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Minnesota (State or Other Jurisdiction of Incorporation or Organization) | 4812 (Primary Standard Industrial Classification Code Number) | 41-1693295 (IRS Employer Identification No.) |
Proposed Maximum | Proposed Maximum | ||||||||
Title of Each Class of | Amount | Offering Price | Aggregate | Amount of | |||||
Securities to be Registered | to be Registered | Per Note(1) | Offering Price(1) | Registration Fee | |||||
81/4% Senior Secured Notes Due 2012 | $160,000,000 | 100% | $160,000,000 | $17,120 | |||||
Guarantees | — | — | — | (2) | |||||
Total | $17,120(3) | ||||||||
(1) | Estimated solely for purposes of calculating the registration fee. Fee calculated pursuant to Rule 457(f)(2) based on the liquidation value of the $160,000,000 aggregate principal amount of 81/4% Senior Secured Notes to be exchanged for the securities being registered. |
(2) | No separate consideration will be received for the guarantees and, therefore, no additional registration fee is required. |
(3) | Previously paid. |
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IRS Employer | ||||||||
Exact Name of Additional Registrants* | Jurisdiction of Formation | Identification No. | ||||||
Alexandria Indemnity Corporation | Vermont | 48-1269440 | ||||||
RCC Atlantic, Inc. | Minnesota | 41-1900518 | ||||||
RCC Atlantic Licenses, LLC | Minnesota | 20-1068392 | ||||||
RCC Minnesota, Inc. | Minnesota | 41-1896796 | ||||||
RCC Transport, Inc. | Minnesota | 41-1966859 | ||||||
TLA Spectrum, LLC | Minnesota | 41-1929306 |
* | The address for each of the additional Registrants is c/o Rural Cellular Corporation, 3905 Dakota Street, SW, P.O. Box 2000, Alexandria, MN 56308-2000. The primary standard industrial classification number for each of the additional Registrants is 4812. |
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Information contained herein is subject to completion or amendment. A Registration Statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the Registration Statement becomes effective. This Prospectus shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such state. |
• | Expires 5:00 p.m., New York City time, on , 2006 unless extended. | |
• | All old notes that are validly tendered and not withdrawn will be exchanged. | |
• | Tenders of old notes may be withdrawn any time prior to the expiration of the exchange offer. | |
• | The exchange of old notes for new notes will not be a taxable exchange for U.S. federal income tax purposes. | |
• | We will not receive any proceeds from the exchange offer. | |
• | The terms of the new notes we will issue in the exchange offer are substantially identical to the old notes, except that certain transfer restrictions and registration rights relating to the old notes will not apply to the new notes. |
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Consent of Deloitte & Touche LLP | ||||||||
Consent of Deloitte & Touche LLP |
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• | the competitive environment in the wireless and telecommunications industries and in the markets we serve, including the quality and pricing of comparable wireless communications services offered by our competitors; | |
• | economic conditions in our geographic markets and in general, including those resulting from geopolitical concerns; | |
• | demographic changes; | |
• | our business plan and our strategy for implementing our plan; | |
• | our ability to meet our schedule for buildout and upgrade of our wireless network; | |
• | our ability to meet changes in technology and adapt our network to those changes; | |
• | the market acceptance of the technology we use; | |
• | the availability of adequate quantities of system infrastructure and customer equipment and components to meet our service deployment and marketing plans and customer demand; | |
• | our ability to achieve and maintain market penetration and average customer revenue levels sufficient to provide financial viability; | |
• | our ability to reverse customer loss rates (churn) experienced during recent quarters and return to prior retention levels; | |
• | our ability to maintain increases in roaming minutes of use in the face of decreasing roaming yields; | |
• | our ability to implement new billing systems and customer service infrastructure and adopt such systems and infrastructure to take account of future changes in order to minimize disruption and maximize retention; | |
• | our ability to integrate the operations of any businesses we acquire; | |
• | our ability to attract and retain qualified personnel; | |
• | our capital expenditures and funding requirements, including our ability to access sufficient capital to meet operating and financing needs; |
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• | future legislation, regulatory actions, or judicial decisions relating to commercial mobile radio services, local multipoint distribution services, other wireless communications services, or telecommunications services generally; | |
• | other risks and uncertainties described from time to time in our reports filed with the Securities and Exchange Commission, or SEC; and | |
• | other factors described in this prospectus, including, without limitation, under “Risk Factors.” |
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Service | Customers as | |||||||||||||||||||||
Percentage | Area | of June 30, | Square | |||||||||||||||||||
Ownership | POPS(1) | 2006(2) | Miles | States | ||||||||||||||||||
Cellular: | ||||||||||||||||||||||
Midwest | 100 | % | 759,000 | 136,897 | 45,000 | MN, ND, SD | ||||||||||||||||
Northeast | 100 | % | 2,208,000 | 242,289 | 46,000 | MA, ME, NH, NY, VT | ||||||||||||||||
South | 100 | % | 2,004,000 | 82,706 | 79,000 | AL, KS, MS | ||||||||||||||||
Northwest | 100 | % | 857,000 | 115,625 | 77,000 | ID, OR, WA | ||||||||||||||||
Total | 5,828,000 | 577,517 | 247,000 | |||||||||||||||||||
PCS: | ||||||||||||||||||||||
Wireless Alliance | 70 | % | 776,000 | 9,068 | 19,000 | MN, ND, SD, WI | ||||||||||||||||
Wholesale | N/A | 103,841 | N/A | |||||||||||||||||||
Total | 6,604,000 | 690,426 | 266,000 | |||||||||||||||||||
(1) | Reflects 2000 U.S. Census Bureau data updated for December 2002. |
(2) | Customer numbers exclude paging and long distance customers. |
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• | Maintain mutually beneficial roaming arrangements. We have national roaming agreements in our markets with Cingular (effective through December 2009) and Verizon (effective through December 2009). Under these agreements, we are able to attain preferred roaming status by overlaying our existing TDMA networks in our South, Northeast, and Northwest regions with GSM/ GPRS/ EDGE technology and our Midwest region network with CDMA technology. These technology conversions are substantially completed. We also have various agreements withT-Mobile, which are effective through December 2007. | |
• | Maximize customer retention by capitalizing on our strong local presence and our high-quality networks. We have developed a strong local presence in the rural communities that we serve through our extensive network of local distribution channels and customer service, which we believe provides us a competitive advantage. We seek to position ourselves as the highest quality provider in our markets, and we are committed to making the capital investment required to maintain and operate a comprehensive network. Finally, we have received and will continue to pursue federal support funds, which we expect will allow us to expand into new markets in which wireless services would not otherwise be provided. | |
• | Introduce enhanced products and services. We will evaluate deployment of new and enhanced products and services on an ongoing basis to ensure our customers have access to the best available wireless technology and to enhance our local service revenue. Some of these new technologies and features include wirelesse-mail access and internet access. | |
Six Months Ended | ||||||||||||||||||||||||||
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2005 | 2004 | 2003 | 2002 | 2001 | 2006 | 2005 | ||||||||||||||||||||
— | — | — | 1.19 | — | — | — |
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Registration Rights Agreement | You have the right to exchange your old notes for new notes with substantially identical terms. This exchange offer is intended to satisfy this right. After the exchange offer is complete, you will no longer be entitled to any exchange or registration rights with respect to your notes. | |
The Exchange Offer | We are offering to exchange $1,000 principal amount of $160,000,000 aggregate principal amount of our 81/4% Senior Secured Notes due 2012, which have been registered under the Securities Act, for each $1,000 principal amount of our outstanding 81/4% Senior Secured Notes due 2012, which were issued in May 2006 in a private offering. In order to be exchanged, an outstanding note must be validly tendered and accepted. We will exchange all notes validly tendered and not validly withdrawn. As of the date of this prospectus, there is $160,000,000 aggregate principal amount of old notes. We will issue new notes on or promptly after the expiration of the exchange offer. | |
Resale | We believe that, if you are not a broker-dealer, you may offer new notes for resale, resell, or otherwise transfer the new notes without complying with the registration and prospectus delivery requirements of the Securities Act if you: | |
• are not an “affiliate,” as defined under the Securities Act, of RCC; | ||
• acquired the new notes in the ordinary course of business; | ||
• are not engaged in, do not intend to engage in, and have no arrangement or understanding with any person to participate in a “distribution,” as defined under the Securities Act, of the new notes; and | ||
• are not acting on behalf of any person who could not truthfully make the foregoing representations. | ||
Our belief that resales and other transfers of new notes would be permitted without registration or prospectus delivery under the conditions described above is based on interpretations of the SEC given to other, unrelated issuers in transactions similar to the exchange offer. We cannot assure you that the SEC would take the same position with respect to the exchange offer. If any of the above conditions is not satisfied, you may not rely on the applicable interpretations of the staff of the SEC and you must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale or other transfer transaction. Failure to so comply may result in liability to you under the Securities Act. We will not be responsible for or indemnify you against any liability you may incur under the Securities Act. |
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Notwithstanding the foregoing, any holder who acquired old notes to be exchanged for new notes in the exchange offer directly from RCC or any of its affiliates must acknowledge and agree that it: | ||
• may not rely on the applicable interpretations of the staff of the SEC and | ||
• must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction and that such a secondary resale transaction must be covered by an effective registration statement containing the selling security holder information required by the securities laws. | ||
Any broker-dealer that receives new notes for its own account in exchange for old notes may be deemed to be an “underwriter” within the meaning of the Securities Act. Each broker-dealer that receives new notes for its own account in exchange for old notes must represent that the old notes to be exchanged for the new notes were acquired by it as a result of marketmaking activities or other trading activities (and not acquired directly from RCC or any of its affiliates) and acknowledge that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of the new notes; however, by so acknowledging and by delivering a prospectus, the participating broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. We have agreed that during the period ending on the earlier of (1) one year from the date on which the exchange offer is consummated, subject to extension in limited circumstances, and (2) the date on which all transfer restricted securities covered by the exchange offer registration statement have been sold pursuant thereto, we will use commercially reasonable efforts to keep the exchange offer registration statement effective to the extent necessary to ensure that this prospectus is available for sales of the new notes by participating broker-dealers. See “Plan of Distribution and Selling Restrictions.” | ||
Expiration Date | The exchange offer will expire at 5:00 p.m., New York City time, on , 2006, unless we decide to extend the expiration date. | |
Conditions to the Exchange Offer | We may terminate or amend the exchange offer if: | |
• any legal proceeding, government action, or other adverse development materially impairs our ability to complete the exchange offer; | ||
• any SEC rule, regulation, or interpretation materially impairs the exchange offer; or | ||
• we have not obtained any necessary governmental approvals with respect to the exchange offer. |
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Procedures for Tendering Old Notes | Each registered holder of old notes wishing to accept the exchange offer must: | |
• complete, sign, and date the accompanying letter of transmittal, or a facsimile thereof; or | ||
• arrange for The Depository Trust Company, or DTC, to transmit certain required information to the exchange agent in connection with a book-entry transfer. See “The Exchange Offer — Procedures for Tendering.” | ||
You must mail or otherwise deliver the documentation listed above and your old notes to U.S. Bank National Association, as exchange agent, at the address set forth under “The Exchange Offer — Exchange Agent.” By tendering your old notes in this manner, you will be representing, among other things, that you meet the three requirements set forth under “— Resale” above. | ||
Remaining Old Notes | If you are eligible to participate in the exchange offer and you do not tender your old notes or if we do not accept your old notes for exchange as described under “The Exchange Offer — Procedures for Tendering,” you will not have any further registration or exchange rights, and your old notes will continue to be subject to restrictions on transfer. Accordingly, the liquidity of the market for such old notes could be adversely affected. | |
You do not have any appraisal or dissenters’ rights in connection with the exchange offer. | ||
Special Procedures for Beneficial Owners | If you beneficially own old notes registered in the name of a broker, dealer, commercial bank, trust company, or other nominee and you wish to tender your old notes in the exchange offer, you should contact the registered holder promptly and instruct it to tender on your behalf. If you wish to tender on your own behalf, you must, prior to completing and executing the letter of transmittal for the exchange offer and delivering your old notes, either arrange to have your old notes registered in your name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. | |
Guaranteed Delivery Procedures | If you wish to tender your old notes and time will not permit your required documents to reach the exchange agent by the expiration date of the exchange offer, or you cannot complete the procedure for book-entry transfer on time, or you cannot deliver certificates for your old notes on time, you may tender your old notes according to the procedures described in this prospectus under the heading “The Exchange Offer — Guaranteed Delivery Procedures.” |
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Withdrawal Rights | You may withdraw the tender of your old notes at any time prior to 5:00 p.m., New York City time, on , 2006. Any withdrawal must be in accordance with the procedures described in “The Exchange Offer — Withdrawal of Tenders.” | |
Taxation | The exchange of notes will not be a taxable event for United States federal income tax purposes. See “Certain United States Federal Income Tax Consequences.” | |
Use of Proceeds | We will not receive any proceeds from the issuance of new notes in the exchange offer. We will pay all of our expenses incident to the exchange offer. See “Use of Proceeds.” | |
Exchange Agent | U.S. Bank National Association is serving as the exchange agent in connection with the exchange offer. The address and facsimile and telephone numbers of the exchange agent are provided in this prospectus under “The Exchange Offer — Exchange Agent.” |
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Issuer | Rural Cellular Corporation | |
Securities Offered | $160,000,000 million in aggregate principal amount of 81/4% senior secured notes due 2012, plus $350,000,000 aggregate principal amount of 81/4% senior secured notes originally issued in March 2004. The notes have been issued under a single indenture and will be treated as a single class for purposes of voting, waivers, and amendments. | |
Maturity Date | The notes will mature on March 15, 2010. | |
Interest | The notes bear interest at a rate of 81/4% per year. Interest on the notes is payable semi-annually on March 15 and September 15 of each year, commencing on September 15, 2006. | |
Guarantees | Our obligations under the notes, including the obligation to pay principal, interest, and liquidated damages, if any, are fully and unconditionally guaranteed on a senior, secured, second-priority basis by all of our existing and future restricted subsidiaries. Wireless Alliance, LLC is not a restricted subsidiary and is not a guarantor of the notes. | |
Ranking | The notes and guarantees rank: | |
• equal in right of payment with our and the guarantors’ existing and future senior indebtedness; and | ||
• senior in right of payment to our and the guarantors’ existing and future subordinated indebtedness. | ||
The assets of any subsidiary that does not guarantee the notes will be subject to the prior claims of all creditors of that subsidiary, including trade creditors. | ||
As of June 30, 2006, we had: | ||
• $58.0 million in senior indebtedness secured by first-priority liens on the collateral described below under “— Collateral,” with $1.4 million available for borrowing under our revolving credit facility; | ||
• $510.0 million in aggregate principal amount of notes, which is secured by second-priority liens on the collateral described below under “— Collateral”; | ||
• no material indebtedness secured by other liens; | ||
• $325.0 million in aggregate principal amount of senior, unsecured indebtedness, which is not guaranteed by any of our subsidiaries; and | ||
• $1.1 billion in senior subordinated debt and preferred stock, including accrued but unpaid dividends. | ||
Collateral | The notes are secured by second-priority liens, subject to certain exceptions, on the collateral securing our revolving credit facility, which consists of substantially all of our and the guarantors’ tangible and intangible personal property, assets, and fixtures. |
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See “Description of the Notes — Security” for more information about exclusions from the collateral. Our and the guarantors’ obligations under the revolving credit facility are secured by first-priority liens on the collateral. | ||
The indenture and the collateral documents relating to the notes permit us to incur a significant amount of debt, including additional obligations secured on a first-priority basis or second-priority basis by the collateral, subject to compliance with specified conditions. Including the indebtedness under the revolving credit facility, we and the guarantors are permitted under the indenture to incur up to $160.0 million in indebtedness secured by first-priority liens plus an additional $125.0 million, subject to certain restrictions. No appraisals of any collateral have been prepared by us or on our behalf. The value of the collateral securing the notes at any time will depend on market and other economic conditions, including the availability of suitable buyers for the collateral. | ||
Optional Redemption | We may redeem the notes, in whole or in part, at any time, on one or more occasions, on or after March 15, 2008, at the redemption prices set forth in the “Description of the Notes” section under the heading “Optional Redemption,” together with accrued and unpaid interest to, but excluding, the date fixed for redemption. At any time, which may be more than once, before March 15, 2007, we can choose to redeem up to 35% of the notes with money that we raise in certain equity offerings, as long as: | |
• we pay 108.250% of the aggregate principal amount of the notes redeemed, plus accrued and unpaid interest to, but excluding, the date of redemption; | ||
• we redeem the notes within 45 days after completing the equity offering; and | ||
• at least 65% of the aggregate principal amount of the notes issued under the indenture remains outstanding after the redemption. | ||
See “Description of the Notes — Optional Redemption.” | ||
Mandatory Redemption | The notes are not mandatorily redeemable prior to their maturity date. | |
Change of Control | Upon the occurrence of specified change of control events, we will be required to make an offer to repurchase all of the notes. The purchase price will be 101% of the outstanding principal amount of the notes plus accrued and unpaid interest to the date of repurchase. See “Description of the Notes — Change of Control.” In certain circumstances, our ability to complete a change of control repurchase may be limited by the terms of our revolving credit facility or our other future indebtedness. | |
Certain Covenants | The indenture governing the notes contains certain covenants that limit our ability and the ability of our restricted subsidiaries to: | |
• incur additional indebtedness or, in the case of our restricted subsidiaries, issue preferred stock; | ||
• sell or make certain dispositions of assets; |
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• sell the stock of restricted subsidiaries; | ||
• pay dividends and make certain distributions and payments with respect to capital stock; | ||
• make certain investments; | ||
• engage in transactions with affiliates; | ||
• create liens; and | ||
• consolidate or merge or sell substantially all of our or our restricted subsidiaries’ assets. | ||
These covenants are subject to important qualifications and exceptions, which are described under “Description of the Notes — Certain Covenants.” | ||
Fall-Away Covenants | Under the indenture governing the notes, in the event, and only for so long as, the notes are rated investment grade, many of the covenants described above will not be applicable to us and our restricted subsidiaries. |
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Six Months Ended | ||||||||||||||||||||||||||||||
Years Ended December 31, | June 30, | |||||||||||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | 2006 | 2005 | ||||||||||||||||||||||||
(In thousands, except per share amounts and operating data) | ||||||||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||||||||
Revenue: | ||||||||||||||||||||||||||||||
Service | $ | 387,848 | $ | 377,219 | $ | 355,038 | $ | 319,933 | $ | 310,520 | $ | 192,909 | $ | 193,560 | ||||||||||||||||
Roaming | 122,774 | 105,504 | 131,896 | 122,703 | 116,541 | 67,466 | 44,734 | |||||||||||||||||||||||
Equipment | 34,313 | 22,094 | 20,455 | 20,442 | 18,627 | 12,955 | 18,474 | |||||||||||||||||||||||
Total revenue | 544,935 | 504,817 | 507,389 | 463,078 | 445,688 | 273,330 | 256,768 | |||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||
Network costs, excluding depreciation | 120,322 | 104,071 | 96,069 | 97,200 | 101,509 | 67,169 | 55,492 | |||||||||||||||||||||||
Cost of equipment sales | 58,266 | 40,372 | 37,636 | 29,184 | 28,415 | 26,249 | 29,009 | |||||||||||||||||||||||
Selling, general and administrative | 152,918 | 135,170 | 131,761 | 119,185 | 122,387 | 70,957 | 73,474 | |||||||||||||||||||||||
Depreciation and amortization | 100,463 | 76,355 | 76,429 | 82,497 | 112,577 | 60,058 | 46,926 | |||||||||||||||||||||||
Impairment of assets | 7,020 | 47,136 | 42,244 | — | — | — | 7,020 | |||||||||||||||||||||||
Total operating expenses | 438,989 | 403,104 | 384,139 | 328,066 | 364,888 | 224,433 | 211,921 | |||||||||||||||||||||||
Operating income | 105,946 | 101,713 | 123,250 | 135,012 | 80,800 | 48,897 | 44,847 | |||||||||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||||
Interest expense(1)(2) | (171,831 | ) | (163,977 | ) | (136,262 | ) | (114,478 | ) | (130,432 | ) | (99,963 | ) | (80,328 | ) | ||||||||||||||||
Interest and dividend income | 2,221 | 1,727 | 916 | 562 | 1,172 | 3,750 | 662 | |||||||||||||||||||||||
Other | (876 | ) | (76 | ) | 891 | 66 | (752 | ) | 204 | (24 | ) | |||||||||||||||||||
Other expense, net | (170,486 | ) | (162,326 | ) | (134,455 | ) | (113,850 | ) | (130,012 | ) | (96,009 | ) | (79,690 | ) | ||||||||||||||||
Income (loss) before income taxes and cumulative change in accounting principle | (64,540 | ) | (60,613 | ) | (11,205 | ) | 21,162 | (49,212 | ) | (47,112 | ) | (34,843 | ) | |||||||||||||||||
Income tax benefit | (418 | ) | (1,672 | ) | — | — | — | (209 | ) | (209 | ) | |||||||||||||||||||
Income (loss) before cumulative change in accounting principle | (64,122 | ) | (58,941 | ) | (11,205 | ) | 21,162 | (49,212 | ) | (46,903 | ) | (34,634 | ) | |||||||||||||||||
Cumulative effect of change in accounting principle(3) | — | — | — | (417,064 | ) | 1,621 | — | — | ||||||||||||||||||||||
Net loss | (64,122 | ) | (58,941 | ) | (11,205 | ) | (395,902 | ) | (47,591 | ) | (46,903 | ) | (34,634 | ) | ||||||||||||||||
Preferred stock dividend(2) | (7,174 | ) | (12,915 | ) | (38,877 | ) | (60,556 | ) | (54,545 | ) | (7,136 | ) | (6,767 | ) | ||||||||||||||||
Net loss applicable to common shares | $ | (71,296 | ) | $ | (71,856 | ) | $ | (50,082 | ) | $ | (456,458 | ) | $ | (102,136 | ) | $ | (54,039 | ) | $ | (41,401 | ) | |||||||||
Weighted average common shares outstanding | 12,695 | 12,239 | 12,060 | 11,920 | 11,865 | 14,027 | 12,323 | |||||||||||||||||||||||
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Six Months Ended | |||||||||||||||||||||||||||||
Years Ended December 31, | June 30, | ||||||||||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | 2006 | 2005 | |||||||||||||||||||||||
(In thousands, except per share amounts and operating data) | |||||||||||||||||||||||||||||
Net loss applicable to common shares before cumulative effect of change in accounting principle | $ | (5.62 | ) | $ | (5.87 | ) | $ | (4.15 | ) | $ | (3.30 | ) | $ | (8.74 | ) | $ | (3.85 | ) | $ | (3.36 | ) | ||||||||
Cumulative effect of change in accounting principle | — | — | — | (34.99 | ) | 0.13 | — | — | |||||||||||||||||||||
Net loss per basic and diluted share applicable to common shares | $ | (5.62 | ) | $ | (5.87 | ) | $ | (4.15 | ) | $ | (38.29 | ) | $ | (8.61 | ) | $ | (3.85 | ) | $ | (3.36 | ) | ||||||||
Six Months Ended | |||||||||||||||||||||||||||||
Years Ended December 31, | June 30, | ||||||||||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | 2006 | 2005 | |||||||||||||||||||||||
Other Operating Data: | |||||||||||||||||||||||||||||
Retention(4) | 97.3 | % | 97.9 | % | 98.1 | % | 98.2 | % | 97.8 | % | 97.4 | % | 97.4 | % | |||||||||||||||
Average monthly revenue per customer(5) | $ | 67 | $ | 60 | $ | 59 | $ | 57 | $ | 59 | $ | 71 | $ | 61 | |||||||||||||||
Local monthly service revenue per customer(6) | $ | 50 | $ | 46 | $ | 43 | $ | 41 | $ | 42 | $ | 52 | $ | 49 | |||||||||||||||
Acquisition cost per customer(7) | $ | 497 | $ | 444 | $ | 422 | $ | 377 | $ | 290 | $ | 555 | $ | 487 |
As of December 31, | As of June 30, | ||||||||||||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | 2006 | 2005 | |||||||||||||||||||||||||
Customer Data: | |||||||||||||||||||||||||||||||
Customers (not including long distance and paging): | |||||||||||||||||||||||||||||||
Postpaid | 597,769 | 628,614 | 656,110 | 639,221 | 599,514 | 575,537 | 614,998 | ||||||||||||||||||||||||
Prepaid | 11,663 | 20,391 | 22,302 | 27,452 | 33,255 | 11,048 | 16,851 | ||||||||||||||||||||||||
Wholesale | 96,170 | 80,806 | 67,104 | 55,700 | 29,139 | 103,841 | 84,906 | ||||||||||||||||||||||||
Total customers | 705,602 | 729,811 | 745,516 | 722,373 | 661,908 | 690,426 | 716,755 | ||||||||||||||||||||||||
Marketed POPs(8) | 6,505,000 | 6,281,000 | 5,962,000 | 5,893,000 | 5,893,000 | 6,604,000 | 6,405,000 | ||||||||||||||||||||||||
Penetration(9) | 9.4 | % | 10.3 | % | 11.4 | % | 11.3 | % | 10.7 | % | 8.9 | % | 9.9 | % | |||||||||||||||||
Cell sites / Base stations | 1,061 | 857 | 754 | 732 | 684 | 1,115 | 944 |
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As of December 31, | As of June 30, | ||||||||||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | 2006 | 2005 | |||||||||||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||||||||||||||||
Balance Sheet Data: | |||||||||||||||||||||||||||||
Working capital (deficit) | $ | 129,922 | $ | 45,308 | $ | 86,135 | $ | (55,496 | ) | $ | (18,273 | ) | $ | 151,036 | $ | 30,354 | |||||||||||||
Net property and equipment | 277,408 | 276,133 | 226,202 | 240,536 | 244,980 | 246,545 | 281,311 | ||||||||||||||||||||||
Total assets | 1,480,682 | 1,417,450 | 1,521,058 | 1,462,978 | 1,836,779 | 1,441,025 | 1,375,948 | ||||||||||||||||||||||
Senior secured debt | 568,000 | 510,000 | 525,723 | 793,853 | 1,111,510 | 568,000 | 510,000 | ||||||||||||||||||||||
Total long-term liabilities | 1,847,994 | 1,733,079 | 1,764,867 | 1,211,026 | 1,286,301 | 1,870,349 | 1,745,514 | ||||||||||||||||||||||
Redeemable preferred stock | 170,976 | 166,296 | 153,381 | 569,500 | 509,736 | 178,117 | 173,063 | ||||||||||||||||||||||
Balance Sheet Ratios:(10) | |||||||||||||||||||||||||||||
Ratio of earnings to fixed charges | — | — | — | 1.19 | — | — | — |
(1) | Interest expense for the years ended December 31, 2005, 2004, 2003 and 2002 and the six months ended June 30, 2006 and 2005 reflects the reclassification of extraordinary costs related to the early extinguishment of debt to interest expense. |
(2) | Effective July 1, 2003, we adopted SFAS No. 150, which required us to classify dividends on our senior and junior exchangeable preferred securities as “Interest expense” on a prospective basis. |
(3) | Cumulative effect changes in 2002 and 2001 reflect certain adjustments as required under SFAS No. 142 and SFAS No. 133. |
(4) | Determined for each period by dividing total postpaid wireless voice customers discontinuing service during such period by the average postpaid wireless voice customers for such period (customers at the beginning of the period plus customers at the end of the period, divided by two), dividing that result by the number of months in the period, and subtracting such result from one. |
(5) | Determined for each period by dividing the sum of service revenue (not including regulatory pass-through fees) and roaming revenue for such period by the monthly average postpaid wireless voice customers for such period (customers at the beginning of the period plus customers at the end of the period, divided by two), and dividing that result by the number of months in such period. |
(6) | Determined for each period by dividing service revenue (not including regulatory pass-through fees) for such period by the monthly average postpaid wireless voice customers for such period (customers at the beginning of the period plus customers at the end of the period, divided by two), and dividing that result by the number of months in such period. |
(7) | Determined for each period by dividing the sum of selling and marketing expenses, net cost of equipment sales, and depreciation of rental telephone equipment by the gross postpaid and prepaid wireless voice customers added during such period. |
(8) | Reflects 2000 U.S. Census Bureau data updated for December 2002. |
(9) | Represents the ratio of wireless voice customers, excluding wholesale customers, at the end of the period to POPs. |
(10) | The ratio of earnings to fixed charges is computed by dividing fixed charges into earnings. Fixed charges consist of all interest, whether expensed or capitalized, amortization of debt costs, and the portion of rent expense representing interest. Earnings consist of income before income tax, cumulative effect adjustment, and preferred stock dividends plus fixed charges reduced by capitalized interest. On this basis, earnings for some periods were not adequate to cover fixed charges, and, accordingly, no ratio is shown. The deficiency of earnings to fixed charges for the years ended December 31 2005, 2004, 2003, and 2001 was $66.4 million, $62.5 million, $11.4 million, and $49.2 million, respectively. The deficiency of earnings to fixed charges for the six months ended June 30, 2006 and 2005 was $47.4 million and $36.5 million, respectively. |
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We have a significant amount of debt and preferred stock, which may limit our ability to meet our debt service and dividend obligations, obtain future financing, make capital expenditures in support of our business plan, react to a downturn in our business, or otherwise conduct necessary corporate activities. |
• | we must use a substantial portion of our cash flow from operations to make principal and interest payments on our debt, thereby reducing funds that would otherwise be available to us for working capital, capital expenditures, future business opportunities, and other purposes; | |
• | we may not be able to obtain additional financing for working capital, capital expenditures, and other purposes on terms favorable to us or at all; | |
• | the 2012 notes and borrowings under our revolving credit facility bear interest at variable rates, making us vulnerable to increases in interest rates; | |
• | we may have more debt than many of our competitors, which may place us at a competitive disadvantage; | |
• | we may have limited flexibility to react to changes in our business; and | |
• | we may not be able to refinance our indebtedness or preferred stock on terms that are commercially reasonable or at all. |
Despite our substantial indebtedness and preferred stock, we may still be able to incur significantly more debt and issue more preferred stock, intensifying the risks described above. |
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Our failure to pay the cash dividends on our exchangeable preferred stock may result in changes in our board of directors and affect our ability to incur additional debt or refinance our existing indebtedness. |
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A substantial portion of our indebtedness and preferred stock matures or becomes redeemable prior to the notes. We may not be able to repay or refinance that indebtedness or preferred stock. |
Maturity/ | ||||||||
Amount | Redemption Date | |||||||
93/4% senior subordinated notes | $ | 300.0 million | January 2010 | |||||
97/8% senior notes | $ | 325.0 million | February 2010 | |||||
Senior exchangeable preferred stock(1) | $ | 177.1 million | May 2010 | |||||
Junior exchangeable preferred stock(2) | $ | 301.7 million | February 2011 | |||||
81/4% senior secured notes | $ | 510.0 million | March 2012 | |||||
Class M redeemable voting convertible preferred stock(3) | $ | 178.1 million | April 2012 | |||||
Senior subordinated floating rate notes | $ | 175.0 million | November 2012 |
(1) | Includes $33.0 million of accrued but unpaid dividends. |
(2) | Includes $46.2 million of accrued but unpaid dividends. |
(3) | Includes $70.4 million of accrued but unpaid dividends. |
Increases in market interest rates will increase our debt service obligations. |
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The restrictive covenants associated with our debt and preferred stock may limit our ability to operate our business. |
• | incur additional debt; | |
• | pay cash dividends on capital stock; | |
• | repay junior debt and preferred stock prior to stated maturities; | |
• | allow the imposition of dividend restrictions on certain subsidiaries; | |
• | sell assets; | |
• | make investments; | |
• | engage in transactions with shareholders and affiliates; | |
• | create liens; and | |
• | engage in some types of mergers or acquisitions. |
Our future growth and our network upgrades may require significant capital expenditures, and our capital structure could impair our ability to fund our capital expenditure requirements. |
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• | public offerings or private placements of equity and debt securities; | |
• | commercial bank loans; and | |
• | equipment lease financing. |
We are subject to limitations on our ability to pay cash dividends on and repurchase or otherwise satisfy our obligations under our senior exchangeable preferred stock and junior exchangeable preferred stock. If we do not satisfy these obligations, the holders of these series of preferred stock may have the right to elect additional members to our board of directors. |
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We and the subsidiary guarantors may be subject to laws relating to fraudulent conveyance. |
• | intended to hinder, delay, or defraud any existing or future creditor; or | |
• | received less than fair consideration or reasonably equivalent value for issuing the notes; and | |
• | were insolvent; | |
• | were rendered insolvent by reason of that issuance; | |
• | were engaged or about to engage in a business or transaction for which our remaining assets constituted unreasonably small capital to carry on our business; or | |
• | intended to incur, or believed that we would incur, debts beyond our ability to pay as they matured, |
• | the sum of its debts, including contingent liabilities, was greater than the fair saleable value of all of its assets, as the case may be; | |
• | 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 | |
• | it could not pay its debts as they became due. |
• | the notes and the guarantees will be issued for proper purposes and in good faith; | |
• | each of we and the guarantors will be solvent after issuing the notes and the guarantees, respectively; | |
• | each of we and the guarantors will be able to pay its debts as they mature after issuing the notes and the guarantees, respectively; and | |
• | each of we and the guarantors will not have unreasonably small capital for the business in which it is engaged. |
The collateral securing the notes is subject to control by creditors with first-priority liens. If there is a default, the value of the collateral may not be sufficient to repay both the first-priority lien creditors and the holders of the notes. |
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You will not have a security interest in some of our assets and those of our subsidiaries, which could adversely affect the value of the collateral. |
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Rights of holders of notes in the collateral may be adversely affected by the failure to perfect security interests in certain collateral or the perfection of liens on the collateral by other creditors. |
The value of the collateral securing the notes may not be sufficient to satisfy our obligations under the notes, and the collateral securing the notes may be reduced under certain circumstances. |
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Your right to exercise remedies with respect to certain collateral is limited. |
The assets of our subsidiaries that are not guarantors of the notes will be subject to prior claims by creditors of those subsidiaries. |
Bankruptcy laws and other factors may limit or delay the trustee’s ability to foreclose on the collateral. |
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Certain pledges of collateral might be avoidable by a trustee in bankruptcy. Security interests in deposit accounts can be perfected only by use of a control agreement. |
The pledge of the capital stock and other securities of some of our subsidiaries that secure the notes will automatically be released from the lien on them and no longer constitute collateral while the pledge of such capital stock or such other securities would require the filing of separate financial statements with the SEC for that subsidiary. |
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The security for the benefit of the holders of the notes can be released without your consent, under specified circumstances. |
• | the asset has been sold or otherwise disposed of by us or a guarantor to a person other than us or a guarantor in a transaction permitted by the indenture, at the time of such sale or disposition; | |
• | the asset is owned or has been acquired by one of our subsidiaries that has been released from its subsidiary guarantee in accordance with the terms of the indenture, including by virtue of a guarantor becoming an unrestricted subsidiary; or | |
• | the first-lien collateral agent exercises any remedies in respect of such asset in accordance with the intercreditor agreement, including any sale or other disposition thereof. |
In the event of a change of control, we will be obligated to offer to repurchase the notes. Such a repurchase may be prohibited or limited by the terms of our revolving credit facility or our future indebtedness. In addition, we may not have sufficient funds to fulfill our obligation to repurchase the notes upon the occurrence of a change of control. |
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There is no public market for the notes, and if a market does develop, the price of the notes could be subject to volatility. |
You will be subject to transfer restrictions if you fail to exchange your old notes. |
We are not obligated to notify you of untimely or defective tenders of old notes. |
Our future operating results could fluctuate significantly. |
• | increased costs we may incur in connection with the buildout of our networks and the further development, expansion, and upgrading of our wireless systems; | |
• | fluctuations in the demand for our services and equipment and wireless services in general; | |
• | increased competition, including price competition; |
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• | changes in our roaming revenue and expenses due to renegotiation of our roaming agreements and the development of neighboring or competing networks; | |
• | changes in the regulatory environment; | |
• | changes in the availability or level of support provided by the USF; | |
• | the cost and availability of equipment components; | |
• | seasonality of roaming revenue; | |
• | changes in travel trends; | |
• | acts of terrorism, political tensions, unforeseen health risks, unusual weather patterns, and other catastrophic occurrences that could affect travel and demand for our services; and | |
• | changes in general economic conditions that may affect, among other things, demand for our services and the creditworthiness of our customers. |
Our implementation of 2.5G network technology has resulted in network capacity constraints, heightened customer churn, and increased costs. |
We may not be successful in reversing our recent trend of declining postpaid customers, which would force us to change our business plan and financial outlook and would likely negatively affect the price of our stock. |
As we dedicate more resources to 2.5G voice technology, our TDMA offerings could become less attractive, resulting in a loss of customers and reduced profitability. |
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We have required and will continue to require substantial amounts of capital to maintain our upgrade to 2.5G technologies and to meet various obligations under our financing arrangements. Our ability to generate the required capital depends on many factors, including some that are beyond our control. |
We have committed a substantial amount of capital to upgrade our wireless voice networks to offer 2.5G data services. If the demand for wireless data services does not grow, if we fail to capitalize on such demand, or if new technologies we are employing do not work as we expect, it could have an adverse effect on our growth potential. |
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Our business could be materially and adversely affected by our failure to anticipate and react to frequent and significant technological changes. |
• | the introduction of 3.0G digital handsets and applications; | |
• | evolving industry standards; | |
• | the availability of new radio frequency spectrum allocations for wireless services; | |
• | ongoing improvements in the capacity and quality of digital technology; | |
• | shorter development cycles for new products and enhancements; | |
• | developments in emerging wireless transmission technologies; and | |
• | changes in end user requirements and preferences. |
A significant portion of our revenue is from roaming charges. Based on industry trends, outcollect roaming yield has been declining over the last few years and is expected to continue to decline in the future. As a result, our future operating results could be adversely affected if increases in roaming minutes do not offset anticipated decreases in roaming yield. |
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Our roaming revenue is subject to some effects of seasonality, and as a result, our overall revenue and operating income are also subject to seasonal fluctuations. |
We operate in a very competitive business environment, which can adversely affect our business and operations. Competitors who offer more services than we do may attract our targeted customers. |
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Market prices for wireless service may decline in the future. |
Wireless number portability may continue to have a negative impact on our customer retention and increase our marketing costs. |
If we encounter significant problems, such as delays, inaccuracies, or loss of customer information from our database, in the process of upgrading our billing function, we could experience customer dissatisfaction and increased churn, which could have a material adverse impact on our financial performance. |
Regulation or potential litigation relating to the use of wireless phones while driving could adversely affect our results of operations. Further, if wireless handsets are perceived to pose health and safety risks, we may be subject to new regulations, and demand for our services may decrease. |
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Our business is subject to extensive government regulation, which could adversely affect our business by increasing our expenses. We also may be unable to obtain or retain regulatory approvals necessary to operate our business, which could negatively affect our results of operations. |
Our designation or certification as an Eligible Telecommunications Carrier (“ETC”) in any state where we conduct business could be refused, conditioned, or revoked due to circumstances beyond our control, thus depriving us of financial support in that state from the Universal Service Fund. In addition, we cannot be certain that we will continue to receive payments at the current levels. |
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Our inability to comply with Communications Assistance for Law Enforcement Act (“CALEA”) obligations could adversely affect our financial results. |
Equipment failure, intentional or other destruction of equipment, and natural disasters may adversely affect our operations. |
Difficulties in upgrading our wireless systems could increase our planned capital expenditures, delay the continued buildout of our networks, and negatively impact our roaming arrangements. |
• | select appropriate equipment vendors; | |
• | select and acquire appropriate sites for our transmission equipment, or cell sites; | |
• | purchase and install low-power transmitters, receivers, and control equipment, or base radio equipment; | |
• | build out any required physical infrastructure; | |
• | obtain interconnection services from local telephone service carriers on a timely basis; and | |
• | test cell sites. |
• | obtain necessary zoning and other regulatory approvals; | |
• | lease or obtain rights to sites for the location of our base radio equipment; | |
• | obtain any necessary capital; | |
• | acquire any additional necessary spectrum from third parties; and |
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• | commence and complete the construction of sites for our equipment in a timely and satisfactory manner. |
Our future financial results could be adversely impacted by asset impairments or other charges. |
We may not be able to successfully integrate acquired or exchanged properties, which could have an adverse effect on our financial results. |
We will continue to incur increased costs as a result of being a public company subject to the Sarbanes-Oxley Act of 2002 (“SOA”), as well as related rules implemented by the SEC and The Nasdaq Stock Market. |
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If we fail to maintain an effective system of internal and disclosure controls, we may not be able to accurately report our financial results or prevent fraud. |
We have shareholders who could exercise significant influence on management. |
The market price of our securities has been and may continue to be volatile. Litigation instituted against us and our officers and directors as a result of changes in the price of our securities could materially and adversely affect our business, financial condition, and operating results. |
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Antitakeover provisions could prevent a sale of our business to a third party. |
• | provisions for a classified board of directors; | |
• | provisions for advance notice for director nominations and shareholder proposals; | |
• | provisions allowing holders of our Class B common stock ten votes per share as compared to one vote per share for our Class A common stock; | |
• | provisions for supermajority votes to approve mergers or amend specified provisions of the Articles and Bylaws; and | |
• | statutory limits regarding share acquisitions and business combinations. |
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As of June 30, | ||||||
2006 | ||||||
(In thousands) | ||||||
Revolving credit facility(1) | $ | 58,000 | ||||
81/4% Senior Secured Notes due 2012 | 510,000 | |||||
97/8% Senior Notes due 2010 | 325,000 | |||||
93/4% Senior Subordinated Notes due 2010 | 300,000 | |||||
Senior Subordinated Floating Rate Notes due 2012 | 175,000 | |||||
Total debt, excluding preferred stock | 1,368,000 | |||||
Exchangeable preferred stock(2) | 656,954 | |||||
Shareholders’ deficit | (703,510 | ) | ||||
Total capitalization | $ | 1,321,444 | ||||
(1) | We have $1.4 million available for borrowing under the revolving credit facility. |
(2) | Amounts represent all our outstanding preferred stock, including accrued but unpaid dividends. |
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Six Months Ended | ||||||||||||||||||||||||||||||
Years Ended December 31, | June 30, | |||||||||||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | 2006 | 2005 | ||||||||||||||||||||||||
(In thousands, except per share amounts and operating data) | ||||||||||||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||||||||||||
Revenue: | ||||||||||||||||||||||||||||||
Service | $ | 387,848 | $ | 377,219 | $ | 355,038 | $ | 319,933 | $ | 310,520 | $ | 192,909 | $ | 193,560 | ||||||||||||||||
Roaming | 122,774 | 105,504 | 131,896 | 122,703 | 116,541 | 67,466 | 44,734 | |||||||||||||||||||||||
Equipment | 34,313 | 22,094 | 20,455 | 20,442 | 18,627 | 12,955 | 18,474 | |||||||||||||||||||||||
Total revenue | 544,935 | 504,817 | 507,389 | 463,078 | 445,688 | 273,330 | 256,768 | |||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||
Network costs, excluding depreciation | 120,322 | 104,071 | 96,069 | 97,200 | 101,509 | 67,169 | 55,492 | |||||||||||||||||||||||
Cost of equipment sales | 58,266 | 40,372 | 37,636 | 29,184 | 28,415 | 26,249 | 29,009 | |||||||||||||||||||||||
Selling, general and administrative | 152,918 | 135,170 | 131,761 | 119,185 | 122,387 | 70,957 | 73,474 | |||||||||||||||||||||||
Depreciation and amortization | 100,463 | 76,355 | 76,429 | 82,497 | 112,577 | 60,058 | 46,926 | |||||||||||||||||||||||
Impairment of assets | 7,020 | 47,136 | 42,244 | — | — | — | 7,020 | |||||||||||||||||||||||
Total operating expenses | 438,989 | 403,104 | 384,139 | 328,066 | 364,888 | 224,433 | 211,921 | |||||||||||||||||||||||
Operating income | 105,946 | 101,713 | 123,250 | 135,012 | 80,800 | 48,897 | 44,847 | |||||||||||||||||||||||
Other income (expense): | ||||||||||||||||||||||||||||||
Interest expense | (171,831 | ) | (163,977 | ) | (136,262 | ) | (114,478 | ) | (130,432 | ) | (99,963 | ) | (80,328 | ) | ||||||||||||||||
Interest and dividend income | 2,221 | 1,727 | 916 | 562 | 1,172 | 3,750 | 662 | |||||||||||||||||||||||
Other | (876 | ) | (76 | ) | 891 | 66 | (752 | ) | 204 | (24 | ) | |||||||||||||||||||
Other expense, net | (170,486 | ) | (162,326 | ) | (134,455 | ) | (113,850 | ) | (130,012 | ) | (96,009 | ) | (79,690 | ) | ||||||||||||||||
Income (loss) before income taxes and cumulative change in accounting principle | (64,540 | ) | (60,613 | ) | (11,205 | ) | 21,162 | (49,212 | ) | (47,112 | ) | (34,843 | ) | |||||||||||||||||
Income tax benefit | (418 | ) | (1,672 | ) | — | — | — | (209 | ) | (209 | ) | |||||||||||||||||||
Income (loss) before cumulative change in accounting principle | (64,122 | ) | (58,941 | ) | (11,205 | ) | 21,162 | (49,212 | ) | (46,903 | ) | (34,634 | ) | |||||||||||||||||
Cumulative effect of change in accounting principle | — | — | — | (417,064 | ) | 1,621 | — | — | ||||||||||||||||||||||
Net loss | (64,122 | ) | (58,941 | ) | (11,205 | ) | (395,902 | ) | (47,591 | ) | (46,903 | ) | (34,634 | ) | ||||||||||||||||
Preferred stock dividend | (7,174 | ) | (12,915 | ) | (38,877 | ) | (60,556 | ) | (54,545 | ) | (7,136 | ) | (6,767 | ) | ||||||||||||||||
Net loss applicable to common shares | $ | (71,296 | ) | $ | (71,856 | ) | $ | (50,082 | ) | $ | (456,458 | ) | $ | (102,136 | ) | $ | (54,039 | ) | $ | (41,401 | ) | |||||||||
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Six Months Ended | |||||||||||||||||||||||||||||
Years Ended December 31, | June 30, | ||||||||||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | 2006 | 2005 | |||||||||||||||||||||||
(In thousands, except per share amounts and operating data) | |||||||||||||||||||||||||||||
Weighted average common shares outstanding | 12,695 | 12,239 | 12,060 | 11,920 | 11,865 | 14,027 | 12,323 | ||||||||||||||||||||||
Net loss applicable to common shares before cumulative effect of change in accounting principle | $ | (5.62 | ) | $ | (5.87 | ) | $ | (4.15 | ) | $ | (3.30 | ) | $ | (8.74 | ) | $ | (3.85 | ) | $ | (3.36 | ) | ||||||||
Cumulative effect of change in accounting principle | — | — | — | (34.99 | ) | 0.13 | — | — | |||||||||||||||||||||
Net loss per basic and diluted share applicable to common shares | $ | (5.62 | ) | $ | (5.87 | ) | $ | (4.15 | ) | $ | (38.29 | ) | $ | (8.61 | ) | $ | (3.85 | ) | $ | (3.36 | ) | ||||||||
As of December 31, | As of June 30, | |||||||||||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | 2006 | 2005 | ||||||||||||||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||||||||||||||||
Balance Sheet Data: | ||||||||||||||||||||||||||||||
Working capital (deficit) | $ | 129,922 | $ | 45,308 | $ | 86,135 | $ | (55,496 | ) | $ | (18,273 | ) | $ | 151,036 | $ | 30,354 | ||||||||||||||
Net property and equipment | 277,408 | 276,133 | 226,202 | 240,536 | 244,980 | 246,545 | 281,311 | |||||||||||||||||||||||
Total assets | 1,480,682 | 1,417,450 | 1,521,058 | 1,462,978 | 1,836,779 | 1,441,025 | 1,375,948 | |||||||||||||||||||||||
Senior secured debt | 568,000 | 510,000 | ||||||||||||||||||||||||||||
Total long-term liabilities | 1,847,994 | 1,733,079 | 1,764,867 | 1,211,026 | 1,286,301 | 1,870,349 | 1,745,514 | |||||||||||||||||||||||
Redeemable preferred stock | 170,976 | 166,296 | 153,381 | 569,500 | 509,736 | 178,117 | 173,063 | |||||||||||||||||||||||
Total shareholders’ deficit | $ | (651,982 | ) | $ | (596,338 | ) | $ | (526,830 | ) | $ | (483,115 | ) | $ | (33,830 | ) | $ | (703,510 | ) | $ | (637,599 | ) | |||||||||
Other Operating Data: | ||||||||||||||||||||||||||||||
Customers (not including long distance and paging): | ||||||||||||||||||||||||||||||
Postpaid | 597,769 | 628,614 | 656,110 | 639,221 | 599,514 | 575,537 | 614,998 | |||||||||||||||||||||||
Prepaid | 11,663 | 20,391 | 22,302 | 27,452 | 33,255 | 11,048 | 16,851 | |||||||||||||||||||||||
Wholesale | 96,170 | 80,806 | 67,104 | 55,700 | 29,139 | 103,841 | 84,906 | |||||||||||||||||||||||
Total customers | 705,602 | 729,811 | 745,516 | 722,373 | 661,908 | 690,426 | 716,755 | |||||||||||||||||||||||
Marketed POPs(1) | 6,505,000 | 6,281,000 | 5,962,000 | 5,893,000 | 5,893,000 | 6,604,000 | 6,405,000 | |||||||||||||||||||||||
Penetration(2) | 9.4 | % | 10.3 | % | 11.4 | % | 11.3 | % | 10.7 | % | 8.9 | % | 9.9 | % | ||||||||||||||||
Cell sites/Base stations | 1,061 | 857 | 754 | 732 | 684 | 1,115 | 944 |
Six Months Ended | ||||||||||||||||||||||||||||
Years Ended December 31, | June 30, | |||||||||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | 2006 | 2005 | ||||||||||||||||||||||
(In thousands, except per share amounts and operating data) | ||||||||||||||||||||||||||||
Retention(3) | 97.3% | 97.9% | 98.1% | 98.2% | 97.8% | 97.4% | 97.4% | |||||||||||||||||||||
Local monthly service revenue per customer(4) | $ | 50 | $ | 46 | $ | 43 | $ | 41 | $ | 42 | $ | 52 | $ | 49 | ||||||||||||||
Average monthly revenue per customer(5) | $ | 67 | $ | 60 | $ | 59 | $ | 57 | $ | 59 | $ | 71 | $ | 61 | ||||||||||||||
Acquisition cost per customer(6) | $ | 497 | $ | 444 | $ | 422 | $ | 377 | $ | 290 | $ | 555 | $ | 487 |
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(1) | Updated to reflect 2000 U.S. Census Bureau Official Statistics. |
(2) | Represents the ratio of wireless voice customers, excluding wholesale customers, at the end of the period to population served. |
(3) | Determined for each period by dividing total postpaid wireless voice customers discontinuing service during such period by the average postpaid wireless voice customers for such period (customers at the beginning of the period plus customers at the end of the period, divided by two), dividing that result by the number of months in the period, and subtracting such result from one. |
(4) | Determined for each period by dividing service revenue (not including pass-through regulatory fees) by the monthly average postpaid customers for such period. |
(5) | Determined for each period by dividing the sum of service revenue (not including pass-through regulatory fees) and roaming revenue by the monthly average postpaid customers for such period. |
(6) | Determined for each period by dividing the sum of selling and marketing expenses, net costs of equipment sales, and depreciation of rental telephone equipment by the gross postpaid and prepaid wireless voice customers added during such period. |
Reconciliations of Key Financial Measures |
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Six Months | |||||||||||||||||||||||||||||
Years Ended December 31, | Ended June 30, | ||||||||||||||||||||||||||||
2005 | 2004 | 2003 | 2002 | 2001 | 2006 | 2005 | |||||||||||||||||||||||
Retention | |||||||||||||||||||||||||||||
Postpaid wireless voice customers discontinuing service(1) | 197,471 | 161,222 | 150,745 | 136,237 | 153,078 | 92,973 | 95,317 | ||||||||||||||||||||||
Weighted average 12 month aggregate postpaid wireless voice customers(2) | 7,362,780 | 7,667,797 | 7,780,921 | 7,409,873 | 6,954,051 | 3,515,594 | 3,743,001 | ||||||||||||||||||||||
Churn(1) ÷ (2) | 2.7 | % | 2.1 | % | 1.9 | % | 1.8 | % | 2.2 | % | 2.6 | % | 2.6 | % | |||||||||||||||
Retention (1 minus churn) | 97.3 | % | 97.9 | % | 98.1 | % | 98.2 | % | 97.8 | % | 97.4 | % | 97.4 | % | |||||||||||||||
Acquisition Cost Per Customer | |||||||||||||||||||||||||||||
(In thousands, except customer gross additions and acquisition cost per customer) | |||||||||||||||||||||||||||||
Selling and marketing expense | $ | 59,201 | $ | 54,077 | $ | 52,150 | $ | 50,563 | $ | 49,808 | $ | 27,004 | $ | 29,875 | |||||||||||||||
Net cost of equipment | 23,953 | 18,278 | 17,181 | 8,742 | 9,788 | 13,294 | 10,535 | ||||||||||||||||||||||
Adjustments to cost of equipment | 3,990 | 2,399 | 8,549 | 15,647 | 7,373 | 1,198 | 2,196 | ||||||||||||||||||||||
Total costs used in the calculation of acquisition cost per customer(3) | $ | 87,144 | $ | 74,754 | $ | 77,880 | $ | 74,952 | $ | 66,969 | $ | 41,536 | $ | 42,606 | |||||||||||||||
Customer gross additions(4) | 175,324 | 168,330 | 184,522 | 198,923 | 230,895 | 74,850 | 86,679 | ||||||||||||||||||||||
Acquisition cost per customer(3) ÷ (4) | $ | 497 | $ | 444 | $ | 422 | $ | 377 | $ | 290 | $ | 555 | $ | 492 | |||||||||||||||
Local Service Revenue Per Customer (“LSR”) | |||||||||||||||||||||||||||||
(In thousands, except weighted average 12 month aggregate postpaid wireless voice customers and LSR) | |||||||||||||||||||||||||||||
Service revenues | $ | 387,848 | $ | 377,219 | $ | 355,038 | $ | 319,933 | $ | 310,520 | $ | 192,909 | $ | 193,560 | |||||||||||||||
Non postpaid revenue adjustments | (20,253 | ) | (20,743 | ) | (24,016 | ) | (18,395 | ) | (16,814 | ) | (10,401 | ) | (10,789 | ) | |||||||||||||||
Service revenues for LSR(5) | $ | 367,595 | $ | 356,476 | $ | 331,022 | $ | 301,538 | $ | 293,706 | $ | 182,508 | $ | 182,771 | |||||||||||||||
Weighted average 12 month aggregate postpaid wireless voice customers(6) | 7,362,780 | 7,667,797 | 7,780,921 | 7,409,873 | 6,954,051 | 3,515,594 | 3,743,001 | ||||||||||||||||||||||
LSR(5) ÷ (6) | $ | 50 | $ | 46 | $ | 43 | $ | 41 | $ | 42 | $ | 52 | $ | 49 | |||||||||||||||
Average Revenue Per Customer (“ARPU”) | |||||||||||||||||||||||||||||
(In thousands, except weighted average 12 month aggregate postpaid wireless voice customers and ARPU) | |||||||||||||||||||||||||||||
Service revenues | $ | 387,848 | $ | 377,219 | $ | 355,038 | $ | 319,933 | $ | 310,520 | $ | 192,909 | $ | 193,560 | |||||||||||||||
Roaming revenues | 122,774 | 105,504 | 131,896 | 122,703 | 116,541 | 67,464 | 44,734 | ||||||||||||||||||||||
Total | 510,622 | 482,723 | 486,934 | 442,636 | 427,061 | 260,375 | 238,294 | ||||||||||||||||||||||
Non postpaid revenue adjustments: | (20,253 | ) | (20,743 | ) | (24,016 | ) | (18,395 | ) | (16,814 | ) | (10,401 | ) | (10,789 | ) | |||||||||||||||
Service revenues for ARPU(7) | $ | 490,369 | $ | 461,980 | $ | 462,918 | $ | 424,241 | $ | 410,247 | $ | 249,974 | $ | 227,505 | |||||||||||||||
Weighted average 12 month aggregate postpaid wireless voice customers(8) | 7,362,780 | 7,667,797 | 7,780,921 | 7,409,873 | 6,954,051 | 3,515,594 | 3,743,001 | ||||||||||||||||||||||
ARPU(7) ÷ (8) | $ | 67 | $ | 60 | $ | 59 | $ | 57 | $ | 59 | $ | 71 | $ | 61 | |||||||||||||||
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Service revenueincludes monthly access charges, charges for airtime used in excess of the time included in the service package purchased, long distance charges derived from calls placed by customers, data related services, as well as wireless and paging equipment lease revenue. | |
Also included are charges for features such as voicemail, call waiting, call forwarding, and incollect revenue, which consists of charges to our customers when they use their wireless phones in other wireless markets. We do not charge installation or connection fees. We also include in service revenue the USF support funding that we receive as a result of our ETC status in certain states and the USF pass-through we charge our customers. | |
Roamingrevenue includes only outcollect revenue, which we receive when other wireless providers’ customers use our network. | |
Equipmentrevenue includes sales of wireless equipment and accessories to customers, network equipment reselling, and customer activation fees. |
Network costsinclude switching and transport expenses and expenses associated with the maintenance and operation of our wireless network facilities, including salaries for employees involved in network operations, site costs, charges from other service providers for resold minutes, and the service and expense associated with incollect revenue. | |
Cost of equipment salesincludes costs associated with telephone equipment and accessories sold to customers. In recent years, we and other wireless providers have increased the use of discounts on phone equipment to attract customers as competition between service providers has intensified. As a |
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result, we have incurred, and expect to continue to incur, losses on equipment sales per gross additional and migrated customer. We expect to continue these discounts and promotions because we believe they will increase the number of our wireless customers and, consequently, increase service revenue. | |
Selling, general and administrative(“SG&A”) expenses include salaries, benefits, and operating expenses such as marketing, commissions, customer support, accounting, administration, and billing. We also include in SG&A contributions payable to the USF. | |
Depreciation and amortizationrepresents the costs associated with the depreciation of fixed assets and the amortization of customer lists and spectrum relocation. |
Interest expenseprimarily results from the issuance of outstanding notes and exchangeable preferred stock, the proceeds of which were used to finance acquisitions, repay other borrowings, and further develop our wireless network. | |
Interest expense includes the following: |
• | Interest expense on our credit facility, senior secured notes, senior notes, and senior subordinated notes, | |
• | Amortization of debt issuance costs, | |
• | Early extinguishment of debt issuance costs, | |
• | Dividends on senior and junior exchangeable preferred stock, | |
• | Amortization of preferred stock issuance costs, | |
• | Gain (loss) on derivative instruments, and | |
• | Gains on repurchase and exchange of preferred stock. |
Preferred stockdividends are accrued on our outstanding Class M convertible preferred stock and had been accrued on our Class T convertible preferred stock, which was converted to common stock in October 2005. |
Goodwill and Other Indefinite-Lived Intangible Assets |
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Revenue Recognition — Service |
Revenue Recognition — Roaming Revenue and Incollect Cost |
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Allowance for Doubtful Accounts |
Depreciation of Property and Equipment |
Impairment of Long-Lived Assets |
Income Taxes |
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Litigation and Other Loss Contingencies |
Accounting for Share-Based Compensation |
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Six Months Ended | ||||||||
June 30, | ||||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Total stock-based compensation included in SG&A | $ | 467 | $ | 109 |
Revenue |
Operating Revenue: |
�� | |||||||||||||||||
Six Months Ended June 30, | |||||||||||||||||
2006 | 2005 | $ Change | % Change | ||||||||||||||
(In thousands) | |||||||||||||||||
Service | $ | 192,909 | $ | 193,560 | $ | (651 | ) | (0.3 | )% | ||||||||
Roaming | 67,466 | 44,734 | 22,732 | 50.8 | |||||||||||||
Equipment | 12,955 | 18,474 | (5,519 | ) | (29.9 | ) | |||||||||||
Total operating revenue | $ | 273,330 | $ | 256,768 | $ | 16,562 | 6.5 | ||||||||||
Service Revenue. |
Service Revenue |
Six Months Ended June 30, | |||||||||||||||||
2006 | 2005 | $ Change | % Change | ||||||||||||||
(In thousands) | |||||||||||||||||
Local service | $ | 163,853 | $ | 166,514 | $ | (2,661 | ) | (1.6 | )% | ||||||||
USF support | 22,271 | 19,500 | 2,771 | 14.2 | |||||||||||||
Regulatory pass through | 6,411 | 7,127 | (716 | ) | (10.0 | ) | |||||||||||
Other | 374 | 419 | (45 | ) | (10.7 | ) | |||||||||||
Total service revenue | $ | 192,909 | $ | 193,560 | $ | (651 | ) | (0.3 | ) | ||||||||
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• | High levels of overall customer churn partially offset by lower voluntary churn within our new technology customer base, and | |
• | A decline in gross postpaid additions reflecting tightening credit standards and increased competition. Postpaid customer gross adds for the six months ended June 30, 2006 were 70,741 as compared to 81,701 for the six months ended June 30, 2005. | |
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Operating Expenses |
Six Months Ended June 30, | ||||||||||||||||||
2006 | 2005 | $ Change | % Change | |||||||||||||||
(In thousands) | ||||||||||||||||||
Network cost | ||||||||||||||||||
Incollect cost | $ | 21,824 | $ | 23,272 | $ | (1,448 | ) | (6.2 | )% | |||||||||
Other network cost | 45,345 | 32,220 | 13,125 | 40.7 | ||||||||||||||
67,169 | 55,492 | 11,677 | 21.0 | |||||||||||||||
Cost of equipment sales | 26,249 | 29,009 | (2,760 | ) | (9.5 | ) | ||||||||||||
Selling, general and administrative | 70,957 | 73,474 | (2,517 | ) | (3.4 | ) | ||||||||||||
Depreciation and amortization | 60,058 | 46,926 | 13,132 | 28.0 | ||||||||||||||
Impairment of assets | — | 7,020 | (7,020 | ) | N/A | |||||||||||||
Total operating expenses | $ | 224,433 | $ | 211,921 | $ | 12,512 | 5.9 | |||||||||||
Selling, General and Administrative. |
Six Months Ended June 30, | ||||||||||||||||
2006 | 2005 | $ Change | % Change | |||||||||||||
(In thousands) | ||||||||||||||||
General and administrative | $ | 29,333 | $ | 30,765 | $ | (1,432 | ) | (4.7 | )% | |||||||
Sales and marketing | 26,278 | 29,976 | (3,698 | ) | (12.3 | ) | ||||||||||
Regulatory pass-through fees | 6,844 | 7,177 | (333 | ) | (4.6 | ) | ||||||||||
Stock based compensation | 467 | 109 | 358 | 328.4 | ||||||||||||
Bad debt | 8,035 | 5,447 | 2,588 | 47.5 | ||||||||||||
$ | 70,957 | $ | 73,474 | $ | (2,517 | ) | (3.4 | ) | ||||||||
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Other Income (Expense) |
Interest Expense. |
Six Months Ended June 30, | ||||||||||||||||
2006 | 2005 | $ Change | % Change | |||||||||||||
(In thousands) | ||||||||||||||||
Interest expense on credit facility | $ | 2,262 | $ | — | $ | 2,262 | N/A | |||||||||
Interest expense on senior secured notes | 22,454 | 20,334 | 2,120 | 10.4 | % | |||||||||||
Interest expense on senior notes | 16,047 | 16,047 | — | — | ||||||||||||
Interest expense on senior subordinated notes | 23,980 | 20,641 | 3,339 | 16.2 | ||||||||||||
Amortization of debt issuance costs | 2,381 | 2,340 | 41 | 1.8 | ||||||||||||
Write-off of debt issuance costs | 2,795 | 151 | 2,644 | 1,751.0 | ||||||||||||
Senior and junior preferred stock dividends | 27,572 | 27,670 | (98 | ) | (0.4 | ) | ||||||||||
Effect of derivative instruments | (726 | ) | (343 | ) | (383 | ) | (111.7 | ) | ||||||||
Gain on repurchase of senior exchangeable preferred stock | (173 | ) | (5,554 | ) | 5,381 | 96.9 | ||||||||||
Other | 3,371 | (958 | ) | 4,329 | N/A | |||||||||||
$ | 99,963 | $ | 80,328 | $ | 19,635 | 24.4 | ||||||||||
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Preferred Stock Dividends |
Operating Revenue |
Years Ended December 31, | |||||||||||||||||
2005 | 2004 | $ Increase | % Increase | ||||||||||||||
(In thousands) | |||||||||||||||||
Service | $ | 387,848 | $ | 377,219 | $ | 10,629 | 2.8 | % | |||||||||
Roaming | 122,774 | 105,504 | 17,270 | 16.4 | |||||||||||||
Equipment | 34,313 | 22,094 | 12,219 | 55.3 | |||||||||||||
Total operating revenue | $ | 544,935 | $ | 504,817 | $ | 40,118 | 7.9 | ||||||||||
Service Revenue |
Years Ended December 31, | |||||||||||||||||
$ Increase | % Increase | ||||||||||||||||
2005 | 2004 | (Decrease) | (Decrease) | ||||||||||||||
(In thousands) | |||||||||||||||||
Local service | $ | 332,310 | $ | 337,361 | $ | (5,051 | ) | (1.5 | )% | ||||||||
USF support | 40,792 | 28,154 | 12,638 | 44.9 | |||||||||||||
Regulatory pass-through | 13,891 | 11,204 | 2,687 | 24.0 | |||||||||||||
Other | 855 | 500 | 355 | 71.0 | |||||||||||||
Total service revenue | $ | 387,848 | $ | 377,219 | $ | 10,629 | 2.8 | ||||||||||
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Operating Expenses |
Years Ended December 31, | |||||||||||||||||
$ Increase | % Increase | ||||||||||||||||
2005 | 2004 | (Decrease) | (Decrease) | ||||||||||||||
(In thousands) | |||||||||||||||||
Network cost | |||||||||||||||||
Incollect cost | $ | 46,880 | $ | 45,745 | $ | 1,135 | 2.5 | % | |||||||||
Other network cost | 73,442 | 58,326 | 15,116 | 25.9 | |||||||||||||
120,322 | 104,071 | 16,251 | 15.6 | ||||||||||||||
Cost of equipment sales | 58,266 | 40,372 | 17,894 | 44.3 | |||||||||||||
Selling, general and administrative | 152,238 | 135,129 | 17,109 | 12.7 | |||||||||||||
Stock-based compensation — SG&A | 680 | 41 | 639 | 1,558.5 | |||||||||||||
Depreciation and amortization | 100,463 | 76,355 | 24,108 | 31.6 | |||||||||||||
Impairment of assets | 7,020 | 47,136 | (40,116 | ) | (85.1 | ) | |||||||||||
Total operating expenses | $ | 438,989 | $ | 403,104 | $ | 35,885 | 8.9 | ||||||||||
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Years Ended December 31, | ||||||||||||||||
2005 | 2004 | $ Increase | % Increase | |||||||||||||
(In thousands) | ||||||||||||||||
General and administrative | $ | 64,887 | $ | 59,853 | $ | 5,034 | 8.4 | % | ||||||||
Sales and marketing | 59,376 | 54,077 | 5,299 | 9.8 | ||||||||||||
Bad debt | 13,769 | 9,762 | 4,007 | 41.0 | ||||||||||||
Regulatory pass-through fees | 14,206 | 11,478 | 2,728 | 23.8 | ||||||||||||
$ | 152,238 | $ | 135,170 | $ | 17,068 | 12.6 | ||||||||||
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Other Income (Expense) |
Years Ended | ||||||||
December 31, | ||||||||
Components of Interest Expense | 2005 | 2004 | ||||||
(In thousands) | ||||||||
Interest expense on credit facility | $ | 691 | $ | 5,135 | ||||
Interest expense on senior secured notes | 41,517 | 29,753 | ||||||
Interest expense on senior notes | 32,095 | 32,094 | ||||||
Interest expense on senior subordinated notes | 45,252 | 41,281 | ||||||
Amortization of debt issuance costs | 4,692 | 4,674 | ||||||
Write-off of debt issuance costs | 1,533 | 12,605 | ||||||
Senior and junior preferred stock dividends | 54,778 | 55,373 | ||||||
Effect of derivative instruments | (1,997 | ) | 5,208 | |||||
Gain on repurchase and exchange of senior exchangeable preferred stock | (5,722 | ) | (22,572 | ) | ||||
Other | (1,008 | ) | 426 | |||||
$ | 171,831 | $ | 163,977 | |||||
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Preferred Stock Dividends |
Operating Revenue |
Years Ended December 31, | |||||||||||||||||
$ Increase | % Increase | ||||||||||||||||
2004 | 2003 | (Decrease) | (Decrease) | ||||||||||||||
(In thousands) | |||||||||||||||||
Service | $ | 377,219 | $ | 355,038 | $ | 22,181 | 6.2 | % | |||||||||
Roaming | 105,504 | 131,896 | (26,392 | ) | (20.0 | ) | |||||||||||
Equipment | 22,094 | 20,455 | 1,639 | 8.0 | |||||||||||||
Total revenue | $ | 504,817 | $ | 507,389 | $ | (2,572 | ) | (0.5 | ) | ||||||||
Postpaid | Prepaid | Wholesale | Total | ||||||||||||||||
Customers at December 31, 2003 | 656,110 | 22,302 | 67,104 | 745,516 | |||||||||||||||
Net customer adds (loss) | (5,487 | ) | (2,710 | ) | 13,746 | 5,549 | |||||||||||||
AWE Property Exchange: | |||||||||||||||||||
South territory customers acquired | 12,858 | 979 | — | 13,837 | |||||||||||||||
Oregon RSA 4 customers transferred | (34,867 | ) | (180 | ) | (44 | ) | (35,091 | ) | |||||||||||
Net customer change | (22,009 | ) | 799 | (44 | ) | (21,254 | ) | ||||||||||||
Customers at December 31, 2004 | 628,614 | 20,391 | 80,806 | 729,811 | |||||||||||||||
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Operating Expenses |
Years Ended December 31, | ||||||||||||||||||
$ Increase | % Increase | |||||||||||||||||
2004 | 2003 | (Decrease) | (Decrease) | |||||||||||||||
(In thousands) | ||||||||||||||||||
Network cost | ||||||||||||||||||
Incollect cost | $ | 45,745 | $ | 44,055 | $ | 1,690 | 3.8 | % | ||||||||||
Other network cost | 58,326 | 52,014 | 6,312 | 12.1 | ||||||||||||||
104,071 | 96,069 | 8,002 | 8.3 | |||||||||||||||
Cost of equipment sales | 40,372 | 37,636 | 2,736 | 7.3 | ||||||||||||||
Selling, general and administrative | 135,170 | 131,761 | 3,409 | 2.6 | ||||||||||||||
Depreciation and amortization | 76,355 | 76,429 | (74 | ) | (0.1 | ) | ||||||||||||
Loss on impairment of assets | 47,136 | 42,244 | 4,892 | 11.6 | ||||||||||||||
Total operating expenses | $ | 403,104 | $ | 384,139 | $ | 18,965 | 4.9 | |||||||||||
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Years Ended December 31, | ||||||||||||||||
$ Increase | % Increase | |||||||||||||||
2004 | 2003 | (Decrease) | (Decrease) | |||||||||||||
(In thousands) | ||||||||||||||||
General and administrative | $ | 59,853 | $ | 60,860 | $ | (1,007 | ) | (1.7 | )% | |||||||
Sales and marketing | 54,077 | 52,150 | 1,927 | 3.7 | ||||||||||||
Bad debt | 9,762 | 9,412 | 350 | 3.7 | ||||||||||||
Regulatory pass-through fees | 11,478 | 9,339 | 2,139 | 22.9 | ||||||||||||
$ | 135,170 | $ | 131,761 | $ | 3,409 | 2.6 | ||||||||||
Loss on Impairment of Assets |
Other Income (Expense) |
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Years Ended | ||||||||
December 31, | ||||||||
2004 | 2003 | |||||||
(In thousands) | ||||||||
Interest expense on credit facility | $ | 5,135 | $ | 44,574 | ||||
Interest expense on senior secured notes | 29,753 | — | ||||||
Interest expense on senior notes | 32,094 | 13,372 | ||||||
Interest expense on senior subordinated notes | 41,281 | 41,281 | ||||||
Amortization of debt issuance costs | 4,674 | 4,773 | ||||||
Write-off of debt issuance costs | 12,605 | 6,134 | ||||||
Senior and junior preferred stock dividends | 55,373 | 27,973 | ||||||
Effect of derivative instruments | 5,208 | (3,502 | ) | |||||
Gain on repurchase of senior exchangeable preferred stock | (22,572 | ) | — | |||||
Other | 426 | 1,657 | ||||||
$ | 163,977 | $ | 136,262 | |||||
Preferred Stock Dividends |
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Six Months Ended | ||||||||||||||||
June 30, | Year Ended December 31, | |||||||||||||||
2006 | 2005 | 2005 | 2004 | |||||||||||||
Net cash provided by operating activities | $ | 37,218 | $ | 32,781 | $ | 72,937 | $ | 130,277 | ||||||||
Net cash used in investing activities | (22,571 | ) | (64,637 | ) | (161,585 | ) | (81,459 | ) | ||||||||
Net cash provided by (used in) financing activities | 312 | (13,012 | ) | 90,131 | (106,026 | ) | ||||||||||
Net increase (decrease) in cash and cash equivalents | 14,959 | (44,868 | ) | 1,483 | (57,208 | ) | ||||||||||
Cash and cash equivalents, at beginning of year | 86,822 | 85,339 | 85,339 | 142,547 | ||||||||||||
Cash and cash equivalents, at end of year | $ | 101,781 | $ | 40,471 | $ | 86,822 | $ | 85,339 | ||||||||
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Contractual Obligations Summary |
Senior | |||||||||||||||||||||||||||||||||||||
Subordinated | Senior and | ||||||||||||||||||||||||||||||||||||
Revolving | Floating Rate | 93/4% Senior | Junior | ||||||||||||||||||||||||||||||||||
Credit Facility | Notes | Subordinated | 97/8% Senior | Senior Secured | Exchangeable | Class M | |||||||||||||||||||||||||||||||
Operating | (due 3/25/2010) | (due 11/1/2012) | Notes | Notes | Notes | Preferred | Preferred | ||||||||||||||||||||||||||||||
Leases | (1) | (2) | (due 1/15/2010) | (due 2/1/2010) | (due 3/15/ 2012) | Securities(3) | Securities(4) | Total | |||||||||||||||||||||||||||||
Six months ended December 31, 2006 | $ | 9,085 | $ | 2,140 | $ | 9,800 | $ | 14,625 | $ | 16,047 | $ | 21,038 | $ | 28,554 | $ | — | $ | 101,289 | |||||||||||||||||||
2007 | 16,456 | 4,280 | 19,600 | 29,250 | 32,094 | 42,075 | 57,108 | — | 200,863 | ||||||||||||||||||||||||||||
2008 | 14,007 | 4,280 | 19,600 | 29,250 | 32,094 | 42,075 | 57,108 | — | 198,414 | ||||||||||||||||||||||||||||
2009 | 11,326 | 4,280 | 19,600 | 29,250 | 32,094 | 42,075 | 57,108 | — | 195,733 | ||||||||||||||||||||||||||||
2010 | 6,029 | 58,985 | 19,600 | 301,219 | 327,674 | 42,075 | 221,648 | — | 977,230 | ||||||||||||||||||||||||||||
Thereafter | 6,690 | — | 210,978 | — | — | 560,605 | 306,332 | 284,487 | 1,369,092 | ||||||||||||||||||||||||||||
Total | $ | 63,593 | $ | 73,965 | $ | 299,178 | $ | 403,594 | $ | 440,003 | $ | 749,943 | $ | 727,858 | $ | 284,487 | $ | 3,042,621 | |||||||||||||||||||
(1) | The revolving credit facility interest obligations are reflected at the June 30, 2006 rate level of 7.38%. Increases or decreases in LIBOR will impact interest expense in future years. |
(2) | Floating rate note interest obligations are reflected at the June 30, 2006 rate level of 11.2%. Increases or decreases in LIBOR will impact interest expense in future years. |
(3) | This table assumes cash dividends are paid each year. If dividends are not paid in cash, they accrue and compound until paid. If senior exchangeable preferred cash dividends are not declared and paid at any time prior to the mandatory redemption date of May 15, 2010, and the junior exchangeable preferred cash dividends are not declared and paid at any time prior to the mandatory redemption date of February 15, 2011, the total liquidation preference plus accumulated and unpaid dividends will be $800.8 million. |
(4) | Dividends on the Class M convertible preferred stock are compounded quarterly, accrue at 8% per annum, and are payable upon redemption. The scheduled redemption date for Class M preferred stock is April 3, 2012. Dividends are not payable if the preferred stock is converted into equity. |
Inflation |
Seasonality |
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2006 Quarter Ended | 2005 Quarter Ended | 2004 Quarter Ended | ||||||||||||||||||||||||||||||||||||||||
Mar | Jun | Mar | Jun | Sep | Dec | Mar | Jun | Sep | Dec | |||||||||||||||||||||||||||||||||
Revenue: | ||||||||||||||||||||||||||||||||||||||||||
Service | $ | 95,970 | $ | 96,939 | $ | 94,695 | $ | 98,865 | $ | 98,287 | $ | 96,001 | $ | 88,585 | $ | 94,979 | $ | 97,093 | $ | 96,562 | ||||||||||||||||||||||
Roaming | 30,806 | 36,660 | 19,622 | 25,112 | 41,785 | 36,255 | 25,740 | 26,266 | 29,739 | 23,759 | ||||||||||||||||||||||||||||||||
Equipment | 6,356 | 6,599 | 9,054 | 9,420 | 8,220 | 7,619 | 5,523 | 5,338 | 5,589 | 5,644 | ||||||||||||||||||||||||||||||||
Total Revenue | 133,132 | $ | 140,198 | $ | 123,371 | $ | 133,397 | $ | 148,292 | $ | 139,875 | $ | 119,848 | $ | 126,583 | $ | 132,421 | $ | 125,965 | |||||||||||||||||||||||
Operating income (loss) | 24,121 | $ | 24,776 | $ | 23,814 | $ | 21,033 | $ | 35,931 | 25,168 | $ | 38,831 | $ | 38,291 | $ | 40,156 | $ | (15,565 | ) | |||||||||||||||||||||||
Net income (loss) before income tax benefit | (20,929 | ) | $ | (26,183 | ) | $ | (18,574 | ) | $ | (16,269 | ) | $ | (7,721 | ) | $ | (21,976 | ) | $ | (15,348 | ) | $ | 6,597 | $ | 5,437 | $ | (57,299 | ) | |||||||||||||||
Net income (loss) applicable to common shares | (24,338 | ) | $ | (29,701 | ) | $ | (21,804 | ) | $ | (19,597 | ) | $ | (11,151 | ) | $ | (18,744 | ) | $ | (18,482 | ) | $ | 3,403 | $ | 2,184 | $ | (58,961 | ) | |||||||||||||||
Net income (loss) per basic share | $ | (1.74 | ) | $ | (2.11 | ) | $ | (1.77 | ) | $ | (1.59 | ) | $ | (0.89 | ) | $ | (1.38 | ) | $ | (1.51 | ) | $ | 0.28 | $ | 0.18 | $ | (4.81 | ) | ||||||||||||||
Net income (loss) per diluted share | $ | (1.74 | ) | $ | (2.11 | ) | $ | (1.77 | ) | $ | (1.59 | ) | $ | (0.89 | ) | $ | (1.38 | ) | $ | (1.51 | ) | $ | 0.27 | $ | 0.17 | $ | (4.81 | ) |
Interest Rate Risk |
Financial Instruments |
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Percentage | Service Area | Square | ||||||||||||||||||
Ownership | POPS(1) | Customers | Miles | States | ||||||||||||||||
Cellular: | ||||||||||||||||||||
Midwest | 100 | % | 759,000 | 136,897 | 45,000 | MN, ND, SD | ||||||||||||||
Northeast | 100 | % | 2,208,000 | 242,289 | 46,000 | MA, ME, NH, NY, VT | ||||||||||||||
South | 100 | % | 2,004,000 | 82,706 | 79,000 | AL, KS, MS | ||||||||||||||
Northwest | 100 | % | 857,000 | 115,625 | 77,000 | ID, OR, WA | ||||||||||||||
Total | 5,828,000 | 577,517 | 247,000 | |||||||||||||||||
PCS: | ||||||||||||||||||||
Wireless Alliance | 70 | % | 776,000 | 9,068 | 19,000 | MN, ND, SD, WI | ||||||||||||||
Wholesale | N/A | 103,841 | N/A | |||||||||||||||||
Total | 6,604,000 | 690,426 | 266,000 | |||||||||||||||||
(1) | Reflects 2000 U.S. Census Bureau population data updated for December 2002. |
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Local Service |
• | Short Message Service — allows a customer to receive and send text messages or content messages. | |
• | Voicemail — allows a customer to receive and retrieve voicemail. | |
• | Wireless Imaging Service — allows customers to receive and send pictures to another wireless handset or PC. | |
• | 2.5G Technology Data Services — includes picture phones, BREW and Java service, data cards, and Internet accessibility allowing customers to download ring-tones, games, graphics, entertainment and information. | |
• | Mobile Web — allows customers to access the Internet from a laptop computer through our wireless network. |
Roaming |
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• | Cingular, which is effective through December 2009, | |
• | T-Mobile, which is effective through December 2007, and | |
• | Verizon, which is effective through December 2009. |
Customer Equipment |
Distribution and Sales |
• | direct sales through: |
• | retail stores and kiosks that we operate and staff with our employees. As of June 30, 2006, we had 90 stores, primarily located in our more densely populated markets. In addition, we had nine stand-alone kiosks. Our retail locations help us establish our local presence and promote customer sales and service; | |
• | account executives who are our employees and focus on business and major account sales and service; | |
• | telesales, which are conducted by customer service representatives, internet, and toll-free phone services; and |
• | indirect sales through approximately 350 independent sales agents. Our independent sales agents are established businesses in their communities and include retail electronics stores, farm implement dealers, automobile dealers, automotive parts suppliers, college and university bookstores, video and music stores, and local telephone companies. Most of the agents sell our services in conjunction with their principal business. We provide cellular equipment to the agents for sale to customers, and the agents market our services utilizing a cooperative advertising program. |
Customer Base |
Customer Service |
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Service Marks |
Technology |
Technology | Territory Deployment | Description | ||||
CDMA2000/1XRTT | Midwest — deployed in 2003 and 2004 and commercially launched in August 2004. | CDMA2000/1XRTTis an evolution of CDMA technology and represents a step towards 3G technology and allows data transmission at approximately 50 kilobits per second (“Kbps”). | ||||
GSM/ GPRS | Northeast, Northwest, and South —network deployment is operational and commercially launched throughout the first half of 2005. | GSM/GPRSfacilitates certain applications that have not previously been available over GSM networks due to the limitations in speed of Circuit Switched Data and message length of the Short Message Service. Dataspeeds of up to approximately 35 Kbps are expected. | ||||
EDGE | Northeast, Northwest, and South —substantially overlaid in the first half of 2005. | EDGEis an evolution of GPRS technology and is a system designed to increase the speed of data transmission via cell phone, creating broadband capability. EDGE technology data speeds are expected to be approximately 70-135 Kbps. |
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• | Midwest territory CDMA network expansion into the adjacent markets of Hibbing and Virginia, Minnesota and Fargo and Grand Forks, North Dakota, | |
• | Northeast territory GSM network expansion into the adjacent market of Lewiston-Auburn, Maine, | |
• | Northeast territory GSM network expansion into the adjacent Lakes Area territory in east central New Hampshire, and | |
• | Northwest territory GSM network expansion into the adjacent markets of Lewiston-Moscow, Idaho and Madras, Oregon. |
Licenses |
Suppliers and Equipment Partners |
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US | ||||||||||||||||||||||||||||
Region | Alltel | Cingular | Sprint/Nextel | T-Mobile | Cellular | Verizon | Other (*) | |||||||||||||||||||||
Midwest | X | X | X | X | Dobson Communications, Qwest | |||||||||||||||||||||||
Northeast | X | X | X | X | X | |||||||||||||||||||||||
Northwest | X | X | X | X | X | Qwest, Inland Cellular, Snake River Wireless | ||||||||||||||||||||||
South | X | X | X | X | X | Southern Linc, Pine Belt Wireless, Public Service Telephone, Westlink Communications, Panhandle Telecommunications, Cellular Telepak, Inc. |
(*) | National Third Party Resellers. We also compete with national third party resellers including Virgin Mobile USA, LLC and TracFone Wireless, Inc. These resellers purchase bulk wireless services from wireless providers and resell through mass-market retail outlets, including Wal-Mart, Target, Radio Shack, and Best Buy. TracFone purchases bulk wireless services from RCC in selected markets. |
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Overview |
Federal Licensing of Wireless Systems |
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Regulatory Matters and Developments |
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Leased/ | Square | ||||||||||||
Address | Owned | Feet | |||||||||||
Midwest: | |||||||||||||
Principal Corporate HQ | 3905 Dakota Street SW | Owned | 50,000 | ||||||||||
Alexandria, Minnesota | |||||||||||||
Northeast: | |||||||||||||
Territory Office | 302 Mountain View Drive | Leased | 10,413 | ||||||||||
Colchester, Vermont | |||||||||||||
Territory Office | 6 Telcom Drive | Owned | 36,250 | ||||||||||
Bangor, Maine | |||||||||||||
Territory Office | 323 North Street | Owned | 4,000 | ||||||||||
Saco, Maine | |||||||||||||
Northwest: | |||||||||||||
Territory Office | 705 SW Columbia Street, Suite 1100 | Leased | 8,130 | ||||||||||
Bend, Oregon | |||||||||||||
South: | |||||||||||||
Territory Office | 621 Boll Weevil Circle, Suite 2 | Leased | 18,000 | ||||||||||
Enterprise, Alabama |
As of | |||||||||
June 30, 2006 | December 31, 2005 | ||||||||
Midwest | 240 | 232 | |||||||
Northeast | 341 | 327 | |||||||
Northwest | 172 | 169 | |||||||
South | 362 | 333 | |||||||
Total | 1,115 | 1,061 | |||||||
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Name | Age | Position | ||||
Richard P. Ekstrand | 57 | President, Chief Executive Officer and Director | ||||
Wesley E. Schultz | 49 | Executive Vice President, Chief Financial Officer and Director | ||||
Ann K. Newhall | 55 | Executive Vice President, Chief Operating Officer and Director | ||||
David J. Del Zoppo | 51 | Senior Vice President, Finance and Accounting | ||||
Anthony J. Bolland | 52 | Director | ||||
James V. Continenza | 44 | Director | ||||
Paul J. Finnegan | 53 | Director | ||||
Jacques Leduc | 43 | Director | ||||
George M. Revering | 65 | Director | ||||
Don C. Swenson | 64 | Director | ||||
George W. Wikstrom | 69 | Director |
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Long-Term | |||||||||||||||||||||
Compensation | |||||||||||||||||||||
Awards | |||||||||||||||||||||
Annual Compensation | |||||||||||||||||||||
Fiscal | Securities | All Other | |||||||||||||||||||
Name and Principal Position | Year | Salary | Bonus | Underlying Options | Compensation(1) | ||||||||||||||||
Richard P. Ekstrand | 2005 | $ | 518,000 | $ | 407,264 | — | $ | 18,620 | (2) | ||||||||||||
President and Chief Executive | 2004 | 518,000 | 207,200 | — | 18,470 | ||||||||||||||||
Officer | 2003 | 508,000 | 535,093 | 80,000 | 19,082 | ||||||||||||||||
Wesley E. Schultz | 2005 | $ | 402,000 | $ | 254,958 | — | $ | 14,160 | (3) | ||||||||||||
Executive Vice President and | 2004 | 402,000 | 128,640 | — | 14,010 | ||||||||||||||||
Chief Financial Officer | 2003 | 394,000 | 337,789 | 60,000 | 13,835 | ||||||||||||||||
Ann K. Newhall | 2005 | $ | 402,000 | $ | 254,958 | — | $ | 15,319 | (4) | ||||||||||||
Executive Vice President and | 2004 | 402,000 | 128,640 | — | 15,169 | ||||||||||||||||
Chief Operating Officer | 2003 | 394,000 | 337,789 | 60,000 | 13,834 | ||||||||||||||||
David J. Del Zoppo | 2005 | $ | 190,550 | $ | 37,380 | — | $ | 6,300 | |||||||||||||
Vice President Finance | 2004 | 185,000 | 37,555 | — | 6,150 | ||||||||||||||||
and Accounting | 2003 | 166,000 | 62,051 | 5,000 | 4,506 |
(1) | Except as otherwise indicated, for all years, All Other Compensation consists of RCC’s contributions on behalf of each Named Executive Officer to RCC’s 401(k) Plan and to the deferred compensation plan. |
(2) | Includes RCC’s matching contribution to the 401(k) Plan of $6,300 and payment of $12,320 of premiums for long-term care insurance for Mr. Ekstrand and his spouse. |
(3) | Includes RCC’s matching contribution to the 401(k) Plan of $6,300 and payment of $7,860 of premiums for long-term care insurance for Mr. Schultz and his spouse. |
(4) | Includes RCC’s matching contribution to the 401(k) Plan of $6,300 and payment of $9,019 of premiums for long-term care insurance for Ms. Newhall and her spouse. |
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Option Grants in Last Fiscal Year |
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values |
Number of Shares | Value of Unexercised | |||||||||||||||||||||||
Underlying Unexercised | In-the-Money | |||||||||||||||||||||||
Options at | Options at | |||||||||||||||||||||||
Shares | Fiscal Year-End(1) | Fiscal Year-End(2) | ||||||||||||||||||||||
Acquired on | Value | |||||||||||||||||||||||
Name | Exercise | Realized | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||||
Richard P. Ekstrand | — | — | 349,743 | 96,000 | $ | 1,473,865 | $ | 1,000,160 | ||||||||||||||||
Wesley E. Schultz | 90,000 | $ | 490,185 | 255,985 | 72,000 | $ | 1,294,815 | $ | 750,120 | |||||||||||||||
Ann K. Newhall | — | — | 209,485 | 72,000 | $ | 870,880 | $ | 750,120 | ||||||||||||||||
David J. Del Zoppo | — | — | 43,614 | 9,000 | $ | 155,230 | $ | 84,970 |
(1) | Rural Cellular has not granted any stock appreciation rights. |
(2) | Value is calculated as the difference between the closing price of Class A Common Stock on December 31, 2005 ($14.60) and the related option exercise price multiplied by the number of shares underlying the option (assuming the option exercise price is lower than the closing price). |
Long-Term Incentive Plans — Awards In Last Fiscal Year |
Number of | Estimated Future Payouts Under | |||||||||||||||||||
Shares, Units | Non-Stock Price-Based Plans(1) | |||||||||||||||||||
or Other | Performance or Other | |||||||||||||||||||
Rights | Period Until Maturation | Threshold | Target | Maximum | ||||||||||||||||
Name | (#) | or Payout | (#) | (#) | (#) | |||||||||||||||
Richard P. Ekstrand | 12,000 | 1/01/05 to 12/31/09 | 11,400 | 12,000 | 12,000 | |||||||||||||||
Wesley E. Schultz | 9,000 | 1/01/05 to 12/31/09 | 8,550 | 9,000 | 9,000 | |||||||||||||||
Ann K. Newhall | 9,000 | 1/01/05 to 12/31/09 | 8,550 | 9,000 | 9,000 | |||||||||||||||
David J. Del Zoppo | 2,500 | 1/01/05 to 12/31/09 | 2,375 | 2,500 | 2,500 |
(1) | The restricted stock awards to Messrs. Ekstrand and Schultz and Ms. Newhall were granted in February 2005 and will vest in January 2010. The restricted stock award to Mr. Del Zoppo was granted in December 2005 and will vest in December 2010. The shares will vest only if the grantee is still employed by the Company on the vesting date and if the Company’s average actual EBITDA for the five fiscal years ending December 31, 2009 is at least 95% of average budgeted EBITDA. If the 95% level is achieved, 95% of the shares will vest. If a higher level is achieved, the percentage of shares vesting will increase by the same percentage. The maximum number of shares that can vest is 100%. |
If the grantee is terminated without cause or as a result of disability or death, the award will vest on a pro rata basis, provided that the performance goal has been met for the full fiscal years preceding termination. In the event of a change in control (as defined in the 1995 Stock Compensation Plan), all shares will immediately vest. In addition to the shares, Mr. Ekstrand, Mr. Schultz, and Ms. Newhall will also receive a cash payment equal to 50% of the value of the shares vesting to cover income taxes payable upon receipt of the shares. During the restricted period, grantees have the right to vote the shares and receive any dividends that may be paid on the shares. The value of the shares on the date of grant was: Mr. Ekstrand, $81,240, Mr. Schultz and Ms. Newhall, $60,930, and Mr. Del Zoppo, $32,450. |
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• | the majority of our directors are not persons whose election was solicited by our board or who were appointed by our Board, | |
• | any person or group of persons acquires 30% or more of our outstanding voting stock, or | |
• | the shareholders approve liquidation, or dissolution, or specified mergers or consolidations or exchanges of shares, or dispositions of substantially all of our assets. |
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Deferred Compensation Plan |
• | During 2005, 2004, 2003, and the six months ended June 30, 2006, we paid $880,783, $569,918, $723,058, and $513,020, respectively, to Arvig Enterprises, Inc. and its affiliates for all services. Arvig Enterprises, Inc. is the beneficial owner of more than 5% of our outstanding Class B Common Stock. Don C. Swenson, one of our directors, chairman of our audit committee, and former member of our compensation committee, serves as a director of Arvig Enterprises, Inc. and had served as director of operations for Arvig Communications, Inc., an affiliate of Arvig Enterprises, Inc., from 1981 until his retirement in 2001. |
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• | During 2005, 2004, 2003, and the six months ended June 30, 2006, we paid $119,954, $139,973, $147,989, and $58,700, respectively, to Garden Valley Telephone Co. and its affiliates, which beneficially own more than 5% of our outstanding Class B Common Stock, for all services. | |
• | During 2005, 2004, and the six months ended June 30, 2006, we paid $31,251, $8,598, and $13,304, respectively, to Telephone and Data Systems, Inc. and its affiliates, which beneficially own, in the aggregate, more than 5% of our Class A and Class B Common Stock, for all services. | |
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• | each person known by us to be the beneficial owner of more than 5% of any class of our outstanding common stock; | |
• | each Named Executive Officer (as defined in the rules of the Securities and Exchange Commission); | |
• | each director and nominee as a director; and | |
• | all directors and executive officers as a group. |
Class A | Class B | Percentage of | |||||||||||||||||||
Combined | |||||||||||||||||||||
Number of | Percentage | Number | Percentage | Voting | |||||||||||||||||
Name and Address of Beneficial Owner | Shares | of Class | of Shares | of Class | Power | ||||||||||||||||
Kevin Douglas(1) | 1,919,000 | 13.8 | % | — | — | 9.6 | % | ||||||||||||||
1101 Fifth Avenue, Suite 360 San Rafael, CA 94901 | |||||||||||||||||||||
Madison Dearborn Partners(2) | 1,122,119 | 7.5 | — | — | 5.6 | ||||||||||||||||
Three First Plaza, Suite 330 Chicago, IL 60602 | |||||||||||||||||||||
Knickerbocker Partners LLC(3) | 1,033,761 | 7.5 | — | — | 5.2 | ||||||||||||||||
237 Park Avenue, Suite 801 New York, NY 10017 | |||||||||||||||||||||
Philippe Laffont(4) | 778,305 | 5.6 | — | — | 3.8 | ||||||||||||||||
126 East 56th Street New York, NY 10022 | |||||||||||||||||||||
Boston Ventures Management, Inc.(5) | 758,580 | 5.2 | — | — | 3.8 | ||||||||||||||||
One Federal Street 23rd Floor Boston, MA 02110 | |||||||||||||||||||||
Telephone and Data Systems, Inc.(6) | 586,799 | 4.2 | 132,597 | 33.3 | % | 9.5 | |||||||||||||||
30 North LaSalle Street Chicago, IL 60602 | |||||||||||||||||||||
Arvig Enterprises, Inc.(7) | — | — | 121,664 | 30.5 | 6.1 | ||||||||||||||||
160 2nd Ave. S.W. Perham, MN 56573 | |||||||||||||||||||||
Garden Valley Telephone Co. | 85,418 | * | 45,035 | 11.3 | 2.7 | ||||||||||||||||
201 Ross Avenue Erskine, MN 56535 | |||||||||||||||||||||
North Holdings, Inc. | 97,276 | * | 32,708 | 8.2 | 2.1 | ||||||||||||||||
P.O. Box 211 Lowry, MN 56349 | |||||||||||||||||||||
Gardonville Coop | — | — | 26,200 | 6.6 | 1.3 | ||||||||||||||||
P.O. Box 187 Brandon, MN 56315 |
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Class A | Class B | Percentage of | ||||||||||||||||||
Combined | ||||||||||||||||||||
Number of | Percentage | Number | Percentage | Voting | ||||||||||||||||
Name and Address of Beneficial Owner | Shares | of Class | of Shares | of Class | Power | |||||||||||||||
Richard P. Ekstrand(8) | 504,830 | 3.6 | % | 32,708 | 8.2 | % | 4.1 | % | ||||||||||||
Anthony J. Bolland(5) | 758,580 | 5.2 | — | — | 3.8 | |||||||||||||||
James V. Continenza(9) | 5,250 | * | — | — | * | |||||||||||||||
Paul J. Finnegan(2) | 1,122,119 | 7.5 | — | — | 5.6 | |||||||||||||||
Jacques Leduc(9) | 5,250 | * | — | — | * | |||||||||||||||
Ann K. Newhall(10) | 286,047 | 2.0 | — | — | 1.4 | |||||||||||||||
George M. Revering(11) | 125,350 | * | — | — | * | |||||||||||||||
Wesley E. Schultz(12) | 257,660 | 1.8 | — | — | 1.3 | |||||||||||||||
Don C. Swenson(11) | 31,500 | * | — | — | * | |||||||||||||||
George W. Wikstrom(13) | 59,723 | * | — | — | * | |||||||||||||||
David J. Del Zoppo(14) | 57,344 | * | — | — | * | |||||||||||||||
All directors and executive officers as a group (11 persons)(15) | 3,213,653 | 19.3 | 32,708 | 8.2 | 16.8 |
* | Denotes less than 1%. |
(1) | Based on Schedule 13G/ A dated February 13, 2006, filed jointly on behalf of Kevin Douglas, Michelle Douglas, James E. Douglas, III, the Douglas Family Trust, the James Douglas and Jean Douglas Irrevocable Descendants’ Trust, the Estate of Cynthia Douglas, and James E. Douglas III. | |
(2) | Based on Schedule 13D dated April 13, 2000 (the “April 2000 13D”) filed jointly by Boston Ventures Company V, L.L.C., Boston Ventures Limited Partnership V, Madison Dearborn Capital Partners III, L.P., Madison Dearborn Partners III, L.P., Madison Dearborn Partners, LLC, Madison Dearborn Special Equity III, L.P., Special Advisors Fund I, LLC, The Toronto-Dominion Bank, Toronto Dominion Holdings (U.S.A.), Inc. and Toronto Dominion Investments, Inc. Reflects 1,090,619 shares of Class A common stock into which the 55,000 shares of Class M convertible preferred stock held by certain affiliates of Madison Dearborn Partners, LLC may be converted. The shares of Class M preferred stock may vote on all matters submitted for a vote of the holders of the common stock on an as-converted basis. Also includes 31,500 shares of Class A common stock that may be issued upon exercise of currently exercisable options. Paul J. Finnegan is a Managing Director of Madison Dearborn Partners, Inc., an affiliate of Madison Dearborn Partners, LLC. | |
(3) | Based on Schedule 13G/A dated February 14, 2006, filed jointly by Marc Buchheit and Knickerbocker Partners LLC. | |
(4) | Based on Schedule 13G/A dated February 14, 2006. | |
(5) | Based on the April 2000 13D. Reflects 727,080 shares of Class A common stock into which 36,667 shares of Class M convertible preferred stock owned by Boston Ventures Limited Partnership V may be converted. The shares of Class M preferred stock may vote on all matters submitted for a vote of the holders of the common stock on an as-converted basis. Also includes 31,500 shares of Class A common stock that may be issued upon exercise of currently exercisable options. Anthony J. Bolland is a general partner of Boston Ventures Management, Inc., an affiliate of Boston Ventures Limited Partnership V. | |
(6) | Based on Schedule 13G/ A dated February 9, 2006, filed jointly by Telephone and Data Systems, Inc., Arvig Telephone Company, Mid-State Telephone Company, United States Cellular Corporation, United States Cellular Investment Company, LLC, TDS Telecommunications Corporation, USCCI Corporation, TDSI Telecommunications Corporation, and The Trustees of the TDS Voting Trust. | |
(7) | Not included are 90,475 shares of Class A Common Stock owned beneficially by members of the Arvig family, who may be deemed to be controlling shareholders of Arvig Enterprises, Inc. and who serve on its board of directors. Arvig Enterprises, Inc. disclaims beneficial ownership of such shares. |
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(8) | Includes 97,276 shares of Class A common stock and 32,708 shares of Class B common stock owned by North Holdings, Inc., of which Mr. Ekstrand is the sole shareholder and president, and 500 shares of Class A common stock held by or on behalf of one of Mr. Ekstrand’s children. Also includes 332,943 shares of Class A common stock that may be purchased upon exercise of currently exercisable options. | |
(9) | Includes 5,250 shares of Class A Common Stock that may be purchased upon exercise of currently exercisable options. |
(10) | Includes 245,485 shares of Class A common stock that may be purchased upon exercise of currently exercisable options. Also includes 5,000 shares of Class A common stock held by Ms. Newhall’s spouse and 1,000 shares of Class A common stock held in an IRA account. |
(11) | Includes 31,500 shares of Class A common stock that may be purchased upon exercise of currently exercisable options. |
(12) | Includes 201,985 shares of Class A common stock that may be purchased upon exercise of currently exercisable options. |
(13) | Includes 28,233 shares of Class A common stock owned by Wikstrom Telephone Company, Inc., of which Mr. Wikstrom is a shareholder and Vice President. Mr. Wikstrom disclaims beneficial ownership of these shares. Also includes 31,500 shares of Class A common stock that may be purchased upon exercise of currently exercisable options. |
(14) | Includes 48,614 shares of Class A common stock that may be purchased upon exercise of currently exercisable options. |
(15) | Includes 1,817,699 shares of Class A common stock into which 91,667 shares of Class M convertible preferred stock may be converted and 997,027 shares of Class A common stock that may be purchased upon exercise of currently exercisable options. |
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• | to exclude those dividends from the calculation of cash interest expense, which is used in various financial ratio tests in our revolving credit facility; and | |
• | to permit the incurrence of up to $50.0 million of senior indebtedness that matures on the same date as our senior notes (out of a total of $200.0 million of additional senior indebtedness that is permitted). |
• | to exclude from the calculation of the interest coverage covenant cash dividends paid on the Company’s senior exchangeable preferred stock, provided that no more than four such dividends may be excluded during any reference period (as defined), | |
• | to reduce the applicable margins used to determine interest rates under the facility to 1.00% to 1.25% for the Alternate Base Rate and 2.00% to 2.25% for the Eurodollar rate, and | |
• | to reduce the minimum interest coverage ratio. |
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Other | |||||||||||||||||||||||||
Conversion | Features, | ||||||||||||||||||||||||
Mandatory | Dividend | Price to | Rights, | Shares Distributed | |||||||||||||||||||||
Redemption | Rate per | Common | Preferences | through March 31, | Accrued Dividends | ||||||||||||||||||||
Date | Annum | Stock | and Powers | 2006 | at June 30, 2006 | ||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||
Senior Exchangeable Preferred Stock | May 2010 | 11.375 | % | — | Non-Voting | 144,149 | $ | 32,983 | |||||||||||||||||
Junior Exchangeable Preferred Stock | February 2011 | 12.250 | % | — | Non-Voting | 255,558 | 46,154 | ||||||||||||||||||
Class M Voting Convertible Preferred Stock | April 2012 | 8.000 | % | $ | 50.43 | Voting | 110,000 | 70,350 | |||||||||||||||||
Total | 509,707 | $ | 149,487 | ||||||||||||||||||||||
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(a) required to file the Exchange Offer Registration Statement or | |
(b) permitted to consummate the Exchange Offer because the Exchange Offer is not permitted by applicable law or Commission policy, or |
(a) it is prohibited by law or Commission policy from participating in the Exchange Offer, or | |
(b) it may not resell the Exchange Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Exchange Offer Registration Statement is not appropriate or available for such resales, or | |
(c) it is a broker-dealer and owns notes acquired directly from us or one of our affiliates, |
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• | to delay accepting any old notes, to extend the exchange offer, or to terminate the exchange offer and not accept old notes not previously accepted if any of the conditions set forth under “— Conditions” shall have occurred and shall not have been waived by us, by giving oral or written notice of such delay, extension, or termination to the exchange agent or | |
• | to amend the terms of the exchange offer in any manner we deem to be advantageous to the holders of the old notes. |
• | certificates for such tendered old notes must be received by the exchange agent along with the letter of transmittal prior to the Expiration Date, | |
• | a timely confirmation of a book-entry transfer (a “Book-Entry Confirmation”) of such old notes, if such procedure is available, into the exchange agent’s account at the Depository Trust Company (the “Book-Entry Transfer Facility”) pursuant to the procedure for book-entry transfer described below, must be received by the exchange agent prior to the Expiration Date, or | |
• | the holder must comply with the guaranteed delivery procedures described below. |
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• | by a registered holder who has not completed the box entitled “Special Issuance Instructions” or “Special Delivery Instructions” on the letter of transmittal or | |
• | for the account of an Eligible Institution. |
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• | is not an “affiliate,” as defined under the Securities Act, of RCC; | |
• | acquired the new notes in the ordinary course of business; | |
• | is not engaged in, does not intend to engage in, and has no arrangement or understanding with any person to participate in a “distribution,” as defined under the Securities Act, of the new notes; and | |
• | is not acting on behalf of any person who could not truthfully make the foregoing representations. |
• | may not rely on the position of the SEC enunciated inMorgan Stanley and Co., Inc. (available June 5, 1991) andExxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the SEC’s letter toShearman & Sterlingdated July 2, 1993, and similar no-action letters and | |
• | must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction and that such a secondary resale transaction must be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K. |
• | is not an affiliate of RCC; | |
• | is acquiring the new notes in its ordinary course of business; | |
• | is not engaged in, does not intend to engage in, and has no arrangement or understanding with any person to participate in a distribution of the new notes; and | |
• | is not acting on behalf of any person who could not truthfully make the foregoing representations. |
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• | we fail to file any registration statement required to be filed under the registration rights agreement on or prior to the date specified for such filing, | |
• | any such registration statement is not declared effective by the Commission on or prior to the date specified for effectiveness in the registration rights agreement, | |
• | we fail to consummate the exchange offer on or prior to 30 business days following the effectiveness of the Exchange Offer Registration Statement, or | |
• | the Shelf Registration Statement or the Exchange Offer Registration Statement is declared effective by the Commission, but thereafter ceases to be effective or useable in connection with resales of Transferred Restricted Notes during the periods specified in the registration rights agreement without being succeeded within two business days by a post-effective amendment to such Registration Statement that cures such failure and that is itself declared effective within five business days of filing such post-effective amendment to such Registration Statement |
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• | the tender is made through an Eligible Institution, | |
• | prior to the Expiration Date, the exchange agent receives from such Eligible Institution a properly completed and duly executed letter of transmittal (or a facsimile thereof) and notice of guaranteed delivery, substantially in the form provided by us (by facsimile transmission, mail, or hand delivery), |
• | setting forth the name and address of the holder of such old notes and the amount of old notes tendered, stating that the tender is being made thereby and | |
• | guaranteeing that within five New York Stock Exchange (“NYSE”) trading days after the date of execution of the notice of guaranteed delivery, the certificates for all physically tendered old notes, in proper form to transfer, or a Book-Entry Confirmation, as the case may be, and any other documents required by the letter of transmittal will be deposited by the Eligible Institution with the exchange agent, and |
• | the certificate for all physically tendered old notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, and all other documents required by the letter of transmittal are received by the exchange agent within five NYSE trading days after the date of execution of the notice of guaranteed delivery. |
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(i) any aspect or accuracy of DTC’s records or any Participant’s or Indirect Participant’s records relating to or payments made on account of beneficial ownership interests in the registered global notes or for maintaining, supervising, or reviewing any of DTC’s records or any Participant’s or Indirect Participant’s records relating to the beneficial ownership interests in the registered global notes; or | |
(ii) any other matter relating to the actions and practices of DTC or any of its Participants or Indirect Participants. |
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(i) DTC (a) notifies us that it is unwilling or unable to continue as depositary for the registered global notes and we fail to appoint a successor depositary or (b) has ceased to be a clearing agency registered under the Exchange Act; | |
(ii) we, at our option, notify the trustee in writing that we elect to cause the issuance of the Certificated Notes; or | |
(iii) there has occurred and is continuing a Default or Event of Default with respect to the notes. |
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• | are senior obligations of Rural Cellular; | |
• | are secured by security interests (“Second Priority Liens”) in the Collateral on a second priority basis, subject to the first priority security interests securing Rural Cellular’s obligations under the Credit Agreement and any other First Lien Obligations; | |
• | are unconditionally guaranteed by all of Rural Cellular’s current Subsidiaries, other than Wireless Alliance, and by all of Rural Cellular’s future Restricted Subsidiaries; | |
• | rank equally in right of payment with all existing and future Pari Passu Indebtedness of Rural Cellular, including under Rural Cellular’s existing senior notes, the Credit Agreement, and any other First Lien Obligations; and | |
• | rank senior in right of payment to all existing and future Indebtedness of Rural Cellular that expressly provides for its subordination to the notes, including Rural Cellular’s existing senior subordinated notes. |
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(1) all of Rural Cellular’s current and future Restricted Subsidiaries, including all License Only Subsidiaries; and | |
(2) all of the present and future guarantors and obligors (other than Rural Cellular itself) under the Credit Agreement or any other First Lien Obligations. |
(a) such Guarantor is the surviving Person or the Person acquiring the property in any such sale or disposition or the Person formed by any such consolidation or merger assumes all the obligations of that Guarantor under the indenture, its Subsidiary Guarantee and security documents pursuant to a supplemental indenture and appropriate security documents reasonably satisfactory to the trustee under the indenture; or | |
(b) the Net Proceeds of such sale or other disposition are applied in accordance with the “Asset Sale” provisions of the indenture. |
(1) in connection with any sale or other disposition of all or substantially all of the assets of that Guarantor (including by way of merger, consolidation, or otherwise) by Rural Cellular or a Subsidiary of Rural Cellular, if the sale or other disposition complies with the “Asset Sale” provisions of the indenture; | |
(2) in connection with any sale or other disposition of all of the Capital Stock of a Guarantor by Rural Cellular or a Subsidiary of Rural Cellular, if the sale or other disposition complies with the “Asset Sale” provisions of the indenture; |
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(3) if Rural Cellular designates that Guarantor to be an Unrestricted Subsidiary in accordance with the applicable provisions of the indenture; or | |
(4) upon legal defeasance of the notes as provided below under the caption “— Defeasance.” |
(1) all of the Capital Stock of each S-X Stock Pledge Subsidiary (subject to the Regulation S-X Exclusion) and all of the Capital Stock of each License Only Subsidiary that is not a Dropdown Subsidiary; | |
(2) FCC Licenses, to the extent permitted by applicable law; | |
(3) all accounts, inventory, investment property (other than Capital Stock of the Subsidiaries of Rural Cellular), general intangibles, equipment, instruments, and chattel paper; | |
(4) all fixtures; | |
(5) real property described below under “Additional Collateral; Acquisition of Assets or Property”; | |
(6) patents, trademarks, copyrights, and other intellectual property; and | |
(7) all proceeds of, and all other amounts arising from, the collection, sale, lease, exchange, assignment, licensing, or other disposition or realization upon the Collateral described in clauses (1) through (6) above. |
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(1) upon payment in full of the principal of, and accrued and unpaid interest and premium on, the notes and payment in full of all other Note Obligations that are due and payable at or prior to the time such principal, accrued and unpaid interest, and premium are paid; or | |
(2) upon a defeasance of the notes in accordance with the provisions described below under the caption “— Defeasance.” |
(1) the asset has been sold or otherwise disposed of by Rural Cellular or a Guarantor to a Person other than Rural Cellular or a Guarantor in a transaction permitted by the indenture, at the time of such sale or disposition; or | |
(2) the asset is owned or has been acquired by a Subsidiary that has been released from its Subsidiary Guarantee in accordance with the terms of the indenture (including by virtue of a Guarantor becoming an Unrestricted Subsidiary); or | |
(3) the First Lien Agent exercises any remedies in respect to such asset in accordance with the Intercreditor Agreement, including any sale or other disposition thereof. |
FCC Licenses |
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(1) Rural Cellular and its Restricted Subsidiaries shall not make a transfer of an FCC License to Rural Cellular or any of its Restricted Subsidiaries except for (a) a transfer of an FCC License to a License Only Subsidiary other than TLA Spectrum or a Dropdown Subsidiary and (b) a transfer of an FCC License that is required to be made by RCC Holdings or RCC Atlantic, as provided under “— FCC Licenses currently held by RCC Minnesota and RCC Atlantic,” below; and | |
(2) A License Only Subsidiary may only merge with or into or consolidate with, another License Only Subsidiary other than TLA Spectrum or a Dropdown Subsidiary. |
(1) Rural Cellular and its Restricted Subsidiaries shall use commercially reasonable efforts to acquire initially such FCC License in a License Only Subsidiary other than a Dropdown Subsidiary or TLA Spectrum, unless such acquisition would result in a Material Adverse Tax Effect; and | |
(2) If the acquisition described in clause (1) above is not completed at the time of the acquisition of such FCC License, Rural Cellular and its Restricted Subsidiaries shall use commercially reasonable efforts to transfer, as promptly as practicable, such FCC License to a License Only Subsidiary other than a Dropdown Subsidiary or TLA Spectrum unless such transfer would result in a Material Adverse Tax Effect; |
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Additional Collateral; Acquisition of Assets or Property |
(i) the acquisition (including, without limitation, through the specification, acquisition or creation of a new Restricted Subsidiary) by Rural Cellular or any Guarantor of any assets or property (including fixtures, but excluding all other real property) having a fair market value (as determined in good faith by the Board of Directors of Rural Cellular) in excess of $2.0 million individually or $10.0 million in a series of one or more related transactions; | |
(ii) the acquisition (including, without limitation, through the specification, acquisition, or creation of a new Restricted Subsidiary) by Rural Cellular or any Guarantor of any fee interest in any individual or contiguous parcels of owned real property (other than fixtures) having a fair market value (as determined in good faith by the Board of Directors of Rural Cellular) in excess of $5.0 million individually or in a series of one or more related transactions; | |
(iii) the acquisition of any FCC License by Rural Cellular or any Guarantor; or | |
(iv) the inclusion by Rural Cellular or any Guarantor of any other assets or property in collateral securing First Lien Obligations or Second Lien Obligations other than the Note Obligations; |
Rural Cellular shall, or shall cause the applicable Guarantor to, as promptly as practicable, subject to obtaining the consents contemplated by the next succeeding paragraph: |
(1) execute and deliver to the Collateral Agent, such Collateral Documents and take such other actions as shall be necessary or (in the opinion of the Collateral Agent) desirable to create, perfect, and protect a Second Priority Lien in favor of the Collateral Agent on such assets or property (to the extent permitted by applicable law, in the case of FCC Licenses); | |
(2) in the case of real property, deliver to the Collateral Agent title and extended coverage insurance covering such real property in an amount at least equal to the purchase price of such real property, with local fixture filings being made in respect of fixtures associated with such real property; and | |
(3) promptly deliver to the Collateral Agent such opinions of counsel, if any, as the Collateral Agent may reasonably require with respect to the foregoing (including opinions as to enforceability and perfection of security interests). |
Intercreditor Agreement |
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Bankruptcy Limitations |
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Additional Indebtedness Secured by Second Priority Liens |
Year | Redemption Price | |||
2008 | 104.125% | |||
2009 | 102.063% | |||
2010 and thereafter | 100.000% |
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(1) if the notes are listed on any securities exchange, in compliance with the requirements of the principal securities exchange on which the notes are listed; or | |
(2) if the notes are not listed on any securities exchange, on a pro rata basis, by lot or by such method as the trustee deems fair and appropriate. |
(1) directly or indirectly, a merger, sale, transfer, or other conveyance of all or substantially all the assets of Rural Cellular, on a consolidated basis, to any “person” or “group” (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable), excluding transfers or conveyances to or among Rural Cellular’s current or newly-formed Wholly Owned Restricted Subsidiaries, as an entirety or substantially as an entirety in one transaction or series of related transactions, in each case with the effect that any Person or group of Persons beneficially owns more than 50% of the total Voting Power entitled to vote in the election of directors, managers, or trustees of the transferee entity immediately after such transaction; | |
(2) any “person” or “group” (as such terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) is or becomes the beneficial owner, directly or indirectly, of more than 50% of the total Voting Power of Rural Cellular; | |
(3) during any period of 24 consecutive months, individuals who at the beginning of such period constituted the Board of Directors of Rural Cellular (together with any new directors whose election by such Board or whose nomination for election by the shareholders of Rural Cellular was approved by a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors of Rural Cellular then in office; |
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(4) the adoption of a plan relating to the liquidation or dissolution of Rural Cellular; or | |
(5) any transaction constituting a “change of control” under the instruments governing any Subordinated Indebtedness or Preferred Stock of Rural Cellular, if such “change of control” would provide a holder of such Subordinated Indebtedness or Preferred Stock with a right to require Rural Cellular to repurchase or redeem such Subordinated Indebtedness or Preferred Stock in an aggregate principal amount (or liquidation value, in the case of Preferred Stock) in excess of $20.0 million and such right has not been waived pursuant to the terms thereof. |
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Limitation on Consolidated Indebtedness |
(1) Indebtedness evidenced by the notes on the Issue Date and a like aggregate principal amount of Exchange Notes and any Subsidiary Guarantees of the foregoing; | |
(2) Indebtedness, letters of credit, and bankers’ acceptances Incurred by Rural Cellular under the Credit Agreement in an aggregate principal amount not to exceed (A) $125.0 million at any time outstanding, reduced by the amount of repayments and permanent reductions of Indebtedness Incurred under this clause (2)(A) due to the application of Net Cash Proceeds after the Issue Date as set forth in the “— Limitation on Asset Sales and Sales of Subsidiary Stock” covenant plus (B) $125.0 million at any time outstanding, reduced by the amount of repayments and permanent reductions of Indebtedness Incurred under this clause (2)(B) due to the application of Net Cash Proceeds after the Issue Date as set forth in the “— Limitation on Asset Sales and Sales of Subsidiary Stock” covenant, so long as, in the case of Indebtedness incurred under clause (2)(B), at the time such Indebtedness is Incurred, Rural Cellular’s Operating Cash Flow Ratio would be less than 7.0 to 1.0 and Rural Cellular’s Senior Secured Operating Cash Flow Ratio would be less than 2.0 to 1.0; | |
(3) Indebtedness of Rural Cellular or any of its Restricted Subsidiaries owing to Rural Cellular or any of its Restricted Subsidiaries (“Intercompany Indebtedness”); provided that (A) in the case of any such Indebtedness of Rural Cellular, such obligations will be unsecured and subordinated by their terms in all respects to the Holders’ rights pursuant to the notes and the Subsidiary Guarantees and (B) if any event occurs that causes a Person that is a Restricted Subsidiary to no longer be a Restricted Subsidiary, then this clause (3) will no longer be applicable to such Indebtedness of that Person; |
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(4) Indebtedness of Rural Cellular or any Restricted Subsidiary issued in exchange for, or to renew, replace, extend, refinance, or refund, any Indebtedness of Rural Cellular or such Restricted Subsidiary Incurred pursuant to clauses (1), (4), (6), (8), (11), or (14) or pursuant to the first paragraph of this covenant, which Indebtedness was outstanding or committed on the date of exchange, renewal, replacement, extension, refinancing, or refunding; provided, however, that: |
(A) such Indebtedness does not exceed the principal amount (or in the case of Redeemable Stock or Preferred Stock that constitutes Indebtedness, the aggregate redemption or repurchase price or liquidation value) of outstanding or committed Indebtedness so exchanged, renewed, replaced, extended, refinanced, or refunded plus all accrued interest, dividends and redemption premiums on the Indebtedness and all fees, expenses, penalties, and redemption premiums incurred in connection therewith; | |
(B) such exchanging, renewing, replacing, extending, refinancing, or refunding Indebtedness has (x) a final maturity that is later than the final maturity of the Indebtedness being so exchanged, renewed, replaced, extended, refinanced, or refunded and (y) an Average Life, at the time of such exchange, renewal, replacement, extension, refinancing, or refunding of such Indebtedness, that is equal to or greater than the Average Life of the Indebtedness being so exchanged, renewed, replaced, extended, refinanced, or refunded; | |
(C) in the case of any exchanging, renewing, replacing, extending, refinancing, or refunding of Indebtedness subordinated to the notes (or Preferred Stock that constitutes Indebtedness), the exchanging, renewing, replacing, extending, refinancing, or refunding Indebtedness ranks subordinate in right of payment to the notes to substantially the same extent as, or to a greater extent than, the Indebtedness so exchanged, renewed, replaced, extended, refinanced, or refunded; and | |
(D) no Indebtedness of Rural Cellular may be exchanged, renewed, replaced, extended, refinanced, or refunded by the Incurrence of Indebtedness or the issuance of Capital Stock by any Restricted Subsidiary. |
(5) Indebtedness Incurred by Rural Cellular or any of its Restricted Subsidiaries under Hedge Agreements to protect Rural Cellular or any of its Restricted Subsidiaries from interest or foreign currency risk on Indebtedness permitted to be Incurred by the indenture or to manage such risk, provided that the notional principal amount of any such Hedge Agreements does not exceed the principal amount of Indebtedness to which such Hedge Agreements relate, and such Hedge Agreements are not for speculative purposes; | |
(6) Indebtedness of Rural Cellular and its Restricted Subsidiaries existing on the Issue Date (other than Indebtedness Incurred under clause (3) above) (“Existing Indebtedness”); | |
(7) any guarantee by any Restricted Subsidiary of any Indebtedness Incurred under the Credit Agreement under clause (2) or (14); | |
(8) Acquired Indebtedness of Rural Cellular; provided that, on a pro forma basis after giving effect to the Incurrence of such Acquired Indebtedness, Rural Cellular would be able to Incur at least $1.00 of additional Indebtedness pursuant to the provisions described under the first paragraph of this covenant, “— Limitation on Consolidated Indebtedness”; | |
(9) Indebtedness of Rural Cellular or any of its Restricted Subsidiaries in respect of performance, bid, surety, appeal, or similar bonds or completion or performance guarantees provided in the ordinary course of business; | |
(10) Indebtedness of Rural Cellular or any of its Restricted Subsidiaries arising from agreements providing for indemnification, adjustment of purchase price, or similar obligations, or from guarantees or letters of credit, surety bonds, or performance bonds securing any obligations of Rural Cellular or any of its Restricted Subsidiaries pursuant to such agreements, in any case Incurred in connection with the disposition of any business, assets, or Subsidiary of Rural Cellular (other than guarantees of, |
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or similar obligations under, Indebtedness Incurred by any Person acquiring all or any portion of such business, assets, or Restricted Subsidiary of Rural Cellular for the purpose of financing such acquisition), in an amount not to exceed the gross proceeds actually received by Rural Cellular or any Restricted Subsidiary in connection with such disposition; | |
(11) Indebtedness of Rural Cellular or any of its Restricted Subsidiaries represented by Capital Lease Obligations, mortgage financings, or purchase money 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 used in the business of Rural Cellular or any of its Restricted Subsidiaries, in an aggregate principal amount, including all Indebtedness Incurred pursuant to clause (4) above in exchange for, or to renew, replace, extend, refinance, or refund any Indebtedness Incurred pursuant to this clause (11), not to exceed the greater of 1.0% of Total Assets at any time outstanding and $12.0 million; | |
(12) Indebtedness of Rural Cellular or any of its Restricted Subsidiaries owed to, including obligations in respect of letters of credit for the benefit of, any Person in connection with workers’ compensation, health, disability, or other employee benefits or property, casualty, or liability insurance provided by such Person to Rural Cellular or any of its Restricted Subsidiaries, in each case Incurred in the ordinary course of business; | |
(13) Indebtedness of Rural Cellular or any of its Restricted Subsidiaries 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 that such Indebtedness is extinguished within two Business Days after its Incurrence; and | |
(14) Indebtedness of Rural Cellular or any of its Restricted Subsidiaries, other than Indebtedness permitted pursuant to clauses (1) through (13) above, which does not exceed $35 million at any time outstanding, including all Indebtedness Incurred pursuant to clause (4) above in exchange for, or to renew, replace, extend, refinance, or refund any such Indebtedness. |
Limitation on Preferred Stock of Restricted Subsidiaries |
(1) Preferred Stock outstanding on the Issue Date (“Existing Preferred Stock”); | |
(2) Preferred Stock issued to and held by Rural Cellular or any Wholly Owned Restricted Subsidiary of Rural Cellular; | |
(3) Preferred Stock issued by any Person prior to that Person’s having become a Restricted Subsidiary of Rural Cellular; and |
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(4) Preferred Stock issued by a Restricted Subsidiary in exchange for, or the proceeds of which are used to refinance outstanding Preferred Stock of a Restricted Subsidiary; provided that (a) the liquidation value of the refinancing Preferred Stock does not exceed the liquidation value so refinanced plus financing fees and other expenses, penalties, and premiums associated with such refinancing and all accrued dividends on such Preferred Stock and (b) such refinancing Preferred Stock has no mandatory redemptions prior to (and in no greater amounts than) the Preferred Stock being refinanced. |
Limitation on Asset Sales and Sales of Subsidiary Stock |
(a) such Asset Sale is for Fair Market Value; | |
(b) at least 75% of the value of the consideration for such Asset Sale consists of: |
(1) cash or Cash Equivalents, | |
(2) the assumption by the transferee (and release of Rural Cellular or the relevant Restricted Subsidiary, as the case may be) of Pari Passu Indebtedness of Rural Cellular or Indebtedness of any Restricted Subsidiary or | |
(3) notes, obligations, or other marketable securities (collectively “Marketable Securities”) that are converted within 30 days after consummation of such Asset Sale into cash or Cash Equivalents; and |
(c) the Net Cash Proceeds therefrom are, at Rural Cellular’s option and to the extent it so elects, applied on or prior to the date that is 365 days after the date of such Asset Sale: |
(1) to the repayment of Indebtedness under the Credit Agreement or other First Lien Obligations (which payment permanently reduces the commitment thereunder); | |
(2) to the repurchase of the notes or Applicable Pari Passu Indebtedness, pursuant to an offer to purchase (an “Asset Sale Offer”) described below; | |
(3) to the making of capital expenditures or other acquisitions of long-term assets (other than Capital Stock) that are used or useful in a Wireless Communications Business that is owned wholly by Rural Cellular or any Guarantor; | |
(4) to the acquisition by Rural Cellular or any Guarantor of all or substantially all of the assets of, or Capital Stock representing a majority of the Voting Power of, an entity engaged primarily in a Wireless Communications Business; or | |
(5) any combination of the foregoing. |
(1) the conveyance, sale, transfer, or other disposition of all or substantially all the assets of Rural Cellular on a consolidated basis are governed by the provisions of the indenture described under the caption “Change of Control” and/or the provisions of the indenture described under “Consolidation, Merger, Conveyance, Transfer, or Lease” and not by the provisions of this Asset Sale covenant; |
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(2) any Restricted Subsidiary of Rural Cellular may convey, sell, lease, transfer, or otherwise dispose of any or all of its assets (upon voluntary liquidation or otherwise) to Rural Cellular or any Restricted Subsidiary; | |
(3) Rural Cellular and its Restricted Subsidiaries may, in the ordinary course of business, (A) convey, sell, lease, transfer, assign, or otherwise dispose of assets, provided that if such conveyance, sale, lease, transfer, assignment or other disposition is to a Person other than a Restricted Subsidiary, the consideration received reflects the Fair Market Value of such assets and (B) exchange assets for either assets or equity interests in Wireless Communications Businesses, provided that (i) the assets or equity interests received have a Fair Market Value substantially equal to the assets exchanged, (ii) the assets received by Rural Cellular are controlled by Rural Cellular with respect to voting rights andday-to-day operations, or the equity interests received by Rural Cellular represent a controlling interest in the total Voting Power andday-to-day operations of a Person that is the issuer of such equity interests, and (iii) the assets received in such exchange are received by Rural Cellular or a Guarantor, if such exchange is made by Rural Cellular or a Guarantor; | |
(4) Rural Cellular and its Restricted Subsidiaries may make an exchange of assets where Rural Cellular and/or a Guarantor receives consideration for such assets at least 75% of which consists of (a) cash, (b) long-term assets (other than Capital Stock) at Fair Market Value that are used or useful in a Wireless Communications Business, or (c) any combination thereof (it being understood that any net cash proceeds shall be treated as Net Cash Proceeds under clause (c) of the preceding paragraph); | |
(5) Rural Cellular and its Restricted Subsidiaries may sell, exchange, or dispose of damaged, worn out, or other obsolete property in the ordinary course of business or other property no longer necessary for the proper conduct of the business of Rural Cellular or any of its Restricted Subsidiaries; and | |
(6) in addition to Asset Sales permitted by the foregoing clauses (1) through (5), without compliance with the restrictions set forth in the immediately preceding paragraph, Rural Cellular may consummate any single Asset Sale or series of related Asset Sales with respect to assets the Fair Market Value of which does not exceed $10.0 million in the aggregate after the Issue Date. |
(1) an issuance of Capital Stock by a Restricted Subsidiary of Rural Cellular to Rural Cellular or to a Guarantor; | |
(2) the sale or other disposition of cash or Cash Equivalents; | |
(3) the surrender or waiver of contract rights or settlement, release, or surrender of a contract, tort, or other litigation claim in the ordinary course of business; | |
(4) the lease, sublease, or licensing of any property in the ordinary course of business; | |
(5) a Restricted Payment (other than a Permitted Investment) that is not prohibited by the covenant described under the caption, “— Certain Covenants — Limitation on Restricted Payments,” or a Permitted Investment pursuant to clauses (9), (11), and (12) of the definition thereof; | |
(6) the sale of inventory in the ordinary course of business; | |
(7) any issuance of employee stock options or stock awards by Rural Cellular pursuant to benefit plans in existence on the Issue Date; and | |
(8) the granting of Liens not prohibited by the indenture. |
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Limitation on Restricted Payments |
(a) no Default or Event of Default has occurred and is continuing; | |
(b) Rural Cellular would be permitted to Incur an additional $1.00 of Indebtedness pursuant to the Operating Cash Flow Ratio test described in the first paragraph under “— Limitation on Consolidated Indebtedness”; and | |
(c) the total of all Restricted Payments made on or after January 16, 2002 does not exceed the sum, without duplication, of (1) Cumulative Operating Cash Flow less 1.60 times Cumulative Interest Expense, (2) 100% of the aggregate Qualified Capital Stock Proceeds of Rural Cellular after January 16, 2002, (3) 100% of the cash proceeds received from an Unrestricted Subsidiary to the extent of Investments (other than Permitted Investments) made in such Unrestricted Subsidiary since January 16, 2002, and (4) to the extent that any Investment, other than a Permitted Investment, that was made after the Issue Date is sold or otherwise liquidated or repaid, or the Person in whom such Investment was made subsequently becomes a Restricted Subsidiary of Rural Cellular, the lesser of (x) the cash or Cash Equivalents received upon the sale, liquidation, or repayment of such Investment, less the cost of disposition, if any, or the cash plus the Fair Market Value of any assets other than cash held by such Person on the date it becomes a Restricted Subsidiary of Rural Cellular, as applicable, and (y) the initial amount of such Investment. |
(1) the payment of any dividend within 60 days after declaration thereof if at the declaration date such payment would have complied with the preceding provision; | |
(2) any refinancing of any Indebtedness otherwise permitted under the provision of the indenture described under clause (2) or (4) of the second paragraph of “— Limitation on Consolidated Indebtedness”; | |
(3) (a) the issuance of the Senior Subordinated Exchange Debentures in exchange for the Exchangeable Preferred Stock in accordance with the terms of the Exchangeable Preferred Stock in effect on the Issue Date; provided that after giving effect thereto, Rural Cellular’s Operating Cash Flow Ratio would have been less than 6.5 to 1.0 or (b) the issuance of Additional Senior Subordinated Exchange Debentures in exchange for the Junior Exchangeable Preferred Stock in accordance with the terms of the Junior Exchangeable Preferred Stock in effect on the Issue Date, provided that after giving effect thereto, Rural Cellular’s Operating Cash Flow Ratio would have been less than 6.5 to 1.0; | |
(4) the purchase, redemption, or other acquisition or retirement for value of Capital Stock of any Restricted Subsidiary held by Persons other than Rural Cellular or any of its Restricted Subsidiaries; | |
(5) the making of any Investment, other than a Permitted Investment, or the payment, redemption, defeasance, repurchase, or other acquisition or retirement of any Capital Stock of Rural Cellular or any Subordinated Indebtedness prior to its scheduled maturity or the payment of dividends on any Capital Stock of Rural Cellular either in exchange for or out of the net cash proceeds of the substantially concurrent sale (other than to a Subsidiary of Rural Cellular) of Qualified Capital Stock of Rural Cellular; provided that the amount of any such net cash proceeds that are utilized for any such Investment, payment, redemption, defeasance, repurchase, or other acquisition, retirement, or dividend will be excluded from clause (c)(2), above; | |
(6) the repurchase, redemption, acquisition, or other retirement for value of any Capital Stock of Rural Cellular or any of its Restricted Subsidiaries held by any employee benefit plans of Rural Cellular or any of its Restricted Subsidiaries, any current or former employees or directors of Rural |
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Cellular or any of its Restricted Subsidiaries, or pursuant to any management equity subscription agreement or stock option agreement of Rural Cellular or any of its Restricted Subsidiaries; provided that the aggregate price paid for all such repurchased, redeemed, acquired, or retired Capital Stock shall not exceed $1.0 million in any12-month period; | |
(7) the payment of dividends on either the Exchangeable Preferred Stock or on the Junior Exchangeable Preferred Stock after February 15, 2005, which dividends do not exceed $30.0 million in the aggregate since January 16, 2002; provided that in no event may any such payment be made unless the Operating Cash Flow Ratio of Rural Cellular, calculated on the basis that the Preferred Stock on which such dividends are proposed to be paid constitutes Indebtedness, is less than 7.0 to 1.0; | |
(8) the distribution, as a dividend or otherwise, of Capital Stock of, or Indebtedness owed to Rural Cellular or a Restricted Subsidiary by, any Unrestricted Subsidiary; | |
(9) any purchase, redemption, retirement, defeasance, or other acquisition for value of any Subordinated Indebtedness pursuant to the provisions of such Subordinated Indebtedness upon a Change of Control or an Asset Sale after Rural Cellular shall have complied with the provisions of the indenture described under the captions “Change of Control” or “Limitation on Asset Sales and Sales of Subsidiary Stock,” as the case may be; or | |
(10) Restricted Payments, in addition to Restricted Payments permitted pursuant to clauses (1) through (9) of this paragraph, not in excess of $25.0 million in the aggregate after the Issue Date; |
provided that with respect to clauses (3) through (10) above, no Default or Event of Default shall have occurred and be continuing, and the payments described in clauses (1), (6), (7), (9), and (10) of this paragraph will count as Restricted Payments for the calculation under the first paragraph of this section, “— Limitation on Restricted Payments.” |
Limitations on Distributions and Transfers by Restricted Subsidiaries |
(a) pay dividends on, or make other distributions in respect of, its Capital Stock, or any other ownership interest or participation in, or measured by, its profits, to Rural Cellular or any Restricted Subsidiary or pay any Indebtedness or other obligation owed to Rural Cellular or any Restricted Subsidiary, | |
(b) make any loans or advances to Rural Cellular or any Restricted Subsidiary or | |
(c) transfer any of its property or assets to Rural Cellular or any Restricted Subsidiary. |
(1) pursuant to the indenture, the old notes, the new notes, the Credit Agreement, the First Lien Documents, the Collateral Documents, the Intercreditor Agreement, or any other agreement in |
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effect on the Issue Date and, if executed and delivered, the Exchange Indenture; provided that any such restriction or prohibition in the Exchange Indenture is no more restrictive than that contained in the indenture, | |
(2) pursuant to an agreement relating to any Indebtedness or Capital Stock of such Restricted Subsidiary which was outstanding or committed prior to the date on which such Restricted Subsidiary became a Restricted Subsidiary of Rural Cellular, other than restrictions or prohibitions adopted in anticipation of becoming a Restricted Subsidiary; provided that such restriction or prohibition shall not apply to any property or assets of Rural Cellular or any Restricted Subsidiary other than the property or assets of such Restricted Subsidiary and its Subsidiaries, | |
(3) existing under or by reason of applicable law, rule, regulation, or order, | |
(4) pursuant to customary provisions restricting subletting or assignment of any lease governing any leasehold interest of any Restricted Subsidiary, | |
(5) pursuant to purchase money obligations for property acquired in the ordinary course of business that impose restrictions of the type referred to in clause (c) of this covenant, | |
(6) pursuant to restrictions of the type referred to in clause (c) of this covenant contained in security agreements securing Indebtedness of a Restricted Subsidiary to the extent that such Liens were otherwise incurred in accordance with the “Limitation on Liens” provision described below and restrict the transfer of property subject to such agreements, | |
(7) pursuant to any agreement for the sale or other disposition of all or substantially all of the Capital Stock or assets of a Restricted Subsidiary that restricts distributions by that Restricted Subsidiary pending its sale or disposition, | |
(8) pursuant to other agreements in effect on the Issue Date, | |
(9) pursuant to customary provisions in joint venture agreements and other similar agreements entered into in the ordinary course of business and | |
(10) pursuant to an agreement effecting an amendment, modification, restatement, supplement, renewal, increase, extension, refinancing, replacement, or refunding of any agreement described in clauses (1), (2) and (8) above; provided that the provisions contained in such amendment, modification, restatement, supplement, renewal, increase, extension, refinancing, replacement, or refunding agreement relating to such restriction or prohibition are not materially more restrictive, taken as a whole, than the provisions contained in the agreement which is the subject thereof. |
Limitation on the Activities of Rural Cellular and its Restricted Subsidiaries |
Limitation on Transactions with Affiliates |
(1) such Affiliate Transaction is on terms that are no less favorable to Rural Cellular or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction by Rural Cellular or such Restricted Subsidiary with an unrelated Person; and |
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(2) Rural Cellular delivers to the trustee: |
(a) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $7.5 million, a determination by the Board of Directors of Rural Cellular set forth in a Board Resolution and an Officers’ Certificate certifying that each such Affiliate Transaction complies with clause (1) above and that each such Affiliate Transaction has been approved by a majority of the disinterested members of the Board of Directors of Rural Cellular; and | |
(b) with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $15.0 million, an opinion as to the fairness to Rural Cellular of the financial terms of such Affiliate Transaction or series of related Affiliate Transactions from a financial point of view issued by an accounting, appraisal, or investment banking firm of national standing. |
(1) any employment, service, or termination agreement entered into by Rural Cellular or any of its Restricted Subsidiaries in the ordinary course of business; | |
(2) transactions between or among Rural Cellular and/or its Restricted Subsidiaries; | |
(3) transactions with a Person that is an Affiliate of Rural Cellular solely because Rural Cellular owns Capital Stock in, or controls, such Person; | |
(4) reasonable and customary fees and compensation paid to, and indemnity provided on behalf of, officers, directors and employees of Rural Cellular or any Restricted Subsidiary of Rural Cellular, as determined by the Board of Directors of Rural Cellular; | |
(5) sales or issuances of Qualified Capital Stock to Affiliates or employees of Rural Cellular and its Subsidiaries at Fair Market Value; and | |
(6) Restricted Payments that are not prohibited by the provisions of the indenture as described above under the caption “— Limitation on Restricted Payments” and Permitted Investments. |
Limitation on Liens |
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(1) All Indebtedness Incurred by Rural Cellular and its Restricted Subsidiaries during the Covenant Suspension that would not have been permitted to be incurred under the covenant described above under “— Certain Covenants — Limitation on Consolidated Indebtedness” had such covenant been applicable during the Covenant Suspension shall be deemed to be “Existing Indebtedness”; | |
(2) All Preferred Stock issued by Rural Cellular’s Restricted Subsidiaries during the Covenant Suspension that would not have been permitted to be issued under the covenant described above under “— Certain Covenants — Limitation on Preferred Stock of Restricted Subsidiaries” had such covenant been applicable during the Covenant Suspension shall be deemed to be “Existing Preferred Stock”; and | |
(3) Restricted Payments made by Rural Cellular or any of its Restricted Subsidiaries during the Covenant Suspension that would not have been permitted to be Incurred under the covenant described above under “— Certain Covenants — Limitation on Restricted Payments” shall not be deemed to cause a Default or Event of Default under such covenant; provided, however, that all Restricted Payments made during the Covenant Suspension shall count as Restricted Payments for the calculation under the first paragraph of “— Certain Covenants — Limitation on Restricted Payments.” |
(1) (a) Rural Cellular is the surviving entity or (b) if Rural Cellular is not the surviving entity, then the successor or transferee assumes all the obligations of Rural Cellular under the notes and the indenture, and the surviving entity is a corporation organized and validly existing under the laws of the United States of America, the District of Columbia, or any State of the United States, | |
(2) the Consolidated Net Worth of the successor or transferee (if any) immediately after the transaction is not less than 100% of Rural Cellular’s Consolidated Net Worth immediately prior to the transaction, | |
(3) (i) immediately after giving effect to such transaction, Rural Cellular (or its successor or transferee) would be permitted to Incur at least $1.00 of additional Indebtedness pursuant to the Operating Cash Flow Ratio test described in the first paragraph under “— Certain Covenants — Limitation on Consolidated Indebtedness” or (ii) the Operating Cash Flow Ratio for Rural Cellular, or its successor or transferee, will, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the Reference Period, not be greater than such Operating Cash Flow Ratio for Rural Cellular immediately prior to such transaction; | |
(4) after giving effect to such transaction no Default or Event of Default has occurred and is continuing, and | |
(5) an Officers’ Certificate and an Opinion of Counsel covering such conditions is delivered to the trustee. |
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(1) All quarterly and annual financial information that would be required to be contained in a filing with the Commission on Form 10-Q and Form 10-K if Rural Cellular were required to file such Forms, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and, with respect to the annual information only, a report on the annual financial statements by Rural Cellular’s certified independent accountants; and | |
(2) All current reports that would be required to be filed with the Commission on Form 8-K if Rural Cellular were required to file such reports. |
(1) failure to pay the principal of or premium, if any, on the notes at Maturity; | |
(2) failure to pay any interest or Liquidated Damages, if any, on the notes for a period of 30 consecutive days or more after those amounts become due and payable; | |
(3) failure to offer to purchase or purchase notes, in the time periods required by the indenture, required to be purchased by Rural Cellular pursuant to any of the provisions of the indenture described under “— Change of Control” or “— Certain Covenants — Limitation on Asset Sales and Sales of Subsidiary Stock”; | |
(4) failure to perform or comply with the provisions of the indenture described under “— Consolidation, Merger, Conveyance, Transfer, or Lease”; | |
(5) failure to perform any other covenant or agreement of Rural Cellular under the indenture or the Collateral Documents that continues for 30 days after written notice to Rural Cellular by the trustee or Holders of at least 25% in aggregate principal amount of outstanding notes; | |
(6) default under any mortgage, indenture, or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by Rural Cellular or any of its Restricted Subsidiaries (or the payment of which is guaranteed by Rural Cellular or any of |
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its Restricted Subsidiaries), whether such Indebtedness or guarantee now exists, or is created after the Issue Date, if that default: |
• | is caused by a failure to pay principal of, or interest or premium, if any, on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a “Payment Default”); or | |
• | results in the acceleration of such Indebtedness prior to its express maturity, |
and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $20.0 million or more; |
(7) the rendering of a final judgment or judgments against Rural Cellular or a Restricted Subsidiary in an amount in excess of $20 million, excluding amounts covered by insurance, which remains undischarged or unstayed for a period of 60 days after the date on which the right of appeal has expired; | |
(8) any of the Subsidiary Guarantees ceases to be in full force and effect or any of the Subsidiary Guarantees is declared to be null and void and unenforceable or any of the Subsidiary Guarantees is found to be invalid, in each case by a court of competent jurisdiction in a final non-appealable judgment, or any of the Guarantors denies its liability under its Subsidiary Guarantee (other than by reason of release of a Guarantor in accordance with the terms of the indenture); | |
(9) unless all of the Collateral shall have been released from the Second Priority Liens in accordance with the provisions of the Collateral Documents and the indenture, (a) any default by Rural Cellular or any of its Restricted Subsidiaries party thereto in the performance of the Collateral Documents, which adversely affects the enforceability, validity, perfection (in the case of Collateral for which perfection is required under the Collateral Documents), or priority of any Second Priority Lien on a material portion of the Collateral granted to the Collateral Agent for its benefit and the benefit of the trustee and the Holders, (b) the repudiation or disaffirmation by Rural Cellular or any of its Restricted Subsidiaries party thereto of its material obligations under the Collateral Documents, or (c) the determination in a final, non-appealable judicial proceeding that any material rights under the Collateral Documents are unenforceable or invalid against Rural Cellular or any of its Restricted Subsidiaries that are party thereto for any reason with respect to a material portion of the Collateral (which default, repudiation, disaffirmation, or determination is not rescinded, stayed, or waived by the Persons having such authority pursuant to the Collateral Documents or otherwise cured within 30 days after written notice to Rural Cellular by the trustee or Holders of at least 25% in aggregate principal amount of outstanding notes); and | |
(10) certain events of bankruptcy, insolvency, or reorganization affecting Rural Cellular or a Significant Subsidiary. |
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Year | Additional Premium | |||
2004 | 12.375% | |||
2005 | 10.313% | |||
2006 | 8.250% | |||
2007 | 6.188% |
(1) change the Stated Maturity of the principal of or any installment of interest or Liquidated Damages, if any, on any note, | |
(2) reduce the principal amount of, or premium, if any, or Liquidated Damages, if any, or interest on any note, | |
(3) change the place or currency of payment of principal of or premium or Liquidated Damages, if any, or interest on any note, | |
(4) impair the right to institute suit for the enforcement of any payment on or with respect to any note, except a rescission of acceleration of the notes by the holders of at least a majority in aggregate principal amount of notes under certain circumstances, | |
(5) reduce the percentage of aggregate principal amount of notes outstanding necessary to amend the indenture, | |
(6) reduce the percentage of aggregate principal amount of notes outstanding necessary for waiver of compliance with certain provisions of the indenture or for waiver of certain defaults, | |
(7) release any Guarantor from any of its Obligations under its Subsidiary Guarantee or the indenture, except in accordance with the terms of the indenture, |
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(8) release any Collateral from the Liens created by the Collateral Documents, except as specifically provided for in the indenture and the Collateral Documents, | |
(9) modify the provisions with respect to modification and waiver, | |
(10) modify or add any provision of the indenture affecting the ranking of the notes in a manner that adversely affects the Holders of the notes, | |
(11) following the mailing of an Offer to Purchase notes, modify the provisions of the indenture with respect to such Offer to Purchase in a manner adverse to such Holder, or | |
(12) alter the provisions under the caption “— Optional Redemption” or waive a redemption payment with respect to any note thereunder. |
(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 Rural Cellular’s obligations to Holders of notes in the case of a consolidation, amalgamation, combination, or merger or sale of all or substantially all of Rural Cellular’s assets in accordance with the provisions described above under the caption, “— Consolidation, Merger, Conveyance, Transfer, or Lease,” | |
(4) to make any change that would provide any additional rights or benefits to the Holders of notes and that does not 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 of 1939, as amended, | |
(6) to release any Guarantor from its Obligations under its Subsidiary Guarantee and the indenture in accordance with the terms of the indenture, | |
(7) to evidence and provide for the acceptance of appointment of a successor trustee, or | |
(8) to provide for the issuance of additional notes in accordance with the indenture. |
(1) will be discharged from any and all obligations in respect of outstanding notes (except for certain obligations to register the transfer or exchange of notes, to replace mutilated, lost, destroyed, or stolen notes, and to maintain paying agents and hold moneys for payment in trust) or |
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(2) need not comply with certain restrictive covenants and that such omission shall not be deemed to be an Event of Default under the indenture and the notes, |
(a) with respect to clause (1), Rural Cellular shall have delivered to the trustee an Opinion of Counsel to the effect that Rural Cellular has received from, or there has been published by, the Internal Revenue Service a ruling or there has been a change in law, which provides that Holders of notes will not recognize gain or loss for federal income tax purposes as a result of such deposit, defeasance, and discharge and will be subject to federal income tax on the same amount, in the same manner and at the same times as would have been the case if such deposit, defeasance, and discharge had not occurred; or, with respect to clause (2), Rural Cellular shall have delivered to the trustee an Opinion of Counsel to the effect that the Holders of the notes will not recognize gain or loss for federal income tax purposes as a result of such deposit and defeasance, and will be subject to federal income tax on the same amount, in the same manner, and at the same times as would have been the case if such deposit, defeasance, and discharge had not occurred; | |
(b) no Default or Event of Default shall have occurred and be continuing on the date of such deposit, other than an Event of Default resulting from the borrowing of funds to be applied to such deposit; | |
(c) no Event of Default described under clause (10) under “— Events of Default and Remedies” above or event that, with the passing of time or the giving of notice, or both, shall constitute an Event of Default under such clause (10) shall have occurred and be continuing at any time during the period ending on the 91st day following such date of deposit; | |
(d) such deposit shall not cause the trust so created to be subject to the Investment Company Act of 1940, as amended, or shall be qualified under such act or exempt from regulation thereunder; and | |
(e) certain other customary conditions precedent. |
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(1) with respect to any asset that is the subject of an Asset Sale at a time when such asset is included in the Collateral, Pari Passu Indebtedness secured by all or any part of the Collateral and | |
(2) with respect to any other asset, Pari Passu Indebtedness. |
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(1) the sum of the product of (x) the number of years from such date of determination to the date of each successive scheduled amortization, redemption, or principal payment of such Indebtedness (or similar payment with respect to such Preferred Stock), times (y) the amount of such payment; by | |
(2) the sum of all such payments. |
(1) securities 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), in each case, maturing within one year after the date of acquisition; | |
(2) time deposits, certificates of deposit, banker’s acceptances, money market deposits, and commercial paper issued by, or deposited with, any domestic bank or trust company of recognized standing having capital and surplus in excess of $200 million and commercial paper issued by others rated at leastA-2 or the equivalent thereof by S&P or at leastP-2 or the equivalent thereof by Moody’s and, in each case, maturing within one year after the date of acquisition; | |
(3) repurchase obligations with a term of not more than seven days for underlying securities of the types described in (1) and (2) above entered into with any financial institution meeting the qualifications specified in clause (2) above; and | |
(4) investments in money market funds substantially all of whose assets comprise securities of the types described in clauses (2) and (3) above. |
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(1) the portion of any rental obligation in respect of any Capital Lease Obligation allocable to interest expense in accordance with GAAP; | |
(2) the amortization of Indebtedness discounts; | |
(3) any payments or fees, other than reimbursement or similar obligations, with respect to letters of credit, bankers’ acceptances, or similar facilities; | |
(4) net payment obligations under Hedge Agreements; | |
(5) the portion other than Attributable Debt of any rental obligations in respect of any Sale and Leaseback Transaction; and | |
(6) Preferred Stock dividends accrued or payable other than dividends on Qualified Capital Stock of such Person. |
(a) in the event that any of Rural Cellular’s Qualified Capital Stock is classified as indebtedness because of a change in GAAP occurring after the Issue Date or SFAS 150, dividend payments on such Qualified Capital Stock will not be included in “Consolidated Interest Expense”; and | |
(b) for purposes of the covenant described under the caption “— Limitation on Restricted Payments,” “Consolidated Interest Expense” shall exclude any non-cash charges resulting from the write-down of unamortized security issuance costs, to the extent included in “Consolidated Interest Expense.” |
(1) the net income (or loss) of any Person, other than such Person, that is not a Restricted Subsidiary of such Person except to the extent of the amount of dividends or other distributions actually paid to such Person or a Restricted Subsidiary of such Person by such other Person during such period, | |
(2) gains or losses from sales of assets other than sales of inventory in the ordinary course of business, |
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(3) in the event that any of Rural Cellular’s Qualified Capital Stock is classified as indebtedness because of a change in GAAP occurring after the Issue Date or SFAS 150, dividend payments thereon, to the extent they are treated as interest expense under GAAP, | |
(4) for purposes of the “— Limitation on Restricted Payments” covenant, the net income, if positive, of any Restricted Subsidiary to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of such net income is not at that time permitted by the operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule, or governmental regulations applicable to such Restricted Subsidiary, except to the extent such restrictions with respect to the payment of dividends or similar distributions have been validly waived, and | |
(5) all extraordinary gains and extraordinary losses. |
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(a) Liens on securities accounts and deposit accounts permitted under clauses (10), (15), or (16) of the definition of “Permitted Liens,” | |
(b) Liens permitted under clauses (1), (6), (7), (9), or (22) of the definition of “Permitted Liens,” | |
(c) Liens permitted under clause (8) of the definition of “Permitted Liens,” with respect to replacements of Liens permitted under clause (1) of the definition of “Permitted Liens,” and | |
(d) Liens permitted under clause (25) of the definition of “Permitted Liens,” on property or assets the Fair Market Value of which does not exceed $10 million in the aggregate; |
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(1) all Indebtedness of Rural Cellular and its Subsidiaries under the Credit Agreement that is (or, in the case of any reimbursement obligation for a letter of credit issued under the Credit Agreement or any loan required to be made under the Credit Agreement to satisfy such reimbursement obligation, was, when such letter of credit was issued) permitted to be Incurred by clause (2), (7), or (14) of the second paragraph under “— Certain Covenants — Limitation on Consolidated Indebtedness”; and | |
(2) Hedging Obligations that are designated as First Lien Debt by Rural Cellular. |
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(1) every obligation of such Person for money borrowed, | |
(2) every obligation of such Person evidenced by bonds, debentures, notes, or similar instruments, including obligations Incurred in connection with the acquisition of property, assets, or businesses, | |
(3) every reimbursement or similar obligation of such Person with respect to letters of credit, bankers’ acceptances, or similar facilities issued for the account of such Person, | |
(4) every obligation of such Person issued or assumed as the deferred and unpaid purchase price of property or services (but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business), | |
(5) every Capital Lease Obligation of such Person, | |
(6) the maximum fixed redemption or repurchase price of Redeemable Stock of such Person at the time of determination, | |
(7) Attributable Debt of such Person with respect to any Sale and Leaseback Transaction to which such Person is a party, | |
(8) all obligations under Hedge Agreements, | |
(9) every obligation of the type referred to in clauses (1) through (8) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed or is responsible or liable, directly or indirectly, as obligor, guarantor, or otherwise or for which such Person provides any form of credit support, and if such credit support takes the form of a Lien on any assets of the specified Person (which Lien is permitted to be Incurred by the indenture) where such Indebtedness is without recourse to such Person, the amount of such Indebtedness will be the lesser of (A) the Fair Market Value of such assets as of the date of determination and (B) the amount of such Indebtedness, and | |
(10) the liquidation value of Preferred Stock of a Subsidiary of such Person issued and outstanding, except for Preferred Stock held by such Person (or one of its Wholly Owned Restricted Subsidiaries); |
(A) the amount outstanding at any time of any Indebtedness issued with original issue discount is the face amount of such Indebtedness less the unamortized portion of the original issue discount of such Indebtedness at the time of its issuance as determined in conformity with GAAP, | |
(B) Indebtedness shall not include any liability for federal, state, local, or other taxes, and | |
(C) in the event that any of Rural Cellular’s Qualified Capital Stock is classified as indebtedness because of a change in GAAP occurring after the Issue Date or SFAS 150, such Qualified Capital Stock shall not be included in “Indebtedness.” |
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(1) the acquisition (whether by purchase, merger, consolidation, or otherwise) by such Person (whether for cash, property, services, securities, or otherwise) of Capital Stock, bonds, notes, debentures, partnership or other ownership interests, or other securities of such other Person; | |
(2) the making by such Person of any deposit with, or advance, loan, or other extension of credit to, such other Person or any commitment to make any such advance, loan, or extension; | |
(3) the entering into by such Person of any guarantee of, or other contingent obligation with respect to, Indebtedness or other liability of such other Person; | |
(4) the making of any capital contribution by such Person to such other Person; and | |
(5) the designation by the Board of Directors of Rural Cellular of any Person to be an Unrestricted Subsidiary. |
(A) “Investment” shall include and be valued at the Fair Market Value of such Person’spro ratainterest in the net assets of any Restricted Subsidiary at the time that such Restricted Subsidiary is designated an Unrestricted Subsidiary and shall exclude the lesser of (x) the Fair Market Value of such Person’spro ratainterest in the net assets of any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary and (y) the Fair Market Value of the amount of such Person’s Investments (other than Permitted Investments) made in (net of cash distributions received from) such Unrestricted Subsidiary since the Issue Date and | |
(B) the amount of any Investment shall be the Fair Market Value of such Investment at the time any such Investment is made. |
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(1) RCC Minnesota and TLA Spectrum; | |
(2) Each Dropdown Subsidiary; and | |
(3) Any other Wholly Owned Restricted Subsidiary that is a Domestic Subsidiary owned directly by Rural Cellular or any Guarantor and that is designated by Rural Cellular as a License-Only Subsidiary in an Officers’ Certificate and by a Board Resolution. |
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(1) as to which neither Rural Cellular nor any of its Restricted Subsidiaries: |
(a) provides credit support of any kind (including any undertaking, agreement, or instrument that would constitute Indebtedness); | |
(b) is directly or indirectly liable, as a guarantor or otherwise; or | |
(c) constitutes the lender other than with respect to amounts that are lent by Rural Cellular or one of its Restricted Subsidiaries to an Unrestricted Subsidiary in compliance with the covenants described under “— Certain Covenants — Limitation on Restricted Payments” and “— Certain Covenants — Limitation on Transactions with Affiliates” and are otherwise permitted by the indenture; |
(2) no default with respect to which, including any rights that the holders of such Indebtedness may have to take enforcement action against an Unrestricted Subsidiary, would permit (upon notice, lapse of time, or both) any holder of any other Indebtedness of Rural Cellular or any of its Restricted Subsidiaries to declare a default on that other Indebtedness or cause the payment of that other Indebtedness to be accelerated or payable prior to its stated maturity; and | |
(3) as to which the lenders will not have any recourse to the assets of Rural Cellular or the stock or assets of any of its Restricted Subsidiaries. |
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(1) the Consolidated Net Income of such Person for such period, plus | |
(2) the sum, without duplication (and only to the extent such amounts are deducted in determining such Consolidated Net Income), of: |
(a) the provisions for income taxes for such period for such Person and its Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP, | |
(b) depreciation, amortization, and other non-cash charges of such Person and its Restricted Subsidiaries, determined on a consolidated basis in accordance with GAAP, and | |
(c) Consolidated Interest Expense of such Person for such period, |
less the amount of all cash payments made during such period by such Person and its Restricted Subsidiaries to the extent such payments relate to non-cash charges that were added back in determining Operating Cash Flow for such period or for any prior period (and only to the extent such amounts are included in determining such Consolidated Net Income). |
(1) Consolidated Indebtedness of such Person and its Restricted Subsidiaries on the Transaction Date (after giving pro forma effect to the Incurrence of any Indebtedness and the application of the proceeds thereof on such Transaction Date) divided by | |
(2) the aggregate amount of Operating Cash Flow during the Reference Period of such Person; |
provided that for purposes of such computation, in calculating Operating Cash Flow and Consolidated Indebtedness: |
(A) the transaction giving rise to the need to calculate the Operating Cash Flow Ratio will be assumed to have occurred (on a pro forma basis) on the first day of the Reference Period; | |
(B) acquisitions that have been made by such Person or any of its Restricted Subsidiaries, including through consolidations, amalgamations, combinations, or mergers during the Reference Period or subsequent thereto and on or prior to the Transaction Date will be given effect (on a pro forma basis) as if they had occurred on the first day of the Reference Period; | |
(C) businesses disposed of by such Person or any of its Restricted Subsidiaries during the Reference Period or subsequent thereto and on or prior to the Transaction Date will be given effect (on a pro forma basis) as if they had occurred on the first day of the Reference Period; | |
(D) the Indebtedness of any Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary shall be determined in accordance with the actual percentage of the Person’s common equity interest in such Restricted Subsidiary on the date of determination of the Operating Cash Flow Ratio (thus, for example, in the case of a Restricted Subsidiary in which such Person owns a 51% common equity interest, 51% of such Subsidiary’s Indebtedness would be included in the calculation of such Person’s aggregate Indebtedness); and |
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(E) except as provided in clause (7) of “— Limitation on Restricted Payments,” (i) the Exchangeable Preferred Stock and the Junior Exchangeable Preferred Stock outstanding on the Issue Date (and any accrued but unpaid dividends on such Preferred Stock), (ii) any Junior Exchangeable Preferred Stock issued as Junior Exchangeable Preferred Stock PIK Dividends (and any accrued but unpaid dividends thereon), and (iii) the Class M Preferred Stock outstanding on the Issue Date shall be excluded from Consolidated Indebtedness. |
(1) Investments in Cash Equivalents; | |
(2) Investments in Rural Cellular or a Restricted Subsidiary; | |
(3) Investments in a Person substantially all of whose assets are of a type generally used in a Wireless Communications Business (an “Acquired Person”) if, as a result of such Investments, (A) the Acquired Person immediately thereupon becomes a Restricted Subsidiary or (B) the Acquired Person immediately thereupon either (a) is merged or consolidated with or into Rural Cellular or any Restricted Subsidiary or (b) transfers or conveys all or substantially all of its assets to, or is liquidated into, Rural Cellular or any of its Restricted Subsidiaries; | |
(4) Investments in accounts and notes receivable acquired in the ordinary course of business; | |
(5) any securities received in connection with an Asset Sale and any Investment with the Net Cash Proceeds from any Asset Sale in Capital Stock of a Person, all or substantially all of whose assets are of a type used in a Wireless Communications Business, that complies with the “— Limitation on Asset Sales and Sales of Subsidiary Stock” covenant; | |
(6) advances and prepayments for asset purchases in the ordinary course of business in a Wireless Communications Business of Rural Cellular or a Restricted Subsidiary; | |
(7) customary loans or advances made in the ordinary course of business to officers, directors, or employees of Rural Cellular or any of its Restricted Subsidiaries for travel, entertainment and moving and other relocation expenses not to exceed $5.0 million at any one time outstanding; | |
(8) the purchase of Cooperative Bank Equity in Cooperative Banks to the extent required by the charter documents of such Cooperative Banks in connection with the Incurrence of any Indebtedness which is provided by such Cooperative Banks under the Credit Agreement, provided that such Incurrence is permitted under the terms of the indenture; | |
(9) Investments in Wireless Alliance not exceeding $10.0 million in the aggregate made after January 16, 2002; | |
(10) Investments received in satisfaction of judgments, settlements of debt, or compromises of obligations incurred in the ordinary course of business, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer; | |
(11) Investments arising from Hedge Agreements permitted to be Incurred pursuant to clause (5) of the second paragraph under “— Limitation on Consolidated Indebtedness”; | |
(12) Investments in any Person, which Investments have an aggregate Fair Market Value, measured on the date each such Investment is made and without giving effect to subsequent changes |
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in value, when taken together with all other Investments made pursuant to this clause (12) since the Issue Date not exceeding $15.0 million; | |
(13) receivables owing to Rural Cellular or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; | |
(14) Investments that are deemed to have been made as a result of the acquisition of a Person that at the time of such acquisition held instruments constituting Investments that were not acquired in contemplation of the acquisition of such Person (only to the extent that the making of such Investment through the acquisition of such Person was already deemed to be a Restricted Payment made pursuant to the covenant under the caption “— Limitation on Restricted Payments” as of the date of such acquisition); and | |
(15) Investments in prepaid expenses and lease, utility and workers’ compensation performance and other similar deposits. |
(1) Liens existing on the Issue Date securing obligations of Rural Cellular or any of its Restricted Subsidiaries outstanding on the Issue Date, other than Indebtedness under the Credit Agreement (“Existing Liens”); | |
(2) Liens securing Indebtedness of Rural Cellular or any Restricted Subsidiary under the Credit Agreement, which Indebtedness is permitted to be Incurred under clause (2), (7), or (14) of the second paragraph under “— Limitation on Consolidated Indebtedness”; | |
(3) Second Priority Liens securing Indebtedness permitted to be Incurred under clause (1) of the second paragraph under “— Limitation on Consolidated Indebtedness”; | |
(4) Second Priority Liens securing Pari Passu Indebtedness permitted to be Incurred under the first paragraph of “— Limitation on Consolidated Indebtedness,” provided that, (i) at the time such Indebtedness is Incurred, Rural Cellular’s Senior Secured Operating Cash Flow Ratio would be less than 3.25 to 1.0; (ii) such Indebtedness has an Average Life and final stated maturity that is equal to or greater than that of the latest Stated Maturity of the then outstanding notes; (iii) such Second Priority Liens are on an equal and ratable basis with the Second Priority Liens securing the Note Obligations; and (iv) the assets securing such Pari Passu Indebtedness also are a part of the Collateral; | |
(5) Liens in favor of Rural Cellular or any Guarantor; | |
(6) Liens to secure Indebtedness of Rural Cellular or a Restricted Subsidiary outstanding or committed for the purpose of financing all or any part of the purchase price or the cost of construction or improvement of the equipment or other property subject to such Liens; provided, however, that (a) the principal amount of any Indebtedness secured by such a Lien does not exceed 100% of such purchase price or cost, (b) such Lien does not extend to or cover any property other than such item of property or any improvements on such item, and (c) the Incurrence of such Indebtedness is otherwise permitted by the indenture; | |
(7) (a) Liens on property existing immediately prior to the time of acquisition thereof (and not Incurred in anticipation of the financing of such acquisition) by Rural Cellular or any Restricted Subsidiary and (b) Liens in respect of Acquired Indebtedness existing at the time of the relevant acquisition by Rural Cellular; provided that such Liens do not extend to any assets of Rural Cellular other than the assets being acquired and as long as such Liens were not Incurred in anticipation of such acquisition; | |
(8) Liens to secure Indebtedness to extend, renew, refinance, or refund (or successive extensions, renewals, refinancings, or refundings), in whole or in part, Indebtedness secured by any Lien referred to in the foregoing clauses (1), (3), (5), and (6) so long as such Liens do not extend |
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to any other property and the principal amount of Indebtedness so secured is not increased, except for amounts relating to accrued interest, dividends, and redemption premiums on the Indebtedness and fees, expenses, penalties, and redemption premiums incurred in connection therewith; | |
(9) Liens on any Permitted Investment in Cooperative Bank Equity in favor of any Cooperative Banks; | |
(10) Liens Incurred or deposits made to secure the performance of statutory or regulatory obligations, surety or appeal bonds, performance bonds, deposits to secure the performance of tenders, bids, trade contracts, government contracts, import duties, payment of rent, leases (other than capital leases), or licenses or other obligations of a like nature incurred in the ordinary course of business, including, without limitation, landlord Liens on leased properties; | |
(11) Liens for taxes, assessments, or governmental charges or claims that are not yet delinquent, that are not yet subject to penalties or interest for non-payment, or that are being contested in good faith by appropriate proceedings; provided that any reserve or other appropriate provision as is required in conformity with GAAP has been made therefor; | |
(12) carriers’, warehousemen’s, mechanics’, landlords’, materialmen’s, repairmen’s, suppliers’, or other like Liens arising in the ordinary course of business and deposits made to obtain the release of such Liens and with respect of obligations not overdue for a period in excess of 60 days or which are being contested in good faith by appropriate proceedings; provided that any reserve or other appropriate provision as shall be required to conform with GAAP shall have been made therefor; | |
(13) easements,rights-of-way, zoning ordinances, and similar charges, restrictions, exceptions, or other irregularities, reservations of, or rights of others for: licenses, sewers, electric lines, telegraph and telephone lines, and other similar encumbrances or title defects incurred, or leases or subleases granted to others, in the ordinary course of business, which do not in any case materially detract from the value of the property subject thereto or do not materially interfere with the ordinary conduct of the business of Rural Cellular or any of its Restricted Subsidiaries; | |
(14) Liens in favor of customs and revenue authorities to secure payment of customs duties in connection with the importation of goods in the ordinary course of business and other similar Liens arising in the ordinary course of business; | |
(15) Liens (other than any Lien imposed by ERISA or any rule or regulation promulgated thereunder) Incurred or pledges or deposits made in the ordinary course of business, in connection with workers’ compensation, unemployment insurance, and other types of social security; | |
(16) deposits made in the ordinary course of business to secure liability to insurance carriers other than in connection with financing premiums; | |
(17) any attachment, appeal, or judgment Lien not constituting an Event of Default under clause (7) of the first paragraph of the section described under the caption “— Events of Default and Remedies”; | |
(18) Liens under licensing agreements for use of intellectual property entered into in the ordinary course of business; | |
(19) any interest or title of a lessor or lessee or sublessor or sublessee under any operating lease entered into by Rural Cellular and its Restricted Subsidiaries in the ordinary course of business; | |
(20) Liens arising from Uniform Commercial Code financing statement filings regarding operating leases entered into by Rural Cellular and its Restricted Subsidiaries in the ordinary course of business; | |
(21) rights of set-off of as to deposit accounts or other funds maintained with a depository or other financial institution; |
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(22) Liens on property subject to capital leases to the extent the related Capital Lease Obligation is permitted to be Incurred pursuant to clause (11) of the second paragraph under “— Limitation on Consolidated Indebtedness”; | |
(23) Liens securing Hedge Agreements permitted to be Incurred pursuant to clause (5) of the second paragraph under “— Limitation on Consolidated Indebtedness,” so long as the related Indebtedness is, and the indenture permits such related Indebtedness to be, secured by a Lien on the same property securing such Hedge Agreements and such Lien is of equal priority with the Lien securing such related Indebtedness; | |
(24) Liens securing Indebtedness permitted to be Incurred pursuant to clause (10), (12), or (13) of the second paragraph under “— Limitation on Consolidated Indebtedness”; and | |
(25) any other Liens in respect of any Indebtedness, which Indebtedness does not exceed $10 million in the aggregate. |
(1) in the case of any sale of Qualified Capital Stock, the aggregate net cash proceeds received by such Person (plus 70% of the Fair Market Value of long-term assets that are used or usable in a Wireless Communications Business), after payment of expenses, commissions and the like incurred by such Person in connection therewith, and net of Indebtedness that such Person Incurred, guaranteed, or otherwise became liable for in connection with the issuance or acquisition of such Capital Stock; and | |
(2) in the case of any exchange, exercise, conversion, or surrender of any Redeemable Stock or Indebtedness of such Person issued (other than to any Subsidiary) for cash after January 16, 2002 for or into shares of Qualified Capital Stock of such Person, the liquidation value of the Redeemable Stock or the net book value of such Indebtedness as adjusted on the books of such Person to the date of such exchange, exercise, conversion, or surrender, plus any additional amount paid by the securityholders to such Person upon such exchange, exercise, conversion, or surrender, and less any and all payments made to the securityholders, and all other expenses, commissions and the like Incurred by such Person or any Subsidiary in connection therewith. |
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(1) only the portion of the Capital Stock which is mandatorily redeemable or is so redeemable at the option of the holder prior to such date shall be deemed Redeemable Stock; | |
(2) if such Capital Stock is issued in the ordinary course of business to any employee or to any plan for the benefit of employees of Rural Cellular or its Subsidiaries or by any such plan to such employees, such Capital Stock shall not constitute Redeemable Stock solely because it may be required to be repurchased by Rural Cellular or any of its Subsidiaries in order to satisfy applicable statutory or regulatory obligations or as a result of such employee’s termination, death, or disability; and | |
(3) any Capital Stock that would not constitute Redeemable Stock but for provisions in it giving holders thereof the right to require such Person to repurchase or redeem such Capital Stock upon the occurrence of a “change of control” or “asset sale” occurring prior to the final Stated Maturity of the notes shall not constitute Redeemable Stock if the “change of control” or “asset sale” provisions applicable to such Capital Stock are no more favorable to the holders of such Capital Stock than the provisions contained in the “Change of Control” or “Asset Sale” covenant, as applicable, in the indenture and such Capital Stock specifically provides that such Person will not repurchase or redeem any such Capital Stock pursuant to such provision prior to Rural Cellular’s repurchase of the notes as required pursuant to such “Change of Control” or “Asset Sale” covenant, as applicable. |
(1) any declaration or payment of a dividend or making any other payment or other distribution (including, without limitation, any payment in connection with any merger or consolidation involving such Person or any Restricted Subsidiary of such Person) on or on account of any shares of Capital Stock of such Person or any Restricted Subsidiary of such Person (other than a dividend payable solely in shares of the Qualified Capital Stock of such Person or options, warrants, or other rights to acquire the Qualified Capital Stock of such Person and other than any declaration or payment of a dividend or other distribution by a Restricted Subsidiary to Rural Cellular or another Wholly Owned Restricted Subsidiary of Rural Cellular); | |
(2) any payment on account of the purchase, redemption, retirement, or acquisition (including by way of issuing any Indebtedness or Redeemable Stock in exchange for Qualified Capital Stock) of (A) any shares of Capital Stock (including, without limitation, the Exchangeable Preferred Stock, the Junior Exchangeable Preferred Stock, and the Class M Preferred Stock) of such Person or any Subsidiary of such Person held by Persons other than such Person or any of its Restricted Subsidiaries or any shares of Capital Stock of the direct or indirect parent of such Person or (B) any option, warrant, or other right to acquire shares of Capital Stock of such Person or any Restricted |
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Subsidiary of such Person or any of its Restricted Subsidiaries, in each case, other than pursuant to the cashless exercise of options, warrants, or other rights to acquire Capital Stock of such Person; | |
(3) any Investment (other than a Permitted Investment) made by such Person; and | |
(4) any payment on or with respect to any Subordinated Indebtedness of such Person or any redemption, defeasance, repurchase, or other acquisition or retirement for value prior to any scheduled maturity, repayment, or sinking fund payment, of any such Indebtedness of such Person, except a payment of interest or principal at the stated maturity thereof; |
(1) consolidated Senior Secured Indebtedness of such Person and its Restricted Subsidiaries on the Senior Secured Transaction Date (after giving pro forma effect to the Incurrence of any Indebtedness and the application of the proceeds thereof on such Senior Secured Transaction Date) divided by | |
(2) the aggregate amount of Operating Cash Flow during the Reference Period of such Person; |
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provided, that for purposes of such computation, in calculating Operating Cash Flow and consolidated Senior Secured Indebtedness: |
(A) the transaction giving rise to the need to calculate the Senior Secured Operating Cash Flow Ratio will be assumed to have occurred (on a pro forma basis) on the first day of the Reference Period; | |
(B) acquisitions that have been made by such Person or any of its Restricted Subsidiaries, including through consolidations, amalgamations, combinations, or mergers during the Reference Period or subsequent thereto and on or prior to the Senior Secured Transaction Date will be given effect (on a pro forma basis) as if they had occurred on the first day of the Reference Period; | |
(C) businesses disposed of by such Person or any of its Restricted Subsidiaries during the Reference Period or subsequent thereto and on or prior to the Senior Secured Transaction Date will be given effect (on a pro forma basis) as if they had occurred on the first day of the Reference Period; and | |
(D) the Indebtedness of any Restricted Subsidiary that is not a Wholly Owned Restricted Subsidiary shall be determined in accordance with the actual percentage of the Person’s common equity interest in such Restricted Subsidiary on the date of determination of the Senior Secured Operating Cash Flow Ratio (thus, for example, in the case of a Restricted Subsidiary in which such Person owns a 51% common equity interest, 51% of such Subsidiary’s Indebtedness would be included in the calculation of such Person’s aggregate Indebtedness). |
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(1) RCC Holdings and RCC Atlantic; | |
(2) Each Dropdown Subsidiary; | |
(3) Each License Only Subsidiary that is not a Dropdown Subsidiary; and | |
(4) Wireless Alliance; |
(1) has no Indebtedness other than Non-Recourse Debt; | |
(2) is not party to any agreement, contract, arrangement or understanding with Rural Cellular or any Restricted Subsidiary of Rural Cellular, unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to Rural Cellular or the Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of Rural Cellular; | |
(3) is a Person with respect to which neither Rural Cellular nor any of its Restricted Subsidiaries has any direct or indirect obligation |
(a) to subscribe for additional Capital Stock or | |
(b) to maintain or preserve that Person’s financial condition or to cause that Person to achieve any specified levels of operating results; and |
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(4) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of Rural Cellular or any of its Restricted Subsidiaries. |
(A) the Indebtedness is permitted under the covenant described above under the caption “— Certain Covenants — Limitation on Consolidated Indebtedness” calculated on a pro forma basis as if that designation had occurred at the beginning of the Reference Period and | |
(B) no Default or Event of Default would occur or be in existence following that designation. |
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• | a citizen or resident of the United States, | |
• | a corporation, partnership, or other entity created or organized in the United States or under the laws of the United States or of any political subdivision of the United States, | |
• | an estate, the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source, or | |
• | a trust that (i) is subject to the primary supervision of the U.S. courts and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) has properly elected to continue to be treated as a U.S. person under applicable Treasury Regulations. |
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• | thenon-U.S. holder does not actually or constructively own 10% or more of the total combined voting power of all classes of our stock entitled to vote; | |
• | thenon-U.S. holder is not a controlled foreign corporation to which we are a related person for U.S. federal income tax purposes; | |
• | thenon-U.S. holder is not a bank with respect to which the receipt of interest on the notes is described in Section 881(c)(3)(A) of the Code; | |
• | the interest is not effectively connected with thenon-U.S. holder’s conduct of a U.S. trade or business; and | |
• | thenon-U.S. holder certifies, on Form W-8BEN (or other applicable form) under penalties of perjury, that it is the beneficial owner of the new notes and is not a U.S. person and provides its name and address and (i) files such form with the paying agent or (ii) in the case of a note held through a foreign partnership or intermediary, the beneficial owner and the foreign partnership or intermediary satisfy certain certification requirements of applicable U.S. Treasury Regulations. |
(1) IRS Form W-8BEN (or other applicable form) claiming an exemption from (or reduction in) withholding under the benefit of an applicable income tax treaty; or | |
(2) IRS Form W-8ECI (or other applicable form) stating that the interest paid on the new note is not subject to withholding tax because it is effectively connected with thenon-U.S. holder’s conduct of a trade or business in the United States. If, however, the interest is effectively connected with the conduct of a trade or business in the United States by thenon-U.S. holder, the interest will be subject to U.S. federal income tax imposed on net income on the same basis as applies to U.S. persons generally. In addition, for corporate holders and under certain circumstances, the branch profits tax may also apply. |
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• | is not an “affiliate,” as defined under the Securities Act, of RCC; | |
• | acquired the new notes in the ordinary course of business; | |
• | is not engaged in, does not intend to engage in, and has no arrangement or understanding with any person to participate in a “distribution,” as defined under the Securities Act, of the new notes; and | |
• | is not acting on behalf of any person who could not truthfully make the foregoing representations. |
• | may not rely on the position of the SEC enunciated inMorgan Stanley and Co., Inc. (available June 5, 1991) andExxon Capital Holdings Corporation (available May 13, 1988), as interpreted in the SEC’s letter toShearman & Sterlingdated July 2, 1993, and similar no-action letters and | |
• | must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction and that such a secondary resale transaction must be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K. |
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Page | |||||
Rural Cellular Corporation | |||||
F-2 | |||||
F-3 | |||||
F-6 | |||||
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F-9 | |||||
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RCC Minnesota, Inc. | |||||
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F-48 | |||||
F-49 | |||||
Rural Cellular Corporation (unaudited) | |||||
F-54 | |||||
F-55 | |||||
F-56 | |||||
F-57 |
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December 31, | ||||||||||
2005 | 2004 | |||||||||
(In thousands) | ||||||||||
ASSETS | ||||||||||
CURRENT ASSETS: | ||||||||||
Cash and cash equivalents | $ | 86,822 | $ | 85,339 | ||||||
Short-term investments | 66,778 | — | ||||||||
Accounts receivable, less allowance for doubtful accounts of $3,567 and $2,456 | 72,887 | 62,549 | ||||||||
Inventories | 12,849 | 7,658 | ||||||||
Other current assets | 4,280 | 4,175 | ||||||||
Total current assets | 243,616 | 159,721 | ||||||||
PROPERTY AND EQUIPMENT, net | 277,408 | 276,133 | ||||||||
LICENSES AND OTHER ASSETS: | ||||||||||
Licenses, net | 548,513 | 548,513 | ||||||||
Goodwill, net | 348,684 | 348,682 | ||||||||
Customer lists, net | 29,301 | 47,868 | ||||||||
Deferred debt issuance costs, net | 27,022 | 30,228 | ||||||||
Other assets, net | 6,138 | 6,305 | ||||||||
Total licenses and other assets | 959,658 | 981,596 | ||||||||
$ | 1,480,682 | $ | 1,417,450 | |||||||
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December 31, | ||||||||||
2005 | 2004 | |||||||||
(In thousands, except per | ||||||||||
share data) | ||||||||||
LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||||
CURRENT LIABILITIES: | ||||||||||
Accounts payable | $ | 53,492 | $ | 52,465 | ||||||
Current portion of long-term debt | — | 81 | ||||||||
Advance billings and customer deposits | 11,885 | 11,076 | ||||||||
Accrued interest | 39,336 | 41,112 | ||||||||
Other accrued expenses | 8,981 | 9,679 | ||||||||
Total current liabilities | 113,694 | 114,413 | ||||||||
LONG-TERM LIABILITIES | 1,847,994 | 1,733,079 | ||||||||
Total liabilities | 1,961,688 | 1,847,492 | ||||||||
COMMITMENTS AND CONTINGENCIES (Note 9) | ||||||||||
REDEEMABLE PREFERRED STOCK | 170,976 | 166,296 | ||||||||
SHAREHOLDERS’ DEFICIT: | ||||||||||
Class A common stock; $.01 par value; 200,000 shares authorized, 13,530 and 11,836 outstanding | 135 | 118 | ||||||||
Class B common stock; $.01 par value; 10,000 shares authorized, 427 and 540 outstanding | 4 | 5 | ||||||||
Additional paid-in capital | 212,420 | 193,347 | ||||||||
Accumulated deficit | (862,742 | ) | (791,446 | ) | ||||||
Unearned compensation | (1,799 | ) | (698 | ) | ||||||
Accumulated other comprehensive income | — | 2,336 | ||||||||
Total shareholders’ deficit | (651,982 | ) | (596,338 | ) | ||||||
$ | 1,480,682 | $ | 1,417,450 | |||||||
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For the Years Ended | ||||||||||||||
December 31, | ||||||||||||||
2005 | 2004 | 2003 | ||||||||||||
(In thousands, except per share data) | ||||||||||||||
REVENUE: | ||||||||||||||
Service | $ | 387,848 | $ | 377,219 | $ | 355,038 | ||||||||
Roaming | 122,774 | 105,504 | 131,896 | |||||||||||
Equipment | 34,313 | 22,094 | 20,455 | |||||||||||
Total revenue | 544,935 | 504,817 | 507,389 | |||||||||||
OPERATING EXPENSES: | ||||||||||||||
Network costs, excluding depreciation | 120,322 | 104,071 | 96,069 | |||||||||||
Cost of equipment sales | 58,266 | 40,372 | 37,636 | |||||||||||
Selling, general and administrative | 152,238 | 135,129 | 131,761 | |||||||||||
Stock based compensation — SG&A | 680 | 41 | — | |||||||||||
Depreciation and amortization | 100,463 | 76,355 | 76,429 | |||||||||||
Impairment of assets | 7,020 | 47,136 | 42,244 | |||||||||||
Total operating expenses | 438,989 | 403,104 | 384,139 | |||||||||||
OPERATING INCOME | 105,946 | 101,713 | 123,250 | |||||||||||
OTHER INCOME (EXPENSE): | ||||||||||||||
Interest expense | (171,831 | ) | (163,977 | ) | (136,262 | ) | ||||||||
Interest and dividend income | 2,221 | 1,727 | 916 | |||||||||||
Other | (876 | ) | (76 | ) | 891 | |||||||||
Other expense, net | (170,486 | ) | (162,326 | ) | (134,455 | ) | ||||||||
LOSS BEFORE INCOME TAX BENEFIT | (64,540 | ) | (60,613 | ) | (11,205 | ) | ||||||||
INCOME TAX BENEFIT | (418 | ) | (1,672 | ) | — | |||||||||
NET LOSS | (64,122 | ) | (58,941 | ) | (11,205 | ) | ||||||||
PREFERRED STOCK DIVIDEND | (7,174 | ) | (12,915 | ) | (38,877 | ) | ||||||||
LOSS APPLICABLE TO COMMON SHARES | $ | (71,296 | ) | $ | (71,856 | ) | $ | (50,082 | ) | |||||
BASIC AND DILUTED WEIGHTED AVERAGE SHARES USED TO COMPUTE LOSS PER SHARE: | 12,695 | 12,239 | 12,060 | |||||||||||
NET LOSS PER BASIC AND DILUTED SHARE | $ | (5.62 | ) | $ | (5.87 | ) | $ | (4.15 | ) | |||||
F-8
Table of Contents
Accumulated | ||||||||||||||||||||||||||||||||||||||||||
Class A | Class A | Class B | Class B | Other | ||||||||||||||||||||||||||||||||||||||
Common | Common | Common | Common | Additional | Comprehensive | Total | ||||||||||||||||||||||||||||||||||||
Stock | Stock | Stock | Stock | Paid-In | Accumulated | Unearned | Income | Shareholders’ | Comprehensive | |||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Deficit | Compensation | (Loss) | Deficit | Loss | |||||||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||||||||
BALANCE, December 31, 2002 | 11,229 | $ | 112 | 693 | $ | 7 | $ | 192,294 | $ | (669,508 | ) | $ | — | $ | (6,020 | ) | $ | (483,115 | ) | |||||||||||||||||||||||
Conversion of Class B common stock to Class A common stock | 141 | 1 | (141 | ) | (1 | ) | 0 | — | — | — | — | — | ||||||||||||||||||||||||||||||
Stock issued through employee stock purchase plan | 147 | 2 | — | — | 112 | — | — | — | 114 | — | ||||||||||||||||||||||||||||||||
Stock options exercised | 5 | 0 | — | — | 17 | — | — | — | 17 | — | ||||||||||||||||||||||||||||||||
COMPONENTS OF COMPREHENSIVE LOSS | ||||||||||||||||||||||||||||||||||||||||||
Net loss applicable to common shares | — | — | — | — | — | (50,082 | ) | — | — | (50,082 | ) | $ | (50,082 | ) | ||||||||||||||||||||||||||||
Current year effect of SFAS No. 133 | — | — | — | — | — | — | — | 6,236 | 6,236 | 6,236 | ||||||||||||||||||||||||||||||||
Total comprehensive loss | — | — | — | — | — | — | — | — | $ | (43,846 | ) | |||||||||||||||||||||||||||||||
BALANCE, December 31, 2003 | 11,522 | 115 | 552 | 6 | 192,423 | (719,590 | ) | — | 216 | (526,830 | ) | |||||||||||||||||||||||||||||||
Conversion of Class B common stock to Class A common stock | 12 | 1 | (12 | ) | (1 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Stock issued through employee stock purchase plan | 166 | 1 | — | — | 145 | — | — | — | 146 | — | ||||||||||||||||||||||||||||||||
Stock options exercised | 15 | 0 | — | — | 41 | — | — | — | 41 | — | ||||||||||||||||||||||||||||||||
Restricted Stock Issuances | 121 | 1 | — | — | 738 | — | (739 | ) | — | — | — | |||||||||||||||||||||||||||||||
Amortization of unearned compensation | — | — | — | — | — | — | 41 | — | 41 | — | ||||||||||||||||||||||||||||||||
COMPONENTS OF COMPREHENSIVE LOSS | ||||||||||||||||||||||||||||||||||||||||||
Net loss applicable to common shares | — | — | — | — | — | (71,856 | ) | — | — | (71,856 | ) | $ | (71,856 | ) | ||||||||||||||||||||||||||||
Current year effect of SFAS No. 133 | — | — | — | — | — | — | — | 2,120 | 2,120 | 2,120 | ||||||||||||||||||||||||||||||||
Total comprehensive loss | $ | (69,736 | ) | |||||||||||||||||||||||||||||||||||||||
BALANCE, December 31, 2004 | 11,836 | 118 | 540 | 5 | 193,347 | (791,446 | ) | (698 | ) | 2,336 | (596,338 | ) | ||||||||||||||||||||||||||||||
Stock issued through employee stock purchase plan | 71 | 1 | — | — | 378 | — | — | — | $ | 379 | — | |||||||||||||||||||||||||||||||
Stock options exercised | 169 | 2 | — | — | 1,189 | — | — | — | 1,191 | — | ||||||||||||||||||||||||||||||||
Class A common issued in exchange for senior exchangeable preferred stock | 1,153 | 12 | — | — | 13,423 | — | — | — | 13,435 | — | ||||||||||||||||||||||||||||||||
Conversion of Class B common stock to Class A common stock | 218 | 2 | (218 | ) | (2 | ) | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Conversion of Class T preferred Stock to Class A and Class B common stock | 43 | — | 105 | 1 | 2,476 | — | — | — | 2,477 | — | ||||||||||||||||||||||||||||||||
Restricted stock activity | 40 | — | — | — | 1,607 | — | (1,599 | ) | — | 8 | — | |||||||||||||||||||||||||||||||
Amortization of unearned compensation | — | — | — | — | — | — | 498 | — | 498 | — | ||||||||||||||||||||||||||||||||
COMPONENTS OF COMPREHENSIVE LOSS | ||||||||||||||||||||||||||||||||||||||||||
Net loss applicable to common shares | — | — | — | — | — | (71,296 | ) | — | — | (71,296 | ) | $ | (71,296 | ) | ||||||||||||||||||||||||||||
Current year effect of derivative financial instruments | — | — | — | — | — | — | — | (2,336 | ) | (2,336 | ) | (2,336 | ) | |||||||||||||||||||||||||||||
Total comprehensive loss | $ | (73,632 | ) | |||||||||||||||||||||||||||||||||||||||
BALANCE, December 31, 2005 | 13,530 | $ | 135 | 427 | $ | 4 | $ | 212,420 | $ | (862,742 | ) | $ | (1,799 | ) | $ | — | $ | (651,982 | ) | |||||||||||||||||||||||
F-9
Table of Contents
Years Ended December 31, | ||||||||||||||||
2005 | 2004 | 2003 | ||||||||||||||
(In thousands) | ||||||||||||||||
OPERATING ACTIVITIES: | ||||||||||||||||
Net loss | $ | (64,122 | ) | $ | (58,941 | ) | $ | (11,205 | ) | |||||||
Adjustments to reconcile to net cash provided by operating activities: | ||||||||||||||||
Depreciation and customer list amortization | 100,463 | 76,355 | 76,429 | |||||||||||||
Loss on write-off of debt and preferred stock issuance costs | 1,533 | 12,605 | 6,134 | |||||||||||||
Mark-to-market adjustments — financial instruments | 339 | 4,339 | (2,225 | ) | ||||||||||||
Gain on repurchase and exchange of senior exchangeable preferred stock | (5,722 | ) | (22,573 | ) | — | |||||||||||
Non — cash senior and junior exchangeable preferred stock dividends | 3,797 | 28,626 | 13,074 | |||||||||||||
Impairment of assets | 7,020 | 47,136 | 42,244 | |||||||||||||
Stock based compensation | 680 | 41 | — | |||||||||||||
Deferred income taxes | (418 | ) | (1,672 | ) | — | |||||||||||
Other | 6,825 | 7,693 | 4,013 | |||||||||||||
Change in other operating elements: | ||||||||||||||||
Accounts receivable | (14,262 | ) | (1,821 | ) | (14,286 | ) | ||||||||||
Inventories | (5,191 | ) | 547 | (1,581 | ) | |||||||||||
Other current assets | (105 | ) | 89 | (1,076 | ) | |||||||||||
Accounts payable | 6,757 | 6,153 | 4,678 | |||||||||||||
Advance billings and customer deposits | 809 | 482 | 146 | |||||||||||||
Accrued senior and junior exchangeable preferred stock dividends | 33,211 | 26,747 | 14,899 | |||||||||||||
Accrued interest | 2,021 | 6,598 | 12,188 | |||||||||||||
Other accrued expenses | (698 | ) | (2,127 | ) | 1,089 | |||||||||||
Net cash provided by operating activities | 72,937 | 130,277 | 144,521 | |||||||||||||
INVESTING ACTIVITIES: | ||||||||||||||||
Purchases of property and equipment | (94,951 | ) | (94,417 | ) | (53,704 | ) | ||||||||||
Purchases of short-term investments | (66,778 | ) | — | — | ||||||||||||
Purchases of wireless properties | — | (725 | ) | (7,200 | ) | |||||||||||
Net proceeds from property exchange | — | 13,567 | — | |||||||||||||
Proceeds from sale of property and equipment | 247 | 92 | 624 | |||||||||||||
Other | (103 | ) | 24 | (174 | ) | |||||||||||
Net cash used in investing activities | (161,585 | ) | (81,459 | ) | (60,454 | ) | ||||||||||
FINANCING ACTIVITIES: | ||||||||||||||||
Proceeds from issuance of common stock related to employee stock purchase plan and stock options | 1,570 | 188 | 131 | |||||||||||||
Proceeds from issuance of long-term debt under the credit facility | 58,000 | — | 120,000 | |||||||||||||
Repayments of long-term debt under the credit facility | — | (525,724 | ) | (394,628 | ) | |||||||||||
Proceeds from issuance of senior subordinated floating rate notes | 172,816 | — | — | |||||||||||||
Proceeds from issuance of 97/8% senior notes | — | — | 325,000 | |||||||||||||
Proceeds from issuance of 81/4% senior secured notes | — | 350,000 | — | |||||||||||||
Proceeds from issuance of senior secured floating rate notes | — | 160,000 | — | |||||||||||||
Redemption of 95/8% senior subordinated notes | (125,000 | ) | — | |||||||||||||
Repurchases of senior exchangeable preferred stock | (13,355 | ) | (68,351 | ) | — | |||||||||||
Payments to settle interest rate swaps | — | (7,645 | ) | — | ||||||||||||
Payments of debt issuance costs | (3,798 | ) | (14,293 | ) | (13,374 | ) | ||||||||||
Repayment of swaption | — | — | (34,184 | ) | ||||||||||||
Proceeds from unwinding hedge agreements | — | — | 2,632 | |||||||||||||
Other | (102 | ) | (201 | ) | (885 | ) | ||||||||||
Net cash provided by (used in) financing activities | 90,131 | (106,026 | ) | 4,692 | ||||||||||||
NET (DECREASE) INCREASE IN CASH | 1,483 | (57,208 | ) | 88,759 | ||||||||||||
CASH AND CASH EQUIVALENTS, at beginning of year | 85,339 | 142,547 | 53,788 | |||||||||||||
CASH AND CASH EQUIVALENTS, at end of year | $ | 86,822 | $ | 85,339 | $ | 142,547 | ||||||||||
F-10
Table of Contents
1. | Organization and Nature of Business: |
2. | Summary of Significant Accounting Policies: |
Principles of Consolidation |
Revenue Recognition — Service |
F-11
Table of Contents
Revenue Recognition — Roaming Revenue and Incollect Cost |
Revenue Recognition — Equipment |
Allowance for Doubtful Accounts |
Cash Equivalents |
Short-term Investments |
Inventories |
Property and Equipment |
F-12
Table of Contents
2005 | 2004 | Useful Lives | ||||||||||
Land | $ | 7,214 | $ | 7,200 | N/A | |||||||
Building and towers | 101,110 | 98,367 | 15-39 Years | |||||||||
Equipment(1) | 443,406 | 350,385 | 2-7 Years | |||||||||
Phone service equipment | 1,217 | 2,938 | 19 Months | |||||||||
Furniture and fixtures(2) | 28,928 | 29,759 | 3-7 Years | |||||||||
Assets under construction | 15,449 | 37,232 | N/A | |||||||||
597,324 | 525,881 | |||||||||||
Less — accumulated depreciation | (319,916 | ) | (249,748 | ) | ||||||||
Property and equipment — net | $ | 277,408 | $ | 276,133 | ||||||||
(1) | Includes the cost of cell site radio equipment, switch equipment, billing hardware and related software. |
(2) | Includes the cost of furniture, in-house computer hardware/ software, and phone system equipment. |
Licenses and Other Intangible Assets |
F-13
Table of Contents
Year Ended December 31, 2005 | |||||||||||||||||||||
As of | As of | ||||||||||||||||||||
December 31, | Impairment | Amortization | December 31, | ||||||||||||||||||
2004 | Acquisition | of Assets | Expense | 2005 | |||||||||||||||||
(In thousands) | |||||||||||||||||||||
Licenses, net | $ | 548,513 | $ | — | $ | — | $ | — | $ | 548,513 | |||||||||||
Goodwill, net | 348,682 | 2 | — | — | 348,684 | ||||||||||||||||
Customer lists | — | ||||||||||||||||||||
Gross Valuation | 144,415 | — | — | — | 144,415 | ||||||||||||||||
Accumulated amortization | (96,547 | ) | — | — | (18,567 | ) | (115,114 | ) | |||||||||||||
47,868 | — | — | — | 29,301 | |||||||||||||||||
Total | $ | 945,063 | $ | 2 | $ | — | $ | (18,567 | ) | $ | 926,498 | ||||||||||
Year Ended December 31, 2004 | |||||||||||||||||||||
As of | As of | ||||||||||||||||||||
December 31, | Impairment | Amortization | December 31, | ||||||||||||||||||
2003 | Acquisition | of Assets | Expense | 2004 | |||||||||||||||||
(In thousands) | |||||||||||||||||||||
Licenses, net | $ | 563,283 | $ | 16,582 | $ | (31,352 | ) | $ | — | $ | 548,513 | ||||||||||
Goodwill, net | 360,796 | 3,670 | (15,784 | ) | — | 348,682 | |||||||||||||||
Customer lists | — | ||||||||||||||||||||
Gross Valuation | 142,616 | 1,799 | — | — | 144,415 | ||||||||||||||||
Accumulated amortization | (78,041 | ) | — | — | (18,506 | ) | (96,547 | ) | |||||||||||||
64,575 | 1,799 | — | (18,506 | ) | 47,868 | ||||||||||||||||
Total | $ | 988,654 | $ | 22,051 | $ | (47,136 | ) | $ | (18,506 | ) | $ | 945,063 | |||||||||
F-14
Table of Contents
Deferred Debt Issuance Costs |
As of December 31, | ||||||||
2005 | 2004 | |||||||
(In thousands) | ||||||||
Gross valuation | $ | 39,005 | $ | 40,331 | ||||
Accumulated amortization | (11,983 | ) | (10,103 | ) | ||||
$ | 27,022 | $ | 30,228 | |||||
F-15
Table of Contents
Other Assets |
As of December 31, | ||||||||
2005 | 2004 | |||||||
(In thousands) | ||||||||
Gross valuation | $ | 8,561 | $ | 8,375 | ||||
Accumulated Amortization | (2,423 | ) | (2,070 | ) | ||||
$ | 6,138 | $ | 6,305 | |||||
Income Taxes |
Net Loss Per Common Share |
Comprehensive Loss |
F-16
Table of Contents
Business and Credit Concentrations |
Impairment of Long-lived Assets |
Derivative Financial Instruments |
Use of Estimates |
F-17
Table of Contents
Recently Issued Accounting Pronouncements |
Accounting for Share-Based Compensation |
3. | Stock Compensation Plans: |
Nonemployee | Stock | Employee Stock | |||||||||||
Directors Plan | Compensation Plan | Purchase Plan(1) | |||||||||||
Available for issuance at December 31, 2004 | 174,250 | 61,844 | 262,312 | ||||||||||
Options granted | (36,750 | ) | (20,000 | ) | (88,116 | ) | |||||||
Restricted stock awarded | — | (47,500 | ) | — | |||||||||
Options cancelled | 26,250 | 47,315 | — | ||||||||||
Available for issuance at December 31, 2005 | 163,750 | 41,659 | 174,196 | ||||||||||
(1) | Employee Stock Purchase Plan options granted of 88,116 shares reflect contributions made in 2005 with corresponding shares being awarded in January 2006. |
F-18
Table of Contents
2005 | 2004 | ||||||||
Shares | Shares | ||||||||
Restricted Stock Awards, beginning of year | 118,667 | — | |||||||
Issued | 47,500 | 120,667 | |||||||
Released to employee | (676 | ) | — | ||||||
Cancelled | (5,324 | ) | (2,000 | ) | |||||
Restricted Stock Awards, outstanding, end of year | 160,167 | 118,667 | |||||||
F-19
Table of Contents
2005 | 2004 | 2003 | |||||||||||||||||||||||
Weighted | Weighted | Weighted | |||||||||||||||||||||||
Average | Average | Average | |||||||||||||||||||||||
Shares | Exercise Price | Shares | Exercise Price | Shares | Exercise Price | ||||||||||||||||||||
Outstanding, beginning of period | 2,044,037 | $ | 14.61 | 2,084,770 | $ | 14.64 | 1,908,084 | $ | 17.40 | ||||||||||||||||
Granted | 56,750 | $ | 6.30 | 31,500 | $ | 7.62 | 369,500 | 1.23 | |||||||||||||||||
Exercised | (169,517 | ) | $ | 7.02 | (14,760 | ) | $ | 2.80 | (5,120 | ) | 3.37 | ||||||||||||||
Cancelled | (68,241 | ) | $ | 13.30 | (57,473 | ) | $ | 15.17 | (187,694 | ) | 16.72 | ||||||||||||||
Outstanding, end of period | 1,863,029 | $ | 15.09 | 2,044,037 | $ | 14.61 | 2,084,770 | $ | 14.64 | ||||||||||||||||
Exercisable, end of period | 1,409,119 | $ | 17.91 | 1,392,617 | $ | 17.46 | 1,143,970 | $ | 18.92 | ||||||||||||||||
Weighted average fair value of options granted | $ | 5.18 | $ | 5.82 | $ | 1.09 | |||||||||||||||||||
Weighted Average | ||||||||||||||||||||
Number | Remaining | Weighted Average | Number | Weighted Average | ||||||||||||||||
Exercise Price Range | Outstanding | Contractual Life | Exercise Price | Exercisable | Exercise Price | |||||||||||||||
$00.00 — $ 9.99 | 957,515 | 5 | $ | 4.00 | 567,825 | $ | 4.85 | |||||||||||||
$10.00 — $19.99 | 382,325 | 3 | $ | 13.40 | 382,325 | $ | 13.40 | |||||||||||||
$20.00 — $29.99 | 274,100 | 5 | $ | 27.12 | 216,460 | $ | 27.18 | |||||||||||||
$30.00 — $39.99 | 153,939 | 4 | $ | 35.00 | 147,359 | $ | 34.88 | |||||||||||||
$40.00 — $49.99 | 14,500 | 4 | $ | 43.25 | 14,500 | $ | 43.25 | |||||||||||||
$50.00 — $59.99 | 8,500 | 4 | $ | 56.59 | 8,500 | $ | 56.59 | |||||||||||||
$60.00 — $69.99 | 36,750 | 0 | $ | 68.25 | 36,750 | $ | 68.25 | |||||||||||||
$70.00 — $79.25 | 35,400 | 4 | $ | 76.91 | 35,400 | $ | 76.91 | |||||||||||||
$00.00 — $79.25 | 1,863,029 | 5 | $ | 15.09 | 1,409,119 | $ | 17.91 |
F-20
Table of Contents
Years Ended December 31, | |||||||||||||
2005 | 2004 | 2003 | |||||||||||
(In thousands, except for per share | |||||||||||||
data) | |||||||||||||
Net loss applicable to common shares: | |||||||||||||
As reported | $ | (71,296 | ) | $ | (71,856 | ) | $ | (50,082 | ) | ||||
Fair value compensation expense | (2,921 | ) | (2,909 | ) | (4,304 | ) | |||||||
Pro forma | $ | (74,217 | ) | $ | (74,765 | ) | $ | (54,386 | ) | ||||
Net loss per basic and diluted share: | |||||||||||||
As reported | $ | (5.62 | ) | $ | (5.87 | ) | $ | (4.15 | ) | ||||
Fair value compensation expense | (0.23 | ) | (0.24 | ) | (0.36 | ) | |||||||
Pro forma | $ | (5.85 | ) | $ | (6.11 | ) | $ | (4.51 | ) | ||||
F-21
Table of Contents
4. | Long-term Liabilities: |
December 31, | December 31, | ||||||||
2005 | 2004 | ||||||||
Line of Credit | $ | 58,000 | $ | — | |||||
Senior subordinated floating rate notes(1) | 175,000 | — | |||||||
81/4% senior secured notes | 350,000 | 350,000 | |||||||
Senior secured floating rate notes | 160,000 | 160,000 | |||||||
97/8% senior notes | 325,000 | 325,000 | |||||||
93/4% senior subordinated notes | 300,000 | 300,000 | |||||||
95/8% senior subordinated notes(1) | — | 125,000 | |||||||
113/8% senior exchangeable preferred stock | 148,708 | 174,176 | |||||||
Accrued dividends on 113/8% senior exchangeable preferred stock | 32,520 | 34,844 | |||||||
121/4% junior exchangeable preferred stock | 255,558 | 247,984 | |||||||
Accrued dividends on 121/4% junior exchangeable preferred stock | 28,490 | — | |||||||
Deferred tax liability | 13,561 | 13,979 | |||||||
Discount on senior subordinated floating rate notes | (2,132 | ) | — | ||||||
Other | 3,289 | 2,096 | |||||||
Long-term liabilities | $ | 1,847,994 | $ | 1,733,079 | |||||
(1) | Net proceeds from the Senior Subordinated Floating Rate Notes offering of $172.8 million were used to redeem the 95/8% Senior Subordinated Notes due 2008, to pay fees and expenses associated with the offering and repayment, and for general corporate purposes. |
• | to exclude those dividends from the calculation of cash interest expense, which is used in various financial ratio tests in its revolving credit facility and | |
• | to permit the incurrence of up to $50.0 million of senior indebtedness that matures on the same date as our senior notes (out of a total of $200.0 million of additional senior indebtedness that is permitted). |
F-22
Table of Contents
F-23
Table of Contents
F-24
Table of Contents
5. | Financial Instruments: |
F-25
Table of Contents
F-26
Table of Contents
Carrying Value | Estimated Fair Market Value | ||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | ||||||||||||||||
2005 | 2004 | 2005 | 2004 | ||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||
Financial liabilities | |||||||||||||||||||
Credit facility | $ | 58,000 | $ | — | $ | 57,130 | $ | — | |||||||||||
81/4% senior secured notes | 350,000 | 350,000 | 370,125 | 370,125 | |||||||||||||||
Senior secured floating rate notes | 160,000 | 160,000 | 164,400 | 165,600 | |||||||||||||||
97/8% senior notes | 325,000 | 325,000 | 342,875 | 330,688 | |||||||||||||||
95/8% senior subordinated notes | — | 125,000 | — | 118,750 | |||||||||||||||
93/4% senior subordinated notes | 300,000 | 300,000 | 303,000 | 271,500 | |||||||||||||||
Senior subordinated floating rate notes | 172,868 | — | 176,313 | — | |||||||||||||||
113/8% senior exchangeable preferred stock | 148,708 | 174,176 | 138,495 | 140,212 | |||||||||||||||
121/4% junior exchangeable preferred stock | 255,558 | 247,984 | 223,235 | 131,432 | |||||||||||||||
Class M convertible preferred stock(1) | 173,403 | 160,198 | 173,403 | 160,198 | |||||||||||||||
Class T convertible preferred stock(1) | — | 8,973 | — | 8,973 | |||||||||||||||
1,943,537 | 1,851,331 | 1,948,976 | 1,697,478 | ||||||||||||||||
Derivative financial instrument | |||||||||||||||||||
Interest rate collar agreement | 339 | — | 339 | — | |||||||||||||||
Morgan Stanley (terminates November 1, 2008) | |||||||||||||||||||
Other | |||||||||||||||||||
Accrued 113/8% senior exchangeable preferred stock dividends | 32,520 | 34,844 | 32,520 | 34,844 | |||||||||||||||
Accrued 121/4% junior exchangeable preferred stock dividends | 28,490 | — | 28,490 | — | |||||||||||||||
Other long-term liabilities | 2,950 | 2,096 | 2,950 | 2,096 | |||||||||||||||
Total financial liabilities | $ | 2,007,836 | $ | 1,888,271 | $ | 2,013,275 | $ | 1,734,418 | |||||||||||
(1) | These financial instruments are not actively traded and, therefore, the estimated fair market value is stated at the carrying value. |
6. | Redeemable Convertible Preferred Stock: |
As of | ||||
December 31, 2005 | ||||
Preferred securities originally issued | $ | 110,000 | ||
Accrued dividends | 63,403 | |||
Unamortized issuance costs | (2,427 | ) | ||
$ | 170,976 | |||
F-27
Table of Contents
7. | Shareholders’ Deficit: |
Authorized Shares |
Common Stock Rights |
F-28
Table of Contents
8. | Income Taxes: |
Years Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Tax at statutory rate | (35.0 | )% | (35.0 | )% | (35.0 | )% | ||||||
State taxes | (3.0 | ) | (3.0 | ) | (3.0 | ) | ||||||
Nondeductible item — amortization | (0.6 | ) | (2.8 | ) | 2.0 | |||||||
Adjustment for valuation allowance | 38.0 | 38.0 | 36.0 | |||||||||
(0.6 | )% | (2.8 | )% | 0.0 | % | |||||||
Years Ended December 31, | |||||||||||||
2005 | 2004 | 2003 | |||||||||||
Current | |||||||||||||
Federal | $ | — | $ | — | $ | — | |||||||
State | — | — | — | ||||||||||
— | — | — | |||||||||||
Deferred | |||||||||||||
Federal | (385 | ) | (1,540 | ) | — | ||||||||
State | (33 | ) | (132 | ) | — | ||||||||
(418 | ) | (1,672 | ) | — | |||||||||
Total | $ | (418 | ) | $ | (1,672 | ) | $ | 0 | |||||
F-29
Table of Contents
December 31, | ||||||||||
2005 | 2004 | |||||||||
Deferred income tax assets: | ||||||||||
Operating loss carryforwards | $ | 167,191 | $ | 159,954 | ||||||
Temporary differences: | ||||||||||
Allowance for doubtful accounts | 1,358 | 925 | ||||||||
Intangible assets | — | 27,654 | ||||||||
Other | 2,885 | 2,440 | ||||||||
Valuation allowance | (160,513 | ) | (178,819 | ) | ||||||
Total deferred income tax assets | 10,921 | 12,154 | ||||||||
Deferred income tax liabilities: | ||||||||||
Depreciation | (21,111 | ) | (24,950 | ) | ||||||
Intangible assets | (2,158 | ) | — | |||||||
Other | (1,213 | ) | (1,183 | ) | ||||||
Net deferred income tax liability | $ | (13,561 | ) | $ | (13,979 | ) | ||||
9. | Commitments and Contingencies: |
Employment Agreements |
Related Party Transactions |
F-30
Table of Contents
Legal and Regulatory Matters |
Leases |
Year | Amount | |||
2006 | $ | 17,140 | ||
2007 | 15,065 | |||
2008 | 12,746 | |||
2009 | 10,242 | |||
2010 | 5,172 | |||
Thereafter | 4,551 | |||
Total | $ | 64,916 | ||
F-31
Table of Contents
Purchase Commitments |
Off-Balance Sheet Financings and Liabilities |
10. | Defined Contribution Plan: |
F-32
Table of Contents
11. | Supplemental Cash Flow Information (in thousands): |
Years Ended December 31, | |||||||||||||
2005 | 2004 | 2003 | |||||||||||
Cash paid for: | |||||||||||||
Interest, net of amounts capitalized(1) | $ | 132,966 | $ | 101,405 | $ | 86,801 | |||||||
Noncash financing transactions: | |||||||||||||
Class M and T preferred stock dividends | $ | 13,865 | $ | 12,915 | $ | 38,877 | |||||||
Conversion of Class T preferred stock into common stock | $ | 7,540 | — | — | |||||||||
Reversal of Class T preferred stock accrued dividends | $ | 1,681 | — | — | |||||||||
Exchange of Senior Exchangeable Preferred Stock for Class A Common Stock | $ | 13,435 | — | — |
(1) | Includes four Senior Exchangeable Preferred Stock quarterly dividends totaling approximately $17.8 million paid in cash. |
12. | Quarterly Results of Operations (Unaudited): |
2005 Quarter Ended | 2004 Quarter Ended | |||||||||||||||||||||||||||||||||
Mar | Jun | Sep | Dec | Mar | Jun | Sep | Dec | |||||||||||||||||||||||||||
Revenue: | ||||||||||||||||||||||||||||||||||
Service | $ | 94,695 | $ | 98,865 | $ | 98,287 | $ | 96,001 | $ | 88,585 | $ | 94,979 | $ | 97,093 | $ | 96,562 | ||||||||||||||||||
Roaming | 19,622 | 25,112 | 41,785 | 36,255 | 25,740 | 26,266 | 29,739 | 23,759 | ||||||||||||||||||||||||||
Equipment | 9,054 | 9,420 | 8,220 | 7,619 | 5,523 | 5,338 | 5,589 | 5,644 | ||||||||||||||||||||||||||
Total Revenue | 123,371 | 133,397 | 148,292 | 139,875 | $ | 119,848 | $ | 126,583 | $ | 132,421 | $ | 125,965 | ||||||||||||||||||||||
Operating income (loss) | 23,814 | 21,033 | 35,931 | 25,168 | $ | 38,831 | $ | 38,291 | $ | 40,156 | $ | (15,565 | ) | |||||||||||||||||||||
Income (loss) before income tax benefit | (18,574 | ) | (16,269 | ) | (7,721 | ) | (21,976 | ) | $ | (15,348 | ) | $ | 6,597 | $ | 5,437 | $ | (57,299 | ) | ||||||||||||||||
Net income (loss) applicable to common shares | $ | (21,804 | ) | $ | (19,597 | ) | $ | (11,151 | ) | $ | (18,744 | ) | $ | (18,482 | ) | $ | 3,403 | $ | 2,184 | $ | (58,961 | ) | ||||||||||||
Net income (loss) per basic share | $ | (1.77 | ) | $ | (1.59 | ) | $ | (0.89 | ) | $ | (1.38 | ) | $ | (1.51 | ) | $ | 0.28 | $ | 0.18 | $ | (4.81 | ) | ||||||||||||
Net income (loss) per diluted share | $ | (1.77 | ) | $ | (1.59 | ) | $ | (0.89 | ) | $ | (1.38 | ) | $ | (1.51 | ) | $ | 0.27 | $ | 0.17 | $ | (4.81 | ) |
F-33
Table of Contents
13. | Guarantor/ Non-Guarantor Condensed Consolidating Financial Information |
F-34
Table of Contents
Guarantor | Non-Guarantor | ||||||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
CURRENT ASSETS: | |||||||||||||||||||||||
Cash and cash equivalents | $ | 84,136 | $ | 2,639 | $ | 47 | $ | — | $ | 86,822 | |||||||||||||
Short-term investments | 66,778 | — | — | — | 66,778 | ||||||||||||||||||
Accounts receivable, less allowance for doubtful accounts | 25,166 | 45,486 | 2,235 | — | 72,887 | ||||||||||||||||||
Inventories | 3,721 | 8,945 | 183 | — | 12,849 | ||||||||||||||||||
Other current assets | 1,590 | 2,606 | 84 | — | 4,280 | ||||||||||||||||||
Current intercompany receivable | 40,778 | 11,460 | — | (52,238 | ) | — | |||||||||||||||||
Total current assets | 222,169 | 71,136 | 2,549 | (52,238 | ) | 243,616 | |||||||||||||||||
PROPERTY AND EQUIPMENT, net | 53,423 | 214,960 | 9,025 | — | 277,408 | ||||||||||||||||||
LICENSES AND OTHER ASSETS: | |||||||||||||||||||||||
Licenses, net | — | 539,834 | 8,679 | — | 548,513 | ||||||||||||||||||
Goodwill, net | 3,151 | 345,533 | — | — | 348,684 | ||||||||||||||||||
Customer lists, net | 956 | 28,345 | — | — | 29,301 | ||||||||||||||||||
Deferred debt issuance costs, net | 27,022 | — | — | — | 27,022 | ||||||||||||||||||
Investment in consolidated | |||||||||||||||||||||||
subsidiaries | 1,145,748 | — | — | (1,145,748 | ) | — | |||||||||||||||||
Other assets, net | 3,569 | 5,624 | 2,218 | (5,273 | ) | 6,138 | |||||||||||||||||
Total licenses and other assets | 1,180,446 | 919,336 | 10,897 | (1,151,021 | ) | 959,658 | |||||||||||||||||
$ | 1,456,038 | $ | 1,205,432 | $ | 22,471 | $ | (1,203,259 | ) | $ | 1,480,682 | |||||||||||||
CURRENT LIABILITIES: | |||||||||||||||||||||||
Accounts payable | $ | 26,894 | $ | 25,989 | $ | 609 | $ | — | $ | 53,492 | |||||||||||||
Advance billings and customer deposits | 2,395 | 9,239 | 251 | — | 11,885 | ||||||||||||||||||
Accrued interest | 39,336 | — | — | — | 39,336 | ||||||||||||||||||
Other accrued expenses | 34,936 | 49,676 | 39 | (75,670 | ) | 8,981 | |||||||||||||||||
Current intercompany payable | — | 105,672 | (4,435 | ) | (101,237 | ) | — | ||||||||||||||||
Total current liabilities | 103,561 | 190,576 | (3,536 | ) | (176,907 | ) | 113,694 | ||||||||||||||||
LONG-TERM LIABILITIES | 1,833,483 | 1,037,347 | 41,027 | (1,063,863 | ) | 1,847,994 | |||||||||||||||||
Total liabilities | 1,937,044 | 1,227,923 | 37,491 | (1,240,770 | ) | 1,961,688 | |||||||||||||||||
REDEEMABLE PREFERRED STOCK | 170,976 | — | — | — | 170,976 | ||||||||||||||||||
SHAREHOLDERS’ EQUITY (DEFICIT): | |||||||||||||||||||||||
Class A common stock; $.01 par value; 200,000 shares authorized, 13,530 outstanding | 135 | 918 | — | (918 | ) | 135 | |||||||||||||||||
Class B common stock; $.01 par value; 10,000 shares authorized, 427 outstanding | 4 | — | — | — | 4 | ||||||||||||||||||
Additional paid-in capital | 212,420 | 760,152 | 31,679 | (791,831 | ) | 212,420 | |||||||||||||||||
Accumulated earnings (deficit) | (862,742 | ) | (783,561 | ) | (46,699 | ) | 830,260 | (862,742 | ) | ||||||||||||||
Unearned compensation | (1,799 | ) | — | — | — | (1,799 | ) | ||||||||||||||||
Total shareholders’ equity (deficit) | (651,982 | ) | (22,491 | ) | (15,020 | ) | 37,511 | (651,982 | ) | ||||||||||||||
$ | 1,456,038 | $ | 1,205,432 | $ | 22,471 | $ | (1,203,259 | ) | $ | 1,480,682 | |||||||||||||
F-35
Table of Contents
Guarantor | Non-Guarantor | |||||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
REVENUE: | ||||||||||||||||||||||
Service | $ | 95,620 | $ | 285,681 | $ | 7,555 | $ | (1,008 | ) | $ | 387,848 | |||||||||||
Roaming | 25,061 | 88,877 | 8,839 | (3 | ) | 122,774 | ||||||||||||||||
Equipment | 6,733 | 26,914 | 666 | — | 34,313 | |||||||||||||||||
Total revenue | 127,414 | 401,472 | 17,060 | (1,011 | ) | 544,935 | ||||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||||
Network costs, excluding depreciation | 23,270 | 94,688 | 3,117 | (753 | ) | 120,322 | ||||||||||||||||
Cost of equipment sales | 11,744 | 45,472 | 1,050 | — | 58,266 | |||||||||||||||||
Selling, general and administrative | 39,021 | 108,517 | 4,958 | (258 | ) | 152,238 | ||||||||||||||||
Stock based compensation — SG&A | 680 | — | — | — | 680 | |||||||||||||||||
Depreciation and amortization | 18,128 | 78,779 | 3,556 | — | 100,463 | |||||||||||||||||
Impairment of assets | 7,020 | — | — | — | 7,020 | |||||||||||||||||
Total operating expenses | 99,863 | 327,456 | 12,681 | (1,011 | ) | 438,989 | ||||||||||||||||
OPERATING INCOME | 27,551 | 74,016 | 4,379 | — | 105,946 | |||||||||||||||||
OTHER INCOME (EXPENSE): | ||||||||||||||||||||||
Interest expense | (171,745 | ) | (105,133 | ) | (2,990 | ) | 108,037 | (171,831 | ) | |||||||||||||
Interest and dividend income | 110,222 | 34 | 2 | (108,037 | ) | 2,221 | ||||||||||||||||
Inter-company charges | 10,140 | (10,140 | ) | — | — | — | ||||||||||||||||
Equity in subsidiaries | (39,134 | ) | — | — | 39,126 | (8 | ) | |||||||||||||||
Other | 18 | (884 | ) | (2 | ) | — | (868 | ) | ||||||||||||||
Other expense, net | (90,499 | ) | (116,123 | ) | (2,990 | ) | 39,126 | (170,486 | ) | |||||||||||||
INCOME (LOSS) BEFORE INCOME TAXES | (62,948 | ) | (42,107 | ) | 1,389 | 39,126 | (64,540 | ) | ||||||||||||||
INCOME TAX PROVISION (BENEFIT) | 1,174 | (1,649 | ) | — | 57 | (418 | ) | |||||||||||||||
NET INCOME (LOSS) | (64,122 | ) | (40,458 | ) | 1,389 | 39,069 | (64,122 | ) | ||||||||||||||
PREFERRED STOCK DIVIDEND | (7,174 | ) | — | — | — | (7,174 | ) | |||||||||||||||
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES | $ | (71,296 | ) | $ | (40,458 | ) | $ | 1,389 | $ | 39,069 | $ | (71,296 | ) | |||||||||
F-36
Table of Contents
Guarantor | Non-Guarantor | |||||||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||||
OPERATING ACTIVITIES: | ||||||||||||||||||||||||
Net income (loss) | $ | (64,122 | ) | $ | (40,458 | ) | $ | 1,389 | $ | 39,069 | $ | (64,122 | ) | |||||||||||
Adjustments to reconcile to net cash provided by operating activities: | ||||||||||||||||||||||||
Depreciation and customer list amortization | 18,128 | 78,779 | 3,556 | — | 100,463 | |||||||||||||||||||
Loss on write-off of debt and preferred stock issuance costs | 1,533 | — | — | — | 1,533 | |||||||||||||||||||
Mark-to-market adjustments — financial instruments | 339 | — | — | — | 339 | |||||||||||||||||||
Gain on repurchase of preferred stock | (5,722 | ) | — | — | — | (5,722 | ) | |||||||||||||||||
Non-cash preferred stock dividends | 3,797 | — | — | — | 3,797 | |||||||||||||||||||
Impairment of assets | 7,020 | — | — | — | 7,020 | |||||||||||||||||||
Stock-based compensation | 680 | — | — | — | 680 | |||||||||||||||||||
Deferred income taxes | 1,174 | (1,649 | ) | — | 57 | (418 | ) | |||||||||||||||||
Other | 5,627 | 1,196 | 2 | — | 6,825 | |||||||||||||||||||
Change in other operating elements: | ||||||||||||||||||||||||
Accounts receivable | (9,175 | ) | (5,241 | ) | 154 | — | (14,262 | ) | ||||||||||||||||
Inventories | (1,817 | ) | (3,510 | ) | 136 | — | (5,191 | ) | ||||||||||||||||
Other current assets | 78 | (180 | ) | (3 | ) | — | (105 | ) | ||||||||||||||||
Accounts payable | 5,086 | 1,952 | (281 | ) | — | 6,757 | ||||||||||||||||||
Advance billings and customer deposits | 248 | 620 | (59 | ) | — | 809 | ||||||||||||||||||
Accrued preferred stock dividends | 33,211 | — | — | — | 33,211 | |||||||||||||||||||
Accrued interest | 2,021 | — | — | — | 2,021 | |||||||||||||||||||
Other accrued expenses | (681 | ) | (14 | ) | (3 | ) | — | (698 | ) | |||||||||||||||
Net cash provided by (used in) operating activities | (2,575 | ) | 31,495 | 4,891 | 39,126 | 72,937 | ||||||||||||||||||
INVESTING ACTIVITIES: | ||||||||||||||||||||||||
Purchases of property and equipment | (18,920 | ) | (75,604 | ) | (427 | ) | — | (94,951 | ) | |||||||||||||||
Purchases of short-term investments | (66,778 | ) | — | — | — | (66,778 | ) | |||||||||||||||||
Proceeds from sale of property and equipment | 34 | 213 | — | — | 247 | |||||||||||||||||||
Other | (103 | ) | — | — | — | (103 | ) | |||||||||||||||||
Net cash used in investing activities | (85,767 | ) | (75,391 | ) | (427 | ) | — | (161,585 | ) | |||||||||||||||
FINANCING ACTIVITIES: | ||||||||||||||||||||||||
Change in parent company receivable and payable | (1,721 | ) | 45,282 | (4,435 | ) | (39,126 | ) | — | ||||||||||||||||
Proceeds from issuance of common stock related to employee stock purchase plan and stock options | 1,570 | — | — | — | 1,570 | |||||||||||||||||||
Proceeds from issuance of long-term debt under the credit facility | 58,000 | — | — | — | 58,000 | |||||||||||||||||||
Proceeds from issuance of senior subordinated floating rate notes | 172,816 | — | — | — | 172,816 | |||||||||||||||||||
Redemption of 95/8% senior subordinated notes | (125,000 | ) | — | — | — | (125,000 | ) | |||||||||||||||||
Repurchases of preferred stock | (13,355 | ) | — | — | — | (13,355 | ) | |||||||||||||||||
Payments of debt issuance costs | (3,798 | ) | — | — | — | (3,798 | ) | |||||||||||||||||
Other | (102 | ) | — | — | — | (102 | ) | |||||||||||||||||
Net cash (used in) provided by financing activities | 88,410 | 45,282 | (4,435 | ) | (39,126 | ) | 90,131 | |||||||||||||||||
NET INCREASE IN CASH | 68 | 1,386 | 29 | — | 1,483 | |||||||||||||||||||
CASH AND CASH EQUIVALENTS, at beginning of year | 84,068 | 1,253 | 18 | — | 85,339 | |||||||||||||||||||
CASH AND CASH EQUIVALENTS, at end of year | $ | 84,136 | $ | 2,639 | $ | 47 | — | $ | 86,822 | |||||||||||||||
F-37
Table of Contents
Guarantor | Non-Guarantor | |||||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||||||||
Cash and cash equivalents | $ | 84,068 | $ | 1,253 | $ | 18 | $ | — | $ | 85,339 | ||||||||||||
Accounts receivable, less allowance for doubtful accounts | 17,047 | 43,252 | 2,250 | — | 62,549 | |||||||||||||||||
Inventories | 1,905 | 5,435 | 318 | — | 7,658 | |||||||||||||||||
Other current assets | 1,669 | 2,425 | 81 | — | 4,175 | |||||||||||||||||
Total current assets | 104,689 | 52,365 | 2,667 | — | 159,721 | |||||||||||||||||
PROPERTY AND EQUIPMENT, net | 61,016 | 203,148 | 11,969 | — | 276,133 | |||||||||||||||||
LICENSES AND OTHER ASSETS: | ||||||||||||||||||||||
Licenses, net | — | 539,834 | 8,679 | — | 548,513 | |||||||||||||||||
Goodwill, net | 3,149 | 345,533 | — | — | 348,682 | |||||||||||||||||
Customer lists, net | 1,268 | 46,600 | — | — | 47,868 | |||||||||||||||||
Deferred debt issuance costs, net | 30,228 | — | — | — | 30,228 | |||||||||||||||||
Investment in consolidated subsidiaries | 1,184,801 | — | — | (1,184,801 | ) | — | ||||||||||||||||
Other assets, net | 3,453 | 10,245 | 2,518 | (9,911 | ) | 6,305 | ||||||||||||||||
Total licenses and other assets | 1,222,899 | 942,212 | 11,197 | (1,194,712 | ) | 981,596 | ||||||||||||||||
$ | 1,388,604 | $ | 1,197,725 | $ | 25,833 | $ | (1,194,712 | ) | $ | 1,417,450 | ||||||||||||
CURRENT LIABILITIES: | ||||||||||||||||||||||
Accounts payable | $ | 22,609 | $ | 28,991 | $ | 865 | $ | — | $ | 52,465 | ||||||||||||
Current portion of long-term debt | 81 | — | — | — | 81 | |||||||||||||||||
Advance billings and customer deposits | 2,147 | 8,619 | 310 | — | 11,076 | |||||||||||||||||
Accrued interest | 41,112 | — | — | — | 41,112 | |||||||||||||||||
Other accrued expenses | 34,442 | 49,248 | 42 | (74,053 | ) | 9,679 | ||||||||||||||||
Total current liabilities | 100,391 | 86,858 | 1,217 | (74,053 | ) | 114,413 | ||||||||||||||||
LONG-TERM LIABILITIES | 1,718,255 | 1,852,703 | 41,025 | (1,878,904 | ) | 1,733,079 | ||||||||||||||||
Total liabilities | 1,818,646 | 1,939,561 | 42,242 | (1,952,957 | ) | 1,847,492 | ||||||||||||||||
REDEEMABLE PREFERRED STOCK | 166,296 | — | — | — | 166,296 | |||||||||||||||||
SHAREHOLDERS’ EQUITY (DEFICIT): | ||||||||||||||||||||||
Class A common stock; $.01 par value; 200,000 shares authorized, 11,836 outstanding | 118 | 918 | — | (918 | ) | 118 | ||||||||||||||||
Class B common stock; $.01 par value; 10,000 shares authorized, 540 outstanding | 5 | — | — | — | 5 | |||||||||||||||||
Additional paid-in capital | 193,347 | 349 | 31,679 | (32,028 | ) | 193,347 | ||||||||||||||||
Accumulated earnings (deficit) | (791,446 | ) | (743,103 | ) | (48,088 | ) | 791,191 | (791,446 | ) | |||||||||||||
Unearned compensation | (698 | ) | — | — | — | (698 | ) | |||||||||||||||
Accumulated other comprehensive income | 2,336 | — | — | — | 2,336 | |||||||||||||||||
Total shareholders’ equity (deficit ) | (596,338 | ) | (741,836 | ) | (16,409 | ) | 758,245 | (596,338 | ) | |||||||||||||
$ | 1,388,604 | $ | 1,197,725 | $ | 25,833 | $ | (1,194,712 | ) | $ | 1,417,450 | ||||||||||||
F-38
Table of Contents
Guarantor | Non-Guarantor | |||||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
REVENUE: | ||||||||||||||||||||||
Service | $ | 86,138 | $ | 282,453 | $ | 8,944 | $ | (316 | ) | $ | 377,219 | |||||||||||
Roaming | 15,555 | 82,727 | 7,230 | (8 | ) | 105,504 | ||||||||||||||||
Equipment | 5,667 | 15,652 | 775 | — | 22,094 | |||||||||||||||||
Total revenue | 107,360 | 380,832 | 16,949 | (324 | ) | 504,817 | ||||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||||
Network costs, excluding depreciation | 18,298 | 82,602 | 3,435 | (264 | ) | 104,071 | ||||||||||||||||
Cost of equipment sales | 8,671 | 30,627 | 1,074 | — | 40,372 | |||||||||||||||||
Selling, general and administrative | 33,657 | 96,341 | 5,232 | (60 | ) | 135,170 | ||||||||||||||||
Depreciation and amortization | 15,630 | 57,188 | 3,537 | — | 76,355 | |||||||||||||||||
Impairment of assets | — | 47,136 | — | — | 47,136 | |||||||||||||||||
Total operating expenses | 76,256 | 313,894 | 13,278 | (324 | ) | 403,104 | ||||||||||||||||
OPERATING INCOME | 31,104 | 66,938 | 3,671 | — | 101,713 | |||||||||||||||||
OTHER INCOME (EXPENSE): | ||||||||||||||||||||||
Interest expense | (163,870 | ) | (166,004 | ) | (2,438 | ) | 168,335 | (163,977 | ) | |||||||||||||
Interest and dividend income | 170,044 | 18 | — | (168,335 | ) | 1,727 | ||||||||||||||||
Inter-company charges | (26,971 | ) | 26,971 | — | — | — | ||||||||||||||||
Equity in subsidiaries | (69,242 | ) | — | — | 69,239 | (3 | ) | |||||||||||||||
Other | (6 | ) | (67 | ) | — | — | (73 | ) | ||||||||||||||
Other expense, net | (90,045 | ) | (139,082 | ) | (2,438 | ) | 69,239 | (162,326 | ) | |||||||||||||
INCOME (LOSS) BEFORE INCOME TAXES | (58,941 | ) | (72,144 | ) | 1,233 | 69,239 | (60,613 | ) | ||||||||||||||
INCOME TAX PROVISION (BENEFIT) | — | 13,742 | — | (15,414 | ) | (1,672 | ) | |||||||||||||||
NET INCOME (LOSS) | (58,941 | ) | (85,886 | ) | 1,233 | 84,653 | (58,941 | ) | ||||||||||||||
PREFERRED STOCK DIVIDEND | (12,915 | ) | — | — | — | (12,915 | ) | |||||||||||||||
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES | $ | (71,856 | ) | $ | (85,886 | ) | $ | 1,233 | $ | 84,653 | $ | (71,856 | ) | |||||||||
F-39
Table of Contents
Guarantor | Non-Guarantor | |||||||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||||
OPERATING ACTIVITIES: | ||||||||||||||||||||||||
Net income (loss) | $ | (58,941 | ) | $ | (85,886 | ) | $ | 1,233 | $ | 84,653 | $ | (58,941 | ) | |||||||||||
Adjustments to reconcile to net cash provided by (used in) operating activities: | ||||||||||||||||||||||||
Depreciation and customer list amortization | 15,630 | 57,188 | 3,537 | — | 76,355 | |||||||||||||||||||
Loss on write-off of debt and preferred stock issuance costs | 12,605 | — | — | — | 12,605 | |||||||||||||||||||
Mark-to-market adjustments — financial instruments | 4,339 | — | — | — | 4,339 | |||||||||||||||||||
Gain on repurchase of preferred stock | (22,573 | ) | — | — | — | (22,573 | ) | |||||||||||||||||
Non-cash preferred stock dividends | 28,626 | — | — | — | 28,626 | |||||||||||||||||||
Impairment of assets | — | 47,136 | — | — | 47,136 | |||||||||||||||||||
Stock based compensation | 41 | — | — | — | 41 | |||||||||||||||||||
Deferred income taxes | — | 13,741 | — | (15,413 | ) | (1,672 | ) | |||||||||||||||||
Other | 5,594 | 2,143 | (44 | ) | — | 7,693 | ||||||||||||||||||
Change in other operating elements : | ||||||||||||||||||||||||
Accounts receivable | 2,425 | (3,690 | ) | (556 | ) | — | (1,821 | ) | ||||||||||||||||
Inventories | (131 | ) | 704 | (26 | ) | — | 547 | |||||||||||||||||
Other current assets | 600 | (511 | ) | — | — | 89 | ||||||||||||||||||
Accounts payable | (4,877 | ) | 11,276 | (246 | ) | — | 6,153 | |||||||||||||||||
Advance billings and customer deposits | (115 | ) | 558 | 39 | — | 482 | ||||||||||||||||||
Accrued preferred stock dividends | 26,747 | — | — | — | 26,747 | |||||||||||||||||||
Accrued interest | 6,598 | — | — | — | 6,598 | |||||||||||||||||||
Other accrued expenses | (1,376 | ) | (680 | ) | (71 | ) | — | (2,127 | ) | |||||||||||||||
Net cash provided by (used in) operating activities | 15,192 | 41,979 | 3,866 | 69,240 | 130,277 | |||||||||||||||||||
INVESTING ACTIVITIES: | ||||||||||||||||||||||||
Purchases of property and equipment | (24,768 | ) | (66,956 | ) | (2,693 | ) | — | (94,417 | ) | |||||||||||||||
Purchases of wireless properties, net | — | (725 | ) | — | — | (725 | ) | |||||||||||||||||
Net proceeds from property exchange | — | 13,567 | — | — | 13,567 | |||||||||||||||||||
Proceeds from sale of property and equipment | 25 | 67 | — | — | 92 | |||||||||||||||||||
Other | 231 | (207 | ) | — | — | 24 | ||||||||||||||||||
Net cash used in investing activities | (24,512 | ) | (54,254 | ) | (2,693 | ) | — | (81,459 | ) | |||||||||||||||
FINANCING ACTIVITIES: | ||||||||||||||||||||||||
Change in parent company receivable and payable | 58,151 | 12,262 | (1,173 | ) | (69,240 | ) | — | |||||||||||||||||
Proceeds from issuance of common stock related to employee stock purchase plan and stock options | 188 | — | — | — | 188 | |||||||||||||||||||
Repayments of long-term debt under the credit facility | (525,724 | ) | — | — | — | (525,724 | ) | |||||||||||||||||
Proceeds from issuance of 81/4% senior secured notes | 350,000 | — | — | — | 350,000 | |||||||||||||||||||
Proceeds from issuance of senior secured floating rate notes | 160,000 | — | — | — | 160,000 | |||||||||||||||||||
Repurchase of preferred stock | (68,351 | ) | — | — | — | (68,351 | ) | |||||||||||||||||
Payments to settle interest rate swaps | (7,645 | ) | — | — | — | (7,645 | ) | |||||||||||||||||
Payments of debt issuance costs | (14,293 | ) | — | — | — | (14,293 | ) | |||||||||||||||||
Other | (201 | ) | — | — | — | (201 | ) | |||||||||||||||||
Net cash (used in) provided by financing activities | (48,875 | ) | 12,262 | (1,173 | ) | (69,240 | ) | (106,026 | ) | |||||||||||||||
NET DECREASE IN CASH | (57,195 | ) | (13 | ) | — | — | (57,208 | ) | ||||||||||||||||
CASH AND CASH EQUIVALENTS, at beginning of year | 141,263 | 1,266 | 18 | — | 142,547 | |||||||||||||||||||
CASH AND CASH EQUIVALENTS, at end of year | $ | 84,068 | $ | 1,253 | $ | 18 | $ | — | $ | 85,339 | ||||||||||||||
F-40
Table of Contents
Guarantor | Non-Guarantor | |||||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
REVENUE: | ||||||||||||||||||||||
Service | $ | 71,073 | $ | 275,224 | $ | 8,893 | $ | (152 | ) | $ | 355,038 | |||||||||||
Roaming | 15,410 | 112,300 | 4,199 | (13 | ) | 131,896 | ||||||||||||||||
Equipment | 4,433 | 15,101 | 921 | — | 20,455 | |||||||||||||||||
Total revenue | 90,916 | 404,625 | 14,013 | (165 | ) | 507,389 | ||||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||||
Network costs, excluding depreciation | 16,922 | 76,037 | 3,275 | (165 | ) | 96,069 | ||||||||||||||||
Cost of equipment sales | 6,661 | 29,548 | 1,427 | — | 37,636 | |||||||||||||||||
Selling, general and administrative | 30,670 | 95,564 | 5,527 | — | 131,761 | |||||||||||||||||
Depreciation and amortization | 15,290 | 57,868 | 3,271 | — | 76,429 | |||||||||||||||||
Loss on assets held for sale | — | 42,244 | — | — | 42,244 | |||||||||||||||||
Total operating expenses | 69,543 | 301,261 | 13,500 | (165 | ) | 384,139 | ||||||||||||||||
OPERATING INCOME | 21,373 | 101,364 | 513 | — | 123,250 | |||||||||||||||||
OTHER INCOME (EXPENSE): | ||||||||||||||||||||||
Interest expense | (135,590 | ) | (143,975 | ) | (2,330 | ) | 145,633 | (136,262 | ) | |||||||||||||
Interest and dividend income | 146,522 | 25 | 2 | (145,633 | ) | 916 | ||||||||||||||||
Inter-company charges | (15,815 | ) | 16,297 | (482 | ) | — | — | |||||||||||||||
Equity in subsidiaries | (14,388 | ) | — | — | 14,385 | (3 | ) | |||||||||||||||
Other | 1,001 | (107 | ) | — | — | 894 | ||||||||||||||||
Other expense, net | (18,270 | ) | (127,760 | ) | (2,810 | ) | 14,385 | (134,455 | ) | |||||||||||||
NET INCOME (LOSS) BEFORE INCOME TAXES | (3,103 | ) | (26,396 | ) | (2,297 | ) | 14,385 | (11,205 | ) | |||||||||||||
INCOME TAX PROVISION (BENEFIT) | 14,308 | 22,279 | — | (36,587 | ) | — | ||||||||||||||||
NET INCOME (LOSS) | (11,205 | ) | (48,675 | ) | (2,297 | ) | 50,972 | (11,205 | ) | |||||||||||||
PREFERRED STOCK DIVIDEND | (38,877 | ) | — | — | — | (38,877 | ) | |||||||||||||||
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES | $ | (50,082 | ) | $ | (48,675 | ) | $ | (2,297 | ) | $ | 50,972 | $ | (50,082 | ) | ||||||||
F-41
Table of Contents
Guarantor | Non-Guarantor | |||||||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||||
OPERATING ACTIVITIES: | ||||||||||||||||||||||||
Net income (loss) | $ | (11,205 | ) | $ | (48,675 | ) | $ | (2,297 | ) | $ | 50,972 | $ | (11,205 | ) | ||||||||||
Adjustments to reconcile to net cash provided by operating activities: | ||||||||||||||||||||||||
Depreciation and amortization | 15,290 | 57,868 | 3,271 | — | 76,429 | |||||||||||||||||||
Loss on write-off of debt and preferred stock issuance costs | 6,134 | — | — | — | 6,134 | |||||||||||||||||||
Adjustments of interest rate derivatives to fair market value | (2,225 | ) | — | — | — | (2,225 | ) | |||||||||||||||||
Non-cash preferred stock dividends | 13,074 | — | — | — | 13,074 | |||||||||||||||||||
Tax adjustments | 14,308 | 22,279 | — | (36,587 | ) | — | ||||||||||||||||||
Loss on assets held for sale | — | 42,244 | — | — | 42,244 | |||||||||||||||||||
Other | 3,596 | 401 | 16 | — | 4,013 | |||||||||||||||||||
Change in other operating elements: | ||||||||||||||||||||||||
Accounts receivable | (6,483 | ) | (7,597 | ) | (206 | ) | — | (14,286 | ) | |||||||||||||||
Inventories | (889 | ) | (704 | ) | 12 | — | (1,581 | ) | ||||||||||||||||
Other current assets | (1,249 | ) | 174 | (1 | ) | — | (1,076 | ) | ||||||||||||||||
Accounts payable | 4,428 | 248 | 2 | — | 4,678 | |||||||||||||||||||
Advance billings and customer deposits | (219 | ) | 729 | (364 | ) | — | 146 | |||||||||||||||||
Accrued preferred stock dividends | 14,899 | — | — | — | 14,899 | |||||||||||||||||||
Accrued interest | 12,188 | — | — | — | 12,188 | |||||||||||||||||||
Other accrued liabilities | 1,578 | (338 | ) | (151 | ) | — | 1,089 | |||||||||||||||||
Net cash provided by operating activities | 63,225 | 66,629 | 282 | 14,385 | 144,521 | |||||||||||||||||||
INVESTING ACTIVITIES: | ||||||||||||||||||||||||
Purchases of property and equipment | (17,496 | ) | (33,625 | ) | (2,583 | ) | — | (53,704 | ) | |||||||||||||||
Proceeds from property exchange, net | 121 | 503 | — | — | 624 | |||||||||||||||||||
Proceeds from sale of property and equipment | — | (7,200 | ) | — | — | (7,200 | ) | |||||||||||||||||
Other | (176 | ) | 2 | — | — | (174 | ) | |||||||||||||||||
Net cash used in investing activities | (17,551 | ) | (40,320 | ) | (2,583 | ) | — | (60,454 | ) | |||||||||||||||
FINANCING ACTIVITIES: | ||||||||||||||||||||||||
Change in parent company receivable and payable | 32,135 | (20,035 | ) | 2,285 | (14,385 | ) | — | |||||||||||||||||
Proceeds from issuance of common stock related to employee stock purchase plan and stock options | 131 | — | — | — | 131 | |||||||||||||||||||
Proceeds from issuance of long-term debt under the credit agreement | 120,000 | — | — | — | 120,000 | |||||||||||||||||||
Repayments of long-term debt under the credit agreement | (388,128 | ) | (6,500 | ) | — | — | (394,628 | ) | ||||||||||||||||
Proceeds from issuance of 81/4% senior secured notes | 325,000 | — | — | — | 325,000 | |||||||||||||||||||
Proceeds from issuance of variable rate notes | ||||||||||||||||||||||||
Repayment of swaption | (34,184 | ) | — | — | — | (34,184 | ) | |||||||||||||||||
Proceeds from unwinding derivative hedge agreements | 2,632 | — | — | — | 2,632 | |||||||||||||||||||
Payments of debt issuance costs | (13,374 | ) | — | — | — | (13,374 | ) | |||||||||||||||||
Other | (885 | ) | — | — | — | (885 | ) | |||||||||||||||||
Net cash provided by (used in) financing activities | 43,327 | (26,535 | ) | 2,285 | (14,385 | ) | 4,692 | |||||||||||||||||
NET (DECREASE) INCREASE IN CASH | 89,001 | (226 | ) | (16 | ) | — | 88,759 | |||||||||||||||||
CASH AND CASH EQUIVALENTS, at beginning of year | 52,262 | 1,492 | 34 | — | 53,788 | |||||||||||||||||||
CASH AND CASH EQUIVALENTS, at end of year | $ | 141,263 | $ | 1,266 | $ | 18 | $ | — | $ | 142,547 | ||||||||||||||
F-42
Table of Contents
F-43
Table of Contents
F-44
Table of Contents
As of December 31, | ||||||||||
2005 | 2004 | |||||||||
(In thousands, except | ||||||||||
shares and per | ||||||||||
share data) | ||||||||||
ASSETS | ||||||||||
INTERCOMPANY RECEIVABLE | $ | 11,460 | $ | — | ||||||
LICENSES AND OTHER ASSETS: | ||||||||||
Licenses, net | 445,098 | 445,098 | ||||||||
Deferred tax asset | 5,266 | 9,905 | ||||||||
Total assets | $ | 461,824 | $ | 455,003 | ||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||
CURRENT LIABILITIES: | ||||||||||
Current portion of inter-company long-term debt | $ | 49,000 | $ | — | ||||||
Inter-company taxes payable | 20,940 | 20,940 | ||||||||
Total current liabilities | 69,940 | 20,940 | ||||||||
LONG-TERM LIABILITIES: | ||||||||||
Inter-company long-term debt | 301,000 | 418,529 | ||||||||
Total liabilities | 370,940 | 439,469 | ||||||||
SHAREHOLDERS’ EQUITY: | ||||||||||
Common stock; $0.01 par value; 200,000 shares authorized; 1,000 issued and outstanding | — | — | ||||||||
Additional paid-in capital | 68,530 | 1 | ||||||||
Accumulated equity | 22,354 | 15,533 | ||||||||
Total shareholders’ equity | 90,884 | 15,534 | ||||||||
$ | 461,824 | $ | 455,003 | |||||||
F-45
Table of Contents
Years Ended December 31, | ||||||||||||||
2005 | 2004 | 2003 | ||||||||||||
(In thousands) | ||||||||||||||
REVENUE: | ||||||||||||||
License management revenue | $ | 49,797 | $ | 99,058 | $ | 108,349 | ||||||||
Total revenue | 49,797 | 99,058 | 108,349 | |||||||||||
OPERATING EXPENSES: | ||||||||||||||
Corporate management expense | 2,939 | 3,775 | 3,714 | |||||||||||
Other operating | 693 | 407 | 280 | |||||||||||
Impairment of assets | — | 24,307 | 28,318 | |||||||||||
Total operating expenses | 3,632 | 28,489 | 32,312 | |||||||||||
OPERATING INCOME | 46,165 | 70,569 | 76,037 | |||||||||||
OTHER EXPENSE: | ||||||||||||||
Inter-company interest | 34,705 | 37,942 | 34,206 | |||||||||||
INCOME BEFORE INCOME TAX PROVISION | 11,460 | 32,627 | 41,831 | |||||||||||
INCOME TAX PROVISION | 4,639 | 13,051 | 16,732 | |||||||||||
NET INCOME | $ | 6,821 | $ | 19,576 | $ | 25,099 | ||||||||
F-46
Table of Contents
Total | |||||||||||||
Additional | Accumulated | Shareholders’ | |||||||||||
Paid-In Capital | Earnings (Deficit) | Equity (Deficit) | |||||||||||
(In thousands) | |||||||||||||
BALANCE, December 31, 2002 | $ | 1 | $ | (29,142 | ) | $ | (29,141 | ) | |||||
Net income | — | 25,099 | 25,099 | ||||||||||
BALANCE, December 31, 2003 | 1 | (4,043 | ) | (4,042 | ) | ||||||||
Net income | — | 19,576 | 19,576 | ||||||||||
BALANCE, December 31, 2004 | 1 | 15,533 | 15,534 | ||||||||||
Net income | — | 6,821 | 6,821 | ||||||||||
Parent company capital contribution | 68,529 | — | 68,529 | ||||||||||
BALANCE, December 31, 2005 | $ | 68,530 | $ | 22,354 | $ | 90,884 | |||||||
F-47
Table of Contents
Years Ended December 31, | ||||||||||||||||
2005 | 2004 | 2003 | ||||||||||||||
(In thousands) | ||||||||||||||||
OPERATING ACTIVITIES: | ||||||||||||||||
Net income | $ | 6,821 | $ | 19,576 | $ | 25,099 | ||||||||||
Adjustments to reconcile to net cash provided by operating activities: | ||||||||||||||||
Impairment of assets | — | 24,307 | 28,318 | |||||||||||||
Income taxes | 4,639 | 13,051 | 16,732 | |||||||||||||
Net cash provided by operating activities | 11,460 | 56,934 | 70,149 | |||||||||||||
INVESTING ACTIVITIES: | ||||||||||||||||
Assignment of licenses from wholly-owned subsidiaries of RCC | — | (98,804 | ) | — | ||||||||||||
Acquisition of licenses | — | (14,526 | ) | (7,200 | ) | |||||||||||
Disposition of licenses | — | 34,175 | — | |||||||||||||
Net cash used in investing activities | — | (79,155 | ) | (7,200 | ) | |||||||||||
FINANCING ACTIVITIES: | ||||||||||||||||
Net change in inter-company (receivable)/long-term debt | (11,460 | ) | 22,221 | (62,949 | ) | |||||||||||
Net cash provided by (used in) financing activities | (11,460 | ) | 22,221 | (62,949 | ) | |||||||||||
NET CHANGE IN CASH | — | — | — | |||||||||||||
CASH AND CASH EQUIVALENTS, at beginning of year | — | — | — | |||||||||||||
CASH AND CASH EQUIVALENTS, at end of year | $ | — | $ | — | $ | — | ||||||||||
F-48
Table of Contents
History of RCC Minnesota, Inc. |
• | October 1997, RCC assigned its cellular licenses in its Midwest territory to RCC Licenses, Inc. | |
• | July 1998, RCC Licenses, Inc. changed its name to RCC Minnesota, Inc. | |
• | December 2000, RGI Group, Inc., Western Maine Cellular, Inc., RCC Holdings, Inc., and MRCC, Inc., wholly-owned subsidiaries of RCC, assigned certain licenses to RCCM. Management agreements between RCCM and RCC operating subsidiaries commenced on December 1, 2000. | |
• | January 2001, Star Cellular, a wholly-owned subsidiary of RCC, was acquired by RCC and assigned certain licenses to RCCM. | |
• | February 2001, RCCM entered into an agreement to sell its 10MHz PCS licenses in its Northwest territory. | |
• | October 2003, RCCM acquired 1900 MHz spectrum from AT&T Wireless Services, Inc. (“AWE”) and one of its affiliates. | |
• | March 2004, RCCM exchanged certain wireless properties with AWE. Under the agreement, RCCM sold to AWE its Oregon RSA 4 license. RCCM received from AWE licenses in Alabama and Mississippi. In addition, RCCM received from AWE unbuilt PCS licenses covering portions of RCC’s South, Midwest, and Northwest territories. | |
• | May 2004, RCC Holdings, a wholly-owned subsidiary of RCC, assigned licenses in its Alabama and Mississippi markets to RCCM. | |
• | November 2004, RCCM acquired additional 1900 MHz PCS licenses, which cover selected areas in its Midwest and Northwest territories. |
Principles of Presentation |
F-49
Table of Contents
Use of Estimates |
Revenue Recognition — License management revenue |
Expense Recognition |
Income Tax Provision |
F-50
Table of Contents
Licenses |
Years Ended December 31, | |||||||||
2005 | 2004 | ||||||||
Beginning of year | $ | 445,098 | $ | 356,075 | |||||
Acquisitions | — | 14,526 | |||||||
Impairment of assets | — | (24,307 | ) | ||||||
License held for sale | — | — | |||||||
Assigned from RCC wholly-owned subsidiary | — | 98,804 | |||||||
End of year | $ | 445,098 | $ | 445,098 | |||||
Inter-company receivable: |
F-51
Table of Contents
Inter-company long term debt: |
Year Ended December 31, | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Tax at statutory rate | 35.0 | % | 35.0 | % | 35.0 | % | ||||||
State taxes | 5.0 | 5.0 | 5.0 | |||||||||
40.0 | % | 40.0 | % | 40.0 | % | |||||||
Year Ended December 31, | |||||||||||||
2005 | 2004 | 2003 | |||||||||||
(In thousands) | |||||||||||||
Current | |||||||||||||
Federal | $ | — | $ | 1,919 | $ | 13,703 | |||||||
State | — | 281 | 1,958 | ||||||||||
— | 2,200 | 15,661 | |||||||||||
Deferred | |||||||||||||
Federal | 4,059 | 9,495 | 986 | ||||||||||
State | 580 | 1,356 | 85 | ||||||||||
4,639 | 10,851 | 1,071 | |||||||||||
Total | $ | 4,639 | $ | 13,051 | $ | 16,732 | |||||||
F-52
Table of Contents
As of December 31, | ||||||||||
2005 | 2004 | |||||||||
Deferred income tax assets: | ||||||||||
Operating loss carryforwards | $ | 14,304 | $ | — | ||||||
Temporary differences: | ||||||||||
Intangible assets | — | 9,905 | ||||||||
Total deferred income tax assets | 14,304 | — | ||||||||
Deferred income tax liabilities: | ||||||||||
Intangible assets | (9,038 | ) | — | |||||||
Net deferred income tax asset | $ | 5,266 | $ | 9,905 | ||||||
F-53
Table of Contents
June 30, | December 31, | |||||||||
2006 | 2005 | |||||||||
(Unaudited) | ||||||||||
(In thousands) | ||||||||||
ASSETS | ||||||||||
CURRENT ASSETS: | ||||||||||
Cash and cash equivalents | $ | 101,781 | $ | 86,822 | ||||||
Short-term investments | 69,222 | 66,778 | ||||||||
Accounts receivable, less allowance for doubtful accounts of $3,326 and $3,567 | 65,013 | 72,887 | ||||||||
Inventories | 6,416 | 12,849 | ||||||||
Other current assets | 4,673 | 4,280 | ||||||||
Total current assets | 247,105 | 243,616 | ||||||||
PROPERTY AND EQUIPMENT, net | 246,545 | 277,408 | ||||||||
LICENSES AND OTHER ASSETS, net: | ||||||||||
Licenses | 548,513 | 548,513 | ||||||||
Goodwill | 348,684 | 348,684 | ||||||||
Customer lists | 20,018 | 29,301 | ||||||||
Deferred debt issuance costs | 24,306 | 27,022 | ||||||||
Other assets | 5,854 | 6,138 | ||||||||
Total licenses and other assets | 947,375 | 959,658 | ||||||||
$ | 1,441,025 | $ | 1,480,682 | |||||||
LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||||
CURRENT LIABILITIES: | ||||||||||
Accounts payable | $ | 34,986 | $ | 53,492 | ||||||
Advance billings and customer deposits | 11,361 | 11,885 | ||||||||
Accrued interest | 43,135 | 39,336 | ||||||||
Other accrued expenses | 6,587 | 8,981 | ||||||||
Total current liabilities | 96,069 | 113,694 | ||||||||
LONG-TERM LIABILITIES | 1,870,349 | 1,847,994 | ||||||||
Total liabilities | 1,966,418 | 1,961,688 | ||||||||
REDEEMABLE PREFERRED STOCK | 178,117 | 170,976 | ||||||||
SHAREHOLDERS’ DEFICIT: | ||||||||||
Class A common stock; $.01 par value; 200,000 shares authorized, 13,869 and 13,530 outstanding | 139 | 135 | ||||||||
Class B common stock; $.01 par value; 10,000 shares authorized, 399 and 427 outstanding | 4 | 4 | ||||||||
Additional paid-in capital | 213,128 | 212,420 | ||||||||
Accumulated deficit | (916,781 | ) | (862,742 | ) | ||||||
Unearned compensation | — | (1,799 | ) | |||||||
Total shareholders’ deficit | (703,510 | ) | (651,982 | ) | ||||||
$ | 1,441,025 | $ | 1,480,682 | |||||||
F-54
Table of Contents
Six Months Ended | |||||||||||
June 30, | |||||||||||
2006 | 2005 | ||||||||||
(Unaudited) | |||||||||||
(In thousands, except per | |||||||||||
share data) | |||||||||||
REVENUE: | |||||||||||
Service | $ | 192,909 | $ | 193,560 | |||||||
Roaming | 67,466 | 44,734 | |||||||||
Equipment | 12,955 | 18,474 | |||||||||
Total revenue | 273,330 | 256,768 | |||||||||
OPERATING EXPENSES: | |||||||||||
Network costs, excluding depreciation | 67,169 | 55,492 | |||||||||
Cost of equipment sales | 26,249 | 29,009 | |||||||||
Selling, general and administrative | 70,957 | 73,474 | |||||||||
Depreciation and amortization | 60,058 | 46,926 | |||||||||
Impairment of assets | — | 7,020 | |||||||||
Total operating expenses | 224,433 | 211,921 | |||||||||
OPERATING INCOME | 48,897 | 44,847 | |||||||||
OTHER INCOME (EXPENSE): | |||||||||||
Interest expense | (99,963 | ) | (80,328 | ) | |||||||
Interest and dividend income | 3,750 | 662 | |||||||||
Other | 204 | (24 | ) | ||||||||
Other expense, net | (96,009 | ) | (79,690 | ) | |||||||
LOSS BEFORE INCOME TAX BENEFIT | (47,112 | ) | (34,843 | ) | |||||||
INCOME TAX BENEFIT | (209 | ) | (209 | ) | |||||||
NET LOSS | (46,903 | ) | (34,634 | ) | |||||||
PREFERRED STOCK DIVIDEND | (7,136 | ) | (6,767 | ) | |||||||
LOSS APPLICABLE TO COMMON SHARES | $ | (54,039 | ) | $ | (41,401 | ) | |||||
LOSS PER BASIC AND DILUTED SHARE | $ | (3.85 | ) | $ | (3.36 | ) | |||||
WEIGHTED AVERAGE SHARES USED TO COMPUTE LOSS PER BASIC AND DILUTED SHARE | 14,027 | 12,323 | |||||||||
COMPREHENSIVE LOSS: | |||||||||||
LOSS APPLICABLE TO COMMON SHARES | $ | (54,039 | ) | $ | (41,401 | ) | |||||
Adjustments — derivative financial instruments | — | (343 | ) | ||||||||
TOTAL COMPREHENSIVE LOSS | $ | (54,039 | ) | $ | (41,744 | ) | |||||
F-55
Table of Contents
Six Months Ended | ||||||||||||
June 30, | ||||||||||||
2006 | 2005 | |||||||||||
(Unaudited) | ||||||||||||
(In thousands) | ||||||||||||
OPERATING ACTIVITIES: | ||||||||||||
Net loss | $ | (46,903 | ) | $ | (34,634 | ) | ||||||
Adjustments to reconcile to net cash provided by operating activities: | ||||||||||||
Depreciation and customer list amortization | 60,058 | 46,926 | ||||||||||
Loss on write-off of senior exchangeable preferred stock issuance costs | 2,795 | 151 | ||||||||||
Mark-to-market adjustments — financial instruments | (726 | ) | - | |||||||||
Gain on repurchase of senior exchangeable preferred stock | (173 | ) | (5,554 | ) | ||||||||
Non-cash junior exchangeable preferred stock dividends | — | 3,797 | ||||||||||
Impairment of assets | — | 7,020 | ||||||||||
Stock based compensation | 467 | 109 | ||||||||||
Deferred income taxes | (209 | ) | (209 | ) | ||||||||
Other | 1,442 | 2,493 | ||||||||||
Change in other operating elements: | ||||||||||||
Accounts receivable | 4,761 | (5,228 | ) | |||||||||
Inventories | 6,433 | (1,687 | ) | |||||||||
Other current assets | (393 | ) | (677 | ) | ||||||||
Accounts payable | (10,475 | ) | (5,223 | ) | ||||||||
Advance billings and customer deposits | (523 | ) | 409 | |||||||||
Accrued senior and junior exchangeable preferred stock dividends | 19,258 | 23,873 | ||||||||||
Accrued interest | 3,800 | 26 | ||||||||||
Other accrued expenses | (2,394 | ) | 1,189 | |||||||||
Net cash provided by operating activities | 37,218 | 32,781 | ||||||||||
INVESTING ACTIVITIES: | ||||||||||||
Purchases of property and equipment | (23,670 | ) | (64,649 | ) | ||||||||
Purchases of short-term investments | (78,443 | ) | - | |||||||||
Maturities of short-term investments | 78,000 | - | ||||||||||
Proceeds from sale of property and equipment | 1,587 | 89 | ||||||||||
Other | (45 | ) | (77 | ) | ||||||||
Net cash used in investing activities | (22,571 | ) | (64,637 | ) | ||||||||
FINANCING ACTIVITIES: | ||||||||||||
Proceeds from issuance of common stock related to employee stock purchase plan and stock options | 2,058 | 408 | ||||||||||
Proceeds from issuance of 81/4% senior secured notes | 166,600 | - | ||||||||||
Retirement of senior secured floating rate notes | (160,000 | ) | - | |||||||||
Repurchase of senior exchangeable preferred stock | (5,518 | ) | (13,355 | ) | ||||||||
Other | (2,828 | ) | (65 | ) | ||||||||
Net cash provided by (used in) financing activities | 312 | (13,012 | ) | |||||||||
NET INCREASE (DECREASE) IN CASH | 14,959 | (44,868 | ) | |||||||||
CASH AND CASH EQUIVALENTS, at beginning of year | 86,822 | 85,339 | ||||||||||
CASH AND CASH EQUIVALENTS, at end of period | $ | 101,781 | $ | 40,471 | ||||||||
F-56
Table of Contents
Recently Issued Accounting Pronouncements |
F-57
Table of Contents
2006 Omnibus | ||||||||
Incentive Plan and | ||||||||
Prior Plans | ||||||||
Six Months Ended | ||||||||
June 30, | ||||||||
2006 | 2005 | |||||||
Average expected term (years) | 6.5 | 6.0 | ||||||
Expected volatility | 82.00 | % | 85.94 | % | ||||
Risk-free interest rate | 5.17 | % | 7.25 | % | ||||
Expected dividend yield | — | — |
F-58
Table of Contents
Six Months | ||||||||
Ended June 30, | ||||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Total stock-based compensation included in SG&A | $ | 467 | $ | 109 |
2006 Omnibus | ||||||||
Incentive and | Employee Stock | |||||||
Prior Plans | Purchase Plan | |||||||
Available for issuance at December 31, 2005 | 205,409 | 174,196 | ||||||
Shares authorized under the 2006 Omnibus Incentive Plan | 1,000,000 | — | ||||||
Options granted | (75,960 | ) | — | |||||
Non-vested shares awarded | (95,679 | ) | — | |||||
Options forfeited | 64,252 | — | ||||||
Non-vested shares forfeited | 5,847 | — | ||||||
Available for issuance at June 30, 2006 | 1,103,869 | 174,196 | ||||||
Non-Vested Shares |
F-59
Table of Contents
Weighted Average | |||||||||
Shares | Fair Value | ||||||||
Non-vested shares, December 31, 2005 | 160,167 | $ | 9.37 | ||||||
Granted | 95,679 | 13.99 | |||||||
Vested | (1,653 | ) | 9.51 | ||||||
Forfeited | (5,847 | ) | 9.51 | ||||||
Non-vested shares outstanding June 30, 2006 | 248,346 | $ | 11.15 | ||||||
Employee Stock Purchase Plan |
Stock Options |
F-60
Table of Contents
Six Months Ended June 30, 2006 | |||||||||||||||||
Weighted | |||||||||||||||||
Average | |||||||||||||||||
Weighted | Remaining | ||||||||||||||||
Average | Contractual | ||||||||||||||||
Shares | Exercise Price | Term | Intrinsic Value | ||||||||||||||
(In thousands)(1) | |||||||||||||||||
Outstanding at December 31, 2005 | 1,863,029 | $ | 15.09 | ||||||||||||||
Granted | 75,960 | $ | 13.56 | ||||||||||||||
Exercised | (201,573 | ) | 7.84 | $ | 663 | ||||||||||||
Forfeited | (64,252 | ) | 40.90 | ||||||||||||||
Outstanding, at June 30, 2006 | 1,673,164 | $ | 14.86 | 4.3 yrs | $ | 5,936 | |||||||||||
Exercisable, at June 30, 2006 | 1,380,134 | $ | 16.56 | 4.1 yrs | $ | 7,687 | |||||||||||
(1) | The intrinsic value of options exercised during the six months ended June 30, 2005 was $26,000. The aggregate intrinsic value of options outstanding and exercisable at June 30, 2006 is calculated as the difference between the exercise price of the underlying options and the market price of our common stock for shares that had exercise prices lower than our per share closing market price at June 30, 2006, which was $10.99. |
Six Months Ended | |||||
June 30, 2005 | |||||
(In thousands, | |||||
except for per | |||||
share data) | |||||
Net loss applicable to common shares: | |||||
As reported | $ | (41,401 | ) | ||
Fair value compensation expense | (1,460 | ) | |||
Pro forma | $ | (42,861 | ) | ||
WEIGHTED AVERAGE SHARES USED TO COMPUTE LOSS PER BASIC AND DILUTED SHARE | 12,323 | ||||
Net loss per basic and diluted share: | |||||
As reported | $ | (3.36 | ) | ||
Fair value compensation expense | (.12 | ) | |||
Pro forma | $ | (3.48 | ) | ||
F-61
Table of Contents
Deferred Debt Issuance Costs |
F-62
Table of Contents
June 30, | December 31, | |||||||
2006 | 2005 | |||||||
Revolving credit facility | $ | 58,000 | $ | 58,000 | ||||
Senior subordinated floating rate notes | 175,000 | 175,000 | ||||||
81/4% senior secured notes | 510,000 | 350,000 | ||||||
Senior secured floating rate notes | — | 160,000 | ||||||
97/8% senior notes | 325,000 | 325,000 | ||||||
93/4% senior subordinated notes | 300,000 | 300,000 | ||||||
113/8% senior exchangeable preferred stock | 144,149 | 148,708 | ||||||
Accrued dividends on 113/8% senior exchangeable preferred stock | 32,983 | 32,520 | ||||||
121/4% junior exchangeable preferred stock | 255,558 | 255,558 | ||||||
Accrued dividends on 121/4% junior exchangeable preferred stock | 46,154 | 28,490 | ||||||
Deferred tax liability | 13,352 | 13,561 | ||||||
Premium on senior secured notes offering | 6,252 | — | ||||||
Discount on senior subordinated floating rate notes | (2,035 | ) | (2,132 | ) | ||||
Other | 5,936 | 3,289 | ||||||
Long-term liabilities | $ | 1,870,349 | $ | 1,847,994 | ||||
F-63
Table of Contents
F-64
Table of Contents
As of | ||||
June 30, 2006 | ||||
Preferred securities originally issued | $ | 110,000 | ||
Accrued dividends | 70,350 | |||
Unamortized issuance costs | (2,233 | ) | ||
$ | 178,117 | |||
F-65
Table of Contents
Six Months Ended | ||||||||
June 30, | ||||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Interest expense on credit facility | $ | 2,262 | $ | — | ||||
Interest expense on senior secured notes | 22,454 | 20,334 | ||||||
Interest expense on senior notes | 16,047 | 16,047 | ||||||
Interest expense on senior subordinated notes | 23,980 | 20,641 | ||||||
Amortization of debt issuance costs | 2,381 | 2,340 | ||||||
Write-off of debt issuance costs | 2,795 | 151 | ||||||
Senior and junior preferred stock dividends | 27,572 | 27,670 | ||||||
Effect of derivative instruments | (726 | ) | (343 | ) | ||||
Gain on repurchase of senior exchangeable preferred stock | (173 | ) | (5,554 | ) | ||||
Other | 3,371 | (958 | ) | |||||
$ | 99,963 | $ | 80,328 | |||||
8) | GUARANTOR/ NON-GUARANTOR CONDENSED CONSOLIDATING FINANCIAL INFORMATION |
F-66
Table of Contents
Guarantor | Non-Guarantor | ||||||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
CURRENT ASSETS: | |||||||||||||||||||||||
Cash and cash equivalents | $ | 98,614 | $ | 3,134 | $ | 33 | $ | — | $ | 101,781 | |||||||||||||
Short term investments | 69,222 | — | — | — | 69,222 | ||||||||||||||||||
Accounts receivable, less allowance for doubtful accounts | 24,647 | 38,539 | 1,827 | — | 65,013 | ||||||||||||||||||
Inventories | 1,403 | 4,818 | 195 | — | 6,416 | ||||||||||||||||||
Other current assets | 2,075 | 2,534 | 64 | — | 4,673 | ||||||||||||||||||
Current inter-company receivable | 25,288 | 16,639 | — | (41,927 | ) | — | |||||||||||||||||
Total current assets | 221,249 | 65,664 | 2,119 | (41,927 | ) | 247,105 | |||||||||||||||||
PROPERTY AND EQUIPMENT, net | 49,906 | 188,890 | 7,749 | — | 246,545 | ||||||||||||||||||
LICENSES AND OTHER ASSETS: | |||||||||||||||||||||||
Licenses, net | — | 539,834 | 8,679 | — | 548,513 | ||||||||||||||||||
Goodwill, net | 3,151 | 345,533 | — | — | 348,684 | ||||||||||||||||||
Customer lists, net | 800 | 19,218 | — | — | 20,018 | ||||||||||||||||||
Deferred debt issuance costs, net | 24,306 | — | — | — | 24,306 | ||||||||||||||||||
Investment in consolidated subsidiaries | 1,123,102 | — | — | (1,123,102 | ) | — | |||||||||||||||||
Other assets, net | 3,110 | 3,797 | 2,066 | (3,119 | ) | 5,854 | |||||||||||||||||
Total licenses and other assets | 1,154,469 | 908,382 | 10,745 | (1,126,221 | ) | 947,375 | |||||||||||||||||
$ | 1,425,624 | $ | 1,162,936 | $ | 20,613 | $ | (1,168,148 | ) | $ | 1,441,025 | |||||||||||||
CURRENT LIABILITIES: | |||||||||||||||||||||||
Accounts payable | $ | 18,804 | $ | 15,631 | $ | 551 | $ | — | $ | 34,986 | |||||||||||||
Advance billings and customer deposits | 2,607 | 8,509 | 245 | — | 11,361 | ||||||||||||||||||
Accrued interest | 43,135 | — | — | — | 43,135 | ||||||||||||||||||
Other accrued expenses | 32,572 | 49,835 | 32 | (75,852 | ) | 6,587 | |||||||||||||||||
Current inter-company payable | — | 48,686 | (6,759 | ) | (41,927 | ) | — | ||||||||||||||||
Total current liabilities | 97,118 | 122,661 | (5,931 | ) | (117,779 | ) | 96,069 | ||||||||||||||||
LONG-TERM LIABILITIES | 1,853,899 | 1,072,304 | 41,141 | (1,096,995 | ) | 1,870,349 | |||||||||||||||||
Total liabilities | 1,951,017 | 1,194,965 | 35,210 | (1,214,774 | ) | 1,966,418 | |||||||||||||||||
REDEEMABLE PREFERRED STOCK | 178,117 | — | — | — | 178,117 | ||||||||||||||||||
SHAREHOLDERS’ EQUITY (DEFICIT): | |||||||||||||||||||||||
Class A common stock; $.01 par value; 200,000 shares authorized,13,869 outstanding | 139 | 2 | — | (2 | ) | 139 | |||||||||||||||||
Class B common stock; $.01 par value; 10,000 shares authorized, 399 outstanding | 4 | — | — | — | 4 | ||||||||||||||||||
Additional paid-in capital | 213,128 | 760,152 | 31,679 | (791,831 | ) | 213,128 | |||||||||||||||||
Accumulated earnings (deficit) | (916,781 | ) | (792,183 | ) | (46,276 | ) | 838,459 | (916,781 | ) | ||||||||||||||
Total shareholders’ equity (deficit) | (703,510 | ) | (32,029 | ) | (14,597 | ) | 46,626 | (703,510 | ) | ||||||||||||||
$ | 1,425,624 | $ | 1,162,936 | $ | 20,613 | $ | (1,168,148 | ) | $ | 1,441,025 | |||||||||||||
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Table of Contents
Guarantor | Non-Guarantor | ||||||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
CURRENT ASSETS: | |||||||||||||||||||||||
Cash and cash equivalents | $ | 84,136 | $ | 2,639 | $ | 47 | $ | — | $ | 86,822 | |||||||||||||
Short-term investments | 66,778 | — | — | — | 66,778 | ||||||||||||||||||
Accounts receivable, less allowance for doubtful accounts | 25,166 | 45,486 | 2,235 | — | 72,887 | ||||||||||||||||||
Inventories | 3,721 | 8,945 | 183 | — | 12,849 | ||||||||||||||||||
Other current assets | 1,590 | 2,606 | 84 | — | 4,280 | ||||||||||||||||||
Current inter-company receivable | 40,778 | 11,460 | — | (52,238 | ) | — | |||||||||||||||||
Total current assets | 222,169 | 71,136 | 2,549 | (52,238 | ) | 243,616 | |||||||||||||||||
PROPERTY AND EQUIPMENT, net | 53,423 | 214,960 | 9,025 | — | 277,408 | ||||||||||||||||||
LICENSES AND OTHER ASSETS: | |||||||||||||||||||||||
Licenses, net | — | 539,834 | 8,679 | — | 548,513 | ||||||||||||||||||
Goodwill, net | 3,151 | 345,533 | — | — | 348,684 | ||||||||||||||||||
Customer lists, net | 956 | 28,345 | — | — | 29,301 | ||||||||||||||||||
Deferred debt issuance costs, net | 27,022 | — | — | — | 27,022 | ||||||||||||||||||
Investment in consolidated subsidiaries | 1,145,748 | — | — | (1,145,748 | ) | — | |||||||||||||||||
Other assets, net | 3,569 | 5,624 | 2,218 | (5,273 | ) | 6,138 | |||||||||||||||||
Total licenses and other assets | 1,180,446 | 919,336 | 10,897 | (1,151,021 | ) | 959,658 | |||||||||||||||||
$ | 1,456,038 | $ | 1,205,432 | $ | 22,471 | $ | (1,203,259 | ) | $ | 1,480,682 | |||||||||||||
CURRENT LIABILITIES: | |||||||||||||||||||||||
Accounts payable | $ | 26,894 | $ | 25,989 | $ | 609 | $ | — | $ | 53,492 | |||||||||||||
Advance billings and customer deposits | 2,395 | 9,239 | 251 | — | 11,885 | ||||||||||||||||||
Accrued interest | 39,336 | — | — | — | 39,336 | ||||||||||||||||||
Other accrued expenses | 34,936 | 49,676 | 39 | (75,670 | ) | 8,981 | |||||||||||||||||
Current inter-company payable | — | 105,672 | (4,435 | ) | (101,237 | ) | — | ||||||||||||||||
Total current liabilities | 103,561 | 190,576 | (3,536 | ) | (176,907 | ) | 113,694 | ||||||||||||||||
LONG-TERM LIABILITIES | 1,833,483 | 1,037,347 | 41,027 | (1,063,863 | ) | 1,847,994 | |||||||||||||||||
Total liabilities | 1,937,044 | 1,227,923 | 37,491 | (1,240,770 | ) | 1,961,688 | |||||||||||||||||
REDEEMABLE PREFERRED STOCK | 170,976 | — | — | — | 170,976 | ||||||||||||||||||
SHAREHOLDERS’ EQUITY (DEFICIT): | |||||||||||||||||||||||
Class A common stock; $.01 par value; 200,000 shares authorized, 13,530 outstanding | 135 | 918 | — | (918 | ) | 135 | |||||||||||||||||
Class B common stock; $.01 par value; 10,000 shares authorized, 427 outstanding | 4 | — | — | — | 4 | ||||||||||||||||||
Additional paid-in capital | 212,420 | 760,152 | 31,679 | (791,831 | ) | 212,420 | |||||||||||||||||
Accumulated earnings (deficit) | (862,742 | ) | (783,561 | ) | (46,699 | ) | 830,260 | (862,742 | ) | ||||||||||||||
Unearned compensation | (1,799 | ) | — | — | — | (1,799 | ) | ||||||||||||||||
Total shareholders’ equity (deficit) | (651,982 | ) | (22,491 | ) | (15,020 | ) | 37,511 | (651,982 | ) | ||||||||||||||
$ | 1,456,038 | $ | 1,205,432 | $ | 22,471 | $ | (1,203,259 | ) | $ | 1,480,682 | |||||||||||||
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Table of Contents
Guarantor | Non-Guarantor | |||||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
REVENUE: | ||||||||||||||||||||||
Service | $ | 52,499 | $ | 138,039 | $ | 3,165 | $ | (794 | ) | $ | 192,909 | |||||||||||
Roaming | 15,152 | 48,376 | 3,938 | — | 67,466 | |||||||||||||||||
Equipment | 2,677 | 10,024 | 254 | — | 12,955 | |||||||||||||||||
Total revenue | 70,328 | 196,439 | 7,357 | (794 | ) | 273,330 | ||||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||||
Network costs, excluding depreciation | 14,919 | 51,334 | 1,512 | (596 | ) | 67,169 | ||||||||||||||||
Cost of equipment sales | 6,296 | 19,568 | 385 | — | 26,249 | |||||||||||||||||
Selling, general and administrative | 29,679 | 39,566 | 1,910 | (198 | ) | 70,957 | ||||||||||||||||
Depreciation and amortization | 10,370 | 48,196 | 1,492 | — | 60,058 | |||||||||||||||||
Total operating expenses | 61,264 | 158,664 | 5,299 | (794 | ) | 224,433 | ||||||||||||||||
OPERATING INCOME | 9,064 | 37,775 | 2,058 | — | 48,897 | |||||||||||||||||
OTHER INCOME (EXPENSE): | ||||||||||||||||||||||
Interest expense | (99,929 | ) | (52,126 | ) | (1,622 | ) | 53,714 | (99,963 | ) | |||||||||||||
Interest and dividend income | 57,395 | 69 | — | (53,714 | ) | 3,750 | ||||||||||||||||
Inter-company charges | 8,742 | (8,742 | ) | — | — | — | ||||||||||||||||
Equity in subsidiaries | (22,225 | ) | — | — | 22,225 | — | ||||||||||||||||
Other | 2 | 215 | (13 | ) | — | 204 | ||||||||||||||||
Other expense, net | (56,015 | ) | (60,584 | ) | (1,635 | ) | 22,225 | (96,009 | ) | |||||||||||||
INCOME (LOSS) BEFORE INCOME TAXES | (46,951 | ) | (22,809 | ) | 423 | 22,225 | (47,112 | ) | ||||||||||||||
INCOME TAX PROVISION (BENEFIT) | (48 | ) | (13,692 | ) | — | 13,531 | (209 | ) | ||||||||||||||
NET INCOME (LOSS) | (46,903 | ) | (9,117 | ) | 423 | 8,694 | (46,903 | ) | ||||||||||||||
PREFERRED STOCK DIVIDEND | (7,136 | ) | — | — | — | (7,136 | ) | |||||||||||||||
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES | $ | (54,039 | ) | $ | (9,117 | ) | $ | 423 | $ | 8,694 | $ | (54,039 | ) | |||||||||
F-69
Table of Contents
Guarantor | Non-Guarantor | |||||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
REVENUE: | ||||||||||||||||||||||
Service | $ | 45,367 | $ | 144,757 | $ | 3,845 | $ | (409 | ) | $ | 193,560 | |||||||||||
Roaming | 8,592 | 32,016 | 4,128 | (2 | ) | 44,734 | ||||||||||||||||
Equipment | 3,062 | 15,091 | 321 | — | 18,474 | |||||||||||||||||
Total revenue | 57,021 | 191,864 | 8,294 | (411 | ) | 256,768 | ||||||||||||||||
OPERATING EXPENSES: | ||||||||||||||||||||||
Network costs, excluding depreciation | 10,008 | 44,244 | 1,543 | (303 | ) | 55,492 | ||||||||||||||||
Cost of equipment sales | 5,514 | 22,927 | 568 | — | 29,009 | |||||||||||||||||
Selling, general and administrative | 17,344 | 53,706 | 2,532 | (108 | ) | 73,474 | ||||||||||||||||
Depreciation and amortization | 8,954 | 36,081 | 1,891 | — | 46,926 | |||||||||||||||||
Impairment of assets | 7,020 | — | — | — | 7,020 | |||||||||||||||||
Total operating expenses | 48,840 | 156,958 | 6,534 | (411 | ) | 211,921 | ||||||||||||||||
OPERATING INCOME | 8,181 | 34,906 | 1,760 | — | 44,847 | |||||||||||||||||
OTHER INCOME (EXPENSE): | ||||||||||||||||||||||
Interest expense | (80,284 | ) | (52,136 | ) | (1,467 | ) | 53,559 | (80,328 | ) | |||||||||||||
Interest and dividend income | 54,210 | 9 | 2 | (53,559 | ) | 662 | ||||||||||||||||
Inter-company charges | 6,787 | (6,787 | ) | — | — | — | ||||||||||||||||
Equity in subsidiaries | (23,535 | ) | — | — | 23,535 | — | ||||||||||||||||
Other | 7 | (31 | ) | — | — | (24 | ) | |||||||||||||||
Other expense, net | (42,815 | ) | (58,945 | ) | (1,465 | ) | 23,535 | (79,690 | ) | |||||||||||||
INCOME (LOSS) BEFORE INCOME TAXES | (34,634 | ) | (24,039 | ) | 295 | 23,535 | (34,843 | ) | ||||||||||||||
INCOME TAX PROVISION (BENEFIT) | — | (740 | ) | — | 531 | (209 | ) | |||||||||||||||
NET INCOME (LOSS) | (34,634 | ) | (23,299 | ) | 295 | 23,004 | (34,634 | ) | ||||||||||||||
PREFERRED STOCK DIVIDEND | (6,767 | ) | — | — | — | (6,767 | ) | |||||||||||||||
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES | $ | (41,401 | ) | $ | (23,299 | ) | $ | 295 | $ | 23,004 | $ | (41,401 | ) | |||||||||
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Guarantor | Non-Guarantor | |||||||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||||
OPERATING ACTIVITIES: | ||||||||||||||||||||||||
Net income (loss) | $ | (46,903 | ) | $ | (9,117 | ) | $ | 423 | $ | 8,694 | $ | (46,903 | ) | |||||||||||
Adjustments to reconcile to net cash (used in) provided by operating activities: | ||||||||||||||||||||||||
Depreciation and customer list amortization | 10,370 | 48,196 | 1,492 | — | 60,058 | |||||||||||||||||||
Loss on write-off of senior exchangeable preferred stock issuance costs | 2,795 | — | — | — | 2,795 | |||||||||||||||||||
Mark-to-market adjustments — financial instruments | (726 | ) | — | — | — | (726 | ) | |||||||||||||||||
Gain on repurchase of senior exchangeable preferred stock | (173 | ) | — | — | — | (173 | ) | |||||||||||||||||
Stock-based compensation | 467 | — | — | — | 467 | |||||||||||||||||||
Deferred income taxes | (48 | ) | (13,692 | ) | — | 13,531 | (209 | ) | ||||||||||||||||
Other | 1,631 | (203 | ) | 14 | — | 1,442 | ||||||||||||||||||
Change in other operating elements: | ||||||||||||||||||||||||
Accounts receivable | (164 | ) | 4,609 | 316 | — | 4,761 | ||||||||||||||||||
Inventories | 2,319 | 4,127 | (13 | ) | — | 6,433 | ||||||||||||||||||
Other current assets | (479 | ) | 66 | 20 | — | (393 | ) | |||||||||||||||||
Accounts payable | (7,146 | ) | (3,419 | ) | 90 | — | (10,475 | ) | ||||||||||||||||
Advance billings and customer deposits | 207 | (725 | ) | (5 | ) | — | (523 | ) | ||||||||||||||||
Accrued senior and junior exchangeable preferred stock dividends | 19,258 | — | — | — | 19,258 | |||||||||||||||||||
Accrued interest | 3,800 | — | — | — | 3,800 | |||||||||||||||||||
Other accrued expenses | (2,615 | ) | 227 | (6 | ) | — | (2,394 | ) | ||||||||||||||||
Net cash provided by (used in) operating activities | (17,407 | ) | 30,069 | 2,331 | 22,225 | 37,218 | ||||||||||||||||||
INVESTING ACTIVITIES: | ||||||||||||||||||||||||
Purchases of property and equipment | (6,716 | ) | (16,934 | ) | (20 | ) | — | (23,670 | ) | |||||||||||||||
Purchases of short-term investments | (78,443 | ) | — | — | — | (78,443 | ) | |||||||||||||||||
Maturities of short-term investments | 78,000 | — | — | — | 78,000 | |||||||||||||||||||
Proceeds from sale of property and equipment | 99 | 1,488 | — | — | 1,587 | |||||||||||||||||||
Other | 458 | (503 | ) | — | — | (45 | ) | |||||||||||||||||
Net cash used in investing activities | (6,602 | ) | (15,949 | ) | (20 | ) | — | (22,571 | ) | |||||||||||||||
FINANCING ACTIVITIES: | ||||||||||||||||||||||||
Change in parent company receivable and payable | 38,175 | (13,625 | ) | (2,325 | ) | (22,225 | ) | — | ||||||||||||||||
Proceeds from issuance of common stock related to employee stock purchase plan and stock options | 2,058 | — | — | — | 2,058 | |||||||||||||||||||
Proceeds from issuance of 81/4% senior secured notes | 166,600 | — | — | — | 166,600 | |||||||||||||||||||
Retirement of senior secured floating rate notes | (160,000 | ) | — | — | — | (160,000 | ) | |||||||||||||||||
Repurchase of senior exchangeable preferred stock | (5,518 | ) | — | — | — | (5,518 | ) | |||||||||||||||||
Other | (2,828 | ) | — | — | — | (2,828 | ) | |||||||||||||||||
Net cash (used in) provided by financing activities | 38,487 | (13,625 | ) | (2,325 | ) | (22,225 | ) | 312 | ||||||||||||||||
NET (DECREASE) INCREASE IN CASH | 14,478 | 495 | (14 | ) | — | 14,959 | ||||||||||||||||||
CASH AND CASH EQUIVALENTS, at beginning of year | 84,136 | 2,639 | 47 | — | 86,822 | |||||||||||||||||||
CASH AND CASH EQUIVALENTS, at end of period | $ | 98,614 | $ | 3,134 | $ | 33 | $ | — | $ | 101,781 | ||||||||||||||
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Guarantor | Non Guarantor | |||||||||||||||||||||||
Parent | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||||
OPERATING ACTIVITIES: | ||||||||||||||||||||||||
Net income (loss) | $ | (34,634 | ) | $ | (23,299 | ) | $ | 295 | $ | 23,004 | $ | (34,634 | ) | |||||||||||
Adjustments to reconcile to net cash provided by operating activities: | ||||||||||||||||||||||||
Depreciation and customer list amortization | 8,954 | 36,081 | 1,891 | — | 46,926 | |||||||||||||||||||
Loss on write-off of debt issuance costs | 151 | — | — | — | 151 | |||||||||||||||||||
Gain on repurchase of senior exchangeable preferred stock | (5,554 | ) | — | — | — | (5,554 | ) | |||||||||||||||||
Non-cash preferred stock dividends | 3,797 | — | — | — | 3,797 | |||||||||||||||||||
Impairment of assets | 7,020 | — | — | — | 7,020 | |||||||||||||||||||
Stock based compensation | 109 | — | — | — | 109 | |||||||||||||||||||
Deferred income taxes | — | (740 | ) | — | 531 | (209 | ) | |||||||||||||||||
Other | 2,453 | 41 | (1 | ) | — | 2,493 | ||||||||||||||||||
Change in other operating elements: | ||||||||||||||||||||||||
Accounts receivable | 436 | (5,691 | ) | 27 | — | (5,228 | ) | |||||||||||||||||
Inventories | 708 | (2,398 | ) | 3 | — | (1,687 | ) | |||||||||||||||||
Other current assets | (827 | ) | 133 | 17 | — | (677 | ) | |||||||||||||||||
Accounts payable | (6,409 | ) | 1,348 | (162 | ) | — | (5,223 | ) | ||||||||||||||||
Advance billings and customer deposits | 113 | 316 | (20 | ) | — | 409 | ||||||||||||||||||
Accrued senior and junior exchangeable preferred stock dividends | 23,873 | — | — | — | 23,873 | |||||||||||||||||||
Accrued interest | 26 | — | — | — | 26 | |||||||||||||||||||
Other accrued expenses | (143 | ) | 1,322 | 10 | — | 1,189 | ||||||||||||||||||
Net cash provided by operating activities | 73 | 7,113 | 2,060 | 23,535 | 32,781 | |||||||||||||||||||
INVESTING ACTIVITIES: | ||||||||||||||||||||||||
Purchases of property and equipment | (9,858 | ) | (54,680 | ) | (111 | ) | — | (64,649 | ) | |||||||||||||||
Proceeds from sale of property and equipment | 12 | 77 | — | — | 89 | |||||||||||||||||||
Other | (76 | ) | (1 | ) | — | — | (77 | ) | ||||||||||||||||
Net cash used in investing activities | (9,922 | ) | (54,604 | ) | (111 | ) | — | (64,637 | ) | |||||||||||||||
FINANCING ACTIVITIES: | ||||||||||||||||||||||||
Change in parent company receivable and payable | (23,082 | ) | 48,554 | (1,937 | ) | (23,535 | ) | — | ||||||||||||||||
Proceeds from issuance of common stock related to employee stock purchase plan and stock options | 408 | — | — | — | 408 | |||||||||||||||||||
Repurchase of preferred stock | (13,355 | ) | — | — | — | (13,355 | ) | |||||||||||||||||
Other | (65 | ) | — | — | — | (65 | ) | |||||||||||||||||
Net cash (used in) provided by financing activities | (36,094 | ) | 48,554 | (1,937 | ) | (23,535 | ) | (13,012 | ) | |||||||||||||||
NET INCREASE (DECREASE) IN CASH | (45,943 | ) | 1,063 | 12 | — | (44,868 | ) | |||||||||||||||||
CASH AND CASH EQUIVALENTS, at beginning of year | 84,068 | 1,253 | 18 | — | 85,339 | |||||||||||||||||||
CASH AND CASH EQUIVALENTS, at end of period | $ | 38,125 | $ | 2,316 | $ | 30 | $ | — | $ | 40,471 | ||||||||||||||
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Item 20. | Indemnification of Directors and Officers |
(a) in the case of conduct in the director’s official capacity with the corporation, that the director’s conduct was in the corporation’s best interests and | |
(b) in all other cases that the director’s conduct was at least not opposed to the corporation’s best interests and |
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Item 21. | Exhibits and Financial Statement Schedules |
Exhibit | ||||||
Number | Document | |||||
3 | .1(a) | Articles of Incorporation | [1] | |||
3 | .1(b) | Amendments to Articles of Incorporation effective March 24, 2000 | [1] | |||
3 | .2(a) | Amended and Restated Bylaws | [1] | |||
3 | .2(b) | Amendment to Amended and Restated Bylaws effective March 22, 2000 | [1] | |||
3 | .3 | Articles of Incorporation of Alexandria Indemnity Corporation | [2] | |||
3 | .4 | Bylaws of Alexandria Indemnity Corporation | [2] | |||
3 | .5 | Articles of Incorporation of RCC Atlantic, Inc. | [2] | |||
3 | .6 | Amended and Restated Bylaws of RCC Atlantic, Inc. | [2] | |||
3 | .7 | Articles of Organization of RCC Atlantic Licenses, LLC | [2] | |||
3 | .8 | Bylaws of RCC Atlantic Licenses, LLC | [2] | |||
3 | .9 | Articles of Incorporation of RCC Minnesota, Inc. | [2] | |||
3 | .10 | Amended and Restated Bylaws of RCC Minnesota, Inc. | [2] | |||
3 | .11 | Articles of Incorporation of RCC Transport, Inc. | [2] | |||
3 | .12 | Bylaws of RCC Transport, Inc. | [2] | |||
3 | .13 | Articles of Organization of TLA Spectrum, LLC | [2] | |||
3 | .14 | Operating Agreement of TLA Spectrum, LLC | [2] | |||
4 | .1(a) | Indenture dated March 25, 2004, between Rural Cellular Corporation and U.S. Bank National Association, as trustee, with respect to the senior secured notes, including the forms of Senior Secured Notes | [3] | |||
4 | .1(b) | Collateral Agreement dated as of March 25, 2004, made by Rural Cellular Corporation and each of its subsidiaries that are signatories in favor of U.S. Bank National Association, as Collateral Trustee | [3] | |||
4 | .1(c) | Registration Rights Agreement dated as of May 5, 2006 by and among Rural Cellular Corporation as Issuer and Lehman Brothers Inc., Morgan Stanley & Co. Incorporated, and Lazard Capital Markets as the Initial Purchasers | * | |||
4 | .2 | Indenture dated August 1, 2003 between Rural Cellular Corporation, as Issuer, and U.S. Bank National Association, as Trustee, with respect to the 97/8% Senior Notes Due 2010, including the form of 97/8% Senior Notes Due 2010 | [4] | |||
4 | .3 | Indenture dated January 16, 2002 between Rural Cellular Corporation, as Issuer, and Wells Fargo Bank Minnesota, N.A., as Trustee, with respect to the 93/4% Senior Subordinated Notes Due 2010, including form of 93/4% Senior Subordinated Notes Due 2010 | [5] | |||
4 | .4 | Indenture dated November 1, 2005 between Rural Cellular Corporation, as Issuer, and Wells Fargo Bank, National Association, as Trustee, with respect to the Senior Subordinated Floating Rate Notes Due 2012, including form of Senior Subordinated Floating Rate Notes Due 2012 | [6] | |||
4 | .5 | Certificate of Designation of 113/8% Senior Exchangeable Preferred Stock | [7] | |||
4 | .6 | Certificate of Designation of 121/4% Junior Exchangeable Preferred Stock | [1] | |||
4 | .7(a) | Class A Share Rights Agreement dated April 30, 1999 | [8] | |||
4 | .7(b) | Amendment to the Class A Share Rights Agreement dated March 31, 2000 | [9] |
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Exhibit | ||||||
Number | Document | |||||
4 | .8(a) | Registration Rights Agreement dated March 31, 2000 by and between Rural Cellular Corporation and Telephone and Data Systems, Inc. | [10] | |||
4 | .8(b) | Certificate of Designation of Voting Power, Preferences and Relative Participating, Optional and Other Special Rights, Qualifications and Restrictions of Class T Convertible Preferred Stock of Rural Cellular Corporation | [10] | |||
4 | .9(a) | Preferred Stock Purchase Agreement dated April 3, 2000 among Rural Cellular Corporation, Madison Dearborn Capital Partners III, L.P., Madison Dearborn Special Equity III, L.P., Special Advisors Fund I, LLC, Boston Ventures Limited Partnership V and Toronto Dominion Investment, Inc. (collectively “Class M Investors”) | [10] | |||
4 | .9(b) | Certificate of Designation of Voting Power, Preferences and Relative Participating, Optional and Other Special Rights, Qualifications and Restrictions of Class M Redeemable Voting Convertible Preferred Stock of Rural Cellular Corporation | [10] | |||
4 | .9(c) | Registration Rights Agreement dated April 3, 2000 among Rural Cellular Corporation and Class M Investors | [10] | |||
5 | .1 | Opinion of Moss & Barnett, A Professional Association | * | |||
5 | .2 | Opinion of Elizabeth L. Kohler, Esq. | * | |||
10 | .1(a) | Credit Agreement dated as of March 25, 2004 among Rural Cellular Corporation, Lehman Commercial Paper, Inc., as Administrative Agent, and Bank of America, N.A., as Documentation Agent. | [2] | |||
10 | .1(b) | First Amendment to Credit Agreement dated October 18, 2005 | [11] | |||
10 | .1(c) | Second Amendment to Credit Agreement dated as of May 22, 2006 | [11] | |||
10 | .1(d) | Guarantee and Collateral Agreement dated as of March 25, 2004 among Rural Cellular Corporation, Lehman Commercial Paper Inc., as Administrative Agent, and Bank of America, N.A., as Documentation Agent. | [2] | |||
10 | .1(e) | Intercreditor Agreement, dated as of March 25, 2004, among Lehman Commercial Paper Inc., as Senior Agent and Account Agent, U.S. Bank National Association, as Indenture Trustee and Collateral Trustee, Rural Cellular Corporation, a Minnesota corporation, and the Guarantors. | [2] | |||
10 | .2 | 1995 Stock Compensation Plan, as amended to date | [12] | |||
10 | .2(a) | Form of Restricted Stock Award Agreement pursuant to 1995 Stock Compensation Plan | [2] | |||
10 | .3 | Stock Option Plan for Nonemployee Directors, as amended to date | [13] | |||
10 | .4(a) | Employment Agreement with Richard P. Ekstrand effective January 22, 1999 | [14] | |||
10 | .4(b) | Amendment to Employment Agreement with Richard P. Ekstrand effective January 1, 2001 | [15] | |||
10 | .4(c) | Second Amendment to Employment Agreement with Richard P. Ekstrand effective July 24, 2001 | [16] | |||
10 | .4(d) | Third Amendment to Employment Agreement with Richard P. Ekstrand effective August 23, 2001 | [16] | |||
10 | .4(e) | Fourth Amendment to Employment with Richard P. Ekstrand effective February 27, 2003 | [17] | |||
10 | .4(f) | Fifth Amendment to Employment with Richard P. Ekstrand effective February 17, 2005 | [18] | |||
10 | .5(a) | Employment Agreement with Wesley E. Schultz effective January 22, 1999 | [14] | |||
10 | .5(b) | Amendment to Employment Agreement with Wesley E. Schultz effective January 1, 2001 | [15] | |||
10 | .5(c) | Second Amendment to Employment Agreement with Wesley E. Schultz effective July 24, 2001 | [16] |
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Exhibit | ||||||
Number | Document | |||||
10 | .5(d) | Third Amendment to Employment Agreement with Wesley E. Schultz effective August 23, 2001 | [16] | |||
10 | .5(e) | Fourth Amendment to Employment Agreement with Wesley E. Schultz effective February 17, 2005 | [18] | |||
10 | .6(a) | Employment Agreement with Ann K. Newhall effective February 6, 1999 | [19] | |||
10 | .6(b) | Amendment to Employment Agreement with Ann K. Newhall effective January 1, 2001 | [15] | |||
10 | .6(c) | Second Amendment to Employment Agreement with Ann K. Newhall effective July 24, 2001 | [16] | |||
10 | .6(d) | Third Amendment to Employment Agreement with Ann K. Newhall effective August 23, 2001 | [16] | |||
10 | .6(e) | Fourth Amendment to Employment Agreement with Ann K. Newhall effective February 17, 2005 | [18] | |||
10 | .7(a) | Change of Control Agreement with David Del Zoppo effective January 2, 2001 | [15] | |||
10 | .7(b) | Amendment to Change of Control Agreement with David Del Zoppo effective July 24, 2001 | [16] | |||
10 | .8(a) | Key Employee Deferred Compensation Plan | [20] | |||
10 | .8(b) | Amendment to Key Employee Deferred Compensation Plan | [21] | |||
10 | .8(c) | Second Amendment to Key Employee Deferred Compensation Plan | [5] | |||
10 | .9 | Key Employee Deferred Compensation Plan II | [5] | |||
10 | .10 | 2006 Omnibus Incentive Plan | [22] | |||
10 | .10(a) | Form of Agreement for Performance Restricted Stock Units for Officers | [23] | |||
10 | .10(b) | Form of Agreement for Restricted Stock Units for Directors | [23] | |||
**10 | .11(a) | Master Purchase Agreement dated March 14, 2002 by and between Rural Cellular Corporation and Ericsson Inc. | [24] | |||
**10 | .11(b) | Addendum dated August 4, 2003 to Master Purchase Agreement | [24] | |||
**10 | .12(a) | Intercarrier Multi-Standard Roaming and Colocation Agreement by and between Cingular Wireless LLC and Rural Cellular Corporation effective June 6, 2003 (“Roaming Agreement”) | [11] | |||
**10 | .12(b) | Amendment No. 1 to Roaming Agreement | [11] | |||
**10 | .13 | Billing Services and License Agreement between VeriSign, Inc. and Rural Cellular Corporation | [25] | |||
12 | Statements re Computation of Ratio of Earnings to Fixed Charges | *** | ||||
21 | Subsidiaries of Registrant | [5] | ||||
23 | .1 | Consent of Deloitte & Touche LLP | *** | |||
23 | .2 | Consent of Deloitte & Touche LLP | *** | |||
23 | .3 | Consent of Moss & Barnett, A Professional Association (included in Exhibit 5.1) | * | |||
23 | .4 | Consent of Elizabeth L. Kohler (included in Exhibit 5.2) | * | |||
24 | Power of Attorney from Messrs. Ekstrand, Schultz, Del Zoppo, Bolland, Continenza, Finnegan, Leduc, Revering, Swenson, and Wikstrom and Ms. Newhall (included on signature page) | * | ||||
25 | Statement of Eligibility of Trustee | * | ||||
99 | .1 | Form of Letter of Transmittal for Senior Subordinated Notes | * | |||
99 | .2 | Form of Notice of Guaranteed Delivery for Senior Subordinated Notes | * | |||
99 | .3 | Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies, and Other Nominees for Senior Subordinated Notes | * |
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Exhibit | ||||||
Number | Document | |||||
99 | .4 | Form of Letter to Clients of Brokers, Dealers, Commercial Banks, Trust Companies, and Other Nominees for Senior Subordinated Notes | * | |||
99 | .5 | Form of Instruction from Owner of Senior Subordinated Notes | * |
[1] | Filed as an exhibit to Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference. | |
[2] | Filed as an exhibit to Regulation Statement on Form S-4 (SEC No. 333-118973), filed September 14, 2004, and incorporated herein by reference. | |
[3] | Filed as an exhibit to Report on Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference. | |
[4] | Filed with Report on Form 10-Q for quarter ended June 30, 2003, and incorporated herein by reference. | |
[5] | Filed as an Exhibit to Report on Form 10-K for year ended December 31, 2001, and incorporated herein by reference. | |
[6] | Filed as an exhibit to Report on Form 10-K for the year ended December 31, 2005 and incorporated herein by reference. | |
[7] | Filed as an exhibit to Registration Statement on Form S-4 (SEC No. 333-57677), filed June 25, 1998, and incorporated herein by reference. | |
[8] | Filed as an exhibit to Registration Statement on Form 8-A filed May 19, 1999 and incorporated herein by reference. | |
[9] | Filed as an exhibit to Registration Statement on Form 8-A/ A-1 filed April 18, 2000 and incorporated herein by reference. |
[10] | Filed as an exhibit to Report on Form 8-K dated April 1, 2000 and incorporated herein by reference. |
[11] | Filed as an exhibit to Amendment No. 1 to Registration Statement on Form S-4 (SEC No. 333-132744) and incorporated herein by reference. |
[12] | Filed with definitive Proxy Statement for 2000 Annual Meeting on April 7, 2000 and incorporated herein by reference. |
[13] | Filed with definitive Proxy Statement for 2002 Annual Meeting on April 8, 2002 and incorporated herein by reference. |
[14] | Filed as an exhibit to Report on Form 10-K for the year ended December 31, 1998 and incorporated herein by reference. |
[15] | Filed as an exhibit to Report on Form 10-K for the year ended December 31, 2000, and incorporated herein by reference. |
[16] | Filed as an exhibit to Report on Form 10-Q/ A for the quarter ended September 30, 2001, and incorporated herein by reference. |
[17] | Filed as an exhibit to Report on Form 10-K for the year ended December 31, 2004 and incorporated herein by reference. |
[18] | Filed as an exhibit to Report on Form 10-Q for the quarter ended March 31, 2005, and incorporated herein by reference. |
[19] | Filed as an exhibit to Report on Form 10-Q for the quarter ended March 31, 1999 and incorporated herein by reference. |
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[20] | Filed as an exhibit to Report on Form 10-Q/ A for the quarter ended June 30, 2001, and incorporated herein by reference. |
[21] | Filed as an exhibit to Report on Form 10-K for year ended December 31, 2002, and incorporated herein by reference |
[22] | Filed as an exhibit to Report on Form8-K dated May 22, 2006, and incorporated herein by reference. |
[23] | Filed as an exhibit to Report on Form10-Q for the quarter ended June 30, 2006, and incorporated herein by reference. |
[24] | Filed as an exhibit to Report on Form 10-K/ A for the year ended December 31, 2003, and incorporated herein by reference. |
[25] | Filed as an exhibit to Report on Form 10-Q for the quarter ended September 30, 2005, and incorporated herein by reference. |
* | Filed previously. |
** | Portions of this exhibit have been omitted and filed separately with the Secretary of the Securities and Exchange Commission pursuant to Registrant’s request for confidential treatment of such information under Rule 24b-2 of the Securities Exchange Act of 1934. |
*** | Filed herewith |
(b) | Financial Statement Schedule |
(a) The undersigned registrant hereby undertakes: |
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: |
(i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; | |
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and | |
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. |
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and |
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(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrants pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrants of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. | |
(d) The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. |
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Rural Cellular Corporation |
By: | /s/ Richard P. Ekstrand |
Richard P. Ekstrand | |
President and C.E.O. |
Signature | Title | |||
* | President and Chief Executive Officer (Principal Executive Officer) and Director | |||
/s/ Wesley E. Schultz | Executive Vice President, Chief Financial Officer (Principal Financial Officer) and Director | |||
/s/ David J. Del Zoppo | Vice President — Finance and Accounting (Principal Accounting Officer) | |||
* | Director | |||
Director | ||||
* | Director | |||
Director | ||||
/s/ Ann K. Newhall | Director | |||
Director | ||||
* | Director | |||
* | Director | |||
*By | /s/ Richard P. Ekstrand |
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Alexandria Indemnity Corporation |
By: | /s/ Richard P. Ekstrand |
Richard P. Ekstrand | |
President and C.E.O. |
Signature | Title | |||
* | President and Chief Executive Officer (Principal Executive Officer) and Director | |||
/s/ Wesley E. Schultz | Treasurer (Principal Financial Officer) and Director | |||
* | Director | |||
*By | /s/ Richard P. Ekstrand |
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RCC Atlantic, Inc. |
By: | /s/ Richard P. Ekstrand |
Richard P. Ekstrand | |
President and C.E.O. |
Signature | Title | |||
/s/ Richard P. Ekstrand | President and Chief Executive Officer (Principal Executive Officer) and Director | |||
/s/ Wesley E. Schultz | Executive Vice President, Chief Financial Officer (Principal Financial Officer) and Director | |||
/s/ David J. Del Zoppo | Vice President — Finance and Accounting (Principal Accounting Officer) | |||
/s/ Ann K. Newhall | Director |
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RCC Atlantic Licenses, LLC |
By: | /s/ Richard P. Ekstrand |
Richard P. Ekstrand | |
President and Chief Manager |
Signature | Title | |||
/s/ Richard P. Ekstrand | President and Chief Manager (Principal Executive Officer) and Governor | |||
/s/ Wesley E. Schultz | Executive Vice President, Chief Financial Officer (Principal Financial Officer) and Governor | |||
/s/ David J. Del Zoppo | Vice President — Finance and Accounting (Principal Accounting Officer) | |||
/s/ Ann K. Newhall | Governor |
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RCC Minnesota, Inc. |
By: | /s/ Richard P. Ekstrand |
Richard P. Ekstrand | |
President and C.E.O. |
Signature | Title | |||
/s/ Richard P. Ekstrand | President and Chief Executive Officer (Principal Executive Officer) and Director | |||
/s/ Wesley E. Schultz | Executive Vice President, Chief Financial Officer (Principal Financial Officer) and Director | |||
/s/ David J. Del Zoppo | Vice President — Finance and Accounting (Principal Accounting Officer) | |||
/s/ Ann K. Newhall | Director |
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RCC Transport, Inc. |
By: | /s/ Richard P. Ekstrand |
Richard P. Ekstrand | |
President and C.E.O. |
Signature | Title | |||
/s/ Richard P. Ekstrand | President and Chief Executive Officer (Principal Executive Officer) and Director | |||
/s/ Wesley E. Schultz | Executive Vice President, Chief Financial Officer (Principal Financial Officer) and Director | |||
/s/ David J. Del Zoppo | Vice President — Finance and Accounting (Principal Accounting Officer) | |||
/s/ Ann K. Newhall | Director |
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TLA Spectrum, LLC |
By: | /s/ Richard P. Ekstrand |
Richard P. Ekstrand | |
President and Chief Manager |
Signature | Title | |||
/s/ Richard P. Ekstrand | President and Chief Manager (Principal Executive Officer) and Governor | |||
/s/ Wesley E. Schultz | Executive Vice President, Chief Financial Officer (Principal Financial Officer) and Governor | |||
/s/ David J. Del Zoppo | Vice President — Finance and Accounting (Principal Accounting Officer) | |||
/s/ Ann K. Newhall | Governor |
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Years Ended December 31, | |||||||||||||
2005 | 2004 | 2003 | |||||||||||
(In thousands) | |||||||||||||
Balance, at beginning of year | $ | 2,456 | $ | 3,333 | $ | 3,096 | |||||||
Additions charged to income | 20,112 | 12,584 | 12,784 | ||||||||||
Write-offs | (19,001 | ) | (13,461 | ) | (12,547 | ) | |||||||
Balance, at end of year | $ | 3,567 | $ | 2,456 | $ | 3,333 | |||||||
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Exhibit | ||||||
Number | Document | |||||
3 | .1(a) | Articles of Incorporation | [1] | |||
3 | .1(b) | Amendments to Articles of Incorporation effective March 24, 2000 | [1] | |||
3 | .2(a) | Amended and Restated Bylaws | [1] | |||
3 | .2(b) | Amendment to Amended and Restated Bylaws effective March 22, 2000 | [1] | |||
3 | .3 | Articles of Incorporation of Alexandria Indemnity Corporation | [2] | |||
3 | .4 | Bylaws of Alexandria Indemnity Corporation | [2] | |||
3 | .5 | Articles of Incorporation of RCC Atlantic, Inc. | [2] | |||
3 | .6 | Amended and Restated Bylaws of RCC Atlantic, Inc. | [2] | |||
3 | .7 | Articles of Organization of RCC Atlantic Licenses, LLC | [2] | |||
3 | .8 | Bylaws of RCC Atlantic Licenses, LLC | [2] | |||
3 | .9 | Articles of Incorporation of RCC Minnesota, Inc. | [2] | |||
3 | .10 | Amended and Restated Bylaws of RCC Minnesota, Inc. | [2] | |||
3 | .11 | Articles of Incorporation of RCC Transport, Inc. | [2] | |||
3 | .12 | Bylaws of RCC Transport, Inc. | [2] | |||
3 | .13 | Articles of Organization of TLA Spectrum, LLC | [2] | |||
3 | .14 | Operating Agreement of TLA Spectrum, LLC | [2] | |||
4 | .1(a) | Indenture dated March 25, 2004, between Rural Cellular Corporation and U.S. Bank National Association, as trustee, with respect to the senior secured notes, including the forms of Senior Secured Notes | [3] | |||
4 | .1(b) | Collateral Agreement dated as of March 25, 2004, made by Rural Cellular Corporation and each of its subsidiaries that are signatories in favor of U.S. Bank National Association, as Collateral Trustee | [3] | |||
4 | .1(c) | Registration Rights Agreement dated as of May 5, 2006 by and among Rural Cellular Corporation as Issuer and Lehman Brothers Inc., Morgan Stanley & Co. Incorporated and Lazard Capital Markets as the Initial Purchasers | * | |||
4 | .2 | Indenture dated August 1, 2003 between Rural Cellular Corporation, as Issuer, and U.S. Bank National Association, as Trustee, with respect to the 97/8% Senior Notes Due 2010, including the form of 97/8% Senior Notes Due 2010 | [4] | |||
4 | .3 | Indenture dated January 16, 2002 between Rural Cellular Corporation, as Issuer, and Wells Fargo Bank Minnesota, N.A., as Trustee, with respect to the 93/4% Senior Subordinated Notes Due 2010, including form of 93/4% Senior Subordinated Notes Due 2010 | [5] | |||
4 | .4 | Indenture dated November 1, 2005 between Rural Cellular Corporation, as Issuer, and Wells Fargo Bank, National Association, as Trustee, with respect to the Senior Subordinated Floating Rate Notes Due 2012, including form of Senior Subordinated Floating Rate Notes Due 2012 | [6] | |||
4 | .5 | Certificate of Designation of 113/8% Senior Exchangeable Preferred Stock | [7] | |||
4 | .6 | Certificate of Designation of 121/4% Junior Exchangeable Preferred Stock | [1] | |||
4 | .7(a) | Class A Share Rights Agreement dated April 30, 1999 | [8] | |||
4 | .7(b) | Amendment to the Class A Share Rights Agreement dated March 31, 2000 | [9] | |||
4 | .8(a) | Registration Rights Agreement dated March 31, 2000 by and between Rural Cellular Corporation and Telephone and Data Systems, Inc. | [10] |
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Exhibit | ||||||
Number | Document | |||||
4 | .8(b) | Certificate of Designation of Voting Power, Preferences and Relative Participating, Optional and Other Special Rights, Qualifications and Restrictions of Class T Convertible Preferred Stock of Rural Cellular Corporation | [10] | |||
4 | .9(a) | Preferred Stock Purchase Agreement dated April 3, 2000 among Rural Cellular Corporation, Madison Dearborn Capital Partners III, L.P., Madison Dearborn Special Equity III, L.P., Special Advisors Fund I, LLC, Boston Ventures Limited Partnership V and Toronto Dominion Investment, Inc. (collectively “Class M Investors”) | [10] | |||
4 | .9(b) | Certificate of Designation of Voting Power, Preferences and Relative Participating, Optional and Other Special Rights, Qualifications and Restrictions of Class M Redeemable Voting Convertible Preferred Stock of Rural Cellular Corporation | [10] | |||
4 | .9(c) | Registration Rights Agreement dated April 3, 2000 among Rural Cellular Corporation and Class M Investors | [10] | |||
5 | .1 | Opinion of Moss & Barnett, A Professional Association | * | |||
5 | .2 | Opinion of Elizabeth L. Kohler, Esq. | * | |||
10 | .1(a) | Credit Agreement dated as of March 25, 2004 among Rural Cellular Corporation, Lehman Commercial Paper, Inc., as Administrative Agent, and Bank of America, N.A., as Documentation Agent. | [2] | |||
10 | .1(b) | First Amendment to Credit Agreement dated October 18, 2005 | [11] | |||
10 | .1(c) | Second Amendment to Credit Agreement dated as of May 22, 2006 | [11] | |||
10 | .1(d) | Guarantee and Collateral Agreement dated as of March 25, 2004 among Rural Cellular Corporation, Lehman Commercial Paper Inc., as Administrative Agent, and Bank of America, N.A., as Documentation Agent. | [2] | |||
10 | .1(e) | Intercreditor Agreement, dated as of March 25, 2004, among Lehman Commercial Paper Inc., as Senior Agent and Account Agent, U.S. Bank National Association, as Indenture Trustee and Collateral Trustee, Rural Cellular Corporation, a Minnesota corporation, and the Guarantors. | [2] | |||
10 | .2 | 1995 Stock Compensation Plan, as amended to date | [12] | |||
10 | .2(a) | Form of Restricted Stock Award Agreement pursuant to 1995 Stock Compensation Plan | [2] | |||
10 | .3 | Stock Option Plan for Nonemployee Directors, as amended to date | [13] | |||
10 | .4(a) | Employment Agreement with Richard P. Ekstrand effective January 22, 1999 | [14] | |||
10 | .4(b) | Amendment to Employment Agreement with Richard P. Ekstrand effective January 1, 2001 | [15] | |||
10 | .4(c) | Second Amendment to Employment Agreement with Richard P. Ekstrand effective July 24, 2001 | [16] | |||
10 | .4(d) | Third Amendment to Employment Agreement with Richard P. Ekstrand effective August 23, 2001 | [16] | |||
10 | .4(e) | Fourth Amendment to Employment with Richard P. Ekstrand effective February 27, 2003 | [17] | |||
10 | .4(f) | Fifth Amendment to Employment with Richard P. Ekstrand effective February 17, 2005 | [18] | |||
10 | .5(a) | Employment Agreement with Wesley E. Schultz effective January 22, 1999 | [14] | |||
10 | .5(b) | Amendment to Employment Agreement with Wesley E. Schultz effective January 1, 2001 | [15] | |||
10 | .5(c) | Second Amendment to Employment Agreement with Wesley E. Schultz effective July 24, 2001 | [16] |
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Exhibit | ||||||
Number | Document | |||||
10 | .5(d) | Third Amendment to Employment Agreement with Wesley E. Schultz effective August 23, 2001 | [16] | |||
10 | .5(e) | Fourth Amendment to Employment Agreement with Wesley E. Schultz effective February 17, 2005 | [18] | |||
10 | .6(a) | Employment Agreement with Ann K. Newhall effective February 6, 1999 | [19] | |||
10 | .6(b) | Amendment to Employment Agreement with Ann K. Newhall effective January 1, 2001 | [15] | |||
10 | .6(c) | Second Amendment to Employment Agreement with Ann K. Newhall effective July 24, 2001 | [16] | |||
10 | .6(d) | Third Amendment to Employment Agreement with Ann K. Newhall effective August 23, 2001 | [16] | |||
10 | .6(e) | Fourth Amendment to Employment Agreement with Ann K. Newhall effective February 17, 2005 | [18] | |||
10 | .7(a) | Change of Control Agreement with David Del Zoppo effective January 2, 2001 | [15] | |||
10 | .7(b) | Amendment to Change of Control Agreement with David Del Zoppo effective July 24, 2001 | [16] | |||
10 | .8(a) | Key Employee Deferred Compensation Plan | [20] | |||
10 | .8(b) | Amendment to Key Employee Deferred Compensation Plan | [21] | |||
10 | .8(c) | Second Amendment to Key Employee Deferred Compensation Plan | [5] | |||
10 | .9 | Key Employee Deferred Compensation Plan II | [5] | |||
10 | .10 | 2006 Omnibus Incentive Plan | [22] | |||
10 | .10(a) | Form of Agreement for Performance Restricted Stock Units for Officers | [23] | |||
10 | .10(b) | Form of Agreement for Restricted Stock Units for Directors | [23] | |||
**10 | .11(a) | Master Purchase Agreement dated March 14, 2002 by and between Rural Cellular Corporation and Ericsson Inc. | [24] | |||
**10 | .11(b) | Addendum dated August 4, 2003 to Master Purchase Agreement | [24] | |||
**10 | .12(a) | Intercarrier Multi-Standard Roaming and Colocation Agreement by and between Cingular Wireless LLC and Rural Cellular Corporation effective June 6, 2003 (“Roaming Agreement”) | [11] | |||
**10 | .12(b) | Amendment No. 1 to Roaming Agreement | [11] | |||
**10 | .13 | Billing Services and License Agreement between VeriSign, Inc. and Rural Cellular Corporation | [25] | |||
12 | Statements re Computation of Ratio of Earnings to Fixed Charges | *** | ||||
21 | Subsidiaries of Registrant | [5] | ||||
23 | .1 | Consent of Deloitte & Touche LLP | *** | |||
23 | .2 | Consent of Deloitte & Touche LLP | *** | |||
23 | .3 | Consent of Moss & Barnett, A Professional Association (included in Exhibit 5.1) | * | |||
23 | .4 | Consent of Elizabeth L. Kohler (included in Exhibit 5.2) | * | |||
24 | Power of Attorney from Messrs. Ekstrand, Schultz, Del Zoppo, Bolland, Continenza, Finnegan, Leduc, Revering, Swenson, and Wikstrom and Ms. Newhall (included on signature page) | * | ||||
25 | Statement of Eligibility of Trustee | * |
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Exhibit | ||||||
Number | Document | |||||
99 | .1 | Form of Letter of Transmittal for Senior Subordinated Notes | * | |||
99 | .2 | Form of Notice of Guaranteed Delivery for Senior Subordinated Notes | * | |||
99 | .3 | Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies, and Other Nominees for Senior Subordinated Notes | * | |||
99 | .4 | Form of Letter to Clients of Brokers, Dealers, Commercial Banks, Trust Companies, and Other Nominees for Senior Subordinated Notes | * | |||
99 | .5 | Form of Instruction from Owner of Senior Subordinated Notes | * |
[1] | Filed as an exhibit to Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference. | |
[2] | Filed as an exhibit to Regulation Statement on Form S-4 (SEC No. 333-118973), filed September 14, 2004, and incorporated herein by reference. | |
[3] | Filed as an exhibit to Report on Form 10-Q for the quarter ended March 31, 2004 and incorporated herein by reference. | |
[4] | Filed with Report on Form 10-Q for quarter ended June 30, 2003, and incorporated herein by reference. | |
[5] | Filed as an Exhibit to Report on Form 10-K for year ended December 31, 2001, and incorporated herein by reference. | |
[6] | Filed as an exhibit to Report on Form 10-K for the year ended December 31, 2005 and incorporated herein by reference. | |
[7] | Filed as an exhibit to Registration Statement on Form S-4 (SEC No. 333-57677), filed June 25, 1998, and incorporated herein by reference. | |
[8] | Filed as an exhibit to Registration Statement on Form 8-A filed May 19, 1999 and incorporated herein by reference. | |
[9] | Filed as an exhibit to Registration Statement on Form 8-A/ A-1 filed April 18, 2000 and incorporated herein by reference. |
[10] | Filed as an exhibit to Report on Form 8-K dated April 1, 2000 and incorporated herein by reference. |
[11] | Filed as an exhibit to Amendment No. 1 to Registration Statement on Form S-4 (SEC No. 333-132744) and incorporated herein by reference. |
[12] | Filed with definitive Proxy Statement for 2000 Annual Meeting on April 7, 2000 and incorporated herein by reference. |
[13] | Filed with definitive Proxy Statement for 2002 Annual Meeting on April 8, 2002 and incorporated herein by reference. |
[14] | Filed as an exhibit to Report on Form 10-K for the year ended December 31, 1998 and incorporated herein by reference. |
[15] | Filed as an exhibit to Report on Form 10-K for the year ended December 31, 2000, and incorporated herein by reference. |
[16] | Filed as an exhibit to Report on Form 10-Q/ A for the quarter ended September 30, 2001, and incorporated herein by reference. |
[17] | Filed as an exhibit to Report on Form 10-K for the year ended December 31, 2004 and incorporated herein by reference. |
Table of Contents
[18] | Filed as an exhibit to Report on Form 10-Q for the quarter ended March 31, 2005, and incorporated herein by reference. |
[19] | Filed as an exhibit to Report on Form 10-Q for the quarter ended March 31, 1999 and incorporated herein by reference. |
[20] | Filed as an exhibit to Report on Form 10-Q/ A for the quarter ended June 30, 2001, and incorporated herein by reference. |
[21] | Filed as an exhibit to Report on Form 10-K for year ended December 31, 2002, and incorporated herein by reference |
[22] | Filed as an exhibit to Report on Form8-K dated May 22, 2006, and incorporated herein by reference. |
[23] | Filed as an exhibit to Report on Form10-Q for the quarter ended June 30, 2006, and incorporated herein by reference. |
[24] | Filed as an exhibit to Report on Form 10-K/ A for the year ended December 31, 2003, and incorporated herein by reference. |
[25] | Filed as an exhibit to Report on Form 10-Q for the quarter ended September 30, 2005, and incorporated herein by reference. |
* | Filed previously. |
** | Portions of this exhibit have been omitted and filed separately with the Secretary of the Securities and Exchange Commission pursuant to Registrant’s request for confidential treatment of such information under Rule 24b-2 of the Securities Exchange Act of 1934. |
*** | Filed herewith |