Mail Stop 3561
December 30, 2005
Michael B. Moneymaker
Executive Vice President, Chief Financial
Officer, Treasurer and Secretary
NTELOS Holdings Corp.
401 Spring Lane, Suite 300
P.O. Box 1990
Waynesboro, Virginia 22980
Re: NTELOS Holdings Corp.
Amendment No. 1 to Form S-1
Filed November 14, 2005
File No. 333-128849
Dear Mr. Moneymaker:
We have reviewed your filing and have the following
comments.
Where indicated, we think you should revise your document in
response
to these comments. If you disagree, we will consider your
explanation as to why our comment is inapplicable or a revision is
unnecessary. Please be as detailed as necessary in your
explanation.
In some of our comments, we may ask you to provide us with
information so we may better understand your disclosure. After
reviewing this information, we may raise additional comments.
Note 11. Stockholder`s Equity and Earnings Per Share, page F-22
The following has been excerpted from the Shareholders Agreement
dated May 2, 2005, filed as Exhibit 4.2 to the Form S-1/A filed on
November 15, 2005. Section 4.04 of that Agreement sets forth the
terms of a purchase option, which enables either the company or,
with
Board approval, the Class L shareholders, to purchase any or all
incentive shares held by a Management Shareholder (the Class A
shares) in the event that the Management Shareholder ceases to be
employed by the company. This purchase option has been referred
to
as a Call Option in the disclosure provided in the Form S-1/A. If
the Management Shareholder is terminated for cause, the price to
be
paid for the incentive share is the lesser of fair market value or
adjusted cost. If the Management Shareholder resigns, or is
terminated for other than cause, the price to be paid for the
incentive share is based upon whether or not the share is deemed
to
be vested or unvested. We understand that vesting as used in this
context relates solely to determining the price to be paid for the
incentive share upon exercise of the Call Option, and does not
impact
the Management Shareholder`s ability to vote the incentive share
or
their entitlement to any dividends associated with the incentive
share. If the incentive share is vested, the Management
Shareholder
will receive fair market value. If the incentive share is
unvested,
the Management Shareholder will receive the adjusted cost price.
The
adjusted cost price is defined in Section 1.01 as $1.00 (which
represents the consideration originally received from the
Management
Shareholder for the incentive share). At both June 30, 2005 and
September 30, 2005, we understand that no incentive shares are yet
vested.
After giving consideration to the terms of the Call Option, we
believe that this instrument should be accounted for in accordance
with Issue 33(b) of EITF 00-23, on the basis that an employee who
resigns or is terminated for other than cause will receive, upon
exercise of the Call Option, its original consideration paid (in
this
case, the $1.00). Issue 33(b) requires that the receipt of the
exercise price be recognized as a liability, until such time as
the
company`s repurchase right lapses. In light of the guidance in
Issue
33(b) of EITF 00-23, it is unclear how you determined that it was
appropriate to reflect the consideration received for the Class A
common stock within equity.
We also gave consideration to Issue 40(b) of EITF 00-23 in
determining whether or not the Class A common stock represents a
substantive class of equity. We recognize that this is a
determination that is judgmental, and in reaching a conclusion it
is
important to look at the substance of the arrangement, after
taking
into consideration all of the relevant facts and circumstances.
With
respect to the Class A shares, we note the following:
* This is a new class of equity issued solely to employees;
* Due to the liquidation preference on the Class L shares, the
dividend rights are limited;
* Existence of the cost Call Option.
With respect to the Call Option, the conclusion in Issue 33(b) of
EITF 00-23 indicates that when shares are subject to a cost call,
the
employee is not considered to have made a substantive investment
because the employee has no money at risk. For example, if the
employee resigns, and the Call Option is exercised, it is presumed
that the employee will receive a return of what they initially
paid
for the shares. Note that the presumption in paragraph 151 of
EITF
00-23 is that the Call Option will be exercised regardless of
whether
the stock has a fair value of more or less than cost on the date
the
employee terminates their employment. In light of this, it
appears
difficult to justify that the Management Shareholders made a
substantive investment. The determination that no party has ever
made a substantive investment in this class of shares, coupled
with
the factors noted above, as well as the fact that the proceeds
received from issuance of the Class A shares should be classified
as
a liability, appear to indicate that a substantive class of equity
does not exist.
Upon reaching the conclusion that the Class A common stock is a
non-
substantive class of equity, the shares in Class A that were
issued
to Management Shareholders would not qualify for fixed plan
accounting, and variable accounting would be required until such
time
as the Call Option is no longer at cost, or the Class A common
stock
is exchanged for a substantive class of equity (i.e., the proposed
exchange into Class B common stock at the time of the IPO). We
believe your financial statements for the periods ended June 30,
2005
(audited) and September 30, 2005 (unaudited) should be revised to
reflect compensation expense related to the Class A common stock.
* * *
As appropriate, please amend your registration statement in
response to these comments. You may wish to provide us with
marked
copies of the amendment to expedite our review. Please furnish a
cover letter with your amendment that keys your responses to our
comments and provides any requested information. Detailed cover
letters greatly facilitate our review. Please understand that we
may
have additional comments after reviewing your amendment and
responses
to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities Act
of
1933 and that they have provided all information investors require
for an informed investment decision. Since the company and its
management are in possession of all facts relating to a company`s
disclosure, they are responsible for the accuracy and adequacy of
the
disclosures they have made.
You may contact Nicole Holden, Staff Accountant, at 202-551-
3374, or Dean Suehiro, Senior Staff Accountant, at 202-551-3384,
if
you have questions regarding comments on the financial statements
and
related matters. Please contact Cheryl Grant, Staff Attorney, at
202-551-3359, or Kathleen Krebs, Special Counsel, at 202-551-3350,
with any other questions.
Sincerely,
Larry Spirgel
Assistant Director
cc: David Carter/Hunton & Williams
(via facsimile: 404-888-4190)
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Mr. Goldstein
ECtel Ltd
November 21, 2005
Page 3
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE