e424b5
CALCULATION OF
REGISTRATION FEE
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Proposed maximum
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Title of each class of
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Amount to be
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Proposed maximum
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aggregate
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Amount of
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securities to be registered
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registered (1)
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offering price
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offering price
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registration fee
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7.625 Senior Notes due 2021
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$750,000,000
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100.0%
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$750,000,000
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$87,075
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(1) |
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Calculated in accordance with Rule 457(r) under the
Securities Act of 1933, as amended. This Calculation of
Registration Fee table shall be deemed to update the
Calculation of Registration Fee table in the
registrants Registration Statement on
Form S-3
(File No.
333-173029). |
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-173029
$750,000,000
NII Capital Corp.
7.625% SENIOR NOTES DUE
2021
Guaranteed by NII Holdings, Inc.
We will pay interest on the Notes on April 1 and
October 1 of each year. The first such payment will be made
on October 1, 2011. The Notes will be issued only in
denominations of $2,000 and integral multiples of $1,000.
We may redeem any of the Notes, in whole or in part, at any time
on or after April 1, 2016 at the applicable redemption
prices set forth in this prospectus, plus accrued interest.
Before April 1, 2016 we may also redeem the Notes, in whole
or in part, at a redemption price equal to 100% of their
principal amount, plus accrued interest and a
make-whole premium. In addition, before
April 1, 2014, we may redeem up to 35% of the Notes at a
redemption price equal to 107.625% of their principal amount,
plus accrued interest, using the proceeds of certain equity
offerings.
The Notes will be fully and unconditionally guaranteed on a
senior unsecured basis by NII Holdings, Inc. and all of its
current and future domestic restricted subsidiaries, other than
NII Capital Corp. We refer to NII Holdings, Inc. and these
domestic subsidiaries as the guarantors.
The Notes and the related guarantees (i) will rank equally
with all of the existing and future unsecured and unsubordinated
indebtedness of NII Capital Corp. and the guarantors and
(ii) will be effectively junior to all existing and future
secured indebtedness of NII Capital Corp. and the guarantors to
the extent of the assets securing that indebtedness. No foreign
subsidiaries of NII Holdings, Inc. will initially guarantee the
Notes. As a result, the Notes will be structurally subordinated
to all existing and future liabilities and obligations of our
non-guarantor subsidiaries. Almost all of our business
operations and assets are conducted and held by our foreign
subsidiaries that will not guarantee the Notes. As of
December 31, 2010, our non-guarantor subsidiaries had
$4,176.0 million in liabilities outstanding, including
$901.6 million of indebtedness.
The Notes will not be listed on any securities exchange.
Currently, there is no public market for the Notes.
For a more detailed description of the Notes, see
Description of Notes beginning on page 27.
Investing in the Notes involves risks. See Risk
Factors beginning on page 6 and other risks described
in our annual report on
Form 10-K
for the fiscal year ended December 31, 2010, which is
incorporated into this prospectus to read about important
factors you should consider before investing in the Notes.
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Per Note
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Total
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Public offering
price(1)
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100.000
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%
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$
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750,000,000
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Underwriting discounts and commissions
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1.750
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%
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$
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13,125,000
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Proceeds, before expenses, to
us(1)
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98.250
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%
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$
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736,875,000
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(1) |
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Plus accrued interest, if any, from March 29, 2011, if
settlement occurs after that date. |
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or passed upon the adequacy or accuracy of this
prospectus. Any representation to the contrary is a criminal
offense.
The underwriters expect to deliver the Notes through the
facilities of The Depository Trust Company against payment
in New York, New York on March 29, 2011.
Joint bookrunning
Managers
Prospectus dated March 24, 2011.
TABLE OF
CONTENTS
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Page
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1
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6
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22
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24
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25
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26
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27
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72
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76
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79
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79
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79
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80
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We have not authorized anyone to provide any information or
to make any representations other than those contained or
incorporated by reference in this prospectus, any prospectus
supplement or in any free writing prospectus we have prepared.
We take no responsibility for, and can provide no assurance as
to the reliability of, any other information that others may
give you. This prospectus is an offer to sell only the notes
offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information
contained in this prospectus, any prospectus supplement or in
any free writing prospectus is current only as of the respective
dates of such documents.
In this prospectus, NII Holdings, we,
us, our and our company
refer to NII Holdings, Inc. and its subsidiaries, including NII
Capital Corp., the issuer of the Notes, as a combined entity,
except where it is clear that the terms mean only NII Holdings,
Inc. This prospectus also uses the terms issuer and
NII Capital to refer to NII Capital Corp. as a
separate entity.
Except as otherwise indicated, all amounts are expressed in
U.S. dollars and references to dollars and
$ are to U.S. dollars. All historical financial
statements incorporated by reference in this prospectus are
prepared in accordance with accounting principles generally
accepted in the United States.
The distribution of this prospectus and the offering and sale of
the Notes in certain jurisdictions may be restricted by law.
Persons who come into possession of this prospectus should
inform themselves about and observe any such restrictions. This
prospectus does not constitute, and may not be used in
connection with, an offer or solicitation by anyone in any
jurisdiction in which such offer or solicitation is not
authorized or in which the person making such offer or
solicitation is not qualified to do so or to any person to whom
it is unlawful to make such offer or solicitation.
You should not consider any information in this prospectus to be
investment, legal or tax advice. You should consult your own
counsel, accountant and other advisors for legal, tax, business,
financial and related advice regarding the purchase of the
Notes. We are not, and the underwriters are not, making any
representation to you regarding the legality of an investment in
the Notes by you under applicable investment or similar laws.
You should read and consider all information contained or
incorporated by reference in this prospectus before making your
investment decision.
SUMMARY
This summary contains basic information about us and this
offering. Because it is a summary, it does not contain all of
the information that you should consider before investing. You
should read this entire prospectus carefully, including the
section entitled Risk Factors, our financial
statements and the notes thereto incorporated by reference to
our annual report on
Form 10-K
for the fiscal year ended December 31, 2010, and the other
documents we refer to and incorporate by reference in this
prospectus for a more complete understanding of us and this
offering before making an investment decision. In particular, we
incorporate important business and financial information in this
prospectus by reference. You may obtain a copy of the documents
incorporated by reference by following the instructions in the
section entitled Where You Can Find More
Information.
NII
Holdings
We provide wireless communication services, primarily targeted
at meeting the needs of customers who use our services in their
businesses and individuals that have medium to high usage
patterns, both of whom value our multi-function handsets,
including our Nextel Direct
Connect®
feature, and our high level of customer service. We provide
these services through operating companies located in selected
Latin American markets under the
Nexteltm
brand, with our principal operations located in major business
centers and related transportation corridors of Mexico, Brazil,
Argentina, Peru and Chile. We provide our services in major
urban and suburban centers with high population densities, which
we refer to as major business centers, where we believe there is
a concentration of the countrys business users and
economic activity. We believe that vehicle traffic congestion,
low wireline service penetration and the expanded coverage of
wireless networks in these major business centers encourage the
use of the mobile wireless communications services that we
offer. Our planned third generation networks are expected to
serve both these major business centers and a broader geographic
area in order to reach more potential customers and to meet the
requirements of our spectrum licenses.
Organizational
Structure
We provide our services through operating companies located in
each of our Latin American markets and we refer to our operating
companies by the countries in which they operate, such as Nextel
Mexico, Nextel Brazil, Nextel Argentina, Nextel Peru and Nextel
Chile. All of the operating companies and their subsidiaries are
organized under foreign law. Each of the operating companies is
owned, directly or indirectly, by intermediary
U.S. subsidiaries of NII Holdings. Each of those
intermediary U.S. subsidiaries will guarantee the Notes. We
refer to the intermediary U.S. subsidiaries that guarantee
the Notes as the subsidiary guarantors, and to NII Holdings, the
parent company of the issuer, and the subsidiary guarantors
collectively as the guarantors.
The following chart represents the corporate organizational
structure of NII Holdings and its intermediary
U.S. subsidiaries on the date hereof, as well as a summary
of cash, cash equivalents and short-term investments and debt,
capital leases and other financial obligations at NII Holdings,
NII Capital, the subsidiary guarantors and each of our
operating segments, as of December 31, 2010. This chart
excludes foreign intermediate subsidiaries and the foreign
subsidiaries of the operating companies.
1
* * * * *
Our corporate headquarters are located at 1875 Explorer Street,
Suite 1000, Reston, Virginia 20190, and our telephone
number is
(703) 390-5100.
Our Internet address is www.nii.com. The information contained
on our web site is not part of this prospectus.
2
The
Offering
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Issuer |
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NII Capital Corp. |
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Notes Offered |
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$750 million aggregate principal amount of
7.625% Senior Notes due 2021. |
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Maturity Date |
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April 1, 2021. |
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Interest |
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7.625% per annum, payable semi-annually in arrears. |
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Interest Payment Date |
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April 1 and October 1 of each year, beginning on
October 1, 2011. Interest will accrue from the issue date
of the Notes. |
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Optional Redemption |
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NII Capital may redeem the Notes, in whole or in part, at any
time on or after April 1, 2016 at the applicable redemption
prices set forth in this prospectus, plus accrued and unpaid
interest. Prior to April 1, 2016, NII Capital may redeem
the Notes, in whole or in part, at a redemption price equal to
100% of the principal amount thereof plus a
make-whole premium and accrued and unpaid interest
as described in Description of Notes Optional
Redemption. |
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Prior to April 1, 2014, NII Capital may redeem up to 35% of
the aggregate principal amount of the Notes with the net cash
proceeds from specified equity offerings by NII Holdings at a
redemption price of 107.625% of their principal amount, plus
accrued and unpaid interest. NII Capital may, however, only make
such a redemption if, after the redemption, at least 65% of the
aggregate principal amount of the Notes issued under the
indenture remains outstanding. |
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Change of Control |
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If a change of control of NII Holdings occurs, each holder of
Notes may require us to repurchase all of the holders
Notes at a purchase price equal to 101% of the principal amount
of the Notes, plus accrued and unpaid interest. See
Description of Notes Repurchase at the Option
of Holders Change of Control. |
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Guarantees |
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The Notes will be fully and unconditionally guaranteed on a
senior unsecured basis by NII Holdings and all of its current
and future domestic restricted subsidiaries, other than
NII Capital. We refer to NII Holdings and these domestic
subsidiaries as the guarantors. No foreign
subsidiaries will initially guarantee the Notes. |
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Ranking |
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The Notes and the guarantees: |
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will be general senior unsecured obligations of NII
Capital and the guarantors;
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will rank equally in right of payment with any
future unsecured and unsubordinated indebtedness of NII Capital
and the guarantors, including, but not limited to, NII
Capitals outstanding $800.0 million aggregate
principal amount of 10% senior notes due 2016 and the
related guarantees thereof by the guarantors,
$500.0 million aggregate principal amount of
8.875% senior notes due 2019 and the related
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guarantees thereof by the guarantors and, with respect to NII
Holdings guarantee, and NII Holdings outstanding
$1,100.0 million aggregate principal amount of 3.125%
convertible notes due 2012; |
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will be effectively junior to existing and future
secured obligations of NII Capital and the guarantors to the
extent of the assets securing such obligations;
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will be structurally junior to all existing and
future liabilities, including trade payables, of NII
Holdings subsidiaries that do not guarantee the notes; and
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will be senior in right of payment to any future
subordinated indebtedness of NII Capital or any guarantor.
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As of December 31, 2010, (i) NII Holdings had
$1,100.0 million principal amount of indebtedness
outstanding on an unconsolidated basis (excluding NII
Holdings guarantee of NII Capitals 10% senior
notes due 2016 and 8.875% senior notes due 2019), none of
which was secured, (ii) NII Capital had
$1,300.0 million aggregate principal amount of indebtedness
outstanding, representing NII Capitals 10% senior
notes due 2016 and 8.875% senior notes due 2019, and
(iii) other than NII Aviation, which had
$41.1 million of secured indebtedness outstanding, none of
the subsidiary guarantors had any indebtedness outstanding,
other than their guarantee of NII Capitals 10% senior
notes due 2016 and 8.875% senior notes due 2019. Almost all
of our business operations and assets are conducted and held by
our foreign subsidiaries that will not guarantee the Notes. As
of December 31, 2010, NII Holdings subsidiaries that
are not subsidiary guarantors or the issuer had
$4,176.0 million in liabilities outstanding, including
$901.6 million of indebtedness. |
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Certain Covenants |
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The indenture governing the Notes, among other things, will
limit NII Holdings ability and the ability of its
restricted subsidiaries, including NII Capital, to: |
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incur additional indebtedness and issue preferred
stock;
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create liens or other encumbrances;
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place limitations on distributions from restricted
subsidiaries;
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pay dividends, acquire shares of our capital stock,
make investments,
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prepay subordinated indebtedness or make other
restricted payments;
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issue or sell capital stock of restricted
subsidiaries;
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issue guarantees;
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sell or exchange assets;
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enter into transactions with affiliates; and
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merge or consolidate with another entity.
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4
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The covenants are subject to a number of important
qualifications and exceptions that are described in the section
Description of Notes Certain Covenants. |
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Covenant Suspension |
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During any period of time that (i) the ratings assigned to
the Notes by both of Moodys Investors Service, Inc. and
Standard & Poors Ratings Service are equal to or
higher than Baa3 and BBB-, respectively (or, if either such
entity ceases to rate the Notes for reasons outside of our
control, the equivalent investment grade credit rating from any
other nationally recognized statistical rating
organization within the meaning of Section 3(a)(62)
under the Exchange Act, selected by us as a replacement agency),
and (ii) no default or event of default has occurred and is
continuing, we will not be subject to most of the covenants
discussed above with respect to the Notes. In the event that we
are not subject to certain covenants for any period of time as a
result of the preceding sentence and, on any subsequent date,
the rating assigned by either rating agency (or replacement
agency) should decline below the level set forth above, then we
will thereafter again be subject to such covenants. |
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Use of Proceeds |
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We estimate that the net proceeds from this offering will be
approximately $736.1 million, after deducting estimated
underwriting discounts, commissions and offering expenses. We
intend to use the net proceeds from this offering for general
corporate purposes, which may include, without limitation,
expansion of our existing network, either through capital
expenditures for internal expansion or acquisitions of other
operators; the acquisition of telecommunications spectrum
licenses or other assets; the deployment of new network
technologies; or the refinancing, repayment or repurchase of
outstanding indebtedness. |
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Risk Factors |
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You should refer to the section entitled Risk
Factors on page 6 of this prospectus and other risks
discussed in our annual report on
Form 10-K
for the year ended December 31, 2010 for a discussion of
the factors you should carefully consider before deciding to
invest in the Notes, including factors affecting forward-looking
statements. |
5
RISK
FACTORS
Before you make a decision to invest in the Notes, you should
be aware of various risks, including the risks described below.
Our business, financial condition or results of operations could
be materially adversely affected by any of these risks. The
trading price of the Notes could decline due to any of these
risks, and you may lose all or part of your investment. In
addition, please read Forward-Looking and Cautionary
Statements in this prospectus, other risks described in
our annual report on
Form 10-K
for the fiscal year ended December 31, 2010 and other
information in documents we file with the SEC, which are
incorporated by reference into this prospectus, where we
describe additional uncertainties associated with our business
and the forward-looking statements included or incorporated by
reference in this prospectus. Our actual results could differ
materially from those anticipated in these forward-looking
statements as a result of certain factors, including the risks
faced by us described below and included elsewhere or
incorporated by reference in this prospectus. Please note that
additional risks not presently known to us or that we currently
deem immaterial may also impair our business and operations.
Risk Factors
Relating to This Offering
Although the
Notes are referred to as senior notes, they will be
effectively subordinated to NII Capitals and the
guarantors secured indebtedness and to the indebtedness
and other liabilities of our non-guarantor
subsidiaries.
The Notes and the guarantees are unsecured and therefore will be
effectively subordinated to the existing and future secured
indebtedness of NII Holdings, NII Capital and the subsidiary
guarantors to the extent of the assets securing such
indebtedness. As of December 31, 2010, NII Aviation, which
is one of the subsidiary guarantors, had $41.1 million of
secured indebtedness outstanding and NII Holdings, NII Capital
and the subsidiary guarantors other than NII Aviation had no
secured indebtedness outstanding; however, the indenture
governing the Notes permits NII Holdings, NII Capital and the
subsidiary guarantors to incur a substantial amount of secured
indebtedness. See Description of Notes.
If NII Holdings, NII Capital or a subsidiary guarantor becomes
insolvent or is liquidated, the lenders under NII Holdings, NII
Capital or the subsidiary guarantors secured indebtedness
will have claims on the assets securing their indebtedness and
will have priority over any claim for payment under the Notes or
the guarantees to the extent of such security. Accordingly, in
the event of a bankruptcy or insolvency, it is possible that
there would be no assets remaining after satisfaction of the
claims of such secured creditors from which claims of the
holders of the Notes could be satisfied or, if any assets
remained, they might be insufficient to satisfy such claims
fully. Also, as described below, there are federal and state
laws that could invalidate NII Holdings and the subsidiary
guarantors guarantees of the Notes. If that were to occur,
the claims of creditors of NII Holdings and those subsidiaries
would also rank effectively senior to the Notes, to the extent
of the assets of those entities.
None of our foreign subsidiaries has any obligation to pay any
amounts due on the Notes or to provide us with funds for our
payment obligations, whether by dividends, distributions, loans
or other payments. In the event of a bankruptcy, liquidation or
reorganization of any of our non-guarantor subsidiaries, holders
of their liabilities, including trade creditors, will generally
be entitled to payment of their claims from the assets of those
non-guarantor subsidiaries before any assets are made available
for distribution to us. Almost all of our business operations
and assets are conducted and held by our foreign subsidiaries
that will not guarantee the Notes. As of December 31, 2010,
our non-guarantor subsidiaries had total liabilities of
$4,176.0 million, including outstanding indebtedness of
$901.6 million.
Contractual
provisions in our subsidiaries debt agreements, as well as
laws restricting the exchange of currencies or expatriating
funds, impair the ability of our subsidiaries to make funds
available to us to pay debt service.
Because almost all of our business operations and assets are
conducted and held by our foreign subsidiaries, we depend on
those subsidiaries to provide us with cash to satisfy our
obligations,
6
including debt service on the Notes, whether in the form of
advances from our subsidiaries, the repayment by our
subsidiaries of intercompany loans or the payment of dividends
and other distributions from the net earnings and cash flow
generated by such subsidiaries. Contractual provisions in the
agreements governing the indebtedness of our foreign
subsidiaries in Brazil, Mexico, Peru and, Chile and laws or
regulations restricting the exchange of currencies or
expatriation of funds, as well as any such subsidiarys
financial condition and operating requirements, limit the
ability of our foreign subsidiaries to distribute cash or assets
to NII Holdings, NII Capital or the subsidiary guarantors. For
example, Brazilian law provides that the Brazilian government
may, for a limited period of time, impose restrictions on the
remittance by Brazilian companies to foreign investors of the
proceeds of investments in Brazil. These restrictions may be
imposed whenever there is a material imbalance or a serious risk
of a material imbalance in Brazils balance of payments.
The inability to receive sufficient cash from our foreign
subsidiaries to satisfy our obligations would require us to
obtain additional debt or equity financing or sell assets. There
can be no assurance that we would be able to obtain such
financing or sell assets at acceptable terms or at all and,
under such circumstances, our failure to do so could prevent us
from satisfying our obligations, including making payments on
the Notes when due.
Federal and
state statutes allow courts, under specific circumstances, to
void guarantees and require noteholders to return payments
received from the guarantors.
The creditors of the guarantors could challenge the guarantees
as fraudulent conveyances or on other grounds. Under federal
bankruptcy law and comparable provisions of state fraudulent
transfer laws, the delivery of the guarantees could be found to
be a fraudulent transfer and declared void if a court determined
that the guarantor, at the time it incurred the obligations
evidenced by its guarantee, (1) delivered the guarantee
with the intent to hinder, delay or defraud its existing or
future creditors; or (2) received less than reasonably
equivalent value or did not receive fair consideration for the
issuance of the guarantee and any of the following three
conditions apply:
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the guarantor was insolvent on the date of the issuance of the
guarantee or was rendered insolvent as a result of the issuance
of the guarantee;
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the guarantor was engaged in a business or transaction, or was
about to engage in a business or transaction, for which the
guarantors remaining assets constituted unreasonably small
capital; or
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the guarantor intended to incur, or believed that it would
incur, debts beyond its ability to pay as such debts matured.
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In addition, any payment by that guarantor pursuant to its
guarantee could be voided and required to be returned to the
guarantor, or to a fund for the benefit of the creditors of the
guarantor. In any such case, your right to receive payments in
respect of the Notes from any such guarantor would be
effectively subordinated to all indebtedness and other
liabilities of that guarantor.
The indenture governing the notes will contain a savings
clause, which, for each guarantor that is a subsidiary of
ours, limits the liability on such subsidiarys guarantee
to the maximum amount that such guarantor can incur without risk
that its guarantee will be subject to avoidance as a fraudulent
transfer. We cannot assure you that this limitation will protect
such guarantees from fraudulent transfer challenges or, if it
does, that the remaining amount due and collectible under the
guarantees will suffice, if necessary, to pay the notes in full
when due. Furthermore, in Official Committee of Unsecured
Creditors of TOUSA, Inc. v. Citicorp North America,
Inc., the U.S. Bankruptcy Court in the Southern
District of Florida held that a savings clause similar to the
savings clause that will be used in the indenture was
unenforceable. As a result, the subsidiary guarantees were found
to be fraudulent conveyances. We do not know if that decision
will be followed. However, if the TOUSA decision were to be
followed or upheld, the risk that the guarantees would be deemed
fraudulent conveyances would be significantly increased.
If a court declares the guarantees to be void, or if the
guarantees must be limited or voided in accordance with their
terms, any claim you may make against us for amounts payable on
the Notes
7
would, with respect to amounts claimed against the guarantors,
be subordinated to the indebtedness of the guarantors, including
trade payables. The measures of insolvency for purposes of these
fraudulent transfer laws will vary depending upon the law
applied in any proceeding to determine whether a fraudulent
transfer has occurred. Generally, however, a guarantor would be
considered insolvent if:
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the sum of its debts, including contingent liabilities, was
greater than the fair saleable value of all of its assets;
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if the present fair saleable value of its assets was less than
the amount that would be required to pay its probable liability
on its existing debts, including contingent liabilities, as they
become absolute and mature; or
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it could not pay its debts as they become due.
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We cannot assure you, however, as to what standard a court would
apply in making these determinations.
There is no
public market for the Notes, which could limit their market
price or the ability to sell them for an amount equal to or
higher than their initial offering price.
The Notes are a new issue of securities for which there
currently is no trading market. Although the underwriters have
advised us that they intend to make a market in the Notes, they
are not obligated to do so. The underwriters could stop making a
market at any time without notice. As a result, we cannot
provide any assurances that a market will develop for the Notes
or that you will be able to sell your Notes. If any of the Notes
are traded after their initial issuance, they may trade at a
discount from their initial offering price. Future trading
prices of the Notes will depend on many factors, including
prevailing interest rates, the market for similar securities,
general economic conditions and our financial condition,
performance and prospects.
The trading
prices for the Notes will be directly affected by many factors,
including our credit rating.
Credit rating agencies continually revise their ratings for
companies they follow, including us. Any ratings downgrade could
adversely affect the trading price of the Notes, or the trading
market for the Notes, to the extent a trading market for the
Notes develops. The condition of the financial and credit
markets and prevailing interest rates have fluctuated in the
past and are likely to fluctuate in the future and any
fluctuation may impact the trading price of the Notes.
We may not
have sufficient cash flow to make payments on the Notes and our
other debt.
Our ability to pay principal and interest on the Notes and our
other debt and to fund our planned capital expenditures depends
on our future operating performance. Our future operating
performance is subject to a number of risks and uncertainties
that are often beyond our control, including general economic
conditions and financial, competitive, regulatory and
environmental factors. For a discussion of some of these risks
and uncertainties, see Risk Factors Relating
to Our Company. Consequently, we cannot assure you that we
will have sufficient cash flow to meet our liquidity needs,
including making payments on our indebtedness.
If our cash flow and capital resources are insufficient to allow
us to make scheduled payments on the Notes or our other debt, we
may have to sell assets, seek additional capital or restructure
or refinance our debt. We cannot assure you that the terms of
our debt will allow for these alternative measures or that such
measures would satisfy our scheduled debt service obligations.
If we cannot make scheduled payments on our debt:
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the holders of our debt could declare all outstanding principal
and interest to be due and payable;
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the holders of our secured debt could commence foreclosure
proceedings against our assets;
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we could be forced into bankruptcy or liquidation; and
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you could lose all or part of your investment in the Notes.
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8
Failure to
maintain effective internal control over financial reporting and
disclosure controls and procedures could create a risk that our
financial statements may be unreliable and could have a material
adverse effect on our business.
During the fourth quarter of 2010, we identified a material
weakness in the design and operation of our internal controls
over financial reporting in our Brazil operating segment related
to the incorrect recording of payments for, and our right to
seek reimbursement for, certain value-added taxes, or VAT. In
addition, management concluded that our disclosure controls and
procedures were not effective as of September 30, 2010 as a
result of our inclusion of revenue-based tax credits in the
results for our Brazil operating segment in our press release
issued on October 28, 2010 that we later determined we did
not, at that time, have sufficient documentation to support the
recognition of the credits in the reported amounts. The errors
in recording VAT expense and the reporting in our press release
of the revenue-based tax credits without sufficient supporting
documentation were not material and did not require adjustments
to, or restatements of, our financial statements for the prior
periods; nevertheless, we determined that our controls were not
effective at preventing what could have been material errors in
our financial statements. Accordingly, we concluded that the
underlying factors contributing to these errors in recording VAT
expense and the reporting in our press release of the
revenue-based tax credits without sufficient supporting
documentation constitute a material weakness in our internal
controls over financial reporting. See Item 9A.
Controls and Procedures in our Annual Report on
Form 10-K
for the year ended December 31, 2010 filed on
February 24, 2011.
If we are unable to establish and maintain effective internal
controls, our ability to accurately and timely report our
financial position, results of operations or cash flows or to
prevent fraud could be impaired, which could result in
restatements of our consolidated financial statements or other
material adverse effects on our business, reputation, financial
condition, results of operations or liquidity.
From time to
time we engage in discussions that could result in a change of
control, and upon a change of control NII Capital may not be
able to purchase the Notes, which would result in a default
under the indenture governing the Notes and would adversely
affect our business and financial condition.
From time to time we engage in discussions with or receive
proposals from third parties relating to potential acquisitions
or strategic transactions that could result in a change of
control. At this time, we are not in active negotiations with
respect to any such transaction; however, we may enter into such
a transaction in the future.
Upon the occurrence of a change of control, each holder of the
Notes will have the right to require NII Capital to repurchase
all or any part of such holders Notes at 101% of the
principal amount thereof plus accrued and unpaid interest to but
excluding the purchase date. We may not have sufficient funds
available to make any required repurchases of the Notes, and we
may be unable to receive distributions or advances from our
subsidiaries in the future sufficient to meet such repurchase
obligation. In addition, restrictions under future debt
instruments may not permit NII Capital to repurchase the Notes.
If NII Capital fails to repurchase Notes in that circumstance,
we will be in default under the indenture governing the Notes.
See Description of Notes Repurchase at the
Option of Holders.
9
Risk Factors
Relating to Our Company
If we are not
able to compete effectively in the highly competitive wireless
communications industry, our future growth and operating results
will suffer.
Our business involves selling wireless communications services
to subscribers, and as a result, our economic success is based
on our ability to attract new subscribers and retain current
subscribers. Our success will depend on the ability of our
operating companies to compete effectively with other
telecommunications services providers, including wireline
companies and other wireless telecommunications companies, in
the markets in which they operate. Our ability to compete
successfully will depend on our ability to anticipate and
respond to various competitive factors affecting the
telecommunications industry, including new services and
technologies, changes in consumer preferences, demographic
trends, economic conditions and discount pricing strategies by
competitors.
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a. |
The wireless industries in our markets are highly
competitive, making it difficult for us to attract and retain
customers. If we are unable to attract and retain customers, our
financial performance will be impaired.
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Competition in our markets has intensified in recent periods,
and we expect that it will continue to intensify in the future
as a result of the entry of new competitors and the development
of new technologies, products and services. We also expect the
current consolidation trend in the wireless industry to continue
as companies respond to the need for cost reduction and
additional spectrum. This trend may result in larger competitors
with greater financial, technical, promotional and other
resources to compete with our businesses. In addition, as we
expand our marketing and sales focus to include a larger segment
of high value consumers, we will be increasingly seeking to
attract the same customers as our competitors, many of which are
larger companies with more extensive networks, financial
resources and benefits of scale that allow them to spend more
money on marketing and advertising than us.
Among other things, our competitors have:
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provided increased handset subsidies;
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offered higher commissions to distributors;
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provided discounted or free airtime or other services;
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expanded their networks to provide more extensive network
coverage;
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developed and deployed networks that use new technologies and
support new or improved services;
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offered incentives to larger customers to switch service
providers, including reimbursement of cancellation fees; and
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offered bundled telecommunications services that include local,
long distance and data services.
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We anticipate that competition will lead to continued
significant advertising and promotional spending as well as
continued pressure on prices for voice services and handsets. In
addition, portability requirements, which enable customers to
switch wireless providers without changing their wireless
numbers, have been implemented or are proposed to be implemented
in all of our markets. These developments and actions by our
competitors could negatively impact our operating results and
our ability to attract and retain customers. The cost of adding
new customers may increase, reducing profitability even if
customer growth continues. If we are unable to respond to
competition and compensate for declining prices by adding new
customers, increasing usage and offering new services, our
revenues and profitability could decline.
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b. |
If we do not keep pace with rapid technological changes,
including a failure to complete the deployment of our third
generation networks and new technology that supports services on
these networks, we may not be able to attract and retain
customers.
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10
The wireless telecommunications industry is experiencing
significant technological change. For example, competitors in
each of our markets have launched upgraded third generation
networks designed to support services that use high speed data
transmission capabilities, including internet access and video
telephony. Although not in our markets yet, fourth generation
networks with enhanced data speed and capacity have been
launched in some markets around the world and could be launched
by our competitors in markets in which we operate in the future.
These and other future technological advancements may enable
competitors who use other wireless technologies to offer
features or services we cannot provide or exceed the quality of
our current level of service, thereby making the services we
offer less competitive.
The 800 MHz spectrum that our operating companies are
licensed to use is non-contiguous while the third generation
technology platforms that are currently available operate only
on contiguous spectrum. While in Brazil, Mexico, Chile and Peru
we have rights to use spectrum that supports third generation
technology, we have only recently launched the third generation
services in Peru and are only beginning to develop and deploy
these networks in Brazil, Mexico and Chile, which gives our
competitors a significant time-to-market advantage. In addition,
in Argentina, we do not hold rights to use additional spectrum
in bands that would facilitate a transition to a new network
technology, which could make it more difficult or impossible for
us to deploy a third generation network in Argentina.
Deploying the third generation networks in Brazil, Mexico, Chile
and Peru requires a significant amount of time and capital. If
we are unable to acquire additional spectrum in Argentina or are
unsuccessful in our efforts to deploy our planned third
generation networks in Brazil, Mexico, Chile and Peru, or if we
are unable to raise sufficient capital to pay for those efforts,
we will continue to be heavily reliant on Motorola, as the sole
supplier of iDEN technology, to maintain the competitiveness of
our services and customer equipment. If Motorola is unwilling or
unable to upgrade or improve iDEN technology or develop other
technology solutions to meet future advances in competing
technologies on a timely basis, or at an acceptable cost, we
will be less able to compete effectively and could lose
customers to our competitors. For more information, see
Costs, regulatory requirements and other problems we
encounter as we deploy our third generation networks could
adversely affect our operations. The deployment of new
technology and service offerings could distract management from
our current business operations or cause network degradation and
loss of customers.
As we deploy our third generation networks, we must develop,
test and deploy new supporting technologies, software
applications and systems intended to enhance our competitiveness
both by supporting services our customers have come to expect
like push-to-talk services and new services and features and by
reducing the costs associated with providing these services.
Successful deployment and implementation of new services and
technology on our WCDMA networks depend, in part, on the
willingness and ability of third parties to develop successful
new applications in a timely manner. We may not be able to
successfully complete the development and deployment of new
technology and related features or services in a timely manner,
and the features and services we do develop may not be widely
accepted by our subscribers or may not be profitable, which
could result in us failing to recover our investment in this new
technology. Any resulting subscriber dissatisfaction could
affect our ability to retain subscribers and could have an
adverse effect on our results of operations and growth prospects.
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c. |
Some of our competitors are financially stronger than we are,
which may limit our ability to compete based on price.
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Because of their size, scale and resources, and in some cases
ownership by larger companies, some of our competitors may be
able to offer services to customers at prices that are below the
prices that our operating companies can offer for comparable
services. Many of our competitors are well-established companies
that have:
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substantially greater financial and marketing resources;
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larger customer bases;
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11
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larger spectrum positions; and
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larger coverage areas than those of our operating companies.
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If we cannot compete effectively based on the price of our
service offerings and related cost structure, our results of
operations may be adversely affected.
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d. |
The network and subscriber equipment we currently use and
expect to use is more expensive than the equipment used by our
competitors, which may limit our ability to compete.
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Our iDEN networks utilize a proprietary technology developed and
designed by Motorola that relies solely on the efforts of
Motorola and any current or future licensees of this technology
for product development and innovation. Additionally, Motorola
is the primary supplier for the network equipment and handsets
we sell for use on our iDEN networks. In contrast, all of our
competitors use infrastructure and customer equipment that are
based on standard technologies like the global system for mobile
communications standard, or GSM, and WCDMA, which are
substantially more widely used technologies than iDEN, are
available from a significant number of suppliers and are
produced in much larger quantities for a worldwide base of
customers. As a result, our competitors benefit from economies
of scale and lower costs for handsets and infrastructure
equipment than are available to us for services on our iDEN
network. In addition, because we plan to continue to use high
performance push-to-talk service capabilities as a key
differentiator, we expect that the cost of handsets capable of
supporting those differentiated services on our third generation
networks will be higher because they will not be produced at
scale levels comparable with more standard WCDMA handsets. These
factors, as well as the higher cost of our handsets and other
equipment may make it more difficult for us to attract or retain
customers, and may require us to absorb a comparatively larger
cost of offering handsets to new and existing customers. The
combination of these factors may place us at a competitive
disadvantage and may reduce our growth and profitability.
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e. |
Our operating companies may face disadvantages when competing
against formerly government-owned incumbent wireline operators
or wireless operators affiliated with them.
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In some markets, our operating companies may not be able to
compete effectively against a formerly government-owned monopoly
telecommunications operator, which today enjoys a near monopoly
on the provision of wireline telecommunications services and may
have a wireless affiliate or may be controlled by shareholders
who also control a wireless operator. For example, Telcel, which
is one of our largest competitors in Mexico, is an affiliate of
Telefonos de Mexico, S.A.B. de C.V., which provides wireline
services in Mexico and was formerly a government-owned monopoly.
Similarly, in Peru, we compete with Telefonica Moviles, which is
an affiliate of the Telefonica del Peru, S.A.A., which operates
wireline services in Peru and was formerly a government-owned
monopoly. Our operating companies may be at a competitive
disadvantage in these markets because formerly government-owned
incumbents or affiliated competitors may have:
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close ties with national regulatory authorities;
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control over connections to local telephone lines; or
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the ability to subsidize competitive services with revenues
generated from services they provide on a monopoly or
near-monopoly basis.
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Our operating companies may encounter obstacles and setbacks if
local governments adopt policies favoring these competitors or
otherwise afford them preferential treatment. As a result, our
operating companies may be at a competitive disadvantage to
incumbent providers, particularly as our operating companies
seek to offer new telecommunications services.
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f. |
Our coverage is not as extensive as those of other wireless
service providers in our markets, which may limit our ability to
attract and retain customers.
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We have recently expanded the coverage of our iDEN networks,
particularly in Mexico and Brazil, and we are either deploying
or planning to deploy WCDMA networks in Brazil, Mexico, Chile
12
and Peru that are generally expected to serve a wider coverage
area than our iDEN networks, but our current networks do not
offer nationwide coverage in the countries in which we operate
and our iDEN technology limits our potential roaming partners
for customers solely on iDEN networks. As a result, we may not
be able to compete effectively with competitors that operate
mobile networks with more extensive areas of service.
Additionally, many of our competitors have entered into
reciprocal roaming agreements that permit their customers to
roam on the other parties networks. The iDEN technology
that we currently use in our networks is not compatible with the
technology used by our competitors. Although some of the handset
models that we sell are compatible with both iDEN 800 MHz
and GSM 900/1800 MHz systems, we offer very few of these
models and, as such, we are more limited in our ability to offer
the breadth of roaming capabilities of our competitors. In
addition, our customers are not able to roam on other
carriers networks where we do not have roaming agreements.
These factors may limit our ability to attract and retain
certain customers.
To date, we have not entered into roaming agreements with
respect to GSM or WCDMA-based third generation services offered
in the countries in which our operating companies conduct
business, but have entered into agreements that allow our
customers to utilize roaming services in other countries using
the handsets that are compatible with iDEN
and/or GSM
systems. For handsets that operate on our WCDMA-based third
generation network in Peru, we have entered into similar
agreements with providers in a more limited group of countries
that allow our Peruvian third generation customers to utilize
roaming services in those countries.
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g. |
If our current customer turnover rate increases, our business
could be negatively affected.
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In recent years, we have experienced a higher consolidated
customer turnover rate compared to earlier periods, which
resulted primarily from the combined impact of weaker economic
conditions and the more competitive sales environments in the
markets in which we operate. While this trend reversed to some
extent in 2010 as we took steps and incurred expenses in our
effort to maintain and improve subscriber retention and reduce
our customer turnover rate, there can be no assurance that our
efforts will maintain or lower our customer turnover rates.
Subscriber losses adversely affect our business, financial
condition and results of operations because these losses result
in lost revenues and cash flow. Although attracting new
subscribers and retaining existing subscribers are both
important to the financial viability of our business, there is
an added focus on retaining existing subscribers because the
cost of acquiring a new customer is much higher. Accordingly, an
increase in customer deactivations could have a negative impact
on our results, even if we are able to attract new customers at
a rate sufficient to offset those deactivations. If we
experience an increase in our customer turnover rate, our
ability to achieve revenue growth and our profitability could be
impaired.
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h. |
We may be limited in our ability to grow unless we
successfully deploy our third generation networks, expand
network capacity and address increased demands on our business
systems and processes.
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Our customer base continues to grow rapidly. To continue to
successfully increase our number of customers and pursue our
business plan, we must economically:
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deploy our planned third generation networks;
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expand the capacity of our iDEN networks and the capacity and
coverage of our third generation networks;
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secure sufficient transmitter and receiver sites at appropriate
locations to meet planned system coverage and capacity targets;
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obtain adequate quantities of base radios and other system
infrastructure equipment; and
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obtain an adequate volume and mix of handsets to meet customer
demand.
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In particular, the deployment of our planned third generation
networks will require us to deploy a significant number of new
transmitter sites to meet the expanded coverage requirements for
those
13
networks resulting from differences in our commercial
strategies, differences in the propagation characteristics of
the spectrum bands being used to support those networks and the
coverage requirements associated with the spectrum licenses
being utilized for those networks. The effort required to locate
and build a significant number of additional transmitter sites
across our markets in coming years will be substantial, and our
failure to meet this demand could delay or impair the deployment
of our third generation networks, which would adversely affect
our business.
We have experienced significant subscriber growth in recent
years, which has put demands on the capacity of our networks and
our supporting systems. Our operating performance and ability to
retain new customers may be adversely affected if we are not
able to timely and efficiently meet the demands for our services
and address any increased demands on our customer service,
billing and other back-office functions. In addition, we are
deploying new systems that are designed to support our sales,
marketing and customer management functions, but the
implementation of these new systems could heighten these risks
or could distract managements focus from day-to-day
operations and goals. Problems we may encounter in deploying
these new systems could have a material adverse effect on our
business.
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i. |
If our networks do not perform in a manner that meets
customer expectations, we will be unable to attract and retain
customers.
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Customer acceptance of the services we offer on our networks is
and will continue to be affected by technology-based differences
and by the operational performance and reliability of these
networks. We may have difficulty attracting and retaining
customers if we are unable to satisfactorily address and resolve
performance or other transmission quality issues as they arise
or if these issues limit our ability to deploy or expand our
network capacity as currently planned or place us at a
competitive disadvantage to other wireless providers in our
markets.
We operate
exclusively in foreign markets, and our assets, customers and
cash flows are concentrated in Latin America, which presents
risks to our operating plans.
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a. |
A decline in foreign exchange rates for currencies in our
markets may adversely affect our growth and our operating
results.
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Historically, in the countries in which we do business, the
values of the local currencies in relation to the
U.S. dollar have been volatile. The unstable global
economic environment and recent weakness in the economies of
some of the countries where we operate led to increased
volatility in these currencies. Nearly all of our revenues are
earned in non U.S. currencies, but we report our results in
U.S. dollars. As a result, fluctuations in foreign currency
exchange rates can have a significant impact on our reported
results that are unrelated to the operating trends in our
business. In addition, a significant portion of our outstanding
debt is denominated in U.S. dollars. A decline in the
values of the local currencies in the markets in which we
operate makes it more costly for us to service our
U.S. dollar-denominated debt obligations and affects our
operating results because we generate nearly all of our revenues
in foreign currencies, but we pay for some of our operating
expenses and capital expenditures in U.S. dollars. Further,
because we report our results of operations in
U.S. dollars, declines in the value of local currencies in
our markets relative to the U.S. dollar result in
reductions in our reported revenues, operating income and
earnings, as well as a reduction in the carrying value of our
assets, including the value of cash investments held in local
currencies. Depreciation of the local currencies also results in
increased costs to us for imported equipment. Accordingly, if
the values of local currencies in the countries in which our
operating companies conduct business depreciate relative to the
U.S. dollar, we would expect our operating results in
future periods, and the value of our assets held in local
currencies, to be adversely affected.
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b. |
We face economic and political risks in our markets, which
may limit our ability to implement our strategy and our
financial flexibility and may disrupt our operations or hurt our
performance.
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Our operations depend on the economies of the markets in which
our operating companies conduct business, all of which are
considered to be emerging markets. These markets are in
countries
14
with economies in various stages of development, some of which
are subject to volatile economic cycles and significant, rapid
fluctuations in terms of commodity prices, local consumer
prices, employment levels, gross domestic product, interest
rates and inflation rates, which have been generally higher, and
in prior years, significantly higher than the inflation rate in
the United States. If these economic fluctuations and higher
inflation rates make it more difficult for customers to pay for
our products and services, we may experience lower demand for
our products and services and a decline in the growth of their
customer base and in revenues.
In recent years, the economies in some of the markets in which
we operate have also been negatively affected by volatile
political conditions and, in some instances, by significant
intervention by the relevant government authorities relating to
economic and currency exchange policies. We are unable to
predict the impact that local or national elections and the
associated transfer of power from incumbent officials or
political parties to newly elected officials or parties may have
on the local economy or the growth and development of the local
telecommunications industry. Changes in leadership or in the
ruling party in the countries in which we operate may affect the
economic programs developed under the prior administration,
which in turn, may adversely affect the economies in the
countries in which we operate. Other risks associated with
political instability could include the risk of expropriation or
nationalization of our assets by the governments in the markets
where we operate. Although political, economic and social
conditions differ in each country in which we currently operate,
political and economic developments in one country or in the
United States may affect our business as a whole, including our
access to international capital markets.
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c. |
Our operating companies are subject to local laws and
government regulations in the countries in which they operate,
and we are subject to the U.S. Foreign Corrupt Practices
Act, which could limit our growth and strategic plans and
negatively impact our financial results.
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Our operations are subject to local laws and regulations in the
countries in which we operate, which may differ from those in
the United States. We could become subject to legal penalties in
foreign countries if we do not comply with local laws and
regulations, which may be substantially different from those in
the United States. In some foreign countries, particularly in
those with developing economies, persons may engage in business
practices that are prohibited by United States regulations
applicable to us such as the Foreign Corrupt Practices Act, or
the FCPA. The FCPA prohibits us from providing anything of value
to foreign officials for the purpose of influencing official
decisions or obtaining or retaining business. Our employees and
agents interact with government officials on our behalf,
including interactions necessary to obtain licenses and other
regulatory approvals necessary to operate our business and
through contracts to provide wireless service to government
entities, creating a risk of payment that would violate the
FCPA. Although we have implemented policies and procedures
designed to ensure compliance with local laws and regulations as
well as U.S. laws and regulations, including the FCPA,
there can be no assurance that all of our employees,
consultants, contractors and agents will abide by our policies.
The penalties for violating the FCPA can be severe. Any
violations of law, even if prohibited by our policies, could
have a material adverse effect on our business.
In addition, in each market in which we operate, one or more
regulatory entities regulate the licensing, construction,
acquisition, ownership and operation of our wireless
communications systems. Adoption of new regulations, changes in
the current telecommunications laws or regulations or changes in
the manner in which they are interpreted or applied could
adversely affect our operations. In some markets, we are unable,
or have limitations on our ability, to provide some types of
services we have planned to offer. These limitations, or similar
regulatory prohibitions or limitations on our services that may
arise in the future could increase our costs, reduce our
revenues or make it more difficult for us to compete.
The regulatory schemes in the countries in which we operate
allow third parties, including our competitors, to challenge our
actions. If our competitors are successful in pursuing claims
such as these, or if the regulators in our markets take actions
against us in response to actions initiated by our competitors,
our ability to pursue our business plans and our results of
operations could be adversely
15
affected. For example, in Mexico, certain aspects of the
auctions, including the processes used to adopt the rules
applicable to the auctions, the terms of those rules, the
implementation of the auction process, the grant of the spectrum
license to Nextel Mexico and its right to use the spectrum have
been challenged in a number of legal and administrative
proceedings brought primarily by our competitors in Mexico.
While we believe that the auction rules were adopted consistent
with applicable legal requirements in Mexico, the auction
process was conducted properly and the licenses were awarded to
Nextel Mexico in accordance with the auction rules, it is
uncertain whether these proceedings will affect our ability to
use the spectrum granted pursuant to those licenses. If these
proceedings were to result in a loss of, or the imposition of a
significant limitation of our ability to use, the spectrum
awarded to Nextel Mexico, our plans to deploy the third
generation network in Mexico could be adversely affected, which
could have an adverse effect on our business. Similar challenges
could arise with respect to future spectrum auctions in which we
are a participant, and these challenges could adversely affect
our ability to acquire the rights to use spectrum that would
provide us with the ability to deploy new technologies that
support new services that would position us to compete more
effectively.
Finally, rules and regulations affecting tower placement and
construction affect our ability to operate in each of our
markets, and therefore impact our business strategies. In some
of our markets, local governments have adopted very stringent
rules and regulations related to the placement and construction
of wireless towers, or have placed embargoes on some of the cell
sites owned by our operating companies, which can significantly
impede the planned expansion of our service coverage area,
eliminate existing towers, result in unplanned costs, negatively
impact network performance and impose new and onerous taxes and
fees. Our licenses to use spectrum in some of our markets
require us to build our networks within proscribed time periods,
and rules and regulations affecting tower placement and
construction could make it difficult to meet our build
requirements in a timely manner or at all, which could lead us
to incur unplanned costs or result in the loss of spectrum
licenses.
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d. |
We pay significant import duties on our network equipment and
handsets, and any increases could impact our financial
results.
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Our operations are highly dependent upon the successful and
cost-efficient importation of network equipment and handsets
from North America and, to a lesser extent, from Europe and
Asia. Network equipment and handsets may be subject to
significant import duties and other taxes in the countries in
which our operating companies conduct business. Any significant
increase in import duties in the future could significantly
increase our costs. To the extent we cannot pass these costs on
to our customers, our financial results will be negatively
impacted.
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e. |
We are subject to foreign taxes in the countries in which we
operate, which may reduce amounts we receive from our operating
companies or may increase our tax costs.
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Many of the foreign countries in which we operate have
increasingly turned to new taxes, as well as aggressive
interpretations of current taxes, as a method of increasing
revenue. For example, the Mexican government has enacted an
excise tax on telecommunications services, increased the
value-added tax rate and enacted an increase to the corporate
income tax rate. In addition, our operating company in Brazil is
required to pay two types of income taxes, which include a
corporate income tax and a social contribution tax and is
subject to various types of non-income related taxes, including
value-added tax, excise tax, service tax, importation tax and
property tax. In addition, the reduction in tax revenues
resulting from the recent economic downturn has led to proposals
and new laws in some of our markets that increase the taxes
imposed on sales of handsets and on telecommunications services.
The provisions of new tax laws may attempt to prohibit us from
passing these taxes on to our customers. These taxes may reduce
the amount of earnings that we can generate from our services or
in some cases may result in operating losses.
Distributions of earnings and other payments, including
interest, received from our operating companies may be subject
to withholding taxes imposed by some countries in which these
entities operate. Any of these taxes will reduce the amount of
after-tax cash we can receive from those operating companies.
16
In general, a U.S. corporation may claim a foreign tax
credit against its Federal income tax expense for foreign
withholding taxes and, under certain circumstances, for its
share of foreign income taxes paid directly by foreign corporate
entities in which the company owns 10% or more of the voting
stock. Our ability to claim foreign tax credits is, however,
subject to numerous limitations, and we may incur incremental
tax costs as a result of these limitations or because we do not
have U.S. Federal taxable income.
We may also be required to include in our income for
U.S. Federal income tax purposes our proportionate share of
specified earnings of our foreign corporate subsidiaries that
are classified as controlled foreign corporations, without
regard to whether distributions have been actually received from
these subsidiaries.
Nextel Brazil has received tax assessment notices from state and
federal Brazilian tax authorities asserting deficiencies in tax
payments related primarily to value added taxes, import duties
and matters surrounding the definition and classification of
equipment and services. Nextel Brazil has filed various
petitions disputing these assessments. In some cases we have
received favorable decisions, which are currently being appealed
by the respective governmental authorities. In other cases, our
petitions have been denied and we are currently appealing those
decisions. See Note 7 to our consolidated financial
statements in our annual report on
Form 10-K
for the fiscal year ended December 31, 2010 for more
information regarding our potential tax obligations in Brazil.
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We have entered into a number of agreements that are subject
to enforcement in foreign countries, which may limit efficient
dispute resolution.
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A number of the agreements that we and our operating companies
enter into with third parties are governed by the laws of, and
are subject to dispute resolution in the courts of or through
arbitration proceedings in, the countries or regions in which
the operations are located. We cannot accurately predict whether
these forums will provide effective and efficient means of
resolving disputes that may arise. Even if we are able to obtain
a satisfactory decision through arbitration or a court
proceeding, we could have difficulty enforcing any award or
judgment on a timely basis. Our ability to obtain or enforce
relief in the United States is also uncertain.
Costs,
regulatory requirements and other problems we encounter as we
deploy our third generation networks could adversely affect our
operations. The deployment of new technology and service
offerings could distract management from our current business
operations or cause network degradation and loss of
customers.
We have acquired or successfully bid for new spectrum rights and
have deployed or begun to deploy new third generation networks
using that spectrum so that we may offer our customers new
services supported by those networks. The rights to use this new
spectrum come with significant regulatory requirements governing
the coverage of our new networks and the timing of deployment of
these networks. If we fail to meet these regulatory
requirements, the applicable regulators could take action to
revoke our spectrum rights. In addition, our deployment of these
new networks will require significant capital expenditures and
will result in incremental operating expenses prior to fully
launching services. Costs could increase beyond expected levels
in the event of unforeseen delays, cost overruns, unanticipated
expenses, regulatory changes, engineering design changes,
problems with network or systems compatibility, equipment
unavailability and technological or other complications. In
addition, our ability to attract and support customers that use
these new networks could be adversely affected if we are unable
to successfully coordinate the deployment of those networks with
our customer care, billing, order fulfillment and other
back-office operations. In addition, we are deploying new
systems that are designed to support our sales, marketing and
customer management functions. The efforts associated with the
deployment of our new networks and these supporting systems will
require substantial management time and attention, which could
distract managements focus from our day-to-day operations
and goals, which could have an adverse effect on our results of
operations.
17
Deployment of new technology supporting new service offerings
may also adversely affect the performance or reliability of our
networks with respect to both the new and existing services and
may require us to take action like curtailing new customers in
certain markets. Any resulting customer dissatisfaction could
affect our ability to retain customers and have an adverse
effect on our results of operations and growth prospects.
Additionally, we will need to raise additional funds in order to
finance the costs associated with the development and deployment
of our new networks. To do so, we may issue shares of common
stock or incur new debt. Our ability to raise additional capital
on acceptable terms to meet our funding needs will depend on the
conditions in the financial markets. See We are
dependent on external financing to meet our future funding needs
and debt service requirements, and adverse changes in economic
conditions could negatively impact our access to the capital
markets. If we are unable to obtain financing when needed and on
terms acceptable to us, our business may be adversely
affected. and Our current and future debt may
limit our flexibility and increase our risk of
default. for more information.
We are
dependent on external financing to meet our future funding needs
and debt service requirements, and adverse changes in economic
conditions could negatively impact our access to the capital
markets. If we are unable to obtain financing when needed and on
terms acceptable to us, our business may be adversely
affected.
We are dependent on external financing to meet our future
funding needs and debt service requirements. Our current plans
to deploy and operate new third generation networks, as well as
the costs associated with marketing and distribution of our
related services requires substantial capital. In addition, we
have significant outstanding indebtedness that will mature over
the next five years, including most of the $459.0 million
in our outstanding loan facilities and $1.1 billion in
convertible debt that is scheduled to mature in 2012. Based on
the level of capital needed to support our current plans, we
believe it will be necessary for us to refinance or replace a
significant portion of this indebtedness.
Our funding needs may also increase to pursue one or more of the
following opportunities:
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acquisitions of spectrum licenses, either through government
sponsored auctions, including auctions of spectrum that are
expected to occur in Argentina, or through acquisitions of third
parties, acquisitions of assets or businesses or other strategic
transactions;
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a decision by us to deploy new network technologies, in addition
to the planned third generation network deployments in Brazil,
Mexico, Peru and Chile, or to offer new communications services
in one or more of our markets; or
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our expansion into new markets or further geographic expansion
in our existing markets, including the construction of
additional portions of our network.
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Our funding needs could also be affected by changes in economic
conditions in any of our markets generally, or by changes to
competitive practices in the mobile wireless telecommunications
industry from those currently prevailing or those now
anticipated, or by other presently unexpected circumstances that
may arise that have a material effect on the cash flow or
profitability of our business. In addition, upon the occurrence
of certain kinds of change of control events, we may be required
to repurchase or repay a significant portion of our outstanding
debt. Any of these events or circumstances could involve
significant additional funding needs in excess of the currently
available sources and could require us to raise additional
capital to meet those needs.
It will be necessary for us to access the credit and capital
markets to support the combined funding requirements relating
to: (i) the growth of our business, (ii) the
acquisition of additional spectrum, (iii) capital
expenditures in connection with the expansion and improvement of
our wireless networks and the deployment of our planned third
generation networks in Brazil, Mexico and Chile and
(iv) the repayment of our existing indebtedness. While we
believe that our current cash balances, the funds we expect to
generate in our business and the funding opportunities that we
believe are currently available to us will be sufficient to meet
these funding needs, if there is an adverse change in capital
market conditions similar to what occurred in 2008 and early
2009, our access to the
18
necessary funding may be limited and the cost of funding could
increase, which could make it more difficult for us to raise the
capital we need to support our plan. If this occurs, our cash,
cash equivalent and investment balances could be significantly
depleted by the end of 2012. Our ability to obtain additional
capital is subject to a variety of additional factors that we
cannot presently predict with certainty, including the
commercial success of our operations, volatility and demand of
the capital markets and future market prices of our securities.
If we fail to obtain suitable financing when its required,
it could, among other things, result in our inability to
implement our current or future business plans and negatively
impact our results of operations.
Our current
and future debt may limit our flexibility and increase our risk
of default.
As of December 31, 2010, the total outstanding principal
amount of our debt was $3,342.7 million. We may, over time
and as market conditions permit, incur significant additional
indebtedness for various purposes, which may include, without
limitation, expansion of our existing network, the acquisition
of telecommunications spectrum licenses or other assets, the
deployment of new network technologies and the refinancing,
repayment or repurchase of outstanding indebtedness. The terms
of the indentures governing our existing senior notes and the
agreements governing our other indebtedness permit us, subject
to specified limitations, to incur additional indebtedness,
including secured indebtedness.
Our existing debt and debt we may incur in the future could:
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limit our flexibility in planning for, or reacting to, changes
in our business and the industries in which we compete and
increase our vulnerability to general adverse economic and
industry conditions;
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limit our ability to obtain additional financing that we may
need to fund our business; and
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place us at a disadvantage compared to our competitors that have
less indebtedness.
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Furthermore, the indentures relating to our senior notes and
certain of our financing agreements include covenants that
impose restrictions on our business and, in some instances,
require us and our subsidiaries to maintain specified financial
ratios and satisfy financial tests. Similar restrictions may be
contained in future financing agreements. If we or our
subsidiaries are not able to meet the applicable ratios and
satisfy other tests, or if we fail to comply with any of the
other restrictive covenants that are contained in our current or
future financing agreements, we will be in default with respect
to one or more of the applicable financing agreements, which in
turn may result in defaults under the remaining financing
arrangements, giving our lenders and the holders of our debt
securities the right to require us to repay all amounts then
outstanding. In addition, these covenants and restrictions may
prevent us from raising additional financing, competing
effectively or taking advantage of new business opportunities,
which may affect our ability to generate revenues and profits.
Our ability to meet our existing or future debt obligations and
to reduce our indebtedness will depend on our future performance
and the other cash requirements of our business. Our
performance, to a certain extent, is subject to general economic
conditions and financial, business, political and other factors
that are beyond our control. We cannot assure you that we will
continue to generate cash flow from operations at or above
current levels, that we will be able to meet our cash interest
payments on all of our debt or that the related assets currently
owned by us will continue to benefit us in the future.
The costs we
incur to connect our operating companies networks with
those of other carriers are subject to local laws in the
countries in which they operate and may increase, which could
adversely impact our financial results.
Our operating companies must connect their telecommunication
networks with those of other carriers in order to provide the
services we offer. We incur costs relating to these
interconnection arrangements and for local and long distance
transport services relating to the connection of our transmitter
sites and other network equipment. These costs include
interconnection charges and fees, charges for terminating calls
on the other carriers networks and transport costs, most
of which are measured based on the level of our use of the
related services. We are able to recover a portion of
19
these costs through revenues earned from charges we are entitled
to bill other carriers for terminating calls on our network, but
because users of mobile telecommunications services who purchase
those services under contract generally, and business customers
like ours in particular, tend to make more calls that terminate
on other carriers networks and because we have a smaller
number of customers than most other carriers, we incur more
charges than we are entitled to receive under these
arrangements. The terms of the interconnection and transport
arrangements, including the rates that we pay, are subject to
varying degrees of local regulation in most of the countries in
which we operate, and often require us to negotiate agreements
with the other carriers, most of whom are our competitors, in
order to provide our services. In some instances, other carriers
offer their services to some of their subscribers at prices that
are near or lower than the rates that we pay to terminate calls
on their networks, which may make it more difficult for us to
compete profitably. Our costs relating to these interconnection
and transport arrangements are subject to fluctuation both as a
result of changes in regulations in the countries in which we
operate and the negotiations with the other carriers. Changes in
our customers calling patterns that result in more of our
customers calls terminating on our competitors
networks and changes in the interconnection arrangements either
as a result of regulatory changes or negotiated terms that are
less favorable to us could result in increased costs for the
related services that we may not be able to recover through
increased revenues, which could adversely impact our financial
results.
Because we
rely on one supplier for equipment used in our iDEN networks,
any failure of that supplier to perform could adversely affect
our operations.
Much of the spectrum that our operating companies are licensed
to use, other than the spectrum that we have recently acquired
and plan to use to support our third generation networks, is
non-contiguous, and Motorolas iDEN technology is the only
widespread, commercially available technology that operates on
non-contiguous spectrum. As a result, Motorola is the primary
supplier for the network equipment and handsets we sell for use
on our iDEN networks. If Motorola fails to deliver system
infrastructure equipment and handsets or enhancements to the
features and functionality of our networks and handsets on a
timely, cost-effective basis, we may not be able to adequately
service our existing customers or attract new customers. Nextel
Communications, a subsidiary of Sprint Nextel, is currently the
largest customer of Motorola with respect to iDEN technology
and, in the past, has provided significant support with respect
to new product development for that technology. Sprint
Nextels recently announced plans to decommission its iDEN
network over the coming years could affect Motorolas
ability or willingness to provide support for the development of
new iDEN handset models or enhancements to the features and
functionality of our iDEN networks without us funding that
development or agreeing to significant purchase commitments.
This decommissioning could make it more difficult or costly for
us to compete effectively in markets where we have not yet
deployed our planned third generation networks. Lower levels of
iDEN equipment purchases by Sprint Nextel could also increase
our costs for network equipment and new network features, affect
the development of new handsets and could impact Motorolas
willingness to support iDEN technology beyond their current
commitments. We expect to continue to rely principally on
Motorola for the manufacture of a substantial portion of the
equipment necessary to construct, enhance and maintain our
iDEN-based networks and for the manufacture of iDEN compatible
handsets. Accordingly, if Motorola is unable to, or determines
not to, continue supporting or enhancing our iDEN-based
infrastructure and handsets, including potentially as a result
of adverse developments affecting Motorolas operations,
profitability, and financial condition or other business
developments, we will be materially adversely affected.
Motorola recently completed a separation of its mobile devices
and home division into a separate public entity called Motorola
Solutions, Inc., to which our agreements have been assigned. In
addition, in July 2010, Motorola announced that it had reached
an agreement to sell certain of its operations relating to the
manufacture of network equipment to Nokia Siemens Networks.
Although Motorola has announced that the sale does not include
its iDEN business, it is uncertain whether or to what extent the
sale by Motorola of its other network equipment businesses could
impact Motorolas ability to support its iDEN business.
While we cannot currently determine the impact of
Motorolas recently completed separation of
20
the mobile devices business on its iDEN business,
Motorolas obligations under our existing agreements,
including the obligation to supply us with iDEN handsets and
network equipment, remain in effect.
Our reliance
on indirect distribution channels for a significant portion of
our sales exposes us to the risk that our sales could decline or
cost of sales could increase if there are adverse changes in our
relationships with, or the condition of, our indirect
dealers.
Our business depends heavily upon third party distribution
channels for securing a substantial portion of the new customers
to our services. In some of our markets, a significant portion
of our sales through these indirect distribution channels is
concentrated in a small number of third party dealers. Because
these third party dealers are a primary contact between us and
the customer in many instances, they also play an important role
in customer retention. As a result, the volume of our new
customer additions and our ability to retain customers could be
adversely affected if these third party dealers terminate their
relationship with us, if there are adverse changes in our
relationships with these dealers or if the financial condition
of these dealers deteriorates. In addition, our profitability
could be adversely affected if we increase commissions to these
dealers or make other changes to our compensation arrangements
with them.
If our
licenses to provide mobile services are not renewed, or are
modified or revoked, our business may be
restricted.
Wireless communications licenses and spectrum allocations are
subject to ongoing review and, in some cases, to modification or
early termination for failure to comply with applicable
regulations. If our operating companies fail to comply with the
terms of their licenses and other regulatory requirements,
including installation deadlines and minimum loading or service
availability requirements, their licenses could be revoked. This
is particularly true with respect to the grants of licenses for
spectrum we plan to use to support our third generation
networks, most of which impose strict deadlines for the
construction of network infrastructure and supporting systems as
a condition of this license. Further, compliance with these
requirements is a condition for eligibility for license renewal.
Most of our wireless communications licenses have fixed terms
and are not renewed automatically. Because governmental
authorities have discretion as to the grant or renewal of
licenses, our licenses may not be renewed or, if renewed,
renewal may not be on acceptable economic terms. For example,
under existing regulations, our licenses in Brazil and Peru are
renewable once, and no regulations presently exist regarding how
or whether additional renewals will be granted in future
periods. In Mexico, we have filed applications to renew 31 of
our licenses, all of which expired prior to their renewal.
Nextel Mexico subsequently received renewals of 19 of the
expired licenses. While we expect that the remainder of these
renewals will be granted, if some or all of these renewals are
not granted, it could have an adverse effect on our business. In
addition, the regulatory schemes in the countries in which we
operate allow third parties, including our competitors, to
challenge the award and use of our licenses. If our competitors
are successful in pursuing claims such as these, or if
regulators in our markets take actions modifying or revoking our
licenses in response to these claims, our ability to pursue our
business plans, including our plans to deploy third generation
networks, and our results of operations could be adversely
affected.
Any
modification or termination of our trademark license with Nextel
Communications could increase our costs.
Nextel Communications has licensed to us the right to use
Nextel and other of its trademarks on a perpetual
royalty-free basis in Latin America. However, that license is
limited to the use of the trademarks in connection with the
offering of specified services, which may not include all of the
services we propose to offer in the future, and Nextel
Communications may terminate the license on 60 days notice
if we commit one of several specified defaults (namely, failure
to maintain agreed quality controls or a change in control of
NII Holdings). If there is a change in control of one of our
subsidiaries, upon 30 days notice, Nextel Communications
may terminate the sublicense granted by us to the subsidiary
with respect to the licensed marks. The loss of the use of the
Nextel name and trademark could have a material
adverse effect on our operations.
21
FORWARD-LOOKING
AND CAUTIONARY STATEMENTS
We caution you that this prospectus and the documents
incorporated by reference in this prospectus include
forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 and are subject
to the safe harbor created by that act. Among other things,
these statements relate to our financial condition, results of
operations and business. When used in this prospectus and in the
documents incorporated by reference in this prospectus, these
forward-looking statements are generally identified by the words
or phrases would be, will allow,
expects to, will continue, is
anticipated, estimate, project or
similar expressions.
While we provide forward-looking statements to assist in the
understanding of our anticipated future financial performance,
we caution readers not to place undue reliance on any
forward-looking statements, which speak only as of the date that
we make them. Forward-looking statements are subject to
significant risks and uncertainties, many of which are beyond
our control. It is routine for our internal projections and
expectations to change, and therefore it should be clearly
understood that the internal projections, beliefs and
assumptions upon which we base our expectations may change prior
to the end of each quarter or the year. Although these
expectations may change, we undertake no obligation to inform
you if they do. Although we believe that the assumptions
underlying our forward-looking statements are reasonable, any of
the assumptions could prove to be inaccurate. Actual results may
differ materially from those contained in or implied by these
forward-looking statements for a variety of reasons.
We have included risk factors and uncertainties that might cause
differences between anticipated and actual future results in the
Risk Factors section of this prospectus and other
risks described in our annual report on
Form 10-K
for the fiscal year ended December 31, 2010, which is
incorporated by reference into this prospectus. We have
attempted to identify, in context, some of the factors that we
currently believe may cause actual future experience and results
to differ from our current expectations regarding the relevant
matter or subject area. The operation and results of our
wireless communications business also may be subject to the
effects of other risks and uncertainties, including, but not
limited to:
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our ability to attract and retain customers;
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our ability to meet the operating goals established by our
business plan;
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general economic conditions in the United States or in Latin
America and in the market segments that we are targeting for our
services, including the impact of the current uncertainties in
global economic conditions;
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the political and social conditions in the countries in which we
operate, including political instability, which may affect the
economies of our markets and the regulatory schemes in these
countries;
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the impact of foreign currency exchange rate volatility in our
markets when compared to the U.S. dollar and related
currency depreciation in countries in which our operating
companies conduct business;
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our ability to access sufficient debt or equity capital to meet
any future operating and financial needs;
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reasonable access to and the successful performance of the
technology being deployed in our service areas, and improvements
thereon, including technology deployed in connection with the
introduction of digital two-way mobile data or Internet
connectivity services in our markets;
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the availability of adequate quantities of system infrastructure
and subscriber equipment and components at reasonable pricing to
meet our service deployment and marketing plans and customer
demand;
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Motorolas ability and willingness to provide handsets and
related equipment and software applications or to develop new
technologies or features for us for use on our iDEN network,
including the timely development and availability of new
handsets with expanded applications and features;
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the risk of deploying new third generation networks, including
the potential need for additional funding to support that
deployment, the risk that new services supported by the new
networks will not attract enough subscribers to support the
related costs of deploying or operating the new networks, the
need to significantly increase our employee base and the
potential distraction of management;
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our ability to successfully scale our billing, collection,
customer care and similar back-office operations to keep pace
with customer growth, increased system usage rates and growth or
to successfully deploy new systems that support those functions;
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the success of efforts to improve and satisfactorily address any
issues relating to our network performance;
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future legislation or regulatory actions relating to our SMR
services, other wireless communications services or
telecommunications generally and the costs
and/or
potential customer impacts of compliance with regulatory
mandates;
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the ability to achieve and maintain market penetration and
average subscriber revenue levels sufficient to provide
financial viability to our network business;
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the quality and price of similar or comparable wireless
communications services offered or to be offered by our
competitors, including providers of cellular services and
personal communications services;
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market acceptance of our new service offerings;
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unexpected results of litigation;
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equipment failure, natural disasters, terrorist acts or other
breaches of network or information technology security; and
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other risks and uncertainties described in this prospectus and
from time to time in our reports filed with the Securities and
Exchange Commission (the SEC), which we have
incorporated by reference into this prospectus.
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23
USE OF
PROCEEDS
We estimate that we will receive approximately
$736.1 million in net proceeds from this offering after
deducting estimated underwriting discounts and commissions and
estimated expenses of this offering payable by us.
We intend to use the net proceeds from this offering for general
corporate purposes, which may include, without limitation,
expansion of our existing network, either through capital
expenditures for internal expansion or acquisitions of other
operators; the acquisition of telecommunications spectrum
licenses or other assets; the deployment of new network
technologies; or the refinancing, repayment or repurchase of
outstanding indebtedness. Until we use the net proceeds to us
from this offering, we plan to invest them, and these
investments may not yield a favorable rate of return.
24
CAPITALIZATION
The following table sets forth our consolidated cash and cash
equivalents and capitalization, as of December 31, 2010:
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on an actual historical basis; and
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on an as adjusted basis to give effect to this offering of
$750.0 million principal amount of Notes after deducting
estimated underwriting discounts and commissions and estimated
offering expenses payable by us.
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You should read the information set forth in the table in
conjunction with Use of Proceeds and our historical
consolidated financial statements and notes thereto incorporated
by reference in this prospectus from our annual report on
Form 10-K for the fiscal year ended December 31, 2010.
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December 31, 2010
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Actual
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As Adjusted
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(In thousands)
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Cash, cash equivalents and short-term
investments(1)
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$
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2,305,040
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$
|
3,041,152
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Debt(2):
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7.625% Senior Notes due 2021 offered hereby
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$
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$
|
750,000
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8.875% Senior Notes due
2019(3)
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|
496,210
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|
|
|
496,210
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10% Senior Notes due
2016(4)
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|
783,314
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|
|
|
783,314
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3.125% convertible notes due
2012(5)
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|
1,043,236
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|
|
|
1,043,236
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Brazil syndicated loan
facility(6)
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|
178,442
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|
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|
178,442
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Mexico syndicated loan
facility(7)
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|
156,600
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|
|
|
156,600
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Peru syndicated loan
facility(8)
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|
123,922
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|
|
|
123,922
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Tower financing obligations
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175,932
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|
|
|
175,932
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Capital lease obligations
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114,303
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|
114,303
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Other
|
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193,459
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|
|
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193,459
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|
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Total debt
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3,265,418
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|
|
|
4,015,418
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Stockholders equity:
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Common stock, 169,661 shares issued and outstanding
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$
|
169
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$
|
169
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Paid-in capital
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1,364,705
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|
|
|
1,364,705
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Retained earnings
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|
2,015,950
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|
|
|
2,015,950
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Accumulated other comprehensive loss
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(61,251
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)
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|
(61,251
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)
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|
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Total stockholders equity
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3,319,573
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|
|
|
3,319,573
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Total capitalization
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$
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6,584,991
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|
$
|
7,334,991
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|
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|
|
|
|
|
|
|
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|
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(1)
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The as adjusted cash and cash
equivalents balance reflects proceeds of this offering net of
estimated underwriting discounts and commissions and offering
expenses.
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(2)
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On December 14, 2010,
Centennial Cayman Corp. Chile S.A., which does business as
Nextel Chile, entered into a $150.0 million vendor
financing agreement. The closing of the agreement is conditioned
on obtaining a commercial and political risk insurance policy
issued by the China Export and Credit Insurance Corporation.
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|
(3)
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Amount shown is net of deferred
financing costs. As of December 31, 2010, the outstanding
aggregate principal amount of the notes was $500.0 million.
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(4)
|
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Amount shown is net of original
issue discount and deferred financing costs. As of
December 31, 2010, the outstanding aggregate principal
amount of the notes was $800.0 million.
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|
(5)
|
|
As of December 31, 2010, the
outstanding aggregate principal amount of the notes was
$1,100.0 million.
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|
(6)
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As of December 31, 2010, no
additional amounts were available under our syndicated loan
facility in Brazil.
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|
(7)
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|
As of December 31, 2010, no
additional amounts were available under our syndicated loan
facility in Mexico.
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(8)
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|
As of December 31, 2010, no
additional amounts were available under our syndicated loan
facility in Peru.
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25
RATIO OF EARNINGS
TO FIXED CHARGES
The following table presents our historical ratio of earnings to
fixed charges for each of the years in the five-year period
ended December 31, 2010.
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|
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|
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Year Ended December 31,
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|
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2010
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|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
Historical Ratio of Earnings to Fixed Charges
|
|
|
2.42
|
|
|
|
3.04
|
|
|
|
2.78
|
|
|
|
3.45
|
|
|
|
3.60
|
|
We have computed the ratios of earnings to fixed charges shown
above by dividing earnings by fixed charges. For this purpose,
earnings is the amount resulting from adding
(a) income from continuing operations before income tax,
(b) fixed charges and (c) amortization of capitalized
interest; and then subtracting (a) interest capitalized,
(b) equity in gains or losses of unconsolidated affiliates
and (c) losses attributable to minority interests.
Fixed charges is the amount resulting from adding
(a) interest expense on indebtedness (including
amortization of debt expense and discount), (b) interest
capitalized and (c) the portion of rent expense
representative of interest (30%).
26
DESCRIPTION OF
NOTES
The Issuer will issue the Notes offered hereby pursuant to an
Indenture to be dated as of March 29, 2011, by and among
the Issuer, the Initial Guarantors and Wilmington
Trust Company, as trustee (the Indenture). The
terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the
Trust Indenture Act of 1939, as amended (the
Trust Indenture Act). The Notes are subject to
all such terms, and you should refer to the Indenture and the
Trust Indenture Act for a statement thereof.
The following description is a summary of the material
provisions of the Indenture relating to the Notes offered
hereby. It does not restate the Indenture in its entirety. We
urge you to read the Indenture because it, and not this
description, defines your rights as Holders of the Notes. Anyone
who receives this prospectus may obtain a copy of the Indenture,
without charge, by writing to NII Holdings, Inc., 1875
Explorer Street, Suite 1000, Reston, Virginia 20190,
Attention: Secretary.
You can find the definitions of certain terms used in this
description below under the caption Certain
Definitions. Certain capitalized terms used in this
description but not defined below under the caption
Certain Definitions have the meanings
assigned to them in the Indenture. In this description, the word
Issuer refers only to NII Capital Corp. and not to
any of its subsidiaries, and the word Parent refers
only to NII Holdings, Inc. and not to any of its subsidiaries.
The registered Holder of a Note will be treated as its owner for
all purposes. Only registered Holders of Notes will have rights
under the Indenture.
Brief Description
of the Notes
The Notes:
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are general unsecured obligations of the Issuer;
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are equal in right of payment with any future unsecured,
unsubordinated Indebtedness of the Issuer,
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are senior in right of payment to any future subordinated
Indebtedness of the Issuer; and
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are effectively subordinated to all existing and any future
Secured Indebtedness of the Issuer, to the extent of the assets
securing such Indebtedness, and to all existing and any future
Indebtedness and other liabilities (including trade payables) of
the Parents Subsidiaries that are not Guarantors (or the
Issuer), to the extent of the assets of such Subsidiaries.
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As of December 31, 2010, (i) the Parent had
$1,100.0 million principal amount of indebtedness
outstanding on an unconsolidated basis (excluding the
Parents guarantee of the Issuers 10% senior
notes due 2016 and 8.875% senior notes due 2019), none of
which was secured, (ii) the Issuer had
$1,300.0 million aggregate principal amount of indebtedness
outstanding, representing the Issuers 10% senior
notes due 2016 and 8.875% senior notes due 2019, and
(iii) other than NII Aviation, which had $41.1 million
of secured indebtedness outstanding, none of the Subsidiary
Guarantors had any indebtedness outstanding, other than their
guarantee of the Issuers 10% senior notes due 2016
and 8.875% senior notes due 2019. In addition, as of
December 31, 2010, the Parents Subsidiaries that are
not Subsidiary Guarantors or the Issuer had
$4,176.0 million in liabilities outstanding, including
$901.6 million of indebtedness. The Parent, the Issuer and
the Subsidiary Guarantors are holding companies substantially
all of the assets of which consist of the Capital Stock of, and
loans to, the Parents Subsidiaries and cash and Cash
Equivalents.
Although the Indenture will limit the Incurrence of Indebtedness
by the Parent and its Restricted Subsidiaries, such limitations
are subject to a number of significant exceptions. The Parent
and its Restricted Subsidiaries may be able to incur substantial
amounts of Indebtedness, including secured Indebtedness, in the
future.
As of the date of the Indenture, all of the Parents
Subsidiaries, including the Issuer, will be Restricted
Subsidiaries. However, under the circumstances described
below under the caption Certain
Covenants Designation of Restricted and Unrestricted
Subsidiaries, the Parent will be permitted to designate
certain of its Subsidiaries as Unrestricted
Subsidiaries. Any Unrestricted Subsidiaries will not be
subject to any of the restrictive covenants in the Indenture and
will not
27
Guarantee the Notes. As of the Issue Date, the Parent and all of
the Parents Domestic Restricted Subsidiaries, other than
the Issuer, will Guarantee the Notes.
Principal,
Maturity and Interest
The Indenture provides for the issuance by the Issuer of Notes
with an unlimited principal amount, of which $750 million
principal amount will be issued in connection with this
offering. The Issuer may issue Additional Notes (the
Additional Notes) from time to time after this
offering. Any offering of Additional Notes is subject to the
covenant described below under the caption
Certain Covenants Incurrence of
Indebtedness. The Notes offered hereby and any Additional
Notes subsequently issued under the Indenture will be treated as
a single class for all purposes under the Indenture, including,
without limitation, waivers, amendments, redemptions and offers
to purchase. The Issuer will issue Notes in denominations of
$2,000 and integral multiples of $1,000 in excess thereof. The
Notes will mature on April 1, 2021.
Cash interest on the Notes will accrue at the rate of 7.625% per
annum and will be payable semi-annually in arrears on
April 1 and October 1, beginning on October 1,
2011. The Issuer will make each interest payment to the Holders
of record on the immediately preceding March 15 and
September 15.
Interest on the Notes will accrue from the most recent date on
which interest on the Notes has been paid, or if no interest has
been paid, from the Issue Date. Interest will be computed on the
basis of a
360-day year
comprised of twelve
30-day
months.
Methods of
Receiving Payments on the Notes
If a Holder has given wire transfer instructions to the Issuer,
the Issuer will pay or cause the Paying Agent to pay all
principal, interest and premium, if any, on that Holders
Notes in accordance with those instructions. All other payments
on Notes will be made at the office or agency of the Paying
Agent and Registrar unless the Issuer elects to make interest
payments by check mailed to the Holders at their addresses set
forth in the register of Holders.
Paying Agent and
Registrar for the Notes
The Trustee will initially act as Paying Agent and Registrar.
The location of the corporate trust office of the Trustee is
1100 North Market Street, Rodney Square North, Wilmington,
Delaware
19890-1615.
The Issuer may change the Paying Agent or Registrar without
prior notice to the Holders, and the Parent or any of its
Subsidiaries may act as Paying Agent or Registrar.
Transfer and
Exchange
A Holder may transfer or exchange Notes in accordance with the
Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and
transfer documents and the Issuer may require a Holder to pay
any taxes and fees required by law or permitted by the
Indenture. The Issuer is not required to transfer or exchange
any Note selected for redemption. Also, the Issuer is not
required to transfer or exchange any Note for a period of
15 days before a selection of Notes to be redeemed.
Note
Guarantees
The Notes will be guaranteed, jointly and severally, by Parent
and each of its Domestic Restricted Subsidiaries other than the
Issuer.
Each Note Guarantee:
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will be a general unsecured obligation of the Guarantor;
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will be equal in right of payment with all existing and any
future unsecured, unsubordinated Indebtedness of such Guarantor,
including such Guarantors guarantee of the Issuers
$800.0 million aggregate principal amount of
10% senior notes due 2016 and $500.0 million aggregate
principal amount of 8.875% senior notes due 2019 and, in
the case of the Parent, $1,100.0 million aggregate
principal amount of the Parents outstanding 3.125%
convertible notes due 2012;
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will be senior in right of payment to any future subordinated
Indebtedness of the Guarantor; and
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28
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will be effectively subordinated to all existing and any future
secured Indebtedness of such Guarantor, to the extent of the
assets securing such Indebtedness, and the Note Guarantee of
each Guarantor will be effectively subordinated to all existing
and any future liabilities of such Guarantors Subsidiaries
other than the Issuer and any Subsidiary Guarantor to the extent
of the assets of such Subsidiaries.
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The obligations of each Guarantor under its Note Guarantee will
be limited as necessary to prevent that Note Guarantee from
constituting a fraudulent conveyance under applicable law. See
Risk Factors Federal and state statutes allow
courts, under specific circumstances, to void guarantees and
require noteholders to return payments received from the
guarantors. As of December 31, 2010, (i) the
Parent had $1,100.0 million principal amount of
indebtedness outstanding on an unconsolidated basis (excluding
the Parents guarantee of the Issuers 10% senior
notes due 2016 and 8.875% senior notes due 2019), none of
which was secured, (ii) the Issuer had
$1,300.0 million aggregate principal amount of indebtedness
outstanding, representing the Issuers 10% senior
notes due 2016 and 8.875% senior notes due 2019, and
(iii) other than NII Aviation, which had $41.1 million
of secured indebtedness outstanding, none of the Subsidiary
Guarantors had any indebtedness outstanding, other than their
guarantee of the Issuers 10% senior notes due 2016
and 8.875% senior notes due 2019. In addition, as of
December 31, 2010, the Parents Subsidiaries that are
not Subsidiary Guarantors or the Issuer had
$4,176.0 million in liabilities outstanding, including
$901.6 million of indebtedness.
Note Guarantees of the Subsidiary Guarantors may be released in
certain circumstances. See Certain
Covenants Guarantees.
Optional
Redemption
At any time prior to April 1, 2014, the Issuer may (on any
one or more occasions) redeem up to 35% of the aggregate
principal amount of Notes issued under the Indenture (including
any Additional Notes) at a redemption price of 107.625% of the
principal amount thereof, plus accrued and unpaid interest
thereon to the redemption date, with the net cash proceeds of
one or more Equity Offerings; provided that:
(1) at least 65% of the aggregate principal amount of Notes
issued under the Indenture (including any Additional Notes)
remains outstanding immediately after the occurrence of such
redemption (excluding Notes held by the Issuer and its
Affiliates); and
(2) the redemption must occur within 180 days of the
date of the closing of such Equity Offering.
At any time prior to April 1, 2016, the Issuer may redeem
all or part of the Notes upon not less than 30 nor more than
60 days prior notice at a redemption price equal to
the sum of (i) 100% of the principal amount thereof, plus
(ii) the Applicable Premium as of the date of redemption,
plus (iii) accrued and unpaid interest to the date of
redemption.
At any time on or after April 1, 2016, the Issuer may
redeem all or a part of the Notes upon not less than 30 nor more
than 60 days prior notice, at the redemption prices
set forth below (expressed as percentages of principal amount),
plus accrued and unpaid interest on the Notes to be redeemed to
the date of redemption, if redeemed during the twelve-month
period beginning on April 1 of the years indicated below:
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Year
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Percentage
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2016
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103.813
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%
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2017
|
|
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102.541
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%
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2018
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101.271
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%
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2019 and thereafter
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100.000
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%
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If less than all of the Notes are to be redeemed at any time,
the Trustee will select Notes for redemption as follows:
(1) if the Notes are listed on any national securities
exchange, in compliance with the requirements of such principal
national securities exchange; or
(2) if the Notes are not so listed, on a pro rata basis.
29
No Notes of $2,000 or less will be redeemed in part. Notices of
redemption will be mailed by first class mail at least 30 but
not more than 60 days before the redemption date to each
Holder of Notes to be redeemed at its registered address.
Notices of redemption may not be conditional.
If any Note is to be redeemed in part only, the notice of
redemption that relates to that Note will state the portion of
the principal amount thereof to be redeemed. A Note in principal
amount equal to the unredeemed portion of the original Note will
be issued in the name of the Holder thereof upon cancellation of
the original Note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date,
interest ceases to accrue on Notes or portions of them called
for redemption.
Mandatory
Redemption
The Issuer is not required to make mandatory redemption or
sinking fund payments with respect to the Notes.
Repurchase at the
Option of Holders
Change of
Control
If a Change of Control occurs, each Holder of Notes will have
the right to require the Issuer to repurchase all or any part
(equal to $2,000 or an integral multiple of $1,000 in excess
thereof) of that Holders Notes pursuant to an offer (a
Change of Control Offer) on the terms set forth in
the Indenture. In the Change of Control Offer, the Issuer will
offer payment (a Change of Control Payment) in cash
equal to not less than 101% of the aggregate principal amount of
Notes repurchased plus accrued and unpaid interest thereon, to
the date of repurchase (the Change of Control Payment
Date, which date will be no earlier than the date of such
Change of Control); provided, however, that
notwithstanding the occurrence of a Change of Control, the
Issuer shall not be obligated to purchase the Notes pursuant to
this section in the event that the Issuer has exercised its
right to redeem all the Notes under the terms of the caption
Optional Redemption. No later than 30 days
following any Change of Control, the Issuer will mail a notice
to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase
Notes on the Change of Control Payment Date specified in such
notice, which date will be no earlier than 30 days and no
later than 60 days from the date such notice is mailed,
pursuant to the procedures required by the Indenture and
described in such notice. The Issuer will comply with the
requirements of
Rule 14e-1
under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations
are applicable in connection with the repurchase of the Notes as
a result of a Change of Control. To the extent that the
provisions of any securities laws or regulations conflict with
the Change of Control provisions of the Indenture, the Issuer
will comply with the applicable securities laws and regulations
and will not be deemed to have breached its obligations under
the Change of Control provisions of the Indenture by virtue of
such compliance.
On the Change of Control Payment Date, the Issuer will, to the
extent lawful:
(1) accept for payment all Notes or portions thereof
properly tendered pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent, prior to 11:00 am, New
York City time, an amount equal to the Change of Control Payment
in respect of all Notes or portions thereof properly
tendered; and
(3) deliver or cause to be delivered to the Trustee the
Notes so accepted together with an Officers Certificate
stating the aggregate principal amount of Notes or portions
thereof being purchased by the Issuer.
The Paying Agent will promptly mail or wire transfer to each
Holder of Notes so tendered the Change of Control Payment for
such Notes, and the Trustee will promptly authenticate and mail
(or cause to be transferred by book entry) to each Holder a new
Note equal in principal amount to any unpurchased portion of the
Notes surrendered, if any; provided that each such new
Note will be in a principal amount of $2,000 or an integral
multiple of $1,000 in excess thereof. The Issuer will publicly
announce the results of the Change of Control Offer on or as
soon as practicable after the Change of Control Payment Date.
30
Future credit agreements or other similar agreements to which
the Parent or any of its subsidiaries becomes a party may
contain restrictions on the Issuers ability to purchase
the Notes. In the event a Change of Control occurs at a time
when the Issuer is prohibited from purchasing Notes, the Parent
or applicable subsidiary could seek the consent of its lenders
to the purchase of Notes or could attempt to refinance the
borrowings that contain such prohibition. If the Parent or such
subsidiary does not obtain such consent or repay such
borrowings, the Issuer will remain prohibited from purchasing
Notes. In such case, the Issuers failure to purchase
properly tendered Notes would constitute an Event of Default
under the Indenture which could, in turn, constitute a default
under such other agreements.
The provisions described above that require the Issuer to make a
Change of Control Offer following a Change of Control will be
applicable regardless of whether any other provisions of the
Indenture are applicable. Except as described above with respect
to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Notes to require that
the Issuer repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar transaction.
The Issuer will not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change
of Control Offer in the manner, at the times and otherwise in
compliance with the requirements set forth in the Indenture
applicable to a Change of Control Offer made by the Issuer and
purchases all Notes properly tendered and not withdrawn under
such Change of Control Offer.
A Change of Control Offer may be made in advance of a Change of
Control, and conditioned upon such Change of Control, if a
definitive agreement is in place for the Change of Control at
the time of making of the Change of Control Offer.
The definition of Change of Control includes a phrase relating
to the direct or indirect sale, transfer, conveyance or other
disposition of all or substantially all of the
properties or assets of the Parent and its Restricted
Subsidiaries taken as a whole. Although there is a limited body
of case law interpreting the phrase substantially
all, there is no precise established definition of the
phrase under applicable law. Accordingly, the ability of a
Holder of Notes to require the Issuer to repurchase such Notes
as a result of a sale, transfer, conveyance or other disposition
of less than all of the assets of the Parent and its Restricted
Subsidiaries taken as a whole to another Person or group may be
uncertain.
Holders may not be able to require the Issuer to purchase their
Notes in certain circumstances involving a significant change in
the composition of the Parents Board of Directors,
including a proxy contest where the Parents Board of
Directors does not endorse the dissident slate of directors but
approves them as Continuing Directors. In this
regard, a recent decision of the Delaware Chancery Court (not
involving the Parent or its securities) considered a change of
control redemption provision of an indenture governing publicly
traded debt securities substantially similar to the change of
control event described in clause (4) of the definition of
Change of Control. In its decision, the court noted
that a board of directors may approve a dissident
shareholders nominees solely for purposes of such an
indenture, provided the board of directors determines in good
faith that the election of the dissident nominees would not be
materially adverse to the interests of the corporation or its
stockholders (without taking into consideration the interests of
the holders of debt securities in making this determination).
Asset
Sales
The Parent will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) the Parent or such Restricted Subsidiary receives
consideration at the time of such Asset Sale at least equal to
the Fair Market Value of the assets or Equity Interests issued
or sold or otherwise disposed of; and
31
(2) at least 75% of the consideration therefor received by
the Parent or such Restricted Subsidiary is in the form of cash,
Cash Equivalents or Replacement Assets or a combination thereof.
For purposes of this provision, each of the following will be
deemed to be cash:
(a) any liabilities, as shown on the Parents or such
Restricted Subsidiarys most recent balance sheet, of the
Parent or any Restricted Subsidiary (other than contingent
liabilities, Indebtedness that is by its terms subordinated to
the Notes or any Note Guarantee and liabilities to the extent
owed to the Parent or any Affiliate of the Parent) that are
assumed by the transferee of any such assets or Equity Interests
pursuant to a written novation agreement that releases the
Parent or such Restricted Subsidiary from further liability
therefor; and
(b) any securities, notes or other obligations received by
the Parent or any such Restricted Subsidiary from such
transferee that are (within 60 days of receipt and subject
to ordinary settlement periods) converted by the Parent or such
Restricted Subsidiary into cash (to the extent of the cash
received in that conversion).
Within 365 days after the receipt of any Net Proceeds from
an Asset Sale, the Parent or its Restricted Subsidiaries may
apply such Net Proceeds at its option:
(1) to repay, prepay, defease, redeem, purchase or
otherwise retire, in whole or in part, (i) Indebtedness
secured by such assets, (ii) unsubordinated Indebtedness of
the Issuer or any Subsidiary Guarantor or (iii) any
Indebtedness of any Restricted Subsidiary of the Parent that is
not a Subsidiary Guarantor or the Issuer, other than
Indebtedness owed to the Parent or another Restricted Subsidiary
and, in each case, if the Indebtedness repaid is revolving
credit Indebtedness to correspondingly reduce commitments with
respect thereto; or
(2) to purchase Replacement Assets (or enter into a binding
agreement to purchase such Replacement Assets; provided
that (i) such purchase is consummated within the later
of (x) 180 days after the date such binding agreement
is entered into and (y) 365 days after the receipt of
Net Proceeds from such Asset Sale and (ii) if such purchase
is not consummated within the period set forth in subclause (i),
the Net Proceeds not so applied will be deemed to be Excess
Proceeds (as defined below)).
Pending the final application of any such Net Proceeds, the
Parent or any of its Restricted Subsidiaries may temporarily
reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture.
On the
365th day
after an Asset Sale (or, in the event that a binding agreement
has been entered into as set forth in clause (2) of the
preceding paragraph, the later date set forth in such clause
(2)) or such earlier date, if any, as the Parent determines not
to apply the Net Proceeds relating to such Asset Sale as set
forth in the preceding paragraph (each such date being referred
as an Excess Proceeds Trigger Date), such aggregate
amount of Net Proceeds that has not been applied on or before
the Excess Proceeds Trigger Date as permitted in the preceding
paragraph (Excess Proceeds) will be applied by the
Issuer to make an offer (an Asset Sale Offer) to all
Holders of Notes and all holders of other Indebtedness that is
pari passu with the Notes or any Note Guarantee
containing provisions similar to those set forth in the
Indenture with respect to offers to purchase with the proceeds
of sales of assets, to purchase the maximum principal amount of
Notes and such other pari passu Indebtedness that may be
purchased out of the Excess Proceeds. The offer price in any
Asset Sale Offer will be equal to 100% of the principal amount
of the Notes and such other pari passu Indebtedness plus
accrued and unpaid interest to the date of purchase, and will be
payable in cash.
The Issuer may defer the Asset Sale Offer until the aggregate
unutilized Excess Proceeds accrued equals or exceeds
$100 million, at which time the entire unutilized amount of
Excess Proceeds (not only the amount in excess of
$100 million) will be applied as provided in the preceding
paragraph. If any Excess Proceeds remain after consummation of
an Asset Sale Offer, the Parent and its Restricted Subsidiaries
may use such Excess Proceeds for any purpose not otherwise
prohibited by the Indenture. If the aggregate principal amount
of Notes and such other pari passu Indebtedness tendered
into such Asset Sale Offer exceeds the amount of Excess
Proceeds, the Notes and such other pari passu
Indebtedness will be purchased on a pro rata basis based on
the principal amount of
32
Notes and such other pari passu Indebtedness tendered.
Upon completion of each Asset Sale Offer, the Excess Proceeds
subject to such Asset Sale will no longer be deemed to be Excess
Proceeds.
The Issuer will comply with the requirements of
Rule 14e-1
under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations
are applicable in connection with each repurchase of Notes
pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with
the Asset Sale provisions of the Indenture, the Issuer will
comply with the applicable securities laws and regulations and
will not be deemed to have breached its obligations under the
Asset Sale provisions of the Indenture by virtue of such
compliance.
The Issuer will not be required to make an Asset Sale Offer as
described above if the Parent or any of its Restricted
Subsidiaries makes the Asset Sale Offer in the manner, at the
times and otherwise in compliance with the requirements set
forth in the Indenture applicable to an Asset Sale Offer made by
the Issuer and purchases all Notes properly tendered and not
withdrawn under such Asset Sale Offer.
Future credit agreements or other similar agreements to which
the Parent or its subsidiaries becomes a party may contain
restrictions on the Issuers ability to purchase Notes. In
the event an Asset Sale occurs at a time when the Issuer is
prohibited from purchasing Notes, the Parent or applicable
subsidiary could seek the consent of its lenders to the purchase
of Notes or could attempt to refinance the borrowings that
contain such prohibition. If the Parent or such subsidiary does
not obtain such consent or repay such borrowings, the Issuer
will remain prohibited from purchasing Notes. In such case, the
Issuers failure to purchase tendered Notes would
constitute an Event of Default under the Indenture which could,
in turn, constitute a default under such other agreements.
Certain
Covenants
Changes in
Covenants When Notes Rated Investment Grade
If on any date following the Issue Date:
(1) the Notes are rated Baa3 or better by Moodys and
BBB- or better by Standard & Poors (or, if
either such entity ceases to rate the Notes for reasons outside
of the control of the Parent or the Issuer, the equivalent
investment grade credit rating from any other nationally
recognized statistical rating organization within the
meaning of Section 3(a)(62) under the Exchange Act,
selected by the Issuer as a replacement agency); and
(2) no Default or Event of Default shall have occurred and
be continuing,
then, beginning on that day and subject to the provisions of the
following paragraph, the covenants specifically listed under the
following captions in this prospectus will be suspended:
(1) Repurchase at the Option of Holders
Asset Sales;
(2) Restricted Payments;
(3) Incurrence of Indebtedness;
(4) Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries;
(5) Transactions with Affiliates;
(6) clause (3) of the covenant
described below under the caption Merger,
Consolidation or Sale of Assets;
(7) Designation of Restricted and
Unrestricted Subsidiaries;
(8) Note Guarantees; and
(9) Business Activities.
During any period that the foregoing covenants have been
suspended, the Parents Board of Directors may not
designate any of its Subsidiaries as Unrestricted Subsidiaries
pursuant to the covenant under the caption
Designation of Restricted and Unrestricted
Subsidiaries unless such designation would have been
permitted if a Suspension Period had not been in effect at such
time.
Notwithstanding the foregoing, if the rating assigned by either
such rating agency should subsequently decline to below Baa3 or
BBB-, respectively (or if either such agency ceases to rate the
33
Notes, the equivalent investment grade credit rating from
another nationally recognized statistical rating organization),
the foregoing covenants will be reinstated as of and from the
date of such rating decline. Calculations under the reinstated
Restricted Payments covenant will be made as if the
Restricted Payments covenant had been in effect
since the date of the indenture except that no default will be
deemed to have occurred solely by reason of a Restricted Payment
made while that covenant was suspended. Notwithstanding that the
suspended covenants may be reinstated, no default will be deemed
to have occurred as a result of a failure to comply with such
suspended covenants during any period such covenants have been
suspended. There can be no assurance that the Notes will ever
achieve an investment grade rating or that any such rating will
be maintained.
Restricted
Payments
(A) The Parent will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly:
(1) declare or pay (without duplication) any dividend or
make any other payment or distribution on account of the
Parents or any of its Restricted Subsidiaries Equity
Interests (including, without limitation, any payment in
connection with any merger or consolidation involving the Parent
or any of its Restricted Subsidiaries) or to the direct or
indirect holders of the Parents or any of its Restricted
Subsidiaries Equity Interests in their capacity as such
(other than dividends, payments or distributions
(x) payable in Equity Interests (other than Disqualified
Stock) of the Parent or (y) to the Parent or a Restricted
Subsidiary of the Parent);
(2) purchase, redeem or otherwise acquire or retire for
value (including, without limitation, in connection with any
merger or consolidation involving the Parent or any of its
Restricted Subsidiaries) any Equity Interests of the Parent or
any Restricted Subsidiary thereof held by Persons other than the
Parent or any of its Restricted Subsidiaries;
(3) make any payment on or with respect to, or purchase,
redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Notes or any Note
Guarantee, except (x) a payment of interest or principal at
the Stated Maturity thereof or (y) the purchase, repurchase
or other acquisition of any such Indebtedness in anticipation of
satisfying a sinking fund obligation, principal installment or
final maturity, in each case due within one year of the date of
such purchase, repurchase or other acquisition; or
(4) make any Restricted Investment (all such payments and
other actions set forth in clauses (1) through
(4) above being collectively referred to as
Restricted Payments),
unless, at the time of and after giving effect to such
Restricted Payment:
(1) no Default or Event of Default will have occurred and
be continuing or would occur as a consequence thereof;
(2) the Parent would, at the time of such Restricted
Payment and after giving pro forma effect thereto as if such
Restricted Payment had been made at the beginning of the
applicable Four Quarter Period, have been permitted to Incur at
least $1.00 of additional Indebtedness pursuant to the first
paragraph of the covenant described below under the caption
Incurrence of Indebtedness; and
(3) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by the Parent and
its Restricted Subsidiaries after August 18, 2009
(excluding Restricted Payments permitted by clauses (2), (3),
(4), (5), (6), (8) and (9) of the next succeeding
paragraph (B)), is less than the sum, without duplication, of:
(i) 100% of the Consolidated Cash Flow of the Parent for
the period (taken as one accounting period) from July 1,
2009 to the end of the Parents most recently ended fiscal
quarter for which internal financial statements are available at
the time of such Restricted Payment, minus 1.4 times the Fixed
Charges of the Parent for the same period, plus
(ii) 100% of the aggregate net proceeds (including
(x) cash and Cash Equivalents and (y) the Fair Market
Value of property other than cash and Cash Equivalents, provided
that if the Fair Market Value of such property exceeds
$50 million such Fair Market Value shall be determined in
good faith by the Board of Directors of the Parent, whose good
faith
34
determination shall be conclusive and evidenced by a Board
Resolution) received by the Parent since August 18, 2009 as
a contribution to its common equity capital or from the issue or
sale of Equity Interests (other than Disqualified Stock) of the
Parent or from the Incurrence of Indebtedness of the Parent or
the Issuer that has been converted into or exchanged for such
Equity Interests (other than Equity Interests sold to, or
Indebtedness held by, a Subsidiary of the Parent), plus
(iii) with respect to Restricted Investments made by the
Parent and its Restricted Subsidiaries after August 18,
2009, an amount equal to the net reduction in such Restricted
Investments in any Person resulting from repayments of loans or
advances, or other transfers of assets, in each case to the
Parent or any Restricted Subsidiary or from the net cash
proceeds from the sale of any such Restricted Investment
(except, in each case, to the extent any such payment or
proceeds are included in the calculation of Consolidated Cash
Flow), from the release of any Guarantee (except to the extent
any amounts are paid under such Guarantee) or from
redesignations of Unrestricted Subsidiaries as Restricted
Subsidiaries, not to exceed, in each case, the amount of
Restricted Investments previously made by the Parent or any
Restricted Subsidiary in such Person or Unrestricted Subsidiary
after August 18, 2009.
(B) The preceding provisions will not prohibit, so long as,
in the case of clauses (5), (7) and (9) below, no
Default has occurred and is continuing or would be caused
thereby:
(1) the payment of any dividend within 60 days after
the date of declaration thereof, if at said date of declaration
such payment would have complied with the provisions of the
Indenture;
(2) the payment of any dividend by a Restricted Subsidiary
of the Parent to the holders of its Common Stock on a pro rata
basis;
(3) the redemption, repurchase, retirement, defeasance or
other acquisition of any subordinated Indebtedness of the
Parent, the Issuer or any Subsidiary Guarantor or of any Equity
Interests of the Parent or any Restricted Subsidiary in exchange
for, or out of the net cash proceeds of a contribution to the
common equity of the Parent or a substantially concurrent sale
(other than to a Restricted Subsidiary of the Parent) of, Equity
Interests (other than Disqualified Stock) of the Parent;
provided that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement,
defeasance or other acquisition will be excluded from clause (3)
(ii) of the preceding paragraph (A);
(4) the defeasance, redemption, repurchase or other
acquisition of Indebtedness subordinated to the Notes or any
Note Guarantee with the net cash proceeds from an Incurrence of
Permitted Refinancing Indebtedness;
(5) the payment of any dividend or the making of any other
payment or distribution on account of the Parents Equity
Interests or the purchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Parent or
any Restricted Subsidiary of the Parent in an aggregate amount
not to exceed $100 million;
(6) the repurchase of Equity Interests deemed to occur upon
the exercise of options or warrants to the extent that such
Equity Interests represents all or a portion of the exercise
price thereof;
(7) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Parent held
by any current or former employee, consultant or director of the
Parent, or any Restricted Subsidiaries of the Parent pursuant to
the terms of any equity subscription agreement, stock option
agreement or similar agreement entered into in the ordinary
course of business; provided that the aggregate of all amounts
paid by the Parent in any calendar year will not exceed
$20 million (with unused amounts in any calendar year being
carried over to the next succeeding calendar year; provided,
further, that such amount in any calendar year may be increased
by an amount equal to (a) the net cash proceeds from the
sale of Equity Interests of the Parent to current or former
members of management, directors, consultants or employees that
occurs after August 18, 2009 (provided that the amount of
any
35
such net cash proceeds will be excluded from clause (3)
(ii) of the preceding paragraph (A)) plus (b) the net
cash proceeds of key man life insurance policies received by the
Parent or its Restricted Subsidiaries after August 18, 2009;
(8) the purchase, redemption, acquisition, cancellation or
other retirement for value of shares of Capital Stock of the
Parent, to the extent necessary, in the good faith judgment of
the Parents Board of Directors, to prevent the loss or
secure the renewal or reinstatement of any license held by the
Parent or any of its Restricted Subsidiaries from any
governmental agency; and
(9) other Restricted Payments in an aggregate amount not to
exceed $250 million.
The amount of all Restricted Payments (other than cash) will be
the Fair Market Value on the date of the Restricted Payment of
the asset(s) or securities proposed to be transferred or issued
to or by the Parent or such Subsidiary, as the case may be,
pursuant to the Restricted Payment; provided that if the
Fair Market Value exceeds $50 million, such Fair Market
Value shall be determined in good faith by the Board of
Directors of the Parent evidenced by a Board Resolution. Not
later than the date of making any Restricted Payment under
paragraph (A) or clause B (9) above, the Parent
will deliver to the Trustee an Officers Certificate
stating that such Restricted Payment is permitted and setting
forth the basis upon which the calculations required by this
Restricted Payments covenant were computed, together
with a copy of any opinion or appraisal required by the
Indenture.
Incurrence of
Indebtedness
The Parent will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, Incur any Indebtedness;
provided, however, that the Parent, the Issuer,
any Subsidiary Guarantor or any Foreign Restricted Subsidiary
that is not a Subsidiary Guarantor may Incur Indebtedness if,
after giving effect to the Incurrence of such Indebtedness and
the receipt and application of the proceeds therefrom, the
Consolidated Leverage Ratio would be less than 5.25 to 1, and if
(A) such Indebtedness is to be Incurred by the Issuer or
any Subsidiary Guarantor, the Subsidiary Debt Leverage Ratio
would less than 3.5 to 1 or (B) such Indebtedness is to be
Incurred by a Foreign Restricted Subsidiary that is not a
Subsidiary Guarantor, the Priority Debt Leverage Ratio would be
less than 2.5 to 1.
The first paragraph of this covenant will not prohibit the
Incurrence of any of the following items of Indebtedness
(collectively, Permitted Debt):
(1) the Incurrence by the Parent, the Issuer, any
Subsidiary Guarantor or any Foreign Restricted Subsidiary of
Indebtedness under Credit Facilities in an aggregate amount at
any one time outstanding pursuant to this clause (1), including
all Permitted Refinancing Indebtedness Incurred to refund,
refinance or replace any Indebtedness Incurred pursuant to this
clause (1), not to exceed $500 million, less the aggregate
amount of all Net Proceeds of Asset Sales applied by the Parent,
the Issuer, any Subsidiary Guarantor or any Foreign Restricted
Subsidiary to permanently repay any such Indebtedness pursuant
to the covenant described above under the caption
Repurchase at the Option of
Holders Asset Sales;
(2) the Incurrence of Existing Indebtedness;
(3) the Incurrence by the Parent, the Issuer and the
Subsidiary Guarantors of Indebtedness represented by the Notes
and the related Note Guarantees to be issued on the Issue Date;
(4) the Incurrence by the Parent or any Restricted
Subsidiary of Indebtedness represented by Capital Lease
Obligations, mortgage financings, Attributable Debt, purchase
money obligations or other obligations, in each case, Incurred
for the purpose of financing all or any part of the purchase
price or cost of construction or improvement of property, plant
or equipment (including acquisition of Capital Stock of a Person
that becomes a Restricted Subsidiary to the extent of the Fair
Market Value of the property, plant or equipment of such Person)
used in the business of the Parent or such Restricted
Subsidiary, in an aggregate amount, including all Permitted
Refinancing Indebtedness Incurred to refund, refinance or
replace any Indebtedness Incurred pursuant to this clause (4),
not to exceed $350 million at any time outstanding;
(5) the Incurrence by the Parent or any Restricted
Subsidiary of the Parent of Permitted Refinancing Indebtedness
in exchange for, or the net proceeds of which are used to
refund,
36
refinance, replace, defease or discharge Indebtedness (other
than intercompany Indebtedness) that was permitted by the
Indenture to be Incurred under the first paragraph of this
covenant or clauses (1), (2), (3), (4), (5), (12), (13),
(15) or (16) of this paragraph;
(6) the Incurrence by the Parent or any of its Restricted
Subsidiaries of intercompany Indebtedness owing to or held by
the Parent or any of its Restricted Subsidiaries;
provided, however, that:
(a) if the Parent, the Issuer or any Subsidiary Guarantor
is the obligor on such Indebtedness, such Indebtedness must be
unsecured and expressly subordinated to the prior payment in
full in cash of all Obligations with respect to the Notes, in
the case of the Issuer, or the Note Guarantee, in the case of
the Parent or a Subsidiary Guarantor; and
(b) (i) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a
Person other than the Parent or a Restricted Subsidiary of the
Parent and (ii) any sale or other transfer of any such
Indebtedness to a Person that is not the Parent or a Restricted
Subsidiary of the Parent, will be deemed, in each case, to
constitute an Incurrence of such Indebtedness by the Parent or
such Restricted Subsidiary, as the case may be, that was not
permitted by this clause (6);
(7) the Guarantee by the Parent, the Issuer or any
Subsidiary Guarantor of Indebtedness of the Parent or a
Restricted Subsidiary of the Parent that was permitted to be
Incurred by another provision of this covenant (other than
(x) a Guarantee by the Issuer or any Subsidiary Guarantor
of Existing Indebtedness of the Parent and (y) a Guarantee
by the Issuer or any Subsidiary Guarantor of Indebtedness of the
Parent Incurred under the first paragraph of this covenant or in
the case of clauses (x) and (y) any refinancings
thereof); provided that if the Indebtedness being
Guaranteed is subordinated to or pari passu with the
Notes or any Note Guarantee, then the Guarantee shall be
subordinated or pari passu, as applicable, to the same
extent as the Indebtedness guaranteed;
(8) the Incurrence by the Parent or any of its Restricted
Subsidiaries of Hedging Obligations that are Incurred for the
purpose of fixing, hedging or swapping interest rate, commodity
price or foreign currency exchange rate risk (or to reverse or
amend any such agreements previously made for such purposes),
and not for speculative purposes, and that do not increase the
Indebtedness of the obligor outstanding at any time other than
as a result of fluctuations in interest rates, commodity prices
or foreign currency exchange rates or by reason of fees,
indemnities and compensation payable thereunder;
(9) the Incurrence by the Parent or any of its Restricted
Subsidiaries of Indebtedness arising from agreements providing
for indemnification, adjustment of purchase price or similar
obligations, or Guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of the Parent or any
of its Restricted Subsidiaries pursuant to such agreements, in
any case Incurred in connection with the disposition of any
business, assets or Restricted Subsidiary (other than Guarantees
of Indebtedness Incurred by any Person acquiring all or any
portion of such business, assets or Restricted Subsidiary for
the purpose of financing such acquisition), so long as the
amount (other than with respect to indemnities relating to tax
obligations) does not exceed the gross proceeds actually
received by the Parent or any Restricted Subsidiary thereof in
connection with such disposition;
(10) the Incurrence by the Parent or any of its Restricted
Subsidiaries of Indebtedness arising from the honoring by a bank
or other financial institution of a check, draft or similar
instrument drawn against insufficient funds in the ordinary
course of business, provided, however, that such
Indebtedness is extinguished promptly after its Incurrence;
(11) the Incurrence by the Parent or any of its Restricted
Subsidiaries of Indebtedness constituting reimbursement
obligations with respect to letters of credit issued in the
ordinary course of business; provided that, upon the drawing of
such letters of credit or the Incurrence of such Indebtedness,
such obligations are reimbursed within 30 days following
such drawing or Incurrence;
37
(12) the Incurrence by the Parent, the Issuer or any
Subsidiary Guarantor of Permitted Subordinated Indebtedness in
an aggregate principal amount at any time outstanding, including
all Permitted Refinancing Indebtedness Incurred to refund,
refinance or replace any Indebtedness Incurred pursuant to this
clause (12), not to exceed $500 million;
(13) the Incurrence by the Parent or any Restricted
Subsidiary of Acquired Indebtedness, provided that immediately
after giving effect to such Incurrence on a pro forma basis, the
Consolidated Leverage Ratio and, if the Acquired Indebtedness is
to be Incurred by the Issuer or any Subsidiary Guarantor, the
Subsidiary Debt Leverage Ratio and, if the Acquired Indebtedness
is to be Incurred by a Foreign Restricted Subsidiary that is not
a Subsidiary Guarantor, the Priority Debt Leverage Ratio will
not be greater than such ratios immediately prior to such
Incurrence;
(14) the Incurrence by the Parent, the Issuer or any
Subsidiary Guarantor of Indebtedness to the extent that the net
proceeds thereof are promptly deposited to defease or to satisfy
and discharge the Notes;
(15) the Incurrence by the Parent or any Restricted
Subsidiary of Indebtedness in favor of a governmental entity in
connection with the purchase of licenses or other rights to
utilize radio spectrum in an aggregate principal amount at any
time outstanding, including all Permitted Refinancing
Indebtedness Incurred to refund, refinance or replace any
Indebtedness Incurred pursuant to this clause (15), not to
exceed $300 million; or
(16) the Incurrence by the Parent, Issuer or any Subsidiary
Guarantor or any of its Restricted Subsidiaries of additional
Indebtedness in an aggregate principal amount at any time
outstanding, including all Permitted Refinancing Indebtedness
Incurred to refund, refinance or replace any Indebtedness
Incurred pursuant to this clause (16), not to exceed
$250 million.
For purposes of determining compliance with this covenant, in
the event that any proposed Indebtedness meets the criteria of
more than one of the categories of Permitted Debt described in
clauses (1) through (16) above, or is entitled to be
Incurred pursuant to the first paragraph of this covenant, the
Parent will be permitted to divide and classify such item of
Indebtedness at the time of its Incurrence in any manner that
complies with this covenant and may later redivide
and/or
reclassify all or a portion of such item of Indebtedness in any
manner that complies with this covenant; provided that
notwithstanding the foregoing, Indebtedness outstanding
under Credit Facilities on the Issue Date shall be deemed to
have been incurred on such date under clause (1) above.
For purposes of determining compliance with any
U.S. dollar-denominated restriction on the incurrence of
Indebtedness, the U.S. dollar-equivalent principal amount
of Indebtedness denominated in a foreign currency shall be
calculated based on the relevant currency exchange rate in
effect on the date such Indebtedness was incurred, in the case
of term debt, or first committed, in the case of revolving
credit debt; provided that if such Indebtedness is incurred to
refinance other Indebtedness denominated in a foreign currency,
and such refinancing would cause the applicable
U.S. dollar-denominated restriction to be exceeded if
calculated at the relevant currency exchange rate in effect on
the date of such refinancing, such U.S. dollar-denominated
restrictions shall be deemed not to have been exceeded so long
as the principal amount of such refinancing Indebtedness does
not exceed the principal amount of such Indebtedness being
refinanced.
The principal amount of any Indebtedness incurred to refinance
other Indebtedness, if incurred in a different currency from the
Indebtedness being refinanced, shall be calculated based on the
currency exchange rate applicable to the currencies in which
such respective Indebtedness is denominated that is in effect on
the date of such refinancing.
The Issuer will not Incur any Indebtedness that is subordinate
in right of payment to any other Indebtedness of the Issuer
unless it is subordinate in right of payment to the Notes to the
same extent. The Parent will not, and will not permit any
Subsidiary Guarantor to, Incur any Indebtedness that is
subordinate in right of payment to any other Indebtedness of the
Parent or such Subsidiary Guarantor, as the case may be, unless
it is subordinate in right of payment to the relevant Note
Guarantee to the same extent. For purposes of the foregoing, no
Indebtedness will be deemed to be subordinated in right of
payment to any other Indebtedness of the Parent, the Issuer or
any Subsidiary
38
Guarantor, as applicable, solely by reason of any Liens or
Guarantees arising or created in respect thereof or by virtue of
the fact that the holders of any Secured Indebtedness have
entered into intercreditor agreements giving one or more of such
holders priority over the other holders in the collateral held
by them.
Liens
The Parent will not, and will not permit the Issuer or any
Subsidiary Guarantor to, create, Incur, assume or otherwise
cause or suffer to exist or become effective any Lien of any
kind (other than Permitted Liens) upon any of its property or
assets, now owned or hereafter acquired, unless all payments due
under the Indenture and the Notes or the Note Guarantee, as
applicable, are secured on an equal and ratable basis with the
obligations so secured (or, in the case of Indebtedness
subordinated to the Notes, prior or senior thereto, with the
same relative priority as the Notes or Note Guarantee will have
with respect to such subordinated Indebtedness) until such time
as such obligations are no longer secured by a Lien.
Dividend and
Other Payment Restrictions Affecting Restricted
Subsidiaries
The Parent will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to
exist or become effective any consensual encumbrance or
restriction on the ability of any Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its
Capital Stock (or with respect to any other interest or
participation in, or measured by, its profits) to the Parent or
any of its Restricted Subsidiaries or pay any liabilities owed
to the Parent or any of its Restricted Subsidiaries;
(2) make loans or advances to the Parent or any of its
Restricted Subsidiaries; or
(3) sell, lease or transfer any of its properties or assets
to the Parent or any of its Restricted Subsidiaries.
However, the preceding restrictions will not apply to
encumbrances or restrictions:
(1) existing under, by reason of or with respect to
Existing Indebtedness or any other agreements in effect on the
Issue Date and any amendments, modifications, restatements,
renewals, extensions, supplements, refundings, replacements or
refinancings thereof, provided that the encumbrances and
restrictions in any such amendments, modifications,
restatements, renewals, extensions, supplements, refundings,
replacements or refinancings, in the good faith judgment of the
Board of Directors of the Parent, whose judgment shall be
conclusively binding and evidenced by a Board Resolution, either
(i) are not materially more restrictive, taken as a whole,
than those contained in Existing Indebtedness or such other
agreements, as the case may be, as in effect on the Issue Date
or (ii) will not materially affect the Issuers
ability to pay the interest or principal, when due, on the Notes;
(2) set forth in the Indenture and the Notes and the Note
Guarantees;
(3) existing under, by reason of or with respect to
applicable law, rule, regulation or order;
(4) with respect to any Person or the property or assets of
a Person acquired by the Parent or any of its Restricted
Subsidiaries existing at the time of such acquisition and not
incurred in connection with or in contemplation of such
acquisition, which encumbrance or restriction is not applicable
to any Person or the properties or assets of any Person, other
than the Person, or the property or assets of the Person, so
acquired and any amendments, modifications, restatements,
renewals, extensions, supplements, refundings, replacements or
refinancings thereof, provided that the encumbrances and
restrictions in any such amendments, modifications,
restatements, renewals, extensions, supplements, refundings,
replacements or refinancings, in the good faith judgment of the
Board of Directors of the Parent, whose judgment shall be
binding and evidenced by a Board Resolution, either (i) are
not materially more restrictive, taken as a whole, than those in
effect on the date of the acquisition or (ii) will not
materially affect the Issuers ability to pay the interest
or principal, when due, on the Notes;
39
(5) in the case of clause (3) of the first paragraph
of this covenant:
(A) that restrict in a customary manner the subletting,
assignment or transfer of any property or asset that is a lease,
license, conveyance or contract or similar property or asset,
(B) existing by virtue of any transfer of, agreement to
transfer, option or right with respect to, or Lien on, any
property or assets of the Parent or any Restricted Subsidiary
thereof not otherwise prohibited by the Indenture, or
(C) arising or agreed to in the ordinary course of
business, not relating to any Indebtedness, and that do not,
individually or in the aggregate, detract from the value of
property or assets of the Parent or any Restricted Subsidiary
thereof in any manner material to the Parent or any Restricted
Subsidiary thereof;
(6) existing under, by reason of or with respect to any
agreement for the sale or other disposition of all or
substantially all of the Capital Stock of, or property and
assets of, a Restricted Subsidiary that restrict distributions
by that Restricted Subsidiary pending such sale or other
disposition;
(7) existing under restrictions on cash or other deposits
or net worth imposed by customers or required by insurance,
surety or bonding companies, in each case, under contracts
entered into in the ordinary course of business;
(8) existing under, by reason of or with respect to
provisions with respect to the disposition or distribution of
assets or property, in each case contained in joint venture
agreements and which the Board of Directors of the Parent
determines in good faith will not adversely affect the
Issuers ability to make payments of principal or interest
payments on the Notes; and
(9) encumbrances and restrictions in other Indebtedness
incurred in compliance with the covenant described under the
caption Incurrence of Indebtedness;
provided that such encumbrances and restrictions, taken as a
whole, in the good faith judgment of the Parents Board of
Directors, whose judgment shall be binding and evidenced by a
Board Resolution, either (x) are no more materially
restrictive with respect to such encumbrances and restrictions
than those contained in the existing agreements referenced in
clauses (1) and (2) above or (y) are ordinary and
customary for Indebtedness of that type at such time and will
not materially affect the Issuers ability to pay the
interest or principal, when due, on the Notes.
Merger,
Consolidation or Sale of Assets
The Parent will not, directly or indirectly:
(i) consolidate or merge with or into another Person
(whether or not the Parent is the surviving corporation) or
(ii) sell, assign, transfer, convey or otherwise dispose of
all or substantially all of the properties and assets of the
Parent and its Restricted Subsidiaries, taken as a whole, in one
or more related transactions, to another Person, unless:
(1) either: (a) the Parent is the surviving
corporation; or (b) the Person formed by or surviving any
such consolidation or merger (if other than the Parent) or to
which such sale, assignment, transfer, conveyance or other
disposition will have been made (i) is a corporation,
partnership or limited liability company organized or existing
under the laws of the United States, any state thereof or the
District of Columbia and (ii) assumes all the obligations
of the Parent under its Guarantee and the Indenture, pursuant to
agreements reasonably satisfactory to the Trustee;
(2) immediately after giving effect to such transaction, no
Default or Event of Default exists;
(3) immediately after giving effect to such transaction on
a pro forma basis, (a) the Parent (or the Person formed by
or surviving any such consolidation or merger with the Parent,
if other than the Parent, or the Person to which such sale,
assignment, transfer, conveyance or other disposition will have
been made) will be permitted to Incur at least $1.00 of
additional Indebtedness pursuant to the first paragraph of the
covenant described above under the caption
Incurrence of Indebtedness or
(b) the Consolidated Leverage Ratio for the Parent (or such
Person, as the case may be) will not be greater than the
Consolidated Leverage Ratio for the Parent immediately prior to
such transaction; and
40
(4) each Guarantor, unless such Guarantor is the Person
with which the Parent has entered into a transaction under this
covenant, will have by amendment to its Note Guarantee confirmed
that its Note Guarantee will apply to the obligations of the
Issuer in accordance with the Notes and the Indenture.
Upon any consolidation or merger, or any sale, assignment,
transfer, conveyance or other disposition of all or
substantially all of the assets of the Parent in accordance with
this covenant, the successor corporation formed by such
consolidation or into or with which the Parent is merged or to
which such sale, assignment, transfer, conveyance or other
disposition is made will succeed to, and be substituted for (so
that from and after the date of such consolidation, merger,
sale, assignment, conveyance or other disposition, the
provisions of the Indenture referring to the Parent
will refer instead to the successor corporation and not to the
Parent) and may exercise all rights and powers of, the Parent
under the Indenture with the same effect as if such successor
Person had been named as the Parent in the Indenture.
In addition, the Parent and its Restricted Subsidiaries may not,
directly or indirectly, lease all or substantially all of its
and its Restricted Subsidiaries properties or assets taken as a
whole, in one or more related transactions, to any other Person.
Clause (3) above of this covenant will not apply to
(x) any merger, consolidation or sale, assignment,
transfer, conveyance or other disposition of assets between or
among the Parent and any of Parents Restricted
Subsidiaries or (y) a merger of the Parent with an
Affiliate solely for the purpose of reincorporating the Parent
in another jurisdiction.
The Issuer will not, directly or indirectly:
(i) consolidate or merge with or into another Person
(whether or not the Issuer is the surviving corporation) or
(ii) sell, assign, transfer, convey or otherwise dispose of
all or substantially all of the properties and assets of the
Issuer and its Restricted Subsidiaries, taken as a whole, in one
or more related transactions, to another Person, unless:
(1) immediately after giving effect to that transaction, no
Default or Event of Default exists; and
(2) in the case of a consolidation or merger:
(a) either: (i) the Issuer is the surviving
corporation; or (ii) the Person formed by or surviving any
such consolidation or merger (if other than the Issuer )
(x) is a corporation, partnership or limited liability
company organized or existing under the laws of the
United States, any state thereof or the District of
Columbia and (y) assumes all the obligations of the Issuer
under the Notes and the Indenture, pursuant to agreements
reasonably satisfactory to the Trustee; provided that in
the case where such Person is not a corporation, a co-obligor of
the Notes is a corporation; and
(b) each Guarantor, unless such Guarantor is the Person
with which the Issuer has consolidated with or merged into, will
have by amendment to its Note Guarantee confirmed that its Note
Guarantee will apply to the obligations of the Issuer in
accordance with the Notes and the Indenture; or
(3) in the case of a sale, assignment, transfer, conveyance
or other disposition of all or substantially all of the
properties and assets of the Issuer and its Restricted
Subsidiaries, taken as a whole, either:
(a) (i) the Person acquiring the property in any such
sale, assignment, transfer, conveyance or other disposition
(x) is a corporation, partnership or limited liability
company organized or existing under the laws of the United
States, any state thereof or the District of Columbia and
(y) assumes all the obligations of the Issuer under the
Notes and the Indenture, pursuant to agreements reasonably
satisfactory to the Trustee; provided that in the case
where such Person is not a corporation, a co-obligor of the
Notes is a corporation; and
(ii) each Guarantor, unless such Guarantor is the Person
with which the Issuer has consolidated with or merged into, will
have by amendment to its Note Guarantee confirmed that its Note
Guarantee will apply to the obligations of the Issuer in
accordance with the Notes and the Indenture; or
41
(b) to the extent such properties and assets constitute all
or substantially all of the properties and assets of the Parent
and its Restricted Subsidiaries taken as a whole, such sale or
other disposition complies with the covenant described above
under the caption Repurchase at the Option of
Holders Asset Sales.
Upon any consolidation or merger of the Issuer in accordance
with this covenant, or any sale, assignment, transfer,
conveyance or other disposition of all or substantially all of
the assets of the Issuer in accordance with clause (3)(a) of
this covenant, the successor corporation formed by such
consolidation or into or with which the Issuer is merged or to
which such sale, assignment, transfer, conveyance or other
disposition is made will succeed to, and be substituted for (so
that from and after the date of such consolidation, merger,
sale, assignment, conveyance or other disposition, the
provisions of the Indenture referring to the Issuer
will refer instead to the successor corporation and not to the
Issuer, and may exercise all rights and powers of, the Issuer
under the Indenture with the same effect as if such successor
Person had been named as the Issuer in the Indenture.
In the event of any consolidation or merger between the Issuer
and the Parent in accordance with this covenant, the successor
corporation of such transaction (whether the Issuer or the
Parent) shall be deemed to be the Issuer for purposes of the
first paragraph of Incurrence of Indebtedness
covenant following such event.
Transactions
with Affiliates
The Parent will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into, make,
amend, renew or extend any transaction, contract, agreement,
understanding, loan, advance or Guarantee with, or for the
benefit of, any Affiliate (each, an Affiliate
Transaction), unless:
(1) such Affiliate Transaction is on terms that are no less
favorable to the Parent or the relevant Restricted Subsidiary
than those that would have been obtained in a comparable
arms-length transaction by the Parent or such Restricted
Subsidiary with a Person that is not an Affiliate of the Parent
or any of its Restricted Subsidiaries; and
(2) the Parent delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration
in excess of $25 million, a Board Resolution set forth in
an Officers Certificate certifying that such Affiliate
Transaction or series of related Affiliate Transactions complies
with this covenant and that such Affiliate Transaction or series
of related Affiliate Transactions has been approved by a
majority of the disinterested members of the Board of Directors
of the Parent; and
(b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration
in excess of $50 million, an opinion as to the fairness to
the Parent or such Restricted Subsidiary of such Affiliate
Transaction or series of related Affiliate Transactions from a
financial point of view issued by an independent accounting,
appraisal or investment banking firm of national standing.
The following items will not be deemed to be Affiliate
Transactions and, therefore, will not be subject to the
provisions of the prior paragraph:
(1) transactions between or among the Parent
and/or its
Restricted Subsidiaries;
(2) payment of reasonable and customary compensation to,
and reasonable and customary indemnification and similar
payments on behalf of, directors of the Parent;
(3) Permitted Investments and Restricted Payments that are
permitted by the provisions of the Indenture described above
under the caption Restricted Payments;
(4) any sale of Equity Interests (other than Disqualified
Stock) of the Parent or receipt of any capital contribution to
the Parent from any Affiliate of the Parent;
(5) transactions pursuant to agreements or arrangements in
effect on the Issue Date, or any amendment, modification, or
supplement thereto or replacement thereof, as long as such
42
agreement or arrangement, as so amended, modified, supplemented
or replaced, taken as a whole, is not materially more
disadvantageous to the Parent and its Restricted Subsidiaries
than the original agreement or arrangement in existence on the
Issue Date;
(6) any employment, consulting, service or termination
agreement or arrangement, or indemnification arrangements,
entered into by the Parent or any of its Restricted Subsidiaries
with current or former directors, officers and employees of the
Parent or any of its Restricted Subsidiaries and the payment of
compensation to current or former directors, officers and
employees of the Parent or any of its Restricted Subsidiaries
(including amounts paid pursuant to employee benefit plans,
employee stock option or similar plans), so long as such
agreement, arrangement, plan or payment has been approved by a
majority of the disinterested members of the Board of Directors
of the Parent;
(7) issuances, purchases or repurchases of Notes or other
Indebtedness of the Parent or its Restricted Subsidiaries or
solicitations of amendments, waivers or consents in respect of
Notes or such other Indebtedness, so long as such issuance,
purchase, repurchase or solicitation is (i) offered
generally to other holders of the Notes or other Indebtedness on
the same or more favorable terms and (ii) approved by a
majority of the disinterested members of the Board of Directors
of the Parent;
(8) transactions with any Person that is an Affiliate of
the Parent solely by reason of the Parents ownership
interest in such Person in the ordinary course of business and
otherwise in compliance with the terms of the Indenture which
are fair to the Parent and its Restricted Subsidiaries, in the
reasonable determination of the Parent, or are on terms at least
as favorable as might reasonably have been obtained at such time
from an unaffiliated party; and
(9) reasonable and customary payments made for any
financial advisory, financing, underwriting, placement or
syndication services approved by the Board of Directors of the
Parent in good faith.
Designation of
Restricted and Unrestricted Subsidiaries
The Board of Directors of the Parent may designate any
Restricted Subsidiary of the Parent, other than the Issuer, to
be an Unrestricted Subsidiary; provided that:
(1) any Guarantee by the Parent or any Restricted
Subsidiary thereof of any Indebtedness of the Subsidiary being
so designated will be deemed to be an Incurrence of Indebtedness
by the Parent or such Restricted Subsidiary (or both, if
applicable) at the time of such designation, and such Incurrence
of Indebtedness would be permitted under the covenant described
above under the caption Incurrence of
Indebtedness;
(2) the aggregate Fair Market Value of all outstanding
Investments owned by the Parent and its Restricted Subsidiaries
in the Subsidiary being so designated (including any Guarantee
by the Parent or any Restricted Subsidiary thereof of any
Indebtedness of such Subsidiary) and any commitments to make any
such Investments will be deemed to be an Investment made as of
the time of such designation and that such Investment would be
permitted under the covenant described above under the caption
Restricted Payments;
(3) such Subsidiary does not hold any Liens on any property
of the Parent or any Restricted Subsidiary thereof;
(4) the Subsidiary being so designated:
(a) is not party to any agreement, contract, arrangement or
understanding with the Parent or any Restricted Subsidiary of
the Parent unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Parent
or such Restricted Subsidiary than those that could have been
obtained at the time the agreement, contract, arrangement or
understanding was entered into from Persons who are not
Affiliates of the Parent (other than any such agreement,
contract, arrangement or understanding permitted under the
covenant described under the caption Certain
Covenants Transactions with
Affiliates), and
43
(b) has not Guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of the Parent or
any of its Restricted Subsidiaries, except to the extent such
Guarantee or credit support would be released upon such
designation; and
(5) no Default or Event of Default would be in existence
following such designation.
Any designation of a Subsidiary of the Parent as an Unrestricted
Subsidiary will be evidenced to the Trustee by filing with the
Trustee the Board Resolution giving effect to such designation
and an Officers Certificate certifying that such
designation complied with the preceding conditions and was
permitted by the Indenture. If, at any time, any Unrestricted
Subsidiary would fail to meet any of the preceding requirements
described in clause (4) above, it will thereafter cease to
be an Unrestricted Subsidiary for purposes of the Indenture and
any Indebtedness, Investments, or Liens on the property, of such
Subsidiary will be deemed to be Incurred or made by a Restricted
Subsidiary of the Parent as of such date and, if such
Indebtedness, Investments or Liens are not permitted to be
Incurred or made as of such date under the Indenture, the Parent
will be in default under the Indenture.
The Board of Directors of the Parent may at any time designate
any Person that is about to become a Subsidiary of the Parent as
an Unrestricted Subsidiary, and may designate any newly created
Subsidiary as an Unrestricted Subsidiary, if at the time that
Subsidiary is created it contains no assets, other than the
de minimis amount of assets then required by law for the
formation of corporations, and Subsidiaries of the Parent that
are not designated by the Board of Directors as Restricted or
Unrestricted will be deemed to be Restricted Subsidiaries.
The Board of Directors of the Parent may at any time designate
any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that:
(1) such designation will be deemed to be an Incurrence of
Indebtedness by a Restricted Subsidiary of the Parent of any
outstanding Indebtedness of such Unrestricted Subsidiary and
such designation will only be permitted if such Indebtedness is
permitted under the covenant described under the caption
Incurrence of Indebtedness;
(2) all outstanding Investments owned by such Unrestricted
Subsidiary will be deemed to be made as of the time of such
designation and such designation will only be permitted if such
Investments would be permitted under the covenant described
above under the caption Restricted
Payments;
(3) all Liens upon property or assets of such Unrestricted
Subsidiary existing at the time of such designation would be
permitted under the caption
Liens; and
(4) no Default or Event of Default would be in existence
following such designation.
Note
Guarantees
The Parent will cause each of its First Tier Restricted
Subsidiaries and each of its Domestic Restricted Subsidiaries to
Guarantee the payment of the Notes.
In addition, the Parent will not permit any of its Restricted
Subsidiaries, directly or indirectly, to Guarantee or pledge any
assets to secure the payment of any other Indebtedness of the
Parent, the Issuer or any Subsidiary Guarantor unless such
Restricted Subsidiary is the Issuer or a Subsidiary Guarantor or
simultaneously executes and delivers to the Trustee an Opinion
of Counsel and a supplemental indenture providing for the
Guarantee of the payment of the Notes (a Note
Guarantee) by such Restricted Subsidiary, which Note
Guarantee will be pari passu with or, if such other
Indebtedness is subordinated to the Notes or any Note
Guarantees, senior to such Subsidiarys Guarantee of such
other Indebtedness.
A Subsidiary Guarantor may not sell or otherwise dispose of all
or substantially all of its assets to, or consolidate with or
merge with or into (whether or not such Subsidiary Guarantor is
the surviving Person), another Person, other than the Parent,
the Issuer or another Subsidiary Guarantor, unless:
(1) immediately after giving effect to that transaction, no
Default or Event of Default exists; and
44
(2) either:
(a) the Person acquiring the property in any such sale or
disposition or the Person formed by or surviving any such
consolidation or merger (if other than the Subsidiary Guarantor)
is organized or existing under the laws of the United States,
any state thereof or the District of Columbia and assumes all
the obligations of that Subsidiary Guarantor under the Indenture
and its Note Guarantee pursuant to a supplemental indenture
satisfactory to the Trustee; or
(b) such sale or other disposition or consolidation or
merger complies with the covenant described above under the
caption Repurchase at the Option of
Holders Asset Sales.
The Note Guarantee of a Subsidiary Guarantor will be released:
(1) in connection with any sale or other disposition of all
of the Capital Stock of a Subsidiary Guarantor to a Person that
is not (either before or after giving effect to such
transaction) a Restricted Subsidiary of the Parent, if the sale
of all such Capital Stock of that Subsidiary Guarantor complies
with the covenant described above under the caption
Repurchase at the Option of
Holders Asset Sales;
(2) if the Parent properly designates any Restricted
Subsidiary that is a Subsidiary Guarantor as an Unrestricted
Subsidiary under the Indenture;
(3) upon legal or covenant defeasance or satisfaction and
discharge of the Notes as permitted under the Indenture;
(4) other than with respect to Domestic Restricted
Subsidiaries, solely in the case of a Note Guarantee created
pursuant to the second paragraph of this covenant, upon release
or discharge of the Guarantee which resulted in the creation of
such Note Guarantee pursuant to this covenant, except a
discharge or release by or as a result of payment under such
Guarantees; or
(5) if such Subsidiary Guarantor becomes a Foreign
Restricted Subsidiary by merger, consolidation or otherwise,
unless such Foreign Restricted Subsidiary (i) is a First
Tier Restricted Subsidiary or (ii) is required to Guarantee
the Notes and be a Subsidiary Guarantor pursuant to the second
paragraph of this covenant.
Business
Activities
The Parent will not, and will not permit any Restricted
Subsidiary thereof to, engage in any business other than
Permitted Businesses, except to such extent as would not be
material to the Parent and its Restricted Subsidiaries taken as
a whole. The Parent shall be a holding company substantially all
of the assets of which will consist of the Capital Stock of its
Subsidiaries, loans to the Issuer or any Subsidiary Guarantor
and cash and Cash Equivalents.
Payments for
Consent
The Parent will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, pay or cause to be paid
any consideration to or for the benefit of any Holder of Notes
for or as an inducement to any consent, waiver or amendment of
any of the terms or provisions of the Indenture or the Notes
unless such consideration is offered to be paid and is paid to
all Holders of the Notes that consent, waive or agree to amend
in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
Reports
Each of the Parent and the Issuer will furnish to the Trustee
and, upon written request, to beneficial owners and prospective
investors a copy of all of the information and reports referred
to in clauses (1) and (2) below within the time
periods specified in the Commissions rules and regulations
(including all applicable extension periods):
(1) all quarterly and annual financial information that
would be required to be contained in a filing with the
Commission on
Forms 10-Q
and 10-K if
it were required to file such Forms, including a
Managements Discussion and Analysis of Financial
Condition and Results of
45
Operations and, with respect to the annual information
only, a report on the annual financial statements by its
certified independent accountants; and
(2) all current reports that would be required to be filed
with the Commission on
Form 8-K
if it were required to file such reports.
Whether or not required by the Commission, the Parent and the
Issuer will comply with the periodic reporting requirements of
the Exchange Act and will file the reports specified in the
preceding paragraph with the Commission within the time periods
specified above unless the Commission will not accept such a
filing. To the extent such filings are made, the reports will be
deemed to be furnished to the Trustee and the Holders of the
Notes. The Parent and the Issuer each agrees that it will not
take any action for the purpose of causing the Commission not to
accept any such filings. If, notwithstanding the foregoing, the
Commission will not accept the Parents or Issuers
filings for any reason, the Parent or the Issuer, as the case
may be, will post the reports referred to in the preceding
paragraph on its website within the time periods that would
apply if the Parent or the Issuer were required to file those
reports with the Commission (including all applicable extension
periods).
If the Parent has designated any of its Subsidiaries as
Unrestricted Subsidiaries, then the quarterly and annual
financial information required by this covenant will include a
summary presentation, either on the face of the financial
statements or in the footnotes thereto, or in
Managements Discussion and Analysis of Financial
Condition and Results of Operations, of the revenues, net
income, total assets and total liabilities of the Parent and its
Restricted Subsidiaries separate from the revenues, net income,
total assets and total liabilities of the Unrestricted
Subsidiaries of the Parent, provided that the foregoing
will not apply if the Subsidiaries that the Parent has
designated as Unrestricted Subsidiaries in the aggregate do not
constitute a Significant Subsidiary as such term is
defined under
Rule 1-02(w)
of
Regulation S-X
under the Exchange Act.
Notwithstanding the foregoing, so long as the Parent is a
Guarantor, the reports, information and other documents required
to be filed and provided by the Issuer as described above will
be satisfied by those of Parent, so long as such filings would
satisfy the Commissions requirements.
Notwithstanding anything herein to the contrary, neither the
Parent nor the Issuer will be deemed to have failed to comply
with any of its obligations hereunder for purposes of
clause (4) under Events of Default and Remedies
until 120 days after the date any report hereunder is due.
Events of Default
and Remedies
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of
interest on the Notes;
(2) default in payment when due (whether at maturity, upon
acceleration, redemption, required repurchase or otherwise) of
the principal of, or premium, if any, on the Notes;
(3) failure by the Parent, the Issuer or any Restricted
Subsidiaries of the Parent for 30 days after written notice
to the Parent by the Trustee or the Holders of at least 25% in
aggregate principal amount of Notes then outstanding to comply
with the provisions described under the captions
Repurchase at the Option of
Holders Change of Control, or
Repurchase at the Option of
Holders Asset Sales, (in each case other than
a failure to purchase Notes which will constitute an Event of
Default under clause (2) above) or the failure by the
Parent or the Issuer to comply with the provisions described
under Certain Covenants Merger,
Consolidation or Sale of Assets;
(4) failure by the Parent, the Issuer or any Restricted
Subsidiary of the Parent for 60 days after written notice
to the Parent by the Trustee or the Holders of at least 25% in
aggregate principal amount of Notes then outstanding to comply
with any of the other agreements in the Indenture;
(5) default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured
or evidenced any Indebtedness by the Parent, the Issuer or any
Restricted Subsidiary that is a Significant Subsidiary of the
Parent (or the payment of which is Guaranteed by the Parent, the
Issuer or any Restricted Subsidiary that is a Significant
46
Subsidiary of the Parent) whether such Indebtedness or Guarantee
now exists, or is created after the Issue Date, if that default:
(a) is caused by a failure to make any payment when due at
the final maturity of such Indebtedness (a Payment
Default); or
(b) results in the acceleration of such Indebtedness prior
to its express maturity, and,
in each case, such default shall not have been rescinded or such
Indebtedness shall not have been discharged within 10 days
and the amount of any such Indebtedness, together with the
amount of any other such Indebtedness under which there has been
a Payment Default or the maturity of which has been so
accelerated, aggregates $50 million or more;
(6) failure by the Parent, the Issuer or any Restricted
Subsidiary that is a Significant Subsidiary of the Parent to pay
final judgments (to the extent such judgments are not paid or
covered by insurance provided by a reputable carrier)
aggregating in excess of $50 million, which judgments are
not paid, discharged or stayed for a period of 60 days;
(7) except as permitted by the Indenture, any Note
Guarantee is held in any judicial proceeding to be unenforceable
or invalid or ceases for any reason to be in full force and
effect or any Guarantor, or any Person acting on behalf of any
Guarantor, denies or disaffirms its obligations under its Note
Guarantee; and
(8) certain events of bankruptcy or insolvency with respect
to the Parent, the Issuer, or any Significant Subsidiary of the
Parent.
In the case of an Event of Default under clause (8), all
outstanding Notes will become due and payable immediately
without further action or notice. If any other Event of Default
occurs and is continuing, the Trustee or the Holders of at least
25% in aggregate principal amount of the then outstanding Notes
may declare all the Notes to be due and payable immediately by
notice in writing to the Parent specifying the Event of Default.
Holders of the Notes may not enforce the Indenture or the Notes
except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in aggregate principal amount
of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any Default or Event of Default
(except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice
is in their interest.
The Holders of a majority in aggregate principal amount of the
Notes then outstanding by notice to the Trustee may on behalf of
the Holders of all of the Notes waive any existing Default or
Event of Default and its consequences under the Indenture except
a continuing Default or Event of Default in the payment of
interest on, or the principal of, the Notes. The Holders of a
majority in aggregate principal amount of the then outstanding
Notes will have the right to direct the time, method and place
of conducting any proceeding for exercising any remedy available
to the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or the Indenture, that may
involve the Trustee in personal liability, or that the Trustee
determines in good faith may be unduly prejudicial to the rights
of Holders of Notes not joining in the giving of such direction
and may take any other action it deems proper that is not
inconsistent with any such direction received from Holders of
Notes. A Holder may not pursue any remedy with respect to the
Indenture or the Notes unless:
(1) the Holder gives the Trustee written notice of a
continuing Event of Default;
(2) the Holders of at least 25% in aggregate principal
amount of then outstanding Notes make a written request to the
Trustee to pursue the remedy;
(3) such Holder or Holders offer the Trustee indemnity
satisfactory to the Trustee against any costs, liability or
expense;
(4) the Trustee does not comply with the request within
60 days after receipt of the request and the offer of
indemnity; and
(5) during such
60-day
period, the Holders of a majority in aggregate principal amount
of the outstanding Notes do not give the Trustee a direction
that is inconsistent with the request.
47
However, such limitations do not apply to the right of any
Holder of a Note to receive payment of the principal of or
premium or interest on, such Note or to bring suit for the
enforcement of any such payment, on or after the due date
expressed in the Notes, which right will not be impaired or
affected without the consent of the Holder.
The Parent is required to deliver to the Trustee annually within
90 days after the end of each fiscal year a statement
regarding compliance with the Indenture. Upon becoming aware of
any Default or Event of Default, the Parent is required to
deliver to the Trustee a statement specifying such Default or
Event of Default, and in any event, no later than 5 Business
Days.
No Personal
Liability of Directors, Officers, Employees and
Stockholders
No director, officer, employee, incorporator, stockholder,
member, manager or partner of the Issuer or any Guarantor, as
such, will have any liability for any obligations of the Issuer
or the Guarantors under the Notes, the Indenture, the Note
Guarantees or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of
Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration
for issuance of the Notes. The waiver may not be effective to
waive liabilities under the federal securities laws.
Legal Defeasance
and Covenant Defeasance
The Issuer may, at its option and at any time, elect to have all
of its obligations discharged with respect to the outstanding
Notes and all obligations of the Guarantors discharged with
respect to their Note Guarantees (Legal Defeasance)
except for:
(1) the rights of Holders of outstanding Notes to receive
payments in respect of the principal of, or interest or premium
on, such Notes when such payments are due from the trust
referred to below;
(2) the Issuers obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance
of an office or agency for payment and money for security
payments held in trust;
(3) the rights, powers, trusts, duties and immunities of
the Trustee, and the Issuers and any Guarantors
obligations in connection therewith; and
(4) the Legal Defeasance provisions of the Indenture.
In addition, the Issuer may, at its option and at any time,
elect to have the obligations of the Parent and the its
Restricted Subsidiaries released with respect to certain
covenants that are described in the Indenture (Covenant
Defeasance) and thereafter any omission to comply with
those covenants will not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events (not including non- payment,
bankruptcy, receivership, rehabilitation and insolvency events)
described under Events of Default will no longer
constitute Events of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(1) the Issuer must irrevocably deposit with the Trustee,
in trust, for the benefit of the Holders of the Notes, cash in
U.S. dollars, non-callable Government Securities, or a
combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent
public accountants, to pay the principal of and interest and
premium on the outstanding Notes on the Stated Maturity or on
the applicable redemption date, as the case may be, and the
Issuer must specify whether the Notes are being defeased to
maturity or to a particular redemption date;
(2) in the case of Legal Defeasance, the Issuer will have
delivered to the Trustee an Opinion of Counsel reasonably
acceptable to the Trustee confirming that (a) the Issuer
has received from, or there has been published by, the Internal
Revenue Service (the IRS) a ruling or (b) since
the Issue Date, there has been a change in the applicable
U.S. federal income tax law, in either case to the effect
that, and based thereon such Opinion of Counsel will confirm
that, the Holders of the outstanding Notes will not recognize
income, gain or loss for U.S. federal income tax purposes
as a result of such Legal Defeasance and will be subject to
U.S. federal
48
income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance
had not occurred;
(3) in the case of Covenant Defeasance, the Issuer will
have delivered to the Trustee an Opinion of Counsel reasonably
acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for
U.S. federal income tax purposes as a result of such
Covenant Defeasance and will be subject to U.S. federal
income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant
Defeasance had not occurred;
(4) no Default or Event of Default will have occurred and
be continuing either: (a) on the date of such deposit; or
(b) insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period
ending on the
123rd day
after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not
result in a breach or violation of, or constitute a default
under any material agreement or instrument to which the Parent
or any of its Subsidiaries is a party or by which the Parent or
any of its Subsidiaries is bound;
(6) the Issuer must have delivered to the Trustee an
Opinion of Counsel to the effect that, (1) assuming no
intervening bankruptcy of the Parent, the Issuer or any
Subsidiary Guarantor between the date of deposit and the
123rd day
following the deposit and assuming that no Holder is an
insider of the Parent, the Issuer or any Subsidiary
Guarantor under applicable bankruptcy law, after the
123rd day
following the deposit, the trust funds will not be subject to
the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors rights
generally, including Section 547 of the United States
Bankruptcy Code and Section 15 of the New York Debtor and
Creditor Law and (2) the creation of the defeasance trust
does not violate the Investment Company Act of 1940;
(7) the Issuer must deliver to the Trustee an
Officers Certificate stating that the deposit was not made
by the Issuer with the intent of preferring the Holders over the
other creditors of the Issuer or any Guarantor with the intent
of defeating, hindering, delaying or defrauding creditors of the
Issuer, any Guarantor or others;
(8) if the Notes are to be redeemed prior to their Stated
Maturity, the Issuer must deliver to the Trustee irrevocable
instructions to redeem all of the Notes on the specified
redemption date; and
(9) the Issuer must deliver to the Trustee an
Officers Certificate and an Opinion of Counsel, each
stating that all conditions precedent relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
Amendment,
Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the
Indenture or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in aggregate
principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a
purchase of, or tender offer or exchange offer for, Notes), and
any existing default or compliance with any provision of the
Indenture or the Notes may be waived with the consent of the
Holders of a majority in aggregate principal amount of the then
outstanding Notes (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or
exchange offer for, Notes).
Without the consent of each Holder affected, an amendment or
waiver may not:
(1) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of
any Note or alter the provisions, or waive any payment, with
respect to the redemption of the Notes;
(3) amend, change or modify the obligation of the Issuer to
make and consummate an Asset Sale Offer with respect to any
Asset Sale in accordance with the covenant described under the
caption Repurchase at the Option of Holders
Asset Sales after the obligation to make such Asset Sale
Offer has arisen, or the obligation of the Issuer to make and
consummate
49
a Change of Control Offer in the event of a Change of Control in
accordance with the covenant described under the caption
Repurchase at the Option of Holders Change of
Control after such Change of Control has occurred,
including, in each case, amending, changing or modifying any
definition relating thereto;
(4) reduce the rate of or change the time for payment of
interest on any Note;
(5) waive a Default or Event of Default in the payment of
principal of, or interest or premium on, the Notes (except a
rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the then
outstanding Notes and a waiver of the payment default that
resulted from such acceleration);
(6) make any Note payable in money other than
U.S. dollars;
(7) make any change in the provisions of the Indenture
relating to waivers of past Defaults or the rights of Holders of
Notes to receive payments of principal of, or interest or
premium on, the Notes;
(8) release any Guarantor from any of its obligations under
its Note Guarantee or the Indenture, except in accordance with
the terms of the Indenture;
(9) impair the right to institute suit for the enforcement
of any payment on or with respect to the Notes or any Note
Guarantee;
(10) except as otherwise permitted under the covenants
described under the captions Certain
Covenants Merger, Consolidation and Sale of
Assets and Certain Covenants
Note Guarantees, consent to the assignment or transfer by
the Parent, the Issuer or any Subsidiary Guarantor of any of
their rights or obligations under the Indenture;
(11) contractually subordinate in right of payment the
Notes or any Note Guarantee to any other Indebtedness; or
(12) make any change in the preceding amendment and waiver
provisions.
Notwithstanding the preceding, without the consent of any Holder
of Notes, the Issuer, the Guarantors and the Trustee may amend
or supplement the Indenture or the Notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or
in place of certificated Notes;
(3) to provide for the assumption of the Parents, the
Issuers or any Subsidiary Guarantors obligations to
Holders of Notes in the case of a merger or consolidation or
sale of all or substantially all of the Parents, the
Issuers or such Subsidiary Guarantors assets;
(4) to make any change that would provide any additional
rights or benefits to the Holders of Notes or that does not
materially adversely affect the legal rights under the Indenture
of any such Holder;
(5) to comply with requirements of the Commission in order
to effect or maintain the qualification of the Indenture under
the Trust Indenture Act;
(6) to comply with the provisions described under
Certain Covenants Note
Guarantees;
(7) to evidence and provide for the acceptance of
appointment by a successor Trustee;
(8) to provide for the issuance of Additional Notes in
accordance with the Indenture; or
(9) to conform the text of the Indenture or the Notes to
any provision of the Description of Notes to the
extent such provision in the Description of Notes
was intended to be a verbatim recitation of a provision of the
Indenture.
Satisfaction and
Discharge
The Indenture will be discharged and will cease to be of further
effect as to all Notes issued thereunder, when:
(1) either:
(a) all Notes that have been authenticated (except lost,
stolen or destroyed Notes that have been replaced or paid and
Notes for whose payment money has theretofore been
50
deposited in trust and thereafter repaid to the Issuer) have
been delivered to the Trustee for cancellation; or
(b) all Notes that have not been delivered to the Trustee
for cancellation have become due and payable by reason of the
mailing of a notice of redemption or otherwise or will become
due and payable within one year and the Issuer or any Guarantor
has irrevocably deposited or caused to be deposited with the
Trustee as trust funds in trust solely for the benefit of the
Holders, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be
sufficient without consideration of any reinvestment of
interest, to pay and discharge the entire indebtedness on the
Notes not delivered to the Trustee for cancellation for
principal, premium and accrued interest to the date of maturity
or redemption;
(2) no Default or Event of Default will have occurred and
be continuing on the date of such deposit or will occur as a
result of such deposit and such deposit will not result in a
breach or violation of, or constitute a default under, any other
instrument to which the Parent, the Issuer or any Subsidiary
Guarantor is a party or by which the Parent, the Issuer or any
Subsidiary Guarantor is bound;
(3) the Issuer or any Guarantor has paid or caused to be
paid all sums payable by it under the Indenture; and
(4) the Issuer has delivered irrevocable instructions to
the Trustee under the Indenture to apply the deposited money
toward the payment of the Notes at maturity or the redemption
date, as the case may be.
In addition, the Parent or the Issuer, as the case may be, must
deliver an Officers Certificate and an Opinion of Counsel
to the Trustee stating that all conditions precedent to
satisfaction and discharge have been satisfied.
Concerning the
Trustee
If the Trustee becomes a creditor of the Issuer or any
Guarantor, the Indenture and the Trust Indenture Act limit
its right to obtain payment of claims in certain cases, or to
realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to
engage in other transactions; however, if it acquires any
conflicting interest it must eliminate such conflict within
90 days, apply to the Commission for permission to continue
or resign.
The Indenture provides that in case an Event of Default will
occur and be continuing, the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent
man in the conduct of his own affairs. Subject to such
provisions, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request
of any Holder of Notes, unless such Holder will have offered to
the Trustee security and indemnity satisfactory to it against
any loss, liability or expense.
Book-Entry,
Delivery and Form
Except as set forth below, Notes will be issued in registered,
global form in minimum denominations of $2,000 and integral
multiples of $1,000 in excess thereof; provided that Notes may
be issuable in denominations less than $1,000 solely to the
extent necessary to accommodate book-entry positions created in
such amounts by DTC. Notes will be issued at the closing of this
offering only against payment in immediately available funds.
The Notes initially will be represented by one or more Notes in
registered, global form without interest coupons (collectively,
the Global Notes). The Global Notes will be
deposited upon issuance with the Trustee as custodian for The
Depository Trust Company (DTC), and registered
in the name of DTC or its nominee, in each case for credit to an
account of a direct or indirect participant in DTC (including,
if applicable, Euroclear Bank, S.A./N.V. as operator of the
Euroclear System (Euroclear) and Clearstream
Banking, S.A. (Clearstream)).
Except as set forth below, the Global Notes may be transferred,
in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. Beneficial interests in the
Global
51
Notes may not be exchanged for Notes in certificated form,
except in the circumstances described below. See
Exchange of Book-Entry Notes for Certificated
Notes.
In addition, transfers of beneficial interests in the Global
Notes will be subject to the applicable rules and procedures of
DTC and its direct or indirect participants (including, if
applicable, those of Euroclear and Clearstream), which may
change from time to time.
Depository
Procedures
The following description of the operations and procedures of
DTC, Euroclear and Clearstream are provided solely as a matter
of convenience. These operations and procedures are solely
within the control of the respective settlement systems and are
subject to changes by them. The Issuer takes no responsibility
for these operations and procedures and urges investors to
contact the system or their participants directly to discuss
these matters.
DTC has advised the Issuer that DTC is a limited-purpose trust
company created to hold securities for its participating
organizations (collectively, the Participants) and
to facilitate the clearance and settlement of transactions in
those securities between Participants through electronic
book-entry changes in accounts of its Participants. The
Participants include securities brokers and dealers (including
the Underwriters), banks, trust companies, clearing corporations
and certain other organizations. Access to DTCs system is
also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly
(collectively, the Indirect Participants). Persons
who are not Participants may beneficially own securities held by
or on behalf of DTC only through the Participants or the
Indirect Participants. The ownership interests in, and transfers
of ownership interests in, each security held by or on behalf of
DTC are recorded on the records of the Participants and Indirect
Participants.
DTC has also advised the Issuer that, pursuant to procedures
established by it:
(1) upon deposit of the Global Notes, DTC will credit the
accounts of Participants designated by the Underwriters with
portions of the principal amount of the Global Notes; and
(2) ownership of these interests in the Global Notes will
be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect
to the Participants) or by the Participants and the Indirect
Participants (with respect to other owners of beneficial
interest in the Global Notes).
Investors in the Global Notes who are Participants in DTCs
system may hold their interests therein directly through DTC.
Investors in the Global Notes who are not Participants may hold
their interests therein indirectly through organizations
(including Euroclear and Clearstream) which are Participants in
such system. Euroclear and Clearstream will hold interests in
certain Global Notes on behalf of their participants through
customers securities accounts in their respective names on
the books of their respective depositories, which are Euroclear
Bank, S.A./N.V., as operator of Euroclear, and Citibank, N.A.,
as operator of Clearstream. All interests in a Global Note,
including those held through Euroclear and Clearstream, may be
subject to the procedures and requirements of DTC. Those
interests held through Euroclear or Clearstream may also be
subject to the procedures and requirements of such systems. The
laws of some states require that certain persons take physical
delivery in definitive form of securities that they own.
Consequently, the ability to transfer beneficial interests in a
Global Note to such persons will be limited to that extent.
Because DTC can act only on behalf of Participants, which in
turn act on behalf of Indirect Participants, the ability of a
person having beneficial interest in a Global Note to pledge
such interests to persons that do not participate in the DTC
system, or otherwise take actions in respect of such interests,
may be affected by the lack of a physical certificate evidencing
such interests.
Except as described below, owners of interests in the Global
Notes will not have Notes registered in their names, will not
receive physical delivery of Notes in certificated form and will
not be considered the registered owners or Holders
thereof under the Indenture for any purpose.
Payments in respect of the principal of, and interest and
premium, if any, on a Global Note registered in the name of DTC
or its nominee will be payable to DTC in its capacity as the
registered Holder under the Indenture. Under the terms of the
Indenture, the Issuer, the Guarantors and the
52
Trustee will treat the Persons in whose names the Notes,
including the Global Notes, are registered as the owners thereof
for the purpose of receiving payments and for all other
purposes. Consequently, neither the Issuer, the Guarantors, the
Trustee nor any agent of the Issuer, the Guarantors or the
Trustee has or will have any responsibility or liability for:
(1) any aspect of DTCs records or any
Participants or Indirect Participants records
relating to or payments made on account of beneficial ownership
interest in the Global Notes or for maintaining, supervising or
reviewing any of DTCs records or any Participants or
Indirect Participants records relating to the beneficial
ownership interests in the Global Notes; or
(2) any other matter relating to the actions and practices
of DTC or any of its Participants or Indirect Participants.
DTC has advised the Issuer that its current practice, upon
receipt of any payment in respect of securities such as the
Notes (including principal and interest), is to credit the
accounts of the relevant Participants with the payment on the
payment date unless DTC has reason to believe it will not
receive payment on such payment date. Each relevant Participant
is credited with an amount proportionate to its beneficial
ownership of an interest in the principal amount of the relevant
security as shown on the records of DTC. Payments by the
Participants and the Indirect Participants to the beneficial
owners of Notes will be governed by standing instructions and
customary practices and will be the responsibility of the
Participants or the Indirect Participants and will not be the
responsibility of DTC, the Trustee, the Issuer or the
Guarantors. Neither the Issuer, the Guarantors nor the Trustee
will be liable for any delay by DTC or any of its Participants
in identifying the beneficial owners of the Notes, and the
Issuer, the Guarantors and the Trustee may conclusively rely on
and will be protected in relying on instructions from DTC or its
nominee for all purposes.
Transfers between Participants in DTC will be effected in
accordance with DTCs procedures, and will be settled in
same-day
funds, and transfers between participants in Euroclear and
Clearstream will be effected in accordance with their respective
rules and operating procedures.
Cross-market transfers between the Participants in DTC, on the
one hand, and Euroclear or Clearstream participants, on the
other hand, will be effected through DTC in accordance with
DTCs rules on behalf of Euroclear or Clearstream, as the
case may be, by its respective depositary; however, such
cross-market transactions will require delivery of instructions
to Euroclear or Clearstream, as the case may be, by the
counterparty in such system in accordance with the rules and
procedures and within the established deadlines (Brussels time)
of such system. Euroclear or Clearstream, as the case may be,
will, if the transaction meets its settlement requirements,
deliver instructions to its respective depositary to take action
to effect final settlement on its behalf by delivering or
receiving interests in the relevant Global Note in DTC, and
making or receiving payment in accordance with normal procedures
for same-day
funds settlement applicable to DTC. Euroclear participants and
Clearstream participants may not deliver instructions directly
to the depositories for Euroclear or Clearstream.
DTC has advised the Issuer that it will take any action
permitted to be taken by a Holder of Notes only at the direction
of one or more Participants to whose account DTC has credited
the interests in the Global Notes and only in respect of such
portion of the aggregate principal amount of the Notes as to
which such Participant or Participants has or have given such
direction. However, if there is an Event of Default under the
Notes, DTC reserves the right to exchange the Global Notes for
legended Notes in certificated form, and to distribute such
Notes to its Participants.
Although DTC, Euroclear and Clearstream have agreed to the
foregoing procedures to facilitate transfers of interests in the
Global Notes among participants in DTC, Euroclear and
Clearstream, they are under no obligation to perform or to
continue to perform such procedures, and may discontinue such
procedures at any time. Neither the Issuer, the Guarantors nor
the Trustee nor any of their respective agents will have any
responsibility for the performance by DTC, Euroclear or
Clearstream or their respective participants or indirect
participants of their respective obligations under the rules and
procedures governing their operations.
53
Exchange of
Global Notes for Certificated Notes
A Global Note is exchangeable for definitive Notes in registered
certificated form (Certificated Notes) if:
(1) DTC (a) notifies the Issuer that it is unwilling
or unable to continue as depositary for the Global Notes or
(b) has ceased to be a clearing agency registered under the
Exchange Act, and in each case the Issuer fails to appoint a
successor depositary;
(2) the Issuer, at its option, notifies the Trustee in
writing that it elects to cause the issuance of Certificated
Notes (DTC has advised the Issuer that, in such event, under its
current practices, DTC would notify its Participants of the
Issuers request, but will only withdraw beneficial
interests from a Global Note at the request of each DTC
Participant); or
(3) there will have occurred and be continuing a Default or
Event of Default with respect to the Notes.
In addition, beneficial interests in a Global Note may be
exchanged for Certificated Notes upon prior written notice given
to the Trustee by or on behalf of DTC in accordance with the
Indenture. In all cases, Certificated Notes delivered in
exchange for any Global Note or beneficial interests in Global
Notes will be registered in the names, and issued in any
approved denominations, requested by or on behalf of the
depositary (in accordance with its customary procedures).
Same Day
Settlement and Payment
The Issuer will make payments in respect of the Notes
represented by the Global Notes (including principal, premium,
if any, and interest) by wire transfer of immediately available
funds to the accounts specified by the Global Note Holder. The
Issuer will make all payments of principal, interest and premium
with respect to Certificated Notes by wire transfer of
immediately available funds to the accounts specified by the
Holders thereof or, if no such account is specified, by mailing
a check to each such Holders registered address. The Notes
represented by the Global Notes are expected to trade in
DTCs
Same-Day
Funds Settlement System, and any permitted secondary market
trading activity in such Notes will, therefore, be required by
DTC to be settled in immediately available funds. The Issuer
expects that secondary trading in any Certificated Notes will
also be settled in immediately available funds.
Because of time zone differences, the securities account of a
Euroclear or Clearstream participant purchasing an interest in a
Global Note from a Participant in DTC will be credited, and any
such crediting will be reported to the relevant Euroclear or
Clearstream participant, during the securities settlement
processing day (which must be a business day for Euroclear and
Clearstream) immediately following the settlement date of DTC.
DTC has advised the Issuer that cash received in Euroclear or
Clearstream as a result of sales of interests in a Global Note
by or through a Euroclear or Clearstream participant to a
Participant in DTC will be received with value on the settlement
date of DTC but will be available in the relevant Euroclear or
Clearstream cash account only as of the business day for
Euroclear or Clearstream following DTCs settlement date.
Certain
Definitions
Set forth below are certain defined terms used in the Indenture.
Reference is made to the Indenture for a full disclosure of all
such terms, as well as any other capitalized terms used herein
for which no definition is provided.
Acquired Indebtedness means
Indebtedness of a Person existing at the time such Person
becomes a Restricted Subsidiary or merges with or into the
Parent or any of its Restricted Subsidiaries or which is assumed
by the Parent or any of its Restricted Subsidiaries in
connection with an Asset Acquisition and not incurred in
connection with, or in anticipation of, such Person becoming a
Restricted Subsidiary or such Asset Acquisition. The term
Acquired Indebtedness does not include Indebtedness
of a Person which is redeemed, defeased, retired or otherwise
repaid at the time of or immediately upon consummation of the
transactions by which such Person becomes a Restricted
Subsidiary or such Asset Acquisition.
Affiliate of any specified Person
means (1) any other Person directly or indirectly
controlling or controlled by or under direct or indirect common
control with such specified Person or (2) any
54
executive officer or director of such specified Person. For
purposes of this definition, control, as used with
respect to any Person, will mean the possession, directly or
indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 5% or more of the
Voting Stock of a Person will be deemed to be control. For
purposes of this definition, the terms controlling,
controlled by and under common control
with will have correlative meanings.
Applicable Premium means, with respect
to a Note at any date of redemption, the greater of
(i) 1.0% of the principal amount of such Note and
(ii) the excess of (a) the present value at such date
of redemption of (1) the redemption price of such Note at
April 1, 2016 (such redemption price being described under
Optional Redemption) plus
(2) all remaining required interest payments due on
such Note through April 1, 2016 (excluding accrued but
unpaid interest to the date of redemption), computed using a
discount rate equal to the Treasury Rate plus 50 basis
points, over (b) the principal amount of such Note.
Asset Acquisition means:
(1) an Investment by the Parent or any of its Restricted
Subsidiaries in any other Person pursuant to which such Person
shall become a Restricted Subsidiary or shall be merged into or
consolidated with the Parent or any of its Restricted
Subsidiaries but only if such Persons primary business is
a Permitted Business, or
(2) an acquisition by the Parent or any of its Restricted
Subsidiaries of the property and assets of any Person other than
the Parent or any of its Restricted Subsidiaries that constitute
all or substantially all of a division, operating unit or line
of business of such Person but only if the property and assets
so acquired is a Permitted Business.
Asset Disposition means the sale or
other disposition by the Parent or any of its Restricted
Subsidiaries, other than to the Parent or another Restricted
Subsidiary, of (a) all or substantially all of the Capital
Stock of any Restricted Subsidiary or (b) all or
substantially all of the assets that constitute a division,
operating unit or line of business of the Parent or any of its
Restricted Subsidiaries.
Asset Sale means:
(1) the sale, lease, conveyance or other disposition of any
assets, other than a transaction governed by the provisions of
the Indenture described above under the caption
Repurchase at the Option of
Holders Change of Control
and/or the
provisions described above under the caption
Certain Covenants Merger,
Consolidation or Sale of Assets; and
(2) (a) the issuance of Equity Interests by any of the
Parents Restricted Subsidiaries or (b) the sale by
the Parent or any Restricted Subsidiary thereof of any Equity
Interests it owns in any of its Subsidiaries (other than
directors qualifying shares and shares issued to foreign
nationals to the extent required by applicable law).
Notwithstanding the preceding, the following items will be
deemed not to be Asset Sales:
(1) any single transaction or series of related
transactions that involves assets or Equity Interests having a
Fair Market Value of less than $15 million;
(2) a transfer of assets or Equity Interests between or
among the Parent and its Restricted Subsidiaries;
(3) an issuance of Equity Interests by a Restricted
Subsidiary of the Parent to the Parent or to another Restricted
Subsidiary;
(4) the sale, lease, sublease, license, sublicense,
consignment, conveyance or other disposition of equipment,
inventory, accounts receivable or other assets in the ordinary
course of business in compliance with the provisions under
Certain Covenants Transactions with
Affiliates;
(5) the sale or other disposition of Cash Equivalents;
(6) dispositions of accounts receivable in connection with
the compromise, settlement or collection thereof in the ordinary
course of business or in bankruptcy or similar proceedings;
55
(7) a Restricted Payment that is permitted by the covenant
described above under the caption Certain
Covenants Restricted Payments and any
Permitted Investment;
(8) any sale or disposition of any property or equipment
that has become damaged, worn out or obsolete;
(9) the creation of a Lien not prohibited by the Indenture;
(10) the licensing of intellectual property or other
general intangibles (other than Wireless Licenses) to third
persons on terms approved by the Board of Directors of the
Parent in good faith and in the ordinary course of business;
(11) the sale or other disposition of transmission towers
and related equipment and assets in one or more Sale and
Leaseback Transactions, in an aggregate amount not to exceed
$100 million;
(12) any surrender or waiver of contract rights or the
settlement, release or surrender of contract, tort or other
claims of any kind; and
(13) any disposition arising from foreclosure, condemnation
or similar action with respect to any property or other assets
or exercise of termination rights under any lease, license,
concession or other agreement.
Attributable Debt in respect of a Sale
and Leaseback Transaction means, at the time of determination,
the present value of the obligation of the lessee for net rental
payments during the remaining term of the lease included in such
Sale and Leaseback Transaction, including any period for which
such lease has been extended or may, at the option of the
lessor, be extended. Such present value will be calculated using
a discount rate equal to the rate of interest implicit in such
transaction, determined in accordance with GAAP.
Beneficial Owner has the meaning
assigned to such term in
Rule 13d-3
and
Rule 13d-5
under the Exchange Act, except that in calculating the
beneficial ownership of any particular person (as
that term is used in Section 13(d) (3) of the Exchange
Act), such person will be deemed to have beneficial
ownership of all securities that such person has the
right to acquire by conversion or exercise of other securities,
whether such right is currently exercisable or is exercisable
only upon the occurrence of a subsequent condition. The terms
Beneficially Owns and Beneficially Owned
will have a corresponding meaning.
Board of Directors means:
(1) with respect to a corporation, the board of directors
of the corporation or, except in the context of the definitions
of Change of Control, a duly authorized committee
thereof;
(2) with respect to a partnership, the Board of Directors
of the general partner of the partnership;
(3) with respect to a limited liability company, the
managing member or members or any controlling committee or board
of directors of such company or of the sole member or of the
managing member thereof; and
(4) with respect to any other Person, the board or
committee of such Person serving a similar function.
Board Resolution means a resolution
certified by the Secretary or an Assistant Secretary of the
Parent or the Issuer, as applicable, to have been duly adopted
by the Board of Directors of the Parent or the Issuer, as
applicable and to be in full force and effect on the date of
such certification.
Business Day means any day other than
a Legal Holiday.
Capital Lease Obligation means, at the
time any determination thereof is to be made, the amount of the
liability in respect of a capital lease that would at that time
be required to be capitalized on a balance sheet in accordance
with GAAP, and the Stated Maturity thereof shall be the date of
the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be
prepaid by the lessee without payment of a penalty.
Capital Stock means:
(1) in the case of a corporation, corporate stock;
56
(2) in the case of an association or business entity, any
and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock;
(3) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or
limited); and
(4) any other interest or participation that confers on a
Person the right to receive a share of the profits and losses
of, or distributions of assets of, the issuing Person.
Cash Equivalents means:
(1) (a) United States dollars; and (b) in the
case of the Parent or any Restricted Subsidiary of the Parent,
the local currency of the country in which it or any of its
Restricted Subsidiaries operates;
(2) readily marketable obligations issued or directly and
fully guaranteed or insured by the United States of America or
any agency or instrumentality thereof (provided that the
full faith and credit of the United States of America is pledged
in support thereof), having maturities, unless such securities
are deposited to defease any Indebtedness, of not more than one
year from the date of acquisition thereof;
(3) demand deposits, certificates of deposit, overnight
deposits and time deposits with maturities of one year or less
from the date of acquisition, bankers acceptances with
maturities not exceeding one year and overnight bank deposits,
in each case, with any commercial bank that is organized under
the laws of the United States of America, any state thereof or
any foreign country recognized by the United States and at the
time of acquisition thereof has capital and surplus in excess of
$500 million (or the foreign currency equivalent thereof)
and a rating of
P-1 or
better from Moodys or
A-1 or
better from S&P or, with respect to a commercial bank
organized outside of the United States, a local market credit
rating of at least BBB- (or the then equivalent
grade) by S&P and the equivalent rating by Moodys, or
with government owned financial institution that is organized
under the laws of any of the countries in which the
Parents Restricted Subsidiaries conduct business;
(4) commercial paper outstanding at any time issued by any
Person that is organized under the laws of the United States of
America, any state thereof or any foreign country recognized by
the United States and rated
P-1 or
better from Moodys or
A-1 or
better from S&P or, with respect to Persons organized
outside of the United States, a local market credit rating at
least BBB- (or the then equivalent grade) by
S&P and the equivalent rating by Moodys and in each
case with maturities of not more than 360 days from the
date of acquisition thereof;
(5) securities with final maturities of not more than one
year from the date of acquisition thereof issued or fully
guaranteed by any state, territory or municipality of the United
States of America or by any political subdivision, taxing
authority, agency or instrumentality thereof or any country
recognized by the United States, which securities are rated at
the time of acquisition at least A by S&P or A by
Moodys;
(6) insured demand deposits made in the ordinary course of
business and consistent with the Parents or its
Subsidiaries customary cash management policy in any
domestic office of any commercial bank organized under the laws
of the United States of America or any state thereof;
(7) repurchase obligations with a term of not more than
360 days for underlying securities of the types described
in clauses (2), (3) and (4) above entered into with
any financial institution meeting the qualifications specified
in clause (3) above;
(8) local currency denominated investments in government
issued instruments with a term of not more than 360 days
from the date of acquisition, but only to the extent the
countrys credit rating is at least BBB- (or
the then equivalent grade) by S&P and the equivalent rating
by Moodys; and
(9) investments, classified in accordance with GAAP as
current assets of the Parent or any of its Restricted
Subsidiaries, in money market funds or investment programs
registered under the Investment Company Act of 1940 or similar
provision under foreign law, at least 90% of the
57
portfolios of which are limited to Investments of the character,
quality and maturity described in clauses (1) through
(8) of this definition.
Change of Control means the occurrence
of any of the following:
(1) the direct or indirect sale, transfer, conveyance or
other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of
all or substantially all of the properties or assets of the
Parent and its Restricted Subsidiaries, taken as a whole, to any
person (as that term is used in Section 13(d)
(3) of the Exchange Act);
(2) the adoption of a plan relating to the liquidation or
dissolution of the Parent or the Issuer;
(3) any person or group (as such
terms are used in Sections 13(d) and 14(d) of the Exchange
Act, but excluding any employee benefit plan of such
person or its Subsidiaries, and any Person or entity
acting in its capacity as trustee, agent or other fiduciary or
administrator of any such plan) becomes the Beneficial Owner,
directly or indirectly, of 35% or more of the Voting Stock of
Parent or the Issuer on a fully-diluted basis (and taking into
account all such securities that such person or
group has the right to acquire pursuant to any
option right to the extent that such option right is exercisable
within 60 days after the date of determination);
(4) the first day on which a majority of the members of the
Board of Directors of the Parent or the Issuer are not
Continuing Directors;
(5) the Parent or the Issuer consolidates with, or merges
with or into, any Person, or any Person consolidates with, or
merges with or into the Parent or the Issuer, in any such event
pursuant to a transaction in which any of the outstanding Voting
Stock of the Parent or the Issuer, as the case may be, or such
Person is converted into or exchanged for cash, securities or
other property, other than any such transaction where the Voting
Stock of the Parent or the Issuer as the case may be,
outstanding immediately prior to such transaction is converted
into or exchanged for Voting Stock (other than Disqualified
Stock) of the surviving or transferee Person constituting a
majority of the outstanding shares of such Voting Stock of such
surviving or transferee Person (immediately after giving effect
to such issuance); or
(6) Parent ceases to own 100% of the Equity Interests of
the Issuer (unless the Parent and the Issuer are merged);
provided that no Change of Control shall be deemed to
occur if the Notes are rated Baa3 or better by Moodys and
BBB- or better by Standard & Poors (or, if
either such entity ceases to rate the Notes for reasons outside
of the control of the Parent or the Issuer, the equivalent
investment grade credit rating from any other nationally
recognized statistical rating organization within the
meaning of Section 3(a)(62) under the Exchange Act,
selected by the Issuer as a replacement agency) for a period of
at least 90 consecutive days, beginning on the date of such
event, which period will be extended for so long as the rating
of the Notes is under publicly announced consideration for
possible downgrading by the applicable rating agency.
Commission means the United States
Securities and Exchange Commission.
Common Stock means, with respect to
any Person, any Capital Stock (other than Preferred Stock) of
such Person, whether outstanding on the Issue Date or issued
thereafter.
Consolidated Cash Flow means, with
respect to any specified Person for any period, the Consolidated
Net Income of such Person for such period plus:
(1) provision for taxes based on income or profits of such
Person and its Restricted Subsidiaries for such period
(including withholding taxes), to the extent that such provision
for taxes was deducted in computing such Consolidated Net
Income; plus
(2) Fixed Charges of such Person and its Restricted
Subsidiaries for such period, to the extent that any such Fixed
Charges were deducted in computing such Consolidated Net Income;
plus
(3) depreciation, amortization (including amortization of
intangibles but excluding amortization of prepaid cash expenses
that were paid in a prior period) and other non-cash expenses or
charges (including, without limitation, minority interest
expense and foreign exchange losses and
58
excluding any such non-cash expense to the extent that it
represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Restricted
Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses or
charges were deducted in computing such Consolidated Net Income,
such other non-cash expenses to include, without limitation,
impairment charges associated with goodwill, wireless licenses,
other indefinite-lived assets and long-lived assets, and
stock-based compensation awards; minus
(4) non-cash items increasing such Consolidated Net Income
(including, without limitation, foreign exchange gains) for such
period, other than the accrual of revenue consistent with past
practice;
in each case, on a consolidated basis and determined in
accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on
the income or profits of, the Fixed Charges of and the
depreciation and amortization and other non-cash expenses of, a
Restricted Subsidiary of the Parent will be added to
Consolidated Net Income to compute Consolidated Cash Flow of the
Parent (a) in the same proportion that the Net Income of
such Restricted Subsidiary was added to compute such
Consolidated Net Income of the Parent and (b) solely for
the purpose of determining the amount available for Restricted
Payments under clause (3)(i) of paragraph (A) of
Certain Covenants Limitation on Restricted
Payments, only to the extent that a corresponding amount
would be permitted at the date of determination to be dividended
or distributed to the Parent by such Restricted Subsidiary
without any prior governmental approval (that has not been
obtained), and without direct or indirect restriction pursuant
to the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or holders of its
Capital Stock, unless such restriction has been legally waived
or is contained in any agreement governing Indebtedness that is
permitted by the covenant described under Certain
Covenants Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries, provided, that
the restrictions on the declaration or payment of dividends or
similar distributions contemplated by this clause (b) shall
not include approvals required by the Board of Directors or
shareholders of the Restricted Subsidiary, the requirement to
obtain audited financial statements and any other requirements
that are administrative in nature and in the good faith judgment
of the Parent would be satisfied; provided further, that
amounts shall not be excluded by this clause (b) to the
extent they are paid or could be paid in cash to the specified
Person or a Restricted Subsidiary thereof by dividend,
distribution or other payment (including, without limitation,
making loans, repaying indebtedness or paying under intercompany
arrangements).
Consolidated Leverage Ratio means on
any Transaction Date, the ratio of:
(1) the aggregate amount of Indebtedness of the Parent and
its Restricted Subsidiaries on a consolidated basis outstanding
on such Transaction Date, to
(2) the aggregate amount of Consolidated Cash Flow of the
Parent and its Restricted Subsidiaries for the Four Quarter
Period.
In determining the Consolidated Leverage Ratio:
(1) pro forma effect shall be given to any Indebtedness
that is to be incurred or repaid on the Transaction Date;
(2) pro forma effect shall be given to Asset Dispositions
and Asset Acquisitions (including giving pro forma effect to the
application of proceeds of any Asset Disposition) that occur
during the Reference Period as if they had occurred and such
proceeds had been applied on the first day of such Reference
Period;
(3) pro forma effect shall be given to asset dispositions
and asset acquisitions (including giving pro forma effect to the
application of proceeds of any asset disposition) that have been
made by any Person that has become a Restricted Subsidiary of
the Parent or has been merged with or into the Parent or any
Restricted Subsidiary during such Reference Period and that
would have constituted Asset Dispositions or Asset Acquisitions
had such transactions occurred when
59
such Person was a Restricted Subsidiary, as if such asset
dispositions or asset acquisitions were Asset Dispositions or
Asset Acquisitions that occurred on the first day of such
Reference Period.
To the extent that pro forma effect is given to an Asset
Acquisition or Asset Disposition, such pro forma calculation
shall be based upon the four full fiscal quarters immediately
preceding the Transaction Date of the Person, or division,
operating unit or line of business of the Person, that is
acquired or disposed of for which financial information is
available, and Consolidated Cash Flow will be calculated on a
pro forma basis in accordance with
Regulation S-X
under the Securities Act, but without giving effect to
clause (3) of the proviso set forth in the definition of
Consolidated Net Income.
Consolidated Net Income means, with
respect to any specified Person for any period, the aggregate of
the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with
GAAP; provided that:
(1) the Net Income of any Person that is not a Restricted
Subsidiary or that is accounted for by the equity method of
accounting will be included only to the extent of the amount of
dividends or distributions paid in cash to the specified Person
or a Restricted Subsidiary thereof;
(2) solely for the purpose of determining the amount
available for Restricted Payments under clause (3)(i) of
paragraph (A) of Certain Covenants
Limitation on Restricted Payments, the Net Income of any
Restricted Subsidiary will be excluded to the extent that the
declaration or payment of dividends or similar distributions by
that Restricted Subsidiary of that Net Income is not at the date
of determination permitted without any prior governmental
approval (that has not been obtained) or, directly or
indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted Subsidiary
or holders of its Capital Stock, unless such restriction with
respect to the payment of dividends or similar distributions has
been legally waived or is contained in any agreement governing
Indebtedness that is permitted by the covenant described under
Certain Covenants Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries,
provided, that the restrictions on the declaration or
payment of dividends or similar distributions contemplated by
this clause (2) shall not include approvals required by the
Board of Directors or shareholders of the Restricted Subsidiary,
the requirement to obtain audited financial statements and any
other requirements that are administrative in nature and in the
good faith judgment of the Parent would be satisfied;
provided further, that the Net Income of a Restricted
Subsidiary shall not be excluded by this clause (2) to the
extent it is paid or could be paid in cash to the specified
Person or a Restricted Subsidiary thereof by dividend,
distribution or other payment (including, without limitation,
making loans, repaying indebtedness or paying under intercompany
arrangements).
(3) the Net Income of any Person acquired during the
specified period for any period prior to the date of such
acquisition will be excluded;
(4) the cumulative effect of a change in accounting
principles will be excluded; and
(5) notwithstanding clause (1) above, the Net Income
or loss of any Unrestricted Subsidiary will be excluded, whether
or not distributed to the specified Person or one of its
Subsidiaries.
Continuing Directors means, as of any
date of determination, any member of the Board of Directors of
the Parent or the Issuer, as applicable who:
(1) was a member of such Board of Directors on the Issue
Date; or
(2) was nominated for election or elected to such Board of
Directors with the approval of a majority of the Continuing
Directors who were members of such Board of Directors at the
time of such nomination or election or, in the case of the
Issuer, was nominated for election or elected by the Parent.
Credit Facilities means, one or more
debt facilities, commercial paper facilities or indentures, in
each case with banks or other institutional lenders or a
trustee, providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables
to such lenders or to special purpose entities formed to borrow
from such lenders against such receivables), letters of credit
60
or issuances of notes, in each case, as amended, restated,
modified, renewed, refunded, replaced or refinanced in whole or
in part from time to time.
Default means any event that is, or
with the passage of time or the giving of notice or both would
be, an Event of Default.
Disqualified Stock means any Capital
Stock that, by its terms (or by the terms of any security into
which it is convertible, or for which it is exchangeable, in
each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable,
pursuant to a sinking fund obligation or otherwise, or
redeemable at the option of the holder thereof, in whole or in
part, on or prior to the date that is one year after the date on
which the Notes mature. Notwithstanding the preceding sentence,
any Capital Stock that would constitute Disqualified Stock
solely because the holders thereof have the right to require the
Parent to repurchase such Capital Stock upon the occurrence of a
change of control or an asset sale will not constitute
Disqualified Stock if the terms of such Capital Stock provide
that the Parent may not repurchase or redeem any such Capital
Stock pursuant to such provisions unless such repurchase or
redemption complies with the covenant described above under the
caption Certain Covenants
Restricted Payments. The term Disqualified
Stock will also include any options, warrants or other
rights that are convertible into Disqualified Stock or that are
redeemable at the option of the holder, or required to be
redeemed, prior to the date that is one year after the date on
which the Notes mature.
Domestic Restricted Subsidiary means
any Restricted Subsidiary of the Parent other than a Restricted
Subsidiary that is (1) a controlled foreign
corporation under Section 957 of the Internal Revenue
Code (a) whose primary operating assets are located outside
the United States and (b) that is not subject to tax under
Section 882(a) of the Internal Revenue Code because of a
trade or business within the United States or (2) a
Subsidiary of an entity described in the preceding clause (1).
Equity Interests means Capital Stock
and all warrants, options or other rights to acquire Capital
Stock (but excluding any debt security that is convertible into,
or exchangeable for, Capital Stock).
Equity Offering means any public or
private placement of Capital Stock (other than Disqualified
Stock) of the Parent (other than pursuant to a registration
statement on
Form S-8
or otherwise relating to equity securities issuable under any
employee benefit plan of the Parent) to any Person other than
any Subsidiary of the Parent.
Existing Indebtedness means the
aggregate amount of Indebtedness of the Parent and its
Restricted Subsidiaries (other than Indebtedness under the
Notes) in existence on the Issue Date.
Fair Market Value means the price that
would be paid in an arms-length transaction between an
informed and willing seller under no compulsion to sell and an
informed and willing buyer under no compulsion to buy, as
determined in good faith by an Officer of the Parent or by the
Board of Directors of the Parent, evidenced by an Officers
Certificate or Board Resolution, as applicable.
First Tier Restricted Subsidiary
means each Restricted Subsidiary of the Parent (other
than the Issuer), the Capital Stock of which is held directly by
the Parent.
Fixed Charges means, with respect to
any specified Person for any period, the sum, without
duplication, of:
(1) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or
accrued, including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest
payments, the interest component of any deferred payment
obligations, the interest component of all payments associated
with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers
acceptance financings, and net of the effect of all payments
made or received pursuant to Hedging Obligations; plus
(2) the consolidated interest of such Person and its
Restricted Subsidiaries that was capitalized during such period;
plus
61
(3) any interest expense on Indebtedness of another Person
that is Guaranteed by such Person or any of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or
any of its Restricted Subsidiaries whether or not such Guarantee
or Lien is called upon; plus
(4) the product of (a) all dividends, whether paid or
accrued and whether or not in cash, on any series of
Disqualified Stock of such Person or Disqualified Stock or
Preferred Stock of any of its Restricted Subsidiaries other than
dividends on Equity Interests payable solely in Equity Interests
(other than Disqualified Stock) of the Parent or to the Parent
or a Restricted Subsidiary of the Parent, times (b) a
fraction, the numerator of which is one and the denominator of
which is one minus the then current combined federal, state and
local statutory tax rate of such Person (if such Person is part
of a consolidated group, then such tax rate shall be computed on
a standalone basis for such Person), expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.
Foreign Restricted Subsidiary means
any Restricted Subsidiary of the Parent that is not a Domestic
Restricted Subsidiary.
Four Quarter Period means, with
respect to any specified Transaction Date, the four fiscal
quarters immediately prior to the Transaction Date for which
internal financial statements of the Parent are available.
GAAP means generally accepted
accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and in the
statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity
as have been approved by a significant segment of the accounting
profession, which were in effect on the Issue Date.
Government Securities means securities
that are direct obligations of the United States of America for
the timely payment of which its full faith and credit is pledged.
Guarantee means, as to any Person, a
guarantee other than by endorsement of negotiable instruments
for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of
a pledge of assets or through letters of credit or reimbursement
agreements in respect thereof, of all or any part of any
Indebtedness of another Person.
Guarantors means:
(1) the Initial Guarantors; and
(2) any other Subsidiary that executes a Note Guarantee in
accordance with the provisions of the Indenture; and their
respective successors and assigns until released from their
obligations under the Note Guarantee and the Indenture in
accordance with the terms of the Indenture.
Hedging Obligations means, with
respect to any specified Person, the obligations of such Person
under:
(1) interest rate swap agreements, interest rate cap
agreements, interest rate collar agreements and other agreements
or arrangements with respect to interest rates;
(2) commodity swap agreements, commodity option agreements,
forward contracts and other agreements or arrangements with
respect to commodity prices; and
(3) foreign exchange contracts, currency swap agreements,
currency option agreements and other agreements or arrangements
with respect to foreign currency exchange rates.
Holder means a Person in whose name a
Note is registered.
Incur means, with respect to any
Indebtedness, to incur, create, issue, assume, Guarantee or
otherwise become directly or indirectly liable for or with
respect to, or become responsible for, the payment of,
contingently or otherwise, such Indebtedness (and
Incurrence and Incurred will have
meanings correlative to the foregoing); provided that
(1) any Indebtedness of a Person existing at the time such
Person becomes a Restricted Subsidiary of the Parent will be
deemed to be Incurred by such Restricted Subsidiary at the time
it becomes a Restricted Subsidiary of the Parent and
(2) neither the accrual of interest nor the accretion of
original issue discount nor the payment of interest in the form
of additional Indebtedness with the same terms and the payment
of dividends on Disqualified
62
Stock or Preferred Stock in the form of additional shares of the
same class of Disqualified Stock or Preferred Stock (to the
extent provided for when the Indebtedness or Disqualified Stock
or Preferred Stock on which such interest or dividend is paid
was originally issued) will be considered an Incurrence of
Indebtedness; provided that in each case the amount
thereof is for all other purposes included in the Fixed Charges
and Indebtedness of the Parent or its Restricted Subsidiaries as
accrued.
Indebtedness means, with respect to
any specified Person, any indebtedness of such Person, whether
or not contingent and without duplication:
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in
respect thereof);
(3) in respect of bankers acceptances;
(4) in respect of Capital Lease Obligations and
Attributable Debt;
(5) in respect of the balance deferred and unpaid of the
purchase price of any property or services, except any such
balance that constitutes an accrued expense or trade payable;
(6) representing Hedging Obligations;
(7) representing Disqualified Stock valued at the greater
of its voluntary or involuntary maximum fixed repurchase price
plus accrued dividends; or
(8) in the case of a Subsidiary of such Person,
representing Preferred Stock valued at the greater of its
voluntary or involuntary maximum fixed repurchase price plus
accrued dividends.
In addition, the term Indebtedness includes
(x) all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness
is assumed by the specified Person), provided that the
amount of such Indebtedness will be the lesser of (a) the
Fair Market Value of such asset at such date of determination
and (b) the amount of such Indebtedness, and (y) to
the extent not otherwise included, the Guarantee by the
specified Person of any Indebtedness of any other Person. For
purposes hereof, the maximum fixed repurchase price
of any Disqualified Stock or Preferred Stock which does not have
a fixed repurchase price will be calculated in accordance with
the terms of such Disqualified Stock or Preferred Stock, as
applicable, as if such Disqualified Stock or Preferred Stock
were repurchased on any date on which Indebtedness will be
required to be determined pursuant to the Indenture.
The amount of any Indebtedness outstanding as of any date will
be the outstanding balance at such date of all unconditional
obligations as described above and, with respect to contingent
obligations, the maximum liability upon the occurrence of the
contingency giving rise to the obligation, and will be:
(1) the accreted value thereof, in the case of any
Indebtedness issued with original issue discount; and
(2) the principal amount thereof, together with any
interest thereon that is more than 30 days past due, in the
case of any other Indebtedness.
Initial Guarantors means the Parent
and all Domestic Restricted Subsidiaries existing on the Issue
Date.
Investments means, with respect to any
Person, all direct or indirect investments by such Person in
other Persons (including Affiliates) in the form of loans or
other extensions of credit (including Guarantees), advances,
capital contributions (by means of any transfer of cash or other
property to others or any payment for property or services for
the account or use of others), purchases or other acquisitions
for consideration of Indebtedness, Equity Interests or other
securities, together with all items that are or would be
classified as investments on a balance sheet prepared in
accordance with GAAP.
If the Parent or any Restricted Subsidiary of the Parent sells
or otherwise disposes of any Equity Interests of any direct or
indirect Restricted Subsidiary of the Parent such that, after
giving effect to any such sale or disposition, such Person is no
longer a Restricted Subsidiary of the Parent, the
63
Parent will be deemed to have made an Investment on the date of
any such sale or disposition equal to the Fair Market Value of
the Investment in such Subsidiary not sold or disposed of. The
acquisition by the Parent or any Restricted Subsidiary of the
Parent of a Person that holds an Investment in a third Person
will be deemed to be an Investment by the Parent or such
Restricted Subsidiary in such third Person in an amount equal to
the Fair Market Value of the Investment held by the acquired
Person in such third Person.
Issue Date means the date of original
issuance of the Notes under the Indenture.
Legal Holiday means a Saturday, a
Sunday or a day on which banking institutions in The City of New
York or at a place of payment are authorized or required by law,
regulation or executive order to remain closed.
Lien means, with respect to any asset,
any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind in respect of such asset, whether or not
filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other
agreement to sell or give a security interest in and any filing
of or agreement to give any financing statement under the
Uniform Commercial Code (or equivalent statutes) of any
jurisdiction.
Moodys means Moodys
Investors Service, Inc. and its successors.
Net Income means, with respect to any
specified Person, the net income (loss) of such Person,
determined in accordance with GAAP and before any reduction in
respect of Preferred Stock dividends, excluding, however:
(1) any gain or loss, together with any related provision
for taxes on such gain or loss, realized in connection with:
(a) any sale of assets outside the ordinary course of
business of such Person; or (b) the disposition of any
securities by such Person or any of its Restricted Subsidiaries
or the extinguishment of any Indebtedness of such Person or any
of its Restricted Subsidiaries; and
(2) any extraordinary gain or loss, together with any
related provision for taxes on such extraordinary gain or loss.
Net Proceeds means the aggregate cash
proceeds, including payments in respect of deferred payment
obligations (to the extent corresponding to the principal, but
not the interest component, thereof) received by the Parent or
any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale
or other disposition of any non-cash consideration received in
any Asset Sale), net of (1) the direct costs relating to
such Asset Sale, including, without limitation, legal,
accounting, investment banking and brokerage fees, and sales
commissions, and any relocation expenses incurred as a result
thereof, (2) taxes paid or payable as a result thereof, in
each case, after taking into account any available tax credits
or deductions and any tax sharing arrangements, (3) amounts
required to be applied to the repayment of Indebtedness or other
liabilities secured by a Lien on the asset or assets that were
the subject of such Asset Sale or required to be paid as a
result of such sale, (4) any reserve for adjustment in
respect of the sale price of such asset or assets established in
accordance with GAAP, (5) in the case of any Asset Sale by
a Restricted Subsidiary of the Parent, payments to holders of
Equity Interests in such Restricted Subsidiary in such capacity
(other than such Equity Interests held by the Parent or any
Restricted Subsidiary thereof) to the extent that such payment
is required to permit the distribution of such proceeds in
respect of the Equity Interests in such Restricted Subsidiary
held by the Parent or any Restricted Subsidiary thereof and
(6) appropriate amounts to be provided by the Parent or its
Restricted Subsidiaries as a reserve against liabilities
associated with such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities
under any indemnification obligations associated with such Asset
Sale, all as determined in accordance with GAAP; provided
that (a) excess amounts set aside for payment of taxes
pursuant to clause (2) above remaining after such taxes
have been paid in full or the statute of limitations therefor
has expired and (b) amounts initially held in reserve
pursuant to clause (6) no longer so held, will, in the case
of each of subclause (a) and (b), at that time become Net
Proceeds.
64
Note Guarantee means a Guarantee of
the Notes pursuant to the Indenture.
Obligations means any principal,
interest, penalties, fees, indemnifications, reimbursements,
damages and other liabilities payable under the documentation
governing any Indebtedness.
Officer means, with respect to any
Person, the Chairman of the Board, the Chief Executive Officer,
the President, the Chief Operating Officer, the Chief Financial
Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.
Officers Certificate means a
certificate signed on behalf of the Issuer or the Parent, as the
case may be by at least two Officers of the Issuer or the Parent
as the case may be, one of whom must be the principal executive
officer, the principal financial officer, the treasurer or the
principal accounting officer of the Issuer or the Parent, as the
case may be, that meets the requirements of the Indenture.
Opinion of Counsel means an opinion
from legal counsel who is reasonably acceptable to the Trustee
(who may be counsel to or an employee of the Parent or any of
its Restricted Subsidiaries) that meets the requirements of the
Indenture.
Permitted Business means the
telecommunications business and related activities and services
including any business conducted or proposed to be conducted (as
described in the prospectus) by the Parent and its Restricted
Subsidiaries on the Issue Date, (which include, without
limitation, the delivery or distribution of wireless
telecommunications services (including voice, data or video
services) and the acquisition, holding or exploitation of any
license relating to the delivery of such wireless
telecommunications services) and other businesses related,
ancillary or complementary thereto.
Permitted Investments means:
(1) any Investment in the Parent or a Restricted Subsidiary
of the Parent;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Parent or any Restricted
Subsidiary of the Parent in a Person, if as a result of such
Investment:
(a) such Person becomes a Restricted Subsidiary of the
Parent; or
(b) such Person is merged, consolidated or amalgamated with
or into, or transfers or conveys substantially all of its assets
to, or is liquidated into, the Parent or a Restricted Subsidiary
of the Parent;
provided that such Persons primary business is a
Permitted Business;
(4) any Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant
to and in compliance with the covenant described above under the
caption Repurchase at the Option of
Holders Asset Sales;
(5) Investments acquired as a capital contribution to, or
in exchange for, or out of the net cash proceeds of a
substantially concurrent sale (other than to a Restricted
Subsidiary of the Parent) of, Equity Interests (other than
Disqualified Stock) of, the Parent; provided that the
amount of any such Equity Interests or net proceeds that are
utilized for any such acquisition or exchange will be excluded
from clause (3)(ii) of paragraph (A) of the covenant
described above under the caption Certain
Covenants Restricted Payments;
(6) Hedging Obligations that are Incurred for the purpose
of fixing, hedging or swapping interest rate, commodity price or
foreign currency exchange rate risk (or to reverse or amend any
such agreements previously made for such purposes), and not for
speculative purposes, and that do not increase the Indebtedness
of the obligor outstanding at any time other than as a result of
fluctuations in interest rates, commodity prices or foreign
currency exchange rates or by reason of fees, indemnities and
compensation payable thereunder;
(7) stock, obligations or securities received in
satisfaction of judgments;
(8) advances to customers or suppliers in the ordinary
course of business that are, in conformity with GAAP, recorded
as accounts receivable, prepaid expenses or deposits on the
65
balance sheet of the Parent or its Restricted Subsidiaries and
endorsements for collection or deposit arising in the ordinary
course of business;
(9) commission, payroll, travel and similar advances to
officers and employees of the Parent or any of its Restricted
Subsidiaries that are expected at the time of such advance
ultimately to be recorded as an expense in conformity with GAAP;
(10) loans and advances to employees, officers or directors
of the Parent or any of its Restricted Subsidiaries made in the
ordinary course of business, provided that such loans and
advances do not exceed $5 million at any one time
outstanding;
(11) Investments existing on the Issue Date;
(12) other Investments in any Person primarily engaged in a
Permitted Business (including joint ventures and Unrestricted
Subsidiaries) having an aggregate Fair Market Value (measured on
the date each such Investment was made and without giving effect
to subsequent changes in value), when taken together with all
other outstanding Investments made pursuant to this
clause (12) since August 18, 2009, not to exceed 20%
of consolidated total assets of the Parent (determined as of the
end of the most recent fiscal quarter of the Parent for which
internal financial statements of the Parent are
available); and
(13) other Investments, having an aggregate Fair Market
Value (measured on the date each such Investment was made and
without giving effect to subsequent changes in value), when
taken together with all other outstanding Investments made
pursuant to this clause (13) since August 18, 2009,
not to exceed $350 million.
Permitted Liens means:
(1) Liens on the assets securing Indebtedness Incurred
under clause (1) of the second paragraph of the covenant
described above under the caption Incurrence
of Indebtedness;
(2) Liens in favor of the Parent, the Issuer or any
Subsidiary Guarantor;
(3) Liens on property of a Person existing at the time such
Person is merged with or into or consolidated with the Parent,
the Issuer or any Subsidiary Guarantor; provided that
such Liens were in existence prior to the contemplation of such
merger or consolidation or other event and do not extend to any
assets other than those of the Person that is merged into or
consolidated with the Parent, the Issuer or the Subsidiary
Guarantor, as the case may be;
(4) Liens on property existing at the time of acquisition
thereof by the Parent, the Issuer or any Subsidiary Guarantor,
provided that such Liens were in existence prior to the
contemplation of such acquisition and do not extend to any
property other than the property so acquired by the Parent, the
Issuer or such Subsidiary Guarantor;
(5) Liens securing the Notes and any Note Guarantee;
(6) Liens existing on the Issue Date (other than any Liens
securing Indebtedness Incurred under clause (1) of the
second paragraph of the covenant described under the caption
Certain Covenants Incurrence of
Indebtedness) and any renewals or extension thereof,
provided that property or assets covered thereby is not
expanded in connection with such renewal or extension;
(7) Liens securing Permitted Refinancing Indebtedness;
provided that such Liens do not extend to any property or
assets other than the property or assets that secure the
Indebtedness being refinanced;
(8) Liens on property or assets used to defease or to
satisfy and discharge Indebtedness; provided that
(a) the Incurrence of such Indebtedness was not prohibited
by the Indenture and (b) such defeasance or satisfaction
and discharge is not prohibited by the Indenture;
(9) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (4) of the second
paragraph of the covenant described under the caption
Certain Covenants Incurrence of
Indebtedness; provided that any such Lien
(a) covers only the assets acquired, constructed or
improved with such Indebtedness and (b) is created within
365 days of such acquisition, construction or improvement;
66
(10) Liens incurred or deposits made in the ordinary course
of business in connection with workers compensation,
unemployment insurance or other social security obligations;
(11) Liens, deposits or pledges to secure the performance
of bids, tenders, contracts (other than contracts for the
payment of Indebtedness), leases, or other similar obligations
arising in the ordinary course of business;
(12) survey exceptions, encumbrances, easements or
reservations of, or rights of other for, rights of way, zoning
or other restrictions as to the use of properties, and defects
in title which, in the case of any of the foregoing, were not
incurred or created to secure the payment of Indebtedness, and
which in the aggregate do no materially adversely affect the
value of such properties or materially impair the use for the
purposes of which such properties are held by the Parent or any
of its Restricted Subsidiaries;
(13) judgment and attachment Liens not giving rise to an
Event of Default and notices of lis pendens and associated
rights related to litigation being contested in good faith by
appropriate proceedings and for which adequate reserves have
been made;
(14) Liens, deposits or pledges to secure public or
statutory obligations, surety, stay, appeal, indemnity,
performance or other similar bonds or obligations; and Liens,
deposits or pledges in lieu of such bonds or obligations, or to
secure such bonds or obligations, or to secure letters of credit
in lieu of or supporting the payment of such bonds or
obligations;
(15) Liens in favor of collecting or payor banks having a
right of setoff, revocation, refund or chargeback with respect
to money or instruments of the Parent or any Subsidiary thereof
on deposit with or in possession of such bank;
(16) any interest or title of a lessor, licensor or
sublicensor in the property subject to any lease, license or
sublicense (other than any property that is the subject of a
Sale and Leaseback Transaction);
(17) Liens for taxes, assessments and governmental charges
not yet delinquent or being contested in good faith and for
which adequate reserves have been established to the extent
required by GAAP;
(18) Liens arising from precautionary financing statements
or similar documents regarding operating leases or consignments;
(19) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of customs duties
in connection with the importation of goods;
(20) Liens on cash collateral not in excess of
$150 million in the aggregate at any time securing letters
of credit;
(21) carriers, warehousemens, mechanics,
landlords, materialmens, repairmens or other
like Liens arising in the ordinary course of business in respect
of obligations not overdue for a period in excess of
60 days or which are being contested in good faith by
appropriate proceedings promptly instituted and diligently
prosecuted; provided, however, that any reserve or other
appropriate provision as will be required to conform with GAAP
will have been made for that reserve or provision.
Permitted Refinancing Indebtedness
means any Indebtedness of the Parent or any of its
Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace,
defease or refund other Indebtedness of the Parent or any of its
Restricted Subsidiaries (other than intercompany Indebtedness);
provided that:
(1) the amount of such Permitted Refinancing Indebtedness
does not exceed the amount of the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus all
accrued and unpaid interest thereon and the amount of any
reasonably determined premium necessary to accomplish such
refinancing and such reasonable expenses incurred in connection
therewith);
(2) such Permitted Refinancing Indebtedness has a Weighted
Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded;
67
(3) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right
of payment to the Notes or any Note Guarantee, such Permitted
Refinancing Indebtedness has a final maturity date later than
the final maturity date of the Notes and is subordinated in
right of payment to the Notes or such Note Guarantee, as
applicable, on terms at least as favorable, taken as a whole, to
the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded;
(4) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is pari passu in
right of payment with the Notes or any Note Guarantee, such
Permitted Refinancing Indebtedness is pari passu with, or
subordinated in right of payment to, the Notes or such Note
Guarantee; and
(5) if the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded is
(a) the Parent, such Indebtedness is Incurred by the
Parent, (b) the Issuer or a Subsidiary Guarantor, such
Indebtedness is incurred by the Parent, the Issuer or a
Subsidiary Guarantor or (c) a Restricted Subsidiary that is
not a Subsidiary Guarantor or the Issuer, such Indebtedness may
be Incurred by the Parent or any of its Restricted Subsidiaries.
Permitted Subordinated Indebtedness
means Indebtedness of the Parent, the Issuer or any
Subsidiary Guarantor that is expressly subordinated in right of
payment to the Notes or the Note Guarantee and that, by its
terms (or by the terms of any security into which it is
convertible, or for which it is exchangeable, in each case at
the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the
option of the holder thereof, in whole or in part, no earlier
than on or after the date that is one year after the date on
which the Notes mature. Notwithstanding the preceding sentence,
any Indebtedness of the Parent, the Issuer or any Subsidiary
Guarantor that would not constitute Permitted Subordinated
Indebtedness solely because the holders thereof have the right
to require the Parent, the Issuer or any Guarantor to repurchase
such Indebtedness upon the occurrence of a change of control or
an asset sale will nonetheless constitute Permitted Subordinated
Indebtedness if the terms of such Indebtedness provide that the
Parent, the Issuer or the Subsidiary Guarantor, as the case may
be, may not repurchase or redeem any such Indebtedness pursuant
to such provisions unless such repurchase or redemption complies
with the covenant described above under the caption
Certain Covenants Restricted
Payments.
Person means any individual,
corporation, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization, limited
liability company or government or other entity.
Preferred Stock means, with respect to
any Person, any Capital Stock of such Person that has
preferential rights to any other Capital Stock of such Person
with respect to dividends or redemptions upon liquidation.
Priority Debt means all Secured
Indebtedness of the Parent, the Issuer or any Subsidiary
Guarantor and all Indebtedness of any Restricted Subsidiary of
the Parent that is not the Issuer or a Subsidiary Guarantor,
other than (i) the Notes in the event the Notes become
secured and (ii) Secured Indebtedness secured pursuant to
the covenant described above under the caption
Certain Covenants Liens
where the Notes are secured on an equal and ratable or senior
basis.
Priority Debt Leverage Ratio means on
any Transaction Date, the ratio of:
(1) the aggregate amount of Priority Debt on a consolidated
basis outstanding on such Transaction Date, to
(2) the aggregate amount of Consolidated Cash Flow of the
Parent and its Restricted Subsidiaries for the Four Quarter
Period;
In determining the Priority Debt Leverage Ratio:
(A) pro forma effect shall be given to any Indebtedness
that is to be incurred or repaid on the Transaction Date;
(B) pro forma effect shall be given to Asset Dispositions
and Asset Acquisitions (including giving pro forma effect to the
application of proceeds of any Asset Disposition) that occur
during
68
the Reference Period as if they had occurred and such proceeds
had been applied on the first day of such Reference
Period; and
(C) pro forma effect shall be given to asset dispositions
and asset acquisitions (including giving pro forma effect to the
application of proceeds of any asset disposition) that have been
made by any Person that has become a Restricted Subsidiary of
the Parent or has been merged with or into the Parent or any
Restricted Subsidiary during such Reference Period and that
would have constituted Asset Dispositions or Asset Acquisitions
had such transactions occurred when such Person was a Restricted
Subsidiary, as if such asset dispositions or asset acquisitions
were Asset Dispositions or Asset Acquisitions that occurred on
the first day of such Reference Period.
To the extent that pro forma effect is given to an Asset
Acquisition or Asset Disposition, such pro forma calculation
shall be based upon the four full fiscal quarters immediately
preceding the Transaction Date of the Person, or division,
operating unit or line of business of the Person, that is
acquired or disposed of for which financial information is
available, and Consolidated Cash Flow will be calculated on a
pro forma basis in accordance with
Regulation S-X
under the Securities Act, but without giving effect to
clause (3) of the proviso set forth in the definition of
Consolidated Net Income.
Reference Period means, with respect
to any specified Transaction Date, the period beginning on the
first day of the Four Quarter Period and ending on such
Transaction Date.
Replacement Assets means
(1) capital expenditures or other non-current assets that
will be used or useful in a Permitted Business,
(2) substantially all the assets of a Permitted Business or
(3) Voting Stock of any Person engaged in a Permitted
Business that, when taken together with all other Voting Stock
of such Person owned by the Parent and its Restricted
Subsidiaries, constitutes a majority of the Voting Stock of such
Person and such Person will become on the date of acquisition
thereof a Restricted Subsidiary.
Restricted Investment means an
Investment other than a Permitted Investment.
Restricted Subsidiary of a Person
means any Subsidiary of such Person that is not an Unrestricted
Subsidiary.
S&P means Standard &
Poors, a division of The McGraw-Hill Companies, and its
successors.
Sale and Leaseback Transaction means,
with respect to any Person, any transaction involving any of the
assets or properties of such Person, whether now owned or
hereafter acquired, whereby such Person sells or otherwise
transfers such assets or properties and then or thereafter
leases such assets or properties or any part thereof or any
other assets or properties which such Person intends to use for
substantially the same purpose or purposes as the assets or
properties sold or transferred.
Secured Indebtedness means any
Indebtedness secured by a Lien upon property or assets of the
Parent or any of its Restricted Subsidiaries.
Significant Subsidiary means any
Subsidiary that would constitute a significant
subsidiary within the meaning of Article 1 of
Regulation S-X
of the Securities Act.
Stated Maturity means, with respect to
any installment of interest or principal on any series of
Indebtedness, the date on which such payment of interest or
principal was scheduled to be paid in the original documentation
governing such Indebtedness, and will not include any contingent
obligations to repay, redeem or repurchase any such interest or
principal prior to the date originally scheduled for the payment
thereof.
Subsidiary means, with respect to any
specified Person:
(1) any corporation, association or other business entity
of which more than 50% of the total voting power of the Voting
Stock is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other
Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners
of which are such Person or one or more Subsidiaries of such
Person (or any combination thereof).
69
Subsidiary Debt Leverage Ratio means
on any Transaction Date, the ratio of:
(1) the aggregate amount of Priority Debt and, without
duplication, any Indebtedness of the Issuer and the Subsidiary
Guarantors on a consolidated basis outstanding on such
Transaction Date, to
(2) the aggregate amount of Consolidated Cash Flow of the
Parent and its Restricted Subsidiaries for the Four Quarter
Period.
In determining the Subsidiary Debt Leverage Ratio:
(1) pro forma effect shall be given to any Indebtedness
that is to be incurred or repaid on the Transaction Date;
(2) pro forma effect shall be given to Asset Dispositions
and Asset Acquisitions (including giving pro forma effect to the
application of proceeds of any Asset Disposition) that occur
during the Reference Period as if they had occurred and such
proceeds had been applied on the first day of such Reference
Period;
(3) pro forma effect shall be given to asset dispositions
and asset acquisitions including giving pro forma effect to the
application of proceeds of any asset disposition) that have been
made by any Person that has become a Restricted Subsidiary of
the Parent or has been merged with or into the Parent or any
Restricted Subsidiary during such Reference Period and that
would have constituted Asset Dispositions or Asset Acquisitions
had such transactions occurred when such Person was a Restricted
Subsidiary, as if such asset dispositions or asset acquisitions
were Asset Dispositions or Asset Acquisitions that occurred on
the first day of such Reference Period.
To the extent that pro forma effect is given to an Asset
Acquisition or Asset Disposition, such pro forma calculation
shall be based upon the four full fiscal quarters immediately
preceding the Transaction Date of the Person, or division,
operating unit or line of business of the Person, that is
acquired or disposed of for which financial information is
available, and Consolidated Cash Flow will be calculated on a
pro forma basis in accordance with
Regulation S-X
under the Securities Act, but without giving effect to
clause (3) of the proviso set forth in the definition of
Consolidated Net Income.
Subsidiary Guarantor means any
Restricted Subsidiary of the Parent that guarantees the
Issuers Obligations under the Notes in accordance with the
terms of the Indenture, and its successors and assigns, until
released from its obligations under such Guarantee and the
Indenture in accordance with the terms of the Indenture.
Transaction Date means, with respect
to the incurrence of any Indebtedness by the Parent or any of
its Restricted Subsidiaries, the date such Indebtedness is to be
incurred, with respect to any Restricted Payment, the date such
Restricted Payment is to be made, and with respect to the
incurrence of any Lien by the Parent or any of its Restricted
Subsidiaries, the date such Lien is to be incurred.
Treasury Rate means the yield to
maturity at the time of computation of United States Treasury
securities with a constant maturity (as compiled and published
in the most recent Federal Reserve Statistical Release H.15
(519) which has become publicly available at least two
Business Days prior to the date fixed for prepayment (or, if
such Statistical Release is no longer published, any publicly
available source for similar market data)) most nearly equal to
the then remaining term of the Notes to April 1, 2016;
provided, however, that if the then remaining term
of the Notes to April 1, 2016 is not equal to the constant
maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate will be obtained by
linear interpolation (calculated to the nearest one-twelfth of a
year) from the weekly average yields of United States Treasury
securities for which such yields are given, except that if the
then remaining term of the Notes to April 1, 2016 is less
than one year, the weekly average yield on actually traded
United States Treasury securities adjusted to a constant
maturity of one year will be used.
Underwriters means Goldman,
Sachs & Co., Credit Suisse Securities (USA) LLC,
Deutsche Bank Securities Inc., J.P. Morgan Securities
LLC, and Morgan Stanley & Co. Incorporated.
Unrestricted Subsidiary means any
Subsidiary of the Parent (other than the Issuer) that is
designated by the Board of Directors of the Parent as an
Unrestricted Subsidiary pursuant to a Board
70
Resolution in compliance with the covenant described under the
caption Certain Covenants
Designation of Restricted and Unrestricted Subsidiaries,
and any Subsidiary of such Subsidiary.
Voting Stock of any Person as of any
date means the Capital Stock of such Person that is ordinarily
entitled to vote in the election of the Board of Directors of
such Person.
Weighted Average Life to Maturity
means, when applied to any Indebtedness at any date, the
number of years obtained by dividing:
(1) the sum of the products obtained by multiplying
(a) the amount of each then remaining installment, sinking
fund, serial maturity or other required payments of principal,
including payment at final maturity, in respect thereof, by
(b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making
of such payment; by
(2) the then outstanding principal amount of such
Indebtedness.
Wireless Licenses means broadband
personal communications service licenses or other licenses for
the provision of wireless telecommunications services or
operation of wireless telecommunications systems issued from
time to time by the applicable government agency or other
authority in the jurisdictions where the Parent and its
Restricted Subsidiaries operate.
71
MATERIAL UNITED
STATES FEDERAL INCOME TAX CONSIDERATIONS
CIRCULAR 230: To ensure compliance with
Internal Revenue Service Circular 230, you are hereby notified
that any discussion of tax matters set forth in this
communication was written in connection with the promotion or
marketing of the transactions or matters addressed herein and
was not intended or written to be used, and cannot be used by
you, for the purpose of avoiding tax-related penalties under
federal, state or local tax law. We recommend that you consult
your own tax advisor regarding the federal, state, local and
foreign tax consequences of engaging in the transactions or
matters addressed herein.
General
The following discussion summarizes the material
U.S. federal income tax consequences of the ownership, sale
or other disposition of the Notes by a holder that acquires the
Notes on original issuance at the price indicated on the cover
of this prospectus. This summary is based upon existing
U.S. federal income tax law, which is subject to change or
differing interpretations, possibly with retroactive effect.
This summary does not discuss all aspects of U.S. federal
income taxation that may be important to particular investors in
light of their individual circumstances, such as investors
subject to special tax rules (e.g., financial institutions,
insurance companies, broker-dealers and tax-exempt
organizations) or to persons that will hold the Notes as a part
of a straddle, hedge, conversion, constructive sale or other
integrated transaction for U.S. federal income tax
purposes, partnerships or U.S. Holders (as defined below)
that have a functional currency other than the United States
dollar, all of whom may be subject to tax rules that differ
materially from those summarized below. In addition, this
summary does not discuss any foreign, state or local tax
considerations. This summary is written for investors that will
hold their Notes as capital assets under the
Internal Revenue Code of 1986, as amended, or the Code. Each
prospective investor is urged to consult its tax advisor
regarding the U.S. federal, state, local and foreign income
and other tax consequences of the ownership, sale or other
disposition of the Notes.
For purposes of this summary, a U.S. Holder is
a beneficial owner of a Note that is, for U.S. federal
income tax purposes, (i) an individual who is a citizen or
resident of the United States, (ii) a corporation or other
entity treated as a corporation for U.S. federal income tax
purposes, created in or organized under the law of the United
States or any state or the District of Columbia, (iii) an
estate the income of which is includible in gross income for
U.S. federal income tax purposes regardless of its source,
or (iv) a trust (A) the administration of which is
subject to the primary supervision of a United States court and
with respect to which one or more United States persons have the
authority to control all substantial decisions of the trust, or
(B) that has in effect a valid election under applicable
United States Treasury regulations to be treated as a United
States person. A beneficial owner of a Note that is not a
U.S. Holder or a partnership is referred to herein as a
Non-U.S. Holder.
If a partnership (including any entity or arrangement treated as
a partnership for U.S. federal income tax purposes) is a
beneficial owner of Notes, the treatment of a partner in the
partnership generally will depend upon the status of the partner
and the activities of the partnership. A holder of Notes that is
a partnership and partners in such a partnership are urged to
consult their tax advisors about the U.S. federal income
tax consequences of holding and disposing of Notes.
U.S.
Holders
Issue Price. We anticipate that the
Notes will be issued at or near par and will not have original
issue discount (OID) for United States federal
income tax purposes. For this purpose, the issue
price of each Note in this offering generally will be
equal to the first price at which a substantial amount of the
Notes are sold for money (not including sales to bond houses,
brokers or similar persons or organizations acting in the
capacity of underwriters, placement agents or wholesalers).
The statutory de minimis amount under which OID is disregarded
is generally equal to 1/4 of 1 percent of the principal
amount of the Notes multiplied by the number of complete years
to maturity
72
of the Notes from their original issue date. If, contrary to
current expectations, the Notes are issued with OID equal to or
exceeding this de minimis amount, then, in addition to reporting
as taxable income stated interest on the Notes, you generally
will be required to include the OID in income as ordinary
interest income, on a constant-yield basis over the term of the
Notes, in advance of the receipt of the cash attributable to
that income. If, as expected, the amount of discount on the
Notes is de minimis, rather than being characterized as
interest, any payment attributable to such de minimis discount
should be characterized as if it were gain from the sale of the
Notes. The remainder of this discussion assumes that the Notes
will not be issued with OID.
Interest Income. Generally, qualified
stated interest on a Note will be taxable to a U.S. Holder
as ordinary interest income (in accordance with the
holders regular method of accounting) at the time such
payments are accrued or received. Qualified stated interest is
generally the stated interest payments on the Note.
In the case of debt instruments that are subject to
contingencies as to payment amount or date, the applicable
treasury regulations provide special provisions in the case of
certain debt instruments for determining the reporting of
interest income and contingent interest, as well as the
treatment of gain on sale or retirement of a debt instrument.
The Notes have various features (see Description of
Notes Optional Redemption and
Description of Notes Repurchase at the Option
of Holders Change of Control) that provide for
contingent payments or dates in certain circumstances. We intend
to take the position that the reporting of income on the Notes
should not be adjusted because of these contingent features.
This position is based in part on our assumptions regarding the
likelihood, as of the issue date of the Notes, that these
contingent events will occur and that these contingent payments
will have to be paid. Assuming such position is respected, a
U.S. Holder generally would be required to include in
income the amount of any such contingent payments at the time
such payments are received or accrued in accordance with such
U.S. Holders method of accounting for
U.S. federal income tax purposes. Our position is binding
on a U.S. Holder unless such U.S. Holder discloses its
contrary position in the manner required by the applicable
treasury regulations. If the Internal Revenue Service
successfully challenged our position, and the Notes were treated
as contingent payment debt instruments, U.S. Holders could
be required to accrue interest income at a rate higher than the
stated interest rate on the Note and to treat as ordinary
income, rather than capital gain, any gain recognized on a sale,
exchange or redemption of a Note.
Sale, Exchange, Retirement or Other Disposition of the
Notes. Upon a sale or other taxable
disposition of Notes, a U.S. Holder generally will
recognize gain or loss in an amount equal to the difference
between the amount realized on the disposition (other than an
amount attributable to accrued but unpaid qualified stated
interest, which will be taxable as ordinary income to the extent
not previously included in income) and the
U.S. Holders adjusted tax basis in such Notes. A
U.S. Holders tax basis in a Note generally will be
equal to the cost of the Note to such holder, decreased by any
payments received on the Note other than qualified stated
interest. Any such gain or loss generally will be capital gain
or loss, and will be long-term capital gain or loss if the
U.S. Holders holding period for the Notes is more
than one year at the time of disposition. For non-corporate
U.S. Holders, long-term capital gains generally will be
subject to reduced rates of taxation. The deductibility of
capital losses is subject to certain limitations.
Non-U.S.
Holders
The following summarizes the U.S. federal income and
withholding tax considerations of the purchase, ownership, or
disposition of Notes by a
Non-U.S. Holder
that is not engaged in a U.S. trade or business (or in the
case of an applicable tax treaty, does not have a permanent
establishment in the U.S.). For a discussion of certain
U.S. federal income and withholding tax considerations for
Non-U.S. Holders
that are engaged in a U.S. trade or business, please see
the discussion set forth under Income
Effectively Connected with a U.S. Trade or Business
below.
73
Interest. All payments of interest and
principal on the Notes made to a
Non-U.S. Holder
will be exempt from U.S. federal income and withholding
tax, provided that: (i) such
Non-U.S. Holder
does not own, actually or constructively, 10% or more of the
total combined voting power of all classes of our stock entitled
to vote, (ii) such
Non-U.S. Holder
is not a controlled foreign corporation related, directly or
indirectly, to us through stock ownership, (iii) such
Non-U.S. Holder
is not a bank receiving certain types of interest, and
(iv) the beneficial owner of the Notes certifies, under
penalties of perjury, to us or our paying agent on Internal
Revenue Service
Form W-8BEN
(or appropriate substitute form) that it is not a United States
person and provides its name, address and certain other required
information or certain other certification requirements are
satisfied.
If a
Non-U.S. Holder
cannot satisfy the requirements described above, payments of
interest will be subject to the 30% U.S. federal
withholding tax, unless such
Non-U.S. Holder
provides us with a properly executed (i) Internal Revenue
Service
Form W-8BEN
(or appropriate substitute form) claiming an exemption from or
reduction in withholding under the benefit of an applicable
income tax treaty or (ii) Internal Revenue Service
Form W-8ECI
(or appropriate substitute form) stating that interest paid or
accrued on the Notes is not subject to withholding tax because
it is effectively connected with the conduct of a trade or
business in the United States.
Sale, Exchange, Retirement or Other Disposition of the
Notes. Subject to the discussion below
concerning backup withholding and except with respect to accrued
but unpaid interest, which will be taxable as described above
under Interest, a
Non-U.S. Holder
generally will not be subject to U.S. federal income or
withholding tax on the receipt of payments of principal on a
Note, or on any gain recognized upon the sale, exchange,
retirement or other disposition of a Note, unless in the case of
gain (i) such gain is effectively connected with the
conduct by such
Non-U.S. Holder
of a trade or business within the United States and, if a treaty
applies (and the holder complies with applicable certification
and other requirements to claim treaty benefits), is
attributable to a permanent establishment maintained by the
Non-U.S. Holder
within the United States or (ii) such
Non-U.S. Holder
is an individual who is present in the United States for
183 days or more in the taxable year of disposition, and
certain other conditions are met.
Income Effectively Connected with a U.S. Trade or
Business. If a
Non-U.S. Holder
of Notes is engaged in a trade or business in the United States,
and if interest on the Notes or gain realized on the sale,
exchange, or other disposition of the Notes is effectively
connected with the conduct of such trade or business, the
Non-U.S. Holder
generally will be subject to regular U.S. federal income
tax on such income or gain in the same manner as if the
non-U.S. Holder
were a U.S. Holder. If the
Non-U.S. Holder
is eligible for the benefits of an income tax treaty between the
United States and the holders country of residence, any
effectively connected income or gain generally will
be subject to U.S. federal income tax only if it is also
attributable to a permanent establishment or fixed base
maintained by the holder in the United States. Payments of
interest that are effectively connected with a U.S. trade
or business (and, if an income tax treaty applies, attributable
to a permanent establishment or fixed base), and therefore
included in the gross income of a
Non-U.S. Holder,
will not be subject to the 30% withholding tax provided that the
holder claims exemption from withholding. To claim exemption
from withholding, the holder must certify its qualification,
which can be done by filing a properly executed IRS
Form W-8ECI.
In addition, if such a
Non-U.S. Holder
is a foreign corporation, such holder may also be subject to a
branch profits tax equal to 30% (or such lower rate provided by
an applicable treaty) of its effectively connected earnings and
profits for the taxable year, subject to certain adjustments.
Information
Reporting and Backup Withholding
U.S. Holders. Payments of interest
on, or the proceeds of the sale or other disposition of, a Note
are generally subject to information reporting unless the
U.S. Holder is an exempt recipient (such as a corporation).
Such payments may also be subject to U.S. federal backup
withholding tax at the applicable rate if the recipient of such
payment fails to supply a taxpayer identification number,
certified under penalties of perjury, as well as certain other
information or otherwise fails to establish
74
an exemption from backup withholding. Any amounts withheld under
the backup withholding rules will be allowed as a refund or
credit against that U.S. Holders U.S. federal
income tax liability provided the required information is
furnished to the Internal Revenue Service.
Non-U.S. Holders. A
Non-U.S. Holder
may be required to comply with certain certification procedures
to establish that the holder is not a U.S. person in order
to avoid backup withholding tax with respect to our payment of
principal and interest on, or the proceeds of the sale or other
disposition of, a Note. Any amounts withheld under the backup
withholding rules will be allowed as a refund or a credit
against that
Non-U.S. Holders
U.S. federal income tax liability provided the required
information is furnished to the Internal Revenue Service. In
certain circumstances, the name and address of the beneficial
owner and the amount of interest paid on a Note, as well as the
amount, if any, of tax withheld, may be reported to the Internal
Revenue Service. Copies of these information returns may also be
made available under the provisions of a specific treaty or
agreement to the tax authorities of the country in which the
Non-U.S. Holder
resides.
75
UNDERWRITING
NII Capital Corp., NII Holdings, the subsidiary guarantors and
the underwriters for the offering named below have entered into
an underwriting agreement with respect to the Notes. Subject to
certain conditions, each underwriter has severally agreed to
purchase the principal amount of Notes indicated in the
following table. Goldman, Sachs & Co. is the
representative of the underwriters.
|
|
|
|
|
|
|
Principal
|
|
Underwriters
|
|
Amount of Notes
|
|
|
Goldman, Sachs & Co.
|
|
$
|
375,000,000
|
|
Credit Suisse Securities (USA) LLC
|
|
$
|
150,000,000
|
|
Deutsche Bank Securities Inc.
|
|
$
|
75,000,000
|
|
J.P. Morgan Securities LLC
|
|
$
|
75,000,000
|
|
Morgan Stanley & Co. Incorporated
|
|
$
|
75,000,000
|
|
|
|
|
|
|
Total
|
|
$
|
750,000,000
|
|
|
|
|
|
|
The underwriters are committed to take and pay for all of the
Notes being offered, if any are taken.
Notes sold by the underwriters to the public will initially be
offered at the initial public offering price set forth on the
cover of this prospectus. Any Notes sold by the underwriters to
securities dealers may be sold at a discount from the initial
public offering price of up to 1.00% of the principal amount of
Notes. Any such securities dealers may resell any Notes
purchased from the underwriters to certain other brokers or
dealers at a discount from the initial public offering price of
up to 0.25% of the principal amount of Notes. If all the Notes
are not sold at the initial offering price, the underwriters may
change the offering price and the other selling terms. The
offering of the Notes by the underwriters is subject to receipt
and acceptance and subject to the underwriters right to
reject any order in whole or in part. The underwriters may offer
and sell the Notes through certain of their affiliates.
The Notes are a new issue of securities with no established
trading market. We have been advised by the underwriters that
the underwriters intend to make a market in the Notes but are
not obligated to do so and may discontinue market making at any
time without notice. No assurance can be given as to the
liquidity of the trading market for the Notes.
In connection with the offering, the underwriters may purchase
and sell Notes in the open market. These transactions may
include short sales, stabilizing transactions and purchases to
cover positions created by short sales. Short sales involve the
sale by the underwriters of a greater number of Notes than they
are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the
purpose of preventing or retarding a decline in the market price
of the Notes while the offering is in progress.
The underwriters also may impose a penalty bid. This occurs when
a particular underwriter repays to the underwriters a portion of
the underwriting discount received by it because the
representative has repurchased Notes sold by or for the account
of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters, as well as other purchases
by the underwriters for their own accounts, may stabilize,
maintain or otherwise affect the market price of the Notes. As a
result, the price of the Notes may be higher than the price that
otherwise might exist in the open market. If these activities
are commenced, they may be discontinued by the underwriters at
any time. These transactions may be effected in the
over-the-counter market or otherwise.
In relation to each Member State of the European Economic Area
which has implemented the Prospectus Directive (each, a Relevant
Member State), each Initial Purchaser has represented and agreed
that with effect from and including the date on which the
Prospectus Directive is implemented in that Relevant Member
State (the Relevant Implementation Date) it has not made and
will not make
76
an offer of notes which are the subject of the offering
contemplated by this offering circular to the public in that
Relevant Member State other than:
(a) to any legal entity which is a qualified investor as
defined in the Prospectus Directive;
(b) to fewer than 100 or, if the Relevant Member State has
implemented the relevant provision of the 2010 PD Amending
Directive, 150, natural or legal persons (other than qualified
investors as defined in the Prospectus Directive), as permitted
under the Prospectus Directive, subject to obtaining the prior
consent of the relevant Dealer or Dealers nominated by the
issuer for any such offer; or
(c) in any other circumstances falling within
Article 3(2) of the Prospectus Directive,
provided that no such offer of notes shall require the issuer or
any Initial Purchaser to publish a prospectus pursuant to
Article 3 of the Prospectus Directive.
For the purposes of this provision, the expression an
offer of notes to the public in relation to any
notes in any Relevant Member State means the communication in
any form and by any means of sufficient information on the terms
of the offer and the notes to be offered so as to enable an
investor to decide to purchase or subscribe the notes, as the
same may be varied in that Member State by any measure
implementing the Prospectus Directive in that Member State, the
expression Prospectus Directive means Directive
2003/71/EC (and amendments thereto, including the 2010 PD
Amending Directive, to the extent implemented in the Relevant
Member State), and includes any relevant implementing measure in
the Relevant Member State and the expression 2010 PD
Amending Directive means Directive 2010/73/EU.
Each underwriter has represented and agreed that:
(a) it has only communicated or caused to be communicated
and will only communicate or cause to be communicated an
invitation or inducement to engage in investment activity
(within the meaning of Section 21 of the FSMA) received by
it in connection with the issue or sale of the Notes in
circumstances in which Section 21(1) of the FSMA does not
apply to the issuer or the Guarantors; and
(b) it has complied and will comply with all applicable
provisions of the FSMA with respect to anything done by it in
relation to the Notes in, from or otherwise involving the United
Kingdom.
The Notes may not be offered or sold by means of any document
other than (i) in circumstances which do not constitute an
offer to the public within the meaning of the Companies
Ordinance (Cap.32, Laws of Hong Kong), or (ii) to
professional investors within the meaning of the
Securities and Futures Ordinance (Cap.571, Laws of Hong Kong)
and any rules made thereunder, or (iii) in other
circumstances which do not result in the document being a
prospectus within the meaning of the Companies
Ordinance (Cap.32, Laws of Hong Kong), and no advertisement,
invitation or document relating to the Notes may be issued or
may be in the possession of any person for the purpose of issue
(in each case whether in Hong Kong or elsewhere), which is
directed at, or the contents of which are likely to be accessed
or read by, the public in Hong Kong (except if permitted to do
so under the laws of Hong Kong) other than with respect to Notes
which are or are intended to be disposed of only to persons
outside Hong Kong or only to professional investors
within the meaning of the Securities and Futures Ordinance (Cap.
571, Laws of Hong Kong) and any rules made thereunder.
The securities have not been and will not be registered under
the Financial Instruments and Exchange Law of Japan (the
Financial Instruments and Exchange Law) and each underwriter has
agreed that it will not offer or sell any securities, directly
or indirectly, in Japan or to, or for the benefit of, any
resident of Japan (which term as used herein means any person
resident in Japan, including any corporation or other entity
organized under the laws of Japan), or to others for re-offering
or resale, directly or indirectly, in Japan or to a resident of
Japan, except pursuant to an exemption from the registration
requirements of, and otherwise in compliance with, the Financial
Instruments and Exchange Law and any other applicable laws,
regulations and ministerial guidelines of Japan.
77
This prospectus has not been registered as a prospectus with the
Monetary Authority of Singapore. Accordingly, this prospectus
and any other document or material in connection with the offer
or sale, or invitation for subscription or purchase, of the
Notes may not be circulated or distributed, nor may the Notes be
offered or sold, or be made the subject of an invitation for
subscription or purchase, whether directly or indirectly, to
persons in Singapore other than (i) to an institutional
investor under Section 274 of the Securities and Futures
Act, Chapter 289 of Singapore (the SFA),
(ii) to a relevant person, or any person pursuant to
Section 275(1A), and in accordance with the conditions,
specified in Section 275 of the SFA or (iii) otherwise
pursuant to, and in accordance with the conditions of, any other
applicable provision of the SFA.
Where the Notes are subscribed or purchased under
Section 275 by a relevant person which is: (a) a
corporation (which is not an accredited investor) the sole
business of which is to hold investments and the entire share
capital of which is owned by one or more individuals, each of
whom is an accredited investor; or (b) a trust (where the
trustee is not an accredited investor) whose sole purpose is to
hold investments and each beneficiary is an accredited investor,
shares, debentures and units of shares and debentures of that
corporation or the beneficiaries rights and interest in
that trust shall not be transferable for 6 months after
that corporation or that trust has acquired the Notes under
Section 275 except: (1) to an institutional investor
under Section 274 of the SFA or to a relevant person, or
any person pursuant to Section 275(1A), and in accordance
with the conditions, specified in Section 275 of the SFA;
(2) where no consideration is given for the transfer; or
(3) by operation of law.
We estimate that our share of the total expenses of the
offering, excluding underwriting discounts and commissions, will
be approximately $763,000.
We have agreed to indemnify the several underwriters against
certain liabilities, including liabilities under the Securities
Act of 1933. We have also agreed that we will not offer, sell,
contract to sell, pledge or otherwise dispose of any debt
securities of NII Capital Corp. or NII Holdings or warrants to
purchase debt securities of NII Capital Corp. or NII Holdings
substantially similar to the Notes during the period ending
30 days after the date of this prospectus without the prior
written consent of Goldman, Sachs & Co.
The underwriters and their respective affiliates are full
service financial institutions engaged in various activities,
which may include securities trading, commercial and investment
banking, financial advisory, investment management, investment
research, principal investment, hedging, financing and brokerage
activities. Certain of the underwriters and their respective
affiliates have, from time to time, performed, and may in the
future perform, various financial advisory and investment
banking services for the issuer, for which they received or will
receive customary fees and expenses.
In the ordinary course of their various business activities, the
underwriters and their respective affiliates may make or hold a
broad array of investments and actively trade debt and equity
securities (or related derivative securities) and financial
instruments (including bank loans) for their own account and for
the accounts of their customers, and such investment and
securities activities may involve securities
and/or
instruments of the issuer. The underwriters and their respective
affiliates may also make investment recommendations
and/or
publish or express independent research views in respect of such
securities or instruments and may at any time hold, or recommend
to clients that they acquire, long
and/or short
positions in such securities and instruments.
78
LEGAL
MATTERS
Certain legal matters relating to the Notes offered hereby will
be passed upon for NII Holdings and NII Capital by Williams
Mullen, Richmond, Virginia. The underwriters have been
represented by Shearman & Sterling LLP, New York, New
York.
EXPERTS
The financial statements, the financial statement schedule and
managements assessment of the effectiveness of internal
control over financial reporting (which is included in
Managements Report on Internal Control over Financial
Reporting) incorporated in this Prospectus by reference to the
annual report on
Form 10-K
of NII Holdings, Inc. for the year ended December 31, 2010
have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, an independent registered public
accounting firm, given on the authority of said firm as experts
in auditing and accounting.
INCORPORATION BY
REFERENCE
The SEC allows us to incorporate by reference
certain information into this prospectus. This means that we can
disclose important information to you by referring you to
another document that we have filed separately with the SEC that
contains such information. The information incorporated by
reference is considered part of this prospectus, and we can
disclose important information to you by referring you to those
documents.
We incorporate by reference the documents listed below, to the
extent they have been filed with the SEC:
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|
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our annual report on
Form 10-K
for the year ended December 31, 2010;
|
|
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|
|
|
our definitive proxy statement on Schedule 14A filed on
April 1, 2010; and
|
|
|
|
|
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our current reports on
Form 8-K
filed on March 24, 2011 and March 25, 2011.
|
We also incorporate by reference all documents to the extent
they have been filed with the SEC under Sections 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (other
than those furnished pursuant to Item 2.02 or
Item 7.01 in any current report on
Form 8-K
or other information deemed to have been furnished
rather than filed in accordance with the SECs rules)
(1) after the date of this prospectus and (2) until
this offering has been completed. Information in this prospectus
supersedes related information in the documents listed above,
and information in subsequently filed documents supersedes
related information in both this prospectus and the incorporated
documents.
We will promptly provide, without charge to you, upon written or
oral request, a copy of any or all of the documents incorporated
by reference in this prospectus, other than exhibits to those
documents, unless the exhibits are specifically incorporated by
reference in those documents. Requests should be directed to
Investor Relations, NII Holdings, Inc., 1875 Explorer Street,
Suite 1000, Reston, Virginia 20190,
(703) 390-5100,
or you may visit the investor relations section of our website
at www.nii.com/investor relations.html. The
information contained on our website is not part of this
prospectus.
This prospectus or information incorporated by reference herein,
contains summaries of certain agreements that we have filed as
exhibits to various filings we have made with the SEC, as well
as certain agreements that we will enter into in connection with
the offering of the Notes described in this prospectus. The
descriptions of these agreements contained in this prospectus or
information incorporated by reference herein do not purport to
be complete and are subject to, or qualified in their entirety
by reference to, the definitive agreements. Copies of the
definitive agreements will be made available without charge to
you by making a written or oral request to us.
79
WHERE YOU CAN
FIND MORE INFORMATION
We are subject to the information requirements of the Securities
Exchange Act of 1934, and we file annual, quarterly and current
reports, proxy statements and other information with the SEC.
You may read and copy any document that we file at the
SECs public reference room facility located at
100 F Street, NE, Room 1580,
Washington, D.C. 20549. Please call the SEC at
l-800-SEC-0330 for further information on the public reference
room. The SEC maintains an Internet site at
http://www.sec.gov
that contains reports, proxy and information statements and
other information regarding issuers, including us, that file
documents with the SEC electronically through the SECs
electronic data gathering, analysis and retrieval system known
as EDGAR.
80
$750,000,000
NII Capital Corp.
7.625% Senior Notes Due 2021
Goldman, Sachs &
Co.
Credit Suisse
Deutsche Bank
Securities
J.P. Morgan
Morgan Stanley