AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 3, 2001
REGISTRATION NO. 333-59322
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
AMERICAN CELLULAR CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 4812 22-3043811
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of Industrial Identification No.)
incorporation or organization) Classification Code Number)
--------------------------
13439 NORTH BROADWAY EXTENSION BRUCE R. KNOOIHUIZEN
SUITE 200 13439 NORTH BROADWAY EXTENSION
SUITE 200
OKLAHOMA CITY, OKLAHOMA 73114 OKLAHOMA CITY, OKLAHOMA 73114
(405) 529-8500 (405) 529-8500
(Address, including Zip Code, and telephone (Name, address, including Zip
number, including area code, of Code, and telephone number,
registrant's principal including area code, of
executive offices) agent for service)
--------------------------
COPIES TO:
THEODORE M. ELAM, ESQ.
MCAFEE & TAFT A PROFESSIONAL CORPORATION
TENTH FLOOR, TWO LEADERSHIP SQUARE
211 NORTH ROBINSON
OKLAHOMA CITY, OKLAHOMA 73102
(405) 235-9621
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement under the earlier effective registration statement for
the same offering. / /
--------------------------
CALCULATION OF REGISTRATION FEE
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
Guarantees of 9 1/2% Senior
Subordinated Notes due 2009.......... -- -- -- --
9 1/2% Senior Subordinated Notes due
2009................................. $450,000,000 100% $450,000,000 $112,500(1)
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(f)(2).
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8 OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8, MAY DETERMINE.
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ADDITIONAL REGISTRANTS
ACC ACQUISITION LLC
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 75-2845642
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
AMERICAN CELLULAR WIRELESS LLC
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 73-1608056
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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PCPCS CORPORATION
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 13-3872306
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
ACC OF KENTUCKY LLC
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 62-1763860
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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ACC OF KENTUCKY LICENSE LLC
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 62-1763860
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
ACC OF MICHIGAN CORPORATION
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 13-3773786
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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ACC OF MICHIGAN LICENSE LLC
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 13-3773786
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
ACC OF MINNESOTA CORPORATION
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 52-1666462
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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ACC MINNESOTA LICENSE LLC
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 52-1666462
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
ALEXANDRA CELLULAR CORPORATION
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 13-3864136
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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ACC NEW YORK LICENSE I LLC
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 13-3864136
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
ACC NEW YORK LICENSE II LLC
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 13-3852427
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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ACC NEW YORK LICENSE III LLC
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 06-1196415
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
ACC OF OHIO CORPORATION
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 13-3852424
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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ACC OHIO LICENSE LLC
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 13-3852424
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
ACC OF PENNSYLVANIA LLC
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 25-1824770
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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ACC OF PENNSYLVANIA LICENSE LLC
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 25-1824770
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
ACC OF TENNESSEE LLC
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 62-1763861
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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ACC OF TENNESSEE LICENSE LLC
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 62-1763861
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
ACC OF WAUSAU CORPORATION
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 39-1675559
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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ACC OF WAUSAU LICENSE LLC
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 39-1675559
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
ACC OF WEST VIRGINIA CORPORATION
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 13-3557306
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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ACC OF WEST VIRGINIA LICENSE LLC
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 13-3557306
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
ACC OF WISCONSIN LLC
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 39-1948201
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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ACC OF WISCONSIN LICENSE LLC
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 39-1948201
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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CHILL CELLULAR CORPORATION
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 13-3852427
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
DUTCHESS COUNTY CELLULAR TELEPHONE COMPANY, INC.
(Exact Name of registrant as specified in its charter)
DELAWARE 4812 06-1196415
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization Classification Code Number) Identification Number)
------------------------
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(address, including zip code, and telephone number, including
area code, of registrant's principal executive officers)
Bruce R. Knooihuizen
Vice President and Treasurer
13439 North Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
(405) 529-8500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED MAY 3, 2001
PROSPECTUS
OFFER TO EXCHANGE
OUTSTANDING
9 1/2% SENIOR SUBORDINATED NOTES DUE 2009
FOR
NEW SHARES OF 9 1/2% SENIOR SUBORDINATED NOTES DUE 2009
OF
AMERICAN CELLULAR CORPORATION
TERMS OF EXCHANGE OFFER
We are offering to exchange our outstanding 9 1/2% Senior Subordinated Notes
due 2009 for new 9 1/2% Senior Subordinated Notes due 2009 which have been
registered under the Securities Act. Our exchange offer will expire at 5:00 p.m.
New York City time on , 2001 unless we extend the time of expiration.
There is currently no established trading market for the senior notes, and
we do not expect that a trading market for the senior notes will exist following
completion of this exchange offer.
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN MATTERS THAT
SHOULD BE CONSIDERED BY INVESTORS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE NOTES TO BE DISTRIBUTED IN THE
EXCHANGE OFFER, NOR HAVE ANY OF THESE ORGANIZATIONS DETERMINED THAT THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS , 2001.
TABLE OF CONTENTS
PAGE
--------
Summary..................................................... 1
Risk Factors................................................ 12
Use of Proceeds............................................. 19
Capitalization.............................................. 20
The Exchange Offer.......................................... 21
Unaudited Pro Forma Consolidated Financial Data............. 30
Selected Consolidated Financial and Other Data.............. 33
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 35
Industry Overview........................................... 42
Business.................................................... 44
Management.................................................. 58
Related Party Transactions.................................. 60
Principal Shareholders...................................... 62
Description of Senior Credit Facility....................... 63
Description of the Notes.................................... 66
Certain Material United States Federal Tax Consequences for
United States Holders and Non-United States Holders....... 112
Plan of Distribution........................................ 118
Legal Matters............................................... 120
Experts..................................................... 120
Index to Consolidated Financial Statements.................. F-1
------------------------
No person is authorized in connection with the offering made hereby to give
any information or to make any representation not contained in this prospectus
or the accompanying letter of transmittal and, if given or made, such
information or representation not contained herein must not be relied upon as
having been authorized by us.
------------------------
The exchange offer is not being made to, nor will we accept surrenders for
exchange from, holders of our outstanding 9 1/2% Senior Subordinated Notes due
2009 in any jurisdiction in which this exchange offer or the acceptance thereof
would not be in compliance with the securities or Blue Sky laws of such
jurisdiction. Neither the delivery of this prospectus nor the accompanying
letter of transmittal, nor any exchange made hereunder shall under any
circumstances imply that the information herein is correct as of any date
subsequent to the date hereof.
------------------------
ii
SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND THE RELATED NOTES THAT WE INCLUDE
ELSEWHERE IN THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL
REFERENCES IN THIS OFFERING MEMORANDUM TO "OUR," "US" AND "WE" REFER TO AMERICAN
CELLULAR CORPORATION AND ITS PREDECESSORS AND SUBSIDIARIES AS A COMBINED ENTITY,
EXCEPT WHERE IT IS CLEAR THAT SUCH TERMS MEAN ONLY AMERICAN CELLULAR
CORPORATION. REFERENCES TO "PRO FORMA" WITH RESPECT TO OUR RESULTS OF OPERATIONS
REFLECT ADJUSTMENTS TO OUR HISTORICAL FINANCIAL STATEMENTS AS IF AT&T WIRELESS
SERVICES, INC. AND DOBSON COMMUNICATIONS CORPORATION HAD ACQUIRED US AND THIS
OFFERING HAD BEEN COMPLETED WITH THE PROCEEDS APPLIED AS SET FORTH IN "USE OF
PROCEEDS" AS OF JANUARY 1, 2000. REFERENCES TO "PRO FORMA" WITH RESPECT TO OUR
FINANCIAL CONDITION REFLECT ADJUSTMENTS TO OUR HISTORICAL FINANCIAL STATEMENTS
AS IF THE OFFERING OF OUR 9 1/2% SENIOR SUBORDINATED NOTES DUE 2009 HAD BEEN
COMPLETED WITH THE PROCEEDS APPLIED AS OF DECEMBER 31, 2000. WE ENCOURAGE YOU TO
READ THE ENTIRE PROSPECTUS, INCLUDING THE SECTION ENTITLED "RISK FACTORS" AND
THE FINANCIAL STATEMENTS.
THE EXCHANGE OFFER
We completed on March 14, 2001 the private offering of $450.0 million
aggregate principal amount of our 9 1/2% Senior Subordinated Notes due 2009. We
entered into a registration rights agreement with the initial purchasers in the
private offering in which we agreed, among other things, to deliver to you this
prospectus and to complete the exchange offer within 180 days of the issuance of
our 9 1/2% Senior Subordinated Notes due 2009. You are entitled to exchange in
the exchange offer your outstanding 9 1/2% Senior Subordinated Notes due 2009
for registered 9 1/2% Senior Subordinated Notes due 2009 with substantially
identical terms. If the exchange offer is not completed by October 11, 2001,
then we will pay liquidated damages. You should read the discussion under the
heading "Summary Description of the New Notes" and "Description of the Notes"
for further information regarding the registered 9 1/2% Senior Subordinated
Notes due 2009.
We believe that the 9 1/2% Senior Subordinated Notes due 2009 issued in the
exchange offer may be resold by you without compliance with the registration and
prospectus delivery provisions of the Securities Act, subject to certain
conditions. You should read the discussion under the headings "Summary of the
Terms of Exchange Offer" and "The Exchange Offer" for further information
regarding the exchange offer and resale of the 9 1/2% Senior Subordinated Notes
due 2009.
AMERICAN CELLULAR CORPORATION
We are one of the largest rural and suburban providers of wireless
communications services in the United States. As of December 31, 2000, our
network covered an estimated population of approximately 4.9 million and we had
approximately 554,400 subscribers, giving us an aggregate market penetration of
11.3%. On January 18, 2001 we began operating wireless systems in southeast
Kansas and northeast Oklahoma, which will cover a population of approximately
250,000. We provide wireless service in portions of Illinois, Kansas, Kentucky,
Michigan, Minnesota, New York, Ohio, Oklahoma, Pennsylvania, Tennessee, West
Virginia and Wisconsin.
On February 25, 2000, we were acquired by a joint venture equally owned by
AT&T Wireless and Dobson Communications. Our operations are managed by Dobson
Communications and are integrated with Dobson Communications' wireless
operations. We market our products and services under the nationally recognized
CELLULAR ONE brand name and benefit from its national advertising campaign.
Since our acquisition by AT&T Wireless and Dobson Communications, our
business has experienced significant growth. In 2000, on a pro forma basis, we
added 209,500 gross subscribers and 119,700 net subscribers, including 39,900
net additions in the fourth quarter. In addition, roaming minutes on our network
increased approximately 42% in 2000 when compared to 1999.
1
We have long-term roaming agreements with AT&T Wireless, which has
designated us as its preferred roaming partner for its subscribers who roam into
our markets, as well as other major wireless providers including Cingular
Wireless and U.S. Cellular, which allow our subscribers to benefit from
coast-to-coast wireless coverage. Our markets have high roaming activity due, in
part, to their greater than average concentration of expressway corridors and
their proximity to densely populated urban areas, including New York City,
Minneapolis-St. Paul, Pittsburgh, Cincinnati, Louisville and Knoxville. On a pro
forma basis, for the year ended December 31, 2000, we had $152.1 million in
roaming revenue, comprising approximately 39% of our total revenue.
We have upgraded our entire network to digital time division multiple
access, or TDMA, technology and we now offer digital voice and feature services,
including voice mail, e-mail, caller ID, call waiting, 2-way short-messaging
services, or SMS, and wireless Internet access. Approximately 45% of our
subscribers utilize digital service and use tri-mode, dual-band handsets. We
believe subscribers utilizing digital technology generate network efficiencies,
greater roaming opportunities, higher average revenue per user, or ARPU, and
lower churn rates. On a pro forma basis, for the year ended December 31, 2000,
our monthly ARPU, excluding roaming revenue, was $38 and our average monthly
churn was 1.7%.
COMPETITIVE STRENGTHS
STRONG CURRENT MARKET POSITION. We have significant market share in
virtually all of our wireless markets. We distinguish ourselves from our
competition by emphasizing digital technology, customer care and a commitment to
the local community. We plan to attract additional subscribers by leveraging our
strategic relationships, digital technologies, local sales channels and diverse
service offerings, including national, regional and local rate plans.
ATTRACTIVE MARKETS. Our markets are attractive for providing wireless
communications services due, in part, to their proximity to markets operated by
AT&T Wireless and major metropolitan areas such as New York City,
Minneapolis-St. Paul, Pittsburgh, Cincinnati, Louisville and Knoxville. Our
markets have a relatively high density of highway and other traffic corridors
and strong tourist activity due to seasonal attractions. Additionally, our
markets have demonstrated positive demographic growth trends and generally
maintain a high population density relative to other rural service providers.
ADVANCED DIGITAL TECHNOLOGY. Our fully digital network uses TDMA
technology, making our network compatible with AT&T Wireless' network and other
TDMA networks. This technology allows us to offer enhanced features and services
relative to standard analog cellular service, including extended battery life,
integrated voicemail, paging, fax and e-mail delivery, enhanced voice privacy
and short-messaging capability. We plan to offer wireless Internet service in
virtually all of our markets by mid-2001. We believe our extensive digital
network deployment provides us with a competitive advantage in many of our
markets.
STRATEGIC ROAMING RELATIONSHIPS. We have long-term roaming agreements with
many of our major roaming partners including AT&T Wireless, Cingular Wireless
and US Cellular. These roaming agreements have terms ranging from two to twenty
years. We believe our strategic roaming relationships will continue to be
beneficial as the growth in roaming minutes in our markets continues.
EXPERIENCED MANAGEMENT TEAM. Dobson Communications' management team is
responsible for our day-to-day operations. With over 50 years of
telecommunications experience on a combined basis, Dobson Communications' senior
management team, consisting of Everett R. Dobson, G. Edward Evans and Bruce R.
Knooihuizen, is extremely knowledgeable and well regarded in the
telecommunications industry. Since 1993, including our acquisition, Dobson
Communications has acquired licenses covering a combined population of more than
11.0 million.
2
AT&T RELATIONSHIP. We believe that our relationship with AT&T Wireless, one
of our owners, provides us with significant strategic benefits. We are the
preferred provider of wireless service to AT&T Wireless' subscribers who roam
into our markets. Through our long-term roaming agreement with AT&T Wireless, we
offer our subscribers national and regional rate plans which access AT&T
Wireless' coast-to-coast footprint. We believe these plans differentiate us from
our competition in many of our markets. AT&T Wireless also has generally agreed
to use commercially reasonable efforts to assist us in obtaining discounts from
its vendors for the purchase of subscriber or infrastructure equipment.
INTEGRATION WITH DOBSON COMMUNICATIONS. We believe that the integration of
our operations with those of Dobson Communications has significant benefits. Our
licensed areas, combined with those of Dobson Communications, cover an estimated
population of more than 12.0 million, and together we served more than
1.2 million subscribers at December 31, 2000. This size and scale enable us to
reduce our operating costs and receive certain technical, network and
operational functions from Dobson Communications' existing corporate
infrastructure.
3
CORPORATE STRUCTURE
The following chart summarizes our ownership and corporate structure at
December 31, 2000 after giving effect to the issuance of our 9 1/2% Senior
Subordinated Notes due 2009 and the application of the net proceeds from that
issuance. Neither the notes nor our senior credit facility are guaranteed by
AT&T Wireless or Dobson Communications.
[CHART]
4
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
In the exchange offer we are offering to exchange up to $450.0 million
aggregate principal amount outstanding of our 9 1/2% Senior Subordinated Notes
due 2009, or "old notes", for an equal principal amount of our 9 1/2% Senior
Subordinated Notes due 2009, or "new notes" and, together with old notes, the
"notes". The form and terms of the new notes are identical in all material
respects to the form and terms of the outstanding old notes except that the new
notes have been registered under the Securities Act of 1933 and, therefore, are
not entitled to the benefits of the registration rights granted under the
registration rights agreement, executed as part of the offering of the
outstanding old notes.
Registration rights agreement............. You are entitled to exchange your old notes for
registered new notes with substantially identical terms.
The exchange offer is intended to satisfy these rights.
After the exchange offer is complete, you will no longer
be entitled to any exchange or registration rights with
respect to your old notes.
The exchange offer........................ We are offering to exchange $1,000 principal amount of
one new note for each old note. We will accept for
exchange all outstanding old notes that are validly
tendered and not validly withdrawn. In order to be
accepted, an outstanding old note must be properly
tendered and accepted. After consummation of the
exchange offer, holders of old notes which are not
exchanged will continue to be subject to the existing
restrictions upon the transfer of old notes and we will
have no further obligation to such holders to provide
for the registration of the old notes under the
Securities Act.
Shelf registration........................ We may be required to file a shelf registration
statement with respect to our outstanding old notes if:
- the Securities and Exchange Commission issues an
interpretation that we are not permitted to effect
the exchange offer;
- we do not conclude the exchange offer by
October 10, 2001;
- an initial purchaser of the old notes requests
that we file a shelf registration statement with
respect to notes held by the initial purchaser;
- a holder of old notes
(a) is not eligible to participate in the
exchange offer, or
(b) has participated in the exchange offer but
does not receive freely tradeable new notes; or
- an initial purchaser has received new notes in the
exchange offer or has otherwise been issued new
notes in exchange for old notes constituting a
portion of an unsold allotment, which new notes
are not freely tradeable.
Resale of new notes....................... Based on interpretations by the staff of the Securities
and Exchange Commission set forth in no-action letters
issued to third parties, including "Exxon Holdings
Corporation" (available May 13, 1998) and "Morgan
Stanley & Co. Incorporated" (available June 5, 1991), we
believe that you may offer the new notes for resale,
resell the new notes and otherwise transfer the
5
new notes without compliance with the registration and
prospectus delivery provisions of the Securities Act,
provided that:
- you acquire the new notes in the exchange offer in
the ordinary course of business;
- you have no arrangement or understanding with any
person to participate in the distribution of the
new notes that you obtain in the exchange offer;
- you are not a broker-dealer who purchased old
notes directly from us for resale pursuant to
Rule 144A or any other available exemption under
the Securities Act; and
- you are not an "affiliate".
We intend to rely on the existing no-action letters and
we do not intend to seek a no-action letter from the
Securities and Exchange Commission with respect to the
resale of the new notes.
The expiration date....................... The exchange offer will expire at 5:00 p.m., New York
City time, , 2001, unless we decide to extend
the expiration date.
Accrued interest on the new notes and the
outstanding old notes................... Interest on the new notes will accrue from March 14,
2001. If we accept your old notes you will not receive
any payment of interest on such outstanding old notes
accrued from March 14, 2001 to the date of the issuance
of the new notes. Consequently, holders who exchange
their outstanding old notes for new notes will receive
the same interest payment on October 15, 2001, which is
the first interest payment date with respect to the
outstanding old notes and the new notes to be issued in
the exchange offer that they would have received had
they not accepted the exchange offer.
Termination of the exchange
offer................................... We may terminate the exchange offer at any time prior to
the expiration date if we determine that our ability to
proceed with the exchange offer could be materially
impaired due to any legal or governmental action, new
law, statute, rule or regulation or any interpretation
of the staff of the Securities and Exchange Commission
of any existing law, statute, rule or regulation. We do
not expect any of the foregoing conditions to occur,
although there can be no assurance that such conditions
will not occur. Holders of outstanding old notes will
have certain rights against under the registration
rights agreement executed as part of the offering of the
outstanding old notes should we fail to consummate the
exchange offer.
Conditions to the exchange offer.......... The exchange offer is subject to certain conditions,
which may be waived by us. See "The Exchange
Offer--Conditions of the exchange offer." The exchange
offer is not conditioned upon any minimum number of old
notes being tendered.
Special procedures for beneficial
owners.................................. If you are the beneficial owner of old notes and your
name does not appear on a security position listing of
the Depository Trust Company as the holder of such old
notes or if you are a
6
beneficial owner of old notes that are registered in the
name of a broker, dealer, commercial bank, trust company
or other nominee and you wish to tender such old notes
or registered old notes in the exchange offer, you
should contact the person in whose name your old notes
are registered promptly and instruct that person to
tender on your behalf. If such beneficial holder wished
to tender on his own behalf such beneficial holder must,
prior to completing and executing the letter of
transmittal and delivering its outstanding old notes
either make appropriate arrangements to register
ownership of the outstanding old notes in such holder's
name or obtain a properly completed bond power from the
registered holder. The transfer of record 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, or the procedure for
book-entry transfer cannot be completed on time or
certificates for registered old notes cannot be
delivered on time, you may tender your old notes
pursuant to the procedures described in this prospectus
under the heading "The Exchange Offer--Terms of the
Exchange Offer--Guaranteed delivery procedures."
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
, 2001, unless we decide to extend the
expiration date or your old notes were previously
accepted for exchange.
Acceptance of outstanding old notes and
delivery of new notes................... Subject to certain conditions as described more fully
under "The Exchange Offer--Conditions of the Exchange
Offer", we will accept for exchange any and all
outstanding old notes which are properly tendered in the
exchange offer prior to 5:00 p.m., New York City time,
on the expiration date. The new notes issued pursuant to
the exchange offer will be delivered promptly to you
following the expiration date.
Federal income tax considerations......... The exchange of the old notes will generally not be a
taxable exchange for United States federal income tax
purposes. We believe you will not recognize any taxable
gain or loss or any income as a result of such exchange.
Use of proceeds........................... We will not receive any proceeds from the issuance of
new notes pursuant to the exchange offer. We will pay
all expenses incident to the exchange offer.
Exchange agent............................ United States Trust Company of New York is serving as
the exchange agent in connection with the exchange
offer. The exchange agent can be reached at Corporate
Trust Administration, 114 West 47th Street, New York, NY
10036-1532. For more information with respect to the
exchange offer, the telephone number for the exchange
agent is (212) 852-1000 and the facsimile number for the
exchange agent is (212) 852-1625.
7
SUMMARY DESCRIPTION OF THE NEW NOTES
THE SUMMARY BELOW DESCRIBES THE PRINCIPAL TERMS OF THE NEW NOTES. THE TERMS
AND CONDITIONS DESCRIBED BELOW ARE SUBJECT TO IMPORTANT LIMITATIONS AND
EXCEPTIONS. THE "DESCRIPTION OF THE NOTES" SECTION OF THIS PROSPECTUS CONTAINS A
MORE DETAILED DESCRIPTION OF THE TERMS AND CONDITIONS OF THE NOTES.
ISSUER.................................... American Cellular Corporation, a Delaware corporation
SECURITIES................................ $450.0 million in aggregate principal amount of 9 1/2%
Senior Subordinated Notes due 2009.
GUARANTEES................................ All payments with respect to the notes, including
principal and interest, will be fully and
unconditionally guaranteed on an unsecured senior
subordinated basis, jointly and severally, by our direct
parent, ACC Acquisition LLC, and substantially all of
our existing subsidiaries. Each of our guarantors also
guarantees our senior credit facility on a senior
secured basis and is jointly and severally liable on a
senior secured basis with us for all obligations under
the senior credit facility.
MATURITY DATE............................. October 15, 2009
INTEREST PAYMENT DATES.................... April 15 and October 15, commencing October 15, 2001.
INTEREST RESERVE.......................... We have irrevocably deposited in an interest reserve
account with the trustee for the notes an amount in cash
or U.S. government securities, which, together with the
interest received on that cash or those securities, will
be sufficient to pay when due the first four scheduled
interest payments on the notes, with any balance to be
retained by us.
RANKING................................... The notes and the guarantees are unsecured and are:
- subordinate in right of payment to all of our and our
subsidiaries' existing and future senior indebtedness,
including our and our guarantors' obligations under
the senior credit facility;
- equal in right of payment to our and our guarantors'
future senior subordinated indebtedness; and
- senior in right of payment to our and our guarantors'
future subordinated indebtedness.
On a pro forma basis, as of December 31, 2000:
- our outstanding senior indebtedness would have been
$1,332.7 million;
- the outstanding senior indebtedness guaranteed by the
guarantors would have been $1,332.7 million;
- our senior subordinated indebtedness would have been
$450.0 million;
- the outstanding senior subordinated indebtedness
guaranteed by the guarantors would have been
$450.0 million; and
8
- neither we nor the guarantors of the notes would have
had any indebtedness subordinated to the notes.
OPTIONAL REDEMPTION....................... At any time prior to October 15, 2005, we may redeem the
notes at a price based on a fixed spread above the
prevailing yield on U.S. government securities at the
time of redemption.
At any time on or after October 15, 2005, we may redeem
all or a part of the notes at the redemption prices
listed in "Description of the Notes--Optional
Redemption."
Prior to April 15, 2004, we may use the proceeds of
certain equity offerings to redeem up to 35% of the
original principal amount of the notes at a redemption
price of 109.50% of their principal amount, plus accrued
and unpaid interest and liquidated damages, if any, to
the redemption date.
MANDATORY OFFER TO PURCHASE............... If we experience specific kinds of changes of control or
if we sell certain assets and do not apply the proceeds
as required, we will be required to offer to repurchase
part or all of the notes at 101% of the principal
balance plus accrued and unpaid interest and liquidated
damages, if any.
COVENANTS................................. We have issued the old notes, and we will issue the new
notes, under an indenture with United States Trust
Company of New York, as trustee. The indenture, among
other things, limits our ability and the ability of our
restricted subsidiaries to:
- sell assets;
- make restricted payments;
- incur additional indebtedness;
- create or incur liens;
- place restrictions on distributions and other payments
from restricted subsidiaries;
- merge or consolidate with or transfer substantial
assets to another entity;
- engage in transactions with related persons; or
- engage in any business other than permitted
businesses.
See "Description of the Notes--Certain Covenants."
USE OF PROCEEDS........................... We will not receive any proceeds from the issuance of
our new notes in the exchange offer pursuant to this
prospectus.
YOU SHOULD REFER TO THE SECTION ENTITLED "RISK FACTORS" BEGINNING ON
PAGE 11 FOR AN EXPLANATION OF CERTAIN RISKS OF INVESTING IN THE NOTES.
------------------------
We were incorporated in Delaware on February 21, 1990, as PriCellular
Corporation and became American Cellular Corporation by merger on June 25, 1998.
Our principal executive offices are located at Suite 200, 13439 North Broadway
Extension, Oklahoma City, Oklahoma 73114. Our telephone number is
(405) 529-8500.
9
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth:
- certain historical consolidated financial and other data for us as of
December 31, 2000 and for the period from February 26, 1998 through
December 31, 1998, for the year ended December 31, 1999, and for the
period from February 25, 2000 through December 31, 2000; and
- certain pro forma financial and other data as of and for the year ended
December 31, 2000.
We derived our summary historical consolidated financial data as of
December 31, 2000 and for the period from February 26, 1998 through
December 31, 1998, for the year ended December 31, 1999 and for the period from
February 25, 2000 through December 31, 2000 from our audited consolidated
financial statements included elsewhere in this prospectus. The pro forma
results of operations for the year ended December 31, 2000 give pro forma effect
to our acquisition by AT&T Wireless and Dobson Communications and our offering
of the old notes as if each had been completed and the proceeds from our
offering of the old notes had been applied as of January 1, 2000. The as
adjusted balance sheet data adjusts for our offering of the old notes as if it
had been completed and the proceeds applied as of December 31, 2000.
We derived our summary pro forma consolidated financial data from the pro
forma consolidated financial statements included elsewhere in this prospectus.
The summary pro forma consolidated financial data are based on currently
available information and assumptions that we believe are reasonable. The
summary pro forma consolidated financial data do not purport to represent what
our financial condition or results of operations would have been if the pro
forma transactions had been completed on the dates and for the periods
indicated, nor do they purport to indicate our future financial condition or
results of operations. You should read the summary pro forma consolidated
financial data in conjunction with "Capitalization," "Unaudited Pro Forma
Consolidated Financial Data," "Selected Consolidated Financial and Other Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and the financial statements and related notes that we include
elsewhere in this prospectus.
In the following tables, our EBITDA represents earnings (loss) from
continuing operations before interest income, interest expense, income taxes,
depreciation, amortization, other income and nonrecurring charges. We believe
that EBITDA provides meaningful additional information concerning a company's
operating results and its ability to service its long-term debt and other fixed
obligations and to fund its continued growth. Many financial analysts consider
EBITDA to be a meaningful indicator of an entity's ability to meet its future
financial obligations, and they consider growth in EBITDA to be an indicator of
future profitability, especially in a capital-intensive industry such as
wireless telecommunications. You should not construe EBITDA as an alternative to
operating income (loss) as determined in accordance with generally accepted
accounting principles, or GAAP, as an alternative to cash flows from operating
activities as determined in accordance with GAAP or as a measure of liquidity.
Because EBITDA is not calculated in the same manner by all companies, it may not
be comparable to other similarly titled measures of other companies. See our
consolidated statement of cash flows in our consolidated financial statements
included elsewhere in this prospectus.
We determine market penetration by dividing the number of our total
subscribers at the end of the period by the estimated total population for those
markets. We calculate average monthly churn rates based on the number of
subscriber cancellations during the period as a percentage of the weighted
average total subscribers for the period.
ARPU represents average revenue per user, which is calculated as the sum of
our service and roaming revenue divided by the average number of our
subscribers.
10
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
PERIOD FROM
FEBRUARY 26, 1998 PERIOD FROM PRO FORMA
(DATE OF FORMATION) FEBRUARY 25, 2000 FOR THE
THROUGH YEAR ENDED THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1998 1999 2000 2000
------------------- ------------- ----------------- -------------
($ IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
Operating revenue:
Service revenue.......................... $ 76,264 $ 176,323 $ 190,176 $ 221,365
Roaming revenue.......................... 53,458 131,174 131,091 152,096
Equipment revenue and other.............. 7,765 18,324 15,569 18,038
----------- --------- ----------- ---------
Total operating revenue................ 137,487 325,821 336,836 391,499
Operating expenses:
Cost of service.......................... 25,995 57,246 64,468 74,633
Cost of equipment........................ 7,271 19,356 28,249 31,759
Marketing and selling.................... 18,363 31,078 38,434 43,781
General and administrative............... 19,262 43,350 40,391 48,692
Depreciation and amortization............ 45,569 97,217 154,797 185,093
Nonrecurring charges..................... 4,355 -- -- --
----------- --------- ----------- ---------
Total operating expenses............... 120,815 248,247 326,339 383,958
----------- --------- ----------- ---------
Operating income........................... 16,672 77,574 10,497 7,541
----------- --------- ----------- ---------
Interest expense........................... (61,477) (106,888) (140,970) (180,049)
Other income, net.......................... 4,936 4,918 536 16
Income tax (provision) benefit............. (530) (5,418) 30,694 41,064
----------- --------- ----------- ---------
Net loss................................... $ (40,399) $ (29,814) $ (99,243) $(131,428)
=========== ========= =========== =========
OTHER FINANCIAL DATA:
Cash flows provided by operating
activities............................... $ 35,295 $ 62,976 $ 38,466 n/a
Cash flows used in investing activities.... $(1,512,745) $ (21,858) $ (60,949) n/a
Cash flows provided by (used in) financing
activities............................... $ 1,511,465 $ (237) $ 12,193 n/a
EBITDA..................................... $ 66,596 $ 174,791 $ 165,294 $ 192,634
Capital expenditures....................... $ 24,260 $ 50,462 $ 61,170 $ 68,137
OTHER DATA:
Subscribers (at period end)................ 334,500 434,700 554,400 554,400
Penetration (at period end)................ 6.8% 8.9% 11.3% 11.3%
Average monthly churn rates................ 1.8% 1.6% 1.7% 1.7%
Population................................. 4,892,000 4,889,000 4,889,000 4,889,000
ARPU....................................... $ 69 $ 68 $ 65 $ 64
ARPU, excluding roaming revenue............ $ 40 $ 39 $ 38 $ 38
DECEMBER 31, 2000
---------------------------
HISTORICAL AS ADJUSTED
------------- -----------
($ IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 15,123 $ 15,123
Restricted investments...................................... -- 85,000
Property, plant and equipment, net.......................... 192,986 192,986
Total assets................................................ 2,670,103 2,771,503
Total debt.................................................. 1,678,000 1,779,400
Stockholder's equity........................................ 665,757 665,757
11
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW
BEFORE YOU DECIDE TO PARTICIPATE IN THE EXCHANGE OFFER.
RISKS RELATED TO OUR BUSINESS
WE HAVE A SUBSTANTIAL AMOUNT OF DEBT, WHICH COULD MATERIALLY ADVERSELY AFFECT
OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS AND PREVENT US FROM
FULFILLING OUR OBLIGATIONS, INCLUDING OUR OBLIGATIONS UNDER THE NOTES.
We have a large amount of indebtedness. On a pro forma basis adjusted for
the issuance of the notes, we would have had approximately $1,779.4 million of
indebtedness and stockholder's equity of $665.8 million at December 31, 2000. We
are permitted under the indenture governing the notes to incur substantial
additional debt by, for example, issuing additional notes or drawing additional
funds under our senior credit facility. If we incur additional debt following
the completion of this offering, the related risks could intensify.
This large amount of indebtedness could, for example:
- make it more difficult for us to satisfy our obligations under the notes
or other indebtedness and, if we fail to comply with the requirements of
the indebtedness, could result in an event of default;
- limit our ability to obtain additional financing for working capital,
capital expenditures, acquisitions and other general corporate activities;
- limit our flexibility in planning for, or reacting to, changes in our
business and the industry in which we operate;
- limit our ability to successfully withstand a downturn in our business or
the economy generally; and
- place us at a competitive disadvantage against other less leveraged
competitors.
Our ability to make payments on our debt, including the notes, depends upon
our future operating performance, which is subject to general economic and
competitive conditions and to financial, business and other factors, many of
which we cannot control. If our cash flow from our operating activities is
insufficient to service our debt, we may be forced to make alternative financing
plans, including delaying or reducing capital expenditures, attempting to
restructure or refinance our debt, selling assets or operations or seeking
additional equity capital. We may be unable to take any of these actions, on
satisfactory terms or in a timely manner or to the extent necessary to allow us
to service our debt. Moreover, neither Dobson Communications nor AT&T Wireless
is obligated to contribute additional capital to us. Our senior credit facility
limits our ability to take certain of these actions and the indenture governing
the notes will contain similar restrictions. Our failure to pay our debt or to
successfully undertake any of these actions could, among other things, result in
that debt becoming immediately due and payable or otherwise materially adversely
affect the market value of the notes.
WE HAVE A HISTORY OF NET LOSSES. WE EXPECT TO INCUR SIGNIFICANT ADDITIONAL
LOSSES IN THE FUTURE AND OUR SUBSIDIARIES' OPERATING RESULTS COULD FLUCTUATE
SIGNIFICANTLY ON A QUARTERLY AND ANNUAL BASIS. AS A RESULT, WE MAY BE UNABLE TO
PAY AMOUNTS DUE UNDER THE NOTES AND YOU COULD LOSE ALL OR PART OF YOUR
INVESTMENT.
We sustained net losses of $29.8 million for the year ended December 31,
1999 and, on a pro forma basis, $131.4 million for the year ended December 31,
2000. Our earnings were insufficient to cover our fixed charges by
$68.5 million for the year ended December 31, 1999 and, on a pro forma
12
basis, by $172.5 million for the year ended December 31, 2000. We expect to
incur significant additional losses during the next several years while we
continue to develop our wireless systems and grow our subscriber base.
In addition, we believe that our future operating results and cash flows
will be subject to quarterly and annual fluctuations due to many factors, some
of which are outside our control. These factors include increased costs we may
incur in connection with the further development, expansion and upgrade of our
wireless systems, and fluctuations in the demand for our services. We cannot
assure you that we will achieve or sustain profitability. To the extent
quarterly or annual results of operations fluctuate significantly, we may be
unable to pay amounts due under the notes and you could lose all or part of your
investment.
THE RESTRICTIVE COVENANTS IN OUR DEBT INSTRUMENTS MAY LIMIT OUR OPERATING
FLEXIBILITY. IF WE FAIL TO COMPLY WITH THESE COVENANTS, OUR LENDERS COULD
DECLARE A DEFAULT UNDER OUR INDEBTEDNESS EVEN THOUGH WE MAY BE ABLE TO MEET OUR
DEBT SERVICE OBLIGATIONS.
The instruments governing our indebtedness, including the notes, impose
significant operating and financial restrictions on us. These restrictions
significantly limit, among other things, our ability to incur additional
indebtedness, pay dividends, repay junior indebtedness, sell assets, make
investments, engage in transactions with affiliates, create liens and engage in
some types of mergers or acquisitions. In addition, the terms of our senior
credit facility require us to maintain specified financial ratios. Substantially
all of our assets are subject to liens securing our senior credit facility.
These restrictions could limit our ability to obtain future financings, make
needed capital expenditures, withstand a future downturn in our business or the
economy in general, or otherwise take advantage of business opportunities that
may arise. If we fail to comply with these restrictions, the lenders or note
holders could declare a default under the terms of the relevant indebtedness
even though we are able to meet debt service obligations and, because our
indebtedness has cross-default and cross-acceleration provisions, could cause
all of our debt to become immediately due and payable.
We cannot assure you that we would have sufficient funds available, or that
we would have access to sufficient capital from other sources, to repay any
accelerated debt. Even if we could obtain additional financing, we cannot assure
you that the terms would be favorable to us. If the amounts outstanding under
our senior credit facility were accelerated, our lenders could foreclose on
their liens on substantially all of our assets. As a result, any event of
default could have a material adverse effect on our business and financial
condition, and could prevent us from paying amounts due under the notes.
THE NOTES AND GUARANTEES ARE SUBORDINATE TO ALL OF OUR EXISTING AND FUTURE
SENIOR DEBT.
The right to payment on the notes will be subordinate to all of our existing
and future senior debt. Similarly, each guarantee of the notes will be
subordinate to all existing and future senior debt of the guarantor. In the
event of a bankruptcy, liquidation, dissolution, reorganization or similar
proceeding with respect to us or any guarantor, our or the guarantor's assets
will be available to pay obligations on the notes or the applicable guarantee
only after all outstanding senior debt of that party has been paid in full.
There may not be sufficient assets remaining to make payments on amounts due on
any or all of the notes then outstanding or any guarantee. In addition, under
certain circumstances, an event of default in the payment of senior indebtedness
will prohibit us and the guarantors of the notes from paying amounts due on the
notes. On a pro forma basis, as of December 31, 2000:
- our outstanding senior debt was approximately $1,332.7 million (excluding
unused commitments of $217.3 million under our senior credit facility);
and
- the outstanding senior debt of our guarantors was approximately
$1,332.7 million (consisting entirely of guarantees of borrowings under
our senior credit facility).
13
WE MAY NOT BE ABLE TO REPURCHASE THE NOTES UPON A CHANGE OF CONTROL.
If a change of control under the indenture occurs, we will be required to
make an offer to purchase all the outstanding notes at a premium, plus any
accrued and unpaid interest and liquidated damages, if any to the date of
purchase. In such a situation, we may not have enough funds to pay for all of
the notes that are tendered under the offer to purchase. If a significant amount
of notes are tendered, we will almost certainly have to obtain financing to pay
for the tendered notes; however, we may not be able to obtain such financing on
acceptable terms, if at all. A change of control may also result in an event of
default under other debt instruments including our subsidiaries' credit
facilities, and may result in the acceleration of that indebtedness, in which
case we will be required to pay that indebtedness. We urge you to read the
information under "Description of the Notes--Change of Control" for more
information regarding the treatment of a change of control under the indenture.
IN THE EVENT OF OUR BANKRUPTCY, YOU MAY BE UNABLE TO FORECLOSE UPON THE INTEREST
RESERVE WITHOUT BANKRUPTCY COURT APPROVAL. IN ADDITION, A BANKRUPTCY COURT MIGHT
FIND THAT THE INTEREST RESERVE SECURES ONLY THE PRINCIPAL OF THE NOTES AND
PRE-PETITION INTEREST.
The right of the trustee to foreclose upon the funds in the interest reserve
account upon the occurrence of an event of default with respect to the notes may
be impaired significantly under applicable bankruptcy law if we were to commence
a bankruptcy or reorganization case or if our creditors commenced those
proceedings against us. Under applicable bankruptcy law, secured creditors, are
prohibited from foreclosing upon or disposing of a debtor's property without
prior bankruptcy court approval. The noteholders will have a secured claim in
any remaining amounts in the interest reserve account. Because Section
502(b)(2) of the Bankruptcy Code disallows claims in bankruptcy for unmatured
interest on unsecured pre-petition debt, it is possible that a bankruptcy court
would conclude that any funds remaining in the interest reserve account at the
time of our bankruptcy secures only the principal and pre-petition accrued and
unpaid interest on the notes and not interest accruing thereafter.
WE DEPEND ON ROAMING REVENUE FOR A SUBSTANTIAL PORTION OF OUR TOTAL REVENUE. IF
THE TERMS OF OUR ROAMING AGREEMENTS WITH OUR ROAMING PARTNERS, OR THE AMOUNT OF
ROAMING TRAFFIC FROM OUR ROAMING PARTNERS CHANGE MATERIALLY, THIS COULD
SUBSTANTIALLY HARM OUR OPERATIONS.
Roaming revenues accounted for approximately 39% of our total revenues, on a
pro forma basis, for the year ended December 31, 2000. Our top four roaming
partners accounted for approximately 87% of our roaming revenue, on a pro forma
basis, for the year ended December 31, 2000. None of our roaming agreements with
these roaming partners are exclusive, so our partners are not precluded from
entering into other preferred roaming arrangements with our competitors. To the
extent these roaming partners enter into preferred roaming agreements with our
competitors in our markets, it may materially adversely affect our roaming
revenue.
We have long-term roaming agreements with only three of our top four roaming
partners. Our roaming partners may terminate their agreements and discontinue
roaming traffic in our service areas if our quality of service does not continue
to meet designated technical and quality standards or if we are unable to
control fraudulent use. Moreover, we cannot assure you that any of our roaming
agreements will not be terminated or renegotiated on terms that are less
favorable to us. In addition, these agreements provide for scheduled declining
roaming rates over the next several years. As a result, if we are unable to
lower our operating costs, and/or increase roaming minutes of use, our operating
income may significantly decline.
We rely on agreements with other wireless communications service providers
to provide roaming capabilities to our customers in the areas of the United
States that our network does not serve. We cannot assure you that we will
continue to be able to obtain or maintain roaming agreements with
14
other providers on terms that are acceptable to us. In addition, the quality of
service that a wireless provider delivers during a roaming call may be inferior
to the quality of service we provide, the prices of a roaming call may not be
competitive with prices of other wireless providers for such call, and our
customers may not be able to use any of the advanced features, such as voicemail
notification, that are available within our network.
OUR ROAMING PARTNERS, INCLUDING AT&T WIRELESS, ARE NOT PROHIBITED FROM COMPETING
WITH US IN MANY OF OUR MARKETS. OUR LICENSES DO NOT PRECLUDE OTHER OPERATORS
FROM OFFERING COMPETING WIRELESS COMMUNICATIONS SERVICES IN OUR MARKETS.
Our roaming agreements generally do not prevent our roaming partners from
acquiring licenses to provide competing services in our markets. If any of our
roaming partners were to acquire or build wireless networks in our markets, we
could lose a substantial portion of our roaming revenues in those markets. Under
the terms of the joint venture operating agreement between AT&T Wireless and
Dobson Communications, AT&T Wireless may, among other things, resell our service
in our territory, provide fixed wireless service in our territory and continue
to provide services to customers of AT&T Wireless who reside or move to our
territory and act as an agent for the carriers who provide cellular products and
services to national account customers of AT&T Wireless in the geographic areas
in which we operate.
WE FACE INTENSE COMPETITION FROM OTHER WIRELESS PROVIDERS.
The viability of our business will depend upon, among other things, our
ability to compete with other wireless providers, especially on price,
reliability, quality of service, availability of voice and data features and
customer care. In addition, the pricing of our services may be affected by
competition, including the entry of new service providers into our markets. Some
of the providers with which we compete have significant infrastructure in place
and have been operational for many years with substantial existing subscriber
bases, and may have greater capital resources than we do.
We also face competition from paging, dispatch and conventional mobile radio
operations, enhanced specialized mobile radio, called ESMR and mobile satellite
service. We will also compete with resellers of wireless communications services
in each of our markets. We expect competition in the wireless telecommunications
industry to be dynamic and intense as a result of the entrance of new
competition, the development and deployment of new technologies, products and
services, changes in consumer preferences and demographic trends.
CHANGES IN TECHNOLOGY AND CUSTOMER DEMANDS COULD ADVERSELY AFFECT US. THERE IS
NO GUARANTEE THAT OUR TECHNOLOGY WILL BE COMPETITIVE WITH OTHER TECHNOLOGIES OR
COMPATIBLE WITH NEXT GENERATION TECHNOLOGY.
We use TDMA technology for our second generation network. Other digital
technology choices are code division multiple access, or CDMA, and global system
for mobile communications, or GSM. GSM is the prevalent standard in Europe. As a
result, it is possible that a digital transmission technology other than TDMA
may gain sufficient acceptance in the United States to adversely affect the
resources currently devoted by vendors to improving TDMA digital cellular
technology. If consumers perceive that another technology has marketplace
advantages over TDMA, we could experience a competitive disadvantage or be
forced to implement that technology at substantially increased cost.
AT&T Wireless has selected GSM/GPRS technology as their next step towards
the development of advanced voice and high speed data services. There can be no
assurance that handset devices will become available that will operate on both
our existing TDMA networks and the planned AT&T Wireless GSM/GPRS networks,
enabling customers to use a single handset to access both networks.
15
Our current business plan does not include, and we have not developed a budget
for, the development and implementation of a GSM/GPRS overlay network and
delivery of GSM/GPRS voice and data services.
It is likely that we will be compelled to adopt a new technology that may
require significant capital expenditures in the future. We may not have or be
able to raise sufficient capital to successfully purchase and deploy the
equipment necessary to allow us to convert to a new or different technology or
to adopt a new or different technology. In addition, the technologies we choose
to invest in may not lead to successful implementation of our business plan.
Moreover, our roaming revenues may decline substantially to the extent that we
are unable to provide roaming services to customers of AT&T Wireless who have
handsets that utilize GSM or other non-TDMA technologies.
WE DEPEND ON THIRD-PARTY SERVICE MARKS TO MARKET OUR PRODUCTS AND SERVICES. THE
LOSS OF THE RIGHT TO USE THESE SERVICE MARKS OR THE DIMINISHED MARKETING APPEAL
OF THESE SERVICE MARKS COULD ADVERSELY AFFECT OUR BUSINESS.
We use the registered service mark CELLULAR ONE for all of our services. We
have agreements with Cellular One Group that govern our use of the CELLULAR ONE
service mark. Under these agreements, we must meet specified operating and
service quality standards for our systems. If the owner of this service mark
terminates our license agreements because we fail to meet the applicable
operating or service quality standards, or if the name CELLULAR ONE were to
suffer diminished marketing appeal, our ability to attract new subscribers and
to retain existing subscribers in the applicable markets could be materially
impaired.
WE ARE CONTROLLED BY DOBSON COMMUNICATIONS AND AT&T WIRELESS WITH WHOM WE HAVE
ENTERED INTO SIGNIFICANT TRANSACTIONS AND MAY HAVE SIGNIFICANT CONFLICTS OF
INTEREST.
We are a wholly-owned subsidiary of ACC Acquisition LLC, a limited liability
company of which Dobson Communications and AT&T Wireless are each 50% members.
Conflicts of interest may arise as a result of the positions of control and
influence of Dobson Communications and AT&T Wireless. Our board of directors
consists of two representatives of each of Dobson Communications and AT&T
Wireless. Our day-to-day management consists entirely of employees of Dobson
Communications. Both Dobson Communications and AT&T Wireless may compete with
us. Moreover, these companies control our operations, including capital
expenditures, system development, sales and marketing and customer service
functions. With certain exceptions, directors and officers do not owe a
fiduciary duty to creditors. Our directors and officers may make decisions with
respect to our strategic direction, corporate opportunities, network and
operations that may be more beneficial to Dobson Communications and AT&T
Wireless than to us.
In the past, we have entered into significant transactions with each of AT&T
Wireless and Dobson Communications. We describe these transactions under
"Related Party Transactions." We expect to enter into future transactions with
either or both of these affiliates. Although we intend that any future
transactions will be on terms at least as favorable to us as those we could
obtain from an unaffiliated third party, we cannot assure you that this will be
the case or that you will consider the terms we obtain to be advantageous.
OUR BUSINESS DEPENDS IN LARGE PART ON OUR MANAGEMENT AGREEMENT WITH DOBSON
COMMUNICATIONS AND THE EFFORTS OF ITS KEY PERSONNEL. THE LOSS OF KEY PERSONNEL
OF DOBSON COMMUNICATIONS IN A COMPETITIVE EMPLOYMENT ENVIRONMENT COULD AFFECT
OUR GROWTH AND FUTURE SUCCESS.
We depend on Dobson Communications to devote significant management and
technical resources to our business. Each member of our day-to-day management
team is employed by Dobson Communications and serves us under the terms of a
management agreement between Dobson
16
Communications and our parent. Our success depends in large part on the
continued employment by Dobson Communications of Everett R. Dobson, our
president, G. Edward Evans, our vice president, and Bruce R. Knooihuizen, our
treasurer, any of whom may terminate their employment with Dobson Communications
at any time. We have no formal employment agreement with any of our key
managers. Dobson Communications provides complete management services to us with
respect to the design, development and operation of our network, for which we
pay management fees.
There is intense competition for qualified personnel in our industry and the
limited availability of qualified individuals could become an issue of
increasing concern in the future. Our financial condition depends upon qualified
personnel successfully implementing our business plan. The inability to hire and
retain qualified personnel, or to retain key managers, could hinder our growth
and the successful implementation of our business plan.
OUR BUSINESS IS REGULATED AND THERE IS POTENTIAL FOR ADVERSE REGULATORY CHANGE.
WE MAY BE UNABLE TO OBTAIN REGULATORY APPROVALS WHICH COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR OPERATIONS AND OUR ABILITY TO REPAY THE NOTES.
The FCC regulates the licensing, construction, operation, acquisition and
sale of our wireless systems, as well as the number of cellular and other
wireless licensees permitted in each of our markets. Changes in the regulation
of wireless activities and wireless carriers or the loss of any license or
licensed area could have a material adverse effect on our operations and impair
our ability to repay the notes. All of our licenses are subject to renewal upon
expiration of each license's initial and subsequent ten-year license period.
However, we cannot assure you that the FCC will grant us any renewal
applications or that our future applications will be free from challenge. In
addition, some aspects of the Telecommunications Act of 1996 place additional
burdens upon us or subject us to increased competition and increase our costs of
doing business.
Several states and localities have proposed or enacted legislation that
would limit or prohibit the use or possession of hand-held mobile phones while
driving an automobile. If adopted in our territories or that of our roaming
partners, this legislation could reduce the minutes of use by our customers or
customers of our roaming partners traveling through our territory, which could
adversely affect our business.
CONCERNS THAT THE USE OF WIRELESS HANDSETS MAY POSE HEALTH AND SAFETY RISKS MAY
DISCOURAGE THE USE OF OUR WIRELESS HANDSETS.
Media reports have suggested that, and studies are currently being
undertaken to determine whether, radio frequency emissions from wireless
handsets may be linked with health risks, including cancer, and interference
with various electronic medical devices, including hearing aids and pacemakers.
Concerns over radio frequency emissions may discourage the use of wireless
communications devices, which could adversely affect our business. In addition,
the Federal Communications Commission requires that certain transmitters,
facilities, operations, and mobile and portable transmitting devices used in
wireless handsets meet specific radio frequency emission standards. Compliance
with any new restrictions could materially increase our costs. Concerns about
radio frequency emissions may affect our ability to obtain licenses from
government entities necessary to construct microwave sites in certain locations.
RISKS RELATED TO THIS EXCHANGE OFFER
THERE IS NOT CURRENTLY AN ACTIVE MARKET FOR THE NOTES AND WE CANNOT ASSURE YOU
THAT ONE WILL DEVELOP.
There is currently no active trading market for the notes. If the notes are
traded, they may trade for less than their initial offering price, depending
upon prevailing interest rates, the market for similar
17
securities, our financial condition and prospects and other factors beyond our
control, including general economic conditions. We do not intend to apply for a
listing or quotation of the notes. Although the initial purchasers have informed
us that they intend to make a market in the notes, they are not obligated to do
so. In addition, the initial purchasers may discontinue their market making
activities at any time without notice. Accordingly, we cannot assure you as to
the development or liquidity of any trading market for the notes.
THERE MAY BE ADVERSE CONSEQUENCES OF A FAILURE TO EXCHANGE.
Untendered outstanding old notes that are not exchanged for new notes
pursuant to this exchange offer will remain restricted securities. These
outstanding old notes will continue to be subject to the following restrictions
on transfer:
- outstanding old notes may be resold only if registered pursuant to the
Securities Act, if an exemption from registration is available thereunder,
or if neither such registration nor such exemption is required by law,
- outstanding old notes shall bear a legend restricting transfer in the
absence of registration or an exemption therefrom, and
- a holder of outstanding old notes who desires to sell or otherwise dispose
of all or any part of its outstanding old notes under an exemption from
registration under the Securities Act, if requested by us, must deliver to
us an opinion of independent counsel experienced in Securities Act
matters, reasonably satisfactory in form and substance to us, that such
exemption is available.
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These forward-looking
statements are subject to risks and uncertainties. You should not place undue
reliance on these statements. Forward-looking statements include information
concerning possible or assumed future results of operations, including
descriptions of our business strategies. These statements often include words
such as "anticipates," "expects," "plans," "intends" and similar expressions. We
base these statements on certain assumptions that we have made in light of our
experience in the industry, as well as our perceptions of historical trends,
current conditions, expected future developments and other factors we believe
are appropriate in these circumstances. As you read and consider this
prospectus, you should understand that these statements are not guarantees of
performance or results. They involve risks, uncertainties and assumptions.
Although we believe that these forward-looking statements are based on
reasonable assumptions, you should be aware that many factors could affect our
actual financial results or results of operations and could cause actual results
to differ materially from those expressed in the forward-looking statements.
These factors include those described under "Risk Factors," as well as the
following:
- our substantial leverage and debt service requirements;
- pricing, market strategies, the expansion, consolidation and other
activities of competitors;
- our relationship with AT&T Wireless;
- the integration of our business with Dobson Communications;
- the effect of economic conditions in our markets;
- customer demand; and
- the effect of seasonal and weather fluctuations.
18
All future written and oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by our
cautionary statements. We do not intend to release publicly any revisions to any
forward-looking statements to reflect events or circumstances in the future or
to reflect the occurrence of unanticipated events, except as required by law.
USE OF PROCEEDS
This exchange offer is intended to satisfy our obligations under our
Registration Rights Agreement dated as of March 14, 2001 with the initial
purchasers of the old notes. We will not receive any cash proceeds from the
issuance of the new notes. We will only receive old notes equal in principal
amount to the principal amount of new notes that we issue in the exchange offer.
19
CAPITALIZATION
The following table sets forth our cash and cash equivalents, restricted
investments and consolidated capitalization as of December 31, 2000, and as
adjusted to give effect to use of the net proceeds of the offering of the old
notes. You should read this table together with "Selected Consolidated Financial
and Other Data," "Unaudited Pro Forma Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical financial statements and notes included elsewhere
in this offering memorandum. The term "restricted investments" includes cash or
U.S. government securities that we have irrevocably deposited in an interest
reserve account to fund the first four scheduled interest payments on the notes.
On a pro forma basis after giving effect to the application of the estimated net
proceeds of the offering of the old notes, at December 31, 2000 we had available
to us for additional borrowing $217.3 million under our revolving credit
facility.
AS OF DECEMBER 31, 2000
-------------------------
ACTUAL AS ADJUSTED
----------- -----------
($ IN THOUSANDS)
Cash and cash equivalents............................ $ 15,123 $ 15,123
Restricted investments............................... -- 85,000
---------- ----------
Total cash, cash equivalents and restricted
investments...................................... $ 15,123 $ 100,123
========== ==========
Long-term debt (including current maturities):
Senior credit facility:
Revolving credit facility........................ $ 228,000 $ 82,735
Term loan A...................................... 700,000 603,448
Term loan B...................................... 350,000 301,724
Term loan C...................................... 400,000 344,828
---------- ----------
Total senior credit facility................... 1,678,000 1,332,735
Senior subordinated notes, net of discount........... -- 446,665
---------- ----------
Total long-term debt............................... 1,678,000 1,779,400
---------- ----------
Stockholder's equity:
Paid-in capital...................................... 765,000 765,000
Retained deficit..................................... (99,243) (99,243)
---------- ----------
Total stockholder's equity........................... 665,757 665,757
---------- ----------
Total capitalization............................... $2,343,757 $2,445,157
========== ==========
20
THE EXCHANGE OFFER
PURPOSE AND EFFECTS OF THE EXCHANGE OFFER
We initially issued $450.0 million aggregate principal amount old notes on
March 14, 2001 in a private offering in reliance on Section 4(2) of the
Securities Act. The initial purchasers were Lehman Brothers Inc., Banc of
America Securities LLC, Barclays Capital Inc., Deutsche Banc Alex. Brown, Inc.,
Dresdner Kleinwort Wasserstein-Grantchester, Inc., First Union Securities, Inc.
and TD (USA) Inc. The initial purchasers subsequently offered and sold a portion
of the old notes only to "qualified institutional buyers" as defined in and in
compliance with Rule 144A and outside the United States in compliance with
Regulation S of the Securities Act.
In connection with the sale of the old notes, we entered into a registration
rights agreement, which requires us
- to cause the old notes to be registered under the Securities Act, or
- to file with the Securities and Exchange Commission a registration
statement under the Securities Act with respect to an issue of new notes
identical in all material respects to the old notes, and
- use our best efforts to cause such registration statement to become
effective under the Securities Act and
- upon the effectiveness of that registration statement, to offer to the
holders of the old notes the opportunity to exchange their old notes for a
like principal amount of new notes, which will be issued without a
restrictive legend and which may be reoffered and resold by the holder
without restrictions or limitations under the Securities Act.
We are making the exchange offer to satisfy our obligations under the
registration rights agreement. The term "holder" with respect to the exchange
offer means any person in whose name old notes are registered on our or the
Depository Trust Company's ("DTC") books or any other person who has obtained a
properly completed certificate of transfer from the registered holder, or any
person whose old notes are held of record by DTC who desires to deliver such old
notes by book-entry transfer at DTC.
We have not requested, and do not intend to request, an interpretation by
the staff of the Securities and Exchange Commission with respect to whether the
new notes issued in the exchange offer in exchange for the old notes may be
offered for sale, resold or otherwise transferred by any holder without
compliance with the registration and prospectus delivery provisions of the
Securities Act. Based on interpretations by the staff of the Securities and
Exchange Commission set forth in no-action letters issued to third parties, we
believe the new notes issued in exchange for old notes may be offered for
resale, resold and otherwise transferred by any holder without compliance with
the registration and prospectus delivery provisions of the Securities Act
provided that:
- you are not a broker-dealer who purchased old notes directly from us for
resale pursuant to Rule 144A or any other available exemption under the
Securities Act,
- you are not our "affiliate", or
- you acquire the new notes in the ordinary course of your business and that
you have no arrangement or understanding with any person to participate in
the distribution of the new notes.
Any holder who tenders in the exchange offer with the intention to
participate, or for the purpose of participating, in a distribution of the new
notes or who is our affiliate may not rely upon such interpretations by the
staff of the Securities and Exchange Commission and, in the absence of an
21
exemption, must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction. Any holder to comply with such requirements may incur liabilities
under the Securities Act for which the holder is not indemnified by us. Each
broker-dealer (other than an affiliate of ours) that receives new notes for its
own account in the exchange offer must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of new notes. The letter of transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act. We have agreed
that, for a period of 180 days after the exchange date, we will make the
prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
We are not making the exchange offer to, nor will we accept surrenders for
exchange from, holders of old notes in any jurisdiction in which this exchange
offer or its acceptance would not comply with the securities or blue sky laws.
By tendering in the exchange offer, you will represent to us that, among
other things:
- you are acquiring the new notes in the exchange offer in the ordinary
course of your business, whether or not you are a holder,
- you do not have an arrangement or understanding with any person to
participate in the distribution of the new notes,
- you are not a broker-dealer, or you are a broker-dealer but will not
receive new notes for your own account in exchange for old notes, neither
you nor any other person is engaged in or intends to participate in the
distribution of the new notes, and
- you are not our "affiliate" within the meaning of Rule 405 under the
Securities Act or, if you are our "affiliate," you will comply with the
registration and prospectus delivery requirements of the Securities Act to
the extent applicable.
Following the completion of the exchange offer, no notes will be entitled to
the liquidated damages payment applicable to the old notes. Nor will holders of
notes have any further registration rights, and the old notes will continue to
be subject to certain restrictions on transfer. See "--Consequences of Failure
to Exchange." Accordingly, the liquidity of the market for the old notes could
be adversely affected. See "Risk Factors--There may be adverse consequences of a
failure to exchange."
Participation in the exchange offer is voluntary and you should carefully
consider whether to accept. We urge you to consult your financial and tax
advisors in making your own decisions on whether to participate in the exchange
offer.
TERMS OF THE EXCHANGE OFFER
GENERAL. Upon the terms and subject to the conditions set forth in this
prospectus and in the letter of transmittal, we will accept for exchange any and
all old notes validly tendered and not withdrawn prior to 5:00 p.m., New York
City time, on the expiration date. We will issue one new note in the principal
amount of $1,000 in exchange for each $1,000 principal amount of old notes
accepted in the exchange offer. You may tender some or all of your old notes in
the exchange offer.
The form and terms of the new notes will be identical in all material
respects to the form and terms of the old notes except that the new notes will
be registered under the Securities Act and, therefore, the new notes will not
bear legends restricting their transfer. The new notes will be treated as a
single class with any old notes that remain outstanding. We are not conditioning
the exchange offer upon any minimum number of old notes being tendered for
exchange.
22
As of March 31, 2001 $450.0 million aggregate principal amount of old notes
was outstanding.
We are sending this prospectus, together with the letter of transmittal, to
all registered holders of old notes. We have not fixed any record date for
determining record holders of old notes entitled to participate in the exchange
offer. We intend to conduct the exchange offer in accordance with the provisions
of the registration rights agreement and the applicable requirements of the
Exchange Act, and the rules and regulations of the Securities and Exchange
Commission. Old notes which are not tendered for exchange in the exchange offer
will remain outstanding and interest will continue to accrue, but such old notes
will not be entitled to any rights or benefits under the registration rights
agreement.
We will be deemed to have accepted validly tendered old notes when, as and
if we have given oral or written notice to the exchange agent. The exchange
agent will act as agent for the tendering holders for the purposes of receiving
the new notes from us. If we do not accept any tendered old notes for exchange
because of an invalid tender or the occurrence of certain other events
identified in this prospectus, we will return the certificates for the
unaccepted old notes, without expense, to the tendering holder as promptly as
practicable after the expiration date.
You will not be required to pay brokerage commissions or fees or, subject to
the instructions in the letter of transmittal, transfer taxes if you tender old
notes in the exchange offer. We will pay all charges and expenses, other than
certain applicable taxes described below, in connection with the exchange offer.
See "--Fees and expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS. The exchange offer expires at
5:00 p.m., New York City time, on , 2001, unless we, in our sole
discretion, extend the exchange offer, in which case the expiration date will be
the latest date and time to which the exchange offer is extended. Although we do
not intend to extend the exchange offer at this time, we reserve the right to
extend the exchange offer at any time by giving oral or written notice to the
exchange agent and by timely public announcement communicated, unless otherwise
required by applicable law or regulation, by making a release to the Dow Jones
News Service. During any extension of the exchange offer, all old notes
previously tendered pursuant to the exchange offer and not withdrawn will remain
subject to the exchange offer. The date of the exchange of the new notes for old
notes will be as soon as practicable following the expiration date.
We reserve the right, in our sole discretion,
- to delay accepting any old notes, to extend the exchange offer or to
terminate the exchange offer if any of the conditions set forth below
under "--Conditions of the Exchange Offer" have not been satisfied, 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 will, as promptly as practicable, notify you orally or in writing if
there is any delay in acceptance, extension, termination or amendment. If we
amend the exchange offer in any manner determined by us to constitute a material
change, we will promptly disclose the amendment by means of a prospectus
supplement that we will distribute to you. We will also extend the exchange
offer for a period of time, depending upon the significance of the amendment and
the manner of disclosure to the registered holders, if the exchange offer would
otherwise expire during that period.
In all cases we will issue new notes for old notes accepted for exchange in
the exchange offer only after the exchange agent timely receives a properly
completed and duly executed letter of transmittal and all other required
documents. We reserve the right to waive any conditions of the exchange offer or
defects or irregularities in the tender of old notes. If any tendered old notes
are not accepted for any reason set forth in the terms and conditions of the
exchange offer or if old notes are submitted for
23
a greater number of notes than the holder desires to exchange, such unaccepted
or non-exchanged old notes or substitute old notes evidencing the unaccepted
portion, as appropriate, will be returned without expense to the tendering
holder, unless otherwise provided in the letter of transmittal, as promptly as
practicable after the expiration or termination of the exchange offer.
INTEREST ON THE NEW NOTES. You will not receive accrued interest on old
notes that are accepted for exchange at the time of exchange. However, we will
pay accrued but unpaid interest on exchanged old notes on the new notes on the
first interest payment date following consummation of the exchange offer.
PROCEDURES FOR TENDERING OLD NOTES. Your tender of old notes through one of
the procedures set forth below will constitute an agreement between you and us
in accordance with the terms and subject to the conditions set forth in this
prospectus and in the letter of transmittal. In order to tender old notes, you
must
- properly complete and sign a letter of transmittal or a facsimile thereof
and deliver the same, together with any corresponding certificate or
certificates representing the old notes being tendered and any required
signature guarantees, to the exchange agent at its address set forth in
the letter of transmittal on or prior to the expiration date,
- comply with the procedure for book-entry transfer described below, or
- comply with the guaranteed delivery procedures described below.
You do not need to have our signature guaranteed if the tendered old notes
are registered in the name of the signer of the letter of transmittal and the
new notes to be issued in exchange are to be issued and any untendered old notes
are to be reissued in the name of the registered holder, including any
participant in DTC (also referred to as a book-entry facility) whose name
appears on a security listing as the owner of old notes. In any other case you
must endorse the tendered old notes or accompany them with written instruments
of transfer in a form satisfactory to us and duly executed by the registered
holder. In addition, the signature on the endorsement or instrument of transfer
must be guaranteed by an eligible guarantor institution which is a member of one
of the following recognized signature guarantee programs:
- The Securities Transfer Agents Medallion Program (STAMP),
- The New York Stock Exchange Medallion Signature Program (MSF), or
- The Stock Exchange Medallion Program (SEMP).
If the new notes or old notes not exchanged are to be delivered to an
address other than that of the registered holder appearing on the note register
for the old notes, the signature in the letter of transmittal must be guaranteed
by an eligible institution.
YOU MUST ELECT, AND ACCEPT THE RISK OF, THE METHOD OF DELIVERY OF OLD NOTES,
THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE
AGENT. IF SUCH DELIVERY IS BY MAIL, WE RECOMMEND THAT REGISTERED MAIL, PROPERLY
INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, YOU SHOULD ALLOW
SUFFICIENT TIME TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION
DATE. DO NOT SEND ANY LETTER OF TRANSMITTAL OR OLD NOTES TO US. YOU MAY REQUEST
YOUR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES
TO EFFECT THE ABOVE TRANSACTIONS FOR YOU.
We understand that the exchange agent has confirmed with DTC that any
financial institution that is a participant in DTC's system may utilize DTC's
Automated Tender Offer Program ("ATOP") to tender old notes. We further
understand that the exchange agent will request, within two business days after
the date the exchange offer commences, that DTC establish an account with
respect to the old notes for the purpose of facilitating the exchange offer, and
any participant may make book-entry delivery of old notes by causing DTC to
transfer such old notes into the exchange agent's account in
24
accordance with DTC's ATOP procedures for transfer. However, the exchange of the
old notes so tendered will only be made after timely confirmation (a "Book-Entry
Confirmation") of such book-entry transfer and timely receipt by the exchange
agent of an agent's message, and any other documents required by the letter of
transmittal. The term "agent's message" means a message, transmitted by DTC and
received by the exchange agent and forming part of Book-Entry Confirmation,
which states that:
- DTC has received an express acknowledgment from a participant tendering
old notes which are the subject of such Book-Entry Confirmation,
- the participant has received and agrees to be bound by the terms of the
letter of transmittal, and
- we may enforce such agreement against such participant.
A tender will be deemed to have been received as of the date when
- the tendering holder's properly completed and duly signed letter of
transmittal accompanied by the old notes or a confirmation of book-entry
transfer of such old notes into the exchange agent's account at DTC, is
received by the exchange agent, or
- a notice of guaranteed delivery or letter, telegram or facsimile
transmission to similar effect from an eligible institution is received by
the exchange agent.
Issuances of new notes in exchange for old notes tendered pursuant to a
notice of guaranteed delivery or letter, telegram or facsimile transmission to
similar effect by an eligible institution will be made only against submission
of a duly signed letter of transmittal and any other required documents and
deposit of the tendered old notes.
We will determine all questions as to the validity, form, eligibility
including time of receipt, and acceptance for exchange of any tender of old
notes in our reasonable judgment. Our determination will be final and binding.
We reserve the absolute right to reject any or all tenders not in proper form or
the acceptance for exchange of which may, in the opinion of our counsel, be
unlawful. We also reserve the absolute right to waive any of the conditions of
the exchange offer or any defect or irregularity in the tender of any old notes.
Neither we, the exchange agent or any other person will be under any duty to
give notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification. Any old notes received by
the exchange agent that are not validly tendered and as to which the defects or
irregularities have not been cured or waived, or if old notes are submitted in
principal amount greater than the principal amount of old notes being tendered
by such tendering holder, such unaccepted or non-exchanged old notes will be
returned by the exchange agent to the tendering holder, unless otherwise
provided in the letter of transmittal, as soon as practicable following the
expiration date.
In addition, we reserve the right in our sole discretion
- to purchase or make offers for any old notes that remain outstanding
subsequent to the expiration date, and
- to the extent permitted by applicable law, to purchase old notes in the
open market, in privately negotiated transactions or otherwise.
The terms of any such purchases or offers will differ from the terms of the
exchange offer.
GUARANTEED DELIVERY PROCEDURES. If you desire to accept the exchange offer
and time will not permit a letter of transmittal or old notes to reach the
exchange agent before the expiration date or the procedure for book-entry
transfer cannot be completed on a timely basis, you may effect a tender if the
exchange agent has received at its office, on or prior to the expiration date, a
letter, telegram or facsimile transmission from an eligible institution
25
- setting forth the name and address of the tendering holder,
- setting forth the name(s) in which the old notes are registered and the
certificate number(s) of the old notes to be tendered,
- stating that the tender is being made thereby, and
- guaranteeing that, within three New York Stock Exchange trading days after
the date of execution of such letter, telegram or facsimile transmission
by the eligible institution, such old notes, in proper form for transfer
or a confirmation of book-entry transfer of such old notes into the
exchange agent's account at DTC, will be delivered by such eligible
institution together with a properly completed and duly executed letter of
transmittal and any other required documents.
Unless old notes being tendered by the above-described method are deposited
with the exchange agent within the time period set forth above, accompanied or
preceded by a properly competed letter of transmittal and any other required
documents, we may, at our option, reject the tender. Copies of a notice of
guaranteed delivery which may be used by eligible institutions for the purposes
described in this paragraph are available from the exchange agent.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL. The letter of
transmittal contains, among other things, the following terms and conditions,
which are part of the exchange offer.
The party tendering old notes for exchange (the "transferor") exchanges,
assigns and transfers the old notes to us and irrevocably constitutes and
appoints the exchange agent as the transferor's agent and attorney-in-fact to
cause the old notes to be assigned, transferred and exchanged. The transferor
represents and warrants that it has full power and authority to tender,
exchange, assign and transfer the old notes and to acquire new notes issuable
upon the exchange of such tendered old notes, and that, when the same are
accepted for exchange, we will acquire good and unencumbered title to the
tendered old notes, free and clear of all liens, restrictions, charges and
encumbrances and not subject to any adverse claim. The transferor also warrants
that it will, upon request, execute and deliver any additional documents deemed
by us to be necessary or desirable to complete the exchange, assignment and
transfer of tendered old notes or to transfer ownership of such old notes on the
account books maintained by DTC. All authority conferred by the transferor will
survive the death, bankruptcy or incapacity of the transferor and every
obligation of the transferor shall be binding upon the heirs, personal
representatives, executors, administrators, successors, assigns, trustees in
bankruptcy and other legal representatives of such Transferor.
By executing a letter of transmittal, each holder will make to us the
representations set forth above under the heading "--Purpose and Effect of the
Exchange Offer."
WITHDRAWAL OF TENDERS OF OLD NOTES. Except as otherwise provided herein,
tenders of old notes may be withdrawn at any time prior to 5:00 p.m., New York
City time, on the expiration date provided the old notes have not already been
accepted for exchange.
To withdraw a tender of old notes in the exchange offer, a written or
facsimile transmission notice of withdrawal must be received by the exchange
agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the expiration date. Any such notice of withdrawal must
- specify the name of the person having deposited the old notes to be
withdrawn (the "depositor"),
- identify the old notes to be withdrawn, including the certificate number
or numbers and principal amount of such old notes,
- contain a statement that the holder is withdrawing its election to have
such old notes exchanged,
26
- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which such old notes were tendered, including
any required signature guarantees, or be accompanied by documents of
transfer sufficient to have the Transfer Agent with respect to the old
notes register the transfer of such old notes in the name of the person
withdrawing the tender, and
- specify the name in which any such old notes are to be registered, if
different from that of the depositor.
If old notes have been tendered pursuant to the procedure for book-entry
transfer, any notice of withdrawal must specify the name and number of the
account at the book-entry transfer facility. All questions as to the validity,
form and eligibility, including time of receipt, of such notices will be
determined by us, and our determination shall be final and binding on all
parties. Any old notes so withdrawn will be deemed not to have been validly
tendered for purposes of the exchange offer and no new notes will be issued with
respect thereto unless the old notes so withdrawn are validly retendered. Any
old notes which have been tendered but which are not accepted for exchange will
be returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the exchange
offer. Properly withdrawn old notes may be retendered by following one of the
procedures described above under "--Procedures for tendering old notes" at any
time prior to the Expiration Date.
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other term of the exchange offer, or any extension of
the exchange offer, we are not required to accept for exchange, or exchange new
notes for, any old notes, and may terminate the exchange offer as provided
herein before the acceptance of such old notes, if:
- any statute, rule or regulation shall have been enacted, or any action
shall have been taken by any court or governmental authority which, in our
reasonable judgment, would prohibit, restrict or otherwise render illegal
consummation of the exchange offer; or
- any change, or any development involving a prospective change, in our
business or financial affairs or any of our subsidiaries has occurred
which, in our sole judgment, might materially impair our ability to
proceed with the exchange offer or materially impair the contemplated
benefits of the exchange offer to us; or
- there shall occur a change in the current interpretations by the staff of
the Securities and Exchange Commission which, in our reasonable judgment,
might materially impair our ability to proceed with the exchange offer.
If we determine in our reasonable judgment that any of the above conditions
are not satisfied, we may
- refuse to accept any old notes and return all tendered old notes to the
tendering holders,
- extend the exchange offer and retain all old notes tendered prior to the
expiration date, subject, however, to the right of holders to withdraw
such old notes, or
- waive such unsatisfied conditions with respect to the exchange offer and
accept all validly tendered old notes which have not been withdrawn.
If such waiver constitutes a material change to the exchange offer, we will
promptly disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders, and we will extend the exchange offer for
a period of time, depending upon the significance of the waiver and the manner
of disclosure to the registered holders, if the exchange offer would otherwise
expire during such period.
27
EXCHANGE AGENT
We have appointed United States Trust Company of New York as exchange agent
for the exchange offer. Questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal and
requests for notices of guaranteed delivery should be directed to the exchange
agent addressed as follows:
By mail: By overnight courier: By hand:
United States Trust Company United States Trust Company United States Trust Company
of New York of New York of New York
P. O. Box 844 Corporate Trust Operations 111 Broadway
Cooper Station Department Lower Level
New York, NY 10276-0844 770 Broadway - 13th Floor New York, NY 10006
Attn: Corporate Trust New York, NY 10003 Attn: Corporate Trust
Services Services
(registered or certified mail
recommended)
By facsimile:
(646) 458-8104
(For eligible institutions only)
Confirm by Telephone:
(800) 548-6565
FEES AND EXPENSES
We will bear all fees and the expenses of soliciting tenders. The principal
solicitation is being made by mail; however, additional solicitation may be made
by telecopy, telephone or in person by our officers and regular employees and
those of affiliates. No additional compensation will be paid to any such
officers and employees who engage in soliciting tenders.
We have not retained any dealer-manager or other soliciting agent in
connection with the exchange offer and will not make any payments to brokers,
dealers or others soliciting acceptance of the exchange offer. However, we will
pay the exchange agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith.
We may also pay brokerage houses and other custodians, nominees and fiduciaries
the reasonable out-of-pocket expenses incurred by them in forwarding copies of
this prospectus, the letter of transmittal and related documents to the
beneficial owners of the old notes and in handling or forwarding tenders for
exchange.
The cash expenses to be incurred in connection with the exchange offer will
be paid by us and are estimated in the aggregate to be approximately $100,000.
These expenses include fees and expenses of the exchange agent and transfer
agent and registrar, accounting and legal fees and printing costs, among others.
We will pay all transfer taxes, if any, applicable to the exchange of the
old notes for new notes in the exchange offer. If, however, new notes, or old
notes for principal amounts not tendered or accepted for exchange, are to be
delivered to, or are to be issued in the name of, any person other than the
registered holder of the old notes tendered or if a transfer tax is imposed for
any reason other than the exchange of the old notes pursuant to the exchange
offer, then the amount of any such transfer taxes, whether imposed on the
registered holder or any other persons, will be payable by the tendering holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the letter of transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
28
CONSEQUENCES OF FAILURE TO EXCHANGE
The old notes that are not exchanged for new notes in the exchange offer
will remain restricted securities within the meaning of Rule 144 of the
Securities Act. Accordingly, such old notes may be resold only
- to us or any of our subsidiaries,
- to a qualified institutional buyer in compliance with Rule 144A,
- to an institutional accredited investor that, prior to such transfer,
furnishes to the Trustee a signed letter containing certain
representations and agreements relating to the restrictions on transfer of
the old notes and, if such transfer is in respect of an aggregate
principal amount of old notes at the time of transfer of less than
$100,000, an opinion of counsel acceptable to us that such transfer is in
compliance with the Securities Act,
- outside the United States in compliance with Rule 904 under the Securities
Act,
- pursuant to the exemption from registration provided by Rule 144 under the
Securities Act, if available, or
- pursuant to an effective registration statement under the Securities Act.
The liquidity of the old notes could be adversely affected by the exchange
offer. Following the consummation of the exchange offer, holders of the old
notes will have no further registration rights under the registration rights
agreement and will not be entitled to the liquidated damages applicable to the
old notes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of interest, original issue discount, premium and to the proceeds of
sales of notes made to non-United States holders, other than certain exempt
recipients (such as corporations). In addition, a backup withholding tax of 31%
may apply to such payments unless the non-United States holder provides
appropriate certification of foreign status. Prospective non-United States
holders should consult their own tax advisors regarding the application of the
new Treasury regulations to an investment in the notes.
THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF U.S. FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO YOU IN LIGHT OF YOUR PARTICULAR CIRCUMSTANCES
AND INCOME TAX SITUATION. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR AS TO THE
SPECIFIC TAX CONSEQUENCES THAT WOULD RESULT FROM YOUR PURCHASE, OWNERSHIP AND
DISPOSITION OF THE NOTES, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR
OTHER TAX LAWS.
29
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The accompanying unaudited pro forma balance sheet as of December 31, 2000
gives effect to the issuance of $450.0 million of the notes and the application
of the proceeds as if the notes had been issued on December 31, 2000. In
addition, the accompanying unaudited pro forma statement of operations gives
effect to the above transactions and our acquisition on February 25, 2000 by
AT&T Wireless and Dobson Communications as if these transactions had occurred on
January 1, 2000.
We provide the following unaudited pro forma consolidated financial
statements and the related notes for informational purposes only. The unaudited
pro forma consolidated financial statements are based upon currently available
information and assumptions that we believe are reasonable. The accompanying
data do not purport to represent what our financial condition or results of
operations would have been if the pro forma transactions had been completed on
the dates indicated, nor do they purport to indicate our future financial
position or results of operations. You should read the unaudited pro forma
consolidated financial statements and notes thereto in conjunction with
"Capitalization," "Selected Consolidated Financial and Other Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical financial statements and related notes that we
include elsewhere in this prospectus.
30
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
($ IN THOUSANDS)
PERIOD FROM PERIOD FROM
JANUARY 1, 2000 FEBRUARY 25, 2000 COMBINED PRO FORMA
THROUGH THROUGH FOR YEAR ENDED FOR YEAR ENDED
FEBRUARY 24, 2000(1) DECEMBER 31, 2000 DECEMBER 31, 2000 ADJUSTMENTS DECEMBER 31, 2000
--------------------- ------------------ ------------------ ------------ ------------------
Operating revenue:
Service revenue........... $ 31,189 $ 190,176 $ 221,365 $ -- $ 221,365
Roaming revenue........... 21,005 131,091 152,096 -- 152,096
Equipment sales and other
revenue................. 2,469 15,569 18,038 -- 18,038
-------- --------- --------- --------- ---------
Total operating
revenue............... 54,663 336,836 391,499 -- 391,499
-------- --------- --------- --------- ---------
Operating expenses:
Cost of services.......... 10,165 64,468 74,633 -- 74,633
Cost of equipment......... 3,510 28,249 31,759 -- 31,759
Marketing and selling..... 5,347 38,434 43,781 -- 43,781
General and
administrative.......... 8,301 40,391 48,692 -- 48,692
Depreciation and
amortization............ 16,720 154,797 171,517 13,576 (2) 185,093
-------- --------- --------- --------- ---------
Total operating
expenses.............. 44,043 326,339 370,382 13,576 383,958
-------- --------- --------- --------- ---------
Operating income............ 10,620 10,497 21,117 (13,576) 7,541
-------- --------- --------- --------- ---------
Interest expense.......... (16,051) (140,970) (157,021) (23,028)(3) (180,049)
Other income (expense).... (520) 536 16 -- 16
-------- --------- --------- --------- ---------
Loss before income
taxes................... (5,951) (129,937) (135,888) (36,604) (172,492)
Income tax (provision)
benefit................... (154) 30,694 30,540 10,524 41,064
-------- --------- --------- --------- ---------
Net loss.................... $ (6,105) $ (99,243) $(105,348) $ (26,080) $(131,428)
======== ========= ========= ========= =========
- ------------------------------
(1) Reflects the operations not included in our audited financial statements as
this period was prior to February 25, 2000, the date we were acquired by
AT&T Wireless and Dobson Communications.
(2) Reflects the additional depreciation and amortization on assets acquired on
February 25, 2000 as if those amounts had been acquired on January 1, 2000.
(3) Reflects the addition of $10.5 million of net interest expense which we
would have incurred had our senior credit facility been outstanding for the
entire year, the addition of $42.7 million of interest expense related to
the issuance of the notes, the addition of $0.4 million of interest expense
related to the amortization of the discount on the notes, the elimination of
$32.5 million of interest expense resulting from the reduction in amounts
outstanding under our senior credit facility and the addition of
$1.9 million of interest expense due to amortization of deferred financing
costs associated with this offering.
31
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 2000
($ IN THOUSANDS)
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ----------
ASSETS
Current assets, net of restricted investments......... $ 80,283 $ -- $ 80,283
Restricted investments................................ -- 85,000(1) 85,000
Property, plant and equipment......................... 192,986 -- 192,986
Wireless license acquisition cost..................... 1,149,420 -- 1,149,420
Customer list......................................... 41,556 -- 41,556
Goodwill.............................................. 1,175,251 -- 1,175,251
Deferred financing costs.............................. 30,472 16,400(2) 46,872
Other assets.......................................... 135 -- 135
---------- -------- ----------
Total assets........................................ $2,670,103 $101,400 $2,771,503
========== ======== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities................................... $ 106,180 $ -- $ 106,180
Payables--affiliates.................................. 9,193 -- 9,193
Long-term debt, net of current portion................ 1,650,535 101,400(3) 1,751,935
Deferred credits...................................... 238,438 -- 238,438
Stockholder's equity.................................. 665,757 -- 665,757
---------- -------- ----------
Total liabilities and stockholder's equity.......... $2,670,103 $101,400 $2,771,503
========== ======== ==========
- ------------------------
(1) Reflects the issuance of $450.0 million aggregate principal amount of notes
and the irrevocable deposit of cash or U.S. government securities in an
interest reserve account to fund the first four scheduled interest payments
on the notes.
(2) Reflects deferred financing costs associated with the offering of the old
notes.
(3) Reflects the net increase in long-term debt resulting from the offering of
the old notes.
32
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following tables set forth certain of our historical consolidated
financial data and that of our predecessor, PriCellular. We derived our
consolidated financial data as of December 31, 2000 and for the period from
February 25, 2000 through December 31, 2000 from our consolidated financial
statements included elsewhere in this prospectus, which have been audited by
Arthur Andersen LLP. We derived the consolidated financial data as of
December 31, 1998 and 1999 and for the period from February 26, 1998 through
December 31, 1998 and for the year ended December 31, 1999 from our consolidated
financial statements included elsewhere in this prospectus, which have been
audited by Ernst & Young LLP. We derived the consolidated financial data of our
predecessor, PriCellular, for the six months ended June 30, 1998 from our
predecessor's consolidated financial statements included elsewhere in this
prospectus, which have also been audited by Ernst & Young LLP. We derived the
consolidated financial data of our predecessor, PriCellular, as of and for the
years ended December 31, 1996 and 1997 from our predecessor's consolidated
financial statements that are not included in this prospectus, which have also
been audited by Ernst & Young LLP.
Our predecessor, PriCellular, was formed on February 21, 1990. American
Cellular Corporation was formed on February 26, 1998 and acquired PriCellular,
for accounting purposes, on June 25, 1998. Between February 26, 1998 and
June 25, 1998, American Cellular did not conduct any business. As a result, its
statement of operations data for the period from February 26, 1998 through
December 31, 1998 only includes actual operations for the six-month period from
July 1, 1998 through December 31, 1998. On February 25, 2000, we were acquired
by AT&T Wireless and Dobson Communications. You should read the following
historical consolidated financial data in conjunction with "Capitalization,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and related notes that we include
elsewhere in this prospectus.
In the following tables, our EBITDA, represents earnings (loss) from
continuing operations before interest income, interest expense, income taxes,
depreciation, amortization, other income and nonrecurring charges. We believe
that EBITDA provides meaningful additional information concerning a company's
operating results and its ability to service its long-term debt and other fixed
obligations and to fund its continued growth. Many financial analysts consider
EBITDA to be a meaningful indicator of an entity's ability to meet its future
financial obligations, and they consider growth in EBITDA to be an indicator of
future profitability, especially in a capital-intensive industry such as
wireless telecommunications. You should not construe EBITDA as an alternative to
operating income (loss) as determined in accordance with GAAP, as an alternative
to cash flows from operating activities as determined in accordance with GAAP or
as a measure of liquidity. Because EBITDA is not calculated in the same manner
by all companies, it may not be comparable to other similarly titled measures of
other companies. See our consolidated statements of cash flows in our
consolidated financial statements included elsewhere in this prospectus.
We determine market penetration by dividing our total subscribers at the end
of the period by the total population for those markets. We calculate average
monthly churn rates based on the number of subscriber cancellations during the
period as a percentage of the weighted average total subscribers for the period.
Our ARPU represents average revenue per user, which is calculated as the sum
of our service and roaming revenue divided by the average number of subscribers.
Our earnings were insufficient to cover fixed charges by $29.2 million for
the year ended December 31, 1996, $20.2 million for the year ended December 31,
1997, $9.6 million for the period ended June 30, 1998, $61.2 million for the
period from February 26, 1998 through December 31, 1998, $68.5 million for the
year ended December 31, 1999, and $129.9 million for the period from
February 25, 2000 through December 31, 2000. We define earnings as net income
(loss) before discontinued operations, extraordinary items, interest expense,
amortization, financing costs, taxes and the portion of rent expenses under
operating leases representative of interest. Fixed charges consist of interest
expense, amortization of deferred financing costs and the portion of rent
expense under operating leases representative of interest.
33
PRICELLULAR
(THE PREDECESSOR COMPANY) AMERICAN CELLULAR
------------------------------------- ---------------------------------------------
PERIOD FROM
FEBRUARY 26,
1998 (DATE OF PERIOD FROM
YEAR ENDED SIX MONTHS FORMATION) FEBRUARY 25,
DECEMBER 31, ENDED THROUGH YEAR ENDED 2000 THROUGH
----------------------- JUNE 30, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1997 1998 1998 1999 2000
---------- ---------- ----------- ------------- ------------- -------------
($ IN THOUSANDS, EXCEPT PER SHARE AND SUBSCRIBER DATA)
STATEMENT OF OPERATIONS DATA:
Total operating revenue............. $ 112,616 $ 181,000 $ 108,670 $ 137,487 $ 325,821 $ 336,836
---------- ---------- ---------- ----------- ---------- ------------
Operating expenses:
Cost of service................... 29,571 48,691 20,911 25,995 57,246 64,468
Cost of equipment................. 10,073 12,841 5,365 7,271 19,356 28,249
Selling, general and
administrative.................. 34,502 53,485 30,230 37,625 74,428 78,825
Depreciation and amortization..... 19,537 28,759 17,553 45,569 97,217 154,797
Nonrecurring charges.............. -- -- 4,889 4,355 -- --
---------- ---------- ---------- ----------- ---------- ------------
Total operating expenses........ 93,683 143,776 78,948 120,815 248,247 326,339
---------- ---------- ---------- ----------- ---------- ------------
Operating income.................... 18,933 37,224 29,722 16,672 77,574 10,497
Gain (loss) on sale of investments
in cellular operations............ (1,401) 8,423 (133) -- -- --
Interest expense.................... (47,076) (67,392) (38,955) (61,477) (106,888) (140,970)
Other income, net................... 6,501 8,114 3,080 4,936 4,918 536
Income tax (provision) benefit...... -- -- -- (530) (5,418) 30,694
---------- ---------- ---------- ----------- ---------- ------------
Net loss............................ (23,043) (13,631) (6,286) (40,399) (29,814) (99,243)
Dividends on preferred stock........ (6,178) (6,540) (3,357) (21,375) (44,105) --
---------- ---------- ---------- ----------- ---------- ------------
Net loss applicable to common
stockholders...................... $ (29,221) $ (20,171) $ (9,643) $ (61,774) $ (73,919) $ (99,243)
========== ========== ========== =========== ========== ============
Net loss applicable to common
stockholders per common share..... $ (0.76) $ (0.55) $ (0.28) $ (229.31) $ (274.40) $(992,433.88)
========== ========== ========== =========== ========== ============
Cash dividends declared per common
share............................. $ -- $ -- $ -- $ -- $ -- $ --
OTHER FINANCIAL DATA:
Cash flows provided by operating
activities........................ $ 39,371 $ 49,026 $ 11,665 $ 35,295 $ 62,976 $ 38,466
Cash flows used in investing
activities........................ $ (200,969) $ (36,284) $ (80,327) $(1,512,745) $ (21,858) $ (60,949)
Cash flows provided by (used in)
financing activities.............. $ 138,518 $ (51,749) $ 58,765 $ 1,511,465 $ (237) $ 12,193
EBITDA.............................. $ 38,470 $ 65,983 $ 52,164 $ 66,596 $ 174,791 $ 165,294
EBITDA margin....................... 34.2% 36.5% 48.0% 54.4% 59.7% 49.1%
Capital expenditures................ $ 29,470 $ 25,717 $ 20,517 $ 24,260 $ 50,462 $ 61,170
OTHER DATA:
Subscribers (at period end)......... 139,800 243,700 286,000 334,500 434,700 554,400
Penetration (at period end)......... 3.6% 5.3% 5.9% 6.8% 8.9% 11.3%
Average monthly churn rates......... 1.6% 1.8% 1.4% 1.8% 1.6% 1.7%
Population.......................... 3,883,000 4,598,000 4,850,000 4,892,000 4,889,000 4,889,000
ARPU................................ $ 82 $ 69 $ 63 $ 69 $ 68 $ 65
ARPU, excluding roaming revenue..... $ 48 $ 40 $ 40 $ 40 $ 39 $ 38
Ratio of earnings to fixed
charges........................... N/A N/A N/A N/A N/A N/A
AS OF DECEMBER 31,
----------------------------------------------------------
1996 1997 1998 1999 2000
-------- -------- ---------- ---------- ----------
($ IN THOUSANDS)
BALANCE SHEET DATA:
Cash and cash equivalents................................ $100,364 $ 61,357 $ 34,015 $ 74,896 $ 15,123
Net fixed assets......................................... 73,327 104,854 159,792 173,425 192,986
Total assets............................................. 735,816 747,656 1,517,600 1,484,143 2,670,103
Total debt............................................... 524,517 568,323 1,198,971 1,196,188 1,678,000
Stockholder's equity..................................... 179,919 134,180 263,369 233,555 665,757
34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS PRESENTS FACTORS WHICH WE BELIEVE ARE
RELEVANT TO AN ASSESSMENT AND UNDERSTANDING OF OUR CONSOLIDATED FINANCIAL
POSITION AND RESULTS OF OPERATIONS. THIS FINANCIAL AND BUSINESS ANALYSIS SHOULD
BE READ IN CONJUNCTION WITH OUR SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
AND OUR CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO.
OVERVIEW
Our predecessor, PriCellular was formed on February 21, 1990. American
Cellular Corporation was formed on February 26, 1998 and acquired PriCellular,
for accounting purposes, on June 25, 1998. On February 25, 2000 we were acquired
by AT&T Wireless and Dobson Communications. We provide rural and suburban
wireless telephone services in portions of twelve states. At December 31, 2000,
our wireless systems covered an estimated population of approximately
4.9 million and we had approximately 554,400 subscribers.
REVENUE
Our operating revenue consists of service revenue, roaming revenue,
equipment sales and other revenues.
We primarily derive service revenue by providing wireless communications
services to our subscribers. The industry has experienced a trend of declining
average revenue per minute as competition among wireless service providers has
led to reductions in rates for airtime and subscriptions and other charges. We
believe that the impact of this trend will be mitigated by increases in the
number of wireless subscribers and the number of minutes of usage per
subscriber.
Our service revenue also includes charges to our subscribers when those
subscribers roam into markets of other wireless providers. Through 1999, our
accounting practice was to net that service revenue against the associated
expenses charged to us by third-party wireless providers (that is, the fees we
pay the other wireless providers for carrying our subscribers' calls on their
network) and to record the net expense as cost of service. Historically, we have
been able to pass through to our subscribers the majority of the costs charged
to us by third-party wireless providers. Recently, the industry has been
increasing the use of pricing plans that include flat rate pricing and larger
home areas. Under these types of plans, amounts we are charged by other wireless
providers may not necessarily be passed through to our subscribers. Therefore,
we have changed our accounting procedures to report service revenue and expense
separately in our statements of operations and have reclassified prior year
amounts to reflect this change in accounting.
We derive roaming revenue by providing wireless communications services to
subscribers of other wireless providers when those subscribers "roam" into our
markets and use our systems to carry their calls. Roaming revenue typically
yields higher average per minute rates and higher margins than revenues from our
subscribers. We achieve these higher margins because we incur relatively little
or no incremental costs related to equipment, customer service or collections to
earn roaming revenues. Roaming revenue tends to be impacted by seasonality. We
typically have higher roaming revenue during the second and third quarters of
each year, as users tend to travel more and therefore use their wireless phones
more during the spring and summer months. Despite a decline in our roaming yield
due to an industry-wide trend of a reduction in roaming rates, we have
experienced increases in overall roaming revenue due to increases in roaming
minutes of use.
We include any toll, or long-distance, revenues related to our wireless and
roaming services in service revenue and roaming revenue.
Equipment sales are revenue from selling wireless equipment to our
subscribers.
35
COSTS AND EXPENSES
Our primary operating expense categories include cost of service, cost of
equipment, marketing and selling costs, general and administrative costs and
depreciation and amortization.
Our cost of service consists primarily of costs to operate and maintain our
facilities utilized in providing service to customers, costs from toll and
interconnect charges and amounts paid to third-party cellular providers for
providing service to our subscribers when our subscribers roam into their
markets.
Our cost of equipment represents the cost 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 and
free phone promotions as competition between service providers has intensified.
As a result, we have incurred, and expect to continue to incur, losses on
equipment sales, which have resulted in increased marketing and selling costs
per gross additional subscriber. While we expect to continue these discounts and
promotions, we believe that these promotions will result in increased revenue
from increases in the number of wireless subscribers.
Our marketing and selling costs include advertising, compensation paid to
sales personnel and independent agents and all other costs to market and sell
wireless products and services and costs related to customer retention. We pay
commissions to direct sales personnel for new business generated. Independent
sales agents receive commissions for generating new sales and ongoing sales to
existing customers.
Our general and administrative costs include all infrastructure costs,
including costs for customer support, billing, collections, and corporate
administration. Dobson Communications provides management and certain other
services to us in accordance with a management agreement. We share corporate and
shared call center costs incurred by Dobson Communications with Dobson
Communications. These shared costs are allocated between Dobson Communications
and us primarily based on the estimated populations in our respective licensed
areas and subscribers.
Our depreciation and amortization expense represents the costs associated
with the depreciation of our fixed assets and the amortization of our intangible
assets, primarily goodwill, wireless license acquisition costs and customer
lists.
RESULTS OF OPERATIONS
BASIS OF PRESENTATION
The combined year ended December 31, 1998 results of operations combine the
results of operations for the six months ended June 30, 1998 (the period prior
to our acquisition of PriCellular) and the results of operations for the six
months ended December 31, 1998 (the period subsequent to our acquisition of
PriCellular). Between February 26, 1998 and June 25, 1998, American Cellular did
not conduct any business. As a result, its statement of operations data for the
period from February 26, 1998 through December 31, 1998 only includes actual
operations for the six-month period from July 1, 1998 through December 31, 1998.
Any reference to December 31, 1998 in this "Management's Discussion and Analysis
of Financial Condition and Results of Operations" refer to the combined year
ended December 31, 1998. The combined year ended December 31, 2000 results of
operations combine the results of operation for the period from January 1, 2000
through February 24, 2000 (the period prior to AT&T Wireless' and Dobson
Communications' acquisition of us) and the results of operations for the period
from February 25, 2000 through December 31, 2000 (the period subsequent to AT&T
Wireless' and Dobson Communications' acquisition of us). Any reference in this
"Management's
36
Discussion and Analysis of Financial Conditions and Results of Operations" to
the year ended December 31, 2000 refers to the combined year ended December 31,
2000.
AMERICAN AMERICAN
CELLULAR AMERICAN CELLULAR
FEBRUARY 26, COMBINED CELLULAR YEAR JANUARY 1,
PRICELLULAR SIX 1998 THROUGH YEAR ENDED ENDED 2000 THROUGH
MONTHS ENDED DECEMBER 31, DECEMBER 31, DECEMBER 31, FEBRUARY 24,
JUNE 30, 1998 1998 1998 1999 2000
--------------- ------------- ------------- ------------- -------------
($ IN THOUSANDS)
OPERATING REVENUE:
Service revenue............... $ 66,394 $ 76,264 $142,658 $176,323 $ 31,189
Roaming revenue............... 35,494 53,458 88,952 131,174 21,005
Equipment sales and other..... 6,782 7,765 14,547 18,324 2,469
-------- -------- -------- -------- --------
Total operating revenue..... 108,670 137,487 246,157 325,821 54,663
-------- -------- -------- -------- --------
OPERATING EXPENSES:
Cost of service............... 20,911 25,995 46,906 57,246 10,165
Cost of equipment............. 5,365 7,271 12,636 19,356 3,510
Marketing and selling......... 12,220 18,363 30,583 31,078 5,347
General and administrative.... 18,010 19,262 37,272 43,350 8,301
Depreciation and
amortization................ 17,553 45,569 63,122 97,217 16,720
Non-recurring charges......... 4,889 4,355 9,244 -- --
-------- -------- -------- -------- --------
Total operating expenses.... 78,948 120,815 199,763 248,247 44,043
-------- -------- -------- -------- --------
OPERATING INCOME.............. 29,722 16,672 46,394 77,574 10,620
-------- -------- -------- -------- --------
Interest expense.............. (38,955) (61,477) (100,432) (106,888) (16,051)
Interest income............... 1,570 5,036 6,606 4,912 990
Other income (loss)........... 1,377 (100) 1,277 6 (1,510)
-------- -------- -------- -------- --------
LOSS BEFORE INCOME TAXES...... (6,286) (39,869) (46,155) (24,396) (5,951)
INCOME TAX (PROVISION)
BENEFIT..................... -- (530) (530) (5,418) (154)
-------- -------- -------- -------- --------
NET LOSS...................... $ (6,286) $(40,399) $(46,685) $(29,814) $ (6,105)
======== ======== ======== ======== ========
AMERICAN
CELLULAR
FEBRUARY 25, COMBINED
2000 THROUGH YEAR ENDED
DECEMBER 31, DECEMBER 31,
2000 2000
------------- -------------
($ IN THOUSANDS)
OPERATING REVENUE:
Service revenue............... $ 190,176 $ 221,365
Roaming revenue............... 131,091 152,096
Equipment sales and other..... 15,569 18,038
--------- ---------
Total operating revenue..... 336,836 391,499
--------- ---------
OPERATING EXPENSES:
Cost of service............... 64,468 74,633
Cost of equipment............. 28,249 31,759
Marketing and selling......... 38,434 43,781
General and administrative.... 40,391 48,692
Depreciation and
amortization................ 154,797 171,517
Non-recurring charges......... -- --
--------- ---------
Total operating expenses.... 326,339 370,382
--------- ---------
OPERATING INCOME.............. 10,497 21,117
--------- ---------
Interest expense.............. (140,970) (157,021)
Interest income............... -- 990
Other income (loss)........... 536 (974)
--------- ---------
LOSS BEFORE INCOME TAXES...... (129,937) (135,888)
INCOME TAX (PROVISION)
BENEFIT..................... 30,694 30,540
--------- ---------
NET LOSS...................... $ (99,243) $(105,348)
========= =========
YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999
OPERATING REVENUE. For the year ended December 31, 2000, total operating
revenue increased $65.7 million, or 20.2%, to $391.5 million from $325.8 million
for the comparable period in 1999.
For the year ended December 31, 2000, service revenue increased $45.1
million, or 25.5%, to $221.4 million from $176.3 million for the year ended
December 31, 1999, primarily due to the growth of our subscriber base. Our
subscriber base increased 27.5% to 554,400 at December 31, 2000 from 434,700 at
December 31, 1999. Our average monthly service revenue per subscriber decreased
2.5% to $38 for the year ended December 31, 2000 from $39 for the year ended
December 1999 due to competitive pricing pressures.
For the year ended December 31, 2000, roaming revenue increased $20.9
million, or 15.9%, to $152.1 million from $131.2 million for the year ended
December 31, 1999. This increase was primarily attributable to increased roaming
minutes in our markets due to expanded coverage areas and increased roaming
traffic in these markets.
For the year ended December 31, 2000, equipment sales and other revenues
decreased $0.3 million, or 1.6%, to $18.0 million from $18.3 million for the
year ended December 31, 1999 due to increased use of phone promotions resulting
from competitive market pressures.
COST OF SERVICE. For the year ended December 31, 2000, the total cost of
service increased $17.4 million, or 30.4%, to $74.6 million from $57.2 million
for the comparable period in 1999. The increase was primarily attributable to
our increased subscriber base and their increased usage of
37
minutes in markets owned by third party wireless providers. This increase was
partially offset by our overall decrease in the cost per minute of use to roam
on third party networks.
COST OF EQUIPMENT. For the year ended December 31, 2000, our cost of
equipment increased $12.4 million, or 64.1%, to $31.8 million from $19.4 million
in 1999. The increase was primarily the result of increases in the volume of
equipment we sold due to the growth in gross subscriber additions, migrations of
existing subscribers from analog service to digital service and higher costs of
digital handsets compared to analog handsets.
MARKETING AND SELLING COSTS. For the year ended December 31, 2000, our
marketing and selling costs increased $12.7 million, or 40.9%, to $43.8 million
from $31.1 million for the year ended December 31, 1999. In 2000, we increased
our spending for advertising in an effort to increase gross subscriber
additions. We added 218,400 gross subscribers during the year ended
December 31, 2000 compared to 171,700 gross subscribers during the year ended
December 31, 1999. In addition, we incurred increased compensation and
commissions in 2000 resulting from the increase in gross subscriber additions.
GENERAL AND ADMINISTRATIVE COSTS. For the year ended December 31, 2000, our
general and administrative costs, including those costs allocated to us by
Dobson Communications under our management agreement, increased $5.3 million, or
12.3%, to $48.7 million from $43.4 million for the year ended December 31, 1999.
This increase was primarily the result of increased infrastructure costs,
including customer service, billing, collections and administrative costs as a
result of the overall growth of our business.
DEPRECIATION AND AMORTIZATION EXPENSE. For the year ended December 31,
2000, our depreciation and amortization expense increased $74.3 million, or
76.4% to $171.5 million from $97.2 million for 1999 due to increased
amortization on intangible assets resulting from our acquisition by AT&T
Wireless and Dobson Communications.
INTEREST EXPENSE. For the year ended December 31, 2000, our interest
expense increased $50.1 million, or 46.9%, to $157.0 million from $106.9 million
for the year ended December 31, 1999 primarily due to increased borrowings
during 2000 to finance our acquisition by AT&T Wireless and Dobson
Communications.
NET LOSS. For the year ended December 31, 2000, our net loss was $105.3
million. Our net loss increased $75.5 million, or 253.4%, from $29.8 million for
the year ended December 31, 1999. This increase in our net loss is primarily
attributable to increased depreciation and amortization expense and interest
expense.
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
OPERATING REVENUE. For the year ended December 31, 1999, total operating
revenue increased $79.6 million, or 32.4%, to $325.8 million from $246.2 million
for the comparable period in 1998.
For the year ended December 31, 1999, service revenue increased $33.6
million, or 23.6%, to $176.3 million from $142.7 million for the year ended
December 31, 1998 primarily as a result of the growth of our subscriber base.
Our subscriber base increased 30.0% to 434,700 at December 31, 1999 from 334,500
at December 31, 1998. Our average monthly service revenue per subscriber
decreased 2.5% to $39 for the year ended December 31, 1999 from $40 for the
comparable period in 1998 due to the competitive pricing pressures in our
markets.
For the year ended December 31, 1999, roaming revenue increased $42.2
million, or 47.5%, to $131.2 million from $89.0 million for the year ended
December 31, 1998. This increase was primarily
38
attributable to increased roaming minutes in our markets due to expanded
coverage areas and increased roaming traffic in these markets.
For the year ended December 31, 1999, equipment sales and other revenues
increased $3.8 million, or 26.0%, to $18.3 million from $14.5 million for the
year ended December 31, 1998 due to increased sales of equipment as a result of
growth in gross subscriber additions.
COST OF SERVICE. For the year ended December 31, 1999, the total cost of
service increased $10.3 million, or 22.0%, to $57.2 million from $46.9 million
for the comparable period in 1998. The increase was primarily attributable to
our increased subscriber base, and the increased minutes of use in markets owned
by third party wireless providers.
COST OF EQUIPMENT. For the year ended December 31, 1999, our cost of
equipment increased $6.8 million, or 53.2%, to $19.4 million during 1999 from
$12.6 million in 1998, primarily as a result of increases in the volume of
equipment we sold due to the growth in gross subscriber additions.
MARKETING AND SELLING COSTS. For the year ended December 31, 1999, our
marketing and selling costs increased $0.5 million, or 1.6%, to $31.1 million
from $30.6 million for the year ended December 31, 1998. As a percentage of
total operating revenue, marketing and selling costs decreased to 9.5% for the
year ended December 31, 1999 compared to 12.4% for the year ended December 31,
1998. This reduction in marketing and selling costs represents cost efficiencies
the Company has realized while achieving an increase in gross subscriber
additions of 21% from 1998.
GENERAL AND ADMINISTRATIVE COSTS. For the year ended December 31, 1999, our
general and administrative costs increased $6.1 million, or 16.3%, to $43.4
million from $37.3 million for the year ended December 31, 1998. This increase
was primarily the result of increased infrastructure costs, including customer
service, billing, collections and administrative costs as a result of the
overall growth of our business.
DEPRECIATION AND AMORTIZATION EXPENSE. For the year ended December 31,
1999, our depreciation and amortization expense increased $34.1 million, or
54.0% to $97.2 million from $63.1 million for 1998. This increase was from
depreciation and amortization attributable to depreciable assets and intangibles
acquired in the PriCellular acquisition.
INTEREST EXPENSE. For the year ended December 31, 1999, our interest
expense increased $6.5 million, or 6.4%, to $106.9 million from $100.4 million
for the year ended December 31, 1998. This increase resulted primarily from
increased borrowings to finance the PriCellular acquisition.
NET LOSS. For the year ended December 31, 1999, our net loss was $29.8
million. Our net loss decreased $16.9 million, or 36.1%, from $46.7 million for
the year ended December 31, 1998 as a result of the items discussed above.
LIQUIDITY AND CAPITAL RESOURCES
We expect to continue to fund our capital requirements with cash flows from
operations and funds borrowed under our senior credit facility.
The construction and improvement of our network and the distribution of
wireless communications products and services have required and will continue to
require substantial capital. These capital requirements include capital
expenditures for the network and working capital costs. We expect our total
capital expenditures for the year ending December 31, 2001 to be approximately
$90 million. However, these requirements do not include the potential
acquisition of additional wireless licenses or operations or future upgrades for
advances in new technology including advanced wireless communications services,
none of which is currently planned in 2001.
39
At December 31, 2000, we had a working capital deficit of $25.9 million and
a ratio of current assets to current liabilities of (0.8:1) . Our net cash
provided by operating activities totaled $38.5 million for the period from
February 25, 2000 through December 31, 2000. This was primarily the result of
our net loss offset by depreciation and amortization and the changes in current
assets and current liabilities. Our net cash used in investing activities, which
totaled $60.9 million for the period from February 25, 2000 through
December 31, 2000, was primarily attributable to capital expenditures.
Net cash provided by financing activities was $12.2 million for the period
from February 25, 2000 through December 31, 2000. This was the result of
additional borrowings under the senior credit facility of $114.0 million and
advances from affiliates for capital expenditures of $9.2 million offset by
repayments of amounts outstanding on the senior credit facility of
$111.0 million.
On February 25, 2000, we obtained a $1,750.0 million senior credit facility,
of which we drew $1,675.0 million used primarily to finance our acquisition by
AT&T Wireless and Dobson Communications and refinance our existing debt. Our
senior credit facility includes a $300.0 million revolving credit facility and
$1,450.0 million of term loan facilities. Upon repayment of our indebtedness
under the senior credit facility with proceeds from this offering, the committed
amounts under our senior credit facility will be reduced to $1,550.0 million and
we will have $217.3 million available under the revolving credit facility.
Interest on the revolving credit facility and the term loan facilities is
based on a base rate or a Eurodollar formula, and has ranged in total between
8.5% and 10.1% since inception. We are required to reduce the outstanding
principal balances of our term loans by $27.5 million in 2001. See "Description
of Senior Credit Facility."
Our senior credit facility imposes a number of restrictive covenants that,
among other things, limit our ability to incur additional indebtedness, create
liens, make capital expenditures and pay dividends. At December 31, 2000, we
were in violation of our interest coverage ratio covenant. We received a waiver
from our lenders for this covenant violation. On March 2, 2001, we and our
lenders agreed to an amendment to our senior credit facility, which became
effective on March 14, 2001 upon our permanent repayment of $200.0 million of
the term loans under our senior credit facility at the closing of this offering.
We believe we will be in compliance with the revised covenants under the amended
credit facility for the foreseeable future.
CAPITAL COMMITMENTS
We had capital expenditures of $61.2 million during 2000. We have budgeted
approximately $90.0 million for capital expenditures in 2001. The amount and
timing of capital expenditures may vary depending on the rate at which we expand
and develop our wireless systems.
We have committed to purchase approximately $45.2 million of cell site and
switching equipment from Nortel Networks prior to November 2001. Of this
commitment, approximately $23.2 million remained outstanding at December 31,
2000. Purchases made under this commitment will be financed using funds
available under our senior credit facility.
EFFECT OF NEW ACCOUNTING STANDARDS
In July 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Derivatives and Hedging ("SFAS 133").
SFAS 133 establishes uniform hedge accounting criteria for all derivatives
requiring companies to formally document, designate and assess the effectiveness
of transactions that receive hedge accounting. Under SFAS 133, derivatives will
be recorded in the balance sheet as either an asset or liability measured at its
fair value, with changes in the fair value recognized in current earnings. SFAS
133, as amended by SFAS 137, Derivatives and Hedging-Deferral of the Effective
Date of FASB Statement No. 133, will be effective for fiscal years
40
beginning after June 15, 2000. On January 1, 2001, in accordance with SFAS 133,
we recorded a liability and net loss to comprehensive income totalling
$15.9 million relating to our interest rate hedges.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our primary market risk relates to changes in interest rates. Market risk is
the potential loss arising from adverse changes in market prices and rates,
including interest rates. The objective of our financial risk management is to
minimize the negative impact of interest rate fluctuations on our earnings and
equity. At December 31, 2000, we had interest rate hedges on $1,025.0 million of
our outstanding indebtedness under our senior credit facility. The fair value of
these hedges was $(15.9) million at December 31, 2000. Increases in interest
expense related to the interest rate hedge for the period from February 25
through December 31, 2000 were reflected in income. We do not enter into
derivatives or other financial instruments for trading or speculative purposes.
41
INDUSTRY OVERVIEW
Wireless communications systems use a variety of radio frequencies to
transmit voice and data. Broadly defined, the commercial wireless communication
industry includes one-way radio applications, such as paging or beeper services,
and two-way radio applications, such as cellular services, PCS, and enhanced
specialized mobile radio services. Since the introduction of commercial cellular
service in the United States in 1983, the wireless communications industry has
experienced dramatic growth. The number of subscribers for cellular services,
PCS and enhanced specialized mobile radio services has increased from an
estimated 340,000 at the end of 1985 to 97.0 million as of June 30, 2000
according to the Cellular Telecommunications & Internet Association, an
international association for the wireless industry. Paul Kagan and Associates
Inc., an independent media and telecommunications association, estimates that
the number of wireless users in the United States will increase from an
estimated 107.4 million at the end of 2000 to approximately 201.9 million by the
end of 2005. The following chart illustrates the annual growth in U.S. wireless
communication customers for cellular services, PCS and enhanced specialized
mobile radio services through June 30, 2000.
WIRELESS INDUSTRY STATISTICS(1) 1993 1994 1995 1996 1997 1998 1999 2000
- ------------------------------- -------- -------- -------- -------- -------- -------- -------- --------
Total service revenues (in billions)...... $ 10.9 $ 14.2 $ 19.1 $ 23.6 $ 27.5 $ 33.1 $ 40.0 $ 24.6
Subscribers at end of period (in
millions)............................... 16.0 24.1 33.8 44.0 55.3 69.2 86.0 97.0
Annualized subscriber growth.............. 45.1% 50.8% 40.0% 30.4% 25.6% 25.1% 24.3% 27.2%
Average monthly service revenues per
subscriber, excluding roaming
revenues................................ $58.74 $51.48 $47.59 $44.66 $41.12 $39.66 $38.57 $41.28
Average monthly service revenues per
subscriber, including roaming
revenues................................ $67.13 $59.08 $54.91 $50.61 $46.11 $44.35 $42.96 $44.87
Penetration at end of period.............. 6.2% 9.4% 13.0% 16.3% 20.7% 25.7% 30.9% 34.8%
- ------------------------------
SOURCE: CELLULAR TELECOMMUNICATIONS & INTERNET ASSOCIATION.
(1) Statistics are as of and for the years ended December 31, except for those
as of and for the six months ended June 30, 2000.
In general, rural markets, such as those where we concentrate our cellular
operations, were licensed by the FCC later than urban markets and, consequently,
have a shorter operating history. As a result, while our subscriber base is
growing more rapidly than the industry average, our current level of penetration
is lower than the overall industry average.
Cellular service, which operates in the 800 MHz frequency band of the radio
spectrum, is currently the predominant form of commercial mobile wireless voice
communications service. Cellular systems have historically been analog-based
systems, which use one continuous electronic signal that varies in amplitude or
frequency over a single radio channel. However, over the last several years,
cellular operators have deployed digital service in most of the major
metropolitan markets and in some rural and suburban areas. Digital systems
convert voice or data signals into a stream of digits that is compressed before
transmission, enabling a single radio channel to carry multiple simultaneous
signal transmissions. This increases the capacity of the networks of cellular
operators. This increased capacity, along with enhancements in digital signal
protocols, allows digital-based wireless technologies to offer new services,
such as greater call privacy, caller ID, call forwarding, call waiting and more
complex data transmission features, including facsimile, e-mail, Internet and
data network access.
PCS service, which operates in the 1850-1990 MHz frequency band of the radio
spectrum, has been available in the U.S. since 1994, when the FCC began
auctioning this spectrum. PCS systems provide wireless communications services
which are substantially the same as digital cellular services, and compete
directly with existing cellular telephone, paging and enhanced specialized
mobile radio services. In addition to PCS and cellular services, enhanced
specialized mobile radio licensees provide interconnected two-way voice and data
services within a 15 MHz band of spectrum in the 800 MHz frequency band.
Wireless communications systems are divided into multiple geographic
coverage areas, known as "cells." Each cell contains a transmitter, a receiver
and signaling equipment, collectively known as the "cell site." The cell site is
connected by microwave or landline telephone circuits to a switch that uses
42
computers to control the operation of the wireless systems for the entire
service area. The system controls the transfer of calls from cell to cell as a
subscriber's handset travels, coordinates calls to and from handsets, allocates
calls among the cells within the system and connects calls to the local landline
telephone system or to a long distance carrier. Wireless communications
providers establish interconnection agreements with local exchange carriers and
interexchange carriers, thereby integrating their system with the existing
landline communications system. Because the signal strength of transmission
between a handset and a cell site declines as the handset moves away from the
cell site, the switching office and the cell site monitor the signal strength of
calls in progress. When the signal strength of a call declines to a
predetermined level, the switching office may hand-off the call to another cell
site where the signal strength is stronger. Cells are typically designed on a
grid, although terrain factors, including natural and man-made obstructions,
signal coverage patterns and capacity constraints may result in irregularly
shaped cells and overlaps or gaps in coverage.
Wireless system operators normally agree to provide service to subscribers
from other compatible wireless systems who are temporarily located in or
traveling through their service areas in a practice called "roaming." Agreements
among system operators provide that the carrier that normally provides services
to the roaming subscriber pays the serving carrier at rates prescribed by the
serving carrier. Analog cellular handsets are functionally compatible with
cellular systems in all markets within the United States. As a result, analog
cellular handsets may be used wherever a subscriber is located, as long as a
cellular system is operational in the area and necessary roaming arrangements
exist. Although cellular, PCS and enhanced specialized mobile radio systems
utilize similar technologies and hardware, they operate on different frequencies
and use different technical and network standards. Multi-mode phones, however,
make it possible in many instances for users of one type of system to roam on a
different type of system outside of their service area.
Wireless digital signal transmission is accomplished through the use of
various forms of "air interface protocols." The FCC has not mandated a single
national digital standard (as it did with the analog Advanced Mobile Phone
System historically used in cellular systems) and, as a result, the following
three distinct technologies have evolved as standards and have been deployed
nationally in digital cellular and PCS systems:
- TDMA--Time Division Multiple Access is the standard adopted and certified
by the Cellular Telecommunications & Internet Association. It is the
digital standard being deployed nationally by AT&T Wireless and Cingular
Wireless.
- GSM--Global System for Mobile Communications is the digital standard that
originated in Europe and has been widely deployed by PCS license holders
such as VoiceStream Communications, and Powertel, Inc. AT&T Wireless, our
principal roaming partner, has announced that it intends to also utilize
GSM digital technology in certain of its markets.
- CDMA--Code Division Multiple Access is a spread-spectrum technology that
is predominantly being used by Sprint Corporation, Verizon Wireless, and
ALLTEL.
Each standard of digital technology provides substantially the same level
and quality of service to the end user. However, the three technological
standards currently in use are incompatible with each other. As a result,
wireless subscribers may only utilize digital wireless service in the areas
where the technological standard that is utilized by their handset has been
deployed. TDMA and CDMA digital systems have been deployed over a wider area of
the nation than the GSM standard has been; however, the GSM standard has also
been deployed throughout much of Europe. Over time, the TDMA and GSM standards
are expected to converge and become compatible, assuming operators invest in
expected third generation technologies. These are not expected to be introduced
commercially for several years.
43
BUSINESS
OVERVIEW
We are one of the largest rural and suburban providers of wireless
communications services in the United States. As of December 31, 2000, our
network covered an estimated population of approximately 4.9 million and we had
approximately 554,400 subscribers, giving us an aggregate market penetration of
11.3%. On January 18, 2001 we began operating wireless systems in southeast
Kansas and northeast Oklahoma, which will cover a population of approximately
250,000. We provide wireless service in portions of Illinois, Kansas, Kentucky,
Michigan, Minnesota, New York, Ohio, Oklahoma, Pennsylvania, Tennessee, West
Virginia and Wisconsin. On a pro forma basis, for the year ended December 31,
2000, we had total revenue of $391.5 million and EBITDA of $192.6 million.
On February 25, 2000, we were acquired by a joint venture equally owned by
AT&T Wireless and Dobson Communications. Our operations are managed by Dobson
Communications and are integrated with Dobson Communications' wireless
operations. We market our products and services under the nationally recognized
CELLULAR ONE brand name and benefit from its national advertising campaign.
Since our acquisition by AT&T Wireless and Dobson Communications, our
business has experienced significant growth. In 2000, on a pro forma basis, we
added 209,500 gross subscribers and 119,700 net subscribers, including 39,900
net additions in the fourth quarter. In addition, roaming minutes on our network
increased approximately 42% in 2000 when compared to 1999.
We have long-term roaming agreements with AT&T Wireless, which has
designated us as its preferred roaming partner for its subscribers who roam into
our markets, as well as other major wireless providers including Cingular
Wireless and US Cellular, which allow our subscribers to benefit from
coast-to-coast wireless coverage. Our markets have high roaming activity due, in
part, to their greater than average concentration of expressway corridors and
their proximity to densely populated urban areas, including New York City,
Minneapolis-St. Paul, Pittsburgh, Cincinnati, Louisville and Knoxville. On a pro
forma basis, for the year ended December 31, 2000, we had $152.1 million in
roaming revenue, comprising approximately 39% of our total revenue.
We have upgraded our entire network to digital time division multiple
access, or TDMA, technology and we now offer digital voice and feature services,
including voice mail, e-mail, caller ID, call waiting, 2-way short-messaging
services, or SMS, and wireless Internet access. Approximately 45% of our
subscribers utilize digital service and use tri-mode, dual-band handsets. We
believe subscribers utilizing digital technology generate network efficiencies,
greater roaming opportunities, higher average revenue per user, or ARPU, and
lower churn rates. On a pro forma basis, for the year ended December 31, 2000,
our monthly ARPU, excluding roaming revenue, was $38 and our average monthly
churn was 1.7%.
COMPETITIVE STRENGTHS
STRONG CURRENT MARKET POSITION. We have significant market share in
virtually all of our wireless markets. We distinguish ourselves from our
competition by emphasizing digital technology, customer care and a commitment to
the local community. We plan to attract additional subscribers by leveraging our
strategic relationships, digital technologies, local sales channels and diverse
service offerings, including national, regional and local rate plans.
ATTRACTIVE MARKETS. Our markets are attractive for providing wireless
communications services due, in part, to their proximity to markets operated by
AT&T Wireless and major metropolitan areas such as New York City,
Minneapolis-St. Paul, Pittsburgh, Cincinnati, Louisville and Knoxville. Our
markets have a relatively high density of highway and other traffic corridors
and strong tourist activity due to
44
seasonal attractions. Additionally, our markets have demonstrated positive
demographic growth trends and generally maintain a high population density
relative to other rural service providers.
ADVANCED DIGITAL TECHNOLOGY. Our fully digital network uses TDMA
technology, making our network compatible with AT&T Wireless' network and other
TDMA networks. This technology allows us to offer enhanced features and services
relative to standard analog cellular service, including extended battery life,
integrated voicemail, paging, fax and e-mail delivery, enhanced voice privacy
and short-messaging capability. We plan to offer wireless Internet service in
virtually all of our markets by mid-2001. We believe our extensive digital
network deployment provides us with a competitive advantage in many of our
markets.
STRATEGIC ROAMING RELATIONSHIPS. We have long-term roaming agreements with
many of our major roaming partners including AT&T Wireless, Cingular Wireless
and US Cellular. These roaming agreements have terms ranging from two to twenty
years. We believe our strategic roaming relationships will continue to be
beneficial as the growth in roaming minutes in our markets continues.
EXPERIENCED MANAGEMENT TEAM. Dobson Communications' management team is
responsible for our day-to-day operations. With over 50 years of
telecommunications experience on a combined basis, Dobson Communications' senior
management team, consisting of Everett R. Dobson, G. Edward Evans and Bruce R.
Knooihuizen, is extremely knowledgeable and well regarded in the
telecommunications industry. Since 1993, including our acquisition, Dobson
Communications has acquired licenses covering a combined population of more than
11.0 million.
AT&T RELATIONSHIP. We believe that our relationship with AT&T Wireless, one
of our owners, provides us with significant strategic benefits. We are the
preferred provider of wireless service to AT&T Wireless' subscribers who roam
into our markets. Through our long-term roaming agreement with AT&T Wireless, we
offer our subscribers national and regional rate plans which access AT&T
Wireless' coast-to-coast footprint. We believe these plans differentiate us from
our competition in many of our markets. AT&T Wireless also has generally agreed
to use commercially reasonable efforts to assist us in obtaining discounts from
its vendors for the purchase of subscriber or infrastructure equipment.
INTEGRATION WITH DOBSON COMMUNICATIONS. We believe that the integration of
our operations with those of Dobson Communications has significant benefits. Our
licensed areas, combined with those of Dobson Communications, cover an estimated
population of more than 12.0 million, and together we served more than
1.2 million subscribers at December 31, 2000. This size and scale enable us to
reduce our operating costs and receive certain technical, network and
operational functions from Dobson Communications' existing corporate
infrastructure.
45
MARKETS AND SYSTEMS
The following table details the markets in which we offer service and the
estimated population in each market as of December 31, 2000:
TOTAL
POPULATION
----------
MARKETS:
Alton, IL RSA............................................. 23,000
KY 4 RSA.................................................. 252,000
KY 5 RSA.................................................. 161,000
KY 6 RSA.................................................. 268,000
KY 8 RSA.................................................. 120,000
MI 1 RSA.................................................. 198,000
Duluth, MN MSA............................................ 247,000
MN 2 RSA.................................................. 31,000
MN 3 RSA.................................................. 58,000
MN 4 RSA.................................................. 15,000
MN 5 RSA.................................................. 214,000
MN 6 RSA.................................................. 257,000
Orange County, NY MSA..................................... 330,000
Poughkeepsie, NY MSA...................................... 264,000
NY 5 RSA.................................................. 378,000
NY 6 RSA.................................................. 112,000
OH 7 RSA.................................................. 258,000
OH 10 RSA................................................. 65,000
PA 9 RSA.................................................. 187,000
TN 4 RSA.................................................. 273,000
Eau Claire, WI MSA........................................ 145,000
Wausau, WI MSA............................................ 126,000
WI 1 RSA.................................................. 109,000
WI 2 RSA.................................................. 85,000
WI 3 RSA.................................................. 138,000
WI 4 RSA.................................................. 119,000
WI 5 RSA.................................................. 80,000
WI 6 RSA.................................................. 32,000
WV 2 RSA.................................................. 78,000
WV 3 RSA.................................................. 266,000
---------
Total 4,889,000
=========
On January 18, 2001, we began operating wireless systems in southeast Kansas
and northeast Oklahoma, which will cover a combined population of approximately
250,000.
SERVICE AND FEATURES
The following are key components of our service offering:
WIRELESS CALLING. Our primary service offering is wireless calling. We
offer digital service in all of our markets using the TDMA digital standard, as
well as analog service in all of our wireless markets. In addition, we offer
various custom-calling features, including voice mail, call forwarding, call
waiting, three-way calling, no answer transfer, caller ID and message waiting
indicator.
46
VOICE PRIVACY AND CALL SECURITY. Digital technology is inherently more
secure than analog technologies. This security provides increased voice privacy
and enhanced fraud protection for our customers.
DATA AND INTERNET SERVICES. We currently offer wireless data service and
access to the Internet through our WebMagic product, available on some digital
handsets, which we have deployed in certain of our cellular markets using our
Cellular Digital Packet Data, or CDPD, network. This product offers unlimited
access to our wireless Internet portal for a monthly fee. We also provide
two-way short-messaging services in some of our markets.
TRI-MODE HANDSETS. As of December 31, 2000, approximately 45% of our
subscribers use a tri-mode, dual-band handset. These handsets are compatible
with analog cellular, digital cellular and digital PCS service, allowing our
subscribers access to AT&T Wireless' national footprint, as well as the
extensive coverage areas of our other roaming partners, including Cingular
Wireless and US Cellular.
MARKETING
The following are key components of our marketing strategy:
BRANDING. We offer wireless service under the CELLULAR ONE brand name. We
believe the national advertising campaign conducted by the Cellular One Group
has enhanced our advertising exposure at a lower cost than could be achieved
alone. We also believe that we have obtained significant marketing benefits from
the high name recognition associated with this widely used service mark.
ADVERTISING. In addition to the national advertising campaign conducted by
the Cellular One Group, our advertising strategy is focused on establishing a
strong local presence in each of our markets. We direct our media efforts at the
market level by advertising in local publications and sponsoring local and
regional events. We also use mass media outlets such as television, radio,
newspaper, magazine and outdoor advertising, as well as direct marketing, to
augment our efforts at the community level.
SEGMENTED RATE PLANS. We offer our subscribers a diverse array of rate
plans, so that each subscriber can choose the plan that best fits that
subscriber's expected calling needs. Our offerings include our Talk USA national
rate plan, similar to AT&T Wireless' Digital One-Rate plan, regional rate plans
and home area rate plans at a variety of pricing tiers. The majority of our
digital subscribers are on our regional rate plans. Our rate plans generally
combine a fixed monthly access charge, a designated number of minutes of use,
per minute usage charges for minutes in excess of the included amount and
additional charges for certain custom-calling features. Most of our digital
plans include some features such as voice mail, caller ID, call forwarding and
call waiting. These plans offer value to the customer while enhancing airtime
usage and revenue. Local management conducts market research to identify and
design rate plans and roaming rates to emphasize the quality, value and
advantage of our wireless communications services.
We are able to offer national and regional rate plans as a result of our
roaming agreement with AT&T Wireless. Competing rate plans often limit flat rate
usage to the competitor's own networks. This allows us to differentiate our
product offering from our competitors and to offer our customers pricing plans
which are designed to be both flexible and economical.
SALES AND DISTRIBUTION
Our sales and distribution strategy is to use a variety of distribution
channels to maximize our penetration within our service area, while reducing
overall customer acquisition costs. These channels include company retail
stores, a direct sales force and third-party agents. Our retail stores offer a
full
47
line of wireless products and services. As of December 31, 2000, we operated
approximately 80 retail locations, which ranged from small sales kiosks in malls
to large retail stores. Some of the stores are also authorized repair centers.
Our direct sales force is composed of approximately 125 salespeople who focus
primarily on small and medium-sized businesses located within our licensed
territory. As of December 31, 2000, we had approximately 240 third-party agents
who distribute our products, many of whom do so on an exclusive basis. These
agents include national retailers such as Radio Shack, Office Max, Best Buy,
Office Depot, Ace Hardware and Staples, as well as local retail establishments.
CUSTOMER CARE
Customer service is an essential element of our marketing and operating
philosophy. We attract new subscribers and retain existing subscribers by
providing consistently high-quality customer service. Our customers benefit from
a local staff, including a market manager, customer service representatives,
technical and engineering staff, sales representatives and installation and
repair facilities. Each service region has its own customer-related functions
such as credit evaluation, customer activations, account adjustments and rate
plan changes. Local offices and installation and repair facilities allow us to
better service our customers, schedule installations and make repairs. As of
December 31, 2000, our markets were serviced by five regional call centers,
which, in aggregate, employed approximately 200 customer care representatives.
We are in the process of consolidating our Richmond, Kentucky call center
operations into Dobson Communications' Frederick, Maryland call center. The
regional presence of these call centers enhances our knowledge of the local
markets, which improves our ability to provide customer service, credit and
collection and order activation.
NETWORK OPERATIONS
NETWORK COMMUNICATIONS EQUIPMENT. Our network communications equipment is
provided by a variety of leading network suppliers, including Nortel Networks.
We often aggregate our orders for network equipment with those of Dobson
Communications to provide additional equipment discounts.
CONNECTION AGREEMENTS. Our wireless network connects to the public switched
telephone network system through local exchange carriers. We have entered into
connection agreements with BellSouth, Southwestern Bell, Ameritech, Verizon and
other local exchange carriers within our markets.
LONG DISTANCE CONNECTION. We have executed a wholesale long distance
agreement with AT&T to provide long distance services.
ROAMING ARRANGEMENTS. Our agreements with our wireless operators, including
AT&T Wireless, allow us to offer our subscribers service in virtually all
wireless service areas throughout the United States.
NETWORK OPERATIONS. Our network operations are monitored by network
personnel, who provide monitoring on a real-time basis for items including alarm
monitoring, power outages, tower lighting problems and traffic patterns.
TECHNOLOGY
We have deployed digital TDMA technology for the digital voice and features
of our wireless network. TDMA technology allows for:
- the use of advanced tri-mode handsets, which permit roaming in both
cellular and PCS service areas, including both analog and digital
technologies;
- enhanced services and features, such as short-messaging, extended battery
life and added call security; and
48
- network equipment which can improve network coverage and capacity with low
incremental investment.
TDMA technology is the primary digital technology of two of the largest
wireless communications companies in the United States, AT&T Wireless Services
and Cingular Wireless. This technology served an estimated 35 million
subscribers worldwide and 19 million subscribers in North America as of
December 31, 1999, according to the Universal Wireless Communications
Consortium, an association of TDMA providers and manufacturers. TDMA equipment
is available from leading telecommunications equipment vendors such as Nortel,
Lucent and Ericsson.
COMPETITION
We compete with at least one wireless provider in each of our markets,
including cellular, PCS and ESMR providers in some of our markets. Our principal
wireless competitors include: ALLTEL, Century Telephone, Cingular Wireless,
Rural Cellular, Sprint PCS, US Cellular, Verizon Wireless and VoiceStream
Wireless. We typically compete with wireless service providers on the basis of
pricing, quality of service, coverage area, technology, customer care, value
added services and additional calling features.
SERVICE MARKS
We use the CELLULAR ONE service mark to identify and promote our wireless
service pursuant to licensing agreements with the Cellular One Group. We pay
licensing and advertising fees based upon the population of the licensed areas.
The licensing agreements require us to provide high-quality wireless service to
our customers and to maintain a certain minimum overall customer satisfaction
rating in surveys commissioned by the Cellular One Group. The licensing
agreements which we have entered into are for five-year terms expiring on
various dates. These agreements may be renewed at our option for three
additional five-year terms. From time to time, we may consider alternative brand
name strategies and service marks.
REGULATION
OVERVIEW
The wireless telecommunications industry is subject to extensive
governmental regulation on the federal level and to varying degrees on the state
level. The enactment of the Telecommunications Act of 1996 has had an impact on
many aspects of this regulation. In addition, this regulation is currently the
subject of administrative rulemakings and judicial proceedings that are
significant to us. The following is a summary of the federal laws and
regulations that materially affect the wireless telecommunications industry, in
general, and us, in particular, and a description of certain applicable state
laws. This section does not purport to be a summary of all present and proposed
federal, state and local regulations and legislation relating to the wireless
telecommunications industry.
FEDERAL REGULATION
The licensing, construction, modification, operation, ownership and
acquisition of wireless telephone systems are subject to regulations and
policies of the FCC under the Communications Act of 1934, as amended. The FCC
has promulgated rules and regulations governing, among other things,
applications to construct and operate wireless communications systems,
applications to transfer control of or assign wireless licenses and technical
and operational standards for the operation of wireless systems (such as maximum
power and antenna height).
The FCC licenses cellular systems in accordance with 734 geographically
defined market areas comprised of 306 Metropolitan Statistical Areas, or MSAs
and 428 Rural Service Areas, or RSAs. In
49
each market, the frequencies allocated for cellular telephone use are divided
into two equal 25 MHz blocks and were originally designated as wireline and
non-wireline. Apart from the different frequency blocks, there is no technical
difference between wireline and non-wireline cellular systems and the
operational requirements imposed on each by the FCC are the same. Under FCC
rules, the authorized service area of a cellular provider in each of its markets
is referred to as the cellular geographic service area. The cellular geographic
service area may conform exactly with the boundaries of the FCC designated MSA
or RSA, or it may be smaller if a licensee has chosen not to provide services to
certain areas. A cellular licensee has the exclusive right to expand its
cellular geographic service area boundaries within the licensee's MSA or RSA for
a period of five years after grant of the licensee's initial construction
permit. At the end of this five-year buildout period, however, other entities
may apply to serve portions of the MSA or RSA in areas outside the licensee's
then designated cellular geographic service area. The five year build-out period
has expired for most wireless markets and the FCC has granted several "unserved
area" applications filed by parties other than the original MSA or RSA licensee.
No entity may, directly or indirectly, own a controlling interest in, or
otherwise have the ability to control, both systems. The FCC may prohibit or
impose conditions on transfers of licenses. In addition, under FCC rules, no
person or entity may have an attributable interest, as defined in FCC rules, in
a total of more than 45 MHz of licensed broadband personal communications
service, cellular and enhanced specialized mobile radio spectrum, regulated as
commercial mobile radio services with significant overlap in any geographic area
except in RSAs, where a total of 55 MHz is lawful. This so-called "spectrum cap"
rule could have an impact on our ability to acquire other cellular systems, and
it also could limit the universe of potential buyers of any of our systems
should we attempt to sell these systems.
The FCC recently amended the spectrum cap ownership attribution rules to
allow for somewhat more ownership overlap. Significant overlap occurs when at
least 10% of the 1990 census population of the licensed service area is within
the cellular geographic service area, as defined below, and/or the personal
communications service area or enhanced specialized mobile radio service area.
Ownership limits on overlapping cellular licensees were recently amended so that
a party with a controlling interest or otherwise attributable interest in a
cellular licensee may have a direct or indirect ownership interest of up to 5%
in another cellular licensee in overlapping cellular geographic service areas,
and a party may have a direct or indirect ownership interest of up to 20% in
both cellular licensees in overlapping cellular geographic service areas so long
as neither interest is a controlling interest. This change in the ownership
attribution rules affords greater opportunities for non-controlling investments
in cellular systems and could increase our ability to attract capital or to make
investments in other cellular operators.
Cellular service providers also must satisfy a variety of FCC requirements
relating to technical and reporting matters. One requirement is the coordination
of proposed frequency usage with adjacent cellular users, permittees and
licensees in order to avoid interference between adjacent systems. In addition,
the height and power of base station transmitting facilities and the type of
signals they emit must fall within specified parameters. We are obligated to pay
annual regulatory fees and assessments to support the FCC's regulation of the
cellular industry, as well as fees necessary to support federal universal
service programs, number portability regional database costs, centralized
administration of telephone numbering, telecommunications relay service for the
hearing-impaired and application filing fees. These regulatory payment
obligations increase our costs of doing business.
The Communications Act requires prior FCC approval for substantive, non pro
forma transfers or assignments to or from us of a controlling interest in any
license or construction permit, or any rights thereunder. Although we cannot
assure you that the FCC will approve or act in a timely fashion upon any future
requests for approval of applications that we file, we have no reason to believe
that the FCC would not approve or grant such requests or applications in due
course. Because an FCC license is
50
necessary to lawfully provide cellular or PCS service, if the FCC were to
disapprove any such filing our business plans would be adversely affected.
The FCC also regulates a number of other aspects of the cellular business.
For example, the FCC regulates cellular resale practices and currently also
applies such cellular resale requirements to A and B Block (and A/B Block
controlled) broadband personal communications service and enhanced specialized
mobile radio licensees. These cellular, personal communications service and
enhanced specialized mobile radio providers may not restrict any customer's
resale of their services or unreasonably discriminate against resellers of their
services. All resale obligations for cellular, broadband personal communications
service and enhanced specialized mobile radio operators are currently scheduled
to terminate on November 24, 2002. Moreover, federal legislation enacted in 1993
requires the FCC to reduce the disparities in the regulatory treatment of
similar mobile services, such as cellular services, personal communications
services and enhanced specialized mobile radio services. Under this regulatory
structure, all of our cellular licenses are classified as commercial mobile
radio services. As a commercial mobile radio services provider, the FCC
regulates us as a common carrier. The FCC, however, has exempted cellular
services from some typical common carrier regulations, such as tariff and
interstate certification filings, thereby allowing us to respond more quickly to
our competition in the marketplace.
As our manager, a subsidiary of Dobson Communications is currently engaged
in an extensive review of the technical and regulatory procedures regarding FCC
and FAA related matters which were utilized by our prior owners. To date, we
have uncovered certain minor technical and regulatory omissions or defects,
which have required disclosure with the FCC. We have made it a practice to bring
forward any such issues to the FCC in order to ensure complete disclosure and
accuracy with the FCC and its records. While minor in nature, some of these
omissions or defects may result in the issuance by the FCC of a monetary
forfeiture for the actions. To date, however, we have not received any such
forfeiture notice by the FCC and we do not anticipate that any forfeitures would
be material to us. This review is still ongoing.
The FCC has also adopted requirements for cellular and other commercial
mobile radio services providers to implement basic and enhanced 911 services.
These services provide emergency service providers with the ability to better
identify and locate callers using wireless services, including callers using
special devices for the hearing impaired. Our obligations to implement these
services are scheduled to occur in several stages, with the final stage
beginning as early as March 2001 and the FCC recently amended its rules to
eliminate a requirement that carriers be compensated for enhanced 911 costs and
expand the circumstances under which wireless carriers may be required to offer
enhanced 911 services. Federal legislation enacted in 1999 may limit our
liability relative to incompleted 911 calls to a degree commensurate with
wireline carriers in our markets. Federal law also requires cellular and
personal communications service carriers to provide law enforcement agencies
with capacity to support lawful wiretaps by March 12, 2001 and technical
capabilities for wiretaps beginning June 30, 2000 and to comply with
wiretap-related record-keeping and personnel-related obligations. These wireless
911 and law enforcement wiretap requirements may create additional capital
obligations for us to make necessary system changes.
In addition, the FCC regulates the ancillary service offerings that cellular
and personal communications service licensees can provide and permits cellular,
broadband personal communications service, paging and enhanced specialized
mobile radio licensees to offer fixed services on a co-primary basis along with
mobile services. This rule may facilitate the provision of wireless local loop
service, which involves the use of wireless links to provide local telephone
service by cellular licensees, as well as broadband personal communications
service and enhanced specialized mobile radio licensees, although the extent of
lawful state regulation of such "wireless local loop" service is undetermined.
In this regard, the FCC has also adopted telephone number portability rules for
local exchange carriers, as well as cellular, personal communications service
and enhanced specialized mobile radio licensees, that
51
could facilitate the development of local exchange competition, including
wireless local loop service. The number portability rules generally require
cellular, personal communications service and enhanced specialized mobile radio
licensees to have the capability to deliver calls from their systems to ported
numbers effective December 31, 1998 and offer number portability in a manner
that supports roaming to ported numbers by November 24, 2002 but this schedule
may be expedited if deemed necessary by the FCC to promote number conservation.
These requirements may result in added capital expenditures for us to make
necessary system changes, although we currently have no plans for any such
expenditures.
The FCC generally grants cellular and personal communications service
licenses for terms of ten years that are renewable upon application to the FCC.
Near the conclusion of the license term, we must file applications for renewal
of licenses to obtain authority to operate for an additional ten-year term. The
FCC may revoke our licenses and may deny our license renewal applications for
cause after appropriate notice and hearing. The FCC will award a renewal
expectancy to us if we meet certain standards of past performance. If we receive
a renewal expectancy, it is very likely that the FCC will renew our existing
cellular and PCS licenses so that they will not become subject to competing
applications. To receive a renewal expectancy, we must show that we have
provided "substantial" service during our past license term, and have
substantially complied with applicable FCC rules and policies and the
Communications Act. The FCC defines "substantial" service as service which is
sound, favorable and substantially above a level of mediocre service that might
only minimally warrant renewal. If a licensee does not receive a renewal
expectancy, then the FCC will accept competing applications for the license,
subject to a comparative hearing, and the FCC may award the license to another
entity. To date, the FCC has renewed each of our licenses for which a renewal
application was required for a new term of ten years. The balance of our
existing licenses begin to expire in October 2001.
A personal communications service system operates under a protected
geographic service area license granted by the FCC for either a major trading
area, or MTA, or basic trading area, or BTA, on one of six frequency blocks
allocated for broadband personal communications service. The FCC has divided the
United States and its possessions and territories into personal communications
service markets based upon Rand McNally's 493 BTAs, all of which are included in
the 51 MTAs. The FCC has allocated 120 MHz of radio spectrum in the 2 GHz band
for licensed broadband personal communications services. The FCC divided the 120
MHz of spectrum into six individual blocks, two 30 MHz blocks (A and B Blocks)
licensed for each of the 51 MTAs, one 30 MHz block (C Block) licensed for each
of the 493 BTAs, and three 10 MHz blocks (D, E and F Blocks) licensed for each
of the 493 BTAs, a total of more than 2,000 licenses. In 1997, the FCC afforded
financially-troubled C Block licensees several debt relief options, including
returning all or half of their spectrum to the FCC for reauction in return for a
reduction or elimination of their debt obligations. On April 15, 1999, the FCC
completed a reauction of personal communications service licenses in the C, E
and F Blocks. Bidders won a total of 302 licenses (179 30 MHz C Block, 115 15
MHz C Block, 6 E Block and 2 F Block). On August 29, 2000, the FCC decided that
for future auctions, the remaining 30 MHz C Block licenses would be reconfigured
into three 10 MHz C Block licenses. In addition, the FCC permits PCS licensees
to disaggregate spectrum, which some licensees have done, and some of the
original C Block licensees have returned 15 MHz of their spectrum to the FCC. On
January 26, 2001, the FCC completed another reauction for C and F Block
licenses. Bidders won a total of 422 licenses (312 10 MHz C Block, 43 15 MHz
C Block, and 67 10 MHz F Block). The applications procedures imposed on each of
those winning bidders prior to grant of these licenses are currently pending.
The FCC has adopted construction standards for PCS licenses. All 30 MHz
broadband PCS licensees must construct facilities that offer coverage to
one-third of the population of their service area within five years, and
two-thirds of the population within ten years, of their initial license grants.
All 10 MHz and 15 MHz Block licensees must provide service to at least 25% of
the service area within five
52
years of their initial license, or make a showing of substantial service.
Licensees that fail to meet the coverage requirements may be subject to
forfeiture of the license.
FCC rules restrict the voluntary assignments or transfers of control of
certain C and F Block licenses awarded to "small businesses" with bidding
enhancements in the C Block and F Block auctions. During the first five years of
the license term, assignments or transfers affecting control are permitted only
to assignees or transferees that meet the eligibility criteria for participation
in the entrepreneur block auction at the time the application for assignment or
transfer of control is filed or, if the proposed assignee or transferee holds
other licenses for C Block and F Block, met the same eligibility criteria at the
time of receipt of such licenses. The FCC recently amended its rules to allow
such transfers or assignments if the original licensee has met the applicable
five-year construction requirement for the license. Any transfers or assignments
by licensees that qualified for installment payments during the entire ten-year
initial license terms are subject to unjust enrichment penalties; i.e.,
acceleration of any installment payment plans should the assignee or transferee
not qualify for the same benefits. Any transfers or assignments by licensees
that qualified for bidding credits during the first five years of the license
term are subject to unjust enrichment penalties; i.e., forfeiture of any bidding
credit based upon the amount of time the initial license has been held should
the assignee or transferee not qualify for these same benefits. In the case of
the C and F Block licenses, the FCC will conduct random audits to ensure that
licensees are in compliance with the FCC's eligibility rules. Violations of the
Communications Act or the FCC's rules could result in license revocations,
forfeitures or fines.
Until April 4, 2005, the FCC prohibits a personal communications service
licensee from interfering with existing licensees that operate certain fixed
microwave systems within its license area. To secure a sufficient amount of
unencumbered spectrum to operate our personal communications service systems
efficiently and with adequate population coverage, we may need to relocate many
of these incumbent licensees, at our expense, to other frequencies or to
reimburse other previously-licensed personal communications service licensees
for expenses they have incurred in relocating incumbent licensees that we might
otherwise have been required to relocate. In an effort to balance the competing
interests of existing microwave users and newly authorized personal
communications service licensees, the FCC has adopted a transition plan to
relocate such microwave operators to other spectrum blocks and a cost sharing
plan so that if the relocation of an incumbent benefits more than one personal
communications service licensee, the benefiting personal communications service
licensees will share the cost of the relocation. This transition plan allows
most microwave users to operate on the personal communications service spectrum
for a one-year voluntary negotiation period and an additional one-year mandatory
negotiation period. For public safety entities dedicating a majority of their
system communications for police, fire or emergency medical services operations,
the voluntary negotiation period is three years, with an additional two-year
mandatory negotiation period. After the voluntary and mandatory negotiation
periods expire, the microwave user continues to hold primary status until
April 4, 2005, but may be involuntarily relocated, albeit at the personal
communications service licensee's expense. Parties unable to reach agreement
within these time periods may refer the matter to the FCC for resolution, but
the incumbent microwave user is permitted to continue its operations until final
FCC resolution of the matter. The transition and cost sharing plans expire on
April 4, 2005, at which time remaining incumbents in the personal communications
service spectrum will be responsible for their costs to relocate to alternate
spectrum locations. We have not yet determined the extent, if any, of expenses
we may need to incur for the relocation of microwave incumbents in order to
provide personal communications services using our personal communications
service licenses. We also cannot be sure that any transitions will occur in a
timely fashion that will allow us to meet our marketing and operating
objectives.
The FCC has also adopted rules to govern customer billing by commercial
mobile radio service providers and is considering whether to extend billing
rules currently applicable to landline carriers to
53
commercial mobile radio services carriers. Adoption of some of the FCC's
proposals could increase the complexity and costs of our billing processes and
limit the manner in which we bill for services. Finally, the FCC has initiated a
rulemaking proceeding, which remains pending, to help facilitate the offering of
so-called "calling party pays" services whereby the party placing the call to a
wireless customer pays the wireless airtime charges. Adoption of a calling party
pays system may result in increased usage of wireless systems, thereby
generating increased revenues and creating more competition between commercial
mobile radio services and traditional landline carriers.
The FCC may deny applications for FCC authority, and in extreme cases revoke
licenses, if it finds that an entity lacks the requisite "character"
qualifications to be a licensee. In making the determination, the FCC considers
whether an applicant or licensee has been the subject of adverse findings in a
judicial or administrative proceeding involving felonies, the possession or sale
of unlawful drugs, fraud, antitrust violations or unfair competition, employment
discrimination, misrepresentations to the FCC or other government agencies, or
serious violations of the Communications Act or FCC regulations. To our
knowledge, there are no activities, and no judicial or administrative
proceedings, involving either us or the licensees in which we hold a controlling
interest, that would warrant such a finding by the FCC.
If foreign nationals or their representatives, a foreign government or its
representative or any corporation organized under the laws of a foreign country
own of record or vote greater than 25 percent of our equity and the FCC
determines that the public interest would be so served, it may revoke our
cellular licenses or require an ownership restructuring. The FCC will generally
permit additional indirect ownership in excess of the statutory 25 percent
benchmark where that interest is to be held by an entity or entities from member
countries of the World Trade Organization. For investors from countries that are
not members of the World Trade Organization, the FCC will determine whether the
home country of the foreign investor extends reciprocal treatment called
"equivalent competitive opportunities" to U.S. entities. If these opportunities
do not exist, it is unlikely that the FCC will permit investment beyond the 25
percent benchmark. These restrictions could adversely affect our ability to
attract additional equity financing. We have no knowledge that any foreign
entity directly or indirectly owns a significant percentage of our capital
stock.
The Telecommunications Act, which made significant changes to the
Communications Act, requires state public utilities commissions and/or the FCC
to implement policies that mandate reciprocal compensation between local
exchange carriers, a category that will, for these purposes, include cellular
carriers, for interconnection services at rates more closely related to cost. In
a rulemaking proceeding pertaining to interconnection between local exchange
carriers and commercial mobile radio service providers such as us, the FCC
concluded that local exchange carriers are required to compensate commercial
mobile radio service providers for the reasonable costs incurred by these
providers in terminating traffic that originates on local exchange carrier
facilities, and vice versa. Consistent with this ruling, the FCC has determined
that local exchange carriers may not charge a commercial mobile radio service
provider or other carrier for terminating local exchange carrier-originated
traffic and that local exchange carriers may not charge commercial mobile radio
service providers for number activation and usage fees. Depending on further FCC
disposition of these issues, we may or may not be successful in securing
refunds, future relief or both, with respect to charges for termination of local
exchange carrier-originated local traffic. If the FCC ultimately resolves these
issues in favor of commercial mobile radio service providers, then we will
pursue relief through settlement negotiations, administrative complaint
procedures or both. If these issues are ultimately decided in favor of the local
exchange carriers, we likely would be required to pay all past due contested
charges and may also be assessed interest and late charges for the withhold
amounts. These requirements could in the future have a material effect on us.
The Telecommunications Act requires, and the FCC has adopted, rules that
require interstate communications carriers, including cellular carriers, to
"make an equitable and non-discriminatory
54
contribution" to a universal service fund that reimburses communications
carriers that provide basic communications services to users who receive
services at subsidized rates. We have made such payments as the FCC has
required. In 1999, the United States Court of Appeals for the Fifth Circuit
reversed many of the FCC's rules regarding carriers' contribution obligations,
and the FCC has adopted rules implementing the court's decision. While it
generally appears that our contributions to federal universal service programs
decreased as a result of the court's decision, our contributions to state
universal service programs may be subject to increases and, moreover, the FCC's
decision implementing the court's decision is subject to further administrative
and possibly judicial proceedings. Thus, the impact of the court's decision is
uncertain. We may also seek to qualify for payments from these federal and state
programs in high cost areas where we provide wireless communications services,
although we are not certain of the extent to which such payments will be
available to cellular carriers. If such payments are made available to us, they
would be an additional source of revenue to us that could be used to subsidize
service we provide in these high cost areas.
The Telecommunications Act also eases the restrictions on the provision of
interexchange telephone services by wireless carriers affiliated with regional
Bell operating companies. Regional Bell operating company-affiliated wireless
carriers have interpreted the legislation to permit immediate provision of
in-region long distance call delivery for their cellular customers, thus
presenting an additional source of competition to us.
Additionally, the Telecommunications Act specifically exempts all cellular
carriers from the obligation to provide equal access to interstate long distance
carriers. However, the Telecommunications Act gives the FCC the authority to
impose rules to require unblocked access through carrier identification codes or
800/888 numbers, so that cellular subscribers are not denied access to the long
distance carrier of their choosing, if the FCC determines that the public
interest so requires. We currently provide "dial around" equal access to all of
our customers.
The Telecommunications Act also imposes restrictions on a telecommunications
carrier's use of customer proprietary network information without prior customer
approval. FCC rules implementing these restrictions are being revised but have
the potential to impose upon us new costly obligations and impose burdens on our
current marketing activities. The FCC's rules implementing the
Telecommunications Act's customer proprietary network information provisions
were vacated by the United States Court of Appeals for the Tenth Circuit on
First Amendment grounds and the Supreme Court declined to review the Tenth
Circuit's decision. The extent to which the FCC will modify its rules to address
the court's concerns is uncertain, but imposition of rules similar to those
vacated by the court would impose additional costs on us and inhibit our
marketing efforts.
The Telecommunications Act also requires telecommunications carriers to make
their services accessible to persons with disabilities and the FCC's rules
implementing these requirements are in effect. These rules generally require
service providers to offer equipment and services that are accessible to and
usable by persons with disabilities, if readily achievable, and to comply with
complaint/grievance procedures for violations of these provisions. These rules
are largely untested and are subject to interpretation through the complaint
process. While much of the focus of these rules is on the manufacture of
equipment, carriers such as us could, if found to have violated the rules, be
subject to fines and/or the imposition of costly new requirements.
In addition, the FCC has adopted rules to promote the conservation of
numbering resources and is considering additional rules in this area. These
rules require wireless carriers to participate in number pooling (whereby phone
numbers are allocated in blocks of 1,000 rather than 10,000) when they have
implemented number portability capabilities, and imposes additional
administrative, monitoring, and number reclamation obligations on all carriers
(currently required by November 2002), including wireless carriers. These
efforts may affect wireless service providers by imposing additional costs or
limiting access to numbering resources. The FCC has also authorized states to
initiate limited
55
numbering administration to supplement federal requirements including a number
of states in which we provide service. The impact of the federal rules on
wireless carriers, and whether states will have additional numbering
administration authority, is uncertain. If more states are given authority over
numbering administration, differing number conservation regimes may be adopted
in different states. In such a case, we likely would incur additional costs in
order to keep abreast of each such regime.
The FCC has determined that interexchange (long distance) service offerings
of commercial mobile radio service providers are subject to rate averaging and
rate integration requirements of the Telecommunications Act. Rate averaging
requires us to average our intrastate long distance commercial mobile radio
service rates between high cost and urban costs. The FCC has delayed
implementation of the rate integration requirements with respect to wide area
rate plans pending further reconsideration of its rules, and has delayed the
requirement that commercial mobile radio service carriers integrate their rates
among commercial mobile radio service affiliates. Other aspects of the FCC's
rules were recently vacated by the United States Court of Appeals for the
District of Columbia and are subject to further consideration by the FCC. There
is a pending proceeding in which the FCC will determine how integration
requirements apply to commercial mobile radio service offerings, including
single rate plans. To the extent that we offer services subject to these
requirements our pricing flexibility is reduced, and there is no assurance that
the FCC will decline to impose these requirements on us and/or across our
various commercial mobile radio service affiliates.
The overall impact of the Telecommunications Act on our business is unclear
and will likely remain so for the foreseeable future. For example, limitations
on local zoning requirements imposed by the Telecommunications Act may
facilitate the construction of new cell sites and related facilities. However,
these restrictions on zoning authority may provide only limited assistance to
cellular carriers. On the other hand, other provisions of the new statute
relating to interconnection, telephone number portability, universal service,
equal access, use of customer proprietary network information and resale could
subject us to additional costs and increased competition.
STATE, LOCAL AND OTHER REGULATION
The Communications Act preempts state or local regulation of the market
entry of, or the rates charged by, any commercial mobile radio services, which
includes cellular telephone service providers. The FCC denied the petitions of
eight states to continue their rate regulation authority, including authority
over cellular operators. As a practical matter, we are free to establish rates
and offer new products and service with a minimum of regulatory requirements.
The states in which we operate maintain nominal oversight jurisdiction,
primarily focusing upon prior approval of acquisitions and transfers of licenses
and resolution of customer complaints.
The location and construction of our cellular transmitter towers and
antennae are subject to FCC and Federal Aviation Administration regulations and
are subject to federal, state and local environmental regulation, as well as
state or local zoning, land use and other regulation. Before we can put a system
into commercial operation, we must obtain all necessary zoning and building
permit approvals for the cell site and microwave tower locations. The time
needed to obtain zoning approvals and requisite state permits varies from market
to market and state to state. Likewise, variations exist in local zoning
processes. Additionally, any proposed site must comply with the FCC's
environmental rules. If zoning approval or requisite state permits cannot be
obtained, or if environmental rules make construction impossible or infeasible
on a particular site, our network design might be adversely affected, network
design costs could increase and the service provided to our customers might be
reduced.
We cannot assure you that any state or local regulatory requirements
currently applicable to our systems will not be changed in the future or that
regulatory requirements will not be adopted in those
56
states and localities which currently have none. Such changes could impose new
obligations on us that would adversely affect our operating results.
FUTURE REGULATION
From time to time, federal or state legislators propose legislation that
could affect us, either beneficially or adversely. We cannot assure you that
federal or state legislation will not be enacted, or that regulations will not
be adopted or actions taken by the FCC or state regulatory authorities, that
might adversely affect our business. Changes such as the allocation by the FCC
of radio spectrum for services that compete with our business could adversely
affect our operating results.
LEGAL PROCEEDINGS
We are not currently aware of any pending or threatened litigation against
us or our subsidiaries that could have a material adverse effect on our
financial condition, results of operations or cash flows.
EMPLOYEES
We have no employees. Our operations are entirely managed by Dobson
Communications pursuant to the management agreement. See "Related Party
Transactions--Management Agreement."
PROPERTIES
As of December 31, 2000, we owned four regional call centers located in
Duluth, Minnesota, Wausau, Wisconsin, LaGrangeville, New York, and Richmond,
Kentucky. As of December 31, 2000, our wireless operations leased approximately
80 retail locations throughout our markets. We review these leases from time to
time and, in the future, may lease or acquire new facilities as needed. We do
not anticipate encountering any material difficulties in meeting our future
needs for leased space.
57
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our directors and executive officers are set forth below. The ages and
position titles of the persons set forth below are as of February 15, 2001.
NAME AGE POSITION
- ---- -------- -----------------------------
Everett R. Dobson....................................... 41 President and Director
G. Edward Evans......................................... 40 Vice President
Joseph E. Stumpf........................................ 35 Vice President and Director
Tamara A. Bramel........................................ 43 Vice President and Director
Bruce R. Knooihuizen.................................... 44 Treasurer and Director
Timothy J. Duffy........................................ 40 Vice President
Ronald L. Ripley........................................ 55 Secretary
Richard D. Sewell, Jr................................... 43 Assistant Treasurer
EVERETT R. DOBSON has served as our President and Director, and a member of
the management committee of our parent, ACC Acquisition LLC, since February
2000. Since April 1996, Mr. Dobson has served as Chairman of the Board, Chief
Executive Officer and a director of Dobson Communications. From 1990 to 1996, he
was a director, President and Chief Operating Officer of Dobson Communications.
Mr. Dobson served on the board of the Cellular Telecommunications Industry
Association (now known as the Cellular Telecommunications & Internet
Association) in 1993 and 1994. He holds a B.A. in Economics from Southwestern
Oklahoma State University and currently sits on its Foundation Board and chairs
its Investment Committee.
G. EDWARD EVANS has served as our Vice President since October 2000. He has
served as President and Chief Operating Officer of Dobson Communications since
March 2000. From January 1997 through March 2000, he served as President of its
cellular subsidiaries. Mr. Evans was employed by BellSouth Mobility, Inc. from
1993 to 1996, serving as General Manager--Kentucky, Director of Field Operations
at the company's corporate office in Atlanta and Director of Marketing--Alabama.
He was an Area Manager and a Market Manager of U.S. Cellular from 1990 to 1993
and was a Sales Manager of GTE Mobilnet from 1989 to 1990. Mr. Evans serves on
the board of the Cellular Telecommunications & Internet Association. He holds a
B.S. in Business Administration from the University of South Florida and an
M.B.A. from Georgia State University.
JOSEPH E. STUMPF has served as our Vice President and Director, and as a
member of the management committee of our parent, ACC Acquisition LLC, since
October 2000. He has served as Vice President, Acquisitions and Development at
AT&T Wireless since July 2000. From 1997 to 1999 he was a junior partner with
Rutledge & Company (now Rutledge Capital), a private equity firm based in
Greenwich, CT. He practiced in the area of mergers and acquisitions and
corporate finance as an Associate at the law firm Skadden, Arps, Slate, Meagher
& Flom LLP, Los Angeles from 1995 to 1997 and at the law firm White & Case LLP
in its Los Angeles, Hanoi and Bangkok offices from 1993 to 1995. He was a Senior
Financial Services Consultant at Price Waterhouse, Los Angeles from 1988 to 1990
and held various finance and accounting positions with Great American Bank, San
Diego from 1984 to 1988. He holds a B.S. in Business Administration from San
Diego State University, an M.B.A. from Arizona State University and a J.D. from
the University of Southern California.
TAMARA A. BRAMEL has served as our Vice President and Director since April
2001. Ms. Bramel first became associated with AT&T Wireless in 1985. Since 1999,
Ms. Bramel has served as Vice President and General Manager of operations of
AT&T Wireless in the southern United States. In this capacity, Ms. Bramel
oversees operations of AT&T Wireless' properties in Florida, North Carolina,
Georgia, Texas, Louisiana, Oklahoma, Kansas and Missouri. Between 1985 and 1999,
Ms. Bramel
58
served AT&T Wireless in several capacities, including Controller, Director of
Finance and Operations, Director of Consumer Sales and General Manager for
Oklahoma, Arkansas and Missouri. She holds a B.B.A. in Accounting from the
University of Oklahoma and is a Certified Public Accountant.
BRUCE R. KNOOIHUIZEN has served as our Treasurer and Director, and as a
member of the management committee of our parent, ACC Acquisition LLC, since
February 2000. He has served as Vice President and Chief Financial Officer of
Dobson Communications since July 1996. From 1994 to 1996, Mr. Knooihuizen was
Chief Financial Officer and Secretary for The Westlink Co. in San Diego, a
wireless provider which was formerly an operating unit of US WEST. Previously,
he was Treasurer and Controller of Ameritech Cellular from 1990 to 1994;
Director, Accounting Operations of Ameritech Applied Technologies from 1988 to
1990; and Controller of Ameritech Properties in 1988, all located in Chicago.
From 1980 to 1988 he held various financial and accounting positions with The
Ohio Bell Telephone Company. Mr. Knooihuizen received a B.S. in Finance from
Miami University in Oxford, Ohio and an M.B.A. in finance from the University of
Cincinnati.
TIMOTHY J. DUFFY has served as our Vice President since October 2000. He has
served as Chief Technical Officer and Senior Vice President of Network
Operations and Engineering for Dobson Cellular Systems since December 1998. In
this capacity, he manages Dobson's wireless network facilities as well as
engineering, design and build out of new wireless networks. Prior to joining us,
Mr. Duffy worked for Sygnet Communications from 1985 to 1998 in engineering and
related management positions. In 1983 he was employed as Director of Engineering
for the Constrander Corporation where he was responsible for seven AM and FM
radio broadcast facilities in Ohio and Pennsylvania. From 1976 to 1982 he served
as Chief Engineer of radio station WGRP in Greenville, Pennsylvania. Mr. Duffy
holds a U.S. patent concerning the integration of wireless phone location
information to make call management decisions. He is a member of the Institute
of Electrical and Electronics Engineers and holds a degree in Electrical
Engineering from Pennsylvania State University.
RONALD L. RIPLEY has served as our Secretary since February 2000.
Mr. Ripley is Vice President and Senior Corporate Counsel of Dobson
Communications, having served in that capacity since joining Dobson
Communications in November 1997. From 1972 until November 1997, he was in the
private practice of law in Oklahoma City, Oklahoma, the last eleven years of
which he was a shareholder in the firm of Linn and Neville. He received a B.B.A.
(with honors) in business and a Juris Doctor degree in law, both from the
University of Oklahoma.
RICHARD D. SEWELL, JR. has served as our Assistant Treasurer since February
2000. Mr. Sewell is Treasurer of Dobson Communications. He was employed by
Dal-Tile International Inc., a ceramic tile manufacturer and distributor, as
Vice President--Finance from 1997 to 1998, as Vice President--Treasurer from
1995 to 1997 and as Vice President--Financial Reporting from 1990 to 1995. From
1979 to 1989, Mr. Sewell was employed by a predecessor entity to Ernst & Young,
a public accounting firm, concluding as a principal in their Entrepreneurial
Service Group. Mr. Sewell received a B.S. in Accounting from the University of
Missouri--Kansas City.
BOARD COMPOSITION
Each member of our board of directors serves for a one-year term. Our
directors serve until they resign or are removed, or are otherwise disqualified
to serve, or until their successors are elected and qualified. Our executive
officers serve at the discretion of our board of directors. Our officers are
appointed at the board's first meeting after each annual meeting of
stockholders.
DIRECTOR AND OFFICER COMPENSATION
We reimburse directors for out-of-pocket expenses incurred in attending
board meetings. None of our officers or directors receive any compensation for
serving as officers or directors. All compensation of our officers is paid by
Dobson Communications.
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RELATED PARTY TRANSACTIONS
CONTRIBUTION AGREEMENT
On January 18, 2001, pursuant to a contribution agreement among affiliates
of AT&T Wireless, Dobson Communications and ACC Acquisition LLC, Dobson
Communications made a capital contribution of $15.0 million and AT&T Wireless
contributed PCS licenses and other assets in certain portions of northeast
Oklahoma and southeast Kansas to our parent, ACC Acquisition LLC. The cash and
licenses were then contributed by ACC Acquisition LLC to us. The licensed area
covers an estimated population of 250,000.
LIMITED LIABILITY COMPANY AGREEMENT
GOVERNANCE
We are wholly-owned by ACC Acquisition LLC, a limited liability company
equally owned by AT&T Wireless and Dobson Communications. Under its limited
liability company agreement, ACC Acquisition's management is vested in a
four-person management committee, which consists of two representatives
designated by AT&T Wireless and two designated by Dobson Communications. The
approval of any merger, sale of a material portion of our assets, offering of
our securities, our liquidation or other significant matter requires the
affirmative vote of all representatives.
CHANGE OF CONTROL
ACC Acquisition's limited liability company agreement contains change of
control provisions. If Dobson Communications experiences a change of control and
either:
- ACC Acquisition remains a limited liability company and AT&T Wireless and
its affiliates retain at least 100% of their initial voting interest and
80% of their initial economic interest in ACC Acquisition; or
- ACC Acquisition has converted to a corporation, and AT&T Wireless and its
affiliates retain at least 50% of their initial economic interest in us,
then AT&T Wireless and its affiliates will have the right to initiate a buy/sell
procedure. Pursuant to this procedure, AT&T Wireless may offer to purchase
Dobson Communication's interest in ACC Acquisition, or sell its interest in ACC
Acquisition to Dobson Communications, at a price established by AT&T Wireless
or, at its election, by Dobson Communications. If this offer is made, Dobson
Communications must either agree to sell its interest in ACC Acquisition to AT&T
Wireless at the established price or purchase AT&T Wireless' interest in ACC
Acquisition at the same price. In addition, Dobson Communications will lose its
right to appoint one of its two representative to the management committee and
its power to approve all significant matters.
If AT&T Wireless chooses not to initiate the buy/sell procedure upon a
change of control, Dobson Communications will have the right, subject to certain
conditions, to initiate the buy/sell procedure. Either Dobson Communications or
AT&T Wireless may initiate a buy/sell procedure on the same terms described
above after February 25, 2005. AT&T Wireless may also initiate a buy/sell
procedure if:
- we offer commercial mobile radio services other than wireless
telecommunications services using TDMA or analog technology in service
areas covering more than 15% of our total population; and
- AT&T Wireless is offering, or intends to offer, these services in our
service areas.
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TRANSFER RESTRICTIONS
Prior to February 25, 2003, neither AT&T Wireless nor Dobson Communications
may transfer any interest in ACC Acquisition without the consent of the other.
After February 25, 2003, each of AT&T Wireless and Dobson Communications has the
right to transfer up to 20% of their economic interest in ACC Acquisition,
subject to a pro rata tag-along right in favor of the other party. Any transfers
above that 20% threshold will be subject to a right of first refusal and a
tag-along right in favor of the other party. After February 25, 2003, if more
than 20% of the economic interests in ACC Acquisition held by Dobson
Communications or AT&T Wireless are transferred directly or indirectly to a
third party, the transferring party will lose its voting rights in ACC
Acquisition (including the right to appoint representatives to the management
committee).
LIMITS ON COMPETITION
So long as we continue to meet quality standards applicable generally to
wireless systems owned by AT&T Wireless and its affiliates that utilize TDMA
technology, AT&T Wireless has agreed not to construct, own or acquire a
controlling interest in, or manage a communications system that provides TDMA
mobile wireless service in areas in which we operate our cellular systems until
February 25, 2005. However, AT&T Wireless and its affiliates may:
- resell our communications services;
- act as our agent for the sale of our communications services;
- continue to provide wireless services to customers of AT&T Wireless or its
affiliates in our territory;
- provide or resell wireless telecommunications services to or from specific
locations; and
- act as an agent for other carriers who provide cellular products and
services to national account customers of the carrier in the geographic
areas in which we operate.
MANAGEMENT AGREEMENT
Dobson Cellular Systems, Inc., a subsidiary of Dobson Communications,
provides all supervision, design, construction and management for us under a
management agreement dated February 25, 2000. The management services provided
include administration, accounting, billing, credit, collection, insurance,
purchasing and clerical services; operational, engineering, maintenance and
construction services; and marketing, sales and advertising services. To the
extent employees of Dobson Cellular perform services for us under the management
agreement, we reimburse Dobson Cellular for the allocable cost of the service
provided, which for indirect services is generally based on the relative size of
our populations or subscribers. Because of the services provided by Dobson
Cellular under the management agreement, we have no employees of our own.
The management agreement may be terminated:
- by either party in the event of the bankruptcy, insolvency, dissolution,
winding up or liquidation of the other party;
- by ACC Acquisition (acting through its management committee excluding any
representatives of Dobson Communications) upon a material breach by Dobson
Cellular, upon a failure by ACC Acquisition to satisfy certain quality or
financial performance standards established by Dobson Communications and
AT&T Wireless, and in the event of certain changes of control of Dobson
Communications or transfers by Dobson Communications of its interests in
ACC Acquisition; and
- by Dobson Cellular upon a material breach by ACC Acquisition.
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Additionally, the management agreement terminates upon the consummation of a
purchase and sale transaction pursuant to the buy/sell procedure.
Upon termination of the management agreement for any reason, AT&T Wireless
will designate a replacement manager, which may be an affiliate of AT&T
Wireless.
In 2000, we reimbursed Dobson Communications $3.9 million for allocated
shared costs. In addition, we reimbursed Dobson Communications for other
expenses incurred by them on our behalf, primarily related to $25.6 million of
compensation related expenses.
OPERATING AGREEMENTS
We have entered into twenty year operating agreements dated February 25,
2000, with each of AT&T Wireless and Dobson Communications.
Under the terms of these agreements, until February 25, 2005:
- Dobson Cellular will be the preferred provider of roaming services for our
subscribers who roam in Dobson Cellular's markets;
- AT&T Wireless will be the preferred provider of roaming services for our
subscribers who roam in AT&T Wireless' markets; and
- we will be the preferred provider of roaming services for Dobson
Cellular's subscribers and AT&T Wireless' subscribers who roam in our
markets.
In addition, the operating agreements contain provisions providing for
declining rates over the twenty year term of the agreement.
From February 25, 2000 to December 31, 2000, we received approximately
$47.7 million in roaming fees from AT&T Wireless and paid AT&T Wireless
approximately $8.6 million in roaming fees. From February 25, 2000 to
December 31, 2000 we received approximately $1.3 million in roaming fees from
Dobson Communications and paid Dobson Communications approximately $1.2 million
in roaming fees.
In addition, to the extent permitted by law, AT&T Corp. will be our
preferred provider of long distance service for so long as AT&T Wireless is the
preferred provider of roaming services for our subscribers who roam in AT&T
Wireless' markets.
Pursuant to the Limited Liability Company Agreement, AT&T Wireless has the
right, with respect to all or any portion of our markets, to terminate its
5-year limited non-competition agreement and terminate its roaming preferences
described above upon a merger, consolidation, asset acquisition or disposition
or other business combination of AT&T Corp. or its affiliates with a business
that:
- has annual telecommunication revenues in excess of $5.0 billion;
- derives less than one-third of its aggregate revenues from wireless
services; and
- owns FCC licenses to offer, and does offer, mobile wireless services
serving more than 25% of the population in our markets.
Upon such acceleration or termination, the voting interests held by AT&T
Wireless will cease to exist, and we will have the right to terminate the
operating agreement with respect to the same portion of our markets.
PRINCIPAL SHAREHOLDERS
All of our outstanding capital stock is held by ACC Acquisition LLC which is
equally and beneficially owned by AT&T Wireless and Dobson Communications.
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DESCRIPTION OF SENIOR CREDIT FACILITY
Banc of America Securities LLC and its affiliate, Bank of America, N.A., on
behalf of a group of banks, provided to us a $1,750.0 million senior credit
facility, the proceeds of which were used primarily to consummate our
acquisition by a limited liability company equally owned by Dobson
Communications and AT&T Wireless, and to refinance certain of our then existing
indebtedness. In March 2001, we used $200.0 million of the net proceeds from the
sale of the notes to reduce the balances outstanding on the term loan portion of
this commitment. Our senior credit facility currently consists of:
- $300.0 million revolving credit facility due March 31, 2007;
- $574.9 million term loan A due March 31, 2007;
- $315.2 million term loan B due March 31, 2008; and
- $359.9 million term loan C due March 31, 2009.
The following is a summary of the provisions of the senior credit facility.
This summary is qualified in its entirety by reference to the definitive loan
documentation.
Each of term loan A, term loan B and term loan C are fully funded. As of
March 2, 2001, a balance of $217.0 million was outstanding under the revolving
credit facility. The proceeds of this offering will be used to make prepayments
of our term loans and to reduce outstanding borrowings under our revolving
credit facility. See "Use of Proceeds."
Advances under all facilities may bear interest at either a base rate or
Eurodollar rate. Interest is payable quarterly on base rate borrowings and at
the end of the applicable interest period, or quarterly if the interest period
exceeds three months, on Eurodollar rate borrowings. Base rate borrowings may be
converted to Eurodollar rate borrowings and Eurodollar rate borrowings may be
converted to base rate borrowings.
Borrowings under the revolving credit facility and term loans A, B and C
bear interest at:
- For base rate borrowings, the "Applicable Margin" plus a base rate equal
to the greater of
- the federal funds rate plus 0.5%, and
- the prime rate, or
- For Eurodollar rate borrowings, the "Applicable Margin" plus a base rate
equal to the adjusted Eurodollar rate for interest periods of 1, 2, 3 or 6
months.
The "Applicable Margin" for the revolving credit facility and term loan A
fluctuates from 0.25% to 1.25% on base rate borrowings and from 1.5% to 2.5% on
Eurodollar rate borrowings based on the consolidated leverage ratio of our
parent, us and our subsidiaries (other than certain specified subsidiaries). For
term loan B, the "Applicable Margin" fluctuates from 1.5% to 1.75% on base rate
borrowings and from 2.75% to 3.0% on Eurodollar rate borrowings based on the
consolidated leverage ratio of our parent, us and our subsidiaries (other than
certain specified subsidiaries). For term loan C, the "Applicable Margin" is
fixed at 2.0% for base rate borrowings and 3.25% for Eurodollar rate borrowings.
In addition, our credit agreement provides for a standby letter of credit
subfacility upon which we may draw, at our request, for up to a maximum at any
given time of $50 million.
We must amortize the term loan facilities quarterly in amounts ranging from
an aggregate of $27.5 million for all three term loans in 2001 to $49.0 million
on term loan C in 2009.
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We must make mandatory prepayments under our senior credit facility in
amounts equal to:
- 100% of net cash proceeds from sales of our assets in excess of $10.0
million, to the extent these net cash proceeds are not reinvested within
12 months;
- an amount equal to 100% of net cash proceeds we receive from certain
equity issuances, except for issuances of equity by our parent, ACC
Acquisition LLC, to AT&T Wireless and Dobson Communications if the net
cash proceeds are contributed to us and used by us for certain specified
purposes;
- an amount equal to 100% of net cash proceeds received from certain debt
issuances, other than the sale of the notes;
- all of the net cash proceeds from the sale of the notes to the extent the
net cash proceeds are less than or equal to $200.0 million and to the
extent net cash proceeds from this offering exceed $200.0 million, the
outstanding principal balance under our revolving credit facility; and
- 75% of excess cash flow, if our leverage ratio, determined, with respect
to our parent and its subsidiaries (other than certain specified
subsidiaries), on a consolidated basis, is greater than or equal to 7.00
to 1 for the relevant fiscal year, and 50% of excess cash flow if our
leverage ratio is less than 7.00 to 1.
Mandatory prepayments from any sale of assets, equity issuance or debt
issuance will be applied ratably to the term loans, until paid in full, and then
to the revolving credit facility. Any such application to the revolving loan
from a sale of assets or equity issuance reduces the revolving credit facility
commitment until it is reduced to $100.0 million. Mandatory prepayments made in
2001 and 2002 from excess cash flow during 2000 and 2001 will be applied ratably
on the revolving credit facility and the term loans. Mandatory prepayments made
in 2003 and thereafter from excess cash flow during 2002 and thereafter will be
applied ratably to the term loans, until paid in full, and then to the revolving
credit facility.
We may prepay base rate borrowings at any time and Eurodollar rate
borrowings at the end of an applicable interest period, in each case without
penalty or premium. Mandatory prepayments are applied first to the term loan
facilities and next to the revolving credit facility except that for 2001 and
2002, the excess cash flow of our parent, us and our subsidiaries, on a
consolidated basis, will be applied ratably to the term loans plus the balance
outstanding under the revolving credit facility.
Our senior credit facility contains a number of covenants including, among
others, covenants limiting our ability and that of our parent and certain of our
subsidiaries to incur debt, make loans, use proceeds of loans or dividends or
distributions from our subsidiaries, create liens, make guarantees and
investments, change their businesses, engage in transactions with affiliates,
sell assets, enter into certain restrictive agreements, engage in sale leaseback
transactions and in mergers and acquisitions. Our senior credit facility
contains other usual and customary negative and affirmative covenants.
Additionally, our senior credit facility limits our ability to amend the terms
of the notes, or the related indenture, and to optionally prepay or redeem the
notes; however, subject to certain restrictions, we will be permitted to make
regularly-scheduled interest payments on the notes.
The senior credit facility restricts our parent, us and our subsidiaries
from declaring and paying distributions or making restricted payments, including
payments on our notes. However, subject to certain restrictions, we will be
permitted to make:
- intercompany loans;
- permitted acquisitions;
- distributions by our subsidiaries; and
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- certain specified distributions to parent to pay management expenses.
We are required to maintain certain financial ratios (determined, with
respect to our parent and our subsidiaries (other than certain specified
subsidiaries), on a consolidated basis), including, among others, the following:
- a ratio of total senior indebtedness to operating cash flow of currently
not more than 9.15 to 1, decreasing over time to 2.50 to 1;
- a ratio of total indebtedness (including the notes) to operating cash flow
beginning March 31, 2001 of not more than 9.50 to 1, decreasing over time
to 4.00 to 1;
- a ratio of operating cash flow to debt service requirements of currently
not less than 1.10 to 1 increasing over time to 1.15 to 1;
- a ratio of operating cash flow to interest expense of currently not less
than 1.10 to 1, increasing over time to 2.50 to 1;
- beginning on December 31, 2002, a ratio of operating cash flow minus
capital expenditures to the sum of debt service requirements and cash
distributions to AT&T Wireless and Dobson Communications of initially not
less than 1.00 to 1;
- a limitation on capital expenditures of $110.0 million for 2001; and
- a limitation on capital expenditures for our PCS systems of an aggregate
of $100 million.
Our failure to satisfy any of the financial covenants will constitute an
event of default under the senior credit facility, permitting the lenders, after
notice, to terminate the commitments and/or accelerate payment of outstanding
indebtedness notwithstanding our ability to meet our debt service obligations.
The senior credit facility includes other customary events of default
including, without limitation:
- breach of representations, warranties and covenants;
- our insolvency or bankruptcy or that of any guarantor;
- default on other material indebtedness;
- any material adverse event;
- our dissolution or that of any guarantor; and
- certain changes in control, provided that a reduction in the aggregate
ownership of our parent by AT&T Wireless and Dobson Communications to not
less than 80% or more of the equity of our parent, will not constitute a
change of control, if AT&T Wireless and Dobson Communications retain the
right to designate the members of our parent's management committee.
Our obligations under the senior credit facility are guaranteed by our
parent and by substantially all of our subsidiaries. Borrowings under the senior
credit facility are secured by a pledge of our capital stock and that of
substantially all of our subsidiaries, and liens on all of our assets and all of
our parent's and substantially all of our subsidiaries' assets, including FCC
licenses, but only to the extent that these licenses can be pledged under
applicable law.
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DESCRIPTION OF THE NOTES
We issued our 9 1/2% Senior Subordinated Notes due 2009 under an indenture
between us, as issuer, ACC Acquisition LLC, as Parent Guarantor, substantially
all of our subsidiaries, as Subsidiary Guarantors, and United States Trust
Company of New York, as trustee. For the purposes of the following discussion,
the term "Notes" refers to our old notes and new notes. The indenture is
governed by the Trust Indenture Act. In this description, the term "we," "our,"
the "issuer" and similar terms refer only to American Cellular Corporation, and
not to any of our subsidiaries, and the term "Guarantor" refers to both our sole
stockholder, ACC Acquisition LLC, the Parent Guarantor, and all of our
subsidiaries that are guarantors.
The following summary describes the provisions of the indenture that we
consider to be material, but does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, all the provisions of the
indenture, including the definitions of terms in the indenture. A copy of the
form of indenture is available from us upon request. For definitions of
capitalized terms used in this summary for which no definition is provided, see
"--Certain Definitions."
BRIEF DESCRIPTION OF THE NOTES
The Notes:
- are our unsecured, general obligations;
- are junior in right of payment to any of our existing or future Senior
Indebtedness;
- are equal in right of payment to any of our future Senior Subordinated
Indebtedness;
- are senior in right of payment to any of our future Subordinated
Indebtedness;
- are fully and unconditionally guaranteed by the Parent Guarantor and the
Subsidiary Guarantors;
- are issued under an indenture that will provide that additional Notes may
be issued from time to time after the offering, subject to compliance with
the "Limitation on Indebtedness" covenant described below;
- will mature on October 15, 2009; and
- bear interest at the rate of 9 1/2% per annum, computed on the basis of a
360-day year comprised of twelve 30-day months, to be paid semiannually in
cash in arrears on April 15 and October 15 of each year, starting on
October 15, 2001.
The Note Guarantees are:
- are the unsecured, general obligations of the Parent Guarantor and the
Subsidiary Guarantors;
- are junior in right of payment to any existing or future Senior
Indebtedness of the Parent Guarantor and the Subsidiary Guarantors;
- are equal in right of payment to any future Senior Subordinated
Indebtedness of the Parent Guarantor and the Subsidiary Guarantors; and
- are senior in right of payment to any future Subordinated Indebtedness of
the Parent Guarantor and the Subsidiary Guarantors.
On a pro forma basis after giving effect to the sale of the Notes and the
use of the proceeds from their sale as though we completed those transactions on
December 31, 2000, we and our subsidiaries would have had total consolidated
indebtedness of approximately $1,779.4 million outstanding. See "Description of
Senior Credit Facility."
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Any direct or indirect subsidiaries of the Parent Guarantor created or
acquired in the future will be bound by the covenants contained in the
indenture, unless the Parent Guarantor designates a subsidiary as an
"UNRESTRICTED SUBSIDIARY." Unrestricted Subsidiaries will not be subject to any
of the restrictive covenants contained in the indenture. We refer to any direct
or indirect subsidiary of the Parent Guarantor that is not an Unrestricted
Subsidiary, including the Issuer, as a "RESTRICTED SUBSIDIARY." We may not be
designated an Unrestricted Subsidiary. All of our current subsidiaries are
"Restricted Subsidiaries" except Alton CellTelco Cellular Corporation, Alton
CellTelco Partnership and Cellular Information Systems of Laredo, Inc., which
will be designated as Unrestricted Subsidiaries. Alton CellTelco Cellular
Corporation, Alton CellTelco Partnership and Cellular Information Systems of
Laredo collectively represent less than 1% of our consolidated assets, revenues
and earnings.
GENERAL
We will pay principal, premium, if any, interest and liquidated damages, if
any, on the Notes by wire transfer of immediately available funds to the
registered holder of the relevant global Note and, with respect to certificated
Notes, by wire transfer of immediately available funds in accordance with
instructions provided by the registered holders of certificated Notes or, if no
such instructions are specified, by mailing a check to each such holder's
registered address.
Interest on the Notes will accrue from the most recent interest payment date
to which interest has been paid or, if no interest has been paid, from the date
we issue the Notes in this offering. We will issue the Notes only in fully
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. Subject to our compliance with the covenant described under
the subheading "--Certain Covenants--Limitation on Indebtedness," we are
permitted to issue more Notes under the indenture (the "ADDITIONAL NOTES"). The
Notes and the Additional Notes, if any, will be treated as a single class for
all purposes of the indenture, including waivers, amendments, redemptions and
offers to purchase. Unless the context otherwise requires, for all purposes of
the indenture and this "Description of the Notes," references to the Notes
include any Additional Notes actually issued.
GUARANTEES
Subject to the release provisions in the indenture and as set forth herein,
the Subsidiary Guarantors, and certain future subsidiaries of the Parent
Guarantor, as primary obligors and not merely as sureties, will jointly and
severally irrevocably and unconditionally guarantee on an unsecured senior
subordinated basis the performance and full and punctual payment when due,
whether at Stated Maturity, by acceleration or otherwise, of all obligations of
the Issuer under the indenture and the Notes, whether for payment of principal
of, or interest on, or liquidated damages in respect of, the Notes, expenses,
indemnification or otherwise (all such obligations guaranteed by the Guarantors
being herein called the "GUARANTEED OBLIGATIONS") by executing a Guarantee. The
Guarantors will agree to pay, in addition to the amount stated above, any and
all costs and expenses (including reasonable counsel fees and expenses) incurred
by the trustee or the holders of Notes in enforcing any rights under the
Guarantees. Each Guarantee will be limited in amount to an amount not to exceed
the maximum amount that can be guaranteed by the applicable Guarantor without
rendering the Guarantee, as it relates to such Guarantor, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally. The Parent Guarantor
will cause (1) each Domestic Restricted Subsidiary that incurs Indebtedness and
(2) each Foreign Restricted Subsidiary that incurs Material Indebtedness to
become a Guarantor; PROVIDED, HOWEVER, that in the event that a Subsidiary
Guarantor no longer has outstanding, other than the Guarantee, any Indebtedness
(in the case of a Domestic Restricted Subsidiary) or Material Indebtedness (in
the case of a Foreign Restricted Subsidiary), the Guarantee of that Subsidiary
Guarantor will terminate. See "--Certain Covenants--Future Subsidiary
Guarantors."
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The obligations of each Guarantor under its guarantee will be senior
subordinated obligations. As such, the rights of noteholders to receive payment
from a Guarantor pursuant to its guarantee will be subordinated in right of
payment to the rights of holders of Senior Indebtedness of that Guarantor. The
terms of the subordination provisions described under "--Subordination" with
respect to the Issuer's obligations under the Notes apply equally to each
Guarantor and the obligations of such Guarantor under its guarantee.
Each guarantee will be a continuing guarantee and will:
(1) remain in full force and effect until payment in full of all the
Guaranteed Obligations unless earlier terminated;
(2) be binding upon each Guarantor and its successors; and
(3) inure to the benefit of and be enforceable by the trustee, the holders
of the Notes and their successors, transferees and assigns.
The indenture provides that upon the merger or consolidation of a Subsidiary
Guarantor with or into any Person, other than the Parent Guarantor, a subsidiary
of the Parent Guarantor or an Affiliate of the Parent Guarantor, in a
transaction in which that Subsidiary Guarantor is not the surviving entity of
the merger or consolidation, such Subsidiary Guarantor will be released and
discharged from its obligations under its guarantee. The indenture also provides
that if a majority of the Capital Stock of a Subsidiary Guarantor is sold
(including by issuance or otherwise) by the Parent Guarantor or any subsidiary
of the Parent Guarantor, other than to the Parent Guarantor, or a subsidiary of
the Parent Guarantor or an affiliate of the Parent Guarantor, in a transaction
constituting an Asset Sale and either:
(1) the Net Cash Proceeds from such Asset Sale are used in accordance with
the "Limitation on Asset Sales" covenant; or
(2) the Issuer delivers to the trustee an officers' certificate to the
effect that the Net Cash Proceeds from such Asset Sale will be used in
accordance with the "Limitation on Asset Sales" covenant within the time
limits specified by that covenant,
then such Subsidiary Guarantor will be released and discharged from its
obligations under its Guarantee upon such use, in the case of clause (1), or
upon such delivery, in the case of clause (2). In addition, any Subsidiary
Guarantor that becomes a Subsidiary Guarantor as a consequence of its guarantee
of certain Indebtedness permitted under the indenture and that is released and
discharged from such guarantee will be released and discharged from its
Guarantee upon delivery of an officers' certificate certifying such release and
discharge from such Guarantee to the trustee.
INTEREST RESERVE
We have purchased and pledged to the trustee as security for the benefit of
the holders of the Notes the Pledged Securities in an amount that will be
sufficient upon receipt of the scheduled interest and/or principal payments on
those Pledged Securities, in the opinion of a nationally recognized firm of
independent public accountants selected by us, to provide for payment in full of
the first four scheduled interest payments due on the Notes. We used
approximately $85.0 million of the net proceeds from the offering of the Notes
to acquire the Pledged Securities. The mix or type of U.S. Government Securities
that we acquired, as well as any changes in the mix or type of U.S. Government
Securities, was determined by us solely in our discretion.
We pledged the Pledged Securities to the collateral agent for the benefit of
the holders of Notes in accordance with the terms of our pledge agreement
between us and the trustee (the "PLEDGE AGREEMENT"). We also purchased the
Pledged Securities and delivered them to the trustee, to be held in an account
(the "INTEREST RESERVE ACCOUNT") to secure the Issuer's obligations under the
Notes and to
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pay for the Pledged Securities when payment is due in accordance with customary
settlement cycles for the purchase of securities. The trustee will hold the
Pledged Securities in the Interest Reserve Account for the benefit of the
holders of the Notes. Any interest earned on the Pledged Securities will be
added to the Interest Reserve Account.
The Pledge Agreement requires that, immediately prior to or on each of the
first four scheduled interest payment dates for the Notes, we either:
(1) deposit with the trustee cash from funds otherwise available to us
sufficient to pay the interest then due; or
(2) direct the trustee to release from the Interest Revenue Account proceeds
sufficient to pay the interest on the Notes then due.
If we exercise the option under clause (1), we may then direct the trustee
to release to us proceeds or Pledged Securities from the Interest Reserve
Account in the same amount as the cash deposited by us with the trustee. In the
event that the funds or Pledged Securities held in the Interest Reserve Account
are insufficient to pay the first four scheduled interest payments under the
Notes, we nevertheless will be obligated to pay any deficiency from cash
available to us from other sources. Our failure to pay interest when due on the
Notes through the first four scheduled interest payment dates will constitute an
immediate Event of Default.
The Notes, including the payment of the principal amount of and interest on
those Notes, are secured by a first priority security interest in the Pledged
Securities, including interest earned on the Pledged Securities, and in the
Interest Reserve Account, including the cash delivered pending settlement of the
purchase of the Pledged Securities, through the date of the fourth scheduled
interest payment date with respect to the Notes to the extent of that security.
The ability of holders of Notes to realize upon the Pledged Securities or other
funds in the Interest Reserve Account may be subject to bankruptcy law
limitations in the event of our bankruptcy.
Upon the acceleration of the maturity of the Notes, the Pledge Agreement
allows the trustee for the Notes to foreclose upon the Pledged Securities and
the net proceeds of the Interest Reserve Account. Under the terms of the
supplemental indenture relating to the Notes, any proceeds from the sale of the
Pledged Securities and other funds in the Interest Reserve Account will be
applied, first, to amounts owing to the trustee for the Notes in respect of fees
and expenses of that trustee and, second, to all obligations under the Notes.
In the event that the funds or Pledged Securities held in the Interest
Reserve Account at any time exceed the amount sufficient, in the opinion of a
nationally recognized firm of independent public accountants selected by us, to
pay in full the first four scheduled interest payments on the Notes, the trustee
will be permitted to release any excess amount to us upon our request. Moreover,
after the first four scheduled interest payments on the Notes have been made in
a timely manner, any Pledged Securities or other funds held in the Interest
Reserve Account will be released and returned to us if no Default or Event of
Default then exists and continues. Thereafter, the Notes will be our general
unsecured obligations.
RANKING
As of December 31, 2000:
- with respect to us,
- the outstanding Senior Indebtedness of the Issuer was $1,678.0 million
(exclusive of unused commitments under the Senior Credit Facility) all
of which was secured Indebtedness;
- we had no outstanding Senior Subordinated Indebtedness; and
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- we had no outstanding Subordinated Indebtedness;
- with respect to the Parent Guarantor,
- the outstanding Senior Indebtedness guaranteed by the Parent Guarantor
was $1,678.0 million, consisting entirely of a guarantee of
Indebtedness under the Senior Credit Facility;
- the Parent Guarantor had no Senior Subordinated Indebtedness; and
- the Parent Guarantor had no outstanding Subordinated Indebtedness; and
- with respect to the Subsidiary Guarantors,
- the outstanding Senior Indebtedness guaranteed by the Subsidiary
Guarantors was $1,678.0 million, consisting entirely of guarantees of
Indebtedness under the Senior Credit Facility;
- the Subsidiary Guarantors had no Senior Subordinated Indebtedness;
- the Subsidiary Guarantors had no outstanding Subordinated Indebtedness;
and
- Subsidiaries that will not guarantee the Notes had no Indebtedness and
guaranteed no Indebtedness.
As of December 31, 2000, after giving effect to the offering of the Notes,
the Parent Guarantor and its Restricted Subsidiaries would have been liable for
approximately $1,779.4 million of Indebtedness.
Although the indenture contains limitations on the amount of additional
Indebtedness which the Parent Guarantor and its Restricted Subsidiaries may
incur, under certain circumstances the amount of such Indebtedness could be
substantial and, in any case, such Indebtedness may be Senior Indebtedness. See
"--Certain Covenants--Limitation on Indebtedness."
Payment from the money or the proceeds of U.S. Government Securities held in
any defeasance trust described under "--Defeasance" will not, however, be
subordinated to any Senior Indebtedness or subject to the restrictions and
covenants described in this description.
Substantially all of the operations of the Parent Guarantor and us are
conducted through our respective Subsidiaries. Claims of creditors of those
Subsidiaries, including trade creditors, and claims of preferred stockholders,
if any, of those Subsidiaries, generally will have priority with respect to the
assets and earnings of those Subsidiaries over the claims of creditors of the
Parent Guarantor and of us, including noteholders. The Notes, therefore, will be
effectively subordinated to creditors, including trade creditors, and preferred
stockholders, if any, of our subsidiaries. Although the indenture contains
limitations on the incurrence of Indebtedness by, and the issuance of preferred
stock of, certain of the Parent Guarantor's subsidiaries, those limitations are
subject to a number of significant qualifications.
SUBORDINATION
The payment of principal, interest and premium and liquidated damages, if
any, on the Notes will be subordinated to the prior payment in full of all our
Senior Indebtedness, including our Senior Indebtedness incurred in the future.
The holders of Senior Indebtedness will be entitled to receive payment in
full of all obligations due in respect of Senior Indebtedness, including
interest after the commencement of any bankruptcy proceeding at the rate
specified in the applicable Senior Indebtedness, before the noteholders will be
entitled to receive any payment with respect to the Notes, except that
noteholders may receive and
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retain Permitted Junior Securities and payments made from the trust described
under "--Defeasance," in the event of any distribution to creditors of the
Issuer or the Guarantors:
(1) in a liquidation or dissolution of us or the Guarantors;
(2) in a bankruptcy, reorganization, insolvency, receivership or similar
proceeding relating to us, any Guarantor or their respective property;
(3) in an assignment for the benefit of creditors; or
(4) in any marshaling of the assets and liabilities of us or any Guarantor.
Neither we nor any Guarantor will be permitted to make any payment in
respect of the Notes, except in Permitted Junior Securities or from the Interest
Reserve Account or the trust described under "--Defeasance," if:
(1) a payment default on Designated Senior Indebtedness occurs and is
continuing beyond any applicable grace period; or
(2) any other default occurs and is continuing on any series of Designated
Senior Indebtedness that permits holders of that series of Designated
Senior Indebtedness to accelerate its maturity and the trustee receives a
notice of such default (a "PAYMENT BLOCKAGE NOTICE") from the Issuer or
the holders of any Designated Senior Indebtedness.
Payments on the Notes may and will be resumed:
(1) in the case of a payment default, upon the date on which such default is
cured or waived; and
(2) in case of a nonpayment default, the earlier of the date on which that
nonpayment default is cured or waived or 179 days after the date on which
the applicable Payment Blockage Notice is received, unless the maturity
of any Designated Senior Indebtedness has been accelerated.
No new Payment Blockage Notice may be delivered unless and until 360 days
have elapsed since the delivery of the immediately prior Payment Blockage
Notice.
No nonpayment default that existed or was continuing on the date of delivery
of any Payment Blockage Notice to the trustee will be, or be made, the basis for
a subsequent Payment Blockage Notice unless that default is cured or waived for
a period of not less than 90 days.
If the trustee or any noteholder receives a payment in respect of the Notes,
except in Permitted Junior Securities or from the trust described under
"--Defeasance," when the payment is prohibited by these subordination
provisions, the trustee or the noteholder, as the case may be, will hold the
payment in trust for the benefit of the holders of Senior Indebtedness. Upon the
proper written request of the holders of Senior Indebtedness, the trustee or the
noteholder, as the case may be, will deliver the amounts in trust to the holders
of Senior Indebtedness or their proper representatives.
We must promptly notify holders of Senior Indebtedness if payment of the
Notes is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event of
a bankruptcy, liquidation or reorganization of the Issuer or the Guarantors,
noteholders may recover less ratably than creditors of the Issuer and Guarantors
who hold their Senior Indebtedness.
OPTIONAL REDEMPTION
At any time prior to October 15, 2005, we may redeem in whole or in part, at
a redemption price equal to 100% of the principal amount thereof plus the
Applicable Premium as of, and accrued and unpaid interest and liquidated
damages, if any, to, the date of redemption (subject to the right of
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holders of record on the relevant record date to receive interest due on the
relevant interest payment date in respect of then outstanding Notes).
In addition to the foregoing, we may redeem the Notes at any time on or
after October 15, 2005, at our option, in whole or in part, at the redemption
prices (expressed as a percentage of the principal amount thereof) set forth
below, plus accrued and unpaid interest and liquidated damages, if any, to the
redemption date, if redeemed during the 12-month period beginning October 15 of
each of the years set forth below:
YEAR PERCENTAGE
- ---- ----------
2005........................ 104.750%
2006........................ 103.167%
2007........................ 101.583%
2008 and thereafter......... 100.000%
In addition, on or prior to April 15, 2004, we may redeem up to 35% of the
original principal amount of the Notes at a redemption price equal to 109.500%
of their principal amount, plus accrued and unpaid interest and liquidated
damages, if any, to the redemption date, with the proceeds of one or more Equity
Offerings by either us or by the Parent Guarantor to the extent that the
proceeds thereof are contributed to us, but only if such redemption date occurs
within 180 days after consummation of that Equity Offering and at least 65% of
the original aggregate principal amount of the Notes remains outstanding.
Notes called for redemption become due and payable on the date fixed for
redemption. If we timely pay the redemption price, interest will cease to accrue
on the Notes or portions of the Notes called for redemption on and after the
redemption date.
If we elect to redeem less than all of the Notes, the trustee will select
the Notes or portions of those Notes for redemption in compliance with the
requirements of the principal national securities exchange, if any, on which the
Notes we are redeeming are listed or, if the Notes we are redeeming are not
listed on a national securities exchange, on a pro rata basis, by lot or by such
other customary method as the trustee in its sole discretion deems to be fair
and appropriate; provided, however, that in no event will a Note of $1,000 in
principal amount be redeemed in part. If any Note is to be redeemed in part
only, the notice of redemption relating to that Note will state the portion of
the principal amount to be redeemed. A new Note in principal amount equal to the
unredeemed portion of that Note will be issued in the name of the registered
holder upon cancellation of the original Note. We will send any notices of
redemption by first class mail not less than 30 nor more than 60 days before the
redemption date to each holder of the Notes being redeemed at that holder's
registered address.
MANDATORY REDEMPTION
Except as described below under "Change of Control" and "Certain
Covenants--Limitation on Asset Sales," we are not required to make any mandatory
redemption of, sinking fund payments for, or offer to repurchase any Notes.
CHANGE OF CONTROL
If a Change of Control occurs, each holder of Notes will have the right to
require us to repurchase all or any part of the holder's Notes pursuant to the
offer described below (the "CHANGE OF CONTROL OFFER"). In the Change of Control
Offer, we will offer a payment in cash equal to 101% of the aggregate principal
amount of Notes repurchased plus accrued and unpaid interest and liquidated
damages, if any, to the purchase date (the "CHANGE OF CONTROL PAYMENT"). Within
30 days following any Change of Control, we will mail an Offer to Purchase to
each holder describing the transaction or transactions that constitute the
Change of Control and offering to repurchase Notes on the date
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specified in such Offer to Purchase, which date will be no earlier than 30 days
and no later than 60 days from the date such notice is mailed (the "CHANGE OF
CONTROL PAYMENT DATE"), pursuant to the procedures required by the indenture and
described in the Offer to Purchase.
On the Change of Control Payment Date, we will, to the extent lawful:
- accept for payment all Notes or portions thereof properly tendered and not
withdrawn pursuant to the Change of Control Offer;
- deposit with the paying agent an amount equal to the Change of Control
Payment in respect of all Notes or portions thereof so tendered; and
- deliver or cause to be delivered to the trustee the Notes so accepted
together with an officer's certificate stating the aggregate principal
amount of the Notes or portions thereof being purchased by us.
The trustee will promptly mail to each holder of Notes so tendered the
Change of Control Payment for such Notes, and the trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each holder
a new Note representing the unpurchased portion of the Notes surrendered, if
any.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the indenture are applicable. We will comply, to
the extent applicable, with the requirements of Section 14(e) of the Securities
Exchange Act of 1934 and any other securities laws or regulations applicable to
any Change of Control Offer. To the extent that the provisions of any such
securities laws or securities regulations conflict with the provisions of the
covenant described above, we will comply with the applicable securities laws and
regulations and will not be deemed to have breached our obligations under the
covenant described above by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
us and the initial purchasers. We have no present intention to engage in a
transaction involving a Change of Control, although we could decide to do so in
the future. Subject to the limitations discussed below, we could, in the future,
enter into related party transactions, including acquisitions, refinancings or
other recapitalizations, that would not constitute a Change of Control under the
indenture, but that could increase the amount of Indebtedness outstanding at
such time or otherwise affect our capital structure. Restrictions on our ability
to incur additional Indebtedness are contained in the covenants described under
"Certain Covenants--Limitation on Indebtedness." Such restrictions can only be
waived with the consent of the holders of a majority in principal amount of the
Notes then outstanding. Except for the limitations contained in such covenant,
however, the indenture will not contain any covenants or provisions that may
afford holders of the Notes protection in the event of certain highly leveraged
transactions.
We cannot assure you that we will have sufficient funds available at the
time of any Change of Control to make any payments required by the Notes or
other Indebtedness that we have outstanding at the time of the Change of
Control, including the repurchase of Notes required by the "Change of Control"
covenant or the repurchase or repayment of other of our Indebtedness containing
similar provisions. Our existing and future Indebtedness and that of our
Subsidiaries restricts or may restrict our access to the cash flow from our
Subsidiaries. Any future agreements relating to Indebtedness to which we or any
of our Subsidiaries becomes a party may contain similar restrictions and
provisions. In the event that a Change of Control occurs at a time when we are
prohibited or prevented from repurchasing Notes, we could seek the consent of
the applicable lenders to allow such repurchase or could attempt to refinance
the financing arrangements that contain such prohibition. If we do not obtain
such a consent or repay such borrowings, we will remain prohibited from
repurchasing the Notes. In such case, our failure to purchase tendered Notes
would constitute an Event of Default. Our future Indebtedness and that of our
Subsidiaries may contain prohibitions on the repurchase of the
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Notes and on the occurrence of certain events that would constitute a Change of
Control or may require us to repurchase such Indebtedness upon a Change of
Control. Finally, our existing financial resources and our ability to access the
cash flow of our Subsidiaries may limit our ability to pay cash to the holders
of Notes following the occurrence of a Change of Control. See "Risk Factors--We
may be unable to repurchase the Notes upon a change of control." There can be no
assurance that sufficient funds will be available when necessary to make any
required repurchases.
We will not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in the
indenture applicable to a Change of Control Offer made by us and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of our assets and our Restricted Subsidiaries taken as a whole. Although there
is a developing body of case law interpreting the phrase "substantially all,"
there is no precise established definition of the phrase under applicable law.
Accordingly, the ability of a holder of Notes to require us to repurchase such
Notes as a result of a sale, lease, transfer, conveyance or other disposition of
less than all of our assets and our Restricted Subsidiaries taken as a whole to
another person or group may be uncertain.
CERTAIN COVENANTS
The indenture will contain, among others, the following covenants:
LIMITATION ON INDEBTEDNESS
Neither the Parent Guarantor nor any Restricted Subsidiary may incur any
Indebtedness other than Indebtedness existing on the date of the indenture.
However, the Parent Guarantor and any Restricted Subsidiary may incur
Indebtedness, if, after giving effect to the incurrence of such Indebtedness and
the receipt and application of the proceeds therefrom, the Consolidated Leverage
Ratio would be less than 8.50 to 1 for Indebtedness incurred on or prior to
September 30, 2002, 8.00 to 1 for Indebtedness incurred after September 30, 2002
and on or prior to September 30, 2003, and 7.50 to 1 for Indebtedness incurred
thereafter.
The first paragraph of this covenant will not prohibit the Parent Guarantor
and any Restricted Subsidiary (except as specified below) from incurring the
following types of Indebtedness (including Acquired Indebtedness):
(1) additional Indebtedness under one or more Credit Agreements outstanding
at any time in an aggregate principal amount not to exceed
$1,550.0 million incurred under this clause (1);
(2) Indebtedness issued in exchange for, or the net proceeds of which are
used to refinance or refund, then outstanding Indebtedness, other than
Indebtedness incurred under clause (1), (3), (4), (5) or (7) of this
paragraph, and any refinancings thereof in an amount not to exceed the
amount so refinanced or refunded (plus premiums, accrued interest,
accrued dividends, fees and expenses), but only if such new Indebtedness,
determined as of the date of incurrence of such new Indebtedness, does
not mature or have a mandatory redemption or repurchase date prior to the
final Stated Maturity of the Indebtedness to be refinanced or refunded,
and the Average Life of such new Indebtedness is at least equal to the
remaining Average Life of the Indebtedness to be refinanced or refunded
and on the condition that in no event may Indebtedness of the Issuer be
refinanced by means of any Indebtedness of any Restricted Subsidiary
pursuant to this clause (2);
(3) Indebtedness represented by the Notes issued in connection with this
offering, the exchange Notes to be issued pursuant to the exchange offer
contemplated by the Registration Rights
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Agreement, including, in each case, the Guarantees, and Guarantees of any
Additional Notes that may be issued in the future in accordance with the
indenture; PROVIDED, HOWEVER, that if any Additional Notes are issued
prior to October 15, 2003, we will deposit in the Interest Reserve
Account funds sufficient to pay, when due, all cash interest payments
accruing on the Additional Notes on or prior to October 15, 2003;
(4) Indebtedness
(a) in respect of performance, surety or appeal bonds provided in the
ordinary course of business,
(b) under Currency Agreements and Interest Rate Agreements, but only if
such agreements
- are designed solely to protect the Parent Guarantor or its
Restricted Subsidiaries against fluctuations in foreign currency
exchange rates or interest rates, and
- do not increase the Indebtedness of the obligor outstanding at any
time other than as a result of fluctuations in foreign currency
exchange rates or interest rates or by reason of fees, indemnities
and compensation payable thereunder, or
(c) 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 the Parent Guarantor or any of its Restricted Subsidiaries
pursuant to such agreements, in any case incurred in connection with
the disposition of any business, assets or Restricted Subsidiary of
the Parent Guarantor (other than Guarantees of Indebtedness incurred
by any Person acquiring all or any portion of such business, assets
or Restricted Subsidiary of the Parent Guarantor for the purpose of
financing such acquisition), in an amount not to exceed the gross
proceeds actually received by the Parent Guarantor or any Restricted
Subsidiary in connection with such disposition;
(5) Guarantees of Indebtedness of the Parent Guarantor or the Issuer by any
Restricted Subsidiary or by the Parent Guarantor or the Issuer of
Indebtedness of any Restricted Subsidiary so long as such Indebtedness
was permitted to be incurred under another provision of this "Limitations
on Indebtedness" covenant;
(6) Indebtedness of the Parent Guarantor or the Issuer not to exceed, at any
time outstanding, the sum of:
(a) two times the sum of
- Net Cash Proceeds received by the Issuer after the date of the
indenture from the issuance and sale of (A) its Common Stock or
Preferred Shares convertible or exchangeable solely into shares of
such Common Stock (in either case, other than Disqualified Stock),
(B) the Parent Guarantor's Common Stock or Preferred Shares
convertible or exchangeable solely into shares of such Common Stock
(in either case, other than Disqualified Stock) or (C) the sale of
any Capital Stock (other than Disqualified Stock) of the Issuer or
the Parent Guarantor to any Permitted Holder (such Capital Stock in
(A), (B) or (C) being "Qualifying Capital Stock"), to the extent
such Net Cash Proceeds are contributed to the Issuer, to a Person
that is not a Restricted Subsidiary of the Parent Guarantor to the
extent such Net Cash Proceeds have not been used pursuant to
clause (4)(c)(ii) of the first paragraph, or clause (7) of the
second paragraph of the "Limitation on Restricted Payments"
covenant to make a Restricted Payment; and
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- 80% of the Fair Market Value of property other than cash received
by the Parent Guarantor or the Issuer after the date of the
indenture from the issuance and sale of its Qualifying Capital
Stock to a Person that is not a Restricted Subsidiary of the Parent
Guarantor; and
(b) the sum of
- Net Cash Proceeds received by the Issuer after the date of the
indenture from the issuance and sale of either any of its Capital
Stock (other than Qualifying Capital Stock and Disqualified Stock),
or the Parent Guarantor's Capital Stock (other than Qualifying
Capital Stock and Disqualified Stock) to the extent such Net Cash
Proceeds are contributed to the Issuer, to a Person that is not a
Restricted Subsidiary of the Parent Guarantor to the extent such
Net Cash Proceeds have not been used pursuant to clause (4)(c)(ii)
of the first paragraph, or clause (7) of the second paragraph of
the "Limitation on Restricted Payments" covenant to make a
Restricted Payment; and
- 80% of the Fair Market Value of property other than cash received
by the Parent Guarantor or the Issuer after the date of the
indenture from the issuance and sale of its Capital Stock (other
than Qualifying Capital Stock and Disqualified Stock) to a Person
that is not a Restricted Subsidiary of the Parent Guarantor;
(7) intercompany Indebtedness (other than any Guarantee to the extent
addressed in clause (5) above) by or among the Parent Guarantor and its
Restricted Subsidiaries; PROVIDED, HOWEVER, that (A) if the Issuer or the
Parent Guarantor is the obligor on such Indebtedness, such Indebtedness
is expressly subordinated to the prior payment in full in cash of all
obligations in respect of the Notes or the Parent Guarantor's Guarantee
of the Notes, as the case may be, and (B)(1) any subsequent issuance or
transfer of Capital Stock that results in any such Indebtedness being
held by a Person other than the Parent Guarantor, the Issuer or another
Restricted Subsidiary of the Parent Guarantor and (2) any sale or other
transfer of any such Indebtedness to a Person other than the Parent
Guarantor, the Issuer or another Restricted Subsidiary of the Parent
Guarantor will be deemed, in each case, to constitute an incurrence of
Indebtedness by the Parent Guarantor, the Issuer or such Restricted
Subsidiary, as the case may be, that was not permitted by this
clause (7); and
(8) Indebtedness outstanding at any time in an aggregate principal amount
not to exceed $100.0 million.
Items of Indebtedness incurred under clauses (1) through (8) above are
referred to as "PERMITTED INDEBTEDNESS."
The maximum amount of Indebtedness that the Parent Guarantor or a Restricted
Subsidiary may incur pursuant to this "Limitation on Indebtedness" covenant will
not be deemed to be exceeded, with respect to any outstanding Indebtedness, due
solely to the result of fluctuations in the exchange rates of currencies.
For purposes of determining any particular amount of Indebtedness under this
"Limitation on Indebtedness" covenant, Guarantees, or obligations with respect
to letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount will not be included.
For purposes of determining compliance with this covenant, in the event that
an item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Indebtedness described in clauses (1) through (8) above
as of the date of incurrence thereof or is entitled to be incurred pursuant to
the first paragraph of this covenant as of the date of incurrence thereof, the
Issuer shall, in its sole discretion, classify (or later classify or reclassify
in whole or in part, in its sole discretion) such item of Indebtedness in any
manner that complies with this covenant. Indebtedness under the Senior
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Credit Facility outstanding on the date on which the Notes are first issued and
authenticated under the indenture will be deemed to have been incurred on such
date in reliance on the exception provided by clause (1) of the definition of
Permitted Indebtedness. Accrual of interest, the accretion of accreted value and
the payment of interest in the form of additional Indebtedness or the payment of
dividends on Preferred Shares in the form of additional shares of the same class
or series of Preferred Shares will not be deemed an incurrence of Indebtedness
for purposes of this covenant.
LIMITATION ON LAYERED INDEBTEDNESS
Neither the Parent Guarantor nor any Restricted Subsidiary of the Parent
Guarantor will directly or indirectly incur any Indebtedness that by its terms
would expressly rank senior in right of payment to the Notes and rank
subordinate in right of payment to any other Indebtedness of the Parent
Guarantor or that Restricted Subsidiary; PROVIDED, HOWEVER, that no Indebtedness
will be deemed to be subordinated solely by virtue of being unsecured.
LIMITATION ON LIENS
The Parent Guarantor may not, and may not permit any of its Restricted
Subsidiaries to, create, incur, assume or otherwise cause or suffer to exist or
become effective any Lien of any kind securing Indebtedness either that is PARI
PASSU with the Notes or any Guarantee of the Notes, as the case may, or that is
Subordinated Indebtedness, upon any of their property or assets, now owned or
hereafter acquired (other than Permitted Liens), unless all payments due under
the indenture and the Notes are secured equally and ratably with (or prior to,
in the case of Subordinated Indebtedness) the obligations so secured until such
time as such obligations are no longer secured by such Lien; PROVIDED, HOWEVER,
that this restriction will not apply to any Lien securing Acquired Indebtedness
created prior to the incurrence of such Indebtedness by the Parent Guarantor or
any Restricted Subsidiary (and to successive extensions or refinancings
thereof), where such Lien only extends to the assets that were subject to such
Lien prior to the related acquisition by the Parent Guarantor or the Restricted
Subsidiary.
LIMITATION ON RESTRICTED PAYMENTS
The Parent Guarantor and its Restricted Subsidiaries are not permitted to
take any of the following actions (each a "RESTRICTED PAYMENT"):
(1) declare or pay any dividend or make any distributions on or with respect
to its Capital Stock; PROVIDED, HOWEVER, dividends or distributions are
permitted if they are payable solely in Capital Stock, other than
Disqualified Stock, or in options, warrants or other rights to acquire
shares of Capital Stock, other than Disqualified Stock, or are payable to
the Parent Guarantor or any Restricted Subsidiary; PROVIDED FURTHER,
HOWEVER, that if such Restricted Subsidiary is not a Wholly Owned
Subsidiary, then distributions or dividends may be payable to its other
shareholders only if on a pro rata basis measured by value;
(2) purchase, redeem, retire or otherwise acquire for value any Capital
Stock of
(a) the Parent Guarantor, the Issuer or an Unrestricted Subsidiary
(including options, warrants or other rights to acquire such shares
of Capital Stock) held by any Person, or
(b) a Restricted Subsidiary (including options, warrants or other rights
to acquire such shares of Capital Stock) held by any Affiliate of the
Parent Guarantor (other than a Wholly Owned Restricted Subsidiary) or
any beneficial holder (or any Affiliate of such holder) of 5% or more
of the Capital Stock of the Parent Guarantor or the Issuer;
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(3) make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Subordinated Indebtedness,
except a payment of interest or principal at Stated Maturity; or
(4) make any Investment, other than a Permitted Investment, in any Person if
at the time of, and after giving effect to, the proposed Restricted
Payment:
(a) a Default or Event of Default occurs and continues to occur or would
result therefrom or shall have occurred and be continuing; or
(b) the Parent Guarantor could not incur at least $1.00 of Indebtedness
under the first paragraph of the "Limitation on Indebtedness"
covenant; or
(c) the aggregate amount of such Restricted Payments and all other
Restricted Payments declared or made after the date of the indenture
(the amount, if other than in cash, to be determined in good faith by
our board of directors) would exceed the sum of:
- 100% of the Parent Guarantor's Consolidated EBITDA (or, if its
Consolidated EBITDA is a loss, minus 100% of the amount of such
loss) accrued during the period treated as one accounting period,
beginning on January 1, 2001, to the end of the most recent fiscal
quarter preceding the date of such Restricted Payment for which
consolidated financial statements of the Parent Guarantor have been
filed with the Commission, MINUS 1.50 times the Parent Guarantor's
Consolidated Interest Expense for the same period, plus
- the aggregate Net Cash Proceeds received by the Issuer after the
date of the indenture as a capital contribution or from issuing or
selling its Capital Stock, and options, warrants and other rights
to acquire its Capital Stock, to a Person who is not a Restricted
Subsidiary of the Issuer (except to the extent such Net Cash
Proceeds are used to incur Indebtedness pursuant to clause (6)(a)
of the second paragraph under the "Limitations on Indebtedness"
covenant) (in each case, exclusive of any Disqualified Stock or any
options, warrants or other rights that are redeemable at the option
of the holder, or are required to be redeemed, prior to the final
Stated Maturity of the Notes), plus
- an amount equal to the net reduction in Investments that constitute
Restricted Payments resulting from payments of interest, dividends,
repayments or loans or advances, returns of capital or other
transfers of assets to the Parent Guarantor or any Restricted
Subsidiary of the Parent Guarantor or from the Net Cash Proceeds
from the sale of any Investment (except to the extent any such
payment or proceeds are included in the calculation of Consolidated
EBITDA), or from redesignations of Unrestricted Subsidiaries as
Restricted Subsidiaries (valued in each case as provided in the
definition of "Investment"), not to exceed, in each case, the
amount of the relevant Investments so being reduced or sold.
The following actions will not be deemed to violate the limitation on
Restricted Payments:
(1) the payment of any dividend within 60 days after the date of declaration
thereof if, at the date of declaration, such payment would comply with
the subparagraphs (1), (2) and (3) above;
(2) the repurchase, redemption, defeasance or other acquisition or
retirement of Capital Stock of the Parent Guarantor or the Issuer (or
options, warrants or other rights to acquire such Capital Stock) or any
Indebtedness that is subordinated to the Notes in each case in exchange
for, or out of the Net Cash Proceeds of the substantially concurrent sale
(other than to any Restricted Subsidiary of the Parent Guarantor) of,
shares of Capital Stock (other than Disqualified Stock) of the Parent
Guarantor or the Issuer;
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(3) the repurchase, redemption, defeasance or other acquisition or
retirement of Subordinated Indebtedness with the Net Cash Proceeds from
an incurrence of Indebtedness that meets the requirements of clause (2)
of the second paragraph of the "Limitation on Indebtedness" covenant;
(4) payments or distributions, to dissenting stockholders in connection with
a consolidation, merger or transfer of assets that complies with the
provisions described under the "Consolidation, Merger and Sale of Assets"
covenant;
(5) the purchase, redemption, acquisition, cancellation or other retirement
for value of shares of Capital Stock of the Parent Guarantor or the
Issuer to the extent necessary in the good faith judgment of the Parent
Guarantor's and the Issuer's board of directors, to prevent the loss or
secure the renewal or reinstatement of any license or franchise held by
the Parent Guarantor or any Restricted Subsidiary from any governmental
agency;
(6) the purchase, redemption, retirement or other acquisition for value of
Capital Stock of the Parent Guarantor or the Issuer, or options to
purchase such shares, held by the Parent Guarantor's or the Issuer's
directors, employees or former directors or employees or of any
Restricted Subsidiary, or their estates or beneficiaries under their
estates, upon death, disability, retirement, termination of employment or
pursuant to the terms of any agreement under which such shares of Capital
Stock or options were issued, but only if (a) the aggregate consideration
paid for such purchase, redemption, acquisition, cancellation or other
retirement of such shares of Capital Stock or options after the date of
the indenture does not exceed $10.0 million in any twelve-month period,
(b) any unused amount in any twelve-month period is carried forward to
one more future twelve-month periods, and (c) the aggregate of all unused
amounts that are carried forward to any future twelve-month period shall
not exceed $20.0 million in the aggregate;
(7) Investments in any Person in an aggregate amount not to exceed
$75.0 million plus, in the case of an Investment in a Person the primary
business of which is related, ancillary or complementary to the business
of the Parent Guarantor and its Restricted Subsidiaries on the date of
such Investment, an amount not to exceed the Net Cash Proceeds received
by the Issuer after the date of the indenture from capital contributions
or from the issuance and sale of its Capital Stock (other than
Disqualified Stock) to a Person that is not a Subsidiary, except to the
extent such Net Cash Proceeds are used to incur Indebtedness outstanding
pursuant to clause (6)(a) of the second paragraph of the "Limitation on
Indebtedness" covenant or to make Restricted Payments pursuant to
clause (4)(c)(2) of the first paragraph, or clause (2) of this paragraph,
of this "Limitation on Restricted Payments" covenant;
(8) the repurchase of Subordinated Indebtedness at a purchase price not
greater than 101% of the principal amount thereof (plus accrued and
unpaid interest) pursuant to a mandatory offer to repurchase made upon
the occurrence of a Change of Control; PROVIDED, HOWEVER, that the Issuer
first make an Offer to Purchase the Notes (and repurchase all tendered
Notes) under the indenture pursuant to the provisions of the indenture
described under "--Change of Control";
(9) the payment by the Parent Guarantor of a payment to AT&T Wireless and
Dobson Communications, in accordance with the Joint Venture Agreements,
in an amount sufficient to pay the cash tax liabilities of those parties
for federal and state income taxes, which taxes are directly attributable
to each of AT&T Wireless' and Dobson Communications' profit with respect
to the Parent Guarantor, so long as such payments in the aggregate do not
exceed the lesser of (A) the aggregate amount of taxes that would be
payable by the Parent Guarantor and its consolidated subsidiaries if they
were filing on a separate return basis as a consolidated entity and
(B) the aggregate amount of taxes that would be payable by the Issuer and
its
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consolidated Subsidiaries if they were filing on a separate return basis
as a consolidated entity; or
(10) the payment by the Parent Guarantor or any Restricted Subsidiaries to
any employees, officers, directors or consultants (or their respective
permitted transferees) to purchase stock in accordance with stock option
plans or similar arrangements, so long as such distributions do not
exceed $1.0 million in the aggregate from and after the date of the
indenture.
PROVIDED, HOWEVER, that except in the case of clauses (1) and (2), no Default or
Event of Default, shall have occurred and be continuing or occur as a
consequence of the actions or payments set forth therein.
Each Restricted Payment that is permitted as provided in the preceding
paragraph (other than (A) an exchange of Capital Stock for Capital Stock or for
Subordinated Indebtedness referred to in clause (2), (B) the repurchase,
redemption or the acquisition or retirement of Subordinated Indebtedness
referred to in clause (3), and (C) the Net Cash Proceeds from any issuance of
Capital Stock referred to in clause (2) or issuance of Capital Stock referred to
in clause (7) above) will be included in calculating whether the conditions of
clause (3)(c) of the first paragraph of this "Limitation on Restricted Payments"
covenant have been met with respect to any subsequent Restricted Payments.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES
The Parent Guarantor and its Restricted Subsidiaries will not create or
otherwise cause or permit to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Restricted
Subsidiary to:
(1) pay dividends or make any other distributions permitted by applicable
law on any Capital Stock of such Restricted Subsidiary owned by the
Parent Guarantor, the Issuer or any other Restricted Subsidiary;
(2) pay any Indebtedness owed to the Parent Guarantor, the Issuer or any
other Restricted Subsidiary;
(3) make loans or advances to the Parent Guarantor, the Issuer or any other
Restricted Subsidiary; or
(4) transfer any of its property or assets to the Parent Guarantor, the
Issuer or any other Restricted Subsidiary.
However, the prohibition does not apply to any encumbrances or restrictions:
(1) existing on the date of the indenture or in the Notes or the indenture,
and any amendments, extensions, refinancings, renewals or replacements of
such agreements; on the condition that, the encumbrances and restrictions
in any such amendments, extensions, refinancings, renewals or
replacements are no less favorable in all material respects to the
holders than those encumbrances or restrictions that are then in effect
and that are being extended, refinanced, renewed or replaced;
(2) existing under or by reason of applicable law;
(3) existing with respect to any Person or the property or assets of such
Person acquired by the Parent Guarantor or any Restricted Subsidiary,
existing at the time of such acquisition and not incurred in
contemplation thereof, which encumbrances or restrictions are not
applicable to any Person or the property or assets of any Person other
than such Person or the property or assets of such Person so acquired;
(4) in the case of restrictions relating to the transfers of property,
restrictions that
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(a) restrict in a customary manner the subletting, assignment or transfer
of any property or asset that is a lease, license, conveyance or
contract or similar property or asset,
(b) exist by virtue of any transfer of, agreement to transfer, option or
right with respect to, or Lien on, any property or assets of the
Parent Guarantor or any Restricted Subsidiary not otherwise
prohibited by the indenture or
(c) arise or agreed to in the ordinary course of business, not relating
to any Indebtedness, and that do not, individually or in the
aggregate, detract from the value of property or assets of the Parent
Guarantor or any Restricted Subsidiary in any manner material to the
Parent Guarantor or any Restricted Subsidiary;
(5) with respect to a Restricted Subsidiary and imposed pursuant to an
agreement that has been entered into for the sale or disposition of all
or substantially all of the Capital Stock of, or property and assets of,
such Restricted Subsidiary; or
(6) contained in the terms of any Indebtedness (other than as contemplated
by clause (1) above), or any agreement creating Indebtedness, of a
Restricted Subsidiary entered into after the date of the indenture if:
(a) the encumbrance or restriction applies only if there is a payment
default, a default with respect to a financial covenant, or an event
of default resulting in the acceleration of the final maturity of
such Indebtedness,
(b) the encumbrance or restriction is not materially more disadvantageous
to holders of Notes than is customary in comparable financings (as
determined by the Issuer), and
(c) the Issuer determines that the encumbrance or restriction will not
materially affect the ability to pay interest on the Notes at their
Stated Maturity or principal and accrued and unpaid interest on the
Notes at their final Stated Maturity.
The Parent Guarantor and its Restricted Subsidiaries are not precluded from:
(1) creating, incurring, assuming or permitting to exist any Liens otherwise
permitted under the "Limitation on Liens" covenant, or
(2) restricting the sale of their assets that secure Indebtedness of the
Parent Guarantor or its Restricted Subsidiaries.
LIMITATION ON TRANSACTIONS WITH AFFILIATES
The Parent Guarantor and its Restricted Subsidiaries will not, directly or
indirectly, engage in any transaction including, without limitation, the
purchase, sale, lease or exchange of property or assets, or the rendering of any
service, with any Affiliate except (A) upon fair and reasonable terms no less
favorable to the Parent Guarantor or such Restricted Subsidiary than might
reasonably be obtained in a comparable arm's-length transaction with an
unrelated Person and (B)(1) with respect to any transaction or series of related
transactions involving aggregate consideration in excess of $10.0 million, such
transaction is approved by at least a majority of the disinterested members of
the board of directors, if any, of the Parent Guarantor and the Issuer or
(2) with respect to any transaction or series of related transactions involving
aggregate consideration in excess of $25.0 million, the Issuer obtains a written
opinion as to the fairness to the holders of the Notes of such transaction or
series of related transactions issued by an investment banking, accounting or
appraisal firm of national standing; PROVIDED, HOWEVER, that the requirements
set forth in this clause (2) shall not apply in the case of exchanges of
licenses and related assets between the Parent Guarantor or any of its
Restricted Subsidiaries and AT&T Corp., AT&T Wireless, Dobson Communications and
any of their respective Subsidiaries so long as the Fair Market Value of the
licenses and related assets exchanged by the
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Parent Guarantor or any of its Restricted Subsidiaries shall not in any single
transaction exceed $50.0 million.
The above limitation will not apply to:
(1) any transaction solely between the Parent Guarantor and any of its
Restricted Subsidiaries or solely between or among Restricted
Subsidiaries;
(2) the payment of reasonable and customary regular fees and indemnity
payments to directors of the Parent Guarantor or the Issuer who are not
employees of the Parent Guarantor or the Issuer and the payment of
reasonable compensation and indemnity payments to officers of the Parent
Guarantor and the Issuer;
(3) any payments or other transactions pursuant to any tax-sharing agreement
between the Parent Guarantor and any other Person with which the Parent
Guarantor files a consolidated tax return or with which the Issuer is
part of a consolidated group for tax purposes;
(4) any Restricted Payments or Permitted Investments not prohibited by the
"Limitation on Restricted Payments" covenant;
(5) any payments or other transactions contemplated by the Joint Venture
Agreements, as in effect on the date hereof; or
(6) roaming or similar communications services agreement (x) among the
Parent Guarantor and/or its Restricted Subsidiaries and a Qualified Joint
Venture that is not a Restricted Subsidiary or (y) between a Qualified
Joint Venture that is a Restricted Subsidiary and any of its Qualified
Joint Venture Partners who are Affiliates of such Qualified Joint
Venture; provided that in either case any such agreement is upon fair and
reasonable terms no less favorable to the Parent Guarantor or such
Restricted Subsidiary (which, in the case of clause (y) refers to the
relevant Qualified Joint Venture) than could be obtained in a comparable
arm's-length transaction with an unrelated Person.
LIMITATION ON ASSET SALES
Neither the Parent Guarantor nor its Restricted Subsidiaries will be
permitted to consummate any Asset Sale, unless:
(1) the consideration received by the Parent Guarantor or such Restricted
Subsidiary is at least equal to the Fair Market Value of the assets sold
or disposed of, and
(2) at least 75% of the consideration received consists of:
(a) cash or Cash Equivalents;
(b) the assumption of Indebtedness (other than non-recourse Indebtedness
or any Subordinated Indebtedness) of the Parent Guarantor or such
Restricted Subsidiary or other obligations relating to such assets
(accompanied by an irrevocable and unconditional release of the
Parent Guarantor or such Restricted Subsidiary from all liability on
the Indebtedness or other obligations assumed); or
(c) notes, other obligations or common stock received by the Parent
Guarantor or such Restricted Subsidiary from such transferee that are
converted by the Parent Guarantor or such Restricted Subsidiary into
cash or Cash Equivalents concurrently with the receipt of such notes
or other obligations (to the extent of the cash actually received by
the Parent Guarantor or the Restricted Subsidiary).
In the event and to the extent that the Net Cash Proceeds received by the
Parent Guarantor or any of its Restricted Subsidiaries from one or more Asset
Sales occurring on or after the date of the
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indenture in any period of 12 consecutive months exceeds 10% of Adjusted
Consolidated Net Tangible Assets (determined as of the date closest to the
commencement of such 12-month period for which a consolidated balance sheet of
the Issuer has been filed with the Commission) then the Parent Guarantor will or
will cause the relevant Restricted Subsidiary, to
(1) within 12 months after the date Net Cash Proceeds so received exceed 10%
of Adjusted Consolidated Net Tangible Assets, to
(a) apply an amount equal to such excess Net Cash Proceeds to permanently
repay Senior Indebtedness of the Issuer or Senior Indebtedness of any
Restricted Subsidiary of the Issuer in each case owing to a Person
other than the Parent Guarantor or any of its Restricted
Subsidiaries, or
(b) invest an equal amount, or the amount not so applied pursuant to
clause (1) (or enter into a definitive agreement committing to so
invest within 12 months after the date of such agreement), in
property or assets (other than current assets) of a nature or type or
that are used in a business (or in a company having property and
assets of a nature or type, or engaged in a business) related,
ancillary or complementary to the business of, the Issuer and its
Restricted Subsidiaries existing on the date of such investment, and
(2) apply, no later than the end of the 12-month period referred to in
clause (1)(b), such excess Net Cash Proceeds (to the extent not applied
pursuant to clause (1)), as provided in the following paragraph of this
"Limitation on Asset Sales" covenant. The amount of such excess Net Cash
Proceeds required to be applied, or to be committed to be applied, during
such 12-month period as set forth in clause (1) of the preceding sentence
and not applied as so required by the end of such period will constitute
"EXCESS PROCEEDS."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
"Limitation on Asset Sales" covenant totals at least $10 million, the Issuer
must commence, not later than the fifteenth business day of such month, and
consummate an Offer to Purchase from the holders of Notes and the holders of any
Indebtedness ranking equally with the Notes and entitled to participate in such
an Offer to Purchase on a pro rata basis, an aggregate principal amount of Notes
and such other Indebtedness equal to the Excess Proceeds on such date, at a
purchase price equal to 101% of the principal amount thereof, plus, in each
case, accrued interest and liquidated damages, if any, to the Payment Date.
LIMITATION ON LINE OF BUSINESS
The Parent Guarantor will not, and will not permit any Restricted Subsidiary
to, engage in any business other than a Permitted Business, except to such
extent as is not material to the Parent Guarantor and its Restricted
Subsidiaries, taken as a whole.
FUTURE SUBSIDIARY GUARANTORS
The Parent Guarantor will cause each Domestic Restricted Subsidiary that
incurs Indebtedness and each Foreign Restricted Subsidiary that incurs Material
Indebtedness to become a Subsidiary Guarantor, and, if applicable, execute and
deliver to the trustee a supplemental indenture in the form set forth in the
indenture pursuant to which that Restricted Subsidiary will guarantee payment of
the Notes; PROVIDED, HOWEVER, that in the event that a Subsidiary Guarantor no
longer has outstanding any Indebtedness, other than its Guarantee of the Notes
(in the case of a Domestic Restricted Subsidiary) or Material Indebtedness,
other than its Guarantee of the Notes (in the case of a Foreign Restricted
Subsidiary), the Subsidiary Guaranty of that Subsidiary Guarantor will
terminate. Each Subsidiary Guaranty will be limited to an amount not to exceed
the maximum amount that can be guaranteed by that Restricted Subsidiary without
rendering the Subsidiary Guaranty, as it relates to that Restricted
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Subsidiary, voidable under applicable law relating to fraudulent conveyance or
fraudulent transfer or similar laws affecting the rights of creditors generally.
COMMISSION REPORTS AND REPORTS TO NOTEHOLDERS
Whether or not the Parent Guarantor and we are required to file reports with
the Commission, for so long as any Notes are outstanding, the Parent Guarantor
and we will file with the Commission all reports and other information as they
would be required to file with the Commission by Section 13(a) or 15(d) under
the Exchange Act if they were subject to the Exchange Act to the extent such
filings are accepted by the Commission. The Parent Guarantor and we will also
supply the trustee and each holder or will supply to the trustee for forwarding
to each such holder, without cost to such holder, copies of such reports and
other information, regardless of whether the Commission accepts such reports and
other information for filing.
PAYMENTS FOR CONSENT
The Parent Guarantor will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to any holder of
any Notes for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of the indenture or the Notes unless that consideration
is offered to be paid or is paid to all holders of the Notes that consent, waive
or agree to amend in the time frame set forth in the solicitation documents
relating to the consent, waiver or agreement.
CONSOLIDATION, MERGER AND SALE OF ASSETS
Neither the Parent Guarantor nor we will be permitted to consolidate or
merge with, or sell, lease or otherwise dispose of all or substantially all of
its property and assets in one transaction or a series of related transactions
to any Person or permit any Person to merge with or into it unless:
(1) the resulting, surviving or transferee Person (the "SUCCESSOR PERSON")
will be a Person organized and existing under the laws of the United
States of America, or, any state or jurisdiction thereof;
(2) immediately after giving effect to such transaction, no Default or Event
of Default shall have occurred and be continuing;
(3) immediately after giving effect to such transaction on a pro forma basis
we, or the Successor Person or resulting company, as the case may be,
could incur at least $1.00 of Indebtedness under the first paragraph of
the "Limitation on Indebtedness" covenant; provided that this clause (3)
will not apply to a consolidation or merger with or into a Wholly Owned
Restricted Subsidiary, in connection with which no consideration, other
than Common Stock in the Successor Person or the Issuer and cash payable
upon exercise of dissenters' rights or for fractional shares, is issued
or distributed to the stockholders of the Parent Guarantor or us, as
applicable;
(4) the Successor Person assumes by supplemental indenture all of the
obligations of the Parent Guarantor under its Guarantee of the Notes or
our obligations on the Notes, as applicable, and in either case under the
indenture; and
(5) we deliver to the trustee an officer's certificate, attaching the
arithmetic computations to demonstrate compliance with clause (3), and an
opinion of counsel, in each case stating that such consolidation, merger
or transfer complies with this provision and that all conditions
precedent provided for herein relating to such transaction have been
satisfied.
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Clause (3) above will not apply if, in the good faith determination of our
board of directors, the principal purpose of the transaction is to change our
state of incorporation and the transaction does not have as one of its purposes
the evasion of the foregoing limitations.
Except in connection with an Asset Sale effected as a merger or conveyance,
transfer or lease of all or substantially all of the assets of a Subsidiary
Guarantor in which the Parent Guarantor or its applicable Restricted Subsidiary
complies with the "Limitation on Asset Sales" covenant, the Parent Guarantor
will not permit any Subsidiary Guarantor to consolidate with or merge with or
into, or convey, transfer or lease, in one transaction or a series of
transactions, all or substantially all of its assets to any Person unless:
(1) the resulting, surviving or transferee Person (if not the Subsidiary)
will be a Person organized and existing under the laws of the
jurisdiction under which that Subsidiary was organized or under the laws
of the United States of America, or any state or jurisdiction thereof,
and that Person will expressly assume, by a supplemental indenture
satisfactory to the trustee, all the obligations of the Subsidiary, if
any, under its Subsidiary Guaranty;
(2) immediately after giving effect to that transaction or transactions on a
pro forma basis (and treating any Indebtedness which becomes an
obligation of the resulting, surviving or transferee Person as a result
of the transaction as having been issued by that Person at the time of
the transaction), no Default or Event of Default shall have occurred and
be continuing; and
(3) we deliver to the trustee an officers' certificate and an opinion of
counsel, each stating that such consolidation, merger or transfer and
such supplemental indenture, if any, complies with the indenture.
The provisions of the foregoing two paragraphs will not apply to:
(1) any merger of our Restricted Subsidiary with or into us or our Wholly
Owned Restricted Subsidiary;
(2) a sale, lease or other disposition of all or substantially all of the
property and assets of our Restricted Subsidiary to us or our Wholly
Owned Restricted Subsidiary; or
(3) the release of any Guarantor in accordance with the terms of its
Guarantee and the indenture in connection with any transaction complying
with the provisions of covenant described under "--Certain
Covenants--Limitation on Asset Sales".
EVENTS OF DEFAULT
The following events will be defined as "EVENTS OF DEFAULT" in the
indenture:
(1) default in the payment of principal of (or premium, if any, on) any Note
when the same becomes due and payable at maturity, upon acceleration,
redemption or otherwise, whether or not prohibited by the provisions
described under "Subordination";
(2) default in the payment of interest or liquidated damages, if any, on any
Note when the same becomes due and payable, whether or not prohibited by
the provisions described under "Subordination," and such default
continues for a period of 30 days;
(3) default in the performance or breach of the provisions of the indenture
applicable to mergers, consolidations and transfers of all or
substantially all of the assets of the Issuer;
(4) default in the performance of any covenant set forth in the Pledge
Agreement, or repudiation by us of any of our obligations under the
Pledge Agreement or the unenforceability of the Pledge Agreement against
us for any reason that in any one case or in the aggregate results in a
material impairment of the rights intended to be afforded thereby;
85
(5) default in the performance of the "Change of Control" covenant or any
other covenant described under "Certain Covenants" (other than a default
specified in clause (1), (2), (3) or (4) above and other than any failure
to purchase the Notes) and such default or breach continues for a period
of 30 consecutive days after written notice by the trustee or the holders
of 25% or more in aggregate principal amount of the Notes;
(6) the failure to comply for 60 days after written notice by the trustee or
the holders of 25% or more in aggregate principal amount of the Notes
with the other agreements contained in the indenture or the Notes;
(7) there occurs with respect to any issue or issues of Indebtedness of
ours, the Parent Guarantor or any Significant Subsidiary having an
outstanding principal amount of $20.0 million or more in the aggregate
for all such issues of all such Persons, whether such Indebtedness now
exists or is hereafter created,
(a) an event of default that has caused the holder thereof to declare
such Indebtedness to be due and payable prior to its final Stated
Maturity and such Indebtedness has not been discharged in full or
such acceleration has not been rescinded or annulled within 30 days
of such acceleration, and/or
(b) the failure to make a principal payment at the final (but not any
interim) fixed maturity and such defaulted payment shall not have
been made, waived or extended within 30 days of such payment default;
(8) any final judgment or order (not covered by insurance) for the payment
of money in excess of $20.0 million in the aggregate for all such final
judgments or orders against all such Persons (treating any deductibles,
self-insurance or retention as not so covered) is rendered against the
Issuer or any Significant Subsidiary and is not paid or discharged, and
there is any period of 30 consecutive days following entry of the final
judgment or order that causes the aggregate amount for all such final
judgments or orders outstanding and not paid or discharged against all
such Persons to exceed $20.0 million during which a stay of enforcement
of such final judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect;
(9) a court having jurisdiction in the premises enters a decree or order for
(a) relief in respect of us, the Parent Guarantor or any Significant
Subsidiary in an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect,
(b) appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of us, the Parent Guarantor or any
Significant Subsidiary or for all or substantially all of the
property and assets of us or any Significant Subsidiary, or
(c) the winding up or liquidation of the affairs of the Issuer, the
Parent Guarantor or any Significant Subsidiary
and, in each case, such decree or order remains unstayed and in effect for a
period of 60 consecutive days; or
(10) we, the Parent Guarantor or any Significant Subsidiary
(a) commences a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or
consents to the entry of an order for relief in an involuntary case
under any such law,
(b) consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of us or any Significant Subsidiary or for
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all or substantially all of the property and assets of the Issuer or
any Significant Subsidiary, or
(c) effects any general assignment for the benefit of creditors.
If an Event of Default, other than an Event of Default specified in
clause (9) or (10) above that occurs with respect to us, occurs and is
continuing under the Notes or the indenture, the trustee or the holders of at
least 25% in aggregate principal amount of the Notes then outstanding, by
written notice to us (and to the trustee if such notice is given by the
holders), may, and the trustee at the request of such holders will, declare the
principal of, premium, if any, and accrued interest on the Notes to be
immediately due and payable; PROVIDED, HOWEVER, that so long as any Senior
Indebtedness is outstanding, the acceleration will not be effective until the
earlier of (a) an acceleration of any Senior Indebtedness or (b) five business
days after the Issuer's receipt of written notice of the acceleration of the
Notes. Upon a declaration of acceleration, such principal of, premium, if any,
and accrued and unpaid interest and liquidated damages, if any, will be
immediately due and payable on the condition that so long as the Senior Credit
Facility is in effect, such declaration will not become effective until five
business days after the receipt of the acceleration notice by the agent
thereunder and the Issuer.
In the event of a declaration of acceleration because an Event of Default
set forth in clause (7) above has occurred and is continuing, such declaration
of acceleration will be automatically rescinded and annulled if the event of
default triggering such Event of Default pursuant to clause (7) will be remedied
or cured or waived by the holders of the relevant Indebtedness within 60 days
after the declaration of acceleration with respect thereto.
If an Event of Default specified in clause (9) or (10) above occurs with
respect to us, the principal of, premium, if any, and accrued and unpaid
interest and liquidated damages, if any, on the Notes then outstanding will
automatically become and be immediately due and payable without any declaration
or other act on the part of the trustee or any holder. At any time after
declaration of acceleration, but before a judgment or decree for the payment of
the money due has been obtained by the trustee, the holders of at least a
majority in principal amount of the outstanding Notes by written notice to the
Issuer and to the trustee, may waive all past defaults and rescind and annul a
declaration of acceleration and its consequences if:
(1) all existing Events of Default, other than the nonpayment of the
principal of, premium, if any, and interest on the Notes that have become
due solely by such declaration of acceleration, have been cured or
waived; and
(2) the rescission would not conflict with any judgment or decree of a court
of competent jurisdiction. For information as to the waiver of defaults,
see "--Modification and Waiver."
The holders of at least a majority in aggregate principal amount of the
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the trustee or exercising any trust or
power conferred on the trustee. However, the trustee may refuse to follow any
direction that conflicts with law or the indenture, that may involve the trustee
in personal liability, or that the trustee determines in good faith may be
unduly prejudicial to the rights of holders of Notes not joining in the giving
of such direction and may take any other action it deems proper that is not
inconsistent with any such direction received from holders of Notes. A holder
may not pursue any remedy with respect to the indenture or the Notes unless:
(1) the holder gives the trustee written notice of a continuing Event of
Default;
(2) the holders of at least 25% in aggregate principal amount of outstanding
Notes make a written request to the trustee to pursue the remedy;
(3) such holder or holders offer the trustee indemnity satisfactory to the
trustee against any costs, liability or expense;
87
(4) the trustee does not comply with the request within 60 days after
receipt of the request and the offer of indemnity; and
(5) during such 60-day period, the holders of a majority in aggregate
principal amount of the outstanding Notes do not give the trustee a
direction that is inconsistent with the request.
However, such limitations do not apply to the right of any holder of a Note
to receive payment of the principal of, premium, if any, or interest or
liquidated damages, if any, on such Note or to bring suit for the enforcement of
any such payment, on or after the due date expressed in the Notes, which right
will not be impaired or affected without the consent of the holder.
The indenture requires certain of our officers to certify, on or before a
date not more than 90 days after the end of each fiscal year, that a review has
been conducted of the activities of the Issuer and its Restricted Subsidiaries
and the Issuer's and its Restricted Subsidiaries' performance under the
indenture and that the Issuer has fulfilled all obligations thereunder, or, if
there has been a default in the fulfillment of any such obligation, specifying
each such default and the nature and status thereof. We will also be obligated
to notify the trustee of any default or defaults in the performance of any
covenants or agreements under the indenture.
DEFEASANCE
DEFEASANCE AND DISCHARGE.
The indenture provides that we will be deemed to have paid and will be
discharged from any and all obligations in respect of the Notes on the day of
the deposit referred to below, and the provisions of the indenture will no
longer be in effect with respect to the Notes (except for, among other matters,
certain obligations to register the transfer or exchange of the Notes, to
replace stolen, lost or mutilated Notes, to maintain paying agencies and to hold
monies for payment in trust) if, among other things,
(1) we have deposited with the trustee, in trust, money and/or U.S.
Government Securities that through the payment of interest and principal
in respect thereof in accordance with their terms will provide money in
an amount sufficient to pay the principal of, premium, if any, and
accrued interest on the Notes on the Stated Maturity of such payments in
accordance with the terms of the indenture and the Notes,
(2) we have delivered to the trustee
(a) either
(i) an opinion of counsel to the effect that holders will not
recognize income, gain or loss for federal income tax purposes
as a result of the Issuer's exercise of its option under this
"Defeasance" provision and will be subject to federal income tax
on the same amount and in the same manner and at the same times
as would have been the case if such deposit, defeasance and
discharge had not occurred, which opinion of counsel must be
based upon (and accompanied by a copy of) a ruling of the
Internal Revenue Service to the same effect unless there has
been a change in applicable federal income tax law after the
date of the indenture such that a ruling is no longer required
or
(ii) a ruling directed to the trustee received from the Internal
Revenue Service to the same effect as the aforementioned
opinion of counsel and
(b) an opinion of counsel to the effect that the creation of the
defeasance trust does not violate the Investment Company Act of 1940
and after the passage of 123 days following the deposit (except with
respect to any trust funds for the account of any holder who may be
deemed an "insider" for purposes of the United States Bankruptcy
Code, after one
88
year following the deposit), the trust funds will not be subject to
the effect of Section 547 of the United States Bankruptcy Code or
Section 15 of the New York Debtor and Creditor Law,
(3) immediately after giving effect to such deposit on a pro forma basis, no
Default or Event of Default shall have occurred and be continuing on the
date of such deposit, and such deposit shall not result in a breach or
violation of, or constitute a default under, any other agreement or
instrument to which the Issuer or any of its Subsidiaries is a party or
by which the Issuer or any of its Subsidiaries is bound, and
(4) if at such time the Notes are listed on a national securities exchange,
we have delivered to the trustee an opinion of counsel to the effect that
the Notes will not be delisted as a result of such deposit, defeasance
and discharge.
DEFEASANCE OF CERTAIN COVENANTS AND CERTAIN EVENTS OF DEFAULT.
The indenture will further provide that the provisions of the indenture will
no longer be in effect with respect to clauses (3) and (4) under "Consolidation,
Merger and Sale of Assets" and all the covenants described herein under "Certain
Covenants," clauses (3) and (4) under "Events of Default" with respect to such
clauses (3) and (4) under "Consolidation, Merger and Sale of Assets" and such
covenants and clauses (5) and (6) under "Events of Default" will be deemed not
to be Events of Default, upon, among other things, the deposit with the trustee,
in trust, of money and/or U.S. Government Securities that through the payment of
interest and principal in respect thereof in accordance with their terms will
provide money in an amount sufficient to pay the principal of, premium, if any,
and accrued interest on the Notes on the Stated Maturity of such payments in
accordance with the terms of the indenture and the Notes, the satisfaction of
the provisions described in clauses (3) and (4) of the preceding paragraph and
the delivery by the Issuer to the trustee of an opinion of counsel to the effect
that, among other things, the holders will not recognize income, gain or loss
for federal income tax purposes as a result of such deposit and defeasance of
certain covenants and Events of Default and will be subject to federal income
tax on the same amount and in the same manner and at the same times as would
have been the case if such deposit and defeasance had not occurred.
DEFEASANCE AND CERTAIN OTHER EVENTS OF DEFAULT.
In the event we exercise our option to omit compliance with certain
covenants and provisions of the indenture with respect to the Notes as described
in the immediately preceding paragraphs and the Notes are declared due and
payable because of the occurrence of an Event of Default that remains
applicable, the amount of money and/or U.S. Government Securities on deposit
with the trustee will be sufficient to pay amounts due on the Notes at the time
of their Stated Maturity but may not be sufficient to pay amounts due on the
Notes at the time of the acceleration resulting from such Event of Default.
However, we will remain liable for such payments.
MODIFICATION AND WAIVER
Modifications and amendments of the indenture may be made by us and the
trustee with the consent of the holders of not less than a majority in aggregate
principal amount of the outstanding Notes. However, no such modification or
amendment may, without the consent of each holder affected thereby:
(1) change the Stated Maturity of the principal of, or any installment of
interest on, any Notes;
(2) reduce the principal amount of, premium, if any, or interest on, any
Notes;
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(3) change the place or currency of payment of principal of premium, if any,
or interest on, any Notes;
(4) impair the right to institute suit for the enforcement of any payment on
or after the Stated Maturity (or, in the case of a redemption, on or
after the redemption date) of any Notes;
(5) reduce the above-stated percentage of outstanding Notes the consent of
whose holders is necessary to modify or amend the indenture;
(6) waive a default in the payment of principal of, premium, if any, or
interest or liquidated damages, if any, on, the Notes; or
(7) reduce the percentage of aggregate principal amount of outstanding Notes
the consent of whose holders is necessary for waiver of compliance with
certain provisions of the indenture or for waiver of certain defaults.
Without the consent of the holders of 66 2/3% in aggregate principal amount
of the Notes then outstanding, no amendment may:
(1) make any change to the subordination provisions of the indenture that
adversely affects the rights of any holder of Notes; or
(2) modify a Guarantee in any manner adverse to the holders of Notes.
Notwithstanding the foregoing, without the consent of any holder of Notes,
we, the Parent Guarantor, the Subsidiary Guarantors and the trustee will be
permitted to amend or supplement the indenture or the Notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(3) to provide for the assumption of our obligations to holders of Notes in
the case of a merger, consolidation or sale of all or substantially all
the assets of the Issuer in compliance with the indenture;
(4) to make any other change that would provide any additional rights or
benefits to the holders of Notes or that does not adversely affect the
legal rights under the indenture of any holder; or
(5) to comply with requirements of the Commission in order to effect or
maintain the qualification of the indenture under the Trust Indenture
Act.
However, no amendment may be made to the subordination provisions of the
indenture that adversely affects the rights of any holder of our Senior
Indebtedness or a Subsidiary Guarantor then outstanding unless the holders of
such Senior Indebtedness (or their Representative) consents to such change.
NO PERSONAL LIABILITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS, DIRECTORS OR
EMPLOYEES
The indenture provides that no recourse for the payment of the principal of,
premium, if any, or interest or liquidated damages on, any of the Notes, or for
any claim based thereon or otherwise in respect thereof, and no recourse under
or upon any obligation, covenant or agreement of the Issuer contained in the
indenture or in any of the Notes, or because of the creation of any Indebtedness
represented thereby, shall be had against any incorporator or past, present or
future shareholder, officer, director, employee or controlling person of the
Issuer, the Parent Guarantor or Subsidiary Guarantor. Each holder, by accepting
such Note, waives and releases all such liability.
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CONCERNING THE TRUSTEE
The indenture provides that, except during the continuance of an Event of
Default, the trustee will perform only such duties as are specifically set forth
in the indenture. If an Event of Default has occurred and is continuing, the
trustee will exercise those rights and powers vested in it under such indenture
and use the same degree of care and skill in its exercise of such rights and
powers as a prudent person would exercise under the circumstances in the conduct
of such person's own affairs.
The indenture and provisions of the Trust Indenture Act incorporated by
reference in the indenture, contain limitations on the rights of the trustee
thereunder, should it become a creditor of the Issuer, to obtain payment of
claims in certain cases or to realize on certain property received by it in
respect of any such claims, as security or otherwise. The trustee is permitted
to engaged in other transactions. However, if the trustee acquires any
conflicting interest, it must eliminate such conflict or resign.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the indenture. Reference is made to the
indenture for the full definitions of all such terms as well as any other
capitalized terms used herein for which no definition is provided.
"ACQUIRED INDEBTEDNESS" means Indebtedness of a Person existing at the time
such person becomes a Restricted Subsidiary or merges with or into the Parent
Guarantor or which is assumed in connection with an Asset Acquisition by a
Restricted Subsidiary or by the Parent Guarantor and not incurred in connection
with, or in anticipation of, such Person becoming a Restricted Subsidiary or
such Asset Acquisition. The term "Acquired Indebtedness" does not include
Indebtedness of a Person which is redeemed, defeased, retired or otherwise
repaid at the time of or immediately upon consummation of the transactions by
which such Person becomes a Restricted Subsidiary or merges with or into the
Parent Guarantor or such Asset Acquisition.
"ADJUSTED CONSOLIDATED NET INCOME" means, for any period, the aggregate
consolidated net income (or loss) of the Parent Guarantor and its Restricted
Subsidiaries for such period determined in conformity with GAAP; PROVIDED,
HOWEVER, that the following items will be excluded in computing Adjusted
Consolidated Net Income, without duplication:
(1) the net income of any Person other than net income attributable to a
Restricted Subsidiary in which any Person other than the Parent Guarantor
or any of its Restricted Subsidiaries has a joint interest and the net
income of any Unrestricted Subsidiary, except to the extent of the amount
of dividends or other distributions actually paid to the Parent Guarantor
or any of its Restricted Subsidiaries by such other Person or such
Unrestricted Subsidiary during such period;
(2) solely for the purposes of calculating the amount of Restricted Payments
that may be made pursuant to the first paragraph of the "Limitation on
Restricted Payments" covenant (and in such case, except to the extent
includable pursuant to clause (1) above), the net income or loss of any
Person accrued prior to the date it becomes a Restricted Subsidiary or is
merged into or consolidated with the Parent Guarantor or any of its
Restricted Subsidiaries or all or substantially all of the property and
assets of such Person are acquired by the Parent Guarantor or any of its
Restricted Subsidiaries;
(3) except in the case of any restriction or encumbrance permitted under the
"Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries" covenant, the net income 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 the time permitted by the operation of the terms of its charter or
any agreement, instrument, judgment,
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decree, order, statute, rule or governmental regulation applicable to
such Restricted Subsidiary;
(4) any gains or losses on an after-tax basis attributable to Asset Sales;
and
(5) all extraordinary gains and extraordinary losses, net of tax.
"ADJUSTED CONSOLIDATED NET TANGIBLE ASSETS" means the total amount of assets
of the Parent Guarantor and its Restricted Subsidiaries (less applicable
depreciation, amortization and other valuation reserves), except to the extent
resulting from write-ups of capital assets (excluding write-ups in connection
with accounting for acquisitions in conformity with GAAP), after deducting
therefrom:
(1) all current liabilities of the Parent Guarantor and its Restricted
Subsidiaries (excluding intercompany items); and
(2) all goodwill, trade names, trademarks, patents, unamortized debt
discount and expense and other like intangibles (other than FCC license
acquisition costs), all as set forth on the most recent quarterly or
annual consolidated balance sheet of the Parent Guarantor and its
Restricted Subsidiaries, prepared in conformity with GAAP and filed with
the Commission pursuant to the "Commission Reports and Reports to
Noteholders" covenant.
"AFFILIATE" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"APPLICABLE PREMIUM" means, with respect to a Note at any redemption date,
the greater of (i) 1.0% of the principal amount of such Note and (ii) the excess
of (A) the present value at such time of (1) the redemption price of such Note
at October 15, 2005 plus (2) all required interest payments, if any, due on such
Note through October 15, 2005, computed using a discount rate equal to the
Treasury Rate plus 50 basis points, over (B) the principal amount of such Note.
"ASSET ACQUISITION" means:
(1) an Investment by the Parent Guarantor or any of its Restricted
Subsidiaries in any other Person pursuant to which such Person becomes a
Restricted Subsidiary or is merged into or consolidated with the Parent
Guarantor or any of its Restricted Subsidiaries but only if such Person's
primary business is related, ancillary or complementary to the businesses
of the Issuer and its Restricted Subsidiaries on the date of such
Investment; or
(2) an acquisition by the Parent Guarantor or any of its Restricted
Subsidiaries of the property and assets of any Person other than the
Parent Guarantor or any of its Restricted Subsidiaries that constitute
all or substantially all of a division, operating unit or line of
business of such Person but only if the property and assets acquired are
related, ancillary or complementary to the businesses of the Parent
Guarantor and its Restricted Subsidiaries on the date of such
acquisition.
"ASSET DISPOSITION" means the sale or other disposition by the Parent
Guarantor or any of its Restricted Subsidiaries other than to the Issuer or
another Restricted Subsidiary of:
(1) all or substantially all of the Capital Stock of any Restricted
Subsidiary; or
(2) all or substantially all of the assets that constitute a division,
operating unit or line of business of us or any of its Restricted
Subsidiaries.
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"ASSET SALE" means any sale, transfer or other disposition (including by way
of merger, consolidation or sale-leaseback transaction) in one transaction or a
series of related transactions by the Parent Guarantor or any of its Restricted
Subsidiaries to any Person other than the Parent Guarantor or any of its
Restricted Subsidiaries of:
(1) all or any of the Capital Stock of any Restricted Subsidiary, other than
our Capital Stock;
(2) all or substantially all of the property and assets of a division,
operating unit or line of business of the Parent Guarantor or any of its
Restricted Subsidiaries; or
(3) any other property and assets of the Parent Guarantor or any of its
Restricted Subsidiaries outside the ordinary course of business of the
Parent Guarantor or such Restricted Subsidiary and, in each case, that is
not governed by the "Consolidation, Merger and Sale of Assets" covenant.
The term "ASSET SALE" will not include:
(1) sales, transfers or other dispositions of inventory, receivables and
other current assets in the ordinary course;
(2) sales, transfers or other dispositions of assets, including capital
stock of Restricted Subsidiaries, for consideration at least equal to the
fair market value of the assets sold or disposed of, but only if the
consideration received consists of Capital Stock of a Person that becomes
a Restricted Subsidiary engaged in, or property or assets (other than
cash, except to extent used as a bona fide means of equalizing the value
of the property or assets involved in the swap transaction) of a nature
or type or that are used in, a business having property or assets of a
nature or type, or engaged in a business similar or related to the nature
or type of the property and assets of, or businesses of, the Parent
Guarantor and its Restricted Subsidiaries existing on the date of such
sale or other disposition;
(3) sales, transfers or other dispositions of assets constituting a
Permitted Investment or Restricted Payment permitted to be made under the
"Limitation on Restricted Payments" covenant;
(4) sales, transfers or other dispositions of assets, including issuances of
Capital Stock, between or among the Parent Guarantor and its Restricted
Subsidiaries; or
(5) sales or issuances of Capital Stock of the Issuer.
"AVERAGE LIFE" means, at any date of determination with respect to any debt
security, the quotient obtained by dividing
(1) the sum of the products of
(a) the number of years from such date of determination to the dates of
each successive scheduled principal payment of such debt security and
(b) the amount of such principal payment, by
(2) the sum of all such principal payments.
"CAPITAL STOCK" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, including, without limitation,
all Common Stock and Preferred Shares.
"CAPITALIZED LEASE" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person.
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"CAPITALIZED LEASE OBLIGATIONS" means the discounted present value of the
rental obligations under a Capitalized Lease.
"CASH EQUIVALENTS" means:
(1) direct obligations of, or obligations the principal of and interest on
which are unconditionally guaranteed by, the United States of America (or
by any agency thereof to the extent such obligations are backed by the
full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;
(2) investments in commercial paper maturing within 365 days from the date
of acquisition thereof and having, at such date of acquisition, the
highest credit rating obtainable from S&P or from Moody's;
(3) investments in certificates of deposit, banker's acceptance and time
deposits maturing within 365 days from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts
issued or offered by, any domestic office of any commercial bank
organized under the laws of the United States of America or any State
thereof which has a combined capital and surplus and undivided profits of
not less than $500 million;
(4) fully collateralized repurchase agreements with a term of not more than
30 days for securities described in clause (1) above and entered into
with a financial institution satisfying the criteria described in clause
(3) above; and
(5) money market funds substantially all of whose assets comprise securities
of the type described in clauses (1) through (3) above.
"CHANGE OF CONTROL" means:
(1) any "person" or "group", within the meaning of Section 13(d) or 14(d)(2)
of the Exchange Act, other than a Permitted Holder or Permitted Holders
or a person or group controlled by a Permitted Holder or Permitted
Holders, becomes the ultimate "beneficial owner", as defined in
Rule 13d-3 under the Exchange Act, of more than 50% of the total voting
power of the Voting Stock of either the Parent Guarantor or the Issuer on
a fully diluted basis;
(2) (x) for so long as the Parent Guarantor or we, as the case may be, are
not required to file reports with the Commission pursuant to either
Section 12(b) or Section 12(g) of the Exchange Act, a majority of the
members of the board of directors (or equivalent governing body) are
appointed by one or more persons that are not Permitted Holders and
(y) for so long as the Parent Guarantor or we, as the case may be, are
required to file reports with the Commission pursuant to either
Section 12(b) or Section 12(g) of the Exchange Act, individuals who on
the date of the indenture constituted the board of directors of either
the Parent Guarantor or us, together with any new directors whose
election by the board of directors or whose nomination for election by
the Parent Guarantor's securityholders or our stockholders, as the case
may be, was approved by a vote of at least a majority of the members of
the board of directors then in office who either were members of the
board of directors on the date of the indenture or whose election or
nomination for election was previously so approved, cease for any reason
to constitute a majority of the members of the board of directors of
either the Parent Guarantor or us then in office;
(3) the sale, lease, transfer, conveyance or other disposition (other than
by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all the combined assets of the
Parent Guarantor or us and their respective Restricted Subsidiaries,
taken as a whole, to any Person other than a Wholly Owned Restricted
Subsidiary or a Permitted Holder or any Affiliate thereof; or
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(4) the adoption of a plan of liquidation or dissolution of the Parent
Guarantor or us.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's equity, other than Preferred Shares of
such Person, whether now outstanding or issued after the date of the indenture,
including without limitation, all series and classes of such Common Stock.
"CONSOLIDATED EBITDA" means, for any period, Adjusted Consolidated Net
Income for such period plus, to the extent such amount was deducted in
calculating Adjusted Consolidated Net Income:
(1) Consolidated Interest Expense,
(2) income taxes, other than income taxes (either positive or negative)
attributable to extraordinary and non-recurring gains or losses or sales
of assets,
(3) depreciation expense,
(4) amortization expense, and
(5) all other non-cash items reducing Adjusted Consolidated Net Income other
than items that will require cash payments and for which an accrual or
reserve is, or is required by GAAP to be, made, less all non-cash items
increasing Adjusted Consolidated Net Income, all as determined on a
consolidated basis for the Parent Guarantor and its Restricted
Subsidiaries in conformity with GAAP;
PROVIDED, HOWEVER, that if any Restricted Subsidiary is not a Wholly Owned
Restricted Subsidiary, Consolidated EBITDA will be reduced to the extent not
otherwise reduced in accordance with GAAP by an amount equal to the amount of
the Adjusted Consolidated Net Income attributable to such Restricted Subsidiary
multiplied by the quotient of
(1) the number of shares of outstanding Common Stock of such Restricted
Subsidiary not owned on the last day of such period by the Parent
Guarantor or any of its Restricted Subsidiaries, divided by
(2) the total number of shares of outstanding Common Stock of such
Restricted Subsidiary on the last day of such period.
"CONSOLIDATED INTEREST EXPENSE" means, for any period, the aggregate amount
of interest in respect of Indebtedness including, without limitation,
(1) amortization of original issue discount on any Indebtedness and the
interest portion of any deferred payment obligation, calculated in
accordance with the effective interest method of accounting;
(2) all commissions, discounts and other fees and charges owed with respect
to letters of credit and bankers' acceptance financing; and
(3) the net costs associated with Interest Rate Agreements and the interest
expense in respect of Indebtedness that is guaranteed or secured by the
Parent Guarantor or any of its Restricted Subsidiaries and all but the
principal component of rentals in respect of Capitalized Lease
Obligations paid, accrued or scheduled to be paid or to be accrued by the
Parent Guarantor and its Restricted Subsidiaries during such period;
EXCLUDING, HOWEVER, any amount of such interest of any Restricted
Subsidiary if the net income of such Restricted Subsidiary is excluded in
the calculation of Adjusted Consolidated Net Income pursuant to
clause (3) of the definition thereof (but only in the same proportion as
the net income of such Restricted
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Subsidiary is excluded from the calculation of Adjusted Consolidated Net
Income pursuant to clause (3) of the definition thereof).
"CONSOLIDATED LEVERAGE RATIO" means, on any Transaction Date, the ratio of:
(1) the aggregate amount of Indebtedness of the Parent Guarantor and its
Restricted Subsidiaries on a consolidated basis outstanding on such
Transaction Date; to
(2) the product of (A) the aggregate amount of Consolidated EBITDA of the
Parent Guarantor and its Restricted Subsidiaries for the then most recent
two fiscal quarters for which consolidated financial statements of the
Issuer have been filed with the Commission (such two fiscal quarter
period being the "TWO QUARTER PERIOD") and (B) two.
In determining the Consolidated Leverage Ratio, pro forma effect will be
given to:
(1) any Indebtedness that is to be incurred or repaid on the Transaction
Date as if such incurrence or repayment had occurred on the first day of
such Two Quarter Period;
(2) Asset Dispositions and Asset Acquisitions (including giving pro forma
effect to the application of proceeds of any Asset Disposition) that
occur during the period beginning on the first day of the Two Quarter
Period and ending on the Transaction Date (the "REFERENCE PERIOD") as if
they had occurred and such proceeds had been applied on the first day of
such Reference Period; and
(3) Asset Dispositions and Asset Acquisitions (including giving pro forma
effect to the application of proceeds of any Asset Disposition) that have
been made by any Person that has become a Restricted Subsidiary or has
been merged with or into the Parent Guarantor or any Restricted
Subsidiary during such Reference Period and that would have constituted
Asset Dispositions or Asset Acquisitions had such transactions occurred
when such Person was a Restricted Subsidiary as if such asset
dispositions or asset acquisitions were Asset Dispositions or Asset
Acquisitions that occurred on the first day of such Reference Period.
To the extent that pro forma effect is given to an Asset Acquisition or Asset
Disposition, such pro forma calculation will be based upon the two full fiscal
quarters immediately preceding the Transaction Date of the Person, or division,
operating unit or line of business of the Person, that is acquired or disposed
of for which financial information is available.
"CONSOLIDATED TANGIBLE ASSETS" means the greater of the book value and the
Fair Market Value, as determined by an accounting, financial advisory or
appraisal firm of national reputation, of the total amount of assets of the
Parent Guarantor and its Restricted Subsidiaries after deducting therefrom all
goodwill, trade names, trademarks, patents, customer lists, deferred financing
costs, unamortized debt discount and expense and other like intangibles (other
than FCC license acquisition costs), all as set forth on the most recent
quarterly or annual consolidated balance sheet of the Parent Guarantor and its
Restricted Subsidiaries, prepared in conformity with GAAP and filed with the
Commission pursuant to the "Commission Reports and Reports to Noteholders"
covenant. Book value will be calculated less applicable depreciation,
amortization and other valuation reserves, except to the extent resulting from
write-ups of capital assets.
"CREDIT AGREEMENT" means one or more debt facilities (including, without
limitation, the Senior Credit Facility) or commercial paper facilities with
banks or other institutional lenders providing for revolving credit loans, term
loans, receivables financing (including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from such lenders
against such receivables) or letters of credit, in each case together with all
other agreements, instruments, and documents executed or delivered pursuant
thereto or in connection therewith, in each case as such agreement, other
agreements, instruments or documents may be amended, supplemented, extended,
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renewed, refinanced or otherwise modified from time to time, including without
limitation, increases and decreases from time to time in the amounts available
for borrowings thereunder.
"CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"DEFAULT" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"DESIGNATED SENIOR INDEBTEDNESS" means (i) any Indebtedness outstanding
under the Senior Credit Facility and (ii) any other Senior Indebtedness
permitted under the indenture the principal amount of which is $25.0 million or
more and that has been designated by the Issuer as "Designated Senior
Indebtedness."
"DISQUALIFIED STOCK" means any class or series of Capital Stock of any
Person that by its terms or otherwise is:
(1) required to be redeemed prior to the final Stated Maturity of the Notes;
(2) redeemable at the option of the holder of such class or series of
Capital Stock at any time prior to the final Stated Maturity of the
Notes; or
(3) convertible into or exchangeable for Capital Stock referred to in
(1) or (2) above or Indebtedness having a scheduled maturity prior to the
final Stated Maturity of the Notes.
Any Capital Stock that would not constitute Disqualified Stock but for
provisions thereof giving holders thereof the right to require such Person to
repurchase or redeem such Capital Stock upon the occurrence of a "change of
control" occurring prior to the final Stated Maturity of the Notes will not
constitute Disqualified Stock if the "change of control" 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" covenant and such
Capital Stock specifically provides that the issuer of such Capital Stock will
not repurchase or redeem any such Capital Stock pursuant to such provision prior
to the Issuer's repurchase of such Notes as are required to be repurchased
pursuant to the "Change of Control" covenant.
"DOMESTIC RESTRICTED SUBSIDIARY" means any Restricted Subsidiary of the
Parent Guarantor other than a Foreign Restricted Subsidiary.
"EQUITY MARKET CAPITALIZATION" of any Person means, as of any day of
determination, the average Closing Price of that Person's common stock over the
20 consecutive trading days immediately preceding that day for which a Closing
Price can be determined multiplied by the total number of shares of common stock
of such Person at the time outstanding. "CLOSING PRICE" on any trading day with
respect to the per share price of any shares of common stock means the last
reported sale price regular way or, in case no such reported sale takes place on
such day, the average of the reported closing bid and asked prices regular way,
in either case on the New York Stock Exchange or, if the shares of common stock
are not listed or admitted to trading on that exchange, on the principal
national securities exchange on which the shares are listed or admitted to
trading or, if not listed or admitted to trading on any national securities
exchange, on the National Association of Securities Dealers Automated Quotations
National Market System or, if the shares are not listed or admitted to trading
on any national securities exchange or quoted on such automated quotation system
but such Person is a Foreign Issuer, as defined in Rule 3b-4(b) under the
Exchange Act, and the principal securities exchange on which the shares are
listed or admitted to trading is a Designated Offshore Securities Market, as
defined in Rule 902(a) under the Securities Act, the average of the reported
closing bid and asked prices regular way on that principal exchange, or, if the
shares are not listed or admitted to trading on any national securities exchange
or quoted on that automated quotation system and the Issuer and principal
securities exchange do not meet such requirements, the average of the
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closing bid and asked prices in the over-the-counter marked as furnished by any
New York Stock Exchange member firm that is selected from time to time by us for
that purpose and is reasonably acceptable to the trustee. In the event a Person
has more than one class of common stock outstanding, and only one of such
classes has a Closing Price, the Closing Price for that class will be deemed to
be the Closing Price for all classes of such Person's Common Stock.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock but excluding any debt security that is
convertible into or exchangeable for, Capital Stock.
"EQUITY OFFERING" means any public or private sale of Capital Stock (other
than Disqualified Stock) made on a primary basis by the Parent Guarantor or by
us after the date of the indenture, including through the issuance or sale of to
one or more Strategic Equity Investors; PROVIDED, HOWEVER, that a sale to the
Parent Guarantor or other parent entity of ours will constitute an Equity
Offering only if funded by a substantially concurrent Equity Offering by the
Parent Guarantor or such other parent entity.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or any
successor statute.
"FAIR MARKET VALUE" means the price that would be paid in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined in
good faith by the board of directors of the Parent Guarantor, whose
determination will be conclusive if evidenced by a board resolution. For
purposes of clause (6)(b) of the second paragraph of the "Limitation on
Indebtedness" covenant:
(1) the fair market value of any security registered under the Exchange Act
will be the average of the closing prices, regular way, of such security
for the 20 consecutive trading days immediately preceding the sale of
Capital Stock; and
(2) in the event the aggregate fair market value of any other property
received by us exceeds $10 million, the fair market value of such
property will be determined by a nationally recognized investment banking
or appraisal firm and set forth in their written opinion which will be
delivered to the trustee.
"FCC" means the Federal Communications Commission.
"FOREIGN RESTRICTED SUBSIDIARY" means any Restricted Subsidiary of the
Parent Guarantor that is not organized under the laws of the United States of
America or any state thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the date of the indenture, including, without
limitation, those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as approved by a significant segment
of the accounting profession. All ratios and computations contained or referred
to in the indenture will be computed in conformity with GAAP applied on a
consistent basis.
"GUARANTEE" or "GUARANTY" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person:
(1) to purchase or pay, or advance or supply funds for the purchase or
payment of, such Indebtedness or other obligation of such other Person,
whether arising by virtue of partnership arrangements, or by agreements
to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise;
or
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(2) entered into for purposes of assuring in any other manner the obligee of
such Indebtedness or other obligation of the payment thereof or to
protect such obligee against loss in respect thereof, in whole or in
part.
The term "Guarantee" will not include endorsements for collection or deposit
in the ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"INCUR" means, with respect to any Indebtedness, to incur, create, issue,
assume, Guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Indebtedness,
including an "incurrence" of Indebtedness by reason of a Person becoming a
Restricted Subsidiary.
"INDEBTEDNESS" means, with respect to any Person at any date of
determination, without duplication:
(1) all Indebtedness of such Person for borrowed money;
(2) all obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments;
(3) all obligations of such Person in respect of letters of credit or other
similar instruments (including reimbursement obligations with respect
thereto, but excluding obligations with respect to letters of credit
(including trade letters of credit) securing obligations (other than
obligations described in (1) or (2) above or (5), (6), (7) or (8) below)
entered into in the ordinary course of business of such Person to the
extent such letters of credit are not drawn upon or, if drawn upon, to
the extent such drawing is reimbursed no later than the third business
day following receipt by such Person of a demand for reimbursement);
(4) all obligations of such Person to pay the deferred and unpaid purchase
price of property or services, which purchase price is due more than six
months after the date of placing such property in service or taking
delivery and title thereto or the completion of such services, except
Trade Payables;
(5) all obligations of such Person as lessee under Capitalized Leases;
(6) all Indebtedness of other Persons secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person; but
only to the extent of the lesser of:
(a) the fair market value of such asset at such date of determination;
and
(b) the amount of such Indebtedness;
(7) all Indebtedness of other Persons Guaranteed by such Person to the
extent such Indebtedness is Guaranteed by such Person;
(8) the maximum fixed redemption or repurchase price of Disqualified Stock
(or, in the case of any Restricted Subsidiary, of Preferred Shares) of
such Person outstanding at the time of determination; and
(9) to the extent not otherwise included in this definition, obligations
under Currency Agreements and Interest Rate Agreements.
The amount of Indebtedness of any Person at any date will be the outstanding
balance at such date of all unconditional obligations as described above and,
with respect to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligation; PROVIDED, HOWEVER,
that:
(1) the amount outstanding at any time of any Indebtedness issued with
original issue discount is the face amount of that Indebtedness less the
unamortized portion of the original issue
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discount of such Indebtedness at the time of its issuance as determined
in conformity with GAAP; and
(2) money borrowed at the time of the incurrence of any Indebtedness in
order to pre-fund the payment of interest on such Indebtedness will be
deemed not to be "Indebtedness."
"INTEREST RATE AGREEMENT" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, option or future contract or other similar
agreement or arrangement.
"INVESTMENT" in any Person means any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of Guarantee or
similar arrangement; but excluding advances to customers in the ordinary course
of business that are, in conformity with GAAP, recorded as accounts receivable
on our balance sheet or that of our Restricted Subsidiaries) or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase or acquisition of Capital Stock, bonds, notes, debentures or other
similar instruments issued by, such Person and will include
(1) the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary; and
(2) the fair market value of the Capital Stock or any other Investment held
by us or any of our Restricted Subsidiaries, of or in any Person that has
ceased to be a Restricted Subsidiary other than as a result of being
designated as an Unrestricted Subsidiary.
For purposes of the definition of "Unrestricted Subsidiary" and the
"Limitation on Restricted Payments" covenant described below:
(1) "Investment" will include the fair market value of the assets (net of
liabilities (other than liabilities to the Parent Guarantor or any of its
Subsidiaries)) of any Restricted Subsidiary at the time that such
Restricted Subsidiary is designated an Unrestricted Subsidiary;
(2) the fair market value of the assets (net of liabilities (other than
liabilities to the Issuer or any of its Subsidiaries)) of any
Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is
designated a Restricted Subsidiary will be considered a reduction in
outstanding Investments; and
(3) any property transferred to or from an Unrestricted Subsidiary will be
valued at its fair market value at the time of such transfer.
"ISSUER" means American Cellular Corporation, a Delaware corporation, its
successors and assigns.
"JOINT VENTURE AGREEMENTS" means the Second Amended and Restated Limited
Liability Company Agreement, dated as of February 25, 2000, between AT&T
Wireless Services JV Co. and Dobson JV Company; the Amended and Restated
Management Agreement, dated as of February 25, 2000, between Dobson Cellular
Systems, Inc. and ACC Acquisition LLC; the Amended and Restated Operating
Agreement, dated as of February 25, 2000, between AT&T Wireless Services, Inc.
and ACC Acquisition LLC; and the Amended and Restated Operating Agreement, dated
as of February 25, 2000, between Dobson Cellular Systems, Inc. and ACC
Acquisition LLC.
"LIEN" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, without limitation, any conditional sale or other
title retention agreement or lease in the nature thereof or any agreement to
give any security interest).
"MATERIAL INDEBTEDNESS" means Indebtedness having an aggregate principal
amount (or accreted value) of $50.0 million or more at the time outstanding.
"MOODY'S" means Moody's Investors Service, Inc. and its successors.
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"NET CASH PROCEEDS" means:
(1) with respect to any Asset Sale, the proceeds of such Asset Sale in the
form of cash or cash equivalents, including payments in respect of
deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form
of cash or cash equivalents (except to the extent such obligations are
financed or sold with recourse to the Parent Guarantor or any Restricted
Subsidiary) and proceeds from the conversion of other property received
when converted to cash or cash equivalents, net of
(a) brokerage commissions and other fees and expenses (including fees and
expenses of counsel and investment bankers) related to such Asset
Sale,
(b) provisions for all taxes (whether or not such taxes will actually be
paid or are payable) as a result of such Asset Sale without regard to
the consolidated results of operations of the Parent Guarantor and
its Restricted Subsidiaries, taken as a whole,
(c) payments made to repay Indebtedness or any other obligation (owing to
a Person other than the Parent Guarantor or any Subsidiary of ours)
outstanding at the time of such Asset Sale that either
- is secured by a Lien on the property or assets sold, or
- is required to be paid as a result of such sale, and
(d) appropriate amounts to be provided by the Parent Guarantor or any
Restricted Subsidiary of the Parent Guarantor as a reserve against
any liabilities associated with such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale, all
as determined in conformity with GAAP; and
(2) with respect to any issuance or sale of Capital Stock or the incurrence
of any indebtedness, the proceeds of such issuance or sale in the form of
cash or cash equivalents, including payments in respect of deferred
payment obligations to the extent corresponding to the principal, but not
interest, component thereof when received in the form of cash or cash
equivalents (except to the extent such obligations are financed or sold
with recourse to the Parent Guarantor or any Restricted Subsidiary of the
Parent Guarantor) and proceeds from the conversion of other property
received when converted to cash or cash equivalents, net of attorney's
fees, accountants' fees, underwriters' or placement agents' fees,
discounts or commissions and brokerage, consultant and other fees
incurred in connection with such issuance or sale and net of taxes paid
or payable as a result thereof.
"OFFER TO PURCHASE" means an offer by us to purchase Notes from the
noteholders commenced by mailing a notice to the trustee and each holder
stating:
(1) the covenant pursuant to which the offer is being made and that all
Notes validly tendered and not withdrawn will be accepted for payment on
a pro rata basis;
(2) the purchase price and the date of purchase (which will be a business
day no earlier than 30 days nor later than 60 days from the date such
notice is mailed) (the "PAYMENT DATE");
(3) that any Notes not tendered will continue to accrue interest and
liquidated damages, if any, pursuant to its terms;
(4) that, unless we default in the payment of the purchase price, any Notes
accepted for payment pursuant to the Offer to Purchase will cease to
accrue interest and liquidated damages, if any, on and after the Payment
Date;
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(5) that holders electing to have Notes purchased pursuant to the Offer to
Purchase will be required to surrender the Notes, together with the form
entitled "Option of the Holder to Elect Purchase" on the reverse side of
the Notes completed, to the paying agent at the address specified in the
notice prior to the close of business on the business day immediately
preceding the Payment Date;
(6) that holders will be entitled to withdraw their election if the paying
agent receives, not later than the close of business on the third
business day immediately preceding the Payment Date, a telegram,
facsimile transmission or letter setting forth the name of such holder,
the principal amount of Notes delivered for purchase and a statement that
such holder is withdrawing its election to have such Notes purchased; and
(7) that holders whose Notes are being purchased only in part will be issued
new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered; but only if each Note purchased and each new Note
issued is in a principal amount of $1,000 or integral multiples thereof.
On the Payment Date, we will:
(1) accept for payment on a pro rata basis Notes or portions thereof validly
tendered and not withdrawn pursuant to an Offer to Purchase;
(2) deposit with the paying agent money sufficient to pay the purchase price
of all Notes or portions thereof so accepted; and
(3) deliver, or cause to be delivered, to the trustee all Notes or portions
thereof so accepted together with an officer's certificate specifying the
Notes or portions thereof accepted for payment by the Issuer.
The paying agent will promptly mail to the holders of Notes so accepted
payment in an amount equal to the purchase price, and the trustee will promptly
authenticate and mail to such holders new Notes equal in principal amount to any
unpurchased portion of the Notes surrendered; but only if each Note purchased
and each new Note issued is in a principal amount of $1,000 or integral
multiples thereof. The Issuer will publicly announce the results of an Offer to
Purchase as soon as practicable after the Payment Date. The trustee will act as
the paying agent for an Offer to Purchase. The Issuer will comply with
Rule 14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable to an Offer to
Purchase. To the extent that the provisions of any such securities laws or
securities regulations conflict with the provisions described above, we will
comply with the applicable securities laws and regulations and will not be
deemed to have breached our obligations under these provisions by virtue
thereof.
"PERMITTED BUSINESS" means (1) the delivery or distribution of
telecommunications, voice, data, Internet or video services, (2) any business or
activity determined in good faith by the board of directors of the Parent
Guarantor to be reasonably related or ancillary thereto, including, without
limitation, any business conducted by the Issuer or any Restricted Subsidiary on
the date of the indenture and the acquisition, holding or exploitation or any
license relating to the delivery of the services described in clause (2) of this
definition.
"PERMITTED HOLDER" means:
(1) each of AT&T Wireless, Dobson Communications and any of their respective
Affiliates and the respective successors (by merger, consolidation, transfer or
otherwise) to all or substantially all of the respective businesses and assets
of any of the foregoing; and
(2) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act) controlled by one or more persons identified in
clause (1) above.
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"PERMITTED INVESTMENT" means:
(1) an Investment in the Parent Guarantor or a Restricted Subsidiary of the
Parent Guarantor or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary or be merged or consolidated
with or into or transfer or convey all or substantially all its assets
to, the Parent Guarantor or a Restricted Subsidiary of the Parent
Guarantor; but only if such person's primary business is related,
ancillary or complementary to the businesses of the Parent Guarantor and
its Restricted Subsidiaries on the date of that Investment;
(2) Cash Equivalents;
(3) payroll, travel and similar advances to cover matters that are expected
at the time of such advances ultimately to be treated as expenses in
accordance with GAAP;
(4) stock, obligations or securities received in satisfaction of judgments
or pursuant to any court supervised plan of reorganization or similar
proceeding;
(5) non-cash consideration acquired in any Asset Sale effected in accordance
with the "Limitation on Asset Sales" covenant;
(6) any acquisition of assets used, or Capital Stock of a Person primarily
engaged, in a business related, ancillary or complementary to the
business of the Parent Guarantor and its Restricted Subsidiaries solely
in exchange for Capital Stock (other than Disqualified Stock) of the
Parent Guarantor or ours;
(7) the contribution by us or any Restricted Subsidiary of assets, including
Capital Stock of a Restricted Subsidiary, to one or more Qualified Joint
Ventures in exchange for Capital Stock of such Qualified Joint Ventures;
PROVIDED, HOWEVER, that the aggregate fair market value of such
contribution and all other contributions pursuant to this clause (7) made
after the date of the indenture, will not exceed 15% of the Consolidated
Tangible Assets of the Parent Guarantor as of the date of such
contribution; PROVIDED, HOWEVER, that at the time of such contribution no
Default or Event of Default shall have occurred and be continuing or
shall occur as a result of such contribution; PROVIDED FURTHER, HOWEVER,
that after giving pro forma effect to such contribution, the Issuer would
be able to incur at least $1.00 of Indebtedness under the first paragraph
of the "Limitation on Indebtedness" covenant. For purposes of calculating
the fair market value of a contribution made pursuant to this
clause (7), the fair market value of a prior contribution will be deemed
to equal the fair market value of such contribution on the date on which
it was made; and
(8) other Investments (with each such Investment being valued as of the date
made and without giving effect to subsequent changes in value) in an
aggregate amount not to exceed $15.0 million at any one time outstanding.
"PERMITTED JUNIOR SECURITIES" means:
(1) Equity Interests in us or any Guarantor; or
(2) debt securities that are subordinated to all Senior Indebtedness and any
debt securities issued in exchange for Senior Indebtedness to
substantially the same extent as, or to a greater extent than, the Notes
and the Subsidiary Guaranty are subordinated to Senior Indebtedness under
the indenture.
"PERMITTED LIENS" means:
(a) Liens to secure Indebtedness permitted to be incurred under clause (1)
of the covenant described under "Certain Covenants--Limitation on
Indebtedness";
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(b) Liens consisting of the interests of other Persons under operating
leases entered into in the ordinary course of business by the Parent
Guarantor or a Restricted Subsidiary;
(c) Liens granted by a Restricted Subsidiary to secure Indebtedness owing to
the Parent Guarantor or another Restricted Subsidiary;
(d) Liens securing Currency Agreements and Interest Rate Agreements so long
as such Currency Agreements and Interest Rate Agreements relate to
Indebtedness that is, and is permitted to be incurred under the
"Limitation on Indebtedness" covenant, secured by a Lien on the same
property covered by such Currency Agreements or Interest Rate Agreements;
(e) Liens arising from the rendering of a final judgment or order that does
not at the time constitute an Event of Default;
(f) Liens incurred in the ordinary course of the business of the Parent
Guarantor or any Restricted Subsidiary with respect to obligations that
do not exceed, in the aggregate at any one time outstanding, more than
10% of the total consolidated assets of the Parent Guarantor and the
Restricted Subsidiaries;
(g) Liens for taxes, assessments or governmental charges or levies on the
property of the Parent Guarantor or any Restricted Subsidiary if the same
shall not at the time be delinquent or thereafter can be paid without
penalty, or are being contested in good faith and by appropriate
proceedings promptly instituted and diligently concluded, provided that
any reserve or other appropriate provision that shall be required in
conformity with GAAP shall have been made therefor;
(h) Liens imposed by law, such as carriers', warehousemen's and mechanics'
Liens and other similar Liens, on the property of the Parent Guarantor or
any Restricted Subsidiary arising in the ordinary course of business and
securing payment of obligations that are not more than 60 days past due
or are being contested in good faith and by appropriate proceedings;
(i) Liens on the property of the Parent Guarantor or any Restricted
Subsidiary incurred in the ordinary course of business to secure
performance of obligations with respect to statutory or regulatory
requirements, performance or return-of-money bonds, surety bonds or
arising from partial or progress payments by a customer or other
obligations of a like nature and incurred in a manner consistent with
industry practice, in each case which are not Incurred in connection with
the borrowing of money, the obtaining of advances or credit or the
payment of the deferred purchase price of property and which do not in
the aggregate impair in any material respect the use of property in the
operation of the business of the Parent Guarantor and the Restricted
Subsidiaries taken as a whole;
(j) deposits made in the ordinary course of business to secure liability to
insurance carriers;
(k) Liens on property at the time the Parent Guarantor or any Restricted
Subsidiary acquired such property, including any acquisition by means of
a merger or consolidation with or into the Parent Guarantor or any
Restricted Subsidiary; PROVIDED, HOWEVER, that any such Lien may not
extend to any other property of the Parent Guarantor or any Restricted
Subsidiary; PROVIDED FURTHER, HOWEVER, that such Liens shall not have
been incurred in anticipation of or in connection with the transaction or
series of transactions pursuant to which such property was acquired by
the Parent Guarantor or any Restricted Subsidiary;
(l) Liens on the property or Capital Stock of a Person at the time such
Person becomes a Restricted Subsidiary; PROVIDED, HOWEVER, that any such
Lien may not extend to any other property of the Parent Guarantor or any
other Restricted Subsidiary that is not a direct Subsidiary of such
Person; PROVIDED FURTHER, HOWEVER, that any such Lien was not incurred in
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anticipation of or in connection with the transaction or series of
transactions pursuant to which such Person became a Restricted
Subsidiary;
(m) pledges or deposits by the Parent Guarantor or any Restricted Subsidiary
under workmen's compensation laws, unemployment insurance laws or similar
legislation, or good faith deposits in connection with bids, tenders,
contracts (other than for the payment of Indebtedness) or leases to which
the Parent Guarantor or any Restricted Subsidiary is party, or deposits
to secure public or statutory obligations of the Parent Guarantor or any
Restricted Subsidiary, or deposits for the payment of rent, in each case
incurred in the ordinary course of business;
(n) utility easements, building restrictions and such other encumbrances or
charges against real property as are of a nature generally existing with
respect to properties of a similar character;
(o) Liens under licensing agreements for use of intellectual property
entered into in the ordinary course of business; and
(p) Liens existing on the date of the indenture not otherwise described in
clauses (a) through (o) above.
"PERSON" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust, estate,
unincorporated organization or government or any agency or political subdivision
thereof or any other entity.
"PLEDGED SECURITIES" means the cash and U.S. Government Securities deposited
in the Interest Reserve Account, together with any interest and other
distributions received on that cash or those securities.
"PREFERRED SHARES" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's preferred or preference equity, whether
now outstanding or issued after the date of the indenture, including, without
limitation, all series and classes of such preferred stock or preference stock.
"QUALIFIED JOINT VENTURE" means (A) a Person at least 50% of the Voting
Stock of which, after giving effect to the contribution contemplated by
clause (7) of the definition of "Permitted Investment," is beneficially owned by
Qualified Joint Venture Partners, or (B) a Restricted Subsidiary, at least a
majority of the Voting Stock of which, other than Voting Stock held by the
Issuer or any Restricted Subsidiary, is beneficially owned by Qualified Joint
Venture Partners; PROVIDED, HOWEVER, that any such Qualified Joint Venture
engages in only a Permitted Business or Permitted Businesses.
"QUALIFIED JOINT VENTURE PARTNER" means a Person that either has, or is a
direct or indirect majority-owned subsidiary of a Person that has, an Equity
Market Capitalization of at least $10.0 billion as of the date of determination.
"REPRESENTATIVE" means with respect to a Person, any trustee, agent or
representative (if any) for an issue of Senior Indebtedness of such person.
"RESTRICTED SUBSIDIARY" means the Issuer and any other Subsidiary of the
Parent Guarantor other than an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Ratings Services and its successors.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR CREDIT FACILITY" means the Credit Agreement among American Cellular
Corporation, as successor by merger to ACC Acquisition Co., Banc of America
Securities LLC, as sole lead arranger and book running manager, Bank of America,
N.A., as Administrative Agent, Lehman Commercial Paper Inc. and TD Securities
(USA), Inc., as Co-Syndication Agents, CIBC World Markets Corp. and Barclays
Bank PLC, as Co-Documentation Agents, and the lenders named therein, dated as of
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February 25, 2000, as amended by that certain First Amendment to Credit
Agreement, dated as of March 2, 2001, together with all other agreements,
instruments and documents executed or delivered pursuant thereto or in
connection therewith, in each case as such agreements, instruments or documents
may be amended, supplemented, extended, renewed, refinanced, replaced or
otherwise modified from time to time, including without limitation, increases
and decreases from time to time in the amounts available for borrowings
thereunder.
"SENIOR INDEBTEDNESS" of ours means the principal of, premium (if any) and
accrued and unpaid interest (including interest accruing on or after the filing
of any petition in bankruptcy or for reorganization of ours, regardless of
whether or not a claim for post-filing interest is allowed in such proceedings)
on, and fees and other amounts owing in respect of the Senior Credit Facility
and all other Indebtedness of ours, whether outstanding on the date of the
indenture or thereafter incurred, unless in the instrument creating or
evidencing the same or pursuant to which the same is outstanding it is provided
that such obligations are not superior in right of payment to the Notes;
PROVIDED, HOWEVER, that Senior Indebtedness will not include:
(1) any obligation of ours or any Subsidiary of ours to any Subsidiary of
ours;
(2) any liability for federal, state, local or other taxes owed or owing by
us;
(3) any accounts payable or other liability to trade creditors arising in
the ordinary course of business (including guarantees thereof or
instruments evidencing such liabilities);
(4) any indebtedness or obligation of the Issuer, and any accrued and unpaid
interest in respect thereof, that by its terms is subordinate or junior
in any respect to any other Indebtedness or obligation of ours, including
any of our Senior Subordinated Indebtedness and any of our Subordinated
Indebtedness;
(5) any obligations with respect to any Capital Stock; or
(6) any Indebtedness incurred in violation of the indenture.
"Senior Indebtedness" of any Guarantor has a correlative meaning.
"SENIOR SUBORDINATED INDEBTEDNESS" of us means the Notes and any other of
our Indebtedness that specifically provides that such Indebtedness is to rank
PARI PASSU with the Notes in right of payment and is not subordinated by its
terms in right of payment to any Indebtedness or other obligation of ours that
is not Senior Indebtedness. "Senior Subordinated Indebtedness" of a Guarantor
has a correlative meaning.
"SIGNIFICANT SUBSIDIARY" means, at any date of determination, any Restricted
Subsidiary that, together with its Subsidiaries that are Restricted
Subsidiaries:
(1) for the most recent fiscal year of the Parent Guarantor, accounted for
more than 10% of the consolidated revenues of the Parent Guarantor and
its Restricted Subsidiaries; or
(2) as of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Parent Guarantor and its Restricted
Subsidiaries, all as set forth on the most recently available
consolidated financial statements of the Parent Guarantor for such fiscal
year.
"STATED MATURITY" means with respect to any Indebtedness, the date specified
in such Indebtedness as the fixed date on which the final installment of
principal of such Indebtedness is due and payable, including pursuant to any
mandatory redemption provision (but excluding any provision providing for the
repurchase of that Indebtedness at the option of the holder thereof upon the
happening of any contingency beyond the control of the Issuer unless that
contingency has occurred).
"STRATEGIC EQUITY INVESTOR" means any AT&T Wireless Services Inc., Dobson
Communications Corporation and any of their Affiliates, and any other Person
(a) engaged in or controlled by a Person
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engaged in a Permitted Business whose Equity Market Capitalization exceeds
$500.0 million or (b) with at least $100.0 million total funds under management,
who has issued an irrevocable, unconditional commitment to purchase Capital
Stock (other than Disqualified Stock) of the Issuer, or Capital Stock of the
Parent Guarantor to the extent such Capital Stock is contributed to the Issuer,
for an aggregate purchase price that does not exceed 20% of the value of the
funds under management by such Person.
"SUBORDINATED INDEBTEDNESS" means any of our Indebtedness or any Guarantor
(whether outstanding on the date of the Indenture or thereafter incurred) which
is by its terms expressly subordinate or junior in right of payment to the Notes
or the Guarantee of such Guarantor, as the case may be.
"SUBSIDIARY" means, with respect to any Person, any corporation, association
or other business entity of which more than 50% of the voting power of the
outstanding Voting Stock is owned, directly or indirectly, by such Person and
one or more other Subsidiaries of such Person.
"SUBSIDIARY GUARANTY" means each Guarantee of the obligations with respect
to the Notes issued by a Subsidiary of the Parent Guarantor pursuant to the
terms of the indenture.
"SUBSIDIARY GUARANTOR"means any Subsidiary of the Parent Guarantor that has
issued a Subsidiary Guaranty.
"TRADE PAYABLES" means accounts payable to vendors in the ordinary course of
business.
"TRANSACTION DATE" means, with respect to the incurrence of any Indebtedness
by the Parent Guarantor or any of its Restricted Subsidiaries, the date such
Indebtedness is to be incurred and, with respect to any Restricted Payment, the
date such Restricted Payment is to be made.
"TREASURY RATE" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15
(519) which has become publicly available at least two business days prior to
the redemption date or, if such Statistical Release is no longer published, any
publicly available source or similar market data most nearly equal to the period
from the redemption date to October 15, 2005, PROVIDED, HOWEVER, that if the
period from the redemption date to October 15, 2005 is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the Treasury Rate will be obtained by linear interpolation (calculated
to the nearest one-twelfth of a year) from the weekly average yields of United
States Treasury securities for which such yields are given, except that if the
period from the redemption date to October 15, 2005 is less than one year, the
weekly average yield on actually traded United States Treasury securities
adjusted to a constant maturity of one year will be used.
"UNRESTRICTED SUBSIDIARY" means Cellular Information Systems of Laredo,
Inc., Alton CellTelco Cellular Corporation and Alton CellTelco Partnership and
any other Subsidiary of the Parent Guarantor that at any time of determination
after the date of the indenture shall be designated an Unrestricted Subsidiary
by the Parent Guarantor's board of directors in the manner provided below and
any Subsidiary of an Unrestricted Subsidiary; provided, however, that the Issuer
may not be designated as an Unrestricted Subsidiary. The Parent Guarantor's
board of directors may designate any Restricted Subsidiary including any newly
acquired or newly formed Subsidiary of the Parent Guarantor to be an
Unrestricted Subsidiary unless, immediately after such designation, that
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, us or any Restricted Subsidiary; on the condition that:
(1) any Guarantee by the Parent Guarantor or any Restricted Subsidiary of
any Indebtedness of the Subsidiary being so designated shall be deemed an
"incurrence" of such Indebtedness and an "Investment" by the Issuer or
such Restricted Subsidiary (or both, if applicable) at the time of the
designation;
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(2) either the Subsidiary to be so designated has total assets of $1,000 or
less or if such Subsidiary has assets greater than $1,000, such
designation would be permitted under the "Limitation on Restricted
Payments" covenant described below; and
(3) if applicable, the incurrence of Indebtedness and the Investment
referred to in clause (1) of this proviso would be permitted under the
"Limitation on Indebtedness" and "Limitation on Restricted Payments"
covenants.
The Parent Guarantor's board of directors may designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; on the condition that immediately
after giving effect to that designation:
(1) all Liens and Indebtedness of such Unrestricted Subsidiary outstanding
immediately after such designation would, if incurred at such time, have
been permitted to be incurred for all purposes of the indenture; and
(2) no Default or Event of Default shall have occurred and be continuing, or
shall occur upon such redesignation.
Any such designation by the Parent Guarantor's board of directors will be
evidenced to the trustee by promptly providing the trustee a copy of the board
resolution giving effect to such designation and an officers' certificate
certifying that such designation complied with the foregoing provisions.
"U.S. GOVERNMENT SECURITIES" means securities that are direct obligations
of, or obligations guaranteed by, the United States of America for the payment
of which its full faith and credit is pledged.
"VOTING STOCK" means with respect to any Person, Capital Stock of any class
or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
"WHOLLY OWNED" means, with respect to any Subsidiary of any Person, the
ownership of all of the outstanding Capital Stock of such Subsidiary (other than
any director's qualifying shares or Investments by foreign nationals mandated by
applicable law) by such Person or one or more Wholly Owned Subsidiaries of such
Person.
NO PERSONAL LIABILITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS, DIRECTORS OR
EMPLOYEES
The indenture provides that no recourse for the payment of the principal of,
premium, if any, or interest or Liquidated Damages on, any of the notes, or for
any claim based thereon or otherwise in respect thereof, and no recourse under
or upon any obligation, covenant or agreement of ours contained in the indenture
or in any of the notes, or because of the creation of any Indebtedness
represented thereby, shall be had against any of our incorporators or past,
present or future shareholders, officers, directors, employees or controlling
person. Each holder, by accepting such note, waives and releases all such
liability.
CONCERNING THE TRUSTEE
The indenture provides that, except during the continuance of an Event of
Default, the trustee will perform only such duties as are specifically set forth
in the indenture. If an Event of Default has occurred and is continuing, the
trustee will exercise those rights and powers vested in it under such indenture
and use the same degree of care and skill in its exercise of such rights and
powers as a prudent person would exercise under the circumstances in the conduct
of such person's own affairs.
The indenture and provisions of the Trust Indenture Act of 1939 incorporated
by reference in the indenture, contain limitations on the rights of the trustee
thereunder, should it become a creditor of ours, to obtain payment of claims in
certain cases or to realize on certain property received by it in
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respect of any such claims, as security or otherwise. The trustee is permitted
to engaged in other transactions. However, if the trustee acquires any
conflicting interest, it must eliminate such conflict or resign.
SAME DAY SETTLEMENT AND PAYMENT
We will make payments in respect of the notes represented by the Global
Notes (including principal, premium, if any, interest and Liquidated Damages, if
any) by wire transfer of immediately available funds to the accounts specified
by the Global Note holder. We will make all payments of principal, interest and
premium, if any, and Liquidated Damages, if any, with respect to Certificated
Notes by wire transfer of immediately available funds to the accounts specified
by the holders thereof or, if no such account is specified, by mailing a check
to each such holder's registered address. The notes represented by the Global
Notes are expected to be eligible to trade in the PORTAL market and to trade in
DTC's Same-Day Funds Settlement System, and any permitted secondary market
trading activity in such notes will, therefore, be required by DTC to be settled
in immediately available funds. We expect that secondary trading in any
Certificated Notes will also be settled in immediately available funds.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Note from a Participant in
DTC will be credited, and any such crediting will be reported to the relevant
Euroclear or Cedel participant, during the securities settlement processing day
(which must be a business day for Euroclear and Cedel) immediately following the
settlement date of DTC. DTC has advised us that cash received in Euroclear or
Cedel as a result of sales of interests in a Global Note by or through a
Euroclear or Cedel participant to a Participant in DTC will be received with
value on the settlement date of DTC but will be available in the relevant
Euroclear or Cedel cash account only as of the business day for Euroclear or
Cedel following DTC's settlement date.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
We and the initial purchasers entered into a registration rights agreement
on the closing of the notes offering. The following description is a summary of
the provisions of the Registration Rights Agreement that we consider material.
It does not restate that agreement in its entirety. The Registration Rights
Agreement, and not this description, determines the registration rights of
holders of these Notes. A copy of the registration rights agreement is available
from us upon request.
Under the registration rights agreement, we agreed, at our cost, to file a
registration statement with the Commission on the appropriate form under the
Securities Act with respect to the registered offer to exchange the old notes
for new notes that will have terms substantially identical in all material
respects to the old notes (except that the new notes will not contain terms with
respect to transfer restrictions). Upon the effectiveness of the exchange offer
registration statement, we will offer to the holders of Transfer Restricted
Securities pursuant to the exchange offer who are able to make certain
representations the opportunity to exchange their Transfer Restricted Securities
for exchange notes.
If:
(1) we are not
(a) required to file the exchange offer registration statement;
(b) permitted to consummate the exchange offer because the exchange offer
is not permitted by applicable law or Commission policy; or
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(2) any holder of Transfer Restricted Securities notifies us prior to the
20th day following consummation of the exchange offer that:
(a) it is prohibited by law or Commission policy from participating in
the exchange offer;
(b) that 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) that it is a broker-dealer and owns Notes acquired directly from us
or an affiliate of ours, then
we will file with the Commission a registration statement (the "SHELF
REGISTRATION STATEMENT") to cover resales of the Notes by the holders thereof
who satisfy certain conditions relating to the provision of information in
connection with the Shelf Registration Statement.
We will use our best efforts to cause the applicable registration statement
to be declared effective as promptly as possible by the Commission.
For purposes of the preceding, "TRANSFER RESTRICTED SECURITIES" means each
Note until:
(1) the date on which such Note has been exchanged by a Person other than a
broker-dealer for an exchange note in the exchange offer;
(2) following the exchange by a broker-dealer in the exchange offer of a
Note for an exchange note, the date on which such Exchange Note is sold
to a purchaser who receives from such broker-dealer on or prior to the
date of such sale a copy of the prospectus contained in the exchange
offer registration statement;
(3) the date on which such Note has been effectively registered under the
Securities Act and disposed of in accordance with the shelf registration
statement; or
(4) the date on which such Note is distributed to the public pursuant to
Rule 144 under the Securities Act.
The registration rights agreement also provides that:
(1) we will file an exchange offer registration statement with the
Commission on or prior to 90 days after the closing of the old notes
offering;
(2) we will use our best efforts to have the exchange offer registration
statement declared effective by the Commission on or prior to 180 days
after the closing of the old notes offering;
(3) unless the exchange offer would not be permitted by applicable law or
Commission policy, we will
(a) commence the exchange offer; and
(b) use our best efforts to consummate the exchange offer not later than
210 days, unless a longer time is required by the federal securities
laws, after the closing of this offering and issue exchange notes in
exchange for all Notes validly tendered and not withdrawn prior
thereto in the exchange offer; and
(4) if obligated to file the shelf registration statement, we will use our
best efforts to file the shelf registration statement with the Commission
as promptly as practicable after such filing obligation arises and to
cause the Shelf Registration to be declared effective by the Commission
on or prior to 120 days after such obligation arises.
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If:
(1) we fail to file any of the registration statements required by the
registration rights agreement on or before the date specified for such
filing;
(2) any of such registration statements is not declared effective by the
Commission on or prior to the date specified for such effectiveness;
(3) we fail to consummate the exchange offer within 30 days of the
effectiveness target date with respect to the exchange offer registration
statement; or
(4) the shelf registration statement or the exchange offer registration
statement is declared effective but thereafter ceases to be effective or
usable in connection with the resales of Transfer Restricted Securities
during the periods specified in the registration rights agreement (each
such event referred to in clauses (1) through (4) above, a "REGISTRATION
DEFAULT"),
then we will pay liquidated damages to each holder of Notes, with respect to the
first 90-day period immediately following the occurrence of the first
Registration Default in an amount equal to $0.05 per week per $1,000 principal
amount of Notes held by that holder. The amount of the liquidated damages will
increase by an additional $0.05 per week per $1,000 principal amount of Notes
with respect to each subsequent 90-day period until all Registration Defaults
have been cured, up to a maximum amount of liquidated damages for all
Registration Defaults of $0.50 per week per $1,000 principal amount of Notes.
All accrued liquidated damages will be paid by us on each interest payment
date to the Global Note holder by wire transfer of immediately available funds
and to holders of Certificated Notes by wire transfer to the accounts specified
by them or by mailing checks to their registered addresses if no such accounts
have been specified.
Following the cure of all Registration Defaults, the accrual of liquidated
damages will cease.
Holders of Notes will be required to make certain representations to us
(registration rights agreement) in order to participate in the exchange offer
and will be required to deliver certain information to be used in connection
with the shelf registration statement and to provide comments on the shelf
registration statement within the time periods set forth in the registration
rights agreement in order to have their Notes included in the shelf registration
statement and benefit from the provisions regarding liquidated damages set forth
above. By acquiring Transfer Restricted Securities, a holder will be deemed to
have agreed to indemnify us against certain losses arising out of information
furnished by such holder in writing for inclusion in any shelf registration
statement. Holders of Notes will also be required to suspend their use of the
prospectus included in the Shelf Registration Statement under certain
circumstances upon receipt of written notice to that effect from us.
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CERTAIN MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES FOR
UNITED STATES HOLDERS AND NON-UNITED STATES HOLDERS
The following is a general discussion of the material, anticipated United
States federal income and estate tax consequences of the ownership and
disposition of the notes, by an initial beneficial owner of the notes. These
consequences depend on whether the beneficial owner is or is not a "United
States person." For purposes of this discussion, a "United States person" means
(a) a citizen or resident of the United States, (b) 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 thereof, (c) an estate whose
income is includible in gross income for United States federal income tax
purposes regardless of its source, or (d) a trust, if a United States court is
able to exercise primary supervision over the administration of the trust and
one or more United States persons have the authority to control all substantial
decisions of the trust, or certain electing trusts that were in existence on
August 19, 1996, and treated as a domestic trust on such date. An individual
may, subject to certain exceptions, be deemed to be a resident (as opposed to an
non-resident alien) of the United States by virtue of being present in the
United States on at least 31 days in the calendar year and for an aggregate of
at least 183 days during a three-year period ending in the current calendar year
(counting for such purposes all of the days present in the current year,
one-third of the days present in the immediately preceding year and one-sixth of
the days present in the second preceding year).
This discussion is based upon current provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), applicable Treasury Regulations, judicial
authority and administrative rulings and practice, any of which may be altered
with retroactive effect thereby changing the federal tax consequences discussed
herein. The tax treatment of the holders of the notes may vary depending upon
their particular situations. In addition, certain holders, including insurance
companies, tax exempt organizations, financial institutions and broker-dealers
and certain former citizens and residents of the United States, may be subject
to special rules not included in this discussion. Except where noted, this
discussion deals only with notes held by a United States person (a "United
States Holder") as capital assets within the meaning of Section 1221 of the
Code. We will not seek a ruling from the Internal Revenue Service (the "IRS")
with respect to any of the matters discussed herein and there can be no
assurance that the IRS will not challenge one or more of the tax consequences
described herein. You should consult your own tax advisor concerning the
consequences of the ownership and disposition of the notes including the tax
consequences under the laws of any foreign, state, local or other taxing
jurisdictions and the possible effects on investors of changes in United States
federal or other tax laws. All prospective purchasers are advised to consult
their own tax advisors regarding the federal, state, local and foreign tax
consequences of the purchase, ownership and disposition of the notes.
UNITED STATES HOLDERS
SURRENDER OF OLD NOTE FOR NEW NOTE
The surrender by a United States Holder of an old note for a new note
pursuant to this offer should not constitute a taxable exchange. A United States
Holder will have the same tax basis and holding period in the new note as it did
in the old note.
STATED INTEREST
The notes were not issued with original issue discount. Except as described
below, interest on a note will be includable by a United States Holder as
ordinary interest income at the time the interest, accrues or is received in
accordance with the holder's method of accounting for tax purposes.
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MARKET DISCOUNT
If a United States Holder acquires a note, other than in an exchange of an
old note for a new note pursuant to this offer, for an amount that is less than
its principal amount, the amount of the difference will be treated as "market
discount," unless such difference is less than a specified de minimis amount.
Under the market discount rules of the Code, a United States Holder will be
required to treat any partial principal payment on, or any gain on the sale,
exchange, retirement or. other disposition (including a gift, but not including
an exchange of an old note for a new note pursuant to this offer) of, a note as
ordinary income to the extent of any accrued market discount that has not
previously been included in income. Market discount generally accrues on a
straight-line basis over the remaining term of the note, unless the United
States Holder elects to accrue market discount on a const interest method. A
United States Holder may not be allowed to deduct immediately all or a portion
of the interest expense on any indebtedness incurred or continued to purchase or
to carry such note.
A United States Holder may elect to include market discount in income
currently as it accrues (either on a straight-line basis or, if the United
States Holder so elects, on a constant-yield basis), in which case the interest
deduction deferral rule set forth in the preceding paragraph will not apply.
Such an election will apply to all bonds acquired by the United States Holder on
or after the first day of the first taxable year to which such election applies
and may be revoked only with the consent of the IRS. A United States Holder
should consult with his or her own tax advisors about this election.
AMORTIZABLE BOND PREMIUM
A United States Holder that purchases a note for an amount in excess of the
principal amount will be considered to have purchased the note at a "premium." A
United States Holder generally may elect to amortize such premium over the
remaining term of the note on a constant-yield method. The amount amortized in
any year will be treated as reduction of the United States Holder's interest
income from the note. Bond premium on a note held by a United States Holder that
does not make such an election will decrease the gain or increase the loss
otherwise recognized on disposition of the note. The election to amortize bond
premium on a constant-yield method, once made, applies to all debt obligations
held or subsequently acquired by the electing United States Holder on or after
the first day of the taxable year to which the election applies and may not be
revoked without the consent of the IRS. United States Holders should consult
with their own tax advisors about this election.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES
Upon the disposition of a note by sale, exchange or redemption, but not
including an exchange of an old note for a new note pursuant to this offer, a
United States Holder will generally recognize gain or loss equal to the
difference between (i) the amount realized on the disposition (other than
amounts attributable to accrued interest) and (ii) the United States Holder's
tax basis in the note. A United States Holder's tax basis in a note generally
will equal the cost of the note (other than any cost attributable to accrued
interest as of the date the United States Holder acquired the note) increased by
any market discount previously included in income by the United States Holder
with respect to the note and reduced by any principal payments on the note and
by any amounts deducted with respect to amortizable bond premium.
Assuming that the note is held as a capital asset, such gain or loss will
generally constitute capital gain or loss and will be long-term capital gain or
loss if the United States Holder has held such note for longer than one year.
Non-corporate taxpayers are generally subject to a maximum regular federal
income tax rate of 20% on net long-term capital gains. The deductibility of
capital losses is subject to certain limitations.
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BACKUP WITHHOLDING AND INFORMATION REPORTING
A United States Holder may be subject, under certain circumstances, to
information reporting and/ or backup withholding at a 31% rate with respect to
cash payments in respect of interest or the gross proceeds from dispositions the
note. The withholding requirement will apply only if the holder (i) fails to
furnish its social security or other taxpayer identification number ("TIN")
within a reasonable time after a request therefor, (ii) furnishes an incorrect
TIN, (iii) fails to report interest or dividends properly, or (iv) fails under
certain circumstances, to provide a certified statement, signed under penalty of
perjury, that the TIN provided is its correct number and that the holder is not
subject to backup withholding. Any amount withheld from a payment to a United
States Holder under the backup withholding rules is allowable as a credit
against such holder's United States federal income tax liability (and, may
entitle such holder to a refund), provided the required information is furnished
to the IRS. Certain persons are exempt from backup withholding, including
corporations and certain financial institutions. United States Holders of notes
should consult their tax advisors as to their qualification for exemption from
withholding and the procedure for obtaining such exemption.
NON-UNITED STATES HOLDERS
SURRENDER OF OLD NOTE FOR NEW NOTE
The surrender by a non-United States Holder of an old note for a new note
pursuant to this offer should not constitute a taxable exchange. A non-United
States Holder will have the same tax basis and holding period in the new note as
it did in the old note.
WITHHOLDING TAX ON PAYMENTS OF INTEREST ON NOTES
Interest paid on the notes by us or our paying agent to a non-United States
Holder will qualify for the so-called "portfolio-interest-exemption" and,
therefore, will not be subject to United States federal income tax or
withholding tax provided that such interest income is not effectively connected
with a United States trade or business of the non-United States Holder and
provided that:
- the non-United States 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;
- the non-United States Holder is not (A) a controlled foreign corporation
related to us actually or constructively through the stock ownership rules
under Section 864(d)(4) of the Code, of (B) a bank which acquired the
notes in consideration for an extension of credit made pursuant to a loan
agreement entered into in the ordinary course of business;
- the interest paid to the non-United States Holder is not considered
contingent interest under Section 871(h)(4) of the Code and the
regulations thereunder, and
- the beneficial owner satisfies the statement requirements set forth in
Section 871(h) and 881(c) of the Code and the regulations thereunder.
Currently, the statement requirements will be satisfied in either of the
following circumstances:
- first, this requirement will be satisfied if, in accordance with specified
procedures, the non-United States Holder provides to us or our paying
agent a Form W-8BEN or a suitable substitute or successor form that is
signed under penalties of perjury, includes its name and address, and
contains a certification that the holder is not a United States person; or
- second, the requirement will be satisfied if (a) the Non-United States
Holder provides a Form W-8BEN or a suitable substitute or successor form,
signed under penalties of perjury, to a qualified intermediary, such as a
securities clearing organization, bank, or other financial institution who
holds customers' securities in the ordinary course of its trade or
business and
114
holds the notes on behalf of a beneficial owner, and (b) the qualified
intermediary certifies to us, or our paying agent, under penalties of
perjury, that such statement has been received by it from the beneficial
owner, directly or through another intermediary financial institution, and
furnishes us or our paying agent with a copy thereof.
Recently finalized Treasury Regulations provide alternative documentation
procedures for satisfying the certification requirement described above. Such
regulations add intermediary certification options for certain qualifying
agents.
Interest received by a non-United States Holder that is effectively
connected with a United States trade or business conducted by such holder (or if
a treaty applies, attributable to a permanent establishment) will be taxed at
the graduated rates applicable to United States persons. Effectively connected
interest received by a corporate non-United States Holder may also, under
certain circumstances, be subject to an additional "branch profits tax" at a 30%
rate or, if applicable, a lower treaty rate. Even though such effectively
connected interest will be subject to federal income tax and possibly subject to
the branch profits tax, it will not be subject to withholding if the non-United
States Holder delivers a properly executed IRS Form W-8ECI or suitable
substitute or successor form to us or our agent.
Interest that does not qualify for the portfolio interest exemption or is
not effectively connected with a U.S. trade or business (or attributable to a
permanent establishment) will be subject to tax at a 30% rate unless a treaty
applies to reduce or eliminate withholding.
GAIN ON DISPOSITION OF THE NOTE
The exchange of an old note for a new note should not be a taxable
transaction to a non-United States Holder. With respect to other transactions, a
non-United States Holder generally will not be required to pay U.S. federal
income tax on gain realized on the sale, exchange or redemption of a note
unless:
- in the case of an individual non-United States Holder, such holder is
present in the United States for 183 days or more in the year of such
sale, exchange or redemption and meets certain other requirements;
- the non-United States Holder is required to pay tax pursuant to the
provisions of U.S. tax law applicable to certain U.S. expatriates; or
- the gain is effectively connected with the conduct of a U.S. trade or
business of, or, if a tax treaty applies, is attributable to a U.S.
permanent establishment of, the non-United States Holder.
If a non-United States Holder is required to pay U.S. federal income tax on
gain realized on the sale, exchange, or redemption of a note because the gain is
effectively connected with the conduct of a U.S. trade or business, (or if a
treaty applies, applicable to a permanent establishment), the holder will be
taxed on the net gain derived from the sale under the graduated U.S. federal
income tax rates that are applicable to United States persons and, if the
non-United States Holder is a foreign corporation, it may also be subject to the
branch profits tax described above. Even though the effectively connected income
will be subject to federal income tax, and possibly subject to the branch
profits tax, it will not be subject to withholding if the non-United States
Holder delivers a properly executed IRS Form W-8ECI or a suitable substitute or
successor form to us or our agent.
If an individual non-United States Holder is required to pay U.S. federal
income tax on gain realized on the sale, exchange, or redemption of a note
because such holder is present in the United States for 183 days or more in the
year of such sale, and certain other requirements are met, the holder generally
will be subject to U.S. federal income tax at a rate of 30% on the amount by
which
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the gain derived from the sale from sources within the United States were to
exceed such holder's capital losses allocable to sources within the United
States for the taxable year of the sale.
U.S. FEDERAL ESTATE TAXES
If interest on the notes is exempt from US. federal income tax under the
portfolio interest exemption, the notes will not be included in the estate of a
deceased non-United States Holder for U.S. federal income tax purposes. In
addition, an estate treaty may apply to exclude such notes from the estate of a
deceased non-United States Holder.
BACKUP WITHHOLDING AND INFORMATION REPORTING
We must report annually to the IRS and to each non-United States Holder the
amount of any interest paid to, and the tax withheld with respect to, such
non-United States Holder, regardless of whether any tax was actually withheld.
Copies of these information returns may also be made available under the
provisions of a specific treaty or agreement to the tax authorities of the
country in which the non-United States Holder resides.
Backup withholding and information reporting will not apply to payments of
interest or principal on the notes by us or our agent to a non-United States
Holder if the non-United States Holder certifies as to its non-United States
Holder status under penalties of perjury or otherwise establishes an exemption,
provided that neither we nor our agents have actual knowledge that the holder is
a U.S. person or that the conditions of any other exemptions are not in fact
satisfied.
Information reporting and backup withholding requirements with respect to
the payment of the proceeds from the disposition of the notes by a non-United
States Holder are as follows:
- If the proceeds are paid to or through the United States office of a
broker, they generally will be subject to information reporting and backup
withholding at a rate of 31%. However, no such reporting and withholding
is required if: (i) the holder either certifies as to its status as a non-
United States Holder under penalties of perjury on an IRS form W-8BEN or
suitable substitute or successor form or otherwise establishes an
exemption; and (ii) the broker does not have actual knowledge that the
holder is a United States person or that the conditions of any other
exemption are not, in fact, satisfied.
- If the proceeds are paid to or through a non-United States office of a
broker that is not a United States person or a "United States related
person," as defined below, they will not be subject to backup withholding
or information reporting.
- If the proceeds are paid to or through a non-United States office of a
broker that is either a United States person or a "United States related
person," they generally will be subject to information reporting. However,
no such reporting is required if (i) the holder certifies as to its status
as a non-United States Holder under penalties of perjury or the broker has
certain documentary evidence in its files as to the non-United States
Holder's foreign status, and (ii) the broker has no actual knowledge to
the contrary. Backup withholding will generally not apply to payments made
through foreign offices of a United States person or United States related
person.
For purposes of this paragraph, a "United States related person" is:
- a "controlled foreign corporation" for U.S. federal income tax purposes;
- a foreign person 50% or more of whose gross income from all sources for
the three-year period ending with the close of its taxable year preceding
the payment (or for such part of the period that the broker has been in
existence) is derived from activities that are effectively connected with
the conduct of a United States trade or business; or
116
- a foreign partnership if at any time during its tax year one or more of
its partners are United States persons who, in the aggregate, hold more
than 50% of the income or capital interest of the partnership or if, at
any time during its taxable year, the partnership is engaged in the
conduct of a United States trade or business.
Any amounts withheld under the backup withholding rules from a payment to a
non-United States Holder will be allowed as a refund or a credit against such
non-United States Holder's U.S. federal income tax liability provided that the
requisite procedures are followed.
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PLAN OF DISTRIBUTION
There has previously been only a limited secondary market and no public
market for the old notes. We do not intend to apply for the listing of the notes
on a national securities exchange or for their quotation through The Nasdaq
Stock Market. The notes are eligible for trading in the PORTAL market. We have
been advised by the initial purchasers that the initial purchasers currently
intend to make a market in the notes; however, the initial purchasers are not
obligated to do so and any market making may be discontinued by the initial
purchasers at any time. In addition, such market making activity may be limited
during the exchange offer. Therefore, there can be no assurance that an active
market for the old notes or the new notes will develop. If a trading market does
not develop or is not maintained, holders of notes may experience difficulty in
reselling notes. If a trading market develops for the notes, future trading
prices of the notes will depend on many factors, including, among other things,
prevailing interest rates, our results of operations and the market for similar
securities. Depending on such factors, such securities may trade at a discount
from their offering price.
BROKER-DEALERS WHO DID NOT ACQUIRE OLD NOTES AS A RESULT OF MARKET MAKING
ACTIVITIES OR TRADING ACTIVITIES MAY NOT PARTICIPATE IN THE EXCHANGE OFFER.
With respect to resale of new notes, based on an interpretation by the staff
of the Securities and Exchange Commission set forth in no-action letters issued
to third parties, we believe that a holder (other than a person that is our
affiliate within the meaning of Rule 405 under the Securities Act or a "broker"
or "dealer" registered under the Exchange Act) who exchanges old notes for new
notes in the ordinary course of business and who is not participating, does not
intend to participate, and has no arrangement or understanding with any person
to participate, in the distribution of the new notes, will be allowed to resell
the new notes to the public without further registration under the Securities
Act and without delivering to the purchasers of the new notes a prospectus that
satisfies the requirements of Section 10 thereof. However, if any holder
acquires new notes in the exchange offer for the purpose of distributing or
participating in a distribution of the new notes, such holder cannot rely on the
position of the staff of the Securities and Exchange Commission enunciated in
EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988) or similar no-action
letters or any similar interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction, unless an exemption from
registration is otherwise available.
As contemplated by the no-action letters mentioned above and the
registration rights agreement, each holder accepting the exchange offer is
required to represent to us in the letter of transmittal that
- the new notes are to be acquired by the holder in the ordinary course of
business
- the holder is not engaging and does not intend to engage in the
distribution of the new notes, and
- the holder acknowledges that, if such holder participates in the exchange
offer for the purpose of distributing the new notes, such holder must
comply with the registration and prospectus delivery requirements of the
Securities Act and cannot rely on the above no-action letters.
Any broker or dealer registered under the Exchange Act (each a
"Broker-Dealer") who holds old notes that were acquired for its own account as a
result of market-making activities or other trading activities (other than old
notes acquired directly from us or our affiliate) may exchange such old notes
for new notes pursuant to the exchange offer; however, such Broker-Dealer may be
deemed an underwriter within the meaning of the Securities Act and, therefore,
must deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of the new notes received by it in the exchange
offer, which prospectus delivery requirement may be satisfied by the delivery by
such Broker-Dealer of this prospectus. We have agreed to cause the exchange
offer Registration Statement, of which this prospectus is a part, to remain
continuously effective for a period of 180 days, if required,
118
from the exchange date, and to make this prospectus, as amended or supplemented,
available to any such Broker-Dealer for use in connection with resales. Any
Broker-Dealer participating in the exchange offer will be required to
acknowledge that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resales of new notes received by it in the
exchange offer. The delivery by a Broker-Dealer of a prospectus in connection
with resales of new notes shall not be deemed to be an admission by such
Broker-Dealer that it is an underwriter within the meaning of the Securities
Act. We will not receive any proceeds from any sale of new notes by a
Broker-Dealer.
New notes received by Broker-Dealers for their own account pursuant to the
exchange offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the new notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such Broker-Dealer and/or the
purchasers of any such new notes.
119
LEGAL MATTERS
Certain legal matters with respect to the validity of the notes offered
hereby are being passed upon for us by McAfee & Taft A Professional Corporation,
Oklahoma City, Oklahoma.
EXPERTS
The consolidated balance sheet of American Cellular Corporation and
subsidiaries as of December 31, 2000, and the related consolidated statements of
operations, stockholder's equity and cash flows for the period from
February 25, 2000 through December 31, 2000, and the consolidated balance sheet
of ACC Acquisition LLC and its subsidiaries as of December 31, 2000, and the
related consolidated statements of operations, members' equity and cash flows
for the period from February 15, 2000 through December 31, 2000, included in
this prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report appearing herein in reliance upon the
authority of said firm as experts in giving said report.
The consolidated financial statements of American Cellular Corporation and
subsidiaries at December 31, 1998 and 1999, and for the period from
February 26, 1998 to December 31, 1998 and the year ended December 31, 1999, and
the consolidated financial statements of PriCellular Corporation and
subsidiaries for the six months ended June 30, 1998, appearing in this
prospectus and registration statement, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein, and are included in reliance upon such reports given on the authority of
such firm as experts in accounting and auditing.
120
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
--------
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
Report of independent public accountants.................. F-2
Consolidated balance sheet as of December 31, 2000........ F-3
Consolidated statement of operations for the period from
February 25, 2000 through December 31, 2000............. F-4
Consolidated statement of stockholder's equity for the
period from February 25, 2000 through December 31,
2000.................................................... F-5
Consolidated statement of cash flows for the period from
February 25, 2000 through December 31, 2000............. F-6
Notes to consolidated financial statements................ F-7
Report of independent auditors............................ F-15
Consolidated balance sheets as of December 31, 1998 and
December 31, 1999....................................... F-16
Consolidated statements of operations for the period from
February 26, 1998 to December 31, 1998 and the year
ended December 31, 1999................................. F-17
Consolidated statements of stockholders' equity for the
period from February 26, 1998 to December 31, 1998 and
for the year ended December 31, 1999.................... F-18
Consolidated statements of cash flows for the period from
February 26, 1998 to December 31, 1998 and the year
ended December 31, 1999................................. F-19
Notes to consolidated financial statements................ F-20
ACC ACQUISITION LLC AND SUBSIDIARIES
Report of independent public accountants.................. F-30
Consolidated balance sheet as of December 31, 2000........ F-31
Consolidated statement of operations for the period from
February 15, 2000 through December 31, 2000............. F-32
Consolidated statement of members' equity for the period
from February 15, 2000 through December 31, 2000........ F-33
Consolidated statement of cash flows for the period from
February 15, 2000 through December 31, 2000............. F-34
Notes to consolidated financial statements................ F-35
PRICELLULAR CORPORATION AND SUBSIDIARIES (THE PREDECESSOR
COMPANY)
Report of independent auditors............................ F-43
Consolidated statement of operations for the six months
ended June 30, 1998..................................... F-44
Consolidated statement of stockholders' equity for the six
months ended June 30, 1998.............................. F-45
Consolidated statement of cash flows for the six months
ended June 30, 1998..................................... F-46
Notes to consolidated financial statements................ F-47
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
American Cellular Corporation:
We have audited the accompanying consolidated balance sheet of American
Cellular Corporation (a Delaware Corporation) and subsidiaries as of
December 31, 2000 and the related consolidated statements of operations,
stockholder's equity and cash flows for the period from February 25, 2000
through December 31, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
American Cellular Corporation and subsidiaries as of December 31, 2000, and the
results of their operations and their cash flows for the period from
February 25, 2000 through December 31, 2000, in conformity with accounting
principles generally accepted in the United States.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma,
March 9, 2001
F-2
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2000
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 15,123,142
Accounts receivable, net of allowance for doubtful
accounts of $1,810,265.................................... 48,208,271
Inventory................................................. 8,372,549
Deferred income taxes..................................... 7,170,411
Prepaid expenses and other................................ 1,408,471
--------------
Total current assets.................................... 80,282,844
--------------
PROPERTY, PLANT AND EQUIPMENT, net.......................... 192,986,089
--------------
OTHER ASSETS:
Wireless license acquisition costs, net of accumulated
amortization of $50,669,623............................. 1,149,419,497
Customer List, net of accumulated amortization of
$8,444,482.............................................. 41,555,518
Goodwill, net of accumulated amortization of
$53,203,817............................................. 1,175,251,171
Deferred financing costs and other, net of accumulated
amortization of $3,426,409.............................. 30,607,705
--------------
Total other assets...................................... 2,396,833,891
--------------
Total assets............................................ $2,670,102,824
==============
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 30,100,531
Accounts payable--affiliates.............................. 11,805,894
Accrued expenses.......................................... 15,204,735
Accrued interest payable.................................. 11,596,175
Deferred revenue and customer deposits.................... 10,007,706
Current portion of long-term debt......................... 27,465,000
--------------
Total current liabilities............................... 106,180,041
--------------
OTHER LIABILITIES:
Payables--affiliates...................................... 9,193,025
Long-term debt, net of current portion.................... 1,650,535,000
Deferred tax liabilities.................................. 238,438,146
STOCKHOLDER'S EQUITY:
Class A common stock, $0.01 par value; 475,000 shares
authorized; 100 shares issued and outstanding........... 1
Paid-in capital........................................... 764,999,999
Retained deficit.......................................... (99,243,388)
--------------
Total stockholder's equity.............................. 665,756,612
--------------
Total liabilities and stockholder's equity.............. $2,670,102,824
==============
The accompanying notes are an integral part of this consolidated balance sheet.
F-3
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM FEBRUARY 25, 2000 TO DECEMBER 31, 2000
OPERATING REVENUE:
Service revenue........................................... $ 190,176,142
Roaming revenue........................................... 131,091,186
Equipment sales and other................................. 15,569,192
-------------
Total operating revenue................................. 336,836,520
OPERATING EXPENSES:
Cost of service........................................... 64,468,139
Cost of equipment......................................... 28,248,754
Marketing and selling..................................... 38,434,449
General and administrative................................ 40,390,640
Depreciation and amortization............................. 154,797,328
-------------
Total operating expenses................................ 326,339,310
OPERATING INCOME............................................ 10,497,210
OTHER INCOME (EXPENSE):
Interest expense.......................................... (140,970,478)
Other income, net......................................... 536,308
-------------
LOSS BEFORE INCOME TAXES.................................... (129,936,960)
INCOME TAX BENEFIT.......................................... 30,693,572
-------------
NET LOSS.................................................... $ (99,243,388)
=============
BASIC NET LOSS APPLICABLE TO THE COMMON STOCKHOLDER PER
COMMON SHARE.............................................. $ (992,434)
=============
BASIC WEIGHTED AVERAGE COMMON SHARES OUTSTANDING............ 100
=============
The accompanying notes are an integral part of this consolidated financial
statement.
F-4
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE PERIOD FROM FEBRUARY 25, 2000 TO DECEMBER 31, 2000
CLASS A
COMMON STOCK
--------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ------------ ------------ ------------
February 25, 2000................................. 100 $1 $764,999,999 -- $765,000,000
Net loss.......................................... -- -- -- (99,243,388) (99,243,388)
--- -- ------------ ------------ ------------
December 31, 2000................................. 100 $1 $764,999,999 $(99,243,388) $665,756,612
=== == ============ ============ ============
The accompanying notes are an integral part of this consolidated financial
statement.
F-5
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM FEBRUARY 25, 2000 TO DECEMBER 31, 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (99,243,388)
Adjustments to reconcile net loss to net cash provided by
operating activities--
Depreciation and amortization........................... 154,797,328
Amortization of bond premium and financing costs........ 3,426,409
Deferred income taxes and investment tax credits, net... (30,515,642)
Other................................................... (139,632)
Changes in current assets and liabilities--
Accounts receivable....................................... (15,856,758)
Inventory................................................. (4,159,944)
Prepaid expenses and other................................ 220,640
Accounts payable.......................................... 23,257,550
Accounts payable-affiliates............................... 11,805,894
Accrued expenses.......................................... (8,693,386)
Deferred revenue and customer deposits.................... 3,566,840
-------------
Net cash provided by operating activities............... 38,465,911
-------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (61,169,628)
Other investing activities................................ 220,457
-------------
Net cash used in investing activities................... (60,949,171)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt.............................. 114,000,000
Repayments of long-term debt.............................. (111,000,000)
Advances from affiliate for capital expenditures.......... 9,193,025
-------------
Net cash provided by financing activities............... 12,193,025
-------------
NET DECREASE IN CASH AND CASH EQUIVALENTS................... (10,290,235)
CASH AND CASH EQUIVALENTS, as of February 25, 2000.......... 25,413,377
-------------
CASH AND CASH EQUIVALENTS, end of year...................... $ 15,123,142
=============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for--
Interest net of amounts capitalized..................... $ 124,274,707
=============
The accompanying notes are an integral part of this consolidated financial
statement.
F-6
AMERICAN CELLULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION:
American Cellular Corporation was originally formed on February 26, 1998, to
acquire the operations of PriCellular Corporation. On February 25, 2000,
American Cellular Corporation and its subsidiaries ("the Company") were acquired
by ACC Acquisition LLC, an equally owned joint venture between Dobson
Communications Corporation and AT&T Wireless Services, Inc. ("the Joint
Venture"). The acquisition costs as of February 25, 2000 were pushed down to the
Company, thus creating a new basis in the assets and liabilities of the Company.
Therefore, the financial statements and the related notes presented here are for
the period from the acquisition date (February 25, 2000) through December 31,
2000.
2. SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the accounts of
all subsidiaries. For financial reporting purposes, the Company reports 100% of
revenues and expenses for the markets for which it provides cellular
telecommunications service. Significant intercompany accounts and transactions
have been eliminated.
BUSINESS SEGMENTS
The Company operates in one business segment pursuant to Statement of
Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an
Enterprise and Related Information."
CASH AND CASH EQUIVALENTS
Cash and cash equivalents on the accompanying consolidated balance sheet
includes cash and short-term investments with original maturities of three
months or less.
INVENTORY
The Company values its inventory at the lower of cost or market on the
first-in, first-out method of accounting.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company assesses potential impairments of long-lived assets, certain
identifiable intangibles and goodwill when there is evidence that events or
changes in circumstances indicate that an asset's carrying value may not be
recoverable. An impairment loss is recognized when the sum of the expected
future net cash flows is less than the carrying amount of the asset. The amount
of any recognized impairment would be based on the estimated fair value of the
asset subject to impairment compared to the carrying amount of such asset. No
such losses have been identified by the Company.
WIRELESS LICENSE ACQUISITION COSTS
Wireless license acquisition costs consist of amounts paid to acquire FCC
licenses to provide wireless services. Wireless license acquisition costs are
being amortized on a straight-line basis over twenty years. Amortization expense
of $50,669,623 was recorded for the period from February 25, 2000 through
December 31, 2000.
F-7
AMERICAN CELLULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
CUSTOMER LIST
Customer list consists of amounts paid to acquire wireless customer lists.
Customer list acquisition costs are being amortized on a straight-line basis
over five years. Amortization expense of $8,444,482 was recorded for the period
from February 25, 2000 through December 31, 2000.
GOODWILL
Goodwill is being amortized on a straight-line basis over twenty years.
Amortization expense related to goodwill of $53,203,817, was recorded for the
period from February 25, 2000 through December 31, 2000.
The ongoing value and remaining useful lives of intangible and other
long-term assets are subject to periodic evaluation and the Company currently
expects the carrying amounts to be fully recoverable.
DEFERRED FINANCING COSTS
Deferred financing costs consist primarily of fees incurred to secure
long-term debt. Deferred financing costs are being amortized on a straight-line
basis over the nine-year term of the debt and recorded as interest expense.
Interest expense related to the amortization of these costs of $3,426,409, was
recorded for the period from February 25, 2000 through December 31, 2000.
ADVERTISING COSTS
Advertising costs are expensed as incurred and are included as marketing and
selling expenses in the accompanying consolidated statement of operations.
INCOME TAXES
The Company files a consolidated income tax return. Income taxes are
allocated among the various entities included in the consolidated tax return, as
agreed, based on the ratio of each entity's taxable income (loss) to
consolidated taxable income (loss). Deferred income taxes reflect the estimated
future tax effects of differences between financial statement and tax bases of
assets and liabilities at year-end.
REVENUE RECOGNITION
The Company records service revenues over the period they are earned. The
cost of providing service is recognized as incurred. Airtime and toll revenue
are billed in arrears. The Company accrued estimated unbilled revenues for
services provided of approximately $3,375,565 as of December 31, 2000, which is
included in accounts receivable in the accompanying consolidated balance sheet.
Monthly access charges are billed in advance and are reflected as deferred
revenue on the accompanying consolidated balance sheet. Equipment sales are
recognized when the equipment is delivered to the customer. Subscriber
acquisition costs (primarily commissions and losses on equipment sales) are
expensed as incurred.
As of December 31, 2000, the Company implemented SEC Staff Accounting
Bulletin ("SAB") No. 101 "Revenue Recognition." The impact of implementing
SAB 101 was not material to the Company's revenues or results of operations for
the period ended December 31, 2000.
F-8
AMERICAN CELLULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
USE OF ESTIMATES
The preparation of these consolidated financial statements in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes. Actual results
could differ from those estimates.
SIGNIFICANT CONCENTRATIONS
In connection with providing wireless services to customers of other
wireless carriers, the Company has contractual agreements with those carriers
which provide for agreed-upon billing rates between the parties. Approximately
73% of the Company's wireless roaming revenue was earned from three wireless
carriers during the period from February 25, 2000 through December 31, 2000.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In July 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Derivatives and Hedging ("SFAS 133"). SFAS 133 establishes uniform hedge
accounting criteria for all derivatives requiring companies to formally
document, designate and assess the effectiveness of transactions that receive
hedge accounting. Under SFAS 133, derivatives will be recorded in the balance
sheet as either an asset or liability measured at its fair value, with changes
in the fair value recognized as a component of comprehensive income or in
current earnings. SFAS 133, as amended by SFAS 137, Derivatives and
Hedging-Deferral of the Effective Date of FASB Statement No. 133, will be
effective for fiscal years beginning after June 15, 2000. In addition,
SFAS 138, was issued in June 2000 as amendment to SFAS 133 and addresses issues
causing implementation difficulties. On January 1, 2001, in accordance with
SFAS 133, the Company recorded a liability and a net loss to comprehensive
income totaling $15.9 million relating to its interest rate hedges.
3. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are recorded at cost. Newly constructed
cellular systems are added to property, plant and equipment at cost, which
includes contracted services, direct labor, materials overhead and capitalized
interest. For the period from February 25, 2000 through December 31, 2000
interest capitalized was not material. Existing property, plant and equipment
purchased through acquisitions is recorded at its fair value at the date of the
purchase. Repairs, minor replacements and maintenance are charged to operations
as incurred. The provisions for depreciation are provided using the
straight-line method based on the estimated useful lives of the various classes
of depreciable property. Depreciation expense totaling $42,667,136 was recorded
during the period from February 25, 2000 through December 31, 2000.
F-9
AMERICAN CELLULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. PROPERTY, PLANT AND EQUIPMENT: (CONTINUED)
Listed below are the major classes of property, plant and equipment and
their estimated useful lives, in years, as of December 31, 2000:
USEFUL LIFE 2000
----------- ------------
Wireless systems and equipment...................... 3-10 $181,935,969
Buildings and improvements.......................... 5-40 9,675,578
Vehicles, aircraft and other work equipment......... 3-10 1,570,909
Furniture and office equipment...................... 5-10 12,509,956
Plant under construction............................ 28,915,125
Land................................................ 1,045,688
------------
Property, plant and equipment..................... 235,653,225
Accumulated depreciation............................ (42,667,136)
------------
Property, plant and equipment, net................ $192,986,089
============
4. LONG-TERM DEBT:
On February 25, 2000, the Company obtained a $1.75 billion credit facility
to retire existing debt and complete the acquisition of the Company by the Joint
Venture.
At December 31, 2000, this credit facility included a $300.0 million
revolving credit facility and $1.45 billion of term loan facilities. Interest on
the revolving credit facility and the term loan facilities is variable and is
based on a prime rate or a LIBOR formula, and has ranged in total between 8.5%
and 10.1% since inception. This credit facility is collateralized by
substantially all of the assets of the Company.
The Company's credit facility consists of the following:
WEIGHTED AVERAGE
INTEREST RATE FOR
MAXIMUM AMOUNT OUTSTANDING THE YEAR ENDED
FACILITY AVAILABILITY AT DECEMBER 31, 2000 DECEMBER 31, 2000 TERMINATION DATE
- -------- -------------- --------------------- ------------------ ----------------
Revolver.................... $ 300,000,000 $ 228,000,000 9.0% March 31, 2007
Term A...................... $ 700,000,000 $ 700,000,000 9.5% March 31, 2007
Term B...................... $ 350,000,000 $ 350,000,000 10.1% March 31, 2008
Term C...................... $ 400,000,000 $ 400,000,000 9.8% March 31, 2009
-------------- --------------
TOTAL....................... $1,750,000,000 $1,678,000,000
============== ==============
The Company's credit facility imposes a number of restrictive covenants
that, among other things, limit the Company's ability to incur additional
indebtedness, create liens, make capital expenditures and pay dividends. At
December 31, 2000, the Company was in violation of its interest coverage ratio
covenant. Subsequent to year-end, the Company received a waiver from its lenders
for this covenant violation. On March 2, 2001, the Company and its lenders
agreed to an amendment to its credit facility, which will become effective upon
the permanent repayment of $200.0 million of the term loans under its credit
facility with the proceeds of its offering of 9 1/2% senior subordinated notes
(see Note 12). Management expects that the Company will be in compliance with
the revised covenants under the amended credit facility throughout 2001.
F-10
AMERICAN CELLULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT: (CONTINUED)
Minimum future payments of long-term debt for years subsequent to
December 31, 2000, are as follows:
2001........................................................ $ 27,465,000
2002........................................................ 59,234,000
2003........................................................ 89,383,000
2004........................................................ 119,533,000
2005........................................................ 149,683,000
2006 and thereafter......................................... 1,232,702,000
--------------
$1,678,000,000
==============
INTEREST RATE HEDGES
The Company pays interest on its bank credit facility based on a variable
factor, such as LIBOR or prime rate. The Company will from time-to-time enter
into interest rate hedge contracts to reduce exposure against rising interest
rates.
During 2000, the Company entered into a $1.03 billion interest rate hedge
contract on its credit facility whereby the interest rate on the facility is
effectively fixed at a rate of 7.3% plus a factor based on the Company's
leverage (total weighted average rate of approximately 9.6% as of December 31,
2000). The agreement expires in June, 2001. The Company has also entered into an
interest rate hedge contract which expires June 30, 2002 which sets the interest
rate on $1.03 billion of debt at a rate between 6.7% and 8.0%, depending upon
the LIBOR rate on July 1, 2001.
5. STOCKHOLDER'S EQUITY:
On February 25, 2000, the Joint Venture contributed $765.0 million to the
Company to complete its acquisition of the Company.
6. ACQUISITION:
On February 25, 2000, the Joint Venture acquired the Company for
$2.44 billion, of which $765.0 million was in the form of a capital contribution
to the Company, as discussed in Note 5, and the remaining $1.675 billion was
financed by the Company's new credit facility, as described in Note 4. The
Company's markets include systems in twelve states. This acquisition was
accounted for as a
F-11
AMERICAN CELLULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. ACQUISITION: (CONTINUED)
purchase. Accordingly, the cost of the acquisition was allocated to Company's
assets and liabilities. The allocation of the $2.44 billion of purchase price
was the following:
Current assets.............................................. $ 63,606,606
Property, plant and equipment............................... 174,511,971
Wireless license costs...................................... 1,200,089,119
Customer list............................................... 50,000,000
Goodwill.................................................... 1,228,454,988
Other assets................................................ 33,898,836
Current liabilities......................................... (48,778,143)
Deferred tax liabilities.................................... (261,783,377)
--------------
$2,440,000,000
==============
7. EMPLOYEE BENEFIT PLANS:
The Company is managed by Dobson Communications Corporation. Dobson
Communications Corporation maintains a 401(k) plan (the "Plan") in which
substantially all employees of the Company are eligible to participate. The Plan
requires the Company to match 100% of employees' contributions up to 4% of their
salary. Contributions to the Plan charged to the Company's operations were
$308,533 for the period from February 25, 2000 through December 31, 2000, and
were recorded as general and administrative expenses in the accompanying
statement of operations.
8. TAXES:
The benefit for income taxes for the period from February 25, 2000 through
December 31, 2000, was as follows:
Federal income taxes--
Deferred.................................................... $(26,088,319)
State income taxes (current and deferred)................... (4,605,253)
------------
Total income tax benefit.................................. $(30,693,572)
============
The benefit for income taxes for the period from February 25, 2000 through
December 31, 2000, differs from amounts computed at the statutory rate as
follows:
Income taxes at statutory rate (34%)........................ $(44,178,566)
State income taxes, net of Federal income tax effect........ (7,796,218)
Goodwill amortization, for which no benefit is recognized... 21,281,527
Other, net.................................................. (315)
------------
Total..................................................... $(30,693,572)
============
F-12
AMERICAN CELLULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. TAXES: (CONTINUED)
The tax effects of the temporary differences which gave rise to deferred tax
assets and liabilities at December 31, 2000, was as follows:
Current deferred income taxes:
Allowance for doubtful accounts receivable................ $ 724,120
Accrued liabilities....................................... 6,446,291
-------------
Net current deferred income tax asset................... 7,170,411
-------------
Noncurrent deferred income taxes:
Fixed assets.............................................. (30,843,424)
Intangible assets......................................... (331,530,344)
Tax credits and carryforwards............................. 123,935,622
-------------
Net noncurrent deferred income tax liability.............. (238,438,146)
-------------
Total deferred income taxes............................. $(231,267,735)
=============
At December 31, 2000, the Company had NOL carryforwards of approximately
$310 million, which may be utilized to reduce future Federal income taxes
payable. These NOL carryforwards begin to expire in 2009.
9. RELATED PARTY TRANSACTIONS:
At December 31, 2000, the Company had payables of $20,998,919 due to related
parties. Of this amount, $9.2 million represents capital expenditures paid by
Dobson Communications on behalf of the Company in its newly acquired PCS market
in northeast Oklahoma (see Note 12). The remaining amount represents other
expenditures made by Dobson Communications on behalf of the Company.
Dobson Communications provides certain services to the Company in accordance
with a management agreement. Certain costs incurred by Dobson Communications are
shared-costs of the Company and Dobson Communications. These shared costs are
allocated between the Company and Dobson Communications primarily based on each
Company's pro rata population coverage and subscribers.
10. COMMITMENTS:
Effective June 30, 2000, the Company entered into an equipment supply
agreement with Nortel Networks Inc., in which the Company is required to
purchase approximately $45.2 million of cell site and switching equipment
between June 30, 2000 and December 31, 2002. Of the commitment, approximately
$23.2 million remained at December 31, 2000.
F-13
AMERICAN CELLULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. COMMITMENTS: (CONTINUED)
Future minimum lease payments required under operating leases that have an
initial or remaining noncancellable lease term in excess of one year at
December 31, 2000, are as follows:
2001........................................................ $4,885,790
2002........................................................ 3,844,501
2003........................................................ 2,735,788
2004........................................................ 1,843,171
2005........................................................ 1,054,936
2006 and thereafter......................................... 1,338,783
Lease expense under the above leases was approximately $3,833,777 for the
period from February 25, 2000 through December 31, 2000.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS:
Unless otherwise noted, the carrying value of the Company's financial
instruments approximates fair value. The Company estimates the fair value of its
long-term debt based on quoted market prices for publicly traded debt or on the
present value of the cash flow stream utilizing the current rates available to
the Company for debt with similar terms and remaining maturation. The Company
estimates the fair value of its interest rate hedge based on the current market
value of the hedge instrument.
Indicated below are the carrying amounts and estimated fair values of the
Company's financial instruments as of December 31:
2000
--------------------------------
CARRYING AMOUNT FAIR VALUE
--------------- --------------
Revolving credit facilities................... $1,678,000,000 $1,678,000,000
Interest rate hedge liability................. -- 15,850,608
12. SUBSEQUENT EVENTS:
On January 18, 2001, the Joint Venture completed a transaction whereby cash
totalling $15 million, certain assets and PCS licenses with an estimated
population of 250,000 were contributed to the Company by AT&T Wireless and
Dobson Communications. The licensed area is located in nine counties of
northeast Oklahoma and southeast Kansas. Operations in this licensed area were
launched in February 2001.
On March 9, 2001, the Company sold $450.0 million in 9 1/2% senior
subordinated notes at a discount of $3,334,500. The proceeds from this offering
will be used to reduce debt under the Company's existing credit agreement (see
Note 4) and to fund certain interest payments to be made on the senior
subordinated notes.
F-14
REPORT OF INDEPENDENT AUDITORS
Board of Directors
American Cellular Corporation
We have audited the accompanying consolidated balance sheets of American
Cellular Corporation and subsidiaries (the Company) as of December 31, 1998 and
1999, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the period from February 26, 1998 (Date of Formation)
to December 31, 1998 and the year ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
American Cellular Corporation and subsidiaries at December 31, 1998 and 1999,
and the consolidated results of its operations and its cash flows for the period
from February 26, 1998 (Date of Formation) to December 31, 1998 and the year
ended December 31, 1999, in conformity with accounting principles generally
accepted in the United States.
ERNST & YOUNG LLP
Chicago, Illinois
February 9, 2000
F-15
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
DECEMBER 31
-----------------------
1998 1999
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents................................. $ 34,015 $ 74,896
Restricted short-term investments......................... 26,550 28,134
Accounts receivable, net of allowance for doubtful
accounts of $2,084 in 1998 and $555 in 1999............. 26,494 32,675
Inventories............................................... 2,005 5,216
Prepaids and other current assets......................... 1,569 2,640
---------- ----------
Total current assets........................................ 90,633 143,561
Cellular facilities, equipment, and other, net.............. 159,792 173,425
Other assets................................................ 1,267,175 1,167,157
---------- ----------
Total assets................................................ $1,517,600 $1,484,143
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt......................... $ 3,000 $ 25,608
Accounts payable.......................................... 6,022 5,467
Interest payable.......................................... 22,061 20,073
Accrued operating expenses................................ 16,620 15,727
Income and other taxes payable............................ 3,398 6,234
Deferred revenue.......................................... 6,170 5,502
Other current liabilities................................. 989 1,397
---------- ----------
Total current liabilities................................... 58,260 80,008
Long-term debt.............................................. 1,195,971 1,170,580
Stockholders' equity:
Series A cumulative redeemable preferred stock, $0.01 par
value, $100 liquidation value, net of $2,000 notes
receivable from stockholders; authorized 5,000,000
shares; 3,250,000 shares issued and outstanding,
including accrued dividends of $21,375 at December 31,
1998 and $65,480 at December 31, 1999................... 344,375 388,480
Common Stock, $0.01 par:
Class A: Authorized 475,000 shares; 250,000 shares
issued and outstanding at December 31, 1998 and
254,819 shares issued and outstanding at December 31,
1999.................................................. 3 3
Class B: Authorized 25,000 shares; 19,687 shares issued
and 19,387 shares outstanding at December 31, 1998 and
15,168 shares issued and 14,568 shares outstanding at
December 31, 1999..................................... -- --
Additional paid-in capital.............................. 25,191 25,191
Accumulated deficit....................................... (106,200) (180,119)
---------- ----------
Total stockholders' equity.................................. 263,369 233,555
---------- ----------
Total liabilities and stockholders' equity.................. $1,517,600 $1,484,143
========== ==========
See notes to consolidated financial statements.
F-16
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
PERIOD FROM
FEBRUARY 26,
1998 (DATE OF
FORMATION) TO YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1999
------------- -------------
REVENUES
Subscriber revenues......................................... $ 76,264 $ 176,323
Roaming revenues............................................ 53,458 131,174
Equipment sales............................................. 3,740 9,931
Other....................................................... 4,025 8,393
-------- ---------
Total revenues.............................................. 137,487 325,821
COSTS AND EXPENSES
Cost of cellular service.................................... 25,995 57,246
Cost of equipment sold...................................... 7,271 19,356
General and administrative.................................. 19,262 43,350
Sales and marketing......................................... 18,363 31,078
Depreciation and amortization............................... 45,569 97,217
Nonrecurring charges........................................ 4,355 --
-------- ---------
Total costs and expenses.................................... 120,815 248,247
-------- ---------
Operating income............................................ 16,672 77,574
OTHER INCOME (EXPENSE)
Interest expense............................................ (61,477) (106,888)
Interest income............................................. 5,036 4,912
Other income (expense), net................................. (100) 6
-------- ---------
(56,541) (101,970)
-------- ---------
Loss before provision for income taxes...................... (39,869) (24,396)
Provision for income taxes.................................. (530) (5,418)
-------- ---------
Net loss.................................................... $(40,399) $ (29,814)
======== =========
See notes to consolidated financial statements.
F-17
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
SERIES A CLASS A CLASS B
-------------------- -------------------- --------------------
PREFERRED STOCK COMMON STOCK COMMON STOCK ADDITIONAL
-------------------- -------------------- -------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
--------- -------- -------- --------- -------- --------- ---------- ------------
Initial capital contributions.... 3,250,000 $323,000 250,000 $ 3 -- $ -- $24,997 $ --
Capital contributions, net....... -- -- -- -- 19,387 -- 194 --
Excess purchase price over
predecessor basis.............. -- -- -- -- -- -- -- (44,426)
Accrued preferred stock
dividends...................... -- 21,375 -- -- -- -- -- (21,375)
Net loss for the period from
February 26, 1998 (Date of
Formation) to December 31,
1998........................... -- -- -- -- -- -- -- (40,399)
--------- -------- ------- --------- ------ --------- ------- ---------
Balance at December 31, 1998..... 3,250,000 344,375 250,000 3 19,387 -- 25,191 (106,200)
Conversion of Class B stock...... -- -- 4,819 -- (4,819) -- -- --
Accrued preferred stock
dividends...................... -- 44,105 -- -- -- -- -- (44,105)
Net loss for the year ended
December 31, 1999.............. -- -- -- -- -- -- -- (29,814)
--------- -------- ------- --------- ------ --------- ------- ---------
Balance at December 31, 1999..... 3,250,000 $388,480 254,819 $ 3 14,568 $ -- $25,191 $(180,119)
========= ======== ======= ========= ====== ========= ======= =========
See notes to consolidated financial statements.
F-18
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
PERIOD FROM
FEBRUARY 26, 1998
(DATE OF
FORMATION) TO YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1999
------------------ -------------
OPERATING ACTIVITIES
Net loss.................................................... $ (40,399) $(29,814)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization........................... 45,569 97,217
Amortization of deferred financing costs................ 2,393 4,409
Deferred income taxes................................... -- 5,171
Accretion of discount on Senior Notes................... 137 217
Amortization of premium on restricted investments....... 222 281
Amortization of covenant not to compete................. (500) --
Change in working capital components:
Accounts receivable................................... 2,666 (6,181)
Inventories........................................... (1,211) (3,211)
Prepaids and other current assets..................... 297 (1,071)
Accounts payable...................................... 2,074 (555)
Interest payable...................................... 22,061 (1,988)
Accrued operating expenses............................ (472) (4,075)
Income and other taxes payable........................ (19) 2,836
Deferred revenue...................................... 1,537 (668)
Other current liabilities............................. 940 408
----------- --------
Net cash provided by operating activities................... 35,295 62,976
INVESTING ACTIVITIES
Acquisition of cellular operations, net of cash acquired.... (1,418,741) --
Purchase of fixed assets.................................... (24,260) (50,462)
Proceeds from sale of fixed assets.......................... -- 2,179
Change in restricted investments, net....................... (69,744) 26,425
----------- --------
Net cash used in investing activities....................... (1,512,745) (21,858)
FINANCING ACTIVITIES
Proceeds from sale of preferred and common stock............ 348,194 --
Proceeds from issuance of Senior Notes...................... 282,834 --
Borrowings against (repayment on) credit facility........... 916,000 (3,000)
Proceeds from termination of hedging instruments............ -- 3,182
Deferred financing costs.................................... (35,563) (419)
----------- --------
Net cash provided by (used in) financing activities......... 1,511,465 (237)
----------- --------
Increase in cash and cash equivalents....................... 34,015 40,881
Cash and cash equivalents at beginning of period............ -- 34,015
----------- --------
Cash and cash equivalents at end of period.................. $ 34,015 $ 74,896
=========== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest.................................................. $ 36,886 $104,250
Income taxes.............................................. 38 671
See notes to consolidated financial statements.
F-19
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. ORGANIZATION, BASIS OF PRESENTATION, AND PENDING SALE OF BUSINESS
American Cellular Corporation, a Delaware corporation, was formed on
February 26, 1998, to acquire the operations of PriCellular Corporation (see
Note 3). American Cellular Corporation and Subsidiaries (the Company) is
principally engaged in the ownership and operation of cellular telephone
systems. The Company operates in one business segment pursuant to Statement of
Financial Accounting Standards (SFAS) No. 131, "Disclosures About Segments of an
Enterprise and Related Information."
The consolidated financial statements include the assets, liabilities, and
results of operations of entities in which the Company has a controlling
interest. All significant intercompany balances and transactions have been
eliminated.
PENDING SALE OF BUSINESS
On October 5, 1999, American Cellular Corporation entered into an Agreement
and Plan of Merger (the Merger Agreement) pursuant to which a newly formed joint
venture of Dobson Communications Corporation and AT&T Wireless Systems, Inc.
will, subject to the terms and conditions set forth in the Merger Agreement,
acquire the Company by merging a wholly owned subsidiary of the joint venture
with and into the Company (the Merger). Pursuant to the Merger Agreement, each
share of Class A common stock, par value $.01 per share, of the Company will, at
the effective time of the Merger (the Effective Time), be converted into the
right to receive $3,244.24 per share in cash, plus interest thereon for the
period commencing January 1, 2000, through and including the closing date at a
rate of 8% per annum (the Common Stock Purchase Price). As provided in the
Merger Agreement, the Common Stock Purchase Price is subject to adjustment in
the event shares of common stock are repurchased by the Company pursuant to
stock repurchase rights prior to the Effective Time.
The Merger Agreement further provides that each share of nonvoting Class B
common stock, par value $.01 per share, of the Company issued and outstanding
immediately prior to the Effective Time will become fully vested and will
automatically be converted into one share of Class A common stock at the
Effective Time in accordance with the terms of the grant thereof and, as such,
will there upon be subject to conversion into the right to receive the Common
Stock Purchase Price. In addition, each share of nonvoting Series A Preferred
Stock, par value $.01 per share, of the Company issued and outstanding
immediately prior to the Effective Time will, consistent with the terms of such
preferred stock designated in the Company's certificate of incorporation, be
converted at the Effective Time into the right to receive $100 per share in cash
plus all accrued but unpaid dividends thereon to and including the Effective
Time.
Concurrent with the execution of the Merger Agreement, certain stockholders
of the Company executed a stockholder Voting Agreement, dated as of October 5,
1999, pursuant to which, among other things, such stockholders agreed to vote
all shares beneficially owned by such persons in favor of the Merger and each of
the other transactions contemplated by the Merger Agreement at any meeting of
the Company's stockholders in connection with the Merger (or otherwise to
consent in writing thereto, as the case may be). A majority of the stockholders
of the Company voted to approve the Merger Agreement and the transactions
contemplated thereby, including the Merger, at a meeting of the stockholders
held on October 5, 1999.
F-20
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
1. ORGANIZATION, BASIS OF PRESENTATION, AND PENDING SALE OF BUSINESS (CONTINUED)
The Merger is expected to be completed in February 2000.
2. SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, restricted investments,
accounts receivable, and accounts payable approximate fair value. See Note 5 for
fair value of long-term debt.
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost (first in, first out method) or
market. Inventories consist primarily of cellular telephones and accessories.
CELLULAR FACILITIES, EQUIPMENT, AND OTHER
Cellular facilities, equipment, and other fixed assets are recorded at cost,
including labor associated with construction. Depreciation is computed using the
straight-line method over the estimated useful lives, typically three to seven
years.
INVESTMENTS IN CELLULAR OPERATIONS
The Company owns a 44.5% interest in a joint venture with SBC
Communications, Inc. (SBC). Under the terms of the joint venture agreement, the
Company recorded preferential distributions which totaled $2.6 million for the
period from June 25, 1998, the date of the PriCellular acquisition, through
December 31, 1998, and $5.3 million for the year ended December 31, 1999, which
are included in other revenues. SBC has operating control of the properties and,
accordingly, the Company accounts for its investment using the cost method. The
Company also had an option to put its joint venture interest to SBC which it
exercised for $39.1 million on December 1, 1999. The sale of the Company's
investment, which is expected to close in the first quarter of 2000, will result
in a pretax gain of approximately $3.6 million.
F-21
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OTHER ASSETS
Other assets consist of the following (in thousands):
DECEMBER 31
-----------------------
1998 1999
---------- ----------
Goodwill/cellular licenses........................... $1,175,479 $1,170,308
Investments in cellular operations................... 35,531 35,531
Deferred financing costs............................. 35,563 35,982
Restricted investments............................... 42,972 14,682
Subscriber lists..................................... 11,233 11,233
Accumulated amortization............................. (33,603) (100,579)
---------- ----------
$1,267,175 $1,167,157
========== ==========
Goodwill/cellular licenses represent the excess of purchase price over the
fair market value assigned to the net tangible and identifiable intangible
assets of the business acquired.
The Company uses a 20-year life to amortize goodwill/cellular licenses.
Accumulated amortization of goodwill/cellular licenses was approximately
$29.3 million and $88.2 million as of December 31, 1998 and 1999, respectively.
The Company periodically reviews the carrying value of goodwill/cellular
licenses to determine whether such amounts are recoverable based on undiscounted
future cash flows of the Company in order to determine whether a reduction to
fair value is necessary. The Company has determined that no such reductions were
necessary through December 31, 1999.
Deferred financing costs primarily represent underwriting and related fees
incurred in connection with the issuance of the Company's long-term debt. These
costs are amortized using the effective yield method, and the amortization
expense is included in interest expense. Accumulated amortization of deferred
financing costs was approximately $2.4 million and $6.8 million as of
December 31, 1998 and 1999, respectively.
Approximately $82.4 million of the proceeds from the issuance of the 10.5%
Senior Notes (see Note 5) was used to acquire certain treasury securities
sufficient to pay the first six scheduled interest payments of those notes.
Approximately $12.7 million of securities were sold in 1998 and $26.2 million of
securities were sold in 1999 to satisfy the interest payments with no realized
gain or loss. These securities are held in an escrow account pursuant to a
Pledge Escrow and Assignment Agreement. The restricted investments are
classified in the balance sheets according to their maturities. These treasury
securities mature through May 2001, bear interest rates from 5.625% to 6.375%,
and are considered as held to maturity.
The Company amortizes subscriber lists over a three-year period. Accumulated
amortization was approximately $1.9 million and $5.6 million as of December 31,
1998 and 1999, respectively.
REVENUE RECOGNITION
The Company earns revenue by providing access to its cellular system and for
usage of its cellular system (collectively subscriber revenues), for providing
service to customers from other cellular systems who roam through the service
area (roaming revenues), and for long-distance calls placed by the Company's
customers and those of other carriers within the Company's service area (toll
revenues).
F-22
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Access revenue is billed one month in advance and is recognized when earned.
Airtime, long-distance, and roaming revenues are recognized when the service is
rendered. Equipment sales are recognized on delivery of the equipment to the
customer.
ADVERTISING COSTS
Advertising costs relating to new subscribers are expensed in the period in
which they are incurred. Advertising expense amounted to $3.7 million and
$6.6 million for the periods ended December 31, 1998 and 1999, respectively.
COMPREHENSIVE LOSS
Net loss for the periods ended December 31, 1998 and 1999, is the same as
comprehensive loss.
CONCENTRATIONS OF CREDIT RISK
No single customer is large enough to pose a significant financial risk to
the Company. The Company maintains an allowance for losses based on the expected
collectibility of accounts receivable. Credit losses have been within
management's expectations.
PENDING ACCOUNTING STANDARD
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities," which
will be adopted by the Company effective January 1, 2001. The Statement will
require the Company to recognize all derivatives, including interest rate swaps
and collars, on the balance sheet at fair value. Derivatives that are not hedges
must be adjusted to fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in fair value of derivatives will
either be offset against the change in fair value of the hedged assets,
liabilities, or firm commitments through earnings or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
ineffective portion of a derivative's change in fair value will be immediately
recognized in earnings. The Company has terminated all of its interest rate
swaps and collars as of December 31, 1999, as described in Note 5. Accordingly,
unless other derivative instruments are acquired, management does not expect the
adoption of Statement 133 will have any effect on the results of operations or
financial position of the Company.
RECLASSIFICATIONS
Certain items have been reclassified in the December 31, 1998 consolidated
financial statements to conform to the current presentation.
3. ACQUISITION OF PRICELLULAR CORPORATION
On June 25, 1998, the Company acquired PriCellular Corporation ("PCC")
pursuant to an Agreement and Plan of Merger (the "Merger Agreement") dated
March 6, 1998, for approximately $1.5 billion. The acquisition was accounted for
utilizing the purchase method of accounting. The results of operations for PCC
are included in the Company's consolidated statements of operations beginning
July 1, 1998. The results of operations do not differ materially than if the
closing date had been used.
F-23
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
3. ACQUISITION OF PRICELLULAR CORPORATION (CONTINUED)
The allocation of the purchase price to the fair value of net assets
acquired is as follows (in thousands):
Cash........................................................ $ 51,460
Accounts receivable......................................... 29,160
Cellular facilities and equipment........................... 149,891
Investment in cellular operations........................... 35,531
Other assets................................................ 2,660
Goodwill.................................................... 1,175,479
Subscriber lists............................................ 11,233
Excess purchase price over predecessor basis................ 44,426
Total liabilities assumed................................... (29,639)
-----------
Total merger consideration.................................. 1,470,201
Less:
Cash acquired............................................. 51,460
-----------
Total cash paid............................................. $ 1,418,741
===========
PCC had been partially owned (6.39%) by a group of investors, which also own
approximately 27.2% of the Company (the 6.39% is considered to be the continuing
ownership interest). The cost to acquire the continuing ownership interest in
the net assets of PCC in excess of the predecessor basis has been reflected as a
reduction of stockholders' equity of the Company pursuant to generally accepted
accounting principles.
Nonrecurring charges recorded in the period ended December 31, 1998,
represent stay-on bonuses paid by American Cellular Corporation to retain
employees through the completion of the Merger.
4. CELLULAR FACILITIES, EQUIPMENT, AND OTHER
The components of the Company's cellular facilities, equipment, and other
include the following (in thousands):
DECEMBER 31
-------------------
1998 1999
-------- --------
Cellular facilities and equipment....................... $165,522 $209,984
Furniture and other..................................... 8,629 12,187
-------- --------
174,151 222,171
Less: Accumulated depreciation.......................... (14,359) (48,746)
-------- --------
$159,792 $173,425
======== ========
Depreciation expense was $14.4 million and $34.6 million for the periods
ended December 31, 1998 and 1999, respectively.
F-24
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
5. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
DECEMBER 31 FAIR DECEMBER 31 FAIR
1998 MARKET VALUE 1999 MARKET VALUE
------------ ------------ ------------ ------------
Borrowings under Credit Facility:
Revolver Loans............................. $ 66,000 $ 66,000 $ 66,000 $ 66,000
Tranche A Term Loans....................... 450,000 450,000 450,000 450,000
Tranche B Term Loans....................... 200,000 200,000 198,500 198,500
Tranche C Term Loans....................... 200,000 200,000 198,500 198,500
10.5% Senior Notes, due 2008 282,971 276,450(1) 283,188 316,350(1)
---------- ---------- ---------- ----------
1,198,971 $1,192,450 1,196,188 $1,229,350
========== ==========
Less: Current portion........................ (3,000) (25,608)
---------- ----------
$1,195,971 $1,170,580
========== ==========
- ------------------------
(1) Based on quoted market price.
The bank syndicated Credit Facility provides a subsidiary of the Company up
to $1 billion in four tranches ($450 million on Tranche A, $200 million for each
Tranche B and C, and up to $150 million on the Revolver). Payments under the
Credit Facility are due quarterly, in varying installments through December
2007. Additional payments are required for excess cash flow pursuant to the
Credit Facility agreement. These amounts totaled $21,608,000 in 1999 and
accordingly, are reflected as current at December 31, 1999. Interest is payable
quarterly at the adjusted prime rate, plus the applicable margin for each
tranche (0.125% for the Revolver and Tranche A, 1.5% for Tranche B, and 1.75%
for Tranche C) or LIBOR, plus the applicable margin for each tranche (1.125% for
the Revolver and Tranche A, 2.5% for Tranche B, and 2.75% for Tranche C), based
on the subsidiary consolidated leverage ratio. As of December 31, 1999, the
interest rates applicable on the tranches of the Credit Facility ranged from
approximately 6.73% to 8.35%, yielding a weighted-average rate of 7.38%. In
addition, commitment fees of 0.25% on the unutilized portion of the Revolver are
payable quarterly. At December 31, 1999, the Company had $84.0 million available
under the Revolver Loans of the Credit Facility. Substantially all of the
subsidiaries assets are pledged as collateral to the Credit Facility. The Credit
Facility contains several financial covenants related to the subsidiary's
leverage and debt service ratios and restrictions on the subsidiary's incurrence
of additional debt, payment of dividends, incurrence of liens, and payments and
transfers of net assets from the subsidiary to the Company. Restricted net
assets of the Company approximated $465.5 million and $464.1 million as of
December 31, 1998 and 1999, respectively.
On May 13, 1998, the Company issued approximately $285.0 million aggregate
principal amount of 10.5% Senior Notes (the Notes), due 2008. The Notes are
unsecured and subordinated to the Credit Facility. Approximately $82.4 million
of the proceeds were used to purchase treasury securities that were placed in an
escrow account (see Note 2). The remaining funds were used to finance the
acquisition of PCC. The Notes were issued at a price of 99.24% or
$282.8 million. The original issue discount on the Notes accretes, compounded
semiannually, to yield an effective rate of 10.63%. Interest is payable
semiannually on each May 15 and November 15. The first six scheduled interest
payments on the Notes will be funded from the securities held in escrow.
F-25
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. LONG-TERM DEBT (CONTINUED)
The Notes are subject to redemption at any time on or after May 15, 2003, at
the option of the Company, in amounts of $1,000 at the following redemption
prices, if redeemed during the 12-month period beginning May 15 of the years
indicated below:
REDEMPTION
YEAR PRICES
- ---- ----------
2003........................................................ 105.25%
2004........................................................ 103.50
2005........................................................ 101.75
Thereafter.................................................. 100.00
The holders of record receive the redemption price plus any accrued and
unpaid interest. In addition, at any time prior to May 15, 2001, the Company may
use the net cash proceeds of one or more equity offerings to redeem up to an
aggregate 35% of the principal amount of Notes originally issued at a redemption
price equal to 110.50%, plus any accrued and unpaid interest.
In the event of a change of control as defined in the Notes indenture, each
holder of Notes will have the right to require the Company to repurchase all or
any part of such holder's Notes, at a cash price equal to 101% of the aggregate
principal amount plus any accrued and unpaid interest. On January 12, 2000, ACC
Acquisition Company, an entity formed to complete the acquisition of the Company
described in Note 1, announced a tender offer to purchase all of the Company's
outstanding Notes at a redemption price as described in the Offer to Purchase
and Consent Solicitation.
As part of its interest rate risk management program, the Company utilized
interest rate swap and collar agreements to hedge variable interest rate risk
under the Credit Facility. Net interest paid or received related to such
agreements was recorded using the accrual method and as an adjustment to
interest expense. At December 31, 1998, the Company had interest rate collars
with an aggregate notional amount of $700 million, effectively fixing the
interest rate between 5.38% and 6.00%, expiring in 2001. At December 31, 1998,
the Company had an interest rate swap with a notional amount of $100 million,
effectively fixing the interest rate to 5.84%, expiring in 2001. During the
fourth quarter of 1999, the Company terminated all of its interest rate swap and
collar agreements resulting in a gain of approximately $3.3 million. The gain
has been deferred and is being amortized into income over the remaining terms of
the swap and collar agreements. The deferred gain at December 31, 1999, totaled
approximately $3.2 million.
The maturities of the Company's long-term debt are as follows (in
thousands):
2000........................................................ $ 25,608
2001........................................................ 49,000
2002........................................................ 49,000
2003........................................................ 71,500
2004........................................................ 71,500
Thereafter.................................................. 929,580
----------
$1,196,188
==========
F-26
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES
The significant components of the Company's deferred tax liabilities and
assets are as follows (in thousands):
DECEMBER 31
-------------------
1998 1999
-------- --------
Deferred tax liabilities:
Cellular facilities, equipment, and other............. $(26,055) $(27,457)
Intangible assets..................................... (5,393) (8,102)
State and local deferred taxes........................ (5,656) (6,656)
Investment in joint venture........................... (4,312) (3,065)
Other................................................. (2,571) (5,032)
Deferred tax assets:
Net operating loss carryforwards...................... 76,362 79,651
Accruals.............................................. 3,376 952
Other................................................. 1,324 3,249
-------- --------
Net deferred tax assets................................. 37,075 33,540
Valuation allowance..................................... (37,075) (33,540)
-------- --------
Net deferred tax liability.............................. $ -- $ --
======== ========
At December 31, 1999, the Company had federal tax net operating loss
carryforwards (NOLs) of approximately $207.5 million which are available to
offset future federal taxable income. NOLs begin expiring in the year 2009
through 2018 as follows: 2009--$2.0 million; 2010--$1.7 million; 2011--
$5.6 million; 2012--$22.4 million; and 2018--$175.8 million. At December 31,
1999, the Company had state tax NOLs of approximately $126.6 million.
The Company established a valuation allowance in accordance with generally
accepted accounting principles. The Company continually reviews the adequacy of
the valuation allowance and recognizes the benefits of deferred tax assets only
when management's assessment indicates that it is more likely than not that the
deferred tax assets will be realized.
A reconciliation of the income tax provision based upon the federal
statutory rate to the actual income tax provision is as follows (in thousands):
PERIOD FROM
FEBRUARY 26, 1998
(DATE OF
FORMATION) TO YEAR ENDED
DECEMBER 31 DECEMBER 31
1998 1999
------------------ ------------
Income tax benefit at federal statutory rate..... $(13,954) $(8,539)
Effect of:
State income tax expense, net of federal
benefit...................................... 344 818
Amortization of goodwill/cellular licenses..... 6,459 12,951
Increase in valuation allowance................ 7,681 --
AMT provision and other........................ -- 188
-------- -------
Income tax expense............................... $ 530 $ 5,418
======== =======
F-27
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. INCOME TAXES (CONTINUED)
Income tax expense consists of the following (in thousands):
PERIOD FROM
FEBRUARY 26, 1998
(DATE OF
FORMATION) TO YEAR ENDED
DECEMBER 31 DECEMBER 31
1998 1999
------------------ ------------
Current taxes:
Federal........................................ $ -- $ 160
State.......................................... 530 87
---- ------
Total current taxes.............................. 530 247
Deferred taxes:
Federal........................................ -- 4,000
State.......................................... -- 1,171
---- ------
Total deferred taxes............................. -- 5,171
---- ------
Total tax provision.............................. $530 $5,418
==== ======
For the year ended December 31, 1999, the Company recorded a deferred tax
provision of $5,171,000 related to the utilization of preacquisition net
operating loss carry forwards. In accordance with SFAS No. 109, "Accounting for
Income Taxes," the utilization of such preacquisition tax benefits has been
recorded as a reduction to goodwill.
7. STOCKHOLDERS' EQUITY
PREFERRED STOCK
The Company issued 3,250,000 shares of Series A Preferred Stock for gross
proceeds of $325 million. The preferred stock accrues dividends daily at the
rate of 12% per annum, compounded quarterly. Such dividends shall accrue and be
cumulative on the stated value of $100 per share. Dividends shall be payable
quarterly, in arrears, on the last day of each December, March, June, and
September. Dividends shall be paid in cash. If the payment does not occur on a
regular dividend date, dividends shall accrue to the final payment date.
The holders of Series A Preferred Stock have preference and priority over
the holders of shares of any stock of the Company ranking junior to the
Series A Preferred Stock, with respect to the payment of dividends or
distribution of assets, whether upon liquidation, dissolution, winding up, or
otherwise (Junior Stock). No dividend or distribution shall be declared or paid,
either directly or indirectly, nor shall any Junior Stock, or any warrants,
rights, calls, or options exercisable or convertible into any Junior Stock be
redeemed, purchased, retired, or otherwise acquired for any consideration,
unless as of such date the Company has paid all dividends accrued and payable to
date on the Series A Preferred Stock.
If the Company shall adopt a plan of liquidation, dissolution, or winding
up, no distribution shall be made to the holders of shares of Junior Stock,
unless the holders of Series A Preferred Stock have received in cash the stated
value, $100 per share, plus all accrued but unpaid dividends thereon.
F-28
AMERICAN CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. STOCKHOLDERS' EQUITY (CONTINUED)
The Company shall have the right to redeem outstanding shares of Series A
Preferred Stock at any time in aggregate amounts of $5 million or more at any
one time. The redemption price shall be $100 per share plus the amount of all
accrued and unpaid dividends through the redemption date.
The Series A Preferred Stock have no voting rights, except certain actions
in which each share of Series A Preferred Stock shall have one vote.
The notes receivable from two stockholders related to the Series A Preferred
Stock bear interest at 6%.
CLASS B COMMON STOCK
The Company has reserved 21,739 shares of its Class B Common Stock for
issuance to certain of its employees. As of December 31, 1998 and 1999, 19,387
and 14,568 shares are outstanding, respectively. The shares vest in equal,
annual increments over a four-year period starting on the date of issuance. The
shares are convertible into shares of Class A Common Stock on a one-to-one
basis, and automatically convert when vested. No shares were vested as of
December 31, 1998. As of December 31, 1999, 4,819 shares have vested.
OTHER
Upon termination of employment without cause, certain employees have the
right to put their Class A and B Common Stock and Series A Preferred Stock at
the fair market value, provided the Company will have the right to pay certain
amounts by issuing shares of Series A Preferred Stock.
8. LEASE COMMITMENTS
Minimum rental commitments as of December 31, 1999, for all noncancelable
operating leases, consisting principally of leases for office space, real
estate, and tower space, were as follows (in thousands):
2000........................................................ $ 5,133
2001........................................................ 4,500
2002........................................................ 3,992
2003........................................................ 3,572
2004........................................................ 2,572
Thereafter.................................................. 12,473
-------
$32,242
=======
Total rent expense amounted to approximately $2.7 million and $5.8 million
for the periods ended December 31, 1998 and 1999, respectively.
9. RELATED PARTIES
The Company obtains customer information management and billing services
from a vendor in which two of the Company's directors have an indirect and
noncontrolling ownership interest. Since June 25, 1998, services provided to the
Company by this vendor pursuant to the terms of a license agreement, totaled
$4.9 million for the period from June 25, 1998 to December 31, 1998, and
$9.3 million for the year ended December 31, 1999.
F-29
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Members of
ACC Acquisition LLC:
We have audited the accompanying consolidated balance sheet of ACC
Acquisition LLC (a Delaware Limited Liability Corporation) and subsidiaries as
of December 31, 2000 and the related consolidated statements of operations,
members' equity and cash flows for the period from February 15, 2000 through
December 31, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall consolidated
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
ACC Acquisition LLC and subsidiaries as of December 31, 2000, and the results of
their operations and their cash flows for the period from February 15, 2000
through December 31, 2000, in conformity with accounting principles generally
accepted in the United States.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma,
March 9, 2001
F-30
ACC ACQUISITION LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2000
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 15,123,142
Accounts receivable, net of allowance for doubtful
accounts of $1,810,265.................................... 48,208,271
Inventory................................................. 8,372,549
Deferred income taxes..................................... 7,170,411
Prepaid expenses and other................................ 1,408,471
--------------
Total current assets.................................... 80,282,844
--------------
PROPERTY, PLANT AND EQUIPMENT, net.......................... 192,986,089
--------------
OTHER ASSETS:
Wireless license acquisition costs, net of accumulated
amortization of $50,669,623............................. 1,149,419,497
Customer List, net of accumulated amortization of
$8,444,482.............................................. 41,555,518
Goodwill, net of accumulated amortization of
$53,203,817............................................. 1,175,251,171
Deferred financing costs and other, net of accumulated
amortization of $3,426,409.............................. 30,607,705
--------------
Total other assets...................................... 2,396,833,891
--------------
Total assets............................................ $2,670,102,824
==============
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 30,100,531
Accounts payable--affiliates.............................. 11,805,894
Accrued expenses.......................................... 15,204,735
Accrued interest payable.................................. 11,596,175
Deferred revenue and customer deposits.................... 10,007,706
Current portion of long-term debt......................... 27,465,000
--------------
Total current liabilities............................... 106,180,041
--------------
OTHER LIABILITIES:
Payables--affiliates...................................... 9,193,025
Long-term debt, net of current portion.................... 1,650,535,000
Deferred tax liabilities.................................. 238,438,146
MEMBERS' EQUITY:
Members' equity........................................... 765,000,000
Retained deficit.......................................... (99,243,388)
--------------
Total members' equity................................... 665,756,612
--------------
Total liabilities and members' equity................... $2,670,102,824
==============
The accompanying notes are an integral part of this consolidated balance sheet.
F-31
ACC ACQUISITION LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD FROM FEBRUARY 15, 2000 THROUGH DECEMBER 31, 2000
OPERATING REVENUE:
Service revenue........................................... $ 190,176,142
Roaming revenue........................................... 131,091,186
Equipment sales and other................................. 15,569,192
-------------
Total operating revenue................................. 336,836,520
OPERATING EXPENSES:
Cost of service........................................... 64,468,139
Cost of equipment......................................... 28,248,754
Marketing and selling..................................... 38,434,449
General and administrative................................ 40,390,640
Depreciation and amortization............................. 154,797,328
-------------
Total operating expenses................................ 326,339,310
OPERATING INCOME............................................ 10,497,210
OTHER INCOME (EXPENSE):
Interest expense.......................................... (140,970,478)
Other income, net......................................... 536,308
-------------
LOSS BEFORE INCOME TAXES.................................... (129,936,960)
INCOME TAX BENEFIT.......................................... 30,693,572
-------------
NET LOSS.................................................... $ (99,243,388)
=============
The accompanying notes are an integral part of this consolidated financial
statement.
F-32
ACC ACQUISITION LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF MEMBERS' EQUITY
FOR THE PERIOD FROM FEBRUARY 15, 2000 THROUGH DECEMBER 31, 2000
MEMBERS' RETAINED
EQUITY DEFICIT TOTAL
------------ ------------ ------------
February 15, 2000........................................... $ -- $ -- $ --
Capital Contribution........................................ 765,000,000 -- 765,000,000
Net loss.................................................... -- (99,243,388) (99,243,388)
------------ ------------ ------------
December 31, 2000........................................... $765,000,000 $(99,243,388) $665,756,612
============ ============ ============
The accompanying notes are an integral part of this consolidated financial
statement.
F-33
ACC ACQUISITION LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM FEBRUARY 15, 2000 THROUGH DECEMBER 31, 2000
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (99,243,388)
Adjustments to reconcile net loss to net cash provided by
operating activities--
Depreciation and amortization........................... 154,797,328
Amortization of bond premium and financing costs........ 3,426,409
Deferred income taxes and investment tax credits, net... (30,515,642)
Other................................................... (139,632)
Changes in current assets and liabilities--
Accounts receivable....................................... (15,856,758)
Inventory................................................. (4,159,944)
Prepaid expenses and other................................ 220,640
Accounts payable.......................................... 23,257,550
Accounts payable-affiliates............................... 11,805,894
Accrued expenses.......................................... (8,693,386)
Deferred revenue and customer deposits.................... 3,566,840
---------------
Net cash provided by operating activities............... 38,465,911
---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures...................................... (61,169,628)
Other investing activities................................ 220,457
Acquisition of American Cellular Corporation.............. (2,440,000,000)
Cash acquired with American Cellular Corporation.......... 25,413,377
---------------
Net cash used in investing activities................... (2,475,535,794)
---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt.............................. 1,789,000,000
Repayments of long-term debt.............................. (111,000,000)
Advances from affiliate for capital expenditures.......... 9,193,025
Capital contribution...................................... 765,000,000
---------------
Net cash provided by financing activities............... 2,452,193,025
---------------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 15,123,142
CASH AND CASH EQUIVALENTS, beginning of year................ --
---------------
CASH AND CASH EQUIVALENTS, end of year...................... $ 15,123,142
===============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for--
Interest net of amounts capitalized..................... $ 124,274,707
===============
The accompanying notes are an integral part of this consolidated financial
statement.
F-34
ACC ACQUISITION LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION:
ACC Acquisition LLC ("the Company"), a limited liability company equally
owned by AT&T Wireless and Dobson Communications, was originally formed on
February 15, 2000, to acquire the operations of American Cellular Corporation
("American") and its subsidiaries. On February 25, 2000, the Company acquired
American for $2.44 billion. The acquisition was accounted for as a purchase,
therefore, the operations of American are included in the accompanying financial
statements beginning February 25, 2000.
2. SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the accounts of
all subsidiaries. For financial reporting purposes, the Company reports 100% of
revenues and expenses for the markets for which it provides wireless
telecommunications service. Significant intercompany accounts and transactions
have been eliminated.
BUSINESS SEGMENTS
The Company operates in one business segment pursuant to Statement of
Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an
Enterprise and Related Information."
CASH AND CASH EQUIVALENTS
Cash and cash equivalents on the accompanying consolidated balance sheet
includes cash and short-term investments with original maturities of three
months or less.
INVENTORY
The Company values its inventory at the lower of cost or market on the
first-in, first-out method of accounting.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company assesses potential impairments of long-lived assets, certain
identifiable intangibles and goodwill when there is evidence that events or
changes in circumstances indicate that an asset's carrying value may not be
recoverable. An impairment loss is recognized when the sum of the expected
future net cash flows is less than the carrying amount of the asset. The amount
of any recognized impairment would be based on the estimated fair value of the
asset subject to impairment compared to the carrying amount of such asset. No
such losses have been identified by the Company.
WIRELESS LICENSE ACQUISITION COSTS
Wireless license acquisition costs consist of amounts paid to acquire FCC
licenses to provide wireless services. Wireless license acquisition costs are
being amortized on a straight-line basis over twenty years. Amortization expense
of $50,669,623 was recorded for the period from February 15, 2000 through
December 31, 2000.
F-35
ACC ACQUISITION LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
CUSTOMER LIST
Customer list consists of amounts paid to acquire customer lists. Customer
list acquisition costs are being amortized on a straight-line basis over five
years. Amortization expense of $8,444,482 was recorded for the period from
February 15, 2000 through December 31, 2000.
GOODWILL
Goodwill is being amortized on a straight-line basis over twenty years.
Amortization expense related to goodwill of $53,203,817, was recorded for the
period from February 15, 2000 through December 31, 2000.
The ongoing value and remaining useful lives of intangible and other
long-term assets are subject to periodic evaluation and the Company currently
expects the carrying amounts to be fully recoverable.
DEFERRED FINANCING COSTS
Deferred financing costs consist primarily of fees incurred to secure
long-term debt. Deferred financing costs are being amortized on a straight-line
basis over the nine-year term of the debt and recorded as interest expense.
Interest expense related to the amortization of these costs of $3,426,409, was
recorded for the period from February 15, 2000 through December 31, 2000.
ADVERTISING COSTS
Advertising costs are expensed as incurred and are included as marketing and
selling expenses in the accompanying consolidated statement of operations.
INCOME TAXES
Income taxes are allocated among the various entities included in the
consolidated group, as agreed, based on the ratio of each entity's taxable
income (loss) to consolidated taxable income (loss). Deferred income taxes
reflect the estimated future tax effects of differences between financial
statement and tax bases of assets and liabilities at year-end.
REVENUE RECOGNITION
The Company records service revenues over the period they are earned. The
cost of providing service is recognized as incurred. Airtime and toll revenue
are billed in arrears. The Company accrued estimated unbilled revenues for
services provided of approximately $3,375,565 as of December 31, 2000, which is
included in accounts receivable in the accompanying consolidated balance sheet.
Monthly access charges are billed in advance and are reflected as deferred
revenue on the accompanying consolidated balance sheet. Equipment sales are
recognized when the equipment is delivered to the customer. Subscriber
acquisition costs (primarily commissions and losses on equipment sales) are
expensed as incurred.
As of December 31, 2000, the Company implemented SEC Staff Accounting
Bulletin ("SAB") No. 101 "Revenue Recognition." The impact of implementing
SAB 101 was not material to the Company's revenues or results of operations for
the period from February 15, 2000 through December 31, 2000.
F-36
ACC ACQUISITION LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
USE OF ESTIMATES
The preparation of these consolidated financial statements in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes. Actual results
could differ from those estimates.
SIGNIFICANT CONCENTRATIONS
In connection with providing wireless services to customers of other
wireless carriers, the Company has contractual agreements with those carriers
which provide for agreed-upon billing rates between the parties. Approximately
73% of the Company's wireless roaming revenue was earned from three wireless
carriers during the period from February 15, 2000 through December 31, 2000.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In July 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Derivatives and Hedging ("SFAS 133"). SFAS 133 establishes uniform hedge
accounting criteria for all derivatives requiring companies to formally
document, designate and assess the effectiveness of transactions that receive
hedge accounting. Under SFAS 133, derivatives will be recorded in the balance
sheet as either an asset or liability measured at its fair value, with changes
in the fair value recognized as a component of comprehensive income or in
current earnings. SFAS 133, as amended by SFAS 137, Derivatives and
Hedging-Deferral of the Effective Date of FASB Statement No. 133, will be
effective for fiscal years beginning after June 15, 2000. In addition,
SFAS 138, was issued in June 2000 as amendment to SFAS 133 and addresses issues
causing implementation difficulties. On January 1, 2001, in accordance with
SFAS 133, the Company recorded a liability and a net loss to comprehensive
income totaling $15.9 million relating to its interest rate hedges.
3. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are recorded at cost. Newly constructed
wireless systems are added to property, plant and equipment at cost, which
includes contracted services, direct labor, materials overhead and capitalized
interest. For the period from February 15, 2000 through December 31, 2000
interest capitalized was not material. Existing property, plant and equipment
purchased through acquisitions is recorded at its fair value at the date of the
purchase. Repairs, minor replacements and maintenance are charged to operations
as incurred. The provisions for depreciation are provided using the
straight-line method based on the estimated useful lives of the various classes
of depreciable property. Depreciation expense totaling $42,667,136 was recorded
during the period from February 15, 2000 through December 31, 2000.
F-37
ACC ACQUISITION LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. PROPERTY, PLANT AND EQUIPMENT: (CONTINUED)
Listed below are the major classes of property, plant and equipment and
their estimated useful lives, in years, as of December 31, 2000:
USEFUL LIFE 2000
----------- ------------
Wireless systems and equipment...................... 3-10 $181,935,969
Buildings and improvements.......................... 5-40 9,675,578
Vehicles, aircraft and other work equipment......... 3-10 1,570,909
Furniture and office equipment...................... 5-10 12,509,956
Plant under construction............................ 28,915,125
Land................................................ 1,045,688
------------
Property, plant and equipment..................... 235,653,225
Accumulated depreciation............................ (42,667,136)
------------
Property, plant and equipment, net................ $192,986,089
============
4. LONG-TERM DEBT:
On February 25, 2000, the Company obtained a $1.75 billion credit facility
to retire existing debt and complete the acquisition of American.
At December 31, 2000, this credit facility included a $300.0 million
revolving credit facility and $1.45 billion of term loan facilities. Interest on
the revolving credit facility and the term loan facilities is variable and is
based on a prime rate or a LIBOR formula, and has ranged in total between 8.5%
and 10.1% since inception. This credit facility is collateralized by
substantially all of the assets of the Company.
The Company's credit facility consists of the following:
WEIGHTED AVERAGE
INTEREST RATE FOR
MAXIMUM AMOUNT OUTSTANDING THE YEAR ENDED
FACILITY AVAILABILITY AT DECEMBER 31, 2000 DECEMBER 31, 2000 TERMINATION DATE
- -------- -------------- --------------------- ------------------ ----------------
Revolver.................... $ 300,000,000 $ 228,000,000 9.0% March 31, 2007
Term A...................... $ 700,000,000 $ 700,000,000 9.5% March 31, 2007
Term B...................... $ 350,000,000 $ 350,000,000 10.1% March 31, 2008
Term C...................... $ 400,000,000 $ 400,000,000 9.8% March 31, 2009
-------------- --------------
TOTAL....................... $1,750,000,000 $1,678,000,000
============== ==============
The Company's credit facility imposes a number of restrictive covenants
that, among other things, limit the Company's ability to incur additional
indebtedness, create liens, make capital expenditures and pay dividends. At
December 31, 2000, the Company was in violation of its interest coverage ratio
covenant. Subsequent to year-end, the Company received a waiver from its lenders
for this covenant violation. On March 2, 2001, the Company and its lenders
agreed to an amendment to its credit facility, which will become effective upon
the permanent repayment of $200 million of the term loans under its credit
facility with the proceeds of its offering of 9 1/2% senior subordinated notes
(see Note 12). Management expects that the Company will be in compliance with
the revised covenants under the amended credit facility throughout 2001.
F-38
ACC ACQUISITION LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT: (CONTINUED)
Minimum future payments of long-term debt for years subsequent to
December 31, 2000, are as follows:
2001........................................................ $ 27,465,000
2002........................................................ 59,234,000
2003........................................................ 89,383,000
2004........................................................ 119,533,000
2005........................................................ 149,683,000
2006 and thereafter......................................... 1,232,702,000
--------------
$1,678,000,000
==============
INTEREST RATE HEDGES
The Company pays interest on its bank credit facility based on a variable
factor, such as LIBOR or prime rate. The Company will from time-to-time enter
into interest rate hedge contracts to reduce exposure against rising interest
rates.
During 2000, the Company entered into a $1.03 billion interest rate hedge
contract on its credit facility whereby the interest rate on the facility is
effectively fixed at a rate of 7.3% plus a factor based on the Company's
leverage (total weighted average rate of approximately 9.6% as of December 31,
2000). The agreement expires in June, 2001. The Company has also entered into an
interest rate hedge contract which expires June 30, 2002 which sets the interest
rate on $1.03 billion of debt at a rate between 6.7% and 8.0%, depending upon
the LIBOR rate on July 1, 2001.
5. MEMBERS' EQUITY:
On February 25, 2000, AT&T Wireless and Dobson Communications contributed
$765.0 million to the Company to complete its acquisition of American.
6. ACQUISITION:
On February 25, 2000, the Company acquired American for $2.44 billion, of
which $765.0 million was paid in cash to American, and the remaining
$1.675 billion was financed by the Company's new credit facility, as described
in Note 4. This acquisition was accounted for as a purchase. Accordingly,
F-39
ACC ACQUISITION LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. ACQUISITION: (CONTINUED)
the cost of the acquisition was allocated to the acquired assets and
liabilities. The allocation of the $2.44 billion of purchase price was the
following:
Current assets.............................................. $ 63,606,606
Property, plant and equipment............................... 174,511,971
Wireless license costs...................................... 1,200,089,119
Customer list............................................... 50,000,000
Goodwill.................................................... 1,228,454,988
Other assets................................................ 33,898,836
Current liabilities......................................... (48,778,143)
Deferred tax liabilities.................................... (261,783,377)
--------------
$2,440,000,000
==============
7. EMPLOYEE BENEFIT PLANS:
The Company is managed by Dobson Communications Corporation. Dobson
Communications Corporation maintains a 401(k) plan (the "Plan") in which
substantially all employees of the Company are eligible to participate. The Plan
requires the Company to match 100% of employees' contributions up to 4% of their
salary. Contributions to the Plan charged to the Company's operations were
$308,533 for the period from February 15, 2000 through December 31, 2000 and
were recorded as general and administrative expenses in the accompanying
statement of operations.
8. TAXES:
The benefit for income taxes for the period from February 15, 2000 through
December 31, 2000, was as follows:
Federal income taxes--
Deferred.................................................... $(26,088,319)
State income taxes (current and deferred)................... (4,605,253)
------------
Total income tax benefit.................................. $(30,693,572)
============
The benefit for income taxes for the period from February 15, 2000 through
December 31, 2000, differs from amounts computed at the statutory rate as
follows:
Income taxes at statutory rate (34%)........................ $(44,178,566)
State income taxes, net of Federal income tax effect........ (7,796,218)
Goodwill amortization, for which no benefit is recognized... 21,281,527
Other, net.................................................. (315)
------------
Total..................................................... $(30,693,572)
============
F-40
ACC ACQUISITION LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. TAXES: (CONTINUED)
The tax effects of the temporary differences which gave rise to deferred tax
assets and liabilities at December 31, 2000, was as follows:
Current deferred income taxes:
Allowance for doubtful accounts receivable................ $ 724,120
Accrued liabilities....................................... 6,446,291
-------------
Net current deferred income tax asset................... 7,170,411
-------------
Noncurrent deferred income taxes:
Fixed assets.............................................. (30,843,424)
Intangible assets......................................... (331,530,344)
Tax credits and carryforwards............................. 123,935,622
-------------
Net noncurrent deferred income tax liability.............. (238,438,146)
-------------
Total deferred income taxes............................. $(231,267,735)
=============
At December 31, 2000, the Company had NOL carryforwards of approximately
$310 million, which may be utilized to reduce future Federal income taxes
payable. These NOL carryforwards begin to expire in 2009.
9. RELATED PARTY TRANSACTIONS:
At December 31, 2000, the Company had payables of $20,998,919 due to related
parties. Of this amount, $9.2 million represents capital expenditures paid by
Dobson Communications on behalf of the Company for its newly acquired PCS market
in northeast Oklahoma (see Note 12). The remaining amount represents other
expenditures made by Dobson Communications on behalf of the Company.
Dobson Communications provides certain services to the Company in accordance
with a management agreement. Certain costs incurred by Dobson Communications are
shared-costs of the Company and Dobson Communications. These shared costs are
allocated between the Company and Dobson Communications primarily based on each
Companies' pro rata population coverage and subscribers.
10. COMMITMENTS:
Effective June 30, 2000, the Company entered into an equipment supply
agreement with Nortel Networks Inc., in which the Company is required to
purchase approximately $45.2 million of cell site and switching equipment
between June 30, 2000 and December 31, 2002. Of the commitment, approximately
$23.2 million remained at December 31, 2000.
F-41
ACC ACQUISITION LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. COMMITMENTS: (CONTINUED)
Future minimum lease payments required under operating leases that have an
initial or remaining noncancellable lease term in excess of one year at
December 31, 2000, are as follows:
2001........................................................ $4,885,790
2002........................................................ 3,844,501
2003........................................................ 2,735,788
2004........................................................ 1,843,171
2005........................................................ 1,054,936
2006 and thereafter......................................... 1,338,783
Lease expense under the above leases was approximately $3,833,777 for the
period from February 15, 2000 through December 31, 2000.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS:
Unless otherwise noted, the carrying value of the Company's financial
instruments approximates fair value. The Company estimates the fair value of its
long-term debt based on quoted market prices for publicly traded debt or on the
present value of the cash flow stream utilizing the current rates available to
the Company for debt with similar terms and remaining maturation. The Company
estimates the fair value of its interest rate hedge based on the current market
value of the hedge instrument.
Indicated below are the carrying amounts and estimated fair values of the
Company's financial instruments as of December 31:
2000
--------------------------------
CARRYING AMOUNT FAIR VALUE
--------------- --------------
Revolving credit facilities................... $1,678,000,000 $1,678,000,000
Interest rate hedge........................... -- (15,850,608)
12. SUBSEQUENT EVENTS:
On January 18, 2001, the Company completed a transaction whereby certain
assets and PCS licenses with an estimated population of 250,000 were contributed
to the Company. The licensed area is located in nine counties of northeast
Oklahoma and southeast Kansas. Operations in this licensed area were launched in
February, 2001.
On March 9, 2001, American sold $450.0 million in 9.5% senior subordinated
notes at a discount of $3,334,500. The proceeds from this offering will be used
to reduce debt under the Company's existing credit agreement (see Note 4) and to
fund certain interest payments to be made on the senior subordinated notes.
F-42
REPORT OF INDEPENDENT AUDITORS
Board of Directors
PriCellular Corporation
We have audited the consolidated statements of operations, stockholders'
equity, and cash flows of PriCellular Corporation and subsidiaires for the six
months ended June 30, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of operations
and cash flows of PriCellular Corporation and subsidiaries for the six months
ended June 30, 1998, in conformity with accounting principles generally accepted
in the United States.
ERNST & YOUNG LLP
Chicago, Illinois
March 15, 1999
F-43
PRICELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
SIX MONTHS ENDED
JUNE 30, 1998
----------------
REVENUES
Service revenue............................................. $ 66,394
Roaming revenue............................................. 35,494
Equipment sales............................................. 2,868
Other....................................................... 3,914
----------
108,670
COSTS AND EXPENSES
Cost of cellular service.................................... 20,911
Cost of equipment sold...................................... 5,365
Marketing and selling....................................... 12,220
General and administrative.................................. 18,010
Depreciation and amortization............................... 17,553
Nonrecurring charges........................................ 4,889
----------
78,948
----------
Operating income............................................ 29,722
OTHER INCOME (EXPENSE)
Gain (loss) on sale of investments in cellular operations... (133)
Interest expense............................................ (38,955)
Interest income............................................. 1,570
Other income, net........................................... 1,510
----------
(36,008)
----------
Net loss.................................................... $ (6,286)
==========
Net loss after adjustment for accrued preferred stock
dividend.................................................. $ (9,643)
==========
Basic and diluted loss per common share..................... $ (0.28)
==========
Weighted-average number of common shares used in computation
of basic and diluted loss per common share................ 34,959,000
==========
See notes to consolidated financial statements.
F-44
PRICELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
SERIES A CLASS A CLASS B
PREFERRED STOCK COMMON STOCK COMMON STOCK ADDITIONAL
------------------- ------------------- ------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
-------- -------- -------- -------- -------- -------- ---------- ------------
BALANCE--DECEMBER 31, 1997... 96 $ 1 21,825 $ 218 13,134 $ 131 $180,704 $(46,874)
Conversion of Class B common
stock to Class A common
stock...................... -- -- 163 2 (163) (2) -- --
Net loss for the six months
ended June 30, 1998........ -- -- -- -- -- -- -- (6,286)
------ -------- ------- ------ -------- -------- -------- --------
BALANCE--JUNE 30, 1998....... 96 $ 1 21,988 $ 220 12,971 $ 129 $180,704 $(53,160)
====== ======== ======= ====== ======== ======== ======== ========
STOCKHOLDERS'
EQUITY
-------------
BALANCE--DECEMBER 31, 1997... $134,180
Conversion of Class B common
stock to Class A common
stock...................... --
Net loss for the six months
ended June 30, 1998........ (6,286)
--------
BALANCE--JUNE 30, 1998....... $127,894
========
See notes to consolidated financial statements.
F-45
PRICELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
SIX MONTHS
ENDED
JUNE 30,
1998
----------
OPERATING ACTIVITIES
Net loss.................................................... $ (6,286)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization............................. 17,553
Interest on Senior Subordinated and Convertible Discount
Notes and amortization of deferred financing costs...... 16,137
Loss on sale of investments in cellular operations........ 133
Amortization of covenant not to compete................... (1,625)
Provision for losses on accounts receivable............... 456
Changes in operating assets and liabilities, net of
acquisitions:
Accounts receivable..................................... (9,577)
Inventory............................................... 1,526
Other current assets.................................... (457)
Accounts payable and accrued expenses................... (8,653)
Deferred revenue........................................ (37)
Other current liabilities............................... 1,547
Other, net.............................................. 948
--------
Net cash provided by operating activities................... 11,665
INVESTING ACTIVITIES
Purchase of fixed assets.................................... (20,517)
Proceeds from sale of investments in cellular operations.... 1,352
Acquisition of cellular operations, net of cash acquired.... (60,185)
Investment in cellular operations........................... (977)
--------
Net cash used in investing activities....................... (80,327)
FINANCING ACTIVITIES
Payments for deferred financing costs....................... (1,235)
Proceeds from issuance of long-term debt.................... 60,000
--------
Net cash provided by (used in) financing activities......... 58,765
--------
Decrease in cash and cash equivalents....................... (9,897)
Cash and cash equivalents at beginning of period............ 61,357
--------
Cash and cash equivalents at end of period.................. $ 51,460
========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest.................................................. $ 22,819
Income taxes.............................................. 479
See notes to consolidated financial statements.
F-46
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
PriCellular Corporation and subsidiaries, including its wholly owned
subsidiary, PriCellular Wireless Corporation (Wireless) (collectively, the
Company), is principally engaged in the ownership and operation of cellular
telephone systems primarily in rural areas of the Midwestern and Eastern
portions of the United States. The Company operates in one business segment
pursuant to SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information."
The consolidated financial statements include the accounts of the Company
and its wholly owned and majority owned subsidiaries. The assets, liabilities,
and results of operations of entities in which the Company has a controlling
interest have been consolidated. All significant intercompany balances and
transactions have been eliminated.
On June 25, 1998, American Cellular Corporation acquired all of the
operations of the Company pursuant to an agreement and plan of merger. For
further discussion of the merger see Note 7. The accompanying consolidated
financial statements include results of operations of the Company through June
30, 1998, the Company's normal month-end. The results of operations of the
Company do not differ materially from if the actual closing date of the merger
had been used.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
FIXED ASSETS
Cellular facilities, equipment, and other fixed assets are recorded at cost,
including labor associated with construction. Depreciation is computed using the
straight-line method over the estimated useful lives, typically three to seven
years. Depreciation expense for the six months ended June 30, 1998, was $10.2
million.
INVESTMENTS IN CELLULAR OPERATIONS
The Company has a 44.5% interest in a joint venture with SBC Communications,
Inc. (SBC). Under the terms of the joint venture agreement, the Company receives
preferential distributions in the first four years of the joint venture
increasing from $3.3 million in 1996 to $5.8 million in 1999. Such preferential
distributions are guaranteed by SBC. The Company also has an option to put its
joint venture interest to SBC at prices escalating to $39.0 million in 1999. SBC
has operating control of the properties and has certain rights to purchase the
Company's interests on November 30, 1999. The Company's guaranteed preferential
distributions from the joint venture for the six months ended June 30, 1998,
amounted to $2.6 million, which is included in other revenues.
F-47
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CELLULAR LICENSES
Cellular licenses represent the excess of purchase price over the underlying
fair value of assets acquired, and are being amortized on a straight-line basis
over 40 years. Amortization expense for the six months ended June 30, 1998, was
$7.3 million.
The Company periodically reviews the carrying value of cellular licenses to
determine whether such amounts are recoverable based on undiscounted future cash
flows of the market to which the license relates and by comparing the cellular
license to the estimated market value of the cellular system in order to
determine whether a reduction to fair value is necessary. The Company has
determined that no such reductions were necessary through June 30, 1998.
DEFERRED FINANCING COSTS
Deferred financing costs primarily represent underwriting and related fees
incurred in connection with the issuance of the Company's long-term debt. These
costs are being amortized over the terms of the related debt and the
amortization expense is included in interest expense.
REVENUE RECOGNITION
The Company earns revenue by providing access to its cellular system, for
usage of its cellular system for long-distance calls placed by the Company's
customers and those of other carriers within the Company's service area, and for
providing service to customers from other cellular systems who roam through the
service area. Access revenue is billed one month in advance and is recognized
when earned. Airtime, long-distance, and roaming revenues are recognized when
the service is rendered. Equipment sales are recognized on delivery of the
equipment to the customer.
ADVERTISING COSTS
Marketing costs relating to new subscribers are expensed in the period in
which they are incurred. Advertising expense amounted to $2.5 million for the
six months ended June 30, 1998.
NET LOSS PER SHARE
In computing dilutive loss per share for the six months ended June 30, 1998,
no effect has been given to options outstanding under the Company's 1994 Stock
Option Plan, outstanding warrants to purchase Class B common stock, the 10.75%
Senior Subordinated Convertible Discount Notes, or the Cumulative Convertible
Preferred Stock, since the exercise of any of these items would have an
antidilutive effect on net loss per share.
COMPREHENSIVE INCOME
In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income."
Net loss for the six months ended June 30, 1998, is the same as comprehensive
loss defined pursuant to SFAS No. 130.
F-48
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONCENTRATIONS OF CREDIT RISK
No single customer is large enough to pose a significant financial risk to
the Company. The Company maintains an allowance for losses based on the expected
collectibility of accounts receivable. Credit losses have been within
management's expectations.
2. ACQUISITIONS AND DIVESTITURES
The following acquisition was completed in 1998 and was accounted for
utilizing the purchase method of accounting. The results of operations of the
acquired entity is included in the Company's consolidated results of operations
from the date of acquisition.
ACQUISITION PURCHASE NET POPS
MARKET DATE PRICE ACQUIRED
- ------ -------------------------------------- -------------- ---------
(IN THOUSANDS)
1998
TN-4 RSA January 15, 1998...................... $ 73,000 264,000
The pro forma unaudited condensed consolidated results of operations
assuming the TN-4 RSA acquisition was consummated as of January 1, 1998, are as
follows (in thousands, except per share amounts):
SIX MONTHS
ENDED
JUNE 30
1998
----------
Revenues.................................................... $108,670
========
Net loss after adjustment for accrued preferred stock
dividend.................................................. $ (9,643)
========
Basic and diluted loss per common share..................... $ (0.28)
========
The Company made the following disposition of cellular properties and interests
in 1998 (in thousands):
SALES GAIN
DATE DESCRIPTION PRICE (LOSS)
- ---- ----------- -------- --------
1998
June Sale of Minority Pops............................... $ 1,352 $ (133)
=======
3. LONG-TERM DEBT
On January 15, 1998, the Company borrowed $60.0 million under a Senior
Secured Reducing Revolver (the Borrowing). The Borrowing matures eight years
from the closing date with repayment commencing in the year 2001 with final
payment in the year 2005 in amounts ranging from 10.0% to
F-49
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
3. LONG-TERM DEBT (CONTINUED)
25.0%. Interest will be charged at the LIBOR rate plus a premium ranging from
1.500% to 2.250% depending on the ratio of debt to cash flow as defined. The
Borrowing requires the attainment by the Company of certain financial ratios in
order to maintain the permitted indebtedness. The Borrowing is secured by the
assets of Kyle Cellular, a wholly owned subsidiary of the Company.
The Company's long-term debt includes restrictions on Wireless' incurrence
of additional debt, the payment of dividends, the incurrence of liens, and on
payments and transfer of net assets from Wireless to the Company. Restricted net
assets of the Company as of June 30, 1998, approximated $175.6 million.
The maturities of the Company's long-term debt for each of the periods
subsequent to June 30, 1998, are as follows (in thousands):
Six months ending December 31, 1998......................... $ --
Years ending December 31:
1999...................................................... --
2000...................................................... --
2001...................................................... 169,500
2002...................................................... 10,500
2003...................................................... 211,101
Thereafter................................................ 251,054
--------
Total................................................... $642,155
========
4. INCOME TAXES
At June 30, 1998, the Company had tax net operating loss carryforwards
(NOLs) of approximately $43.3 million, which are available to offset future
taxable income. NOLs begin expiring in the year 2007 through 2018 as follows:
2007--$1.3 million, 2009--$2.7 million, 2010--$1.7 million, 2011--$5.6 million,
2012--$20.8 million and 2018--$11.2 million.
The Company established a valuation allowance in accordance with the
provisions of SFAS No. 109, "Accounting for Income Taxes." The Company
continually reviews the adequacy of the valuation allowance and recognizes the
benefits of deferred tax assets only as assessment indicates that it is more
likely than not that the deferred tax assets will be realized.
5. STOCKHOLDERS' EQUITY
COMMON STOCK
In January 1996, Price Communications, an affiliate of the Company, acquired
warrants which are convertible directly into 1,820,000 shares of Class B common
stock from former executives of an acquired company. The effective exercise
price is $5.42 per share of Class B common stock at June 30, 1998.
F-50
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
5. STOCKHOLDERS' EQUITY (CONTINUED)
On February 4, 1997, the Company purchased and retired, under separate
authorization of its Board of Directors, 1,948,052 shares of its Class A common
stock from Horizon, which Horizon received in connection with the Kentucky
Cluster acquisition.
In July 1997, the Company repurchased and retired 3,994,945 shares of its
Class B common stock from Aeneas Venture Corp., an affiliate of Harvard Private
Capital Group, Inc. (Harvard) at $9.00 per share, which was the current market
price at the date of the transaction. In addition, 56,275 warrants to purchase
Class B common stock, also owned by Harvard, were redeemed at a net cash
expenditure of $3.83 per warrant ($9.00 current market price less the exercise
price of $5.17).
In November 1997, Robert Price, Chairman of the Board of the Company,
exercised options for 742,188 shares of the Company's Class A common stock.
Subsequently, the Company purchased from Robert Price 200,000 of the 742,188
shares issued at market ($11.25 per share), and simultaneously retired the same
shares.
Shares of Class A common stock reserved for issuance at June 30, 1998 are as
follows (in thousands):
Options issued to employees................................. 1,477
Options reserved for issuance............................... 401
Warrants.................................................... 1,820
Shares reserved for convertible securities.................. 32,856
------
36,554
======
PREFERRED STOCK
The Company issued Series A Cumulative Convertible Preferred Stock, par
value $.01 per share (the Series A Preferred Stock) for gross proceeds of
$80 million. The preferred stock accrues dividends at the rate of 6.25% per
annum compounded quarterly. Such dividends will not be paid in cash but will
accrue and be calculated on the face value of $1,000 per share. The cumulative
accrued dividends are $16.1 million at June 30, 1998. The number of shares of
Class A common stock into which the Series A Preferred Stock is convertible is
equal to the quotient obtained by dividing the conversion value (initially $83.2
million and increasing to $96.0 million by the third anniversary of the original
date of issuance or earlier upon the occurrence of certain contingencies, plus,
in each case, accrued dividends through the date of conversion or, upon the
occurrence of certain contingencies, through the fifth anniversary of the date
of issuance) by the conversion price ($8.83 per share subject to adjustment).
The holder of each share of Series A Preferred Stock is entitled to the number
of votes equal to the number of shares of Class A common stock the holder would
receive upon conversion.
STOCK OPTION PLAN
Under the Company's 1994 Stock Option Plan (the Plan), the Board of
Directors can grant options to purchase up to 2,636,000 shares of Class A common
stock to certain eligible employees and directors (Class A shares are entitled
to one vote per share). During 1996, the Company registered approximately
2,636,000 shares of Class A common stock reserved for issuance under the Plan.
The
F-51
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
5. STOCKHOLDERS' EQUITY (CONTINUED)
Plan provides that the option price cannot be less than the fair market value of
the stock on the date of grant. All options granted subsequent to January 1,
1995 have a 10 year term and vest and become fully exercisable at the end of
three years of continued employment.
The Company has adopted SFAS No. 123, "Accounting for Stock-Based
Compensation." However, as permitted under SFAS No. 123, the Company continues
to apply Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," in accounting for its stock option plan. Under APB No. 25,
because the number of options is fixed and the option price is market price at
the date of grant, no compensation expense is required. Pro forma information
regarding net loss and basic and diluted loss per common share is required by
SFAS No. 123, and has been determined as if the Company has accounted for its
employee stock options under the fair value method using the Black-Scholes
valuation method.
The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
The fair value for the Company's options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for 1996 and 1997: risk free interest rate of 6.25%; dividend yield
of 0%; a volatility factor of .480 for 1996 and .323 for 1997 and a
weighted-average expected life of the options of four years. There were no
option grants in 1998.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information follows (in thousands, except per share):
JUNE 30,
1998
--------
Net loss after adjustment for accrued preferred stock
dividend:
As reported............................................... $ (9,643)
Pro forma................................................. (10,276)
Basic and diluted loss per common share:
As reported............................................... (0.28)
Pro forma................................................. (0.29)
Because compensation expense associated with option grants is recognized
over the vesting period, the initial impact of applying FAS 123 on pro forma net
loss is not representative of the potential impact on pro forma net loss in
future years when the effect of recognition of a portion of compensation expense
from multiple awards would be reflected.
F-52
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1998
5. STOCKHOLDERS' EQUITY (CONTINUED)
The weighted-average grant date fair value of options granted in 1997 and
1996 was $3.38 and $4.84, respectively.
The following table summarizes information about stock options outstanding
at June 30, 1998:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------ -----------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
RANGE OF NUMBER REMAINING EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE PRICE EXERCISABLE PRICE
- --------------- ----------- ---------------- --------- ----------- ---------
$3.71 to $ 4.67............... 848,957 6.6 years $ 4.29 848,957 $ 4.29
$8.72 to $ 8.88............... 314,899 8.3 years $ 8.83 153,232 $ 8.78
$10.80 to $11.40.............. 313,125 8.1 years $10.88 160,833 $10.89
6. LEASE COMMITMENTS
Minimum rental commitments as of June 30, 1998, for all noncancelable
operating leases, consisting principally of leases for office space, real estate
and tower space, are as follows (in thousands):
Six months ending December 31, 1998......................... $ 2,193
Years ending December 31:
1999...................................................... 4,386
2000...................................................... 3,989
2001...................................................... 3,495
2002...................................................... 3,129
2003...................................................... 2,184
Thereafter.................................................. 2,708
-------
$22,084
=======
Total rent expense amounted to approximately $2.0 million for the six months
ended June 30, 1998.
7. MERGER WITH AMERICAN CELLULAR CORPORATION
On June 25, 1998, American Cellular Corporation acquired all of the
operations of the Company pursuant to an Agreement and Plan of Merger (the
Merger Agreement). At the effective time, as defined in the Merger Agreement,
the holders of each issued and outstanding share of Class A common stock and
Class B common stock received $14 in cash, without interest, and each issued and
outstanding share of Series A Preferred Stock received the product of $14 and
the number of Class A Shares into which each such share of Series A Preferred
Stock is convertible at such time in connection with a change of control.
F-53
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the Delaware General Corporation Law under which American
Cellular Corporation (the "Company") is incorporated, Article VIII of the
Company's Fourth Restated Certificate of Incorporation provides for
indemnification of each of the Company's officers and directors against
(a) expense, including attorney's fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with any
action, suit or proceeding brought by reason of his being or having been a
director, officer, employee or agent of the Company, or of any other
corporation, partnership, joint venture, or other enterprise at the request of
the Company, other than an action by or in the right of the Company, provided
that he acted in good faith and in a manner he reasonably believed to be in the
best interest of the Company, and with respect to any criminal action, he had no
reasonable cause to believe that his conduct was unlawful and (b) expenses
(including attorney's fees) actually and reasonably incurred by him in
connection with the defense or settlement of any action or suit by or in the
right of the Company brought by reasons of his being or having been a director,
officer, employee or agent of the Company, or any other corporation,
partnership, joint venture, or other enterprise at the request of the Company,
provided that he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interest of the Company; except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged liable to the Company, unless and
only to the extent that the court in which such action or suit was decided has
determined that the person is fairly and reasonably entitled to indemnification
for such expenses which the court shall deem proper. The Company's bylaws
provide for similar indemnification. These provisions may be sufficiently broad
to indemnify such persons for liabilities arising under the Securities Act of
1933, as amended.
The Company's directors and officers are also insured against claims arising
out of the performance of their duties in such capacities.
ITEM. 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
EXHIBIT
NUMBERS DESCRIPTION
--------------------- -----------
3.1 Fourth Restated Certificate of Incorporation of American
Cellular Corporation*
3.2 Amended and Restated Bylaws of Registrant*
3.3 Certificate of Formation of ACC Acquisition LLC*
3.4 Second Amended and Restated Limited Liability Company
Agreement of ACC Acquisition LLC, dated February 25, 2000,
between AT&T Wireless Services JV Co. and Dobson JV
Company*
3.5 Certificate of Formation of American Cellular Wireless LLC*
3.6 Limited Liability Company Agreement of American Cellular
Wireless LLC*
3.7 Certificate of Incorporation of PCPCS Corporation*
3.8 Bylaws of PCPCS Corporation*
3.9 Certificate of Formation of ACC of Kentucky LLC*
3.10 Limited Liability Company Agreement of ACC of Kentucky LLC*
3.11 Corrected Certificate of Formation of ACC Kentucky License
LLC*
3.12 Limited Liability Company Agreement of ACC Kentucky License
LLC*
3.13 Certificate of Incorporation of ACC of Michigan Corporation*
II-1
EXHIBIT
NUMBERS DESCRIPTION
--------------------- -----------
3.14 Bylaws of ACC of Michigan Corporation, formerly known as
Gilro Cellular Corporation*
3.15 Certificate of Formation of ACC Michigan License LLC*
3.16 Limited Liability Company Agreement of ACC Michigan License
LLC*
3.17 Certificate of Incorporation of ACC of Minnesota
Corporation*
3.18 Bylaws of ACC of Minnesota Corporation, successor to
Cellular Information Systems International Inc.*
3.19 Certificate of Formation of ACC Minnesota License LLC*
3.20 Limited Liability Company Agreement of ACC Minnesota License
LLC*
3.21 Certificate of Incorporation of Alexandra Cellular
Corporation*
3.22 Bylaws of Alexandra Cellular Corporation*
3.23 Certificate of Formation of ACC New York License I LLC*
3.24 Limited Liability Company Agreement of ACC New York License
I LLC*
3.25 Certificate of Formation of ACC New York License II LLC*
3.26 Limited Liability Company Agreement of ACC New York License
II LLC*
3.27 Certificate of Formation of ACC New York License III LLC*
3.28 Limited Liability Company Agreement of ACC New York License
III LLC*
3.29 Certificate of Incorporation of ACC of Ohio Corporation*
3.30 Bylaws of ACC of Ohio Corporation, formerly known as, Seven
Cellular Corporation*
3.31 Certificate of Formation of ACC Ohio License LLC*
3.32 Limited Liability Company Agreement of ACC Ohio License LLC*
3.33 Certificate of Formation of ACC of Pennsylvania LLC*
3.34 Limited Liability Company Agreement of ACC of Pennsylvania
LLC*
3.35 Corrected Certificate of Formation of ACC of Pennsylvania
License LLC*
3.36 Limited Liability Company Agreement of ACC of Pennsylvania
License LLC*
3.37 Certificate of Formation of ACC of Tennessee LLC*
3.38 Limited Liability Company Agreement of ACC of Tennessee LLC*
3.39 Certificate of Formation of ACC Tennessee License LLC*
3.40 Limited Liability Company Agreement of ACC Tennessee License
LLC*
3.41 Certificate of Incorporation ACC of Wausau Corporation*
3.42 Bylaws of ACC of Wausau Corporation, successor to Wausau
License Corporation*
3.43 Certificate of Formation of ACC of Wausau License LLC*
3.44 Limited Liability Company Agreement of ACC of Wausau License
LLC*
3.45 Certificate of Incorporation ACC of West Virginia
Corporation*
3.46 Bylaws of ACC of West Virginia Corporation, successor to
Northland Cellular Corporation*
3.47 Certificate of Formation of ACC of West Virginia License
LLC*
3.48 Limited Liability Company Agreement of ACC of West Virginia
License LLC*
3.49 Certificate of Formation of ACC of Wisconsin LLC*
3.50 Limited Liability Company Agreement of ACC of Wisconsin LLC*
3.51 Certificate of Formation of ACC of Wisconsin License LLC*
3.52 Limited Liability Company Agreement of ACC of Wisconsin
License LLC*
3.53 Certificate of Incorporation Chill Cellular Corporation*
3.54 Bylaws of Chill Cellular Corporation*
3.55 Certificate of Incorporation Dutchess County Cellular
Telephone Company, Inc.*
3.56 Bylaws of Dutchess County Cellular Telephone Company, Inc. *
4.1 Second Amended and Restated Limited Liability Company
Agreement of ACC Acquisition LLC, dated February 25, 2000,
between AT&T Wireless Services JV Co. and Dobson JV
Company* (filed as Exhibit 3.4)
II-2
EXHIBIT
NUMBERS DESCRIPTION
--------------------- -----------
4.2 Indenture dated March 14, 2001 between American Cellular
Corporation and United States Trust Company of New York*
4.3 Escrow and Security Agreement dated March 14, 2001 between
American Cellular Corporation and United States Trust
Company of New York*
4.4 Registration Rights Agreement dated March 14, 2001 between
American Cellular Corporation, Lehman Brothers, Inc. and
Banc of America Securities LLC*
5 Opinion of McAfee & Taft A Professional Corporation**
10.1 Amended and Restated Management Agreement, dated February
25, 2000, between Dobson Cellular Systems, Inc. and of ACC
Acquisition LLC*
10.2 Amended and Restated Operating Agreement, dated February 25,
2000, between Dobson Cellular Systems, Inc. (and its
affiliates) and ACC Acquisition LLC (and its affiliates)*
10.3 Amended and Restated Operating Agreement, dated February 25,
2000, between AT&T Wireless Services, Inc. (and its
affiliates) and ACC Acquisition LLC (and its affiliates)*
10.4 Credit Agreement, dated February 25, 2000, among American
Cellular Corporation, Bank of America, N.A., CIBC World
Market Corp., Barclays Bank PLC, Lehman Commercial
Paper Inc., TD Securities Inc. and others*
10.4.1 First Amendment to Credit Agreement dated March 2, 2001*
10.5 License Agreement, dated September 23, 1998, by and between
H.O. Software, Inc. and American Cellular Corporation, as
amended, modified or otherwise supplemented from time to
time*
10.6 Supply Agreement, dated December 6, 1995, between Nortel
Networks, Inc. f/k/a Northern Telecom, Inc. and Dobson
Communications Corporation, as amended.
10.7 Form of License Agreement among Cellular One Group and
various subsidiaries of American Cellular Corporation*
10.8 Intercarrier Roamer Service Agreement, dated January 23,
1997, between American Cellular Corporation, as successor
to PriCellular Corporation and United States Cellular
Corporation*
10.9 Intercarrier Roamer Service Agreement dated October 16, 1999
between Cingular Wireless, as successor to Southwestern
Bell Mobile Systems, Inc., and Dobson Cellular
Systems, Inc.
10.9.1 Letter Agreement dated July 5, 2000 accepting American
Cellular Corporation as an affiliate of Dobson Cellular
Systems, Inc.
10.9.2 Letter Agreement regarding Crossband Roaming, dated June 14,
2000, between American Cellular Corporation and Cingular
Wireless, successor to Southwestern Bell Mobile Systems,
Inc.*
10.10 Intercarrier Roamer Service Agreement, dated March 14, 1997,
between American Cellular Corporation, successor to
PriCellular Corporation and Cingular Wireless, successor
to Houston Cellular*
10.11 Intercarrier Roamer Service Agreement, dated September 16,
2000, between Cingular Wireless, successor to BellSouth
Cellular National Marketing, Inc. and Dobson Cellular
Systems, Inc.*
10.12 Intercarrier Roamer Service Agreement, dated January 16,
1997, between American Cellular Corporation, successor to
PriCellular Corporation and Verizon Wireless, successor to
parties doing business as Bell Atlantic NYNEX Mobile*
10.13 Intercarrier Roamer Service Agreement, dated April 2, 1997,
between American Cellular Corporation, successor to
PriCellular Corporation and Verizon Wireless, successor to
GTE Mobile Communications Inc., GTE Mobilenet Inc. and
Control Cellular Inc.*
II-3
EXHIBIT
NUMBERS DESCRIPTION
--------------------- -----------
10.14 Intercarrier Roamer Service Agreement, dated January 16,
1997, between Verizon Wireless, successor to AIRTOUCH
Cellular and American Cellular Corporation, successor to
PriCellular Corporation*
10.15 Intercarrier Roamer Service Agreement, dated September 9,
1997, between American Cellular Corporation, successor to
PriCellular Wireless Corporation and Verizon Wireless,
successor to US West Communications, Inc.*
10.16 Intercarrier Roamer Service Agreement, dated January 16,
1997, between Licensees and Permittees (as defined in the
Agreement) and American Cellular Corporation, successor to
PriCellular Corporation*
23.1 Consent of McAfee & Taft is contained in Exhibit 5**
23.2 Consent of Arthur Andersen LLP**
23.3 Consent of Ernst & Young LLP**
24.1 Power of Attorney for American Cellular Corporation*
24.2 Power of Attorney for ACC Acquisition LLC*
24.3 Power of Attorney for American Cellular Wireless LLC*
24.4 Power of Attorney for PCPCS Corporation*
24.5 Power of Attorney for ACC of Kentucky LLC*
24.6 Power of Attorney for ACC of Kentucky License LLC*
24.7 Power of Attorney for ACC of Michigan Corporation*
24.8 Power of Attorney for ACC of Michigan License LLC*
24.9 Power of Attorney for ACC of Minnesota Corporation*
24.10 Power of Attorney for ACC of Minnesota License LLC*
24.11 Power of Attorney for Alexandra Cellular Corporation*
24.12 Power of Attorney for ACC New York License I LLC*
24.13 Power of Attorney for ACC New York License II LLC*
24.14 Power of Attorney for ACC New York License III LLC*
24.15 Power of Attorney for ACC of Ohio Corporation*
24.16 Power of Attorney for ACC of Ohio License LLC*
24.17 Power of Attorney for ACC of Pennsylvania LLC*
24.18 Power of Attorney for ACC of Pennsylvania License LLC*
24.19 Power of Attorney for ACC of Tennessee LLC*
24.20 Power of Attorney for ACC of Tennessee License LLC*
24.21 Power of Attorney for ACC of Wausau Corporation*
24.22 Power of Attorney for ACC of Wausau License LLC*
24.23 Power of Attorney for ACC of West Virginia Corporation*
24.24 Power of Attorney for ACC of West Virginia License LLC*
24.25 Power of Attorney for ACC of Wisconsin LLC*
24.26 Power of Attorney for ACC of Wisconsin License LLC*
24.27 Power of Attorney for Chill Cellular Corporation*
24.28 Power of Attorney for Dutchess County Cellular Telephone
Company, Inc.*
99.1 Letter of Transmittal**
99.2 Notice of Guaranteed Delivery**
99.3 Company letter**
99.4 Client letter**
99.5 Instruction to Beneficial Holders**
99.6 Guidelines for Certification of Taxpayer Identification
Number**
- ------------------------
* Previously filed
** Filed herewith
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
AMERICAN CELLULAR CORPORATION
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Director
JOSEPH E. STUMPF* Vice President and Director
-------------------------------------------
Joseph E. Stumpf
Vice President and Director
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer and Chief Financial Officer
------------------------------------------- (Principal Financial Officer) and Director
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
ACC ACQUISITION LLC
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
AMERICAN CELLULAR WIRELESS LLC
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
PCPCS CORPORATION
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
ACC OF KENTUCKY LLC
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
ACC OF KENTUCKY LICENSE LLC
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
ACC OF MICHIGAN CORPORATION
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
ACC OF MICHIGAN LICENSE LLC
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-12
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
ACC OF MINNESOTA CORPORATION
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-13
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
ACC MINNESOTA LICENSE LLC
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
ALEXANDRA CELLULAR CORPORATION
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-15
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
ACC NEW YORK LICENSE I LLC
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-16
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
ACC NEW YORK LICENSE II LLC
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
ACC NEW YORK LICENSE III LLC
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
ACC OF OHIO CORPORATION
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-19
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
ACC OHIO LICENSE LLC
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
ACC OF PENNSYLVANIA LLC
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-21
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
ACC OF PENNSYLVANIA LICENSE LLC
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-22
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
ACC OF TENNESSEE LLC
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
ACC OF TENNESSEE LICENSE LLC
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-24
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
ACC OF WAUSAU CORPORATION
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-25
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
ACC OF WAUSAU LICENSE LLC
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-26
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
ACC OF WEST VIRGINIA CORPORATION
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-27
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
ACC OF WEST VIRGINIA LICENSE LLC
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-28
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
ACC OF WISCONSIN LLC
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-29
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
ACC OF WISCONSIN LICENSE LLC
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-30
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
CHILL CELLULAR CORPORATION
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-31
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Oklahoma City, State of Oklahoma, on the 3rd day of May, 2001.
DUTCHESS COUNTY CELLULAR TELEPHONE
COMPANY, INC.
By: EVERETT R. DOBSON*
-----------------------------------------
Everett R. Dobson
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities indicated on May 3, 2001.
NAME TITLE
---- -----
EVERETT R. DOBSON* Chairman of the Board, President and Chief
------------------------------------------- Executive Officer (Principal Executive
Everett R. Dobson Officer) and Manager
JOSEPH E. STUMPF* Vice President and Manager
-------------------------------------------
Joseph E. Stumpf
Vice President and Manager
-------------------------------------------
Tamara A. Bramel
BRUCE R. KNOOIHUIZEN* Treasurer Chief Financial Officer (Principal
------------------------------------------- Financial Officer) and Manager
Bruce R. Knooihuizen
TRENT LEFORCE* Corporate Controller (Principal Accounting
------------------------------------------- Officer)
Trent LeForce
*By: /s/ RONALD L. RIPLEY
--------------------------------------
Ronald L. Ripley,
ATTORNEY-IN-FACT
II-32
INDEX TO EXHIBITS
EXHIBIT
NUMBERS DESCRIPTION
--------------------- -----------
3.1 Fourth Restated Certificate of Incorporation of American
Cellular Corporation*
3.2 Amended and Restated Bylaws of Registrant*
3.3 Certificate of Formation of ACC Acquisition LLC*
3.4 Second Amended and Restated Limited Liability Company
Agreement of ACC Acquisition LLC, dated February 25, 2000,
between AT&T Wireless Services JV Co. and Dobson JV
Company*
3.5 Certificate of Formation of American Cellular Wireless LLC*
3.6 Limited Liability Company Agreement of American Cellular
Wireless LLC*
3.7 Certificate of Incorporation of PCPCS Corporation*
3.8 Bylaws of PCPCS Corporation*
3.9 Certificate of Formation of ACC of Kentucky LLC*
3.10 Limited Liability Company Agreement of ACC of Kentucky LLC*
3.11 Corrected Certificate of Formation of ACC Kentucky License
LLC*
3.12 Limited Liability Company Agreement of ACC Kentucky License
LLC*
3.13 Certificate of Incorporation of ACC of Michigan Corporation*
3.14 Bylaws of ACC of Michigan Corporation, formerly known as
Gilro Cellular Corporation*
3.15 Certificate of Formation of ACC Michigan License LLC*
3.16 Limited Liability Company Agreement of ACC Michigan License
LLC*
3.17 Certificate of Incorporation of ACC of Minnesota
Corporation*
3.18 Bylaws of ACC of Minnesota Corporation, successor to
Cellular Information Systems International Inc.*
3.19 Certificate of Formation of ACC Minnesota License LLC*
3.20 Limited Liability Company Agreement of ACC Minnesota License
LLC*
3.21 Certificate of Incorporation of Alexandra Cellular
Corporation*
3.22 Bylaws of Alexandra Cellular Corporation*
3.23 Certificate of Formation of ACC New York License I LLC*
3.24 Limited Liability Company Agreement of ACC New York License
I LLC*
3.25 Certificate of Formation of ACC New York License II LLC*
3.26 Limited Liability Company Agreement of ACC New York License
II LLC*
3.27 Certificate of Formation of ACC New York License III LLC*
3.28 Limited Liability Company Agreement of ACC New York License
III LLC*
3.29 Certificate of Incorporation of ACC of Ohio Corporation*
3.30 Bylaws of ACC of Ohio Corporation, formerly known as, Seven
Cellular Corporation*
3.31 Certificate of Formation of ACC Ohio License LLC*
3.32 Limited Liability Company Agreement of ACC Ohio License LLC*
3.33 Certificate of Formation of ACC of Pennsylvania LLC*
3.34 Limited Liability Company Agreement of ACC of Pennsylvania
LLC*
3.35 Corrected Certificate of Formation of ACC of Pennsylvania
License LLC*
3.36 Limited Liability Company Agreement of ACC of Pennsylvania
License LLC*
3.37 Certificate of Formation of ACC of Tennessee LLC*
3.38 Limited Liability Company Agreement of ACC of Tennessee LLC*
3.39 Certificate of Formation of ACC Tennessee License LLC*
3.40 Limited Liability Company Agreement of ACC Tennessee License
LLC*
3.41 Certificate of Incorporation ACC of Wausau Corporation*
3.42 Bylaws of ACC of Wausau Corporation, successor to Wausau
License Corporation*
3.43 Certificate of Formation of ACC of Wausau License LLC*
3.44 Limited Liability Company Agreement of ACC of Wausau License
LLC*
3.45 Certificate of Incorporation ACC of West Virginia
Corporation*
EXHIBIT
NUMBERS DESCRIPTION
--------------------- -----------
3.46 Bylaws of ACC of West Virginia Corporation, successor to
Northland Cellular Corporation*
3.47 Certificate of Formation of ACC of West Virginia License
LLC*
3.48 Limited Liability Company Agreement of ACC of West Virginia
License LLC*
3.49 Certificate of Formation of ACC of Wisconsin LLC*
3.50 Limited Liability Company Agreement of ACC of Wisconsin LLC*
3.51 Certificate of Formation of ACC of Wisconsin License LLC*
3.52 Limited Liability Company Agreement of ACC of Wisconsin
License LLC*
3.53 Certificate of Incorporation Chill Cellular Corporation*
3.54 Bylaws of Chill Cellular Corporation*
3.55 Certificate of Incorporation Dutchess County Cellular
Telephone Company, Inc.*
3.56 Bylaws of Dutchess County Cellular Telephone Company, Inc. *
4.1 Second Amended and Restated Limited Liability Company
Agreement of ACC Acquisition LLC, dated February 25, 2000,
between AT&T Wireless Services JV Co. and Dobson JV
Company* (filed as Exhibit 3.4)
4.2 Indenture dated March 14, 2001 between American Cellular
Corporation and United States Trust Company of New York*
4.3 Escrow and Security Agreement dated March 14, 2001 between
American Cellular Corporation and United States Trust
Company of New York*
4.4 Registration Rights Agreement dated March 14, 2001 between
American Cellular Corporation, Lehman Brothers, Inc. and
Banc of America Securities LLC*
5 Opinion of McAfee & Taft A Professional Corporation**
10.1 Amended and Restated Management Agreement, dated February
25, 2000, between Dobson Cellular Systems, Inc. and of ACC
Acquisition LLC*
10.2 Amended and Restated Operating Agreement, dated February 25,
2000, between Dobson Cellular Systems, Inc. (and its
affiliates) and ACC Acquisition LLC (and its affiliates)*
10.3 Amended and Restated Operating Agreement, dated February 25,
2000, between AT&T Wireless Services, Inc. (and its
affiliates) and ACC Acquisition LLC (and its affiliates)*
10.4 Credit Agreement, dated February 25, 2000, among American
Cellular Corporation, Bank of America, N.A., CIBC World
Market Corp., Barclays Bank PLC, Lehman Commercial
Paper Inc., TD Securities Inc. and others*
10.4.1 First Amendment to Credit Agreement dated March 2, 2001*
10.5 License Agreement, dated September 23, 1998, by and between
H.O. Software, Inc. and American Cellular Corporation, as
amended, modified or otherwise supplemented from time to
time*
10.6 Supply Agreement, dated December 6, 1995, between Nortel
Networks, Inc. f/k/a Northern Telecom, Inc. and Dobson
Communications Corporation, as amended.
10.7 Form of License Agreement among Cellular One Group and
various subsidiaries of American Cellular Corporation*
10.8 Intercarrier Roamer Service Agreement, dated January 23,
1997, between American Cellular Corporation, as successor
to PriCellular Corporation and United States Cellular
Corporation*
10.9 Intercarrier Roamer Service Agreement dated October 16, 1999
between Cingular Wireless, as successor to Southwestern
Bell Mobile Systems, Inc., and Dobson Cellular
Systems, Inc.
10.9.1 Letter Agreement dated July 5, 2000 accepting American
Cellular Corporation as an affiliate of Dobson Cellular
Systems, Inc.
10.9.2 Letter Agreement regarding Crossband Roaming, dated June 14,
2000, between American Cellular Corporation and Cingular
Wireless, successor to Southwestern Bell Mobile Systems,
Inc.*
EXHIBIT
NUMBERS DESCRIPTION
--------------------- -----------
10.10 Intercarrier Roamer Service Agreement, dated March 14, 1997,
between American Cellular Corporation, successor to
PriCellular Corporation and Cingular Wireless, successor
to Houston Cellular*
10.11 Intercarrier Roamer Service Agreement, dated September 16,
2000, between Cingular Wireless, successor to BellSouth
Cellular National Marketing, Inc. and Dobson Cellular
Systems, Inc.*
10.12 Intercarrier Roamer Service Agreement, dated January 16,
1997, between American Cellular Corporation, successor to
PriCellular Corporation and Verizon Wireless, successor to
parties doing business as Bell Atlantic NYNEX Mobile*
10.13 Intercarrier Roamer Service Agreement, dated April 2, 1998,
between American Cellular Corporation, successor to
PriCellular Corporation and Verizon Wireless, successor to
GTE Mobile Communications Inc., GTE Mobilenet Inc. and
Control Cellular Inc.*
10.14 Intercarrier Roamer Service Agreement, dated January 16,
1997, between Verizon Wireless, successor to AIRTOUCH
Cellular and American Cellular Corporation, successor to
PriCellular Corporation*
10.15 Intercarrier Roamer Service Agreement, dated September 9,
1997, between American Cellular Corporation, successor to
PriCellular Wireless Corporation and Verizon Wireless,
successor to US West Communications, Inc.*
10.16 Intercarrier Roamer Service Agreement, dated January 16,
1997, between Licensees and Permittees (as defined in the
Agreement) and American Cellular Corporation, successor to
PriCellular Corporation*
23.1 Consent of McAfee & Taft is contained in Exhibit 5**
23.2 Consent of Arthur Andersen LLP**
23.3 Consent of Ernst & Young LLP**
24.1 Power of Attorney for American Cellular Corporation*
24.2 Power of Attorney for ACC Acquisition LLC*
24.3 Power of Attorney for American Cellular Wireless LLC*
24.4 Power of Attorney for PCPCS Corporation*
24.5 Power of Attorney for ACC of Kentucky LLC*
24.6 Power of Attorney for ACC of Kentucky License LLC*
24.7 Power of Attorney for ACC of Michigan Corporation*
24.8 Power of Attorney for ACC of Michigan License LLC*
24.9 Power of Attorney for ACC of Minnesota Corporation*
24.10 Power of Attorney for ACC of Minnesota License LLC*
24.11 Power of Attorney for Alexandra Cellular Corporation*
24.12 Power of Attorney for ACC New York License I LLC*
24.13 Power of Attorney for ACC New York License II LLC*
24.14 Power of Attorney for ACC New York License III LLC*
24.15 Power of Attorney for ACC of Ohio Corporation*
24.16 Power of Attorney for ACC of Ohio License LLC*
24.17 Power of Attorney for ACC of Pennsylvania LLC*
24.18 Power of Attorney for ACC of Pennsylvania License LLC*
24.19 Power of Attorney for ACC of Tennessee LLC*
24.20 Power of Attorney for ACC of Tennessee License LLC*
24.21 Power of Attorney for ACC of Wasau Corporation*
24.22 Power of Attorney for ACC of Wasau License LLC*
24.23 Power of Attorney for ACC of West Virginia Corporation*
24.24 Power of Attorney for ACC of West Virginia License LLC*
24.25 Power of Attorney for ACC of Wisconsin LLC*
24.26 Power of Attorney for ACC of Wisconsin License LLC*
24.27 Power of Attorney for Chill Cellular Corporation*
24.28 Power of Attorney for Dutchess County Cellular Telephone
Company, Inc.*
EXHIBIT
NUMBERS DESCRIPTION
--------------------- -----------
99.1 Letter of Transmittal**
99.2 Notice of Guaranteed Delivery**
99.3 Company letter**
99.4 Client letter**
99.5 Instruction to Beneficial Holders**
99.6 Guidelines for Certification of Taxpayer Identification
Number**
- ------------------------
* Previously filed
** Filed herewith