As filed with the Securities and Exchange Commission on September 13, 2001
Registration Number 333-68538
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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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)
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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
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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. [ ]
------------------------
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.
PROSPECTUS
SUBJECT TO COMPLETION, DATED SEPTEMBER 13, 2001
ALAMOSA (DELAWARE), INC.
EXCHANGE OFFER FOR
13 5/8% SENIOR NOTES DUE 2011
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We are offering to exchange an aggregate principal amount of up to
$150,000,000 of our new 13 5/8% senior notes due 2011, which have been
registered under the Securities Act of 1933, as amended, for a like amount of
our outstanding 13 5/8% senior notes due 2011.
---------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON [ ], 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 129 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 11 FOR A
DISCUSSION OF THE RISKS THAT YOU SHOULD CONSIDER PRIOR TO TENDERING YOUR
OUTSTANDING NOTES FOR EXCHANGE.
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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.
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:
i
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;
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.
ii
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. References in this prospectus to the "notes" refer to
the 13 5/8% senior notes, unless otherwise indicated. References in this
prospectus to "registered notes" refers to the registered 13 5/8% senior notes
due 2011 being offered in the exchange offer. References in this prospectus to
"outstanding notes" refers to our currently outstanding 13 5/8% senior notes due
2011 that are exchangeable for the registered notes.
THE COMPANY
OVERVIEW
We are the largest network partner in terms of subscribers, revenues and
market population of Sprint PCS, the personal communications services group of
Sprint Corporation. We have the exclusive right to provide wireless mobility
communications network services under the Sprint and Sprint PCS brand names in
a territory encompassing over 15.6 million residents primarily located in
Texas, New Mexico, Arizona, Colorado, Wisconsin, Illinois, Oklahoma, Kansas,
Missouri, Washington and Oregon. For the six months ended June 30, 2001, we
generated approximately $129.4 million in revenue and ended the period with
approximately 316,000 subscribers.
We launched Sprint PCS services in Laredo Texas in June 1999, and through
June 30, 2001, have commenced service in 62 additional markets, including
markets in territories serviced by companies that we acquired in 2001. At June
30, 2001, our systems covered approximately 10 million residents out of
approximately 15.6 million total residents in those markets. We anticipate that
we will complete the network build-out requirements required by Sprint PCS by
the end of 2001. At such time, our network will cover approximately 11 million
residents in 87 markets. The number of residents covered by our system does not
represent the number of Sprint PCS subscribers that we expect to be based in
our territories.
Over the past year we have grown our business significantly. During the
first quarter of 2001, we completed our acquisitions of three Sprint PCS
affiliates. We acquired Roberts Wireless Communications, L.L.C. ("Roberts") and
Washington Oregon Wireless, LLC ("WOW") on February 14, 2001. We acquired
Southwest PCS Holdings, Inc. ("Southwest") on March 30, 2001. The acquisitions
added territories with a total of approximately 6.8 million residents and added
approximately 90,000 subscribers. Since the second quarter of 2000, we have
increased subscribers and revenues an average of 49% and 49%, respectively, per
quarter.
RECENT DEVELOPMENTS
SECOND QUARTER 2001 OPERATING RESULTS. Total revenues for the second
quarter of 2001 were $83.5 million, an increase of $66.0 million over the
second quarter of 2000. Our average monthly revenue per user ("ARPU") was $91
including roaming and long distance and approximately $62 without roaming for
the second quarter of 2001, compared to approximately $85 including roaming and
long distance and approximately $65 without roaming for the second quarter of
2000. We added over 54,000 new subscribers in the second quarter of 2001,
representing a 204% increase from 17,995 net subscriber additions in the second
quarter of 2000. Our churn rate (excluding 30 day returns) for the second
quarter of 2001 was 2.4% compared to 3.0% for the second quarter of 2000. We
had approximately 245,000 more subscribers at June 30, 2001 than at June 30,
2000, an increase of over 354%.
NEW RATE AGREEMENT. On April 27, 2001, we announced that Sprint PCS had
reached an agreement in principle with its network partners, including us and
our subsidiaries, providing for a reduction in the
1
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 was 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, which we expect to be approximately 10 cents per
minute.
DEBT COVENANT WAIVER. In connection with the Roberts and WOW acquisitions,
we entered into a new senior secured credit facility the ("senior secured
credit facility") for up to $280 million, which was later increased to $333
million, in connection with the Southwest acquisition. As of March 31, 2001, we
did not meet the maximum negative EBITDA covenant under the senior secured
credit facility, which had an outstanding balance of $203 million. 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 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 quarter ended March 31, 2001 from
the lenders under the senior secured credit facility. We met the negative
EBITDA covenant in the senior secured credit facility for the quarter ended
June 30, 2001.
AMENDMENT TO THE SENIOR SECURED CREDIT FACILITY. Concurrently with the
issuance of the outstanding notes, we paid down the senior secured credit
facility by approximately $65.8 million, and reduced the amount of the senior
secured credit facility to $225 million.
ADDITIONAL INFORMATION
Our principal executive office is located at 5225 S. Loop 289, Lubbock,
Texas 79424. Our telephone number is (806) 722-1100.
2
THE EXCHANGE OFFER
On August 15, 2001, we issued and sold $150 million aggregate principal
amount of 13 5/8% 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 the outstanding 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.
Securities Offered.......... Up to $150 million in principal amount of new
13 5/8% 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 the expiration
of the exchange offer. 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.
3
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.
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".
4
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.......... $150.0 million aggregate principal amount of
13 5/8% senior notes due 2011.
Issuer...................... Alamosa (Delaware), Inc.
Maturity Date............... August 15, 2001.
Interest.................... 13 5/8% per annum, payable semi-annually on
February 15 and August 15, beginning on February
15, 2002.
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
our 12 1/2% senior notes due 2011; 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;"
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.
5
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 the full amount of
the borrowings under that facility. 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 $39.2 million from the proceeds of
such offering (either in cash or U.S. government
securities) to secure on a pro rata basis our
payment obligations under the notes, the 12 7/8%
senior discount notes and the 12 1/2% senior
notes. The amount that was deposited in the
security account created in connection with the
offering of the outstanding notes (the "August
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
August security account to make interest payments
on the notes, the 12 7/8% senior discount notes
and the 12 1/2% senior notes as they become due,
so long as there does not exist an event of
default with respect to the notes, the 12 7/8%
senior discount notes or the 12 1/2% senior
notes; provided, however, that payments of
interest when due on the 12 1/2% senior notes
shall be made first out of the security account
created in connection with the 12 1/2% senior
notes (the "January security account"), and then
out of the August security account to the extent
there is a shortfall in the January security
account. An interest payment on the 12 1/2%
senior notes will become due on August 1, 2003,
when there will be funds remaining in the August
security account but no funds remaining in the
January security account. At that time, the funds
remaining in the August security account will be
available to make the interest payment due on the
12 1/2% senior notes. However, it is the
Company's present intention to make the August 1,
2003 interest payment on the 12 1/2% senior notes
out of available cash flow and to make the fourth
interest payment on the notes out of the
remaining funds in the August security account.
See "Description of Notes -- Security Agreement."
Optional Redemption......... During the first 36 months of this offering, 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 113.625% of the principal amount as of
the date of redemption, provided that at least
65% of the principal amount of the notes
originally issued remains outstanding immediately
after the redemption.
See "Description of Notes--Optional Redemption."
6
On or after August 15, 2006, we may redeem all
or part of the 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 notes contains
covenants that, among other things and subject to
important exceptions, 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 11 for a discussion of factors that
should be considered by holders of the outstanding notes in the exchange offer.
7
ALAMOSA (DELAWARE), INC.
SELECTED HISTORICAL FINANCIAL INFORMATION
The selected historical financial data presented below under the captions
"Selected Operating Data" and "Selected Balance Sheet Data" as of December 31,
2000, 1999 and 1998 and for each of the years ended December 31, 2000 and 1999
and for the period ended December 31, 1998 have been derived from the audited
consolidated financial statements of Alamosa (Delaware).
The selected historical financial data presented under the captions
"Selected Operating Data" and "Selected Balance Sheet Data" as of June 30, 2001
and 2000 and for the six months ended June 30, 2001 and 2000 are derived from
the unaudited consolidated financial statements of Alamosa (Delaware). The
unaudited financial statements of Alamosa (Delaware) include all adjustments,
consisting only of normal accruals, that management considers necessary for a
fair presentation of financial position and results of operations for the
unaudited interim periods. Operating results for the six month period ended
June 30, 2001 are not necessarily indicative of the results that may be
expected for the entire year ending December 31, 2001.
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 six month period ended June 30, 2001 and June 30, 2000, and for the
periods ended December 31, 2000, 1999, and 1998 and the related notes.
FOR THE PERIOD
JULY 16, 1998
(INCEPTION) FOR THE YEAR ENDED FOR THE SIX MONTHS
THROUGH DECEMBER 31, ENDED JUNE 30,
DECEMBER 31, ------------------------------- -------------------------------
1998 1999 2000 2000 2001
--------------- -------------- -------------- -------------- --------------
(DOLLARS IN THOUSANDS)
SELECTED OPERATING DATA:
Revenues:
Service revenues ................... $ -- $ 6,534 $ 73,500 $ 25,661 $ 119,422
Product sales ...................... -- 2,450 9,200 3,772 9,947
--------- ---------- ---------- ---------- ----------
Total revenue .................... -- 8,984 82,700 29,433 129,369
--------- ---------- ---------- ---------- ----------
Costs and expenses .................. 959 39,656 151,597 53,291 192,465
Interest and other income/
(expense) .......................... 35 (2,164) (11,291) (4,630) (26,475)
--------- ---------- ---------- ---------- ----------
Net loss before extraordinary
item ............................... (924) (32,836) (80,188) (28,488) (89,571)
--------- ---------- ---------- ---------- ----------
Income tax benefit .................. -- -- -- -- 31,306
Loss on debt extinguishment ......... -- -- -- -- (3,503)
Net loss ............................ $ (924) $ (32,836) $ (80,188) $ (28,488) $ (61,768)
========= ========== ========== ========== ==========
Deficiency of earnings before
fixed charges (1) .................. (924) (33,493) (80,188) (28,488) (90,552)
Pro forma deficiency of earnings
before fixed charges (7) ........... (95,357) (98,137)
8
AS OF DECEMBER 31, AS OF JUNE 30,
--------------------------------------------------- -----------------------------------
1998 1999 2000 2000 2001
-------------- --------------- ---------------- ---------------- ----------------
SELECTED BALANCE SHEET DATA:
Cash and cash equivalents ...... $ 13,529 $ 5,656 $ 141,768 $ 241,038 $ 122,092
Short-term investments ......... -- -- 1,600 21,841 --
Property and equipment, net..... 2,093 84,714 228,983 142,220 410,432
Restricted cash ................ -- 518 -- -- 70,727
Goodwill and intangible
assets, net ................... -- -- -- -- 856,141
Total assets ................... 15,674 104,492 458,398 428,691 1,542,688
Accounts payable and
accrued expenses .............. 846 16,335 61,386 43,975 93,451
Long-term debt ................. 708(2) 72,703(3) 264,843(4) 201,914(5) 677,313(6)
Total liabilities .............. 1,598 93,052 327,000 246,439 927,236
Total stockholder's equity ..... 14,076 11,440 131,398 182,252 615,452
Total liabilities and
stockholder's equity .......... 15,674 104,492 458,398 428,691 1,542,688
- ----------
(1) For purposes of computing the deficiency of earnings before fixed
charges, fixed charges consist of interest expense, capitalized interest,
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.
(2) Reflects capital lease obligations of $708.
(3) Reflects indebtedness incurred under the credit facility (the "EDC credit
facility") entered into with Export Development Corprpation (which was
refinanced with the senior secured credit facility) of $71,876 and
capital lease obligations of $827.
(4) Reflects indebtedness incurred under the 12 7/8% senior discount notes of
$209,280, EDC credit facility of $54,524, and capital lease obligations
of $1,039.
(5) Reflects indebtedness incurred under the 12 7/8% senior discount notes of
$196,575, EDC credit facility of $4,524 and capital lease obligations of
$815.
(6) Reflects indebtedness incurred under the 12 7/8% senior discount notes of
$222,807, 12 1/2% senior notes of $250,000, senior secured credit
facility of $203,000 and capital lease obligations of $1,506.
(7) For purposes of computing the pro forma deficiency of earnings before
fixed charges, in addition to the items listed in note (1), above, we
have applied the proceeds of the debt and associated interest expense, as
if the offering of the outstanding notes had occurred on January 1, 2000.
9
CAPITALIZATION
The following table show our cash and cash equivalents, restricted cash,
short-term debt, long-term debt, stockholders' equity and capitalization:
o On a historical basis as of June 30, 2001; and
o On an adjusted basis reflecting (1) the issuance of the 13 5/8% senior
notes in the amount of $150.0 million less original issue discount and
offering-related expenses of approximately $9.5 million, (2) the pay down
of the senior secured credit facility of approximately $65.8 million, and
(3) the use of approximately $39.2 million of the net proceeds to
establish a security account to secure on a pro rata basis our payment
obligations under the notes, the 12 7/8% senior discount notes and the
12 1/2% senior notes.
AS OF JUNE 30, 2001
-------------------------------
ACTUAL AS ADJUSTED
-------------- --------------
(DOLLARS IN THOUSANDS,
UNAUDITED)
Cash and cash equivalents ............................. $ 122,092 $ 157,560
Short-term investments ................................ -- --
Restricted cash (1) ................................... 70,727 109,967
Short-term debt:
Current portion of capital lease obligations ......... $ 138 $ 138
Long-term debt:
Senior secured credit facility ....................... 203,000 137,162
12 7/8% senior discount notes ........................ 222,807 222,807
12 1/2% senior notes ................................. 250,000 250,000
13 5/8% senior notes ................................. -- 150,000
Capital lease obligations ............................ 1,506 1,506
---------- ----------
Total long-term debt ................................. 677,313 761,475
Stockholder's equity:
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 issued and outstanding, actual and
as adjusted .......................................... -- --
Additional paid-in capital ............................ 791,932 791,932
Unearned compensation ................................. (930) (930)
Accumulated other comprehensive income, net of tax..... 166 166
Accumulated deficit ................................... (175,716) (175,716)
---------- ----------
Total stockholder's equity ............................ 615,452 615,452
---------- ----------
Total capitalization .................................. $1,292,903 $1,377,065
========== ==========
- ----------
(1) Restricted cash includes (i) $59.0 million and $39.2 million,
respectively, placed in two separate security accounts to secure on a pro
rata basis the payment obligations under the 12 7/8% senior discount
notes, the 12 1/2% senior notes and the notes and (ii) $11.5 million as
interest collateral for the senior secured credit facility.
10
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 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 the 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.
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.
During the six months ended June 30, 2001, we experienced a significantly
higher increase in usage by our subscribers outside our network compared to the
increase in usage by other Sprint PCS subscribers on our network than we had
previously anticipated. That relative increase in outbound versus inbound usage
contributed to a larger EBITDA loss for the quarter ended June 30, 2001 than we
had previously anticipated. If this trend in the ratio of outbound to inbound
usage continues, our results of operations may be negatively affected in the
future. In addition, on April 27, 2001, Alamosa Holdings reached an agreement
with Sprint PCS providing for a reduction in the reciprocal rate exchanged
between Sprint PCS and us for each other's customers that travel into
territories covered by the other party's portion of the Sprint PCS network.
Depending on the pattern of usage by our subscribers and Sprint PCS
subscribers, the rate reductions may result in lower revenues for us, which may
negatively affect our results of operations. See "Offering Memorandum Summary
- -- The Company -- Recent Developments."
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;
11
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.
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:
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.
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
12
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 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 Federal Communications
Commission. 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 additional new businesses, we may encounter difficulties that may
be costly and time-consuming, may slow our growth or may lower the value of the
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.
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
$500.8 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, borrowings under the senior
secured credit facility and funds available from the issuance of the notes.
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. If we contract to develop additional markets, we will need
to raise additional equity or debt capital. These additional funds may not
13
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.
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. 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. The failure by any of our vendors, suppliers,
consultants, contractors or 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.
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.
14
RISKS RELATED TO OUR INDEBTEDNESS
OUR SUBSTANTIAL LEVERAGE COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH.
We are highly leveraged. As of June 30, 2001, after giving effect to the
issuance of the notes and the application of the net proceeds therefrom, our
total outstanding debt, excluding unused commitments made by lenders, would
have been approximately $761.5 million. As of that date, such total long term
indebtedness represents approximately 55% of our total capitalization.
The senior secured credit facility and the indentures governing the 12 7/8%
senior discount notes, the 12 1/2% senior notes, and the notes permit us to
incur additional indebtedness subject to certain 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 12 7/8%
senior discount notes, 12 1/2% senior 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.
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 the 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.
15
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:
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.
In addition, 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.
As of March 31, 2001, we did not meet the maximum negative EBITDA covenant
under the senior secured credit facility, which had an outstanding balance of
$203.0 million. 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. 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 quarter
ended March 31, 2001 from the lenders under the senior secured credit facility.
We met the negative EBITDA covenant for the quarter ended June 30, 2001.
We believe that the EBITDA covenants in the senior secured credit facility
will be met for the next twelve months. However, in connection with negotiating
modified financial covenants to the senior secured credit facility, we have
provided our senior lenders with various models some of which may include
losses larger than the maximum losses contemplated by our public guidance
published on August 8, 2001. Our EBITDA is directly impacted by the upfront
selling and marketing expenses we incur in order to increase our subscriber
base, so in the event we experience greater than expected subscriber growth
there is a material risk that we will not achieve our publicly forecasted
results.
The senior secured credit facility was amended simultaneously with the
closing of the offering of the outstanding notes to, among other things, permit
the offering of the outstanding notes, reduce the amount of the senior secured
credit facility to approximately $225.0 million and modify the financial
covenants.
16
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 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
17
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 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 or change other characteristics of their plans in
a way that may not be economically sufficient for our business. See
"Offering Memorandum Summary -- The Company -- Recent Developments."
o Sprint PCS could further change the per minute rate for Sprint PCS
roaming fees and increase the costs for Sprint PCS to perform back office
services. See "Offering Memorandum Summary -- The Company -- 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. On more than one occasion in the past year, we have failed to meet
the requirements of the Sprint PCS build-out schedule due to force majeure
conditions in particular territories. In the event that we have a similar
failure and Sprint PCS disagrees with us over the presence of a force majeure
condition, Sprint PCS may choose to attempt to terminate one or more of our
affiliation agreements. 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.
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
18
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 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 $11.0
million. We expect this number to significantly increase as our number of
subscribers 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.
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.
19
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 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 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.
20
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.
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 $225.0 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 circumstances, 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.
21
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 12 7/8% senior discount notes and our 12 1/2% senior 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 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;
22
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 OUR ABILITY TO SERVICE OUR OBLIGATIONS
UNDER THE NOTES MAY BE IMPAIRED.
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 our
ability to service our obligations under the notes may be impaired, if we have
a worse than expected fourth quarter for any reason, including the following:
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 have in the past experienced difficulty, and may in the future 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.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
When we sold the outstanding notes on August 15, 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 November 13, 2001;
o the registration statement is not declared effective by February 11,
2002; or
o the exchange offer has not been completed by March 13, 2002.
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.
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
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.
24
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
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.
25
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
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.
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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 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.
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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.
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
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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
(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
29
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
MAC N9303-110 MAC N9303-110 12th Floor -- Northstar East Building
PO Box 1517 Sixth & Marquette Avenue Corporate Trust Services
Minneapolis, MN 55480 Minneapolis, MN 55479 608 Second Avenue South
Minneapolis, MN
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.
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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 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);
31
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.
32
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 the largest network partner in terms of subscribers, revenues and
market population of Sprint PCS, the personal communications services group of
Sprint Corporation. We have the exclusive right to provide wireless mobility
communications network services under the Sprint and Sprint PCS brand names in
a territory encompassing over 15.6 million residents primarily located in
Texas, New Mexico, Arizona, Colorado, Wisconsin, Illinois, Oklahoma, Kansas,
Missouri, Washington and Oregon. For the six months ended June 30, 2001, we
generated approximately $129.4 million in revenue and ended the period with
approximately 316,000 subscribers.
We launched Sprint PCS services in Laredo Texas in June 1999, and through
June 30, 2001, have commenced service in 62 additional markets, including
markets in territories serviced by companies that we acquired in 2001. At June
30, 2001, our systems covered approximately 10 million residents out of
approximately 15.6 million total residents in those markets. We anticipate that
we will complete the network build-out requirements required by Sprint PCS by
the end of 2001. At such time, our network will cover approximately 11 million
residents in 87 markets. The number of residents covered by our system does not
represent the number of Sprint PCS subscribers that we expect to be based in
our territories.
Over the past year we have grown our business significantly. During the
first quarter of 2001, we completed our acquisitions of three Sprint PCS
affiliates. We acquired Roberts Wireless Communications, L.L.C. ("Roberts") and
Washington Oregon Wireless, LLC ("WOW") on February 14, 2001. We acquired
Southwest PCS Holdings, Inc. ("Southwest") on March 30, 2001. The acquisitions
added territories with a total of approximately 6.8 million residents and added
approximately 90,000 subscribers Since the second quarter of 2000, we have
increased subscribers and revenues an average of 49% and 49%, respectively, per
quarter.
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.
Alamosa (Delaware), Inc. (formerly Alamosa PCS Holdings) was formed in
October 1999 to operate as a holding company. 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.
33
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 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.
On December 14, 2000, Alamosa (Delaware) formed a new holding company
pursuant to Section 251(g) of the Delaware General Corporation Law. In that
transaction, each share of Alamosa (Delaware) was converted into one share of
the new holding company, and the former public company, which was renamed
"Alamosa (Delaware), Inc." became a wholly owned subsidiary of the new holding
company, which was renamed "Alamosa PCS Holdings, Inc."
We were formed in July 2000 to operate as a holding company. On February
14, 2001, Alamosa Sub I, Inc., our wholly owned subsidiary, merged with and
into Alamosa PCS Holdings, with Alamosa PCS Holdings surviving the merger and
becoming our wholly owned subsidiary. 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 our common stock.
On February 14, 2001, we completed our acquisition of Roberts and WOW.
Roberts' service area, which included 2.5 million people, included 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 included 1.5 million people, included 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. Southwest's
service area, which included 2.8 million people, included 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
subscribers.
In connection with the Roberts and WOW acquisitions, we entered into a new
senior secured credit facility for up to $280.0 million. In connection with the
acquisition of Southwest, we increased the amount of the senior secured credit
facility from $280.0 million to $333.0 million. The senior secured credit
facility was reduced to $225.0 million concurrently with the issuance of the
outstanding notes.
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.
34
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."
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
We believe part of our success is attributable to the strategic
attractiveness of our markets. We believe our markets are attractive for
several reasons:
o PROXIMITY TO MAJOR SPRINT PCS MARKETS. Our markets are located near or
around several major Sprint PCS markets, including Dallas, San Antonio,
Kansas City, St. Louis, Phoenix, Seattle, Portland, Milwaukee,
Minneapolis, Tulsa and Wichita.
o FEWER COMPETITORS. We believe we face a smaller number of competitors in
our markets than the typical Sprint PCS market and fewer competitors than
is generally the case for service providers operating in more urban
areas.
o MEXICO / U.S. BORDER. Our territories include more than 75% of the
Mexico / U.S. border area.
o HIGH POPULATION GROWTH MARKETS. The overall population growth rate in
our territories has been approximately 37% above the national average for
the past ten years.
35
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 as of June 30,
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.
ESTIMATED ESTIMATED
BTA MHZ OF TOTAL COVERED DATE
LOCATION NO. (1) SPECTRUM RESIDENTS (2) RESIDENTS (3) 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 * *
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
36
ESTIMATED ESTIMATED
BTA MHZ OF TOTAL COVERED DATE
LOCATION NO. (1) SPECTRUM RESIDENTS (2) RESIDENTS (3) LAUNCHED
- --------------------------------------- --------- ---------- --------------- --------------- ---------
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 * *
Roswell ............................... 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
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 * *
37
ESTIMATED ESTIMATED
BTA MHZ OF TOTAL COVERED DATE
LOCATION NO. (1) SPECTRUM RESIDENTS (2) RESIDENTS (3) LAUNCHED
- ---------------------------------- --------- ---------- --------------- --------------- ---------
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
- ----------
* These markets have not yet been launched.
(1) BTA No. refers to the basic trading area number assigned to that market
by 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 June 30, 2001,
we had approximately 316,000 Sprint PCS subscribers.
NETWORK OPERATIONS
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
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 June 30, 2001, our portion of the Sprint PCS network included 1,283
base stations and 10 switching centers.
38
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 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.
39
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 June 30, 2001, we owned and operated 57
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 agreement with
RadioShack to build a "store within a store," making Sprint PCS one of two
brands of wireless mobility communications network services using CDMA
technology in the 1900 MHz spectrum and products sold through RadioShack
stores. As of June 30, 2001, RadioShack had approximately 265 stores in our
territories.
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 June 30, 2001, these retailers had approximately 368 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 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:
40
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 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
41
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, 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.
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.
42
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.
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 June 30, 2001, we employed 846 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 June 30, 2001 we leased 57 retail stores and 10
switching centers. As of June 30, 2001 we leased 1,283 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
43
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. As of June 30, 2001, our accumulated deficit was $175.7 million.
Through June 30, 2001, we incurred $443.8 million of capital expenditures and
construction in progress including capital expenditures related to the
build-out of our portion of the Sprint PCS network, including costs connected
to the acquisition of Roberts, WOW and Southwest. 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 June 30, 2001 it included approximately
10.0 million covered residents, including the acquisitions of Roberts, WOW and
Southwest.
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 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.
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 and 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. In
connection with the
45
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.
On February 14, 2001, as part of the reorganization transaction in which
we acquired Roberts and WOW, Alamosa PCS Holdings merged with a wholly owned
subsidiary of Alamosa Holdings and became a wholly owned subsidiary of Alamosa
Holdings, with Alamosa Holdings becoming the new public holding company,
Alamosa PCS 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 our common stock.
We launched Sprint PCS service in our first market, Laredo, Texas, in June
1999, and have since commenced service in 62 additional markets including
acquisitions, through June 30, 2001. At June 30, 2001 our systems, including
acquisitions, covered approximately 10.0 million residents out of approximately
15.6 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 June 30, 2001, approximately
316,000 Sprint PCS subscribers were based in our territories.
RESULTS OF OPERATION
FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO THE QUARTER AND
SIX MONTHS ENDED JUNE 30, 2000
NET LOSS. Our net loss for the quarter ended June 30, 2001 was $34.3
million as compared to a net loss of $12.9 million for the quarter ended June
30, 2000. Net loss for the six months ended June 30, 2001 was $61.8 million
compared to a net loss of $28.5 million for the six months ended June 30, 2000.
These losses were the result of the continued incurrence of start-up expenses
relative to the preparation of markets for commercial launch and the operation
of markets in service.
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 under a variety of service plans. These plans generally
reflect the terms of national plans offered by Sprint PCS. 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. This reciprocal rate was 20 cents per minute
for travel from inception through May 31, 2001. Pursuant to our affiliation
agreements with Sprint PCS, Sprint PCS can change this per minute rate. Sprint
and the Company recently agreed to change the reciprocal roaming rate to 15
cents effective June 1, 2001, 12 cents effective October 1, 2001, and 10 cents
effective January 1, 2002 and thereafter. The long distance rate of 6 cents per
minute remains unchanged. Service revenues were $77.5 million for the quarter
ended June 30, 2001 compared to $15.4 million for the quarter ended June 30,
2000 Service revenues were $119.4 million for the six months ended June 30,
2001, and $25.7 million for the six months ended June 30, 2000. These increases
are due to the growth in our subscribers and the approximately 90,000
subscribers acquired in the first quarter of 2001, resulting from the closing
of the merger with WOW, Roberts and Southwest.
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.
For the quarter ended June 30, 2001 our average monthly revenue per user
("ARPU") including roaming and long distance revenue was approximately $91
compared to approximately $85 for the same quarter of 2000. For the six months
ended June 30, 2001, ARPU for Sprint PCS customers in our territories,
including long distance and roaming revenue, was approximately $88 and was
approximately $85 for the six months ended June 30, 2000. For the quarter ended
June 30, 2001, ARPU without roaming
46
was approximately $62 compared to $65 for the quarter ended June 30, 2000.
Without roaming, our ARPU was approximately $61 and $64 for the six months
ended June 30, 2001 and 2000, respectively.
PRODUCT SALES. 100% of the revenue from the sale of handsets and
accessories through our retail stores and to our local indirect distributors
are recorded, net of an allowance for returns, as product sales. Product sales
for the quarter ended June 30, 2001 totaled $6.0 million compared to $2.2
million for the same quarter of 2000. The amount recorded for the six months
ended June 30, 2001 totaled $9.9 million as compared to $3.8 million for the
six months ended June 30, 2000. The increase in product sales, for both the
quarter and the year can be attributed to the opening of retail stores and the
addition of local indirect distributors in markets launched in the last half of
2000 and the acquisitions of WOW, Roberts and Southwest in the first quarter of
2001. Our handset return policy allows customers to return their handsets for a
full refund within 14 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. These expenses include the cost of
operations for our network, (such as fees related to data transfer via T-1 and
other transport lines and inter-connection fees), Sprint PCS and, non-Sprint
PCS roaming fees, long distance, the affiliation fee paid to Sprint PCS of 8%
of collected service revenues and customer care, billing and service fees paid
to Sprint PCS. Cost of service and operations totaled $53.9 million and $11.2
million for the quarters ended June 30, 2001 and 2000, respectively. Cost of
service and operations totaled $86.2 million for the six months ended June 30,
2001 and $19.1 million for the six months ended June 30, 2000, related to
providing wireless services to customers and are included in cost of services
and operations. The increase is primarily attributable to the increase in
subscribers in 2001 as compared to 2000. Also included is non-cash compensation
expense related to the Company's stock option plans of $159 for the quarter
ended June 30, 2000. No non-cash compensation expense was recognized in the
2001 for service and operations. 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. Sprint and the Company recently agreed to
change the reciprocal roaming rate which has been 20 cents to 15 cents
effective June 1, 2001, 12 cents effective October 1, 2001, and 10 cents
effective January 1, 2002 and thereafter. 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 products sold through our retail stores
and to our local indirect retailers totaled $10.5 million for the quarter ended
June 30, 2001 as compared to $3.7 million for the quarter ended June 30, 2000.
Cost of products sold was $18.6 million and $7.0 million for the six months
ended June 30, 2001 and 2000, respectively. The increase was due to growth in
our subscribers between June 30, 2000 and June 30, 2001. 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. The handset subsidy included in cost of products sold
through our retail stores totaled $4.8 million for the quarter ended June 30,
2001 and $1.6 million for the quarter ended June 30, 2000. For the six months
ended June 30, 2001, handset subsidy through our retail stores was $9.1 million
compared to $3.3 million for the same period of 2000.
SELLING AND MARKETING. Selling and marketing expenses totaled $24.8
million for the quarter ended June 30, 2001 and $8.1 million for the quarter
ended June 30, 2000. Selling and marketing expenses were $43.3 million and
$14.7 million for the six months ended June 30, 2001 and 2000, respectively.
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. The amount of handset
subsidy from channels other than our retails stores and sales to local
indirects included in selling and marketing totaled $2.7 million and $1.1
million for the quarters ended June 30, 2001 and 2000, respectively. For the
six months ended June 30, 2001 the amount of handset subsidy from channels
other than our retail stores and sales to local indirects included in selling
and marketing totaled $4.4 million as compared to $2.3 million for the six
months ended June 30, 2000.
47
GENERAL AND ADMINISTRATIVE EXPENSES. For the quarters ended June 30, 2001
and 2000, general and administrative expenses totaled $3.4 million and $2.8
million, respectively. For the six months ended June 30, 2001, these expenses
totaled $7.3 million compared to $7.7 million for the six months ended June 30,
2000. General and administrative expenses include corporate costs and expenses
such as administration, human resources and accounting and finance. Also
included in general and administrative expenses is non-cash compensation
expense related to the Company's stock option plans of $762 for the quarter
ended June 30, 2000. No non-cash compensation expense was recorded for the
quarter ended June 30, 2001. For the six months ended June 30, 2001, $183 of
non-cash compensation expense was recorded as compared to $4.3 million for the
six months ended June 30, 2000.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for the
quarter ended June 30, 2001 totaled $25.2 million as compared to $2.5 million
for the quarter ended June 30, 2000. For the six months ended June 30, 2001 and
June 30, 2000, depreciation and amortization totaled $37.2 million and $4.7
million, respectively. Included in depreciation and amortization for the
quarter ended June 30, 2001 and the six months June 30, 2001, was $14.6 million
and $19.2 million, respectively, of amortization of goodwill and identified
intangibles that resulted from the mergers with Roberts, WOW and Southwest.
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
launch that market. The increase in depreciation expense is due to the
significant increase in network infrastructure we built and launched since June
2000.
INTEREST AND OTHER INCOME. Interest and other income totaled $2.5 million
for the quarter ended June 30, 2001 and $4.4 million for the quarter ended June
30, 2000. Interest and other income totaled $8.2 million and $6.7 million for
the six months ended June 30, 2001 and 2000, respectively. This income
generally has been generated from the investment of equity and loan proceeds
held in liquid accounts waiting to be deployed.
INTEREST EXPENSE. Interest expense totaled $19.9 million for the quarter
ended June 30, 2001 and $6.6 million for the quarter ended June 30, 2000. For
the six months ended June 30, 2001, interest expense was $34.7 million compared
to $11.4 million for the six months ended June 30, 2000. During the first
quarter of 2001, we issued new Senior Notes and a new credit facility for a
combined total of approximately $453 million. The increase from 2000 to 2001 is
due to higher average outstanding debt balances due to business acquisitions
and network construction.
INCOME TAX BENEFIT. For the quarter and six months ended June 30, 2001,
income tax benefit totaled $17.4 million and $31.3 million, respectively. The
income tax benefit represents the anticipated recognition of the Company's
deductible net operating loss carry forward. This benefit is being recognized
based on an assessment of the combined expected future taxable income of the
Company and expected reversals of the temporary differences from the Roberts,
WOW and Southwest mergers.
LOSS ON DEBT EXTINGUISHMENT. For the six months ended June 30, 2001, a
loss on extinguishment of debt of $5.4 million, net of tax benefit of $1.9
million was recorded to write off debt issuance costs associated with the
Nortel/EDC Credit Facility. This credit facility was replaced with the Senior
Secured Credit Facility, which was entered into on February 14, 2001. No such
loss was incurred for the period ended June 30, 2000.
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 under a variety of service plans. These plans generally
reflect the terms of national plans offered by Sprint PCS
48
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 (the period during 1999
after launch of our first market) 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. The increase was
due to significant growth in our subscribers between December 31, 1999 and
December 31, 2000. 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 are
related to providing wireless services to customers and are included in cost of
services. The increase was due to significant growth in our subscribers between
December 31, 1999 and December 31, 2000. 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 31, 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. 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.
49
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
include corporate costs and expenses, such as administration, human resources
and accounting and finance. 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 our 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 12 7/8% 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 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." For the year ended
December 31, 2000, the deferred tax asset generated, primarily from temporary
difference related to the treatment of start-up costs, unearned compensation
and from net operating loss carry forwards, was offset by a full valuation
allowance. For the quarter and six months ended June 30, 2001, the income tax
benefit totaled $17.4 million and $31.3 million, respectively. The income tax
benefit represents the anticipated recognition of the Company's deductible net
operating loss carry forward. This benefit is being recognized based on an
assessment of the combined expected future taxable income of the Company and
expected reversals of the temporary differences from the Roberts, WOW and
Southwest mergers.
50
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 public 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 and EDC entered into the credit facility with
EDC (the "EDC credit facility").
The EDC credit facility was reduced by $75.0 million from the issuance of
the 12 7/8% senior discount notes, such that the EDC credit facility provided
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. On February
14, 2001, we repaid the total amount outstanding on the facility in the amount
of $54.5 million plus accrued interest of $884 with the proceeds from our
senior secured credit facility of $333 million.
Pursuant to the equipment agreement with Nortel, we are required to
purchase a total of $167 million of equipment and services from Nortel. As of
June 30, 2001, this commitment has been fully satisfied. 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 pursuant to such facility.
On February 4, 2000, we issued $350 million face amount of the 12 7/8%
senior discount notes. The 12 7/8% 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 12 7/8% senior discount notes will
accrete to their $350.0 million face amount by February 8, 2005, after which
interest will be paid in cash semiannually.
On January 31, 2001, we issued $250 million face amount of 12 1/2% senior
notes. The 12 1/2% 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.
On February 14, 2001, Alamosa Holdings, Alamosa (Delaware) and Alamosa
Holdings, LLC, as borrower; entered into a $280 million 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. On March 30, 2001, this credit facility was
amended to increase the facility to $333 million in relation to the acquisition
of Southwest. At that time, all covenants were amended to reflect this increase
and the inclusion of Southwest. The senior secured credit facility was amended
on July 19, 2001 to extend the period prior to which Alamosa Holdings, LLC must
borrow $50.0 million of term loans from August 14, 2001 to December 31, 2001.
Net cash used in operating activities was $60.4 million for the six months
ended June 30, 2001. Net cash used in operating activities was $2.8 million for
the six months ended June 30, 2000. Cash used in operating activities was
attributable to operating losses and working capital needs.
Net cash used in investing activities was $97.0 million for the six months
ended June 30, 2001, and $65.8 million for the six months ended June 30, 2000.
In 2001, we invested $72.9 million in our network
51
infrastructure and $37.6 million in the acquisitions of Roberts, WOW and
Southwest. The expenditures in 2000 were related primarily to the purchase of
network infrastructure needed to construct our portion of the Sprint PCS
network and investment in short-term liquid investments of $21.8 million.
Net cash provided by financing activities was $137.7 million for the six
months ended June 30, 2001 and consisted primarily of the net proceeds from our
issuance of the 12 1/2% senior notes and borrowings under the senior secured
credit facility, less repayment of long-term debt of $223.6 million, $169.1
million of which was assumed through acquisitions. We also set aside $70.7
million in restricted cash primarily for escrow of two years of interest on the
12 1/2% senior notes. Net cash provided by financing activities was $303.9
million for the six months ended June 30, 2000 consisting primarily of net
proceeds from our initial public offering of approximately $194.3 million and
net proceeds from our issuance of 12 7/8% senior discount notes of approximately
$181 million less repayments of long-term debt of $76.2 million.
As of June 30, 2001, our primary sources of liquidity were approximately
$122 million in cash and cash equivalents and $130 million of unused capacity
under the senior secured credit facility.
We estimate that we will require approximately $87.0 million to complete
the current build-out plan and fund working capital losses through the
remainder of 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 June 30, 2001, capital leases totaled $1.6
million and included long-term capital lease obligations of $1.5 million. At
December 31, 2000 the capital leases totaled $1.1 million.
DEBT COVENANT WAIVER
As of March 31, 2001, we did not meet the maximum negative EBITDA covenant
under the 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.
On May 8, 2001, we obtained a waiver of any default or event of default
arising from the failure to comply with the maximum negative EBITDA covenant
for the quarter ended March 31, 2001 from the lending institutions under the
senior secured credit facility. See the following comment regarding the change
in the senior secured credit facility and the resetting of the covenants behind
the credit.
The Company met its negative EBITDA covenant for the quarter ended June
30, 2001, and we believe that the EBITDA covenants will be met for the next
twelve months. Our EBITDA is directly impacted by the up front selling and
marketing expenses we incur in order to grow our subscriber base. As such,
greater than expected subscriber growth may impact our EBITDA negatively.
AMENDMENT TO THE SENIOR SECURED CREDIT FACILITY
The senior secured credit facility was amended simultaneously with the
closing of the offering of the outstanding notes to, among other things, reduce
the amount of the senior secured credit facility from $333.0 million to $225.0
million and modify the financial covenants.
For a complete description of our indebtedness, please refer to the
consolidated financial statements and the related notes included in this
prospectus.
INFLATION
Management believes that inflation has not had, and is not likely to have,
a material adverse effect on our results of operations.
52
EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In July 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other
Intangible Assets." The provisions of SFAS No. 141 will apply to all business
combinations initiated after June 30, 2001, and will also apply to all business
combinations accounted for by the purchase method that are completed after June
30, 2001. SFAS No. 142 should be applied in fiscal years beginning after
December 15, 2001 to all goodwill and other intangible assets recognized in an
entity's statement of financial position at that date, regardless of when those
assets were initially recognized. Certain provisions of SFAS No. 142 will be
effective for business combinations completed after June 20, 2001. The Company
is in the process of evaluating the effect of the adoption of these
pronouncements.
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 the senior
secured credit facility and any future floating rate financing.
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 12 7/8% senior discount notes, the
12 1/2% senior notes, the notes, capital leases and the senior secured credit
facility financing based on our projected level of long-term indebtedness:
YEAR ENDING DECEMBER 31,
------------------------------------------------------------------------------
2001 2002 2003 2004 2005 THEREAFTER
------------ ------------ ------------ ------------ ------------ -------------
(DOLLARS IN MILLIONS)
Fixed Rate Instruments:
12 7/8% 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
12 1/2% senior notes .................... $ 250 $ 250 $ 250 $ 250 $ 250 $ 250
Fixed interest rate ................... 12.5% 12.5% 12.5% 12.5% 12.5% 12.5%
Principal payment ..................... -- -- -- -- -- 250
13 5/8% senior notes .................... $ 150 $ 150 $ 150 $ 150 $ 150 $ 150
Fixed interest rate ................... 13.625% 13.625% 13.625% 13.625% 13.625% 13.625%
Principal payment ..................... -- -- -- -- -- 150
Capital Leases--Annual Minimum:
Lease Payments (1) .................... $ 0.148 $ 0.149 $ 0.150 $ 0.160 $ 0.161 $ 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)..... $ 187 $ 225 $ 225 $ 200 $ 149 --
Average Interest Rate (3) ............. 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%
Principal payments ................... -- -- -- $ 25 $ 51 $ 149
- ----------
(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.
53
(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 the 12 7/8% 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 12 7/8% senior discount notes have a carrying value of $209 million and
a fair value which approximates $215 million.
54
MANAGEMENT
BOARD OF DIRECTORS
The following table presents information with respect to our current
directors:
NAME AGE
- ------------------------------------------- ----
David E. Sharbutt ....................... 51
Michael R. Budagher ..................... 43
Ray M. Clapp, Jr. ....................... 41
Scotty Hart ............................. 51
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 .......................... 62
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 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
55
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. Mr. Hart also serves as a director of Texas
Statewide Telephone Cooperative, Inc., a non-public company.
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 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 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.
THOMAS F. RILEY, JR. Mr. Riley, a licensed CPA, has served as a director
since his appointment to the Board of Directors on April 27, 2001 in connection
with our completion of our acquisition of Southwest. 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. Pursuant to the agreement providing for the acquisition of Southwest PCS
Holdings, Inc., we agreed to nominate Mr. Riley for re-election to the Board of
Directors and to solicit proxies in favor of his re-election to the Board of
Directors at the Meeting.
MICHAEL V. ROBERTS. Mr. Roberts has served as a director since his
appointment to the Board of Directors on April 27, 2001 in connection with
our completion of our acquisition of Roberts, of which Mr. Roberts formerly was
a 50% owner. 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 since his
appointment to the Board of Directors on April 27, 2001 in connection with our
completion of our acquisition of Roberts, of which Mr. Roberts formerly was a
50% owner. 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.
56
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 of 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 of our other directors or
executive officers.
EXECUTIVE OFFICERS
The following table sets forth 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 39 Chief Technology Officer and Senior Vice President of Engineering
and Network Operations
Margaret Z. Couch 49 Chief Marketing Officer
Set forth below is a brief description of the present and past business
experience of each of the persons who serves as an executive officer of Alamosa
who is not also serving as a director.
MARGARET Z. COUCH. Mrs. Couch has been Chief Marketing Officer since May
2001, but she has been with us since 1999 in various capacities. From February
to May 2001 she was Senior Vice President, South Central Region and from
January 2000 to January 2001 she was General Manager and Vice President for the
Great Plains and Northwest Regions. In January 1999 she started as General
Manager for the West Texas Region. In 1987, Mrs. Couch founded Performance
Associates, Inc., a human resources and sales training consulting firm and in
1996 she founded CK BusinesSense, Inc., which expanded the services provided by
Performace Associates, to include management consulting and assisting
organizations in generating greater profitability. Mrs. Couch has more than
twenty years of management and leadership experience as a management consultant
and trainer. She has worked with a vast array of clients, including
communications, manufacturing, health care and financial companies as well as
government, education and non-profit entities.
KENDALL W. COWAN. Mr. Cowan has been Chief Financial Officer 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 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
57
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 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 -- --
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--$29,075 for company-paid life insurance premiums.
(2) Mr. Stull served as our Chief Technology Officer from October 1998 until
his resignation on September 2000.
(3) Mr. Brantley served as our President and Chief Operating Officer from
October 1998 to January 2001.
STOCK OPTION GRANTS IN LAST FISCAL YEAR
References in this section to "shares" and "common stock" refer to shares
of common stock of Alamosa Holdings, our parent holding company whose shares of
common stock are quoted on the Nasdaq National Market System under the symbol
"APCS".
58
The table below provides information regarding stock options granted to
the named executive officers in fiscal year 2000 and hypothetical gains for the
options through the end of their respective ten year terms. In accordance with
applicable requirements of the SEC, we have assumed annualized growth rates of
the market price of the common stock over the exercise price of the option of
5% and 10%, running from the date the option was granted to the end of the
option term. Actual gains, if any, depend on the future performance of the
common stock and overall conditions and the information in this table should
not be construed as an estimate of future stock price growth. We did not grant
any stock appreciation rights in fiscal year 2000.
POTENTIAL
% OF TOTAL REALIZABLE
OPTIONS VALUE AT ASSUMED
NUMBER OF GRANTED TO ANNUAL RATE OF
SECURITIES EMPLOYEES EXERCISE STOCK PRICE
UNDERLYING IN PRICE EXPIRATION APPRECIATION
NAME OPTIONS FISCAL YEAR (PER SHARE) DATE FOR OPTION TERM
- ------------------ ---------------- ------------- ------------- ------------ ---------------------------
5%($) 10%($)
----------- -------------
Loyd I. Rinehart 100,000(1) 4.69% $ 12.375 6/12/10 $778,257 $1,972,256
- ----------
(1) Options become exercisable with respect to one-third of the shares
subject thereto on June 19 of 2001, 2002 and 2003. All options become
fully vested and exercisable upon a change in control of Alamosa
Holdings.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides summary information regarding option
exercises in 2000 by the named executive officers and the value of such
officers' unexercised options at December 31, 2000.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
ACQUIRED VALUE YEAR-END (#) AT FISCAL YEAR-END
NAME ON EXERCISE(#)(1) REALIZED($) (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
59
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 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
60
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 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.
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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
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:
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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.
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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 us and
Nortel, which Nortel assigned to EDC and we acknowledged, each of our
stockholders pledged its ownership interest in us 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.
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.
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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 our directors, and a manager of Budagher
Family, LLC, one of our 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. and Budagher Family, LLC,
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.
RESERVE OF SHARES BY UNDERWRITERS
As part of our initial public offering, the underwriters reserved a
maximum of 10% of the shares of common stock sold in the offering for sale to
the persons who were our stockholders 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 us were the same as if the shares were sold to
the general public. The persons who were our stockholders of 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 our directors, officers or employees, 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. Messrs.
Michael V. Roberts and Steven C. Roberts, who are our directors, were the sole
owners of Roberts. Pursuant to the terms of the merger agreement with Roberts,
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. 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 upon completion of the
Roberts acquisition.
In connection with the acquisition of Roberts, 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., our subsidiary, (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, a corporation owned and operated by
Messrs. Michael V. Roberts and Steven C. Roberts.
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o ROBERTS LOAN AGREEMENT. On July 31, 2000, Alamosa Operations (as lender)
entered into a loan agreement with Roberts (as borrower). In connection
with the loan agreement, Roberts 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. As of December 31, 2000, approximately $23.8
million had been funded under the Roberts loan agreement. 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.
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 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 through the completion of
the merger with Roberts. 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 entered
into a joint venture development agreement with Messrs. Michael V.
Roberts and Steven C. Roberts. 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 Mr. Michael V. Roberts or Mr. 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 Mr. Michael V. Roberts or Mr. 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
Mr. Michael V. Roberts or Mr. 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 and 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 entered
into a right of first negotiation agreement with Roberts Tower 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 entered into a resale
agreement with Messrs. Michael V. Roberts and Steven C. Roberts 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.
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o MASTER LEASE AGREEMENT. On February 14, 2001, Roberts and Roberts Tower
entered into a master lease agreement which provides for the lease from
Roberts Tower by Roberts 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
has the right to extend the initial term of the lease for four additional
terms of five years each. The agreement provides for monthly payments
aggregating to approximately $16,800 per year, subject to an annual
adjustment of 4% per annum. Roberts subsequently assigned all of its
right, title and interest in the master lease agreement to its wholly
owned subsidiary, Alamosa Missouri Properties, LLC (formerly Roberts
Wireless Properties, L.L.C.).
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.
On February 14, 2001, we completed our 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, LP, which owned approximately 44.4% of the outstanding membership
interests of WOW Holdings.
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 our directors and the
general manager of South Plains Telephone Cooperative, Inc., one of our
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 five 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.
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;
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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 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,
69
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.
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.
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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 to 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.
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;"
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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."
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
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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.
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 five 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.
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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 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:
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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;
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
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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
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, we announced that Sprint PCS had reached an agreement
in principle with its network partners, including us and our 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, we 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
our total revenue for the year ended December 31, 2000), and approximately
$14,281,000 of travel expense incurred for our outbound customers using other
portions of the Sprint PCS network (representing approximately 26% of our total
operating expenses) 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% threshold 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. The FCC has opened a proceeding to investigate whether
market conditions warrant eliminating or modifying the spectrum cap.
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.
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
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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 FCC 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
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
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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. The FCC has released a series of orders requiring broadband wireless
personal communications services and other commercial mobile radio services
providers to implement enhanced emergency 911 capabilities. The rules require
Sprint PCS to begin selling specially-equipped telephone handsets by October 1,
2001, with a rollout of such handsets continuing until December 31, 2002, when
all new handsets must be specially-equipped. In addition, Sprint PCS must begin
providing a specified level of enhanced 911 service by October 1, 2001, or
within six months of a request from a designated public safety agency,
whichever is later. Sprint PCS has reported to the FCC that it has a compliance
plan in place to meet the FCC's schedule for enhanced 911 service
implementation.Waivers of the enhanced emergency 911 capability requirements
may be obtained by individual service providers by filing a waiver request. As
the required equipment becomes more functional and less expensive, 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.
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.
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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 our antennae and those of our 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.
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 our 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 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
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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 retated 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 our common stock, the number of
shares of our common stock beneficially owned by each of our executive
officers, directors and nominees 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.
NUMBER OF SHARES PERCENTAGE OF
NAME AND ADDRESS (1) 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 ............................. 138,500(12) *
Tom M. Phelps .................................... 31,325(13) *
Thomas F. Riley, Jr. ............................. 166,500 *
Loyd I. Rinehart ................................. 33,334(14) *
Michael V. Roberts ............................... 6,753,750(15) 7.35%
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 ............. 23,083,798 24.83%
- ----------
* 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 our 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,
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"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. 2 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 May 18, 2001 with
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.
(5) The share information reflected is based upon a statement on a Schedule
13D filed jointly by Mr. Budagher and the Budagher Family, LLC on
February 26, 2001 with the SEC. Mr. Budagher and his spouse and children
own 100% of the membership interests in the Budagher Family, LLC.
Includes 28,000 shares issuable to Mr. Budagher pursuant to options
currently exercisable and 7,284,776 shares for which Budagher Family, LLC
and Mr. Budagher share voting and investment power, as a result of their
control person relationship. Mr. Budagher is the sole Manager and
President of Budagher Family, LLC. The address for Mr. Budagher is the
same as the address for the Budagher Family, LLC.
(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.
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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.
(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.
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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 "13 5/8% senior note" or "13 5/8% senior
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 August 15, 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 13 5/8% senior notes will mature on August 15, 2011. We can issue a
maximum of $150.0 million aggregate principal amount of 13 5/8% senior notes.
Interest on the 13 5/8% senior notes will accrue at the rate of 13 5/8% per
annum and will be payable in cash semi-annually on February and August of each
year, beginning on February 15, 2002. The Company will pay interest to those
persons who were holders of record on the February 1 or August 1 immediately
preceding each interest payment date. Interest on the 135/8% senior notes will
accrue from the date of original issuance 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 13 5/8% senior notes will be:
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 12 7/8% senior discount notes and the
12 1/2% senior notes;
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.
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As of June 30, 2001, after giving effect to the issuance of the 13 5/8%
senior notes and the application of the net proceeds therefrom, the total
outstanding debt of the Company and the Subsidiary Guarantors, excluding unused
commitments made by lenders, would have been approximately $761.5 million. As
of that date, none of the Company's debt, after taking the same factors into
account, would have been subordinated to the 13 5/8% senior 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
13 5/8% senior 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 13 5/8%
senior 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
13 5/8% Senior 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 13 5/8% senior 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
June 30, 2001, after giving effect to the issuance of the 13 5/8% senior notes
and the application of the net proceeds therefrom, excluding unused commitments
made by lenders, would have been approximately $409.3 million.
The Subsidiary Guarantors have other liabilities, including contingent
liabilities, that may be significant. As of the date of the Indenture, other
than Alamosa Delaware Operations, LLC, the Company will 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 13 5/8% senior 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 13 5/8% senior 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 June 30, 2001, after giving effect to the issuance of the 13 5/8%
senior notes and the application of the net proceeds therefrom, the total
outstanding secured Debt of the Company and the Subsidiary Guarantors,
excluding unused commitments made by lenders, would have been approximately
$137.2 million.
See "Risk Factors -- Risks Related to the 13 5/8% Senior 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 void the guarantees of the
13 5/8% senior 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
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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 13 5/8% senior 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 13 5/8% senior
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 13 5/8% senior notes (collectively,
"make a Subsidiary Guarantor payment"), if:
(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.
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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 13 5/8% senior notes
are entitled to receive any payment pursuant to the Subsidiary Guaranty
of such Subsidiary Guarantor, except that holders of 13 5/8% senior 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
o until the Designated Senior Debt is paid in full in cash, any
distribution to which holders of the 13 5/8% senior 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 13 5/8% senior 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 13 5/8% senior 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 13 5/8% senior 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 13 5/8% senior 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
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trustee under the Indenture and the Custody Agent (the "Security Agreement")
approximately $39.2 million (in cash or U.S. Government Obligations) from the
proceeds of such offering to secure on a pro rata basis our payment obligations
under the 13 5/8% senior notes, the 12 7/8% senior discount notes and the
12 1/2% senior notes. Funds will be released from the August security account to
make interest payments on the 13 5/8% senior notes, the 12 7/8% senior discount
notes and the 12 1/2% senior notes as they become due, so long as at such time
no Event of Default exists with respect to any of the 12 1/2% senior notes, the
13 5/8% senior notes or the 12 7/8% senior discount notes; provided, however,
that payments of interest when due on the 12 1/2% senior notes shall be made
first out of the January security account, and then out of the August security
account to the extent there is a shortfall in the January security account. An
interest payment on the 12 1/2% senior notes will become due on August 1, 2003,
when there will be funds remaining in the August security account but no funds
remaining in the January security account. At that time, the funds remaining in
the August security account will be available to make the interest payment due
on the 12 1/2% senior notes. However, it is the Company's present intention to
make the interest payment on the 12 1/2% senior notes due on August 1, 2003 out
of available cash flow and to make the fourth interest payment on the 13 5/8%
senior notes out of the remaining funds in the August security account. The
amount deposited in the August security account, together with the proceeds
from the investment thereof, will be sufficient to pay when due the first four
interest payments on the 13 5/8% senior notes (the last of which is due August
15, 2003). Following disbursement from the August security account of funds
sufficient to pay the interest payment on the 13 5/8% senior notes, any funds
remaining in the August security account will be returned to the Company,
provided no Event of Default exists with respect to the 13 5/8% senior notes,
the 12 7/8% senior discount notes or the 12 1/2% senior notes. Pending such
disbursements, all funds contained in the August security account will be
invested in U.S. Government Obligations. Interest earned on the U.S. Government
Obligations will be placed in the August security account.
OPTIONAL REDEMPTION
Except as set forth in the following paragraph, the 13 5/8% senior notes
will not be redeemable at the option of the Company prior to August 15, 2006.
Starting on that date, the Company may redeem all or any portion of the 13 5/8%
senior notes, at once or over time, after giving the required notice under the
Indenture. The 13 5/8% senior 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 13 5/8% senior notes redeemed during the 12-month period
commencing on August 15 of the years set forth below, and are expressed as
percentages of principal amount:
YEAR REDEMPTION PRICE
---- -----------------
2006 ......................... 106.813%
2007 ......................... 104.542%
2008 ......................... 102.271%
2009 and thereafter .......... 100.000%
At any time and from time to time, prior to August 15, 2004, the Company
may redeem up to a maximum of 35% of the original aggregate principal amount at
maturity of the 13 5/8% senior notes with the proceeds of one or more Public
Equity Offerings, at a redemption price equal to 113.625% of the principal
amount thereof, plus accrued and unpaid 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 13 5/8% senior 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 13 5/8% senior
notes.
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REPURCHASE AT THE OPTION OF HOLDERS UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each holder of 13 5/8% senior
notes will have the right to require the Company to repurchase all or any part
of such holder's 13 5/8% senior 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 13 5/8% senior 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
13 5/8% senior 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 13 5/8% senior notes must follow
in order to tender their 13 5/8% senior notes (or portions
thereof) for payment, and the procedures that holders of 13 5/8%
senior notes must follow in order to withdraw an election to
tender 13 5/8% senior 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 13 5/8% senior 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. 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, 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 13 5/8% senior notes to require the Company to
repurchase its 13 5/8% senior notes may be uncertain. In such a case, holders of
the 13 5/8% senior 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
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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 13 5/8% senior notes of their
right to require the Company to repurchase such 13 5/8% senior 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 13 5/8% senior
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 13 5/8% senior 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 13 5/8% senior notes. See "Risk Factors -- Risks Related
to the 13 5/8% Senior Notes -- We may be unable to purchase the 13 5/8% senior
notes upon a change of control." The Company's obligation to make an offer to
repurchase the 13 5/8% senior 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 13 5/8% senior 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.
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 13 5/8% senior notes, the
12 1/2% senior notes and the 12 7/8% senior discount notes and of
Subsidiary Guarantors evidenced by Subsidiary Guarantees relating
to the 13 5/8% senior notes, the 12 1/2% senior notes and the
12 7/8% 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) $250.0 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 13 5/8% senior notes or Repay other
Debt, pursuant to the covenant described under "-- Limitation on
Asset Sales";
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(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 $50.0 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 $50.0 million.
For purposes of determining compliance with this covenant,
(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 13 5/8% senior 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,
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(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 convertible
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;
93
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
(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 $3.0 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
94
(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 $50.0 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
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
13 5/8% senior 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.
95
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;
(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 13 5/8% senior 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 13 5/8% senior notes, the 12 1/2% senior notes and
the 12 7/8% 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 $10.0 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 13 5/8% senior 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 13 5/8% senior notes have been given
the opportunity to tender their 13 5/8% senior 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 13 5/8% senior 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 13 5/8% senior 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 12 1/2% senior notes and 12 7/8% senior
discount notes) outstanding on the date of the Prepayment
Offer that is pari passu in right of payment with the 13 5/8%
senior 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 13 5/8% senior
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 13 5/8% senior 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 13 5/8%
senior 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
13 5/8% senior notes, and
(y) the provisions of any Credit Facilities with a Stated
Maturity on or after the scheduled maturity date of the
13 5/8% senior 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 13 5/8% senior 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
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
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(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 13 5/8% senior 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 13 5/8% senior 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 $2.0 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 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 $15.0 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;
98
(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 $3.0 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 13 5/8% senior 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:
(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)
99
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).
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 13 5/8% senior 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;
100
(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
(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
101
(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
(b) a lease,
shall not be released from the obligations to pay the principal of, and
premium, if any, and interest on, the 13 5/8% senior 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 Securities and Exchange Commission and provide the Trustee and holders
of 13 5/8% senior 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 Securities and Exchange
Commission if the Securities and Exchange Commission does not permit such
filings.
EVENTS OF DEFAULT
Events of Default in respect of the 13 5/8% senior notes include:
(1) failure to make the payment of any interest on the 13 5/8% senior
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 13 5/8% senior 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 13 5/8%
senior 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
$15.0 million (the "cross acceleration provisions");
(6) any judgment or judgments for the payment of money in an aggregate
amount in excess of $15.0 million that shall be rendered against the
Company or any Restricted Subsidiary and
102
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").
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 13 5/8% senior 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 13 5/8% senior 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 13 5/8% senior notes then
outstanding may declare to be immediately due and payable the principal amount
of all the 13 5/8% senior 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 13 5/8% senior
notes shall be due and payable immediately without any declaration or other act
on the part of the Trustee or the holders of the 13 5/8% senior 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 13 5/8% senior 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 13 5/8%
senior 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 13 5/8% senior
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
13 5/8% senior notes.
No holder of 13 5/8% senior 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 13 5/8% senior 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 13 5/8% senior
notes then outstanding a direction inconsistent with such request
and shall have failed to institute such proceeding within 60
days.
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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 13 5/8% senior notes with the consent of the registered holders of a
majority in aggregate principal amount of the 13 5/8% senior notes then
outstanding (including consents obtained in connection with a tender offer or
exchange offer for such 13 5/8% senior 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 covenants and provisions of the
Indenture which cannot be amended without the consent of each holder of an
outstanding 13 5/8% senior note) with the consent of the registered holders of
at least a majority in aggregate principal amount of the 13 5/8% senior notes
then outstanding. However, without the consent of each holder of an outstanding
13 5/8% senior note, no amendment may, among other things,
(1) reduce the amount of 13 5/8% senior 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
13 5/8% senior note,
(3) reduce the principal of or extend the Stated Maturity of any 13 5/8%
senior note,
(4) make any Note payable in money other than that stated in the 13 5/8%
senior note,
(5) impair the right of any holder of the 13 5/8% senior notes to receive
payment of principal of and interest on such holder's 13 5/8% senior
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 13 5/8%
senior notes or any Subsidiary Guaranty,
(6) subordinate the 13 5/8% senior 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 13 5/8% senior notes other than pursuant to the
terms of such security interest,
(8) reduce the premium payable upon the redemption of any 13 5/8% senior
note nor change the time at which any 13 5/8% senior 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
13 5/8% senior 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 13 5/8%
senior 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 13 5/8% senior notes.
Without the consent of any holder of the 13 5/8% senior 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 13 5/8% senior notes in addition to or in
place of certificated 13 5/8% senior notes (provided that the
uncertificated 13 5/8% senior notes are issued in registered form for
104
purposes of Section 163(f) of the Code, or in a manner such that the
uncertificated 13 5/8% senior notes are described in Section 163(f)(2)(B)
of the Code),
o add additional Guarantees with respect to the 13 5/8% senior notes or to
release Subsidiary Guarantors from Subsidiary Guaranties as provided by
the terms of the Indenture,
o secure the 13 5/8% senior notes, to add to the covenants of the Company
for the benefit of the holders of the 13 5/8% senior 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 13 5/8% senior notes or to comply with any requirement
of the Securities and Exchange Commission in connection with the
qualification of the Indenture under the Trust Indenture Act.
The consent of the holders of the 13 5/8% senior 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 13 5/8% senior 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
13 5/8% senior 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 13 5/8% senior
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 13 5/8% senior notes, to replace mutilated,
destroyed, lost or stolen 13 5/8% senior notes and to maintain a registrar and
paying agent in respect of the 13 5/8% senior 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
13 5/8% senior 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 13 5/8% senior 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.
105
The legal defeasance option or the covenant defeasance option may be
exercised only if:
(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 13 5/8% senior 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 13 5/8% senior 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 13 5/8% senior 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 13 5/8% senior 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 13 5/8% senior notes have
been complied with as required by the Indenture.
GOVERNING LAW
The Indenture and the 13 5/8% senior notes are governed by the internal
laws of the State of New York without reference to principles of conflicts of
law.
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.
106
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 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",
107
(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, $1.0
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 13 5/8% senior 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.
"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
108
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 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) commissions, 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,
109
(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 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
110
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.
"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;
111
(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
(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 13 5/8% senior 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 13 5/8% senior 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 13 5/8% senior 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.
"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
112
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., Alamosa
Wisconsin GP, LLC, Alamosa (Wisconsin) Properties, LLC, Alamosa Finance LLC,
Alamosa Limited, LLC, Alamosa Delaware GP, LLC, Alamosa Properties, LP, Alamosa
Missouri, LLC, Alamosa Missouri Properties, LLC, Washington Oregon Wireless,
LLC, Washington Oregon Wireless Properties, LLC, Washington Oregon Wireless
Licenses, LLC, SWGP, L.L.C., SWLP, L.L.C., Southwest PCS, LP, Southwest PCS
Properties, LLC, Southwest PCS Licenses, LLC, 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 Management 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,
(a) if such Property has a Fair Market Value equal to or less than
$15.0 million, by any Officer of the Company, or
113
(b) if such Property has a Fair Market Value in excess of $15.0
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 accounting profession, and
(d) the rules and regulations of the Securities and Exchange
Commission 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 Securities and Exchange Commission.
"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.
"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
114
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 the date on which the 13 5/8% senior notes are initially
issued.
"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.
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
115
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, commissions,
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 Subsidiaries 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
13 5/8% senior notes when due, whether at maturity, by
acceleration, by redemption or otherwise, and all other monetary
obligations of the Company under the 13 5/8% senior notes, and
(b) the full and punctual performance within applicable grace
periods of all other obligations of the Company under the 13 5/8%
senior 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.
"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;
116
(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 $3.0 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 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 requirements, 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
117
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
(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 $15.0 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;
118
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.
"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 13 5/8% senior notes as
described under "Optional Redemption."
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"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;
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.
120
"Securities Act" means the Securities Act of 1933.
"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 13 5/8% senior 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.
"13 5/8% senior notes" means the senior notes due 2011 of the Company to be
issued pursuant to the Indenture to be dated as of August 15, 2001 among the
Company, the Subsidiary Guarantors and Wells Fargo Bank Minnesota, N.A., as
trustee, as the same may be amended or supplemented from time to time.
"12 1/2% senior notes" means the senior notes due 2011 of the Company
issued pursuant to the Indenture, dated as of January 31, 2001, the Company,
the Subsidiary Guarantors and Wells Fargo Bank Minnesota, N.A. as trustee, as
the same may be amended or supplemented from time to time.
"12 7/8% 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, among the Company, the Subsidiary Guarantors and Norwest Bank Minnesota,
N.A. as trustee, as the same may be amended or supplemented from time to time.
"senior secured credit facility" means the credit facility for up to
$333.0 million ($225.0 million after the contemplated amendment to the senior
secured credit facility becomes effective) issued pursuant to the Amended and
Restated Credit Agreement, dated as of March 30, 2001, among the Company,
Alamosa Holdings, LLC, Alamosa Holdings, Inc., the lenders 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, as
amended by Amendment No. 1 on May 8, 2001, Amendment No. 2 on June 7, 2001 and
Amendment No. 3 on July 19, 2001, and as further amended and 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 Securities and Exchange Commission.
"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 13 5/8% senior 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:
121
(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 13 5/8% senior notes.
"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 $500.0 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 organization" (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:
122
(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:
(a) the total amount of equity capital contributed to the Company as
of February 8, 2000 (being $37.0 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., Alamosa
Wisconsin GP, LLC,
123
Alamosa (Wisconsin) Properties, LLC, Alamosa Finance LLC, Alamosa Limited, LLC,
Alamosa Delaware GP, LLC, Alamosa Properties, LP, Alamosa Missouri, LLC,
Alamosa Missouri Properties, LLC, Washington Oregon Wireless, LLC, Washington
Oregon Wireless Properties, LLC, Washington Oregon Wireless Licenses, LLC,
SWGP, L.L.C., SWLP, L.L.C., Southwest PCS, LP, Southwest PCS Properties, LLC,
Southwest PCS Licenses, LLC, Texas Telecommunications, LP and Alamosa Wisconsin
Limited Partnership, will be considered Wholly Owned Restricted Subsidiaries so
long as they remain Restricted Subsidiaries.
124
BOOK-ENTRY SYSTEM
The Depository Trust Company ("DTC"), New York, New York, will act as
securities depositary 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 depositary 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 registerable, at the office or
agency of Alamosa (Delaware) maintained for such purposes, and
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.
125
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 depositary 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 depositary 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 depositary. 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.
126
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,
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
127
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
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.
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.
128
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.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The exchange of outstanding notes for registered notes in the exchange
offer will not constitute a taxable event for holders of notes. Consequently,
holders of notes will not recognize gain upon receipt of a registered note in
exchange for an outstanding note in the exchange offer, the 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
holder's holding period in the registered note will include its holding period
in the original note. In addition, the original issue discount on the
outstanding notes will carryover to the registered notes received in the
exchange, and holders will continue to accrue such original issue discount on a
constant yield basis in the same manner as such original issue discount has
been accruing on the outstanding notes.
129
ALAMOSA (DELAWARE), INC.
SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma condensed combined financial statements
combine the historical statements (consolidated, where applicable) of Alamosa
(Delaware), Roberts, WOW and Southwest. The unaudited pro forma condensed
combined balance sheet gives effect to the issuance of the senior notes The
unaudited pro forma statements of operations give effect to the issuance of the
13 5/8% senior notes. 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 aid you in your analysis of the financial aspects of each of
these transactions, both individually and combined, we have presented these
unaudited pro forma condensed combined financial statements to demonstrate the
financial aspects of the combined transaction.
We derived this information from the unaudited financial statements
(consolidated, where applicable) of Alamosa (Delaware) as of and for the six
months ended June 30, 2001, Roberts and WOW for the period January 1, 2001 to
February 14, 2001, Southwest for the period January 1, 2001 to March 30, 2001,
and from the audited consolidated statements of operations 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
six months ended June 30, 2001 and the year ended December 31, 2000, assumes
the issuance of the 13 5/8% senior notes, the 12 1/2% senior 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 June 30, 2001
gives effect to the issuance of the 13 5/8% senior notes as if the transaction
had occurred on June 30, 2001. 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 materially
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.
130
ALAMOSA (DELAWARE), INC. (FORMERLY ALAMOSA PCS HOLDINGS, INC.)
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 2001
(IN THOUSANDS)
ISSUANCE OF
HISTORICAL 13 5/8%
ALAMOSA SENIOR NOTES TOTAL
-------------- -------------------- -------------
ASSETS (NOTE 1)
Current assets:
Cash and cash equivalents ............................ $ 122,092 $ 35,468 $ 157,560
Accounts receivable, net ............................. 39,906 -- 39,906
Inventory ............................................ 4,425 -- 4,425
Prepaid expenses and other assets .................... 4,539 -- 4,539
Deferred tax asset ................................... 1,762 -- 1,762
Interest receivable .................................. 1,169 -- 1,169
---------- ----------- ----------
Total current assets ............................... 173,893 35,468 209,361
Property and equipment, net ........................... 410,432 -- 410,432
Debt issuance costs, net .............................. 27,378 9,454(1b) 36,832
Restricted cash ....................................... 70,727 39,240 109,967
Goodwill and intangible assets, net ................... 856,141 -- 856,141
Other noncurrent assets ............................... 4,117 -- 4,117
---------- ------------- ----------
Total assets ....................................... $1,542,688 $ 84,162 $1,626,850
========== ============= ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses ................ $ 78,450 $ -- $ 78,450
Accrued interest payable ............................. 15,001 -- 15,001
Current installments of capital leases ............... 138 -- 138
---------- ------------- ----------
Total current liabilities .......................... 93,589 -- 93,589
12 7/8% senior discount notes ........................ 222,807 -- 222,807
12 1/2% senior notes ................................. 250,000 150,000 400,000
Senior secured credit facility ....................... 203,000 (65,838)(1a) 137,162
Deferred tax liability, net .......................... 153,294 -- 153,294
Capital lease obligations, noncurrent ................ 1,506 -- 1,506
Other noncurrent liabilities ......................... 3,040 -- 3,040
---------- ------------- ----------
Total liabilities .................................. 927,236 84,162 1,011,398
---------- ------------- ----------
Commitments and contingencies ......................... -- -- --
Stockholder's equity:
Preferred stock ...................................... -- -- --
Common stock ......................................... -- -- --
Additional paid-in capital ........................... 791,932 -- 791,932
Accumulated deficit .................................. (175,716) -- (175,716)
Accumulated other comprehensive income, net of
tax ................................................ 166 -- 166
Unearned compensation ................................ (930) -- (930)
---------- ------------- ----------
Total stockholder's equity ......................... 615,452 -- 615,452
---------- ------------- ----------
Total liabilities and stockholder's equity ......... $1,542,688 $ 84,162 $1,626,850
========== ============= ==========
131
ALAMOSA (DELAWARE), INC. (FORMERLY ALAMOSA PCS HOLDINGS, INC.)
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(IN THOUSANDS)
ROBERTS MERGER
------------------------------
ISSUANCE OF ALAMOSA HISTORICAL
HISTORICAL 13 5/8% PRO FORMA ROBERTS PRO FORMA
ALAMOSA SENIOR NOTES SUBTOTAL ADJUSTMENTS WIRELESS ADJUSTMENTS
------------ ------------------- ------------ ------------- ----------- ------------------
Revenues: (NOTE 1) (NOTE 2) (NOTE 3)
Service revenues ....... $ 119,422 $ -- $ 119,422 $ -- $ 3,251 $ --
Product sales .......... 9,947 -- 9,947 -- 291 --
--------- ----------- --------- -------- -------- ----------
Total revenue ......... 129,369 -- 129,369 -- 3,542 --
--------- ----------- --------- -------- -------- ----------
Costs and expenses:
Cost of service and
operations ............ 86,202 -- 86,202 -- 3,133 --
Cost of products
sold .................. 18,559 -- 18,559 -- 608 --
Selling and
marketing ............. 43,276 -- 43,276 -- 2,229 --
General and
administrative
expenses .............. 7,257 -- 7,257 -- 376 44 (3a)
Depreciation and
amortization .......... 37,171 -- 37,171 -- 749 3,559 (3b)
--------- ----------- --------- -------- -------- -----------
Total costs and
expenses .............. 192,465 -- 192,465 -- 7,095 3,603
--------- ----------- --------- -------- -------- -----------
Loss from
operations ............ (63,096) -- (63,096) -- (3,553) (3,603)
Interest and other
income ................. 8,188 -- 8,188 -- 1 --
Interest expense ........ (34,663) (7,585)(1c) (42,248) (2,642) (755) (45)(3c)
--------- ----------- --------- -------- -------- -----------
Loss before income
tax benefit and
extraordinary item (89,571) (7,585) (97,156) (2,642) (4,307) (3,648)
Income tax benefit ...... 31,306 2,882 (1d) 34,188 1,004 -- 2,433 (3b)
--------- ----------- --------- -------- -------- -----------
Loss before
extraordinary item $ (58,265) $ (4,703) $ (62,968) $ (1,638) $ (4,307) $ (1,215)
========= =========== ========= ======== ======== ===========
WOW MERGER SOUTHWEST MERGER
------------------------------- -------------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
WOW ADJUSTMENTS SOUTHWEST ADJUSTMENTS TOTAL
------------ ------------------ ------------ ------------------ -------------
Revenues: (NOTE 4) (NOTE 5)
Service revenues ....... $ 1,193 $ -- $ 12,955 $ -- $ 136,821
Product sales .......... 180 -- 1,053 -- 11,471
-------- ---------- -------- ---------- ----------
Total revenue ......... 1,373 -- 14,008 -- 148,292
-------- ---------- -------- ---------- ----------
Costs and expenses:
Cost of service and
operations ............ 1,139 -- 8,950 -- 99,424
Cost of products
sold .................. 398 -- 3,274 -- 22,839
Selling and
marketing ............. 1,308 -- 2,753 -- 49,566
General and
administrative
expenses .............. 525 -- 804 -- 9,006
Depreciation and
amortization .......... 490 1,599 (4a) 2,169 4,980 (5a) 50,717
-------- ----------- -------- ----------- ----------
Total costs and
expenses .............. 3,860 1,599 17,950 4,980 231,552
-------- ----------- -------- ----------- ----------
Loss from
operations ............ (2,487) (1,599) (3,942) (4,980) (83,260)
Interest and other
income ................. 12 -- 4 -- 8,205
Interest expense ........ (325) (24)(4b) (2,302) (137)(5b) (48,478)
-------- ----------- -------- ----------- ----------
Loss before income
tax benefit and
extraordinary item (2,800) (1,623) (6,240) (5,117) (123,533)
Income tax benefit ...... -- 1,411 (4a) -- 3,972 (5a) 43,008
-------- ----------- -------- ----------- ----------
Loss before
extraordinary item $ (2,800) $ (212) $ (6,240) $ (1,145) $ (80,525)
======== =========== ======== =========== ==========
132
ALAMOSA (DELAWARE), INC. (FORMERLY ALAMOSA PCS HOLDINGS, INC.)
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2000
(IN THOUSANDS)
ROBERTS MERGER
---------------------------------
ISSUANCE OF ALAMOSA HISTORICAL
HISTORICAL 13 5/8% PRO FORMA ROBERTS PRO FORMA
ALAMOSA SENIOR NOTES SUBTOTAL ADJUSTMENTS WIRELESS ADJUSTMENTS
------------ -------------------- ------------ ------------- ------------- -------------------
Revenues: (NOTE 1) (NOTE 2) (NOTE 3)
Service revenues ....... $ 73,500 $ -- $ 73,500 $ -- $ 13,413 $ --
Product sales ........... 9,200 -- 9,200 -- 1,316 --
--------- ------------ --------- --------- --------- -----------
Total revenue ......... 82,700 -- 82,700 -- 14,729 --
--------- ------------ --------- --------- --------- -----------
Costs and expenses:
Cost of service and
operations ............ 55,430 -- 55,430 -- 10,005 --
Cost of products
sold .................. 20,524 -- 20,524 -- 2,494 --
Selling and
marketing ............. 46,513 -- 46,513 -- 6,976 --
General and
administrative
expenses .............. 14,352 -- 14,352 -- 2,507 350 (3a)
Terminated merger
and acquisition
costs ................. 2,247 -- 2,247 -- -- --
Depreciation and
amortization .......... 12,530 -- 12,530 -- 5,672 27,047 (3b)
--------- ------------ --------- --------- --------- -----------
Total costs and
expenses .............. 151,596 -- 151,596 -- 27,654 27,397
--------- ------------ --------- --------- --------- -----------
Loss from
operations ............ (68,896) -- (68,896) -- (12,925) (27,397)
Interest and other
income ................. 14,483 -- 14,483 -- 98 --
Interest expense ........ (25,775) (15,169)(1c) (40,944) (32,150) (3,279) (2,942)(3c)
--------- ------------ --------- --------- --------- -----------
Loss before income
tax benefit and
extraordinary item..... (80,188) (15,169) (95,357) (32,150) (16,106) (30,339)
Income tax benefit ...... -- 36,236 (1d) 36,236 12,217 -- 14,061 (3b)
--------- ------------ --------- --------- --------- -----------
Loss before
extraordinary item..... $ (80,188) $ 21,067 $ (59,121) $ (19,933) $ (16,106) $ (16,278)
========= ============ ========= ========= ========= ===========
WOW MERGER SOUTHWEST MERGER
-------------------------------- --------------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
WOW ADJUSTMENTS SOUTHWEST ADJUSTMENTS TOTAL
------------ ------------------- ------------ ------------------- -------------
Revenues: (NOTE 4) (NOTE 5)
Service revenues ....... $ 1,823 $ -- $ 27,129 $ -- $ 115,865
Product sales ........... 683 -- 2,732 -- 13,931
--------- ----------- --------- ----------- ----------
Total revenue ......... 2,506 -- 29,861 -- 129,796
--------- ----------- --------- ----------- ----------
Costs and expenses:
Cost of service and
operations ............ 4,374 -- 10,297 -- 80,106
Cost of products
sold .................. 1,750 -- 8,819 -- 33,587
Selling and
marketing ............. 4,106 -- 17,085 -- 74,680
General and
administrative
expenses .............. 4,377 -- 6,507 -- 28,093
Terminated merger
and acquisition
costs ................. -- -- -- -- 2,247
Depreciation and
amortization .......... 1,433 12,133 (4a) 7,501 19,922 (5a) 86,238
--------- ----------- --------- ----------- ----------
Total costs and
expenses .............. 16,040 12,133 50,209 19,922 304,951
--------- ----------- --------- ----------- ----------
Loss from
operations ............ (13,534) (12,133) (20,348) (19,922) (175,155)
Interest and other
income ................. 156 -- 98 -- 14,835
Interest expense ........ (978) (878)(4b) (7,060) (4,948)(5b) (93,179)
--------- ----------- --------- ----------- ----------
Loss before income
tax benefit and
extraordinary item..... (14,356) (13,011) (27,310) (24,870) (253,499)
Income tax benefit ...... -- 8,772 (4a) -- 18,454 (5a) 89,740
--------- ----------- --------- ----------- ----------
Loss before
extraordinary item..... $ (14,356) $ (4,239) $ (27,310) $ (6,416) $ (163,759)
========= =========== ========= =========== ==========
133
NOTES TO PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 -- ADJUSTMENTS FOR ISSUANCE OF 13 5/8% SENIOR NOTES
Alamosa (Delaware)'s historical financial statements have been adjusted to
illustrate the effects of the planned issuance of the 13 5/8% senior notes in
the amount of $150.0 million.
(1a) Approximately $65.8 million of the net proceeds will be used to pay
down the senior secured credit facility borrowings outstanding as of
June 30, 2001.
(1b) Debt issuance costs, comprised of a 3% commitment fee and
approximately $4.95 million of other expenses, will be amortized on a
straight-line basis over the ten-year life of the 13 5/8% senior notes.
(1c) The pro forma adjustment reflects an increase in Alamosa (Delaware)'s
interest expense of $10,692 for the six months ended June 30, 2001 and
$21,383 for the year ended December 31, 2001 offset by interest
savings related to the pay down on the senior secured credit facility
of $3,107 for the six months ended June 30, 2001 and $6,214 for the
year ended December 31, 2000.
(1d) The pro forma tax expense adjustment to Alamosa (Delaware)'s
historical statement of operations for the six months ended June 30,
2001 and for the year ended December 31, 2000, represents the expected
income tax benefit which will be generated based on the issuance of
the 13 5/8% senior notes.
NOTE 2 -- ALAMOSA PRO FORMA ADJUSTMENTS
Alamosa (Delaware)'s historical statement of operations has been adjusted
to illustrate the effect of the interest expense related to the January 31,
2001 issuance of the 12 1/2% senior notes in the amount of $250.0 million.
Additionally, the pro forma tax expense adjustment to Alamosa (Delaware)'s
historical statement of operations for the six months ended June 30, 2001 and
for the year ended December 31, 2000, represents the expected income tax
benefit which will be generated based on the issuance of the 13 5/8% senior
notes.
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 $200.00 in cash, without any interest
thereon. The aggregate consideration paid in the Roberts merger was 13.5
million shares of Alamosa Holdings common stock and $4.0 million in cash.
Alamosa Holdings also assumed the net debt of Roberts, which amounted to
approximately $57.0 million.
The unaudited pro forma condensed combined statements of operations has
been adjusted for the Roberts merger, which was accounted for using the
purchase method of accounting effective February 14, 2001.
The following pro forma adjustments represent the adjustments necessary to
reflect the Roberts merger in the unaudited pro forma condensed combined
statement of operations for the six months ended June 30, 2001 and the year
ended December 31, 2000:
(3a) 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 and
has been recorded as compensation expense.
134
(3b) 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 are being amortized over 18 years
and the intangible asset related to the subscribers is being amortized
over 3 years. These amounts total $3,559 for the six months ended June
30, 2001 and $27,047 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.
(3c) The pro forma adjustment reflects an increase in interest expense
related to the incremental debt to fund the cash consideration of the
Roberts merger, the merger related costs and the debt assumed and paid
off by Alamosa at the time of close under the terms of the credit
facility. This amount totals $45 for the six months ended June 30,
2001 and $2,942 for the year ended December 31, 2000. A 1/8% variance
in interest rates would increase or decrease interest expense by $14
for the six months ended June 30, 2001 and $87 for the year ended
December 31, 2000.
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 approximately 6.05 million shares of Alamosa Holdings common
stock and $12.5 million in cash. Alamosa Holdings assumed the net debt of WOW
which amounted to approximately $31.0 million.
The unaudited pro forma condensed statement of operations has been
adjusted for the WOW merger, which was accounted for using the purchase method
of accounting effective February 14, 2001.
The pro forma adjustments represent the purchase accounting adjustments
necessary to reflect the WOW merger in the unaudited pro forma condensed
combined statement of operations for the six months ended June 30, 2001 and the
year ended December 31, 2000:
(4a) The pro forma adjustment to depreciation and amortization expense
reflects the incremental amortization expense related to the
intangible assets as if the WOW merger occurred on January 1, 2000.
The intangible assets related to the Sprint PCS affiliation and
operating agreements and goodwill are being amortized over 18 years
and the intangible asset related to the subscribers is being amortized
over 3 years. This amount totals $1,599 for the six months ended June
30, 2001 and $12,133 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.
(4b) The pro forma adjustment reflects an increase in interest expense
related to the incremental debt to fund the cash consideration of the
WOW merger, the merger related costs and the debt assumed and paid off
by Alamosa at the time of close under the terms of the credit
facility. This amount totals $24 for the six months ended June 30,
2001 and $878 for the year ended December 31, 2000. A 1/8% variance in
interest rates would increase or decrease interest expense by $7 for
the six months ended June 30, 2001 and $25 for the year ended December
31, 2000.
NOTE 5 -- THE SOUTHWEST MERGER
On March 30, 2001 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 approximately 11.1 million shares of Alamosa
Holdings common stock and $5.0 million in cash. Alamosa (Delaware) assumed the
net debt of Southwest which amounted to approximately $81.0 million as of March
30, 2001.
135
The unaudited pro forma condensed combined statement of operations has
been adjusted for the Southwest merger, which was accounted for using the
purchase method of accounting effective March 30, 2001.
The pro forma adjustments represent the purchase accounting adjustments
necessary to reflect the Southwest merger in the unaudited pro forma condensed
combined statement of operations for the six months ended June 30, 2001 and the
year ended December 31, 2000:
(5a) The pro forma adjustment to depreciation and amortization expense
reflects the incremental amortization expense related to the
intangible assets as if the Southwest merger occurred on January 1,
2000. The intangible assets related to the Sprint PCS affiliation and
operating agreements and goodwill are being amortized over 18 years
and the intangible asset related to the subscribers is being amortized
over 3 years. This amount totals $4,980 for the six months ended June
30, 2001 and $19,922 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.
(5b) The pro forma adjustment reflects an increase in interest expense
related to the incremental debt to fund the cash consideration of the
Southwest merger, the merger related costs and the debt assumed and
paid off by Alamosa at the time of close under the terms of the credit
facility. This amount totals $137 for the six months ended June 30,
2001 and $4,948 for the year ended December 31, 2000. A 1/8% variance
in interest rates would increase or decrease interest expense by $42
for the six months ended June 30, 2001 and $146 for the year ended
December 31, 2000.
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.
136
INDEX TO FINANCIAL STATEMENTS
ALAMOSA (DELAWARE), INC.
Interim Consolidated Financial Statements
Consolidated Balance Sheets at June 30, 2001 (unaudited) and December 31, 2000 .......... F-2
Consolidated Statement of Operations for the three months and six months ended
June 30, 2001 and 2000 (unaudited) .................................................... F-3
Consolidated Statements of Cash Flows for the six months ended
June 30, 2001 and 2000 (unaudited) .................................................... F-4
Notes to the Consolidated Financial Statements .......................................... F-5
Consolidated Financial Statements
Report of Independent Accountants ....................................................... F-14
Consolidated Balance Sheets ............................................................. F-15
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-16
Consolidated Statements of Stockholders' Equity for the period July 16, 1998 (inception)
through the year ended December 31, 2000 .............................................. F-17
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-18
Notes to Consolidated Financial Statements .............................................. F-19
Report of Independent Accountants on Financial Statement Schedule ....................... F-43
Schedule II ............................................................................. F-44
ROBERTS WIRELESS COMMUNICATIONS, L.L.C.
Independent Auditor's Report ............................................................. F-45
Consolidated Balance Sheets .............................................................. F-46
Consolidated Statements of Operations for the years ended December 31, 2000 and
December 31, 1999 ....................................................................... F-47
Consolidated Statements of Members' Equity (Deficit) for the years ended December 31,
2000 and December 31, 1999 .............................................................. F-48
Consolidated Statements of Cash Flows for the years ended December 31, 2000 and
December 31, 1999 ....................................................................... F-49
Consolidated Notes to Financial Statements ............................................... F-50
WASHINGTON OREGON WIRELESS, LLC
Independent Auditor's Report ............................................................. F-55
Balance Sheets ........................................................................... F-56
Statements of Income for the years ended December 31, 2000 and December 31, 1999 ......... F-57
Statements of Members' Equity (Deficit) for the years ended December 31, 2000 and
December 31, 1999 ....................................................................... F-58
Statements of Cash Flows for the years ended December 31, 2000 and December 31, 1999 ..... F-59
Notes to Financial Statements ............................................................ F-61
SWPCS HOLDINGS, L.L.C.
Report of Independent Accountants ........................................................ F-67
Consolidated Balance Sheet ............................................................... F-68
Consolidated Statement of Operations for the year ended December 31, 2000 ................ F-69
Consolidated Statement of Mandatorily Redeemable Member's Deficit and Members' Deficit
for the year ended December 31, 2000 .................................................... F-70
Consolidated Statement of Cash Flows for the year ended December 31, 2000 ................ F-71
Consolidated Notes to Financial Statement ................................................ F-72
F-1
ALAMOSA (DELAWARE), INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share information)
JUNE 30, 2001 DECEMBER 31, 2000
--------------- ------------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents ........................................... $ 122,092 $ 141,768
Short-term investments .............................................. -- 1,600
Accounts receivable, net of allowance for doubtful accounts of $3,801
and $1,503, respectively........................................... 39,906 14,747
Inventory ........................................................... 4,425 2,753
Prepaid expenses and other assets ................................... 4,539 3,027
Deferred tax asset .................................................. 1,762 --
Interest receivable ................................................. 1,169 1,046
---------- ----------
Total current assets .............................................. 173,893 164,941
Property and equipment, net .......................................... 410,432 228,983
Notes receivable ..................................................... -- 46,865
Debt issuance costs, net ............................................. 27,378 13,108
Restricted cash ...................................................... 70,727 --
Goodwill and intangible assets, net .................................. 856,141 --
Other noncurrent assets .............................................. 4,117 4,501
---------- ----------
Total assets ...................................................... $1,542,688 $ 458,398
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses ............................... $ 78,450 $ 61,167
Accrued interest payable ............................................ 15,001 219
Current installments of capital leases .............................. 138 36
---------- ----------
Total current liabilities ......................................... 93,589 61,422
12 7/8% senior discount notes ........................................ 222,807 209,280
12 1/2% senior notes ................................................. 250,000 --
Senior secured credit facility ....................................... 203,000 --
EDC credit facility .................................................. -- 54,524
Deferred tax liability ............................................... 153,294 --
Capital lease obligations, noncurrent ................................ 1,506 1,039
Other noncurrent liabilities ......................................... 3,040 735
---------- ----------
Total liabilities ................................................. 927,236 327,000
---------- ----------
Commitments and contingencies ........................................ -- --
Stockholder's equity:
Preferred stock, $.01 par value, 1,000 shares authorized; no shares
issued ............................................................ -- --
Common stock, $.01 value; 9,000 shares authorized, 100 issued and
outstanding ....................................................... -- --
Additional paid-in capital .......................................... 791,932 246,459
Accumulated deficit ................................................. (175,716) (113,948)
Accumulated other comprehensive income, net of tax .................. 166 --
Unearned compensation ............................................... (930) (1,113)
---------- ----------
Total stockholder's equity ........................................ 615,452 131,398
---------- ----------
Total liabilities and stockholder's equity ........................ $1,542,688 $ 458,398
========== ==========
The accompanying notes are an integral part of the consolidated
financial statements.
F-2
ALAMOSA (DELAWARE), INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(dollars in thousands)
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30 JUNE 30,
--------------------------- ---------------------------
2001 2000 2001 2000
------------ ------------ ------------ ------------
Revenues:
Subscriber revenues ..................... $ 53,305 $ 11,734 $ 83,813 $ 19,514
Roaming and travel revenues ............. 24,198 3,630 35,609 6,147
--------- --------- --------- ---------
Total service revenues ................ 77,503 15,364 119,422 25,661
Product sales ........................... 6,032 2,189 9,947 3,772
--------- --------- --------- ---------
Total revenue ......................... 83,535 17,553 129,369 29,433
--------- --------- --------- ---------
Costs and expenses:
Cost of service and operations
(including non-cash compensation
of $0 and $159 for the three months
ended June 30, 2001 and 2000,
respectively, and $0 and $615 for
the six months ended June 30, 2001
and 2000, respectively) ............... 53,933 11,208 86,202 19,066
Cost of product sold .................... 10,526 3,705 18,559 7,032
Selling and marketing ................... 24,794 8,058 43,276 14,709
General and administrative expenses
(including non-cash compensation
of $0 and $762 for the three months
ended June 30, 2001 and 2000,
respectively, and $183 and $4,279
for the six months ended June 30,
2001 and 2000, respectively) .......... 3,351 2,835 7,257 7,736
Depreciation and amortization ........... 25,235 2,491 37,171 4,748
--------- --------- --------- ---------
Total costs and expenses .............. 117,839 28,297 192,465 53,291
--------- --------- --------- ---------
Loss from operations .................. (34,304) (10,744) (63,096) (23,858)
Interest and other income ............... 2,467 4,408 8,188 6,722
Interest expense ........................ (19,947) (6,572) (34,663) (11,352)
--------- --------- --------- ---------
Net loss before income tax benefit
and extraordinary item ............... (51,784) (12,908) (89,571) (28,488)
Income tax benefit ...................... 17,448 -- 31,306 --
--------- --------- --------- ---------
Net loss before extraordinary item..... (34,336) (12,908) (58,265) (28,488)
Loss on debt extinguishment, net of
tax benefit of $1,969.................. -- -- (3,503) --
--------- --------- --------- ---------
Net loss .............................. $ (34,336) $ (12,908) $ (61,768) $ (28,488)
========= ========= ========= =========
The accompanying notes are an integral part of the consolidated
financial statements.
F-3
ALAMOSA (DELAWARE), INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
SIX MONTHS ENDED JUNE 30,
-----------------------------
2001 2000
------------- -------------
Cash flows from operating activities:
Net loss .................................................................... $ (61,768) $ (28,488)
Adjustments to reconcile net loss to net cash used in operating activities:
Income tax benefit ......................................................... (33,275) --
Non-cash compensation expense .............................................. 183 4,894
Depreciation and amortization .............................................. 17,971 4,748
Amortization of goodwill ................................................... 19,200 --
Bad debt expense ........................................................... 713 514
Amortization of debt issuance costs ........................................ 1,163 653
Deferred interest expense .................................................. 13,527 10,346
Loss on debt extinguishment ................................................ 5,472 --
Loss from disposition of interest rate cap agreements ...................... -- 266
Loss from disposition of assets ............................................ 39 54
(Increase) decrease in asset accounts, net of effects from acquisitions ....
Accounts receivable ...................................................... (15,995) (158)
Inventory ................................................................ 1,652 3,626
Prepaid expenses and other assets ........................................ (131) (116)
Increase (decrease) in liability accounts, net of effects from acquisitions:
Accounts payable and accrued expenses .................................... (9,165) 891
---------- ---------
Net cash used in operating activities .................................... (60,414) (2,770)
---------- ---------
Cash flows from investing activities:
Additions to property and equipment ........................................ (72,852) (44,049)
Repayment of notes receivable .............................................. 11,860 100
Cash paid for business acquisitions ........................................ (37,617) --
Sale (purchase) of short term investments .................................. 1,600 (21,841)
---------- ---------
Net cash used in investing activities .................................... (97,009) (65,790)
---------- ---------
Cash flows from financing activities:
Equity offering proceeds ................................................... -- 208,589
Equity offering costs ...................................................... -- (13,599)
Issuance of 12 7/8% senior discount notes .................................. -- 187,096
Issuance of 12 1/2% senior notes ........................................... 242,500 --
Issuance of senior secured credit facility ................................. 203,000 --
Repayment of debt assumed through acquisitions ............................. (169,060) --
Debt issuance costs ........................................................ (13,404) (10,763)
Stock options exercised .................................................... 4 619
Proceeds from issuance of long-term debt ................................... -- 7,758
Repayments of long-term debt ............................................... (54,524) (76,239)
Change in restricted cash .................................................. (70,727) 518
Payments on capital leases ................................................. (42) (10)
Interest rate cap premiums ................................................. -- (27)
---------- ---------
Net cash provided by financing activities ................................ 137,747 303,942
---------- ---------
Net increase (decrease) in cash and cash equivalents ........................ (19,676) 235,382
Cash and cash equivalents at beginning of period ............................ 141,768 5,656
---------- ---------
Cash and cash equivalents at end of period .................................. $ 122,092 $ 241,038
========== =========
The accompanying notes are an integral part of the consolidated
financial statements.
F-4
ALAMOSA (DELAWARE), INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION OF UNAUDITED INTERIM FINANCIAL INFORMATION
The unaudited consolidated balance sheet as of June 30, 2001, the unaudited
consolidated statements of operations for the three and six months ended June
30, 2001 and 2000, the unaudited consolidated statements of cash flows for the
six months ended June 30, 2001 and 2000, and related footnotes, have been
prepared in accordance with generally accepted accounting principles for interim
financial information and Article 10 of Regulation S-X. Accordingly, they do not
include all the information and footnotes required by generally accepted
accounting principles. The financial information presented should be read in
conjunction with the audited consolidated financial statements for the year
ended December 31, 2000. In the opinion of management, the interim data includes
all adjustments (consisting of only normally recurring adjustments) necessary
for a fair statement of the results for the interim periods. Operating results
for the six months ended June 30, 2001 are not necessarily indicative of results
that may be expected for the year ending December 31, 2001.
2. ORGANIZATION AND BUSINESS OPERATIONS
Alamosa (Delaware), Inc. ("Alamosa (Delaware)") is a wholly owned
subsidiary of Alamosa PCS Holdings, Inc. ("Alamosa PCS Holdings"), which is a
wholly owned subsidiary of Alamosa Holdings, Inc. ("Alamosa Holdings"). Alamosa
Holdings shares of common stock are quoted on The Nasdaq National Market under
the symbol "APCS." Alamosa (Delaware) is a holding company and through its
subsidiaries provides wireless personal communications services, commonly
referred to as PCS, in the Southwestern, Northwestern and Midwestern United
States.
Alamosa (Delaware) is a Delaware corporation and was formed in October 1999
under the name "Alamosa PCS Holdings, Inc." to operate as a holding company in
anticipation of its initial public offering. Alamosa (Delaware) completed its
initial public offering of common stock on February 3, 2000. Immediately prior
to the initial public offering, shares of Alamosa (Delaware) were exchanged for
Alamosa PCS LLC's ("Alamosa") membership interests, and Alamosa became wholly
owned by Alamosa (Delaware). These financial statements are presented as if the
reorganization had occurred as of the beginning of the periods presented.
Alamosa (Delaware) and its subsidiaries are collectively referred to in these
financial statements as the "Company."
On December 14, 2000, Alamosa (Delaware) formed a new holding company
pursuant to Section 251(g) of the Delaware General Corporation Law. In that
transaction, each share of Alamosa PCS Holdings was converted into one share of
the new holding company, and the former public company, which was renamed
"Alamosa (Delaware), Inc.", became a wholly owned subsidiary of the new holding
company, which was renamed "Alamosa PCS Holdings, Inc."
On February 14, 2001, Alamosa Holdings became the new public holding
company of Alamosa PCS Holdings and its subsidiaries pursuant to a
reorganization transaction in which a wholly owned subsidiary of Alamosa
Holdings was merged with and into Alamosa PCS Holdings. As a result of this
reorganization, Alamosa PCS Holdings became a wholly owned subsidiary of Alamosa
Holdings, and each share of Alamosa PCS Holdings common stock was converted into
one share of Alamosa Holdings common stock. On that day the Company also
completed its acquisitions of two Sprint PCS affiliates. The Company acquired
Roberts Wireless Communications, L.L.C. ("Roberts") and Washington Oregon
Wireless, LLC ("WOW"). On March 30, 2001, the Company acquired Southwest PCS
Holdings, Inc. ("Southwest").
3. CAPITAL REORGANIZATION
As described in Note 2, in December 2000, the capital stock of Alamosa
(Delaware) was converted into shares of a new holding company with Alamosa
(Delaware) surviving. Following this transaction, the 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 Alamosa (Delaware) common stock is owned
F-5
ALAMOSA (DELAWARE), INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
by Alamosa PCS Holdings. However, Alamosa (Delaware) remains the issuer of the
2000 Senior Discount Notes. On July 5, 2001 the Alamosa (Delaware) charter was
amended to reduce the number of authorized common shares from 9,000 to 1,000 and
to eliminate the preferred stock.
4. NOTES RECEIVABLE
ROBERTS -- On July 31, 2000, Alamosa Holdings' subsidiary, Alamosa
Operations, Inc. ("Operations") entered into a loan agreement with 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 in Note 5. Also on July 31, 2000,
Operations entered into a loan agreement with the owners of Roberts for $15
million, which was fully repaid at February 14, 2001, when the merger closed.
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.
5. MERGERS WITH ROBERTS WIRELESS COMMUNICATIONS, L.L.C., WASHINGTON OREGON
WIRELESS, LLC, AND SOUTHWEST PCS HOLDINGS, INC.
As of the end of the first quarter of 2001, Alamosa Holdings completed the
acquisitions of three Sprint PCS network partners. On February 14, 2001, Alamosa
Holdings completed its acquisition of Roberts and WOW. In connection with the
Roberts and WOW acquisitions, Alamosa Holdings entered into a new senior secured
credit facility for up to $280 million. On March 30, 2001, Alamosa Holdings
completed its acquisition of Southwest. In connection with the Southwest
acquisition, Alamosa Holdings 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.
The merger consideration in the Roberts acquisition consisted of 13.5
million common shares of Alamosa Holdings and approximately $4.0 million in
cash. Alamosa Holdings also assumed the net debt of Roberts in the transaction,
which amounted to approximately $57 million as of February 14, 2001.
The merger consideration in the WOW acquisition consisted of 6.05 million
common shares of Alamosa Holdings and approximately $12.5 million in cash.
Alamosa Holdings also assumed the net debt of WOW in the transaction, which
amounted to approximately $31 million as of February 14, 2001.
The merger consideration in the Southwest acquisition consisted of 11.1
million common shares of Alamosa Holdings and approximately $5.0 million in
cash. Alamosa Holdings also assumed the net debt of Southwest in the
transaction, which amounted to approximately $81 million as of March 30, 2001.
The Company has obtained preliminary independent valuations of Roberts and
WOW to allocate the purchase price and is in the process of obtaining an
independent valuation of Southwest. The results of the preliminary valuations
are as follows (in thousands):
Current assets ............................................. $ 15,357
Property, plant and equipment .............................. 129,154
Goodwill ................................................... 127,440
Sprint affiliation and other agreements .................... 525,488
Subscriber base acquired ................................... 37,700
--------
Net book value of assets acquired, including intangibles ... $835,139
========
F-6
ALAMOSA (DELAWARE), INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
As a result of the acquisitions, the Company recorded goodwill and
intangibles of $875.3 million. This amount includes a deferred tax liability of
$184.7 million which was recorded for the differences between the estimated fair
value and tax bases of the assets acquired and liabilities assumed.
Additionally, this amount includes $37.7 million which is attributable to the
subscribers acquired with the mergers. The subscriber base will be amortized
over 3 years, which approximates the average life of the Company's customer and
the remaining goodwill and other intangibles will be amortized over 18 years,
which approximates the remaining life of the initial term of the assumed Sprint
PCS contracts.
The unaudited pro forma condensed consolidated statements of income for the
three and six months ended June 30, 2001 and 2000 set forth below, present the
results of operations as if the acquisitions had occurred at the beginning of
each period and are not necessarily indicative of future results or actual
results that would have been achieved had these acquisitions occurred as of the
beginning of the period.
FOR THE SIX MONTHS ENDED
JUNE 30,
------------------------------
2001 2000
-------------- -------------
(IN THOUSANDS)
Total revenues .................................................... $ 148,292 $ 43,767
========== =========
Net loss before income tax benefit and extraordinary item ......... $ (113,306) $ (80,830)
Income tax benefit ................................................ 39,123 20,643
---------- ---------
Net loss before extraordinary item ................................ (74,183) (60,187)
Loss on debt extinguishment, net of tax benefit of $1,969.......... (3,503) --
---------- ---------
Net loss .......................................................... $ (77,686) $ (60,187)
========== =========
6. ACCUMULATED DEPRECIATION AND AMORTIZATION
Property and equipment are stated net of accumulated depreciation of $33.4
million and $15.6 million at June 30, 2001 and December 31, 2000, respectively.
Additionally, goodwill and other intangibles are stated net of accumulated
amortization of $19.2 million and $0 million at June 30, 2001 and December 31,
2000, respectively.
7. LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
JUNE 30, 2001 DECEMBER 31, 2000
--------------- ------------------
12 7/8% senior discount notes ......................... $222,807 $209,280
12 1/2% senior notes .................................. 250,000 --
Senior secured credit facility ........................ 203,000 --
EDC credit facility ................................... -- 54,524
-------- --------
Total debt ........................................... 675,807 263,804
Less current maturities ............................... -- --
-------- --------
Long-term debt, excluding current maturities .......... $675,807 $263,804
======== ========
12 7/8% SENIOR DISCOUNT NOTES
On December 23, 1999, Alamosa (Delaware) Inc. filed a registration
statement with the Securities and Exchange Commission for the issuance of $350
million face amount of senior discount notes (the "12 7/8% Notes Offering"). The
12 7/8% Notes Offering was completed on February 8, 2000 and generated net
proceeds of approximately $181 million after underwriters' commissions and
expenses of approximately
F-7
ALAMOSA (DELAWARE), INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
$6.1 million. The 12 7/8% 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 12 7/8% Senior Discount 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 12 7/8% Senior
Discount Notes Offering were 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.
12 1/2% SENIOR NOTES
On January 31, 2001, Alamosa (Delaware) consummated the offering (the
"12 1/2% Notes Offering") of $250 million aggregate principal amount of senior
notes (the "12 1/2% Senior Notes"). The 12 1/2% 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 12 1/2% Senior Notes were approximately $241 million, after
deducting the discounts and commissions to the initial purchasers and estimated
offering expenses.
Approximately $59 million of the proceeds of the 12 1/2% Notes Offering
were used by Alamosa (Delaware) to establish a security account (with cash or
U.S. government securities) to secure on a pro rata basis the payment
obligations under the 12 1/2% Senior Notes and the 12 7/8% Senior Discount
Notes, and the balance will be used for general corporate purposes of Alamosa
(Delaware), including, accelerating coverage within the existing territories of
Alamosa (Delaware); 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.
SENIOR SECURED CREDIT FACILITY
On February 14, 2001, Alamosa Holdings, Alamosa (Delaware) and Alamosa
Holdings, LLC, as borrower; entered into a $280 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. On
March 30, 2001, this credit facility was amended to increase the facility to
$333 million in relation to the acquisition of Southwest. At that time, all
covenants were amended to reflect this increase and the inclusion of Southwest.
As of June 30, 2001, Alamosa Holdings, LLC borrowed $203 million under the
new term loan facility while an additional $130 million in term debt will be
available for multiple drawings in amounts to be agreed for a period of 12
months thereafter.
DEBT COVENANT WAIVER
As of March 31, 2001, we did not meet the maximum negative EBITDA covenant
under the 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.
On May 8, 2001, we obtained a waiver of any default or event of default
arising from the failure to comply with the maximum negative EBITDA covenant for
the quarter ended March 31, 2001 from the lending institutions under the Senior
Secured Credit Facility.
The Company met its negative EBITDA covenant for the quarter ended June 30,
2001, and we believe that the EBITDA covenants will be met for the next twelve
months. Our EBITDA is directly impacted by the up front selling and marketing
expenses we incur in order to grow our subscriber base. As such, greater than
expected subscriber growth may impact our EBITDA negatively.
See Note 12, Subsequent Events for additional information on the
restructuring of the Senior Secured Credit Facility and the resetting of the
related financial covenants.
F-8
ALAMOSA (DELAWARE), INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NORTEL/EDC CREDIT FACILITY
On February 14, 2001, the outstanding balance of $54,524 was paid in full
plus accrued interest in the amount of $884 with proceeds from the Senior
Secured Credit Facility. As a result, $5,472 of unamortized issuance costs were
written off and classified as an extraordinary item. The Company was refunded
$1,377 of these costs as a result of the early extinguishment.
8. INCOME TAXES
The income tax benefit represents the anticipated recognition of the
Company's deductible net operating loss carry forwards. This benefit is being
recognized based on an assessment of the combined expected future taxable income
of the Company and expected reversals of the temporary differences from the
Roberts, WOW and Southwest mergers.
9. HEDGING ACTIVITIES AND COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 133, "Accounting for Derivatives and Hedging Activities" on January 1, 2001.
The statement requires the Company to record all derivatives on the balance
sheet at fair value. Derivatives that are not hedges must be adjusted to fair
value through earnings. If the derivative is a hedge, depending on the nature of
the hedge, changes in the fair value of the derivatives are either recognized in
earnings or are recognized in other comprehensive income until the hedged item
is recognized in earnings. During the quarter ended June 30, 2001, the Company
recorded approximately $388 in "other noncurrent assets" and $128 in "other
noncurrent liabilities" representing the change in the fair market value of the
interest rate hedge instruments that expire in 2004. In addition, the Company
recognized $166 net of tax effect, in other comprehensive income, which appears
as a separate component of Stockholder's Equity as "Accumulated other
comprehensive income", as illustrated below:
SIX MONTHS ENDED JUNE 30,
-----------------------------
2001 2000
------------- -------------
Net loss .............................................................. $ (61,768) $ (28,488)
Change in fair value of derivatives (net of tax effect of $93)......... 166 --
--------- ---------
Comprehensive loss .................................................... $ (61,602) $ (28,488)
========= =========
10. SUPPLEMENTAL DISCLOSURE TO STATEMENTS OF CASH FLOW
Accounts payable at June 30, 2001 and 2000 include $26,269 and $27,356,
respectively, of property and equipment additions. Additions to property and
equipment of $72,852 in the consolidated statements of cash flows for the six
months ended June 30, 2001 include payments of accounts payable outstanding at
December 31, 2000.
11. EFFECT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In July 2001, the FASB issued SFAS No. 141, "Business Combinations" and
SFAS No. 142, "Goodwill and Other Intangible Assets." The provisions of SFAS No.
141 will apply to all business combinations initiated after June 30, 2001, and
will also apply to all business combinations accounted for by the purchase
method that are completed after June 30, 2001. SFAS No. 142 should be applied in
fiscal years beginning after December 15, 2001 to all goodwill and other
intangible assets recognized in an entity's statement of financial position at
that date, regardless of when those assets were initially recognized. Certain
provisions of SFAS No. 142 will be effective for business combinations completed
after June 30, 2001. The Company is in the process of evaluating the effect of
the adoption of these pronouncements.
F-9
ALAMOSA (DELAWARE), INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. SUBSEQUENT EVENTS
The Senior Secured Credit Facility was amended on July 19, 2001 to extend
the period prior to which Alamosa Holdings, LLC can borrow $50.0 million of term
loans from August 14, 2001 to December 31, 2001.
On August 7, 2001, the Company announced that it will issue $150 million
face amount of senior notes (the "13 5/8% Senior Notes"). The 13 5/8% Senior
Notes will mature in ten years (August 15, 2011), will carry a coupon rate of
13 5/8% payable semiannually on February 15 and August 15, beginning on
February 15, 2002. The net proceeds from the sale of the 13 5/8% Senior Notes
will be approximately $140.5 million, after deducting the discounts and
commissions to the initial purchaers and estimated offering expenses.
Approximately $39 million of the proceeds of the 13 5/8% Notes Offering
will be used by Alamosa (Delaware) to establish a security account (with cash or
U.S. government securities) to secure on a pro rata basis the payment
obligations under the 13 5/8% Senior Notes, the 12 1/2% Senior Notes and the
12 7/8% Senior Discount Notes. The balance will be used to pay down a portion of
the Senior Secured Credit Facility and for general corporate purposes.
The Senior Secured Credit Facility will be amended simultaneously with the
closing of the offering of the 13 5/8% Senior Notes to, among other things,
reduce the amount of the Senior Secured Credit Facility from $333.0 million to
$225.0 million and modify the financial covenants.
13. 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
12 7/8% Senior Discount Notes and the 12 1/2% Senior Notes. Separate financial
statements of each guarantor subsidiary have not been provided because the
guarantees are full and conditional and joint and several.
F-10
ALAMOSA (DELAWARE), INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING BALANCE SHEET
AS OF JUNE 30, 2001
(UNAUDITED, IN THOUSANDS)
GUARANTOR NON-GUARANTOR
ISSUER SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
-------------- -------------- -------------- ---------------- -------------
ASSETS
Current Assets:
Cash and cash equivalents ....................... $ 3,825 $ 103,454 $ 14,813 $ -- $ 122,092
Accounts receivable, net of allowance ........... -- 39,906 -- -- 39,906
Intercompany receivable ......................... 9,127 5,562 -- (14,689) --
Inventory ....................................... -- 4,425 -- -- 4,425
Investment in subsidiary ........................ 1,015,248 -- -- (1,015,248) --
Deferred tax asset .............................. -- 1,762 -- -- 1,762
Prepaid expenses and other assets ............... 1,283 4,425 -- -- 5,708
---------- ---------- -------- ------------ ----------
Total current assets ........................... 1,029,483 159,534 14,813 (1,029,937) 173,893
Property and equipment, net ...................... -- 410,432 -- -- 410,432
Restricted cash .................................. 59,069 11,658 -- -- 70,727
Notes receivable ................................. -- 35,005 -- (35,005) --
Debt issuance costs, net ......................... 13,975 13,403 -- -- 27,378
Goodwill and intangible asset .................... -- 856,141 -- -- 856,141
Other non-current assets ......................... -- 4,117 -- -- 4,117
---------- ---------- -------- ------------ ----------
Total assets ................................... $1,102,527 $1,490,290 $ 14,813 $ (1,064,942) $1,542,688
========== ========== ======== ============ ==========
LIABILITIES AND STOCKHOLDER'S
EQUITY
Current Liabilities:
Accounts payable and accrued expenses ........... $ 1,160 $ 77,290 $ -- $ -- $ 78,450
Accrued interest payable ........................ 13,108 1,893 -- -- 15,001
Intercompany payable ............................ -- -- 14,689 (14,689) --
Current installments on capital lease
obligations .................................... -- 138 -- -- 138
---------- ---------- -------- ------------ ----------
Total current liabilities ...................... 14,268 79,321 14,689 (14,689) 93,589
Notes payable .................................... -- 35,005 -- (35,005) --
12 7/8% senior discount notes .................... 222,807 -- -- -- 222,807
12 1/2% senior notes ............................. 250,000 -- -- -- 250,000
Senior secured credit facility ................... -- 203,000 -- -- 203,000
Deferred tax liability ........................... -- 153,294 -- -- 153,294
Capital lease obligations ........................ -- 1,506 -- -- 1,506
Other noncurrent liabilities ..................... -- 3,040 -- -- 3,040
---------- ---------- -------- ------------ ----------
Total liabilities .............................. 487,075 475,166 14,689 (49,694) 927,236
---------- ---------- -------- ------------ ----------
Stockholder's 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 ......... -- 485 -- (485) --
Additional paid-in capital ...................... 791,932 1,153,324 (4,000) (1,149,324) 791,932
Accumulated (deficit) earnings .................. (175,716) (137,921) 4,124 133,797 (175,716)
Accumulated other comprehensive income,
net of tax ..................................... 166 166 -- (166) 166
Unearned compensation ........................... (930) (930) -- 930 (930)
---------- ---------- -------- ------------ ----------
Total equity ................................... 615,452 1,015,124 124 (1,015,248) 615,452
---------- ---------- -------- ------------ ----------
Total liabilities and stockholder's equity ..... $1,102,527 $1,490,290 $ 14,813 $ (1,064,942) $1,542,688
========== ========== ======== ============ ==========
F-11
ALAMOSA (DELAWARE), INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(UNAUDITED, IN THOUSANDS)
GUARANTOR NON-GUARANTOR
ISSUER SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
------------ -------------- -------------- -------------- -------------
Revenues:
Subscriber revenues .......................... $ -- $ 83,813 $ -- $ -- $ 83,813
Travel and roaming revenues .................. -- 35,609 -- -- 35,609
--------- --------- ------ ------- ---------
Total services revenues ..................... -- 119,422 -- -- 119,422
Product sales ................................ -- 9,947 -- -- 9,947
--------- --------- ------ ------- ---------
Total revenue ............................... -- 129,369 -- -- 129,369
Cost of services and operations ............... -- 86,202 -- -- 86,202
Cost of products sold ......................... -- 18,559 -- -- 18,559
Selling and marketing ......................... -- 43,276 -- -- 43,276
General and administrative (including $183
non-cash compensation) ....................... 485 6,760 12 -- 7,257
Depreciation and amortization ................. -- 37,171 -- -- 37,171
--------- --------- ------ ------- ---------
Loss from operations ......................... (485) (62,599) (12) -- (63,096)
Equity in loss of subsidiaries ................ (37,214) -- -- 37,214 --
Interest and other income ..................... 2,162 3,795 2,231 -- 8,188
Interest expense .............................. (26,231) (8,432) -- -- (34,663)
--------- --------- ------ ------- ---------
Net loss before income tax benefit and
extraordinary item ........................... (61,768) (67,236) 2,219 37,214 (89,571)
Income tax benefit ............................ -- 31,306 -- -- 31,306
--------- --------- ------ ------- ---------
Net loss before extraordinary item ............ (61,768) (35,930) 2,219 37,214 (58,265)
Loss on debt extinguishment, net of tax benefit
of $1,969..................................... -- (3,503) -- -- (3,503)
--------- --------- ------ ------- ---------
Net loss ...................................... $ (61,768) $ (39,433) $2,219 $37,214 $ (61,768)
========= ========= ====== ======= =========
F-12
ALAMOSA (DELAWARE), INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CONSOLIDATING STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2001
(UNAUDITED, IN THOUSANDS)
GUARANTOR NON-GUARANTOR
ISSUER SUBSIDIARIES SUBSIDIARY ELIMINATIONS CONSOLIDATED
------------- -------------- -------------- -------------- -------------
Cash flows from operating activities:
Net income (loss) .............................. $ (61,768) $ (39,433) $ 2,219 $ 37,214 $ (61,768)
Adjustments to reconcile net loss to net
cash used in operating activities:
Equity in loss of subsidiaries ................ 37,214 -- -- (37,214) --
Income tax benefit ............................ -- (33,275) -- -- (33,275)
Non-cash compensation expense ................. 183 -- -- -- 183
Depreciation and amortization ................. -- 17,971 -- -- 17,971
Amortization of goodwill ...................... -- 19,200 -- -- 19,200
Bad debt expense .............................. -- 713 -- -- 713
Amortization of debt issuance costs ........... 578 585 -- -- 1,163
Deferred interest expense ..................... 13,527 -- -- -- 13,527
Loss on debt extinguishment ................... -- 5,472 -- -- 5,472
Loss from disposition of assets ............... -- 39 -- -- 39
(Increase) decrease in asset accounts, net
of effects from acquisitions:
Accounts receivable .......................... -- (16,895) 900 -- (15,995)
Inventory .................................... -- 1,652 -- -- 1,652
Prepaid expense and other assets ............. 2,052 (3,229) 1,046 -- (131)
Increase (decrease) in liability accounts,
net of effects from acquisitions:
Accounts payable and accrued
expenses .................................... 13,704 (22,830) (39) -- (9,165)
---------- ---------- -------- ---------- ----------
Net cash provided by (used in)
operating activities ...................... 5,490 (70,030) 4,126 -- (60,414)
---------- ---------- -------- ---------- ----------
Cash flows from investing activities:
Additions to property and equipment ........... -- (72,852) -- -- (72,852)
Intercompany receivable ....................... 3,106 (1,222) (1,884) -- --
Equity investment in subsidiary ............... (302,960) -- (4,000) 306,960 --
Equity investment from parent ................. -- 306,960 -- (306,960) --
Repayment of notes receivable ................. -- -- 11,860 -- 11,860
Acquisition related costs ..................... -- (37,617) -- -- (37,617)
Purchase (sale) of short term
investments .................................. 1,600 -- -- -- 1,600
---------- ---------- -------- ---------- ----------
Net cash provided by (used in)
investing activities ...................... (298,254) 195,269 5,976 -- (97,009)
---------- ---------- -------- ---------- ----------
Cash flows from financing activities:
Issuance of 12 1/2% senior notes .............. 242,500 -- -- -- 242,500
Issuance of senior secured credit facility..... -- 203,000 -- -- 203,000
Repayment of debt assumed through
acquisitions ................................. -- (169,060) -- -- (169,060)
Debt issuance cost ............................ (845) (12,559) -- -- (13,404)
Repayment of long-term debt ................... -- (54,524) -- -- (54,524)
Change in restricted cash ..................... (59,069) (11,658) -- -- (70,727)
Exercise of stock options ..................... -- 4 -- -- 4
Payments on capital leases .................... -- (42) -- -- (42)
---------- ---------- -------- ---------- ----------
Net cash provided by (used in)
financing activities ...................... 182,586 (44,839) -- -- 137,747
---------- ---------- -------- ---------- ----------
Net increase (decrease) in cash and
cash equivalents .......................... (110,178) 80,400 10,102 -- (19,676)
Cash and cash equivalents at beginning of
period ........................................ 114,003 23,054 4,711 -- 141,768
---------- ---------- -------- ---------- ----------
Cash and cash equivalents at end of period...... $ 3,825 $ 103,454 $ 14,813 $ -- $ 122,092
========== ========== ======== ========== ==========
F-13
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-14
ALAMOSA (DELAWARE), INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 DECEMBER 31, 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-15
ALAMOSA (DELAWARE), INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIOD
JULY 16, 1998
(INCEPTION)
YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 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-16
ALAMOSA (DELAWARE), INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE PERIOD FROM JULY 16, 1998 (INCEPTION) TO DECEMBER 31, 2000
COMMON STOCK ADDITIONAL
------------------------------ PAID-IN
SHARES AMOUNT CAPITAL
---------------- ------------- ---------------
Balance, July 16, 1998 (inception) ... $ -- $ -- $ --
Member's contribution ................ 48,500,008 485,000 14,515,000
Net loss ............................. -- -- --
-------------- ----------- ------------
Balance, December 31, 1998 . ......... 48,500,008 485,000 14,515,000
Members' contributions ............... -- -- 22,000,000
Stock options ........................ -- -- 14,309,876
Amortization of unearned
compensation ........................ -- -- --
Net loss ............................. -- -- --
-------------- ----------- ------------
Balance, December 31, 1999 . ......... 48,500,008 485,000 50,824,876
Initial public offering .............. 12,321,100 123,211 193,664,076
Exercise of stock options ............ 538,748 5,387 703,061
Capital reorganization ............... (61,359,756) (613,597) 613,597
Amortization of unearned
compensation ........................ -- -- --
Unearned compensation ................ -- -- 653,073
Net loss ............................. -- -- --
-------------- ----------- ------------
Balance, December 31, 2000 ........... $ 100 $ 1 $246,458,683
============== =========== ============
ACCUMULATED UNEARNED
DEFICIT COMPENSATION TOTAL
------------------ ---------------- ----------------
Balance, July 16, 1998 (inception) ... $ -- $ -- $ --
Member's contribution ................ -- -- 15,000,000
Net loss ............................. (923,822) -- (923,822)
-------------- ------------- -------------
Balance, December 31, 1998 . ......... (923,822) -- 14,076,178
Members' contributions ............... -- -- 22,000,000
Stock options ........................ -- (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 . ......... (33,759,681) (6,110,365) 11,439,830
Initial public offering .............. -- -- 193,787,287
Exercise of stock options ............ -- -- 708,448
Capital reorganization ............... -- -- --
Amortization of unearned
compensation ........................ -- 5,650,625 5,650,625
Unearned compensation ................ -- (653,073) --
Net loss ............................. (80,188,100) -- (80,188,100)
-------------- ------------- -------------
Balance, December 31, 2000 ........... $ (113,947,781) $ (1,112,813) $ 131,398,090
============== ============= =============
The accompanying notes are an integral part of the consolidated
financial statements.
F-17
ALAMOSA (DELAWARE), INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIOD
JULY 16, 1998
(INCEPTION)
YEAR ENDED YEAR ENDED THROUGH
DECEMBER 31, 2000 DECEMBER 31, 1999 DECEMBER 31, 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-18
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."
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
F-19
ALAMOSA (DELAWARE), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
$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.
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
F-20
ALAMOSA (DELAWARE), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
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.
F-21
ALAMOSA (DELAWARE), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
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.
F-22
ALAMOSA (DELAWARE), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
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-23
ALAMOSA (DELAWARE), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
F-24
ALAMOSA (DELAWARE), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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
==========
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:
F-25
ALAMOSA (DELAWARE), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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%;
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,
F-26
ALAMOSA (DELAWARE), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
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:
F-27
ALAMOSA (DELAWARE), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 ....................... $ --
=============
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.
F-28
ALAMOSA (DELAWARE), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
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.
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 Associa-
F-29
ALAMOSA (DELAWARE), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
tion 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.
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
F-30
ALAMOSA (DELAWARE), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
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
YEAR END YEAR END (INCEPTION) 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
YEAR END YEAR END (INCEPTION) 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
F-31
ALAMOSA (DELAWARE), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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
----------------------------------------- -----------------------------
NUMBER OF EXERCISE REMAINING NUMBER OF WEIGHTED AVERAGE
RANGE OF EXERCISE PRICES OPTIONS PRICE CONTRACTUAL LIFE OPTIONS EXERCISE 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
========= ======= === ========= ============
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)
========== ===========
F-32
ALAMOSA (DELAWARE), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
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.
F-33
ALAMOSA (DELAWARE), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 expenses ............ $ 564 $ 60,783 $ 39 $ -- $ 61,386
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-34
ALAMOSA (DELAWARE), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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-35
ALAMOSA (DELAWARE), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 end of period ...... $ 114,003 $ 23,054 $ 4,711 $ -- $ 141,768
========== ========== ========== ========== ==========
F-36
ALAMOSA (DELAWARE), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
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,
F-37
ALAMOSA (DELAWARE), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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%.
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
F-38
ALAMOSA (DELAWARE), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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;
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.
F-39
ALAMOSA (DELAWARE), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
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.
F-40
ALAMOSA (DELAWARE), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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.
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.
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
F-41
ALAMOSA (DELAWARE), INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)
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, the Company did not meet the maximum negative EBITDA
covenant under the Senior Secured Credit Facility, which had an outstanding
balance of $203 million. During the quarter ended March 31, 2001, the Company
reported an EBITDA loss of $16.7 million, which exceeded the maximum negative
EBITDA covenant by $7.0 million.
On May 8, 2001, the Company obtained a permanent waiver of the covenant as
of March 31, 2001 from the lending institutions of the Senior Secured Credit
Facility. Management of the Company believes that the maximum negative EBITDA
covenant will be met in periods subsequent to March 31, 2001.
F-42
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, of
Almosa (Delaware), Inc. also included an audit of the financial statement
schedule included in the accompanying Schedule II. 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-43
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-44
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-45
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
2000 1999
--------------- ---------------
ASSETS
Current Assets
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-46
ROBERTS WIRELESS COMMUNICATIONS, L.L.C.
CONSOLIDATED STATEMENTS OF OPERATIONS
DECEMBER 31, 2000 DECEMBER 31, 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-47
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 2000 AND 1999
CONTRIBUTED
CONTRIBUTED CAPITAL ACCUMULATED
CAPITAL MEMBERS RELATED ENTITIES DEFICIT MEMBERS' 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-48
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-49
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, 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.
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
F-50
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
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.
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.
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
F-51
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
$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
- -------- ----------------------
(greater than) 10 x 3.50%
= or (less than) 10 x but (greater than) 6 x 3.25%
= or (less than) 6 x but (less than) 4 x 3.00%
= or (less than) 4 x 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
============
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:
F-52
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
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.
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).
F-53
ROBERTS WIRELESS COMMUNICATIONS, LLC AND SUBSIDIARY
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
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-54
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-55
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-56
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-57
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),
Decmber 31, 2000 .................. $15,573,311 (15,381,646) (750,000) (558,335)
=========== =========== ======== ===========
The accompanying notes are an integral part of the financial statements.
F-58
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-59
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-60
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.
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.
F-61
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999 (CONTINUED)
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.
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).
F-62
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999 (CONTINUED)
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.
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).
F-63
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999 (CONTINUED)
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.
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:
F-64
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999 (CONTINUED)
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.
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
F-65
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999 (CONTINUED)
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.
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-66
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.
PricewaterhouseCoopers
Dallas, Texas
April 27, 2001
F-67
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-68
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-69
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-70
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
=============
The accompanying notes are an integral part of these financial statements.
F-71
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
F-72
SWPCS HOLDINGS, L.L.C.
CONSOLIDATED NOTES TO FINANCIAL STATEMENT
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.
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-73
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.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising expenses totaled
$4,011,443 for the year ended December 31, 2000.
F-74
SWPCS HOLDINGS, L.L.C.
CONSOLIDATED NOTES TO FINANCIAL STATEMENT
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.
4. LONG-TERM DEBT
Long-term debt consists of the following at December 31, 2000:
F-75
SWPCS HOLDINGS, L.L.C.
CONSOLIDATED NOTES TO FINANCIAL STATEMENT
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.
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
F-76
SWPCS HOLDINGS, L.L.C.
CONSOLIDATED NOTES TO FINANCIAL STATEMENT
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.
Future maturities of long-term debt as of December 31, 2000 are as follows:
F-77
SWPCS HOLDINGS, L.L.C.
CONSOLIDATED NOTES TO FINANCIAL STATEMENT
YEARS ENDING DECEMBER 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-78
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:
PERCENTAGE COMPANY
COMPANY INTEREST 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
F-79
SWPCS HOLDINGS, L.L.C.
CONSOLIDATED NOTES TO FINANCIAL STATEMENT
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.
9. FAIR VALUE 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-80
================================================================================
TABLE OF CONTENTS
Prospectus Summary ................................. 1
The Exchange Offer ................................. 3
The Registered Notes ............................... 5
Alamosa (Delaware), Inc. Selected Historical
Financial Information ........................... 8
Capitalization ..................................... 10
Risk Factors ....................................... 11
The Exchange Offer ................................. 24
Business ........................................... 33
Management's Discussion and Analysis of
Financial Condition and Results of
Operations ...................................... 45
Management ......................................... 55
Certain Relationships and Related
Transactions .................................... 64
Our Affiliation Agreements with Sprint PCS ......... 68
Regulatory Environment ............................. 77
Security Ownership of Certain Beneficial
Owners and Management ........................... 82
Description of Notes ............................... 85
Book-entry System .................................. 125
Exchange Offer; Registration Rights ................ 126
Plan of Distribution ............................... 129
Material United States Federal Tax
Considerations .................................. 129
Alamosa (Delaware), Inc. Selected Unaudited
Pro Forma Financial Data ........................ 130
Legal Matters ...................................... 136
Experts ............................................ 136
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."
$150,000,000
OFFER FOR ALL OUTSTANDING
13 5/8% SENIOR NOTES DUE 2011
IN EXCHANGE FOR
13 5/8% 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 INDEX
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 Statement on Form S-4, dated
January 12, 2001 (Registration No. 333-47916) of
Alamosa Holdings, Inc., which exhibit is incorporated
herein by reference.
2.4 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 Amended and Restated Certificate of Incorporation of
Alamosa (Delaware), Inc., filed as Exhibit 3.1 to Form
10-Q, for the quarter ended June 30, 2001, dated August
10, 2001, which exhibit is incorporated herein by
reference.
3.2 Amended and Restated Bylaws of Alamosa (Delaware),
Inc., filed as Exhibit 3.2 to the Registration
Statement on Form S-4, dated May 9, 2001 (Registration
No. 333-60572), of Alamosa (Delaware), Inc., which
exhibit is incorporated herein by reference.
4.1 Specimen Common Stock Certificate of Alamosa
(Delaware), filed as Exhibit 4.1 to the Registration
Statement on Form S-4, dated May 9, 2001.
(Registration No. 333-60572), of Alamosa (Delaware),
Inc., which exhibit is incorporated herein by
reference.
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
filed as Exhibit 4.10 to the Registration Statement on
Form S-4 dated May 9, 2001 (Registration No.
333-60572), of Alamosa (Delaware), Inc., which exhibit
is incorporated herein by reference.
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 filed as
Exhibit 4.11 to the Registration statement in Form S-4,
dated May 9, 2001 (Registration No. 333-60572), of
Alamosa (Delaware), Inc., which exhibit is herein
incorporated by reference.
4.12++ Indenture for 13 5/8% Senior Notes due 2011, dated
August 15, 2001, among Alamosa (Delaware), the
Subsidiary Guarantors party thereto, and Wells Fargo
Bank Minnesota, N.A., as trustee.
4.13++ Form of Global Note relating to the 13 5/8% Senior
Notes due 2011.
4.14++ Registration Rights Agreement, dated August 7, 2001, by
and among Alamosa (Delaware), Salomon Smith Barney
Inc., TD Securities (USA) Inc., First Union Securities,
Inc., and Scotia Capital (USA) Inc., relating to the
13 5/8% Senior Notes due 2011.
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, (or 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), filed as Exhibit 10.23, to
Amendment No. 1 to the Registration Statement on Form
S-4 dated June 8, 2001 (Registration No. 333-60572), of
Alamosa (Delaware), Inc., which exhibit is herein
incorporated by reference.
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, filed as
Exhibit 10.24 to the Registration Statement on Form
S-4, dated May 9, 2001 (Registration No. 333-60572), of
Alamosa (Delaware), Inc., which exhibit is incorporated
herein by reference.
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, filed as Exhibit 10.25 to
the Registration Statement on Form S-4, dated May 9,
2001 (Registration No. 333-60572), of Alamosa
(Delaware), Inc., which exhibit is incorporated herein
by reference.
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, filed as Exhibit 10.26 to the
Registration Statement on Form S-4, dated May 9, 2001
(Registration No. 333-60572), of Alamosa (Delaware),
Inc., which exhibit is incorporated herein by
reference.
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, filed as Exhibit 10.45 to the Registration
Statement on Form S-4, dated May 9, 2001 (Registration
No. 333-60572), of Alamosa (Delaware), Inc., which
exhibit is incorporated herein by reference.
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, filed as Exhibit 10.46 to the
Registration Statement on Form S-4, dated May 9, 2001
(Registration No. 333-60572), of Alamosa (Delaware),
Inc., which exhibit is incorporated herein by
reference.
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, filed as Exhibit
10.47 to the Registration Statement on Form S-4, dated
May 9, 2001 (Registration No. 333-60572), of Alamosa
(Delaware), Inc., which exhibit is incorporated herein
by reference.
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, filed as Exhibit
10.48 to the Registration Statement on Form S-4, dated
May 9, 2001 (Registration No. 333-60572), of Alamosa
(Delaware), Inc., which exhibit is incorporated herein
by reference.
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., filed as Exhibit 10.49 to the Registration
Statement on Form S-4, dated May 9, 2001 (Registration
No. 333-60572), of Alamosa (Delaware), Inc., which
exhibit is incorporated herein by reference.
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., filed as Exhibit
10.51 to the Registration Statement on Form S-4, dated
May 9, 2001 (Registration No. 333-60572), of Alamosa
(Delaware), Inc., which exhibit is incorporated herein
by reference.
10.52 Sprint Spectrum Trademark and Service Mark License
Agreement, dated July 10, 1998, between Sprint Spectrum
L.P. and Southwest PCS, L.P., filed as Exhibit 10.52 to
the Registration Statement on Form S-4, dated May 9,
2001 (Registration No. 333-60572), of Alamosa
(Delaware), Inc., which exhibit is incorporated herein
by reference.
10.53 Second Amendment, dated as of June 7, 2001, to the
Amended and Restated Credit Agreement, among Alamosa
Holdings, Inc., Alamosa (Delaware), Inc., Alamosa
Holdings, LLC, the Lenders party thereto, Export
Development Corporation, as co-documentation agent,
First Union National Bank, as documentation agent,
Toronto Dominion (Texas), Inc. as syndication agent and
Citicorp USA, Inc., as administrative and collateral
agent, as an amendment to Exhibit 10.23 above, filed as
Exhibit 10.55 to the Registration Statement on Form
S-1, dated July 31, 2001 (Registration No. 333-66358),
of Alamosa Holdings, Inc., which exhibit is
incorporated herein by reference.
10.54 Third Amendment and Waiver, dated as of July 19, 2001,
to the Amended and Restated Credit Agreement, among
Alamosa Holdings, Inc., Alamosa (Delaware), Inc.,
Alamosa Holdings, LLC, Export Development Corporation,
as co-documentation agent, First Union National Bank,
as documentation agent, Toronto Dominion (Texas), Inc.
as syndication agent and Citicorp USA, Inc., as
administrative and collateral agent, as an amendment to
Exhibit 10.23 above, filed as Exhibit 10.56 to the
Registration Statement on Form S-1, dated July 31, 2001
(Registration No. 333-66358), of Alamosa Holdings,
Inc., which exhibit is incorporated herein by
reference.
10.55++ Fourth Amendment and Waiver, dated as of August 6,
2001, to the Amended and Restated Credit Agreement,
among Alamosa Holdings, Inc., Alamosa (Delaware), Inc.,
Alamosa Holdings, LLC, the Lenders party thereto (the
"Lenders"), Export Development Corporation, as
co-documentation agent, First Union National Bank, as
documentation agent, Toronto Dominion (Texas), Inc., as
syndication agent, and Citicorp USA, Inc., as
administrative Agent and collateral Agent, as an
amendment to Exhibit 10.23 above.
10.56++ Fifth Amendment and Consent, dated as of August 7, 2001
(this "Amendment"), to the Amended and Restated Credit
Agreement, among Alamosa Holdings, Inc., Alamosa
(Delaware), Inc., Alamosa Holdings, LLC, the Lenders
party thereto (the "Lenders"), Export Development
Corporation, as co-documentation agent, First Union
National Bank, as documentation agent, Toronto Dominion
(Texas), Inc., as syndication agent, and Citicorp USA,
Inc., as administrative Agent and collateral Agent, as
an amendment to Exhibit 10.23 above.
10.57++ Security agreement, dated as of August 15, 2001, among
Alamosa (Delaware), Inc., a Delaware corporation, Wells
Fargo Bank Minnesota, N.A., as security agent, Wells
Fargo Bank Minnesota, N.A., as collateral agent for
Wells Fargo Bank Minnesota, N.A., as trustee under the
August 2001 Indenture (as to paragraph 6(b)), for Wells
Fargo Bank Minnesota, N.A., as trustee under the
January 2001 Indenture (as to paragraph 6(b)), and for
Wells Fargo Bank Minnesota, N.A., as trustee under the
2000 Indenture (as to paragraph 6(b)).
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.
++ Previously filed together with the Registration Statement on Form S-4,
dated August 28, 2001, (Registration No. 333-68538) of Alamosa
(Delaware), Inc. and herein incorporated by reference.
+++ Filed with this prospectus.
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 September 13, 2001.
ALAMOSA (DELAWARE), INC.
/s/ David E. Sharbutt
----------------------------------
David E. Sharbutt
Chairman of the Board of Directors
and Chief Executive Officer
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 9/13/01
--------------------------------------------
David E. Sharbutt Date
Chairman of the Board of Directors
and Chief Executive Officer
(Principal Executive Officer)
* /s/ David E. Sharbutt 9/13/01
---------------------------------------------
Kendall W. Cowan Date
Chief Financial Officer
(Principal Financial and Accounting Officer)
---------------------------------------------
Michael R. Budagher Date
Director
II-16
* /s/ David E. Sharbutt 9/13/01
---------------------------------------------
Ray M. Clapp, Jr. Date
Director
* /s/ David E. Sharbutt 9/13/01
---------------------------------------------
Scotty Hart Date
Director
* /s/ David E. Sharbutt 9/13/01
---------------------------------------------
Thomas Hyde Date
Director
* /s/ David E. Sharbutt 9/13/01
---------------------------------------------
Schuyler B. Marshall Date
Director
* /s/ David E. Sharbutt 9/13/01
---------------------------------------------
Tom M. Phelps Date
Director
* /s/ David E. Sharbutt 9/13/01
---------------------------------------------
Jimmy R. White Date
Director
* /s/ David E. Sharbutt 9/13/01
---------------------------------------------
Thomas F. Riley Date
Director
---------------------------------------------
Michael V. Roberts Date
Director
---------------------------------------------
Steven C. Roberts Date
Director
* By: /s/ David E. Sharbutt
-------------------------------------
David E. Sharbutt
Attorney-in-fact
II-17
EXHIBIT INDEX
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 Statement on Form S-4, dated
January 12, 2001 (Registration No. 333-47916) of
Alamosa Holdings, Inc., which exhibit is incorporated
herein by reference.
2.4 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 Amended and Restated Certificate of Incorporation of
Alamosa (Delaware), Inc., filed as Exhibit 3.1 to Form
10-Q, for the quarter ended June 30, 2001, dated August
10, 2001, which exhibit is incorporated herein by
reference.
3.2 Amended and Restated Bylaws of Alamosa (Delaware),
Inc., filed as Exhibit 3.2 to the Registration
Statement on Form S-4, dated May 9, 2001 (Registration
No. 333-60572), of Alamosa (Delaware), Inc., which
exhibit is incorporated herein by reference.
4.1 Specimen Common Stock Certificate of Alamosa
(Delaware), filed as Exhibit 4.1 to the Registration
Statement on Form S-4, dated May 9, 2001.
(Registration No. 333-60572), of Alamosa (Delaware),
Inc., which exhibit is incorporated herein by
reference.
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.
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
filed as Exhibit 4.10 to the Registration Statement on
Form S-4 dated May 9, 2001 (Registration No.
333-60572), of Alamosa (Delaware), Inc., which exhibit
is incorporated herein by reference.
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 filed as
Exhibit 4.11 to the Registration statement in Form S-4,
dated May 9, 2001 (Registration No. 333-60572), of
Alamosa (Delaware), Inc., which exhibit is herein
incorporated by reference.
4.12++ Indenture for 13 5/8% Senior Notes due 2011, dated
August 15, 2001, among Alamosa (Delaware), the
Subsidiary Guarantors party thereto, and Wells Fargo
Bank Minnesota, N.A., as trustee.
4.13++ Form of Global Note relating to the 13 5/8% Senior
Notes due 2011.
4.14++ Registration Rights Agreement, dated August 7, 2001, by
and among Alamosa (Delaware), Salomon Smith Barney
Inc., TD Securities (USA) Inc., First Union Securities,
Inc., and Scotia Capital (USA) Inc., relating to the
13 5/8% Senior Notes due 2011.
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.
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.
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.
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.
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, (or 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), filed as Exhibit 10.23, to
Amendment No. 1 to the Registration Statement on Form
S-4 dated June 8, 2001 (Registration No. 333-60572), of
Alamosa (Delaware), Inc., which exhibit is herein
incorporated by reference.
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, filed as
Exhibit 10.24 to the Registration Statement on Form
S-4, dated May 9, 2001 (Registration No. 333-60572), of
Alamosa (Delaware), Inc., which exhibit is incorporated
herein by reference.
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, filed as Exhibit 10.25 to
the Registration Statement on Form S-4, dated May 9,
2001 (Registration No. 333-60572), of Alamosa
(Delaware), Inc., which exhibit is incorporated herein
by reference.
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, filed as Exhibit 10.26 to the
Registration Statement on Form S-4, dated May 9, 2001
(Registration No. 333-60572), of Alamosa (Delaware),
Inc., which exhibit is incorporated herein by
reference.
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.
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.
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.
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, filed as Exhibit 10.45 to the Registration
Statement on Form S-4, dated May 9, 2001 (Registration
No. 333-60572), of Alamosa (Delaware), Inc., which
exhibit is incorporated herein by reference.
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, filed as Exhibit 10.46 to the
Registration Statement on Form S-4, dated May 9, 2001
(Registration No. 333-60572), of Alamosa (Delaware),
Inc., which exhibit is incorporated herein by
reference.
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, filed as Exhibit
10.47 to the Registration Statement on Form S-4, dated
May 9, 2001 (Registration No. 333-60572), of Alamosa
(Delaware), Inc., which exhibit is incorporated herein
by reference.
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, filed as Exhibit
10.48 to the Registration Statement on Form S-4, dated
May 9, 2001 (Registration No. 333-60572), of Alamosa
(Delaware), Inc., which exhibit is incorporated herein
by reference.
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., filed as Exhibit 10.49 to the Registration
Statement on Form S-4, dated May 9, 2001 (Registration
No. 333-60572), of Alamosa (Delaware), Inc., which
exhibit is incorporated herein by reference.
10.50 Sprint PCS Services Agreement, dated July 10, 1998,
between Sprint Spectrum L.P. and Southwest PCS, L.P.
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., filed as Exhibit
10.51 to the Registration Statement on Form S-4, dated
May 9, 2001 (Registration No. 333-60572), of Alamosa
(Delaware), Inc., which exhibit is incorporated herein
by reference.
10.52 Sprint Spectrum Trademark and Service Mark License
Agreement, dated July 10, 1998, between Sprint Spectrum
L.P. and Southwest PCS, L.P., filed as Exhibit 10.52 to
the Registration Statement on Form S-4, dated May 9,
2001 (Registration No. 333-60572), of Alamosa
(Delaware), Inc., which exhibit is incorporated herein
by reference.
10.53 Second Amendment, dated as of June 7, 2001, to the
Amended and Restated Credit Agreement, among Alamosa
Holdings, Inc., Alamosa (Delaware), Inc., Alamosa
Holdings, LLC, the Lenders party thereto, Export
Development Corporation, as co-documentation agent,
First Union National Bank, as documentation agent,
Toronto Dominion (Texas), Inc. as syndication agent and
Citicorp USA, Inc., as administrative and collateral
agent, as an amendment to Exhibit 10.23 above, filed as
Exhibit 10.55 to the Registration Statement on Form
S-1, dated July 31, 2001 (Registration No. 333-66358),
of Alamosa Holdings, Inc., which exhibit is
incorporated herein by reference.
10.54 Third Amendment and Waiver, dated as of July 19, 2001,
to the Amended and Restated Credit Agreement, among
Alamosa Holdings, Inc., Alamosa (Delaware), Inc.,
Alamosa Holdings, LLC, Export Development Corporation,
as co-documentation agent, First Union National Bank,
as documentation agent, Toronto Dominion (Texas), Inc.
as syndication agent and Citicorp USA, Inc., as
administrative and collateral agent, as an amendment to
Exhibit 10.23 above, filed as Exhibit 10.56 to the
Registration Statement on Form S-1, dated July 31, 2001
(Registration No. 333-66358), of Alamosa Holdings,
Inc., which exhibit is incorporated herein by
reference.
10.55++ Fourth Amendment and Waiver, dated as of August 6,
2001, to the Amended and Restated Credit Agreement,
among Alamosa Holdings, Inc., Alamosa (Delaware), Inc.,
Alamosa Holdings, LLC, the Lenders party thereto (the
"Lenders"), Export Development Corporation, as
co-documentation agent, First Union National Bank, as
documentation agent, Toronto Dominion (Texas), Inc., as
syndication agent, and Citicorp USA, Inc., as
administrative Agent and collateral Agent, as an
amendment to Exhibit 10.23 above.
10.56++ Fifth Amendment and Consent, dated as of August 7, 2001
(this "Amendment"), to the Amended and Restated Credit
Agreement, among Alamosa Holdings, Inc., Alamosa
(Delaware), Inc., Alamosa Holdings, LLC, the Lenders
party thereto (the "Lenders"), Export Development
Corporation, as co-documentation agent, First Union
National Bank, as documentation agent, Toronto Dominion
(Texas), Inc., as syndication agent, and Citicorp USA,
Inc., as administrative Agent and collateral Agent, as
an amendment to Exhibit 10.23 above.
10.57++ Security agreement, dated as of August 15, 2001, among
Alamosa (Delaware), Inc., a Delaware corporation, Wells
Fargo Bank Minnesota, N.A., as security agent, Wells
Fargo Bank Minnesota, N.A., as collateral agent for
Wells Fargo Bank Minnesota, N.A., as trustee under the
August 2001 Indenture (as to paragraph 6(b)), for Wells
Fargo Bank Minnesota, N.A., as trustee under the
January 2001 Indenture (as to paragraph 6(b)), and for
Wells Fargo Bank Minnesota, N.A., as trustee under the
2000 Indenture (as to paragraph 6(b)).
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.
++ Previously filed together with the Registration Statement on Form S-4,
dated August 28, 2001, (Registration No. 333-68538) of Alamosa
(Delaware), Inc. and herein incorporated by reference.
+++ Filed with this prospectus.