof) an equitable portion of any allowance for limited use of NOLs that remains available. Such allocation shall be determined based upon the proportion that the net operating losses (including carryforward net operating losses) of each member of the WWC Affiliated Group represents of the total of such losses (inclusive of such carryforward losses) of the entire WWC Affiliated Group as of the date of the deconsolidation. 1.14 Indemnification of the Western PCS Group. WWC shall indemnify and hold the Western PCS Group members harmless from and against all federal, state, local, foreign and other taxes and penalties and interest related thereto due or payable by WWC or any member of the WWC Affiliated Group (other than taxes, 16 17 penalties and interest allocable to members of the Western PCS Group pursuant to Sections 1.01 through 1.10 of this Agreement and taxes, penalties and interest of the members of the Western PCS Group where such items are not otherwise subject to the provisions of the Agreement). If, upon receipt by WWC of a notice of indemnification claim by Western PCS from Western PCS or Investor hereunder, WWC disputes such claim, WWC shall notify Western PCS and Investor of its disagreement and the basis therefor within 30 days of receipt of the notice of claim. The parties shall act in good faith to resolve such disagreement and if they cannot reach a resolution, the matter shall be referred to an independent accounting firm acceptable to all parties, whose resolution of the matter shall be binding on the parties. Any indemnification payment required hereunder shall be paid within 30 days after the indemnifying party receives notice of such required payment from the indemnified party or, if disputed, within 30 days after the resolution of such dispute as provided in the preceding sentence. The indemnifying party shall also pay the reasonable attorney's fees and other costs incurred by the indemnified party with respect to the payment of such taxes and other amounts and the pursuit of the indemnification claim. 1.15 Indemnification of WWC. Western PCS shall indemnify and hold WWC and all members of its Affiliated Group (other than the members of the Western PCS Group) harmless from and against all federal, state, local, foreign and other taxes and penalties and interest related thereto allocable to any member of the Western PCS Group pursuant to Sections 1.01 through 1.10 of this Agreement and taxes, penalties and interest of the members of the Western PCS Group where such items are not otherwise subject to the provisions of the Agreement. Any indemnification claim by WWC shall be 17 18 delivered to both Western PCS and Investor. If, upon receipt by Western PCS and Investor of a notice of indemnification claim by WWC hereunder, Western PCS or Investor disputes such claim, Western PCS or Investor shall notify WWC of its disagreement and the basis therefor within 30 days of receipt of the notice of claim. The parties shall act in good faith to resolve such disagreement and if they cannot reach a resolution, the matter shall be referred to an independent accounting firm acceptable to all parties, whose resolution of the matter shall be binding on the parties. Any indemnification payment required hereunder shall be paid within 30 days after the indemnifying party receives notice of such required payment from the indemnified party or, if disputed, within 30 days of the resolution of such dispute as provided in the preceding sentence. The indemnifying party shall also pay the reasonable attorney's fees and other costs incurred by the indemnified party with respect to the payment of such taxes and other amounts and the pursuit of the indemnification claim. 1.16 Portion of Taxable Year. Whenever it is necessary under this Agreement to determine liability for taxes for a portion of a taxable year or period that begins before and ends after the Western PCS Group members cease to file a consolidated federal income Tax Return with WWC, the determination shall be made by assuming that each of the relevant corporations had a taxable year which ended at the close of the date on which such corporations cease to file a consolidated federal income Tax Return with WWC, except that exemptions, allowances or deductions that are calculated on an annual basis, such as the deduction for depreciation, shall be apportioned on a time basis. 18 19 1.17 Payment Gross-up. Any payment required to be made under this Agreement after the Western PCS Group members cease to file a consolidated federal income Tax Return with WWC shall be increased so that the net amount retained by the corporation to which payment is due, after deduction of any tax due thereon, shall be equal to the amount otherwise due. All parties agree to report payments to each other hereunder as non-includable and non-deductible to the extent permitted under applicable law. 1.18 Net Payments. Notwithstanding any provisions within this Agreement permitting a party to offset amounts it owes to another party hereunder by amounts such other party owes to it, no party may offset amounts currently due and payable to another party by any amounts in the WWC Deferred Account or the Western PCS Deferred Account (as such terms are defined in Section 1.06) unless such amounts have become currently due and payable. ARTICLE II 2.01 Limitation to Consolidated Return Years. The obligations of the parties hereunder shall relate solely to taxes, net operating losses and tax attributes arising during taxable years for which the Western PCS Group members file a consolidated federal income Tax Return with WWC, except that if, in a taxable year in which the Western PCS Group no longer files a consolidated federal income Tax Return with WWC, the Western PCS Group generates a net operating loss or other tax attribute which it carries back to a year in which the Western PCS Group did file a consolidated federal income Tax Return with WWC, WWC shall promptly apply for a refund upon notice of such carryback to WWC and, upon receipt of such refund, shall promptly pay to Western PCS the amount of the refund. Western PCS shall pay and indemnify WWC for all out- 19 20 of-pocket expenses including outside accountant's fees, attorney's fees and reasonable overhead allocation incurred by WWC in making such refund claim and WWC shall be entitled to offset any such expenses against the amount of any refund received. 2.02 Expenses. Except as otherwise stated herein, all costs and expenses incurred in connection with this Agreement and transactions contemplated hereby shall be paid by the party incurring such costs and expenses. 2.03 Entire Agreement. This Agreement contains the entire agreement among the parties and supersedes all prior agreements, arrangements, and understandings relating to the subject matter hereof. There are no written or oral agreements, understandings, representations or warranties between or among the parties other than those set forth or referred to in this Agreement. 2.04 Section Headings. The Section and paragraph headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. 2.05 Notices. All notices, consents, requests, instructions, approvals and other communications provided for herein and all legal process in regard hereto shall be validly given when made, or served if in writing when delivered personally (by courier service or otherwise), when delivered by telecopy and confirmed by returned telecopy, addressed as follows, or, in each case, to such other address as may be specified by a party in writing to another party: (a) if to WWC, to it at: Western Wireless Corporation 2001 NW Sammamish Road Issaquah, Washington 98027 20 21 Attention: Donald Guthrie Facsimile No.: 425-313-7731 with copies (which shall not constitute notice) to: Rubin Baum Levin Constant & Friedman 30 Rockefeller Plaza New York, New York 10112 Attention: Barry A. Adelman, Esq. Facsimile No.: 212-698-7825 and Jones, Day, Reavis & Pogue 1450 G Street, N.W. Washington, D.C. 20005 Attention: Lester W. Droller, Esq. Facsimile No.: 202-737-2832 (b) if to Western PCS, to it at: Western PCS Corporation 2001 NW Sammamish Road Issaquah, Washington 98027 Attention: Donald Guthrie Facsimile No.: 425-313-7731 with copies (which shall not constitute notice) to: Rubin Baum Levin Constant & Friedman 30 Rockefeller Plaza New York, New York 10112 Attention: Barry A. Adelman, Esq. Facsimile No.: 212-698-7825 and Jones, Day, Reavis & Pogue 1450 G Street, N.W. Washington, D.C. 20005 Attention: Lester W. Droller, Esq. Facsimile No.: 202-737-2832 (c) if to Investor, to it at: 21 22 Hutchison Telecommunications PCS (USA) Limited 22nd Floor, Hutchison House 10 Harcourt Road Hong Kong Attention: Ms. Edith Shih Facsimile No.: 852-2128-1778 with a copy (which shall not constitute notice) to: Dewey Ballantine LLP Suite 3907 Asia Pacific Finance Tower Citibank Plaza, 3 Garden Road Central Hong Kong Attention: John A. Otoshi Facsimile No.: 852-2509-7088 2.06 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York without reference to the choice of law principles thereof. 2.07 Illegality. In case any provision in this Agreement shall be invalid, illegal or unenforceable the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, unless such remaining provisions are inconsistent with the policy objectives set forth in Section 1.04. 2.08 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that no member of the Western PCS Group may assign any of its rights or obligations under this Agreement without the prior written consent of WWC. 2.09 Arbitration. Except where dispute resolution procedures are expressly provided within this Agreement (e.g., Sections 1.06, 1.11 and 1.12), in the event of any dispute between WWC and Western PCS arising out of this Agreement, such dispute shall be submitted to arbitration in accordance (mutatis mutandis) with the 22 23 terms and procedures set forth in Section 13(k) of the Western PCS Shareholders Agreement among WWC, the Investor and Western PCS dated February 17, 1998 (the "Shareholders Agreement"). The Investor shall have the right to participate in any pending arbitration and to consolidate any such arbitration with any arbitration which may be pending under the Shareholders Agreement and which relates to a dispute which involves in a material way substantially similar issues. IN WITNESS WHEREOF, this Agreement has been signed on behalf of each of the parties on the day set forth above. WESTERN WIRELESS CORPORATION By: /s/ Donald Guthrie ------------------------------------- Title: Vice Chairman Chief Financial Officer WESTERN PCS CORPORATION By: /s/ John W. Stanton ------------------------------------- Title: Chief Executive Officer HUTCHISON TELECOMMUNICATIONS PCS (USA) LIMITED By: /s/ Khoo Chek Ngee ------------------------------------- Title: Director 23 EX-10.28 6 FIRST AMENDMENT TO TAX SHARING AGREEMENT 1 EXHIBIT 10.28 First Amendment to Tax Sharing Agreement First Amendment dated __________, 1999, to the Tax Sharing Agreement (the "Tax Sharing Agreement"), dated February 17, 1998, by and among Western Wireless Corporation, a Washington Corporation, Western PCS Corporation (presently named VoiceStream Wireless Corporation), a Washington Corporation, and Hutchison Telecommunications PCS (USA) Limited, a British Virgin Islands corporation. WHEREAS, the parties to the Tax Sharing Agreement desire to make certain amendments thereto in light of the proposed spin-off by Western Wireless Corporation of all of its stock in VoiceStream Wireless Corporation; and WHEREAS, VoiceStream Wireless Corporation was reincorporated in Washington prior to the date hereof. NOW, THEREFORE, the parties agree that the Tax Sharing Agreement is amended as follows: 1. All references in the Tax Sharing Agreement to Western PCS Corporation or Western PCS shall be deemed to be references to VoiceStream Wireless Corporation ("VoiceStream"), a Washington Corporation, and all references in the Tax Sharing Agreement to the Western PCS Group shall be deemed to be references to the VoiceStream Group, which shall consist of VoiceStream and its direct and indirect subsidiaries. 2. Section 1.02 of the Tax Sharing Agreement shall be amended so that the obligations of WWC thereunder shall be subject to Sections 1.05, 1.08, 1.14, 1.19, and 1.20. Accordingly, Section 1.02 of the Tax Sharing Agreement shall be amended to read as follows: 2 1.02 Payment of taxes by WWC. Subject to Sections 1.05, 1.08, 1.14, 1.19, and 1.20 and any rights of offset that WWC may have under this Agreement, WWC shall pay, or cause to be paid, all income taxes, interest, and penalties due with respect to income earned or recognized by the VoiceStream Group. 3. Section 1.14 of the Tax Sharing Agreement is deleted in its entirety and the following is inserted in lieu thereof: 1.14 Indemnification of the VoiceStream Group. Except as otherwise provided in Section 1.20, WWC and each member of the WWC Affiliated Group (other than members of the VoiceStream Group) shall indemnify and hold each of the VoiceStream Group members harmless from and against all federal, state, local, foreign and other taxes and penalties and interest related thereto due from or payable by WWC or any member of the WWC Affiliated Group, other than taxes, penalties and interest (a) allocable to members of the VoiceStream Group pursuant to Sections 1.01 through 1.10 of the Agreement, (b) of members of the VoiceStream Group that are not otherwise subject to the provisions of this Agreement, (c) arising as a result of the failure of any member of the VoiceStream Group to comply in all material respects with each written representation and written statement made concerning it in the ruling request filed with the Internal Revenue Service by Western Wireless 2 3 Corporation on September 28, 1998, including all accompanying exhibits and materials and the letters filed with the Internal Revenue Service by Western Wireless Corporation in connection therewith on November 24, 1998, January 14, 1999, and March 3, 1999 (collectively, the "Ruling Request"), (d) arising as a result of VoiceStream voluntarily ceasing within two years after the Spin-off, as defined in the Ruling Request, to actively conduct the VoiceStream Active Business, as defined in the Ruling Request, or (e) that are provided for in Section 1.19(b). For purposes of clause (c) of the prior sentence, the inaccuracy as of the time of the Spin-off of any written representation or written statement in the Ruling Request shall not constitute a failure of any member of the VoiceStream Group to comply with such representation or statement. If, upon receipt by WWC of a notice of indemnification claim by VoiceStream from VoiceStream or Investor hereunder (other than a claim related to the taxability of the Spin-off under Section 355 of the Code or Section 311(b) of the Code or otherwise), WWC disputes such claim, WWC shall notify VoiceStream and Investor of its disagreement and the basis therefor within 30 days of receipt of the notice of claim. The parties shall act in good faith to resolve such disagreement and if they cannot reach a resolution, the matter shall be referred to an independent accounting firm acceptable to all parties, whose resolution of the matter shall be binding on the parties. Any indemnification payment required under this Section 1.14 (other than a payment related to the taxability of the Spin-off under Section 355 of the Code or Section 311(b) of the Code or otherwise) shall be paid within 30 days after the 3 4 indemnifying party receives notice of such required payment from the indemnified party or, if disputed, within 30 days after the resolution of such dispute as provided in the preceding sentence. The indemnifying party shall also pay the reasonable attorney's fees and other costs incurred by the indemnified party with respect to the payment of such taxes and other amounts and the pursuit of the indemnification claim. 4. Section 1.15 of the Tax Sharing Agreement is deleted in its entirety and the following is inserted in lieu thereof: 1.15 Indemnification of WWC Affiliated Group. Except as otherwise provided in Section 1.20, VoiceStream and each member of the VoiceStream Group shall indemnify and hold each of the WWC Affiliated Group members (other than the members of the VoiceStream Group) harmless from and against all federal, state, local, foreign and other taxes and penalties and interest related thereto due from or payable by any member of the VoiceStream Group and, in the case of taxes specified in Section 1.14(c), (d), or (e) of this Agreement, due from or payable by any member of the WWC Affiliated Group (other than members of the VoiceStream Group), other than taxes, penalties and interest (a) allocable to members of the WWC Affiliated Group (other than the members of the VoiceStream Group) pursuant to Sections 1.01 through 1.10 of the Agreement, (b) of members of the WWC Affiliated Group (other than members of the VoiceStream Group) that are not otherwise subject to the provisions of this Agreement, (c) arising as a result of the failure of any member of the WWC Affiliated Group (other than the members of the VoiceStream Group) to comply in all material respects with each written 4 5 representation and written statement made concerning it in the Ruling Request, (d) arising as a result of WWC voluntarily ceasing within two years after the Spin-off to actively conduct the WWC Active Business, as defined in the Ruling Request, or (e) that are provided for in Section 1.19(a). If, upon receipt by VoiceStream and Investor of a notice of indemnification claim by WWC hereunder (other than a claim relating to the taxability of the Spin-off under Section 355 of the Code or Section 311(b) of the Code or otherwise), VoiceStream or Investor disputes such claim, VoiceStream or Investor shall notify WWC of its disagreement and the basis therefor within 30 days of receipt of the notice of claim. The parties shall act in good faith to resolve such disagreement and if they cannot reach a resolution, the matter shall be referred to an independent accounting firm acceptable to all parties, whose resolution of the matter shall be binding on the parties. Any indemnification payment required under this Section 1.15 (other than a payment related to the taxability of the Spin-off under Section 355 of the Code or Section 311(b) of the Code or otherwise) shall be paid within 30 days after the indemnifying party receives notice of such required payment from the indemnified party or, if disputed, within 30 days of the resolution of such dispute as provided in the preceding sentence. The indemnifying party shall also pay reasonable attorney's fees and other costs incurred by the indemnified party with 5 6 respect to the payment of such taxes and other amounts and the pursuit of the indemnification claim. 5. A new Section 1.19 is added to the Tax Sharing Agreement as follows: 1.19 Code Section 355(e) Taxes. (a) Except as otherwise provided in Section 1.20, WWC and each member of the WWC Affiliated Group (other than members of the VoiceStream Group) shall indemnify and hold harmless each of the VoiceStream Group members from and against all taxes, and penalties and interest related thereto, arising in connection with the Spin-off pursuant to the application of Section 355(e) of the Code (and any similar provision of state or local law) as a result of any acquisition of a 50-percent or greater interest, within the meaning of Section 355(e) of the Code, of WWC or any of its successors. (b) Except as otherwise provided in Section 1.20, VoiceStream and each member of the VoiceStream Group shall indemnify and hold harmless each of the WWC Affiliated Group members (other than the members of the VoiceStream Group) from and against all taxes, and penalties and interest related thereto, arising in connection with the Spin-off pursuant to the application of Section 355(e) of the Code (and any similar provision of state or local law) as a result of any acquisition of a 50-percent or greater interest, within the meaning of Section 355(e) of the Code, of VoiceStream or any of its successors. 6 7 (c) For purposes of Section 1.19 (b), the amount of any tax arising in connection with the Spin-off pursuant to the application of Section 355(e) of the Code (and any similar provision of state or local law) shall be deemed to include the present value of any net operating losses of WWC utilized by WWC to offset gain arising in connection with the Spin-off pursuant to the application of Section 355(e) of the Code (and any similar provision of state or local law). The present value of such WWC net operating losses shall be determined by mutual agreement among WWC and VoiceStream based on (i) the maximum federal income tax rate for corporations applicable for the year during which the Spin-off becomes effective, (ii) reasonable projections for the WWC Affiliated Group with regard to the anticipated timing of the utilization by it of such losses, and (iii) a commercially reasonable discount rate. If there is a dispute among WWC and VoiceStream with regard to the preceding calculation, the matter shall be referred to an independent accounting firm acceptable to all parties, whose resolution of the matter shall be binding on the parties. 6. A new Section 1.20 is added to the Agreement as follows: 1.20 Shared Responsibility for Certain Taxes Arising in Connection with the Spin-off. (a) VoiceStream and each member of the VoiceStream Group shall indemnify and hold harmless each of the WWC Affiliated Group members (other than members of the VoiceStream Group) from and against 50 percent of all taxes, and 50 percent of all penalties and interest related thereto, arising in connection with the Spin-off if (1) there have 7 8 been acquisitions of a 50-percent or greater interest, within the meaning of Section 355(e) of the Code, of both WWC or any of its successors and VoiceStream or any of its successors, and each such acquisition, standing alone, would give rise to a tax in connection with the Spin-off pursuant to the application of Section 355(e) of the Code, or (2) both (x) a member of the WWC Affiliated Group (other than the members of the VoiceStream Group) has failed to comply in all material respects with each written representation made concerning it in the Ruling Request or WWC has voluntarily ceased within two years after the Spin-off to actively conduct the WWC Active Business, as defined in the Ruling Request, and as a result a tax would arise in connection with the Spin-off pursuant to the application of Section 355 of the Code, and (y) a member of the VoiceStream Group has failed to comply in all material respects with each written representation made concerning it in the Ruling Request or VoiceStream has voluntarily ceased within two years after the Spin-off to actively conduct the VoiceStream Active Business, as defined in the Ruling Request, and as a result a tax would arise in connection with the Spin-off pursuant to the application of Section 355 of the Code. WWC and each member of the WWC Affiliated Group shall indemnify and hold harmless each member of the VoiceStream Group from the remaining taxes, and penalties and interest related thereto, arising in connection with the Spin-off in the circumstances set forth in clauses (1) and (2) of the prior sentence. 8 9 (b) For purposes of Section 1.20(a), the amount of any tax arising in connection with the Spin-off pursuant to the application of Section 355 (including Section 355(e)) of the Code (and any similar provision of state or local law) shall be deemed to include the present value of any net operating losses of WWC utilized by WWC to offset gain arising in connection with Spin-off pursuant to the application of Section 355(e) of the Code (and any similar provision of state or local law). The present value of such WWC net operating losses shall be determined by mutual agreement among WWC and VoiceStream based on (i) the maximum federal income tax rate for corporations applicable for the year during which the Spin-off becomes effective, (ii) reasonable projections for the WWC Affiliated Group with regard to the anticipated timing of the utilization by it of such losses, and (iii) a commercially reasonable discount rate. If there is a dispute among WWC and VoiceStream with regard to the preceding calculation, the matter shall be referred to an independent accounting firm acceptable to all parties, whose resolution of the matter shall be binding on the parties. 7. A new Section 1.21 is added to the Agreement as follows: 1.21 Proceedings and Payment Related to Code Section 355 Taxes. (a) Notwithstanding Section 1.10 of this Agreement, WWC and its duly appointed representatives shall have the right on behalf of all members of the VoiceStream Group to supervise or otherwise coordinate any tax 9 10 examination process and to negotiate, resolve, settle, and contest any asserted tax deficiencies or assert and prosecute any claim for tax refund related to any tax arising as a result of the Spin-off and for which WWC has sole indemnification responsibility under this Agreement. WWC shall consult with VoiceStream in connection with such matters as relate to the VoiceStream Group, shall give VoiceStream a reasonable opportunity to participate therein (provided that WWC shall retain ultimate control of such matters), and shall promptly provide to VoiceStream all information relating to such matters received by WWC or its representatives, including providing copies of all notices, assessments, or similar documents within 10 business days of receipt. (b) Notwithstanding Section 1.10 of this Agreement, VoiceStream and its duly appointed representatives shall have the right on behalf of all members of the WWC Affiliated Group to supervise or otherwise coordinate that portion of any tax examination process and to negotiate, resolve, settle, and contest that portion of any asserted tax deficiencies or assert and prosecute that portion of any claim for tax refund related to any tax arising as a result of the Spin-off and for which VoiceStream has sole indemnification responsibility under this Agreement. VoiceStream shall consult with WWC in connection with such matters, shall give WWC a reasonable opportunity to participate therein (provided that VoiceStream shall retain ultimate control of such matters), and shall promptly provide to WWC all information relating to such matters received by VoiceStream or 10 11 its representatives, including providing copies of all notices, assessments, or similar documents within 5 business days of receipt. WWC shall promptly notify VoiceStream in writing upon receipt by WWC of notice of any pending or threatened federal, state, or local tax audits or assessments for which VoiceStream has sole indemnification responsibility under this Agreement, provided that failure to comply with this provision shall not affect WWC's right to indemnification hereunder. (c) Notwithstanding Section 1.10 of this Agreement, WWC and VoiceStream shall mutually agree how to supervise or otherwise coordinate that portion of any tax examination process, and how to negotiate, resolve, settle, and contest that portion of any asserted tax deficiency, or how to prosecute that portion of any claim for tax refund, related to any tax for which there is shared responsibility under Section 1.20. (d) Any indemnification payment under this Agreement related to the taxability of the Spin-off under Section 355 of the Code or Section 311(b) of the Code shall be made at least 3 business days before the relevant tax becomes due (taking into account any extensions of the due date for payment). Notice of any payment to be made pursuant to the preceding sentence shall be given by the indemnified party to the indemnifying party at least 10 business days before the relevant tax becomes due. 8. A new section 1.22 is added to the Tax Sharing Agreement as follows: 11 12 1.22 Employee Stock Options. WWC and VoiceStream agree that following the Spin-off, (a) WWC shall claim a deduction under section 162 of the Code with respect to the exercise of all employee stock options to acquire the stock of WWC, and (b) VoiceStream shall claim a deduction under section 162 of the Code with respect to the exercise of all employee stock options to acquire the stock of VoiceStream. The party claiming the deduction as set forth in the prior sentence is referred to as the "Employer" and the other party is referred to as the "non-Employer." In the event that the non-Employer claims a deduction under the Code (for whatever reason) with respect to the exercise of an employee stock option to acquire stock of the Employer, such non-Employer shall compensate the Employer in an amount equal to the present value of the Employer's deduction claimed pursuant to this section 1.22. The present value of the Employer's deduction shall be determined by mutual agreement among WWC and VoiceStream based on (i) the maximum federal income tax rate for corporations applicable for the year during which the deduction was claimed by the Employer, (ii) reasonable projections for the Employer's affiliated group with regard to the anticipated timing of the utilization by it of such deduction, and (iii) a commercially reasonable discount rate. If there is a dispute among WWC and VoiceStream with regard to the preceding calculation, the matter shall be referred to an independent accounting firm acceptable to all parties, whose resolution of the matter shall be binding on the parties. 12 13 9. Section 2.01 of the Tax Sharing Agreement is amended to read as follows: 2.01 Limitation to Consolidated Return Years. Except as provided in Section 1.22, the obligations of the parties hereunder shall relate solely to taxes, net operating losses and tax attributes arising during taxable years for which the VoiceStream Group members file a consolidated federal income Tax Return with WWC, except that if, in a taxable year in which the VoiceStream Group no longer files a consolidated federal income Tax Return with WWC, the VoiceStream Group generates a net operating loss or other tax attribute which it carries back to a year in which the VoiceStream Group did file a consolidated federal income Tax Return with WWC, WWC shall promptly apply for a refund upon notice of such carryback to WWC and, upon receipt of such refund, shall promptly pay to VoiceStream the amount of the refund. VoiceStream shall pay and indemnify WWC for all out-of-pocket expenses including outside accountant's fees, attorney's fees and reasonable overhead allocation incurred by WWC in making such refund claim and WWC shall be entitled to offset any such expenses against the amount of any refund received. 10. Except as expressly stated herein, the Tax Sharing Agreement is ratified and confirmed in all respects. IN WITNESS WHEREOF, this First Amendment has been signed on behalf of each of the parties on the day set forth. 13 14 WESTERN WIRELESS CORPORATION By: /s/ Alan R. Bender --------------------------------- Title: Senior Vice President VOICESTREAM WIRELESS CORPORATION By: /s/ John W. Stanton --------------------------------- Title: Chief Executive Officer 14 15 HUTCHISON TELECOMMUNICATIONS PCS (USA) LIMITED By: /s/ Ting Chan --------------------------------- Title: Director 15 EX-10.38 7 VOTING AGREEMENT 1 EXHIBIT 10.38 VOTING AGREEMENT BY AND AMONG VOICESTREAM WIRELESS CORPORATION, HELLMAN & FRIEDMAN CAPITAL PARTNERS II, L.P., H&F ORCHARD PARTNERS, L.P., H&F INTERNATIONAL PARTNERS, L.P., JOHN W. STANTON and THERESA E. GILLESPIE, PN CELLULAR, INC., STANTON FAMILY TRUST, STANTON COMMUNICATIONS CORPORATION, GS CAPITAL PARTNERS, L.P., THE GOLDMAN SACHS GROUP, L.P., BRIDGE STREET FUND 1992, L.P., STONE STREET FUND 1992, L.P., PROVIDENCE MEDIA PARTNERS L.P., HUTCHISON TELECOMMUNICATIONS HOLDINGS (USA) LIMITED, AND HUTCHISON TELECOMMUNICATIONS PCS (USA) LIMITED DATED: _____________, 1999 2 TABLE OF CONTENTS
Section Page - ------- ---- 1. Certain Definitions........................................................................2 1.1 "Agreement".......................................................................2 1.3 "Beneficially Own"................................................................2 1.4 "Board"...........................................................................3 1.5 "BSF".............................................................................3 1.6 "Business Day"....................................................................3 1.7 "Common Stock"....................................................................3 1.8 "Company".........................................................................3 1.9 "Dispute".........................................................................3 1.10 "Effective Date"..................................................................3 1.11 "Exchange Act"....................................................................3 1.12 "GS"..............................................................................3 1.13 "GSC".............................................................................3 1.14 "GSCP"............................................................................3 1.15 "H&F".............................................................................4 1.16 "HFCP II".........................................................................4 1.17 "HTL".............................................................................4 1.18 "Hutchison".......................................................................4 1.19 "Immediate Family"................................................................4 1.20 "International"...................................................................4 1.21 "JWS".............................................................................4 1.22 "Orchard".........................................................................4 1.23 "Percentage Ownership"............................................................4 1.24 "Permitted Affiliate Transferee"..................................................4 1.25 "Person"..........................................................................5 1.26 "PN"..............................................................................5 1.27 "Providence"......................................................................5 1.28 "SCC".............................................................................5 1.29 "SFT".............................................................................5 1.30 "Shareholder".....................................................................5 1.31 "Spin-Off" has the meaning .......................................................5 1.32 "SSF".............................................................................5 1.33 "Stanton".........................................................................5 1.34 "Subsidiary"......................................................................5 1.35 "TEG".............................................................................5 1.36 "Transfer"........................................................................6 1.37 "WWC".............................................................................6 1.38 "WWC Shareholders Agreement" has the meaning given in the preamble................6 2. Effectiveness; Legend......................................................................6
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Section Page - ------- ---- 3. Management of the Corporation..............................................................7 3.1 Board of Directors................................................................7 3.2 Company Covenant.................................................................11 4. Representations and Warranties............................................................12 5. Term......................................................................................12 6. Miscellaneous.............................................................................13 6.1 Successors, Assigns and Transferees..............................................13 6.2 Specific Performance, Etc........................................................14 6.3 Headings.........................................................................14 6.4 Notices..........................................................................14 6.5 Exchanges, Recapitalizations, Etc. Affecting the Company's Common Stock..........17 6.6 Inspection and Compliance with Law...............................................17 6.7 Waivers..........................................................................18 6.8 Counterparts.....................................................................18 6.9 Obligations Several..............................................................18 6.10 Entire Agreement.................................................................18 6.11 Applicable Law...................................................................18 6.12 Arbitration......................................................................19 6.13 Failure to Pursue Remedies.......................................................22 6.14 Cumulative Remedies..............................................................22 6.15 Severability.....................................................................22
- ii - 4 VOTING AGREEMENT This VOTING AGREEMENT (this "Agreement") is made and entered into as of this ____ day of ____________, 1999 by and among VoiceStream Wireless Corporation, a Washington corporation (the "Company"), Hellman & Friedman Capital Partners II, L.P., a California limited partnership ("HFCP II"), H & F Orchard Partners, L.P., a California limited partnership ("Orchard"), H & F International Partners, L.P., a California limited partnership ("International"; HFCP II, Orchard and International are hereinafter referred to collectively as "H&F"), John W. Stanton ("JWS"), Theresa E. Gillespie ("TEG"), PN Cellular, Inc., a Washington corporation ("PN"), Stanton Family Trust, established November 1, 1990 by JWS and TEG, as settlors f/b/o the settlors' children ("SFT"), Stanton Communications Corporation, a Washington corporation ("SCC"; JWS, TEG, PN, SFT and SCC are hereinafter referred to collectively as "Stanton"), GS Capital Partners, L.P., a Delaware limited partnership ("GSCP"), The Goldman Sachs Group, L.P., a Delaware limited partnership ("GS"), Bridge Street Fund 1992, L.P., a Delaware limited partnership ("BSF"), Stone Street Fund 1992, L.P., a Delaware limited partnership ("SSF"; GSCP, GS, BSF and SSF are hereinafter referred to collectively as "GSC"), Providence Media Partners L.P., a Delaware limited partnership ("Providence"); Hutchison Telecommunications PCS (USA) Limited, a British Virgin Islands corporation ("Hutchison PCS"); and Hutchison Telecommunications Holdings (USA) Limited, a British Virgin Islands corporation ("Hutchison Holdings"; Hutchison PCS and Hutchison Holdings are hereinafter referred to collectively as "Hutchison") (each of H&F, Stanton, GSC, Providence and Hutchison are hereinafter referred to individually as a "Shareholder" and collectively as the "Shareholders"). 5 R E C I T A L S WHEREAS, the Company and Western Wireless Corporation, a Washington corporation ("WWC"), are parties to that certain Agreement and Plan of Distribution, dated as of ___________, 1999, pursuant to which, among other things, WWC has agreed, upon the terms and conditions set forth therein, to distribute the shares of Common Stock (as hereinafter defined) owned by it, which shares represent 80.1% of the issued and outstanding shares of Common Stock, to WWC's shareholders, including the Shareholders party hereto, on the basis of one share of Common Stock for each one share of WWC's outstanding common stock (the "Spin-Off"); WHEREAS, effective with the Spin-Off, the Company will be authorized to issue ____ shares of Common Stock, of which ____ shares will be issued and outstanding immediately after the Spin-Off; WHEREAS, immediately after the Spin-Off, each of the Shareholders will own the number of shares of Common Stock set forth opposite its respective name on Schedule 1 annexed hereto; and WHEREAS, simultaneously with the consummation of the Spin-Off (the date of such consummation being hereinafter referred to as the "Effective Date"), this Agreement shall be in full force and effect in accordance with its terms in order, among other things, to set forth certain matters relating to the management of the Company. NOW THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the Shareholders and the Company agree as follows: 1. Certain Definitions. As used in this Agreement, the following terms have the meanings set forth below: 1.1 "Agreement" has the meaning given in the preamble. - 2 - 6 1.2 "Arbitrators" has the meaning given in Section 6.12(i). 1.3 "Beneficially Own" has the meaning set forth in Rule 13d-3 of the Securities and Exchange Act of 1934, as amended; except that no broker or dealer or any affiliate thereof shall be deemed to Beneficially Own shares of Common Stock, the beneficial ownership of which is acquired in the ordinary course of the activities of a broker or dealer registered under Section 15 of the Securities Exchange Act of 1934, as amended, including, but not limited to, the acquisition of beneficial ownership of such securities as a result of any market-making or underwriting activities (including any shares acquired for the investment account of a broker or dealer in connection with such underwriting activities), or the exercise of investment or voting discretion authority over any of its customer accounts, or the acquisition in good faith of such securities in connection with the enforcement of payment of a debt previously contracted. 1.4 "Board" means the Board of Directors of the Company. 1.5 "BSF" has the meaning given in the preamble. 1.6 "Business Day" means any day other than a Saturday, Sunday or legal holiday in New York, New York, Seattle or Hong Kong or any other day on which commercial banks in those locations are authorized by law or governmental decree to close. 1.7 "Common Stock" means the Company's Common Stock, no par value, and shall include any new, substituted and additional securities issued at any time in replacement of the Common Stock or issued or delivered with respect to the Common Stock. 1.8 "Company" has the meaning given in the preamble. 1.9 "Dispute" has the meaning given in Section 6.12. 1.10 "Effective Date" has the meaning given in the recitals. - 3 - 7 1.11 "Exchange Act" means the Securities Exchange Act of 1934, as amended. 1.12 "GS" has the meaning given in the preamble. 1.13 "GSC" has the meaning given in the preamble. 1.14 "GSCP" has the meaning given in the preamble. 1.15 "H&F" has the meaning given in the preamble. 1.16 "HFCP II" has the meaning given in the preamble. 1.17 "HTL" means Hutchison Telecommunications Limited, a corporation organized under the laws of Hong Kong. 1.18 "Hutchison" has the meaning given in the preamble. 1.19 "Immediate Family" means an individual's spouse, children (including adopted children), grandchildren and parents. 1.20 "International" has the meaning given in the preamble. 1.21 "JWS" has the meaning given in the preamble. 1.22 "Orchard" has the meaning given in the preamble. 1.23 "Percentage Ownership" means, as to any Shareholder, the aggregate percentage of the outstanding shares of Common Stock Beneficially Owned by such Shareholder, including for this purpose, shares Beneficially Owned by such Shareholder's Affiliated Transferees. 1.24 "Permitted Affiliate Transferee" means (i) with respect to any Shareholder who is a natural Person, any member of such Person's Immediate Family, or any trust for the benefit of, or a partnership all of the partners of which are, such Person and/or any member of such Person's Immediate Family; (ii) with respect to any Shareholder which is a limited partnership (a) any Person that, as of May 13, 1996, was the sole general partner of such Shareholder or is the sole general - 4 - 8 partner of the sole general partner of such Shareholder, (b) another limited partnership which has a sole general partner, the control of which sole general partner is held, directly or indirectly, by five or fewer natural Persons, provided such natural Persons had control at May 13, 1996 of the sole general partner of such Shareholder or (iii) with respect to Hutchison, (x) HTL, (y) any Subsidiary of HTL, or (z) any other entity acceptable to Shareholders (other than Hutchison and its Permitted Affiliate Transferees) holding at least a majority of the Common Stock owned by all Shareholders (other than Hutchison and its Permitted Affiliate Transferees) in which HTL owns, directly or indirectly, more than 40% of the outstanding voting power, and (d) in the case of any Person referred to in clause (x), (y) or (z), Hutchison. For purposes of this definition, "control" shall mean ownership of at least 51% of the equity interest in, and at least 51% of the voting power on all matters in, an entity or, if applicable, the sole general partner of such entity. 1.25 "Person" means an individual, corporation, association, partnership, trust or estate, an unincorporated organization, a joint venture, a government or any agency or political subdivision thereof, or any other entity of whatever nature. 1.26 "PN" has the meaning given in the preamble. 1.27 "Providence" has the meaning given in the preamble. 1.28 "SCC" has the meaning given in the preamble. 1.29 "SFT" has the meaning given in the preamble. 1.30 "Shareholder" has the meaning given in the preamble. 1.31 "Spin-Off" has the meaning given in the recitals. 1.32 "SSF" has the meaning given in the preamble. 1.33 "Stanton" has the meaning given in the preamble. - 5 - 9 1.34 "Subsidiary" means, as to any Person, another Person which is an entity as to which such Person owns more than 50% of the outstanding voting power. 1.35 "TEG" has the meaning given in the preamble. 1.36 "Transfer" means any sale, assignment, pledge, hypothecation, gift or other transfer, disposition or encumbrance of any interest (and includes an exchange of shares in a merger, consolidation or similar transaction). 1.37 "WWC" has the meaning given in the recitals. 1.38 "WWC Shareholders Agreement" has the meaning given in the preamble. Each definition or pronoun herein shall be deemed to refer to the singular, plural, masculine, feminine or neuter as the context requires. Words such as "herein, "hereinafter," "hereof," "hereto" and "hereunder" refer to this Agreement as a whole, unless the context otherwise requires. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." 2. Effectiveness; Legend. 2.1 This Agreement shall become effective on the Effective Date. If the Effective Date does not occur on or before December 31, 1999, this Agreement shall terminate and be of no further force or effect whatsoever. 2.2 All certificates representing shares of Common Stock now or hereafter issued by the Company to any of the Shareholders or their Permitted Affiliate Transferees shall be subject to this Agreement and shall bear the following legend: "The shares evidenced by this certificate or any certificate issued in exchange or transfer therefor are and will be subject to, the terms of a certain - 6 - 10 Voting Agreement, dated as of ___________, 1999, by and among certain shareholders of the Company." The requirement that the above legend be placed upon certificates evidencing any such Common Stock shall cease and terminate upon the earlier of (i) the Transfer of such Common Stock to any Person other than a Permitted Affiliate Transferee, and (ii) as to any Shareholder and its Permitted Affiliate Transferees, the termination of this Agreement as to such Shareholder and its Permitted Affiliate Transferees. Upon the occurrence of any event requiring the removal of a legend hereunder, the Company, upon the surrender of certificates containing such legend, shall, at its own expense, deliver to the holder of any such Common Stock as to which the requirement for such legend shall have terminated, one or more new certificates evidencing such Common Stock not bearing such legend. 3. Management of the Corporation. 3.1 Board of Directors. Pursuant to the Company's by-laws, the Board shall be constituted of ten (10) directors, subject to increase as provided in this Section 3.1. Each of the Shareholders (and its Permitted Affiliate Transferees) agrees that it will vote, or cause to be voted, all of the shares of Common Stock Beneficially Owned by it (whether now owned or hereafter acquired), in person or by proxy (and shall take all other necessary or desirable actions within such Shareholder's control, whether in the capacity of a stockholder, director or member of a board committee of the Company or otherwise, and including attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings), for the election, removal and replacement of the following ten (10) members: (a) JWS, for so long as he is the Chief Executive Officer of the Company or he, together with his Permitted Affiliate Transferees, - 7 - 11 Beneficially Own at least 4,500,000 shares of Common Stock; (b) two (2) designees of Hutchison (or if Hutchison has Transferred all of its shares of Common Stock to Permitted Affiliate Transferees of Hutchison, two (s) designees of such Permitted Affiliate Transferees); (c) two (2) designees of H&F (or, if H&F has Transferred all of its shares of Common Stock to Permitted Affiliate Transferees of H&F, two (2) designees of such Permitted Affiliate Transferees); (d) one (1) designee of GSC (or, if GSC has Transferred all of its shares of Common Stock to Permitted Affiliate Transferees of GSC, one (1) designee of such Permitted Affiliate Transferees); (e) one (1) designee selected by a majority vote of Stanton (or, if Stanton has Transferred all of its shares of Common Stock to Permitted Affiliate Transferees of Stanton, of such Permitted Affiliate Transferees) and Providence (or, if Providence has Transferred all of its shares of Common Stock to Permitted Affiliate Transferees of Providence, of such Permitted Affiliate Transferees) (it being understood that such designee is in addition to JWS for so long as JWS shall serve on the Board by reason of his holding the office of Chief Executive Officer of the Company); and (f) three (3) designees selected by the persons selected as provided above. Stanton (and its Permitted Affiliate Transferees) agrees with respect to the designee to the Board selected by the vote of Stanton and Providence (or their respective Permitted Affiliate Transferees) that from and after the date hereof and for so long as (i) JWS is serving as the Chief Executive Officer of the Company or he, together with his Permitted Affiliate Transferees, Beneficially Own at least 4,500,000 shares of Common Stock, (ii) Stanton and Providence (and their respective Permitted Affiliate Transferees) shall collectively Beneficially Own at least 4,500,000 shares of Common Stock, and (iii) Providence (or its Permitted Affiliate Transferees) shall Beneficially Own at least 2,500,000 shares of Common Stock, Stanton (and its Permitted Affiliate Transferees) shall so vote, or cause to be voted, all of the shares of Common Stock owned or held - 8 - 12 of record by Stanton (and its Permitted Affiliate Transferees) for one designee of Providence (and its Permitted Affiliate Transferees). In addition, Hutchison shall have the right to designate an additional director (and the Board shall in each case be expanded by one member to accommodate such new designee) when Hutchison's aggregate Percentage Ownership exceeds each of the following thresholds: 27.25%, 33.33%, 38.5%, 42.9%, 46.67% and 50%. No designee to the Board shall be removed from the Board (except removal for cause under applicable law) without the written consent of the Shareholder or group of Shareholders who has the right to designate such Person to the Board (or, if such Shareholder or group of Shareholders have Transferred all of their shares of Common Stock to Permitted Affiliate Transferees of such Shareholder or group of Shareholders without the written consent of Permitted Affiliate Transferees holding a majority of the shares owned by all of such Permitted Affiliate Transferees). Any Shareholder or group of Shareholders (or, if such Shareholder or group of Shareholders have Transferred all of their shares of Common Stock to Permitted Affiliate Transferees of such Shareholder or group of Shareholders, Permitted Affiliate Transferees holding a majority of the shares owned by all of such Permitted Affiliate Transferees) who has the right to designate any member(s) of the Board shall have the right to replace any member(s) so designated by it (whether or not such member is removed from the Board with or without cause or ceases to be a member of the Board by reason of death, disability or for any other reason) upon written notice to the Company and the other members of the Board, which notice shall set forth the name of the member(s) being replaced and the name of the new member(s). Each of the Shareholders (and their respective Permitted Affiliate Transferees) agrees to vote its shares of Common Stock, or shall otherwise take any action as is necessary, desirable or appropriate, so as to cause the election of any successor director designated - 9 - 13 by any of the Shareholders (or any of such Shareholder's Permitted Affiliate Transferees) pursuant to this Section 3.1. Notwithstanding the foregoing, (a) if at any time H&F (and its Permitted Affiliate Transferees) shall cease to Beneficially Own at least (i) 9,800,000 shares of Common Stock, then in such event, H&F (or, if H&F has Transferred all of its shares of Common Stock to Permitted Affiliate Transferees of H&F, its Permitted Affiliate Transferees) shall be entitled to designate only one member of the Board; and (ii) 4,500,000 shares of Common Stock, then in such event, H&F (or, if H&F has Transferred all of its shares of Common Stock to Permitted Affiliate Transferees of H&F, its Permitted Affiliate Transferees) shall not be entitled to designate any member of the Board; (b) if at any time GSC (or, if GSC has Transferred all of its shares of Common Stock to Permitted Affiliate Transferees of GSC, its Permitted Affiliate Transferees) shall cease to Beneficially Own at least 4,500,000 shares of Common Stock, then in such event, GSC (or, if GSC has Transferred all of its shares of Common Stock to Permitted Affiliate Transferees of GSC, its Permitted Affiliate Transferees) shall not be entitled to designate any member of the Board; (c) if at any time Stanton and Providence (and their respective Permitted Affiliate Transferees) shall cease collectively to Beneficially Own at least 4,500,000 shares of Common Stock, then in such event, they shall not be entitled to designate any member of the Board (except that JWS shall continue to serve on the Board for so long as he holds the office of Chief Executive Officer of the Company); and (d) if at any time Hutchison (and its Permitted Affiliate Transferees) shall cease to Beneficially Own at least (i) 9,800,000 shares of Common Stock, then in such event Hutchison (or, if Hutchison has Transferred all of its shares of Common Stock to Permitted Affiliate - 10 - 14 Transferees of Hutchison, its Permitted Affiliate Transferees) shall be entitled to designate only one member of the Board; and (ii) 4,500,000 shares of Common Stock, then in such event, Hutchison (or, if Hutchison has Transferred all of its shares of Capital Stock to Permitted Affiliate Transferees of Hutchison, its Permitted Affiliate Transferees) shall not be entitled to designate any member of the Board. In addition, if Hutchison shall have designated additional director(s) (in excess of the two (2) specified above) by reason of an increase in its Percentage Ownership as set forth in this Section 3.1 above, and at any time thereafter the Percentage Ownership of Hutchison (and its Permitted Affiliate Transferees) shall be less than the Percentage Ownership entitling Hutchison to such additional director(s), then in such event Hutchison (or, if Hutchison has Transferred all of its shares of Common Stock to Permitted Affiliate Transferees of Hutchison, its Permitted Affiliate Transferees) shall cease to be entitled to designate such additional director(s). Any vacancies on the Board created by reason of the provisions of subsections (a) through (d) above shall be filled by the directors then in office to serve until the next annual meeting of shareholders of the Company, and at the next annual meeting shall be filled by a vote of a plurality of all shareholders (including the Shareholders and their Permitted Affiliate Transferees) of the Company; provided, however, that in the event that the size of the Board shall have increased by reason of Hutchison having the right to designate additional director(s) and thereafter Hutchison shall cease to have the right to so designate such additional director(s), the size of the Board shall be appropriately reduced. (e) Notwithstanding anything to the contrary contained in this Agreement, Hutchison's right to transfer its right to designate directors to certain block transferees as set forth in Sections 14 and 15 of the Shareholders Agreement of VoiceStream Wireless Corporation, dated February 17, 1998, as amended, among WWC, the Company and Hutchison PCS, shall continue in - 11 - 15 full force and effect until terminated in accordance with the terms of such Shareholders Agreement. (f) The number of shares referred to in this Section 3.1 shall be appropriately adjusted for any stock dividends, stock splits, reverse splits, combinations, recapitalizations and the like occurring after the date hereof. 3.2 Company Covenant. The Company hereby agrees to use all reasonable efforts to give effect to the provisions of Section 3.1. In this regard, the Company shall, subject to the provisions of Section 3.1, duly nominate the designees set forth above for election to the Board and shall include in any proxy solicitation materials related to the election of members of the Board such information and recommendations of the Board as are appropriate in proxy solicitation materials. Each Shareholder shall vote such Shareholder's shares of Common Stock at any regular or special meeting of the Shareholders or in any written consent executed in lieu of such a meeting of Shareholders for the election of such designees. The Company and each Shareholder shall take all other actions necessary to ensure that the certificate of incorporation and by-laws of the Company as in effect immediately following the date hereof do not, at any time thereafter, conflict in any respect with the provisions of this Agreement. 4. Representations and Warranties. Each of the Company, HFCP II, Orchard, International, JWS, TEG, PN, SFT, SCC, GS, GSCP, BSF, SSF, Providence and Hutchison hereby represents and warrants to the other parties as follows: (a) Such Person has full power and authority to execute, deliver and perform its obligations under this Agreement; - 12 - 16 (b) This Agreement and all transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of such Person and this Agreement constitutes the legal, valid and binding obligation of such Person enforceable against it in accordance with its terms; and (c) Neither the execution, delivery or performance of this Agreement by such Person, nor the consummation of the transactions contemplated hereby will, with or without the giving of notice of passage of time, or both conflict with, result in a default or loss of rights (or give rise to any right of termination, cancellation or acceleration) under, (i) any provision of the certificate of incorporation, by-laws, partnership agreement or comparable constituent document of such Person, (ii) any material note, bond, indenture, mortgage, deed of trust, contract, Agreement, lease or other instrument or obligation to which any such Person is a party or by which it or its properties may be bound or affected or (iii) any law, order, judgment, ordinance, rule, regulation or decree to which any such Person is a party or by which it or any of its properties are bound or affected. 5. Term. This Agreement shall terminate upon the earliest to occur of any of the following events: (a) Upon agreement by Shareholders retaining the right to designate directors under this Agreement; or (b) The filing by the Company of a petition in bankruptcy or the expiration of sixty (60) days after a petition in bankruptcy shall have been filed against the Company and such petition shall not have been stayed or discharged during such sixty (60) day period; or upon the expiration of sixty (60) days after the commencement of any proceeding under any law for the relief of debtors - 13 - 17 seeking the relief or readjustment of the Company's indebtedness either through reorganization, winding-up, extension or otherwise, and such proceedings involving the Company as debtor shall not have been vacated or stayed within such sixty (60) day period; or upon the appointment of a receiver, custodian or trustee for all or substantially all of the Company's property, or the making by the Company of any general assignment for the benefit of creditors, or the admitting in writing by the Company of its inability to pay its debts as they mature; or upon the voluntary or involuntary liquidation or dissolution of the Company; or (c) The Beneficial Ownership of all of the Common Stock by only one Shareholder (including its Permitted Affiliate Transferees). 6. Miscellaneous. 6.1 Successors, Assigns and Transferees. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their Permitted Affiliate Transferees. Each of the Shareholders hereby agrees that prior to any Transfer of any Common Stock to a Permitted Affiliate Transferee, such Permitted Affiliate Transferee shall execute a counterpart of this Agreement agreeing to be bound by the provisions of this Agreement. No Transfer to a Permitted Affiliate Transferee shall be effective unless such Permitted Affiliate Transferee has executed such counterpart of this Agreement. 6.2 Specific Performance, Etc. Each of the parties hereto acknowledges and agrees that, in the event of any breach of this Agreement, the non-breaching parties would be irreparably harmed and could not be made whole by monetary damages. Accordingly, each of the parties hereto agrees that the other parties, in addition to any other remedy to which they may be entitled at law or - 14 - 18 in equity, shall be entitled to compel specific performance of this Agreement pursuant to Section 6.12(x). 6.3 Headings. The headings in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement. 6.4 Notices. All notices, requests, demands and other communications hereunder shall be in writing and, except to the extent otherwise expressly provided in this Agreement, shall be deemed to have been duly given if delivered by same day or next day courier (guaranteed delivery) or mailed, registered mail, return receipt requested, or transmitted by telegram, telex or facsimile (i) if to a Shareholder, at such Shareholder's address appearing below or at any other address such Shareholder may have provided in writing to the Company and the other Shareholders then party to this Agreement and (ii) if to the Company, at 3650 131 Avenue SE, Bellevue, Washington 98006, U.S.A., Tel: (425) 586-8014, Fax: (425) 586-8080; Attention: Alan R. Bender, Esq., or such other address as the Company may have furnished to the Shareholders in writing, with a copy (which shall not constitute notice) to Friedman Kaplan & Seiler LLP, 875 Third Avenue, New York, NY 10022, USA, Tel: (212) 833-1107, Fax: (212) 355-6401, Attention: Barry A. Adelman. If a notice hereunder is transmitted by confirmed fax so as to arrive during normal business hours during a Business Day at the place of receipt, then such notice shall be deemed to have been given on such Business Day at the place of receipt or, if so transmitted to arrive after normal business hours during a Business Day at the place of receipt, then such notice shall be deemed to have been given on the following Business Day at the place of receipt. If such notice is sent by next-day courier it shall be deemed to have been given on the third Business Day at the place of receipt following sending and, if by registered air mail, - 15 - 19 on the tenth Business Day at the place of receipt following sending, provided, that the date of sending shall be deemed to be the date at the place of receipt at the time such notice is posted. (a) if to JWS, TEG, PN, SFT or SCC: c/o Stanton Communications, Inc. 3650 131 Avenue SE Bellevue, Washington 98006 Attention: John W. Stanton Facsimile: (___) ___-____ with a copy to (which shall not constitute notice): Barry A. Adelman, Esq. Friedman Kaplan & Seiler LLP 875 Third Avenue New York, New York 10022-6225 Facsimile: (212) 355-6401 (b) if to GS, GSCP, BSF or SSF: c/o Goldman, Sachs & Co. 85 Broad Street New York, New York 10004 Attention: Terence M. O'Toole Facsimile: (212) 357-5505 with a copy to (which shall not constitute notice): Alison S. Ressler, Esq. Sullivan & Cromwell 444 South Flower Street Los Angeles, California 90071 Facsimile: (213) 683-0457 (c) if to Providence: c/o Providence Ventures, Inc. 900 Fleet Center 50 Kennedy Plaza Providence, Rhode Island 02903 Attention: Jonathan M. Nelson - 16 - 20 Facsimile: (401) 751-1790 with a copy to (which shall not constitute notice): David K. Duffell, Esq. Edwards & Angell 2700 Hospital Tower Providence, Rhode Island 02903 Facsimile: (401) 276-6611 (d) if to Hutchison: Hutchison Telecommunications PCS (USA) Limited c/o Offshore Incorporations Limited P.O. Box 957 Offshore Incorporations Centre Road Town, Tortola British Virgin Islands Tel: (809) 494-2233 Fax: (809) 494-4885 and Hutchison Telecommunications PCS (USA) Limited 22nd Floor, Hutchison House 10 Harcourt Road Hong Kong Attention: Edith Shih Tel: (852) 2128-1232 Fax: (852) 2128-1778 and Hutchison Telecommunications Holdings (USA) Limited 22nd Floor, Hutchison House 10 Harcourt Road Hong Kong Attention: Edith Shih Tel: (852) 2128-1232 Fax: (852) 2128-1778 - 17 - 21 with a copy to (which shall not constitute notice): Dewey Ballantine LLP Suite 3907, Asia Pacific Finance Tower Citibank Plaza 3 Garden Road Central, Hong Kong Attention: John A. Otoshi Tel: (852) 2509-7000 Fax: (852) 2509-7088 6.5 Exchanges, Recapitalizations, Etc. Affecting the Company's Common Stock. The provisions of this Agreement shall apply, to the full extent set forth herein with respect to the shares of Common Stock now or hereinafter owned by each Shareholder (and its Permitted Affiliate Transferees), to any and all securities of the Company or any successor or assign of the Company (whether by merger, consolidation or otherwise) that may be issued in respect of, in exchange for, or in substitution of such shares of Common Stock, and shall be appropriately adjusted for any stock dividends, stock splits, reverse splits, combinations, recapitalizations and the like occurring after the date hereof. 6.6 Inspection and Compliance with Law. Copies of this Agreement will be available for inspection or copying by any interested Person at the offices of the Company through the Secretary of the Company. The Company will otherwise take all actions as may be necessary or appropriate to comply with any applicable law relating to the validity and enforceability of shareholders agreements containing the provisions of this Agreement. 6.7 Waivers. Except as expressly provided otherwise herein, neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the Company and each of the Shareholders. The failure - 18 - 22 of any party hereto to give notice of the breach or non-fulfillment of any term or condition of this Agreement shall not constitute a waiver thereof, nor shall the waiver of any breach or non-fulfillment of any term or condition of this Agreement constitute a waiver of any other breach or non-fulfillment of that term or condition or any other term or condition of this Agreement. 6.8 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, and all of which together shall be considered one and the same agreement. 6.9 Obligations Several. The obligations of each of the Shareholders under this Agreement shall be several with respect to each such Shareholder. 6.10 Entire Agreement. This Agreement constitutes the entire understanding of the parties hereto with respect to the subject matter hereof and supersedes all prior understandings among such parties with respect to such subject matter. 6.11 Applicable Law. The validity of this Agreement, its construction, interpretation and enforcement, and the rights of the parties hereunder, shall be determined under, governed by and construed in accordance with the internal laws of the State of Washington applicable to contracts formed in such State. Each party hereto agrees that, subject to Section 6.12 hereof, any suit, action or other proceeding arising out of this Agreement shall be brought and litigated in the courts of the State of Washington or the United States District Court for the Western District of Washington and each party hereto hereby irrevocably consents to personal jurisdiction and venue in any such court and hereby waives any claim it may have that such court is an inconvenient forum for the purposes of any such suit, action or other proceeding. - 19 - 23 6.12 Arbitration. Any and all disputes, controversies or claims (each a "Dispute") between the Shareholders relating to the interpretation or enforcement or performance of this Agreement shall be resolved by binding arbitration by the American Arbitration Association in accordance with its rules, subject to the following provisions: (i) There shall be three arbitrators (the "Arbitrators"). Each party shall appoint one arbitrator within 30 days after giving or receiving notice of the submission of a Dispute to arbitration. The two arbitrators appointed by the parties shall appoint the third arbitrator. If a party does not appoint an arbitrator within such designated period, or if the two appointed arbitrators fail to appoint a third arbitrator within 30 days after their appointment, the relevant appointment shall be made by the American Arbitration Association. (ii) The expenses of the arbitration shall be borne equally by the Shareholders involved in the arbitration, and each party shall bear its own legal fees and expenses; provided, however, that the Arbitrators shall have discretion to require that one party pay all or a portion of the expenses of arbitration or the other party's legal fees and expenses in connection with any particular arbitration. (iii) The Arbitrators shall determine whether and to what extent any party shall be entitled to damages or equitable relief. No party shall be entitled to punitive damages or consequential damages or shall be required to post a bond in connection with equitable relief. (iv) The Arbitrators shall not have the power to add to nor modify any of the terms or conditions of this Agreement. The Arbitrators' decision shall not go beyond what is necessary for the interpretation and application of the provisions of this Agreement in respect of the issue before the Arbitrators. The Arbitrators' decision and award or permitted remedy, if any, - 20 - 24 shall be based upon the issue as drafted and submitted by the respective parties and the relevant and competent evidence adduced at the hearing(s). (v) The Arbitrators shall have the authority to award any remedy or relief provided for in this Agreement, in addition to any other remedy or relief (including provisional remedies and relief) that a court of competent jurisdiction could order or grant (but subject to the remedial limitations elsewhere set forth in this Agreement, including, but without limitation, the aforesaid prohibition against punitive and consequential damages). The Arbitrators written decision shall be rendered within sixty (60) days of the hearing. The decision reached by the Arbitrators shall be final and binding upon the parties as to the matter in dispute. To the extent that the relief or remedy granted by the Arbitrators is relief or remedy on which a court could enter judgement, a judgement upon the award rendered by the Arbitrators may be entered in any court having jurisdiction thereof (unless in the case of an award of damages, the full amount of the award is paid within ten (10) days of its determination by the Arbitrators). Otherwise, the award shall be binding on the parties in connection with their continuing performance of this Agreement and in any subsequent arbitral or judicial proceeding between the parties. (vi) The arbitration shall take place in Seattle, Washington, unless otherwise agreed by the parties, and shall be conducted in the English language. (vii) The arbitration proceeding and all filing, testimony, documents and information relating to or presented during the arbitration proceeding shall be disclosed exclusively for the purpose of facilitating the arbitration process and for no other purpose. (viii) The parties shall continue performing their respective obligations under this Agreement notwithstanding the existence of a Dispute while the Dispute is - 21 - 25 being resolved unless and until such obligations are terminated, expire or are suspended in accordance with the provisions hereof. (ix) The Arbitrators may, in their sole discretion, order a pre- hearing exchange of information including production of documents, exchange of summaries of testimony or exchange of statements of position, and shall schedule promptly all discovery and other procedural steps and otherwise assume case management initiative and control to effect an efficient and expeditious resolution of the Dispute. At any oral hearing of evidence in connection with an arbitration proceeding, each party and its counsel shall have the right to examine its witnesses and to cross-examine the witnesses of the other party. No testimony of any witness shall be presented in written form unless the opposing party or parties shall have the opportunity to cross-examine such witness, except as the parties otherwise agree in writing. (x) Notwithstanding the dispute resolution procedures contained in this Section 6.12, either party may apply to any court having jurisdiction (a) to enforce this Agreement to arbitrate, (b) to seek provisional injunctive relief so as to maintain the status quo until the arbitration award is rendered or the Dispute is otherwise resolved, or (c) to challenge or vacate any final judgment, award or decision of the Arbitrators that does not comport with the express provisions of this Section 6.12. 6.13 Failure to Pursue Remedies. The failure of any party to seek redress for violation of, or to insist upon the strict performance of, any provision of this Agreement shall not prevent a subsequent act, which would have originally constituted a violation, from having the effect of an original violation. - 22 - 26 6.14 Cumulative Remedies. The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any party shall not preclude or waive its right to use any or all other remedies except as otherwise expressly provided in this Agreement. Such rights and remedies are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise. 6.15 Severability. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted. - 23 - 27 IN WITNESS WHEREOF, each of the parties has executed or caused this Agreement to be executed by its duly authorized officer as of the date first above written. VOICESTREAM WIRELESS CORPORATION By: /S/ John W. Stanton ------------------------------------- Name: John W. Stanton Title: Chief Executive Officer HUTCHISON TELECOMMUNICATIONS PCS (USA) LIMITED By: /S/ Ting Chan ------------------------------------- Name: Ting Chan Title: Director HUTCHISON TELECOMMUNICATIONS HOLDINGS (USA) LIMITED By: /S/ Khoo Chek Ngee ------------------------------------- Name: Khoo Chek Ngee Title: Director HELLMAN & FRIEDMAN CAPITAL PARTNERS II, L.P., a California limited partnership By: Hellman & Friedman Investors, L.P., its general partner By: Hellman & Friedman Investors, Inc., its general partner By: /S/ Mitchell Cohen ------------------------------------- Name: Mitchell Cohen Title: Vice President - 24 - 28 H & F ORCHARD PARTNERS, L.P., a California limited partnership By: H & F Orchard Investors, L.P., its general partner By: H & F Orchard Investors, Inc., its general partner By: /S/ Mitchell Cohen ----------------------------- Name: Mitchell Cohen Title: Vice President H & F INTERNATIONAL PARTNERS, L.P., a California limited partnership By: H & F International Investors, L.P., its general partner By: H & F International Investors, Inc., its general partner By: /S/ Mitchell Cohen ----------------------------- Name: Mitchell Cohen Title: Vice President /S/ John W. Stanton ---------------------------------------- JOHN W. STANTON /S/ Theresa E. Gillespie ---------------------------------------- THERESA E. GILLESPIE PN CELLULAR, INC. By: John W. Stanton ------------------------------------- Name: John W. Stanton - 25 - 29 Title: Chief Executive Officer STANTON FAMILY TRUST By: /S/ John W. Stanton ------------------------------------- /S/ Donald Guthrie ------------------------------------- Name: John W. Stanton, Donald Guthrie, Trustees STANTON COMMUNICATIONS CORPORATION By: /S/ John W. Stanton ------------------------------------- Name: John W. Stanton Title: Chief Executive Officer THE GOLDMAN SACHS GROUP, L.P. By: /S/ Terence M. O'Toole ------------------------------------- Name: Terence M. O'Toole Title: Director GS CAPITAL PARTNERS, L.P. By: GS Advisors L.P., General Partner By: GS Advisors, Inc., General Partner By: /S/ Eve M. Gerriets ----------------------------- Name: Eve M. Gerriets Title: Vice President BRIDGE STREET FUND 1992, L.P. By: Stone Street Performance Corp., Managing General Partner By: /S/ Eve M. Gerriets --------------------------------- Name: Eve M. Gerriets Title: Vice President - 26 - 30 STONE STREET FUND 1992, L.P. By: Stone Street Performance Corp., General Partner By: /S/ Eve M. Gerriets --------------------------------- Name: Eve M. Gerriets Title: Vice President PROVIDENCE MEDIA PARTNERS L.P. By: Providence Media GP Limited Partnership Its: General Partner By: Providence Ventures, L.P. Its: General Partner By: /S/ Jonathan Nelson -------------------------------- Name: Jonathan Nelson Title: Director - 27 - 31 Schedule 1 to Voting Agreement
No. of Shares of Common Stock Name of Shareholder Owned by Shareholders - ------------------- --------------------- Hellman & Friedman Capital Partners II, L.P. H&F Orchard Partners, L.P. H&F International Partners, L.P. GS Capital Partners, L.P. Bridge Street Fund 1992, L.P. Stone Street Fund 1992, L.P. The Goldman Sachs Group, L.P. PN Cellular, Inc. Stanton Communications Corporation John W. Stanton & Theresa E. Gillespie Stanton Family Trust Providence Media Partners L.P. Hutchison Telecommunications PCS (USA) Limited Hutchison Telecommunications Holdings (USA) Limited
EX-10.39 8 REGISTRATION RIGHTS AGREEMENT 1 EXHIBIT 10.39 REGISTRATION RIGHTS AGREEMENT BY AND AMONG VOICESTREAM WIRELESS CORPORATION, HELLMAN & FRIEDMAN CAPITAL PARTNERS II, L.P., H&F ORCHARD PARTNERS, L.P., H&F INTERNATIONAL PARTNERS, L.P., JOHN W. STANTON and THERESA E. GILLESPIE, PN CELLULAR, INC., STANTON FAMILY TRUST, STANTON COMMUNICATIONS CORPORATION, GS CAPITAL PARTNERS, L.P., THE GOLDMAN SACHS GROUP, L.P., BRIDGE STREET FUND 1992, L.P., STONE STREET FUND 1992, L.P. PROVIDENCE MEDIA PARTNERS L.P.; DATED: _____________, 1999 2 TABLE OF CONTENTS
Section Page - ------- ---- 1. Effectiveness.........................................................................3 2. Registration Rights...................................................................3 3. Term; Survival........................................................................4 4. Successors and Assigns................................................................5 5. Specific Performance..................................................................5 6. Governing Law.........................................................................5 7. Headings..............................................................................5 8. Notices...............................................................................5 9. Exchanges, Recapitalizations, Etc. Affecting the Company's Common Stock...............7 10. Inspection and Compliance with Law....................................................8 11. Waivers...............................................................................8 12. Amendments............................................................................8 13. Multiple Counterparts.................................................................8 14. Severability..........................................................................8 15. Entire Agreement......................................................................9
- i - 3 REGISTRATION RIGHTS AGREEMENT This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered into as of this ____ day of ____________, 1999 by and among VoiceStream Wireless Corporation, a Washington corporation (the "Company"), Hellman & Friedman Capital Partners II, L.P., a California limited partnership ("HFCP II"), H & F Orchard Partners, L.P., a California limited partnership ("Orchard"), H & F International Partners, L.P., a California limited partnership ("International"; HFCP II, Orchard and International are hereinafter referred to collectively as "H&F"), John W. Stanton ("JWS"), Theresa E. Gillespie ("TEG"), PN Cellular, Inc., a Washington corporation ("PN"), Stanton Family Trust, established November 1, 1990 by JWS and TEG, as settlors f/b/o the settlors' children ("SFT"), Stanton Communications Corporation, a Washington corporation ("SCC"; JWS, TEG, PN, SFT and SCC are hereinafter referred to collectively as "Stanton"), GS Capital Partners, L.P., a Delaware limited partnership ("GSCP"), The Goldman Sachs Group, L.P., a Delaware limited partnership ("GS"), Bridge Street Fund 1992, L.P., a Delaware limited partnership ("BSF"), Stone Street Fund 1992, L.P., a Delaware limited partnership ("SSF"; GSCP, GS, BSF and SSF are hereinafter referred to collectively as "GSC"), and Providence Media Partners L.P., a Delaware limited partnership ("Providence") (each of H&F, Stanton, GSC, and Providence are hereinafter referred to individually as a "Stockholder" and collectively as the "Stockholders"). R E C I T A L S WHEREAS, the Company and Western Wireless Corporation, a Washington Corporation ("WWC"), are parties to that certain Agreement and Plan of Distribution, dated as of ___________, 1999, pursuant to which, among other things, WWC has agreed, upon the terms and conditions set forth therein, to distribute the shares of the Company's Common Stock, no par value (the "Common 4 Stock") owned by it, which shares represent 80.1% of the issued and outstanding shares of Common Stock, to WWC's stockholders, which include the Stockholders, on the basis of one share of Common Stock for each one share of WWC's outstanding common stock (the "Spin-Off"); WHEREAS, certain of the Stockholders and certain other persons were parties to that certain Stockholders Agreement, dated as of July 29, 1994, as amended by the First Amendment to Stockholders Agreement, dated as of November 30, 1994 (as amended, the "WWC Stockholders Agreement"), relating to, among other things, their ownership of shares of common stock of WWC and certain registration rights with respect thereto; WHEREAS, the Stockholders and WWC are parties to that certain Voting Agreement, dated as of May 13, 1996 (the "WWC Voting Agreement"), setting forth, among other things, certain agreements regarding the termination of the WWC Stockholders Agreement (except as expressly set forth in Section 10.2 of the WWC Stockholders Agreement with respect to the survival of certain registration and other rights) upon the consummation of WWC's Public Offering (as defined in the WWC Voting Agreement); WHEREAS, the WWC Stockholders Agreement terminated upon the consummation of WWC's Public Offering pursuant to the terms thereof and the terms of the WWC Voting Agreement, except as expressly set forth in Section 10.2 of the WWC Stockholders Agreement with respect to the survival of certain registration and other rights granted to Stockholders and Minority Stockholders (as defined in the WWC Stockholders Agreement) to the extent such persons were Stockholders or Minority Stockholders immediately prior to the consummation of WWC's Public Offering; and - 2 - 5 WHEREAS, simultaneously with the consummation of the Spin-Off (the date of such consummation being hereinafter referred to as the "Spin-Off Effective Date"), this Agreement shall be in full force and effect in accordance with its terms in order, among other things, to clarify that the registration rights which survive pursuant to Section 10.2 of the WWC Stockholders Agreement shall extend, as well, and to the same extent, to the shares of Common Stock. NOW THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Stockholders and the Company agree as follows: 1. Effectiveness. This Agreement shall become effective on the Spin-Off Effective Date. If the Spin-Off Effective Date does not occur on or before December 31, 1999, this Agreement shall terminate and be of no further force or effect whatsoever. 2. Registration Rights. (a) The Company and the Stockholders hereby agree and affirm that the registration rights granted under the WWC Stockholders Agreement to the Stockholders and the Minority Stockholders (to the extent such persons were Stockholders and Minority Stockholders immediately prior to the consummation of WWC's Public Offering), shall extend, to the same extent that such rights survived the termination of the WWC Stockholders Agreement, to shares of Common Stock held by each Stockholder and each such Minority Stockholder. It being understood that, for purposes of this Agreement, each reference set forth in the WWC Stockholders Agreement to (a) "Common Stock" shall be deemed to mean shares of "Common Stock of VoiceStream Wireless Corporation, no par value," (b) the "Company" shall be deemed to mean "VoiceStream Wireless Corporation", (c) an "Investor" or the "Investors" shall be deemed to mean a Stockholder or the Stockholders, respectively. - 3 - 6 3. Term; Survival. (a) This Agreement shall terminate upon the earliest to occur of any of the following events: (i) The consent in writing of all of the parties hereto; or (ii) July 29, 2004; or (iii) The filing by the Company of a petition in bankruptcy or the expiration of sixty (60) days after a petition in bankruptcy shall have been filed against the Company and such petition shall not have been stayed or discharged during such sixty (60) day period; or upon the expiration of sixty (60) days after the commencement of any proceeding under any law for the relief of debtors seeking the relief or readjustment of the Company's indebtedness either through reorganization, winding-up, extension or otherwise, and such proceedings involving the Company as debtor shall not have been vacated or stayed within such sixty (60) day period; or upon the appointment of a receiver, custodian or trustee for all or substantially all of the Company's property, or the making by the Company of any general assignment for the benefit of creditors, or the admitting in writing by the Company of its inability to pay its debts as they mature; or upon the voluntary or involuntary liquidation or dissolution of the Company; or (iv) The beneficial ownership of all of the Common Stock by only one Stockholder. (b) Nothing contained in this Section 3 shall affect or impair any rights or obligations of any party hereto arising prior to the time of the termination of this Agreement, or which may arise by an event causing the termination of this Agreement. - 4 - 7 4. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, heirs, successors and assigns. 5. Specific Performance. The Company and each Stockholder, in addition to being entitled to exercise all of the rights provided herein or in the Company's Certificate of Incorporation or granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. Each of the Company and the Stockholders agree that monetary damages would not be adequate compensation for any loss incurred by it by reason of a breach by any other party hereto of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. 6. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware as applied to agreements entered into and wholly to be performed within the State of Delaware. 7. Headings. The captions in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement. 8. Notices. Any notice required or permitted hereunder shall be given in writing and shall be conclusively deemed effectively received by the addressee upon personal delivery, on the date of receipt if sent by facsimile or overnight courier, charges prepaid, or five days after deposit in the United States mail, by registered or certified mail, postage prepaid, addressed as follows: (a) if to the Company: VoiceStream Wireless Corporation 3650 131 Avenue SE Bellevue, Washington 98005 Attention: General Counsel Facsimile: (425) 586-8080 - 5 - 8 with copies to: Alan R. Bender, Esq. 3650 131 Avenue SE Bellevue, Washington 98005 Facsimile: (425) 586-8080 and: Barry A. Adelman, Esq. Friedman Kaplan & Seiler LLP 875 Third Avenue New York, New York 10022-6225 Facsimile: (212) 355-6401 (b) if to HFCP II, Orchard or International: c/o Hellman & Friedman One Maritime Plaza, Suite 1200 San Francisco, California 94111 Attention: John L. Bunce, Jr. General Partner Facsimile: (415) 788-0176 with a copy to: Paul J. Mundie, Esq. Heller Ehrman White & McAuliffe 333 Bush Street San Francisco, CA 94104-2878 Facsimile: (415) 772-6268 (c) if to JWS, TEG PN or SCC: c/o Stanton Communications, Inc. 3650 131 Avenue SE Bellevue, Washington 98006 Attention: John W. Stanton Facsimile: ( ) with a copy to: Barry A. Adelman, Esq. Friedman Kaplan & Seiler LLP 875 Third Avenue New York, New York 10022-6225 Facsimile: (212) 355-6401 - 6 - 9 (d) if to GS, GSCP, GSC, BSF or SSF: c/o Goldman Sachs & Co. 85 Broad Street New York, New York 10004 Attention: Terence M. O'Toole Facsimile: (212) 902-4103 with a copy to: Alison S. Ressler, Esq. Sullivan & Cromwell 444 South Flower Street Los Angeles, California 90071 Facsimile: (213) 683-0457 (e) if to Providence: c/o Providence Ventures, Inc. 900 Fleet Center 50 Kennedy Plaza Providence, Rhode Island 02903 Attention: Jonathan M. Nelson Facsimile: (401) 751-1790 with a copy to: David K. Duffell, Esq. Edwards & Angell 2700 Hospital Tower Providence, Rhode Island 02903 Facsimile: (401) 276-6611 or to such other address or facsimile number as any party may have furnished in writing to the other parties in the manner provided above. 9. Exchanges, Recapitalizations, Etc. Affecting the Company's Common Stock. The provisions of this Agreement shall apply, to the full extent set forth herein with respect to the shares of Common Stock now or hereinafter owned by each Stockholder, to any and all securities of the Company or any successor or assign of the Company (whether by merger, consolidation or otherwise) that may be issued in respect of, in exchange for, or in substitution of such shares of Common Stock, - 7 - 10 and shall be appropriately adjusted for any stock dividends, stock splits, reverse splits, combinations, recapitalizations and the like occurring after the date hereof. 10. Inspection and Compliance with Law. Copies of this Agreement will be available for inspection or copying by any interested person at the offices of the Company through the Secretary of the Company. The Company will otherwise take all actions as may be necessary or appropriate to comply with any applicable law relating to the validity and enforceability of stockholder agreements containing the provisions of this Agreement. 11. Waivers. The failure of any party hereto to give notice of the breach or non-fulfillment of any term or condition of this Agreement shall not constitute a waiver thereof, nor shall the waiver of any breach or non-fulfillment of any term or condition of this Agreement constitute a waiver of any other breach or non-fulfillment of that term or condition or any other term or condition of this Agreement. 12. Amendments. This Agreement may be amended or modified at any time by a writing setting forth such amendment or modification, signed by all of the parties hereto. 13. Multiple Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall constitute an original copy hereof, but all of which together shall constitute one agreement. 14. Severability. In the event that any one or more of the provisions contained in this Agreement or in any other document, instrument or agreement referred to herein, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any other such document, instrument or agreement. - 8 - 11 15. Entire Agreement. This Agreement contains the entire understanding among the parties hereto concerning the subject matter hereof and supersedes all prior agreements and undertakings, whether written or oral, with respect to the subject matter hereof. - 9 - 12 IN WITNESS WHEREOF, each of the parties has executed or caused this Agreement to be executed by its duly authorized officer as of the date first above written. VOICESTREAM WIRELESS CORPORATION By: /S/ John W. Stanton ------------------------------------- Name: John W. Stanton Title: Chief Executive Officer HELLMAN & FRIEDMAN CAPITAL PARTNERS II, L.P., a California limited partnership By: Hellman & Friedman Investors, L.P., its general partner By: Hellman & Friedman Investors, Inc., its general partner By: /S/ Mitchell Cohen ----------------------------- Name: Mitchell Cohen Title: Vice President H & F ORCHARD PARTNERS, L.P., a California limited partnership By: H & F Orchard Investors, L.P., its general partner By: H & F Orchard Investors, Inc., its general partner By: /S/ Mitchell Cohen ----------------------------- Name: Mitchell Cohen Title: Vice President - 10 - 13 H & F INTERNATIONAL PARTNERS, L.P., a California limited partnership By: H & F International Investors, L.P., its general partner By: H & F International Investors, Inc., its general partner By: /S/ Mitchell Cohen ----------------------------- Name: Mitchell Cohen Title: Vice President /S/ John W. Stanton ---------------------------------------- JOHN W. STANTON /S/ Theresa E. Gillespie ---------------------------------------- THERESA E. GILLESPIE PN CELLULAR, INC. By: /S/ John W. Stanton ------------------------------------- Name: John W. Stanton Title: Chief Executive Officer STANTON FAMILY TRUST By: /S/ John W. Stanton ------------------------------------- /S/ Donald Guthrie ------------------------------------- Name: John W. Stanton, Donald Guthrie, Trustees STANTON COMMUNICATIONS CORPORATION By: /S/ John W. Stanton ------------------------------------- - 11 - 14 Name: John W. Stanton Title: Chief Executive Officer THE GOLDMAN SACHS GROUP, L.P. By: /S/ Terence M. O'Toole ------------------------------------- Name: Terence M. O'Toole Title: Director GS CAPITAL PARTNERS, L.P. By: GS Advisors L.P., General Partner By: GS Advisors, Inc., General Partner By: /S/ Eve M. Gerriets ----------------------------- Name: Eve M. Gerriets Title: Vice President BRIDGE STREET FUND 1992, L.P. By: Stone Street Performance Corp., Managing General Partner By: /S/ Eve M. Gerriets ------------------------------------- Name: Eve M. Gerriets Title: Vice President STONE STREET FUND 1992, L.P. By: Stone Street Performance Corp., General Partner By: /S/ Eve M. Gerriets --------------------------------- Name: Eve M. Gerriets Title: Vice President - 12 - 15 PROVIDENCE MEDIA PARTNERS L.P. By: Providence Media GP Limited Partnership Its: General Partner By: Providence Ventures, L.P. Its: General Partner By: /S/ Jonathan Nelson -------------------------------- Name: Jonathan Nelson Title: Director - 13 - EX-10.41 9 FIRST AMENDMENT TO SHAREHOLDERS AGREEMENT 1 EXHIBIT 10.41 FIRST AMENDMENT TO SHAREHOLDERS AGREEMENT FIRST AMENDMENT TO SHAREHOLDERS AGREEMENT, dated as of _________, 1999 (the "Agreement"), by and among VoiceStream Wireless Corporation, a Washington corporation (the "Company"), Western Wireless Corporation, a Washington corporation ("WWC"), Hutchison Telecommunications Holdings (USA) Limited, a British Virgin Islands corporation ("Hutchison Holdings"), and Hutchison Telecommunications PCS (USA) Limited, a British Virgin Islands corporation ("Hutchison PCS"; each of Hutchison Holdings, Hutchison PCS, WWC and the Company is sometimes referred to herein as a "Party" and collectively as the "Parties"). WHEREAS, the Company and WWC are parties to that certain Agreement and Plan of Distribution, dated as of ___________, 1999, pursuant to which, among other things, WWC has agreed, upon the terms and conditions set forth therein, to distribute the shares of the Company's Common Stock, no par value (the "Common Stock"), owned by it, which shares represent 80.1% of the issued and outstanding shares of Common Stock, to WWC's shareholders on the basis of one share of Common Stock for each one share of WWC's outstanding common stock (the "Spin-Off"); WHEREAS, prior to the Spin-Off, Hutchison PCS is the owner of 19.9% of the issued and outstanding shares of Common Stock, and WWC, the Company and Hutchison PCS are Parties to that certain Shareholders Agreement, dated February 17, 1998 (the "Shareholders Agreement"), pursuant to which, among other things, certain agreements concerning the management and control of the Company, preemptive rights with respect to the Company's equity securities, registration rights with respect to the Common Stock, and certain other matters were set forth; WHEREAS, prior to the Spin-Off, Hutchison Holdings is the owner of 3,888,888 shares of the issued and outstanding Class A common stock of WWC, and as a result of the Spin-Off, will receive a like number of shares of Common Stock; WHEREAS, as of the effective date of the Spin-Off (the "Spin-Off Effective Date"), the Company and certain stockholders of the Company, including Hutchison Holdings and Hutchison PCS, intend to enter into a Voting Agreement (the "Voting Agreement"), setting forth, among other things, certain agreements concerning the management of the Company; and WHEREAS, simultaneously with the execution of the Voting Agreement, the Parties desire to terminate the Shareholders Agreement, except for certain provisions therein granting Hutchison PCS preemptive rights on equity securities issued by the Company, rights to designate directors and registration rights on the Common Stock owned by Hutchison PCS, all on the terms set forth herein. 2 NOW, THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties hereby agree as follows: 1. Certain Definitions. For purposes of this Agreement, capitalized terms used herein and not otherwise defined shall have the meanings ascribed to such terms in the Shareholders Agreement as if such definitions were set forth herein, unless the context otherwise requires. 2. Termination of Certain Provisions of the Shareholders Agreement. (a) Effective as of the Spin-Off Effective Date, the Shareholders Agreement is amended to delete WWC as a party thereto and from and after the Spin-Off Effective Date, (i) WWC shall not have no further rights, obligations or liabilities of any nature whatsoever under the Shareholders Agreement; and (ii) neither the Company nor Hutchison PCS shall have any further rights against, or obligations or liabilities of any nature whatsoever to, WWC under the Shareholders Agreement. (b) Except as set forth in Section 2(c) below, the Parties hereby agree that, as of the Spin-Off Effective Date, all rights and obligations of the Parties under the Shareholders Agreement shall terminate. (c) Notwithstanding the termination of the rights and obligations of the Parties pursuant to Section 2(b) hereof, the Parties hereby agree that (i) Hutchison PCS's preemptive right to purchase equity securities issued by the Company under Section 9 of the Shareholders Agreement shall survive the Spin-Off Effective Date until the termination in its entirety of Hutchison PCS's right to designate directors to the Board of Directors of the Company under Section 3 of the Voting Agreement, or, if earlier, the completion of an Investor 50% Transfer; (ii) Hutchison PCS's demand and piggyback registration rights under Section 11 of the Shareholders Agreement shall survive the Spin-Off Effective Date until terminated in accordance with Section 11 of the Shareholders Agreement; (iii) Hutchison Holdings is hereby granted, with respect to the Common Stock which Hutchison Holdings will receive as a result of the Spin-Off with respect to its WWC Class A common stock, the same demand and piggyback registration rights as Hutchison PCS under Section 11 of the Shareholders Agreement, which rights shall survive the Spin-Off Effective Date until terminated in accordance with Section 11 of the Shareholders Agreement; and (iv) Hutchison PCS's right to transfer its right to designate directors and demand and piggyback registration rights to an Investor 50% Transferee shall continue until terminated in accordance with the Shareholders Agreement. 3. Representations and Warranties. Each Party hereby represents and warrants, as to itself, to each other Party as follows: (a) It is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation with full power and authority to execute, deliver and perform its obligations under this Agreement; - 2 - 3 (b) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on its part and this Agreement constitutes its legal, valid and binding obligation enforceable against it in accordance with its terms; and (c) Neither the execution, delivery or performance of this Agreement by it, nor the consummation of the transactions contemplated hereby will, with or without the giving of notice of passage of time, or both conflict with, result in a default or loss of rights (or give rise to any right of termination, cancellation or acceleration) under, (i) any provision of its (or any of its Subsidiaries') certificate of incorporation or by-laws, (ii) any material note, bond, indenture, mortgage, deed of trust, contract, agreement, lease or other instrument or obligation to which it, or any of its Subsidiaries, is a party or by which it, or any of its Subsidiaries, or its, or any of its Subsidiaries', properties may be bound or affected, or (iii) any law, order, judgment, ordinance, rule, regulation or decree to which it, or any of its Subsidiaries, is a party or by which it, or any of its Subsidiaries, or any of its, or any of its Subsidiaries', properties are bound or affected. 4. Effectiveness. This Agreement shall become effective on the Spin-Off Effective Date. If the Spin-Off Effective Date does not occur on or before December 31, 1999, (a) this Agreement shall terminate and be of no further force and effect whatsoever, and (b) the Shareholders Agreement shall remain in full force and effect without any amendment thereto whatsoever resulting from this Agreement and shall hereby be ratified, adopted and confirmed in all respects. 5. Waiver; Amendments. Except as expressly provided otherwise herein, neither this Agreement nor any provision hereof may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the Parties. 6. Recapitalization, Exchanges, Etc. The provisions of this Agreement shall apply to the full extent set forth herein with respect to shares or other securities of the Company that may be issued to Hutchison PCS or Hutchison Holdings in respect of, in exchange for, or in substitution of the Common Stock. 7. Notices. All notices, requests, demands and other communications hereunder shall be in writing and, except to the extent otherwise expressly provided in this Agreement, shall be deemed to have been duly given if delivered by same day or next day courier (guaranteed delivery) or mailed, registered mail, return receipt requested, or transmitted by telegram, telex or facsimile at such Party's address appearing below, or such other address as such Party may have furnished to the other Parties, in writing, in accordance with this Section 7. If a notice hereunder is transmitted by confirmed fax so as to arrive during normal business hours during a Business Day at the place of receipt, then such notice shall be deemed to have been given on such Business Day at the place of receipt or, if so transmitted to arrive after normal business hours during a Business Day at the place of receipt, then such notice shall be deemed to have been given on the following Business Day at the place of receipt. If such notice is sent by next-day courier it shall - 3 - 4 be deemed to have been given on the third Business Day at the place of receipt following sending and, if by registered air mail, on the tenth Business Day at the place of receipt following sending, provided, that the date of sending shall be deemed to be the date at the place of receipt at the time such notice is posted. (a) if to Hutchison PCS: Hutchison Telecommunications PCS (USA) Limited c/o Offshore Incorporations Limited P.O. Box 957 Offshore Incorporations Centre Road Town, Tortola British Virgin Islands Tel: (809) 494-2233 Fax: (809) 494-4885 and Hutchison Telecommunications PCS (USA) Limited 22nd Floor, Hutchison House 10 Harcourt Road Hong Kong Attention: Edith Shih Tel: (852) 2128-1232 Fax: (852) 2128-1778 With a copy (which shall not constitute notice) to: Dewey Ballantine LLP Suite 3907, Asia Pacific Finance Tower Citibank Plaza 3 Garden Road Central, Hong Kong Attention: John A. Otoshi Tel: (852) 2509-7000 Fax: (852) 2509-7088 - 4 - 5 (b) if to Hutchison Holdings: 22nd Floor, Hutchison House 10 Harcourt Road Hong Kong Attention: Edith Shih Tel: (852) 2128-1232 Fax: (852) 2128-1778 With a copy (which shall not constitute notice) to: Dewey Ballantine LLP Suite 3907, Asia Pacific Finance Tower Citibank Plaza 3 Garden Road Central, Hong Kong Attention: John A. Otoshi Tel: (852) 2509-7000 Fax: (852) 2509-7088 (c) if to WWC: 3650 131 Avenue SE Bellevue, Washington 98006 Attention: Alan R. Bender, Esq. Tel: (425) 586-8014 Fax: (425) 586-8080 With a copy (which shall not constitute notice) to: Friedman Kaplan & Seiler LLP 875 Third Avenue New York, New York 10022-6225 Attention: Barry A. Adelman, Esq. Tel: (212) 833-1107 Fax: (212) 355-6401 (d) if to the Company: - 5 - 6 3650 131 Avenue SE Bellevue, Washington 98006 Attention: Alan R. Bender, Esq. Tel: (425) 586-8014 Fax: (425) 586-8080 With a copy (which shall not constitute notice) to: Friedman Kaplan & Seiler LLP 875 Third Avenue New York, New York 10022-6225 Attention: Barry A. Adelman, Esq. Tel: (212) 833-1107 Fax: (212) 355-6401 For purposes of this Section 7, a "Business Day" shall mean any day other than a Saturday, Sunday or legal holiday in New York, New York, Seattle or Hong Kong or any other day on which commercial banks in those locations are authorized by law or governmental decree to close. 8. Successors and Assigns. Except as otherwise provided herein, this Agreement shall inure to the benefit of, and be binding upon, the successors and assigns of each of the Parties. 9. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement. 10. Entire Agreement. This Agreement constitutes the entire understanding of the Parties with respect to the subject matter hereof and supersedes all prior understandings among the Parties with respect to such subject matter. 11. Applicable Law. The validity of this Agreement, its construction, interpretation and enforcement, and the rights of the Parties hereunder, shall be determined under, governed by and construed in accordance with the internal laws of the State of New York applicable to contracts formed in such State. Each Party agrees that, subject to Section 13 hereof, any suit, action or other proceeding arising out of this Agreement shall be brought and litigated in the courts of the State of New York or the United States District Court for the Southern District of New York and each Party hereby irrevocably consents to personal jurisdiction and venue in any such court and hereby waives any claim it may have that such court is an inconvenient forum for the purposes of any such suit, action or other proceeding. - 6 - 7 12. Section Headings. The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof. 13. Arbitration. Any and all disputes, controversies or claims (each a "Dispute") between the Parties relating to the interpretation or enforcement or performance of this Agreement shall be resolved by binding arbitration by the Arbitration Institute of the Stockholm Chamber of Commerce in accordance with its rules, subject to the following provisions: (i) There shall be three arbitrators (the "Arbitrators"). Each Party shall appoint one arbitrator within 30 days after giving or receiving notice of the submission of a Dispute to arbitration. The two arbitrators appointed by the Parties shall appoint the third arbitrator. If a Party does not appoint an arbitrator within such designated period, or if the two appointed arbitrators fail to appoint a third arbitrator within 30 days after their appointment, the relevant appointment shall be made by the Arbitration Institute of the Stockholm Chamber of Commerce. (ii) The expenses of the arbitration shall be borne equally by WWC, on the one hand, and VoiceStream, on the other hand, and each Party shall bear its own legal fees and expenses; provided, however, that the Arbitrators shall have discretion to require that one Party pay all or a portion of the expenses of arbitration or the other Party's legal fees and expenses in connection with any particular arbitration. (iii) The Arbitrators shall determine whether and to what extent any Party shall be entitled to damages or equitable relief. No Party shall be entitled to punitive damages or consequential damages or shall be required to post a bond in connection with equitable relief. (iv) The Arbitrators shall not have the power to add to nor modify any of the terms or conditions of this Agreement. The Arbitrators' decision shall not go beyond what is necessary for the interpretation and application of the provisions of this Agreement in respect of the issue before the Arbitrators. The Arbitrators' decision and award or permitted remedy, if any, shall be based upon the issue as drafted and submitted by the respective Parties and the relevant and competent evidence adduced at the hearing(s). (v) The Arbitrators shall have the authority to award any remedy or relief provided for in this Agreement, in addition to any other remedy or relief (including provisional remedies and relief) that a court of competent jurisdiction could order or grant (but subject to the remedial limitations elsewhere set forth in this Agreement, including, but without limitation, the aforesaid prohibition against punitive and consequential damages). The Arbitrators written decision shall be rendered within sixty (60) days of the hearing. The decision reached by the Arbitrators shall be final and binding upon the Parties as to the matter in dispute. To the extent that the relief or remedy granted by the Arbitrators is relief or remedy on which a court could enter judgement, a judgement upon the award rendered by the Arbitrators may be entered in any court having jurisdiction thereof (unless in the case of an award of damages, the full amount of the award is paid within ten (10) days of its determination by the Arbitrators). Otherwise, the award - 7 - 8 shall be binding on the Parties in connection with their continuing performance of this Agreement and in any subsequent arbitral or judicial proceeding between the Parties. (vi) The arbitration shall take place in Stockholm, Sweden, unless otherwise agreed by the Parties, and shall be conducted in the English language. (vii) The arbitration proceeding and all filing, testimony, documents and information relating to or presented during the arbitration proceeding shall be disclosed exclusively for the purpose of facilitating the arbitration process and for no other purpose. (viii) The Parties shall continue performing their respective obligations under this Agreement notwithstanding the existence of a Dispute while the Dispute is being resolved unless and until such obligations are terminated, expire or are suspended in accordance with the provisions hereof. (ix) The Arbitrators may, in their sole discretion, order a pre-hearing exchange of information including production of documents, exchange of summaries of testimony or exchange of statements of position, and shall schedule promptly all discovery and other procedural steps and otherwise assume case management initiative and control to effect an efficient and expeditious resolution of the Dispute. At any oral hearing of evidence in connection with an arbitration proceeding, each Party and its counsel shall have the right to examine its witnesses and to cross-examine the witnesses of the other Party. No testimony of any witness shall be presented in written form unless the opposing Party or Parties shall have the opportunity to cross-examine such witness, except as the Parties otherwise agree in writing. (x) Notwithstanding the dispute resolution procedures contained in this Section 13, either Party may apply to any court having jurisdiction (a) to enforce this Agreement to arbitrate, (b) to seek provisional injunctive relief so as to maintain the status quo until the arbitration award is rendered or the Dispute is otherwise resolved, or (c) to challenge or vacate any final judgment, award or decision of the Arbitrators that does not comport with the express provisions of this Section 13. 14. Failure to Pursue Remedies. The failure of any Party to seek redress for violation of any provision of this Agreement shall not prevent a subsequent act, which would have originally constituted a violation, from having the effect of an original violation. 15. Cumulative Remedies. The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any Party shall not preclude or waive its right to use any or all other remedies except as otherwise expressly provided in this Agreement. Such rights and remedies are given in addition to any other rights the Parties may have by law, statute, ordinance or otherwise. - 8 - 9 16. Severability. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provisions were omitted. 17. HTL. In the event Hutchison PCS shall exercise its preemptive rights under Section 9 of the Shareholders Agreement, Hutchison Telecommunications Limited, a corporation organized under the laws of Hong Kong, agrees to cause Hutchison PCS to perform its obligations under such Section 9 in accordance with its respective terms in connection with any such purchases (including causing or enabling Hutchison PCS to make payment). 18. Further Assurances. Each party hereto at the request of the other party shall, from time to time, execute and deliver such other assignments, transfers, conveyances and other instruments and documents and do and perform such other acts and things as may be reasonably necessary or desirable for effecting complete consummation of this Agreement and the transactions herein contemplated. - 9 - 10 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the date first above written. WESTERN WIRELESS CORPORATION /s/ Alan R. Bender ---------------------------------------- Name: Alan R. Bender Title: Senior Vice President HUTCHISON TELECOMMUNICATIONS PCS (USA) LIMITED /s/ Ting Chan ---------------------------------------- Name: Ting Chan Title: Director HUTCHISON TELECOMMUNICATIONS HOLDINGS (USA) LIMITED /s/ Khoo Chek Ngee ---------------------------------------- Name: Khoo Chek Ngee Title: Director VOICESTREAM WIRELESS CORPORATION /s/ John W. Stanton ---------------------------------------- Name: John W. Stanton Title: Chief Executive Officers - 10 - 11 The undersigned joins as a Party to this Agreement solely for the purpose of acknowledging and becoming bound by the provisions of Section 17 hereof. HUTCHISON TELECOMMUNICATIONS LIMITED /s/ Khoo Chek Ngee ---------------------------------------- Name: Khoo Chek Ngee Title: Director - 11 - EX-10.42 10 ROAMING AGREEMENT 1 EXHIBIT 10.42 ROAMING AGREEMENT This Agreement is entered into as of __________, 1999 by and between Western Wireless Corporation, a Washington corporation ("WWC"), and VoiceStream Wireless Corporation, a Washington corporation ("VoiceStream"). WHEREAS, WWC and VoiceStream are parties to that certain Roaming Agreement, dated as of February 17, 1998 (the "February Roaming Agreement"), setting forth, among other things, certain agreements regarding the rates upon which each of WWC and VoiceStream provide roaming services to the other; WHEREAS, in connection with the February Roaming Agreement, WWC and VoiceStream have entered into that certain Intercarrier Roamer Service Agreement dated as of _______, 1998 (the "February Roamer Service Agreement"), setting forth, among other things, the terms upon which each of WWC and VoiceStream provide roaming services to the other; WHEREAS, WWC and VoiceStream are parties to that certain Agreement and Plan of Distribution, dated as of ________, 1999, pursuant to which, among other things, WWC has agreed, upon the terms and conditions set forth therein, to distribute the shares of VoiceStream's Common Stock, no par value (the "Common Stock"), owned by it, which shares represent 80.1% of the Common Stock, to WWC's shareholders, on the basis of one share of Common Stock for each one share of WWC's outstanding common stock (the "Spin-Off"); WHEREAS, as of the effective date of the Spin-Off (the "Spin-Off Effective Date"), VoiceStream and WWC desire to (i) terminate the February Roaming Agreement and the February Roamer Service Agreement; and (ii) enter into a new arrangement to provide roaming services to one another at the rates and upon the terms hereinafter provided; and WHEREAS, WWC and VoiceStream anticipate entering into a new Intercarrier Roamer Service Agreement (the "Standard Agreement"), in connection with this Agreement, a copy of which is attached hereto as Schedule A. NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows: 1. This Agreement shall become effective on the Spin-Off Effective Date. If the Spin- Off Effective Date does not occur on or before December 31, 1999, (a) this Agreement shall terminate and be of no further force and effect whatsoever, and (b) each of the February Roaming Agreement and the February Roamer Service Agreement shall remain in full force and effect. 2 2. WWC and VoiceStream hereby agree that each of the February Roaming Agreement and the February Roamer Service Agreement shall be terminated as of the Spin-Off Effective Date and thereafter shall be of no further force and effect. 3. Each of WWC and VoiceStream agrees, on behalf of itself and its Subsidiaries, that each will provide roaming on its system to the other at a rate per minute for local service and an additional rate per minute for long-distance service as the Board of Directors of each of WWC and VoiceStream have mutually agreed prior to the date hereof. 4. WWC further agrees, on behalf of itself and its Subsidiaries, if within the control of WWC, to use its reasonable best efforts to provide roaming technology for the benefit of VoiceStream customers where necessary. 5. Each of WWC and VoiceStream agrees, on behalf of itself and its Subsidiaries, that all roaming agreements between them shall be modified by mutual consent to reflect industry technological changes applicable to PCS to AMPS roaming and vice versa. 6. Arbitration. Any and all disputes, controversies or claims (each a "Dispute") between the parties relating to the interpretation or enforcement or performance of this Agreement shall be resolved by binding arbitration by American Arbitration Association ("AAA") in accordance with its rules, subject to the following provisions: (a) There shall be three arbitrators (the "Arbitrators"). Each party shall appoint one arbitrator within 30 days after giving or receiving notice of the submission of a Dispute to arbitration. The two arbitrators appointed by the parties shall appoint the third arbitrator. If a party does not appoint an arbitrator within such designated period, or if the two appointed arbitrators fail to appoint a third arbitrator within 30 days after their appointment, the relevant appointment shall be made by the president of the AAA. (b) The expenses of the arbitration shall be borne equally by WWC and VoiceStream, and each party shall bear its own legal fees and expenses; provided, however, that the Arbitrators shall have discretion to require that one party pay all or a portion of the expenses of arbitration or the other party's legal fees and expenses in connection with any particular arbitration. (c) The Arbitrators shall determine whether and to what extent any party shall be entitled to damages or equitable relief. No party shall be entitled to punitive damages or consequential damages or shall be required to post a bond in connection with equitable relief. (d) The Arbitrators shall not have the power to add to nor modify any of the terms or conditions of this Agreement. The Arbitrators' decision shall not go beyond what is necessary for the interpretation and application of the provisions of this Agreement in respect of the issue before the Arbitrators. The Arbitrators' decision and award or permitted remedy, if any, shall be based upon the - 2 - 3 issue as drafted and submitted by the respective parties and the relevant and competent evidence adduced at the hearing(s). (e) The Arbitrators shall have the authority to award any remedy or relief provided for in this Agreement, in addition to any other remedy or relief (including provisional remedies and relief) that a court of competent jurisdiction could order or grant (but subject to the remedial limitations elsewhere set forth in this Agreement, including, but without limitation, the aforesaid prohibition against punitive and consequential damages). The Arbitrators written decision shall be rendered within sixty (60) days of the hearing. The decision reached by the Arbitrators shall be final and binding upon the parties as to the matter in dispute. To the extent that the relief or remedy granted by the Arbitrators is relief or remedy on which a court could enter judgement, a judgement upon the award rendered by the Arbitrators may be entered in any court having jurisdiction thereof (unless in the case of an award of damages, the full amount of the award is paid within ten (10) days of its determination by the Arbitrators). Otherwise, the award shall be binding on the parties in connection with their continuing performance of this Agreement and in any subsequent arbitral or judicial proceeding between the parties. (f) The arbitration shall take place in New York, New York unless otherwise agreed by the parties. (g) The arbitration proceeding and all filing, testimony, documents and information relating to or presented during the arbitration proceeding shall be disclosed exclusively for the purpose of facilitating the arbitration process and for no other purpose. (h) The parties shall continue performing their respective obligations under this Agreement notwithstanding the existence of a Dispute while the Dispute is being resolved unless and until such obligations are terminated, expire or are suspended in accordance with the provisions hereof. (i) The Arbitrators may, in their sole discretion, order a pre-hearing exchange of information including production of documents, exchange of summaries of testimony or exchange of statements of position, and shall schedule promptly all discovery and other procedural steps and otherwise assume case management initiative and control to effect an efficient and expeditious resolution of the Dispute. At any oral hearing of evidence in connection with an arbitration proceeding, each party and its counsel shall have the right to examine its witnesses and to cross- examine the witnesses of the other party. No testimony of any witness shall be presented in written form unless the opposing party or parties shall have the opportunity to cross-examine such witness, except as the parties otherwise agree in writing. (j) Notwithstanding the dispute resolution procedures contained in this Section 6 either party may apply to any court having jurisdiction (a) to enforce this Agreement to arbitrate, (b) to seek provisional injunctive relief so as to maintain the status quo until the arbitration award is rendered or - 3 - 4 the Dispute is otherwise resolved, or (c) to challenge or vacate any final judgment, award or decision of the Arbitrators that does not comport with the express provisions of this Section 6. 7. Notices. All notices, claims or other communications hereunder shall be in writing and shall be given by delivery in person, by facsimile transmission, by registered or certified mail (return receipt requested), postage prepaid or overnight carrier guaranteeing next day delivery: (a) to VoiceStream: 3650 131 Avenue SE Bellevue, Washington 98006 U.S.A. Attention: General Counsel Tel: (425) 586-8014 Fax: (425) 586-8080 with a copy to: Alan R. Bender, Esq. 3650 131 Avenue SE Bellevue, Washington 98006 U.S.A. Tel: (425) 586-8014 Fax: (425) 586-8080 and: Friedman Kaplan & Seiler LLP 875 Third Avenue New York, New York 10022-6225 Attention: Barry A. Adelman, Esq. Telephone: (212) 833-1107 Facsimile: (212)-355-6401 (b) to WWC: 3650 131 Avenue SE Bellevue, Washington 98006 U.S.A. Attention: General Counsel Tel: (425) 586-8014 Fax: (425) 586-8080 - 4 - 5 with a copy to: Alan R. Bender, Esq. 3650 131 Avenue SE Bellevue, Washington 98006 U.S.A. Tel: (425) 586-8014 Fax: (425) 586-8080 and: Friedman Kaplan & Seiler LLP 875 Third Avenue New York, New York 10022-6225 Attention: Barry A. Adelman, Esq. Telephone: (212) 833-1107 Facsimile: (212)-355-6401 or to such other address as any party may from time to time furnish to the other by a notice given in accordance with the provisions of this Section 7. All such notices and communications shall be deemed to have been duly given at the time delivered by hand, if personally delivered; when receipt confirmed, if sent by facsimile; and the next business day after timely delivery to the courier, if sent by an overnight air courier service guaranteeing next day delivery. 8. Termination. WWC and VoiceStream agree that notwithstanding any terms to the contrary in the Standard Agreement or any other related agreement, this Agreement shall terminate upon the earliest to occur of any of the following events: (a) the mutual written agreement of the parties; (b) upon notice by WWC to VoiceStream, in the event that VoiceStream or any of its Subsidiaries provides or resells, or acts as the agent for any other entity offering or reselling, wireless telephony services in any portion of the geographic area in which WWC or any of its Subsidiaries provides wireless telephony services other than (i) any such geographic area in which VoiceStream or any of its Subsidiaries provides such services on the Spin-Off Effective Date, or (ii) any such geographic area which is mutually agreed to by the parties after the Spin-Off Effective Date; (c) upon notice by VoiceStream to WWC, in the event that WWC or any of its Subsidiaries provides or resells, or acts as the agent for any other entity offering or reselling, wireless telephony services in any portion of the geographic area in which VoiceStream or any of its Subsidiaries provides wireless telephony services other than (i) any such geographic area in which WWC or any of its Subsidiaries provides such services on the Spin-Off Effective Date, or (ii) any such geographic area which is mutually agreed to by the parties after the Spin-Off Effective Date; or - 5 - 6 (d) upon six (6) months notice by either of WWC or VoiceStream to the other, in the event of a Change of Control (as defined below). For purposes of this Section 8, (a) a "Change of Control" means (i) directly or indirectly a sale, transfer, or other conveyance of all or substantially all of the assets of VoiceStream or WWC, as the case may be, on a consolidated basis, to any "person" (as such term is used for purposes of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not applicable), excluding transfers or conveyances to or among VoiceStream's Subsidiaries or WWC's Subsidiaries, respectively, as an entirety or substantially as an entirety in one transaction or series of related transactions, in each case with the effect that a Person owns more than 50% of the aggregate number of votes of all classes of capital stock of VoiceStream or WWC, respectively, which ordinarily have voting power for the election of directors VoiceStream or WWC, respectively, immediately after such transaction; (ii) any "person" (as such term is used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable), is or becomes the "beneficial owner" (as that term is used in Rules 13d-3 and 13d-5 under the Exchange Act, whether or not applicable, except that a Person shall be deemed to have "beneficial ownership" of all shares that such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the aggregate number of votes of all classes of capital stock of VoiceStream or WWC, as the case may be, which ordinarily have voting power for the election of directors of VoiceStream or WWC, respectively; (iii) any "person" (as such term is used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) shall have the right or ability (whether by agreement, proxies, ownership of shares or otherwise) to elect a majority of the Board of Directors of VoiceStream or WWC, as the case may be; or (iv) there ceasing to be any Person who serves on the Board of Directors of both WWC and VoiceStream; and (b) a "Person" means an individual, partnership, joint-stock company, corporation, trust or unincorporated organization, limited liability, company, or a government or agency or political subdivision thereof or any other entity. 9. For purposes of this Agreement, a "Subsidiary" of any party hereto shall mean any other entity as to which such party, directly or indirectly, owns more than 50% of the outstanding voting power. 10. Applicable Law. The validity of this Agreement, its construction, interpretation and enforcement, and the rights of the parties hereunder, shall be determined under, governed by and construed in accordance with the internal laws of the State of Washington. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed on their behalf by their officers thereunto duly authorized as of the day and year first above written. WESTERN WIRELESS CORPORATION VOICESTREAM WIRELESS CORPORATION By: /S/ Alan R. Bender By: /S/ John W. Stanton -------------------------------- ------------------------------------- - 6 - 7 Name: Alan R. Bender Name: John W. Stanton ------------------------------ ----------------------------------- Its: Senior Vice President Its: Chief Executive Officer ------------------------------- ------------------------------------ - 7 - EX-10.55 11 ASSIGNMENT AND ASSUMPTION AGREEMENT 1 EXHIBIT 10.55 ASSIGNMENT AND ASSUMPTION AGREEMENT ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of _________, 1999 (the "Agreement"), by and between Western Wireless Corporation, a Washington corporation ("WWC"), and VoiceStream Wireless Corporation, a Washington corporation ("VoiceStream", WWC and VoiceStream are sometimes individually referred to herein as a "Party" and collectively as the "Parties"). WHEREAS, WWC and VoiceStream are parties to that certain Agreement and Plan of Distribution, dated as of ______________, 1999, pursuant to which, among other things, WWC has agreed, upon the terms and conditions set forth therein, to distribute the shares of VoiceStream's Common Stock, no par value (the "Common Stock"), owned by it, which shares represent 80.1% of the issued and outstanding shares of Common Stock, to WWC's shareholders on the basis of one share of Common Stock for each one share of WWC's outstanding common stock (the "Spin Off"); WHEREAS, WWC and Robert Stapleton (the "Employee") have entered into an Employment Agreement, dated as of _________, 199_ (the "Employment Agreement"), setting forth, among other things, the terms of the Employee's employment by WWC; and WHEREAS, as of the effective date of the Spin-Off (the "Spin-Off Effective Date"), WWC desires to assign to VoiceStream, and VoiceStream desires to assume, all of WWC's rights and obligations under the Employment Agreement on the terms set forth herein. NOW, THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, WWC and VoiceStream agree as follows: 1. Assignment and Assumption of the Employment Agreement. On and as of the Spin-Off Effective Date, WWC hereby transfers, assigns and conveys to VoiceStream all of WWC's rights and interests in, and VoiceStream hereby accepts, assumes and agrees to perform and discharge all of the obligations arising from and after the Spin-Off Effective Date under, the Employment Agreement. 2. (a) Indemnification of WWC by VoiceStream. VoiceStream shall indemnify and hold harmless WWC, its subsidiaries and affiliates and its and their respective shareholders, members, managers, officers, employees, agents and/or the legal representatives of any of them (each, a "WWC Indemnified Party"), from and against any and all demands, claims, losses, liabilities, actions or causes of action, assessments, damages, fines, fees, penalties, costs and expenses, including, without limitation, interest, expenses of investigation, reasonable fees and disbursements of counsel, accountants and other experts (collectively, "Losses") (whether arising out of or relating to matters asserted by third parties against a WWC Indemnified Party or incurred or sustained by such WWC Indemnified Party in the absence of a third party claim) that - 1 - 2 arise after the Spin-Off Effective Date (a) under the Employment Agreement, (b) by reason of the Employee's employment by VoiceStream after the Spin-Off Effective Date, or (c) any default by VoiceStream in the performance of its obligations under the Employment Agreement. (b) Indemnification of VoiceStream by WWC. WWC shall indemnify and hold harmless VoiceStream, its subsidiaries and affiliates and its and their respective shareholders, members, managers, officers, employees, agents and/or the legal representatives of any of them (each, a "VoiceStream Indemnified Party"), from and against any and all Losses (whether arising out of or relating to matters asserted by third parties against a VoiceStream Indemnified Party or incurred or sustained by such VoiceStream Indemnified Party in the absence of a third party claim) that arise out of or result from (a) the assignment to VoiceStream of the Employment Agreement, (b) the Employee's employment by WWC on or prior to the Spin-Off Effective Date, or (c) any default by WWC prior to the Spin-Off Effective Date in the performance of its obligations under the Employment Agreement. (c) Procedures. (i) In the event that any VoiceStream Indemnified Party or WWC Indemnified Party (each an "Indemnified Party") shall sustain or incur any Losses in respect of which indemnification may be sought by such Indemnified Party pursuant to this Section 2, the Indemnified Party shall assert a claim for indemnification by giving prompt notice to the applicable indemnifying party (the "Indemnifying Party) under Section 2 and shall thereafter keep the Indemnifying Party reasonably informed with respect thereto; provided that failure of the Indemnified Party to give the Indemnifying Party notice as provided herein shall not relieve the Indemnifying Party of any of its obligations hereunder, except to the extent that the Indemnifying Party is materially prejudiced by such failure. Upon the Indemnifying Party's receipt of such notice, the Indemnifying Party shall have the right to assume, conduct and control the defense, compromise or settlement thereof, by written notice to the Indemnified Party of its intention to do so within thirty (30) days after receipt of the notice, with counsel reasonably satisfactory to the Indemnified Party, at the Indemnifying Party's own expense, and thereupon to prosecute in the name and on behalf of the Indemnified Party any available cross-claims, counter-claims or third-party claims arising with respect to the claim. If the Indemnifying Party shall assume the defense of such claim, it shall not settle such claim unless such settlement includes as an unconditional term thereof the giving by the claimant or the plaintiff of a release of the Indemnified Party, reasonably satisfactory to the Indemnified Party, from all liability with respect to such claim. As long as the Indemnifying Party is contesting any such claim in good faith and on a timely basis, the Indemnified Party shall not pay or settle any such claim. Notwithstanding the assumption by the Indemnifying Party of the defense of any claim as provided in this Section 2(c) and without limiting the Indemnifying Party's right to assume, conduct and control the defense, compromise or settlement thereof, the Indemnified Party shall be permitted to join in the defense of such claim and to employ counsel at its own expense. Assumption by the Indemnifying Party of the defense of any claim shall not be deemed a concession by the Indemnifying Party that it is required to indemnify the Indemnified Party for the subject matter of such claim. - 2 - 3 (ii) If the Indemnifying Party shall fail to notify the Indemnified Party of its desire to assume the defense of such claim within the prescribed 30-day period set forth in Section 2(c)(i) or shall notify the Indemnified Party that it will not assume the defense of any such claim, then the Indemnified Party may defend any such claim, in which event it may do so in such manner as it may deem appropriate, and the Indemnifying Party shall be bound by any determinations made in any litigation with respect to such claim or any settlement thereof effected by the Indemnified Party, provided that any such determinations or settlement shall not affect the right of the Indemnifying Party to dispute the Indemnified Party's claim for indemnification. Unless and until the Indemnified Party assumes the defense of any claim, the Indemnifying Party shall advance to the Indemnified Party any of its reasonable attorneys' fees and other costs and expenses incurred in connection with the defense of any such action or proceeding. 3. Representations and Warranties. Each of WWC and VoiceStream hereby represents and warrants to the other as follows: (a) It is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation with full power and authority to execute, deliver and perform its obligations under this Agreement; (b) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on its part and this Agreement constitutes its legal, valid and binding obligation enforceable against it in accordance with its terms; and (c) Neither the execution, delivery or performance of this Agreement by it, nor the consummation of the transactions contemplated hereby will, with or without the giving of notice of passage of time, or both, conflict with, result in a default or loss of rights (or give rise to any right of termination, cancellation or acceleration) under, (i) any provision of its (or any of its subsidiaries') certificate of incorporation or by-laws, (ii) any material note, bond, indenture, mortgage, deed of trust, contract, agreement, lease or other instrument or obligation to which it, or any of its subsidiaries, is a party or by which it, or any of its subsidiaries, or its, or any of its subsidiaries', properties may be bound or affected, or (iii) any law, order, judgment, ordinance, rule, regulation or decree to which it, or any of its subsidiaries, is a party or by which it, or any of its subsidiaries, or any of its, or any of its subsidiaries', properties are bound or affected. 4. Effectiveness. This Agreement shall become effective only upon the Spin-Off Effective Date. If the Spin-Off Effective Date does not occur on or before December 31, 1999, this Agreement shall terminate and be of no further force and effect whatsoever. 5. Notices. All notices, claims or other communications hereunder shall be in writing and shall be given by delivery in person, by facsimile transmission, by registered or certified mail (return receipt requested), postage prepaid, or overnight carrier guaranteeing next day delivery: - 3 - 4 (a) to VoiceStream: 3650 131 Avenue SE Bellevue, Washington 98006 Attention: General Counsel Tel: (425) 586-8014 Fax: (425) 586-8080 with a copy to: Alan R. Bender, Esq. 3650 131 Avenue SE Bellevue, Washington 98006 Tel: (425) 586-8014 Fax: (425) 586-8080 and: Friedman Kaplan & Seiler LLP 875 Third Avenue New York, New York 10022-6225 Attention: Barry A. Adelman, Esq. Telephone: (212) 833-1107 Facsimile: (212)-355-6401 (b) to WWC: 3650 131 Avenue SE Bellevue, Washington 98006 Attention: General Counsel Tel: (425) 586-8014 Fax: (425) 586-8080 with a copy to: Alan R. Bender, Esq. 3650 131 Avenue SE Bellevue, Washington 98006 Tel: (425) 586-8014 Fax: (425) 586-8080 and: - 4 - 5 Friedman Kaplan & Seiler LLP 875 Third Avenue New York, New York 10022-6225 Attention: Barry A. Adelman, Esq. Telephone: (212) 833-1107 Facsimile: (212)-355-6401 or to such other address as any Party may from time to time furnish to the other by a notice given in accordance with the provisions of this Section 5. All such notices and communications shall be deemed to have been duly given at the time delivered by hand, if personally delivered; five (5) business days after being deposited in the mail, first class postage prepaid, return receipt requested, if mailed; when receipt confirmed, if sent by facsimile; and the next business day after timely delivery to the courier, if sent by an overnight air courier service guaranteeing next day delivery. 6. Waiver; Amendments. This Agreement may be amended, modified or supplemental only by written agreement of the Parties. No provision in this Agreement shall be deemed waived except by an instrument in writing signed by the Party waiving such provision. Any waiver by any Party of any of its rights under this Agreement or of any breach of this Agreement shall not constitute a waiver of any other rights or of any other or future breach. 7. Cumulative Remedies. The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any Party shall not preclude or waive its right to use any or all other remedies except as otherwise expressly provided in this Agreement. Such rights and remedies are given in addition to any other rights the Parties may have by law, statute, ordinance or otherwise. 8. Successors, Assigns and Transferees. This Agreement shall inure to the benefit of, and be binding upon, the successors and assigns of each Party. 9. Entire Agreement. This Agreement constitutes the entire understanding of the Parties with respect to the subject matter hereof and supersedes all prior understandings among the Parties with respect to such subject matter. 10. Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, and all of which together shall be considered the same agreement. 11. Applicable Law. This 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. - 5 - 6 12. Section Headings. The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof. 13. Severability. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provisions were omitted. - 6 - 7 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. WESTERN WIRELESS CORPORATION By: /S/ Alan R. Bender ------------------------------------- Name: Alan R. Bender Title: Senior Vice President VOICESTREAM WIRELESS CORPORATION By: /S/ John W. Stanton ------------------------------------- Name: John W. Stanton Title: Chief Executive Officer - 7 - EX-10.56 12 ASSIGNMENT AND ASSUMPTION AGREEMENT 1 EXHIBIT 10.56 ASSIGNMENT AND ASSUMPTION AGREEMENT ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of _________, 1999 (the "Agreement"), by and between Western Wireless Corporation, a Washington corporation ("WWC"), and VoiceStream Wireless Corporation, a Washington corporation ("VoiceStream", WWC and VoiceStream are sometimes individually referred to herein as a "Party" and collectively as the "Parties"). WHEREAS, WWC and VoiceStream are parties to that certain Agreement and Plan of Distribution, dated as of ______________, 1999, pursuant to which, among other things, WWC has agreed, upon the terms and conditions set forth therein, to distribute the shares of VoiceStream's Common Stock, no par value (the "Common Stock"), owned by it, which shares represent 80.1% of the issued and outstanding shares of Common Stock, to WWC's shareholders on the basis of one share of Common Stock for each one share of WWC's outstanding common stock (the "Spin Off"); WHEREAS, WWC and Cregg Baumbaugh (the "Employee") have entered into an Employment Agreement, dated as of _________, 199_ (the "Employment Agreement"), setting forth, among other things, the terms of the Employee's employment by WWC; and WHEREAS, as of the effective date of the Spin-Off (the "Spin-Off Effective Date"), WWC desires to assign to VoiceStream, and VoiceStream desires to assume, all of WWC's rights and obligations under the Employment Agreement on the terms set forth herein. NOW, THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, WWC and VoiceStream agree as follows: 1. Assignment and Assumption of the Employment Agreement. On and as of the Spin-Off Effective Date, WWC hereby transfers, assigns and conveys to VoiceStream all of WWC's rights and interests in, and VoiceStream hereby accepts, assumes and agrees to perform and discharge all of the obligations arising from and after the Spin-Off Effective Date under, the Employment Agreement. 2. (a) Indemnification of WWC by VoiceStream. VoiceStream shall indemnify and hold harmless WWC, its subsidiaries and affiliates and its and their respective shareholders, members, managers, officers, employees, agents and/or the legal representatives of any of them (each, a "WWC Indemnified Party"), from and against any and all demands, claims, losses, liabilities, actions or causes of action, assessments, damages, fines, fees, penalties, costs and expenses, including, without limitation, interest, expenses of investigation, reasonable fees and disbursements of counsel, accountants and other experts (collectively, "Losses") (whether arising out of or relating to matters asserted by third parties against a WWC Indemnified Party or incurred or sustained by such WWC Indemnified Party in the absence of a third party claim) that - 1 - 2 arise after the Spin-Off Effective Date (a) under the Employment Agreement, (b) by reason of the Employee's employment by VoiceStream after the Spin-Off Effective Date, or (c) any default by VoiceStream in the performance of its obligations under the Employment Agreement. (b) Indemnification of VoiceStream by WWC. WWC shall indemnify and hold harmless VoiceStream, its subsidiaries and affiliates and its and their respective shareholders, members, managers, officers, employees, agents and/or the legal representatives of any of them (each, a "VoiceStream Indemnified Party"), from and against any and all Losses (whether arising out of or relating to matters asserted by third parties against a VoiceStream Indemnified Party or incurred or sustained by such VoiceStream Indemnified Party in the absence of a third party claim) that arise out of or result from (a) the assignment to VoiceStream of the Employment Agreement, (b) the Employee's employment by WWC on or prior to the Spin-Off Effective Date, or (c) any default by WWC prior to the Spin-Off Effective Date in the performance of its obligations under the Employment Agreement. (c) Procedures. (i) In the event that any VoiceStream Indemnified Party or WWC Indemnified Party (each an "Indemnified Party") shall sustain or incur any Losses in respect of which indemnification may be sought by such Indemnified Party pursuant to this Section 2, the Indemnified Party shall assert a claim for indemnification by giving prompt notice to the applicable indemnifying party (the "Indemnifying Party) under Section 2 and shall thereafter keep the Indemnifying Party reasonably informed with respect thereto; provided that failure of the Indemnified Party to give the Indemnifying Party notice as provided herein shall not relieve the Indemnifying Party of any of its obligations hereunder, except to the extent that the Indemnifying Party is materially prejudiced by such failure. Upon the Indemnifying Party's receipt of such notice, the Indemnifying Party shall have the right to assume, conduct and control the defense, compromise or settlement thereof, by written notice to the Indemnified Party of its intention to do so within thirty (30) days after receipt of the notice, with counsel reasonably satisfactory to the Indemnified Party, at the Indemnifying Party's own expense, and thereupon to prosecute in the name and on behalf of the Indemnified Party any available cross-claims, counter-claims or third-party claims arising with respect to the claim. If the Indemnifying Party shall assume the defense of such claim, it shall not settle such claim unless such settlement includes as an unconditional term thereof the giving by the claimant or the plaintiff of a release of the Indemnified Party, reasonably satisfactory to the Indemnified Party, from all liability with respect to such claim. As long as the Indemnifying Party is contesting any such claim in good faith and on a timely basis, the Indemnified Party shall not pay or settle any such claim. Notwithstanding the assumption by the Indemnifying Party of the defense of any claim as provided in this Section 2(c) and without limiting the Indemnifying Party's right to assume, conduct and control the defense, compromise or settlement thereof, the Indemnified Party shall be permitted to join in the defense of such claim and to employ counsel at its own expense. Assumption by the Indemnifying Party of the defense of any claim shall not be deemed a concession by the Indemnifying Party that it is required to indemnify the Indemnified Party for the subject matter of such claim. - 2 - 3 (ii) If the Indemnifying Party shall fail to notify the Indemnified Party of its desire to assume the defense of such claim within the prescribed 30-day period set forth in Section 2(c)(i) or shall notify the Indemnified Party that it will not assume the defense of any such claim, then the Indemnified Party may defend any such claim, in which event it may do so in such manner as it may deem appropriate, and the Indemnifying Party shall be bound by any determinations made in any litigation with respect to such claim or any settlement thereof effected by the Indemnified Party, provided that any such determinations or settlement shall not affect the right of the Indemnifying Party to dispute the Indemnified Party's claim for indemnification. Unless and until the Indemnified Party assumes the defense of any claim, the Indemnifying Party shall advance to the Indemnified Party any of its reasonable attorneys' fees and other costs and expenses incurred in connection with the defense of any such action or proceeding. 3. Representations and Warranties. Each of WWC and VoiceStream hereby represents and warrants to the other as follows: (a) It is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation with full power and authority to execute, deliver and perform its obligations under this Agreement; (b) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on its part and this Agreement constitutes its legal, valid and binding obligation enforceable against it in accordance with its terms; and (c) Neither the execution, delivery or performance of this Agreement by it, nor the consummation of the transactions contemplated hereby will, with or without the giving of notice of passage of time, or both, conflict with, result in a default or loss of rights (or give rise to any right of termination, cancellation or acceleration) under, (i) any provision of its (or any of its subsidiaries') certificate of incorporation or by-laws, (ii) any material note, bond, indenture, mortgage, deed of trust, contract, agreement, lease or other instrument or obligation to which it, or any of its subsidiaries, is a party or by which it, or any of its subsidiaries, or its, or any of its subsidiaries', properties may be bound or affected, or (iii) any law, order, judgment, ordinance, rule, regulation or decree to which it, or any of its subsidiaries, is a party or by which it, or any of its subsidiaries, or any of its, or any of its subsidiaries', properties are bound or affected. 4. Effectiveness. This Agreement shall become effective only upon the Spin-Off Effective Date. If the Spin-Off Effective Date does not occur on or before December 31, 1999, this Agreement shall terminate and be of no further force and effect whatsoever. 5. Notices. All notices, claims or other communications hereunder shall be in writing and shall be given by delivery in person, by facsimile transmission, by registered or certified mail (return receipt requested), postage prepaid, or overnight carrier guaranteeing next day delivery: - 3 - 4 (a) to VoiceStream: 3650 131 Avenue SE Bellevue, Washington 98006 Attention: General Counsel Tel: (425) 586-8014 Fax: (425) 586-8080 with a copy to: Alan R. Bender, Esq. 3650 131 Avenue SE Bellevue, Washington 98006 Tel: (425) 586-8014 Fax: (425) 586-8080 and: Friedman Kaplan & Seiler LLP 875 Third Avenue New York, New York 10022-6225 Attention: Barry A. Adelman, Esq. Telephone: (212) 833-1107 Facsimile: (212)-355-6401 (b) to WWC: 3650 131 Avenue SE Bellevue, Washington 98006 Attention: General Counsel Tel: (425) 586-8014 Fax: (425) 586-8080 with a copy to: Alan R. Bender, Esq. 3650 131 Avenue SE Bellevue, Washington 98006 Tel: (425) 586-8014 Fax: (425) 586-8080 and: - 4 - 5 Friedman Kaplan & Seiler LLP 875 Third Avenue New York, New York 10022-6225 Attention: Barry A. Adelman, Esq. Telephone: (212) 833-1107 Facsimile: (212)-355-6401 or to such other address as any Party may from time to time furnish to the other by a notice given in accordance with the provisions of this Section 5. All such notices and communications shall be deemed to have been duly given at the time delivered by hand, if personally delivered; five (5) business days after being deposited in the mail, first class postage prepaid, return receipt requested, if mailed; when receipt confirmed, if sent by facsimile; and the next business day after timely delivery to the courier, if sent by an overnight air courier service guaranteeing next day delivery. 6. Waiver; Amendments. This Agreement may be amended, modified or supplemental only by written agreement of the Parties. No provision in this Agreement shall be deemed waived except by an instrument in writing signed by the Party waiving such provision. Any waiver by any Party of any of its rights under this Agreement or of any breach of this Agreement shall not constitute a waiver of any other rights or of any other or future breach. 7. Cumulative Remedies. The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any Party shall not preclude or waive its right to use any or all other remedies except as otherwise expressly provided in this Agreement. Such rights and remedies are given in addition to any other rights the Parties may have by law, statute, ordinance or otherwise. 8. Successors, Assigns and Transferees. This Agreement shall inure to the benefit of, and be binding upon, the successors and assigns of each Party. 9. Entire Agreement. This Agreement constitutes the entire understanding of the Parties with respect to the subject matter hereof and supersedes all prior understandings among the Parties with respect to such subject matter. 10. Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, and all of which together shall be considered the same agreement. 11. Applicable Law. This 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. - 5 - 6 12. Section Headings. The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof. 13. Severability. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provisions were omitted. - 6 - 7 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. WESTERN WIRELESS CORPORATION By: /s/ Alan R. Bender ------------------------------------- Name: Alan R. Bender Title: Senior Vice President VOICESTREAM WIRELESS CORPORATION By: /s/ John W. Stanton ------------------------------------- Name: John W. Stanton Title: Chief Executive Officer - 7 - EX-10.57 13 ASSIGNMENT AND ASSUMPTION AGREEMENT 1 EXHIBIT 10.57 ASSIGNMENT AND ASSUMPTION AGREEMENT ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of _________, 1999 (the "Agreement"), by and between Western Wireless Corporation, a Washington corporation ("WWC"), and VoiceStream Wireless Corporation, a Washington corporation ("VoiceStream", WWC and VoiceStream are sometimes individually referred to herein as a "Party" and collectively as the "Parties"). WHEREAS, WWC and VoiceStream are parties to that certain Agreement and Plan of Distribution, dated as of ______________, 1999, pursuant to which, among other things, WWC has agreed, upon the terms and conditions set forth therein, to distribute the shares of VoiceStream's Common Stock, no par value (the "Common Stock"), owned by it, which shares represent 80.1% of the issued and outstanding shares of Common Stock, to WWC's shareholders on the basis of one share of Common Stock for each one share of WWC's outstanding common stock (the "Spin Off"); WHEREAS, WWC and Timothy Wong (the "Employee") have entered into an Employment Agreement, dated as of _________, 199_ (the "Employment Agreement"), setting forth, among other things, the terms of the Employee's employment by WWC; and WHEREAS, as of the effective date of the Spin-Off (the "Spin-Off Effective Date"), WWC desires to assign to VoiceStream, and VoiceStream desires to assume, all of WWC's rights and obligations under the Employment Agreement on the terms set forth herein. NOW, THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, WWC and VoiceStream agree as follows: 1. Assignment and Assumption of the Employment Agreement. On and as of the Spin-Off Effective Date, WWC hereby transfers, assigns and conveys to VoiceStream all of WWC's rights and interests in, and VoiceStream hereby accepts, assumes and agrees to perform and discharge all of the obligations arising from and after the Spin-Off Effective Date under, the Employment Agreement. 2. (a) Indemnification of WWC by VoiceStream. VoiceStream shall indemnify and hold harmless WWC, its subsidiaries and affiliates and its and their respective shareholders, members, managers, officers, employees, agents and/or the legal representatives of any of them (each, a "WWC Indemnified Party"), from and against any and all demands, claims, losses, liabilities, actions or causes of action, assessments, damages, fines, fees, penalties, costs and expenses, including, without limitation, interest, expenses of investigation, reasonable fees and disbursements of counsel, accountants and other experts (collectively, "Losses") (whether arising out of or relating to matters asserted by third parties against a WWC Indemnified Party or incurred or sustained by such WWC Indemnified Party in the absence of a third party claim) that - 1 - 2 arise after the Spin-Off Effective Date (a) under the Employment Agreement, (b) by reason of the Employee's employment by VoiceStream after the Spin-Off Effective Date, or (c) any default by VoiceStream in the performance of its obligations under the Employment Agreement. (b) Indemnification of VoiceStream by WWC. WWC shall indemnify and hold harmless VoiceStream, its subsidiaries and affiliates and its and their respective shareholders, members, managers, officers, employees, agents and/or the legal representatives of any of them (each, a "VoiceStream Indemnified Party"), from and against any and all Losses (whether arising out of or relating to matters asserted by third parties against a VoiceStream Indemnified Party or incurred or sustained by such VoiceStream Indemnified Party in the absence of a third party claim) that arise out of or result from (a) the assignment to VoiceStream of the Employment Agreement, (b) the Employee's employment by WWC on or prior to the Spin-Off Effective Date, or (c) any default by WWC prior to the Spin-Off Effective Date in the performance of its obligations under the Employment Agreement. (c) Procedures. (i) In the event that any VoiceStream Indemnified Party or WWC Indemnified Party (each an "Indemnified Party") shall sustain or incur any Losses in respect of which indemnification may be sought by such Indemnified Party pursuant to this Section 2, the Indemnified Party shall assert a claim for indemnification by giving prompt notice to the applicable indemnifying party (the "Indemnifying Party) under Section 2 and shall thereafter keep the Indemnifying Party reasonably informed with respect thereto; provided that failure of the Indemnified Party to give the Indemnifying Party notice as provided herein shall not relieve the Indemnifying Party of any of its obligations hereunder, except to the extent that the Indemnifying Party is materially prejudiced by such failure. Upon the Indemnifying Party's receipt of such notice, the Indemnifying Party shall have the right to assume, conduct and control the defense, compromise or settlement thereof, by written notice to the Indemnified Party of its intention to do so within thirty (30) days after receipt of the notice, with counsel reasonably satisfactory to the Indemnified Party, at the Indemnifying Party's own expense, and thereupon to prosecute in the name and on behalf of the Indemnified Party any available cross-claims, counter-claims or third-party claims arising with respect to the claim. If the Indemnifying Party shall assume the defense of such claim, it shall not settle such claim unless such settlement includes as an unconditional term thereof the giving by the claimant or the plaintiff of a release of the Indemnified Party, reasonably satisfactory to the Indemnified Party, from all liability with respect to such claim. As long as the Indemnifying Party is contesting any such claim in good faith and on a timely basis, the Indemnified Party shall not pay or settle any such claim. Notwithstanding the assumption by the Indemnifying Party of the defense of any claim as provided in this Section 2(c) and without limiting the Indemnifying Party's right to assume, conduct and control the defense, compromise or settlement thereof, the Indemnified Party shall be permitted to join in the defense of such claim and to employ counsel at its own expense. Assumption by the Indemnifying Party of the defense of any claim shall not be deemed a concession by the Indemnifying Party that it is required to indemnify the Indemnified Party for the subject matter of such claim. - 2 - 3 (ii) If the Indemnifying Party shall fail to notify the Indemnified Party of its desire to assume the defense of such claim within the prescribed 30-day period set forth in Section 2(c)(i) or shall notify the Indemnified Party that it will not assume the defense of any such claim, then the Indemnified Party may defend any such claim, in which event it may do so in such manner as it may deem appropriate, and the Indemnifying Party shall be bound by any determinations made in any litigation with respect to such claim or any settlement thereof effected by the Indemnified Party, provided that any such determinations or settlement shall not affect the right of the Indemnifying Party to dispute the Indemnified Party's claim for indemnification. Unless and until the Indemnified Party assumes the defense of any claim, the Indemnifying Party shall advance to the Indemnified Party any of its reasonable attorneys' fees and other costs and expenses incurred in connection with the defense of any such action or proceeding. 3. Representations and Warranties. Each of WWC and VoiceStream hereby represents and warrants to the other as follows: (a) It is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation with full power and authority to execute, deliver and perform its obligations under this Agreement; (b) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on its part and this Agreement constitutes its legal, valid and binding obligation enforceable against it in accordance with its terms; and (c) Neither the execution, delivery or performance of this Agreement by it, nor the consummation of the transactions contemplated hereby will, with or without the giving of notice of passage of time, or both, conflict with, result in a default or loss of rights (or give rise to any right of termination, cancellation or acceleration) under, (i) any provision of its (or any of its subsidiaries') certificate of incorporation or by-laws, (ii) any material note, bond, indenture, mortgage, deed of trust, contract, agreement, lease or other instrument or obligation to which it, or any of its subsidiaries, is a party or by which it, or any of its subsidiaries, or its, or any of its subsidiaries', properties may be bound or affected, or (iii) any law, order, judgment, ordinance, rule, regulation or decree to which it, or any of its subsidiaries, is a party or by which it, or any of its subsidiaries, or any of its, or any of its subsidiaries', properties are bound or affected. 4. Effectiveness. This Agreement shall become effective only upon the Spin-Off Effective Date. If the Spin-Off Effective Date does not occur on or before December 31, 1999, this Agreement shall terminate and be of no further force and effect whatsoever. 5. Notices. All notices, claims or other communications hereunder shall be in writing and shall be given by delivery in person, by facsimile transmission, by registered or certified mail (return receipt requested), postage prepaid, or overnight carrier guaranteeing next day delivery: - 3 - 4 (a) to VoiceStream: 3650 131 Avenue SE Bellevue, Washington 98006 Attention: General Counsel Tel: (425) 586-8014 Fax: (425) 586-8080 with a copy to: Alan R. Bender, Esq. 3650 131 Avenue SE Bellevue, Washington 98006 Tel: (425) 586-8014 Fax: (425) 586-8080 and: Friedman Kaplan & Seiler LLP 875 Third Avenue New York, New York 10022-6225 Attention: Barry A. Adelman, Esq. Telephone: (212) 833-1107 Facsimile: (212)-355-6401 (b) to WWC: 3650 131 Avenue SE Bellevue, Washington 98006 Attention: General Counsel Tel: (425) 586-8014 Fax: (425) 586-8080 with a copy to: Alan R. Bender, Esq. 3650 131 Avenue SE Bellevue, Washington 98006 Tel: (425) 586-8014 Fax: (425) 586-8080 and: - 4 - 5 Friedman Kaplan & Seiler LLP 875 Third Avenue New York, New York 10022-6225 Attention: Barry A. Adelman, Esq. Telephone: (212) 833-1107 Facsimile: (212)-355-6401 or to such other address as any Party may from time to time furnish to the other by a notice given in accordance with the provisions of this Section 5. All such notices and communications shall be deemed to have been duly given at the time delivered by hand, if personally delivered; five (5) business days after being deposited in the mail, first class postage prepaid, return receipt requested, if mailed; when receipt confirmed, if sent by facsimile; and the next business day after timely delivery to the courier, if sent by an overnight air courier service guaranteeing next day delivery. 6. Waiver; Amendments. This Agreement may be amended, modified or supplemental only by written agreement of the Parties. No provision in this Agreement shall be deemed waived except by an instrument in writing signed by the Party waiving such provision. Any waiver by any Party of any of its rights under this Agreement or of any breach of this Agreement shall not constitute a waiver of any other rights or of any other or future breach. 7. Cumulative Remedies. The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any Party shall not preclude or waive its right to use any or all other remedies except as otherwise expressly provided in this Agreement. Such rights and remedies are given in addition to any other rights the Parties may have by law, statute, ordinance or otherwise. 8. Successors, Assigns and Transferees. This Agreement shall inure to the benefit of, and be binding upon, the successors and assigns of each Party. 9. Entire Agreement. This Agreement constitutes the entire understanding of the Parties with respect to the subject matter hereof and supersedes all prior understandings among the Parties with respect to such subject matter. 10. Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, and all of which together shall be considered the same agreement. 11. Applicable Law. This 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. - 5 - 6 12. Section Headings. The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof. 13. Severability. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provisions were omitted. - 6 - 7 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. WESTERN WIRELESS CORPORATION By: /s/ Alan R. Bender ------------------------------------- Name: Alan R. Bender Title: Senior Vice President VOICESTREAM WIRELESS CORPORATION By: /s/ John W. Stanton ------------------------------------- Name: John W. Stanton Title: Executive Vice President - 7 - EX-10.58 14 ASSIGNMENT AND ASSUMPTION AGREEMENT 1 EXHIBIT 10.58 ASSIGNMENT AND ASSUMPTION AGREEMENT ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of _________, 1999 (the "Agreement"), by and between Western Wireless Corporation, a Washington corporation ("WWC"), and VoiceStream Wireless Corporation, a Washington corporation ("VoiceStream", WWC and VoiceStream are sometimes individually referred to herein as a "Party" and collectively as the "Parties"). WHEREAS, WWC and VoiceStream are parties to that certain Agreement and Plan of Distribution, dated as of ______________, 1999, pursuant to which, among other things, WWC has agreed, upon the terms and conditions set forth therein, to distribute the shares of VoiceStream's Common Stock, no par value (the "Common Stock"), owned by it, which shares represent 80.1% of the issued and outstanding shares of Common Stock, to WWC's shareholders on the basis of one share of Common Stock for each one share of WWC's outstanding common stock (the "Spin Off"); WHEREAS, WWC and Robert Dotson (the "Employee") have entered into an Employment Agreement, dated as of _________, 199_ (the "Employment Agreement"), setting forth, among other things, the terms of the Employee's employment by WWC; and WHEREAS, as of the effective date of the Spin-Off (the "Spin-Off Effective Date"), WWC desires to assign to VoiceStream, and VoiceStream desires to assume, all of WWC's rights and obligations under the Employment Agreement on the terms set forth herein. NOW, THEREFORE, in consideration of the mutual covenants herein contained and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, WWC and VoiceStream agree as follows: 1. Assignment and Assumption of the Employment Agreement. On and as of the Spin-Off Effective Date, WWC hereby transfers, assigns and conveys to VoiceStream all of WWC's rights and interests in, and VoiceStream hereby accepts, assumes and agrees to perform and discharge all of the obligations arising from and after the Spin-Off Effective Date under, the Employment Agreement. 2. (a) Indemnification of WWC by VoiceStream. VoiceStream shall indemnify and hold harmless WWC, its subsidiaries and affiliates and its and their respective shareholders, members, managers, officers, employees, agents and/or the legal representatives of any of them (each, a "WWC Indemnified Party"), from and against any and all demands, claims, losses, liabilities, actions or causes of action, assessments, damages, fines, fees, penalties, costs and expenses, including, without limitation, interest, expenses of investigation, reasonable fees and disbursements of counsel, accountants and other experts (collectively, "Losses") (whether arising out of or relating to matters asserted by third parties against a WWC Indemnified Party or incurred or sustained by such WWC Indemnified Party in the absence of a third party claim) that - 1 - 2 arise after the Spin-Off Effective Date (a) under the Employment Agreement, (b) by reason of the Employee's employment by VoiceStream after the Spin-Off Effective Date, or (c) any default by VoiceStream in the performance of its obligations under the Employment Agreement. (b) Indemnification of VoiceStream by WWC. WWC shall indemnify and hold harmless VoiceStream, its subsidiaries and affiliates and its and their respective shareholders, members, managers, officers, employees, agents and/or the legal representatives of any of them (each, a "VoiceStream Indemnified Party"), from and against any and all Losses (whether arising out of or relating to matters asserted by third parties against a VoiceStream Indemnified Party or incurred or sustained by such VoiceStream Indemnified Party in the absence of a third party claim) that arise out of or result from (a) the assignment to VoiceStream of the Employment Agreement, (b) the Employee's employment by WWC on or prior to the Spin-Off Effective Date, or (c) any default by WWC prior to the Spin-Off Effective Date in the performance of its obligations under the Employment Agreement. (c) Procedures. (i) In the event that any VoiceStream Indemnified Party or WWC Indemnified Party (each an "Indemnified Party") shall sustain or incur any Losses in respect of which indemnification may be sought by such Indemnified Party pursuant to this Section 2, the Indemnified Party shall assert a claim for indemnification by giving prompt notice to the applicable indemnifying party (the "Indemnifying Party) under Section 2 and shall thereafter keep the Indemnifying Party reasonably informed with respect thereto; provided that failure of the Indemnified Party to give the Indemnifying Party notice as provided herein shall not relieve the Indemnifying Party of any of its obligations hereunder, except to the extent that the Indemnifying Party is materially prejudiced by such failure. Upon the Indemnifying Party's receipt of such notice, the Indemnifying Party shall have the right to assume, conduct and control the defense, compromise or settlement thereof, by written notice to the Indemnified Party of its intention to do so within thirty (30) days after receipt of the notice, with counsel reasonably satisfactory to the Indemnified Party, at the Indemnifying Party's own expense, and thereupon to prosecute in the name and on behalf of the Indemnified Party any available cross-claims, counter-claims or third-party claims arising with respect to the claim. If the Indemnifying Party shall assume the defense of such claim, it shall not settle such claim unless such settlement includes as an unconditional term thereof the giving by the claimant or the plaintiff of a release of the Indemnified Party, reasonably satisfactory to the Indemnified Party, from all liability with respect to such claim. As long as the Indemnifying Party is contesting any such claim in good faith and on a timely basis, the Indemnified Party shall not pay or settle any such claim. Notwithstanding the assumption by the Indemnifying Party of the defense of any claim as provided in this Section 2(c) and without limiting the Indemnifying Party's right to assume, conduct and control the defense, compromise or settlement thereof, the Indemnified Party shall be permitted to join in the defense of such claim and to employ counsel at its own expense. Assumption by the Indemnifying Party of the defense of any claim shall not be deemed a concession by the Indemnifying Party that it is required to indemnify the Indemnified Party for the subject matter of such claim. - 2 - 3 (ii) If the Indemnifying Party shall fail to notify the Indemnified Party of its desire to assume the defense of such claim within the prescribed 30-day period set forth in Section 2(c)(i) or shall notify the Indemnified Party that it will not assume the defense of any such claim, then the Indemnified Party may defend any such claim, in which event it may do so in such manner as it may deem appropriate, and the Indemnifying Party shall be bound by any determinations made in any litigation with respect to such claim or any settlement thereof effected by the Indemnified Party, provided that any such determinations or settlement shall not affect the right of the Indemnifying Party to dispute the Indemnified Party's claim for indemnification. Unless and until the Indemnified Party assumes the defense of any claim, the Indemnifying Party shall advance to the Indemnified Party any of its reasonable attorneys' fees and other costs and expenses incurred in connection with the defense of any such action or proceeding. 3. Representations and Warranties. Each of WWC and VoiceStream hereby represents and warrants to the other as follows: (a) It is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation with full power and authority to execute, deliver and perform its obligations under this Agreement; (b) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on its part and this Agreement constitutes its legal, valid and binding obligation enforceable against it in accordance with its terms; and (c) Neither the execution, delivery or performance of this Agreement by it, nor the consummation of the transactions contemplated hereby will, with or without the giving of notice of passage of time, or both, conflict with, result in a default or loss of rights (or give rise to any right of termination, cancellation or acceleration) under, (i) any provision of its (or any of its subsidiaries') certificate of incorporation or by-laws, (ii) any material note, bond, indenture, mortgage, deed of trust, contract, agreement, lease or other instrument or obligation to which it, or any of its subsidiaries, is a party or by which it, or any of its subsidiaries, or its, or any of its subsidiaries', properties may be bound or affected, or (iii) any law, order, judgment, ordinance, rule, regulation or decree to which it, or any of its subsidiaries, is a party or by which it, or any of its subsidiaries, or any of its, or any of its subsidiaries', properties are bound or affected. 4. Effectiveness. This Agreement shall become effective only upon the Spin-Off Effective Date. If the Spin-Off Effective Date does not occur on or before December 31, 1999, this Agreement shall terminate and be of no further force and effect whatsoever. 5. Notices. All notices, claims or other communications hereunder shall be in writing and shall be given by delivery in person, by facsimile transmission, by registered or certified mail (return receipt requested), postage prepaid, or overnight carrier guaranteeing next day delivery: - 3 - 4 (a) to VoiceStream: 3650 131 Avenue SE Bellevue, Washington 98006 Attention: General Counsel Tel: (425) 586-8014 Fax: (425) 586-8080 with a copy to: Alan R. Bender, Esq. 3650 131 Avenue SE Bellevue, Washington 98006 Tel: (425) 586-8014 Fax: (425) 586-8080 and: Friedman Kaplan & Seiler LLP 875 Third Avenue New York, New York 10022-6225 Attention: Barry A. Adelman, Esq. Telephone: (212) 833-1107 Facsimile: (212)-355-6401 (b) to WWC: 3650 131 Avenue SE Bellevue, Washington 98006 Attention: General Counsel Tel: (425) 586-8014 Fax: (425) 586-8080 with a copy to: Alan R. Bender, Esq. 3650 131 Avenue SE Bellevue, Washington 98006 Tel: (425) 586-8014 Fax: (425) 586-8080 and: - 4 - 5 Friedman Kaplan & Seiler LLP 875 Third Avenue New York, New York 10022-6225 Attention: Barry A. Adelman, Esq. Telephone: (212) 833-1107 Facsimile: (212)-355-6401 or to such other address as any Party may from time to time furnish to the other by a notice given in accordance with the provisions of this Section 5. All such notices and communications shall be deemed to have been duly given at the time delivered by hand, if personally delivered; five (5) business days after being deposited in the mail, first class postage prepaid, return receipt requested, if mailed; when receipt confirmed, if sent by facsimile; and the next business day after timely delivery to the courier, if sent by an overnight air courier service guaranteeing next day delivery. 6. Waiver; Amendments. This Agreement may be amended, modified or supplemental only by written agreement of the Parties. No provision in this Agreement shall be deemed waived except by an instrument in writing signed by the Party waiving such provision. Any waiver by any Party of any of its rights under this Agreement or of any breach of this Agreement shall not constitute a waiver of any other rights or of any other or future breach. 7. Cumulative Remedies. The rights and remedies provided by this Agreement are cumulative and the use of any one right or remedy by any Party shall not preclude or waive its right to use any or all other remedies except as otherwise expressly provided in this Agreement. Such rights and remedies are given in addition to any other rights the Parties may have by law, statute, ordinance or otherwise. 8. Successors, Assigns and Transferees. This Agreement shall inure to the benefit of, and be binding upon, the successors and assigns of each Party. 9. Entire Agreement. This Agreement constitutes the entire understanding of the Parties with respect to the subject matter hereof and supersedes all prior understandings among the Parties with respect to such subject matter. 10. Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, and all of which together shall be considered the same agreement. 11. Applicable Law. This 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. - 5 - 6 12. Section Headings. The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof. 13. Severability. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provisions were omitted. - 6 - 7 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. WESTERN WIRELESS CORPORATION By: /s/ Alan R. Bender ------------------------------------- Name: Alan R. Bender Title: Senior Vice President VOICESTREAM WIRELESS CORPORATION By: /s/ John W. Stanton ------------------------------------- Name: John W. Stanton Title: Chief Executive Officer - 7 - EX-10.90 15 SECURITIES PURCHASE AGREEMENT 1 EXHIBIT 10.90 - -------------------------------------------------------------------------------- SECURITIES PURCHASE AGREEMENT by and among VOICESTREAM WIRELESS CORPORATION, HUTCHISON TELECOMMUNICATIONS PCS (USA) LIMITED and OMNIPOINT CORPORATION Dated as of June 23, 1999 - -------------------------------------------------------------------------------- 2 SECURITIES PURCHASE AGREEMENT SECURITIES PURCHASE AGREEMENT, dated as of June 23, 1999 (the "Agreement"), by and among Omnipoint Corporation, a Delaware corporation ("Issuer"), VoiceStream Wireless Corporation, a Washington corporation ("VoiceStream") and Hutchison Telecommunications PCS (USA) Limited, a British Virgin Islands corporation ("HPCS"). VoiceStream and HPCS are sometimes referred to herein individually as a "Purchaser" and collectively as the "Purchasers". W I T N E S S E T H : WHEREAS, upon the terms and conditions set forth in this Agreement, Issuer has determined to issue and sell, and Purchasers have determined to purchase, 12,500 shares of Issuer's Series A Non-Voting Convertible Preferred Stock, par value $0.01 per share (the "Preferred Stock"). WHEREAS, concurrently herewith, Issuer and VoiceStream are entering into an Agreement and Plan of Reorganization (the "Reorganization Agreement"), pursuant to which, among other things, wholly owned subsidiaries of VoiceStream Wireless Holding Corporation, a Delaware corporation ("VWHC"), will be merged with and into each of Issuer and VoiceStream; and WHEREAS, it is a condition to the purchase and sale of the Preferred Stock hereunder that the Reorganization Agreement continue to be in full force and effect on the initial closing date of such purchase and sale of Preferred Stock. NOW, THEREFORE, in consideration of the mutual covenants, conditions and promises hereinafter set forth, the parties hereby agree as follows: I DEFINITIONS SECTION 1.1 (a) Capitalized terms used herein and not otherwise defined shall have the meaning ascribed to such term in the Reorganization Agreement. (b) The following terms as used herein have the following meanings: "Anniversary" means each one-year period measured from the date of this Agreement. "Common Stock" means the Common Stock, par value $0.01 per share, of Issuer. "Registrable Securities" means (i) shares of Common Stock beneficially owned by Purchasers and (ii) shares of Common Stock issued to Purchasers upon the conversion of shares of Preferred Stock and, in each case, any shares into which such shares are subdivided, combined or otherwise converted by Issuer. 3 "Securities Act" means the Securities Act of 1933, as amended. (c) Each of the following terms is defined in the Section set forth opposite such term: Agreement....................................................Preamble Company Indemnitee.............................................7.8(b) Demand Registration............................................7.1(a) HPCS.........................................................Preamble Indemnified Party................................................11.3 Initial Closing...................................................3.1 Initial Closing Date..............................................3.1 Initial Shares....................................................2.1 Issuer.......................................................Preamble Losses...........................................................11.3 Maturity..........................................................2.5 Offerors.......................................................7.1(a) Other Registrable Securities...................................7.1(a) Preferred Stock..............................................Preamble Purchaser....................................................Preamble Purchaser Indemnitee...........................................7.8(a) Reduced Conversion Price..........................................2.4 Registration Expenses..........................................7.7(a) Remaining Preferred Shares........................................2.5 Reorganization Agreement.....................................Preamble Subsequent Closing................................................3.2 Subsequent Closing Date...........................................3.2 Subsequent Shares.................................................2.2 VWHC.........................................................Preamble VoiceStream..................................................Preamble
(d) Unless the context otherwise requires, the terms defined in this Article I or elsewhere in this Agreement shall have the meanings herein specified for all purposes of this Agreement, applicable to both the singular and plural forms of any of the terms defined herein. When a reference is made in this Agreement to a Section, Article, Exhibit or Schedule such reference shall be to a Section, Article, Exhibit or Schedule, respectively, of this Agreement unless otherwise indicated. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." The use of any gender herein shall be deemed to include the neuter, masculine and feminine genders wherever necessary or appropriate. 2 4 II PURCHASE AND SALE OF PREFERRED STOCK SECTION 2.1 Initial Closing. Subject to the terms and conditions of this Agreement, at the Initial Closing, Issuer will issue, sell and deliver 4,271 shares of Preferred Stock to VoiceStream and 4,271 shares of Preferred Stock to HPCS (collectively, the "Initial Shares") for a purchase price of $24,000 per share payable to Issuer on the Initial Closing Date. SECTION 2.2 Subsequent Closing. Subject to the terms and conditions of this Agreement, at the Subsequent Closing, Issuer will issue, sell and deliver 1,979 shares of Preferred Stock to VoiceStream and 1,979 shares of Preferred Stock to HPCS (collectively, the "Subsequent Shares"), for a purchase price of $24,000 per share payable to Issuer on the Subsequent Closing Date. SECTION 2.3 Use of Proceeds. Issuer shall use the proceeds from the sale of the Initial Closing Shares and the Subsequent Closing Shares for working capital purposes. SECTION 2.4 Terms of Preferred Stock. The Preferred Stock is convertible at any time or from time to time into Common Stock at the conversion price of $24 per share of Common Stock; provided, however, that the conversion price shall be reduced to $18.50 per share of Common Stock (the "Reduced Conversion Price") if the mergers contemplated by the Reorganization Agreement are not consummated and are terminated by reason of (i) a breach by Issuer of its covenants, agreements or obligations under the Reorganization Agreement or (ii) any representation or warranty of Issuer under the Reorganization Agreement being untrue in any material respect; provided, however, that conversion may not occur until any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, relating to the transactions contemplated hereby shall have expired or been terminated. In the event that the conversion of the Preferred Stock into Common Stock occurs at the Reduced Conversion Price, the number of shares of Preferred Stock so converted shall not exceed that number of shares which may be converted into Common Stock in accordance with the regulations and rulings of the Federal Communications Commission ("FCC") and applicable law. In the event that, after giving effect to such conversion at the Reduced Conversion Price, there are shares of Preferred Stock remaining which could not be so converted (such remaining amount, the "Remaining Preferred Shares"), the Remaining Preferred Shares shall, at the option of Purchasers, either remain outstanding or be redeemed by Issuer through the issuance of indebtedness to the Purchasers. Such indebtedness shall be senior unsecured debt of Issuer, shall bear interest at an annual rate of 7%, and shall mature on September 30, 2006 (the "Maturity"). There shall be no payments of interest or principal on such debt until the Maturity. Such debt shall not contain any covenants (other than the obligation to repay in accordance with the terms thereof) and shall only be accelerated upon a bankruptcy or insolvency event of Issuer or upon acceleration of Issuer's high yield indebtedness. In the event that the Remaining Preferred Shares (or the indebtedness which was issued in order to redeem the Remaining Preferred Shares) can, in accordance with the regulations and rulings of the FCC and applicable law, be converted into Common Stock then the Purchasers may convert such Remaining Preferred Shares or indebtedness into Common Stock. 3 5 III CLOSINGS SECTION 3.1 Time and Place of Initial Closing. Subject to the conditions set forth in Section 9.1, the closing of the transactions contemplated by Section 2.1 (the "Initial Closing") shall take place at the offices of Friedman Kaplan & Seiler LLP, 875 Third Avenue, New York, New York, at 10:00 a.m. local time on the date hereof (the "Initial Closing Date"). At the Initial Closing, Issuer shall deliver to Purchasers duly executed and issued stock certificates evidencing the Initial Shares purchased thereby against payment of the purchase price therefor by wire transfer of immediately available funds to the account specified therefor by Issuer, one-half of which purchase price shall be paid on the Initial Closing Date and one-half of which shall be paid on the first Business Day following the Initial Closing Date. SECTION 3.2 Time and Place of Subsequent Closing. The closing of the transactions contemplated by Section 2.2 (the "Subsequent Closing") shall take place at the offices of Friedman Kaplan & Seiler LLP, 875 Third Avenue, New York, New York, at 10:00 a.m. local time on October 1, 1999, provided that the conditions set forth in Section 9.3 are satisfied, or such later date on which the conditions set forth in Section 9.3 are satisfied (such earlier date, the "Subsequent Closing Date") or waived by Purchasers or at such other place and/or time and/or on such other date as the parties may agree; provided, however, that if the Subsequent Closing Date has not occurred on or before December 31, 1999, Purchasers' obligations hereunder may be terminated by Purchasers. In the event the Reorganization Agreement has been terminated as a result of a breach of such Reorganization Agreement by Issuer, Purchasers shall have the right but not the obligation to acquire the Subsequent Shares. At the Subsequent Closing, Issuer shall deliver to Purchasers duly executed and issued stock certificates evidencing the Subsequent Shares purchased thereby against payment of the purchase price therefor by wire transfer of immediately available funds to the account specified therefor by Issuer. IV REPRESENTATIONS AND WARRANTIES OF ISSUER SECTION 4.1 Representations and Warranties of Issuer. (a) Incorporation of Representations and Warranties in Reorganization Agreement. The representations and warranties of Issuer set forth in Section 4 of the Reorganization Agreement (together with the Disclosure Schedule) are hereby incorporated herein by reference, and are hereby made by Issuer to Purchasers as of the date hereof and the Initial Closing Date, in their entirety with the same force and effect. (b) Additional Representations and Warranties. Issuer hereby represents and warrants to Purchasers as of the date hereof, the Initial Closing Date and the Subsequent Closing Date that the shares of Preferred Stock being issued to Purchasers hereunder, when issued and paid for pursuant to the terms of this Agreement, will be duly authorized, validly issued, fully paid and nonassessable, and will be free and clear of any Liens, and shall not be subject to any preemptive rights of the holders of any other class or series of the capital stock of Issuer. The shares of Common 4 6 Stock issued upon conversion of the Preferred Stock, when issued pursuant to the terms thereof, will be validly issued, fully paid and nonassessable, and will be free and clear of any Liens. (c) Power and Authority; No Violation. The Issuer has full power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. This Agreement and all transactions contemplated hereby have been duly and validly authorized by all necessary action on the part of Issuer and this Agreement constitutes a legal, valid and binding obligation of Issuer enforceable in accordance with its terms except as such enforceability may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting or relating to enforcement of creditors' rights generally. Neither the execution, delivery or performance of this Agreement nor the consummation of the transactions contemplated hereby by Issuer will, with or without the giving of notice or the passage of time, or both, (i) conflict with, result in a default or loss of rights (or give rise to any right of termination, cancellation or acceleration) under, or result in the creation of any Lien, pursuant to (A) any provision of the certificate of incorporation, by-laws, stockholders agreements or other constituent documents of Issuer; (B) any material note, bond, indenture, mortgage, deed of trust, contract, agreement, lease or other instrument or obligation to which Issuer is a party or by which Issuer or its property may be bound or affected; or (C) any law, order, judgment, ordinance, rule, regulation or decree to which Issuer is a party or by which it or its property is bound or affected; or (ii) give rise to any right of first refusal or similar right with respect to any interest, or any properties or assets, of Issuer. No permit, consent, approval, authorization, qualification or registration of, or declaration to or filing with any governmental or regulatory authority or agency or third party is required to be obtained or made by Issuer in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby or thereby in order to (A) render this Agreement or the transactions contemplated hereby or thereby valid and effective and (B) enable Issuer to sell the Purchased Shares (including shares of Common Stock into which such shares may be converted). (d) Legal Matters. There is no claim, legal action, counterclaim, suit, arbitration, governmental investigation or other legal, administrative or tax proceeding, nor any order, decree or judgment, in progress or pending, or to the knowledge of Issuer threatened, against or relating to the right of Issuer to perform its obligations under this Agreement, nor does Issuer know or have reason to be aware of any basis for the same. There is outstanding no order, writ, injunction, judgment or decree of any court, governmental agency or arbitration tribunal applicable to Issuer or binding upon it or its property which would individually or in the aggregate impair in any material respect the performance of the obligations of Issuer hereunder or the consummation of the transactions contemplated by this Agreement other than orders or decrees involving the wireless telephone industry in general. (e) Truth and Correctness. No representation or warranty by Issuer in this Agreement contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary to make the statements contained herein or therein, in light of the circumstances under which such statements are made, not misleading. 5 7 (f) Investment Company Act. Issuer is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (g) No Brokers. Except as set forth on Schedule 4.1(g) hereto, no agent, broker, investment banker, person or firm is or will be entitled to any broker's or finder's fee or any other commission or similar fee directly or indirectly in connection with the transactions contemplated by this Agreement based in any way on any arrangements, agreements or understandings made by or on behalf of Issuer or an Affiliate thereof, and Issuer hereby agrees to indemnify the Investor and agrees to hold harmless the Investor against and in respect of any claims for brokerage and other commissions relating to such transactions based in any way on any arrangements, agreements or understandings made by or on behalf of Issuer or an Affiliate thereof. (h) Reports and Financial Statements. The Issuer has filed all reports required to be filed with the SEC since January 1, 1998 (collectively, including all exhibits thereto, the "SEC Reports"). None of such SEC Reports, as of their respective dates (as amended through the date hereof), contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Each of the financial statements (including the related notes) included in the SEC Reports presents fairly, in all material respects, the consolidated financial position and consolidated results of operations and cash flows of Issuer and its subsidiaries as of the respective dates or for the respective periods set forth therein, all in conformity with generally accepted accounting principles consistently applied during the periods involved, subject, in the case of the unaudited interim financial statements, to normal year-end adjustments and any other adjustments described therein. All such SEC Reports, as of their respective dates (as amended through the date hereof), complied in all material respects with the requirements of the Exchange Act. V REPRESENTATIONS AND WARRANTIES OF PURCHASERS Each Purchaser, as to itself only, hereby represents and warrants to Issuer (as of the date hereof, the Initial Closing Date and the Subsequent Closing Date): SECTION 5.1 Authorization. It has the full power and authority to enter into this Agreement and to perform all of its obligations hereunder. The execution, delivery and performance of this Agreement by it have been duly authorized by all necessary corporate action, and this Agreement constitutes a valid and binding obligation of it enforceable against it in accordance with its terms except as may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors' rights generally and by equitable principles of general applicability. The execution, delivery and performance of this Agreement by it do not (a) violate any provision of its certificate of incorporation, by-laws or other constituent documents, (b) conflict with or constitute a default under any material agreement, indenture or instrument to which it is a party or by which it or its property is bound or (c) violate any statute or order of any court or Governmental Body applicable to it, except in each case set forth in clauses (b) or (c) which would not reasonably be expected to 6 8 have a material adverse effect on its business taken as a whole or the transactions contemplated hereby. SECTION 5.2 Investment Representations. It is an Accredited Investor within the definition set forth in Rule 501(a) of the Securities Act. It is acquiring the shares of Preferred Stock it is purchasing hereunder for its own account, for investment, and not with a view to, or for sale in connection with, the distribution thereof or of any interest therein, in violation of state or federal law. It understands that such shares have not been registered under the Securities Act by reason of its issuance in a transaction exempt from the registration requirements of the Securities Act pursuant to the exemption provided in Section 4(2) thereof, that such shares of Preferred Stock have not been registered under applicable state securities laws by reason of their issuance in a transaction exempt from such registration requirements, and that such shares of Preferred Stock may not be sold or otherwise disposed of unless registered under the Securities Act and applicable state securities laws or exempted from registration therefrom. SECTION 5.3 Additional HPCS Representation and Agreement. HPCS represents, warrants and agrees to Issuer that either (a) immediately before the closing of the transactions described in the Reorganization Agreement, HPCS will directly own at least 3.5 million shares of VoiceStream Common Stock, no par value, and all the shares of the Preferred Stock (or the Common Stock into which it was converted) issued pursuant to this Agreement, or (b) at the closing of such transactions, HPCS shall be the purchaser of the shares of capital stock of VWHC issued pursuant to the Stock Subscription Agreement dated June 23, 1999, and, immediately prior to the exchange of such shares as contemplated by the Reorganization Agreement, the holder of all the Preferred Stock (or the Common Stock into which it was converted) issued pursuant to this Agreement. VI BOARD OF DIRECTORS SECTION 6.1 Board of Directors. From and after the date when any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, relating to the transactions contemplated hereby shall have expired or been terminated, for so long as Purchasers beneficially own at least seven and one-half percent (7 1/2%) of Issuer's outstanding equity securities, and provided that the Preferred Stock has been converted into Common Stock, Purchasers shall have the right to jointly designate one person to serve on the Board of Directors. Issuer agrees, and Issuer confirms that, by the approval of this Agreement by the Board of Directors, the Board of Directors has agreed to take all actions necessary to promptly cause the election to the Board of Directors of any Person so designated by Purchasers in accordance with this Section 6.1, including expanding the number of members of the Board of Directors to accommodate the addition of such Person who is elected to the Board of Directors and including, recommending for election, any such Person so nominated by Purchasers in any slate of directors set forth in any proxy materials sent to Issuer's stockholders in respect of any future annual meeting. 7 9 VII REGISTRATIONS RIGHTS SECTION 7.1 Demand Registrations. (a) Right to Demand Registration. At any time on and after the earliest to occur of (i) the termination of the Reorganization Agreement, (ii) any breach by Issuer of its obligations under this Agreement or the Reorganization Agreement and (iii) June 30, 2000, the holders of not less than twenty (20%) percent of the Registrable Securities, as the case may be (collectively, the "Offerors"), may request registration under the Securities Act of all or part of their Registrable Securities. Within seven days after receipt of any such request, Issuer will give written notice of such request to all other holders of securities of the Issuer entitled to notice of or the right to participate in such registrations ("Other Registrable Securities") and will include in such registration all Other Registrable Securities with respect to which Issuer has received written requests for inclusion therein within 20 days after the receipt of Issuer's notice. A registration requested pursuant to this Section 7.1(a) is referred to herein as a "Demand Registration". A Demanding Stockholder may make a written request for a Demand Registration in accordance with the foregoing in respect of equity securities of Issuer that it intends to convert into shares of Common Stock upon the effectiveness of the Registration Statement prepared in connection with such demand, and Issuer shall fulfill its obligations under this Section 7.1(a) in a manner that permits such Demanding Stockholder to exercise its conversion rights in respect of such equity securities and substantially contemporaneously sell the shares of Common Stock issuable upon such conversion under such Registration Statement. A request pursuant to this Section shall state the number of Registrable Securities requested to be registered, the intended method of disposition thereof and the jurisdictions in which registration is desired. In connection with any registration subject to this Section 7.1(a), the holders of Registrable Securities included in such registration shall enter into such underwriting, lock-up and other agreements, and shall execute and complete such questionnaires and other documents, as are customary in a primary offering. (b) Number of Demand Registrations. The holders of Registrable Securities will be entitled to request four (4) Demand Registrations, and Issuer will pay all Registration Expenses in connection therewith. A registration will not constitute a Demand Registration (i) until it has become effective, (ii) if the Offerors for such registration are not able to sell at least 80% of the Registrable Securities requested to be included in such registration, or (iii) if after it has become effective, the offering of Registrable Securities pursuant to such registration is interfered with by any stop order, injunction or other order or requirement of the SEC or other governmental agency or court. (c) Priority on Demand Registrations. Issuer will not include in any Demand Registration any securities which are not Registrable Securities or Other Registrable Securities without the written consent of the Offerors not to be unreasonably withheld (and the Offerors may not withhold their written consent if the Demand Registration is an underwritten offering and the managing underwriters advise Issuer and the Offerors in writing that in their opinion the number of 8 10 Registrable Securities and other securities requested to be included therein does not exceed the number of securities which can be sold in such offering without materially adversely affecting such sale). If Other Registrable Securities are permitted to be included in a Demand Registration which is an underwritten offering and the managing underwriters advise Issuer in writing that in their opinion the number of Registrable Securities and Other Registrable Securities requested to be included exceeds the number of securities which can be sold in such offering without materially adversely affecting such sale, Issuer will include in such registration prior to the inclusion of any securities which are not Registrable Securities the number of Registrable Securities requested to be included which in the opinion of such managing underwriters can be sold, pro rata among the respective holders of such Registrable Securities on the basis of the amount of such securities owned. (d) Restrictions on Demand Registrations. Issuer may postpone for up to three months in the aggregate during any twelve month period any filing or the effectiveness of any registration statement for a Demand Registration if the Board of Directors of Issuer determines (and Issuer so certifies by written notice to the Offerors) that such Demand Registration might reasonably be expected to have an adverse effect on any proposal or plan by Issuer or any of its Subsidiaries to engage in any material corporate transaction; provided that in such event, the Offerors initiating the request for such Demand Registration will be entitled to withdraw such request. (e) Selection of Underwriters. In the case of a Demand Registration, the Offerors will have the right to select the investment banker(s) and manager(s) to administer the offering, subject to Issuer's approval which will not be unreasonably withheld. SECTION 7.2 Piggyback Registrations. (a) Right to Piggyback Registrations. Whenever Issuer proposes to register any of its Capital Stock under the Securities Act, Issuer will give prompt written notice (in any event within ten business days after its receipt of notice of any exercise of other demand registration rights) to the holders of Registrable Securities of its intention to effect such a registration and will use its best efforts to include in such registration all Registrable Securities with respect to which Issuer has received written requests for inclusion therein within 20 days after the receipt of Issuer's notice by such holders (or at such later time if Issuer and the process of such registration will not be materially prejudiced thereby). A request pursuant to this Section 7.2(a) shall state the number of Registrable Securities requested to be registered. In connection with any registration subject to this Section 7.2(a), the holders of Registrable Securities included in such registration shall enter into such underwriting, lock-up and other agreements, and shall execute and complete such questionnaires and other documents, as are customary in a secondary offering. Issuer shall have the right to terminate or withdraw any registration initiated by it under this Section 7.2(a) prior to the effectiveness of such registration whether or not any holders of Registrable Securities have elected to include any securities in such registration. All registrations requested pursuant to this Section 7.2(a) are referred to herein as "Piggyback Registrations". No registration effected under this Section 7.2 shall relieve Issuer of its obligation to effect a Demand Registration pursuant to Section 7.1. 9 11 (b) Priority on Primary Registrations. If a Piggyback Registration is an underwritten primary registration on behalf of Issuer, and the managing underwriters advise Issuer in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold without materially adversely affecting such offering, Issuer will include in such registration (regardless of whether any holder initially requested such registration) (i) first, the securities Issuer proposes to sell and (ii) second, Registrable Securities and all Other Registrable Securities requested to be included in such registration, pro rata among the holders thereof on the basis of the number of shares owned by such holders. (c) Priority on Secondary Registrations. If a Piggyback Registration is an underwritten secondary registration on behalf of holders of Issuer's securities (and in which Issuer is not issuing any securities under such registration), and the managing underwriters advise Issuer in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold without materially adversely affecting such offering, Issuer will include in such registration (i) first, the securities requested to be included in such registration by the holder or holders who requested such registration (such holders being entitled to participate in accordance with the relative priorities, if any, as may exist among them) and (ii) second, Registrable Securities and all Other Registrable Securities requested to be included in such registration, pro rata among the holders thereof on the basis of the number of shares owned by such holders. (d) Selection of Underwriters. In the case of a Piggyback Registration which is a primary registration on behalf of Issuer, Issuer will have the right to select any investment banker(s) and manager(s) of nationally recognized standing to administer the offering. SECTION 7.3 No Inconsistent Agreement. Any right given by Issuer to any holder or prospective holder of Issuer's securities in connection with the registration of securities shall be conditioned such that it shall be consistent with the rights of the holders of Registrable Securities provided in this Agreement and shall not materially adversely affect the right of the holders of Registrable Securities to participate in Piggyback Registrations in the manner set forth in this Agreement. Notwithstanding anything to the contrary set forth in this Article VII, the parties hereto agree to promptly incorporate the provisions of this Article VII into the existing Amended and Restated Registration Rights Agreement, dated June 29, 1995, to which Issuer is a party, it being understood that such incorporation shall not in any material way impair the registration rights set forth in this Article VII. SECTION 7.4 Lockup Agreement. (a) Each Purchaser agrees, and prior to transferring Registrable Securities will cause its proposed transferee to agree, if requested by Issuer and the managing underwriters of Registrable Securities, not to sell or otherwise transfer or dispose of (other than by private placement) any other Registrable Securities (or other securities) of Issuer ten days prior to or during the 90-day period following the effective date of a registration statement of Issuer filed under the Securities Act, provided that all officers, directors and stockholders owning four percent (4%) or more (on a fully diluted basis, treating all outstanding options, rights and warrants to acquire equity 10 12 securities of Issuer as fully exercised, and treating all securities convertible into or exchangeable for equity securities of Issuer as fully converted or exchanged) of Issuer's equity securities shall enter into similar agreements. Such agreement shall be in writing in a form satisfactory to Issuer and such underwriter. Issuer may impose stop transfer instructions with respect to the shares (or securities) subject to the foregoing restriction until the end of said 90-day period. (b) Issuer agrees (i) not to effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during the ten days prior to and during the 90-day period beginning on the effective date of any underwritten Demand Registration or any underwritten Piggyback Registration (except as part of such underwritten registration or pursuant to registrations on Form S-4 or Form S-8 or any successor form or forms not available for registering capital stock for sale to the public at large), unless all of the Registrable Securities included in such Registration have been sold and (ii) to cause each holder of at least 25% of its equity securities acquired from Issuer (other than a holder that acquired such securities in a registered public offering or in open market transactions, unless such holder owned beneficially five percent or more of Issuer's equity securities prior to such public offering) to agree not to effect any public sale or distribution of any such securities during such period (except as part of such underwritten registration, if otherwise permitted), unless all of the Registrable Securities included in such Registration have been sold. SECTION 7.5 Termination of Certain Rights and Obligations. Notwithstanding the foregoing provisions of this Agreement, the rights to registration pursuant to Sections 7.1 and 7.2, the obligations of Purchasers pursuant to Section 7.4(a), and the obligations of Issuer and the holders of 25% or more of its equity securities pursuant to Section 7.4(b) shall terminate as to any particular Registrable Securities that shall have been (a) sold in a registered public offering, (b) sold through a broker, dealer or underwriter in a public distribution or a public securities transaction in which the transferee receives a certificate without a securities legend or (c) sold or distributed pursuant to Rule 144. SECTION 7.6 Registration Procedures. Whenever the Offerors have requested that any Registrable Securities be registered pursuant to this Agreement, Issuer will use its best efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof, and pursuant thereto Issuer will expeditiously: (a) prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become and remain effective for a period of not less than three months; provided that before filing a registration statement or prospectus or any amendments or supplements thereto, Issuer will furnish to the counsel selected by the Offerors requesting such registration statement copies of all such documents proposed to be filed, which documents will be subject to the review of such counsel before such filing is made, and Issuer will comply with any reasonable request made by such counsel to make changes to the extent such documents do not comply in all material respects with the Securities Act; 11 13 (b) prepare and file with the SEC such amendments (including post-effective amendments) and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period of not less than three months and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement; (c) furnish to each seller of Registrable Securities such number of conformed copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits), the prospectus included in such registration statement (including each preliminary prospectus) and such other customary documents as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller; (d) use its best efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions as any seller reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller (provided that Issuer will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph, (ii) subject itself to taxation in any such jurisdiction, or (iii) consent to service of process except as required by the securities or blue sky laws in any such jurisdiction); (e) notify each seller of such Registrable Securities at any time when a prospectus relating thereto is required to be delivered under the Securities Act of Issuer's becoming aware that the prospectus included in such registration statement, as then in effect, contains an untrue statement of a material fact or omits any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made, and, at the written request of any such seller, Issuer will prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made; (f) use its best efforts to cause all such Registrable Securities covered by such registration statement to be listed or quoted on the principal securities exchange or national automated quotation system on which similar securities issued by Issuer are then listed or quoted or, if not then listed or quoted, use its best efforts to cause such Registrable Securities to be listed on a national securities exchange or quoted on a national automated quotation system; (g) provide a transfer agent and registrar for all such Registrable Securities covered by such registration statement not later than the effective date of such registration statement; 12 14 (h) in the event the offering is an underwritten offering, use its best efforts to obtain a "cold comfort" letter from the independent public accountants for Issuer in customary form and covering such matters of the type customarily covered by such letters; (i) enter into such customary agreements (including underwriting agreements in customary form) and take all such other actions as the holders of a majority of the Registrable Securities being sold or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities; and (j) upon execution and delivery of such customary confidentiality agreements as Issuer shall reasonably request, make available for inspection by any seller of Registrable Securities covered by such registration statement, any underwriter participating in any disposition pursuant to such registration statement, and any attorney, accountant or other agent retained by any such seller or underwriter, all pertinent financial and other records, pertinent corporate documents and properties of Issuer, and cause Issuer's officers, directors, employees and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement. Issuer will make generally available to the holders of Registrable Securities an earnings statement (which need not be audited) for the twelve months beginning after the effective date of a registration statement as soon as reasonably practicable after the end of such period, which earnings statement shall satisfy Section 11(a) of the Securities Act. Issuer will, at all times after Issuer has filed a registration statement with the SEC pursuant to the requirements of either the Securities Act or the Exchange Act, file all reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder, and take such further action as any holder or holders of Registrable Securities may reasonably request, all to the extent required to enable such holders to be eligible to sell Registrable Securities pursuant to (i) Rule 144 adopted by the SEC under the Securities Act, as such rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the SEC or (ii) a registration statement on Form S-2 or S-3 or any similar registration form hereafter adopted by the SEC. Upon request, Issuer will deliver to holders of Registrable Securities a written statement as to whether it has complied with such requirements. SECTION 7.7 Registration Expenses. (a) All expenses incident to Issuer's performance of or compliance with this Agreement, including, without limitation, all registration and filing fees, fees and expenses of compliance with securities or blue sky laws, word processing, duplicating and printing expenses, messenger and delivery expenses, and fees and disbursements of counsel for Issuer and all independent certified public accountants (including, but not limited to, fees and disbursements 13 15 relating to the "cold comfort" letter described in Section 7.6(h)) and other Persons retained by Issuer (all such expenses being herein called "Registration Expenses"), provided that discounts and commissions to underwriters shall not be considered Registration Expenses for purposes of this Agreement, will be borne by Issuer as provided in this Agreement, except that Issuer will, in any event, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit or quarterly review, the expense of any liability insurance and the expenses and fees for listing the securities to be registered on each securities exchange on which similar securities issued by Issuer are then listed or on a national automated quotation system. (b) In connection with each Demand Registration and Piggyback Registration, Issuer will reimburse the holders of Registrable Securities covered by such registration for the reasonable fees and disbursements of one counsel chosen by the holders of a majority of the Registrable Securities included in such registration. (c) To the extent expenses are not required to be paid by Issuer, each holder of securities included in any registration hereunder will pay those expenses allocable to the registration of such holder's securities so included, and any expenses not so allocable will be borne by all sellers of securities included in such registration in proportion to the aggregate selling price of the securities to be so registered. SECTION 7.8 Indemnification. (a) In the event of any registration of any Registrable Securities under the Securities Act pursuant to this Agreement, Issuer agrees to indemnify, to the fullest extent permitted by law, each holder of Registrable Securities covered by the applicable registration statement, its respective officers, directors shareholders or general or limited partners or members and each Person who controls such holder within the meaning of the Securities Act (each, a "Purchaser Indemnitee"), as follows: (i) against all losses, claims, damages, liabilities and expenses to which a Purchaser Indemnitee may become subject under the Securities Act, common law or otherwise, insofar as such losses, claims, damages, liabilities or expenses arise out of or are caused by any untrue or alleged untrue statement of material fact contained in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto relating to such securities or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made, except insofar as the same are caused by or contained in any information furnished in writing to Issuer by such holder expressly for use therein or by such holder's failure to deliver a copy of the registration statement or prospectus or any amendments or supplements thereto after Issuer has furnished such holder with a sufficient number of copies of the same; 14 16 (ii) against all losses, claims, damages, liabilities and expenses to the extent of the aggregate amount paid in settlement of any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or of any claim whatsoever based upon any such untrue statement of a material fact or omission of a material fact, or any such alleged untrue statement of a material fact or omission of a material fact, if such settlement is effected with the prior written consent of Issuer, except insofar as the same are caused by or contained in any information furnished in writing to Issuer by such holder expressly for use therein or by such holder's failure to deliver a copy of the registration statement or prospectus or any amendments or supplements thereto after Issuer has furnished such holder with a sufficient number of copies of the same; and (iii) against all expenses reasonably incurred by such holder in connection with investigating, preparing or defending against any litigation, or investigation or proceeding by any governmental agency or body, commenced or threatened, or any claim whatsoever based upon any such untrue statement of a material fact or omission of a material fact, or any such alleged untrue statement of a material fact or omission of a material fact, to the extent that any such expense is not paid under clause (i) or (ii) above, except insofar as the same are caused by or contained in any information furnished in writing to Issuer by such holder expressly for use therein or by such holder's failure to deliver a copy of the registration statement or prospectus or any amendments or supplements thereto after Issuer has furnished such holder with a sufficient number of copies of the same. In connection with an underwritten offering, Issuer will indemnify such underwriters, their officers and directors and each Person who controls such underwriters within the meaning of the Securities Act to the same extent as provided above with respect to the indemnification of the Purchaser Indemnitees. (b) In connection with any registration statement in which a holder of Registrable Securities is participating, each such holder will furnish to Issuer in writing such information and affidavits as Issuer reasonably requests for use in connection with any such registration statement or prospectus and, to the extent permitted by law, will indemnify Issuer, its directors and officers and each Person who controls Issuer within the meaning of the Securities Act (each, an "Issuer Indemnitee") against any losses, claims, damages, liabilities and expenses resulting from any untrue statement of material fact contained in the registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such holder expressly for use in the preparation of such registration statement, prospectus or preliminary prospectus; provided that the obligation to indemnify will be several, not joint and several, among such holders of Registrable Securities and the liability of each such holder of Registrable Securities will be in proportion to and limited to the net amount received by such holder from the sale of Registrable Securities pursuant to such registration statement, prospectus or preliminary prospectus. 15 17 (c) Any Person entitled to indemnification hereunder will (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party will not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent will not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified hereunder by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim in which case such indemnified party shall have the right to employ one counsel. Failure to give prompt written notice shall not release the indemnifying party from its obligations hereunder, except to the extent that the indemnifying party is actually prejudiced by such failure to give notice. (d) The indemnification provided for under this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and will survive the transfer of securities. Issuer also agrees to make such provisions as are reasonably requested by any indemnified party for contribution to such party in the event Issuer's indemnification is unavailable for any reason. SECTION 7.9 Contribution. In order to provide for just and equitable contribution in circumstances under which the indemnity contemplated by Section 7.8 is for any reason not available, the parties required to indemnify by the terms thereof shall contribute to the aggregate losses, claims, damages, liabilities and expenses of the nature contemplated by such indemnity agreement incurred by any Purchaser Indemnitee, any Company Indemnitee and one or more of the underwriters, except to the extent that contribution is not permitted under Section 11(f) of the Securities Act. In determining the amounts which the respective parties shall contribute, there shall be considered the parties' relative fault concerning the matter with respect to which the claim was asserted, knowledge and access to information concerning the matter with respect to which the claim was asserted, the opportunity to correct and prevent any statement or omission and any other equitable considerations appropriate under the circumstances. Issuer and each Person selling securities agree with each other that no seller of Registrable Securities shall be required to contribute any amount in excess of the amount such seller would have been required to pay to an indemnified party if the indemnity under Section 7.8 were available. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Issuer and each such seller agree with each other, and the underwriters of the Registrable Securities if requested by such underwriters, that it would not be equitable if the amount of such contribution were determined by pro rata or per capita allocation (even if the underwriters were treated as one entity for such purpose) or for the underwriters' portion of such contribution to exceed the percentage that the underwriting discount bears to the initial public offering price of the Registrable Securities. For 16 18 purposes of this Section 7.9, each Person, if any, who controls an underwriter within the meaning of Section 15 of the Securities Act shall have the same rights to contribution as such underwriter, and each director and each officer of Issuer who signed the registration statement, and each Person, if any, who controls Issuer or a seller of Registrable Securities within the meaning of Section 15 of the Securities Act, shall have the same rights to contribution as Issuer or a seller of Registrable Securities, as the case may be. SECTION 7.10 Participation in Underwritten Registrations. No Person may participate in any registration hereunder which is underwritten unless such Person (a) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved by the Person or Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. SECTION 7.11 Recapitalization of Nonvoting Stock. At any time any holder of non-voting Registrable Securities wishes to sell such shares pursuant to a public offering of shares of voting common stock, Issuer shall cause such shares to be recapitalized into or exchanged for shares of voting common stock, such recapitalization or exchange to become effective at such time as the registration statement pertaining to such shares has been filed with and declared effective by the SEC. SECTION 7.12 Adjustments Affecting Registrable Securities. Issuer will not take any action, or permit any change to occur, with respect to its securities which would materially adversely affect the ability of the Offerors to include their Registrable Securities in a registration undertaken pursuant to this Agreement or which would materially adversely affect the marketability of such Registrable Securities in any such registration (including, without limitation, effecting a stock split or a combination of shares), except as contemplated by the Reorganization Agreement. VIII ADDITIONAL RIGHTS AND COVENANTS SECTION 8.1 Cooperation and Full Access. Issuer shall give to Purchasers and their respective counsel, accountants, advisers and other representatives, full access at all times during reasonable business hours and on reasonable notice, to all the offices, properties, contracts, books, records, personnel and affairs of Issuer or in any way relating to or connecting with the business or its assets, including, such access as may be requested to allow Purchasers to satisfy themselves that the conditions to the Subsequent Closing set forth herein have been or will be satisfied and complied with. Issuer shall furnish, and shall direct its independent accountants and legal counsel to furnish, to Purchasers all such documents and information concerning the assets, properties, liabilities and affairs of Issuer as Purchasers may from time to time reasonably request. SECTION 8.2 Transactions, Agreements, etc. Except as expressly provided in the Reorganization Agreement, Issuer shall not enter into any transaction or contract or take (or omit to take) any action which would, or is reasonably likely to, (i) result in any of Issuer's representations or 17 19 warranties contained in this Agreement not being true and correct as of the Subsequent Closing Date or (ii) prevent Issuer from performing, satisfying and complying with all of its covenants and agreements contained in this Agreement. SECTION 8.3 Standstill. From and after the date hereof through the fifth (5th) Anniversary of the date of the award to Issuer or its subsidiaries of the last of the licenses for which Issuer was the high bidder in the FCC reauctions of C Block licenses completed in April 1999, Purchasers agree that they will not, without the prior consent of Issuer, seek to acquire, offer to acquire or agree to acquire any equity securities of Issuer that would result in Purchasers' aggregate ownership of equity securities of Issuer exceeding fifteen (15%) of Issuer's outstanding equity securities (except by way of stock dividends or other distributions made on a pro rata basis to all holders of the equity securities held by Purchasers) to the extent the acquisition of such equity securities would result in Issuer violating the Communications Act as in effect on the date of such acquisition. IX CLOSING CONDITIONS SECTION 9.1 Conditions to Purchasers' Obligations at the Initial Closing. The obligations of Purchasers under Section 2.1 of this Agreement are subject to the fulfillment on or before the Initial Closing of each of the following conditions, any of which may be waived by Purchasers in writing: (a) Representations and Warranties. The representations and warranties of Issuer contained in Section 4.1 hereof shall be true and correct on and as of the Initial Closing with the same effect as though such representations and warranties had been made on and as of the Initial Closing Date. (b) Performance. Issuer shall have executed and delivered certificates representing the Initial Shares, and shall have performed and complied with all agreements, covenants and conditions contained in this Agreement that are required to be performed or complied with by it on or before the Initial Closing. (c) Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Initial Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to Purchasers and their counsel, and Purchasers shall have received all such counterpart original, certified and other copies of such documents as Purchasers may reasonably request. (d) No Adverse Action. There shall not have been adopted or enacted any statute, rule or regulation prohibiting or imposing any material condition on the transactions contemplated by this Agreement, nor shall there have been instituted or pending any action or proceeding by or before any court or governmental authority or other regulatory or administrative agency or commission, domestic or foreign, by any government or governmental authority, nor shall there be 18 20 any determination by any government, governmental authority, regulatory or administrative agency or commission which, in either case, seeks to restrain, enjoin or impose any material condition on the transactions contemplated by this Agreement or the Reorganization Agreement, or would require Issuer or Purchasers, in the reasonable opinion of Purchasers, to take any action or do anything in connection with the foregoing that may reasonably be expected to have a material adverse effect to their respective businesses or materially impair the ownership or operation of all or a material portion of the business, assets or properties presently owned by Issuer or any of its Subsidiaries or to be acquired by Purchasers pursuant to the Reorganization Agreement. (e) Opinion of Company Counsel. Purchasers shall have received from Piper & Marbury L.L.P., counsel to Issuer, a legal opinion addressed to Purchasers, dated as of the Initial Closing Date, in the form and substance reasonably satisfactory to Purchasers. (f) Consents. All consents, approvals and authorizations of, and filings, registrations and qualifications with, any governmental authority or any other party on the part of Issuer required in connection with the consummation of the transactions contemplated hereby shall have been obtained or made and shall be in full force and effect. (g) Secretary's Certificate. Purchasers shall have received a Certificate of the Secretary of Issuer (i) certifying that no document has been filed relating to or affecting the Charter of Issuer after the date of the Certificate of the Secretary of State of the State of Delaware delivered pursuant to clause (iii) of this subsection, (ii) certifying the names and true signatures of each officer of Issuer who has been authorized to execute and deliver this Agreement and any other document delivered by Issuer pursuant to the Initial Closing, (iii) attaching thereto a copy of the Charter certified as of a recent date by the Secretary of State of Delaware, and a true and complete copy of Bylaws of Issuer, as in full force and effect at the Initial Closing Date and (iv) attaching copies of resolutions duly adopted by the Board of Directors (and stockholders, if applicable) authorizing the execution and delivery of this Agreement and each of the other documents delivered by Issuer pursuant to the Initial Closing, the issuance, delivery and sale of the Initial Shares and the performance of the transactions contemplated by this Agreement, and certifying that such resolutions were duly adopted, are in full force and effect and have not been rescinded or amended as of the Initial Closing Date. (h) Additional Documents. Purchasers shall have received such certificates, documents and information as they may reasonably request in order to establish satisfaction of the conditions set forth in this Section 9.1. SECTION 9.2 Conditions to Issuer's Obligations at the Initial Closing. The obligations of Issuer to Purchasers under Section 2.1 of this Agreement are subject to the fulfillment on or before the Initial Closing of each of the following conditions by Purchasers, any of which may be waived in writing by Issuer: (a) Representations and Warranties. The representations and warranties of each Purchaser contained in Article V hereof shall be true on and as of the Initial Closing with the same effect as though such representations and warranties had been made on and as of such Closing. 19 21 (b) Payment of Purchase Price. VoiceStream and HPCS shall have delivered the purchase price for their respective Initial Shares in accordance with Section 2.1. (c) Consents. All consents, approvals and authorizations of, and filings, registrations and qualifications with, any governmental authority or any other party on the part of Purchasers required in connection with the consummation of the transactions contemplated hereby shall have been obtained or made and shall be in full force and effect. SECTION 9.3 Conditions to Purchasers' Obligations at the Subsequent Closing. The obligation of Purchasers to acquire Subsequent Shares at the Subsequent Closing is subject to the fulfillment to the satisfaction of Purchasers on or before the Subsequent Closing Date of the following conditions, any of which may be waived by Purchasers in writing: (a) No Defaults. Issuer shall not have taken any action or omitted to take any action which action or omission shall have caused a default or breach of its covenants hereunder. (b) Representations and Warranties. The representations and warranties of Issuer contained in Section 4.1 hereof (other than Section 4.1(a) hereof) shall be true and correct on and as of the Subsequent Closing Date with the same effect as though such representations and warranties had been made on and as of the Subsequent Closing Date. (c) Performance. Issuer shall have executed and delivered certificates representing the Subsequent Shares, and shall have performed and complied with all agreements, covenants and conditions contained herein and in any other related document or which are required to be performed or complied with by Issuer on or before the Subsequent Closing Date. (d) Proceedings and Documents. All corporate and other proceedings in connection with the transactions contemplated at the Subsequent Closing and all documents incident thereto shall be reasonably satisfactory in form and substance to Purchasers and their counsel, and Purchasers shall have received all such counterpart original, certified and other copies of such documents as Purchasers may reasonably request. (e) No Adverse Action. There shall not have been adopted or enacted any statute, rule or regulation prohibiting or imposing any material condition on the transactions contemplated by this Agreement, nor shall there have been instituted or pending any action or proceeding by or before any court or governmental authority or other regulatory or administrative agency or commission, domestic or foreign, by any government or governmental authority, nor shall there be any determination by any government, governmental authority, regulatory or administrative agency or commission which, in either case, seeks to restrain, enjoin or impose any material condition on the transactions under this Agreement or would require Issuer or Purchasers, in the opinion of Purchasers, to take any action or do anything in connection with the foregoing that may reasonably be expected to have a material adverse effect to their respective businesses or materially impair the ownership or operation of all or a material portion of the business, assets or properties presently 20 22 owned by Issuer or any of its Subsidiaries or to be acquired by Purchasers pursuant to the Reorganization Agreement. (f) Opinion of Company Counsel. Purchasers shall have received from Piper & Marbury L.L.P., counsel to Issuer, a legal opinion addressed to Purchasers, dated as of the Subsequent Closing Date, in the form and substance reasonably satisfactory to Purchasers. (g) Consents. All consents, approvals and authorizations of, and filings, registrations and qualifications with, any governmental authority or any other party on the part of Issuer required in connection with the consummation of the transactions contemplated hereby shall have been obtained or made and shall be in full force and effect. (h) Secretary's Certificate. Purchasers shall have received a Certificate of the Secretary of Issuer (i) certifying that no document has been filed relating to or affecting the Charter of Issuer after the date of the Certificate of the Secretary of State of the State of Delaware delivered pursuant to clause (iii) of this subsection, (ii) certifying the names and true signatures of each officer of Issuer who has been authorized to execute and deliver this Agreement and any other document delivered by Issuer pursuant to the Subsequent Closing, (iii) attaching thereto a copy of the Charter certified as of a recent date by the Secretary of State of Delaware, and a true and complete copy of Bylaws of Issuer, as in full force and effect at the Subsequent Closing Date and (iv) attaching copies of resolutions duly adopted by the Board of Directors (and stockholders, if applicable) authorizing the execution and delivery of this Agreement and each of the other documents delivered by Issuer pursuant to the Subsequent Closing, the issuance, delivery and sale of the Subsequent Shares and the performance of the transactions contemplated by this Agreement, and certifying that such resolutions were duly adopted, are in full force and effect and have not been rescinded or amended as of the Subsequent Closing Date. (i) Additional Documents. Purchasers shall have received such certificates, documents and information as they may reasonably request in order to establish satisfaction of the conditions set forth in this Section 9.3. SECTION 9.4 Conditions to Issuer's Obligations at the Subsequent Closing. (a) Representations and Warranties. The representations and warranties of each Purchaser contained in Article V hereof shall be true and correct on and as of the Subsequent Closing. (b) Payment of Purchase Price. VoiceStream and HPCS shall have delivered the purchase price for their respective Subsequent Shares in accordance with Section 2.2. (c) Consents. All consents, approvals and authorizations of, and filings, registrations and qualifications with, any governmental authority or any other party on the part of Purchasers required in connection with the consummation of the transactions contemplated hereby shall have been obtained or made and shall be in full force and effect. 21 23 X TERMINATION SECTION 10.1 Termination. This Agreement may be terminated: (a) by mutual written agreement of the parties hereto; or (b) by either Issuer or Purchasers upon consummation of the transactions contemplated by the Reorganization Agreement. SECTION 10.2 Effect of Termination. If this Agreement is terminated pursuant to Section 10.1, this Agreement shall become void and of no effect without liability of any party (or any stockholder, director, officer, employee, agent, consultant or representative of such party) to the other parties hereto, except that (a) the agreements set forth in Article VI (Board of Directors), Article VII (Registration Rights), and Section 8.3 (Standstill) shall survive the termination of this Agreement and shall terminate in accordance with the terms, if any, set for in such Section or Article. No such termination shall relieve any Party of any liability or damages resulting from any breach by such party of this Agreement. SECTION 10.3 Fees and Expenses. All costs and expense incurred in connection with this Agreement shall be paid by the party incurring such cost or expense whether or not the transactions contemplated hereby occur. XI MISCELLANEOUS SECTION 11.1 Notices. All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission) and shall be given, if to VoiceStream, to: 3650 131 Avenue SE Bellevue, Washington 98006 Attention: Alan R. Bender, Esq. Fax: (425) 586-8080 with a copy to: Friedman Kaplan & Seiler LLP 875 Third Avenue New York, New York 10022 Attention: Barry A. Adelman, Esq. Fax: (212) 355-6401 22 24 it to HPCS, to: Hutchison Telecommunications PCS (USA) Limited c/o Offshore Incorporations Limited P.O. Box 957 Offshore Incorporations Centre Road Town, Tortola British Virgin Islands Telephone No.: 809-494-2233 Facsimile No.: 809-494-4885 and: Hutchison Telecommunications Limited 22nd Floor, Hutchison 10 Harcourt Road Hong Kong Attention: Ms. Edith Shih Facsimile No.: 852-2128-1778 with a copy to: Dewey Ballantine, LLP Suite 3907 Asia Pacific Finance Tower Citibank Plaza, 3 Garden Road Central Hong Kong Attention: John A. Otoshi, Esq. Facsimile No.: 852-2509-7088 if to Issuer, to: Omnipoint Corporation Three Bethesda Metro Center Suite 400 Bethesda, MD 20814 Attention: (301) 951-2500 Fax: (301) 951-2518 with copies to: Piper & Marbury L.L.P. 1200 Nineteenth Street, N.W. Washington, D.C. 20036 23 25 Attention: Edwin M. Martin, Jr., Esq. Fax: (202) 233-2085 or such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto. All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. on a Business Day, in the place of receipt. Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt. SECTION 11.2 Survival of Warranties. The warranties, representations, certifications and covenants of Issuer and Purchasers contained in or made pursuant to this Agreement shall survive each of (a) the execution and delivery of this Agreement, (b) the Initial Closing, and (c) the Subsequent Closing and shall in no way be affected by any investigation of the subject matter thereof made by or on behalf of Purchasers. SECTION 11.3 Indemnification. Issuer agrees to indemnify each of the Purchasers and their respective Affiliates, and the shareholders, members, managers, officers, employees, agents and or legal representatives of any of them (each, an "Indemnified Party") and to hold each Indemnified Party harmless from and against any and all direct or indirect liabilities, claims, losses, damages, costs and expenses of any kind (including, without limitation, the reasonable fees and disbursements of such Indemnified Party's counsel in connection with any investigative, administrative or adjudicative proceeding, whether or not either Purchaser shall be designated a party thereto), together with any and all costs and expenses associated with the investigation of the same and/or the enforcement of the provisions hereof (collectively, "Losses"), which may be incurred by such Indemnified Party relating to, based upon, resulting from or arising out of (a) the breach by Issuer of any representation, warranty, covenant or agreement of Issuer contained herein, (b) this Agreement or the transactions contemplated hereby, subject, in the case of the registration rights described in Article VII, to the provisions set forth in Section 7.8, or (c) any actual or proposed use of the proceeds of the sale of any of the Preferred Stock. Issuer shall reimburse each Indemnified Party promptly for all such Losses as they are incurred by such Indemnified Party. SECTION 11.4 Amendments; No Waivers. (a) Subject to applicable law, any provision of this Agreement may be amended or waived, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement or, in the case of a waiver, by each party against whom the waiver is to be effective. (b) No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. 24 26 SECTION 11.5 Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of each other party hereto. SECTION 11.6 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of law rules of such State. SECTION 11.7 Jurisdiction. Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in any federal court located in the State of Delaware or any Delaware state court, and each of the parties hereby consents to the exclusive jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. SECTION 11.8 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. SECTION 11.9 Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. SECTION 11.10 Entire Agreement; No Third Party Beneficiaries. This Agreement constitutes the entire agreement between the parties with respect to the subject matter of this Agreement and supersedes all prior agreements and understandings, both oral and written, between the parties with respect to the subject matter of this Agreement. Except as specifically set forth herein, this Agreement is not intended to confer upon any Person other than the parties hereto any rights or remedies. SECTION 11.11 Captions. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. SECTION 11.12 Severability. If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement 25 27 shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner so that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible. SECTION 11.13 Specific Performance. The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof in any federal court located in the State of Delaware or any Delaware state court, in addition to any other remedy to which they are entitled at law or in equity. 26 28 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. VOICESTREAM WIRELESS CORPORATION By: ------------------------------------- Name: Title: HUTCHISON TELECOMMUNICATIONS PCS (USA) LIMITED By: ------------------------------------- Name: Title: OMNIPOINT CORPORATION By: ------------------------------------- Name: Title: 29 TABLE OF CONTENTS
PAGE ---- I DEFINITIONS.......................................................................................1 SECTION 1.1..............................................................................1 II PURCHASE AND SALE OF PREFERRED STOCK..............................................................3 SECTION 2.1 Initial Closing............................................................3 SECTION 2.2 Subsequent Closing.........................................................3 SECTION 2.3 Use of Proceeds............................................................3 SECTION 2.4 Terms of Preferred Stock...................................................3 III CLOSINGS..........................................................................................4 SECTION 3.1 Time and Place of Initial Closing..........................................4 SECTION 3.2 Time and Place of Subsequent Closing.......................................4 IV REPRESENTATIONS AND WARRANTIES OF ISSUER..........................................................4 SECTION 4.1 Representations and Warranties of Issuer...................................4 V REPRESENTATIONS AND WARRANTIES OF PURCHASERS......................................................6 SECTION 5.1 Authorization..............................................................6 SECTION 5.2 Investment Representations.................................................7 SECTION 5.3 Additional HPCS Representation and Agreement...............................7 VI BOARD OF DIRECTORS................................................................................7 SECTION 6.1 Board of Directors.........................................................7 VII REGISTRATIONS RIGHTS..............................................................................8 SECTION 7.1 Demand Registrations.......................................................8 SECTION 7.2 Piggyback Registrations....................................................9 SECTION 7.3 No Inconsistent Agreement.................................................10 SECTION 7.4 Lockup Agreement..........................................................10 SECTION 7.5 Termination of Certain Rights and Obligations.............................11 SECTION 7.6 Registration Procedures...................................................11 SECTION 7.7 Registration Expenses.....................................................13 SECTION 7.8 Indemnification...........................................................14 SECTION 7.9 Contribution..............................................................16 SECTION 7.10 Participation in Underwritten Registrations...............................17 SECTION 7.11 Recapitalization of Nonvoting Stock.......................................17 SECTION 7.12 Adjustments Affecting Registrable Securities..............................17 VIII ADDITIONAL RIGHTS AND COVENANTS..................................................................17
i 30 SECTION 8.1 Cooperation and Full Access...............................................17 SECTION 8.2 Transactions, Agreements, etc.............................................18 SECTION 8.3 Standstill................................................................18 IX CLOSING CONDITIONS...............................................................................18 SECTION 9.1 Conditions to Purchasers' Obligations at the Initial Closing..............18 SECTION 9.2 Conditions to Issuer's Obligations at the Initial Closing.................20 SECTION 9.3 Conditions to Purchasers' Obligations at the Subsequent Closing...................................................................20 SECTION 9.4 Conditions to Issuer's Obligations at the Subsequent Closing..............22 X TERMINATION......................................................................................22 SECTION 10.1 Termination...............................................................22 SECTION 10.2 Effect of Termination.....................................................22 SECTION 10.3 Fees and Expenses.........................................................22 XI MISCELLANEOUS....................................................................................23 SECTION 11.1 Notices...................................................................23 SECTION 11.2 Survival of Warranties....................................................24 SECTION 11.3 Indemnification...........................................................24 SECTION 11.4 Amendments; No Waivers....................................................24 SECTION 11.5 Successors and Assigns....................................................25 SECTION 11.6 Governing Law.............................................................25 SECTION 11.7 Jurisdiction..............................................................25 SECTION 11.8 WAIVER OF JURY TRIAL......................................................25 SECTION 11.9 Counterparts; Effectiveness...............................................25 SECTION 11.10 Entire Agreement; No Third Party Beneficiaries............................25 SECTION 11.11 Captions..................................................................26 SECTION 11.12 Severability..............................................................26 SECTION 11.13 Specific Performance......................................................26
ii 31 LIST OF EXHIBITS Exhibit A-1 Form of Purchase Agreement between Omnipoint and the Cook Entity Exhibit A-2 Form of Purchase Agreement between Omnipoint and the Cook Entity Exhibit B Form of Omnipoint Rule 145 Affiliate Agreement Exhibit C Form of Officer's Certificate of VoiceStream Exhibit D Form of Officer's Certificate of Holding Company Exhibit E Form of Opinion Letter of Regulatory Counsel to VoiceStream Exhibit F-1 Form of Officer's Certificate of Omnipoint Exhibit F-2 Form of Officer's Certificate of Omnipoint Exhibit G Form of Opinion Letter of Regulatory Counsel to Omnipoint
EX-23.2 16 CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accoutants, we hereby consent to the use of our reports (and to all references to our Firm), as it relates to Voicestream Wireless Corporation and Subsidiaries, included in or made part of this registration statement. ARTHUR ANDERSEN LLP Seattle, Washington October 19, 1999 EX-23.3 17 CONSENT OF PRICEWATERHOUSECOOPERS 1 EXHIBIT 23.3 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the use in this Registration Statement on form S-4 of VoiceStream Wireless Holding Corporation of our report dated March 31, 1999 relating to the financial statements of Omnipoint Corporation, which appear in such Registration Statement. We also consent to the references to us under the headings "Experts" in such Registration Statement. PricewaterhouseCoopers LLP Boston, MA October, 25, 1999 EX-23.4 18 CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23.4 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report (and to all references to our Firm), as it relates to Aerial Communications, Inc. and Subsidiaries, included in or made a part of this registration statement. ARTHUR ANDERSEN LLP Chicago, Illinois October 22, 1999 -----END PRIVACY-ENHANCED MESSAGE-----