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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
Commission file number 1-4721
SPRINT CORPORATION
(Exact name of registrant as specified in its charter)
KANSAS 48-0457967
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
P.O. Box 11315, Kansas City, Missouri 64112
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (913) 624-3000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
registered
Preferred Stock, without par value
First series, $7.50 stated value New York Stock Exchange
Second series, $6.25 stated value New York Stock Exchange
Common stock, $2.50 par New York Stock Exchange
value, and Rights (shares Chicago Stock Exchange
outstanding at February 1, Pacific Stock Exchange
1995, 348,326,042)
Securities registered pursuant to Section 12(g) of the Act:
None
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 by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value of voting stock held by non-affiliates at
February 1, 1995 is $9,933,174,704.
Documents incorporated by reference.
Registrant's definitive proxy statement to be filed pursuant to
Regulation 14A promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, which
definitive proxy statement is anticipated to be filed within
120 days after the end of Registrant's fiscal year ended
December 31, 1994, is incorporated by reference in Part III
hereof.
SPRINT CORPORATION
SECURITIES AND EXCHANGE COMMISSION
ANNUAL REPORT ON FORM 10-K
Part I
Item 1. Business
THE CORPORATION
Sprint Corporation (Sprint), incorporated in 1938 under the laws
of Kansas, is a holding company. Sprint's principal subsidiaries
provide domestic and international long distance, local exchange
and cellular telecommunications services. Other subsidiaries are
engaged in the wholesale distribution of telecommunications
products and the publishing and marketing of white and yellow
page telephone directories.
In March 1993, Sprint's merger with Centel Corporation (Centel)
was consummated, increasing Sprint's local exchange operations
and greatly expanding its cellular and wireless operations.
LONG DISTANCE COMMUNICATIONS SERVICES
Sprint's long distance division is the nation's third largest
long distance telephone company, operating a nationwide all-
digital long distance communications network utilizing state-of-
the-art fiber-optic and electronic technology. The division
provides domestic and international long distance voice, video,
and data communications services, and consists principally of
Sprint Communications Company L.P. (the Limited Partnership).
The terms under which the division offers its services to the
public are subject to different levels of state and federal
regulation, but rates are generally not subject to rate-base
regulation. The division had net operating revenues of $6.81
billion, $6.14 billion and $5.66 billion in 1994, 1993 and 1992,
respectively.
The 1982 Modification of Final Judgment (MFJ) entered into by
AT&T Corp. (formerly American Telephone and Telegraph Company) (AT&T)
and the Department of Justice significantly affected the long distance
communications market. The major aspects of the MFJ were (1) the
divestiture of AT&T's local telephone operating companies (the
Bell Operating Companies), (2) the creation of geographical areas
called Local Access and Transport Areas (LATAs) within which the
Bell Operating Companies and independent local exchange companies
provide basic local and intra-LATA toll service and access
services to long distance companies, and (3) the prohibition
against the Bell Operating Companies providing inter-LATA
services, among other things, until they could demonstrate that
they could not use their dominant position in local telephone
service to impair long distance competition. The Bell Operating
Companies and GTE local exchange companies were required by the
MFJ and the GTE Consent Decree, respectively, to provide
customers with access to all long distance carriers' networks in
a manner "equal in type, quality, and price" to that provided to
AT&T (equal access). The independent local exchange companies
were required by the Federal Communications Commission (FCC) to
provide equal access from many of their central offices.
AT&T dominates the long distance communications market and is
expected to continue to dominate the market for some years into
the future. MCI Communications Corporation (MCI) is the nation's
second largest long distance telephone company. Sprint's long
distance division competes with AT&T and MCI in all segments of
the long distance communications market. Competition is based
upon price and pricing plans, the types of services offered,
customer service, and communications quality, reliability and
availability.
The opportunities for and cost of competition and, as a result,
the structure of the telecommunications industry are all subject
to varying degrees of change by decisions of the executive,
judicial and legislative branches of the federal government.
Some of these changes seek to open all facets of the industry to
new entrants and eventually replace regulation with competition
where it best serves the public interest. Some of the major
issues being addressed by the federal government include the
implementation of competition for local telephone and cable
services (which could lead to lower access costs for long
distance companies), and the possible modification of some or all
of the line-of-business restrictions imposed on the Bell
Operating Companies by the MFJ. Local competition issues in
particular are also being considered by a number of state
regulators and legislators.
The Clinton Administration has indicated that it supports
legislation which promotes local telephone competition. Although
federal legislation to implement local competition and modify the
MFJ has been introduced several times in recent years, bills have
yet to be reported out of both the House of Representatives and
the Senate in a session. Legislation has been introduced in
Congress in 1995. While both major political parties are
predicting that legislation will be passed, such predictions have
proven to be inaccurate in the past.
In 1982, the FCC distinguished between carriers and found some
(AT&T and the Local Exchange Carriers, or LECs) to be dominant,
and others (primarily smaller competitive long distance
companies) to be nondominant. The FCC found it was in the public
interest to continue to regulate dominant carriers but, because
of market forces, it was appropriate to significantly lessen the
amount of regulation applied to nondominant domestic carriers;
thus, for instance, nondominant carriers were allowed to choose
not to file interstate tariffs. This policy of "permissive
detariffing" for nondominant carriers was found by the U.S. Court
of Appeals for the D.C. Circuit, in November 1992, to violate the
requirement in the Communications Act that all carriers "shall"
file tariffs. In response to the Court's decision, the FCC
adopted rules streamlining tariff filings for nondominant
carriers. AT&T appealed that FCC order, and the D.C. Circuit
Court vacated the order in January 1995. Thus, if the Court's
decision is not changed on appeal or the FCC doesn't adopt new
regulations for nondominant carrier tariffs, all carriers
(dominant and nondominant) will have to file similar tariffs with
the FCC. In February 1993, AT&T filed lawsuits in federal
District Court in Washington, D.C. against the Limited
Partnership, MCI and WilTel, Inc. alleging unspecified damages
for providing competitive service at rates not contained in
tariffs filed with the FCC. In November 1993, the court granted
Sprint's motion to dismiss AT&T's lawsuit because AT&T had first
filed similar complaints with the FCC, which are still pending.
Although it is impossible to predict the outcome of these
proceedings with certainty, Sprint believes that the Limited
Partnership has at all times complied with applicable laws
and regulations, that its rates are proper and enforceable,
and that even if it is eventually required to file tariffs with
the FCC which are substantially similar to those filed by AT&T,
neither the filing nor the contents of these tariffs will
competitively burden Sprint.
In 1989, the FCC replaced regulation of AT&T's rate of return
with a system of price caps, giving AT&T increased pricing
flexibility. Since 1991, the FCC has adopted partial
"streamlined" regulation of certain competitive business services
provided by AT&T. Specifically, the FCC removed these services
(primarily WATS, private line, most 800 services and business
switched services) from price caps regulation, reduced the
related tariff filing requirements and permitted contracts with
individual customers if the terms are generally available to
other business users.
LOCAL COMMUNICATIONS SERVICES
The local division is comprised of rate-regulated LECs which
serve approximately 6.4 million access lines in 19 states. In
addition to furnishing local exchange services, the division
provides intra-LATA toll service and access by other carriers to
Sprint's local exchange facilities.
The division had net operating revenues of $4.41 billion, $4.13
billion and $3.86 billion in 1994, 1993 and 1992, respectively.
Florida and North Carolina were the only jurisdictions in which
10 percent or more of the division's total 1994 net operating
revenues were generated. The following table reflects major
revenue categories as a percentage of the division's total net
operating revenues:
1994 1993 1992
Local service 39.7% 39.4% 39.0%
Network access 36.2 37.1 36.9
Toll service 12.0 12.2 12.6
Other 12.1 11.3 11.5
100.0% 100.0% 100.0%
AT&T, as the dominant long distance telephone company, is the
division's largest customer for network access services. In
1994, 16.6 percent of the division's net operating revenues was
derived from services provided to AT&T, primarily network access
services, compared to 17.3 percent in 1993 and 18.7 percent in 1992.
While AT&T is a significant customer, Sprint does not believe the
division's revenues are dependent upon AT&T, as customers' demand
for inter-LATA long distance telephone service is not tied to any
one long distance carrier. Historically, as the market share of
AT&T's long distance competitors increases, the percent of
revenues derived from network access services provided to AT&T
decreases.
The LECs comprising the division are subject to the jurisdiction
of the FCC and the utilities commissions of each of the states in
which they operate. In each state in which the commission
exercises authority to grant certificates of public convenience
and necessity, the LECs have been granted such certificates of
indefinite duration to provide local exchange telephone service
in their current service areas.
Effective January 1, 1991, the FCC adopted a price caps
regulatory format for the Bell Operating Companies and the GTE
local exchange companies. Other LECs could volunteer to become
subject to price caps regulation. Under price caps, prices for
network access service must be adjusted annually to reflect industry
average productivity gains (as specified by the FCC), inflation and
certain allowed cost changes. Sprint elected to be subject to
price caps regulation, and under the form of the plan adopted,
Sprint's LECs generally have an opportunity to earn up to a 14.25
percent rate of return on investment. Some of Sprint's LECs have
committed to produce higher than industry average productivity
gains, and as a result have an opportunity to earn up to a 15.25
percent rate of return on investment. The LECs owned by Centel
did not originally elect price caps, but as a result of the
merger, these LECs adopted price caps effective July 1, 1993.
Prior to price caps, under rate of return regulation, the Centel
companies' authorized rate of return on investment was 11.25
percent, with the ability to earn 0.25 percent above the
authorized return. The FCC is conducting a scheduled review of
all aspects of the price caps plan and the FCC is expected to
implement changes in 1995. Without further action by the FCC,
the current price caps plan will expire in 1995 and will be
replaced by rate of return regulation. It is expected that the
FCC will act and that there will not be a return to rate of
return regulation.
The potential for more direct competition with Sprint's LECs is
increasing. Many states, including most of the states in which
Sprint's LECs operate, allow limited competitive entry into the
intra-LATA long-distance service market. State regulators are
also increasingly confronted with requests to permit resale of
local exchange services, with such resale now existing in a
number of states in which Sprint's LECs operate, including
Pennsylvania, Kansas, Illinois and Missouri. Illinois law also
allows alternative telecommunications providers to obtain
certificates of local exchange service authority in direct
competition with existing LECs if certain showings are made to
the satisfaction of the Illinois Commerce Commission. In the
metropolitan Chicago, Illinois area, where the operations of one
of Sprint's LECs are located, such certificates have been
granted.
At the interstate level, the FCC has revised its rules to permit
connection of customer-owned coin telephones to the local
network, exposing LECs to direct coin telephone competition.
Additionally, to facilitate competition in providing access to
interexchange carriers and end users the FCC mandated that all
Tier 1 (over $100 million annual operating revenues) LECs allow
virtual collocation of Competitive Access Providers (CAPs)
equipment in LEC central offices.
The extent and ultimate impact of competition for LECs will
continue to depend, to a considerable degree, on FCC and state
regulatory actions, court decisions and possible federal or state
legislation. As mentioned above, legislation designed to
stimulate local competition between local exchange service
providers and cable programming service providers, in both
markets, is presently pending in Congress.
CELLULAR AND WIRELESS COMMUNICATIONS SERVICES
The cellular and wireless division primarily consists of Sprint
Cellular Company and its subsidiaries. In addition, Sprint's
LECs hold FCC licenses for several Rural Service Areas. For
management and financial reporting purposes, these operations
have been combined with Sprint Cellular Company's operations.
Approximately 50 percent of Sprint's local communications
services customers are located in areas served by the cellular
and wireless division of Sprint. The division has operating
control of 87 markets in 14 states and a minority interest in 53
markets. The division had net operating revenues of $702 million
in 1994 and served approximately 1.04 million cellular subscribers
as of year end. In 1993 and 1992, the division had revenues of
$464 million and $322 million, respectively.
Prior to the November 1992 decision by the U.S. Court of Appeals
for the D.C. Circuit rejecting permissive detariffing discussed
above under "Long Distance Communications Services", cellular
carriers had not filed tariffs with the FCC. In February 1993,
resale of domestic interstate toll tariffs for Sprint's cellular
and wireless operations were filed. The FCC, pursuant to
authority conferred by the Revenue Reconciliation Act of 1993,
has adopted rules to pre-empt all state regulation of commercial
mobile radio services, including cellular, and to forbear from
enforcing tariffing requirements with respect to commercial
mobile radio services.
The FCC licenses two carriers in each cellular market area and
these carriers compete directly with each other to provide
cellular service to end users and resellers. Each carrier is
licensed to operate on frequencies set aside for its cellular
operation. Licensees also encounter retail competition from
resale carriers in their market. Sprint Cellular Company also
sells cellular equipment in the competitive retail market.
Competition is based on quality of service, price and product
quality.
The FCC is conducting radio spectrum auctions aimed at awarding
up to six personal communications services (PCS) licenses per
market area. The holders of these PCS licenses are expected to
compete with the incumbent cellular companies. The FCC auctions
of these spectrum licenses is ongoing and may be completed before
the end of 1995.
PRODUCT DISTRIBUTION AND DIRECTORY PUBLISHING
North Supply Company (North Supply), a wholesale distributor of
telecommunications, security and alarm, and electrical products,
distributes products of more than 1,200 manufacturers to
approximately 9,500 customers. Products range from basics, such
as wire and cable, telephones and repair parts, to complete PBX
systems, transmission systems and security and alarm equipment.
North Supply also provides material management services to
several of its affiliates and to several subsidiaries of the
Regional Bell Holding Companies.
The nature of competition in North Supply's markets demands a
high level of customer service to succeed, as a number of
competitors, including other national wholesale distributors,
sell the same products and services.
North Supply sells to telephone companies and other users of
telecommunications products, including Sprint's local and long
distance divisions, other local and long distance telephone
companies, and companies with large private networks. Other
North Supply customers include original equipment manufacturers,
interconnect companies, security and alarm dealers and local,
state and federal governments. Sales to affiliates represented
42.4 percent of North Supply's total sales in 1994 and 39.3
percent for both 1993 and 1992. North Supply's net operating
revenues were $829 million, $677 million, and $594 million in
1994, 1993 and 1992, respectively.
Sprint Publishing & Advertising along with Centel Directory
Company publish and market white and yellow page telephone
directories in certain of Sprint's local exchange territories, as
well as in the greater metropolitan areas of Milwaukee, Wisconsin
and Chicago, Illinois. The companies publish approximately 335
directories in 20 states with a circulation of 16.1 million copies.
Sprint Publishing & Advertising's net operating revenues were $280
million, $268 million and $257 million in 1994, 1993 and 1992,
respectively. Centel Directory Company operates through The
CenDon Partnership, a general partnership between Centel
Directory Company and The Reuben H. Donnelley Corporation.
Revenues of Sprint Publishing & Advertising and The CenDon
Partnership are principally derived from selling directory
advertisements. The companies compete with publishers of
telephone directories and others for advertising revenues.
NEW JOINT VENTURE
Sprint is a 40 percent partner in WirelessCo, L.P. (WirelessCo),
a partnership with Tele-Communications Inc. (TCI), Comcast
Corporation (Comcast) and Cox Communications (Cox). TCI owns 30
percent of WirelessCo, while Comcast and Cox own 15 percent each.
WirelessCo is bidding for PCS licenses in many areas of the
country and expects to create a nationwide PCS offering using the
Sprint brand name. Sprint, TCI, Comcast and Cox have also agreed
to form another partnership owned in the same percentages, which
will serve as a competitive entry vehicle into the LEC business
in areas not covered by the Sprint LECs. This partnership
expects to utilize the cable plant of the partners and other
affiliates as the primary vehicle for competition with incumbent
LECs.
While legislation facilitating local competition has been
proposed in Congress and in many state legislatures, without such
legislation, the partnership will require certification by local
regulators before it may enter many of these markets. In many
states, local competition is currently prohibited by law.
ENVIRONMENT
Sprint's environmental compliance and remediation expenditures
are primarily related to the operation of standby power
generators for its telecommunications equipment. The
expenditures arise in connection with permits, standards
compliance, or occasional remediation, which are usually
associated with generators, batteries or fuel storage. Certain
Sprint subsidiaries have been designated a potentially
responsible party at sites relating to either landfill
contamination or discontinued power generation operations.
Sprint's expenditures relating to environmental compliance and
remediation have not been material to the financial statements or
to the operations of Sprint and are not expected to have any
future material effects.
PATENTS, TRADEMARKS AND LICENSES
Sprint and its subsidiaries own numerous patents, patent
applications and trademarks in the United States and other
countries. Sprint and its subsidiaries are also licensed under
domestic and foreign patents owned by others. In the aggregate,
these patents, patent applications, trademarks and licenses are
of material importance to Sprint's businesses.
EMPLOYEE RELATIONS
As of December 31, 1994, Sprint and its subsidiaries had
approximately 51,600 employees, of whom approximately 25 percent
are members of unions. During 1994, Sprint and its subsidiaries
had no material work stoppages caused by labor controversies.
INFORMATION AS TO INDUSTRY SEGMENTS
Sprint's net operating revenues from affiliates and non-
affiliates, by segment, for the three years ended December 31,
1994, 1993 and 1992, are as follows (in millions):
Net Operating Revenues
1994 1993 1992
Long Distance Communications Services
Non-affiliates $ 6,746.2 $ 6,088.4 $ 5,612.1
Affiliates 58.9 50.8 46.1
6,805.1 6,139.2 5,658.2
Local Communications Services
Non-affiliates 4,171.2 3,911.5 3,662.4
Affiliates 241.6 214.5 199.8
4,412.8 4,126.0 3,862.2
Cellular and Wireless
Communications Services
Non-affiliates 701.8 464.0 322.2
Product Distribution and
Directory Publishing
Non-affiliates 757.1 679.2 629.7
Affiliates 351.6 266.0 233.2
1,108.7 945.2 862.9
Subtotal 13,028.4 11,674.4 10,705.5
Intercompany revenues (366.6) (306.6) (285.2)
Net operating revenues $ 12,661.8 $ 11,367.8 $ 10,420.3
In accordance with industry practice, revenues and related net
income of non-regulated operations attributable to transactions
with Sprint's rate-regulated telephone companies have not been
eliminated in the above table or the accompanying consolidated
financial statements. Intercompany revenues of such entities
amounted to $285 million, $225 million and $194 million in 1994,
1993 and 1992, respectively. For additional information as to
industry segments of Sprint, refer to "Segmental Results of
Operations" within Management's Discussion and Analysis of
Financial Condition and Results of Operations filed as part
of this report.
Item 2. Properties
The aggregate cost of Sprint's property, plant and equipment was
$19.20 billion as of December 31, 1994, of which $11.83 billion
relates to local communications services, $6.06 billion relates
to long distance communications services and $819 million relates
to cellular and wireless communications services. These
properties consist primarily of land, buildings, digital fiber-
optic network, switching equipment, cellular radio, microwave
radio and cable and wire facilities and are in good operating
condition. Certain switching equipment and several general
office facilities are located on leased premises. The long
distance division has been granted easements, rights-of-way and
rights-of-occupancy, primarily by railroads and other private
landowners, for its fiber-optic network.
The properties of the product distribution and directory
publishing businesses consist primarily of office and warehouse
facilities to support the business units in the distribution of
telecommunications products and publication of telephone
directories.
Sprint owns its corporate headquarters building and certain other
property located in the greater Kansas City metropolitan area.
Property, plant and equipment with an aggregate cost of
approximately $10.89 billion is either pledged as security for
first mortgage bonds and certain notes or is restricted for use
as mortgaged property.
Item 3. Legal Proceedings
Following announcement of the Sprint/Centel merger agreement in
May 1992, a class action suit was filed by certain Centel
shareholders against Centel and certain of its officers and
directors. The suit was consolidated in the United States
District Court for the Northern District of Illinois in July
1992. The complaint alleges violations of federal securities
laws by failing to disclose pertinent information regarding the
value of Centel common stock. The plaintiffs seek damages in an
unspecified amount. In January 1995, a purported class action
suit was filed against Centel's financial advisors in state court
in New York in connection with the Sprint/Centel merger. Sprint
may have indemnification obligations to the financial advisors in
connection with this suit.
Other suits arising in the ordinary course of business are
pending against Sprint and its subsidiaries. Sprint cannot
predict the ultimate outcome of these actions or the above-
described litigation, but believes they will not result in a
material effect on Sprint's consolidated financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the
fourth quarter of 1994.
Item 10(b). Executive Officers of the Registrant
Office Name Age
Chairman, President and Chief
Executive Officer William T. Esrey (1) 55
President and Chief Operating
Officer - Cellular and Wireless
Communications Division Dennis E. Foster (2) 54
President and Chief Operating
Officer - Long Distance Division Ronald T. LeMay (3) 49
President and Chief Operating
Officer - Local
Telecommunications Division D. Wayne Peterson (4) 59
Executive Vice President - Law and
External Affairs J. Richard Devlin (5) 44
Executive Vice President - Chief
Financial Officer Arthur B. Krause (6) 53
Senior Vice President - Financial
Services and Taxes Gene M. Betts (7) 42
Senior Vice President - External
Affairs John R. Hoffman (8) 49
Senior Vice President and
Controller John P. Meyer (9) 44
Senior Vice President - Strategic
Planning / Business Development Theodore H. Schell (10) 50
Senior Vice President - Quality
Development and Public Relations Richard C. Smith, Jr. (11) 53
Senior Vice President and Treasurer M. Jeannine Strandjord (12) 49
Senior Vice President - Human
Resources I. Benjamin Watson (13) 46
Vice President and Secretary Don A. Jensen (14) 59
(1) Mr. Esrey was elected Chairman in 1990. He was elected Chief
Executive Officer and a member of the Board of Directors in
1985. In addition, he has served as Chief Executive Officer
of the Limited Partnership since 1988.
(2) Mr. Foster was elected President - Cellular and Wireless
Communications Division in 1993. Mr. Foster had served as
Senior Vice President - Operations of a subsidiary of Sprint
since 1992. From 1991 to 1992, he served as President of GTE
Mobilnet in Atlanta, Georgia. Prior to that, he had served in
various positions with GTE Corporation for more than five
years.
(3) Mr. LeMay was elected President - Long Distance Division in
1989. He was elected to the Board of Directors of Sprint in
1993.
(4) Mr. Peterson was elected President - Local Telecommunications
Division in 1993. From 1980 to 1993, he served as President
of Carolina Telephone and Telegraph Company, a subsidiary of
Sprint.
(5) Mr. Devlin was elected Executive Vice President - Law and
External Affairs in 1989.
(6) Mr. Krause was elected Executive Vice President - Chief
Financial Officer in 1988. During 1990 and 1991, he also
served as Chief Information Officer.
(7) Mr. Betts was elected Senior Vice President - Financial
Services and Taxes in 1990. He had served as Vice President -
Taxes since 1988.
(8) Mr. Hoffman was elected Senior Vice President - External
Affairs in 1990. He had served in the same capacity at the
Limited Partnership since 1986.
(9) Mr. Meyer was elected Senior Vice President and Controller in
1993. He had served as Vice President and Controller of
Centel since 1989.
(10) Mr. Schell was elected Senior Vice President - Strategic
Planning / Business Development in 1990. He joined the Long
Distance Division as Vice President - Strategic Planning in
1989.
(11) Mr. Smith was elected Senior Vice President - Quality
Development and Public Relations in 1991. He had served as
President of the Limited Partnership's National Markets since
1989.
(12) Ms. Strandjord was elected Senior Vice President and
Treasurer in 1990. She had served as Vice President and
Controller since 1986.
(13) Mr. Watson was elected Senior Vice President - Human
Resources in 1993. He had served as Vice President - Finance
and Administration of United Telephone - Eastern Group, an
operating group of subsidiaries of Sprint, since 1990. From
1983 to 1990, he served as Vice President - Administration of
the Midwest Group, an operating group of subsidiaries of
Sprint.
(14) Mr. Jensen was elected Vice President and Secretary in
1975.
There are no known family relationships between any of the
persons named above or between any such persons and any outside
directors of Sprint. Officers are elected annually.
Part II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
Market Price Per Share
1994 1993
End of End of
High Low Period High Low Period
First Quarter 38 1/8 32 1/2 34 1/4 31 3/4 25 1/2 30 1/2
Second Quarter 40 1/8 33 1/4 34 7/8 35 3/8 29 1/2 35 1/8
Third Quarter 40 1/8 34 1/8 38 1/8 37 1/2 33 1/2 36 3/4
Fourth Quarter 38 7/8 26 1/8 27 5/8 40 1/4 31 3/8 34 3/4
As of February 1, 1995, there were approximately 104,000 record
holders of Sprint's common stock. The principal trading market
for Sprint's common stock is the New York Stock Exchange. The
common stock is also listed and traded on the Chicago and Pacific
Stock Exchanges. Sprint has declared dividends of $0.25 per
quarter during each of the years ended December 31, 1994 and
1993.
Item 6. Selected Financial Data
For information required by Item 6, refer to the "Selected
Financial Data" section of the Financial Statements, Financial
Statement Schedule and Supplementary Data filed as part of this
report.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
For information required by Item 7, refer to the "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" section of the Financial Statements, Financial
Statement Schedule and Supplementary Data filed as part of this
report.
Item 8. Financial Statements and Supplementary Data
For information required by Item 8, refer to the "Consolidated
Financial Statements and Schedule" and "Quarterly Financial Data"
sections of the Financial Statements, Financial Statement
Schedule and Supplementary Data filed as part of this report.
Item 9. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure
As previously reported in Sprint's Current Report on Form 8-K
dated April 23, 1993, following consummation of the merger with
Centel, Arthur Andersen & Co. was replaced with Ernst & Young as
auditors of Centel and its subsidiaries, effective April 23,
1993.
Part III
Item 10. Directors and Executive Officers of the Registrant
Pursuant to Instruction G(3) to Form 10-K, the information
relating to Directors of Sprint required by Item 10 is
incorporated by reference from Sprint's definitive proxy
statement which is to be filed pursuant to Regulation 14A within
120 days after the end of Sprint's fiscal year ended December 31,
1994.
For information pertaining to Executive Officers of Sprint, as
required by Instruction 3 of Paragraph (b) of Item 401 of
Regulation S-K, refer to the "Executive Officers of the
Registrant" section of Part I of this report.
Pursuant to Instruction G(3) to Form 10-K, the information
relating to compliance with Section 16(a) required by Item 10 is
incorporated by reference from Sprint's definitive proxy
statement which is to be filed pursuant to Regulation 14A within
120 days after the end of Sprint's fiscal year ended December 31,
1994.
Item 11. Executive Compensation
Pursuant to Instruction G(3) to Form 10-K, the information
required by Item 11 is incorporated by reference from Sprint's
definitive proxy statement which is to be filed pursuant to
Regulation 14A within 120 days after the end of Sprint's fiscal
year ended December 31,1994.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Pursuant to Instruction G(3) to Form 10-K, the information
required by Item 12 is incorporated by reference from Sprint's
definitive proxy statement which is to be filed pursuant to
Regulation 14A within 120 days after the end of Sprint's fiscal
year ended December 31, 1994.
Item 13. Certain Relationships and Related Transactions
Pursuant to Instruction G(3) to Form 10-K, the information
required by Item 13 is incorporated by reference from Sprint's
definitive proxy statement which is to be filed pursuant to
Regulation 14A within 120 days after the end of Sprint's fiscal
year ended December 31, 1994.
Part IV
Item 14. Exhibits, Financial Statement Schedule, and Reports on
Form 8-K
(a) 1. The consolidated financial statements of Sprint
and supplementary financial information filed as part of
this report are listed in the Index to Financial
Statements, Financial Statement Schedule and Supplementary
Data.
2. The consolidated financial statement schedule of
Sprint filed as part of this report is listed in the Index
to Financial Statements, Financial Statement Schedule and
Supplementary Data.
3. The following exhibits are filed as part of
this report:
EXHIBITS
(3) Articles of Incorporation and Bylaws:
(a) Articles of Incorporation, as amended (filed
as Exhibit 4 to Sprint Corporation Current Report
on Form 8-K dated March 9, 1993 and incorporated
herein by reference).
(b) Bylaws, as amended (filed as Exhibit 3(b) to
Sprint Corporation Annual Report on Form 10-K for
the year ended December 31, 1991 and incorporated
herein by reference).
(4) Instruments defining the Rights of Sprint's Equity
Security Holders:
(a) The rights of Sprint's equity security holders
are defined in the Fifth, Sixth, Seventh and Eighth
Articles of Sprint's Articles of Incorporation. See
Exhibit 3(a).
(b) Rights Agreement dated as of August 8, 1989,
between Sprint Corporation (formerly United
Telecommunications, Inc.) and UMB Bank, n.a.
(formerly United Missouri Bank of Kansas City,
N.A.), as Rights Agent (filed as Exhibit 2(b) to
Sprint Corporation Registration Statement on Form 8-
A dated August 11, 1989 (File No. 1-4721), and
incorporated herein by reference).
(c) Amendment and supplement dated June 4, 1992 to
Rights Agreement dated as of August 8, 1989 (filed
as Exhibit 2(c) to Amendment No. 1 on Form 8 dated
June 8, 1992 to Sprint Corporation Registration
Statement on Form 8-A dated August 11, 1989 (File
No. 1-4721), and incorporated herein by reference).
(10) Material Agreements - Joint Ventures:
(a) Memorandum of Understanding between Sprint
Corporation and France Telecom and Deutsche
Bundespost Telekom, dated June 14, 1994 (filed as
Exhibit 10(a) to Sprint Corporation Quarterly
Report on Form 10-Q for the quarter ended June 30,
1994 and incorporated herein by reference).
(b) Agreement of Limited Partnership of
WirelessCo, L. P., a Delaware limited partnership,
dated as of October 24, 1994, among Sprint
Spectrum, Inc., TCI Network, Inc., Comcast
Telephony Services and Cox Communications Wireless,
Inc.
(10) Executive Compensation Plans and Arrangements
(c) 1978 Stock Option Plan, as amended.
(d) 1981 Stock Option Plan, as amended.
(e) 1985 Stock Option Plan, as amended.
(f) 1990 Stock Option Plan, as amended.
(g) 1990 Restricted Stock Plan, as amended (filed
as Exhibit (99) to Sprint Corporation Registration
Statement No. 33-57785 and incorporated herein by
reference).
(h) Long-Term Stock Incentive Program, as amended.
(i) Restated Memorandum Agreements Respecting
Supplemental Pension Benefits between Sprint
Corporation (formerly United Telecommunications,
Inc.) and two of its current and former executive
officers (filed as Exhibit 10(i) to Sprint
Corporation Annual Report on Form 10-K for the year
ended December 31, 1992, and incorporated herein by
reference).
(j) Executive Long-Term Incentive Plan (filed as
Exhibit 10(j) to Sprint Corporation Annual Report
on Form 10-K for the year ended December 31, 1993
and incorporated herein by reference).
(k) Executive Management Incentive Plan (filed as
Exhibit 10(k) to Sprint Corporation Annual Report
on Form 10-K for the year ended December 31, 1993
and incorporated herein by reference).
(l) Long-Term Incentive Compensation Plan (filed
as Exhibit 10(j) to United Telecommunications, Inc.
Annual Report on Form 10-K for the year ended
December 31, 1989, and incorporated herein by
reference).
(m) Short-Term Incentive Compensation Plan (filed
as Exhibit 10(k) to United Telecommunications, Inc.
Annual Report on Form 10-K for the year ended
December 31, 1989, and incorporated herein by
reference).
(n) Retirement Plan for Directors, as amended
(filed as Exhibit 10(b) to Sprint Corporation
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1994 and incorporated herein by
reference).
(o) Key Management Benefit Plan, as amended (filed
as Exhibit 10(o) to Sprint Corporation Annual
Report on Form 10-K for the year ended December 31,
1993 and incorporated herein by reference).
(p) Executive Deferred Compensation Plan, as
amended.
(q) Director's Deferred Fee Plan, as amended
(filed as Exhibit 19(g) to United
Telecommunications, Inc. Quarterly Report on Form
10-Q for the quarter ended September 30, 1991, and
incorporated herein by reference).
(r) Summary of Sprint Supplemental Executive
Retirement Plan (filed as Exhibit 10(c) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994 and incorporated
herein by reference).
(s) Form of Contingency Employment Agreements
between Sprint Corporation and certain of its
executive officers (filed as Exhibit 10(r) to
Sprint Corporation Annual Report on Form 10-K for
the year ended December 31, 1992, and incorporated
herein by reference).
(t) Form of Indemnification Agreements between
Sprint Corporation (formerly United
Telecommunications, Inc.) and its Directors and
Officers (filed as Exhibit 10(s) to Sprint
Corporation Annual Report on Form 10-K for the year
ended December 31, 1991, and incorporated herein by
reference).
(u) Summary of Executive Benefits (filed as
Exhibit 10(u) to Sprint Corporation Annual Report
on Form 10-K for the year ended December 31, 1991,
and incorporated herein by reference).
(v) Agreements Regarding Special Compensation and
Post Employment Restrictive Covenants between
Sprint Corporation and four of its executive
officers (filed as Exhibit 10(d) to Sprint
Corporation Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994 and incorporated
herein by reference).
(w) Amended and Restated Centel Stock Option Plan.
(x) Agreements Regarding Special Compensation and
Post Employment Restrictive Covenants between
Sprint Corporation and three of its executive
officers (filed as Exhibit 10(x) to Sprint
Corporation Annual Report on Form 10-K for the year
ended December 31, 1993, and incorporated herein by
reference).
(y) Description of agreement regarding
Supplemental Pension Benefits between Sprint
Corporation and one of its executive officers
(filed as Exhibit 10(e) to Sprint Corporation
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994, and incorporated herein by
reference).
(z) Amended and Restated Centel Directors Deferred
Compensation Plan (filed as Exhibit 10(z) to Sprint
Corporation Annual Report on Form 10-K for the year
ended December 31, 1993, and incorporated herein by
reference).
(aa) Amended and Restated Centel Director Stock
Option Plan (filed as Exhibit 10(aa) to Sprint
Corporation Annual Report on Form 10-K for the year
ended December 31, 1993, and incorporated herein by
reference).
(bb) Management Incentive Stock Option Plan (filed
as Exhibit (99) to Sprint Corporation Registration
Statement No. 33-57911 and incorporated herein by
reference).
(11) Computation of Earnings Per Common Share.
(12) Computation of Ratio of Earnings to Fixed Charges.
(21) Subsidiaries of Registrant.
(23a) Consent of Ernst & Young LLP.
(23b) Consent of Arthur Andersen LLP.
(27) Financial Data Schedule.
Sprint will furnish to the Securities and Exchange Commission,
upon request, a copy of the instruments defining the rights of
holders of its long-term debt and the long-term debt of its
subsidiaries. The total amount of securities authorized under
any of said instruments does not exceed 10 percent of the total
assets of Sprint and its subsidiaries on a consolidated basis.
(b) Reports on Form 8-K
Sprint filed a Current Report on Form 8-K dated
October 25, 1994 in which it reported that Sprint, Tele-
Communications Inc., Comcast Corporation and Cox
Communications had formed a joint venture to provide wireless
communications services and local telephone services. See
"Part I -- Item 1 -- Business -- New Joint Venture" and Part
II -- Item 7 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Strategic
Developments" for further discussion regarding the joint
venture.
(c) Exhibits are listed in Item 14(a).
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
SPRINT CORPORATION
(Registrant)
By /s/ W. T. Esrey
William T. Esrey
Chairman, President and
Chief Executive Officer
Date: March 7, 1995
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities indicated on the
7th day of March, 1995.
/s/ W. T. Esrey
William T. Esrey
Chairman, President and
Chief Executive Officer
/s/ Arthur B. Krause
Arthur B. Krause
Executive Vice President and
Chief Financial Officer
/s/ John P. Meyer
John P. Meyer
Senior Vice President and Controller
Principal Accounting Officer
SIGNATURES
SPRINT CORPORATION
(Registrant)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities indicated on the
7th day of March, 1995.
/s/ DuBose Ausley
DuBose Ausley, Director
/s/ Warren L. Batts
Warren L. Batts, Director
/s/ Ruth M. Davis
Ruth M. Davis, Director
/s/ W. T. Esrey
William T. Esrey, Director
/s/ Donald J. Hall
Donald J. Hall, Director
/s/ P. H. Henson
Paul H. Henson, Director
/s/ Harold S. Hook
Harold S. Hook, Director
/s/ Robert E. R. Huntley
Robert E. R. Huntley, Director
/s/ Ronald T. LeMay
Ronald T. LeMay, Director
/s/ Linda Koch Lorimer
Linda Koch Lorimer, Director
Charles H. Price II, Director
/s/ Frank E. Reed
Frank E. Reed, Director
/s/ Charles E. Rice
Charles E. Rice, Director
/s/ Stewart Turley
Stewart Turley, Director
INDEX TO FINANCIAL STATEMENTS, FINANCIAL STATEMENT Sprint
SCHEDULE AND SUPPLEMENTARY DATA Corporation
Selected Financial Data
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Consolidated Financial Statements and Schedule:
Management Report
Report of Independent Auditors - Ernst & Young LLP
Report of Independent Auditors - Arthur Andersen LLP
Consolidated Statements of Income for each of the
three years ended December 31, 1994
Consolidated Balance Sheets as of December 31, 1994
and 1993
Consolidated Statements of Cash Flows for each of the
three years ended December 31, 1994
Consolidated Statements of Common Stock and Other
Shareholders' Equity for each of the three years
ended December 31, 1994
Notes to Consolidated Financial Statements
Financial Statement Schedule for each of the three
years ended December 31, 1994:
VIII - Consolidated Valuation and Qualifying
Accounts
Certain financial statement schedules are omitted
because the required information is not present, or
because the information required is included in the
consolidated financial statements and notes thereto.
Quarterly Financial Data
SELECTED FINANCIAL DATA Sprint Corporation
As of or For the Years Ended December 31,
1994 1993 1992 1991 1990
(In Millions, Except Per Share Data)
Results of Operations
Net operating revenues $ 12,661.8 $ 11,367.8 $ 10,420.3 $9,933.3 $9,469.8
Operating income (1) 1,787.8 1,250.6 1,213.4 1,185.6 1,045.3
Income from continuing
operations (1), (2),
(3), (4) 883.7 480.6 496.1 472.7 351.1
Earnings per common share
from continuing
operations (1), (2),
(3), (4) 2.53 1.39 1.46 1.41 1.06
Dividends per common share 1.00 1.00 1.00 1.00 1.00
Financial Position
Total assets $ 14,936.3 $ 14,148.9 $ 13,599.6 $13,929.8 $14,080.6
Property, plant and
equipment, net 10,878.6 10,314.8 10,219.9 10,310.5 10,295.2
Total debt (including
short-term borrowings) 4,937.2 5,094.4 5,442.7 5,571.2 6,082.3
Redeemable preferred
stock 37.1 38.6 40.2 56.6 60.0
Common stock and other
shareholders' equity 4,524.8 3,918.3 3,971.6 3,671.9 3,353.5
Cash Flow Data
Cash from operating
activities $ 2,472.0 $ 2,112.4 $ 2,250.6 $1,820.6 $1,324.5
Capital expenditures 2,015.9 1,594.7 1,466.2 1,523.2 1,868.9
Free cash flow (5) 106.7 170.6 184.3 1.6 (833.4)
(1) During 1993, nonrecurring charges of $293 million were
recorded related to (a) transaction costs associated with the
merger with Centel and the expenses of integrating and
restructuring the operations of the two companies and (b) a
realignment and restructuring within the long distance division.
Such charges reduced consolidated 1993 income from continuing
operations by $193 million ($0.56 per share).
During 1990, nonrecurring charges of $72 million were recorded
related to the long distance division, which reduced consolidated
1990 income from continuing operations by $37 million ($0.11 per
share).
(2) During 1992 and 1991, gains were recognized related to the
sales of certain local telephone and cellular properties, which
increased consolidated 1992 income from continuing operations by
$44 million ($0.13 per share) and consolidated 1991 income from
continuing operations by $78 million ($0.23 per share).
(3) During 1994, Sprint sold an investment in equity securities,
realizing a gain of $35 million, which increased consolidated
1994 income from continuing operations by $22 million ($0.06 per
share).
(4) During 1993, as a result of the enactment of the Revenue
Reconciliation Act of 1993, Sprint was required to adjust its
deferred income tax assets and liabilities to reflect the
increased tax rate. Such adjustment reduced consolidated 1993
income from continuing operations by $13 million ($0.04 per
share).
(5) Free cash flow represents cash from operating activities
less capital expenditures and dividends paid. Such amount for
1992 excludes the additional proceeds from the sale of accounts
receivable of $300 million.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF Sprint Corporation
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Strategic Developments
On October 25, 1994, Sprint Corporation (Sprint), along with Tele-
Communications Inc. (TCI), Comcast Corporation (Comcast) and Cox
Communications (Cox), announced the formation of a venture that
will provide wireless communications services and local telephone
services on a broad geographic basis within the United States. The
joint venture will be owned 40 percent by Sprint, 30 percent by TCI
and 15 percent each by Comcast and Cox. The parties have signed
definitive agreements and created partnerships which are bidding
for Personal Communications Services (PCS) licenses being auctioned
by the Federal Communications Commission (FCC). The parties have
also entered into a joint venture formation agreement, which
provides the basis upon which they are developing definitive
agreements for their local telephone activities.
On June 14, 1994, Sprint announced that it had entered into a
Memorandum of Understanding (the MOU) with Deutsche Telekom and
France Telecom to form a global partnership which would offer
telecommunications services to business, consumer and carrier
markets worldwide. The MOU provided that Deutsche Telekom and
France Telecom together would purchase approximately 42.9 million
shares of a new class of Sprint common stock at a price of $47.225
per share. The MOU further provided that Deutsche Telekom and
France Telecom would also purchase approximately 42.9 million
shares of the new class of Sprint common stock at a price of $51.00
per share two years after the initial acquisition. As part of the
transaction, Deutsche Telekom and France Telecom would be entitled
to representation on Sprint's board. This representation would be
based on their actual percentage ownership interest, with a minimum
of two directors serving on Sprint's board so long as the two
companies own at least 10 percent of the outstanding common stock
of Sprint, subject to the approval of the New York Stock Exchange.
The formation of the partnership and the acquisition of Sprint
stock are subject to conditions, including the negotiation and
execution of definitive agreements. The terms in these definitive
agreements, including terms relating to the financial investment by
Deutsche Telekom and France Telecom, could differ in material
respects from those in the MOU. Also, there can be no assurance that
definitive agreements will be reached. Other contingencies to the
transaction include the approval by Sprint's board of directors and
its shareholders, approval by the governing bodies of Deutsche
Telekom and France Telecom, and governmental and regulatory
approvals.
Sprint/Centel Merger
Effective March 9, 1993, Sprint consummated its merger with
Centel Corporation (Centel), creating a diversified
telecommunications enterprise with operations in long distance,
local exchange, and cellular and wireless communications services.
The merger was accounted for in 1993 as a pooling of interests.
Results of Operations
Consolidated
Each of Sprint's primary divisions -- long distance, local
exchange, and cellular and wireless communications services --
generated record levels of net operating revenues and improved
operating results in 1994. The long distance division generated a
solid 11 percent growth in traffic volumes in 1994, the number of
access lines served by the local division grew 4.8 percent, and the
cellular and wireless division benefited from a strong 59 percent
growth in cellular subscribers.
Total net operating revenues for the year ended December 31, 1994
were $12.66 billion, an 11 percent increase over net operating
revenues of $11.37 billion for 1993. Total net operating revenues
for the year ended December 31, 1992 were $10.42 billion. For the
year ended December 31, 1994, income from continuing operations was
$884 million, or $2.53 per share, compared with $481 million, or
$1.39 per share, for 1993 and $496 million, or $1.46 per share, for
1992. Income from continuing operations for the year ended
December 31, 1994 included a gain related to the sale of an
investment in equity securities ($0.06 per share). Income from
continuing operations for the year ended December 31, 1993 included
charges related to the merger and integration costs associated with
the Centel merger and the realignment and restructuring of Sprint's
long distance division ($0.56 per share) and a charge associated
with the enactment of the Revenue Reconciliation Act of 1993 ($0.04
per share). Income from continuing operations for the year ended
December 31, 1992 included a gain related to the sale of certain
telephone properties ($0.13 per share).
Segmental Results of Operations
Long Distance Communications Services
For the Years Ended
December 31,
1994 1993 1992
(In Millions)
Net operating revenues $ 6,805.1 $ 6,139.2 $ 5,658.2
Operating expenses
Interconnection 2,994.5 2,710.7 2,574.9
Operations 925.4 857.7 759.8
Selling, general and administrative 1,729.9 1,546.4 1,426.3
Depreciation and amortization 550.5 523.5 586.6
Merger, integration and
restructuring costs -- 45.9 --
Total operating expenses 6,200.3 5,684.2 5,347.6
Operating income $ 604.8 $ 455.0(1) $ 310.6
Operating margin 8.9% 7.4%(1) 5.5%
Capital expenditures $ 774.1 $ 529.4 $ 468.1
Identifiable assets as of
December 31 $ 4,538.7 $ 4,193.1 $ 4,232.0
(1) Excluding the merger, integration and restructuring costs of
$45.9 million, operating income and margin for 1993 would have
been $500.9 million and 8.2 percent, respectively.
Sprint's long distance division provides domestic and
international voice, video, and data communications services.
Rates charged by the division for its services are subject to
different levels of state and federal regulation, but are generally
not rate-base regulated.
Net operating revenues increased 11 percent in 1994, following a 9
percent increase in 1993. Such increases were generally due to
traffic volume growth of 11 percent and 8 percent over the same
periods. As a result of changes in product mix, average revenue
per minute received from customers was relatively constant during
1994, 1993 and 1992. The increases in net operating revenues and
traffic volumes in both 1994 and 1993 reflect ongoing growth in the
international, business and residential markets. Growth in the
international market during these periods reflects the division's
continuing efforts to target new geographic markets. The business
market continued to experience growth in the "800" services market.
This growth was sparked by the May 1993 arrival of "800
portability," which enables customers to keep their advertised
"800" numbers when changing long distance carriers. In 1994,
revenue growth was also enhanced by solid performance in the data
services market, which includes sales to consumer on-line services.
Interconnection costs consist of amounts paid to local exchange
carriers, other domestic service providers, and foreign telephone
companies for the completion of calls made by the division's
customers. Interconnection costs increased in 1994 and 1993
primarily as a result of traffic volume growth; however, as a
percentage of net operating revenues, interconnection costs
decreased from 45.5 percent in 1992 to 44.2 percent and 44.0
percent in 1993 and 1994, respectively. These decreased
percentages were primarily due to reductions in interconnection
charges paid to local exchange companies, partially offset by
increased costs related to settlements on international revenues.
Operations expense consists of costs related to operating and
maintaining the long distance network; costs of providing various
services such as operator services, public payphones,
telecommunications services for the hearing impaired, and video
teleconferencing; and costs of data systems sales. Operations
expense increased $68 million in 1994 and $98 million in 1993,
primarily due to expanded service offerings as well as providing
services to new customers. The 1993 increase was also impacted by
a change in accounting method whereby circuit activity costs are
now being expensed when incurred (see Note 1 of Notes to
Consolidated Financial Statements for additional information).
Exclusive of the effect of this accounting change, 1993 operations
expense increased $63 million.
Selling, general and administrative (SG&A) expense increased $184
million and $120 million in 1994 and 1993, respectively, generally
reflecting the overall growth in the division's operating
activities. As a percentage of net operating revenues, these
expenses have remained at relatively stable levels, increasing
slightly to 25.4 percent in 1994 from 25.2 percent in 1993 and
1992. In 1994, this increase was generally due to increased
advertising expenses resulting from the ongoing sales and marketing
efforts which are critical in the intensely competitive long
distance marketplace.
Depreciation and amortization in 1994 increased $27 million
compared to 1993, generally due to an increase in the asset base.
Depreciation and amortization in 1993 decreased $63 million from
1992, primarily due to the change in accounting for circuit
activity costs, as described above.
In the 1994 fourth quarter, the division broke its string of nine
consecutive quarters of increased operating income. Fourth quarter
1994 operating income decreased $27 million from the 1994 third
quarter. This decline in operating income was primarily driven by
lower revenue yields and seasonally lower volumes in the business
market. Fourth quarter net operating revenues also reflect intensified
competition in the residential marketplace. The reduction in net
operating revenues was partially offset by lower expense levels,
which included revised estimates related to employee benefit and
operating tax expenses. The division has implemented various
actions to address this decline, including selective pricing
actions, product introductions, marketing initiatives, and process
and productivity improvements. The division's return to previous
operating levels will depend upon the success of marketing efforts
and the ability to maintain pricing strategies and gain market share
in the intensely competitive long distance marketplace. A continued
focus on cost containment and technology improvements should also
contribute to improved results.
Local Communications Services
For the Years Ended
December 31,
1994 1993 1992
(In Millions)
Net operating revenues
Local service $ 1,752.3 $ 1,624.3 $ 1,507.4
Network access 1,598.4 1,530.4 1,425.8
Toll service 529.3 505.3 487.5
Other 532.8 466.0 441.5
Total net operating revenues 4,412.8 4,126.0 3,862.2
Operating expenses
Plant operations 1,298.3 1,206.7 1,165.6
Depreciation and amortization 794.6 733.0 720.0
Customer operations 549.3 532.4 473.7
Other 748.7 700.1 663.3
Merger and integration costs -- 190.1 --
Total operating expenses 3,390.9 3,362.3 3,022.6
Operating income $ 1,021.9 $ 763.7(1) $ 839.6
Operating margin 23.2% 18.5%(1) 21.7%
Capital expenditures $ 914.2 $ 845.3 $ 839.4
Identifiable assets as of
December 31 $ 7,821.3 $ 7,604.0 $ 7,242.2
(1) Excluding the merger and integration costs of $190.1 million,
operating income and margin for 1993 would have been $953.8
million and 23.1 percent, respectively.
The local division consists principally of Sprint's rate-
regulated, local exchange telephone operations.
Net operating revenues increased 7 percent in both 1994 and 1993.
Increased local service revenues reflect continued increases in the
number of access lines served and growth in add-on services, such
as custom calling features. The division experienced a 4.8
percent growth in access lines during both 1994 and 1993. Network
access revenues, derived from interexchange long distance carriers'
use of the local network to complete calls, increased during 1994
and 1993 as a result of increased traffic volumes, partially offset
by periodic reductions in network access rates charged. Also
affecting the 1993 increase were additional revenues resulting from
the recognition of a portion of the merger, integration and
restructuring costs for regulatory purposes in certain
jurisdictions. Toll service revenues, related to the provision of
long distance services within specified geographical areas and the
reselling of interexchange long distance services, increased 5
percent and 4 percent in 1994 and 1993, respectively. Other
revenues, including revenues from directory publishing fees,
billing and collection services, and sales of telecommunications
equipment, increased in 1994 and 1993 generally due to growth in
equipment sales.
Plant operations expense includes network operations costs; repair
and maintenance costs of property, plant and equipment; and other
costs associated with the provision of local exchange services.
The 8 percent and 4 percent increases in such costs in 1994 and
1993, respectively, were primarily related to increases in the
costs of providing services resulting from access line growth.
Additionally, certain states have implemented revised toll plans
requiring payment of access charges for calls terminating in the
service areas of other local exchange carriers, resulting in
increased plant operations expense. Increased expenditures related
to switching system software associated with advanced calling
features also contributed to the higher level of plant operations
expense in 1994.
Depreciation and amortization expense increased $62 million in
1994, following a $13 million increase in 1993. These increases
include the effects of depreciation rate changes, special short-
term amortizations and nonrecurring charges approved by state
regulatory commissions of $26 million and $7 million in 1994 and
1993, respectively. The remaining increases generally reflect
plant additions.
Customer operations expense includes costs associated with
business office operations and billing services, marketing costs,
and expenses related to providing operator and directory assistance
and other customer services. These costs increased 3 percent and
12 percent in 1994 and 1993, respectively. The 1993 increase was
primarily due to increased marketing costs and increased systems
development costs incurred to enhance the division's billing
processes.
Other operating expense increased $49 million and $37 million in
1994 and 1993, respectively, primarily due to costs associated with
the growth in equipment sales.
The 1993 increases in plant operations, customer operations and
other operating expenses also reflect the impact of the increased
postretirement benefits cost of approximately $38 million
recognized as a result of the adoption of Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions." The amounts of such
benefits were generally consistent between 1993 and 1994.
Consistent with most local exchange carriers (LECs), the division
accounts for the economic effects of regulation pursuant to SFAS
No. 71, "Accounting for the Effects of Certain Types of
Regulation." The application of SFAS No. 71 requires the
accounting recognition of the rate actions of regulators where
appropriate, including the recognition of depreciation and
amortization based on estimated useful lives prescribed by
regulatory commissions rather than those that might be utilized by
non-regulated enterprises. Sprint currently believes the
division's rate-regulated operations meet the criteria for the
continued application of the provisions of SFAS No. 71. However,
the division operates in an evolving environment in which the
regulatory framework is changing and the level and types of
competition are increasing. Accordingly, Sprint constantly
monitors and evaluates the ongoing applicability of SFAS No. 71 by
assessing the likelihood that prices which provide for the recovery
of specific costs can continue to be charged to customers. In the
event Sprint determines that the division's rate-regulated
operations no longer qualify for the application of the provisions
of SFAS No. 71, Sprint would eliminate from its financial
statements the effects of any actions of regulators that had been
recognized as assets and liabilities. The resulting material
noncash charge would be recorded as an extraordinary item. See
Note 8 of Notes to Consolidated Financial Statements for
information regarding the primary components and estimated amounts
of regulatory assets and liabilities as of December 31, 1994.
Cellular and Wireless Communications Services
For the Years Ended
December 31,
1994 1993 1992
(In Millions)
Net operating revenues $ 701.8 $ 464.0 $ 322.2
Operating expenses
Cost of services and products 233.2 154.9 118.3
Selling, general and administrative 290.6 209.9 154.6
Depreciation and amortization 92.4 75.0 52.1
Merger and integration costs -- 3.2 --
Total operating expenses 616.2 443.0 325.0
Operating income (loss) $ 85.6 $ 21.0(1) $ (2.8)
Operating margin 12.2% 4.5%(1) --
Capital expenditures $ 264.3 $ 164.9 $ 123.8
Identifiable assets as of
December 31 $ 1,728.0 $ 1,504.3 $ 1,489.4
(1) Excluding the merger and integration costs of $3.2 million,
operating income and margin for 1993 would have been $24.2
million and 5.2 percent, respectively.
In addition to activities comprising the above operating results,
Sprint's cellular and wireless division also owns minority
interests in certain markets. Equity in the earnings and losses of
these minority investments is included in "Other expense, net" in
the Consolidated Statements of Income.
The increases in net operating revenues during 1994 and 1993
resulted principally from the growth in the number of cellular
subscribers, which increased 59 percent in 1994 and 67 percent in
1993. The effect of this growth was partially offset by a decline
in service revenue per subscriber, reflecting an industry-wide
trend that has occurred as a result of increased general consumer
market penetration. Future growth rates for net operating revenues
and the number of cellular subscribers will be dependent on price
levels and the quality of service in the competitive cellular
marketplace as well as the impacts of emerging competition such as
PCS.
Excluding the costs and revenues related to equipment sales, costs
of services and products declined to 24.2 percent of net operating
revenues in 1994 from 26.3 percent in 1993 and 29.7 percent in
1992, generally reflecting economies of scale gained from serving
additional subscribers. The increases in selling, general and
administrative expense for 1994 and 1993 resulted principally from
increased commissions and customer service expenses, as well as
increased advertising costs related to the growth in the number of
cellular subscribers. Despite the increases in the amount of SG&A
expense, such costs as a percentage of net operating revenues
(excluding revenues from equipment sales) declined to 45.0 percent
in 1994 from 49.2 percent in 1993 and 52.3 percent in 1992. These
improvements resulted primarily from additional economies realized
from providing service and support to a larger customer base.
These economies contributed to a 3 percent decline in the total per
unit cost to acquire customers (including costs of equipment sales)
from 1993 to 1994. Depreciation and amortization increased during
both 1994 and 1993 as additional investments in property, plant and
equipment were required to meet the growth in the number of
cellular subscribers.
Product Distribution and Directory Publishing
For the Years Ended
December 31,
1994 1993 1992
(In Millions)
Net operating revenues $ 1,108.7 $ 945.2 $ 862.9
Operating expenses
Cost of services and products 938.2 801.0 717.8
Selling, general and administrative 88.1 74.6 71.7
Depreciation and amortization 6.9 5.4 7.4
Merger and integration costs -- 2.5 --
Total operating expenses 1,033.2 883.5 796.9
Operating income $ 75.5 $ 61.7(1) $ 66.0
Operating margin 6.8% 6.5%(1) 7.6%
Capital expenditures $ 6.7 $ 9.0 $ 5.8
Identifiable assets as of
December 31 $ 376.2 $ 341.8 $ 306.7
(1) Excluding the merger and integration costs of $2.5 million,
operating income and margin for 1993 would have been $64.2 million
and 6.8 percent, respectively.
North Supply, a wholesale distributor of telecommunications
products, had 1994 net operating revenues of $829 million, compared
to $677 million in 1993 and $594 million in 1992. The increases
primarily reflect additional nonaffiliated contracts and increased
sales to the local division, partially as a result of sales to the
merged Centel telephone operations. As a percentage of net
operating revenues, operating expenses for 1994, 1993 and 1992 were
95.4 percent, 96.5 percent and 95.2 percent, respectively.
Sprint Publishing & Advertising, a publisher and marketer of
telephone directories, had net operating revenues of $280 million
in 1994 compared with 1993 and 1992 net operating revenues of $268
million and $257 million, respectively. As a percentage of net
operating revenues, operating expenses for 1994, 1993 and 1992 were
86.6 percent, 84.9 percent and 82.6 percent, respectively.
Non-operating Items
Interest Expense
Interest expense totaled $398 million in 1994 compared to $452
million in 1993 and $511 million in 1992. These decreases
generally reflect reductions in the average levels of debt
outstanding as well as lower interest rates due to debt
refinancings during 1993 and 1992. Sprint's average debt
outstanding decreased $334 million and $596 million in 1994 and
1993, respectively, and the effective interest rate decreased 52
and 15 basis points, respectively.
Other Expense, Net
The components of other income (expense), are as follows (in
millions):
For the Years Ended
December 31,
1994 1993 1992
Gain on sale of investment in $ 34.7 $ -- $ --
equity securities
Equity in earnings from cellular
minority partnership interests 21.6 20.0 12.8
Loss on sales of accounts (28.7) (22.0) (17.7)
receivable
Minority interests (22.1) (9.4) (6.1)
Other, net (13.2) (10.9) 6.0
Total other expense, net $ (7.7) $ (22.3) $ (5.0)
Income Tax Provision
Sprint's income tax provisions for 1994, 1993, and 1992 resulted
in effective tax rates of 36 percent, 38 percent and 36 percent,
respectively. During 1993, the Revenue Reconciliation Act of 1993
was enacted which, among other changes, raised the federal income
tax rate to 35 percent from 34 percent. As a result, Sprint
adjusted its deferred income tax assets and liabilities to reflect
the revised rate. See Note 3 of Notes to Consolidated Financial
Statements for additional information regarding the differences
which cause the effective income tax rates to vary from the
statutory federal income tax rates.
As of December 31, 1994, Sprint had recorded deferred income tax
assets of $301 million related to postretirement benefits and other
benefits, $93 million related to alternative minimum tax credit
carryforwards, and $39 million (net of a $21 million valuation
allowance) related to state operating loss carryforwards. Sprint's
management has determined that it is more likely than not that
these deferred income tax assets, net of the valuation allowance,
will be realized based on current income tax laws and expectations
of future taxable income stemming from the reversal of existing
deferred tax liabilities or ordinary operations. Uncertainties
surrounding income tax law changes, shifts in operations between
state taxing jurisdictions, and future operating income levels may,
however, affect the ultimate realization of all or some portion of
these deferred income tax assets.
Discontinued Operations and Extraordinary Losses
For the year ended December 31, 1994, Sprint recognized $7
million of income associated with the settlement of matters related
to a discontinued operation. During 1993, Sprint incurred a loss
from discontinued operations of $12 million, net of income tax
benefits. In 1993 and 1992, Sprint incurred extraordinary losses
related to the early extinguishments of debt of $29 million and $16
million, respectively, net of related income tax benefits.
Accounting Changes
Effective January 1, 1993, Sprint changed its method of
accounting for postretirement and postemployment benefits by
adopting SFAS No. 106 and No. 112 and effected another accounting
change. The cumulative effect of these changes in accounting
principles reduced 1993 net income by $384 million. Effective
January 1, 1992, Sprint also changed its method of accounting for
income taxes by adopting SFAS No. 109. The cumulative effect of
this change in accounting principle increased 1992 net income by
$23 million.
Inflation
The effects of inflation on Sprint's operations were not
significant during 1994, 1993 or 1992.
Financial Condition
Sprint's consolidated assets totaled $14.94 billion at December
31, 1994 compared to $14.15 billion at December 31, 1993. Accounts
receivable increased $239 million as of December 31, 1994 compared
to December 31, 1993 generally due to an 11 percent increase in
consolidated net operating revenues and the timing of sales
activities and cash collections. This increase did not have a
significant impact on Sprint's aging of accounts receivable.
Property, plant and equipment, net of accumulated depreciation,
increased $564 million from 1993 to 1994. This increase was
primarily a result of increased capital expenditures to enhance and
upgrade Sprint's networks, to expand service capabilities and
increase productivity. The $130 million investment in equity
securities classified as a current asset as of December 31, 1993
was sold during 1994. Current maturities of long-term debt as of
December 31, 1994 decreased $191 million compared to December 31,
1993 due to scheduled debt payments. As of December 31, 1994,
Sprint's total capitalization aggregated $9.50 billion, consisting
of long-term debt (including current maturities), redeemable
preferred stock, and common stock and other shareholders' equity.
Long-term debt (including current maturities) comprised 52 percent
of total capitalization as of December 31, 1994, compared to 56
percent at year-end 1993.
Liquidity and Capital Resources
Cash Flows - Operating Activities
Cash flows from operating activities, which are Sprint's primary
source of liquidity, were $2.47 billion, $2.11 billion and $2.25
billion in 1994, 1993 and 1992, respectively. Operating cash flows
for 1994 and 1993 reflect improved operating results, partially
offset by expenditures related to the 1993 merger, integration and
restructuring actions of $86 million and $155 million for 1994 and
1993, respectively. The 1992 operating cash flows include proceeds
of $300 million from the sale of accounts receivable within the
long distance division.
Cash Flows - Investing Activities
Sprint's investing activities used cash of $1.98 billion, $1.57
billion and $1.58 billion in 1994, 1993 and 1992, respectively.
Capital expenditures, which represent Sprint's most significant
investing activity, were $2.02 billion, $1.59 billion and $1.47
billion in 1994, 1993 and 1992, respectively.
Long distance capital expenditures were incurred each year
primarily to increase the network capacity and to enhance network
reliability and capabilities for providing new products and
services. Capital expenditures for the local division were made to
accommodate access line growth, to continue the conversion to
digital technologies, and to expand the division's capabilities for
providing enhanced telecommunications services. The increases in
1994 and 1993 capital expenditures for the cellular and wireless
division reflect the significant increases in the number of
cellular subscribers served during such years.
Investing activities for 1994 also include $118 million received
in connection with the sale of an investment in equity securities.
Additionally, Sprint made investments of $49 million in connection
with several joint ventures, which included initial funding
requirements associated with a joint venture's participation in the
PCS auction conducted by the FCC. Investing activities in 1992
included $250 million paid in connection with Sprint's $530 million
acquisition of the remaining 19.9 percent interest in Sprint
Communications Company L.P. (the Limited Partnership) and proceeds
of $114 million from the sale of certain local telephone
properties.
Cash Flows - Financing Activities
Sprint's financing activities used cash of $444 million, $596
million and $670 million in 1994, 1993 and 1992, respectively.
Improved operating cash flows during each year, together with
proceeds in 1992 from the sale of additional accounts receivable
and from the divestiture of certain local telephone properties,
allowed Sprint to fund capital expenditures and dividends
internally and to reduce total debt outstanding during each year.
In addition, the $280 million note issued to the seller in
connection with the acquisition of the remaining interest in the
Limited Partnership was paid in 1992.
During 1993 and 1992, a significant level of debt refinancing
occurred in order to take advantage of lower interest rates.
Accordingly, a majority of the proceeds from long-term borrowings
in 1993 was used to finance the redemption prior to scheduled
maturities of $1.24 billion of debt. During 1992, Sprint
refinanced $720 million of long-term debt and borrowed $250 million
to finance the payment related to the acquisition of the remaining
19.9 percent interest in the Limited Partnership.
Sprint paid dividends to common and preferred shareholders of $349
million, $347 million and $300 million in 1994, 1993 and 1992,
respectively. Sprint's indicated annual dividend rate on common
stock is currently $1.00 per share.
Liquidity and Capital Requirements
Sprint anticipates cash flows from operating activities to be
sufficient to fund dividends and capital expenditures during 1995.
Sprint currently expects 1995 capital expenditures to be
approximately $2.1 billion, excluding cash commitments associated
with joint ventures. Sprint expects its external cash requirements
for 1995 to be approximately $550 million to $650 million, which is
generally required to repay scheduled long-term debt maturities and
to refinance notes payable and commercial paper. Long-term debt
outstanding as of December 31, 1994 includes $1.08 billion of notes
payable and commercial paper. Such amounts which are not
refinanced through the issuance of long-term debt will continue to
be financed under existing credit facilities or may be reduced
through free cash flows. External cash requirements will be
financed primarily with debt, the source of which will depend upon
prevailing market conditions during the year.
As discussed in "Strategic Developments," in October 1994 Sprint
entered into a joint venture with certain cable companies to
provide wireless communications services to consumers and
businesses on a broad geographic basis within the United States.
The joint venture is bidding on certain PCS licenses currently
being auctioned by the FCC. The results of this auction, which is
anticipated to conclude during the 1995 first quarter, will likely
cause the joint venture, and ultimately its partners, to incur
significant cash commitments. Additionally in 1995, Sprint will
incur cash commitments associated with the continued development of
the joint venture's infrastructure and presence in the
communications marketplace, as well as cash commitments associated
with the planned joint venture to provide local telephone service
in competition with non-Sprint LECs. Aggregate cash commitments
associated with these joint venture activities will be fully
determined upon completion of the FCC's auction and negotiation of
definitive agreements related to local telephone activities.
Sprint is currently negotiating an interim credit facility to
support anticipated cash commitments associated with these joint
venture activities. A portion of the cash proceeds from the
anticipated investment in Sprint by Deutsche Telekom and France
Telecom would be used to ultimately fund commitments associated
with joint venture activities.
At year-end 1994, Sprint had the ability to borrow $525 million
under a revolving credit agreement with a syndicate of domestic and
international banks and other bank commitments. Other available
financing sources include a Medium-Term Note program, under which
Sprint may offer for sale up to $175 million of unsecured senior
debt securities. Additionally, pursuant to shelf registration
statements filed with the Securities and Exchange Commission, up to
$1.2 billion of debt securities could be offered for sale as of
December 31, 1994. In January 1995, $70 million of such debt
securities under shelf registration statements were issued in order
to reduce commercial paper outstanding.
The aggregate amount of additional borrowings which can be
incurred is ultimately limited by certain covenants contained in
existing debt agreements. As of December 31, 1994, Sprint had
borrowing capacity of approximately $4.1 billion under the most
restrictive of its debt covenants.
General Hedging Policies
Sprint, on a limited basis, utilizes certain derivative financial
instruments in an effort to manage exposure to interest rate risk
and foreign exchange risk. Sprint's utilization of such derivative
financial instruments related to hedging activities is generally
limited to interest rate swap agreements and forward contracts and
options in foreign currencies. Sprint will in no circumstance take
speculative positions and create an exposure to benefit from market
fluctuations. All hedging activity is in accordance with board-
approved policies. Any potential loss or exposure related to
Sprint's use of derivative instruments is immaterial to its overall
operations, financial condition and liquidity. See Note 10 of
Notes to Consolidated Financial Statements for more information
related to Sprint's portfolio of derivative instruments.
Interest Rate Risk Management
Sprint's interest rate risk management program focuses on
minimizing vulnerability of net income to movements in interest
rates, setting an optimal mixture of floating-rate and fixed-rate
debt in the liability portfolio and preventing liquidity risk.
Sprint primarily employs a gap methodology to measure interest rate
exposure and utilizes simulation analysis to manage interest rate
risk. Sprint takes an active stance in modifying hedge positions
to benefit from the value of timing flexibility and fixed-
rate/floating-rate adjustments.
Foreign Exchange Risk Management
Sprint's foreign exchange risk management program focuses on
optimizing consolidated cash flows and stabilizing accounting
results. Sprint does not hedge translation exposure because it
believes that optimizing consolidated cash flows will, over time,
maintain shareholder value. Sprint's primary transaction exposure
in foreign currencies results from changes in foreign exchange
rates between the dates Sprint incurs and settles liabilities
(payable in a foreign currency) to overseas telephone companies for
the costs of terminating international calls made by Sprint's
domestic customers.
Impact of Recently Issued Accounting Pronouncements
The American Institute of Certified Public Accountants has issued
a Statement of Position, "Reporting on Advertising Costs" which
provides guidance on financial reporting of advertising costs in
annual financial statements. The statement requires reporting the
costs of all advertising as expenses in the periods in which the
costs are incurred, or the first time the advertising takes place
unless certain criteria for deferral are met. The statement is
effective for financial statements for years beginning after June
15, 1994. Management believes that Sprint's current practice of
expensing advertising costs as incurred meets the requirements of
the statement.
MANAGEMENT REPORT
The management of Sprint Corporation has the responsibility for
the integrity and objectivity of the information contained in this
Annual Report. Management is responsible for the consistency of
reporting such information and for ensuring that generally accepted
accounting principles are used.
In discharging this responsibility, management maintains a
comprehensive system of internal controls and supports an extensive
program of internal audits, has made organizational arrangements
providing appropriate divisions of responsibility and has
established communication programs aimed at assuring that its
policies, procedures and codes of conduct are understood and
practiced by its employees.
The consolidated financial statements included in this Annual
Report have been audited by Ernst & Young LLP, independent
auditors. Their audit was conducted in accordance with generally
accepted auditing standards and their report is included herein.
The responsibility of the Board of Directors for these financial
statements is pursued primarily through its Audit Committee. The
Audit Committee, composed entirely of directors who are not
officers or employees of Sprint, meets periodically with the
internal auditors and independent auditors, both with and without
management present, to assure that their respective
responsibilities are being fulfilled. The internal and independent
auditors have full access to the Audit Committee to discuss
auditing and financial reporting matters.
/s/ W. T. Esrey
William T. Esrey
Chairman, President and Chief Executive Officer
/s/ Arthur B. Krause
Arthur B. Krause
Executive Vice President and Chief Financial Officer
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Sprint Corporation
We have audited the accompanying consolidated balance sheets of
Sprint Corporation (Sprint) as of December 31, 1994 and 1993, and
the related consolidated statements of income, cash flows, and
common stock and other shareholders' equity for each of the three
years in the period ended December 31, 1994. Our audits also
included the financial statement schedule listed in the Index to
Financial Statements, Financial Statement Schedule and
Supplementary Data. These financial statements and the schedule
are the responsibility of the management of Sprint. Our
responsibility is to express an opinion on these financial
statements and the schedule based on our audits. We did not audit
the financial statements or the schedule of Centel Corporation, a
wholly-owned subsidiary, for the year ended December 31, 1992,
which statements reflect net income constituting approximately 9
percent of consolidated net income for the year ended December 31,
1992. Those statements and the schedule were audited by other
auditors whose report has been furnished to us, and our opinion,
insofar as it relates to data included for Centel Corporation, is
based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits and
the report of other auditors provide a reasonable basis for our
opinion.
In our opinion, based on our audits and the report of other
auditors, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Sprint at December 31, 1994 and 1993, and the
consolidated results of its operations and its cash flows for each
of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles. Also in
our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set
forth therein.
As discussed in Notes 1, 2 and 3 to the consolidated financial
statements, Sprint changed its method of accounting for
postretirement benefits, postemployment benefits and circuit
activity costs in 1993 and income taxes in 1992.
ERNST & YOUNG LLP
Kansas City, Missouri
January 31, 1995
REPORT OF INDEPENDENT AUDITORS
To the Shareowners of Centel Corporation:
We have audited the consolidated statements of income, common
shareowners' investment and cash flows of CENTEL CORPORATION (a
Kansas corporation) AND SUBSIDIARIES for the year ended December
31, 1992, prior to the pooling of interests with Sprint Corporation
(and, therefore, are not presented herein) described in Note 9 to
the consolidated financial statements of Sprint Corporation for the
year ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the results of operations and
cash flows of Centel Corporation and Subsidiaries for the year
ended December 31, 1992, in conformity with generally accepted
accounting principles.
Our audit was made for the purpose of forming an opinion on the
basic financial statements taken as a whole. In connection with
our audit, certain auditing procedures were applied to the
following schedule which is required for purposes of complying with
the Securities and Exchange Commission's rules and is not part of
the basic financial statements. Such schedule is not included
herein:
Schedule VIII - Consolidated Allowance for Doubtful Accounts
In our opinion, the information contained in the schedule fairly
states, in all material respects, the financial data required to be
set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois
February 3, 1993
CONSOLIDATED STATEMENTS OF INCOME Sprint Corporation
For the Years Ended December 31,
1994 1993 1992
(In Millions, Except Per Share Data)
Net Operating Revenues $ 12,661.8 $ 11,367.8 $ 10,420.3
Operating Expenses
Costs of services and products 6,361.0 5,736.1 5,325.5
Selling, general and administrative 3,034.6 2,729.9 2,489.9
Depreciation and amortization 1,478.4 1,358.7 1,391.5
Merger, integration and
restructuring costs -- 292.5 --
Total operating expenses 10,874.0 10,117.2 9,206.9
Operating Income 1,787.8 1,250.6 1,213.4
Gain on divestiture of telephone -- -- 81.1
properties
Interest expense (398.0) (452.4) (511.1)
Other expense, net (7.7) (22.3) (5.0)
Income from continuing operations
before income taxes 1,382.1 775.9 778.4
Income tax provision (498.4) (295.3) (282.3)
Income From Continuing Operations 883.7 480.6 496.1
Discontinued operations, net 7.0 (12.3) --
Extraordinary losses on early
extinguishments of debt, net -- (29.2) (16.0)
Cumulative effect of changes in
accounting principles, net -- (384.2) 22.7
Net income 890.7 54.9 502.8
Preferred stock dividends (2.7) (2.8) (3.5)
Earnings applicable to common stock $ 888.0 $ 52.1 $ 499.3
Earnings Per Common Share
Continuing operations $ 2.53 $ 1.39 $ 1.46
Discontinued operations 0.02 (0.04) --
Extraordinary item -- (0.08) (0.05)
Cumulative effect of changes in
accounting principles -- (1.12) 0.07
Total $ 2.55 $ 0.15 $ 1.48
Weighted average number of common shares 348.7 343.7 337.2
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED BALANCE SHEETS Sprint Corporation
As of December 31,
1994 1993
Assets (In Millions)
Current assets
Cash and equivalents $ 123.3 $ 76.8
Accounts receivable, net of allowance
for doubtful accounts of $128.9 million
($121.9 million in 1993) 1,469.8 1,230.6
Investment in equity securities -- 130.2
Inventories 215.8 182.3
Deferred income taxes 54.2 81.1
Prepaid expenses 144.5 120.7
Other 180.9 156.1
Total current assets 2,188.5 1,977.8
Investments in equity securities 177.6 173.1
Property, plant and equipment
Long distance communications services 6,056.3 5,492.7
Local communications services 11,827.4 11,226.4
Cellular and wireless communications services 818.5 569.6
Other 498.6 433.7
19,200.8 17,722.4
Less accumulated depreciation 8,322.2 7,407.6
10,878.6 10,314.8
Cellular minority partnership interests 301.7 284.9
Excess of cost over net assets acquired 706.7 739.5
Other assets 683.2 658.8
$ 14,936.3 $ 14,148.9
CONSOLIDATED BALANCE SHEETS (continued) Sprint Corporation
As of December 31,
1994 1993
Liabilities and Shareholders' Equity (In Millions)
Current liabilities
Current maturities of long-term debt $ 332.4 $ 523.4
Accounts payable 1,072.2 875.2
Accrued interconnection costs 527.6 537.7
Accrued taxes 268.5 307.2
Advance billings 167.6 150.6
Other 686.3 674.5
Total current liabilities 3,054.6 3,068.6
Long-term debt 4,604.8 4,571.0
Deferred credits and other liabilities
Deferred income taxes and investment
tax credits 1,259.0 1,229.9
Post retirement and other benefit obligations 850.3 793.1
Other 605.7 529.4
2,715.0 2,552.4
Redeemable preferred stock 37.1 38.6
Common stock and other shareholders' equity
Common stock, par value $2.50 per share,
authorized 500.0 million shares, issued
348.6 million (343.4 million in 1993), and
outstanding 348.3 million (343.4 million in 1993) 871.4 858.5
Capital in excess of par or stated value 942.9 827.4
Retained earnings 2,730.9 2,184.2
Other (20.4) 48.2
4,524.8 3,918.3
$ 14,936.3 $ 14,148.9
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS Sprint Corporation
For the Years Ended December 31,
1994 1993 1992
(In Millions)
Operating Activities
Net income $ 890.7 $ 54.9 $ 502.8
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation and amortization 1,478.4 1,358.7 1,391.5
Deferred income taxes and
investment tax credits 74.6 (34.5) 3.0
Gain on sale of investment in
equity securities (34.7) -- --
Gain on divestiture of telephone
properties -- -- (81.1)
Extraordinary losses on early
extinguishments of debt -- 20.4 14.2
Cumulative effect of changes in
accounting principles -- 384.2 (22.7)
Changes in operating assets and
liabilities
Accounts receivable, net (239.2) (185.8) 257.8
Inventories and other current
assets (84.5) (42.7) (13.9)
Accounts payable, accrued expenses
and other current liabilities 197.8 362.0 126.8
Noncurrent assets and liabilities, net 134.3 135.1 152.3
Other, net 54.6 60.1 (80.1)
Net cash provided by operating
activities 2,472.0 2,112.4 2,250.6
Investing Activities
Capital expenditures (2,015.9) (1,594.7) (1,466.2)
Proceeds from sale of investment in
equity securities 117.7 -- --
Equity investments (49.2) 9.0 (1.7)
Acquisition of Limited Partnership
minority interest -- -- (250.0)
Proceeds from divestiture of
telephone properties -- -- 114.0
Other, net (34.5) 17.3 26.0
Net cash used by investing
activities (1,981.9) (1,568.4) (1,577.9)
Financing Activities
Proceeds from long-term debt 107.9 840.4 951.2
Retirements of long-term debt (597.0) (1,589.0) (1,257.4)
Net increase in notes payable and
commercial paper 321.5 393.5 147.0
Payment of note payable to minority
partner -- -- (280.0)
Proceeds from common stock issued 42.7 70.8 51.6
Proceeds from employees stock
purchase installments 33.1 28.3 13.2
Dividends paid (349.4) (347.1) (300.1)
Other, net (2.4) 7.1 4.7
Net cash used by financing
activities (443.6) (596.0) (669.8)
Increase (Decrease) in Cash and Equivalents 46.5 (52.0) 2.9
Cash and Equivalents at Beginning of Year 76.8 128.8 125.9
Cash and Equivalents at End of Year $ 123.3 $ 76.8 $ 128.8
Supplemental Cash Flows Information
Cash paid for interest $ 418.1 $ 453.6 $ 507.5
Cash paid for income taxes $ 435.1 $ 292.4 $ 269.0
Noncash Financing Activities
Common stock contributed to employee
savings plans, at market $ 31.0 $ 39.0 $ 28.0
See accompanying Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF COMMON STOCK Sprint Corporation
AND OTHER SHAREHOLDERS' EQUITY
For the Years Ended December 31, 1994, 1993 and 1992
Capital
in
Excess
of Par
or
Common Stated Retained
Stock Value Earnings Other Total
(In Millions)
Balance as of January 1,
1992 (334.8 million shares
issued and outstanding) $ 836.9 $ 640.3 $2,248.1 $ (53.4) $ 3,671.9
Net income -- -- 502.8 -- 502.8
Common stock dividends -- -- (296.6) -- (296.6)
Preferred stock dividends -- -- (3.5) -- (3.5)
Employee stock purchase and
other installments
received, net -- -- -- 15.5 15.5
Common stock issued 9.9 73.7 -- (6.5) 77.1
Other, net 0.3 3.5 0.9 (0.3) 4.4
Balance as of December 31,
1992 (338.9 million shares
issued and outstanding) 847.1 717.5 2,451.7 (44.7) 3,971.6
Net income -- -- 54.9 -- 54.9
Common stock dividends -- -- (324.5) -- (324.5)
Preferred stock dividends -- -- (2.8) -- (2.8)
Employee stock purchase and
other installments
received, net -- -- -- 30.8 30.8
Common stock issued 11.0 98.4 -- (2.4) 107.0
Change in unrealized
holding gains on
investments in equity
securities, net -- -- -- 64.8 64.8
Other, net 0.4 11.5 4.9 (0.3) 16.5
Balance as of December 31,
1993 (343.4 million shares
issued and outstanding) 858.5 827.4 2,184.2 48.2 3,918.3
Net income -- -- 890.7 -- 890.7
Common stock dividends -- -- (346.7) -- (346.7)
Preferred stock dividends -- -- (2.7) -- (2.7)
Employee stock purchase and
other installments
received, net -- -- -- 15.0 15.0
Common stock issued 12.8 111.9 -- (53.4) 71.3
Change in unrealized
holding gains on
investments in equity
securities, net -- -- -- (20.5) (20.5)
Other, net 0.1 3.6 5.4 (9.7) (0.6)
Balance as of December 31,
1994 (348.6 million shares
issued and 348.3 million
shares outstanding) $871.4 $942.9 $2,730.9 $(20.4) $4,524.8
See accompanying Notes to Consolidated Financial Statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Sprint Corporation
1. Summary of Significant Accounting Policies
This summary of significant accounting policies of Sprint
Corporation is presented to assist in understanding the
accompanying consolidated financial statements.
Basis of Consolidation and Presentation
The accompanying consolidated financial statements include the
accounts of Sprint Corporation and its wholly-owned and majority-
owned subsidiaries (Sprint). Investments in less than 50 percent-
owned partnerships or joint ventures are accounted for using the
equity method.
In accordance with industry practice, revenues and related net
income of non-regulated operations attributable to transactions
with Sprint's rate-regulated telephone companies have not been
eliminated in the accompanying consolidated financial statements.
Intercompany revenues of such entities amounted to $285 million,
$225 million and $194 million in 1994, 1993 and 1992, respectively.
All other significant intercompany transactions have been
eliminated.
Certain amounts previously reported for prior periods have been
reclassified to conform to the current period presentation in the
accompanying consolidated financial statements. Such
reclassifications had no effect on the results of operations or
shareholders' equity as previously reported.
Classification of Operations
The long distance communications services division provides
domestic voice and data communications services across certain
specified geographical boundaries, as well as international long
distance communications services. Rates charged for such services
sold to the public are subject to different levels of state and
federal regulation, but are generally not subject to rate-base
regulation.
The local communications services division consists principally
of the operations of Sprint's rate-regulated telephone companies.
These operations provide local exchange services, access by
telephone customers and other carriers to local exchange facilities
and long distance services within specified geographical areas.
The cellular and wireless communications services division
consists of wholly-owned and majority-owned interests in
partnerships and corporations operating cellular and wireless
communications properties in various metropolitan and rural service
area markets.
The product distribution and directory publishing businesses
include the wholesale distribution of telecommunications products
and the publishing and marketing of white and yellow page telephone
directories.
Revenue Recognition
Operating revenues for the long distance, local and cellular and
wireless communications services divisions are recognized as
communications services are rendered. Operating revenues for the
long distance communications services division are recorded net of
an estimate for uncollectible accounts. Operating revenues for
Sprint's product distribution business are recognized upon delivery
of products to customers.
Regulated Operations
Sprint's rate-regulated telephone companies account for the
economic effects of regulation pursuant to Statement of Financial
Accounting Standards (SFAS) No. 71, "Accounting for the Effects of
Certain Types of Regulation," which requires the accounting
recognition of the rate actions of regulators where appropriate.
Such actions can provide reasonable assurance of the existence of
an asset, reduce or eliminate the value of an asset, or impose a
liability on a regulated enterprise.
Cash and Equivalents
Cash equivalents generally include highly liquid investments with
original maturities of three months or less and are stated at cost,
which approximates market value.
As part of its cash management program, Sprint utilizes
controlled disbursement banking arrangements. As of December 31,
1994 and 1993, outstanding checks in excess of cash balances of
$174 million and $166 million, respectively, are included in
accounts payable. Sprint had sufficient funds available to fund
these outstanding checks when they were presented for payment.
Investments in Equity Securities
Investments in equity securities are classified as available for
sale and are reported at fair value (estimated based on quoted
market prices) as of December 31, 1994 and 1993. As of December
31, 1994 and 1993, the cost of such investments was $109 million
and $202 million, respectively, with the gross unrealized holding
gains of $69 million and $101 million, respectively, reflected as
an addition to other shareholders' equity, net of related income
taxes.
During 1994, Sprint sold an investment in equity securities,
realizing a gain of $35 million.
Inventories
Inventories, consisting principally of those related to Sprint's
product distribution business, are stated at the lower of cost
(principally first-in, first-out method) or market.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Generally,
ordinary asset retirements and disposals are charged against
accumulated depreciation with no gain or loss recognized. Repairs
and maintenance costs are expensed as incurred.
Effective January 1, 1993, Sprint's long distance communications
services division changed its method of accounting for certain
costs related to connecting new customers to its network. The
change was made to conform Sprint's accounting to the predominant
industry practice for such costs. Under the new method, such costs
(which were previously capitalized) are being expensed when
incurred. The resulting nonrecurring, noncash charge of $32
million ($0.09 per share), net of related income tax benefits, is
reflected in the 1993 consolidated statement of income as a
cumulative effect of change in accounting principle. The proforma
impact of retroactive application of the change would not have been
material to net income or earnings per share for 1992, and the
impact of the change on Sprint's 1993 operating expenses was not
significant.
Depreciation
The cost of property, plant and equipment is depreciated
generally on a straight-line basis over the estimated useful lives
(such lives related to regulated property, plant and equipment are
those prescribed by regulatory commissions). Depreciation rate
changes, special short-term amortizations and nonrecurring charges
approved by regulatory commissions for the rate-regulated telephone
companies resulted in additional depreciation totaling $26 million,
$7 million and $46 million in 1994, 1993 and 1992, respectively.
After the related effects on revenues and income taxes, these items
reduced income from continuing operations for 1994, 1993 and 1992
by approximately $14 million, $4 million and $24 million,
respectively.
Cellular Minority Partnership Investments
Cellular minority partnership investments include the excess of
the purchase price over the underlying book value of cellular
communications partnerships of $195 million and $201 million as of
December 31, 1994 and 1993, respectively. Such excess is being
amortized on a straight-line basis over 40 years; accumulated
amortization aggregated $35 million and $29 million as of December
31, 1994 and 1993, respectively.
Excess of Cost over Net Assets Acquired
The excess of the purchase price over the fair value of net
assets acquired, principally related to cellular communications
services properties, is being amortized on a straight-line basis
over 40 years. Accumulated amortization aggregated $132 million
and $112 million as of December 31, 1994 and 1993, respectively.
Income Taxes
Deferred income taxes are provided for certain temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for tax
purposes.
Investment tax credits related to regulated telephone property,
plant and equipment have been deferred and are being amortized over
the estimated useful lives of the related assets.
Interest Charged to Construction
Regulatory commissions allow the rate-regulated telephone
companies to capitalize an allowance for funds expended during
construction. Amounts capitalized will be recovered over the
service lives of the respective assets constructed as the resulting
higher depreciation is recovered through increased revenues.
Interest costs associated with the construction of capital assets
for Sprint's other operations are capitalized in accordance with
SFAS No. 34, "Capitalization of Interest Costs." Total amounts
capitalized during 1994, 1993 and 1992 were $9 million, $8 million
and $11 million, respectively.
Earnings Per Share
Earnings per common share amounts are based on the weighted
average number of shares both outstanding and issuable assuming
exercise of all dilutive options, as applicable.
2. Employee Benefit Plans
Defined Benefit Pension Plan
Substantially all Sprint employees are covered by a
noncontributory defined benefit pension plan. For participants of
the plan represented by collective bargaining units, benefits are
based upon schedules of defined amounts as negotiated by the
respective parties. For participants not covered by collective
bargaining agreements, the plan provides pension benefits based
upon years of service and participants' compensation.
Sprint's policy is to make contributions to the plan each year
equal to an actuarially determined amount consistent with
applicable federal tax regulations. The funding objective is to
accumulate funds at a relatively stable rate over the participants'
working lives so that benefits are fully funded at retirement. As
of December 31, 1994, the plan's assets consisted principally of
investments in corporate equity securities and U.S. government and
corporate debt securities.
The components of the net pension costs (credits) and related
weighted average assumptions are as follows (in millions):
1994 1993 1992
Service cost -- benefits earned
during the period $ 61.6 $ 58.2 $ 50.8
Interest cost on projected benefit
obligation 121.6 103.9 96.1
Actual return on plan assets (1.1) (241.2) (89.5)
Net amortization and deferral (176.6) 62.5 (64.7)
Net pension cost (credit) $ 5.5 $ (16.6) $ (7.3)
Discount rate 7.5% 8.0% 8.4%
Expected long-term rate of return
on plan assets 9.5% 9.5% 8.5%
Anticipated composite rate of
future increases in compensation 4.5% 5.5% 6.2%
In addition, Sprint recognized pension curtailment losses of $3
million in 1993 as a result of integration and restructuring
actions (see Notes 9 and 10).
The funded status and amounts recognized in the consolidated
balance sheets for the plan, as of December 31, are as follows (in
millions):
1994 1993
Actuarial present value of benefit obligations
Vested benefit obligation $ (1,338.1) $ (1,277.0)
Accumulated benefit obligation $ (1,459.5) $ (1,462.7)
Projected benefit obligation $ (1,547.3) $ (1,582.9)
Plan assets at fair value 1,950.2 2,029.0
Plan assets in excess of the projected
benefit obligation 402.9 446.1
Unrecognized net gains (203.8) (197.3)
Unrecognized prior service cost 107.4 88.1
Unamortized portion of transition asset (197.0) (221.9)
Prepaid pension cost $ 109.5 $ 115.0
The projected benefit obligations as of December 31, 1994 and
1993 were determined using discount rates of 8.5 percent and 7.5
percent, respectively, and anticipated composite rates of future
increases in compensation of 5.0 percent and 4.5 percent,
respectively.
Defined Contribution Plans
Sprint sponsors defined contribution employee savings plans
covering substantially all employees. Participants may contribute
portions of their compensation to the plans. Contributions of
participants represented by collective bargaining units are matched
by Sprint based upon defined amounts as negotiated by the
respective parties. Contributions of participants not covered by
collective bargaining agreements are also matched by Sprint. For
these participants, Sprint provides matching contributions in
common stock equal to 50 percent of participants' contributions up
to 6 percent of their compensation and may, at the discretion of
the Board of Directors, provide additional matching contributions
based upon the performance of Sprint's common stock in comparison
to other telecommunications companies. Sprint's matching
contributions (including cash contributions under the former Centel
Corporation [Centel] savings plans) aggregated $49 million, $49
million and $40 million in 1994, 1993 and 1992, respectively.
Postretirement Benefits
Sprint sponsors postretirement benefits (principally health care
benefits) arrangements covering substantially all employees.
Employees who retired before specified dates are eligible for these
benefits at no cost or a reduced cost. Employees retiring after
specified dates are eligible for these benefits on a shared cost
basis. Sprint funds the accrued costs as benefits are paid.
Effective January 1, 1993, Sprint changed or modified its method
of accounting for postretirement benefits by adopting SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions." The resulting nonrecurring, noncash charge of $341
million ($1.00 per share), net of related income tax benefits, is
reflected in the 1993 consolidated statement of income as a
cumulative effect of change in accounting principle. During 1992,
the cost of providing postretirement benefits to Sprint's retirees
was expensed as such costs were paid, while for Centel's employees
and retirees, an accrual basis approach was utilized to recognize
such costs.
Upon adoption of the new standard, Sprint elected to immediately
recognize its previously unrecorded obligation for postretirement
benefits already earned by current retirees and employees (the
transition obligation), a substantial portion of which related to
its rate-regulated telephone companies. Pursuant to SFAS No. 71,
regulatory assets associated with the recognition of the transition
obligation were recorded in jurisdictions where the regulators have
issued orders specific to Sprint permitting recognition of net
postretirement benefits costs for ratemaking purposes, and
providing for recovery of the transition obligation over a period
of no longer than 20 years. As of December 31, 1994, such
regulatory assets aggregated $78 million. In all other
jurisdictions, regulatory assets associated with the recognition of
the transition obligation were not recorded due to the
uncertainties as to the timing and extent of recovery.
The components of the net postretirement benefits cost are as
follows (in millions):
1994 1993
Service cost -- benefits earned during the
period $ 23.5 $ 22.1
Interest on accumulated benefit obligation 53.4 56.5
Net amortization and deferral (1.9) --
Net postretirement benefits cost $ 75.0 $ 78.6
For measurement purposes, a weighted average annual health care
cost trend rate of 12 percent was assumed for 1994, gradually
decreasing to 6 percent by 2001 and remaining constant thereafter.
The effect of a 1 percent increase in the assumed trend rates would
have increased the 1994 net postretirement benefits cost by
approximately $25 million. The discount rates for 1994 and 1993
were 7.5 percent and 8.0 percent, respectively.
In addition, Sprint recognized postretirement benefits
curtailment losses of $11 million in 1993 as a result of
integration and restructuring actions (see Notes 9 and 10).
The cost of providing postretirement benefits was $28 million in
1992.
The amounts recognized in the consolidated balance sheets as of
December 31, are as follows (in millions):
1994 1993
Accumulated postretirement benefits obligation
Retirees $ 299.2 $ 322.8
Active plan participants -- fully eligible 130.7 158.0
Active plan participants -- other 246.2 254.4
676.1 735.2
Unrecognized prior service benefit 6.4 6.8
Unrecognized net gains 155.3 38.9
Accrued postretirement benefits cost $ 837.8 $ 780.9
The accumulated benefits obligations as of December 31, 1994 and
1993 were determined using discount rates of 8.5 percent and 7.5
percent, respectively. An annual health care trend rate of 12
percent was assumed for 1995, gradually decreasing to 6 percent by
2001 and remaining constant thereafter. The effect of a 1 percent
annual increase in the assumed health care cost trend rates would
have increased the accumulated benefits obligation as of December
31, 1994 by approximately $86 million.
Postemployment Benefits
Effective January 1, 1993, Sprint adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits." Upon
adoption, Sprint recognized certain previously unrecorded
obligations for benefits being provided to former or inactive
employees and their dependents, after employment but before
retirement. The resulting nonrecurring, noncash charge of $11
million ($0.03 per share), net of related income tax benefits, is
reflected in the 1993 consolidated statement of income as a
cumulative effect of change in accounting principle. Such
postemployment benefits offered by Sprint include severance,
disability and workers compensation benefits, including the
continuation of other benefits such as health care and life
insurance coverage.
3. Income Taxes
The components of the income tax provisions allocated to
continuing operations are as follows (in millions):
1994 1993 1992
Current income tax provision
Federal $ 343.4 $ 275.6 $ 242.1
State 80.4 54.2 37.2
423.8 329.8 279.3
Deferred income tax provision (benefit)
Federal 100.2 16.4 9.5
State (3.6) (26.2) 24.8
Amortization of deferred
investment tax credits (22.0) (24.7) (31.3)
74.6 (34.5) 3.0
Total income tax provision $ 498.4 $ 295.3 $ 282.3
On August 10, 1993, the Revenue Reconciliation Act of 1993 was
enacted which, among other changes, raised the federal income tax
rate for corporations to 35 percent from 34 percent, retroactive to
January 1, 1993. Accordingly, Sprint adjusted its deferred income
tax assets and liabilities to reflect the revised rate. The
resulting adjustment related to Sprint's nonregulated subsidiaries
increased the 1993 deferred income tax provision by $13 million
($0.04 per share). Adjustments to the net deferred income tax
liabilities associated with the rate-regulated telephone companies
were generally recorded as reductions to regulatory liabilities.
The differences which cause the effective income tax rate to vary
from the statutory federal income tax rate of 35 percent in 1994
and 1993 and 34 percent in 1992 are as follows (in millions):
1994 1993 1992
Income tax provision at the $ 483.7 $ 271.6 $ 264.7
statutory rate
Less investment tax credits
included in income 22.0 24.7 31.3
Expected federal income tax provision
after investment tax credits 461.7 246.9 233.4
Effect of
State income taxes, net of federal
income tax effect 49.9 18.2 40.9
Differences required to be flowed
through by regulatory commissions 4.8 6.0 5.6
Reversal of rate differentials (9.7) (13.0) (16.3)
Amortization of intangibles 8.8 8.8 8.6
Merger related costs -- 18.0 --
Other, net (17.1) 10.4 10.1
Income tax provision, including
investment tax credits $ 498.4 $ 295.3 $ 282.3
Effective income tax rate 36% 38% 36%
The income tax provisions (benefits) allocated to other items are
as follows (in millions):
1994 1993 1992
Discontinued operations $ (9.0) $ (6.6) $ --
Extraordinary losses on early
extinguishments of debt -- (20.3) (9.1)
Cumulative effect of changes in
accounting principles
Postretirement benefits -- (216.7) --
Postemployment benefits -- (6.7) --
Circuit activity costs -- (21.5) --
Unrealized holding gains on
investments in equity securities
(recorded directly to shareholders'
equity) (11.6) 36.5 --
Stock ownership, purchase and options
arrangements (recorded directly to
shareholders' equity) (8.1) (10.6) (6.0)
Deferred income taxes are provided for the temporary differences
between the carrying amounts of Sprint's assets and liabilities for
financial statement purposes and their tax bases. The sources of
the differences that give rise to the deferred income tax assets
and liabilities as of December 31, 1994 and 1993, along with the
income tax effect of each, are as follows (in millions):
1994 Deferred 1993 Deferred
Income Tax Income Tax
Assets Liabilities Assets Liabilities
Property, plant and equipment $ -- $ 1,592.3 $ -- $ 1,611.1
Postretirement and other
benefits 301.3 -- 281.1 --
Alternative minimum tax
credit carryforwards 93.0 -- 259.7 --
Operating loss carryforwards 59.9 -- 64.7 --
Integration and
restructuring costs 12.2 -- 35.0 --
Regulatory revenue reserves 33.4 -- 10.2 --
Other, net -- 2.9 -- 20.1
499.8 1,595.2 650.7 1,631.2
Less valuation allowance 21.1 -- 24.5 --
Total $ 478.7 $ 1,595.2 $ 626.2 $ 1,631.2
During 1994 and 1993, the valuation allowance related to deferred
income tax assets decreased $3 million and $6 million, respectively.
As of December 31, 1994, Sprint has available, for income tax
purposes, $93 million of alternative minimum tax credit
carryforwards to offset regular income tax payable in future years,
and tax benefits of $60 million associated with state operating
loss carryforwards. The loss carryforwards expire in varying
amounts annually from 1995 through 2009.
Effective January 1, 1992, Sprint changed its method of
accounting for income taxes by adopting SFAS No. 109. The
cumulative effect of this change in accounting principle increased
1992 net income by $23 million ($0.07 per share).
4. Debt
Long-term debt, as of December 31, is as follows (in millions):
Maturing 1994 1993
Corporate
Senior notes
8.60% to 9.71% 1994 $ -- $ 225.0
9.45% 1995 50.0 50.0
10.45% 1996 200.0 200.0
9.88% 1997 80.0 120.0
9.19% to 9.60% 1998 43.0 43.0
8.13% to 9.80% 2000 to 2003 632.3 632.3
Debentures
9.25% 2022 200.0 200.0
Notes payable and commercial paper,
classified as long-term debt 1996 934.0 634.4
Other
11.88% 1999 -- 4.5
Long Distance Communications Services
Vendor financing agreements
6.99% to 15.00% 1995 to 2001 223.1 423.4
Local Communications Services
First mortgage bonds
2.00% to 9.37% 1995 to 1999 156.6 197.8
5.88% to 9.29% 2000 to 2004 593.0 595.7
4.00% to 8.75% 2005 to 2009 249.2 268.0
6.88% to 9.79% 2010 to 2014 110.0 80.0
8.77% to 9.28% 2015 to 2019 254.6 275.0
7.13% to 9.89% 2020 to 2024 147.9 148.6
Debentures and notes
4.50% to 9.61% 1995 to 2020 424.0 424.4
Notes payable and commercial paper,
classified as long-term debt 1996 143.4 121.4
Other
2.00% to 19.45% 1995 to 2017 20.0 17.3
Other
Senior notes
9.88% 1998 250.0 277.1
Debentures
9.00% 2019 150.0 150.0
Other
5.39% to 13.00% 1995 to 1999 76.1 6.5
4,937.2 5,094.4
Less current maturities 332.4 523.4
Long-term debt $ 4,604.8 $ 4,571.0
Long-term debt maturities during each of the next five years are
as follows (in millions):
1995 $ 332.4
1996 1,337.4
1997 110.9
1998 410.6
1999 52.9
Property, plant and equipment with an aggregate cost of
approximately $10.89 billion is either pledged as security for
first mortgage bonds and certain notes or is restricted for use as
mortgaged property.
Notes payable and commercial paper outstanding and related
weighted average interest rates, as of December 31, are as follows
(in millions):
1994 1993
Bank notes, 5.85% (3.55% in 1993) $ 263.0 $ 397.5
Master Trust notes, 6.33% (3.71% in 1993) 248.7 250.0
Commercial paper, 5.08% (3.29% in 1993) 565.7 108.3
Total notes payable and commercial paper $ 1,077.4 $ 755.8
Notes payable and commercial paper outstanding as of December 31,
1994 and 1993 are classified as long-term debt due to Sprint's
intent to refinance such borrowings on a long-term basis and due to
its demonstrated ability to do so pursuant to the $1.1 billion
revolving credit agreement described below.
The bank notes are renewable at various dates throughout the
year. Sprint pays a fee to certain commercial banks to support
current and future credit requirements based upon loan commitments.
Lines of credit may be withdrawn by the banks if there is a
material adverse change in Sprint's financial condition.
Sprint has a Master Trust Note Agreement with the trust division
of a bank to borrow funds on demand. Interest on such borrowings
is at a rate that yields interest equivalent to the most favorable
discount rate paid on 30-day commercial paper.
As of December 31, 1994, Sprint had a total of $1.3 billion of
credit arrangements, consisting of various bank commitments and a
$1.1 billion revolving credit agreement with a syndicate of
domestic and international banks. At that date, Sprint had
availability totaling $525 million under such arrangements. The
revolving credit agreement expires in July 1996 and, subject to the
approval of the lenders, may be extended for an additional year.
Sprint is in compliance with all restrictive or financial
covenants relating to its debt arrangements at December 31, 1994.
During 1993 and 1992, Sprint redeemed or called for redemption
prior to scheduled maturities $1.34 billion and $720 million,
respectively, of first mortgage bonds, senior notes and debentures.
Excluding amounts deferred by the rate-regulated telephone
companies as required by certain regulatory commissions, the
prepayment penalties incurred in connection with early
extinguishments of debt and the write-off of related debt issuance
costs aggregated $29 million in 1993 and $16 million in 1992,
net of related income tax benefits, and are reflected as extraordinary
losses in the consolidated statements of income.
5. Redeemable Preferred Stock
Sprint has 20 million authorized shares and subsidiaries have
approximately 6 million authorized shares of preferred stock,
including non-redeemable preferred stock. The redeemable preferred
stock outstanding, as of December 31, is as follows (in millions):
1994 1993
Third series -- stated value $100 per share,
shares - 196,000 in 1994 and 208,000 in
1993, non-participating, non-voting,
cumulative 7.75% annual dividend rate $ 19.6 $ 20.8
Fifth series -- stated value $100,000 per
share, shares - 95 in 1994 and 1993, voting,
cumulative 6% annual dividend rate 9.5 9.5
Subsidiaries -- stated value ranging from $10
to $100 per share, shares - 364,345 in 1994
and 380,055 in 1993, annual dividend rates
ranging from 4.7% to 5.4% 8.0 8.3
Total redeemable preferred stock $ 37.1 $ 38.6
Sprint's third series preferred stock is redeemed through a
sinking fund at the rate of 12,000 shares, or $1.2 million per
year, until 2008, at which time all remaining shares are to be
redeemed. Sprint may redeem additional third series preferred
shares at $102.29 per share during 1995, and at declining amounts
in succeeding years. In the event of default, the holders of
Sprint's third series redeemable preferred stock are entitled to
elect a certain number of directors until all arrears in dividend
and sinking fund payments have been paid.
Sprint's fifth series preferred stock must be redeemed in full in
2003. If less than full dividends have been paid for four
consecutive dividend periods or if the total amount of dividends in
arrears exceeds an amount equal to the dividend payment for six
dividend periods, the holders of the fifth series preferred stock
are entitled to elect a majority of directors standing for election
until all arrears in dividend payments have been paid.
6. Common Stock
Common stock activity during 1994 and shares reserved for future
grants under stock option plans or future issuances under various
arrangements are as follows (in millions):
Number of Shares
1994 Reserved as of
Activity December 31, 1994
Employees Stock Purchase Plan 2.7 --
Employee savings plans 1.3 3.4
Automatic Dividend Reinvestment Plan 0.2 1.2
Officer and key employees' and
directors' stock options 0.9 4.7
Conversion of preferred stock and
other 0.1 1.5
Total 5.2 10.8
As of December 31, 1994, elections to purchase 2.9 million of
Sprint's common shares were outstanding under the 1994 offering of
the Employees Stock Purchase Plan. The purchase price under the
offering cannot exceed $32.35 per share, such price representing 85
percent of the average market price on the offering date, or fall
below $12.00 per share. The 1994 offering terminates on June 30,
1996.
Under various stock option plans, shares of common stock are
reserved for issuance to officers, other key employees and outside
directors. All options are granted at 100 percent of the market
price at date of grant. Approximately 2 percent of all options
outstanding as of December 31, 1994 provide for the granting of
stock appreciation rights as an alternate method of settlement upon
exercise. A summary of stock option activity under the plans is as
follows (in millions, except per share data):
Per Share
Number Exercise Aggregate
of Price Exercise
Shares Low High Amount
Shares under option as of
January 1, 1992 (5.1
million shares exercisable) 9.3 $ 9.44 $ 39.31 $ 200.2
Granted 0.4 21.56 25.88 9.9
Exercised
Options without stock (1.3) 9.44 29.68 (22.6)
appreciation rights
Options with stock (0.5) 9.44 29.68 (7.1)
appreciation rights
Terminated and expired (0.4) 14.03 33.75 (10.2)
Shares under option as of
December 31, 1992 (5.5
million shares exercisable) 7.5 9.44 39.31 170.2
Granted 1.6 27.50 38.44 50.3
Exercised
Options without stock
appreciation rights (2.1) 9.44 33.75 (41.0)
Options with stock
appreciation rights (0.3) 11.09 29.68 (5.5)
Terminated and expired (0.1) 18.16 33.75 (3.2)
Shares under option as of
December 31, 1993 (4.5
million shares exercisable) 6.6 9.44 39.31 170.8
Granted 2.8 30.81 39.50 100.3
Exercised
Options without stock
appreciation rights (0.8) 9.44 33.75 (17.4)
Options with stock
appreciation rights (0.2) 11.09 29.68 (3.8)
Terminated and expired (0.6) 22.13 36.69 (16.7)
Shares under option as of
December 31, 1994 (3.7
million shares exercisable) 7.8 $ 11.09 $ 39.50 $ 233.2
During 1990, the Savings Plan Trust, an employee savings plan,
acquired shares of common stock from Sprint in exchange for a $75
million promissory note payable to Sprint. The note bears an
interest rate of 9 percent and is to be repaid from the common
stock dividends received by the plan and the contributions made to
the plan by Sprint in accordance with plan provisions. The
remaining balance of the note receivable of $58 million as of
December 31, 1994 is reflected as a reduction to other
shareholders' equity.
Under a Shareholder Rights plan, one-half of a Preferred Stock
Purchase Right is attached to each share of common stock. Each
Right, which is exercisable and detachable only upon the occurrence
of certain takeover events, entitles shareholders to buy units
consisting of one one-hundredth of a newly issued share of
Preferred Stock-Fourth Series, Junior Participating at a price of
$235 per unit or, in certain circumstances, common stock. Under
certain circumstances, Rights beneficially owned by an acquiring
person become null and void. Sprint's Preferred Stock-Fourth
Series is without par value. It is voting, cumulative and accrues
dividends equal generally to the greater of $10 per share or one
hundred times the aggregate per share amount of all common stock
dividends. No shares of Preferred Stock-Fourth Series were issued
or outstanding at December 31, 1994. The Rights may be redeemed by
Sprint at a price of one cent per Right and will expire on
September 8, 1999.
During 1994, 1993 and 1992, Sprint declared and paid annual
dividends on common stock of $1.00 per share, and Centel declared
pre-merger (see Note 9) common stock dividends of $0.15 and $0.90
per share during 1993 and 1992, respectively. The most restrictive
covenant applicable to dividends on common stock results from the
$1.1 billion revolving credit agreement. Among other restrictions,
this agreement requires Sprint to maintain specified levels of
consolidated net worth, as defined. As a result
of this requirement, $1.67 billion of Sprint's $2.73 billion
consolidated retained earnings were effectively restricted from the
payment of dividends as of December 31, 1994. The indentures and
financing agreements of certain of Sprint's subsidiaries contain
various provisions restricting the payment of cash dividends on
subsidiary common stock held by Sprint. In connection with these
restrictions, $792 million of the related subsidiaries' $1.78
billion total retained earnings is restricted as of December 31,
1994. The flow of cash in the form of advances from the
subsidiaries to Sprint is generally not restricted.
7. Commitments and Contingencies
Litigation, Claims and Assessments
Following announcement of Sprint's merger with Centel (see Note
9), class action suits were filed against Centel and certain of its
officers and directors in federal and state courts. The state
suits have been dismissed, while the federal suits have been
consolidated into a single action and seek damages for alleged
violations of securities laws. In January 1995, a purported class
action suit was filed against Centel's financial advisors in state
court in New York in connection with the Sprint/Centel merger.
Sprint may have indemnification obligations to the financial
advisors in connection with this suit. Various other suits arising
in the ordinary course of business are pending against Sprint.
Management cannot predict the ultimate outcome of these actions but
believes they will not result in a material effect on Sprint's
consolidated financial statements.
Accounts Receivable Sold with Recourse
Under an agreement available through December 1995, Sprint may
sell on a continuous basis, with recourse, up to $600 million of
undivided interests in a designated pool of its accounts
receivable. Subsequent collections of receivables sold to
investors are typically reinvested in the pool. Sprint is required
to repurchase the designated pool of accounts receivable only upon
the occurrence of specified events involving non-collectibility of
accounts. As of December 31, 1994, Sprint had not been required to
repurchase receivables under this recourse provision. Because
Sprint retains credit losses associated with its accounts
receivable, any exposure related to this retention is estimated in
conjunction with Sprint's calculation of its reserve for
uncollectible accounts. On a quarterly basis, subject to the
approval of the investors, Sprint may extend the agreement for an
additional 90 days. Receivables sold that remained uncollected as
of December 31, 1994 and 1993 aggregated $600 million.
Commitments
See "Liquidity and Capital Resources" in "Management's Discussion
and Analysis of Financial Condition and Results of Operations" for
a discussion of cash commitments associated with joint ventures.
Operating Leases
Minimum rental commitments as of December 31, 1994 for all non-
cancelable operating leases, consisting principally of leases for
data processing equipment and real estate, are as follows (in
millions):
1995 $ 316.7
1996 218.3
1997 141.0
1998 106.5
1999 85.6
Thereafter 260.9
Gross rental expense aggregated $387 million, $387 million and
$385 million in 1994, 1993 and 1992, respectively. The amount of
rental commitments applicable to subleases, contingent rentals and
executory costs is not significant.
8. Regulatory Accounting
Consistent with most local exchange carriers, the local
communications services division accounts for the economic effects
of regulation pursuant to SFAS No. 71. The application of SFAS No.
71 requires the accounting recognition of the rate actions of
regulators where appropriate, including the recognition of
depreciation and amortization based on estimated useful lives
prescribed by regulatory commissions rather than those that might
be utilized by non-regulated enterprises. Sprint currently
believes the local communications services division's rate-
regulated operations meet the criteria for the continued
application of the provisions of SFAS No. 71. However, the local
communications services division operates in an evolving
environment in which the regulatory framework is changing and the
level of competition is increasing. Accordingly, Sprint constantly
monitors and evaluates the ongoing applicability of SFAS No. 71 by
assessing the likelihood that prices which provide for the recovery
of specific costs can continue to be charged to customers.
The approximate amount of Sprint's net regulatory assets at
December 31, 1994 was between $450 million and $800 million,
consisting primarily of property, plant and equipment and deferred
postretirement benefit obligations, partially offset by deferred
tax liabilities. The estimate for property, plant and equipment
was calculated based upon a projection of useful remaining lives
which are affected by the development of competition, changes in
regulation, and the expansion of broadband services to be offered
to customers.
9. Sprint / Centel Merger
Effective March 9, 1993, Sprint consummated its merger with
Centel, a telecommunications company with local exchange and
cellular and wireless communications services operations. Pursuant
to the Agreement and Plan of Merger dated May 27, 1992, Sprint
issued 1.37 shares of its common stock in exchange for each
outstanding share of Centel common stock, or approximately 119
million shares. The transaction costs associated with the merger
(consisting primarily of investment banking and legal fees) and the
expenses of integrating and restructuring the operations of the two
companies (consisting primarily of employee severance and
relocation expenses and costs of eliminating duplicative
facilities) resulted in nonrecurring charges of $259 million, which
reduced 1993 income from continuing operations by $172 million
($0.50 per share).
The merger was accounted for as a pooling of interests.
Accordingly, the accompanying consolidated financial statements
were retroactively restated in 1993 for the year ended December 31,
1992 to include the results of operations, financial position and
cash flows of Centel. In addition, the accompanying consolidated
financial statements reflect the elimination of significant,
recurring intercompany transactions and certain adjustments to
conform the accounting policies of the two companies.
10. Additional Financial Information
Segment Information
Information related to Sprint's operating business segments is
included in the tables in "Segmental Results of Operations" of
"Management's Discussion and Analysis of Financial Condition and
Results of Operations." The net operating revenues and operating
expenses shown in such tables include revenues and expenses
eliminated in consolidation totaling $367 million, $307 million and
$285 million for the years ended December 31, 1994, 1993 and 1992,
respectively. Sprint incurred capital expenditures of $57 million,
$46 million and $29 million for the years ended December 31, 1994,
1993 and 1992, respectively, and had identifiable assets of $472
million, $506 million and $329 million at December 31, 1994, 1993
and 1992, respectively, not attributable to segmental operations.
Additionally, Sprint incurred $51 million of merger, integration
and restructuring costs not attributable to its segmental
operations for the year ended December 31, 1993.
Realignment and Restructuring Charge
During 1993, Sprint initiated a realignment and restructuring of
its long distance communications services division, including the
elimination of approximately 1,000 positions and the closure of two
facilities. These actions resulted in a nonrecurring charge of $34
million, which reduced income from continuing operations by $21
million ($0.06 per share).
Divestiture of Telephone Properties
In April 1992, the sale of Centel's local telephone operations in
Ohio was completed, pursuant to a definitive agreement reached in
November 1991. Proceeds from the sale aggregated $129 million,
including $114 million of cash and $15 million of assumed debt; a
gain of $44 million ($0.13 per share), net of related income taxes,
was realized on the sale.
Concentrations of Credit Risk
Sprint's accounts receivable are not subject to any concentration
of credit risk. Interest rate swap agreements and foreign currency
contracts involve the risk of dealing with counterparties and their
ability to meet the terms of the contracts. Notional principal
amounts often are used to express the volume of these transactions,
but the amounts subject to credit risk are significantly smaller.
In the event of non-performance by the counterparties, Sprint's
accounting loss would be limited to the net amount that it would be
entitled to receive under the terms of the applicable interest rate
swap agreement or foreign currency contract. However, Sprint does
not anticipate non-performance by any of the counterparties with
which it has such agreements. Sprint controls the amount of credit
risk as well as the concentration of credit risk of its interest
rate swap agreements and foreign currency contracts through credit
approvals, dollar exposure limits, and internal monitoring
procedures.
Financial Instruments
Sprint estimates the fair value of its financial instruments
using available market information and appropriate valuation
methodologies. Accordingly, the estimates presented herein are not
necessarily indicative of the values Sprint could realize in a
current market exchange. Although management is not aware of any
factors that would affect the estimated fair value amounts
presented as of December 31, 1994, such amounts have not been
comprehensively revalued for purposes of these financial statements
since that date, and therefore, estimates of fair value subsequent
to that date may differ significantly from the amounts presented
herein. The carrying amounts and estimated fair values of Sprint's
financial instruments, as of December 31, are as follows (in
millions):
1994 1993
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
Financial assets
Cash and cash equivalents $ 123.3 $ 123.3 $ 76.8 $ 76.8
Investments in equity
securities 177.6 177.6 303.3 303.3
Financial liabilities
Long-term debt
Corporate 2,139.3 2,170.5 2,109.2 2,377.2
Long distance
communications services 223.1 222.1 423.4 447.8
Local communications
services 2,098.7 1,966.4 2,128.2 2,342.5
Other 476.1 488.2 433.6 534.6
Off-balance sheet instruments
Interest rate swap agreements -- 2.6 -- (1.7)
Foreign currency contracts -- (0.4) -- (0.3)
The carrying values of Sprint's cash equivalents approximate fair
value as of December 31, 1994 and 1993. The fair value of Sprint's
investments in equity securities are estimated by reference to
quoted market prices. The fair values of Sprint's long-term debt
are estimated based on quoted market prices for publicly-traded
issues, and based on the present value of estimated future cash
flows using a discount rate commensurate with the risks involved
for all other issues. The fair value of interest rate swap
agreements is estimated as the cost that Sprint would receive (pay)
to terminate the swap agreements at December 31, 1994 and 1993,
taking into account the then-current interest rates. The fair
value of foreign currency contracts is estimated as the replacement
cost of the contracts at December 31, 1994 and 1993, taking into
account the then-current foreign currency exchange rates.
Interest Rate Swap Agreements
Interest rate swap agreements are utilized by Sprint as part of
its interest rate risk management program. Net interest paid or
received related to such agreements is recorded using the accrual
method and is recorded as an adjustment to interest expense. At
December 31, 1994 and 1993, Sprint had outstanding $125 million
notional amount of interest rate swap agreements. Net interest
expense (income) related to interest rate swap agreements was $1
million, $2 million, and ($400,000) for the years ended December
31, 1994, 1993 and 1992, respectively. There were no deferred
gains or losses relating to any terminated interest rate swap
agreements recorded at December 31, 1994, 1993 and 1992.
Foreign Currency Contracts
As part of its foreign currency exchange risk management program,
Sprint purchases and sells over-the-counter forward contracts and
options in various foreign currencies. Sprint had outstanding
approximately $13 million and $4 million of open forward contracts
to buy various foreign currencies at December 31, 1994 and 1993,
respectively. Sprint also had outstanding approximately $1 million
and $6 million of open forward contracts to sell various foreign
currencies at December 31, 1994 and 1993, respectively. There were
no foreign currency option contracts outstanding at December 31,
1994 or 1993. The forward contracts open at December 31, 1994 all
had an original maturity of six months or less. The net gain or
loss recorded to reflect the cash paid or received upon settlement
of such contracts is recorded in the period incurred. Total net
losses of $2 million and $1 million were recorded related to
foreign currency transactions and contracts for the years ended
December 31, 1994 and 1993, respectively.
At December 31, 1994 and 1993, Sprint had foreign currency
translation gains of $1 million and $2 million, respectively,
included in "Other, net" in the Consolidated Statements of Common
Stock and Other Shareholders' Equity.
SPRINT CORPORATION
SCHEDULE VIII -- CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 1994, 1993 and 1992
(In Millions)
Additions
Charged
Balance Charged to Balance
beginning to other Other end of
of year income accounts deductions year
1994
Allowance for
doubtful accounts $ 121.9 $ 312.4 $ 4.5 $ (309.9)(1) $ 128.9
Valuation allowance -
deferred income
tax assets $ 24.5 $ 2.2 -- $ (5.6) $ 21.1
1993
Allowance for
doubtful accounts $ 118.0 $ 271.5 $ 2.6 $(270.2)(1) $ 121.9
Valuation allowance -
deferred income
tax assets $ 30.2 $ 0.7 -- $(6.4) $ 24.5
1992
Allowance for
doubtful accounts $ 144.8 $ 267.6 $ 2.4 $ (296.8)(1) $ 118.0
Valuation allowance -
deferred income
tax assets -- $ 35.4(2) -- $ (5.2) $ 30.2
(1) Accounts written off, net of recoveries.
(2) Valuation allowance established upon adoption of SFAS No. 109,
"Accounting for Income Taxes."
QUARTERLY FINANCIAL DATA
(Unaudited)
First Second Third
Quarter Quarter Quarter
1994 1993 1994 1993 1994 1993
(In Millions, Except Per Share Data)
Net operating revenues $3,033.2 $2,718.0 $3,150.4 $2,800.9 $3,233.8 $2,867.6
Operating expenses
Costs of services and
products 1,528.4 1,381.9 1,574.4 1,408.9 1,615.0 1,435.1
Selling, general and
administrative 724.2 641.8 752.8 675.9 781.7 690.8
Depreciation and
amortization 352.3 337.2 366.4 338.0 366.8 338.5
Merger, integration
and restructuring
costs (1), (2) -- 248.0 -- -- -- 44.5
Total operating
expenses 2,604.9 2,608.9 2,693.6 2,422.8 2,763.5 2,508.9
Operating income 428.3 109.1 456.8 378.1 470.3 358.7
Interest expense (101.1) (117.9) (100.0) (113.0) (98.6) (114.2)
Other income
(expense), net (3) 29.2 (0.7) (9.3) (8.1) (9.3) (11.4)
Income (loss) from
continuing operations
before income taxes 356.4 (9.5) 347.5 257.0 362.4 233.1
Income tax provision (4) (129.0) (1.8) (127.9) (91.9) (132.3) (96.4)
Income (loss) from
continuing operations 227.4 (11.3) 219.6 165.1 230.1 136.7
Discontinued
operations, net -- (12.3) -- -- -- --
Extraordinary losses
on early
extinguishments of
debt, net -- (5.2) -- (8.5) -- (14.5)
Cumulative effect of
changes in accounting
principles, net (5) -- (384.2) -- -- -- --
Net income (loss) 227.4 (413.0) 219.6 156.6 230.1 122.2
Preferred stock dividends (0.7) (0.6) (0.7) (0.9) (0.6) (0.6)
Earnings (loss)
applicable to common
stock $226.7 $(413.6) $218.9 $155.7 $229.5 $121.6
Earnings (loss) per
common share
Continuing operations $ 0.65 $ (0.03) $ 0.63 $ 0.48 $ 0.66 $ 0.39
Discontinued operations -- (0.04) -- -- -- --
Extraordinary item -- (0.02) -- (0.02) -- (0.04)
Cumulative effect of
changes in accounting
principles -- (1.12) -- -- -- --
Total $ 0.65 $ (1.21) $ 0.63 $ 0.46 $ 0.66 $ 0.35
QUARTERLY FINANCIAL DATA Sprint Corporation
(Unaudited)
Fourth Total Year
Quarter
1994 1993 1994 1993
Net operating revenues $3,244.4 $2,981.3 $12,661.8 $11,367.8
Operating expenses
Costs of services and
products 1,643.2 1,510.2 6,361.0 5,736.1
Selling, general and
administrative 775.9 721.4 3,034.6 2,729.9
Depreciation and
amortization 392.9 345.0 1,478.4 1,358.7
Merger, integration
and restructuring
costs (1), (2) -- -- -- 292.5
Total operating
expenses 2,812.0 2,576.6 10,874.0 10,117.2
Operating income 432.4 404.7 1,787.8 1,250.6
Interest expense (98.3) (107.3) (398.0) (452.4)
Other income
(expense), net (3) (18.3) (2.1) (7.7) (22.3)
Income (loss) from
continuing operations
before income taxes 315.8 295.3 1,382.1 775.9
Income tax provision (4) (109.2) (105.2) (498.4) (295.3)
Income (loss) from
continuing operations 206.6 190.1 883.7 480.6
Discontinued
operations, net 7.0 -- 7.0 (12.3)
Extraordinary losses
on early
extinguishments of
debt, net -- (1.0) -- (29.2)
Cumulative effect of
changes in accounting
principles, net (5) -- -- -- (384.2)
Net income (loss) 213.6 189.1 890.7 54.9
Preferred stock dividends (0.7) (0.7) (2.7) (2.8)
Earnings (loss)
applicable to common
stock $212.9 $188.4 $ 888.0 $52.1
Earnings (loss) per
common share
Continuing operations $ 0.59 $ 0.55 $ 2.53 $ 1.39
Discontinued operations 0.02 -- 0.02 (0.04)
Extraordinary item -- -- -- (0.08)
Cumulative effect of
changes in accounting
principles -- -- -- (1.12)
Total $ 0.61 $ 0.55 $ 2.55 $ 0.15
(1) During 1993, Sprint consummated its merger with Centel. The
transaction costs associated with the merger and the expenses of
integrating and restructuring the operations of the two companies
resulted in nonrecurring charges in the first and third quarters
of 1993. Such charges reduced net income by $165 million ($0.48
per share) and $7 million ($0.02 per share), respectively. See
Note 9 of Notes to Consolidated Financial Statements for
additional information.
(2) During third quarter 1993, Sprint realigned and restructured
its long distance communications services division, resulting in
a nonrecurring charge which reduced net income by $21 million
($0.06 per share). See Note 10 of Notes to Consolidated Financial
Statements for additional information.
(3) During first quarter 1994, Sprint sold an investment in
equity securities, realizing a gain of $35 million, which
increased net income by $22 million ($0.06 per share).
(4) During third quarter 1993, the Revenue Reconciliation Act of
1993 was enacted which, among other changes, raised the federal
income tax rate to 35 percent from 34 percent. As a result,
Sprint adjusted its deferred income tax assets and liabilities to
reflect the revised rate, resulting in a nonrecurring charge
which reduced net income by $13 million ($0.04 per share). See
Note 3 of Notes to Consolidated Financial Statements for
additional information.
(5) Effective January 1, 1993, Sprint changed its method of
accounting for postretirement and postemployment benefits by
adopting SFAS No. 106 and No. 112 and effected another accounting
change. See Notes 1 and 2 of Notes to Consolidated Financial
Statements for additional information.
EX-10
2
AGREEMENT LIMITED PARTNERSHIP
Exhibit (10)(b)
AGREEMENT OF LIMITED PARTNERSHIP
OF
WIRELESSCO, L.P.,
A DELAWARE LIMITED PARTNERSHIP
dated as of October 24, 1994
among
SPRINT SPECTRUM, INC.
TCI NETWORK, INC.
COMCAST TELEPHONY SERVICES
and
COX COMMUNICATIONS WIRELESS, INC.
TABLE OF CONTENTS
SECTION 1 THE PARTNERSHIP 1
1.1 Formation. 1
1.2 Name. 1
1.3 Purpose. 1
1.4 Principal Executive Office. 2
1.5 Term. 2
1.6 Filings; Agent for Service of Process. 3
1.7 Title to Property. 3
1.8 Payments of Individual Obligations. 3
1.9 Independent Activities. 3
1.10 Definitions. 4
1.11 Additional Definitions. 23
1.12 Terms Generally. 26
SECTION 2 PARTNERS' CAPITAL CONTRIBUTIONS 27
2.1 Percentage Interests; Preservation of Percentages of
Interests Held as General Partners and as Limited
Partners. 27
2.2 Partners' Original Capital Contributions. 27
2.3 Additional Capital Contributions. 28
2.4 Failure to Contribute Capital. 32
2.5 Other Additional Capital Contributions. 47
2.6 Partnership Funds. 37
2.7 Partner Loans; Other Borrowings. 37
2.8 Other Matters. 38
SECTION 3 ALLOCATIONS 39
3.1 Profits. 39
3.2 Losses. 40
3.3 Special Allocations. 40
3.4 Curative Allocations. 42
3.5 Loss Limitation. 43
3.6 Other Allocation Rules. 43
3.7 Tax Allocations: Code Section 704(c). 44
SECTION 4 DISTRIBUTIONS 44
4.1 Available Cash. 44
4.2 Tax Distributions. 44
4.3 Amounts Withheld. 45
SECTION 5 MANAGEMENT 45
5.1 Authority of the Management Committee. 45
5.2 Business Plan and Annual Budget. 50
5.3 Employees. 53
5.4 Limitation of Agency. 53
5.5 Liability of Partners and Representatives. 54
5.6 Indemnification. 54
5.7 Temporary Investments. 56
5.8 Deadlocks. 56
5.9 Conversion to Corporate Form. 57
SECTION 6 PARTNERSHIP OPPORTUNITIES;
CONFIDENTIALITY 58
6.1 Engaging in Wireless Businesses. 58
6.2 Enforceability and Enforcement. 61
6.3 General Exceptions to Section 6.1. 61
6.4 Comcast Exceptions. 63
6.5 Freedom of Action. 67
6.6 Confidentiality. 68
SECTION 7 ROLE OF EXCLUSIVE LIMITED PARTNERS 70
7.1 Rights or Powers. 70
7.2 Voting Rights. 70
SECTION 8 TRANSACTIONS WITH PARTNERS; OTHER
AGREEMENTS 71
8.1 Sprint Cellular. 71
8.2 Sprint Brand Licensing Agreement. 71
8.3 Joint Marketing Agreement. 72
8.4 Network Services Agreement. 72
8.5 Preferred Provider. 72
8.6 MFJ 73
8.7 Interested Party Transactions. 73
8.8 Access to Technical Information 74
8.9 Parent Undertaking. 74
8.10 Certain Additional Covenants. 74
8.11 PioneerCo Preemptive Rights. 75
8.12 Foreign Ownership 75
SECTION 9 REPRESENTATIONS AND WARRANTIES 76
SECTION 10 ACCOUNTING, BOOKS AND RECORDS 78
10.1 Accounting, Books and Records. 78
10.2 Reports. 78
10.3 Tax Returns and Information. 80
10.4 Proprietary Information. 81
SECTION 11 ADVERSE ACT 81
11.1 Remedies. 81
11.2 Adverse Act Purchase. 83
11.3 Net Equity. 86
11.4 Gross Appraised Value. 87
11.5 Extension of Time. 88
SECTION 12 DISPOSITIONS OF INTERESTS 89
12.1 Restriction on Dispositions. 89
12.2 Permitted Transfers. 89
12.3 Conditions to Permitted Transfers. 89
12.4 Right of First Refusal. 92
12.5 Tagalong Rights. 96
12.6 Partner Put Rights. 97
12.7 Prohibited Dispositions. 100
12.8 Representations Regarding Transfers. 100
12.9 Distributions and Allocations in Respect of
Transferred Interests 100
SECTION 13 CONVERSION OF INTERESTS 101
13.1 Termination of Status as General Partner. 101
13.2 Restoration of Status as General Partner. 101
SECTION 14 DISSOLUTION AND WINDING UP 102
14.1 Liquidating Events. 102
14.2 Winding Up. 102
14.3 Compliance With Certain Requirements of Regulations;
Deficit Capital Accounts. 104
14.4 Deemed Distribution and Recontribution. 104
14.5 Rights of Partners. 105
14.6 Notice of Dissolution. 105
14.7 Buy/Sell Arrangements. 105
SECTION 15 MISCELLANEOUS 108
15.1 Notices. 108
15.2 Binding Effect. 108
15.3 Construction. 108
15.4 Time. 108
15.5 Table of Contents; Headings. 109
15.6 Severability. 109
15.7 Incorporation by Reference. 109
15.8 Further Action. 109
15.9 Governing Law. 109
15.10 Waiver of Action for Partition; No Bill For
Partnership Accounting. 109
15.11 Counterpart Execution. 110
15.12 Sole and Absolute Discretion. 110
15.13 Specific Performance. 110
15.14 Entire Agreement. 110
15.15 Limitation on Rights of Others. 110
15.16 Waivers; Remedies. 110
15.17 Jurisdiction; Consent to Service of Process. 111
15.18 Waiver of Jury Trial. 111
15.19 No Right of Set-Off. 112
AGREEMENT OF LIMITED PARTNERSHIP
OF
WIRELESSCO, L.P.,
A DELAWARE LIMITED PARTNERSHIP
This AGREEMENT OF LIMITED PARTNERSHIP is entered into as of
the 24th day of October, 1994, by and among Sprint Spectrum,
Inc., a Kansas corporation ("Sprint"), TCI Network, Inc., a
Colorado corporation ("TCI"), Comcast Telephony Services, a
Delaware general partnership ("Comcast"), and Cox Communications
Wireless, Inc., a Delaware corporation ("Cox"), each as a General
Partner and a Limited Partner, pursuant to the provisions of the
Delaware Revised Uniform Limited Partnership Act, on the
following terms and conditions:
SECTION 1
THE PARTNERSHIP
1.1 Formation.
The Partners hereby form the Partnership as a limited
partnership pursuant to the provisions of the Act for the
purposes and upon the terms and conditions set forth in this
Agreement.
1.2 Name.
The name of the Partnership shall be WirelessCo, L.P, and
all business of the Partnership shall be conducted in such name
or, in the discretion of the Management Committee, under any
other names (but excluding a name that includes the name of a
Partner unless such Partner has consented thereto).
1.3 Purpose.
(a) Subject to, and upon the terms and conditions of this
Agreement, the purposes and business of the Partnership shall be
to develop (through acquisition, lease, construction, investment
or otherwise) a seamless, integrated, competitive Wireless
Business providing Wireless Exclusive Services and Non-Exclusive
Services nationwide, and to operate, manage and maintain such
business. Without the unanimous consent of the Partners, the
Partnership shall not engage in any other business, including any
of the Excluded Businesses. During the term of the Trademark
License and upon the terms and conditions thereof, the
Partnership's services will be marketed under the Sprint Brand.
In furtherance of its purposes, but subject to the terms and
conditions of this Agreement, the Partnership may do any or all
of the following: provide certain services to other operators of
Wireless Businesses that provide Wireless Exclusive Services and
Non-Exclusive Services pursuant to Affiliation Agreements or
other contractual relationships with such operators (including
PioneerCo); make and prosecute applications and bids for licenses
for such Wireless Business and renewals thereof; invest in
Persons holding licenses for such Wireless Businesses (including
PioneerCo); and design, construct, develop and dispose of systems
for such Wireless Business.
(b) The Partnership shall have all the powers now or hereafter
conferred by the laws of the State of Delaware on limited
partnerships formed under the Act and, subject to the limitations
of this Agreement, may do any and all lawful acts or things that
are necessary, appropriate, incidental or convenient for the
furtherance and accomplishment of the purposes of the
Partnership. Without limiting the generality of the foregoing,
and subject to the terms of this Agreement, the Partnership may
enter into, deliver and perform all contracts, agreements and
other undertakings and engage in all activities and transactions
as may be necessary or appropriate to carry out its purposes and
conduct its business.
(c) Simultaneously with the execution of this Agreement, the
Parents of the Partners have entered into the Joint Venture
Formation Agreement, pursuant to which (subject to the
satisfaction of certain conditions) NewTelco will be formed by
the Partners on the NewTelco Closing Date to engage in the
businesses described in the Joint Venture Formation Agreement.
On the NewTelco Closing Date, NewTelco and the Partnership will
be combined in a manner to be agreed upon by the Partners.
1.4 Principal Executive Office.
The principal executive office of the Partnership shall be
located in such place as determined by the Management Committee,
and the Management Committee may change the location of the
principal executive office of the Partnership to any other place
within or without the State of Delaware upon ten (10) Business
Days prior notice to each of the Partners, provided that such
principal executive office shall be located in the United States.
The Management Committee may establish and maintain such
additional offices and places of business of the Partnership,
within or without the State of Delaware, as it deems appropriate.
1.5 Term.
The term of the Partnership shall commence on the date the
certificate of limited partnership described in Section 17-201 of
the Act (the "Certificate") is filed in the office of the
Secretary of State of Delaware in accordance with the Act and
shall continue until the winding up and liquidation of the
Partnership and its business is completed following a Liquidating
Event, as provided in Section 14.
1.6 Filings; Agent for Service of Process.
(a) Promptly following the execution of this Agreement, the
General Partners shall cause the Certificate to be filed in the
office of the Secretary of State of Delaware in accordance with
the Act. The Management Committee shall take any and all other
actions reasonably necessary to perfect and maintain the status
of the Partnership as a limited partnership under the laws of
Delaware. The General Partners shall cause amendments to the
Certificate to be filed whenever required by the Act. The
Partners shall be provided with copies of each document filed or
recorded as contemplated by this Section 1.6 promptly following
the filing or recording thereof.
(b) The General Partners shall execute and cause to be filed
original or amended Certificates and shall take any and all other
actions as may be reasonably necessary to perfect and maintain
the status of the Partnership as a limited partnership or similar
type of entity under the laws of any other states or
jurisdictions in which the Partnership engages in business.
(c) The registered agent for service of process on the
Partnership shall be The Corporation Trust Company or any
successor as appointed by the Management Committee in accordance
with the Act. The registered office of the Partnership in the
State of Delaware is located at Corporation Trust Center, 1209
Orange Street, Wilmington, Delaware 19801.
1.7 Title to Property.
No Partner shall have any ownership interest in its
individual name or right in any real or personal property owned,
directly or indirectly, by the Partnership, and each Partner's
Interest shall be personal property for all purposes. The
Partnership shall hold all of its real and personal property in
the name of the Partnership or its nominee and not in the name of
any Partner.
1.8 Payments of Individual Obligations.
The Partnership's credit and assets shall be used solely for
the benefit of the Partnership, and no asset of the Partnership
shall be transferred or encumbered for, or in payment of, any
individual obligation of any Partner.
1.9 Independent Activities.
Each Partner and any of its Affiliates shall be required to
devote only such time to the affairs of the Partnership as such
Partner determines in its sole discretion may be necessary to
manage and operate the Partnership to the extent contemplated by
this Agreement, and each such Person, except as expressly
provided herein, shall be free to serve any other Person or
enterprise in any capacity that it may deem appropriate in its
discretion.
1.10 Definitions.
Capitalized words and phrases used in this Agreement have
the following meanings:
"Act" means the Delaware Revised Uniform Limited
Partnership Act, as set forth in Del. Code Ann. tit. 6, 17-101
to 17-1109.
"Accountants" means, as of any time, such firm of
nationally recognized independent certified public accountants
that, as of such time, has been appointed by the Management
Committee as the accountants for the Partnership.
"Additional Capital Contributions" means, with respect
to each Partner, the Capital Contributions made by such Partner
pursuant to Sections 2.3, 2.4 and 2.5, reduced by the amount of
any liabilities of such Partner assumed by the Partnership in
connection with such Capital Contributions or which are secured
by any property contributed by such Partner as a part of such
Capital Contribution. In the event all or a portion of an
Interest is Transferred in accordance with the terms of this
Agreement, the transferee shall succeed to the Additional Capital
Contributions of the transferor to the extent they relate to the
transferred Interest.
"Additional Contribution Agreement" means a
contribution agreement the terms of which have been approved by
the Unanimous Vote of the Management Committee pursuant to which
a Partner makes an Additional Capital Contribution to the
Partnership pursuant to Section 2.5.
"Additional Contribution Notice" means a written notice
given to all Partners, which shall (i) state the Additional
Contribution Amount being requested of all Partners and each
Partner's proportionate share thereof determined as provided in
Section 2.3(a) (or, in the case of a required Additional Capital
Contribution in respect of a Declined Accelerated Contribution,
as provided in Section 2.3(c)), (ii) specify in reasonable detail
the purposes for which the Additional Contribution Amount is
required, (iii) identify a date (the "Contribution Date"), not
more than forty-five (45) days nor less than thirty (30) days
after the date of such notice, upon which the Additional Capital
Contributions are to be made and (iv) specify the account of the
Partnership to which the contribution is to be made; provided
that any Additional Contribution Notice with respect to any
portion of the Auction Commitment of the Partners may require the
Additional Capital Contribution to be made on a date that is less
than thirty (30) days, but not less than two (2) days, after the
date of such notice.
"Adjusted Capital Account Deficit" means, with respect
to any Exclusive Limited Partner, the deficit balance, if any, in
such Exclusive Limited Partner's Capital Account as of the end of
the relevant Allocation Year, after giving effect to the
following adjustments:
(i) Credit to such Capital Account any amounts
which such Exclusive Limited Partner is obligated to restore
pursuant to any provision of this Agreement or is deemed to be
obligated to restore pursuant to the penultimate sentences of
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and
(ii) Debit to such Capital Account the items
described in Sections 1.704-1(b)(2)(ii)(d)(4),
1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6) of the
Regulations.
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Section
1.704-1(b)(2)(ii)(d) of the Regulations and shall be interpreted
consistently therewith.
"Adverse Act" means, with respect to any Partner, any
of the following:
(i) Such Partner becomes a Defaulting Partner;
(ii) Such Partner Disposes of all or any part of
its Interest except as required or permitted by this Agreement;
provided, however, that no Adverse Act shall be considered to
have occurred until thirty (30) days following the involuntary
encumbrance of all or any part of such Interest if during such
thirty (30) day period the affected Partner acts diligently to,
and prior to the end of such thirty (30) day period does, remove
any such encumbrance, including effecting the posting of a bond
to prevent foreclosure where necessary;
(iii) Such Partner has committed a material breach
of any covenant contained in this Agreement (other than as
otherwise expressly enumerated in this definition) or a material
default on any obligation provided for in this Agreement (other
than as otherwise expressly enumerated in this definition) and
such breach or default continues for thirty (30) days after the
date written notice thereof has been given to such Partner by any
other Partner (with a copy to the Management Committee and each
other Partner); provided that if such breach or default is not a
failure to pay money and is of such a nature that it cannot
reasonably be cured within such thirty (30) day period, but is
curable and such Partner in good faith begins efforts to cure it
within such thirty (30) day period and continues diligently to do
so, such Partner shall have a reasonable additional period
thereafter to effect the cure (which shall not exceed an
additional ninety (90) days unless otherwise approved by the
Management Committee by Required Majority Vote; and provided
further that if, within thirty (30) days after the date written
notice of such breach or default has been given to such Partner,
such Partner delivers written notice (the "Contest Notice") to
the Management Committee and all other Partners that it contests
such notice of breach or default, such breach or default shall
not constitute an Adverse Act unless and until (and assuming that
such breach or default has not theretofore been cured in full)
(A) the disinterested Representatives determine in good faith by
Required Majority Vote that such Partner has committed such a
breach or default or (B) there is a Final Determination that such
Partner's actions or failures to act constituted such a breach or
default; and provided further that this clause (iii) shall not
apply in the event of a breach of Section 8.6 hereof, which
breach shall constitute an Adverse Act (if at all) pursuant to
clause (vii) below;
(iv) The Bankruptcy of such Partner or the
occurrence of any other event which would permit a trustee or
receiver to acquire control of the affairs or assets of such
Partner;
(v) The occurrence of a Change in Control of such
Partner without the unanimous written consent of the other
General Partners;
(vi) An IXC Transaction has occurred with respect
to such Partner;
(vii) The occurrence of any event with respect to
such Partner (A) that causes such Partner or the Partnership to
become a BOC or (B) that causes the Partnership to become a BOC
Affiliated Enterprise or an entity subject to any restriction or
limitation under Section II of the MFJ, provided, however, that
(a) in the case of an event specified in clause (B) above, such
event must have a material adverse effect on the business,
assets, liabilities, results of operations, financial condition
or prospects of the Partnership and (b) no Adverse Act shall be
considered to have occurred if such Partner has taken actions
which have cured the event that would otherwise have constituted
an Adverse Act under clause (B) of this clause (vii) within
ninety (90) days following its receipt of notice from a General
Partner of the occurrence of such event; and provided further
that if, within ninety (90) days after the date written notice of
such occurrence has been given to such Partner, such Partner
delivers a Contest Notice to the Management Committee and all
other Partners that it contests such occurrence (or contests
whether such occurrence constitutes an Adverse Act under this
clause (vii)), such occurrence shall not constitute an Adverse
Act unless and until (and assuming that such event has not
theretofore been cured in full) (A) the disinterested
Representatives determine in good faith by Required Majority Vote
that such occurrence constitutes an Adverse Act under this clause
(vii) or (B) there is a Final Determination that such occurrence
constitutes an Adverse Act under this clause (vii); or
(viii) Such Partner otherwise causes a dissolution
of the Partnership in contravention of the terms of this
Agreement (other than solely by reason of the Bankruptcy of such
Partner).
An "Adverse Partner" is any Partner with respect to
which an Adverse Act has occurred.
"Affiliate" means, with respect to any Person, any
other Person that directly or indirectly through one or more
intermediaries controls, is controlled by, or is under common
control with such Person. For purposes of this definition, the
term "controls" (including its correlative meanings "controlled
by" and "under common control with") shall mean the possession,
direct or indirect, of the power to direct or cause the direction
of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
Notwithstanding the foregoing, (i) neither the Partnership,
NewTelco nor any Person controlled by the Partnership or NewTelco
shall be deemed to be an Affiliate of any Partner or of any
Affiliate of any Partner and (ii) no Partner or any Affiliate
thereof shall be deemed to be an Affiliate of any other Partner
or any Affiliate thereof solely by virtue of its Interest in the
Partnership or its partnership interest in NewTelco.
"Agreement" or "Partnership Agreement" means this
Agreement of Limited Partnership, including all Schedules hereto,
as amended from time to time.
"Allocation Year" means (i) the period commencing on
the effective date of this Agreement and ending on December 31,
1994, (ii) any subsequent twelve (12) month period commencing on
January 1 and ending on December 31, or (iii) any portion of the
period described in clauses (i) or (ii) for which the Partnership
is required to allocate Profits, Losses, and other items of
Partnership income, gain, loss or deduction pursuant to
Section 3.
"Auction Commitment" of any Partner means an amount
equal to the product of (i) such Partner's initial Percentage
Interest as of the date of this Agreement and (ii) the aggregate
maximum amount of the Additional Capital Contributions specified
in the Management Committee Resolution (whether or not specified
in the Management Committee Resolution as required to be
immediately available or to be secured by the Letters of Credit) to be
used for (a) the Partnership's maximum budgeted expenditure in the
PCS Auction for the payment of the purchase price for PCS Licenses
awarded to it, (b) capital contributions to be paid in cash to PioneerCo
under the partnership agreement of PioneerCo during the Auction
Period in connection with the formation of PioneerCo and the
contribution of the Cox Pioneer Preference License to PioneerCo
and capital contributions to be paid in cash during the Auction
Period to other partnerships formed to hold pioneer preference
licenses for frequency blocks "A" and "B" in connection with
the formation of such partnerships and the payment of the
purchase price for such licenses, (c) capital contributions
to be paid in cash during the Auction Period for
investments in or with entities that are eligible to bid for PCS
licenses in frequency blocks "C" and "F" in connection with the
formation of such entities and the payment of the purchase price
for such licenses and (d) incidental expenses relating to the
foregoing; provided, that the amount specified in this clause
(ii) shall be increased if and to the extent that the Management
Committee by Unanimous Vote approves an increase in the aggregate
amount of such Additional Capital Contributions, and shall be
reduced following the PCS Auction as and to the extent
contemplated by the Wireless Strategic Plan to reflect the
results of the PCS Auction. In the event all or a portion of an
Interest is Transferred in accordance with the terms of this
Agreement, the transferee shall succeed to the Auction Commitment
of the transferor to the extent it relates to the transferred
Interest and has not been called in full.
"Auction Period" means the period from the date hereof
to the effective date of the Initial Business Plan.
"Available Cash" means as of any date the cash of the
Partnership as of such date less such portion thereof as the
Management Committee determines to reserve for Partnership
expenses, debt payments, capital improvements, replacements, and
contingencies.
"Bankruptcy" means, with respect to any Person, a
"Voluntary Bankruptcy" or an "Involuntary Bankruptcy." A
"Voluntary Bankruptcy" means, with respect to any Person, the
inability of such Person generally to pay its debts as such debts
become due (other than any obligation of such Person to make
capital contributions under this Agreement), or an admission in
writing by such Person of its inability to pay its debts
generally or a general assignment by such Person for the benefit
of creditors; the filing of any petition or answer by such Person
seeking to adjudicate it bankrupt or insolvent, or seeking for
itself any liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of such Person or
its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking, consenting to,
or acquiescing in the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar
official for such Person or for any substantial part of its
property; or corporate action taken by such Person to authorize
any of the actions set forth above. An "Involuntary Bankruptcy"
means, with respect to any Person, without the consent or
acquiescence of such Person, the entering of an order for relief
or approving a petition for relief or reorganization or any other
petition seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or other similar relief
under any present or future bankruptcy, insolvency or similar
statute, law or regulation, or the filing of any such petition
against such Person which petition shall not be dismissed within
ninety (90) days, or, without the consent or acquiescence of such
Person, the entering of an order appointing a trustee, custodian,
receiver or liquidator of such Person or of all or any
substantial part of the property of such Person which order shall
not be dismissed within sixty (60) days.
"BOC" means "BOC" or "Bell Operating Companies" as
defined in Section IV.C of the MFJ.
"BOC Affiliated Enterprise" has the same meaning as the
term "affiliated enterprise" as used with respect to "BOC" or
"Bell Operating Companies" in Section II.D of the MFJ.
"BTA" means a Basic Trading Area, as defined in the FCC
Rules to be codified at 47 C.F.R. 24.13.
"Business Day" means a day of the year on which banks
are not required or authorized to close in the State of New York.
"Capital Account" means, with respect to any Partner,
the Capital Account maintained for such Partner in accordance
with the following provisions:
(i) To each Partner's Capital Account there shall
be credited such Partner's Capital Contributions, such Partner's
Special Contributions, if any, such Partner's distributive share
of Profits and any items in the nature of income or gain which
are specially allocated pursuant to Section 3.3 or Section 3.4,
and the amount of any Partnership liabilities which are assumed
by such Partner or secured by any Property distributed to such
Partner as permitted by this Agreement.
(ii) To each Partner's Capital Account there shall
be debited the amount of cash and the Gross Asset Value of any
Property distributed or deemed to be distributed to such Partner
pursuant to any provision of this Agreement, such Partner's
distributive share of Losses and any items in the nature of
expenses or losses which are specially allocated pursuant to
Section 3.3 or Section 3.4, and the amount of any liabilities of
such Partner assumed by the Partnership or which are secured by
any property contributed by such Partner to the Partnership.
(iii) In the event all or a portion of an Interest
is transferred in accordance with the terms of this Agreement,
the transferee shall succeed to the Capital Account of the
transferor to the extent it relates to the transferred Interest.
(iv) In determining the amount of any liability
for purposes of the definitions of "Additional Capital
Contributions" and "Original Capital Contribution" and
subparagraphs (i) and (ii) of this definition of "Capital
Account," there shall be taken into account Code Section 752(c)
and any other applicable provisions of the Code and Regulations.
The foregoing provisions and the other provisions of
this Agreement relating to the maintenance of Capital Accounts
are intended to comply with Regulations Section 1.704-1(b), and
shall be interpreted and applied in a manner consistent with such
Regulations. In the event the Management Committee determines
that it is prudent to modify the manner in which the Capital
Accounts, or any debits or credits thereto (including debits or
credits relating to liabilities which are secured by contributed
or distributed property or which are assumed by the Partnership
or any Partner), are computed in order to comply with such
Regulations, the Management Committee may make such modification,
provided that it is not likely to have a material effect on the
amounts distributable to any Partner pursuant to Section 14 upon
the dissolution of the Partnership. The Management Committee
also shall (i) make any adjustments that are necessary or
appropriate to maintain equality between the Capital Accounts of
the Partners and the amount of Partnership capital reflected on
the Partnership's balance sheet, as computed for book purposes,
in accordance with Regulations Section 1.704-1(b)(2)(iv)(q), and
(ii) make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to
comply with Regulations Section 1.704-1(b). Any such action will
require the Unanimous Vote of the Management Committee.
"Cable Partners" means Comcast, Cox and TCI.
"Capital Commitment" of any Partner means with respect
to any Fiscal Year or part thereof included in the Initial
Three-Year Period, an amount equal to the excess, if any, of (i)
the product of (A) such Partner's initial Percentage Interest and
(B) the sum of (1) the aggregate amount of Additional Capital
Contributions expressly contemplated by the Initial Business Plan
to be required of the Partners in such Fiscal Year (including,
with respect to the first Fiscal Year in the Initial Three-Year
Period, the Post-Auction Requirements) plus (2) the Prior Years'
Carryforward, over (ii) the cumulative Accelerated Contribution
Amounts requested of and made by such Partner in all prior Fiscal
Years that the Management Committee has determined shall be
applied to reduce the Planned Capital Amount for such Fiscal
Year. In the event all or a portion of an Interest is
Transferred in accordance with this Agreement, the transferee
shall succeed to the Capital Commitment of the transferor to the
extent it relates to the transferred Interest and has not been
called in full.
"Capital Contribution" means, with respect to any
Partner, the amount of money and the initial Gross Asset Value of
any property (other than money) contributed or deemed to be
contributed to the Partnership with respect to the Interest held
by such Partner. The principal amount of a promissory note which
is not readily traded on an established securities market and
which is contributed to the Partnership by the maker of the note
(or a Partner related to the maker of the note within the meaning
of Regulations Section 1.704-1(b)(2)(ii)(c)) shall not be included
in the Capital Account of any Partner until the Partnership makes
a taxable disposition of the note or until (and to the extent)
principal payments are made on the note, all in
accordance with Regulations Section 1.704-1(b)(2)(iv)(d)(2).
"Carrier" has the meaning set forth in the definition
of "IXC" below.
"Change in Control" means, with respect to any Partner
that has a Parent other than itself, such Partner's ceasing to be
a Subsidiary of its Parent other than in connection with a
Permitted Transaction.
"Chief Executive Officer" means the chief executive
officer of the Partnership, including any interim chief executive
officer.
"Code" means the Internal Revenue Code of 1986.
"Comcast Parent" means Comcast Corporation, a
Pennsylvania corporation.
"Consumer Price Index" means the Consumer Price Index
"All Urban Consumers: U.S. city average, all items" (1982-1984 =
100) published by the Bureau of Labor Statistics of the United
States Department of Labor, or any equivalent successor or
substitute index selected by the Management Committee and
published by the Bureau of Labor Statistics or a successor or
substitute governmental agency and selected by the Management
Committee.
"Contest Notice" has the meaning set forth in clause
(iii) of the definition of "Adverse Act."
"Contribution Date" has the meaning set forth in the
definition of "Additional Contribution Notice."
"Controlled Affiliate" of any Person means the Parent
of such Person and each Subsidiary of such Parent. As used in
Sections 6, 8.6, 8.10 and 8.12 the term "Controlled Affiliate"
shall also include any Affiliate of a Person that such Person or
its Parent can directly or indirectly unilaterally cause to take
or refrain from taking any of the actions required, prohibited or
otherwise restricted by such Section, whether through ownership
of voting securities, contractually or otherwise. As used in
Sections 2.4, 5.1(c), 11.2, 12.4, 12.5 and 12.6, the term
"Controlled Affiliate" shall also include any Affiliate of a
Person that such Person or its Parent can directly or indirectly
unilaterally cause to take or refrain from taking any action
regarding the Partnership, whether through ownership of voting
securities, contractually or otherwise.
"Cox Parent" means Cox Cable Communications, Inc., a
Delaware corporation; provided, that if on January 1, 1996, Cox
Cable Communications, Inc. is not Publicly Held, the term Cox
Parent shall thereafter mean the Person that would be the Parent
of Cox if a Permitted Transaction were deemed to have occurred on
such date with respect to Cox.
"Cox Pioneer Preference License" means the 30 MHz MTA
"A" block PCS license in the Los Angeles MTA for which Cox Parent
has filed an application with the FCC.
"Debt" means (i) any indebtedness for borrowed money or
deferred purchase price of property or evidenced by a note,
bonds, or other instruments, (ii) obligations to pay money as
lessee under capital leases, (iii) obligations to pay money
secured by any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind existing on any asset owned or held by
the Partnership whether or not the Partnership has assumed or
become liable for the obligations secured thereby, (iv) any
obligation under any interest rate swap agreement (the principal
amount of such obligation shall be deemed to be the notional
principal amount on which such swap is based), and (v)
obligations under direct or indirect guarantees of (including
obligations (contingent or otherwise) to assure a creditor
against loss in respect of) indebtedness or obligations of the
kinds referred to in clauses (i), (ii), (iii) and (iv) above,
provided that Debt shall not include obligations in respect of
any accounts payable that are incurred in the ordinary course of
the Partnership's business and are not delinquent or are being
contested in good faith by appropriate proceedings.
"Depreciation" means, for each Allocation Year, an
amount equal to the depreciation, amortization, or other cost
recovery deduction allowable with respect to an asset for such
Allocation Year, except that if the Gross Asset Value of an asset
differs from its adjusted basis for federal income tax purposes
at the beginning of such Allocation Year, Depreciation shall be
an amount which bears the same ratio to such beginning Gross
Asset Value as the federal income tax depreciation, amortization,
or other cost recovery deduction for such Allocation Year bears
to such beginning adjusted tax basis; provided, however, that if
the adjusted basis for federal income tax purposes of an asset at
the beginning of such Allocation Year is zero, Depreciation shall
be determined with reference to such beginning Gross Asset Value
using any reasonable method selected by the Management Committee.
"Dispose" (including its correlative meanings,
"Disposed of", "Disposition" and "Disposed"), with respect to any
Interest means to Transfer, pledge, hypothecate or otherwise
dispose of such Interest, in whole or in part, voluntarily or
involuntarily, except by operation of law in connection with a
merger, consolidation or other business combination of the
Partnership and except that such term shall not include any
pledge or hypothecation of, or granting of a security interest
in, an Interest that is approved by the Management Committee in
connection with any financing obtained on behalf of the
Partnership.
"ESMR" means any commercial mobile radio service, and
the resale of such service, authorized under the rules for
Specialized Mobile Radio services designated under Subpart S of
Part 90 of the FCC's rules in effect on the date hereof,
including the networking, marketing, distribution, sales,
customer interface and operations functions relating thereto.
"Excluded Businesses" has the meaning set forth in
Exhibit A to Exhibit 1.1(a) to the Joint Venture Formation
Agreement.
"Exclusive Limited Partner" means any Limited Partner
that is not also a General Partner.
"FCC" means the Federal Communications Commission.
"Final Determination" means (i) a determination set
forth in a binding settlement agreement between the Partnership
and the Partner alleged to have committed the Adverse Act, which
has been approved by a Required Majority Vote of the Management
Committee pursuant to Section 8.7 or (ii) a final judicial
determination, not subject to further appeal, by a court of
competent jurisdiction.
"Fiscal Year" means (i) the period commencing on the
date of this Agreement and ending on December 31, 1994, (ii) any
subsequent twelve (12) month period commencing on January 1, and
ending on December 31, or (iii) the period commencing on the
immediately preceding January 1 and ending on the date on which
all Property is distributed to the Partners pursuant to
Section 14.2. When used in connection with the Initial Business
Plan or the Initial Three-Year Period, "Fiscal Year" also means
the period commencing on the effective date of the Initial
Business Plan and ending on December 31, 1995.
"GAAP" means generally accepted accounting principles
in effect in the United States of America from time to time.
"General Partner" means any Person who (i) is referred
to as such in the first paragraph of this Agreement or has become
a General Partner pursuant to the terms of this Agreement, and
(ii) has not, at any given time, ceased to be a General Partner
pursuant to the terms of this Agreement. "General Partners"
means all such Persons.
"Gross Asset Value" means, with respect to any asset,
the asset's adjusted basis for federal income tax purposes,
except as follows:
(i) The initial Gross Asset Value of any asset
contributed by a Partner to the Partnership shall be the gross
fair market value of such asset, as determined by the
contributing Partner and the Management Committee in accordance
with Section 8.7;
(ii) The Gross Asset Value of all Partnership
assets shall be adjusted to equal their gross fair market value,
as determined by the Management Committee, as of the following
times: (A) the acquisition of an Interest by any new Partner in
exchange for more than a de minimis Capital Contribution; (B) the
distribution by the Partnership to a Partner of more than a de
minimis amount of Property as consideration for an Interest; (C)
the liquidation of the Partnership within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g); and (D) the conversion
of a General Partner to an Exclusive Limited Partner if, and only
if, in the judgment of the Management Committee, such adjustment
would either cause the Person who is being converted to an
Exclusive Limited Partner to have a deficit balance in its
Capital Account or increase the amount of such a deficit balance;
(iii) The Gross Asset Value of any Partnership
asset distributed to any Partner shall be adjusted to equal the
gross fair market value of such asset on the date of distribution
as determined by the distributee and the Management Committee in
accordance with Section 8.7;
(iv) The Gross Asset Values of Partnership assets
shall be increased (or decreased) to reflect any adjustments to
the adjusted basis of such assets pursuant to Code Section 734(b)
or Code Section 743(b), but only to the extent that such
adjustments are taken into account in determining Capital
Accounts pursuant to Regulation Section 1.704-1(b)(2)(iv)(m) and
subparagraph (vi) of the definition of "Profits" and "Losses" and
Section 3.3(g); provided, however, that Gross Asset Values shall
not be adjusted pursuant to this subparagraph (iv) to the extent
the Management Committee determines that an adjustment pursuant
to subparagraph (ii) hereof is necessary or appropriate in
connection with a transaction that would otherwise result in an
adjustment pursuant to this subparagraph (iv); and
(v) If Gross Asset Value is required to be
determined for the purpose of Sections 11.1 or 14.7, Gross Asset
Value shall be determined in the manner set forth in such
Sections.
If the Gross Asset Value of an asset has been determined or
adjusted pursuant to subparagraph (i), (ii) or (iv) hereof, such
Gross Asset Value shall thereafter be adjusted by the
Depreciation taken into account with respect to such asset for
purposes of computing Profits and Losses.
"Hypothetical Federal Income Tax Amount" means for any
Fiscal Year the product of (A) the daily weighted average highest
marginal federal income tax rate applicable to domestic
corporations in effect for such Fiscal Year expressed as a
percentage and (B) the excess, if any, of (i) the cumulative
amount of taxable income and gain reported by the Partnership on
its Internal Revenue Service Forms 1065 over its life determined
as of the end of such Fiscal Year, over (ii) the larger of zero
(0) or the cumulative amount of taxable income and gain reported
by the Partnership on its Internal Revenue Service Forms 1065
over its life determined as of the beginning of such Fiscal Year.
"Initial Three-Year Period" means the period from the
effective date of the Initial Business Plan through December 31,
1997.
"Intermediate Subsidiary" means, with respect to any
Parent of a Partner, a Subsidiary of such Parent that holds a
direct or indirect equity interest in such Partner.
"Interest" means, as to any Partner, all of the
interests of such Partner in the Partnership, including any and
all benefits to which the holder of an interest in the
Partnership may be entitled as provided in this Agreement and
under the Act, together with all obligations of such Partner to
comply with the terms and provisions of this Agreement.
"IXC" means each of AT&T Corp., MCI Communications
Corporation and British Telecommunications plc (each, a
"Carrier") and each of their respective Affiliates.
"IXC Transaction" means, with respect to any Partner,
that (i) an IXC has become the beneficial owner of an equity
interest in such Partner or an equity interest in any Intermediate
Subsidiary (other than a Publicly Held Intermediate Subsidiary)
of the Parent of such Partner, (ii) an IXC has become the
beneficial owner of securities representing fifteen percent (15%)
or more of the voting power of the outstanding voting securities
of the Parent of such Partner or any Publicly Held Intermediate
Subsidiary of such Parent, and, if such Parent or Publicly Held
Intermediate Subsidiary is subject to a State Statute or has a
shareholder rights plan, such Parent or Publicly Held Intermediate
Subsidiary or the board of directors or other governing body of
such Parent or Publicly Held Intermediate Subsidiary has
approved such beneficial ownership or otherwise has taken
action to waive any applicable restrictions with respect to such
ownership under any State Statute or to permit the exercise by
the IXC of its rights under any shareholder rights plan, (iii) an
IXC has become the beneficial owner of securities representing
twenty-five percent (25%) or more of the voting power of the
outstanding voting securities of any such Parent or Publicly Held
Intermediate Subsidiary, provided that, if such IXC is an Affiliate
of a Carrier, such Affiliate has identified a Carrier as a Person
controlling such Affiliate either (a) pursuant to General
Instruction C to Schedule 13D, in a Schedule 13D
(filed with the Securities and Exchange Commission
in accordance with Section 13(d) of the Securities Exchange Act
of 1934, as amended) or (b) pursuant to General Instruction C to
Schedule 14D-1, in a Schedule 14D-1 (filed with the Securities
Exchange Commission in accordance with Section 14(d) of the
Securities Exchange Act of 1934, as amended), (iv) any such
Parent or Publicly Held Intermediate Subsidiary has sold or
issued beneficial ownership in any equity interest in such Parent
or Publicly Held Intermediate Subsidiary to an IXC or granted to
an IXC any rights with respect to the governance of such Parent
or Publicly Held Intermediate Subsidiary that are not possessed
generally by the owners of outstanding equity interests in such
Parent or Publicly Held Intermediate Subsidiary; or (v) such
Partner has otherwise become an Affiliate of an IXC. Solely for
the purposes of this definition the terms "beneficial owner" and
"beneficial ownership" shall have the same meaning as in Rule 13d-
3 under the Securities Exchange Act of 1934, as amended.
"Joint Venture Formation Agreement" means the Joint
Venture Formation Agreement of even date herewith among each of
the Parents providing for the formation of NewTelco and certain
other actions.
"Limited Partner" means any Person (i) who is referred
to as such in the first paragraph of this Agreement or who has
become a Limited Partner pursuant to the terms of this Agreement,
and (ii) who, at any given time, holds an Interest. "Limited
Partners" means all such Persons.
"Management Committee" means the committee that will
have the authority and powers set forth in Section 5.1.
"Management Committee Resolution" means the resolution
of the Management Committee adopted by written consent
simultaneously with the execution of this Agreement that approves
(among other things) the aggregate Auction Commitment.
"MFJ" means the Modification of Final Judgment agreed
to by the American Telephone and Telegraph Company and the U.S.
Department of Justice and approved by the U.S. District Court for
the District of Columbia on August 24, 1982, as reported in
United States v. Western Electric Company, Inc., et al., 552 F.
Supp. 131 (D.D.C. 1982), aff'd sub nom Maryland v. United States,
460 U.S. 1001 (1983) and any subsequent orders or amendments
issued in connection therewith. Any reference in this Agreement
to Section II of the MFJ shall also include any subsequent
statute, rule, regulation, order or decree which modifies or
supersedes Section II of the MFJ (or any material portion
thereof) and imposes any restriction(s) substantially similar to
any of the material restrictions imposed by Section II of the
MFJ.
"Minimum Ownership Requirement" means, with respect to
(i) any Original Partner, as of any date, that the ratio
(expressed as a percentage) of such Original Partner's Percentage
Interest to the aggregate Percentage Interests of all Original
Partners is at least eight percent (8%) or (ii) any Partner not
an Original Partner, as of any date, that such Partner's
Percentage Interest is at least eight percent (8%).
"MTA" means a Major Trading Area as defined in FCC
Rules to be codified at 47 C.F.R. 24.13.
"NewTelco" means the Delaware limited partnership to be
formed by the Partners subsequent to the date hereof pursuant to
the terms of the Joint Venture Formation Agreement to conduct the
Wireline Business (as defined in the Joint Venture Formation
Agreement).
"NewTelco Closing Date" means the date of formation of
NewTelco pursuant to the Joint Venture Formation Agreement.
"NewTelco Partnership Agreement" means the Agreement of
Limited Partnership of NewTelco to be entered into by the
Partners on the NewTelco Closing Date in accordance with the
provisions of the Joint Venture Formation Agreement.
"Non-Exclusive Services" has the meaning set forth in
Exhibit A to Exhibit 1.1(a) to the Joint Venture Formation
Agreement.
"Nonrecourse Deductions" has the meaning set forth in
Section 1.704-2(b)(1) of the Regulations.
"Nonrecourse Liability" has the meaning set forth in
Section 1.704-2(b)(3) of the Regulations.
"Original Capital Contribution" means, with respect to
each Partner, the Capital Contribution to be made by such Partner
pursuant to Section 2.2. In the event all or a portion of an
Interest is transferred in accordance with the terms of this
Agreement, the transferee shall succeed to the Original Capital
Contribution of the transferor to the extent it relates to the
transferred Interest.
"Original Partners" means collectively Cox, Comcast,
TCI and Sprint and any successors or transferees thereof to the
extent such successors or transferees acquired their Interest in
accordance with this Agreement.
"Parent" means, except as otherwise provided below with
respect to Cox (and its Controlled Affiliates), Cox Parent, (ii) with
respect to Comcast (and its Controlled Affiliates), Comcast
Parent, (iii) with respect to TCI (and its Controlled Affiliates),
TCI Parent and (iv) with respect to Sprint (and its Controlled
Affiliates), Sprint Parent. With respect to any other Person
hereafter admitted to the Partnership as a Partner, the
Parent with respect to such Partner shall be the Person
identified as such in a Schedule to be attached to
this Agreement in connection with the admission of such Partner.
In the event of a Permitted Transaction, the new Parent of the
applicable Partner immediately following such Permitted
Transaction will be the ultimate parent entity (as determined in
accordance with the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 and the rules and regulations promulgated thereunder (the
"HSR Act")) of such Partner (or such Partner if it is its own
ultimate parent entity); provided that if such ultimate parent
entity is not a Publicly Held Person then the next highest
corporate entity in the ownership chain from such ultimate parent
entity through the Partner which is a Publicly Held Person shall
be deemed to be the new Parent. If there is no intermediate
Publicly Held Person or if the ultimate parent entity is an
individual, the Parent shall be the highest entity in the
ownership chain from the ultimate parent entity through the
Partner which is not an individual. For purposes of the
definition of Controlled Affiliate, the Parent of a Person that
is neither a Partner nor a Controlled Affiliate of a Partner is
the ultimate parent entity (as determined in accordance with the
HSR Act) of such Person.
"Parents' Undertaking" means a written instrument in
substantially the form of Exhibit 1.10(a) executed simultaneously
with the execution of this Agreement by each Parent of a Partner
for the benefit of the Partnership, the Partners and the other
Parents.
"Partner Nonrecourse Debt" has the meaning set forth in
Section 1.704-2(b)(4) of the Regulations.
"Partner Nonrecourse Debt Minimum Gain" means an
amount, with respect to each Partner Nonrecourse Debt, equal to
the Partnership Minimum Gain that would result if such Partner
Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Section 1.704-2(i)(3) of the
Regulations.
"Partner Nonrecourse Deductions" has the meaning set
forth in Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the
Regulations.
"Partners" means all General Partners and all Limited
Partners. "Partner" means any one of the Partners.
"Partnership" means the partnership formed pursuant to
this Agreement and the partnership continuing the business of
this Partnership in the event of dissolution as herein provided.
"Partnership Minimum Gain" has the meaning set forth in
Sections 1.704-2(b)(2) and 1.704-2(d) of the Regulations.
"PCS" means a radio communications system authorized
under the rules for broadband personal communications services
designated as Subpart E of Part 24 of the FCC's rules, including
the network, marketing, distribution, sales, customer interface
and operations functions relating thereto.
"PCS Auction" means the series of simultaneous multiple
round auctions for broadband PCS licenses to be conducted by the
FCC under the authority of Section 309(j) of the Communications
Act, 47 U.S.C. 309(j) (1993), in accordance with the rules
promulgated thereunder by the FCC.
"Percentage Interest" means, with respect to any
Partner, (i) until the Original Capital Contributions are made,
the Percentage Interest of each Partner set forth on Schedule 2.1
and (ii) thereafter, the ratio (expressed as a percentage) of the
sum of such Partner's Original Capital Contribution and aggregate
Additional Capital Contributions (other than Special
Contributions) as of such date to the sum of the aggregate
Original Capital Contributions and Additional Capital
Contributions (other than Special Contributions) of all Partners
as of such date. Such Capital Contributions will be determined
after giving effect to all Capital Contributions made prior to
and on the date as to which the determination of Percentage
Interests is made, subject to the provisions regarding the
adjustment of Percentage Interests set forth in Section 2.4(d).
In the event all or any portion of an Interest is Transferred in
accordance with the terms of this Agreement, the transferee shall
succeed to the Percentage Interest of the transferor to the
extent it relates to the Transferred Interest.
"Permitted Transaction" with respect to a Partner means
a transaction or series of related transactions in which (i) such
Partner ceases to be a Subsidiary of its Parent or such Partner
Transfers its Interest and (ii) the new Parent of such Partner
(or such Partner if it is its own Parent) or the Parent of the
transferee of the Interest after giving effect to such
transaction, or the last transaction in a series of related
transactions, owns, directly or indirectly through its Controlled
Affiliates, all or a Substantial Portion of the cable system
assets (in the case of a Cable Partner) or long distance
telecommunications business assets (in the case of Sprint) owned
by the Parent of such Partner, directly and indirectly through
its Controlled Affiliates, immediately prior to the commencement
of such transaction or series of transactions. As used herein,
"Substantial Portion" means (x) in the case of a Cable Partner,
cable systems serving 75% or more of the aggregate number of
basic subscribers served by cable systems owned by the Parent of
such Cable Partner, directly and indirectly through its
Controlled Affiliates, and (y) in the case of Sprint, long
distance telecommunications business assets serving 75% or more
of the aggregate number of customers served by the long distance
telecommunications business owned by the Parent of Sprint,
directly and indirectly through its Controlled Affiliates.
"Person" means any individual, partnership,
corporation, trust, or other entity.
"PioneerCo" means the Delaware limited partnership to
be formed between the Partnership and an Affiliate of Cox, as
contemplated by the PioneerCo Term Sheet, to own the Cox Pioneer
Preference License and to operate a Wireless Business in
connection therewith.
"PioneerCo Term Sheet" means the term sheet attached as
Exhibit 1.1(c) to the Joint Venture Formation Agreement regarding
the formation of PioneerCo.
"Planned Capital Amount" means for any Fiscal Year
during the Initial Three-Year Period the amount of Additional
Capital Contributions contemplated to be required of the Partners
during such Fiscal Year as set forth in the Initial Business
Plan, as such amount may be revised by the Unanimous Vote of the
Management Committee.
"Prime Rate" means the rate announced from time to time
by Citibank, N.A. as its prime rate.
"Prior Years' Carryforward", with respect to any Fiscal
Year, means the amount by which the aggregate amount of
Additional Capital Contributions actually made by the Partners
with Contribution Dates during the Fiscal Year(s) in the Initial
Three-Year Period prior to such Fiscal Year (disregarding for
such purposes any Additional Capital Contribution representing an
Accelerated Contribution Amount during such Fiscal Year(s) that
the Management Committee has accelerated from a Planned Capital
Amount for a Fiscal Year following such Fiscal Year) was less
than the aggregate amount of Additional Capital Contributions
that the Initial Business Plan contemplated would be requested
during such Fiscal Year(s).
"Profits" and "Losses" means, for each Allocation Year,
an amount equal to the Partnership's taxable income or loss for
such Allocation Year, determined in accordance with Code Section
703(a) (for this purpose, all items of income, gain, loss, or
deduction required to be stated separately pursuant to Code
Section 703(a)(1) shall be included in taxable income or loss),
with the following adjustments (without duplication):
(i) Any income of the Partnership that is exempt
from federal income tax and not otherwise taken into account in
computing Profits or Losses pursuant to this definition of
"Profits" and "Losses" shall be added to such taxable income or
loss;
(ii) Any expenditures of the Partnership described
in Code Section 705(a)(2)(B) or treated as Code Section
705(a)(2)(B) expenditures pursuant to Regulations Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Profits or Losses pursuant to this definition of
"Profits" and "Losses," shall be subtracted from such taxable
income or loss;
(iii) In the event the Gross Asset Value of any
Partnership asset is adjusted pursuant to subparagraph (ii) or
(iii) of the definition of Gross Asset Value, the amount of such
adjustment shall be taken into account as gain or loss from the
disposition of such asset for purposes of computing Profits or
Losses;
(iv) Gain or loss resulting from any disposition
of Property with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to the
Gross Asset Value of the Property disposed of, notwithstanding
that the adjusted tax basis of such Property differs from its
Gross Asset Value;
(v) In lieu of the depreciation, amortization,
and other cost recovery deductions taken into account in
computing such taxable income or loss, there shall be taken into
account Depreciation for such Allocation Year, computed in
accordance with the definition of Depreciation;
(vi) To the extent an adjustment to the adjusted
tax basis of any Partnership asset pursuant to Code Section
734(b) is required pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining
Capital Accounts as a result of a distribution other than in
liquidation of a Partner's Interest, the amount of such
adjustment shall be treated as an item of gain (if the adjustment
increases the basis of the asset) or loss (if the adjustment
decreases the basis of the asset) from the disposition of the
asset and shall be taken into account for purposes of computing
Profits or Losses; and
(vii) Notwithstanding any other provision of this
definition of "Profits" or "Losses," any items which are
specially allocated pursuant to Section 3.3 or Section 3.4 shall
not be taken into account in computing Profits or Losses.
The amounts of the items of Partnership income, gain, loss or
deduction available to be specially allocated pursuant to
Sections 3.3 and 3.4 shall be determined by applying rules
analogous to those set forth in this definition of "Profits" and
"Losses."
"Property" means all real and personal property
acquired by the Partnership and any improvements thereto, and
shall include both tangible and intangible property.
"Publicly Held" means, with respect to any Person, that
such Person has a class of equity securities registered under
Section 12(b) or 12(g) of the Securities Exchange Act of 1934.
"Publicly Held Intermediate Subsidiary" means, with
respect to any Parent of a Partner, an Intermediate Subsidiary of
such Parent that is Publicly Held.
"Regulations" means the Income Tax Regulations,
including Temporary Regulations, promulgated under the Code.
"Representative" means an individual designated by a
General Partner as a member of the Management Committee.
"Sprint Brand" means the trademark "Sprint" together
with the related "Diamond" logo.
"Sprint Parent" means Sprint Corporation, a Kansas
corporation.
"State Statutes" means any business combination
statute, anti-takeover statute, fair price statute, control share
acquisition statute or any other state statute or regulation that
contains any similar prohibition, limitation, obligation,
restriction or other provision adopted and in effect in the
jurisdiction of organization of such Person that affects the
rights of any other Person that acquires a specified percentage
ownership interest in another Person without the consent or
approval of the board of directors or other governing body of
such other Person, and, includes (i) with respect to Cox Parent
and TCI Parent, Section 203 of the Delaware General Corporation
Law; (ii) with respect to Comcast Parent, Subchapters E, F and G
of Chapter 25 of the Pennsylvania Business Corporation Law of
1988; and (iii) with respect to Sprint Parent, Sections 17-12,100
and 17-1286 through 1298, et seq. of the Kansas Corporations
Statute.
"Subsidiary" of any Person means a corporation, company
or other entity (i) more than fifty percent (50%) of whose
outstanding shares or equity securities are, as of the time of
such determination, owned or controlled, directly or indirectly
through one or more Subsidiaries, by such Person, and the shares
or securities so owned entitle such Person and/or its
Subsidiaries to elect at least a majority of the members of the
board of directors or other managing authority of such
corporation, company or other entity notwithstanding the vote of
the holders of the remaining shares or equity securities so
entitled to vote or (ii) which does not have outstanding shares
or securities, as may be the case in a partnership, joint venture
or unincorporated association, but more than fifty percent (50%)
of whose ownership interest is, as of the time of such
determination, owned or controlled, directly or indirectly
through one or more Subsidiaries, by such Person, or in which the
ownership interest so owned entitles such Person and/or
Subsidiaries to make the decisions for such corporation, company
or other entity.
"TCI Parent" means Tele-Communications, Inc., a
Delaware corporation.
"Technical Information" means all technical
information, regardless of form and however transmitted and shall
include, among other forms, computer software, including computer
program code, and system and user documentation, drawings,
illustrations, diagrams, reports, designs, specifications,
formulae, know-how, procedural protocols and methods and manuals.
"Technical Information Rights" means all intellectual
property rights which protect or cover Technical Information.
"Transfer" means, as a noun, any sale, exchange
assignment or transfer and, as a verb, to sell, exchange, assign
or transfer.
"Voluntary Bankruptcy" has the meaning set forth in the
definition of "Bankruptcy".
"Voting Percentage Interest" means, as of any date and
with respect to any Partner that as of such date is entitled to
designate one or more members of the Management Committee, the
ratio (expressed as a percentage) of such Partner's Percentage
Interest to the aggregate Percentage Interests of all Partners
that are entitled to designate one or more members of the
Management Committee.
"Wireless Business" means the use of radio spectrum for
cellular, PCS, ESMR, paging, mobile telecommunications and any
other voice or data wireless services, whether fixed or mobile
conducted in the United States of America (including its
territories and possessions other than Puerto Rico), but not
including the delivery of video or the provision of satellite or
broadband microwave transmission services.
"Wireless Exclusive Services" has the meaning set forth
in Exhibit A to Exhibit 1.1(a) to the Joint Venture Formation
Agreement.
1.11 Additional Definitions.
Defined Term Defined in
"1933 Act" Section 5.9(a)
"Accelerated Contribution Amount" Section 2.3(a)(ii)
"Accepting Offerees" Section 12.4(d)
"Additional Contribution Amount" Section 2.3(a)
"Additional Purchase Commitment" Section 12.6(c)(i)
"Adjusted Percentage Interest" Section 2.4(a)(iv)
"Affiliation Agreement" Section 6.1(d)
"Agents" Section 6.6(a)
"Annual Budget" Section 5.2(c)
"Approved Business Plan" Section 5.2(c)
"Bidding Partner" Section 14.7(e)
"Blocking Limited Partner" Section 5.1(k)(ii)
"Brief" Section 5.8(a)(ii)
"Business Plan" Section 5.2(a)
"Buying Partner" Section 12.6(c)
"Buy-Sell Price" Section 11.2(a)
"Cable Buying Partner" Section 12.6(c)(i)
"Certificate" Section 1.5
"Comcast Area" Section 6.4(a)(v)
"Competitive Activity" Section 6.1(a)
"Confidential Information" Section 6.6(a)
"Contributing Partner" Section 2.4(a)(ii)
"Control Notice" Section 12.5(b)
"Control Offer" Section 12.5(b)
"Control Offer Period" Section 12.5(b)
"Controlling Partner" Section 12.5(b)
"Cure Date" Section 2.4(c)(iii)
"Damages" Section 11.1(a)
"Deadlock Event" Section 5.8(b)
"Declining Partner" Section 2.4(a)(i)
"Declined Accelerated Contribution" Section 2.3(c)
"Declined Additional Contribution" Section 2.3(c)
"Default Budget" Section 5.2(d)
"Default Loan" Section 2.4(c)(ii)
"Default Loan Notice" Section 2.4(c)(ii)
"Defaulted Contribution" Section 2.3(b)(i)
"Defaulting Partner" Section 2.4(c)(i)
"Delinquent Partner" Section 2.4(b)
"Determination Date" Section 12.6(a)
"Election Notice" Section 11.2(a)
"Election Period" Section 11.2(b)
"Excess Contribution Amount" Section 2.3(a)(ii)
"Firm Offer" Section 12.4(b)
"First Appraiser" Section 11.4
"Floating Rate" Section 2.4(f)
"Free to Sell Period" Section 12.4(f)
"Funding Commitment" Section 2.4(a)(ii)
"General Partner Percentage Interests" Section 2.1
"Grace Period" Section 2.4(b)
"Gross Appraised Value" Section 11.4
"In-Territory Customers" Section 6.4(e)
"In-Territory Distributors" Section 6.4(e)
"Initial Business Plan" Section 5.2(a)
"Initial Offer" Section 14.7(b)
"Interested Person" Section 8.7
"Issuance Items" Section 3.3(h)
"Lending Commitment" Section 2.4(c)(ii)
"Lending Partner" Section 2.4(c)(ii)
"Letter of Credit" Section 2.3(b)(ii)
"Liquidating Events" Section 14.1(a)
"Limited Partner Percentage Interests" Section 2.1
"Loan Date" Section 2.4(c)(ii)
"Loan Date" Section 2.3(b)(i)
"Make-up Amount" Section 2.4(c)(iii)
"Mediator" Section 5.8(a)(ii)
"Net Equity" Section 11.3
"Net Equity Notice" Section 11.3
"Network Services Statement of
Principles" Section 8.9(a)
"Non-Adverse Partners" Section 11.1(a)
"Non-Defaulting Partners" Section 2.3(b)(i)
"Offer" Section 6.1(c)
"Offer Notice" Section 12.4(b)
"Offer Period" Section 12.4(c)
"Offer Price" Section 12.4(a)
"Offered Interest" Section 12.4
"Offerees" Section 12.4(b)
"Other Pennsylvania Company" Section 6.4(g)
"Ownership Restrictions" Section 8.12
"Overlap Cellular Area" Section 8.1(b)
"Partner Loan" Section 2.7
"Partnership's Businesses" Section 6.4(b)
"Paying Partner" Section 2.4(a)(ii)
"Payment Default" Section 2.4(c)(i)
"Penalty Amount" Section 2.4(b)
"Permitted Transfer" Section 12.2
"PhillieCo" Section 6.3(e)
"Preliminary Initial Business Plan" Section 5.2(a)
"Proposed Budget" Section 5.2(c)
"Proposed Business Plan" Section 5.2(c)
"Post-Auction Requirements" Section 2.3(a)
"Purchase Commitment" Section 11.2(b)
"Public Offering" Section 5.9(c)
"Purchase Notice" Section 11.2(b)
"Purchase Offer" Section 12.4(a)
"Purchaser" Section 12.4(a)
"Purchasing Partner" Section 11.2(b)
"Put Notice" Section 12.6(b)(i)
"receiving party" Section 6.5(a)
"Regulatory Allocations" Section 3.4
"Related Group" Section 5.1(c)
"Remaining Deficit Balance" Section 14.3
"Representative" Section 5.1(c)
"Requested Contribution" Section 2.3(a)(ii)
"Required Majority Vote" Section 5.1(i)
"Restricted Party" Section 6.5(a)
"Sale Notice" Section 12.4(e)
"Second Appraiser" Section 11.4
"Section 5.1 Election Period" Section 5.1(k)(ii)
"Seller" Section 12.4
"Selling Partner" Section 12.6(c)
"Senior Credit Agreement" Section 2.7
"Shortfall" Section 2.4(a)(ii)
"Shortfall Notice" Section 2.4(a)(ii)
"Special Contribution" Section 2.4(b)
"Sprint Cellular Business" Section 8.1(b)
"Sprint Obligation" Section 12.6(c)(i)
"Substantial Portion" Section 1.10
"Tagalong Notice" Section 12.5(a)
"Tagalong Offer" Section 12.5(a)
"Tagalong Period" Section 12.5(a)
"Tagalong Purchaser" Section 12.5(a)
"Tagalong Transaction" Section 12.5(a)
"Tax Matters Partner" Section 10.3(a)
"Third Appraiser" Section 11.4
"Timely Partner" Section 2.4(b)
"Trademark License" Section 8.2
"Transferring Partner" Section 12.5(a)
"Unanimous Partner Vote" Section 5.1(k)(i)
"Unanimous Vote" Section 5.1(j)
"Unfunded Shortfall" Section 2.3(c)
"Unpaid Amount" Section 2.4(b)
"Unreturned Capital" Section 11.2(a)
"Wireless Strategic Plan" Section 5.2(a)
1.12 Terms Generally.
The definitions in Sections 1.10 and elsewhere in this
Agreement shall apply equally to both the singular and plural
forms of the terms defined. Whenever the context may require,
any pronoun shall include the corresponding masculine, feminine
and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without
limitation". The words "herein", "hereof" and "hereunder" and
words of similar import refer to this Agreement (including the
Schedules) in its entirety and not to any part hereof unless the
context shall otherwise require. All references herein to
Articles, Sections, Exhibits and Schedules shall be deemed
references to Articles and Sections of, and Exhibits and
Schedules to, this Agreement unless the context shall otherwise
require. Unless the context shall otherwise require, any
references to any agreement or other instrument or statute or
regulation are to it as amended and supplemented from time to
time (and, in the case of a statute or regulation, to any
corresponding provisions of successor statutes or regulations).
Any reference in this Agreement to a "day" or number of "days"
(without the explicit qualification of "Business") shall be
interpreted as a reference to a calendar day or number of
calendar days. If any action or notice is to be taken or given
on or by a particular calendar day, and such calendar day is not
a Business Day, then such action or notice shall be deferred
until, or may be taken or given on, the next Business Day.
SECTION 2
PARTNERS' CAPITAL CONTRIBUTIONS
2.1 Percentage Interests; Preservation of Percentages of
Interests Held as General Partners and as Limited Partners.
The initial Percentage Interest of each Partner as of the
date of this Agreement is set forth on Schedule 2.1 and
represents the sum of the "General Partner Percentage Interest"
and "Limited Partner Percentage Interest" of such Partner as set
forth in such Schedule 2.1. Except as expressly provided in this
Agreement, or as may result from a Transfer of Interests required
or permitted by this Agreement, the Percentage Interest of a
Partner shall not be subject to increase or decrease without such
Partner's prior consent. For purposes of this Agreement, each
Partner is treated as though it holds a single Interest, even
though such Partner (unless and until it becomes an Exclusive
Limited Partner) holds ninety-nine percent (99.0%) of its
Interest as a General Partner and one percent (1.0%) of its
Interest as a Limited Partner. Each Partner, unless and until it
becomes an Exclusive Limited Partner, will hold ninety-nine
percent (99.0%) of its Interest as a General Partner and one
percent (1.0%) of its Interest as a Limited Partner and the
amount of any Capital Contributions made by a Partner pursuant to
Section 2 and any allocations and distributions to a Partner
pursuant to Section 3 or Section 4 shall, except as otherwise
provided therein, be allocated ninety-nine percent (99.0%) to the
Interest held by the Partner as a General Partner and one percent
(1.0%) to the Interest held by the Partner as a Limited Partner. In
the event that a Partner Transfers all or any portion of its Interest
pursuant to this Agreement, ninety-nine percent (99.0%) of the
aggregate Interest so acquired by any Person shall be treated as
attributable to the Interest held by the transferring Partner as a
General Partner and one percent (1.0%) of the aggregate Interest
so acquired shall be treated as attributable to the Interest held by
the transferring Partner as a Limited Partner. In the event that the
Interest of a Partner is otherwise increased or decreased
pursuant to this Agreement, the amount of the increase or
decrease, as the case may be, shall be allocated ninety-nine
percent (99.0%) to the Interest held by such Partner as a General
Partner and one percent (1.0%) to the Interest held by such
Partner as a Limited Partner.
2.2 Partners' Original Capital Contributions.
Within five (5) Business Days after the execution and
delivery of this Agreement, the Partners shall make their
respective Original Capital Contributions in cash by wire
transfer of immediately available funds to the Partnership's bank
account. The name, address and Original Capital Contribution of
each of the Partners is as set forth on Schedule 2.2.
2.3 Additional Capital Contributions.
(a) Additional Capital Contributions Generally. Subject to
the limitations of this Agreement, the Management Committee (or
the Chief Executive Officer pursuant to (x) the express
provisions of Section 2.3(b), (y) the authority to be granted in
each Annual Budget to make requests for Additional Capital
Contributions in the amounts, during the periods and subject to
the limitations set forth therein, and (z) such authority as may
be delegated to the Chief Executive Officer from time to time by
the Management Committee (which delegation may occur only by a
vote of the members of the Management Committee required to take
the action so delegated)) may in accordance with the following
procedures request the Partners to make Additional Capital
Contributions to the Partnership in cash from time to time to
fund (i) in the case of Additional Capital Contributions
requested during the Auction Period, the expenditures described
in the definition of Auction Commitment in Section 1.10 and
(ii) following the Auction Period, the cash needs of the
Partnership in conformity with the Annual Budget then in effect,
as it may be modified from time to time in accordance with this
Agreement; provided that the Capital Commitment reflected in the
Annual Budget for the first Fiscal Year of the Initial Three-Year
Period shall include that portion of the Auction Commitment that
has not been contributed to the Partnership as of the end of the
Auction Period and that the Management Committee determines will
be required during such first Fiscal Year for the purposes
specified in the definition of Auction Commitment (the
"Post-Auction Requirements"). The aggregate amount of the
Additional Capital Contributions requested to be made as of any
Contribution Date (the "Additional Contribution Amount") shall be
set forth in an Additional Contribution Notice given to each
Partner, shall not exceed the amount reasonably anticipated to be
required to fund the cash needs of the Partnership for the
ensuing six months or such shorter period as may be determined by
the Management Committee, and
(i) during the Auction Period, shall not be
greater than that amount which, when added to the Additional
Contribution Amounts stated in all prior Additional Contribution
Notices, equals the cumulative amount of Additional Capital
Contributions contemplated to be required of the Partners
pursuant to the Management Committee Resolution, unless otherwise
approved by the Unanimous Vote of the Management Committee, and
(ii) during each Fiscal Year commencing with the
first Fiscal Year in the Initial Three-Year Period, shall not be
greater than that amount which, when added to the Additional
Contribution Amounts stated in all prior Additional Contribution
Notices with Contribution Dates in the then-current Fiscal Year,
(x) does not exceed the cumulative amount of Additional Capital
Contributions contemplated to be required of the Partners during
such Fiscal Year as set forth in the Annual Budget for such
Fiscal Year (including, with respect to the first Fiscal Year in the
Initial Three-Year Period, any Post-Auction Requirements)
unless otherwise approved by the Required Majority Vote of the
Management Committee and (y) if such Fiscal Year falls within the
Initial Three-Year Period, also does not exceed, unless otherwise
approved by the Unanimous Vote of the Management Committee, the
sum of (A) the product of (1) 150% times (2) the Planned Capital
Amount for such Fiscal Year minus (for the first Fiscal Year of
the Initial Three-Year Period) any Post-Auction Requirements;
provided, that the amount determined in accordance with this
clause (2) will be decreased by any portion thereof the payment
of which the Management Committee has previously determined as
provided below to accelerate into any prior Fiscal Year, (B) 100%
of the Prior Years' Carryforward and (C) for the first Fiscal
Year of the Initial Three-Year Period, any Post-Auction
Requirements.
To the extent that the cumulative Additional
Contribution Amounts stated in Additional Contribution Notices
with Contribution Dates in any given Fiscal Year within the
period covered by the Initial Three-Year Period exceed the sum of
the Planned Capital Amount for such Fiscal Year plus the Prior
Years' Carryforward, such excess shall constitute an "Excess
Contribution Amount" and, if determined by a Required Majority
Vote of the Management Committee, an "Accelerated Contribution
Amount". The Accelerated Contribution Amount in any Fiscal Year
will be applied to reduce the Planned Capital Amount set forth in
the Initial Business Plan for subsequent Fiscal Years in such
order of priority as the Management Committee may determine in
connection with its determination pursuant to the immediately
preceding sentence. The amount of the Additional Capital
Contribution requested of any Partner in an Additional
Contribution Notice (the "Requested Contribution") shall be equal
to (i) with respect to Requested Contributions with Contribution
Dates during the Auction Period or during any Fiscal Year in the
Initial Three-Year Period, that amount which represents the same
percentage of the Additional Contribution Amount specified in
such Additional Contribution Notice as such Partner's initial
Percentage Interest and (ii) with respect to Requested
Contributions with Contribution Dates during any Fiscal Year
after the period in the Initial Three-Year Period, that amount
which represents the same percentage of the Additional
Contribution Amount specified in such Additional Contribution
Notice as such Partner's Percentage Interest as of the date of
such Additional Contribution Notice.
(b) Mandatory Additional Capital Contributions With Respect to
the Auction Commitment.
(i) A Partner may not decline to make any of its
Requested Contributions with Contribution Dates in the Auction
Period.
(ii) Not later than November 18, 1994, each
Partner shall provide the Partnership with an irrevocable letter
of credit (or the legal equivalent thereof as approved by a
Unanimous Vote of the Management Committee) ("Letter of Credit")
in the amount of such Partner's share of the portion of the
Auction Commitment as is designated in the Management Committee
Resolution to be secured by a Letter of Credit, which may be
drawn by the Chief Executive Officer on behalf of the Partnership
to fund such Partner's Auction Commitment solely in accordance
with Section 2.3(b)(iii). Within two (2) Business Days after a
Partner makes a Requested Contribution in accordance with Section
2.3(b)(iii), the Chief Executive Officer shall notify the issuing
bank of such Partner's Letter of Credit of the payment of the
Requested Contribution and shall instruct such bank to reduce the
amount of the Letter of Credit by an amount equal to the
Requested Contribution made by such Partner. In addition, the
Chief Executive Officer shall, as directed by the Management
Committee instruct the issuing bank of each Partner's Letter of
Credit to reduce the amount thereof as may be appropriate to
effect the results of the PCS Auction. Each Partner's Letter of
Credit shall be issued on behalf of such Partner by a bank
reasonably satisfactory to the other Partners with offices in New
York City for payment of amounts under the Letter of Credit. The
expiry date of the Letter of Credit shall be no sooner than
September 30, 1995; provided that if the Auction Commitment has
not been fully contributed prior to August 31, 1995, each Partner
shall by September 15, 1995, extend the term of its Letter of
Credit in the amount of such Partner's Auction Commitment (as
reduced pursuant to the second sentence of this paragraph) until
December 31, 1995, unless otherwise determined by a Required
Majority Vote of the Management Committee. Each such Letter of
Credit shall be substantially in the form and substance of
Exhibit 2.3(b)(iii) attached hereto, with such changes as shall
be approved by the Management Committee.
(iii) To the extent necessary to satisfy on a
timely basis in accordance with the FCC's rules all
(A) obligations of the Partnership with respect to the payment of
the purchase price for PCS licenses for frequency blocks "A" and
"B" awarded to it in the PCS Auction or (B) obligations to make
capital contributions under the partnership agreement of
PioneerCo during the Auction Period in connection with the
formation of PioneerCo and the contribution of the Cox Pioneer
Preference License to PioneerCo and obligations of the
Partnership pursuant to partnership agreements or related
agreements to make capital contributions to other entities that
are awarded pioneer preference licenses for frequency blocks "A"
and "B" in the PCS Auction in connection with the formation of
such entities and the payment of the purchase price for such
licenses, in either case as contemplated by and in accordance
with the Wireless Strategic Plan, the Chief Executive Officer is
expressly authorized, without any requirement of action by the
Management Committee, to give an Additional Contribution Notice
to the Partners with respect to the Additional Capital
Contributions required to fund such payment obligations and
commitments subject, however, to the limitations of Section
2.3(a). If any Partner fails to make its Requested
Contribution as set forth in such Additional Contribution Notice on
or before the Contribution Date, the Chief Executive Officer is
expressly authorized to draw on the Partner's Letter of Credit.
(c) Mandatory Additional Capital Contributions After the
Auction Period. No Partner may decline to make any of its
Requested Contributions with Contribution Dates after the Auction
Period unless, and then only to the extent that, (i) with respect
to Requested Contributions with Contribution Dates during any
Fiscal Year in the Initial Three-Year Period, the amount of the
Requested Contribution of such Partner, when added to the
cumulative amount of all Requested Contributions theretofore
requested of and made by such Partner during the same Fiscal
Year, would exceed the sum of (A) such Partner's Capital
Commitment with respect to such Fiscal Year and (B) the product
of such Partner's initial Percentage Interest times any Excess
Contribution Amount for such Fiscal Year if and to the extent
that such Partner's Representative(s) voted for approval of the
Annual Budget pursuant to which the Excess Contribution Amount is
being requested or voted in favor of requesting (or delegating to
the Chief Executive Officer the authority to request) such Excess
Contribution Amount, and (ii) with respect to Requested
Contributions with Contribution Dates during any Fiscal Year
after the Initial Three-Year Period, none of such Partner's
Representative(s) voted for approval of the Annual Budget that
provides for the Additional Contribution Amount being requested
and did not vote in favor of requesting (or delegating to the
Chief Executive Officer the authority to request) such Additional
Contribution Amount or such Partner was an Exclusive Limited
Partner at the time of such vote. Notwithstanding the foregoing,
if it was a Declining Partner with respect to an Accelerated
Contribution Amount with a Contribution Date during a prior
Fiscal Year in the Initial Three-Year Period (with respect to any
such Partner, its "Declined Accelerated Contribution"), such
Partner shall also be required to make an Additional Capital
Contribution to the Partnership (to the extent that there is a
Shortfall that is not fully allocated to one or more Contributing
Partners pursuant to Section 2.4(a) in connection with a
Requested Contribution with a Contribution Date during a
subsequent Fiscal Year (an "Unfunded Shortfall")) up to an amount
equal to such Partner's initial Percentage Interest of the
portion of the Planned Capital Amount set forth in the Initial
Business Plan for such subsequent Fiscal Year that was
accelerated to such prior Fiscal Year (but only to the extent of
such Declined Accelerated Contribution and, if there is more
than one such Partner, pro rata in proportion to the aggregate
amounts of the previously unfunded Declined Accelerated
Contributions of each such Partner). Any such required
Additional Capital Contribution shall be contributed by such
Partner within ten (10) days of notice to such Partner by the
Chief Executive Officer that there exists an Unfunded Shortfall
with respect to which such Partner is required to make an
Additional Capital Contribution pursuant to the preceding
sentence, which notice shall set forth the amount of
the Additional Capital Contribution required of such Partner and
the applicable Contribution Date and shall otherwise constitute an
Additional Contribution Notice for purposes of this Agreement.
(d) Cox Contribution Credit. Cox shall contribute to the
Partnership an undivided fractional interest in the Cox Pioneer
Preference License and other associated assets (the "License
Contribution"), with a deemed Gross Asset Value of $17,647,059,
as determined pursuant to the PioneerCo Term Sheet and the
partnership agreement of PioneerCo to be entered into pursuant
thereto, which undivided interest the Partnership in turn will
contribute to the capital of PioneerCo. Such contribution shall
be made concurrently with the contribution by Cox Communications
Pioneer, Inc. to PioneerCo of the remaining undivided fractional
interest in the Cox Pioneer Preference License and such
associated assets, which shall be made at the date and time
provided in, and in accordance with, the PioneerCo Term Sheet and
the partnership agreement of PioneerCo. For purposes hereof,
such contributions to the Partnership and then to PioneerCo may
be effected through the direct conveyance by Cox Parent of the
Cox Pioneer Preference License to PioneerCo. The Gross Asset
Value of the License Contribution shall be credited against the
next Additional Capital Contribution to be made by Cox under this
Agreement to the same extent as if Cox had contributed cash in
the amount of such Gross Asset Value.
2.4 Failure to Contribute Capital.
(a) Declining Partners.
(i) Any Partner that is entitled to decline to make a
Requested Contribution as provided in Sections 2.3(b) and 2.3(c)
may do so by notice given to the Chief Executive Officer (with a
copy to the Management Committee) within fifteen (15) days of the
date the applicable Additional Contribution Notice was given (any
such Partner that timely exercises such right is herein referred
to as a "Declining Partner").
(ii) If any Partner is a Declining Partner with respect to an
Additional Contribution Notice, the Chief Executive Officer
shall, within five (5) days after the date notice was required to
be received under Section 2.4(a)(i), give a notice (a "Shortfall
Notice") to each Partner that made its Requested Contribution in
full (each a "Paying Partner") requesting the Paying Partners to
make Additional Capital Contributions in an aggregate amount
equal to the amount not contributed by the Declining Partner(s)
in response to such Additional Contribution Notice (the
"Shortfall"). Each Paying Partner that is willing to commit to
fund all or any portion of the Shortfall (each a "Contributing
Partner") shall so notify the Chief Executive Officer and each
other Paying Partner within ten (10) days after the date the
Shortfall Notice was given, setting forth the maximum amount of
the Shortfall, up to one hundred percent (100%) thereof, that
such Contributing Partner is willing to fund (the "Funding
Commitment"). Except as otherwise provided in Section
2.4(a)(iii), if the aggregate Funding Commitments are less than
or equal to one hundred percent (100%) of the Shortfall, each
Contributing Partner shall be entitled to make an Additional
Capital Contribution to the Partnership in response to a
Shortfall Notice in an amount equal to its Funding Commitment.
If the aggregate Funding Commitments made by the Contributing
Partners exceed one hundred percent (100%) of the Shortfall, then
except as otherwise provided in Section 2.4(a)(iii), each
Contributing Partner shall be entitled to contribute an amount
equal to the same percentage of the Shortfall as such
Contributing Partner's Percentage Interest represents of the
total Percentage Interests of the Contributing Partners (in each
case before giving effect to any adjustments to the Percentage
Interests to be made in connection with the Additional
Contribution Notice with respect to which the Shortfall
occurred), provided that, if any Contributing Partner's Funding
Commitment was for an amount less than its proportionate share of
the Shortfall as so determined, the portion of the Shortfall not
so committed to be funded shall, except as otherwise provided in
Section 2.4(a)(iii), continue to be allocated proportionally, in
the manner provided above in this sentence, among the other
Contributing Partners until each has been allocated by such
process of apportionment an amount equal to its Funding
Commitment or until the entire Shortfall has been allocated among
the Contributing Partners. The amount of the Additional Capital
Contribution to be made by each Contributing Partner in response
to the Shortfall Notice as determined in accordance with this
Section 2.4(a)(ii) shall be specified in a notice delivered by
the Chief Executive Officer to the Contributing Partner and shall
be paid to the account of the Partnership designated in the
Shortfall Notice within ten (10) days after the date of such
notice.
(iii) Except as otherwise provided in Section 2.4(a)(iv),
if the Declining Partner is a Cable Partner and no Cable
Partner's Percentage Interest, when added to the Percentage
Interests of all Controlled Affiliates of such Partner, is equal
to or greater than Sprint's Percentage Interest, when added to
the Percentage Interests of all Controlled Affiliates of Sprint
(in each case determined without regard to any Additional Capital
Contribution made by any Partner pursuant to the Additional
Contribution Notice with respect to which the Shortfall
occurred), the Shortfall shall be allocated first among those of
the Contributing Partners that are Cable Partners in the manner
provided in Section 2.4(a)(ii) as though Sprint were not a
Contributing Partner, and if and to the extent that the aggregate
Funding Commitments made by such Cable Partners are less than one
hundred percent (100%) of the Shortfall, the balance of the
Shortfall up to Sprint's Funding Commitment shall be allocated to
Sprint.
(iv) The Shortfall shall be allocated among the Cable
Partners in the manner set forth in Section 2.4(a)(iii) until any
Cable Partner would have a Percentage Interest, when
added to the Percentage Interests of all Controlled Affiliates of
such Partner, that is equal to Sprint's Percentage Interest, when
added to the Percentage Interests of all Controlled Affiliates of
Sprint, calculated in each case after giving effect to the
adjustments to the Percentage Interests to be made in connection
with the Additional Contribution Notice with respect to which the
Shortfall occurred assuming that the Additional Capital
Contributions to be made pursuant to this Section 2.4(a) were
made up to the aggregate amount that would yield such result (as
to each Partner, its "Adjusted Percentage Interest"). Any
portion of the Shortfall not yet allocated shall continue to be
allocated proportionately among all of the Contributing Partners
(including Sprint, if applicable) in the manner provided in
Section 2.4(a)(ii) without regard to Section 2.4(a)(iii), but
substituting the Adjusted Percentage Interests of the
Contributing Partners for the Percentage Interests that would
otherwise be used to determine such allocation, until each has
been allocated by such process an amount equal to its Funding
Commitment or until the entire Shortfall has been allocated among
the Contributing Partners.
(b) Delinquent Partners. In the event that any Partner
other than a Declining Partner (a "Delinquent Partner") fails to
make all or any portion of its Requested Contribution on or
before the related Contribution Date, an additional amount shall
accrue as a penalty with respect to such unpaid amount (the
"Unpaid Amount") at the applicable Floating Rate from and
including the Contribution Date until the Unpaid Amount and the
full amount of the penalty accrued thereon (as of any date of
determination, the "Penalty Amount") are paid as provided in this
Section 2.4 or the failure to pay the same results in such
Partner becoming a Defaulting Partner. If the Delinquent Partner
pays the Unpaid Amount to the Partnership at any time during the
period ending at the close of business on the tenth (10th) day
following the related Contribution Date (the "Grace Period"), the
Delinquent Partner shall, at the time of such payment, pay to
each other Partner, if any, that made its Requested Contribution
in full on or before the related Contribution Date and has no
uncured Payment Defaults (each a "Timely Partner"), a pro rata
portion of the Penalty Amount (based on the percentage that the
amount of each Timely Partners' Requested Contribution represents
of the total amount of the Timely Partner's Requested
Contributions), but in no event more than the amount that such
Timely Partner would have earned as interest on the amount of its
Requested Contribution, from and including the Contribution Date
to the date the Delinquent Partner pays the Unpaid Amount to the
Partnership, if the Timely Partner had made a loan in such amount
to the Partnership with interest at the Floating Rate applicable
during the Grace Period. The Delinquent Partner shall pay the
balance of the Penalty Amount, if any, to the Partnership and the
amount so paid shall be deemed to be a "Special Contribution" by
the Delinquent Partner to the capital of the Partnership. The
portion of the Penalty Amount paid to the Timely Partners shall
not, for any purpose, be deemed to be a Capital Contribution.
(c) Defaulting Partners.
(i) If a Delinquent Partner fails to pay the Unpaid Amount
together with the Penalty Amount to the Partnership or the Timely
Partners as provided in Section 2.4(b) on or before the
expiration of the Grace Period, such failure shall constitute a
"Payment Default" and if such Payment Default is not thereafter
cured in full as provided in Section 2.4(c)(iii) the Delinquent
Partner shall for all purposes hereof be considered a "Defaulting
Partner" with the effect described herein.
(ii) If a Payment Default occurs with respect to any Additional
Contribution Notice, the Chief Executive Officer shall, within
five (5) days after the related Contribution Date, give a notice
(a "Default Loan Notice") to each Partner that was a Paying
Partner with respect to such Additional Contribution Notice
requesting the Paying Partners to make loans (each a "Default
Loan") to the Partnership in an aggregate amount equal to the
Unpaid Amount. Each Paying Partner that is willing to commit to
make a Default Loan (each a "Lending Partner") shall so notify
the Chief Executive Officer and each other Paying Partner within
ten (10) days after the date the Default Loan Notice was given,
setting forth the maximum portion of the Unpaid Amount, up to one
hundred percent (100%) thereof, that such Lending Partner is
willing to lend to the Partnership (the "Lending Commitment").
The amount of the Default Loan that each Lending Partner shall be
entitled to make to the Partnership in response to a Default Loan
Notice shall be determined in the same manner as provided in
Section 2.4(a) for the determination of the amount of the
Additional Capital Contribution that each Contributing Partner is
entitled to make in response to a Shortfall Notice. The amount
of the Default Loan to be made by each Lending Partner in
response to the Default Loan Notice as so determined shall be
paid to the account of the Partnership designated in the Default
Loan Notice within fifteen (15) days after the date the Default
Loan Notice was given. Each Default Loan shall bear interest
from the date made (the "Loan Date") until paid in full or
contributed to the Partnership as provided in this Section 2.4 at
the Floating Rate applicable following the Grace Period and shall
be evidenced by a promissory note of the Partnership in the form
of Exhibit 2.3(c)(ii) hereto (with any changes thereto requested
by any lender under any Senior Credit Agreement and consented to
by the Lending Partner, which consent shall not be unreasonably
withheld).
(iii) A Delinquent Partner may cure its Payment Default at
any time prior to the close of business on the ninetieth (90th)
day following the Loan Date (the "Cure Date") by transferring to
an account of the Partnership designated by the Chief Executive
Officer as an Additional Capital Contribution cash in an amount
equal to the sum of the Unpaid Amount and the Penalty Amount
accrued thereon to the date of such transfer (the "Make-up
Amount"). The portion of the Make-up Amount equal to the Penalty
Amount shall be deemed to be a Special Contribution by the
Delinquent Partner to the Partnership and the balance thereof
shall constitute an Additional Capital Contribution by the
Delinquent Partner to the Partnership. The Chief Executive
Officer shall cause the Partnership to apply the funds so
received from the Delinquent Partner to the payment in full of
the unpaid principal of and accrued interest on each Default Loan
in accordance with the terms of the note evidencing the same.
(iv) If a Delinquent Partner has not timely cured its Payment
Default in full in accordance with Section 2.4(c)(iii), then the
Lending Partners shall contribute their respective Default Loans
to the Partnership effective as of the day following the Cure
Date and surrender the notes evidencing the same to the
Partnership for cancellation. The unpaid principal amount of a
Lending Partner's Default Loan through the Cure Date shall
constitute an Additional Capital Contribution (and the accrued
interest on such Default Loan shall constitute a Special
Contribution) by the Lending Partner to the Partnership as of the
effective date of such contribution.
(d) Adjustments to Percentage Interests. The Percentage
Interests of the Partners shall be adjusted in accordance with
the definition of "Percentage Interest" to give effect to
Additional Capital Contributions made pursuant to Section 2.3 and
this Section 2.4, provided that if there are any Declining
Partners or Delinquent Partners with respect to any Additional
Contribution Notice, the determination of the amount of the
adjustment of the Percentage Interests for Additional Capital
Contributions made in response to such notice will be deferred
until the later of the last day for the making of Additional
Capital Contributions in connection with any Shortfall and the
expiration of the Grace Period, provided, however, that such
adjustment whenever determined shall be effective as of the
Contribution Date. If any Partner is a Defaulting Partner with
respect to an Additional Contribution Notice, the Percentage
Interests of the Partners will be further adjusted as and when
Additional Capital Contributions are made as contemplated by
clause (iii) or (iv), as applicable, of Section 2.4(c). Solely
for purposes of calculating Percentage Interests, the Gross Asset
Value of the License Contribution made by Cox pursuant to Section
2.3(d) shall not be treated as a Capital Contribution until the
Contribution Date on which the License Contribution is credited
against an Additional Capital Contribution to be made by Cox.
The Management Committee shall provide notice of each adjustment
to all Partners and Schedule 2.1 shall be revised to reflect such
adjustment.
(e) Paying Partners. A Paying Partner that declines to
make a Funding Commitment or Lending Commitment as contemplated
by this Section 2.4 shall not be deemed to be a Delinquent
Partner or Defaulting Partner as a result thereof, nor shall the
failure to make such a commitment constitute a Payment Default
with respect to such Partner.
(f) Floating Rate. Subject to the last two sentences of
Section 2.7, the term "Floating Rate" means the rate per annum
(computed on the basis of the actual number of days elapsed in a
year of 365 or 366 days, as applicable), compounded monthly,
equal to the greater of (i) the Prime Rate (adjusted as and when
changes in the Prime Rate occur) plus (x) during the Grace
Period, two percent (2%) and (y) following the Grace Period, five
percent (5%), and (ii) the rate per annum applicable to
borrowings by the Partnership under its principal credit
facility, if any, or, if a choice of rates is then available to
the Partnership, the highest such rate (in either case adjusted
as and when changes in such applicable rate occur) plus,
following the Grace Period, two percent (2%).
2.5 Other Additional Capital Contributions.
Each Partner may contribute from time to time such
additional cash or other Property as the Management Committee may
approve by Unanimous Vote or as may be expressly contemplated by
this Agreement, provided that any Capital Contribution of
property (other than cash) made pursuant to this Section 2.5
shall be subject to the terms and provisions of an Additional
Contribution Agreement.
2.6 Partnership Funds.
The funds of the Partnership shall be deposited in such bank
accounts or invested in such investments as shall be designated
by the Management Committee. Partnership funds shall not be
commingled with those of any Person other than a wholly owned
subsidiary of the Partnership without the consent of all
Partners. The Partnership shall not lend or advance funds to, or
guarantee any obligation of, a Partner or any Affiliate thereof
without the prior written consent of all Partners.
2.7 Partner Loans; Other Borrowings.
In order to satisfy the Partnership's financial needs, the
Partnership may, if so approved by the requisite vote of the
Management Committee, borrow from (i) banks, lending
institutions or other unrelated third parties, and may pledge
Partnership properties or the production of income therefrom
to secure and provide for the repayment of such loans and
(ii) any Partner or an Affiliate of a Partner. Loans made by a
Partner or an Affiliate of a Partner (a "Partner Loan") shall be
evidenced by a promissory note of the Partnership in the form
attached hereto as Exhibit 2.7 and, subject to the last two
sentences of this Section 2.7, shall bear interest payable
quarterly from the date made until paid in full at a rate per
annum to be determined by the Management Committee that is
no less favorable to the Partnership than if the loan had been
made by an independent third party. Unless a Partner
declines to make such loan or is a Defaulting Partner or a
Partner subject to Bankruptcy, Partner Loans shall be made pro
rata in accordance with the respective
Percentage Interests of the Partners (or in such other proportion
as the Management Committee may approve by Unanimous Vote).
Unless otherwise determined by the Management Committee, all
Partner Loans shall be unsecured and the promissory notes
evidencing the same shall be nonnegotiable and, except as
otherwise provided in this Section 2.7(c) or Section 12.3(c),
nontransferable. Repayment of the principal amount of and
accrued interest on all Partner Loans and Default Loans shall be
subordinated to the repayment of the principal of and accrued
interest on any indebtedness of the Partnership to third party
lenders to the extent required by the applicable provisions of
the instruments creating such indebtedness to third party lenders
("Senior Credit Agreements"). All amounts required to be paid in
accordance with the terms of such notes and all amounts permitted
to be prepaid shall be applied to the notes held by the Partners
in accordance with the order of payment contemplated by
Section 14.2(b)(ii) and (iii). Subject to the terms of
applicable Senior Credit Agreements, Partner Loans shall be
repaid to the Partners at such times as the Partnership has
sufficient funds to permit such repayment without jeopardizing
the Partnership's ability to meet its other obligations on a
timely basis. Nothing contained in this Agreement or in any
promissory note issued by the Partnership hereunder shall require
the Partnership or any Partner to pay interest or any amount as a
penalty at a rate exceeding the maximum amount of interest
permitted to be collected from time to time under applicable
usury laws. If the amount of interest or of such penalty payable
by the Partnership or any Partner on any date would exceed the
maximum permissible amount, it shall be automatically reduced to
such amount, and interest or the amount of the penalty for any
subsequent period, to the extent less than that permitted by
applicable usury laws, shall, to that extent, be increased by the
amount of such reduction.
An election by a Partner to purchase all or any portion of
another Partner's Interest pursuant to Sections 5.1, 11, 12.4,
12.5, 12.6 or 14.7 shall also constitute an election to purchase
an equivalent portion of any outstanding Partner Loans held by
such selling Partner, and each purchasing Partner shall be
obligated to purchase a percentage of such Partner Loans equal to
the percentage of the selling Partner's Interest such purchasing
Partner is obligated to purchase for a price equal to the
outstanding principal and accrued and unpaid interest on such
Partner Loans through the date of the closing of such purchase
(except in the case of a transfer pursuant to Section 12.4, in
which case the terms of the Purchase Offer shall apply).
2.8 Other Matters.
(a) No Partner shall have the right to demand or, except as
otherwise provided in Sections 4.1 and 14.2, receive a return of
all or any part of its Capital Account or its Capital
Contributions or withdraw from the Partnership without the
consent of all Partners. Under circumstances requiring a return
of all or any part of its Capital Account or Capital
Contributions, no Partner shall have the right to receive
Property other than cash.
(b) The Exclusive Limited Partners shall not be liable for the
debts, liabilities, contracts or any other obligations of the
Partnership. Except as otherwise provided by any other
agreements among the Partners or mandatory provisions of
applicable state law, an Exclusive Limited Partner shall be
liable only to make Capital Contributions to the extent required
by Sections 2.2, 2.3, 2.5 and 14.3 and shall not be required to
lend any funds to the Partnership or, after such Capital
Contributions have been made, to make any additional Capital
Contributions to the Partnership.
(c) No other Partner shall have any personal liability for the
repayment of any Capital Contributions of any Partner.
(d) No Partner shall be entitled to receive interest on its
Capital Contributions or Capital Account.
SECTION 3
ALLOCATIONS
3.1 Profits.
After giving effect to the special allocations set forth in
Sections 3.3 and 3.4, Profits for any Allocation Year shall be
allocated in the following order and priority:
(a) First, one hundred percent (100%) to the Partners, in
proportion to, and to the extent of, an amount equal to the
excess, if any, of (i) the cumulative Losses allocated to each
such Partner pursuant to Section 3.5 for all prior Allocation
Years, over (ii) the cumulative Profits allocated to such Partner
pursuant to this Section 3.1(a) for all prior Allocation Years;
(b) Second, one hundred percent (100%) to the Partners, in
proportion to, and to the extent of, an amount equal to the
excess, if any, of (i) the cumulative Losses allocated to each
such Partner pursuant to Section 3.2(c) for all prior Allocation
Years, over (ii) the cumulative Profits allocated to such Partner
pursuant to this Section 3.1(b) for all prior Allocation Years;
(c) Third, to the extent such Profits arise during or after
the Allocation Year in which all or substantially all of the
Partnership's assets are disposed of, to the Partners in such
ratios and amounts as may be necessary to cause the balances in
their Capital Accounts to be as nearly as practicable in the same
ratio as their respective Percentage Interests; and
(d) The balance, if any, among the Partners in proportion to
their Percentage Interests.
3.2 Losses.
After giving effect to the special allocations set forth in
Sections 3.3 and 3.4, Losses for any Allocation Year shall be
allocated in the following order and priority:
(a) First, one hundred percent (100%) to the Partners, in
proportion to, and to the extent of, the excess, if any, of
(i) the cumulative Profits allocated to each such Partner
pursuant to Section 3.1(d) for all prior Allocation Years, over
(ii) the cumulative Losses allocated to such Partner pursuant to
this Section 3.2(a) for all prior Allocation Years; and
(b) Second, to the extent such Losses arise during or after
the Allocation Year in which all or substantially all of the
Partnership's assets are disposed of, to the Partners in such
ratio and amounts as may be necessary to cause the balances in
their Capital Accounts to be as nearly as practicable in the same
ratio as their respective Percentage Interests; and
(c) The balance, if any, among the Partners in proportion to
their Percentage Interests.
3.3 Special Allocations.
The following special allocations shall be made in the
following order:
(a) Minimum Gain Chargeback. Except as otherwise provided in
Section 1.704-2(f) of the Regulations, notwithstanding any other
provision of this Section 3, if there is a net decrease in
Partnership Minimum Gain during any Allocation Year, each Partner
shall be specially allocated items of Partnership income and gain
for such Allocation Year (and, if necessary, subsequent
Allocation Years) in an amount equal to such Partner's share of
the net decrease in Partnership Minimum Gain, determined in
accordance with Regulations Section 1.704-2(g). Allocations
pursuant to the previous sentence shall be made in proportion to
the respective amounts required to be allocated to each Partner
pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(f)(6) and 1.704-
2(j)(2) of the Regulations. This Section 3.3(a) is intended to
comply with the minimum gain chargeback requirement in Section
1.704-2(f) of the Regulations and shall be interpreted
consistently therewith.
(b) Partner Minimum Gain Chargeback. Except as
otherwise provided in Section 1.704-2(i)(4) of the Regulations,
notwithstanding any other provision of this Section 3, if there
is a net decrease in Partner Nonrecourse Debt Minimum Gain
attributable to a Partner Nonrecourse Debt during any Allocation
Year, each Partner who has a share of the Partner Nonrecourse
Debt Minimum Gain attributable to such Partner Nonrecourse Debt,
determined in accordance with Section 1.704-2(i)(5) of the
Regulations, shall be specially allocated items of Partnership
income and gain for such Allocation Year (and, if necessary,
subsequent Allocation Years) in an amount equal to such Partner's
share of the net decrease in Partner Nonrecourse Debt Minimum
Gain attributable to such Partner Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to
the respective amounts required to be allocated to each Partner
pursuant thereto. The items to be so allocated shall be
determined in accordance with Sections 1.704-2(i)(4) and 1.704-
2(j)(2) of the Regulations. This Section 3.3(b) is intended to
comply with the minimum gain chargeback requirement in Section
1.704-2(i)(4) of the Regulations and shall be interpreted
consistently therewith.
(c) Qualified Income Offset. In the event any Exclusive
Limited Partner unexpectedly receives any adjustments,
allocations, or distributions described in Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) or
1.704-1(b)(2)(ii)(d)(6) of the Regulations, items of Partnership
income and gain shall be specially allocated to each such
Exclusive Limited Partner in an amount and manner sufficient to
eliminate, to the extent required by the Regulations, the
Adjusted Capital Account Deficit of such Exclusive Limited
Partner as quickly as possible, provided that an allocation
pursuant to this Section 3.3(c) shall be made only if and to the
extent that such Exclusive Limited Partner would have an Adjusted
Capital Account Deficit after all other allocations provided for
in this Section 3 have been tentatively made as if this Section
3.3(c) were not in the Agreement.
(d) Gross Income Allocation. In the event any Exclusive
Limited Partner has a deficit Capital Account at the end of any
Allocation Year which is in excess of the sum of (i) the amount
such Exclusive Limited Partner is obligated to restore pursuant
to any provision of this Agreement, and (ii) the amount such
Exclusive Limited Partner is deemed to be obligated to restore
pursuant to the penultimate sentences of Sections 1.704-2(g)(1)
and 1.704-2(i)(5) of the Regulations, each such Exclusive Limited
Partner shall be specially allocated items of Partnership income
and gain in the amount of such excess as quickly as possible,
provided that an allocation pursuant to this Section 3.3(d) shall
be made only if and to the extent that such Exclusive Limited
Partner would have a deficit Capital Account in excess of such
sum after all other allocations provided for in this Section 3
have been made as if Section 3.3(c) and this Section 3.3(d) were
not in the Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any
Allocation Year shall be specially allocated among the Partners
in proportion to their Percentage Interests.
(f) Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Allocation Year shall be specially allocated
to the Partner who bears the economic risk of loss with respect
to the Partner Nonrecourse Debt to which such Partner Nonrecourse
Deductions are attributable in accordance with Regulations
Section 1.704-2(i)(1).
(g) Section 754 Adjustments. To the extent an adjustment to
the adjusted tax basis of any Partnership asset pursuant to Code
Section 734(b) or Code Section 743(b) is required pursuant to
Regulations Section 1.704-1(b)(2)(iv)(m)(2) or
1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining
Capital Accounts as the result of a distribution to a Partner in
complete liquidation of its Interest, the amount of such
adjustment to Capital Accounts shall be treated as an item of
gain (if the adjustment increases the basis of the asset) or loss
(if the adjustment decreases such basis) and such gain or loss
shall be specially allocated to the Partners in accordance with
their interests in the Partnership in the event Regulations
Section 1.704-1(b)(2)(iv)(m)(2) applies, or to the Partner to
whom such distribution was made in the event Regulations Section
1.704-1(b)(2)(iv)(m)(4) applies.
(h) Allocations Relating to Taxable Issuance of Partnership
Interests. Any income, gain, loss or deduction realized as a
direct or indirect result of the issuance of an Interest by the
Partnership to a Partner (the "Issuance Items") shall be
allocated among the Partners so that, to the extent possible, the
net amount of such Issuance Items, together with all other
allocations under this Agreement to each Partner, shall be equal
to the net amount that would have been allocated to each such
Partner if the Issuance Items had not been realized.
(i) Special Interest Allocation. In the event that the
Partnership makes any payment in respect of interest accrued on
any Default Loan in any Allocation Year, the deduction
attributable to such payment shall be specially allocated to the
Delinquent Partner with respect to which such Default Loan was
made.
3.4 Curative Allocations.
The allocations set forth in Sections 3.3(a), 3.3(b), 3.3(c),
3.3(d), 3.3(e), 3.3(f) and 3.3(g) (the "Regulatory Allocations")
are intended to comply with certain requirements of the
Regulations. It is the intent of the Partners that, to the extent
possible, all Regulatory Allocations shall be offset either with
other Regulatory Allocations or with special allocations of other
items of Partnership income, gain, loss or deduction pursuant to
this Section 3.4. Therefore, notwithstanding any other provision
of this Section 3 (other than the Regulatory Allocations), the
Management Committee shall make such offsetting special
allocations of Partnership income, gain, loss or deduction in
whatever manner it determines appropriate so that, after
such offsetting allocations are made, each Partner's
Capital Account balance is, to the extent possible, equal to the
Capital Account balance such Partner would have had if the
Regulatory Allocations were not part of the Agreement and all
Partnership items were allocated pursuant to Sections 3.1, 3.2,
3.3(h) and 3.3(i). In exercising its discretion under this
Section 3.4, the Management Committee shall take into account
future Regulatory Allocations under Sections 3.3(a) and 3.3(b)
that, although not yet made, are likely to offset other
Regulatory Allocations previously made under Section 3.3(e) and
3.3(f).
3.5 Loss Limitation.
The Losses allocated pursuant to Section 3.2 shall not
exceed the maximum amount of Losses that can be so allocated
without causing (or increasing the amount of) any Exclusive
Limited Partner to have an Adjusted Capital Account Deficit at
the end of any Allocation Year. All Losses in excess of such
limitation shall be allocated to the Partners who are not
Exclusive Limited Partners in proportion to their Percentage
Interests.
3.6 Other Allocation Rules.
(a) For purposes of determining the Profits, Losses, or any
other items allocable to any period, Profits, Losses, and any
such other items shall be determined on a daily, monthly, or
other basis, as determined by a Required Majority Vote of the
Management Committee using any permissible method under Code
Section 706 and the Regulations thereunder.
(b) The Partners are aware of the income tax consequences of
the allocations made by this Section 3 and hereby agree to be
bound by the provisions of this Section 3 in reporting their
shares of Partnership income and loss for income tax purposes.
(c) Solely for purposes of determining a Partner's
proportionate share of the "excess nonrecourse liabilities" of
the Partnership within the meaning of Section 1.752-3(a)(3) of
the Regulations, the Partners' interests in Partnership profits
are in proportion to their Percentage Interests.
(d) To the extent permitted by Section 1.704-2(h)(3) of the
Regulations, the Management Committee shall endeavor to treat
distributions of cash as having been made from the proceeds of a
Nonrecourse Liability or a Partner Nonrecourse Debt only to the
extent that such distributions would cause or increase an
Adjusted Capital Account Deficit for any Exclusive Limited
Partner.
3.7 Tax Allocations: Code Section 704(c).
In accordance with Code Section 704(c) and the Regulations
thereunder, income, gain, loss, and deduction with respect to any
property contributed to the capital of the Partnership shall,
solely for tax purposes, be allocated among the Partners so as to
take account of any variation between the adjusted basis of such
property to the Partnership for federal income tax purposes and
its initial Gross Asset Value (computed in accordance with the
definition of Gross Asset Value).
In the event the Gross Asset Value of any Partnership asset
is adjusted pursuant to subparagraph (ii) of the definition of
Gross Asset Value, subsequent allocations of income, gain, loss,
and deduction with respect to such asset shall take account of
any variation between the adjusted basis of such asset for
federal income tax purposes and its Gross Asset Value in the same
manner as under Code Section 704(c) and the Regulations
thereunder.
Any elections or other decisions relating to such
allocations shall be made by the Management Committee in any
manner that reasonably reflects the purpose and intention of this
Agreement. Allocations pursuant to this Section 3.7 are solely
for purposes of federal, state, and local taxes and shall not
affect, or in any way be taken into account in computing, any
Partner's Capital Account or share of Profits, Losses, other
items, or distributions pursuant to any provision of this
Agreement.
SECTION 4
DISTRIBUTIONS
4.1 Available Cash.
Except as otherwise provided in Section 4.2 and 14.2,
Available Cash, if any, shall be distributed among the Partners
in cash in proportion to their Percentage Interests at such times
and in such amounts as the Management Committee shall determine
by Required Majority Vote. The Partnership shall pay in full all
Partner Loans (in accordance with the order of payment
contemplated by Section 14.2(b)) prior to making any cash
distributions to the Partners.
4.2 Tax Distributions.
Available Cash shall be distributed to the Partners in
proportion to their Percentage Interests within one hundred
thirty-five (135) days after the end of each Fiscal Year of the
Partnership in an aggregate amount equal to the Hypothetical
Federal Income Tax Amount for such Fiscal Year.
4.3 Amounts Withheld.
All amounts withheld pursuant to the Code or any provision
of any state or local tax law from any payment or distribution to
a Partner shall be treated as amounts paid or distributed to such
Partner pursuant to this Section 4 for all purposes under this
Agreement. The Management Committee is authorized to withhold
from payments and distributions to any Partner and to pay over to
any federal, state, or local government any amounts required to
be so withheld pursuant to the Code or any provisions of any
other federal, state, or local law.
SECTION 5
MANAGEMENT
5.1 Authority of the Management Committee.
(a) General Authority. Subject to the limitations and
restrictions set forth in this Agreement, the General Partners
shall conduct the business and affairs of the Partnership, and
all powers of the Partnership, except those specifically reserved
to the Partners by the Act or this Agreement, are hereby granted
to and vested in the General Partners, which shall conduct such
business and exercise such powers through their Representatives
on the Management Committee.
(b) Delegation. The Management Committee shall have the
power to delegate authority to such officers, employees, agents
and representatives of the Partnership as it may from time to
time deem appropriate. Any delegation of authority to take any
action must be approved in the same manner as would be required
for the Management Committee to approve such action directly.
(c) Number and Term of Office. The Management
Committee initially shall have six voting members, one of which
shall be designated by each Cable Partner and three of which
shall be designated by Sprint. Each General Partner shall give
written notice to the other General Partners on or prior to the date
hereof of the Person(s) selected to be its initial Representative(s).
The Chief Executive Officer shall be a non-voting member of the
Management Committee. During the term of this Agreement,
except as otherwise provided below, each General Partner shall
be entitled to designate one Representative to the Management
Committee, provided that (i) for so long as Sprint is entitled to
representation on the Management Committee (except as
otherwise provided below), Sprint shall be entitled to designate
three Representatives to the Management Committee; provided,
however, that at any time any other Partner holds a greater
Voting Percentage Interest than Sprint (except as otherwise
provided below), Sprint shall be entitled to designate only two
Representatives to the Management Committee; and provided,
further, that at any time any other Partner holds a greater Voting
Percentage Interest than Sprint and Sprint's Percentage Interest
is less than twenty percent (20%), Sprint shall be entitled to
designate only one Representative to the Management Committee,
and (ii) those Partners, if any, that are Controlled Affiliates of the
same Parent (a "Related Group") shall collectively be entitled to
designate only the largest number of Representatives as is entitled
to be designated by any single member of the Related Group, which
Representative(s) shall be designated by the Partner that has the
largest Percentage Interest of the Partners in the Related Group.
Any Partner whose Percentage Interest, together with the Percentage
Interest(s) of each other Partner, if any, that is a member of the
same Related Group, is, in the aggregate, less than the Minimum
Ownership Requirement shall, for so long as its Percentage Interest
or the aggregate Percentage Interest of its Related Group, as
applicable, is less than the Minimum Ownership Requirement, not
be entitled to designate a Representative to the Management
Committee, and the Representative of such Partner or Related
Group, as applicable, shall immediately cease to be a member of
the Management Committee, without any further act by the affected
Partner.
Any Partner who becomes an Adverse Partner shall
immediately forfeit the right to designate a member of the
Management Committee, and the Representative(s) of the affected
Partner shall immediately cease to be a member of the Management
Committee, without any further act by the affected Partner;
provided that if a Partner becomes an Adverse Partner as the
result of the occurrence of an Adverse Act described in clause
(iii), (iv), (vi) or (vii) of the definition of such term in
Section 1.10, such Partner will regain (or its transferee will be
entitled to, as applicable) the right to designate a
Representative on the Management Committee (if otherwise so
entitled thereto under this Agreement) if (i) a Partner that is
an Adverse Partner other than as a result of the occurrence of an
Adverse Act described in clause (iii) of the definition of such
term in Section 1.10 Transfers its Interest in compliance with
Section 12 to a Person that is not an Adverse Partner and does
not become an Adverse Partner as a result of such Transfer, (ii)
in the case of a Partner that is an Adverse Partner as a
consequence of the occurrence of an Adverse Act described in
clause (iii) of the definition of such term in Section 1.10,
there is a Final Determination that such Partner's actions or
failure to act did not constitute such an Adverse Act, (iii) a
Partner that is an Adverse Partner as a consequence of Bankruptcy
ceases to be in a state of Bankruptcy, (iv) a Partner that is an
Adverse Partner as a consequence of the occurrence of any IXC
Transaction ceases to have the relationship with the IXC which
caused such IXC Transaction to occur, or (v) a Partner that is an
Adverse Partner as a consequence of the occurrence of an event
described in clause (vii) of the definition of the term "Adverse
Act" in Section 1.10 takes actions that eliminate the
circumstances that constituted such an Adverse Act within the
meaning of such clause (vii). The membership of the Management
Committee shall be increased or decreased from time to time in
accordance with the preceding sentences.
Each Representative shall hold office at the pleasure
of the Partner that designated such Representative. Any Partner
may at any time, and from time to time, by written notice to the
other Partners remove any or all of the Representatives
designated by such Partner, with or without cause, and appoint
substitute Representatives to serve in their stead. Each Partner
shall be entitled to name an alternate Representative to serve in
the place of any Representative appointed by such Partner should
any such Representative not be able to attend a meeting or
meetings, which alternate shall be deemed to be a Representative
hereunder with respect to any action taken at such meeting or
meetings. Each Partner shall bear the costs incurred by each
Representative or alternate designated by it to serve on the
Management Committee, and no Representative or alternate shall be
entitled to compensation from the Partnership for serving in such
capacity.
The written notice of a Partner's appointment of a
Representative or alternate shall in each case set forth such
Representative's or alternate's business and residence addresses
and business telephone number. Each Partner shall promptly give
written notice to the other Partners of any change in the
business or residence address or business telephone number of any
of its Representatives. Each Partner shall cause its
Representatives on the Management Committee to comply with the
terms of this Agreement. In the absence of prior written notice
to the contrary, any action taken by a Representative of a
Partner shall be deemed to have been duly authorized by the
Partner that appointed such Representative.
(d) Vacancy. In the event any Representative dies or is
unwilling or unable to serve as such or is removed from office by
the Partner that designated him or her, such Partner shall
promptly designate a successor to such Representative.
(e) Place of Meeting/Action by Written Consent. The
Management Committee may hold its meetings at such place or
places within or outside the State of Delaware as the Management
Committee may from time to time determine or as may be designated
in the notice calling the meeting. If a meeting place is not so
designated, the meeting shall be held at the Partnership's
principal office. Notwithstanding anything to the contrary in
this Section 5.1, the Management Committee may take without a
meeting any action contemplated to be taken by the Management
Committee under this Agreement if such action is approved by the
unanimous written consent of a Representative of each of the
Partners (which may be executed in counterparts). The initial
meeting of the Management Committee shall take place on such date
and at such time and place as the Partners shall agree. The
Management Committee may meet in person or by means of conference
telephone or similar communications equipment. Each
Representative shall have the right to participate in any meeting
by means of conference telephone or similar communications
equipment.
(f) Regular Meetings. The Management Committee shall hold
regular meetings no less frequently than quarterly and shall
establish meeting times, dates and places and requisite notice
requirements and adopt rules or procedures consistent with the
terms of this Agreement. At such meetings the members of the
Management Committee shall transact such business as may properly
be brought before the meeting.
(g) Special Meetings. Special meetings of the Management
Committee may be called by any Representative. Notice of each
such meeting shall be given to each member of the Management
Committee by telephone, telecopy, telegram or similar method (in
which case notice shall be given at least twenty-four (24) hours
before the time of the meeting) or sent by first-class mail (in
which case notice shall be given at least five (5) days before
the meeting), unless a longer notice period is established by the
Management Committee. Each such notice shall state (i) the time,
date, place (which shall be at the principal office of the
Partnership unless otherwise agreed to by all Representatives) or
other means of conducting such meeting and (ii) the purpose of
the meeting to be so held. Any Representative may waive notice
of any meeting in writing before, at or after such meeting. The
attendance of a Representative at a meeting shall constitute a
waiver of notice of such meeting, except when a Representative
attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting was not properly
called.
(h) Voting. The Representative(s) of each General Partner
or of the General Partners in a Related Group shall together have
voting power equal to the Voting Percentage Interest held by such
General Partner or the aggregate Voting Percentage Interest of
the General Partners in such Related Group, as applicable, as in
effect from time to time. If a General Partner or a Related
Group designates only one Representative, such Representative
shall be entitled to vote the entire voting power held by such
General Partner or the General Partners in such Related Group, as
applicable. If a General Partner or Related Group designates
more than one Representative, such Representatives shall vote the
entire voting power of such General Partner or the General
Partners in such Related Group as a single unit. None of the
Partners (other than the Partners in a Related Group) shall enter
into any agreements with any other Partner regarding the voting
of their Interests or of Representatives on the Management
Committee.
(i) Required Majority Decisions. Except as provided in
Section 5.1(j) or as otherwise expressly provided in this
Agreement, all actions required or permitted to be taken by the
Management Committee (including the matters listed on Schedule
5.1(i)) must be approved by the affirmative vote, at a meeting at
which a quorum is present, of Representatives with voting power
of seventy-five percent (75%) or more of the Voting Percentage
Interests of all Partners whose Representatives are not required
by Section 8.7 or any other express provision of this Agreement
to abstain from such vote (a "Required Majority Vote").
(j) Unanimous Vote (Management Committee). No action may
be taken by the Partnership in connection with any of the matters
listed on Schedule 5.1(j) without the prior approval of the
Management Committee by the unanimous vote of all of the
Representatives who are not required to abstain from the vote
with respect to the particular matter as provided for in Section
8.7 of this Agreement or any other express provision of this
Agreement, whether or not present at a Management Committee
meeting (a "Unanimous Vote").
(k) Unanimous Decisions (Partners).
(i) No action may be taken by the Partnership in
connection with any of the matters listed on Schedule 5.1(k)
without the prior consent of all of the Partners (including
Exclusive Limited Partners) other than any Partner required to
abstain from the vote with respect to a particular matter by
Section 8.7 or any other express provision of this Agreement (a
"Unanimous Partner Vote").
(ii) If any matter listed on Schedule 5.1(k) or
otherwise required by this Agreement to be approved by the
unanimous consent of the Partners is not approved solely as a
result of the failure of one or more Exclusive Limited Partners
to consent to such action (each, a "Blocking Limited Partner"),
the remaining Partners (other than any Exclusive Limited Partner)
may purchase all but not less than all of the respective
Interests of the Blocking Limited Partner(s) pursuant to this
Section 5.1(k)(ii) if the Management Committee elects to initiate
the procedures in this Section. For a period ending at 11:59
p.m. (local time at the Partnership's principal office) on the
thirtieth (30th) day following the date on which such Blocking
Limited Partner failed to consent to such matter, the Management
Committee may elect to cause the Net Equity of the Blocking
Limited Partner's Interest to be determined in accordance with
Section 11.3. For purposes of such determination of Net Equity,
the Management Committee shall designate the First Appraiser as
required by Section 11.4 and the Blocking Limited Partner shall
designate the Second Appraiser within ten (10) days of receiving
notice of the First Appraiser. For a period ending at 11:59 p.m.
(local time at the Partnership's principal office) on the
thirtieth (30th) day following the date on which notice of the
Net Equity of the Blocking Limited Partner's Interest is given
pursuant to Section 11.3 (the "Section 5.1 Election Period"),
except as otherwise provided in Section 11.2(b), each of the
Partners (other than any Exclusive Limited Partner) may elect to
purchase all or any portion of the Interests of the Blocking
Limited Partners. Such elections shall be made, and the purchase
of the Blocking Limited Partner's Interest shall occur, in the
manner and pursuant to the procedures set forth in Section 11.2
as if the Blocking Limited Partner were an Adverse Partner and
the Election Period referred to in Section 11.2 was the Section 5.1
Election Period; provided that the Buy-Sell Price of
the Blocking Limited Partner's Interest shall be equal to the Net
Equity thereof. Notwithstanding the foregoing, the Blocking
Limited Partner will not be subject to the buy-out provisions of
this Section 5.1(k)(ii) if the matter to which the Blocking
Limited Partner refused to consent would, if approved, have
adversely affected the Exclusive Limited Partner's rights and
obligations under this Agreement in a manner different from the
other Partners.
(l) Proxies; Minutes. Each Representative entitled to vote
at a meeting of the Management Committee may authorize another
Person to act for him by proxy; provided that such proxy must be
signed by the Representative and shall be revocable by such
Representative any time prior to such meeting. Minutes of each
meeting of the Management Committee shall be prepared by the
Chief Executive Officer or his or her designee and circulated to
the Representatives. Written consents to any action taken by the
Management Committee shall be filed with the minutes.
(m) Quorum. At any meeting of the Management
Committee duly called or held, the presence or participation in
person, by conference telephone or similar communications
equipment or by proxy of Representatives with voting power equal
to at least a Required Majority Vote of the Voting Percentage
Interests of all Partners shall constitute a quorum for the taking
of any action at such meeting.
5.2 Business Plan and Annual Budget.
(a) Simultaneously with the execution of this Agreement,
the Management Committee has adopted the Management
Committee Resolution specifying the aggregate Auction Commitment.
Prior to the commencement of the PCS Auction, the General
Partners shall, and shall cause their respective Representatives on
the Management Committee to, use all commercially reasonable
efforts and cooperate in good faith with each other to develop and
approve by Unanimous Vote of the Management Committee a
strategic plan for the Wireless Business during the Auction Period
(the "Wireless Strategic Plan"). Within sixty (60) days after the
completion of the PCS Auction relating to frequency blocks "A"
and "B", the General Partners shall, and shall cause their
respective Representatives on the Management Committee to,
use all commercially reasonable efforts and cooperate in good
faith with each other to develop and approve a business plan
("Business Plan") for the Partnership covering the balance of the
Fiscal Year in which the PCS Auction is completed and the
succeeding Fiscal Years through the Fiscal Year ending
December 31, 1999 (such initial Business Plan, if approved,
being herein referred to as the "Initial Business Plan"). The
Initial Business Plan shall include capital expenditure and
operating budgets for each Fiscal Year covered thereby and
shall also specify for each Fiscal Year (or portion thereof)
covered thereby the aggregate amount of Additional Capital
Contributions that would be requested of the
Partners during such Fiscal Year based on the
assumptions (or varying sets of assumptions) upon which the
Initial Business Plan was prepared (which shall be stated
therein) and depending, if applicable, on the achievement of any
milestones specified therein.
(b) The approval of the Initial Business Plan shall require
the Unanimous Vote of the Management Committee.
(c) The Chief Executive Officer shall submit annually to
the Management Committee at least ninety (90) days prior to the
start of each Fiscal Year after the first full Fiscal Year (i) a
proposed budget (the "Proposed Budget") for the forthcoming
Fiscal Year including an income statement prepared on an accrual
basis which shall show in reasonable detail the revenues and
expenses projected for the Partnership's business for the
forthcoming Fiscal Year and a cash flow statement which shall
show in reasonable detail the receipts and disbursements
projected for the Partnership's business for the forthcoming
Fiscal Year and the amount of any corresponding cash deficiency
or surplus, and the required Additional Capital Contributions, if
any, and any contemplated borrowings of the Partnership and
(ii) a proposed revised Business Plan ("Proposed Business Plan")
for the Fiscal Year covered by the Proposed Budget and the
succeeding four Fiscal Years in substantially the same or greater
detail as the Initial Business Plan and containing such
additional categories of information as may be appropriate to
reflect the progress of the development of the Partnership's
business. Such Proposed Budget and Proposed Business Plan shall
be prepared on a basis consistent with the Partnership's audited
financial statements. If such Proposed Budget or such Proposed
Business Plan is approved by the Management Committee, then such
Proposed Budget or such Proposed Business Plan, as the case may
be, shall be considered approved and shall constitute the "Annual
Budget" or the "Approved Business Plan," as the case may be, for
all purposes of this Agreement and shall supersede any previously
approved Annual Budget or Approved Business Plan, as the case may
be. Except as provided on Schedule 5.1(j), the approval of each
Proposed Budget and Proposed Business Plan and action by the
Partnership constituting any material deviation from any Annual
Budget or Approved Business Plan shall require the Required
Majority Vote of the Management Committee. No Approved Business
Plan or Annual Budget shall be inconsistent with the provisions
of this Agreement, nor shall this Agreement be deemed amended by
any provision of an Approved Business Plan or Annual Budget. If
a Proposed Budget or Proposed Business Plan is not approved by
the Required Majority Vote of the Management Committee, then the
General Partners shall cause their Representatives to cooperate
in good faith and confer with the Chief Executive Officer and
other senior officers of the Partnership for the purpose of
attempting to arrive at a Proposed Budget or Proposed Business
Plan, as the case may be, that can secure the approval of the
Management Committee.
(d) If, notwithstanding the foregoing procedures, on
January 1 of any Fiscal Year no Proposed Budget has been approved
by the Management Committee for such Fiscal Year, then the Annual
Budget for the prior Fiscal Year, adjusted (without duplication)
to reflect increases or decreases resulting from the following
events, shall govern until such time as the Management Committee
approves a new Proposed Budget:
(i) the operation of escalation or de-escalation provisions
in contracts in effect at the time of approval of the prior
Fiscal Year's Annual Budget solely as a result of the passage of
time or the occurrence of events beyond the control of the
Partnership to the extent such contracts are still in effect;
(ii) elections made in any prior Fiscal Year under contracts
contemplated by the Annual Budget for the prior Fiscal Year
regardless of which party to such contracts makes such election;
(iii) increases or decreases in expenses attributable to the
annualized effect of employee additions or reductions during the
prior Fiscal Year contemplated by the Annual Budget for the prior
Fiscal Year;
(iv) changes in interest expense attributable to any loans
made to or retired by the Partnership (including Partner Loans);
(v) increases in overhead expenses in an amount equal to
the total of overhead expenses reflected in the Annual Budget for
the prior Fiscal Year multiplied by the increase in the Consumer
Price Index for the prior year, but in no event more than five
percent (5%);
(vi) the anticipated incurrence of costs during such Fiscal
Year for any legal, accounting and other professional fees or
disbursements in connection with events or changes not
contemplated at the time of preparation of the Annual Budget for
the prior Fiscal Year;
(vii) the continuation of the effects of a decision made by
the Management Committee or the Partners in the prior Fiscal Year
with respect to any of the matters referred to on Schedules
5.1(i), 5.1(j) or 5.1(k) that are not reflected in the Annual
Budget for the prior Fiscal Year; and
(viii) decreases in expense attributable to non-recurring
items reflected in the prior Fiscal Year's Annual Budget.
Any budget established pursuant to this Section 5.2(d) is
herein referred to as a "Default Budget."
(e) If a Proposed Business Plan is submitted for approval
pursuant to this Section 5.2 and is not approved by the requisite
vote of the Management Committee, the Business Plan most recently
approved by the Management Committee pursuant to Section 5.2(c)
shall remain in effect as the Approved Business Plan; provided,
that, if a Proposed Budget is approved pursuant to Section 5.2(c)
(and the corresponding Proposed Business Plan is not so
approved), the Approved Business Plan then in effect shall be
deemed to be amended so that the Fiscal Year therein
corresponding to the Fiscal Year for which such Annual Budget has
been approved shall be consistent with such Annual Budget.
(f) The day-to-day business and operations of the
Partnership shall be conducted in accordance with the Approved
Business Plan and the Annual Budget (or Default Budget) then in
effect and the policies, strategies and standards established by
the Management Committee. The Management Committee and the
officers and employees of the Partnership shall implement the
Annual Budget and Approved Business Plan.
5.3 Employees.
The Management Committee will appoint the senior management
of the Partnership and will establish policies and guidelines for
the hiring of employees to permit the Partnership to act as an
operating company with respect to its Wireless Business. The
Management Committee may adopt appropriate management incentive
plans and employee benefit plans.
5.4 Limitation of Agency.
The Partners agree not to exercise any authority to act for
or to assume any obligation or responsibility on behalf of the
Partnership except (i) as approved by the Management Committee by
Required Majority Vote, (ii) as approved by written agreement
among the General Partners and (iii) as expressly provided
herein. No Partner shall have any authority to act for or to
assume any obligations or responsibility on behalf of another
Partner under this Agreement except (i) as approved by written
agreement among the Partners and (ii) as expressly provided
herein. Subject to Section 5.6, in addition to the other
remedies specified herein, each Partner agrees to indemnify and
hold the Partnership and the other Partners harmless from and
against any claim, demand, loss, damage, liability or expense
(including reasonable attorneys' fees and disbursements and
amounts paid in settlement, but excluding any indirect, special
or consequential damages) incurred by or against such other
Partners or the Partnership and arising out of or resulting from
any action taken by the indemnifying Partner in violation of this
Section 5.4.
5.5 Liability of Partners and Representatives.
No Partner, former Partner or Representative or former
Representative, no Affiliate of any thereof, nor any partner,
shareholder, director, officer, employee or agent of any of the
foregoing, shall be liable in damages for any act or failure to
act in such Person's capacity as a Partner or Representative or
otherwise on behalf of the Partnership unless such act or
omission constituted bad faith, gross negligence, fraud or
willful misconduct of the indemnified person or a violation of
this Agreement. Subject to Section 5.6, each Partner, former
Partner, Representative and former Representative, each Affiliate
of any thereof, and each partner, shareholder, director, officer,
employee and agent of any of the foregoing, shall be indemnified
and held harmless by the Partnership, its receiver or trustee
from and against any liability for damages and expenses,
including reasonable attorneys' fees and disbursements and
amounts paid in settlement, resulting from any threatened,
pending or completed action, suit or proceeding relating to or
arising out of such Person's acts or omissions in such Person's
capacity as a Partner or Representative or (except as provided in
Section 5.4) otherwise involving such Person's activities on
behalf of the Partnership, except to the extent that such damages
or expenses result from the bad faith, gross negligence, fraud or
willful misconduct of the indemnified Person or a violation by
such Person of this Agreement or an agreement between such Person
and the Partnership. Any indemnity by the Partnership, its
receiver or trustee under this Section 5.5 shall be provided out
of and to the extent of Partnership Property only.
5.6 Indemnification.
Any Person asserting a right to indemnification under
Section 5.4 or 5.5 shall so notify the Partnership or the other
Partners, as the case may be, in writing. If the facts giving
rise to such indemnification shall involve any actual or
threatened claim or demand by or against a third party, the
indemnified Person shall give such notice promptly (but the
failure to so notify shall not relieve the indemnifying Person
from any liability which it otherwise may have to such
indemnified Person hereunder except to the extent the
indemnifying Person is actually prejudiced by such failure to
notify). The indemnifying Person shall be entitled to control
the defense or prosecution of such claim or demand in the name of
the indemnified Person, with counsel satisfactory to the
indemnified Person, if it notifies the indemnified Person in
writing of its intention to do so within twenty (20) days of its
receipt of such notice, without prejudice, however, to the right
of the indemnified Person to participate therein through counsel
of its own choosing, which participation shall be at the
indemnified Person's expense unless (i) the indemnified Person
shall have been advised by its counsel that use of the same
counsel to represent both the indemnifying Person and the
indemnified Person would present a conflict of interest (which
shall be deemed to include any case where there may be a legal
defense or claim available to the indemnified Person which is
different from or additional to those available to the
indemnifying Person), in which case the indemnifying Person shall
not have the right to direct the defense of such action on behalf
of the indemnified Person, or (ii) the indemnifying Person shall
fail vigorously to defend or prosecute such claim or demand
within a reasonable time. Whether or not the indemnifying Person
chooses to defend or prosecute such claim, the Partners shall
cooperate in the prosecution or defense of such claim and shall
furnish such records, information and testimony and attend such
conferences, discovery proceedings, hearings, trials and appeals
as may reasonably be requested in connection therewith. The
indemnifying Person may not take control of any investigation or
defense, without the consent of any indemnified Person, if the
claims involved in such proceedings involve any material risk of
the sale, forfeiture or loss of, or the creation of any lien
(other than a judgment lien) on, any material property of such
indemnified Person or could entail a risk of criminal liability
to such indemnified Person.
The indemnified Person shall not settle or permit the
settlement of any claim or action for which it is entitled to
indemnification without the prior written consent of the
indemnifying Person, unless the indemnifying Person shall have
failed to assume the defense thereof after the notice and in the
manner provided above.
The indemnifying Person may not without the consent of the
indemnified Person agree to any settlement (i) that requires such
indemnified Person to make any payment that is not indemnified
hereunder, (ii) does not grant a general release to such
indemnified Person with respect to the matters underlying such
claim or action, or (iii) that involves the sale, forfeiture or
loss of, or the creation of any lien on, any material property of
such indemnified Person. Notwithstanding the foregoing, the
indemnifying Person may not in connection with any such
investigation, defense or settlement, without the consent of the
indemnified Person, take or refrain from taking any action which
would reasonably be expected to materially impair the
indemnification of such indemnified Person hereunder or would
require such indemnified Person to take or refrain from taking
any action or to make any public statement, which such
indemnified Person reasonably considers to materially adversely
affect its interests.
Upon the request of any indemnified Person, the indemnifying
Person shall use reasonable efforts to keep such indemnified
Person reasonably apprised of the status of those aspects of such
investigation and defense controlled by the indemnifying Person
and shall provide such information with respect thereto as such
indemnified Person may reasonably request.
5.7 Temporary Investments.
All Property in the form of cash not otherwise invested
shall be deposited for the benefit of the Partnership in one or
more accounts of the Partnership or any of its wholly owned
subsidiaries, maintained in such financial institutions as the
Management Committee shall determine or shall be invested in
short-term liquid securities or other cash-equivalent assets or
shall be left in escrow, and withdrawals shall be made only for
Partnership purposes on such signature or signatures as the
Management Committee may determine from time to time.
5.8 Deadlocks.
(a) Upon the occurrence of a Deadlock Event, the General
Partners shall first use their good faith efforts to resolve such
matter in a mutually satisfactory manner. If, after such efforts
have continued for twenty (20) days, no mutually satisfactory
solution has been reached, the General Partners shall resolve the
Deadlock Event as provided herein:
(i) The General Partners shall (at the insistence of any of
them) refer the matter to the chief executive officers of their
respective Parents for resolution.
(ii) Should the chief executive officers of the Parents fail to
resolve the matter within ten (10) days after it is referred to
them, each General Partner (or any group of General Partners
electing to act together) shall prepare a brief (a "Brief"),
which includes a summary of the issue, its proposed resolution of
the issue and considerations in support of such proposed
resolution, not later than ten (10) days following the failure of
the chief executive officers to resolve such dispute, and such
Briefs shall be submitted to such reputable and experienced
mediation service as is selected by the Management Committee by
Required Majority Vote or, failing such selection, by the Chief
Executive Officer (the "Mediator"). During a period of twenty
(20) days, the Mediator and the General Partners shall attempt to
reach a resolution of the Deadlock Event.
(iii) In the event that after such twenty (20) day period
(or such longer period as the Management Committee may approve by
Required Majority Vote), the General Partners are still unable to
reach resolution of the Deadlock Event (such resolution to be
evidenced by the requisite vote of the Management Committee with
respect to the underlying matters), the Deadlock Event shall
constitute a Liquidating Event as provided in Section
14.1(a)(iii) unless the Management Committee determines by
Required Majority Vote not to dissolve.
(b) A "Deadlock Event" shall be deemed to have occurred if
(i) after failing to approve a Proposed Budget or Proposed
Business Plan for one Fiscal Year, the Management Committee has
failed to approve a Proposed Budget or Proposed Business Plan for
the next succeeding Fiscal Year prior to the commencement of such
succeeding Fiscal Year, or (ii) the position of Chief Executive
Officer is vacant for a period of more than sixty (60) days after
at least two Partners with an aggregate of at least thirty-three
percent (33%) of the Voting Percentage Interests have proposed a
candidate to fill such vacancy.
5.9 Conversion to Corporate Form.
(a) In the event that the Management Committee shall determine
by Required Majority Vote (or such other vote as may be required
by Item B. of Schedule 5.1(i)) that it is desirable or helpful
for the business of the Partnership to be conducted in a
corporate rather than in a partnership form (for the purposes of
conducting a public offering or otherwise), the Management
Committee shall have the power to incorporate the Partnership in
Delaware. In connection with any such incorporation of the
Partnership, the Partners shall receive, in exchange for their
Interests, shares of capital stock of such corporation having the
same relative economic interests and other rights as such
Partners hold in the Partnership as set forth in this Agreement,
subject in each case to (i) any modifications required solely as
a result of the conversion to corporate form and (ii)
modifications to the provisions of Section 5.1 to conform to the
provisions relating to actions of stockholders and a board of
directors set forth in the Delaware General Corporation Law;
provided, that the relative number of representatives on the
board of directors and relative voting power of the outstanding
equity interests of such corporation of each General Partner
shall be as nearly as practicable in proportion to the relative
Voting Percentage Interests of the General Partners immediately
prior to such incorporation. For purposes of the preceding
sentence, each Partner's relative economic interest in the
Partnership shall equal such Partner's Net Equity as compared to
the Net Equity of all of the Partners, as determined in
accordance with Section 11.3 except that the Management Committee
shall by Required Majority Vote select a single Appraiser to
determine Gross Appraised Value. At the time of such conversion,
the Partners shall enter into a stockholders' agreement providing
for (i) rights of first refusal and other restrictions on
transfer equivalent to those set forth in Sections 12.1 through
12.4; provided that such restrictions shall not apply, following
the initial Public Offering by the corporate successor to the
Partnership, to sales in broadly disseminated Public Offerings or
sales in accordance with Rule 144 under the Securities Act of
1933 (the "1933 Act"), including the manner of sale required by
Rule 144 (whether or not applicable to such sale) and (ii) an
agreement to vote all shares of capital stock held by them with
respect to the election of directors of the corporation so as to
duplicate as closely as possible the management structure of the
Partnership as set forth in Section 5.1.
(b) Upon conversion to corporate form, the corporate successor
to the Partnership shall grant to each of the Partners certain
rights to require such successor to register under the 1933 Act
the shares of capital stock received by the Partners in exchange
for their Partnership Interests. Such rights shall be as
approved by the Required Majority vote of the Management
Committee, provided that the registration rights of each Partner
shall be identical on a proportionate basis.
(c) Each Partner shall have preemptive rights, exercisable in
accordance with procedures to be established by the Management
Committee in connection with and following the conversion of the
Partnership to corporate form, to purchase equity securities
proposed to be issued from time to time by a corporate successor
to the Partnership or its successor, provided, however, that no
Partner shall have any such preemptive right with respect to any
equity securities which, by a vote of the board of directors of
such corporate successor that is equivalent to a Required
Majority Vote, have been approved for issuance by such corporate
successor in connection with (i) a Public Offering or (ii) any
acquisition (including by way of merger or consolidation) by the
corporate successor of the equity interests or assets of another
entity that is not a Partner or its Affiliate in a transaction
pursuant to which the purchase price is paid by delivery of such
equity securities to the seller. A "Public Offering" means an
offering by the corporate successor pursuant to a registration
statement on a form applicable to the sale of securities to the
general public.
SECTION 6
PARTNERSHIP OPPORTUNITIES;
CONFIDENTIALITY
6.1 Engaging in Wireless Businesses.
(a) In General. For so long as any Person is a Partner,
neither such Person nor any of its Controlled Affiliates shall
engage in any Competitive Activity in the United States of
America (including its territories and possessions other than
Puerto Rico) except (i) through the Partnership, (ii) subject to
Section 6.1(d), as provided in Section 6.1(b) or 6.1(c) or (iii)
as permitted by Section 6.3 or 6.4. The term "Competitive
Activity" means to bid on, acquire or, directly or indirectly,
own, manage, operate, join, control, or finance or participate in
the ownership, management, operation, control or financing of, or
be connected as a principal, agent, representative, consultant,
beneficial owner of an interest in any Person, or otherwise with,
or use or permit its name to be used in connection with, any
business or enterprise which (i) engages in the bidding for or
acquisition of any Wireless Business license or engages in any
Wireless Business and, in either such case, provides services
within the Exclusive Services, or (ii) offers, promotes or brands
services that are within the Exclusive Services.
(b) Bidding for Wireless Business Licenses. Except as
permitted by Section 6.4, no Partner nor any of its Controlled
Affiliates shall bid in the PCS Auction for any Wireless Business
licenses unless (i) the Management Committee consents to such bid
following consultation by such Partner with the Representatives
of the other Partners; or (ii) (A) the Partnership has entered a
bid or bids for such license, but a third-party bid has been
entered which equals or exceeds the maximum amount that the
Partnership has determined to bid for such license, (B) if a vote
was taken, such Partner's Representative(s) voted in favor of the
Partnership's increasing the amount it would bid for such
license, and (C) the Partnership has determined not to increase
its bid in response to such third party bid. Prior to the PCS
Auction, the Partners will agree upon procedures to facilitate
the bid by a Partner under the circumstances described in clause
(ii) above and to permit the Partnership to re-enter the bidding
on its own behalf following any such bid; provided the purchase
price of a license purchased by or on behalf of a Partner
pursuant to this Section 6.1(b) shall be in addition to (and not
credited against) such Partner's Auction Commitment. This
Section 6.1(b) will not permit a Partner or its Affiliate to bid
for or acquire a Wireless Business license if the bidding for or
acquisition of such license by a Partner or its Affiliate would
otherwise violate (or cause the Partnership or any of the other
Partners or their respective Affiliates to be in violation of)
the FCC's rules or orders relating to Wireless Business license
cross-ownership, license attribution standards, and/or spectrum
attribution or aggregation requirements, including Sections 20.6,
24.204 and 24.229(c) of the FCC's rules.
(c) Acquiring Interests in Wireless Businesses. If any
Partner or any of its Controlled Affiliates proposes to engage in
any Competitive Activity other than as permitted by Section
6.1(b), 6.3 or 6.4, then such Partner shall first offer to the
Partnership the opportunity to engage, in lieu of such Partner
and its Affiliates, in such Competitive Activity (whether by
acquiring such interest itself or itself offering, promoting or
branding such services) (the "Offer"), which Offer shall be made
in writing and shall set forth in reasonable detail the nature and
scope of the activity proposed to be engaged in, including all
material terms of any proposed acquisition. The Partnership
(by Required Majority Vote of the Management Committee
pursuant to Section 8.7) shall have thirty (30) days from receipt
of the Offer to accept or reject it. If the Partnership fails to
accept the Offer within such thirty (30) day period, it shall be
deemed to have rejected the Offer, and the offering Partner or
its Affiliate shall be permitted to engage in such Competitive
Activity on terms no more favorable to such Partner or its
Affiliate than those described in the Offer. If the Partnership
accepts the Offer, the offering Partner and its Affiliates shall not
pursue such opportunity to engage in such Competitive Activity;
provided, however, that if the Partnership accepts the Offer but
does not within a commercially reasonable period of time after such
acceptance take reasonable steps to pursue such opportunity, other
than as a result of a violation of this Agreement or wrongful acts or bad
faith on the part of the offering Partner or its Controlled Affiliates, then
the offering Partner or its Controlled Affiliate shall be permitted to
pursue such opportunity on terms no more favorable to the offering
Partner than those terms described in the Offer. If the offering
Partner or its Controlled Affiliate does not take reasonable
steps to pursue such opportunity contemplated by the Offer within
a reasonable period of time after acquiring the right to do so in
accordance with the foregoing provisions of this Section 6.1(c)
(including, in the case of an acquisition, by entering into a
definitive agreement (subject solely to obtaining the requisite
regulatory approvals and other customary closing conditions) with
respect to such acquisition within one hundred twenty (120) days
thereafter), then it shall lose its right to pursue such
opportunity and thereafter be required to reoffer the opportunity
to do so to the Partnership in accordance with, and shall
otherwise comply with, this Section 6.1(c). Notwithstanding the
foregoing, a Partner shall not be permitted to present an Offer
to the Partnership (or otherwise engage in any Competitive
Activity in reliance on this Section 6.1(c)) (i) involving any
Wireless Business other than PCS until one year following the
completion of the PCS Auction (the "Lock-out Period") or (ii) in
any license area in which the Partnership or any of its
Controlled Affiliates is otherwise engaged in the Wireless
Business (including pursuant to an Affiliation Agreement), in
either case without a Unanimous Vote of the Management Committee
pursuant to Section 8.7.
(d) Affiliation Agreements. (i) Any Partner or Controlled
Affiliate thereof that acquires or owns a Wireless Business
license, or directly engages in a Wireless Business providing
services included in the Exclusive Services, as permitted by the
exceptions provided by Sections 6.1(b) and 6.1(c) to the
prohibitions on Competitive Activities contained in Section
6.1(a), shall as a condition to the availability of such
exceptions, offer to enter into an affiliation agreement with
respect to such Wireless Business with the Partnership on terms
and conditions comparable to those which the Partnership offers
to other affiliated Wireless Businesses in similar situations (or
if no such agreement then exists, such terms and conditions shall
include a provision for competitive pricing), under which such
Wireless Business will provide its services to the public as an
affiliate of the Partnership's business (as entered into with a
Partner or its Controlled Affiliate or any other person, an
"Affiliation Agreement"). The Management Committee may waive
compliance with all or any part of this Section 6.1(d) with
respect to any transaction by Required Majority Vote of the
Management Committee pursuant to Section 8.7.
(ii) Each Partner and its Controlled Affiliates shall also
use all commercially reasonable efforts to cause any Affiliate of
such Partner which acquires or owns a Wireless Business
license, or otherwise engages in any Wireless Business,
and provides services within the Exclusive Services, to (if the
Partnership so desires) enter into an Affiliation Agreement with
the Partnership.
(e) Geographic Restrictions. Unless approved by the
unanimous consent of the Partners, the Partnership will not
engage in any Competitive Activities in the Philadelphia,
Cleveland, Richmond, El Paso, Jacksonville, Knoxville, Charlotte
or Omaha MTAs, including bidding for or acquiring any PCS
licenses therein; provided that, to the extent permitted by law,
the Partnership may enter into Affiliation Agreements with
Persons engaged in Competitive Activities in such MTAs.
(f) Unrestricted Activities. Nothing in this Section 6 shall
prevent any Person from (i) providing any Non-Exclusive Services
or engaging in any Excluded Business or (ii) complying with any
applicable laws, rules or regulations, including those requiring
that any facilities be made available to any other Person.
6.2 Enforceability and Enforcement.
(a) The Partners acknowledge and agree that the time, scope,
geographic area and other provisions of Section 6.1 have been
specifically negotiated by sophisticated parties and agree that
such time, scope, geographic area, and other provisions are
reasonable under the circumstances. If, despite this express
agreement of the Partners, a court should hold any portion of
Section 6.1 to be unenforceable for any reason, the maximum
restrictions of time, scope and geographic area reasonable under
the circumstances, as determined by the court, will be
substituted for the restrictions held to be unenforceable.
(b) The Partnership shall be entitled to preliminary and
permanent injunctive relief, without the necessity of proving
actual damages or posting any bond or other security, to prevent
any breach of Section 6.1, which rights shall be cumulative and
in addition to any other rights or remedies to which the
Partnership may be entitled.
6.3 General Exceptions to Section 6.1.
The restrictions set forth in Section 6.1 on Competitive
Activities shall not be construed to prohibit any of the
following actions by a Partner and its Controlled Affiliates
except to the extent any such action would (i) cause the
Partnership (including the ownership of its assets and the
conduct of its business) to be in violation of any law or
regulation or otherwise result in any restriction or other
limitation on the Partnership's ownership of its assets or
conduct of its business or (ii) in any way impair, prevent or
delay the ability of the Partnership to bid for or acquire a
Wireless Business license during the Lock-out Period in
any license area in which the Partnership plans to engage in
a Competitive Activity pursuant to or as set forth in the Wireless
Strategic Plan:
(a) The acquisition or ownership of any debt or equity
securities registered pursuant to the Securities Exchange Act of
1934, so long as such securities (i) do not represent more than
five percent (5%) of the aggregate voting power of the
outstanding capital stock of any Person that engages in a
Competitive Activity (assuming the conversion, exercise or
exchange of all such securities held by such Partner or its
Controlled Affiliates that are convertible, exercisable or
exchangeable into or for voting stock) or (ii) in the case of
debt securities, entitle the holder to receive only interest or
other returns that are fixed, or vary by reference to an index or
formula that is not based on the value or results of operations
of such Person;
(b) The acquisition (through merger, consolidation,
purchase of stock or assets, or otherwise) of a Person or an
interest in a Person, which engages (directly or indirectly
through an Affiliate that is controlled by such Person) in any
Competitive Activity if the Competitive Activity does not
constitute the principal activity, in terms of revenues or fair
market value, of the businesses acquired in such acquisition or
conducted by the Person in which such interest is acquired,
provided, in each case, that such Partner or Controlled Affiliate
divests itself of the Competitive Activity or interest therein as
soon as is practicable, but in no event later than twenty-four
(24) months, after the acquisition unless the Management
Committee approves the entering into of an Affiliation Agreement
with respect to such Competitive Activity pursuant to Section
8.7;
(c) The continued holding of an equity interest in an Person
that commences a Competitive Activity following the acquisition
of such equity interest if neither the Partner nor its Controlled
Affiliate has any responsibility or control over the conduct of
such Competitive Activity, does not permit its name to be used in
connection with such Competitive Activity and uses all
commercially reasonable efforts, including voting its equity
interest, to cause such Person either (i) to cease such
Competitive Activity or (ii) to offer to enter into an
Affiliation Agreement with the Partnership;
(d) The conduct of any Competitive Activity that is a
necessary component of or an incidental part of the conduct of
any Excluded Business by a Partner or its Controlled Affiliates
or the entering into of an arrangement with an independent third
party for the provision of any services included in the Exclusive
Services which is a necessary component of or an incidental part
of the conduct of such Excluded Business, so long as, in each
case, such Partner or Controlled Affiliate shall first use all
commercially reasonable efforts to negotiate agreements with the
Partnership, which are reasonable in the independent judgment of
both parties, pursuant to which the Partnership would provide such
services included in the Exclusive Services on terms no less
favorable to the Partner or such Controlled Affiliate than such
Partner or Controlled Affiliate could obtain from an independent
third party or could provide itself;
(e) The ownership and operation by (i) a partnership of
Sprint, TCI and Cox of a PCS license and a Wireless Business in
the Philadelphia MTA ("PhillieCo") and (ii) any of Cox, Comcast
and TCI or their Affiliates (acting singly or jointly through a
partnership or other entity) of a PCS License and an associated
Wireless Business in any of the Cleveland, Richmond, El Paso,
Jacksonville, Knoxville and Omaha MTAs, in each case so long as
such owners or entities holding the licenses enter into
Affiliation Agreements with the Partnership, subject to
applicable law;
(f) Any Partner may conduct any Competitive Activity
involving the provision of any product or service that is an
ancillary value-added addition to a Wireless Business and which
does not itself require an FCC license (including but not limited
to operator services, location services and weather, sports and
other information services);
(g) The ownership and operation by Sprint of its cellular
business within the territories in which it currently operates;
and
(h) The ownership by Cox or its Affiliate of PioneerCo.
Notwithstanding anything to the contrary in this Section 6, any
investment fund in which a Partner or any of its Affiliates has
an investment (including pension funds) that invests funds on
behalf of and has a fiduciary duty to third party investors shall
be permitted to engage in or invest in entities engaged in any
activity whatsoever provided that, neither such Partner nor any
of its Controlled Affiliates, directly or indirectly, exercises
any management or operational control whatsoever in any such
entity engaging in a Wireless Business providing Exclusive
Services.
6.4 Comcast Exceptions.
The restrictions set forth in Section 6.1 shall not
apply with respect to the following:
(a) Subject to the limitations set forth in this Section
6.4, Comcast and its Controlled Affiliates may engage in any
Competitive Activities with respect to any Wireless Services in
the Comcast Area.
(b) Comcast and its Controlled Affiliates may participate
in a bid for and/or acquire any interest in a 10 MHz PCS license
only in any of the BTAs in the Philadelphia MTA or the Allentown,
Pennsylvania BTA. Comcast and its Controlled Affiliates may
acquire any interest in a 10 MHz PCS license in any of the
following cellular license areas in New Jersey: Hunterdon
County, Middlesex County, Monmouth County and Ocean County;
provided, that at the time of such acquisition Comcast and its
Controlled Affiliates own a controlling interest in a cellular
license for such area and further provided, that the license area
of such 10 MHz license shall not extend beyond such area in other
than an immaterial manner. In the event Comcast and its
Controlled Affiliates own a controlling interest in any such 10
MHz PCS license, then Comcast and its Controlled Affiliates will,
to the extent permitted by applicable law, provide for their
customers receiving services under any such 10 MHz PCS license to
receive roaming services from any of the Partnership's or its
Affiliate's businesses providing services under any PCS license
(the "Partnership's Businesses"), subject to the conditions that
(i) such roaming is technically feasible, (ii) such roaming is at
competitive rates and on other terms and conditions reasonably
acceptable to Comcast and its Controlled Affiliates, (iii) the
Partnership's Businesses support the features and services
provided by Comcast and its Controlled Affiliates to their
customers and (iv) subject to the same conditions, the
Partnership's Businesses will provide for their customers to
receive reciprocal roaming services from Comcast and its
Controlled Affiliates in the areas described above at such times
as neither PhillieCo nor the Partnership owns or has an
affiliation with respect to a Wireless Business license for such
areas. Notwithstanding the foregoing, if the ownership by
Comcast or any of its Controlled Affiliates of any 10 MHz PCS
license outside of the Philadelphia MTA (A) causes the
Partnership (including the ownership of its assets and the
conduct of its business) to be in violation of any law or
regulation or otherwise results in any restriction or other
limitation on the Partnership's ownership of its assets or
conduct of its business or (B) in any way impairs, prevents or
delays the ability of the Partnership to bid for or acquire a
Wireless Business license in any license area in which the
Partnership plans to engage in a Competitive Activity pursuant to
or as set forth in the Wireless Strategic Plan or its
then-current Business Plan, Comcast and its Controlled Affiliates
will be prohibited from making such acquisition or, if such
acquisition has already occurred, will cure the circumstances
described above (including, if required, by divesting its
ownership of the 10 MHz PCS license) within a commercially
reasonable period of time after its receipt of notice from the
Partnership of the existence of such circumstances; provided
that, in the event of such divestiture, Comcast and its
Controlled Affiliates will have the right to resell service in
such area provided such resale shall occur using the
Partnership's facilities if they are available and it is
technically feasible to do so.
(c) Comcast and its Controlled Affiliates may engage in any
Competitive Activities utilizing its currently held SMR assets
within the territory covered by its current SMR licenses.
(d) Comcast and its Controlled Affiliates may engage in any
Competitive Activities with respect to any Wireless Services in
the Kankakee, Illinois RSA cellular license area as well as the
cellular license area served by Indiana Cellular Holdings, Inc.,
Harrisburg Cellular Telephone Company, Aurora/Elgin Cellular
Telephone Company, Inc. and Joliet Cellular Telephone Company,
Inc.; provided that such Competitive Activities are confined to
the geographic territories of the cellular licenses currently
held by such businesses.
(e) Comcast and its Controlled Affiliates may participate
in regional marketing activities within the Comcast Area for the
purpose of: (i) selling to its "In-Territory Customers" (as
defined below) wireless services within the Washington, D.C., New
York and Philadelphia MTAs; and (ii) obtaining distribution from
its "In-Territory Distributors" (as defined below) of wireless
services within the Washington, D.C., New York and Philadelphia
MTAs; provided that (A) Comcast and its Controlled Affiliates do
not maintain or deploy any sales personnel, sales office or other
direct sales presence, or otherwise advertise or promote the
Comcast brand or any other brand, in either the New York MTA or
the Washington, D.C. MTA outside of the Comcast Area, (B) Comcast
and its Controlled Affiliates do not own or lease any wireless
transmission facilities outside of the Comcast Area in connection
therewith and (C) in obtaining the distribution contemplated by
Section 6.4(e)(ii), Comcast and its Controlled Affiliates
subcontract the provision of wireless services outside the
Comcast Area to a third party provider only if such services
cannot be subcontracted to the Partnership without material
adverse consequences for Comcast's and its Controlled Affiliates'
ability to participate in such regional marketing activities.
For the purposes hereof, an "In-Territory Customer" is a customer
that has a business location in the Comcast Area and places the
order for the services described above through Comcast and its
Controlled Affiliates in the Comcast Area. For the purposes
hereof, an "In-Territory Distributor" is a distributor that has a
business location in the Comcast Area and requires a regional
contract be entered into by Comcast and its Controlled Affiliates
in the Comcast Area. For purposes of this Section 6.4(e), the
term "Comcast Area" shall include any area in which Comcast and
its Controlled Affiliates at such time own a controlling interest
in a PCS license which was permitted to be acquired under
Section 6.4(b).
(f) Comcast and its Controlled Affiliates may hold an
interest in Nextel, Inc. ("Nextel"), provided that (i) none of
Comcast's or its Controlled Affiliates' Agents or Representatives
participate in or are present at any discussions, or receive any
information, regarding Nextel's PCS bidding strategies; and
(ii) at the election of Comcast, no later than the first
anniversary date of the date hereof either (A) Comcast and its
Controlled Affiliates shall own securities representing less than
5.4% of the voting power and equity of all of the outstanding
capital stock of Nextel, (B) no Agent of Comcast or any of its
Controlled Affiliates shall be a director or officer of Nextel,
and no director of Nextel shall be an appointee of Comcast or its
Controlled Affiliates pursuant to any contractual right of
Comcast and its Controlled Affiliates to appoint any director of
Nextel, or (C) Comcast shall elect to become an Exclusive Limited
Partner as of such date by giving written notice of such election
to the Partnership; provided, however, that if Comcast and its
Controlled Affiliates fail to satisfy either of clauses (A) or
(B) above at any time after the first anniversary hereof or
acquire any additional common stock or other voting securities
(or securities convertible into or exchangeable for common stock
or voting securities) of Nextel (other than as a result of the
exercise of its existing stock option to acquire 25,000,000
shares and warrants to acquire 230,000 shares and of the
consummation of its existing required purchase obligation in the
amount of $50,000,000) then Comcast will automatically (without
any action required to be taken by the Partnership or any
Partner) become an Exclusive Limited Partner. Notwithstanding
the preceding sentence, if (1) such acquisition is the result of
the exercise by Comcast and its Controlled Affiliates of
preemptive rights held by them as of the date hereof, (2) Comcast
and its Controlled Affiliates exercise any available registration
rights immediately following such exercise of preemptive rights
and otherwise seek to Transfer such common stock as soon as
practicable; and (3) all of the Nextel common stock so acquired
is Transferred to a non-Affiliate of Comcast and its Controlled
Affiliates within one hundred and eighty (180) days of the date
of acquisition thereof, then Comcast will automatically (without
any action required by the Partnership or any Partner) be
returned to the status of General Partner if it satisfies either
of clauses (A) or (B) above and is not otherwise required to be
an Exclusive Limited Partner under this Section 6.4(f). If
Comcast has become an Exclusive Limited Partner pursuant to this
Section 6.4(f) and has on or before the first anniversary date
hereof presented the Partnership in writing with a plan providing
for the disposition of an ownership interest in Nextel such that
following such disposition Comcast and its Controlled Affiliates
will satisfy the requirements of clause (A) above, then Comcast
will automatically (without any action required by the
Partnership or any Partner) be returned to the status of General
Partner at such time as such plan (or a substantially similar
plan) is consummated if such consummation occurs prior to the
second anniversary of this Agreement and if Comcast is not
otherwise required to be an Exclusive Limited Partner under this
Section 6.4(f). If at any time following the date hereof Comcast
and its Controlled Affiliates own more than 31% of the common
stock of Nextel on a fully diluted basis (provided that at such time
Nextel has a total market capitalization of at least $2,000,000,000),
or own 50% or more of the common stock of Nextel on a fully-
diluted basis (regardless of Nextel's total market capitalization),
then the other Partners will have the option, exercisable within
ninety (90) days of the date of the acquisition of such ownership
interest to purchase the Interest of Comcast at its Net Equity
Value for cash at a closing to be held no later than ninety (90)
days from the date such option is exercised. Such purchase shall
occur in accordance with the procedures set forth in Section 11
as if Comcast is an "Adverse Partner" and each of the other
Partners is a "Purchasing Partner."
(g) The term "Comcast Area" means (i) the following
cellular license areas (or portions thereof) in New Jersey:
Hunterdon NJ1 RSA, New Brunswick MSA, Long Branch MSA,
Trenton MSA, Allentown, PA MSA, Philadelphia MSA, Ocean NJ2
RSA, Atlantic City MSA, Vineland-Millville MSA, and Wilmington,
DE MSA; (ii) Delaware; (iii) Maryland RSA2; (iv) counties in
Pennsylvania in which Comcast and its Controlled Affiliates engage
in the cellular business on the date hereof, and all counties in
Pennsylvania contiguous thereto; (v) the Philadelphia MTA; and
(vi) minor overlaps into any territory adjoining any of the areas
included in (i) - (v) required to efficiently provide services in
such area.
(h) The obligations under Section 6.1(d) shall not apply to
Comcast and its Controlled Affiliates with respect to any
Competitive Activities permitted pursuant to this Section 6.4.
(i) Comcast and its Controlled Affiliates may co-brand or
package any Wireless Services permitted to be provided pursuant
to this Section 6.4 together with their cable television
offerings; provided that in such event the only brand name(s)
which may be used for any such Wireless Services are any of the
following, any combination thereof or any variants thereof
substantially similar thereto: Comcast, Comcast Cellular,
Comcast Metrophone, Metrophone, Comcast Cellular One and Cellular
One, which Comcast represents are currently utilized by its
cellular business in the Comcast Area as of the date hereof;
provided further, however, that Comcast may request that the
Partnership approve the use by Comcast and its Controlled
Affiliates of another brand name (other than that of an
inter-exchange carrier), in which case the Partnership's consent
to the use thereof will not be unreasonably withheld.
6.5 Freedom of Action.
Except as set forth in this Section 6, no Partner or
Affiliate shall have any obligation not to (i) engage in the same
or similar activities or lines of business as the Partnership or
develop or market any products or services that compete, directly
or indirectly, with those of the Partnership, (ii) invest or own
any interest publicly or privately in, or develop a business
relationship with, any Person engaged in the same or similar
activities or lines of business as, or otherwise in competition
with, the Partnership, (iii) do business with any client or
customer of the Partnership, or (iv) employ or otherwise engage a
former officer or employee of the Partnership.
6.6 Confidentiality.
(a) Maintenance of Confidentiality. Each Partner and its
Controlled Affiliates (each a "Restricted Party") shall, and
shall cause their respective officers, directors, employees,
attorneys, accountants, consultants and other agents and advisors
(collectively, "Agents") to, keep secret and maintain in
confidence the terms of this Partnership Agreement and all
confidential and proprietary information and data of the
Partnership and the other Partners or their Affiliates disclosed
to it (in each case, a "receiving party") in connection with the
formation of the Partnership and the conduct of the Partnership's
business and in connection with the transactions contemplated by
the Joint Venture Formation Agreement (the "Confidential
Information") and shall not disclose Confidential Information,
and shall cause their respective Agents not to disclose
Confidential Information, to any Person other than the Partners,
their Controlled Affiliates, their respective Agents that need to
know such Confidential Information, or the Partnership. Each
Partner further agrees that it shall not use the Confidential
Information for any purpose other than monitoring and evaluating
its investment, determining and performing its obligations and
exercising its rights under this Agreement. The Partnership and
each Partner shall take all reasonable measures necessary to
prevent any unauthorized disclosure of the Confidential
Information by any of their respective Controlled Affiliates or
any of their respective Agents.
(b) Permitted Disclosures. Nothing herein shall prevent the
Partnership, any Restricted Party or its Agents from using,
disclosing, or authorizing the disclosure of Confidential
Information it receives in the course of the business of the
Partnership which:
(i) has been published or is in the public domain through no
fault of the receiving party;
(ii) prior to receipt hereunder (or under that certain
Agreement for Use and Non-Disclosure of Proprietary Information,
dated as of May 4, 1994, among Affiliates of the Partners) was
properly within the legitimate possession of the receiving party
or, subsequent to receipt hereunder (or under such Agreement), is
lawfully received from a third party having rights therein
without restriction of the third party's right to disseminate the
Confidential Information and without notice of any restriction
against its further disclosure;
(iii) is independently developed by the receiving party
through parties who have not had, either directly or indirectly,
access to or knowledge of such Confidential Information;
(iv) is disclosed to a third party with the written approval of
the party originally disclosing such information, provided that
such Confidential Information shall cease to be confidential and
proprietary information covered by this Agreement only to the
extent of the disclosure so consented to;
(v) subject to the receiving party's compliance with paragraph
(d) below, is required to be produced under order of a court of
competent jurisdiction or other similar requirements of a
governmental agency, provided that such Confidential Information
to the extent covered by a protective order or equivalent shall
otherwise continue to be Confidential Information required to be
held confidential for purposes of this Agreement; or
(vi) subject to the receiving party's compliance with paragraph
(d) below, is required to be disclosed by applicable law or a
stock exchange or association on which such receiving party's
securities (or those of its Affiliate) are listed.
(c) Notwithstanding this Section 6.5, any Partner may
provide Confidential Information (i) to other Persons considering
the acquisition (whether directly or indirectly) of all or a
portion of such Partner's Interest in the Partnership pursuant to
Section 12 of this Agreement, (ii) to other Persons considering
the consummation of a Permitted Transaction with respect to such
Person or (iii) to any financial institution in connection with
the provision of funds by such financial institution to such
Partner, so long as prior to any such disclosure such other
Person or financial institution executes a confidentiality
agreement that provides protection substantially equivalent to
the protection provided the Partners and the Partnership in this
Section 6.5.
(d) In the event that any receiving party (i) must disclose
Confidential Information in order to comply with applicable law
or the requirements of a stock exchange or association on which
such receiving party's securities or those of its Affiliates are
listed or (ii) becomes legally compelled (by oral questions,
interrogatories, requests for information or documents,
subpoenas, civil investigative demands or otherwise) to disclose
any Confidential Information, the receiving party shall provide
the disclosing party with prompt written notice so that in the
case of clause (i), the disclosing party can work with the
receiving party to limit the disclosure to the greatest extent
possible consistent with legal obligations, or in the case of
clause (ii), the disclosing party may seek a protective order or
other appropriate remedy or waive compliance with the provisions
of this Agreement. In the event that the disclosing party is
unable to obtain a protective order or other appropriate remedy,
or if the disclosing party so directs, the receiving party shall,
and shall cause its employees to, exercise all commercially
reasonable efforts to obtain a protective order or other
appropriate remedy at the disclosing party's reasonable expense.
Failing the entry of a protective order or other appropriate
remedy or receipt of a waiver hereunder, the receiving party
shall furnish only that portion of the Confidential Information
which it is advised by opinion of its counsel is legally required
to be furnished and shall exercise all commercially reasonable
efforts to obtain reliable assurance that confidential treatment
shall be accorded such Confidential Information, it being
understood that such reasonable efforts shall be at the cost and
expense of the disclosing party whose Confidential Information
has been sought.
(e) Any press release concerning the formation and
operation of the Partnership shall be approved in advance by a
Required Majority Vote of the Management Committee.
(f) The obligations under this Section 6.5 shall survive
(i) as to all Partners, the termination of the Partnership,
(ii) as to any Partner, such Partner's withdrawal therefrom (or
otherwise ceasing to be a Partner) and (iii) as to any Person,
such Person's ceasing to be an Affiliate or Agent of a Partner,
in each case for a period of two (2) years from the date of such
termination, withdrawal or cessation, as the case may be;
provided that in the case of a withdrawal or cessation pursuant
to clauses (ii) or (iii) above, such obligations shall continue
indefinitely with respect to any trade secret or similar
information which is proprietary to the Partnership and provides
the Partnership with an advantage over its competitors.
SECTION 7
ROLE OF EXCLUSIVE LIMITED PARTNERS
7.1 Rights or Powers.
The Exclusive Limited Partners shall not have any right or
power to take part in the management or control of the
Partnership or its business and affairs or to act for or bind the
Partnership in any way.
7.2 Voting Rights.
The Exclusive Limited Partners shall have the right to vote
only on the matters specifically reserved for the vote or
approval of Partners (including the Exclusive Limited Partners)
set forth in this Agreement, including those matters listed on
Schedule 5.1(k) hereto.
SECTION 8
TRANSACTIONS WITH PARTNERS; OTHER AGREEMENTS
8.1 Sprint Cellular.
(a) The Partners shall negotiate in good faith terms
pursuant to which Sprint will make available or transfer to the
Partnership assets, expertise and services relating to its
cellular operations, including certain senior level management
and technical expertise from its cellular headquarters and
regional operations, as well as other core employees and
capabilities such as administrative services and intellectual
property.
(b) In the event (i) the Partnership is the winning bidder for
a PCS license with respect to a license area and Sprint and its
Controlled Affiliates have an ownership interest in a cellular
business or businesses (a "Sprint Cellular Business") having a
service area which is included within such license area in whole
or in part (an "Overlap Cellular Area") or (ii) the Partnership
has decided, within thirty (30) months from the date of this
Agreement, to acquire a PCS license in a license area which
includes an Overlap Cellular Area; and as a result of Sprint's
ownership interest in a Sprint Cellular Business the Partnership
would not be awarded on an unconditional basis (in the event of
clause (i) above) or be permitted to acquire (in the event of
clause (ii) above) such PCS license under FCC rules and
regulations relating to CMRS spectrum cap limitations; then
Sprint agrees that it will divest such portion of such Sprint
Cellular Business, within the time period provided by FCC rules
in the event of clause (i) above, and as soon as commercially
reasonable (e.g., to avoid "fire sale" prices) in the event of
clause (ii) above, or take any other action as is necessary, so
that the Partnership will not be impaired from holding or
acquiring such PCS license. Nothing herein prevents one or more
Partners from acquiring a PCS license, subject to an obligation
to affiliate with the Partnership to the extent allowed by law,
if Sprint is unable to divest the overlap property in a timely
manner. This Section 8.1(b) shall not require Sprint to divest,
or take any other action with respect to, any of the Sprint
Cellular Businesses listed on Schedule A-4 of Exhibit A to
Exhibit 1.1(a) to the Joint Venture Formation Agreement.
8.2 Sprint Brand Licensing Agreement.
As promptly as practicable following the execution of this
Agreement, the Partnership will enter into a brand licensing
agreement with Sprint Parent (the "Trademark License") to provide
the Partnership with a national brand license to market its
national Wireless Business containing substantially the terms set
forth in the term sheet attached as Exhibit 1.1(d) to the Joint
Venture Formation Agreement and in Paragraph 8 of Exhibit E to
the NewTelco Summary of Terms attached as Exhibit 1.1(a) to the
Joint Venture Formation Agreement.
8.3 Joint Marketing Agreement.
Following the execution of this Agreement, each Partner
agrees to (i) negotiate in good faith regarding the definitive
terms of a joint marketing agreement among the Partnership, each
of the Partners and certain of their Affiliates reflecting the
principles attached as Exhibit E to Exhibit 1.1(a) to the Joint
Venture Formation Agreement, with such modifications and
additions as the Partners shall negotiate in good faith and (ii)
subject to the agreement of the Partners as to such definitive
documentation, to use all commercially reasonable efforts to
cause such agreement to be executed and delivered as promptly as
practicable following the execution of this Agreement.
8.4 Network Services Agreement.
(a) Following the execution of this Agreement, each Partner
agrees to (i) negotiate in good faith regarding the definitive
terms of a network services agreement to be entered into between
the Partnership and Sprint reflecting the principles attached as
Exhibit F to Exhibit 1.1(a) to the Joint Venture Formation
Agreement (the "Network Services Statement of Principles") with
such modifications and additions as the Partners shall negotiate
in good faith and (ii) subject to the agreement of the Partners
as to such definitive documentation, to use all commercially
reasonable efforts to cause such agreement to be executed and
delivered as promptly as practicable following the execution of
this Agreement.
(b) Pending the execution by Sprint and the Partnership of
a definitive network services agreement, the Partners agree that
(so long as Sprint or its Controlled Affiliate is a Partner) the
Partnership shall be required to purchase the telecommunications
services described in clauses (i) through (iv) of paragraph 1 of
the Network Services Term Sheet at the prices contemplated by
paragraph 2 of the Network Services Term Sheet.
8.5 Preferred Provider.
The Partnership shall contract with each Partner, its
Affiliates and third parties, as appropriate, on a negotiated
arms-length basis, for services it may require, which may include
billing and information systems and marketing and sales services.
The Partnership may in the normal course of its business enter
into transactions with the Partners and their respective Affiliates
provided that, subject to Section 8.5(b) below, the Management
Committee by the requisite vote pursuant to Section 8.7 has
determined that the price and other terms of such transactions are
fair to the Partnership and that the price and other terms of such
transaction are not less favorable to the Partnership than
those generally prevailing with respect to comparable transactions
involving non-Affiliates of Partners. Subject to the foregoing, the
Management Committee, acting in accordance with Section 8.7,
may in its discretion elect from time to time to provide rights of first
opportunity to various Partners or their Affiliates to provide services
to the Partnership; provided that the Management Committee shall
have adopted, by Unanimous Vote, procedures (including conflict
avoidance procedures) relating generally to such right of first
opportunity arrangements, and the provision of such rights and
all matters related to the exercise thereof shall be subject to
and effected in a manner consistent with such procedures. The
Partnership is expressly authorized to enter into the agreements
expressly referred to in this Section 8.
8.6 MFJ.
Each Partner agrees that neither it nor any of its
Controlled Affiliates shall take any action which (i) causes such
Partner or the Partnership to become a BOC or (ii) which causes
the Partnership to become a BOC Affiliated Enterprise or an
entity subject to any restriction or limitation under Section II
of the MFJ if, in the case of an event specified in clause (ii)
above, such event would have a material adverse effect on the
business, assets, liabilities, results or operations, financial
condition or prospects of the Partnership.
8.7 Interested Party Transactions.
Any contract, agreement, relationship or transaction between
the Partnership or any of its subsidiaries, on the one hand, and
any Partner or any Person in which a Partner (including its
Controlled Affiliates) has a direct or indirect material
financial interest or which has a direct or indirect material
financial interest in such Partner (provided that a Person shall
not be deemed to have a such an interest solely as a result of
its ownership of less than 10% (by value) of the outstanding
economic interests in a Publicly Held Parent of a Partner (or a
Publicly Held Intermediate Subsidiary of such Parent) (each, an
"Interested Person") on the other hand, shall be approved and all
decisions with respect thereto (including a decision to accept or
reject an Offer pursuant to Section 6.1(c), the determination to
amend, terminate or abandon any such contract or agreement,
whether there has been a breach thereof and whether to exercise,
waive or release any rights of the Partnership with respect
thereto) shall be made (after full disclosure by the interested
Partner of all material facts relating to such matter) by the
Management Committee (with the Representatives of the interested
Partner(s) absent from the deliberations and abstaining from the
vote with respect thereto) by the requisite affirmative vote of
the Representatives of the disinterested General Partners. For
purposes of the foregoing, a disinterested General Partner is a
General Partner that is not a party to, and does not have an
Interested Person that is a party to, the contract, agreement,
relationship or transaction in question.
8.8 Access to Technical Information.
Subject to the provisions of Sections 6 and 10.4 of this
Agreement and to applicable confidentiality restrictions, the
Partnership shall grant to each Partner and its Controlled
Affiliates access to Technical Information. Such access shall be
granted at such reasonable times and locations and on such other
reasonable terms as the Management Committee may approve by
Required Majority Vote pursuant to Section 8.7. Subject to
Section 6, the Partnership shall grant to any such Partner or its
Controlled Affiliate a license to use any Technical Information
Rights to which it is granted access pursuant to this Section
8.8, which license shall provide for royalties and fees and other
terms and conditions that are generally prevailing with respect
to comparable transactions involving unrelated third parties and
are at least as favorable to such Partner or its Controlled
Affiliate as those generally prevailing with respect to
comparable licenses (if any) granted to non-Affiliates of
Partners.
8.9 Parent Undertaking.
Simultaneously with the execution of this Agreement, each
Parent has executed and delivered to the Partnership and the
other Partners a Parent Undertaking substantially in the form of
Exhibit 8.9. Cox agrees that the Person that will be its Parent
as of January 1, 1996 as provided in the definition of said term
in Section 1.10, if other than Cox Parent, will execute and
deliver to the Partnership and each other Partner a Parent
Undertaking on or before December 31, 1995.
8.10 Certain Additional Covenants.
(a) Each Cable Partner agrees that for so long prior
to the fifth anniversary of the date of this Agreement as it is a
Partner, neither it nor any of its Controlled Affiliates will
engage in any transaction or series of related transactions,
other than a Permitted Transaction, in which cable system assets
owned directly or indirectly by the Parent of such Partner are
Transferred if, after giving effect to such transaction or the
last transaction in such series of related transactions, the
number of basic subscribers served by the cable systems owned by
the Parent of such Partner, directly and indirectly through its
Controlled Affiliates, is equal to twenty-five percent (25%) or
less of the number of basic subscribers served by the cable
systems owned by the Parent of such Partner, directly and
indirectly through its Controlled Affiliates, before giving
effect to such transaction or the first transaction in such
series of related transactions.
(b) Sprint agree that for so long prior to the fifth
anniversary of the date of this Agreement as it is a Partner,
neither it nor any of its Controlled Affiliates will engage in any
transaction or series of related transactions, other than a
Permitted Transaction, in which long distance telecommunications
business assets owned directly or indirectly by the Parent of
Sprint are Transferred if, after giving effect to such
transaction or the last transaction in such series of related
transactions, the number of customers served by the long distance
telecommunications business owned by the Parent of Sprint,
directly and indirectly through its Controlled Affiliates, is
equal to twenty-five percent (25%) or less of the number of
customers served by the long distance telecommunications business
owned by the Parent of Sprint, directly and indirectly through
its Controlled Affiliates, before giving effect to such
transaction or the first transaction in such series of related
transactions.
8.11 PioneerCo Preemptive Rights.
As contemplated by the PioneerCo Term Sheet, the Partners
intend that the definitive partnership agreement relating to
PioneerCo will grant to an Affiliate of Cox and the Partnership
certain put and call rights that may result in the acquisition by
the Partnership of such Affiliate's interest in PioneerCo in
exchange for an additional Interest in the Partnership. At the
time of such exchange, each of the Partners (other than Cox) will
be permitted to make Additional Capital Contributions in cash up
to the amount necessary to permit such Partner to avoid any
reduction in its Percentage Interest as a consequence of such
exchange (assuming that all such other Partners were to exercise
such right).
8.12 Foreign Ownership.
Each Partner agrees that neither it nor any of its
Controlled Affiliates will take any action that (i) causes the
Partnership to violate any federal laws or regulations
restricting foreign ownership of the Partnership (including 47
U.S.C. 310(b) and the rules and regulations promulgated
thereunder by the FCC) (the "Ownership Restrictions") or (ii)
would cause the Partnership to be in violation of the Ownership
Restrictions assuming that Sprint Parent is 28% foreign-owned (as
measured by the Ownership Restrictions). After the date hereof,
the Partners will consider in good faith additional provisions to
be included in this Agreement (i) regarding the relative rights
of the Partners and their Controlled Affiliates with respect to
foreign ownership and (ii) to permit the Partners and the
Partnership to cure any violation of the Ownership Restrictions.
SECTION 9
REPRESENTATIONS AND WARRANTIES
Each Partner hereby represents and warrants that as of the
date hereof:
(a) Due Incorporation or Formation; Authorization of
Agreement. Such Partner is a corporation duly organized or a
partnership duly formed, validly existing and in good standing
under the laws of the jurisdiction of its incorporation or
formation and has the corporate or partnership power and
authority to own its property and carry on its business as owned
and carried on at the date hereof and as contemplated hereby.
Such Partner is duly licensed or qualified to do business and in
good standing in each of the jurisdictions in which the failure
to be so licensed or qualified would have a material adverse
effect on its financial condition or its ability to perform its
obligations hereunder. Such Partner has the corporate or
partnership power and authority to execute and deliver this
Agreement and to perform its obligations hereunder and the
execution, delivery and performance of this Agreement has been
duly authorized by all necessary corporate or partnership action.
Assuming the due execution and delivery by the other parties
hereto, this Agreement constitutes the legal, valid and binding
obligation of such Partner enforceable against such Partner in
accordance with its terms, subject as to enforceability to limits
imposed by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and the availability of equitable
remedies.
(b) No Conflict with Restrictions; No Default. Neither the
execution, delivery and performance of this Agreement nor the
consummation by such Partner of the transactions contemplated
hereby (i) will conflict with, violate or result in a breach of
any of the terms, conditions or provisions of any law,
regulation, order, writ, injunction, decree, determination or
award of any court, any governmental department, board, agency
or instrumentality, domestic or foreign, or any arbitrator,
applicable to such Partner or any of its Controlled Affiliates,
(ii) will conflict with, violate, result in a breach of or constitute a
default under any of the terms, conditions or provisions of the
articles of incorporation, bylaws or partnership agreement of such
Partner or any of its Controlled Affiliates or of any material
agreement or instrument to which such Partner or any of its
Controlled Affiliates is a party or by which such Partner or any of
its Controlled Affiliates is or may be bound or to which any of its
material properties or assets is subject (other than any such conflict,
violation, breach or default that has been validly and unconditionally
waived), (iii) will conflict with, violate, result in a breach of, constitute a
default under (whether with notice or lapse of time or both),
accelerate or permit the acceleration of the performance required
by, give to others any material interests or rights or require any
consent, authorization or approval under any indenture, mortgage,
lease agreement or instrument to which such Partner or any of its
Controlled Affiliates is a party or by which such Partner or any of
its Controlled Affiliates is or may be bound, or (iv) will result in
the creation or imposition of any lien upon any of the material
properties or assets of such Partner or any of its Controlled
Affiliates, which in any such case could reasonably be
expected to have a material adverse effect on the
Partnership or to materially impair such Partner's ability to
perform its obligations under this Agreement or to have a
material adverse effect on the consolidated financial condition
of such Partner or its Parent.
(c) Governmental Authorizations. Any registration,
declaration or filing with, or consent, approval, license, permit
or other authorization or order by, any governmental or
regulatory authority, domestic or foreign, that is required to be
obtained by such Partner in connection with the valid execution,
delivery, acceptance and performance by such Partner under this
Agreement or the consummation by such Partner of any transaction
contemplated hereby has been or will be completed, made or
obtained on or before the effective date of this Agreement,
except for any FCC or other regulatory approvals, licenses,
permits or other authorizations required to be obtained by the
Partnership in connection with the acquisition and ownership of
Wireless Business licenses relating to PCS.
(d) Litigation. There are no actions, suits, proceedings or
investigations pending or, to the knowledge of such Partner or
its Parent, threatened against or affecting such Partner or any
of its Controlled Affiliates or any of their properties, assets
or businesses in any court or before or by any governmental
department, board, agency or instrumentality, domestic or
foreign, or any arbitrator which could, if adversely determined
(or, in the case of an investigation could lead to any action,
suit or proceeding, which if adversely determined could),
reasonably be expected to materially impair such Partner's
ability to perform its obligations under this Agreement or to
have a material adverse effect on the consolidated financial
condition of such Partner or its Parent; and such Partner or any
of its Controlled Affiliates has not received any currently
effective notice of any default, and such Partner or any of its
Controlled Affiliates is not in default, under any applicable
order, writ, injunction, decree, permit, determination or award
of any court, any governmental department, board, agency or
instrumentality, domestic or foreign, or any arbitrator which
default could reasonably be expected to materially impair such
Partner's ability to perform its obligations under this Agreement
or to have a material adverse effect on the consolidated
financial condition of such Partner or its Parent.
(e) MFJ. Such Partner is not a BOC, a BOC Affiliated
Enterprise or an entity subject to any restrictions under Section
II of the MFJ.
SECTION 10
ACCOUNTING, BOOKS AND RECORDS
10.1 Accounting, Books and Records.
The Partnership shall maintain at its principal office
separate books of account for the Partnership which (i) shall
fully and accurately reflect all transactions of the Partnership,
all costs and expenses incurred, all charges made, all credits
made and received, and all income derived in connection with the
conduct of the Partnership and the operation of its business in
accordance with GAAP or, to the extent inconsistent therewith, in
accordance with this Agreement and (ii) shall include all
documents and other materials with respect to the Partnership's
business as are usually entered and maintained by persons engaged
in similar businesses. The Partnership shall use the accrual
method of accounting in preparation of its annual reports and for
tax purposes and shall keep its books and records accordingly.
Subject to Section 10.4, any Partner or its designated
representative shall have the right, at any reasonable time and
for any lawful purpose related to the affairs of the Partnership
or the investment in the Partnership by such Partner, (i) to have
access to and to inspect and copy the contents of such books or
records, (ii) to visit the facilities of the Partnership and
(iii) to discuss the affairs of the Partnership with its
officers, employees, attorneys, accountants, customers and
suppliers. The Partnership shall not charge such Partner for
such examination and each Partner shall bear its own expenses in
connection with any examination made for any such Partner's
account.
10.2 Reports.
(a) In General. The chief financial officer of the
Partnership shall be responsible for the preparation of financial
reports of the Partnership and the coordination of financial
matters of the Partnership with the Accountants.
(b) Periodic and Other Reports. The Partnership shall
cause to be delivered to each Partner the financial statements
listed in clauses (i) through (iii) below, prepared, in each
case, in accordance with GAAP (and, if required by any Partner
for purposes of reporting under the Securities Exchange Act of
1934, Regulation S-X), and such other reports as any Partner may
reasonably request from time to time, provided that, if the
Management Committee so determines within thirty (30) days
thereof, such other reports shall be provided at such requesting
Partner's sole cost and expense. Such financial statements shall
be accompanied by an analysis, in reasonable detail, of the
variance between the financial condition and results of
operations reported therein and the corresponding amounts for the
applicable period or periods in the Approved Business Plan. The
monthly and quarterly financial statements referred to in clauses
(ii) and (iii) below may be subject to normal year-end audit
adjustments.
(i) As soon as practicable following the end
of each Fiscal Year (and in any event not later than
seventy-five (75) days after the end of such Fiscal
Year) and at such time as distributions are made to the
Partners pursuant to Section 14.2 following the
occurrence of a Liquidating Event, a balance sheet of
the Partnership as of the end of such Fiscal Year and
the related statements of operations, Partners' Capital
Accounts and changes therein, and cash flows for such
Fiscal Year, together with appropriate notes to such
financial statements and supporting schedules, all of
which shall be audited and certified by the
Accountants, and in each case, to the extent the
Partnership was in existence, setting forth in
comparative form the corresponding figures for the
immediately preceding Fiscal Year (in the case of the
balance sheet) and the two (2) immediately preceding
Fiscal Years (in the case of the statements).
(ii) As soon as practicable following the end
of each of the first three fiscal quarters of each
Fiscal Year (and in any event not later than forty
(40) days after the end of each such fiscal quarter), a
balance sheet of the Partnership as of the end of such
fiscal quarter and the related statements of
operations, Partners' Capital Accounts and changes
therein, and cash flows for such fiscal quarter and for
the Fiscal Year to date, in each case, to the extent
the Partnership was in existence, setting forth in
comparative form the corresponding figures for the
prior Fiscal Year's fiscal quarter and interim period
corresponding to the fiscal quarter and interim period
just completed.
(iii) As soon as practicable following
the end of each of the first two calendar months of
each fiscal quarter (and in any event not later than
thirty (30) days after the end of such calendar month),
a balance sheet as of the end of such month and
statements of operations for the interim period through
such month and the monthly period then ended, setting
forth in comparative form the corresponding figures
from the Business Plan for such month and the interim
period through such month.
The quarterly or monthly statements described in clauses
(ii) and (iii) above shall be accompanied by a written
certification of the chief financial officer of the Partnership
that such statements have been prepared in accordance with GAAP
or this Agreement, as the case may be.
10.3 Tax Returns and Information.
(a) Sprint, acting in its capacity as a General
Partner, shall act as the "Tax Matters Partner" of the
Partnership within the meaning of Section 6231(a)(7) of the Code
(and in any similar capacity under applicable state or local law)
(the "Tax Matters Partner"). If Sprint shall cease to be a
General Partner, then the Partner with the greatest Voting
Percentage Interest, acting in its capacity as a General Partner,
shall thereafter act as the Tax Matters Partner. The Tax Matters
Partner shall take reasonable action to cause each other Partner
to be treated as a "notice partner" within the meaning of
Section 6231(a)(9) of the Code. All reasonable expenses incurred
by a Partner while acting in its capacity as Tax Matters Partner
shall be paid or reimbursed by the Partnership. Each Partner
shall have the right to have five (5) Business Days advance
notice from the Tax Matters Partner of the time and place of, and
to participate in (i) any material aspect of any administrative
proceeding relating to the determination of Partnership items at
the Partnership level and (ii) any material discussions with the
Internal Revenue Service relating to the allocations pursuant to
Section 3 of this Agreement. The Tax Matters Partner shall not
initiate any action or proceeding in any court, extend any
statute of limitations, or take any other action contemplated by
Sections 6222 through 6232 of the Code that would legally bind
any other Partner or the Partnership without approval of the
Management Committee by a Required Majority Vote. The Tax
Matters Partner shall from time to time upon request of any other
Partner confer, and cause the Partnership's tax attorneys and
Accountants to confer, with such other Partner and its attorneys
and accountants on any matters relating to a Partnership tax
return or any tax election.
(b) The Tax Matters Partner shall cause all federal,
state, local and other tax returns and reports (including amended
returns) required to be filed by the Partnership to be prepared
and timely filed with the appropriate authorities and shall cause
all income or franchise tax returns or reports required to be
filed by the Partnership to be sent to each Partner for review at
least fifteen (15) Business Days prior to filing. Unless
otherwise determined by the Management Committee, all such income
or franchise tax returns of the Partnership shall be prepared by
the Accountants. The cost of preparation of any returns by the
Accountants or other outside preparers shall be borne by the
Partnership. In the event of a Transfer of all or part of an
Interest, the Tax Matters Partner shall at the request of the
transferee cause the Partnership to elect, pursuant to Section
754 of the Code, to adjust the basis of the Partnership's
property; provided, however, that such transferee shall reimburse
the Partnership promptly for all costs associated with such basis
adjustment, including bookkeeping, appraisal and other similar
costs. Except as otherwise expressly provided herein, all other
elections required or permitted to be made by the Partnership
under the Code (or applicable state or local tax law) shall be
made in such manner as may be determined by the Management
Committee to be in the best interests of the Partners as a group.
(c) The Tax Matters Partner shall cause to be provided
to each Partner as soon as possible after the close of each
Fiscal Year (and, in any event, no later than one hundred
thirty-five (135) days after the end of each Fiscal Year), a
schedule setting forth such Partner's distributive share of the
Partnership's income, gain, loss, deduction and credit as
determined for federal income tax purposes and any other
information relating to the Partnership that is reasonably
required by such Partner to prepare its own federal, state, local
and other tax returns. At any time after such schedule and
information have been provided, upon at least two (2) Business
Days' notice from a Partner, the Tax Matters Partner shall also
provide each Partner with a reasonable opportunity during
ordinary business hours to review and make copies of all work
papers related to such schedule and information or to any return
prepared under paragraph (b) above. The Tax Matters Partner
shall also cause to be provided to each Partner, at the time that
the quarterly financial statements are required to be delivered
pursuant to Section 10.2(b)(ii) above, an estimate of each
Partner's share of all items of income, gain, loss, deduction and
credit of the Partnership for the fiscal quarter just completed
and for the Fiscal Year to date for federal income tax purposes.
10.4 Proprietary Information.
Notwithstanding anything to the contrary in this Section 10,
an Exclusive Limited Partner shall only have access to such
information regarding the Partnership as is required by
applicable law and shall not have access for such time as the
Management Committee deems reasonable to such information
relating to the Partnership's business which the Management
Committee reasonably believes to be in the nature of trade
secrets or other information the disclosure of which the
Management Committee in good faith believes is not in the best
interest of the Partnership or could damage the Partnership or
its business or which the Partnership is required by law or by
agreement with a third party to keep confidential.
SECTION 11
ADVERSE ACT
11.1 Remedies.
(a) If an Adverse Act has occurred with respect to any
Partner, (x) in the case of an Adverse Act specified in clause
(vii) of the definition of such term in Section 1.10, any General
Partner may elect or (y) in the case of any other Adverse Act,
the Management Committee (with the Representatives of the
affected Partner abstaining) may elect:
(i) to cause the Partnership to commence the procedures
specified in Section 11.2 for the purchase of the Adverse
Partner's Interest; or
(ii) to seek to enjoin such Adverse Act or to obtain specific
performance of the Adverse Partner's obligations or Damages (as
defined and subject to the limitations specified below) in
respect of such Adverse Act.
Notwithstanding anything to the contrary contained in this
Section 11, (x) none of the remedies specified above (nor any
other provision of this Section 11) shall apply to an Adverse Act
specified in clause (vi) of the definition of such term in
Section 1.10, (y) the remedies specified in clause (ii) shall not
be available to the Partners with respect to an Adverse Act
specified in clause (vii) of such definition unless the
circumstances under which such event arose also constituted a
breach by the Adverse Partner of the covenant contained in
Section 8.6 of this Agreement, and (z) the remedy specified in
clause (i) above and the right to seek Damages under clause
(ii) above may not be pursued and Section 11.1(b) will not apply
to an Adverse Act specified in clause (iii) of such definition
until such time as there is a Final Determination that the
Partner's actions or failure to act constituted an Adverse Act,
if the affected Partner timely delivered a Contest Notice.
In the event of an Adverse Act specified in any clause of
the definition of such term in Section 1.10 other than clause
(vii), the vote of the Management Committee required to elect a
remedy specified in clause (i) or (ii) above shall be the
Required Majority Vote of Representatives of the Partners that
are not actual or alleged Adverse Partners (the "Non-Adverse
Partners"), provided that in the event more than one (1) Partner
is alleged to be an Adverse Partner, such vote shall be taken
separately with respect to each alleged Adverse Partner
excluding from such vote only the Partner(s) that is alleged to
be an Adverse Partner as a result of the specific facts or
circumstances with respect to which such vote is being taken.
The election of a remedy specified in clause (i) or (ii) above
may be exercised by notice given to the Adverse Partner (x) in
case of an Adverse Act specified in clause (i) of the definition
of the term "Adverse Act" in Section 1.10, within ninety (90)
days after the occurrence of such Adverse Act or (y) in the case
of any other Adverse Act with respect to which such remedy is
available, within ninety (90) days after the Management
Committee or the Partner making such election, as the case may
be, obtains actual knowledge of the occurrence of such Adverse
Act, including, if applicable, that any cure period has expired;
provided that, if an election pursuant to clause (ii) above is
made to seek an injunction, specific performance or other
equitable relief and a final judgment in such action is rendered
denying such equitable remedy, then, by notice given within
ten (10) days thereafter, the Management Committee may
elect to pursue the remedies specified in clause (i) above
unless (x) prior to the giving of such notice, the Adverse Partner
has cured in full (or caused to be cured in full) the Adverse Act in
question (other than an Adverse Act specified in clause (i) of
the definition of such term in Section 1.10, which may only be
cured with the Unanimous Vote of, and on the terms prescribed by,
the Management Committee) and no other Adverse Act with respect
to such Partner has occurred and is continuing or (y) the final
judgment denying equitable relief specifically held that there
was no Adverse Act.
The foregoing remedies shall not be deemed to be mutually
exclusive, and selection or resort to any thereof shall not
preclude selection or resort to the others. The resort to any
remedy pursuant to this Section 11.1(a) shall not for any purpose
be deemed to be a waiver of any other remedy available hereunder
or under applicable law. Except as provided in Section 11.1(b),
the failure to elect a remedy within the time periods provided in
the preceding paragraph shall be conclusively presumed to be a
waiver of the remedies provided in this Section 11 with respect
to the subject Adverse Act; and provided further, that if an
election is made pursuant to clause (i) above, the amount the
Partnership may recover in any action for Damages shall be
reduced by an amount equal to any positive difference between the
Net Equity of the Adverse Partner's Interest and the applicable
Buy-Sell Price.
Unless resort to such remedy has been waived as set forth in
the immediately preceding paragraph, the Partnership shall be
entitled to recover from the Adverse Partner in an appropriate
proceeding any and all damages, losses and expenses (including
reasonable attorneys' fees and disbursements) (collectively,
"Damages") suffered or incurred by the Partnership as a result of
such Adverse Act; provided that the Partnership shall not have or
assert any claim against the Adverse Partner for punitive Damages
or for indirect, special or consequential Damages suffered or
incurred by the Partnership as a result of an Adverse Act.
(b) If the Partnership is dissolved pursuant to
Section 14.1(a) at any time as a result of a Liquidating Event
that occurs prior to a remedy having been elected pursuant to
Section 11.1(a) with respect to any Adverse Partner, the time
periods for such election shall thereupon expire and the
Management Committee shall deduct from any amounts to be paid to
such Adverse Partner that amount which it reasonably estimates to
be sufficient to compensate the Non-Adverse Partners for Damages
incurred by them as a result of the Adverse Act (subject to the
limitations of Section 11.1(a)) and shall pay the same to the
Non-Adverse Partners.
11.2 Adverse Act Purchase.
(a) Determination of Net Equity of Adverse Partner's
Interest. If the Management Committee or any General Partner
makes an election pursuant to Section 11.1(a)(i) to commence the
purchase procedures set forth in this Section 11.2, the Net Equity
of the Adverse Partner's Interest shall be determined in accordance
with this Section 11 as of the last day of the fiscal quarter
immediately preceding the fiscal quarter in which notice of such
election (the "Election Notice") was given to the Adverse
Partner, and the Adverse Partner shall be obligated to sell to
the Purchasing Partners, if any, all but not less than all of the
Adverse Partner's Interest in accordance with this Section 11.2
at a purchase price (the "Buy-Sell Price") equal to (A) in the
case of any Adverse Act (other than an Adverse Act identified in
clause (i) of the definition of such term that occurs during a
Fiscal Year covered by the Initial Business Plan or the two
succeeding Fiscal Years, an Adverse Act identified in clause (iv)
of the definition of such term or, unless such Adverse Act
occurred in connection with any breach by such Partner of its
obligations under Section 8.6, an Adverse Act identified in
clause (vii) of the definition of such term), ninety percent
(90%) of the Net Equity thereof as so determined, (B) in the case
of an Adverse Act specified in clause (iv) or, unless such
Adverse Act occurred in connection with any breach by such
Partner of its obligations under Section 8.6, clause (vii) of the
definition of such term in Section 1.10, the Net Equity thereof
and (C) in the case of an Adverse Act specified in clause (i) of
the definition of such term in Section 1.10 that occurred during
a Fiscal Year covered by the Initial Business Plan or the two
succeeding Fiscal Years, the lesser of (A) ninety percent (90%)
of the Net Equity thereof as so determined or (B) eighty percent
(80%) of the remainder of (1) the sum of such Adverse Partner's
Original Capital Contribution and aggregate Additional Capital
Contributions minus (2) the cumulative distributions made to such
Partner pursuant to Section 4 ("Unreturned Capital"), with the
amount of such Unreturned Capital determined as of the date on
which the Adverse Partner's Interest is purchased. Such Election
Notice shall designate the First Appraiser as required by Section
11.4 and the Adverse Partner shall appoint the Second Appraiser
within ten (10) Business Days of receiving such notice
designating the First Appraiser.
(b) Election to Purchase Interest of Adverse Partner.
For a period ending at 11:59 p.m. (local time at the Partnership's
principal office) on the thirtieth (30th) day following the day on
which notice of the Adverse Partner's Net Equity is given pursuant
to Section 11.3 (the "Election Period"), except as otherwise
provided in Section 11.2(b)(i), each of the Partners (other than the
Adverse Partner and any Exclusive Limited Partners) may elect, by
notice to the Adverse Partner and each other Partner (the
"Purchase Notice"), to purchase all or any portion of the Interest
of the Adverse Partner, which notice shall state the maximum
Percentage Interest that such Partner (a "Purchasing Partner") is
willing to purchase (each a "purchase commitment"). If the
aggregate purchase commitments made by the Purchasing Partners
are equal to at least one hundred percent (100%) of the Adverse
Partner's Interest, then subject to the following sentence, each
Purchasing Partner shall be obligated to purchase, and the Adverse
Partner shall be obligated to sell to such Purchasing Partner,
that portion of the Adverse Partner's Interest that corresponds to
the ratio of the Percentage Interest of such Purchasing Partner to
the aggregate Percentage Interests of the Purchasing Partners,
provided that, if any Purchasing Partner's purchase commitment was
for an amount less than its proportionate share of the Adverse Partner's
Interest as so determined, then the portion of the Adverse Partner's
Interest not so committed to be purchased shall continue to be
allocated proportionally in the manner provided above in this
sentence among the other Purchasing Partners until each has been
allocated, by such process of apportionment, a percentage of the
Adverse Partner's Interest equal to the maximum percentage such
Purchasing Partner committed to purchase or until the Adverse
Partner's entire Interest has been allocated among the Purchasing
Partners. In the event that the other Partners do not elect to
purchase the entire Interest of the Adverse Partner, the Adverse
Partner shall be under no obligation to sell any portion of its
Interest to any Partner.
(i) Except as otherwise provided in Section 11.2(b)(ii), if an
Adverse Partner is a Cable Partner and no Cable Partner's
Percentage Interest, when added to the Percentage Interests of
all Controlled Affiliates of such Partner, is equal to or greater
than Sprint's Percentage Interest when added to the Percentage
Interests of all Controlled Affiliates of Sprint, then the
Adverse Partner's Interest shall be allocated first among those
of the Purchasing Partners that are Cable Partners as though
Sprint were not a Purchasing Partner and if and to the extent
that the aggregate purchase commitments made by such Cable
Partners are less than one hundred percent (100%) of the Adverse
Partner's Interest, the balance of the Adverse Partner's Interest
up to Sprint's purchase commitment shall be allocated to Sprint.
(ii) The Adverse Partner's Interest shall be allocated among
the Cable Partners in the manner set forth in Section 11.2(b)(i)
until any Cable Partner would have a Percentage Interest, when
added to the Percentage Interests of all Controlled Affiliates of
such Partner, equal to Sprint's Percentage Interest, when added
to the Percentage Interests of all Controlled Affiliates of
Sprint up to the amount that would yield such result, calculated
in each case after giving effect to the adjustments to the
Percentage Interests to be made in connection with the purchase
of the Adverse Partner's Interest by the Cable Partners in
accordance with Section 11.2(b)(i) (as to each Partner, its
"Adjusted Percentage Interest"). Any portion of the Adverse
Partner's Interest not yet allocated shall continue to be
allocated proportionately among all Purchasing Partners
(including Sprint, if applicable) in the manner set forth in this
Section 11.2(b) without regard to Section 11.2(b)(i), but
substituting the Adjusted Percentage Interests of the Purchasing
Partners for the Percentage Interests that would otherwise be
used to determine such allocation until each has been allocated
an amount equal to its purchase commitment or until the entire
Interest of the Adverse Partner has been allocated among the
Purchasing Partners.
(c) Terms of Purchase; Closing. Unless the Purchasing
Partners and the Adverse Partner otherwise agree, the closing of
the purchase and sale of the Adverse Partner's Interest and
Partner Loans shall occur at the principal office of the
Partnership at 10:00 a.m. (local time at the place of the
closing) on the first Business Day occurring on or after the
thirtieth (30th) day following the last day of the Election
Period (subject to the provision of Section 11.5). At the
closing, each Purchasing Partner shall pay to the Adverse
Partner, by cash or other immediately available funds, that
portion of the purchase price for the Adverse Partner's Interest
and Partner Loans and the Adverse Partner shall deliver to each
Purchasing Partner good title, free and clear of any liens,
claims, encumbrances, security interests or options (other than
those created by this Agreement and those securing financing
obtained by the Partnership), to the portion of the Adverse
Partner's Interest and Partner Loans thus purchased. Each
Purchasing Partner shall be liable to the Adverse Partner only
for its individual portion of the purchase price for the Adverse
Partner's Interest and Partner Loans.
At the closing, the Partners shall execute such documents
and instruments of conveyance as may be necessary or appropriate
to effectuate the transactions contemplated hereby, including the
Transfer of the Adverse Partner's Interest and Partner Loans to
the Accepting Offerees and the assumption by each Purchasing
Partner of the Adverse Partner's obligations with respect to the
portion of the Adverse Partner's Interest Transferred to such
Purchasing Partner. The Partnership and each Partner shall bear
its own costs of such Transfer and closing, including attorneys'
fees and filing fees. The cost of determining Net Equity shall
be borne one-half by the Adverse Partner and one-half by the
Partnership and the amount borne by the Partnership shall be
treated as an expense of the Partnership for purposes of such
determination.
In the event that any Purchasing Partner shall fail to
perform its obligation to purchase hereunder, and no other
Purchasing Partner elects to purchase the portion of the Adverse
Partner's Interest and Partner Loans thus not purchased, the
Adverse Partner will not be obligated to sell any portion of its
Interest or Partner Loans to any Purchasing Partner. If one or
more of the other purchasing Partners elects to purchase such
portion of the Adverse Partner's Interest and Partner Loans, such
Purchasing Partner(s) shall be provided an additional ten (10)
days from the previously scheduled closing date in which to
tender payment therefor.
11.3 Net Equity.
The "Net Equity" of a Partner's Interest, as of any day,
shall be the amount that would be distributed to such Partner in
liquidation of the Partnership pursuant to Section 14 if (1) all of
the Partnership's business and assets were sold substantially as
an entirety for Gross Appraised Value, (2) the Partnership paid
its accrued, but unpaid, liabilities and established reserves
pursuant to Section 14.3 for the payment of reasonably
anticipated contingent or unknown liabilities and (3) the
Partnership distributed the remaining proceeds to the Partners in
liquidation, all as of such day, provided that in determining
such Net Equity, no reserve for contingent or unknown liabilities
shall be taken into account if such Partner (or its successor in
interest) agrees to indemnify the Partnership and all other
Partners for that portion of any such reserve as would be treated
as having been withheld pursuant to Section 14.3 from the
distribution such Partner would have received pursuant to Section
14.2 if no such reserve were established.
The Net Equity of a Partner's Interest shall be determined,
without audit or certification, from the books and records of the
Partnership by the Accountants. The Net Equity of a Partner's
Interest shall be determined within thirty (30) days of the day
upon which the Accountants are apprised in writing of the Gross
Appraised Value of the Partnership's business and assets, and the
amount of such Net Equity shall be disclosed to the Partnership
and each of the Partners by written notice ("Net Equity Notice").
The Net Equity determination of the Accountants shall be final
and binding in the absence of a showing of manifest error.
11.4 Gross Appraised Value.
"Gross Appraised Value," as of any day, means the price at
which a willing seller would sell, and a willing buyer would buy,
the business and assets of the Partnership, free and clear of all
liens and encumbrances, substantially as an entirety and as a
going concern in a single arm's-length transaction for cash,
without time constraints and without being under any compulsion
to buy or sell.
Each provision of this Agreement that requires a
determination of Gross Appraised Value also provides the manner
and time for the appointment of two (2) appraisers (the "First
Appraiser" and the "Second Appraiser"). If the Second Appraiser
is not timely designated, the determination of the Gross
Appraised Value shall be made by the First Appraiser. The First
Appraiser, or each of the First Appraiser and the Second
Appraiser if the Second Appraiser is timely designated, shall
submit its determination of the Gross Appraised Value to the
Partnership, the Partners and the Accountants within forty-five
(45) days of the date of its selection (or the selection of the
Second Appraiser, as applicable). If there are two (2)
Appraisers and their respective determinations of the Gross
Appraised Value vary by less than ten percent (10%) of the
higher determination, the Gross Appraised Value shall be the
average of the two determinations. If such determinations
vary by ten percent (10%) or more of the higher determination,
the two Appraisers shall promptly designate a third appraiser
(the "Third Appraiser"). Neither the Partnership nor any
Partner shall provide, and the First Appraiser and Second
Appraiser shall be instructed not to provide, any
information to the Third Appraiser as to the determinations of the
First Appraiser and the Second Appraiser or otherwise influence
such Third Appraiser's determination in any way. The Third
Appraiser shall submit its determination of the Gross Appraised
Value to the Partnership, the Partners and the Accountants within
forty-five (45) days of the date of its selection. The Gross Appraised
Value shall be equal to the average of the two closest of the three
determinations, provided that, if the difference between the
highest and middle determinations is no more than one hundred and
five percent (105%) and no less than ninety-five percent (95%) of
the difference between the middle and lowest determinations, then
the Gross Appraised Value shall be equal to the middle
determination. The determination of the Gross Appraised Value in
accordance with the foregoing procedure shall be final and
binding on the Partnership and each Partner. If any Appraiser is
only able to provide a range in which Gross Appraised Value would
exist, the average of the highest and lowest value in such range
shall be deemed to be such Appraiser's determination of the Gross
Appraised Value of the Partnership's business and assets. Each
Appraiser selected pursuant to the provisions of this Section
shall be an investment banking firm or other qualified Person
with prior experience in appraising businesses comparable to the
business of the Partnership and that is not an Interested Person
with respect to any Partner.
11.5 Extension of Time.
If any Transfer of a Partner's Interest in accordance with
this Section 11 or Sections 5.1, 12 or 14.7 requires the consent,
approval, waiver, or authorization of any government department,
board, bureau, commission, agency or instrumentality as a
condition to the lawful and valid Transfer of such Partner's
Interest to the proposed transferee thereof, then each of the
time periods provided in this Section 11 or Sections 5.1, 12 or
14.7, as applicable, for the closing of such Transfer shall be
suspended for the period of time during which any such consent,
approval, waiver, or authorization is being diligently pursued;
provided, however, that in no event shall the suspension of any
time period pursuant to this Section 11.5 extend for more than
three hundred sixty-five (365) days other than in the case of a
purchase of an Adverse Partner's Interest. Each Partner agrees
to use its diligent efforts to obtain, or to assist the affected
Partner or the Management Committee in obtaining, any such
consent, approval, waiver, or authorization and shall cooperate
and use its diligent efforts to respond as promptly as
practicable to all inquiries received by it, by the affected
Partner or by the Management Committee from any government
department, board, bureau, commission, agency or instrumentality
for initial or additional information or documentation in
connection therewith.
SECTION 12
DISPOSITIONS OF INTERESTS
12.1 Restriction on Dispositions.
Except as otherwise permitted by this Agreement, no Partner
shall Dispose of all or any portion of its Interest.
12.2 Permitted Transfers.
Subject to the conditions and restrictions set forth in
Section 12.3, a Partner may at any time Transfer all or any
portion of its Interest (a) to any Controlled Affiliate of such
Partner, (b) in connection with a Permitted Transaction involving
the Parent of such Partner, (c) to the administrator or trustee
of such Partner to whom such Interest is transferred in an
Involuntary Bankruptcy, (d) pursuant to and in compliance with
Sections 5.1, 11.2, 12.4, 12.5, 12.6 and 14.7 or (e) with the
prior written consent of the other Partners (each a "Permitted
Transfer"). The rights of a Partner to engage in a Permitted
Transfer (other than pursuant to clauses (b) and (c) above) will
also be subject to the rights of the Partners under Section 12.5.
After any Permitted Transfer, the transferred Interest shall
continue to be subject to all the provisions of this Agreement,
including the provisions of this Section 12 with respect to the
Disposition of Interests. Except in the case of a Transfer of a
Partner's entire Interest made in compliance herewith, no Partner
shall withdraw from the Partnership, except upon the Unanimous
Vote of the Management Committee. The withdrawal of a Partner,
whether or not permitted, shall not relieve the withdrawing
Partner of its obligations under Section 5.4 or 15.19 and shall
not relieve such Partner or any of its Affiliates of its
obligations under, or result in a termination of or otherwise
affect, any agreement between the Partnership and such Partner or
Affiliate then in effect, except to the extent provided therein.
12.3 Conditions to Permitted Transfers.
A Transfer shall not be treated as a Permitted Transfer
unless and until the following conditions are satisfied:
(a) Except in the case of a Transfer involuntarily by
operation of law, the transferor and transferee shall execute and
deliver to the Partnership such documents as may be necessary or
appropriate in the opinion of counsel to the Partnership to effect
such Transfer. In the case of a Transfer of Interests involuntarily
by operation of law, the Transfer shall be confirmed by
presentation to the Partnership of legal evidence of such Transfer,
in form and substance satisfactory to counsel to the Partnership.
In all cases, the Partnership shall be reimbursed by the transferor
and/or transferee for all costs and expenses that it reasonably
incurs in connection with such Transfer (including
reasonable attorneys' fees and expenses, but excluding the
portion of the costs of determining Net Equity that are to be
borne by the Partnership as provided in Section 11.2(b));
(b) Except in the case of a Transfer involuntarily by
operation of law, the transferee of an Interest (other than, with
respect to clauses (A) and (B) below, a transferee that was a
Partner prior to the Transfer) shall, by written instrument in
form and substance reasonably satisfactory to the Management
Committee (and, in the case of clause (C) below, the transferor
Partner), (A) make representations and warranties to the
nontransferring Partners equivalent to those set forth in
Section 9, (B) accept and adopt the terms and provisions of this
Agreement, including this Section 12, and (C) assume the
obligations of the transferor Partner under this Agreement with
respect to the transferred Interest. The transferor Partner
shall be released from all such assumed obligations except (x) as
otherwise provided in Section 6, (y) those obligations or
liabilities of the transferor Partner arising out of a breach of
this Agreement or pursuant to Section 5.4 or 15.19 and (z) in the
case of a transfer to any Person other than a Partner or any of
its Controlled Affiliates, those obligations or liabilities of
the transferor Partner based on events occurring, arising or
maturing prior to the date of Transfer;
(c) Except in the case of a Transfer involuntarily by
operation of law, the transferor and its Affiliates will be
obligated to sell to the transferee, and the transferee will be
obligated to buy from the transferor and its Affiliates, all
Partner Loans of the Partnership held directly or indirectly by
the transferor or an Affiliate thereof. If the transferee is a
Partner or a Controlled Affiliate thereof, the terms of such
purchase will be as provided in Section 2.7;
(d) Except in the case of a Transfer involuntarily by
operation of law, if required by the Management Committee, the
transferee shall deliver to the Partnership an opinion,
satisfactory in form and substance to the Management Committee,
of counsel reasonably satisfactory to the Management Committee to
the effect that the Transfer of the Partnership Interest is in
compliance with applicable state and Federal securities laws;
(e) Except in the case of a Transfer involuntarily by
operation of law, if required by the Management Committee, the
transferee (other than a transferee that was a Partner prior to
the Transfer) shall deliver to the Partnership evidence of the
authority of such Person to become a Partner and to be bound by
all of the terms and conditions of this Agreement, and the
transferee and transferor shall each execute and deliver such
other instruments as the Management Committee reasonably deems
necessary or appropriate to effect, and as a condition to, such
Transfer, including amendments to the Certificate or any other
instrument filed with the State of Delaware or any other state or
governmental agency;
(f) Unless otherwise approved by the Management Committee
(with the Representatives of the transferor General Partner
abstaining), no Transfer of an Interest shall be made except upon
terms which would not, in the opinion of counsel chosen by and
mutually acceptable to the Management Committee and the
transferor Partner, result in the termination of the Partnership
within the meaning of Section 708 of the Code or cause the
application of the rules of Sections 168(g)(1)(B) and 168(h) of
the Code or similar rules to apply to the Partnership. If the
immediate Transfer of such Interest would, in the opinion of such
counsel, cause a termination within the meaning of Section 708 of
the Code, then if, in the opinion of such counsel, the following
action would not precipitate such termination, the transferor
Partner shall be entitled (or required, as the case may be) (i)
immediately to Transfer only that portion of its Interest as may,
in the opinion of counsel to the Partnership, be transferred
without causing such a termination and (ii) to enter into an
agreement to Transfer the remainder of its Interest, in one or
more Transfers, at the earliest date or dates on which such
Transfer or Transfers may be effected without causing such
termination. The purchase price for the Interest shall be
allocated between the immediate Transfer and the deferred
Transfer or Transfers pro rata on the basis of the percentage of
the aggregate Interest being transferred each portion to be
payable when the respective Transfer is consummated, unless
otherwise agreed by the parties to the Transfer. In the case of
a Transfer by one Partner to another Partner, the deferred
purchase price shall be deposited in an interest-bearing escrow
account unless another method of securing the payment thereof is
agreed upon by the transferor Partner and the transferee
Partner(s). In determining whether a particular proposed
Transfer will result in a termination of the Partnership, counsel
to the Partnership shall take into account the existence of prior
written commitments to Transfer made pursuant to this Agreement
and such commitments shall always be given precedence over
subsequent proposed Transfers;
(g) The transferor or transferee shall furnish the Partnership
with the transferee's taxpayer identification number, sufficient
information to determine the transferee's initial tax basis in
the Interest transferred, and any other information reasonably
necessary to permit the Partnership to file all required federal
and state tax returns and other legally required information
statements or returns. Without limiting the generality of the
foregoing, the Partnership shall not be required to make any
distribution otherwise provided for in this Agreement with
respect to any transferred Interest until it has received such
information;
(h) Except in the case of a Transfer of an Interest
involuntarily by operation of law, if the transferor is a General
Partner, the transferor and transferee shall provide the
Partnership with an opinion of counsel, which opinion of counsel
shall be reasonably satisfactory to the other Partners, to the
effect that such Transfer will not cause the Partnership to
become taxable as a corporation for federal income tax purposes;
and
(i) If the Parent of a transferee is not the same Person as
the Parent of the transferring Partner, then the Parent of the
transferee (other than a transferee Partner) shall execute and
deliver to the Partnership and the other Parents a Parents'
Undertaking. If a Partner ceases to be a Controlled Affiliate of
its former Parent as a result of a Permitted Transaction, then
the new Parent of such Partner shall execute and deliver a
Parents' Undertaking to the Partnership and the other Parents.
Upon completion of any Permitted Transfer and compliance
with the provisions of this Section 12.3, the transferee of the
Interest (if not already a Partner) shall be admitted as a
Partner without any further action.
12.4 Right of First Refusal.
Following the fifth anniversary of the date of this
Agreement, a Partner may Transfer all or any portion of its
Interest (the "Offered Interest") if (i) such Partner (the
"Seller") first offers to sell the Offered Interest pursuant to
the terms of this Section 12.4, and (ii) the Transfer of the
Offered Interest to the Purchaser (as defined below) would not
cause an Adverse Act under clause (vii) of the definition
thereof.
(a) Limitation on Transfers. No Transfer may be made under
this Section 12.4 unless the Seller has received a bona fide
written offer (the "Purchase Offer") from a Person (including
another Partner) who is not a Controlled Affiliate of such
Partner (the "Purchaser") to purchase the Offered Interest for a
purchase price (the "Offer Price") denominated and payable in
United States dollars at closing, which offer shall be in writing
signed by the Purchaser and shall be irrevocable for a period
ending no sooner than the Business Day following the end of the
Offer Period, as hereinafter defined.
(b) Offer Notice. Prior to accepting the Purchase Offer, the
Seller shall give to the Partnership and each other Partner other
than any Exclusive Limited Partner written notice (the "Offer
Notice") which shall include a copy of the Purchase Offer and an
offer (the "Firm Offer") to sell the Offered Interest to the
other Partners (the "Offerees") for the Offer Price, payable
according to the same terms as (or on more favorable terms than)
those contained in the Purchase Offer, provided that the Firm
Offer shall be made without regard to the requirement of any
earnest money or similar deposit required of the Purchaser prior
to closing. If the Person making the Purchase Offer is not an
entity that is subject to the periodic reporting requirements of
Section 13 or Section 15(d) of the Securities Exchange Act of
1934, the Seller shall also provide any information concerning the
ownership of the Person making the Purchase Offer that may be
reasonably requested by any other Partner, to the extent such
information is available to the Seller.
(c) Offer Period. The Firm Offer shall be irrevocable for a
period (the "Offer Period") ending at 11:59 P.M., local time at
the Partnership's principal place of business, on the sixtieth
(60th) day following the day of the Offer Notice.
(d) Acceptance of First Offer. At any time during the Offer
Period, any Offeree may accept the Firm Offer as to all or any
portion of the Offered Interest, by giving written notice of such
acceptance to the Seller and each other Offeree, which notice
shall indicate the maximum Percentage Interest that such Offeree
is willing to purchase (the "purchase commitment"). If the
aggregate purchase commitments made by Offerees accepting the
Firm Offer ("Accepting Offerees") are equal to at least one
hundred percent (100%) of the Offered Interest, then, except as
otherwise provided in Section 12.4(d)(i) and, subject to the
following sentence, each Accepting Offeree shall be obligated to
purchase, and the Seller shall be obligated to sell to such
Accepting Offeree that portion of the Offered Interest that
corresponds to the ratio of the Percentage Interest of such
Accepting Offeree to the aggregate Percentage Interests of the
Accepting Offerees provided that if any Accepting Offeree's
purchase commitment was for an amount less than its proportionate
share of the Offered Interest as so determined, then the portion
of the Offered Interest not so committed to be purchased shall
continue to be allocated proportionally in the manner provided
above in this sentence among the other Accepting Offerees until
each has been allocated, by such process of apportionment, a
percentage of the Offered Interest equal to the maximum
percentage such Accepting Offeree committed to purchase or until
the entire Offered Interest has been allocated among the
Accepting Offerees. If Offerees do not accept the Firm Offer as
to all of the Offered Interest during the Offer Period, the Firm
Offer shall be deemed to be rejected in its entirety.
(i) Except as otherwise provided in Section 12.4(d)(ii), if a
Seller is a Cable Partner and no Cable Partner's Percentage
Interest, when added to the Percentage Interests of all
Controlled Affiliates of such Partner, is equal to or greater
than Sprint's Percentage Interest, when added to the Percentage
Interests of all Controlled Affiliates of Sprint, then the
Offered Interest shall be allocated first among those of the
Accepting Offerees that are Cable Partners as though Sprint were
not an Accepting Offeree and if and to the extent that the
aggregate purchase commitments made by such Cable Partners are
less than one hundred percent (100%) of the Offered Interest, the
balance of the Offered Interest up to Sprint's purchase
commitment shall be allocated to Sprint.
(ii) The Offered Interest shall be allocated among the Cable
Partners in the manner set forth in Section 12.4(d)(i) until any
Cable Partner would have a Percentage Interest, when added to the
Percentage Interests of all Controlled Affiliates of such
Partner, that is equal to Sprint's Percentage Interest, when
added to the Percentage Interests of all Controlled Affiliates of
Sprint, up to the aggregate amount that would yield such result,
calculated in each case after giving effect to the adjustments to
Percentage Interests to be made in connection with the purchase
of the Offered Interest by the Cable Partners in accordance with
Section 12.4(d)(i) (as to each Partner, its "Adjusted Percentage
Interest"). Any portion of the Offered Interest not yet
allocated shall continue to be allocated proportionately among
all Accepting Offerees (including Sprint, if applicable) in the
manner set forth in this Section 12.4(d) without regard to
Section 12.4(d)(i), but substituting the Adjusted Percentage
Interests of the Offerees for the Percentage Interests that would
otherwise be used to determine such allocation, until each has
been allocated an amount equal to its purchase commitment or
until the entire Offered Interest has been allocated among the
Accepting Offerees.
(e) Closing of Purchase Pursuant to Firm Offer. If all of the
Offered Interest has been subscribed for in accordance with the
terms of Section 12.4(d), the Seller shall give notice to such
effect (the "Sale Notice") to all Offerees within five days after
the end of the Offer Period. Unless the Accepting Offerees and
the Seller otherwise agree, the closing of any purchase pursuant
to this Section 12.4 shall be held at the principal office of the
Seller at 10:00 a.m. (local time at the place of closing) on the
first Business Day on or after the thirtieth (30th) day following
the date on which the Sale Notice is given (subject to the
provisions of Section 11.5). At the closing, each Accepting
Offeree shall pay to the Seller, by cash or other immediately
available funds, that portion of the purchase price for the
Offered Interest, and the Seller shall deliver to each Accepting
Offeree good title, free and clear of any liens, claims,
encumbrances, security interests or options (other than those
created by this Agreement and those securing financing obtained
by the Partnership), to the portion of the Offered Interest thus
purchased. Each Accepting Offeree shall be liable to the Seller
only for its individual portion of the purchase price for the
Offered Interest.
At the closing, the Partners shall execute such documents
and instruments of conveyance as may be necessary or appropriate
to effectuate the transactions contemplated hereby, including the
Transfer of the Offered Interest to the Accepting Offerees and
the assumption by each Accepting Offeree of the Seller's
obligations with respect to the portion of the Seller's Interest
Transferred to such Accepting Offerees. Each Partner and the
Partnership shall bear its own costs of such Transfer and
closing, including attorneys' fees and filing fees.
(f) Sale Pursuant to Purchase Offer If Firm Offer Rejected.
If the Firm Offer is not accepted in the manner hereinabove
provided, or the Accepting Offerees fail to close the purchase on
the closing date, then in either such event, but subject to the
last sentence of this Section 12.4(f) and subject to Section
12.3, the Seller shall be free for the period described below
(the "Free to Sell Period") to sell the Offered Interest to the
Purchaser upon terms and conditions that are the same as, or more
favorable to the Seller than, those contained in the Purchase
Offer (including at the same or greater price). The Free to Sell
Period shall be the applicable of (i) if the Firm Offer is not
accepted, sixty (60) days after the last day of the Offer Period
or (ii) sixty (60) days (subject to the provisions of Section
11.5) after the scheduled closing date, provided that if the last
sentence of this Section 12.4(f) becomes applicable, then such
sixty (60) day period shall be measured from the fifth (5th)
Business Day after the previously scheduled closing date or, if
applicable, from the subsequently scheduled closing date
contemplated by such sentence (assuming the required purchase
elections are made). If the Offered Interest is not so sold
within the Free to Sell Period, the Seller's right to transfer
its Interest shall again be subject to the foregoing
restrictions. Notwithstanding the foregoing, if more than one
Offeree elected to purchase the Offered Interest and at least one
Accepting Offeree tendered its proportionate share of the
purchase price therefor at the closing but any other Accepting
Offeree failed to make such tender, then any tendering Accepting
Offeree may elect, by notice given to the Seller within five (5)
Business Days thereafter, to purchase the portion of the Offered
Interest for which payment was not tendered (provided that, after
giving effect to such election, the entire Offered Interest is
being purchased) and shall be provided an additional fifteen (15)
days from the previously scheduled closing date in which to
tender payment therefor.
(g) Restrictions on Notice. No notice initiating the
procedures contemplated by this Section 12.4 may be given by any
Partner while any notice, purchase or Transfer is pending under
Section 11 or this Section 12.4 or after a Liquidating Event has
occurred. No notice initiating the procedures contemplated by
this Section 12.4 may be given by an Adverse Partner nor any
Delinquent Partner prior to the applicable Cure Date unless such
Partner has cured the underlying Payment Default, and no Seller
shall be required to offer any portion of its interest to an
Adverse Partner during the period that the Partnership is
pursuing any remedy specified in Section 11.1 with respect to
such Adverse Partner. No Partner may accept a Purchase Offer
during any period that, as provided above, such Partner may not
give the notice initiating the procedures contemplated by this
Section 12.4 or thereafter until it has given such notice and
otherwise complied with the provisions of this Section 12.4.
12.5 Tagalong Rights.
(a) Direct Transfers. In the event that (i) a Partner
proposes to Transfer its Interest (as part of a single
transaction or any series of related transactions) to any person
other than a Controlled Affiliate of such Partner after the fifth
anniversary of the date of this Agreement, and such Transfer
would cause the proposed transferee (a "Tagalong Purchaser") and
its Controlled Affiliates to own more than fifty-five percent
(55%) of the Percentage Interests (a "Tagalong Transaction") and
(ii) if Section 12.4 is applicable, the Firm Offer is not
accepted in the manner provided in Section 12.4, the Tagalong
Transaction shall not be permitted hereunder unless the Tagalong
Purchaser offers to purchase the entire Interest of any other
Partner that desires to sell its Interest to the Tagalong
Purchaser at the same price and on the same terms and conditions
as the Tagalong Purchaser has offered to the Partner proposing to
make such Transfer (the "Transferring Partner"). If such
Transfer occurs as part of a series of related transactions, the
price and terms shall be the price and terms most favorable to
the Transferring Partner for which any portion of the Percentage
Interest of the Transferring Partner is transferred as part of
such series of transactions. Prior to effecting any Tagalong
Transaction, the Transferring Partner shall deliver to each other
Partner a binding, irrevocable offer (the "Tagalong Offer") by
the Tagalong Purchaser to purchase the entire Interest of the
other Partners at the same price and on the same terms and
conditions as the Tagalong Purchaser has offered to the Partner
proposing to make such Transfer (the "Tagalong Notice"). The
"Tagalong Offer" shall be irrevocable for a period (the "Tagalong
Period") ending at 11:59 p.m., local time at the Partnership's
principal place of business, (x) with respect to a Tagalong
Purchaser that is an existing Partner or a Controlled Affiliate
of an existing Partner, on the one hundred eightieth (180th) day
following the date of the Tagalong Notice and (y) with respect to
any other Tagalong Purchaser, on the first anniversary of the
date of the Tagalong Notice. At any time during the Tagalong
Period, any Partner may accept the Tagalong Offer as to the
entire amount of its Interest by giving written notice of such
acceptance to the Tagalong Purchaser. The Tagalong Purchaser's
purchase of the Interest of any Partner that accepts the Tagalong
Offer shall occur within sixty (60) days following the expiration
of the Tagalong Period, subject to Section 11.5.
(b) Indirect Transfers. Within five (5) days of the
Parent of any Partner (such Partner, a "Controlling Partner")
acquiring, indirectly, Interests in the Partnership causing such
Parent to own, directly and indirectly through its Controlled
Affiliates, more than fifty-five percent (55%) of the Percentage
Interests, such Controlling Partner shall give to each other
Partner written notice of such acquisition (a "Control Notice"),
which shall include an offer (the "Control Offer") by the
Controlling Partner to purchase the entire Interest of each other
Partner at a price equal to the Net Equity thereof (as determined
pursuant to Section 11.3) and shall designate a First Appraiser
(as required by Section 11.4). The Representatives of the other
General Partners shall by Required Majority Vote pursuant to
Section 8.7 appoint the Second Appraiser. The Control Offer
shall be irrevocable for a period (the "Control Offer Period")
ending at 11:59 p.m., local time at the Partnership's principal
place of business, on the one hundred eightieth (180th) day
following the date of the Net Equity Notice. At any time during
the Control Offer Period, any Partner may accept the Control
Offer as to the entire amount of its Interest by giving written
notice of such acceptance to the Controlling Partner. The
Controlling Partner's purchase of the Interest of any Partners
that accept the Control Offer shall occur within sixty (60) days
following the expiration of the Control Offer Period, subject to
Section 11.5. The costs of determining the Net Equity shall be
borne one-half by the Controlling Partner and one-half by the
Partnership.
12.6 Partner Put Rights.
(a) Determination of Net Equity of Partners' Interests. If
the NewTelco Partnership Agreement has not been executed by the
Partners on or before the one hundred eightieth (180th) day after
the date of this Agreement (the "Determination Date"), any
Partner can cause the Net Equity of each Partner's Interest to be
determined as of the Determination Date in accordance with
Section 11.3 by giving notice to the Management Committee and
each other Partner of its desire to have Net Equity so
determined. In such event, the initiating Partner shall appoint
the First Appraiser and the Representatives of the other Partners
shall appoint the Second Appraiser by Required Majority Vote
pursuant to Section 8.7.
(b) Put Procedure.
(i) Within thirty (30) days of delivery of the Net Equity
Notice, each Partner may elect to put its entire Interest to all
other Partners not electing to put their Interests pursuant to
this Section 12.6(b) by giving written notice of its election (a
"Put Notice") to each other Partner and the Management Committee.
(ii) Within fifteen (15) days of the expiration of the
deadline for delivering a Put Notice pursuant to Section
12.6(b)(i), each Partner who did not deliver a Put Notice
pursuant to Section 12.6(b)(i) may elect to put its entire
Interest to all other Partners who do not elect to put their
Interests pursuant to this Section 12.6(b) by delivering a Put
Notice to each other Partner and the Management Committee.
(iii) The procedure set forth in Section 12.6(b)(ii)
shall be repeated until either (A) all Partners have delivered a
Put Notice, in which case a Liquidating Event will occur pursuant
to Section 14.1(a)(iv), or (B) a period during which one or more
Partners may deliver a Put Notice expires without any Partner
delivering a Put Notice, in which case each Partner that has not
delivered a Put Notice will be obligated to purchase the Interest
of each Partner that has delivered a Put Notice pursuant to the
procedures set forth in Section 12.6(c). An election by a
Partner to put its Interest by delivery of a Put Notice is
binding and irrevocable.
(c) Purchase of Put Interests. Except as otherwise
provided in Section 12.6(c)(i), each General Partner not electing
to put its Interest pursuant to Section 12.6(b) (a "Buying
Partner") shall purchase a pro rata share (based on the relative
Percentage Interests of the Buying Partners) of the aggregate
Interests of the Partners that delivered Put Notices pursuant to
Section 12.6(b) (the "Selling Partners"). The purchase price of
each Selling Partner's Interest purchased pursuant to this
Section 12.6(c) shall be equal to the lesser of (i) the Net
Equity of such Interest or (ii) the cumulative Capital
Contribution of the Selling Partner.
(i) Except as otherwise provided in Section 12.6(c)(ii), if
any Selling Partner is a Cable Partner, Sprint is a Buying
Partner, and no Cable Partner's Percentage Interest, when added
to the Percentage Interests of all Controlled Affiliates of such
Partner, is equal to or greater than Sprint's Percentage
Interest, when added to the Percentage Interests of all
Controlled Affiliates of Sprint, then each Cable Partner that is
a Buying Partner (a "Cable Buying Partner") may elect by written
notice to all other Partners to purchase all or any portion of
the Selling Partners' Interests that would, without regard to
this Section 12.6(c)(i), have been purchased by Sprint (the
"Sprint Obligation"), which notice shall state the maximum share
of the Sprint Obligation that such Cable Buying Partner is
willing to purchase (each an "additional purchase commitment").
If the aggregate additional purchase commitments are equal to at
least one hundred percent (100%) of the Sprint Obligation, each
Cable Buying Partner shall be obligated to purchase that portion
of the Sprint Obligation that corresponds to the ratio of the
Percentage Interest of such Cable Buying Partner to the aggregate
Percentage Interests of the Cable Buying Partners, provided that,
if any Cable Partner's additional purchase commitment was for an
amount less than its proportionate share of the Sprint Obligation
as so determined, then the portion of the Sprint Obligation not
so committed to be purchased shall continue to be allocated
proportionally in the manner provided above in this sentence
among the other Cable Buying Partners until each has been
allocated, by such process of apportionment, a percentage of the
Sprint Obligation equal to the maximum percentage such Cable
Buying Partner committed to purchase or until the entire Sprint
Obligation has been allocated among the Cable Buying Partners.
If and to the extent that the aggregate Cable Partner's
additional purchase commitments are less than one hundred percent
(100%) of the Sprint Obligation, the balance of the Sprint
Obligation shall be allocated to Sprint.
(ii) The Selling Partners' Interests shall be allocated
among the Cable Partners in the manner set forth in Section
12.6(c)(i), if applicable, until any Cable Partner would have a
Percentage Interest, when added to the Percentage Interests of
all Controlled Affiliates of such Partner, that is equal to
Sprint's Percentage Interest, when added to the percentage
Interests of all Controlled Affiliates of Sprint, after taking
into account a purchase of the Selling Partners' Interests by the
Cable Partners in accordance with Section 12.6(c)(i) up to the
aggregate amount that would yield such result (as to each
Partner, its "Adjusted Percentage Interest"). Any portion of the
Selling Partners' Interests not yet allocated shall continue to
be allocated proportionately among all Buying Partners (including
Sprint, if applicable) in the manner set forth in this Section
12.6(c) without regard to Section 12.6(c)(i), but substituting
the Adjusted Percentage Interests of the Buying Partners for the
Percentage Interests that would otherwise be used to determine
such allocation until each partner has been allocated an amount
equal to its purchase commitment or until the entire amount of
the Interest has been allocated among the Buying Partners.
(d) Terms of Purchase; Closing. Unless the Buying Partners
and the Selling Partners otherwise agree, the closing of the
purchase and sale of the Selling Partner's Interest and Partner
Loans shall occur at the principal office of the Partnership at
10:00 a.m. (local time at the place of the closing) on the first
Business Day occurring on or after the ninetieth (90th) day
following the date of the final Put Notice (subject to the
provision of Section 11.5) or such earlier date as the Buying and
Selling Partners may agree. At the closing, each Buying Partner
shall pay to the Selling Partner, by cash or other immediately
available funds, that portion of the purchase price of the
Selling Partner's Interest and Partner Loans for which such
Buying Partner is liable, and the Selling Partner shall deliver
to each Buying Partner good title, free and clear of any liens,
claims, encumbrances, security interests or options (other than
those created by this Agreement and those securing financing
obtained by the Partnership), to the portion of the Selling
Partner's Interest and Partner Loans thus purchased. Each Buying
Partner shall be liable to the Selling Partner only for its
individual portion of the purchase price and the purchase price
for such Selling Partner's Interest and Partner Loans.
At the closing, the Partners shall execute such documents
and instruments of conveyance as may be necessary or appropriate
to effectuate the transactions contemplated hereby, including the
Transfer of the Interests and Partner Loans of the Selling
Partner to the Buying Partners and the assumption by each Buying
Partner of the Selling Partner's obligations with respect to the
portion of the Selling Partner's Interest Transferred to such
Buying Partner. Each Partner and the Partnership shall bear its
own costs of such Transfer and closing, including attorneys' fees
and filing fees. The costs of determining Net Equity shall be
borne by the Partnership if no Partner or all Partners deliver a Put
Notice, and one-half by the Selling Partners and one-half by
the Buying Partners (in each case pro rata among the members of
each group based on their respective Percentage Interests)
otherwise.
12.7 Prohibited Dispositions.
Any purported Disposition of all or any part of an Interest
that is not a Permitted Transfer shall be null and void and of no
force or effect whatever; provided that, if the Partnership is
required to recognize a Disposition that is not a Permitted
Transfer (or if the Management Committee, in its sole discretion,
elects to recognize a Disposition that is not a Permitted
Transfer), the Interest Disposed of shall be strictly limited to
the transferor's rights to allocations and distributions as
provided by this Agreement with respect to the transferred
Interest, which allocations and distributions may be applied
(without limiting any other legal or equitable rights of the
Partnership) to satisfy any debts, obligations, or liabilities
for damages that the transferor or transferee of such Interest
may have to the Partnership.
12.8 Representations Regarding Transfers.
Each Partner hereby represents and warrants to the
Partnership and the other Partners that such Partner's
acquisition of Interests hereunder is made as principal for such
Partner's own account and not for resale or distribution of such
Interests.
12.9 Distributions and Allocations in Respect of
Transferred Interests.
If any Interest is Transferred during any Fiscal Year in
compliance with the provisions of this Section 12, Profits,
Losses, each item thereof, and all other items attributable to
the Transferred Interest for such Fiscal Year shall be divided
and allocated between the transferor and the transferee by taking
into account their varying Percentage Interests during the Fiscal
Year in accordance with Code Section 706(d), using any
conventions permitted by law and selected by the Management
Committee. All distributions on or before the date of such
Transfer shall be made to the transferor, and all distributions
thereafter shall be made to the transferee. Solely for purposes
of making such allocations and distributions, the Partnership
shall recognize such Transfer not later than the end of the
calendar month during which it is given notice of such Transfer,
provided that, if the Partnership is given notice of a Transfer at
least ten (10) Business Days prior to the Transfer, the
Partnership shall recognize such Transfer as of the date of
such Transfer, and provided further that if the Partnership
does not receive a notice stating the date such Interest was
transferred and such other information as the Management
Committee may reasonably require within thirty (30) days
after the end of the Fiscal Year during which the Transfer
occurs, then all such items shall be allocated, and all
distributions shall be made, to the Person who, according to the
books and records of the Partnership, was the owner of the
Interest on the last day of such Fiscal Year. Neither the
Partnership nor the Management Committee shall incur any
liability for making allocations and distributions in accordance
with the provisions of this Section 12.9, whether or not the
Management Committee or the Partnership has knowledge of
any Transfer of ownership of any Interest.
SECTION 13
CONVERSION OF INTERESTS
13.1 Termination of Status as General Partner.
(a) A General Partner shall cease to be a General Partner upon
the first to occur of (i) the Transfer of such Partner's entire
Interest as a Partner in a Permitted Transfer (in which event the
transferee of such Interest shall be admitted as a successor
General Partner and a Limited Partner upon compliance with
Section 12.3), (ii) the Unanimous Vote of the Management
Committee to approve a request by such General Partner to
withdraw, (iii) any Adverse Act with respect to such Partner,
(iv) such Partner's failure to satisfy the Minimum Ownership
Requirement or (v) in the case of Comcast only, the occurrence of
any of the events described in Section 6.4(a)(v) that cause
Comcast to become an Exclusive Limited Partner. In the event a
Person ceases to be a General Partner, pursuant to clauses (ii),
(iii), (iv) or (v), the Interest of such Person as a General
Partner shall automatically and without any further action by the
Partners be converted into an Interest solely as a Limited
Partner, and such Partner shall thereafter be an Exclusive
Limited Partner.
(b) The Partners intend that the Partnership not dissolve as a
result of the cessation of any Person's status as a General
Partner; provided, however, that if it is determined by a court
of competent jurisdiction that the Partnership has dissolved, the
provisions of Section 14.1 shall govern.
13.2 Restoration of Status as General Partner.
An Exclusive Limited Partner whose rights to representation
on the Management Committee have been restored as provided in
Section 5.1(c) shall be restored to the status of a General
Partner and its Interest shall thereafter be deemed held in part
as a General Partner and in part as a Limited Partner as provided
in Section 2.1. If Comcast becomes an Exclusive Limited Partner
pursuant to Section 6.4(a)(v), it shall not be entitled to be
restored to the status of General Partner except as expressly
provided in such Section.
SECTION 14
DISSOLUTION AND WINDING UP
14.1 Liquidating Events.
(a) In General. Subject to Section 14.1(b), the Partnership
shall dissolve and commence winding up and liquidating upon the
first to occur of any of the following ("Liquidating Events"):
(i) The sale of all or substantially all of the Property;
(ii) A Unanimous Vote of the Management Committee to
dissolve, wind up, and liquidate the Partnership in accordance
with Section 5.1;
(iii) The failure of the General Partners to resolve a
Deadlock Event as provided in Section 5.8(a)(iii) unless the
Management Committee determines by Required Majority Vote not to
dissolve; and
(iv) The withdrawal of a General Partner, the assignment by
a General Partner of its entire Interest or any other event that
causes a General Partner to cease to be a general partner under
the Act, provided that any such event shall not constitute a
Liquidating Event if the Partnership is continued pursuant to
this Section 14.1.
The Partners hereby agree that, notwithstanding any provision of
the Act or the Delaware Uniform Partnership Act, the Partnership
shall not dissolve prior to the occurrence of a Liquidating
Event. Upon the occurrence of any event set forth in Section
14.1(a)(iv), the Partnership shall not be dissolved or required
to be wound up if (x) at the time of such event there is at least
one remaining General Partner and that General Partner carries on
the business of the Partnership (any such remaining General
Partner being hereby authorized to carry on the business of the
Partnership), or (y) within ninety (90) days after such event all
remaining Partners agree in writing to continue the business of
the Partnership and to the appointment, effective as of the date
of such event, of one or more additional General Partners.
(b) Special Rules. The events described in
Sections 14.1(a)(ii), 14.1(a)(iii) or 14.1(a)(iv) shall not
constitute Liquidating Events until such time as the Partnership
is otherwise required to dissolve, and commence winding up and
liquidating, in accordance with Section 14.7.
14.2 Winding Up.
Upon the occurrence of a Liquidating Event, the Partnership
shall continue solely for the purposes of winding up its affairs
in an orderly manner, liquidating its assets, and satisfying the
claims of its creditors and Partners and neither the Management
Committee nor any Partner shall take any action that is
inconsistent with, or not appropriate for, the winding up of the
Partnership's business and affairs. To the extent not
inconsistent with the foregoing, this Agreement shall continue in
full force and effect until such time as the Partnership's
Property has been distributed pursuant to this Section 14.2 and
the Certificate has been cancelled in accordance with the Act.
The Management Committee shall be responsible for overseeing the
winding up and dissolution of the Partnership, shall take full
account of the Partnership's liabilities and Property, shall
cause the Partnership's Property to be liquidated as promptly as
is consistent with obtaining the fair value thereof, and shall
cause the proceeds therefrom, to the extent sufficient therefor,
to be applied and distributed in the following order:
(a) First, to the payment of all of the Partnership's debts
and liabilities (other than Partner Loans) to creditors other
than the Partners and to the payment of the expenses of
liquidation;
(b) Second, to the payment of all Partner Loans and all of the
Partnership's debts and liabilities to the Partners in the
following order and priority:
(i) first, to the payment of all debts and liabilities owed to
any Partner other than in respect of Partner Loans;
(ii) second, to the payment of all accrued and unpaid interest
on Partner Loans, such interest to be paid to each Partner and
its Affiliates (considered as a group) pro rata in proportion to
the interest owed to each such group; and
(iii) third, to the payment of the unpaid principal amount
of all Partner Loans, such principal to be paid to each Partner
and its Affiliates (considered as a group) pro rata in proportion
to the outstanding principal owed to each such group; and
(c) The balance, if any, to the Partners in accordance with
their Capital Accounts, after giving effect to all contributions,
distributions, and allocations for all periods.
(d) In the discretion of the Management Committee, a
pro rata portion of the distributions that would otherwise be
made to the Partners pursuant to this Section 14.2 may be:
(i) distributed to a trust established for the benefit of the
Partners for the purposes of liquidating Partnership assets,
collecting amounts owed to the Partnership, and paying any
contingent or unforeseen liabilities or obligations of the
Partnership or of the General Partners arising out of or in
connection with the Partnership. The assets of any such trust
shall be distributed to the Partners from time to time, in the
reasonable discretion of the Management Committee in the same
proportions as the amount distributed to such trust by the
Partnership would otherwise have been distributed to the Partners
pursuant to Section 14.2; or
(ii) withheld to provide a reasonable reserve for Partnership
liabilities (contingent or otherwise) and to reflect the
unrealized portion of any installment obligations owed to the
Partnership, provided that such withheld amounts shall be
distributed to the Partners as soon as practicable.
Each Partner and each of its Affiliates (as to Partner Loans
only) agrees that by accepting the provisions of this
Section 14.2 setting forth the priority of the distribution of
the assets of the Partnership to be made upon its liquidation,
such Partner or Affiliate expressly waives any right which it, as
a creditor of the Partnership, might otherwise have under the Act
to receive distributions of assets pari passu with the other
creditors of the Partnership in connection with a distribution of
assets of the Partnership in satisfaction of any liability of the
Partnership, and hereby subordinates to said creditors any such
right.
14.3 Compliance With Certain Requirements of Regulations;
Deficit Capital Accounts.
In the event the Partnership is "liquidated" within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g), (a)
distributions shall be made pursuant to this Section 14 to the
Partners who have positive Capital Accounts in compliance with
Regulations Section 1.704-1(b)(2)(ii)(b)(2), and (b) if any
Partner's Capital Account has any deficit balance (after giving
effect to all contributions, distributions, and allocations for
all taxable years, including the year during which such
liquidation occurs), such Partner shall contribute to the capital
of the Partnership the amount necessary to restore such deficit
balance to zero in compliance with Regulations Section
1.704-1(b)(2)(ii)(b)(3); provided, however, that the obligation
of an Exclusive Limited Partner to contribute capital pursuant to
this sentence shall be limited to the amount of the deficit
balance, if any, that existed in such Exclusive Limited Partner's
Capital Account at the time it became an Exclusive Limited
Partner (taking into account for this purpose any revaluation of
Partnership assets pursuant to subparagraph (ii)(D) of the
definition of Gross Asset Value made as a result of such
Partner's becoming an Exclusive Limited Partner).
14.4 Deemed Distribution and Recontribution.
Notwithstanding any other provision of this Section 14, in the
event the Partnership is liquidated within the meaning of Section
1.704-1(b)(2)(ii)(g) of the Regulations but no Liquidating Event
has occurred, the Property shall not be liquidated, the
Partnership's liabilities shall not be paid or discharged, and the
Partnership's affairs shall not be wound up. Instead, solely for
federal income tax purposes, the Partnership shall be deemed
to have distributed the Property in kind to the Partners,
who shall be deemed to have assumed and taken subject
to all Partnership liabilities, all in accordance with their
respective Capital Accounts and, if any Partner's Capital Account
has a deficit balance that such Partner would be required to
restore pursuant to Section 14.3 (after giving effect to all
contributions, distributions, and allocations for all Fiscal
Years, including the Fiscal Year during which such liquidation
occurs), such Partner shall contribute to the capital of the
Partnership the amount necessary to restore such deficit balance
to zero in compliance with Regulations Section
1.704-1(b)(2)(ii)(b)(3). Immediately thereafter, the Partners
shall be deemed to have recontributed the Property in kind to the
Partnership, which shall be deemed to have assumed and taken
subject to all such liabilities.
14.5 Rights of Partners.
Except as otherwise provided in this Agreement, (a) each
Partner shall look solely to the assets of the Partnership for
the return of its Capital Contributions and shall have no right
or power to demand or receive property other than cash from the
Partnership, and (b) no Partner shall have priority over any
other Partner as to the return of its Capital Contributions,
distributions, or allocations. If, after the Partnership ceases
to exist as a legal entity, a Partner is required to make a
payment to any Person on account of any activity carried on by
the Partnership, such paying Partner shall be entitled to
reimbursement from each other Partner consistent with the manner
in which the economic detriment of such payment would have been
borne had the amount been paid by the Partnership immediately
prior to its cessation.
14.6 Notice of Dissolution.
In the event a Liquidating Event occurs or an event
described in Section 14.1(a)(iv) occurs that would, but for
provisions of Section 14.1, result in a dissolution of the
Partnership, the Management Committee shall, within thirty (30)
days thereafter, provide written notice thereof to each of the
Partners.
14.7 Buy/Sell Arrangements.
(a) As soon as practicable after the occurrence of an
event described in Section 14.1(a)(ii), 14.1(a)(iii) or, subject to the
proviso contained therein, Section 14.1(a)(iv), the Net Equity of
the Interests shall be determined and delivered to each General
Partner. Such Net Equity shall be determined in accordance with
Section 11.3. For purpose of such determination of Net Equity
pursuant to this Section 14.7(a), the General Partner that
(together with its Controlled Affiliates) holds the largest
Voting Percentage Interest shall designate the First Appraiser
as required by Section 11.4 and the General Partner that
(together with its Controlled Affiliates) holds the smallest Voting
Percentage Interest shall appoint the Second Appraiser within ten
(10) days of receiving notice of the First Appraiser.
(b) Within thirty (30) days after its receipt of the
determination of Net Equity, each General Partner (individually
or together with one or more other General Partners) must submit
simultaneously to each other Partner sealed statements (the
"Initial Offer") notifying the other Partners in writing either
(i) that such General Partner or group of General Partners offers
to sell all of its Interest(s), or (ii) that such General Partner
or group of General Partners offers to buy all of the other
Partners' Interests. Except as provided in Section 14.7(g), each
Exclusive Limited Partner shall be automatically deemed to have
offered to sell its Interest hereunder and shall for all purposes
under this Section 14.7 shall be treated as a General Partner
that has offered to sell its Interest.
(c) If the Initial Offers indicate that one General Partner
or group of General Partners wishes to buy and all of the other
Partners wish to sell, the Net Equity of the Interests shall
thereupon be the price at which the Interests will be sold.
(d) If the Initial Offers indicate that all Partners wish
to sell their Interests, the Partnership shall dissolve, and
commence winding up and liquidating in accordance with
Section 14.2.
(e) If the Initial Offers indicate that more than one
General Partner or group of General Partners wishes to purchase
the other Partners' Interests, then the General Partners or
groups of General Partners wishing to purchase (each General
Partner or group of Partners, a "Bidding Partner") shall begin
the bidding process described below and the highest bidder
(determined as the amount bid per each Percentage Interest in the
Partnership) shall buy all other Partners' Interests. Each of
the Bidding Partners can make an initial offer to purchase the
Interests of the other Partners, which offer cannot be less than
the Net Equity of the Interests to be purchased and shall be made
within fifteen (15) days of receipt of the last of the Initial
Offers. If no Bidding Partner makes an initial offer within such
fifteen (15) day period, the Partnership shall dissolve, and
commence winding up and liquidating in accordance with
Section 14.2. If only one Bidding Partner makes an initial offer,
such offer shall thereupon be the price at which all other Partners'
Interests shall be sold to such Bidding Partner. If more than one
Bidding Partner makes an initial offer, each such Bidding Partner
must respond within fifteen (15) days of receiving such initial offer
either by accepting the highest of such initial offers or delivering a
counteroffer to purchase the Interests of the other Partners. A
counteroffer must be at least one percent (1%) higher than the
prior offer of which the Bidding Partner has received notice. The
bidding process shall continue until all Bidding Partners have either
responded by accepting the highest immediate prior offer or
failed to make a timely response, in which case the highest
immediate prior offer shall be deemed accepted. For purposes
of this Section 14.7, all offers, acceptances and counteroffers
must be in writing, in a form which is firm and binding and
delivered to the Chief Executive Officer (who shall promptly
notify each other Partner of the identity of the bidder and the
amount of such bid); all offers must be responded to within
fifteen (15) days of receipt of notice of a prior offer. If no
response to an offer or counteroffer is received within such
fifteen (15) day period, the highest immediate prior offer shall
be deemed to be accepted.
(f) The closing of the purchase and sale of each selling
Partner's Interests and Partner Loans shall occur at the
principal office of the Partnership at 10:00 a.m. (local time at
the place of the closing) on the first Business Day occurring on
or after the thirtieth (30th) day following the date of the final
determination of the purchase price pursuant to Section 14.7(e)
(subject to Section 11.5). At the closing, the purchasing
Partner(s) shall pay to each selling Partner, by cash or other
immediately available funds, the purchase price for such selling
Partners' Interest and Partner Loans, and the selling Partner
shall deliver to the purchasing Partner(s) good title, free and
clear of any liens, claims, encumbrances, security interests or
options (other than those created by this Agreement and those
securing financing obtained by the Partnership), to the selling
Partner's Interest and Partner Loans thus purchased.
At the closing, the Partners shall execute such documents
and instruments of conveyance as may be necessary or appropriate
to effectuate the transactions contemplated hereby, including the
Transfer of the Interests and Partner Loans of the selling
Partner(s) to the purchasing Partner(s) and the assumption by
each purchasing Partner of the selling Partner's obligations with
respect to the selling Partner's Interest Transferred to the
purchasing Partner(s). Each Partner shall bear its own costs of
such Transfer and closing, including attorneys' fees and filing
fees. The costs of determining Net Equity shall be borne by the
Partners (pro rata based on their respective Percentage Interests
as of the occurrence of the Liquidating Event).
(g) Solely for the purposes of this Section 14.7, Comcast
will have the same rights and obligations as a General Partner
hereunder even if it has become an Exclusive Limited Partner
under Section 6.4(a)(v) so long as Comcast would not otherwise
then be an Exclusive Limited Partner under Section 13.1(a).
SECTION 15
MISCELLANEOUS
15.1 Notices.
Any notice, payment, demand, or communication required or
permitted to be given by any provision of this Agreement shall be
in writing and mailed (certified or registered mail, postage
prepaid, return receipt requested) or sent by hand or overnight
courier, or by facsimile (with acknowledgment received), charges
prepaid and addressed as follows, or to such other address or
number as such Person may from time to time specify by notice to
the Partners:
(a) If to the Partnership, to the address or number set forth
on Schedule 2.2;
(b) If to a Partner or its designated Representative(s), to
the address or number set forth in Schedule 2.2;
(c) If to the Management Committee, to the Partnership and to
each Partner and its designated Representative(s).
Any Person may from time to time specify a different address by
notice to the Partnership and the Partners. All notices and
other communications given to a Person in accordance with the
provisions of this Agreement shall be deemed to have been given
and received (i) four (4) Business Days after the same are sent
by certified or registered mail, postage prepaid, return receipt
requested, (ii) when delivered by hand or transmitted by
facsimile (with acknowledgment received and, in the case of a
facsimile only, a copy of such notice is sent no later than the
next Business Day by a reliable overnight courier service, with
acknowledgment of receipt) or (iii) one (1) Business Day after
the same are sent by a reliable overnight courier service, with
acknowledgment of receipt.
15.2 Binding Effect.
Except as otherwise provided in this Agreement, this
Agreement shall be binding upon and inure to the benefit of the
Partners and their respective successors, transferees, and
assigns.
15.3 Construction.
This Agreement shall be construed simply according to its
fair meaning and not strictly for or against any Partner.
15.4 Time.
Time is of the essence with respect to this Agreement.
15.5 Table of Contents; Headings.
The table of contents and section and other headings
contained in this Agreement are for reference purposes only and
are not intended to describe, interpret, define or limit the
scope, extent or intent of this Agreement.
15.6 Severability.
Every provision of this Agreement is intended to be
severable. If any term or provision hereof is illegal, invalid
or unenforceable for any reason whatsoever, that term or
provision will be enforced to the maximum extent permissible so
as to effect the intent of the Partners, and such illegality,
invalidity or unenforceability shall not affect the validity or
legality of the remainder of this Agreement. If necessary to
effect the intent of the Partners, the Partners will negotiate in
good faith to amend this Agreement to replace the unenforceable
language with enforceable language which as closely as possible
reflects such intent.
15.7 Incorporation by Reference.
Every exhibit and other appendix (other than schedules)
attached to this Agreement and referred to herein is not
incorporated in this Agreement by reference unless this Agreement
expressly otherwise provides.
15.8 Further Action.
Each Partner, upon the reasonable request of the Management
Committee, agrees to perform all further acts and execute,
acknowledge, and deliver any documents which may be reasonably
necessary, appropriate, or desirable to carry out the intent and
purposes of this Agreement.
15.9 Governing Law.
The internal laws of the State of Delaware (without regard
to principles of conflict of law) shall govern the validity of
this Agreement, the construction of its terms, and the
interpretation of the rights and duties of the Partners.
15.10 Waiver of Action for Partition; No Bill For Partnership
Accounting.
Each Partner irrevocably waives any right that it may have
to maintain any action for partition with respect to any of the
Property; provided that the foregoing shall not be construed to
apply to any action by a Partner for the enforcement of its
rights under this Agreement. Each Partner waives its right to
seek a court decree of dissolution (other than a dissolution in
accordance with Section 14) or to seek appointment of a court
receiver for the Partnership as now or hereafter permitted under
applicable law. To the fullest extent permitted by law, each
Partner covenants that it will not (except with the consent of
the Management Committee) file a bill for Partnership accounting.
15.11 Counterpart Execution.
This Agreement may be executed in any number of counterparts
with the same effect as if all the Partners had signed the same
document. All counterparts shall be construed together and shall
constitute one agreement.
15.12 Sole and Absolute Discretion.
Except as otherwise provided in this Agreement, all actions
which the Management Committee may take and all determinations
which the Management Committee may make pursuant to this
Agreement may be taken and made at the sole and absolute
discretion of the Management Committee.
15.13 Specific Performance.
Each Partner agrees with the other Partners that the other
Partners would be irreparably damaged if any of the provisions of
this Agreement are not performed in accordance with their
specific terms and that monetary damages would not provide an
adequate remedy in such event. Accordingly, in addition to any
other remedy to which the nonbreaching Partners may be entitled,
at law or in equity, the nonbreaching Partners shall be entitled
to injunctive relief to prevent breaches of this Agreement and
specifically to enforce the terms and provisions hereof.
15.14 Entire Agreement.
The provisions of this Agreement set forth the entire
agreement and understanding between the Partners as to the
subject matter hereof and supersede all prior agreements, oral or
written, and other communications between the Partners relating
to the subject matter hereof.
15.15 Limitation on Rights of Others.
Nothing in this Agreement, whether express or implied, shall
be construed to give any Person other than the Partners any legal
or equitable right, remedy or claim under or in respect of this
Agreement.
15.16 Waivers; Remedies.
The observance of any term of this Agreement may be waived
(either generally or in a particular instance and either
retroactively or prospectively) by the party or parties entitled to
enforce such term, but any such waiver shall be effective only if
in a writing signed by the party or parties against which such
waiver is to be asserted. Except as otherwise provided herein, no
failure or delay of any Partner in exercising any power or
right under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power,
or any abandonment or discontinuance of steps to enforce such
right or power, preclude any other or further exercise thereof or
the exercise of any other right or power.
15.17 Jurisdiction; Consent to Service of Process.
(a) Each Partner hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court sitting in the County of
New York or any Federal court of the United States of America
sitting in the Southern District of New York, and any appellate
court from any such court, in any suit, action or proceeding
arising out of or relating to the Partnership or this Agreement,
or for recognition or enforcement of any judgment, and each
Partner hereby irrevocably and unconditionally agrees that all
claims in respect of any such suit, action or proceeding may be
heard and determined in such New York State court or, to the
extent permitted by law, in such Federal court.
(b) Each Partner hereby irrevocably and unconditionally
waives, to the fullest extent it may legally do so, any objection
which it may now or hereafter have to the laying of venue of any
suit, action or proceeding arising out of or relating to the
Partnership or this Agreement in any New York State court sitting
in the County of New York or any Federal court sitting in the
Southern District of New York. Each Partner hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such suit, action or
proceeding in any such court and further waives the right to
object, with respect to such suit, action or proceeding, that
such court does not have jurisdiction over such Partner.
(c) Each Partner irrevocably consents to service of process
in the manner provided for the giving of notices pursuant to this
Agreement, provided that such service shall be deemed to have
been given only when actually received by such Partner. Nothing
in this Agreement shall affect the right of a party to serve
process in any other manner permitted by law.
15.18 Waiver of Jury Trial.
Each Partner waives, to the fullest extent permitted by
applicable law, any right it may have to a trial by jury in
respect of any action, suit or proceeding arising out of or
relating to the Partnership or this Agreement.
15.19 No Right of Set-Off.
No Partner shall be entitled to offset against any of its
financial obligations to the Partnership under this Agreement,
any obligation owed to it or any of its Affiliates by any other
Partner or any of such other Partner's Affiliates.
IN WITNESS WHEREOF, the parties have entered into this
Agreement of Limited Partnership as of the day first above set
forth.
[signatures follow on a separate page]
IN WITNESS WHEREOF, the undersigned have duly
executed this Agreement of Limited Partnership as of the day
first above set forth.
SPRINT SPECTRUM, INC.
By: /s/ J. Richard Devlin
Name:
Title:
TCI NETWORK, INC.
By: /s/ Brendan R. Clouston
Name:
Title:
COMCAST TELEPHONY SERVICES, INC.
By: /s/ Lawrence S. Smith
Name:
Title:
COX COMMUNICATIONS WIRELESS, INC.
By: /s/ David L. Woodrow
Name:
Title:
Exhibit (10)(c)
1978 STOCK OPTION PLAN
(as amended on April 27, 1982, April 23, 1985,
February 7, 1987, August 11, 1987, April 12, 1988,
December 12, 1989, April 16, 1991, August 13, 1991, and
February 18, 1995)
Section 1. Establishment.
United Telecommunications, Inc., a Kansas corporation
("Company"), hereby establishes a stock option plan to be
named the United Telecommunications, Inc. 1978 Stock Option
Plan ("Plan"), for officers and key employees of the Company
and its Subsidiaries.
Section 2. Purpose.
The purpose of the Plan is to induce officers and key
employees of the Company and its subsidiaries, who are in a
position to contribute materially to the prosperity thereof,
to remain with the Company or its subsidiaries, to offer
them incentives and reward in recognition of their share in
the Company's progress, and to encourage them to continue to
promote the best interest of the Company and its
subsidiaries. The Plan will also aid the Company and its
subsidiaries in competing with other enterprises for the
services of new key personnel needed to help insure their
continued development.
All options granted pursuant to the Plan prior to April
27, 1982, and outstanding as of such date shall be
nonstatutory stock options.
Options granted to an optionee shall be either
Incentive Stock Options within the meaning of Section 422A
of the Internal Revenue Code of 1986, as amended, or
nonstatutory stock options, provided that no Incentive Stock
Options shall be granted which would permit options first
exercisable in any calendar year to exceed the limitations
set forth in Section 5A(a) hereof. Options which become
first exercisable in any calendar year in excess of said
limitations shall be nonstatutory stock options. Options
designated "Nonqualified" or "Nonstatutory" Stock Options
shall not be restricted by the limitations of said Section
5(A)(a) and shall not be treated as Incentive Stock Options.
Section 3. Administration.
The Plan shall be administered by a Stock Option
Committee (the "Committee") consisting of three or more
persons who shall be members of the Board of Directors of
the Company. The Committee shall be elected by the Board of
Directors of the Company which may from time to time appoint
members of the Committee in substitution for members
previously appointed and may fill vacancies, however caused,
in the Committee. The Committee shall select one of its
members as its chairman, and shall hold its meetings at such
times and places as it may determine. A majority of the
Committee shall constitute a quorum and the acts of a
majority of the members present at any meeting at which a
quorum is present, or acts approved in writing by a majority
of the Committee, shall be deemed the acts of the Committee.
The Company shall grant options and related stock
appreciation rights under the Plan in accordance with
determinations made by the Committee pursuant to the
provisions of the Plan. Members of the Committee shall be
disinterested persons as defined in regulations issued under
Section 16 of the Securities Exchange Act of 1934. The
Committee from time to time may adopt (and thereafter amend
and rescind) such rules and regulations for carrying out the
Plan and take such action in the administration of the Plan,
not inconsistent with the provisions hereof, as it shall
deem proper. The interpretation and construction of any
provisions of the Plan by the Committee shall, unless
otherwise determined by the Board of Directors of the
Company, be final and conclusive. No member of the Board of
Directors or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or
any option granted under it.
Section 4. Total Number of Shares to be Optioned.
The maximum number of shares of common stock ($2.50 par
value) of the Company which may be issued upon exercise of
options under the Plan shall not exceed 800,000 (subject to
adjustment as provided in Section 10 hereof). The shares
sold under the Plan may be either issued shares reacquired
by the Company at any time or authorized but unissued
shares, as the Board of Directors from time to time may
determine.
In the event that any outstanding options under the
Plan for any reason expire or are terminated, the shares of
common stock of the Company allocable to the unexercised
portion of all of such options may again be subject to an
option under the Plan.
Section 5. Eligibility.
Options shall be granted only to officers and key
employees of the Company or its subsidiaries. The Committee
will, in its discretion, determine the officers and key
employees to be granted options, the time or times at which
options shall be granted, the number of shares subject to
each option, whether the options are Incentive Stock Options
or nonstatutory stock options, and the manner in which
options may be exercised. In making such determination, the
Committee may take into consideration the value of the
services rendered by the respective individuals, their
present and potential contributions to the success of the
Company and its subsidiaries and such other factors which
the Committee may deem relevant in accomplishing the purpose
of the Plan.
No option may be granted to any individual who
immediately after the option grant owns directly or
indirectly stock possessing more than five percent (5%) of
the total combined voting power or value of all classes of
stock of the Company or any subsidiary.
An individual may be granted more than one option but
only on the terms and subject to the restrictions
hereinafter set
forth. No person shall be eligible to receive an option for
a larger number of shares than is recommended for such
individual by the Committee.
Section 5A. Limitation on Incentive Stock Options.
(a) General Rule. For options granted after December
31, 1986, the aggregate fair market value (determined at the
time the option is granted) of the stock with respect to
which Incentive Stock Options are exercisable for the first
time during any calendar year by the optionee under all
plans of the Company and its subsidiaries shall not exceed
$100,000.
(b) Fair Market Value. Fair market value shall be
deemed to be the average of the high and low prices of the
common stock of the Company for composite transactions as
published by major newspapers for the date the Incentive
Stock Option is granted or, if no sale of the Company's
stock shall have been made on that day, the next preceding
day on which there was a sale of such stock; provided,
however, that fair market value in the case of Incentive
Stock Options granted prior to April 23, 1985, shall be
deemed to be the closing price of the common stock of the
Company on the New York Stock Exchange on the date the
Incentive Stock Option was granted.
Section 6. Terms and Conditions of Options.
Each option granted on or after April 27, 1982, under
the Plan shall be evidenced by a Stock Option Agreement in
such form not inconsistent with the Plan as the Committee
shall determine, provided that such Stock Option Agreement
clearly and separately identifies nonstatutory stock options
and Incentive Stock Options and that the substance of the
following terms and conditions be included therein:
(a) Option Price. The price at which each share of
common stock covered by such option may be purchased shall
be determined by the Committee and shall be no less than one
hundred percent (100%) of the fair market value of the stock
on the date the option is granted. Fair market value shall
be deemed to be the average of the high and low prices of
the common stock of the Company for composite transactions
as published by major newspapers for the date the option is
granted or, if no sale of the Company's stock shall have
been made on that day, the next preceding day on which there
was a sale of such stock; provided, however, that fair
market value in the case of options granted prior to April
23, 1985, was deemed to be the closing price of the common
stock of the Company on the New York Stock Exchange on the
date the option was granted.
(b) Nontransferable. The option and any related SAR
shall not be transferable by the optionee otherwise than by
will or by the laws of descent and distribution; provided
that, if so determined by the Committee, an optionee may, in
the manner established by the Committee, designate a
beneficiary to exercise:
(i) any incentive stock option granted on or after the
effective date of the Committee's approval of
applicable procedures; and
(ii) any nonqualified options or SAR
upon the death of the optionee. During the optionee's
lifetime, the option and any related SAR may be exercised
only by the optionee or, if permissible under applicable
law, by the guardian or representative of the optionee.
(c) Exercise of Option. The option and any right
related thereto, if exercised by the optionee, may be
exercised (subject, however, to the provisions of Section
8, and if applicable, Section 9) only if the optionee has
been an employee of the Company or of any subsidiary thereof
at all times during the period beginning with the date of
the granting of the option and ending on the day three (3)
months before the date of such exercise; provided, however,
that in the case of an optionee who is a retiree of the
Company or of any subsidiary thereof or who becomes
permanently and totally disabled, the three (3) months shall
be extended to five (5) years for options designated
"Nonqualified" or "Nonstatutory" options. (For this
purpose, a retiree is a person who is entitled to receive
pension benefits in accordance with the United System
Employee Retirement Plan immediately upon termination of
employment.) Options granted under the Plan shall not be
affected by any change of duties or position so long as the
optionee continues to be an employee of the Company or of a
subsidiary. Only those options exercisable at the date the
optionee's employment is terminated may be exercised during
the period following such termination, whether such
termination is by retirement or otherwise.
(d) Term of Option. The option and any right related
thereto shall not be exercisable after the expiration of ten
(10) years from the date the option was granted.
(e) Death of Optionee. In the event of the death of
an optionee during the period in which an option is
exercisable (as set forth in Subsection (c) above), the
option theretofore granted to such person and any related
SAR shall be exercisable only within the twelve (12) months
next succeeding such death, and then only (i) by the
executor or administrator of the optionee's estate, by the
person or persons to whom the optionee's rights under the
option shall pass by the optionee's will or the laws of
descent and distribution, or, if a beneficiary has been
designated in accordance with Subsection (b) above, by the
beneficiary, and (ii) if and to the extent that the optionee
was entitled to exercise the option at the date of the
optionee's death, provided that in no event shall the option
be exercisable more than ten (10) years after the date it
was granted.
(f) Sequential Exercise of Incentive Stock Options.
No Incentive Stock Option granted prior to January 1, 1987,
shall be exercisable while there is outstanding any other
Incentive Stock Option which was granted to the optionee at
an earlier time to purchase stock in the Company or in any
corporation which (at the time of the granting of such
Incentive Stock Option) is a subsidiary of the Company, or
in any predecessor of any of such corporations. For the
purpose of this Section 6(f), an Incentive Stock Option
which has not been exercised in full is outstanding until
the expiration of the period during which, under its initial
terms, it could have been exercised. The cancellation of an
earlier Incentive Stock Option will not enable a subsequent
Incentive Stock Option to be exercised any sooner.
Section 7. Consideration for Options.
Each optionee shall, as consideration for the grant of
the option, agree in writing to remain in the employ of the
Company or of one of its subsidiaries, at the pleasure of
the Company or of such subsidiary, for at least one (1) year
from the date of the granting of such option or until
earlier termination of the optionee's employment effected or
approved by the Company or by such subsidiary. In the event
of a violation by the optionee of such agreement, any
options still held by such person at the time of such
violation shall automatically terminate. The Committee may
waive this requirement in the case of any optionee. Nothing
contained in the Plan, or in any option granted pursuant to
the Plan, nor in any agreement made pursuant to the
provisions of this Section 7, shall confer upon any optionee
any right with respect to continuance of employment by the
Company or its subsidiaries, nor interfere in any way with
the right of the Company or its subsidiaries to terminate
the optionee's employment or change the optionee's
compensation at any time.
Section 8. Exercise of Options - Purchase of Shares.
Unless otherwise determined by the Committee, 25% of
the total number of shares subject to an option granted
under the Plan shall become exercisable one year from date
of grant and 25% on each of the three succeeding
anniversaries. An optionee's right to purchase shares with
respect to shares which become exercisable shall be
cumulative during the term of the option. An option shall
be exercisable by purchase of shares only upon payment to
the Company of the full purchase price of the shares with
respect to which the option is exercised; provided, however,
that the Company shall not be required to issue or deliver
any certificates for shares of common stock purchased upon
the exercise of an option prior to (i) if requested by the
Company, the filing with the Company by the optionee or
purchaser acting under Section 6(e) hereof of a
representation in writing that at the time of such exercise
it is the optionee's then present intention to acquire the
shares being purchased for investment and not for resale, or
(ii) the completion of any registration or other
qualification of such shares under any state or federal laws
or rulings or regulations of any government regulatory body,
which the Company shall determine to be necessary or
advisable.
Payment for the shares shall be either in United States
dollars, payable in cash or by check, or by surrender of
stock certificates representing like common stock of the
Company having an aggregate fair market value, determined as
of the date of exercise, equal to the number of shares with
respect to which such option is exercised multiplied by the
option price per share; provided that the Committee may
impose whatever restrictions it deems necessary or desirable
with respect to the payment for shares by the surrender of
stock certificates representing like common stock of the
Company. The fair market value of common stock on the date
of exercise of an option shall be determined in the same
manner as the fair market value of common stock on the date
of grant of such option was determined pursuant to Section
6(a). Such payment shall be accompanied by a written
request for the shares purchased. An option shall be deemed
exercised on the date such payment and written request are
received by the Secretary of the Company.
In addition, for all options outstanding on February
17, 1995, or issued thereafter, certain optionees, as
determined by the Committee, may elect to receive restricted
shares upon payment for the exercise of an option in the
form of unrestricted common stock. The optionee will
receive the same number of unrestricted shares as the number
of shares surrendered to pay the exercise price, while the
shares received in excess of the number surrendered to pay
the exercise price may be restricted. Such optionees may
also elect to deliver restricted shares of the Company's
common stock in payment of the exercise price
notwithstanding restrictions on transferability to which
such shares are subject. The Company shall be authorized to
issue restricted shares of common stock upon such exercises
of stock options, subject to the following conditions:
(a) The optionee shall elect a vesting period for the
restricted common stock to be received upon exercise of the
option of between six (6) months and ten (10) years, but in
no event may an optionee elect a vesting period shorter than
the period provided in paragraph (c) hereof.
(b) Restricted common stock issued upon an exercise
shall include the right to have stock withheld for taxes on
the lapse of the restrictions.
(c) Restricted common stock received in such an
exercise or from an election to receive a Long-Term
Incentive Plan payout in restricted stock, or any Restricted
Stock Award granted pursuant to the Long-Term Stock
Incentive Program, shall be eligible for use in payment of
the exercise price of a stock option, so long as all the
shares received as a result of such an exercise are
restricted for a period at least as long as, and with terms
at least as restrictive as the terms of, the restricted
common stock used in payment. Any such restricted common
stock so delivered in payment of the exercise price shall
have an aggregate fair market value (determined as of the
date of exercise and in the same manner as the fair market
value of unrestricted common stock of the Company on the
date of exercise of an option is determined pursuant to
Section 6(a)) equal to the number of shares with respect to
which such option is exercised, multiplied by the exercise
price per share.
(d) Shares of restricted common stock received in an
exercise of a stock option that continue to be restricted
shall be forfeited in the event that vesting conditions are
not satisfied, subject to the discretion of the Committee,
except in the case of death, disability, normal retirement,
or involuntary termination for reasons other than cause, in
which case all restrictions lapse; provided, however, that
in no event shall restrictions lapse if the restrictions on
shares used to pay for the exercise would not have lapsed
under the same conditions.
(e) The optionee will have all the rights of a
stockholder with respect to shares of restricted stock
received upon the exercise of an option, including the right
to vote the shares of stock and the right to dividends on
the stock. Unless the Corporate Secretary establishes
alternative procedures, the shares of restricted stock will
be registered in the name of the optionee and the
certificates evidencing such shares shall bear an
appropriate legend referring to the terms, conditions and
restrictions applicable to the award and shall be held in
escrow by the Company. The optionee shall execute a stock
power or powers assigning the shares of restricted stock
back to the Company, which stock powers shall be held in
escrow by the Company and used only in the event of the
forfeiture of any of the shares of restricted stock. A
certificate evidencing unrestricted shares of common stock
shall be issued to the optionee promptly after the
restrictions lapse on any restricted shares.
(f) The Corporate Secretary shall have the discretion
and authority to establish any and all procedures, including
the requirement of election forms, which he deems necessary
or desirable for the orderly administration of such
exercises.
No optionee or optionee's executor or administrator,
legatees or distributees, as the case may be, will be, or
will be deemed to be, a holder of any shares subject to an
option unless and until a stock certificate or certificates
for such shares are issued to such person or them under the
terms of the Plan. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other
rights for which the record date is prior to the date such
stock certificate is issued, except as provided in Section
10 hereof.
In the event that any optionee shall be dismissed from
the employ of the Company or any of its subsidiaries for any
reason which in the opinion of the Committee shall
constitute good cause for dismissal, any option still held
by such person at such time shall automatically terminate.
The decision of the Committee as to what shall constitute
good cause for dismissal shall be final and binding upon all
concerned.
Section 9. Exercise of Options - Stock Appreciation Rights.
In addition to providing for the exercise of an option
as set forth in Section 8, at the time of grant of such
option the Committee may by separate agreement, in
conjunction with all or part of any option granted under the
Plan, permit an optionee to exercise the option in an
alternative manner based on the appreciated value of the
common stock subject to option ("Stock Appreciation Right");
provided, however, that no Stock Appreciation Right granted
to an optionee who is an officer of the Company shall be
exercisable during the six-month period following the date
of grant, except that such limitation shall not apply in the
event of death or physical disability of such optionee
occurring prior to the expiration of such six-month period.
Stock Appreciation Rights may be exercised by an optionee by
surrendering the related option or applicable portion
thereof. Upon such exercise and surrender, the optionee
shall be entitled to receive the value of such Stock
Appreciation Rights determined in the manner prescribed in
this Section 9. Options which have been so surrendered, in
whole or in part, shall no longer be exercisable.
Each agreement evidencing Stock Appreciation Rights
granted on or after April 27, 1982, shall clearly and
separately identify the nonstatutory stock options and
Incentive Stock Options to which it relates and shall
contain such terms and conditions not inconsistent with
other provisions of the Plan as shall be determined from
time to time by the Committee, which shall include the
following:
(a) Stock Appreciation Rights shall expire no later
than the expiration of the related option.
(b) Stock Appreciation Rights shall be transferable
only when and to the extent that the related option is
transferable.
(c) Stock Appreciation Rights shall be exercisable at
such time or times and only to the extent that the related
option is exercisable.
(d) Stock Appreciation Rights shall be exercisable
only when there is a positive spread, that is, when the
market price of the stock subject to the related option
exceeds the exercise price of such option.
(e) Upon the exercise of Stock Appreciation Rights, an
optionee shall be entitled to receive the value thereof,
which value shall be equal to the excess of the fair market
value on the date of exercise of one share of common stock
over the option price per share specified in the related
option multiplied by the number of shares in respect of
which the Stock Appreciation Rights shall have been
exercised. The fair market value of common stock on the
date of exercise of Stock Appreciation Rights shall be
determined in the same manner as the fair market value of
common stock on the date of grant of the related option was
determined pursuant to Section 6(a).
(f) Upon an exercise of Stock Appreciation Rights, the
optionee shall notify the Company of the form in which
payment of the value thereof will be made (i.e., cash,
common stock, or any combination thereof); provided,
however, in the case of optionees who are officers of the
Company or other persons subject to Section 16(b) of the
Securities Exchange Act of 1934, (i) payment of the value of
Stock Appreciation Rights related to Incentive Stock Options
may be elected in common stock only insofar as the issuance
of such common stock to the optionee would be subject to the
Internal Revenue Code of 1954, Section 83 Income Inclusion
Rule, as in effect on the date of exercise of the Stock
Appreciation Rights, and (ii) the Committee may at any time
impose any other limitations upon the exercise of Stock
Appreciation Rights which, in the Committee's sole
discretion, are necessary or desirable in order to comply
with Section 16(b) and the rules and regulations thereunder,
or in order to obtain any exemption therefrom.
Upon the exercise of Stock Appreciation Rights, the
option or part thereof to which such Stock Appreciation
Rights is related shall be deemed to have been exercised for
the purpose of the limitation of the number of shares of
common stock to be issued under the Plan as set forth in
Section 4 and the requirement of sequential exercise of
Incentive Stock Options as set forth in Section 6(f). Stock
Appreciation Rights shall be deemed exercised on the date
written notice of exercise is received by the Secretary of
the Company.
Section 10. Change in Stock, Adjustments, Etc.
In the event that the outstanding shares of common
stock of the Company are hereafter increased or decreased or
changed into or exchanged for a different number of shares
or kind of shares or other securities of the Company or of
another corporation, by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock
split up, combination of shares, or a dividend payable in
capital stock, appropriate adjustment shall be made by the
Committee in the number and kind of shares for the purchase
of which options may be granted under the Plan including the
maximum number that may be granted to any one person. In
addition, the Committee shall make appropriate adjustment in
the number and kind of shares as to which outstanding
options, or portions thereof then unexercised, shall be
exercisable, to the end that the optionee's proportionate
interest shall be maintained as before the occurrence of
such event, and such adjustment and outstanding options
shall be made without change of the total price applicable
to the unexercised portion of the option and with a
corresponding adjustment in the option price per share;
provided, however, that each such adjustment in the number
and kind of shares subject to outstanding options, including
any adjustment in the option price, shall be made in such
manner as not to constitute a modification as defined in
Section 425 of the Internal Revenue Code of 1986, as
amended. Any such adjustment made by the Committee shall be
conclusive.
The grant of an option pursuant to the Plan shall not
affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes
of its capital or business structure or to merge or to
consolidate or to dissolve, liquidate or sell, or transfer
all or any part of its business or assets.
Section 11. Duration, Amendment and Termination.
The Board of Directors of the Company may at any time
terminate the Plan or make such amendments thereof as it
shall deem advisable and in the best interests of the
Company, without further action on the part of the
stockholders of the Company; provided, however, that no such
termination or amendment shall, without the consent of the
individual to whom any option shall theretofore have been
granted, affect or impair the rights of such individual
under such option, and provided further, that unless the
stockholders of the Company shall have first approved
thereof, no amendment of this Plan shall be made whereby (a)
the total number of shares which may be optioned under the
Plan to all individuals, or any of them, shall be increased,
except by operation of the adjustment provisions of Section
10 hereof, (b) the authority to administer the Plan by a
committee consisting of directors of the Company not
eligible to receive options granted under the Plan shall be
withdrawn, (c) the term of the options shall be extended,
(d) the minimum option price shall be decreased, or (e) the
class of employees to whom options may be granted shall be
changed.
No Incentive Stock Option shall be granted under the
Plan after December 31, 1987, but Incentive Stock Options
granted prior to or as of such date may extend beyond such
date in accordance with the provisions hereof.
Section 12. Effectiveness of Plan.
This Plan shall not become effective unless and until
the following conditions shall have been met:
(a) The Plan shall have been adopted by the
affirmative vote of a majority of the outstanding shares of
the Company at a meeting of the stockholders within one (1)
year of its approval by the Board of Directors.
(b) The Committee shall have been advised by counsel
that all other applicable legal requirements incident to the
establishment and operation of the Plan have been complied
with.
Section 13. Date of Granting of Options.
The granting of an option pursuant to the Plan shall
take place on the date the Committee decides to grant the
option. Within thirty (30) days of the granting of the
option, the Company shall notify the optionee of the grant
of the option, and submit to the optionee a Stock Option
Agreement and, if applicable, an agreement respecting Stock
Appreciation Rights, duly executed by and on behalf of the
Company, with the request that the optionee execute the
agreement or agreements within thirty (30) days after the
mailing by the Company of the notice to the optionee. If
the optionee shall fail to execute the written option
agreement and, if applicable, the agreement respecting Stock
Appreciation Rights within said 30-day period, such person's
option shall be automatically terminated.
Section 14. Application of Funds.
The proceeds received by the Company from the sale of
stock subject to option are to be added to the general funds
of the Company and used for its corporate purposes as the
Board of Directors shall determine.
Section 15. No Obligation to Exercise Option.
Granting of an option shall impose no obligation on the
optionee to exercise such option.
Section 16. Stock Withholding Election.
When taxes are withheld in connection with the exercise
of a stock option by delivering shares of stock in payment
of the exercise price, or an exercise of an SAR for stock,
or upon the lapse of restrictions on restricted stock
received upon the exercise of an option (the date on which
such exercise occurs or such restrictions lapse hereinafter
referred to as the "Tax Date"), the optionee may elect to
make payment for the withholding of federal, state and local
taxes, excluding Social Security and Medicare taxes, up to
the optionee's marginal tax rate, by one or both of the
following methods:
(i) delivering part or all of the payment in
previously-owned shares (which shall be valued at
fair market, as defined herein, on the Tax Date)
held for at least six months, whether or not
received through the prior exercise of a stock
option or SAR for stock; or
(ii) requesting the Company to withhold from those
shares that would otherwise be received upon
exercise of the option, upon exercise of an SAR
for stock, or upon the lapse of restrictions, a
number of shares having a fair market value (as
defined herein) on the Tax Date equal to the
amount to be withheld. The amount of tax
withholding to be satisfied by withholding shares
from the option exercise is limited to the
minimum amount of taxes, excluding Social
Security and Medicare taxes, required to be
withheld under federal, state and local law.
Such election is irrevocable. Any Social Security and
Medicare taxes, any fractional share amount and any
additional withholding not paid by the withholding or
surrender of shares must be paid in cash. If no timely
election is made, cash must be delivered to satisfy all tax
withholding requirements.
Optionees who are subject to Section 16 of the
Securities Exchange Act of 1934 ("Insiders") making an
election pursuant to (i) or (ii) of the immediately
preceding paragraph must do so: (a) at least six months
after the date of grant of the option or SAR; and (b) within
a "window period" as defined in Rule 16b-3(e)(3) under the
Securities Exchange Act of 1934 or at least six months in
advance of the Tax Date. An election by an Insider to
orhave stock withheld to satisfy tax obligations is subject
to the approval of the Committee and to such rules as the
Committee may from time to time adopt.
[FN]
The initial number of shares authorized was doubled due
to the December 1989 two-for-one stock split.
Exhibit (10)(d)
1981 STOCK OPTION PLAN
(as amended on April 27, 1982, April 23, 1985,
February 7, 1987, August 11, 1987, April 12, 1988,
December 12, 1989, April 16, 1991, August 13, 1991, and
February 18, 1995)
Section 1. Establishment.
United Telecommunications, Inc., a Kansas corporation
("Company"), hereby establishes a stock option plan to be
named the United Telecommunications, Inc. 1981 Stock Option
Plan ("Plan"), for officers and key employees of the Company
and its subsidiaries.
Section 2. Purpose.
The purpose of the Plan is to induce officers and key
employees of the Company and its subsidiaries, who are in a
position to contribute materially to the prosperity thereof,
to remain with the Company or its subsidiaries, to offer
them incentives and reward in recognition of their share in
the Company's progress, and to encourage them to continue to
promote the best interest of the Company and its
subsidiaries. The Plan will also aid the Company and its
subsidiaries in competing with other enterprises for the
services of new key personnel needed to help insure their
continued development.
All options granted pursuant to the Plan prior to April
27, 1982, and outstanding as of such date shall be
nonstatutory stock options.
Options granted to an optionee shall be either
Incentive Stock Options within the meaning of Section 422A
of the Internal Revenue Code of 1986, as amended, or
nonstatutory stock options, provided that no Incentive Stock
Options shall be granted which would permit options first
exercisable in any calendar year to exceed the limitations
set forth in Section 5A(a) hereof. Options which become
first exercisable in any calendar year in excess of said
limitations shall be nonstatutory stock options. Options
designated "Nonqualified" or "Nonstatutory" Stock Options
shall not be restricted by the limitations of said Section
5(A)(a) and shall not be treated as Incentive Stock Options.
Section 3. Administration.
The Plan shall be administered by a Stock Option
Committee (the "Committee") consisting of three or more
persons who shall be members of the Board of Directors of
the Company. The Committee shall be elected by the Board of
Directors of the Company which may from time to time appoint
members of the Committee in substitution for members
previously appointed and may fill vacancies, however caused,
in the Committee. The Committee shall select one of its
members as its chairman, and shall hold its meetings at such
times and places as it may determine. A majority of the
Committee shall constitute a quorum and the acts of a
majority of the members present at any meeting at which a
quorum is present, or acts approved in writing by a majority
of the Committee, shall be deemed the acts of the Committee.
The Company shall grant options and related stock
appreciation rights under the Plan in accordance with
determinations made by the Committee pursuant to the
provisions of the Plan. Members of the Committee shall be
disinterested persons as defined in regulations issued under
Section 16 of the Securities Exchange Act of 1934. The
Committee from time to time may adopt (and thereafter amend
and rescind) such rules and regulations for carrying out the
Plan and take such action in the administration of the Plan,
not inconsistent with the provisions hereof, as it shall
deem proper. The interpretation and construction of any
provisions of the Plan by the Committee shall, unless
otherwise determined by the Board of Directors of the
Company, be final and conclusive. No member of the Board of
Directors or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or
any option granted under it.
Section 4. Total Number of Shares to be Optioned.
The maximum number of shares of common stock ($2.50 par
value) of the Company which may be issued upon exercise of
options under the Plan shall not exceed 1,400,000 (subject
to adjustment as provided in Section 10 hereof). The shares
sold under the Plan may be either issued shares reacquired
by the Company at any time or authorized but unissued
shares, as the Board of Directors from time to time may
determine.
In the event that any outstanding options under the
Plan for any reason expire or are terminated, the shares of
common stock of the Company allocable to the unexercised
portion of all of such options may again be subject to an
option under the Plan.
Section 5. Eligibility.
Options shall be granted only to officers and key
employees of the Company or its subsidiaries. The Committee
will, in its discretion, determine the officers and key
employees to be granted options, the time or times at which
options shall be granted, the number of shares subject to
each option, whether the options are Incentive Stock Options
or nonstatutory stock options, and the manner in which
options may be exercised. In making such determination, the
Committee may take into consideration the value of the
services rendered by the respective individuals, their
present and potential contributions to the success of the
Company and its subsidiaries and such other factors which
the Committee may deem relevant in accomplishing the purpose
of the Plan.
No option may be granted to any individual who
immediately after the option grant owns directly or
indirectly stock possessing more than five percent (5%) of
the total combined voting power or value of all classes of
stock of the Company or any subsidiary.
An individual may be granted more than one option but
only on the terms and subject to the restrictions
hereinafter set forth. No person shall be eligible to
receive an option for a larger number of shares than is
recommended for such individual by the Committee.
Section 5A. Limitation on Incentive Stock Options.
(a) General Rule. For options granted after December
31, 1986, the aggregate fair market value (determined at the
time the option is granted) of the stock with respect to
which Incentive Stock Options are exercisable for the first
time during any calendar year by the optionee under all
plans of the Company and its subsidiaries shall not exceed
$100,000.
(b) Fair Market Value. Fair market value shall be
deemed to be the average of the high and low prices of the
common stock of the Company for composite transactions as
published by major newspapers for the date the Incentive
Stock Option is granted or, if no sale of the Company's
stock shall have been made on that day, the next preceding
day on which there was a sale of such stock; provided,
however, that fair market value in the case of Incentive
Stock Options granted prior to April 23, 1985, shall be
deemed to be the closing price of the common stock of the
Company on the New York Stock Exchange on the date the
Incentive Stock Option was granted.
Section 6. Terms and Conditions of Options.
Each option granted on or after April 27, 1982, under
the Plan shall be evidenced by a Stock Option Agreement in
such form not inconsistent with the Plan as the Committee
shall determine, provided that such Stock Option Agreement
clearly and separately identifies nonstatutory stock options
and Incentive Stock Options and that the substance of the
following terms and conditions be included therein:
(a) Option Price. The price at which each share of
common stock covered by such option may be purchased shall
be determined by the Committee and shall be no less than one
hundred percent (100%) of the fair market value of the stock
on the date the option is granted. Fair market value shall
be deemed to be the average of the high and low prices of
the common stock of the Company for composite transactions
as published by major newspapers for the date the option is
granted or, if no sale of the Company's stock shall have
been made on that day, the next preceding day on which there
was a sale of such stock; provided, however, that fair
market value in the case of options granted prior to April
23, 1985, was deemed to be the closing price of the common
stock of the Company on the New York Stock Exchange on the
date the option was granted.
(b) Nontransferable. The option and any related SAR
shall not be transferable by the optionee otherwise than by
will or by the laws of descent and distribution; provided
that, if so determined by the Committee, an optionee may, in
the manner established by the Committee, designate a
beneficiary to exercise:
(i) any incentive stock option granted on or after the
effective date of the Committee's approval of
applicable procedures; and
(ii) any nonqualified options or SAR
upon the death of the optionee. During the optionee's
lifetime, the option and any related SAR may be exercised
only by the optionee or, if permissible under applicable
law, by the guardian or representative of the optionee.
(c) Exercise of Option. The option and any right
related thereto, if exercised by the optionee, may be
exercised (subject, however, to the provisions of Section 8,
and if applicable, Section 9) only if the optionee has been
an employee of the Company or of any subsidiary thereof at
all times during the period beginning with the date of the
granting of the option and ending on the day three (3)
months before the date of such exercise; provided, however,
that in the case of an optionee who is a retiree of the
Company or of any subsidiary thereof or who becomes
permanently and totally disabled, the three (3) months shall
be extended to five (5) years for options designated
"Nonqualified" or "Nonstatutory" options. (For this
purpose, a retiree is a person who is entitled to receive
pension benefits in accordance with the United System
Employee Retirement Plan immediately upon termination of
employment.) Options granted under the Plan shall not be
affected by any change of duties or position so long as the
optionee continues to be an employee of the Company or of a
subsidiary. Only those options exercisable at the date the
optionee's employment is terminated may be exercised during
the period following such termination, whether such
termination is by retirement or otherwise.
(d) Term of Option. The option and any right related
thereto shall not be exercisable after the expiration of ten
(10) years from the date the option was granted.
(e) Death of Optionee. In the event of the death of
an optionee during the period in which an option is
exercisable (as set forth in Subsection (c) above), the
option theretofore granted to such person and any related
SAR shall be exercisable only within the twelve (12) months
next succeeding such death, and then only (i) by the
executor or administrator of the optionee's estate, by the
person or persons to whom the optionee's rights under the
option shall pass by the optionee's will or the laws of
descent and distribution, or, if a beneficiary has been
designated in accordance with Subsection (b) above, by the
beneficiary, and (ii) if and to the extent that the optionee
was entitled to exercise the option at the date of the
optionee's death, provided that in no event shall the option
be exercisable more than ten (10) years after the date it
was granted.
(f) Sequential Exercise of Incentive Stock Options.
No Incentive Stock Option granted prior to January 1, 1987,
shall be exercisable while there is outstanding any other
Incentive Stock Option which was granted to the optionee at
an earlier time to purchase stock in the Company or in any
corporation which (at the time of the granting of such
Incentive Stock Option) is a subsidiary of the Company, or
in any predecessor of any of such corporations. For the
purpose of this Section 6(f), an Incentive Stock Option
which has not been exercised in full is outstanding until
the expiration of the period during which, under its initial
terms, it could have been exercised. The cancellation of an
earlier Incentive Stock Option will not enable a subsequent
Incentive Stock Option to be exercised any sooner.
Section 7. Consideration for Options.
Each optionee shall, as consideration for the grant of
the option, agree in writing to remain in the employ of the
Company or of one of its subsidiaries, at the pleasure of
the Company or of such subsidiary, for at least one (1) year
from the date of the granting of such option or until
earlier termination of the optionee's employment effected or
approved by the Company or by such subsidiary. In the event
of a violation by the optionee of such agreement, any
options still held by such person at the time of such
violation shall automatically terminate. The Committee may
waive this requirement in the case of any optionee. Nothing
contained in the Plan, or in any option granted pursuant to
the Plan, nor in any agreement made pursuant to the
provisions of this Section 7, shall confer upon any optionee
any right with respect to continuance of employment by the
Company or its subsidiaries, nor interfere in any way with
the right of the Company or its subsidiaries to terminate
the optionee's employment or change the optionee's
compensation at any time.
Section 8. Exercise of Options - Purchase of Shares.
Unless otherwise determined by the Committee, 25% of
the total number of shares subject to an option granted
under the Plan shall become exercisable one year from date
of grant and 25% on each of the three succeeding
anniversaries. An optionee's right to purchase shares with
respect to shares which become exercisable shall be
cumulative during the term of the option. An option shall
be exercisable by purchase of shares only upon payment to
the Company of the full purchase price of the shares with
respect to which the option is exercised; provided, however,
that the Company shall not be required to issue or deliver
any certificates for shares of common stock purchased upon
the exercise of an option prior to (i) if requested by the
Company, the filing with the Company by the optionee or
purchaser acting under Section 6(e) hereof of a
representation in writing that at the time of such exercise
it is the optionee's then present intention to acquire the
shares being purchased for investment and not for resale, or
(ii) the completion of any registration or other
qualification of such shares under any state or federal laws
or rulings or regulations of any government regulatory body,
which the Company shall determine to be necessary or
advisable.
Payment for the shares shall be either in United States
dollars, payable in cash or by check, or by surrender of
stock certificates representing like common stock of the
Company having an aggregate fair market value, determined as
of the date of exercise, equal to the number of shares with
respect to which such option is exercised multiplied by the
option price per share; provided that the Committee may
impose whatever restrictions it deems necessary or desirable
with respect to the payment for shares by the surrender of
stock certificates representing like common stock of the
Company. The fair market value of common stock on the date
of exercise of an option shall be determined in the same
manner as the fair market value of common stock on the date
of grant of such option was determined pursuant to Section
6(a). Such payment shall be accompanied by a written
request for the shares purchased. An option shall be deemed
exercised on the date such payment and written request are
received by the Secretary of the Company.
In addition, for all options outstanding on February
17, 1995, or issued thereafter, certain optionees, as
determined by the Committee, may elect to receive restricted
shares upon payment for the exercise of an option in the
form of unrestricted common stock. The optionee will
receive the same number of unrestricted shares as the number
of shares surrendered to pay the exercise price, while the
shares received in excess of the number surrendered to pay
the exercise price may be restricted. Such optionees may
also elect to deliver restricted shares of the Company's
common stock in payment of the exercise price
notwithstanding restrictions on transferability to which
such shares are subject. The Company shall be authorized
to issue restricted shares of common stock upon such
exercises of stock options, subject to the following
conditions:
(a) The optionee shall elect a vesting period for the
restricted common stock to be received upon exercise of the
option of between six (6) months and ten (10) years, but in
no event may an optionee elect a vesting period shorter than
the period provided in paragraph (c) hereof.
(b) Restricted common stock issued upon an exercise
shall include the right to have stock withheld for taxes on
the lapse of the restrictions.
(c) Restricted common stock received in such an
exercise or from an election to receive a Long-Term
Incentive Plan payout in restricted stock, or any Restricted
Stock Award granted pursuant to the Long-Term Stock
Incentive Program, shall be eligible for use in payment of
the exercise price of a stock option, so long as all the
shares received as a result of such an exercise are
restricted for a period at least as long as, and with terms
at least as restrictive as the terms of, the restricted
common stock used in payment. Any such restricted common
stock so delivered in payment of the exercise price shall
have an aggregate fair market value (determined as of the
date of exercise and in the same manner as the fair market
value of unrestricted common stock of the Company on the
date of exercise of an option is determined pursuant to
Section 6(a)) equal to the number of shares with respect to
which such option is exercised, multiplied by the exercise
price per share.
(d) Shares of restricted common stock received in an
exercise of a stock option shall be forfeited in the event
that vesting conditions are not satisfied, subject to the
discretion of the Committee, except in the case of death,
disability, normal retirement, or involuntary termination
for reasons other than cause, in which case all restrictions
lapse; provided, however, that in no event shall
restrictions lapse if the restrictions on shares used to pay
for the exercise would not have lapsed under the same
conditions.
(e) The optionee will have all the rights of a
stockholder with respect to shares of restricted stock
received upon the exercise of an option, including the right
to vote the shares of stock and the right to dividends on
the stock. Unless the Corporate Secretary establishes
alternative procedures, the shares of restricted stock will
be registered in the name of the optionee and the
certificates evidencing such shares shall bear an
appropriate legend referring to the terms, conditions and
restrictions applicable to the award and shall be held in
escrow by the Company. The optionee shall execute a stock
power or powers assigning the shares of restricted stock
back to the Company, which stock powers shall be held in
escrow by the Company and used only in the event of the
forfeiture of any of the shares of restricted stock. A
certificate evidencing unrestricted shares of common stock
shall be issued to the optionee promptly after the
restrictions lapse on any restricted shares.
(f) The Corporate Secretary shall have the discretion
and authority to establish any and all procedures, including
the requirement of election forms, which he deems necessary
or desirable for the orderly administration of such
exercises.
No optionee or optionee's executor or administrator,
legatees or distributees, as the case may be, will be, or
will be deemed to be, a holder of any shares subject to an
option unless and until a stock certificate or certificates
for such shares are issued to such person or them under the
terms of the Plan. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other
rights for which the record date is prior to the date such
stock certificate is issued, except as provided in Section
10 hereof.
In the event that any optionee shall be dismissed from
the employ of the Company or any of its subsidiaries for any
reason which in the opinion of the Committee shall
constitute good cause for dismissal, any option still held
by such person at such time shall automatically terminate.
The decision of the Committee as to what shall constitute
good cause for dismissal shall be final and binding upon all
concerned.
Section 9. Exercise of Options - Stock Appreciation Rights.
In addition to providing for the exercise of an option
as set forth in Section 8, at the time of grant of such
option the Committee may by separate agreement, in
conjunction with all or part of any option granted under the
Plan, permit an optionee to exercise the option in an
alternative manner based on the appreciated value of the
common stock subject to option ("Stock Appreciation Right");
provided, however, that no Stock Appreciation Right granted
to an optionee who is an officer of the Company shall be
exercisable during the six-month period following the date
of grant, except that such limitation shall not apply in the
event of death or physical disability of such optionee
occurring prior to the expiration of such six-month period.
Stock Appreciation Rights may be exercised by an optionee by
surrendering the related option or applicable portion
thereof. Upon such exercise and surrender, the optionee
shall be entitled to receive the value of such Stock
Appreciation Rights determined in the manner prescribed in
this Section 9. Options which have been so surrendered, in
whole or in part, shall no longer be exercisable.
Each agreement evidencing Stock Appreciation Rights
granted on or after April 27, 1982, shall clearly and
separately identify the nonstatutory stock options and
Incentive Stock Options to which it relates and shall
contain such terms and conditions not inconsistent with
other provisions of the Plan as shall be determined from
time to time by the Committee, which shall include the
following:
(a) Stock Appreciation Rights shall expire no later
than the expiration of the related option.
(b) Stock Appreciation Rights shall be transferable
only when and to the extent that the related option is
transferable.
(c) Stock Appreciation Rights shall be exercisable at
such time or times and only to the extent that the related
option is exercisable.
(d) Stock Appreciation Rights shall be exercisable
only when there is a positive spread, that is, when the
market price of the stock subject to the related option
exceeds the exercise price of such option.
(e) Upon the exercise of Stock Appreciation Rights, an
optionee shall be entitled to receive the value thereof,
which value shall be equal to the excess of the fair market
value on the date of exercise of one share of common stock
over the option price per share specified in the related
option multiplied by the number of shares in respect of
which the Stock Appreciation Rights shall have been
exercised. The fair market value of common stock on the
date of exercise of Stock Appreciation Rights shall be
determined in the same manner as the fair market value of
common stock on the date of grant of the related option was
determined pursuant to Section 6(a).
(f) Upon an exercise of Stock Appreciation Rights, the
optionee shall notify the Company of the form in which
payment of the value thereof will be made (i.e., cash,
common stock, or any combination thereof); provided,
however, in the case of optionees who are officers of the
Company or other persons subject to Section 16(b) of the
Securities Exchange Act of 1934, (i) payment of the value of
Stock Appreciation Rights related to Incentive Stock Options
may be elected in common stock only insofar as the issuance
of such common stock to the optionee would be subject to the
Internal Revenue Code of 1954, Section 83 Income Inclusion
Rule, as in effect on the date of exercise of the Stock
Appreciation Rights, and (ii) the Committee may at any time
impose any other limitations upon the exercise of Stock
Appreciation Rights which, in the Committee's sole
discretion, are necessary or desirable in order to comply
with Section 16(b) and the rules and regulations thereunder,
or in order to obtain any exemption therefrom.
Upon the exercise of Stock Appreciation Rights, the
option or part thereof to which such Stock Appreciation
Rights is related shall be deemed to have been exercised for
the purpose of the limitation of the number of shares of
common stock to be issued under the Plan as set forth in
Section 4 and the requirement of sequential exercise of
Incentive Stock Options as set forth in Section 6(f). Stock
Appreciation Rights shall be deemed exercised on the date
written notice of exercise is received by the Secretary of
the Company.
Section 10. Change in Stock, Adjustments, Etc.
In the event that the outstanding shares of common
stock of the Company are hereafter increased or decreased or
changed into or exchanged for a different number of shares
or kind of shares or other securities of the Company or of
another corporation, by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock
split up, combination of shares, or a dividend payable in
capital stock, appropriate adjustment shall be made by the
Committee in the number and kind of shares for the purchase
of which options may be granted under the Plan including the
maximum number that may be granted to any one person. In
addition, the Committee shall make appropriate adjustment in
the number and kind of shares as to which outstanding
options, or portions thereof then unexercised, shall be
exercisable, to the end that the optionee's proportionate
interest shall be maintained as before the occurrence of
such event, and such adjustment and outstanding options
shall be made without change of the total price applicable
to the unexercised portion of the option and with a
corresponding adjustment in the option price per share;
provided, however, that each such adjustment in the number
and kind of shares subject to outstanding options, including
any adjustment in the option price, shall be made in such
manner as not to constitute a modification as defined in
Section 425 of the Internal Revenue Code of 1986, as
amended. Any such adjustment made by the Committee shall be
conclusive.
The grant of an option pursuant to the Plan shall not
affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes
of its capital or business structure or to merge or to
consolidate or to dissolve, liquidate or sell, or transfer
all or any part of its business or assets.
Section 11. Duration, Amendment and Termination.
The Board of Directors of the Company may at any time
terminate the Plan or make such amendments thereof as it
shall deem advisable and in the best interests of the
Company, without further action on the part of the
stockholders of the Company; provided, however, that no such
termination or amendment shall, without the consent of the
individual to whom any option shall theretofore have been
granted, affect or impair the rights of such individual
under such option, and provided further, that unless the
stockholders of the Company shall have first approved
thereof, no amendment of this Plan shall be made whereby (a)
the total number of shares which may be optioned under the
Plan to all individuals, or any of them, shall be increased,
except by operation of the adjustment provisions of Section
10 hereof, (b) the authority to administer the Plan by a
committee consisting of directors of the Company not
eligible to receive options granted under the Plan shall be
withdrawn, (c) the term of the options shall be extended,
(d) the minimum option price shall be decreased, or (e) the
class of employees to whom options may be granted shall be
changed.
No Incentive Stock Option shall be granted under the
Plan after September 30, 1990, but Incentive Stock Options
granted prior to or as of such date may extend beyond such
date in accordance with the provisions hereof.
Section 12. Effectiveness of Plan.
This Plan shall not become effective unless and until
the following conditions shall have been met:
(a) The Plan shall have been adopted by the
affirmative vote of a majority of the outstanding shares of
the Company at a meeting of the stockholders within one (1)
year of its approval by the Board of Directors.
(b) The Committee shall have been advised by counsel
that all other applicable legal requirements incident to the
establishment and operation of the Plan have been complied
with.
Section 13. Date of Granting of Options.
The granting of an option pursuant to the Plan shall
take place on the date the Committee decides to grant the
option. Within thirty (30) days of the granting of the
option, the Company shall notify the optionee of the grant
of the option, and submit to the optionee a Stock Option
Agreement and, if applicable, an agreement respecting Stock
Appreciation Rights, duly executed by and on behalf of the
Company, with the request that the optionee execute the
agreement or agreements within thirty (30) days after the
mailing by the Company of the notice to the optionee. If
the optionee shall fail to execute the written option
agreement and, if applicable, the agreement respecting Stock
Appreciation Rights within said 30-day period, such person's
option shall be automatically terminated.
Section 14. Application of Funds.
The proceeds received by the Company from the sale of
stock subject to option are to be added to the general funds
of the Company and used for its corporate purposes as the
Board of Directors shall determine.
Section 15. No Obligation to Exercise Option.
Granting of an option shall impose no obligation on the
optionee to exercise such option.
Section 16. Stock Withholding Election.
When taxes are withheld in connection with the exercise
of a stock option by delivering shares of stock in payment
of the exercise price, or an exercise of an SAR for stock,
or upon the lapse of restrictions on restricted stock
received upon the exercise of an option (the date on which
such exercise occurs or such restrictions lapse hereinafter
referred to as the "Tax Date"), the optionee may elect to
make payment for the withholding of federal, state and local
taxes, excluding Social Security and Medicare taxes, up to
the optionee's marginal tax rate, by one or both of the
following methods:
(i) delivering part or all of the payment in
previously-owned shares (which shall be valued at
fair market, as defined herein, on the Tax Date)
held for at least six months, whether or not
received through the prior exercise of a stock
option or SAR for stock; or
(ii) requesting the Company to withhold from those
shares that would otherwise be received upon
exercise of the option, upon exercise of an SAR
for stock, or upon the lapse of restrictions, a
number of shares having a fair market value (as
defined herein) on the Tax Date equal to the
amount to be withheld. The amount of tax
withholding to be satisfied by withholding shares
from the option exercise is limited to the
minimum amount of taxes, excluding Social
Security and Medicare taxes, required to be
withheld under federal, state and local law.
Such election is irrevocable. Any Social Security and
Medicare taxes, any fractional share amount and any
additional withholding not paid by the withholding or
surrender of shares must be paid in cash. If no timely
election is made, cash must be delivered to satisfy all tax
withholding requirements.
Optionees who are subject to Section 16 of the
Securities Exchange Act of 1934 ("Insiders") making an
election pursuant to (i) or (ii) of the immediately
preceding paragraph must do so: (a) at least six months
after the date of grant of the option or SAR; and (b) within
a "window period" as defined in Rule 16b-3(e)(3) under the
Securities Exchange Act of 1934 or at least six months in
advance of the Tax Date. An election by an Insider to have
stock withheld to satisfy tax obligations is subject to the
approval of the Committee and to such rules as the Committee
may from time to time adopt.
[FN]
The initial number of shares authorized was doubled due
to the December, 1989 two-for-one stock split.
Exhibit (10)(e)
1985 STOCK OPTION PLAN
(as amended on February 7, 1987, August 11, 1987,
April 12, 1988, December 12, 1989, April 16, 1991
and August 13, 1991)
Section 1. Establishment.
United Telecommunications, Inc., a Kansas corporation
("Company"), hereby establishes a stock option plan to be
named the United Telecommunications, Inc. 1985 Stock Option
Plan ("Plan"), for officers and key employees of the Company
and its subsidiaries.
Section 2. Purpose.
The purpose of the Plan is to induce officers and key
employees of the Company and its subsidiaries, who are in a
position to contribute materially to the prosperity thereof,
to remain with the Company or its subsidiaries, to offer
them incentives and reward in recognition of their share in
the Company's progress, and to encourage them to continue to
promote the best interests of the Company and its
subsidiaries. The Plan will also aid the Company and its
subsidiaries in competing with other enterprises for the
services of new key personnel needed to help insure their
continued development.
Options granted to an optionee shall be either
Incentive Stock Options within the meaning of Section 422A
of the Internal Revenue Code of 1986, as amended, or
nonstatutory stock options, provided that no Incentive Stock
Options shall be granted which would permit options first
exercisable in any calendar year to exceed the limitations
set forth in Section 6(a) hereof. Options which become
first exercisable in any calendar year in excess of said
limitations shall be nonstatutory stock options. Options
designated "Nonqualified" or "Nonstatutory" Stock Options
shall not be restricted by the limitations of said Section
6(a) and shall not be treated as Incentive Stock Options.
Section 3. Administration.
The Plan shall be administered by a Stock Option
Committee (the "Committee") consisting of three or more
persons who shall be members of the Board of Directors of
the Company. The Committee shall be elected by the Board of
Directors of the Company which may from time to time appoint
members of the Committee in substitution for members
previously appointed and may fill vacancies, however caused,
in the Committee. The Committee shall hold its meetings at
such times and places as it may determine. A majority of
the Committee shall constitute a quorum and the acts of a
majority of the members present at any meeting at which a
quorum is present, or acts approved in writing by a majority
of the Committee, shall be deemed the acts of the Committee.
The Company shall grant options and related stock
appreciation rights under the Plan in accordance with
determinations made by the Committee pursuant to the
provisions of the Plan. Members of the Committee shall be
disinterested persons as defined in regulations issued under
Section 16 of the Securities Exchange Act of 1934 ("Exchange
Act"). The Committee from time to time may adopt (and
thereafter amend and rescind) such rules and regulations for
carrying out the Plan and take such action in the
administration of the Plan, not inconsistent with the
provisions hereof, as it shall deem proper. The
interpretation and construction of any provisions of the
Plan by the Committee shall, unless otherwise determined by
the Board of Directors of the Company, be final and
conclusive. No member of the Board of Directors or the
Committee shall be liable for any action or determination
made in good faith with respect to the Plan or any option
granted under it.
Section 4. Total Number of Shares to be Optioned.
The maximum number of shares of common stock ($2.50 par
value) of the Company which may be issued upon exercise of
options under the Plan shall not exceed 3,000,000 (subject
to adjustment as provided in Section 11 hereof). The shares
sold under the Plan may be either issued shares reacquired
by the Company at any time or authorized but unissued
shares, as the Board of Directors from time to time may
determine.
In the event that any outstanding options under the
Plan for any reason expire or are terminated, the shares of
common stock of the Company allocable to the unexercised
portion of all of such options may again be subject to an
option under the Plan.
Section 5. Eligibility.
Options shall be granted only to officers and key
employees of the Company or its subsidiaries. The Committee
will, in its discretion, determine the officers and key
employees to be granted options, the time or times at which
options shall be granted, the number of shares subject to
each option, whether the options are Incentive Stock Options
or nonstatutory stock options, and the manner in which
options may be exercised. In making such determination, the
Committee may take into consideration the value of the
services rendered by the respective individuals, their
present and potential contributions to the success of the
Company and its subsidiaries and such other factors which
the Committee may deem relevant in accomplishing the purpose
of the Plan.
No option may be granted to any individual who
immediately after the option grant owns directly or
indirectly stock possessing more than five percent (5%) of
the total combined voting power or value of all classes of
stock of the Company or any subsidiary.
An individual may be granted more than one option but
only on the terms and subject to the restrictions
hereinafter set forth. No person shall be eligible to
receive an option for a larger number of shares than is
recommended for such individual by the Committee.
Section 6. Limitation on Incentive Stock Options.
(a) General Rule. For options granted after December
31, 1986, the aggregate fair market value (determined at the
time the option is granted) of the stock with respect to
which Incentive Stock Options are exercisable for the first
time during any calendar year by the optionee under all
plans of the Company and its subsidiaries shall not exceed
$100,000.
(b) Fair Market Value. Fair market value shall be
deemed to be the average of the high and low prices of the
common stock of the Company for composite transactions as
published by major newspapers for the date the Incentive
Stock Option is granted or, if no sale of the Company's
stock shall have been made on that day, the next preceding
day on which there was a sale of such stock.
Section 7. Terms and Conditions of Options.
Each option granted under the Plan shall be evidenced
by a Stock Option Agreement in such form not inconsistent
with the Plan as the Committee shall determine, provided
that such Stock Option Agreement clearly and separately
identifies nonstatutory stock options and Incentive Stock
Options and that the substance of the following terms and
conditions be included therein:
(a) Option Price. The price at which each share of
common stock covered by such option may be purchased shall
be determined by the Committee and shall be no less than one
hundred percent (100%) of the fair market value of the stock
on the date the option is granted. Fair market value shall
be deemed to be the average of the high and low prices of
the common stock of the Company for composite transactions
as published by major newspapers for the date the option is
granted or, if no sale of the Company's stock shall have
been made on that day, the next preceding day on which there
was a sale of such stock.
(b) Nontransferable. The option and any related SAR
shall not be transferable by the optionee otherwise than by
will or by the laws of descent and distribution; provided
that, if so determined by the Committee, an optionee may, in
the manner established by the Committee, designate a
beneficiary to exercise:
(i) any incentive stock option granted on or after the
effective date of the Committee's approval of
applicable procedures; and
(ii) any nonqualified options or SAR
upon the death of the optionee. During the optionee's
lifetime, the option and any related SAR may be exercised
only by the optionee or, if permissible under applicable
law, by the guardian or representative of the optionee.
(c) Exercise of Option. The option and any right
related thereto, if exercised by the optionee, may be
exercised (subject, however, to the provisions of Section 9,
and if applicable, Section 10) only if the optionee has been
an employee of the Company or of any subsidiary thereof at
all times during the period beginning with the date of the
granting of the option and ending on the day three (3)
months before the date of such exercise; provided, however,
that in the case of an optionee who is a retiree of the
Company or of any subsidiary thereof or who becomes
permanently and totally disabled, the three (3) months shall
be extended to twelve (12) months for options designated
"Incentive Stock Options" and to five (5) years for options
designated "Nonqualified" or "Nonstatutory" options. (For
this purpose, a retiree is a person who is entitled to
receive pension benefits in accordance with the United
System Employee Retirement Plan immediately upon termination
of employment.) Options granted under the Plan shall not be
affected by any change of duties or position so long as the
optionee continues to be an employee of the Company or of a
subsidiary. Only those options exercisable at the date the
optionee's employment is terminated may be exercised during
the period following such termination, whether such
termination is by retirement or otherwise.
(d) Term of Option. The option and any right related
thereto shall not be exercisable after the expiration of ten
(10) years from the date the option was granted.
(e) Death of Optionee. In the event of the death of
an optionee during the period in which an option is
exercisable (as set forth in Subsection (c) above), the
option theretofore granted to such person and any related
SAR shall be exercisable only within the twelve (12) months
next succeeding such death, and then only (i) by the
executor or administrator of the optionee's estate, by the
person or persons to whom the optionee's rights under the
option shall pass by the optionee's will or the laws of
descent and distribution, or, if a beneficiary has been
designated in accordance with Subsection (b) above, by the
beneficiary, and (ii) if and to the extent that the optionee
was entitled to exercise the option at the date of the
optionee's death, provided that in no event shall the option
be exercisable more than ten (10) years after the date it
was granted.
(f) Sequential Exercise of Incentive Stock Options.
No Incentive Stock Option granted prior to January 1, 1987,
shall be exercisable while there is outstanding any other
Incentive Stock Option which was granted to the optionee at
an earlier time to purchase stock in the Company or in any
corporation which (at the time of the granting of such
Incentive Stock Option) is a subsidiary of the Company, or
in any predecessor of any of such corporations. For the
purpose of this Section 7(f), an Incentive Stock Option
which has not been exercised in full is outstanding until
the expiration of the period during which, under its initial
terms, it could have been exercised. The cancellation of an
earlier Incentive Stock Option will not enable a subsequent
Incentive Stock Option to be exercised any sooner.
Section 8. Consideration for Options.
Each optionee shall, as consideration for the grant of
the option, agree in writing to remain in the employ of the
Company or of one of its subsidiaries, at the pleasure of
the Company or of such subsidiary, for at least (1) year
from the date of the granting of such option or until
earlier termination of the optionee's employment effected or
approved by the Company or by such subsidiary. In the event
of a violation by the optionee of such agreement, any
options still held by such person at the time of such
violation shall automatically terminate. The Committee may
waive this requirement in the case of any optionee. Nothing
contained in the Plan, or in any option granted pursuant to
the Plan, nor in any agreement made pursuant to the
provisions of this Section 8, shall confer upon any optionee
any right with respect to continuance of employment by the
Company or its subsidiaries, nor interfere in any way with
the right of the Company or its subsidiaries to terminate
the optionee's employment or change the optionee's
compensation at any time.
Section 9. Exercise of Options - Purchase of Shares.
Unless otherwise determined by the Committee, 25% of
the total number of shares subject to an option granted
under the Plan shall become exercisable one year from date
of grant and 25% on each of the three succeeding
anniversaries. An optionee's right to purchase shares with
respect to shares which become exercisable shall be
cumulative during the term of the option. An option shall
be exercisable by purchase of shares only upon payment to
the Company of the full purchase price of the shares with
respect to which the option is exercised; provided, however,
that the Company shall not be required to issue or deliver
any certificates for shares of common stock purchased upon
the exercise of an option prior to (i) if requested by the
Company, the filing with the Company by the optionee or
purchaser acting under Section 7(e) hereof of a
representation in writing that at the time of such exercise
it is the optionee's or purchaser's then present intention
to acquire the shares being purchased for investment and not
for resale, or (ii) the completion of any registration or
other qualification of such shares under any state or
federal laws or rulings or regulations of any government
regulatory body, which the Company shall determine to be
necessary or advisable.
Payment for the shares shall be either in United States
dollars, payable in cash or by check, or by surrender of
stock certificates representing like common stock of the
Company having an aggregate fair market value, determined as
of the date of exercise, equal to the number of shares with
respect to which such option is exercised multiplied by the
option price per share; provided that the Committee may
impose whatever restrictions it deems necessary or desirable
with respect to the payment for shares by the surrender of
stock certificates representing like common stock of the
Company. The fair market value of common stock on the date
of exercise of an option shall be determined in the same
manner as the fair market value of common stock on the date
of grant of an option is determined pursuant to Section
7(a). Such payment shall be accompanied by a written
request for the shares purchased. An option shall be deemed
exercised on the date such payment and written request are
received by the Secretary of the Company.
In addition, for all options outstanding on February
17, 1995, or issued thereafter, certain optionees, as
determined by the Committee, may elect to receive restricted
shares upon payment for the exercise of an option in the
form of unrestricted common stock. The optionee will
receive the same number of unrestricted shares as the number
of shares surrendered to pay the exercise price, while the
shares received in excess of the number surrendered to pay
the exercise price may be restricted. Such optionees may
also elect to deliver restricted shares of the Company's
common stock in payment of the exercise price
notwithstanding restrictions on transferability to which
such shares are subject. The Company shall be authorized to
issue restricted shares of common stock upon such exercises
of stock options, subject to the following conditions:
(a) The optionee shall elect a vesting period for the
restricted common stock to be received upon exercise of the
option of between six (6) months and ten (10) years, but in
no event may an optionee elect a vesting period shorter than
the period provided in paragraph (c) hereof.
(b) Restricted common stock issued upon an exercise
shall include the right to have stock withheld for taxes on
the lapse of the restrictions.
(c) Restricted common stock received in such an
exercise or from an election to receive a Long-Term
Incentive Plan payout in restricted stock, or any Restricted
Stock Award granted pursuant to the Long-Term Stock
Incentive Program, shall be eligible for use in payment of
the exercise price of a stock option, so long as all the
shares received as a result of such an exercise are
restricted for a period at least as long as, and with terms
at least as restrictive as the terms of, the restricted
common stock used in payment. Any such restricted common
stock so delivered in payment of the exercise price shall
have an aggregate fair market value (determined as of the
date of exercise and in the same manner as the fair market
value of unrestricted common stock of the Company on the
date of exercise of an option is determined pursuant to
Section 7(a)) equal to the number of shares with respect to
which such option is exercised, multiplied by the exercise
price per share.
(d) Shares of restricted common stock received in an
exercise of a stock option that continue to be restricted
shall be forfeited in the event that vesting conditions are
not satisfied, subject to the discretion of the Committee,
except in the case of death, disability, normal retirement,
or involuntary termination for reasons other than cause, in
which case all restrictions lapse; provided, however, that
in no event shall restrictions lapse if the restrictions on
shares used to pay for the exercise would not have lapsed
under the same conditions.
(e) The optionee will have all the rights of a
stockholder with respect to shares of restricted stock
received upon the exercise of an option, including the right
to vote the shares of stock and the right to dividends on
the stock. Unless the Corporate Secretary establishes
alternative procedures, the shares of restricted stock will
be registered in the name of the optionee and the
certificates evidencing such shares shall bear an
appropriate legend referring to the terms, conditions and
restrictions applicable to the award and shall be held in
escrow by the Company. The optionee shall execute a stock
power or powers assigning the shares of restricted stock
back to the Company, which stock powers shall be held in
escrow by the Company and used only in the event of the
forfeiture of any of the shares of restricted stock. A
certificate evidencing unrestricted shares of common stock
shall be issued to the optionee promptly after the
restrictions lapse on any restricted shares.
(f) The Corporate Secretary shall have the discretion
and authority to establish any and all procedures, including
the requirement of election forms, which he deems necessary
or desirable for the orderly administration of such
exercises.
No optionee or optionee's executor or administrator,
legatees or distributees, as the case may be, will be, or
will be deemed to be, a holder of any shares subject to an
option unless and until a stock certificate or certificates
for such shares are issued to such person or them under the
terms of the Plan. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash,
securities or other property) or distributions or other
rights for which the record date is prior to the date such
stock certificate is issued, except as provided in Section
11 hereof.
In the event that any optionee shall be dismissed from
the employ of the Company or any of its subsidiaries for any
reason which in the opinion of the Committee shall
constitute good cause for dismissal, any option still held
by such person at such time shall automatically terminate.
The decision of the Committee as to what shall constitute
good cause for dismissal shall be final and binding upon all
concerned.
Section 10. Exercise of Options - Stock Appreciation
Rights.
In addition to providing for the exercise of an option
as set forth in Section 9, at the time of grant of such
option the Committee may by separate agreement, in
conjunction with all or part of any option granted under the
Plan, permit an optionee to exercise the option in an
alternative manner based on the appreciated value of the
common stock subject to option ("Stock Appreciation Right");
provided, however, that no Stock Appreciation Right granted
to an optionee who is an officer of the Company or who is
otherwise subject to Section 16(b) of the Exchange Act shall
be exercisable during the six-month period following the
date of grant, except that such limitation shall not apply
in the event of death or physical disability of such
optionee occurring prior to the expiration of such six-month
period. Stock Appreciation Rights may be exercised by an
optionee by surrendering the related option or applicable
portion thereof. Upon such exercise and surrender, the
optionee shall be entitled to receive the value of such
Stock Appreciation Rights determined in the manner
prescribed in this Section 10. Options which have been so
surrendered, in whole or in part, shall no longer be
exercisable.
Each agreement evidencing Stock Appreciation Rights
shall clearly and separately identify the nonstatutory stock
options and Incentive Stock Options to which it relates and
shall contain such terms and conditions not inconsistent
with other provisions of the Plan as shall be determined
from time to time by the Committee, which shall include the
following:
(a) Stock Appreciation Rights shall expire no later
than the expiration of the related option.
(b) Stock Appreciation Rights shall be transferable
only when and to the extent that the related option is
transferable.
(c) Stock Appreciation Rights shall be exercisable at
such time or times and only to the extent that the related
option is exercisable.
(d) Stock Appreciation Rights shall be exercisable
only when there is a positive spread, that is, when the
market price of the stock subject to the related option
exceeds the exercise price of such option.
(e) Upon the exercise of Stock Appreciation Rights, an
optionee shall be entitled to receive the value thereof,
which value shall be equal to the excess of the fair market
value on the date of exercise of one share of common stock
over the option price per share specified in the related
option multiplied by the number of shares in respect of
which the Stock Appreciation Rights shall have been
exercised. The fair market value of common stock on the
date of exercise of Stock Appreciation Rights shall be
determined in the same manner as the fair
market value of common stock on the date of grant of an
option is determined pursuant to Section 7(a).
(f) Upon an exercise of Stock Appreciation Rights, the
optionee shall notify the Company of the form in which
payment of the value thereof will be made (i.e., cash,
common stock, or any combination thereof); provided,
however, in the case of optionees who are officers of the
Company or other persons subject to Section 16(b) of the
Exchange Act, (i) payment of the value of Stock Appreciation
Rights related to Incentive Stock Options may be elected in
common stock only insofar as the issuance of such common
stock to the optionee would be subject to the Internal
Revenue Code of 1954, Section 83 Income Inclusion Rule, as
in effect on the date of exercise of the Stock Appreciation
Rights, and (ii) the Committee may at any time impose any
other limitations upon the exercise of Stock Appreciation
Rights which, in the Committee's sole discretion, are
necessary or desirable in order to comply with Section 16(b)
and the rules and regulations thereunder, or in order to
obtain any exemption therefrom.
Upon the exercise of Stock Appreciation Rights, the
option or part thereof to which such Stock Appreciation
Rights is related shall be deemed to have been exercised for
the purpose of the limitation of the number of shares of
common stock to be issued under the Plan as set forth in
Section 4 and the requirement of sequential exercise of
Incentive Stock Options as set forth in Section 7(f). Stock
Appreciation Rights shall be deemed exercised on the date
written notice of exercise is received by the Secretary of
the Company.
Section 11. Change in Stock, Adjustments, Etc.
In the event that the outstanding shares of common
stock of the Company are hereafter increased or decreased or
changed into or exchanged for a different number of shares
or kind of shares or other securities of the Company or of
another corporation, by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock
split-up, combination of shares, or a dividend payable in
capital stock, appropriate adjustment shall be made by the
Committee in the number and kind of shares for the purchase
of which options may be granted under the Plan including the
maximum number that may be granted to any one person. In
addition, the Committee shall make appropriate adjustment in
the number and kind of shares as to which outstanding
options, or portions thereof then unexercised, shall be
exercisable, to the end that the optionee's proportionate
interest shall be maintained as before the occurrence of
such event, and such adjustment of outstanding options shall
be made without change of the total price applicable to the
unexercised portion of the option and with a corresponding
adjustment in the option price per share; provided, however,
that each such adjustment in the number and kind of shares
subject to outstanding options, including any adjustment in
the option price, shall be made in such manner as not to
constitute a modification as defined in Section 425 of the
Internal Revenue Code of 1986, as amended. Any such
adjustment made by the Committee shall be conclusive.
The grant of an option pursuant to the Plan shall not
affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes
of its capital or business structure or to merge or to
consolidate or to dissolve, liquidate or sell, or transfer
all or any part of its business or assets.
Section 12. Duration, Amendment and Termination.
The Board of Directors of the Company may at any time
terminate the Plan or make such amendments thereof as it
shall deem advisable and in the best interests of the
Company, without further action on the part of the
stockholders of the Company; provided, however, that no such
termination or amendment shall, without the consent of the
individual to whom any option shall theretofore have been
granted, affect or impair the rights of such individual
under such option, and provided further, that unless the
stockholders of the Company shall have first approved
thereof, no amendment of this Plan shall be made whereby (a)
the total number of shares which may be optioned under the
Plan to all individuals, or any of them, shall be increased,
except by operation of the adjustment provisions of Section
11 hereof, (b) the authority to administer the Plan by a
committee consisting of directors of the Company not
eligible to receive options granted under the Plan shall be
withdrawn, (c) the term of the options shall be extended,
(d) the minimum option price shall be decreased, or (e) the
class of employees to whom options may be granted shall be
changed.
No Incentive Stock Option shall be granted under the
Plan after November 30, 1994, but Incentive Stock Options
granted prior to or as of such date may extend beyond such
date in accordance with the provisions hereof.
Section 13. Effectiveness of Plan.
This Plan shall not become effective unless and until
the following conditions shall have been met:
(a) The Plan shall have been adopted by the
affirmative vote of a majority of the outstanding shares of
the Company present and entitled to vote at a meeting of the
stockholders at which a quorum is present within one (1)
year of its approval by the Board of Directors.
(b) The Committee shall have been advised by counsel
that all other applicable legal requirements incident to the
establishment and operation of the Plan have been complied
with.
Section 14. Date of Granting of Options.
The granting of an option pursuant to the Plan shall
take place on the date the Committee decides to grant the
option. Within thirty (30) days of the granting of the
option, the Company shall notify the optionee of the grant
of the option, and submit to the optionee a Stock Option
Agreement and, if applicable, an agreement respecting Stock
Appreciation Rights, duly executed by and on behalf of the
Company, with the request that the optionee execute the
agreement or agreements within thirty (30) days after the
mailing by the Company of the notice to the optionee. If
the optionee shall fail to execute the written option
agreement and, if applicable, the agreement respecting Stock
Appreciation Rights within said 30-day period, such person's
option shall be automatically terminated.
Section 15. Application of Funds.
The proceeds received by the Company from the sale of
stock subject to option are to be added to the general funds
of the Company and used for its corporate purposes as the
Board of Directors shall determine.
Section 16. No Obligation to Exercise Option.
Granting of an option shall impose no obligation on the
optionee to exercise such option.
Section 17. Stock Withholding Election.
When taxes are withheld in connection with the exercise
of a stock option by delivering shares of stock in payment
of the exercise price, or an exercise of an SAR for stock,
or upon the lapse of restrictions on restricted stock
received upon the exercise of an option (the date on which
such exercise occurs or such restrictions lapse hereinafter
referred to as the "Tax Date"), the optionee may elect to
make payment for the withholding of federal, state and local
taxes, excluding Social Security and Medicare taxes, up to
the optionee's marginal tax rate, by one or both of the
following methods:
(i) delivering part or all of the payment in
previously-owned shares (which shall be valued at
fair market, as defined herein, on the Tax Date)
held for at least six months, whether or not
received through the prior exercise of a stock
option or SAR for stock; or
(ii) requesting the Company to withhold from those
shares that would otherwise be received upon
exercise of the option, upon exercise of an SAR
for stock, or upon the lapse of restrictions, a
number of shares having a fair market value (as
defined herein) on the Tax Date equal to the
amount to be withheld. The amount of tax
withholding to be satisfied by withholding shares
from the option exercise is limited to the
minimum amount of taxes, excluding Social
Security and Medicare taxes, required to be
withheld under federal, state and local law.
Such election is irrevocable. Any Social Security and
Medicare taxes, any fractional share amount and any
additional withholding not paid by the withholding or
surrender of shares must be paid in cash. If no timely
election is made, cash must be delivered to satisfy all tax
withholding requirements.
Optionees who are subject to Section 16 of the
Securities Exchange Act of 1934 ("Insiders") making an
election pursuant to (i) or (ii) of the immediately
preceding paragraph must do so: (a) at least six months
after the date of grant of the option or SAR; and (b) within
a "window period" as defined in Rule 16b-3(e)(3) under the
Securities Exchange Act of 1934 or at least six months in
advance of the Tax Date. An election by an Insider to have
stock withheld to satisfy tax obligations is subject to the
approval of the Committee and to such rules as the Committee
may from time to time adopt.
[FN]
The initial number of shares authorized was doubled due
to the December, 1989 two-for-one stock split.
Exhibit (10)(f)
1990 STOCK OPTION PLAN
(As Amended February 16, 1991, April 16, 1991,
August 13, 1991, December 8, 1992 and February 18, 1995)
Section 1. Establishment.
Pursuant to the Sprint Corporation Long-Term Stock
Incentive Program (the "Program"), Sprint Corporation, a
Kansas corporation (the "Company"), hereby establishes a
stock option plan to be named the 1990 Stock Option Plan
(the "Plan"), for officers and key employees of the Company
and its subsidiaries.
Section 2. Purpose.
The purpose of the Plan is to induce officers and key
employees of the Company and its subsidiaries, who are in a
position to contribute materially to the prosperity thereof,
to remain with the Company or its subsidiaries, to offer
them incentives and reward in recognition of their share in
the Company's progress, and to encourage them to continue to
promote the best interests of the Company and its
affiliates. The Plan will also aid the Company and its
subsidiaries in competing with other enterprises for the
services of new key personnel needed to help insure their
continued development.
Options granted to an optionee shall be either
Incentive Stock Options within the meaning of Section 422A
of the Internal Revenue Code of 1986, as amended, or
Nonstatutory Stock Options, provided that no Incentive Stock
Options shall be granted which would permit options first
exercisable in any calendar year to exceed the limitations
set forth in Section 6(a) hereof. Options which become
first exercisable in any calendar year in excess of said
limitations shall be Nonstatutory Stock Options. Options
designated "Nonstatutory Stock Options" shall not be
restricted by the limitations of said Section 6(a) and shall
not be treated as Incentive Stock Options.
Section 3. Administration.
The Plan shall be administered by the Organization and
Compensation Committee (the "Committee") of the Board of
Directors of the Company. Members of the Committee shall be
Disinterested Persons as defined in the Program. The
Committee shall hold its meetings at such times and places
as it may determine. A majority of the Committee shall
constitute a quorum and the acts of a majority of the
members present at any meeting at which a quorum is present,
or acts approved in writing by a majority of the Committee,
shall be deemed the acts of the Committee. The Company
shall grant options and related Stock Appreciation Rights
("SARs") under the Plan in accordance with determinations
made by the Committee pursuant to the provisions
of the Plan and the Program. The Committee from time to
time may adopt (and thereafter amend and rescind) such rules
and regulations for carrying out the Plan and take such
action in the administration of the Plan, not inconsistent
with the provisions of the Plan and the Program, as it shall
deem proper. The interpretation and construction of any
provisions of the Plan by the Committee shall, unless
otherwise determined by the Board of Directors of the
Company, be final and conclusive. No member of the Board of
Directors or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or
any option granted under it.
Section 4. Total Number of Shares to be Optioned.
The maximum number of shares of common stock ($2.50 par
value) of the Company which may be issued upon exercise of
options under the Plan shall not exceed 17,000,000 (subject
to adjustment as provided in Section 11 hereof). The shares
sold under the Plan may be either treasury shares or
authorized but unissued shares, as the Board of Directors
from time to time may determine. The maximum number of
shares of common stock which may be issued upon exercise of
options granted in any calendar year, together with shares
of common stock subject to other awards under the Program,
shall not exceed the limits set forth in Section 4(a) of the
Program.
In the event that any outstanding options under the
Plan for any reason expire or are terminated, the shares of
common stock of the Company allocable to the unexercised
portion of all of such options may again be subject to an
option under the Plan.
Section 5. Eligibility.
Options shall be granted only to officers and key
employees of the Company or its subsidiaries. The Committee
will, in its discretion, determine the officers and key
employees to be granted options, the time or times at which
options shall be granted, the number of shares subject to
each option, whether the options are Incentive Stock Options
or Nonstatutory Stock Options, any conditions on the
exercise of the options, and the manner in which options may
be exercised. In making such determination, the Committee
may take into consideration the value of the services
rendered by the respective individuals, their present and
potential contributions to the success of the Company and
its affiliates and such other factors which the Committee
may deem relevant in accomplishing the purpose of the Plan.
No option may be granted to any individual who
immediately after the option grant owns directly or
indirectly stock possessing more than five percent (5%) of
the total combined voting power or value of all classes of
stock of the Company or any subsidiary.
An individual may be granted more than one option but
only on the terms and subject to the restrictions
hereinafter set forth. No person shall be eligible to
receive an option for a larger number of shares than is
recommended for such individual by the Committee.
Section 6. Limitation on Incentive Stock Options.
(a) General Rule. The aggregate fair market value
(determined at the time the option is granted) of the stock
with respect to which Incentive Stock Options are
exercisable for the first time during any calendar year by
the optionee under all plans of the Company and its
subsidiaries shall not exceed $100,000 or, if different, the
maximum limitation in effect at the time of grant under
Section 422A of the Internal Revenue Code of 1986, as
amended, or any successor provision, and any regulations
promulgated thereunder.
(b) Fair Market Value. Fair market value shall be
deemed to be the average of the high and low prices of the
common stock of the Company for composite transactions as
published by major newspapers for the date the Incentive
Stock Option is granted or, if no sale of the Company's
stock shall have been made on that day, the next preceding
day on which there was a sale of such stock.
Section 7. Terms and Conditions of Options.
Each option granted under the Plan shall be evidenced
by a Stock Option Agreement in such form not inconsistent
with the Plan as the Committee shall determine, provided
that such Stock Option Agreement clearly and separately
identifies Nonstatutory Stock Options and Incentive Stock
Options and that the substance of the following terms and
conditions be included therein:
(a) Option Price. The price at which each share of
common stock covered by such option may be purchased shall
be determined by the Committee and shall be no less than one
hundred percent (100%) of the fair market value of the stock
on the date the option is granted. Fair market value shall
be deemed to be the average of the high and low prices of
the common stock of the Company for composite transactions
as published by major newspapers for the date the option is
granted or, if no sale of the Company's stock shall have
been made on that day, the next preceding day on which there
was a sale of such stock.
(b) Nontransferable. The option and any related SAR
shall not be transferable by the optionee otherwise than by
will or by the laws of descent and distribution; provided
that, if so determined by the Committee, an optionee may, in
the manner established by the Committee, designate a
beneficiary to exercise the option and any related SAR upon
the death of the optionee. During the optionee's lifetime,
the option and any related SAR may be exercised only by the
optionee or, if permissible under applicable law, by the
guardian or representative of the optionee.
(c) Exercise of Option. The option and any related
SAR, if exercised by the optionee, may be exercised
(subject, however, to the provisions of Section 9, and if
applicable, Section 10) only if the optionee has been an
employee of the Company or of any subsidiary thereof at all
times during the period beginning with the date of the
granting of the option and ending on the day three (3)
months before the date of such exercise; provided, however,
that in the case of an optionee who is a retiree of the
Company or of any subsidiary thereof or who becomes
permanently and totally disabled, the three (3) months shall
be extended to twelve (12) months for options designated
"Incentive Stock Options" and to five (5) years for options
designated "Non-statutory" Stock Options" (for this purpose,
a retiree is a person who is entitled to receive pension
benefits in accordance with the Sprint Retirement Pension
Plan immediately upon termination of employment). Options
granted under the Plan shall not be affected by any change
of duties or position so long as the optionee continues to
be an employee of the Company or of a subsidiary. Only
those options exercisable at the date the optionee's
employment is terminated may be exercised during the period
following such termination, whether such termination is by
retirement or otherwise.
(d) Term of Option. The option and any related SAR
shall not be exercisable after the expiration of ten (10)
years from the date the option was granted.
(e) Death of Optionee. In the event of the death of
an optionee during the period in which an option is
exercisable (as set forth in Section 7(c) above), the option
theretofore granted to such person and any related SAR shall
be exercisable only within the twelve (12) months next
succeeding such death, and then only (i) by the executor or
administrator of the optionee's estate, by the person or
persons to whom the optionee's rights under the option shall
pass by the optionee's will or the laws of descent and
distribution, or, if a beneficiary has been designated in
accordance with Section 7(b) above, by the beneficiary, and
(ii) if and to the extent that the optionee was entitled (or
deemed to be entitled by the Committee) to exercise the
option at the date of the optionee's death, provided that in
no event shall the option be exercisable more than ten (10)
years after the date it was granted.
Section 7A. Reload Options.
In connection with non-qualified options (including
newly-granted options or outstanding options granted under
the Plan or any other stock option plan of the Company or of
US Sprint Communications Company Limited Partnership), the
Committee may provide that an optionee has the right to a
reload option, which shall be subject to the following terms
and conditions:
(a) Grant of the Reload Option; Number of Shares,
Price. Subject to subsections (b) and (c) of this Section
7A and to the availability of shares to be optioned under
the Plan, if an optionee has an option (the "original
option") with reload rights and pays for the exercise of the
original option by surrendering common stock of the Company,
the optionee shall receive a new option ("reload option")
for the number of shares so surrendered at an option price
equal to the fair market value of the stock on the date of
the exercise of the original option.
(b) Minimum Purchase Required. A reload option will
be granted only if the exercise of the original option is an
exercise of at least 25% of the total number of shares
granted under the original option (or an exercise of all the
shares remaining under the original option if less than 25%
of the shares remain to be exercised).
(c) Other Requirements. A reload option will not be
granted: (1) if the market value of the common stock of the
Company on the date of exercise of the original option is
less than the exercise price of the original option; (2) if
the optionee is no longer an employee of Sprint or a Sprint
subsidiary; or (3) if the original option is exercised less
than one year prior to the expiration of the original
option.
(d) Term of Option. The reload option shall expire on
the same date as the original option.
(e) Type of Option. The reload option shall be a non-
qualified option.
(f) No Additional Reload Options. The reload options
shall not include any right to a second reload option.
(g) Date of Grant, Vesting. The date of grant of the
reload option shall be the date of the exercise of the
original option. The reload options shall be exercisable in
full beginning one year from date of grant; provided,
however, that all shares purchased upon the exercise of the
original option (except for any shares withheld for tax
withholding obligations) shall not be sold, transferred or
pledged within six months from the date of exercise of the
original option. In no event shall a reload option be
exercised after the original option expires as provided in
subsection (d) of this Section 7A.
(h) Stock Withholding; Grants of Reload Options. If
the other requirements of this Section 7A are satisfied, and
if shares are withheld or shares surrendered for tax
withholding pursuant to Section 17, a reload option will be
granted for the number of shares surrendered as payment for
the exercise of the original option plus the number of
shares surrendered or withheld to satisfy tax withholding.
In connection with reload options for officers who are
subject to Section 16 of the Securities Exchange Act of 1934
("Insiders"), the Committee may at any time impose any
limitations which, in the Committee's sole discretion, are
necessary or desirable in order to comply with Section 16(b)
of the Securities Exchange Act of 1934 and the rules and
regulations thereunder, or in order to obtain any exemption
therefrom.
(i) Other Terms and Conditions. Except as otherwise
provided in this Section 7A, all the provisions of the 1990
Stock Option Plan shall apply to reload options granted
pursuant to this Section 7A.
Section 8. Consideration for Options.
Each optionee shall, as consideration for the grant of
the option, agree in writing to remain in the employ of the
Company or of one of its subsidiaries, at the pleasure of
the Company or of such subsidiary, for at least (1) year
from the date of the granting of such option or until
earlier termination of the optionee's employment effected or
approved by the Company or by such subsidiary. In the event
of a violation by the optionee of such agreement, any
options still held by such person at the time of such
violation shall automatically terminate. The Committee may
waive this requirement in the case of any optionee. Nothing
contained in the Plan, or in any option granted pursuant to
the Plan, nor in any agreement made pursuant to the
provisions of this Section 8, shall confer upon any optionee
any right with respect to continuance of employment by the
Company or its subsidiaries, nor interfere in any way with
the right of the Company or its subsidiaries to terminate
the optionee's employment or change the optionee's
compensation at any time.
Section 9. Exercise of Options - Purchase of Shares.
Options and related SARs shall be exercisable at such
time or times, and upon the satisfaction of such conditions,
as determined by the Committee; provided, however, that
unless otherwise determined by the Committee, no Incentive
Stock Option shall be exercisable during the year ending on
the day before the first anniversary date of the granting of
the Incentive Stock Option. An optionee's right to purchase
shares with respect to shares which become exercisable shall
be cumulative during the term of the option. An option
shall be exercisable by purchase of shares only upon payment
to the Company of the full purchase price of the shares with
respect to which the option is exercised; provided, however,
that the Company shall not be required to issue or deliver
any certificates for shares of common stock purchased upon
the exercise of an option prior to (i) if requested by the
Company, the filing with the Company by the optionee or
purchaser acting under Section 7(e) hereof of a
representation in writing that at the time of such exercise
it is the optionee's or purchaser's then present intention
to acquire the shares being purchased for investment and not
for resale, or (ii) the completion of any registration or
other qualification of such shares under any state or
federal laws or rulings or regulations of any government
regulatory body, which the Company shall determine to be
necessary or advisable.
Payment for the shares shall be either in United States
dollars, payable in cash or by check, or by surrender of
stock certificates representing like common stock of the
Company having an aggregate fair market value, determined as
of the date of exercise, equal to the number of shares with
respect to which such option is exercised multiplied by the
option price per share; provided that the Committee may
impose whatever restrictions it deems necessary or desirable
with respect to the payment for shares by the surrender of
stock certificates representing like common stock of the
Company. The fair market value of common stock on the date
of exercise of an option shall be determined in the same
manner as the fair market value of common stock on the date
of grant of an option is determined pursuant to Section
7(a). Such payment shall be accompanied by a written
request for the shares purchased. An option shall be deemed
exercised on the date such payment and written request are
received by the Secretary of the Company.
In addition, for all options outstanding on February
17, 1995, or issued thereafter, certain optionees, as
determined by the Committee, may elect to deliver restricted
shares of the Company's common stock in payment of the
exercise price notwithstanding restrictions on
transferability to which such shares are subject, and the
Company shall be authorized to issue restricted shares of
common stock upon the exercise of such stock options,
subject to the following conditions:
(a) The optionee shall elect a vesting period for the
restricted common stock to be received upon exercise of the
option of between six (6) months and ten (10) years, but in
no event may an optionee elect a vesting period shorter than
the period provided in paragraph (c) hereof.
(b) Restricted common stock issued upon an exercise
shall include the right to have stock withheld for taxes on
the lapse of the restrictions.
(c) Restricted common stock received in such an
exercise or from an election to receive a Long-Term
Incentive Plan payout in restricted stock, or any Restricted
Stock Award granted pursuant to the Long-Term Stock
Incentive Program, shall be eligible for use in payment of
the exercise price of a stock option, so long as all the
shares received as a result of such an exercise are
restricted for a period at least as long as, and with terms
at least as restrictive as the terms of, the restricted
common stock used in payment. Any such restricted common
stock so delivered in payment of the exercise price shall
have an aggregate fair market value (determined as of the
date of exercise and in the same manner as the fair market
value of unrestricted common stock of the Company on the
date of exercise of an option is determined pursuant to
Section 7(a)) equal to the number of shares with respect to
which such option is exercised, multiplied by the exercise
price per share.
(d) Restricted common stock received in an exercise of
a stock option shall be forfeited in the event that vesting
conditions are not satisfied, subject to the discretion of
the Committee, except in the case of death, disability,
normal retirement, or involuntary termination for reasons
other than cause, in which case all restrictions lapse;
provided, however, that in no event shall restrictions lapse
if the restrictions on shares used to pay for the exercise
would not have lapsed under the same conditions.
(e) In the case of early retirement, the lapse of
restrictions may be accelerated at the discretion of the
Committee, provided, however, that in no event shall
restrictions lapse if the restrictions on shares used to pay
for the exercise would not have lapsed under the same
conditions.
(f) The Corporate Secretary shall have the discretion
and authority to establish any and all procedures, including
the requirement of election forms, which he deems necessary
or desirable for the orderly administration of such
exercises.
No optionee or optionee's beneficiary, executor or
administrator, legatees or distributees, as the case may be,
will be, or will be deemed to be, a holder of any shares
subject to an option unless and until a stock certificate or
certificates for such shares are issued to such person or
them under the terms of the Plan. No adjustment shall be
made for dividends (ordinary or extraordinary, whether in
cash, securities or other property) or distributions or
other rights for which the record date is prior to the date
such stock certificate is issued, except as provided in
Section 11 hereof.
In the event that any optionee shall be dismissed from
the employ of the Company or any of its subsidiaries for any
reason which in the opinion of the Committee shall
constitute good cause for dismissal, any option still held
by such person at such time shall automatically terminate.
The decision of the Committee as to what shall constitute
good cause for dismissal shall be final and binding upon all
concerned.
In the event that any optionee, without the consent
of the Committee, while employed by the Company or any
affiliate of the Company or after termination of such
employment, becomes associated with, employed by, renders
services to, or owns any interest in (other than any
nonsubstantial interest, as determined by the Committee),
any business that is in competition with the Company or
with any business in which the Company has a substantial
interest, as determined by the Committee, any option still
held by such person at such time shall automatically
terminate. The decision of the Committee on any such
matters shall be final and binding upon all concerned.
Section 10. Exercise of Options - Stock Appreciation
Rights.
In addition to providing for the exercise of an option
as set forth in Section 9, at the time of grant of such
option the Committee may by separate agreement, in
conjunction with all or part of any option granted under the
Plan, permit an optionee to exercise the option in an
alternative manner based on the appreciated value of the
common stock subject to option; provided, however, that no
SAR granted to an optionee who is subject to Section 16(b)
of the Exchange Act (an "Insider") shall be exercisable
during the six-month period following the date of grant,
except that such limitation shall not apply in the event of
death or physical disability of such optionee occurring
prior to the expiration of such six-month period. SARs may
be exercised by an optionee by surrendering the related
option or applicable portion thereof. Upon such exercise
and surrender, the optionee shall be entitled to receive
the value of such SARs determined in the manner prescribed
in this Section 10. Options which have been so surrendered,
in whole or in part, shall no longer be exercisable.
Each agreement evidencing SARs shall clearly and
separately identify the Nonstatutory Stock Options and
Incentive Stock Options to which it relates and shall
contain such terms and conditions not inconsistent with
other provisions of the Plan and the Program as shall be
determined from time to time by the Committee, which shall
include the following:
(a) SARs shall expire no later than the expiration of
the related option.
(b) SARs shall be transferable only when and to the
extent that the related option is transferable.
(c) SARs shall be exercisable at such time or times
and only to the extent that the related option is
exercisable. The SAR shall terminate and no longer be
exercisable upon the termination or exercise of the related
option, except that SARs granted with respect to less than
the full number of shares covered by a related option shall
not be reduced until the exercise or termination of the
related option exceeds the number of shares not covered by
the SARs.
(d) SARs shall be exercisable only when there is a
positive spread, that is, when the market price of the stock
subject to the related option exceeds the exercise price of
such option.
(e) Upon the exercise of SARs, an optionee shall be
entitled to receive the value thereof, which value shall be
equal to the excess of the fair market value on the date of
exercise of one share of common stock over the option price
per share specified in the related option multiplied by the
number of shares in respect of which the SARs shall have
been exercised. The fair market value of common stock on
the date of exercise of SARs shall be determined in the same
manner as the fair market value of common stock on the date
of grant of an option is determined pursuant to Section
7(a).
(f) Upon an exercise of SARs, the optionee shall
notify the Company of the form in which payment of the value
thereof will be made (i.e., cash, common stock, or any
combination thereof); provided, however, in the case of
Insiders, (i) payment of the value of SARs related to
Incentive Stock Options may be elected in common stock only
insofar as the issuance of such common stock to the optionee
would be subject to the Internal Revenue Code of 1986,
Section 83 Income Inclusion Rule, as in effect on the date
of exercise of the SARs, and (ii) the Committee may at any
time impose any other limitations upon the exercise of SARs
which, in the Committee's sole discretion, are necessary or
desirable in order to comply with Section 16(b) of the
Exchange Act and the rules and regulations thereunder, or in
order to obtain any exemption therefrom.
Upon the exercise of SARs, the option or part thereof
to which such SARs are related shall be deemed to have been
exercised for the purpose of the limitation of the number of
shares of common stock to be issued under the Plan as set
forth in Section 4 and the limitation of the number of
shares of common stock to be issued under the Program as set
forth in Section 4(a) of the Program. SARs shall be deemed
exercised on the date written notice of exercise is received
by the Secretary of the Company.
Section 11. Change in Stock, Adjustments, Etc.
In the event that the outstanding shares of common
stock of the Company are hereafter increased or decreased or
changed into or exchanged for a different number of shares
or kind of shares or other securities of the Company or of
another corporation, by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock
split-up, combination of shares, or a dividend payable in
capital stock, appropriate adjustment shall be made by the
Committee in the number and kind of shares for the purchase
of which options may be granted under the Plan including the
maximum number that may be granted to any one person. In
addition, the Committee shall make appropriate adjustment in
the number and kind of shares as to which outstanding
options, or portions thereof then unexercised, shall be
exercisable, to the end that the optionee's proportionate
interest shall be maintained as before the occurrence of
such event, and such adjustment of outstanding options shall
be made without change of the total price applicable to the
unexercised portion of the option and with a corresponding
adjustment in the option price per share; provided, however,
that each such adjustment in the number and kind of shares
subject to outstanding options, including any adjustment in
the option price, shall be made in such manner as not to
constitute a modification as defined in Section 425 of the
Internal Revenue Code of 1986, as amended. If any
outstanding options are subject to any conditions, the
Committee shall also make appropriate adjustments to such
conditions. Any such adjustment made by the Committee shall
be conclusive.
The grant of an option pursuant to the Plan shall not
affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes
of its capital or business structure or to merge or to
consolidate or to dissolve, liquidate or sell, or transfer
all or any part of its business or assets.
Section 12. Duration, Amendment and Termination.
The Board of Directors of the Company may at any time
terminate the Plan or make such amendments thereof as it
shall deem advisable and in the best interests of the
Company; provided, however, that no such termination or
amendment shall, without the consent of the individual to
whom any option shall theretofore have been granted, affect
or impair the rights of such individual under such option;
and provided further, that any such amendment shall be
consistent with the provisions of the Program, as it may be
amended from time to time.
No stock option shall be granted under the Plan after
April 18, 1999, but stock options granted prior to or as of
such date may extend beyond such date in accordance with the
provisions hereof.
Section 13. Effectiveness of Plan.
This Plan shall be effective as of February 17, 1990.
Section 14. Date of Granting of Options.
The date of grant of a reload option shall be
determined in accordance with Section 7A(g). The date of
grant of all other options shall be the date designated by
the Committee as the date of grant, provided that in no
event shall the date of grant be earlier than the date on
which the Committee approved the grant. Within sixty (60)
days of the granting of the option, the Company shall notify
the optionee of the grant of the option, and submit to the
optionee a Stock Option Agreement and, if applicable, an
agreement respecting SARs, duly executed by and on behalf of
the Company, with the request that the optionee execute the
agreement or agreements within sixty (60) days after the
mailing by the Company of the notice to the optionee. The
optionee shall execute the written option agreement and, if
applicable, the agreement respecting SARs, within said 60-
day period.
Section 15. Application of Funds.
The proceeds received by the Company from the sale of
stock subject to option are to be added to the general funds
of the Company and used for its corporate purposes.
Section 16. No Obligation to Exercise Option.
Granting of an option shall impose no obligation on the
optionee to exercise such option.
Section 17. Stock Withholding Election.
When taxes are withheld in connection with the exercise
of a stock option by delivering shares of stock in payment
of the exercise price, or an SAR for stock, or upon the
lapse of restrictions on restricted stock received upon the
exercise of an option (the date on which such exercise
occurs or such restrictions lapse hereinafter referred to as
the "Tax Date"), the optionee may elect to make payment for
the withholding of federal, state and local taxes, excluding
Social Security and Medicare taxes, up to the optionee's
marginal tax rates, by one or both of the following methods:
(i) delivering part or all of the payment in
previously-owned shares (which shall be valued at
fair market, as defined herein, on the Tax Date)
held for at least six months, whether or not
received through the prior exercise of a stock
option or SAR for stock; or
(ii) requesting the Company to withhold from those
shares that would otherwise be received upon
exercise of the option, upon exercise of an SAR
for stock, or upon the lapse of restrictions, a
number of shares having a fair market value (as
defined herein) on the Tax Date equal to the
amount to be withheld. The amount of tax
withholding to be satisfied by withholding shares
from the option exercise is limited to the
minimum amount of taxes, excluding Social
Security and Medicare taxes, required to be
withheld under federal, state and local law.
Such election is irrevocable. Any Social Security and
Medicare taxes, any fractional share amount and any
additional withholding not paid by the withholding or
surrender of shares must be paid in cash. If no timely
election is made, cash must be delivered to satisfy all tax
withholding requirements.
Optionees who are subject to Section 16 of the
Securities Exchange Act of 1934 ("Insiders") making an
election pursuant to (i) or (ii) of the immediately
preceding paragraph must do so: (a) at least six months
after the date of grant of the option or SAR; and (b) within
a "window period" as defined in Rule 16b-3(e)(3) under the
Securities Exchange Act of 1934 or at least six months in
advance of the Tax Date. An election by an Insider to
deliver stock or have stock retained to satisfy tax
obligations is subject to the approval of the Committee and
to such rules as the Committee may from time to time adopt.
Exhibit (10)(h)
THE SPRINT LONG-TERM STOCK INCENTIVE PROGRAM
(as amended February 18, 1995)
Section 1. Purpose. The purposes of the Sprint Long-
Term Stock Incentive Program (the "Plan") are to encourage
directors of Sprint Corporation (the "Company") and officers
and selected key employees of the Company and its Affiliates
to acquire a proprietary and vested interest in the growth
and performance of the Company, to generate an increased
incentive to contribute to the Company's future success and
prosperity, thus enhancing the value of the Company for the
benefit of stockholders, and to enhance the ability of the
Company and its Affiliates to attract and retain individuals
of exceptional talent upon whom, in large measure, the
sustained progress, growth and profitability of the Company
depends.
Section 2. Definitions. As used in the Plan, the
following terms shall have the meanings set forth below:
(a) "Affiliate" shall mean (i) any Person that
directly, or through one or more intermediaries, controls,
or is controlled by, or is under common control with, the
Company or (ii) any entity in which the Company has a
significant equity interest, as determined by the Committee.
(b) "Award" shall mean any Option, Stock Appreciation
Right, Restricted Stock Award, Performance Share,
Performance Unit, Dividend Equivalent, Other Stock Unit
Award, or any other right, interest, or option relating to
Shares granted pursuant to the provisions of the Plan.
(c) "Award Agreement" shall mean any written
agreement, contract, or other instrument or document
evidencing any Award granted hereunder and signed by both
the Company and the Participant or by both the Company and
an Outside Director.
(d) "Board" shall mean the Board of Directors of the
Company.
(e) "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(f) "Committee" shall mean the Organization and
Compensation Committee of the Board, composed of not less
than three directors each of whom is a Disinterested Person.
(g) "Company" shall mean Sprint Corporation.
(h) "Disinterested Person" shall have the meaning set
forth in Rule 16b-3(d)(3) promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of
1934, as amended, or any successor definition adopted by the
Commission.
(i) "Dividend Equivalent" shall mean any right granted
pursuant to Section 14(h) hereof.
(j) "Employee" shall mean any salaried employee of the
Company or of any Affiliate.
(k) "Fair Market Value" shall mean, with respect to
any property, the market value of such property determined
by such methods or procedures as shall be established from
time to time by the Committee.
(l) "Incentive Stock Option" shall mean an Option
granted under Section 6 hereof that is intended to meet the
requirements of Section 422A of the Code or any successor
provision thereto.
(m) "Nonstatutory Stock Option" shall mean an Option
granted to a Participant under Section 6 hereof, and an
Option granted to an Outside Director pursuant to Section 11
hereof, that is not intended to be an Incentive Stock
Option.
(n) "Option" shall mean any right granted to a
Participant under the Plan allowing such Participant to
purchase Shares at such price or prices and during such
period or periods as the Committee shall determine.
"Option" shall also mean the right granted to an Outside
Director under Section 11 hereof allowing such Outside
Director to purchase shares of the common stock of the
Company on the terms set forth in Section 11.
(o) "Other Stock Unit Award" shall mean any right
granted to a Participant by the Committee pursuant to
Section 10 hereof.
(p) "Outside Director" shall mean a member of the
Board who is not an Employee of the Company or of any
Affiliate.
(q) "Participant" shall mean an Employee who is
selected by the Committee to receive an Award under the
Plan.
(r) "Performance Award" shall mean any Award of
Performance Shares or Performance Units pursuant to Section
9 hereof.
(s) "Performance Period" shall mean that period
established by the Committee at the time any Performance
Award is granted or at any time thereafter during which any
performance goals specified by the Committee with respect to
such Award are to be measured.
(t) "Performance Share" shall mean any grant pursuant
to Section 9 hereof of a unit valued by reference to a
designated number of Shares, which value may be paid to the
Participant by delivery of such property as the Committee
shall determine, including, without limitation, cash,
Shares, or any combination thereof, upon achievement of such
performance goals during the Performance Period as the
Committee shall establish at the time of such grant or
thereafter.
(u) "Performance Unit" shall mean any grant pursuant
to Section 9 hereof of a unit valued by reference to a
designated amount of property other than Shares, which value
may be paid to the Participant by delivery of such property
as the Committee shall determine, including, without
limitation, cash, Shares, or any combination thereof, upon
achievement of such performance goals during the Performance
Period as the Committee shall establish at the time of such
grant or thereafter.
(v) "Person" shall mean any individual, corporation,
partnership, association, joint-stock company, trust,
unincorporated organization, or government or political
subdivision thereof.
(w) "Restricted Stock" shall mean any Share issued
with the restriction that the holder may not sell, transfer,
pledge, or assign such Share and with such other
restrictions as the Committee, in its sole discretion, may
impose (including, without limitation, any restriction on
the right to vote such Share, and the right to receive any
cash dividends), which restrictions may lapse separately or
in combination at such time or times, in installments or
otherwise, as the Committee may deem appropriate.
(x) "Restricted Stock Award" shall mean an award of
Restricted Stock under Section 8 hereof.
(y) "Senior Officer" shall mean any employee of the
Company holding the office of Vice President or higher.
(z) "Shares" shall mean shares of the common stock of
the Company, $2.50 par value, and such other securities of
the Company as the Committee may from time to time
determine.
(aa) "Stock Appreciation Right" shall mean any right
granted to a Participant pursuant to Section 7 hereof to
receive, upon exercise by the Participant, the excess of (i)
the Fair Market Value of one Share on the date of exercise
or, if the Committee shall so determine in the case of any
such right other than one related to any Incentive Stock
Option, at any time during a specified period before the
date of exercise over (ii) the grant price of the right as
specified by the Committee, in its sole discretion, on the
date of grant, which shall not be less than the Fair Market
Value of one Share on such date. Any payment by the Company
in respect of such right may be made in cash, Shares, other
property, or any combination thereof, as the Committee, in
its sole discretion, shall determine.
(bb) "Stockholder Meeting" shall mean the annual
meeting of stockholders of the Company in each year.
Section 3. Administration. The Plan shall be
administered by the Committee. The Committee shall have
full power and authority, subject to such orders or
resolutions not inconsistent with the provisions of the Plan
as may from time to time be adopted by the Board, to: (i)
select the Employees of the Company and its Affiliates to
whom Awards may from time to time be granted hereunder; (ii)
determine the type or types of Award to be granted to each
Participant hereunder; (iii) determine the number of Shares
to be covered by each Award granted hereunder; provided,
however, that Shares subject to Options and Stock
Appreciation Rights granted to any individual employee
during any calendar year shall not exceed a total of 500,000
Shares; (iv) determine the terms and conditions, not
inconsistent with the provisions of the Plan, of any Award
granted hereunder; (v) determine whether, to what extent and
under what circumstances Awards may be settled in cash,
Shares or other property or canceled or suspended; (vi)
determine whether, to what extent and under what
circumstances cash, Shares and other property and other
amounts payable with respect to an Award under this Plan
shall be deferred either automatically or at the election of
the Participant; (vii) interpret and administer the Plan and
any instrument or agreement entered into under the Plan;
(viii) establish such rules and regulations and appoint such
agents as it shall deem appropriate for the proper
administration of the Plan; and (ix) make any other
determination and take any other action that the Committee
deems necessary or desirable for administration of the Plan.
Decisions of the Committee shall be final, conclusive and
binding upon all persons, including the Company, any
Participant, any stockholder, and any employee of the
Company or of any Affiliate. Notwithstanding the above, the
Committee shall not have any discretion with respect to the
Options granted to Outside Directors pursuant to Section 11
hereof. A majority of the members of the Committee may
determine its actions and fix the time and place of its
meetings.
Section 4. Shares Subject to the Plan.
(a) Subject to adjustment as provided in Section 4(b),
the total number of Shares available for grant under the
Plan in each calendar year shall be three-fifths of one
percent (0.6%) of the total outstanding Shares as of the
first day of such year for which the Plan is in effect;
provided that such number shall be increased in any year by
the number of Shares available for grant hereunder in
previous years but not covered by Awards granted hereunder
in such years; and provided further, that no more than four
million (4,000,000) Shares shall be cumulatively available
for the grant of Incentive Stock Options under the Plan. In
addition, any Shares issued by the Company through the
assumption or substitution of outstanding grants from an
acquired company shall not reduce the shares available for
grants under the Plan. Any Shares issued hereunder may
consist, in whole or in part, of authorized and unissued
shares or treasury shares. If any Shares subject to any
Award granted hereunder are forfeited or such Award
otherwise terminates without the issuance of such Shares or
of other consideration in lieu of such Shares, the Shares
subject to such Award, to the extent of any such forfeiture
or termination, shall again be available for grant under the
Plan.
(b) In the event of any merger, reorganization,
consolidation, recapitalization, stock dividend, or other
change in corporate structure affecting the Shares, such
adjustment shall be made in the aggregate number and class
of Shares which may be delivered under the Plan, in the
number, class and option price of Shares subject to
outstanding Options granted under the Plan, and in the value
of, or number or class of Shares subject to, Awards granted
under the Plan as may be determined to be appropriate by the
Committee, in its sole discretion, provided that the number
of Shares subject to any Award shall always be a whole
number, and provided further, that the number and price of
shares subject to outstanding Options granted to Outside
Directors pursuant to Section 11 hereof and the number of
shares subject to future Options to be granted pursuant to
Section 11 shall be subject to adjustment only as set forth
in Section 11.
Section 5. Eligibility. Any Employee (excluding any
member of the Committee) shall be eligible to be selected as
a Participant.
Section 6. Stock Options. Options may be granted
hereunder to Participants either alone or in addition to
other Awards granted under the Plan. Any Option granted to
a Participant under the Plan shall be evidenced by an Award
Agreement in such form as the Committee may from time to
time approve. Any such Option shall be subject to the
following terms and conditions and to such additional terms
and conditions, not inconsistent with the provisions of the
Plan, as the Committee shall deem desirable:
(a) Option Price. The purchase price per Share
purchasable under an Option shall be determined by the
Committee in its sole discretion; provided that such
purchase price shall not be less than the Fair Market Value
of the Share on the date of the grant of the Option.
(b) Option Period. The term of each Option shall be
fixed by the Committee in its sole discretion; provided that
no Incentive Stock Option shall be exercisable after the
expiration of ten years from the date the Option is granted.
(c) Exercisability. Options shall be exercisable at
such time or times as determined by the Committee at or
subsequent to grant. Unless otherwise determined by the
Committee at or subsequent to grant, no Incentive Stock
Option shall be exercisable during the year ending on the
day before the first anniversary date of the granting of the
Incentive Stock Option.
(d) Method of Exercise. Subject to the other
provisions of the Plan and any applicable Award Agreement,
any Option may be exercised by the Participant in whole or
in part at such time or times, and the Participant may make
payment of the option price in such form or forms,
including, without limitation, payment by delivery of cash,
Shares or other consideration (including, where permitted by
law and the Committee, Awards) having a Fair Market Value on
the exercise date equal to the total option price, or by any
combination of cash, Shares and other consideration as the
Committee may specify in the applicable Award Agreement.
(e) Incentive Stock Options. In accordance with rules
and procedures established by the Committee, the aggregate
Fair Market Value (determined as of the time of grant) of
the Shares with respect to which Incentive Stock Options
held by any Participant which are exercisable for the first
time by such Participant during any calendar year under the
Plan (and under any other benefit plans of the Company or of
any parent or subsidiary corporation of the Company) shall
not exceed $100,000 or, if different, the maximum limitation
in effect at the time of grant under Section 422A of the
Code, or any successor provision, and any regulations
promulgated thereunder. The terms of any Incentive Stock
Option granted hereunder shall comply in all respects with
the provisions of Section 422A of the Code, or any successor
provision, and any regulations promulgated thereunder.
(f) Form of Settlement. In its sole discretion, the
Committee may provide, at the time of grant, that the shares
to be issued upon an Option's exercise shall be in the form
of Restricted Stock or other similar securities, or may
reserve the right so to provide after the time of grant.
Section 7. Stock Appreciation Rights. Stock
Appreciation Rights may be granted hereunder to Participants
either alone or in addition to other Awards granted under
the Plan and may, but need not, relate to a specific Option
granted under Section 6. The provisions of Stock
Appreciation Rights need not be the same with respect to
each recipient. Any Stock Appreciation Right related to a
Nonstatutory Stock Option may be granted at the same time
such Option is granted or at any time thereafter before
exercise or expiration of such Option. Any Stock
Appreciation Right related to an Incentive Stock Option must
be granted at the same time such Option is granted. In the
case of any Stock Appreciation Right related to any Option,
the Stock Appreciation Right or applicable portion thereof
shall terminate and no longer be exercisable upon the
termination or exercise of the related Option, except that a
Stock Appreciation Right granted with respect to less than
the full number of Shares covered by a related Option shall
not be reduced until the exercise or termination of the
related Option exceeds the number of shares not covered by
the Stock Appreciation Right. Any Option related to any
Stock Appreciation Right shall no longer be exercisable to
the extent the related Stock Appreciation Right has been
exercised. The Committee may impose such conditions or
restrictions on the exercise of any Stock Appreciation Right
as it shall deem appropriate.
Section 8. Restricted Stock.
(a) Issuance. Restricted Stock Awards may be issued
hereunder to Participants, for no cash consideration or for
such minimum consideration as may be required by applicable
law, either alone or in addition to other Awards granted
under the Plan. The provisions of Restricted Stock Awards
need not be the same with respect to each recipient.
(b) Registration. Any Restricted Stock issued
hereunder may be evidenced in such manner as the Committee
in its sole discretion shall deem appropriate, including,
without limitation, book-entry registration or issuance of a
stock certificate or certificates. In the event any stock
certificate is issued in respect of shares of Restricted
Stock awarded under the Plan, such certificate shall be
registered in the name of the Participant, and shall bear an
appropriate legend referring to the terms, conditions, and
restrictions applicable to such Award.
(c) Forfeiture. Except as otherwise determined by the
Committee at the time of grant, upon termination of
employment for any reason during the restriction period, all
shares of Restricted Stock still subject to restriction
shall be forfeited by the Participant and reacquired by the
Company; provided that in the event of a Participant's
retirement, permanent disability, other termination of
employment or death, or in cases of special circumstances,
the Committee may, in its sole discretion, when it finds
that a waiver would be in the best interests of the Company,
waive in whole or in part any or all remaining restrictions
with respect to such Participant's shares of Restricted
Stock. Unrestricted Shares, evidenced in such manner as the
Committee shall deem appropriate, shall be issued to the
grantee promptly after the period of forfeiture, as
determined or modified by the Committee.
Section 9. Performance Awards. Performance Awards may
be issued hereunder to Participants, for no cash
consideration or for such minimum consideration as may be
required by applicable law, either alone or in addition to
other Awards granted under the Plan. The performance
criteria to be achieved during any Performance Period and
the length of the Performance Period shall be determined by
the Committee upon the grant of each Performance Award.
Except as provided in Section 12, Performance Awards will be
paid only after the end of the relevant Performance Period.
Performance Awards may be paid in cash, Shares, other
property or any combination thereof, in the sole discretion
of the Committee at the time of payment. The performance
levels to be achieved for each Performance Period and the
amount of the Award to be distributed shall be conclusively
determined by the Committee. Performance Awards may be paid
in a lump sum or in installments following the close of the
Performance Period or, in accordance with procedures
established by the Committee, on a deferred basis.
Section 10. Other Stock Unit Awards.
(a) Stock and Administration. Other Awards of Shares
and other Awards that are valued in whole or in part by
reference to, or are otherwise based on, Shares or other
property ("Other Stock Unit Awards") may be granted
hereunder to Participants, either alone or in addition to
other Awards granted under the Plan. Other Stock Unit
Awards may be paid in Shares, cash or any other form of
property as the Committee shall determine. Subject to the
provisions of the Plan, the Committee shall have sole and
complete authority to determine the Employees of the Company
and its Affiliates to whom and the time or times at which
such Awards shall be made, the number of Shares to be
granted pursuant to such Awards, and all other conditions of
the Awards. The provisions of Other Stock Unit Awards need
not be the same with respect to each recipient.
(b) Terms and Conditions. Subject to the provisions
of this Plan and any applicable Award Agreement, Shares
subject to Awards made under this Section 10 may not be
sold, assigned, transferred, pledged or otherwise encumbered
prior to the date on which the Shares are issued, or, if
later, the date on which any applicable restriction,
performance or deferral period lapses. Shares granted under
this Section 10 may be issued for no cash consideration or
for such minimum consideration as may be required by
applicable law; Shares purchased pursuant to a purchase
right awarded under this Section 10 shall be purchased for
such consideration as the Committee shall in its sole
discretion determine, which shall not be less than the Fair
Market Value of such Shares as of the date such purchase
right is awarded.
Section 11. Outside Directors' Options.
(a) Grant of Options. On the date of the 1989
Stockholders Meeting, each Outside Director shall
automatically be granted an Option to purchase 5,000 shares
of the common stock of the Company, $2.50 par value; on the
date of the 1990 Stockholders Meeting, each Outside Director
who became an Outside Director after the 1989 Stockholders
Meeting shall automatically be granted an Option to purchase
8,000 shares of the common stock of the Company; on the
date of the 1991 Stockholders Meeting, each Outside Director
who became an Outside Director after the 1990 Stockholders
Meeting shall automatically be granted an Option to purchase
6,000 shares of the common stock of the Company; on the
date of the 1992 Stockholders Meeting, each Outside Director
who became an Outside Director after the 1991 Stockholders
Meeting shall automatically be granted an Option to purchase
4,000 shares of the common stock of the Company; on the
date of the 1993 Stockholders Meeting, each Outside Director
who became an Outside Director after the 1992 Stockholders
Meeting shall automatically be granted an Option to purchase
2,000 shares of the common stock of the Company; and on the
date of each Stockholders Meeting after the 1993
Stockholders Meeting, each Outside Director shall
automatically be granted an Option to purchase 2,000 shares
of the common stock of the Company. All such options shall
be Nonstatutory Stock Options. The price at which each
share of common stock covered by such Options may be
purchased shall be one hundred percent (100%) of the fair
market value of the stock on the date the Option is granted.
Fair market value for purposes of this Section 11 shall be
deemed to be the average of the high and low prices of the
common stock for composite transactions as published by
major newspapers for the date the Option is granted or, if
no sale of the common stock shall have been made on that
day, the next preceding day on which there was a sale of the
common stock.
(b) Exercise of Options. Except as set forth in this
Section 11, 25% of the total number of the shares subject to
an Option granted to an Outside Director shall become
exercisable on December 31 of the year in which the option
is granted and 25% on December 31 of each of the three
succeeding years. The right to purchase shares with respect
to shares which have become exercisable shall be cumulative
during the term of the Option. Any Option that has been
outstanding for more than one (1) year shall immediately
become exercisable in the event of a Change in Control, as
hereinafter defined. The Option may be exercised by the
Outside Director during the period that the Outside Director
remains a member of the Board and for a period of five (5)
years following retirement, provided that only those Options
exercisable at the date of the Outside Director's retirement
may be exercised during the period following retirement and,
provided further, that in no event shall the Option be
exercisable more than ten (10) years after the date of
grant.
In the event of the death of an Outside Director, the
Option shall be exercisable only within the twelve (12)
months next succeeding the date of death, and then only (i)
by the executor or administrator of the Outside Director's
estate or by the person or persons to whom the Outside
Director's rights under the Option shall pass by the Outside
Director's will or the laws of descent and distribution, and
(ii) if and to the extent that the Outside Director was
entitled to exercise the Option at the date of the Outside
Director's death, provided that in no event shall the Option
be exercisable more than ten (10) years after the date of
grant.
(c) Payment. An Option granted to an Outside Director
shall be exercisable only upon payment to the Company of the
full purchase price of the shares with respect to which the
Option is being exercised. Payment for the shares shall be
in United States dollars, payable in cash or by check.
(d) Adjustment of Options. In case there shall be a
merger, reorganization, consolidation, recapitalization,
stock dividend or other change in corporate structure such
that the shares of common stock of the Company are changed
into or become exchangeable for a larger or smaller number
of shares, thereafter the number of shares subject to
outstanding Options and the number of shares subject to
Options to be granted to Outside Directors pursuant to the
provisions of this Section 11 shall be increased or
decreased, as the case may be, in direct proportion to the
increase or decrease in the number of shares of common stock
of the Company by reason of such change in corporate
structure, provided that the number of shares shall always
be a whole number, and the purchase price per share of any
outstanding Options shall, in the case of an increase in the
number of shares, be proportionately reduced, and in the
case of a decrease in the number of shares, shall be
proportionately increased.
Section 12. Change in Control.
(a) In order to maintain the Participants' rights in
the event of any Change in Control of the Company, as
hereinafter defined, the Committee, as constituted before
such Change in Control, may, in its sole discretion, as to
any Award (except Options granted pursuant to Section 11),
either at the time an Award is made hereunder or any time
thereafter, take any one or more of the following actions:
(i) provide for the acceleration of any time periods
relating to the exercise or realization of any such Award so
that such Award may be exercised or realized in full on or
before a date fixed by the Committee; (ii) provide for the
purchase of any such Award, upon the Participant's request,
for an amount of cash equal to the amount that could have
been attained upon the exercise of such Award or realization
of the Participant's rights had such Award been currently
exercisable or payable; (iii) make such adjustment to any
such Award then outstanding as the Committee deems
appropriate to reflect such Change in Control; or (iv) cause
any such Award then outstanding to be assumed, or new rights
substituted therefor, by the acquiring or surviving
corporation after such Change in Control. The Committee
may, in its discretion, include such further provisions and
limitations in any agreement documenting such Awards as it
may deem equitable and in the best interests of the Company.
(b) A "Change in Control" shall be deemed to have
occurred if (i) any Person other than a trustee or other
fiduciary holding securities under an employee benefit plan
of the Company, and other than the Company or a corporation
owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their
ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of
securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding
securities; or (ii) during any period of two consecutive
years, individuals who at the beginning of such period
constitute the Board and any new Director (other than a
Director designated by a person who has entered into an
agreement with the Company to effect a transaction described
in (i) above) whose election by the Board or nomination for
election by the Company's stockholders was approved by a
vote of at least two-thirds (2/3) of the Directors then
still in office who either were Directors at the beginning
of the period or whose election or nomination for election
was previously so approved, cease for any reason to
constitute a majority thereof.
Section 13. Amendments and Termination. The Board may
amend, alter or discontinue the Plan, but no amendment,
alteration, or discontinuation shall be made that would
impair the rights of an optionee or Participant under an
Award theretofore granted, without the optionee's or
Participant's consent, or that without the approval of the
Stockholders would:
(a) except as is provided in Section 4(b) of the Plan,
increase the total number of shares reserved for the
purposes of the Plan;
(b) change the employees or class of employees
eligible to participate in the Plan; or
(c) change in any way the Options provided for in
Section 11 of the Plan.
The Committee may amend the terms of any Award
theretofore granted (except Options granted pursuant to
Section 11 hereof), prospectively or retroactively, but no
such amendment shall impair the rights of any Participant
without his consent. The Committee may also substitute new
Awards for Awards previously granted to Participants,
including without limitation previously granted Options
having higher option prices.
Section 14. General Provisions.
(a) No Award shall be assignable or transferable by a
Participant or an Outside Director otherwise than by will or
by the laws of descent and distribution, except that
Restricted Stock may be used in payment of the exercise
price of a stock option issued by the Company; provided
that, if so determined by the Committee, a Participant may,
in the manner established by the Committee, designate a
beneficiary to exercise the rights of the Participant with
respect to any Award upon the death of the Participant.
Each Award shall be exercisable, during the lifetime of the
Participant or the Outside Director, only by the Participant
or the Outside Director or, if permissible under applicable
law, by the guardian or legal representative of the
Participant or Outside Director.
(b) The term of each Award shall be for such period of
months or years from the date of its grant as may be
determined by the Committee; provided that in no event shall
the term of any Incentive Stock Option or any Stock
Appreciation Right related to any Incentive Stock Option
exceed a period of ten (10) years from the date of its
grant.
(c) No Employee or Participant shall have any claim to
be granted any Award under the Plan and there is no
obligation for uniformity of treatment of Employees or
Participants under the Plan.
(d) The prospective recipient of any Award under the
Plan shall not, with respect to such Award, be deemed to
have become a Participant, or to have any rights with
respect to such Award, until and unless such recipient shall
have executed an agreement or other instrument evidencing
the Award and delivered a fully executed copy thereof to the
Company, and otherwise complied with the then applicable
terms and conditions.
(e) The Committee shall be authorized to make
adjustments in performance award criteria or in the terms
and conditions of other Awards in recognition of unusual or
nonrecurring events affecting the Company or its financial
statements or changes in applicable laws, regulations or
accounting principles. The Committee may correct any
defect, supply any omission or reconcile any inconsistency
in the Plan or any Award in the manner and to the extent it
shall deem desirable to carry it into effect. In the event
the Company shall assume outstanding employee benefit awards
or the right or obligation to make future such awards in
connection with the acquisition of another corporation or
business entity, the Committee may, in its discretion, make
such adjustments in the terms of Awards under the Plan as it
shall deem appropriate. Notwithstanding the above, the
Committee shall not have the right to make any adjustments
in the terms or conditions of Options granted pursuant to
Section 11.
(f) The Committee shall have full power and authority
to determine whether, to what extent and under what
circumstances any Award (other than an Option granted
pursuant to Section 11) shall be canceled or suspended. In
particular, but without limitation, all outstanding Awards
to any Participant shall be canceled if the Participant,
without the consent of the Committee, while employed by the
Company or after termination of such employment, becomes
associated with, employed by, renders services to, or owns
any interest in (other than any nonsubstantial interest, as
determined by the Committee), any business that is in
competition with the Company or with any business in which
the Company has a substantial interest as determined by the
Committee or any one or more Senior Officers or committee of
Senior Officers to whom the authority to make such
determination is delegated by the Committee.
(g) All certificates for Shares delivered under the
Plan pursuant to any Award shall be subject to such stock-
transfer orders and other restrictions as the Committee may
deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any
stock exchange upon which the Shares are then listed, and
any applicable Federal or state securities law, and the
Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such
restrictions.
(h) Subject to the provisions of this Plan and any
Award Agreement, the recipient of an Award (including,
without limitation, any deferred Award, but excluding
Options granted pursuant to Section 11) may, if so
determined by the Committee, be entitled to receive,
currently or on a deferred basis, interest or dividends, or
interest or dividend equivalents, with respect to the number
of shares covered by the Award, as determined by the
Committee, in its sole discretion, and the Committee may
provide that such amounts (if any) shall be deemed to have
been reinvested in additional Shares or otherwise
reinvested.
(i) Except as otherwise required in any applicable
Award Agreement or by the terms of the Plan, recipients of
Awards under the Plan shall not be required to make any
payment or provide consideration other than the rendering of
services.
(j) The Committee may delegate to one or more Senior
Officers or a committee of Senior Officers the right to
grant Awards to Employees who are not officers or directors
of the Company and to cancel or suspend Awards to Employees
who are not officers or directors of the Company.
(k) The Company shall be authorized to withhold from
any Award granted or payment due under the Plan the amount
of withholding taxes due with respect to an Award or payment
hereunder and to take such other action as may be necessary
in the opinion of the Company to satisfy all obligations for
the payment of such taxes. The Company shall also be
authorized to accept the delivery of shares by a Participant
in payment for the withholding of federal, state and local
taxes (but not for social security and medicare taxes) up to
the Participant's marginal tax rates.
(l) Nothing contained in this Plan shall prevent the
Board of Directors from adopting other or additional
compensation arrangements, subject to stockholder approval
if such approval is required; and such arrangements may be
either generally applicable or applicable only in specific
cases.
(m) The validity, construction, and effect of the Plan
and any rules and regulations relating to the Plan shall be
determined in accordance with the laws of the State of
Kansas and applicable Federal law.
(n) If any provision of this Plan is or becomes or is
deemed invalid, illegal or unenforceable in any
jurisdiction, or would disqualify the Plan or any Award
under any law deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to
applicable laws or if it cannot be construed or deemed
amended without, in the determination of the Committee,
materially altering the intent of the Plan, it shall be
stricken and the remainder of the Plan shall remain in full
force and effect.
Section 15. Effective Date of Plan. The Plan shall be
effective as of April 18, 1989.
Section 16. Term of Plan. No Award shall be granted
pursuant to the Plan after 10 years from the date of
stockholder approval, but any Award theretofore granted may
extend beyond that date.
[FN]
The initial number of shares authorized was doubled due to
the December, 1989 two-for-one stock split.
The number of shares under the options was increased to
10,000 due to the December, 1989 two-for-one stock split.
The initial number of shares authorized was doubled due to
the December, 1989 two-for-one stock split.
The initial number of shares authorized was doubled due to
the December, 1989 two-for-one stock split.
The initial number of shares authorized was doubled due to
the December, 1989 two-for-one stock split.
The initial number of shares authorized was doubled due to
the December, 1989 two-for-one stock split.
The initial number of shares authorized was doubled due to
the December, 1989 two-for-one stock split.
Exhibit (10)(p)
Executive Deferred Compensation Plan
ARTICLE I
PURPOSE
The purpose of the Sprint Corporation Executive Deferred
Compensation Plan (hereinafter referred to as the "Plan") is to
provide funds for retirement or death for executive employees (and
their beneficiaries) of Sprint Corporation and its subsidiaries. It is
intended that the Plan will aid in retaining and attracting employees
of exceptional ability by providing such employees with a means to
supplement their standard of living at retirement.
ARTICLE II
DEFINITIONS
For the purposes of this Plan, the following words and phrases
shall have the meanings indicated, unless the context clearly
indicates otherwise:
2.1 Account Transfer Request. "Account Transfer Request" means a
written notice, in a form prescribed by the Company, by a Participant
to transfer all or any portion of one Deferred Benefit Account to
another Deferred Benefit Account as provided for in paragraph 6.7.
2.2 Beneficiary. "Beneficiary" means the person, persons or
entity designated by the Participant, or as provided in Article VIII,
to receive any benefits payable under the Plan. Any Participant
Beneficiary Designation shall be made in a written instrument filed
with the Company and shall become effective only when received,
accepted and acknowledged in writing by the Company.
2.3 Board. "Board" means the Board of Directors of the Company.
2.4 Committee. "Committee" means Deferred Compensation Committee
appointed to review the Plan decisions pursuant to Article III.
2.5 Company. "Company" means Sprint Corporation, or any
successor thereto.
2.6 Compensation. "Compensation" means the Base Salary, Annual
Incentive Compensation and Long-Term Incentive Compensation payable to
a Participant during a Plan Year other than a distribution under this
plan.
(a) Base Salary. "Base Salary" means all regular cash
remuneration for services, other than such items as Annual
Incentive Compensation, payable by the Employer to a Participant
in cash during a Plan Year, but before reduction for amounts
deferred pursuant to this Plan or any other Plan of the Employer.
(b) Annual Incentive Compensation. "Annual Incentive
Compensation" means any annual cash incentive compensation
payable by the Employer to a Participant in a Plan Year.
(c) Long-Term Incentive Compensation. "Long-Term Incentive
Compensation" means any incentive compensation earned over a
period of at least two years.
2.7 Deferral Benefit. "Deferral Benefit" means the benefit
payable to a Participant on his retirement, death, disability, or
termination of employment as calculated in Article VII hereof.
2.8 Deferred Benefit Account. "Deferred Benefit Account" means
the accounts maintained on the books of account of the Employer for
each Participant pursuant to Article VI. Separate Deferred Benefit
Accounts shall be maintained for each Participant. More than one
Deferred Benefit Account shall be maintained for each Participant to
reflect (a) Termination and Retirement Interest Yields, (b) separate
deferral elections, and (c) Account A, Account B, Account AA, and
Account BB elections. For Account AA two sub-accounts (a Retirement
Deferred Benefit Account and a Termination Deferred Benefit Account)
shall be maintained to reflect the difference in Interest Yields as
provided in Article VI, paragraph 6.4. For Account BB two sub-accounts
(a Retirement Deferred Benefit Account and a Termination Deferred
Benefit Account) shall be maintained to reflect, in the event of a
transfer from Account AA to Account BB pursuant to paragraph 6.7, the
difference in values of the two sub-accounts of Account AA transferred
to Account BB. A Participant's Deferred Benefit Accounts shall be
utilized solely as a device for the measurement and determination of
the amounts to be paid to the Participant pursuant to this Plan. A
Participant's Deferred Benefit Account shall not constitute or be
treated as a trust fund of any kind. Unless the context requires
otherwise, "Deferred Benefit Account" shall mean the aggregate balance
of all accounts of a Participant.
2.9 Determination Date. "Determination Date" means the date on
which the amount of a Participant's Deferred Benefit Account is
determined as provided in Article VI hereof. The last day of each
calendar month shall be a Determination Date.
2.10 Disability. "Disability" or "Disabled Participant" means a
physical or mental condition of a Participant resulting in a
determination of disability for purposes of receiving benefits under
the Employer Long-Term Disability Insurance Plan.
2.11 Early Retirement Date. "Early Retirement Date" means the
date on which the Participant actually terminates employment following
the first day of the month coincidental with or next following a
Participant's attainment of age fifty-five (55), but prior to his
Normal Retirement Date.
2.12 Employer. "Employer" means Sprint Corporation, any
successor to the business thereof or any affiliate or subsidiary
designated by the Board.
2.13 Internal Revenue Code. "Internal Revenue Code" means
Internal Revenue Code of 1986, as amended or supplemented from time to
time. References to any section of the Internal Revenue Code shall be
to that section as it is renumbered, amended, supplemented or re-
enacted.
2.14 Interest Yield. "Interest Yield" means with respect to any
calendar month the Termination Interest Yield or the Retirement
Interest Yield as defined below:
(a) Termination Interest Yield. The "Termination Interest
Yield" means (1)in the case of balances in Account AA, the
composite yield on Moody's Seasoned Corporate Bond Yield Index
for the preceding calendar month as determined from Moody's Bond
Record published by Moody's Investors Services, Inc. (or any
successor thereto), or, if such monthly yield is no longer
published, a substantially similar average selected by the
Company, and (2) in the case of balances in Account A, the
greater of (i) the prime rate in effect at Citibank, N.A. at the
opening of business on the first business day of the month, or if
said bank, for any reason, no longer publishes its prime rate,
the prime rate similarly determined of another major bank
selected by the Company and (ii) six percent per annum.
(b) Retirement Interest Yield. The "Retirement Interest
Yield" means (1) in the case of balances in Account AA, three
percentage points over the Termination Interest Yield, and (2) in
the case of balances in Account A, the Termination Interest
Yield.
2.15 Normal Retirement Age. "Normal Retirement Age" means the
time at which a Participant attains age sixty-five (65).
2.16 Normal Retirement Date. "Normal Retirement Date" means the
first day of the month coincidental with or next following a
Participant's Normal Retirement Age.
2.17 Participant. "Participant" means any individual who is
designated by the Company in accordance with paragraph 4.1 to
participate in this Plan and who elects to participate by filing a
Participation Agreement as provided in Article IV.
2.18 Participation Agreement. "Participation Agreement" means
the agreement, in a form prescribed by the Company, filed by a
Participant prior to the beginning of the first period in which the
Participant's Compensation is to be deferred pursuant to the Plan and
the Participation Agreement. A new Participation Agreement shall be
filed by the Participant for each separate Base Salary deferral
election and for each Annual Incentive Compensation and Long-Term
Incentive Compensation deferral election not accompanying a Base
Salary deferral election.
2.19 Pension Make-Up Benefit. "Pension Make-Up Benefit " means
the benefit described under paragraph 5.2(b).
2.20 Pension Make-Up Compensation. "Pension Make-Up
compensation" means the sum of (a) compensation as determined under
the Retirement Plan and (b) Base Salary and Annual Incentive
Compensation which are actually deferred under this Plan.
2.21 Plan. "Plan" means the Sprint Corporation Executive
Deferred Compensation Plan as set forth in this document. This Plan is
the successor to, and comprises an amendment and revision of, the
United Telecommunications, Inc. 1985 Executive Deferred Compensation
Plan adopted February 12, 1985.
2.22 Plan Administrator. "Plan Administrator" means the person
appointed by the Company to represent the Company in the
administration of this Plan.
2.23 Plan Year. "Plan Year" means a twelve month period
commencing May 1st and ending the following April 30th. The first Plan
Year shall commence on May 1, 1985.
2.24 Retirement Plan. "Retirement Plan" means the Sprint
Retirement Pension Plan, as amended from time to time.
2.25 Share Unit. "Share Unit" means a measure of participation
under the Plan having a value based on the market value of a share of
common stock of the Company.
2.26 Spouse. "Spouse" means a Participant's wife or husband who
was lawfully married to the Participant upon the Participant's
retirement, death or severance from service.
2.27 Transition Date. "Transition Date" means May 1, 1990.
ARTICLE III
ADMINISTRATION
3.1 Plan Administrator; Company and Committee; Duties. This Plan
shall be administered by the Committee. The Committee shall consist of
not more than five persons appointed by the Board. The Committee may
be a consolidated Committee administering other benefit plans of the
Company in addition to this Plan. The Committee shall have the
authority to make, amend, interpret, and enforce all appropriate rules
and regulations for the administration of this Plan and decide or
resolve any and all questions including interpretations of this Plan,
as may arise in connection with the Plan. The Committee may appoint a
Benefit Administrative Committee and a Plan Administrator. The
Committee may delegate its duties for the day-to-day operations of the
Plan to the Plan Administrator and other duties to the Benefit
Administrative Committee. Members of the Committee, the Benefit
Administrative Committee and the Plan Administrator may be
Participants under this Plan.
3.2 Claim for Benefits. Any claim for benefits under this Plan
shall be made in writing to the Plan Administrator. If a claim for
benefits is wholly or partially denied, the Plan Administrator shall
so notify the Participant or Beneficiary within 90 days after receipt
of the claim. The notice of denial shall be written in a manner
calculated to be understood by the Participant or Beneficiary and
shall contain (a) the specific reason or reasons for denial of the
claim, (b) specific references to the pertinent Plan provisions upon
which the denial is based, (c) a description of any additional
material or information necessary to perfect the claim together with
an explanation of why such material or information is necessary and
(d) an explanation of the claims review procedure. The decision or
action of the Plan Administrator shall be final, conclusive and
binding on all persons having any interest in the Plan, unless a
written appeal is filed as provided in Section 3.3 hereof.
3.3 Review of Claim. Within 60 days after the receipt by the
Participant or Beneficiary of notice of denial of a claim, the
Participant or Beneficiary may (a) file a request with the Benefit
Administrative Committee that it conduct a full and fair review of the
denial of the claim, (b) review pertinent documents and (c) submit
questions and comments to the Committee in writing.
3.4 Decision After Review. Within 60 days after the receipt of
a request for review under Section 3.3, the Committee shall deliver to
the Participant or Beneficiary a written decision with respect to the
claim, except that if there are special circumstances (such as the
need to hold a hearing) which require more time for processing, the 60-
day period shall be extended to 120 days upon notice to the
Participant or Beneficiary to that effect. The decision shall be
written in a manner calculated to be understood by the Participant or
Beneficiary and shall (a) include the specific reason or reasons for
the decision and (b) contain a specific reference to the pertinent
Plan provisions upon which the decision is based.
ARTICLE IV
PARTICIPATION
4.1 Participation. Participation in the Plan shall be limited to
executives having a job grade level of E14 or above who elect to
participate in the Plan by filing a Participation Agreement with the
Company. Except as provided below, a Participation Agreement must be
filed prior to the April 15th immediately preceding the Plan Year in
which the Participant's participation under the agreement will
commence, and the election to participate shall be effective on the
first day of the Plan Year following receipt by the Company of a
properly completed and executed Participation Agreement. A Participant
in the Plan, who is also a participant in the Employer's 1975
Executive Deferred Compensation Plan, may elect to transfer to this
Plan all, and not less than all, of the dollar value of his Account A
and the dollar value of his Account B under the 1975 Plan. Such
election shall be made by delivering to the Company a properly
executed Participation Agreement; such an election must be made when
the Participant is first eligible for the 1985 Plan.
4.2 Minimum and Maximum Deferral and Length of Participation. A
Participant may elect in any Participation Agreement to defer a
portion of his Compensation. However, a Participant may not defer his
Annual Incentive Compensation or his Long-Term Incentive Compensation
unless the Participant also defers a portion of his Base Salary. The
minimum and maximum amounts that may be deferred under any single
Participation Agreement shall be in $100 units and shall be as
follows:
Minimum Deferral Maximum Deferral
With respect to initial
Base Salary Deferrals $300 per month 50% of Base Salary
Subsequent Base Salary
Deferrals $100 per month 50% of Base Salary
With respect to Annual 25% of Annual 100% of Annual
Incentive Compensation Incentive Compensation Incentive Compensation
With respect to Long- 25% of Long-Term 100% of Long-Term
Term Incentive Incentive Compensation Incentive
Compensation Compensation
(a) With respect to Base Salary deferrals, the dollar
amount of deferral elected in each Participation Agreement shall
be the amount of Base Salary that will be deferred in each month
subject to the Participation Agreement. Each Participation
Agreement shall apply to the Participant's Base Salary payable
over a period (1) for Participation Agreements first effective
before the Transition Date, of either four or eight Plan Years,
or (2) for Participation Agreements first effective on or after
the Transition Date, one Plan Year (or, in either case, until the
Participant's retirement, whichever occurs first), commencing
with the Plan Year immediately following the Plan Year in which
the respective Participation Agreement is filed. The fixed dollar
amount of Base Salary deferral applicable over a deferral period
shall not be changed by virtue of a change in Base Salary alone.
(b) With respect to Annual Incentive Compensation or Long-
Term Incentive Compensation deferrals, the deferral percentage
selected in each Participation Agreement shall apply only to the
Participant's Annual Incentive Compensation or Long-Term
Incentive Compensation paid in the Plan Year immediately
following receipt of the respective Participation Agreement.
(c) From time to time, the Company may increase or decrease
the minimum and maximum deferrals set forth above as well as the
period for which the deferrals are effective by giving reasonable
written notice to the affected Participants. Such changes shall
be effective for all Participation Agreements filed thereafter.
(d) A Participant's election to defer Compensation shall be
irrevocable upon the filing of the respective Participation
Agreement; provided, however, that the deferral of Compensation
under any Participation Agreement may be suspended or amended as
provided in paragraphs 7.5 or 9.1.
4.3 Additional Participation Agreements. A Participant may enter
into additional Participation Agreements by filing a Participation
Agreement with the Company prior to April 15th of any calendar year,
stating the amount that the Participant elects to have deferred. Such
additional agreements shall be effective as to Compensation paid in
Plan Years beginning after the last day of the Plan Year in which the
respective agreement is filed with the Company. Each additional
Participation Agreement is subject to all of the provisions and
requirements set forth in paragraph 4.2, including without limitation,
the provisions relating to minimum and maximum deferral amounts and
duration of the agreements; provided, that the minimum Base Salary
deferral for each additional Participation Agreement shall be $1,200
per year. In addition, the aggregate amount of Base Salary that a
Participant may have deferred under this Plan out of his Base Salary
for any single Plan Year under all applicable Participation Agreements
shall not exceed 50% of his Base Salary, excluding Incentive
Compensation. In the event a Participant elects to defer Compensation
for a new period, the new election shall be treated as an arrangement
for which a separate Deferred Benefit Account shall be maintained and
separate Deferred Benefits shall be payable.
ARTICLE V
DEFERRED COMPENSATION
5.1 Elective Deferred Compensation. The amount of Compensation
that a Participant elects to defer in the Participation Agreement
executed by the Participant, with respect to each Plan Year of
participation in the Plan, shall be credited by the Company to the
Participant's Deferred Benefit Account throughout each Plan Year as
the Participant is paid the non-deferred portion of Compensation for
such Plan Year. The amount credited to a Participant's Deferred
Benefit Account shall equal the amount deferred. To the extent that
the Employer is required to withhold any taxes or other amounts from
the employees' deferred wages pursuant to any state, federal or local
law, such amounts shall be taken out of the portion of the
Participant's Compensation which is not deferred under this Plan.
5.2 Additional Amounts Under Savings Plan and Retirement Plan.
(a) Savings Plan. Except for Participants who are officers
of the Company subject to Section 16 of the Securities Exchange
Act of 1934, to the extent a Participant's deferral of
Compensation under this Plan causes a reduction in the Company's
contribution for the Participant under the Sprint Retirement
Savings Plan, the Company shall credit the amount of any such
reduction to the Participant's Deferred Benefit Account B. For
such officers, such reduction shall be credited to Account A.
(b) Retirement Plan. A Participant shall receive a Pension
Make-Up Benefit from the Supplemental Executive Retirement Plan
if the deferral of compensation under this Plan causes a
reduction in the Participant's benefit under the Retirement Plan.
5.3 Additional Payments. The Company also intends that
supplemental payments shall be made at death, disability or
termination of employment, as the case may be, for any reduction in
benefits due to deferrals of Compensation under this Plan in respect
of any of the Employer's life insurance or disability plans or
Employee Stock Purchase Plan now in existence or adopted after the
effective date of this Plan.
5.4 Vesting of Deferred Benefit Account. A Participant shall be
100% vested in his/her Deferred Benefit Account.
ARTICLE VI
DEFERRED BENEFIT ACCOUNT
6.1 Determination of Account. Each Participant's Deferred
Benefit Account, as of each Determination Date, shall consist of the
balance of the Participant's Deferred Benefit Account as of the
immediately preceding Determination Date, plus the Participant's
elective deferred compensation withheld since the immediately
preceding Determination Date pursuant to paragraph 5.1 and plus
amounts credited to the Participant's Deferred Benefit Account
pursuant to paragraphs 6.4 and 6.5. The Deferred Benefit Account of
each Participant shall be reduced by the amount of all distributions,
if any, made from such Deferred Benefit Account since the preceding
Determination Date.
6.2 Type of Deferral. A Participant may elect to have any
portion of the amount deferred credited to either Account A (fixed
income return) or to Account B (Share Units). The initial election
shall be made by a properly executed Participation Agreement. With
respect to a Participation Agreement first effective before the
Transition Date, an election to defer any amount to Account A shall be
treated as an election to defer to Account AA, except as set forth
below. A separate Deferred Benefit Account shall be maintained for a
Participant's Account A, B, AA, and BB.
An election to change the apportionment of deferred amounts
between Accounts A and B may be made by a Participant filing with the
Plan Administrator a revised Participation Agreement indicating such
change on or before April 15th of each calendar year. The revised
Participation Agreement shall be deemed a continuation of the initial
Participation Agreement to which it relates for purposes of complying
with the provisions of paragraphs 4.2 and 4.3 relating to the minimum
and maximum deferrals and duration of the Participation Agreement. The
revised Participation Agreement shall be effective for Plan Years
beginning after the date it is filed.
Deferrals in such Plan Years shall be credited in accordance with
the election of the revised Participation Agreement, provided,
however, that an election to allocate a portion of deferrals to
Account A in excess of the portion allocated in the Participation
Agreement to be deferred into the fixed income account as of May 1,
1989, shall be deemed to be an election by the Participant to allocate
to Account AA a portion of deferrals equal to the portion so allocated
to the fixed income account on May 1, 1989, and to allocate to Account
A the portion in excess of such portion.
6.3 Accounts AA and BB. As of the start of business on the
Transition Date, all amounts standing to the credit of each
Participant in Account A shall be transferred to an Account AA. As of
the start of business on the Transition Date, amounts standing to the
credit of each Participant in Account B that are attributable to prior
transfers from Account A into Account B shall be transferred to an
Account BB. The amount of such transfers shall be an amount equal to
the sum of the dollar amount of all transfers from Account A to
Account B during the period beginning on the effective date of the
Participation Agreement and ending on the Transition Date. For all
purposes of this Plan, except as otherwise noted in this Plan, Account
AA shall be treated in the same manner as Account A, and Account BB
shall be treated in the same manner as Account B. Compensation earned
by employees on or after the Transition Date subject to deferral under
a Participation Agreement first effective before the Transition Date
shall be credited to Accounts AA and B (in accordance with the
Participant's election to allocate such deferrals to Accounts A or B,
respectively, in such Participation Agreements) for such Participation
Agreement.
6.4 Accounts A and AA. As of each Determination Date, the
Participant's Deferred Benefit Accounts A and AA shall be increased by
the amount of interest earned since the preceding Determination Date.
Interest on Accounts A and AA shall be based upon the Interest Yield
defined in paragraph 2.14. For Account AA, a Retirement Deferred
Benefit Account shall be maintained and increased at the rate
specified by the Retirement Interest Yield and a Termination Deferred
Benefit Account shall be maintained and increased at the rate
specified by the Termination Interest Yield. Interest shall be
credited on the mean average of the balances of the Deferred Benefit
Account on the Determination Date (before crediting the interest) and
on the last preceding Determination Date, but after the Deferred
Benefit Account has been adjusted for any contributions or
distributions to be credited or deducted for each such day.
6.5 Accounts B and BB. The monthly amount to be credited to the
Participant's Deferred Benefit Account B or BB shall be converted into
Share units, or fractions thereof, by dividing the amount to be
credited by the market value of a share of the Employer's common stock
on the Determination Date. Two sub-accounts shall be maintained for
Account BB: a Retirement Deferred Benefit Account shall include the
transfer from Account B into Account BB described in paragraph 6.3
plus amounts transferred from the Account AA Retirement Deferred
Benefit Account, if any, plus additions pursuant to subparagraphs (a)
and (b) of this paragraph; a Termination Deferred Benefit Account
shall include the transfer from Account B into Account BB described in
paragraph 6.3 plus amounts transferred from the Account AA Termination
Deferred Benefit Account, if any, plus additions pursuant to
subparagraphs (a) and (b) of this paragraph. The market value of a
share of the Company's common stock for purposes other than
distributions from
Accounts B and BB shall be the closing price for such stock as
reported by the New York Stock Exchange on the Determination Date. If
no common shares were traded on that date, the immediately preceding
day on which trading occurred shall be used.
(a) For all Participants except Participants subject to
liability under Section 16 of the Securities Exchange Act of
1934, when a dividend is declared and paid by the Company on its
common stock, an amount shall be credited to the Participant's
Accounts B and BB as though the same dividend had been paid on
the Share Units in such accounts as of the Determination Date
immediately preceding the declaration of the dividend, and such
amount shall be converted to Share Units. Such amount shall be
valued as of the Determination Date immediately preceding the
declaration of the dividend.
(b) For Participants subject to liability under Section 16
of the Securities Exchange Act of 1934, subparagraph (a) of this
paragraph 6.5 shall apply to balances in Accounts B and BB as of
April 30, 1991. With respect to Share Units resulting from
deferrals or transfers from Account A or Account AA into Account
B or Account BB on or after May 1, 1991 ("Post May 1, 1991 Share
Units"), when a cash dividend is declared and paid by the Company
on its common stock, an amount shall be credited to the
Participant's Account A or Account AA, as appropriate, as though
the same dividend had been paid on the Post May 1, 1991 Share
Units as of the Determination Date immediately preceding the
declaration of the dividend.
(c) In the event of a stock dividend, stock split or other
corporate reorganization involving the Employer's common stock,
the Company shall make equitable adjustment to the number of
Share units credited to a Participant's Accounts B and BB as may
be necessary to give effect to such change in the Employer's
capital structure.
(d) Share Units in Accounts B and BB shall be converted to
an equivalent dollar amount prior to any distribution thereof to
a Participant pursuant to Article VII. For purposes of
distribution, the value of a Share Unit shall be based upon the
average market value of a share of the Company's common stock.
Such average market value shall be based upon the closing price
of the Company's common stock on the New York Stock Exchange on
the last day (or, if no share traded on such day, the immediately
preceding day on which shares traded) for each of the twelve
calendar months preceding the date of distribution. If a
Participant elects payment in other than a lump sum, Share Units
shall be converted to a dollar amount only with respect to each
distribution. During the period of distribution, dividends and
other equitable adjustments shall be credited to the
Participant's Accounts B and BB in accordance with paragraphs
6.5(a). 6.5(b) and 6.5(c). For such purposes, a Participant
subject to liability under Section 16 of the Securities Exchange
Act of 1934 immediately prior to the event that entitles the
Participant to distribution shall be deemed subject to such
liability during the period of distribution.
6.6 Statement of Accounts. The Company shall submit to each
Participant, within 120 days after the close of each Plan Year, a
statement in such form as the Company deems desirable, setting forth
the balance to the credit of such Participant in his Deferred Benefit
Accounts A and B and in his Deferred Benefit Accounts AA and BB
(showing separate calculations for each Interest Yield), and in each
case, as of the last day of the preceding Plan Year.
6.7 Transfer Between Accounts. Within the limitations of this
paragraph 6.7, a Participant may elect, by executing an Account
Transfer Request: (1) to transfer all or any portion of his Account A
to Account B, (2) to transfer all or any portion of his Account B to
Account A, (3) to transfer all or any portion of his Account AA to
Account BB, and (4) to transfer all or any portion of his Account BB
to Account AA. Such election shall be effective on the last day of the
calendar month in which the Plan Administrator timely receives the
Participant's executed Account Transfer Request.
(a) Participants subject to liability under Section 16 of
the Securities Exchange Act of 1934 may request any combination
of the foregoing transfers no more than twice in any Plan Year,
provided, however, that no such transfer may be made unless a
period of at least six months shall have elapsed from the
effective date of the most recent such transfer (whether it
occurred in the current Plan Year or not) to the effective date
of the current transfer.
(b) Participants not described in paragraph 6.7(a) may make
any combination of the foregoing transfers no more than four
times in any Plan Year provided, however, that no such transfer
may be made unless a period of at least three months shall have
elapsed from the effective date of the most recent such transfer
(whether it occurred in the current Plan Year or not) to the
effective date of the current transfer.
ARTICLE VII
BENEFITS
7.1 Benefit for Normal or Early Retirement and Termination After
Age 55. Subject to paragraph 7.6 below, upon a Participant's (i)
retirement after reaching the Normal Retirement Date, or (ii)
retirement after reaching the Early Retirement Date, or (iii)
termination of employment after attaining age 55, he shall be entitled
to a Deferral Benefit equal to the amount of his Retirement Deferred
Benefit Account determined under paragraph 6.1 hereof as of the
Determination Date coincident with or immediately following such
event.
7.2 Termination of Employment Before Age 55. Upon any
termination of service of the Participant before age 55 for reasons
other than death or Disability, the Employer shall pay to the
Participant, as compensation earned for services rendered prior to his
termination of service, a Deferral Benefit equal to the amount of his
Termination Deferred Benefit Account determined under paragraph 6.1
hereof. The Termination Deferred Benefit Account of a Participant
whose employment has terminated shall be paid in a single sum to the
terminated Participant within 30 days following termination of
employment, if the aggregate balance of the Deferred Benefit
Account(s) of such Participant is $20,000 or less. If such aggregate
balance of a Participant's Deferred Benefit Account(s) is more than
$20,000, payment shall commence pursuant to the Participant's election
in the Participation Agreement.
7.3 Death. If a Participant dies after the commencement of
payments of his Deferral Benefit, his Beneficiary shall continue to
receive the remaining installments of his Deferred Benefit Account in
accordance with the Participant's election pursuant to paragraph 7.6.
If a Participant dies while employed, prior to any payments of a
Deferral Benefit, the aggregate amounts deferred under all
Participation Agreements shall be determined as follows:
(a) In the case of deferrals pursuant to a Participation
Agreement first effective before the Transition Date:
(1) Deferrals of Incentive Compensation shall be the
Retirement Deferred Benefit Account value thereof.
(2) Deferrals of Base Salary pursuant to
Participation Agreements requiring a total deferral of less
than $15,000 per year allocated to Accounts A and AA
pursuant to the Participation Agreement as revised on the
date of the Participant's death shall be the greater of (I)
the Retirement Deferred Benefit Account value thereof or
(ii) ten times the amount of the elected annual Base Salary
deferral.
(3) Deferrals of Base Salary pursuant to
Participation Agreements requiring a total deferral of
$15,000 or more per year allocated to Accounts A and AA
pursuant to the Participation Agreement as revised on the
date of the Participant's death shall be determined as
follows: (i) that portion of the deferral which totals
$15,000 per year shall be the greater of (x) the Retirement
Deferred Benefit Account value thereof and (y) ten times
the amount of the elected annual Base Salary deferral, and
(ii) the portion of such deferral which is in excess of
$15,000 per year shall be the Retirement Deferred Benefit
Account value of such excess.
(4) Deferrals allocated to Accounts B and BB shall be
the Retirement Deferred Benefit Account value thereof.
(b) In the case of deferrals pursuant to a Participation
Agreement first effective on or after the Transition Date, the
aggregate amount of all deferrals shall be the Retirement
Deferred Benefit Account value of Accounts A and B.
The Deferral Benefit shall be payable as provided for in
paragraph 7.6.
The Deferral Benefit provided above shall be in lieu of all
other benefits under this Plan.
7.4 Disability. In the event of Disability, as defined in
paragraph 2.10, while employed by the Employer, prior to the
completion of all deferrals provided for under a Participation
Agreement, the Employer shall credit to the disabled Participant's
Deferred Benefit Account an amount equal to the amount of the
Participant's Agreement to defer during such period of Disability, but
not beyond the period elected.
In the event of Disability prior to termination of employment or
the Normal Retirement Date, the disabled Participant, unless he
otherwise elects under this paragraph, shall be entitled to the amount
in his Retirement Deferred Benefit Account (rather than his
Termination Deferred Benefit Account) determined under paragraph 6.1
as of the Determination Date next following such Disability, with
payments to commence upon attainment of the Participant's Normal
Retirement Date in the form specified in paragraph 7.6(a)(2) and/or
7.6(a)(3) over a 15 year period. Before payments commence under the
preceding sentence, a Disabled Participant may elect, subject to
Committee approval upon good cause shown: (i) to accelerate
commencement of the payments to any earlier date, but not sooner than
60 days after the onset of Disability and/or (ii) to change the form
of payment permitted under paragraph 7.6(a).
7.5 Suspension of Participation/Failure to Continue
Participation. The Committee, in its sole discretion, may suspend the
deferral of a Participant's Compensation upon the advanced written
request of a Participant on account of financial hardship suffered by
that Participant. A Participant must file any request for such
suspension on or before the 15th day preceding the regular payment
date on which the suspension is to take effect. The Committee, in its
sole discretion, shall determine the amount, if any, that will not be
deferred by the Participant as a result of the financial hardship.
The suspension of any deferrals under this paragraph shall not
affect amounts deferred with respect to periods prior to the effective
date of the suspension. A Participant whose deferrals are suspended
may not execute a subsequent Participation Agreement that would take
effect prior to the beginning of the third Plan Year following the
close of the Plan Year in which the suspension first took effect.
In the event the Participant ceases to remain a member of the
class of employees who are eligible to participate in this Plan, the
Participant may elect to suspend the amount of any remaining deferral
commitment in the same manner as described for other suspensions in
this paragraph, except that Committee approval shall not be required.
7.6 Form of Benefit Payment
(a) Upon the happening of an event described in paragraphs
7.1, 7.2, 7.3 or 7.4 above, the Employer shall pay to the
Participant or his Beneficiary the amount specified therein in
one of the following forms as elected by the Participant in the
Participation Agreement filed by the Participant:
(1) A lump sum payment at a time designated in the
Participation Agreement but no later than the Participant's
Normal Retirement Date.
(2) With respect to balances in Accounts A and AA, an
annual payment of a fixed amount which shall amortize the
Deferred Benefit Account balance in equal annual payments
of principal and interest over a period from 2 to 20 years.
For purposes of determining the amount of the annual
payment, the assumed rate of interest on Accounts A and AA
shall be the average of the applicable Interest Yield as of
each Determination Date for the 60 months preceding the
initial annual installment payment.
(3) With respect to balances in Accounts B and BB, an
annual payment over a period from 2 to 20 years. Each
payment shall be the value (as determined pursuant to
paragraph 6.5 [d]) of the number of Share Units equal to
(i) the number of Share Units in the accounts on the
Determination Date immediately following the event
described in paragraph 7.1, 7.2, 7.3 or 7.4, divided by
(ii) the number of annual installments elected.
(4) A Participant may change the form in which his
benefits shall be paid by filing a revised Participation
Agreement indicating such change prior to attaining age 60
and at least 13 months prior to the date upon which the
payments to be made are determined. Such revised
Participation Agreement shall be deemed a continuation of
the initial Participation Agreement to which it relates for
purposes of complying with the provisions of paragraphs 4.2
and 4.3 relating to the minimum and maximum deferrals and
duration of Participation Agreements. No such revised
Participation Agreement shall change the amount elected to
be deferred in the original Participation Agreement, nor
the time elected for commencement of benefit payments.
(b) In the absence of a Participant's election under
subparagraph 7.6(a), benefits shall be paid in the form specified
in subparagraph 7.6(a)(2) and/or 7.6(a)(3) over a 15 year period,
except as provided in paragraph 7.2. In the event of a Disabled
Participant, payment shall be in the form described in paragraph
7.4.
7.7 Withholding; Payroll Taxes. To the extent required by the
law in effect at the time payments are made, the Employer shall
withhold from payments made hereunder any taxes required to be
withheld from an employee's wages for the federal or any state or
local government.
7.8 Commencement of Payments. Unless otherwise provided,
payments under this Plan shall begin within 60 days following receipt
of notice by the Plan Administrator of an event which entitles a
Participant (or a Beneficiary) to payments under this Plan, or at such
earlier date as may be determined by the Company pursuant to the terms
of the plan. All payments shall be made as of the first day of the
month.
ARTICLE VIII
BENEFICIARY DESIGNATION
8.1 Beneficiary Designation. Each Participant shall have the
right, at any time, to designate any person or persons as his
Beneficiary or Beneficiaries (both principal as well as contingent) to
whom payment under this Plan shall be paid in the event of his death
prior to complete distribution to the Participant of the benefits due
him under the Plan.
8.2 Amendments. Any Beneficiary Designation may be changed by a
participant by the written filing of such change on a form prescribed
by the Company. The filing of a new Beneficiary Designation form will
cancel all Beneficiary Designations previously filed.
8.3 No Beneficiary Designation. If a Participant fails to
designate a Beneficiary as provided above, or if all designated
Beneficiaries predecease the Participant, then the Participant's
designated Beneficiary shall be deemed to be the person or persons
surviving him in the first of the following classes in which there is
a survivor, share and share alike:
(a) The surviving Spouse;
(b) The Participant's children, except that if any of
the children predecease the Participant but leave issue
surviving, then such issue shall take by right of
representation the share their parent would have taken if
living;
(c) The Participant's personal representative
(executor or administrator).
8.4 Effect of Payment. The payment to the deemed Beneficiary
shall completely discharge the Employer's obligations under this Plan.
ARTICLE IX
AMENDMENT AND TERMINATION OF PLAN
9.1 Amendment. The Board may at any time amend the Plan in whole
or in part; provided, however, that no amendment shall be effective to
decrease or restrict any Deferred Benefit Account at the time of such
amendment.
9.2 Employer's Right to Terminate. The Board may at any time
terminate the Plan with respect to new elections to defer if, in its
judgment, the continuance of the Plan, the tax, accounting, or other
effects thereof, or potential payments thereunder would not be in the
best interests of the Company. The Board may also terminate the Plan
in its entirety at any time, and upon any such termination, each
Participant (a) who is then receiving a Deferral Benefit shall be paid
in a lump sum, or over such period of time as determined by the
Company, the then remaining balance in his Deferred Benefit Account,
and (b) who has not received a Deferral Benefit shall be paid in a
lump sum, or over such period of time as determined by the Company,
the balance in his Deferred Benefit Account.
ARTICLE X
MISCELLANEOUS
10.1 Unsecured General Creditor. Participants and their
Beneficiaries shall have no legal or equitable rights, interest or
claims in any property or assets of the Employer, nor shall they be
Beneficiaries of, or have any rights, claims or interests in any life
insurance policies, annuity contracts or the proceeds therefrom owned
or which may be acquired by the Employer ('Policies'). Such Policies
or other assets of the Employer shall not be held under any trust for
the benefit of Participants or their Beneficiaries or held in any way
as collateral security for the fulfilling of the obligations of the
Employer under this Plan. Any and all of the Employer's assets and
Policies shall be, and remain, the general, unpledged, unrestricted
assets of the Employer. The Employer's obligation under the Plan shall
be merely that of an unfunded and unsecured promise of the Employer to
pay money in the future.
10.2 Nonassignability. Neither a Participant nor any other
person shall have any right to commute, sell, assign, transfer,
pledge, anticipate, mortgage or otherwise encumber, transfer,
hypothecate or convey in advance of actual receipt the amounts, if
any, payable hereunder, or any part thereof, which are, and all rights
to which are, expressly declared to be unassignable and non-
transferable. No part of the amounts payable shall, prior to actual
payment, be subject to seizure or sequestration for the payment of any
debts, judgments, alimony or separate maintenance owed by a
Participant or any other person, nor be transferable by operation of
law in the event of a Participant's or any other person's bankruptcy
or insolvency.
10.3 Not a Contract of Service. The terms and conditions of this
Plan shall not be deemed to constitute a contract of service between
the Employer and the Participant, and the Participant (or his
Beneficiary) shall have no rights against the Employer except as may
otherwise be specifically provided herein. Moreover, nothing in this
Plan shall be deemed to give a Participant the right to be retained in
the service of the Employer or to interfere with the right of the
Employer to discipline or discharge him at any time.
10.4 Protective Provisions. A Participant will cooperate with
the Employer by furnishing any and all information requested by the
Employer, in order to facilitate the payment of benefits hereunder,
and by taking such physical examinations as the Employer may deem
necessary and taking such other action as may be requested by the
Employer.
10.5 Applicable Law. The Plan, and any Participation Agreement
related thereto, shall be governed by the laws of the State of Kansas,
without regard to the principles of conflicts of law.
10.6 Alcatel Employees. Employees who transferred to the joint
venture with Alcatel, N.V. (the "Joint Venture") December 31, 1993,
shall not be deemed a retirement or termination of employment. When
such transferred employees retire or terminate employment with the
Joint Venture (other than by reason of a transfer to employment with
the Company or an affiliate of the Company), or if prior to such
retirement or termination of employment, the Company ceases to own at
least a 49 percent interest in the Joint Venture (or such lesser
percentage as determined by the Organization and Compensation
Committee of the Company), the transferred employees shall be
considered to have retired or terminated employment.
Exhibit (10)(w)
CENTEL CORPORATION
CENTEL STOCK OPTION PLAN
(Amended and Restated as of February 18, 1995)
1. Purpose of Plan. The purpose of the Centel Stock Option
Plan (the Plan) is to promote the long-term financial
interests of the Company and its subsidiaries by:
(a) providing an incentive for key management employees to
maximize the long-term value of Centel Common Stock and
otherwise act in the best interest of Centel
shareowners;
(b) providing management with the opportunity to acquire a
greater stake in the future of the Company and its
subsidiaries through stock ownership;
(c) attracting, retaining and rewarding highly qualified
executives and managers who will contribute in
exceptional ways to the long-term financial success of
the Company and its subsidiaries; and
(d) tying compensation of key management employees more
closely with the performance of Common Stock.
2. Definitions. The following words and phrases have the
respective meanings indicated below unless a different
meaning is plainly implied by the context.
(a) "Administrative Committee" means a committee of
management employees which, pursuant to Section 4, has
been appointed by the Board Committee and authorized to
assume designated responsibilities and perform
designated functions.
(b) "award" means the grant of stock options or stock
appreciation rights (SARs) to an eligible employee
pursuant to this Plan.
(c) "Board Committee" means the Organization and
Compensation Committee of the Board of Directors of
Sprint.
(d) "Common Stock" or "stock," or "shares" means shares of
common stock of Sprint.
(e) "Company" means Centel Corporation, a Kansas
corporation and its successors.
(f) "date of award" means the date designated by the Board
Committee for the award of stock options or SARs which
have been approved by the Board Committee to be awarded
pursuant to this Plan.
(g) "eligible employee" means any management employee of
the Company or of a subsidiary of Sprint who is
designated by the Board Committee as a key employee
eligible to receive an award of options or SARs under
this Plan.
(h) "Exchange Act" means the Securities Exchange Act of
1934. References to a particular section or, or rule
under, the Exchange Act shall include references to
successor provisions.
(i) "Insider" means any participant who is subject to
Section 16 of the Exchange Act with respect to the
equity securities of Sprint.
(j) "letter of agreement" means a letter from the Board
Committee, or from the Administrative Committee or
Administrative Committee member acting on behalf of the
Board Committee, to an employee, indicating that the
employee is a participant in the Centel Stock Option
Plan, the number of shares subject to option or SAR to
be granted to the participant, the option price, the
date or dates when such option or SAR may be exercised,
and other provisions consistent with the Plan.
(k) "market value" of Common Stock on any date means the
average of the high and low prices of the Common Stock
for composite transactions as published by major
newspapers for that date or, if no sale of the Common
Stock shall have been made on that date, such average
price on the next preceding date on which there was a
sale.
(l) "Non-Insider" means any participant who is not an
Insider.
(m) "participant" means any person who has been awarded
options or SARs pursuant to this Plan.
(n) "Plan" means the plan set forth in this Centel Stock
Option Plan, as it may be amended from time to time,
and known as the "Centel Stock Option Plan."
(o) "retirement" means cessation of employment with the
Company, Sprint and all subsidiaries after a
participant has attained age fifty-five under
circumstances that would result in the participant
having a vested interest under the Centel Retirement
Benefit Plan or successor Sprint plan if the
participant were a participant in that plan.
"normal retirement" means retirement after a
participant has attained age sixty-five; "early
retirement" means retirement before a participant has
attained age sixty-five.
(p) "SEC" means the Securities and Exchange Commission.
(q) "Sprint" means Sprint Corporation, a Kansas
corporation, and its successors.
(r) "stock appreciation right" or "SAR" is a right granted
to a participant to receive a payment in cash or in
shares of Common Stock or in a combination of cash and
shares equal in value to the increase in the market
value of the Common Stock from the date of grant of
such SAR to the date of exercise with respect to the
shares represented by such SAR. The election to
receive either cash or shares, or a combination of cash
and shares, is made by the participant.
(s) "stock option" or "option" is a right granted to a
participant to purchase a designated number of shares
of Common Stock at a stated price for a stated period
of time. The participant may exercise that right
according to Section 8 of the Plan as to all or a
portion of the shares at a specified time or times.
Stock options granted under this Plan are not intended
to qualify as incentive stock options under Internal
Revenue Code Section 422A.
(t) "subsidiary" means any corporation fifty percent or
more of the voting stock of which is owned, directly or
indirectly, by the Company or Sprint.
(u) "tandem grant" means an option and an SAR granted in
combination such that both cover the same shares.
Either the option or the SAR may be exercised for all
or any portion of the shares. By exercising the option
for a given number of shares, the right to exercise the
tandem SAR for that number of shares is canceled and
vice-versa.
(v) "total disability" of a participant means the
participant would be eligible to receive disability
benefits under the Centel Corporation Group Welfare
Plan or similar Sprint plan if the participant were a
participant in that plan.
3. Administration of Plan.
(a) This Plan shall be administered by the Board Committee.
(b) The Board Committee shall have full authority and
discretion to adopt rules and regulations and prescribe
or approve the forms to carry out the purposes and
provisions of this Plan. The Board Committee's
interpretation and construction of any provision of
this Plan or any option or SAR granted hereunder shall
be binding and conclusive, unless otherwise determined
by the Board.
4. Appointment of Administrative Committee.
(a) The Board Committee may appoint an Administrative
Committee to:
(1) construe this Plan and make equitable adjustments
for any mistakes, omissions, or errors made in the
administration of this Plan;
(2) adopt such rules and regulations as may be deemed
reasonably necessary for the proper and efficient
administration of this Plan consistent with its
purposes;
(3) enforce this Plan in accordance with its terms and
with the rules and regulations adopted for the
Plan; and
(4) do all other acts which in the Administrative
Committee's reasonable judgment are necessary or
desirable for the proper and advantageous
administration of this Plan consistent with the
Plan's purposes.
(b) No member of the Administrative Committee who is a
participant in the Plan shall act on any matter that
has particular reference to such member's own interest
under this Plan.
5. Eligibility. The Board Committee shall from time to time
determine the key management employees of the Company
(including officers and directors of the Company who are
also employees) and subsidiaries who shall be participants
in this Plan.
6. Shares Subject to Plan. Subject to adjustment as provided
in Section 21, the aggregate number of shares subject to
options or SARs granted by the Board Committee under this
Plan shall be less than 2,534,450 shares of Common Stock of
Sprint, par value $2.50 per share (the shares), which may be
treasury shares reacquired by Sprint or authorized and
unissued shares, or a combination of both.
7. Option Price. The option price per share under each option
granted by the Board Committee shall be not less than 100%
of the market value per share on the date an option is
granted, but in no event shall the option price be less than
the par value per share.
8. Exercise of Options.
(a) Terms. Each option granted under this Plan shall be
exercisable on the dates and for the number of shares
as shall be provided in a letter of agreement between
the Company and the participant evidencing the option
granted by the Board Committee and the terms thereof.
However, subject to Sections 13, 14, 15, 16, and 17, no
option shall become exercisable until six months after
its date of award.
(b) Exercise and Payment of Exercise Price. Shares shall
be issued to the participant pursuant to the exercise
of an option only upon receipt by Sprint from the
participant of written notice of exercise, specifying
the number of shares with respect to which the option
is being exercised, accompanied by payment in full
either in cash or by a single exchange of shares of
Common Stock of Sprint previously owned by the
optionee, or a combination of both, in an amount or
having a combined value equal to the aggregate purchase
price for the shares subject to the option or portion
thereof being exercised. The value of the previously
owned shares of Common Stock exchanged in full or
partial payment for the shares purchased upon the
exercise of an option shall be equal to the aggregate
market value, as defined in Section 2, of such shares
on the date of the exercise of such option. Certain
optionees may use restricted stock as payment for the
exercise price in accordance with paragraph (f) of this
Section 8. In that event, market value of the shares
of restricted stock will be determined as if the shares
were not restricted. Previously owned shares acquired
via prior exercise of a stock option granted under this
Plan shall not be accepted in full or partial payment
for shares purchased upon the exercise of an option
unless such previously owned shares have been held by
the participant for at least six months subsequent to
such prior exercise.
(c) Effect on Tandem Grants. If the option was granted in
a tandem grant (as defined in Section 2) with an SAR,
then exercise of such option with respect to a stated
number of shares shall cancel the right to exercise the
tandem SAR with respect to the same number of shares.
(d) Stock Withholding Election. When federal, state and
local income taxes are required to be withheld ("Tax
Withholding Obligations") in connection with the
exercise of a stock option, or upon the lapse of
restrictions on restricted stock received upon the
exercise of an option (the date on which income is
recognized in connection with any such exercise or
lapse of such restrictions hereinafter referred to as
the "Tax Date"), the optionee may elect to make payment
for Tax Withholding Obligations by one or both of the
following methods:
(i) delivering part or all of the payment in
previously-owned unrestricted shares (which shall
be valued at market value on the Tax Date) held
for at least six months, whether or not received
through the prior exercise of a stock option; or
(ii) requesting Sprint to withhold from those shares
that would otherwise be received upon exercise of
the option, or upon the lapse of restrictions, a
number of shares having a market value (as defined
herein) on the Tax Date equal to the amount to be
withheld.
Such election is irrevocable. Any fractional share
amount, Social Security taxes, Medicare taxes and any
additional withholding not paid by the withholding of
shares must be paid in cash. If no timely election is
made, cash must be delivered to satisfy all Tax
Withholding Obligations.
Insiders making an election pursuant to (i) or
(ii) of the immediately preceding paragraph must do so:
(a) at least six months after the date of grant of the
option; and (b) within a "window period" as defined in
Rule 16b-3(e)(3) under the Exchange Act (such period a
"Quarterly Window Period" and such election a
"Quarterly Window Period Election") or at least six
months in advance of the Tax Date. An election by an
Insider to deliver stock or have stock retained to
satisfy tax obligations is subject to the approval of
the Board Committee and to such rules as the Board
Committee may from time to time adopt.
(e) Quarterly Window Period Elections.
(i) A Quarterly Window Period Election made pursuant
to paragraph (d) of this Section 8 or paragraphs
(c) or (e) of Section 9 becomes effective when
made, if made during a Quarterly Window Period, or
as of the first day of the next Quarterly Window
Period, if not made during a Quarterly Window
Period.
(ii) A Quarterly Window Period Election may be revoked
by making a new Quarterly Window Period Election
which (A) changes the previous Quarterly Window
Period Election and (B) becomes effective (in
accordance with Section 8(e)(i)) before the
exercise of the option or SAR, as applicable, to
which the new election relates. The new Quarterly
Window Period Election may, in turn, be revoked in
accordance with this clause (ii).
(iii) A Quarterly Window Period Election may be
either a specific election or a standing election.
A specific election is effective only with respect
to the first exercise of options or SARs, as
applicable, after the election becomes effective.
A standing election that has become effective
remains effective with respect to all subsequent
exercises of options or SARs, as applicable, until
the election is revoked in accordance with Section
8(e)(ii).
(f) Restricted Stock. Certain optionees, as determined by
the Board Committee, may elect to receive restricted
shares upon payment for the exercise of an option in
the form of unrestricted common stock. The optionee
will receive the same number of unrestricted shares as
the number of shares surrendered to pay the exercise
price, while the shares received in excess of the
number surrendered to pay the exercise price may be
restricted. Such optionees may also elect to deliver
restricted shares of Sprint common stock in payment of
the exercise price notwithstanding restrictions on
transferability to which such shares are subject.
Sprint shall be authorized to issue restricted shares
of common stock upon such exercises of stock options,
subject to the following conditions:
(i) The optionee shall elect a vesting period for the
restricted common stock to be received upon
exercise of the option of between six (6) months
and ten (10) years, subject to rules and
procedures established by the Corporate Secretary
of Sprint, but in no event may an optionee elect a
vesting period shorter than the period provided in
paragraph (iv) of this paragraph (f).
(ii) The optionee who receives the restricted stock may
not sell, transfer, assign, pledge, or otherwise
encumber or dispose of shares of restricted stock,
except in payment of the exercise price of a stock
option issued by the Company or Sprint, until such
time as all restrictions on such stock have
lapsed.
(iii) An optionee who elects to receive restricted
common stock upon an exercise shall have the right
to satisfy tax withholding obligations in the
manner provided in paragraph (d) of this Section
8.
(iv) Restricted common stock received in such an
exercise or from an election to receive a Long-
Term Incentive Plan payout in restricted stock, or
any Restricted Stock Award granted pursuant to the
Long-Term Stock Incentive Program, shall be
eligible for use in payment of the exercise price
of a stock option, so long as all the shares
received as a result of such an exercise are
restricted for a period at least as long as, and
with terms at least as restrictive as the terms
of, the restricted common stock used in payment.
(v) The shares of restricted common stock received in
an exercise of a stock option that continue to be
restricted shall be forfeited in the event that
vesting conditions are not satisfied, subject to
the discretion of the Board Committee, except in
the case of death, disability, normal retirement,
or involuntary termination for reasons other than
cause, in which case all restrictions lapse;
provided, however, that in no event shall
restrictions lapse if the restrictions on shares
used to pay for the exercise have not lapsed under
the same conditions. If restricted shares are
forfeited, the optionee or his representative
shall sign any document and take any other action
required to assign said restricted shares back to
Sprint.
(vi) The optionee will have all the rights of a
stockholder with respect to shares of restricted
stock received upon the exercise of an option,
including the right to vote the shares of stock
and the right to dividends on the stock. Unless
alternate procedures are established, the shares
of restricted stock will be registered in the name
of the optionee and the certificates evidencing
such shares shall bear an appropriate legend
referring to the terms, conditions and
restrictions applicable to the award and shall be
held in escrow by Sprint. The optionee shall
execute a stock power or powers assigning the
shares of restricted stock back to Sprint, which
stock powers shall be held in escrow by Sprint and
used only in the event of the forfeiture of any of
the shares of restricted stock. A certificate
evidencing unrestricted shares of common stock
shall be issued to the optionee promptly after the
restrictions lapse on any restricted shares.
(vii) The Corporate Secretary of Sprint shall have
the discretion and authority to establish any
rules in connection with the use of restricted
stock, including but not limited to regulating the
timing of the lapse of restrictions within the six-
month to ten-year period and prescribing election
forms as the Corporate Secretary of Sprint deems
necessary or desirable for the orderly
administration of such exercises.
9. Exercise of SARs.
(a) Terms. Each SAR granted under this Plan shall be
exercisable on the dates and for the number of shares
as shall be provided in a letter of agreement between
the Company and the participant evidencing the SAR
granted by the Board Committee and the terms thereof.
However, subject to Sections 13, 14, 15, 16, and 17, no
SAR shall become exercisable until six months after its
date of award.
(b) Exercise by Non-Insider Participants. Cash or shares
(at the election of the Non-Insider) shall be issued to
the Non-Insider pursuant to the exercise of an SAR upon
the receipt by Sprint from the Non-Insider of written
notice that an SAR is being exercised.
(c) Exercise by Insider Participants. An Insider may
exercise an SAR by delivery to Sprint of written notice
of exercise, which notice includes, or is preceded by,
the Insider's election to receive cash or stock. If
the Insider elects to receive Common Stock, the SAR may
be exercised only pursuant to a Quarterly Window Period
Election; provided, however, that an Insider's election
to receive stock may be made at any time if the Board
Committee determines, with the advice of counsel, that
the implementation of this proviso does not require
shareholder approval pursuant to SEC Rule 16b-3(b). If
the Insider elects to receive cash, (i) such election
must be a Quarterly Window Period Election and (ii) the
SAR may be exercised only during a Quarterly Window
Period. Any such election by an Insider to receive
cash shall be subject to the approval of the Board
Committee in its sole discretion at any time after such
election.
(d) Effect on Tandem Grants. If an SAR was granted in a
tandem grant (as defined in Section 2) with an option,
then exercise of such SAR with respect to a stated
number of shares shall cancel the right to exercise the
tandem option with respect to the same number of
shares.
(e) Withholding. Participants may elect to have all or a
portion of the cash or shares to be received from
exercising an SAR retained by Sprint in order to
exercise a stock option, or to satisfy Tax Withholding
Obligations in respect of an exercise of an option or
SAR; provided, however, that an Insider may elect to
have all or a portion of the shares to be received from
exercising an SAR retained by Sprint to satisfy Tax
Withholding Obligations only if (i) such election is a
Quarterly Window Period Election, and (ii) the SAR is
exercised during a Quarterly Window Period. Any such
election by an Insider that relates to the satisfaction
of Tax Withholding Obligations shall be subject to the
approval of the Board Committee in its sole discretion
at any time after such election.
10. Term of Option or SAR. Each option or SAR granted hereunder
shall be exercisable for not more than ten years from the
date it is granted, after which the unexercised portion
thereof shall expire.
11. Nontransferability of Option. No option or SAR granted
under this Plan shall be transferable except by will or the
laws of descent or pursuant to a qualified domestic
relations order as defined by the Internal Revenue Code of
1986. Each such option and SAR shall be exercisable during
the participant's lifetime only by the participant.
12. Termination of Employment. Upon termination of employment
of a participant for any reason other than retirement, total
disability, death, sale or disposition of a business unit,
or change in control (as defined in Section 17), all options
and SARs previously granted to the participant, whether
exercisable or unexercisable, shall be forfeited and
canceled.
13. Retirement of Participant.
(a) Upon the normal retirement of a participant (after
attaining age sixty-five), all options and SARs
previously granted to the participant shall become
fully exercisable, and may be exercised within a three-
year period following the date of retirement, but in no
event later than ten years from the date of grant of
such options and SARs; provided, however, that an
Insider may not exercise an option or SAR until at
least six months after the date of award of such option
or SAR, as applicable.
(b) Upon the early retirement of a participant (prior to
attaining age sixty-five), the portion of all options
and SARs that the participant is then entitled to
exercise may be exercised within a three-year period
following the date of retirement, but in no event later
than ten years from the date of grant of such options
and SARs.
14. Total Disability of Participant. Upon the total disability
of a participant (as defined in Section 2) all options and
SARs previously granted to the participant shall become
fully exercisable and may be exercised within a one-year
period following the date the participant becomes totally
disabled, but in no event later than ten years from the date
of grant of such options and SARs; provided, however, than
an Insider may not exercise an option or SAR until at least
six months after the date of award of such option or SAR, as
applicable.
15. Death of Participant. Upon the death of a participant, all
options and SARs previously granted to the participant shall
become fully exercisable by the legal representative of the
deceased participant's estate and may be exercised within a
one-year period following the date of the participant's
death, but in no event later than ten years from the date of
grant of such options or SARs.
16. Sale or Disposition of a Business Unit. Upon the
termination of employment of a participant occurring as a
result of the disposition by Sprint of a subsidiary,
division or business unit, the Board Committee, or, except
with respect to Insiders, the Administrative Committee,
acting on behalf of the Board Committee, may determine the
extent to which unexercisable options and SARs shall become
exercisable, and the period of time, if any, following the
date of disposition during which the participant may
exercise such options and SARs; provided, however, than an
Insider may not exercise an option or SAR until at least six
months after the date of award of such option or SAR, as
applicable.
17. Change in Control. Deleted.
18. Committee Discretion in the Event of Termination.
Notwithstanding the provisions of Sections 12, 13, 14, and
15, if, upon termination of employment of the participant
for any reason, the Board Committee, or, except with respect
to Insiders, the Administrative Committee acting on behalf
of the Board Committee, determines that it is in the best
interest of Sprint, it may determine that all or a portion
of the participant's unexercisable options and SARs may
become exercisable, and that all or a portion of the
participant's exercisable options and SARs may be exercised
for a period of time following the date of the participant's
termination of employment, but in no event later than ten
years from the date of grant of such options or SARs.
19. Nonalienation of Benefits. No right or benefit under this
Plan shall be subject to anticipation, alienation, sale,
assignment, pledge, encumbrance or charge and any attempt to
anticipate, alienate, sell, assign, pledge, encumber or
charge the same shall be void. No right or benefit under
this Plan shall in any manner be liable for or subject to
the debts, contracts, liabilities or torts of the person
entitled to such benefits except such claims as may be made
by the Company, Sprint or any subsidiary. If any
participant or beneficiary hereunder should become bankrupt
or attempt to anticipate, alienate, sell, assign, pledge,
encumber or charge any right or benefit under this Plan,
such right or benefit shall, in the sole discretion of the
Board Committee (or, except with respect to Insiders, the
Administrative Committee acting on behalf of the Board
Committee), cease, and in such event, the Company or Sprint
shall hold or apply the same or any part thereof for the
benefit of such participant or beneficiary, such person's
spouse, children or other dependents, or any of them, in
such manner and in such proportions as the Committee in its
sole discretion shall determine.
20. Indemnification of Committee Members. In addition to such
other rights of indemnification as any person may have as a
director, officer or member of the Board Committee or
Administrative Committee, each member of the Committees
shall be indemnified by the Company against the reasonable
expenses, including attorney's fees, actually and
necessarily incurred in connection with the defense of any
action, suit or proceeding, or in connection with any appeal
therein, to which such person may be a party by reason of
any action taken or failure to act under or in connection
with this Plan, and against all amounts paid by such person
in settlement thereof (provided such settlement is approved
by legal counsel selected or approved by the Company), or
paid by such person in satisfaction of a judgment in any
such action, suit or proceeding, except in relation to
matters as to which it shall be adjudged in such action,
suit or proceeding, that such Committee member is liable for
gross misconduct; provided that within 60 days after the
institution of such action, suit or proceeding, such
Committee member shall in writing offer the Company the
opportunity, at its own expense, to handle and defend the
same.
21. Adjustment in Number of Shares and Option Price. In the
event of any subdivision or combination of the outstanding
shares of Sprint by reclassification or otherwise, or in the
event of the payment of a stock dividend, a capital
reorganization, a reclassification of shares, a
consolidation or merger, or the sale, lease or conveyance of
substantially all the assets of Sprint, the Board Committee
shall make appropriate and equitable adjustments in the
number and kind of shares with respect to which all
outstanding options and SARs, or portions thereof then
unexercised, shall be exercisable. Any such adjustment made
by the Board Committee shall be final and binding upon all
participants, Sprint, the Company and all other interested
persons.
22. Compliance with Rule 16b-3. the intent of this Plan is to
qualify for the exemption provided by Rule 16b-3 of the
Exchange Act. To the extent any provision of the Plan does
not comply with the requirements of Rule 16b-3, it shall be
deemed inoperative and shall not affect the validity of the
Plan. In the event Rule 16b-3 is revised or replaced, the
Board Committee, or the Administrative Committee acting on
behalf of the Board Committee, may exercise discretion to
modify this Plan in any respect necessary to satisfy the
requirements of the revised exemption or its replacement.
23. Amendments and Discontinuance. The Board of Directors of
the Company may alter, suspend or terminate this Plan;
provided, however, that no such action shall increase the
term of any option or SAR previously granted, or increase
the number of shares available under the Plan (other than as
provided in Section 21), or reduce the minimum option price
per share as provided in Section 7, and provided further
that no such action shall materially and adversely affect
any outstanding options or SARs without the consent of the
respective participants.