EXHIBIT 10.5
Settlement Strategy Agreement
This Settlement Strategy Agreement, dated as of September 21, 1999 (this
"Agreement"), is entered into by and between Vodafone AirTouch plc ("Vodafone")
and ▇▇▇▇ Atlantic Corporation ("▇▇▇▇ Atlantic"). This Agreement sets forth the
principal terms and conditions upon which Vodafone and ▇▇▇▇ Atlantic intend to
minimize or avoid the possibility of certain potential litigation, and to
pursue a settlement of any claims made or litigation commenced, in connection
with the U.S. Wireless Alliance Agreement, dated September 21, 1999, by and
between Vodafone and ▇▇▇▇ Atlantic (the "Alliance Agreement") and the
transactions contemplated thereunder.
Recitals
a. Vodafone and ▇▇▇▇ Atlantic (each, a "Party") have a common interest in
preventing or minimizing any liability, damages or other relief that may be
sought against either Party or their respective affiliates in connection with
the Alliance Agreement and the transactions contemplated thereunder.
b. This Agreement is being entered into pursuant to the Joint Defense
Agreement between the Parties.
1. Certain Defined Terms
a. Capitalized terms used but not defined in this Agreement have the
meanings set forth in the Alliance Agreement.
b. As used herein, the following terms have the following meanings:
"Asset Party" means, as to any asset, the Party obligated under the
Alliance Agreement to contribute such asset to Wireless.
"Base Value" means, as to any asset, the Fair Market Value (as defined
in the Partnership Agreement) of such asset determined in the manner set forth
in Section 9.5(b) of the Partnership Agreement.
"Consent" means, as to any Conveyed Asset, any approval, consent or waiver
with respect to a Third Party Right necessary for the contribution of such
Conveyed Asset to Wireless as contemplated by the Alliance Agreement including,
without limitation, any such consent, approval or waiver to the admission of
Wireless as a general partner and/or limited partner of a Conveyed Partnership.
"Dispute Costs" means, with respect to a Party, all Losses (as defined in
the Alliance Agreement) arising out of or relating to Transaction Litigation,
or incurred in connection with obtaining Consents.
"Payment Resolution" has the meaning set forth in Section 3.a.
"Purchase Resolution" has the meaning set forth in Section 3.a.
"Remaining Cap" means, with respect to a Party, the excess, if any, of (i)
$40 million, over (ii) the aggregate amount of Resolution Costs and Dispute
Costs incurred by such Party and its Affiliates prior to the time of
determination.
"Resolution" means a Payment Resolution, a Purchase Resolution, or a Sale
Resolution.
"Resolution Costs" mean:
(i) in the case of any Payment Resolution, the amount of the payment
made to a Right Holder in connection with such Payment Resolution;
(ii) in the case of any Sale Resolution, the amount of any Value
Shortfall resulting from such Sale Resolution; and
(iii) in the case of any Purchase Resolution, the amount of any Value
Premium resulting from such Purchase Resolution.
Resolution Costs shall specifically exclude any Resolution related to the
transactions contemplated by the ▇▇▇▇ Atlantic GTE Agreement.
"Right Holder" means any Person having or asserting a Third Party Right.
"Sale Resolution" has the meaning set forth in Section 3.a.
"Stage II Ownership Interest" means, as to any Party, the aggregate
Partnership Interest in Wireless of such Party and its Affiliates contemplated
in Section 2.8 of the Alliance Agreement (based on the assumption that ▇▇▇▇
Atlantic owns the ▇▇▇▇ Atlantic Conveyed Assets).
"Third Party Right" means, as to any Conveyed Asset, any claimed right of
consent, right of first refusal, put right, Default, dissolution or similar
claim made with respect to such Conveyed Asset.
"Transaction Claims" means any and all claims, litigation and Proceedings
(as defined in the Alliance Agreement) arising out of or relating to the
transactions contemplated by the Alliance Agreement (including, without
limitation, claims, litigation and Proceedings arising out of or relating to
Third Party Rights).
"Value Premium" means, as to any Purchase Resolution, the excess, if any,
of (i) the acquisition price of any asset(s) acquired in connection with such
Purchase Resolution over (ii) the Base Value of such acquired asset(s).
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"Value Shortfall" means, as to any Sale Resolution, the excess, if any, of
(i) the Base Value of the Conveyed Asset sold in connection with such Sale
Resolution over (ii) the pre-tax proceeds realized from such Sale Resolution.
"Wireless" means Cellco Partnership, a Delaware general partnership.
2. Resolution Process
a. Wireless will have full authority to obtain Consents with respect to
each Party's Conveyed Assets, subject to the terms and conditions of this
Agreement. The Parties will share the costs and expenses of obtaining such
Consents to the extent and in the manner contemplated by Section 3 below.
b. Wireless will use its good faith, reasonable best efforts to obtain all
Consents necessary to effect the contribution of each Party's Conveyed Assets
to Wireless as contemplated by the Alliance Agreement, and to minimize the
Resolution Costs incurred in obtaining such Consents.
c. Wireless will control and manage the process of obtaining Consents with
respect to each Party's Conveyed Assets, including the conduct of
communications, discussions and negotiations with Right Holders.
d. Wireless will, to the extent practicable, provide each Party with
reasonable advance notice of, and a reasonable opportunity to consult with
respect to, (i) all communications regarding settlement options with any Right
Holder, (ii) all settlement offers or proposals made by Wireless to, or
received by Wireless, from any Right Holder and (iii) all negotiations and
discussions with any Right Holder with respect to obtaining Consents. Each
Party will respond promptly to all requests for review or consultation made by
Wireless pursuant to this Agreement.
e. Notwithstanding the foregoing, without the prior written consent of the
Asset Party (which consent shall not be unreasonably withheld), Wireless shall
not make or enter into any agreement, commitment or undertaking with respect to
any Resolution or other agreement relating to a Consent for a Conveyed Asset
unless all obligations and liabilities of the Asset Party thereunder are
expressly conditioned upon the occurrence of the Stage I Closing.
f. Nothing contained in this Agreement shall (i) give Wireless, directly
or indirectly, the right to control or direct the operations of any Party or
its Affiliates prior to the Stage I Closing (or the Stage II Closing, in the
case of Vodafone's San Francisco Bay Area markets and Chicago MTA markets) or
(ii) restrict an Asset Party from complying with any obligation which (in the
opinion of counsel to such Asset Party) exists to any Right Holder or other
Person in connection with the transactions contemplated by the Alliance
Agreement including (without limitation) compliance with Third Party Rights.
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g. The rights of Wireless set forth in this Section 2 shall not become
effective unless and until all consents, approvals and actions by the FCC which
are required to consummate the transactions contemplated by the Alliance
Agreement shall have been obtained.
3. Responsibility for Resolution Costs; Effect of Resolutions on Contributions
to Wireless and Ownership in Wireless
a. Forms of Resolution. The Parties currently contemplate that the
resolution of Third Party Rights with respect to a Conveyed Asset may result in
(i) a payment to the Right Holder (a "Payment Resolution"), (ii) a sale by a
Party of the Conveyed Asset to the Right Holder (a "Sale Resolution) and/or
(iii) a purchase by a Party of an additional ownership interest in the Conveyed
Asset (a "Purchase Resolution").
b. Responsibility for Resolution Costs Below Individual Cap. Each Party
will bear all Resolution Costs incurred by such Party or its Affiliates up to
an aggregate amount of $40 million (as to either Party, the "Individual Cap").
c. Responsibility for Resolution Costs Above Individual Cap. Wireless will
bear, or the Parties will share in proportion to their Stage II Ownership
Interests, as the case may be, all Resolution Costs incurred by a Party and its
Affiliates in excess of such Party's Individual Cap in accordance with the
following provisions:
(i) Payment Resolutions. Each Party will contribute, in proportion to
its Stage II Ownership Interest, to the payment made to a Right Holder in
connection with any Payment Resolution (but only to the extent that such
payment exceeds the Asset Party's Remaining Cap at the time of such
Payment Resolution). The Parties will cooperate to structure their
contributions to any Payment Resolution in a tax-efficient manner.
(ii) Sale Resolutions. In the case of a Sale Resolution, the Asset
Party will contribute to Wireless, in lieu of the Conveyed Asset disposed
of in such Sale Resolution, (x) the Net Proceeds (as defined in the
Alliance Agreement) from the disposition of such Conveyed Asset and (y) an
amount of cash equal to any Value Shortfall from such Sale Resolution (but
only to the extent that such Value Shortfall does not exceed the Asset
Party's Remaining Cap at the time of such Sale Resolution). The Stage II
Ownership Interests will not be adjusted as a result of a contribution
made pursuant to this Section 3.c.(ii) in lieu of the Conveyed Asset
disposed of in such Sale Resolution.
(iii) Purchase Resolutions. In the case of any Purchase Resolution:
(A) Each Party will contribute, in proportion to its Stage II
Ownership Interest, to the purchase of the additional
ownership interest in a Conveyed Asset acquired in such
Purchase Resolution (an "Additional Interest");
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(B) At the Stage I Closing, each Party will contribute to
Wireless the Additional Interest so acquired;
(C) The Asset Party will contribute to Wireless an amount of
cash equal to any Value Premium from such Purchase
Resolution (but only to the extent that such Value Premium
does not exceed the Asset Party's Remaining Cap at the time
of such Purchase Resolution); and
(D) In the event that the Alliance Agreement is terminated,
then at any time within the 30-day period following such
termination: the Asset Party will have the option to
purchase, and the other Party will have the option to
require the Asset Party to purchase, any Additional
Interest so acquired by the other Party at a purchase price
equal to the acquisition price of such Additional Interest
accreted at a rate equal to the (1) LIBO Rate (as defined
in the Alliance Agreement) plus 100 basis points for the
initial 30-day period following the date of acquisition and
(2) the LIBO Rate plus 200 basis points through the date of
sale.
The Stage II Ownership Interests of the Parties will not be adjusted
as a result of contributions made pursuant to this Section 3.c.(iii).
d. Other Resolutions. If the resolution of a Third Party Right occurs in a
manner not contemplated by Section 3.a., the Parties will implement sharing
arrangements with respect to the costs and expenses incurred in connection
with such resolution that are consistent with the principles embodied in
Sections 3.b. and 3.c.
e. Responsibility for Transaction Litigation. From and after the Stage I
Closing, all Transaction Litigation shall be Assumed Liabilities for purposes
of the Alliance Agreement.
4. Right of Vodafone to Dispose of Conveyed Assets for which Consents are not
Obtained. In the event that Wireless is unable to obtain all Consents necessary
to effect the contribution of any Conveyed Asset of Vodafone to Wireless prior
to the Stage I Closing Date, then Vodafone (with consultation and cooperation
from ▇▇▇▇ Atlantic) shall be entitled to dispose of the Conveyed Asset and
contribute to Wireless, in lieu of the Conveyed Asset, the Net Proceeds from
the disposition of the Conveyed Asset. The Stage II Ownership Interests will
not be adjusted as a result of a contribution made pursuant to this Section 4
in lieu of the Conveyed Asset disposed of.
5. Termination; Survival. This Agreement will terminate upon any termination of
the Alliance Agreement; provided that if, prior to such termination, either
Party shall have become obligated with respect to the resolution of a Third
Party Right, then the
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obligations of the Parties under Section 3 with respect to such resolution will
survive the termination of this Agreement.
6. Entire Agreement. This Agreement constitutes the entire agreement
between the Parties with respect to the matters described herein and supercedes
all prior and contemporaneous agreements and understandings, offers and
negotiations (oral or written). This Agreement may be modified or amended only
by subsequent written agreement signed by both Parties.
7. Governing Law; Disputes. This Agreement shall be governed by, and construed
in accordance with, the law of the State of Delaware, without reference to
choice of law principles, including all matters of construction, validity and
performance. Any dispute, controversy or claim arising out of or relating to
this Agreement shall be resolved in accordance with the provisions of Section
10.1 of the Alliance Agreement.
8. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all of which together
shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the Parties have entered into this Agreement as of the
day and year first written above.
VODAFONE AIRTOUCH PLC
By: /s/ C.C. Gent
----------------------------
Name: C.C. Gent
Title:
▇▇▇▇ ATLANTIC CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title:
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