Filed Pursuant to Rule 424(b)(3)
Registration No. 333-112843
[GRAPHIC OMITTED - LOGO]
9 3/8% Senior Subordinated Secured Notes due 2009
and
Shares of Common Stock
This prospectus relates to:
o $107,689,600 aggregate principal amount of our 9 3/8% Senior
Subordinated Secured Notes due 2009; and
o 4,447,895 shares of our common stock.
We issued the notes and common stock to the selling holders named in
this prospectus (or in any supplement to this prospectus) on February 20, 2004
in a private offering made in connection with our recent capital restructuring.
The notes and the common stock that are offered for resale by this prospectus
(or in any supplement to this prospectus) are offered for the accounts of the
selling holders. The selling holders may sell the notes and the common stock
from time to time in any legal manner selected by the selling holder, including
directly to purchasers or through underwriters, broker-dealers or agents who
may act as agent or as principal, and who may receive compensation in the form
of discounts, concessions or commissions from the selling holders or the
purchasers. The notes and the common stock may be sold in one or more
transactions at fixed prices, prevailing market prices at the time of sale,
prices related to the prevailing market prices, varying prices determined at
the time of sale or negotiated prices. We will not receive any of the proceeds
from the sale of the notes or the common stock by the selling holders.
The selling holders and any broker-dealers that participate in the
distribution of the notes and the common stock offered hereby may be deemed to
be "underwriters" within the meaning of Section 2(a)(11) of the Securities Act.
As a result, any profits on the sale of notes or common stock by the selling
holders and any discounts, commissions or concessions received by any
broker-dealers or agents may be deemed to be underwriting commissions and
discounts under the Securities Act. Upon being notified by the selling holders
that any material arrangement has been entered into with a broker or dealer for
the sales through a secondary distribution, or a purchase by a broker or
dealer, a supplemented prospectus will be filed, if required, disclosing, among
other matters, the names of such brokers and dealers, the amount of notes or
the number of shares of common stock involved, the price at which such notes or
shares of common stock are being sold and the commissions paid or the discounts
or concessions allowed to such broker-dealers.
As used in this prospectus, "selling holders" includes holders of
shares of common stock or notes on the date hereof and any donees, pledgees,
transferees or other successors-in-interest, selling shares of common stock or
notes received after the date of this prospectus from a selling holder.
The notes bear interest at the rate of 9-3/8% per year and will mature
on September 1, 2009. Interest on the notes accrues from January 1, 2004 and is
payable on January 1 and July 1 of each year, beginning on July 1, 2004. We may
redeem some or all of the notes at any time on or after January 1, 2006, at
redemption prices described under "Description of the Notes ? Redemption." The
notes are our senior subordinated obligations and are guaranteed by our
subsidiaries on a senior subordinated basis and secured by a second-priority
lien on our assets that secure our senior debt.
Our common stock is quoted on The Nasdaq National Market under the
symbol "PCSAD." On February 19, 2004, the last reported bid price per share of
our common stock on The Nasdaq National Market was $21.28.
Investing in the notes and our common stock involves risks. See "Risk
Factors" beginning on page 4.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these securities or passed
upon the accuracy or adequacy of this prospectus. Any representation to the
contrary is a criminal offense.
The date of this Prospectus is February 20, 2004
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS
AND THOSE DOCUMENTS INCORPORATED BY REFERENCE HEREIN. WE HAVE NOT AUTHORIZED
ANYONE TO PROVIDE YOU WITH DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH
DIFFERENT OR INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON IT. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO PURCHASE, THE SECURITIES OFFERED BY THIS PROSPECTUS IN ANY JURISDICTION TO
OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION OF ANY OFFER IN SUCH JURISDICTION. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN THIS PROSPECTUS OR ANY DOCUMENT INCORPORATED BY
REFERENCE IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT COVER OF
THE APPLICABLE DOCUMENT. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES PURSUANT TO THIS PROSPECTUS SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
INFORMATION SET FORTH OR INCORPORATED INTO THIS PROSPECTUS BY REFERENCE OR IN
OUR AFFAIRS SINCE THE DATE OF THIS PROSPECTUS. OUR BUSINESS, FINANCIAL
CONDITION, RESULTS OF OPERATIONS AND PROSPECTS MAY HAVE CHANGED SINCE THAT
DATE.
TABLE OF CONTENTS
Page
Summary ............................................................... 1
Risk Factors .......................................................... 4
Forward-looking Statements ............................................ 11
Use of Proceeds ....................................................... 13
Ratio of Earnings to Fixed Charges..................................... 13
Selling Holders ....................................................... 14
Description of the Notes .............................................. 16
Description of Capital Stock .......................................... 53
Material United States Federal Income Tax Considerations .............. 56
Plan of Distribution .................................................. 62
Legal Matters ......................................................... 64
Tax Matters ........................................................... 64
Experts ............................................................... 64
Where You Can Find More Information ................................... 64
Documents Incorporated by Reference ................................... 64
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement on Form S-3 that we
and our subsidiaries filed jointly with the Securities and Exchange Commission
(the "SEC") using a "shelf" registration or continuous offering process. Under
this shelf process, selling holders may from time to time sell the securities
described in this prospectus in one or more offerings.
This prospectus provides you with a general description of the
securities that the selling holders may offer. Each time a selling holder sells
securities, the selling holders are required to provide you with a prospectus
and/or a prospectus supplement containing specific information about the
selling holder. A prospectus supplement may include other special
considerations applicable to those securities. The prospectus supplement may
also add, update or change information in this prospectus. If there is any
inconsistency between the information in this prospectus and any prospectus
supplement, you should rely on the information in that prospectus supplement.
You should read carefully both this prospectus and any prospectus supplement,
together with the additional information described under the heading "Where You
Can Find More Information."
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The registration statement containing this prospectus, including the
exhibits to the registration statement, provides additional information about
us and the securities offered under this prospectus. The registration
statement, including the exhibits, can be read on the SEC web site or at the
SEC offices mentioned under the heading "Where You Can Find More Information."
References in this prospectus to "AirGate," the "Company," "we, "us"
and "our" refer to AirGate PCS, Inc. together with its subsidiaries, unless
otherwise specified.
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SUMMARY
This summary contains basic information about us. Because it is a
summary, it does not contain all of the information that you should consider
before purchasing any of the common stock or notes offered hereby. You should
read this entire prospectus carefully, including the section entitled "Risk
Factors" and the documents incorporated by reference in this prospectus,
including any documents incorporated after the date of this prospectus, before
making any investment decision.
AirGate PCS, Inc. and its subsidiaries were created for the purpose of
providing wireless Personal Communication Services, or "PCS." We are a network
partner of Sprint PCS with the exclusive right to market and provide Sprint PCS
products and services in a defined network territory. "Sprint PCS" is a group
of wholly-owned subsidiaries of Sprint Corporation, a diversified
telecommunications service provider, that operate and manage Sprint's PCS
products and services.
AirGate offers PCS products and services in a territory covering
portions of South Carolina, North Carolina and Georgia with attractive
demographic characteristics. AirGate's territory has many vacation
destinations, covers substantial highway mileage and includes a large student
population, with at least 60 colleges and universities. As of December 31,
2003, AirGate had 359,898 subscribers and total network coverage of
approximately 6.1 million residents, representing approximately 83% of the
residents in its territory. For the quarter ended December 31, 2003, AirGate
(excluding iPCS, Inc.) generated revenue of approximately $81.5 million and had
a loss from continuing operations of $11.1 million. AirGate has experienced
continued net losses from inception and has an accumulated deficit of $1.1
billion and stockholders' deficit of $203.9 million at December 31, 2003.
In connection with their audit of our year-end financial results, KPMG
LLP, our independent auditors, included an explanatory paragraph for "going
concern" in their audit opinion with respect to our fiscal 2003 financial
statements. Such an explanatory paragraph would result in a default under our
credit facility. We have obtained an amendment of our credit facility to permit
this explanatory paragraph and prevent a default under the credit facility.
On February 20, 2004, AirGate completed a recapitalization that
included, among other matters, an exchange of approximately $298.2 million of
its outstanding 13.5% senior subordinated discount notes due 2009 for an
aggregate of approximately 6.6 million shares of AirGate's common stock (on a
post-reverse split basis) and approximately $159.0 million of AirGate's 9-3/8%
senior subordinated secured notes due 2009, which we refer to herein as the
"notes." In connection with the recapitalization, certain holders of our
discount notes entered into a support agreement, pursuant to which these
noteholders had agreed to exchange their outstanding discount notes for shares
of common stock and the notes. Because these noteholders received restricted
shares of common stock and notes, pursuant to a registration rights agreement,
we granted them certain registration rights, which included filing the
registration statement of which this prospectus forms a part, to permit the
resale of the common stock and notes.
Our principal executive offices are located at Harris Tower, 233
Peachtree Street NE, Suite 1700, Atlanta, Georgia 30303. Our website is located
at www.airgatepcsa.com. Information contained on our website does not
constitute a part of this prospectus.
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THE SECURITIES
The Common Stock
Common Stock Offered by
the Selling Holders.......................4,447,895 shares
Common Stock Outstanding......................11,760,942 shares
The Nasdaq National Market Symbol.............PCSAD
The Notes
Issuer........................................ AirGate PCS, Inc.
Notes Offered................................. $107,689,600 million principal amount of 9-3/8% Senior Subordinated Secured Notes
due 2009.
Maturity Date................................. September 1, 2009.
Interest Payment Dates........................ Interest on the notes accrues from January 1, 2004 and will be paid each January 1
and July 1, commencing July 1, 2004.
Ranking....................................... The notes are our senior subordinated secured obligations and rank junior in right
of payment to up to $175.0 million of indebtedness under our credit facility. As
of December 31, 2003, after giving effect to the restructuring, we would have had
approximately $309.3 million of outstanding indebtedness, approximately $141.3
million of which would have been senior to the notes.
Collateral.................................... The notes are secured by second-priority liens, subject to certain exceptions and
permitted liens, on substantially all of our and our restricted subsidiaries'
existing and after-acquired assets for which a first-priority lien has been
granted to the lenders under our credit facility, which we refer to in this
prospectus as the "collateral."
The indenture and the security documents relating to the notes permit us to
incur additional debt and other obligations that may also be secured by liens
on the collateral that are senior to or pari passu with the second-priority
lien securing the notes, subject to certain restrictions. No appraisals of any
collateral have been prepared by us or on our behalf in connection with this
exchange offer.
The first-priority liens on all or a portion of the collateral may be released
as more fully provided under the security documents governing the credit
facility, and under certain circumstances, the second-priority lien that
secures the notes on such released collateral shall automatically be released
without the consent of the holders of the notes. In addition, the lenders under
the credit facility have the sole ability to control the exercise of remedies
with respect to the collateral. In the event of a liquidation of the
collateral, the proceeds may not be sufficient to satisfy the obligations under
the credit facility or the notes. See "Risk Factors -- Risks Relating to the
Notes -- The value of the collateral securing the notes may not be sufficient
to satisfy obligations under the notes and the collateral securing the notes
may be reduced or diluted under certain circumstances" and "-- The lenders
under our credit facility have the sole right to exercise remedies against the
collateral for so long as the credit facility is outstanding, including
releasing the collateral securing the notes." You should read "Description of
the Notes -- Security" for a more complete description of the security granted
to the holders of the notes.
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Optional Redemption........................... At any time on or after January 1, 2006, we may redeem the notes in whole or in
part, at redemption prices described under the caption "Description of the Notes--
Redemption," plus accrued and unpaid interest, if any, to the redemption date.
Change of Control............................. Upon a change of control, as described under the caption "Description of the Notes
-- Repurchase at the Option of Holders-- Change of Control," you have the right, as
a holder of notes, to require us to repurchase all or part of your notes at a
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of repurchase.
Guarantee..................................... AirGate's obligations under the notes are fully and unconditionally guaranteed on
a senior subordinated secured basis by all of its restricted subsidiaries, which
we collectively refer to as the guarantors. The guarantees are senior subordinated
secured obligations of the guarantors and rank junior to up to $175.0 million of
indebtedness of the guarantors under our credit facility. See "Description of the
Notes -- Guarantees."
Restrictive Covenants......................... The indenture governing the notes limits our ability and the ability of our
restricted subsidiaries to:
o........incur more debt;
o........create liens;
o........repurchase stock and make certain investments;
o........pay dividends, make loans or transfer property or assets;
o........enter into sale and leaseback transactions;
o........transfer or dispose of substantially all of our assets; and
o........engage in transactions with affiliates.
o........These covenants are subject to a number of important exceptions and
limitations that are described under the caption "Description of the
Notes."
Trading....................................... We do not intend to list the notes for trading on any securities exchange.
Risk Factors.................................. You should consider carefully all of the information set forth in this prospectus
and, in particular, you should evaluate the specific factors set forth under "Risk
Factors" in deciding whether to invest in the notes.
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RISK FACTORS
Our business is affected by the factors discussed in Management's
Discussion and Analysis of Financial Condition and Results of Operations
incorporated into this prospectus by reference to our Annual Report on Form
10-K/A and the other reports that we file with the SEC under the Securities
Exchange Act of 1934. In addition, the other factors described in this section
could affect our business, results of operations or the prices of our
securities. We believe the risks and uncertainties described below, in our
Annual Report on Form 10-K/A and the other reports that we file with the SEC
under the Exchange Act are the material risks and uncertainties known or
currently anticipated by us that affect our business. You should carefully
consider all of these factors before making a decision to purchase the common
stock or notes. Each of the following factors could have a materially adverse
effect on our business and could result in a loss or a decrease in the value of
your investment.
Risks Related to Our Common Stock
We cannot predict the price at which our common stock will trade.
We cannot predict
o what the demand for our stock will be;
o how many shares of our common stock will be offered for sale
or be sold; or
o the price at which our common stock will trade.
Our common stock may experience price volatility because there are no
agreements or other restrictions that prevent the sale of a large number of our
shares of common stock. In addition, the shares of common stock issued in the
restructuring may further increase price volatility because approximately 32%
of such issuance has been registered with the SEC, which means that those
shares are, in general, freely tradeable. In addition, the offer and sale of
shares of common stock pursuant to this prospectus has been registered with the
SEC, which means that these shares also are, in general, freely tradeable. Such
sales, or the potential for such sales, could adversely affect the price of our
stock and create greater volatility in the price of our common stock.
We may not achieve or sustain operating profitability or positive cash flows,
which may adversely affect our stock price.
We have a limited operating history. Our ability to achieve and sustain
operating profitability will depend on many factors, including the
attractiveness and competitiveness of Sprint PCS products and services and our
ability to:
o increase our subscriber base;
o reduce churn;
o sustain monthly average revenues per user; and
o reduce operating expenses and maintain a moderate level of
capital expenditures.
We have experienced slowing net subscriber growth, higher rates of
churn than industry averages and increased costs to acquire new subscribers and
as a result, have had to revise our business plan. If we do not achieve and
maintain positive cash flows from operations as projected, our stock price may
be materially adversely affected.
Our stock price has suffered significant declines and remains volatile.
The market price of our common stock has been and may continue to be
subject to wide fluctuations in response to factors such as the following, some
of which are beyond our control:
o quarterly variations in our operating results;
o concerns about liquidity;
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o operating results that vary from the expectations of
securities analysts and investors;
o changes in expectations as to our future financial
performance, including financial estimates by securities
analysts and investors;
o changes in the market perception about the prospects and
results of operations and market valuations of other companies
in the telecommunications industry in general and the wireless
industry in particular, including Sprint and its PCS network
partners and our competitors;
o changes in our relationship with Sprint, including the impact
of our efforts to more closely examine Sprint charges and
amounts paid by Sprint, and our disputes with Sprint;
o litigation between other Sprint network partners and Sprint;
o announcements by Sprint concerning developments or changes in
its business, financial condition or results of operations, or
in its expectations as to future financial performance;
o actual or potential defaults by us under any of our
agreements;
o actual or potential defaults in bank covenants by Sprint or
Sprint PCS network partners, which may result in a perception
that we are unable to comply with our bank covenants;
o announcements by Sprint or our competitors of technological
innovations, new products and services or changes to existing
products and services;
o changes in law and regulation;
o announcements by third parties of significant claims or
proceedings against us;
o announcements by us or our competitors of significant
contracts, acquisitions, strategic partnerships, joint
ventures or capital commitments; and
o general economic and competitive conditions.
Our common stock may be concentrated in a few holders.
As a result of the restructuring, the holders of old notes received
shares of our common stock representing approximately 55.9% of our common stock.
Before the restructuring, the majority of our outstanding old notes were held by
a few investors. Consequently, these investors individually hold high
concentrations of our common stock following the restructuring. The largest
percentage of our common stock held by any single noteholder as a result of the
consummation of the financial restructuring is approximately 13.3%.
In addition, we entered into a registration rights agreement at the
time of our acquisition of iPCS, Inc. with some of the former iPCS stockholders.
Under the terms of the registration rights agreement, Blackstone Communications
Partners I L.P. and certain of its affiliates ("Blackstone") have a demand
registration right, which became exercisable after November 30, 2002, subject to
the requirement that the offering exceed size requirements. In addition, the
former iPCS stockholders, including Blackstone, have incidental registration
rights pursuant to which they can, in general, include their shares of our
common stock in any public registration we initiate, whether or not for sale for
our own account.
Sales of substantial amounts of shares of our common stock by any of
these large holders, or even the potential for such sales, could lower the
market price of our common stock and impair its ability to raise capital through
the sale of equity securities.
We do not intend to pay dividends in the foreseeable future.
We do not anticipate paying any cash dividends on our common stock in
the foreseeable future. We intend to retain any future earnings to fund
operations, debt service requirements and other corporate needs. Accordingly,
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you will not receive a return on your investment in our common stock through the
payment of dividends in the foreseeable future and may not realize a return on
your investment even if you sell your shares. In addition, both our credit
facility and the indenture governing the notes severely limit our ability to
declare and pay dividends.
Our amended and restated certificate of incorporation and bylaws include
provisions that may discourage a change of control transaction or make removal
of members of the board of directors more difficult.
Some provisions of our amended and restated certificate of
incorporation and bylaws could have the effect of delaying, discouraging or
preventing a change in control of us or making removal of members of the board
of directors more difficult. These provisions include the following:
o a classified board, with each board member serving a
three-year term;
o no authorization for stockholders to call a special meeting;
o no ability of stockholders to remove directors without cause;
o prohibition of action by written consent of stockholders; and
o advance notice for nomination of directors and for stockholder
proposals.
These provisions, among others, may have the effect of discouraging a
third party from making a tender offer or otherwise attempting to obtain control
of us, even though a change in ownership might be economically beneficial to us
and our stockholders.
Risks Related to the Notes
Our substantial level of indebtedness could adversely affect our financial
condition and prevent us from fulfilling our obligations on the notes.
We have a substantial amount of indebtedness that requires significant
interest payments. As of December 31, 2003, on a pro forma basis after giving
effect to the restructuring, we would have had approximately $309.3 million of
total debt. In addition, the indenture for the notes permits us to incur
additional indebtedness, subject to specified restrictions.
Our substantial level of indebtedness could have important consequences
to you, including the following:
o limiting our ability to fund working capital, capital
expenditures, acquisitions or other general corporate
purposes;
o requiring us to use a substantial portion of our cash flow
from operations to pay interest and principal on the credit
facility, the notes and other indebtedness, which will reduce
the funds available to us for purposes such as capital
expenditures, marketing, development, potential acquisitions
and other general corporate purposes;
o exposing us to fluctuations in interest rates, to the extent
our borrowings bear variable rates of interest, including
through interest rate swap agreements;
o placing us at a competitive disadvantage compared to our
competitors that have less debt;
o reducing our flexibility in planning for, or responding to,
changing conditions in our industry, including increased
competition; and
o making us more vulnerable to general economic downturns and
adverse developments in our business.
Your right to receive payments on the notes and guarantees is subordinated to
our credit facility.
Payment on the notes and guarantees is subordinated in right of payment
to up to $175.0 million of our and the guarantors' senior debt under our credit
facility. As a result, upon any distribution to our creditors or the guarantors'
creditors in a bankruptcy, liquidation, reorganization or similar proceeding
relating to us or the guarantors or our or their property, the holders of our
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and the guarantors' senior debt will be entitled to be paid in full in cash
before any cash payment may be made on the notes or the related guarantees. In
these cases, we and the guarantors may not have sufficient funds to pay all of
our creditors, and holders of the notes may receive less, ratably, than the
holders of our senior debt. In addition, all payments on the notes and the
related guarantees will be blocked in the event of a payment default on our
designated senior debt and may be blocked for up to 179 consecutive days in the
event of certain defaults other than payment defaults on our designated senior
debt.
As of December 31, 2003, the notes and the related guarantees would
have been subordinated to approximately $151.5 million of debt under our credit
facility. In addition, the indenture and our credit facility permit us and the
guarantors to incur additional debt, some or all of which may be senior debt.
See "Description of the Notes -- Limitation on Incurrence of Indebtedness and
Issuance of Preferred Stock." All amounts outstanding from time to time under
our credit facility will be designated senior debt.
The value of the collateral securing the notes may not be sufficient to satisfy
obligations under the notes, and the collateral securing the notes may be
reduced or diluted under certain circumstances.
The notes are secured by second-priority liens on the collateral
described in this prospectus. The collateral also secures on a first-priority
basis our obligations under our credit facility, as well as other indebtedness
to the extent permitted by the terms of the indenture governing the notes.
We do not own our 800 tower sites (except one) or retail or
administrative sites. The collateral consists primarily of
o network assets such as base stations, switching equipment and
other specialized telecommunications equipment;
o rights under agreements, such as those with Sprint, or leases
with tower operators and other landlords; and
o office and retail store equipment.
In the event of foreclosure on the collateral, the proceeds from the
sale of the collateral securing indebtedness under the notes may not be
sufficient to satisfy our obligations on the notes. This is so because proceeds
from a sale of the collateral would be distributed to satisfy indebtedness and
all other obligations under the credit facility and any other indebtedness
secured by a first-priority lien on the collateral before any such proceeds
could be distributed in respect of the notes. Only after all of our obligations
under the credit facility and any other first-priority indebtedness have been
satisfied will proceeds from the sale of collateral be available to holders of
the notes.
The value of the collateral and the amount to be received upon a sale
of the collateral will depend on many factors, including, among others,
o our ability to sell our equipment as part of an operating
business;
o the perceived value of the Sprint agreements and Sprint's
consent to any transfer;
o the condition of the collateral and our industry;
o the ability to sell the collateral in an orderly sale;
o the condition of the international, national and local
economies;
o the availability of buyers; and
o similar factors.
The book value of the collateral should not be relied on as a measure
of realizable value for such assets. By their nature, most of the collateral may
be illiquid and may have little or no readily ascertainable market value. In
addition, a significant portion of the collateral includes assets that may only
be usable, and thus retain value, as part of our existing operating businesses.
Accordingly, any such sale of the collateral separate from the sale of
our business may not be feasible or of significant value. To the extent that
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holders of other secured indebtedness or third parties enjoy liens (including
statutory liens), such holders or third parties may have rights and remedies
with respect to the collateral securing the notes that, if exercised, could
reduce the proceeds available to satisfy the obligations under the notes. See
"Description of the Notes -- Security -- Intercreditor Agreement."
The indenture and the credit facility may also permit us to designate
one or more of our restricted subsidiaries as an unrestricted subsidiary. If we
designate an unrestricted subsidiary, all of the liens on any collateral owned
by the unrestricted subsidiary or any of its subsidiaries and any guarantees of
the notes by the unrestricted subsidiary or any of its subsidiaries will be
released under the indenture. Designation of an unrestricted subsidiary will
reduce the aggregate value of the collateral to the extent that liens on the
assets of the unrestricted subsidiary and its subsidiaries are released and the
notes will be structurally subordinated to the debt and other obligations of the
unrestricted subsidiary and its subsidiaries. This may materially reduce the
collateral available to secure the notes.
The lenders under our credit facility have the sole right to exercise remedies
against the collateral for so long as the credit facility is outstanding,
including releasing the collateral securing the notes.
The intercreditor agreement provides that the lenders under our credit
facility have the exclusive right to manage, perform and enforce the terms of
the security documents relating to the collateral, and to exercise and enforce
all privileges, rights and remedies thereunder, including to take or retake
control or possession of the collateral and to hold or dispose of the
collateral. Under the terms of the intercreditor agreement, if the lenders under
the credit facility release a portion of the collateral securing the credit
facility in connection with certain sales of assets that are permitted or not
prohibited under the indenture, then the collateral so released would no longer
secure our obligations under the notes. Any collateral released would cease to
act as security for the notes and the guarantees of the notes, as well as our
obligations under the credit facility. In addition, if the lenders under the
credit facility release collateral in connection with the exercise of remedies
against such collateral to satisfy obligations under the credit facility, then
the lien securing the notes also would be released.
In addition, since the lenders under the credit facility control the
disposition of the collateral securing the credit facility and the notes, if
there were an event of default under the notes, the lenders could decide not to
proceed against the collateral, regardless of whether or not there also were a
default under the credit facility. In such event, the only remedy available to
the holders of the notes would be to accelerate the indebtedness evidenced by
the notes and to sue for payment on the notes and the guarantees. By virtue of
the direction of the administration of the pledges and security interests and
the release of collateral, actions may be taken under the collateral documents
that may be adverse to you.
The indenture and our credit facility impose significant operating and financial
restrictions on us, which may prevent us from capitalizing on business
opportunities and taking some corporate actions.
The indenture and our credit facility impose, and the terms of any
future debt may impose, significant operating and financial restrictions on us.
These restrictions, among other things, limit our ability and that of our
subsidiaries to:
o incur or guarantee additional indebtedness;
o issue redeemable preferred stock and non-guarantor subsidiary
preferred stock;
o pay dividends or make other distributions;
o repurchase our stock;
o make investments in other businesses or entities, including
entering into and funding joint ventures with third parties;
o sell or otherwise dispose of assets, including capital stock
of subsidiaries;
o create liens;
o prepay, redeem or repurchase debt;
o enter into agreements restricting our subsidiaries' ability to
pay dividends;
o enter into transactions with affiliates;
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o enter into sale and leaseback transactions; and
o consolidate, merge or sell all of our assets.
In addition, our credit facility requires us to maintain specified
financial ratios and satisfy other financial condition tests. These covenants
may adversely affect our ability to finance our future operations or capital
needs or to pursue available business opportunities or limit our ability to plan
for or react to market conditions or meet capital needs or otherwise restrict
our activities or business plans. A breach of any of those covenants or our
inability to maintain the required financial ratios could result in a default in
respect of the related indebtedness. If a default occurs, the relevant lenders
could elect to declare the indebtedness, together with accrued interest and
other fees, to be immediately due and payable and proceed against any collateral
securing that indebtedness.
Federal and state statutes allow courts, under specific circumstances, to void
guarantees and require noteholders to return payments received from guarantors.
Under the federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, a guarantee could be voided, or claims in respect of a
guarantee could be subordinated to all other debts of that guarantor, if the
guarantor at the time it incurred the indebtedness evidenced by its guarantee:
o received less than reasonably equivalent value or fair
consideration for the incurrence of its guarantee and was
insolvent or rendered insolvent by reason of such incurrence;
o was engaged in a business or transaction for which the
guarantor's remaining assets constituted unreasonably small
capital; or
o intended to incur, or believed that it would incur, debts
beyond its ability to pay those debts as they mature.
The measures of insolvency for purposes of these fraudulent transfer
laws will vary depending upon the law applied in any proceeding to determine
whether a fraudulent transfer has occurred. Generally, however, a guarantor
would be considered insolvent if:
o the sum of its debts, including contingent liabilities, was
greater than the fair saleable value of all of its assets;
o the present fair saleable value of its assets was less than
the amount that would be required to pay its probable
liability on its existing debts, including contingent
liabilities, as they become absolute and mature; or
o it could not pay its debts as they become due.
The indenture requires that our restricted subsidiaries guarantee the
notes. These considerations also apply to their guarantees. Because our
subsidiaries do not conduct any independent operations, they do not generate any
revenues. Consequently, they depend on AirGate to support their operations,
which AirGate is not contractually obligated to do.
We cannot assure you as to what standard a court would apply in
determining whether a guarantor would be considered to be insolvent. If a court
determined that a guarantor was insolvent after giving effect to the guarantees,
it could void the guarantees of the notes by one or more of our subsidiaries and
require you to return any payments received from such subsidiaries.
Our credit facility, as amended, prevents us from repurchasing the notes upon a
change of control or asset sale.
Upon a "change of control" or "asset sale," in each case as defined in
the indenture, we are required under certain circumstances to make an offer to
repurchase all of the outstanding notes at a price equal to, for a change of
control, 101% of the principal amount thereof and, for an asset sale, 100% of
the principal amount thereof, together with any accrued and unpaid interest and
additional interest to the date of repurchase. If a change of control or asset
sale were to occur, there can be no assurance that we would have sufficient
funds to pay the purchase price for all of the notes that we might be required
to purchase. Our credit facility limits our ability to purchase the notes in the
event of a change of control or asset sale. Our future indebtedness may also
contain restrictions on our ability to repurchase the notes upon certain events,
including transactions that could constitute a change of control or asset sale
under the indenture. Our failure to purchase, or give notice of purchase of, the
-9-
notes would be a default under the indenture, which would in turn be a default
under our credit facility. In addition, a change of control will constitute an
event of default under our credit facility. A default under our credit facility
would result in an event of default under the indenture if the lenders were to
accelerate the debt under our credit facility. If the foregoing occurs, we may
not have enough assets to satisfy all obligations under our credit facility and
the indenture. All payments on the notes and the related guarantees will be
blocked in the event of a payment default on our designated senior debt and may
be blocked up to 179 consecutive days in the event of defaults other than
payment defaults on our designated senior debt that permit the holders of that
debt to accelerate its maturity. See "Description of the Notes -- Ranking."
Our payment obligations may be accelerated if we are unable to maintain or
comply with the financial and operating covenants contained in our credit
facility.
Our credit facility contains covenants specifying
o the maintenance of certain financial ratios;
o reaching defined subscriber growth and network covered
population goals;
o minimum service revenues;
o maximum capital expenditures; and
o the maintenance of a ratio of total and senior debt to
annualized EBITDA, as defined in the credit facility.
The definition of EBITDA in our credit facility is not the same as EBITDA used
by us in this prospectus. If we are unable to operate our business within the
covenants specified in our credit facility, our ability to use our cash could be
restricted or terminated and our payment obligations may be accelerated. Such a
restriction, termination or acceleration could have a material adverse affect on
our liquidity and capital resources.
If we fail to pay the debt under our credit facility, Sprint has the option of
purchasing our loans, giving Sprint certain rights of a creditor to foreclose on
our assets.
Sprint has contractual rights, triggered by an acceleration of the
maturity of the debt under our credit facility, pursuant to which Sprint may
purchase our obligations to our senior lenders and obtain the rights of a senior
lender. To the extent Sprint purchases these obligations, Sprint's interests as
a creditor could conflict with our interests. Sprint's rights as a senior lender
would enable it to exercise rights with respect to our assets and continuing
relationship with Sprint in a manner not otherwise permitted under our Sprint
agreements.
Your ability to sell the notes may be limited by the absence of an active
trading market.
The notes are a new issue of securities for which there currently is no
established trading market. Consequently, the notes are relatively illiquid and
you may be unable to sell your notes. We do not intend to apply for the notes to
be listed on any securities exchange or to arrange for quotation on any
automated dealer quotation system. We cannot assure you as to the liquidity of
any trading market for the notes. We also cannot assure you that you will be
able to sell your notes at a particular time or that the prices that you receive
when you sell will be favorable.
Trading prices of the notes will depend on many factors, including:
o our operating performance and financial condition;
o the interest of securities dealers in making a market; and
o the market for similar securities.
-10-
FORWARD-LOOKING STATEMENTS
This prospectus contains or incorporates by reference forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (which is codified in Section 21E of the Exchange Act and Section 27A of
the Securities Act). These forward-looking statements are based on current
expectations, estimates, forecasts and projections about us, our future
performance, our liquidity, the wireless industry, our beliefs and management's
assumptions. In addition, other written and oral statements that constitute
forward-looking statements may be made by us or on our behalf. Such
forward-looking statements include statements regarding expected financial
results and other planned events, including but not limited to, anticipated
liquidity, churn rates, ARPU and CPGA, roaming rates, EBITDA, and capital
expenditures. Words such as "anticipate," "assume," "believe," "estimate,"
"expect," "intend," "plan," "seek", "project," "target," "goal," variations of
such words and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and
involve certain risks, uncertainties and assumptions that are difficult to
predict. Therefore, actual future events or results may differ materially from
these statements. These risks and uncertainties include:
o the impact of the recapitalization for AirGate;
o our dependence on the success of Sprint's wireless business;
o the competitiveness and impact of Sprint's pricing plans and
PCS products and services;
o intense competition in the wireless market and the unsettled
nature of the wireless market;
o the potential to experience a continued high rate of
subscriber turnover;
o the ability of Sprint to provide back office billing,
subscriber care and other services and the quality and costs
of such services or, alternatively, our ability to outsource
all or a portion of these services at acceptable costs and the
quality of such services;
o subscriber credit quality;
o the ability to successfully leverage 3G products and services;
o inaccuracies in financial information provided by Sprint;
o new charges and fees, or increased charges and fees, imposed
by Sprint;
o the impact and outcome of disputes with Sprint;
o our ability to predict future customer growth, as well as
other key operating metrics;
o the impact of spending cuts on network quality, customer
retention and customer growth;
o rates of penetration in the wireless industry;
o our significant level of indebtedness and debt covenant
requirements;
o the impact and outcome of legal proceedings between other
Sprint network partners and Sprint;
o the potential need for additional sources of capital and
liquidity;
o risks related to our ability to compete with larger, more
established businesses;
o anticipated future losses;
o rapid technological and market change;
-11-
o an adequate supply of subscriber equipment;
o the current economic slowdown; and
o the volatility of the market price of our common stock.
These forward-looking statements involve a number of risks and
uncertainties that could cause actual results to differ materially from those
suggested by the forward-looking statements. Forward-looking statements should,
therefore, be considered in light of various important factors, including those
set forth in this prospectus under the caption "Risk Factors" and elsewhere in
this prospectus and the incorporated reports. Moreover, we caution you not to
place undue reliance on these forward-looking statements, which speak only as of
the date they were made. We do not undertake any obligation to publicly release
any revisions to these forward-looking statements to reflect events or
circumstances after the date of this report or to reflect the occurrence of
unanticipated events. All subsequent forward-looking statements attributable to
us or any person acting on our behalf are expressly qualified in their entirety
by the cautionary statements contained or referred to in this prospectus.
-12-
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the notes or
common stock by the selling holders.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges
of AirGate for the nine month period ended September 30, 1999 and for each of
the years ended September 30, 2000 through 2003.
---------------- ------------------------------------ ------------------
Quarter ended Nine months ended
December 30, Year ended September 30, September 30,
------------- ------------------------ -----------------
2003 2003 2002 2001 2000 1999
---- ---- ---- ---- ---- ----
--(1) --(1) --(1) --(1) --(1) --(1)
(1) Earnings were inadequate to cover fixed charges for the nine months
ended September 30, 1999, the years ended September 30, 2000, 2001, 2002, and
2003, and the quarter ended December 31, 2003 by approximately $15.6 million,
$81.3 million, $111 million, $92.8 million, $42.2 million, and $11.1 million,
respectively. "Fixed charges" consist of interest on outstanding debt and
amortization of debt discount and expense, adjusted for capitalized interest and
25% (the proportion deemed representative of the interest factor) of operating
lease expense. "Earnings" consist of consolidated loss from continuing
operations before income taxes and fixed charges.
-13-
SELLING HOLDERS
We issued the common stock and the notes offered by this prospectus on
February 20, 2004. Selling holders may from time to time offer and sell pursuant
to this prospectus any or all of the notes and the common stock.
The following table sets forth information, as of February 12, 2004,
with respect to the selling holders and the principal amounts of notes and the
number and percentage of shares of common stock beneficially owned by each
selling holder that may be offered under this prospectus. The information is
based on information provided by or on behalf of the selling holders. The
selling holders may offer all, some or none of the notes or common stock.
Because the selling holders may offer all or some portion of the notes or the
common stock, no estimate can be given as to the amount of the notes or common
stock that will be held by the selling holders upon any sales. In addition, the
selling holders identified below may have sold, transferred or otherwise
disposed of all or a portion of their notes or common stock since the date on
which they provided the information regarding their notes or common stock in
transactions exempt from the registration requirements of the Securities Act.
Information about the selling holders may change over time. Any changed
information will be set forth in prospectus supplements.
Principal
Amount of
Notes Number of
Beneficially Shares of
Owned that Common % of
may be sold Stock that Outstanding
Name and Address ($) may be sold Common Stock
- ---------------- ------------- ------------ -------------
Alexandra Investment Management
Alexandra Global Master Fund Ltd. 5,989,200 247,370 2.10%
JMB Capital Partners, LP
JMB Capital Partners, LP 4,213,300 174,018 1.48%
Lonestar Capital Management
Lonestar Partners LP 1,599,900 66,083 *
Third Point Management Company L.L.C.
Third Point Partners LP 2,710,300 111,944 *
Third Point Offshore Fund Ltd. 5,121,500 211,531 1.80%
Points West International Investments Ltd. 730,600 30,177 *
Banzai Partners LP 359,400 14,846 *
Banzai Offshore Fund Ltd. 524,200 21,653 *
Lyxor Asset Management 1,220,200 50,399 *
Loeb Partners Corporation
Loeb Arbitrage Fund 1,791,900 74,013 *
Loeb Partners Corporation 106,600 4,405 *
Loeb Offshore Fund 165,300 6,828 *
Starr International Co. Inc. 69,300 2,863 *
Credit Suisse First Boston International
Credit Suisse First Boston International 1,599,900 66,083 *
40/86 Advisors
40/86 Series Trust - High Yield Portfolio 69,300 2,863 *
Bankers Life & Casualty Co. - High Yield 533,300 22,027 *
Conseco Fund Group - High Yield Fund 725,300 29,957 *
40/86 Strategic Income Fund 741,300 30,618 *
Evergreen Funding, Ltd./Evergreen Funding Corp. 933,300 38,548 *
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Capital Research and Management Company
American High Income Trust 16,253,200 671,293 5.71%
The Bond Fund of America, Inc. 10,666,600 440,553 3.75%
The Income Funds of America, Inc. 10,853,200 448,263 3.81%
American Funds Ins. Series - High Income Bond Fund 26,600 1,101 *
Glenview Capital Management LLC
Glenview Capital Master Fund, Ltd. 8,581,500 354,436 3.01%
Glenview Institutional Partners, LP 4,707,300 194,422 1.65%
Glenview Capital Partners, LP 1,979,800 81,771 *
River Run Management, LLC
River Run Fund Ltd. 1,999,900 82,603 *
Cold Springs LP 231,900 9,582 *
River Run Partners LP 1,733,300 71,589 *
AIG Global Investment Corp.
AIG Life Insurance Company 13,300 550 *
AIG Annuity Insurance Company - AIG Annuity High Yield Distressed Fund 1,839,900 75,995 *
AIG Annuity Insurance Company - AIG Annuity High Yield Fund 1,013,300 41,852 *
American General Life and Accident Insurance Company 1,333,300 55,069 *
American General Life Insurance Company 1,919,900 79,299 *
The Variable Annuity Life Insurance Company - High Yield Distressed Funds 1,679,900 69,387 *
The Variable Annuity Life Insurance Company - High Yield Bond Fund 4,186,600 172,917 1.47%
VALIC Company II Strategic Bond Fund 213,300 8,811 *
SunAmerica Series Trust - High Yield Bond Portfolio 2,733,300 112,891 *
SunAmerica Income Funds - SunAmerica Strategic Income Fund 373,300 15,419 *
VALIC Company II High Yield Bond Fund 466,600 19,274 *
SunAmerica Life Insurance Company 1,546,600 63,880 *
AIG SunAmerica Inc. 1,599,900 66,083 *
SunAmerica Income Funds - SunAmericas High Yield Bond Fund 2,533,300 104,631 *
_____________________
* Less than one percent.
-15-
DESCRIPTION OF THE NOTES
This description of the 9-3/8% Senior Subordinated Secured Notes due
September 1, 2009 generally describes the terms of these securities, which are
referred to in this section of the prospectus (the "prospectus") as the "Notes."
The Notes were issued under an indenture, dated as of February 20, 2004 (the
"Indenture"), by and among AirGate, the Guarantors and The Bank of New York, as
trustee (the "Trustee"). In this description, the word "AirGate" refers only to
AirGate PCS, Inc. and not to any of its Subsidiaries. Capitalized terms used in
this section and not otherwise defined below under the heading "Definitions"
have the respective meanings assigned to them in the Indenture.
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 of 1939. The
Notes are subject to all such terms, and reference is made to the Indenture and
the Trust Indenture Act for a statement of those terms. The Indenture is
qualified as an indenture under the Trust Indenture Act.
The following summary of specific provisions of the Indenture, the
Intercreditor Agreement and each of the Security Documents is not intended to be
complete and is subject to, and is qualified in its entirety by reference to,
all of the provisions of the Indenture, the Notes, including the definitions of
certain terms therein and those terms made a part thereof by the Trust Indenture
Act, the Intercreditor Agreement and each of the Security Documents. We urge you
to read the Indenture, the Intercreditor Agreement and each of the Security
Documents because they define your rights as a holder of the Notes. We have
filed a copy of the Indenture, the Intercreditor Agreement and each of the
Security Documents as exhibits to the registration statement that includes this
prospectus.
General
AirGate issued the Notes in an aggregate principal amount of
$159,034,600, approximately $107.7 million of which is being offered by this
prospectus. The Notes will mature on September 1, 2009. The Notes were issued
only in registered form without coupons and only in denominations of $100 and
any integral multiple thereof. Except in limited circumstances, the Notes were
issued as a global note. See "-- Book Entry Form" below. No service charge will
be made for any registration of transfer or exchange or redemption of Notes, but
we may require payment in certain circumstances of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
The payment of principal, premium, if any, and interest on the Notes is
unconditionally guaranteed on a senior subordinated secured basis by the
Guarantors (the "Guarantees"). The Guarantors are collectively referred to as
the "Guarantors" and are individually referred to as a "Guarantor." See "--
Guarantees."
The Notes are secured, on a second-priority basis, by Liens on
substantially all of AirGate's and its Restricted Subsidiaries' existing and
after-acquired assets for which a first-priority lien has been granted to the
lenders under AirGate's Credit Facilities. See "-- Security."
Ranking
The payment of principal of and premium, if any, and interest on the
Notes is subordinated in right of payment, as set forth in the Indenture, to the
prior payment in full of all Senior Debt. The Notes are:
o senior subordinated secured obligations of AirGate;
o secured by a second-priority lien, subject to certain
exceptions and Permitted Liens, on the Collateral described
below under "--Security;"
o unconditionally guaranteed on a senior subordinated secured
basis by the Guarantors;
o subordinated in right of payment to all existing and future
Senior Debt (which consists of up to $175.0 million of
Indebtedness under the Credit Facilities and Hedging
Obligations with respect thereto) of AirGate;
o equal in right of payment to all existing and future senior
subordinated indebtedness of AirGate;
-16-
o senior in right of payment to all existing and future
subordinated indebtedness of AirGate;
o junior in right of payment up to $175.0 million of existing
and future obligations of AirGate and the Guarantors under
Credit Facilities; and
o effectively junior in right of payment to all existing and
future debt and other liabilities of AirGate's Subsidiaries
that are not Guarantors.
As of December 31, 2003, after giving effect to the restructuring,
AirGate and its Restricted Subsidiaries would have had approximately $309.3
million of total outstanding Indebtedness, of which approximately $141.3 million
would have been senior to the Notes.
As of the date of the Indenture, all of AirGate's Subsidiaries are
"Restricted Subsidiaries." However, under the circumstances described below
under the subheading "Selected Covenants -- Designation of Restricted and
Unrestricted Subsidiaries," AirGate is permitted to designate Subsidiaries
meeting particular requirements as "Unrestricted Subsidiaries." Unrestricted
Subsidiaries will not Guarantee the Notes and will not be subject to many of the
restrictive covenants in the Indenture.
If AirGate fails to make any payment on the Notes when due or within
any applicable grace period, whether or not on account of the payment blockage
provisions referred to below, such failure would constitute an Event of Default
under the Indenture and would enable the holders to accelerate the maturity
thereof. The rights of the holders of Notes to receive payment upon an
acceleration of the maturity is subordinated in right of payment to the rights
of the holders of the Senior Debt. See "Events of Default and Remedies."
The obligations of each Guarantor under its Guarantee are senior
subordinated secured obligations. As such, the rights of holders of Notes to
receive payment by a Guarantor pursuant to its Guarantee are subordinated in
right of payment to the rights of holders of the Senior Debt. The terms of the
subordination provisions described below with respect to AirGate's obligations
under the Notes apply equally to a Guarantor and the obligations of such
Guarantor under its Guarantee.
The terms of the subordination provisions described below do not apply
to payments from money or the proceeds of U.S. Government obligations deposited
in trust prior to the occurrence of an event prohibiting payment of or on the
Notes and held in trust by the Trustee for the payment of principal of or
interest on the Notes pursuant to the provisions described under "Legal
Defeasance and Covenant Defeasance."
Upon any distribution to creditors of AirGate in a liquidation or
dissolution of AirGate or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to AirGate or its property, an
assignment for the benefit of creditors or any marshaling of AirGate's assets
and liabilities, the holders of Senior Debt are entitled to receive payment in
full of all Obligations due in respect of such Senior Debt, including interest
after the commencement of any such proceeding at the rate specified in the
applicable Senior Debt, before the holders of Notes are entitled to receive any
payment with respect to the Subordinated Note Obligations, and until all
obligations with respect to Senior Debt are paid in full, any distribution to
which the holders of Notes would be entitled shall be made to the holders of
Senior Debt, except that holders of Notes may receive and retain Permitted
Junior Securities and payments made from the trust described under "Legal
Defeasance and Covenant Defeasance."
AirGate also may not make any payment upon or in respect of the
Subordinated Note Obligations, except in Permitted Junior Securities or from the
trust described under "Legal Defeasance and Covenant Defeasance," if (a) a
default in the payment of the principal of, or premium, if any, or interest on,
or commitment fees relating to, Designated Senior Debt occurs and is continuing
beyond any applicable period of grace or (b) any other default occurs and is
continuing with respect to Designated Senior Debt that permits holders of the
Designated Senior Debt as to which such default relates to accelerate its
maturity and the Trustee receives a notice of such default (a "Payment Blockage
Notice") from AirGate or the holders of any Designated Senior Debt. Payments on
the Notes may and shall be resumed, including the payment of any amounts
previously blocked by such Payment Blockage Notice (a) in the case of a payment
default, upon the date on which such default is cured or waived and (b) in the
case of a nonpayment default, upon the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on which the
applicable Payment Blockage Notice is received, unless the maturity of any
Designated Senior Debt has been accelerated. No new period of payment blockage
may be commenced unless and until 360 days have elapsed since the effectiveness
of the immediately prior Payment Blockage Notice. No nonpayment default that
existed or was continuing on the date of delivery of any Payment Blockage Notice
to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice unless such default shall have been waived or cured for a period of not
less than 90 days.
-17-
The Indenture further requires that AirGate promptly notify holders of
Designated Senior Debt if payment of the Notes is accelerated because of an
Event of Default. As a result of the subordination provisions described above,
in the event of a liquidation or insolvency, holders of Notes may recover less
ratably than creditors of AirGate who are holders of Senior Debt.
Principal, Maturity and Interest
AirGate issued the Notes in an aggregate principal amount of
$159,034,600. The Notes will mature on September 1, 2009.
Interest is payable at a rate of 9-3/8% per annum, semi-annually in
arrears on January 1 and July 1 of each year, commencing July 1, 2004 to holders
of record of such Notes at the close of business on the December 15 and June 15
next preceding the Interest Payment Date (each a "Regular Record Date").
Interest accrues from the most recent Interest Payment Date to which interest
has been paid or duly provided for or, if no interest has been paid or duly
provided for, from January 1, 2004. Cash interest is computed on a basis of a
360-day year of twelve 30-day months. Certain of AirGate's existing debt
agreements restrict the ability of AirGate's Subsidiaries to pay dividends to
enable AirGate to pay interest on the Notes.
The principal of, premium, if any, and interest on the Notes is
payable, and the Notes are exchangeable and transferable, at the office or
agency of AirGate in the City of New York maintained for such purposes, which
initially is the office of the Trustee located at 101 Barclay Street, New York,
New York 10286.
Mandatory Sinking Fund
The Notes are not subject to any sinking fund.
Paying Agent and Registrar for the Notes
The Trustee initially acts as Paying Agent and Registrar. We may change
the Paying Agent or Registrar without prior notice to the holders of the Notes,
and we or any of our Subsidiaries may act as Paying Agent or Registrar.
Transfer and Exchange
A Holder of Notes may transfer or exchange such Notes in accordance
with the Indenture. The Registrar and the Trustee may require a holder, among
other things, to furnish appropriate endorsements and transfer documents and we
may require a holder to pay any taxes and fees required by law or permitted by
the Indenture. We are not required to transfer or exchange any Note selected for
redemption. Also, we are not required to transfer or exchange any Note for a
period of 15 days before a selection of Notes to be redeemed.
The registered holder of a Note will be treated as the owner of it for
all purposes.
Guarantees
The Guarantors, jointly and severally, fully and unconditionally
guarantee our obligations on a senior subordinated secured basis under the
Notes. Each Guarantee is:
o subordinated in right of payment to all existing and future
senior Indebtedness of each Guarantor;
o equal in right of payment to all other existing and future
senior subordinated Indebtedness of each Guarantor; and
o senior in right of payment to all existing and future
subordinated Indebtedness of each Guarantor.
The obligations of each Guarantor under its Guarantee is limited as
necessary to prevent that Guarantee from constituting a fraudulent conveyance
under applicable law. See "Risk Factors -- Risks Related to the Notes -- Federal
and state statutes allow courts, under specific circumstances, to void the
guarantees and require noteholders to return payments received from guarantors."
-18-
A Guarantor may not sell or otherwise dispose of all or substantially
all of its assets, or consolidate with or merge with or into another Person,
whether or not such Guarantor is the surviving Person, unless:
o immediately after giving effect to that transaction, no
Default or Event of Default exists; and
either:
o the Person acquiring the property in any such sale or
disposition or the Person formed by or surviving any such
consolidation or merger assumes all the obligations of that
Guarantor pursuant to a supplemental indenture satisfactory to
the Trustee; or
o the Net Proceeds of such sale or other disposition are applied
in accordance with the applicable provisions of the Indenture.
The Guarantee of a Guarantor will be released:
o if we designate the Guarantor as an Unrestricted Subsidiary;
o in connection with any sale of all of the capital stock of a
Guarantor, if we apply the Net Proceeds of that sale in
accordance with the applicable provisions of the Indenture; or
o in connection with any sale or other disposition of all or
substantially all of the assets of that Guarantor, including
by way of merger or consolidation, if we apply the Net
Proceeds of that sale or other disposition in accordance with
the applicable provisions of the Indenture.
See "--Repurchase at the Option of Holders-- Asset Sales."
Security
Pursuant to certain security agreements and pledge agreements, as
amended from time to time, among AirGate, the Guarantors and the Trustee
(collectively, the "Second-Priority Security Documents"), subject to Permitted
Liens, the Notes are secured by a second-priority security interest in the
assets of AirGate and the Guarantors (collectively, the "Collateral") that
secure the Indebtedness outstanding under Credit Facilities and obligations
under interest rate and foreign currency hedging obligations provided by lenders
under Credit Facilities (collectively, the "First-Priority Debt Obligations").
The First-Priority Debt Obligations are secured on a first-priority basis
pursuant to the First-Priority Security Documents. The Collateral consists of
substantially all of the personal property of AirGate and the Guarantors. In
addition, AirGate and the Guarantors have pledged all the capital stock of their
directly-owned subsidiaries. Subject to the foregoing limitation on stock
pledges, the Indenture and the Second-Priority Security Documents require that
the Trustee be granted a second-priority lien on any additional assets that
secure the First-Priority Debt Obligations after the date hereof.
In addition to borrowings under the Credit Facilities, AirGate and its
Restricted Subsidiaries finance a portion of their business and operations with
other First Lien Indebtedness. As of December 31, 2003, AirGate and its
Restricted Subsidiaries had approximately $1.0 million of such other First Lien
Indebtedness, including outstanding capital leases and other purchase money
indebtedness. These obligations are generally secured by a first-priority lien
on the underlying assets relating to such obligations and in some instances, a
second-priority lien has been granted for the benefit of the lenders under the
Credit Facilities. As a result, the Notes are secured by a third-priority
security interest in such assets.
AirGate is permitted to issue certain additional debt or other
obligations secured by the Collateral, subject to the covenants described below
under "-- Covenants -- Limitation on Incurrence of Indebtedness and Issuance of
Preferred Stock" and "-- Limitation on Liens" and subject to compliance with the
terms of the Credit Facilities and other debt that may be secured by the
Collateral. The second-priority liens securing the Notes are junior to the
first-priority liens securing the First Lien Indebtedness and to certain
Permitted Liens. The persons holding liens under the First-Priority Security
Documents and the holders of certain Permitted Liens are entitled to control the
Collateral under certain circumstances, including the sale or other disposition
thereof to the extent permitted or not otherwise prohibited by the Indenture,
and such persons and holders of Permitted Liens may have rights and remedies
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with respect to the Collateral that, if exercised, could adversely affect the
value of the Collateral or the ability of the Trustee on behalf of the Holders
of the Notes to realize or foreclose on the Collateral. See "Risk Factors --
Risks Related to the Notes -- The lenders under our credit facility have the
sole right to exercise remedies against the collateral for so long as the credit
facility is outstanding, including releasing the collateral securing the notes."
Upon any foreclosure or related sale of the assets constituting the
Collateral, the proceeds will first be applied to repay First Lien Indebtedness
and Indebtedness securing Permitted Liens. Any remaining proceeds will be used
to repay obligations, including the Notes, secured on a second-priority basis.
If such remaining proceeds are insufficient, the Holders of the Notes would only
have an unsecured claim against AirGate and the Guarantors. See "Risk Factors --
Risks Related to the Notes -- The value of the collateral securing the notes may
not be sufficient to satisfy obligations under the notes and the collateral
securing the notes may be reduced or diluted under certain circumstances."
No appraisals of any Collateral were prepared by us or on our behalf in
connection with the exchange offer. The value of the Collateral at any time will
depend on market and other economic conditions, including the availability of
suitable buyers for the Collateral.
Liens on portions of the Collateral may be released under certain
circumstances, as described below in "-- Intercreditor Agreement."
Subject to certain terms and conditions in the Indenture and the
Second-Priority Security Documents, AirGate and the Guarantors have the right to
remain in possession and retain control of the Collateral, to freely operate the
Collateral and to collect, invest and dispose of any income therefrom.
Intercreditor Agreement
All rights against the Collateral are subject to the terms and
provisions of the Intercreditor Agreement among AirGate, the Guarantors, the
Senior Collateral Agent and the Trustee, as collateral agent for the Holders of
the Notes. Pursuant to the Indenture, the Trustee has the authority to act as
the exclusive agent for each of the Holders of the Notes with respect to the
Collateral, including the enforcement of any remedy against the Collateral.
For so long as the Credit Facilities (including any refinancing,
substitution or replacement facilities) are in effect, the decision of whether,
and to what extent, to exercise remedies against the Collateral will be solely
at the direction of the Senior Collateral Agent and the required lenders under
the Credit Facilities. Following the date on which
o all obligations under the Credit Facilities have been paid in
full in cash,
o there are no outstanding letters of credit under the Credit
Facilities, and
o the Credit Facilities have been terminated and not replaced,
the Trustee will, subject to Permitted Liens, have the exclusive right to
exercise any right or remedy with respect to the Collateral in accordance with
the Indenture and the Second-Priority Security Documents.
The Trustee and the Holders of the Notes do not have any right to
initiate or direct the exercise of remedies against the Collateral until such
date. As a result, even during a bankruptcy case, neither the Trustee nor the
Holders of the Notes have any right or ability to exercise or cause the exercise
of remedies against the Collateral until such date. The Trustee is permitted to
file a claim of interest in a bankruptcy case with respect to the
second-priority liens in order to preserve its rights in the Collateral.
If the Trustee or any Holder of the Notes receives any cash proceeds or
other monies in respect of the Collateral by exercise of any rights of set-off
or otherwise at any time when such proceeds or monies are required to be
delivered to the Senior Collateral Agent under the Intercreditor Agreement, such
proceeds will be applied in accordance with the terms of the Intercreditor
Agreement.
The cash proceeds of any sales of, or collections on, any Collateral
received upon the exercise of remedies will be applied pursuant to the
Intercreditor Agreement in the order and priority as stated under "-- Security."
The Intercreditor Agreement provides that the second-priority liens
will automatically be released on the applicable portion of the Collateral if
(1) the Senior Collateral Agent exercises any remedies in respect of such
Collateral; or (2) such Collateral is sold or otherwise disposed of as permitted
or not prohibited by the Credit Facilities (unless prohibited under the
Indenture).
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Certain Bankruptcy Limitations
The right of the Trustee to foreclose upon and dispose of, or otherwise
exercise remedies in respect of, the Collateral upon the occurrence of an Event
of Default is likely to be significantly impaired by applicable bankruptcy law
if a bankruptcy case were to be commenced by or against AirGate prior to the
Trustee having repossessed and disposed of, or otherwise exercised remedies in
respect of, the Collateral. Under the Bankruptcy Code, a secured creditor such
as the Trustee is prohibited from repossessing its collateral from a debtor in a
bankruptcy case, or from disposing of collateral repossessed from such debtor,
without bankruptcy court approval. Moreover, the Bankruptcy Code permits the
debtor to continue to retain and to use collateral even though the debtor is in
default under the applicable debt instruments, provided that the secured
creditor is given "adequate protection." The meaning of the term "adequate
protection" may vary according to circumstances, but it is intended in general
to protect the value of the secured creditor's interest in the collateral and
may include cash payments or the granting of additional collateral, if and at
such times as the court in its discretion determines, for any diminution in the
value of the collateral as a result of the stay of repossession or disposition
or any use of the collateral by the debtor during the pendency of the bankruptcy
case. In view of the lack of a precise definition of the term "adequate
protection" and the broad discretionary powers of a bankruptcy court, it is
impossible to predict how long payments with respect to the Notes could be
delayed following commencement of a bankruptcy case, whether or when the Trustee
could foreclose upon or dispose of the Collateral or whether or to what extent
Holders of the Notes would be adequately compensated for any delay in payment or
loss of value of the Collateral.
Optional Redemption
The Notes are not redeemable at the option of AirGate prior to January
1, 2006. Starting on that date, AirGate may redeem all or a part of the Notes
upon not less than 30 nor more than 60 days' notice, at the redemption prices,
expressed as percentages of principal amount at maturity thereof, set forth
below plus accrued and unpaid interest thereon, if any, to the applicable
redemption date (subject to the right of holders of record on the relevant date
to receive interest due on the relevant interest payment date), if redeemed
during the twelve-month period beginning on January 1, of the years indicated
below:
Percentage of
Principal Amount
Year at Maturity
---- ----------------
2006...............................................104.688%
2007...............................................102.344%
2008 and thereafter................................100.000%
Notwithstanding the foregoing, AirGate's outstanding Senior Debt
currently prohibits AirGate from redeeming any Notes.
Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, each Holder of Notes has the right to
require AirGate to repurchase all or any part, equal to $100 or an integral
multiple thereof, of that Holder's Notes pursuant to a Change of Control Offer,
as defined below. In the Change of Control Offer, AirGate will offer a Change of
Control Payment in cash equal to 101% of the aggregate principal amount thereof,
plus accrued and unpaid interest thereon, if any, to the date of purchase
(subject to the right of holders of record on the relevant date to receive
interest due on the relevant interest payment date). Within 30 days following
any Change of Control, AirGate will mail a notice to each Holder of Notes
describing the transaction or transactions that constitute the Change of Control
and offering to repurchase Notes (a "Change of Control Offer") on the Change of
Control Payment Date specified in such notice, pursuant to the procedures
required by the Indenture and described in such notice. AirGate will comply with
the requirements of Rule 14e-1 under the Exchange Act and any other securities
laws and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
To the extent that the provisions of any securities laws or regulations
conflict with the Change of Control provisions of the Indenture, AirGate will
comply with the applicable securities laws and regulations and will not be
deemed to have breached its obligations under the Change of Control provisions
of the Indenture by virtue of such conflict.
On the Change of Control Payment Date, AirGate will, to the extent
lawful:
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o accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer;
o deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all Notes or portions thereof so
tendered; and
o deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being
purchased by AirGate.
The Paying Agent will promptly mail to each holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail or cause to be transferred by book entry to each Holder a
new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note will be in a principal
amount of $100 or an integral multiple thereof.
Prior to complying with any of the provisions of this "Change of
Control" covenant, but in any event within 90 days following a Change of
Control, AirGate will either repay all outstanding Senior Debt or obtain the
requisite consents, if any, under all agreements governing outstanding Senior
Debt to permit the repurchase of Notes required by this covenant. AirGate will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The provisions described above that require AirGate to make a Change of
Control Offer following a Change of Control are applicable regardless of whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the holders of the Notes to require that AirGate
repurchase or redeem the Notes in the event of a takeover, recapitalization or
similar transaction.
AirGate's outstanding Senior Debt currently prohibits AirGate from
purchasing any Notes, and also provides that certain change of control events
with respect to AirGate would constitute a default under the agreements
governing the Senior Debt. Any future credit agreements or other agreements
relating to Senior Debt to which AirGate becomes a party may contain similar
restrictions and provisions. In the event a Change of Control occurs at a time
when AirGate is prohibited from purchasing Notes, AirGate could seek the consent
of its senior lenders to the purchase of Notes or could attempt to refinance the
borrowings that contain such prohibition. If AirGate does not obtain such a
consent or repay such borrowings, AirGate will remain prohibited from purchasing
Notes. In such case, AirGate's failure to purchase tendered Notes would
constitute an Event of Default under the Indenture which would, in turn,
constitute a default under such Senior Debt. In such circumstances, the
subordination provisions in the Indenture would likely restrict payments to the
holders of Notes.
AirGate will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by AirGate and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or substantially
all" of the assets of AirGate and its Subsidiaries taken as a whole. Although
there is a limited body of case law interpreting, the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a holder of Notes to require AirGate to
repurchase such Notes as a result of a sale, lease, transfer, conveyance or
other disposition of less than all of the assets of AirGate and its Subsidiaries
taken as a whole to another Person or group is uncertain.
Asset Sales
AirGate will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) AirGate, or the Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to
the fair market value of the assets or Equity Interests issued or sold
or otherwise disposed of;
(2) such fair market value is determined by AirGate's Board of
Directors and, if such fair market value exceeds $5.0 million, is
evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee; and
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(3) at least 75% of the consideration therefor received by AirGate
or such Restricted Subsidiary is in the form of cash or Cash
Equivalents. For purposes of this provision, each of the following
shall be deemed to be cash:
(a) any liabilities, as shown on AirGate's or such Restricted
Subsidiary's most recent balance sheet, of AirGate or any
Restricted Subsidiary, other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or
any Guarantee, that are assumed by the transferee of any such
assets pursuant to a customary novation agreement that releases
AirGate or such Restricted Subsidiary from further liability; and
(b) any securities, Notes or other obligations received by
AirGate or any such Restricted Subsidiary from such transferee
that are contemporaneously, subject to ordinary settlement
periods, converted by AirGate or such Restricted Subsidiary into
cash, to the extent of the cash received in that conversion; and
(4) if such Asset Sale involves the transfer of Collateral, (a)
such Asset Sale complies with the applicable provisions of the Security
Documents and (b) all consideration (other than cash) received in such
Asset Sale shall be expressly made subject to the Lien under the
Security Documents, which Lien shall be junior in priority to a similar
Lien granted to secure Senior Debt.
Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, AirGate may apply such Net Proceeds at its option:
(1) to repay Senior Debt;
(2) to acquire all or substantially all of the assets of, or a
majority of the Voting Stock of, another Permitted Business which
becomes part of, or which is or becomes, a Restricted Subsidiary;
(3) to make a capital expenditure in assets that are used or
useful in a Permitted Business; or
(4) to acquire other long-term assets that are used or useful in a
Permitted Business.
Pending the final application of any such Net Proceeds, AirGate may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute Excess Proceeds. When the
aggregate amount of Excess Proceeds exceeds $10.0 million, AirGate will make an
Asset Sale Offer to all Holders of Notes and all holders of other Indebtedness
that is equal in right of payment with the Notes containing provisions similar
to those set forth in the Indenture with respect to offers to purchase or redeem
with the proceeds of sales of assets to purchase the maximum principal amount of
Notes and such other Indebtedness that is equal in right of payment that may be
purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer
will be equal to 100% of the principal amount, plus accrued and unpaid interest,
if any, to the date of purchase and will be payable in cash. If any Excess
Proceeds remain after consummation of an Asset Sale Offer, AirGate may use such
Excess Proceeds for any purpose not otherwise prohibited by the Indenture. If
the aggregate principal amount of Notes and such other pari passu Indebtedness
tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes and such other Indebtedness that is equal in
right of payment to be purchased on a pro rata basis. Upon completion of each
Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.
AirGate will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with each
repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the Asset Sale
provisions of the Indenture, AirGate will comply with the applicable securities
laws and regulations and will not be deemed to have breached its obligations
under the Asset Sale provisions of the Indenture by virtue of such conflict.
Selection and Notice
If less than all of the Notes are to be redeemed at any time, the
Trustee will select Notes for redemption as follows:
o if the Notes are listed, in compliance with the requirements
of the principal national securities exchange on which the
Notes are listed; or
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o if the Notes are not so listed, on a pro rata basis, by lot or
by such method as the Trustee shall deem fair and appropriate.
No Notes of $100 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each holder of Notes to be redeemed at its
registered address. Notices of redemption may not be conditional.
If any Note is to be redeemed in part only, the notice of redemption
that relates to that Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion of the original Note will be issued in the name of the holder thereof
upon cancellation of the original Note. Notes called for redemption become due
on the date fixed for redemption. On and after the redemption date, interest
ceases to accrue on Notes or portions of them called for redemption.
Selected Covenants
Limitation on Restricted Payments
AirGate shall not, and shall not permit any Restricted Subsidiary to,
directly or indirectly:
(1) declare or pay any dividend on, or make any distribution to
the holders of, any shares of its Equity Interests, other than
dividends or distributions payable solely in its Equity Interests,
other than Disqualified Stock, or in options, warrants or other rights
to purchase any such Equity Interests, other than Disqualified Stock;
(2) purchase, redeem or otherwise acquire or retire for value,
other than value consisting solely of Equity Interests of AirGate that
is not Disqualified Stock or options, warrants or other rights to
acquire such Equity Interests that is not Disqualified Stock, any
Equity Interests of AirGate, including options, warrants or other
rights to acquire such Equity Interests;
(3) redeem, repurchase, defease or otherwise acquire or retire for
value, other than value consisting solely of Equity Interests of
AirGate that is not Disqualified Stock or options, warrants or other
rights to acquire such Equity Interests that is not Disqualified Stock,
prior to any scheduled maturity, scheduled repayment or scheduled
sinking fund payment, any Indebtedness that is subordinate, whether
pursuant to its terms or by operation of law, in right of payment to
the Notes; or
(4) make any Investment that is not a Permitted Investment;
(each of the foregoing actions set forth in clauses (1) through (4), other than
any such action that is a Permitted Investment, being referred to as a
"Restricted Payment"), unless, at the time thereof, and after giving effect
thereto,
(a) no Default or Event of Default shall have occurred and be
continuing;
(b) AirGate would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted
Payment had been made at the beginning of the applicable period,
have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the first paragraph of the covenant
described below under the caption "-- Limitation on Incurrence of
Indebtedness and Issuance of Preferred Stock;" and
(c) after giving effect to such Restricted Payment on a pro
forma basis, the aggregate amount of all Restricted Payments made
on or after the Closing Date shall not exceed
(i) the amount of (x) the Operating Cash Flow of AirGate
after June 30, 2003 through the end of the latest full fiscal
quarter for which consolidated financial statements of AirGate
are available preceding the date of such Restricted Payment,
treated as a single accounting period, less (y) 150% of the
cumulative Consolidated Interest Expense of AirGate after June
30, 2003 through the end of the latest full fiscal quarter for
which consolidated financial statements of AirGate are
available preceding the date of such Restricted Payment
treated as a single accounting period, plus
(ii) the aggregate Net Proceeds, including the fair market
value of property other than cash, as determined:
(A) in the case of any property other than cash with
a value less than $25 million, by the Board of Directors,
whose good-faith determination shall be conclusive and as
evidenced by a Board Resolution, or
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(B) in the case of any property other than cash with
a value equal to or greater than $25 million, by an
accounting, appraisal or investment banking firm of
national standing and evidenced by a written opinion of
such firm,
received by AirGate from the issuance and sale, other than to
a Restricted Subsidiary, on or after the Closing Date of
shares of its Equity Interests other than Disqualified Stock,
or any options, warrants or other rights to purchase such
Equity Interests, other than Disqualified Stock, plus
(iii) the aggregate Net Proceeds, including the fair
market value of property other than cash, as determined:
(A) in the case of any property other than cash with
a value less than $25 million, by the Board of Directors,
whose good-faith determination shall be conclusive and as
evidenced by a Board Resolution, or
(B) in the case of any property other than cash with
a value equal to or greater than $25 million, by an
accounting, appraisal or investment banking firm of
national standing and evidenced by a written opinion of
such firm,
received by AirGate from the issuance or sale, other than to a
Restricted Subsidiary, after the Closing Date of any Equity
Interests of AirGate, other than Disqualified Stock, or any
options, warrants or other rights to purchase such Equity
Interests, other than Disqualified Stock, upon the conversion
of, or exchange for, Indebtedness of AirGate or a Restricted
Subsidiary, plus
(iv) the aggregate Net Proceeds received by AirGate or any
Restricted Subsidiary from the sale, disposition or repayment,
other than to AirGate or a Restricted Subsidiary, of any
Investment made after the Closing Date and constituting a
Restricted Payment in an amount equal to the lesser of (x) the
return of capital with respect to such Investment and (y) the
initial amount of such Investment previously made (and treated
as a Restricted Payment), in either case, less the cost of
disposition of such Investment.
The foregoing limitations in this "Limitation on Restricted Payments"
covenant do not limit or restrict the making of any Permitted Investment, and a
Permitted Investment shall not be counted as a Restricted Payment for purposes
of clause (c) above, except that a Permitted Investment made pursuant to clause
(7) of the definition of Permitted Investments shall be counted as a Restricted
Payment for the purposes of clause (c) above. In addition, so long as no Default
or Event of Default shall have occurred and be continuing, the foregoing
limitations do not prevent AirGate from:
(1) the payment of a dividend on Equity Interests of AirGate
within 60 days after the declaration thereof if, on the date when the
dividend was declared, AirGate could have paid such dividend in
accordance with the provisions of the Indenture;
(2) the repurchase of Equity Interests of AirGate, including
options, warrants or other rights to acquire such Equity Interests,
from former employees or directors of AirGate or any Subsidiary thereof
for consideration not to exceed $2.0 million in the aggregate in any
fiscal year; provided that any unused amount in any 12-month period may
be carried forward to one or more future periods; provided, further,
that the aggregate amount of all such repurchases made pursuant to this
clause (2) does not exceed $10.0 million in the aggregate;
(3) the redemption, repurchase, defeasance or other acquisition or
retirement for value of Indebtedness that is subordinated in right of
payment to the Notes, including premium, if any, and accrued and unpaid
interest, with the proceeds of, or in exchange for:
(a) the proceeds of a capital contribution or a substantially
concurrent offering of, shares of Equity Interests, other than
Disqualified Stock, of AirGate or options, warrants or other
rights to acquire such Equity Interests, or
(b) Indebtedness that (i) is at least as subordinated in right
of payment to the Notes, including premium, if any, and accrued
and unpaid interest, as the Indebtedness being purchased, and (ii)
has a final maturity date later than the final maturity date of,
and has a Weighted Average Life to Maturity equal to or greater
than the Weighted Average Life to Maturity of, the Indebtedness
being repurchased, with Restricted Payments pursuant to this
clause not being counted as Restricted Payments for purposes of
clause (c) above;
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(4) the repurchase, redemption or other acquisition of Equity
Interests of AirGate, or options, warrants or other rights to acquire
such Equity Interests, in exchange for, or out of the proceeds of a
capital contribution or a substantially concurrent offering of, shares
of our common stock, other than Disqualified Stock, of AirGate or
options, warrants or other rights to acquire such Equity Interests;
(5) the repurchase, redemption, defeasance, acquisition or
retirement for value of Senior Subordinated Discount Notes using no
more than $25 million;
(6) the payment of any dividend (or, in the case of any
partnership or limited liability company, any similar distribution) by
a Restricted Subsidiary of AirGate to the holders of its Equity
Interests on a pro rata basis; or
(7) other Restricted Payments not to exceed $5.0 million in the
aggregate at any time outstanding, with Restricted Payments pursuant to
this clause not being counted as Restricted Payments for purposes of
clause (c) above.
Restricted Payments made pursuant to clause (1) of the immediately
preceding paragraph will be included in the calculation of subsequent Restricted
Payments. In addition, if any Person in which an Investment is made, which
Investment constitutes a Restricted Payment when made, thereafter becomes a
Restricted Subsidiary, all such Investments previously made in such Person shall
no longer be counted as Restricted Payments for purposes of calculating the
aggregate amount of Restricted Payments pursuant to clause (c) of the second
preceding paragraph to the extent such Investments would otherwise be so
counted.
For purposes of clause (3) and (4) above, the net proceeds received by
AirGate from the issuance or sale of its Equity Interests either upon the
conversion of, or exchange for, Indebtedness of AirGate or any Restricted
Subsidiary shall be deemed to be an amount equal to (a) the sum of (1) the
principal amount or accreted value, whichever is less, of such Indebtedness on
the date of such conversion or exchange and (2) the additional cash
consideration, if any, received by AirGate upon such conversion or exchange,
less any payment on account of fractional shares, minus (b) all expenses
incurred in connection with such issuance or sale. In addition, for purposes of
clause (3) and (4) above, the net proceeds received by AirGate from the issuance
or sale of its Equity Interests upon the exercise of any options or warrants of
AirGate or any Restricted Subsidiary shall be deemed to be an amount equal to
(a) the additional cash consideration, if any, received by AirGate upon such
exercise, minus (b) all expenses incurred in connection with such issuance or
sale.
For purposes of this "Limitation on Restricted Payments" covenant, if a
particular Restricted Payment involves a noncash payment, including a
distribution of assets, then such Restricted Payment shall be deemed to be an
amount equal to the cash portion of such Restricted Payment, if any, plus an
amount equal to the fair market value of the noncash portion of such Restricted
Payment, as determined by the Board of Directors, whose good-faith determination
shall be conclusive and evidenced by a Board Resolution. Not later than the date
of making any Restricted Payment, AirGate shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by this "Limitation
on Restricted Payments" covenant were computed, together with a copy of any
fairness opinion or appraisal required by the Indenture.
The amount of any Investment outstanding at any time shall be deemed to
be equal to the amount of such Investment on the date made, less the return of
capital, repayment of loans and return on capital, including interest and
dividends, in each case, received in cash, up to the amount of such Investment
on the date made.
Limitation on Incurrence of Indebtedness and Issuance of Preferred Stock
AirGate shall not, and shall not permit any Restricted Subsidiary to,
incur any Indebtedness, including Acquired Debt, other than Permitted Debt, and
AirGate shall not issue any Disqualified Stock unless immediately after giving
effect to the incurrence of such Indebtedness or the issuance of such
Indebtedness or the issuance of such Disqualified Stock and the receipt and
application of the net proceeds therefrom, including, without limitation, the
application or use of the net proceeds therefrom to repay Indebtedness or make
any Restricted Payment, the Consolidated Debt to Operating Cash Flow Ratio would
be (1) less than 7.0 to 1.0, if prior to September 30, 2005, (2) less than 6.0
to 1.0, if on or after September 30, 2005 and (3) less than 5.0 to 1.0, if on or
after September 30, 2006.
So long as no Default or Event of Default shall have occurred and be
continuing or would be caused thereby, the first paragraph of this covenant will
not prohibit the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
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(1) the incurrence by AirGate and its Subsidiaries of Existing
Indebtedness;
(2) the incurrence by AirGate and the Guarantors of Indebtedness
represented by the Notes and the Guarantees;
(3) the incurrence by AirGate and any Guarantor of Indebtedness
under Credit Facilities; provided that the aggregate principal amount
of all Indebtedness of AirGate and the Guarantors outstanding under all
Credit Facilities at any time outstanding, after giving effect to such
incurrence, does not exceed an amount equal to $175.0 million less the
aggregate amount of all Net Proceeds of Asset Sales applied by AirGate
or any of its Subsidiaries since the date of the Indenture to
permanently repay Indebtedness under a Credit Facility pursuant to the
covenant described above under the caption "-- Repurchase at the Option
of Holders -- Asset Sales" accompanied by a corresponding reduction in
commitment thereunder;
(4) the incurrence by AirGate or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case,
incurred for the purpose of leasing or financing all or any part of the
purchase price or cost of construction or improvement of inventory,
property, plant or equipment used in the business of AirGate or such
Restricted Subsidiary, including telephone and computer systems and
operating facilities, in an aggregate principal amount not to exceed
$5.0 million at any time outstanding and the aggregate principal amount
of such Indebtedness does not exceed the fair market value (on the date
of incurrence thereof) of the property so leased or financed;
(5) the incurrence by AirGate or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or
the net proceeds of which are used to refund, refinance or replace,
Indebtedness, other than intercompany Indebtedness, that was permitted
by the Indenture to be incurred under the first paragraph of this
covenant or clauses (1), (2) or (12) of this paragraph;
(6) the incurrence by AirGate or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among AirGate and
any of its Wholly Owned Restricted Subsidiaries that are Guarantors;
provided, however, that:
(a) if AirGate or any Guarantor is the obligor on such
Indebtedness, such Indebtedness, other than intercompany
obligations owed by AirGate to AGW Leasing Company, Inc. relating
to tower leases or licenses and leases of real property, must be
expressly subordinated to the prior payment in full in cash of all
Obligations with respect to the Notes, in the case of AirGate, or
the Guarantee of such Guarantor, in the case of a Guarantor; and
(b) (1) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a
Person other than AirGate or a Wholly Owned Restricted Subsidiary
thereof and (2) any sale or other transfer of any such
Indebtedness to a Person that is not either AirGate or a Wholly
Owned Restricted Subsidiary thereof, shall be deemed, in each
case, to constitute an incurrence of such Indebtedness by AirGate
or such Restricted Subsidiary, as the case may be, that was not
permitted by this clause (6);
(7) the incurrence by AirGate or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose
of fixing or hedging interest rate risk with respect to any floating
rate Indebtedness that is permitted by the terms of the Indenture to be
outstanding;
(8) the guarantee by AirGate or any of the Guarantors of
Indebtedness of AirGate or a Restricted Subsidiary of AirGate that was
permitted to be incurred by another provision of this covenant;
(9) the incurrence by AirGate's Unrestricted Subsidiaries of
Non-Recourse Debt; provided, however, that if any such Indebtedness
ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, such
event shall be deemed to constitute an incurrence of Indebtedness by a
Restricted Subsidiary of AirGate that was not permitted by this clause
(9);
(10) the accrual of interest, accretion or amortization of
original issue discount, the payment of interest on any Indebtedness in
the form of additional Indebtedness with the same terms, and the
payment of dividends on Disqualified Stock in the form of additional
shares of the same class of Disqualified Stock;
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(11) Indebtedness (A) in respect of performance, surety or appeal
bonds or bankers' acceptances provided in the ordinary course of
business; and (B) arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations,
or from guarantees or letters of credit, surety bonds or performance
bonds securing any obligations of AirGate or any Restricted Subsidiary
pursuant to such agreements, in any case incurred in connection with
the disposition of any business, assets or Restricted Subsidiary (other
than guarantees of Indebtedness incurred by a person acquiring all or
any portion of such business, assets or Restricted Subsidiary for the
purpose of financing such acquisition), in a principal amount not to
exceed the gross proceeds actually received by AirGate or any
Restricted Subsidiary in connection with such disposition;
(12) the incurrence by AirGate or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal
amount, or accreted value, as applicable, at any time outstanding,
including all Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any Indebtedness incurred pursuant to this clause
(12), not to exceed $50.0 million; and
(13) the incurrence by AirGate of any Indebtedness under the
promissory note executed by AirGate pursuant to the Lucent Consent.
For purposes of determining compliance with this "Limitation on
Incurrence of Indebtedness and Issuance of Preferred Stock" covenant, in the
event that an item of proposed Indebtedness meets the criteria of more than one
of the categories of Permitted Debt described in clauses (1) through (13) above,
or is entitled to be incurred pursuant to the first paragraph of this covenant,
AirGate will be permitted to classify such item of Indebtedness on the date of
its incurrence, or later reclassify all or a portion of such item of
Indebtedness, in any manner that complies with this covenant.
Limitation on Senior Subordinated Debt
The Indenture provides that AirGate and the Guarantors will not incur
any Indebtedness that pursuant to its terms is subordinate or junior in right of
payment to any Senior Debt or any Permitted Debt described in clause (4) of the
second paragraph under "-- Limitation on Incurrence of Indebtedness and Issuance
of Preferred Stock," and senior in any respect in right of payment to the Notes
or the Guarantees; provided that the foregoing limitation shall not apply to
distinctions between categories of Senior Debt of AirGate or a Guarantor that
exist by reason of any Liens or Guarantees arising or created in respect of some
but not all such Senior Debt.
Limitation on Liens
AirGate will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, incur any Lien of any kind, other than Permitted Liens,
on or with respect to any property or assets now owned or hereafter acquired or
any interest therein or any income or profits therefrom.
Limitation on Dividend and Other Payment Restrictions Affecting
Subsidiaries
AirGate will not, and will not permit any of its Restricted
Subsidiaries, directly or indirectly, to create or permit to exist or become
effective any encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(1) pay dividends or make any other distributions on its Capital
Stock to AirGate or any of AirGate's Restricted Subsidiaries, or with
respect to any other interest or participation in, or measured by, its
profits, or pay any indebtedness owed to AirGate or any of its
Restricted Subsidiaries;
(2) make loans or advances to AirGate or any of AirGate's
Restricted Subsidiaries; or
(3) transfer any of its properties or assets to AirGate or any of
AirGate's Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness or Credit Facilities as in effect on the
date of the Indenture and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or
refinancings thereof, provided that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacement
or refinancings are no more restrictive, taken as a whole, with respect
to such dividend and other payment restrictions than those contained in
such Existing Indebtedness, as in effect on the date of the Indenture;
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(2) the Indenture, the Notes and the Security Documents;
(3) applicable law;
(4) any instrument governing Indebtedness or Capital Stock of a
Person acquired by AirGate or any of its Restricted Subsidiaries as in
effect at the time of such acquisition, except to the extent such
Indebtedness was incurred in connection with or in contemplation of
such acquisition, which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other than the
Person, or the property or assets of the Person, so acquired, provided
that, in the case of Indebtedness, such Indebtedness was permitted by
the terms of the Indenture to be incurred;
(5) customary non-assignment provisions in leases entered into in
the ordinary course of business and consistent with past practices;
(6) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions on the property so
acquired of the nature described in clause (3) of the preceding
paragraph;
(7) any agreement for the sale or other disposition of a
Restricted Subsidiary that restricts distributions by such Restricted
Subsidiary pending its sale or other disposition;
(8) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive, taken as a whole,
than those contained in the agreements governing the Indebtedness being
refinanced;
(9) Liens relating to Indebtedness otherwise permitted to be
incurred and secured pursuant to the provisions of the covenants
described above under the captions "-- Limitation on Incurrence of
Indebtedness and Issuance of Preferred Stock" and "-- Limitation on
Liens" that limit the right of AirGate or any of its Restricted
Subsidiaries to dispose of the assets securing such Indebtedness;
(10) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar
agreements entered into in the ordinary course of business; and
(11) restrictions on cash or other deposits or net worth imposed
by customers or vendors under contracts entered into in the ordinary
course of business.
Merger, Consolidation or Sale of Assets
AirGate shall not, in any transaction or series of related
transactions, merge or consolidate with or into, or sell, assign, convey,
transfer or otherwise dispose of its properties and assets substantially as an
entirety to, any Person, and shall not permit any of its Restricted Subsidiaries
to enter into any such transaction or series of transactions if such transaction
or series of transactions, in the aggregate, would result in a sale, assignment,
conveyance, transfer or other disposition of the properties and assets of
AirGate and its Restricted Subsidiaries, taken as a whole, substantially as an
entirety to any Person, unless, at the time and after giving effect thereto:
(1) either: (A) if the transaction or series of transactions is a
consolidation of AirGate with or a merger of AirGate with or into any
other Person, AirGate shall be the surviving Person of such merger or
consolidation, or (B) the Person formed by any consolidation with or
merger with or into AirGate, or to which the properties and assets of
AirGate or AirGate and its Restricted Subsidiaries, taken as a whole,
as the case may be, substantially as an entirety are sold, assigned,
conveyed or otherwise transferred (any such surviving Person or
transferee Person referred to in this clause (B) being the "Surviving
Entity"), shall be a corporation, partnership, limited liability
company or trust organized and existing under the laws of the United
States of America, any state thereof or the District of Columbia and
shall expressly assume by a supplemental indenture executed and
delivered to the Trustee, in form satisfactory to the Trustee, all the
obligations of AirGate under the Notes and the Indenture and, in each
case, the Indenture, as so supplemented, shall remain in full force and
effect;
(2) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis including
any Indebtedness incurred or anticipated to be incurred in connection
with or in respect of such transaction or series of transactions, no
Default or Event of Default shall have occurred and be continuing; and
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(3) AirGate or the Surviving Entity will, at the time of such
transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable period, (A)
have Consolidated Net Worth immediately after the transaction equal to
or greater than the Consolidated Net Worth of AirGate immediately
preceding the transaction and (B) be permitted to Incur at least $1.00
of additional Indebtedness pursuant to the first paragraph of the
covenant described above under the caption "Limitation on Incurrence of
Indebtedness and Issuance of Preferred Stock"; provided, however, that
the foregoing requirements shall not apply to any transaction or series
of transactions involving the sale, assignment, conveyance, transfer or
other disposition of the properties and assets by any Restricted
Subsidiary or AirGate to any other Restricted Subsidiary or AirGate, or
the merger or consolidation of any Restricted Subsidiary with or into
any other Restricted Subsidiary or AirGate.
The Indenture also provides that AirGate may not, directly or
indirectly, lease all or substantially all of its properties or asset, in one or
more related transactions, to any other Person.
In connection with any consolidation, merger, sale, assignment,
conveyance, transfer or other disposition contemplated by the foregoing
provisions, AirGate shall deliver, or cause to be delivered, to the Trustee, in
form and substance reasonably satisfactory to the Trustee, an Officers'
Certificate stating that such consolidation, merger, sale, assignment,
conveyance, transfer, or other disposition and the supplemental indenture in
respect thereof, required under clause (1)(B) of the preceding paragraph, comply
with the requirements of the Indenture and an opinion of counsel. Each such
Officers' Certificate shall set forth the manner of determination of AirGate's
compliance with clause (3) of the preceding paragraph.
For all purposes of the Indenture and the Notes, including the
provisions described in the two immediately preceding paragraphs and the
"Limitation on Incurrence of Indebtedness and Issuance of Preferred Stock" and
"Designation of Restricted and Unrestricted Subsidiaries" covenants,
Subsidiaries of any Surviving Entity will, upon such transaction or series of
transactions, become Restricted Subsidiaries or Unrestricted Subsidiaries as
provided pursuant to the "Designation of Restricted and Unrestricted
Subsidiaries" covenant and all Indebtedness of the Surviving Entity and its
Subsidiaries that was not Indebtedness of AirGate and its Subsidiaries
immediately prior to such transaction or series of transactions shall be deemed
to have been incurred upon such transaction or series of transactions.
The Surviving Entity shall succeed to, and be substituted for, and may
exercise every right and power of AirGate under the Indenture, and the
predecessor company shall be released from all its obligations and covenants
under the Indenture and the Notes.
Limitation on Transactions with Affiliates
AirGate will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less
favorable to AirGate or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by AirGate or
such Restricted Subsidiary with an unrelated Person; and
(2) AirGate delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration
in excess of $1.0 million, a resolution of the Board of Directors
set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with this covenant and that such
Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors; provided,
however, AirGate need not deliver such Officers' Certificate to
the Trustee with respect to any Affiliate Transaction or series of
related Affiliate Transactions that involve (i) aggregate
consideration not in excess of $5.0 million and (ii) an Affiliate
that (x) engages in a related telecommunication services business,
(y) bids on, owns or leases spectrum or (z) provides management,
billing or customer care services; and
(b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration
in excess of $25.0 million, an opinion as to the fairness to the
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holders of Notes of such Affiliate Transaction from a financial
point of view issued by an accounting, appraisal or investment
banking firm of national standing.
The following items shall not be deemed to be Affiliate Transactions
and, therefore, will not be subject to the provisions of the prior paragraph:
(1) any employment agreement, including payments made thereunder
in securities or cash, entered into by AirGate or any of its Restricted
Subsidiaries in the ordinary course of business of AirGate or such
Restricted Subsidiary;
(2) transactions between or among AirGate and/or its Restricted
Subsidiaries;
(3) payment of reasonable directors fees, expenses and
indemnification (whether such payment is made pursuant to AirGate's
charter or by-laws or a written agreement with any director or officer)
to Persons who are not otherwise Affiliates of AirGate;
(4) Restricted Payments that are permitted by the provisions of
the Indenture described above under the caption "-- Limitation on
Restricted Payments;" and
(5) sales of Equity Interests, other than Disqualified Stock, and
the grant of registration rights with respect thereto, to Affiliates of
AirGate.
Additional Guarantees
If AirGate or any of its Restricted Subsidiaries acquires or creates
another Restricted Subsidiary after the date of the Indenture, then that newly
acquired or created Restricted Subsidiary must become a Guarantor and (1)
execute a supplemental indenture satisfactory to the Trustee making the
Restricted Subsidiary a party to the Indenture, (2) execute an endorsement of
Guarantee, (3) deliver an Opinion of Counsel to the Trustee and (4) become a
party to the Second-Priority Security Documents, in each case within 10 Business
Days of the date on which it was acquired or created.
Designation of Restricted and Unrestricted Subsidiaries
The Board of Directors may designate any Restricted Subsidiary as an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, all
outstanding Investments owned by AirGate and its Restricted Subsidiaries in the
Subsidiary so designated will be deemed to be an Investment made as of the time
of such designation and will reduce the amount available for Restricted Payments
under paragraph (c) of the covenant described above under the caption "--
Limitation on Restricted Payments" or Permitted Investments, as applicable. All
such outstanding Investments will be valued at their fair market value at the
time of such designation. That designation will only be permitted if such
Restricted Payment would be permitted at that time and if such Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. The
Board of Directors may redesignate any Unrestricted Subsidiary to be a
Restricted Subsidiary if the redesignation would not cause a Default.
Limitation on Sale and Leaseback Transactions
AirGate will not, and will not permit any of its Restricted
Subsidiaries to, enter into any Sale and Leaseback Transaction; provided that
AirGate or any Restricted Subsidiary of AirGate that is a Guarantor may enter
into a Sale and Leaseback Transaction if:
(1) AirGate or that Guarantor, as applicable, could have (a)
incurred Indebtedness in an amount equal to the Attributable Debt
relating to such Sale and Leaseback Transaction under the first
paragraph of the covenant described above under the caption "--
Limitation on Incurrence of Indebtedness and Issuance of Preferred
Stock" and (b) incurred a Lien to secure such Indebtedness pursuant to
the covenant described above under the caption "-- Limitation on
Liens;"
(2) the gross cash proceeds of that Sale and Leaseback Transaction
are at least equal to the fair market value of the property that is the
subject of such Sale and Leaseback Transaction, as determined in good
faith by the Board of Directors and, if the aggregate consideration
received in the Sale and Leaseback Transaction exceeds $1.0 million, is
set forth in an Officers' Certificate delivered to the Trustee; and
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(3) the transfer of assets in that Sale and Leaseback Transaction
is permitted by, and AirGate applies the proceeds of such transaction
in compliance with, the covenant described above under the caption
"Repurchase at the Option of Holders -- Asset Sales."
Limitation on Issuances and Sales of Equity Interests in Wholly Owned
Restricted Subsidiaries
AirGate will not, and will not permit any of its Restricted
Subsidiaries to, transfer, convey, sell, lease or otherwise dispose of any
Equity Interests in any Wholly Owned Restricted Subsidiary of AirGate to any
Person, other than AirGate or a Wholly Owned Restricted Subsidiary of AirGate,
unless:
(1) such transfer, conveyance, sale, lease or other disposition is
of all the Equity Interests in such Wholly Owned Restricted Subsidiary;
and
(2) such transfer, conveyance, sale, lease or other disposition is
effected in accordance with the covenant described above under the
caption "Repurchase at the Option of Holders -- Asset Sales."
In addition, AirGate will not permit any Wholly Owned Restricted
Subsidiary of AirGate to issue any of its Equity Interests, other than, if
necessary, shares of its Capital Stock constituting directors' qualifying
shares, to any Person other than to AirGate or a Wholly Owned Restricted
Subsidiary of AirGate.
Business Activities
AirGate will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses.
Payments for Consent
AirGate will not, and will not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration to or for the
benefit of any holder of Notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Indenture or the Notes unless
such consideration is offered to be paid and is paid to all holders of the Notes
that consent, waive or agree to amend in the time frame set forth in the
solicitation documents relating to such consent, waiver or agreement.
Reports
Whether or not required by the rules and regulations of the Commission,
so long as any Notes are outstanding, AirGate will furnish to the Holders of
Notes:
(1) all quarterly and annual financial information that is
required to be filed with the Commission on Forms 10-Q and 10-K to the
extent AirGate does not file such Forms with the Commission, including
a "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and, with respect to the annual information
only, a report on the annual financial statements by AirGate's
independent accountants; and
(2) all current reports that are required to be filed with the
Commission on Form 8-K to the extent AirGate does not file such reports
with the Commission.
If AirGate has designated any of its Subsidiaries as Unrestricted
Subsidiaries, then the quarterly and annual financial information required by
the preceding paragraph shall include a reasonably detailed presentation, either
on the face of the financial statements or in the footnotes thereto, and in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, of the financial condition and results of operations of AirGate and
its Restricted Subsidiaries separate from the financial condition and results of
operations of the Unrestricted Subsidiaries of AirGate.
In addition, whether or not required by the Commission, AirGate will
file a copy of all of the information and reports referred to in clauses (1) and
(2) above with the Commission for public availability unless the Commission will
not accept such a filing, within the time periods specified in the Commission's
rules and regulations, and make such information available to securities
analysts and prospective investors upon request.
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Events of Default and Remedies
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on the
Notes, whether or not prohibited by the subordination provisions of the
Indenture;
(2) default in payment when due of the principal of or premium, if
any, on the Notes, whether or not prohibited by the subordination
provisions of the Indenture;
(3) failure by AirGate or any of its Restricted Subsidiaries to
comply with the provisions described under the captions "Repurchase at
the Option of Holders -- Change of Control" and "-- Asset Sales;"
(4) failure by AirGate or any of its Restricted Subsidiaries for
60 days after notice to comply with any of the other agreements in the
Indenture;
(5) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by AirGate or any of its Restricted
Subsidiaries, or the payment of which is guaranteed by AirGate or any
of its Restricted Subsidiaries, whether such Indebtedness or guarantee
now exists, or is created after the date of the Indenture, if that
default:
(a) is caused by a failure to pay principal of or premium, if
any, or interest on such Indebtedness prior to the expiration of
the grace period provided in such Indebtedness on the date of such
default (a "Payment Default"); or
(b) results in the acceleration of such Indebtedness prior to
its express maturity;
and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there has been a Payment Default or the maturity of which has
been so accelerated, aggregates $10.0 million or more;
(6) failure by AirGate or any of its Restricted Subsidiaries to
pay final judgments aggregating in excess of $10.0 million, which
judgments are not paid, discharged or stayed for a period of 60 days;
(7) any Second-Priority Security Document or the Intercreditor
Agreement is held to be unenforceable or invalid for any reason, the
security interests purported to be created by the Second-Priority
Security Documents are held to be unenforceable, invalid or impaired
with respect to a material portion of the Collateral, AirGate or any
Guarantor defaults in the performance of the terms of any of the
Second-Priority Security Documents or the Intercreditor Agreement in a
manner which adversely affects the enforceability or validity of the
security interest on a material portion of the Collateral or in a
manner which adversely affects the condition or value of a material
portion of the Collateral, or AirGate or any Guarantor repudiates or
disaffirms any of its obligations under any of the Second-Priority
Security Documents or the Intercreditor Agreement;
(8) except as permitted by the Indenture, any Guarantee shall be
held in any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or any Guarantor,
or any Person acting on behalf of any Guarantor, shall deny or
disaffirm its obligations under its Guarantee;
(9) certain events of bankruptcy or insolvency with respect to
AirGate, any Restricted Subsidiary that is a Significant Subsidiary or
any group of Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidiary; and
(10) any event occurs that causes, subject to any applicable grace
period, an Event of Termination under any of the Sprint Agreements.
In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to AirGate, any Restricted Subsidiary
that is a Significant Subsidiary or any group of Restricted Subsidiaries that,
taken together, would constitute a Significant Subsidiary, all outstanding Notes
will become due and payable immediately without further action or notice. If any
other Event of Default occurs and is continuing, the Trustee or the Holders of
at least 25% in principal amount of the then outstanding Notes may declare all
the Notes to be due and payable immediately.
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Holders of the Notes may not enforce the Indenture or the Notes except
as provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
holders of the Notes notice of any continuing Default or Event of Default,
except a Default or Event of Default relating to the payment of principal or
interest, if it determines that withholding notice is in their interest.
The holders of a majority in aggregate principal amount of the Notes
then outstanding by notice to the Trustee may on behalf of the holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of interest on, or the principal of, the Notes.
In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by or on behalf of AirGate with the
intention of avoiding payment of the premium that AirGate would have had to pay
if AirGate then had elected to redeem the Notes pursuant to the optional
redemption provisions of the Indenture, an equivalent premium shall also become
and be immediately due and payable to the extent permitted by law upon the
acceleration of the Notes. If an Event of Default occurs prior to January 1,
2006, by reason of any willful action or inaction taken or not taken by or on
behalf of AirGate with the intention of avoiding the prohibition on redemption
of the Notes prior to January 1, 2006, then the premium specified in the
Indenture shall also become immediately due and payable to the extent permitted
by law upon the acceleration of the Notes.
AirGate is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture. Upon becoming aware of any Default or
Event of Default, AirGate is required to deliver to the Trustee a statement
specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of AirGate
or any Guarantor, as such, shall have any liability for any obligations of
AirGate or the Guarantors under the Notes, the Indenture, the Guarantees, the
Intercreditor Agreement or any Second-Priority Security Document or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each holder of Notes by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for issuance of
the Notes. The waiver may not be effective to waive liabilities under the
federal securities laws.
Legal Defeasance and Covenant Defeasance
AirGate may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes and all obligations
of the Guarantors discharged with respect to their Guarantees ("Legal
Defeasance") except for:
(1) the rights of holders of outstanding Notes to receive payments
in respect of the principal of, premium, if any, and interest on such
Notes when such payments are due from the trust referred to below;
(2) AirGate's obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for
payment and money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the
Trustee, and AirGate's obligations in connection therewith; and
(4) the Legal Defeasance provisions of the Indenture.
In addition, AirGate may, at its option and at any time, elect to have
the obligations of AirGate and the Guarantors released with respect to certain
covenants that are described in the Indenture ("Covenant Defeasance") and
thereafter any omission to comply with those covenants shall not constitute a
Default or Event of Default with respect to the Notes. In the event Covenant
Defeasance occurs, certain events, not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events, described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
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(1) AirGate must irrevocably deposit with the Trustee, in trust,
for the benefit of the holders of the Notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the principal
of, premium, if any, and interest on the outstanding Notes on the
stated maturity or on the applicable redemption date, as the case may
be, and AirGate must specify whether the Notes are being defeased to
maturity or to a particular redemption date;
(2) in the case of Legal Defeasance, AirGate shall have delivered
to the Trustee an Opinion of Counsel reasonably acceptable to the
Trustee confirming that (a) AirGate has received from, or there has
been published by, the Internal Revenue Service a ruling or (b) since
the date of the Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the holders of the
outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal 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 Legal
Defeasance had not occurred;
(3) in the case of Covenant Defeasance, AirGate shall have
delivered to the Trustee an Opinion of Counsel reasonably acceptable to
the Trustee confirming that the holders of the outstanding 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;
(4) no Default or Event of Default shall have occurred and be
continuing either: (a) on the date of such deposit other than a Default
or Event of Default resulting from the borrowing of funds to be applied
to such deposit; or (b) insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on
the 91st day after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not result
in a breach or violation of, or constitute a default under any material
agreement or instrument, other than the Indenture, to which AirGate or
any of its Restricted Subsidiaries is a party or by which AirGate or
any of its Restricted Subsidiaries is bound;
(6) AirGate must have delivered to the Trustee an opinion of
counsel to the effect that, assuming no intervening bankruptcy of
AirGate between the date of deposit and the 91st day following the
deposit and assuming that no holder is an "insider" of AirGate under
applicable bankruptcy law, after the 91st day following the deposit,
the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting
creditors' rights generally;
(7) AirGate must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by AirGate with the intent of
preferring the holders of Notes over the other creditors of AirGate
with the intent of defeating, hindering, delaying or defrauding
creditors of AirGate or others; and
(8) AirGate must deliver to the Trustee an Officers' Certificate
and an opinion of counsel, each stating that all conditions precedent
relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.
Amendment, Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the
Indenture, the Notes, the Guarantees, the Intercreditor Agreement or any
Second-Priority Security Document may be amended or supplemented with the
consent of the holders of at least a majority in aggregate principal amount of
the Notes (it being understood that the provisions of the Intercreditor
Agreement and the Second-Priority Security Documents that may by their terms be
amended or supplemented without the consent of the Holders do not require the
consent of the Holders contemplated hereby), including, without limitation,
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, Notes, and any existing default or compliance with any provision of
the Indenture, the Notes, the Intercreditor Agreement or any Second-Priority
Security Document may be waived with the consent of the holders of a majority in
aggregate principal amount of the then outstanding Notes (it being understood
that the provisions of the Intercreditor Agreement and the Second Priority
Security Documents that may by their terms be waived without the consent of the
Holders do not require the consent of the Holders contemplated hereby),
including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Notes.
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Without the consent of each holder adversely affected, an amendment or
waiver may not, with respect to any Notes held by a non-consenting holder:
(1) reduce the aggregate of the principal amount of Notes whose
holders must consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any
Note or alter the provisions with respect to the redemption of the
Notes, other than provisions relating to the covenants described above
under the captions "-- Repurchase at the Option of Holders -- Change of
Control" and "-- Asset Sales;"
(3) reduce the rate of or change the time for payment of interest
on any Note;
(4) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes, except a
rescission of acceleration of the Notes by the holders of at least a
majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration;
(5) make any Note payable in money other than that stated in the
Notes;
(6) make any change in the provisions of the Indenture relating to
waivers of past Defaults or the rights of holders of Notes to receive
payments of principal of or premium, if any, or interest on the Notes;
(7) waive a redemption payment with respect to any Note, other
than a payment required by one of the covenants described above under
the captions "-- Repurchase at the Option of Holders -- Change of
Control" and "-- Asset Sales;" or
(8) make any change in the preceding amendment and waiver
provisions.
Notwithstanding the preceding, without the consent of any Holder of
Notes, AirGate and the Trustee may amend or supplement the Indenture, the Notes,
the Intercreditor Agreement or any Second-Priority Security Document:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or in place
of certificated Notes;
(3) to provide for the assumption of AirGate's obligations to
Holders under the Indenture, the Intercreditor Agreement or any
Second-Priority Security Document, in the case of a merger or
consolidation or sale of all or substantially all of AirGate's assets
in accordance with the applicable provisions of the Indenture;
(4) to make any change that would provide any additional rights or
benefits to the holders of Notes or that does not adversely affect the
legal rights under the Indenture of any holder;
(5) to secure the Notes under the Indenture, to add Guarantees
with respect to the Notes, or to confirm and evidence the release,
termination or discharge of any such security or Guarantee when such
release, termination or discharge is permitted by the Indenture and the
Security Documents;
(6) to add or release Collateral as permitted under the terms of
the Indenture, the Intercreditor Agreement or the Second-Priority
Security Documents;
(7) to comply with requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust
Indenture Act or otherwise in obtaining an exemption from, or
interpretation of, or in elaborating on, the requirements of the Trust
Indenture Act or to enable AirGate to rely on existing interpretations
of the Commission regarding the requirements of the Trust Indenture
Act; or
(8) to conform the automatic amendment or waiver of the
Second-Priority Security Documents pursuant to the terms of the
Intercreditor Agreement.
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Concerning the Trustee
If the Trustee becomes a creditor of AirGate or any Guarantor, the
Indenture limits its right to obtain payment of claims in certain cases, or to
realize on certain property received in respect of any such claim as security or
otherwise. The Trustee will be permitted to engage in other transactions;
however, if it acquires any conflicting interest it must eliminate such conflict
within 90 days, apply to the Commission for permission to continue or resign.
The holders of a majority in principal amount of the then outstanding
Notes will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur and be continuing, the Trustee will be required, in the exercise of
its power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indenture at the request of any
holder of Notes, unless such holder shall have offered to the Trustee security
and indemnity satisfactory to it against any loss, liability or expense.
Definitions
Set forth below are many of the defined terms used in the Indenture.
Reference is made to the Indenture for a full disclosure of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such
other Person is merged with or into or became a Subsidiary of such specified
Person, whether or not such Indebtedness is incurred in connection with, or
in contemplation of, such other Person merging with or into, or becoming a
Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired
by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" shall have correlative meanings.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets
or rights, other than sales of inventory, accounts receivable and sales
of surplus or obsolete property or equipment in the ordinary course of
business consistent with industry practices; provided that the sale,
conveyance or other disposition of all or substantially all of the
assets of AirGate and its Restricted Subsidiaries taken as a whole will
be governed by the provisions of the Indenture described above under
the caption "-- Repurchase at the Option of Holders -- Change of
Control" and/or the provisions described above under the caption "--
Selected Covenants -- Merger, Consolidation or Sale of Assets" and not
by the provisions of the Asset Sale covenant; and
(2) the issuance of Equity Interests by any of AirGate's
Restricted Subsidiaries or the sale of Equity Interests in any of its
Restricted Subsidiaries.
Notwithstanding the preceding, the following items shall not be deemed
to be Asset Sales:
(1) any single transaction or series of related transactions that:
(a) involves assets having a fair market value of less than $1.0
million; or (b) results in net proceeds to AirGate and its Restricted
Subsidiaries of less than $1.0 million;
(2) a transfer of assets between or among AirGate and its Wholly
Owned Restricted Subsidiaries;
(3) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary to AirGate or to another Wholly Owned Restricted Subsidiary;
(4) a Restricted Payment that is permitted by the covenant
described above under the caption "-- Selected Covenants -- Limitation
on Restricted Payments;" and
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(5) any transfer by AirGate or a Subsidiary of property or
equipment with a fair market value of less than $5.0 million to a
Person who is not an Affiliate of AirGate in exchange for property or
equipment that has a fair market value at least equal to the fair
market value of the property or equipment so transferred; provided
that, in the event of a transfer described in this clause (5), AirGate
shall deliver to the Trustee an officer's certificate certifying that
such exchange complies with this clause (5).
"Attributable Debt" in respect of a Sale and Leaseback Transaction
means, at the time of determination, the present value of the obligation of the
lessee for net 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 or may, at the option of the lessor, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person," as such term is used in Section 13(d)(3)
of the Exchange Act, such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire, whether such
right is currently exercisable or is exercisable only upon the occurrence of a
subsequent condition.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of AirGate to have been duly adopted by the
Board of Directors, unless the context specifically requires that such
resolution be adopted by a majority of the disinterested directors, in which
case by a majority of such directors, and to be in full force and effect on the
date of such certification and delivered to the Trustee.
"Capital Lease Obligation" means, as of any date of determination, the
amount of the liability in respect of a capital lease that would at that time be
required to be capitalized on a balance sheet in accordance with GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents, however
designated, of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests, whether general or limited; and
(4) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"Cash Equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured
by the United States government or any agency or instrumentality
thereof, provided that the full faith and credit of the United States
is pledged in support thereof, having maturities of less than one year
from the date of acquisition;
(3) certificates of deposit and eurodollar time deposits with
maturities of less than one year from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case, with any domestic commercial bank, including
the Trustee, having capital and surplus in excess of $500 million and a
Thompson Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (2) and (3)
above entered into with any financial institution meeting the
qualifications specified in clause (3) above;
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(5) commercial paper having the highest rating obtainable from a
Rating Organization and in each case maturing prior to one year after
the date of acquisition; and
(6) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (1)
through (5) of this definition.
"Change of Control" means the occurrence of any of the following:
(1) the sale, transfer, conveyance or other disposition, other
than by way of merger or consolidation, in one or a series of related
transactions, of all or substantially all of the assets of AirGate and
its Subsidiaries taken as a whole to any "person," as such term is used
in Section 13(d)(3) of the Exchange Act;
(2) the adoption of a plan relating to the liquidation or
dissolution of AirGate;
(3) the consummation of any transaction, including, without
limitation, any merger or consolidation, the result of which is that
any "person," as defined above, becomes the Beneficial Owner, directly
or indirectly, of more than 50% of the Voting Stock of AirGate,
measured by voting power rather than number of shares;
(4) the first day on which a majority of the members of the Board
of Directors of AirGate are not Continuing Directors; or
(5) AirGate consolidates with, or merges with or into, any Person,
or any Person consolidates with, or merges with or into, AirGate, in
any such event pursuant to a transaction in which any of the
outstanding Voting Stock of AirGate is converted into or exchanged for
cash, securities or other property, other than any such transaction
where the Voting Stock of AirGate outstanding immediately prior to such
transaction is converted into or exchanged for Voting Stock, other than
Disqualified Stock, of the surviving or transferee Person constituting
a majority of the outstanding shares of such Voting Stock of such
surviving or transferee Person immediately after giving effect to such
issuance.
Notwithstanding the foregoing, a "Change of Control" shall not occur
under clause (5) above in the event AirGate merges or consolidates with a Sprint
PCS Affiliate, if
(a) after announcement of the merger or consolidation but before
consummation thereof,
(i) there shall not have occurred any downgrading nor shall
any notice have been given (that is not subsequently removed prior
to the consummation thereof) of any potential or intended
downgrading of any rating of the Notes to a rating that is lower
than the rating that existed or was indicated prior to the
announcement of the merger or consolidation, in any case by a
Rating Organization, that is not subsequently removed prior to
such consummation;
(ii) there shall not have occurred any suspension or
withdrawal of, nor shall any notice have been given of any
potential or intended suspension or withdrawal of, any review (or
of any potential or intended review) for a possible change that
does not indicate the direction of the possible change in, any
rating of the Notes (including, without limitation, the placing of
any of the Notes on credit watch with negative or developing
implications or under review with an uncertain direction) by any
Rating Organization, in each case that is not subsequently removed
prior to the consummation of such merger or consolidation;
(iii) there shall not have occurred any change, nor shall any
notice have been given of any potential or intended change, in the
outlook for any rating of the Notes to a rating that is lower than
the rating that existed or was indicated prior to the announcement
of the merger or consolidation, in any case by any Rating
Organization, that is not subsequently removed prior to the
consummation of such merger or consolidation;
(iv) no Rating Organization shall have given notice that it
has assigned (or is considering assigning) a rating to the Notes
that is lower than the rating that existed or was indicated prior
to the announcement of the merger or consolidation, that is not
subsequently removed prior to such consummation; and
(b) the Beneficial Owners of Voting Stock of AirGate prior to the
merger or consolidation continue to be the Beneficial Owners of at
least 35% of the outstanding Voting Stock of AirGate or the surviving
Person after the merger or consolidation; and
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(c) a majority of the members of the Board of Directors and the
Chief Executive Officer, Chief Financial Officer and one additional
"named executive officer" (as defined in Item 402(a)(3) of Regulation
S-K under the Securities Act of 1933, as amended) of AirGate
immediately prior to the merger or consolidation shall continue to
serve in the same capacity or hold the same office, as the case may be,
for AirGate or the surviving Person after the merger or consolidation.
"Closing Date" means February 20, 2004, the date on which the Notes
were originally issued under the Indenture.
"Collateral" means, collectively, all of the property and assets that
are from time to time subject to or required to be subject to the Liens created
under the Second-Priority Security Documents.
"Collateral Agent" means the agent for the holders of the Notes under
the Second-Priority Security Documents.
"Consent and Agreement" means the consent and agreement, dated as of
August 16, 1999, among Sprint Spectrum L.P., Sprintcom, Inc., Sprint
Communications Company, L.P., Wireless, L.P., and Lucent Technologies Inc., as
administrative agent for the lenders under the Credit Agreement.
"Consolidated Debt" means the aggregate amount of Indebtedness of
AirGate and its Restricted Subsidiaries on a Consolidated basis outstanding at
the date of determination.
"Consolidated Debt to Operating Cash Flow Ratio" means, at any date of
determination, the ratio of (i) Consolidated Debt to (ii) the Operating Cash
Flow for the period of the latest four fiscal quarters for which consolidated
financial statements of AirGate are available.
"Consolidated Interest Expense" of any Person means, for any period,
(1) the aggregate interest expense and fees and other financing
costs in respect of Indebtedness (including amortization of original
issue discount and non-cash interest payments and accruals);
(2) the interest component in respect of Capital Lease
Obligations and any deferred payment obligations of such Person and its
Restricted Subsidiaries determined on a consolidated basis in
accordance with GAAP;
(3) all commissions, discounts, other fees and charges owed with
respect to letters of credit and bankers' acceptance financing and net
costs (including amortization of discounts) associated with interest
rate swap and similar agreements and with foreign currency hedge,
exchange and similar agreements; and
(4) the product of (a) all dividend payments, whether or not in
cash, on any series of Preferred Capital Stock of such Person or any of
its Restricted Subsidiaries, other than dividend payments on Capital
Stock payable solely in Capital Stock of AirGate (other than
Disqualified Stock) or to AirGate or its Restricted Subsidiaries, times
(b) a fraction, the numerator of which is one and the denominator of
which is one minus the then current combined federal, state and local
statutory tax rate of such Person, expressed as a decimal, in each
case, on a consolidated basis in accordance with GAAP.
"Consolidated Net Income" means, with respect to any specified Person
for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided that:
(1) the Net Income, but not loss, of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of
dividends or distributions paid in cash to the specified Person or a
Wholly Owned Subsidiary thereof;
(2) the Net Income of any Restricted Subsidiary shall be excluded
to the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not
at the date of determination permitted without any prior governmental
approval that has not been obtained or, directly or indirectly, by
operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders;
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(3) the Net Income, but not loss, of any Unrestricted Subsidiary
shall be excluded, whether or not distributed to the specified Person
or one of its Subsidiaries; and
(4) the cumulative effect of a change in accounting principles
shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any
date of determination, the sum of:
(1) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date; plus
(2) the respective amounts reported on such Person's balance sheet
as of such date with respect to any series of preferred stock, other
than Disqualified Stock, that by its terms is not entitled to the
payment of dividends unless such dividends may be declared and paid
only out of net earnings in respect of the year of such declaration
and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock.
"Consolidation" means the consolidation of the accounts of each of the
Restricted Subsidiaries with those of AirGate, if and to the extent that the
accounts of each such Restricted Subsidiary would normally be consolidated with
those of AirGate in accordance with generally accepted accounting principles;
provided, however, that "Consolidation" shall not include consolidation of the
accounts of any Unrestricted Subsidiary, but the interest of AirGate or any
Restricted Subsidiary in any Unrestricted Subsidiary shall be accounted for as
an investment. The term "Consolidated" has a correlative meaning.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of AirGate who:
(1) was a member of such Board of Directors on the date of the
Indenture; or
(2) was nominated for election or elected to such Board of
Directors with the approval of a majority of the Continuing Directors
who were members of such Board at the time of such nomination or
election.
"Credit Agreement" means the Credit Agreement, dated as of August 16,
1999, among AirGate, as borrower, the lenders party thereto, State Street Bank
and Trust Company, as collateral agent, and Lucent Technologies Inc., as
administrative agent, as amended by (1) the First Amendment to Credit Agreement,
dated as of October 12, 2001, among AirGate, as borrower, State Street Bank and
Trust Company, as collateral agent, and Lehman Commercial Paper Inc., as
administrative agent, and (2) Amendment No. 2 to the Credit Agreement, dated as
of November 30, 2003, among AirGate, as borrower, and Lehman Commercial Paper
Inc., as administrative agent, or any credit agreement or similar document
providing for one or more debt facilities or commercial paper facilities entered
into by AirGate and any lenders to amend, restate, modify, renew, refund,
replace or refinance the Credit Agreement in any manner in whole or in part from
time to time.
"Credit Facilities" means, with respect to AirGate or any Guarantor,
one or more debt facilities or agreements or commercial paper facilities
(including, without limitation, any senior secured notes), in each case with
banks or other institutional lenders providing for revolving credit loans, term
loans, receivables financing, including through the sale of receivables to such
lenders or to special purpose entities formed to borrow from such lenders
against such receivables, or letters of credit, and shall include the Credit
Agreement, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in any manner in whole or in part from time to time.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Designated Senior Debt" means (a) Indebtedness under the Credit
Agreement constituting Senior Debt and (b) any other Senior Debt that has been
designated by AirGate in writing to the Trustee as "Designated Senior Debt."
"Disqualified Stock" means 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 each case at the option of the holder thereof, or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature. Notwithstanding the preceding sentence, any
Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require AirGate to repurchase such Capital
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Stock upon the occurrence of a Change of Control or an Asset Sale 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 provisions contained in the "Repurchase at the
Option of Holders -- Change of Control" and "-- Asset Sales" covenants described
above and such Capital Stock specifically provides that such Person will not
repurchase or redeem any such stock pursuant to such provision prior to
AirGate's repurchase of the Notes as are required pursuant to such covenants.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock, but excludes any debt security that is
convertible into, or exchangeable for, Capital Stock.
"Event of Termination" means any of the events described in (1) Section
11.3 of the Management Agreement, (2) Section 13.2 of the Trademark Agreement or
(3) Section 13.2 of the Spectrum Trademark Agreement.
"Existing Indebtedness" means the $151.5 million in aggregate principal
amount of Indebtedness of AirGate and its Restricted Subsidiaries in existence
on the date of the Indenture, including any Indebtedness that may be incurred
under the promissory note executed by AirGate pursuant to the Consent and
Agreement, until such amounts are repaid.
"First Lien Indebtedness" means Indebtedness that is not by its terms
junior or subordinated in right of payment to the Notes and is secured by a Lien
that has priority over the Lien securing the Notes and is permitted under "--
Covenants -- Limitation on Liens" as a "Permitted Lien."
"First-Priority Security Documents" means, collectively, the security
agreements, pledge agreements, mortgages, deeds of trust, pledges, collateral
assignments and other agreements or instruments, as amended, supplemented,
replaced or otherwise modified from time to time, that evidence or create a
security interest in any or all of the Collateral to secure Indebtedness under
the Credit Facilities constituting Senior Debt and any interest rate and
currency hedging obligations provided by lenders under the Credit Facilities
constituting Senior Debt.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Government Securities" means (1) any security which is (a) a direct
obligation of the United States of America for the payment of which the full
faith and credit of the United States of America is pledged or (b) an obligation
of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation of the United
States of America, which, in either case, is not callable or redeemable at the
option of the issuer thereof, and (2) any depository receipt issued by a bank,
as defined in the Securities Act, as custodian with respect to any Government
Securities and held by such bank for the account of the holder of such
depository receipt, or with respect to any specific payment of principal of or
interest on any Government Securities which is so specified and held, provided
that, except as required by law, such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the Government Securities or
the specific payment of principal or interest evidenced by such depository
receipt.
"Guarantee" means any guarantee of the Notes by any Guarantor pursuant
to the Indenture.
"Guarantors" means each of AGW Leasing Company, Inc., AirGate Network
Services, LLC and AirGate Service Company, Inc. and any future subsidiary that
guarantees the Notes in accordance with the provisions of the Indenture, and
their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements
and interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such
Person against fluctuations in interest rates.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication):
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(1) the principal of and premium (if any) in respect of (i) debt
of such Person for money borrowed, and (ii) debt evidenced by notes,
debentures, bonds or other similar instruments for the payment of
which such Person is responsible or liable;
(2) all Capital Lease Obligations of such Person and all
Attributable Debt in respect of Sale and Leaseback Transactions
entered into by such Person;
(3) 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);
(4) all obligations of such Person for the reimbursement of any
obligor on any letter of credit, banker's acceptance or similar credit
transactions (other than obligations with respect to letters of credit
securing obligations (other than obligations described in (1) through
(3) 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);
(5) 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 Capital Stock (but excluding,
in each case, any accrued dividends);
(6) all obligations of the type referred to in clauses (1) through
(5) 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;
(7) all obligations of the type referred to in clauses (1) through
(6) 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 begin deemed to be the lesser of the value
of such property or the amount of the obligation so secured; and
(8) 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 (i) zero if such Hedging
Obligation has been incurred pursuant to clause (7) of the second paragraph of
the covenant described under "-- Certain Covenants -- Limitation on Incurrence
of Indebtedness and Issuance of Preferred Stock;" or (ii) the notional amount of
such Hedging Obligation if not incurred pursuant to such clause.
"Intercreditor Agreement" means the intercreditor agreement, dated as
of the Closing Date, among the Trustee, Lehman Commercial Paper Inc., in its
capacity as administrative agent for the financial institutions party to the
Credit Agreement, and State Street Bank and Trust Company, in its capacity as
collateral agent for the financial institutions party to the Credit Agreement,
and consented to by AirGate, as the same may be amended, supplemented, restated,
replaced or otherwise modified from time to time (whether with the original
agent or agents or lenders or other agents or lenders under the Credit
Facilities).
"Investments" means, with respect to any Person, all investments by
such Person in other Persons, including Affiliates, in the forms of direct or
indirect loans, including guarantees of Indebtedness or other obligations,
advances or capital contributions, excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business,
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If AirGate or any Restricted Subsidiary of AirGate sells or otherwise disposes
of any Equity Interests of any direct or indirect Restricted Subsidiary of
AirGate such that, after giving effect to any such sale or disposition, such
Person is no longer a Restricted Subsidiary of AirGate, AirGate shall be deemed
to have made an Investment on the date of any such sale or disposition equal to
the fair market value of the Equity Interests of such Restricted Subsidiary not
sold or disposed of in an amount determined as provided in the final paragraph
of the covenant described above under the caption "-- Selected Covenants --
Limitation on Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
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including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code, or equivalent statutes, of any jurisdiction.
"Management Agreement" means the Management Agreement between
SprintCom, Inc. and AirGate, dated as of July 22, 1998, and any exhibits,
schedules or addendum thereto, as such may be amended, modified or supplemented
from time to time.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person and its Restricted Subsidiaries, determined in accordance with
GAAP and before any reduction in respect of preferred stock dividends,
excluding, however:
(1) any gain, but not loss, together with any related provision
for taxes on such gain (but not loss), realized in connection with:
(a) any Asset Sale; or (b) the disposition of any securities by such
Person or any of its Restricted Subsidiaries or the extinguishment of
any Indebtedness of such Person or any of its Restricted Subsidiaries;
and
(2) any extraordinary gain, but not loss, together with any
related provision for taxes on such extraordinary gain, but not loss.
"Net Proceeds" means the aggregate cash proceeds received by AirGate or
any of its Restricted Subsidiaries in respect of any Asset Sale, including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale, net of the direct costs
relating to such Asset Sale, including, without limitation, legal, accounting
and investment banking fees, and sales commissions, and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof, in each
case after taking into account any available tax credits or deductions and any
tax sharing arrangements and amounts required to be applied to the repayment of
Indebtedness, other than Senior Debt, secured by a Lien on the asset or assets
that were the subject of such Asset Sale and appropriate amounts to be provided
by AirGate or any Restricted Subsidiary, as the case may be, as a reserve
required in accordance with GAAP against any liabilities associated with such
Asset Sale and retained by AirGate or any Restricted Subsidiary, as the case may
be, after such Asset Sale, including, without limitation, pension and other
post-employment benefit liabilities, liabilities related to environmental
matters and liabilities under any indemnification obligations associated with
such Asset Sale.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither AirGate nor any of its Restricted
Subsidiaries (a) provides credit support of any kind, including any
undertaking, agreement or instrument that would constitute
Indebtedness, (b) is directly or indirectly liable as a guarantor or
otherwise, or (c) constitutes the lender;
(2) no default with respect to which, including any rights that
the holders thereof may have to take enforcement action against an
Unrestricted Subsidiary, would permit upon notice, lapse of time or
both any holder of any other Indebtedness, other than the Notes, of
AirGate or any of its Restricted Subsidiaries to declare a default on
such other Indebtedness or cause the payment thereof to be accelerated
or payable prior to its stated maturity; and
(3) as to which the lenders have been notified in writing that
they will not have any recourse to the stock or assets of AirGate or
any of its Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities of any kind
payable under the documentation governing any Indebtedness.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the President or a Vice President, and by the Treasurer, an Assistant
Treasurer, the Secretary, or an Assistant Secretary, of AirGate, and delivered
to the Trustee.
"Operating Cash Flow" means, for any period, AirGate's Consolidated Net
Income (Loss) plus, to the extent deducted in calculating Consolidated Net
Income (Loss) for such period
(i) depreciation, amortization and other non-cash charges;
(ii) all amounts in respect of Consolidated Interest Expense, and
all income taxes, whether or not deferred, applicable to such income
period, all as determined on a consolidated basis in accordance with
generally accepted accounting principles;
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(iii) amounts actually incurred in pursuit of claims against, or
disputing claims by, Sprint PCS or any of its Affiliates, in an
aggregate amount not to exceed $2 million in any one fiscal year
period, provided that any portion of such amount not expended in any
such one-year period may be carried forward into the succeeding
one-year period but not in any subsequent year;
(iv) amounts not in excess of $5 million in start-up costs
actually incurred in connection with the provision of billing and
customer care services and any similar services by AirGate or an
Affiliate that had been provided to AirGate pursuant to the Sprint
Agreements;
(v) any restructuring costs or charges incurred in connection with
the restructuring transactions described in this prospectus.
For purposes of calculating Operating Cash Flow for the four fiscal
quarters most recently completed for which financial statements are available
prior to any date on which an action is taken that requires a calculation of the
Operating Cash Flow to Consolidated Interest Expense Ratio or Consolidated Debt
to Operating Cash Flow Ratio,
(1) any Person that is a Restricted Subsidiary on such date (or
would become a Restricted Subsidiary in connection with the
transaction that requires the determination of such ratio) will be
deemed to have been a Restricted Subsidiary at all times during such
period;
(2) any Person that is not a Restricted Subsidiary on such date
(or would cease to be a Restricted Subsidiary in connection with the
transaction that requires the determination of such ratio) will be
deemed not to have been a Restricted Subsidiary at any time during
such period; and
(3) if AirGate or any Restricted Subsidiary shall have in any
manner acquired (including through commencement of activities
constituting such operating business) or disposed of (including
through termination or discontinuance of activities constituting such
operating business) any operating business during or subsequent to the
most recently completed four fiscal quarters, such calculation will be
made on a pro forma basis on the assumption that such acquisition or
disposition had been completed on the first day of such completed
period.
"Paying Agent" means any Person authorized by AirGate to pay the
principal of, and premium, if any, or interest on any Notes on behalf of
AirGate.
"Permitted Business" means the business primarily involved in (a) the
ownership, design, construction, development, acquisition, installation,
integration, management and/or provision of communications systems, (b) the
delivery or distribution of communications, voice, data or video services, (c)
the provision of management, billing or customer care services or (d) any
business or activity reasonably related or ancillary thereto, including, without
limitation, any business conducted by AirGate or any Restricted Subsidiary on
the Closing Date.
"Permitted Investments" means:
(1) any Investment in AirGate or in a Wholly Owned Restricted
Subsidiary of AirGate that is a Guarantor;
(2) any Investment in Cash Equivalents;
(3) any Investment by AirGate or any Restricted Subsidiary of
AirGate in a Person, if as a result of such Investment:
(a) such Person becomes a Wholly Owned Restricted Subsidiary
of AirGate; or
(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to,
or is liquidated into, AirGate or a Wholly Owned Restricted
Subsidiary of AirGate;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption
"Repurchase at the Option of Holders -- Asset Sales;"
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(5) any acquisition of assets solely in exchange for the issuance
of Equity Interests, other than Disqualified Stock, of AirGate;
(6) Investments, the payment of which consists only of Equity
Interests, other than Disqualified Stock;
(7) Investments of up to $5 million in fiscal 2003, $7.5 million
in fiscal 2004, $10 million in fiscal 2005, $12.5 million in fiscal
2006 and $15 million in fiscal 2007, in the aggregate, in one or more
transactions in one or more entities that (i) will engage in a related
telecommunications service business, (ii) will bid on, own or lease
spectrum or (iii) will provide management, billing or customer care
services; provided that, at the time of such Investment, AirGate could
have incurred $1.00 of additional debt pursuant to the first paragraph
of the covenant described in "Selected Covenants -- Limitation on
Incurrence of Indebtedness and Issuance of Preferred Stock;" provided
further, that such amounts will be included in the calculation of
subsequent Restricted Payments under the covenant described in
"Selected Covenants -- Limitation on Restricted Payments."
(8) Investments in one or more transactions, not to exceed an
aggregate of $5 million, in one or more entities that will provide
management, billing or customer care services; and
(9) other Investments in any Person having an aggregate fair
market value, measured on the date each such Investment was made and
without giving effect to subsequent changes in value, when taken
together with all other Investments made pursuant to this clause (9)
since the date of the Indenture, not to exceed $5.0 million.
"Permitted Junior Securities" means Equity Interests in AirGate or its
Subsidiaries or debt securities of AirGate or its Subsidiaries that are
subordinated to all Senior Debt (and any debt securities issued in exchange for
Senior Debt) to substantially the same extent as, or to a greater extent than,
the Notes are subordinated to Senior Debt.
"Permitted Liens" means:
(1) Liens securing Indebtedness under Credit Facilities
constituting Senior Debt on any tangible or intangible asset or
property of AirGate or any Restricted Subsidiary, whether such asset
or property is real, personal or mixed; provided, that a similar Lien
on such asset or property shall also be granted for the benefit of the
Holders of the Notes and such Lien granted for the benefit of the
Holders of the Notes shall be junior only to the Liens securing
Indebtedness under Credit Facilities constituting Senior Debt and
certain other Permitted Liens, and any intercreditor agreement or
other agreement pertaining to relative rights in such Collateral shall
not be any less favorable than the Intercreditor Agreement as in
effect at such time or as last in effect;
(2) Liens in favor of AirGate or the Guarantors;
(3) Liens on property of a Person existing at the time such Person
is merged with or into or consolidated with AirGate or any Restricted
Subsidiary of AirGate; provided that such Liens (a) were in existence
prior to the contemplation of such merger or consolidation, (b) are
not incurred in anticipation of or in connection with such merger or
consolidation, and (c) do not extend to any assets other than those of
the Person merged into or consolidated with AirGate or the Restricted
Subsidiary;
(4) Liens on property existing at the time of acquisition thereof
by AirGate or any Restricted Subsidiary of AirGate, provided that such
Liens (a) were in existence prior to the contemplation of such
acquisition, (b) are not incurred in anticipation of or in connection
with the acquisition of such property and (c) do not extend to any
assets other than those of the property acquired;
(5) Liens and deposits made to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds, letters of
credit or other obligations of a like nature incurred in the ordinary
course of business;
(6) Liens to secure Indebtedness, including Capital Lease
Obligations, permitted by clause (4) of the second paragraph of the
covenant entitled "Limitation on Incurrence of Indebtedness and
Issuance of Preferred Stock" covering only the assets acquired with
such Indebtedness;
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(7) Liens existing on the date of the Indenture;
(8) Liens on Assets of Guarantors to secure Senior Debt of such
Guarantor that was permitted by the Indenture to be incurred;
(9) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith
by appropriate proceedings promptly instituted and diligently
concluded, provided that any reserve or other appropriate provision as
shall be required in conformity with GAAP shall have been made
therefor;
(10) Liens incurred in the ordinary course of business of AirGate
or any Restricted Subsidiary of AirGate with respect to obligations
that do not exceed $5.0 million at any one time outstanding;
(11) Liens on property or shares of stock of a Person at the time
such Person becomes a Subsidiary; provided, however, that any such
Lien may not extend to any other property owned by AirGate or any
Restricted Subsidiary; provided further that such Liens are not
incurred in anticipation of or in connection with the transaction or
series of related transactions pursuant to which such Person became a
Restricted Subsidiary;
(12) Liens securing the Notes and the Guarantees outstanding on
the Closing Date;
(13) Liens to secure any refinancing, refunding, extension,
renewal or replacement (or successive refinancings, refundings,
extensions, renewals or replacements) as a whole, or in part, of any
Indebtedness secured by any Lien referred to in the foregoing clauses
(3), (4), (7) and (8);
(14) Liens imposed by law, such as carriers', warehousemen's and
mechanics' liens, in each case for sums not yet due or being contested
in good faith by appropriate proceedings, or other Liens arising out
of judgments or awards against such Person not giving rise to an Event
of Default so long as any appropriate legal proceeding that may have
been duly initiated for the review of such judgment or award shall
have been finally determined, or the period within which such
proceeding may be initiated shall not have expired;
(15) Liens on assets of AirGate or any Restricted Subsidiary
arising as a result of a sale and leaseback transaction with respect
to such assets; provided that the proceeds from such sale and
leaseback transaction are applied in accordance with the covenant
described above under the caption "-- Repurchase at the Option of
Holders -- Asset Sales;" and
(16) Liens to secure Indebtedness (and any guarantee of such
Indebtedness) permitted to be incurred under (i) clause (12) of the
covenant described in the caption "-- Selected Covenants -- Limitation
of Incurrence of Indebtedness and Issuance of Preferred Stock" or (ii)
the first paragraph of such covenant, provided, that such Liens shall
be junior to the Liens securing Indebtedness under the Credit
Facilities constituting Senior Debt and provided further that such
Liens shall also be granted for the benefit of the Holders of the
Notes and such Liens shall rank pari passu with the Lien granted for
the benefit of the Holders of the Notes.
"Permitted Refinancing Indebtedness" means any Indebtedness of AirGate
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of AirGate or any of its Restricted Subsidiaries,
other than intercompany Indebtedness; provided that:
(1) the principal amount, or accreted value, if applicable, of
such Permitted Refinancing Indebtedness does not exceed the principal
amount of, or accreted value, if applicable, plus the amount of any
premium required to be paid in connection with such refinancing
pursuant to the terms of the Indebtedness refinanced or the amount of
any premium reasonably determined by AirGate as necessary to
accomplish such refinancing, plus accrued interest on, the
Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded, plus the amount of reasonable expenses incurred in
connection therewith;
(2) such Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded;
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(3) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to
the Notes, such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and is
subordinated in right of payment to, the Notes on terms at least as
favorable to the holders of Notes as those contained in the
documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by AirGate or by the
Restricted Subsidiary who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, trust, unincorporated organization or government or
any agency or political subdivision thereof or other entity of any nature.
"Preferred Capital Stock," as applied to the Capital Stock of any
Person, means Capital Stock of such Person of any class or classes, however
designated, that ranks prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of such Person.
"Rating Organization" means Standard & Poor's Ratings Service, a
discussion of The McGraw-Hill Companies Inc., or Moody's Investors Service, Inc.
or their respective subsidiaries.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Sale and Leaseback Transaction" means any arrangement with any Person
(other than AirGate or a Subsidiary), or to which any such Person is a party,
providing for the leasing, pursuant to a capital lease that would at such time
be required to be capitalized on a balance sheet in accordance with GAAP, to
AirGate or a Restricted Subsidiary of any property or asset which has been or is
to be sold or transferred by AirGate or such Restricted Subsidiary to such
Person or to any other Person (other than AirGate or a Subsidiary) to which
funds have been or are to be advanced by such Person.
"Second-Priority Security Documents" means, collectively, the security
agreements, pledge agreements, mortgages, deeds of trust, pledges, collateral
assignments and other agreements or instruments, as amended, supplemented,
replaced or otherwise modified from time to time, among AirGate, certain other
grantors and the Trustee, that evidence or create a security interest in any or
all of the Collateral in favor of the Trustee and any Holders of the Notes.
"Security Documents" mean, collectively:
(1) the First-Priority Security Documents;
(2) the Second-Priority Security Documents; and
(3) the Intercreditor Agreement.
"Senior Debt" means:
(1) all Indebtedness outstanding under Credit Facilities and any
guarantees thereof and all Hedging Obligations with respect thereto,
to the extent permitted under clause(3) of the second paragraph of the
covenant described under the caption "-- Selected Covenants --
Limitation on Issuance of Indebtedness and Issuance of Preferred
Stock;" and
(2) all Obligations with respect to the items listed in the
preceding clause (1).
Notwithstanding anything to the contrary in the preceding, Senior Debt
will not include:
(1) any liability for federal, state, local or other taxes owed or
owing by AirGate;
(2) any Indebtedness of AirGate to any of its Subsidiaries or
other Affiliates;
(3) any trade payables; or
(4) any Indebtedness that is incurred in violation of the
Indenture or that is not permitted to be incurred under clause (3) of
the second paragraph of the covenant described under "-- Selected
Covenants -- Limitation on Incurrence of Indebtedness and Issuance of
Preferred Stock."
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"Senior Subordinated Discount Notes" means the 13.5% Senior
Subordinated Discount Notes due October 1, 2009 of AirGate.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"Spectrum Trademark Agreement" means Sprint Trademark and Service Mark
License Agreement between Sprint Spectrum L.P. and AirGate, dated as of July 22,
1998, and any exhibits, schedules or addendum thereto, as such may be amended,
modified or supplemented from time to time.
"Sprint Agreements" means the (1) Management Agreement; (2) Sprint PCS
Services Agreement between Sprint Spectrum L.P. and AirGate, dated as of July
22, 1998, and any exhibits, schedules or addendum thereto, as such may be
amended, modified or supplemented from time to time; (3) Trademark Agreement;
and (4) Spectrum Trademark Agreement.
"Sprint PCS Affiliate" means any Person whose sole or predominant
business is operating a personal communications services business pursuant to
arrangements with Sprint Spectrum L.P. and/or its Affiliates, or their
successors, similar to the Sprint Agreements.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subordinated Note Obligations" means all Obligations with respect to
the Notes, including without limitation, principal of, premium, if any, and
interest, if any, payable pursuant to the terms of the Notes (including upon the
acceleration of redemption thereof), together with and including any amounts
received or receivable upon the exercise of rights of rescission or other rights
of action (including claims for damages) or otherwise.
"Subsidiary" means, with respect to any Person:
(1) any corporation, association or other business entity of which
more than 50% of the total voting power of shares of Capital Stock
entitled, without regard to the occurrence of any contingency, to vote
in the election of directors, managers or trustees thereof is at the
time owned or controlled, directly or indirectly, by such Person or
one or more of the other Subsidiaries of that Person, or a combination
thereof; and
(2) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person
or (b) the only general partners of which are such Person or of one or
more Subsidiaries of such Person, or any combination thereof.
"Trademark Agreement" means Sprint Trademark and Service Mark License
Agreement between Sprint Communications Company, L.P. and AirGate, dated as of
July 22, 1998, and any exhibits, schedules or addendum thereto, as such may be
amended, modified or supplemented from time to time.
"Trustee" means the trustee under the Indenture.
"Unrestricted Subsidiary" means any Subsidiary of AirGate that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution, but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with AirGate or any Restricted Subsidiary of AirGate
unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to AirGate or such Restricted
Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of AirGate;
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(3) is a Person with respect to which neither AirGate nor any of
its Restricted Subsidiaries has any direct or indirect obligation (a)
to subscribe for additional Equity Interests or (b) to maintain or
preserve such Person's financial condition or to cause such Person to
achieve any specified levels of operating results;
(4) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of AirGate or any of its
Restricted Subsidiaries; and
(5) has at least one director on its board of directors that is
not a director or executive officer of AirGate or any of its
Restricted Subsidiaries and has at least one executive officer that is
not a director or executive officer of AirGate or any of its
Restricted Subsidiaries.
Any designation of a Subsidiary of AirGate as an Unrestricted
Subsidiary shall be evidenced to the Trustee by filing with the Trustee the
Board Resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the preceding conditions and was
permitted by the covenant described above under the caption "-- Selected
Covenants -- Limitation on Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the preceding requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary
shall be deemed to be incurred by a Restricted Subsidiary of AirGate as of such
date and, if such Indebtedness is not permitted to be incurred as of such date
under the covenant described under the caption "Limitation on Incurrence of
Indebtedness and Issuance of Preferred Stock," AirGate shall be in default of
such covenant. The Board of Directors of AirGate may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of AirGate of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (1) such Indebtedness
is permitted under the covenant described under the caption "-- Selected
Covenants -- Limitation on Incurrence of Indebtedness and Issuance of Preferred
Stock," calculated on a pro forma basis as if such designation had occurred at
the beginning of the four-quarter reference period; and (2) no Default or Event
of Default would be in existence following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date of determination, the number of years obtained by
dividing:
(1) the sum of the products obtained by multiplying (a) the amount
of each then remaining installment, sinking fund, serial maturity or
other required payments of principal, including payment at final
maturity, in respect thereof, by (b) the number of years, calculated
to the nearest one-twelfth, that will elapse between such date and the
making of such payment; by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which, other than directors' qualifying shares, shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
Book Entry Form
Global Notes
We issued the Notes in fully registered form without coupons and each
Note is represented by a global Note (a "Global Note") registered in the name of
a nominee of the depositary. Except as set forth in this prospectus, Notes are
issuable only in global form. All Notes are represented by one or more fully
registered Global Notes. Each Global Note was deposited with, or on behalf of,
the depositary and registered in the name of the depositary or its nominee. Your
beneficial interest in a Note is shown on, and transfers of beneficial interests
are effected only through, records maintained by the depositary or its
participants. Payments of principal of, premium, if any, and interest, if any,
on, Notes represented by a Global Note will be made by us or our paying agent to
the depositary or its nominee. The Depository Trust Company ("DTC") is the
initial depositary.
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The Depositary
DTC is the initial depositary with respect to the Notes. DTC has
advised us that it is a limited-purpose trust company organized under the laws
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 Securities and Exchange Act of 1934, as
amended. DTC was created to hold securities of its participants and to
facilitate the clearance and settlement of securities transactions among its
participants in those 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, banks, trust
companies, clearing corporations and certain other organizations, some of whom,
and/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. Persons who are not participants may beneficially own
securities held by DTC only through participants. The rules applicable to DTC
and its participants are on file with the Securities and Exchange Commission.
Ownership of Global Notes
When we issued the Notes represented by a Global Note, the depositary
credited, on its book-entry registration and transfer system, the participants'
accounts with the principal amounts of the Notes represented by the Global Note
beneficially owned by the participants. Ownership of beneficial interests in a
Global Note are limited to participants or persons that hold interests through
participants. Ownership of beneficial interests in Notes represented by a Global
Note are limited to participants or persons that hold interests through
participants. Ownership of beneficial interests in Notes represented by a Global
Note or Global Notes are shown on, and the transfer of that ownership is
effected only through, records maintained by the depositary, or by participants
in the depositary or persons that may hold interests through participants. The
laws of some states require that purchasers of securities take physical delivery
of securities in definitive form. These limits and laws may impair your ability
to transfer beneficial interests in a Global Note.
So long as the depositary for a Global Note, or its nominee, is the
registered owner of the Global Note, the depositary or its nominee will be
considered the sole owner or holder of the Notes represented by a Global Note
for all purposes under the Indenture. Except as provided below, you, as the
owner of beneficial interests in Notes represented by a Global Note or Global
Notes (a) are not entitled to register the Notes represented by a Global Note in
your name, (b) will not receive or be entitled to receive physical delivery of
Notes in definitive form and (c) are not considered the owner or holder of the
Notes under the Indenture.
Accordingly, you must rely on the procedures of the depositary or on
the procedures of the participant through which you own your interest, to
exercise any rights of a holder under the Indenture or a Global Note. We
understand that under existing policy of the depositary and industry practices,
if (a) we request any action of holders, or (b) you desire to give notice or
take action which a holder is entitled to under the Indenture or a Global Note,
the depositary would authorize the participants holding the beneficial interests
to give the notice or take the action.
If you are a beneficial owner that is not a participant, you must rely
on the contractual arrangements you have directly, or indirectly through your
financial intermediary, with a participant to give notice or take action.
To facilitate subsequent transfers, all Global Notes deposited by
participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Global Notes with DTC and their registration in the
name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual beneficial owners of the book-entry Notes; DTC's records
reflect only the identity of the direct participants to whose accounts the
book-entry Notes are credited, which may or may not be the beneficial owners.
The participants will remain responsible for keeping account of their holdings
on behalf of their customers.
Neither DTC nor Cede & Co. will consent or vote with respect to
book-entry Notes. Under its usual procedures, DTC will mail an "Omnibus Proxy"
to us as soon as possible after the record date. The Omnibus Proxy assigns Cede
& Co.'s consenting or voting rights to those direct participants to whose
accounts the book-entry Notes are credited on the record date (identified in a
listing attached to the Omnibus Proxy).
A beneficial owner shall give notice to elect to have its book-entry
Notes purchased or tendered, through its participant, to the paying agent, and
shall effect delivery of such book-entry Notes by causing the direct participant
to transfer the participant's interest in the book-entry Notes, on the
depositary's records, to the paying agent. The requirement for physical delivery
of book-entry Notes in connection with a demand for purchase or a mandatory
purchase will be deemed satisfied when the ownership rights in the book-entry
Notes are transferred by a direct participant on the depositary's records.
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Payments
We will make payments of principal of, premium, if any, and interest,
if any, on, the Notes represented by a Global Note through the trustee to the
depositary or its nominee, as the registered owner of a Global Note. Neither we,
the trustee, any paying agent or any other of our agents will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests of a Global Note or
for maintaining, supervising or reviewing any records relating to beneficial
ownership interests. We expect that the depositary, upon receipt of any
payments, will immediately credit the accounts of the related participants with
payments in amounts proportionate to their beneficial interest in the Global
Note. We also expect that payments by participants to owners of beneficial
interests in a Global Note will be governed by standing customer instructions
and customary practices and will be the responsibility of the participants.
Certificated Notes
If DTC or any other designated replacement depositary is at any time
unwilling or unable to continue as depositary or ceases to be a clearing agency
registered under the Exchange Act and a successor depositary registered as a
clearing agency under the Exchange Act is not appointed by us within 90 calendar
days, we will issue certificated Notes in exchange for all the Global Notes.
Also, we may at any time and in our sole discretion determine not to have the
Notes represented by the Global Note and, in that event, will issue certificated
Notes in exchange for all the Global Notes. In either instance, you, as an owner
of a beneficial interest in a Global Note, will be entitled to have certificated
Notes equal in principal amount to the beneficial interest registered in your
name and will be entitled to physical delivery of the certificated Notes. The
certificated Notes will be registered in the name or names as the depositary
shall instruct the Trustee. These instructions may be based upon directions
received by the depositary from participants with respect to beneficial
interests in the Global Notes. The certificated Notes will be issued in
denominations of $100,000 or any amount in excess of $100,000 which is an
integral multiple of $1,000 and will be issued in registered form only, without
coupons. No service charge will be made for any transfer or exchange of
certificated Notes, but we may require payment of a sum sufficient to cover any
tax or other governmental charge.
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DESCRIPTION OF CAPITAL STOCK
General
The following summarizes all of the material terms and provisions of
our capital stock. Under our amended and restated certificate of incorporation,
which effected a 1 for 5 reverse stock split, we have 31,000,000 shares of
authorized capital stock, including 30,000,000 shares of common stock, par value
$0.01 per share, and 1,000,000 shares of preferred stock, par value $0.01 per
share. As of December 31, 2003, after giving effect to the reverse stock split,
we had outstanding 5,192,238 shares of common stock (including 7,400 shares of
restricted stock), no shares of preferred stock, options exercisable for 255,414
shares of common stock and warrants to acquire 137,560 shares of common stock.
After giving effect to the recapitalization, including the reverse stock split,
as of December 31, 2003, there would have been issued and outstanding
approximately 11,760,942 shares of our common stock (or approximately 12,153,916
shares, assuming exercise of all options and warrants issued and outstanding as
of that date).
On February 12, 2004, the Company's stockholders approved a 1-for-5
reverse split of the Company's capital stock. On February 13, 2004, the Company
amended and restated its certificate of incorporation to effect the reverse
stock split. Trading of the Company's shares of common stock on a post-split
basis commenced on February 20, 2004. As a result of the reverse stock split,
the stockholders will receive one share of common stock, and cash resulting from
the elimination of any fractional shares, in exchange for each five shares of
common stock currently outstanding. The table below indicates all share and per
share amounts for the years ended September 30, 2001, 2002, and 2003 on a
historical basis and as adjusted for this 1-for-5 reverse stock split.
Years Ended September 30,
------------------------------------------------------------------
2001 2002 2003
------------------------------------------------------------------
(in thousands, except share and per share information)
Net loss $ (110,990) $ (996,617) $ (84,757)
Basic and diluted weighted-average outstanding common
shares:
Pre-split shares 13,089,285 23,751,507 25,908,414
Post-split shares 2,617,857 4,750,301 5,181,683
Earnings per share:
Pre-split $ (8.48) $ (41.96) $ (3.27)
Post-split $ (42.40) $ (209.80) $ (16.36)
Common Stock
The holders of our common stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders and do not
have any cumulative rights. Subject to the rights of the holders of any series
of preferred stock, holders of common stock are entitled to receive ratably such
dividends as may be declared by the board of directors out of funds legally
available therefor. Holders of shares of common stock have no preemptive,
conversion, redemption, subscription or similar rights. If we liquidate,
dissolve or wind up, the holders of shares of our common stock are entitled to
share ratably in the assets which are legally available for distribution, if
any, remaining after the payment or provision for the payment of all debts and
other liabilities and the payment and setting aside for payment of any
preferential amount due to the holders of shares of any series of preferred
stock.
Preferred Stock
Under our amended and restated certificate of incorporation, the board
of directors is authorized, subject to certain limitations prescribed by law,
without further stockholder approval, from time to time to issue up to an
aggregate of 1,000,000 shares of preferred stock. The preferred stock may be
issued in one or more series. Each series may have different rights, preferences
and designations and qualifications, limitations and restrictions that may be
established by our board of directors without approval from the stockholders.
These rights, designations and preferences include:
o number of shares to be issued;
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o dividend rights;
o dividend rates;
o right to convert the preferred shares into a different type of
security;
o voting rights attributable to the preferred shares;
o right to set aside a certain amount of assets for payment
relating to the preferred shares; and
o prices to be paid upon redemption of the preferred shares or a
bankruptcy type event.
If our board of directors decides to issue any preferred stock, it
could have the effect of delaying or preventing another party from taking
control of us. This is because the terms of the preferred stock could be
designed to make it prohibitively expensive for any unwanted third party to make
a bid for our shares. We have no present plans to issue any shares of preferred
stock.
Delaware Law and Certain Charter and By-Law Provisions
Subject to certain exceptions, Section 203 of the Delaware General
Corporation Law prohibits a publicly held Delaware corporation from engaging in
a "business combination" with an "interested stockholder" for a certain period
of time. That period is three years after the date of the transaction in which
the person became an interested stockholder, unless the interested stockholder
attained that status with the approval of the board of directors or unless the
business combination is approved in a prescribed manner. A "business
combination" includes certain merger, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Subject to
certain exceptions, an "interested stockholder" is a person who, together with
his or her affiliates and associates, owns, or owned within three years prior,
15% or more of the corporation's voting stock.
Our amended and restated certificate of incorporation provides that
certain business transactions with interested stockholders must be approved by
the holders of at least 80% of the voting power of our then-outstanding shares
of stock entitled to vote in the election of directors, voting together as a
single class. Such business transactions include: mergers or consolidations with
an interested stockholder; sales, leases, exchanges, mortgages, pledges,
transfers or other dispositions of any of our assets to an interested
stockholder; certain sizable issuances or transfers of any of our securities to
an interested stockholder; the adoption of any plan or proposal for our
liquidation proposed by or on behalf of an interested stockholder; or any
reclassification of our securities or recapitalization which increases the
proportionate share of any class of securities of an interested stockholder.
However, the affirmative vote of a majority of the shares of outstanding stock
entitled to vote, or such vote as is required by law or our certificate of
incorporation, will suffice with respect to a business combination with an
interested stockholder if the consideration received meets certain fair price
standards.
Our amended and restated certificate of incorporation and by-laws
provide for the division of the board of directors into three classes, as nearly
equal in size as possible, with each class beginning its three year term in a
different year. A director may be removed only for cause by the affirmative vote
of the holders of at least 80% of the voting power of all of the
then-outstanding shares of capital stock entitled to vote generally for the
election of directors voting together as a single class.
Our by-laws also require a stockholder who intends to nominate a
candidate for election to the board of directors, or to raise new business at a
stockholder meeting to give at least 90 days advance notice to the Secretary.
The notice provision requires a stockholder who desires to raise new business to
provide us with certain information concerning the nature of the new business,
the stockholder and the stockholder's interest in the business matter.
Similarly, a stockholder wishing to nominate any person for election as a
director will need to provide us with certain information concerning the nominee
and the proposing stockholder.
Our amended and restated certificate of incorporation empowers our
board of directors, when considering a tender offer or merger or acquisition
proposal, to take into account factors in addition to potential economic
benefits to stockholders. These factors may include:
o comparison of the proposed consideration to be received by
stockholders in relation to the then current market price of
our capital stock, the estimated current value of the company
in a freely negotiated transaction and the estimated future
value of the company as an independent entity; and
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o the impact of a transaction on our employees, suppliers and
clients and its effect on the communities in which we
operates.
Our amended and restated certificate of incorporation also contains a
provision which acknowledges that certain of our Sprint agreements establish a
process for the sale of our operating assets in the event of a default by us and
an acceleration of the obligations under our credit facility. This provision of
the amended and restated certificate of incorporation is intended to permit the
sale of such assets without further stockholder approval.
The provisions described above could make it more difficult for a third
party to acquire control of us and, furthermore, could discourage a third party
from making any attempt to acquire control of us.
Our amended and restated certificate of incorporation provides that any
action required or permitted to be taken by our stockholders may be taken only
at a duly called annual or special meeting of the stockholders, and that special
meetings may be called only by resolution adopted by a majority of the board of
directors, or as otherwise provided in the bylaws. These provisions could have
the effect of delaying until the next annual stockholders meeting stockholder
actions that are favored by the holders of a majority of the outstanding voting
securities. These provisions may also discourage another person or entity from
making an offer to stockholders for the common stock. This is because the person
or entity making the offer, even if it acquired a majority of our outstanding
voting securities, would be unable to call a special meeting of the stockholders
and would further be unable to obtain unanimous written consent of the
stockholders. As a result, any meeting as to matters they endorse, including the
election of new directors or the approval of a merger, would have to wait for
the next duly called stockholders meeting.
Delaware law provides that the affirmative vote of a majority of the
outstanding shares is required to amend a corporation's certificate of
incorporation, unless the corporation's certificate of incorporation requires a
greater percentage. Our amended and restated certificate of incorporation
requires the affirmative vote of the holders of at least 80% of the outstanding
voting stock to amend or repeal any of the provisions of the amended and
restated certificate of incorporation described above. The 80% vote is also
required to amend or repeal any of our by-law provisions described above. The
by-laws may also be amended or repealed by the board of directors. The 80%
stockholder vote would be in addition to any separate vote that each class of
preferred stock is entitled to that might in the future be required in
accordance with the terms of any preferred stock that might be outstanding at
the time any amendments are submitted to stockholders.
Registration Rights Agreement
Pursuant to a support agreement, we previously made a private offer to
holders of approximately 67% of our outstanding old notes to exchange their old
notes for shares of our common stock and notes, on terms and conditions
substantially identical to those in the public exchange offer. The shares of our
common stock and the notes issued in the private exchange offer are restricted
securities under the Securities Act of 1933, as amended, and contain a legend to
this effect.
After the consummation of the restructuring, the noteholders that were
party to the support agreement, including its amendment, held restricted shares
of common stock and notes. Consequently, we agreed, pursuant to a registration
rights agreement, to file and to use our reasonable best efforts to effect and
maintain the effectiveness of a shelf registration statement to permit such
noteholders' resale of such common stock and notes.
In addition, we entered into a registration rights agreement at the
time of our acquisition of iPCS with some of the former iPCS stockholders. Under
the terms of the registration rights agreement, Blackstone Communications
Partners I L.P. and certain of its affiliates ("Blackstone") have a demand
registration right, which became exercisable after November 30, 2002, subject to
the requirement that the offering exceed size requirements. In addition, the
former iPCS stockholders, including Blackstone, have incidental registration
rights pursuant to which they can, in general, include their shares of our
common stock in any public registration we initiate, whether or not for sale for
our own account.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is American Stock
Transfer & Trust Company.
Listing
AirGate's common stock is currently quoted on The Nasdaq National
Market.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following describes the material United States federal income tax
consequences of the ownership and disposition of the common stock and notes by
U.S. and non-U.S. Holders, each as defined below, who acquire the common stock
and notes and, where indicated, represents the opinion of KPMG LLP. The
following discussion does not purport to be a full description of all United
States federal income tax considerations that may be relevant to the holding or
disposition of common stock and notes, such as tax consequences arising under
the tax laws of any state, locality or foreign jurisdiction. Except where noted,
this summary deals only with notes held as capital assets within the meaning of
Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code") and
does NOT deal with special situations, such as those of:
o dealers in securities or currencies;
o financial institutions;
o tax-exempt entities;
o insurance companies;
o regulated investment companies;
o real estate investment trusts;
o persons holding notes as part of a hedging, integrated,
conversion or constructive sale transaction or a straddle;
o traders in securities that elect to use a mark-to-market
method of accounting for their securities holdings;
o corporations that accumulate earnings to avoid federal income
tax;
o persons whose functional currency is not the United States
dollar;
o persons subject to the alternative minimum tax; and
o investors in pass-through entities.
Furthermore, this discussion is based on the Code and Treasury
Regulations (the "Regulations"), rulings and judicial decisions thereunder as of
the date hereof, and such authorities may be repealed, revoked or modified
(possibly with retroactive effect) so as to result in United States federal
income tax consequences different from those discussed below. PERSONS
CONSIDERING ACQUIRING THE COMMON STOCK AND NOTES SHOULD CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES IN LIGHT
OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES ARISING UNDER THE
LAWS OF ANY OTHER TAXING JURISDICTION.
Except where noted, the following discussion addresses only U.S.
Holders of the notes. As used herein, a "U.S. Holder" of notes means a holder
that is for United States federal income tax purposes:
o a citizen or resident of the United States, including, an
alien resident who is a lawful permanent resident of the
United States or who meets the substantial presence test under
Section 7701(b) of the Code;
o a corporation (or other entity taxable as a corporation for
United States federal income tax purposes) created or
organized in or under the laws of the United States or any
political subdivision thereof;
o an estate, if its income is subject to United States federal
income taxation regardless of its source; or
o a trust, if a United States court is able to exercise primary
supervision over the administration of the trust and one or
more United States persons have the authority to control all
substantial decisions of the trust, or if it has made a valid
election to be treated as a United States person.
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A non-U.S. Holder is an individual, corporation, entity, estate or trust (that
is a beneficial owner of the notes or common stock) other than a U.S. Holder.
If an entity that is treated as a partnership for federal income tax
purposes holds notes or common stock, the tax treatment of its partners or
members will generally depend upon the status of the partner or member and the
activities of the entity. If you are a partner of a partnership or a member of a
limited liability company or other entity classified as a partnership for
federal income tax purposes and that entity is holding notes and common stock,
you should consult your tax advisor.
We have not sought and will not seek any rulings from the Internal
Revenue Service ("IRS") with respect to the United States federal income tax
consequences discussed below. Although the discussion below represents our best
judgment as to the matters discussed herein, it does not in any way bind the IRS
or the courts or in any way constitute an assurance that the United States
federal income tax consequences discussed herein will be accepted by the IRS or
the courts.
Federal Income Tax Consequences to U.S. Holders
Ownership, Sale, Exchange or Retirement of the Notes
Interest and OID
Stated interest paid on the notes will be included in a U.S. Holder's
income as ordinary income in accordance with such U.S. Holder's method of tax
accounting. In addition, the notes may have original issue discount ("OID") in
the event that the issue price of the notes is less than their stated redemption
price at maturity by more than a specified de minimis amount. The determination
of the issue price of the notes will depend on whether the notes are publicly
traded within the meaning of applicable Regulations. The notes will be treated
as publicly traded if, at any time during the 60-day period ending 30 days after
the issue date of the notes, the notes were traded on an established market. If
the notes are considered to be publicly traded, the issue price of the notes
will equal their fair market value on the date of the exchange. If the notes are
not considered to be publicly traded, but the old notes previously exchanged for
these notes are considered to be publicly traded, the fair market value of the
old notes on the date of the exchange will be allocated between the notes and
the common stock based on their relative fair market values, and the issue price
of the notes will equal the portion of such fair market value allocated to the
notes. If neither the old notes nor the notes are considered to be publicly
traded, the issue price of the notes will equal their stated principal amounts.
If OID is associated with the notes, a U.S. Holder of such notes will be
required to include in income an amount equal to the sum of the daily portions
of the OID for each day during the taxable year on which the holder held the
notes regardless of its method of accounting. In compliance with applicable
Regulations, we will furnish certain information to the IRS and holders of the
notes with respect to any OID accruing while the notes are held.
Acquisition Premium in Event Notes Have OID
If the notes have OID, a U.S. Holder of a note will be entitled to a
reduction in the amount of OID required to be included in its income if the U.S.
Holder is considered to acquire the note with "acquisition premium." A note will
have acquisition premium if the U.S. Holder's adjusted tax basis in the note
immediately after its acquisition is less than or equal to the stated redemption
price at maturity and exceeds the adjusted issue price of the note. The amount
of OID the holder must include in its gross income with respect to that note for
any taxable year is generally reduced by the portion of the acquisition premium
properly allocable to that year.
Market Premium
If the notes do not have any OID and a U.S. Holder purchases the note
at a cost greater than the note's stated redemption price at maturity, such U.S.
Holder will be considered to have purchased the note at a premium, and may elect
to amortize the premium as an offset to interest income, using a constant yield
method, over the remaining term of the note. However, if the note may be
optionally redeemed for more than the amount payable at maturity at the time it
is purchased (see the description of the redemption prices described under the
caption "Description of the Notes--Optional Redemption" above), the amortization
of the premium might, depending on the timing and pricing of the purchase
relative to the redemption provisions of the notes, have special rules apply. If
a U.S. Holder makes this election, the election generally will apply to all
taxable debt instruments held during or after such U.S. Holder's taxable year
for which the election is made. In addition, a U.S. Holder may not revoke the
election without the consent of the IRS. If U.S. Holder elects to amortize the
premium, such U.S. Holder will be required to reduce tax basis in the note by
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the amount of the premium amortized during such U.S. Holder's holding period. If
a U.S. Holder does not elect to amortize premium, the amount of premium will be
included in the tax basis in the note and will decrease the gain or increase the
loss otherwise recognized upon the disposition of the note. Therefore, if a U.S.
Holder does not elect to amortize premium and holds the note to maturity, such
U.S. Holder generally will be required to treat the premium as capital loss when
the note matures.
Market Discount
If a U.S. Holder purchases a note at a price that is lower than the
note's stated redemption price at maturity (or in the case of an OID note, the
note's issue price, increased by the amount of any accrued OID), by 0.25% or
more of the stated redemption price at maturity (or issue price, increased by
the amount of any accrued OID), multiplied by the number of remaining whole
years to maturity, the note will be considered to have "market discount" in such
U.S. Holder's hands. In this case, any partial principal payment on the note,
gain realized on the sale, exchange, retirement or other disposition of the note
and unrealized appreciation on some nontaxable dispositions of the note
generally will be treated as ordinary interest income to the extent of the
market discount that accrued on the note during such U.S. Holder's holding
period. In general, market discount will be treated as accruing ratably over the
term of the note, or, at such U.S. Holder's election, under a constant yield
method. A constant yield election will apply only to notes to which it is made,
but is irrevocable.
A U.S. Holder may elect to include market discount in gross income
currently as it accrues (on either a ratable or constant yield basis), in lieu
of treating a portion of any gain realized on a sale of the note as ordinary
income. If a U.S. Holder does make this election, it will apply to all market
discount debt instruments acquired on or after the first day of the first
taxable year to which the election applies. The election may not be revoked
without the consent of the IRS.
Unless a U.S. Holder elects to include any market discount in income on
a current basis, as described above, such U.S. Holder could be required to defer
the deduction of a portion of interest expense on any indebtedness incurred or
maintained to purchase or carry the notes.
Applicable High Yield Discount Obligation
The notes may constitute "applicable high yield discount obligations."
An "applicable high yield discount obligation" is any debt instrument that (1)
has a maturity date that is more than five years from the date of issue, (2) has
a yield to maturity that equals or exceeds the applicable federal rate ("AFR")
released by the IRS for the calendar month in which the obligation was issued
plus five percentage points and (3) has "significant original issue discount." A
debt instrument generally has "significant original issue discount" if, as of
the close of any accrual period ending more than five years after the date of
issue, the excess of the interest (including OID) that has accrued on the
obligation over the interest that is required to be paid thereon exceeds the
product of the issue price of the instrument and its yield to maturity.
Provided that the notes are applicable high yield discount obligations,
the OID on the notes would not be deductible by us until we pay it in cash.
Moreover, if the notes' yield to maturity exceeds the AFR plus six percentage
points, a ratable portion of the OID (the "Disqualified OID") (based on the
portion of the yield to maturity that exceeds the AFR plus six percentage
points) would be permanently non-deductible to us. From a Holder's standpoint,
for purposes of the dividends-received deduction under Section 243 of the Code,
the Disqualified OID should be treated as a dividend to corporate note holders
to the extent it would have been so treated had such amount been distributed
with respect to our stock. A corporate holder should consult with its tax
advisor regarding the treatment to it of holding an applicable high yield
discount obligation.
Sale, Exchange or Retirement of the Notes
A U.S. Holder generally will recognize gain or loss on the sale,
exchange or retirement of notes equal to the difference between (i) the amount
realized on the sale, exchange or retirement of the notes and (ii) the U.S.
Holder's tax basis in the notes. Such gain or loss will be a capital gain or
loss, except that any gain will be ordinary income to the extent:
o of any accrued market discount on the old notes, as of the
time of the exchange, not previously included in income that
is allocable to the notes received in the exchange.
Any gain or loss recognized on the sale, exchange or retirement of
notes will generally be long-term capital gain or loss if the U.S. Holder has
held the notes as a capital asset for more than one year (which includes the
holding period of the notes). In addition, any payments attributable to accrued
but unpaid interest on notes may be taxable as ordinary income in accordance
with such U.S. Holder's method of tax accounting.
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The capital gain or loss recognized by a U.S. Holder will constitute
long-term capital gain or loss if his or her holding period for the note exceeds
one year at the time of disposition. Under current law, some noncorporate
taxpayers, including individuals, are eligible for preferential rates of
taxation on long-term capital gain, while the deductibility of capital losses is
subject to limitation. Holders should consult their tax advisors as to the
particular tax consequences to them upon sale, exchange or retirement of a note.
Ownership, Sale, Exchange or Retirement of the Common Stock
Dividends
Distributions to U.S. Holders of common stock (including redemption or
sale proceeds that are treated under Section 302 or Section 304 of the Code as
dividend distributions rather than payment in exchange for the common stock)
will be treated as dividend income to such holders to the extent paid out of
current or accumulated earnings and profits, as determined under United States
federal income tax principles. If the U.S. Holder is a corporation, a dividends
received deduction may be available to such U.S. Holder with respect to any such
dividends paid on the common stock, subject to applicable limitations under the
Code. We do not intend to pay dividends on the common stock.
To the extent that the amount of any distribution exceeds our current
and accumulated earnings and profits for a taxable year, the distribution will
first be treated as a tax-free return of capital. Such treatment will cause a
reduction in the adjusted basis of the common stock (thereby increasing the
amount of gain, or decreasing the amount of loss, to be recognized by the
investor on a subsequent disposition of the common stock). The balance in excess
of adjusted basis will be taxed as capital gain recognized on a sale or
exchange.
Recently Enacted Legislation
The recently enacted Jobs and Growth Tax Relief Reconciliation Act of
2003 (the "Act") reduces the maximum rate of tax imposed on most dividends
received by individuals from the higher marginal income tax rates to 15% (5% for
individuals in the lower tax brackets and 0% for these taxpayers in 2008).
Subject to certain holding requirements, this provision generally applies to
dividends received in taxable years beginning after December 31, 2002 and before
January 1, 2009. For sales and exchanges of capital assets on or after May 6,
2003 and before January 1, 2009, the Act also reduces the top individual tax
rate on adjusted net capital gains from 20% (10% for individuals in the lower
tax brackets) to 15% (5% for individuals in the lower tax brackets and 0% for
these taxpayers in 2008). Holders should consult their tax advisors regarding
the specific tax consequences to them that may result from the Act.
Sale, Exchange and Retirement of Common Stock
For United States federal income tax purposes, a U.S. Holder will
recognize taxable gain or loss on any sale or exchange of a share of common
stock in an amount equal to the difference between the amount realized for the
share and the U.S. Holder's basis in the share. Capital gains of individuals
derived with respect to capital assets held for more than one year are eligible
for reduced rates of taxation, while the deductibility of capital losses is
subject to limitations. In certain circumstances, a redemption of stock or
purchase of stock by a related party can constitute a dividend which will be
taxed as described above.
Federal Income Tax Consequences to non-U.S. Holders
The following discussion is limited to certain United States federal
income tax consequences to non-U.S. Holders. For purposes of the discussion
below, stated interest, OID, dividends and gain on the sale, exchange or other
disposition of a note or share of common stock will be considered to be "United
States trade or business income" if such income or gain is:
o effectively connected with the conduct of a United States
trade or business; or
o in the case of a treaty resident, attributable to a United
States permanent establishment (or, in the case of an
individual, a fixed base) in the United States.
Stated Interest and OID
Generally, stated interest and OID paid to a non-U.S. Holder will not
be subject to United States federal income or withholding tax, if such stated
interest or OID is not United States trade or business income and is "portfolio
interest." Generally, stated interest and OID will qualify as portfolio interest
and eligible for the portfolio interest exception if the non-U.S. Holder:
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o does not actually or constructively own 10% or more of the
total combined voting power of all classes of our stock
entitled to vote;
o is not a controlled foreign corporation with respect to which
we are a "related person" within the meaning of the Code;
o is not a bank receiving interest on the extension of credit
made pursuant to a loan agreement made in the ordinary course
of its trade or business; and
o certifies, under penalties of perjury, that such holder is not
a United States person and provides such holder's name and
address.
The amount of payments of stated interest and OID on the notes or
dividends on the common stock, or gain realized on the disposition of the notes
or common stock, that are United States trade or business income will not be
subject to United States withholding tax at a 30% gross rate but generally will
be taxed at regular graduated United States rates. In the case of a non-U.S.
Holder that is a corporation, such United States trade or business income also
may be subject to the branch profits tax. The gross amount of payments of stated
interest and OID that does not qualify for the portfolio interest exception (and
is not United States trade or business income) generally will be subject to
United States withholding tax at a rate of 30% unless a treaty applies to reduce
or eliminate withholding.
To claim an exemption from withholding in the case of United States
trade or business income, or to claim the benefits of a treaty, a non-U.S.
Holder must provide a properly executed Form W-8ECI (in the case of United
States trade or business income) or Form W-8BEN (in the case of a treaty), or
any successor form, as applicable, prior to the payment of stated interest or
OID. These forms must be periodically updated. A non-U.S. Holder who is claiming
the benefits of a treaty may be required, in certain instances, to obtain a
United States taxpayer identification number and to provide certain documentary
evidence issued by foreign governmental authorities to prove residence in the
foreign country. Also, special procedures are provided under applicable
Regulations for payments through qualified intermediaries.
Dividends
Generally, the gross amount of any distributions with respect to the
common stock (including redemption proceeds that are treated under Section 302
of the Code as dividend distributions rather than payment in exchange for the
common stock) that are not United States trade or business income (as described
above under the heading "-- Stated Interest and OID") will be subject to United
States withholding tax at a rate of 30% unless a treaty applies to reduce or
eliminate withholding.
Sale, Exchange or Redemption of Notes and Common Stock
Except as described below and subject to the discussion concerning
backup withholding, any gain recognized by a non-U.S. Holder on the sale,
exchange or redemption of a note or common stock generally will not be subject
to United States federal income tax, unless:
o such gain is United States trade or business income or
constitutes gain realized on the sale of an interest in a
"United States real property holding corporation" which is
treated as income effectively connected with the conduct of a
United States trade or business under Section 897 of the Code;
o subject to certain exceptions, the non-U.S. Holder is an
individual who is present in the United States for 183 days or
more in the taxable year of the disposition; or
o the non-U.S. Holder is subject to tax pursuant to the
provisions of United States tax law applicable to certain
United States expatriates.
Upon a sale, exchange or redemption of a note, no United States tax withholding
will apply to accrued and unpaid OID to the extent that such OID qualifies for
an exemption as described above under the heading "-- Stated Interest and OID."
If the accrued and unpaid OID does not so qualify, United States tax withholding
will apply in the manner described above under the heading "-- Stated Interest
and OID" upon redemption of a note, and in certain circumstances, upon a sale or
exchange of a note.
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We do not believe that we are a United States real property holding
corporation within the meaning of Section 897 of the Code. If our belief were
incorrect, United States withholding tax could apply with respect to the amount
realized by a non-U.S. Holder on the sale, exchange or redemption of shares of
common stock.
Information Reporting and Backup Withholding
U.S. Holders
In general, information reporting requirements will apply to payments
of dividends on the common stock and interest on the notes (including accruals
of OID), and to the proceeds of a sale or other disposition of the common stock
and notes made to U.S. Holders other than certain exempt recipients (such as
corporations). A backup withholding tax will apply to such payments if the U.S.
Holder fails to provide a correct taxpayer identification number or
certification of exempt status or fails to report in full dividend and interest
income.
Any amounts withheld under the backup withholding rules generally will
be allowed as a refund or a credit against such holder's United States federal
income tax liability provided the required information is furnished to the IRS.
Non-U.S. Holders
We must report annually to the IRS and to each non-U.S. Holder the
amount of dividends and interest payments paid to such holder and the tax
withheld with respect to such dividends and interest income, regardless of
whether withholding was required. Copies of the information returns reporting
such dividends, interest payments and withholding may also be made available to
the tax authorities in the country in which the non-U.S. Holder resides under
the provisions of an applicable income tax treaty.
Backup withholding may apply to dividends and interest payments paid to
a non-U.S. Holder unless the beneficial owner provides his name and address. In
some cases, a taxpayer identification number may be required to be provided
(i.e., where treaty benefits are claimed). Please consult your tax advisor
regarding this requirement. The beneficial owner must also certify, under
penalty of perjury, that he or she is not a United States person (which
certification may be made on Form W-8BEN). If a financial institution holds the
common stock and notes on behalf of the beneficial owner, such institution must
certify, under penalty of perjury, that such statement has been received by it
and furnish a paying agent with a copy thereof.
Information reporting and, depending on the circumstances, backup
withholding will apply to the proceeds of a sale of common stock and notes
within the United States or conducted through United States-related financial
intermediaries unless:
o the beneficial owner certifies under penalty of perjury that
he or she is a non-U.S. Holder (and the payor does not have
actual knowledge or reason to know that the beneficial owner
is a United States person); or
o the holder otherwise establishes an exemption.
Any amounts withheld under the backup withholding rules may be allowed
as a refund or a credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.
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PLAN OF DISTRIBUTION
We are registering shares of our common stock and our notes on behalf
of the selling holders. As used in this prospectus, "selling holders" includes
holders of shares of common stock or notes on the date hereof and any donees,
pledgees, transferees or other successors-in-interest, selling shares of common
stock or notes received after the date of this prospectus from a selling holder.
The selling holders may sell the shares of common stock and the notes
covered by this prospectus from time to time in any legal manner selected by the
selling holders, including directly to purchasers or through underwriters,
broker-dealers or agents, who may act as agent or as principal, and who may
receive compensation in the form of discounts, concessions or commissions from
the selling holders or the purchasers. These discounts, concessions or
commissions as to any particular underwriter, broker-dealer or agent may be in
excess of those customary in the types of transactions involved. The selling
holders will act independently of us in making decisions with respect to the
timing, manner and size of each sale of the shares of common stock and the notes
covered by this prospectus.
The selling holders have advised us that the shares of common stock and
the notes may be sold in one or more transactions at fixed prices, at prevailing
market prices at the time of sale, at prices related to the prevailing market
prices, at varying prices determined at the time of sale and/or at negotiated
prices. These sales may be affected in one or more transactions, including:
o on The Nasdaq National Market or in any other securities
market on which our common stock or notes are then listed or
traded;
o in the over-the-counter market;
o in negotiated transactions;
o to underwriters for resale to the public or to investors;
o in a combination of any of the above transactions; or
o through any other available transaction.
Our common stock is quoted on The Nasdaq National Market under the
symbol "PCSAD." Sales on or through The Nasdaq National Market will be effected
at such prices as may be obtainable and as may be satisfactory to the selling
holders.
The selling holders may enter into hedging and/or monetization
transactions. For example, a selling holder may:
o enter into transactions with a broker-dealer or affiliate of a
broker-dealer or other third party in connection with which
that other party will become a selling holder and engage in
short sales or other sales of our common stock and notes under
this prospectus, in which case the other party may use shares
of our common stock and notes received or borrowed from or
pledged by the selling holder or others to settle those sales
or to close out any related open borrowings of common stock
and notes, and may use securities received from the selling
holder in settlement of those derivatives to close out any
related borrowings of common stock and notes;
o itself sell short our common stock and notes under this
prospectus and use shares of our common stock and notes held
by it to close out any short position;
o enter into options, forwards or other transactions that
require a selling holder to deliver, in a transaction exempt
from registration under the Securities Act, our common stock
and notes to a broker-dealer or an affiliate of a
broker-dealer or other third party who may then become a
selling holder and publicly resell or otherwise transfer our
common stock and notes under this prospectus; or
o loan or pledge our common stock and notes to a broker-dealer
or affiliate of a broker-dealer or other third party who may
then become a selling holder and sell the loaned shares of
common stock and notes or, in an event of default in the case
of a pledge, become a selling holder and sell the pledged
shares under this prospectus.
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The selling holders may sell any or all of the shares of our common
stock and notes offered by them pursuant to this prospectus. In addition, the
selling holders may transfer, devise or gift the shares of common stock and
notes by other means not described in this prospectus. Any shares of common
stock and notes covered by this prospectus that qualify for sale under Rule 144
under the Securities Act may be sold under that rule rather than under this
prospectus.
If the selling holders use underwriters for a sale of securities, the
underwriters will acquire the securities for their own account. The underwriters
may resell the securities in one or more transactions, including negotiated
transactions, at a fixed public offering price or at varying prices determined
at the time of sale. The obligations of the underwriters to purchase the
securities will be subject to the conditions set forth in the applicable
underwriting agreement. Any public offering price and any discounts or
concessions allowed or paid to dealers may be changed from time to time.
The selling holders and any underwriters, broker-dealers or agents that
participate in the sale of the shares may be deemed to be "underwriters" within
the meaning of Section 2(a)(11) of the Securities Act. As a result, any profits
on the sale of the shares of common stock or notes by the selling holders and
any discounts, commissions or concessions received by any broker-dealers or
agents may be deemed to be underwriting discounts and commissions under the
Securities Act. If a selling holder is deemed to be an "underwriter" within the
meaning of Section 2(a)(11) of the Securities Act, that selling holder will be
subject to the prospectus delivery requirements of the Securities Act. We have
informed the selling holders of their obligations to comply with the provisions
of the Exchange Act and the rules under the Exchange Act relating to stock
manipulation, particularly Regulation M.
We have agreed to indemnify the selling holders and any broker-dealer,
agent or underwriter against certain liabilities related to the selling of the
shares of common stock and notes, including liabilities under the Securities
Act.
To the extent required, the shares to be sold, the names of the selling
holders, the respective purchase prices and public offering prices, the names of
any agent, dealer or underwriter, the specific terms of any underwriting or
other agreement and any applicable commissions, discounts or concessions with
respect to a particular offering will be set forth in an accompanying prospectus
supplement or, if appropriate, a post-effective amendment to the registration
statement of which this prospectus is a part. If a third party in any
monetization or hedging transaction is an underwriter, such underwriter will be
identified in the applicable prospectus supplement (or post effective
amendment). In addition, upon our being notified by a selling holder that a
donee, pledgee, transferee or other successor-in-interest intends to sell shares
of common stock or notes, we will file a supplement to this prospectus.
In order to comply with the securities laws of some states, if
applicable, the shares of common stock and notes may be sold in these
jurisdictions only through registered or licensed brokers or dealers. In
addition, in some states the shares of common stock and notes may not be sold
unless they have been registered or qualified for sale or any exemption from
registration or qualification requirements is available and is complied with.
Expenses of this offering related to this registration statement,
estimated at $115,643, will be borne in full by us. Commission expenses and
brokerage fees, if any, will be paid by the selling holders.
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LEGAL MATTERS
The validity of the notes and the common stock offered hereby will be
passed upon for us by Winston & Strawn LLP, Chicago, Illinois.
TAX MATTERS
The tax matters described in this prospectus have been passed upon by
KPMG LLP.
EXPERTS
The consolidated financial statements and financial statement schedule
of AirGate PCS, Inc. and subsidiaries as of September 30, 2003 and 2002, and for
each of the years in the three-year period ended September 30, 2003, have been
incorporated by reference in this prospectus and in the registration statement
in reliance upon the reports of KPMG LLP, independent accountants, incorporated
by reference herein, and upon the authority of said firm as experts in
accounting and auditing. The audit report covering the September 30, 2003
consolidated financial statements contains an explanatory paragraph that states
that the Company has suffered significant recurring losses since inception and
has an accumulated deficit of $1.3 billion and a stockholders' deficit of $377.0
million at September 30, 2003. The Company's continuation as a going concern is
dependent on its ability to restructure or otherwise amend the terms of its
debt, and if unsuccessful, the Company may seek bankruptcy court or other
protection from its creditors within the next year. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
The consolidated financial statements and financial statement schedule
incorporated by reference herein do not include any adjustments that might
result from the outcome of this uncertainty.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission (the "SEC"). You
may read and copy any document we file at the SEC's public reference room
located at 450 5th Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room. Our SEC
filings are also available to the public from commercial document retrieval
services and at the web site maintained by the SEC at: http://www.sec.gov.
We filed a registration statement on Form S-3 to register with the SEC
the common stock and notes offered by this prospectus. This prospectus is a part
of that registration statement. As allowed by SEC rules, this prospectus does
not contain all of the information you can find in our registration statement on
Form S-3 or the exhibits to the registration statement.
You should rely only on the information or representations provided in
this prospectus or any prospectus supplement. We have not authorized anyone else
to provide you with different information. We may not make an offer of the
common stock or notes in any state where the offer is not permitted. The
delivery of this prospectus does not, under any circumstances, mean that there
has not been a change in our affairs since the date of this prospectus. It also
does not mean that the information in this prospectus is correct after this
date.
Our address on the world wide web is http://www.airgatepcsa.com. The
information on our web site is not a part of this document.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to incorporate by reference information into this
prospectus. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is considered to be part of this prospectus, except
for any information that is superseded by information that is included directly
in this document. We incorporate by reference the documents listed below:
o Annual Report on Form 10-K/A for the year ended September 30,
2003 and filed January 15, 2004;
o Annual Report on Form 10-K/A for the year ended September 30,
2003 and filed January 28, 2004;
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o Quarterly Report on Form 10-Q for the three-month period ended
December 31, 2003 and filed February 17, 2004; and
o Current Reports on Form 8-K as filed on January 15, 2004,
February 2, 2004, February 12, 2004, and February 20, 2004.
All reports and other documents that we subsequently file pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (the
"Exchange Act") after the date of this prospectus will be deemed to be
incorporated by reference in this prospectus and to be part of it from the date
of the filing of those reports and documents. Any statement contained in this
prospectus or in a document incorporated or deemed to be incorporated by
reference herein will be deemed to be modified or superseded for purposes of
this prospectus to the extent that a statement contained in any subsequently
filed document that is or is deemed to be incorporated by reference herein
modifies or supersedes that statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this prospectus.
We will provide without charge to each person to whom this prospectus
is delivered, upon request of that person, a copy of any or all documents that
are incorporated in this prospectus by reference, other than exhibits to those
documents unless those exhibits are specifically incorporated by reference in
the document this prospectus incorporates. You should direct your requests to
AirGate PCS, Inc., Attn: Investor Relations, Harris Tower, 233 Peachtree Street
NE, Suite 1700, Atlanta, Georgia 30303.
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