As filed with the Securities and Exchange Commission on May 9, 2001
Registration Number 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ALAMOSA (DELAWARE), INC.
(EXACT NAME OF REGISTRANT
AS SPECIFIED IN ITS CHARTER)
DELAWARE 4812 75-2843707
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION
INCORPORATION OR NUMBER)
ORGANIZATION)
------------------------
5225 S. LOOP 289
LUBBOCK, TEXAS 79424
(806) 722-1100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
SEE TABLE OF ADDITIONAL REGISTRANTS
------------------------
David E. Sharbutt
Chief Executive Officer
Alamosa (Delaware), Inc.
5225 S. Loop 289
Lubbock, Texas 79424
(806) 722-1100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copies to:
Fred B. White, III, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
(212) 735-3000
------------------------
Approximate Date of Commencement of Proposed Sale to the Public: As soon as
practicable after the effective date of this Registration Statement.
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 of 1933, please check the
following box and list the Securities Act registration statement 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 of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
=====================================================================================================================
PROPOSED PROPOSED
TITLE OF EACH CLASS OF MAXIMUM MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED PER SECURITY (2) OFFERING PRICE (2) REGISTRATION FEE (2)
- ---------------------------------------------------------------------------------------------------------------------
12 1/2% Senior Notes due 2011
of Alamosa (Delaware), Inc. $250,000,000 100% $250,000,000 $62,500
- ---------------------------------------------------------------------------------------------------------------------
Guarantees (1)
=====================================================================================================================
(1) Pursuant to Rule 457(n) under the Securities Act, no separate filing fee
will be paid in respect of these guarantees.
(2) Estimated solely for the purposes of calculating the registration fee in
accordance with Rule 457(f) under the Securities Act.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
TABLE OF ADDITIONAL REGISTRANTS
STATE OR OTHER PRIMARY STANDARD
JURISDICTION OF INDUSTRIAL I.R.S. EMPLOYER
EXACT NAME OF INCORPORATION CLASSIFICATION IDENTIFICATION
ADDITIONAL REGISTRANTS OR FORMATION CODE NUMBER NUMBER
Alamosa Holdings, LLC* Delaware 4812 75-2900875
Alamosa PCS, Inc.* Delaware 4812 74-2938804
Alamosa Missouri, LLC* Missouri 4812 43-1827437
Alamosa Missouri Properties, LLC* Missouri 4812 43-1860773
Washington Oregon Wireless, LLC* Oregon 4812 93-1249029
Washington Oregon Wireless Properties,
LLC* Delaware 4812 93-1311633
Washington Oregon Wireless Licenses, LLC* Delaware 4812 93-1311636
SWLP, L.L.C.* Oklahoma 4812 75-2900875
SWGP, L.L.C.* Oklahoma 4812 75-2900875
Southwest PCS, L.P.* Oklahoma 4812 73-1545917
Southwest PCS Properties, LLC* Delaware 4812 52-2303150
Southwest PCS Licenses, LLC* Delaware 4812 52-2303152
Alamosa Wisconsin GP, LLC* Wisconsin 4812 74-2938804
Alamosa Wisconsin Limited Partnership* Wisconsin 4812 74-2938839
Alamosa (Wisconsin) Properties, LLC* Wisconsin 4812 74-2938839
Alamosa Finance, LLC* Delaware 4812 74-2938804
Alamosa Limited, LLC
200 West Ninth Street Plaza
Suite 102
Wilmington, Delaware 19801 Delaware 4812 74-2938804
Alamosa Delaware GP, LLC* Delaware 4812 74-2938804
Texas Telecommunications, LP* Texas 4812 75-2851320
Alamosa Properties, LP* Texas 4812 75-2921304
- -------------------
* Address and telephone of principal executive offices are the same as those of
Alamosa (Delaware), Inc.
THE INFORMATION CONTAINED IN THIS DOCUMENT IS NOT COMPLETE AND MAY BE CHANGED.
THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS DOCUMENT IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MAY 9, 2001
PROSPECTUS
ALAMOSA (DELAWARE), INC.
EXCHANGE OFFER FOR
12 1/2% SENIOR NOTES DUE 2011
------------------------
We are offering to exchange an aggregate principal amount of up to
$250,000,000 of our new 12 1/2% senior notes due 2011, which have been
registered under the Securities Act of 1933, as amended, for a like amount of
our outstanding 12 1/2% senior notes due 2011.
------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON ___________, 2001, UNLESS EXTENDED.
------------------------
TERMS OF THE EXCHANGE OFFER:
o We will exchange all outstanding notes that are validly tendered and
not withdrawn prior to the expiration of the exchange offer.
o You may withdraw tendered outstanding notes at any time prior to the
expiration of the exchange offer.
o We believe that the exchange of outstanding notes will not be a taxable
exchange for United States federal income tax purposes, but you should
see the section entitled "Material Federal Income Tax Consequences" on
page 135 for more information.
o The terms of the notes to be issued are substantially identical to the
terms of the outstanding notes, except for transfer restrictions and
registration rights relating to the outstanding notes.
o We will not receive any proceeds from the exchange offer.
o There is no existing market for the notes to be issued, and we do not
intend to apply for their listing on any securities exchange.
SEE THE SECTION ENTITLED "RISK FACTORS" THAT BEGINS ON PAGE 10 FOR A
DISCUSSION OF THE RISKS THAT YOU SHOULD CONSIDER PRIOR TO TENDERING YOUR
OUTSTANDING NOTES FOR EXCHANGE.
-----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
AND EXCHANGE COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
PASSED UPON THE ADEQUACY OR THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------------
The date of this Prospectus is , 2001.
WHERE YOU MAY FIND MORE INFORMATION
We file reports and other information with the Securities and Exchange
Commission. Copies of those reports and other information may be inspected and
copied at the public reference facilities maintained by the Securities and
Exchange Commission at:
o Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549;
o Seven World Trade Center, 13th Floor, New York, New York 10048; or
o Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661.
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the operation of the public reference rooms.
Copies of these materials can also be obtained by mail at prescribed rates
from the Public Reference Room of the Securities and Exchange Commission, 450
Fifth Street, N.W., Washington, D.C. 20549 or by calling the Securities and
Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission
maintains a website that contains reports, proxy statements and other
information regarding us. The address of the Securities and Exchange Commission
website is http://www.sec.gov.
We have filed a registration statement on Form S-4 under the Securities Act
of 1933 with the Securities and Exchange Commission with respect to the
registered notes to be issued in the exchange offer. This prospectus does not
contain all of the information set forth in the registration statement because
certain parts of the registration statement are omitted in accordance with the
rules and regulations of the Securities and Exchange Commission. The
registration statement and its exhibits are available for inspection and copying
as set forth above.
In the event that we are not required to comply with the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), we will be required under the indenture for the registered notes to
continue to file with the Securities and Exchange Commission, and to furnish the
holders of the registered notes with, the information, documents and other
reports specified in Sections 13 and 15(d) of the Exchange Act.
The documents referred to in this prospectus are available from us upon
request. We will provide a copy of any and all of the information that is
referred to in this prospectus to any person, without charge, upon written or
oral request. If exhibits to the documents referred to in this prospectus are
not themselves specifically referred to in this prospectus, then the exhibits
will not be provided.
Requests for documents should be directed to:
Alamosa (Delaware), Inc.
5225 S. Loop 289
Lubbock, TX 79424
Attention: Kendall W. Cowan,
Chief Financial Officer and Secretary
You should rely only on the information contained in this prospectus or
information to which we have referred you. We have not authorized anyone to
provide you with any additional information.
-i-
FORWARD-LOOKING STATEMENTS
This prospectus includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act, and Section 21E of the Exchange Act, which
can be identified by the use of forward-looking terminology such as "may,"
"might," "could," "would," "believe," "expect," "intend," "plan," "seek,"
"anticipate," "estimate," "project" or "continue" or the negative thereof or
other variations thereon or comparable terminology. All statements other than
statements of historical fact included in this prospectus, including, but not
limited to, those regarding our financial position and liquidity, are
forward-looking statements. These forward-looking statements also include:
o forecasts of growth in the number of consumers using wireless personal
communications services and in estimated populations;
o statements regarding our plans for, schedule for and costs of the
build-out of our portion of the Sprint PCS network;
o statements regarding our anticipated revenues, expense levels,
liquidity and capital resources, operating losses and projections of
when we will launch commercial wireless personal communications
service in particular markets; and
o statements regarding expectations or projections about markets in our
territories.
Although we believe that the expectations reflected in such forward-looking
statements are reasonable, we can give no assurance that such expectations will
prove to have been correct. Important factors with respect to any such
forward-looking statements, including certain risks and uncertainties that could
cause actual results to differ materially from our expectations ("Cautionary
Statements") are disclosed in this prospectus, including, without limitation, in
conjunction with the forward-looking statements included in this prospectus.
Important factors that could cause actual results to differ materially from
those in the forward-looking statements included herein include, but are not
limited to:
o our dependence on our affiliation with Sprint PCS;
o the ability of Sprint PCS to alter fees paid or charged to us in
accordance with our affiliation agreements;
o the need to successfully complete the build-out of our portion of the
Sprint PCS network on our anticipated schedule;
o our limited operating history and anticipation of future losses;
o our dependence on Sprint PCS's back office services;
o potential fluctuations in our operating results;
o changes or advances in technology;
o competition in the industry and markets in which we operate;
o our ability to attract and retain skilled personnel;
o our potential need for additional capital or the need for refinancing
existing indebtedness;
o our potential inability to expand our services and related products in
the event of substantial increases in demand for these services and
related products;
-ii-
o changes in government regulation; and
o general economic and business conditions.
All subsequent written and oral forward-looking statements attributable to
us or persons acting on our behalf are expressly qualified in their entirety by
the Cautionary Statements.
-iii-
PROSPECTUS SUMMARY
The following summary highlights selected information from this prospectus
and may not contain all of the information that is important to you. This
prospectus includes the basic terms of the notes we are offering, as well as
information regarding our business and detailed financial data. We encourage you
to read this prospectus in its entirety. References in this prospectus to
"Alamosa (Delaware)," "we," "our" and "us" refer to Alamosa (Delaware), Inc.
and our subsidiaries. "Alamosa Holdings" refers to Alamosa Holdings, Inc., our
parent holding company.
THE COMPANY
OVERVIEW. We are an indirect wholly owned subsidiary of Alamosa Holdings,
Inc., a Delaware corporation, whose shares of common stock are quoted on the
Nasdaq National Market System under the symbol "APCS." We are a holding company,
and through our operating subsidiaries we provide wireless personal
communications services, commonly referred to as PCS, in the Southwestern,
Northwestern and Midwestern United States. We are a network partner of Sprint
PCS, the personal communications services group of Sprint Corporation. Sprint
PCS, directly and through affiliates such as us, provides wireless personal
communications services in more than 4,000 cities and communities across the
country. We have the exclusive right to provide digital wireless personal
communications network services under the Sprint and Sprint PCS brand names in a
territory primarily located in Texas, New Mexico, Arizona, Colorado, Wisconsin,
Illinois, Oklahoma, Kansas, Missouri, Washington and Oregon. Through December
31, 1999, we were a development stage company.
We launched Sprint PCS service in Laredo, Texas in June 1999, and through
March 31, 2001 have commenced service in 62 additional markets, including 41
markets in territories serviced by companies that we acquired in 2001. At March
31, 2001, our systems covered approximately 9,202,300 residents out of
approximately 15,642,200 million total residents in those markets. The number of
residents covered by our systems does not represent the number of Sprint PCS
subscribers that we expect to be based in our territories. As of March 31, 2001,
261,345 Sprint PCS subscribers were based in our territories.
RECENT ACQUISITIONS. On February 14, 2001, we completed our acquisition of
Roberts Wireless Communications, L.L.C. ("Roberts") and Washington Oregon
Wireless, LLC ("WOW"). Roberts' service area, which includes 2.5 million people,
includes the market areas surrounding Kansas City, the world headquarters of
Sprint PCS, and St. Louis, including the Interstate 70 corridor connecting the
two cities. At December 31, 2000, Roberts' network covered approximately 1.1
million people. WOW's service area, which includes 1.5 million people, includes
the market areas of Ellenburg, Yakima and Kennewick, Washington and key travel
corridors within Washington and Oregon. At December 31, 2000, WOW's network
covered approximately 800,000 people.
On March 30, 2001, we completed our acquisition of Southwest PCS Holdings,
Inc. ("Southwest"). Southwest's service area, which includes 2.8 million people,
includes market areas in Texas, Oklahoma and Arkansas, encompassing over 2,100
heavily traveled highway miles. At December 31, 2000, Southwest had launched
service in 18 markets covering approximately 1.5 million residents and had
approximately 40,000 customers.
In connection with the Roberts and WOW acquisitions, we entered into a new
senior secured credit facility for up to $280 million. In connection with the
acquisition of Southwest, we increased the amount of the senior secured credit
facility from $280 million to $333 million. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources."
----------
Our principal executive office is located at 5225 S. Loop 289, Lubbock,
Texas 79424. Our telephone number is (806) 722-1100.
THE EXCHANGE OFFER
On January 31, 2001, we issued and sold $250 million aggregate principal
amount of 12 1/2% senior notes due 2011 in a transaction exempt from the
registration requirements of the Securities Act. Simultaneously with that
transaction, we entered into a registration rights agreement with the initial
purchasers of those original notes, in which we agreed to deliver this
prospectus to you and to commence this exchange offer. In this exchange offer,
you may exchange your outstanding notes for registered notes which have
substantially the same terms. You should read the discussion under the headings
"The Exchange Offer" and "Description of Notes" for further information
regarding the notes to be issued in the exchange offer. The term "registered
notes" refers to the registered 12 1/2% Senior Notes due 2011 being offered in
the exchange offer. The term "outstanding notes" refers to our currently
outstanding 12 1/2% Senior Notes due 2011 that are exchangeable for the
registered notes.
Securities Offered........................... Up to $250 million in principal
amount of new 12 1/2% senior notes
due 2011, registered under the
Securities Act of 1933. The terms
of the notes offered in the
exchange offer are substantially
identical to those of the
outstanding notes, except that the
transfer restrictions,
registration rights and special
interest provisions relating to
the outstanding notes do not apply
to the new registered notes.
The Exchange Offer........................... We are offering registered notes
in exchange for a like principal
amount of our outstanding
unregistered notes. We are
offering these registered notes to
satisfy our obligations under a
registration rights agreement
which we entered into with the
initial purchasers of the
outstanding notes. You may tender
your outstanding notes for
exchange by following the
procedures described under the
heading "The Exchange Offer."
Tenders; Expiration Date; Withdrawal......... The exchange offer will expire at
5:00 p.m., New York City time, on
[ ], unless we extend it. If you
decide to exchange your
outstanding notes for registered
notes, you must acknowledge that
you are not engaging in, and do
not intend to engage in, a
distribution of the registered
notes. You may withdraw any notes
that you tender for exchange at
any time prior to [ ]. If we
decide for any reason not to
accept any notes you have tendered
for exchange, those notes will be
returned to you without cost
promptly after the expiration or
termination of the exchange offer.
See "The Exchange Offer -- Terms
of the Exchange Offer" for a more
complete description of the tender
and withdrawal provisions.
United States Federal Income
Tax Consequences........................... Your exchange of outstanding notes
for registered notes to be issued
in the exchange offer will not
result in any gain or loss to you
for United States federal income
tax purposes. See "Material United
States Federal Tax Considerations"
for a summary of material United
States federal income tax
consequences associated with the
exchange of outstanding notes for
the registered notes to be issued
in the exchange offer and the
ownership and disposition of those
registered notes.
Accounting Treatment......................... We will not recognize any gain or
loss for accounting purposes upon
the consummation of the exchange
offer. We will amortize the
expense of the exchange offer over
the term of the registered notes
under accounting principles
generally acceptable in the United
States of America.
2
Use of Proceeds.............................. We will not receive any cash
proceeds from the exchange offer.
Exchange Agent............................... Wells Fargo Bank Minnesota, N.A.
Consequences of Failure to
Exchange................................... Outstanding notes not exchanged in
the exchange offer will continue
to be subject to the restrictions
on transfer that are described in
the legend on the outstanding
notes. In general, you may offer
or sell your outstanding notes
only if they are registered under,
or offered or sold under an
exemption from, the Securities Act
and applicable state securities
laws. We do not currently intend
to register the outstanding notes
under the Securities Act. If your
notes are not tendered and
accepted in the exchange offer, it
may become more difficult for you
to sell or transfer your
unexchanged notes.
Consequences of Exchanging
Your Outstanding Notes..................... Based on interpretations of the
staff of the Securities and
Exchange Commission, we believe
that you may offer for resale,
resell or otherwise transfer the
notes that we issue in the
exchange offer without complying
with the registration and
prospectus delivery requirements
of the Securities Act if:
o you acquire the notes issued in
the exchange offer in the
ordinary course of your
business;
o you are not participating, do
not intend to participate, and
have no arrangement or
undertaking with anyone to
participate, in the
distribution of the notes
issued to you in the exchange
offer; and
o you are not an "affiliate" of
Alamosa (Delaware), as defined
in Rule 405 of the Securities
Act.
If any of these conditions are not
satisfied and you transfer any
notes issued to you in the
exchange offer without delivering
a proper prospectus or without
qualifying for a registration
exemption, you may incur liability
under the Securities Act. We will
not be responsible for, or
indemnify you against, any
liability you may incur.
Each broker-dealer that receives
registered notes for its own
account in exchange for
outstanding notes, where such
outstanding notes were acquired
by such broker-dealer as a result
of market-making activities or
other trading activities, must
acknowledge that it will deliver a
prospectus in connection with any
resale of such registered notes.
See "Plan of Distribution".
3
THE REGISTERED NOTES
When we refer to the term "note" or "senior notes", we are referring to
both the outstanding notes and the registered notes.
The terms of the registered notes we are issuing in this exchange offer and
the outstanding notes are identical in all material respects, except:
o the registered notes will have been registered under the Securities
Act;
o the registered notes will not contain transfer restrictions and
registration rights that relate to the outstanding notes; and
o the registered notes will not contain provisions relating to the
payment of special interest to the holders of the outstanding notes
under circumstances related to the timing of the exchange offer.
A brief description of the material terms of the registered notes follows:
Securities Offered.......................... $250 million aggregate principal
amount of 12 1/2% senior notes due
2011.
Issuer...................................... Alamosa (Delaware), Inc.
Maturity Date............................... February 1, 2011.
Interest.................................... 12 1/2% per annum, payable
semi-annually on February 1 and
August 1, beginning on August 1,
2001.
Subsidiary Guarantees....................... The registered notes will be
guaranteed on a senior
subordinated basis by all of our
current or future domestic
restricted subsidiaries. See
"Description of Notes --
Subsidiary Guarantees."
Ranking..................................... The registered notes will be:
o senior unsecured obligations of
Alamosa (Delaware) (except to
the extent of amounts secured
under the security agreement
described below);
o equal in right of payment to
all of our existing and future
senior debt, including our
12 7/8% senior discount notes
due 2010; and
o senior in right of payment to
all of our existing and future
subordinated debt.
The guarantees will be unsecured
obligations of the guarantors and
will be:
o subordinated in right of
payment to each guarantor's
obligations under any credit
facilities with banks or
institutional lenders, referred
to herein as "designated senior
debt;"
4
o equal in right of payment to
all existing and future senior
subordinated debt of each
guarantor; and
o senior in right of payment to
all existing and future
subordinated debt of each
guarantor.
At the time of completion of this
offering, the guarantees will be
subordinated to any obligations of
our subsidiaries under our senior
secured credit facility for up to
$333.0 million. Our guarantors
generate all of our operating
income, and we are dependent on
them to meet our obligations under
the notes.
See "Description of Notes --
Ranking."
Security Agreement......................... Concurrently with the closing of
the offering of the outstanding
notes, we deposited with Wells
Fargo Bank Minnesota, N.A., as
custody agent, approximately $59.0
million from the proceeds of such
offering in U.S. government
securities to secure on a pro rata
basis our payment obligations
under the notes and under our
12 7/8% senior discount notes. The
amount that was deposited in the
security account, together with
the proceeds from the investment
thereof, will be sufficient to pay
when due the first four interest
payments on the notes. Funds will
be released from the custody
account to make interest payments
on the notes as they become due,
so long as there does not exist an
event of default with respect to
the notes or the 12 7/8% senior
discount notes.
Optional Redemption......................... On or prior to February 1, 2004,
we may use the net proceeds from
certain equity offerings by us or
our direct or indirect parent
companies to redeem up to 35% of
the aggregate principal amount of
the notes at a redemption price of
112.5% of the principal amount as
of the date of redemption,
provided that at least 65% of the
principal amount of the notes
remains outstanding immediately
after the redemption.
See "Description of Notes --
Optional Redemption."
On or after February 1, 2006, we
may redeem all or part of the
registered notes at various
redemption prices set forth under
"Description of Notes -- Optional
Redemption," together with accrued
and unpaid interest, if any, to
the date of redemption.
Change of Control........................... If we experience a change of
control, we will be required to
make an offer to repurchase the
registered notes at a price equal
to 101% of the principal amount
together with accrued and unpaid
interest, if any, to the date of
repurchase. See "Description of
Notes -- Repurchase at the Option
of Holders Upon a Change of
Control."
Restrictive Covenants....................... The indenture governing the
registered notes contains
covenants that, among other things
and subject to important excep-
5
tions, limit our ability and the
ability of our existing and future
domestic restricted subsidiaries
to:
o incur additional debt or issue
preferred stock;
o pay dividends, redeem capital
stock or make other restricted
payments or investments;
o create liens on assets;
o merge, consolidate or dispose
of assets;
o enter into transactions with
affiliates; and
o change lines of business.
See "Description of Notes --
Certain Covenants."
RISK FACTORS
See "Risk Factors" beginning on page 10 for a discussion of factors that
should be considered by holders of the outstanding notes in the exchange offer.
6
ALAMOSA (DELAWARE), INC.
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected financial data presented below under the captions "Selected
Operating Data" and "Selected Balance Sheet Data" as of and for the year ended
December 31, 2000 and December 31, 1999 and for the period ended December 31,
1998 have been derived from the audited consolidated financial statements of
Alamosa (Delaware) and the notes thereto appearing elsewhere herein.
It is important that you also read "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements for
the periods ended December 31, 1998, 1999, and 2000 and the related notes
appearing elsewhere herein.
FOR THE PERIOD JULY
FOR THE YEAR ENDED FOR THE YEAR ENDED 16, 1998 (INCEPTION)
DECEMBER 31, DECEMBER 31, THROUGH
2000 1999 DECEMBER 31, 1998
--------------------- --------------------- ---------------------
SELECTED OPERATING DATA:
Revenues:
Service revenues $73,499,638 $6,533,623 $ -
Product sales 9,200,669 2,450,090 -
------------ ------------ ---------
Total revenue 82,700,307 8,983,713 -
------------ ------------ ---------
Costs and expenses 151,596,913 39,655,669 958,394
Interest and other income/(expense) (11,291,494) (2,163,903) 34,572
------------ ------------ ---------
Net income/(loss) ($80,188,100) ($32,835,859) ($923,822)
============ ============ =========
Other data:
Deficiency of earnings
before fixed charges (1) ($80,188,100) ($33,492,844) ($923,822)
------------ ------------ ---------
AS OF AS OF AS OF
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2000 1999 1998
--------------------- --------------------- ------------------------
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents $141,768,167 $5,655,711 $13,529,077
Short-term investments 1,600,000 - -
Property and equipment, net 228,982,869 84,713,724 2,092,762
Restricted cash - 518,017 -
Total assets 458,398,013 104,492,199 15,673,885
Accounts payable and accrued
expenses 59,749,061 15,153,068 395,355
Long-term debt 263,804,132 71,876,379 -
Total liabilities 326,999,923 93,052,369 1,597,707
Total shareholders' equity $131,398,090 $11,439,830 $14,076,178
7
(1) For purposes of computing the deficiency of earnings before fixed charges,
fixed charges consist of interest expense, rental expense and amortization
of expense related to indebtedness. The deficiency of earnings before fixed
charges is the amount required for the ratio of earnings to fixed charges
to be one-to-one.
8
CAPITALIZATION
The following table shows our cash and cash equivalents, restricted cash,
short-term debt, long-term debt, stockholders' equity and capitalization:
o on an historical basis as of December 31, 2000; and
o on an adjusted basis reflecting (1) the acquisitions of Roberts, WOW
and Southwest, (2) the issuance of $250 million in senior notes, less
discounts and commissions of the initial purchasers and estimated
offering expenses of $7.5 million, (3) the initial draw of $150 million
under the senior secured credit facility used to pay off the EDC debt
and the debt of Roberts and WOW and the subsequent increase of the
senior secured credit funding to $333 million and drawdown of $53
million thereunder to pay off the secured portion of the debt of
Southwest, and (4) the use of approximately $59 million to establish a
security account to secure on a pro rata basis our payment obligations
under the senior notes and the senior discount notes and $11.5 million
as interest collateral for the new senior secured credit facility.
AS OF DECEMBER 31, 2000
----------------------------------
ACTUAL AS ADJUSTED
--------------- ----------------
(UNAUDITED, IN THOUSANDS)
Cash and cash equivalents .......................... $ 141,768 $ 276,466
Short-term investments ............................. $ 1,600 $ 1,600
Restricted cash (1) ................................ -- $ 70,500
Short-term debt
Current portion of capital lease obligations ....... 36 36
----------- -----------
Long-term debt:
EDC financing .................................. $ 54,524 $ --
Senior discount notes .......................... 209,280 209,280
Senior notes ................................... -- 250,000
Senior secured credit facility ................. -- 203,000
Capital lease obligations ...................... 1,039 1,039
----------- -----------
Total long-term debt ........................... $ 264,843 $ 663,319
Stockholders' equity (deficit):
Preferred stock, par value $.01 per share;
1,000 shares authorized; no shares
issued ....................................... $ -- $ --
Common stock, par value $.01 per share:
9,000 shares authorized;
100 shares outstanding, actual and as adjusted .001 .001
Additional paid-in capital ..................... 246,459 792,513
Unearned compensation .......................... (1,113) (1,698)
Accumulated deficit ............................ (113,948) (113,948)
----------- -----------
Total stockholders' equity ......................... $ 131,398 $ 676,867
----------- -----------
Total capitalization ............................... $ 396,277 $ 1,340,222
=========== ===========
- ------------------
(1) Reflects the portion of the net proceeds of the offering of the outstanding
senior notes used to purchase a portfolio of U.S. government securities.
9
RISK FACTORS
You should consider carefully the following risks and all of the
information set forth in this prospectus before tendering your notes for
exchange in the exchange offer. The risk factors set forth below, other than
those which discuss the consequences of failing to exchange your outstanding
notes in the exchange offer, are generally applicable to both the outstanding
notes and the registered notes.
RISKS RELATED TO THE NOTES
YOU MAY HAVE DIFFICULTY SELLING THE NOTES WHICH YOU DO NOT EXCHANGE. If you
do not exchange your outstanding notes for the notes offered in this exchange
offer, you will continue to be subject to the restrictions on the transfer of
your notes. Those transfer restrictions are described in the indenture and in
the legend contained on the outstanding notes, and arose because we originally
issued the outstanding notes under exemptions from, and in transactions not
subject to, the registration requirements of the Securities Act of 1933.
In general, you may offer or sell your outstanding notes only if they are
registered under the Securities Act and applicable state securities laws, or if
they are offered and sold under an exemption from those requirements. We do not
intend to register the outstanding notes under the Securities Act.
If a large number of outstanding notes are exchanged for notes issued in
the exchange offer, it may be more difficult for you to sell your unexchanged
notes. In addition, if you do not exchange your outstanding notes in the
exchange offer, you will no longer be entitled to have those notes registered
under the Securities Act.
See "The Exchange Offer -- Consequences of Failure to Exchange Outstanding
Notes" for a discussion of the possible consequences of failing to exchange your
notes.
THE ABSENCE OF A PUBLIC MARKET MAY MAKE IT DIFFICULT TO SELL THE REGISTERED
NOTES. The outstanding notes were issued to, and we believe these securities are
currently owned by, a relatively small number of beneficial owners. The
outstanding notes have not been registered under the Securities Act and will
remain subject to restrictions on transferability if they are not exchanged for
the registered notes. Although the registered notes may be resold or otherwise
transferred by the holders (who are not our affiliates) without compliance with
the registration requirements under the Securities Act, they will constitute a
new issue of securities with no established trading market. There can be no
assurance that such a market will develop. In addition, the registered notes
will not be listed on any national securities exchange. The registered notes may
trade at a discount from the initial offering price of the outstanding notes,
depending upon prevailing interest rates, the market for similar securities, our
operating results and other factors. We have been advised by the initial
purchasers that they currently intend to make a market in the registered notes,
as permitted by applicable laws and regulations; however, the initial purchasers
are not obligated to do so, and any such market-making activities may be
discontinued at any time without notice. In addition, such market-making
activity may be limited during the exchange offer and the pendency of a shelf
registration. Therefore, there can be no assurance that an active market for any
of the registered notes will develop, either prior to or after our performance
of our obligations under the registration rights agreement. If an active public
market does not develop, the market price and liquidity of the registered notes
may be adversely affected.
If a public trading market develops for the registered notes, future
trading prices will depend on many factors, including, among other things,
prevailing interest rates, our financial condition, and the market for similar
securities. Depending on these and other factors, the registered notes may trade
at a discount.
Notwithstanding the registration of the registered notes in the exchange
offer, holders who are "affiliates" (as defined under Rule 405 of the Securities
Act) of Alamosa (Delaware) may publicly offer for sale or resale the registered
notes only in compliance with the provisions of Rule 144 under the Securities
Act.
10
Each broker-dealer that receives registered notes for its own account in
exchange for outstanding notes, where such outstanding notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such registered notes. See "Plan of Distribution."
WE ARE A HOLDING COMPANY AND BECAUSE THE GUARANTEES ARE UNSECURED AND
SUBORDINATED TO DEBT THAT ENCUMBERS OUR GUARANTOR SUBSIDIARIES' ASSETS, YOU MAY
NOT BE FULLY REPAID IF WE OR OUR GUARANTOR SUBSIDIARIES BECOME INSOLVENT. The
notes are unsecured obligations of Alamosa (Delaware) (except to the extent of
amounts secured under the security agreement). We are a holding company that
will derive all our operating income from our subsidiaries. We are dependent on
the earnings and cash flow of our subsidiaries to meet our obligations with
respect to the notes. If we or our guarantor subsidiaries become insolvent, we
or our guarantor subsidiaries may not have sufficient assets to make payments on
amounts due on any or all of the notes or the subsidiary guarantees.
In addition, the right to payment on the guarantees will be subordinated to
all of our guarantor subsidiaries' existing and future senior debt. Our
guarantor subsidiaries are parties to our senior secured credit facility,
pursuant to which they may incur indebtedness of up to $333 million. The senior
secured credit facility is secured by liens on substantially all of the assets
of our guarantor subsidiaries. We have guaranteed all of the obligations under
the senior secured credit facility and have granted a security interest in
substantially all of our assets (other than certain cash amounts and certain
other exceptions) as security for such obligations under the senior secured
credit facility. If our guarantor subsidiaries were to default on the senior
secured credit facility, Citibank, as administrative agent and collateral agent
under the senior secured credit facility, could foreclose on the collateral
(including our pledged assets) regardless of whether there exists any default
with respect to the notes and could, under certain circum stances, seek
repayment from us under our guarantee. These assets would first be used to repay
in full all amounts outstanding under the senior secured credit facility. If our
guarantor subsidiaries become bankrupt, liquidate, dissolve, reorganize or
undergo a similar proceeding, such guarantor subsidiaries' assets will be
available to pay obligations on the notes or the applicable guarantee only after
all outstanding senior debt of such party has been paid in full. In addition, an
event of default under the senior credit facility may prohibit us and the
guarantors of the notes from paying the notes or the guarantees of the notes.
Our agreements with Sprint PCS and the infrastructure equipment used in our
network create the value of our assets. These assets are highly specialized and,
taken individually, have limited marketability, particularly as a result of some
of the provisions in the Sprint PCS agreements. Therefore, in a foreclosure
sale, these assets are likely to be sold as an entirety, and the lender may not
realize enough money to satisfy all senior debt.
BECAUSE FEDERAL AND STATE STATUTES MAY ALLOW COURTS TO VOID THE GUARANTEES
OF THE NOTES BY OUR SUBSIDIARIES, YOU MAY NOT HAVE THE RIGHT TO RECEIVE ANY
MONEY PURSUANT TO THE GUARANTEES. Although the guarantees of the notes by our
subsidiaries provide you with a claim against the assets of the applicable
subsidiary guarantor, creditors of a bankrupt subsidiary guarantor may challenge
the guarantee. If a challenge were upheld, then the applicable guarantee would
be invalid and unenforceable, junior to all creditors, including trade
creditors, of that subsidiary guarantor.
The creditors of a bankrupt subsidiary guarantor could challenge a
guarantee on the grounds that the guarantee constituted a fraudulent conveyance
under bankruptcy laws. If a court were to rule that the guarantee did constitute
a fraudulent conveyance, then the court could void the obligations under the
guarantee or subordinate the guarantee to other debt of the guarantor or take
other action detrimental to holders of the notes. In addition, any of the
guarantees could be subject to the claim that, since the guarantee was incurred
for our benefit, and only indirectly for the benefit of our subsidiary that
provided the guarantee, the obligations of the applicable guarantor were
incurred for less than fair consideration.
WE MAY BE UNABLE TO PURCHASE THE NOTES UPON A CHANGE OF CONTROL. Upon a
change of control event, we would be required to offer to purchase the notes for
cash at a price equal to 101% of their aggregate principal amount, plus accrued
and unpaid interest, if any. We would also be required to offer to purchase our
senior discount
11
notes for cash at a price equal to 101% of their aggregate accreted value, plus
accrued and unpaid interest, if any. The terms of the notes may not protect you
if we undergo a highly leveraged transaction, reorganization, restructuring,
merger or similar transaction that may adversely affect you unless the
transaction is included within the definition of a change of control.
A change of control under the terms of the notes is likely to constitute an
event of default under the senior secured credit facility. If this occurs, then
Citibank or other lenders pursuant to the senior secured credit facility may
declare their debt immediately due and payable. Since the guarantees of our
subsidiaries are subordinate in right of payment to the senior secured credit
facility, our subsidiary guarantors would first be obligated to pay any debt
declared under the senior secured credit facility immediately due and payable
before repurchasing any notes. The same could be true of any future debt
incurred by our subsidiaries pursuant to credit facilities with banks or other
institutional lenders. We cannot assure you that we will have the financial
resources necessary to repurchase the notes and satisfy other payment
obligations that could be triggered upon a change of control. If we do not have
sufficient financial resources to effect a change of control offer, we would be
required to seek additional financing from outside sources to repurchase the
notes. We cannot assure you that financing would be available to us on
satisfactory terms.
RISKS PARTICULAR TO OUR INDEBTEDNESS
OUR SUBSTANTIAL LEVERAGE COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH. We
are highly leveraged. As of December 31, 2000, on a pro forma consolidated basis
after giving effect to the issuance of the notes, the acquisitions of Roberts,
WOW and Southwest and the completion of the senior secured credit facility, our
total long-term indebtedness would have been approximately $663 million. As of
that date, such total long term indebtedness represents approximately 49% of our
total capitalization.
The senior secured credit facility and the indentures governing the senior
discount notes and the senior notes permit us to incur additional indebtedness
subject to some limitations.
Our substantial indebtedness could adversely affect our financial health
by, among other things:
o increasing our vulnerability to adverse economic conditions or
increases in prevailing interest rates, particularly if any of our
borrowings are at variable interest rates;
o limiting our ability to obtain any additional financing we may need to
operate, develop and expand our business;
o requiring us to dedicate a substantial portion of any cash flow from
operations to service our debt, which reduces the funds available for
operations and future business opportunities; and
o potentially making us more highly leveraged than our competitors, which
could potentially decrease our ability to compete in our industry.
The ability to make payments on our debt will depend 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 the cash flow from our operating activities is insufficient, we may
take actions, such as delaying or reducing capital expenditures, attempting to
restructure or refinance our debt, selling assets or operations or seeking
additional equity capital. Any or all of these actions may not be sufficient to
allow us to service our debt obligations. Further, we may be unable to take any
of these actions on satisfactory terms, in a timely manner or at all. The senior
secured credit facility and the indentures for the senior discount notes and for
the notes may limit our ability to take several of these actions. Our failure to
generate sufficient funds to pay our debts or to successfully undertake any of
these actions could, among other things, materially adversely affect the market
value of the notes and our ability to repay our obligations under the notes.
12
THE TERMS OF OUR DEBT PLACE RESTRICTIONS ON US AND OUR SUBSIDIARIES WHICH
MAY LIMIT OUR OPERATING FLEXIBILITY AND OUR ABILITY TO PAY PRINCIPAL AND
INTEREST ON THE NOTES. The documents governing the terms of our debt, including
the documents governing these notes, impose material operating and financial
restrictions on us and our subsidiaries. These restrictions, subject to ordinary
course of business exceptions, may limit our ability and the ability of our
subsidiaries to engage in some transactions, including the following:
o designated types of mergers or consolidations;
o paying dividends or other distributions to our stockholders;
o making investments;
o selling or encumbering assets;
o repurchasing our common stock;
o changing lines of business;
o borrowing additional money; and
o engaging in transactions with affiliates.
These restrictions could limit our ability to obtain debt financing,
repurchase stock, refinance or pay principal or interest on our outstanding
debt, complete acquisitions for cash or debt, or react to changes in our
operating environment.
The senior secured credit facility contains numerous affirmative and
negative covenants customary for credit facilities of a similar nature,
including, but not limited to, negative covenants imposing limitations on our
ability to, among other things, (1) declare dividends or repurchase stock; (2)
prepay, redeem or repurchase debt; (3) incur liens and engage in sale-leaseback
transactions; (4) make loans and investments; (5) incur additional debt, hedging
agreements and contingent obligations; (6) issue preferred stock of
subsidiaries; (7) engage in mergers, acquisitions and asset sales; (8) engage in
certain transactions with affiliates; (9) amend, waive or otherwise alter
material agreements or enter into restrictive agreements; and (10) alter the
businesses we conduct.
Pursuant to the senior secured credit facility, we are also subject to the
following financial covenants, which will apply until June 30, 2002:
o minimum numbers of Sprint PCS subscribers;
o providing coverage to a minimum number of residents;
o minimum service revenue;
o maximum negative EBITDA or minimum EBITDA;
o ratio of senior debt to total capital;
o ratio of total debt to total capital; and
o maximum capital expenditures.
After June 30, 2002, the financial covenants will be the following:
13
o ratio of senior debt to EBITDA;
o ratio of total debt to EBITDA;
o ratio of EBITDA to total fixed charges (the sum of debt service,
capital expenditures and taxes);
o ratio of EBITDA to total cash interest expense; and
o ratio of EBITDA to pro forma debt service.
We may not satisfy the financial ratios and tests under the senior secured
credit facility due to events that are beyond our control. If we fail to satisfy
any of the financial ratios and tests, we could be in a default under the senior
secured credit facility, or we may be limited in our ability to access
additional funds under the senior secured credit facility, which could result in
our being unable to make payments on the notes.
IF WE DEFAULT UNDER THE SENIOR SECURED CREDIT FACILITY, THE LENDERS MAY
DECLARE THE DEBT IMMEDIATELY DUE AND SPRINT PCS WILL HAVE THE RIGHT TO EITHER
PURCHASE OUR ASSETS OR PURCHASE THE OUTSTANDING DEBT OBLIGATIONS UNDER THE
SENIOR SECURED CREDIT FACILITY AND FORECLOSE ON OUR ASSETS. The senior secured
credit facility requires us and our subsidiaries to comply with specified
financial ratios and other performance covenants. If we fail to comply with
these covenants or default on our obligations under the senior secured credit
facility, the lenders may accelerate the maturity of the debt. If the lenders
accelerate the debt, Sprint PCS will have the right to either:
o purchase our operating assets for an amount equal to the greater of (i)
72% of our "entire business value" and (ii) the aggregate amount of the
outstanding debt under the senior secured credit facility; or
o purchase the obligations under the senior secured credit facility by
repaying the lenders in full in cash. To the extent Sprint PCS
purchases these obligations from the lenders, Sprint PCS's rights as a
senior lender would enable it to foreclose on the assets securing the
senior secured credit facility in a manner not otherwise permitted
under our affiliation agreements with Sprint PCS.
If Sprint PCS does not exercise either of these options, the lenders under
the senior secured credit facility may sell the assets securing the facility to
third parties. In addition, if Sprint PCS provides notice to the lenders under
the senior secured credit facility that we are in breach of our management
agreements with Sprint PCS and, as a result, our obligations under the senior
secured credit facility are accelerated and Sprint PCS does not elect to operate
our business, the lenders under the senior secured credit facility may designate
a third party to operate our business.
RISKS RELATING TO OUR BUSINESS, STRATEGY AND OPERATIONS
WE HAVE A VERY LIMITED OPERATING HISTORY AND WE MAY NOT ACHIEVE OR SUSTAIN
OPERATING PROFITABILITY OR POSITIVE CASH FLOWS, WHICH MAY LIKELY RESULT IN OUR
INABILITY TO MAKE PAYMENTS ON THE NOTES. We have a limited operating history. We
expect to continue to incur significant operating losses and to generate
significant negative cash flow from operating activities at least through the
year ending December 31, 2001. Our operating profitability will depend upon many
factors, including, among others, our ability to market Sprint PCS services,
achieve projected market penetration and manage customer turnover rates. If we
do not achieve and maintain operating profitability and positive cash flow from
operating activities on a timely basis, we may be unable to make interest or
principal payments on our notes and you could lose all or part of your
investment. We will have to dedicate a substantial portion of any cash flow from
operations to make interest and principal payments on our consolidated debt,
which will reduce funds available for other purposes. If we do not achieve and
maintain positive cash flow from operations on a timely basis, we may be unable
to develop our network or conduct our business in an effective or competitive
manner.
14
OUR FAILURE TO OBTAIN ADDITIONAL CAPITAL, IF NEEDED TO COMPLETE THE
BUILD-OUT OF OUR PORTION OF THE SPRINT PCS NETWORK, COULD CAUSE DELAY OR
ABANDONMENT OF OUR DEVELOPMENT PLANS. The build-out of our portions of the
Sprint PCS network will require substantial capital. We estimate that we will
have incurred approximately $279.4 million in total capital expenditures from
inception through December 31, 2001 for the build-out of our portion of the
Sprint PCS network. We plan to fund these requirements using existing cash and
funds available from the issuance of the outstanding notes and the senior
secured credit facility. Additional funds could be required for a variety of
reasons, including unforeseen delays, unanticipated expenses, higher than
expected operating losses, engineering design changes and other technology risks
or other corporate purposes. In addition, if the build-out is completed more
rapidly than currently anticipated, or if we contract to develop additional
markets, we will need to raise additional equity or debt capital. These
additional funds may not be available. Even if these funds are available, we may
not be able to obtain them on a timely basis, on terms acceptable to us or
within limitations permitted under the covenants contained in the documents
governing our debt. Failure to obtain additional funds, should the need for
funds develop, could result in the delay or abandonment of our development and
expansion plans and we may be unable to fund its ongoing operations.
WE MAY ENCOUNTER DIFFICULTIES IN COMPLETING THE BUILD-OUT OF OUR PORTION OF
THE SPRINT PCS NETWORK, WHICH COULD INCREASE COSTS AND DELAY COMPLETION OF OUR
BUILD-OUT. As part of our build-out, we must successfully lease or otherwise
retain rights to a sufficient number of radio communications and network control
sites, complete the purchase and installation of equipment, build out the
physical infrastructure and test the network. Some of the radio communications
sites are likely to require us to obtain zoning variances or other local
governmental or third party approvals or permits. Additionally, we must obtain
rights to a sufficient number of tower sites, which will require us to obtain
local regulatory approvals. The local governmental authorities in various
locations in our markets have, at times, placed moratoriums on the construction
of additional towers and radio communications sites. We may also have to make
changes to our radio base station network design as a result of difficulties in
the site acquisition process. Additionally, the FCC requires that our portion of
the PCS network must not interfere with the operations of microwave radio
systems, and Sprint PCS may be required to relocate incumbent microwave
operations to enable us to complete our build-out. Any of the foregoing
developments could increase the costs and delay the completion of our network
build-out. Any failure by us to construct our portion of the Sprint PCS network
on a timely basis may limit our network capacity and may reduce the number of
new Sprint PCS subscribers. Any significant delays could have a material adverse
effect on our business.
BECAUSE WE DEPEND HEAVILY ON OUTSOURCING, THE INABILITY OF THIRD PARTIES TO
FULFILL THEIR CONTRACTUAL OBLIGATIONS TO US MAY DISRUPT OUR SERVICES OR THE
BUILD-OUT OF OUR PORTION OF THE SPRINT PCS NETWORK. Because we outsource
portions of our business, we depend heavily on third-party vendors, suppliers,
consultants, contractors and local exchange carriers. These parties:
o design and engineer our systems;
o construct base stations, switch facilities and towers;
o install T-1 lines; and
o deploy our wireless personal communications services network systems.
We are especially dependent on Nortel for network equipment. Pursuant to
the equipment agreement with Nortel, we are required to purchase a total of
$167.0 million of equipment and services from Nortel. As of March 31, 2001, we
have remaining commitments of $12.5 million under the Nortel equipment
agreement. In addition, we lease some tower sites for our wireless systems
through a master lease agreement with Omni America Development Corp. and a
master design build agreement with SBA Towers, Inc. Both Omni America and SBA in
turn have separate leasing arrangements with each of the owners of the sites. If
Omni America or SBA were to become insolvent or Omni America or SBA were to
breach its leasing arrangements, we may experience extended service interruption
in the areas serviced by those sites. We rely on CHR Solutions, Inc. for
engineering, marketing, operating and other consulting services. The failure by
any of our vendors, suppliers, consultants, contractors or
15
local exchange carriers to fulfill their contractual obligations to us could
materially delay build out or adversely affect the operations of our portion of
the Sprint PCS network.
OUR ROAMING ARRANGEMENTS MAY NOT BE COMPETITIVE WITH OTHER WIRELESS SERVICE
PROVIDERS, WHICH MAY RESTRICT OUR ABILITY TO ATTRACT AND RETAIN CUSTOMERS AND
THUS MAY ADVERSELY AFFECT OUR OPERATIONS. We rely on roaming arrangements with
other wireless service providers for coverage in some areas. Some risks related
to these arrangements are as follows:
o the quality of the service provided by another provider during a
roaming call may not approximate the quality of the service provided by
Sprint PCS;
o the price of a roaming call may not be competitive with prices charged
by other wireless companies for roaming calls;
o customers may have to use a more expensive dual-band/dual mode handset
with diminished standby and talk time capacities;
o customers must end a call in progress and initiate a new call when
leaving the Sprint PCS network and entering another wireless network;
and
o Sprint PCS customers may not be able to use Sprint PCS advanced
features, such as voicemail notification, while roaming.
If Sprint PCS customers are not able to roam instantaneously or efficiently
onto other wireless networks, we may lose current Sprint PCS subscribers and
Sprint PCS services will be less attractive to potential new customers.
WE ARE LIKELY TO RECEIVE VERY LITTLE NON-SPRINT PCS ROAMING REVENUE SINCE
THE SPRINT PCS NETWORK IS NOT COMPATIBLE WITH MANY OTHER NETWORKS. A portion of
our revenue may be derived from payments by other wireless service providers for
use by their subscribers of the Sprint PCS network in our territories. However,
the technology used in the Sprint PCS network is not compatible with the
technology used by many other systems, which diminishes the ability of other
wireless service providers' subscribers to use Sprint PCS services. Sprint PCS
has entered into few agreements that enable customers of other wireless service
providers to roam onto the Sprint PCS network. As a result, the actual
non-Sprint PCS roaming revenue that we receive in the future is likely to be low
relative to that of other wireless service providers.
IF WE RECEIVE LESS REVENUES OR INCUR MORE FEES THAN WE ANTICIPATE FOR
SPRINT PCS ROAMING, OUR RESULTS OF OPERATIONS MAY BE NEGATIVELY AFFECTED. We are
paid a fee from Sprint PCS or a Sprint PCS affiliate for every minute that a
Sprint PCS subscriber based outside of our territories uses the Sprint PCS
network in our territories. Similarly, we pay a fee to Sprint PCS for every
minute that a Sprint PCS subscriber based in our territories uses the Sprint PCS
network outside our territories. Sprint PCS customers from our territories may
spend more time in other Sprint PCS coverage areas than we anticipate, and
Sprint PCS customers from outside our territories may spend less time in our
territories or may use our services less than we anticipate. As a result, we may
receive less Sprint PCS roaming revenue than we anticipate or we may have to pay
more Sprint PCS roaming fees than we collect. In addition, Sprint PCS could
change the current fee for each Sprint PCS roaming minute used. If we were to
receive less Sprint PCS roaming net revenue than anticipated, our results of
operations may be negatively affected. See "Our Affiliation Agreements with
Sprint PCS - Recent Developments."
WE MAY NOT BE ABLE TO MANAGE OUR RAPID GROWTH SUCCESSFULLY. We expect to
experience rapid growth and development in a relatively short period of time as
we complete the build-out of our portion of the Sprint PCS network. The
management of this anticipated growth will require, among other things:
16
o continued development of our operational and administrative systems;
o stringent control of costs and timing of network build-out;
o increased marketing activities;
o the ability to attract and retain qualified management, technical and
sales personnel; and
o the training of new personnel.
Our failure to successfully manage our expected rapid growth and
development could impair our ability to complete the build-out of our portion of
the Sprint PCS network, manage the expanding systems in those territories and
achieve profitability.
OUR PROJECTED BUILD-OUT PLAN DOES NOT COVER ALL AREAS OF OUR TERRITORIES,
WHICH COULD MAKE IT DIFFICULT TO MAINTAIN A PROFITABLE CUSTOMER BASE. Our
projected build-out plan does not cover all areas of our territories. Upon
completion of our current build-out plan, we expect to cover approximately 72.1%
of the resident population in our territories. As a result, our build-out plan
may not adequately serve the needs of the potential customers in our territories
or attract enough subscribers to operate our business successfully. To correct
this potential problem, we may have to cover a greater percentage of our
territories than we currently anticipate, which we may not have the financial
resources to complete or may be unable to do profitably.
WE MAY HAVE DIFFICULTY OBTAINING EQUIPMENT THAT IS IN SHORT SUPPLY, WHICH
COULD CAUSE DELAYS IN THE BUILD-OUT OF OUR NETWORK. We depend on our
relationships with manufacturers of equipment used by us to construct our
portion of the Sprint PCS network. The demand for this equipment is
considerable, and some manufacturers could have substantial order backlogs. If
we are unable to rely on these manufacturers, we could have difficulty obtaining
necessary equipment in a timely manner and our costs for obtaining necessary
equipment could increase. As a result, we could suffer increased costs, delays
in the build-out of our portion of the Sprint PCS network, disruptions in
customer service and a reduction in subscribers.
PARTS OF OUR TERRITORIES HAVE LIMITED LICENSED SPECTRUM, AND THIS MAY
AFFECT THE QUALITY OF OUR SERVICE OR RESTRICT OUR ABILITY TO PURCHASE SPECTRUM
LICENSES FROM SPRINT PCS IN THOSE AREAS. While Sprint PCS has licenses to use 30
MHZ of spectrum throughout most of our territories, it has licenses covering
only 10 MHZ in New Mexico and Durango and 20 MHZ in El Paso. In the future, as
the number of our subscribers in those areas increases, this limited licensed
spectrum may not be able to accommodate increases in call volume and may lead to
more dropped calls than in other parts of our territories. In addition, if
Sprint PCS were to terminate its affiliation agreements with us, Sprint PCS
would have no obligation to sell spectrum licenses to us in areas where Sprint
PCS owns less than 20 MHZ of spectrum. Accordingly, if Sprint PCS were to
terminate the affiliation agreements with us, it is likely that we would be
unable to operate our business in New Mexico and Durango.
THE TECHNOLOGY THAT WE USE MAY BECOME OBSOLETE, WHICH WOULD LIMIT OUR
ABILITY TO COMPETE EFFECTIVELY WITHIN THE WIRELESS INDUSTRY. The wireless
telecommunications industry is experiencing significant technological change. We
employ code division multiple access ("CDMA") digital technology, the digital
wireless communications technology selected by Sprint PCS for its nationwide
network. CDMA technology may not ultimately provide all of the advantages
expected by us or Sprint PCS. If another technology becomes the preferred
industry standard, we would be at a competitive disadvantage and competitive
pressures may require Sprint PCS to change its digital technology, which in turn
could require us to make changes to our network at substantial costs. We may be
unable to respond to these pressures and implement new technology on a timely
basis or at an acceptable cost.
UNAUTHORIZED USE OF, OR INTERFERENCE WITH, THE SPRINT PCS NETWORK COULD
DISRUPT OUR SERVICE AND INCREASE OUR COSTS. We may incur costs associated with
the unauthorized use of the Sprint PCS network, including
17
administrative and capital costs associated with detecting, monitoring and
reducing the incidence of fraud. Fraudulent use of the Sprint PCS network may
impact interconnection costs, capacity costs, administrative costs, fraud
prevention costs and payments to other carriers for inviolable fraudulent
roaming. In addition, some of our border markets are susceptible to
uncertainties related to areas not governed by the FCC. For example,
unauthorized microwave radio signals near the border in Mexico could disrupt our
service in the United States.
POTENTIAL ACQUISITIONS MAY REQUIRE US TO INCUR SUBSTANTIAL ADDITIONAL DEBT
AND INTEGRATE NEW TECHNOLOGIES, OPERATIONS AND SERVICES, WHICH MAY BE COSTLY AND
TIME CONSUMING. We intend to continually evaluate opportunities for the
acquisition of businesses that are intended to complement or extend our existing
operations. If we acquire new businesses, we may encounter difficulties that may
be costly and time-consuming, may slow our growth or may lower the value of our
notes. Examples of such difficulties are that we may have to:
o assume and/or incur substantial additional debt to finance the
acquisitions and fund the ongoing operations of the acquired companies;
o integrate new technologies with our existing technology;
o integrate new operations with our existing operations;
o integrate new services with our existing offering of services; or
o divert the attention of our management from other business concerns.
RISKS RELATED TO THE RELATIONSHIPS WITH SPRINT PCS
IF WE FAIL TO COMPLETE THE BUILD-OUT OF OUR PORTION OF THE SPRINT PCS
NETWORK IN ACCORDANCE WITH THE TERMS OF OUR MANAGEMENT AGREEMENTS WITH SPRINT
PCS, AND AN ACCELERATION IS DECLARED UNDER THE SENIOR SECURED CREDIT FACILITY,
SPRINT PCS MAY HAVE THE RIGHT TO PURCHASE OUR OPERATING ASSETS AT A DISCOUNT TO
MARKET VALUE. Our affiliation agreements with Sprint PCS require that we provide
network coverage to a minimum network coverage area within specified time
frames. We may amend our agreements with Sprint PCS in the future to expand this
network coverage. A failure by us to meet the build-out requirements for any one
of our markets could constitute an event of termination under our management
agreements with Sprint PCS. Our affiliation agreements provide that upon the
occurrence of an event of termination, Sprint PCS has the right to purchase our
operating assets without further stockholder approval and for a price equal to
72% of our "entire business value." The "entire business value" includes our
spectrum licenses, business operations and other assets.
Sprint PCS's right to purchase our assets following an event of termination
under our affiliation agreements is currently subject to the provisions of a
consent and agreement entered into by Sprint PCS for the benefit of the lenders
under the senior secured credit facility. Pursuant to the terms of this consent
and agreement, Sprint may not purchase our operating assets until all of our
obligations under the senior secured credit facility have been paid in full in
cash and all commitments to advance credit under the senior secured credit
facility have been terminated or have expired. However, Sprint PCS may purchase
our assets if it first pays all obligations due under the senior secured credit
facility and the senior secured credit facility is terminated in connection with
such payment. Furthermore, Sprint PCS also has the right to purchase our assets
upon receipt of a notice of acceleration under the senior secured credit
facility following an event of default thereunder. Such right to purchase is
subject to time limitations, and the purchase price must be the greater of an
amount equal to 72% of our "entire business value" or the amount owed under the
senior secured credit facility.
IF SPRINT PCS DOES NOT COMPLETE THE CONSTRUCTION OF ITS NATIONWIDE PCS
NETWORK, WE MAY NOT BE ABLE TO ATTRACT AND RETAIN CUSTOMERS. Sprint PCS
currently intends to cover a significant portion of the population of the United
States, Puerto Rico and the U.S. Virgin Islands by creating a nationwide PCS
network through its own construction efforts and those of its network partners.
Sprint PCS is still constructing its nationwide network and does not offer PCS
services, either on its own network or through its roaming agreements, in every
city
18
in the United States. Sprint PCS has entered into, and anticipates entering
into, management agreements similar to ours with companies in other markets
under its nationwide PCS build-out strategy. Our results of operations are
dependent on Sprint PCS's national network and, to a lesser extent, on the
networks of Sprint PCS's other network partners. Sprint PCS's network may not
provide nationwide coverage to the same extent as its competitors, which could
adversely affect our ability to attract and retain customers.
SPRINT PCS'S VENDOR DISCOUNTS MAY BE DISCONTINUED, WHICH COULD INCREASE OUR
EQUIPMENT COSTS AND REQUIRE MORE CAPITAL THAN WE PROJECT TO BUILD-OUT OUR
NETWORK. We intend to continue to purchase infrastructure equipment under Sprint
PCS's vendor agreements that include significant volume discounts. If Sprint PCS
were unable to continue to obtain vendor discounts for its affiliates, the loss
of vendor discounts could increase our equipment costs for our new markets.
SPRINT PCS MAY MAKE DECISIONS THAT COULD INCREASE OUR EXPENSES, REDUCE OUR
REVENUES OR MAKE OUR AFFILIATE RELATIONSHIPS WITH SPRINT PCS LESS COMPETITIVE.
Sprint PCS, under our affiliation agreements has a substantial amount of control
over factors which significantly affect the conduct of our business.
Accordingly, Sprint PCS may make decisions that adversely affect our business,
such as the following:
o Sprint PCS prices its national plans based on its own objectives and
could set price levels that may not be economically sufficient for our
business.
o Sprint PCS could change the per minute rate for Sprint PCS roaming fees
and increase the costs for Sprint PCS to perform back office services.
See "Our Affiliation Agreements with Sprint PCS - Recent Developments."
o Sprint PCS may alter its network and technical requirements or request
that we build out additional areas within our territories, which could
result in increased equipment and build-out costs or in Sprint PCS
building out that area itself or assigning it to another affiliate.
THE TERMINATION OF OUR AFFILIATION AGREEMENTS WITH SPRINT PCS WOULD
SEVERELY RESTRICT OUR ABILITY TO CONDUCT OUR BUSINESS. Our relationship with
Sprint PCS is governed by our affiliation agreements with Sprint PCS. Since we
do not own any licenses to operate a wireless network, our business depends on
the continued effectiveness of these affiliation agreements. However, Sprint PCS
may be able to terminate our affiliation agreements if we materially breach the
agreements. Among other things, a failure by us to meet the build-out
requirements for any one of the individual markets in our territories or to meet
Sprint PCS's technical or customer service requirements contained in the
affiliation agreements would constitute a material breach of the agreements,
which could lead to its termination. If Sprint PCS terminates the affiliation
agreements, we may not be a part of the Sprint PCS network and we would have
extreme difficulty conducting our business. Sprint's right to terminate its
affiliation agreement with us is subject to the provisions of the consent and
agreement entered into by Sprint with Citicorp, as administrative agent for the
lenders, in connection with the senior secured credit facility.
IF SPRINT PCS DOES NOT RENEW OUR AFFILIATION AGREEMENTS, OUR ABILITY TO
CONDUCT OUR BUSINESS WOULD BE SEVERELY RESTRICTED. Our affiliation agreements
with Sprint PCS are not perpetual, and will eventually expire. Sprint PCS can
choose not to renew these agreements at the expiration of their 20 year initial
terms or any ten year renewal term. If Sprint PCS decides not to renew our
affiliation agreements, we may no longer be a part of the Sprint PCS network and
we would have extreme difficulty conducting our business.
CERTAIN PROVISIONS OF OUR AFFILIATION AGREEMENTS WITH SPRINT PCS MAY
DIMINISH OUR VALUE AND RESTRICT THE SALE OF OUR BUSINESS. Under specific
circumstances and without further stockholder approval, Sprint PCS may purchase
our operating assets or capital stock at a discount. In addition, Sprint PCS
must approve any change of control of our ownership and must consent to any
assignment of our affiliation agreements. Sprint PCS also has a right of first
refusal if we decide to sell our operating assets to a third party. We are also
subject to a number of restrictions on the transfer of our business, including a
prohibition on the sale of us or our operating assets to competitors of Sprint
or Sprint PCS. These restrictions and other restrictions contained in these
affiliation
19
agreements with Sprint PCS could adversely affect the value of our common stock,
may limit our ability to sell our business, may reduce the value a buyer would
be willing to pay for our business and may reduce our "entire business value."
PROBLEMS EXPERIENCED BY SPRINT PCS WITH ITS INTERNAL SUPPORT SYSTEMS COULD
LEAD TO CUSTOMER DISSATISFACTION OR INCREASE OUR COSTS. We rely on Sprint PCS's
internal support systems, including customer care, billing and back office
support. As Sprint PCS has expanded, its internal support systems have been
subject to increased demand and, in some cases, suffered a degradation in
service. We cannot assure you that Sprint PCS will be able to successfully add
system capacity or that its internal support systems will be adequate. It is
likely that problems with Sprint PCS's internal support systems could cause:
o delays or problems in our operations or services;
o delays or difficulty in gaining access to customer and financial
information;
o a loss of Sprint PCS customers; and
o an increase in the costs of customer care, billing and back office
services.
OUR COSTS FOR INTERNAL SUPPORT SYSTEMS MAY INCREASE IF SPRINT PCS
TERMINATES ALL OR PART OF OUR SERVICES AGREEMENTS. We currently estimate that
the costs for the services provided by Sprint PCS under our services agreements
in the year 2001 will be approximately $11 million. We expect this number to
significantly increase as the number of Sprint PCS subscribers based in our
territories increases. Our services agreements with Sprint PCS provide that,
upon nine months' prior written notice, Sprint PCS may terminate any service
provided under such agreements. We do not expect to have a contingency plan if
Sprint PCS terminates any such service. If Sprint PCS terminates a service for
which we have not developed a cost-effective alternative or increases the amount
it charges for these services, our operating costs may increase beyond our
expectations and our operations may be interrupted or restricted.
WE MAY HAVE DIFFICULTY IN OBTAINING HANDSETS FROM SPRINT PCS, WHICH ARE IN
SHORT SUPPLY. We depend on our relationship with Sprint PCS to obtain handsets.
The demand for specific types of handsets is considerable and the manufacturers
of those handsets may have to distribute their limited supply of products among
their numerous customers. If Sprint PCS modifies its handset logistics and
delivery plan or if we are not able to continue to rely on Sprint PCS's
relationships with suppliers and vendors, we could have difficulty obtaining
specific types of handsets in a timely manner. As a result, we could suffer
disruptions in customer service and a reduction in subscribers.
IF SPRINT PCS DOES NOT MAINTAIN CONTROL OVER ITS LICENSED SPECTRUM, THE
AFFILIATION AGREEMENTS WITH SPRINT PCS MAY BE TERMINATED. Sprint PCS, not us,
owns the licenses necessary to provide wireless services in our territories. The
FCC requires that licensees like Sprint PCS maintain control of their licensed
systems and not delegate control to third party operators or managers. Our
affiliation agreements with Sprint PCS reflect an arrangement that the parties
believe meets the FCC requirements for licensee control of licensed spectrum.
However, if the FCC were to determine that any of our affiliation agreements
with Sprint PCS need to be modified to increase the level of licensee control,
we have agreed with Sprint PCS to use our best efforts to modify the agreements
to comply with applicable law. If we cannot agree with Sprint PCS to modify the
agreements, those agreements may be terminated. If the agreements are
terminated, we would no longer be a part of the Sprint PCS network and we would
not be able to conduct our business.
THE FCC MAY FAIL TO RENEW THE SPRINT PCS LICENSES UNDER CERTAIN
CIRCUMSTANCES, WHICH WOULD PREVENT US FROM PROVIDING WIRELESS SERVICES. We do
not own any licenses to operate a wireless network. We are dependent on Sprint
PCS's licenses, which are subject to renewal and revocation by the FCC. Sprint
PCS's licenses in our territories will expire in 2005 or 2007 but may be renewed
for additional ten-year terms. The FCC has adopted specific standards that apply
to wireless personal communications services license renewals. Any failure by
20
Sprint PCS or us to comply with these standards could cause the nonrenewability
of the Sprint PCS licenses for our territories. Additionally, if Sprint PCS does
not demonstrate to the FCC that Sprint PCS has met the five-year and ten-year
construction requirements for each of its wireless personal communications
services licenses, it can lose those licenses. If Sprint PCS loses its licenses
in our territories for any of these reasons, we and our subsidiaries would not
be able to provide wireless services without obtaining rights to other licenses.
RISKS RELATED TO THE WIRELESS PERSONAL COMMUNICATIONS SERVICES INDUSTRY
WE MAY EXPERIENCE A HIGH RATE OF CUSTOMER TURNOVER WHICH WOULD INCREASE OUR
COSTS OF OPERATIONS AND REDUCE OUR REVENUE. The wireless personal communications
services industry in general and Sprint PCS in particular have experienced a
higher rate of customer turnover as compared to cellular industry averages. In
particular, the customer turnover experienced by us may be high because:
o Sprint PCS does not require its customers to sign long-term contracts;
and
o Sprint PCS's handset return policy allows customers to return used
handsets within 14 days of purchase and receive a full refund.
A high rate of customer turnover could adversely affect our competitive
position, results of operations and our costs of, or losses incurred in,
obtaining new subscribers, especially because our subsidiaries subsidize some of
the costs of initial purchases of handsets by customers.
REGULATION BY GOVERNMENT AGENCIES AND TAXING AUTHORITIES MAY INCREASE OUR
COSTS OF PROVIDING SERVICE OR REQUIRE US TO CHANGE OUR SERVICES. Our operations
and those of Sprint PCS may be subject to varying degrees of regulation by the
FCC, the Federal Trade Commission, the Federal Aviation Administration, the
Environmental Protection Agency, the Occupational Safety and Health
Administration and state and local regulatory agencies and legislative bodies.
Adverse decisions or regulations of these regulatory bodies could negatively
impact Sprint PCS's operations and our costs of doing business. For example,
changes in tax laws or the interpretation of existing tax laws by state and
local authorities could subject us to increased income, sales, gross receipts or
other tax costs or require us to alter the structure of our current relationship
with Sprint PCS.
CONCERNS OVER HEALTH RISKS POSED BY THE USE OF WIRELESS HANDSETS MAY REDUCE
THE CONSUMER DEMAND FOR OUR SERVICES. Media reports have suggested that radio
frequency emissions from wireless handsets may:
o be linked to various health problems resulting from continued or
excessive use, including cancer;
o interfere with various electronic medical devices, including hearing
aids and pacemakers; and
o cause explosions if used while fueling an automobile.
Widespread concerns over radio frequency emissions may expose us to
potential litigation or discourage the use of wireless handsets. Any resulting
decrease in demand for these services could impair our ability to profitably
operate our business.
WORSE THAN EXPECTED FOURTH QUARTER RESULTS MAY SIGNIFICANTLY REDUCE OUR
OVERALL RESULTS OF OPERATIONS AND CAUSE OUR STOCK PRICE TO DROP. The wireless
industry is heavily dependent on fourth quarter results. Among other things, the
industry relies on significantly higher customer additions and handset sales in
the fourth quarter as compared to the other three fiscal quarters.
Our overall results of operations could be significantly reduced, and the
price of our common stock may drop, if we have a worse than expected fourth
quarter for any reason, including the following:
21
o our inability to match or beat pricing plans offered by competitors;
o the failure to adequately promote Sprint PCS's products, services and
pricing plans;
o our inability to obtain an adequate supply or selection of handsets;
o a downturn in the economy of some or all markets in our territories; or
o a poor holiday shopping season.
SIGNIFICANT COMPETITION IN THE WIRELESS COMMUNICATIONS SERVICES INDUSTRY
MAY RESULT IN OUR COMPETITORS OFFERING NEW SERVICES OR LOWER PRICES, WHICH COULD
PREVENT US FROM OPERATING PROFITABLY. Competition in the wireless communications
services industry is intense. We anticipate that competition will cause the
market prices for two-way wireless products and services to decline in the
future. Our ability to compete will depend, in part, on our ability to
anticipate and respond to various competitive factors affecting the
telecommunications industry.
Our dependence on Sprint PCS to develop competitive products and services
and the requirement that we obtain Sprint PCS's consent for our subsidiaries to
sell non-Sprint PCS approved equipment may limit our ability to keep pace with
our competitors on the introduction of new products, services and equipment.
Some of our competitors are larger than us, possess greater resources and more
extensive coverage areas, and may market other services, such as landline
telephone service, cable television and Internet access, with their wireless
communications services. In addition, we may be at a competitive disadvantage
since we may be more highly leveraged than some of our competitors.
Furthermore, there has been a recent trend in the wireless communications
industry towards consolidation of wireless service providers through joint
ventures, reorganizations and acquisitions. We expect this consolidation to lead
to larger competitors over time. We may be unable to compete successfully with
larger competitors who have substantially greater resources or who offer more
services than we do.
A LACK OF SUITABLE TOWER SITES MAY DELAY THE BUILD-OUT OF OUR PORTION OF
THE SPRINT PCS NETWORK AND RESTRICT OUR OPERATING CAPACITY. We experienced
difficulty, and may continue to have difficulty, in obtaining tower sites in
some areas of our territories on a timely basis. For example, the local
governmental authorities in various locations in our territories have at times
placed moratoriums on the construction of additional towers and base stations.
These moratoriums may materially and adversely affect the timing of the planned
build-out and quality of the network operations in those markets. A lack of
tower site availability due to difficulty in obtaining local regulatory
approvals, or for any other reasons, may delay the build-out of our portion of
the Sprint PCS network, delay the opening of markets, limit network capacity or
reduce the number of new Sprint PCS subscribers in our territories.
22
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
When we sold the outstanding notes in January 2001, we entered into a
registration rights agreement with the initial purchasers of those notes. Under
the registration rights agreement, we agreed to file a registration statement
regarding the exchange of the outstanding notes for notes which are registered
under the Securities Act of 1933. We also agreed to use our reasonable best
efforts to cause the registration statement to become effective with the
Securities and Exchange Commission, and to conduct this exchange offer after the
registration statement is declared effective. We will keep the exchange offer
open for a period of not less than 20 business days after the day notice thereof
is mailed to the holders of the outstanding notes. The outstanding notes provide
that generally we will be required to pay special interest to the holders of the
outstanding notes if:
o the registration statement is not filed by May 1, 2001;
o the registration statement is not declared effective by July 30, 2001;
o the exchange offer has not been completed by August 29, 2001.
A copy of the registration rights agreement and a form of global note
relating to the outstanding notes is filed as an exhibit to the registration
statement to which this prospectus is a part.
Because the registration statement was filed on May 9, 2001, special
interest (in addition to the stated interest on the outstanding notes) accrued
on the principal amount of the outstanding notes from and including May 1, 2001
to but excluding May 9, 2001.
TERMS OF THE EXCHANGE OFFER
This prospectus and the accompanying letter of transmittal together
constitute the exchange offer. Upon the terms and subject to the conditions set
forth in this prospectus and in the letter of transmittal, we will accept for
exchange outstanding notes which are properly tendered on or before the
expiration date and are not withdrawn as permitted below. The expiration date
for this exchange offer is 5:00 p.m., New York City time, on [ ], or such later
date and time to which we, in our sole discretion, extend the exchange offer.
The form and terms of the notes being issued in the exchange offer are the
same as the form and terms of the outstanding notes, except that:
o the notes being issued in the exchange offer will have been registered
under the Securities Act;
o the notes issued in the exchange offer will not bear the restrictive
legends restricting their transfer under the Securities Act; and
o the notes being issued in the exchange offer will not contain the
registration rights and special interest provisions contained in the
outstanding notes.
Notes tendered in the exchange offer must be in denominations of the
principal amount of $1,000 and any integral multiple thereof.
We expressly reserve the right, in our sole discretion:
o to extend the expiration date;
o to delay accepting any outstanding notes;
o if any of the conditions set forth below under "--Conditions to the
Exchange Offer" have not been satisfied, to terminate the exchange
offer and not accept any notes for exchange; or
23
o to amend the exchange offer in any manner.
We will give oral or written notice of any extension, delay,
non-acceptance, termination or amendment as promptly as practicable by a public
announcement, and in the case of an extension, no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date.
During an extension, all outstanding notes previously tendered will remain
subject to the exchange offer and may be accepted for exchange by us. Any
outstanding notes not accepted for exchange for any reason will be returned
without cost to the holder that tendered them as promptly as practicable after
the expiration or termination of the exchange offer.
HOW TO TENDER NOTES FOR EXCHANGE
When the holder of outstanding notes tenders, and we accept, notes for
exchange, a binding agreement between us and the tendering holder is created,
subject to the terms and conditions set forth in this prospectus and the
accompanying letter of transmittal. Except as set forth below, a holder of
outstanding notes who wishes to tender notes for exchange must, on or prior to
the expiration date:
o transmit a properly completed and duly executed letter of transmittal,
including all other documents required by such letter of transmittal,
to Wells Fargo Bank Minnesota, N.A. (the "exchange agent"), at the
address set forth below under the heading "Exchange Agent"; or
o if notes are tendered pursuant to the book-entry procedures set forth
below, transmit an agent's message to the exchange agent at the address
set forth below under the heading "Exchange Agent."
In addition, either:
o the exchange agent must receive the certificates for the outstanding
notes and the letter of transmittal;
o the exchange agent must receive, prior to the expiration date, a timely
confirmation of the book-entry transfer of the notes being tendered
into the exchange agent's account at the Depository Trust Company (the
"DTC"), along with the letter of transmittal or an agent's message; or
o the holder must comply with the guaranteed delivery procedures
described below.
The term "agent's message" means a message, transmitted to the DTC and
received by the exchange agent and forming a part of a book-entry transfer (a
"book-entry confirmation"), which states that the DTC has received an express
acknowledgment that the tendering holder agrees to be bound by the letter of
transmittal and that we may enforce the letter of transmittal against such
holder.
THE METHOD OF DELIVERY OF THE OUTSTANDING NOTES, THE LETTERS OF TRANSMITTAL
AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF
SUCH DELIVERY IS BY MAIL, WE RECOMMEND REGISTERED MAIL, PROPERLY INSURED, WITH
RETURN RECEIPT REQUESTED. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO
ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR NOTES SHOULD BE SENT
DIRECTLY TO US.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the notes surrendered for exchange are
tendered:
o by a holder of outstanding notes who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on
the letter of transmittal; or
24
o for the account of an eligible institution.
An "eligible institution" is a firm which is a member of a registered
national securities exchange or a member of the National Association of
Securities Dealers, Inc., or a commercial bank or trust company having an office
or correspondent in the United States.
If signatures on a letter of transmittal or notice of withdrawal are
required to be guaranteed, the guarantor must be an eligible institution. If
notes are registered in the name of a person other than the signer of the letter
of transmittal, the notes surrendered for exchange must be endorsed by, or
accompanied by a written instrument or instruments of transfer or exchange, in
satisfactory form as determined by us in our sole discretion, duly executed by
the registered holder with the holder's signature guaranteed by an eligible
institution.
We will determine all questions as to the validity, form, eligibility
(including time of receipt) and acceptance of notes tendered for exchange in our
sole discretion. Our determination will be final and binding. We reserve the
absolute right to:
o reject any and all tenders of any note improperly tendered;
o refuse to accept any note if, in our judgment or the judgment of our
counsel, acceptance of the note may be deemed unlawful; and
o waive any defects or irregularities or conditions of the exchange offer
as to any particular note either before or after the expiration date,
including the right to waive the ineligibility of any holder who seeks
to tender notes in the exchange offer.
Our interpretation of the terms and conditions of the exchange offer as to
any particular notes either before or after the expiration date, including the
letter of transmittal and the instructions to it, will be final and binding on
all parties. Holders must cure any defects and irregularities in connection with
tenders of notes for exchange within such reasonable period of time as we will
determine, unless we waive such defects or irregularities. Neither we, the
exchange agent nor any other person shall be under any duty to give notification
of any defect or irregularity with respect to any tender of notes for exchange,
nor shall any of us incur any liability for failure to give such notification.
If a person or persons other than the registered holder or holders of the
outstanding notes tendered for exchange signs the letter of transmittal, the
tendered notes must be endorsed or accompanied by appropriate powers of
attorney, in either case signed exactly as the name or names of the registered
holder or holders that appear on the outstanding notes.
If trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity sign the letter of transmittal or any notes or any power of attorney,
such persons should so indicate when signing, and you must submit proper
evidence satisfactory to us of such person's authority to so act unless we waive
this requirement.
By tendering, each holder will represent to us, among other things, that
the person acquiring notes in the exchange offer is obtaining them in the
ordinary course of its business, whether or not such person is the holder, and
that neither the holder nor such other person has any arrangement or
understanding with any person to participate in the distribution of the notes
issued in the exchange offer. If any holder or any such other person is an
"affiliate," as defined under Rule 405 of the Securities Act, of Alamosa
(Delaware), or is engaged in or intends to engage in or has an arrangement or
understanding with any person to participate in a distribution of such notes to
be acquired in the exchange offer, such holder or any such other person:
o may not rely on the applicable interpretations of the staff of the SEC;
and
25
o must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives registered notes for its own account in
exchange for outstanding notes, where such outstanding notes were acquired as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale of such
registered notes. See "Plan of Distribution".
ACCEPTANCE OF OUTSTANDING NOTES FOR EXCHANGE; DELIVERY OF NOTES ISSUED IN THE
EXCHANGE OFFER
Upon satisfaction or waiver of all of the conditions to the exchange offer,
we will accept, promptly after the expiration date, all outstanding notes
properly tendered and will issue notes registered under the Securities Act. For
purposes of the exchange offer, we shall be deemed to have accepted properly
tendered outstanding notes for exchange when, as and if we have given oral or
written notice to the exchange agent, with written confirmation of any oral
notice to be given promptly thereafter. See "--Conditions to the Exchange Offer"
for a discussion of the conditions that must be satisfied before we accept any
notes for exchange.
For each outstanding note accepted for exchange, the holder will receive a
note registered under the Securities Act having a principal amount equal to that
of the surrendered outstanding note. Accordingly, registered holders of notes
issued in the exchange offer on the relevant record date for the first interest
payment date following the consummation of the exchange offer will receive
interest accruing from the most recent date to which interest has been paid or,
if no interest has been paid on the outstanding notes, from January 31, 2001.
Outstanding notes that we accept for exchange will cease to accrue interest from
and after the date of consummation of the exchange offer. Under the terms of the
outstanding notes, we may be required to make additional payments in the form of
special interest to the holders of the outstanding notes under circumstances
relating to the timing of the exchange offer.
In all cases, we will issue notes in the exchange offer for outstanding
notes that are accepted for exchange only after the exchange agent timely
receives:
o certificates for such outstanding notes or a timely book-entry
confirmation of such outstanding notes into the exchange agent's
account at the DTC;
o a properly completed and duly executed letter of transmittal or an
agent's message; and
o all other required documents.
If for any reason set forth in the terms and conditions of the exchange
offer we do not accept any tendered outstanding notes, or if a holder submits
outstanding notes for a greater principal amount than the holder desires to
exchange, we will return such unaccepted or non-exchanged notes without cost to
the tendering holder. In the case of notes tendered by book-entry transfer into
the exchange agent's account at the DTC, such non-exchanged notes will be
credited to an account maintained with the DTC. We will return the notes or have
them credited to the DTC account as promptly as practicable after the expiration
or termination of the exchange offer.
BOOK-ENTRY TRANSFERS
The exchange agent will make a request to establish an account with respect
to the outstanding notes at the DTC for purposes of the exchange offer within
two business days after the date of this prospectus. Any financial institution
that is a participant in the DTC's systems must make book-entry delivery of
outstanding notes by causing the DTC to transfer such outstanding notes into the
exchange agent's account at the DTC in accordance with the DTC's procedures for
transfer. Such participant should transmit its acceptance to the DTC on or prior
to the expiration date or comply with the guaranteed delivery procedures
described below. DTC will verify such acceptance, execute a book-entry transfer
of the tendered outstanding notes into the exchange agent's account at DTC and
then send to the exchange agent confirmation of such book-entry transfer. The
confirmation of such book-entry
26
transfer will include an agent's message confirming that DTC has received an
express acknowledgment from such participant that such participant has received
and agrees to be bound by the letter of transmittal and that we may enforce the
letter of transmittal against such participant. Delivery of notes issued in the
exchange offer may be effected through book-entry transfer at DTC. However, the
letter of transmittal or facsimile thereof or an agent's message, with any
required signature guarantees and any other required documents, must:
o be transmitted to and received by the exchange agent at the address set
forth below under "--Exchange Agent" on or prior to the expiration
date; or
o comply with the guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
If a holder of outstanding notes desires to tender such notes and the
holder's notes are not immediately available, or time will not permit such
holder's notes or other required documents to reach the exchange agent before
the expiration date, or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if:
o the holder tenders the notes through an eligible institution;
o prior to the expiration date, the exchange agent receives from such
eligible institution a properly completed and duly executed notice of
guaranteed delivery, substantially in the form we have provided, by
telegram, telex, facsimile transmission, mail or hand delivery, setting
forth the name and address of the holder of the notes being tendered
and the amount of the notes being tendered. The notice of guaranteed
delivery shall state that the tender is being made and guarantee that
within three New York Stock Exchange trading days after the date of
execution of the notice of guaranteed delivery, the certificates for
all physically tendered notes, in proper form for transfer, or a
book-entry confirmation, as the case may be, together with a properly
completed and duly executed letter of transmittal or agent's message
with any required signature guarantees and any other documents required
by the letter of transmittal will be deposited by the eligible
institution with the exchange agent; and
o the exchange agent receives the certificates for all physically
tendered outstanding notes, in proper form for transfer, or a
book-entry confirmation, as the case may be, together with a properly
completed and duly executed letter of transmittal or agent's message
with any required signature guarantees and any other documents required
by the letter of transmittal, within three New York Stock Exchange
trading days after the date of execution of the notice of guaranteed
delivery.
WITHDRAWAL RIGHTS
You may withdraw tenders of your outstanding notes at any time prior to
5:00 p.m., New York City time, on the expiration date.
For a withdrawal to be effective, you must send a written notice of
withdrawal to the exchange agent at one of the addresses set forth below under
"-- Exchange Agent." Any such notice of withdrawal must:
o specify the name of the person having tendered the outstanding notes to
be withdrawn;
o identify the outstanding notes to be withdrawn, including the principal
amount of such outstanding notes; and
o where certificates for outstanding notes are transmitted, specify the
name in which outstanding notes are registered, if different from that
of the withdrawing holder.
27
If certificates for outstanding notes have been delivered or otherwise
identified to the exchange agent, then, prior to the release of such
certificates, the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and signed notice of withdrawal with
signatures guaranteed by an eligible institution unless such holder is an
eligible institution. If notes have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify the
name and number of the account at the DTC to be credited with the withdrawn
notes and otherwise comply with the procedures of such facility. We will
determine all questions as to the validity, form and eligibility (including time
of receipt) of such notices and our determination will be final and binding on
all parties. Any tendered notes so withdrawn will be deemed not to have been
validly tendered for exchange for purposes of the exchange offer. Any notes
which have been tendered for exchange but which are not exchanged for any reason
will be returned to the holder thereof without cost to such holder. In the case
of notes tendered by book-entry transfer into the exchange agent's account at
the DTC, the notes withdrawn will be credited to an account maintained with the
DTC for the outstanding notes. The notes will be returned or credited to the DTC
account as soon as practicable after withdrawal, rejection of tender or
termination of the exchange offer. Properly withdrawn notes may be re-tendered
by following one of the procedures described under "--How to Tender Notes for
Exchange" above at anytime on or prior to 5:00 p.m., New York City time, on the
expiration date.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the exchange offer, we are not
required to accept for exchange, or to issue registered notes in exchange for,
any outstanding notes and may terminate or amend the exchange offer, if any of
the following events occur prior to acceptance of such outstanding notes:
o there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been
issued by, any court or governmental agency or other governmental
regulatory or administrative agency or commission,
(1) seeking to restrain or prohibit the making or consummation of the
exchange offer or any other transaction contemplated by the
exchange offer, or assessing or seeking any damages as a result
thereof; or
(2) resulting in a material delay in our ability to accept for
exchange or exchange some or all of the outstanding notes
pursuant to the exchange offer;
or any statute, rule, regulation, order or injunction shall be sought,
proposed, introduced, enacted, promulgated or deemed applicable to the
exchange offer or any of the transactions contemplated by the exchange
offer by any government or governmental authority, domestic or foreign,
or any action shall have been taken, proposed or threatened, by any
government, governmental authority, agency or court, domestic or
foreign, that in our sole judgment might, directly or indirectly,
result in any of the consequences referred to in paragraph (1) or (2)
above, or
o there shall have occurred:
(1) any general suspension of or general limitation on prices for, or
trading in, securities on any national securities exchange or in
the over-the-counter market; or
(2) any limitation by a governmental agency or authority which may
adversely affect our ability to complete the transactions
contemplated by the exchange offer; or
(3) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or any
limitation by any governmental agency or authority which
adversely affects the extension of credit; or
28
(4) a commencement of a war, armed hostilities or other similar
international calamity directly or indirectly involving the
United States, or, in the case of any of the foregoing existing
at the time of the commencement of the exchange offer, a material
acceleration or worsening thereof; or
o any change (or any development involving a prospective change) shall
have occurred or be threatened in our business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects and our subsidiaries taken as a whole that, in our reasonable
judgment, is or may be adverse to us, or we have become aware of facts
that, in our reasonable judgment, have or may have adverse significance
with respect to the value of the outstanding notes or the registered
notes;
which in our reasonable judgment in any case, and regardless of the
circumstances (including any action by us) giving rise to any such condition,
makes it inadvisable to proceed with the exchange offer and/or with such
acceptance for exchange or with such exchange.
In addition, we may terminate or amend the exchange offer if at any time
before the acceptance of such outstanding notes for exchange there shall occur a
change in the current interpretation by staff of the SEC which permits the notes
issued in the exchange offer in exchange for the outstanding notes to be offered
for resale, resold and otherwise transferred by such holders, other than
broker-dealers and any such holder which is an "affiliate" of Alamosa (Delaware)
within the meaning of Rule 405 under the Securities Act, without compliance with
the registration and prospectus delivery provisions of the Securities Act,
provided that such notes acquired in the exchange offer are acquired in the
ordinary course of such holder's business and such holder has no arrangement or
understanding with any person to participate in the distribution of such notes
issued in the exchange offer.
The foregoing conditions are for our sole benefit and may be asserted by us
regardless of the circumstances giving rise to any condition or may be waived by
us in whole or in part at any time in our reasonable discretion. Our failure at
any time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right and each such right shall be deemed an ongoing right which may be
asserted at any time.
In addition, we will not accept for exchange any outstanding notes
tendered, and no registered notes will be issued in exchange for any such
outstanding notes, if at such time any stop order shall be threatened or in
effect with respect to the registration statement, of which this prospectus
constitutes a part, or the qualification of the indenture under the Trust
Indenture Act.
THE EXCHANGE AGENT
Wells Fargo Bank Minnesota, N.A. has been appointed as our exchange agent
for the exchange offer. All executed letters of transmittal should be directed
to our exchange agent at one of the addresses set forth below. 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:
WELLS FARGO BANK MINNESOTA, N.A., AS EXCHANGE AGENT
By Registered & Certified Mail: By Regular Mail or Overnight Courier: In Person by Hand Only:
WELLS FARGO BANK MINNESOTA, N.A. WELLS FARGO BANK MINNESOTA, N.A. WELLS FARGO BANK MINNESOTA, N.A.
Corporate Trust Operations Corporate Trust Operations 12th Floor - Northstar East Building
MAC N9303-121 MAC N9303-121 Corporate Trust Services
PO Box 1517 Sixth & Marquette Avenue 608 Second Avenue South
Minneapolis, MN 55480 Minneapolis, MN 55479 Minneapolis, MN
29
By Facsimile (for Eligible Institutions only):
(612) 667-4927
For Information or Confirmation by
Telephone:
(800) 344-5128
DELIVERY OF THE LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF SUCH LETTER OF TRANSMITTAL VIA FACSIMILE OTHER THAN AS
SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY OF SUCH LETTER OF
TRANSMITTAL.
FEES AND EXPENSES
The principal solicitation is being made by mail by Wells Fargo Bank
Minnesota, N.A., as exchange agent. We will pay the exchange agent customary
fees for its services, reimburse the exchange agent for its reasonable out-
of-pocket expenses incurred in connection with the provision of these services
and pay other registration expenses, including fees and expenses of the trustee
under the indenture relating to the new notes, filing fees, blue sky fees and
printing and distribution expenses. We may make payment to brokers, dealers or
others soliciting acceptances of the exchange offer.
Additional solicitation may be made by telephone, facsimile or in person by
our and our affiliates' officers and regular employees and by persons so engaged
by the exchange agent.
ACCOUNTING TREATMENT
We will not recognize any gain or loss for accounting purposes upon the
consummation of the exchange offer. We will amortize the expense of the exchange
offer over the term of the registered notes under accounting principles
generally accepted in the United States of America.
TRANSFER TAXES
Holders who tender their outstanding notes for exchange will not be
obligated to pay any transfer taxes in connection with the exchange. If,
however, notes issued in the exchange offer are to be delivered to, or are to be
issued in the name of, any person other than the holder of the notes tendered,
or if a transfer tax is imposed for any reason other than the exchange of
outstanding notes in connection with the exchange offer, then the holder must
pay any such transfer taxes, whether imposed on the registered holder or on any
other person. If satisfactory evidence of payment of, or exemption from, such
taxes is not submitted with the letter of transmittal, the amount of such
transfer taxes will be billed directly to the tendering holder.
CONSEQUENCES OF FAILURE TO EXCHANGE OUTSTANDING NOTES
Holders who desire to tender their outstanding notes in exchange for notes
registered under the Securities Act should allow sufficient time to ensure
timely delivery. Neither the exchange agent nor Alamosa (Delaware) is under any
duty to give notification of defects or irregularities with respect to the
tenders of notes for exchange.
Outstanding notes that are not tendered or are tendered but not accepted
will, following the consummation of the exchange offer, continue to be subject
to the provisions in the indenture regarding the transfer and exchange of the
outstanding notes and the existing restrictions on transfer set forth in the
legend on the outstanding notes and in the offering circular dated January 24,
2001, relating to the outstanding notes. Except in limited circumstances with
respect to specific types of holders of outstanding notes, we will have no
further obligation to provide for the registration under the Securities Act of
such outstanding notes. In general, outstanding notes, unless registered under
the Securities Act, may not be offered or sold except pursuant to an exemption
from, or in a transaction not subject
30
to, the Securities Act and applicable state securities laws. We do not currently
anticipate that we will take any action to register the outstanding notes under
the Securities Act or under any state securities laws.
Upon completion of the exchange offer, holders of the outstanding notes
will not be entitled to any further registration rights under the registration
rights agreement, except under limited circumstances.
Holders of the notes issued in the exchange offer and any outstanding notes
which remain outstanding after consummation of the exchange offer will vote
together as a single class for purposes of determining whether holders of the
requisite percentage of the class have taken certain actions or exercised
certain rights under the indenture.
CONSEQUENCES OF EXCHANGING OUTSTANDING NOTES
Based on interpretations of the staff of the SEC, as set forth in no-action
letters to third parties, we believe that the notes issued in the exchange offer
may be offered for resale, resold or otherwise transferred by holders of such
notes, other than by any holder which is an "affiliate" of Alamosa (Delaware)
within the meaning of Rule 405 under the Securities Act. Such notes may be
offered for resale, resold or otherwise transferred without compliance with the
registration and prospectus delivery provisions of the Securities Act, if:
o such notes issued in the exchange offer are acquired in the ordinary
course of such holder's business; and
o such holder, other than broker-dealers, has no arrangement or
understanding with any person to participate in the distribution of
such notes issued in the exchange offer.
However, the SEC has not considered the exchange offer in the context of a
no-action letter and we cannot guarantee that the staff of the SEC would make a
similar determination with respect to the exchange offer as in such other
circumstances.
Each holder, other than a broker-dealer, must furnish a written
representation, at our request, that:
o it is not an affiliate of Alamosa (Delaware);
o it is not engaged in, and does not intend to engage in, a distribution
of the notes issued in the exchange offer and has no arrangement or
understanding to participate in a distribution of notes issued in the
exchange offer; and
o it is acquiring the notes issued in the exchange offer in the ordinary
course of its business.
Each broker-dealer that receives notes issued in the exchange offer for its
own account in exchange for outstanding notes must acknowledge that such
outstanding notes were acquired by such broker-dealer as a result of
market-making or other trading activities and that it will deliver a prospectus
in connection with any resale of such notes issued in the exchange offer. See
"Plan of Distribution" for a discussion of the exchange and resale obligations
of broker-dealers in connection with the exchange offer.
In addition, to comply with state securities laws of certain jurisdictions,
the notes issued in the exchange offer may not be offered or sold in any state
unless they have been registered or qualified for sale in such state or an
exemption from registration or qualification is available and complied with by
the holders selling the notes. We have agreed in the registration rights
agreement that, prior to the exchange offer, we will register or qualify the
transfer restricted securities for offer or sale under the securities laws of
any jurisdiction reasonably requested by a holder. Unless a holder requests, we
currently do not intend to register or qualify the sale of the notes issued in
the exchange offer in any state where an exemption from registration or
qualification is required and not available.
31
BUSINESS
References in this prospectus to us as a provider of wireless personal
communications services or similar phrases generally refer to our building,
owning and managing our portion of the Sprint PCS network pursuant to our
affiliation agreements with Sprint PCS. Sprint PCS holds the spectrum licenses
and controls the network through its agreements with us.
All references contained in this prospectus to resident population and
residents are based on projections of year-end 2000 population counts calculated
by applying the annual growth rate from 1990 to 1999 to estimates of 1999
population counts compiled by the U.S. Census Bureau.
OVERVIEW
We are an indirect wholly owned subsidiary of Alamosa Holdings, Inc., a
Delaware corporation, whose shares of common stock are quoted on The Nasdaq
National Market System under the symbol "APCS". We are a holding company and
through our subsidiaries provide wireless personal communication services,
commonly referred to as PCS, in the Southwestern, Northwestern and Midwestern
United States. We are a network partner of Sprint PCS, the personal
communications services group of Sprint Corporation. Sprint PCS, directly and
through affiliates such as us, provides wireless services in more than 4,000
cities and communities across the country. We have the exclusive right to
provide digital wireless mobility communications network services under the
Sprint and Sprint PCS brand names in territories primarily located in Texas, New
Mexico, Arizona, Colorado, Wisconsin, Illinois, Oklahoma, Kansas, Missouri,
Washington and Oregon. Through December 31, 1999, we were a development stage
company.
We launched Sprint PCS service in Laredo, Texas in June 1999, and through
March 31, 2001 have commenced service in 62 additional markets, including 41
markets in territories serviced by companies that we acquired in 2001. At March
31, 2001, our systems covered approximately 9,202,300 residents out of
approximately 15,642,200 million total residents in those markets. The number of
residents covered by our systems does not represent the number of Sprint PCS
subscribers that we expect to be based in our territories. As of March 31, 2001,
261,345 Sprint PCS subscribers were based in our territories.
OUR BACKGROUND
Prior to the closing of our initial public offering in February 2000, we
were comprised of Alamosa PCS LLC, a Texas limited liability company, Alamosa
Wisconsin Limited Partnership, a Wisconsin limited partnership and a 99.75%
owned subsidiary of Alamosa PCS LLC, and Texas Telecommunications, LP, a Texas
limited partnership and wholly owned subsidiary of Alamosa PCS LLC. Immediately
prior to the closing of our initial public offering, we reorganized the business
into a holding company structure. The members of Alamosa PCS LLC received shares
of our common stock in the same proportion to their membership interests in
Alamosa PCS LLC.
Texas Telecommunications, LP was formed in December 1999. In connection
with our original reorganization, Texas Telecommunications, LP received the
assets of Alamosa PCS LLC related to operations in the Southwest United States
and operated the business of Alamosa PCS LLC. Alamosa PCS, Inc. held a 99%
limited partnership interest in Texas Telecommunications, LP. Alamosa Delaware
GP, LLC, a wholly owned subsidiary of Alamosa PCS, Inc., held a 1% general
partnership interest in Texas Telecommunications, LP. Currently Alamosa Limited,
LLC, a wholly owned subsidiary of Alamosa PCS, Inc., holds the 99% limited
partnership interest in Texas Telecommunications, LP and Alamosa Delaware GP,
LLC continues to hold the 1% general partnership interest in Texas
Telecommunications, LP.
Alamosa Wisconsin Limited Partnership was formed in December 1999. In
connection with our original reorganization, Alamosa Wisconsin Limited
Partnership received the assets of Alamosa PCS LLC related to operations in
Wisconsin. After our original reorganization, Alamosa Wisconsin Limited
Partnership commenced our business operations in Wisconsin. Alamosa PCS, Inc.
holds the 98.75% Class A limited partnership interests in
32
Alamosa Wisconsin Limited Partnership and Alamosa PCS Holdings holds the .25%
Class B limited partnership interests in Alamosa Wisconsin Limited Partnership.
Alamosa Wisconsin GP, LLC, a wholly owned subsidiary of Alamosa PCS, Inc., holds
a 1% general partnership interest in Alamosa Wisconsin Limited Partnership.
We are a Delaware corporation and we were formed in October 1999 under the
name "Alamosa PCS Holdings, Inc." to operate as a holdings company. On February
3, 2000, we completed our initial public offering. On December 14, 2000, we
formed a new holding company pursuant to a merger under Section 251(g) of the
Delaware General Corporation Law. Each of our common shares was converted into
one share of the new holding company and we became a wholly owned subsidiary of
the new holding company. The Section 251(g) transaction did not require any vote
of our stockholders. Upon effectiveness of the Section 251(g) transaction, our
name was changed to Alamosa (Delaware), Inc. and the new holding company's name
was changed to Alamosa PCS Holdings, Inc.
On February 14, 2001, Alamosa Sub I, Inc. ("Alamosa Sub I"), Alamosa
Holdings' wholly owned subsidiary, merged with and into Alamosa PCS Holdings,
with Alamosa PCS Holdings surviving the merger and becoming a wholly owned
subsidiary of Alamosa Holdings. Each share of Alamosa PCS Holdings common stock
issued and outstanding immediately prior to the merger, was converted into the
right to receive one share of Alamosa Holdings' common stock.
On February 14, 2001, we completed our acquisition of Roberts Wireless
Communications, L.L.C. ("Roberts") and Washington Oregon Wireless, LLC ("WOW").
Roberts' service area, which includes 2.5 million people, includes the market
areas surrounding Kansas City, the world headquarters of Sprint PCS, and St.
Louis, including the Interstate 70 corridor connecting the two cities. At
December 31, 2000, Roberts' network covered approximately 1.1 million people.
WOW's service area, which includes 1.5 million people, includes the market areas
of Ellenburg, Yakima and Kennewick, Washington and key travel corridors within
Washington and Oregon. At December 31, 2000, WOW's network covered approximately
800,000 people.
On March 31, 2001, we completed our acquisition of Southwest PCS Holdings,
Inc. ("Southwest"). Southwest's service area, which includes 2.8 million people,
includes the market areas in Texas, Oklahoma and Arkansas, encompassing over
2,100 heavily traveled highway miles. At December 31, 2000, Southwest had
launched service in 18 markets covering approximately 1.5 million residents and
had approximately 40,000 customers.
In connection with the Roberts and WOW acquisitions, we entered into a new
senior secured credit facility for up to $280 million. In connection with the
acquisition of Southwest, we increased the amount of the senior secured credit
facility from $280 million to $333 million.
The current organization of Alamosa Holdings and its subsidiaries is
illustrated in the chart on the following page:
33
--------------------------
Alamosa Holdings, Inc.
--------------------------
|
|
|
--------------------------
---------------------------------------------- Alamosa PCS Holdings, Inc.
| .25%
| --------------------------
| |
| |
| |
| --------------------------
|
| Alamosa (Delaware), Inc.
|
| --------------------------
| |
| |--------------------------------
| | |
| -------------------------- --------------------------
|
| Alamosa Holdings, LLC Alamosa Delaware
| Operations, LLC
| -------------------------- --------------------------
| |
| -----------------------------------------------------------------------------------------
| |
| --------------------------
|
| -------------------- Alamosa PCS, Inc.
| |
| | --------------------------
| | 98.75% |
| | -----------------------------------------------------------------------
| | | | |
| | -------------------------- -------------------------- ----------------------------
| | | |
| | Alamosa Wisconsin GP, LLC Alamosa Finance, LLC -------------------------- --------------------------
| |
| | -------------------------- -------------------------- Alamosa Limited, LLC Alamosa Delaware GP, LLC
| | 1% |
| | -------------------------- -------------------------- --------------------------
| - | | |
| Alamosa Wisconsin ---------------------------- |
--- Limited Partnership | |
-------------------------- -------------------------- |
| |
-------------------------- Texas | 1% GP
Telecommunications LP |
Alamosa (Wisconsin) -------------------------- |
Properties, LLC | 99% |
-------------------------- -------------------------- |
|
Alamosa Properties, LP -----
--------------------------
(continued on next page)
- ----------------------------------------------------------------------------------------------------------
| | |
- ---------------------- -------------------------- --------------------------
| |
Alamosa Washington Oregon ----------------------- ------------------------
Missouri, LLC(1) Wireless, LLC
- ---------------------- -------------------------- SWGP, L.L.C. SWLP, L.L.C.
| |
| ---------------------------- ----------------------- ------------------------
| | | | |
- ---------------------- -------------------------- -------------------------- --------------------------
|
Alamosa Missouri Washington Oregon Wireless Washington Oregon Wireless --------------------------
Properties, LLC(2) Properties, LLC Licenses, LLC
- ---------------------- -------------------------- -------------------------- Southwest PCS, LP
--------------------------
|
--------------------------
| |
----------------------- ------------------------
Southwest PCS Southwest PCS
Properties, LLC Licenses, LLC
----------------------- ------------------------
(1) Formerly Roberts Wireless Communications, L.L.C.
(2) Formerly Roberts Wireless Properties, L.L.C.
34
OUR RELATIONSHIP WITH SPRINT PCS
Sprint PCS is a wholly owned tracking group of Sprint Corporation and
operates the largest 100% digital, 100% PCS nationwide network in the United
States with licenses to provide services to an area of more than 280 million
residents in the United States, Puerto Rico and the U.S. Virgin Islands. The
Sprint PCS network uses code division multiple access technology nationwide.
Sprint PCS directly operates its PCS network in major markets throughout the
United States and has entered into independent agreements with various
affiliates such as us, under which the affiliate has agreed to construct and
manage PCS networks in smaller metropolitan areas and along major highways.
We are the largest affiliate of Sprint PCS based on the resident population
in our territories, and our territories adjoin several major Sprint PCS markets.
The build-out of our territories will significantly extend Sprint PCS's coverage
in the Southwestern and Midwestern United States. Due to our relationship with
Sprint PCS, we benefit from:
BRAND RECOGNITION. We market products and services directly under the
Sprint and Sprint PCS brand names. We benefit from the recognizable Sprint and
Sprint PCS brand names and national advertising as we open markets. We offer
pricing plans, promotional campaigns and handset and accessory promotions of
Sprint PCS.
EXISTING DISTRIBUTION CHANNELS. We benefit from relationships with major
national retailers who distribute Sprint PCS products and services under
existing Sprint PCS contracts. These national retailers have approximately 470
retail outlets in our territories. Furthermore, we benefit from sales made by
Sprint PCS to customers in our territories through its national telemarketing
sales force, national account sales team and Internet sales capability. These
existing distribution channels provide immediate access to customers as our
services become available in their area. For more information on our
distribution plan, see "--Sales and Distribution."
SPRINT PCS'S NATIONAL NETWORK. We offer access to Sprint PCS's wireless
network. Sprint PCS's network offers service in metropolitan markets across the
country representing 223 million people. We derive additional revenue from
Sprint PCS when its customers based outside of our territories roam on our
portion of the Sprint PCS network.
HIGH CAPACITY NETWORK. Sprint PCS built its network around code division
multiple access digital technology, which we believe provides advantages in
capacity, voice-quality, security and handset battery life. For more information
on the benefits of this technology, see "--Technology -- Code Division Multiple
Access."
SPRINT PCS'S LICENSED SPECTRUM. Sprint PCS has invested approximately
$100.0 million to purchase the wireless mobility communications network service
licenses in our territories and to pay costs to remove sources of microwave
signals that interfere with the licensed spectrum, a process generally referred
to as microwave clearing.
BETTER EQUIPMENT AVAILABILITY AND PRICING. We are able to acquire handsets
and network equipment more quickly and at a lower cost than we would without our
affiliation with Sprint PCS. For example, Sprint PCS will use commercially
reasonable efforts to obtain for us the same discounted volume-based pricing on
wireless-related products and warranties as Sprint PCS receives from its
vendors.
ESTABLISHED BACK OFFICE SUPPORT SERVICES. We have contracted with Sprint
PCS to provide critical back office services, including customer activation,
handset logistics, billing, customer care and network monitoring services.
Because we do not have to establish and operate these systems, we are able to
accelerate our market launches and capitalize upon Sprint PCS's economies of
scale.
ACCESS TO THE SPRINT PCS WIRELESS WEB. We support the Sprint PCS Wireless
Web service in our portion of the Sprint PCS network. For more information on
the Sprint PCS Wireless Web, see "--Products and Services--Access to the Sprint
PCS Wireless Web."
35
Statements in this prospectus regarding Sprint or Sprint PCS are derived
from information contained in our affiliation agreements with Sprint and Sprint
PCS and periodic reports and other documents filed with the Securities and
Exchange Commission by, or press releases issued by, Sprint and Sprint PCS.
MARKETS
The following table lists the location, basic trading area number, whether
the network coverage has been launched, megahertz of spectrum, estimated total
residents and estimated covered residents for each of the markets that comprise
our territories under our affiliation agreements with Sprint PCS at March 31,
2001. The number of estimated covered residents does not represent the number of
Sprint PCS subscribers that we expect to be based in our territories.
MHZ OF ESTIMATED TOTAL ESTIMATED COVERED
LOCATION BTA NO. (1) SPECTRUM RESIDENTS (2) RESIDENTS (3) DATE LAUNCHED
- ------------------------------------- ------------ ---------- ---------------- ---------------------- ---------------
ARKANSAS
Fayetteville-Springdale-Rogers ...... 140 30 325,400 243,100 3Q99
Fort Smith .......................... 153 30 326,900 182,500 4Q98
Little Rock ......................... 257 30 19,600
Russellville ........................ 387 30 95,400
ARIZONA
Flagstaff ........................... 144 30 116,300 76,600 4Q00
Las Vegas, NV (Arizona side) (4) .... 245 30 155,000
Prescott ............................ 362 30 167,500 141,200 4Q00
Phoenix (4) ......................... 347 30 15,900
Sierra Vista-Douglas ................ 420 30 117,800
Tucson (4) .......................... 447 30 17,200
Yuma ................................ 486 30 160,000 142,200 1Q01
CALIFORNIA
El Centro-Calexico .................. 124 30 142,400
San Diego (4) ....................... 402 30 3,500
COLORADO
Colorado Springs (4) ................ 89 30 9,000
Farmington, NM-Durango, CO .......... 139 30 208,300
Grand Junction ...................... 168 30 246,100 135,500 4Q00
Pueblo .............................. 366 30 312,800 207,400 3Q00
ILLINOIS
Carbondale-Marion ................... 67 30 214,200 114,700 1Q01
KANSAS
Pittsburg-Parsons ................... 349 30 92,500 27,900 1Q01
Emporia ............................. 129 30 47,800 31,900 1Q99
Hutchinson (4) ...................... 200 30 30,700 20,700 1Q99
Manhattan-Junction City ............. 275 30 117,800 85,400 4Q98
Salina .............................. 396 30 144,300 63,400 4Q98
MINNESOTA
La Crosse, WI-Winona, MN............. 234 30 320,400
Minneapolis-St. Paul (4) ............ 298 30 84,800
36
MHZ OF ESTIMATED TOTAL ESTIMATED COVERED
LOCATION BTA NO. (1) SPECTRUM RESIDENTS (2) RESIDENTS (3) DATE LAUNCHED
- -------------------------------------- ------------ ---------- ---------------- ---------------------- ---------------
MISSOURI
Cape Girardeau-Sikeston .............. 66 30 189,400 158,600 1Q01
Columbia ............................. 90 30 216,800 154,200 1Q99
Jefferson City ....................... 217 30 163,600 131,400 1Q99
Kirksville ........................... 230 30 57,400 37,700 4Q00
Poplar Bluff ......................... 355 30 154,000 50,900 1Q01
Quincy, IL-Hannibal .................. 367 30 184,800 104,500 1Q01
Rolla ................................ 383 30 104,800 69,400 4Q00
St. Joseph ........................... 393 30 196,600 135,600 2Q00
Sedalia .............................. 414 30 92,600 57,700 1Q99
Springfield .......................... 428 30 660,200 427,800 4Q99
West Plains .......................... 470 30 77,100
NEW MEXICO
Albuquerque .......................... 8 10 831,900 684,200 3Q99
Carlsbad ............................. 68 10 51,700
Clovis ............................... 87 30 75,300
Gallup ............................... 162 10 144,200
Hobbs ................................ 191 30 55,500
Roswel ............................... 386 10 80,800
Santa Fe ............................. 407 10 218,800 140,100 3Q99
Las Cruces ........................... 244 10 249,900 195,200 3Q99
OKLAHOMA
Joplin, MO-Miami ..................... 220 30 247,300 214,800 4Q00
Ada .................................. 4 30 55,100 29,100 2Q99
Ardmore .............................. 19 30 90,800 51,000 3Q99
Bartlesville ......................... 31 30 49,000 43,300 3Q99
Enid ................................. 130 30 85,700 50,300 2Q00
Lawton-Duncan ........................ 248 30 180,900 103,200 1Q99
McAlester ............................ 267 30 54,600 30,100 3Q99
Muskogee ............................. 311 30 164,300 71,800 2Q99
Oklahoma City (4) .................... 329 30 577,600 200,000 1Q99
Ponca City ........................... 354 30 48,100 42,000 2Q99
Stillwater ........................... 433 30 79,600 57,500 4Q98
Tulsa (4) ............................ 448 30 278,500 92,800 3Q99
OREGON
Bend ................................. 38 30 153,600 134,200 1Q01
Coos Bay-North Bend .................. 97 30 83,900 35,900 3Q00
Klamath Falls ........................ 231 30 80,600 59,600 3Q00
Medford-Grants Pass .................. 288 30 257,000 199,000 3Q00
Portland (4) ......................... 358 30 20,600 20,600 3Q00
Roseburg ............................. 385 30 100,400 80,100 3Q00
Walla Walla, WA-Pendleton, OR ........ 460 30 174,500 128,300 3Q00
TEXAS
Eagle Pass-Del Rio ................... 121 30 117,400 111,600 1Q00
El Paso .............................. 128 20 748,200 702,400 3Q99
Laredo ............................... 242 30 216,400 212,400 2Q99
Wichita Falls ........................ 473 30 222,500 135,600 4Q98
Abilene .............................. 3 30 261,700 155,200 4Q99
Amarillo ............................. 13 30 410,300 240,900 3Q99
Big Spring ........................... 40 30 35,800
37
MHZ OF ESTIMATED TOTAL ESTIMATED COVERED
LOCATION BTA NO. (1) SPECTRUM RESIDENTS (2) RESIDENTS (3) DATE LAUNCHED
- -------------------------------------- ------------ ---------- ---------------- ---------------------- ---------------
Lubbock ............................. 264 30 409,200 359,600 3Q99
Midland ............................. 296 30 120,800 106,300 3Q99
Odessa .............................. 327 30 209,100 146,800 3Q99
San Angelo .......................... 400 30 161,900 106,100 4Q99
WASHINGTON
Kennewick-Pasco-Richland ............ 228 30 191,800 181,300 3Q00
Wenatchee ........................... 468 30 213,500 146,100 4Q00
Yakima .............................. 482 30 255,900 246,100 3Q00
WISCONSIN
Appleton-Oshkosh .................... 18 30 452,400 359,000 4Q00
Eau Claire .......................... 123 30 195,400
Fond du Lac ......................... 148 30 97,300 86,500 4Q00
Green Bay ........................... 173 30 355,800 264,500 4Q00
Madison (4) ......................... 272 30 149,000
Manitowoc ........................... 276 30 82,900 78,500 4Q00
Milwaukee (4) ....................... 297 30 84,600
Sheboygan ........................... 417 30 112,600 100,000 4Q00
Stevens Point-Marshfield-Wisconsin
Rapids ........................... 432 30 214,600
Wausau-Rhinelander .................. 466 30 244,000
TOTAL 15,642,200 9,202,300
(1) BTA No. refers to the basic trading area number assigned to that market by
the Federal Communications Commission (the "FCC") for the purposes of
issuing licenses for wireless services.
(2) Estimated total residents is based on projections of year-end 2000
population counts calculated by applying the annual growth rate from 1990
to 1999 to estimates of 1999 population counts compiled by the U.S. Census
Bureau.
(3) Estimated percent coverage is based on our actual or projected network
coverage in markets at the launch date using current projections of
year-end 2000 population counts calculated by applying the annual growth
rate from 1990 to 1999 to estimates of 1999 population counts compiled by
the U.S. Census Bureau.
(4) Total residents, covered residents and actual customers for these markets
reflect only those residents or customers contained in our licensed
territories, not the total residents, covered residents and actual
customers in the entire basic trading area.
Pursuant to our affiliation agreements with Sprint PCS, we have agreed to
cover a minimum percentage of the resident population in our territories within
specified time periods. We are fully compliant with these build-out requirements
and expect to launch our remaining markets ahead of the schedule established in
our affiliation agreements with Sprint PCS. As of March 31, 2001, we had 261,345
Sprint PCS subscribers.
NETWORK OPERATIONS
GENERAL. The effective operation of our portion of the Sprint PCS network
requires:
o public switched and long distance interconnection;
o the implementation of roaming arrangements; and
38
o the development of network monitoring systems.
Our network connects to the public switched telephone network to facilitate
the origination and termination of traffic between our network and both local
exchange and long distance carriers. Sprint provides preferred rates for long
distance services. Through our arrangements with Sprint PCS and Sprint PCS's
arrangements with other wireless service providers, Sprint PCS subscribers based
in our territories have roaming capabilities on other networks. We monitor our
portion of the Sprint PCS network during normal business hours. For after hours
monitoring, Sprint PCS Network Operating Centers provide 24 hours, seven days a
week monitoring of our portion of the Sprint PCS network and notification to our
designated personnel.
As of March 31, 2001, our portion of the Sprint PCS network included 1,021
base stations and 10 switching centers.
PRODUCTS AND SERVICES
We offer products and services throughout our territories under the Sprint
and Sprint PCS brand names. Our services are designed to mirror the service
offerings of Sprint PCS and to integrate with the Sprint PCS network. The Sprint
PCS service packages we currently offer include the following:
100% DIGITAL WIRELESS NETWORK WITH SERVICE ACROSS THE COUNTRY. We are part
of the largest 100% digital wireless personal communications services network in
the country. Sprint PCS customers based in our territories may access Sprint PCS
services throughout the Sprint PCS network, which includes more than 4,000
cities and communities across the United States. Dual-band/dual-mode handsets
allow roaming on wireless networks where Sprint PCS has roaming agreements.
ACCESS TO THE SPRINT PCS WIRELESS WEB. We support the Sprint PCS Wireless
Web in our portion of the Sprint PCS network. The Sprint PCS Wireless Web allows
customers with data capable handsets to connect their portable computers or
personal digital assistants to the Internet. Sprint PCS customers with data
capable handsets also have the ability to receive periodic information updates
such as stock prices, sports scores and weather reports. Sprint PCS customers
with web-browser enabled handsets have the ability to connect to and browse
specially designed text-based Internet sites on an interactive basis.
OTHER SERVICES. In addition to these services, we may also offer wireless
local loop services in our territories, but only where Sprint is not a local
exchange carrier. Wireless local loop is a wireless substitute for the
landline-based telephones in homes and businesses. We also believe that new
features and services will be developed on the Sprint PCS network to take
advantage of code division multiple access technology. Sprint PCS conducts
ongoing research and development to produce innovative services that are
intended to give Sprint PCS a competitive advantage. We may incur additional
expenses in modifying our technology to provide these additional features and
services.
ROAMING
SPRINT PCS ROAMING. Sprint PCS roaming includes both inbound Sprint PCS
roaming, when a Sprint PCS subscriber based outside of our territories uses our
portion of the Sprint PCS network, and outbound Sprint PCS roaming, when a
Sprint PCS subscriber based in our territories uses the Sprint PCS network
outside of our territories. Sprint PCS pays us a per minute fee for inbound
Sprint PCS roaming. Similarly, we pay a per minute fee to Sprint PCS for
outbound Sprint PCS roaming. Pursuant to our affiliation agreements with Sprint
PCS, Sprint PCS has the discretion to change the per minute rate for Sprint PCS
roaming fees. See "Our Affiliation Agreements with Sprint PCS - Recent
Developments."
NON-SPRINT PCS ROAMING. Non-Sprint PCS roaming includes both inbound
non-Sprint PCS roaming, when a non-Sprint PCS subscriber uses our portion of the
Sprint PCS network, and outbound non-Sprint PCS roaming, when a Sprint PCS
subscriber based in our territories uses a non-Sprint PCS network. Pursuant to
roaming
39
agreements between Sprint PCS and other wireless service providers, when another
wireless service provider's subscriber uses our portion of the Sprint PCS
network, we earn inbound non-Sprint PCS roaming revenue. These wireless service
providers must pay fees for their subscribers' use of our portion of the Sprint
PCS network, and as part of our collected revenues, we are entitled to 92% of
these fees. Currently, pursuant to our services agreement with Sprint PCS,
Sprint PCS bills these wireless service providers for these fees. When another
wireless service provider provides service to one of the Sprint PCS subscribers
based in our territories, we pay outbound non-Sprint PCS roaming fees. Sprint
PCS, pursuant to our current services agreement with Sprint PCS, then bills the
Sprint PCS subscriber for use of that provider's network at rates specified in
his or her contract and pays us 100% of this outbound non-Sprint PCS roaming
revenue collected from that subscriber on a monthly basis. We bear the
collection risk for all service.
MARKETING STRATEGY
Our marketing strategy is to complement Sprint PCS's national marketing
strategies with techniques tailored to each of the specific markets in our
territories.
USE SPRINT PCS'S BRAND EQUITY. We feature exclusively and prominently the
nationally recognized Sprint and Sprint PCS brand names in our marketing and
sales effort. From the customers' point of view, they use our portion of the
Sprint PCS network and the rest of the Sprint PCS network as a unified national
network.
ADVERTISING AND PROMOTIONS. Sprint PCS promotes its products through the
use of national as well as regional television, radio, print, outdoor and other
advertising campaigns. In addition to Sprint PCS's national advertising
campaigns, we advertise and promote Sprint PCS products and services on a local
level in our markets at our cost. We have the right to use any promotion or
advertising materials developed by Sprint PCS and only have to pay the
incremental cost of using those materials, such as the cost of local radio and
television advertisement placements, and material costs and incremental printing
costs. We also benefit from any advertising or promotion of Sprint PCS products
and services by third party retailers in our territories, such as RadioShack,
Circuit City and Best Buy. We must pay the cost of specialized Sprint PCS print
advertising by third party retailers. Sprint PCS also runs numerous promotional
campaigns which provide customers with benefits such as additional features at
the same rate or free minutes of use for limited time periods. We offer these
promotional campaigns to potential customers in our territories.
SALES FORCE WITH LOCAL PRESENCE. We have established local sales forces to
execute our marketing strategy through direct business-to-business contacts, our
company-owned retail stores, local distributors and other channels. Our market
teams also participate in local clubs and civic organizations such as the
Chamber of Commerce, Rotary and Kiwanis.
SALES AND DISTRIBUTION
Our sales and distribution plan is designed to exploit Sprint PCS's
multiple channel sales and distribution plan and to enhance it through the
development of local distribution channels. Key elements of our sales and
distribution plan consist of the following:
SPRINT PCS RETAIL STORE. As of March 31, 2001, we owned and operated 55
Sprint PCS stores and 7 kiosks at military base locations. These stores provide
us with a local presence and visibility in the markets within our territories.
Following the Sprint PCS model, these stores are designed to facilitate retail
sales, activation, bill collection and customer service.
SPRINT STORE WITHIN A RADIOSHACK STORE. Sprint has an exclusive arrangement
with RadioShack to install a "store within a store," making Sprint PCS the
exclusive brand of wireless mobility communications network services using CDMA
technology in the 1900 MHz spectrum and products sold through RadioShack stores.
As of March 31, 2001, Radio Shack had approximately 213 stores in our
territories.
40
OTHER NATIONAL THIRD PARTY RETAIL STORES. In addition to RadioShack, we
benefit from the distribution agreements established by Sprint PCS with other
national and regional retailers such as Best Buy, Circuit City and Target. As of
March 31, 2001, these retailers had approximately 334 stores in our territories.
ELECTRONIC COMMERCE. Sprint PCS maintains an Internet site,
www.sprintpcs.com, which contains information on Sprint PCS products and
services. A visitor to Sprint PCS's Internet site can order and pay for a
handset and select a rate plan. Sprint PCS customers visiting the site can
review the status of their account, including the number of minutes used in the
current billing cycle. We will recognize the revenues generated by Sprint PCS
customers in our territories who purchase products and services over the Sprint
PCS Internet site.
SEASONALITY
Our business is subject to seasonality because the wireless industry is
heavily dependent on fourth quarter results. Among other things, the industry
relies on significantly higher customer additions and handset sales in the
fourth quarter as compared to the other three fiscal quarters. A number of
factors contribute to this trend, including:
o the increasing use of retail distribution, which is dependent upon the
year-end holiday shopping season;
o the timing of new product and service announcements and introductions;
o competitive pricing pressures; and
o aggressive marketing and promotions.
TECHNOLOGY
GENERAL. In 1993, the FCC allocated the 1900 MHz frequency block of the
radio spectrum for wireless personal communications services. Wireless personal
communications services differ from traditional analog cellular telephone
service principally in that wireless personal communications services systems
operate at a higher frequency and employ advanced digital technology.
Analog-based systems send signals in which the transmitted signal resembles the
input signal, the caller's voice. Digital systems convert voice or data signals
into a stream of digits that permit a single radio channel to carry multiple
simultaneous transmissions. Digital systems also achieve greater frequency reuse
than analog systems resulting in greater capacity than analog systems. This
enhanced capacity, along with enhancements in digital protocols, allows
digital-based wireless technologies, whether using wireless personal
communications services or cellular frequencies, to offer new and enhanced
services, including greater call privacy and more robust data transmission, such
as facsimile, electronic mail and connecting notebook computers with
computer/data networks.
Wireless digital signal transmission is accomplished through the use of
various forms of frequency management technology or "air interface protocols."
The FCC has not mandated a universal air interface protocol for wireless
personal communications services systems. Wireless personal communications
systems operate under one of three principal air interface protocols; code
division multiple access, time division multiple access, commonly referred to as
TDMA, or global system for mobile communications, commonly referred to as GSM.
Time division multiple access and global system for mobile communications are
both time division multiple access systems but are incompatible with each other.
The code division multiple access system is incompatible with both global system
for mobile communications and time division multiple access systems.
Accordingly, a subscriber of a system that utilizes code division multiple
access technology is unable to use a code division multiple access handset when
traveling in an area not served by code division multiple access-based wireless
personal communications services operators, unless the customer carries a
dual-band/dual-mode handset that permits the customer to use the analog cellular
system in that area. The same issue would apply to users of time division
multiple access or global system for mobile communications systems. All of the
wireless personal communications services operators now have
41
dual-mode or tri-mode handsets available to their customers. Because digital
networks do not cover all areas in the country, these handsets will remain
necessary for segments of the subscriber base.
CODE DIVISION MULTIPLE ACCESS TECHNOLOGY
Sprint PCS's network and its affiliates' networks all use digital code
division multiple access technology. We believe that code division multiple
access provides important system performance benefits such as:
GREATER CAPACITY. We believe, based on studies by code division multiple
access manufacturers, that code division multiple access systems can provide
system capacity that is approximately seven to ten times greater than that of
current analog technology and approximately three times greater than time
division multiple access and global system for mobile communications systems.
PRIVACY AND SECURITY. One of the benefits of code division multiple access
technology is that it combines a constantly changing coding scheme with a low
power signal to enhance call security and privacy.
SOFT HAND-OFF. Code division multiple access systems transfer calls
throughout the code division multiple access network using a technique referred
to as a soft hand-off, which connects a mobile customer's call with a new base
station while maintaining a connection with the base station currently in use.
Code division multiple access networks monitor the quality of the transmission
received by multiple base stations simultaneously to select a better
transmission path and to ensure that the network does not disconnect the call in
one cell unless replaced by a stronger signal from another base station. Analog,
time division multiple access and global system for mobile communications
networks use a "hard hand-off" and disconnect the call from the current base
station as it connects with a new one without any simultaneous connection to
both base stations.
SIMPLIFIED FREQUENCY PLANNING. Frequency planning is the process used to
analyze and test alternative patterns of frequency used within a wireless
network to minimize interference and maximize capacity. Unlike time division
multiple access and global system for mobile communications based systems, code
division multiple access based systems can reuse the same subset of allocated
frequencies in every cell, substantially reducing the need for costly frequency
reuse patterning and constant frequency plan management.
LONGER BATTERY LIFE. Due to their greater efficiency in power consumption,
code division multiple access handsets can provide longer standby time and more
talk time availability when used in the digital mode than handsets using
alternative digital or analog technologies.
COMPETITION
Competition in the wireless communications services industry is intense. We
compete with a number of wireless service providers in our markets. We believe
that our primary competition is with national wireless providers such as AT&T
Wireless Services, Cingular and Voicestream Wireless, Verizon Wireless and
Alltel.
We also face competition from resellers, which provide wireless services to
customers but do not hold FCC licenses or own facilities. Instead, the resellers
buy blocks of wireless telephone numbers and capacity from a licensed carrier
and resell services through their own distribution network to the public. The
FCC currently requires all cellular and wireless personal communications
services licensees to permit resale of carrier services to a reseller.
In addition, we compete with existing communications technologies such as
paging, enhanced specialized mobile radio service dispatch and conventional
landline telephone companies in our markets. Potential users of wireless
personal communications services systems may find their communications needs
satisfied by other current and developing technologies. One or two-way paging or
beeper services that feature voice messaging and data display as well as
tone-only service may be adequate for potential customers who do not need to
speak to the caller.
42
In the future, we expect to face increased competition from entities
providing similar services using other communications technologies, including
satellite-based telecommunications and wireless cable systems. While some of
these technologies and services are currently operational, others are being
developed or may be developed in the future.
Many of our competitors have significantly greater financial and technical
resources and subscriber bases than we do. Some of our competitors also have
established infrastructures, marketing programs and brand names. In addition,
some of our competitors may be able to offer regional coverage in areas not
served by the Sprint PCS network, or, because of their calling volumes or
relationships with other wireless providers, may be able to offer regional
roaming rates that are lower than those we offer. Wireless personal
communications services operators will likely compete with us in providing some
or all of the services available through the Sprint PCS network and may provide
services that we do not. Additionally, we expect that existing cellular
providers will continue to upgrade their systems to provide digital wireless
communication services competitive with Sprint PCS. Recently, there has been a
trend in the wireless communications industry towards consolidation of wireless
service providers through joint ventures, mergers and acquisitions. We expect
this consolidation to lead to larger competitors over time. These larger
competitors may have substantial resources or may be able to offer a variety of
services to a large customer base.
Over the past several years the FCC has auctioned and will continue to
auction large amounts of wireless spectrum that could be used to compete with
Sprint PCS services. Based upon increased competition, we anticipate that market
prices for two-way wireless services generally will decline in the future. We
will compete to attract and retain customers principally on the basis of:
o the strength of the Sprint and Sprint PCS brand names, services and
features;
o nationwide network;
o our network coverage and reliability; and
o CDMA technology.
Our ability to compete successfully will also depend, in part, on our
ability to anticipate and respond to various competitive factors affecting the
industry, including:
o new services and technologies that may be introduced;
o changes in consumer preferences;
o demographic trends;
o economic conditions; and
o discount pricing strategies by competitors.
INTELLECTUAL PROPERTY
The Sprint diamond design logo is a service mark registered with the United
States Patent and Trademark Office. The service mark is owned by Sprint. We use
the Sprint and Sprint PCS brand names, the Sprint diamond design logo and other
service marks of Sprint in connection with marketing and providing wireless
services within our territories. Under the terms of the trademark and service
mark license agreements with Sprint and Sprint PCS, we do not pay a royalty fee
for the use of the Sprint and Sprint PCS brand names and Sprint service marks.
43
Except in certain instances and other than in connection with the national
distribution agreements, Sprint PCS has agreed not to grant to any other person
a right or license to use the licensed marks in our territories. In all other
instances, Sprint PCS reserves the right to use the licensed marks in providing
its services within or without our territories.
The trademark license agreements contain numerous restrictions with respect
to the use and modification of any of the licensed marks. See "Our Affiliation
Agreements with Sprint PCS-The Trademark and Service Mark License Agreements"
for more information on this topic.
EMPLOYEES
As of March 31, 2001, we employed 870 employees. None of our employees are
represented by a labor union. We believe that our relations with our employees
are good.
PROPERTIES
Our headquarters are located in Lubbock, Texas and we lease space in a
number of locations, primarily for our Sprint PCS stores, base stations, and
switching centers. As of March, 31 2001 we leased 71 retail stores and 10
switching centers. As of March, 31 2001 we leased 1,021 towers and owned 4
towers. We believe that our facilities are adequate for our current operations
and that additional leased space can be obtained if needed on commercially
reasonable terms.
ENVIRONMENTAL COMPLIANCE
Our environmental compliance expenditures primarily result from the
operation of standby power generators for our telecommunications equipment and
compliance with various environmental rules during network build-out and
operations. The expenditures arise in connection with standards compliance or
permits which are usually related to generators, batteries or fuel storage. Our
environmental compliance expenditures have not been material to our financial
statements or to our operations and are not expected to be material in the
future.
LEGAL PROCEEDINGS
We and our subsidiaries are not parties to any pending legal proceedings
that we believe would, if adversely determined, individually or in the
aggregate, have a material adverse effect on our, or our subsidiaries',
financial condition or results of operations.
44
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
You should read the following discussion and analysis when you read the
consolidated financial statements and the related notes included in this
prospectus. The discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from the
results anticipated in these forward-looking statements as a result of factors
including, but not limited to, those under "RISK FACTORS" and "FORWARD-LOOKING
STATEMENTS."
OVERVIEW
Prior to January 1, 2000, we had very limited operations, very limited
revenues, significant losses, substantial future capital requirements and an
expectation of continued losses. As a result of significant operational results
reflected in the December 31, 2000 financial statements presented in this
document, beginning on page F-1, a comparison of these results to the same
period for 1999 may not be meaningful.
Since our inception, we have incurred substantial costs to negotiate our
contracts with Sprint PCS and our debt financing, to raise funds in the public
market, to engineer our wireless system, to develop our business infrastructure
and distribution channels and to build-out our portion of the Sprint PCS
network. Prior to the opening of Laredo on June 22, 1999, we did not have any
markets in operation. As of December 31, 2000, our accumulated deficit was
$113.9 million. Through December 31, 2000, we incurred $244.1 million of capital
expenditures and construction in progress related to the build-out our portion
of the Sprint PCS network. While we anticipate operating losses to continue, we
expect revenue to continue to increase substantially as the base of Sprint PCS
subscribers located in our territories increases.
On July 17, 1998, we entered into our affiliation agreements with Sprint
PCS. We subsequently amended our affiliation agreements with Sprint PCS to
expand our territories so that as of December 31, 2000 it included approximately
8.4 million residents.
As a Sprint PCS affiliate, we have the exclusive right to provide wireless,
mobility communications network services under the Sprint and Sprint PCS brand
names in our territories. We are responsible for building, owning and managing
the portion of the Sprint PCS network located in our territories. We market
wireless products and services in our territories under the Sprint and Sprint
PCS brand names. We offer national plans designed by Sprint PCS and intend to
offer specialized local plans tailored to our market demographics. Our portion
of the Sprint PCS network is designed to offer a seamless connection with Sprint
PCS's 100% digital wireless network. We market wireless products and services
through a number of distribution outlets located in our territories, including
our own Sprint PCS stores, major national distributors and third party local
representatives.
We recognize 100% of revenues from Sprint PCS subscribers based in our
territories, proceeds from the sales of handsets and accessories and fees from
Sprint PCS and other wireless service providers when their customers roam onto
our portion of the Sprint PCS network. Sprint PCS handles our billing and
collections and retains 8% of all collected revenue from Sprint PCS subscribers
based in our territories and fees from wireless service providers other than
Sprint PCS when their subscribers roam onto our portion of the Sprint PCS
network. We report the amount retained by Sprint PCS as an operating expense.
As part of our affiliation agreements with Sprint PCS, we have the option
of contracting with Sprint PCS to provide back office services such as customer
activation, handset logistics, billing, customer service and network monitoring
services. We have elected to delegate the performance of these services to
Sprint PCS to take advantage of Sprint PCS's economies of scale, to accelerate
our build-out and market launches and to lower our initial capital requirements.
The cost for these services is primarily calculated on a per subscriber and per
transaction basis and is recorded as an operating expense.
45
As of the end of the first quarter of 2001, we completed the acquisitions
of three Sprint PCS network partners. On February 14, 2001, we completed our
acquisition of Roberts Wireless Communications, L.L.C. ("Roberts") and
Washington Oregon Wireless, LLC ("WOW"). In connection with the Roberts and WOW
acquisitions, we entered into a new senior secured credit facility for up to
$280 million. On March 30, 2001, we completed our acquisition of Southwest PCS.
In connection with the Southwest acquisition we increased the senior secured
credit facility from $280 million to $333 million. Each of these transactions
was accounted for under the purchase method of accounting.
Roberts' service area, which includes 2.5 million people, includes the
market areas surrounding Kansas City, the world headquarters of Sprint PCS, and
St. Louis, including the Interstate 70 corridor connecting the two cities. At
December 31, 2000, Roberts' network covered approximately 1.1 million people.
The merger consideration in the Roberts acquisition consisted of 13.5 million
common shares of Alamosa Holdings and approximately $4.0 million in cash.
WOW's service area, which includes 1.5 million people, includes the market
areas of Ellenburg, Yakima and Kennewick, Washington and key travel corridors
within Washington and Oregon. At December 31, 2000, WOW's network covered
approximately 800,000 people. The merger consideration in the WOW acquisition
consisted of 6.05 million common shares of Alamosa Holdings and approximately
$12.5 million in cash.
Southwest's service area, which includes 2.8 million people, includes the
market areas in Texas, Oklahoma and Arkansas, encompassing over 2,100 heavily
traveled highway miles. At December 31, 2000, Southwest had launched service in
18 markets covering approximately 1.5 million residents and had approximately
40,000 customers. The merger consideration in the Southwest acquisition
consisted of approximately 11.1 million common shares of Alamosa Holdings and
approximately $5 million in cash.
On February 14, 2001, as part of the reorganization transaction in which we
acquired Roberts and WOW, Alamosa PCS Holdings, Inc. merged with a wholly owned
subsidiary of Alamosa Holdings and became a wholly owned subsidiary of Alamosa
Holdings, with Alamosa Holdings becoming our new public holding company. Each
share of Alamosa PCS Holdings common stock issued and outstanding immediately
prior to the merger was converted into the right to receive one share of Alamosa
Holdings common stock.
We launched Sprint PCS service in our first market, Laredo, Texas, in June
1999, and have since commenced service in 20 additional markets through December
31, 2000. At December 31, 2000 our systems covered approximately 4.5 million
residents out of approximately 5.9 million total residents in those markets. The
number of residents covered by our systems does not represent the number of
Sprint PCS subscribers that we expect to be based in our territories. As of
December 31, 2000, 132,940 Sprint PCS subscribers were based in our territories.
Additionally, pursuant to our services agreements with Roberts and WOW
prior to closing the mergers on February 14, 2001, we launched markets in
Springfield and Joplin, Missouri for Roberts and Kennewick, Yakima and Walla
Walla, Washington and Klamath Falls, Roseburg and Medford-Grants Pass, Oregon on
behalf of WOW. Roberts and WOW systems cover approximately 1.9 million residents
out of approximately 2.4 million total residents in those territories.
Pursuant to our services agreements with Roberts and WOW prior to closing
the mergers, we were responsible for the operation of Jefferson City, Columbia
and St. Joseph, Missouri which were in operation when the services agreements
were signed.
46
RESULTS OF OPERATION
FOR THE YEAR ENDED DECEMBER 31, 2000 COMPARED TO THE YEAR ENDED DECEMBER 31,
1999
NET LOSS. Our net loss for the year ended December 31, 2000 was $80,188,100
as compared to a net loss of $32,835,859 for the year ended December 31, 1999.
These losses were comprised of the continued incurrence of start-up expenses
relative to the preparation of markets for commercial launch and the operation
of markets launched during 1999 and 2000. We launched 11 markets during the year
ended December 31, 1999. For the year ended December 31, 2000, we launched 10
additional markets.
SERVICE REVENUES. Service revenues are comprised of subscriber revenue,
Sprint PCS roaming revenue, non-Sprint PCS roaming revenue and long distance
revenue, all of which initially began accruing to us at or near our first
initial commercial launch in June 1999. Subscriber revenue consists of payments
received from Sprint PCS subscribers based in our territories for monthly Sprint
PCS service in our territories under a variety of service plans. These plans
generally reflect the terms of national plans offered by Sprint PCS and are
issued on a month-to-month basis. We receive Sprint PCS roaming revenue at a per
minute rate from Sprint PCS or another Sprint PCS affiliate when Sprint PCS
subscribers based outside of our territories use our portion of the Sprint PCS
network. Service revenues were $73,499,638 for the year ended December 31, 2000,
and $6,533,623 for the year ended December 31, 1999, due to limited operations
in 1999 and rapid growth in the subscriber base of newly launched markets.
Non-Sprint PCS roaming revenue primarily consists of fees collected from
Sprint PCS customers based in our territories when they roam on non-Sprint PCS
networks. These fees are based on rates specified in the customers' contracts.
However, it is possible that in some cases these fees may be less than the
amount we must pay to other wireless service providers that provide service to
Sprint PCS customers based in our territories. Non-Sprint PCS roaming revenue
also includes payments from wireless service providers, other than Sprint PCS,
when those providers' customers roam on our portion of the Sprint PCS network.
Our average monthly revenue per user for Sprint PCS customers in our
territories, including long distance and roaming revenue, was approximately $96
for the period from June 26, 1999 to December 31, 1999 and was approximately $84
for the year ended December 31, 2000.
PRODUCT SALES. 100% of the revenue from the sale of handsets and
accessories is recorded, net of an allowance for returns, as product sales. The
amount recorded for the year ended December 31, 2000 totaled $9,200,669 as
compared to $2,450,090 for the year ended December 31,1999. Sprint PCS's handset
return policy allows customers to return their handsets for a full refund within
30 days of purchase. When handsets are returned to us, we may be able to reissue
the handsets to customers at little additional cost to us. However, when
handsets are returned to Sprint PCS for refurbishing, we receive a credit from
Sprint PCS, which is less than the amount we originally paid for the handset.
COST OF SERVICE AND OPERATIONS. Expenses totaling $55,429,985 for the year
ended December 31, 2000 and $8,699,903 for the year ended December 31, 1999
related to providing wireless services to customers and are included in cost of
services. Among these costs are the cost of operations, fees related to data
transfer via T-1 and other transport lines, inter-connection fees, Sprint PCS
roaming fees, non-Sprint PCS roaming fees and other expenses related to
operations. Also included is non-cash compensation expense related to our stock
plans of $836,296 and $1,259,427 for the years ended December 2000 and 1999,
respectively. We pay Sprint PCS roaming fees when Sprint PCS subscribers based
in our territories use the Sprint PCS network outside of our territories.
Pursuant to our affiliation agreements with Sprint PCS, Sprint PCS can change
this per minute rate. We pay non-Sprint PCS roaming fees to other wireless
service providers when Sprint PCS customers based in our territories use their
network.
COST OF PRODUCTS SOLD. The cost of equipment sold totaled $20,524,427 for
the year ended December 31, 2000 as compared to $5,938,838 for the year ended
December 31, 1999. These amounts include the cost of accessories and the cost of
handsets sold through our retail stores including sales to local indirects. We
expect the cost of handsets to exceed the retail sales price because we
subsidize the price of handsets for competitive reasons.
47
The handset subsidy included in cost of products sold through our retail stores
totaled $10,961,708 for the year ended December 31, 2000 and $3,535,532 for the
year ended December 31, 1999.
SELLING AND MARKETING. Selling and marketing expenses totaled $46,513,835
during 2000 and $10,810,946 for 1999. Selling and marketing expenses include
advertising expenses, promotion costs, sales commissions and expenses related to
our distribution channels and handset subsidy paid to Sprint PCS for customers
based in our territories that purchase handsets through Sprint PCS or its
national retailers. We incur handset subsidy expense, in addition to that
incurred through our retail stores, from other sales channels such as
E-commerce, telemarketing and Sprint PCS national retailers. The handset subsidy
incurred from sources other than our retail stores is included in selling and
marketing. The amount of handset subsidy included in Selling and Marketing
totaled $4,846,009 in 2000 and $1,487,898 in 1999.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
include corporate costs and expenses other than those related to Cost of
Operations and Selling and Marketing. We have incurred significant general and
administrative expenses related to the development of our system. For the year
ended December 31, 2000, General and Administrative expenses totaled
$14,351,839. For the year ended December 31, 1999, these expenses totaled
$11,149,059 and are primarily related to the start-up of the business and were
expensed according to American Institute of Certified Public Accountants
Statement of Position 98-5, "Reporting on the Costs of Start-up Activities."
Also included in general and administrative expenses is non-cash compensation
expense related to Company's stock plans of $4,814,329 and $6,940,084 for the
years ended December 31, 2000 and 1999, respectively.
RELATED PARTY EXPENSES. Related party expenses totaled $1,995,942 for the
year ended December 31, 2000 and $1,726,198 for the year ended December 31,
1999. These amounts were primarily comprised of information technology and other
professional consulting expenses incurred in connection with a contract between
us and a telecommunications engineering and consulting firm. Several key
officers and owners of these companies have an equity ownership interest in us.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the year
ended December 31, 2000 totaled $12,530,038 as compared to $3,056,923 for the
year ended December 31, 1999. Depreciation is calculated using the straight line
method over the useful life of the asset. We begin to depreciate the assets for
each market only after we open that market.
INTEREST AND OTHER INCOME. Interest and other income totaling $14,483,431
for the year ended December 31, 2000 and $477,390 for the year ended December
31, 1999 generally have been generated from the investment of equity and loan
proceeds held in liquid accounts waiting to be deployed.
INTEREST EXPENSE. Interest expense totaled $25,774,925 for the year ended
December 31, 2000 and $2,641,293 for the year ended December 31, 1999 and
primarily related to interest accretion on the senior discount notes during 2000
and financing via our credit facility during 1999.
FOR THE PERIOD JULY 16, 1998 (INCEPTION) THROUGH DECEMBER 31, 1998
REVENUES, DIRECT COSTS AND NET LOSS. From inception through December 31,
1998, our operating activities were directed towards the development of our
business. During July 1998, we signed our affiliation agreements with Sprint PCS
to operate as the exclusive affiliate of Sprint PCS in our territories. Our
operating activities were focused on executing our build-out plan and developing
our network infrastructure. As our first market did not launch until June 1999,
the 1998 period reflects no service revenues, product sales or related costs
associated with services or products. Our net loss for the period was $923,822,
which was principally comprised of general and administrative expenses.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the period in the amount of $956,331 were comprised primarily of legal and
other professional services of $704,381 related to the start up of
48
our business and the development of our systems. In addition, we incurred
$166,850 of human resource costs related to preparation for the 1999 launch of
our network. Virtually all general and administrative expenses during this
period related to the start-up of the business and were expensed according to
American Institute of Certified Public Accountants Statement of Position 98-5,
"Reporting on the Costs of Start-up Activities."
INCOME TAXES
We account for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes." The deferred tax
asset generated, primarily from temporary differences related to the treatment
of start-up costs, unearned compensation and from net operating loss carry
forwards, was offset by a full valuation allowance.
Our financial statements for the periods ended December 31, 1999 and
December 31, 1998 did not report any effect for federal and state income taxes
since we had elected to be taxed as a partnership prior to our original Alamosa
reorganization. For the periods presented, the members of the limited liability
company recorded our tax losses on their own income tax returns. Subsequent to
the original Alamosa reorganization, we have accounted for income taxes in
accordance with Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." Had we applied the provisions of SFAS No. 109 for the period
from inception on July 16, 1998 through December 31, 1999, the deferred tax
asset generated, primarily from temporary differences related to the treatment
of start-up costs, unearned compensation and from net operating loss carry
forwards, would have been offset by a full valuation allowance.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, we have financed our operations through capital
contributions from our owners, through debt financing and through proceeds
generated from our initial offering. We entered into a credit agreement with
Nortel effective June 10, 1999, which was amended and restated on February 8,
2000. On June 23, 2000, Nortel assigned the entirety of its loans and
commitments to EDC, and Alamosa (Delaware) and EDC entered into the credit
facility with EDC.
The EDC Credit Facility was reduced by $75.0 million from the issuance of
our senior discount notes, such that the EDC credit facility provides for
advancing term loan facilities in the aggregate principal amount of $175.0
million. The terms and conditions of the EDC credit facility were substantially
the same as the terms and conditions of the Nortel credit agreement before the
assignment and the amendments. As of December 31, 2000, approximately $54.5
million of the $175.0 million EDC credit facility had been drawn. This amount
was paid off with proceeds of the new senior secured credit facility.
Pursuant to the equipment agreement with Nortel, we are required to
purchase a total of $167.0 million of equipment and services from Nortel. As of
December 31, 2000, we had remaining commitments of $23.1 million under the
Nortel equipment agreement. These purchases from Nortel were financed pursuant
to the EDC credit facility prior to the closing of the senior secured credit
facility, and, after the closing of the senior secured credit facility, have
been and will be pursuant to such facility.
On February 4, 2000, we issued $350.0 million face amount of senior
discount notes. The senior discount notes mature in ten years (February 15,
2010), carry a coupon rate of 12 7/8%, and provide for interest deferral for the
first five years. The senior discount notes will accrete to their $350 million
face amount by February 8, 2005, after which interest will be paid in cash
semiannually.
On January 31, 2001, we issued $250.0 million face amount of senior notes.
The senior notes mature in ten years (February 1, 2011), carry a coupon rate of
12 1/2%, payable semiannually on February 1 and August 1, beginning on August 1,
2001.
49
On December 20, 2000, we announced that we had entered into a commitment
letter with Citicorp North America, Salomon Smith Barney, Toronto Dominion
(Texas), First Union National Bank and EDC providing for the senior secured
credit facility of up to $280.0 million to be made to one of our subsidiaries.
The senior secured credit facility was closed and initial funding of $150
million was made on February 14, 2001 in connection with the completion of the
Roberts and WOW mergers. A portion of the proceeds of the senior secured credit
facility was used (i) to pay the cash portion of the merger consideration for
the Roberts and WOW mergers, (ii) to refinance existing indebtedness under
Alamosa PCS's $175.0 million credit facility with EDC and under Roberts' and
WOW's existing credit facilities, and (iii) to pay transaction costs. The
remaining proceeds will be used for general corporate purposes, including
funding capital expenditures, subscriber acquisition and marketing costs,
purchase of spectrum and working capital needs. On March 30, 2001, in connection
with the Southwest merger, the senior secured credit facility was increased from
$280.0 million to $333.0 million. Proceeds from the senior secured credit
facility were used to pay-off Southwest's existing debt of approximately $82.0
million.
The senior secured credit facility consists of:
o A 7-year senior secured 12 month delayed draw term loan facility in an
aggregate principal amount of up to $293.0 million; and
o A 7 year senior secured revolving credit facility in an aggregate
principal amount of up to $40.0 million, part of which will be
available in the form of letters of credit.
Net cash used in operating activities was $29,218,164 for the year ended
December 31, 2000 and $17,089,704 for the year ended December 31, 1999. Cash
used in operating activities for the periods was attributable to operating
losses and working capital needs.
Net cash used in investing activities was $188,162,258 for the year ended
December 31, 2000, and $77,219,021 for the year ended December 31, 1999. The
expenditures were related primarily to the purchase of network infrastructure
needed to construct our portion of the Sprint PCS network, office equipment and
telephone equipment.
Net cash provided by financing activities was $353,492,878 for the year
ended December 31, 2000 consisting primarily of net proceeds from our initial
public offering of approximately $195 million and net proceeds from our issuance
of senior discount notes of approximately $181 million. Net cash provided by
financing activities totaled $86,435,359 for the year ended December 31, 1999
consisting primarily of capital contributions of $22,000,000 and Nortel draws of
$65,967,777.
As of March 30, 2001, our primary sources of liquidity were approximately
$203.0 million in cash, $33.9 million in short term investments and $130.0
million of unused capacity under the $333.0 million senior secured credit
facility.
We estimate that we will require approximately $161.2 million to complete
the current build-out plan and fund working capital losses through the year
2001. The actual funds required to build-out our portion of the Sprint PCS
network and to fund operating losses and working capital needs may vary
materially from this estimate, and additional funds could be required.
We include capital leases related to network equipment and build-out in
construction in progress until service has commenced in their respective
markets. Once that service has commenced, those capital leases are reclassified
to property and equipment. At December 31, 2000, capital leases totaled
$1,074,392 and included long-term capital lease obligations of $1,038,614. At
December 31, 1999 the capital leases totaled $848,842 and included long-term
capital lease obligations of $827,024. Amortization in the amount of $21,818 was
recorded under these leases for the year ended December 31, 2000 and $30,894 for
the year ended December 31, 1999.
50
DEBT COVENANT
As of March 31, 2001, we did not meet the maximum negative EBITDA covenant
under our senior secured credit facility. During the quarter ended March 31,
2001, we reported an EBITDA loss of $16.7 million which exceeded the maximum
negative EBITDA covenant by $7.0 million.
Differences in first quarter 2001 actual results versus projections on
which the covenants were based are primarily attributable to negative variances
from (i) higher than projected selling and marketing expenses, somewhat due to
greater than expected subscriber growth, (ii) actual outbound roaming minutes
used by our customers exceeding projections which resulted in higher costs, and
(iii) general and administrative costs in excess of projections, all partially
offset by favorable variances in revenues due to (a) higher actual ARPU than
projected, (b) more actual subscribers than projected and (c) actual inbound
roaming minutes on our network exceeding projections resulting in additional
revenue, albeit much less than the increased roaming expenses mentioned above.
On May 8, 2001, we obtained a waiver of any default or event of default
arising from the failure to comply with the covenant for the fiscal quarter
ended March 31, 2001 from the lending institutions under the senior secured
credit facility. We believe that the maximum negative EBITDA covenant will be
met in periods subsequent to March 31, 2001.
INFLATION
Management believes that inflation has not had, and is not likely to have,
a material adverse effect on our results of operations.
EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In March 2000, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 44 ("FIN 44"), "Accounting for Certain Transactions Involving
Stock Compensation-An Interpretation of APB 25." This Interpretation clarifies
(i) the definition of employee for purposes of applying Opinion 25, (ii) the
criteria for determining whether a plan qualifies as a noncompensatory plan,
(iii) the accounting consequence of various modifications to the terms of a
previously fixed stock option or award, and (iv) the accounting for an exchange
of stock compensation awards in a business combination. FIN 44 is effective July
1, 2000; however, certain conclusions in the Interpretation cover specific
events that occur after either December 15, 1998, or January 12, 2000. To the
extent that this Interpretation covers events occurring during the period after
December 15, 1998, or January 12, 2000, but before the effective date of July 1,
2000, the effects of applying this Interpretation will be recognized on a
prospective basis from July 1, 2000. The implementation of FIN 44 did not have a
material effect on our financial position, results of operations or cash flows.
In June 1998 and June 1999, the Financial Accounting Standards Board
("FASB"), issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" and SFAS No. 137, "Accounting for Derivative Instruments and
Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133."
These statements require companies to record derivatives on the balance sheet as
assets or liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for depending on
the use of the derivative and whether it qualifies for hedging accounting. SFAS
No. 133 will be effective for our fiscal year ending December 31, 2001.
Management believes that the adoption of these statements will not have a
significant impact on our financial results.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 summarizes certain of the staff's interpretations in
applying generally accepted accounting principles to revenue recognition. The
provisions of SAB 101 were required to be adopted during our quarter ending
December 31, 2000 effective as of January 1, 2000. Pursuant to SAB 101, we began
deferring customer activation fee revenue and an equal amount of customer
acquisition related expenses in October 2000 when we began charging these fees.
These deferred amounts are amortized over a three-year period, which
approximates the average life of a customer. For the year ended December 31,
2000, we had deferred $1,180,413 of activation fee revenue and acquisition
related expenses and had amortized $77,012. At December 31, 2000, $735,593 of
the remaining deferral was classified as long-term.
We do not believe that any recently issued accounting pronouncements will
have any material impact on our financial position, results of operations or
cash flows.
CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We do not engage in commodity futures trading activities and do not enter
into derivative financial instrument transactions for trading or other
speculative purposes. We also do not engage in transactions in foreign
currencies that could expose us to market risk.
We are subject to some interest rate risk on our financing from EDC and any
future floating rate financing.
51
The following table presents the estimated future outstanding long-term
debt at the end of each year and future required annual principal payments for
each year then ended associated with the senior discount notes, capital leases
and the credit facility financing based on our projected level of long-term
indebtedness:
YEARS ENDING DECEMBER 31,
-------------------------
2001 2002 2003 2004 2005 THEREAFTER
---- ---- ---- ---- ---- ----------
(DOLLARS IN MILLIONS)
Fixed Rate Instruments:
Senior discount notes $ 237 $ 269 $ 305 $ 345 $ 350 $ 350
Fixed interest rate 12.875% 12.875% 12.875% 12.875% 12.875% 12.875%
Principal payments -- -- -- -- -- $ 350
Capital Leases -- Annual Minimum:
Lease Payments (1) $ .148 $ .149 $ .150 $ .160 $ .161 $ 1.18
Average Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Variable Rate Instruments:
Senior Secured Credit Facility (2) $ 254 $ 280 $ 280 $ 248 $ 185 $ --
Average Interest Rate (3) 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Principal payments $ -- $ -- $ -- $ 32 $ 63 $ 186
(1) These amounts represent the estimated minimum annual payments due under our
estimated capital lease obligations for the periods presented.
(2) The amounts represent estimated year-end balances under the senior secured
credit facility based on a projection of the funds borrowed under that
facility pursuant to our current plan of network build-out.
(3) Interest rate under the Nortel financing equals, at our option, either the
London Interbank Offered Rate (LIBOR) + 3.75%, or the prime or base rate of
Citibank, N.A. plus 2.75%. LIBOR is assumed to equal 6.0% for all periods
presented.
Our primary market risk exposure relates to:
o the interest rate risk on long-term and short-term borrowings;
o our ability to refinance our senior discount notes at maturity at
market rates; and
o the impact of interest rate movements on our ability to meet interest
expense requirements and meet financial covenants.
The senior discount notes have a carrying value of $209 million and a fair
value which approximates $215 million.
As a condition to the EDC credit facility, we had to maintain one or more
interest rate protection agreements in an amount equal to 50% of the total debt
under the financing. We do not hold or issue financial or derivative financial
instruments for trading or speculative purposes. While we cannot predict our
ability to refinance existing debt or the impact that interest rate movements
will have on our existing debt, we continue to evaluate our financial position
on an ongoing basis.
52
MANAGEMENT
BOARD OF DIRECTORS
The following table presents information with respect to our current
directors:
NAME AGE
---- ---
David E. Sharbutt ................................ 51
Michael R. Budagher .............................. 42
Ray M. Clapp, Jr. ................................ 41
Scotty Hart ...................................... 50
Thomas Hyde ...................................... 56
Schuyler B. Marshall ............................. 55
Tom M. Phelps .................................... 52
Thomas F. Riley, Jr. ............................. 55
Steven C. Roberts ................................ 49
Michael V. Roberts ............................... 52
Jimmy R. White ................................... 61
Set forth below is a brief description of the present and past business
experience of each of our directors:
DAVID E. SHARBUTT. Mr. Sharbutt has been Chairman and a director since we
were founded in July 1998 and was named Chief Executive Officer in October 1999.
Mr. Sharbutt was formerly the President and Chief Executive Officer of Hicks &
Ragland Engineering Co., an engineering consulting company, now known as CHR
Solutions. Mr. Sharbutt was employed by CHR Solutions as a Senior Consultant
from October 1999 until November 2000. He was employed by CHR Solutions from
1977 through 1999, where he worked with independent telephone companies in
developing strategic, engineering and implementation plans for various types of
telecommunications services. Before he joined CHR Solutions, Mr. Sharbutt was
employed with Southwestern Bell.
MICHAEL R. BUDAGHER. Mr. Budagher has served as a director of Alamosa
(Delaware) since December 1998. Mr. Budagher was the founder of Specialty
Constructors, a wholly owned subsidiary of Specialty Teleconstructors, Inc., a
wireless infrastructure installation company. He served as the President,
Chairman of the Board, Chief Executive Officer and Chief Operating Officer of
Specialty from 1990 to 1999. Mr. Budagher is also a founder, stockholder and the
President of Specialty Antenna Site Resources, Inc. and was a founder and served
as the President of Specialty Constructors Coatings, Inc. until March 1997. He
also serves as the Managing Member and President of the Budagher Family LLC as
well as a Manager of West Texas PCS, LLC, both non-public limited liability
companies.
RAY M. CLAPP, JR. Mr. Clapp has served as a director since we were founded
in July 1998. Since 1995, Mr. Clapp has been Managing Director, Acquisitions and
Investments for the Rosewood Corporation, the primary holding company for the
Caroline Hunt Trust Estate. From 1989 to 1995 he has held various officer level
positions with the Rosewood Corporation and its subsidiaries. Prior to his
employment with the Rosewood Corporation, Mr. Clapp was a consultant with Booz,
Allen & Hamilton, a management consulting firm. Mr. Clapp received his Bachelor
of Science and Engineering degree, with honors, from Princeton University and
earned a Master of Business Administration from the University of Texas at
Austin.
SCOTTY HART. Mr. Hart has served as a director since we were founded in
July 1998. He has also served as General Manager of South Plains Telephone
Cooperative, a wireline and wireless telecommunications company, since April
1995, and previously as Assistant Manager of South Plains Telephone Cooperative.
Mr. Hart is currently Vice President of SPPL, Inc., Chairman of the General
Partners Committee for Caprock Cellular Limited Partnership and past Chairman
for Texas RSA3 Limited Partnership, all affiliates of South Plains Telephone
Cooperative. He is also General Manager of South Plains Advanced Communications
& Electronics, Inc., a wholly-owned subsidiary of South Plains Telephone
Cooperative, and Secretary of Alamo Cellular, Inc., a non-public holding company
with interests in a wireless telecommunications service provider and an
affiliate of South Plains Advanced Communications & Electronics, Inc. In
addition, he is the general partner and a limited partner of Lubbock HLH, Ltd.
He was President of Alamo IV LLC until its dissolution in November 1999.
53
THOMAS HYDE. Mr. Hyde has served as a director since we were founded in
July 1998. Since 1998, Mr. Hyde has served as Manager of Taylor Telephone
Cooperative, Inc., a landline telephone service provider, and from 1996 to 1997
he served as Assistant Manager of that company. He has also served as Manager of
Taylor Telecommunications, Inc., a cellular service provider. Prior to 1996, Mr.
Hyde was self-employed in the farming and ranching business. Mr. Hyde was also
Secretary of Alamo IV LLC until its dissolution in November 1999. Mr. Hyde
currently serves as a director of Alamo Cellular, Inc., and was a director of
Taylor Telephone Cooperative, Inc. and Taylor Telecommunications, Inc. from 1979
to 1996.
SCHUYLER B. MARSHALL. Mr. Marshall has served as a director of Alamosa
(Delaware) since November 1999. He has served as President of the Rosewood
Corporation, the primary holding company for the Caroline Hunt Trust Estate,
since January 1999. From 1996 through 1998, he served as Senior Vice President
and General Counsel, and Executive Director of the Rosewood Corporation, and as
director and president of various of its subsidiaries. He currently serves as a
member of the advisory board of Rosewood Capital IV, L.P., a San Francisco based
venture capital fund that will focus on e-commerce, telecommunications and other
consumer oriented investments. Prior to his employment with the Rosewood
Corporation, Mr. Marshall was a senior shareholder with Thompson & Knight, P.C.,
in Dallas, where he practiced law since 1970.
TOM M. PHELPS. Mr. Phelps has served as a director of Alamosa since
December 1998. Mr. Phelps has served as Chief Executive Officer of Nebraska
Wireless since October 2000. From September 1997 to October 2000 he served as
Executive Vice President and General Manager of ENMR Telephone Cooperative, a
telecommunications services provider, and of Telecommunications Holdings East,
since September 1997. From September 1997 to October 2000 Mr. Phelps was also
Executive Vice President of Plateau Telecommunications, Inc., a wireless and
wireline telecommunications provider and wholly owned subsidiary of
Telecommunications Holdings East. Additionally, Mr. Phelps served as Assistant
Manager of ENMR Telephone Cooperative and its wholly owned subsidiaries from
1995 to 1997, and as Area Manager of GTE Corporation, a telephone service
provider, from 1994 to 1995. He is currently a director of Rocky Mountain
Telecommunications Association, a non-public company.
THOMAS F. RILEY, JR. Mr. Riley, a licensed CPA, has served as a director of
Alamosa since his appointment to the Board of Directors on April 27, 2001. Mr.
Riley has served as Executive Vice President and Chief Operating Officer of
Chickasaw Holding Co. since January 1997. From July 1999 to March 2001, Mr.
Riley served as President and Chief Executive Officer of Southwest PCS Holdings,
Inc. Before he joined Chickasaw, Mr. Riley was associated with Dobson
Communications Corp. from 1970 through 1996, first as external auditor and
consultant, then Chief Financial Officer from 1986 through 1995 and then as
President of Dobson Telephone Co. in 1996.
MICHAEL V. ROBERTS. Mr. Roberts has served as a director of Alamosa since
his appointment to the Board of Directors on April 27, 2001. Mr. Roberts is
co-founder of Roberts Broadcasting Company which owns several television
stations in medium-sized markets in the U.S. and has served as that company's
Chairman and Chief Executive Officer since its founding in 1989. Mr. Roberts is
also the founder of companies involved in commercial real estate development,
construction management, corporate management consulting and communications
towers. He is currently a director of ACME Communications, Inc., which owns and
operates broadcast television stations.
STEVEN C. ROBERTS. Mr. Roberts has served as a director of Alamosa
since his appointment to the Board of Directors on April 27, 2001. Mr. Roberts
is co-founder of Roberts Broadcasting Company and has served as that company's
President and Chief Operating Officer since its founding. Mr. Roberts is the
founder of companies involved in commercial real estate development and
communications towers. He is currently a director of Southside Bancshares Corp.
and Falcon Products Inc.
JIMMY R. WHITE. Mr. White has served as a director since we were founded in
July 1998. He has served as the General Manager of XIT Rural Telephone
Cooperative, Inc. and its subsidiaries, XIT Telecommunication & Technology,
Inc., XIT Cellular, and XIT Fiber, Inc., all wireline and wireless
telecommunications services providers, since 1975. He was also the Treasurer of
Alamo IV LLC until its dissolution in November 1999. Mr. White currently serves
as the President of Alamo Cellular, Inc. He also currently serves as a director
of Texas Telephone Association, a non-public company, and Forte of Colorado, a
general partnership.
All our current directors are also members of the board of directors of
Alamosa Holdings. Messrs. Michael V. Roberts and Steven C. Roberts are brothers.
There is no family relationship among any other directors or executive officers
of Alamosa.
EXECUTIVE OFFICERS
The following table sets forth certain information concerning the persons
who serve as our executive officers. Our executive officers are elected annually
by the Board of Directors and serve until their successors are duly elected and
qualified.
NAME AGE TITLE
- ---- --- -----
David E. Sharbutt 51 Chairman of the Board of Directors and Chief Executive
Officer
Kendall W. Cowan 47 Chief Financial Officer and Secretary
Loyd I. Rinehart 46 Senior Vice President of Corporate Finance
Anthony Sabatino 38 Chief Technology Officer and Senior Vice President of
Engineering and Network Operations
Set forth below is a brief description of the present and past business
experience of each of our executive officers who is not also serving as a
director.
54
KENDALL W. COWAN. Mr. Cowan has been Chief Financial Officer of Alamosa
(Delaware) since December 1999. From October 1993 to December 1999, he was a
partner in the public accounting firm of Robinson Burdette Martin & Cowan,
L.L.P. and from January 1986 to September 1993, he was a partner in the Lubbock
and Dallas offices of Coopers & Lybrand. He provided consulting and accounting
services to a wide range of clients at both firms including public companies. He
is a Certified Public Accountant and a member of both the American Institute of
Certified Public Accountants and the Texas Society of Certified Public
Accountants. Mr. Cowan is Chairman of the Board and a stockholder of ShaCo
Xpress, Inc., a director of Robert Heath Trucking, Inc., and a member of C.C. &
Co., L.L.C., all of which are non-public companies.
LOYD I. RINEHART. Mr. Rinehart became the Senior Vice President of
Corporate Finance of Alamosa (Delaware) in June 2000. From June 1998 to June
2000, Mr. Rinehart served as Chief Financial Officer of Affordable Residential
Communities, the fourth largest owner of manufactured housing land-lease
communities and one of the top three largest independent retailers of
manufactured homes. From June 1995 to June 1998, Mr. Rinehart served as
Executive Vice President of Plains Capital Corporation, a bank holding company
based in Lubbock, Texas. He was responsible for all non-Lubbock banking
operations, including due diligence, modeling, the purchase or the establishment
of additional locations and ultimately management. Prior to his employment with
Plains Capital Corporation, Mr. Rinehart served as Chief Financial Officer of
First Nationwide, a $15 billion thrift, and its predecessor financial
institutions. Mr. Rinehart is a Certified Public Accountant.
ANTHONY SABATINO. Mr. Sabatino became the Chief Technology Officer and
Senior Vice President of Engineering and Network Operations of Alamosa
(Delaware) in July 2000. From 1995 to July 2000, he was the National Radio
Frequency (RF) Engineering Director for Sprint PCS and was an initial member of
the SPCS corporate launch team. Mr. Sabatino developed all SPCS National RF
Engineering Standards. He also acted as design lead for a SPCS new RF
Interference Analysis Tool. Mr. Sabatino is a director and President of the PCIA
Cost Sharing Clearinghouse and a member of the University of Kansas Advisory
Committee representing electrical engineering.
EXECUTIVE COMPENSATION
The following table sets forth the compensation received by our Chief
Executive Officer and our other executive officers who were serving in such
capacities on December 31, 2000 with respect to our 2000 fiscal year. Such
executive officers are referred to herein collectively as the "named executive
officers."
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
SECURITIES
NAME AND PRINCIPAL UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(1)
David E. Sharbutt 2000 $204,166 $146,024 $20,434
Chief Executive Officer 1999 $43,750 $43,750 1,697,500
Kendall W. Cowan 2000 $162,500 $100,163 $19,889
Chief Financial Officer 1999 $12,500 $12,500 1,455,000
Loyd I. Rinehart 2000 $87,500 $23,908 100,000
Senior Vice President of
Corporate Finance
W. Don Stull 2000 $66,987 $25,663 48,501 $111,462
Former Chief Technology 1999 $90,000 $58,875 145,500
Officer(2) 1998 $16,108 $0 -----
- --------------------------------------------------------------------------------------------------------------------------
55
Jerry W. Brantley 2000 $175,000 $75,942 $29,075
Former President and Chief 1999 $175,000 $142,309 1,697,500
Operating Officer(3) 1998 $43,077 $25,823 -----
- --------------
(1) The amounts reflected in the All Other Compensation column represent the
following payments and benefits: Mr. Sharbutt - $11,223 for company-paid
life insurance premiums and $9,211 for company contributions to our 401(k)
plan; Mr. Cowan - $12,163 for company-paid life insurance and $7,726 for
company contributions to our 401(k) plan; Mr. Stull - $100,000 for
severance payments and $11,462 payment in lieu of annual bonus; Mr.
Brantley - $29,075 for company-paid life insurance premiums.
(2) Mr. Stull served as our Chief Technology Officer from October 1998 until
his resignation on September 2000.
(3) Mr. Brantley served as our President and Chief Operating Officer from
October 1998 to January 2001.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
References in this section to "shares" and "common stock" refer to shares
of common stock of Alamosa Holdings, our parent holding company whose shares of
common stock are quoted on the Nasdaq National Market System under the symbol
"APCS".
The table below provides information regarding stock options granted to the
named executive officers in fiscal year 2000 and hypothetical gains for the
options through the end of their respective ten year terms. In accordance with
applicable requirements of the SEC, we have assumed annualized growth rates of
the market price of the common stock over the exercise price of the option of 5%
and 10%, running from the date the option was granted to the end of the option
term. Actual gains, if any, depend on the future performance of the common stock
and overall conditions and the information in this table should not be construed
as an estimate of future stock price growth. We did not grant any stock
appreciation rights in fiscal year 2000.
POTENTIAL
% OF TOTAL REALIZABLE
OPTIONS VALUE AT ASSUMED
NUMBER OF GRANTED TO EXERCISE ANNUAL RATE OF
SECURITIES EMPLOYEES PRICE STOCK PRICE
UNDERLYING IN (PER EXPIRATION APPRECIATION
NAME OPTIONS FISCAL YEAR SHARE) DATE FOR OPTION TERM
- -------------------- -------------- --------------- ------------- ----------- --------------------------------
5%($) 10%($)
Loyd I. Rinehart 100,000 (1) 4.69% $12.375 6/12/10 $778,257 $1,972,256
- --------------
(1) Options become exercisable with respect to one-third of the shares subject
thereto on June 19 of 2001, 2002 and 2003. All options become fully vested
and exercisable upon a change in control of Alamosa Holdings.
56
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides summary information regarding option exercises
in 2000 by the named executive officers and the value of such officers'
unexercised options at December 31, 2000.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
ACQUIRED VALUE YEAR-END(#) AT FISCAL YEAR-END
NAME ON EXERCISE(#) (1) REALIZED ($) (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)(2)
- ---- ------------------ ------------ --------------------------- ------------------------------
David E. Sharbutt 242,500 3,843,625 485,000 / 970,000 0 / 0
Kendall W. Cowan 0 -- 291,000 / 1,164,000 0 / 0
Loyd I. Rinehart 0 -- 0 / 100,000 0 / 0
Jerry W. Brantley 242,500 3,843,625 363,750 / 1,091,250 $1,403,469 / 0
W. Don Stull 0 -- 105,499 / 0 $731,899 / 0
- --------------
(1) Refers to shares of Alamosa (Delaware) if option was exercised on or prior
to December 14, 2000 (during which time Alamosa (Delaware) was the public
holding company), and shares of Alamosa PCS Holdings if option was
exercised on or after December 15, 2000 (during which time Alamosa PCS
Holdings was the public holding company).
(2) The values in this column are based upon the closing price of the common
stock of Alamosa PCS Holdings on December 29, 2000 of $6.9375 per share.
EMPLOYMENT AGREEMENTS
DAVID E. SHARBUTT. We are a party to an employment agreement with David E.
Sharbutt, effective October 1, 1999. This employment agreement has a three-year
term and provides that Mr. Sharbutt receive a minimum base salary of $175,000,
payable no less often than semi-monthly, subject to increases at our discretion.
Mr. Sharbutt is entitled to receive a bonus of up to $43,750 for each calendar
quarter in which we meet certain corporate milestones. In addition, the
employment agreement also provides for Mr. Sharbutt to be granted a total of
1,697,500 stock options, with one-third of the options vesting on each September
30th during the employment term. Mr. Sharbutt is also entitled to $5,000,000 in
term life insurance coverage, reimbursement for reasonable business expenses,
$1,250 per month as a vehicle and club dues allowance, reimbursement for vehicle
business mileage at the standard rate set by the Internal Revenue Service, and
such incentive, retirement, profit-sharing, life, medical, disability and other
benefit plans as may be available to our other executives with comparable
responsibilities, subject to the terms of those programs.
If we terminate Mr. Sharbutt's employment other than for cause or
non-performance, as defined in the employment agreement, we would be required to
pay him severance pay equal to one year's base salary and all stock options
granted to him under the agreement would become vested and exercisable. If Mr.
Sharbutt should terminate his employment agreement for cause, as defined in the
employment agreement, he will be entitled to severance pay equal to the lesser
of one year's base salary and the unpaid balance of his salary that would have
been payable to him through September 30, 2002 and he will be entitled to a
vesting of the portion of his options that would have become vested on the first
September 30th following the date of his termination. If Mr. Sharbutt is
terminated by us within
57
one year after a change in control (as defined in the agreement) for any reason
other than cause, he will be entitled to severance pay equal to the unpaid
balance of the base salary which would have been payable to him through
September 30, 2002 and all stock options granted to him under the agreement will
become vested and exercisable.
Pursuant to the employment agreement, Mr. Sharbutt has agreed not to
compete with us during his employment and not to compete with us within a
defined area for a period of two years following termination of his employment
(subject to certain exceptions). Further, Mr. Sharbutt has agreed not to
disclose any of our confidential information at any time during or subsequent to
his employment with us without our written consent.
KENDALL W. COWAN. We are a party to an employment agreement with Kendall W.
Cowan, effective December 1, 1999. This employment agreement has a five-year
term and provides that Mr. Cowan receive a minimum base salary of $150,000,
subject to increases at our discretion. In addition, the employment agreement
provides for Mr. Cowan to be granted a total of 1,455,000 stock options, with
one-fifth of the options vesting on each November 30th during the employment
term. Mr. Cowan is entitled to receive a bonus of up to $37,500 for each
calendar quarter in which we meet certain corporate milestones. Mr. Cowan is
also entitled to reimbursement for reasonable business expenses, a $600 per
month vehicle allowance, reimbursement for vehicle business mileage at the
standard mileage rate set by the Internal Revenue Service, and such incentive,
retirement, profit-sharing, life, medical, disability and other benefit plans as
may be available to our other executives with comparable responsibilities,
subject to the terms of those programs. Pursuant to the employment agreement, we
will pay the costs of all continuing professional education courses required for
Mr. Cowan to maintain his certified public accountant license, as well as all
professional dues and licenses attributable to his certified public accountant
license.
If we terminate Mr. Cowan's employment for other than cause or
non-performance, as defined in the employment agreement, we would be required to
pay him severance pay equal to one year's base salary and all stock options
granted to him under the agreement will become vested and exercisable. If Mr.
Cowan should terminate his employment for cause, as defined in the employment
agreement, he will be entitled to severance pay equal to the lesser of one
year's base salary and the unpaid balance of his salary which would be payable
to him through November 30, 2004 and he will be entitled to a pro rata vesting
of the options that would otherwise have become vested on the first November
30th following the date of his termination.
Mr. Cowan has agreed, pursuant to the employment agreement, not to compete
with us during his employment and for a period of two years following
termination of his employment (subject to certain exceptions). Further, Mr.
Cowan has agreed not to disclose any of our confidential information at any time
during or subsequent to his employment with us without our written consent.
LOYD I. RINEHART. We are a party to an employment agreement with Loyd I.
Rinehart effective June 1, 2000. This employment agreement has a five-year term
and provides that Mr. Rinehart receive a minimum base salary of $150,000,
payable no less often than semi-monthly, subject to increases at our discretion.
Mr. Rinehart is entitled to receive bonuses of up to (i) $25,000 for each
calendar quarter in which we meet certain corporate milestones and (ii) $200,000
based on the acquisitions of POPs (not including POPs assigned by Sprint) in any
calendar year, reduced by bonuses paid under (i) above. The maximum bonus Mr.
Rinehart can receive in one calendar year will be the greater of (i) or (ii)
above. Mr. Rinehart is also entitled to reimbursement for reasonable business
expenses, relocation from Denver, Colorado to Lubbock, Texas, a $600 per month
vehicle allowance, reimbursement for vehicle business mileage at the standard
mileage rate set by the Internal Revenue Service, and incentive, retirement,
profit-sharing, life, medical, disability and other benefit plans as may be
available to our other executives with comparable responsibilities, subject to
the terms of those programs. Pursuant to the employment agreement, we will pay
the costs of all continuing professional education courses required for Mr.
Rinehart to maintain his certified public accountant license, as well as all
professional dues and licenses attributable to his certified public accountant
license.
If we terminate Mr. Rinehart's employment for other than cause or
non-performance, both as defined in the employment agreement, we would be
required to pay him severance pay equal to one year's base salary. If Mr.
Rinehart should terminate his employment for cause, as defined in the employment
agreement, he will be entitled to
58
severance pay equal to the lesser of one year's base salary and the unpaid
balance of his salary which would be payable to him through May 31, 2005. Mr.
Rinehart has agreed, pursuant to the employment agreement, not to compete with
us during his employment and for a period of two years following termination of
his employment (subject to certain exceptions detailed in his employment
agreement). Further, Mr. Rinehart has agreed not to disclose any of our
confidential information at any time during or subsequent to his employment with
us without our written consent.
JERRY W. BRANTLEY. Prior to Mr. Brantley leaving Alamosa (Delaware), we
were a party to an amended and restated employment agreement with him, effective
October 1, 1999.
On January 23, 2001, we announced that Mr. Brantley left Alamosa (Delaware)
and is pursuing other interests.
W. DON STULL. Before his departure from Alamosa (Delaware), we were a party
to an amended and restated employment agreement with W. Don Stull, effective
October 29, 1999. Mr. Stull left Alamosa (Delaware) on September 20, 2000. In
connection with the termination of his employment, Mr. Stull entered into a
separation and release agreement with us. In addition to the payment described
under the "All Other Compensation" column in the summary compensation table,
vesting was accelerated with respect to an aggregate of 57,001 of Mr. Stull's
options pursuant to the separation agreement.
COMPENSATION OF DIRECTORS
We do not pay any cash fees or other compensation to our directors. Each of
our directors also serves on the Board of Directors of Alamosa Holdings.
Pursuant to the Alamosa Holdings long-term incentive plan, each non-employee
director of Alamosa Holdings is granted an initial option to purchase 28,000
shares of Alamosa Holdings common stock on the date he or she joins the Board of
Directors of Alamosa Holdings. All initial options will expire on the tenth
anniversary of the date of grant. In addition to the initial option, each
independent director will receive an annual grant pursuant to the long-term
incentive plan of an option to purchase that number of shares of common stock of
Alamosa Holdings equal to $60,000 divided by the fair market value of common
stock on the date of grant. The annual option will be granted on the date of the
first full meeting of the Board of Directors following the end of each fiscal
year. The annual option will immediately vest on the date of grant and will
expire on the tenth anniversary of the date of grant. The exercise price of
options granted to independent directors equal to the fair market value of the
common stock of Alamosa Holdings on the date of grant. All of our directors are
entitled to reimbursement of their reasonable out-of-pocket expenses in
connection with their travel to, and attendance at, meetings of the Board of
Directors or committees thereof.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 2000, the Compensation Committee consisted of Messrs.
Marshall, Hyde and Silber. Mr. Silber resigned from the Board of Directors
effective April 16, 2001. The Compensation Committee is responsible for
reviewing and approving all compensation arrangements for our officers. None of
these committee members are or have been executive officers of Alamosa
(Delaware) or its subsidiaries.
In 2000, we entered into various arrangements with Mericom Corporation and
its affiliates for site acquisition, RF engineering and fixed network design.
Mr. Silber holds an indirect minority interest in Mericom Corporation, which is
a privately-held provider of planning, design, deployment, maintenance and
operations services for wireless telecommunications networks. During fiscal year
2000, we paid approximately $1.0 million under these arrangements. On February
14, 2001, we completed our acquisition of WOW, a wholly-owned subsidiary of WOW
Holdings, LLC ("WOW Holdings") through the merger of WOW Holdings with and into
Alamosa Holdings. Mr. Silber was a member of the board of managers of WOW
Holdings. Mr. Silber is also a principal of Silpearl Associates, LLC, which is
an affiliate of WOW Investment Partners, L.P., which owned approximately 44.4%
of the outstanding membership interests of WOW Holdings. WOW Investment
Partners, L.L.C. holds the sole general partner interest of WOW Investment
Partners, L.P. The sole membership interest of WOW Investment Partner L.L.C. is
held by Silpearl Associates, LLC. Mr. Silber indirectly owns 50% of the
membership interests, and is the President, of Silpearl Associates, L.L.C.
Following the closing of the acquisition of WOW, Mr. Silber received 915,193
shares of common stock of Alamosa Holdings and approximately $1.5 million in
cash as a distribution from WOW Investment Partners, L.P. Mr. Silber did not
participate in the Board of Directors vote to approve the WOW Holdings merger.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Our executive compensation philosophy reflects its belief that the
compensation of executives should:
o be linked to achievement of our business and strategic goals;
o be aligned with the interests of stockholders through awards of stock
options and other stock-based compensation;
o recognize individual contributions, as well as overall business
results; and
59
o result in attracting, motivating and retaining highly-talented
executives to serve our company.
To achieve these objectives, our current compensation program consists of
the following elements:
o base salary;
o annual incentive compensation, the receipt of which is based on:
o our financial performance from year to year; and/or
o significant individual contributions; and
o long-term incentive compensation, primarily in the form of stock
options.
CEO COMPENSATION. The structure of Mr. Sharbutt's fiscal 2000 compensation
was based in part on comparisons to the compensation of executives in similar
positions with other companies in the industry, as well as Mr. Sharbutt's level
of responsibility, experience and contribution to our business objectives and
the Board's ongoing assessment of our operations. In accordance with such
factors, we entered into an employment agreement with Mr. Sharbutt, effective
October 1, 1999 (see "Employment Agreements -- David E. Sharbutt). This
agreement provides for Mr. Sharbutt's base salary and eligible quarterly bonuses
upon the achievement of certain performance targets established by the Board of
Directors. The Board believes that the structure of Mr. Sharbutt's compensation,
with its emphasis on our performance, is in the best interest of our
stockholders because it more closely aligns the interests of Mr. Sharbutt and
our stockholders. Mr. Sharbutt's fiscal year 2000 bonus was paid as a result of
our achievement of performance targets related to EBITDA, revenue per user and
subscriber targets.
OTHER EXECUTIVE OFFICER COMPENSATION. Our philosophy for the compensation
of our other executive officers focuses on each individual's level of
responsibility, experience and contribution to our business objectives and the
Board's ongoing assessment of our operations. The Board of Directors places
emphasis on compensation that closely aligns the executive's interests with the
stockholders' interests. Therefore, a significant percentage of each executive
officer's total compensation is tied to our performance through:
o bonus eligibility, based on a combination of its performance and
individual achievement; and
o stock option awards.
DEDUCTIBILITY OF COMPENSATION TO EXECUTIVE OFFICERS. The federal income tax
law limits the deductibility of certain compensation paid to the chief executive
officer and the four most highly compensated executives (the "covered
employees") in excess of the statutory maximum of $1 million per covered
employee. The organization and compensation committee's general policy is, where
feasible, to structure the compensation paid to the covered employees so as to
maximize the deductibility of such compensation for federal income tax purposes;
however, the committee shall retain the flexibility, where necessary to promote
the incentive and retention goals described above, to pay compensation which may
not be deductible.
COMPENSATION COMMITTEE:
Thomas Hyde
Schuyler B. Marshal
Reagan W. Silber*
- -------------------
* Mr. Silber resigned from the Board of Directors effective April 16, 2001.
60
PERFORMANCE GRAPH
The following performance graph compares the cumulative total
stockholder total return on our common stock from February 3, 2000 through
December 31, 2000 against the cumulative total return of The Nasdaq Stock Market
(U.S. Companies) Index, The Nasdaq Stock Market Telecommunications Index and a
peer group selected by us for the same period. The peer group consists of the
following three companies (which together with us, represent all of the Sprint
PCS network partners whose stock was publicly traded over the relevant
measurement period): Airgate PCS, UbiquiTel Inc. and US Unwired Inc.
[GRAPHIC OMITTED]
CUMULATIVE TOTAL RETURN
--------------------------
2/3/00 12/31/00
Alamosa PCS (1) $100.00 $47.06
NASDAQ Composite Index $100.00 $58.67
NASDAQ Telecommunications Index $100.00 $44.64
Sprint PCS Network Partner Peer Group $100.00 $28.81
(1) Refers to the common stock of Alamosa (Delaware) from February 3, 2000 to
December 14, 2000 (during which time Alamosa (Delaware) was the public
holding company (and was named "Alamosa PCS Holdings Inc.")) and the common
stock of Alamosa PCS Holdings from December 15, 2000 to December 31, 2000
(during which time Alamosa PCS Holdings was the public holding company).
Our common stock began trading on The Nasdaq National Market on February 3,
2000, under the symbol "APCS." Prior to that date there was no public
market for our common stock.
61
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
FORMATION OF ALAMOSA PCS, LLC
On July 24, 1998, Alamo IV LLC, Rosewood Telecommunications, L.L.C., Tregan
International Corp., West Texas PCS, LLC and Longmont PCS, LLC formed Alamosa
PCS, LLC. Those investors received membership interests in exchange for their
capital commitments. The investors amended the formation documents on December
11, 1998 to allow for a new member, Yellow Rock PCS, L.P., and to modify their
membership interests and capital commitments. Yellow Rock agreed to contribute a
total of $400,000 of capital in exchange for a 0.82% membership interest in
Alamosa PCS, LLC. Pursuant to the agreement, Yellow Rock committed to a funding
schedule beginning with a payment of $123,711 on December 15, 1998 and ending on
January 1, 2001. The original investors retained the remaining 99.18% membership
interest in Alamosa PCS, LLC in exchange for their capital commitments of
$48,100,000. In November 1999, the members of Alamo IV LLC dissolved Alamo IV
LLC and distributed Alamo IV's membership interest in Alamosa PCS, LLC to Alamo
IV's members.
The obligations to commit capital and the other regulations under the
formation documents were eliminated when we reorganized from a limited liability
company to a holding company structure prior to the closing of our initial
public offering in February 2000.
EDC CREDIT FACILITY GUARANTEES
In connection with the credit agreement entered into between Nortel and
Alamosa, which Nortel assigned to EDC and Alamosa acknowledged, each of our
stockholders pledged its ownership interest in Alamosa to Nortel to guaranty our
obligations under the Nortel credit agreement. The rights and obligations of
Nortel under the credit agreement were assigned to EDC. Our stockholders were
required to secure their unfunded contributions with either a letter of credit
or a marketable securities pledge agreement. Each guaranty, pledge, letter of
credit and marketable securities pledge agreement terminated prior to the
closing of our initial public offering.
AGREEMENTS WITH CHR SOLUTIONS
We have entered into a number of agreements with CHR Solutions as described
in more detail below. During fiscal year 2000, we paid CHR Solutions
approximately $6.3 million under these agreements. David Sharbutt, our Chairman
and Chief Executive Officer, was, at the time the agreements were executed, the
President, Chief Executive Officer, a director and a shareholder of CHR
Solutions. Mr. Sharbutt no longer holds any of these positions at CHR Solutions.
o On July 27, 1998, we entered into an engineering service agreement with
CHR Solutions that is to last through August 2001 for a maximum fee of
approximately $7.0 million, excluding taxes.
o As of April 9, 1999, we entered into a data communications services
agreement with CHR Solutions to perform design and implementation
services for Alamosa in connection with our wide area network and local
area networks for a maximum fee of $262,040, excluding taxes. The
agreement lasts until the project is completed, unless either party
terminates it earlier for cause.
o As of October 8, 1999, we entered into a special service agreement with
CHR Solutions to perform marketing and operations consulting services
in selected areas in Wisconsin for a maximum fee of $100,000, excluding
taxes. This agreement lasts until the project is completed, unless
either party terminates it earlier.
o As of October 8, 1999, we entered into a special service agreement with
CHR Solutions to perform business planning and consulting services and
a feasibility study in selected areas of Wisconsin for a fixed fee of
$81,000. This agreement lasts until the project is completed, unless
either party terminates it earlier.
62
o As of October 8, 1999, we entered into a special service agreement with
CHR Solutions to perform business planning and consulting services and
a feasibility study in selected areas of our territory for an estimated
probable cost of $200,000, excluding taxes. This agreement lasts until
the project is completed, unless either party terminates it earlier.
o As of October 8, 1999, we entered into a special service agreement with
CHR Solutions to provide Alamosa with radio frequency "drive testing"
to predict the propagation characteristics of given areas in our
territory for an estimated probable cost of $62,085, excluding taxes.
This agreement lasts until the project is completed, unless either
party terminates it earlier.
o As of November 20, 1999, we entered into a special service agreement
with CHR Solutions, who provided Alamosa with marketing and operations
consulting services for a maximum amount of $100,000, excluding taxes.
o As of January 28, 2000, we entered into a professional services
agreement with CHR Solutions to develop the sub-affiliate program from
the development of a model through the execution of the sub-affiliate
program. The estimated probable costs of the services are $248,000.
Either party may terminate the agreement without penalty at any time
with or without cause upon giving the other party 30 days prior written
notice.
AGREEMENTS WITH TECH TELEPHONE COMPANY LIMITED PARTNERSHIP
As of April 6, 1999, we entered into a telecommunications service agreement
with Tech Telephone Company Limited Partnership, an affiliate of CHR Solutions,
to install and provide DS1 telecommunications lines between Sprint PCS and our
Lubbock operations and between our Lubbock operations and our other markets. The
original term of the agreement is three years, with automatic renewal for
successive 30-day terms until terminated by either party. As of August 13, 1999,
we entered into a distribution agreement with TechTel Communications
Corporation, an affiliate of CHR Solutions, authorizing it to become a third
party distributor of Sprint PCS products and services for us in a standard
agency agreement identical with numerous other agreements between us and other
third party distributors. Pursuant to the distribution agreement, TechTel
Communications Corporation is obligated to purchase ten handsets from us every
quarter for the term of one year. During fiscal year 2000, we paid approximately
$1.7 million under these agreements.
AGREEMENT WITH AMERICAN TOWER CORPORATION
In August 1998, we entered into a nonexclusive master site development and
lease agreement for tower sites with OmniAmerica Development Corp., formerly
known as Specialty Capital Services, Inc., a subsidiary of Specialty
Teleconstructors, Inc. that has since merged with American Tower Corporation.
Pursuant to the agreement, American Tower arranges for collocation of our
equipment, or constructs new facilities, in areas we identify for build-out. The
initial term of the master agreement expires in August 2003, with automatic
renewal for three additional terms of five years each. The agreement provides
for monthly payments aggregating to approximately $5.0 million per year, subject
to an annual adjustment based on the Consumer Price Index. During fiscal year
2000, we paid approximately $2.4 million for these services.
Michael Budagher, who is one of the directors of Alamosa (Delaware) and
Alamosa Holdings, and a manager of West Texas PCS, LLC and Budagher Family, LLC,
two of Alamosa Holding's stockholders, was, at the time the agreement was
entered into the Vice Chairman, Chief Operating Officer and a director of
Specialty Teleconstructors, Inc., and the Chief Executive Officer, President and
sole director of Specialty Capital Services, Inc. Michael Budagher is also a
member and the General Manager of the Budagher Family, LLC, which was, at the
time the agreement was entered into, a stockholder of Specialty
Teleconstructors, Inc. Mr. Budagher no longer holds any of these positions at
Specialty Capital Services, Inc. or Specialty Teleconstructors, Inc. However, he
is a stockholder of American Tower Corporation.
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RESERVE OF SHARES BY UNDERWRITERS
As part of the initial public offering of common stock, the underwriters
reserved a maximum of 10% of the shares of common stock sold in the offering for
sale to the persons who were stockholders of Alamosa (Delaware) at the time
prior to the offering at a price per share of $15.8525, the public offering
price less the underwriting discount. The underwriters were not entitled to any
discount or commission on these shares and the proceeds to Alamosa (Delaware)
were the same as if the shares were sold to the general public. The persons who
were stockholders of Alamosa (Delaware) at the time prior to the offering
purchased 757,589 shares pursuant to this arrangement.
In connection with our initial public offering, Salomon Smith Barney Inc.
reserved up to approximately five percent of the shares being offered as
directed shares for sale at the initial public offering price to persons who
were directors, officers or employees of Alamosa (Delaware), or who were
otherwise associated with us and its affiliates or employees, and who advised us
of their desire to purchase these shares. The number of shares of common stock
available for sale to the general public was reduced to the extent of sales of
directed shares to any of the persons for whom they were reserved. A total of
535,000 shares of common stock were so purchased by such persons.
AGREEMENTS WITH MESSRS. MICHAEL V. ROBERTS AND STEVEN C. ROBERTS
On February 14, 2001, we completed our acquisition of Roberts Wireless.
Messrs. Michael V. Roberts and Steven C. Roberts, who are directors of Alamosa
Holdings, were the sole owners of Roberts Wireless. Pursuant to the terms of the
merger agreement with Roberts Wireless, upon closing of the transaction, each of
Messrs. Michael V. Roberts and Steven C. Roberts was entitled to receive
6,750,000 shares of common stock and approximately $2.0 million in cash as
consideration in respect of his ownership interests in Roberts Wireless. The
terms of the acquisition agreement, including the consideration payable to
Messrs. Michael V. Roberts and Steven C. Roberts, were determined on the basis
of arm's length negotiations between us and Messrs. Michael V. Roberts and
Steven C. Roberts. Messrs. Michael V. Roberts and Steven C. Roberts were
appointed to the Board of Directors of Alamosa Holdings upon completion of the
Roberts Wireless acquisition.
In connection with the acquisition of Roberts Wireless, we entered a number
of arrangements with Messrs. Michael V. Roberts and Steven C. Roberts and
certain companies affiliated with them as described in more detail below.
o LOAN AGREEMENT WITH MESSRS. MICHAEL V. ROBERTS AND STEVEN C. ROBERTS.
On June 30, 2000, Alamosa Operations, Inc. ("Alamosa Operations"), a
wholly-owned subsidiary of Alamosa (Delaware) (as lender) entered into
a loan agreement with Messrs. Michael V. Roberts and Steven C. Roberts
(as borrowers) whereby Alamosa Operations agreed to lend $10.0 million
to Messrs. Michael V. Roberts and Steven C. Roberts. The proceeds from
this loan were used to fund capital and operation requirements of
Roberts and Roberts Tower Company ("Roberts Tower"), a corporation
owned and operated by Messrs. Michael V. Roberts and Steven C. Roberts.
o ROBERTS WIRELESS LOAN AGREEMENT. On July 31, 2000, Alamosa Operations
(as lender) entered into a loan agreement with Roberts Wireless (as
borrower). In connection with the loan agreement, Roberts Wireless
assumed certain obligations of Messrs. Michael V. Roberts and Steven C.
Roberts under the June 30 loan agreement to the extent the proceeds of
that loan were used to make capital contributions to Roberts Wireless.
As of December 31, 2000, approximately $23.8 million had been funded
under the Roberts Wireless loan agreement. At the completion of the
Roberts Wireless acquisition, the Roberts Wireless promissory note was
transferred to Alamosa (Delaware) and contributed as equity to its
wholly owned subsidiary, Alamosa Holdings, LLC.
o ROBERTS TOWER LOAN AGREEMENT. On October 18, 2000, Alamosa Operations
(as lender) and Roberts Tower (as borrower) entered into a loan
agreement whereby Alamosa Operations agreed to lend up to $15.0 million
to Roberts Tower, to be used for the purposes of repaying all remaining
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amounts owed by Messrs. Michael V. Roberts and Steven C. Roberts under
the June 30 loan agreement and funding the construction of wireless
telecommunications towers for use by Roberts Wireless through the
completion of the merger with Roberts Wireless. As of December 31,
2000, approximately $13.2 million had been funded under the Roberts
Tower loan agreement. In February 2001 the loan was paid in full.
o JOINT VENTURE DEVELOPMENT AGREEMENT. On October 30, 2000, we and
Messrs. Michael V. Roberts and Steven C. Roberts entered into a joint
venture development agreement. Pursuant to the agreement, if either Mr.
Michael V. Roberts or Mr. Steven C. Roberts undertakes an international
telecommunications business venture and desires for us to be involved
in that project, then before either Messrs. Michael V. Roberts or
Steven C. Roberts enters into a letter of intent or binding agreement
of any nature with another person regarding the project, they must give
us written notice and we have 60 days to notify them of our desire to
participate in the project. During such 60 day period, we have the
exclusive right with respect to the project. Promptly after we give a
notice of participation, we and either Messrs. Michael V. Roberts or
Steven C. Roberts shall form a project entity and shall execute an
agreement setting forth the terms, covenants, conditions and provisions
for the purpose, ownership, management, financing and operating of the
project. Unless we and either Messrs. Michael V. Roberts or Steven C.
Roberts agree to a different arrangement, we will have a 50% interest
in each project entity and we will have full managerial control of each
project entity. Except as described above, neither us nor Messrs.
Michael V. Roberts or Steven C. Roberts is obligated to bring to the
other any opportunity to participate in a project or any activity,
domestic or international.
o CONSULTING AGREEMENTS. On January 29, 2001, we entered into five-year
consulting agreements with each of Messrs. Michael V. Roberts and
Steven C. Roberts. The consulting agreements provide each of them with
an annual compensation of $125,000, which is paid monthly.
o RIGHT OF FIRST NEGOTIATION AGREEMENT. On February 14, 2001, we and
Roberts Tower entered into a right of first negotiation agreement which
grants Roberts Tower a right to negotiate tower leases on a
"build-to-suit" basis within our present and future territory. During
the term of the agreement, whenever we or one of our subsidiaries is
required to "build to suit" communications towers within the present or
future territories in which we operate, we must notify Roberts Tower
and Roberts Tower will have the exclusive right for a period of 30 days
to negotiate with us to provide such towers. After such 30 day period,
if we have not reached an agreement with Roberts Tower, we may obtain
such tower sites from other third parties. The term of this agreement
is five years.
o RESALE AGREEMENT. On February 14, 2001, we and Messrs. Michael V.
Roberts and Steven C. Roberts entered into a resale agreement which
permits Messrs. Michael V. Roberts and Steven C. Roberts to buy air
time at a discount for resale on a basis no less favorable than any
other similar agreement to which we may be a party. Messrs. Michael V.
Roberts and Steven C. Roberts may resell such airtime anywhere where
such resales are permitted under applicable law. Any arrangement
between us and Messrs. Michael V. Roberts and Steven C. Roberts for
resales and use of air time will be subject to all required approvals
of Sprint, Sprint Spectrum and Sprint PCS and/or any other applicable
Sprint entities.
o MASTER LEASE AGREEMENT. On February 14, 2001, Roberts Wireless and
Roberts Tower entered into a master lease agreement which provides for
the lease from Roberts Tower by Roberts Wireless of certain buildings,
towers, tanks and /or improvements thereon for the purpose of
installing, operating and maintaining communications facilities and
services thereon. The initial term of the master lease agreement
expires in February 2006, and Roberts Wireless has the right to extend
the initial term of the lease for four additional terms of five years
each. The agreement
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provides for monthly payments aggregating to approximately $16,800 per
year, subject to an annual adjustment of 4% per annum.
OTHER RELATED PARTY TRANSACTIONS
In January 2000, we entered into various arrangements with Mericom
Corporation and its affiliates for site acquisition, RF engineering and fixed
network design. Mr. Reagan Silber, who was one of the our directors, holds an
indirect minority interest in Mericom Corporation. Mr. Silber resigned from the
Board of Directors effective April 16, 2001. For a description of the
arrangements involving Mericom and us, see "Management--Compensation
Committee Interlocks and Insider Participation."
On February 14, 2001, Alamosa Holdings completed its merger with WOW
Holdings. Mr. Silber was a member of the board of managers of WOW Holdings. Mr.
Silber is also a principal of Silpearl Associates, LLC, an affiliate of WOW
Investment Partners, L.P., which owned approximately 44.4% of the outstanding
membership interests of WOW Holdings. For a description of the consideration
received by Mr. Silber in connection with the WOW Holdings merger, see
"Management--Compensation Committee Interlocks and Insider Participation."
In connection with our distribution and sales of Sprint PCS wireless
communications equipment, on December 28, 1998, we entered into a long-term
agreement to lease space for a retail store in Lubbock, Texas with Lubbock HLH,
Ltd., principally owned by Mr. Hart, who is one of directors of Alamosa
(Delaware) and Alamosa Holdings and the general manager of South Plains
Telephone Cooperative, Inc., one of Alamosa Holdings' stockholders. This lease
has a term of 15 years and provides for monthly payments aggregating to
approximately $110,000 a year, subject to adjustment based on the Consumer Price
Index on the first day of the sixth lease year and on the first day of the
eleventh lease year. During fiscal year 2000, approximately $100,000 was paid
under this lease.
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OUR AFFILIATION AGREEMENTS WITH SPRINT PCS
We have entered into four major affiliation agreements with Sprint and
Sprint PCS:
o a management agreement;
o a services agreement; and
o two trademark and service mark license agreements with different Sprint
entities.
We entered into one set of these agreements with Sprint and Sprint PCS for
our territories in the Southwestern part of the United States and another set of
these agreements for our territories in Wisconsin. Roberts entered into a set of
these agreements for its territories in Illinois, Kansas and Missouri, which we
have assumed pursuant to our acquisition of Roberts. WOW entered into a set of
these agreements for its territories in Washington and Oregon, which we have
assumed pursuant to our acquisition of WOW. Southwest entered into a set of
these agreements for its territories in Texas, Oklahoma and Arkansas, which we
have assumed pursuant to our acquisition of Southwest. As used herein, the term
"operating subsidiaries" refers to each of our subsidiaries that have entered
into affiliation agreements with Sprint PCS. Unless otherwise indicated below,
the description of our affiliation agreements applies to the affiliation
agreements for all five of our territories.
Under our affiliation agreements with Sprint PCS, we have the exclusive
right to provide wireless mobility communications network services under the
Sprint and Sprint PCS brand names in our territories. Sprint PCS holds the
spectrum licenses and controls the network through our agreements with Sprint
PCS. Our affiliation agreements with Sprint PCS require us to interface with the
Sprint PCS wireless network by building our portion of the Sprint PCS network to
operate on the 10, 20 or 30 MHZ of wireless personal communications services
frequencies licensed to Sprint PCS in the 1900 MHZ range.
The following is a description of the material terms and provisions of our
affiliation agreements and the consent and agreement with Sprint PCS and
Citicorp, that modifies our management agreements for the benefit of Citicorp,
as administrative agent, and the holders of the senior secured credit facility
and any refinancing thereof. See "--Consent and Agreement for the Benefit of the
Holders of the Senior Secured Credit Facility."
A breach or event of termination, as the case may be, under any of our
affiliation agreements by one of our operating subsidiaries will also constitute
a breach or event of termination, as the case may be, by all other operating
subsidiaries of the same provision of the applicable affiliation agreement to
which each operating subsidiary is a party. Each operating subsidiary only has
the right to cure its breach and has no right to cure any breach or event of
termination by another operating subsidiary.
THE MANAGEMENT AGREEMENTS
We originally entered into one set of management agreements with Sprint and
Sprint PCS for our territories in the Southwestern part of the United States and
another set of these agreements for our territories in Wisconsin. Roberts
entered into a management agreement for its territories in Illinois, Kansas and
Missouri, which we have assumed pursuant to our acquisition of Roberts. WOW
entered into a management agreement for its territories in Washington and
Oregon, which we have assumed pursuant to our acquisition of WOW. Southwest
entered into a management agreement for its territories in Texas, Oklahoma and
Arkansas, which we have assumed pursuant to our acquisition of Southwest. Unless
otherwise indicated below, the description of our management agreements applies
to the management agreements for all five of our territories.
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Under our management agreements with Sprint PCS, we have agreed to:
o own, construct and manage a wireless personal communications services
network in our territories in compliance with FCC license requirements
and other technical requirements contained in our management
agreements;
o distribute Sprint PCS products and services;
o use Sprint PCS's and our own distribution channels in our territories;
o conduct advertising and promotion activities in our territories; and
o manage that portion of Sprint PCS's customer base assigned to our
territories.
Sprint PCS will supervise our wireless personal communications services
network operations and has the right to unconditional access to our portion of
the Sprint PCS network, including the right to test and monitor any of our
facilities and equipment.
EXCLUSIVITY. We are designated as the only person or entity that can manage
or operate a wireless mobility communications network for Sprint PCS in our
territories. Sprint PCS is prohibited from owning, operating, building or
managing another wireless mobility communications network in our territories
while our management agreements are in place and no event has occurred that
would permit such agreements to terminate. Sprint PCS is permitted to make
national sales to companies in our territories and, as required by the FCC, to
permit resale of the Sprint PCS products and services in our territories. Our
management agreements prohibit us from interfering with others who resell Sprint
PCS products and services in our territories.
If Sprint PCS decides to expand the geographic size of our build-out within
our territories, Sprint PCS must provide us with written notice of the proposed
expansion. Under our management agreements we have a 90-day right of first
refusal to build out the proposed expansion area. If we choose not to build out
the proposed area, then Sprint PCS may build out the area itself or allow
another Sprint PCS network partner to do so.
NETWORK BUILD-OUT. Our management agreements specify the terms of the
Sprint PCS affiliation, including the required network build-out plan. We have
agreed to cover a specified percentage of the population within each of the
markets, which make up our territories by specified dates. Our current build-out
plans will satisfy the network build-out requirements set forth in our
management agreements.
If technically feasible and commercially reasonable, we have agreed to
provide for a seamless handoff of a call initiated in our territories to a
neighboring Sprint PCS network. Our management agreements require us to
reimburse Sprint PCS one-half of the microwave clearing costs for our
territories.
PRODUCTS AND SERVICES. Our management agreements identify the products and
services that we can offer in our territories. These services include, but are
not limited to, Sprint PCS consumer and business products and services available
as of the date of the agreements, or as modified by Sprint PCS. We are allowed
to sell wireless products and services that are not Sprint PCS products and
services if those additional products and services do not cause distribution
channel conflicts or, in Sprint PCS's sole determination, consumer confusion
with Sprint PCS's products and services. We also cannot sell non-Sprint PCS
products and services if it would hamper our build-out of the network. Under our
management agreement for our Wisconsin territories, if Sprint PCS begins to
offer nationally a product or service that we already offer, then that product
or service will be considered to be a Sprint PCS product or service.
We may also sell services such as specified types of long distance service,
Internet access, handsets, and prepaid phone cards with Sprint, Sprint PCS and
other Sprint network partners. If we decide to use third parties to provide
these services, we must give Sprint PCS an opportunity to provide the services
on the same terms and
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conditions. We cannot offer wireless local loop services specifically designed
for the competitive local exchange market in areas where Sprint owns the local
exchange carrier unless we name the Sprint-owned local exchange carrier as the
exclusive distributor or Sprint PCS approves the terms and conditions. Sprint
does not own the local exchange carrier in a majority of the markets in our
territories.
NATIONAL SALES PROGRAMS. We must participate in the Sprint PCS sales
programs for national sales to customers, and will pay the expenses and receive
the compensation from Sprint PCS sales to national accounts located in our
territories. We must use Sprint's long distance service, which we can buy at the
best prices offered to comparably situated Sprint customers.
SERVICE PRICING, ROAMING AND FEES. We must offer Sprint PCS subscriber
pricing plans designated for regional or national offerings, including Sprint
PCS's "Free & Clear" plans. We are permitted to establish our own local price
plans for Sprint PCS's products and services offered only in our territories,
subject to Sprint PCS's approval. We are entitled to receive a weekly fee from
Sprint PCS equal to 92% of "collected revenues" for all obligations under our
management agreements, adjusted by the cost of customer services provided to us
by Sprint PCS. "Collected revenues" include revenue from Sprint PCS subscribers
based in our territories and inbound non-Sprint PCS roaming. Sprint PCS will
retain 8% of the collected revenues. Outbound non-Sprint PCS roaming revenue,
inbound and outbound Sprint PCS roaming fees, proceeds from the sales of
handsets and accessories, proceeds from sales not in the ordinary course of
business, amounts collected with respect to taxes and proceeds from sales of our
products and services, are not considered collected revenues. Except in the case
of taxes, we will retain 100% of these revenues. Many Sprint PCS subscribers
purchase bundled pricing plans that allow Sprint PCS roaming anywhere on the
Sprint PCS network without incremental Sprint PCS roaming charges. However, we
will earn Sprint PCS roaming revenue for every minute that a Sprint PCS
subscriber from outside our territories enters our territories and uses our
services. We will earn revenue from Sprint PCS based on a per minute rate
established by Sprint PCS when Sprint PCS's or its affiliates' subscribers roam
on our portion of the Sprint PCS network. Similarly, we will pay the same rate
for every minute Sprint PCS subscribers who are based in our territories use the
Sprint PCS network outside our territories. The analog roaming rate onto a
non-Sprint PCS provider's network is set under Sprint PCS's third party roaming
agreements.
VENDOR PURCHASE AGREEMENTS. We may participate in discounted volume-based
pricing on wireless-related products and warranties Sprint PCS receives from its
vendors. Sprint PCS will use commercially reasonable efforts to obtain for us
the same prices as Sprint PCS receives from its vendors.
ADVERTISING AND PROMOTIONS. Sprint PCS uses national as well as regional
television, radio, print, outdoor and other advertising campaigns to promote its
products. We benefit from the national advertising at no additional cost to us.
In addition to Sprint PCS's national advertising campaigns, we advertise and
promote Sprint PCS products and services on a local level in our markets at our
cost. We have the right to use any promotion or advertising materials developed
by Sprint PCS and only have to pay the incremental cost of using those
materials, such as the cost of local radio and television advertisement
placements and incremental printing costs. Sprint PCS also runs numerous
promotional campaigns, which provide customers with benefits such as additional
features at the same rate or free minutes of use for, limited time periods. We
offer these promotional campaigns to potential customers in our territories.
PROGRAM REQUIREMENTS. We must comply with Sprint PCS's program requirements
for technical standards, customer service standards, roaming coverage and
national and regional distribution and national accounts programs. Sprint PCS
can adjust the program requirements at any time. We have the right to appeal to
the management of Sprint PCS if adjustments to program requirements will:
o cause us to incur a cost exceeding 5% of the sum of our stockholders'
equity plus our outstanding long term debt; or
o cause our operating expenses on a per-unit basis using a ten year time
frame to increase by more than 10% on a net present value basis.
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If Sprint PCS denies our appeal and we fail to comply with the program
adjustment, Sprint PCS has the termination rights described below under
"--Termination of Management Agreements."
Under our management agreements for our Wisconsin and Southwest
territories, Sprint PCS has agreed that it will use commercial reasonableness to
adjust the Sprint PCS retail store and customer service requirements for cities
located within those territories that have a population of less than 100,000.
NON-COMPETITION. We may not offer Sprint PCS products and services outside
our territories without the prior written approval of Sprint PCS. We may offer,
market or promote telecommunications products and services within our
territories only under the Sprint PCS brands, our own brand, brands of our
related parties or other products and services approved under our management
agreements, except that no brand of a significant competitor of Sprint PCS or
its related parties may be used for those products and services. To the extent
we have or will obtain licenses to provide wireless personal communications
services outside our territories, we may not use the spectrum to offer Sprint
PCS products and services without prior written consent from Sprint PCS.
INABILITY TO USE NON-SPRINT PCS BRAND. We may not market, promote,
advertise, distribute, lease or sell any of the Sprint PCS products and services
on a non-branded, "private label" basis or under any brand, trademark or trade
name other than the Sprint PCS brand, except for sales to resellers or as
otherwise permitted under the Trademark and Service Mark License Agreements.
TRANSFER OF SPRINT PCS NETWORK. Sprint PCS can sell, transfer or assign its
wireless personal communications services network to a third party if the third
party agrees to be bound by the terms of our management agreements and our
services agreements.
CHANGE IN CONTROL. Sprint PCS must approve our change in control, but this
consent cannot be unreasonably withheld.
RIGHTS OF FIRST REFUSAL. Sprint PCS has rights of first refusal, without
further stockholder approval, to buy our assets upon a proposed sale of all or
substantially all of our assets used in the operation of our portion of the
Sprint PCS network.
TERM. Each of our management agreements has an initial term of 20 years
with three 10-year renewal options, which would lengthen each of our management
agreements to a total term of 50 years. The three 10-year renewal terms
automatically occur unless either Sprint PCS or we provide the other with two
years prior written notice to terminate the agreement or unless we are in
material default of its obligations under such agreement.
TERMINATION OF OUR MANAGEMENT AGREEMENTS. Our management agreements can be
terminated as a result of the following events:
o termination of Sprint PCS's spectrum licenses;
o an uncured breach under our management agreements;
o bankruptcy of a party to our management agreements;
o our management agreements not complying with any applicable law in any
material respect; or
o the termination of any of our trademark and service mark license
agreements.
The termination or non-renewal of our management agreements triggers some
of our rights and some of those of Sprint PCS. The right of either party to
require the other party to purchase or sell the operating assets is discussed
below.
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If we have the right to terminate our management agreements because of an
event of termination caused by Sprint PCS, generally we may:
o require Sprint PCS to purchase all of our operating assets used in
connection with our portion of the Sprint PCS network for an amount
equal to at least 80% of our "entire business value" as defined below;
o in all areas in our territories where Sprint PCS is the licensee for 20
MHZ or more of the spectrum on the date it terminates our management
agreements, require Sprint PCS to assign to us, subject to governmental
approval, up to 10 MHZ of licensed spectrum for an amount equal to the
greater of either the original cost to Sprint PCS of the license plus
any microwave clearing costs paid by Sprint PCS or 9% of our "entire
business value;" or
o choose not to terminate our management agreements and sue Sprint PCS
for damages or submit the matter to arbitration.
If Sprint PCS has the right to terminate our management agreements because
of an event of termination caused by us, generally Sprint PCS may:
o require us, without further stockholder approval, to sell our operating
assets to Sprint PCS for an amount equal to 72% of our "entire business
value;"
o require us to purchase, subject to governmental approval, the licensed
spectrum in our territories for an amount equal to the greater of
either the original cost to Sprint PCS of the license plus any
microwave relocation costs paid by Sprint PCS or 10% of our "entire
business value;"
o take any action as Sprint PCS deems necessary to cure its breach of our
management agreements, including assuming responsibility for, and
operating, our portion of the Sprint PCS network; or
o not terminate our management agreements and sue us for damages or
submit the matter to arbitration.
In connection with the senior secured credit facility, Sprint PCS entered
into a consent and agreement with Citicorp, that modifies Sprint PCS's rights
and remedies under our affiliation agreements for the benefit of Citicorp, as
administrative agent, and the holders of the senior secured credit facility and
any refinancing thereof. The consent and agreement with Citicorp provides, among
other things, that our affiliation agreements generally may not be terminated by
Sprint PCS until all our outstanding indebtedness under the new senior secured
credit facility is satisfied in full pursuant to the terms of the consent and
agreement. See "--Consent and Agreement for the Benefit of the Holders of the
Senior Secured Credit Facility."
NON-RENEWAL. If Sprint PCS gives us timely notice that it does not intend
to renew our management agreements, we may:
o require Sprint PCS to purchase all of our operating assets used in
connection with our portion of the Sprint PCS network for an amount
equal to 80% of our "entire business value;" or
o in all areas in our territories where Sprint PCS is the licensee for 20
MHZ or more of the spectrum on the date it terminates such management
agreement, require Sprint PCS to assign to us, subject to governmental
approval, up to 10 MHZ of licensed spectrum for an amount equal to the
greater of either the original cost to Sprint PCS of the license plus
any microwave relocation costs paid by Sprint PCS or 10% of our "entire
business value."
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If we give Sprint PCS timely notice of non-renewal, or we and Sprint PCS
both give notice of non-renewal, or any of our management agreements expire with
neither party giving a written notice of non-renewal, or if any of our
management agreements can be terminated for failure to comply with legal
requirements or regulatory considerations, Sprint PCS may:
o purchase all of our operating assets, without further stockholder
approval, for an amount equal to 80% of our "entire business value;" or
o require us to purchase, subject to governmental approval, the licensed
spectrum in our territories for an amount equal to the greater of
either the original cost to Sprint PCS of the license plus any
microwave clearing costs paid by Sprint PCS or 10% of our "entire
business value."
DETERMINATION OF ENTIRE BUSINESS VALUE. If our "entire business value" is
to be determined, Sprint PCS and we will each select one independent appraiser
and the two appraisers will select a third appraiser. The three appraisers will
determine our "entire business value" on a going concern basis using the
following principles:
o the "entire business value" is based on the price a willing buyer would
pay a willing seller for the entire on-going business;
o the "entire business value" will not be calculated in a manner that
"double counts" the operating assets of one or more of our affiliates;
o then-current customary means of valuing a wireless telecommunications
business will be used;
o the business is conducted under the Sprint and Sprint PCS brands and
our affiliation agreements with Sprint PCS;
o that we own the spectrum and frequencies presently owned by Sprint PCS
and subject to our affiliation agreements with Sprint PCS; and
o the valuation will not include any value for businesses not directly
related to the Sprint PCS products and services, and those businesses
will not be included in the sale.
INSURANCE. We are required to obtain and maintain with financially
reputable insurers who are licensed to do business in all jurisdictions where
any work is performed under our management agreement and who are reasonably
acceptable to Sprint PCS, workers' compensation insurance, commercial general
liability insurance, business automobile insurance, umbrella excess liability
insurance and "all risk" property insurance.
INDEMNIFICATION. We have agreed to indemnify Sprint PCS and its directors,
employees and agents and related parties of Sprint PCS and their directors,
employees and agents against any and all claims against any of the foregoing
arising from our violation of any law, a breach by us of any representation,
warranty or covenant contained in our management agreements or any other
agreement between us and Sprint PCS, our ownership of the operating assets or
the actions or the failure to act of anyone employed or hired by us in the
performance of any work under such agreement, except we will not be obligated to
indemnify Sprint PCS for any claims arising solely from the negligence or
willful misconduct of Sprint PCS. Sprint PCS has agreed to indemnify us and our
directors, employees and agents against all claims against any of the foregoing
arising from Sprint PCS's violation of any law and from Sprint PCS's breach of
any representation, warranty or covenant contained in our management agreements
or any other agreement between us and Sprint PCS, except Sprint PCS will not be
obligated to indemnify us for any claims arising solely from our negligence or
willful misconduct.
DISPUTE RESOLUTION. If the parties cannot resolve any dispute between
themselves and our management agreements do not provide a remedy, then either
party may require that any dispute be resolved by a binding arbitration.
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THE SERVICES AGREEMENTS
We originally entered into one set of services agreements with Sprint and
Sprint PCS for our territories in the Southwestern part of the United States and
another set of these agreements for our territories in Wisconsin. Roberts
entered into a services agreement for its territories in Illinois, Kansas and
Missouri, which we have assumed pursuant to our acquisition of Roberts. WOW
entered into a services agreement for its territories in Washington and Oregon,
which we have assumed pursuant to our acquisition of WOW. Southwest entered into
a services agreement for its territories in Texas, Oklahoma and Arkansas, which
we have assumed pursuant to our acquisition of Southwest. Unless otherwise
indicated below, the description of our services agreements applies to the
services agreements for all four of our territories.
Our services agreements outline various back office services provided by
Sprint PCS and available to us for an adjustment to our 92% fee. Sprint PCS can
change the amount of adjustment for any or all of the services one time in any
twelve month period. We have the option to cancel a service upon notification of
a fee increase, and if we decide to cancel the service, then Sprint PCS, at our
option, must continue to provide that service for nine months at the original
price. Some of the available services include: billing, customer care,
activation, credit checks, handset logistics, home locator record, voice mail,
prepaid services, directory assistance, operator services, roaming fees, roaming
clearinghouse fees, interconnect fees and inter-territory fees. Sprint PCS
offers three packages of available services. Each package identifies which
services must be purchased from Sprint PCS and which may be purchased from a
vendor or provided in-house. Essentially, services such as billing, activation
and customer care must all be purchased from Sprint PCS or none may be purchased
from Sprint PCS. We have chosen to initially delegate the performance of these
services to Sprint PCS, but we may develop an independent capability with
respect to these services over time. Sprint PCS may contract with third parties
to provide expertise and services identical or similar to those to be made
available or provided to us. We have agreed not to use the services performed by
Sprint PCS in connection with any other business or outside our territories. We
may discontinue use of any service upon three months' prior written notice,
while Sprint PCS must give nine months notice if it will no longer offer any
service.
We have agreed with Sprint PCS to indemnify each other as well as
affiliates, officers, directors and employees for violations of law or the
services agreements except for any liabilities resulting from the negligence or
willful misconduct of the person seeking to be indemnified or its
representatives. Our services agreements also provide that no party will be
liable to the other party for special, indirect, incidental, exemplary,
consequential or punitive damages, or loss of profits arising from the
relationship of the parties or the conduct of business under, or breach of, such
services agreement except as may otherwise be required by the indemnification
provisions. Our services agreements automatically terminate upon termination of
our management agreements, and neither party may terminate the services
agreements for any reason other than the termination of the management
agreements.
THE TRADEMARK AND SERVICE MARK LICENSE AGREEMENTS
We originally entered into one set of trademark and service mark license
agreements with Sprint and Sprint PCS for our territories in the Southwestern
part of the United States and another set of these agreements for our
territories in Wisconsin. Roberts entered into a trademark and service mark
license agreement for its territories in Illinois, Kansas and Missouri, which we
have assumed pursuant to our acquisition of Roberts. WOW entered into a
trademark and service mark license agreement for its territories in Washington
and Oregon, which we have assumed pursuant to our acquisition of WOW. Southwest
entered into a services agreement for its territories in Texas, Oklahoma and
Arkansas, which we have assumed pursuant to our acquisition of Southwest. Unless
otherwise indicated below, the description of the trademark and service mark
license agreements applies to the trademark and service mark license agreements
for all five of our territories.
We have a non-transferable license to use, at no additional cost to us, the
Sprint and Sprint PCS brand names and "diamond" symbol, and several other U.S.
trademarks and service marks such as "The Clear Alternative to Cellular" and
"Clear Across the Nation" on Sprint PCS products and services. We believe that
the Sprint and Sprint PCS brand names and symbols enjoy a high degree of
recognition, providing us an immediate benefit in the market place. Our use of
the licensed marks is subject to our adherence to quality standards determined
by Sprint
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and Sprint PCS and use of the licensed marks in a manner which would not reflect
adversely on the image of quality symbolized by the licensed marks. We have
agreed to promptly notify Sprint and Sprint PCS of any infringement of any of
the licensed marks within our territories of which we become aware and to
provide assistance to Sprint and Sprint PCS in connection with Sprint's and
Sprint PCS's enforcement of their respective rights. We have agreed with Sprint
and Sprint PCS that we will indemnify the other for losses incurred in
connection with a material breach of the trademark license agreements between
Sprint, Sprint PCS and us. In addition, we have agreed to indemnify Sprint and
Sprint PCS from any loss suffered by reason of our use of the licensed marks or
marketing, promotion, advertisement, distribution, lease or sale of any Sprint
or Sprint PCS products and services other than losses arising solely out of our
use of the licensed marks in compliance with certain guidelines.
Sprint and Sprint PCS can terminate our trademark and service mark license
agreements if we file for bankruptcy or materially breach our agreement or if
our management agreements are terminated. We can terminate our trademark and
service mark license agreements upon Sprint's or Sprint PCS's abandonment of the
licensed marks or if Sprint or Sprint PCS files for bankruptcy or our management
agreements are terminated. However, Sprint and Sprint PCS can assign their
interests in the licensed marks to a third party if that third party agrees to
be bound by the terms of our trademark and service mark license agreements.
CONSENT AND AGREEMENT FOR THE BENEFIT OF THE HOLDERS OF THE SENIOR SECURED
CREDIT FACILITY
Sprint PCS entered into a consent and agreement with Citicorp, as
administrative agent, that modifies Sprint PCS's rights and remedies under our
affiliation agreements with Sprint PCS, for the benefit of Citicorp and the
holders of the senior secured credit facility and any refinancing thereof.
The consent and agreement between Sprint PCS and Citicorp generally
provides, among other things, the following:
o Sprint PCS's consent to the pledge of substantially all of our assets,
including our rights in our affiliation agreements with Sprint PCS;
o that our affiliation agreements with Sprint PCS may not be terminated
by Sprint PCS until all outstanding obligations under the senior
secured credit facility are satisfied in full pursuant to the terms of
the consent and agreement, unless our operating subsidiaries or assets
are sold to a purchaser who does not continue to operate the business
as a Sprint PCS network affiliate, which sale requires the approval of
Citicorp;
o Sprint PCS may not exercise its right under our management agreements
to purchase our assets until all obligations pursuant to the senior
secured credit facility have been paid in full in cash and all
commitments to advance credit under such facility have been terminated
or have expired. However, Sprint PCS retains the option to purchase our
assets if it first pays all obligations under the senior secured credit
facility and such facility is terminated in connection with such
payment;
o for redirection of payments due to us under our management agreements
from Sprint PCS to Citicorp during the continuation of any default by
us under the senior secured credit facility;
o for Sprint PCS and Citicorp to provide to each other notices of default
by us under our management agreements and the senior secured credit
facility, respectively;
o the ability to appoint interim replacements, including Sprint PCS or a
designee of the administrative agent under the senior secured credit
facility, to operate our portion of the Sprint PCS network under our
affiliation agreements after an event of default under the senior
secured credit facility or an event of termination under our
affiliation agreements;
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o subject to certain requirements and limitations, the ability of Sprint
PCS to assign our affiliation agreements with Sprint PCS and sell our
assets or the partnership interests, membership interests or other
equity interests of our operating subsidiaries to a qualified purchaser
that is not a major competitor of Sprint PCS or Sprint, free of the
restrictions on assignment and change of control in our management
agreements, if our obligations under the senior secured credit facility
have been accelerated after a default by us; and
o subject to certain requirements and limitations, that if Sprint PCS
enters into consent and agreement documents with similarly-situated
lenders that have provisions that are more favorable to the lender,
Sprint PCS will give Citicorp written notice of the amendments and will
amend our consent and agreement with Citicorp in the same manner at
Citicorp's request; consequently, from time to time, Citicorp and
Sprint PCS may modify our consent and agreement so that it will contain
terms and conditions more favorable to Citicorp.
SPRINT PCS'S RIGHT TO PURCHASE ON ACCELERATION OF AMOUNTS OUTSTANDING UNDER
THE SENIOR SECURED CREDIT FACILITY. Subject to the requirements of applicable
law, so long as the senior secured credit facility remains outstanding, Sprint
PCS has the right to purchase our operating assets or the partnership interests,
membership interests or other equity interests of our operating subsidiaries,
upon its receipt of notice of an acceleration of the senior secured credit
facility, under the following terms:
o Sprint PCS elects to make such a purchase within a specified period;
o the purchase price is the greater of an amount equal to 72% of our
"entire business value" or the amount we owe under the senior secured
credit facility;
o if Sprint PCS has given notice of its intention to exercise the
purchase right, then the administrative agent is prohibited for a
specified period after the acceleration, or until Sprint PCS rescinds
its intention to purchase, from enforcing its security interest; and
o if we receive a written offer that is acceptable to us to purchase our
operating assets or the partnership interests, membership interests or
other equity interests of our operating subsidiaries after the
acceleration, then Sprint PCS has the right to purchase our operating
assets or the partnership interests, membership interests or other
equity interests of our operating subsidiaries, as the case may be, on
terms at least as favorable to us as the offer we receive. Sprint PCS
must agree to purchase the operating assets or the partnership
interests, membership interests or other equity interests of our
operating subsidiaries within 14 business days of its receipt of the
offer, on acceptable conditions, and in an amount of time acceptable to
us and Citicorp.
Upon acceleration of the senior secured credit facility, Sprint also has
the right to purchase the obligations under the senior secured credit facility
by repaying such obligations in full in cash.
SALE OF OPERATING ASSETS OR THE PARTNERSHIP INTERESTS, MEMBERSHIP INTERESTS
OR OTHER EQUITY INTERESTS OF OUR OPERATING SUBSIDIARIES TO THIRD PARTIES. If
Sprint PCS does not purchase our operating assets or the partnership interests,
membership interests or other equity interests of our operating subsidiaries
after an acceleration of the obligations under the senior secured credit
facility, then Citicorp may sell our operating assets or the partnership
interests, membership interests or other equity interests of our operating
subsidiaries. Subject to the requirements of applicable law, including the law
relating to foreclosures of security interests, Citicorp has two options:
o to sell our operating assets or the partnership interests, membership
interests or other equity interests of our operating subsidiaries to an
entity that meets the requirements to be our successor under our
affiliation agreements with Sprint PCS; or
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o to sell our operating assets or the partnership interests, membership
interests or other equity interests of our operating subsidiaries to
any third party, subject to specified conditions.
RECENT DEVELOPMENTS
On April 27, 2001, Alamosa Holdings announced that Sprint PCS had reached
an agreement in principle with its network partners, including Alamosa Holdings
and its subsidiaries, providing for a reduction in the reciprocal rate exchanged
between Sprint PCS and its network partners for customers of either party who
travel into territories covered by the other party's portion of the Sprint PCS
network. The rate will be reduced from 20 cents per minute to 15 cents per
minute effective June 1, 2001, and to 12 cents per minute effective October 1,
2001. Beginning January 1, 2002 and continuing throughout the remaining term of
the affiliate agreements with Sprint PCS, the rate will be adjusted to provide a
fair and reasonable return on the cost of the underlying network, expected to be
approximately 10 cents per minute.
For the year ended December 31, 2000, Alamosa (Delaware) reported
approximately $16,244,000 in travel revenue from inbound Sprint PCS customers
using the Alamosa portion of the Sprint PCS network (representing approximately
20% of total revenue for Alamosa (Delaware) for the year ended December 31,
2000), and approximately $14,281,000 of travel expense incurred for outbound
Alamosa customers using other portions of the Sprint PCS network (representing
approximately 26% of total operating expenses of Alamosa (Delaware) for the year
ended December 31,2000).
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REGULATORY ENVIRONMENT
REGULATION OF THE WIRELESS TELECOMMUNICATIONS INDUSTRY
The FCC can have a substantial impact upon entities that manage wireless
personal communications service systems and/or provide wireless personal
communications services because the FCC regulates the licensing, construction,
operation, acquisition and interconnection arrangements of wireless
telecommunications systems in the United States.
The FCC has promulgated, and is in the process of promulgating, a series of
rules, regulations and policies to, among other things:
o grant or deny licenses for wireless personal communications service
frequencies;
o grant or deny wireless personal communications service license
renewals;
o rule on assignments and/or transfers of control of wireless personal
communications service licenses;
o govern the interconnection of wireless personal communications service
networks with other wireless and wireline service providers;
o establish access and universal service funding provisions;
o impose fines and forfeitures for violations of any of the FCC's rules;
and
o regulate the technical standards of wireless personal communications
services networks.
The FCC currently prohibits a single entity from having an attributable
interest (defined as any general partnership interest or 20% or greater equity
or voting interest or certain other business relationships) in broadband
wireless personal communications service, cellular and specialized mobile radio
(SMR) licenses totaling more than 45 MHZ in any geographic area. The 45 MHZ cap
is raised to 55 MHZ for overlaps involving cellular Rural Service Areas. The 20%
cap is raised to 40% where the owner is an investment company, a small business
or a rural telephone company. The geographic areas at issue are PCS licensed
service areas where there are overlaps involving 10% or more of the population
of such service area. An entity, such as us, that manages the operations of a
broadband PCS, cellular, or SMR licensee pursuant to a management agreement is
also considered to have an attributable interest in the system it manages.
TRANSFERS AND ASSIGNMENTS OF WIRELESS PERSONAL COMMUNICATIONS SERVICES LICENSES
The FCC must give prior approval to the assignment of, or transfers
involving, substantial changes in ownership or control of a wireless personal
communications service license. This means that we and our stockholders will
receive advance notice of any and all transactions involved in transferring
control of Sprint PCS or the assignment of some or all of the wireless personal
communications service licenses held by Sprint PCS. The FCC proceedings afford
us and our stockholders an opportunity to evaluate proposed transactions well in
advance of closing, and to take actions necessary to protect their interests.
Non-controlling interests in an entity that holds a wireless personal
communications service license or operates wireless personal communications
service networks generally may be bought or sold without prior FCC approval. In
addition, the FCC requires only post-consummation notification of pro forma
assignments or transfers of control of certain commercial mobile radio service
licenses.
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CONDITIONS OF WIRELESS PERSONAL COMMUNICATIONS SERVICES LICENSES
All wireless personal communications service licenses are granted for ten
year terms conditioned upon timely compliance with the FCC's build-out
requirements. Pursuant to the FCC's build-out requirements, all 30 MHZ broadband
wireless personal communications service licensees must construct facilities
that offer coverage to one-third of the population in their licensed areas
within five years and to two-thirds of the population in such areas within ten
years, and all 10 MHZ broadband wireless personal communications services
licensees must construct facilities that offer coverage to at least one-quarter
of the population in their licensed areas within five years or make a showing of
"substantial service" within that five-year period.
If the build-out requirements are not met, wireless personal communications
service licenses could be forfeited. The FCC also requires licensees to maintain
control over their licenses. Our affiliation agreements with Sprint PCS reflect
management agreements that the parties believe meet the FCC requirements for
licensee control of licensed spectrum.
If the FCC were to determine that our affiliation agreements with Sprint
PCS need to be modified to increase the level of licensee control, we have
agreed with Sprint PCS to use our best efforts to modify the agreements to the
extent necessary to cause the agreements to comply with applicable law and to
preserve to the extent possible the economic arrangements set forth in the
agreements. If the agreements cannot be so modified, the agreements may be
terminated pursuant to their terms. The FCC could also impose monetary penalties
on Sprint PCS, and possibly revoke one or more of the Sprint PCS licenses.
WIRELESS PERSONAL COMMUNICATIONS SERVICES LICENSE RENEWAL
Wireless personal communications service licensees can renew their licenses
for additional ten year terms. Wireless personal communications service renewal
applications are not subject to auctions. However, under the FCC's rules, third
parties may oppose renewal applications and/or file competing applications. If
one or more competing applications are filed, a renewal application will be
subject to a comparative renewal hearing. The FCC's rules afford wireless
personal communications services renewal applicants involved in comparative
renewal hearings with a "renewal expectancy." The renewal expectancy is the most
important comparative factor in a comparative renewal hearing and is applicable
if the wireless personal communications service renewal applicant has:
o provided "substantial service" during its license term; and
o substantially complied with all applicable laws and Federal
Communications Commission rules and policies.
The FCC's rules define "substantial service" in this context as service
that is sound, favorable and substantially above the level of mediocre service
that might minimally warrant renewal. The FCC's renewal expectancy and
procedures make it very likely that Sprint PCS will retain the wireless personal
communications service licenses that we manage for the foreseeable future.
INTERCONNECTION
The FCC has the authority to order interconnection between commercial
mobile radio services, commonly referred to as CMRS, providers and incumbent
local exchange carriers. The FCC has ordered local exchange carriers to provide
reciprocal compensation to commercial mobile radio service providers for the
termination of traffic. Using these rules, we will assist Sprint PCS in the
negotiation of interconnection agreements for the Sprint PCS network in their
market area with all of the Bell operating companies, including Verizon Wireless
and several smaller independent local exchange carriers. Interconnection
agreements are negotiated on a state-wide basis.
If an agreement cannot be reached, parties to interconnection negotiations
can submit outstanding disputes to state authorities for arbitration. Negotiated
interconnection agreements are subject to state approval. The FCC
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rules and rulings, as well as the state arbitration proceedings, will directly
impact the nature and cost of the facilities necessary for interconnection of
the Sprint PCS systems with local, national and international telecommunications
networks. They will also determine the nature and amount of revenues that we and
Sprint PCS can receive for terminating calls originating on the networks of
local exchange and other telecommunications carriers.
OTHER FCC REQUIREMENTS
In June 1996, the FCC adopted rules that prohibit broadband wireless
personal communications services providers from unreasonably restricting or
disallowing resale of their services or unreasonably discriminating against
resellers. Resale obligations will automatically expire on November 24, 2002.
These existing resale requirements and their expiration may somewhat affect the
number of resellers competing with Sprint PCS and its managers and affiliates in
various markets. However, to date, wireless resellers have not significantly
impacted wireless service providers. Any losses in retail customers have been
offset, in major part, by increases in wireless customers, traffic and wholesale
revenues.
CMRS providers, including Sprint PCS, are required to permit manual
"roaming" on their systems. With manual roaming, any user whose mobile phone is
technically capable of connecting with a carrier's system must be able to make a
call by providing a credit card number or making some other arrangement for
payment. The FCC is currently considering changes in its rules that may
terminate the manual roaming requirement and may impose "automatic roaming"
obligations, under which users with capable equipment would be permitted to
originate or terminate calls without taking action other than turning on the
mobile phone.
FCC rules require local exchange and most commercial mobile radio services
providers to program their networks to allow customers to change service
providers without changing telephone numbers, which is referred to as service
provider number portability. The FCC requires most commercial mobile radio
service providers to implement wireless service provider number portability
where requested in the 100 largest metropolitan areas in the United States by
November 24, 2002. The FCC currently requires most commercial mobile radio
service providers to be able to deliver calls from their networks to ported
numbers anywhere in the country, and to contribute to the Local Number
Portability Fund. Implementation of wireless service provider number portability
will require wireless personal communications service providers like us and
Sprint PCS to purchase more expensive switches and switch upgrades. However, it
will also enable existing cellular customers to change to wireless personal
communications services without losing their existing wireless telephone
numbers, which should make it easier for wireless personal communications
service providers to market their services to existing cellular users.
The FCC has adopted rules permitting broadband wireless personal
communications service and other commercial mobile radio service providers to
provide wireless local loop and other fixed services that would directly compete
with the wireline services of local exchange carriers. This creates new markets
and revenue opportunities for Sprint PCS and its managers and affiliates and
other wireless providers, and may do so increasingly in future years. In June
1996, the FCC adopted rules requiring broadband wireless personal communications
services and other commercial mobile radio services providers to implement
enhanced emergency 911 capabilities within 18 months after the effective date of
the FCC's rules. The full compliance with these rules must occur by October 1,
2001. Further waivers of the enhanced emergency 911 capability requirements may
be obtained by individual service providers by filing a waiver request. The
FCC's waivers and extensions are enabling us, Sprint PCS and other commercial
mobile radio services industry members to delay emergency 911 implementation
until the required equipment becomes more functional and less expensive.
However, at a more reasonable future cost, emergency 911 services may afford
wireless carriers substantial and attractive new service and marketing
opportunities.
On October 12, 2000, the FCC adopted several measures designed to remove
obstacles to competitive access to customers and facilities in commercial
multiple tenant environments, including the following:
o The FCC forbade telecommunications carriers in commercial settings from
entering into exclusive contracts with building owners, including
contracts that effectively restrict premises owners or their agents
from permitting access to other telecommunications service providers.
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o The FCC determined that utilities, including LECs must afford
telecommunications carriers and cable service providers reasonable and
nondiscriminatory access to conduits and rights-of-way located in
customer buildings and campuses, to the extent such conduits and
rights-of-way are owned or controlled by the utility.
The FCC also issued a further notice of proposed rulemaking seeking comment
on whether it should adopt additional rules in this area, including extending
certain regulations to include residential as well as commercial buildings. The
final result of this proceeding could affect the availability and pricing of
sites for the Company's antennae and those of its competitors.
COMMUNICATIONS ASSISTANCE FOR LAW ENFORCEMENT ACT
The Communications Assistance for Law Enforcement Act, or CALEA, enacted in
1994 requires wireless personal communications services and other
telecommunications service providers to meet capability and capacity
requirements needed by federal, state and local law enforcement to preserve
their electronic surveillance capabilities. Wireless personal communications
service providers were generally required to comply with the current industry
CALEA capability standard, known as J-STD-025, by June 30, 2000, and with
recently adopted additions by September 30, 2001. Wireless personal
communications services providers must comply with the CALEA capability
requirements by September 30, 2001. In addition, most wireless personal
communications service providers are ineligible for federal reimbursement for
the software and hardware upgrades necessary to comply with the CALEA capability
and capacity requirements, but several bills pending in Congress may expand
reimbursement rights if they are enacted. Finally, the Federal Bureau of
Investigation has been discussing with the industry options for further
deferring CALEA compliance requirements in geographic areas with minimal or
nonexistent electronic surveillance needs.
In addition, the FCC is considering petitions from numerous parties to
establish and implement technical compliance standards pursuant to CALEA
requirements. In sum, CALEA capability and capacity requirements are likely to
impose some additional switching and network costs upon Sprint PCS and its
managers and affiliates and other wireless entities. However, it is possible
that some of these costs will be reduced or delayed if current law enforcement
or legislative initiatives are adopted and implemented during 2000 or
thereafter.
OTHER FEDERAL REGULATIONS
Sprint PCS and its managers and affiliates must bear the expense of
compliance with FCC and Federal Aviation Administration regulations regarding
the siting, lighting and construction of transmitter towers and antennas. In
addition, FCC environmental regulations may cause some of the Company's base
station locations to become subject to the additional expense of regulation
under the National Environmental Policy Act. The FCC is required to implement
this Act by requiring service providers to meet land use and radio emissions
standards.
REVIEW OF UNIVERSAL SERVICE REQUIREMENTS
The FCC and certain states have established "universal service" programs to
ensure that affordable, quality telecommunications services are available to all
Americans. Sprint PCS is required to contribute to the federal universal service
program as well as existing state programs. The FCC has determined that Sprint
PCS's "contribution" to the federal universal service program is a variable
percentage of "end-user telecommunications revenues." Although many states are
likely to adopt a similar assessment methodology, the states are free to
calculate telecommunications service provider contributions in any manner they
choose as long as the process is not inconsistent with the FCC's rules. At the
present time it is not possible to predict the extent of the Sprint PCS total
federal and state universal service assessments or its ability to recover from
the universal service fund. However, some wireless entities are seeking state
commission designation as "eligible telecommunications carriers," enabling them
to receive federal and state universal service support, and are preparing to
compete aggressively with wireline telephone companies for universal service
revenue. Because we manage substantial rural areas for Sprint PCS, it is
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likely to receive revenues in the future from federal and state universal
service support funds that are much greater than the reductions in its revenues
due to universal service contributions paid by Sprint PCS.
PARTITIONING; DISAGGREGATION
FCC rules allow broadband wireless personal communications services
licensees to partition their market areas and/or to disaggregate their assigned
spectrum and to transfer partial market areas or spectrum assignments to
eligible third parties. These rules may enable us to purchase wireless personal
communications service spectrum from Sprint PCS and other wireless personal
communications services licensees as a supplement or alternative to the existing
management arrangements.
WIRELESS FACILITIES SITING
States and localities are not permitted to regulate the placement of
wireless facilities so as to "prohibit" the provision of wireless services or to
"discriminate" among providers of those services. In addition, so long as a
wireless system complies with the FCC's rules, states and localities are
prohibited from using radio frequency health effects as a basis to regulate the
placement, construction or operation of wireless facilities. These rules are
designed to make it possible for Sprint PCS and its managers and affiliates and
other wireless entities to acquire necessary tower sites in the face of local
zoning opposition and delays. The FCC is considering numerous requests for
preemption of local actions affecting wireless facilities siting.
EQUAL ACCESS
Wireless providers are not required to provide long distance carriers with
equal access to wireless customers for the provision of toll services. This
enables us and Sprint PCS to generate additional revenues by reselling the toll
services of Sprint PCS and other interexchange carriers from whom we can obtain
favorable volume discounts. However, the FCC is authorized to require unblocked
access to toll service providers subject to certain conditions.
STATE REGULATION OF WIRELESS SERVICE
Section 332 of the Communications Act preempts states from regulating the
rates and entry of commercial mobile radio service providers. Section 332 does
not prohibit a state from regulating the other terms and conditions of
commercial mobile services, including consumer billing information and
practices, billing disputes and other consumer protection matters. However,
states may petition the FCC to regulate those providers and the FCC may grant
that petition if the state demonstrates that:
o market conditions fail to protect subscribers from unjust and
unreasonable rates or rates that are unjustly or unreasonably
discriminatory; or
o such market conditions exist and commercial mobile radio service is a
replacement for a substantial portion of the landline telephone service
within the state.
To date, the FCC has granted no such petition. To the extent Sprint PCS and
its managers and affiliates provide fixed wireless service, we may be subject to
additional state regulation. These standards and rulings have prevented states
from delaying the entry of wireless personal communications services and other
wireless carriers into their jurisdictions via certification and similar
requirements, and from delaying or inhibiting aggressive or flexible wireless
price competition after entry.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Alamosa (Delaware) is a direct wholly-owned subsidiary of Alamosa PCS
Holdings which, in turn, is a direct wholly-owned subsidiary of Alamosa
Holdings. Alamosa Holdings' shares of common stock are quoted on The Nasdaq
National Market System under the symbol "APCS." The amended and restated by-laws
of each of Alamosa PCS Holdings and Alamosa Holdings contain a pass-through
voting provision which together have the effect of requiring that the shares of
common stock of Alamosa (Delaware) that are owned by Alamosa PCS Holdings may
only be voted by Alamosa PCS Holdings in proportion to the vote of, or as
directed by the vote of, the stockholders of Alamosa Holdings.
The following table sets forth certain information as of April 16, 2001
(except as otherwise indicated) with respect to the number of shares of common
stock of Alamosa Holdings beneficially owned by each person who is known to us
to be the beneficial owner of more than 5% of the common stock of Alamosa
Holdings, the number of shares of common stock beneficially owned by each
executive officer, director and nominee for director of Alamosa Holdings, and
all current executive officers and directors of Alamosa Holdings as a group.
Except as otherwise indicated, each such stockholder has sole voting and
investment power with respect to the shares beneficially owned by such
stockholder.
NAME AND ADDRESS (1) NUMBER OF SHARES PERCENTAGE OF
BENEFICIALLY OWNED (2) OWNERSHIP
5% STOCKHOLDERS:
Caroline Hunt Trust Estate 8,801,866 (3) 9.57%
100 Crescent Court, Suite 1700
Dallas, TX 75201
South Plains Telephone Cooperative, Inc. 8,769,732 (4) 9.54%
2425 Marshall Street
Lubbock, TX 79415
Budagher Family, LLC 7,312,776 (5) 7.95%
3702 Holland Avenue
Dallas, TX 75219
Taylor Telephone Cooperative, Inc 5,175,700 (6) 5.63%
9796 N. Interstate 20
Merkel, TX 79536
DIRECTORS AND EXECUTIVE OFFICERS:
David E. Sharbutt 1,369,724 (7) 1.48%
Michael R. Budagher 7,312,776 (5) 7.95%
Ray M. Clapp 107,175 (8) *
Kendall W. Cowan 291,000 (9) *
Scotty Hart 29,300 (10) *
Thomas Hyde 28,000 (11) *
Schuyler B. Marshall 138,000 (12) *
Tom M. Phelps 31,325 (13) *
Thomas F. Riley, Jr. 166,500 *
Loyd I. Rinehart 33,334 (14) *
Michael V. Roberts 6,753,500 (15) 7.35%
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NAME AND ADDRESS (1) NUMBER OF SHARES PERCENTAGE OF
BENEFICIALLY OWNED (2) OWNERSHIP
Steven C. Roberts 6,763,650 (16) 7.36%
Anthony Sabatino 30,000 (17) *
Jimmy R. White 29,014 (18) *
All Directors and Executive Officers as a Group (14 persons) 23,083,798 24.83%
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* Less then one percent.
(1) Except as otherwise indicated in the footnotes below, the address for each
executive officer and director is 5225 S. Loop 289, Lubbock, Texas 79424.
(2) Percentage of ownership is based on 91,946,843 shares of common stock
outstanding as of April 16, 2001. Beneficial ownership is determined in
accordance with Rule 13d-3 of the Exchange Act. A person is deemed to be
the beneficial owner of any shares of common stock if that person has or
shares voting power or investment power with respect to that common stock,
or has the right to acquire beneficial ownership at any time within 60 days
of the date of the table. As used herein, "voting power" is the power to
vote or direct the voting of shares and "investment power" is the power to
dispose or direct the disposition of shares.
(3) The share information reflected is based upon a statement on Amendment No.
1 to a Schedule 13D filed jointly by Caroline Hunt Trust Estate, The
Rosewood Corporation, Rosewood Financial, Inc. Rosewood Management
Corporation and Fortress Venture Capital II, L.P. on April 12, 2001 with
the Securities and Exchange Commission (the "SEC"). The Rosewood
Corporation is a wholly-owned subsidiary of Caroline Hunt Trust Estate and
Rosewood Financial, Inc. is an indirect wholly-owned subsidiary of Caroline
Hunt Trust Estate and The Rosewood Corporation. Rosewood Management
Corporation is a wholly-owned subsidiary of The Rosewood Corporation and
serves as the general partner of Fortress Venture Capital II, L.P. Caroline
Hunt Trust Estate and The Rosewood Corporation may be deemed to be the
beneficial owner of the shares held of record by Rosewood Financial, Inc.,
as a result of their parent-subsidiary relationship. Rosewood Management
Corporation may be deemed to be the beneficial owner of the shares held of
record by Fortress Venture Capital II, L.P., as a result of its general
partnership status. Caroline Hunt Trust Estate, The Rosewood Corporation
and Rosewood Financial, Inc. may be deemed to be the beneficial owner of
the shares held of record by Fortress Venture Capital II, L.P., as a result
of their parent-subsidiary relationship with Rosewood Management
Corporation. Caroline Hunt Trust Estate, The Rosewood Corporation and
Rosewood Financial, Inc. disclaim beneficial ownership of any shares held
by Rosewood Management Corporation or Fortress Venture Capital II, L.P.,
and Rosewood Management Corporation and Fortress Venture Capital II, L.P.
disclaim beneficial ownership of any shares held by Caroline Hunt Trust
Estate, The Rosewood Corporation and Rosewood Financial, Inc. The address
for The Rosewood Corporation, Rosewood Financial, Inc., Rosewood Management
Corporation and Fortress Venture Capital II, L.P. is the same address for
Caroline Hunt Trust Estate.
(4) The share information reflected is based upon a statement on a Schedule 13D
filed jointly by South Plains Telephone Cooperative, Inc. and South Plains
Advanced Communications & Electronics, Inc. on February 7, 2000 with the
SEC. South Plains Advanced Communications is a wholly-owned subsidiary of
South Plains Telephone Cooperative, which may be deemed to be the
beneficial owner of the shares held of record by South Plains Advanced
Communications. South Plains Telephone Cooperative and South Plains Advance
Communications share voting and investment power for these shares, as a
result of their parent-subsidiary relationship. The address for South
Plains Advanced Communications is the same as the address for South Plains
Telephone Cooperative.
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(5) The share information reflected is based upon a statement on a Schedule 13D
filed jointly by Mr. Budagher, Budagher Family, LLC and West Texas PCS, LLC
on February 26, 2001 with the SEC. Budagher Family, LLC owns 100% of the
membership interests in West Texas PCS, LLC and Mr. Budagher and his spouse
and children own 100% of the membership interests in Budagher Family, LLC,
each of which may also be deemed to be the beneficial owner of the shares
held by West Texas PCS. Includes 28,000 shares issuable to Mr. Budagher
pursuant to options currently exercisable and 7,284,776 shares for which
Budagher Family, LLC, West Texas PCS and Mr. Budagher share voting and
investment power, as a result of their parent-subsidiary and control person
relationships. Mr. Budagher is the sole Manager and President of Budagher
Family, LLC and the sole Manager of West Texas PCS. The address for
Budagher Family, LLC and West Texas PCS is the same as the address for Mr.
Budagher.
(6) The share information reflected is based upon a statement on a Schedule 13D
filed jointly by Taylor Telephone Cooperative, Inc. and Taylor
Telecommunications, Inc. on February 7, 2000 with the SEC. Taylor
Telecommunications is a wholly-owned subsidiary of Taylor Telephone
Cooperative, which may be deemed to be the beneficial owner of the shares
held of record by Taylor Telecommunications. Taylor Telephone Cooperative
and Taylor Telecommunications share voting and investment power for these
shares, as a result of their parent-subsidiary relationship. The address
for Taylor Telecommunications is the same as the address for Taylor
Telephone Cooperative.
(7) Includes 242,500 shares held individually by Mr. Sharbutt, 48,824 shares
held in Mr. Sharbutt's 401(k) plan, 593,200 shares beneficially owned by
Five S, Ltd., 200 shares beneficially owned by Mr. Sharbutt's children and
485,000 shares issuable pursuant to options currently exercisable. Mr.
Sharbutt is a limited partner of Five S, Ltd. and President of Sharbutt
Inc., the general partner of Five S Ltd., and may be considered a
beneficial owner of the shares owned by Five S, Ltd. Mr. Sharbutt disclaims
beneficial ownership of these shares, except to the extent of his pecuniary
interest therein. Additionally, Mr. Sharbutt is a director, shareholder and
the President of US Consultants, Inc., the general partner of Harness,
Ltd., which holds 292,938 shares of common stock. Mr. Sharbutt disclaims
beneficial ownership of the shares owned by Harness, Ltd. The address for
Five S Ltd. is 4606 91st Street, Lubbock, Texas 79424 and the address for
Harness, Ltd. is P.O. Box 65700, 4747 S. Loop 289, Lubbock, Texas 79464.
(8) Includes 64,175 shares held individually by Mr. Clapp and 43,000 shares
issuable pursuant to options currently exercisable. Includes 64,175 shares
held individually by Mr. Clapp and 43,000 shares issuable pursuant to
options currently exercisable. Excludes 8,801,866 shares held by Caroline
Hunt Trust Estate and its subsidiaries, as to which Mr. Clapp disclaims
beneficial ownership. Mr. Clapp is the Managing Director, Acquisitions and
Investments for the Rosewood Corporation, which is a wholly-owned
subsidiary of the Caroline Hunt Trust Estate. The address for Mr. Clapp is
the same as the address for Caroline Hunt Trust Estate.
(9) These shares are issuable pursuant to options currently exercisable.
(10) Includes 1,000 shares held individually by Mr. Hart, 28,000 shares issuable
pursuant to options currently exercisable and 300 shares held by Lubbock
HLH, Ltd. Mr. Hart controls Lubbock HLH, Ltd. and is a beneficial owner of
the shares held by Lubbock HLH, Ltd. Excludes 8,769,732 shares held by
South Plains Advanced Communications & Electronics, Inc., as to which Mr.
Hart disclaims beneficial ownership. Mr. Hart is the General Manager of
South Plains Telephone Cooperative and South Plains Advanced Communications
& Electronics, a wholly-owned subsidiary of South Plains Telephone
Cooperative. Mr. Hart's address is the same as the address for South Plains
Telephone Cooperative.
(11) Includes 28,000 shares issuable pursuant to options currently exercisable.
Excludes 5,175,700 shares held by Taylor Telecommunications, Inc., as to
which Mr. Hyde disclaims beneficial ownership. Mr. Hyde is the Manager of
Taylor Telephone Cooperative, Inc. and Taylor Telecommunications, a wholly-
owned subsidiary of Taylor Telephone Cooperative. Mr. Hyde's address is the
same as the address for Taylor Telephone Cooperative.
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(12) Includes 110,000 shares held individually by Mr. Marshall, 500 shares held
indirectly in an IRA account for Mr. Marshall and 28,000 shares issuable
pursuant to options currently exercisable. Excludes 8,801,866 shares held
by Caroline Hunt Trust Estate, as to which Mr. Marshall disclaims
beneficial ownership. Mr. Marshall is the President of Rosewood Financial,
Inc. and the Rosewood Corporation, both of which are wholly-owned
subsidiaries of the Caroline Hunt Trust Estate. Additionally, Mr. Marshall
is a Director of various Caroline Hunt Trust Estate subsidiaries. The
address for Mr. Marshall is the same as the address for Caroline Hunt Trust
Estate.
(13) Includes 3,325 shares held individually by Mr. Phelps and 28,000 shares
issuable pursuant to options currently exercisable.
(14) These shares are issuable pursuant to options exercisable within 60 days.
(15) Includes 6,752,500 shares held individually by Mr. Roberts, 1,000 shares
held by Mr. Roberts and his wife together and 250 shares owned by Roberts
Broadcasting Company. Mr. Roberts is the Chairman, Chief Executive Officer
and principal stockholder of Roberts Broadcasting Company and may be
considered a beneficial owner of the shares owned by Roberts Broadcasting
Company.
(16) Includes 6,754,500 shares held individually by Mr. Roberts, 2,500 shares
held by Mr. Roberts and his wife together, 1,000 shares held by Mr.
Roberts' wife, 5,400 shares Mr. Roberts' wife holds in custodial accounts
for their minor children and 250 shares owned by Roberts Broadcasting
Company. Mr. Roberts is the President and Chief Operating Officer and
principal stockholder of Roberts Broadcasting Company and may be considered
a beneficial owner of the shares owned by Roberts Broadcasting Company. Mr.
Roberts disclaims beneficial ownership of the shares of common stock held
in custodial accounts for his minor children.
(17) These shares are issuable pursuant to options currently exercisable.
(18) Includes 1,014 shares held individually by Mr. White and 28,000 shares
issuable pursuant to options currently exercisable. Mr. White's address is
Highway 87 North, Dalhart, TX 79022.
85
DESCRIPTION OF NOTES
You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions." In this description, the words
"Company" and "we" refer only to Alamosa (Delaware), Inc. and not to any of its
subsidiaries. When we refer to the term "Note" or "Notes," we are referring to
both the outstanding notes and the notes to be issued in the exchange offer.
When we refer to "Holders," we are referring to those persons who are registered
holders of the Notes on the books of the registrar appointed under the
Indenture.
GENERAL
The terms of the registered notes we are issuing in this exchange offer and
the outstanding notes are identical in all material respects, except:
o The registered notes will have been registered under the Securities
Act;
o the registered notes will not contain transfer restrictions and
registration rights that relate to the outstanding notes; and
o the registered notes will not contain provisions relating to the
payment of liquidated damages to be made to the holders of the
outstanding notes under circumstances related to the timing of the
exchange offer.
The outstanding notes were issued and the registered notes will be issued
pursuant to an indenture dated as of January 31, 2001, as amended or
supplemented from time to time (the "Indenture"), among the Company, the
Subsidiary Guarantors and Wells Fargo Bank Minnesota, N.A., as trustee (the
"Trustee"). The Indenture is governed by the Trust Indenture Act of 1939 (the
"Trust Indenture Act"). The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act.
We urge you to read the Indenture because it, and not this description,
defines your rights as a holder of the registered notes.
The Company will issue Notes without coupons, in denominations of $1,000
and integral multiples of $1,000.
PRINCIPAL, MATURITY AND INTEREST
The Notes will mature on February 1, 2011. We can issue a maximum of $250
million aggregate principal amount of Notes. Interest on the Notes will accrue
at the rate of 12 1/2% per annum and will be payable in cash semi-annually on
February 1 and August 1 of each year, beginning on August 1, 2001. The Company
will pay interest to those persons who were holders of record on the January 15
or July 15 immediately preceding each interest payment date. Interest on the
Notes will accrue from January 31, 2001 or, if interest has already been paid,
from the date it was most recently paid. Interest will be computed on the basis
of a 360-day year comprised of twelve 30-day months.
RANKING
The Notes are:
o senior unsecured obligations of the Company (except to the extent of
amounts secured under the security agreement);
o equal in ranking ("pari passu") with all existing and future senior
debt of the Company, including the Senior Discount Notes;
86
o senior in right of payment to all existing and future subordinated debt
of the Company; and
o guaranteed on a senior subordinated unsecured basis by the Subsidiary
Guarantors.
As of December 31, 2000, after giving effect to the offering of the
outstanding notes and the application of the net proceeds therefrom, and the
completion of the acquisition of Roberts, WOW and Southwest, the total
outstanding debt of the Company and the Subsidiary Guarantors, excluding unused
commitments made by lenders, would have been approximately $663 million. As of
that date, none of the Company's debt, after taking the same factors into
account, would have been subordinated to the Notes or the Subsidiary Guarantees.
The Company only has a stockholder's claim in the assets of its
subsidiaries. This stockholder's claim is junior to the claims that creditors of
the Company's subsidiaries have against those subsidiaries. Holders of the Notes
will only be creditors of the Company and of those subsidiaries that are
Subsidiary Guarantors.
All the operations of the Company are conducted through its subsidiaries.
Therefore, the Company's ability to service its debt, including the Notes, is
dependent upon the earnings of its subsidiaries, and their ability to distribute
those earnings as dividends, loans or other payments to the Company. Certain
laws restrict the ability of the Company's subsidiaries to pay dividends and
make loans and advances to it. In addition, the Credit Facilities may place
restrictions on the ability of the Restricted Subsidiaries to make distributions
to the Company. See "Risk Factors -- Risks Related to the Notes -- We are a
holding company and because the guarantees are unsecured and subordinated to
debt that encumbers our guarantor subsidiaries' assets, you may not be fully
repaid if we or our guarantor subsidiaries become insolvent." If the
restrictions described above are applied to subsidiaries that are not Subsidiary
Guarantors, then the Company would not be able to use the earnings of those
subsidiaries to make payments on the Notes. Furthermore, under certain
circumstances, bankruptcy "fraudulent conveyance" laws or other similar laws
could invalidate the Subsidiary Guarantees. If this were to occur, the Company
would also be unable to use the earnings of the Subsidiary Guarantors to the
extent they face restrictions on distributing funds to the Company. Any of the
situations described above could make it more difficult for the Company to
service its debt.
The total balance sheet liabilities of the Subsidiary Guarantors, as of
December 31, 2000, after giving effect to the offering of the outstanding notes
and the senior secured credit facility and the application of the net proceeds
therefrom, excluding unused commitments made by lenders and the completion of
the acquisition of Roberts, WOW and Southwest, would have been approximately
$266 million.
The Subsidiary Guarantors have other liabilities, including contingent
liabilities, that may be significant. As of the date of this prospectus, other
than Alamosa Delaware Operations, LLC, the Company does not have any
subsidiaries that are not Subsidiary Guarantors. The Indenture contains
limitations on the amount of additional Debt which the Company and the
Restricted Subsidiaries may Incur. However, the amounts of such Debt could be
substantial and may be Incurred either by Subsidiary Guarantors or by the
Company's other subsidiaries.
The Notes are unsecured obligations of the Company and the Subsidiary
Guarantors (except to the extent of amounts secured under the Security
Agreement). Secured Debt of the Company and the Subsidiary Guarantors will be
effectively senior to the Notes to the extent of the value of the assets
securing such Debt. The Company has guaranteed all of the obligations under the
senior secured credit facility and has pledged substantially all of its assets
(other than certain cash amounts and certain other exceptions) to secure such
obligations under the senior secured credit facility.
As of December 31, 2000, after giving effect to the offering of the
outstanding notes and the application of the net proceeds therefrom and giving
effect to the completion of the acquisitions of Roberts, WOW and Southwest, the
total outstanding secured Debt of the Company and the Subsidiary Guarantors,
excluding unused commitments made by lenders, would have been approximately $203
million.
See "Risk Factors -- Risks Related to the Notes -- We are a holding company
and because the guarantees are unsecured and subordinated to debt that encumbers
our guarantor subsidiaries' assets, you may not be fully repaid if we or our
guarantor subsidiaries become insolvent" and "--Because federal and state
statutes may allow courts to
87
void the guarantees of the notes by our subsidiaries, you may not have the right
to receive any money pursuant to the guarantees."
SUBSIDIARY GUARANTEES
The obligations of the Company under the Indenture, including the
repurchase obligation resulting from a Change of Control, will be fully and
unconditionally guaranteed, jointly and severally, on a senior subordinated,
unsecured basis, by all the existing and any future Domestic Restricted
Subsidiaries of the Company. However, the holders of any Designated Senior Debt
(as defined below) or their authorized representative must be provided written
notice of an Event of Default at least 10 business days prior to the Trustee or
any holder of Notes making any demand for payment under or exercising any right
or remedy with respect to a Subsidiary Guaranty and prior to any Subsidiary
Guarantor making payment under its Subsidiary Guaranty.
If the Company sells or otherwise disposes of either:
(1) its entire ownership interest in a Subsidiary Guarantor, or
(2) all or substantially all the assets of a Subsidiary Guarantor,
such Subsidiary Guarantor will be released from all its obligations under its
Subsidiary Guaranty. In addition, if the Company redesignates a Subsidiary
Guarantor as an Unrestricted Subsidiary, which the Company can do under certain
circumstances, the redesignated Subsidiary Guarantor will be released from all
its obligations under its Subsidiary Guaranty. See "--Certain Covenants --
Designation of Restricted and Unrestricted Subsidiaries," "--Limitation on
Issuance or Sale of Capital Stock of Restricted Subsidiaries" and "--Merger,
Consolidation and Sale of Property."
If any Subsidiary Guarantor makes payments under its Subsidiary Guaranty,
each of the Company and the other Subsidiary Guarantors must contribute their
share of such payments. The Company's and the other Subsidiary Guarantors'
shares of such payment will be computed based on the proportion that the net
worth of the Company or the relevant Subsidiary Guarantor represents relative to
the aggregate net worth of the Company and all the Subsidiary Guarantors
combined.
SUBORDINATION OF SUBSIDIARY GUARANTEES
The obligations of the Subsidiary Guarantors under their respective
Subsidiary Guarantees will be subordinated to any obligations for Debt Incurred
pursuant to Credit Facilities (and Permitted Refinancing Debt in respect
thereof) (collectively, "Designated Senior Debt") as described below. As a
result of this subordination, holders of Designated Senior Debt will be entitled
to receive full payment in cash on all obligations owed to them before any
Subsidiary Guarantor can make any payment to Holders of the Notes in any of the
following situations or proceedings relating to such Subsidiary Guarantor:
o liquidation, dissolution or winding up;
o bankruptcy, reorganization, insolvency, receivership or similar
proceedings;
o any assignment for the benefit of its creditors; or
o any marshaling of its assets and liabilities.
As a result of the subordination referred to above, no Subsidiary Guarantor
may make any payment pursuant to its Obligations or repurchase, redeem or
otherwise retire or defease any Notes (collectively, "make a Subsidiary
Guarantor payment"), if:
88
(a) any principal, premium or interest in respect of any Designated Senior
Debt is not paid when due (including at maturity), or
(b) any other default on Designated Senior Debt occurs and the maturity of
such Debt is accelerated in accordance with its terms,
unless, in either case,
(1) the default has been cured or waived and any such acceleration
has been rescinded, or
(2) such Designated Senior Debt has been paid in full in cash;
provided, however, that a Subsidiary Guarantor may make a Subsidiary Guarantor
payment without regard to the foregoing if such Subsidiary Guarantor and the
Trustee receive written notice approving such payment from the holders of such
Designated Senior Debt.
During the continuance of any default (other than a default described in
clause (a) or (b) above) under the Designated Senior Debt pursuant to which the
maturity thereof may be accelerated immediately without further notice (except
any notice required to effect the acceleration) or the expiration of any
applicable grace period, no Subsidiary Guarantor may make a Subsidiary Guarantor
payment for a period (a "Payment Blockage Period") commencing upon the receipt
by such Subsidiary Guarantor and the Trustee of written notice of such default
from a representative under the Credit Facilities specifying an election to
effect a Payment Blockage Period (a "Payment Blockage Notice") and ending 179
days thereafter, unless such Payment Blockage Period is earlier terminated:
a. by written notice to the Trustee and such Subsidiary Guarantor from the
holders of such Designated Senior Debt,
b. because such default is no longer continuing, or
c. because all such Designated Senior Debt has been repaid in full in
cash.
Unless the holders of Designated Senior Debt have accelerated the maturity of
such Designated Senior Debt and not rescinded such acceleration, a Subsidiary
Guarantor may (unless otherwise prohibited as described in the first or second
paragraphs of this section) resume making Subsidiary Guarantor payments after
the end of such Payment Blockage Period.
Not more than one Payment Blockage Notice may be given in any consecutive
360-day period, irrespective of the number of defaults during such period.
Upon any payment or distribution of the assets of a Subsidiary Guarantor
(1) upon a total or partial liquidation, dissolution or winding up of such
Subsidiary Guarantor, (2) in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to such Subsidiary Guarantor, (3)
upon an assignment for the benefit of creditors of such Subsidiary Guarantor or
(4) upon any marshaling of the assets and liabilities of such Subsidiary
Guarantor:
o the holders of Designated Senior Debt will be entitled to receive
payment in full in cash before the holders of the Notes are entitled to
receive any payment pursuant to the Subsidiary Guaranty of such
Subsidiary Guarantor, except that holders of Notes may receive and
retain shares of stock and any debt securities of such Subsidiary
Guarantor that are subordinated to the Designated Senior Debt to at
least the same extent as the Subsidiary Guaranty of such Subsidiary
Guarantor is subordinated to the Designated Senior Debt; and
89
o until the Designated Senior Debt is paid in full in cash, any
distribution to which holders of the Notes would be entitled but for
the subordination provisions of the Indenture with respect to the
Subsidiary Guarantees will be made to holders of such Designated Senior
Debt. If a payment or distribution is made to holders of Notes that,
due to the subordination provisions with respect to the Subsidiary
Guarantees, should not have been made to them, such holders are
required to hold it in trust for the holders of Designated Senior Debt
and pay it over to them as their interests may appear.
If payment of the Notes is accelerated when any Designated Senior Debt is
outstanding, no Subsidiary Guarantor may make a Subsidiary Guarantor payment
until ten business days after the holders of Designated Senior Debt receive
notice of such acceleration and, thereafter, may make a Subsidiary Guarantor
payment only if the Indenture otherwise permits payment at that time.
Because of the Indenture's subordination provisions with respect to the
Subsidiary Guarantees, holders of Designated Senior Debt may recover
disproportionately more than the holders of the Notes recover in a bankruptcy or
similar proceeding relating to any Subsidiary Guarantor. In such a case, there
may be insufficient assets, or no assets, remaining to pay the principal of or
interest on the Notes.
SECURITY AGREEMENT
Concurrently with the closing of the offering of the outstanding notes, we
deposited with Wells Fargo Bank Minnesota, N.A., as custody agent (the "Custody
Agent") under an agreement between us, the trustee under the notes indenture and
the Custody Agent (the "Security Agreement") approximately $59.0 million in U.S.
Government Obligations from the proceeds of such offering to secure on a pro
rata basis our payment obligations under the Notes and under our Senior Discount
Notes. Funds will be released from the security account to make interest
payments on the Notes or the Senior Discount Notes as they become due, so long
as at such time no Event of Default exists with respect to either set of notes.
The amount deposited in the security account, together with the proceeds from
the investment thereof, will be sufficient to pay when due the first four
interest payments on the Notes. Following disbursement from the custodial
account of funds sufficient to pay the interest payment on the notes due
February 1, 2003, any funds remaining in the custodial account will be returned
to the Company, provided no Event of Default exists with respect to the Notes or
the Senior Discount Notes. Pending such disbursements, all funds contained in
the custodial account will be invested in U.S. Government Obligations. Interest
earned on the U.S. Government Obligations will be placed in the custodial
account.
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the Notes will not be
redeemable at the option of the Company prior to February 1, 2006. Starting on
that date, the Company may redeem all or any portion of the Notes, at once or
over time, after giving the required notice under the Indenture. The Notes may
be redeemed at the redemption prices set forth below, plus accrued and unpaid
interest, if any, to the redemption date (subject to the right of holders of
record on the relevant record date to receive interest due on the relevant
interest payment date). The following prices are for Notes redeemed during the
12-month period commencing on February 1 of the years set forth below, and are
expressed as percentages of principal amount:
YEAR REDEMPTION PRICE
2006 106.250%
2007 104.167%
2008 102.083%
2009 and thereafter 100.000%
At any time and from time to time, prior to February 1, 2004, the Company
may redeem up to a maximum of 35% of the original aggregate principal amount at
maturity of the Notes with the proceeds of one or more Public Equity Offerings,
at a redemption price equal to 112.5% of the principal amount thereof, plus
accrued and unpaid
90
interest thereon, if any, to the redemption date (subject to the right of
holders of record on the relevant record date to receive interest due on the
relevant interest payment date); provided, however, that after giving effect to
any such redemption, at least 65% of the original aggregate principal amount of
the Notes remains outstanding. Any such redemption shall be made within 90 days
of such Public Equity Offering upon not less than 30 nor more than 60 days'
prior notice.
SINKING FUND
There will be no mandatory sinking fund payments for the Notes.
REPURCHASE AT THE OPTION OF HOLDERS UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of Notes will have
the right to require the Company to repurchase all or any part of such holder's
Notes pursuant to the offer described below (the "Change of Control Offer") at a
purchase price (the "Change of Control Purchase Price") equal to 101% of the
principal amount thereof, plus accrued and unpaid interest, if any, to the
purchase date (subject to the right of holders of record on the relevant record
date to receive interest due on the relevant interest payment date).
Within 30 days following any Change of Control, the Company shall:
a. cause a notice of the Change of Control Offer to be sent at least once
to the Dow Jones News Service or similar business news service in the
United States, and
b. send, by first-class mail, with a copy to the Trustee, to each holder
of Notes, at such holder's address appearing in the book of the
registrar appointed under the indenture, a notice stating:
(1) that a Change of Control has occurred and a Change of Control
Offer is being made pursuant to the covenant entitled "Repurchase
at the Option of Holders Upon a Change of Control" and that all
Notes timely tendered will be accepted for payment;
(2) the Change of Control Purchase Price and the purchase date, which
shall be, subject to any contrary requirements of applicable law,
a business day no earlier than 30 days nor later than 60 days
from the date such notice is mailed;
(3) the circumstances and relevant facts regarding the Change of
Control (including, if and to the extent material, information
with respect to pro forma historical income, cash flow and
capitalization after giving effect to the Change of Control); and
(4) the procedures that holders of Notes must follow in order to
tender their Notes (or portions thereof) for payment, and the
procedures that holders of Notes must follow in order to withdraw
an election to tender Notes (or portions thereof) for payment.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to a Change of Control
Offer. To the extent that the provisions of any securities laws or regulations
conflict with the provisions of the covenant described hereunder, the Company
will comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under the covenant described hereunder
by virtue of such compliance.
The Change of Control repurchase feature is a result of negotiations
between the Company and the initial purchasers of the outstanding notes.
Management has no present intention to engage in a transaction involving a
Change of Control, although it is possible that the Company would decide to do
so in the future. Subject to certain covenants described below, the Company
could, in the future, enter into certain transactions, including acquisitions,
91
refinancings or other recapitalizations, that would not constitute a Change of
Control under the Indenture, but that could increase the amount of debt
outstanding at such time or otherwise affect the Company's capital structure or
credit ratings.
The definition of Change of Control includes a phrase relating to the sale,
transfer, assignment, lease, conveyance or other disposition of "all or
substantially all" the Company's assets. 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, if the
Company disposes of less than all its assets by any of the means described
above, the ability of a holder of Notes to require the Company to repurchase its
Notes may be uncertain. In such a case, holders of the Notes may not be able to
resolve this uncertainty without resorting to legal action.
The senior secured credit facility provides that the occurrence of certain
of the events that would constitute a Change of Control would constitute a
default under such existing debt. Since the Subsidiary Guarantees are
subordinate in right of payment to the lenders under the senior secured credit
facility, the Subsidiary Guarantors could be prohibited from making payment
under the Subsidiary Guarantees. Other future debt of the Company may also
contain prohibitions of certain events which would constitute a Change of
Control or require such debt to be repurchased upon a Change of Control.
Moreover, the exercise by holders of Notes of their right to require the Company
to repurchase such Notes could cause a default under existing or future debt of
the Company, even if the Change of Control itself does not, due to the financial
effect of such repurchase on the Company. Finally, the Company's ability to pay
cash to holders of Notes upon a repurchase may be limited by the Company's then
existing financial resources. There can be no assurance that sufficient funds
will be available when necessary to make any required repurchases. The Company's
failure to purchase Notes in connection with a Change of Control would result in
a default under the Indenture. Such a default would, in turn, constitute a
default under existing debt of the Company and may constitute a default under
future debt as well. Since the Subsidiary Guarantees are subordinate in right of
payment to the lenders under the senior secured credit facility, the Subsidiary
Guarantors would first be obligated to pay any Debt Incurred pursuant to the
senior secured credit facility in full before repurchasing any of the Notes. See
"Risk Factors -- Risks Related to the Notes -- We may be unable to purchase the
notes upon a change of control." The Company's obligation to make an offer to
repurchase the Notes as a result of a Change of Control may be waived or
modified at any time prior to the occurrence of such Change of Control with the
written consent of the holders of a majority in principal amount of the Notes.
See "--Amendments and Waivers."
CERTAIN COVENANTS
LIMITATION ON DEBT. The Company shall not, and shall not permit any
Restricted Subsidiary to, Incur, directly or indirectly, any Debt unless, after
giving effect to the application of the proceeds thereof, no Default or Event of
Default would occur as a consequence of such Incurrence or be continuing
following such Incurrence and:
(1) such Debt is Debt of the Company or a Subsidiary Guarantor and
after giving effect to the Incurrence of such Debt and the
application of the proceeds thereof, the Leverage Ratio of the
Company and the Restricted Subsidiaries (calculated on a
consolidated basis using Annualized Pro Forma EBITDA which gives
pro forma effect to those Asset Sales, Investments or
acquisitions of Property described in the definition of Pro Forma
EBITDA) would not exceed (a) 7.0 to 1.0, if the Debt is to be
Incurred prior to January 1, 2004, or (b) 6.0 to 1.0, if the Debt
is to be Incurred on or after January 1, 2004; or
(2) such Debt is Debt of the Company or a Subsidiary Guarantor and is
Incurred prior to January 1, 2004, provided that after giving
effect to the Incurrence of such Debt and the application of the
proceeds thereof, the total Debt of the Company and its
Restricted Subsidiaries on a consolidated basis would be equal to
or less than 75% of Total Invested Capital; or
(3) such Debt is Permitted Debt.
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The term "Permitted Debt" is defined to include obligations which meet the
requirements of any of the following clauses (a) through (i):
a. Debt of the Company evidenced by the Notes and the Senior Discount
Notes and of Subsidiary Guarantors evidenced by Subsidiary Guarantees
relating to the Notes and the Senior Discount Notes;
b. Debt of the Company or a Subsidiary Guarantor under any Credit
Facilities, provided that the aggregate principal amount of all such
Debt under Credit Facilities at any one time outstanding shall not
exceed the sum of (i) $250 million plus (ii) 85% of Eligible
Receivables, which sum shall be permanently reduced by the amount of
Net Available Cash used to Repay Debt under the Credit Facilities, and
not subsequently reinvested in Additional Assets or used to purchase
Notes or Repay other Debt, pursuant to the covenant described under
"--Limitation on Asset Sales";
c. Debt in respect of Capital Lease Obligations and Purchase Money Debt,
provided that:
(1) the aggregate principal amount of such Debt does not exceed the
Fair Market Value (on the date of the Incurrence thereof) of the
Property acquired, constructed or leased, and
(2) the aggregate principal amount of all Debt Incurred and then
outstanding pursuant to this clause (c) (together with all
Permitted Refinancing Debt Incurred and then outstanding in
respect of Debt previously Incurred pursuant to this clause (c))
does not exceed $50 million;
d. Debt of the Company owing to and held by any Restricted Subsidiary and
Debt of a Restricted Subsidiary owing to and held by the Company or any
Restricted Subsidiary; provided, however, that any subsequent issue or
transfer of Capital Stock or other event that results in any such
Restricted Subsidiary ceasing to be a Restricted Subsidiary or any
subsequent transfer of any such Debt (except to the Company or another
Restricted Subsidiary) shall be deemed, in each case, to constitute the
Incurrence of such Debt by the issuer thereof;
e. Debt under Interest Rate Agreements entered into by the Company or a
Restricted Subsidiary for the purpose of limiting interest rate risk in
the ordinary course of the financial management of the Company or such
Restricted Subsidiary and not for speculative purposes, provided that
the obligations under such agreements are related to payment
obligations on Debt otherwise permitted by the terms of this covenant;
f. Debt in connection with one or more standby letters of credit or
performance bonds issued by the Company or a Restricted Subsidiary in
the ordinary course of business or pursuant to self-insurance
obligations and not in connection with the borrowing of money or the
obtaining of advances or credit;
g. Debt outstanding on the Issue Date not otherwise described in clauses
(a) through (f) above;
h. Permitted Refinancing Debt Incurred in respect of Debt Incurred
pursuant to clause (1) or (2) of the first paragraph of this covenant
or clause (a), (c) or (g) above; and
i. additional Debt of the Company in an aggregate principal amount
outstanding at any one time not to exceed $50 million.
For purposes of determining compliance with this covenant,
93
a. in the event that any Debt is allowed to be Incurred pursuant to more
than one of the categories of Debt described above, including clauses
(1) or (2) of the first paragraph of this covenant or as Permitted
Debt, the Company, in its sole discretion, will classify such Debt, as
of the time of Incurrence thereof, as Debt incurred pursuant to a
particular clause under the first paragraph of this covenant, and if
Incurred as Permitted Debt will specify under which clause of Permitted
Debt the Debt is Incurred; and
b. Debt may be divided and classified in more than one of the categories
of Debt described above.
Notwithstanding anything to the contrary contained in this covenant,
a. the Company shall not, and shall not permit any Subsidiary Guarantor
to, Incur any Debt pursuant to this covenant if the proceeds thereof
are used, directly or indirectly, to Refinance any Subordinated
Obligations unless such Debt shall be subordinated to the Notes or the
applicable Subsidiary Guaranty, as the case may be, to at least the
same extent as such Subordinated Obligations, and
b. the Company shall not permit any Restricted Subsidiary that is not a
Subsidiary Guarantor to Incur any Debt pursuant to this covenant if the
proceeds thereof are used, directly or indirectly, to Refinance any
Debt of the Company or any Subsidiary Guarantor.
LIMITATION ON RESTRICTED PAYMENTS. The Company shall not make, and shall
not permit any Restricted Subsidiary to make, directly or indirectly, any
Restricted Payment if at the time of, and after giving effect to, such proposed
Restricted Payment,
a. a Default or Event of Default shall have occurred and be continuing,
b. the Company could not Incur at least $1.00 of additional Debt pursuant
to clause (1) or (2) of the first paragraph of the covenant described
under "--Limitation on Debt", or
c. the aggregate amount of such Restricted Payment and all other
Restricted Payments declared or made since February 8, 2000 (the amount
of any Restricted Payment, if made other than in cash, to be based upon
Fair Market Value) would exceed an amount equal to the sum of:
(1) the result of:
(a) Cumulative EBITDA, minus
(b) the product of 1.5 and Cumulative Interest Expense, plus
(2) Capital Stock Sale Proceeds, plus
(3) the sum of:
(a) the aggregate net cash proceeds received by the Company or
any Restricted Subsidiary from the issuance or sale after
February 8, 2000 of convertible or exchangeable Debt that
has been converted into or exchanged for Capital Stock
(other than Disqualified Stock) of the Company or any direct
or indirect parent holding company of the Company, and
(b) the aggregate amount by which Debt (other than Subordinated
Obligations) of the Company or any Restricted Subsidiary is
reduced on the Company's consolidated balance sheet on or
after February 8, 2000 upon the conversion or exchange of
any Debt issued or sold on or prior to February 8, 2000 that
is convert-
94
ible or exchangeable for Capital Stock (other than
Disqualified Stock) of the Company or any direct or indirect
parent holding company of the Company,
excluding, in the case of clause (A) or (B):
(x) any such Debt issued or sold to the Company or a
Subsidiary of the Company or an employee stock
ownership plan or trust established by the Company or
any such Subsidiary for the benefit of their
employees, and
(y) the aggregate amount of any cash or other Property
distributed by the Company or any Restricted
Subsidiary upon any such conversion or exchange,
plus
(4) an amount equal to the sum of:
(a) the net reduction in Investments in any Person other than
the Company or a Restricted Subsidiary resulting from
dividends, repayments of loans or advances or other
transfers of Property, in each case to the Company or any
Restricted Subsidiary from such Person, less the cost of the
disposition of such Investment, plus
(b) the portion (proportionate to the Company's equity interest
in such Unrestricted Subsidiary) of the Fair Market Value of
the net assets of an Unrestricted Subsidiary at the time
such Unrestricted Subsidiary is designated a Restricted
Subsidiary;
provided, however, that the sum in this clause (4) shall not exceed, in
the case of any Person, the amount of Investments previously made (and
treated as a Restricted Payment) by the Company or any Restricted
Subsidiary in such Person.
Notwithstanding the foregoing limitation, the Company may take any action
if it is in compliance with any of the following clauses (a) through (f):
a. pay dividends on its Capital Stock within 60 days of the declaration
thereof if, on said declaration date, such dividends could have been
paid in compliance with the Indenture; provided, however, that at the
time of such payment of such dividend, no other Default or Event of
Default shall have occurred and be continuing (or result therefrom);
provided further, however, that such dividend shall be included in the
calculation of the amount of Restricted Payments;
b. purchase, repurchase, redeem, legally defease, acquire or retire for
value Capital Stock of the Company or Subordinated Obligations in
exchange for, or out of the proceeds of the substantially concurrent
sale of, Capital Stock of the Company (other than Disqualified Stock
and other than Capital Stock issued or sold to a Subsidiary of the
Company or an employee stock ownership plan or trust established by the
Company or any such Subsidiary for the benefit of their employees);
provided, however, that:
(1) such purchase, repurchase, redemption, legal defeasance,
acquisition or retirement shall be excluded in the calculation of
the amount of Restricted Payments, and
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(2) the Capital Stock Sale Proceeds from such exchange or sale shall
be excluded from the calculation pursuant to clause (c)(2) above;
c. purchase, repurchase, redeem, legally defease, acquire or retire for
value any Subordinated Obligations in exchange for, or out of the
proceeds of the substantially concurrent sale of, Permitted Refinancing
Debt; provided, however, that such purchase, repurchase, redemption,
legal defeasance, acquisition or retirement shall be excluded in the
calculation of the amount of Restricted Payments;
d. make a Restricted Payment, if at the time the Company or any Restricted
Subsidiary first Incurred a commitment for such Restricted Payment,
such Restricted Payment could have been made; provided, however, that
all commitments Incurred and outstanding shall be treated as if such
commitments were Restricted Payments expended by the Company or a
Restricted Subsidiary at the time the commitments were Incurred, except
that commitments Incurred and outstanding that are treated as a
Restricted Payment expended by the Company or a Restricted Subsidiary
and that are terminated shall no longer be treated as a Restricted
Payment expended by the Company or a Restricted Subsidiary upon the
termination of such commitment;
e. repurchase shares of, or options to purchase shares of, common stock of
the Company or any of its Subsidiaries (or pay dividends on its capital
stock for the purpose of enabling any direct or indirect parent company
of the Company to repurchase shares of, or options to purchase shares
of, its common stock) from current or former officers, directors or
employees of the Company or any of its Subsidiaries or any direct or
indirect parent holding company of the Company (or permitted
transferees of such current or former officers, directors or
employees), pursuant to the terms of agreements (including employment
agreements) or plans (or amendments thereto) approved by the Board of
Directors of the Company or such parent holding company under which
such individuals purchase or sell, or are granted the option to
purchase or sell, shares of such common stock; provided, however, that:
(1) the aggregate amount of such repurchases shall not exceed $3
million in any calendar year, although any unused amount in any
calendar year may be carried forward to one or more future
calendar years, and
(2) at the time of such repurchase, no other Default or Event of
Default shall have occurred and be continuing (or result
therefrom);
provided further, however, that such repurchases (and such dividends
made to facilitate such repurchases) shall be included in the
calculation of the amount of Restricted Payments; and
f. make Investments in any Person, provided that the Fair Market Value
thereof, measured on the date each such Investment was made or
returned, as applicable, when taken together with all other Investments
made pursuant to this clause (f), does not exceed the sum of $50
million, plus the aggregate amount of the net reduction in Investments
in any Person made pursuant to this clause (f) on and after February 8,
2000 resulting from dividends, repayments of loans or other transfers
of Property, in each case to the Company or any Restricted Subsidiary
from such Person, except to the extent that any such net reduction
amount is included in the amount calculated pursuant to clause (c) of
the preceding paragraph or any other clause of this paragraph;
provided, however, that at the time of such Investment, no other
Default or Event of Default shall have occurred and be continuing (or
result therefrom); provided further, however, that such Investment
shall be included in the calculation of the amount of Restricted
Payments.
LIMITATION ON LIENS. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, Incur or suffer to exist, any
Lien (other than Permitted Liens) upon any of its Property (including Capital
96
Stock of a Restricted Subsidiary), whether owned at the Issue Date or thereafter
acquired, or any interest therein or any income or profits therefrom, unless it
has made or will make effective provision whereby the Notes or the applicable
Subsidiary Guaranty will be secured by such Lien equally and ratably with (or
prior to) all other Debt of the Company or any Restricted Subsidiary secured by
such Lien.
LIMITATION ON ISSUANCE OR SALE OF CAPITAL STOCK OF RESTRICTED SUBSIDIARIES.
The Company shall not:
a. sell, pledge, hypothecate or otherwise dispose of any shares of Capital
Stock of a Restricted Subsidiary, except pledges of Capital Stock which
constitute Permitted Liens, or
b. permit any Restricted Subsidiary to, directly or indirectly, issue or
sell or otherwise dispose of any shares of its Capital Stock,
other than, in the case of either (a) or (b):
(1) directors' qualifying shares,
(2) to the Company or a Restricted Subsidiary,
(3) a disposition of Capital Stock of such Restricted Subsidiary
where immediately after giving effect thereto, either such
Restricted Subsidiary remains a Restricted Subsidiary or the
Company and the Restricted Subsidiaries no longer own any Capital
Stock of such entity, provided, however, that, in the case of
this clause (3),
(a) such issuance, sale or disposition is effected in compliance
with the covenant described under "--Limitation on Asset
Sales," and
(b) upon consummation of any such disposition which results in
the Company and the Restricted Subsidiaries no longer owning
any Capital Stock of an entity and execution and delivery of
a supplemental indenture in form satisfactory to the
Trustee, such entity shall be released from any Subsidiary
Guaranty previously made by such entity,
(4) the transfer, conveyance, sale or other disposition of shares
required by applicable law or regulation,
(5) Capital Stock issued and outstanding on the Issue Date,
(6) Capital Stock of a Restricted Subsidiary issued and outstanding
prior to the time that such Person becomes a Restricted
Subsidiary so long as such Capital Stock was not issued in
contemplation of such Person's becoming a Restricted Subsidiary
or otherwise being acquired by the Company, or
(7) an issuance of Preferred Stock of a Restricted Subsidiary (other
than Preferred Stock convertible or exchangeable into common
stock of any Restricted Subsidiary) otherwise permitted by the
Indenture.
LIMITATION ON ASSET SALES. The Company shall not, and shall not permit any
Restricted Subsidiary to, directly or indirectly, consummate any Asset Sale
unless:
a. the Company or such Restricted Subsidiary receives consideration at the
time of such Asset Sale at least equal to the Fair Market Value of the
Property subject to such Asset Sale;
97
b. at least 75% of the consideration paid to the Company or such
Restricted Subsidiary in connection with such Asset Sale is in the form
of cash or cash equivalents or Telecommunications Assets or the
assumption by the purchaser of liabilities of the Company or any
Restricted Subsidiary (other than liabilities that are by their terms
subordinated to the Notes or the applicable Subsidiary Guaranty) as a
result of which the Company and the Restricted Subsidiaries are no
longer obligated with respect to such liabilities; and
c. the Company delivers an Officers' Certificate to the Trustee certifying
that such Asset Sale complies with the foregoing clauses (a) and (b).
The Net Available Cash (or any portion thereof) from Asset Sales may be
applied by the Company or a Restricted Subsidiary, to the extent the Company or
such Restricted Subsidiary elects (or is required by the terms of any Debt):
a. to Repay Senior Debt of the Company or any Subsidiary Guarantor
(including the Notes and the Senior Discount Notes), or Debt of any
Restricted Subsidiary that is not a Subsidiary Guarantor (excluding, in
any such case, any Debt owed to the Company or an Affiliate of the
Company); or
b. to reinvest in Additional Assets (including by means of an Investment
in Additional Assets by a Restricted Subsidiary with Net Available Cash
received by the Company or another Restricted Subsidiary).
Any Net Available Cash from an Asset Sale not applied in accordance with
the preceding paragraph within 360 days from the date of the receipt of such Net
Available Cash shall constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $10 million (taking into account income earned on such
Excess Proceeds, if any), the Company will be required to make an offer to
purchase (the "Prepayment Offer") the Notes which offer shall be in the amount
of the Allocable Excess Proceeds, on a pro rata basis according to principal
amount, at a purchase price equal to 100% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the purchase date (subject to the right
of holders of record on the relevant record date to receive interest due on the
relevant interest payment date), in accordance with the procedures (including
prorating in the event of oversubscription) set forth in the Indenture. To the
extent that any portion of the amount of Net Available Cash remains after
compliance with the preceding sentence and provided that all holders of Notes
have been given the opportunity to tender their Notes for purchase in accordance
with the Indenture, the Company or such Restricted Subsidiary may use such
remaining amount for any purpose permitted by the Indenture and the amount of
Excess Proceeds will be reset to zero.
The term "Allocable Excess Proceeds" will mean the product of:
a. the Excess Proceeds, and
b. a fraction,
(1) the numerator of which is the aggregate principal amount of the
Notes outstanding on the date of the Prepayment Offer, and
(2) the denominator of which is the sum of the aggregate principal
amount of the Notes outstanding on the date of the Prepayment
Offer and the aggregate principal amount (or if Incurred with
original issue discount, the aggregate accreted value) of other
Debt of the Company (including the Senior Discount Notes)
outstanding on the date of the Prepayment Offer that is pari
passu in right of payment with the Notes and subject to terms and
conditions in respect of Asset Sales similar to the covenant
described hereunder and requiring the Company to make an offer to
purchase such Debt at substantially the same time as the
Prepayment Offer.
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Within five business days after the Company is obligated to make a
Prepayment Offer as described in the preceding paragraph, the Company shall send
a written notice, by first-class mail, to the holders of Notes, accompanied by
such information regarding the Company and its Subsidiaries as the Company in
good faith believes will enable such holders to make an informed decision with
respect to such Prepayment Offer. Such notice shall state, among other things,
the purchase price and the purchase date, which shall be, subject to any
contrary requirements of applicable law, a business day no earlier than 30 days
nor later than 60 days from the date such notice is mailed.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to the covenant described
hereunder. To the extent that the provisions of any securities laws or
regulations conflict with provisions of the covenant described hereunder, the
Company will comply with the applicable securities laws and regulations and will
not be deemed to have breached its obligations under the covenant described
hereunder by virtue thereof.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED SUBSIDIARIES.
The Company shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist any
consensual restriction on the right of any Restricted Subsidiary to:
a. pay dividends, in cash or otherwise, or make any other distributions on
or in respect of its Capital Stock, or pay any Debt or other obligation
owed, to the Company or any other Restricted Subsidiary,
b. make any loans or advances to the Company or any other Restricted
Subsidiary, or
c. transfer any of its Property to the Company or any other Restricted
Subsidiary.
The foregoing limitations will not apply:
(1) with respect to clauses (a), (b) and (c), to restrictions:
(a) contained in an agreement or instrument governing or
relating to Debt contained in any Credit Facility
outstanding pursuant to clause (b) of Permitted Debt in the
covenant described under "--Certain Covenants -- Limitation
on Debt"; provided, however, that:
(x) the provisions of any Credit Facilities with a Stated
Maturity prior to the scheduled maturity date of the
Notes must permit distributions to the Company for the
sole purpose of, and in an amount sufficient to fund,
the payment of interest when due as scheduled in
respect of the Notes, and
(y) the provisions of any Credit Facilities with a Stated
Maturity on or after the scheduled maturity date of
the Notes must permit distributions to the Company for
the sole purpose of, and in an amount sufficient to
fund, the payment of principal at scheduled maturity
and interest when due as scheduled in respect of the
Notes,
(provided, in the case of both (x) and (y), that such payment is
due or to become due within 30 days from the date of such
distribution and the cash distributed is in fact utilized to meet
such payment obligation) at a time, in the case of both (x) and
(y), when there does not exist an event (or such distribution
would not cause an event) which, with the passage of time or
notice or both, would permit the lenders under any Credit
Facility to
99
declare all amounts thereunder due and payable; provided further,
however, that such agreement or instrument may nevertheless
contain customary financial covenants,
(b) relating to Debt of a Restricted Subsidiary and existing at
the time it became a Restricted Subsidiary if such
restriction was not created in connection with or in
anticipation of the transaction or series of transactions
pursuant to which such Restricted Subsidiary became a
Restricted Subsidiary or was acquired by the Company, or
(c) that result from the Refinancing of Debt Incurred pursuant
to an agreement referred to in clause (1)(A) or (B) above or
in clause (2)(A) or (B) below, provided such restriction is
not materially less favorable to the holders of Notes than
those under the agreement evidencing the Debt so Refinanced,
and
(2) with respect to clause (c) only, to restrictions:
(a) relating to Debt that is permitted to be Incurred and
secured without also securing the Notes or the applicable
Subsidiary Guaranty pursuant to the covenants described
under "--Limitation on Debt" and "--Limitation on Liens"
that limit the right of the debtor to dispose of the
Property securing such Debt,
(b) encumbering Property at the time such Property was acquired
by the Company or any Restricted Subsidiary, so long as such
restriction relates solely to the Property so acquired and
was not created in connection with or in anticipation of
such acquisition,
(c) resulting from customary provisions restricting subletting
or assignment of leases or licenses or customary provisions
in other agreements that restrict assignment of such
agreements or rights thereunder,
(d) customarily contained in property sale agreements limiting
the transfer of such Property pending the closing of such
sale, or
(e) customarily contained in Debt instruments limiting the sale
of all or substantially all the assets of the obligor.
LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Company shall not, and
shall not permit any Restricted Subsidiary to, directly or indirectly, conduct
any business or enter into or suffer to exist any transaction or series of
transactions (including the purchase, sale, transfer, assignment, lease,
conveyance or exchange of any Property or the rendering of any service) with, or
for the benefit of, any Affiliate of the Company (an "Affiliate Transaction"),
unless:
a. the terms of such Affiliate Transaction are:
(1) set forth in writing, and
(2) no less favorable to the Company or such Restricted Subsidiary,
as the case may be, than those that could be obtained in a
comparable arm's-length transaction with a Person that is not an
Affiliate of the Company,
b. if such Affiliate Transaction involves aggregate payments or value in
excess of $2 million, the Board of Directors (including a majority of
the disinterested members of the Board of Directors) approves such
Affiliate Transaction and, in its good faith judgment, believes that
such Affiliate
100
Transaction complies with clause (a)(2) of this paragraph as evidenced
by a Board Resolution promptly delivered to the Trustee, and
c. if such Affiliate Transaction involves aggregate payments or value in
excess of $15 million, the Company obtains a written opinion from an
Independent Financial Advisor to the effect that the consideration to
be paid or received in connection with such Affiliate Transaction is
fair, from a financial point of view, to the Company and the Restricted
Subsidiaries, taken as a whole.
Notwithstanding the foregoing limitation, the Company or any Restricted
Subsidiary may enter into or suffer to exist the following:
a. any transaction or series of transactions between the Company and one
or more Restricted Subsidiaries or between two or more Restricted
Subsidiaries, provided that no more than 10% of the total voting power
of the Voting Stock (on a fully diluted basis) of any such Restricted
Subsidiary is owned by an Affiliate of the Company (other than a
Restricted Subsidiary);
b. any Restricted Payment permitted to be made pursuant to the covenant
described under "--Limitation on Restricted Payments" or any Permitted
Investment;
c. the payment of compensation (including amounts paid pursuant to
employee benefit plans) and the provision of benefits for the personal
services of officers, directors and employees of the Company or any of
the Restricted Subsidiaries, so long as the Board of Directors in good
faith shall have approved the terms thereof;
d. loans and advances to employees made in the ordinary course of business
and consistent with the past practices of the Company or such
Restricted Subsidiary, as the case may be, provided that such loans and
advances do not exceed $3 million in the aggregate at any one time
outstanding; and
e. any transaction or series of transactions pursuant to any agreement in
existence on the Issue Date, and any renewal, extension or replacement
of such agreement on terms no less favorable to the Company and the
Restricted Subsidiaries than the agreement in existence on the Issue
Date.
LIMITATION ON SALE AND LEASEBACK TRANSACTIONS. The Company shall not, and
shall not permit any Restricted Subsidiary to, enter into any Sale and Leaseback
Transaction with respect to any Property unless:
a. the Company or such Restricted Subsidiary would be entitled to:
(1) Incur Debt in an amount equal to the Attributable Debt with
respect to such Sale and Leaseback Transaction pursuant to the
covenant described under "--Limitation on Debt," and
(2) create a Lien on such Property securing such Attributable Debt
without also securing the Notes or the applicable Subsidiary
Guaranty pursuant to the covenant described under "--Limitation
on Liens," and
b. such Sale and Leaseback Transaction is effected in compliance with the
covenant described under "--Limitation on Asset Sales."
DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES. The Board of
Directors may designate any Subsidiary of the Company to be an Unrestricted
Subsidiary if:
101
a. the Subsidiary to be so designated does not own any Capital Stock or
Debt of, or own or hold any Lien on any Property of, the Company or any
other Restricted Subsidiary,
b. either:
(1) the Subsidiary to be so designated has total assets of $1,000 or
less, or
(2) such designation is effective immediately upon such entity
becoming a Subsidiary of the Company, and
c. neither the Company nor any Restricted Subsidiary is directly or
indirectly liable for any Debt that provides that the holder thereof
may (with the passage of time or notice or both) declare a default
thereon or cause the payment thereof to be accelerated or payable prior
to its Stated Maturity upon the occurrence of a default with respect to
any Debt, Lien or other obligation of the Subsidiary to be so
designated (including any right to take enforcement action against the
Subsidiary to be so designated).
Unless so designated as an Unrestricted Subsidiary, any Person that becomes a
Subsidiary of the Company will be classified as a Restricted Subsidiary;
provided, however, that such Subsidiary shall not be designated a Restricted
Subsidiary and shall be automatically classified as an Unrestricted Subsidiary
if either of the requirements set forth in clauses (x) and (y) of the third
immediately following paragraph will not be satisfied after giving pro forma
effect to such classification or if such Person is a Subsidiary of an
Unrestricted Subsidiary.
In addition, neither the Company nor any Restricted Subsidiary shall become
directly or indirectly liable for any Debt that provides that the holder thereof
may (with the passage of time or notice or both) declare a default thereon or
cause the payment thereof to be accelerated or payable prior to its Stated
Maturity upon the occurrence of a default with respect to any Debt, Lien or
other obligation of any Unrestricted Subsidiary (including any right to take
enforcement action against such Unrestricted Subsidiary).
Except as provided in the first sentence of the second preceding paragraph,
no Restricted Subsidiary may be redesignated as an Unrestricted Subsidiary. Upon
designation of a Restricted Subsidiary as an Unrestricted Subsidiary in
compliance with this covenant, such Restricted Subsidiary shall, by execution
and delivery of a supplemental indenture in form satisfactory to the Trustee, be
released from any Subsidiary Guaranty previously made by such Restricted
Subsidiary.
The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary if, immediately after giving pro forma effect to such
designation,
(x) the Company could Incur at least $1.00 of additional Debt pursuant to
either clause (1) or clause (2) of the first paragraph of the covenant
described under "--Limitation on Debt," and
(y) no Default or Event of Default shall have occurred and be continuing or
would result therefrom.
Any such designation or redesignation by the Board of Directors will be
evidenced to the Trustee by filing with the Trustee a Board Resolution giving
effect to such designation or redesignation and an Officers' Certificate that:
a. certifies that such designation or redesignation complies with the
foregoing provisions, and
b. gives the effective date of such designation or redesignation, such
filing with the Trustee to occur within 45 days after the end of the
fiscal quarter of the Company in which such designation or
redesignation is made (or, in the case of a designation or
redesignation made during the last fiscal quarter of the Company's
fiscal year, within 90 days after the end of such fiscal year).
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LIMITATION ON COMPANY'S BUSINESS. The Company shall not, and shall not
permit any Restricted Subsidiary to engage in any business other than the
Telecommunications Business.
FUTURE SUBSIDIARY GUARANTORS. The Company shall cause each Person that
becomes a Domestic Restricted Subsidiary following the Issue Date to execute and
deliver to the Trustee a Subsidiary Guaranty at the time such Person becomes a
Domestic Restricted Subsidiary.
LIMITATION ON LAYERED DEBT. The Company shall not permit any Subsidiary
Guarantor to Incur, directly or indirectly, any Debt that is subordinate or
junior in right of payment to any Senior Debt unless such debt is expressly
subordinated in right of payment to, or ranks pari passu with, the Obligations
under its Subsidiary Guaranty.
MERGER, CONSOLIDATION AND SALE OF PROPERTY
The Company shall not merge, consolidate or amalgamate with or into any
other Person (other than a merger of a Wholly Owned Restricted Subsidiary into
the Company) or sell, transfer, assign, lease, convey or otherwise dispose of
all or substantially all its Property in any one transaction or series of
transactions unless:
a. the Company shall be the surviving Person (the "Surviving Person") or
the Surviving Person (if other than the Company) formed by such merger,
consolidation or amalgamation or to which such sale, transfer,
assignment, lease, conveyance or disposition is made shall be a
corporation organized and existing under the laws of the United States
of America, any State thereof or the District of Columbia;
b. the Surviving Person (if other than the Company) expressly assumes, by
supplemental indenture in form satisfactory to the Trustee, executed
and delivered to the Trustee by such Surviving Person, the due and
punctual payment of the principal of, and premium, if any, and interest
on, all the Notes, according to their tenor, and the due and punctual
performance and observance of all the covenants and conditions of the
Indenture to be performed by the Company;
c. in the case of a sale, transfer, assignment, lease, conveyance or other
disposition of all or substantially all the Property of the Company,
such Property shall have been transferred as an entirety or virtually
as an entirety to one Person;
d. immediately before and after giving effect to such transaction or
series of transactions on a pro forma basis (and treating, for purposes
of this clause (d) and clause (e) below, any Debt that becomes, or is
anticipated to become, an obligation of the Surviving Person or any
Restricted Subsidiary as a result of such transaction or series of
transactions as having been Incurred by the Surviving Person or such
Restricted Subsidiary at the time of such transaction or series of
transactions), no Default or Event of Default shall have occurred and
be continuing;
e. immediately after giving effect to such transaction or series of
transactions on a pro forma basis, the Company or the Surviving Person,
as the case may be, would be able to Incur at least $1.00 of additional
Debt under clause (1) or (2) of the first paragraph of the covenant
described under "--Certain Covenants -- Limitation on Debt";
f. the Company shall deliver, or cause to be delivered, to the Trustee, in
form and substance reasonably satisfactory to the Trustee, an Officers'
Certificate and an Opinion of Counsel, each stating that such
transaction and the supplemental indenture, if any, in respect thereto
comply with this covenant and that all conditions precedent herein
provided for relating to such transaction have been satisfied; and
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g. the Surviving Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that the holders will not recognize income, gain
or loss for Federal income tax purposes as a result of such transaction
or series of transactions and will be subject to Federal income tax on
the same amounts and at the same times as would be the case if the
transaction or series of transactions had not occurred.
The Company shall not permit any Subsidiary Guarantor to merge, consolidate
or amalgamate with or into any other Person (other than a merger of a Wholly
Owned Restricted Subsidiary into such Subsidiary Guarantor) or sell, transfer,
assign, lease, convey or otherwise dispose of all or substantially all such
Subsidiary Guarantor's Property in any one transaction or series of transactions
unless:
a. the Surviving Person (if not such Subsidiary Guarantor) formed by such
merger, consolidation or amalgamation or to which such sale, transfer,
assignment, lease, conveyance or disposition is made shall be a
corporation organized and existing under the laws of the United States
of America, any State thereof or the District of Columbia;
b. the Surviving Person (if other than such Subsidiary Guarantor)
expressly assumes, by Subsidiary Guaranty in form satisfactory to the
Trustee, executed and delivered to the Trustee by such Surviving
Person, the due and punctual performance and observance of all the
obligations of such Subsidiary Guarantor under its Subsidiary Guaranty;
c. in the case of a sale, transfer, assignment, lease, conveyance or other
disposition of all or substantially all the Property of such
Subsidiary Guarantor, such Property shall have been transferred as an
entirety or virtually as an entirety to one Person;
d. immediately before and after giving effect to such transaction or
series of transactions on a pro forma basis (and treating, for purposes
of this clause (d) and clause (e) below, any Debt that becomes, or is
anticipated to become, an obligation of the Surviving Person, the
Company or any Restricted Subsidiary as a result of such transaction or
series of transactions as having been Incurred by the Surviving Person,
the Company or such Restricted Subsidiary at the time of such
transaction or series of transactions), no Default or Event of Default
shall have occurred and be continuing;
e. immediately after giving effect to such transaction or series of
transactions on a pro forma basis, the Company would be able to Incur
at least $1.00 of additional Debt under clause (1) or (2) of the first
paragraph of the covenant described under "--Certain Covenants --
Limitation on Debt"; and
f. the Company shall deliver, or cause to be delivered, to the Trustee, in
form and substance reasonably satisfactory to the Trustee, an Officers'
Certificate and an Opinion of Counsel, each stating that such
transaction and such Subsidiary Guaranty, if any, in respect thereto
comply with this covenant and that all conditions precedent herein
provided for relating to such transaction have been satisfied.
The foregoing provisions (other than clause (d)) shall not apply to any
transactions which constitute an Asset Sale if the Company has complied with the
covenant described under "--Certain Covenants -- Limitation on Asset Sales."
The Surviving Person shall succeed to, and be substituted for, and may
exercise every right and power of the Company under the Indenture (or of the
Subsidiary Guarantor under the Subsidiary Guaranty, as the case may be), but the
predecessor Company in the case of:
a. a sale, transfer, assignment, conveyance or other disposition (unless
such sale, transfer, assignment, conveyance or other disposition is of
all the assets of the Company as an entirety or virtually as an
entirety), or
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b. a lease,
shall not be released from the obligations to pay the principal of, and premium,
if any, and interest on, the Notes.
SEC REPORTS
Notwithstanding that the Company may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file
with the SEC and provide the Trustee and holders of Notes with such annual
reports and such information, documents and other reports as are specified in
Sections 13 and 15(d) of the Exchange Act and applicable to a U.S. corporation
subject to such Sections, such information, documents and reports to be so filed
and provided at the times specified for the filing of such information,
documents and reports under such Sections; provided, however, that the Company
shall not be so obligated to file such information, documents and reports with
the SEC if the SEC does not permit such filings.
EVENTS OF DEFAULT
Events of Default in respect of the Notes include:
(1) failure to make the payment of any interest on the Notes when the
same becomes due and payable, and such failure continues for a
period of 30 days;
(2) failure to make the payment of any principal of, or premium, if
any, on, any of the Notes when the same becomes due and payable
at its Stated Maturity, upon acceleration, redemption, optional
redemption, required repurchase or otherwise;
(3) failure to comply with the covenant described under "--Merger,
Consolidation and Sale of Property";
(4) failure to comply with any other covenant or agreement in the
Notes or in the Indenture (other than a failure that is the
subject of the foregoing clause (1), (2) or (3)) and such failure
continues for 30 days after written notice is given to the
Company as provided below;
(5) a default under any Debt by the Company or any Restricted
Subsidiary that results in acceleration of the maturity of such
Debt, or failure to pay any such Debt at maturity, in an
aggregate amount greater than $15 million (the "cross
acceleration provisions");
(6) any judgment or judgments for the payment of money in an
aggregate amount in excess of $15 million that shall be rendered
against the Company or any Restricted Subsidiary and that shall
not be waived, satisfied or discharged for any period of 60
consecutive days during which a stay of enforcement shall not be
in effect (the "judgment default provisions");
(7) certain events involving bankruptcy, insolvency or reorganization
of the Company or any Significant Subsidiary (the "bankruptcy
provisions");
(8) any Subsidiary Guaranty ceases to be in full force and effect
(other than in accordance with the terms of such Subsidiary
Guaranty) or any Subsidiary Guarantor denies or disaffirms its
obligations under its Subsidiary Guaranty (the "guaranty
provisions"); and
(9) any event occurs that causes, after giving effect to the
expiration of any applicable grace period, an Event of
Termination with Sprint (the "event of termination provisions").
105
A Default under clause (4) is not an Event of Default until the Trustee or
the holders of not less than 25% in aggregate principal amount at maturity of
the Notes then outstanding notify the Company of the Default and the Company
does not cure such Default within the time specified after receipt of such
notice. Such notice must specify the Default, demand that it be remedied and
state that such notice is a "Notice of Default."
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any event that with the giving of notice and the lapse of time would become an
Event of Default, its status and what action the Company is taking or proposes
to take with respect thereto.
If an Event of Default with respect to the Notes (other than an Event of
Default resulting from certain events involving bankruptcy, insolvency or
reorganization with respect to the Company) shall have occurred and be
continuing, the Trustee or the registered holders of not less than 25% in
aggregate principal amount at maturity of the Notes then outstanding may declare
to be immediately due and payable the principal amount of all the Notes then
outstanding, plus accrued but unpaid interest to the date of acceleration. In
case an Event of Default resulting from certain events of bankruptcy, insolvency
or reorganization with respect to the Company shall occur, such amount with
respect to all the Notes shall be due and payable immediately without any
declaration or other act on the part of the Trustee or the holders of the Notes.
After any such acceleration, but before a judgment or decree based on
acceleration is obtained by the Trustee, the registered holders of a majority in
aggregate principal amount of the Notes then outstanding may, under certain
circumstances, rescind and annul such acceleration if all Events of Default,
other than the nonpayment of accelerated principal, premium or interest, have
been cured or waived as provided in the Indenture.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default shall occur and be continuing, the Trustee
will be under no obligation to exercise any of its rights or powers under the
Indenture at the request or direction of any of the holders of the Notes, unless
such holders shall have offered to the Trustee reasonable indemnity. Subject to
such provisions for the indemnification of the Trustee, the holders of a
majority in aggregate principal amount of the Notes then outstanding will have
the right to 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 with respect to the Notes.
No holder of Notes will have any right to institute any proceeding with
respect to the Indenture, or for the appointment of a receiver or trustee, or
for any remedy thereunder, unless:
a. such holder has previously given to the Trustee written notice of a
continuing Event of Default,
b. the registered holders of at least 25% in aggregate principal amount of
the Notes then outstanding have made written request and offered
reasonable indemnity to the Trustee to institute such proceeding as
trustee, and
c. the Trustee shall not have received from the registered holders of a
majority in aggregate principal amount of the Notes then outstanding a
direction inconsistent with such request and shall have failed to
institute such proceeding within 60 days.
However, such limitations do not apply to a suit instituted by a holder of any
Note for enforcement of payment of the principal of, and premium, if any, or
interest on, such Note on or after the respective due dates expressed in such
Note.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with respect to
the Notes with the consent of the registered holders of a majority in aggregate
principal amount of the Notes then outstanding (including consents obtained in
connection with a tender offer or exchange offer for such Notes) and any past
default or compliance with any provisions may also be waived (except a default
in the payment of principal, premium or interest and certain
106
covenants and provisions of the Indenture which cannot be amended without the
consent of each holder of an outstanding Note) with the consent of the
registered holders of at least a majority in aggregate principal amount of the
Notes then outstanding. However, without the consent of each holder of an
outstanding Note, no amendment may, among other things,
(1) reduce the amount of Notes whose holders must consent to an
amendment or waiver,
(2) reduce the rate of or extend the time for payment of interest on
any Note,
(3) reduce the principal of or extend the Stated Maturity of any
Note,
(4) make any Note payable in money other than that stated in the
Note,
(5) impair the right of any holder of the Notes to receive payment of
principal of and interest on such holder's Notes on or after the
due dates therefor or to institute suit for the enforcement of
any payment on or with respect to such holder's Notes or any
Subsidiary Guaranty,
(6) subordinate the Notes or any Subsidiary Guaranty to any other
obligation of the Company or the applicable Subsidiary Guarantor,
(7) release any security interest that may have been granted in favor
of the holders of the Notes other than pursuant to the terms of
such security interest,
(8) reduce the premium payable upon the redemption of any Note nor
change the time at which any Note may be redeemed, as described
under "--Optional Redemption,"
(9) reduce the premium payable upon a Change of Control or, at any
time after a Change of Control has occurred, change the time at
which the Change of Control Offer relating thereto must be made
or at which the Notes must be repurchased pursuant to such Change
of Control Offer,
(10) at any time after the Company is obligated to make a Prepayment
Offer with the Excess Proceeds from Asset Sales, change the time
at which such Prepayment Offer must be made or at which the Notes
must be repurchased pursuant thereto, or
(11) make any change in any Subsidiary Guaranty or the subordination
provisions with respect thereto that would adversely affect the
holders of the Notes.
Without the consent of any holder of the Notes, the Company and the Trustee
may amend the Indenture to:
o cure any ambiguity, omission, defect or inconsistency,
o provide for the assumption by a successor corporation of the
obligations of the Company under the Indenture,
o provide for uncertificated Notes in addition to or in place of
certificated Notes (provided that the uncertificated Notes are issued
in registered form for purposes of Section 163(f) of the Code, or in a
manner such that the uncertificated Notes are described in Section
163(f)(2)(B) of the Code),
o add additional Guarantees with respect to the Notes or to release
Subsidiary Guarantors from Subsidiary Guaranties as provided by the
terms of the Indenture,
107
o secure the Notes, to add to the covenants of the Company for the
benefit of the holders of the Notes or to surrender any right or power
conferred upon the Company,
o make any change to the subordination provisions of the Indenture with
respect to the Subsidiary Guaranties that would limit or terminate the
benefits available to holders of Designated Senior Debt under such
provisions, or
o make any change that does not materially adversely affect the rights of
any holder of the Notes or to comply with any requirement of the SEC in
connection with the qualification of the Indenture under the Trust
Indenture Act.
The consent of the holders of the Notes is not necessary to approve the
particular form of any proposed amendment. It is sufficient if such consent
approves the substance of the proposed amendment. After an amendment becomes
effective, the Company is required to mail to each registered holder of the
Notes at such holder's address appearing in the books of the registrar appointed
under the indenture a notice briefly describing such amendment. However, the
failure to give such notice to all holders of the Notes, or any defect therein,
will not impair or affect the validity of the amendment.
DEFEASANCE
The Company at any time may terminate all its obligations, together with
all the obligations of all Restricted Subsidiaries, under the Notes and the
Indenture ("legal defeasance"), except for certain obligations, including those
respecting the defeasance trust and obligations to register the transfer or
exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes and
to maintain a registrar and paying agent in respect of the Notes. The Company at
any time may terminate:
(1) its obligations under the covenants described under "--Repurchase
at the Option of Holders Upon a Change of Control" and "Certain
Covenants,"
(2) the operation of the cross acceleration provisions, the judgment
default provisions, the bankruptcy provisions with respect to
Significant Subsidiaries, the guaranty provisions and the event
of termination provisions described under "--Events of Default"
above, and
(3) the limitations contained in clause (e) under the first paragraph
of, and in the second paragraph of, "--Merger, Consolidation and
Sale of Property" above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its prior
exercise of its covenant defeasance option.
If the Company exercises its legal defeasance option, payment of the
Notes may not be accelerated because of an Event of Default with respect
thereto. If the Company exercises its covenant defeasance option, payment of the
Notes may not be accelerated because of an Event of Default specified in clause
(4) (with respect to the covenants described under "--Certain Covenants"), (5),
(6), (7) (with respect only to Significant Subsidiaries), (8) or (9) under
"--Events of Default" above or because of the failure of the Company to comply
with clause (e) under the first paragraph of, or with the second paragraph of,
"--Merger, Consolidation and Sale of Property" above. If the Company exercises
its legal defeasance option or its covenant defeasance option, each Subsidiary
Guarantor will be released from all its obligations under its Subsidiary
Guaranty.
The legal defeasance option or the covenant defeasance option may be
exercised only if:
108
a. the Company irrevocably deposits in trust with the Trustee money or
U.S. Government Obligations for the payment of principal of and
interest on the Notes to maturity or redemption, as the case may be;
b. the Company delivers to the Trustee a certificate from a nationally
recognized firm of independent certified public accountants expressing
their opinion that the payments of principal and interest when due and
without reinvestment on the deposited U.S. Government Obligations plus
any deposited money without investment will provide cash at such times
and in such amounts as will be sufficient to pay principal and interest
when due on all the Notes to maturity or redemption, as the case may
be;
c. 123 days pass after the deposit is made and during the 123-day period
no Default described in clause (7) under "--Events of Default" occurs
with respect to the Company or any other Person making such deposit
which is continuing at the end of the period;
d. no Default or Event of Default has occurred and is continuing on the
date of such deposit and after giving effect thereto;
e. such deposit does not constitute a default under any other agreement or
instrument binding on the Company;
f. the Company delivers to the Trustee an Opinion of Counsel to the effect
that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment
Company Act of 1940;
g. in the case of the legal defeasance option, the Company delivers to the
Trustee an Opinion of Counsel stating that:
(1) the Company has received from the Internal Revenue Service a
ruling, or
(2) since the date of the Indenture there has been a change in the
applicable Federal income tax law, to the effect, in either case,
that, and based thereon such Opinion of Counsel shall confirm
that, the holders of the Notes will not recognize income, gain or
loss for Federal income tax purposes as a result of such
defeasance and will be subject to Federal income tax on the same
amounts, in the same manner and at the same time as would have
been the case if such defeasance has not occurred;
h. in the case of the covenant defeasance option, the Company delivers to
the Trustee an Opinion of Counsel to the effect that the holders of the
Notes will not recognize income, gain or loss for Federal income tax
purposes as a result of such covenant defeasance and will be subject to
Federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such covenant defeasance had
not occurred; and
i. the Company delivers to the Trustee an Officers' Certificate and an
Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Notes have been complied with as
required by the Indenture.
GOVERNING LAW
The Indenture and the Notes are governed by the internal laws of the State
of New York without reference to principles of conflicts of law.
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THE TRUSTEE
Wells Fargo Bank Minnesota, N.A. is the Trustee under the Indenture.
Except during the continuance of an Event of Default, the Trustee will
perform only such duties as are specifically set forth in the Indenture. During
the existence of an Event of Default, the Trustee will exercise such of the
rights and powers vested in it under the Indenture and use the same degree of
care and skill in its exercise as a prudent person would exercise under the
circumstances in the conduct of such person's own affairs.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms as well as any other capitalized terms used herein for which no
definition is provided. Unless the context otherwise requires, an accounting
term not otherwise defined has the meaning assigned to it in accordance with
GAAP.
"Additional Assets" means:
a. any Property (other than cash, cash equivalents and securities) to be
owned by the Company or any Restricted Subsidiary and used in a
Telecommunications Business; or
b. Capital Stock of a Person that becomes a Restricted Subsidiary as a
result of the acquisition of such Capital Stock by the Company or
another Restricted Subsidiary from any Person other than the Company or
an Affiliate of the Company; provided, however, that, in the case of
this clause (b), such Restricted Subsidiary is primarily engaged in a
Telecommunications Business.
"Affiliate" of any specified Person means:
a. any other Person directly or indirectly controlling or controlled by or
under direct or indirect common control with such specified Person, or
b. any other Person who is a director or officer of:
(1) such specified Person,
(2) any Subsidiary of such specified Person, or
(3) any Person described in clause (a) above.
For the purposes of this definition, "control" when used with respect to any
Person means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing. For purposes of the covenants described
under "--Certain Covenants -- Limitation on Transactions with Affiliates and --
Limitation on Asset Sales" and the definition of "Additional Assets" only,
"Affiliate" shall also mean any beneficial owner of shares representing 10% or
more of the total voting power of the Voting Stock (on a fully diluted basis) of
the Company or of rights or warrants to purchase such Voting Stock (whether or
not currently exercisable) and any Person who would be an Affiliate of any such
beneficial owner pursuant to the first sentence hereof.
"Annualized Pro Forma EBITDA" means, as of any date of determination, the
product of Pro Forma EBITDA for the Company's two most recently completed fiscal
quarters for which financial statements are available prior to such
determination date multiplied by two.
"Asset Sale" means any sale, lease, transfer, issuance or other disposition
(or series of related sales, leases, transfers, issuances or dispositions) by
the Company or any Restricted Subsidiary, including any disposition by
110
means of a merger, consolidation or similar transaction (each referred to for
the purposes of this definition as a "disposition"), of:
a. any shares of Capital Stock of a Restricted Subsidiary (other than
directors' qualifying shares), or
b. any other assets of the Company or any Restricted Subsidiary outside of
the ordinary course of business of the Company or such Restricted
Subsidiary,
other than, in the case of clause (a) or (b) above,
(1) any disposition by a Restricted Subsidiary to the Company or by
the Company or a Restricted Subsidiary to a Wholly-Owned
Restricted Subsidiary,
(2) any disposition that constitutes a Permitted Investment or
Restricted Payment permitted by the covenant described under
"--Certain Covenants -- Limitation on Restricted Payments,"
(3) any disposition effected in compliance with the first paragraph
of the covenant described under "--Merger, Consolidation and Sale
of Property," and
(4) disposition of assets having an aggregate Fair Market Value of,
and for which the aggregate consideration received by the Company
and its Restricted Subsidiaries is equal to, $1 million or less
in any 12-month period.
"Attributable Debt" in respect of a Sale and Leaseback Transaction means,
at any date of determination,
a. if such Sale and Leaseback Transaction is a Capital Lease
Obligation, the amount of Debt represented thereby according to
the definition of "Capital Lease Obligation," and
b. in all other instances, the present value (discounted at the
interest rate borne by the Notes, compounded annually) of the
total obligations of the lessee for rental payments during the
remaining term of the lease included in such Sale and Leaseback
Transaction (including any period for which such lease has been
extended).
"Average Life" means, as of any date of determination, with respect to any
Debt or Preferred Stock, the quotient obtained by dividing:
a. the sum of the product of the numbers of years (rounded to the
nearest one-twelfth of one year) from the date of determination
to the dates of each successive scheduled principal payment of
such Debt or redemption or similar payment with respect to such
Preferred Stock multiplied by the amount of such payment by
b. the sum of all such payments.
"Capital Lease Obligations" means any obligation under a lease that is
required to be capitalized for financial reporting purposes in accordance with
GAAP; and the amount of Debt represented by such obligation shall be the
capitalized amount of such obligations determined in accordance with GAAP; and
the Stated Maturity thereof shall be the date of the last payment of rent or any
other amount due under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty. For purposes of
"--Certain Covenants --Limitation on Liens," a Capital Lease Obligation shall be
deemed secured by a Lien on the Property being leased.
111
"Capital Stock" means, with respect to any Person, any shares or other
equivalents (however designated) of any class of corporate stock or partnership
interests or any other participations, rights, warrants, options or other
interests in the nature of an equity interest in such Person, including
Preferred Stock, but excluding any debt security convertible or exchangeable
into such equity interest.
"Capital Stock Sale Proceeds" means the aggregate cash proceeds received by
the Company (or received by any direct or indirect parent Person of the Company
and subsequently contributed to the Company) from the issuance or sale (other
than to a Subsidiary of the Company or an employee stock ownership plan or trust
established by the Company or any such Subsidiary for the benefit of their
employees) by the Company or any direct or indirect parent Person of the Company
of Capital Stock (other than Disqualified Stock) of the Company or such parent
Person after February 8, 2000, net of attorneys' fees, accountants' fees,
underwriters' or placement agents' fees, discounts or commissions and brokerage,
consultant and other fees actually incurred by the Company or any Restricted
Subsidiary of the Company in connection with such issuance or sale and net of
taxes paid or payable as a result thereof.
"Change of Control" means the occurrence of any of the following events:
a. if any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act or any successor provisions to either of
the foregoing), including any group acting for the purpose of
acquiring, holding, voting or disposing of securities within the
meaning of Rule 13d-5(b)(1) under the Exchange Act, other than any one
or more of the Permitted Holders, becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act, except that a person will
be deemed to have "beneficial ownership" of all shares that any such
person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly,
of a majority of the total voting power of the Voting Stock of the
Company, (for purposes of this clause (a), such person or group shall
be deemed to beneficially own any Voting Stock of a corporation held by
any other corporation (the "parent corporation") so long as such person
or group beneficially owns, directly or indirectly, in the aggregate a
majority of the total voting power of the Voting Stock of such parent
corporation);
b. the sale, transfer, assignment, lease, conveyance or other disposition,
directly or indirectly, of all or substantially all the assets of the
Company and the Restricted Subsidiaries, considered as a whole (other
than a disposition of such assets as an entirety or virtually as an
entirety to a Wholly Owned Restricted Subsidiary or one or more
Permitted Holders) shall have occurred, or the Company merges,
consolidates or amalgamates with or into any other Person (other than
one or more Permitted Holders) or any other Person (other than one or
more Permitted Holders) merges, consolidates or amalgamates with or
into the Company, in any such event pursuant to a transaction in which
the outstanding Voting Stock of the Company is reclassified into or
exchanged for cash, securities or other Property, other than any such
transaction where:
(1) the outstanding Voting Stock of the Company is reclassified into
or exchanged for other Voting Stock of the Company or for Voting
Stock of the surviving corporation; and
(2) the holders of the Voting Stock of the Company immediately prior
to such transaction own, directly or indirectly, not less than a
majority of the Voting Stock of the Company or the surviving
corporation immediately after such transaction and in
substantially the same proportion as before the transaction;
c. during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors (together
with any new directors whose election or appointment by such Board or
whose nomination for election by the shareholders of the Company was
approved by a vote of not less than a majority of the directors then
still in office who were either directors at
112
the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute
a majority of the Board of Directors then in office; or
d. the shareholders of the Company shall have approved any plan of
liquidation or dissolution of the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commodity Price Protection Agreement" means, in respect of a Person, any
forward contract, commodity swap agreement, commodity option agreement or other
similar agreement or arrangement designed to protect such Person against
fluctuations in commodity prices.
"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Restricted Subsidiaries, plus, to
the extent not included in such total interest expense, and to the extent
Incurred by the Company or its Restricted Subsidiaries,
a. interest expense attributable to leases constituting part of a Sale and
Leaseback Transaction and to Capital Lease Obligations,
b. amortization of debt discount and debt issuance cost, including
commitment fees,
c. capitalized interest,
d. non-cash interest expense,
e. SECs, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing,
f. net costs associated with Hedging Obligations (including amortization
of fees),
g. Preferred Stock Dividends,
h. interest Incurred in connection with Investments in discontinued
operations,
i. interest accruing on any Debt of any other Person to the extent such
Debt is Guaranteed by the Company or any Restricted Subsidiary or is
secured by any Liens on the Property of the Company or any Restricted
Subsidiary, and
j. the cash contributions to any employee stock ownership plan or similar
trust to the extent such contributions are used by such plan or trust
to pay interest or fees to any Person (other than the Company) in
connection with Debt Incurred by such plan or trust.
"Consolidated Net Income" means, for any period, the net income (loss) of
the Company and its consolidated Subsidiaries; provided, however, that there
shall not be included in such Consolidated Net Income:
a. any net income (loss) of any Person (other than the Company) if such
Person is not a Restricted Subsidiary, except that:
(1) subject to the exclusion contained in clause (d) below, the
Company's equity in the net income of any such Person for such
period shall be included in such Consolidated Net Income up to
the aggregate amount of cash distributed by such Person during
such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in
113
the case of a dividend or other distribution to a Restricted
Subsidiary, to the limitations contained in clause (c) below),
and
(2) the Company's equity in a net loss of any such Person, other than
an Unrestricted Subsidiary or a Person as to which the Company
is not, and under no circumstances would be, obligated to make
any additional Investment, for such period shall be included in
determining such Consolidated Net Income,
b. for purposes of the covenant described under "--Certain Covenants
--Limitation on Restricted Payments" only, any net income (loss) of any
Person acquired by the Company or any of its consolidated Subsidiaries
in a pooling of interests transaction for any period prior to the date
of such acquisition,
c. any net income (loss) of any Restricted Subsidiary that is not a
Subsidiary Guarantor if such Restricted Subsidiary is subject to
restrictions, directly or indirectly, on the payment of dividends or
the making of distributions, directly or indirectly, to the Company,
except that:
(1) subject to the exclusion contained in clause (d) below, the
Company's equity in the net income of any such Restricted
Subsidiary for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash distributed by such
Restricted Subsidiary during such period to the Company or
another Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution to
another Restricted Subsidiary, to the limitation contained in
this clause), and
(2) the Company's equity in a net loss of any such Restricted
Subsidiary for such period shall be included in determining such
Consolidated Net Income,
d. any gain or loss realized upon the sale or other disposition of any
Property of the Company or any of its consolidated Subsidiaries
(including pursuant to any Sale and Leaseback Transaction) that is not
sold or otherwise disposed of in the ordinary course of business,
e. any extraordinary gain or loss,
f. the cumulative effect of a change in accounting principles, and
g. any non-cash compensation expense realized for grants of performance
shares, stock options or other rights to officers, directors and
employees of the Company or any Restricted Subsidiary, provided that
such shares, options or other rights can be redeemed at the option of
the holder only for Capital Stock of the Company (other than
Disqualified Stock).
Notwithstanding the foregoing, for purposes of the covenant described under
"--Certain Covenants -- Limitation on Restricted Payments" only, there shall be
excluded from Consolidated Net Income any dividends, repayments of loans or
advances or other transfers of assets from Unrestricted Subsidiaries to the
Company or a Restricted Subsidiary to the extent such dividends, repayments or
transfers increase the amount of Restricted Payments permitted under such
covenant pursuant to clause (c)(4) thereof.
"Credit Facilities" means, with respect to the Company or any Restricted
Subsidiary, one or more debt or commercial paper facilities with banks, life
insurance companies, mutual funds, pension funds or other institutional lenders
providing for revolving credit loans, term loans, receivables or inventory
financing (including through the sale of receivables or inventory to such
lenders or to special purpose, bankruptcy remote entities formed to borrow from
such lenders against such receivables or inventory) or letters of credit, in
each case together with any Refinancings thereof by any lenders or syndicates of
lenders and as any of the same may be amended or modified.
114
"Cumulative EBITDA" means, as of any date of determination, the cumulative
EBITDA of the Company and its consolidated Restricted Subsidiaries from and
after the last day of the fiscal quarter of the Company immediately preceding
February 8, 2000 to the end of the fiscal quarter immediately preceding the date
of determination or, if such cumulative EBITDA for such period is negative, the
amount (expressed as a negative number) by which such cumulative EBITDA is less
than zero.
"Cumulative Interest Expense" means, at any date of determination, the
aggregate amount of Consolidated Interest Expense paid, accrued or scheduled to
be paid or accrued from the last day of the fiscal quarter of the Company
immediately preceding February 8, 2000 to the end of the fiscal quarter
immediately preceding the date of determination.
"Currency Exchange Protection Agreement" means, in respect of a Person, any
foreign exchange contract, currency swap agreement, currency option or other
similar agreement or arrangement designed to protect such Person against
fluctuations in currency exchange rates.
"Debt" means, with respect to any Person on any date of determination
(without duplication):
a. the principal of and premium (if any) in respect of:
(1) debt of such Person for money borrowed, and
(2) debt evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such Person is responsible
or liable;
b. all Capital Lease Obligations of such Person and all Attributable Debt
in respect of Sale and Leaseback Transactions entered into by such
Person;
c. all obligations of such Person issued or assumed as the deferred
purchase price of Property, all conditional sale obligations of such
Person and all obligations of such Person under any title retention
agreement (but excluding trade accounts payable arising in the ordinary
course of business);
d. all obligations of such Person for the reimbursement of any obligor on
any letter of credit, banker's acceptance or similar credit transaction
(other than obligations with respect to letters of credit securing
obligations (other than obligations described in (a) through (c) above)
entered into in the ordinary course of business of such Person to the
extent such letters of credit are not drawn upon or, if and to the
extent drawn upon, such drawing is reimbursed no later than the third
Business Day following receipt by such Person of a demand for
reimbursement following payment on the letter of credit);
e. the amount of all obligations of such Person with respect to the
Repayment of any Disqualified Stock or, with respect to any Subsidiary
of such Person, any Preferred Stock (but excluding, in each case, any
accrued dividends);
f. all obligations of the type referred to in clauses (a) through (e) of
other Persons and all dividends of other Persons for the payment of
which, in either case, such Person is responsible or liable, directly
or indirectly, as obligor, guarantor or otherwise, including by means
of any Guarantee;
g. all obligations of the type referred to in clauses (a) through (f) of
other Persons secured by any Lien on any Property of such Person
(whether or not such obligation is assumed by such Person), the amount
of such obligation being deemed to be the lesser of the value of such
Property or the amount of the obligation so secured; and
115
h. to the extent not otherwise included in this definition, Hedging
Obligations of such Person.
The amount of Debt of any Person at any date shall be the outstanding balance at
such date of all unconditional obligations as described above and the maximum
liability, upon the occurrence of the contingency giving rise to the obligation,
of any contingent obligations at such date. The amount of Debt represented by a
Hedging Obligation shall be equal to:
(1) zero if such Hedging Obligation has been Incurred pursuant to
clause (e) of the second paragraph of the covenant described
under "--Certain Covenants -- Limitation on Debt," or
(2) the notional amount of such Hedging Obligation if not Incurred
pursuant to such clause.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable, in either case at the option of the holder
thereof) or otherwise:
a. matures or is mandatorily redeemable pursuant to a sinking fund
obligation or otherwise,
b. is or may become redeemable or repurchaseable at the option of the
holder thereof, in whole or in part, or
c. is convertible or exchangeable at the option of the holder thereof for
Debt or Disqualified Stock,
on or prior to, in the case of clause (a), (b) or (c), the first anniversary of
the Stated Maturity of the Notes; provided, however, that Capital Stock will not
be deemed to be Disqualified Stock if it is redeemable by exchange for or
through the issuance of Capital Stock (other than Disqualified Stock) of that
issuer; and provided further, however, that any Capital Stock that would not
constitute Disqualified Stock but for the provisions thereof giving holders
thereof the right to require such Person to repurchase or redeem such Capital
Stock upon the occurrence of an Asset Sale or Change of Control occurring prior
to the Stated Maturity of the Notes shall not constitute Disqualified Stock if
the Asset Sale or Change of Control provisions applicable to such Capital Stock
are no more favorable to the holders of such Capital Stock than the covenants
described under "Certain Covenants --Limitation on Asset Sales" and
"--Repurchase at the Option of Holders Upon a Change of Control" and such
Capital Stock specifically provides that:
(1) such Person shall not repurchase or redeem any such Capital Stock
pursuant to such provisions prior to such Person having
repurchased all the Notes that are required to be repurchased
pursuant to such covenants, and
(2) no default, event of default or similar occurrence under the
terms of such Capital Stock shall result from such Person not so
repurchasing or redeeming any such Capital Stock because of the
prohibition described in the preceding clause (1).
"Disqualified Stock Dividends" means all dividends with respect to
Disqualified Stock of the Company held by Persons other than a Wholly Owned
Restricted Subsidiary.
"Domestic Restricted Subsidiary" means any Restricted Subsidiary other than
(a) a Foreign Restricted Subsidiary or (b) a Subsidiary of a Foreign Restricted
Subsidiary.
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"Domestic Wholly Owned Subsidiary" means, at any time, a Restricted
Subsidiary all the Voting Stock of which (except directors qualifying shares) is
at such time owned, directly or indirectly, by the Company and its other
Domestic Wholly Owned Subsidiaries and that is organized under the laws of the
United States of America or any State thereof or the District of Columbia.
Notwithstanding the preceding, all Restricted Subsidiaries existing on the Issue
Date, including Alamosa PCS, Inc., Texas Telecommunications, LP and Alamosa
Wisconsin Limited Partnership, will be considered Domestic Wholly Owned
Subsidiaries so long as they remain Restricted Subsidiaries.
"EBITDA" means, for any period, an amount equal to, for the Company and its
consolidated Restricted Subsidiaries:
a. the sum of Consolidated Net Income for such period, plus the following
to the extent reducing Consolidated Net Income for such period:
(1) the provision for taxes based on income or profits or utilized in
computing net loss,
(2) Consolidated Interest Expense,
(3) depreciation,
(4) amortization of intangibles, and
(5) any other non-cash items (other than any such non-cash item to
the extent that it represents an accrual of or reserve for cash
expenditures in any future period), minus
b. all non-cash items increasing Consolidated Net Income for such period
(other than any such non-cash item to the extent that it will result in
the receipt of cash payments in any future period).
Notwithstanding the foregoing clause (a), the provision for taxes and the
depreciation, amortization and non-cash items of a Restricted Subsidiary that is
not a Subsidiary Guarantor shall be added to Consolidated Net Income to compute
EBITDA only to the extent (and in the same proportion) that the net income of
such Restricted Subsidiary was included in calculating Consolidated Net Income
and only if a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Restricted Subsidiary
without prior approval (that has not been obtained), pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to such Restricted
Subsidiary or its shareholders.
"Eligible Receivables" means, at any time, net Receivables of the Company
and its Restricted Subsidiaries, as evidenced on the most recent quarterly
consolidated balance sheet of the Company as at a date at least 45 days prior to
such time, arising in the ordinary course of business of the Company or any
Restricted Subsidiary.
"Event of Default" has the meaning set forth under "--Events of Default."
"Event of Termination" means any of the events described in (i) Section
11.3 of the Company's Manage ment Agreement with Sprint or (ii) Section 13.2 of
either of the Company's Trademark and Service Mark License Agreements with
Sprint, as such agreements referred to in clauses (i) and (ii) may be amended,
supplemented or otherwise modified from time to time.
"Exchange Act" means the Securities Exchange Act of 1934.
"Fair Market Value" means, with respect to any Property, the price that
could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under undue
pressure or compulsion to complete the transaction. Fair Market Value shall be
determined, except as otherwise provided,
117
a. if such Property has a Fair Market Value equal to or less than $15
million, by any Officer of the Company, or
b. if such Property has a Fair Market Value in excess of $15 million, by a
majority of the Board of Directors and evidenced by a Board Resolution,
dated within 30 days of the relevant transaction, delivered to the
Trustee.
"Foreign Restricted Subsidiary" means any Restricted Subsidiary which is
not organized under the laws of the United States of America or any State
thereof or the District of Columbia.
"GAAP" means United States generally accepted accounting principles as in
effect on February 8, 2000, including those set forth:
a. in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants,
b. in the statements and pronouncements of the Financial Accounting
Standards Board,
c. in such other statements by such other entity as approved by a
significant segment of the account ing profession, and
d. the rules and regulations of the SEC governing the inclusion of
financial statements (including pro forma financial statements) in
periodic reports required to be filed pursuant to Section 13 of the
Exchange Act, including opinions and pronouncements in staff accounting
bulletins and similar written statements from the accounting staff of
the SEC.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Debt of any other Person and any
obligation, direct or indirect, contingent or otherwise, of such Person:
a. to purchase or pay (or advance or supply funds for the purchase or
payment of) such Debt 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
b. entered into for the purpose of assuring in any other manner the
obligee against loss in respect thereof (in whole or in part);
provided, however, that the term "Guarantee" shall not include:
(1) endorsements for collection or deposit in the ordinary course of
business, or
(2) a contractual commitment by one Person to invest in another
Person for so long as such Investment is reasonably expected to
constitute a Permitted Investment under clause (b) of the
definition of "Permitted Investment."
The term "Guarantee" used as a verb has a corresponding meaning. The term
"Guarantor" shall mean any Person Guaranteeing any obligation.
"Hedging Obligation" of any Person means any obligation of such Person
pursuant to any Interest Rate Agreement, Currency Exchange Protection Agreement,
Commodity Price Protection Agreement or any other similar agreement or
arrangement.
118
"Incur" means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by merger, conversion, exchange or otherwise), extend,
assume, Guarantee or become liable in respect of such Debt or other obligation
or the recording, as required pursuant to GAAP or otherwise, of any such Debt or
obligation on the balance sheet of such Person (and "Incurrence" and "Incurred"
shall have meanings correlative to the foregoing); provided, however, that a
change in GAAP that results in an obligation of such Person that exists at such
time, and is not theretofore classified as Debt, becoming Debt shall not be
deemed an Incurrence of such Debt; provided further, however, that any Debt or
other obligations of a Person existing at the time such Person becomes a
Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be
deemed to be Incurred by such Subsidiary at the time it becomes a Subsidiary;
and provided further, however, that solely for purposes of determining
compliance with "--Certain Covenants -- Limitation on Debt," neither accrual of
interest on Debt nor amortization of debt discount shall be deemed to be the
Incurrence of Debt, provided that in the case of Debt sold at a discount to the
principal amount at maturity thereof, the amount of such Debt Incurred shall at
all times be the accreted value of such Debt.
"Independent Financial Advisor" means an investment banking firm of
national standing or any third party appraiser of national standing, provided
that such firm or appraiser is not an Affiliate of the Company.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement designed to protect against fluctuations in interest rates.
"Investment" by any Person means any direct or indirect loan (other than
advances to customers in the ordinary course of business that are recorded as
accounts receivable on the balance sheet of such Person), advance or other
extension of credit or capital contribution (by means of transfers of cash or
other Property to others or payments for Property or services for the account or
use of others, or otherwise) to, or Incurrence of a Guarantee of any obligation
of, or purchase or acquisition of Capital Stock, bonds, notes, debentures or
other securities or evidence of Debt issued by, any other Person, except that
the acquisition of the Capital Stock of another Person in exchange for the
Capital Stock of the Company, other than Disqualified Stock, shall not be
considered an Investment by the Company. For purposes of the covenant described
under "--Certain Covenants -- Limitation on Restricted Payments," "--Designation
of Restricted and Unrestricted Subsidiaries" and the definition of "Restricted
Payment," "Investment" shall include the portion (proportionate to the Company's
equity interest in such Subsidiary) of the Fair Market Value of the net assets
of any Subsidiary of the Company at the time that such Subsidiary is designated
an Unrestricted Subsidiary; provided, however, that upon a redesignation of such
Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent "Investment" in an Unrestricted Subsidiary of an amount (if
positive) equal to:
a. the Company's "Investment" in such Subsidiary at the time of such
redesignation, less
b. the portion (proportionate to the Company's equity interest in such
Subsidiary) of the Fair Market Value of the net assets of such
Subsidiary at the time of such redesignation.
In determining the amount of any Investment made by transfer of any Property
other than cash, such Property shall be valued at its Fair Market Value at the
time of such Investment.
"Issue Date" means January 31, 2001.
"Leverage Ratio" means the ratio of:
a. the outstanding Debt of the Company and the Restricted Subsidiaries on
a consolidated basis, to
b. the Annualized Pro Forma EBITDA.
119
The Leverage Ratio is calculated after giving pro forma effect to any Asset
Sale, Investment or acquisition of Property required to be given pro forma
effect pursuant to the definition of Pro Forma EBITDA.
"Lien" means, with respect to any Property of any Person, any mortgage or
deed of trust, pledge, hypothecation, assignment, deposit arrangement, security
interest, lien, charge, easement (other than any easement not materially
impairing usefulness or marketability), encumbrance, preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever on or with respect to such Property (including any Capital Lease
Obligation, conditional sale or other title retention agreement having
substantially the same economic effect as any of the foregoing or any Sale and
Leaseback Transaction).
"Moody's" means Moody's Investors Service, Inc. or any successor to the
rating agency business thereof.
"Net Available Cash" from any Asset Sale means cash payments received
therefrom (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring Person of Debt or other obligations relating to the
Property that is the subject of such Asset Sale or received in any other
non-cash form), in each case net of:
a. all legal, title and recording tax expenses, SECs, brokerage fees and
other fees and expenses incurred, and all Federal, state, provincial,
foreign and local taxes required to be accrued as a liability under
GAAP, as a consequence of such Asset Sale,
b. all payments made on any Debt that is secured by any Property subject
to such Asset Sale, in accordance with the terms of any Lien upon or
other security agreement of any kind with respect to such Property, or
which must by its terms, or in order to obtain a necessary consent to
such Asset Sale, or by applicable law, be repaid out of the proceeds
from such Asset Sale,
c. all distributions and other payments required to be made to minority
interest holders in Subsidiar ies or joint ventures as a result of such
Asset Sale, and
d. the deduction of appropriate amounts provided by the seller as a
reserve, in accordance with GAAP, against any liabilities associated
with the Property disposed in such Asset Sale and retained by the
Company or any Restricted Subsidiary after such Asset Sale.
"Obligations" means the obligation of each Subsidiary Guarantor pursuant to
its Subsidiary Guaranty of:
a. the full and punctual payment of principal and interest on the Notes
when due, whether at maturity, by acceleration, by redemption or
otherwise, and all other monetary obligations of the Company under the
Notes, and
b. the full and punctual performance within applicable grace periods of
all other obligations of the Company under the Notes.
"Officer" means the Chief Executive Officer, the Chief Operating Officer,
the Chief Financial Officer or the Chief Technology Officer of the Company.
"Officers' Certificate" means a certificate signed by two Officers of the
Company, at least one of whom shall be the principal executive officer or
principal financial officer of the Company, and delivered to the Trustee.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
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"Permitted Holders" means Rosewood Telecommunications, L.L.C., Caroline
Hunt Trust Estate, South Plains Advanced Communications & Electronics, Inc.,
West Texas PCS, LLC, Taylor Telecommunications, Inc., Tregan International Corp.
and Plateau Telecommunications Incorporated, any individual who controlled any
of the above entities as of February 8, 2000 and their respective estates,
spouses, ancestors and lineal descendants, the legal representatives of any of
the foregoing and the trustees of any bona fide trusts of which the foregoing
are the sole beneficiaries or the grantors, or any Person of which the foregoing
"beneficially owns" (as defined in Rule 13d-3 under the Exchange Act),
individually or collectively with any of the foregoing, at least 66 2/3% of the
total voting power of the Voting Stock of such Person, or any group (as such
term is used in Sections 13(d) or 14(d) of the Exchange Act or any successor
provisions) consisting entirely of the foregoing Persons.
"Permitted Investment" means any Investment by the Company or a Restricted
Subsidiary in:
a. the Company or any Restricted Subsidiary or any Person that will, upon
the making of such Investment, become a Restricted Subsidiary;
b. any Person if as a result of such Investment such Person is merged or
consolidated with or into, or transfers or conveys all or substantially
all its Property to, the Company or a Restricted Subsidiary, provided
that such Person's primary business is a Telecommunications Business;
c. Temporary Cash Investments;
d. receivables owing to the Company or a Restricted Subsidiary, if created
or acquired in the ordinary course of business and payable or
dischargeable in accordance with customary trade terms; provided,
however, that such trade terms may include such concessionary trade
terms as the Company or such Restricted Subsidiary deems reasonable
under the circumstances;
e. payroll, travel and similar advances to cover matters that are expected
at the time of such advances ultimately to be treated as expenses for
accounting purposes and that are made in the ordinary course of
business;
f. loans and advances to employees made in the ordinary course of business
consistent with past practices of the Company or such Restricted
Subsidiary, as the case may be, provided that such loans and advances
do not exceed $3 million at any one time outstanding;
g. stock, obligations or other securities received in settlement of debts
created in the ordinary course of business and owing to the Company or
a Restricted Subsidiary or in satisfaction of judgments; and
h. Hedging Obligations Incurred in compliance with the covenant,
"Limitation on Debt."
"Permitted Liens" means:
a. Liens to secure Debt permitted to be Incurred under clause (b) of the
second paragraph of the covenant described under "--Certain Covenants
-- Limitation on Debt";
b. Liens to secure Debt permitted to be Incurred under clause (c) of the
second paragraph of the covenant described under "--Certain Covenants
-- Limitation on Debt," provided that any such Lien may not extend to
any Property of the Company or any Restricted Subsidiary, other than
the Property acquired, constructed or leased with the proceeds of such
Debt and any improvements or accessions to such Property;
c. Liens for taxes, assessments or governmental charges or levies on the
Property of the Company or any Restricted Subsidiary if the same shall
not at the time be delinquent or thereafter can be paid
121
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;
d. Liens imposed by law, such as carriers', warehousemen's and mechanics'
Liens and other similar Liens, on the Property of the Company 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;
e. Liens on the Property of the Company or any Restricted Subsidiary
Incurred in the ordinary course of business to secure performance of
obligations with respect to statutory or regulatory require ments,
performance or return-of-money bonds, surety bonds 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 Company and the Restricted
Subsidiaries taken as a whole;
f. Liens on Property at the time the Company or any Restricted Subsidiary
acquired such Property, including any acquisition by means of a merger
or consolidation with or into the Company or any Restricted Subsidiary;
provided, however, that any such Lien may not extend to any other
Property of the Company 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 Company or any
Restricted Subsidiary;
g. Liens on the Property 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 Company 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 anticipation
of or in connection with the transaction or series of transactions
pursuant to which such Person became a Restricted Subsidiary;
h. pledges or deposits by the Company 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 Debt) or leases to which the
Company or any Restricted Subsidiary is party, or deposits to secure
public or statutory obligations of the Company or any Restricted
Subsidiary, or deposits for the payment of rent, in each case Incurred
in the ordinary course of business;
i. 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;
j. Liens existing on the Issue Date not otherwise described in clauses (a)
through (i) above;
k. Liens on the Property of the Company or any Restricted Subsidiary to
secure any Refinancing, in whole or in part, of any Debt secured by
Liens referred to in clause (b), (f), (g) or (j) above; provided,
however, that any such Lien shall be limited to all or part of the same
Property that secured the original Lien (together with improvements and
accessions to such Property) and the aggregate principal amount of Debt
that is secured by such Lien shall not be increased to an amount
greater than the sum of:
(1) the outstanding principal amount, or, if greater, the committed
amount, of the Debt secured by Liens described under clause (b),
(f), (g) or (j) above, as the case may be, at the time the
original Lien became a Permitted Lien under the Indenture, and
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(2) an amount necessary to pay any fees and expenses, including
premiums and defeasance costs, incurred by the Company or such
Restricted Subsidiary in connection with such Refinancing;
l. Liens on the Property of the Company or any Restricted Subsidiary to
secure Debt under any Interest Rate Agreement, provided that such Debt
was Incurred pursuant to clause (e) of the second paragraph of the
covenant described under "--Certain Covenants -- Limitation on Debt";
m. any interest or title of a lessor in the Property subject to any lease
incurred in the ordinary course of business, other than a Capital
Lease; and
n. judgment Liens securing judgment in an aggregate amount outstanding at
any one time of not more than $15 million.
"Permitted Refinancing Debt" means any Debt that Refinances any other Debt,
including any successive Refinancings, so long as:
a. such Debt is in an aggregate principal amount (or if Incurred with
original issue discount, an aggregate issue price) not in excess of the
sum of:
(1) the aggregate principal amount (or if Incurred with original
issue discount, the aggregate accreted value) then outstanding of
the Debt being Refinanced, and
(2) an amount necessary to pay any fees and expenses, including
premiums and defeasance costs, related to such Refinancing,
b. the Average Life of such Debt is equal to or greater than the Average
Life of the Debt being Refinanced,
c. the Stated Maturity of such Debt is no earlier than the Stated Maturity
of the Debt being Refinanced, and
d. the new Debt shall not be senior in right of payment to the Debt that
is being Refinanced;
provided, however, that Permitted Refinancing Debt shall not include:
(x) Debt of a Subsidiary Guarantor that Refinances Debt of the
Company,
(y) Debt of a Subsidiary that is not a Subsidiary Guarantor that
Refinances Debt of the Company or a Subsidiary Guarantor (other
than Debt Incurred pursuant to Credit Facilities), or
(z) Debt of the Company or a Restricted Subsidiary that Refinances
Debt of an Unrestricted Subsidiary.
"Person" means any individual, corporation, company (including any limited
liability company), association, partnership, joint venture, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to the payment of
dividends, or as to the distribution of assets upon any voluntary or involuntary
liquidation or dissolution of such Person, over shares of any other class of
Capital Stock issued by such Person.
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"Preferred Stock Dividends" means all dividends with respect to Preferred
Stock of Restricted Subsidiaries held by Persons other than the Company or a
Wholly Owned Restricted Subsidiary. The amount of any such dividend shall be
equal to the quotient of such dividend divided by the difference between one and
the maximum statutory federal income rate (expressed as a decimal number between
1 and 0) then applicable to the issuer of such Preferred Stock.
"pro forma" means, with respect to any calculation made or required to be
made pursuant to the terms hereof, a calculation performed in accordance with
Article 11 of Regulation S-X promulgated under the Securities Act, as
interpreted in good faith by the Board of Directors after consultation with the
independent certified public accountants of the Company, or otherwise a
calculation made in good faith by the Board of Directors after consultation with
the independent certified public accountants of the Company, as the case may be.
"Pro Forma EBITDA" means, for any period, the EBITDA of the Company and its
consolidated Restricted Subsidiaries, after giving effect to the following:
if:
a. since the beginning of such period, the Company or any Restricted
Subsidiary shall have made any Asset Sale or an Investment (by merger
or otherwise) in any Restricted Subsidiary (or any Person that becomes
a Restricted Subsidiary) or an acquisition of Property,
b. the transaction giving rise to the need to calculate Pro Forma EBITDA
is such an Asset Sale, Investment or acquisition, or
c. since the beginning of such period any Person (that subsequently became
a Restricted Subsidiary or was merged with or into the Company or any
Restricted Subsidiary since the beginning of such period) shall have
made such an Asset Sale, Investment or acquisition,
EBITDA for such period shall be calculated after giving pro forma effect to such
Asset Sale, Investment or acquisition as if such Asset Sale, Investment or
acquisition occurred on the first day of such period.
"Property" means, with respect to any Person, any interest of such Person
in any kind of property or asset, whether real, personal or mixed, or tangible
or intangible, including Capital Stock in, and other securities of, any other
Person. For purposes of any calculation required pursuant to the Indenture, the
value of any Property shall be its Fair Market Value.
"Public Equity Offering" means an underwritten public offering of common
stock of the Company pursuant to an effective registration statement under the
Securities Act. In the event that any direct or indirect parent Person of the
Company completes an underwritten public offering of such Person's common stock,
any amount of the proceeds of such offering which are contributed to the Company
may be used for an optional redemption of the Notes as described under "Optional
Redemption."
"Purchase Money Debt" means Debt:
a. consisting of the deferred purchase price of property, conditional sale
obligations, obligations under any title retention agreement, other
purchase money obligations and obligations in respect of industrial
revenue bonds, in each case where the maturity of such Debt does not
exceed the anticipated useful life of the Property being financed, and
b. Incurred to finance the acquisition, construction or lease by the
Company or a Restricted Subsidiary of such Property, including
additions and improvements thereto;
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provided, however, that such Debt is Incurred within 180 days after the
acquisition, construction or lease of such Property by the Company or such
Restricted Subsidiary.
"Receivables" means receivables, chattel paper, instruments, documents or
intangibles evidencing or relating to the right to payment of money and proceeds
and products thereof in each case generated in the ordinary course of business.
"Refinance" means, in respect of any Debt, to refinance, amend, extend,
renew, refund, repay, prepay, repurchase, redeem, defease or retire, or to issue
other Debt, in exchange or replacement for, such Debt. "Refinanced" and
"Refinancing" shall have correlative meanings.
"Repay" means, in respect of any Debt, to repay, prepay, repurchase,
redeem, legally defease or otherwise retire such Debt, including through open
market repurchases. "Repayment" and "Repaid" shall have correlative meanings.
For purposes of the covenant described under "--Certain Covenants -- Limitation
on Asset Sales," Debt shall be considered to have been Repaid only to the extent
the related loan commitment, if any, shall have been permanently reduced in
connection therewith.
"Restricted Payment" means:
a. any dividend or distribution (whether made in cash, securities or other
Property) declared or paid on or with respect to any shares of Capital
Stock of the Company or any Restricted Subsidiary (including any
payment in connection with any merger or consolidation with or into the
Company or any Restricted Subsidiary), except for (i) any dividend or
distribution that is made solely to the Company or a Restricted
Subsidiary (and, if such Restricted Subsidiary is not a Wholly Owned
Restricted Subsidiary, to the other shareholders of such Restricted
Subsidiary on a pro rata basis or on a basis that results in the
receipt by the Company or a Restricted Subsidiary of dividends or
distributions of greater value than it would receive on a pro rata
basis); or (ii) any dividend or distribution payable solely in shares
(or options, warrants or other rights to purchase shares) of Capital
Stock (other than Disqualified Stock) of the Company;
b. the purchase, repurchase, redemption, acquisition or retirement for
value of any Capital Stock of the Company (other than from the Company
or a Restricted Subsidiary) or any securities exchangeable for or
convertible into any such Capital Stock, including the exercise of any
option to exchange any Capital Stock (other than for or into Capital
Stock of the Company that is not Disqualified Stock);
c. the purchase, repurchase, redemption, acquisition or retirement for
value, prior to the date for any scheduled maturity, sinking fund or
amortization or other installment payment, of any Subordinated
Obligation (other than the purchase, repurchase or other acquisition of
any Subordinated Obligation purchased in anticipation of satisfying a
scheduled maturity, sinking fund or amortization or other installment
obligation, in each case due within one year of the date of
acquisition); or
d. any Investment (other than Permitted Investments) in any Person.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"S&P" means Standard & Poor's Ratings Service or any successor to the
rating agency business thereof.
"Sale and Leaseback Transaction" means any direct or indirect arrangement
relating to Property now owned or hereafter acquired whereby the Company or a
Restricted Subsidiary transfers such Property to another Person and the Company
or a Restricted Subsidiary leases it from such Person.
"Securities Act" means the Securities Act of 1933.
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"Senior Debt" of the Company means all Debt of the Company, except:
a. Debt of the Company that is by its terms subordinate in right of
payment to the Notes;
b. any Debt Incurred in violation of the provisions of the Indenture;
c. accounts payable or any other obligations of the Company to trade
creditors created or assumed by the Company in the ordinary course of
business in connection with the obtaining of materials or services
(including Guarantees thereof or instruments evidencing such
liabilities);
d. any liability for Federal, state, local or other taxes owed or owing by
the Company;
e. any obligation of the Company to any Subsidiary; or
f. any obligations with respect to any Capital Stock of the Company.
"Senior Debt" of any Subsidiary Guarantor has a correlative meaning.
"Senior Discount Notes" means the 12 7/8% Senior Discount Notes due 2010 of
the Company issued pursuant to the Indenture, dated as of February 8, 2000,
between the Company and Norwest Bank Minnesota, N.A. as trustee, as the same may
be amended or supplemented from time to time.
"Significant Subsidiary" means any Subsidiary that would be a "Significant
Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X
promulgated by the SEC.
"Stated Maturity" means, with respect to any security, the date specified
in such security as the fixed date on which the payment of principal of such
security is finally due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon the happening of a
Change of Control or any other contingency beyond the control of the issuer
unless such contingency has occurred).
"Subordinated Obligation" means any Debt of the Company or any Subsidiary
Guarantor (whether outstanding on the Issue Date or thereafter Incurred) that is
subordinate or junior in right of payment to the Notes or the applicable
Subsidiary Guaranty pursuant to a written agreement to that effect.
"Subsidiary" means, in respect of any Person, any corporation, company
(including any limited liability company), association, partnership, joint
venture or other business entity of which a majority of the total voting power
of the Voting Stock is at the time owned or controlled, directly or indirectly,
by:
a. such Person,
b. such Person and one or more Subsidiaries of such Person, or
c. one or more Subsidiaries of such Person.
"Subsidiary Guarantor" means each Domestic Restricted Subsidiary and any
other Person that becomes a Subsidiary Guarantor pursuant to the covenant
described under "--Certain Covenants -- Future Subsidiary Guarantors."
"Subsidiary Guaranty" means a Guarantee on the terms set forth in the
Indenture by a Subsidiary Guarantor of the Company's obligations with respect to
the Notes.
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"Telecommunications Assets" means all assets and rights, contractual or
otherwise, used or intended for use in connection with (i) transmitting, or
providing services relating to the transmission of, voice, video or data through
owned or leased transmission facilities or (ii) the ownership, design,
construction, development, acquisition, installation or management of
communications systems, and the Capital Stock of any Person engaged entirely or
substantially entirely in the above listed activities.
"Telecommunications Business" means (a) the ownership, design,
construction, development, acquisition, installation or management of
communications systems, (b) the delivery or distribution of communications,
voice, data or video services or (c) any business or activity reasonably related
or ancillary to the activities described in clauses (a) or (b) of this
definition, including, without limitation, any business conducted by the Company
or any Restricted Subsidiary on the Issue Date and the acquisition, holding or
exploitation of any license relating to the activities described in clauses (a)
or (b) of this definition.
"Temporary Cash Investments" means any of the following:
a. Investments in U.S. Government Obligations or in securities guaranteed
by the full faith and credit of the United States of America, in each
case maturing within 365 days of the date of acquisition thereof;
b. Investments in time deposit accounts, certificates of deposit and money
market deposits maturing within 90 days of the date of acquisition
thereof issued by a bank or trust company organized under the laws of
the United States of America or any State thereof having capital,
surplus and undivided profits aggregating in excess of $500 million and
whose long-term debt is rated "A-3" or "A " or higher according to
Moody's or S&P (or such similar equivalent rating by at least one
"nationally recognized statistical rating organization" (as defined in
Rule 436 under the Securities Act));
c. repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (a) entered into
with:
(1) a bank meeting the qualifications described in clause (b) above,
or
(2) any primary government securities dealer reporting to the Market
Reports Division of the Federal Reserve Bank of New York;
d. Investments in commercial paper, maturing not more than 90 days after
the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of
the United States of America with a rating at the time as of which any
Investment therein is made of "P-1" (or higher) according to Moody's or
"A-1" (or higher) according to S&P (or such similar equivalent rating
by at least one "nationally recognized statistical rating organiza-
tion" (as defined in Rule 436 under the Securities Act)); and
e. direct obligations (or certificates representing an ownership interest
in such obligations) of any State of the United States of America
(including any agency or instrumentality thereof) for the payment of
which the full faith and credit of such State is pledged and which are
not callable or redeemable at the issuer's option, provided that:
(1) the long-term debt of such State is rated "A-3" or "A " or higher
according to Moody's or S&P (or such similar equivalent rating by
at least one "nationally recognized statistical rating
organization" (as defined in Rule 436 under the Securities Act)),
and
(2) such obligations mature within 180 days of the date of
acquisition thereof.
"Total Invested Capital" means at any time of determination, the sum
of, without duplication:
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a. the total amount of equity capital contributed to the Company as of
February 8, 2000 (being $37 million), plus
b. the aggregate net cash proceeds received by the Company from the
initial public offering of its common stock completed on February 8,
2000, plus
c. Capital Stock Sale Proceeds, plus
d. the net reduction in Investments in any Person other than the Company
or a Restricted Subsidiary resulting from dividends, repayments of
loans or advances or other transfers of Property, in each case to the
Company or any Restricted Subsidiary from such Person less the cost of
the disposition of such Investment, provided that such amount shall not
exceed, in the case of any Person, the amount of Investments previously
made (and treated as a Restricted Payment) by the Company or any
Restricted Subsidiary in such Person, plus
e. the Fair Market Value of Property received by the Company after
February 8, 2000 (i) in exchange for Capital Stock (other than
Disqualified Stock) of the Company, or (ii) in exchange for Capital
Stock (other than Disqualified Stock) of any direct or indirect parent
holding company of the Company (it being understood that the foregoing
shall include the Fair Market Value of property received by any direct
or indirect parent Person of the Company in exchange for Capital Stock
(other than Disqualified Stock) of such parent Person to the extent
that such Property is contributed to the Company), other than in the
case of either (i) or (ii) Capital Stock issued to the Company or a
Subsidiary of the Company, to employees or to an employee stock
ownership plan or trust established by the Company or any Subsidiary
for the benefit of their employees, plus
f. consolidated Debt of the Company and the Restricted Subsidiaries
outstanding at the date of determination, minus
g. the aggregate amount of all Restricted Payments declared or made on or
after February 8, 2000.
"Unrestricted Subsidiary" means:
a. any Subsidiary of the Company that is designated on or after the Issue
Date as an Unrestricted Subsidiary as permitted or required pursuant to
the covenant described under "--Certain Covenants -- Designation of
Restricted and Unrestricted Subsidiaries" and not thereafter
redesignated as a Restricted Subsidiary as permitted pursuant thereto;
and
b. any Subsidiary of an Unrestricted Subsidiary.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Stock" of any Person means all classes of Capital Stock or other
interests (including partnership interests) of such Person then outstanding and
normally entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof.
"Wholly Owned Restricted Subsidiary" means, at any time, a Restricted
Subsidiary all the Voting Stock of which (except directors' qualifying shares)
is at such time owned, directly or indirectly, by the Company and its other
Wholly Owned Subsidiaries. Notwithstanding the preceding, all Restricted
Subsidiaries existing on the Issue Date, including Alamosa PCS, Inc., Texas
Telecommunications, LP and Alamosa Wisconsin Limited Partnership, will be
considered Wholly Owned Restricted Subsidiaries so long as they remain
Restricted Subsidiaries.
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BOOK-ENTRY SYSTEM
The Depository Trust Company ("DTC"), New York, New York, will act as
securities depository for the registered notes. The registered notes will be
initially issued in the form of one or more global notes registered in the name
of DTC or its nominee.
Upon the issuance of a global note, DTC or its nominee will credit the
accounts of persons holding through it with the respective principal amounts of
the registered notes represented by such global note. Ownership of beneficial
interests in a global note will be limited to persons that have accounts with
DTC ("participants") or persons that may hold interests through participants.
Any person acquiring an interest in a global note through an offshore
transaction may hold such interest through Cedel or Euroclear. Ownership of
beneficial interests in a global note will be shown on, and the transfer of that
ownership interest will be effected only through, records maintained by DTC
(with respect to participants' interests) and such participants (with respect to
the owners of beneficial interests in such global note other than participants).
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such limits and
such laws may impair the ability to transfer beneficial interests in a global
note.
Payment of principal of and interest on registered notes represented by a
global note will be made in immediately available funds to DTC or its nominee,
as the case may be, as the sole registered owner and the sole holder of the
registered notes represented thereby for all purposes under the indenture. We
have been advised by DTC that upon receipt of any payment of principal of or
interest on any global note, DTC will immediately credit, on its book-entry
registration and transfer system, the accounts of participants with payments in
amounts proportionate to their respective beneficial interests in the principal
or face amount of such global note as shown on the records of DTC. Payments by
participants to owners of beneficial interests in a global note held through
such participants will be governed by standing instructions and customary
practices as is now the case with securities held for customer accounts
registered in "street name" and will be the sole responsibility of such
participants.
A global note may not be transferred except as a whole by DTC or a nominee
of DTC to a nominee of DTC or to DTC. A global note is exchangeable for
certificated registered notes only if:
o DTC notifies us that it is unwilling or unable to continue as a
depositary for such global note or if at any time DTC ceases to be a
clearing agency registered under the Exchange Act and we do not appoint
a successor depository within 90 days of such notice,
o we in our discretion at any time determine not to have all the
registered notes represented by such global note, or
o there shall have occurred and be continuing a default or an event of
default with respect to the registered notes represented by such global
note.
Any global note that is exchangeable for certificated registered notes pursuant
to the preceding sentence will be exchanged for certificated registered notes in
authorized denominations and registered in such names as DTC or any successor
depositary holding such global note may direct. Subject to the foregoing, a
global note is not exchangeable, except for a global note of like denomination
to be registered in the name of DTC or any successor depositary or its nominee.
In the event that a global note becomes exchangeable for certificated registered
notes,
o certificated registered notes will be issued only in fully registered
form in denominations of $1,000 or integral multiples thereof,
o payment of principal of, and premium, if any, and interest on, the
certificated registered notes will be payable, and the transfer of the
certificated registered notes will be registrable, at the office or
agency of Alamosa (Delaware) maintained for such purposes, and
129
o no service charge will be made for any registration of transfer or
exchange of the certificated registered notes, although we may require
payment of a sum sufficient to cover any tax or governmental charge
imposed in connection therewith.
So long as DTC or any successor depositary for a global note, or any
nominee, is the registered owner of such global note, DTC or such successor
depositary or nominee, as the case may be, will be considered the sole owner or
holder of the registered notes represented by such global note for all purposes
under the indenture and the registered notes. Except as set forth above, owners
of beneficial interests in a global note will not be entitled to have the
registered notes represented by such global note registered in their names, will
not receive or be entitled to receive physical delivery of certificated
registered notes in definitive form and will not be considered to be the owners
or holders of any registered notes under such global note. Accordingly, each
person owning a beneficial interest in a global note must rely on the procedures
of DTC or any successor depositary, and, if such person is not a participant, on
the procedures of the participant through which such person owns its interest,
to exercise any rights of a holder under the indenture. We understand that under
existing industry practices, in the event that we request any action of holders
or that an owner of a beneficial interest in a global note desires to give or
take any action which a holder is entitled to give or take under the indenture,
DTC or any successor depositary would authorize the participants holding the
relevant beneficial interest to give or take such action and such participants
would authorize beneficial owners owning through such participants to give or
take such action or would otherwise act upon the instructions of beneficial
owners owning through them.
DTC has advised us that DTC is a limited-purpose trust company organized
under the Banking Law of the State of New York, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the New York Uniform
Commercial Code and a "clearing agency" registered under the Exchange Act. DTC
was created to hold the securities of its participants and to facilitate the
clearance and settlement of securities transactions among its participants in
such securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. DTC's participants include securities brokers and dealers (which
may include the initial purchasers of the outstanding notes), banks, trust
companies, clearing corporations and certain other organizations some of whom
(or their representatives) own DTC. Access to DTC's book-entry system is also
available to others, such as banks, brokers, dealers and trust companies, that
clear through or maintain a custodial relationship with a participant, either
directly or indirectly.
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in global notes among participants of DTC, it is under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. DTC may discontinue providing its
services as depository with respect to the registered notes at any time by
giving reasonable notice to us or Wells Fargo Bank Minnesota, N.A., our agent.
Under such circumstances, in the event that a successor depository is not
obtained, certificated registered notes are required to be printed and
delivered.
We may decide to discontinue use of the system of book-entry transfers
through DTC, or a successor depository. In that event, certificated registered
notes will be printed and delivered. None of us, the trustee or the initial
purchasers of the outstanding notes will have any responsibility for the
performance by DTC or its participants or indirect participants of their
respective obligations under the rules and procedures governing their
operations.
130
EXCHANGE OFFER; REGISTRATION RIGHTS
We have agreed pursuant to a registration rights agreement with the initial
purchasers of the outstanding notes, for the benefit of the holders of the
outstanding notes, that we will, at our cost,
o file a registration statement with the Securities and Exchange
Commission with respect to a registered offer within 90 days after the
date of original issuance of the outstanding notes to exchange the
outstanding notes for new notes of Alamosa (Delaware) having terms
substantially identical in all material respects to the outstanding
notes (except that the registered notes will not contain terms with
respect to transfer restrictions), and
o use our reasonable best efforts to cause such registration statement to
be declared effective under the Securities Act within 180 days after
the date of original issuance of the outstanding notes.
Once the registration statement that this prospectus is part of is declared
effective, we will offer the registered notes in exchange for surrender of the
outstanding notes. This offer will remain open for not less than 20 business
days (or longer if required by applicable law) after the date notice of the
exchange offer is mailed to the holders of the outstanding notes. For each
outstanding note surrendered pursuant to the exchange offer, the holder of such
outstanding note will receive a registered note having a principal amount equal
to that of the surrendered outstanding note.
Under existing SEC interpretations, the registered notes would be freely
transferable by holders of the registered notes other than affiliates of Alamosa
(Delaware) after the exchange offer without further registration under the
Securities Act if the holder of the registered notes represents that it is
acquiring the registered notes in the ordinary course of its business, that it
has no arrangement or understanding with any person to participate in the
distribution of the registered notes and that it is not an affiliate of Alamosa
(Delaware), as such terms are interpreted by the SEC; provided, however, that
broker-dealers receiving registered notes in the exchange offer will have a
prospectus delivery requirement with respect to resales of such registered
notes. The SEC has taken the position that participating broker-dealers may
fulfill their prospectus delivery requirements with respect to registered notes
(other than a resale of an unsold allotment from the original sale of the
outstanding notes) with this prospectus. Under the registration rights
agreement, we are required to allow participating broker-dealers and other
persons, if any, with similar prospectus delivery requirements to use this
prospectus in connection with the resale of such registered notes.
A holder of outstanding notes (other than certain specified holders) who
wishes to exchange such outstanding notes for registered notes in the exchange
offer will be required to represent that any registered notes to be received by
it will be acquired in the ordinary course of its business and that at the time
of the commencement of the exchange offer it has no arrangement or understanding
with any person to participate in the distribution (within the meaning of the
Securities Act) of the registered notes and that it is not an "affiliate" of
Alamosa (Delaware), as defined in Rule 405 of the Securities Act.
In the event that,
o applicable interpretations of the staff of the Commission do not permit
us to effect the exchange offer,
o for any reason the registration statement that this prospectus is part
of is not declared effective within 180 days after the date of the
original issuance of the outstanding notes or the exchange offer is not
consummated within 240 days after the original issuance of the
outstanding notes,
o any initial purchaser of outstanding notes so requests with respect to
outstanding notes not eligible to be exchanged for registered notes in
the exchange offer,
131
o any holder of outstanding notes (other than an initial purchaser) is
not eligible to participate in such exchange offer or does not receive
freely tradeable registered notes in such exchange offer other than by
reason of such holder being an affiliate of Alamosa (Delaware), or
o in the case of any initial purchaser that participates in the exchange
offer, such initial purchaser does not receive freely tradeable
registered notes in exchange for outstanding notes constituting any
portion of an unsold allotment (it being understood that the
requirement that a participating broker-dealer deliver this prospectus
in connection with sales of registered notes shall not result in such
registered notes being not "freely tradeable"),
we will, at our cost,
o as promptly as practicable, file a shelf registration statement
covering resales of the outstanding notes or registered notes, as the
case may be,
o use our reasonable best efforts to cause the shelf registration
statement to be declared effective under the Securities Act, and
o keep the shelf registration statement effective until the earliest of,
(1) two years after its effective date,
(2) such time as all of the securities included on the shelf
registration statement have been sold thereunder, and
(3) such time as the securities included on the shelf registration
statement are eligible for resale under Rule 144(k) of the
Securities Act without restriction.
We will, in the event a shelf registration statement is filed, among other
things, provide to each holder for whom such shelf registration statement was
filed, copies of the prospectus which is a part of the shelf registration
statement, notify each such holder when the shelf registration statement has
become effective and take certain other actions as are required to permit
unrestricted resales of the outstanding notes or the registered notes, as the
case may be. A holder selling such registered notes or outstanding notes
pursuant to the shelf registration statement generally would be required to be
named as a selling security holder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the registration rights agreement which are
applicable to such holder (including certain indemnification obligations).
If,
o on or prior to the 90th day following the date of original issuance of
the outstanding notes, neither the registration statement that this
prospectus is part of nor the shelf registration statement has been
filed with the Commission,
o on or prior to the 180th day following the date of original issuance of
the outstanding notes, neither the registration statement that this
prospectus is part of nor the shelf registration statement has been
declared effective,
o on or prior to the 210th day following the date of original issuance of
the outstanding notes, neither the exchange offer has been consummated
nor the shelf registration statement has been declared effective, or
132
o after the shelf registration statement has been declared effective,
such registration statement ceases to be effective or usable in
connection with resales of notes in accordance with and during the
periods specified in the registration rights agreement (each such event
referred to in the prior two bullet points a "registration default"),
special interest will accrue (in addition to the stated interest on the notes
and the registered notes) on the principal amount from and including the date on
which any such registration default shall occur to but excluding the date on
which all registration defaults have been cured. Special interest will accrue on
the principal amount of the notes at a rate of 0.25% per annum. Special interest
will be computed on the basis of a 360-day year comprised of twelve 30-day
months.
Because the registration statement was filed on May 9, 2001, special
interest (in addition to the stated interest on the outstanding notes) accrued
on the principal amount of the outstanding notes from and including May 1, 2001
to but excluding May 9, 2001.
The summary herein of certain provisions of the registration rights
agreement and the outstanding notes does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, all the provisions
of the registration rights agreement and the form of outstanding notes, a copy
of which was filed as an exhibit to the registration statement of which this
prospectus is part.
133
PLAN OF DISTRIBUTION
Each broker-dealer that receives registered notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such registered notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of registered notes received in
exchange for outstanding notes where such outstanding notes were acquired as a
result of market-making activities or other trading activities. We have agreed
that, starting on the expiration date of the exchange offer and ending on the
close of business one year after the expiration date, we will make this
prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, until __________, all dealers
effecting transactions in the registered notes may be required to deliver a
prospectus.
We will not receive any proceeds from any sale of registered notes by
broker dealers. Registered 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 registered 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 at 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 registered notes. Any
broker-dealer that resells registered notes that were received by it for its own
account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such registered notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit resulting
from any such resale of registered notes and any commissions or concessions
received by any such persons may be deemed to be underwriting compensation under
the Securities Act. The letter of transmittal states that by acknowledging that
it will deliver 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.
For a period of one year after the expiration date of the exchange offer,
we will promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the letter of transmittal. We have agreed to pay all expenses incident to the
exchange offer (including the expenses of one counsel for the holders of the
outstanding notes) other than commissions or concessions of any brokers or
dealers and will indemnify the holders of the outstanding notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
134
MATERIAL UNITED STATES FEDERAL TAX CONSIDERATIONS
This is a general discussion of certain United States federal tax
consequences associated with the exchange of our outstanding notes for
registered notes to be issued in the exchange offer and the ownership, and
disposition of those registered notes applicable to you if you acquired our
outstanding notes in the initial offering and hold our notes as a capital asset
(generally, property held for investment). We do not discuss all aspects of
United States federal taxation that may be important to you in light of your
individual investment circumstances, such as if special tax rules apply to you,
for example, if you are a bank, thrift, real estate investment trust, regulated
investment company, insurance company, dealer in securities or currencies,
trader in securities that uses a mark-to-market method accounting for your
securities holdings, expatriate, tax-exempt investor and partnership, or if you
will hold notes as a position in a "straddle," as part of a "synthetic security"
or "hedge," as part of a "conversion transaction" or other integrated investment
or as other than a capital asset. Our discussion is based on current provisions
of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury
Regulations, judicial opinions, published positions of the United States
Internal Revenue Service and other applicable authorities, all as in effect on
the date of this prospectus and all of which are subject to differing
interpretations or change, possibly with retroactive effect. We have not sought
and will not seek, any ruling from the IRS with respect to the positions and
issues discussed in this prospectus, and there can be no assurance that the IRS
will not take a different position concerning the tax consequences from the
exchange of our outstanding notes for registered notes to be issued in the
exchange offer, ownership and taxable disposition of our notes or that any
position taken by the IRS would not be sustained. We urge you to consult your
tax advisor about the United States federal tax consequences of exchanging,
holding, and disposing of our notes, as well as any tax consequences that may
arise under the laws of any foreign, state, local, or other taxing jurisdiction.
For purposes of this discussion, a "U.S. Holder" is a holder of our notes
that is:
o a citizen or resident of the United States;
o a corporation or other entity created or organized in the United States
or under the laws of the United States or of any political subdivision
of the United States;
o an estate, the income of which is includible in gross income for United
States federal income tax purposes regardless of its source; or
o a trust, the administration of which is subject to the primary
supervision of a United States court and that has one or more U.S.
persons who have the authority to control all substantial decisions of
the trust.
A "Non-U.S. Holder" is a holder of our notes that is not a U.S. Holder.
U.S. FEDERAL TAXATION OF U.S. HOLDERS
EXCHANGE OFFER. The exchange of outstanding notes for registered notes in
the exchange offer will not constitute a taxable event for U.S. Holders.
Consequently, a U.S. Holder will not recognize gain upon receipt of a registered
note in exchange for notes in the exchange offer, the U.S. Holder's basis in the
registered note received in the exchange offer will be the same as its basis in
the corresponding note immediately before the exchange and the U.S. Holder's
holding period in the registered note will include its holding period in the
original note.
We are obligated to pay additional interest on the notes under certain
circumstances described under "Exchange Offer; Registration Rights." Although
the matter is not free from doubt, such additional interest should be taxable as
ordinary income at the time it accrues or is received in accordance with the
U.S. Holder's regular method of accounting for federal income tax purposes. It
is possible, however, that the IRS may take a different position, in which case
the timing and amount of income inclusion may be different from that described
above. U.S. Holders should consult their tax advisors about payments of
additional interest.
135
INTEREST. Interest paid to a U.S. Holder generally will be taxable to a
U.S. Holder as ordinary interest income at the time it accrues or is received,
in accordance with the U.S. Holder's method of account for federal income tax
purposes.
DISPOSITION OF NOTES. Upon the sale, exchange, redemption or other
disposition of a note, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between (i) the sum of cash plus the fair market
value of all other property received on such disposition (except to the extent
such cash or property is attributable to accrued buy unpaid interest, which is
treated as interest as described above) and (ii) such holder's adjusted tax
basis in the note. A U.S. Holder's adjusted tax basis in a note generally will
equal the cost of the note to such holder, less any principal payments received
by such holder.
Gain or loss recognized on the disposition of a note generally will be
capital gain or loss, and will be long-term capital gain or loss if, at the
time such disposition, the U.S. Holder's holding period for the note is more
than 12 months. The maximum federal long-term capital gain rate is 20% for
noncorporate U.S. Holders and 35% for corporate U.S. Holders. The deductibility
of capital losses by U.S. Holders is subject to limitations.
U.S. FEDERAL INCOME TAXATION OF NON-U.S. HOLDERS
EXCHANGE OF OFFER. The exchange of notes for registered notes in the
exchange offer will not constitute a taxable event for a Non-U.S. Holder.
INTEREST. Interest paid to a Non-U.S. Holder will generally not be subject
to withholding of United States federal income tax provided that all of the
following are true:
o the non-U.S. Holder does not actually or constructively own 10% or more
of the total combined voting power of all our classes of stock entitled
to vote;
o the Non-U.S. Holder is not a controlled foreign corporation to which we
are a related person for United States federal income tax purposes; and
o the Non-U.S. Holder certifies, under penalties of perjury, that it is a
Non-U.S. Holder and provides its name and address.
Interest paid to a Non-U.S. Holder that does not qualify for the above
exception from withholding tax would generally be subject to withholding of
United States federal income tax at the rate of 30% unless the Non-U.S. Holder
of the note provides us or our paying agent, as the case may be, with a properly
executed (1) IRS Form 1001 (or successor form) claiming an exemption from (or
reduction in) withholding under the benefit of an applicable tax treaty or (2)
IRS Form 4224 (or successor form) stating that the interest paid on the note is
not subject to withholding tax because it is effectively connected with the
Non-U.S. Holder's conduct of a trade or business in the United States. If,
however, the interest is effectively connected with the conduct of a trade or
business in the United States by the Non-U.S. Holder, the interest will be
subject to United States federal income tax imposed on net income on the same
basis that applies to U.S. persons generally, and, for corporate holders and
under certain circumstances, the branch profits tax equal to 30 percent of the
Non-U.S. Holder's "effectively connected earnings and profits" (as adjusted for
certain items). Non-U.S. Holders should consult any applicable income tax
treaties that may provide for a reduction of, or exemption from, withholding
taxes.
GAIN ON DISPOSITION. A Non-U.S. Holder will generally not be subject to
United States federal income tax, including by way of withholding, on gain
recognized on a sale or other disposition of our notes unless any one of the
following is true:
o the gain is effectively connected with the conduct of a trade or
business in the United States by the Non-U.S. Holder;
136
o the Non-U.S. Holder is a nonresident alien individual present in the
United States for 183 or more days in the taxable year of the
disposition and certain other requirements are met; or
o the Non-U.S. Holder is subject to tax pursuant to provisions of the
United States federal income tax law applicable to certain United
States expatriates.
Gain that is effectively connected with the conduct of a trade or business
in the United States by the Non-U.S. Holder will be subject to the United
States federal income tax imposed on net income on the same basis that applies
to U.S. persons generally, and, for corporate holders and under certain
circumstances, the branch profits tax (described above), but will not be subject
to withholding. Non-U.S. Holders should consult any applicable income tax
treaties that may provide for different rules.
UNITED STATES FEDERAL ESTATE TAXES. A note that is owned or treated as
owned by an individual who is not a citizen or resident, as specially defined
for United States federal estate tax purposes, of the United States on the date
of that person's death will not be included in his or her estate for United
States federal estate tax purposes, provided that both of the following are
true:
o the Non-U.S. Holder does not actually or constructively own 10% or more
of the total combined voting power of all of our classes of stock
entitled to vote on the date of that person's death; and
o the interest on the note would not have been effectively connected with
the conduct of trade or business in the United States if it had been
received by that person on the date of that person's death.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Generally, we must report annually to the IRS and to each Non-U.S. Holder
the amount of interest that we paid to that holder, and the amount of tax that
we withheld on the interest. This information may also be made available to the
tax authorities of a country in which the Non-U.S. Holder resides.
Under current United States Regulations, United States information
reporting requirements and backup withholding tax at a rate of 31% will
generally apply to interest and gross proceeds received with respect to a note.
Backup withholding tax will generally not apply to interest and gross proceeds
received by a Non-U.S. Holder who furnishes a certificate of foreign status and
makes any other required certification, or who is otherwise exempt from backup
withholding. Generally, a Non-U.S. Holder will provide this certification on IRS
Form W8BEN (Certificate of Foreign Status).
137
ALAMOSA (DELAWARE), INC.
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma condensed combined financial statements
combine the historical balance sheets and statements of operations of Alamosa
(Delaware), Roberts, WOW and Southwest. These unaudited pro forma financial
statements give effect to the January 31, 2001 issuance of the 12 1/2% senior
notes and the acquisitions of Roberts, WOW and Southwest using the purchase
method of accounting. To assist you in your analysis of the financial aspects of
each of these transactions, both individually and combined, we have presented
this set of unaudited pro forma condensed combined financial statements to
demonstrate the financial aspects of the combined transaction.
We derived this information from the audited financial statements of Alamosa
(Delaware), Roberts, WOW and Southwest for the year ended December 31, 2000.
This information is only a summary and should be read in conjunction with the
historical financial statements and related notes contained elsewhere herein for
the period presented.
The unaudited pro forma condensed combined statement of operations for the year
ended December 31, 2000 assumes the issuance of the outstanding notes and the
acquisitions of Roberts, WOW and Southwest were effected on January 1, 2000. The
unaudited pro forma condensed combined balance sheet as of December 31, 2000
gives effect to the issuance of the outstanding notes and the acquisitions of
Roberts, WOW and Southwest as if they had occurred on December 31, 2000. The
accounting policies of Alamosa (Delaware), Roberts, WOW and Southwest are
comparable. Certain reclassifications have been made to Roberts', WOW's and
Southwest's historical presentation to conform to Alamosa (Delaware)'s
presentation. These reclassifications do not impact Alamosa (Delaware)'s,
Roberts', WOW's or Southwest's operations or financial position for the periods
presented.
The pro forma adjustments, which are based upon available information and upon
certain assumptions that we believe are reasonable, are described in the
accompanying notes. The actual allocation of these adjustments will be different
and the difference may be material.
We are providing the unaudited pro forma condensed combined financial
information for illustrative purposes only. The companies may have performed
differently had they always been combined. You should not rely on the unaudited
pro forma condensed combined financial information as being indicative of the
historical results that would have been achieved had the companies always been
combined or the future results that the combined company will experience.
138
ALAMOSA (DELAWARE), INC. (FORMERLY ALAMOSA PCS HOLDINGS, INC.)
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 2000
Issuance of Alamosa
Historical 12 1/2% Pro Forma Adjust
Alamosa Senior Notes Subtotal ments
----------------- ----------------- ------------------ -------------------
ASSETS (Note 1) (Note 2)
Current Assets:
Cash and cash equivalent $ 141,768,167 $ 182,000,000 $ 323,768,167 $ --
Restricted cash -- 59,000,000(1a) 59,000,000 --
Short-term investments 1,600,000 -- 1,600,000 --
Accounts receivable, net 14,746,930 -- 14,746,930 --
Inventory 2,752,788 -- 2,752,788 --
Prepaid expenses and other assets 4,072,645 -- 4,072,645 42,717,944
----------------- ----------------- ------------------ -------------------
Total current assets 164,940,530 241,000,000 405,940,530 42,717,944
Property and equipment, net 228,982,869 -- 228,982,869 --
Notes receivable from Roberts and Roberts
Holdings' members 46,865,233 -- 46,865,233 --
Debt issuance costs, net 13,108,376 9,000,000(1b) 22,108,376 --
Intangible and other noncurrent assets 4,501,005 -- 4,501,005 (42,717,944)
----------------- ----------------- ------------------ -------------------
Total assets $ 458,398,013 $ 250,000,000 $ 708,398,013 $ --
================= ================= ================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 59,749,061 $ -- $ 59,749,061 $ --
Accounts payable to related parties 1,636,745 -- 1,636,745 --
Current notes payable and installments of
capital leases 35,778 -- 35,778 --
Microwave relocation obligation and other
current liabilities -- -- -- --
----------------- ----------------- ------------------ -------------------
Total current liabilities 61,421,584 -- 61,421,584 --
Capital lease obligations, noncurrent 1,038,614 -- 1,038,614 --
Long-term debt 263,804,132 250,000,000 513,804,132 --
Warrant and option liabilities -- -- -- --
Deferred tax and other noncurrent liabilities 735,593 -- 735,593 --
----------------- ----------------- ------------------ -------------------
Total liabilities 326,999,923 250,000,000 576,999,923 --
----------------- ----------------- ------------------ -------------------
Commitments and contingencies
Shareholders' equity:
Preferred stock -- -- -- --
Shareholders' equity (deficit)/members'
equity (deficit 132,510,903 -- 132,510,903 --
Unearned compensation (1,112,813) -- (1,112,813) --
----------------- ----------------- ------------------ -------------------
Total shareholders' equity 131,398,090 -- 131,398,090 --
----------------- ----------------- ------------------ -------------------
Total liabilities, redeemable preferred
stock and shareholders' equity 458,398,013 $ 250,000,000 $ 708,398,013 $ --
================= ================= ================== ===================
Roberts Merger WOW Merger
-------------------------------------- ------------------------------------------
Historical
Roberts Pro Forma Historical Pro Forma
Wireless Adjustments WOW Adjustments
----------------- ------------------- ------------------ ----------------------
ASSETS (Note 3) (Note 4)
Current Assets:
Cash and cash equivalents ................... $ -- $ -- $ 8,441,896 $ --
Restricted cash ............................. -- -- -- --
Short-term investments ...................... -- -- -- --
Accounts receivable, net .................... 3,704,786 (952,183)(3g) 552,018 (641,723)(4f)
Inventory ................................... 1,156,207 -- 510,089 --
Prepaid expenses and other assets ........... 364,296 (1,045,785)(3f) 273,632 --
----------------- -------------- ------------------ ----------------
Total current assets ..................... 5,225,289 (1,997,968) 9,777,635 (641,723)
Property and equipment, net ................... 67,136,728 (7,095,293) 36,686,735 --
Notes receivable from Roberts and Roberts
Holdings' members ............................. 16,375,106 (37,000,000)(3f) -- (9,865,233)(4e)
Debt issuance costs, net ...................... 1,849,450 (1,849,450) 1,479,324 (1,479,324)
Intangible and other noncurrent assets ........ 6,403,772 447,560,622 (3a) 149,232 207,133,426(4a, b)
----------------- -------------- ------------------ ----------------
Total assets ............................. $ 96,990,345 $ 399,617,911 $ 48,092,926 $ 195,147,146
================= ============== ================== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ....... $ 18,616,283 $ (1,997,968)(3f,g) $ 7,825,710 $ (622,998)(4f)
Accounts payable to related parties ......... -- -- -- --
Current notes payable and installments of
capital leases............................... 37,320,272 (37,000,000)(3f) 9,865,233 (9,865,233)(4e)
Microwave relocation obligation and other
current liabilities ......................... -- -- -- --
----------------- -------------- ------------------ ----------------
Total current liabilities ................ 55,936,555 (38,997,968) 17,690,943 (10,488,231)
Capital lease obligations, noncurrent ....... -- -- -- --
Long-term debt .............................. 56,000,000 8,940,164 30,960,318 17,602,302
Warrant and option liabilities .............. -- -- --
Deferred tax and other noncurrent liabilities -- 123,241,331 (3b) 57,036,741 (4b)
----------------- -------------- ------------------ ----------------
Total liabilities ........................ 111,936,555 93,183,527 48,651,261 64,150,812
----------------- -------------- ------------------ ----------------
Commitments and contingencies
Shareholders' equity:
Preferred stock ............................. -- -- -- --
Shareholders' equity (deficit)/members' .....
equity (deficit) ........................... (14,946,210) 307,019,008 (558,335) 130,996,334
Unearned compensation ....................... -- (584,624)(3c) -- --
----------------- -------------- ------------------ ----------------
Total shareholders' equity ............... (14,946,210) 306,434,384 (558,335) 130,996,334
----------------- -------------- ------------------ ----------------
Total liabilities, redeemable preferred
stock and shareholders' equity ........... $ 96,990,345 $ 399,617,911 $ 48,092,926 $ 195,147,146
================= ============== ================== ================
Southwest Merger
----------------------------------------
Historical Pro Forma
Southwest Adjustments Total
------------------ --------------------- --------------------
ASSETS (Note 5)
Current Assets:
Cash and cash equivalents ................... $ 837,285 $ -- $ 333,047,348
Restricted cash ............................. -- -- 59,000,000
Short-term investments ...................... -- -- 1,600,000
Accounts receivable, net .................... 5,357,377 -- 22,767,205
Inventory ................................... 703,548 -- 5,122,632
Prepaid expenses and other assets ........... 94,992 -- 46,477,724
------------------ ----------------- --------------------
Total current assets ..................... 6,993,202 -- 468,014,909
Property and equipment, net ................... 64,773,196 -- 390,484,235
Notes receivable from Roberts and Roberts
Holdings' members ............................. -- -- 16,375,106
Debt issuance costs, net ...................... 4,735,649 (4,735,649) 22,108,376
Intangible and other noncurrent assets ........ 176,335 214,069,275(5a) 837,275,723
------------------ ----------------- --------------------
Total assets ............................. $ 76,678,382 $ 209,333,626 $ 1,734,258,349
================== ================== ====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses ....... $ 18,896,824 $ -- $ 102,466,912
Accounts payable to related parties ......... 769,135 -- 2,405,880
Current notes payable and installments of
capital leases .............................. -- -- 356,050
Microwave relocation obligation and other
current liabilities ......................... -- -- --
------------------ ----------------- --------------------
Total current liabilities ................ 19,665,959 -- 105,228,842
Capital lease obligations, noncurrent ....... -- -- 1,038,614
Long-term debt .............................. 71,556,437 12,300,000 711,163,353
Warrant and option liabilities .............. 18,025,470 (18,025,470)
Deferred tax and other noncurrent liabilities -- 58,946,612 (5b) 239,960,277
------------------ ----------------- --------------------
Total liabilities ........................ 109,247,866 53,221,142 1,057,391,086
------------------ ----------------- --------------------
Commitments and contingencies
Shareholders' equity:
Preferred stock ............................. -- -- --
Shareholders' equity (deficit)/members'
equity (deficit) ............................ (32,569,484) 156,112,484 678,564,700
Unearned compensation ....................... -- -- (1,697,437)
------------------ ----------------- --------------------
Total shareholders' equity ............... (32,569,484) 156,112,484 676,867,263
------------------ ----------------- --------------------
Total liabilities, redeemable preferred
stock and shareholders' equity ........... $ 76,678,382 $ 209,333,626 $ 1,734,258,349
================== ================== ====================
139
Issuance of Alamosa
Historical 12 1/2% Pro Forma Adjust
Alamosa Senior Notes Subtotal ments
----------------- ----------------- ------------------ -------------------
REVENUES: (Note 1) (Note 2)
Service revenues $ 73,499,638 $ -- $ 73,499,638 $ --
Product sales 9,200,669 -- 9,200,669 --
----------------- ----------------- ------------------ -------------------
Total revenue 82,700,307 -- 82,700,307 --
----------------- ----------------- ------------------ -------------------
Costs and Expenses:
Cost of service and operations 54,593,689 -- 54,593,689 --
Cost of service and operations - related parties -- -- -- --
Cost of products sold 20,524,427 -- 20,524,427 --
Selling and marketing 46,513,835 -- 46,513,835 --
Selling and marketing - related parties -- -- -- --
General and administrative expenses 9,537,510 -- 9,537,510 --
Selling, general and administrative -- -- -- --
Equity participation compensation expense 5,650,625 -- 5,650,625 --
General and administrative - related parties -- -- -- --
Terminated merger and acquisition costs 2,246,789 -- 2,246,789 --
Depreciation and amortization 12,530,038 -- 12,530,038 --
----------------- ----------------- ------------------ -------------------
Total costs and expenses 151,596,913 -- 151,596,913 --
----------------- ----------------- ------------------ -------------------
Loss from operations (68,896,606) -- (68,896,606) --
Interest and other income 14,483,431 -- 14,483,431 --
Interest expense (25,774,925) (32,150,000) (57,924,925) (77,542)
----------------- ----------------- ------------------ -------------------
Loss before income tax benefit (80,188,100) (32,150,000) (112,338,100) (77,542)
Income tax benefit -- -- -- 42,717,944
----------------- ----------------- ------------------ -------------------
Net income/(loss) $ (80,188,100) $ (32,150,000) $(112,338,100) $ 42,640,402
================= ================= ================== ===================
Net loss per common share, basic
and diluted $ (1.33)
Weighted average common shares outstanding,
basic and diluted 60,198,390
Roberts Merger WOW Merger
-------------------------------------- ----------------------------------------
Historical
Roberts Pro Forma Historical Pro Forma
Wireless Adjustments WOW Adjustments
----------------- ------------------- ------------------ -------------------
(Note 3) (Note 4)
Revenues:
Service revenues $ 13,413,135 $ -- $ 1,823,485 $ --
Product sales 1,315,616 -- 682,576 --
----------------- ------------------- ------------------ -------------------
Total revenue 14,728,751 -- 2,506,061 --
----------------- ------------------- ------------------ -------------------
Costs and Expenses:
Cost of service and operations 10,004,526 -- 4,373,599 --
Cost of service and operations - related parties -- -- -- --
Cost of products sold 2,493,853 -- 1,750,059 --
Selling and marketing 6,975,964 -- 4,106,230 --
Selling and marketing - related parties -- -- -- --
General and administrative expenses 2,507,262 350,000(3c,g) 4,218,699 --
Selling, general and administrative -- -- -- --
Equity participation compensation expense -- 116,925(3c) -- --
General and administrative - related parties -- -- 158,649 --
Terminated merger and acquisition costs -- -- -- --
Depreciation and amortization 5,671,944 24,027,603 (3d) 1,432,661 11,443,836(4c)
----------------- ------------------- ------------------ -------------------
Total costs and expenses 27,653,549 24,494,528 16,039,897 11,443,836
----------------- ------------------- ------------------ -------------------
Loss from operations (12,924,798) (24,494,528) (13,533,836) (11,443,836)
Interest and other income 98,085 -- 155,966 --
Interest expense (3,279,364) (1,151,046)(3e) (978,159) (2,266,296)(4d)
----------------- ------------------- ------------------ -------------------
Loss before income tax benefit (16,106,077) (25,645,574) (14,356,029) (13,710,132)
Income tax benefit -- 13,325,584(3d) -- 9,467,685(4c)
----------------- ------------------- ------------------ -------------------
Net income/(loss) $ (16,106,077) $ (12,319,990) $ (14,356,029) $ (4,242,447)
================= =================== ================== ==================-
Southwest Merger
----------------------------------------
Historical Pro Forma
Southwest Adjustments Total
------------------ --------------------- --------------------
(Note 5)
Revenues:
Service revenues $ 27,129,444 $ -- $ 115,865,702
Product sales 2,731,731 -- 13,930,592
------------------ --------------------- --------------------
Total revenue 29,861,175 -- 129,796,294
------------------ --------------------- --------------------
Costs and Expenses:
Cost of service and operations 10,297,643 -- 79,269,457
Cost of service and operations - related parties -- -- --
Cost of products sold 8,819,132 -- 33,587,471
Selling and marketing 17,084,857 -- 74,680,886
Selling and marketing - related parties -- -- --
General and administrative expenses 4,379,329 -- 20,992,800
Selling, general and administrative 2,127,857 -- 2,127,857
Equity participation compensation expense -- -- 5,767,550
General and administrative - related parties -- -- 158,649
Terminated merger and acquisition costs -- -- 2,246,789
Depreciation and amortization 7,500,760 12,163,027(5c) 74,769,869
------------------ --------------------- --------------------
Total costs and expenses 50,209,578 12,163,027 293,601,328
------------------ --------------------- --------------------
Loss from operations (20,348,403) (12,163,027) (163,805,034)
Interest and other income 98,339 -- 14,835,821
Interest expense (7,059,737) (2,085,189) (5d,e) (74,822,258)
------------------ --------------------- --------------------
Loss before income tax benefit (27,309,801) (14,248,216) (223,791,471)
Income tax benefit -- 14,519,336(5c) 80,030,549
------------------ --------------------- --------------------
Net income/(loss) $ (27,309,801) $ 271,120 $(143,760,922)
================== ===================== ====================
Net loss per common share, basic
and diluted $ (1.58)
Weighted average common shares outstanding,
basic and diluted 90,848,390
140
CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - ADJUSTMENTS FOR ISSUANCE OF 12 1/2% SENIOR NOTES
Adjustments have been made to Alamosa (Delaware)'s historical financial
statements to illustrate the effects of the January 31, 2001 issuance of the
12 1/2% senior notes in the amount of $250 million.
(1a) Approximately $59.0 million of the net proceeds were used to establish
a security account to secure payment on a pro rata basis the payment
obligations under the 12 1/2% senior notes and Alamosa (Delaware)'s
existing 12 7/8% senior discount notes.
(1b) Debt issuance costs, comprised of a 3% commitment fee and $1.5 million
of other expenses, will be amortized on a straight-line basis over the
ten-year life of the senior notes.
NOTE 2 - ALAMOSA PRO FORMA ADJUSTMENTS
The pro forma income tax expense adjustments to Alamosa (Delaware)'s historical
financial statements represent the reversal of the deferred tax asset valuation
allowance and the resulting recognition of its deductible net operating loss
carry forwards. These adjustments were based on an assessment of the combined
past and expected future taxable income of Alamosa (Delaware) and expected
reversals of the temporary differences from the Roberts, WOW and Southwest
mergers.
On December 20, 2000, we announced that we had entered into a commitment letter
with a group of banks providing for a new senior credit facility of up to $280
million, to be made to Alamosa Holdings, LLC. The senior secured credit facility
was closed and initial funding of $150 million was made on February 14, 2001 in
connection with the completion of the Roberts and WOW mergers. A portion of the
proceeds of the credit facility were used to refinance Alamosa (Delaware)'s
existing credit facility, to fund the cash portion of the consideration in the
Roberts and WOW mergers, and to pay transaction costs. On March 30, 2001, the
senior credit facility was increased from $280 million to $333 million. The
additional $53 million was used to pay off the secured portion of Southwest's
$82 million of debt assumed in the closing of the merger. Remaining proceeds
will be used for general corporate purposes, including funding capital
expenditures, subscriber acquisition costs and marketing costs, purchase of
spectrum and working capital needs. The credit facility is comprised of a term
facility of $293 million and a revolving credit facility of $40 million, each
with a term of seven years. The rate of interest will be based on LIBOR plus an
interest margin.
The pro forma adjustment to interest expense reflects Alamosa (Delaware)'s
incremental expense based on the new rate of interest applicable under the
senior secured credit facility.
A 1/8% variance in interest rates would increase or decrease interest expense
by $38,771 for the year-ended December 31, 2000.
NOTE 3 - THE ROBERTS MERGER
Pursuant to the Roberts reorganization agreement, the members of Roberts formed
Roberts Wireless Holdings, L.L.C., which held all of the outstanding membership
interest of Roberts. On February 14, 2001, Roberts Holdings merged with and into
Alamosa Holdings. Each unit of membership interest of Roberts Holdings was
converted into the right to receive (i) 675 shares of Alamosa Holdings common
stock, and (ii) up to $200 in cash, without any interest thereon. The aggregate
consideration paid in the Roberts merger was 13,500,000 shares of Alamosa
Holdings common stock and $4.0 million in cash. Alamosa (Delaware) also assumed
the net debt of Roberts, which amounted to approximately $56.0 million.
To obtain the consent of Sprint PCS to the terms of the Roberts reorganization
agreement, Alamosa (Delaware) agreed to make certain payments to Sprint PCS if
Roberts did not meet its network build-out timetables in certain markets. With
respect to each of these markets for which the target dates have passed, Roberts
either has met all launch and build-out requirements or has been granted an
extension by Sprint PCS under a "force majeure" exception.
141
The unaudited pro forma condensed combined balance sheet and unaudited pro forma
condensed combined statement of operations have been adjusted for the Roberts
merger, which includes Alamosa (Delaware)'s acquisition of Roberts in exchange
for cash and stock in Alamosa Holdings. The Roberts merger will be accounted for
using the purchase method of accounting.
The pro forma adjustments represent the purchase accounting adjustments
necessary to reflect the Roberts merger. The aggregate purchase price was
calculated as follows:
Outstanding Membership interests of Roberts Holdings 20,000
Exchange ratio per membership interest 675
-------------
Equivalent Holding Company trading common shares 13,500,000
Average trading price $ 21.56 (i)
-------------
Subtotal $ 291,060,000
Cash consideration 4,000,000
Fair market value of stock options issued 428,175 (ii)
Merger-related costs 4,940,164 (iii)
Assumed deferred tax liability 123,241,331 (3b)
-------------
Total consideration $ 423,669,670
=============
Goodwill was calculated as follows:
Total consideration $ 423,669,670
Less:
Roberts members' equity at December 31, 2000 (14,946,210)
Write-off deferred debt issuance costs and other intangible assets (8,228,343)
Excluded assets (7,095,293) (iv)
Estimated fair value of Sprint PCS affiliation and operating agreements 330,698,185
-------------
Goodwill $ 123,241,331
=============
(i) The average trading price is based on the average of the closing prices of
Alamosa (Delaware)'s common stock for the two days before, the day of, and
the two days after the date of the announcement of the Roberts merger,
July 31, 2000.
(ii) Pursuant to the Roberts reorganization agreement, at the closing of the
Roberts merger, Alamosa Holdings issued stock options to purchase a total
of 45,000 shares of Alamosa Holdings common stock to former employees and
consultants of Roberts identified by Michael and Steven Roberts prior to
closing. It is not anticipated that these employees and consultants will
be providing services to Alamosa (Delaware) in the future. The options
will have an exercise price of 90% of the market value of Alamosa Holdings
common stock on the date of grant, which was February 14, 2001. The fair
value of the stock options was based on a Black-Scholes valuation and has
been recorded as additional consideration.
(iii) Costs of the Roberts merger have been included as additional purchase
price and are:
Investment banking fees $ 2,356,639
Legal, accounting and other 2,583,525
----------------
Total merger-related costs $ 4,940,164
----------------
142
(iv) Pursuant to the Roberts reorganization agreement, Roberts transferred to
the members, Roberts Tower Company or other entities controlled by them,
$7,095,293 of real estate, towers, base stations and retail store sites
that were funded directly or indirectly with capital contributions to
Roberts by the members.
We have preliminarily allocated the excess of the estimated purchase price over
the estimated fair value of the net tangible identifiable assets acquired to the
Sprint PCS affiliation and operating agreements ($330,698,185) and goodwill
($123,241,331). A deferred tax liability has been assumed for the difference
between the reported amounts allocated to the Sprint PCS affiliation and
operating agreements and the underlying tax basis. The final allocation of the
excess purchase price over net identifiable assets, which will be determined by
an independent appraiser, will include, if applicable, recognition of fair value
adjustments to the tangible assets, liabilities and identifiable intangible
assets, including the Sprint PCS affiliation and operating agreements,
intellectual property, subscriber lists and residual goodwill. For illustrative
purposes, we have amortized all intangible assets over a period of 18.7 years to
reflect the remaining term of the underlying Sprint PCS affiliation and
operating agreements from the assumed date of the closing of the reorganization,
which for purposes of this presentation is December 31, 2000.
(3a) The value assigned to the Sprint PCS affiliation and operating agreements
of $330,698,185 and goodwill of $123,241,331 is recorded as a pro forma
adjustment to the unaudited pro forma combined condensed balance sheet,
less the write off of existing intangible assets of $6,378,893.
(3b) A deferred tax liability has been recorded for the differences between the
estimated fair value and tax bases of the Roberts assets acquired and
liabilities assumed. We have assumed the estimated fair value of the
assets acquired, other than the Sprint PCS affiliation and operating
agreements, and liabilities assumed are equal to their tax bases. The
effective tax rate of 38% is an estimate of the composite federal and
state income tax rates. The deferred tax liability has been calculated as
follows:
Estimated Temporary
Fair Value Tax Basis Difference
----------------- ----------------- -----------------
Sprint PCS affiliation and operating
agreements $ 330,698,185 $6,378,893 $ 324,319,292
Estimated effective tax rate 38%
-------------
Deferred tax liability $ 123,241,331
=============
(3c) Represents the estimated cost associated with Michael Roberts', Steven
Roberts' and Kay Gabbert's five-year consulting agreements. The aggregate
annual cost of these consulting agreements totals $350,000 and has been
recorded as compensation expense. In addition, as part of Ms. Gabbert's
five-year consulting agreement, she will receive options for 40,000 shares
of Alamosa Holdings common stock vesting over five years, at an exercise
price of 90% of the market value of Alamosa (Delaware) common stock on
July 1, 2000. The fair value associated with these stock options was based
on a Black-Scholes valuation and has been recorded as unearned
compensation amortized over five years.
(3d) The pro forma adjustment to depreciation and amortization expense reflects
the incremental amortization expense related to the intangible assets as
if the Roberts merger occurred on January 1, 2000. The intangible assets
related to the Sprint PCS affiliation and operating agreements and
goodwill were amortized over 18.7 years. This amount totals $24,027,603
for the year ended December 31, 2000. These amounts are exclusive of
similar amortization expense already recorded by Roberts. A deferred tax
benefit has been recorded for the Roberts Net Operating Loss ("NOL") based
on the expectation of its realizability.
(3e) The pro forma adjustment reflects an increase in interest expense related
to the incremental debt to fund the cash consideration of the Roberts
merger and merger-related costs, assuming an annual interest rate of 12
143
7/8%. This interest rate is based on the terms of a new senior credit
facility as discussed in Note 1. This interest amount totals $1,151,046
for the year ended December 31, 2000. A 1/8% variance in interest rates
would increase or decrease interest expense by $11,175 for the year ended
December 31, 2000.
(3f) The pro forma adjustment represents entries to eliminate Alamosa's note
receivable and Roberts' corresponding note payable and related interest
of $1,045,785 obtained pursuant to the loans agreement dated July 31, 2000
whereby Alamosa Operations agreed to lend up to $26.6 million to Roberts
and up to $15.0 million to the owners of Roberts to be used for the
purpose of funding Roberts' working capital needs through the completion
of the merger. As of December 31, 2000, $37.0 million had been funded
under the loan agreements. At the completion of the Roberts acquisition,
the Roberts promissory note was transferred to Alamosa (Delaware) and
contributed as equity to its wholly owned subsidiary, Alamosa Holdings,
LLC.
(3g) The pro forma adjustment represents entries to eliminate Alamosa
(Delaware)'s receivables and Roberts' corresponding payables generated
pursuant to the services agreement dated July 31, 2000 whereby Alamosa
Operations agreed to provide various services in connection with the
operation of Roberts' business. Under the terms of the agreement, Roberts
was to pay Alamosa (Delaware) a management fee of $100,000 per month and
reimburse Alamosa (Delaware) for certain costs and expenses incurred by or
paid by Alamosa (Delaware) pursuant to the agreement. As of December 31,
2000, these amounts totaled $600,000 and $352,183, respectively.
NOTE 4 - THE WOW MERGER
Pursuant to the WOW reorganization agreement, the members of WOW formed WOW
Holdings, LLC, which held all of the outstanding membership interest of WOW. On
February 14, 2001, WOW Holdings merged with and into Alamosa Holdings. Each unit
of membership interest of WOW Holdings was converted into the right to receive
(i) 0.19171 shares of Alamosa Holdings common stock, and (ii) $0.396 in cash,
without any interest thereon. The aggregate consideration paid in the WOW merger
was 6,050,000 shares of Alamosa Holdings common stock and $12.5 million in cash.
Alamosa (Delaware) assumed the net debt of WOW which amounted to approximately
$31.0 million.
The unaudited pro forma condensed combined balance sheet and unaudited pro forma
condensed combined statement of operations have been adjusted for the WOW
merger, which includes Alamosa (Delaware)'s acquisition of WOW in exchange for
cash and stock in Alamosa Holdings. The WOW merger will be accounted for using
the purchase method of accounting.
The pro forma adjustments represent the purchase accounting adjustments
necessary to reflect the WOW merger. The aggregate purchase price was calculated
as follows:
Outstanding Membership interests of WOW Holdings 31,558,046
Exchange ratio per membership interest 0.19171
-------------
Equivalent Holding Company trading common shares 6,050,000
Average trading price $ 21.56 (i)
-------------
Subtotal $ 130,438,000
Cash consideration 12,500,000
Merger-related costs 3,074,587 (ii)
Assumption of value appreciation plan obligations 1,028,088 (iii)
Assumed deferred tax liability 57,036,741 (4b)
-------------
Total consideration $ 204,077,416
=============
144
Goodwill was calculated as follows:
Total consideration $ 204,077,416
Less:
WOW members' equity at December 31, 2000, less investment banking fees (1,576,687) (ii)
Write-off deferred debt issuance costs (1,479,324)
Estimated fair value of Sprint PCS affiliation and operating agreements 150,096,686
--------------
Goodwill $ 57,036,741
==============
(i) The average trading price is based on the average of the closing prices of
Alamosa (Delaware)'s common stock for the two days before, the day of, and
the two days after the date of the announcement of the WOW merger, July
31, 2000.
(ii) Costs of the WOW merger have been included as additional purchase price
and are:
Investment banking fees $ 1,213,868
Legal, accounting and other 1,509,472
Severance obligations 351,247
--------------
Total merger-related costs $ 3,074,587
==============
Under the terms of the WOW merger, Alamosa (Delaware) has agreed to
also pay WOW's investment banking fees associated with the merger of
$1,018,352. These fees have not been included in the preceding table.
No pro forma adjustment was recorded in WOW's pro forma condensed
statement of operations given the one-time nature of the charge. In
calculating goodwill, the estimated fees were deducted from WOW's
members' equity at December 31, 2000.
(iii) Pursuant to the WOW reorganization agreement, at the request of Alamosa
(Delaware), WOW terminated its value appreciation plan before completion
of the WOW merger and all participants of the value appreciation plan
became fully vested. Alamosa (Delaware) assumed the obligations owed under
the value appreciation plan both to Mitchell Moore and to one other WOW
employee whom Alamosa (Delaware) elected to employ. The obligation owed
under the value appreciation plan was recorded as additional purchase
price. The agreement stipulates that Mitchell Moore received a fixed value
of $1,000,000 in satisfaction of the obligation to him. All of the
obligation to Mr. Moore and one-third of the remaining obligation was paid
on the date of completion of the WOW merger. The remaining amount
($18,725) is payable in equal installments six and twelve months after the
date of completion of the WOW merger, regardless of the employee's
employment status.
We have preliminarily allocated the excess of the estimated purchase price over
the estimated fair value of the net tangible identifiable assets acquired to the
Sprint PCS affiliation and operating agreements ($150,096,686) and goodwill
($57,036,741). A deferred tax liability has been assumed for the difference
between the reported amounts allocated to the Sprint PCS affiliation and
operating agreements and the underlying tax basis. The final allocation of the
excess purchase price over net identifiable assets, which will be determined by
an independent appraiser, will include, if applicable, recognition of fair value
adjustments to the tangible assets, liabilities and identifiable intangible
assets, including the Sprint PCS affiliation and operating agreements,
intellectual property and residual goodwill. For illustrative purposes, we have
amortized all intangible assets over a period of 18.1 years to reflect the
remaining term of the underlying Sprint PCS affiliation and operating agreements
from the assumed date of the closing of the reorganization.
145
(4a) The value assigned to the Sprint PCS affiliation and operating agreements
of $150,096,686 and goodwill of $57,036,741 has been recorded as a pro
forma adjustment to the unaudited pro forma combined condensed balance
sheet.
(4b) A deferred tax liability has been recorded for the differences between the
estimated fair value and tax bases of the WOW assets acquired and
liabilities assumed. We have assumed the estimated fair value of the
assets acquired, other than the Sprint PCS affiliation and operating
agreements, and liabilities assumed are equal to their tax bases. The
effective tax rate of 38% is an estimate of the composite federal and
state income tax rates. The deferred tax liability has been calculated as
follows:
Estimated Temporary
Fair Value Tax Basis Difference
---------------- --------------- -----------------
Sprint PCS affiliation and operating agreements $ 150,096,686 $ - $ 150,096,68 6
Estimated effective tax rate 38%
----------------
Deferred tax liability $ 57,036,741
================
(4c) The pro forma adjustment to depreciation and amortization expense reflects
the amortization of the intangible assets over 18.1 years recognized as if
the WOW merger occurred on January 1, 2000. This amount totals $11,443,836
for the year ended December 31, 2000. A deferred tax benefit has been
recorded for the WOW NOL based on the expectation of its realizability.
(4d) The pro forma adjustment reflects an increase in interest expense related
to the incremental debt to fund the cash consideration of the WOW merger
and merger-related costs, assuming an annual interest rate of 12 7/8%.
This interest rate is based on the terms of a new senior credit facility
as discussed in Note 1. This amount totals $2,266,296 for the year ended
December 31, 2000. A 1/8% variance in interest rates would increase or
decrease interest expense by $22,003 for the year ended December 31, 2000.
(4e) The pro forma adjustment represents entries to eliminate Alamosa
(Delaware)'s note receivable and WOW's corresponding note payable obtained
pursuant to the loan agreement dated July 31, 2000 whereby Alamosa
Operations agreed to lend up to $11.0 million to WOW to be used for the
purpose of funding WOW's working capital needs through the completion of
the merger. As of December 31, 2000, $9,865,233 had been funded under the
loan agreement. At the completion of the WOW acquisition, the WOW
promissory note was transferred to Alamosa (Delaware) and contributed as
equity to its wholly owned subsidiary, Alamosa Holdings, LLC.
(4f) The pro forma adjustment represents entries to eliminate Alamosa
(Delaware)'s receivables and WOW's corresponding payables generated
pursuant to the services agreement dated September 1, 2000 whereby Alamosa
Operations agreed to provide various services in connection with the
operation of WOW's business. Under the terms of the agreement, WOW was to
pay Alamosa (Delaware) a management fee of $100,000 per month and
reimburse Alamosa (Delaware) for certain costs and expenses incurred by or
paid by Alamosa (Delaware) pursuant to the agreement. As of December 31,
2000, these amounts totaled $300,000 and $341,723, respectively.
146
NOTE 5 - THE SOUTHWEST MERGER
On March 30, 2001 Southwest PCS Holdings, Inc. ("Southwest") merged with and
into Forty Acquisition, Inc., a wholly-owned subsidiary of Alamosa Holdings,
Inc. The aggregate consideration paid in the Southwest merger was 11,100,000
shares of Alamosa Holdings common stock and $5 million in cash. Alamosa
(Delaware) assumed the net debt of Southwest which amounts to approximately
$71.5 million as of December 31, 2000.
The unaudited pro forma condensed combined balance sheet and unaudited pro forma
condensed combined statement of operations have been adjusted for the Southwest
merger, which includes Alamosa (Delaware)'s acquisition of Southwest in exchange
for cash and stock in Alamosa Holdings. The Southwest merger will be accounted
for using the purchase method of accounting.
The pro forma adjustments represent the purchase accounting adjustments
necessary to reflect the Southwest merger. The aggregate purchase price was
calculated as follows:
Holding Company trading common shares 11,100,000
Average trading price $ 11.13 (i)
-------------
Subtotal $ 123,543,000
Cash consideration 5,000,000
Merger-related costs 5,000,000 (ii)
Assumed deferred tax liability 58,946,612 (5b)
-------------
Total consideration $ 192,489,612
=============
Goodwill was calculated as follows:
Total consideration $ 192,489,612
Less:
Southwest's equity at December 31, 2000 (34,869,484)
Equity conversion 18,025,470 (iii)
Write-off of debt financing costs (4,735,649)
Estimated fair value of Sprint PCS affiliation and operating agreements 155,122,663
-------------
Goodwill $ 58,946,612
==============
(i) The average trading price is based on the average of the closing prices of
Alamosa Holdings' common stock for the two days before, the day of, and
the two days after the date of the announcement of the Southwest merger,
March 9, 2001.
(ii) Anticipated costs of the Southwest merger have been included as additional
purchase price and are:
Investment banking fees $ 3,500,000
Legal, accounting and other 500,000
Severance obligations 1,000,000
-------------
Total merger-related costs $ 5,000,000
=============
Under the terms of the Southwest merger, Alamosa (Delaware) has agreed to
also pay Southwest's investment banking fees associated with the merger of
$2,300,000. These fees have not been included in the preceding table. No
pro forma adjustment was recorded in Southwest's pro forma condensed
statement of operations given the one-time nature of the charge. In
calculating goodwill, the estimated fees were deducted from Southwest's
members' equity at December 31, 2000.
(iii) Pursuant to the merger agreement, the redeemable warrants and option of
Southwest previously recorded as a liability in Southwest's financial
statements were converted into equity. As a result, the fair value of
these instruments was reclassed to equity on a pro forma basis.
We have preliminarily allocated the excess of the estimated purchase price over
the estimated fair value of the net tangible identifiable assets acquired to the
Sprint PCS affiliation and operating agreements ($155,122,663) and goodwill
($58,946,612). A deferred tax liability has been assumed for the difference
between the reported amounts
147
allocated to the Sprint PCS affiliation and operating agreements and the
underlying tax basis. The final allocation of the excess purchase price over net
identifiable assets, which will be determined by an independent appraiser, will
include, if applicable, recognition of fair value adjustments to the tangible
assets, liabilities and identifiable intangible assets, including the Sprint PCS
affiliation and operating agreements, intellectual property and residual
goodwill. For illustrative purposes, we have amortized all intangible assets
over a period of 17.6 years to reflect the remaining term of the underlying
Sprint PCS affiliation and operating agreements from the assumed date of the
closing of the Southwest merger, which for purposes of this presentation is
December 31, 2000.
(5a) The value assigned to the Sprint PCS affiliation and operating agreements
of $155,122,663 and goodwill of $58,946,612 has been recorded as a pro
forma adjustment to the unaudited pro forma combined condensed balance
sheet.
(5b) A deferred tax liability has been recorded for the differences between the
estimated fair value and tax bases of the Southwest assets acquired and
liabilities assumed. We have assumed the estimated fair value of the
assets acquired, other than the Sprint PCS affiliation and operating
agreements, and liabilities assumed are equal to their tax bases. The
effective tax rate of 38% is an estimate of the composite federal and
state income tax rates. The deferred tax liability has been calculated as
follows:
Estimated Temporary
Fair Value Tax Basis Difference
--------------- -------------- ----------------
Sprint PCS affiliation and operating agreements $ 155,122,663 $ - $ 155,122,663
Estimated effective tax rate 38%
Deferred tax liability $ 58,946,612
(5c) The pro forma adjustment to depreciation and amortization expense reflects
the amortization of the intangible assets over 17.6 years recognized as if
the Southwest merger occurred on January 1, 2000. This amount totals
$12,163,027 for the year ended December 31, 2000. A deferred tax benefit
has been recorded for the Southwest NOL based on the expectation of its
realizability.
(5d) The pro forma adjustment reflects an increase in interest expense related
to the incremental debt to fund the cash consideration of the Southwest
merger and merger-related costs, assuming an annual interest rate of 12
7/8%. This rate is based on the terms of a new senior credit facility as
discussed in Note 1. This amount totals $1,583,625 for the year ended
December 31, 2000. A 1/8% variance in interest rates would increase or
decrease interest expense by $15,375 for the year ended December 31, 2000.
(5e) The pro forma adjustment to interest expense reflects the incremental
interest expense based on the new rate of interest applicable under the
senior secured credit facility which was used to pay off the secured
portion of Southwest's debt assumed upon closing. This amount totals
$501,564 for the year ended December 31, 2000.
148
LEGAL MATTERS
The validity of the notes being offered hereby will be passed upon for
Alamosa (Delaware) by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New
York.
EXPERTS
The consolidated financial statements of Alamosa (Delaware) as of December
31, 1999 and 2000 and for each of the two years in the period ended December 31,
2000 and for the period from July 16, 1998 to December 31, 1998 included in this
prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in accounting and auditing.
The consolidated financial statements of WOW as of December 31, 1999 and
2000 and for each of the two years in the period ended December 31, 2000
included in this prospectus have been so included in reliance upon the report of
Aldrich, Kibride & Tatone, LLP, independent accountants, given on the authority
of said firm as experts in accounting and auditing.
The consolidated financial statements of Roberts as of December 31, 1999
and 2000 and for each of the two years in the period ended December 31, 2000
included in this prospectus have been so included in reliance upon the report of
Melman, Alton & Co., independent accountants, given on the authority of said
firm as experts in accounting and auditing.
The consolidated financial statements of SWPCS Holdings, L.L.C. as of
December 31, 2000 and for the year then ended included in this prospectus have
been so included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
accounting and auditing.
149
INDEX TO FINANCIAL STATEMENTS
Alamosa (Delaware), Inc.
Report of Independent Accountants......................................................................... F-2
Consolidated Balance Sheets............................................................................... F-3
Consolidated Statements of Operations for the years ended December 31, 2000 and December 31, 1999
and for the period July 16, 1998 (inception) through December 31, 1998........................... F-4
Consolidated Statements of Stockholders' Equity for the period July 16, 1998 (inception) through the year
ended December 31, 2000.......................................................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2000 and December 31, 1999
and for the period July 16, 1998 (inception) through December 31, 1998........................... F-6
Notes to Consolidated Financial Statements................................................................ F-7
Report of Independent Accountants on Financial Statement Schedule......................................... F-33
Schedule II............................................................................................... F-34
Roberts Wireless Communications, L.L.C.
Independent Auditor's Report.............................................................................. F-35
Consolidated Balance Sheets............................................................................... F-36
Consolidated Statements of Operations for the years ended December 31, 2000 and
December 31, 1999 ............................................................................... F-37
Consolidated Statements of Members' Equity (Deficit) for the years ended December 31, 2000 and
December 31, 1999................................................................................ F-38
Consolidated Statements of Cash Flows for the years ended December 31, 2000 and
December 31, 1999 ............................................................................... F-39
Consolidated Notes to Financial Statements................................................................ F-40
Washington Oregon Wireless, LLC
Independent Auditor's Report.............................................................................. F-46
Balance Sheets............................................................................................ F-47
Statements of Income for the years ended December 31, 2000 and December 31, 1999.......................... F-48
Statements of Members' Equity (Deficit) for the years ended December 31, 2000 and December 31, 1999....... F-49
Statements of Cash Flows for the years ended December 31, 2000 and December 31, 1999...................... F-50
Notes to Financial Statements............................................................................. F-52
SWPCS Holdings, L.L.C.
Report of Independent Accountants......................................................................... F-59
Consolidated Balance Sheet................................................................................ F-60
Consolidated Statement of Operations for the year ended December 31, 2000................................. F-61
Consolidated Statement of Mandatorily Redeemable Member's Deficit and Members' Deficit for the year
ended December 31, 2000.......................................................................... F-62
Consolidated Statement of Cash Flows for the year ended December 31, 2000................................. F-63
Consolidated Notes to Financial Statement................................................................. F-64
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of Almosa (Delaware), Inc.
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, stockholder's equity and
cash flows present fairly, in all material respects, the financial position
of Alamosa (Delaware), Inc. and its subsidiaries at December 31, 2000 and
December 31, 1999, and the results of their operations and their cash flows
for each of the two years in the period ended December 31, 2000, and the
period from July 16, 1998 (inception) through December 31, 1998, in
conformity with accounting principles generally accepted in the United
States of America. 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 of these
statements in accordance with auditing standards generally accepted in the
United States of America, which 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, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
PricewaterhouseCoopers LLP
Dallas, Texas
February 19, 2001, except for Note 19 as to which the date is March 9,
2001.
F-2
ALAMOSA (DELAWARE), INC.
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2000 1999
--------------- ---------------
ASSETS
Current assets:
Cash and cash equivalents $ 141,768,167 $ 5,655,711
Short term investments 1,600,000 -
Accounts receivable, net of allowance for doubtful accounts of
$1,503,049 and $161,704, respectively 14,746,930 1,675,636
Inventory 2,752,788 5,777,375
Prepaid expenses and other assets 3,026,860 882,516
Interest receivable 1,045,785 -
--------------- ---------------
Total current assets 164,940,530 13,991,238
Property and equipment, net 228,982,869 84,713,724
Note receivable 46,865,233 100,000
Debt issuance costs, net 13,108,376 3,743,308
Restricted cash - 518,017
Other noncurrent assets 4,501,005 1,425,912
--------------- ---------------
Total assets $ 458,398,013 $ 104,492,199
=============== ===============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 59,749,061 $ 15,153,068
Accounts payable to related parties 1,636,745 1,182,225
Current installments of capital leases 35,778 21,818
Bank line of credit - 363,665
Microwave relocation obligation - 3,578,155
--------------- ---------------
Total current liabilities 61,421,584 20,298,931
Capital lease obligations, noncurrent 1,038,614 827,024
Other noncurrent liabilities 735,593 50,035
Long-term debt 54,524,224 71,876,379
Senior notes 209,279,908 -
--------------- ---------------
Total liabilities 326,999,923 93,052,369
--------------- ---------------
Commitments and contingencies
Stockholder's equity:
Preferred stock, $.01 par value; 1,000 and 10,000,000 shares
authorized; no shares issued, respectively - -
Common stock, $.01 par value; 9,000 and 290,000,000 shares
authorized, 100 and 48,500,008 issued and outstanding,
respectively 1 485,000
Additional paid-in capital 246,458,683 50,824,876
Accumulated deficit (113,947,781) (33,759,681)
Unearned compensation (1,112,813) (6,110,365)
--------------- ---------------
Total stockholder's equity 131,398,090 11,439,830
--------------- ---------------
Total liabilities and stockholder's equity $ 458,398,013 $ 104,492,199
=============== ===============
The accompanying notes are an integral part of the
consolidated financial statements.
F-3
ALAMOSA (DELAWARE), INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Period
July 16, 1998
Year Year (Inception)
Ended Ended Through
December 31, December 31, December 31,
2000 1999 1998
------------------- ------------------ -------------------
Revenues:
Subscriber revenues $ 56,154,178 $ 4,398,947 $ -
Roaming and travel revenues 17,345,460 2,134,676 -
------------------- ------------------ -------------------
Service revenues 73,499,638 6,533,623 -
Product sales 9,200,669 2,450,090 -
------------------- ------------------ -------------------
Total revenue 82,700,307 8,983,713 -
------------------- ------------------ -------------------
Costs and expenses:
Cost of service and operations (including
$836,296 and $1,259,427 of non-cash
compensation for 2000 and 1999,
respectively) 55,429,985 8,699,903 -
Cost of product sold 20,524,427 5,938,838 -
Selling and marketing 46,513,835 10,810,946 -
General and administrative expenses
(including $4,814,329 and $6,940,084 of
non-cash compensation for 2000 and
1999, respectively) 14,351,839 11,149,059 956,331
Depreciation and amortization 12,530,038 3,056,923 2,063
Terminated merger and acquisition costs 2,246,789 - -
------------------- ------------------ -------------------
Total costs and expenses 151,596,913 39,655,669 958,394
------------------- ------------------ -------------------
Loss from operations (68,896,606) (30,671,956) (958,394)
Interest and other income 14,483,431 477,390 34,589
Interest expense (25,774,925) (2,641,293) (17)
------------------- ------------------ -------------------
Net loss $ (80,188,100) $ (32,835,859) $ (923,822)
=================== ================== ===================
Pro forma information:
Net loss $ - $ (32,835,859) $ (923,822)
Pro forma income tax adjustment:
Income tax benefit - 10,854,083 317,592
Deferred tax valuation allowance - (10,854,083) (317,592)
------------------- ------------------ -------------------
Pro forma net loss $ - $ (32,835,859) $ (923,822)
=================== ================== ===================
The accompanying notes are an integral part of the consolidated financial statements.
F-4
ALAMOSA (DELAWARE), INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE PERIOD FROM JULY 16, 1998 (INCEPTION) TO DECEMBER 31, 2000
Common Stock
---------------------------
Shares Amount
-------------- ------------
Balance, July 16, 1998
(inception) ............ $ -- $ --
Member's contribution .. 48,500,008 485,000
Net loss ............... -- --
------------- --------------
Balance, December 31, 1998 . 48,500,008 485,000
Members' contributions . -- --
Stock options .......... -- --
Amortization of unearned
compensation ........ -- --
Net loss ............... -- --
------------- -------------
Balance, December 31, 1999 . 48,500,008 485,000
Initial public offering .... 12,321,100 123,211
Exercise of stock options .. 538,748 5,387
Capital reorganization ..... (61,359,756) (613,597)
Amortization of unearned
compensation ........... -- --
Unearned compensation ...... -- --
Net loss ................... -- --
------------- -------------
Balance, December 31, 2000 . $ 100 $ 1
============= =============
Additional
Paid-in Accumulated Unearned
Capital Deficit Compensation Total
-------------- --------------- -------------- -------------
Balance, July 16, 1998
(inception) ............ $ -- $ -- $ -- $ --
Member's contribution .. 14,515,000 -- -- 15,000,000
Net loss ............... -- (923,822) -- (923,822)
------------- ------------- ------------- -------------
Balance, December 31, 1998 . 14,515,000 (923,822) -- 14,076,178
Members' contributions . 22,000,000 -- -- 22,000,000
Stock options .......... 14,309,876 -- (14,309,876) --
Amortization of unearned
compensation ........ -- -- 8,199,511 8,199,511
Net loss ............... -- (32,835,859) -- (32,835,859)
------------- ------------- ------------- -------------
Balance, December 31, 1999 . 50,824,876 (33,759,681) (6,110,365) 11,439,830
Initial public offering .... 193,664,076 -- -- 193,787,287
Exercise of stock options .. 703,061 -- -- 708,448
Capital reorganization ..... 613,597 -- -- --
Amortization of unearned
compensation ........... -- -- 5,650,625 5,650,625
Unearned compensation ...... 653,073 -- (653,073) --
Net loss ................... -- (80,188,100) -- (80,188,100)
------------- ------------- ------------- -------------
Balance, December 31, 2000 . $ 246,458,683 $(113,947,781) $ (1,112,813) $ 131,398,090
============= ============= ============= =============
The accompanying notes are an integral part of the consolidated financial statements.
F-5
ALAMOSA (DELAWARE), INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Period
July 16, 1998
Year Year (Inception)
Ended Ended Through
December 31, December 31, December 31,
2000 1999 1998
----------------- ------------------ ------------------
Cash flows from operating activities:
Net loss $ (80,188,100) $ (32,835,859) $ (923,822)
Adjustments to reconcile net loss to net cash used in
operating activities:
Non-cash compensation expense 5,650,625 8,199,511 -
Depreciation and amortization 12,530,038 3,056,923 2,063
Bad debt expense 1,107,339 160,498 -
Amortization of debt issuance costs 1,397,546 331,063 -
Interest expense on discount notes 23,051,533 2,068,601 -
Loss from disposition of interest rate cap agreements 266,178 - -
Loss from asset disposition 81,347 - -
(Increase) decrease in:
Accounts receivable (14,178,633) (1,836,134) -
Inventory 3,024,587 (5,777,375) -
Prepaid expenses and other assets (4,296,355) (594,027) (52,046)
Increase (decrease) in:
Accounts payable and accrued expenses 22,335,731 10,137,095 845,851
----------------- ------------------ ------------------
Net cash used in operating activities (29,218,164) (17,089,704) (127,954)
----------------- ------------------ ------------------
Cash flows from investing activities
Additions to property and equipment (136,904,260) (76,601,004) (1,366,606)
Issuance of notes receivable (46,865,233) - -
Acquisition related costs (3,155,782) - -
Purchase of short term investments (1,600,000) - -
Repayment (Issuance) of note receivable from officer 100,000 (100,000) -
Purchase of minority interest in subsidiary (255,000) - -
Change in restricted cash 518,017 (518,017) -
----------------- ------------------ ------------------
Net cash used in investing activities (188,162,258) (77,219,021) (1,366,606)
----------------- ------------------ ------------------
Cash flows from financing activities:
Equity offering proceeds 208,589,367 - -
Equity offering costs (13,598,942) (1,360,405) -
Issuance of Senior Discount Notes 187,096,000 - -
Capital contributions - 22,000,000 15,000,000
Proceeds from issuance of long-term debt 57,758,559 66,357,841 23,637
Debt issuance costs (10,762,613) (234,371) -
Stock options exercised 708,449 - -
Repayments of long-term debt (76,239,373) - -
Payments on capital leases (31,169) (25,756) -
Interest rate cap premiums (27,400) (301,950) -
----------------- ------------------ ------------------
Net cash provided by financing activities 353,492,878 86,435,359 15,023,637
----------------- ------------------ ------------------
Net increase (decrease) in cash and cash equivalents 136,112,456 (7,873,366) 13,529,077
Cash and cash equivalents at beginning of period 5,655,711 13,529,077 -
----------------- ------------------ ------------------
Cash and cash equivalents at end of period $ 141,768,167 $ 5,655,711 $ 13,529,077
================= ================== ==================
Supplemental disclosure - cash paid for interest $ 1,730,980 $ 218,142 $ -
================= ================== ==================
Supplemental disclosure of non-cash activities
Capitalized lease obligations incurred $256,719 $146,379 $728,219
Liabilities assumed in connection with purchase of
property and equipment 28,816,329 5,352,347 -
Liabilities assumed in connection with debt issuance
costs - 3,840,000 -
Liabilities assumed in connection with microwave
relocation - 3,578,155 -
----------------- ------------------ ------------------
$ 29,073,048 $ 12,916,881 $ 728,219
================= ================== ==================
The accompanying notes are an integral part of the consolidated financial statements.
F-6
ALAMOSA (DELAWARE), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BUSINESS OPERATIONS
Alamosa (Delaware), Inc. through its subsidiaries provides
wireless personal communications services, commonly referred to as
PCS, in the Southwestern and Midwestern United States. Alamosa PCS
Holdings, Inc. ("Holdings") a Delaware corporation, was formed in
October 1999 to operate as a holding company in anticipation of an
initial public offering as described in Note 2. Immediately prior
to the offering in February 2000, shares of Holdings were
exchanged for Alamosa PCS LLC's ("Alamosa") membership interests,
and Alamosa became wholly owned by Holdings. These financial
statements are presented as if the reorganization had occurred as
of the beginning of the periods presented. As further described
below in 2001, through a series of transactions, Holdings' name
was changed to Alamosa (Delaware), Inc. Alamosa (Delaware), Inc.
and its subsidiaries are collectively referred to in these
financial statements as the "Company."
In 1998, Alamosa was formed and subsequently entered into
affiliation agreements with Sprint PCS, the PCS Group of Sprint
Corporation. These affiliation agreements provided the Company
with the exclusive right to build, own and manage a wireless voice
and data services network in markets with over 5.2 million
residents located in Texas, New Mexico, Arizona and Colorado under
the Sprint PCS brand. The Company amended its affiliation
agreements with Sprint PCS in December 1999 to expand its services
network so that it includes 8.4 million residents. The Company is
required to build out the wireless network according to Sprint PCS
specifications. If the Company does not meet the build-out
schedule as specified in the Sprint management agreement, the
Company could be in breach of its agreement with Sprint and
subject to penalties. The affiliation agreements are in effect for
a term of 20 years with three 10-year renewal options unless
terminated by either party under provisions outlined in the
affiliation agreements. The affiliation agreements include
indemnification clauses between the Company and Sprint PCS to
indemnify each other against claims arising from violations of
laws or the affiliation agreements, other than liabilities
resulting from negligence or willful misconduct of the party
seeking to be indemnified.
On July 31, 2000, the Company signed definitive agreements to
merge two Sprint PCS affiliates, Roberts Wireless Communications,
L.L.C. ("Roberts") and Washington Oregon Wireless, LLC ("WOW")
into its operations. On December 14, 2000, Holdings formed a new
holding company pursuant to a merger under Section 251(g) of the
Delaware General Corporation Law whereby Holdings was merged with
a direct wholly owned subsidiary of a new holding company, which
was a direct wholly owned subsidiary of Holdings. Each share of
the former Alamosa PCS Holdings was converted into one share of
the new holding company and the former public company became a
wholly owned subsidiary of the new holding company. The Section
251(g) transaction did not require any vote of the Alamosa PCS
Holdings stockholders. Upon effectiveness of the Section 251(g)
transaction, Holdings' name was changed to Alamosa (Delaware),
Inc. and the new holding company's name was changed to Alamosa PCS
Holdings, Inc. On February 14, 2001, the new Alamosa PCS Holding
became a wholly owned subsidiary of a new holding company, Alamosa
Holdings, Inc. ("Superholdings"). Each share of the new Alamosa
PCS Holdings' common stock issued and outstanding immediately
prior to the merger was converted into the right to receive one
share of Superholdings' common stock. Superholdings' common stock
is quoted on The Nasdaq National Market under the same symbol
previously used by Alamosa PCS Holdings, "APCS."
F-7
2. INITIAL PUBLIC OFFERING
On October 29, 1999, Holdings filed a registration statement with
the Securities and Exchange Commission for the sale of 10,714,000
shares of its common stock (the "Stock Offering"). The Stock
Offering became effective and the shares were issued on February
3, 2000 at the initial price of $17.00 per share. Subsequently,
the underwriters exercised their over-allotment option of
1,607,100 shares. Holdings received net proceeds of $194.3 million
after commissions of $13.3 million and expenses of approximately
$1.0 million. The proceeds of the Stock Offering are to be used
for the build out of the system, to fund operating capital needs
and for other corporate purposes.
3. CAPITAL REORGANIZATION
As described in Note 1, in December 2000, the Company's capital
stock was converted into shares of a new holding company with the
Company surviving. Following this transaction, the Company's
capital stock consisted of 9,000 shares of common stock, par value
$0.01 per share authorized and 100 shares outstanding, and 1,000
shares of preferred stock, $0.01 par value per share authorized
and no shares outstanding. As a result of this transaction, all of
the Company's common stock is owned by Alamosa PCS Holdings, Inc.
However, Alamosa (Delaware), Inc. remains the issuer of the 2000
Senior Discount Notes.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial
statements include the accounts of the Company and its
subsidiaries. All intercompany accounts and transactions are
eliminated.
Cash and cash equivalents - Cash and cash equivalents include
cash, money market funds, and commercial paper with minimal
interest rate risk and original maturities of three months or less
at the date of acquisition. The carrying amount approximates fair
value.
Short-Term Investments - The Company invests in highly liquid debt
instruments with strong credit ratings. Commercial paper
investments with a maturity greater than three months, but less
than one year, at the time of purchase are considered to be
short-term investments. The carrying amount of the investments
approximates fair value due to their short maturity. The Company
maintains cash and cash equivalents and short-term investments
with certain financial institutions. The Company performs periodic
evaluations of the relative credit standing of those financial
institutions that are considered in the Company's investment
strategy.
Inventory - Inventory consists of handsets and related
accessories. Inventories purchased for resale are carried at the
lower of cost or market using the first-in first-out method.
Market is determined using replacement cost.
F-8
Property and equipment - Property and equipment are reported at
cost less accumulated depreciation. Cost incurred to design and
construct the wireless network in a market are classified as
construction in progress. When the wireless network for a
particular market is completed and placed into service, the
related costs are transferred from construction in progress to
property and equipment. Repair and maintenance costs are charged
to expense as incurred; significant renewals and betterments are
capitalized. When depreciable assets are retired or otherwise
disposed of, the related costs and accumulated depreciation are
removed from the respective accounts, and any gains or losses on
disposition are recognized in income. If facts or circumstances
support the possibility of impairment, the Company will prepare a
projection of future operating cash flows, undiscounted and
without interest. If based on this projection, the Company does
not expect to recover its carrying cost, an impairment loss equal
to the difference between the fair value of the asset and its
carrying value will be recognized in operating income. Property
and equipment are depreciated using the straight-line method based
on estimated useful lives of the assets.
Asset lives are as follows:
Buildings 20 years
Network equipment 5-10 years
Vehicles 5 years
Furniture and office equipment 5-7 years
Leasehold improvements are depreciated over the shorter of the
remaining term of the lease or the estimated useful life of the
improvement.
Interest will be capitalized in connection with the construction
of the wireless network. The capitalized interest will be recorded
as part of the asset to which it relates and will be amortized
over the asset's estimated useful life. No interest was
capitalized in 2000. Total interest capitalized was $656,985 as of
December 31, 1999.
Microwave relocation includes costs and the related obligation
incurred to relocate incumbent microwave frequencies in the
Company's service area. Microwave relocation costs are amortized
on a straight-line basis over 20 years beginning upon commencement
of services in respective markets. The amortization of microwave
relocation costs was $273,453 and $84,312 for the years ended
December 31, 2000 and 1999, respectively.
Software costs - In accordance with Statement of Position ("SOP")
98-1, "Accounting for Costs of Computer Software Developed or
Obtained for Internal Use," certain costs related to the
development or purchase of internal-use software are capitalized
and amortized over the estimated useful life of the software.
During fiscal 2000 and 1999, the Company capitalized approximately
$2,037,000 and $411,000, respectively, in software costs under SOP
98-1, which are being amortized over a five-year life. The Company
amortized computer software costs of approximately $265,000 and
$40,000 during 2000 and 1999, respectively.
Start-up costs - In April 1998, the American Institute of
Certified Public Accountants ("AICPA") issued Statement of
Position ("SOP") 98-5, "Reporting on the Costs of Start-Up
Activities." This statement became effective January 1, 1999 and
required that costs of start up activities and organization costs
be expensed as incurred.
Advertising costs - Advertising costs are expensed as incurred.
Advertising expenses totaled $18,964,068 and $3,663,893 during
2000 and 1999, respectively.
F-9
Income taxes - The Company presents income taxes pursuant to
Statement of Financial Accounting Standards No. 109. "Accounting
for Income Taxes" ("FAS 109"). FAS 109 uses an asset and liability
approach to account for income taxes, wherein, deferred taxes are
provided for book and tax basis differences for assets and
liabilities. In the event differences between the financial
reporting basis and the tax basis of the Company's assets and
liabilities result in deferred tax assets, an evaluation of the
probability of being able to realize the future benefits indicated
by such assets is required. A valuation allowance is provided for
a portion or all of the deferred tax assets when there is
sufficient uncertainty regarding the Company's ability to
recognize the benefits of the assets in future years.
Revenue recognition - In December 1999, the Securities and
Exchange Commission issued Staff Accounting Bulletin No. 101 ("SAB
101"), "Revenue Recognition in Financial Statements." SAB 101
summarizes certain of the staff's interpretations in applying
generally accepted accounting principles to revenue recognition.
The provisions of SAB 101 were required to be adopted during the
quarter ending December 31, 2000 effective as of January 1, 2000.
Pursuant to SAB 101, the company began deferring customer
activation fee revenue and an equal amount of customer acquisition
related expenses in October 2000 when the Company began charging
these fees. These deferred amounts are amortized over a three-year
period, which approximates the average life of a customer. For the
year ended December 31, 2000, the Company had deferred $1,180,413
of activation fee revenue and acquisition related expenses and had
amortized $77,012. At December 31, 2000, $735,593 of the remaining
deferral was classified as long-term.
The Company recognizes revenue as services are performed. Sprint
PCS handles the Company's billings and collections and retains 8%
of collected service revenues from Sprint PCS subscribers based in
the Company's territories and from non-Sprint PCS subscribers who
roam onto the Company's network. The amount retained by Sprint PCS
is recorded in Cost of Service and Operations. Revenues generated
from the sale of handsets and accessories and from roaming
services provided to Sprint PCS customers who are not based in the
Company's territories are not subject to the 8% retainage.
Sprint PCS pays the Company a Sprint PCS roaming fee for each
minute that a Sprint PCS subscriber based outside of the Company's
territories roams on the Company's portion of the Sprint PCS
network. Revenue from these services will be recognized as the
services are performed. Similarly, the Company will pay Sprint PCS
roaming fees to Sprint PCS, when a Sprint PCS subscriber based in
the Company's territories roams on the Sprint PCS network outside
of the Company's territories. These costs will be included as cost
of service when incurred.
Product revenues consisting of proceeds from sales of handsets and
accessories are recorded net of an allowance for sales returns.
The allowance is estimated based on Sprint PCS 's handset return
policy that allows customers to return handsets for a full refund
within 14 days of purchase. When handsets are returned to the
Company, the Company may be able to reissue the handsets to
customers at little additional cost. However, when handsets are
returned to Sprint PCS for refurbishing, the Company will receive
a credit from Sprint PCS, which will be less than the amount the
Company originally paid for the handset. For the years ended
December 31, 2000 and 1999, respectively, product revenue was
$9,200,669 and $2,450,090. The cost of products sold includes the
total cost of accessories and handsets sold through our retail
stores (including sales to local indirects) and totaled
$20,524,427 and $5,938,838 for the years ending December 31, 2000
and 1999, respectively. There were no product revenues or related
costs for the period from inception to December 31, 1998. The
costs of handsets exceeds the retail sales price because we
subsidize the price of handsets for competitive reasons.
F-10
Stock based compensation - The Company has elected to follow
Accounting Principles Board Opinion ("APB") No. 25, "Accounting
for Stock Issued to Employees" and related interpretations in
accounting for its employee stock options. The non-cash
compensation expense relates to three employees whose cash
compensation is recorded in cost of service and operations and
general and administrative expenses. The Company has implemented
the disclosure-only provisions of Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock Based
Compensation." See Note 14.
Omission of per share information - Net loss per share information
is omitted as such information is not meaningful. At December 31,
2000, all of the Company's issued and outstanding shares of common
stock are owned by Alamosa PCS Holdings, Inc.
Use of estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities on the date of the financial
statements and the reported amounts of expenses during the
reporting period. Actual results could differ from those
estimates.
Risks and uncertainties - We estimate that we will require
approximately $223 million to complete the current build-out plan
and fund working capital losses through March 2002. This includes
our acquisitions of Roberts and WOW, as described in Note 19. The
actual funds required to build-out our portion of the Sprint PCS
network and to fund operating losses and working capital needs may
vary materially from this estimate, and additional funds could be
required. Failure to obtain additional capital, if needed to
complete the build-out of our portion of the Sprint PCS network,
could cause delay or abandonment of our development plans.
Concentration of risk - The Company maintains cash and cash
equivalents in accounts with financial institutions in excess of
the amount insured by the Federal Deposit Insurance Corporation.
The Company monitors the financial stability of this institution
regularly and management does not believe there is significant
credit risk associated with deposits in excess of federally
insured amounts.
Reclassification - Certain reclassifications have been made to
prior year balances to conform to current year presentations.
Effects of recent accounting pronouncements - In June 1998 and
June 1999, the Financial Accounting Standards Board ("FASB"),
issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" and SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Date
of FASB Statement No. 133." These statements require companies to
record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending
on the use of the derivative and whether it qualifies for hedging
accounting. SFAS No. 133 will be effective for the Company's
fiscal year ending December 31, 2001. Management believes that the
adoption of these statements will not have a significant impact on
the Company's financial results.
F-11
5. NOTES RECEIVABLE
Roberts - On July 31, 2000, our subsidiary, Alamosa Operations,
Inc. ("Operations") entered into a loan agreement with Roberts
Wireless Communications, L.L.C. ("Roberts") whereby Operations
agreed to lend up to $26.6 million to be used only for the purpose
of funding Roberts' working capital needs from July 31, 2000
through the completion of the Roberts merger, as described Note 1.
Also on July 31, 2000, Operations entered into a loan agreement
with the owners of Roberts for $15 million. As of December 31,
2000, approximately $37 million had been funded under the loan
agreements. The loans bear interest at the prime rate and are due
6 months after the termination of the Roberts reorganization
agreement, upon acceleration or upon demand.
WOW- Also, on July 31, 2000, WOW and Operations entered into a
loan agreement whereby Operations agreed to lend up to $11 million
to WOW to be used only for the purposes of (a) satisfying certain
capital contribution requirements under WOW's operating agreement,
and (b) funding WOW's working capital needs from July 31, 2000
through the completion of the WOW merger. As of December 31, 2000,
approximately $10 million had been funded under the loan
agreement. The loan bears interest at the prime rate and is due 30
days after the termination of the WOW reorganization agreement or
upon demand. The loan is guaranteed by certain members of WOW
Holdings.
The mergers of Roberts and WOW into the Company were completed in
February, 2001.
6. UNAUDITED PRO FORMA INFORMATION
The unaudited pro forma information reflects certain assumptions
regarding transactions and their effects that occurred as a result
of the reorganization described in Note 1.
Unaudited pro forma income information - The unaudited pro forma
information as shown on the statements of operations is presented
to show the effects of income taxes related to the Company's
subsequent termination of its limited liability company status.
The unaudited pro forma income tax adjustment is presented as if
the Company had been a C Corporation subject to federal and state
income taxes at an effective tax rate of 34% for the period from
inception through December 31, 1998 and the year ended December
31, 1999. Application of the provisions of SFAS No. 109,
"Accounting for Income Taxes" would have resulted in a deferred
tax asset primarily from temporary differences related to the
treatment of start-up costs and from net operating loss
carryforwards. The deferred tax asset would have been offset by a
full valuation allowance, as there is not currently sufficient
positive evidence as required by SFAS No. 109 to substantiate
recognition of the asset.
The pro forma information is presented for informational purposes
only and is not necessarily indicative of operating results that
would have occurred had the Company elected to terminate its
limited liability company status as of the beginning of 1999, nor
are they necessarily indicative of future operating results.
F-12
7. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
December 31, 2000 December 31, 1999
----------------- -----------------
Land and building..................... $ 5,668,180 $ 2,762,357
Network equipment..................... 159,982,079 72,518,897
Vehicles.............................. 1,584,286 430,753
Furniture and office equipment........ 10,129,708 2,266,966
-------------- ---------------
177,364,253 77,978,973
Accumulated depreciation.............. (15,290,044) (2,974,674)
-------------- ---------------
Subtotal..................... 162,074,209 75,004,299
Microwave relocation costs............ 4,103,214 3,578,155
Accumulated amortization.............. (273,453) (84,312)
-------------- ---------------
Subtotal..................... 3,829,761 3,493,843
Construction in progress:
Network equipment..................... 60,596,869 4,825,288
Leasehold improvements................ 2,482,030 1,390,294
-------------- ---------------
Subtotal..................... 63,078,899 6,215,582
-------------- ---------------
Total........................ $ 228,982,869 $ 84,713,724
============== ===============
8. LEASES
Operating leases - The Company has various operating leases,
primarily related to rentals of tower sites and offices. Rental
expense was $6,177,267 and $1,924,848 for 2000 and 1999,
respectively. At December 31, 2000, the aggregate minimum rental
commitments under noncancellable operating leases for the periods
shown are as follows:
Years:
2001 $ 8,700,345
2002 8,684,484
2003 8,682,799
2004 8,661,004
2005 8,535,777
Thereafter 35,025,779
----------------
Total $ 78,290,188
================
Capital leases - Capital leases consist of leases for rental of
retail space and switch usage. The net present value of the leases
was $1,074,392 and $848,842 at December 31, 2000 and 1999,
respectively, and was included in property and equipment.
Amortization recorded under these leases was $133,724 for the year
ended December 31, 2000 and was $30,894 during 1999.
At December 31, 2000, the future payments under capital lease
obligations, less imputed interest, are as follows:
Years:
2001 $ 148,280
2002 149,131
2003 149,999
2004 159,135
2005 160,788
Thereafter 1,181,166
------------
Total minimum lease payments 1,948,499
Less imputed interest 874,107
------------
Present value of minimum lease payments 1,074,392
Less current installments 35,778
------------
Long-term capital lease obligations
at December 31, 2000 $ 1,038,614
============
F-13
9. BANK LINE OF CREDIT
The Company had a $500,000 revolving line of credit with a bank
that expired June 9, 2000. The line of credit had a variable
interest rate of 9.25% at December 31, 1999. Proceeds from this
line of credit were used to purchase vehicles for service
representatives. This loan has not renewed and there is no amount
outstanding at December 31, 2000. As of December 31, 1999,
$363,665 was outstanding on the line of credit.
10. LONG-TERM DEBT
Long-term debt consists of the following:
December 31, 2000 December 31, 1999
----------------- -----------------
Debt outstanding under credit facilities:
Senior Discount Notes $ 209,279,908 $ -
EDC Credit Facility 54,524,224 71,876,379
Bank line of credit - 363,665
----------------- -----------------
Total debt 263,804,132 72,240,044
Less current maturities - 363,665
----------------- -----------------
Long-term debt, excluding current maturities $ 263,804,132 $ 71,876,379
================= =================
Senior Discount Notes - On December 23, 1999, the Company filed a
registration statement with the Securities and Exchange Commission
for the issuance of $350 million face amount of Senior Discount
Notes (the "Notes Offering"). The Notes Offering was completed on
February 8, 2000 and generated net proceeds of approximately $181
million after underwriters' commissions and expenses of
approximate $6.1 million. The Senior Discount Notes ("2000 Senior
Discount Notes") mature in ten years (February 15, 2010) and carry
a coupon rate of 12 7/8%, and provides for interest deferral for
the first five years. The Notes will accrete to their $350 million
face amount by February 8, 2005, after which, interest will be
paid in cash semiannually. The proceeds of the Notes Offering are
to be used to prepay $75 million of the Nortel credit facility, to
pay costs to build out the system, to fund operating working
capital needs and for other general corporate purposes.
Significant terms of the Notes include:
o Ranking - The 2000 Senior Discount Notes are senior
unsecured obligations of the Company, equal in right of
payment to all future senior debt of the Company, and
senior in right of payment to all future subordinated
debt of the Company;
o Guarantees - The 2000 Senior Discount Notes are unsecured
obligations and will rank equally with all existing and
future senior debt and senior to all existing and future
subordinate debt. The 2000 Senior Discount Notes are
fully and unconditionally, jointly and severally
guaranteed on a senior subordinated, unsecured basis, by
all the existing and any future restricted subsidiaries
of the Company with the exception of Alamosa Operations,
Inc., a wholly owned subsidiary of the Company;
o Optional Redemption - During the first thirty six (36)
months after the 2000 Senior Discount Notes Offering, we
may use net proceeds of an equity offering to redeem up
to 35% of the accreted value of the notes at a redemption
price of 112 7/8%;
F-14
o Change of Control - Upon a change of control as defined
by the 2000 Senior Discount Notes Offering, we will be
required to make an offer to purchase the notes at a
price equal to 101% of the accreted value (original
principal amount plus accrued interest) before February
15, 2005, or 101% of the principal amount at maturity
thereafter; and
o Restrictive Covenants - The indenture governing the 2000
Senior Discount Notes contains covenants that, among
other things and subject to important exceptions, limit
our ability and the ability of our subsidiaries to incur
additional debt, issue preferred stock, pay dividends,
redeem capital stock or make other restricted payments or
investments as defined by the 2000 Senior Discount Notes
Offering, create liens on assets, merge, consolidate or
dispose of assets, or enter into transactions with
affiliates and change lines of business. The 2000 Senior
Discount Notes have cross default provisions whereby an event of
default, that results in acceleration of the maturity on other
indebtedness of the Company, triggers a default on such Notes.
Nortel/EDC Credit Facility - The Company entered into a credit
facility effective June 10, 1999 with Nortel for $123.0 million.
On February 8, 2000 the Company entered into an Amended and
Restated Credit Agreement with Nortel Networks Inc., and on June
23, 2000, Nortel assigned the entirety of its loans and
commitments under the Amended and Restated Credit Agreement to
Export Development Corporation (the "Nortel/EDC Credit Facility").
The proceeds of the Nortel/EDC Credit Facility are used to
purchase equipment, to fund the construction of the Company's
portion of the Sprint PCS network, and to pay associated financing
costs. The financing terms permitted the Company to borrow $250
million (which was subsequently reduced to $175 million as a
result of the prepayment of $75 million outstanding) under three
commitment tranches through February 18, 2002, and requires
minimum equipment purchases.
The Nortel/EDC Credit Facility is collateralized by all of the
Company's current and future assets and capital stock. The Company
is required to maintain certain financial ratios and other
financial conditions including minimum levels of revenue and
wireless subscribers. In addition, the Company is required to
maintain a 1.0 million cash balance as collateral against the
facility. At December 31, 1999, the Company was not in compliance
with this agreement; however, a waiver of this requirement was
obtained from Nortel.
Alamosa may borrow money under the Nortel/EDC Credit Facility as
either a base rate loan with an interest rate of prime plus 2.75%,
or a Eurodollar loan with an interest rate of the London interbank
offered rate, commonly referred to as LIBOR, plus 3.75%. The LIBOR
interest rate was 6.199% at December 31, 2000. In addition, an
annual unused facility fee of 0.75% will be charged beginning
August 8, 2000 on the portion of the available credit that has not
been borrowed. Interest accrued through the two-year anniversary
from the closing date can be added to the principal amount of the
loan. Thereafter, interest is payable monthly in the case of base
rate loans and at the end of the applicable interest period, not
to exceed three months, in the case of Eurodollar loans. Interest
expense for the period ended December 31, 2000 totaled $1,332,392.
Principal is payable in 20 quarterly installments beginning
September 30, 2002. Alamosa may voluntarily prepay any of the
loans at any time, but any amount repaid may not be reborrowed
since there are no revolving credit features. Alamosa must make
mandatory prepayments under certain circumstances, including 50%
of the excess cash flow, as computed under the Nortel/EDC Credit
Facility, after March 31, 2002 and any amount in excess of
$250,000 received for asset sales outside the ordinary course of
business or insurance proceeds, to the extent not reinvested in
property or assets within a stated period of time. All prepayments
are applied to the outstanding loan balances pro rata in the
inverse order of maturity, except where there is a borrowing base
shortage, in which case prepayments are first applied there, and
then pro rata among all three commitment tranches.
F-15
The original commitment terms provided for warrants representing
2% of the outstanding common stock of Holdings. These warrants
were eliminated, by prior agreement, when the Company used $75
million of the equity contribution from Holdings to prepay, in
February 2000, amounts previously borrowed under the Nortel/EDC
Credit Facility. In addition to the $75 million prepayment, in
conjunction with the closing of the new facility, the Company also
paid accrued interest of approximately $852,500 and origination
fees and expenses of $3,995,000.
As a condition of the financing, Sprint PCS has entered into a
consent and agreement with Nortel that modifies Sprint PCS's
rights and remedies under its affiliation agreements with the
Company. Among other things, Sprint PCS consented to the pledge of
substantially all of the Company's assets to Nortel, including the
affiliation agreements. In addition, Sprint PCS may not terminate
the affiliation agreements with the Company and must maintain 10
MHz of PCS spectrum in the Company's markets until the Nortel/EDC
Credit Facility is satisfied or the Company's assets are sold
pursuant to the terms of the consent and agreement with Nortel.
Alamosa incurred approximately $8,256,000 of costs associated with
obtaining the Nortel/EDC Credit Facility. Those costs consisted of
loan origination fees, legal fees and other debt issuance costs
that have been capitalized and are being amortized to interest
expense using the straight-line method over the term of the
Nortel/EDC Credit Facility.
Terms and conditions of the Nortel/EDC Credit Facility after the
assignment on June 23, 2000 are essentially the same as before the
assignment. However, the Company is no longer required to maintain
a $1 million cash balance as collateral against the Nortel/EDC
Credit Facility.
11. INCOME TAXES
Deferred taxes are provided for those items reported in different
periods for income tax and financial reporting purposes. The net
deferred tax asset has been fully reserved because of uncertainty
regarding the Company's ability to recognize the benefit of the
asset in future years. Prior to February 1, 2000, the Company's
predecessor operated as a Limited Liability Company ("LLC") under
which losses for income tax purposes were utilized by the LLC
members on their income tax returns. Subsequent to January 31,
2000, the Company became a C-Corp for federal income tax purposes
and therefore subsequent losses became net operating loss
carryforwards of the Company. The tax effects of temporary
differences that give rise to significant portions of the deferred
tax assets and deferred tax liabilities are presented below:
December 31,
2000
----------------
Deferred tax assets:
Net operating loss carryforwards $ 25,625,914
Original issue discount 7,690,882
Non-cash compensation 2,067,209
Start-up expenses 1,006,690
Deferred rent 588,000
Bad debt allowance 442,577
Other 600,517
----------------
Gross deferred tax assets 38,021,789
Deferred tax liabilities:
Depreciation 10,995,932
Other 40,532
----------------
Net deferred tax assets 26,985,325
Valuation allowance (26,985,325)
----------------
Deferred tax balance $ -
================
F-16
The provision for income taxes is different than the amount
computed using the applicable statutory federal income tax rate
with the differences summarized below:
December 31,
2000
-------------
Federal tax benefit at statutory rate (35%)
=============
Predecessor Limited Liability Company 1.45%
Adjustment due to increase in valuation allowance 33.40%
Other .15%
-------------
Provision for income taxes 0.00%
=============
As of December 31, 2000, the Company has available net operating
loss carryforwards totaling approximately $73,217,000 which expire
beginning in 2020. Utilization of net operating loss carryforwards
may be limited by ownership changes which may have occurred or
could occur in the future.
12. RELATED PARTY TRANSACTIONS
Note receivable - On April 23, 1999, the Company entered into a
$100,000 loan agreement with an officer of the Company. The loan
was fully repaid on April 10, 2000.
Agreements with CHR Solutions, Inc. - Alamosa has entered into a
number of agreements with CHR Solutions, Inc. ("CHR") to perform
various consulting and engineering services. CHR resulted from a
merger between Hicks & Ragland Engineering Co., Inc., and Cathey,
Hutton & Associates, Inc. effective as of November 1, 1999. David
Sharbutt, the Company's Chairman and Chief Executive Officer, was,
at the time the agreements were executed, the President and Chief
Executive Officer of Hicks & Ragland. As of December 2000, Mr.
Sharbutt resigned his position on the Board of CHR, and is no
longer an employee of CHR.
Total amounts paid under the above agreements totaled $6,334,259
and $3,841,793 for the years ended December 31, 2000 and 1999,
respectively. Amounts included in accounts payable for the above
agreement totaled $1,489,358 and $893,764 for the years ended
December 31, 2000 and 1999, respectively.
Agreement with American Tower Corporation - In August 1998, the
Company entered into a master site development and lease agreement
with Specialty Capital Services, Inc. ("Specialty"), a subsidiary
of Specialty Teleconstructors, Inc. ("Teleconstructors"), that has
since merged with American Tower Corporation ("American").
Pursuant to the agreement, Specialty arranges for collocation of
equipment or constructs new facilities in area identified for
build-out. Specialty provides site acquisitions, leasing and
construction services, and secures zoning, permitting and
surveying approvals and licenses for each base station. This
initial term master agreement expires in August 2003, with
automatic renewal for three additional terms of five years each.
The agreement provides for monthly payments subject to an annual
adjustment based on the Consumer Price Index. Prior to October 1,
1999, Specialty was related to the Company through one of the
Company's directors who owned interests in both the Company and
Teleconstructors and was an employee and officer of Specialty and
Teleconstructors. In addition, another individual who was one of
the Company's directors at the time the agreement was entered into
is a manager of Longmont PCS, LLC, one of the Company's former
members. This individual was also a stockholder of
Teleconstructors and acted as a vice president of American, which
acquired Teleconstructors. The two individuals completed the
disposition of their ownership interests in American by September
30, 1999 and are no longer associated with American. No amounts
were paid or outstanding under this agreement during 1998. Through
September 30, 1999, $165,300 was paid under this agreement.
F-17
Agreements with Tech Telephone Company - Alamosa entered into a
telecommunications service agreement with Tech Telephone Company
Limited Partnership, an affiliate of CHR, to install and provide
DSI telecommunications lines between Sprint PCS and the Company's
Lubbock-based operations and between the Company's Lubbock-based
operations and other markets. The original term of the agreement
is three years, but the agreement automatically renews upon
expiration for additional successive 30-day terms by either party.
The Company has also entered into a distribution agreement with
Tech Telephone, authorizing it to become a third party distributor
of Sprint PCS products and services for the Company in Lubbock.
Total amount paid for these contracts was $1,707,074 and $212,687
during the years ended December 31, 2000 and 1999, respectively.
The amounts included in accounts payable for the same periods were
$147,387 and $288,461, respectively.
Other related party transactions - In November 1998, the Company
entered into an agreement to lease space for telephone switching
equipment in Albuquerque with SASR Limited Partnership, 50% owned
by one of the Company's directors and a manager of West Texas PCS,
LLC, and Budagher Family LLC, two of the Company's interest
holders. The lease has a term of five years with two optional
five-year terms. The lease provides for monthly payments
aggregating to $18,720 a year with 10% increase at the beginning
of the two option periods, as well as a pro rata portion of real
estate taxes on the property. In connection with the Company's
distribution and sales of Sprint PCS wireless communications
equipment, on December 28, 1998, the Company entered into a
long-term agreement to lease space for a retail store in Lubbock,
Texas with Lubbock HLH, Ltd., principally owned by one of
Holding's directors and the general manager of South Plains
Advance Communications & Electronics, Inc. ("SPACE"). SPACE is a
stockholder of the Company. This lease has a term of 15 years and
provides for monthly payments aggregating to approximately
$110,000 a year, subject to adjustment based on the Consumer Price
Index on the first day of the sixth lease year and on the first
day of the eleventh lease year. No amounts were paid or
outstanding under this lease at December 31, 1998. During 1999,
$73,233 was paid under this lease. No amount was payable at
December 31, 1999. During 2000, $100,833 was paid under this
lease. No amount was payable at December 31, 2000.
F-18
13. EMPLOYEE BENEFITS
Effective November 13, 1998, the Company elected to participate in
the NTCA Savings Plan, a defined contribution employee savings
plan sponsored by the National Telephone Cooperative Association
under Section 401(k) of the Internal Revenue Code. No employer
contributions were made to this plan for the period ended December
31, 1999 and 1998. During 2000, the Company made employer
contributions of $187,555.
Effective October 1, 1999, the Company entered into a three-year
employment agreement with its Chief Executive Officer ("CEO"), the
Company's chairman. In addition, in December 1999, the Company
granted options to the CEO to acquire 242,500 common shares at an
exercise price of $1.15 per share which vested immediately prior
to the completion of the initial public offering and 1,455,000
shares at an exercise price equal to the initial public offering
price which vest 33% per year beginning September 30, 2000. The
options expire January 5, 2009. The Company will recognize
compensation expense of $3,116,125 related to the 242,500 options
issued with an exercise price below the initial public offering
price over the options vesting period. Compensation expense
recorded for the year ended December 31, 2000 and 1999 was
$2,764,797 and $351,328, respectively.
On October 2, 1998, the Company entered into an employee agreement
with its Chief Operating Officer ("COO"). The agreement provides
for the granting of stock options in three series. The initial
exercise price was determined based on the following formula:
$48,500,000, committed capital at September 30, 1998, multiplied
by the percentage interest represented by the option exercised.
The exercise price for each series increased by an annual rate of
8%, 15% or 25% compounded monthly beginning at the date of grant
as specified by the agreement. Options may be exercised any time
from January 1, 2004 to January 5, 2008. The options vest over a
three-year period. During 1998, one option from each series was
granted under this agreement. The options to acquire membership
interests described above were to be exchanged for options in
Holdings to acquire an equivalent number of common shares: 242,500
at $1.08 per share, 242,500 at $1.15 per share and 242,500 at
$1.25 per share. Effective December 1999, the Company amended his
options such that each of his three series of original options
were exchanged for two options to acquire a total of 1,697,500
shares of common stock. The first option to acquire 242,500 shares
of common stock has a fixed exercise price of $1.15 per share and
vested immediately prior to completion of the initial public
offering. The second option to acquire 1,455,000 shares of common
stock has an exercise price equal to the initial public offering
price and vests 25% per year beginning September 30, 2000. The
expiration date of all of the COO's options was extended from
January 5, 2008 to January 5, 2009. These amendments resulted in a
new measurement date. The Company will record compensation expense
totaling $9,341,100 in connection with these options. Compensation
expense recorded for the years ended December 31, 2000 and 1999
was $1,639,532 and $6,588,755, respectively.
Effective December 1, 1999, the Company entered into a five-year
employment agreement with its Chief Financial Officer ("CFO"). In
addition, the Company granted the CFO options to purchase
1,455,000 shares at the initial public offering price and that
will expire January 5, 2009. There is no compensation cost related
to these options.
F-19
On October 14, 1998, the Board of Members of the Company approved
an Incentive Ownership Plan. The plan consisted of 3,500 units
comprised of 1,200 Series 8, 1,150 Series 15 and 1,150 Series 25
units. The exercise price for each series was based on a
pre-defined strike price which increased by an annual rate of 8%,
15% or 25% compounded monthly beginning July 1, 2000. The initial
exercise prices were $564.79, $623.84 and $711.88 for Series 8,
Series 15 and Series 25 options, respectively. Each unit provided
the holder an option to purchase an interest in the Company.
Vested units could have been exercised any time from July 1, 2000
to December 31, 2006. On October 29, 1998, under an employment
agreement with the Company's Chief Technology Officer, 300 units
were granted under this plan. The options to acquire membership
interests described above were to be exchanged for options to
acquire an equivalent number of common shares: 48,500 at $1.13 per
share, 48,500 at $1.25 per share and 48,500 at $1.42 per share.
Effective as of the IPO, these options were converted into options
of Holdings and were amended such that his original options with
exercise prices that increased by an annual rate of 8%, 15%, or
25% (compounded monthly beginning July 1, 2000) were exchanged for
options to purchase an equivalent number of common shares at fixed
exercise prices equal to $1.13, $1.25 and $1.42 per share, which
will not increase over the term of the options. These amendments
resulted in a new measurement date. The Company recorded
compensation expense totaling $2,095,723 in connection with these
options. Compensation expense recorded for the year ended December
31, 2000 and 1999 was $836,296 and $1,259,427, respectively.
14. STOCK-BASED COMPENSATION
Holdings adopted an Incentive Stock Option Plan (the "Plan")
effective November 12, 1999, which provides for the granting of
either incentive stock options or nonqualified stock options to
purchase shares of Holdings' common stock and for other
stock-based awards to officers, directors and key employees for
the direction and management of the Company and to non-employee
consultants and independent contractors. Effective December 14,
2000, options to acquire the Company's common stock were converted
into rights to acquire an equal number of common shares of Alamosa
PCS Holdings, Inc. At December 31, 2000, 7,000,000 shares of
common stock were reserved for issuance under the Plan. The
compensation committee of the board of directors administers the
Plan and determines grant prices and vesting periods. Generally,
the options under each plan vest in varying increments over a
three to five-year period, expire ten years from the date of grant
and are issued at exercise prices no less than 100% of the fair
market value of common stock at the time of the grant.
The Company applies APB No. 25, "Accounting for Stock Issued to
Employees" and related interpretation, in accounting for its
employee stock options. In accordance with APB No. 25, no
compensation expense or unearned compensation was recorded as of
December 31, 1998. The Company has recorded unearned compensation
of $14,962,949. This amount is being recognized over the vesting
period in accordance with FASB Interpretation No. 28 when
applicable. For the year ended December 31, 2000 and 1999,
non-cash compensation of $5,650,625 and $8,199,511 has been
recognized, respectively.
F-20
As discussed in Note 4, the Company has adopted the
disclosure-only provisions of SFAS No. 123. Had compensation cost
for the Company's stock option plans been determined based on the
fair value provisions of SFAS No. 123, the Company's net loss and
net loss per share would have been decreased to the pro forma
amounts indicated below:
For the Period
From July 16,
1998 (Inception)
Year End Year End Through
December 31, December 31, December 31,
2000 1999 1998
------------------ ------------------ ----------------------
Net loss - as reported $ (80,188,100) $ (32,835,859) $ (923,822)
Net loss - pro forma $ (80,188,100) $ (32,835,859) $ (997,531)
The pro forma disclosures provided are not likely to be
representative of the effects on reported net income or loss for
future years due to future grants and the vesting requirements of
the Company's stock option plans.
The weighted-average fair value for all stock options granted in
1998, 1999 and 2000 was $0.46, $13.04, and $12.18, respectively.
The fair value of each stock option granted is estimated on the
date of grant using the Black-Scholes option-pricing model with
the following weighted-average assumptions:
For the Period
From July 16,
1998 (Inception)
Year End Year End Through
December 31, December 31, December 31,
2000 1999 1998
------------------ ------------------ ----------------------
Dividend yield 0% 0% 0%
Expected volatility 72% 70% 70%
Risk-free rate of return 6.3% 5.5% 5.5%
Expected life 4.07 years 5.53 years 0.3 years
The following summarizes activity under the Company's stock option
plans:
Weighted-average Exercise
Number of Options Price per Share
------------------------------------- -------------------------------------
Year End Year End Year End Year End
December 31, December 31, December 31, December 31,
2000 1999 2000 1999
----------------- ----------------- ----------------- ------------------
Options outstanding at
beginning of the
period................ 5,282,000 873,000 12.47 1.18
Granted................... . 2,131,750 5,282,000 17.17 12.47
Exercised................. . (538,750) - (1.48) -
Canceled/forfeited........ . (86,248) (873,000) (12.35) (1.18)
----------------- ----------------- ----------------- ------------------
Options outstanding at
the end of the period.. 6,788,752 5,282,000 16.87 12.47
================= ================= ================= =================
Options exercisable at
end of period......... 1,615,502 48,498 16.75 1.27
The following table summarized information for stock options at
December 31, 2000:
Outstanding Exercisable
------------------------------------------------------- -----------------------------
Weighted
Number Remaining Number Average
Range of Of Exercise Contractural Of Exercise
Exercise Prices Options Price Life Options Price
- ------------------ ------------- ------------- ---------------------- ------------ --------------
$1.13 - $10.74 57,002 $ 10.21 8.8 57,002 $ 10.21
$10.75 - $15.67 620,100 $ 13.82 9.7 9,000 $ 15.67
$16.81 - $24.56 6,029,650 $ 17.11 8.3 1,549,500 $ 17.00
$26.25 - $35.63 82,000 $ 27.11 9.6 - N/A
------------- ------------- ---------------------- ------------ --------------
$1.13 - $35.63 6,788,752 $ 16.87 8.5 1,615,502 $ 16.75
============= ============= ====================== ============ ==============
F-21
15. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash, accounts payable, and accrued
expenses approximate fair value because of the short maturity of
these items.
The carrying amount of the debt issued pursuant to the Company's
credit agreement with EDC is expected to approximate fair value
because the interest rate changes with market interest rates.
The Company utilizes interest rate cap agreements to limit the
impact of increases in interest rates on its floating rate debt.
The interest rate cap agreements require premium payments to
counterparties based upon a notional principal amount. Interest
rate cap agreements entitle the Company to receive from the
counterparties the amounts, if any, by which the selected market
interest rates exceed the strike rates stated in the agreements.
The fair value of the interest rate cap agreements is estimated by
obtaining quotes from brokers and represents the cash requirement
if the existing contracts had been settled at the balance sheet
dates.
Selected information related to the Company's senior discount
notes is a follows:
December 31, December 31,
2000 1999
--------------- ---------------
Book value $ 209,279,908 $ -
Fair value 215,558,305 -
--------------- ---------------
Net unrecognized gain $ 6,278,397 $ -
=============== ===============
Selected information related to the Company's interest rate cap
agreements is as follows:
December 31, December 31,
2000 1999
--------------- --------------
Notional amount $ 2,300,000 $ 35,607,000
=============== ===============
Fair value 439 125,815
Carrying amount 20,550 282,958
--------------- ---------------
Net unrecognized gain (loss) $ (20,111) $ (157,143)
=============== ===============
These fair value estimates are subjective in nature and involve
uncertainties and matters of considerable judgment and therefore,
cannot be determined with precision. Changes in assumptions could
significantly affect these estimates.
16. COMMITMENTS AND CONTINGENCIES
On December 21, 1998, the Company entered into a three-year
agreement with Nortel to purchase network equipment and
infrastructure. Pursuant to that agreement, Nortel also agreed to
provide installation and optimization services, such as network
engineering and radio frequency engineering, for the equipment and
to grant the Company a nonexclusive license to use the software
associated with the Nortel equipment. The Company has committed to
purchase $82.0 million worth of equipment and services from
Nortel. Under the agreement, the Company will receive a discount
on the network equipment and services because of the Company's
affiliation with Sprint PCS, but must pay a premium on any
equipment and services financed by Nortel. If the Company's
affiliation with Sprint PCS ends, Nortel has the right to either
terminate the agreement or, with the Company's consent, modify the
agreement to establish new prices, terms and conditions. The
Company entered into a modification of the agreement with Nortel
after December 31, 1999 as described in Note 10.
F-22
17. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The quarterly results of operations (unaudited) for 1998, 1999,
and 2000 per quarter are as follows:
Quarter ended
---------------------------------------------------------------------
March 31 June 30 September 30 December 31
---------------- ----------------- ---------------- -----------------
(In thousands, except per share amount)
1998:
Net sales................. $ - $ - $ - $ -
Operating loss............ - - (401) (558)
Net loss.................. - - (400) (523)
1999:
Net sales................. $ - $ 35 $ 1,965 $ 6,984
Operating loss............ (1,963) (4,005) (11,279) (13,425)
Net loss.................. (1,745) (4,018) (11,926) (15,147)
2000:
Net sales................. $ 11,880 $ 17,553 $ 23,203 $ 30,064
Operating loss............ (13,114) (10,744) (14,621) (30,418)
Net loss.................. (15,580) (12,908) (17,470) (34,230)
Beginning in the fourth quarter of 2000, the Company began
recording bad debt expense as a component of selling and
marketing. Quarterly net sales have been adjusted to reflect the
reclassification of bad debt expense to selling and marketing
expense. The effect amounted to $194,722, $319,590 and $219,871
for each of the first three quarters in the year ended December
31, 2000.
18. GUARANTOR FINANCIAL STATEMENTS
Set forth below are consolidating financial statements of the
issuer and guarantor subsidiaries and Alamosa Operations, Inc.
("Operations") which is the Company's non-guarantor subsidiary
(the "Non-Guarantor Subsidiary") of the Senior Discount Notes.
Separate financial statements of each guarantor subsidiary have
not been provided because management has determined that they are
not material to investors.
CONSOLIDATING BALANCE SHEET
AS OF DECEMBER 31, 2000
(in thousands)
Guarantor Non-Guarantor
Issuer Subsidiaries Subsidiary Eliminations Consolidated
------------ -------------- --------------- ------------ -------------
ASSETS
Current Assets:
Cash and cash equivalents $ 114,003 $ 23,054 $ 4,711 $ - $ 141,768
Short term investments 1,600 - - - 1,600
Accounts receivable, net of
allowance - 13,847 900 - 14,747
Intercompany receivable 47,239 4,338 - (51,577) -
Inventory - 2,753 - - 2,753
Investment in subsidiary 168,857 - - (168,857) -
Prepaid expenses and other assets 17 3,010 1,046 - 4,073
------------ -------------- ------------- ------------ -------------
Total current assets 331,716 47,002 6,657 (220,434) 164,941
Property and equipment, net - 228,983 - - 228,983
Notes receivable - - 46,865 - 46,865
Debt issuance costs, net 6,207 6,901 - - 13,108
Other non-current assets 3,319 1,182 - 4,501
------------ -------------- -------------- ------------- --------------
Total assets $ 341,242 $ 284,068 $ 53,522 $ (220,434) $ 458,398
============ ============== ============== ============= ==============
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable and accrued $ 564 $ 60,783 $ 39 $ - $ 61,386
expenses
Intercompany payable - - 51,577 (51,577) -
Current installments on capital
lease obligations - 36 - - 36
------------ -------------- ------------- ------------- -------------
Total current liabilities 564 60,819 51,616 (51,577) 61,422
Long-term debt 209,280 54,524 - - 263,804
Capital lease obligations - 1,039 - - 1,039
Other noncurrent liabilities - 735 - - 735
------------ -------------- ------------- ------------- -------------
Total liabilities 209,844 117,117 51,616 (51,577) 327,000
------------ -------------- ------------- ------------- -------------
Stockholders' Equity:
Preferred stock, par value $.01 per
share; 1,000 shares authorized, no
shares issued and outstanding - - - - -
Common stock, $.01 par value;
9,000 shares authorized, 100
issued and outstanding 1 485 - (485) 1
Additional paid-in capital 246,458 266,068 - (266,068) 246,458
Accumulated (deficit) earnings (113,948) (98,489) 1,906 96,583 (113,948)
Unearned compensation (1,113) (1,113) - 1,113 (1,113)
------------ -------------- ------------- ------------- -------------
Total equity 131,398 166,951 1,906 (168,857) 131,398
------------ -------------- ------------- ------------- -------------
Total liabilities and
stockholders' equity $ 341,242 $ 284,068 $ 53,522 $ (220,434) $ 458,398
============ ============== ============== ============= ==============
F-23
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(in thousands)
Guarantor Non-Guarantor
Issuer Subsidiaries Subsidiary Eliminations Consolidated
------------ -------------- --------------- ------------ -------------
Revenues:
Subscriber revenues $ - $ 56,154 $ - $ - $ 56,154
Travel and roaming revenues - 17,345 - - 17,345
------------ -------------- -------------- ------------- ---------------
Services revenues - 73,499 - - 73,499
Product sales - 9,201 - - 9,201
------------ -------------- -------------- ------------- ---------------
Total revenue - 82,700 - - 82,700
Cost of services and operations - 55,430 - - 55,430
Cost of products sold (including $836
of non-cash compensation) - 20,524 - - 20,524
Selling and marketing - 46,514 - - 46,514
General and administrative (including
$4,814 of non-cash
compensation) 1,050 13,263 39 - 14,352
Depreciation and amortization - 12,530 - - 12,530
Terminated merger and acquisition
costs 2,247 - - - 2,247
------------ -------------- -------------- ------------- -------------
Loss from operations (3,297) (65,561) (39) - (68,897)
Equity in loss of subsidiaries (62,823) - - 62,823 -
Interest and other income 8,489 4,050 1,945 - 14,484
Interest expense (22,557) (3,218) - - (25,775)
------------ -------------- -------------- ------------- -------------
Net income (loss) $ (80,188) $ (64,729) $ 1,906 $ 62,823 $ (80,188)
============ ============== ============== ============= =============
F-24
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2000
(in thousands)
Guarantor Non-Guarantor
Issuer Subsidiaries Subsidiary Eliminations Consolidated
----------- -------------- ------------------ -------------- --------------
Cash flows from operating activities:
Net income (loss) $ (80,188) $ (64,729) $ 1,906 $ 62,823 $ (80,188)
Adjustments to reconcile net loss to
net cash used in operating activities: - - - - -
Equity in loss of subsidiaries 62,823 - - (62,823) -
Non-cash compensation expense 410 5,241 - - 5,651
Depreciation and amortization - 12,530 - - 12,530
Bad debt expense - 1,107 - - 1,107
Amortization of debt issuance costs 373 1,024 - - 1,397
Deferred interest expense 22,184 868 - - 23,052
Loss from disposition of interest
rate cap agreements - 266 - - 266
Loss from asset disposition - 81 - - 81
(Increase) decrease in asset accounts:
Accounts receivable - (13,278) (900) - (14,178)
Inventory - 3,025 - - 3,025
Prepaid expense and other assets (179) (3,071) (1,046) - (4,296)
Increase (decrease) in liability accounts:
Accounts payable and
accrued expenses 564 21,732 39 - 22,335
----------- -------------- ------------------ ------------- --------------
Net cash provided by (used in)
operating activities 5,987 (35,204) (1) - (29,218)
----------- -------------- ------------------ ------------- --------------
Cash flows from investing activities:
Additions to property and equipment - (136,904) - - (136,904)
Intercompany receivable (47,239) (4,338) - 51,577 -
Intercompany payable - - 51,577 (51,577) -
Equity investment in subsidiary (215,000) - - 215,000 -
Equity investment from parent - 215,000 - (215,000) -
Repayment (issuance) of notes
receivable - 100 (46,865) - (46,765)
Acquisition related costs (3,156) - - - (3,156)
Purchase of short term investments (1,600) - - - (1,600)
Purchase of minority interest in
subsidiary - (255) - - (255)
Change in restricted cash - 518 - - 518
----------- -------------- ------------------ ------------- --------------
Net cash provided by (used in)
investing activities (266,995) 74,121 4,712 - (188,162)
----------- -------------- ------------------ ------------- --------------
Cash flows from financing activities:
Equity offering proceeds 208,589 - - - 208,589
Equity offering costs (14,802) 1,203 - - (13,599)
Issuance of Senior Discount Notes 187,096 - - - 187,096
Debt issuance cost (6,581) (4,182) - - (10,763)
Stock options exercised 709 - - - 709
Proceeds from issuance of
long-term debt - 57,758 - - 57,758
Repayments of long-term debt - (76,239) - - (76,239)
Payments on capital leases - (31) - - (31)
Interest rate cap premiums - (27) - - (27)
----------- -------------- ------------------ -------------- --------------
Net cash provided by financing
activities 375,011 (21,518) - - 353,493
----------- -------------- ------------------ -------------- --------------
Net increase in cash and cash
equivalents 114,003 17,399 4,711 - 136,113
Cash and cash equivalents at
beginning of period - 5,655 - - 5,655
----------- -------------- ------------------ ------------- --------------
Cash and cash equivalents at $ 114,003 $ 23,054 $ 4,711 $ - $ 141,768
end of period =========== ============== ================== ============= ==============
F-25
19. SUBSEQUENT EVENTS
2001 Senior Notes
On January 31, 2001, the Company consummated the offering (the
"2001 Notes Offering") of $250 million aggregate principal amount
of Senior Notes (the "2001 Senior Notes"). The 2001 Senior Notes
mature in ten years (February 1, 2011), carry a coupon rate of 12
1/2%, payable semiannually on February 1 and August 1, beginning
on August 1, 2001. The net proceeds from the sale of the 2001
Senior Notes were approximately $241 million, after deducting the
discounts and commission to the initial purchasers and estimated
offering expenses.
Approximately $59.0 million of the proceeds of the 2001 Senior
Notes Offering were used by the Company to establish a security
account (with cash or U.S. government securities) to secure on a
pro rata basis the payment obligations under the 2001 Senior Notes
and the 2000 Senior Discount Notes, and the balance will be used
for general corporate purposes of the Company, including,
accelerating coverage within the existing territories of the
Company; the build-out of additional areas within its existing
territories; expanding its existing territories; and pursuing
additional telecommunications business opportunities or acquiring
other telecommunications businesses or assets.
Significant terms of the 2001 Senior Notes include:
Ranking -- The 2001 Senior Notes are senior unsecured obligations
of the Company, rank equally with all its existing and future
senior debt and rank senior to all its existing and future
subordinated debt.
Guarantees -- The 2001 Senior Notes are fully and unconditionally,
jointly and severally guaranteed on a senior subordinated basis by
the current subsidiaries and future restricted subsidiaries of the
Company.
Security Agreement -- Concurrently with the closing of the 2001
Senior Notes, the Company deposited $59.0 million with the
collateral agent, to secure on a pro rata basis the payment
obligations of the Company under the 2001 Senior Notes and the
2000 Senior Discount Notes. The amount deposited in the security
account, together with the proceeds from the investment thereof,
will be sufficient to pay when due the first four interest
payments on the 2001 Senior Notes. Funds will be released from the
security account to make interest payments on the 2001 Senior
Notes or the 2000 Senior Discount Notes as they become due, so
long as there does not exist an event of default with respect to
the 2001 Senior Notes or the 2000 Senior Discount Notes.
Optional Redemption -- During the first thirty six (36) months
after the 2001 Notes Offering, the Company may use net proceeds of
an equity offering to redeem up to 35% of the accreted value of
the notes at a redemption price of 112.5%.
Change of Control -- Upon a change of control as defined by the
2001 Notes Offering, the Company will be required to make an offer
to purchase the 2001 Senior Notes at a price equal to 101% of the
principal amount together with accrued and unpaid interest.
Restrictive Covenants -- The indenture governing the 2001 Senior
Notes contains covenants that, among other things and subject to
important exceptions, limit the ability of the Company and the
ability of the subsidiaries of the Company to incur additional
debt, issue preferred stock, pay dividends, redeem capital stock
or make other restricted payments or investments as defined by the
2001 Notes Offering, create liens on assets, merge, consolidate or
dispose of assets, or enter into transactions with affiliates and
change lines of business. The 2001 Senior Notes have cross-default
provisions whereby an event of default, that results in acceleration
of the maturity on other indebtedness of the Company, triggers a
default on such Notes.
F-26
Registration Rights -- In connection with the 2001 Senior Notes
Offering, the Company entered into a registration rights
agreement, where Alamosa (Delaware) and the guarantors of the 2001
Senior Notes agreed, (i) to file a registration statement within
90 days of the closing of the 2001 Notes Offering which, when
effective, will enable holders of the 2001 Senior Notes to
exchange the privately placed 2001 Senior Notes for publicly
registered notes. The publicly registered notes will have terms
substantially identical to those of the privately placed notes,
except that the new notes will be freely transferable; and (ii) to
use reasonable best efforts to cause the registration statement to
become effective under the Securities Act within 180 days after
the closing of the 2001 Notes Offering.
Senior Secured Credit Facility
On February 14, 2001, Superholdings, the Company and Alamosa
Holdings, LLC, as borrower; entered into a $280.0 million Senior
Secured Credit Facility (the "Senior Secured Credit Facility")
with Citicorp USA, as administrative agent and collateral agent
Toronto Dominion (Texas), Inc., as syndication agent; EDC as
co-documentation agent; First Union National Bank, as
documentation agent; and a syndicate of banking and financial
institutions. In connection with the completion of the Southwest
merger, the senior secured credit facility was increased from
$280.0 million to $333.0 million.
The following is a summary of the principal terms of the Senior
Secured Credit Facility.
The Senior Secured Credit Facility consists of:
o a 7-year senior secured 12-month delayed draw term loan
facility in an aggregate principal amount of up to
$293.0 million; and
o 7-year senior secured revolving credit facility in an
aggregate principal amount of up to $40.0 million, part
of which will be available in the form of letters of
credit.
Under the Senior Secured Credit Facility, interest will accrue, at
Alamosa Holdings, LLC's option: (i) at the London Interbank
Offered Rate adjusted for any statutory reserves ("LIBOR"), or
(ii) the base rate which is generally the higher of the
administrative agent's base rate, the federal funds effective rate
plus 0.50% or the administrative agent's base CD rate plus 0.50%,
in each case plus an interest margin which is initially 4.00% for
LIBOR borrowings and 3.00% for base rate borrowings. The
applicable interest margins are subject to reductions under a
pricing grid based on ratios of Alamosa Holdings, LLC's total debt
to its earnings before interest, taxes, depreciation and
amortization ("EBITDA"). The interest rate margins will increase
by an additional 200 basis points in the event Alamosa Holdings,
LLC fails to pay principal, interest or other amounts as they
become due and payable under the Senior Secured Credit Facility.
The interest rate on the outstanding loans is 9.4375%. Alamosa
Holdings, LLC is also required to pay quarterly in arrears a
commitment fee on the unfunded portion of the commitment of each
lender. The commitment fee accrues at a rate per annum equal to
(i) 1.50% on each day when the utilization (determined by dividing
the total amount of loans plus outstanding letters of credit under
the Senior Secured Credit Facility by the total commitment amount
under the Senior Secured Credit Facility) of the Senior Secured
Credit Facility is less than or equal to 33.33%, (ii) 1.25% on
each day when utilization is greater than 33.33% but less than or
equal to 66.66% and (iii) 1.00% on each day when utilization is
greater than 66.66%.
F-27
Alamosa Holdings, LLC is also required to pay a separate annual
administration fee and a fee on the aggregate face amount of
outstanding letters of credit, if any, under the new revolving
credit facility.
On February 14, 2001, Alamosa Holdings, LLC borrowed $150.0
million under the new term loan facility while an additional $90.0
million in term debt will be available for multiple drawings in
amounts to be agreed for a period of 12 months thereafter. Any
amount outstanding at the end of the 12-month period will amortize
quarterly in amounts to be agreed beginning May 14, 2004. The new
revolving credit facility of $40.0 million will be available for
multiple drawings prior to its final maturity, provided that no
amounts under the new revolving credit facility will be available
until all amounts under the new term facility have been fully
drawn. The new revolving credit facility will begin reducing
quarterly in amounts to be agreed beginning May 14, 2004. All
advances under the Senior Secured Credit Facility are subject to
usual and customary conditions, including actual and pro forma
covenant compliance and the requirement that the ratio of senior
debt to net property, plant and equipment for the most recent
fiscal quarter will not exceed 1:1.
Loans under the new term loan portion of the Senior Secured Credit
Facility will be subject to mandatory prepayments from 50% of
excess cash flow for each fiscal year commencing with the fiscal
year ending December 31, 2003, 100% of the net cash proceeds
(subject to exceptions and reinvestment rights of asset sales or
other dispositions, including insurance and condemnation proceeds)
of property by the Company and its subsidiaries, and 100% of the
net proceeds of issuances of debt obligations of the Company and
its subsidiaries (subject to exceptions). After the term loans are
repaid in full, mandatory prepayments will be applied to
permanently reduce commitments under the revolving credit portion
of the Senior Secured Credit Facility.
All obligations of Alamosa Holdings, LLC under the Senior Secured
Credit Facility are unconditionally guaranteed on a senior basis
by Superholdings, Alamosa PCS Holdings, Inc., the Company and,
subject to certain exceptions, by each current and future direct
and indirect subsidiary of the Company, including Alamosa PCS,
Inc., Roberts and WOW.
The Senior Secured Credit Facility is secured by a first priority
pledge of all of the capital stock of Alamosa Holdings, LLC and
subject to certain exceptions, each current and future direct and
indirect subsidiary of the Company, as well as a first priority
security interest in substantially all of the assets (including
all of the Sprint affiliation agreements with Alamosa PCS
Holdings, Inc., Roberts and WOW) of the Company and, subject to
certain exceptions, each current and future direct and indirect
subsidiary of the Company.
The Senior Secured Credit Facility contains customary events of
default, including, but not limited to:
o the non-payment of the principal, interest and other
obligations under the Senior Secured Credit Facility;
F-28
o the inaccuracy of representations and warranties contained in
the credit agreement or the violation of covenants contained
in the credit agreement;
o cross default and cross acceleration to other material
indebtedness;
o bankruptcy;
o material judgments and certain events relating to compliance
with the Employee Retirement Income Security Act of 1974
and related regulations;
o actual or asserted invalidity of the security documents or
guaranties of the Senior Secured Credit Facility;
o the occurrence of a termination event under the
management, licenses and other agreements between any of
the Company, WOW, Roberts and their subsidiaries and
Sprint PCS or a breach or default under the consent and
agreement entered into between Citicorp USA, Inc., as
administrative agent for the lenders, and Sprint PCS;
o loss of rights to benefit of or the occurrence of any
default under other material agreements that could
reasonably be expected to result in a material adverse
effect on Alamosa Holdings, LLC;
o the occurrence of a change of control;
o any termination, revocation or non-renewal by the FCC of one
or more material licenses; and
o the failure by the Company to make a payment, if that
could reasonably be expected to result in the loss,
termination, revocation, non-renewal or material
impairment of any material licenses or otherwise result
in a material adverse affect on Alamosa Holdings, LLC.
The Senior Secured Credit Facility contains numerous affirmative
and negative covenants customary for credit facilities of a
similar nature, including, but not limited to, negative covenants
imposing limitations on the ability of the Company, Alamosa
Holdings, LLC and their subsidiaries, and as appropriate,
Superholdings, to, among other things, (i) declare dividends or
repurchase stock; (ii) prepay, redeem or repurchase debt; (iii)
incur liens and engage in sale-leaseback transactions; (iv) make
loans and investments; (v) incur additional debt, hedging
agreements and contingent obligations; (vi) issue preferred stock
of subsidiaries; (vii) engage in mergers, acquisitions and asset
sales; (viii) engage in certain transactions with affiliates; (ix)
amend, waive or otherwise alter material agreements or enter into
restrictive agreements; and (x) alter the businesses they conduct.
F-29
The Company is also subject to the following financial covenants,
which will apply until June 30, 2002:
o minimum numbers of Sprint PCS subscribers;
o providing coverage to a minimum number of residents;
o minimum service revenue;
o maximum negative EBITDA or minimum EBITDA;
o ratio of senior debt to total capital;
o ratio of total debt to total capital; and
o maximum capital expenditures.
After June 30, 2002, the financial covenants will be the
following:
o ratio of senior debt to EBITDA;
o ratio of total debt to EBITDA;
o ratio of EBITDA to total fixed charges (the sum of debt
service, capital expenditures and taxes);
o ratio of EBITDA to total cash interest expense; and
o ratio of EBITDA to pro forma debt service.
Unless waived by the Senior Secured Credit Facility lenders, the
failure of Superholdings, Alamosa Holdings, LLC and their
subsidiaries to satisfy or comply with any of the financial or
other covenants, or the occurrence of an event of default under
the Senior Secured Credit Facility, will entitle the lenders to
declare the outstanding borrowings under the Senior Secured Credit
Facility immediately due and payable and exercise all or any of
their other rights and remedies. Any such acceleration or other
exercise of rights and remedies would likely have a material
adverse effect on Superholdings, the Company, Alamosa PCS
Holdings, Inc., Alamosa Holdings, LLC and their subsidiaries.
Consent and Agreement for the Benefit of the Holders of the Senior
Secured Credit Facility
Sprint PCS entered into a consent and agreement with Citicorp,
that modifies Sprint PCS's rights and remedies under our
affiliation agreements with Sprint PCS, for the benefit of
Citicorp and the holders of the Senior Secured Credit Facility and
any refinancing thereof. The consent and agreement with Citicorp
generally provide, among other things, Sprint PCS 's consent to
the pledge of substantially all of our assets, including our
rights in our affiliation agreements with Sprint PCS, and that our
affiliation agreements with Sprint PCS generally may not be
terminated by Sprint PCS until the Senior Secured Credit Facility
is satisfied in full pursuant to the terms of the consents and
agreement.
Subject to the requirements of applicable law, so long as the
Senior Secured Credit Facility remains outstanding, Sprint PCS has
the right to purchase our operating assets or the partnership
interests, membership interests or other equity interests of our
operating subsidiaries, upon its receipt of notice of an
acceleration of the Senior Secured Credit Facility, under certain
terms.
If Sprint PCS does not purchase our operating assets or the
partnership interests, membership interests or other equity
interests of our operating subsidiaries after an acceleration of
the obligations under the Senior Secured Credit Facility, then the
administrative agent may sell the operating assets or the
partnership interests, membership interests or other equity
interests of our operating subsidiaries.
F-30
Mergers with Roberts Wireless Communications L.L.C. and Washington
Oregon Wireless, L.L.C.
On July 31, 2000, Holdings signed definitive agreements to merge
two Sprint PCS affiliates, Roberts Wireless Communications, L.L.C.
("Roberts") and Washington Oregon Wireless, LLC ("WOW") into its
operations. Roberts has a management agreement with Sprint PCS to
provide personal communications services to approximately 2.5
million residents primarily in the states of Missouri, Kansas and
Illinois. WOW has a similar management agreement with Sprint PCS
to provide services to approximately 1.5 million people primarily
in Washington and Oregon.
These mergers occurred on February 14, 2001. It is anticipated
that both of these transactions will be accounted for under the
purchase accounting method.
The consummation of these transactions contemplates a merger of
the Company, pursuant to which the Company, Roberts and WOW became
subsidiaries of a new holding company, Superholdings, and the
Company's stockholders became stockholders of Superholdings.
Roberts is a wholly owned subsidiary of Roberts Wireless Holdings,
L.L.C. ("Roberts Holdings"). Pursuant to the Roberts merger
agreement, the members of Roberts Holdings received 13.5 million
shares of Superholdings and approximately $4.0 million in cash.
Superholdings will assume the net debt of Roberts in the
transaction, which amounted to approximately $56.0 million as of
December 31, 2000.
WOW is a wholly owned subsidiary of WOW Holdings, LLC ("WOW
Holdings"). Pursuant to the WOW merger agreement, the members of
WOW Holdings received 6.05 million shares of Superholdings and
$12.5 million in cash. Superholdings will assume the net debt of
WOW in the transaction, which amounted to approximately $31
million as of December 31, 2000.
Prior to consummating the mergers, on July 31, 2000, Operations
entered into services agreements with Roberts and WOW, effective
July 31, 2000 and September 1, 2000, respectively, whereby
Operations began to manage the operations of Roberts and WOW,
pending completion of the mergers. Operations provides various
services in connection with the operation of Robert's and WOW's
businesses, including (a) all network management services, (b)
management of all sales and marketing services, (c) through the
management agreements with Sprint PCS, customer care, billing, and
other services, and (d) certain general and administrative,
executive, financial and accounting, human resources, legal and
other professional and forecasting services. Under the terms of
the agreement, Roberts and WOW each paid Operations a management
fee of $100,000 per month for the services provided by Operations
and each reimbursed Operations for certain costs and expenses
incurred or paid by Operations in providing these services.
The terms of the Roberts and WOW services agreements began on July
31, 2000 and September 1, 2000, respectively, and ended upon the
completion of the respective mergers.
F-31
Merger with Southwest PCS
On March 9, 2001, Superholdings announced the signing of a
definitive agreement to merge Sprint PCS Network Partner,
Southwest PCS Holdings, Inc. ("Southwest") into our operations.
The acquisition was completed on March 30, 2001. Southwest
shareholders exchanged 100 percent of their common shares of
Southwest for 11.1 million shares of our common stock and $5
million in cash. The transaction was structured as a merger.
Southwest has a management agreement with Sprint PCS to service
more than 2.8 million residents with the exclusive right to market
100 percent digital and wireless products and services under the
Sprint and Sprint PCS brand names. The Southwest territories cover
markets in Texas, Oklahoma and Arkansas, encompassing over 2,100
heavily traveled highway miles. As of December 31, 2001, Southwest
had launched service in 18 markets covering approximately 1.5
million residents and had approximately 40,000 customers.
20. DEBT COVENANT (UNAUDITED)
As of March 31, 2001, we did not meet the maximum negative EBITDA
covenant under our senior secured credit facility, which had an
outstanding balance of $203 million. During the guarter ended March
31, 2001, we reported an EBITDA loss of $16.7 million, which exceeded
the maximum negative EBITDA covenant by $7.0 million.
On May 8, 2001, we obtained a waiver of any default or event of
default arising from the failure to comply with the covenant for the
fiscal quarter ended March 31, 2001 from the lending institutions
under the senior secured credit facility. We believe the maximum
negative EBITDA covenant will be met in periods subsequent to March 31,
2001.
F-32
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Alamosa (Delaware), Inc.
Our audits of consolidated financial statements referred to in our report
dated February 19, 2001, except for Note 19 as to which the date is March
9, 2001, appearing in the 2000 annual report on Form 10-K of Almosa
(Delaware), Inc. also included an audit of the financial statement schedule
listed in item 14(a)(2) of this Form 10-K. In our opinion, this financial
statement schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
PricewaterhouseCoopers LLP
Dallas, Texas
February 19, 2001
F-33
SCHEDULE II
ALAMOSA (DELAWARE), INC.
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
FOR THE PERIOD JULY 16, 1998 (INCEPTION) THROUGH
DECEMBER 31, 2000 (IN THOUSANDS)
Additions
Balance at Charged to
Beginning of Costs and Balance at
Classification Period Expenses Deductions End of Period
- ------------------------------------- -------------- -------------- --------------- ---------------
December 31, 1998
Allowance for doubtful accounts $ - $ - $ - $ -
December 31, 1999
Allowance for doubtful accounts $ - $ 162 $ - $ 162
December 31, 2000
Allowance for doubtful accounts $ 162 $ 1,341 $ - $ 1,503
This schedule should be read in conjunction with the Company's
audited consolidated financial statements and related notes
thereto that appear in this prospectus.
F-34
INDEPENDENT AUDITOR'S REPORT
Members
Roberts Wireless Communications, LLC
We have audited the accompanying consolidated balance sheets of
Roberts Wireless Communications, LLC (the Company) as of December 31, 2000
and 1999, and the related consolidated statement of income, members' equity
and cash flows for the years then ended. 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 generally accepted
auditing standards. 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 financial statements referred to above
present fairly, in all material respects, the financial position of Roberts
Wireless Communications, LLC as of December 31, 2000 and 1999, and the
results of their operations and their cash flows for the year then ended,
in accordance with generally accepted accounting principles.
MELMAN, ALTON & CO., L.L.C.
March 24, 2001
F-35
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
ASSETS
Current Assets 2000 1999
----------------------- ---------------------
Cash $ - $ 3,144,756
Accounts Receivable 3,704,786 389,951
Inventory 1,156,207 226,968
Prepaid Rent 364,296 120,000
Note Receivable 16,375,106 -
----------------------- ---------------------
Total Current Assets 21,600,395 3,881,675
----------------------- ---------------------
Fixed Assets
Land and Buildings 1,329,270 216,335
Communication Equipment 71,429,741 14,208,718
Furniture & Fixtures 996,812 191,207
Vehicles 113,553 170,000
----------------------- ---------------------
Total Cost 73,869,376 14,786,260
Less: Accumulated depreciation (6,732,648) (1,454,939)
----------------------- ---------------------
Total Fixed Assets 67,136,728 13,331,321
----------------------- ---------------------
Intangible Assets (net of amortization) 6,378,893 10,129,487
Debt Issuance Costs (net of amortization) 1,849,450 -
Other Noncurrent Assets 24,879 -
----------------------- ---------------------
Total Assets $ 96,990,345 $ 27,342,483
======================= =====================
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities
Accounts Payable and Accrued Expenses $ 18,616,283 $ 2,371,177
Note Payable and Other Current Liability 37,320,272 -
Total Current Liabilities 55,936,555 2,371,177
----------------------- ---------------------
Long Term Liabilities
Notes Payable 56,000,000 25,011,439
----------------------- ---------------------
Total Liabilities 111,936,555 27,382,616
Commitments and Contingencies
----------------------- ---------------------
Members Equity (14,946,210) (40,133)
----------------------- ---------------------
Total Liabilities and Equity $ 96,990,345 $ 27,342,483
======================= =====================
See accompanying notes and accountant's report.
F-36
ROBERTS WIRELESS COMMUNICATIONS, L.L.C.
CONSOLIDATED STATEMENTS OF OPERATIONS
December 31, December 31,
2000 1999
------------------------- -------------------------
Revenues:
Subscriber revenues $ 8,492,521 $ 2,025,110
Roaming and travel revenues 4,920,614 469,328
------------------------- -------------------------
Service revenues 13,413,135 2,494,438
Product sales 1,315,616 379,259
------------------------- -------------------------
Total Revenue 14,728,751 2,873,697
------------------------- -------------------------
Cost and expenses:
Cost of services and operations 10,004,526 1,748,565
Cost of products sold 2,493,853 834,236
Selling and marketing 6,975,964 2,025,429
General and administrative expenses 2,507,262 702,829
Depreciation and amortization 5,671,944 1,799,281
------------------------- -------------------------
Total costs and expenses 27,653,549 7,110,340
------------------------- -------------------------
Loss from operations (12,924,798) (4,236,643)
Interest and other income 98,085 65,739
Interest expense (3,279,364) (417,337)
------------------------- -------------------------
Net Loss $ (16,106,077) $ (4,588,241)
========================= =========================
See accompanying notes and accountant's report.
F-37
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 2000 AND 1999
CONTRIBUTED
CONTRIBUTED CAPITAL
CAPITAL RELATED ACCUMULATED MEMBERS'
MEMBERS ENTITIES DEFICIT EQUITY
-------------- -------------- --------------- -----------------
MEMBERS' EQUITY (DEFICIT)-DECEMBER 31, 1998 $ 1,176,200 $ 3,709,129 $ (3,632,381) $ 1,252,948
CONTRIBUTED CAPITAL - MEMBERS 2,903,000 2,903,000
CONTRIBUTED CAPITAL - RELATED ENTITIES 392,160 392,160
NET LOSS (4,588,241) (4,588,241)
-------------- --------------- ---------------- -----------------
MEMBERS EQUITY(DEFICIT)-DECEMBER 31, 1999 $ 4,079,200 $ 4,101,289 $ (8,220,622) $ (40,133)
CONTRIBUTED CAPITAL - MEMBERS 1,200,000 1,200,000
NET LOSS (16,106,077) (16,106,077)
-------------- --------------- ---------------- -----------------
MEMBERS EQUITY(DEFICIT)-DECEMBER 31, 2000 $ 5,279,200 $ 4,101,289 $ (24,326,699) $ (14,946,210)
============== =============== ================ =================
See accompanying notes and accountant's report.
F-38
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000 AND 1999
2000 1999
------------------- ------------------
Cash Flows From Operating Activities:
Net Loss $ (16,106,077) $ (4,588,241)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 5,671,944 1,799,281
Change in assets and liabilities:
Increase in accounts receivable (3,314,835) (1,073,722)
Increase in inventory (929,239) (226,968)
Increase in accounts payable and accrued expenses 14,995,688 2,371,177
(Increase) decrease in deposits (24,879) 1,000,000
Increase in prepaid expenses (244,296) (120,000)
------------------- ------------------
Net Cash Provided by (Used in) Operating Activities 48,306 (838,473)
------------------- ------------------
Cash Flows From Investing Activities
Additions to fixed assets and operating rights (55,612,297) (22,489,025)
------------------- ------------------
Net Cash Used in Investing Activities (55,612,297) (22,489,025)
------------------- ------------------
Cash Flows From Financing Activities:
Increase in loan costs (714,492) (1,521,841)
Proceeds from contributed capital 1,200,000 2,903,000
Proceeds from debt 51,613,455 25,011,439
------------------- ------------------
Net Cash Provided by Financing Activities 52,098,963 26,392,598
------------------- ------------------
Net Increase (Decrease) in Cash (3,465,028) 3,065,100
Cash and cash equivalents at Beginning of Year 3,144,756 79,656
------------------- ------------------
Cash (Bank Overdraft) at End of Year $ (320,272) $ 3,144,756
=================== ==================
Supplemental Disclosure
------------------- ------------------
Cash Paid for Interest $ 1,697,952 $ -
=================== ==================
See accompanying notes and accountant's report.
F-39
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
1) Organization and Business Policies
Nature of Operations
Roberts Wireless Communications, LLC (The Company) was
formed May, 1998 as a limited liability company, to engage in the
business of wireless communications and is currently operating as
a Sprint PCS affiliate.
Interim Network Operating Agreement/Asset Purchase
On January 21, 1999, Sprint PCS assigned the Columbia, MO Basic
Trading Area ("BTA") and the Jefferson City, MO BTA service areas to the
Company through a purchase agreement. This assignment included an agreement
whereby the Company receives 92% of billed revenue generated by subscribers
in these markets. At the time of this assignment, the Company was in the
process of building its master switching center [MSC], thus not capable of
operating the network. The Company and Sprint entered into an Interim
Network Operating Agreement whereby the twenty-three cell sites located in
the Columbia and Jefferson City, MO service areas would remain on the
Sprint PCS St. Louis switch, and, Sprint PCS would continue to maintain
such properties until: a) all leases for cell sites in both service areas
had been transferred from Sprint PCS to the Company and b) The Company paid
Sprint PCS in full for the "Asset Purchase". On September 8, 1999, the
Asset Purchase was consummated although three of the total twenty-three
leases had not been transferred. From January 21, 1999 through April 4,
2000, the Company incurred Interim Network Operating fees of varying
amounts based upon the number of cell site leases not transferred. On May
19, 2000, all cell sites in the Columbia and Jefferson City service areas
were transferred off the Sprint PCS switch and connected to the Company's
switch.
The purchase price for the operating rights and related equipment
totaled $12.9 million. The fair value of the equipment was $4 million. The
remaining $8.9 million was recorded as an intangible asset and is being
amortized over the remaining life of the Sprint Agreement of 18 years.
Wholly-owned Subsidiary
The Company owns 100% of Roberts Wireless Properties, LLC. This
subsidiary is inactive.
2) Summary of Significant Accounting Policies
Use of Estimates
Management uses estimates and assumptions in preparing
financial statements. Those estimates and assumptions affect the
reported amounts of assets and liabilities, the disclosure of any
contingent assets and liabilities, and the reported revenues and
expenses.
F-40
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
2) Summary of Significant Accounting Policies (continued)
Inventory
Inventory consists of handsets and related accessories.
Inventories purchased for resale will be carried at the lower of
cost (first-in, first-out), or market. Market will be determined
using replacement cost.
Property and Equipment
Property and equipment are reported at cost less
accumulated depreciation. Repair and maintenance costs are charged
to expense as incurred; significant renewals and betterments are
capitalized.
When depreciable assets are retired or otherwise disposed
of, the related costs and accumulated depreciation are removed
from the respective accounts, and any gains or losses on
disposition are recognized in income.
Property and equipment are depreciated using the
straight-line method based on estimated useful lives of the
assets. Asset lives are as follows:
Buildings 39 years
Furniture and Fixtures 5-7 years
Communication Equipment 5-15 years
Vehicles 5 years
Recently Issued Accounting Pronouncements
The Company does not believe that any recently issued
accounting pronouncements will have a material impact on its
financial position, results of operations or cash flows.
Revenue Recognition
The Company recognizes revenue as services are performed.
Sprint PCS handles the Company's billings and collections and
retains 8% of collected service revenues from Sprint PCS
subscribers based in the Company's territory and from non-Sprint
PCS subscribers who roam onto the Company's network. The amount
retained by Sprint PCS is recorded as an operating expense.
Revenues generated from the sale of handsets and accessories and
from roaming services provided to Sprint PCS customers who are not
based in the Company's territory are not subject to the 8%
retainage.
F-41
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
2) Summary of Significant Accounting Policies (continued)
Advertising costs
Advertising costs are expensed as incurred. Advertising
expenses totaled approximately $3,143,566 during 2000 and $565,751
during 1999.
Accrual Basis of Accounting
Assets and liabilities and income and expenses are
recognized on the accrual basis of accounting.
Concentration of Credit Risk
The Company maintains deposits in excess of federally
insured limits. Statement of Financial Accounting Standards No.
105 identifies these items as a concentration of credit risk
requiring disclosure, regardless of the degree of risk. The risk
is managed by maintaining all deposits in high quality financial
institutions.
Accounts Receivable
The Company uses the allowance method for recognizing bad
debts.
Amortization
Loan costs are capitalized and amortized over the term of
the loan on a straight-line basis over eight years.
Income Taxes
No income tax provision has been included in the
financial statements, since income or loss of the limited
liability company is reported by the members on their individual
tax returns.
3) Note Payable and Other Current Liability
Note Payable - Alamosa $ 37,000,000
Origination Date: July 31, 2000
Collateral: Membership Interest
Maturity Date: At merger closing
Interest Rate: 9.5%
Balance December 31, 2000 $ 37,000,000
Bank Overdraft 320,272
--------------------------------
$ 37,320,272
================================
The note payable was paid off February 14, 2001, when the
merger with Alamosa was completed.
F-42
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
4) Long Term Debt
Note payable - DLJ Origination date: September 8, 1999
Collateral:
All assets owned by the company.
Maturity Date: September 8, 2007 $56,000,000
===========
The Company entered into a credit agreement with Lucent.
The financing terms permit the Company to borrow $56 million
through three commitment tranches to finance the costs of
equipment and services purchased from Lucent. In exchange for
Lucent base stations purchased by the Company in connection with
the swap-out of 23 Nortel base stations, Lucent agreed to give the
Company credits amounting to $2,061,428 to be used for future
purchases of Lucent products. This loan was paid off on February
14, 2001, when the merger with Alamosa was completed.
The loan shall bear interest at the alternate base rate
(ABR), plus the applicable margin set forth as follows:
The applicable margin for ABR Borrowings is a percentage
per annum based on the ratio of total debt to annualized earnings
before interest, taxes, depreciation, and amortization ("EBITDA")
of the Borrower as of the prior fiscal quarter (calculated on a
rolling 12-month basis) as follows:
Applicable Margin for
Leverage ABR Borrowings
---------------------------- ------------------------------
> 10 x 3.50%
= or < 10 x but > 6 x 3.25%
= or < 6 x but > 4 x 3.00%
= or < 4x 2.75%
The interest rate at December 31, 2000 approximated
11.5%.
Maturities of long-term debt for the years succeeding
December 31, 2000 were scheduled as follows: This note was paid
off on February 14, 2001 (Note 7).
Year Amount
-------------------------- -----------------------
2001 $ 0
2002 0
2003 5,002,288
2004 5,002,288
2005 5,002,288
Thereafter 40,993,136
----------------------
$ 56,000,000
======================
F-43
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
5) Related Party Transactions and Lease Commitments
Capital has been contributed by related entities of the
Company. Capital was contributed in the form of expenditures paid
by related entities.
During the year 2000, the Company entered into a loan
agreement with Roberts Tower Company. At December 31, 2000, the
amount outstanding was $16,375,106. The loan was fully repaid on
February 14, 2001. Roberts Tower Company is a corporation owned by
the members of the Company.
Agreements with Affiliates - The Company has entered into
an agreement with Roberts Tower Company for the rental of
broadcasting equipment. Amounts paid / accrued under the agreement
totaled $293,494 and $0 for the years ended December 31, 2000 and
1999, respectively.
The Company also has entered into an agreement with
Roberts Brothers Properties, LLC for the rental of office
facilities. Amount paid / accrued under the agreement totaled
$128,334 and $0 for the years ended December 31, 2000 and 1999,
respectively. Roberts Brothers Properties, LLC is a limited
liability company owned by the members of the Company.
The Company has various operating leases, primarily
related to rentals of tower sites and office facilities.
At December 31, 2000, the aggregate minimum rental
commitments under noncancellable operating leases for the periods
shown are as follows:
Year Amount
---- --------------------
2001 $ 1,236,000
2002 1,273,080
2003 1,311,272
2004 1,350,611
2005 1,391,129
Thereafter 5,994,564
--------------------
$ 12,556,656
====================
6) Commitments and Contingencies
o The Company is a defendant in a lawsuit . The plaintiff is
seeking $300,000. The Company has filed a motion to dismiss the
suit on the basis that it fails to state any legal claim on which
relief can be granted by the court as a matter of loss. If the
motion to dismiss is denied, the Company intends to vigorously
defend the suit. The ultimate resolution of this matter is not
ascertainable at this time. No provision has been made in the
financial statements related to this claim.
F-44
ROBERT WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
7) Subsequent Events
On February 14, 2001, the Company combined its operations
with Alamosa PCS Holdings, Inc. in a reorganization transaction in
which the Company and Alamosa PCS Holdings, Inc. each became a
wholly-owned subsidiary of Alamosa Holding, Inc.
The members' of the Company received 13,500,000 shares of
Alamosa PCS Holdings, Inc. stock and $4,000,000 in cash. As part
of the reorganization, the Company transferred to the members',
Roberts Tower Company or other entities controlled by them,
certain assets amounting to $ 7,095,293 that include real estate,
towers, Nortel base stations and retail store sites that were
funded directly or indirectly with capital contributions to the
Company by the members'.
On February 14, 2001, Alamosa, as borrower; entered into
a $280.0 million secured credit facility with Citicorp USA, as
administrative agent and collateral agent Toronto Dominion
(Texas), Inc., as syndication agent; EDC as co-documentation
agent; First National Bank, as documentation agent; and a
syndicate of banking and financial institutions.
The following is a summary of the principal terms of the
new credit facility.
The new credit facility consists of:
o a 7-year senior secured 12-month delayed draw term loan
facility in an aggregate principal amount of up to $255.0
million; and
o 7-year senior secured revolving credit facility in a
aggregate principal amount of up to $40.0 million, part
of which will be available in the form of letters of
credit.
Under the new credit facility, interest will accrue, at
Alamosa's option: (i) at the London Interbank Offered Rate
adjusted for any statutory reserves ("LIBOR")., or (ii) the base
rate which is generally the higher of the administrative agent's
base rate, the federal funds effective rate plus 0.50% or the
administrative agents's base CD rate plus 0.50%, in each case plus
an interest margin which is initially 4.00% for LIBOR borrowings
and 3.00% for base rate borrowings. The applicable interest
margins are subject to reductions under a pricing grid based on
ratios of Alamosa's total debt to its earnings before interest,
taxes, depreciation and amortization ("EBITDA"). The interest rate
margins will increase be any additional 200 basis points in the
event Alamosa fails to pay principal, interest or other amounts as
they become due and payable under the new credit facility. This
secured credit facility with Citicorp USA was used to pay off DLJ
(Note 4).
8) Reclassifications
Certain items in the December 31, 1999 report have been
reclassified to conform to current year classifications. Such
reclassifications had no effect on previously reported net income.
F-45
INDEPENDENT AUDITOR'S REPORT
Board of Managers
Washington Oregon Wireless, LLC
Lake Oswego, Oregon
We have audited the accompanying balance sheets of Washington Oregon
Wireless, LLC (a limited liability company) as of December 31, 2000 and
1999, and the related statements of income, members' equity, and cash flows
for the years then ended. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 financial statements referred to above present fairly
in all material respects, the financial position of Washington Oregon
Wireless, LLC as of December 31, 2000 and 1999, and the results of its
operations, members' equity, and cash flows for years then ended in
conformity with generally accepted accounting principles.
February 28, 2001
Salem, Oregon
F-46
Balance Sheets
December 31, 2000 and 1999
2000 1999
----------------- ---------------
Assets
- ------
Current assets:
Cash and cash equivalents $ 8,441,896 596,445
Accounts receivable less allowance for doubtful
accounts of zero 552,018 -
Inventory 510,089 -
Prepaid expenses and other current assets 273,632 -
----------------- ---------------
Total current assets 9,777,635 596,445
Property, plant, and equipment, net (Note 5) 36,686,735 10,413,155
Deferred financing costs (Note 10) 1,479,324 -
Other assets 149,232 -
----------------- ---------------
$ 48,092,926 11,009,600
================= ===============
Liabilities and Members' Equity
- -------------------------------
Current liabilities - accounts payable
and accrued expenses $ 7,825,710 8,206,097
----------------- ---------------
Long-term liabilities:
Note payable CoBank (Note 9) 30,960,318 -
Note payable Alamosa (Note 2) 9,865,233 -
----------------- ---------------
Total long-term liabilities 40,825,551 -
----------------- ---------------
Members' equity (deficit) (Note 1):
Capital contributed 15,573,311 3,829,120
Accumulated deficit (15,381,646) (1,025,617)
Capital acquisition costs (750,000) -
----------------- ---------------
Total members' equity (deficit) (558,335) 2,803,503
----------------- ---------------
$ 48,092,926 11,009,600
================= ===============
The accompanying notes are an integral part of the financial statements.
F-47
Statements of Income
Years Ended December 31, 2000 and 1999
2000 1999
----------------- ---------------
Revenues:
Subscriber revenue $ 806,850 -
Travel and roaming revenues 1,016,635 -
----------------- ---------------
Total service revenues 1,823,485 -
Product sales 682,576 -
----------------- ---------------
Total revenues 2,506,061 -
----------------- ---------------
Costs and expenses:
Cost of services and operations 4,373,599 -
Cost of products sold 1,750,059 -
Selling and marketing expenses 4,106,230 -
General and administrative expenses 4,377,348 986,210
Depreciation and amortization 1,432,661 923
----------------- ---------------
Total costs and expenses 16,039,897 987,133
----------------- ---------------
Loss from operations (13,533,836) (987,133)
----------------- ---------------
Other income (expense):
Interest and other income 155,966 6,992
Interest expense (978,159) -
----------------- ---------------
Total other income (expense) (822,193) 6,992
----------------- ---------------
Net Loss $ (14,356,029) (980,141)
================= ===============
The accompanying notes are an integral part of the financial statements.
F-48
Statements of Members' Equity
Years Ended December 31, 2000 and 1999
Capital Total
Capital Accumulated Acquisition Members'
Contributed Deficit Cost Equity (Deficit)
----------------- ------------------ --------------- -------------------
Members' equity (deficit),
December 31, 1998 $ 33,000 (45,476) - (12,476)
Capital contributions 3,796,120 - - 3,796,120
Net loss - (980,141) - (980,141)
----------------- ------------------ --------------- -------------------
Members' equity (deficit),
December 31, 1999 3,829,120 (1,025,617) - 2,803,503
Capital contributions 11,744,191 - - 11,744,191
Net loss - (14,356,029) - (14,356,029)
Capital acquisition costs - - (750,000) (750,000)
----------------- ------------------ --------------- -------------------
Members' equity (deficit), $ 15,573,311 (15,381,646) (750,000) (558,335)
December 31, 2000
================= ================== =============== ===================
The accompanying notes are an integral part of the financial statements.
F-49
Statements of Cash Flows
Years Ended December 31, 2000 and 1999
2000 1999
----------------- ---------------
Cash flows from operating activities:
Net loss $ (14,356,029) (980,141)
Contributed services 200,000 100,000
Depreciation and amortization 1,432,661 923
Adjustments to reconcile net loss to net cash
used by operating activities:
Changes in assets and liabilities:
Accounts receivable (552,018) -
Inventory (510,089) -
Prepaid expenses and other current assets (273,632) -
Accounts payable and accrued expenses 5,377,452 25,060
----------------- ---------------
Net cash used by operating activities (8,681,655) (854,158)
----------------- ---------------
Cash flows from investing activities:
Capital expenditures (33,326,508) (2,249,596)
Purchase of other assets (149,232) -
----------------- ---------------
Net cash used by investing activities (33,475,740) (2,249,596)
----------------- ---------------
Cash flows from financing activities:
Member capital contributions 11,544,191 3,696,120
Proceeds from note payable - Alamosa 9,865,233 -
Proceeds from note payable - CoBank 30,960,318 -
Loan financing costs (1,616,896) -
Capital acquisition costs (750,000) -
----------------- ---------------
Net cash provided by financing activities 50,002,846 3,696,120
----------------- ---------------
Net increase in cash and cash equivalents 7,845,451 592,366
Cash and cash equivalents, beginning 596,445 4,079
----------------- ---------------
Cash and cash equivalents, ending $ 8,441,896 596,445
================= ===============
The accompanying notes are an integral part of the financial statements.
F-50
Statements of Cash Flows, continued
Years Ended December 31, 2000 and 1999
2000 1999
----------------- ---------------
Cash paid during the year for interest $ 1,011,142 -
================= ===============
Non-cash investing activities:
Additions to communications network
and construction in progress $ 24,807,257 10,399,330
Equipment additions 1,172,999 14,748
Leasehold improvements 1,588,413 -
Equipment purchases included in
accounts payable:
Beginning 8,164,482 -
Ending (2,406,643) (8,164,482)
----------------- ---------------
Net cash additions to fixed assets $ 33,326,508 2,249,596
The accompanying notes are an integral part of the financial statements.
F-51
Notes to Financial Statements
December 31, 2000 and 1999
1) Summary of Significant Accounting Principles
BUSINESS ACTIVITY
Washington Oregon Wireless, LLC (the Company) (WOW) operates as an
Oregon Limited Liability Company comprised of 27 members as of
December 31, 2000. As an LLC, the members of the Company have
limited personal liability for the obligations and debts of the
entity. The Company was formed in 1998 for the purpose of building
out and operating personal communications services (PCS) networks
in Washington and Oregon, to provide other wireless telephone
services, and construct other infrastructure, towers, and networks
as the members may approve.
AFFILIATION AGREEMENT
In February 1999, the Company entered into an "Affiliation
Agreement" with Sprint PCS (Sprint). As a Sprint PCS affiliate,
WOW has the exclusive right to provide digital PCS services under
the Sprint and Sprint PCS brand name in its service areas in rural
portions of Oregon and Washington for a period of up to 50 years.
Under the Agreement, WOW is responsible for designing, building,
owning, and managing a communications network in its service area
to the standards established by Sprint, which will operate as a
single-integrated system with other Sprint PCS service areas. As
part of the Sprint PCS Agreement, WOW has contracted with Sprint
PCS to provide back office services such as customer activation,
handset logistics, billing, customer service, and network
monitoring.
MEMBERSHIP
All members are required to own a membership interest in the
Company. Each member of the Company has subscribed to a minimum of
$100,000 cash (or contributed services, see Note 4) to be admitted
in the LLC. Only one class of members exists and the entity's life
shall exist indefinitely until dissolved as provided by the
operating agreement. New members may be admitted with the approval
of members comprising 67% of the ownership rights.
Each member of the Company entered into the Amended and Restated
Operating Agreement of Washington Oregon Wireless, LLC that
covered the amount and timing of its contributions to the LLC.
Actual capital calls were made at the discretion of the Board of
Managers of the Company. The original subscription agreements have
been superseded by the Amended and Restated Operating Agreement.
Member capital calls were suspended after the first quarter 2000
due to the proposed merger (see Note 2). As a result of the merger
closing in 2001, there are no capital subscriptions receivable at
December 31, 2000.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with
a maturity of three months or less to be cash equivalents. The
Company maintains its cash in bank deposit accounts that, at
times, may exceed federally insured limits. The Company has not
experienced any losses in such accounts and believes it is not
exposed to any significant credit risk on cash and cash
equivalents.
F-52
INVENTORY
Inventory consists of handsets and phone accessories at retail
store locations. Inventory is stated at the lower of cost,
determined using the first-in, first-out method, or market. Market
is determined using replacement cost in accordance with industry
standards.
FIXED ASSETS
Fixed assets include communication network, office equipment,
leasehold improvements, and construction in progress. Office
equipment and leasehold improvements are recorded at cost and
depreciated on a straight-line basis over the estimated life of
the assets (10 years for the communication network and 5 years for
other equipment), or the term of the lease as appropriate. The
communication network and construction in progress consists of the
costs of acquiring wireless communication sites for the placement
of base stations, purchases of the related equipment, and
construction of a mobile switching center in Beavercreek, Oregon.
INCOME TAXES
The Company is not a taxpaying entity for federal income tax
purposes, and thus, no income tax expense has been recorded in the
statements. Income (loss) of the Company is included in the
members' tax returns.
ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
ACCOUNTING FOR START-UP COSTS
The Company accounts for start-up related costs in accordance with
AICPA Statement of Position 98-5, Reporting on the Costs of
Start-Up Activities. The Company expensed start-up costs as
incurred unless the costs qualify for capitalization under other
generally accepted accounting principles.
ACCOUNTING FOR APPRECIATION RIGHTS
The Company accounts for its Value Appreciation Rights Plan (see
Note 7) in accordance with Statement of Financial Accounting
Standards No. 123, Accounting for Stock Based Compensation.
Statement No. 123 established fair value as the measurement basis
for accounting for employee stock option plans and similar equity
instruments.
F-53
INTEREST CAPITALIZATION
The Company follows the policy of capitalizing interest as a
component of the cost of property, plant, and equipment
constructed for its own use. For the year ended December 31, 2000,
total interest incurred was $1,567,398 (including $87,044 of
amortization of deferred financing costs), of which $589,239 has
been capitalized and $978,159 expensed. The Company incurred no
interest for the year ended December 31, 1999.
ADVERTISING
Advertising costs, which are expensed to operations when incurred,
amounted to $884,428 in 2000 (none in 1999).
2) Reorganization
On July 31, 2000, the Company entered into a definitive agreement
to merge with Sprint PCS affiliate Alamosa PCS Holdings, Inc.
(Alamosa). Pursuant to the Reorganization Agreement, the members
of the Company will receive 6,050,000 shares of Alamosa stock and
$12.5 million in cash in exchange for 100% of the ownership of the
Company. The merger was completed on February 14, 2001.
Upon closing of the merger, all units granted under the VAR Plan
(see Note 7) became fully vested, and the units were valued as of
such closing. The valuation is based on the Company's total equity
value as reflected in the merger (including stock and cash
received by the members of the Company), without deduction of the
cost of such merger and without reducing the value of stock the
members of the Company receive, by a discount for any "lock-up"
period applicable to such stock. All amounts owed under the plan
were either paid directly by the members out of the proceeds
received under the merger or assumed by Alamosa as described
below. The Company incurred no liability related to the plan.
As described in the Agreement and Plan of Reorganization, on the
closing date Alamosa, or an affiliate of Alamosa, assumed the
obligations owed under the VAR Plan to the Company's employees
whom Alamosa or its affiliates elected to employ and assumed the
obligations owed to the CEO of the Company under the VAR Plan.
In addition, on July 31, 2000, the Company entered into a services
agreement with Alamosa Operations, Inc. (Operations), a subsidiary
of Alamosa, effective September 30, 2000, whereby Operations began
to manage the operations of the Company pending the outcome of the
merger. Operations provides various services in connection with
the operation of the Company's business, including: (a) all
network management services, (b) management of all sales and
marketing services, (c) through the management agreements with
Sprint PCS, customer care, billing, and other services, and (d)
certain general and administrative, executive, financial and
accounting, human resources, legal, and other professional, and
forecasting services. Under the terms of the agreement, the
Company pays Operations a management fee of $100,000 per month for
the services provided by Operations and reimburses Operations for
certain costs and expenses incurred by or paid by Operations in
providing these services.
F-54
Also on July 31, 2000, the Company and Operations entered into a
loan agreement whereby Operations will lend up to $11 million to
the Company to be used only for the purposes of: (a) satisfying
certain capital contribution requirements under the Company's
operating agreement, and (b) funding the Company's working capital
needs from July 31, 2000 through completion of the merger. As of
December 31, 2000, $9,865,233 has been funded under the loan
agreement.
The loan bears interest at the prime rate and, prior to the merger
closing, was due 30 days after the termination of the
Reorganization Agreement or upon demand. The loan was guaranteed
by certain members of the Company.
Upon the merger closing, the amounts due to Operations by the
Company under the Loan Agreement remained a debt obligation of the
Company, subject to a subordination agreement in favor of the
senior lender to Alamosa.
In addition, upon the merger closing, Alamosa received funds under
a $280 million credit facility from Citibank, a portion of which
were used to pay off any amounts outstanding on the Company's
Senior Secured Credit Facility with CoBank (see Note 9).
3) Development Stage Operations
Since its formation in July 1998, the operations of the Company
have been devoted to raising capital, design and development
related to construction of facilities, acquisition of wireless
communication sites, construction of base stations, and
administrative functions. Beginning in the second quarter of 2000,
certain tower sites became operational, and the Company began
earning revenue on roaming traffic through its network. In
September and throughout the fourth quarter of 2000, additional
tower sites became operational, began operation of six retail
stores, and the Company is no longer considered in the development
stage.
4) Related Party Transactions
A member of the Company, Western Independent Network, Inc. (WIN),
rents switching facilities and provides certain management and
administrative services to WOW. Payments to WIN for these services
totaled $158,649 and $205,675 for the years ended December 31,
2000 and 1999, respectively. WIN also received $200,000 in
contributed capital in 2000 ($100,000 in 1999) for management
services for a total membership interest of $300,000.
Another member of the Company, Duncan, Tiger, and Tabor, provided
legal services to the Company. Payments for these services totaled
$94,248 and $80,657 for years ended December 31, 2000 and 1999,
respectively.
In addition, organizations affiliated with JMW Wireless
Acquisition Company, LLC, a member of the Company, have provided
various professional services including assistance in obtaining
debt and equity financing for the Company. Payments for these
services were approximately $898,268 (including $750,000 of
capital acquisition costs) and $84,624 for the years ended
December 31, 2000 and 1999, respectively.
F-55
5) Property, Plant, and Equipment
Property, plant, and equipment consists of the following:
2000 1999
------------------ ---------------
Network equipment $ 32,875,762 -
Office equipment 1,187,747 14,748
Leasehold improvements 1,588,413 -
Construction in progress 2,330,825 10,399,330
------------------ ---------------
37,982,747 10,414,078
Accumulated depreciation 1,296,012 923
------------------ ---------------
$ 36,686,735 10,413,155
================== ===============
6) Commitments
The Company designed and engineered the wireless network it will
build and has developed an estimate of the cost to construct. The
Company has entered into various agreements related to building
out the network. These agreements cover the purchase of switching
and other equipment, construction of base stations, and the
construction of a mobile switching center.
Based on the system design, the estimated costs that WOW will
incur to build the network, including the commitments already
made, are as follows:
2001 $ 8,590,000
2002 2,110,000
2003 1,230,000
2004 1,950,000
2005 1,230,000
-----------------
$ 15,110,000
In addition, the Company has entered into lease agreements for the
use of towers. The lease agreements differ in amount based on
whether the tower is a build-to-suit or a co-locate. The leases
commence when a tower is ready for use and began in 2000. The
Company currently has signed lease agreements on 114 sites (90 of
which had commenced at December 31, 2000) with annual lease
payments totaling $2,790,000. An additional 38 sites are expected
to commence in 2001 for a total of 152 sites.
The minimum lease payments on all sites are estimated to be as
follows:
2001 $ 3,015,000
2002 3,550,000
2003 3,550,000
2004 3,600,000
2005 3,650,000
-----------------
$ 17,365,000
The Company has leases for building, office and retail space,
vehicles, and office equipment under operating leases expiring
through 2005. Future minimum payments under these leases are:
2001 $ 433,400
2002 433,400
2003 317,400
2004 226,700
2005 88,000
-----------------
$ 1,498,900
The Company has entered into an agreement to sublease office space
in 2001. Total future minimum lease payments above have not been
reduced by the $571,839 of sublease rental to be received in the
future under the non-cancellable sublease.
F-56
7) Value Appreciation Rights Plan
The Company established a "Value Appreciation Rights" plan for the
benefit of selected management executives effective September 1,
1999. The plan shall remain in effect until it is otherwise
terminated by the Board. A "Value Appreciation Right" (VAR) is the
grant by WOW, to an executive, of "Units" whose value is tied to
the value of the Company, together with the right to be paid an
amount at some time in the future equal to the value of the Units
plus or minus the difference between the value of the Units on the
Grant Date and the value on the date the VAR is exercised. VARs
are granted to executives at the discretion of the Board. The
actual benefit available at the time benefits become payable will
depend on the future financial performance of the Company. The
Plan requires a third party valuation firm to annually determine
the market value of the Company based on its financial statements.
As of December 31, 2000, the Board has granted 337,012 units in
accordance with this Plan. As discussed in Note 2, the units
became fully vested upon the merger with Alamosa closing on
February 14, 2001 and all obligations under the Plan were paid or
assumed outside the Company. As a result, these financial
statements do not include any costs or liability related to the
Plan. The Plan terminated subsequent to December 31, 2000, as part
of the merger.
8) Retirement Savings Plan
Effective May 1, 2000, the Company began sponsoring a defined
contribution employee retirement savings plan. Employees, age 21
and over, who have been employed at least one month are eligible
to participate in the plan on the first day of the next calendar
quarter. Employees may contribute from 1% to 15% of their eligible
compensation on a pre-tax basis up to a maximum of $10,500 per
calendar year. Employer contributions are at the discretion of the
Company and are currently 50% of employees' contributions up to
the first 6% of an employee's eligible compensation deferred under
the Plan. Employees must provide 1,000 hours of service in the
plan year to be eligible for employer matching contributions.
Contributions to the Plan in 2000 amounted to $26,437. The Plan
also allows for potential profit sharing contributions at the
discretion of the Company.
9) Senior Secured Credit Facility
In April 2000, the Company obtained long-term financing from
CoBank in the amount of $45,000,000. Interest rates are determined
at the time of each advance based on the Company's election
between either a base rate (the higher of the prime rate or the
sum of the Federal Funds Rate plus .50%) or LIBOR, plus an
applicable margin based on the leverage ratio as defined in the
agreement.
As of December 31, 2000, the Company has borrowed $30,960,318 on
this credit facility, with interest rates ranging from 9.14% to
10.05%. The loan is secured by a first superior continuing
security interest in all assets of the Company.
As discussed in Note 2, the CoBank credit facility was paid in
full by Alamosa upon the merger closing in 2001. The amount
included in the financial statements related to CoBank is
classified as a long-term liability as it is not the intent of
Alamosa to require repayment of this obligation during 2001.
F-57
10) Deferred Financing Costs
Deferred financing costs consist of loan fees paid to CoBank and
legal fees and other expenses incurred to obtain debt financing.
The costs are being amortized over the life of the loan.
Amortization for the year ended December 31, 2000 amounted to
$137,572 (none in 1999).
F-58
Report of Independent Accountants
To the Board of Directors and Stockholders of
Alamosa Holdings, Inc.:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, mandatorily redeemable member's
deficit and members' deficit and cash flows present fairly, in all material
respects, the financial position of SWPCS Holdings, L.L.C. (the "Company")
at December 31, 2000, and the results of its operations and its cash flows
for the year then ended in conformity with accounting principles generally
accepted in the United States of America. 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 of these statements in accordance with auditing
standards generally accepted in the United States of America, which 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, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
April 27, 2001
F-59
SWPCS HOLDINGS, L.L.C.
CONSOLIDATED BALANCE SHEET
December 31,
2000
----------------------
ASSETS
Current assets:
Cash and cash equivalents $ 837,285
Accounts receivable, net of allowance for doubtful accounts of $561,046 5,357,377
Inventory 703,548
Prepaid expenses 50,518
Other assets 44,474
----------------------
Total current assets 6,993,202
Property and equipment, net 64,773,196
Financing costs, net 4,735,649
Other assets 176,335
----------------------
Total assets $ 76,678,382
=====================
LIABILITIES, MANDATORILY REDEEMABLE MEMBER' S DEFICIT AND MEMBERS' DEFICIT
Current liabilities:
Accounts payable - trade $ 15,261,229
Accrued equipment purchases 1,059,577
Accounts payable - related parties 769,135
Deferred revenue 884,145
Accrued interest payable 1,377,592
Accrued liabilities - other 314,281
----------------------
Total current liabilities 19,665,959
Long-term debt, net of discount 71,556,437
Warrant and option liabilities 18,025,470
Mandatorily redeemable member's deficit (9,008,409)
Members' deficit (23,561,075)
----------------------
Total liabilities, mandatorily redeemable member's deficit and members' deficit $ 76,678,382
======================
The accompanying notes are an integral part of these financial statements.
F-60
SWPCS HOLDINGS, L.L.C.
CONSOLIDATED STATEMENT OF OPERATIONS
Year ended
December 31,
2000
----------------------
Revenues:
Subscriber revenue $ 15,476,568
Roaming revenue 11,652,876
Product sales 2,731,731
----------------------
Total revenues 29,861,175
----------------------
Cost and expenses:
Network operations 10,297,643
Cost of product sold 8,819,132
Selling and marketing 17,084,857
General and administrative 4,379,329
Customer service 2,127,857
Depreciation and amortization 7,500,760
----------------------
Total cost and expenses 50,209,578
----------------------
Loss from operations (20,348,403)
----------------------
Operating income (expense):
Interest expense (7,059,737)
Interest income 98,339
----------------------
Net loss (27,309,801)
----------------------
The accompanying notes are an integral part of these financial statements.
F-61
SWPCS HOLDINGS, L.L.C.
CONSOLIDATED STATEMENT OF MANDATORILY REDEEMABLE
MEMBER'S DEFICIT AND MEMBERS' DEFICIT
Mandatorily
Redeemable
Member's
Equity
(Deficit) Members' Deficit
-------------- --------------------------------------------------------------------------
Central Pioneer Total
Mass Southwest Cellular, Telecommunications, Members'
Mutual PCS, L.L.C. Inc. Inc. Deficit
-------------- --------------- --------------- ----------------------- ---------------
Balance at December 31, 1999 $ 1,915,511 $ (7,403,279) $ (1,014,988) $ (1,014,988) $ (9,433,255)
Members' contribution 2,258,061 $ 2,258,061
Net loss (10,923,920) (11,470,117) (2,457,882) (2,457,882) (16,385,881)
-------------- --------------- --------------- ------------------- ---------------
Balance at December 31, 2000 $ (9,008,409) $ (16,615,335) $ (3,472,870) $ (3,472,870) $ (23,561,075)
-------------- --------------- --------------- ------------------- ---------------
The accompanying notes are an integral part of these financial statements.
F-62
SWPCS HOLDINGS, L.L.C.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended
December 31,
2000
-------------------------
Cash flows from operating activities:
Net loss $ (27,309,801)
Adjustments to reconcile net loss to cash flows used in operations activities:
Depreciation and amortization 7,500,760
Change in fair value of warrant and option liabilities 1,015,470
Amortization of discount on long term debt 134,399
Changes in operation assets and liabilities:
Accounts receivable - trade (4,306,005)
Inventory 682,548
Prepaid expenses 124,091
Other assets (116,912)
Accounts payable - trade 12,420,832
Accounts payable - related parties 535,472
Deferred revenue 758,040
Accrued interest payable 879,200
Accrued liabilities - other 123,871
-------------------------
Net cash used in operating activities (7,558,035)
Cash flows from investing activities:
Purchase of property and equipment (26,671,888)
-------------------------
Net cash used in investing activities (26,671,888)
-------------------------
Cash flows from financing activities:
Net proceeds from revolving credit facility 8,000,000
Proceeds from long-term debt 17,000,000
Payments of financing costs (1,111,145)
Contributions of members' equity 2,258,061
-------------------------
Net cash provided by financing activities 26,146,916
-------------------------
Decrease in cash and cash equivalents (8,083,007)
Cash and cash equivalents at beginning of period 8,920,292
-------------------------
Cash and cash equivalents at end of period $ 837,285
-------------------------
Supplemental schedule of noncash investing and financing activities:
Accrued equipment purchases $ 1,059,577
-------------------------
Supplemental cash flow information:
Cash paid during the period for interest $ 6,186,136
-------------------------
F-63
SWPCS HOLDINGS, L.L.C.
CONSOLIDATED NOTES TO FINANCIAL STATEMENT
1. ORGANIZATION AND BUSINESS OPERATIONS
On June 4, 1998 Southwest PCS, L.L.C., Central Cellular, Inc.
("Central") and Pioneer Telecommunications, Inc. ("Pioneer")
(collectively, the "Initial Members") formed Southwest PCS, LP,
(the "Partnership"). In July 1998, the Partnership entered into a
Management Agreement with Sprint Spectrum, L.P. and Sprint COM,
Inc. (collectively "Sprint") (the "Sprint Agreement"). Under the
Sprint Agreement, the Partnership will design, construct, and
manage wireless personal communication services, commonly referred
to as PCS, in parts of Oklahoma, Kansas, Arkansas and Texas. The
Partnership is required to build out its wireless network
according to Sprint specifications. Under the Sprint Agreement,
the Partnership uses Sprint's licensed spectrum, the Sprint PCS
brand name and Sprint's national advertising. In return, the
Partnership pays Sprint 8% of subscriber revenues. In addition,
Sprint provides, for a fee, back office support, billing and
collection, customer activation, and customer service. The Sprint
Agreement has an initial 20-year term and has three 10 year
renewal options. Upon termination of the Sprint Agreement, the
Partnership will either sell its operations to Sprint or purchase
up to 10 megahertz of spectrum from Sprint. The Sprint Agreement
includes indemnification clauses between the Partnership and
Sprint PCS to indemnify each other against claims arising from
violations of laws or the affiliation agreements, other than
liabilities resulting from negligence or willful negligence or
willful misconduct of the party seeking to be indemnified.
On April 30, 1999 the Initial Members of the Partnership changed
the Partnership structure and formed SWPCS Holdings, L.L.C. (the
"Company") an Oklahoma limited liability company, SWGP, L.L.C.
("SWGP") and SWLP, L.L.C. ("SWLP"). Further on April 30, 1999,
Southwest PCS, L.L.C. contributed 100% of its 70% general partner
interest in the Partnership to SWGP in return for a 100% ownership
interest in SWGP. Also on April 30, 1999, Central and Pioneer each
contributed 100% of their respective 15% limited partnership
interests in the Partnership to SWLP in exchange for 50% interests
in SWLP. Subsequent to these contribution transactions, SWGP
became the general partner of the Partnership and SWLP became the
limited partner of the Partnership owning 70% and 30% of the
Partnership, respectively.
After the contribution of its general partner interest in the
Partnership to SWGP, Southwest PCS, L.L.C. contributed its 100%
ownership interest in SWGP to the Company and Central and Pioneer
contributed their respective 50%, ownership interest in SWLP to
the Company.
Simultaneously, Mass Mutual Life Insurance Company and Mass Mutual
High Yield Partners II L.L.C. (collectively "Mass Mutual")
contributed $8,000,000 and $4,000,000, respectively to the
Company. Based on these contribution transactions, the ownership
interests in the Company at April 30, 1999 and December 31, 2000
is as follows:
Southwest PCS, L.L.C., managing member interest 42.00%
Mass Mutual Life Insurance Company 26.67%
Mass Mutual High Yield Partners II L.L.C. 13.33%
Central 9.00%
Pioneer 9.00%
The Regulations of the Company, as amended, (the "Regulations")
provide for the governance and administration of the Company's
business, allocation of profits and losses, tax allocations,
transactions with members, disposition of ownership interest and
other matters. The Regulations establish two classes of membership
interests. The above mentioned members' ownership interests are
evidenced by Class A Shares. Class A shareholders are entitled to
vote on all matters to be voted on by the members. The Company's
Regulations also allow for Class B shareholders. Class B
shareholders are allowed limited voting rights, including the
right to vote on amendments to the Regulations which adversely
affect the rights of the holders of Class B Shares to vote to
dissolve the Company, and to vote on mergers, consolidations and
recapitalizations pursuant to which members holding Class B Shares
would get securities different from those being received by
holders of Class A Shares. As of December 31, 2000, there were no
Class B shareholders.
F-64
SWPCS HOLDINGS, L.L.C.
CONSOLIDATED NOTES TO FINANCIAL STATEMENT
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries, SWGP,
SWLP, and Southwest PCS, LP. All significant intercompany
transactions have been eliminated.
Cash and Cash Equivalents
The company considers all investments with a maturity of three
months or less when purchased to be cash equivalents.
Concentration of credit risk
Financial instruments that potentially subject the Company to a
concentration of credit risk principally consist of cash and cash
equivalents and trade accounts receivable. At times, the Company
may have cash balances in financial institutions in excess of
federally insured limits. The Company does not believe the cash
balances are exposed to any significant risk. The Company sells
its products and services to businesses and individuals in one
geographical service area. Credit terms are short-term in nature
and generally uncollateralized although the Company may take
deposits from some customers.
Inventory
Inventory consists of handsets and related accessories.
Inventories purchased for resale are carried at the lower of cost
or market using the first-in first-out method. Market is
determined using replacement cost.
Property and equipment
Property and equipment are recorded at cost. Property and
equipment are depreciated over the estimated useful lives of the
assets using the straight-line method. Costs incurred to design
and construct the wireless network in a market, including related
interest costs, are classified as construction in progress until
the network for the related market is placed into service, at
which time the amount is transferred to property and equipment.
Repairs and maintenance are expensed as incurred; significant
renewals and betterments are capitalized. The cost and related
accumulated depreciation of assets sold or retired and removed
from the accounts and the resulting gains or losses are recorded
in the period incurred.
Impairment of Long-Lived Assets
The Company evaluates its long lived assets for impairment when
events or change in circumstances indicate, in management's
judgment, that the carrying value of such assets may not be
recoverable. The determination of whether an impairment has
occurred is based on management's estimate of undiscounted future
cash flows before interest attributable to the assets as compared
to the net carrying value of the assets. If an impairment has
occurred, the amount of the impairment recognized is determined by
estimating the fair value of the assets based on estimated
discounted future cash flows and recording a provision for loss if
the carrying value is greater than fair value. The net carrying
value of assets identified to be disposed of in the future is
compared to the estimated fair value less the cost to sell to
determine if an impairment is required. Until the assets are
disposed of, an estimate of the fair value is redetermined when
related events or circumstances change.
F-65
SWPCS HOLDINGS, L.L.C.
CONSOLIDATED NOTES TO FINANCIAL STATEMENT
Financing costs
Financing costs are capitalized and amortized using the
straight-line basis over the life of the loan. For the year ended
December 31, 2000, the Company incurred financing costs associated
with the senior term loan C of $1,111,144. As of December 31, 2000,
the total amount of capitalized financing costs was $5,891,349.
Cumulative amortization of financing costs was $1,155,700.
Discount on subordinated debt
The Company amortizes the discount on the senior subordinated note
and junior subordinated debentures over the life of the
instruments under the effective interest method. Amortization of
the discount on the subordinated debt is reflected as a component
of interest expense. Amortization for the year ended December 31,
2000 was $134,399.
Revenue Recognition
In December 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin No. 101 "Revenue Recognition in
Financial Statements," ("SAB 101"), which provides guidance on the
recognition, presentation and disclosure of revenue in financial
statements. SAB 101 outlines the basic criteria that must be met
to recognize revenue and provides guidance for disclosure related
to revenue recognition policies. In accordance with SAB 101, the
Company defers customer activation fee revenue and an equal amount
of customer acquisition related expenses. These deferred amounts
are amortized over a three-year period, which approximates the
average life of a customer. For the year ended December 31, 2000,
the Company had deferred $68,428 of activation fee revenue and
acquisition related expenses and had amortized $16,128.
The Company recognizes revenue as services are performed. Sprint
PCS handles the Company's billings and collections and retains 8%
of collected service revenues from Sprint PCS subscribers based in
the Company's territory and from non-Sprint PCS subscribers who
roam onto the Company's network. The amount retained by Sprint PCS
is recorded as an operating expense in network operations.
Revenues generated from the sale of handsets and accessories and
from roaming services provided to Sprint PCS customers who are not
based in the Company's territory are not subject to the 8%
retainage.
Sprint PCS pays the Company a Sprint PCS roaming fee for each
minute that a Sprint PCS subscriber outside of the Company's
territory uses the Company's portion of the Sprint PCS network.
Revenue from these services is recognized as the services are
performed. Similarly, the Company pays Sprint PCS roaming fees,
when a Sprint PCS subscriber based in the Company's territory uses
the Sprint PCS network outside of the Company's territory. These
costs are included as marketing and sales when incurred.
Product revenues consisting of proceeds from sales of handsets and
accessories are recorded net of an allowance for sales returns.
The allowance is estimated based on Sprint PCS's handset policy,
which allows customers to return handsets for a full refund within
15 days of purchase. When handsets are returned to the Company,
the Company may reissue the handsets to customers at little
additional cost. However, when handsets are returned to Sprint PCS
for refurbishing, the Company receives a credit from Sprint PCS,
which is less than the amount the Company originally paid for the
handset. For the year ended December 31, 2000, product revenue was
$2,731,731. The cost of these products was $8,819,132 which was
classified as cost of products sold. The costs of handsets exceed
the retail sales price because the Company subsidizes the price of
handsets for competitive reasons.
F-66
SWPCS HOLDINGS, L.L.C.
CONSOLIDATED NOTES TO FINANCIAL STATEMENT
Advertising costs
Advertising costs are expensed as incurred. Advertising expenses
totaled $4,011,443 for the year ended December 31, 2000.
Income taxes
The Company does not pay federal or state income taxes. The
Company's taxable income or loss is passed through to the members.
Accordingly, no provision for income taxes is provided for in
these financial statements.
Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Effects of recent accounting pronouncements
In June 1998 and June 1999, the Financial Accounting Standards
Board ("FASB"), issued Statement of Financial Accounting Standard
("SFAS") No. 133, "Accounting for Derivative Instruments and
Hedging Activities" and SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Date
of FASB Statement No. 133." These statements require companies to
record derivatives on the balance sheet as assets or liabilities,
measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending
on the use of the derivative and whether it qualifies for hedging
accounting. SFAS No. 133 will be effective for the Company's
fiscal year ending December 31, 2001. Management believes that the
adoption of these statements will not have a significant impact on
the Company's financial results.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31,
2000:
Estimated
Useful Live 2000
------------ --------------
Cell site equipment 8 years $ 54,478,185
Switch equipment 8 years 6,987,518
Leasehold improvements 8 years 1,970,748
Office equipment and furniture 8 and 3 years 1,979,935
Vehicles 5 years 66,421
Construction in progress 7,958,584
--------------
73,441,391
Accumulated depreciation (8,668,195)
--------------
$ 64,773,196
==============
Depreciation expense was $6,728,812 for the year ended December
31, 2000. Interest expense capitalized into construction in
progress aggregated approximately $1,155,469 during 2000.
F-67
SWPCS HOLDINGS, L.L.C.
CONSOLIDATED NOTES TO FINANCIAL STATEMENT
4. LONG-TERM DEBT
Long-term debt consists of the following at December 31, 2000:
Senior term loan A $ 15,000,000
Senior term loan B 15,000,000
Senior term loan C 15,000,000
Revolving credit facilities 8,000,000
Senior subordinated notes, less unamortized discount of $803,451 11,696,549
Junior subordinated debentures, less unamortized discount of $640,112 6,859,888
------------------
$ 71,556,437
==================
On April 30, 1999, the Partnership entered into a credit agreement
with a syndication of banks and investment companies. On September
22, 2000, the credit agreement was amended. The amended credit
agreement includes; a $15,000,000 revolving credit facility,
senior term loans A, B and C each in the amount of $15,000,000,
$1,000,000 swingline loan commitment, and $1,000,000 in letter of
credit availability. Borrowings under the swingline loan or issued
letters of credit result in a ratable reduction in the
availability under the revolving credit facility. The credit
agreement requires that the Partnership meet certain levels of
revenues and subscriber additions, capital expenditures
limitations, limitation on annual expenses from operating lease
agreements, and maintain certain financial ratios. Additionally,
the credit agreement restricts the Partnerships from paying
dividends, with the exception of a dividend payment for up to 40%
of the Partnership's taxable income in any year to be used by the
members to pay their federal income tax obligations. The credit
agreement generally restricts the Partnership and the Company from
incurring additional indebtedness, except for indebtedness from
capital leases for up to $1,000,000 in any one-year or $2,000,000
in the aggregate. All borrowings under this credit agreement are
senior to other borrowings and are collateralized by substantially
all the assets of the Partnership. The Company has guaranteed the
borrowings by the Partnership under the credit agreement.
The $15,000,000 revolving credit facility and any borrowings under
the swingline loan commitment bear interest at variable rates
based on either the London interbank Eurodollar rate plus 3.75% or
the greater of the prime rate of J.P. Morgan Chase & Co. or 0.5%
above the federal funds rate, plus 2.75%, as elected periodically
by the Partnership. The agreement allows for a reduction in the
spread on the variable interest rates of up to 1.0% based on the
Partnership reaching certain leverage ratios. Interest is payable
monthly or quarterly depending on the Partnership's interest rate
election. At December 31, 2000, the variable rate in effect under
the revolving credit facility was 10.68%. Quarterly commitment
reductions on the revolving credit facility begin March 31, 2004
and end March 31, 2005 when the facility matures. The commitment
may also be reduced by proceeds from the issuance of additional
debt and equity instruments in excess of the then outstanding
borrowings on the revolving credit facility or swingline loans
during the year ended December 31, 2000.
The $15,000,000 senior term loan A bears interest at variable
rates based on either the London interbank Eurodollar rate plus
3.75% or the greater of prime rate of J.P. Morgan Chase & Co. or
0.5% above the federal funds rate, plus 2.75%, as elected
periodically by the Partnership. The agreement allows for a
reduction in the spread on the variable interest rates of up to
1.0%, based on the Partnership reaching certain leverage ratios.
At December 31, 2000, the variable rate in effect under the senior
term loan A was 10.45%. Interest is payable monthly or quarterly
depending on the Partnership's interest rate election. Principal
is payable quarterly beginning June 30, 2003 until March 31, 2005
when the loan matures. The Partnership is required to make
additional mandatory repayments from the proceeds from the
issuance of additional debt and equity instruments on a pro-rata
basis with the then outstanding borrowings under senior term loan
B and C, limited to the then outstanding borrowings under senior
term loan A.
F-68
SWPCS HOLDINGS, L.L.C.
CONSOLIDATED NOTES TO FINANCIAL STATEMENT
The $15,000,000 senior term loan B bears interest at variable
rates based on either the London interbank Eurodollar rate plus
4.00% or the greater of prime rate of J.P. Morgan Chase & Co. or
0.5% above the federal funds rate, plus 3.00%, as elected
periodically by the Partnership. The agreement allows for a
reduction in the spread on the variable interest rates of up to
1.0%, based on the Partnership reaching certain leverage ratios.
At December 31, 2000, the variable rate in effect under the senior
term loan B was 10.66%. Principal is payable quarterly beginning
June 30, 2004 until March 31, 2006 when the loan matures. The
Partnership is required to make additional mandatory repayments
from the proceeds from the issuance of additional debt and equity
instruments on a pro-rata basis with the then outstanding
borrowings under senior term loan A and C, limited to the then
outstanding borrowings under senior term loan B.
The $15,000,000 senior term loan C bears interest at variable
rates based on either the London interbank Eurodollar rate plus 4%
or the greater of prime rate of J.P. Morgan Chase & Co. or 0.5%
above the federal funds rate, plus 3.00%, as elected periodically
by the Partnership. The agreement allows for a reduction in the
spread on the variable interest rates of up to 1.0%, based on the
Partnership reaching certain leverage ratios. At December 31,
2000, the variable rate in effect under the senior term loan C was
13.5%. Principal is payable quarterly beginning June 30, 2004
until March 31, 2006 when the loan matures. The Partnership is
required to make additional mandatory repayments from the proceeds
from the issuance of additional debt and equity instruments on a
pro-rata basis with the then outstanding borrowings under senior
term loan A and B, limited to the then outstanding borrowings
under senior term loan C.
On April 30, 1999, the Partnership issued $12,500,000 in senior
subordinated notes net of a discount of $923,925 (See Note 6),
resulting in proceeds to the Partnership of $11,576,075. The
senior subordinated notes are guaranteed by the Company, SWGP and
SWLP. The senior subordinated notes require that the Partnership
meet certain levels of revenues and subscriber additions, capital
expenditures limitations, limitation on annual expenses from
operating lease agreements and maintain certain financial ratios.
The senior subordinated notes mature March 31, 2007, have a stated
interest rate of 12% and an effective interest rate of 13.517%.
Interest on the senior subordinated notes is payable quarterly and
principal is payable at maturity. Prepayment penalties on the
senior subordinated notes range from 7% of the principal amount if
repaid prior to May 4, 2000 to 1% of the principal amount if
repaid prior to May 4, 2004. Subsequent to May 4, 2004 no
prepayment penalties exist. The Partnership is required to make
additional mandatory repayments from the proceeds from the
issuance of additional debt and equity instruments to the extent
the proceeds exceed the prepayment requirements under the senior
credit agreement.
On April 30, 1999, the Partnership issued $7,500,000 in junior
subordinated debentures, net of a discount of $739,140 (See Note
6), resulting in proceeds to the Partnership of $6,760,860. The
junior subordinated debentures are guaranteed by the Company,
SWGP, and SWLP. The junior subordinated debentures require that
the Partnership meet certain levels of revenues and subscriber
additions, capital expenditures limitations, limitation on annual
expenses from operating lease agreements, and maintain certain
financial ratios. The junior subordinated debentures mature April
30, 2007, have a stated interest rate of 12% and an effective
interest rate of 14.058%. Interest on the junior subordinated
debentures is payable quarterly and principal is payable at
maturity. Prepayment penalties on the junior subordinated
debentures range from 7% of the principal amount if repaid prior
to May 4, 2000 to 1% of the principal amount if repaid prior to
May 4, 2004. Subsequent to May 4, 2004 no prepayment penalties
exist on the debentures.
On July 7, 1999, the Partnership entered into an interest rate cap
agreement effectively capping the London interbank Eurodollar rate
on $15,000,000 of debt at 6.5% until June 30, 2002 when the
agreement expires.
F-69
SWPCS HOLDINGS, L.L.C.
CONSOLIDATED NOTES TO FINANCIAL STATEMENT
Future maturities of long-term debt as of December 31, 2000 are as
follows:
Years ending 31,
2001 $ -
2002 -
2003 4,500,000
2004 18,500,000
2005 12,000,000
Thereafter 38,000,000
------------------
Total $ 73,000,000
==================
As a result of the Company's merger with Alamosa Holdings, Inc.
("Alamosa") (See Note 11), the long-term debt of the Company was
repaid in its entirety on March 30, 2001.
5. LEASES
The Company has various operating lease agreements for retail
store locations, site towers, equipment and vehicles. The Company
incurred approximately $3,722,742 in rent expense during the year
ended December 31, 2000.
Minimum noncancelable lease payments under operating leases for
the periods shown are as follows:
2001 $ 3,669,327
2002 3,795,039
2003 3,585,525
2004 2,115,973
2005 382,563
Thereafter 753,866
------------------
$ 14,302,293
==================
6. WARRANT AND OPTION LIABILITIES
On April 30, 1999, the Company entered into a warrant agreement
with the holder of the senior subordinated debt. Under the
agreement, the warrants are exercisable at any time through April
30, 2009 into 75,000 Class B Shares of the Company (7.5% ownership
interest in the Company on a fully diluted basis) at an exercise
price of $.001 per warrant share. The warrant agreement contains
provisions under which the warrant holder may require the Company
to purchase the warrants upon the earlier of an event allowing
Mass Mutual to require the Company to purchase its ownership
interest or the fourth anniversary of the warrant agreement (April
30, 2003). Under this warrant agreement, if required by warrant
holder, the Company must pay the market price of a warrant share
as of the repurchase date for each share repurchased. This put
right expires upon the earlier of a qualified public offering by
the Company and April 30, 2009.
On April 30, 1999, the Company entered into an option agreement
with the holder of the junior subordinated debentures. The option
is exercisable on or after April 30, 2003 into 60,000 Class B
Shares of the Company (6.0% ownership interest in the Company on a
fully diluted basis) at an exercise price of $100 and expires
April 30, 2009. The option agreement contains provisions under
which the option holder may require the Company to purchase the
options on the earlier of an event allowing Mass Mutual to require
the Company to purchase its ownership interest, or the fourth
anniversary of the option agreement (April 30, 2003). Under this
option agreement, if required by the option holders the Company
must pay the market price of an option share as of the repurchase
date for each share repurchased. This put right expires upon the
earlier of qualified public offering by the Company and April 30,
2009. On June 29, 2000 the option was sold to Chickasaw Holding
Company.
F-70
SWPCS HOLDINGS, L.L.C.
CONSOLIDATED NOTES TO FINANCIAL STATEMENT
The option also contains call rights, which can be exercised by
the Company to repurchase the option from the option holder. These
call rights vest on April 30, 2005 and expire on the earlier of an
initial public offering and April 30, 2009. To exercise the call
rights, the Company must pay the market price of an option share
as of the repurchase date for each share.
The Company initially recorded the warrant and option agreements
as a liability at their fair value with subsequent changes in the
estimated fair value of the agreements recorded in operations. The
Company allocated $923,925 of the proceeds from the sale of the
senior subordinated notes to the warrants, which was the estimated
fair value at the time the warrants were issued. The Company
allocated $739,140 of the proceeds from the sale of the junior
subordinate debentures to the options, which was the estimated
fair value at the time the options were issued. For the year ended
December 31, 2000, the Company recorded interest expense of
approximately $1,015,470 related to the increased estimated fair
value of the warrants and options. The estimated fair values of
the warrants and the options at December 31, 2000, were
$10,014,150 and $8,011,320, respectively. Estimated fair value was
determined based upon details of the merger (see Note 11).
Per the Regulations of SWPCS Holdings, LLC Agreement dated April
30, 1999, in the event that the warrant holders and/or the Option
Holders fully exercise their respective warrants and the option,
the initial members' respective Company shares will be diluted and
adjusted as follows:
Company Percentage Interest Company Shares
--------- ------------------- --------------
Southwest PCS, LLC 34.230% 342,300
Central 7.335% 73,350
Pioneer Telecommunications 7.335% 73,350
Massachusetts Mutual Life
Insurance Company 7.833% 78,330.2
Massachusetts Mutual Life
Insurance Company 17.234% 172,339.6
Mass Mutual High Yield
Partners II, L.L.C. 12.533% 125,330.2
Option holder 7.500% 75,000
Warrant holder 6.000% 60,000
------- ---------
Totals 100.000% 1,000,000
7. MANDATORILY REDEEMABLE MEMBER'S EQUITY
Pursuant to the Regulations, Mass Mutual was given a put right
allowing Mass Mutual to require the Company to purchase its
ownership interest within 60 days of the occurrence of an event of
change in control, as defined in the Regulations. The Company
would be required to repurchase those shares, if such notice
presented, at the fair value on a fully diluted basis as
determined by agreement of the parties or an independent financial
expert.
8. EMPLOYEE BENEFITS
Effective January 1, 1999, the Company adopted the Southwest PCS,
LP 401(k) Plan ("the Plan"). All employees are eligible to
participate in the Plan following the attainment of certain
minimum eligibility requirements. Participants may elect to
contribute up to 12% of their pre-tax compensation. The Company
will match 100% of the employees' contributions up to 4% of the
employees' pre-tax compensation. Additionally, the Plan allows the
Company to make discretionary matching contributions which are
allocated to participants' accounts based upon the participant's
contributions to total participant contributions. During the year
ended December 31, 2000, the Company made $73,514 in matching
contributions to the Plan.
F-71
SWPCS HOLDINGS, L.L.C.
CONSOLIDATED NOTES TO FINANCIAL STATEMENT
9. FAIRVALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts
receivable, accounts payable and accrued interest and other
accrued liabilities approximate fair value because of the
short-term nature of these items. The carrying amounts of the
senior secured term loans A, B, and C approximate their fair value
as the interest rates vary with market interest rates. The fair
values of the senior subordinated notes and the junior
subordinated debentures at December 31, 2000 were approximately
$8,692,754 and $5,117,110, respectively.
The Company utilizes an interest rate cap agreement to limit the
impact of increases in interest rates on $15 million of its
floating rate debt. The interest rate cap agreement entitles the
company to receive from the counter parties the amounts, if any,
by which the selected market interest rate exceeds the strike rate
stated in the agreement. Amounts in excess of the strike rate are
accrued and recognized as an adjustment of interest accrued. The
fair value of the interest rate cap agreement of $17,925 is
estimated by obtaining quotes from brokers and represents the cash
requirement if the existing contract had been settled at the
balance sheet date. The Company acquired the interest rate cap for
a payment of $171,852, which is being amortized as interest
expensed ratably over the 36-month term of the agreement. The
amortization for the year ended December 31, 2000 was $57,284.
Estimates of fair value are made at a specific point in time,
based on relevant market information and information about the
financial instrument. Estimates of fair value are subjective in
nature and involve uncertainties and matters of significant
judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect these estimates.
10. RELATED PARTY TRANSACTION
The Company leases office space, certain equipment, and vehicles
from related parties. Rent paid under these agreements totaled
$237,246 for the year ended December 31, 2000. The future minimum
payment requirement under these related party leases have been
included in the amounts stated in Note 5.
A portion of the construction services related to the Company's
network build-out were provided by related parties in the amount
of $566,915 for the year ended December 31, 2000.
The Company was charged for certain general and administrative
expenses from related parties in the amount of $97,871 for the
year ended December 31, 2000.
The Company was charged for Health insurance expenses from related
parties in the amount of $345,372 for the year ended December 31,
2000.
Certain leasehold improvements were charged to the Company by
related parties in the amount of $275,216 for the year ended
December 31, 2000.
11. SUBSEQUENT EVENT
In January 2001, Southwest PCS, L.L.C., a related party, made its
required capital contributions for 2001 in the amount of $408,606.
No additional contribution is required.
On March 9, 2001, the Company and Alamosa announced a signing of a
definitive agreement to merge. In conjunction with the merger the
Company was incorporated. The transaction was consummated on
March 30, 2001. The Partnership shareholders exchanged 100 percent
of their common shares of the Company for 11.1 million shares
Alamosa common stock and $5 million in cash.
F-72
----------------
TABLE OF CONTENTS
----------------
Prospectus Summary....................................................................................1
The Exchange Offer....................................................................................2
The Registered Notes..................................................................................4
Alamosa (Delaware), Inc. Selected Historical Financial Information....................................7
Capitalization........................................................................................9
Risk Factors.........................................................................................10
The Exchange Offer...................................................................................23
Business.............................................................................................32
Management's Discussion and Analysis of Financial Condition and Results of Operations................45
Management...........................................................................................53
Certain Relationships and Related Transactions.......................................................62
Our Affiliation Agreements with Sprint PCS...........................................................67
Regulatory Environment...............................................................................77
Security Ownership of Certain Beneficial Owners and Management.......................................82
Description of Notes.................................................................................86
Book-entry System...................................................................................129
Exchange Offer; Registration Rights.................................................................131
Plan of Distribution................................................................................134
Material United States Federal Tax Considerations...................................................135
Alamosa Holdings, Inc. Selected Unaudited Pro Forma Financial Data..................................138
Legal Matters.......................................................................................149
Experts.............................................................................................149
Financial Statements................................................................................F-1
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You
must not rely on any unauthorized information or representations. This
prospectus does not offer to sell or ask for offers to buy any securities
other than those to which this prospectus relates and it does not
constitute an offer to sell or ask for offers to buy any of the securities
in any jurisdiction where it is unlawful, where the person making the offer
is not qualified to do so, or to any person who cannot legally be offered
the securities. The information contained in this prospectus is current
only as of its date.
Until [_______], all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the dealers' obligations to deliver a
prospectus when acting as underwriters with respect to their unsold allotments
or subscriptions.
Each broker-dealer that receives registered notes for its own account
pursuant to the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such registered 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. This prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of registered notes received in
exchange for outstanding notes where such securities were acquired by such
broker-dealer as a result of market-making activities or other trading
activities. We have agreed that, starting on the expiration date of the
exchange offer and ending on the close of business one year after the
expiration date, we will make this prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution".
$250,000,000
Offer for All Outstanding
12 1/2% Senior Notes Due 2011
In Exchange for
12 1/2% Senior Notes Due 2011
Which Have Been Registered
Under the Securities Act of 1933,
As Amended
---------------
Prospectus
---------------
[ ], 2001
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporate Law (the "DGCL")
generally provides that a corporation may indemnify directors, officers,
employees or agents against liabilities they may incur in such capacities
provided certain standards are met, including good faith and the reasonable
belief that the particular action was in, or not opposed to, the best interests
of the corporation.
Subsection (a) of Section 145 of the DGCL ("Section 145") empowers a
corporation to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation), by reason of the fact that he is or was
a director, officer, employee or agent of the corporation or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation or enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor, by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted
under standards similar to those set forth above, except that no indemnification
may be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation, unless and only to the
extent that the Delaware Court of Chancery or the court in which such action or
suit was brought shall determine that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to be indemnified for such expenses which the court shall
deem proper.
Section 145 further provides that, among other things, to the extent
that a director or officer of a corporation has been successful in the defense
of any action, suit or proceeding referred to in Subsections (a) and (b) of
Section 145, or in the defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith; that indemnification
provided for by Section 145 shall not be deemed exclusive of any other rights to
which the indemnified party may be entitled; and that a corporation is empowered
to purchase and maintain insurance on behalf of a director or officer of the
corporation against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify against such liability under
Section 145.
Indemnification as described above shall be granted in a specific case
only upon a determination that indemnification is proper under the circumstances
using the applicable standard of conduct which is made by (a) a majority of
directors who were not parties to such proceeding, (b) independent legal counsel
in a written opinion if there are no such disinterested directors or if such
disinterested directors so direct, or (c) the shareholders.
The Restated Certificate of Incorporation of Alamosa (Delaware), Inc.
(the "Registrant") provides that the liability of the directors of the
Registrant to the Registrant or any of its stockholders for monetary damages
arising from acts or omissions occurring in their capacity as directors will be
limited to the fullest extent permitted by the laws of Delaware or any other
applicable law. This limitation does not apply with respect to any action in
which a director would be liable under Section 174 of the DGCL nor does it apply
with respect to any liability in which a
II-1
director (1) breached his duty of loyalty to the Registrant or its stockholders;
(2) did not act in good faith or, in failing to act, did not act in good faith;
(3) acted in a manner involving intentional misconduct or a knowing violation of
law or, in failing to act, shall have acted in a manner involving intentional
misconduct or a knowing violation of law; or (4) derived an improper personal
benefit.
The Registrant's Restated Certificate of Incorporation provides that
the Registrant will indemnify its directors, officers and employees and former
directors, officers and employees to the fullest extent permitted by the laws of
Delaware or any other applicable law.
The Registrant has directors' and officers' liability insurance
covering its directors and officers.
II-2
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(i) Exhibits. The following is a complete list of Exhibits filed as
part of this Registration Statement, which are incorporated herein:
EXHIBIT
NUMBER: EXHIBIT TITLE
2.1 Amended and Restated Agreement and Plan of
Reorganization, dated as of December 14, 2000, by and
among Alamosa PCS Holdings, Inc., Alamosa Holdings,
Inc., Alamosa (Delaware), Inc. and Alamosa Sub I, Inc.,
filed as Exhibit 2.1 to Amendment No. 1 to the
Registration State ment on Form S-4, dated January 12,
2001 (Registration No. 333-47916) of Alamosa Holdings,
Inc., which exhibit is incorporated herein by
reference.
2.2 Amended and Restated Agreement and Plan of
Reorganization, dated as of July 31, 2000, by and among
Alamosa PCS Holdings, Inc., Alamosa Holdings, Inc.,
Alamosa Sub I, Inc., Roberts Wireless Communications,
LLC, and Members of Roberts Wireless Communications,
L.L.C., filed as Exhibit 2.2 to Amendment No. 1 to the
Registration Statement on Form S-4, dated January 12,
2001 (Registration No. 333-47916) of Alamosa Holdings,
Inc., which exhibit is incorporated herein by
reference.
2.3 Amended and Restated Agreement and Plan of
Reorganization, dated as of July 31, 2000, by and among
Alamosa PCS Holdings, Inc., Alamosa Holdings, Inc.,
Alamosa Sub I, Inc., Washington Oregon Wireless, LLC,
Members of Washington Oregon Wireless, LLC and WOW
Holdings, LLC, filed as Exhibit 2.3 to Amendment No. 1
to the Registration State ment on Form S-4, dated
January 12, 2001 (Registration No. 333-47916) of
Alamosa Holdings, Inc., which exhibit is incorporated
herein by reference.
2.4 Agreement and Plan of Merger, dated as of December 13,
2000, by and among Alamosa PCS Holdings, Inc., Twenty
Holdings, Inc. and Ten Acquisition, Inc., filed as
Exhibit 2.4 to Form 10-K of Alamosa Holdings, Inc. for
the year ended December 31, 2000, dated March 27, 2001,
which exhibit is incorporated herein by reference.
2.5 Agreement and Plan of Merger, dated as of March 9,
2001, by and among Alamosa PCS Holdings, Inc., Forty
Acquisition, Inc., Southwest PCS Holdings, Inc.
("Southwest") and the stockholders of Southwest, filed
as Exhibit 2.1 to the Current Report on Form 8-K, dated
April 5, 2001, of Alamosa Holdings, Inc., which exhibit
is incorporated herein by reference.
3.1 Restated Certificate of Incorporation of Alamosa
(Delaware), Inc. filed as Exhibit 3.1 to Form 10-K
of Alamosa (Delaware), Inc. for the year ended
December 31, 2000, dated March 27, 2001, which exhibit
is incorporated herein by reference.
3.2++ Amended and Restated Bylaws of Alamosa (Delaware), Inc.
4.1++ Specimen Common Stock Certificate of Alamosa
(Delaware).
II-3
EXHIBIT
NUMBER: EXHIBIT TITLE
4.2 Form of Indenture for 12 7/8% Senior Discount Notes due
2010, by and among Alamosa PCS Holdings, Inc., the
Subsidiary Guarantors party thereto and Norwest Bank
Minnesota, N.A., as trustee, filed as Exhibit 4.1 to
Amendment No. 2 to the Registration Statement on Form
S-1, dated February 1, 2000 (Registration No.
333-93499) of Alamosa (Delaware), Inc. (formerly
Alamosa PCS Holdings, Inc.), which exhibit is
incorporated herein by reference.
4.3 Form of Global Note relating to the Senior Discount
Notes due 2010, filed as Exhibit 4.2 to the
Registration Statement on Form S-1, as amended
(Registration No. 333-93499) of Alamosa (Delaware),
Inc. (formerly Alamosa PCS Holdings, Inc.), which
exhibit is incorporated herein by reference.
4.4 Indenture for 12 1/2% Senior Notes due 2011, dated as
of January 31, 2001, by and among Alamosa (Delaware),
Inc., the Subsidiary Guarantors party thereto and Wells
Fargo Bank Minnesota, N.A., as trustee, filed as
Exhibit 4.4 to Form 10-K of Alamosa Holdings, Inc. for
the year ended December 31, 2000, dated March 27, 2001,
which exhibit is incorporated herein by reference.
4.5 Form of Global Note relating to the Senior Notes due
2011, filed as Exhibit 4.5 to Form 10-K of Alamosa
Holdings, Inc. for the year ended December 31, 2000,
dated March 27, 2001, which exhibit is incorporated
herein by reference.
4.6 First Supplemental Indenture for 12 7/8% Senior
Discount Notes due 2010, dated as of January 31, 2001,
among Alamosa Finance, LLC, LLC, Alamosa Limited, LLC
and Wells Fargo Bank Minnesota, N.A., (formerly known
as Norwest Bank Minnesota, N.A.), as trustee, filed as
Exhibit 4.6 to Form 10-K of Alamosa Holdings, Inc. for
the year ended December 31, 2000, dated March 27, 2001,
which exhibit is incorporated herein by reference.
4.7 First Supplemental Indenture for 12 1/2% Senior Notes
due 2011, dated as of February 14, 2001, among Roberts
Wireless Communications, L.L.C., Roberts Wireless
Properties, LLC, Washington Oregon Wireless, LLC,
Alamosa Holdings, LLC, Alamosa Properties, L.P.,
Alamosa (Wisconsin) Properties, LLC, Washington Oregon
Wireless Properties, LLC, Washington Oregon Wireless
Licenses, LLC and Wells Fargo Bank Minnesota, N.A.,
(formerly known as Norwest Bank Minnesota, N.A.), as
trustee, filed as Exhibit 4.7 to Form 10-K of Alamosa
Holdings, Inc. for the year ended December 31, 2000,
dated March 27, 2001, which exhibit is incorporated
herein by reference.
II-4
EXHIBIT
NUMBER: EXHIBIT TITLE
4.8 Second Supplemental Indenture for 12 7/8% Senior
Discount Notes due 2010, dated as of February 14, 2001,
among Roberts Wireless Communications, L.L.C., Roberts
Wireless Properties, LLC, Washington Oregon Wireless,
LLC, Alamosa Holdings, LLC, Alamosa Properties, L.P.,
Alamosa (Wisconsin) Properties, LLC, Washington Oregon
Wireless Properties, LLC, Washington Oregon Wireless
Licenses, LLC and Wells Fargo Bank Minnesota, N.A.,
(formerly known as Norwest Bank Minnesota, N.A.), as
trustee, filed as Exhibit 4.8 to Form 10-K of Alamosa
Holdings, Inc. for the year ended December 31, 2000,
dated March 27, 2001, which exhibit is incorporated
herein by reference.
4.9 Registration Rights Agreement, dated as of January 24,
2001, by and among Alamosa (Delaware), Inc. and Salomon
Smith Barney Inc., TD Securities (USA) Inc., Credit
Suisse First Boston Corporation, First Union
Securities, Inc., Lehman Brothers Inc., Scotia Capital
(USA) Inc., filed as Exhibit 4.9 to Form 10-K of
Alamosa Holdings, Inc. for the year ended December 31,
2000, dated March 27, 2001, which exhibit is
incorporated herein by reference.
4.10++ Third Supplemental Indenture for 12 7/8% Senior
Discount Notes due 2010, dated as of March 30, 2001,
among SWLP, L.L.C., SWGP, L.L.C., Southwest PCS, L.P.,
Southwest PCS Properties, LLC, Southwest PCS Licenses,
LLC and Wells Fargo Bank Minnesota, N.A., as trustee.
4.11++ Second Supplemental Indenture for 12 1/2% Senior Notes
due 2011, dated as of March 30, 2001, among SWLP,
L.L.C., SWGP, L.L.C., Southwest PCS, L.P., Southwest
PCS Properties, LLC, Southwest PCS Licenses, LLC and
Wells Fargo Bank Minnesota, N.A., as trustee.
5.1+++ Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
10.1 CDMA 1900 SprintCom Additional Affiliate Agreement
dated as of December 21, 1998 by and between Alamosa
PCS, LLC and Northern Telecom, Inc., filed as Exhibit
10.1 to Amendment No. 3 to the Registration Statement
on Form S-1, dated February 1, 2000 (Registration No.
333-89995) of Alamosa (Delaware), Inc. (formerly
Alamosa PCS Holdings, Inc.), which exhibit is
incorporated herein by reference.
10.2 Amendment No. 1 to DMS-MTX Cellular Supply Agreement
dated as of January 12, 1999 by and between Alamosa
PCS, LLC and Nortel Networks Inc. as an amendment to
Exhibit 10.1 described above, filed as Exhibit 10.2 to
Amendment No. 3 to the Registration Statement on Form
S-1, dated February 1, 2000 (Registration No.
333-89995) of Alamosa (Delaware), Inc. (formerly
Alamosa PCS Holdings, Inc.), which exhibit is
incorporated herein by reference.
II-5
10.3 Amendment No. 2 to DMS-MTX Cellular Supply Agreement,
dated as of March 1, 1999 by and between Alamosa PCS,
LLC and Nortel Networks Inc. as an amendment to
Exhibits 10.1 and 10.2 described above, filed as
Exhibit 10.3 to Amendment No. 3 to the Registration
Statement on Form S-1, dated February 1, 2000
(Registration No. 333-89995) of Alamosa (Delaware),
Inc. (formerly Alamosa PCS Holdings, Inc.), which
exhibit is incorporated herein by reference.
10.4 Amendment No. 3 to DMS-MTX Cellular Supply Agreement,
dated as of August 11, 1999 by and between Alamosa PCS,
LLC and Nortel Networks Inc. as an amendment to
Exhibits 10.1, 10.2 and 10.3 described above, filed as
Exhibit 10.4 to Amendment No. 1 to the Registration
Statement on Form S-1, dated December 22, 1999
(Registration No. 333-89995) of Alamosa (Delaware),
Inc. (formerly Alamosa PCS Holdings, Inc.), which
exhibit is incorporated herein by reference.
10.5 Sprint PCS Management Agreement (Wisconsin), as amended
by Addendum I, dated as of December 6, 1999 by and
between Sprint Spectrum, LP, WirelessCo, LP and Alamosa
Wisconsin Limited Partnership, filed as Exhibit 10.10
to Amendment No. 3 to the Registration Statement on
Form S-1, dated February 1, 2000 (Registration No.
333-89995) of Alamosa (Delaware), Inc. (formerly
Alamosa PCS Holdings, Inc.), which exhibit is
incorporated herein by reference.
10.6 Sprint PCS Services Agreement (Wisconsin,) dated as of
December 6, 1999, by and between Sprint Spectrum, LP
and Alamosa Wisconsin Limited Partnership, filed as
Exhibit 10.11 to Amendment No. 3 to the Registration
Statement on Form S-1, dated February 1, 2000
(Registration No. 333-89995) of Alamosa (Delaware),
Inc. (formerly Alamosa PCS Holdings, Inc.), which
exhibit is incorporated herein by reference.
10.7 Sprint Trademark and Service Mark License Agreement
(Wisconsin), dated as of December 6, 1999, by and
between Sprint Communications Company, LP and Alamosa
Wisconsin Limited Partnership, filed as Exhibit 10.12
to Amendment No. 3 to the Registration Statement on
Form S-1, dated February 1, 2000 (Registration No.
333-89995) of Alamosa (Delaware), Inc. (formerly
Alamosa PCS Holdings, Inc.), which exhibit is
incorporated herein by reference.
10.8 Sprint Spectrum Trademark and Service Mark License
Agreement (Wisconsin), dated as of December 6, 1999, by
and between Sprint Spectrum, LP and Alamosa Wisconsin
Limited Partnership, filed as Exhibit 10.13 to
Amendment No. 3 to the Registration Statement on Form
S-1, dated February 1, 2000 (Registration No.
333-89995) of Alamosa (Delaware), Inc. (formerly
Alamosa PCS Holdings, Inc.), which exhibit is
incorporated herein by reference.
II-6
EXHIBIT
NUMBER: EXHIBIT TITLE
10.9 Engineering Service Contract, System Design and
Construction Inspection, dated as of July 27, 1998, as
amended, by and between Alamosa PCS, LLC and Hicks &
Ragland Engineering Co., Inc., filed as Exhibit 10.14
to Amendment No. 1 to the Registration Statement on
Form S-1, dated December 22, 1999 (Registration No.
333-89995) of Alamosa (Delaware), Inc. (formerly
Alamosa PCS Holdings, Inc.), which exhibit is
incorporated herein by reference.
10.10 Master Site Development and Lease Agreement, as
amended, dated as of August 1998, by and between
Alamosa PCS, LLC and Specialty Capital Services, Inc.,
filed as Exhibit 10.15 to Amendment No. 3 to the
Registration Statement on Form S-1, dated December 22,
1999 (Registration No. 333-89995) of Alamosa
(Delaware), Inc. (formerly Alamosa PCS Holdings, Inc.),
which exhibit is incorporated herein by reference.
10.11+ Employment Agreement, effective as of October 1, 1999,
by and between Alamosa PCS LLC and David E. Sharbutt,
filed as Exhibit 10.20 to Amendment No. 2 to the
Registration Statement on Form S-1, dated January 19,
2000 (Registration No. 333-89995) of Alamosa
(Delaware), Inc. (formerly Alamosa PCS Holdings, Inc.),
which exhibit is incorporated herein by reference.
10.12+ Employment Agreement, effective as of December 1, 1999,
by and between Alamosa PCS, LLC and Kendall W. Cowan,
filed as Exhibit 10.21 to Amendment No. 2 to the
Registration Statement on Form S-1, dated January 19,
2000 (Registration No. 333-89995) of Alamosa
(Delaware), Inc. (formerly Alamosa PCS Holdings, Inc.),
which exhibit is incorporated herein by reference.
10.13 Sprint PCS Management Agreement, as amended by Addendum
I, dated as of December 23, 1999, by and between Sprint
Spectrum, LP, WirelessCo, LP, Cox Communications PCS,
L.P., Cox CPS License, LLC, SprintCom, Inc. and Alamosa
PCS, LLC, filed as Exhibit 10.22 to Amendment No. 3 to
the Registration Statement on Form S-1, dated January
19, 2000 (Registration No. 333-89995) of Alamosa
(Delaware), Inc. (formerly Alamosa PCS Holdings, Inc.),
which exhibit is incorporated herein by reference.
10.14 Sprint PCS Services Agreement, dated as of December 23,
1999, by and between Sprint Spectrum, LP and Alamosa
PCS, LLC, filed as Exhibit 10.23 to Amendment No. 2 to
the Registration Statement on Form S-1, dated January
19, 2000 (Registration No. 333-89995) of Alamosa
(Delaware), Inc. (formerly Alamosa PCS Holdings, Inc.),
which exhibit is incorporated herein by reference.
II-7
EXHIBIT
NUMBER: EXHIBIT TITLE
10.15 Sprint Trademark and Service Mark License Agreement,
dated as of December 23, 1999 by and between Sprint
Communications Company, LP and Alamosa PCS, LLC, filed
as Exhibit 10.24 to Amendment No. 2 to the Registration
Statement on Form S-1, dated January 19, 2000
(Registration No. 333-89995) of Alamosa (Delaware),
Inc. (formerly Alamosa PCS Holdings, Inc.), which
exhibit is incorporated herein by reference.
10.16 Sprint Spectrum Trademark and Service Mark Agreement,
dated as of December 23, 1999, by and between Sprint
Spectrum, LP and Alamosa PCS, LLC, filed as Exhibit
10.25 to Amendment No. 2 to the Registration Statement
on Form S-1, dated January 19, 2000 (Registration No.
333-89995) of Alamosa (Delaware), Inc. (formerly
Alamosa PCS Holdings, Inc.), which exhibit is
incorporated herein by reference.
10.17 Amendment No. 4 to DMS-MTX Cellular Supply Agreement by
and between Alamosa PCS, LLC and Nortel Networks Inc.
as an amendment to Exhibits 10.1, 10.2, 10.3 and 10.4
described above, effective as of February 8, 2000,
filed as Exhibit 10.20 to Form 10-K of Alamosa
(Delaware), Inc. (formerly Alamosa PCS Holdings, Inc.),
for the year ended December 31, 1999, dated March 23,
2000 which exhibit is incorporated herein by reference.
10.18+ Amended and Restated Employment Agreement effective as
of October 1, 1999 by and between Alamosa PCS, LLC and
Jerry Brantley, filed as Exhibit 10.29 to Amendment No.
2 to the Registration Statement on Form S-1, dated
January 19, 2000 (Registration No. 333-89995) of
Alamosa (Delaware), Inc. (formerly Alamosa PCS
Holdings, Inc.), which exhibit is incorporated herein
by reference.
10.19+ Amended and Restated Employment Agreement, effective as
of October 1, 1999, by and between Alamosa PCS, LLC and
W. Don Stull, filed as Exhibit 10.21 to the
Registration Statement on Form S-4, dated October 12,
2000 (Registration No. 333-47916) of Alamosa Holdings,
Inc., which exhibit is incorporated herein by
reference.
10.20 Amended and Restated Master Design Build Agreement,
dated as of March 21, 2000, by and between Texas
Telecommunications, L.P. and Alamosa Wisconsin Limited
Partnership and SBA Towers, Inc., filed as Exhibit
10.23 to Form 10-K of Alamosa (Delaware), Inc.
(formerly Alamosa PCS Holdings, Inc.), for the year
ended December 31, 1999, dated March 23, 2000 which
exhibit is incorporated herein by reference.
10.21+ Employment Agreement effective as of June 1, 2000, by
and between Alamosa, Texas Telecommunications, LP and
Loyd Rinehart, filed as Exhibit 10.25 to the
Registration Statement on Form S-4, dated October 12,
2001 (Registration No. 333-47916) of Alamosa Holdings,
Inc., which exhibit is incorporated herein by
reference.
II-8
EXHIBIT
NUMBER: EXHIBIT TITLE
10.22 Security Agreement, dated as of January 31, 2001, by
and among Alamosa (Delaware), Inc., Wells Fargo Bank
Minnesota, N.A., as security agent, Wells Fargo Bank
Minnesota, N.A., as collateral agent, Wells Fargo Bank
Minnesota, N.A., as trustee under the 2001 Indenture
(as to paragraph 6(b) and Wells Fargo Bank Minnesota,
N.A., as trustee under the 2000 Indenture (as to
paragraph 6(b)), filed as Exhibit 10.22 to Form 10-K of
Alamosa Holdings, Inc. for the year ended December 31,
2000, dated March 27, 2001, which exhibit is
incorporated herein by reference.
10.23++ Amended and Restated Credit Agreement, dated as of
March 30, 2001, by and among Alamosa Holdings, LLC,
Alamosa Holdings, Inc., Alamosa (Delaware), Inc., the
lenders party thereto, Citicorp USA, Inc., as
administrative and collateral agent, Export
Development Corporation, as co-documentation agent,
First Union National Bank, as documentation agent,
Toronto Dominion (Texas), Inc. as syndication agent,
Export Development Corporation and First Union
Securities, Inc., as lead arrangers and Salomon Smith
Barney Inc. and TD Securities (USA) Inc. as joint lead
arrangers and joint book managers, for a $333,000,000
credit facility, as amended by the First Amendment and
Waiver dated May 8, 2001 (attached thereto).
10.24++ Amended and Restated Security Agreement, dated as of
March 30, 2001, by and among Alamosa (Delaware), Inc.,
Alamosa Holdings, LLC, each subsidiary of Alamosa
(Delaware), Inc. listed on Schedule I thereto, and
Citicorp USA, Inc., as collateral agent.
10.25++ Amended and Restated Pledge Agreement, dated as of
March 30, 2001, among Alamosa (Delaware), Inc., Alamosa
Holdings, LLC, each Subsidiary of Alamosa (Delaware),
Inc. listed on Schedule I thereto and Citicorp USA,
Inc., as collateral agent.
10.26++ Amended and Restated Consent and Agreement, dated as of
March 30, 2001, by and among Sprint Spectrum L.P.,
SprintCom, Inc., Sprint Communications Company, L.P.,
Cox Communications PCS, L.P., Cox PCS License, LLC,
WirelessCo, L.P., and Citicorp USA, Inc., as
administrative agent.
10.27 Addendum II to Sprint PCS Management Agreement
(Wisconsin), dated as of February 8, 2000, by and
between Sprint Spectrum L.P., WirelessCo, L.P., Sprint
Communications Company, L.P., and Alamosa Wisconsin
Limited Partnership as an amendment to Exhibit 10.5
above, filed as Exhibit 10.27 to Form 10-K of Alamosa
Holdings, Inc. for the year ended December 31, 2000,
dated March 27, 2001, which exhibit is incorporated
herein by reference.
II-9
EXHIBIT
NUMBER: EXHIBIT TITLE
10.28 Addendum III to Sprint PCS Management Agreement
(Wisconsin), dated as of April 25, 2000, by and between
Sprint Spectrum L.P., WirelessCo, L.P., Sprint
Communications Company, L.P., and Alamosa Wisconsin
Limited Partnership as an amendment to Exhibit 10.5
above, filed as Exhibit 10.28 to Form 10-K of Alamosa
Holdings, Inc. for the year ended December 31, 2000,
dated March 27, 2001, which exhibit is incorporated
herein by reference.
10.29 Addendum IV to Sprint PCS Management Agreement
(Wisconsin), dated as of June 23, 2000, by and between
Sprint Spectrum L.P., WirelessCo, L.P., Sprint
Communications Company, L.P., and Alamosa Wisconsin
Limited Partnership as an amendment to Exhibit 10.5
above, filed as Exhibit 10.29 to Form 10-K of Alamosa
Holdings, Inc. for the year ended December 31, 2000,
dated March 27, 2001, which exhibit is incorporated
herein by reference.
10.30 Addendum V to Sprint PCS Management Agreement
(Wisconsin), dated as of February 14, 2001, by and
between Sprint Spectrum L.P., WirelessCo, L.P., Sprint
Communications Company, L.P., and Alamosa Wisconsin
Limited Partnership as an amendment to Exhibit 10.5
above, filed as Exhibit 10.30 to Form 10-K of Alamosa
Holdings, Inc. for the year ended December 31, 2000,
dated March 27, 2001, which exhibit is incorporated
herein by reference.
10.31 Addendum II to Sprint PCS Management Agreement, dated
as of February 8, 2000, by and between Sprint Spectrum
L.P., WirelessCo, L.P., Sprint Communications Company,
L.P., and Texas Telecommunications, LP as an amendment
to Exhibit 10.13 above, filed as Exhibit 10.31 to Form
10-K of Alamosa Holdings, Inc. for the year ended
December 31, 2000, dated March 27, 2001, which exhibit
is incorporated herein by reference.
10.32 Addendum III to Sprint PCS Management Agreement, dated
as of April 25, 2000, by and between Sprint Spectrum
L.P., WirelessCo, L.P., Sprint Communications Company,
L.P., and Texas Telecommunications, LP as an amendment
to Exhibit 10.13 above, filed as Exhibit 10.32 to Form
10-K of Alamosa Holdings, Inc. for the year ended
December 31, 2000, dated March 27, 2001, which exhibit
is incorporated herein by reference.
10.33 Addendum IV to Sprint PCS Management Agreement, dated
as of June 23, 20001, by and between Sprint Spectrum
L.P., WirelessCo, L.P., Sprint Communications Company,
L.P., and Texas Telecommunications, LP as an amendment
to Exhibit 10.13 above, filed as Exhibit 10.33 to Form
10-K of Alamosa Holdings, Inc. for the year ended
December 31, 2000, dated March 27, 2001, which exhibit
is incorporated herein by reference.
II-10
EXHIBIT
NUMBER: EXHIBIT TITLE
10.34 Addendum V to Sprint PCS Management Agreement, dated as
of January 8, 2001, by and between Sprint Spectrum
L.P., WirelessCo, L.P., Sprint Communications Company,
L.P., and Texas Telecommunications, LP as an amendment
to Exhibit 10.13 above, filed as Exhibit 10.34 to Form
10-K of Alamosa Holdings, Inc. for the year ended
December 31, 2000, dated March 27, 2001, which exhibit
is incorporated herein by reference.
10.35 Addendum VI to Sprint PCS Management Agreement, dated
as of February 14, 2001, by and between Sprint Spectrum
L.P., WirelessCo, L.P., Sprint Communications Company,
L.P., and Texas Telecommunications, LP as an amendment
to Exhibit 10.13 above, filed as Exhibit 10.35 to Form
10-K of Alamosa Holdings, Inc. for the year ended
December 31, 2000, dated March 27, 2001, which exhibit
is incorporated herein by reference.
10.36 Sprint PCS Management Agreement, dated as of June 8,
1998, as amended by Addendum I - VIII, between Sprint
Spectrum L.P., SprintCom, Inc. and Roberts Wireless
Communications, L.L.C, filed as Exhibit 10.36 to Form
10-K of Alamosa Holdings, Inc. for the year ended
December 31, 2000, dated March 27, 2001, which exhibit
is incorporated herein by reference.
10.37 Sprint PCS Services Agreement, dated as of June 8,
1998, between Sprint Spectrum L.P. and Roberts Wireless
Communications, L.L.C., filed as Exhibit 10.37 to Form
10-K of Alamosa Holdings, Inc. for the year ended
December 31, 2000, dated March 27, 2001, which exhibit
is incorporated herein by reference.
10.38 Sprint Trademark and Service Mark License Agreement,
dated as of June 8, 1998, between Sprint Communications
Company, L.P. and Roberts Wireless Communications,
L.L.C., filed as Exhibit 10.38 to Form 10-K of Alamosa
Holdings, Inc. for the year ended December 31, 2000,
dated March 27, 2001, which exhibit is incorporated
herein by reference.
10.39 Sprint Spectrum Trademark and Service Mark License
Agreement, dated as of December 8, 1998, between Sprint
Spectrum L.P. and Roberts Wireless Communications,
L.L.C., filed as Exhibit 10.39 to Form 10-K of Alamosa
Holdings, Inc. for the year ended December 31, 2000,
dated March 27, 2001, which exhibit is incorporated
herein by reference.
10.40 Sprint PCS Management Agreement, dated as of January
25, 1999, as amended by Addendum I - III, between
Sprint Spectrum L.P., WirelessCo, L.P. and Washington
Oregon Wireless, LLC, filed as Exhibit 10.40 to Form
10-K of Alamosa Holdings, Inc. for the year ended
December 31, 2000, dated March 27, 2001, which exhibit
is incorporated herein by reference.
II-11
EXHIBIT
NUMBER: EXHIBIT TITLE
10.41 Sprint PCS Services Agreement, dated as of January 25,
1999, between Sprint Spectrum L.P. and Washington
Oregon Wireless, LLC, filed as Exhibit 10.41 to Form
10-K of Alamosa Holdings, Inc. for the year ended
December 31, 2000, dated March 27, 2001, which exhibit
is incorporated herein by reference.
10.42 Sprint Trademark and Service Mark License Agreement,
dated as of January 25, 1999, between Sprint
Communications Company, L.P. and Washington Oregon
Wireless, LLC, filed as Exhibit 10.42 to Form 10-K of
Alamosa Holdings, Inc. for the year ended December 31,
2000, dated March 27, 2001, which exhibit is
incorporated herein by reference.
10.43 Sprint Spectrum Trademark and Service Mark License
Agreement, dated as of January 25, 1999, between Sprint
Spectrum L.P. and Washington Oregon Wireless, LLC,
filed as Exhibit 10.43 to Form 10-K of Alamosa
Holdings, Inc. for the year ended December 31, 2000,
dated March 27, 2001, which exhibit is incorporated
herein by reference.
10.44+ Employment Agreement, effective as of July 24, 2000, by
and between Alamosa PCS Holdings, Inc. and Anthony
Sabatino, filed as Exhibit 10.44 to Form 10-K of
Alamosa Holdings, Inc. for the year ended December 31,
2000, dated March 27, 2001, which exhibit is
incorporated herein by reference.
10.45++ Addendum VI to Sprint PCS Management Agreement
(Wisconsin), dated March 30, 2001, by and between
Sprint Spectrum L.P., WirelessCo, L.P., Sprint
Communications Company, L.P. and Alamosa Wisconsin
Limited Partnership, as an amendment to Exhibit 10.5
above.
10.46++ Addendum VII to Sprint PCS Management Agreement, dated
as of March 30, 2001, by and between Sprint Spectrum
L.P., WirelessCo, L.P., Sprint Communications Company,
L.P. and Texas Telecommunications, LP, as an amendment
to Exhibit 10.13 above.
10.47++ Addendum IX to Sprint PCS Management Agreement, dated
as of March 30, 2001, by and between Sprint Spectrum
L.P., WirelessCo, L.P., Sprint Communications Company,
L.P. and Roberts Wireless Communications, as an
amendment to Exhibit 10.36 above.
10.48++ Addendum IV to Sprint PCS Management Agreement, dated
as of March 30, 2001, by and between Sprint Spectrum
L.P., WirelessCo, L.P., Sprint Communications Company,
L.P. and Washington Oregon Wireless, LLC, as an
amendment to Exhibit 10.40 above.
10.49++ Sprint PCS Management Agreement, dated March 30, 2001,
as amended by Addendum IV, by and between Sprint
Spectrum, L.P., SprintCom, Inc. and Southwest PCS, L.P.
10.50++ Sprint PCS Services Agreement, dated July 10, 1998,
between Sprint Spectrum L.P. and Southwest PCS, L.P.
II-12
EXHIBIT
NUMBER: EXHIBIT TITLE
10.51++ Sprint Trademark and Service Mark License Agreement,
dated July 10, 1998, between Sprint Communications
Company, L.P. and Southwest PCS, L.P.
10.52++ Sprint Spectrum Trademark and Service Mark License
Agreement, dated July 10, 1998, between Sprint Spectrum
L.P. and Southwest PCS, L.P.
12.1++ Statement Regarding the Computation of Ratio of
Earnings to Fixed Charges.
21.1++ List of Subsidiaries.
23.1++ Consent of PricewaterhouseCoopers.
23.2++ Consent of Aldrich, Kilbride & Tatone, LLP.
23.3++ Consent of Melman, Alton & Co.
23.4+++ Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1 above).
23.5++ Consent of PricewaterhouseCoopers.
24.1++ Powers of Attorney (included as part of signature pages
to this registration statement).
25.1++ Statement of Eligibility and Qualification on Form T-1
of Wells Fargo Bank Minnesota, N.A., as Trustee, under
the Indenture filed as Exhibit 4.4 hereto.
99.1++ Form of Letter of Transmittal.
99.2++ Form of Notice of Guaranteed Delivery.
99.3++ Form of Letter to Brokers.
99.4++ Form of Letter to Clients.
+ Exhibit is a management contract or compensatory plan.
++ Filed with this prospectus.
+++ To be filed by amendment.
ITEM 22. UNDERTAKINGS
(A) The undersigned Registrants hereby undertake:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
II-13
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement.
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(B) The undersigned Registrants hereby undertake:
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Registrants pursuant to the foregoing
provisions, or otherwise, the Registrants have been advised that
in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other
than the payment by the Registrants of expenses incurred or paid
by a director, officer or controlling person of the Registrants
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrants
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication
of such issue.
II-14
(C) The undersigned Registrants hereby undertake to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated by first class mail or equally prompt
means. This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding to
the request.
(D) The undersigned Registrants hereby undertake to supply by means of
a post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-15
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Lubbock,
State of Texas, on May 8, 2001.
ALAMOSA (DELAWARE), INC.
/s/ David E. Sharbutt 5/8/01
----------------------------------
David E. Sharbutt
Chairman of the Board of Directors
and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of Alamosa (Delaware), Inc.,
hereby severally and individually constitute and appoint David E. Sharbutt, the
true and lawful attorney and agent (with full power of substitution and
resubstitution in each case) of each of us to execute in the name, place and
stead of each of us (individually and in any capacity stated below) any and all
amendments to this registration statement and all instruments necessary or
advisable in connection therewith and to file the same with the Securities and
Exchange Commission, said attorney and agent to have power to act and to have
full power and authority to do and perform in the name and on behalf of each of
the undersigned every act whatsoever necessary or advisable to be done in the
premises as fully and to all intents and purposes as any of the undersigned
might or could do in person and we hereby ratify and confirm our signatures as
they may be signed by our said attorney and agent to any and all such amendments
and instruments.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ David E. Sharbutt 5/8/01
--------------------------------------------
David E. Sharbutt Date
Chairman of the Board of Directors
and Chief Executive Officer
(Principal Executive Officer)
/s/ Kendall W. Cowan 5/8/01
---------------------------------------------
Kendall W. Cowan Date
Chief Financial Officer
(Principal Financial and Accounting Officer)
---------------------------------------------
Michael R. Budagher Date
Director
II-16
/s/ Ray M. Clapp, Jr. 5/7/01
---------------------------------------------
Ray M. Clapp, Jr. Date
Director
/s/ Scotty Hart 5/7/01
---------------------------------------------
Scotty Hart Date
Director
/s/ Thomas Hyde 5/7/01
---------------------------------------------
Thomas Hyde Date
Director
/s/ Schuyler B. Marshall 5/8/01
---------------------------------------------
Schuyler B. Marshall Date
Director
/s/ Tom M. Phelps 5/7/01
---------------------------------------------
Tom M. Phelps Date
Director
/s/ Jimmy R. White 5/7/01
---------------------------------------------
Jimmy R. White Date
Director
---------------------------------------------
Thomas F. Riley Date
Director
---------------------------------------------
Michael V. Roberts Date
Director
---------------------------------------------
Steven C. Roberts Date
Director
II-17
Exhibits
--------
EXHIBIT
NUMBER: EXHIBIT TITLE
2.1 Amended and Restated Agreement and Plan of
Reorganization, dated as of December 14, 2000, by and
among Alamosa PCS Holdings, Inc., Alamosa Holdings,
Inc., Alamosa (Delaware), Inc. and Alamosa Sub I, Inc.,
filed as Exhibit 2.1 to Amendment No. 1 to the
Registration State ment on Form S-4, dated January 12,
2001 (Registration No. 333-47916) of Alamosa Holdings,
Inc., which exhibit is incorporated herein by
reference.
2.2 Amended and Restated Agreement and Plan of
Reorganization, dated as of July 31, 2000, by and among
Alamosa PCS Holdings, Inc., Alamosa Holdings, Inc.,
Alamosa Sub I, Inc., Roberts Wireless Communications,
LLC, and Members of Roberts Wireless Communications,
L.L.C., filed as Exhibit 2.2 to Amendment No. 1 to the
Registration Statement on Form S-4, dated January 12,
2001 (Registration No. 333-47916) of Alamosa Holdings,
Inc., which exhibit is incorporated herein by
reference.
2.3 Amended and Restated Agreement and Plan of
Reorganization, dated as of July 31, 2000, by and among
Alamosa PCS Holdings, Inc., Alamosa Holdings, Inc.,
Alamosa Sub I, Inc., Washington Oregon Wireless, LLC,
Members of Washington Oregon Wireless, LLC and WOW
Holdings, LLC, filed as Exhibit 2.3 to Amendment No. 1
to the Registration State ment on Form S-4, dated
January 12, 2001 (Registration No. 333-47916) of
Alamosa Holdings, Inc., which exhibit is incorporated
herein by reference.
2.4 Agreement and Plan of Merger, dated as of December 13,
2000, by and among Alamosa PCS Holdings, Inc., Twenty
Holdings, Inc. and Ten Acquisition, Inc., filed as
Exhibit 2.4 to Form 10-K of Alamosa Holdings, Inc. for
the year ended December 31, 2000, dated March 27, 2001,
which exhibit is incorporated herein by reference.
2.5 Agreement and Plan of Merger, dated as of March 9,
2001, by and among Alamosa PCS Holdings, Inc., Forty
Acquisition, Inc., Southwest PCS Holdings, Inc.
("Southwest") and the stockholders of Southwest, filed
as Exhibit 2.1 to the Current Report on Form 8-K, dated
April 5, 2001, of Alamosa Holdings, Inc., which exhibit
is incorporated herein by reference.
3.1 Restated Certificate of Incorporation of Alamosa
(Delaware), Inc. filed as Exhibit 3.1 to Form 10-K
of Alamosa (Delaware), Inc. for the year ended
December 31, 2000, dated March 27, 2001, which exhibit
is incorporated herein by reference.
3.2++ Amended and Restated Bylaws of Alamosa (Delaware), Inc.
4.1++ Specimen Common Stock Certificate of Alamosa
(Delaware).
II-18
EXHIBIT
NUMBER: EXHIBIT TITLE
4.2 Form of Indenture for 12 7/8% Senior Discount Notes due
2010, by and among Alamosa PCS Holdings, Inc., the
Subsidiary Guarantors party thereto and Norwest Bank
Minnesota, N.A., as trustee, filed as Exhibit 4.1 to
Amendment No. 2 to the Registration Statement on Form
S-1, dated February 1, 2000 (Registration No.
333-93499) of Alamosa (Delaware), Inc. (formerly
Alamosa PCS Holdings, Inc.), which exhibit is
incorporated herein by reference.
4.3 Form of Global Note relating to the Senior Discount
Notes due 2010, filed as Exhibit 4.2 to the
Registration Statement on Form S-1, as amended
(Registration No. 333-93499) of Alamosa (Delaware),
Inc. (formerly Alamosa PCS Holdings, Inc.), which
exhibit is incorporated herein by reference.
4.4 Indenture for 12 1/2% Senior Notes due 2011, dated as
of January 31, 2001, by and among Alamosa (Delaware),
Inc., the Subsidiary Guarantors party thereto and Wells
Fargo Bank Minnesota, N.A., as trustee, filed as
Exhibit 4.4 to Form 10-K of Alamosa Holdings, Inc. for
the year ended December 31, 2000, dated March 27, 2001,
which exhibit is incorporated herein by reference.
4.5 Form of Global Note relating to the Senior Notes due
2011, filed as Exhibit 4.5 to Form 10-K of Alamosa
Holdings, Inc. for the year ended December 31, 2000,
dated March 27, 2001, which exhibit is incorporated
herein by reference.
4.6 First Supplemental Indenture for 12 7/8% Senior
Discount Notes due 2010, dated as of January 31, 2001,
among Alamosa Finance, LLC, LLC, Alamosa Limited, LLC
and Wells Fargo Bank Minnesota, N.A., (formerly known
as Norwest Bank Minnesota, N.A.), as trustee, filed as
Exhibit 4.6 to Form 10-K of Alamosa Holdings, Inc. for
the year ended December 31, 2000, dated March 27, 2001,
which exhibit is incorporated herein by reference.
4.7 First Supplemental Indenture for 12 1/2% Senior Notes
due 2011, dated as of February 14, 2001, among Roberts
Wireless Communications, L.L.C., Roberts Wireless
Properties, LLC, Washington Oregon Wireless, LLC,
Alamosa Holdings, LLC, Alamosa Properties, L.P.,
Alamosa (Wisconsin) Properties, LLC, Washington Oregon
Wireless Properties, LLC, Washington Oregon Wireless
Licenses, LLC and Wells Fargo Bank Minnesota, N.A.,
(formerly known as Norwest Bank Minnesota, N.A.), as
trustee, filed as Exhibit 4.7 to Form 10-K of Alamosa
Holdings, Inc. for the year ended December 31, 2000,
dated March 27, 2001, which exhibit is incorporated
herein by reference.
II-19
EXHIBIT
NUMBER: EXHIBIT TITLE
4.8 Second Supplemental Indenture for 12 7/8% Senior
Discount Notes due 2010, dated as of February 14, 2001,
among Roberts Wireless Communications, L.L.C., Roberts
Wireless Properties, LLC, Washington Oregon Wireless,
LLC, Alamosa Holdings, LLC, Alamosa Properties, L.P.,
Alamosa (Wisconsin) Properties, LLC, Washington Oregon
Wireless Properties, LLC, Washington Oregon Wireless
Licenses, LLC and Wells Fargo Bank Minnesota, N.A.,
(formerly known as Norwest Bank Minnesota, N.A.), as
trustee, filed as Exhibit 4.8 to Form 10-K of Alamosa
Holdings, Inc. for the year ended December 31, 2000,
dated March 27, 2001, which exhibit is incorporated
herein by reference.
4.9 Registration Rights Agreement, dated as of January 24,
2001, by and among Alamosa (Delaware), Inc. and Salomon
Smith Barney Inc., TD Securities (USA) Inc., Credit
Suisse First Boston Corporation, First Union
Securities, Inc., Lehman Brothers Inc., Scotia Capital
(USA) Inc., filed as Exhibit 4.9 to Form 10-K of
Alamosa Holdings, Inc. for the year ended December 31,
2000, dated March 27, 2001, which exhibit is
incorporated herein by reference.
4.10++ Third Supplemental Indenture for 12 7/8% Senior
Discount Notes due 2010, dated as of March 30, 2001,
among SWLP, L.L.C., SWGP, L.L.C., Southwest PCS, L.P.,
Southwest PCS Properties, LLC, Southwest PCS Licenses,
LLC and Wells Fargo Bank Minnesota, N.A., as trustee.
4.11++ Second Supplemental Indenture for 12 1/2% Senior Notes
due 2011, dated as of March 30, 2001, among SWLP,
L.L.C., SWGP, L.L.C., Southwest PCS, L.P., Southwest
PCS Properties, LLC, Southwest PCS Licenses, LLC and
Wells Fargo Bank Minnesota, N.A., as trustee.
5.1+++ Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
10.1 CDMA 1900 SprintCom Additional Affiliate Agreement
dated as of December 21, 1998 by and between Alamosa
PCS, LLC and Northern Telecom, Inc., filed as Exhibit
10.1 to Amendment No. 3 to the Registration Statement
on Form S-1, dated February 1, 2000 (Registration No.
333-89995) of Alamosa (Delaware), Inc. (formerly
Alamosa PCS Holdings, Inc.), which exhibit is
incorporated herein by reference.
10.2 Amendment No. 1 to DMS-MTX Cellular Supply Agreement
dated as of January 12, 1999 by and between Alamosa
PCS, LLC and Nortel Networks Inc. as an amendment to
Exhibit 10.1 described above, filed as Exhibit 10.2 to
Amendment No. 3 to the Registration Statement on Form
S-1, dated February 1, 2000 (Registration No.
333-89995) of Alamosa (Delaware), Inc. (formerly
Alamosa PCS Holdings, Inc.), which exhibit is
incorporated herein by reference.
II-20
10.3 Amendment No. 2 to DMS-MTX Cellular Supply Agreement,
dated as of March 1, 1999 by and between Alamosa PCS,
LLC and Nortel Networks Inc. as an amendment to
Exhibits 10.1 and 10.2 described above, filed as
Exhibit 10.3 to Amendment No. 3 to the Registration
Statement on Form S-1, dated February 1, 2000
(Registration No. 333-89995) of Alamosa (Delaware),
Inc. (formerly Alamosa PCS Holdings, Inc.), which
exhibit is incorporated herein by reference.
10.4 Amendment No. 3 to DMS-MTX Cellular Supply Agreement,
dated as of August 11, 1999 by and between Alamosa PCS,
LLC and Nortel Networks Inc. as an amendment to
Exhibits 10.1, 10.2 and 10.3 described above, filed as
Exhibit 10.4 to Amendment No. 1 to the Registration
Statement on Form S-1, dated December 22, 1999
(Registration No. 333-89995) of Alamosa (Delaware),
Inc. (formerly Alamosa PCS Holdings, Inc.), which
exhibit is incorporated herein by reference.
10.5 Sprint PCS Management Agreement (Wisconsin), as amended
by Addendum I, dated as of December 6, 1999 by and
between Sprint Spectrum, LP, WirelessCo, LP and Alamosa
Wisconsin Limited Partnership, filed as Exhibit 10.10
to Amendment No. 3 to the Registration Statement on
Form S-1, dated February 1, 2000 (Registration No.
333-89995) of Alamosa (Delaware), Inc. (formerly
Alamosa PCS Holdings, Inc.), which exhibit is
incorporated herein by reference.
10.6 Sprint PCS Services Agreement (Wisconsin,) dated as of
December 6, 1999, by and between Sprint Spectrum, LP
and Alamosa Wisconsin Limited Partnership, filed as
Exhibit 10.11 to Amendment No. 3 to the Registration
Statement on Form S-1, dated February 1, 2000
(Registration No. 333-89995) of Alamosa (Delaware),
Inc. (formerly Alamosa PCS Holdings, Inc.), which
exhibit is incorporated herein by reference.
10.7 Sprint Trademark and Service Mark License Agreement
(Wisconsin), dated as of December 6, 1999, by and
between Sprint Communications Company, LP and Alamosa
Wisconsin Limited Partnership, filed as Exhibit 10.12
to Amendment No. 3 to the Registration Statement on
Form S-1, dated February 1, 2000 (Registration No.
333-89995) of Alamosa (Delaware), Inc. (formerly
Alamosa PCS Holdings, Inc.), which exhibit is
incorporated herein by reference.
10.8 Sprint Spectrum Trademark and Service Mark License
Agreement (Wisconsin), dated as of December 6, 1999, by
and between Sprint Spectrum, LP and Alamosa Wisconsin
Limited Partnership, filed as Exhibit 10.13 to
Amendment No. 3 to the Registration Statement on Form
S-1, dated February 1, 2000 (Registration No.
333-89995) of Alamosa (Delaware), Inc. (formerly
Alamosa PCS Holdings, Inc.), which exhibit is
incorporated herein by reference.
II-21
EXHIBIT
NUMBER: EXHIBIT TITLE
10.9 Engineering Service Contract, System Design and
Construction Inspection, dated as of July 27, 1998, as
amended, by and between Alamosa PCS, LLC and Hicks &
Ragland Engineering Co., Inc., filed as Exhibit 10.14
to Amendment No. 1 to the Registration Statement on
Form S-1, dated December 22, 1999 (Registration No.
333-89995) of Alamosa (Delaware), Inc. (formerly
Alamosa PCS Holdings, Inc.), which exhibit is
incorporated herein by reference.
10.10 Master Site Development and Lease Agreement, as
amended, dated as of August 1998, by and between
Alamosa PCS, LLC and Specialty Capital Services, Inc.,
filed as Exhibit 10.15 to Amendment No. 3 to the
Registration Statement on Form S-1, dated December 22,
1999 (Registration No. 333-89995) of Alamosa
(Delaware), Inc. (formerly Alamosa PCS Holdings, Inc.),
which exhibit is incorporated herein by reference.
10.11+ Employment Agreement, effective as of October 1, 1999,
by and between Alamosa PCS LLC and David E. Sharbutt,
filed as Exhibit 10.20 to Amendment No. 2 to the
Registration Statement on Form S-1, dated January 19,
2000 (Registration No. 333-89995) of Alamosa
(Delaware), Inc. (formerly Alamosa PCS Holdings, Inc.),
which exhibit is incorporated herein by reference.
10.12+ Employment Agreement, effective as of December 1, 1999,
by and between Alamosa PCS, LLC and Kendall W. Cowan,
filed as Exhibit 10.21 to Amendment No. 2 to the
Registration Statement on Form S-1, dated January 19,
2000 (Registration No. 333-89995) of Alamosa
(Delaware), Inc. (formerly Alamosa PCS Holdings, Inc.),
which exhibit is incorporated herein by reference.
10.13 Sprint PCS Management Agreement, as amended by Addendum
I, dated as of December 23, 1999, by and between Sprint
Spectrum, LP, WirelessCo, LP, Cox Communications PCS,
L.P., Cox CPS License, LLC, SprintCom, Inc. and Alamosa
PCS, LLC, filed as Exhibit 10.22 to Amendment No. 3 to
the Registration Statement on Form S-1, dated January
19, 2000 (Registration No. 333-89995) of Alamosa
(Delaware), Inc. (formerly Alamosa PCS Holdings, Inc.),
which exhibit is incorporated herein by reference.
10.14 Sprint PCS Services Agreement, dated as of December 23,
1999, by and between Sprint Spectrum, LP and Alamosa
PCS, LLC, filed as Exhibit 10.23 to Amendment No. 2 to
the Registration Statement on Form S-1, dated January
19, 2000 (Registration No. 333-89995) of Alamosa
(Delaware), Inc. (formerly Alamosa PCS Holdings, Inc.),
which exhibit is incorporated herein by reference.
II-22
EXHIBIT
NUMBER: EXHIBIT TITLE
10.15 Sprint Trademark and Service Mark License Agreement,
dated as of December 23, 1999 by and between Sprint
Communications Company, LP and Alamosa PCS, LLC, filed
as Exhibit 10.24 to Amendment No. 2 to the Registration
Statement on Form S-1, dated January 19, 2000
(Registration No. 333-89995) of Alamosa (Delaware),
Inc. (formerly Alamosa PCS Holdings, Inc.), which
exhibit is incorporated herein by reference.
10.16 Sprint Spectrum Trademark and Service Mark Agreement,
dated as of December 23, 1999, by and between Sprint
Spectrum, LP and Alamosa PCS, LLC, filed as Exhibit
10.25 to Amendment No. 2 to the Registration Statement
on Form S-1, dated January 19, 2000 (Registration No.
333-89995) of Alamosa (Delaware), Inc. (formerly
Alamosa PCS Holdings, Inc.), which exhibit is
incorporated herein by reference.
10.17 Amendment No. 4 to DMS-MTX Cellular Supply Agreement by
and between Alamosa PCS, LLC and Nortel Networks Inc.
as an amendment to Exhibits 10.1, 10.2, 10.3 and 10.4
described above, effective as of February 8, 2000,
filed as Exhibit 10.20 to Form 10-K of Alamosa
(Delaware), Inc. (formerly Alamosa PCS Holdings, Inc.),
for the year ended December 31, 1999, dated March 23,
2000 which exhibit is incorporated herein by reference.
10.18+ Amended and Restated Employment Agreement effective as
of October 1, 1999 by and between Alamosa PCS, LLC and
Jerry Brantley, filed as Exhibit 10.29 to Amendment No.
2 to the Registration Statement on Form S-1, dated
January 19, 2000 (Registration No. 333-89995) of
Alamosa (Delaware), Inc. (formerly Alamosa PCS
Holdings, Inc.), which exhibit is incorporated herein
by reference.
10.19+ Amended and Restated Employment Agreement, effective as
of October 1, 1999, by and between Alamosa PCS, LLC and
W. Don Stull, filed as Exhibit 10.21 to the
Registration Statement on Form S-4, dated October 12,
2000 (Registration No. 333-47916) of Alamosa Holdings,
Inc., which exhibit is incorporated herein by
reference.
10.20 Amended and Restated Master Design Build Agreement,
dated as of March 21, 2000, by and between Texas
Telecommunications, L.P. and Alamosa Wisconsin Limited
Partnership and SBA Towers, Inc., filed as Exhibit
10.23 to Form 10-K of Alamosa (Delaware), Inc.
(formerly Alamosa PCS Holdings, Inc.), for the year
ended December 31, 1999, dated March 23, 2000 which
exhibit is incorporated herein by reference.
10.21+ Employment Agreement effective as of June 1, 2000, by
and between Alamosa, Texas Telecommunications, LP and
Loyd Rinehart, filed as Exhibit 10.25 to the
Registration Statement on Form S-4, dated October 12,
2001 (Registration No. 333-47916) of Alamosa Holdings,
Inc., which exhibit is incorporated herein by
reference.
II-23
EXHIBIT
NUMBER: EXHIBIT TITLE
10.22 Security Agreement, dated as of January 31, 2001, by
and among Alamosa (Delaware), Inc., Wells Fargo Bank
Minnesota, N.A., as security agent, Wells Fargo Bank
Minnesota, N.A., as collateral agent, Wells Fargo Bank
Minnesota, N.A., as trustee under the 2001 Indenture
(as to paragraph 6(b) and Wells Fargo Bank Minnesota,
N.A., as trustee under the 2000 Indenture (as to
paragraph 6(b)), filed as Exhibit 10.22 to Form 10-K of
Alamosa Holdings, Inc. for the year ended December 31,
2000, dated March 27, 2001, which exhibit is
incorporated herein by reference.
10.23++ Amended and Restated Credit Agreement, dated as of
March 30, 2001, by and among Alamosa Holdings, LLC,
Alamosa Holdings, Inc., Alamosa (Delaware), Inc., the
lenders party thereto, Citicorp USA, Inc., as
administrative and collateral agent, Export
Development Corporation, as co-documentation agent,
First Union National Bank, as documentation agent,
Toronto Dominion (Texas), Inc. as syndication agent,
Export Development Corporation and First Union
Securities, Inc., as lead arrangers and Salomon Smith
Barney Inc. and TD Securities (USA) Inc. as joint lead
arrangers and joint book managers, for a $333,000,000
credit facility, as amended by the First Amendment and
Waiver dated May 8, 2001 (attached thereto).
10.24++ Amended and Restated Security Agreement, dated as of
March 30, 2001, by and among Alamosa (Delaware), Inc.,
Alamosa Holdings, LLC, each subsidiary of Alamosa
(Delaware), Inc. listed on Schedule I thereto, and
Citicorp USA, Inc., as collateral agent.
10.25++ Amended and Restated Pledge Agreement, dated as of
March 30, 2001, among Alamosa (Delaware), Inc., Alamosa
Holdings, LLC, each Subsidiary of Alamosa (Delaware),
Inc. listed on Schedule I thereto and Citicorp USA,
Inc., as collateral agent.
10.26++ Amended and Restated Consent and Agreement, dated as of
March 30, 2001, by and among Sprint Spectrum L.P.,
SprintCom, Inc., Sprint Communications Company, L.P.,
Cox Communications PCS, L.P., Cox PCS License, LLC,
WirelessCo, L.P., and Citicorp USA, Inc., as
administrative agent.
10.27 Addendum II to Sprint PCS Management Agreement
(Wisconsin), dated as of February 8, 2000, by and
between Sprint Spectrum L.P., WirelessCo, L.P., Sprint
Communications Company, L.P., and Alamosa Wisconsin
Limited Partnership as an amendment to Exhibit 10.5
above, filed as Exhibit 10.27 to Form 10-K of Alamosa
Holdings, Inc. for the year ended December 31, 2000,
dated March 27, 2001, which exhibit is incorporated
herein by reference.
II-24
EXHIBIT
NUMBER: EXHIBIT TITLE
10.28 Addendum III to Sprint PCS Management Agreement
(Wisconsin), dated as of April 25, 2000, by and between
Sprint Spectrum L.P., WirelessCo, L.P., Sprint
Communications Company, L.P., and Alamosa Wisconsin
Limited Partnership as an amendment to Exhibit 10.5
above, filed as Exhibit 10.28 to Form 10-K of Alamosa
Holdings, Inc. for the year ended December 31, 2000,
dated March 27, 2001, which exhibit is incorporated
herein by reference.
10.29 Addendum IV to Sprint PCS Management Agreement
(Wisconsin), dated as of June 23, 2000, by and between
Sprint Spectrum L.P., WirelessCo, L.P., Sprint
Communications Company, L.P., and Alamosa Wisconsin
Limited Partnership as an amendment to Exhibit 10.5
above, filed as Exhibit 10.29 to Form 10-K of Alamosa
Holdings, Inc. for the year ended December 31, 2000,
dated March 27, 2001, which exhibit is incorporated
herein by reference.
10.30 Addendum V to Sprint PCS Management Agreement
(Wisconsin), dated as of February 14, 2001, by and
between Sprint Spectrum L.P., WirelessCo, L.P., Sprint
Communications Company, L.P., and Alamosa Wisconsin
Limited Partnership as an amendment to Exhibit 10.5
above, filed as Exhibit 10.30 to Form 10-K of Alamosa
Holdings, Inc. for the year ended December 31, 2000,
dated March 27, 2001, which exhibit is incorporated
herein by reference.
10.31 Addendum II to Sprint PCS Management Agreement, dated
as of February 8, 2000, by and between Sprint Spectrum
L.P., WirelessCo, L.P., Sprint Communications Company,
L.P., and Texas Telecommunications, LP as an amendment
to Exhibit 10.13 above, filed as Exhibit 10.31 to Form
10-K of Alamosa Holdings, Inc. for the year ended
December 31, 2000, dated March 27, 2001, which exhibit
is incorporated herein by reference.
10.32 Addendum III to Sprint PCS Management Agreement, dated
as of April 25, 2000, by and between Sprint Spectrum
L.P., WirelessCo, L.P., Sprint Communications Company,
L.P., and Texas Telecommunications, LP as an amendment
to Exhibit 10.13 above, filed as Exhibit 10.32 to Form
10-K of Alamosa Holdings, Inc. for the year ended
December 31, 2000, dated March 27, 2001, which exhibit
is incorporated herein by reference.
10.33 Addendum IV to Sprint PCS Management Agreement, dated
as of June 23, 20001, by and between Sprint Spectrum
L.P., WirelessCo, L.P., Sprint Communications Company,
L.P., and Texas Telecommunications, LP as an amendment
to Exhibit 10.13 above, filed as Exhibit 10.33 to Form
10-K of Alamosa Holdings, Inc. for the year ended
December 31, 2000, dated March 27, 2001, which exhibit
is incorporated herein by reference.
II-25
EXHIBIT
NUMBER: EXHIBIT TITLE
10.34 Addendum V to Sprint PCS Management Agreement, dated as
of January 8, 2001, by and between Sprint Spectrum
L.P., WirelessCo, L.P., Sprint Communications Company,
L.P., and Texas Telecommunications, LP as an amendment
to Exhibit 10.13 above, filed as Exhibit 10.34 to Form
10-K of Alamosa Holdings, Inc. for the year ended
December 31, 2000, dated March 27, 2001, which exhibit
is incorporated herein by reference.
10.35 Addendum VI to Sprint PCS Management Agreement, dated
as of February 14, 2001, by and between Sprint Spectrum
L.P., WirelessCo, L.P., Sprint Communications Company,
L.P., and Texas Telecommunications, LP as an amendment
to Exhibit 10.13 above, filed as Exhibit 10.35 to Form
10-K of Alamosa Holdings, Inc. for the year ended
December 31, 2000, dated March 27, 2001, which exhibit
is incorporated herein by reference.
10.36 Sprint PCS Management Agreement, dated as of June 8,
1998, as amended by Addendum I - VIII, between Sprint
Spectrum L.P., SprintCom, Inc. and Roberts Wireless
Communications, L.L.C, filed as Exhibit 10.36 to Form
10-K of Alamosa Holdings, Inc. for the year ended
December 31, 2000, dated March 27, 2001, which exhibit
is incorporated herein by reference.
10.37 Sprint PCS Services Agreement, dated as of June 8,
1998, between Sprint Spectrum L.P. and Roberts Wireless
Communications, L.L.C., filed as Exhibit 10.37 to Form
10-K of Alamosa Holdings, Inc. for the year ended
December 31, 2000, dated March 27, 2001, which exhibit
is incorporated herein by reference.
10.38 Sprint Trademark and Service Mark License Agreement,
dated as of June 8, 1998, between Sprint Communications
Company, L.P. and Roberts Wireless Communications,
L.L.C., filed as Exhibit 10.38 to Form 10-K of Alamosa
Holdings, Inc. for the year ended December 31, 2000,
dated March 27, 2001, which exhibit is incorporated
herein by reference.
10.39 Sprint Spectrum Trademark and Service Mark License
Agreement, dated as of December 8, 1998, between Sprint
Spectrum L.P. and Roberts Wireless Communications,
L.L.C., filed as Exhibit 10.39 to Form 10-K of Alamosa
Holdings, Inc. for the year ended December 31, 2000,
dated March 27, 2001, which exhibit is incorporated
herein by reference.
10.40 Sprint PCS Management Agreement, dated as of January
25, 1999, as amended by Addendum I - III, between
Sprint Spectrum L.P., WirelessCo, L.P. and Washington
Oregon Wireless, LLC, filed as Exhibit 10.40 to Form
10-K of Alamosa Holdings, Inc. for the year ended
December 31, 2000, dated March 27, 2001, which exhibit
is incorporated herein by reference.
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EXHIBIT
NUMBER: EXHIBIT TITLE
10.41 Sprint PCS Services Agreement, dated as of January 25,
1999, between Sprint Spectrum L.P. and Washington
Oregon Wireless, LLC, filed as Exhibit 10.41 to Form
10-K of Alamosa Holdings, Inc. for the year ended
December 31, 2000, dated March 27, 2001, which exhibit
is incorporated herein by reference.
10.42 Sprint Trademark and Service Mark License Agreement,
dated as of January 25, 1999, between Sprint
Communications Company, L.P. and Washington Oregon
Wireless, LLC, filed as Exhibit 10.42 to Form 10-K of
Alamosa Holdings, Inc. for the year ended December 31,
2000, dated March 27, 2001, which exhibit is
incorporated herein by reference.
10.43 Sprint Spectrum Trademark and Service Mark License
Agreement, dated as of January 25, 1999, between Sprint
Spectrum L.P. and Washington Oregon Wireless, LLC,
filed as Exhibit 10.43 to Form 10-K of Alamosa
Holdings, Inc. for the year ended December 31, 2000,
dated March 27, 2001, which exhibit is incorporated
herein by reference.
10.44+ Employment Agreement, effective as of July 24, 2000, by
and between Alamosa PCS Holdings, Inc. and Anthony
Sabatino, filed as Exhibit 10.44 to Form 10-K of
Alamosa Holdings, Inc. for the year ended December 31,
2000, dated March 27, 2001, which exhibit is
incorporated herein by reference.
10.45++ Addendum VI to Sprint PCS Management Agreement
(Wisconsin), dated March 30, 2001, by and between
Sprint Spectrum L.P., WirelessCo, L.P., Sprint
Communications Company, L.P. and Alamosa Wisconsin
Limited Partnership, as an amendment to Exhibit 10.5
above.
10.46++ Addendum VII to Sprint PCS Management Agreement, dated
as of March 30, 2001, by and between Sprint Spectrum
L.P., WirelessCo, L.P., Sprint Communications Company,
L.P. and Texas Telecommunications, LP, as an amendment
to Exhibit 10.13 above.
10.47++ Addendum IX to Sprint PCS Management Agreement, dated
as of March 30, 2001, by and between Sprint Spectrum
L.P., WirelessCo, L.P., Sprint Communications Company,
L.P. and Roberts Wireless Communications, as an
amendment to Exhibit 10.36 above.
10.48++ Addendum IV to Sprint PCS Management Agreement, dated
as of March 30, 2001, by and between Sprint Spectrum
L.P., WirelessCo, L.P., Sprint Communications Company,
L.P. and Washington Oregon Wireless, LLC, as an
amendment to Exhibit 10.40 above.
10.49++ Sprint PCS Management Agreement, dated March 30, 2001,
as amended by Addendum IV, by and between Sprint
Spectrum, L.P., SprintCom, Inc. and Southwest PCS, L.P.
10.50++ Sprint PCS Services Agreement, dated July 10, 1998,
between Sprint Spectrum L.P. and Southwest PCS, L.P.
II-27
EXHIBIT
NUMBER: EXHIBIT TITLE
10.51++ Sprint Trademark and Service Mark License Agreement,
dated July 10, 1998, between Sprint Communications
Company, L.P. and Southwest PCS, L.P.
10.52++ Sprint Spectrum Trademark and Service Mark License
Agreement, dated July 10, 1998, between Sprint Spectrum
L.P. and Southwest PCS, L.P.
12.1++ Statement Regarding the Computation of Ratio of
Earnings to Fixed Charges.
21.1++ List of Subsidiaries.
23.1++ Consent of PricewaterhouseCoopers.
23.2++ Consent of Aldrich, Kilbride & Tatone, LLP.
23.3++ Consent of Melman, Alton & Co.
23.4+++ Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1 above).
23.5++ Consent of PricewaterhouseCoopers.
24.1++ Powers of Attorney (included as part of signature pages
to this registration statement).
25.1++ Statement of Eligibility and Qualification on Form T-1
of Wells Fargo Bank Minnesota, N.A., as Trustee, under
the Indenture filed as Exhibit 4.4 hereto.
99.1++ Form of Letter of Transmittal.
99.2++ Form of Notice of Guaranteed Delivery.
99.3++ Form of Letter to Brokers.
99.4++ Form of Letter to Clients.
+ Exhibit is a management contract or compensatory plan.
++ Filed with this prospectus.
+++ To be filed by amendment.