-----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, PyEnZuOuU5+Vx9DVSyq15Td7tP2/g20ivdUsPevMLNSbXiceyMjMpg14sZi3yUKJ QGV4+6PxdvlUQR0tMLIqLw== 0000891020-99-001840.txt : 19991110 0000891020-99-001840.hdr.sgml : 19991110 ACCESSION NUMBER: 0000891020-99-001840 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WESTERN WIRELESS CORP CENTRAL INDEX KEY: 0000930738 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 911638901 STATE OF INCORPORATION: WA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-28160 FILM NUMBER: 99744759 BUSINESS ADDRESS: STREET 1: 3650 131 ST AVENUE SE STREET 2: SUITE 400 CITY: BELLEVUE STATE: WA ZIP: 98006 BUSINESS PHONE: 4255868700 MAIL ADDRESS: STREET 1: 2001 NW SAMMAMISH RD CITY: ISSAQUAH STATE: WA ZIP: 98027 10-Q 1 FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _______ COMMISSION FILE NUMBER 000-28160 WESTERN WIRELESS CORPORATION -------------------------------------------------- (Exact name of registrant as specified in its charter)
WASHINGTON 91-1638901 - --------------------------------------------- --------------------------------- (State or other jurisdiction of incorporation (IRS Employer Identification No.) or organization) 3650 131ST AVENUE S.E., BELLEVUE, WASHINGTON 98006 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code)
(425) 586-8700 --------------------------------------------------- (Registrant's telephone number, including area code) ---------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
Title Shares Outstanding as of October 30, 1999 ----- ----------------------------------------- Class A Common Stock, no par value 69,772,595 Class B Common Stock, no par value 7,290,501
2 WESTERN WIRELESS CORPORATION FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999 TABLE OF CONTENTS
Page PART I -- FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets as of September 30, 1999 and December 31, 1998...............................................................3 Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended September 30, 1999, and September 30, 1998...............................4 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1999, and September 30, 1998.........................................5 Notes to Consolidated Financial Statements...................................................................6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ..............................................................11 PART II -- OTHER INFORMATION.........................................................................................18 ITEM 1. LEGAL PROCEEDINGS...........................................................................................18 ITEM 2. CHANGES IN SECURITIES.......................................................................................18 ITEM 3. DEFAULTS UPON SENIOR SECURITIES.............................................................................18 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........................................................18 ITEM 5. OTHER INFORMATION...........................................................................................18 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................................................................18
2 3 WESTERN WIRELESS CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
September 30, December 31, 1999 1998 (Unaudited) ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 8,864 $ 2,192 Accounts receivable, net of allowance for doubtful accounts of $9,795 and $7,629, respectively 72,663 45,327 Inventory 8,882 8,794 Prepaid expenses and other current assets 15,989 8,544 Receivable from VoiceStream Wireless 1,132 ----------- ----------- Total current assets 107,530 64,857 Property and equipment, net of accumulated depreciation of $260,289 and $208,776, respectively 318,941 272,317 Licensing costs and other intangible assets, net of accumulated amortization of $95,047 and $81,209, respectively 614,737 518,789 Investments in and advances to unconsolidated affiliates 50,122 37,663 Other assets 104 12,912 Net assets from discontinued operations 314,762 ----------- ----------- $ 1,091,434 $ 1,221,300 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY) Current liabilities: Accounts payable $ 16,405 $ 5,101 Accrued liabilities 58,351 70,718 Construction accounts payable 8,595 6,582 ----------- ----------- Total current liabilities 83,351 82,401 ----------- ----------- Long-term debt 1,195,000 1,045,000 ----------- ----------- Minority interest in consolidated subsidiaries 1,338 639 ----------- ----------- Commitments and contingencies (Note 7) Shareholders' equity (net capital deficiency): Preferred stock, no par value, 50,000,000 shares authorized; no shares issued and outstanding Common stock, no par value, 300,000,000 shares authorized; Class A, 57,242,850 and 38,710,893 shares issued and outstanding, respectively, and; Class B, 19,794,310 and 37,312,477 shares issued and outstanding, respectively 685,841 800,631 Deferred compensation (19,756) (1,211) Foreign currency translation (2,518) (2,328) Deficit (851,822) (703,832) ----------- ----------- Total shareholders' equity (net capital deficiency) (188,255) 93,260 ----------- ----------- $ 1,091,434 $ 1,221,300 =========== ===========
See accompanying notes to consolidated financial statements 3 4 WESTERN WIRELESS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Dollars in thousands, except per share data) (Unaudited)
Three months ended Nine months ended September 30, September 30, --------------------------------- --------------------------------- 1999 1998 1999 1998 ------------ ------------ ------------ ------------ Revenues: Subscriber revenues $ 102,441 $ 84,942 $ 284,643 $ 241,802 Roamer revenues 46,461 20,972 104,142 44,669 Equipment sales and other revenues 8,142 5,450 20,673 13,927 ------------ ------------ ------------ ------------ Total revenues 157,044 111,364 409,458 300,398 ------------ ------------ ------------ ------------ Operating expenses: Cost of service 17,765 14,415 48,717 40,013 Cost of equipment sales 10,030 9,247 25,854 24,224 General and administrative 30,341 22,313 85,893 64,361 Sales and marketing 27,188 21,964 71,094 58,899 Depreciation and amortization 27,020 19,199 76,065 54,241 Stock based compensation 3,850 70,346 ------------ ------------ ------------ ------------ Total operating expenses 116,194 87,138 377,969 241,738 ------------ ------------ ------------ ------------ Operating income from continuing operations 40,850 24,226 31,489 58,660 ------------ ------------ ------------ ------------ Other income (expense): Interest and financing expense, net (24,961) (24,191) (71,761) (68,488) Equity in net loss of unconsolidated (3,857) (579) (11,542) (5,184) affiliates Other, net 1,001 103 3,028 1,422 ------------ ------------ ------------ ------------ Total other income (expense) (27,817) (24,667) (80,275) (72,250) ------------ ------------ ------------ ------------ Minority interest in consolidated subsidiaries 509 1,448 ------------ ------------ Net income (loss) from continuing operations 13,542 (441) (47,338) (13,590) ------------ ------------ ------------ ------------ Net loss from discontinued operations (49,232) (82,152) (153,273) Cost of discontinuance (18,500) ------------ ------------ ------------ Total discontinued operations (49,232) (100,652) (153,273) ------------ ------------ ------------ Net income (loss) $ 13,542 $ (49,673) $ (147,990) $ (166,863) ============ ============ ============ ============ Basic earnings (loss) per share: Continuing operations $ 0.18 $ (0.01) $ (0.62) $ (0.18) Discontinued operations (0.64) (1.31) (2.02) ------------ ------------ ------------ ------------ Basic earnings (loss) per share $ 0.18 $ (0.65) $ (1.93) $ (2.20) ============ ============ ============ ============ Diluted earnings (loss) per share: Continuing operations $ 0.17 $ (0.01) $ (0.62) $ (0.18) Discontinued operations (0.64) (1.31) (2.02) ------------ ------------ ------------ ------------ Diluted earnings (loss) per share $ 0.17 $ (0.65) $ (1.93) $ (2.20) ============ ============ ============ ============ Weighted average shares outstanding: Basic 76,892,000 75,877,000 76,585,000 75,828,000 ============ ============ ============ ============ Diluted 79,642,000 75,877,000 76,585,000 75,828,000 ============ ============ ============ ============ Comprehensive income (loss): Net income (loss) $ 13,542 $ (147,990) Other comprehensive income: Foreign currency translation (9) (190) ------------ ------------ Total comprehensive income (loss) $ 13,533 $ (148,180) ============ ============
See accompanying notes to consolidated financial statements 4 5 WESTERN WIRELESS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in thousands) (Unaudited)
Nine months ended September 30, ------------------------------- 1999 1998 --------- --------- Operating activities: Net loss $(147,990) $(166,863) Adjustments to reconcile net loss to net cash provided by operating activities: Net loss from discontinued operations 82,152 153,273 Depreciation and amortization 76,065 54,241 Employee equity compensation 70,331 1,530 Equity in net loss of unconsolidated affiliates 11,542 5,184 Minority interest in net loss of consolidated subsidiary (1,448) Other, net 5,122 2,720 Changes in operating assets and liabilities, net of effects from consolidating acquired interests: Accounts receivable, net (25,575) 174 Inventory (51) 4,391 Prepaid expenses and other current assets (7,445) (2,123) Accounts payable 11,304 1,405 Accrued liabilities (5,138) 7,697 --------- --------- Net cash provided by operating activities 68,869 61,629 --------- --------- Investing activities: Purchase of property and equipment (110,205) (49,465) Additions to licensing costs and other intangible assets (2,508) (8,490) Acquisition of wireless properties, net of cash acquired (124,318) (35,346) Investments in and advances to unconsolidated affiliates (15,043) (6,849) Repayment of advances to VoiceStream Wireless 15,420 96,839 Return of investment from VoiceStream Wireless 20,000 Other (943) --------- --------- Net cash used in investing activities (216,654) (4,254) --------- --------- Financing activities: Proceeds from issuance of common stock, net 4,457 805 Additions to long-term debt 160,000 60,000 Repayment of debt (10,000) (110,000) Net costs of private placement (1,080) --------- --------- Net cash provided by (used in) financing activities 154,457 (50,275) --------- --------- Change in cash and cash equivalents 6,672 7,100 Cash and cash equivalents, beginning of period 2,192 15,122 --------- --------- Cash and cash equivalents, end of period $ 8,864 $ 22,222 ========= =========
See accompanying notes to consolidated financial statements 5 6 WESTERN WIRELESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. ORGANIZATION: Western Wireless Corporation (the "Company") provides wireless communications services in the western United States principally through the ownership and operation of cellular systems in rural areas. As of September 30, 1999, the Company provides cellular services in 94 markets. A wholly owned subsidiary of the Company, WWC Holding Co., Inc., ("Holding Co.") owns 96% of Western Wireless International ("WWI") which holds non-controlling interests in entities which own and operate wireless licenses in certain foreign countries including Haiti, Georgia, Ghana, Croatia, Iceland, and Latvia. Additionally, WWI holds approximately 67% of Meteor Mobile Communications ("MMC"). Early in the fourth quarter of 1999, WWI was notified that it's $15.3 million bid for a wireless license in Bolivia was accepted by government regulators of that country. The Company had an 80.1% controlling interest in VoiceStream Wireless Corporation ("VoiceStream"), an entity which provides wireless communication services through the ownership and operation of personal communication service ("PCS") licenses. On May 3, 1999, VoiceStream formally separated from Western Wireless' other operations (the "Spin-off"). As of that date, Western Wireless distributed all of its interest in VoiceStream to its shareholders. Although VoiceStream has been operated separately from Western Wireless' other operations and has been a separate legal entity since its inception, the Spin-off established VoiceStream as a stand-alone entity with objectives separate from those of Western Wireless. The accompanying consolidated financial statements have been restated to report the discontinued operations of VoiceStream separately from the continuing operations of the Company. The accompanying interim consolidated financial statements and the financial information included herein are unaudited, but reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented. All such adjustments are of a normal, recurring nature. Results of operations for interim periods presented herein are not necessarily indicative of results of operations for the entire year. For further information, refer to the Company's annual audited financial statements and footnotes thereto for the year ended December 31, 1998, contained in the Company's Form 10-K dated March 31, 1999. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Supplemental cash flow disclosures: Cash paid for interest was $69.1 million and $74.5 million for the nine months ended September 30, 1999 and 1998, respectively. Reclassifications: Certain amounts in prior year's financial statements have been reclassified to conform to the 1999 presentation. Recently issued accounting standards: In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." It requires the recognition of all derivatives as either assets or liabilities and the measurement of those instruments at fair value. The required adoption period is effective for the issuance of the Company's March 31, 2001, quarterly financial statements. The implementation of SFAS No. 133 is not expected to have a material impact on the Company's financial position or results of operations. 3. PROPERTY AND EQUIPMENT: Property and equipment consists of:
(Dollars in thousands) SEPTEMBER 30, DECEMBER 31, 1999 1998 --------- --------- Land, buildings, and improvements... $ 11,631 $ 12,748 Wireless communications systems .... 417,031 373,971 Furniture and equipment ............ 63,445 53,919 --------- --------- 492,107 440,638 Less accumulated depreciation ...... (260,289) (208,776) --------- --------- 231,818 231,862 Construction in progress ........... 87,123 40,455 --------- --------- $ 318,941 $ 272,317 ========= =========
Depreciation expense was $22.7 million and $16.2 million for the three months ended September 30, 1999 and 1998, respectively, and $64.8 million and $45.1 million for the nine months ended September 30, 1999 and 1998, respectively. 6 7 WESTERN WIRELESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 4. LICENSING COSTS AND OTHER INTANGIBLE ASSETS:
(Dollars in thousands) SEPTEMBER 30, DECEMBER 31, 1999 1998 --------- --------- License costs ................... $ 673,661 $ 564,157 Other intangible assets.......... 36,123 35,841 --------- --------- 709,784 599,998 Accumulated amortization......... (95,047) (81,209) --------- --------- $ 614,737 $ 518,789 ========= =========
Amortization expense was $4.4 million and $3.0 million for the three months ended September 30, 1999 and 1998, respectively, and $11.3 million and $9.2 million for the nine months ended September 30, 1999 and 1998, respectively. 5. LONG-TERM DEBT:
(Dollars in thousands) SEPTEMBER 30, DECEMBER 31, 1999 1998 --------- --------- Credit Facility: Revolver............................................. $ 595,000 $ 445,000 Term Loan............................................ 200,000 200,000 10-1/2% Senior Subordinated Notes Due 2006................. 200,000 200,000 10-1/2% Senior Subordinated Notes Due 2007................. 200,000 200,000 ---------- ---------- $1,195,000 $1,045,000 ========== ==========
The Company has a $950 million credit facility with a consortium of lenders (the "Credit Facility"), in the form of a $750 million revolving credit loan (the "Revolver") and a $200 million term loan (the "Term Loan"). Early in the fourth quarter of 1999, the Company received approval to establish a $250 million additional facility (the "Additional Facility"), as permitted under the Credit Facility. The Additional Facility is structured as a term loan to be completely drawn by May 5, 2000, and bears interest at Libor plus 2 1/2 percent. Other terms and conditions are similar to the existing Term Loan. The aggregate amounts of principal maturities of the Company's debt are as follows (dollars in thousands): Three months ending December 31, 1999..................$ 0 Year ending December 31, 2000................................................... 0 2001................................................... 61,000 2002................................................... 91,250 2003................................................... 150,750 Thereafter............................................. 892,000 ---------- $1,195,000 ==========
6. ACCRUED LIABILITIES:
(Dollars in thousands) SEPTEMBER 30, DECEMBER 31, 1999 1998 ------------ ----------- Accrued payroll and benefits........................... $11,268 $14,667 Accrued interest expense .............................. 12,538 13,091 Accrued property taxes................................. 5,753 4,951 Accrued taxes (other than income)...................... 10,355 3,870 Accrued interconnect charges........................... 9,436 6,358 Other............................................... 9,001 27,781 ------- ------- $58,351 $70,718 ======= =======
7 8 WESTERN WIRELESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 7. COMMITMENTS AND CONTINGENCIES: Future minimum payments required under operating leases and agreements that have initial or remaining noncancellable terms in excess of one year as of September 30, 1999, are summarized below (dollars in thousands): Three months ending December 31, 1999........................$ 3,043 Year ending December 31, 2000......................................................... 11,142 2001......................................................... 9,563 2002......................................................... 8,065 2003......................................................... 5,434 Thereafter................................................... 6,239 ------- $43,486 =======
Aggregate rental expense for all operating leases was approximately $3.7 million and $3.1 million for the three months ended September 30, 1999 and 1998, respectively, and $10.5 million and $8.7 million for the nine months ended September 30, 1999 and 1998, respectively. The Company has entered into purchase agreements to buy hardware, software, and consulting services in the aggregate of $18.5 million. As of September 30, 1999, no milestones of this commitment have been met and no payments have been made. The Company has various other purchase commitments for materials, supplies and other items incidental to the ordinary course of business which are neither significant individually nor in the aggregate. Such commitments are not at prices in excess of current market value. On October 3, 1999, the Irish High Court remanded to the Office of the Director of Telecommunication Regulation ("ODTR") its decision that ranked MMC number one in a bid for a third mobile phone license in Ireland. The court found that the ODTR may have shown bias in its decision to rank MMC number one in the bid process and therefore the decision of the regulator may have been unreasonable. MMC and the ODTR have appealed this ruling to the Irish Supreme Court. If the ruling is upheld on appeal, then it is most likely that: (1) the previous bids will be reviewed and re-ranked or (2) a new bidding process will be implemented. Management remains committed to the Irish market and believes that the attributes of its original bid that resulted in the initial number one ranking will continue to be recognized as the best plan. However, pending the outcome of the appeal, there is no assurance that the Company will retain its current ranking. During the period from which the Company's bid was ranked number one up through the date of the recent court decision, WWI continued to invest in MMC. However, since MMC may not be awarded the license, it is possible that the investment underlying MMC may not be realized. If MMC is not successful in its bid for this license, the estimated range of a potential loss to be recorded by WWI would range from $6 to $10 million. 8. SHAREHOLDERS' EQUITY: Stock issuances: During the nine months ended September 30, 1999, the Company issued 908,790 shares of its Class A Common Stock as a result of employee stock options exercises. In January 1999, the Company issued an additional 105,000 Class A Common Stock shares to certain key executives pursuant to an Executive Restricted Stock Plan. Other transactions: During the second quarter, as a result of the Spin-off, the Company recognized compensation expense on all options outstanding as of May 3, 1999. On the date of the Spin-off, the Company cancelled and reissued all outstanding stock options. All reissued stock options were granted in a manner that ensured employees of both the Company and VoiceStream maintained the value of their options, subject to normal fluctuations in the price of both companies stock, after the Spin-off. This reissuance did not accelerate benefits to option holders. The Company believes this allows employees to continue to better participate in the success of the Company for which they work. As outlined in the provisions of EITF 90-9 the company recorded deferred compensation of approximately $82.8 million and compensation expense for those options in which the service period had passed. 8 9 WESTERN WIRELESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 9. EARNINGS PER COMMON SHARE: Statement of Financial Accounting Standards No. 128, "Earnings Per Share," requires two presentations of earnings per share -- "basic" and "diluted." Basic earnings per share is computed by dividing income available to shareholders (the numerator) by the weighted-average number of shares (the denominator) for the period. The computation of diluted earnings per share is similar to basic earnings per share, except that the denominator is increased to include the number of additional shares that would have been outstanding if the potentially dilutive shares, such as options, had been issued. The treasury stock method is used to calculate dilutive shares which reduces the gross number of dilutive shares by the number of shares purchasable from the proceeds of the options assumed to be exercised. Loss per share is calculated using the weighted average number of shares of outstanding stock during the period. For those periods presented with a net loss, the options outstanding are anti-dilutive, thus basic and diluted loss per share are equal. The components of basic and diluted earnings per share were as follows: (Dollars in thousands, except per share data)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------------------- ------------------------------------- 1999 1998 1999 1998 -------------- -------------- -------------- -------------- Numerator: Net income (loss) from $ 13,542 $ (441) $ (47,338) $ (13,590) continuing operations Total discontinued operations (49,232) (100,652) (153,273) -------------- -------------- -------------- -------------- Net income (loss) $ 13,542 $ (49,673) $ (147,990) $ (166,863) ============== ============== ============== ============== Denominator: Weighted-average shares Basic 76,892,000 75,877,000 76,585,000 75,828,000 Effect of dilutive securities: Dilutive options 2,750,000 -------------- -------------- -------------- -------------- Weighted-average shares Diluted 79,642,000 75,877,000 76,585,000 75,828,000 ============== ============== ============== ============== Basic earnings (loss) per share: Continuing operations $ 0.18 $ (0.01) $ (0.62) $ (0.18) Discontinued operations (0.64) (1.31) (2.02) -------------- -------------- -------------- -------------- Basic earnings (loss) per share $ 0.18 $ (0.65) $ (1.93) $ (2.20) ============== ============== ============== ============== Diluted earnings (loss) per share: Continuing operations $ 0.17 $ (0.01) $ (0.62) $ (0.18) Discontinued operations (0.64) (1.31) (2.02) -------------- -------------- -------------- -------------- Diluted earnings (loss) per share $ 0.17 $ (0.65) $ (1.93) $ (2.20) ============== ============== ============== ==============
10. ACQUISITIONS: Early in the fourth quarter of 1999, the Company purchased the Texas 7 and Arkansas 11 Rural Service Areas ("RSA") for approximately $165 million in cash. This transaction will be accounted for using the purchase method. In the third quarter of 1999, the Company entered into an agreement to purchase the Utah 5 RSA for approximately $30 million in cash. This transaction is awaiting Federal Communications Commission ("FCC") approval and is expected to close during the fourth quarter of 1999. In June 1999, the Company completed the purchase of the cellular licenses and operations of the Brownsville, TX and McAllen, TX Metropolitan Statistical Areas ("MSA") for an aggregate amount of approximately $96.0 million in cash. This transaction was accounted for using the purchase method. During February 1999, the Company completed the purchase of the cellular license and operations of the Wyoming 4 and Oklahoma 1 RSA for $19 million in cash. Prior to the purchase of the Wyoming 4 RSA, the Company operated this market under an Interim Operating Authority ("IOA") from the FCC. This transaction was accounted for using the purchase method. 9 10 WESTERN WIRELESS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 11. RELATED PARTY TRANSACTIONS: The financial statements include an allocation of certain centralized costs to VoiceStream and its affiliates, prior to and subsequent to the Spin-off. Such centralized items include the costs of shared senior management, customer care operations and certain back office functions. These costs have been allocated to VoiceStream and its affiliates in a manner that reflects the relative time devoted to each. For the three months ended September 30, 1999 and 1998, the Company allocated to VoiceStream and its affiliates costs of $1.4 million and $4.4 million, respectively, and $8.6 million and $11 million for the nine months ended September 30, 1999 and 1998, respectively. After the Spin-off, the net operating loss ("NOL") carryforwards resulting from VoiceStream's cumulative tax losses were transferred to VoiceStream. Pursuant to a tax sharing agreement entered into at the time of the Hutchison investment, VoiceStream paid the Company $20 million, the amount representative of the tax benefit of NOLs generated while VoiceStream was a wholly-owned subsidiary of the Company. This was accounted for as a return of capital to the Company. The Company, its Holding Co., WWI, and Bradley Horwitz, the Vice President-International, have entered into an amendment of a subscription and put and call agreement with respect to shares of common stock of WWI whereby Mr. Horwitz's interest in WWI is decreased from 10% to 4.04% in consideration of the Company's investment in WWI of an additional $29 million in 1996 and 1997. Holding Co. continues to own the balance of the outstanding capital stock of WWI. Any funds provided by the Company to WWI on or subsequent to January 1, 1998, shall be considered revolving debt loaned by the Company to WWI at an interest rate of 10.5% per annum. 10 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE LITIGATION REFORM ACT OF 1995. Statements contained herein that are not based on historical fact, including without limitation statements containing the words "believes," "may," "will," "estimate," "continue," "anticipates," "intends," "expects" and words of similar import, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, events or developments to be materially different from any future results, events or developments expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions, both nationally and in the regions in which Western Wireless Corporation (the "Company") operates; technology changes; competition; changes in business strategy or development plans; the high leverage of the Company; the ability to attract and retain qualified personnel; existing governmental regulations and changes in, or the failure to comply with, governmental regulations; liability and other claims asserted against the Company; the Company's and its third-party suppliers' ability to take corrective action in a timely manner with respect to the year 2000 issue; and other factors referenced in the Company's filings with the Securities and Exchange Commission. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future results, events or developments. The following is a discussion and analysis of the consolidated financial condition and results of operations of the Company and should be read in conjunction with the Company's consolidated financial statements and notes thereto and other financial information included herein and in the Company's annual report on Form 10-K for the year ended December 31, 1998. OVERVIEW Western Wireless provides cellular communications services through the ownership and operation of cellular communications systems in 94 Rural Service Areas and Metropolitan Statistical Areas in the United States. A wholly owned subsidiary of the Company, WWC Holding Co., Inc., ("Holding Co.") owns 96% of Western Wireless International ("WWI") which holds non-controlling interests in entities which own and operate wireless licenses in certain foreign countries including Haiti, Georgia, Ghana, Croatia, Iceland, and Latvia. Additionally, WWI holds approximately 67% of Meteor Mobile Communications ("MMC"). Early in the fourth quarter of 1999, WWI was notified that it's $15.3 million bid for a wireless license in Bolivia was accepted by government regulators of that country. On October 3, 1999, the Irish High Court remanded to the Office of the Director of Telecommunication Regulation ("ODTR") its decision that ranked MMC number one in a bid for a third mobile phone license in Ireland. The court found that the ODTR may have shown bias in its decision to rank MMC number one in the bid process and therefore the decision of the regulator may have been unreasonable. MMC and the ODTR have appealed this ruling to the Irish Supreme Court. If the ruling is upheld on appeal, then it is most likely that: (1) the previous bids will be reviewed and re-ranked or (2) a new bidding process will be implemented. Management remains committed to the Irish market and believes that the attributes of its original bid that resulted in the initial number one ranking will continue to be recognized as the best plan. However, pending the outcome of the appeal, there is no assurance that the Company will retain its current ranking. During the period from which the Company's bid was ranked number one up through the date of the recent court decision, WWI continued to invest in MMC. However, since MMC may not be awarded the license, it is possible that the investment underlying MMC may not be realized. If MMC is not successful in its bid for this license, the estimated range of a potential loss to be recorded by WWI would range from $6 to $10 million. The Company had an 80.1% controlling interest in VoiceStream Wireless Corporation ("VoiceStream"), an entity which provides wireless communication services through the ownership and operation of personal communication services ("PCS") licenses. On May 3, 1999, VoiceStream was formally separated from Western Wireless (the "Spin-off"). As of that date, Western Wireless distributed all of its interest in VoiceStream to its shareholders. Although VoiceStream has been operated separately from Western Wireless' other operations and has been a separate legal entity since its inception, the Spin-off established VoiceStream as a stand-alone entity with objectives separate from those of Western Wireless. For additional information regarding the Spin-off, see the Company's information statement filed with the SEC on Form 14-C dated April 12, 1999. During the second quarter, as a result of the Spin-off, the Company recognized compensation expense on all options outstanding as of May 3, 1999. On the date of the Spin-off, the Company cancelled and reissued all outstanding options. All reissued stock options were granted in a manner that ensured employees of both the Company and VoiceStream maintained the value of their options, subject to normal fluctuations in the price of both companies stock, after the Spin-off. This reissuance did not accelerate any benefits to option holders. The Company believes this allowed employees to continue to better participate in the success of the Company for which they work. As outlined in the provisions of EITF 90-9 the company recorded deferred compensation of approximately $82.8 million and compensation expense for those options in which the service period has passed. 11 12 RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 The Company had 774,000 subscribers at September 30, 1999, representing an increase of 36,400 or 4.9% from June 30, 1999. The Company had 620,300 subscribers at September 30, 1998, representing an increase of 37,000 or 6.3% from June 30, 1998. The following table sets forth certain financial data as it relates to the Company's operations:
(Dollars in thousands) THREE MONTHS ENDED SEPTEMBER 30, ------------------------------------------------- 1999 % CHANGE 1998 --------- -------- --------- Revenues: Subscriber revenues $ 102,441 20.6% $ 84,942 Roamer revenues 46,461 121.5% 20,972 Equipment sales and other revenues 8,142 49.4% 5,450 ---------- --------- Total revenues $ 157,044 $ 111,364 Operating expenses: Cost of service $ 17,765 23.2% $ 14,415 Cost of equipment sales 10,030 8.5% 9,247 General and administrative 30,341 36.0% 22,313 Sales and marketing 27,188 23.8% 21,964 Depreciation and amortization 27,020 40.7% 19,199 Stock based compensation 3,850 N.M. ---------- --------- Total operating expenses $ 116,194 $ 87,138 Other income (expense) $ (27,817) (12.8)% $ (24,667) Net income (loss) from continuing operations $ 13,542 N.M. $ (441) EBITDA $ 71,720 65.2% $ 43,425 Cash flows provided by (used in): Operating activities $ 49,429 97.6% $ 25,010 ========= ========= Investing activities $ (62,273) (50.6)% $ (41,360) ========= ========= Financing activities $ 16,368 (54.1)% $ 30,233 ========= =========
REVENUES The increase in subscriber revenues is primarily due to the 26% growth in the number of the Company's average subscribers for the quarter ended September 30, 1999, compared to the quarter ended September 30, 1998, offset by a decrease in the average monthly subscriber revenue per average subscriber. Average monthly subscriber revenue per average subscriber was $45.18 for the three months ended September 30, 1999, a 4.0% decline from $47.05 for the three months ended September 30, 1998, but is up slightly from the second quarter ended June 30, 1999. The Company continues to focus on attracting new customers with rate plans that provide more value to the customer at a higher average access charge. Management feels this strategy will provide relative stability in the average monthly subscriber revenue per average subscriber in future periods. The increase in roamer revenues is attributed to an increase in roaming traffic on the Company's network and partially offset by a decrease in the rates charged between carriers. A significant portion of the increase is driven by the growth in roamer minutes with digital carriers as a result of the Company's strategy, implemented in 1998, to become the roaming partner of choice for other carriers. While the Company expects total roamer minutes to continue increasing, the decline in the rates charged between carriers may limit the growth of roamer revenues. Equipment sales for the three months ended September 30, 1999, which consists primarily of handset sales, increased primarily due to the growth in subscriber additions. In addition, average phone and accessory revenue per item sold increased compared to the same quarter one year ago. The mix of high-end handsets with more features comprised a larger portion of overall handset revenue during the third quarter of 1999 compared to the third quarter of 1998. 12 13 OPERATING EXPENSES The increase in cost of service is primarily attributable to the increased costs of maintaining the Company's expanding wireless network to support the larger subscriber base. Cost of service as a percentage of service revenues decreased to 11.9% for the three months ended September 30, 1999 from 13.6% for the three months ended September 30, 1998. The decrease as a percentage of service revenues is due mainly to service revenues growing at a faster rate than the fixed cost of service components. The Company expects cost of service dollars to continue to increase in future periods as a result of the growing subscriber base and the increase in other carriers' customers roaming on its network. However, the cost of service as a percentage of service revenues is expected to continue declining as greater economies of scale are realized. Cost of equipment sales to the Company increased primarily due to the increase in handsets sold, offset by a decrease in the average cost of handsets, for the three months ended September 30, 1999 compared to the same period in 1998. The Company expects that the cost for its handsets, will decrease at a slower rate or begin to level off in future periods. The Company's general and administrative costs are principally variable costs based on the average number of subscribers. The increase in total dollars is primarily attributable to the increase in costs associated with supporting a larger subscriber base. The general and administrative monthly cost per average subscriber increased to $13.38 for the three months ended September 30, 1999, from $12.36 for the same period in 1998. The increase is due partly to additional headquarter costs resulting from lost cost efficiencies as a result of the Spin-off. In addition, the Company incurred pre-operating costs related to Ireland with no corresponding additions in subscribers as the Ireland market is not yet operational. Management anticipates improved cost efficiencies to be realized on a per subscriber basis in future periods due to cost reductions expected with the implementation of a new billing system during the next fiscal year. The increase in sales and marketing costs is primarily due to the increase in subscribers added during the three months ended September 30, 1999, compared to the same period in 1998. Sales and marketing cost per net subscriber added, including the loss on equipment sales, remained relatively flat at $835 for the three months ended September 30, 1999, compared to $841 for the three months ended September 30, 1998. The increase in depreciation and amortization expenses is mainly attributable to the acquisition of additional wireless communication system assets. In addition the Company continues to expand and upgrade its wireless systems. Management anticipates depreciation and amortization to increase in future periods as a result of this expansion. The stock based compensation results mainly from the amortization of deferred compensation due to the cancellation and reissuance of employee stock options as a result of the Spin-off, as previously discussed. The Company anticipates future expenses related to this transaction to be approximately $17 million spread over the remainder of 1999, and continue through the year 2001. OTHER INCOME (EXPENSE) Interest and financing expense increased to $25.0 million for the three months ended September 30, 1999, compared to $24.2 million for the same period in 1998, due to a modest increase in the average long-term debt balance offset by a lower applicable borrowing rate for the current quarter compared to the comparative quarter last year. The weighted average interest rate was 8.41% for the three months ended September 30, 1999, as compared to 9.20% for the same period in 1998. NET INCOME (LOSS) FROM CONTINUING OPERATIONS The change from a net loss during the three months ended September 30, 1998 to net income during the three month period ended September 30, 1999 is mainly attributable to increased service revenues combined with greater cost efficiencies due to the larger subscriber base. The Company had no tax liability for the current quarter due to net operating loss carryforwards ("NOLs") from prior years. EBITDA EBITDA represents operating income (loss) before depreciation, amortization and stock based compensation. Management believes EBITDA provides meaningful additional information on the Company's operating results and on its ability to service its long-term debt and other fixed obligations, and to fund the Company's continued growth. EBITDA is considered by many financial analysts to be a meaningful indicator of an entity's ability to meet its future financial obligations, and growth in EBITDA is considered to be an indicator of future profitability, especially in a capital-intensive industry such as wireless telecommunications. EBITDA should not be construed as an alternative to operating income (loss) as determined in accordance with United States GAAP, as an alternate to cash flows from operating activities (as determined in accordance with GAAP), or as a measure of liquidity. Because EBITDA is not calculated in the same manner by all companies, the Company's presentation may not be comparable to other similarly titled measures of other companies. 13 14 EBITDA for the Company increased to $71.7 million for the three months ended September 30, 1999, from $43.4 million for the same period in 1998. The increase in EBITDA is primarily a result of increased revenues due to the increased subscriber base and the related cost efficiencies gained. RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 The Company had 774,000 subscribers at September 30, 1999, representing an increase of 113,600 or 17.2% from December 31, 1998. The Company had 620,300 subscribers at September 30, 1998, representing an increase of 100,300 or 19.2% from December 31, 1997. The following table sets forth certain financial data as it relates to the Company's operations:
(Dollars in thousands) NINE MONTHS ENDED SEPTEMBER 30, -------------------------------------- 1999 % CHANGE 1998 --------- -------- -------- Revenues: Subscriber revenues $ 284,643 17.7% $241,802 Roamer revenues 104,142 133.2% 44,669 Equipment sales and other revenues 20,673 48.4% 13,927 --------- -------- Total revenues $ 409,458 $300,398 Operating expenses: Cost of service $ 48,717 21.8% 40,013 Cost of equipment sales 25,854 6.7% 24,224 General and administrative 85,893 33.5% 64,361 Sales and marketing 71,094 20.7% 58,899 Depreciation and amortization 76,065 40.2% 54,241 Stock based compensation 70,346 N.M. --------- -------- Total operating expenses $ 377,969 $241,738 Other income (expense) $(80,275) (11.1)% $(72,250) Net loss from continuing operations $(47,338) (248.3)% $(13,590) EBITDA $ 177,900 57.6% $112,901 Cash flows provided by (used in): Operating activities $ 68,869 11.7% $ 61,629 ========= ======== Investing activities $(216,654) N.M. $ (4,254) ========= ======== Financing activities $ 154,457 N.M. $(50,275) ========= ========
REVENUES The increase in subscriber revenues is primarily due to a 26% growth in the number of average subscribers for the nine months ended September 30, 1999, compared to the nine months ended September 30, 1998, offset by a decrease in the average monthly subscriber revenue per average subscriber. Average monthly subscriber revenue per average subscriber was $44.10 for the nine months ended September 30, 1999, a 6.4% decline from $47.11 for the nine months ended September 30, 1998. The Company continues to focus on attracting new customers with rate plans that provide more value to the customer at a higher average access charge. Management feels this strategy will provide relative stability in the average monthly subscriber revenue per average subscriber in future periods. The increase in roamer revenues is attributed to an increase in roaming traffic and partially offset by a decrease in the rates charged between carriers. A significant portion of the increase is driven by the growth in roamer minutes as a result of the Company's strategy, implemented in 1998, to become the roaming partner of choice for other carriers. While the Company expects total roamer minutes to continue increasing, the decline in the rates charged between carriers may limit the growth of roamer revenues. Equipment sales for the nine months ended September 30, 1999, which consists primarily of handset sales, increased primarily due to the growth in subscriber additions. In addition, average phone and accessory revenue per item sold increased compared to the same period one year ago. The mix of high-end handsets with more features comprised a larger portion of overall handset sales during the nine months ended September 30, 1999 compared to the nine months ended September 30, 1998. 14 15 OPERATING EXPENSES The increase in cost of service is primarily attributable to the increased costs of maintaining the Company's expanding wireless network to support the larger subscriber base. Cost of service as a percentage of service revenues declined to 12.5% for the nine months ended September 30, 1999 from 14.0% for the nine months ended September 30, 1998. The decrease as a percentage of service revenues is due mainly to service revenues growing at a faster rate than the fixed cost of service components. The Company expects cost of service dollars to continue to increase in future periods as a result of the growing subscriber base and the increase in other carriers' customers roaming on its network. However, the cost of service as a percentage of service revenues is expected to continue to decline as greater economies of scale are realized. Cost of equipment sales to the Company increased primarily due to the increase in handsets sold, offset by a decrease in the average cost of handsets, for the nine months ended September 30, 1999 compared to the same period in 1998. The Company expects that the cost for its handsets will decrease at a slower rate or level off in future periods. The Company's general and administrative costs are principally variable costs based on the average number of subscribers. The increase in total dollars is primarily attributable to the increase in costs associated with supporting a larger subscriber base. The general and administrative monthly cost per average subscriber increased to $13.31 for the nine months ended September 30, 1999, from $12.54 for the same period in 1998. The increase is due partly to additional headquarter costs resulting from lost cost efficiencies as a result of the Spin-off. In addition, the Company incurred pre-operating costs related to Ireland with no corresponding additions in subscribers as the Ireland market is not yet operational. Management anticipates improved cost efficiencies to be realized on a per subscriber basis in future periods due to cost reductions expected with the implementation of a new billing system in the next fiscal year. The increase in sales and marketing costs is primarily due to the increase in subscribers added during the nine months ended September 30, 1999, compared to the same period in 1998. Sales and marketing cost per net subscriber added, including the loss on equipment sales, decreased to $740 for the nine months ended September 30, 1999, from $767 for the nine months ended September 30, 1998. This decrease is attributable to the fixed costs being spread over a larger number of net subscriber additions, which increased 13.9% during the nine months ended September 30, 1999 compared to the nine months ended September 30, 1998. The increase in depreciation and amortization expenses is mainly attributable to the acquisition of additional wireless communication system assets. In addition the Company continues to expand and upgrade its wireless systems. Management anticipates depreciation and amortization to increase in future periods as a result of this expansion. The stock based compensation results mainly from the cancellation and reissuance of employee stock options as a result of the Spin-off, as previously discussed. The Company anticipates future expenses related to this transaction to be approximately $17 million spread over the remainder of 1999, and continue through the year 2001. OTHER INCOME (EXPENSE) Interest and financing expense, increased to $71.8 million for the nine months ended September 30, 1999, compared to $68.5 million for the same period in 1998, due to the increase in average long-term debt. Long-term debt was incurred primarily to fund the Company's acquisition of wireless properties and capital expenditures associated with the build out and enhancements of the cellular systems. The weighted average interest rate, was 8.14% for the nine months ended September 30, 1999, as compared to 8.77% for the same period in 1998. NET INCOME (LOSS) FROM CONTINUING OPERATIONS The net loss from continuing operations of $47.3 million for the nine months ended September 30, 1999 is mainly attributable to the $70.4 million in stock based compensation expense. This compares to a net loss from continuing operations of $13.6 million for the same period in 1998. EBITDA EBITDA represents operating income (loss) before depreciation, amortization and stock based compensation. Management believes EBITDA provides meaningful additional information on the Company's operating results and on its ability to service its long-term debt and other fixed obligations, and to fund the Company's continued growth. EBITDA is considered by many financial analysts to be a meaningful indicator of an entity's ability to meet its future financial obligations, and growth in EBITDA is considered to be an indicator of future profitability, especially in a capital-intensive industry such as wireless telecommunications. EBITDA should not be construed as an alternative to operating income (loss) as determined in accordance with United States GAAP, as an alternate to cash flows from operating activities (as determined in accordance with GAAP), or as a measure of liquidity. Because EBITDA is not calculated in the same manner by all companies, the Company's presentation may not be comparable to other similarly titled measures of other companies. EBITDA for the Company increased to $177.9 million for the nine months ended September 30, 1999, from $112.9 million for the same period in 1998. The increase in EBITDA is directly related to continued revenue increases combined with 15 16 overall cost efficiencies gained from a growing subscriber base. LIQUIDITY AND CAPITAL RESOURCES The Company has a credit facility (the "Credit Facility") with a consortium of lenders providing for $750 million of revolving credit and a $200 million term loan. As of September 30, 1999, $795 million was outstanding under the Credit Facility. The amount available for borrowing under the Credit Facility, which is limited by certain financial covenants and other restrictions, was $155 million. Indebtedness under the Credit Facility matures on March 31, 2006. The Credit Facility bears interest at variable rates. Substantially all the assets of the Company are pledged as security for such indebtedness. The terms of the Credit Facility restrict, among other things, the sale of assets, distribution of dividends or other distributions and loans. Early in the fourth quarter of 1999, the Company received approval to establish a $250 million additional facility (the "Additional Facility"), as permitted under the Credit Facility. The Additional Facility is structured as a term loan to be completely drawn by May 5, 2000, and bears interest at Libor plus 2 1/2 percent. Other terms and conditions are similar to the existing Term Loan. Western Wireless has issued $200 million principal amount of 10 1/2% Senior Subordinated Notes Due 2006 (the "2006 Notes") at par and $200 million principal amount of 10 1/2% Senior Subordinated Notes Due 2007 (the "2007" Notes") at par. Indebtedness under the 2006 Notes and the 2007 Notes matures June 1, 2006 and February 1, 2007, respectively. The Credit Facility prohibits the repayment of all or any portion of the principal amounts of the 2006 Notes or 2007 Notes prior to the repayment of all indebtedness under the Credit Facility. The 2006 and 2007 Notes contain certain restrictive covenants which impose limitations on the operations and activities of the Company and certain of its subsidiaries, including the issuance of other indebtedness, the creation of liens, the sale of assets, issuance of preferred stock of subsidiaries and certain investments and acquisitions. The Company obtained the appropriate waivers from the holders of these notes prior to consummation of the Spin-off at a cost of $16 million. In the fourth quarter of 1999, the Company expects to spend approximately $35 million for the continued expansion of its wireless infrastructure and approximately $195 million for the purchase of cellular licenses and operations of the Texas 7, Arkansas 11 and Utah 5 RSAs. The Company will utilize operating cash flow, the Credit Facility and the Additional Facility for purposes of funding its wireless system expansion. The Company also expects to increase capital spending during the coming year which will allow for anticipated minutes of use growth from its own subscriber base as well as from other carriers' customers roaming on its wireless network. Net cash provided by operating activities was $68.9 million for the nine months ended September 30, 1999. Adjustments to the $147.9 million net loss to reconcile to net cash provided by operating activities included $82.2 million loss from discontinued operations, $76.1 of depreciation and amortization, and $70.3 for stock based compensation. Net cash provided by operating activities was $61.6 million for the nine months ended September 30, 1998. Net cash used in investing activities was $216.7 million for the nine months ended September 30, 1999. Investing activities for such period consisted primarily of $124.3 million in acquisitions of wireless properties, primarily attributable to the purchase of the McAllen and Brownsville MSAs and Wyoming 4 and Oklahoma 1 RSAs. In addition, the Company purchased property and equipment in the amount of $110.2 million. Net cash used in investing activities was $4.3 million for the nine months ended September 30, 1998. Net cash provided by financing activities was $154.5 million for the nine months ended September 30, 1999. Financing activities for such period consisted primarily of additions to long-term debt mainly to finance the acquisition of wireless properties. Net cash used in financing activities was $50.3 million for the nine months ended September 30, 1998. In the ordinary course of business, the Company continues to evaluate acquisition opportunities, joint ventures and other potential business transactions. Such acquisitions, joint ventures and business transactions may be material. Such transactions may also require the Company to seek additional sources of funding through the issuance of additional debt and/or additional equity at the parent or subsidiary level. There can be no assurance that such funds will be available to the Company on acceptable or favorable terms. 16 17 YEAR 2000 ISSUES The Company, like most businesses, will be required to modify significant portions of its information technology ("IT") and non-IT systems so that they will function properly in the year 2000. Any of the Company's, or its vendors', IT and non-IT systems that have date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. The Company's IT and non-IT systems that are being addressed include: its wireless networks; system which interconnect its wireless networks with landline systems; systems which allow verification and billing of roaming traffic; internal communication and data processing systems; billing software an related elements; and systems of third party suppliers, including those of financial institutions, payroll/benefits processors and credit bureaus. Much of the Company's technology, including technology associated with its critical systems, is purchased from third parties. The Company is dependent on those third parties to assess the impact of the year 2000 issue on the technology and services they supply and to take any necessary corrective action. The Company cannot assure that these third parties will have taken the necessary corrective action prior to the year 2000. The Company has adopted a remediation plan to become year 2000 compliant. This plan consists of four key phases: (1) inventory of all systems, (2) research, including obtaining information from third parties to determine whether they have accurately assessed the problem and taken corrective action, (3) implementation of and testing remediation efforts, and (4) development of contingency plans. The Company has completed the first two phases of its plan and has substantially completed the testing, remediation and contingency plans to address the year 2000 issue. Critical systems are those whose failure poses a risk of disruption to the Company's ability to provide wireless services, to collect revenues, to meet safety standards, or to comply with legal requirements. The Company has incurred internal staff costs as well as consulting and other expenses related to infrastructure and facilities enhancements necessary to complete the remediation of the systems for the year 2000. The incremental costs for the year 2000 remediation efforts have been, and will be, insignificant. Based on its current assessments and its remediation plan, which are based in part upon certain representations of third parties, the Company expects that it will not experience a disruption of its operations as a result of the change to the year 2000. However, there can be no assurance that either the Company or the third parties who have supplied technology used in the Company's critical systems will be successful in taking corrective action in a timely manner. As part of its plan, the Company has developed, and is continuing to develop, contingency plans for its critical systems which include, among other things, identifying a core system of cell sites that are being designed to operate for extended periods for mobile to mobile service independent of external power supplies and landline telephone services. The Company believes that these contingency plans will mitigate service disruption; however, the Company cannot guarantee this. The Company will continuously test and update these plans and systems as long as necessary. 17 18 WESTERN WIRELESS CORPORATION PART II -- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS There are no material, pending legal proceedings to which the Company or any of its subsidiaries or affiliates is a party or of which any of their property is subject which, if adversely decided, would have a material adverse effect on the Company. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Description ------- ----------- 10.89 Asset Purchase Agreement by and between KO Communications, Inc., WWC Texas RSA Limited Partnership, and Western Wireless Corporation dated August 25, 1999 10.90 Asset Purchase Agreement by and between NetWireless, LLC, GCC License LLC, and Western Wireless Corporation dated August 25, 1999 10.91 License and Services Agreement between Western Wireless Corporation and AMDOCS (UK) Limited dated August 23, 1999 10.92 Employment Agreement by and between H. Stephen Burdette and Western Wireless Corporation, dated July 12, 1999 27.1 Financial Data Schedule
(b) Reports on Form 8-K A Form 8-K was filed on July 26, 1999, reporting Western Wireless Corporation's financial and operating results for the second quarter ended June 30, 1999. A Form 8-K was filed on September 3, 1999, reporting that Western Wireless Corporation had executed definitive agreements with K.O. Communications, Inc., NetWireless L.L.C, and American Rural Cellular, Inc. whereby Western Wireless Corporation will aquire Rural Service Area (RSA) licenses and related assets for Texas 7, Arkansas 11 and Utah 5. A Form 8-K was filed on October 27, 1999, reporting Western Wireless Corporation's financial and operating results for the third quarter ended September 30, 1999. 18 19 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Western Wireless Corporation By /s/ Theresa E. Gillespie By /s/ Scott Soley -------------------------- -------------------- Theresa E. Gillespie Scott Soley Executive Vice President Director of Accounting (Chief Accounting Officer) Dated: November 9, 1999 19 20 EXHIBIT INDEX
Exhibit Description - ------- ----------- 10.89 Asset Purchase Agreement by and between KO Communications, Inc., WWC Texas RSA Limited Partnership, and Western Wireless Corporation dated August 25, 1999 10.90 Asset Purchase Agreement by and between NetWireless, LLC, GCC License LLC, and Western Wireless Corporation dated August 25, 1999 10.91 License and Services Agreement between Western Wireless Corporation and AMDOCS (UK) Limited dated August 23, 1999 10.92 Employment Agreement by and between H. Stephen Burdette and Western Wireless Corporation, dated July 12, 1999 27.1 Financial Data Schedule
20 EX-10.89 2 ASSET PURCHASE AGREEMENT-KO COMMUNICATIONS, INC. 1 EXHIBIT 10.89 ASSET PURCHASE AGREEMENT Texas-7 Rural Service Area This Asset Purchase Agreement (this "Agreement") is entered into on August 25, 1999 by and among KO Communications, Inc., a Texas Corporation ("Seller"), and WWC Texas RSA Limited Partnership, a Delaware Limited Partnership ("Purchaser"), Western Wireless Corporation, a Delaware corporation, as "Guarantor." Purchaser and Seller are sometimes referred to herein collectively as the "Parties" and each as a "Party." RECITALS WHEREAS, Seller is he holder of the non-wireline cellular radio telephone license granted by the Federal Communications Commission (the "FCC") and certain assets necessary for the operation of the non-wireline cellular radio telephone service system in the Texas-7 Rural Service Area (the "System"); WHEREAS, Purchaser desires to purchase the cellular radio telephone service system, including the licenses necessary to operate such system, in the Texas-7 Rural Service Area; WHEREAS, the Parties desire that Purchaser acquire from Seller all of the assets of the System including, among other things, all of the authorizations issued by the FCC for the operation of the System, all in accordance with the terms and conditions set forth in this Agreement; and WHEREAS, the Parties have determined that it would further the development of competitive cellular radio telephone service systems in the United States to consummate the transactions contemplated hereby; NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereto agree as follows: ARTICLE 1. DEFINITIONS As used herein, the terms below shall have the following meanings: "Action" shall have the meaning set forth in Section 5.11. "Affiliate" of a Person shall mean any Person which directly or indirectly, through one or more intermediaries, owns, controls, or is controlled by, or is under common control with, such Person. The term "control" (including, with correlative meaning, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the 1 2 management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Applicable Laws" shall mean all federal, state and local statutes, ordinances, rules, and regulations of any Governmental Authority that govern, regulate or otherwise apply to the Assets, the Business or operation of the System. "Assets" shall mean all assets, properties and rights, both tangible and intangible, that are owned by, leased or licensed to, Seller for use in the System, and are otherwise necessary for the operation of the Business in a manner consistent with the present operations and with past practices of the System, including, without limitation, the Real Property, Equipment, Authorizations, Contracts, Subscriber Agreements, Intellectual Property and Books and Records; provided, however, that the Assets shall not include the Excluded Assets. "Assignment Applications" shall mean those joint applications filed with the FCC relating to the assignment of the FCC Authorizations to Purchaser in the manner contemplated by this Agreement. "Assumed Liabilities" shall have the meaning set forth in Section 3.2 hereof. "Auditor" shall have the meaning set forth in Section 2.3.4 hereof. "Authorizations" shall mean the approvals, consents, authorizations, permits and licenses issued to Seller by any Governmental Authority relating to the System. "Books and Records" shall mean all the books and records related to the Assets, the Business and the System, including without limitation, (a) books and records relating to the purchase of materials and supplies, invoices, Subscriber lists, supplier lists, personnel records, and Subscriber information, and (b) computer software (to the extent such software is included in the Assets) and data in computer readable and/or human readable form used to maintain such books and records together with the media on which such software and data are stored and all documentation relating thereto, but shall not include books and records relating to the Excluded Assets or Seller's corporate books and records or stock ledgers. "Business" shall mean all of the business and operations relating to the System as currently conducted by Seller. "CERCLA" shall have the meaning set forth in the Section defining Environmental Laws. "Closing Date" shall mean the next business day that is ten or more days after the date on which the FCC Consent becomes a Final Order; provided that if such date is within five days of the end of a calendar month, the Closing Date shall be the last business day of that calendar month. 2 3 "Closing Place" shall mean such location agreed upon by the Parties or, in the absence of such an agreement, the offices of Stokes Lawrence, P.S., 800 Fifth Avenue, Suite 4000, Seattle, Washington 98104-3179. "Closing" shall mean the consummation of the assignment, transfer, conveyance and delivery of the Assets and the Purchase Price as contemplated hereunder. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Consents" shall mean any and all consents, approvals, authorizations or waivers of any Governmental Authority, including, without limitation, the FCC Consent, and any and all consents, approvals or waivers from parties to Contracts that are (i) required for the consummation of the transactions contemplated by this Agreement or (ii) necessary in order that Purchaser (or its designee) can conduct the Business after the Closing Date substantially in the same manner as before the Closing Date. "Contracts" shall mean all leases, contracts, commitments, and other binding agreements relating to the System to which Seller is a party and which are set forth on SCHEDULE 5.7, whether written or oral. "DOJ" shall mean the United States Department of Justice. "Employees" shall mean all persons employed on a full or part-time basis together with all persons retained as "independent contractors" who are the functional equivalent of employees. "Environmental Laws" shall mean Applicable Laws relating to pollution, the environment or the Handling of Regulated Substances, including without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"). "Equipment" shall mean all of the furniture, fixtures, furnishings, machinery, computer hardware, antennas, transmitters, and other personal property used in connection with the Business and the System. "ERISA" shall have the meaning set forth in Section 5.9 hereof. "Escrow Agreement" shall have the meaning set forth in Section 11.2.2 hereof. "Escrow Amount" shall have the meaning set forth in Section 2.2 hereof. "Excluded Assets" shall mean those assets set forth on SCHEDULE 1 hereto. "FCC" shall mean the Federal Communications Commission. "FCC Authorization" shall mean the Authorizations from the FCC relating to the operation of the System. 3 4 "FCC Consent" shall mean the action of the FCC granting its consent to the assignment of the FCC Authorization from Seller to Purchaser. "FTC" shall mean the Federal Trade Commission. "Final Order" shall mean a Preliminary Order which is not reversed, stayed, enjoined, set aside, annulled, or suspended, and with respect to which no timely request for stay, motion or petition for reconsideration or rehearing, application or request for review, or notice of appeal or other judicial petition for review is pending, and as to which the time for filing any such request, motion, petition, application, appeal, or notice, and for the entry of an order staying, reconsidering, or reviewing on the FCC's or other regulatory authorities' own motion, has expired. If a Preliminary Order is subject to conditions which may have a material adverse effect on a party, such party must either timely file a petition for reconsideration with respect to such conditions or accept such conditions. If such party timely files a petition for reconsideration with respect to such conditions, the Preliminary Order shall not become or be deemed a Final Order unless and until such conditions are removed from the Preliminary Order or the party affected thereby has notified the other Party in writing of its willingness to accept such conditions. "Final Settlement" shall have the meaning set forth in Section 2.3.3 hereof. "Financial Statements" shall have the meaning set forth in Section 5.10 hereof. "Governmental Authority" shall mean any court or any federal, state, county, or local governmental, legislative or regulatory body, agency, department, authority, instrumentality or other subdivision thereof, including, without limitation, the FCC and the PUC. "Handling" shall mean the production, use, generation, storage, treatment, recycling, disposal, discharge, release, or other handling or disposition at any time on or prior to the Closing Date of any Regulated Substance either in, on, or under any Operating Site. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Intellectual Property" shall mean all patents, trademarks, service marks, trade names, copyrights, licenses, formulas, computer software, advertising slogans, know-how, data and other intellectual property rights or intangible property rights of Seller which are used or intended for use in connection with the System. "Inventory" shall mean all usable and non-obsolete merchandise owned and intended for resale in connection with the Business, whether or not located on the premises, on consignment to a third party, or in transit or storage. "Liabilities" shall mean liabilities, obligations or commitments of any nature, absolute, accrued, contingent or otherwise, known or unknown, whether matured or unmatured. 4 5 "Lien" shall mean any contract for sale (except for the sale of cellular telephone service and rentals of cellular telephone equipment to Subscribers), claim, lien, pledge, option, charge, covenant, restriction, encroachment, easement, security interest, mortgage, deed of trust, right-of-way, encumbrance or adverse interest of any kind or character of any other Person. "Losses" shall have the meaning set forth in Section 11.2.1 hereof. "Operating Data Statements" shall have the meaning set forth in Section 5.10 hereof. "Operating Site" shall mean any real property or facility owned, leased or used at any time by Seller in connection with the System. "Person" shall mean an individual, a corporation, a partnership, an association, a joint-stock company, a trust, any unincorporated organization, or a government or a political subdivision thereof. "Preliminary Order" shall mean an action by the FCC and any other applicable state regulatory authority consenting to or authorizing the assignment of the FCC Authorization to Purchaser (or its designee), which action has not yet become a Final Order. "PUC" shall mean the Texas Public Utilities Commission. "Purchase Price" shall have the meaning set forth in Section 2.2 hereof. "Purchaser's Closing Certificate" shall have the meaning set forth in Section 7.1 hereof. "Real Property" shall mean all real property owned or leased by or used, or intended by Seller for use, in connection with the System, together with all buildings, improvements, fixtures, easements, licenses, options, insurance proceeds and condemnation awards and all other rights of Seller in or appurtenant thereto, but does not include the property listed on SCHEDULE 1. "Regulated Substance" shall mean (i) any "hazardous substance" as defined in CERCLA, (ii) any petroleum or petroleum substance, and (iii) any other pollutant, waste, contaminant, or other substance regulated under Environmental Laws. "Representative" shall mean any officer, director, principal, attorney, agent, employee or other representative of any Person. "Seller's Closing Certificate" shall have the meaning set forth in Section 8.1 hereof. "Service" shall mean the provision of the System's cellular telephone service to Subscribers. "Subscribers" shall mean customers of Seller that subscribe to the Service. 5 6 "Subscriber Agreements" shall mean Contracts whereby Seller has agreed to provide Service. "Survival Period" shall have the meaning set forth in Section 11.1 hereof. "Taxes" shall mean all taxes, charges, fees, levies or other assessments or charges of any kind whatsoever, including without limitation, income, excise, use, transfer, payroll, occupancy, property, sales, franchise, unemployment and withholding taxes, imposed by any Governmental Authority, and any assessments against Real Property together with any interest, penalties or additional taxes attributable to such taxes and other assessments. "To the knowledge" or "knowledge" of a Party (or similar phrases) shall mean (i) with respect to Seller, to the extent of matters which are actually known by any of the officers, directors or employees of Seller or which, based on facts of which such parties are aware, would be known to a reasonable Person in similar circumstances and (ii) with respect to Purchaser, to the extent of matters which are actually known by any of the officers, directors or employees of Purchaser, or which, based on facts of which such parties are aware, would be known to a reasonable Person in similar circumstances. ARTICLE 2. PURCHASE OF ASSETS 2.1. Transfer of Assets. Subject to the terms and upon satisfaction of the conditions contained in this Agreement, at the Closing, Seller shall sell, convey, transfer, assign and deliver to Purchaser (or its designee), and Purchaser (or its designee) will accept and acquire, the Assets. 2.1.1. The towers on which transmitting and receiving equipment for the System are located are on land that is owned by Affiliates of Seller. Such sites are leased to Seller on non-standard terms and conditions. The parties acknowledge that Purchaser will not assume any such leases as a part of the sale contemplated by this Agreement, but that Purchaser's acquisition of rights to use such sites on terms substantially the same as those contained in the form set forth in SCHEDULE 2.1.2 are a necessary part of the transactions contemplated by this Agreement. 2.1.2. Purchaser and Seller agree to negotiate new leases for all sites and properties that are owned by Affiliates of Seller, with the terms and conditions of such leases to be in substantially the same form as attached as SCHEDULE 2.1.2. All such new leases will take effect on or before the Closing Date. 2.2. Purchase Price. The purchase price for the Assets shall be One Hundred Forty Five Million Dollars ($145,000,000), subject to adjustment pursuant to this Article (the "Purchase Price"), which shall be paid by Purchaser to Seller (or its designee) on the Closing Date as follows: (i) Four Million Dollars ($4,000,000) of such Purchase Price (the "Escrow Amount") shall be delivered to the Escrow Agent as defined in Section 11.2.2 and held pursuant to the terms 6 7 of Section 11.2.2; and (iii) the balance of such Purchase Price shall be paid by Purchaser to Seller by wire transfer of immediately available funds. 2.3. Other Adjustments and Prorations. 2.3.1. The Purchase Price shall be adjusted in accordance with the following: (a) The Purchase Price shall be increased by an amount equal to any cash, adjusted accounts receivable, Inventory (valued at book value), prepaid expenses and any other current assets transferred to Purchaser. For the purposes of this Section the "adjusted accounts receivable" shall equal the sum of the following: (i) 90% of the accounts receivable from carriers (not including any clearinghouse receivables) and resellers, and of receivables from Subscribers which remain unpaid by Subscribers for less than thirty-one (31) days from the date such receivable first comes due ("Outstanding"); plus (ii) 70% of the amount of all Subscriber accounts receivable that are Outstanding for more than thirty (30) days but less than sixty-one (61) days; plus (iii) 50% of the amount of all Subscriber accounts receivable that are Outstanding for more than sixty (60) days, but less than ninety-one (91) days; and (iv) There shall be no adjustment (i.e. 0%) for the amount of any Subscriber accounts receivable that are Outstanding more than ninety (90) days. (b) The Purchase Price shall be decreased by an amount equal to (x) amounts collected by Seller from Subscribers on or prior to the Closing Date (net of liabilities associated with deferred access revenue included in such amounts), which relate to Services to be provided after the Closing Date (hereinafter referred to as "Advance Receipts"), and (y) liabilities associated with deferred access revenue assumed by Purchaser. 2.3.2. Except as otherwise specifically provided for herein, all revenues and all expenses arising from the Business and ownership of the Assets, including resale charges and other expenses payable in respect to Service, utility charges, Taxes levied against the Assets, property and equipment rentals, sales and service charges, Taxes (except for Taxes arising from the transfer of the Assets), and similar prepaid and deferred items, shall be prorated between Seller and Purchaser in accordance with the principle that Seller shall receive the benefit of all revenues, and be responsible for all expenses, costs, obligations and Liabilities allocable to the Business and the ownership of the Assets for the period on and prior to the Closing Date, and Purchaser shall receive the benefit of all revenues, and be responsible for all expenses, costs, obligations and Liabilities allocable to the Business and the ownership of the Assets after the Closing Date. 7 8 2.3.3. A final settlement (the "Final Settlement") of all adjustments or prorations made under this Section, with payment being made by the appropriate Party in cash (but without any interest thereon), shall occur no later than one hundred twenty (120) days after the Closing Date. 2.3.4. In the event that the Parties cannot agree on the amount of the Final Settlement, the determination shall be made by a mutually agreed upon national accounting firm selected jointly by Purchaser and Seller that has not, during the prior three (3) years, been employed by any of the Parties (the "Auditor"). The Auditor shall make its determination of the Final Settlement based on the express provisions of this Agreement; provided, however, that if the Auditor finds that the express terms of this Agreement are not sufficient to resolve any issue or issues, the Auditor shall rely upon generally accepted accounting principles then in effect. Any Party may invoke the use of the Auditor by notifying the other Party in writing, provided that a Party may not invoke the use of the Auditor to determine the Final Settlement earlier than one hundred eighty (180) days after the Closing Date. The Auditor shall be required to render a decision within twenty-one (21) days after the Auditor is requested to render a determination under this Section. The decision of the Auditor shall be binding on the Parties and not subject to any judicial challenge by the Parties. Within five (5) business days after the Auditor provides the determination to the Parties, the payment of the Final Settlement shall be made in accordance with that determination. The expenses of the Auditor shall be paid by Seller and Purchaser in reverse proportion to the Auditor's determination with respect to the allocation to Seller and Purchaser of the amount in disagreement. For example, if the amount in disagreement is One Hundred Thousand Dollars ($100,000) and the Auditor determines that the Seller should receive Seventy Thousand Dollars ($70,000) and the Purchaser should receive Thirty Thousand Dollars ($30,000), then Seller shall pay thirty percent (30%) of the Auditor's expenses, and Purchaser shall pay seventy percent (70%). ARTICLE 3. ASSUMED OBLIGATIONS 3.1. No Assumption of Liabilities by Purchaser, Exceptions. Except as set forth in Section 3.2 below, Purchaser expressly does not, and shall not, assume or be deemed to have assumed under this Agreement or by reason of any transactions contemplated hereunder, any Liabilities of any nature whatsoever relating to the System or of Seller, or any of Seller's stockholders or partners, as the case may be. 3.2. Assumed Liabilities. At the Closing, Purchaser shall assume and shall timely pay, perform, fulfill and discharge all of Seller's liabilities and obligations due after the Closing Date on those Contracts and Liabilities set forth on SCHEDULE 3.2 (the "Assumed Liabilities"). ARTICLE 4. COVENANTS AND AGREEMENTS 8 9 4.1. Covenants of Seller. Seller covenants and agrees that from the time of the execution and delivery of this Agreement until (and including) the Closing Date: 4.1.1. Consummate Transactions. Seller shall use its best efforts to cause the transactions contemplated by this Agreement to be consummated in accordance with the terms hereof, and, without limiting the generality of the foregoing, use best efforts to obtain all necessary approvals, consents, permits, licenses and other authorizations required in connection with this Agreement and the transactions contemplated hereby from Governmental Authorities, and to make all filings with and to give all notices to third parties, which may be necessary or reasonably required of Seller in order to consummate the transactions contemplated hereby. 4.1.2. Full Access and Purchaser Due Diligence. Seller shall allow Purchaser and its agents and representatives (including, without limitation, its independent auditors and attorneys) reasonable access during normal business hours to all of Seller's personnel, premises, properties, assets, financial statements and records, books, contracts, documents and commitments of or relating to the Business, and shall furnish Purchaser and its agents and representatives with all such information concerning the affairs of the System as Purchaser may reasonably request. 4.1.3. Ordinary Course. Seller shall cause the Business and affairs of the System to be conducted only in the ordinary course and consistent with past practices. Without limiting the foregoing, Seller shall continue to pay its bills and other obligations, all in the ordinary course of business consistent with past practices, but shall not, without the prior written consent of Purchaser, perform or do any of the following if the same would have a material adverse effect on the Business, the System or the Assets: (a) incur any material Liability other than obligations to Seller's brokers, attorneys and accountants, all of which shall be paid by Seller; (b) assume, guarantee, change any existing guarantee, endorse, act as an accommodation party, or otherwise become responsible for, the obligations of any other Person; (c) make any loans or advances to any Person; (d) sell, transfer, convey, mortgage, pledge, hypothecate or place any Liens on any of the Assets; (e) waive or compromise any right or claim for any amount; (f) cancel any note, loan or other material obligation owing to Seller; (g) enter into any Contract with any Person, including, without limitation, the stockholders of Seller or any of its Affiliates, consultants, agents or assigns; (h) except as otherwise provided in this Agreement, increase or modify compensation of any type currently paid to any of its employees, officers, directors, agents or consultants; (i) make any new arrangement for any profit-sharing plan, retirement plan, bonus plan, severance arrangement, employee benefit plan, or any similar plan except for modifications of existing plans that are required by law, or contemplated to be implemented at the time of the execution of this Agreement; (j) except as required by law, enter into any collective bargaining agreement, or make any commitment whatsoever to any union or other representative or party which intends to represent any of Seller's employees subsequent to the Closing; (k) except as permitted under Section 5.9 hereof, hire any employees; (l) except as required by law, enter into any additional reseller agreements; or (m) enter into any Contract involving payments, assets, or liabilities with a value greater than $25,000 individually or $100,000 in the aggregate, excluding noncapital expenditures incurred in the ordinary course of business consistent with past practices. Notwithstanding the foregoing, nothing in this Section shall prevent Seller from taking 9 10 appropriate action as may be necessary to maintain its ability to control and manage the System and to comply with the rules, regulations or directives of any Governmental Authority. 4.1.4. Retention of Records. On the Closing Date, Seller shall deliver to Purchaser all of the Books and Records relating to the System and the Business. In addition, for a period of three (3) years after the Closing Date, Seller shall retain and make available to Purchaser copies of any documents not theretofore delivered to Purchaser relating to System, the Business or the Assets. 4.1.5. No Amendments or Issuance of Additional Shares. Seller shall not amend its charter, by-laws, or comparable governing instrument, which amendment would have a material adverse effect on the Assets, the Business or the transactions contemplated by this Agreement or which would require any additional consents or approvals of the transactions contemplated by this Agreement. Seller shall not issue or sell any shares of its capital stock or other securities, or issue options, warrants or rights of any kind to acquire, or any securities convertible into, exchangeable for or representing a right to purchase or receive, any stock-based or stock-related awards or other equity-based awards, shares of its capital stock or other equity or other securities, or enter into any arrangement or contract with respect to the purchase or voting of shares of its capital stock or other equity, or adjust, split, combine or reclassify any of its securities, or make any other changes in its capital structure, if any such issuance, sale, contract, plan, understanding, arrangement, adjustment, split, combination, reclassification or changes would require any additional approvals of the transactions contemplated by this Agreement or would otherwise have a material adverse effect on the transactions contemplated by this Agreement. 4.1.6. No Termination or Settlement. Without the prior written consent of Purchaser, which consent shall not be unreasonably withheld, Seller shall not terminate any agent, or settle any dispute with any agent if such termination or settlement would cause Purchaser to have any continuing obligation after the Closing with respect thereto. 4.1.7. Preserve Business and Goodwill. Seller shall use its diligent efforts to keep the System intact, to preserve and maintain the Assets, to preserve the Business and to preserve the goodwill of suppliers, Subscribers and others dealing with Seller. 4.1.8. Compliance with Law. Seller shall comply in all material respects with Applicable Laws relating to the System, the Business and the Assets. 4.1.9. Approvals; Consents. Seller shall obtain and maintain in full force and effect, and shall not take any action which might have a material adverse effect on, any Authorizations that are required for the operation of the Business as presently conducted, except where such Authorizations are administrative in nature, and the failure to obtain or maintain such Authorizations would not adversely impact the continued operation of any part of the System or any component thereof, as currently operated. The Parties shall consult with one another as to the approach to be taken with any Governmental Authority with respect to obtaining any Authorization to the transactions contemplated hereby, and each of the Parties shall keep each other Party reasonably informed as to the status of any such communications with any 10 11 Governmental Authority. Seller shall not make any material commitments with respect to any Authorizations that would have a material adverse effect on the Business, the System or the Assets without Purchaser's prior written consent. 4.1.10. Insurance. From the date hereof through the Closing Date, Seller shall maintain in full force and effect (including necessary renewals thereof), all of the insurance policies that Seller currently maintains relating to System, or other functionally equivalent policies. The policies currently maintained by Seller are set forth on SCHEDULE 4.1.10. From and after the Closing Date, Seller shall take all actions that may be necessary to cause the coverage under such policies to continue in full force and effect after the Closing Date with respect to liability occurrences prior to the Closing Date and shall take all actions necessary to preserve or protect rights under any such policies with respect to any claim against Seller arising out of the Assets or Business of Seller prior to the Closing Date. Seller will provide Purchaser with information and records regarding all claims pending with respect to the Assets or Business of Seller and agrees to provide to Purchaser any additional information and records Purchaser may reasonably require regarding such claims. 4.1.11. Books and Records. Seller shall continue to maintain the Books and Records in the manner and on a basis consistent with prior years. 4.1.12. Notice of Claims. Seller shall give written notice to Purchaser promptly upon the commencement of any action, investigation, arbitration or proceeding (including any proceeding before any Governmental Authority), or promptly upon obtaining knowledge of any facts giving rise to a threat of any such action, investigation, arbitration or proceeding which, if adversely determined, would have a material adverse effect on (a) Seller's ability to consummate the transactions contemplated hereby; (b) the Business; or (c) the Assets. 4.1.13. Notice of Breaches. Seller shall promptly after obtaining knowledge of the occurrence of, or the impending or threatened occurrence of, any event which would cause or constitute a breach of any warranties, representations, covenants or agreements of the Seller contained in this Agreement, give notice in writing of such event or occurrence or impending or threatened event or occurrence, to Purchaser and use its diligent efforts to prevent or to promptly remedy such breach. 4.1.14. Notice of Change. Except for events occurring in the communications industry generally, Seller shall use reasonable efforts to notify Purchaser promptly in writing of any event, condition or state of facts, which has had or would reasonably be expected to have a material adverse effect on the System, the Business, the Assets, or on the transaction contemplated by this Agreement. 4.1.15. Training / Transition Assistance. (a) Before the Closing, and at the request of Purchaser, Seller hereby agrees to use commercially reasonable efforts to instruct Purchaser's employees and agents in the use of Seller's billing system. Such instruction will be provided at Seller's premises at mutually 11 12 convenient times so as not to disrupt the operation of Seller's businesses and shall be provided at no cost to Purchaser. (b) The Parties agree to use diligent efforts and to direct their respective employees, agents, and subcontractors to cooperate in the conversion and transfer of the Subscribers to Purchaser's billing system so that upon the Closing Date, or as soon thereafter as is reasonably practicable, all of the System's customer billing information shall have been transferred and converted to Purchaser's billing system. The costs associated with converting and transferring the information to Purchaser's billing system shall be the sole responsibility of Purchaser. In the event Purchaser desires to retain Seller's assistance in such matters after the Closing, the parties agree to enter into an agreement having terms substantially the same as those contained in the document attached as SCHEDULE 4.1.15(b). 4.1.16. Interim Financial Statements and Statistical Summaries. Between the date of this Agreement and the Closing Date, Seller shall deliver to Purchaser (i) as soon as practicable, but no later than forty-five (45) days after the end of each calendar month, unaudited financial statements ("Interim Financial Statements") for the most recent month and the interim period then ended, and (ii) as soon as practicable, but no later than forty-five (45) days after the end of each calendar month, interim operating data summaries (the "Interim Operating Data Statements") for the most recent month and interim period then ended, which summaries will be in scope and format substantially identical to the Operating Data Statements. 4.1.17. Material Contracts. Seller shall not (a) default in any material respect under, or breach any term or provision of, or suffer or permit to exist any condition or event which, after notice or lapse of time, or both, would constitute a material default under, any material Contract, or (b) cause or permit the termination, modification or amendment of any material Contract of Seller. 4.1.18. Condition of Assets. Seller shall use diligent efforts to preserve the Assets intact and, from time to time, make all necessary repairs thereto, so that the Business may be conducted in the ordinary course consistent with past practices. 4.2. Covenants of Purchaser. Purchaser covenants and agrees that from the time of the execution and delivery of this Agreement until (and including) the Closing Date: 4.2.1. Consummate Transaction. Purchaser shall use its best efforts to cause the transactions contemplated by this Agreement to be consummated in accordance with the terms hereof, and, without limiting the generality of the foregoing, to assist Seller in obtaining all necessary Consents of third parties, including, without limitation, the approval of this Agreement and the transactions contemplated hereby as required by any Governmental Authority, and to make all filings with and to give all notices to third parties which may be necessary or reasonably required of Purchaser in order to consummate the transactions contemplated hereby. 4.2.2. Purchaser Not to Control. Notwithstanding any provision of this Agreement that may be construed to the contrary, pending the consummation of the Closing, Seller shall maintain actual (de facto) and legal (de jure) control over the System. Specifically, 12 13 and without limitation, the responsibility for the operation of the Business and the System shall, pending the Closing Date, reside with the Board of Directors and management of Seller, including, but not limited to, responsibility for the following matters: (a) access to and the use of the facilities of and equipment owned by Seller; (b) control of the daily operation of the System; (c) creation and implementation of policy decisions; (d) employment and supervision of employees; (e) payment of financing obligations and expenses incurred in the operation of the System; (f) receipt and distribution of monies and profits derived from the operation of the System; and (g) execution and approval of all contracts and applications prepared and filed before Governmental Authorities. 4.2.3. Notice of Breaches. Purchaser shall promptly after obtaining knowledge of the occurrence of, or the impending or threatened occurrence of, any event which would cause or constitute a breach of any warranties, representations, covenants or agreements of the Purchaser contained in this Agreement, give notice in writing of such event or occurrence or impending or threatened event or occurrence, to Seller and use its diligent efforts to prevent or to promptly remedy such breach. 4.2.4. Qualification to Hold Authorizations. Purchaser shall remain an entity qualified to hold the Authorizations under the rules and regulations of the FCC. 4.3. Mutual Covenants of Seller and Purchaser. Seller and Purchaser have filed with the FCC, and, if necessary, will file with the PUC or any other Governmental Authority, as soon as practicable following the date hereof, joint applications requesting the approval of the assignment of the Authorizations to Purchaser, and, if applicable, will file all necessary applications with the DOJ and/or the FTC pursuant to the HSR Act. Seller and Purchaser agree to use their best efforts to make all such filings as have not yet been made within ten (10) business days of the execution of this Agreement. Seller and Purchaser shall diligently take or cooperate in the taking of all steps which are necessary or appropriate to expedite the prosecution and favorable consideration of such applications. Purchaser shall the pay filing fees associated with the filings required by this Section. Seller and Purchaser covenant and agree to undertake all actions and file such material as shall be necessary or required in order to obtain any necessary waivers or other authority in connection with the foregoing applications. ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF SELLER Seller hereby makes the following representations and warranties to Purchaser, all of which have been relied upon by Purchaser in entering into this Agreement and the truth and accuracy of which shall constitute a condition precedent to the obligations of Purchaser hereunder: 5.1. Organization and Standing. Seller (a) is a corporation duly organized, validly existing and in good standing under the laws of the state of Texas, (b) has full corporate power and authority to enter into and perform this Agreement, to own and lease the Assets, and operate the System and to carry on the Business as now being conducted and proposed to be conducted 13 14 by it, and (c) is duly qualified to do business and is in good standing as a foreign corporation in every jurisdiction in which the nature of the business conducted by it requires such qualification, except where the failure to so qualify would not have a material adverse effect on the System, the Business, or the Assets. 5.2. Authorization and Binding Obligations. The execution, delivery and performance of this Agreement by Seller has been duly and validly authorized by all necessary corporate action, including approval of the entire transaction by vote of its shareholders and Board of Directors. This Agreement has been duly executed and delivered by Seller and constitutes a valid and binding obligation of Seller enforceable against it in accordance with its terms, except as its enforceability may be limited by bankruptcy, insolvency, moratorium or other laws relating to or affecting creditors' rights generally and the exercise of judicial discretion in accordance with general equitable principles. 5.3. No Contravention. Except as otherwise contemplated hereunder, the execution, delivery and performance of this Agreement, the consummation of the transactions contemplated hereby and the compliance with the provisions hereof by Seller will not (a) violate any provisions of the corporate charter or by-laws of Seller (b) result in the breach of, or constitute a default under, or result in the creation of any Lien upon any of the Assets, under the provisions of any agreement or other instrument to which Seller is a party or by which any Asset is bound or affected or (c) with respect to Seller, violate any Applicable Laws. 5.4. Title to Assets. 5.4.1. SCHEDULE 5.4.1 is a list of all tangible personal property included in the Assets. Seller has good and marketable title to all the tangible personal property to be transferred by it hereunder, free and clear of all Liens, charges or any other encumbrances, except for and subject only to liens for Taxes not yet due or payable ("Permitted Liens"). 5.4.2. SCHEDULE 5.4.2 is a list of all the Real Property. Seller has good and marketable title to all of the Real Property to be transferred by it hereunder, free and clear of all Liens, and without reservation or exclusion of any mineral, timber or other rights or interests, except for and subject only to (a) Permitted Liens, (b) those matters set forth in SCHEDULE 5.4.2 including the leases listed thereon (whether as lessor or lessee), none of which is violated by existing structures or impairs Seller's use and none of which materially impairs or pursuant to its terms would materially impair the present operations of the System or the present use of such property, and (c) those Liens set forth in SCHEDULE 5.4.2. The Liens set forth on SCHEDULE 5.4.2 will be removed on or prior to the Closing Date. 5.4.3. The Assets include all assets (except the Excluded Assets) which are used to conduct the Business and operations of the System as presently conducted . 5.5. Condition of the Assets. All tangible Assets are in reasonable operating condition and repair, ordinary wear and tear excepted, are reasonably suitable for the uses and purposes for which they are being used, and are in compliance with all Applicable Laws, except where failure of such compliance would not have a material adverse effect on the Assets, the System, or the 14 15 Business, and Seller has no knowledge and has received no notice that it or the present use of the Assets is in violation in any material respect of any Applicable Laws. 5.6. Authorizations. The Authorizations listed on SCHEDULE 5.6 are all of the Authorizations necessary to operate the System, the Business and the Assets as they are now operated. The Authorizations are validly issued in the name of Seller and are in full force and effect. Except as set forth on SCHEDULE 5.6, all material Authorizations are unimpaired by any acts or omissions of Seller (or any of its Representatives) and the Authorizations are free and clear of any restrictions which might limit the full operation of the System. All material ownership reports, employment reports, and other documents required to be filed by Seller with the FCC with respect to the System have been filed or the time period for such filing has not lapsed. All such reports and documents since the date that Seller acquired the System are correct in all material respects. The FCC actions granting the current FCC Authorization to operate the System together with all underlying construction permits have not been reversed, stayed, enjoined, set aside, annulled, or suspended, and no timely request for stay, motion or petition for reconsideration or rehearing, application or request for review, or notice of appeal or other judicial petition for review is pending. The time for filing any such request, motion, petition, application, appeal, or notice, and for the entry of an order staying, reconsidering, or reviewing on the FCC's or other regulatory authorities' own motion, has expired. 5.7. Contracts. SCHEDULE 5.7 is a list of all Contracts, other than Subscriber Agreements and Contracts with Seller's Affiliates which will not survive the Closing. Each such Contract is in full force and effect, paid currently, and has not been materially impaired by any acts or omissions of Seller or any of its Representatives. Except as set forth on SCHEDULE 5.7, no Contract requires the consent of any other party to the transactions contemplated by this Agreement. Seller is not (and, to the best of its knowledge, no other party is) in material breach or violation of, or default under any of the Contracts. Seller is not aware of any intent by any party to any Contract to terminate or amend the terms thereof or to refuse to renew any Contract upon expiration of its term. 5.8. Intellectual Property. SCHEDULE 5.8 is a list of all Intellectual Property. Except as indicated on SCHEDULE 5.8, Seller has properly licensed and has the right to use all of the Intellectual Property. No person has a right to receive a royalty or similar payment in respect of any Intellectual Property other than as indicated on SCHEDULE 5.8. Seller has no licenses granted by or to it, or any other agreements to which it is a party, relating in whole or in part to any of the Intellectual Property other than as indicated on SCHEDULE 5.8. To Seller's knowledge, except as disclosed on SCHEDULE 5.8, Seller's use of the Intellectual Property is not infringing upon or otherwise violating the rights of any third party, and no proceedings have been instituted against or notices received by Seller alleging that such use of its Intellectual Property infringes upon or otherwise violates any rights of a third party. 5.9. Employees; Employment Obligations. Seller and/or the System currently employs those persons in those positions and at those salaries (including benefits) as are listed on SCHEDULE 5.9 Seller shall hire no further employees without the prior written consent of Purchaser, provided that Seller may, as the need arises, hire employees to replace existing employees without the consent of Purchaser. Except as otherwise set forth on such SCHEDULE 5.9, Seller and the 15 16 System are not bound, and at no time have been bound, by any oral or written collective bargaining agreement, severance, pension, retirement, profit-sharing, 401(k), "employee benefit plan" (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), or other employment agreement (other than any agreements terminable on thirty (30) days' or less notice without penalty or severance obligation) with any officer, employee or consultant, nor does Seller or the System have any liability under any such agreement which was terminated previously. Seller has complied in all material respects with all applicable laws, rules and regulations which relate to prices, wages, hours, discrimination in employment and collective bargaining and is not liable for any arrears of wages or any taxes or penalties for failure to comply with any of the foregoing. With respect to each "employee benefit plan," if any, within the meaning of Section 3(3) of ERISA, which is now, or ever has been, maintained, contributed to, or required to be contributed to by Seller, such employee benefit plan has been established and maintained in all material respects in accordance with its terms and in material compliance with all applicable laws, statutes, orders, rules and regulations, including but not limited to ERISA. Seller is not a party to, and is not affected by or threatened with, any dispute or controversy with a union or with respect to unionization or collective bargaining involving the Employees of Seller or the System. 5.10. Financial Statements. Attached hereto as SCHEDULE 5.10 are the unaudited financial statements of Seller for the periods indicated on such Schedule (the "Financial Statements"), which statements have been compiled by L.M. Henderson & Co. SCHEDULE 5.10 also lists key statistical summary information and other documents which set forth the subscriber history for the last three years, and local and roaming minutes of use data of the System for a designated calendar months (the "Operating Data Statements"). A sample Operating Data Statement is attached hereto as SCHEDULE 5.10. All Financial Statements are true and correct in all material respects, have been prepared from the Books and Records and fairly represent the financial position of Seller in a manner consistent with the prior periods prepared in accordance with generally accepted accounting principles. To Seller's knowledge, Seller has not incurred nor is it subject to any Liabilities, whether accrued or absolute, which are not disclosed in the Financial Statements or elsewhere in this Agreement. All Operating Data Statements listed on such SCHEDULE 5.10 are accurate in all material respects. 5.11. Litigation. Except as set forth on SCHEDULE 5.11, there is no action, order, writ, injunction, judgment or decree outstanding or claim, suit, litigation, proceeding, or labor dispute ("Action"), other than rule-making proceedings affecting the cellular telephone industry generally, pending or, to the knowledge of Seller, threatened, relating to or affecting (a) Seller, (b) the Assets, (c) the Business, or (d) the transactions contemplated by this Agreement which if adversely determined, could have a material adverse effect on the Business. Seller is not in default with respect to any judgment, order, writ, injunction or decree of any court or governmental agency, and there are no unsatisfied judgments against Seller or the Assets. There is not a reasonable likelihood of an adverse determination of any pending Action which would, individually or in the aggregate, have a material adverse effect on the Assets or the Business or the financial condition of Seller. 5.12. Complaints. There is not, to the best of Seller's knowledge, any FCC investigation, notice of apparent liability or order of forfeiture pending or outstanding against 16 17 Seller or the System respecting any violation, or allegation thereof, of any FCC rule, regulation or policy, or, to the best of Seller's knowledge, any complaint before the FCC as a result of which an investigation, notice of apparent liability or order of forfeiture may issue from the FCC relating to the System. 5.13. Reports. Except as set forth in SCHEDULE 5.13 hereto, all material returns, reports and statements currently required to be filed by Seller with the FCC or with any other Governmental Authority with respect to the System have been filed and materially complied with and shall continue to be filed and be in substantial compliance on a current basis until the Closing Date. All such reports, returns and statements are (or will be, in the case of future reports) substantially complete and materially correct as filed. 5.14. Taxes. Except as noted below, Seller has paid in full or discharged all Taxes relating to the ownership and operation of the Assets and all Taxes the non-payment of which could result in a Lien on the Assets in the hands of the Purchaser, excepting in each case such Taxes which are not yet due or which are being contested and for which adequate reserves have been made. No event has occurred that could impose on Purchaser any liability for any Taxes, due or to become due, from Seller to any taxing authority. Seller has not yet paid state sales Taxes associated with certain out collect revenues. Seller acknowledges that all such Taxes, and all penalties and interest associated with such taxes, are and will remain Seller's responsibility. Seller shall have paid all such Taxes, penalties and interest before the Closing Date. 5.15. No Other Agreements to Sell the System or the Assets. Seller has no other legal obligation, absolute or contingent, to any other Person to sell, or offer to sell (including any right of first refusal or other similar agreement) the Assets or any capital stock of Seller or to effect any merger, consolidation or other reorganization of Seller or to enter into any contract with respect thereto. 5.16. Resale and Roaming Agreements. SCHEDULE 5.16 contains a list of all resale agreements to which Seller is a party, both as reseller and as a provider of resale services to others. SCHEDULE 5.16 also contains a list of all roaming agreements to which Seller is a party. All such resale and roaming agreements are in full force and effect and, subject to rates which may be imposed upon Seller beyond Seller's control, are on terms reasonable and customary in the cellular telephone industry. 5.17. Environmental Matters. Except as set forth in SCHEDULE 5.17, to Seller's knowledge the Operating Sites, and all existing and prior uses of the Operating Sites, comply and have at all times complied with the Environmental Laws. Except as set forth in SCHEDULE 5.17, Seller has not used, generated manufactured, refined, transported, treated, stored, leaked, poured, emitted, emptied, released, discharged, disposed, spilled or Handled any Regulated Substance on or under any Operating Site. To Seller's knowledge (a) there is and has been no Handling of any Regulated Substances at, on, or from any Operating Site; (b) there is and has been no presence of Regulated Substances on or under any Operating Site regardless of how the Regulated Substance or Regulated Substances came to rest there; (c) no underground tanks, PCBs or 17 18 asbestos-containing materials are or have been located on or under any Operating Site; (d) no Liens have been, or are, imposed on any of the Assets under any Environmental Laws; (e) no action, proceeding, revocation proceeding, amendment procedure, writ, injunction or claim is pending, or threatened concerning any environmental permit, Regulated Substance or activity related thereto. Neither Seller nor any Person acting on behalf of Seller has released any other Person from any claims Seller might have, or have had, for any matter relating to presence or Handling of Regulated Substances at any Operating Site. Seller has obtained all permits, licenses, registrations, and other approvals and has made all reports and notifications required under any Environmental Laws in connection with the Assets, and is in compliance in all material respects with all applicable Environmental Laws. There are no present actions, activities, circumstances, conditions, events, or incidents that would be expected to involve Seller (or any Person whose liability Seller has retained or assumed, either by contract or operation of law) in any litigation under the Environmental Laws, or impose upon Seller (or any Person whose liability Seller has retained or assumed, either by contract or operation of law) any environmental liability including, without limitation, common law tort liability. SCHEDULE 5.17 hereto also contains a list and brief description of all Environmental Law filings by Seller with, notices to Seller from, and related reports to all Governmental Authorities administering Environmental Laws, within three years prior to the date hereof, including without limitation, filings made, corrective action taken, or citations received by Seller. 5.18. Brokers. Seller has entered into a Contract with Daniels and Associates which will result in the obligation of Seller to pay a brokerage commission or similar payment in connection with the transactions contemplated hereby. Seller shall be responsible for making any and all such payments, and Purchaser shall have no obligation therefor. 5.19. No Material Adverse Change. Except as set forth on SCHEDULE 5.19, since the date of the most recent Financial Statements, there has not been: 5.19.1. any material adverse change in the rate of Seller's generation of cash flow from operations (as opposed to cash flow from financing operations and investment activities) after giving effect to customary seasonal fluctuations of cash flow generation; 5.19.2. any occurrence, assumption or guarantee by Seller of a material indebtedness other than pursuant to Contracts in existence on the date hereof and set forth or described on the Schedules annexed hereto; 5.19.3. any creation by Seller of any Lien or encumbrance on any material Asset other than pursuant to Contracts in existence on the date hereof and set forth or described on the Schedules annexed hereto; 5.19.4. any making of any material loan, advance or capital contribution to or investment in any Person by Seller; 5.19.5. any damage, destruction or other casualty loss affecting the Business or the Assets which, after giving effect to payments to Seller under applicable insurance policies, has had or is likely to have a material adverse effect on the financial condition of Seller or the System; or 18 19 5.19.6. any change by Seller in accounting principles or methods not required by law or year end changes. 5.20. Year 2000 Compliance. Seller has performed the necessary testing to determine whether all material software and computer systems used in the operation of the System are Year 2000 Compliant. To the extent that such testing indicated that Seller's software or computer systems are not Year 2000 Compliant, such software and/or computer systems were modified or will be modified prior to the Closing Date so they are Year 2000 Compliant. For purposes of this Section, "Year 2000 Compliant" means that Seller's software or computer systems receive, record, store, process, rout, transfer or present calendar dates and any related information falling on or after January 1, 2000 with similar functionality, in all material respects, as such software or computer systems perform such functions for calendar dates and related information falling prior to January 1, 2000. 5.21. Miscellaneous. No representation or warranty made by Seller in this Agreement, and no statement made in any schedule, exhibit, certificate or other document furnished pursuant to this Agreement, contains any untrue statement of a material fact or knowingly omits or fails to state, or will knowingly omit or fail to state, any material fact or information necessary to make such representation or warranty or any such statement not materially misleading; provided however, that nothing contained in this Section shall alter the standard of those representations or warranties which are made "to Seller's knowledge" or "to the best of Seller's knowledge" or phrases of similar import. ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser hereby makes the following representations and warranties to Seller, all of which have been relied upon by Seller in entering into this Agreement and the truth and accuracy of which shall constitute a condition precedent to the obligations of Seller hereunder: 6.1. Organization and Standing. Purchaser (a) is a limited partnership duly organized, validly existing and in good standing under the laws of the state of its organization, (b) has full power and authority to enter into and perform this Agreement, to own the Assets, and to carry on the Business upon consummation of the transactions contemplated by this Agreement, and (c) is duly qualified to do business and is in good standing as a foreign entity in every jurisdiction in which the nature of the business conducted by it requires such qualification, except where the failure to so qualify would not materially adversely affect Purchaser or the transactions contemplated by this Agreement. 6.2. Authorization and Binding Obligations. The execution, delivery and performance by Purchaser of this Agreement has been or will be within five (5) business days of the date of this Agreement, duly and validly authorized by all necessary partnership action, including approval of the entire transaction by the general partner of Purchaser. This Agreement has been duly executed and delivered by Purchaser and constitutes a valid and binding obligation of Purchaser, 19 20 enforceable against Purchaser in accordance with its terms except as its enforceability may be limited by bankruptcy, insolvency, moratorium or other laws relating to or affecting creditors' rights generally and the exercise of judicial discretion in accordance with general equitable principles. 6.3. No Contravention. Except as otherwise contemplated hereunder, the execution, delivery and performance of this Agreement, the consummation of the transactions contemplated hereby and the compliance with the provisions hereof by Purchaser will not (a) violate any provisions of the organizational documents of Purchaser, (b) result in the breach of, or constitute a default under or result in the creation of any Lien upon any assets of Purchaser, under the provisions of any agreement or other instrument to which Purchaser is a party or by which the property of Purchaser is bound or affected or (c) with respect to Purchaser, violate any Applicable Laws. 6.4. Litigation. Except as set forth on SCHEDULE 6.4, there is no Action, other than rule-making proceedings affecting the cellular telephone industry generally, pending or, to the knowledge of Purchaser, threatened or anticipated against, relating to or affecting Purchaser that would have a material adverse effect on Purchaser or Purchaser's ability to consummate the transactions contemplated by this Agreement. Purchaser is not in material default with respect to any material judgment, order, writ, injunction or decree of any court or governmental agency, and there are no unsatisfied judgments against Purchaser. There is not a reasonable likelihood of an adverse determination of any pending Action which would, individually or in the aggregate, have a material adverse effect on Purchaser or Purchaser's ability to consummate the transactions contemplated by this Agreement. 6.5. Authority to hold Authorizations. Purchaser is an entity that is qualified to hold the Authorizations under the rules and regulations of the FCC. 6.6. No Brokers. Neither Purchaser nor any of its Affiliates has entered into or will enter into any contract, agreement, arrangement or understanding with any person or firm which will result in the obligation of Seller to pay any finder's fee, brokerage commission or similar payment in connection with the transactions contemplated hereby. 6.7. Financial Capacity. Purchaser has now, and will have on the Closing Date, the financial capacity or resources to acquire and operate the System and Assets as contemplated by this Agreement. 6.8. Miscellaneous. No representation or warranty made by Purchaser in this Agreement, and no statement made in any schedule, exhibit, certificate or other document furnished pursuant to this Agreement, contains any untrue statement of a material fact or knowingly omits or fails to state, or will knowingly omit or fail to state, any material fact or information necessary to make such representation or warranty or any such statement not materially misleading; provided however, that nothing contained in this Section shall alter the standard of those representations or warranties which are made "to Purchaser's knowledge" or "to the best of Purchaser's knowledge" or phrases of similar import. 20 21 ARTICLE 7. CONDITIONS TO SELLER'S OBLIGATIONS The obligations of Seller to sell the Assets and to otherwise consummate the transactions contemplated by this Agreement are subject, in the discretion of Seller, to the satisfaction or waiver, on or prior to the Closing Date, of each of the following conditions: 7.1. Representations, Warranties and Covenants. All representations and warranties of Purchaser contained in this Agreement that do not otherwise reference a specific date shall be true and correct in all material respects at and as of the Closing Date as if such representations and warranties were made at and as of the Closing Date, and Purchaser shall have performed in all material respects all agreements and covenants required hereby to be performed by Purchaser prior to or at the Closing Date. There shall be delivered to Seller a certificate (signed by an authorized Officer of Purchaser) to the foregoing effect ("Purchaser's Closing Certificate"). 7.2. Closing Documents. Seller shall have received from Purchaser the documents and other items to be delivered by Purchaser pursuant to Section 9.2 of this Agreement. 7.3. Opinion of Purchaser's Counsel. Purchaser shall have delivered to Seller an opinion of in-house counsel for Purchaser in substantially the form attached hereto as SCHEDULE 7.3. 7.4. Compliance with Advance Agreement. Purchaser shall not be in material default under the terms of the Advance Agreement. 7.5. Certificates. Purchaser shall furnish Seller with such certificates of the officers of Purchaser and others to evidence compliance with the conditions set forth in this Article as may be reasonably requested by Seller. 7.6. Purchase Price. Seller shall have received payment of the Purchase Price in accordance with Section 2.2. 7.7. HSR Waiting Period. Any waiting period required by the HSR Act shall have lapsed or been terminated, and any investigation of the transactions contemplated by this Agreement commenced by the DOJ and/or the FTC pursuant to the HSR Act shall have been terminated. 7.8. No Restraint. There shall not be any pending suit or proceeding to restrain or invalidate, in whole or in part, this Agreement or the transaction contemplated herein. 7.9. Authorization. Purchaser shall have delivered evidence, satisfactory to Seller, that the authorizations contemplated by Section 6.2 hereof has been timely obtained. 21 22 7.10. FCC Consent. The FCC Consent to the assignment of the Authorizations to Purchaser shall have been obtained. ARTICLE 8. CONDITIONS TO PURCHASER'S OBLIGATIONS The obligations of Purchaser to purchase the Assets and to otherwise consummate the transactions contemplated by this Agreement are subject, in the discretion of Purchaser, to the satisfaction or waiver, on or prior to the Closing Date, of each of the following conditions: 8.1. Representations, Warranties and Covenants. All representations and warranties of Seller contained in this Agreement that otherwise do not reference a specified date shall be true and correct in all material respects at and as of the Closing Date as if such representations and warranties were made at and as of the Closing Date, and Seller shall have performed in all material respects all agreements and covenants required hereby to be performed by Seller prior to or at the Closing Date. There shall be delivered to Purchaser a certificate (signed by an authorized officer of Seller) to the foregoing effect ("Seller's Closing Certificate"). 8.2. Consent. The FCC shall have consented to the transfer of the Assets to Purchaser and such consents shall have become a Final Order. 8.3. Board / Stockholder Approval. The transactions contemplated herein shall have been approved by the necessary number of stockholders and directors of Seller. 8.4. Leases. The new leases referenced in Section 2.1.2 shall have been entered into by Purchaser and Seller. 8.5. Closing Documents. Purchaser shall have received from Seller the documents and other items to be delivered by Seller pursuant to Section 9.1 hereof. 8.6. Opinion of Seller's Corporate Counsel. Seller shall have delivered to Purchaser an opinion or opinions of corporate counsel for Seller in substantially the form attached hereto as SCHEDULE 8.6. 8.7. Opinion of Seller's FCC and PUC Counsel. Seller shall have delivered to Purchaser an opinion or opinions of FCC and, if applicable, PUC counsel for Seller in substantially the form attached hereto as SCHEDULE 8.7. 8.8. Certificates. Seller shall furnish Purchaser with such certificates of the respective officers of Seller and others to evidence compliance with the conditions set forth in this Article as may be reasonably requested by Purchaser. 8.9. HSR Waiting Period. Any waiting period required by the HSR Act shall have lapsed or been terminated, and any investigation of the transactions contemplated by this 22 23 Agreement commenced by the DOJ and/or the FTC pursuant to the HSR Act shall have been terminated. 8.10. FCC Consent. The FCC Consent shall have become a Final Order; provided that Purchaser may waive the condition that such Consent be by Final Order. ARTICLE 9. THE CLOSING On the Closing Date at the Closing Place: 9.1. Deliveries by Seller to Purchaser. Seller shall deliver to Purchaser: 9.1.1. one or more assignments transferring to Purchaser (or its designee) all of Seller's interest in and to the Authorizations; 9.1.2. one or more instruments of conveyance transferring to Purchaser (or its designee) all of Seller's interest in and to the Equipment and the Books and Records; 9.1.3. one or more assignments or other instruments of conveyance that may be reasonably requested by Purchaser transferring to Purchaser (or its designee) Seller's interest in and to the Intellectual Property; 9.1.4. one or more instruments of conveyance transferring to Purchaser (or its designee) the Contracts in effect on the Closing Date; 9.1.5. one or more executed warranty deeds and assignments in recordable form, transferring to Purchaser (or its designee) Seller's interest in and to the Real Property; 9.1.6. one or more instruments of conveyance transferring to Purchaser (or its designee) any of the other Assets not otherwise conveyed as provided above; 9.1.7. the opinions of Seller's counsel referenced in Sections 8.6 and 8.7 hereof; 9.1.8. a lien and judgment search from (a) the offices of the Secretaries of State of the state of incorporation of Seller and the state in which Seller is conducting business, and (b) the office of the county clerk of the applicable counties therein, dated not earlier than fifteen (15) business days prior to the Closing Date, the results of which are consistent with Seller's representations in this Agreement; 9.1.9. an affidavit certifying as to Seller's non-foreign status in accordance with Section 1445(b)(2) of the Code; 23 24 9.1.10. a copy of the resolutions of the board of directors and the consent of all shareholders of Seller approving the transactions contemplated by this Agreement certified by an appropriate officer of Seller, together with copies of the Certificate of Incorporation and By-Laws of Seller, certified by an appropriate officer of Seller; 9.1.11. Seller's Closing Certificate; and 9.1.12. an executed Escrow Agreement. 9.2. Deliveries by Purchaser to Seller. Purchaser shall deliver to Seller (or its designee): 9.2.1. one or more agreements whereby Purchaser (or its designee) assumes and agrees to perform Seller's obligations, liabilities and duties under the Assumed Liabilities; 9.2.2. the opinion of Purchaser's counsel referenced in Sections 7.3 hereof; 9.2.3. copy of the resolutions of the board of directors of Purchaser approving the transactions contemplated by this Agreement certified by an appropriate officer of Purchaser; 9.2.4. Purchaser's Closing Certificate; 9.2.5. an executed Escrow Agreement; and 9.2.6. payment of the Purchase Price. ARTICLE 10. ACTIONS BY THE PARTIES AFTER THE CLOSING 10.1. Further Assurances. On and after the Closing Date, the Parties will take all appropriate action and execute all documents, instruments, or conveyances of any kind which may be reasonably necessary or advisable to carry out any of the provisions hereof, including without limitation, putting Purchaser (or its designee) in possession and operating control of the Assets and the System. 10.2. Post-Closing Tax Covenant. Seller shall promptly pay Taxes payable with respect to the operation of the System arising prior to Closing for which Seller is responsible that become due or otherwise have given rise to, or could give rise to, any Lien on the Assets. 10.3. Access to Records. For a period of three (3) years after the Closing Purchaser shall retain and make available to Seller any and all records provided to Purchaser by Seller within a reasonable period of time after receipt of a written request for the same. Seller shall have the right to make copies of the same at its own expense. 24 25 ARTICLE 11. INDEMNIFICATION 11.1. Survival. The several representations, warranties, covenants, and agreements of the Parties contained in this Agreement (or in any document delivered in connection herewith) shall be (i) deemed to have been made on the date of this Agreement and on the Closing Date, (ii) shall be deemed to be material and to have been relied upon by the Parties notwithstanding any investigation made by the Parties, and (iii) shall survive the Closing Date (the "Survival Period") for a period of two (2) years following the Closing Date; provided, however, that the representations, warranties and agreements of Seller contained in Sections 5.4 (Title to Assets), 5.6 (Authorizations), 5.14 and 10.2 (Taxes), and 5.17 (Environmental Matters) shall continue to survive for the duration of any applicable statute of limitations. Any claim for breach of a representation or warranty (an "Indemnity Claim") for which written notice shall have been provided prior to the termination of the applicable survival period to the Party which made such representation or warranty shall be deemed to be timely made within the applicable indemnification period. 11.2. Seller's Indemnity. 11.2.1. During the indemnification Survival Period (or thereafter solely with respect to any Indemnity Claim made prior to the expiration of the applicable Survival Period), Seller shall indemnify and hold harmless Purchaser and its Affiliates from and against any and all demands, claims, losses, liabilities, actions or causes of action, assessments, damages, fines, Taxes, penalties, reasonable costs and expenses (including, without limitation, interest, reasonable expenses of investigation, reasonable fees and disbursements of counsel, accountants and other experts (whether such reasonable fees and disbursements of counsel, accountants and other experts relate to claims, actions or causes of action asserted by Purchaser against Seller or asserted by third parties)) (collectively "Losses") incurred or suffered by Purchaser, its Affiliates, and their respective officers, directors, employees, agents and Representatives, arising out of, resulting from, or relating to: (a) Any breach of any of the representations or warranties made by Seller in this Agreement or in any agreement, certificate, exhibit or other instrument delivered by the Seller pursuant to this Agreement; (b) Any failure by Seller to perform any of its covenants or agreements contained in this Agreement or in any agreement, certificate or other instrument delivered by the Seller pursuant to this Agreement; (c) Any violation by Seller or any of its Affiliates of any Environmental Laws; and (d) Any claims by third parties arising from, relating to or out of the ownership or operation of the System or the Assets prior to the Closing Date. 25 26 11.2.2. Escrow. As collateral security for Seller's indemnification obligations under this Agreement, at the Closing, in accordance with Section 2.2 hereof, Purchaser shall deliver to the Escrow Agent, the Escrow Amount (as defined in Section 2.2), to be held in an interest bearing account pursuant to the terms of an escrow agreement, in substantially the form of SCHEDULE 11.2.2 attached hereto (the "Escrow Agreement"). The Escrow Amount shall be held by the Escrow Agent until the date that is eighteen (18) months after the Closing Date, at which time the Escrow Amount, plus any accrued but undistributed interest, shall be released to Seller, subject to a continuing hold back of the Escrow Amount for any asserted and outstanding indemnification claims at such time. Nothing contained in this Section or in the Escrow Agreement shall limit in any way Seller's indemnification obligations under this Agreement; it being understood that if the Escrow Amount is not sufficient to satisfy such indemnifications obligations as set forth in this Agreement, then Seller shall remain liable for such indemnification obligations until expiration of the applicable Survival Periods and the absence of any pending Indemnity Claims. 11.3. Purchaser's Indemnity. 11.3.1. During the Survival Period (or thereafter solely with respect to any Indemnity Claim made prior to the expiration of the applicable Survival Period), from and after the Closing Date, Purchaser shall indemnify and hold harmless Seller and its Affiliates from and against any and all Losses incurred or suffered by Seller, its Affiliates, and their respective officers, directors, employees, agents and Representatives, arising out of, resulting from, or relating to: (a) Any breach of any of the representations or warranties made by Purchaser in this Agreement or in any agreement, certificate or other instrument delivered by Purchaser pursuant to this Agreement; (b) Any failure by Purchaser to perform any of its covenants or agreements contained in this Agreement or in any agreement, certificate or other instrument delivered by Purchaser pursuant to this Agreement; (c) Any claims by third parties arising from, relating to, or out of the ownership or operation of the System or the Assets after the Closing Date; or (d) Any claims with respect to the Assumed Liabilities. 11.4. Procedure. In the event that any Party hereto shall sustain or incur any Losses in respect of which indemnification may be sought by such Party pursuant to this Article, the Party seeking such indemnification (the "Indemnitee") shall assert an Indemnification Claim by giving prompt written notice thereof (the "Notice") which shall describe in reasonable detail the facts and circumstances upon which the Indemnification Claim is based, along with a copy of the claim or complaint, to the Party required to provide indemnification (the "Indemnitor"), and shall thereafter keep the Indemnitor reasonably and promptly informed with respect thereto; provided that failure of the Indemnitee to give the Indemnitor prompt notice as provided herein shall not relieve the Indemnitor of any of its obligations hereunder, except to the extent that the Indemnitor 26 27 is materially prejudiced by such failure. For purposes of this paragraph, any Notice which is sent within fifteen (15) days of the date upon which the Indemnitee obtained actual knowledge of such Loss shall be deemed to have been a "prompt notice." 11.4.1. If the Indemnitor wishes to defend any claim for any Losses for which such Indemnitor is or may be liable, and such Indemnitor first establishes (to the reasonable satisfaction of the Indemnitee) the Indemnitor's financial ability to pay for any such Losses, then such Indemnitor may, at its own expense, defend such claim; provided that the Indemnitee may retain counsel (at the Indemnitee's expense) to monitor the defense of such claim, and may take over such defense if, during the course thereof, it reasonably appears that the Indemnitor has lost its ability to pay for any Losses threatened by such claim. If an Indemnitor assumes the defense of such an action, no compromise or settlement thereof may be effected by the Indemnitor without the Indemnitee's consent, which consent shall not be unreasonably withheld. If an Indemnitor fails, within thirty (30) days after the date of the Notice, to give notice to the Indemnitee of said Indemnitor's election to assume the defense thereof, said Indemnitor shall be bound by any determination made in such action or any compromise or settlement thereof effected by the Indemnitee. 11.4.2. Amounts payable by the Indemnitor to the Indemnitee in respect of any Losses for which any Party is entitled to indemnification hereunder shall be payable by the Indemnitor as incurred by the Indemnitee, unless such Indemnification Claim is reasonably disputed by the Indemnitor. 11.5. Limitation on Indemnification. No Party shall be entitled to indemnification in accordance with the provisions of this Article until such time as the value of the aggregate loss or liability for which indemnification is sought exceeds the sum of Fifty Thousand Dollars ($50,000). At such time as the aggregate loss or liability for which indemnification may be sought exceeds Fifty Thousand Dollars ($50,000), the Party to be indemnified may seek indemnification for all such losses or liabilities, including the first Fifty Thousand Dollars ($50,000). This limitation on claims shall not apply to any indemnification for claims made by Purchaser relating to Purchaser's failure to pay any taxes that were due and payable on or before the Closing Date. This limitation shall not apply to any of the Taxes, penalties or interest referred to in the second paragraph of Section 5.14. 11.6. Indemnification Payments in Cash. All payments in respect to any undisputed or resolved Indemnification Claims shall be made in cash. 11.7. Investigations: Waivers. The Survival Periods and rights to indemnification provided for in this Article shall remain in effect notwithstanding any investigation at any time by or on behalf of any Party hereto or any waiver by any Party hereto of any condition to such Party's obligations to consummate the transactions contemplated hereby. ARTICLE 12. DEFAULT AND REMEDIES 27 28 12.1. Opportunity to Cure. If any Party believes another to be in material default hereunder for breach of representations and warranties or any other reason, such Party shall provide the other with written notice specifying in reasonable detail the nature of such default. If the default has not been cured by the earlier of: (a) the Closing Date, or (b) within thirty (30) days after delivery of that notice, then the Party giving such notice may terminate this Agreement by notifying the defaulting Party and/or exercise the remedies available to such Party pursuant to this Article, subject to the right of the other Party to contest either such action through appropriate proceedings; provided, however, that if such breach is not capable of being cured within such period and if the breaching Party shall have commenced action to cure such breach within such period and is diligently attempting to cure such breach and such breach can reasonably be expected to be cured during the additional time period, the breaching Party shall be afforded an additional reasonable amount of time to cure such breach but not to exceed an additional sixty (60) days; provided, further, that Purchaser shall have no opportunity to cure the breach of its obligation to deliver any required portion of the Purchase Price to be delivered to Seller at Closing. 12.2. Remedies/Arbitration. 12.2.1. Any claim under this Agreement brought after the Closing Date, and any claim under this Agreement brought prior to the Closing Date in which the Party bringing the claim is praying solely for monetary damages, shall be submitted to binding arbitration in accordance with the commercial arbitration rules of the American Arbitration Association and the provisions contained herein. The arbitration shall be conducted in Dallas, Texas by a panel of three arbitrators. All claims between the Parties shall be arbitrated in a single proceeding, to the full extent practicable. 12.2.2. The Party initiating arbitration shall give the other Party written notice of the matter in dispute and the name of the arbitrator appointed by it. Within fourteen (14) days after receipt of such notice, the non-initiating Party shall give notice to the initiating Party of the arbitrator appointed by it. If the non-initiating Party fails to designate its arbitrator within the said fourteen (14) day period, the American Arbitration Association shall select an arbitrator for such Party. Within fourteen (14) days after the appointment of the second arbitrator, the two arbitrators so appointed shall agree on a third arbitrator. If the two arbitrators are unable to agree on a third arbitrator within said 14-day period, then the American Arbitration Association shall appoint the third arbitrator. 12.2.3. All determinations in the final decision of the arbitration panel shall be made by majority vote. The fees and expenses of the arbitration panel shall be awarded by the arbitrators in their discretion as part of their award. The arbitrators' award will be binding on the Parties hereto and may be entered in any court of competent jurisdiction, and shall not be subject to appeal. 12.2.4. Notwithstanding the foregoing, the Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Parties shall be entitled to an injunction or injunctions to prevent breaches or this Agreement and 28 29 to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. Each Party agrees that it will not assert, as a defense against a claim for specific performance, that the Party seeking specific performance has an adequate remedy at law. ARTICLE 13. TERMINATION 13.1. Absence of FCC Consent. This Agreement may be terminated by either Party by giving written notice thereof to the other if the Assignment Applications have not been granted by Final Order within twelve (12) months after the date of this Agreement. Neither Party may terminate this Agreement pursuant to this Section if such Party is in material default hereunder. 13.2. Mutual Consent. This Agreement may be terminated by the mutual consent of the Parties. ARTICLE 14. DAMAGE; RISK OF LOSS 14.1. Risk of Loss. The risk of loss or damage to the Assets shall be upon Seller at all times prior to the Closing Date. In the event of material loss or damage to the Assets prior to the Closing Date, Seller shall promptly notify Purchaser thereof and, unless otherwise agreed by the Parties, Seller shall use best efforts to repair, replace or restore the lost or damaged property to its former condition as soon as practicable. If such repair, replacement, or restoration has not been completed prior to the Closing Date, Purchaser may, at its option: 14.1.1. elect to consummate the Closing and make such arrangements as the Parties may reasonably agree upon to remedy such loss or damage; or 14.1.2. elect to postpone the Closing Date, with prior consent of the FCC if necessary, for such reasonable period of time (not to exceed ninety (90) days) as is necessary for Seller to repair, replace, or restore (or to cause to be repaired, replaced or restored) the lost or damaged property to its former condition. If, after the expiration of that extension period, the lost or damaged property has not been adequately repaired, replaced or restored, Purchaser may terminate this Agreement or elect to consummate the Closing as provided in Section 14.1.1. For purposes of this Section, loss or damage shall be deemed "material" if the reasonable cost to repair, replace, or restore the lost or damaged property exceeds $100,000.00. 14.2. Resolution of Disagreements. If the Parties are unable to agree upon the extent of any loss or damage, the cost to repair, replace or restore any lost or damaged property, the adequacy of any repair, replacement, or restoration of any lost or damaged property, or any other matter arising under this Section, the disagreement shall be referred to a qualified consulting communications engineer mutually acceptable to Seller and Purchaser who is a member of the 29 30 Association of Federal Communications Consulting Engineers, whose decision shall be final, and whose fees and expenses shall be paid one-half by Seller and one-half by Purchaser. ARTICLE 15. EMPLOYEES 15.1. Employees. For purposes of this Article, the term "Employees" shall include all full-time and part-time employees, employees on workers' compensation, military leave, maternity leave, leave under the Family and Medical Leave Act of 1993, short-term and long-term disability (including a disability pension), non-occupational disability, layoff with recall rights, and employees on other approved leaves of absence with a legal or contractual right to reinstatement. 15.2. Responsibility for Employees on or Before the Closing. All medical, dental, vision, travel accident, accidental death and dismemberment, and life insurance expenses incurred by Employees and their dependents on or before the Closing Date, pursuant to any employee plan, irrespective of the time such claims are presented, shall be the responsibility of Seller on the Closing Date. Seller shall be responsible for any medical, dental or life insurance coverage due to any Employees and their dependents who retired on or before the Closing Date. Seller agrees to fulfill its obligations under continuation coverage rules of COBRA with respect to a "qualifying event," with the meaning or Section 4980B(f) of the Code or Section 603 or ERISA, occurring on or before the Closing Date with respect to any Employees who are not hired by Purchaser and their dependents. All short-term, long-term and extended disability benefits payable to Employees and their dependents who became disabled on or before the Closing Date are the responsibility of Seller and shall be paid directly by Seller or their insurance carrier to such Employees and their dependents. If any Employee is terminated from employment on or before the Closing Date by Seller as result of the transactions contemplated by this Agreement or otherwise, any obligations arising out of such termination, including severance, accrued vacation pay, COBRA obligations, employment discrimination complaints, unfair labor practice charges, grievance under any collective bargaining agreement, wrongful termination and related tort claims and breach of contract claims shall be the sole responsibility of Seller. Purchaser shall have the sole responsibility for the items listed in the preceding sentences for any actions taken by Purchaser with respect to Employees it hires after the Closing Date. ARTICLE 16. MISCELLANEOUS 16.1. Assignment. Neither this Agreement nor any of the rights or obligations hereunder may be assigned by Seller or Purchaser without the prior written consent of the others. Purchaser may assign its right, title and interest in, to and under this Agreement to an Affiliate; provided that Purchaser must first obtain Seller's consent to any such assignment (which consent shall not be unreasonably withheld) if such assignment could reasonably be expected to delay the Closing. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the 30 31 Parties hereto and their respective successors and assigns, and no other person shall have any right, benefit or obligation hereunder. 16.2. Notices. Unless otherwise provided herein, any notice, request, instruction or other document to be given hereunder by any Party to the other shall be in writing and delivered in person or by courier, by facsimile transmission, or mailed by registered or certified mail, postage prepaid, return receipt requested or overnight courier, as follows: If to Purchaser or Guarantor: WWC Texas RSA Limited Partnership 3650 - 131st Avenue Bellevue, Washington 98006 Attention: Scott A. Hopper Fax No: (425) 586-8666 With a copy (which copy shall not constitute notice or service of process) to: Stokes Lawrence, P.S. 800 Fifth Avenue, Suite 4000 Seattle, WA 98104-3199 Attention: Douglas C. Lawrence, Esq. Fax No: (206) 464-1496 If to Seller: KO Communications Inc. 3300 West Foxridge Lane Muncie, IN 47304 Attention: Paul L. Kozel Fax No. (765) 741-4151 With a copy (which copy shall not constitute notice or service of process) to: Lukas, Nace, Gutierrez & Sachs 1111 - 19th Street, NW, Suite 1200 Washington, D.C. 20036 Attention: Thomas Gutierrez, Esq. Fax No: (202) 828-8410 or to such other place and with such other copies as a Party may designate as to itself by written notice to the others. All such notices and communications shall be deemed to have been duly given at the time delivered by hand, if personally delivered; three business days after being deposited in the mail as provided above; when receipt confirmed, if sent by facsimile; and the next business day after timely delivery to the courier, if sent by an over-night air courier service guaranteeing next day delivery. 31 32 16.3. Choice of Law. This Agreement shall be construed, interpreted and the rights of the Parties determined in accordance with the laws of the State of Delaware, except with respect to matters of law concerning the internal affairs of any entity which is a Party to or the subject of this Agreement, and as to those matters the law of the jurisdiction under which the respective entity derives its powers shall govern. 16.4. Entire Agreement; Amendments and Waivers. This Agreement, together with all exhibits and schedules hereto, constitutes the entire agreement among the Parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties. No supplement, modification or waiver of this Agreement shall be binding unless executed in writing by the Party to be bound thereby. No waiver of any of the provisions of this Agreement shall be deemed, or shall constitute, a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 16.5. Allocation of the Purchase Price. The Purchase Price shall be allocated in accordance with SCHEDULE 16.5, to be prepared on or before the Closing, and Purchaser and Seller agree to cooperate reasonably in the preparation of such Schedule. Each of the Parties agrees that (i) such allocation represents the fair market value of the Assets and shall be binding upon it; (ii) no filings made by it with any taxing or other authority shall reflect an allocation other than in the manner agreed upon; and (iii) it shall timely make all filings required by any taxing authority, including the filing of Internal Revenue Service Form 8594. 16.6. Bulk Sales. Purchaser and Seller each waive any obligation of the other Party which may arise under the provision of any applicable "Bulk Sales" laws. 16.7. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 16.8. Invalidity. In the event that any one or more of the provisions contained in this Agreement or in any other instrument referred to herein, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any other such instrument unless such invalidity materially affects the benefit of the bargain of a Party as originally contracted for in this Agreement. 16.9. Headings. The headings of the Articles and Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 16.10. Expenses. Except as otherwise provided herein, Seller and Purchaser shall bear equally any transfer or excise taxes arising from the transactions contemplated herein. Seller shall pay the cost of any recording and transfer fees arising from the purchase and sale of the Assets pursuant to this Agreement. Seller and Purchaser will each be liable for its own expenses incurred 32 33 in connection with the negotiation, preparation, execution or performance of this Agreement. Seller and Purchaser will each be liable for one-half of any expenses incurred in obtaining the FCC Consent. Purchaser shall be responsible for any filing fees associated with the HSR filing. 16.11. Schedules and Exhibits. The Schedules and Exhibits to this Agreement are a material part hereof and shall be treated as if fully incorporated into the body of the Agreement. 16.12. Publicity. Except as required by Applicable Law or on advice of counsel, no Party shall issue any press release or make any public statement regarding the transactions contemplated hereby without the prior approval of the other Party. Any press release or the text of any public statement to be made by one party shall be provided to the other in advance of its release, and no such release or statement shall be made public without the consent of the other party. 16.13. Confidential Information. The Parties acknowledge that the transaction described herein is of a confidential nature and shall not be disclosed except to Representatives, advisors and Affiliates, or as required by law, until such time as the Parties make a public announcement regarding the transaction as provided in Section 16.12. The Parties shall not make any public disclosure of the specific terms of this Agreement, except as required by law. In connection with the negotiation of this Agreement and the preparation for the consummation of the transactions contemplated hereby, the Parties acknowledge that they will have access to confidential information relating to the other Parties. Each Party shall treat such information as confidential, preserve the confidentiality thereof and not duplicate or use such information, except to Representatives, consultants and Affiliates in connection with the transactions contemplated hereby provided such advisors, Representatives and Affiliates also agree to keep such information confidential. In the event of the termination of this Agreement for any reason whatsoever, each Party shall return to the others all documents, work papers and other material (including all copies thereof) obtained in connection with the transactions contemplated hereby and will use all reasonable efforts, including instructing any of its Employees and others who have had access to such information, to keep confidential and not to use any such information, unless such information is now, or is hereafter disclosed, through no act or omission of such Party, in any manner making it available to the general public. 16.14. No Third Party Beneficiaries. All of the rights and obligations included in this Agreement are intended to inure to the benefit of the Parties and their Affiliates alone. Nothing contained in this agreement shall be construed as creating any rights in any other third parties. 16.15. Parent Guarantee. Guarantor hereby absolutely, unconditionally, directly, irrevocably, completely, and immediately guarantees the performance of Purchaser or any of its assignees with respect to the payment of the Purchase Price at the time and in the manner called for in this Agreement. Guarantor's obligation of payment and performance is not contingent upon Seller first pursuing any remedies against Purchaser or any of its successors in interest. In the event Purchaser or its assignee fails to make any such payment when due, within five (5) business days of receipt of written notice from Seller of Purchaser's failure to so perform Guarantor shall make such payment to Seller, subject to all defenses and objections that might otherwise be available to Purchaser. Except as expressly stated in this Section, Guarantor shall have no other responsibility or obligation under this Agreement. 33 34 IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed on its behalf by its officer thereunto duly authorized as of the day and year first above written. KO COMMUNICATIONS, INC. By: /s/ Paul Kozel -------------------------------- Its: President ------------------------------- WWC TEXAS RSA LIMITED PARTNERSHIP By: /s/ Scott Hopper -------------------------------- Its: Vice President ------------------------------- SOLELY AS GUARANTOR UNDER THE PROVISIONS OF SECTION 16.15 ABOVE WESTERN WIRELESS CORPORATION By: /s/ Scott Hopper ------------------------------- Its: Vice President ------------------------------ 34 EX-10.90 3 ASSET PURCHASE AGREEMENT-NETWIRELESS, LLC. 1 EXHIBIT 10.90 ASSET PURCHASE AGREEMENT Arkansas-11 Rural Service Area This Asset Purchase Agreement (this "Agreement") is entered into on August 25, 1999 by and among NetWireless, LLC, an Arkansas limited liability company ("Seller"), GCC Licenses LLC., a Delaware limited liability company ("Purchaser"), and Western Wireless Corporation, a Delaware corporation, as "Guarantor." Purchaser and Seller are sometimes referred to herein collectively as the "Parties" and each as a "Party." RECITALS WHEREAS, Seller is the holder of the non-wireline cellular radio telephone license granted by the Federal Communications Commission (the "FCC") and certain assets necessary for the operation of the non-wireline cellular radio telephone system in the Arkansas-11 Rural Service Area (the "System"); WHEREAS, Purchaser desires to purchase the cellular radio telephone system, including the licenses necessary to operate such system, in the Arkansas-11 Rural Service Area; WHEREAS, the Parties desire that Purchaser acquire from Seller all of the assets of the System including, among other things, all of the authorizations issued by the FCC for the operation of the System, all in accordance with the terms and conditions set forth in this Agreement; and WHEREAS, the Parties have determined that it would further the development of competitive cellular radio telephone systems in the United States to consummate the transactions contemplated hereby; NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Parties hereto agree as follows: ARTICLE 1. DEFINITIONS As used herein, the terms below shall have the following meanings: "Action" shall have the meaning set forth in Section 5.11. "Affiliate" of a Person shall mean any Person which directly or indirectly, through one or more intermediaries, owns, controls, or is controlled by, or is under common control with, such Person. The term "control" (including, with correlative meaning, the terms "controlling," "controlled by" and "under common control with"), as used with respect to any Person, shall 1 2 mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "Applicable Laws" shall mean all federal, state and local statutes, ordinances, rules, and regulations of any Governmental Authority that govern, regulate or otherwise apply to the Assets, the Business or operation of the System. "Assets" shall mean all assets, properties and rights, both tangible and intangible, that are owned by, leased or licensed to, Seller for use in the System, and are otherwise necessary for the operation of the Business in a manner consistent with the present operations and with past practices of the System, including, without limitation, the Real Property, Equipment, Authorizations, Contracts, Subscriber Agreements, Intellectual Property and Books and Records; provided, however, that the Assets shall not include the Excluded Assets. "Assignment Applications" shall mean that joint application filed with the FCC relating to the assignment of the FCC Authorizations to Purchaser in the manner contemplated by this Agreement. "Assumed Liabilities" shall have the meaning set forth in Section 3.2 hereof. "Auditor" shall have the meaning set forth in Section 2.3.4 hereof. "Authorizations" shall mean the approvals, consents, authorizations, permits and licenses issued to Seller by any Governmental Authority relating to the System. "Books and Records" shall mean all the books and records related to the Assets, the Business and the System, including without limitation, (a) books and records relating to the purchase of materials and supplies, invoices, Subscriber lists, supplier lists, personnel records, and Subscriber information, and (b) computer software (to the extent such software is included in the Assets) and data in computer readable and/or human readable form used to maintain such books and records together with the media on which such software and data are stored and all documentation relating thereto, but shall not include books and records relating to the Excluded Assets or Seller's limited liability company books and records or stock ledgers. "Business" shall mean all of the business and operations relating to the System as currently conducted by Seller. "CERCLA" shall have the meaning set forth in the Section defining Environmental Laws. "Closing Date" shall mean the next business day that is ten or more days after the date on which the FCC Consent becomes a Final Order; provided that if such date is within five days of the end of a calendar month, the Closing Date shall be the last business day of that calendar month. 2 3 "Closing Place" shall mean such location agreed upon by the Parties or, in the absence of such an agreement, the offices of Stokes Lawrence, P.S., 800 Fifth Avenue, Suite 4000, Seattle, Washington 98104-3179. "Closing" shall mean the consummation of the assignment, transfer, conveyance and delivery of the Assets and the Purchase Price as contemplated hereunder. "Code" shall mean the Internal Revenue Code of 1986, as amended. "Consents" shall mean any and all consents, approvals, authorizations or waivers of any Governmental Authority, including, without limitation, the FCC Consent, and any and all consents, approvals or waivers from parties to Contracts that are (i) required for the consummation of the transactions contemplated by this Agreement or (ii) necessary in order that Purchaser (or its designee) can conduct the Business after the Closing Date substantially in the same manner as before the Closing Date. "Contracts" shall mean all leases, contracts, commitments, and other binding agreements relating to the System to which Seller is a party and which are set forth on SCHEDULE 5.7, whether written or oral. "DOJ" shall mean the United States Department of Justice. "Employees" shall mean all persons employed on a full or part-time basis together with all persons retained as "independent contractors" who are the functional equivalent of employees. "Environmental Laws" shall mean Applicable Laws relating to pollution, the environment or the Handling of Regulated Substances, including without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"). "Equipment" shall mean all of the furniture, fixtures, furnishings, machinery, computer hardware, antennas, transmitters, and other personal property used in connection with the Business and the System. "ERISA" shall have the meaning set forth in Section 5.9 hereof. "Escrow Agreement" shall have the meaning set forth in Section 11.2.2 hereof. "Escrow Amount" shall have the meaning set forth in Section 2.2 hereof. "Excluded Assets" shall mean those assets set forth on SCHEDULE 1 hereto. "FCC" shall mean the Federal Communications Commission. "FCC Authorization" shall mean the Authorizations from the FCC relating to the operation of the System. 3 4 "FCC Consent" shall mean the action of the FCC granting its consent to the assignment of the FCC Authorization from Seller to Purchaser. "FTC" shall mean the Federal Trade Commission. "Final Order" shall mean a Preliminary Order which is not reversed, stayed, enjoined, set aside, annulled, or suspended, and with respect to which no timely request for stay, motion or petition for reconsideration or rehearing, application or request for review, or notice of appeal or other judicial petition for review is pending, and as to which the time for filing any such request, motion, petition, application, appeal, or notice, and for the entry of an order staying, reconsidering, or reviewing on the FCC's or other regulatory authorities' own motion, has expired. If a Preliminary Order is subject to conditions which may have a material adverse effect on a party, such party must either timely file a petition for reconsideration with respect to such conditions or accept such conditions. If such party timely files a petition for reconsideration with respect to such conditions, the Preliminary Order shall not become or be deemed a Final Order unless and until such conditions are removed from the Preliminary Order or the party affected thereby has notified the other Party in writing of its willingness to accept such conditions. "Final Settlement" shall have the meaning set forth in Section 2.3.3 hereof. "Financial Statements" shall have the meaning set forth in Section 5.10 hereof. "Governmental Authority" shall mean any court or any federal, state, county, or local governmental, legislative or regulatory body, agency, department, authority, instrumentality or other subdivision thereof, including, without limitation, the FCC and the PUC. "Handling" shall mean the production, use, generation, storage, treatment, recycling, disposal, discharge, release, or other handling or disposition at any time on or prior to the Closing Date of any Regulated Substance either in, on, or under any Operating Site. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Intellectual Property" shall mean all patents, trademarks, service marks, trade names, copyrights, licenses, formulas, computer software, advertising slogans, know-how, data and other intellectual property rights or intangible property rights of Seller which are used or intended for use in connection with the System. "Inventory" shall mean all usable and non-obsolete merchandise owned and intended for resale in connection with the Business, whether or not located on the premises, on consignment to a third party, or in transit or storage. "Liabilities" shall mean liabilities, obligations or commitments of any nature, absolute, accrued, contingent or otherwise, known or unknown, whether matured or unmatured. 4 5 "Lien" shall mean any contract for sale (except for the sale of cellular telephone service and rentals of cellular telephone equipment to Subscribers), claim, lien, pledge, option, charge, covenant, restriction, encroachment, easement, security interest, mortgage, deed of trust, right-of-way, encumbrance or adverse interest of any kind or character of any other Person. "Losses" shall have the meaning set forth in Section 11.2.1 hereof. "Operating Data Statements" shall have the meaning set forth in Section 5.10 hereof. "Operating Site" shall mean any real property or facility owned, leased or used at any time by Seller in connection with the System. "Person" shall mean an individual, a corporation, a partnership, an association, a joint-stock company, a trust, any unincorporated organization, or a government or a political subdivision thereof. "Preliminary Order" shall mean an action by the FCC and any other applicable state regulatory authority consenting to or authorizing the assignment of the FCC Authorization to Purchaser (or its designee), which action has not yet become a Final Order. "PUC" shall mean the Arkansas Public Utilities Commission. "Purchase Price" shall have the meaning set forth in Section 2.2 hereof. "Purchaser's Closing Certificate" shall have the meaning set forth in Section 7.1 hereof. "Real Property" shall mean all real property owned or leased by or used, or intended by Seller for use, in connection with the System, together with all buildings, improvements, fixtures, easements, licenses, options, insurance proceeds and condemnation awards and all other rights of Seller in or appurtenant thereto, but does not include the property listed on SCHEDULE 1. "Regulated Substance" shall mean (i) any "hazardous substance" as defined in CERCLA, (ii) any petroleum or petroleum substance, and (iii) any other pollutant, waste, contaminant, or other substance regulated under Environmental Laws. "Representative" shall mean any officer, director, principal, attorney, agent, employee or other representative of any Person. "Seller's Closing Certificate" shall have the meaning set forth in Section 8.1 hereof. "Service" shall mean the provision of the System's cellular telephone service to Subscribers. "Subscribers" shall mean customers of Seller that subscribe to the Service. 5 6 "Subscriber Agreements" shall mean Contracts whereby Seller has agreed to provide Service. "Survival Period" shall have the meaning set forth in Section 11.1 hereof. "Taxes" shall mean all taxes, charges, fees, levies or other assessments or charges of any kind whatsoever, including without limitation, income, excise, use, transfer, payroll, occupancy, property, sales, franchise, unemployment and withholding taxes, imposed by any Governmental Authority, and any assessments against Real Property together with any interest, penalties or additional taxes attributable to such taxes and other assessments. "Texas-7 APA" means that Asset Purchase Agreement entered into between Purchaser and KO Communications, Inc., as Seller, under which Purchaser has agreed to purchase, and KO Communications, Inc., has agreed to sell, certain of the assets of the non-wireline cellular telephone system owned by KO Communications, Inc., and operating in the Texas-7 rural service area. "To the knowledge" or "knowledge" of a Party (or similar phrases) shall mean (i) with respect to Seller, to the extent of matters which are actually known by any of the officers, directors or employees of Seller or which, based on facts of which such parties are aware, would be known to a reasonable Person in similar circumstances and (ii) with respect to Purchaser, to the extent of matters which are actually known by any of the officers, directors or employees of Purchaser, or which, based on facts of which such parties are aware, would be known to a reasonable Person in similar circumstances. ARTICLE 2. PURCHASE OF ASSETS 2.1. Transfer of Assets. Subject to the terms and upon satisfaction of the conditions contained in this Agreement, at the Closing, Seller shall sell, convey, transfer, assign and deliver to Purchaser (or its designee), and Purchaser (or its designee) will accept and acquire, the Assets. 2.2. Purchase Price. The purchase price for the Assets shall be Twenty Million Dollars ($20,000,000), subject to adjustment pursuant to this Article (the "Purchase Price"), which shall be paid by Purchaser to Seller (or its designee) on the Closing Date as follows: (a) One Million Dollars ($1,000,000) of such Purchase Price (the "Escrow Amount") shall be delivered to the Escrow Agent as defined in Section 11.2.2 and held pursuant to the terms of Section 11.2.2; and (b) the balance of such Purchase Price shall be paid by Purchaser to Seller by wire transfer of immediately available funds. 2.3. Other Adjustments and Prorations. 2.3.1. The Purchase Price shall be adjusted in accordance with the following: 6 7 (a) The Purchase Price shall be increased by an amount equal to any cash, adjusted accounts receivable, Inventory (valued at book value), prepaid expenses and any other current assets transferred to Purchaser. For the purposes of this Section the "adjusted accounts receivable" shall equal the sum of the following: (i) 90% of the accounts receivable from carriers (not including any clearinghouse receivables) and resellers, and of receivables from Subscribers which remain unpaid by Subscribers for less than thirty-one (31) days from the date such receivable first comes due ("Outstanding"); plus (ii) 70% of the amount of all Subscriber accounts receivable that are Outstanding for more than thirty (30) days but less than sixty-one (61) days; plus (iii) 50% of the amount of all Subscriber accounts receivable that are Outstanding for more than sixty (60) days, but less than ninety-one (91) days; and (iv) There shall be no adjustment (i.e. 0%) for the amount of any Subscriber accounts receivable that are Outstanding more than ninety (90) days. (b) The Purchase Price shall be decreased by an amount equal to (x) amounts collected by Seller from Subscribers on or prior to the Closing Date (net of liabilities associated with deferred access revenue included in such amounts), which relate to Services to be provided after the Closing Date (hereinafter referred to as "Advance Receipts"), and (y) liabilities associated with deferred access revenue assumed by Purchaser. 2.3.2. Except as otherwise specifically provided for herein, all revenues and all expenses arising from the Business and ownership of the Assets, including resale charges and other expenses payable in respect to Service, utility charges, Taxes levied against the Assets, property and equipment rentals, sales and service charges, Taxes (except for Taxes arising from the transfer of the Assets ), and similar prepaid and deferred items, shall be prorated between Seller and Purchaser in accordance with the principle that Seller shall receive the benefit of all revenues, and be responsible for all expenses, costs, obligations and Liabilities allocable to the Business and the ownership of the Assets for the period on and prior to the Closing Date, and Purchaser shall receive the benefit of all revenues, and be responsible for all expenses, costs, obligations and Liabilities allocable to the Business and the ownership of the Assets after the Closing Date. 2.3.3. A final settlement (the "Final Settlement") of all adjustments or prorations made under this Section, with payment being made by the appropriate Party in cash (but without any interest thereon), shall occur no later than one hundred twenty (120) days after the Closing Date. 7 8 2.3.4. In the event that the Parties cannot agree on the amount of the Final Settlement, the determination shall be made by a mutually agreed upon national accounting firm selected jointly by Purchaser and Seller that has not, during the prior three (3) years, been employed by any of the Parties (the "Auditor"). The Auditor shall make its determination of the Final Settlement based on the express provisions of this Agreement; provided, however, that if the Auditor finds that the express terms of this Agreement are not sufficient to resolve any issue or issues, the Auditor shall rely upon generally accepted accounting principles then in effect. Any Party may invoke the use of the Auditor by notifying the other Party in writing, provided that a Party may not invoke the use of the Auditor to determine the Final Settlement earlier than one hundred eighty (180) days after the Closing Date. The Auditor shall be required to render a decision within twenty-one (21) days after the Auditor is requested to render a determination under this Section. The decision of the Auditor shall be binding on the Parties and not subject to any judicial challenge by the Parties. Within five (5) business days after the Auditor provides the determination to the Parties, the payment of the Final Settlement shall be made in accordance with that determination. The expenses of the Auditor shall be paid by Seller and Purchaser in reverse proportion to the Auditor's determination with respect to the allocation to Seller and Purchaser of the amount in disagreement. For example, if the amount in disagreement is One Hundred Thousand Dollars ($100,000) and the Auditor determines that the Seller should receive Seventy Thousand Dollars ($70,000) and the Purchaser should receive Thirty Thousand Dollars ($30,000), then Seller shall pay thirty percent (30%) of the Auditor's expenses, and Purchaser shall pay seventy percent (70%). ARTICLE 3. ASSUMED OBLIGATIONS 3.1. No Assumption of Liabilities by Purchaser, Exceptions. Except as set forth in Section 3.2 below, Purchaser expressly does not, and shall not, assume or be deemed to have assumed under this Agreement or by reason of any transactions contemplated hereunder, any Liabilities of any nature whatsoever relating to the System or of Seller, or any of Seller's stockholders or partners, as the case may be. 3.2. Assumed Liabilities. At the Closing, Purchaser shall assume and shall timely pay, perform, fulfill and discharge all of Seller's liabilities and obligations due after the Closing Date on those Contracts and Liabilities set forth on SCHEDULE 3.2 (the "Assumed Liabilities"). ARTICLE 4. COVENANTS AND AGREEMENTS 4.1. Covenants of Seller. Seller covenants and agrees that from the time of the execution and delivery of this Agreement until (and including) the Closing Date: 4.1.1. Consummate Transactions. Seller shall use its best efforts to cause the transactions contemplated by this Agreement to be consummated in accordance with the terms 8 9 hereof, and, without limiting the generality of the foregoing, use best efforts to obtain all necessary approvals, consents, permits, licenses and other authorizations required in connection with this Agreement and the transactions contemplated hereby from Governmental Authorities, and to make all filings with and to give all notices to third parties, which may be necessary or reasonably required of Seller in order to consummate the transactions contemplated hereby. 4.1.2. Full Access and Purchaser Due Diligence. Seller shall allow Purchaser and its agents and representatives (including, without limitation, its independent auditors and attorneys) reasonable access during normal business hours to all of Seller's personnel, premises, properties, assets, financial statements and records, books, contracts, documents and commitments of or relating to the Business, and shall furnish Purchaser and its agents and representatives with all such information concerning the affairs of the System as Purchaser may reasonably request. 4.1.3. Ordinary Course. Seller shall cause the Business and affairs of the System to be conducted only in the ordinary course and consistent with past practices. Without limiting the foregoing, Seller shall continue to pay its bills and other obligations, all in the ordinary course of business consistent with past practices, but shall not, without the prior written consent of Purchaser, perform or do any of the following if the same would have a material adverse effect on the Business, the System or the Assets: (a) incur any material Liability other than obligations to Seller's brokers, attorneys and accountants, all of which shall be paid by Seller; (b) assume, guarantee, change any existing guarantee, endorse, act as an accommodation party, or otherwise become responsible for, the obligations of any other Person; (c) make any loans or advances to any Person; (d) sell, transfer, convey, mortgage, pledge, hypothecate or place any Liens on any of the Assets; (e) waive or compromise any right or claim for any amount; (f) cancel any note, loan or other material obligation owing to Seller; (g) enter into any Contract with any Person, including, without limitation, the stockholders of Seller or any of its Affiliates, consultants, agents or assigns; (h) except as otherwise provided in this Agreement, increase or modify compensation of any type currently paid to any of its employees, officers, directors, agents or consultants; (i) make any new arrangement for any profit-sharing plan, retirement plan, bonus plan, severance arrangement, employee benefit plan, or any similar plan except for modifications of existing plans that are required by law, or contemplated to be implemented at the time of the execution of this Agreement; (j) except as required by law, enter into any collective bargaining agreement, or make any commitment whatsoever to any union or other representative or party which intends to represent any of Seller's employees subsequent to the Closing; (k) except as permitted under Section 5.9 hereof, hire any employees; (l) except as required by law, enter into any additional reseller agreements; or (m) enter into any Contract involving payments, assets, or liabilities with a value greater than $25,000 individually or $100,000 in the aggregate, excluding noncapital expenditures incurred in the ordinary course of business consistent with past practices. Notwithstanding the foregoing, nothing in this Section shall prevent Seller from taking appropriate action as may be necessary to maintain its ability to control and manage the System and to comply with the rules, regulations or directives of any Governmental Authority. 4.1.4. Retention of Records. On the Closing Date, Seller shall deliver to Purchaser all of the Books and Records relating to the System and the Business. In addition, for a period of three (3) years after the Closing Date, Seller shall retain and make available to Purchaser 9 10 copies of any documents not theretofore delivered to Purchaser relating to System, the Business or the Assets. 4.1.5. No Amendments or Issuance of Additional Shares. Seller shall not amend its charter, by-laws, or comparable governing instrument, which amendment would have a material adverse effect on the Assets, the Business or the transactions contemplated by this Agreement or which would require any additional consents or approvals of the transactions contemplated by this Agreement. Seller shall not issue or sell any shares of its capital stock or other securities, or issue options, warrants or rights of any kind to acquire, or any securities convertible into, exchangeable for or representing a right to purchase or receive, any stock-based or stock-related awards or other equity-based awards, shares of its capital stock or other equity or other securities, or enter into any arrangement or contract with respect to the purchase or voting of shares of its capital stock or other equity, or adjust, split, combine or reclassify any of its securities, or make any other changes in its capital structure, if any such issuance, sale, contract, plan, understanding, arrangement, adjustment, split, combination, reclassification or changes would require any additional approvals of the transactions contemplated by this Agreement or would otherwise have a material adverse effect on the transactions contemplated by this Agreement. 4.1.6. No Termination or Settlement. Without the prior written consent of Purchaser, which consent shall not be unreasonably withheld, Seller shall not terminate any agent, or settle any dispute with any agent if such termination or settlement would cause Purchaser to have any continuing obligation after the Closing with respect thereto. 4.1.7. Preserve Business and Goodwill. Seller shall use its diligent efforts to keep the System intact, to preserve and maintain the Assets, to preserve the Business and to preserve the goodwill of suppliers, Subscribers and others dealing with Seller. 4.1.8. Compliance with Law. Seller shall comply in all material respects with Applicable Laws relating to the System, the Business and the Assets. 4.1.9. Approvals; Consents. Seller shall obtain and maintain in full force and effect, and shall not take any action which might have a material adverse effect on, any Authorizations that are required for the operation of the Business as presently conducted, except where such Authorizations are administrative in nature, and the failure to obtain or maintain such Authorizations would not adversely impact the continued operation of any part of the System or any component thereof, as currently operated. The Parties shall consult with one another as to the approach to be taken with any Governmental Authority with respect to obtaining any Authorization to the transactions contemplated hereby, and each of the Parties shall keep each other Party reasonably informed as to the status of any such communications with any Governmental Authority. Seller shall not make any material commitments with respect to any Authorizations that would have a material adverse effect on the Business, the System or the Assets without Purchaser's prior written consent. 4.1.10. Insurance. From the date hereof through the Closing Date, Seller shall maintain in full force and effect (including necessary renewals thereof), all of the insurance 10 11 policies that Seller currently maintains relating to System, or other functionally equivalent policies. The policies currently maintained by Seller are set forth on SCHEDULE 4.1.10. From and after the Closing Date, Seller shall take all actions that may be necessary to cause the coverage under such policies to continue in full force and effect after the Closing Date with respect to liability occurrences prior to the Closing Date and shall take all actions necessary to preserve or protect rights under any such policies with respect to any claim against Seller arising out of the Assets or Business of Seller prior to the Closing Date. Seller will provide Purchaser with information and records regarding all claims pending with respect to the Assets or Business of Seller and agrees to provide to Purchaser any additional information and records Purchaser may reasonably require regarding such claims. 4.1.11. Books and Records. Seller shall continue to maintain the Books and Records in the manner and on a basis consistent with prior years. 4.1.12. Notice of Claims. Seller shall give written notice to Purchaser promptly upon the commencement of any action, investigation, arbitration or proceeding (including any proceeding before any Governmental Authority), or promptly upon obtaining knowledge of any facts giving rise to a threat of any such action, investigation, arbitration or proceeding which, if adversely determined, would have a material adverse effect on (a) Seller's ability to consummate the transactions contemplated hereby; (b) the Business; or (c) the Assets. 4.1.13. Notice of Breaches. Seller shall promptly after obtaining knowledge of the occurrence of, or the impending or threatened occurrence of, any event which would cause or constitute a breach of any warranties, representations, covenants or agreements of the Seller contained in this Agreement, give notice in writing of such event or occurrence or impending or threatened event or occurrence, to Purchaser and use its diligent efforts to prevent or to promptly remedy such breach. 4.1.14. Notice of Change. Except for events occurring in the communications industry generally, Seller shall use reasonable efforts to notify Purchaser promptly in writing of any event, condition or state of facts, which has had or would reasonably be expected to have a material adverse effect on the System, the Business, the Assets, or on the transaction contemplated by this Agreement. 4.1.15. Training / Transition Assistance. (a) Before the Closing, and at the request of Purchaser, Seller hereby agrees to use commercially reasonable efforts to instruct Purchaser's employees and agents in the use of Seller's billing system. Such instruction will be provided at Seller's premises at mutually convenient times so as not to disrupt the operation of Seller's businesses and shall be provided at no cost to Purchaser. (b) The Parties agree to use diligent efforts and to direct their respective employees, agents, and subcontractors to cooperate in the conversion and transfer of the Subscribers to Purchaser's billing system so that upon the Closing Date, or as soon thereafter as is reasonably practicable, all of the System's customer billing information shall have been transferred 11 12 and converted to Purchaser's billing system. The costs associated with converting and transferring the information to Purchaser's billing system shall be the sole responsibility of Purchaser. In the event Purchaser desires to retain Seller's assistance in such matters after the Closing, the parties agree to enter into an agreement having terms substantially the same as those contained in the document attached as SCHEDULE 4.1.15(b). 4.1.16. Interim Financial Statements and Statistical Summaries. Between the date of this Agreement and the Closing Date, Seller shall deliver to Purchaser (i) as soon as practicable, but no later than forty-five (45) days after the end of each calendar month, unaudited financial statements ("Interim Financial Statements") for the most recent month and the interim period then ended, and (ii) as soon as practicable, but no later than forty-five (45) days after the end of each calendar month, interim operating data summaries (the "Interim Operating Data Statements") for the most recent month and interim period then ended, which summaries will be in scope and format substantially identical to the Operating Data Statements. 4.1.17. Material Contracts. Seller shall not (a) default in any material respect under, or breach any term or provision of, or suffer or permit to exist any condition or event which, after notice or lapse of time, or both, would constitute a material default under, any material Contract, or (b) cause or permit the termination, modification or amendment of any material Contract of Seller. 4.1.18. Condition of Assets. Seller shall use diligent efforts to preserve the Assets intact and, from time to time, make all necessary repairs thereto, so that the Business may be conducted in the ordinary course consistent with past practices. 4.2. Covenants of Purchaser. Purchaser covenants and agrees that from the time of the execution and delivery of this Agreement until (and including) the Closing Date: 4.2.1. Consummate Transaction. Purchaser shall use its best efforts to cause the transactions contemplated by this Agreement to be consummated in accordance with the terms hereof, and, without limiting the generality of the foregoing, to assist Seller in obtaining all necessary Consents of third parties, including, without limitation, the approval of this Agreement and the transactions contemplated hereby as required by any Governmental Authority, and to make all filings with and to give all notices to third parties which may be necessary or reasonably required of Purchaser in order to consummate the transactions contemplated hereby. 4.2.2. Purchaser Not to Control. Notwithstanding any provision of this Agreement that may be construed to the contrary, pending the consummation of the Closing, Seller shall maintain actual (de facto) and legal (de jure) control over the System. Specifically, and without limitation, the responsibility for the operation of the Business and the System shall, pending the Closing Date, reside with the Board of Directors and management of Seller, including, but not limited to, responsibility for the following matters: (a) access to and the use of the facilities of and equipment owned by Seller; (b) control of the daily operation of the System; (c) creation and implementation of policy decisions; (d) employment and supervision of employees; (e) payment of financing obligations and expenses incurred in the operation of the System; (f) receipt and distribution of monies and profits derived from the operation of the 12 13 System; and (g) execution and approval of all contracts and applications prepared and filed before Governmental Authorities. 4.2.3. Notice of Breaches. Purchaser shall promptly after obtaining knowledge of the occurrence of, or the impending or threatened occurrence of, any event which would cause or constitute a breach of any warranties, representations, covenants or agreements of the Purchaser contained in this Agreement, give notice in writing of such event or occurrence or impending or threatened event or occurrence, to Seller and use its diligent efforts to prevent or to promptly remedy such breach. 4.2.4. Qualification to Hold Authorizations. Purchaser shall remain an entity qualified to hold the Authorizations under the rules and regulations of the FCC. 4.3. Mutual Covenants of Seller and Purchaser. Seller and Purchaser have filed with the FCC, and, if necessary, will file with the PUC or any other Governmental Authority, as soon as practicable following the date hereof, joint applications requesting the approval of the assignment of the Authorizations to Purchaser, and, if applicable, will file all necessary applications with the DOJ and/or the FTC pursuant to the HSR Act. Seller and Purchaser agree to use their best efforts to make all such filings as have not yet been made within ten (10) business days of the execution of this Agreement. Seller and Purchaser shall diligently take or cooperate in the taking of all steps which are necessary or appropriate to expedite the prosecution and favorable consideration of such applications. Purchaser shall the pay filing fees associated with the filings required by this SECTION. Seller and Purchaser covenant and agree to undertake all actions and file such material as shall be necessary or required in order to obtain any necessary waivers or other authority in connection with the foregoing applications. ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF SELLER Seller hereby makes the following representations and warranties to Purchaser, all of which have been relied upon by Purchaser in entering into this Agreement and the truth and accuracy of which shall constitute a condition precedent to the obligations of Purchaser hereunder: 5.1. Organization and Standing. Seller (a) is a limited liability company duly organized, validly existing and in good standing under the laws of the state of Arkansas, (b) has full power and authority to enter into and perform this Agreement, to own and lease the Assets, and operate the System and to carry on the Business as now being conducted and proposed to be conducted by it, and (c) is duly qualified to do business and is in good standing as a foreign entity in every jurisdiction in which the nature of the business conducted by it requires such qualification, except where the failure to so qualify would not have a material adverse effect on the System, the Business, or the Assets. 5.2. Authorization and Binding Obligations. The execution, delivery and performance of this Agreement by Seller has been duly and validly authorized by all necessary action, including 13 14 approval of the entire transaction by vote of its members. This Agreement has been duly executed and delivered by Seller and constitutes a valid and binding obligation of Seller enforceable against it in accordance with its terms, except as its enforceability may be limited by bankruptcy, insolvency, moratorium or other laws relating to or affecting creditors' rights generally and the exercise of judicial discretion in accordance with general equitable principles. 5.3. No Contravention. Except as otherwise contemplated hereunder, the execution, delivery and performance of this Agreement, the consummation of the transactions contemplated hereby and the compliance with the provisions hereof by Seller will not (a) violate any provisions of the organizational documents of Seller (b) result in the breach of, or constitute a default under, or result in the creation of any Lien upon any of the Assets, under the provisions of any agreement or other instrument to which Seller is a party or by which any Asset is bound or affected or (c) with respect to Seller, violate any Applicable Laws. 5.4. Title to Assets. 5.4.1. SCHEDULE 5.4.1 is a list of all tangible personal property included in the Assets. Seller has good and marketable title to all the tangible personal property to be transferred by it hereunder, free and clear of all Liens, charges or any other encumbrances, except for and subject only to liens for Taxes not yet due or payable ("Permitted Liens"). 5.4.2. SCHEDULE 5.4.2 is a list of all the Real Property. Seller has good and marketable title to all of the Real Property to be transferred by it hereunder, free and clear of all Liens, and without reservation or exclusion of any mineral, timber or other rights or interests, except for and subject only to (a) Permitted Liens, (b) those matters set forth in SCHEDULE 5.4.2 including the leases listed thereon (whether as lessor or lessee), none of which is violated by existing structures or impairs Seller's use and none of which materially impairs or pursuant to its terms would materially impair the present operations of the System or the present use of such property, and (c) those Liens set forth in SCHEDULE 5.4.2. The Liens set forth on SCHEDULE 5.4.2 will be removed on or prior to the Closing Date. 5.4.3. The Assets include all assets (except the Excluded Assets) which are used to conduct the Business and operations of the System as presently conducted. 5.5. Condition of the Assets. All tangible Assets are in reasonable operating condition and repair, ordinary wear and tear excepted, are reasonably suitable for the uses and purposes for which they are being used, and are in compliance with all Applicable Laws, except where failure of such compliance would not have a material adverse effect on the Assets, the System, or the Business, and Seller has no knowledge and has received no notice that it or the present use of the Assets is in violation in any material respect of any Applicable Laws. 5.6. Authorizations. The Authorizations listed on SCHEDULE 5.6 are all of the Authorizations necessary to operate the System, the Business and the Assets as they are now operated. The Authorizations are validly issued in the name of Seller and are in full force and effect. Except as set forth on SCHEDULE 5.6, all material Authorizations are unimpaired by any acts or omissions of Seller (or any of its Representatives) and the Authorizations are free and 14 15 clear of any restrictions which might limit the full operation of the System. All material ownership reports, employment reports, and other documents required to be filed by Seller with the FCC with respect to the System have been filed or the time period for such filing has not lapsed. All such reports and documents since the date that Seller acquired the System are correct in all material respects. The FCC actions granting the current FCC Authorization to operate the System together with all underlying construction permits have not been reversed, stayed, enjoined, set aside, annulled, or suspended, and no timely request for stay, motion or petition for reconsideration or rehearing, application or request for review, or notice of appeal or other judicial petition for review is pending. The time for filing any such request, motion, petition, application, appeal, or notice, and for the entry of an order staying, reconsidering, or reviewing on the FCC's or other regulatory authorities' own motion, has expired. 5.7. Contracts. SCHEDULE 5.7 is a list of all Contracts, other than Subscriber Agreements and Contracts with Seller's Affiliates which will not survive the Closing. Each such Contract is in full force and effect, paid currently, and has not been materially impaired by any acts or omissions of Seller or any of its Representatives. Except as set forth on SCHEDULE 5.7, no Contract requires the consent of any other party to the transactions contemplated by this Agreement. Seller is not (and, to the best of its knowledge, no other party is) in material breach or violation of, or default under any of the Contracts. Seller is not aware of any intent by any party to any Contract to terminate or amend the terms thereof or to refuse to renew any Contract upon expiration of its term. 5.8. Intellectual Property. SCHEDULE 5.8 is a list of all Intellectual Property. Except as indicated on SCHEDULE 5.8, Seller has properly licensed and has the right to use all of the Intellectual Property. No person has a right to receive a royalty or similar payment in respect of any Intellectual Property other than as indicated on SCHEDULE 5.8. Seller has no licenses granted by or to it, or any other agreements to which it is a party, relating in whole or in part to any of the Intellectual Property other than as indicated on SCHEDULE 5.8. To Seller's knowledge, except as disclosed on SCHEDULE 5.8, Seller's use of the Intellectual Property is not infringing upon or otherwise violating the rights of any third party, and no proceedings have been instituted against or notices received by Seller alleging that such use of its Intellectual Property infringes upon or otherwise violates any rights of a third party. 5.9. Employees; Employment Obligations. Seller and/or the System currently employs those persons in those positions and at those salaries (including benefits) as are listed on SCHEDULE 5.9 Seller shall hire no further employees without the prior written consent of Purchaser, provided that Seller may, as the need arises, hire employees to replace existing employees without the consent of Purchaser. Except as otherwise set forth on such SCHEDULE 5.9, Seller and the System are not bound, and at no time have been bound, by any oral or written collective bargaining agreement, severance, pension, retirement, profit-sharing, 401(k), "employee benefit plan" (within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), or other employment agreement (other than any agreements terminable on thirty (30) days' or less notice without penalty or severance obligation) with any officer, employee or consultant, nor does Seller or the System have any liability under any such agreement which was terminated previously. Seller has complied in all material respects with all applicable laws, rules and regulations which relate to prices, wages, hours, discrimination in 15 16 employment and collective bargaining and is not liable for any arrears of wages or any taxes or penalties for failure to comply with any of the foregoing. With respect to each "employee benefit plan," if any, within the meaning of Section 3(3) of ERISA, which is now, or ever has been, maintained, contributed to, or required to be contributed to by Seller, such employee benefit plan has been established and maintained in all material respects in accordance with its terms and in material compliance with all applicable laws, statutes, orders, rules and regulations, including but not limited to ERISA. Seller is not a party to, and is not affected by or threatened with, any dispute or controversy with a union or with respect to unionization or collective bargaining involving the Employees of Seller or the System. 5.10. Financial Statements. Attached hereto as SCHEDULE 5.10 are the unaudited financial statements of Seller for the periods indicated on such Schedule (the "Financial Statements"). SCHEDULE 5.10 also lists key statistical summary information and other documents which set forth the subscriber history for the last three years, and local and roaming minutes of use data of the System for a designated calendar months (the "Operating Data Statements"). A sample Operating Data Statement is attached hereto as SCHEDULE 5.10. All Financial Statements are true and correct in all material respects, have been prepared from the Books and Records and fairly represent the financial position of Seller in a manner consistent with the prior periods prepared in accordance with generally accepted accounting principles. To Seller's knowledge, Seller has not incurred nor is it subject to any Liabilities, whether accrued or absolute, which are not disclosed in the Financial Statements or elsewhere in this Agreement. All Operating Data Statements listed on such SCHEDULE 5.10 are accurate in all material respects. 5.11. Litigation. Except as set forth on SCHEDULE 5.11, there is no action, order, writ, injunction, judgment or decree outstanding or claim, suit, litigation, proceeding, or labor dispute ("Action"), other than rule-making proceedings affecting the cellular telephone industry generally, pending or, to the knowledge of Seller, threatened, relating to or affecting (a) Seller, (b) the Assets, (c) the Business, or (d) the transactions contemplated by this Agreement which if adversely determined, could have a material adverse effect on the Business. Seller is not in default with respect to any judgment, order, writ, injunction or decree of any court or governmental agency, and there are no unsatisfied judgments against Seller or the Assets. There is not a reasonable likelihood of an adverse determination of any pending Action which would, individually or in the aggregate, have a material adverse effect on the Assets or the Business or the financial condition of Seller. 5.12. Complaints. There is not, to the best of Seller's knowledge, any FCC investigation, notice of apparent liability or order of forfeiture pending or outstanding against Seller or the System respecting any violation, or allegation thereof, of any FCC rule, regulation or policy, or, to the best of Seller's knowledge, any complaint before the FCC as a result of which an investigation, notice of apparent liability or order of forfeiture may issue from the FCC relating to the System. 5.13. Reports. Except as set forth in SCHEDULE 5.13 hereto, all material returns, reports and statements currently required to be filed by Seller with the FCC or with any other Governmental Authority with respect to the System have been filed and materially complied with and shall continue to be filed and be in substantial compliance on a current basis until the Closing 16 17 Date. All such reports, returns and statements are (or will be, in the case of future reports) substantially complete and materially correct as filed. 5.14. Taxes. Except as noted below, Seller has paid in full or discharged all Taxes relating to the ownership and operation of the Assets and all Taxes the non-payment of which could result in a Lien on the Assets in the hands of the Purchaser, excepting in each case such Taxes which are not yet due or which are being contested and for which adequate reserves have been made. No event has occurred that could impose on Purchaser any liability for any Taxes, due or to become due, from Seller to any taxing authority. Seller may not have yet paid state sales Taxes associated with certain out collect revenues. Seller acknowledges that all such Taxes, and all penalties and interest associated with such Taxes, are and will remain Seller's responsibility. Seller shall have paid all such Taxes, penalties and interest before the Closing Date. 5.15. No Other Agreements to Sell the System or the Assets. Seller has no other legal obligation, absolute or contingent, to any other Person to sell, or offer to sell (including any right of first refusal or other similar agreement) the Assets or any capital stock of Seller or to effect any merger, consolidation or other reorganization of Seller or to enter into any contract with respect thereto. 5.16. Resale and Roaming Agreements. SCHEDULE 5.16 contains a list of all resale agreements to which Seller is a party, both as reseller and as a provider of resale services to others. SCHEDULE 5.16 also contains a list of all roaming agreements to which Seller is a party. All such resale and roaming agreements are in full force and effect and, subject to rates which may be imposed upon Seller beyond Seller's control, are on terms reasonable and customary in the cellular telephone industry. 5.17. Environmental Matters. Except as set forth in SCHEDULE 5.17, to Seller's knowledge the Operating Sites, and all existing and prior uses of the Operating Sites, comply and have at all times complied with the Environmental Laws. Except as set forth in SCHEDULE 5.17, Seller has not used, generated manufactured, refined, transported, treated, stored, leaked, poured, emitted, emptied, released, discharged, disposed, spilled or Handled any Regulated Substance on or under any Operating Site. To Seller's knowledge (a) there is and has been no Handling of any Regulated Substances at, on, or from any Operating Site; (b) there is and has been no presence of Regulated Substances on or under any Operating Site regardless of how the Regulated Substance or Regulated Substances came to rest there; (c) no underground tanks, PCBs or asbestos-containing materials are or have been located on or under any Operating Site; (d) no Liens have been, or are, imposed on any of the Assets under any Environmental Laws; (e) no action, proceeding, revocation proceeding, amendment procedure, writ, injunction or claim is pending, or threatened concerning any environmental permit, Regulated Substance or activity related thereto. Neither Seller nor any Person acting on behalf of Seller has released any other Person from any claims Seller might have, or have had, for any matter relating to presence or Handling of Regulated Substances at any Operating Site. Seller has obtained all permits, licenses, registrations, and other approvals and has made all reports and notifications required under any Environmental Laws in connection with the Assets, and is in compliance in all material respects 17 18 with all applicable Environmental Laws. There are no present actions, activities, circumstances, conditions, events, or incidents that would be expected to involve Seller (or any Person whose liability Seller has retained or assumed, either by contract or operation of law) in any litigation under the Environmental Laws, or impose upon Seller (or any Person whose liability Seller has retained or assumed, either by contract or operation of law) any environmental liability including, without limitation, common law tort liability. SCHEDULE 5.17 hereto also contains a list and brief description of all Environmental Law filings by Seller with, notices to Seller from, and related reports to all Governmental Authorities administering Environmental Laws, within three years prior to the date hereof, including without limitation, filings made, corrective action taken, or citations received by Seller. 5.18. Brokers. Seller has entered into a Contract with Daniels and Associates which will result in the obligation of Seller to pay a brokerage commission or similar payment in connection with the transactions contemplated hereby. Seller shall be responsible for making any and all such payments, and Purchaser shall have no obligation therefor. 5.19. No Material Adverse Change. Except as set forth on SCHEDULE 5.19, since the date of the most recent Financial Statements, there has not been: 5.19.1. any material adverse change in the rate of Seller's generation of cash flow from operations (as opposed to cash flow from financing operations and investment activities) after giving effect to customary seasonal fluctuations of cash flow generation; 5.19.2. any occurrence, assumption or guarantee by Seller of a material indebtedness other than pursuant to Contracts in existence on the date hereof and set forth or described on the Schedules annexed hereto; 5.19.3. any creation by Seller of any Lien or encumbrance on any material Asset other than pursuant to Contracts in existence on the date hereof and set forth or described on the Schedules annexed hereto; 5.19.4. any making of any material loan, advance or capital contribution to or investment in any Person by Seller; 5.19.5. any damage, destruction or other casualty loss affecting the Business or the Assets which, after giving effect to payments to Seller under applicable insurance policies, has had or is likely to have a material adverse effect on the financial condition of Seller or the System; or 5.19.6. any change by Seller in accounting principles or methods not required by law or year end changes. 5.20. Year 2000 Compliance. Seller has performed the necessary testing to determine whether all material software and computer systems used in the operation of the System are Year 2000 Compliant. To the extent that such testing indicated that Seller's software or computer systems are not Year 2000 Compliant, such software and/or computer systems were modified or will be modified prior to the Closing Date so they are Year 2000 Compliant. For purposes of this 18 19 Section, "Year 2000 Compliant" means that Seller's software or computer systems receive, record, store, process, rout, transfer or present calendar dates and any related information falling on or after January 1, 2000 with similar functionality, in all material respects, as such software or computer systems perform such functions for calendar dates and related information falling prior to January 1, 2000. 5.21. Miscellaneous. No representation or warranty made by Seller in this Agreement, and no statement made in any schedule, exhibit, certificate or other document furnished pursuant to this Agreement, contains any untrue statement of a material fact or knowingly omits or fails to state, or will knowingly omit or fail to state, any material fact or information necessary to make such representation or warranty or any such statement not materially misleading; provided however, that nothing contained in this Section shall alter the standard of those representations or warranties which are made "to Seller's knowledge" or "to the best of Seller's knowledge" or phrases of similar import. ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser hereby makes the following representations and warranties to Seller, all of which have been relied upon by Seller in entering into this Agreement and the truth and accuracy of which shall constitute a condition precedent to the obligations of Seller hereunder: 6.1. Organization and Standing. Purchaser (a) is a limited liability company duly organized, validly existing and in good standing under the laws of the state of its organization, (b) has full power and authority to enter into and perform this Agreement, to own the Assets, and to carry on the Business upon consummation of the transactions contemplated by this Agreement, and (c) is duly qualified to do business and is in good standing as a foreign entity in every jurisdiction in which the nature of the business conducted by it requires such qualification, except where the failure to so qualify would not materially adversely affect Purchaser or the transactions contemplated by this Agreement. 6.2. Authorization and Binding Obligations. The execution, delivery and performance by Purchaser of this Agreement has been or will be within five (5) business days of the date of this Agreement, duly and validly authorized by all necessary company action, including approval of the entire transaction by the manager of Purchaser. This Agreement has been duly executed and delivered by Purchaser and constitutes a valid and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms except as its enforceability may be limited by bankruptcy, insolvency, moratorium or other laws relating to or affecting creditors' rights generally and the exercise of judicial discretion in accordance with general equitable principles. 6.3. No Contravention. Except as otherwise contemplated hereunder, the execution, delivery and performance of this Agreement, the consummation of the transactions contemplated hereby and the compliance with the provisions hereof by Purchaser will not (a) violate any provisions of the organizational documents of Purchaser, (b) result in the breach of, or constitute a default under or result in the creation of any Lien upon any assets of Purchaser, under the 19 20 provisions of any agreement or other instrument to which Purchaser is a party or by which the property of Purchaser is bound or affected or (c) with respect to Purchaser, violate any Applicable Laws. 6.4. Litigation. Except as set forth on SCHEDULE 6.4, there is no Action, other than rule-making proceedings affecting the cellular telephone industry generally, pending or, to the knowledge of Purchaser, threatened or anticipated against, relating to or affecting Purchaser that would have a material adverse effect on Purchaser or Purchaser's ability to consummate the transactions contemplated by this Agreement. Purchaser is not in material default with respect to any material judgment, order, writ, injunction or decree of any court or governmental agency, and there are no unsatisfied judgments against Purchaser. There is not a reasonable likelihood of an adverse determination of any pending Action which would, individually or in the aggregate, have a material adverse effect on Purchaser or Purchaser's ability to consummate the transactions contemplated by this Agreement. 6.5. Authority to hold Authorizations. Purchaser is an entity that is qualified to hold the Authorizations under the rules and regulations of the FCC. 6.6. No Brokers. Neither Purchaser nor any of its Affiliates has entered into or will enter into any contract, agreement, arrangement or understanding with any person or firm which will result in the obligation of Seller to pay any finder's fee, brokerage commission or similar payment in connection with the transactions contemplated hereby. 6.7. Financial Capacity. Purchaser has now, and will have on the Closing Date, the financial capacity or resources to acquire and operate the System and Assets as contemplated by this Agreement. 6.8. Miscellaneous. No representation or warranty made by Purchaser in this Agreement, and no statement made in any schedule, exhibit, certificate or other document furnished pursuant to this Agreement, contains any untrue statement of a material fact or knowingly omits or fails to state, or will knowingly omit or fail to state, any material fact or information necessary to make such representation or warranty or any such statement not materially misleading; provided however, that nothing contained in this Section shall alter the standard of those representations or warranties which are made "to Purchaser's knowledge" or "to the best of Purchaser's knowledge" or phrases of similar import. ARTICLE 7. CONDITIONS TO SELLER'S OBLIGATIONS The obligations of Seller to sell the Assets and to otherwise consummate the transactions contemplated by this Agreement are subject, in the discretion of Seller, to the satisfaction or waiver, on or prior to the Closing Date, of each of the following conditions: 20 21 7.1. Representations, Warranties and Covenants. All representations and warranties of Purchaser contained in this Agreement that do not otherwise reference a specific date shall be true and correct in all material respects at and as of the Closing Date as if such representations and warranties were made at and as of the Closing Date, and Purchaser shall have performed in all material respects all agreements and covenants required hereby to be performed by Purchaser prior to or at the Closing Date. There shall be delivered to Seller a certificate (signed by an authorized Officer of Purchaser) to the foregoing effect ("Purchaser's Closing Certificate"). 7.2. Closing Documents. Seller shall have received from Purchaser the documents and other items to be delivered by Purchaser pursuant to Section 9.2 of this Agreement. 7.3. Opinion of Purchaser's Counsel. Purchaser shall have delivered to Seller an opinion of in-house counsel for Purchaser in substantially the form attached hereto as SCHEDULE 7.3. 7.4. Compliance with Advance Agreement. Purchaser shall not be in material default under the terms of the Advance Agreement. 7.5. Certificates. Purchaser shall furnish Seller with such certificates of the officers of Purchaser and others to evidence compliance with the conditions set forth in this Article as may be reasonably requested by Seller. 7.6. Closing of Texas-7 Transaction. All of the terms and conditions of the Texas-7 APA shall have been complied with by the parties thereto, and the transactions contemplated by the Texas-7 APA shall be have been consummated, or shall be consummated concurrently with the consummation of the transaction contemplated by this Agreement. 7.7. Purchase Price. Seller shall have received payment of the Purchase Price in accordance with Section 2.2. 7.8. HSR Waiting Period. Any waiting period required by the HSR Act shall have lapsed or been terminated, and any investigation of the transactions contemplated by this Agreement commenced by the DOJ and/or the FTC pursuant to the HSR Act shall have been terminated. 7.9. No Restraint. There shall not be any pending suit or proceeding to restrain or invalidate, in whole or in part, this Agreement or the transaction contemplated herein. 7.10. Authorization. Purchaser shall have delivered evidence, satisfactory to Seller, that the authorizations contemplated by Section 6.2 hereof has been timely obtained. 7.11. FCC Consent. The FCC Consent to the assignment of the Authorizations to Purchaser shall have been obtained. ARTICLE 8. 21 22 CONDITIONS TO PURCHASER'S OBLIGATIONS The obligations of Purchaser to purchase the Assets and to otherwise consummate the transactions contemplated by this Agreement are subject, in the discretion of Purchaser, to the satisfaction or waiver, on or prior to the Closing Date, of each of the following conditions: 8.1. Representations, Warranties and Covenants. All representations and warranties of Seller contained in this Agreement that otherwise do not reference a specified date shall be true and correct in all material respects at and as of the Closing Date as if such representations and warranties were made at and as of the Closing Date, and Seller shall have performed in all material respects all agreements and covenants required hereby to be performed by Seller prior to or at the Closing Date. There shall be delivered to Purchaser a certificate (signed by an authorized officer of Seller) to the foregoing effect ("Seller's Closing Certificate"). 8.2. Consent. The FCC shall have consented to the transfer of the Assets to Purchaser and such consents shall have become a Final Order. 8.3. Board / Stockholder Approval. The transactions contemplated herein shall have been approved by the necessary number of stockholders and directors of Seller. 8.4. Closing Documents. Purchaser shall have received from Seller the documents and other items to be delivered by Seller pursuant to Section 9.1 hereof. 8.5. Opinion of Seller's Business Counsel. Seller shall have delivered to Purchaser an opinion or opinions of counsel for Seller in substantially the form attached hereto as SCHEDULE 8.5. 8.6. Opinion of Seller's FCC and PUC Counsel. Seller shall have delivered to Purchaser an opinion or opinions of FCC and, if applicable, PUC counsel for Seller in substantially the form attached hereto as SCHEDULE 8.6. 8.7. Certificates. Seller shall furnish Purchaser with such certificates of the respective officers of Seller and others to evidence compliance with the conditions set forth in this Article as may be reasonably requested by Purchaser. 8.8. Closing of Texas-7 Transaction. All of the terms and conditions of the Texas-7 APA shall have been complied with by the parties thereto, and the transactions contemplated by the Texas-7 APA shall be have been consummated, or shall be consummated concurrently with the consummation of the transaction contemplated by this Agreement. 8.9. HSR Waiting Period. Any waiting period required by the HSR Act shall have lapsed or been terminated, and any investigation of the transactions contemplated by this Agreement commenced by the DOJ and/or the FTC pursuant to the HSR Act shall have been terminated. 22 23 8.10. FCC Consent. The FCC Consent shall have become a Final Order; provided that Purchaser may waive the condition that such Consent be by Final Order. ARTICLE 9. THE CLOSING On the Closing Date at the Closing Place: 9.1. Deliveries by Seller to Purchaser. Seller shall deliver to Purchaser: 9.1.1. one or more assignments transferring to Purchaser (or its designee) all of Seller's interest in and to the Authorizations; 9.1.2. one or more instruments of conveyance transferring to Purchaser (or its designee) all of Seller's interest in and to the Equipment and the Books and Records; 9.1.3. one or more assignments or other instruments of conveyance that may be reasonably requested by Purchaser transferring to Purchaser (or its designee) Seller's interest in and to the Intellectual Property; 9.1.4. one or more instruments of conveyance transferring to Purchaser (or its designee) the Contracts in effect on the Closing Date; 9.1.5. one or more executed warranty deeds and assignments in recordable form, transferring to Purchaser (or its designee) Seller's interest in and to the Real Property; 9.1.6. one or more instruments of conveyance transferring to Purchaser (or its designee) any of the other Assets not otherwise conveyed as provided above; 9.1.7. the opinions of Seller's counsel referenced in Sections 8.5 and 8.6 hereof; 9.1.8. a lien and judgment search from (a) the offices of the Secretaries of State of the state of organization of Seller and the state in which Seller is conducting business, and (b) the office of the county clerk of the applicable counties therein, dated not earlier than fifteen (15) business days prior to the Closing Date, the results of which are consistent with Seller's representations in this Agreement; 9.1.9. an affidavit certifying as to Seller's non-foreign status in accordance with Section 1445(b)(2) of the Code; 9.1.10. a copy of the resolutions of the board of directors and the consent of all shareholders of Seller approving the transactions contemplated by this Agreement certified by an appropriate officer of Seller, together with copies of the operating agreement and certificate of formation of Seller, certified by an appropriate officer of Seller; 23 24 9.1.11. Seller's Closing Certificate; and 9.1.12. an executed Escrow Agreement. 9.2. Deliveries by Purchaser to Seller. Purchaser shall deliver to Seller (or its designee): 9.2.1. one or more agreements whereby Purchaser (or its designee) assumes and agrees to perform Seller's obligations, liabilities and duties under the Assumed Liabilities; 9.2.2. the opinion of Purchaser's counsel referenced in Sections 7.3 hereof; 9.2.3. copy of the resolutions of the board of directors of Purchaser approving the transactions contemplated by this Agreement certified by an appropriate officer of Purchaser; 9.2.4. Purchaser's Closing Certificate; 9.2.5. an executed Escrow Agreement; and 9.2.6. payment of the Purchase Price. ARTICLE 10. ACTIONS BY THE PARTIES AFTER THE CLOSING 10.1. Further Assurances. On and after the Closing Date, the Parties will take all appropriate action and execute all documents, instruments, or conveyances of any kind which may be reasonably necessary or advisable to carry out any of the provisions hereof, including without limitation, putting Purchaser (or its designee) in possession and operating control of the Assets and the System. 10.2. Post-Closing Tax Covenant. Seller shall promptly pay Taxes payable with respect to the operation of the System arising prior to Closing for which Seller is responsible that become due or otherwise have given rise to, or could give rise to, any Lien on the Assets. 10.3. Access to Records. For a period of three (3) years after the Closing Purchaser shall retain and make available to Seller any and all records provided to Purchaser by Seller within a reasonable period of time after receipt of a written request for the same. Seller shall have the right to make copies of the same at its own expense. ARTICLE 11. INDEMNIFICATION 24 25 11.1. Survival. The several representations, warranties, covenants, and agreements of the Parties contained in this Agreement (or in any document delivered in connection herewith) shall be (i) deemed to have been made on the date of this Agreement and on the Closing Date, (ii) shall be deemed to be material and to have been relied upon by the Parties notwithstanding any investigation made by the Parties, and (iii) shall survive the Closing Date (the "Survival Period") for a period of two (2) years following the Closing Date; provided, however, that the representations, warranties and agreements of Seller contained in Sections 5.4 (Title to Assets), 5.6 (Authorizations), 5.14 and 10.2 (Taxes), and 5.17 (Environmental Matters) shall continue to survive for the duration of any applicable statute of limitations. Any claim for breach of a representation or warranty (an "Indemnity Claim") for which written notice shall have been provided prior to the termination of the applicable survival period to the Party which made such representation or warranty shall be deemed to be timely made within the applicable indemnification period. 11.2. Seller's Indemnity. 11.2.1. During the indemnification Survival Period (or thereafter solely with respect to any Indemnity Claim made prior to the expiration of the applicable Survival Period), Seller shall indemnify and hold harmless Purchaser and its Affiliates from and against any and all demands, claims, losses, liabilities, actions or causes of action, assessments, damages, fines, Taxes, penalties, reasonable costs and expenses (including, without limitation, interest, reasonable expenses of investigation, reasonable fees and disbursements of counsel, accountants and other experts (whether such reasonable fees and disbursements of counsel, accountants and other experts relate to claims, actions or causes of action asserted by Purchaser against Seller or asserted by third parties)) (collectively "Losses") incurred or suffered by Purchaser, its Affiliates, and their respective officers, directors, employees, agents and Representatives, arising out of, resulting from, or relating to: (a) Any breach of any of the representations or warranties made by Seller in this Agreement or in any agreement, certificate, exhibit or other instrument delivered by the Seller pursuant to this Agreement; (b) Any failure by Seller to perform any of its covenants or agreements contained in this Agreement or in any agreement, certificate or other instrument delivered by the Seller pursuant to this Agreement; (c) Any failure to properly license or register any of the Assets (including Motorola software and hardware); (d) Any violation by Seller or any of its Affiliates of any Environmental Laws; and (e) Any claims by third parties arising from, relating to or out of the ownership or operation of the System or the Assets prior to the Closing Date. 25 26 11.2.2. Escrow. As collateral security for Seller's indemnification obligations under this Agreement, at the Closing, in accordance with Section 2.2 hereof, Purchaser shall deliver to the Escrow Agent, the Escrow Amount (as defined in Section 2.2), to be held in an interest bearing account pursuant to the terms of an escrow agreement, in substantially the form of SCHEDULE 11.2.2 attached hereto (the "Escrow Agreement"). The Escrow Amount shall be held by the Escrow Agent until the date that is eighteen (18) months after the Closing Date, at which time the Escrow Amount, plus any accrued but undistributed interest, shall be released to Seller, subject to a continuing hold back of the Escrow Amount for any asserted and outstanding indemnification claims at such time. Nothing contained in this Section or in the Escrow Agreement shall limit in any way Seller's indemnification obligations under this Agreement; it being understood that if the Escrow Amount is not sufficient to satisfy such indemnifications obligations as set forth in this Agreement, then Seller shall remain liable for such indemnification obligations until expiration of the applicable Survival Periods and the absence of any pending Indemnity Claims. 11.3. Purchaser's Indemnity. 11.3.1. During the Survival Period (or thereafter solely with respect to any Indemnity Claim made prior to the expiration of the applicable Survival Period), from and after the Closing Date, Purchaser shall indemnify and hold harmless Seller and its Affiliates from and against any and all Losses incurred or suffered by Seller, its Affiliates, and their respective officers, directors, employees, agents and Representatives, arising out of, resulting from, or relating to: (a) Any breach of any of the representations or warranties made by Purchaser in this Agreement or in any agreement, certificate or other instrument delivered by Purchaser pursuant to this Agreement; (b) Any failure by Purchaser to perform any of its covenants or agreements contained in this Agreement or in any agreement, certificate or other instrument delivered by Purchaser pursuant to this Agreement; (c) Any claims by third parties arising from, relating to, or out of the ownership or operation of the System or the Assets after the Closing Date; or (d) Any claims with respect to the Assumed Liabilities. 11.4. Procedure. In the event that any Party hereto shall sustain or incur any Losses in respect of which indemnification may be sought by such Party pursuant to this Article, the Party seeking such indemnification (the "Indemnitee") shall assert an Indemnification Claim by giving prompt written notice thereof (the "Notice") which shall describe in reasonable detail the facts and circumstances upon which the Indemnification Claim is based, along with a copy of the claim or complaint, to the Party required to provide indemnification (the "Indemnitor"), and shall thereafter keep the Indemnitor reasonably and promptly informed with respect thereto; provided that failure of the Indemnitee to give the Indemnitor prompt notice as provided herein shall not relieve the Indemnitor of any of its obligations hereunder, except to the extent that the Indemnitor 26 27 is materially prejudiced by such failure. For purposes of this paragraph, any Notice which is sent within fifteen (15) days of the date upon which the Indemnitee obtained actual knowledge of such Loss shall be deemed to have been a "prompt notice." 11.4.1. If the Indemnitor wishes to defend any claim for any Losses for which such Indemnitor is or may be liable, and such Indemnitor first establishes (to the reasonable satisfaction of the Indemnitee) the Indemnitor's financial ability to pay for any such Losses, then such Indemnitor may, at its own expense, defend such claim; provided that the Indemnitee may retain counsel (at the Indemnitee's expense) to monitor the defense of such claim, and may take over such defense if, during the course thereof, it reasonably appears that the Indemnitor has lost its ability to pay for any Losses threatened by such claim. If an Indemnitor assumes the defense of such an action, no compromise or settlement thereof may be effected by the Indemnitor without the Indemnitee's consent, which consent shall not be unreasonably withheld. If an Indemnitor fails, within thirty (30) days after the date of the Notice, to give notice to the Indemnitee of said Indemnitor's election to assume the defense thereof, said Indemnitor shall be bound by any determination made in such action or any compromise or settlement thereof effected by the Indemnitee. 11.4.2. Amounts payable by the Indemnitor to the Indemnitee in respect of any Losses for which any Party is entitled to indemnification hereunder shall be payable by the Indemnitor as incurred by the Indemnitee, unless such Indemnification Claim is reasonably disputed by the Indemnitor. 11.5. Limitation on Indemnification. No Party shall be entitled to indemnification in accordance with the provisions of this Article until such time as the value of the aggregate loss or liability for which indemnification is sought exceeds the sum of Fifty Thousand Dollars ($50,000). At such time as the aggregate loss or liability for which indemnification may be sought exceeds Fifty Thousand Dollars ($50,000), the Party to be indemnified may seek indemnification for all such losses or liabilities, including the first Fifty Thousand Dollars ($50,000). This limitation shall not apply to any of the Taxes, penalties or interest referred to in the second paragraph of Section 5.14. 11.6. Indemnification Payments in Cash. All payments in respect to any undisputed or resolved Indemnification Claims shall be made in cash. 11.7. Investigations: Waivers. The Survival Periods and rights to indemnification provided for in this Article shall remain in effect notwithstanding any investigation at any time by or on behalf of any Party hereto or any waiver by any Party hereto of any condition to such Party's obligations to consummate the transactions contemplated hereby. ARTICLE 12. DEFAULT AND REMEDIES 12.1. Opportunity to Cure. If any Party believes another to be in material default hereunder for breach of representations and warranties or any other reason, such Party shall 27 28 provide the other with written notice specifying in reasonable detail the nature of such default. If the default has not been cured by the earlier of: (a) the Closing Date, or (b) within thirty (30) days after delivery of that notice, then the Party giving such notice may terminate this Agreement by notifying the defaulting Party and/or exercise the remedies available to such Party pursuant to this Article, subject to the right of the other Party to contest either such action through appropriate proceedings; provided, however, that if such breach is not capable of being cured within such period and if the breaching Party shall have commenced action to cure such breach within such period and is diligently attempting to cure such breach and such breach can reasonably be expected to be cured during the additional time period, the breaching Party shall be afforded an additional reasonable amount of time to cure such breach but not to exceed an additional sixty (60) days; provided, further, that Purchaser shall have no opportunity to cure the breach of its obligation to deliver any required portion of the Purchase Price to be delivered to Seller at Closing. 12.2. Remedies/Arbitration. 12.2.1. Any claim under this Agreement brought after the Closing Date, and any claim under this Agreement brought prior to the Closing Date in which the Party bringing the claim is praying solely for monetary damages, shall be submitted to binding arbitration in accordance with the commercial arbitration rules of the American Arbitration Association and the provisions contained herein. The arbitration shall be conducted in Little Rock, Arkansas, by a panel of three arbitrators. All claims between the Parties shall be arbitrated in a single proceeding, to the full extent practicable. 12.2.2. The Party initiating arbitration shall give the other Party written notice of the matter in dispute and the name of the arbitrator appointed by it. Within fourteen (14) days after receipt of such notice, the non-initiating Party shall give notice to the initiating Party of the arbitrator appointed by it. If the non-initiating Party fails to designate its arbitrator within the said fourteen (14) day period, the American Arbitration Association shall select an arbitrator for such Party. Within fourteen (14) days after the appointment of the second arbitrator, the two arbitrators so appointed shall agree on a third arbitrator. If the two arbitrators are unable to agree on a third arbitrator within said 14-day period, then the American Arbitration Association shall appoint the third arbitrator. 12.2.3. All determinations in the final decision of the arbitration panel shall be made by majority vote. The fees and expenses of the arbitration panel shall be awarded by the arbitrators in their discretion as part of their award. The arbitrators' award will be binding on the Parties hereto and may be entered in any court of competent jurisdiction, and shall not be subject to appeal. 12.2.4. Notwithstanding the foregoing, the Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the Parties shall be entitled to an injunction or injunctions to prevent breaches or this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state having jurisdiction, this being in addition to any other remedy to which they are entitled at 28 29 law or in equity. Each Party agrees that it will not assert, as a defense against a claim for specific performance, that the Party seeking specific performance has an adequate remedy at law. ARTICLE 13. TERMINATION 13.1. Absence of FCC Consent. This Agreement may be terminated by either Party by giving written notice thereof to the other if the Assignment Applications have not been granted by Final Order within twelve (12) months after the date of this Agreement. Neither Party may terminate this Agreement pursuant to this Section if such Party is in material default hereunder. 13.2. Mutual Consent. This Agreement may be terminated by the mutual consent of the Parties. ARTICLE 14. DAMAGE; RISK OF LOSS 14.1. Risk of Loss. The risk of loss or damage to the Assets shall be upon Seller at all times prior to the Closing Date. In the event of material loss or damage to the Assets prior to the Closing Date, Seller shall promptly notify Purchaser thereof and, unless otherwise agreed by the Parties, Seller shall use best efforts to repair, replace or restore the lost or damaged property to its former condition as soon as practicable. If such repair, replacement, or restoration has not been completed prior to the Closing Date, Purchaser may, at its option: 14.1.1. elect to consummate the Closing and make such arrangements as the Parties may reasonably agree upon to remedy such loss or damage; or 14.1.2. elect to postpone the Closing Date, with prior consent of the FCC if necessary, for such reasonable period of time (not to exceed ninety (90) days) as is necessary for Seller to repair, replace, or restore (or to cause to be repaired, replaced or restored) the lost or damaged property to its former condition. If, after the expiration of that extension period, the lost or damaged property has not been adequately repaired, replaced or restored, Purchaser may terminate this Agreement or elect to consummate the Closing as provided in Section 14.1.1. For purposes of this Section, loss or damage shall be deemed "material" if the reasonable cost to repair, replace, or restore the lost or damaged property exceeds $100,000.00. 14.2. Resolution of Disagreements. If the Parties are unable to agree upon the extent of any loss or damage, the cost to repair, replace or restore any lost or damaged property, the adequacy of any repair, replacement, or restoration of any lost or damaged property, or any other matter arising under this Section, the disagreement shall be referred to a qualified consulting communications engineer mutually acceptable to Seller and Purchaser who is a member of the Association of Federal Communications Consulting Engineers, whose decision shall be final, and whose fees and expenses shall be paid one-half by Seller and one-half by Purchaser. 29 30 ARTICLE 15. EMPLOYEES 15.1. Employees. For purposes of this Article, the term "Employees" shall include all full-time and part-time employees, employees on workers' compensation, military leave, maternity leave, leave under the Family and Medical Leave Act of 1993, short-term and long-term disability (including a disability pension), non-occupational disability, layoff with recall rights, and employees on other approved leaves of absence with a legal or contractual right to reinstatement. 15.2. Responsibility for Employees on or Before the Closing. All medical, dental, vision, travel accident, accidental death and dismemberment, and life insurance expenses incurred by Employees and their dependents on or before the Closing Date, pursuant to any employee plan, irrespective of the time such claims are presented, shall be the responsibility of Seller on the Closing Date. Seller shall be responsible for any medical, dental or life insurance coverage due to any Employees and their dependents who retired on or before the Closing Date. Seller agrees to fulfill its obligations under continuation coverage rules of COBRA with respect to a "qualifying event," with the meaning or Section 4980B(f) of the Code or Section 603 or ERISA, occurring on or before the Closing Date with respect to any Employees who are not hired by Purchaser and their dependents. All short-term, long-term and extended disability benefits payable to Employees and their dependents who became disabled on or before the Closing Date are the responsibility of Seller and shall be paid directly by Seller or their insurance carrier to such Employees and their dependents. If any Employee is terminated from employment on or before the Closing Date by Seller as result of the transactions contemplated by this Agreement or otherwise, any obligations arising out of such termination, including severance, accrued vacation pay, COBRA obligations, employment discrimination complaints, unfair labor practice charges, grievance under any collective bargaining agreement, wrongful termination and related tort claims and breach of contract claims shall be the sole responsibility of Seller. Purchaser shall have the sole responsibility for the items listed in the preceding sentences for any actions taken by Purchaser with respect to Employees it hires after the Closing Date. ARTICLE 16. MISCELLANEOUS 16.1. Assignment. Neither this Agreement nor any of the rights or obligations hereunder may be assigned by Seller or Purchaser without the prior written consent of the others. Purchaser may, without such consent, assign its right, title and interest in, to and under this Agreement to an Affiliate; provided that Purchaser must first obtain Seller's consent to any such assignment (which consent shall not be unreasonably withheld) if such assignment could reasonably be expected to delay the Closing. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and assigns, and no other person shall have any right, benefit or obligation hereunder. 30 31 16.2. Notices. Unless otherwise provided herein, any notice, request, instruction or other document to be given hereunder by any Party to the other shall be in writing and delivered in person or by courier, by facsimile transmission, or mailed by registered or certified mail, postage prepaid, return receipt requested or overnight courier, as follows: If to Purchaser or Guarantor: Scott Hopper GCC License LLC Western Wireless Corporation 3650 - 131st Avenue Bellevue, Washington 98006 Fax No: (425) 586-8666 With a copy (which copy shall not constitute notice or service of process) to: Stokes Lawrence, P.S. 800 Fifth Avenue, Suite 4000 Seattle, WA 98104-3199 Attention: Douglas C. Lawrence, Esq. Fax No: (206) 464-1496 If to Seller: NetWireless, LLC 3300 West Foxridge Lane Muncie, IN 47304 Attention: Paul L. Kozel Fax No. (765) 741-4151 With a copy (which copy shall not constitute notice or service of process) to: Lukas, Nace, Gutierrez & Sachs 1111 - 19th Street, NW, Suite 1200 Washington, D.C. 20036 Attention: Thomas Gutierrez, Esq. Fax No: (202) 828-8410 or to such other place and with such other copies as a Party may designate as to itself by written notice to the others. All such notices and communications shall be deemed to have been duly given at the time delivered by hand, if personally delivered; three business days after being deposited in the mail as provided above; when receipt confirmed, if sent by facsimile; and the next business day after timely delivery to the courier, if sent by an over-night air courier service guaranteeing next day delivery. 31 32 16.3. Choice of Law. This Agreement shall be construed, interpreted and the rights of the Parties determined in accordance with the laws of the State of Delaware, except with respect to matters of law concerning the internal affairs of any entity which is a Party to or the subject of this Agreement, and as to those matters the law of the jurisdiction under which the respective entity derives its powers shall govern. 16.4. Entire Agreement; Amendments and Waivers. This Agreement, together with all exhibits and schedules hereto, constitutes the entire agreement among the Parties pertaining to the subject matter hereof and supersedes all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties. No supplement, modification or waiver of this Agreement shall be binding unless executed in writing by the Party to be bound thereby. No waiver of any of the provisions of this Agreement shall be deemed, or shall constitute, a waiver of any other provision hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 16.5. Allocation of the Purchase Price. The Purchase Price shall be allocated in accordance with SCHEDULE 16.5, to be prepared on or before the Closing, and Purchaser and Seller agree to cooperate reasonably in the preparation of such Schedule. Each of the Parties agrees that (i) such allocation represents the fair market value of the Assets and shall be binding upon it; (ii) no filings made by it with any taxing or other authority shall reflect an allocation other than in the manner agreed upon; and (iii) it shall timely make all filings required by any taxing authority, including the filing of Internal Revenue Service Form 8594. 16.6. Bulk Sales. Purchaser and Seller each waive any obligation of the other Party which may arise under the provision of any applicable "Bulk Sales" laws. 16.7. Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 16.8. Invalidity. In the event that any one or more of the provisions contained in this Agreement or in any other instrument referred to herein, shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision of this Agreement or any other such instrument unless such invalidity materially affects the benefit of the bargain of a Party as originally contracted for in this Agreement. 16.9. Headings. The headings of the Articles and Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 16.10. Expenses. Except as expressly provided, Seller and Purchaser shall bear equally any transfer or excise taxes arising from the transactions contemplated herein. Seller shall pay the cost of any recording and transfer fees arising from the purchase and sale of the Assets pursuant to this Agreement. Seller and Purchaser will each be liable for its own expenses incurred in connection with the negotiation, preparation, execution or performance of this Agreement. Seller 32 33 and Purchaser will each be liable for one-half of any expenses incurred in obtaining consent or approval from any Governmental Authority to the assignment the Authorizations. 16.11. Schedules and Exhibits. The Schedules and Exhibits to this Agreement are a material part hereof and shall be treated as if fully incorporated into the body of the Agreement. 16.12. Publicity. Except as required by Applicable Law or on advice of counsel, no Party shall issue any press release or make any public statement regarding the transactions contemplated hereby without the prior approval of the other Party. Any press release or the text of any public statement to be made by one party shall be provided to the other in advance of its release, and no such release or statement shall be made public without the consent of the other party 16.13. Confidential Information. The Parties acknowledge that the transaction described herein is of a confidential nature and shall not be disclosed except to Representatives, advisors and Affiliates, or as required by law, until such time as the Parties make a public announcement regarding the transaction as provided in Section 16.12. The Parties shall not make any public disclosure of the specific terms of this Agreement, except as required by law. In connection with the negotiation of this Agreement and the preparation for the consummation of the transactions contemplated hereby, the Parties acknowledges that they will have access to confidential information relating to the other Parties. Each Party shall treat such information as confidential, preserve the confidentiality thereof and not duplicate or use such information, except to Representatives, consultants and Affiliates in connection with the transactions contemplated hereby provided such advisors, Representatives and Affiliates also agree to keep such information confidential. In the event of the termination of this Agreement for any reason whatsoever, each Party shall return to the others all documents, work papers and other material (including all copies thereof) obtained in connection with the transactions contemplated hereby and will use all reasonable efforts, including instructing any of its Employees and others who have had access to such information, to keep confidential and not to use any such information, unless such information is now, or is hereafter disclosed, through no act or omission of such Party, in any manner making it available to the general public. 16.14. No Third Party Beneficiaries. All of the rights and obligations included in this Agreement are intended to inure to the benefit of the Parties and their Affiliates alone. Nothing contained in this agreement shall be construed as creating any rights in any other third parties. 16.15. Parent Guarantee. Guarantor hereby absolutely, unconditionally, directly, irrevocably, completely, and immediately guarantees the performance of Purchaser or any of its assignees with respect to the payment of the Purchase Price at the time and in the manner called for in this Agreement. Guarantor's obligation of payment and performance is not contingent upon Seller first pursuing any remedies against Purchaser or any of its successors in interest. In the event Purchaser or its assignee fails to make any such payment when due, within five (5) business days of receipt of written notice from Seller of Purchaser's failure to so perform Guarantor shall make such payment to Seller, subject to all defenses and objections that might otherwise be available to Purchaser. Except as expressly stated in this Section, Guarantor shall have no other responsibility or obligation under this Agreement. 33 34 IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed on its behalf by its officer thereunto duly authorized as of the day and year first above written. NETWIRELESS, LLC By: /s/ Paul Kozel ----------------------------------- Its: President ---------------------------------- GCC LICENSE LLC By: /s/ Scott Hopper ----------------------------------- Its: Vice President ---------------------------------- SOLELY AS GUARANTOR UNDER THE PROVISIONS OF SECTION 16.15 ABOVE: WESTERN WIRELESS CORPORATION By: /s/ Scott Hopper ------------------------------ Its: Vice President ----------------------------- 34 35 EXHIBIT 10.92 July 12 1999 Steve Burdette 3023 S. Atlantic Ave. #505 Daytona Beach Shores, FL 32118 Dear Steve: This letter (the "Letter Agreement") sets forth the terms of your employment with Western Wireless Corporation ("WWC"), effective August 1, 1999. 1. Your title will be Senior Vice President. In that capacity you will report to the President of WWC (the "President"). 2. Your responsibilities will include supervision of all sales, distribution, marketing and customer service functions, together with such other duties as may be assigned to you by the President. In addition, you agree to serve as a director and/or senior officer of any subsidiary of WWC, if so elected, without any additional salary or other compensation. You will devote substantially all of your business time and attention to the obligations delineated in this Letter Agreement. 3. Your base compensation will be $150,000, payable in accordance with standard payroll practices of WWC. In addition, you will have an opportunity, as determined by WWC, to earn a performance bonus targeted at $75,000 per year, to be paid quarterly, and to continue, during the course of your employment, participation in the option program at a level to be determined by WWC. Your options shall contain change of control language consistent with other officers of WWC. It is understood that nothing contained herein will prevent WWC, in its sole and absolute discretion, from, at any time, increasing your compensation, either permanently or for a limited period, whether in base compensation, by bonus or otherwise, if WWC in its sole discretion, shall deem it advisable to do so in order to recognize and fairly compensate you for the value of your services to WWC; provided, however, that nothing contained in this paragraph three shall in any manner obligate WWC to make any such increase or provide any such additional compensation or benefits. 4. WWC will reimburse you for all reasonable out-of-pocket business expenses paid or incurred by you in connection with the performance of your duties, upon submission of signed, itemized lists of such expenses on general forms established for that purpose by WWC. 5. You will be entitled to participate in all group health and insurance programs and all other fringe benefit or retirement plans or other plans effective generally with respect to executives of WWC. 6. WWC will enter into an Indemnification Agreement with you pursuant to which WWC will agree to indemnify you against certain liabilities arising by reason of your affiliation with WWC. 7. (a) Notwithstanding any other provision of this Letter Agreement, your employment by WWC may be terminated by WWC at any time, with or without Cause, as defined below. In the event of a termination for Cause you will have no rights to severance payments. Termination for "Cause" means (i) your gross neglect or willful material breach of your principal employment responsibilities or duties, (ii) a final judicial adjudication that you are guilty of a felony, (iii) fraudulent conduct as determined by a court of competent jurisdiction in the course of your employment with WWC or any of its subsidiaries, (iv) the breach by you of the covenant set forth in paragraph nine, below, or (v) the material breach by you of any other provision of this Letter Agreement which continues uncured for a period of thirty (30) days after notice thereof by WWC. In the event of your voluntary 36 Steve Burdette Page 2 termination of employment with WWC, you will have no rights to severance benefits. (b) In the event of an involuntary termination for other than Cause (which shall include your resignation as a direct result of (i) a reduction in your base compensation and/or incentive bonus target percentage, or (ii) the material breach by the Company of any provision of this Letter Agreement which continues uncured for a period of thirty (30) days after notice thereof by you), then (A) you will be entitled to receive a severance payment in an amount equal to your accrued but unpaid existing annual targeted incentive bonus through the date of termination, 6 months of your then base compensation and an amount equal to 6 months of your existing annual targeted incentive bonus; (B) WWC will, at its expense, make all COBRA benefit payments on behalf of you and your dependents for six (6) months following such involuntary termination; and (C) with respect to any stock options previously granted to you by WWC which remain unvested at the time of the involuntary termination, notwithstanding the vesting language in the stock option agreement pursuant to which such options were granted, there shall be immediate vesting of that portion of each such grant of unvested stock options as equals the product of the total number of such options under such grant which remain unvested multiplied by a fraction the numerator of which is the sum of (i) the number of days from the date on which the last vesting of options under such grant took place to and including the date on which the termination occurs plus (ii) 183 and the denominator of which is the number of days remaining from the date on which the last vesting of options under such grant took place to and including the date on which the final vesting under such grant would have occurred. Your death or permanent disability will be deemed an involuntary termination for other than Cause. "Permanent disability" shall mean your inability substantially to render the services required hereunder for eight (8) months in any eighteen (18) month period because of a physical or mental condition, it being understood that until you have received notice from WWC terminating this Letter Agreement, you will continue to receive your base compensation and all other benefits to which you are entitled under this Letter Agreement. (c) You agree that upon termination of your employment by WWC for any reason you will surrender to WWC all proprietary records, lists and other documents obtained by you or entrusted to you during the course of your employment by WWC, together with all copies of all such documents. 8. You agree not to disclose at any time, whether during the term of this Letter Agreement or thereafter, any secret or confidential information relating to WWC's or any of its subsidiaries' businesses, financial condition or prospects, which information you have obtained while employed by WWC or by any of its subsidiaries or any of the predecessors in interest of any of them, except (i) as may be required in furtherance of the businesses of WWC or of any of its subsidiaries, (ii) with WWC's express prior written consent, (iii) if such information is made generally available to the public through no fault of yours, or (iv) if such disclosure is required by applicable law or regulation or by legal process and then only with prompt written notice to WWC in advance of any such disclosure. 9. You agree that, during the term of your employment by WWC and for a period of one (1) year immediately following the termination of your employment with WWC for any reason whatsoever, you will not, either directly or indirectly, for compensation or any other consideration, individually or as an employee, broker, agent, consultant, lender, contractor, advisor, solicitor, stockholder (provided that ownership of 5% or less of the outstanding stock of any corporation listed on a national securities exchange is not prohibited), proprietor, partner, or person having any other material 37 Steve Burdette Page 3 economic interest in, affiliated with or rendering services to any other entity, engage in or provide services to or for a business that is substantially the same as or similar to WWC's or its subsidiaries' businesses and which competes within the applicable commercial mobile radio services markets serviced by WWC or its subsidiaries, directly or indirectly. 10. This Letter Agreement contains the entire agreement between you and WWC with respect to your employment by WWC, other than human resource and corporate policies which are to be executed by all employees. This Letter Agreement may not be amended, waived, changed, modified or discharged except by an instrument in writing executed by or on behalf of you and WWC. 11. All notices, requests, demands and other communications with respect to this Letter Agreement will be in writing and will be deemed to have been duly given if delivered by hand, registered or certified mail (first class postage and fees prepaid, return receipt requested), telecopier or overnight courier guaranteeing next-day delivery, as follows: a) to WWC: Western Wireless Corporation 3650 - 131st Avenue SE, #400 Bellevue, Washington 98006 Attention: President Telecopier: (425) 586-8010 b) to you: Steve Burdette 3023 S. Atlantic Ave. #505 Daytona Beach Shores, FL 32118 and/or to such other persons and addresses as either you or WWC has specified in writing to the other by notice as aforesaid. 12. If any part of this Letter Agreement is hereafter construed to be invalid or unenforceable in any jurisdiction, the same will not affect the remainder of the Letter Agreement or the enforceability of such part in any other jurisdiction, which will be given full effect, without regard to the invalid portions or the enforceability in such other jurisdiction. If any part of this Letter Agreement is held to be unenforceable because of the scope thereof, you and WWC agree that the court making such determination will have the power to reduce the duration and/or area of such provision and, in its reduced form, said provision shall be enforceable; provided, however, that such court's determination will not affect the enforceability of this Letter Agreement in any other jurisdiction beyond such court's authority. 13. This Letter Agreement will be governed by and construed and interpreted in accordance with the laws of the State of Washington without reference to conflicts of laws principles. Please signify your acceptance of the terms of this Letter Agreement by signing where indicated below. 38 Steve Burdette Page 4 Sincerely yours, WESTERN WIRELESS CORPORATION ------------------------------------ /s/ Mikal Thomsen Title: President ------------------------------ AGREED TO AND ACCEPTED: - ---------------------------------- /s/ H. Stephen Burdette EX-10.91 4 LICENSE AND SERVICE AGREEMENT 1 EXHIBIT 10.91 LICENSE AND SERVICES AGREEMENT BETWEEN WESTERN WIRELESS CORPORATION AND AMDOCS (UK) LIMITED 2 TABLE OF CONTENTS 1. SCOPE AND DEFINITIONS..............................................................................2 1.1 SCOPE...........................................................................................2 1.2 DEFINITIONS.....................................................................................2 2. PURPOSE OF AGREEMENT...............................................................................6 2.1 PURPOSE OF AGREEMENT............................................................................6 3. PRODUCT LICENSE....................................................................................7 3.1 GRANT OF LICENSE................................................................................7 3.2 USE OF LICENSE..................................................................................7 3.3 SOURCE/OBJECT CODE..............................................................................7 3.4 DOCUMENTATION...................................................................................8 3.5 WARRANTIES......................................................................................8 3.7 MAINTENANCE....................................................................................10 3.8 LICENSE FEES...................................................................................10 3.9 PAYMENT OF THE LICENSE FEE.....................................................................12 4. PROJECT PLAN......................................................................................13 4.1 PHASES OF IMPLEMENTATION OF THE CUSTOMIZED PRODUCT.............................................13 4.2 DFD PROCEDURE..................................................................................13 4.3 CUSTOMIZATION AND CUSTOMIZATION ACTIVITIES.....................................................14 4.4 IMPLEMENTATION ACTIVITIES......................................................................15 4.5 SUPPORT SERVICES...............................................................................15 4.6 ACCEPTANCE TESTING.............................................................................15 4.7 ON-GOING SUPPORT...............................................................................16 4.8 CHANGE REQUEST PROCEDURE.......................................................................16 4.9 PROJECT MANAGEMENT.............................................................................17 5. MAINTENANCE SERVICES..............................................................................18 5.1 MAINTENANCE SERVICES...........................................................................18 5.2 MAINTENANCE FEE................................................................................19 6. HARDWARE AND THIRD PARTY SOFTWARE.................................................................20 6.1 PLATFORM.......................................................................................20 6.2 PLATFORM PURCHASE..............................................................................20 6.3 PLATFORM WARRANTY AND MAINTENANCE..............................................................20 7. PAYMENT...........................................................................................21 7.1 RATES AND RELATED PAYMENTS.....................................................................21 7.2 INVOICING STANDARD.............................................................................21 7.3 PAYMENT IN ARREARS.............................................................................21 7.4 PRICE PROTECTION...............................................................................22 7.6 TAXES..........................................................................................22 8. GENERAL TERMS AND CONDITIONS......................................................................23 8.1 TERM OF THE AGREEMENT..........................................................................23 8.2 ORDERS.........................................................................................23
3 8.3 INTELLECTUAL PROPERTY RIGHTS...................................................................24 8.4 TITLE..........................................................................................24 8.5 CONFIDENTIALITY................................................................................24 8.6 ENTICEMENT OF STAFF............................................................................25 8.7 WORK RULES AND ACCESS TO FACILITIES............................................................25 8.8 NO WAIVER......................................................................................26 8.9 LIABILITY......................................................................................26 8.10 CONFLICT OF INTEREST........................................................................27 8.11 FORCE MAJEURE...............................................................................27 8.12 SEVERABILITY................................................................................27 8.13 ENTIRE AGREEMENT AND CHANGES................................................................28 8.14 TERMINATION.................................................................................28 8.15 GOVERNING LAW, ESCALATION PROCEDURE AND ARBITRATION.........................................30 8.16 INDEPENDENT CONTRACTOR......................................................................31 8.17 ASSIGNMENT AND SUBCONTRACTS.................................................................31 8.18 INTELLECTUAL PROPERTY RIGHTS INDEMNITY......................................................33 8.19 SURVIVAL OF OBLIGATIONS.....................................................................33 8.20 HEADINGS NOT CONTROLLING....................................................................33 8.21 NOTICES.....................................................................................34 8.22 SUCCESSORS AND ASSIGNEES....................................................................34 8.23 NO THIRD PARTY BENEFICIARIES................................................................34 8.24 AUTHORITY...................................................................................35 8.25 EXECUTION OF THE AGREEMENT..................................................................35
APPENDIX 1-- ORDER NO. 1 (LICENSE AND SERVICES) APPENDIX 2 -- ORDER NO. 2 (MAINTENANCE SERVICES) APPENDIX 3 -- FORM OF OGS SERVICES ORDER EXHIBIT A -- RATES AND EXPENSES EXHIBIT B -- CONFIDENTIALITY AGREEMENT BETWEEN AMDOCS AND COMPANY EXHIBIT C -- CONFIDENTIALITY AGREEMENTS WITH THIRD PARTY SUBCONTRACTORS 4 Ann. A to Exh. C LICENSE AND SERVICES AGREEMENT THIS LICENSE AND SERVICES AGREEMENT ("Agreement") is made as of the 2nd day of August, 1999 by and between: WESTERN WIRELESS CORPORATION, a corporation incorporated under the laws of the State of Washington, having offices at 3650 131st Ave. SE, Ste. 400, Bellevue, Washington 98006, USA (hereinafter referred to as "COMPANY"); and AMDOCS (UK) LIMITED, a company incorporated under the laws of England, having offices at Grand Building, 1-3 Strand, London WC2 N5EJ, England (hereinafter referred to as "AMDOCS"). WHEREAS AMDOCS is interested in licensing to COMPANY the use of AMDOCS' proprietary software products that are part of AMDOCS' sets of information systems known as the Ensemble, in providing to COMPANY the Customization Services, Support Services and Maintenance Services related to such software products, and in providing to COMPANY related third party hardware and software products, and has the right to do so, all pursuant to the terms and subject to the conditions of this Agreement; and WHEREAS COMPANY is engaged in the business of providing wireless telecommunications services, and wishes to enter into an agreement with AMDOCS which will give COMPANY the right to purchase a license for the use of software products that are part of the Ensemble, as well as related Customization Services, Support Services and Maintenance Services, and related third party hardware and software products; and WHEREAS in accordance with this Agreement and Order Nos. 1 and 2, attached hereto as Appendices 1 and 2 and made an integral part hereof, AMDOCS is providing to COMPANY, and COMPANY is acquiring from AMDOCS, the licenses, Customization Services, Support Services and Maintenance Services and third party hardware and software products specified in those Orders; and WHEREAS AMDOCS and COMPANY agree that this Agreement will also provide a framework that will enable COMPANY to acquire from AMDOCS additional licenses, services, and third party hardware and software products, all pursuant to orders to be placed with AMDOCS in accordance with the terms and subject to the conditions of this Agreement; NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS: 5 1. SCOPE AND DEFINITIONS 1.1 SCOPE For purposes of this Agreement, all terms defined herein shall have the meanings so defined unless the context clearly indicates otherwise. A term defined in the singular shall include the plural and vice versa when the context so indicates. References to Sections, Appendices and Exhibits are to sections, appendices and exhibits of and to this Agreement, except in any Order when references to Sections are to sections of the relevant Order, unless specified otherwise. 1.2 DEFINITIONS 1.2.1 ACCEPTANCE TEST; ACCEPTANCE TESTING; ACCEPTANCE "Acceptance Tests", "Acceptance Testing" and "Acceptance" are as defined in Section 4.6. 1.2.2 AMDOCS AFFILIATE "Amdocs Affiliate" means a company that controls, is controlled by, or is under common control with AMDOCS, where "control" means the holding of more than fifty percent (50%) of equity ownership. 1.2.3 ARBITRATOR "Arbitrator" is as defined in Section 8.15.3. 1.2.4 AUTHORIZED SUBCONTRACTORS "Authorized Subcontractors" are as defined in Section 8.17.3. 1.2.5 BILLING PERIOD "Billing Period" is as defined in Section 7.2.1. 1.2.6 COMPANY AFFILIATE "COMPANY Affiliate" means a company that controls, is controlled by, or is under common control with COMPANY, where "control" means the holding of more than fifty percent (50%) of equity ownership, or a joint venture or similar business relationship in which COMPANY has an interest and in which COMPANY is responsible for producing bills. 6 1.2.7 CUSTOMIZATION "Customization" means the modifications, additions or changes to the Licensed Products, as set forth in the DFS attached to or referenced in the applicable Order, prior to Acceptance (as defined hereinbelow). 1.2.8 CUSTOMIZATION SERVICES "Customization Services" are as defined in Section 4.3.1. 1.2.9 CUSTOMIZED PRODUCT "Customized Product" means the software modules required for operation of the Licensed Products to satisfy COMPANY's business needs and purposes, as shall be specified in the relevant DFS documents annexed to or referenced in applicable Orders from time to time, whether of generic nature or as specifically developed for COMPANY. "Customized Product" also refers to any part thereof. 1.2.10 DAD "DAD" means Detailed Architectural Design. 1.2.11 DFD "DFD" means the Detailed Functional Design phase of implementation of the Licensed Product, in which the specifications of the Customized Product designed to meet the business needs and requirements of COMPANY will be identified and then detailed in the DFS documents. 1.2.12 DFS "DFS" means the Detailed Functional Specifications, which are the direct result of the DFD. 1.2.13 ENSEMBLE "Ensemble" means AMDOCS' proprietary wireless, long-distance, paging, and other software products that exist from time to time. 1.2.14 ILF "ILF" means the Initial License Fee, as defined in Section 3.7.1 and determined in accordance with Section 3.7.2. 7 1.2.15 INDEX "Index" is as defined in Section 7.4. 1.2.16 INSTALLATION SITE "Installation Site" means the building location(s), specified by COMPANY, at which the Customized Product will reside. 1.2.17 INTELLECTUAL PROPERTY RIGHTS "Intellectual Property Rights" means patents, trademarks, trade names, copyrights, trade secrets, rights of privacy, rights of publicity, and other intellectual property and proprietary rights registered or enforceable in North America. and/or the United Kingdom. 1.2.18 LICENSE FEES "License Fees" means the license fees payable to AMDOCS in accordance with Section 3.7 hereunder and the applicable Order. 1.2.19 LICENSED PRODUCTS "Licensed Products" means the software modules which comprise the generic software products of AMDOCS which are part of the Ensemble. "Licensed Product" also refers to any part thereof when the context so requires. 1.2.20 MAINTENANCE FEE "Maintenance Fee" is as defined in Section 5.2.1. 1.2.21 MAINTENANCE PERIOD "Maintenance Period" means, initially, the term commencing upon expiration of the Warranty Period and ending one year later, and thereafter, each subsequent term of one (1) year. 1.2.22 MAINTENANCE SERVICES "Maintenance Services" means those services defined in Section 5.1.1 and to be provided by AMDOCS pursuant to Section 5 and an applicable Order. 1.2.23 OGS "OGS" means ongoing support, as defined in Section 4.7.1. 8 1.2.24 OGS SERVICES "OGS Services" are as defined in Section 4.7.3. 1.2.25 ORDER "Order" means a COMPANY document issued under Section 8.2, executed, confirmed or acknowledged in writing by both parties ordering a license to use a Licensed Product, a Customized Product, Customization Services, Support Services or Maintenance Services, or any combination thereof. 1.2.26 PLATFORM "Platform" means the hardware and any third party's system software, upon and in conjunction with which the Customized Product, will operate and which, pursuant to Section 6.1, will be installed by COMPANY in a detailed configuration to be mutually agreed upon by AMDOCS and COMPANY and to be specified in the DAD document. 1.2.27 SLF "SLF" means Subsequent License Fee, as defined in Section 3.7.1 and determined in accordance with Sections 3.7.4 and 3.7.5. 1.2.28 SUBSCRIBER "Subscriber" means any person or entity that has been assigned, directly or indirectly by COMPANY, a unique number for a wireless, long-distance, CLEC, ISP, data, paging or other telecommunications service (or combination thereof ) that is billed by COMPANY through the Customized Products. Each Subscriber shall be counted only as one, regardless of the number of services and type of service that COMPANY provides to such Subscriber, unless such Subscriber is assigned, directly or indirectly by COMPANY, more than one unique number for any particular service, in which case the number of Subscribers shall equal the number of unique numbers assigned by COMPANY. "Subscriber" shall not include any prepaid service accounts, or subscription for a service, telecommunications access line, service, or number that was disconnected for more than one (1) month. Actual Subscriber count will be verified by COMPANY's annual financial audit. 1.2.29 SUCCESSOR "Successor" shall have the meaning set forth in Section 8.17.2. 1.2.30 SUPPORT SERVICES "Support Services" are as defined in Section 4.5.1. 9 1.2.31 TERMINATE OR TERMINATION "Terminate" or "Termination" means the ending by COMPANY of this Agreement or any Order issued hereunder in accordance with Section 8.14. 1.2.32 TERRITORY "Territory" means North America. 1.2.33 VERIFICATION DATE "Verification Date" is as defined in Section 3.7.4. 1.2.34 WARRANTY; WARRANTY PERIOD "Warranty" and "Warranty Period" are as defined in Section 3.5.1. 2. PURPOSE OF AGREEMENT 2.1 PURPOSE OF AGREEMENT 2.1.1 The purpose of this Agreement is to provide a framework which will, subject to the terms and conditions of this Agreement, give COMPANY the right to acquire from AMDOCS licenses to the Licensed Products and the related Customized Products, Customizations, Customization Services, Maintenance Services and Support Services. 2.1.2 Licenses or services of AMDOCS hereunder will be provided pursuant to Orders issued by COMPANY and accepted by AMDOCS (in accordance with the procedures specified in Section 8.2 and the other applicable terms and the conditions of this Agreement). Each Order will relate to the specific Licensed Product(s), Customized Products, Customization Services, Support Services or Maintenance Services as set out in Sections 3.1, 4.3, 4.5 and 5, respectively. Accordingly, and pursuant thereto, AMDOCS will provide COMPANY with the ordered license(s), Customization Services, Maintenance Services and Support Services as requested by COMPANY. 2.1.3 In addition to the above, COMPANY shall, except as provided herein, purchase, through AMDOCS, hardware components and standard third party's system software comprising parts of the Platform, and AMDOCS shall sell the same in accordance with and subject to the provisions of Section 6 and pursuant to an Order to be issued by COMPANY and accepted by AMDOCS. 10 3. PRODUCT LICENSE 3.1 GRANT OF LICENSE Subject to the terms and conditions of this Agreement and the applicable Order(s) issued by COMPANY hereunder, AMDOCS shall grant to COMPANY a perpetual, non-exclusive and non-transferable (except as provided herein) license to use the Licensed Product(s) and/or the Customized Product(s) specified in such Order(s) in accordance with the provisions of this Agreement and the applicable Order, provided that the applicable fees are fully paid in accordance herewith. COMPANY has ordered a license for the Licensed Products, the Customized Products, and for related Customization Services and Support Services as specified in Order No. 1 (attached hereto as Appendix 1). 3.2 USE OF LICENSE 3.2.1 COMPANY hereby agrees to accept the license granted by AMDOCS under the specific Order(s) for the Licensed Product(s) and/or the Customized Product(s), to pay the License Fees specified therein, and to exercise such license only in accordance with the terms and conditions of this Agreement and the applicable Order. 3.2.2 COMPANY shall use each Licensed Product(s) and/or Customized Product(s) and all the information related thereto solely for COMPANY's businesses in accordance with the terms and conditions of this Agreement. COMPANY shall not use for or sublicense to any third party the Licensed Products, the Customized Product or any part thereof, and shall not allow their use by any third party without AMDOCS' prior written consent. Notwithstanding the foregoing, COMPANY Affiliates and COMPANY's Successor shall be entitled to order and use the Licensed Products and the Customized Products, subject to full compliance in writing by such COMPANY Affiliates and Successor with all the applicable terms and conditions of this Agreement. 3.2.3 Company may use the Licensed Products and the Customized Products from any of Company's data centers within the Territory and/or the UK to render bills for Subscribers located outside the Territory and, in such event, shall receive the full protection of AMDOCS' indemnification obligations under Section 8.17 for all such activities. In addition, if, but only if, AMDOCS advises Company in writing that it is able to extend such indemnification obligation to a location outside the Territory, Company shall be entitled to use the Licensed Products in such location outside the Territory to render bills to Subscribers with the full benefit of such indemnification obligations. 3.3 SOURCE/OBJECT CODE AMDOCS will provide COMPANY, upon Acceptance of the Customized Product, with all relevant source and object code of the Licensed Products and Customized Products delivered by AMDOCS (including all new releases and 11 versions of the same as they become available, and all support files, configuration, and related components, not including third party software, necessary for the operation and maintenance of the Licensed Products and Customized Products. 3.4 DOCUMENTATION AMDOCS will provide COMPANY with the associated documentation for the Customized Product delivered under the applicable Orders hereunder in a computer-readable format in English, as shall be specified in an annex to the applicable Order. 3.5 WARRANTIES 3.5.1 Unless otherwise specified in an Order, AMDOCS will provide COMPANY with a warranty for each Licensed Product (the "Warranty") for a period of six (6) months after Acceptance of the Customized Product by COMPANY (the "Warranty Period") by providing, at no cost to COMPANY, Maintenance Services as specified in Section 5.1.3 for defects reported by COMPANY in writing during the Warranty Period. 3.5.2 Year 2000 Compliance a) AMDOCS warrants that the Licensed Product and Customized Product, as further specified in the DFS, is "Year 2000 Compliant", which means the Licensed Product and Customized Product are able to: (One) correctly and unambiguously handle and process date information before, during and after January 1, 2000. This includes, but is not limited to, accepting date input, providing date output, storing and retrieving dates and the ability to perform calculations on dates or portions of dates; (Two) correctly process functions that are programmed to commence and/or end on a particular date, including, but not limited to month-end, year-end, leap year and any combination thereof, irrespective of the change in the century identifier; (Three) function accurately and without interruption before, during, and after January 1, 2000 without any change in operations and/or parameters associated with the advent of the new century; and (Four) respond, in the manner to be defined in the DFS, to two-digit year date input in a way that resolves the ambiguity as to the century in a disclosed, defined and predetermined manner; and to store and provide output of date information in ways that are unambiguous as to the century. 12 b) COMPANY shall provide AMDOCS with a suitable testing environment and data to enable AMDOCS to test the conformity of the Customized Product with such warranty, in accordance with a timetable agreed between the parties. Such environment should be identical or substantially similar to COMPANY's overall environment for all of COMPANY's activities. c) In the event of any breach of the foregoing warranty, AMDOCS will promptly correct, at no charge, any problems with respect to the foregoing to achieve compliance therewith, provided the error is reported to AMDOCS within the Warranty Period. iv) AMDOCS does not make any representations or warranties as to the ability of the Customized Product to be Year 2000 Compliant when used or interfaced with other system(s), software, hardware, data or equipment which is not Year 2000 Compliant or which does not have a properly functioning wrapper allowing correct exchange of date-related data, unless such a wrapper is part of the Customized Product. Operability with external interfaces is subject to be predefined in the DFS and in accordance therewith. Furthermore, the Year 2000 warranties above shall not apply in the event that the Platform or any module of the Licensed Products or Customization is altered, modified or adjusted in a manner that directly or indirectly affects Year 2000 compliance, and such alteration, modification or adjustment is made by COMPANY or any third party without AMDOCS' prior written consent. AMDOCS will have no liability for the Year 2000 readiness of, or for any Year 2000 defect or error or deficiency in any system, software or service which is not provided by AMDOCS under this Agreement. 3.5.3 AMDOCS further represents and warrants to COMPANY as follows: 13 3.5.3.1 AMDOCS owns or possesses all necessary licenses or other valid rights to use and license all Licensed Products and Customized Products, and all Licensed Products, Customized Products and Customizations shall not infringe or misappropriate any Intellectual Property Right of any third party, and the Customization Services, Maintenance Services and Support Services shall not cause any such infringement or misappropriation or constitute unfair competition of any kind. 3.5.3.2 The execution, delivery, and performance of this Agreement (i) have been authorized by all necessary action, if any; (ii) do not violate any law, rule, or regulation or the terms of any order, judgment, or decree to which AMDOCS is subject, or the terms of any material agreement to which AMDOCS or any of its assets may be subject; and (iii) are not subject to the consent, approval, or other action of any third party. 3.5.3.3 This Agreement is a valid and binding obligation of AMDOCS, enforceable against AMDOCS in accordance with its terms. 3.5.3.4 All Customization Services, Maintenance Services and Support Services shall be performed in a professional manner, shall be of a high grade, nature, and quality, and shall conform in all material respects with the requirements of this Agreement and the Orders. 3.5.4 DISCLAIMER THE FOREGOING WARRANTIES (AND ANY OTHER WARRANTIES EXPRESSLY SET FORTH IN THIS AGREEMENT) ARE IN LIEU OF ALL OTHER WARRANTIES, WHETHER ORAL, WRITTEN, EXPRESS, IMPLIED OR STATUTORY. THERE ARE NO OTHER WARRANTIES. WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AND ANY OTHER STATUTORY WARRANTIES OF ANY KIND ARE HEREBY WAIVED. COMPANY EXPRESSLY AGREES THAT AMDOCS DOES NOT REPRESENT OR WARRANT THAT THE LICENSED PRODUCTS OR THE CUSTOMIZED PRODUCTS WILL OPERATE ON COMPUTER HARDWARE OR OPERATING SYSTEMS OTHER THAN THE PLATFORM. 3.6 MAINTENANCE AMDOCS shall provide to COMPANY Maintenance Services in accordance with the provisions of Section 5 and an applicable Order. 3.7 LICENSE FEES 3.7.1 The License Fee to be paid by COMPANY for the license to use a Licensed Product and related Customized Product(s) will be specified in the applicable Order. The License Fee shall be comprised of an Initial License Fee ("ILF") and Subsequent License Fee ("SLF"). 14 3.7.2 The ILF for a use of a Licensed Product by COMPANY inside the Territory and related Customized Product(s) will be determined based on the number of Subscribers in the Territory for which COMPANY desires to acquire the right to use such Licensed Product and related Customized Product(s) at the time an Order for that Licensed Product and related Customized Product(s) is issued, but not less than the actual number of COMPANY's Subscribers at such time, as represented by COMPANY to AMDOCS and specified in the Order for the Licensed Product and related Customized Products. The license fee is a cumulative fee comprised of the relevant base fee and incremental fees for the relevant number of Subscribers. 3.7.3 The ILF for a use of a Licensed Product by COMPANY in any market outside the Territory will be based on the number of Subscribers in such market at the time the Licensed Product is first used. In the event that such a market contains more than 100,000 Subscribers, then COMPANY shall pay ILF as calculated in Order No. 1 and shall pay SLF at a rate of 85% of the SLF table as specified in Order No. 1. In the event that the number of Subscribers in such a market is less than or equal to 100,000, then COMPANY: (i) shall not be required to pay ILF, and (ii) shall pay SLF for the actual number of such Subscribers at the SLF rate table in Order No. 1; provided, however, that such rates shall commence from the first such Subscriber upwards, rather than commencing at 800,000 Subscribers, and shall be calculated in accordance with 85% of the SLF table in Order No. 1, always commencing with a deemed 800,000 subscribers and adding the actual number of Subscribers. The number of Subscribers shall be calculated annually in accordance with Section 3.8.4. 3.7.4 COMPANY's number of Subscribers (as specified in the applicable Order for a Licensed Product and related Customized Product(s) and/or Customizations) will be reviewed annually, commencing on the first business day after issuance of COMPANY's annual financial statements following execution of such Order but not later than April 15th of each year (the "Verification Date"). The number of Subscribers as of each Verification Date shall be notified by COMPANY to AMDOCS, and certified to AMDOCS by COMPANY's independent auditors within sixty (60) days of the Verification Date. COMPANY will ensure that such certification shall be made directly by such auditors to AMDOCS within such sixty (60) day period. 3.7.5 If the number of COMPANY's Subscribers at the time of such annual review, as compared to the number of Subscribers at the later of the time the Order for the Licensed Product was issued or as at the previous Verification Date has increased, then COMPANY will pay AMDOCS SLF in accordance with such increase unless otherwise specified an applicable Order. The amount of SLF to be paid, based on increments of increased numbers of Subscribers, will be specified in such Order. 3.7.6 The license fees for a COMPANY Affiliate that uses a Licensed Product will be based on the number of Subscribers of such COMPANY Affiliate on the date the applicable Licensed Product is first used (the "Affiliate Subscribers"). If the number of Affiliate Subscribers is greater than the number of COMPANY Subscribers on the last 15 Verification Date, then the COMPANY Affiliate shall be required to pay ILF and SLF as specified in Order No. 1. If the number of Affiliate Subscribers is less than or equal to the number of COMPANY Subscribers on the last Verification Date, then such COMPANY Affiliate (i) shall not be required to pay ILF, and (ii) shall pay SLF for the number of Affiliate Subscribers, as specified in Order No. 1. 3.7.7 A COMPANY Successor that uses a Licensed Product will not be required to pay any additional license fees in order to continue to use the Licensed Product (except for the normal Subsequent License Fees provided for herein); provided, however, that such COMPANY Successor may only use such Licensed Product in the locations in which COMPANY and its Affiliates are using the Licensed Product at the time the rights of COMPANY under this Agreement are assigned to COMPANY Successor. If COMPANY Successor desires to use the Licensed Product in locations other than those used by COMPANY and its Affiliates at the time the rights of COMPANY under this Agreement are assigned to COMPANY Successor, COMPANY Successor will be required to pay an additional license fee as mutually agreed between COMPANY Successor and AMDOCS. 3.7.8 Upon reasonable prior notice, AMDOCS shall have the right, once annually, through an independent auditor to be appointed by AMDOCS at AMDOCS' expense, to audit during normal business hours COMPANY's records relating to COMPANY's number of Subscribers. If the number of Subscribers revealed by such annual audit is five (5%) percent or more than the number provided to AMDOCS by COMPANY's annual audit, then without derogating from AMDOCS' rights hereunder, COMPANY shall pay SLF in accordance with the results and reimburse AMDOCS the costs of such independent audit. 3.8 PAYMENT OF THE LICENSE FEE 3.8.1 The ILF for each Licensed Product will be paid by COMPANY pursuant to the payment schedule specified in each applicable Order. 3.8.2 Unless otherwise specified in an applicable Order, COMPANY will pay SLF in its entirety to AMDOCS no later than sixty (60) days following the Verification Date, in accordance with the provisions of Sections 3.7.4 and 3.7.5. 3.8.3 Upon expiration or other termination of this Agreement, COMPANY's obligation to pay ILF and SLF shall expire. 16 4. PROJECT PLAN 4.1 PHASES OF IMPLEMENTATION OF THE CUSTOMIZED PRODUCT 4.1.1 The timetable and the phases for the implementation of the Customized Product specified in an Order will be agreed upon between the parties and specified in writing to be annexed to the DFS. 4.1.2 The parties will also agree on an implementation plan, roles and responsibilities for tasks, dependencies between tasks and time schedules. Specific implementation tasks will be allocated to COMPANY and AMDOCS personnel as shall be agreed upon between the parties. COMPANY acknowledges that its implementation work is a pre-condition for AMDOCS' preparation of the Customized Product for installation and Acceptance Testing. 4.2 DFD PROCEDURE 4.2.1 AMDOCS and COMPANY shall jointly carry out the DFD procedure. AMDOCS' services with respect to the DFD shall be ordered by COMPANY by issuing an Order. 4.2.2 During the DFD, the parties shall: a) verify the functionalities for the Customized Product designed to meet COMPANY's business needs. Such functionalities will be specified in the DFS; and b) determine the detailed hardware and third party's system software configurations required to meet COMPANY performance needs from the Customized Product in accordance with the DFS, based upon the information provided by COMPANY to AMDOCS. Such configuration shall be set forth in the DAD document. 4.2.3 At the conclusion of the DFD, AMDOCS shall submit the DFS to COMPANY for COMPANY's approval. COMPANY agrees to respond to all of AMDOCS' requests in a timely manner, and to review and make commercially reasonable efforts to either approve or reject the DFS within fourteen (14) days of submission. In the event that COMPANY rejects the DFS or any part thereof, COMPANY shall promptly provide to AMDOCS a detailed written list of the rejected items and explanations for the reasons for rejection of such items. The parties acknowledge that failure to approve or reject the DFS within that time period may jeopardize compliance with the project timetable agreed between the parties. 17 4.3 CUSTOMIZATION AND CUSTOMIZATION ACTIVITIES 4.3.1 AMDOCS, as part of its services for providing COMPANY with the Customization ("Customization Services," as specified in Section 4.3.2), shall modify the Licensed Products to create the Customized Product in accordance with the DFS and the applicable Order. Details of the Customization shall be determined during the DFD and specified in the DFS. Customization Services shall be ordered by COMPANY by issuing an Order. COMPANY has ordered Customization Services pursuant to Order No. 1 (attached hereto as Appendix 1). 4.3.2 The Customization Services include the following activities: a) Detailed Programming Design (DPD), which is the technical design for implementing the functions specified for the Customized Product, including the adjustments to the Database ERD and the Customized Product documentation; b) Programming, testing and documenting changes to the Licensed Products as required to produce the Customized Product in accordance with the DFS; c) Programming, testing and documenting the Database ERD as required to produce the Customized Product; d) Preparation and delivery of software documentation for the Customized Product on or before installation; e) Provision of the source code of the Customized Product; f) Designing, documenting and executing a modular test for each module of the Customized Product; g) Designing, documenting and executing an integration system test of the Customized Product; and h) Delivery of the Customized Product. i) Configuring, optimizing, and documenting the production environment for efficient operation of the system. j) Development and delivery of technical and user training materials suitable for the initial training of system users and technical Information Technology support personnel. 18 4.4 IMPLEMENTATION ACTIVITIES AMDOCS will assume overall responsibility for the implementation activities; provided, however, that COMPANY and AMDOCS will each perform their respective tasks required for implementation of the Customized Product at COMPANY, in accordance with the roles and responsibilities document to be attached as an annex to each applicable Order. 4.5 SUPPORT SERVICES 4.5.1 During the term of this Agreement, COMPANY shall be entitled to request from AMDOCS support services required for the implementation activities, the OGS Services and any other software-related services required by COMPANY ("Support Services", as described in greater detail in Section 4.7.) 4.5.2 Support Services shall be ordered by COMPANY by issuing an Order. COMPANY has ordered Support Services pursuant to Order No. 1 (attached hereto as Appendix 1). 4.6 ACCEPTANCE TESTING 4.6.1 COMPANY will perform with respect to the Customized Product delivered hereunder acceptance testing procedures ("Acceptance Testing" or "Acceptance Tests"), during a period of thirty (30) consecutive days, to ascertain whether the Customized Product operates in accordance with the DFS. COMPANY will develop and define the Acceptance Testing procedures to be used. AMDOCS will assist COMPANY in developing an applicable Acceptance Testing plan in accordance and consistent with the DFS. Such user Acceptance Testing plan will be utilized during the Acceptance Testing procedures and may be modified as necessary in the COMPANY's reasonable judgement to determine if the Customized Product operates in accordance with the DFS. Acceptance Testing will commence within ten (10) days of the date AMDOCS notifies COMPANY of the installation of the Customized Product. 4.6.2 On a date prior to performance of Acceptance Testing, to be agreed between the parties, but no later than sixty (60) days prior to the scheduled installation of the Customized Product for Acceptance Testing (unless otherwise agreed by the parties), COMPANY will provide AMDOCS with data for conversion purposes, and AMDOCS and COMPANY shall perform such conversion of data in accordance with their respective activities as set forth in the roles and responsibilities document attached to the applicable Order. 4.6.3 During the Acceptance Testing, COMPANY will notify AMDOCS promptly in writing of any inconsistency(ies) with the DFS found by COMPANY, and AMDOCS, as part of its Customization Services, will correct such inconsistency(ies) and AMDOCS will deliver and implement the resulting corrections. The Customized Product shall be 19 accepted ("Accepted" or "Acceptance"): (i) when COMPANY determines and notifies AMDOCS in writing that such Customized Product meets the requirements of the user Acceptance Testing plan referred to in Section 4.6.2 in all material aspects, such Acceptance cannot be unreasonably withheld; or (ii) if COMPANY commences operational use of the Customized Product, then (a) COMPANY shall provide a list of errors to AMDOCS, and AMDOCS shall correct such errors promptly; (b) Acceptance shall occur on the earlier of the expiration of ninety (90) days of operational use or upon AMDOCS' correction of substantially all such errors identified by COMPANY; and (c) notwithstanding anything to the contrary in this Agreement, the Warranty Period shall be extended by one half (1/2) of the time between the commencement of operational use and Acceptance. 4.6.4 AMDOCS will assist COMPANY with respect to Acceptance Testing and preparations thereto by providing Support Services as ordered by COMPANY in accordance with the applicable Order. 4.7 ON-GOING SUPPORT 4.7.1 Prior to commencement of Acceptance Testing of the Customized Product, COMPANY will set up an on-going support ("OGS") team to be chaired by the head of COMPANY's Information Technology Department and comprised of COMPANY and AMDOCS personnel who are acquainted with the Customized Product, subject to Section 4.7.3. 4.7.2 The head of COMPANY's Information Technology Department will be responsible for contact with AMDOCS in respect of AMDOCS' undertakings to provide Maintenance Services and OGS activities as specified herein. It is the parties' intention that the OGS team will function as an intermediary between AMDOCS and the various persons/users in COMPANY, collecting and providing AMDOCS with as much relevant information as reasonably possible regarding any reported error, its occurrence and its impact. 4.7.3 During the term of this Agreement, COMPANY shall be entitled to request from AMDOCS services with respect to OGS activities and personnel for the OGS team ("OGS Services"). OGS Services shall be ordered by COMPANY by issuing an Order in writing from COMPANY's head of Information Technology Department. COMPANY shall be entitled to order OGS Services pursuant to the form of Order attached hereto as Appendix 3. 4.8 CHANGE REQUEST PROCEDURE The parties agree that it is in their mutual interest to minimize the changes made to the Licensed Products. Requests by COMPANY for changes to the Licensed 20 Products not initially considered by the parties as part of the scope of the Customized Product or Customization Services to be provided hereunder or changes after the approval of the DFS will be deemed to be a Change Request. For this purpose, the parties agree that Change Requests may be made by COMPANY, but only subject to the following procedure: 4.8.1 The parties will establish a joint committee to deal with any Change Request; 4.8.2 Every Change Request will be submitted in writing by COMPANY to AMDOCS including a detailed description of the change and the reason for it, and shall be signed by the head of COMPANY's IT department; 4.8.3 AMDOCS will review such Change Request and provide COMPANY with an initial cost estimate and anticipated schedule and Platform changes as a result of implementing such change; 4.8.4 COMPANY will then decide whether to implement the change or ask AMDOCS to perform a detailed design relating to such a change in order to provide COMPANY with a more refined cost estimate and schedule change; and 4.8.5 All AMDOCS activities relating to Change Requests (including the implementation of such changes) will be considered Support Services. AMDOCS shall undertake no work unless authorized in writing by the head of COMPANY's Information Technology Department. 4.9 PROJECT MANAGEMENT COMPANY and AMDOCS will each designate a Project Manager to coordinate the work to be performed under this Agreement and Orders issued and accepted hereunder. With respect to each Order, AMDOCS may not replace its Project Manager without the consent of COMPANY, which consent shall not be unreasonably withheld. The Project Managers will meet on a regular basis to discuss and review the progress of the work by both parties under the applicable Orders. 21 5. MAINTENANCE SERVICES 5.1 MAINTENANCE SERVICES 5.1.1 AMDOCS will provide maintenance services with respect to the Licensed Products, consisting of correction of errors found in modules of the current version of such products, provision of improvements, enhancements, modifications and new releases (not including major new modules defined by AMDOCS as separately priced components of the Licensed Product or the Ensemble modules), and reasonable consultation by telephone ("Maintenance Services"), subject to payment of the Maintenance Fees as set forth hereinafter. COMPANY shall order Maintenance Services pursuant to an Order hereunder. COMPANY has ordered Maintenance Services pursuant to Order No. 2 (attached hereto as Appendix 2). 5.1.2 Maintenance Services hereunder shall commence (provided an applicable Order has been issued and accepted as aforesaid) upon expiration of the Warranty Period. Maintenance Services hereunder shall be available during the term of this Agreement, provided that all Maintenance Fees are duly paid, and further provided there is no termination of the Maintenance Services during that period. 5.1.3 The procedure for error correction shall be as follows: the OGS team (referred to in Section 4.7.1) shall be notified of the error condition discovered; the OGS team will endeavor to determine the source of such error condition, whether it is in the Platform, in one of the modules of the Licensed Products, an operational error, or some other source; in the event that one of the Licensed Products is the source for said error condition, the OGS team will notify AMDOCS promptly of said error and provide AMDOCS, in reasonable detail, with all the information obtained by it with respect to such error, in order to assist AMDOCS to correct such error; AMDOCS will identify the cause for the error and will provide the solution and programs required to correct such error and to perform cleanup to the OGS team; the OGS team will run such programs to (a) implement the correction and (b) implement any clean-up activity required. If it is found that an error condition which was reported to AMDOCS is not an error in the Licensed Product (unless otherwise specified in the applicable Order, Maintenance Services are provided for the Licensed Product, only), AMDOCS will have the right to charge COMPANY for the time spent in handling and diagnosing the matter, at its hourly rates set out in Exhibit A. 5.1.4 The Warranty and the Maintenance Services shall apply to all modules of the Licensed Products, including those that are altered, modified or adjusted in any manner by COMPANY. In the event that any services are rendered by AMDOCS to COMPANY resulting from or caused by modifications, alterations, or adjustments of the Licensed Products that were not made by AMDOCS, then AMDOCS shall charge COMPANY for such services at its hourly rates set out in Exhibit A. In the event that COMPANY and AMDOCS enter into a joint project, then the portion of the project for which AMDOCS shall provide Maintenance Services will be specified in the Order. 22 5.2 MAINTENANCE FEE 5.2.1 The consideration for the Maintenance Services ("Maintenance Fee") for each Maintenance Period for which Maintenance Services are ordered by COMPANY shall be an amount equal to the lower of: (i) fifteen percent (15%) of AMDOCS' discounted License Fees for the applicable Licensed Product; or (ii) the Maintenance Fee for the previous year plus ten percent (10%). The Maintenance Fee for the first Maintenance Period shall be fifteen percent (15%) of AMDOCS' discounted License Fees for the applicable Licensed Products. Notwithstanding the foregoing, the annual Licensed Product Maintenance Fee for each COMPANY Affiliate shall be an amount equal to fifteen percent (15%) of AMDOCS' discounted License Fees for the applicable Licensed Product. On an ongoing yearly basis, the calculation of the Maintenance Fee will take into account all such License Fees, including ILF and SLF. 5.2.2 If under any applicable Order the Maintenance Services will include services for the Customized Product, the Maintenance Fee will include, in addition to the above annual Maintenance Fee, (i) ten (10%) percent of the applicable Customization Services fees for the first three (3) years after the end of the Warranty Period; and (ii) seven and one-half (7.5%) percent of the applicable Customization Services fees for the next three (3) years; and (iii) zero (0%) percent thereafter. The Maintenance Fees in this Section shall also apply to separate modules of the Customized Product, until AMDOCS incorporates such separate modules into the generic ENSEMBLE modules. At such time, even if during the timeframes specified in sub-sections 5.2.2(i) and 5.2.2(ii), COMPANY will not be required to pay Maintenance Fees for Maintenance Services for such modules. 5.2.3 The Maintenance Fee for each Maintenance Period will be invoiced and paid by COMPANY in advance in two (2) semi-annual equal installments, the first payable on or before the commencement of the Maintenance Period and the second within six (6) calendar months of the commencement of that Maintenance Period or of the previous payment date, as the case may be. 5.2.4 If, for any reason, COMPANY did not request that Maintenance Services commence upon conclusion of the Warranty or has terminated or not renewed a Maintenance Services Order, or if, after some period of time during which COMPANY does not request from AMDOCS Maintenance Services, COMPANY requests AMDOCS to commence (or, as the case may be, to recommence) Maintenance Services, AMDOCS, at its discretion and notwithstanding anything to the contrary herein, may agree to provide such services. 23 6. HARDWARE AND THIRD PARTY SOFTWARE 6.1 PLATFORM COMPANY undertakes to install at the Installation Site(s) the Platform as required for the installation and proper operation of the Customized Product, in a detailed configuration to be mutually agreed upon by AMDOCS and COMPANY and to be specified in an annex to the applicable Order. 6.2 PLATFORM PURCHASE COMPANY shall purchase through AMDOCS third party hardware and software components comprising parts of the Platform; provided, however, that AMDOCS shall not purchase such hardware and software without prior written approval of COMPANY, and further provided that if COMPANY is able to secure such hardware and software at a lower cost, COMPANY shall have the option of making the purchase from the lower cost provider. In the event that third party hardware and software components are purchased through AMDOCS, AMDOCS will purchase components through suppliers acceptable to COMPANY. Regardless of the method of purchase, COMPANY shall retain title to all components comprising the Platform. 6.3 PLATFORM WARRANTY AND MAINTENANCE COMPANY acknowledges that the Platform warranty and maintenance are to be supplied by the relevant manufacturers/vendors. All of the terms and conditions governing the supply of such Platform, warranty and maintenance shall be on such terms and conditions as agreed between such manufacturers/vendors and COMPANY. 24 7. PAYMENT 7.1 RATES AND RELATED PAYMENTS 7.1.1 Payment by COMPANY for all of AMDOCS' Licensed Products, Customization Services and Support Services shall be as follows: a) Licenses -- in accordance with Section 3.8; b) Maintenance Services -- in accordance with Section 5.2.1 hereinabove; and c) Customization Services and Support Services relating to the Licensed Products to be used in the Territory-as specified in the applicable Order, either on a fixed fee basis, or on a time and materials basis in accordance with the rates specified in Section 1 of Exhibit A. 7.1.2 Unless otherwise specified in an applicable Order, COMPANY shall reimburse AMDOCS for the travel and associated living expenses of AMDOCS' personnel providing services relating to the Licensed Products to be used in the Territory pursuant to this Agreement in accordance with the provisions of Sections 2 and 3 of Exhibit A to the extent that such expenses have been authorized in advance by COMPANY. 7.2 INVOICING STANDARD 7.2.1 The License Fees and Maintenance Fee will be invoiced as provided for hereinabove. Services provided by AMDOCS on a fixed fee basis will be invoiced in accordance with the schedule contained in each applicable Order. Services provided by AMDOCS on a time and materials basis will be invoiced in twelve (12) invoices per year, each invoice to cover four (4) or five (5) whole weeks ("Billing Period"). 7.2.2 At the end of each Billing Period, AMDOCS will submit to COMPANY an invoice which will consist of the final amount due to AMDOCS for services performed under this Agreement during the Billing Period. COMPANY will pay each invoice submitted to it within sixty (60) days of its submission to COMPANY. AMDOCS will issue invoices in U.S. dollars and all payments under this Agreement will be made in U.S. dollars directly to AMDOCS' bank account (the details of which will be provided in writing by AMDOCS to COMPANY). 7.3 PAYMENT IN ARREARS Notwithstanding any other remedies available to AMDOCS under this Agreement or under applicable law, payment in arrears shall bear interest from the date invoice is received at the rate of two (2) percent per annum above the prime rate of Chase Manhattan Bank as quoted by the Wall Street Journal on the date of the applicable invoice, unless the amount in arrears is disputed in good faith and until such 25 dispute is resolved. However, the undisputed amounts shall be paid by COMPANY without delay as aforesaid and, if AMDOCS' claim for payment of the disputed amount in arrears is resolved in favor of AMDOCS, COMPANY shall pay AMDOCS said interest as if such unpaid amount was not disputed at all. Additionally, and without affecting the foregoing, COMPANY's failure to pay any undisputed payment under this Agreement within one-hundred and twenty (120) days after such payment becomes due shall be considered a material breach of this Agreement by COMPANY. 7.4 PRICE PROTECTION The rates, payments and charges referred to in Section 7.1 and other charges set forth in this Agreement and the Orders attached hereto are fixed for one year from January 1st of each year. Upon ninety (90) days' prior written notice to COMPANY, said rates, fees and charges may be changed once in any period of one year in accordance with the annual percentage change (related to the twelve month period preceding such increase) in the U.S. Consumer Price Index-All Urban Consumers, U.S. City Average, as published by the Bureau of Labor Statistics, U.S. Department of Labor (the "Index") plus five percent (5%). However, if the annual percentage change in the Bureau of Labor Statistics, U.S. Department of Labor for computer software professionals will increase fifteen (15%) percent above the Index, the parties will discuss a larger increase. If the parties cannot agree on such larger increase, the matter shall be resolved in the manner provided for in Section 8.15 for the settlement of disputes. 7.5 TAXES AMDOCS' rates, fees and other charges set forth in the Agreement do not include value added tax, sales tax, consumption tax and similar taxes or duties as well as any city, municipal, state or corporate taxes or any withholding taxes, whether currently imposed or to be imposed in future, other than taxes due upon AMDOCS' net income or the Washington State business and occupation tax. If any such tax or duty is found to be applicable, the appropriate amount of tax or duty shall be invoiced to and paid by COMPANY to AMDOCS at the same time and on the same conditions as applied to the payment due. 26 8. GENERAL TERMS AND CONDITIONS 8.1 TERM OF THE AGREEMENT This Agreement shall become effective as of the date of execution hereof by both parties and shall continue for a period of eight (8) years unless terminated by mutual written consent of both parties or ended otherwise as provided for in this Agreement. 8.2 ORDERS 8.2.1 The procurement by COMPANY from AMDOCS of licenses to use the Licensed Products and related Customized Products, Customization Services, Maintenance Services or Support Services hereunder shall be done by the issuance and acceptance of Orders. Each Order shall be deemed to incorporate (1) the terms and conditions of this Agreement, to the extent applicable; (2) the DFS applicable to such Order, if any; and (3) any relevant subordinate documents attached to or referenced in such Order. 8.2.2 Subject to the provisions of Section 8.13, each Order and this Agreement shall constitute the entire agreement between COMPANY and AMDOCS relating to a particular Order. However, in case of any inconsistency or contradiction between the provisions of this Agreement and the provisions of an Order, the provisions of the Order will prevail as to the subject matter of such inconsistency. An Order may not be modified or amended except as mutually agreed in writing by COMPANY and AMDOCS. 8.2.3 Each Order shall include such specific provisions as agreed upon by the parties and as required by the applicable Sections of this Agreement and its Exhibits. The parties agree that special provisions may be necessary to provide for specific conditions associated with the Customized Product, Support Services, Customization Services or Maintenance Services, and that the required special provisions that the parties agree upon shall pertain solely to the Customized Product, Support Services, Customization Services or Maintenance Services respectively covered by such Order(s). 8.2.4 In the event that an Order is not accepted or rejected by AMDOCS within thirty (30) days of its receipt by AMDOCS, such Order will be deemed rejected. AMDOCS may reject an Order if it is not reasonably feasible or practical for AMDOCS to accept such Order as a result of the time schedule for performance of such Order, the nature of the services requested by COMPANY or the fees proposed, or if such Order is not consistent with the provisions of this Agreement. An Order will be binding upon the parties only if executed, confirmed or acknowledged in writing by both parties. Execution, confirmation or acknowledgment in writing of an Order by both parties will bind both parties to honor dates, amounts and other ordering information shown on the Order, including supplemental provisions contained therein. 27 8.2.5 Order Nos. 1 and 2 are attached hereto as Appendices 1 and 2, respectively. Such Orders are being accepted and executed by the parties simultaneously with their execution of this Agreement. 8.3 INTELLECTUAL PROPERTY RIGHTS 8.3.1 COMPANY acknowledges AMDOCS' claim that copyright, trade secrets, trademarks and any other intellectual property rights as the case may be, subsists in the Ensemble, the Licensed Products, and that COMPANY shall have neither copyright nor ownership or any such other intellectual property right in the Ensemble, the Licensed Products and any enhancements thereto or derivatives thereof (subject to Section 8.3.2 below). Notwithstanding the foregoing, COMPANY shall retain all right, title and interest in and to all COMPANY Intellectual Property Rights, and AMDOCS does not acquire any right, title or interest, express or implied, in any COMPANY Intellectual Property Rights. 8.3.2 AMDOCS hereby assigns and will take all reasonable steps necessary to assign its right, title and interest in and to the Customization to COMPANY. Such Customization shall be deemed to be a work made for hire. Unless otherwise specified in an Order, AMDOCS shall have no license or right to use, market, sell, distribute or otherwise exploit any Customizations. AMDOCS shall have the right to redevelop any part of the Customizations and to market, license, sell and/or distribute such redevelopments to AMDOCS' customers. 8.4 TITLE Title to the Licensed Products and any enhancements thereto or derivatives thereof shall remain with and belong to AMDOCS and shall not pass to COMPANY. COMPANY expressly acknowledges that its right to use the Licensed Products and the Customized Product in accordance with the terms of this Agreement, does not extend to, or encompass, title to or ownership of such products, except as provided in Section 8.3.2. 8.5 CONFIDENTIALITY 8.5.1 The provisions of the Confidentiality Agreement between the parties dated as of January 14, 1997, a copy of which is attached hereto as Exhibit B, shall apply with regard to the performance of this Agreement by the parties hereto. Such provisions shall survive the expiration of or termination of this Agreement or any Order for any reason whatsoever. Any subcontractors of or other third parties who have a need to know or may have access to AMDOCS' or COMPANY's proprietary and confidential information shall first sign AMDOCS' or COMPANY's non-disclosure agreement, as applicable, in the forms attached hereto as Exhibit C, or a comparable document containing similar protections. 8.5.2 Prior to providing any third party with access to the source code of the Customized 28 Product, COMPANY shall first inform AMDOCS of the identity of such third party. In the event that AMDOCS determines that such third party is an AMDOCS Competitor (as defined hereinafter in this Section 8.5.2), AMDOCS shall so inform COMPANY and COMPANY shall not provide such third party with access to the source code of the Licensed Products and/or the Customized Product. For purposes of this Section 8.5.2, an "AMDOCS Competitor" is any third party that licenses and/or develops customer care and/or billing systems for telecommunications. 8.6 ENTICEMENT OF STAFF Each of the parties agrees not to hire or employ any of the other party's employees or their respective subcontractors' employees who are assigned full or part-time to activities which are part of the performance of this Agreement, except by mutual written consent of such other party, within two (2) years of such employee or subcontractor's employee ceasing to be employed by his/her respective employer. The provisions of this Section 8.6 shall survive the expiration or termination of this Agreement or any Order for any reason whatsoever and shall remain in full force and effect for a period of two years thereafter. 8.7 WORK RULES AND ACCESS TO FACILITIES 8.7.1 Each party's respective employees or representatives who use the other party's premises or facilities hereunder will be subject to the reasonable restrictions imposed by the other party. Such employees or representatives will comply with all reasonable rules applicable to the host COMPANY's employees. 8.7.2 Each party acknowledges that the performance by the other party of such other party's obligations hereunder requires information and cooperation between the parties. Without limitation to each party's rights under this Agreement, each party shall provide complete, timely and accurate information regarding its requirements and all other data and information necessary for the performance by the other party of its obligations hereunder and under the applicable Orders. 8.7.3 COMPANY shall, from time to time as reasonably required by AMDOCS, furnish AMDOCS' personnel required to be at COMPANY's premises, at no charge to AMDOCS, with space suitable for AMDOCS' needs and the following services: computer terminals and associated peripherals including access to E-mail/Internet; a communication line from COMPANY's data center to AMDOCS' development center in St. Louis, Missouri; reasonable use of facsimile machine and telephone for business purposes related to this Agreement only; and supplies, equipment and consumables, and reasonable secretarial services in English, at COMPANY's normal standards. All internal communications of AMDOCS using COMPANY's e-mail/telephone/facsimile systems will be private, confidential and proprietary to AMDOCS, and will be subject to COMPANY's standard policies and procedures. 29 8.7.4 COMPANY shall grant the designated personnel of AMDOCS such access to the premises and facilities of COMPANY as shall be reasonably necessary for the performance of AMDOCS' obligations under this Agreement and the applicable Orders. 8.7.5 AMDOCS shall indemnify, defend and hold harmless the COMPANY Indemnified Parties (as defined in Section 8.18.1) harmless from and against all Claims (as defined in Section 8.18.1) for personal injury or property damages resulting from the wrongful or negligent acts of AMDOCS employees or agents (including Authorized Subcontractors) while present at the premises and facilities of COMPANY. 8.7.6 COMPANY is aware that it is required to have the necessary computer equipment at its premises immediately upon the commencement of the provision of services hereunder. COMPANY shall, therefore, obtain such computer systems and provide AMDOCS upon the commencement of the Customization Services with reasonable access to such equipment for the sole purpose of providing services hereunder. 8.8 NO WAIVER No waiver of any rights arising under this Agreement shall be effective unless in writing and signed by the party against whom such waiver is sought to be enforced. No failure or delay by either party in exercising any right, power or remedy under this Agreement shall operate as a waiver of any such right, power or remedy and/or prejudice its rights to bring any action in respect thereof. 8.9 LIABILITY 8.9.1 IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR CLAIMS IN RESPECT OF OR ARISING OUT OF THE PERFORMANCE OF ITS OBLIGATIONS HEREUNDER FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE DAMAGES (INCLUDING LOSS OF PROFITS, REVENUE, DATA, OR USE), INCURRED BY THE OTHER PARTY OR BY ANY THIRD PARTY WHETHER IN AN ACTION IN CONTRACT OR TORT, EVEN IF THAT PARTY OR ANY OTHER PERSON HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. 8.9.2 EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, THE SOLE LIABILITY OF AMDOCS IN CASE OF ANY LOSS OR DAMAGE RESULTING FROM ANY ERROR OR DEFECT IN THE LICENSED PRODUCT(S) OR THE CUSTOMIZED PRODUCTS OR FROM THE SERVICES PROVIDED BY AMDOCS HEREUNDER THAT CAUSE ERRORS OR DEFECTS, WILL BE TO CORRECT, AS SOON AS IS REASONABLY POSSIBLE, SUCH ERROR OR DEFECT IN ACCORDANCE WITH AMDOCS' WARRANTY OR MAINTENANCE OBLIGATIONS. IN THE EVENT OF AN ERROR OR DEFECT THAT RENDERS THE LICENSED PRODUCT(S) OR CUSTOMIZED PRODUCTS INOPERATIVE OR HAS A MATERIAL ADVERSE EFFECT ON THE FUNCTIONING OF SUCH 30 PRODUCT(S), AMDOCS SHALL, AS SOON AS REASONABLY POSSIBLE, COMMENCE DIAGNOSTIC AND CORRECTIVE MEASURES, AND TAKE SUCH REMEDIAL MEASURES (INCLUDING, BUT NOT LIMITED TO, TEMPORARY FIXES, EMERGENCY BYPASSES AND/OR WORKAROUNDS) AS MAY BE REQUIRED TO CORRECT SUCH ERROR OR DEFECT, TO RENDER THE PRODUCT(S) OPERATIVE, AND/OR TO ELIMINATE SUCH MATERIAL ADVERSE EFFECT. 8.9.3 COMPANY SHALL HOLD AMDOCS HARMLESS IN CASE OF ANY SUIT OR CLAIM BY ANY THIRD PARTY ARISING FROM SPECIFICATIONS OR INSTRUCTIONS GIVEN BY COMPANY TO AMDOCS RELATING TO THE CUSTOMIZATIONS. 8.9.4 EXCEPT FOR AMDOCS' LIABILITY UNDER SECTIONS 8.7, 8.14 AND 8.18, AMDOCS' LIABILITY FOR DIRECT DAMAGES UNDER THIS AGREEMENT AND ANY ORDER HEREUNDER FOR ANY CAUSE(S) WHATSOEVER SHALL NOT EXCEED ONE AND ONE-HALF MILLION DOLLARS ($1,500,000) PER SINGLE EVENT OR FIVE MILLION DOLLARS ($5,000,000) IN THE AGGREGATE, EXCEPT AS OTHERWISE SPECIFIED IN AN ORDER. 8.10 CONFLICT OF INTEREST AMDOCS represents and warrants that no officer, employee or agent of COMPANY has been or will be employed, retained, paid a fee, or otherwise has received or will receive any personal compensation or consideration, by or from AMDOCS, or any of AMDOCS' officers, employees or agents, in connection with obtaining, arranging or negotiating this Agreement or other documents entered into, or executed in connection herewith. 8.11 FORCE MAJEURE Each party will be excused for any delay in its performance resulting from causes beyond its control which were not reasonably foreseeable on the date of signing this Agreement including Acts of God, war, riot, civil disorder, embargo, acts of authorities, fire, earthquake or flood and only to the extent such event actually delays such performance. The party so delayed must notify the other party of the occurrence and cessation of such an event to be able to rely upon the terms of this Section 8.11, unless the event itself prevents notice of occurrence being given, in which case it shall be given as soon as reasonably practicable. In no event, however, shall performance hereunder by either party be excused under this Section for a period in excess of three (3) months. 8.12 SEVERABILITY If any provision of this Agreement is determined to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate or render unenforceable the 31 entire Agreement, but rather the entire Agreement shall be construed as if not containing the particular invalid or unenforceable provision or provisions, and the rights and obligations of AMDOCS and COMPANY shall be construed and enforced accordingly. In addition, the parties hereby agree to cooperate with each other to replace the invalid or unenforceable provision with a valid and enforceable one which will achieve the same economic result (to the maximum legal extent) as the provision determined to be invalid or unenforceable. 8.13 ENTIRE AGREEMENT AND CHANGES With the exception of the Confidentiality Agreement referred to in Section 8.5, the terms and conditions contained in this Agreement and in any Orders issued and accepted hereunder constitute the entire agreement between COMPANY and AMDOCS with respect to the subject matter hereof and supersede all prior oral and written quotations, communications, representations, agreements and understandings of the parties with respect to the subject matter hereof. This Agreement may not be altered, amended or modified except by a written instrument signed by a duly authorized representative of each party. Any pre-printed terms that may appear on any of AMDOCS' documents or any of COMPANY's documents which add to, vary from or conflict with the provisions of this Agreement shall be void. 8.14 TERMINATION 8.14.1 Either party may suspend performance and/or terminate this Agreement immediately upon written notice at any time if: (i) The other party shall file a petition seeking relief for itself under the bankruptcy laws of any jurisdiction; (ii) An order for relief shall be entered against the other party under the bankruptcy laws of any jurisdiction, which order is not stayed; or upon the expiration of sixty (60) days after the filing of any involuntary bankruptcy petition against it without the petition being dismissed prior to that time; or (iii) The other party shall (a) make a general assignment for the benefit of its creditors; or (b) consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, or custodian of all or a substantial part of its property; or (c) admit its insolvency or inability to pay its debts generally as they become due; or (d) fail generally to pay its debts as they become due; or (e) take any action (or suffer any action to be taken by its director or shareholders) looking to its dissolution or liquidation. 8.14.2 COMPANY may terminate for convenience any Order prior to Acceptance, or any 32 Support Services Order or Maintenance Order, upon thirty (30) days prior written notice to AMDOCS. COMPANY shall pay to AMDOCS within thirty (30) days following the effective date of such termination: (i) in the case of fixed price Orders, the amounts due and payable under the payment installment immediately following the date of notice of the termination, provided such notice is received at least thirty (30) days prior to such payment installment, and (ii) in the case of time and material Orders, all amounts due to AMDOCS under the terminated Order until the effective date of such termination, plus, in the case of this sub-Section (ii), a fee in an amount equal to the fees charged by AMDOCS to COMPANY for such personnel during the month prior to termination. 8.14.3 COMPANY may, prior to Acceptance of a License or Customization Services Order, or at any time for a Maintenance Services or Support Services Order, provide notice of breach to AMDOCS if COMPANY reasonably determines that AMDOCS has committed a material breach of an Order. Within fifteen days of receipt of such notice, AMDOCS shall notify COMPANY in writing whether AMDOCS acknowledges or disputes the occurrence of such material breach. 8.14.3.1 If AMDOCS provides notice to COMPANY acknowledging the occurrence of such material breach and fails to cure the breach within thirty (30) days thereafter, then COMPANY shall be entitled to Terminate the applicable Order. 8.14.3.2 If AMDOCS provides notice to COMPANY disputing the occurrence of such material breach, then COMPANY shall be entitled to proceed with arbitration in accordance with the provisions of Section 8.15.3. In the event that there is an arbitral decision that AMDOCS has materially breached its obligations under the applicable Order, and AMDOCS does not cure such breach within thirty (30) days of the date of the arbitral decision, then COMPANY shall be entitled to Terminate the applicable Order, without limiting any other rights and remedies of COMPANY under this Agreement. 8.14.4 Upon Termination for breach, the following provisions will apply: a) Each party shall return to the other party any information in tangible form obtained in connection with the relevant Terminated Order from the other party; b) AMDOCS shall immediately cease performing work and incurring costs in connection with the relevant Terminated Order; c) COMPANY's licenses under the relevant Terminated Order will be deemed immediately terminated; (d) Within thirty (30) days of Termination, AMDOCS will return to COMPANY all License Fees actually received by AMDOCS for said terminated licenses; and 33 (e) in the event that the Termination for breach consisted of AMDOCS' decision to cease work on any Order, then AMDOCS shall return to COMPANY all fees actually received by AMDOCS for licenses, services, and hardware under such Order within thirty (30) days of Termination. 8.14.5 Upon Termination for breach, COMPANY may exercise such remedies against AMDOCS as are available under this Agreement, only, with no other remedies available. 8.15 GOVERNING LAW, ESCALATION PROCEDURE AND ARBITRATION 8.15.1 The validity, performance, construction and effect of this Agreement shall be governed by the laws of the State of Washington, without giving effect to its choice-of-law rules. 8.15.2 COMPANY and AMDOCS will endeavor to resolve any controversy or claim arising out of or relating to this Agreement or an Order through good faith negotiations, as follows: If such a controversy or claim should arise, the Project Managers of COMPANY and AMDOCS will attempt to resolve the matter within nine (9) days of the matter being referred to them, or any other period agreed upon by the parties; if the matter is not resolved by the project managers, it will be referred to the head of COMPANY's IT Department and AMDOCS' Vice President responsible for COMPANY; if the matter is not resolved by those persons within nine (9) days of the matter being referred to them, or any other period agreed upon by the parties, the matter will be referred to COMPANY's President and AMDOCS' President for Customer Care and Billing Division responsible for COMPANY/Senior Vice President. In the highly unlikely event that those persons are unable to resolve the matter within nine (9) days of the matter being referred to them, or any other period agreed upon, such matter will be resolved exclusively by arbitration as provided in Section 8.15.3. 8.15.3 Any controversy or claim, whether based on contract, tort or other legal theory (including, but not limited to, any claim of fraud or misrepresentation), arising out or relating to this Agreement, including its interpretation, performance, breach of or termination not resolved by good faith negotiations, as provided in Section 8.15.2, shall be resolved exclusively by arbitration in accordance with the following provisions: a) The arbitration will be conducted in New York, New York by a sole arbitrator ("Arbitrator") in accordance with the rules of the American Arbitration Association (the "Rules"). The Arbitrator shall be appointed by agreement of the parties; in the event that the parties fail to agree upon the appointment of the Arbitrator within thirty (30) days after a notice of arbitration is given by either party to the other, then the Arbitrator shall be selected and appointed in accordance with the Rules. The arbitration will be governed by the United States Arbitration Act, 9 U.S.C. Section 1, et seq. 34 b) Prior to his appointment, the Arbitrator shall be made aware of the terms of this Agreement and the relevant Order(s). The Arbitrator will be bound by the provisions of this Agreement including, but not limited to, the provisions of Section 3.5 (Warranty), Section 8.9 (Liability) and Section 8.14 (Termination). Prior to his appointment, selected Arbitrator shall be made aware of the terms of this Agreement and the relevant Order(s). Following his appointment, the Arbitrator shall set forth the schedule and timing of the arbitration proceedings. c) The Arbitrator shall have the right to assess the costs incurred by either party against the losing party or in such manner as he deems just. That award rendered by such Arbitrator shall be final and binding. d) Upon rendering an award or a decision, the Arbitrator shall set forth in writing the basis of such award or decision. Notwithstanding anything to the contrary, each party retains the right to request that a court of competent jurisdiction vacate the Arbitrator's award or decision on the grounds of the Arbitrator's failure to abide by the provisions of this Agreement or any applicable Order. e) Judgment on the award or any other final or interim decision rendered by the Arbitrator may be entered, registered or filed for enforcement purposes in any court having jurisdiction thereof. 8.16 INDEPENDENT CONTRACTOR AMDOCS undertakes the furnishing of services and performance of its obligations under this Agreement as an independent contractor. AMDOCS' personnel participating in the performance of this Agreement shall remain AMDOCS' employees. There shall be no employer-employee relationship between AMDOCS' employees and COMPANY, and COMPANY's employees and AMDOCS. 8.17 ASSIGNMENT AND SUBCONTRACTS 8.17.1 Any assignment, sub-contract or other transfer of a party's rights or obligations under this Agreement or under any Order issued hereunder requires the prior written consent of the other party. Prior to any such assignments, the assignee will be obliged to sign an undertaking to comply with all obligations under this Agreement and the applicable Orders. Any attempted assignment not complied with in the manner prescribed herein shall be null and void. 8.17.2 Notwithstanding the above, COMPANY may assign its rights and obligations hereunder to (1) any corporation resulting from any merger or other reorganization to which COMPANY is a party, (2) any corporation, partnership, association, or other person or entity to which COMPANY may transfer all or substantially all of its assets or 35 business existing at such time, or (3) any COMPANY Affiliate Prior to any such assignment, the assignee will be obliged to sign an undertaking to comply with all obligations under this Agreement and the applicable Orders. Any attempted assignment not complied with in the manner prescribed herein shall be null and void. The entities referenced in sub-Sections 8.17.2(1) and 8.17.2(2) above are referred to as "Successors" 8.17.3 AMDOCS' performance of this Agreement may involve participation of sub-contractors. Thus, notwithstanding the above, the parties agree that AMDOCS may subcontract any of the services to be provided by AMDOCS hereunder to any of AMDOCS' Affiliates and/or to specialist subcontractors (all referred to in this Agreement as the "Authorized Subcontractors"), however: a) AMDOCS shall be responsible for the performance (or non-performance, as the case may be) of any part of this Agreement and any Order issued hereunder by the Authorized Subcontractors to which such part was assigned or subcontracted; b) the participation of the Authorized Subcontractors shall not affect any liability imposed on AMDOCS under this Agreement; c) AMDOCS' obligations under this Agreement and the Orders issued hereunder shall remain in full force and effect despite any act or omission of the Authorized Subcontractors; and d) Specialist subcontractors shall not be assigned by AMDOCS to COMPANY's facilities without the prior written consent of COMPANY. The applicable terms of this Agreement (including, without limitation, those referred to in Section 8.19) shall also apply to the Authorized Subcontractors. The parties agree that the Authorized Subcontractors will require access to the premises and facilities of COMPANY for their participation in the performance of this Agreement and the Orders issued hereunder, and that if so requested by AMDOCS, COMPANY shall deal with the personnel of the Authorized Subcontractors and with any reasonable requests of the Authorized Subcontractors, in all respects, as if such personnel were the personnel, and such requests were the requests, of AMDOCS. 8.17.4 Subject to Section 8.5, Company may utilize employees or third party consultants or contractors to perform modifications, enhancements, or adjustments to the Licensed Products or Customized Products in a manner similar to those provided by AMDOCS or an AMDOCS assignee. 36 8.18 INTELLECTUAL PROPERTY RIGHTS INDEMNITY 8.18.1 AMDOCS agrees to indemnify, defend and hold harmless COMPANY and its subsidiaries, affiliates, directors, officers, employees, agents and independent contractors (collectively, the "COMPANY Indemnified Parties") from and against from any and all actions, causes of action, claims, demands, costs, liabilities, expenses and damages, including costs and reasonable attorneys' fees (collectively, "Claims") by a third party alleging that its Intellectual Property Rights have been infringed by COMPANY in the normal use or installation of the Licensed Products, the Customized Products or the Customizations pursuant to this Agreement; provided, however, that (i) AMDOCS is promptly notified in writing of such claim, (ii) AMDOCS shall have the sole control of the defense and/or settlement thereof, (iii) COMPANY furnishes to AMDOCS on request all information reasonably available to COMPANY for such defense, and (iv) COMPANY will not admit any such claim and/or make any payments with respect to such claim without the prior written consent of AMDOCS, such consent not to be unreasonably withheld or delayed. 8.18.2 The above indemnity shall not apply to Claims arising from or in connection with: (1) modifications made by COMPANY, (2) the instructions, specifications or requirements supplied by COMPANY for the Customized Product or any services to be provided by AMDOCS, or (3) COMPANY's combination of the Licensed Products or the Customized Product with other products not supplied by AMDOCS. 8.18.3 If any injunction or order is obtained against COMPANY's use of the Customized Product, AMDOCS, at its sole discretion and expense, and without limiting its other obligations and liabilities hereunder or under any Order, may: (a) procure for COMPANY the right to continue using the Customized Product; or (b) replace or modify the Customized Product to make them substantially similar, functionality equivalent, non-infringing Customized Product. 8.19 SURVIVAL OF OBLIGATIONS Obligations under this Agreement or any Order, which by their nature would continue beyond the Termination, expiration or ending in any other way of this Agreement or any Order, including by way of illustration only and not limited to, those in the Sections entitled Liability, Confidentiality and Warranty, shall survive the Termination, expiration or ending in any other way of this Agreement or any Order. 8.20 HEADINGS NOT CONTROLLING The headings of the Sections of this Agreement are inserted for convenience only and are not intended to affect the meaning or interpretation of this Agreement. 37 8.21 NOTICES 8.21.1 Any notice, demand or communication which under the terms of this Agreement or otherwise must or may be given or made by AMDOCS or COMPANY shall be in writing and shall be given or made by any delivery (courier) services requiring signature of receipt or fax addressed or transmitted, as the case may be, to the respective parties as follows: To: COMPANY To: AMDOCS 3650 131st Avenue SE, AMDOCS (UK) Limited Suite 400 Grand Building Bellevue, WA 98006 1-3 Strand London WC2 N5EJ England Tel: Tel: +44 171 903 5169 Fax: Fax: +44 171 903 5172 Attention: Jim Medick, CIO Attention: CC: Legal Department Such notice, demand or other communications shall be deemed to have been given on the date confirmed as the actual date of delivery by the delivery service if sent by such service, or if sent by fax, on the next working day after transmission and receipt by the sender of a confirmation of transmission showing successful completion of the transmission. Notice sent by fax must also be confirmed by sending notice by delivery (courier) service (but shall be deemed to have been given on the next working day after transmission by fax and receipt by the sender of a confirmation of transmission showing successful completion of the transmission). The above addresses or fax numbers may be changed at any time by giving fifteen (15) days' prior written notice as provided above. 8.22 SUCCESSORS AND ASSIGNEES This Agreement shall be binding upon and inure to the benefit of the parties hereof and to their permitted successors and assignees. 8.23 NO THIRD PARTY BENEFICIARIES There are no third party beneficiaries to this Agreement, and nothing herein contained shall be deemed to confer any right whatsoever in favor of any party other than the direct parties hereto. 38 8.24 AUTHORITY Each party has full power and authority to enter into and perform this Agreement and the person signing this Agreement on behalf of each party has been properly authorized and empowered to enter into this Agreement. Each party further acknowledges that it has read this Agreement, understands it and agrees to be bound by it. 8.25 EXECUTION OF THE AGREEMENT In the event that this Agreement is not signed simultaneously by both parties, the Agreement will, unless otherwise agreed in writing, become null and void if the party who is the second signatory of this Agreement does not sign it and submit a signed copy to the party that signed it first within forty-five (45) days of the date on which the first party signed this Agreement. This Agreement may be executed in duplicate counterparts and both together will constitute one and the same document. IN WITNESS WHEREOF, COMPANY and AMDOCS, pursuant to due corporate authority, have caused this Agreement to be signed in their respective names on the date(s) set forth below. ACCEPTED: ACCEPTED: WESTERN WIRELESS CORPORATION AMDOCS (UK) LIMITED ("COMPANY") ("AMDOCS") By: /s/ Mikal J. Thomsen By: /s/ Simon Cassif -------------------------------- ---------------------------------- (Signature) (Signature) Title: President Title: President ----------------------------- ------------------------------- (Typed or Printed) (Typed or Printed) Date: September 17, 1999 Date: October 1, 1999 ------------------------------ -------------------------------- EX-10.92 5 EMPLOYMENT AGREEMENT 1 EXHIBIT 10.92 July 12 1999 Steve Burdette 3023 S. Atlantic Ave. #505 Daytona Beach Shores, FL 32118 Dear Steve: This letter (the "Letter Agreement") sets forth the terms of your employment with Western Wireless Corporation ("WWC"), effective August 1, 1999. 1. Your title will be Senior Vice President. In that capacity you will report to the President of WWC (the "President"). 2. Your responsibilities will include supervision of all sales, distribution, marketing and customer service functions, together with such other duties as may be assigned to you by the President. In addition, you agree to serve as a director and/or senior officer of any subsidiary of WWC, if so elected, without any additional salary or other compensation. You will devote substantially all of your business time and attention to the obligations delineated in this Letter Agreement. 3. Your base compensation will be $150,000, payable in accordance with standard payroll practices of WWC. In addition, you will have an opportunity, as determined by WWC, to earn a performance bonus targeted at $75,000 per year, to be paid quarterly, and to continue, during the course of your employment, participation in the option program at a level to be determined by WWC. Your options shall contain change of control language consistent with other officers of WWC. It is understood that nothing contained herein will prevent WWC, in its sole and absolute discretion, from, at any time, increasing your compensation, either permanently or for a limited period, whether in base compensation, by bonus or otherwise, if WWC in its sole discretion, shall deem it advisable to do so in order to recognize and fairly compensate you for the value of your services to WWC; provided, however, that nothing contained in this paragraph three shall in any manner obligate WWC to make any such increase or provide any such additional compensation or benefits. 4. WWC will reimburse you for all reasonable out-of-pocket business expenses paid or incurred by you in connection with the performance of your duties, upon submission of signed, itemized lists of such expenses on general forms established for that purpose by WWC. 5. You will be entitled to participate in all group health and insurance programs and all other fringe benefit or retirement plans or other plans effective generally with respect to executives of WWC. 6. WWC will enter into an Indemnification Agreement with you pursuant to which WWC will agree to indemnify you against certain liabilities arising by reason of your affiliation with WWC. 7. (a) Notwithstanding any other provision of this Letter Agreement, your employment by WWC may be terminated by WWC at any time, with or without Cause, as defined below. In the event of a termination for Cause you will have no rights to severance payments. Termination for "Cause" means (i) your gross neglect or willful material breach of your principal employment responsibilities or duties, (ii) a final judicial adjudication that you are guilty of a felony, (iii) fraudulent conduct as determined by a court of competent jurisdiction in the course of your employment with WWC or any of its subsidiaries, (iv) the breach by you of the covenant set forth in paragraph nine, below, or (v) the material breach by you of any other provision of this Letter Agreement which continues uncured for a period of thirty (30) days after notice thereof by WWC. In the event of your voluntary 2 Steve Burdette Page 2 termination of employment with WWC, you will have no rights to severance benefits. (b) In the event of an involuntary termination for other than Cause (which shall include your resignation as a direct result of (i) a reduction in your base compensation and/or incentive bonus target percentage, or (ii) the material breach by the Company of any provision of this Letter Agreement which continues uncured for a period of thirty (30) days after notice thereof by you), then (A) you will be entitled to receive a severance payment in an amount equal to your accrued but unpaid existing annual targeted incentive bonus through the date of termination, 6 months of your then base compensation and an amount equal to 6 months of your existing annual targeted incentive bonus; (B) WWC will, at its expense, make all COBRA benefit payments on behalf of you and your dependents for six (6) months following such involuntary termination; and (C) with respect to any stock options previously granted to you by WWC which remain unvested at the time of the involuntary termination, notwithstanding the vesting language in the stock option agreement pursuant to which such options were granted, there shall be immediate vesting of that portion of each such grant of unvested stock options as equals the product of the total number of such options under such grant which remain unvested multiplied by a fraction the numerator of which is the sum of (i) the number of days from the date on which the last vesting of options under such grant took place to and including the date on which the termination occurs plus (ii) 183 and the denominator of which is the number of days remaining from the date on which the last vesting of options under such grant took place to and including the date on which the final vesting under such grant would have occurred. Your death or permanent disability will be deemed an involuntary termination for other than Cause. "Permanent disability" shall mean your inability substantially to render the services required hereunder for eight (8) months in any eighteen (18) month period because of a physical or mental condition, it being understood that until you have received notice from WWC terminating this Letter Agreement, you will continue to receive your base compensation and all other benefits to which you are entitled under this Letter Agreement. (c) You agree that upon termination of your employment by WWC for any reason you will surrender to WWC all proprietary records, lists and other documents obtained by you or entrusted to you during the course of your employment by WWC, together with all copies of all such documents. 8. You agree not to disclose at any time, whether during the term of this Letter Agreement or thereafter, any secret or confidential information relating to WWC's or any of its subsidiaries' businesses, financial condition or prospects, which information you have obtained while employed by WWC or by any of its subsidiaries or any of the predecessors in interest of any of them, except (i) as may be required in furtherance of the businesses of WWC or of any of its subsidiaries, (ii) with WWC's express prior written consent, (iii) if such information is made generally available to the public through no fault of yours, or (iv) if such disclosure is required by applicable law or regulation or by legal process and then only with prompt written notice to WWC in advance of any such disclosure. 9. You agree that, during the term of your employment by WWC and for a period of one (1) year immediately following the termination of your employment with WWC for any reason whatsoever, you will not, either directly or indirectly, for compensation or any other consideration, individually or as an employee, broker, agent, consultant, lender, contractor, advisor, solicitor, stockholder (provided that ownership of 5% or less of the outstanding stock of any corporation listed on a national securities exchange is not prohibited), proprietor, partner, or person having any other material 3 Steve Burdette Page 3 economic interest in, affiliated with or rendering services to any other entity, engage in or provide services to or for a business that is substantially the same as or similar to WWC's or its subsidiaries' businesses and which competes within the applicable commercial mobile radio services markets serviced by WWC or its subsidiaries, directly or indirectly. 10. This Letter Agreement contains the entire agreement between you and WWC with respect to your employment by WWC, other than human resource and corporate policies which are to be executed by all employees. This Letter Agreement may not be amended, waived, changed, modified or discharged except by an instrument in writing executed by or on behalf of you and WWC. 11. All notices, requests, demands and other communications with respect to this Letter Agreement will be in writing and will be deemed to have been duly given if delivered by hand, registered or certified mail (first class postage and fees prepaid, return receipt requested), telecopier or overnight courier guaranteeing next-day delivery, as follows: a) to WWC: Western Wireless Corporation 3650 - 131st Avenue SE, #400 Bellevue, Washington 98006 Attention: President Telecopier: (425) 586-8010 b) to you: Steve Burdette 3023 S. Atlantic Ave. #505 Daytona Beach Shores, FL 32118 and/or to such other persons and addresses as either you or WWC has specified in writing to the other by notice as aforesaid. 12. If any part of this Letter Agreement is hereafter construed to be invalid or unenforceable in any jurisdiction, the same will not affect the remainder of the Letter Agreement or the enforceability of such part in any other jurisdiction, which will be given full effect, without regard to the invalid portions or the enforceability in such other jurisdiction. If any part of this Letter Agreement is held to be unenforceable because of the scope thereof, you and WWC agree that the court making such determination will have the power to reduce the duration and/or area of such provision and, in its reduced form, said provision shall be enforceable; provided, however, that such court's determination will not affect the enforceability of this Letter Agreement in any other jurisdiction beyond such court's authority. 13. This Letter Agreement will be governed by and construed and interpreted in accordance with the laws of the State of Washington without reference to conflicts of laws principles. Please signify your acceptance of the terms of this Letter Agreement by signing where indicated below. 4 Steve Burdette Page 4 Sincerely yours, WESTERN WIRELESS CORPORATION ------------------------------------ /s/ Mikal Thomsen Title: President ------------------------------ AGREED TO AND ACCEPTED: - ---------------------------------- /s/ H. Stephen Burdette EX-27.1 6 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM WESTERN WIRELESS CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q. 1,000 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 8,864 0 82,458 9,795 8,882 107,530 579,230 260,289 1,091,434 83,351 1,195,000 0 0 685,841 (874,096) 1,091,434 16,680 409,458 25,854 377,969 (80,275) 13,748 71,761 (147,990) 0 (47,338) (100,652) 0 0 (147,990) (1.93) (1.93)
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