<PAGE>
As filed with the Securities and Exchange Commission on September 16, 1999
Registration No. 333-79189-02
Registration No. 333-79189-01
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
Amendment No. 5
TO
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
<TABLE>
<S> <C> <C> <C>
AirGate PCS, Inc. Delaware 4812 58-2422929
AG Leasing Company, Inc.W Delaware 4812 58-2441171
(Exact name of registrants as (State or other jurisdiction (Primary Standard Industry (I.R.S. Employer
specified in their charters) of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
---------------
<TABLE>
<S> <C>
Thomas M. Dougherty
Harris Tower AirGate PCS, Inc.
Suite 1700 Harris Tower
233 Peachtree Street, N.E. Suite 1700
Atlanta, Georgia 30303 233 Peachtree Street, N.E.
(404) 525-7272 Atlanta, Georgia 30303
(Address, including zip code, and (404) 525-7272
telephone number, including area (Name, address, including zip code, and
code, of registrants' principal telephone number, including area code,
executive offices) of agent for service)
</TABLE>
---------------
Copies to:
Mary M. Sjoquist, Esq. Gary P. Cullen, Esq.
Joseph G. Passaic, Jr., Esq. Skadden, Arps, Slate, Meagher & Flom
Patton Boggs LLP (Illinois)
2550 M Street, NW 333 West Wacker Drive
Washington, DC 20037 Chicago, Illinois 60606
(202) 457-6000 --------------- (312) 407-0700
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
---------------
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, please check the following box: [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If the Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Title of Each Class of
Securities to be Proposed Maximum
Registered Aggregate Offering Price(1) Amount of Registration Fee
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<S> <C> <C>
Common Stock, par value
$.01 per share......... $ 116,533,312 $ 32,397(2)(3)
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Units................... $ 150,000,000(4) $ 41,700(2)
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% Senior Subordinated
Discount Notes due
2009................... (4) --
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Warrants................ (4) --
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Common Stock, par value
$.01 per share,
issuable upon exercise
of Warrants............ -- --
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Subsidiary Guarantees of
the % Senior
Subordinated Discount
Notes due 2009......... -- (5)
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</TABLE>
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(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(o).
(2) Registration fee of $75,800 previously paid.
(3)Includes fees paid to register the shares of common stock issuable upon
exercise of the warrants.
(4) Each unit consists of $1,000 principal amount at maturity of % senior
subordinated discount notes due 2009 and one warrant to purchase shares
of our common stock, par value $.01 per share, at an exercise price of
$.01 per share.
(5) Pursuant to Rule 457(n), no separate registration fee is payable with
respect to the subsidiary guarantees.
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
EXPLANATORY NOTE
This registration statement contains two forms of prospectus. The common
stock prospectus will be used in connection with an offering of common stock of
AirGate PCS, Inc. The units prospectus will be used in a concurrent units
offering, which includes senior subordinated discount notes and warrants, by
AirGate PCS, Inc. The common stock prospectus and units prospectus will be
substantially identical, except for the front cover page, table of contents,
summary of the offering, risk factors relating to the particular offering,
description of securities, underwriting section, United States federal income
tax consequences section and back cover page, and except that the dilution
section contained in the common stock prospectus will not appear in the units
prospectus. The differing pages for the units prospectus included herein are
each labeled "Alternate Unit Offering Pages." The form of common stock
prospectus is included in this registration statement, and the form of the
Alternate Unit Offering Pages of the units prospectus follows the common stock
prospectus.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+We will amend and complete the information in this prospectus. Although we +
+are permitted by U.S. federal securities laws to offer these securities using +
+this prospectus, we may not sell them or accept your offer to buy them until +
+the documentation filed with the Securities and Exchange Commission relating +
+to these securities has been declared effective by the SEC. This prospectus +
+is not an offer to sell these securities or our solicitation of your offer to +
+buy these securities in any state or other jurisdiction where that would not +
+be permitted or legal. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION -- September 16, 1999
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Prospectus
, 1999
6,333,333 Shares of Common Stock
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AirGate PCS, Inc.:
. AirGate PCS, Inc.
Harris Tower
Suite 1700
233 Peachtree Street, N.E.
Atlanta, Georgia 30303
(404) 525-7272
Proposed Symbol & Market:
. PCSA/Nasdaq National Market
The Offering:
. We are offering 6,333,333 shares of our common stock.
. We have granted the underwriters an option to purchase a maximum of 949,999
additional shares of common stock to cover over-allotments.
. This is our initial public offering. We anticipate the initial public
offering price will be between $14.00 and $16.00 per share.
---------------------------------------------------------
<TABLE>
<S> <C> <C>
Per Share Total
--------------------------------------------
Public offering price: $ $
Underwriting fees:
Proceeds to AirGate:
</TABLE>
---------------------------------------------------------
This investment involves risk. See "Risk Factors" beginning on page 6.
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Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
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Donaldson, Lufkin & Jenrette
Credit Suisse First Boston The Robinson-Humphrey Company
<PAGE>
[One page of four photographs depicting customers using wireless telephones]
[Graphic displaying a map of the United States highlighting Sprint PCS'
licensed areas with blow-up picture of AirGate PCS' territory]
[Series of pictures of a wireless telephone, Sprint PCS network operations
center, Sprint PCS store and a national retail store which has an agreement
with Sprint and Sprint PCS to sell their products and services]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary.................... 1
Risk Factors.......................... 7
Forward-Looking Statements............ 16
Use of Proceeds....................... 17
Dividend Policy....................... 17
Capitalization........................ 18
Dilution.............................. 19
Selected Financial Data............... 20
Management's Discussion and Analysis
of Financial Condition and Results of
Operations........................... 22
Industry Background................... 29
Business....................... 31
The Sprint PCS Agreements...... 46
Description of Certain
Indebtedness.................. 60
Management..................... 64
</TABLE>
<TABLE>
<CAPTION>
Page
<S> <C>
Principal Stockholders................................................ 71
Certain Transactions.................................................. 73
Regulation of the Wireless Telecommunications Industry................ 74
Description of Capital Stock.......................................... 78
Description of Units.................................................. 81
Shares Eligible for Future Sale....................................... 85
U.S. Federal Tax Consequences of
Our Common Stock to Non-U.S. Holders................................. 87
Underwriting.......................................................... 90
Legal Matters......................................................... 93
Experts............................................................... 93
Available Information................................................. 93
Index to Consolidated Financial Statements............................ F-1
</TABLE>
----------------
This prospectus includes product names, trade names and trademarks of other
companies.
<PAGE>
PROSPECTUS SUMMARY
Statements in this prospectus regarding Sprint or Sprint PCS are derived from
information contained in our agreements with Sprint PCS, periodic reports and
other documents filed with the Securities and Exchange Commission, or press
releases issued by Sprint Corporation and Sprint PCS. References to AirGate as
a provider of wireless personal communication services or similar phrases
generally refer to our designing, constructing and managing a personal
communication services network in our territory under our long-term agreements
with Sprint and Sprint PCS.
The Company
We have entered into a management agreement with Sprint PCS whereby we have
the exclusive right to provide 100% digital, 100% PCS products and services
under the Sprint and Sprint PCS brand names in our territory in the
southeastern United States. Based on the population of our territory, we are
the second largest Sprint PCS affiliate in the United States. Under our long-
term agreements with Sprint PCS, we will exclusively market personal
communications services, generally known as PCS, under the Sprint and Sprint
PCS brand names. As a Sprint PCS affiliate, we will offer the same products and
services that have made Sprint PCS the fastest growing wireless company in the
United States based on total new subscribers in 1998. We have completed our
radio frequency design, network design and substantial site acquisition and
cell site engineering, and commenced construction of our personal
communications services network in November 1998. Our network will be built to
meet or exceed the high standards for technical and service quality established
by Sprint PCS. We will use Sprint PCS' established back office services to
handle customer activation, billing and customer care. The customer, who
effectively will see our products and services as those of Sprint PCS, will be
able to make and receive calls, on handsets with both digital and analog
capability, over Sprint PCS' network and other wireless networks with which
Sprint PCS has roaming agreements.
As of June 30, 1999, Sprint PCS, together with its affiliates, operated PCS
systems in 286 metropolitan markets within the United States, including all of
the 50 largest metropolitan areas. Today, Sprint PCS is still constructing its
nationwide network and does not offer PCS services, either on its own network
or through its roaming agreements, in every city in the United States.
We will benefit from Sprint PCS' national advertising campaigns and will have
access to major national retailers for distribution under existing Sprint PCS
contracts. We plan to launch commercial PCS service in the first quarter of
2000 with initial coverage to over 1.5 million residents and expect to offer
service to more than 5.0 million residents, or 74% of the population in our
territory, by the end of the fourth quarter of 2000. Today, we are a
development stage company and have not generated any revenues.
Our territory has a resident population of more than 6.8 million and covers
21 contiguous markets in one of the fastest growing regions in the United
States. The territory covers almost the entire state of South Carolina,
including Charleston, Columbia and Greenville-Spartanburg, parts of North
Carolina, including Asheville, Wilmington and Hickory, and the eastern Georgia
cities of Augusta and Savannah. Our territory is contiguous to important Sprint
PCS markets which are already operational, including Atlanta, Georgia;
Charlotte and Raleigh, North Carolina; Norfolk, Virginia; and Knoxville,
Tennessee. In addition to serving the resident populations of these markets,
1
<PAGE>
our territory welcomes over 27 million visitors each year to popular vacation
and tourist destinations, which include Myrtle Beach, Charleston and Hilton
Head Island, South Carolina; the Outer Banks of North Carolina; and Savannah,
Georgia. As a result, we will generate roaming revenue from visitors to our
territory who will use our PCS network for seamless national Sprint PCS
services.
Under existing Sprint PCS agreements with national third-party retailers,
including distribution agreements with Circuit City, Office Depot and Best Buy
and an exclusive PCS distribution agreement with RadioShack, we will have
access to more than 250 retail outlets to sell and distribute Sprint PCS
products and services throughout our territory. We also intend to offer Sprint
PCS products and services through 12 of our own Sprint PCS stores and through
local retailers with strong community connections. We will combine the strength
of these retail outlets with Sprint PCS' national sales force, which focuses on
Fortune 500 companies, national inbound telemarketing sales force and
electronic commerce sales platforms. In addition, we expect that approximately
30% of the population in our territory will receive their local telephone
service from Sprint by the end of 2000. This provides us with an additional
established distribution channel for selling Sprint PCS products and services.
We believe this combination of major national and local distribution channels
provides us with a competitive advantage over other wireless providers in our
territory.
Sprint PCS has invested $44.6 million to purchase the PCS licenses in our
territory and incurred additional expenses to remove microwave signals from the
licensed spectrum, a process generally referred to as microwave clearing. Under
our long term agreements with Sprint PCS, we will manage the network on Sprint
PCS' licensed spectrum as well as use the Sprint and Sprint PCS brands royalty-
free during our affiliation with Sprint PCS. We also have access to Sprint PCS'
national marketing support and distribution programs and are entitled to buy
network and subscriber equipment and handsets at the same discounted rates
offered by vendors to Sprint PCS based on its large volume purchases. In
exchange for these benefits, Sprint PCS will retain 8% of collected service
revenues and we are entitled to receive 92%. Collected service revenues do not
include revenues from roaming and subscriber equipment sales of which we are
entitled to 100%. Under the agreements with Sprint PCS, we also have the option
to purchase back office services from Sprint PCS at rates reflecting Sprint
PCS' economies of scale.
We have an experienced senior management team, including a former regional
president of Sprint PCS. These executives have an average of more than 15 years
of experience in building wireless telecommunications systems in the Southeast.
We believe that the net proceeds from our concurrent offerings of common
stock and units, which consist of senior subordinated discount notes and
warrants, together with our financing from Lucent Technologies Inc., will
completely fund our capital expenditures, including our PCS network build-out,
operating losses, working capital requirements and other cash needs through
2002, at which point we expect to have achieved break-even operating cash flow.
2
<PAGE>
The Offering
Common Stock Offered........
6,333,333 shares
Common Stock to be
Outstanding After the
Offering.................... 10,825,591 shares
Use of Proceeds.............
We will use:
.the net proceeds from the sale of our common
stock;
. the net proceeds from the concurrent sale
of units, which consist of senior
subordinated discount notes and warrants;
and
.the financing provided by Lucent
to fund the following:
. capital expenditures, including the build-
out of our PCS network;
.operating losses;
.working capital requirements; and
. debt service payments, including the
repayment of existing debt.
See "Use of Proceeds."
Proposed Nasdaq National
Market Symbol..............
"PCSA"
Risk Factors................
See "Risk Factors" beginning on page 6 for a
discussion of the material factors that you
should consider before purchasing shares of
common stock.
This summary of the offering includes 985,641 shares of common stock issuable
upon the consummation of this offering due to the conversion of outstanding
promissory notes and related accrued interest. See "Certain Transactions."
Unless otherwise indicated, the share information in this prospectus
excludes:
. up to 949,999 shares that may be issued to the underwriters to cover
over-allotments. See "Underwriting."
. 2,000,000 shares of common stock reserved for issuance under our 1999
Stock Option Plan including employee grants of 1,075,000 shares effected
on July 28, 1999. See "Management--1999 Stock Option Plan."
. 243,001 shares of common stock issuable upon the exercise of outstanding
warrants at an exercise price of 75% of the initial offering price of
our common stock. See "Certain Transactions."
3
<PAGE>
. 125,189 shares of common stock issuable upon the exercise of outstanding
warrants at an exercise price of 120% of the initial offering price of
our common stock. See "Description of Capital Stock--Warrants."
. 375,575 shares of common stock issuable upon the exercise of warrants to
be issued in the concurrent units offering. In the event the number of
shares underlying the warrants varies based on the closing of the
concurrent units offering, the additional dilution, if any, will be
borne solely by the existing stockholders. See "Description of Units."
All references to shares of common stock in this prospectus reflect a 39,134-
for-1 split of our common stock which was effective as of July 9, 1999 and
subsequent reverse stock splits of 0.996-for-1 of our common stock which was
effective July 28, 1999 and 0.900-for-1 of our common stock which was effective
September 15, 1999.
The closing of our offering of common stock and our completion of a
concurrent offering of units under the separate units prospectus, are
conditioned on each other.
The Concurrent Units Offering
The Units
Issuer......................
AirGate PCS, Inc.
Securities Offered.....
units, each consisting of $1,000
principal amount at maturity of % senior
subordinated discount notes due 2009 and one
warrant to purchase shares of our common stock
representing in the aggregate approximately 3% of
the issued and outstanding shares of common stock
on a fully diluted basis on the date hereof
assuming exercise of all of the outstanding
warrants. The senior subordinated discount notes
and the warrants will not be separately
transferable until the separation date, which
shall be the earliest to occur of:
. 180 days after the closing of the units
offering;
. the occurrence of a change of control or an
event of default on the senior subordinated
discount notes; and
. such date as Donaldson, Lufkin & Jenrette
Securities Corporation in its sole discretion
shall determine.
Issue Price............ $ per unit.
The Senior Subordinated Discount Notes
Senior Subordinated
Discount Notes.........
$ million aggregate principal amount at
maturity of % senior subordinated discount
notes, due 2009. We will issue the senior
subordinated discount notes at a price to
investors that, together with the warrants to be
issued, will yield gross proceeds to us at
issuance of $150.0 million.
4
<PAGE>
Maturity Date...............
, 2009.
Change of Control...........
If we experience a change of control, holders of
our senior subordinated discount notes will have
the right to require us to repurchase our senior
subordinated discount notes at a price equal to
101% of their accreted value or the principal
amount, as applicable, together with accrued and
unpaid interest, if any, to the date of
repurchase.
Restrictive Covenants.......
The indenture governing the senior subordinated
discount notes will contain covenants that, among
other things, will limit our ability and the
ability of our subsidiary and our future
subsidiaries to:
.incur additional indebtedness or issue
preferred stock;
. pay dividends, redeem capital stock or make
other restricted payments or investments;
.create liens on assets;
.merge, consolidate or dispose of assets;
.enter into certain transactions with
affiliates; and
.enter into sale and leaseback transactions.
The Warrants
Number of Warrants
Offered................ warrants which will entitle the holders
of the warrants to purchase an aggregate of
375,575 shares of our common stock representing
approximately 3% of the issued and outstanding
shares of common stock on a fully diluted basis,
assuming exercise of all outstanding warrants.
Exercise...............
Each warrant will entitle the holder to purchase
on or after the separation date, but prior to the
expiration date, shares of our common stock at an
exercise price of $.01 per share, subject to
adjustment from time to time upon the occurrence
of some changes with respect to us, including:
. some distributions of our shares;
. issuances of options or convertible
securities by us;
. dividends and distributions by us; and
. changes in the terms of our options and
convertible securities.
A warrant does not entitle its holder to receive
any dividends paid on our shares of common stock.
5
<PAGE>
September , 2009.
Expiration.............
Transfer Restrictions.......
Until such time, if any, as a registration
statement with respect to resale of the warrant
shares is declared effective, the warrant shares
will be subject to some restrictions on transfer.
We do not intend to list the warrants on any
exchange.
Registration of Warrant
Shares................. We are required, pursuant to the terms of a
warrant agreement, to (1) file a shelf
registration statement with the Securities and
Exchange Commission within 60 days of the date of
this prospectus to register the common stock
underlying the warrants, (2) use our reasonable
best efforts to have the shelf registration
statement declared effective by the Securities
and Exchange Commission within 120 days of the
date of this prospectus and (3) keep the shelf
registration statement continuously effective
until the later of the date on which (a) all of
the warrants have been exercised or (b) the
warrants expire.
6
<PAGE>
RISK FACTORS
You should carefully consider the following risk factors in addition to the
other information contained in this prospectus before purchasing the common
stock we are offering.
Risks Particular to AirGate
The termination of our affiliation with Sprint PCS or Sprint PCS' failure to
perform its obligations under our agreements would severely restrict our
ability to conduct our business
Our ability to offer Sprint PCS products and services and our PCS network's
operation are dependent on our agreements with Sprint PCS being renewed and not
terminated. Each of these agreements can be terminated for breach of any
material terms. We are dependent on Sprint PCS' ability to perform its
obligations under the Sprint PCS agreements. The non-renewal or termination of
any Sprint PCS agreement or the failure of Sprint PCS to perform its
obligations under the Sprint PCS agreements would severely restrict our ability
to conduct our business.
If Sprint PCS does not complete the construction of its nationwide PCS
network, we may not be able to attract and retain customers
Sprint PCS' network may not provide nationwide coverage to the same extent as
its competitors which could adversely affect our ability to attract and retain
customers. Sprint PCS is creating a nationwide PCS network through its own
construction efforts and those of its affiliates. Today, Sprint PCS is still
constructing its nationwide network and does not offer PCS services, either on
its own network or through its roaming agreements, in every city in the United
States. Sprint PCS has entered into, and anticipates entering into, affiliation
agreements similar to ours with companies in other territories pursuant to its
nationwide PCS build-out strategy. Our results of operations are dependent on
Sprint PCS' national network and, to a lesser extent, on the networks of its
other affiliates. Sprint PCS and its affiliate program are subject, to varying
degrees, to the economic, administrative, logistical, regulatory and other
risks described in this prospectus. Sprint PCS' and its other affiliates' PCS
operations may not be successful.
We do not have an operating history and if we do not successfully manage our
anticipated rapid growth, we may not be able to complete our PCS network by our
target date, if at all
Our performance as a PCS provider will depend on our ability to manage
successfully the network build-out process, implement operational and
administrative systems, expand our base of 12 employees as of June 30, 1999 and
train and manage our employees, including engineering, marketing and sales
personnel. We have completed our radio frequency design, network design and
substantial site acquisition and cell site engineering, and commenced
construction of our PCS network in November 1998. Based on our build-out plan,
we do not expect to launch commercial PCS operations until the first quarter of
2000. We will require expenditures of significant funds for the development,
construction, testing and deployment of our PCS network before commencement of
commercial PCS operations. These activities are expected to place significant
demands on our managerial, operational and financial resources.
The inability to use Sprint PCS' back office services and third party vendors'
back office systems could disrupt our business
Our operations could be disrupted if Sprint PCS is unable to maintain and
expand its back office services such as customer activation, billing and
customer care, or to efficiently outsource those services and systems through
third party vendors. The rapid expansion of Sprint PCS' business is expected to
continue to pose a significant challenge to its internal support systems.
Additionally,
7
<PAGE>
Sprint PCS has relied on third-party vendors for a significant number of
important functions and components of its internal support systems and may
continue to rely on these vendors in the future. We depend on Sprint PCS'
willingness to continue to offer such services to us and to provide these
services at competitive costs. Our services agreement with Sprint PCS provides
that, upon nine months' prior written notice, Sprint PCS may elect to terminate
any such service beginning January 1, 2002. If Sprint PCS terminates a service
for which we have not developed a cost-effective alternative, our operating
costs may increase beyond our expectations and restrict our ability to operate
successfully.
If we fail to complete the build-out of our PCS network, Sprint PCS may
terminate our management agreement, and we would no longer be able to offer
Sprint PCS services
A failure to meet our build-out requirements for any one of the individual
markets in our territory, or to meet Sprint PCS' technical requirements, would
constitute a breach of our management agreement with Sprint PCS that could lead
to its termination. If the management agreement is terminated, we will no
longer be able to offer Sprint PCS products and services. Our agreements with
Sprint PCS require us to build our PCS network in accordance with Sprint PCS'
technical and coverage requirements. These agreements also require that we
provide network coverage to a specified percentage, ranging from 39% to 86%, of
the population within each of the 21 markets which make up our territory by
specified dates.
We have substantial debt which we may not be able to service and which may
result in our lenders controlling our assets in an event of default
Our substantial debt will have a number of important consequences for our
operations and our investors, including the following:
. we will have to dedicate a substantial portion of any cash flow from
operations to the payment of interest on, and principal of, our debt,
which will reduce funds available for other purposes;
. we may not have sufficient funds to pay interest on, and principal of,
our debt;
. we may not be able to obtain additional financing for currently
unanticipated capital requirements, capital expenditures, working capital
requirements and other corporate purposes;
. some of our debt, including borrowings under our financing from Lucent,
will be at variable rates of interest, which could result in higher
interest expense in the event of increases in market interest rates; and
. due to the liens on substantially all of our assets and the pledges of
stock of our subsidiary and future subsidiaries that secure our senior
debt and our senior subordinated discount notes, lenders or holders of
our senior subordinated discount notes may control our assets or our
subsidiaries' assets upon a default.
As of June 30, 1999, after giving effect to the common stock offering, the
units offering, consisting of senior subordinated discount notes and warrants,
and the conversion of $7.6 million of convertible notes plus accrued interest
of $127,000, our outstanding long-term debt would have totaled $153.8 million.
In addition, on August 20, 1999 we borrowed an additional $3.5 million from
Lucent. Under our current business plan, we expect to incur substantial
additional debt before achieving break-even operating cash flow, including
$140.0 million of additional borrowings under our financing from Lucent.
8
<PAGE>
If we do not meet all of the conditions required under our Lucent financing
documents, we may not be able to draw down all of the funds we anticipate
receiving from Lucent and may not be able to complete the build-out of our
network
We have received $13.5 million to date from Lucent. The remaining $140.0
million which we expect to receive in the future is subject to our meeting all
of the conditions specified in the financing documents and, in addition, is
subject at each funding date to the following conditions:
. that the representations and warranties in the loan documents are true
and correct; and
. the absence of a default under our loan documents.
If we do not meet these conditions at each funding date, the lenders may not
lend any or all of the remaining amounts, and if other sources of funds are not
available, we may not be in a position to complete the build-out of our PCS
network. If we do not have sufficient funds to complete our network build-out,
we may be in breach of our management agreement with Sprint PCS and in default
under our financing from Lucent and under the senior subordinated discount
notes.
If we lose the right to install our equipment on wireless towers owned by
other carriers or fail to obtain zoning approval for our cell sites, we may
have to rebuild our network
We expect more than 85% of our cell sites to be collocated on facilities
shared with one or more wireless providers. We will collocate over 150 of these
sites on facilities owned by one wireless carrier. If our master collocation
agreement with that carrier were to terminate, we would have to find new sites,
and if the equipment had already been installed we might have to rebuild that
portion of our network. Some of the cell sites are likely to require us to
obtain zoning variances or other local governmental or third party approvals or
permits. We may also have to make changes to our radio frequency design as a
result of difficulties in the site acquisition process.
We may have difficulty in obtaining infrastructure equipment required in order
to meet our network construction deadlines required under our management
agreement
If we are not able to acquire the equipment required to build our PCS network
in a timely manner, we may be unable to provide wireless communications
services comparable to those of our competitors or to meet the requirements of
our agreements with Sprint PCS. The demand for the equipment that we require to
construct our PCS network is considerable, and manufacturers of this equipment
could have substantial order backlogs. Accordingly, the lead time for the
delivery of this equipment may be long. Some of our competitors purchase large
quantities of communications equipment and may have established relationships
with the manufacturers of this equipment. Consequently, they may receive
priority in the delivery of this equipment.
Sprint PCS' vendor discounts may be discontinued, which could increase our
equipment costs
We intend to purchase our infrastructure equipment under Sprint PCS' vendor
agreements that include volume discounts. If Sprint PCS were unable to continue
to obtain vendor discounts for its affiliates, the loss of vendor discounts
could increase our equipment costs.
The failure of our consultants and contractors to perform their obligations
may delay construction of our network which may lead to a breach of our
management agreement
The failure by any of our vendors, consultants or contractors to fulfill
their contractual obligations to us could materially delay construction of our
PCS network. We have retained Lucent and other consultants and contractors to
assist in the design and engineering of our systems, construct cell sites,
switch facilities and towers, lease cell sites and deploy our PCS network
systems and we will be significantly dependent upon them in order to fulfill
our build-out obligations.
9
<PAGE>
Conflicts with Sprint PCS may not be resolved in our favor which could
restrict our ability to manage our business and provide Sprint PCS products and
services
Conflicts between us and Sprint PCS may arise and as Sprint PCS owes us no
duties except as set forth in the management agreement, these conflicts may not
be resolved in our favor. The conflicts and their resolution may harm our
business. For example, Sprint PCS prices its national plans based on its own
objectives and could set price levels that may not be economically sufficient
for our business. In addition, upon expiration, Sprint PCS could decide to not
renew the management agreement which would not be in our best interest or the
interest of our stockholders. There may be other conflicts such as the setting
of the price we pay for back office services and the focus of Sprint PCS'
management and resources.
If we fail to pay our debt, our lenders may sell our loans to Sprint PCS
giving Sprint PCS certain rights of a creditor to foreclose on our assets
Sprint PCS has contractual rights, triggered by an acceleration of the
maturity of our financing by our lender, pursuant to which Sprint PCS may
purchase our obligations under the Lucent financing and obtain the rights of a
senior lender. To the extent Sprint PCS purchases these obligations, Sprint
PCS' interests as a creditor could conflict with ours. Sprint PCS' rights as a
senior lender would enable it to exercise rights with respect to our assets and
continuing relationship with Sprint PCS in a manner not otherwise permitted
under our agreements with Sprint PCS.
Certain provisions of our agreements with Sprint PCS may diminish the
valuation of our company
Provisions of our agreements with Sprint PCS could effect the valuation of
our company, thereby, among other things reducing the market prices of our
securities and decreasing our ability to raise additional capital necessary to
complete our network build-out. Under our agreements with Sprint PCS, subject
to the requirements of applicable law, there are circumstances under which
Sprint PCS may purchase our operating assets or capital stock for 72% or 80% of
the "entire business value" of our company, as defined in our management
agreement with Sprint PCS. In addition, Sprint PCS must approve any change of
control of our ownership and consent to any assignment of our agreements with
Sprint PCS. Sprint PCS also has been granted a right of first refusal if we
decide to sell our operating assets. We are also subject to a number of
restrictions on the transfer of our business including the prohibition on
selling our company or our operating assets to a number of identified and as
yet to be identified competitors of Sprint PCS or Sprint. These and other
restrictions in our agreements with Sprint PCS may limit the saleability and/or
reduce the value a buyer may be willing to pay for our business and may operate
to reduce the "entire business value" of our company.
We may not be able to compete with larger, more established businesses
offering similar products and services
Our ability to compete will depend, in part, on our ability to anticipate and
respond to various competitive factors affecting the telecommunications
industry, including new services that may be introduced, changes in consumer
preferences, demographic trends, economic conditions and discount pricing
strategies by competitors. We will compete in our territory with two cellular
providers, both of which have an infrastructure in place and have been
operational for a number of years. They have significantly greater financial
and technical resources than we do, could offer attractive pricing options and
may have a wider variety of handset options. We expect that existing cellular
providers will upgrade their systems and provide expanded, digital services to
compete with the Sprint PCS
10
<PAGE>
products and services that we intend to offer. These wireless providers require
their customers to enter into long-term contracts, which may make it more
difficult for us to attract customers away from them. Sprint PCS generally does
not require its customers to enter into long-term contracts, which may make it
easier for other wireless providers to attract Sprint PCS customers away from
Sprint PCS. We will also compete with several PCS providers and other existing
communications companies in our territory. A number of our cellular and PCS
competitors will have access to more licensed spectrum than the 10 MHz licensed
to Sprint PCS in our territory. In addition, any competitive difficulties that
Sprint PCS may experience could also harm our competitive position and success.
Our services may not be broadly used and accepted by consumers
PCS systems have a limited operating history in the United States. The extent
of potential demand for PCS in our markets cannot be estimated with any degree
of certainty. If we are unable to establish and successfully market PCS
services we may not be able to attract customers in sufficient numbers to
operate our business successfully.
The technology we use has limitations and could become obsolete
We intend to employ digital wireless communications technology selected by
Sprint PCS for its network. Code division multiple access, known as CDMA,
technology is a relatively new technology. CDMA may not provide the advantages
expected by Sprint PCS. If another technology becomes the preferred industry
standard, we may be at a competitive disadvantage and competitive pressures may
require Sprint PCS to change its digital technology which, in turn, may require
us to make changes at substantially increased costs. We may not be able to
respond to such pressures and implement new technology on a timely basis, or at
an acceptable cost.
If Sprint PCS customers are not able to roam instantaneously or efficiently
onto other wireless networks, prospective customers could be deterred from
subscribing for our Sprint PCS services
The Sprint PCS network operates at a different frequency and uses or may use
a different technology than many analog cellular and other digital systems. To
access another provider's analog cellular or digital system outside of the
Sprint PCS network, a Sprint PCS customer is required to utilize a dual-
band/dual-mode handset compatible with that provider's system. Generally,
because dual-band/dual-mode handsets incorporate two radios rather than one,
they are more expensive and are larger and heavier than single-band/single-mode
handsets. The Sprint PCS network does not allow for call hand-off between the
Sprint PCS network and another wireless network, thus requiring a customer to
end a call in progress and initiate a new call when leaving the Sprint PCS
network and entering another wireless network. In addition, the quality of the
service provided by a network provider during a roaming call may not
approximate the quality of the service provided by Sprint PCS. The price of a
roaming call may not be competitive with prices of other wireless companies for
roaming calls, and Sprint PCS customers may not be able to use Sprint PCS
advanced features, such as voicemail notification, while roaming.
Non-renewal or revocation by the Federal Communications Commission of the
Sprint PCS licenses would significantly harm our business
PCS licenses are subject to renewal and revocation. Sprint PCS' licenses in
our territory will expire in 2007 but may be renewed for additional ten year
terms. There may be opposition to renewal of Sprint PCS' licenses upon their
expiration and the Sprint PCS licenses may not be renewed. The Federal
Communications Commission, generally referred to as the FCC, has adopted
11
<PAGE>
specific standards to apply to PCS license renewals. Failure by Sprint PCS to
comply with these standards in our territory could cause revocation or
forfeiture of the Sprint PCS licenses for our territory or the imposition of
fines on Sprint PCS by the FCC.
The loss of our officers and skilled employees that we depend upon to operate
our business could reduce our ability to offer Sprint PCS products and services
The loss of one or more key officers could impair our ability to offer Sprint
PCS products and services. Our business is managed by a small number of
executive officers. We believe that our future success will also depend in
large part on our continued ability to attract and retain highly qualified
technical and management personnel. We believe that there is and will continue
to be intense competition for qualified personnel in the PCS equipment and
services industry as the PCS market continues to develop. We may not be
successful in retaining our key personnel or in attracting and retaining other
highly qualified technical and management personnel. We intend to, but do not
currently, maintain "key man" life insurance for some of our executive officers
or other employees.
We may not achieve or sustain operating profitability or positive cash flow
from operating activities
We expect to incur significant operating losses and to generate significant
negative cash flow from operating activities until 2002 while we develop and
construct our PCS network and build our customer base. If and when we start to
provide services to customers, our operating profitability will depend upon
many factors, including, among others, our ability to market our services,
achieve our projected market penetration and manage customer turnover rates. If
we do not achieve and maintain operating profitability and positive cash flow
from operating activities on a timely basis, we may not be able to meet our
debt service requirements.
We may need more capital than we currently project to build out our PCS
network
The build-out of our PCS network will require substantial capital. Additional
funds would be required in the event of significant departures from the current
business plan, unforeseen delays, cost overruns, unanticipated expenses,
regulatory changes, engineering design changes and other technological risks.
Due to our highly leveraged capital structure, additional financing may not be
available or, if available, may not be obtained on a timely basis and on terms
acceptable to us or within limitations permitted under our existing debt
covenants. Failure to obtain additional financing, should the need for it
develop, could result in the delay or abandonment of our development and
expansion plans.
Unauthorized use of our PCS network could disrupt our business
We will likely incur costs associated with the unauthorized use of our PCS
network, including administrative and capital costs associated with detecting,
monitoring and reducing the incidence of fraud. Fraud impacts interconnection
costs, capacity costs, administrative costs, fraud prevention costs and
payments to other carriers for unbillable fraudulent roaming.
Our agreements with Sprint PCS, our certificate of incorporation and our
bylaws include provisions that may discourage, delay and/or restrict any sale
of our operating assets or common stock to the possible detriment of our
stockholders
Our agreements with Sprint PCS restrict our ability to sell our operating
assets and common stock. Generally, Sprint PCS must approve a change of control
of our ownership and consent to any assignment of our agreements with Sprint
PCS. The agreements also give Sprint PCS a right of first
12
<PAGE>
refusal if we decide to sell our operating assets to a third party. These
restrictions, among other things, could discourage, delay or make more
difficult any sale of our operating assets or common stock. This could have a
material adverse effect on the value of the senior subordinated discount notes
or our common stock and could reduce the price of our company in the event of a
sale. Provisions of our certificate of incorporation and bylaws could also
operate to discourage, delay or make more difficult a change in control of our
company. Our certificate of incorporation, which contains a provision
acknowledging the terms under the management agreement and a consent and
agreement pursuant to which Sprint PCS may buy our operating assets, has been
duly authorized and approved by our board of directors and our stockholder.
This provision is intended to permit the sale of our operating assets pursuant
to the terms of the management agreement or a consent and agreement with our
lenders without further stockholder approval. See "Description of Capital
Stock."
We face risks relating to the year 2000 issue
If our systems, the systems of our vendors, consultants and contractors, or
the systems of Sprint and Sprint PCS and their vendors, consultants and
contractors, are not year 2000 compliant or are unable to recover from system
interruptions which may result from the year 2000 date change, our business
could be materially adversely affected. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Impact of Year 2000
Issue on the Operations and Financial Condition of AirGate."
Industry Risks
We may experience a high rate of customer turnover which would increase our
costs of operations and reduce our revenue
Our strategy to reduce customer turnover may not be successful. The PCS
industry has experienced a higher rate of customer turnover as compared to
cellular industry averages. The rate of customer turnover may be the result of
several factors, including network coverage; reliability issues such as blocked
calls, dropped calls and handset problems; non-use of phones; change of
employment; non-use of customer contracts, affordability; customer care
concerns and other competitive factors. Price competition and other competitive
factors could also cause increased customer turnover.
Wireless providers offering services based on alternative technologies may
reduce demand for PCS
The wireless telecommunications industry is experiencing significant
technological change, as evidenced by the increasing pace of digital upgrades
in existing analog wireless systems, evolving industry standards, ongoing
improvements in the capacity and quality of digital technology, shorter
development cycles for new products and enhancements and changes in end-user
requirements and preferences. There is also uncertainty as to the extent of
customer demand as well as the extent to which airtime and monthly recurring
charges may continue to decline. As a result, our future prospects and those of
the industry, and the success of PCS and other competitive services, remain
uncertain.
Regulation by government agencies may increase our costs of providing service
or require us to change our services
The licensing, construction, use, operation, sale and interconnection
arrangements of wireless telecommunications systems are regulated to varying
degrees by the FCC, the Federal Aviation
13
<PAGE>
Administration, generally referred to as the FAA, and, depending on the
jurisdiction, state and local regulatory agencies and legislative bodies.
Adverse decisions regarding these regulatory requirements could negatively
impact Sprint PCS' operations and our cost of doing business. The Sprint PCS
agreements reflect an affiliation that the parties believe meets the FCC
requirements for licensee control of licensed spectrum. If the FCC were to
determine that our agreements with Sprint PCS need to be modified to increase
the level of licensee control, we have agreed with Sprint PCS to use our best
efforts to modify the agreements as necessary to cause the agreements to comply
with applicable law and to preserve to the extent possible the economic
arrangements set forth in the agreements. If the agreements cannot be modified,
the agreements may be terminated pursuant to their terms.
Use of hand-held phones may pose health risks
Media reports have suggested that certain radio frequency emissions from
wireless handsets may be linked to various health problems, including cancer,
and may interfere with various electronic medical devices, including hearing
aids and pacemakers. Concerns over radio frequency emissions may discourage use
of wireless handsets or expose us to potential litigation.
Risks Relating to the Offering
Our current management and directors may be able to control the outcome of
significant matters presented to stockholders as a result of their ownership
position following the completion of this offering
Upon completion of this offering, our current management and directors will
beneficially own approximately 41% of our outstanding common stock on a diluted
basis, or approximately 38% if the underwriters' over-allotment option is
exercised in full. These percentages may decrease depending on the number of
shares of common stock underlying the warrants issued in the units offering
upon the exercise of those warrants. Consequently, such persons, as a group,
may be able to control the outcome of matters submitted for stockholder action
including the election of members to our board of directors and the approval of
significant change in control transactions. This may have the effect of
delaying or preventing a change in control. See "Management" and "Principal
Stockholders."
An active market for the common stock may not develop which may inhibit the
ability of our stockholders to sell common stock following this offering
An active or liquid trading market in our common stock may not develop upon
completion of this offering, or if it does develop, it may not continue. The
initial public offering price of our common stock will be determined through
our negotiations with the underwriters and may be higher than the market price
of common stock after this offering. See "Underwriting" for a discussion of the
factors to be considered in determining the initial public offering price.
The price of our common stock may be volatile
The market price of our common stock could be subject to significant
fluctuations in response to variations in quarterly operating results,
announcements of technological innovations or new products and services by us
or our competitors, our failure to achieve operating results consistent with
securities analysts' projections, the operating and stock price performance of
other companies that investors may deem comparable to us and other events or
factors. Factors such as announcements of the introduction of new or enhanced
services or related products by us or our competition,
14
<PAGE>
announcements of joint development efforts or corporate partnerships in the
wireless telecommunications market, market conditions in the technology,
telecommunications and other emerging growth sectors, and rumors relating to us
or our competitors may also have a significant impact on the market price of
our common stock.
The stock market has experienced extreme price volatility. Under these market
conditions, stock prices of many emerging growth and development stage
companies have often fluctuated in a manner unrelated or disproportionate to
the operating performance of such companies. Since we are a development stage
company, our common stock may be subject to greater price volatility than the
stock market as a whole.
Purchasers in this offering will experience dilution
The initial public offering price is substantially higher than the net
tangible book value per share of the outstanding common stock will be
immediately after the offering. Any common stock you purchase in the offering
will have a post-offering net tangible book value per share of $6.34 less than
the price you paid for the share, assuming an initial public offering price of
$15.00 per share, the midpoint of the range set forth on the cover page of this
prospectus. See "Dilution."
Possible future sales of our common stock by management and other affiliates
and exercise of the warrants could cause the market price of our common stock
to decrease
A substantial number of shares of our common stock could be sold into the
public market after this offering. The occurrence of such sales, or the
perception that such sales could occur, could materially and adversely affect
our stock price and could impair our ability to obtain capital through an
offering of equity securities. The shares of common stock being sold in this
offering will be freely transferable under the securities laws immediately
after issuance, except for any shares sold to our "affiliates." All of our
stockholders, Lucent, members of our senior management and our directors have
either entered into or have agreed to enter into written "lock-up" agreements
that, for a period of 180 days from the date of this prospectus, they will not,
among other things, sell their shares without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation. Upon the expiration of the
180 day lock-up period, an additional 2,339,718 shares of our common stock will
be eligible for sale in the public market subject, in most cases, to volume and
other restrictions under federal securities laws. Upon completion of our common
stock offering, Weiss Peck & Greer and Lucent will hold warrants exercisable
for an aggregate of 368,190 shares of our common stock. We have agreed to enter
into registration rights agreements under which, subject to the applicable
lock-up agreements, Weiss Peck & Greer and Lucent may require us to register
these shares. In connection with our concurrent units offering we will issue
warrants exercisable for shares of our capital stock. Upon the occurance of the
separation date, the 375,575 shares underlying the warrants to be issued in the
units offering will be freely tradeable. In the event the number of shares
underlying the warrants varies based on the closing of the concurrent units
offering, additional shares would become freely tradeable on the separation
date. Shares covered by an effective registration statement would be freely
transferable. See "Description of Capital Stock" and "Shares Eligible for
Future Sale."
You may not receive a return on investment through dividend payments or the
sale of your shares
We do not anticipate paying any cash dividends on our common stock in the
foreseeable future. Instead, we intend to retain future earnings to fund our
growth. Therefore, you will not receive a return on your investment in our
common stock through the payment of dividends and may not realize a return on
your investment even if you sell your shares.
15
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains statements about future events and expectations,
which are "forward-looking statements." Any statement in this prospectus that
is not a statement of historical fact may be deemed to be a forward-looking
statement. These statements include:
. forecasts of growth in the number of consumers using PCS services;
. statements regarding our plans for and costs of the build-out of our PCS
network;
. statements regarding our anticipated revenues, expense levels, liquidity
and capital resources and projection of when we will launch commercial
PCS service and achieve break-even operating cash flow;
. statements regarding our preparedness for the year 2000 date change; and
. other statements, including statements containing words such as
"anticipate," "believe," "plan," "estimate," "expect," "seek," "intend"
and other similar words that signify forward-looking statements.
Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements.
Specific factors that might cause such a difference include, but are not
limited to:
. our dependence on our affiliation with Sprint PCS;
. the need to successfully complete the build-out of our PCS network;
. our lack of operating history and anticipation of future losses;
. our dependence on Sprint PCS' back office services;
. potential fluctuations in our operating results;
. our potential need for additional capital;
. our potential inability to expand our services and related products in
the event of substantial increases in demand for these services and
related products;
. our competition; and
. our ability to attract and retain skilled personnel.
See additional discussion under "Risk Factors" beginning on page 6.
16
<PAGE>
USE OF PROCEEDS
The net proceeds to be received from the sale of the common stock we are
offering, after deducting underwriting discounts and commissions and estimated
offering expenses are expected to be approximately $87.3 million, or
approximately $100.6 million if the underwriters' over-allotment option is
exercised in full, assuming an initial public offering price of $15.00 per
share, the midpoint of the range set forth on the cover page of this
prospectus. The net proceeds to be received from the sale of the units,
consisting of senior subordinated discount notes and warrants, we are offering,
after deducting underwriting discounts and commissions and estimated offering
expenses, are expected to be approximately $143.7 million. We intend to use the
net proceeds from the common stock offering and the units offering, together
with the financing from Lucent, to fund:
. capital expenditures, including the build-out of our PCS network, of
approximately $196.7 million;
. operating losses and working capital requirements of approximately $93.2
million; and
. debt service payments, including the repayment of existing debt
consisting of a $7.7 million unsecured promissory note bearing interest
at an annual rate of 14.0% which matures in December 2000 and a $1.0
million note payable to a bank bearing interest at an annual rate of
prime plus 0.5% which currently matures in November 1999.
Pending such uses, we expect to invest the net proceeds from the sale of the
common stock and units in short-term investment grade securities which will
earn interest.
The foregoing discussion represents our best estimate of the allocation of
the net proceeds of the offerings based upon our current plans. Actual
expenditures may vary substantially from these estimates and we may find it
necessary or advisable to reallocate the net proceeds within the above-
described categories or to use portions thereof for other purposes.
DIVIDEND POLICY
We intend to retain our future earnings, if any, to fund the development and
growth of our business and, therefore, do not anticipate paying any cash
dividends in the foreseeable future. Our future decisions concerning the
payment of dividends on the common stock will depend upon our results of
operations, financial condition and capital expenditure plans, as well as such
other factors as the board of directors, in its sole discretion, may consider
relevant. In addition, our existing indebtedness restricts, and we anticipate
our future indebtedness may restrict, our ability to pay dividends.
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<PAGE>
CAPITALIZATION
The following table sets forth the cash and cash equivalents and our actual
capitalization:
. as of June 30, 1999; and
. as adjusted to reflect the conversion of $7.6 million in convertible
notes plus accrued interest of $127,000 into 985,641 shares of common
stock; the sale in the common stock offering of 6,333,333 shares of
common stock at an initial offering price of $15.00 per share, the
midpoint of the range set forth on the cover of the common stock
prospectus, less underwriting discounts and commissions and estimated
offering expenses of $7.7 million; the sale of $150.0 million gross
proceeds at issuance of units, consisting of % senior subordinated
discount notes due 2009 and warrants to purchase 375,575 shares of common
stock at an exercise price of $0.01 per share, less aggregate
underwriting discounts and commissions and estimated offering expenses of
$6.3 million; and the cost of the Lucent financing, including the payment
of origination fees and other fees and expenses of $4.9 million.
<TABLE>
<CAPTION>
As of June 30, 1999
---------------------
Actual As Adjusted
(In thousands)
(Unaudited)
<S> <C> <C>
Cash and cash equivalents................................ $ 2,910 $220,410
======== ========
Short-term debt:
Notes payable(1)........................................ $ 4,146 $ 150
Long-term debt:(2)
Lucent financing(3)..................................... 10,000 9,433
% senior subordinated discount notes due 2009(4)..... -- 144,370
Other long-term debt(5)................................. 7,700 --
-------- --------
Total long-term debt.................................... 17,700 153,803
-------- --------
Stockholders' equity (deficit):
Preferred stock, par value $.01 per share; 5,000,000
shares authorized; no shares issued and outstanding.... -- --
Common stock, par value $.01 per share, 25,000,000
shares authorized; 3,506,617 shares outstanding,
actual; 10,825,591 shares outstanding, as
adjusted(6)(7)......................................... 35 108
Additional paid-in capital(1)(3)(4)..................... 15,871 116,687
Accumulated deficit(1).................................. (19,419) (23,071)
-------- --------
Total stockholders' equity (deficit)................... (3,513) 93,724
-------- --------
Total capitalization................................. $ 14,187 $247,527
======== ========
</TABLE>
- --------------------
(1) Actual includes a $1.0 million credit facility with a bank and $7.7 million
face value of notes payable to affiliates less a $4.6 million unrecognized
discount. As adjusted reflects the conversion of $7.6 million face value of
outstanding promissory notes with an allocation of the $4.6 million
unamortized discount to accumulated deficit and additional paid-in capital,
and repayment of the $1.0 million credit facility.
(2) Includes current maturities.
(3) As adjusted reflects $10.0 million of borrowings outstanding from Lucent at
June 30, 1999 less a $567,000 unamortized discount associated with the
value of warrants issued in connection with the Lucent financing. The
unamortized discount has been allocated to additional paid-in capital.
(4) As adjusted reflects $150.0 million of gross proceeds at issuance of senior
subordinated discount notes less a $5.6 million unrecognized discount
associated with the value of warrants issued in connection with our units
offering. The unrecognized discount has been allocated to additional paid-
in capital.
(5) Actual consists of a promissory note issued to a third party in connection
with our acquisition of certain site acquisition and engineering costs. As
adjusted reflects repayment of this note.
(6) Shares of common stock outstanding reflect a 39,134-for-one stock split
effective July 9, 1999 and subsequent reverse stock splits of 0.996-for-one
of our common stock which was effective July 28, 1999 and 0.900-for-one of
our common stock which was effective September 15, 1999.
(7) Excludes 2,000,000 shares of our common stock reserved for issuance under
our 1999 Stock Option Plan, warrants currently outstanding for 368,190
shares of common stock and warrants to be issued for 375,575 shares of
common stock in the concurrent units offering. On July 28, 1999, we granted
to current employees options to purchase 1,075,000 shares of our common
stock pursuant to the 1999 Stock Option Plan.
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<PAGE>
DILUTION
Our net tangible book value at June 30, 1999, was $(3.5) million or $(1.00)
per share of common stock. Net tangible book value per share represents the
amount of total tangible assets less total liabilities, divided by the number
of shares outstanding. After giving effect to:
. the sale in this offering of 6,333,333 shares of common stock at an
assumed initial public offering price of $15.00 per share, the midpoint
of the range set forth on the cover of this prospectus, and the receipt
of proceeds therefrom;
. the effect of the conversion of $7.6 million in convertible notes plus
accrued interest of $127,000 into 985,641 shares of common stock upon the
closing of this offering; and,
. the deduction of underwriting discounts and commissions and estimated
offering expenses of $7.7 million
our as-adjusted net tangible book value as of June 30, 1999 would have been
approximately $93.7 million, or $8.66 per share. This represents an immediate
dilution of $6.34 per share to new purchasers of common stock in the offering
and an immediate increase in net tangible book value to existing stockholders
of $9.66 per share. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............. $15.00
Net tangible book value per share as of June 30, 1999........ $(1.00)
Increase in net tangible book value per share attributable to
the offering and the conversion of notes payable to common
stock....................................................... 9.66
------
As adjusted net tangible book value per share after the
offering and conversion of notes payable.................... 8.66
------
Dilution per share to new purchasers of common stock......... $ 6.34
======
</TABLE>
The following table summarizes, on an as-adjusted basis as of June 30, 1999,
the number of shares of common stock purchased, the total consideration paid
and the average price per share paid by our existing stockholders and by new
purchasers of common stock in the offering, assuming an offering price of
$15.00 per share, the midpoint of the range set forth on the cover page of this
prospectus, before the deduction of underwriting discounts and commissions and
estimated offering expenses of $7.7 million payable by us:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ -------------------- Average
Price
Number Percent Amount Percent Per Share
<S> <C> <C> <C> <C> <C>
Existing stockholders..... 4,492,258 41% $ 12,399,429 12% $ 2.76
New purchasers of common
stock.................... 6,333,333 59 95,000,000 88 15.00
---------- --- ------------ --- ------
Total................... 10,825,591 100% $107,399,429 100% $ 9.92
========== === ============ === ======
</TABLE>
The foregoing tables assume no exercise of the underwriters' over-allotment
option and no exercise of outstanding stock options and warrants. The number of
shares underlying the warrants may vary from the number set forth in this
prospectus at the completion of the concurrent units offering. In the event the
number of shares underlying the warrants varies based on the closing of the
concurrent units offering, the additional dilution, if any, will be borne
solely by the existing stockholders. See "Management--1999 Stock Option Plan"
and "Management--Employment Agreements."
19
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data presented below under the captions "Statement of
Operations Data," "Other Data," and "Balance Sheet Data" for, and as of the end
of, the period from inception, June 15, 1995, to December 31, 1995 is derived
from the unaudited consolidated financial statements of AirGate PCS, Inc. and
subsidiaries and predecessors. The selected financial data presented below
under the captions "Statement of Operations Data," "Other Data," and "Balance
Sheet Data" for, and as of the end of, each of the years in the three-year
period ended December 31, 1998, are derived from the consolidated financial
statements of AirGate PCS, Inc. and subsidiaries and predecessors, which
consolidated financial statements have been audited by KPMG LLP, independent
certified public accountants.
The selected financial data should be read in conjunction with the
consolidated financial statements for the three-year period ended December 31,
1998, the related notes and the independent auditors' report, which contains an
explanatory paragraph that states that our recurring losses from operations and
working capital and accumulated deficit raise substantial doubt about our
ability to continue as a going concern, appearing elsewhere in this prospectus.
The consolidated financial statements and the selected financial data do not
include any adjustments that might result from the outcome of that uncertainty.
The selected unaudited financial data presented below as of June 30, 1999 and
for the six month periods ended June 30, 1998 and 1999, are derived from our
unaudited consolidated financial statements included elsewhere in this
prospectus. The unaudited consolidated financial statements include all
adjustments, consisting of normal recurring accruals, that management considers
necessary to a fair presentation of financial position and results of
operations. Operating results for the six month period ended June 30, 1999 are
not necessarily indicative of the results that may be expected for the entire
year ending December 31, 1999.
<TABLE>
<CAPTION>
Period From
Inception,
June 15, For the Six Month
1995, to Periods Ended
December 31, For the Years Ended December 31, June 30,
------------ ---------------------------------- ------------------
1995 1996 1997 1998 1998 1999
(In thousands except per share data)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Operating expenses:
General and
administrative........ $ 1,458 $ 1,252 $ 1,101 $ 2,596 $ 1,100 $ 1,799
Depreciation and
amortization.......... 18 19 998 1,204 746 409
------- ---------- ---------- ---------- -------- --------
Operating loss......... (1,476) (1,271) (2,099) (3,800) (1,846) (2,208)
Interest expense....... (217) (582) (817) (1,392) (510) (5,557)
------- ---------- ---------- ---------- -------- --------
Net loss............... $(1,693) $ (1,853) $ (2,916) $ (5,192) $ (2,355) $ (7,765)
======= ========== ========== ========== ======== ========
Other Data:
Operating loss before
fixed charges......... $(1,476) $ (1,271) $ (2,099) $ (3,800) $ (1,846) $ (2,208)
======= ========== ========== ========== ======== ========
Basic and diluted net
loss per share
of common stock (1)... $ (0.48) $ (0.53) $ (0.83) $ (1.48) $ (0.67) $ (2.21)
======= ========== ========== ========== ======== ========
</TABLE>
- ---------------------
(Footnotes on the following page)
20
<PAGE>
<TABLE>
<CAPTION>
As of December 31, As of June 30, 1999
---------------------------------- -----------------------
1995 1996 1997 1998 Actual As Adjusted(2)
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents........... $ 256 $ 6 $ 147 $ 2,296 $ 2,910 $220,410
Total assets........... 21,643 2,196 13,871 15,450 21,190 254,740
Long-term debt(3)...... -- -- 11,745 7,700 17,700 153,803
Stockholders' equity
(deficit)............. (1,272) (3,025) (1,750) (5,350) (3,513) 93,724
</TABLE>
- ---------------------
(1) Basic and diluted net loss per share of common stock is computed by
dividing net loss by the weighted average number of common shares
outstanding.
(2) As adjusted Balance Sheet Data reflects the conversion of notes payable
plus accrued interest to 985,641 shares of common stock, the sale in the
common stock offering of 6,333,333 shares of common stock at an initial
offering price of $15.00 per share, the midpoint of the range set forth on
the cover of the common stock prospectus, less underwriting discounts and
commissions and estimated offering expenses of $7.7 million and the
concurrent sale of approximately $150.0 million of gross proceeds at
issuance of % senior subordinated discount notes due 2009 and warrants in
the units offering, less aggregate underwriting discounts and commissions
and estimated offering expenses of $6.3 million, the repayment of $8.7
million in short-term and long-term debt and the cost of the Lucent
financing, including the payment of origination fees and other estimated
fees and expenses of $4.9 million.
(3) Includes current maturities.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
consolidated financial statements and the related notes included elsewhere in
this prospectus. The discussion contains forward-looking statements that
involve risks and uncertainties. Our actual results could differ materially
from the results anticipated in these forward-looking statements as a result of
factors including, but not limited to, those under "Risk Factors" and elsewhere
in this prospectus.
Overview
On July 22, 1998, we entered into a management agreement with Sprint PCS
whereby we became the Sprint PCS affiliate with the exclusive right to provide
100% digital, 100% PCS services under the Sprint and Sprint PCS brand names in
our territory in the southeastern United States. We are a development stage
company and have not generated any revenues to date. We have completed our
radio frequency design, network design and substantial site acquisition and
cell site engineering, and commenced construction of our PCS network in
November 1998.
Sprint PCS has invested $44.6 million to purchase the PCS licenses in our
territory and incurred additional expenses for microwave clearing. Under our
long term agreements with Sprint PCS, we will manage the network on Sprint PCS'
licensed spectrum as well as the Sprint and Sprint PCS brand names royalty-free
during our affiliation with Sprint PCS. We also have access to Sprint PCS'
national marketing support and distribution programs and are entitled to buy
network and subscriber equipment and handsets at the same discounted rates
offered by vendors to Sprint PCS based on its large volume purchases. In
exchange for these benefits, we are entitled to receive 92%, and Sprint PCS is
entitled to retain 8%, of collected service revenues from customers in our
territory. We are entitled to 100% of revenues collected from the sale of
handsets and accessories, on revenues received when Sprint PCS customers from a
different territory make a wireless call on our PCS network, and on roaming
revenues from non-Sprint PCS customers.
In addition, for specified fees, we may purchase certain back office
services, including customer activation, billing and customer care, directly
from Sprint PCS. We will purchase these services from Sprint PCS at a cost
which reflects Sprint PCS' economies of scale. We expect that the outsourcing
of these services will enable us to reduce capital expenditures for
administrative purposes and to operate with fewer employees than other wireless
providers.
Through June 30, 1999, we have acquired $7.7 million of capitalized network
assets from Sprint PCS and incurred $9.0 million of capital expenditures
related to the build-out of our PCS network. As a result of the progress made
on our PCS network build-out, we expect to be able to launch commercial PCS
operations in the first quarter of 2000. We expect to extend our coverage
during the balance of 2000 and to substantially complete the build-out of our
PCS network by the end of 2000 covering approximately 74% of the population in
our territory. We expect to continue to fill in coverage in 2001.
From our inception in June 1995 through August 1998, our operating activities
were focused on developing a PCS business in the southeastern United States,
including the purchase of four PCS licenses from the FCC. During this period we
did not generate any revenues and, as a result, have incurred operating losses
since inception. The operating results during this period are not indicative of
the anticipated results of operations which we expect to achieve, following
commencement of commercial operations, as a Sprint PCS affiliate.
22
<PAGE>
Results of Operations
Prospective Income Statements
Revenues. Under our management agreement with Sprint PCS, we are entitled to
receive 92% of collected service revenues from customers in our territory. For
financial reporting purposes, we will record 100% of collected service revenues
along with an expense equal to 8% of collected service revenues which Sprint
PCS is entitled to retain under our management agreement. In addition to
collected service revenues, we will generate revenues from the sale of handsets
and accessories and from roaming services provided to customers traveling onto
our PCS network. Sprint PCS is not entitled to retain any of these revenues. We
will make an appropriate accrual of bad debt expense on a monthly basis.
Through our marketing efforts, we will seek to distinguish our service
offerings on the basis of the quality of digital PCS services and extensive
wireless coverage our subscribers will receive through the Sprint PCS network.
We believe that the Sprint and Sprint PCS brand names and quality of digital
PCS service, coupled with Sprint PCS' established customer care and simplified
billing, will build customer loyalty and limit customer turnover, thereby
increasing revenues and margins.
Wireless providers that have offered poor or spotty coverage, inferior voice
quality, unresponsive customer care or confusing billing formats suffer higher
than average customer turnover rates. Accordingly, we will only launch service
in a particular market after comprehensive and reliable coverage and service
can be maintained in that market. In addition, we will use the Sprint PCS
billing platform and rate plans which are designed to offer simple and
understandable options. Specifically, the Sprint PCS Free and Clear rate plans
offer bundled minute options that include local, long distance and roaming on
the entire Sprint PCS network.
Operating Expenses. We expect our operating expenses will principally include
sales and marketing, network operations and general and administrative
expenses.
Sales and marketing expenses relate to our indirect distribution channels,
sales representatives, sales support personnel, our retail stores, advertising
programs and equipment costs and subsidies paid to third party retailers to
sell our handsets. We expect that our cost for each additional customer will be
higher in the initial years of operation and decline as our sales and marketing
expenses are distributed over a greater customer base and costs and subsidies
of handsets decline. We will benefit from the use of the Sprint and Sprint PCS
brand names, Sprint PCS national advertising and other marketing programs. We
will not pay Sprint PCS a marketing service fee. Our costs of handsets and
accessories will reflect Sprint PCS' volume discounts.
Network operations expenses include cell site collocation lease costs,
utilities, switch maintenance, switch site leases, engineering personnel,
backhaul and interconnect charges. We will also be charged roaming fees by
Sprint PCS and other wireless carriers when our customers make a wireless call
on networks outside our territory. More than 85% of our cell sites will be
collocated, which will result in higher cell site lease expenses. These higher
lease expenses will be offset in part by certain operating expense savings
resulting from collocation. Collocation will also substantially reduce our
capital expenditures and time to market. Collocation is the ability to locate
existing antennas and other transmission equipment on existing towers or other
existing structures. Collocation has the following three primary benefits:
. allows us to avoid the costs of building the tower and buying or leasing
the land;
23
<PAGE>
. allows us to more quickly install antennas than if we had to build the
towers ourselves; and
. allows us to avoid any zoning challenges that could prohibit use of the
location for a cell site since we will use existing towers.
On collocation sites we also are able to avoid paying the costs of maintenance
that are borne by the owner of the tower. This results in higher cell lease
expenses, but lower operating costs.
We will purchase a full suite of back office services from Sprint PCS.
. These services will be provided by Sprint PCS in the same manner and with
the same standard of care that Sprint PCS uses in conducting its own
business.
. Initially, the charges for these services, which are based on Sprint PCS'
cost and reflect their economies of scale, will be lower than if we
provided these services ourselves.
. In addition, we expect that, by using these established services, our
capital expenditures and demands on our management's time in connection
with back office services will be lower than if we developed and provided
the services ourselves. We will have access to these services until at
least December 31, 2001. Because of the economic benefits to us, we will
initially purchase:
.customer billing and collections;
.customer care;
.subscriber activation, including credit verification;
.handset logistics;
.network operations control center monitoring;
.national platform interconnectivity;
.voice mail;
.directory assistance and operator services;
.long distance;
.roaming fees and roaming clearinghouse fees; and
.inter-service area fees.
As indicated above, Sprint PCS will retain 8% of collected service revenues.
We will record this affiliation fee as an operating expense.
We will also incur certain general and administrative expenses relating to
corporate overhead, including salaries and other benefits.
Historical Income Statements
From June 15, 1995 (inception) to December 31, 1997:
From inception, June 15, 1995, through December 31, 1997, our operating
activities were focused on developing a PCS business which included the
purchase of four FCC PCS licenses. During this period, we incurred total
cumulative expenses of $6.5 million. These expenses related to salaries and
benefits, professional fees, interest expense, depreciation and amortization of
the FCC
24
<PAGE>
PCS licenses. All costs of start-up and organizational activities have been
expensed or incurred in accordance with AICPA Statement of Position 98-5.
For the year ended December 31, 1998:
In July 1998, we signed a series of agreements with Sprint PCS to operate as
the exclusive affiliate of Sprint PCS in certain markets in the southeastern
United States. As a part of these agreements, we were given the right to market
Sprint PCS' products and services in exchange for building, constructing and
managing a PCS network that will support the wireless service offerings of
Sprint PCS in our territory. In October 1998, AirGate PCS, Inc. was formed and
all operations related to the affiliation with Sprint PCS were transferred to
it and its subsidiaries. The FCC PCS licenses will not be used in our
continuing operations as a Sprint PCS affiliate and, therefore, have been
excluded from the financial statements of AirGate PCS, Inc. During 1998, we
focused on consummating our affiliation with Sprint PCS. Expenses incurred for
these purposes totaled $5.2 million for salaries and benefits, professional
fees, interest expense and depreciation and amortization. Capital outlays in
1998 amounted to $12.9 million. Included in this amount were $7.7 million of
capitalized network assets which we purchased from Sprint PCS which include
radio frequency and engineering design data, site acquisition materials and
construction equipment. We also incurred $5.2 million of capital expenditures
related to the build-out of our PCS network.
For the six month period ended June 30, 1999:
From December 31, 1998 through June 30, 1999, we were focused on raising
capital to continue our PCS network build-out. We incurred expenses of $7.0
million during the six month period ended June 30, 1999. These expenses
consisted of salaries and benefits, professional fees, interest expense and
depreciation and amortization expense primarily related to our network build
out. We incurred capital expenditures of $4.4 million related to the continued
build-out of our PCS network which includes approximately $810,000 of
capitalized interest.
Interest expense for the period was $6.5 million, which included a $5.0
million charge to record the fair value of warrants and the beneficial
conversion feature related to the convertible notes issued to affiliates.
Liquidity and Capital Resources
Since inception, our activities have consisted principally of raising
capital, participating in PCS license auctions, consummating and supporting our
agreements with Sprint PCS, completing the initial design of our PCS network
and adding to our management team. We have relied on the proceeds from equity
and debt financing, rather than revenues, as our primary sources of capital.
Specifically, operations during this development phase have been funded through
equity infusions by Weiss Peck & Greer PCS Partners and Maxicom PCS L.L.C. as
well as convertible notes issued to the various venture capital funds of Weiss,
Peck & Greer Venture Partners and JAFCO America Ventures, Inc. These notes will
convert into common stock concurrently with this offering. In addition, we
issued a secured promissory note to Lucent for $10.0 million in June 1999 which
was repaid in connection with the Lucent financing in August 1999.
Completion of our PCS network will require substantial capital. Our build-out
plan includes the installation of three switches and over 500 cell sites by the
end of the fourth quarter of 2000. In addition, we will construct 12 company-
owned Sprint PCS stores and develop other administrative systems. Currently, we
estimate that the capital requirements to achieve our goals, including
25
<PAGE>
repayment of debt, operating losses and working capital for the period from
July 1, 1999 through the end of 2002, will total approximately $347.0 million.
The actual funds required to build out our PCS network and fund operating
losses and working capital needs may vary materially from these estimates, and
additional funds could be required in the event of unforeseen delays, cost
overruns, unanticipated expenses, engineering design changes and other
technology risks.
Currently, we have no sources of revenue to meet our anticipated capital
requirements. We expect the primary sources of funding to be the proceeds
provided by our concurrent offerings of common stock and units together with
the financing from Lucent. As part of our concurrent offerings, we are offering
for sale units, which consist of senior subordinated discount notes and
warrants. The senior subordinated discount notes will be issued in an aggregate
principal amount and with an interest rate sufficient to generate, together
with the warrants, gross proceeds of $150.0 million. The aggregate accreted
value of the senior subordinated discount notes will increase from
approximately $150.0 million at issuance at a rate of % compounded semi-
annually to a final accreted value equal to their aggregate principal amount of
$ million at the end of year five. After year five, we are required to pay
cash interest on the senior subordinated discount notes. The senior
subordinated discount notes will be secured by a senior subordinated pledge of
the capital stock of our future, direct subsidiaries, will be guaranteed by our
existing and our future subsidiaries and will be subordinated in right of
payment to our existing and future senior indebtedness.
We have entered into a credit agreement with Lucent Technologies Inc.
pursuant to which we can borrow up to $153.5 million. We used $10.0 million of
our financing with Lucent to repay outstanding indebtedness to Lucent. We will
use the balance of the financing to purchase equipment and for general
corporate purposes. Borrowings under the Lucent financing are secured by a
first priority lien over all of our assets and the assets of our subsidiary and
future subsidiaries, and a pledge of the capital stock of our subsidiary and
future subsidiaries. As of August 31, 1999, we had $13.5 million of borrowings
outstanding under our credit agreement with Lucent.
We believe that the net proceeds from our concurrent offerings of common
stock and units, together with the Lucent financing, will provide us with
sufficient funds to complete our PCS network build-out and fund operating
losses and working capital requirements through 2002, at which point we expect
to have achieved break-even operating cash flow. If we expand more rapidly than
currently anticipated, or if our working capital needs exceed our current
expectations, we will need to raise additional equity or debt capital. We
cannot be sure that we will be able to obtain the additional financing to
satisfy our cash requirements or to implement our growth strategy on acceptable
terms or at all. If we cannot obtain such financing on terms acceptable to us,
we may be forced to curtail our planned business expansion and may be unable to
fund our ongoing operations.
Impact of Year 2000 Issue on the Operations and Financial Condition of AirGate
The year 2000 issue arises as the result of computer programs having been
written, and systems having been designed, using two digits rather than four to
define the applicable year. Consequently, such software has the potential to
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
We believe that our computer systems and software are year 2000 compliant. To
the extent that we implement our own computer systems and software in the
future, we will assess year 2000
26
<PAGE>
compliance prior to their implementation. We have not incurred any costs
relating to year 2000 compliance. In the process of designing and constructing
our PCS network, we have entered into material agreements with several third-
party vendors. We rely on them for all of our important operating, computer and
non-information technology systems. We are therefore highly dependent on Sprint
PCS and other vendors for remediation of their network elements, computer
systems, software applications and other business systems. We will purchase
critical back office services from Sprint PCS, and our network infrastructure
equipment will be contractually provided by a third party vendor with whom we
have a material relationship. If either Sprint PCS or this third party vendor
fail to become year 2000 compliant, our ability to commence operations may be
materially delayed. We have contacted our third party vendors and believe that
they will be year 2000 compliant. However, we have no contractual or other
right to compel compliance by them.
We do not expect to commence operations until the first quarter of 2000.
Because of our reliance on third-party vendors, we believe that the impact on
us of issues relating to year 2000 compliance, if any, would be a delay in our
launching commercial PCS operations and not a disruption in service. We,
therefore, have not developed a contingency plan and do not expect to do so.
Quantitative and Qualitative Disclosure About Market Risk
We are exposed to market risks that are inherent in our financial
instruments. These instruments arise from transactions entered into in the
normal course of business. We are subject to interest rate risk on our
financing from Lucent and any future financing requirements. Our fixed rate
debt will consist primarily of the accreted balance of the senior subordinated
discount notes. Our variable rate debt will consist of borrowings made under
the Lucent financing.
The following table presents the estimated future outstanding long-term debt
at the end of each year and future required annual principal payments for each
year then ended associated with senior subordinated discount notes and the
Lucent financing based on our projected level of long-term indebtedness:
<TABLE>
<CAPTION>
Years Ending December 31,
------------------------------------------------
1999 2000 2001 2002 2003 Thereafter
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Senior subordinated
discount notes......... $156,375 $176,948 $200,228 $226,571 $256,380 $ --
Fixed interest rate
(1).................... 12.75% 12.75% 12.75% 12.75% 12.75% 12.75%
Principal payments...... -- -- -- -- -- 278,283
Lucent financing........ 13,500 55,500 121,679 152,994 150,969 --
Variable interest rate
(2).................... 9.25% 9.25% 9.25% 9.25% 9.25% 9.25%
Principal payments...... -- -- -- 506 2,025 150,969
</TABLE>
- ---------------------
(1) Assumed interest rate for senior subordinated discount notes, which will be
paid in full in 2009.
(2) Interest rate on the Lucent financing equals the London Interbank Offered
Rate ("LIBOR") +3.75%. LIBOR is assumed to equal 5.5% for all periods
presented.
Our primary market risk exposure relates to:
.the interest rate risk on long-term and short-term borrowings,
.our ability to refinance our senior subordinated discount notes at
maturity at market rates; and
27
<PAGE>
. the impact of interest rate movements on our ability to meet interest
expense requirements and meet financial covenants.
We expect to manage the interest rate risk on our outstanding long-term and
short-term debt through the use of fixed and variable rate debt and interest
rate swaps. While we cannot predict our ability to refinance existing debt or
the impact interest rate movements will have on our existing debt, we continue
to evaluate our financial position on an ongoing basis.
Inflation
Management believes that inflation has not had, and will not have, a material
adverse effect on our results of operations.
28
<PAGE>
INDUSTRY BACKGROUND
Wireless communications systems use a variety of radio frequencies to
transmit voice and data. Broadly defined, the commercial wireless communication
industry includes one-way radio applications, such as paging or beeper
services, and two-way radio applications, such as cellular, PCS and enhanced
specialized mobile radio, known as ESMR, networks. Historically, each
application has been licensed and operates in a distinct radio frequency block.
In the commercial wireless communication industry there are two principal
services licensed by the FCC for transmitting two-way, real time voice and data
signals: "cellular" and "PCS." Cellular, which uses the 800 MHz frequency
block, is the predominant form of commercial wireless voice communications
service used by subscribers today. Cellular systems are analog-based, but over
the last several years cellular operators have started to deploy digital
service in the 800 MHz frequency block. Digital services have been deployed, as
a complement to the analog based services, in most of the major metropolitan
markets. Analog-based systems send signals in which the transmitted signal
resembles the input signal, the caller's voice, while in digital systems the
input is coded into a binary form before the signal is transmitted. In
addition, ESMR networks may provide up to 15 MHz of spectrum for interconnected
two-way real time voice and data services.
In 1993, the FCC allocated the 1900 MHz frequency block of the radio spectrum
for PCS. PCS differs from traditional analog cellular telephone service
principally in that PCS systems operate at a higher frequency and employ
advanced digital technology. Digital systems convert voice or data signals into
a stream of digits that permit a single radio channel to carry multiple
simultaneous transmissions. Digital systems also achieve greater frequency
reuse than analog systems resulting in greater capacity than analog systems.
This enhanced capacity, along with enhancements in digital protocols, allows
digital-based wireless technologies, whether using PCS or cellular frequencies,
to offer new and enhanced services, such as greater call privacy and more
robust data transmission features, such as "mobile office" applications
including facsimile, electronic mail and connecting notebook computers with
computer/data networks.
Since the introduction of commercial cellular service in 1983, the wireless
communications industry has experienced dramatic growth. The number of wireless
subscribers for cellular, PCS and ESMR has increased from an estimated 340,213
at the end of 1985 to over 69 million as of December 31, 1998, according to the
Cellular Telecommunications Industry Association ("CTIA"), an international
association for the wireless industry. The following chart illustrates the
annual growth in U.S. wireless communication customers for cellular, PCS and
ESMR through December 31, 1998.
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------
1992 1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C>
Wireless Industry
Statistics(1)
Total service revenues
(in billions).......... $ 7.8 $ 10.9 $ 14.2 $ 19.1 $ 23.6 $ 27.5 $ 33.1
Wireless subscribers at
end of period
(in millions).......... 11.0 16.0 24.1 33.8 44.0 55.3 69.2
Subscriber growth....... 46.0% 45.1% 50.8% 40.0% 30.4% 25.6% 25.1%
Average monthly revenues
per subscriber......... $68.68 $61.49 $56.21 $51.00 $47.70 $42.78 $39.43
</TABLE>
- ---------------------
Source: Cellular Telecommunications Industry Association.
(1) Reflects domestic commercially operational cellular, ESMR and PCS
providers.
29
<PAGE>
Paul Kagan Associates, Inc., an independent media and telecommunications
association, estimates that the number of wireless users will increase to
approximately 137 million and 169 million by 2002 and 2005, respectively. This
growth is driven largely by a substantial projected increase in PCS users, who
are forecast to account for approximately 34% and 42% of total users in 2002
and 2005, respectively, representing a significant increase over the
approximately 10% of total wireless customers using PCS as of the end of 1998.
Paul Kagan Associates, Inc. projects that total wireless industry penetration,
defined as the number of wireless subscribers nationwide divided by total
United States population, will grow from an estimated 25.3% in 1998 to 57.0% in
2005.
We believe that a significant portion of the predicted growth in the consumer
market for wireless telecommunications will result from anticipated declines in
costs of service, increased functional versatility, and increased awareness of
the productivity, convenience and privacy benefits associated with the services
offered by PCS providers. PCS providers are one of the first direct wireless
competitors of cellular providers to offer all-digital mobile networks. We also
believe that the rapid growth in the use of notebook computers and personal
digital assistants, combined with emerging software applications for delivery
of electronic mail, fax and database searching, will contribute to the growing
demand for wireless service.
Wireless communications systems, whether PCS or cellular, are divided into
multiple geographic coverage areas, known as "cells." In both PCS and cellular
systems, each cell contains a transmitter, a receiver and signaling equipment,
known as the "cell site." The cell site is connected by microwave or landline
telephone circuits to a switch that uses computers to control the operation of
the cellular or PCS communications system for the entire service area. The
system controls the transfer of calls from cell to cell as a subscriber's
handset travels, coordinates calls to and from handsets, allocates calls among
the cells within the system and connects calls to the local landline telephone
system or to a long distance carrier. Wireless communications providers
establish interconnection agreements with local exchange carriers and
interexchange carriers, thereby integrating their system with the existing
landline communications system. Because the signal strength of a transmission
between a handset and a cell site declines as the handset moves away from the
cell site, the switching office and the cell site monitor the signal strength
of calls in progress. When the signal strength of a call declines to a
predetermined level, the switching office may "hand off" the call to another
cell site where the signal strength is stronger.
Wireless digital signal transmission is accomplished through the use of
various forms of "air interface protocols." The FCC has not mandated a
universal air interface protocol for PCS systems. PCS systems operate under one
of three principal air interface protocols, CDMA, TDMA or GSM. TDMA and GSM are
both time division multiple access systems but are incompatible with each
other. CDMA is a code division multiple access system and is incompatible with
both GSM and TDMA. Accordingly, a subscriber of a system that utilizes CDMA
technology is unable to use a CDMA handset when traveling in an area not served
by CDMA-based PCS operators, unless the customer carries a dual-band/dual-mode
handset that permits the customer to use the analog cellular system in that
area. The same issue would apply to users of TDMA or GSM systems. All of the
PCS operators now have dual- or tri-mode handsets available to their customers.
Until digital networks become fully built-out, these handsets will be necessary
for a certain segment of the subscriber base.
30
<PAGE>
BUSINESS
We have entered into a management agreement with Sprint PCS whereby we have
the exclusive right to provide 100% digital, 100% PCS products and services
under the Sprint and Sprint PCS brand names in our territory in the
southeastern United States. Based upon the population of our territory, we are
the second largest Sprint PCS affiliate in the United States. Our territory,
which covers almost the entire state of South Carolina, parts of North
Carolina, and the eastern Georgia cities of Augusta and Savannah, has a
resident population of more than 6.8 million and covers 21 contiguous markets
in one of the fastest growing regions in the United States based on population.
Sprint PCS
Sprint is a diversified telecommunications service provider whose principal
activities include long distance service, local service, wireless telephony
products and services, product distribution and directory publishing
activities, and other telecommunications activities, investments and alliances.
Sprint PCS, a wholly-owned subsidiary of Sprint, operates the only 100%
digital, 100% PCS wireless network in the United States with licenses to
provide service nationwide using a single frequency and a single technology.
The Sprint PCS network uses CDMA technology nationwide.
Sprint launched its first commercial PCS service in the United States in
November 1995. Since then, Sprint PCS has experienced rapid customer growth,
providing service to approximately 4.0 million customers as of June 30, 1999.
In the fourth quarter of 1998, Sprint PCS added approximately 830,000 net new
subscribers, the largest single quarter of customer growth ever reported by a
wireless provider in the United States. In the first quarter of 1999, Sprint
PCS added approximately 763,000 net new wireless subscribers, the second
largest quarter ever recorded by a wireless carrier in the United States. As of
June 30, 1999, Sprint PCS, together with its affiliates, operated PCS systems
in 286 metropolitan markets within the United States, including all of the 50
largest metropolitan areas. The following table, showing the quarterly end-of-
period subscriber data for Sprint PCS, illustrates Sprint PCS' subscriber
growth from the beginning of 1997 to the end of the second quarter of 1999.
<TABLE>
<CAPTION>
1997 1998 1999
----------------------- ----------------------- -----------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
(In thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Total subscribers.. 192 347 570 887 1,114 1,370 1,750 2,586 3,350 3,967
</TABLE>
Sprint PCS currently provides nationwide PCS service through a combination of:
.operating its own digital network in major metropolitan areas;
.strategic affiliations with other companies, primarily in and around
smaller metropolitan areas;
. roaming on analog cellular networks of other providers using dual-band,
dual-mode handsets; and
.roaming on digital PCS networks of other CDMA-based providers.
We are the second largest affiliate of Sprint PCS and will provide Sprint PCS
services in key cities contiguous to current and future Sprint PCS markets. Our
territory connects to Sprint PCS markets including Atlanta, Georgia; Charlotte
and Raleigh, North Carolina; Norfolk, Virginia; and Knoxville, Tennessee. The
build-out of our territory will significantly extend Sprint PCS' coverage in
the Southeast and we believe is important to its nationwide strategy.
31
<PAGE>
Competitive Strengths
Benefits of the Sprint PCS Affiliation
Our strategic affiliation with Sprint PCS provides us with many business,
operational and marketing advantages including the following:
Exclusive provider of Sprint PCS products and services. We are the exclusive
provider of Sprint PCS' 100% digital, 100% PCS products and services in our
territory. We will provide these products and services exclusively under the
Sprint and Sprint PCS brand names.
Strong brand recognition and national advertising support. We will benefit
from the strength and the reputation of the Sprint and Sprint PCS brands.
Sprint PCS' national advertising campaigns and developed marketing programs
will be provided to us at no additional cost under our agreements with Sprint
PCS. We will offer the same strategic pricing plans, promotional campaigns and
handset and accessory promotions that we believe have made Sprint PCS the
fastest growing wireless service provider in the United States.
Established and available distribution channels. We will have use of all the
national distribution channels used by Sprint PCS. These channels include:
. RadioShack stores on an exclusive basis for PCS;
. other major national third-party retailers such as Best Buy, Circuit City
and Office Depot;
. Sprint PCS' national inbound telemarketing sales force;
. Sprint PCS' national accounts sales team; and
. Sprint PCS' electronic commerce sales platform.
Nationwide coverage. We plan to operate our PCS network seamlessly with the
Sprint PCS national network. This will provide customers in our territory with
immediate nationwide roaming using Sprint PCS' network and other wireless
networks with which Sprint PCS has roaming agreements. As of June 30, 1999,
Sprint PCS, together with its affiliates, operated PCS systems in 286
metropolitan markets within the United States. Sprint PCS is still constructing
its PCS network. Accordingly, the areas currently served by Sprint PCS,
together with the areas covered by Sprint PCS' roaming agreements, do not cover
every area in the United States. We will receive roaming revenue from the use
of our PCS network by Sprint PCS customers traveling in or visiting our
territory.
Ability to purchase back office services from Sprint PCS. Our affiliation
with Sprint PCS provides us with the option to use Sprint PCS' established back
office services, including customer activation, billing and customer care.
Using this option, we can accelerate the launch of our commercial PCS
operations and reduce our capital expenditures and operating costs rather than
establishing and operating our own systems. Sprint PCS has indicated it intends
to provide these services to us at costs reflecting Sprint PCS' economies of
scale. We may elect to develop our own internal capabilities to handle these
functions or outsource them to a third party in the event that doing so proves
to be more cost effective.
Sprint PCS network design. Sprint PCS developed the initial build-out plan
for our PCS network. We have based our network build-out on this design and
have further enhanced it to better provide coverage for our territory.
32
<PAGE>
Economies of scale of a nationwide network. We will purchase our network and
subscriber equipment under Sprint PCS' vendor contracts that provide for volume
discounts. These discounts will reduce the overall capital required to build
our PCS network and will lower the cost of subscriber equipment.
Sprint PCS licenses and long-term commitment. Sprint PCS has funded the
purchase of the licenses covering our territory at a cost of $44.6 million and
incurred additional expenses for microwave clearing. As a Sprint PCS affiliate,
we did not have to fund the acquisition of the licenses thereby reducing our
start-up costs. Sprint PCS has entered into a consent and agreement with Lucent
that limits Sprint PCS' rights or remedies under its agreements with us,
including Sprint PCS' right to terminate the agreements and withhold payments,
until our financing from Lucent is satisfied in full pursuant to the terms of
the consent and agreement. See "The Sprint PCS Agreements--Consent and
Agreement for the Benefit of the Lucent Financing."
Other Competitive Strengths
In addition to the advantages provided by our strategic affiliation with
Sprint PCS, we have the following competitive strengths:
Attractive market footprint. Our territory has favorable demographic
characteristics for wireless communications services which we believe are
important to Sprint PCS' national footprint. The 21 contiguous markets in our
territory:
. include approximately 6.8 million residents;
. include key southeastern cities and vacation destinations such as Myrtle
Beach and Hilton Head Island, South Carolina; Savannah, Georgia; and the
Outer Banks of North Carolina;
. have strong population growth and attractive traffic patterns;
. connect important Sprint PCS markets which are already operational,
including Atlanta, Georgia; Charlotte and Raleigh, North Carolina;
Norfolk, Virginia; and Knoxville, Tennessee; and
. are serviced by Sprint local telephone companies that we expect will
provide local telephone service to approximately 30% of the population in
our territory by the end of the year 2000, contributing to the market
awareness of Sprint's telecommunications services and providing us with
an additional distribution channel.
Experienced management team. We have attracted an experienced senior
management team with an average of more than 15 years of experience in building
and operating telecommunications networks in the southeastern United States.
. Thomas M. Dougherty, our president and chief executive officer, has more
than 16 years of telecommunications experience, and is a former senior
executive of Sprint PCS. As the president of a major Sprint PCS region,
Mr. Dougherty was responsible for Sprint PCS market launches in eighteen
major metropolitan areas with a resident population of approximately 75
million, including Chicago, Illinois; Houston, Texas; Atlanta, Georgia;
and Charlotte, North Carolina.
. Thomas D. Body III, our vice president of strategic planning, has over 20
years of telecommunications experience in the Southeast. Mr. Body co-
founded and operated several successful paging and cellular companies and
also served as chief executive officer of MFS-Atlanta, a major fiber-
optic systems provider.
33
<PAGE>
. W. Chris Blane, our vice president of new business development, has over
20 years of experience in telecommunications in the Southeast. Mr. Blane
co-founded and operated several successful paging and cellular companies
including serving as a chief operating officer of American Mobilphone
Paging and CellularOne of Birmingham and Montgomery, Alabama.
. Robert E. Gourlay, our vice president of marketing, has 22 years of
wireless telecommunications experience including 18 years with Motorola,
Inc. Mr. Gourlay served as the southeastern manager of sales and
operations for Motorola, Inc.'s Cellular Infrastructure Division for four
years.
. David C. Roberts, our vice president of engineering and network
operations, has 15 years of wireless telecommunications experience,
having served in various engineering and management positions with
Motorola, Inc. in the Southeast.
. Shelley L. Spencer, our vice president of law and secretary, has 12 years
of legal experience, six of which were spent in the private practice of
law specializing in telecommunications. Ms. Spencer joined AirGate in
1995.
. Alan B. Catherall, our chief financial officer, has served in senior
financial capacities in the telecommunications industry for approximately
17 years.
Fully financed plan. The net proceeds from our concurrent offerings of common
stock and units, which consist of senior subordinated discount notes and
warrants, together with the Lucent financing, are expected to total
approximately $369.8 million. We believe this capital will provide us with
sufficient funds to complete our PCS network build-out and to fund anticipated
operating losses and working capital requirements through 2002, at which point
we expect to have achieved break-even operating cash flow.
Business Strategy
Upon the completion of our 100% digital, 100% PCS network, we intend to
become a leading provider of wireless PCS services in the Southeast. We believe
that the following elements of our business strategy will enable us to rapidly
launch our network, distinguish our wireless service offerings from those of
our competitors and compete successfully in the wireless communications
marketplace.
Leverage our affiliation with Sprint PCS. The benefits of our affiliation
with Sprint PCS include:
. Sprint PCS brand awareness and national marketing programs;
. access to established Sprint PCS distribution channels and outlets;
. Sprint PCS nationwide coverage;
. use of Sprint PCS' back office services including customer activation,
billing and customer care;
. roaming revenue from Sprint PCS customers traveling onto our PCS network;
. availability of discount prices for network and subscriber equipment
under Sprint PCS' vendor contracts; and
. use of Sprint PCS' national network control center which is responsible
for continually monitoring the performance of our PCS network and
providing rapid response for systems maintenance needs.
34
<PAGE>
Execute optimal build-out plan. We are constructing a state-of-the-art, high
quality, all digital PCS network. Our radio frequency design has a high density
of cell sites. We believe that this cell density, together with the use of
digital technology, will allow our system to handle more customers with fewer
dropped calls and better clarity than our competitors. By leasing cell sites on
facilities shared with one or more other wireless providers, we will be able to
build our PCS network quickly. More than 85% of our leases for cell sites will
be collocation leases. Our strategy is to provide service to major urban and
suburban areas and the interstates and primary roads connecting these areas. We
plan to initiate service only in areas where we are capable of providing
population coverage comparable to or more extensive than that of our wireless
competitors.
Implement efficient operating structure. We intend to maximize operating
efficiency by minimizing staffing and reducing costs through the purchase and
use of Sprint PCS' existing back office services. For example, we will purchase
billing and customer care from Sprint PCS on a per subscriber basis thereby
avoiding the costly and time-consuming tasks of building our own systems. In
addition, we will limit marketing costs by using Sprint PCS' national marketing
concepts and programs. As the customer base in our territory grows, we may
elect to develop internal systems for certain back office functions such as
customer activation, billing and customer care, or outsource such functions
directly to third party vendors if it is more cost-effective.
Explore strategic opportunities to expand our territory in the future. Upon
the successful build-out of our current territory and subject to the
availability of financing, we may strategically expand our territory with a
focus on the southeastern United States.
Markets
Our territory covers almost the entire state of South Carolina including
Charleston, Columbia and Greenville-Spartanburg; portions of North Carolina
including Asheville, Wilmington and Hickory; and the eastern Georgia cities of
Augusta and Savannah. Sprint PCS has launched service in the major southeastern
cities of Atlanta, Georgia; Knoxville, Tennessee; Norfolk, Virginia; and
Charlotte and Raleigh, North Carolina. We will be the exclusive provider of
Sprint PCS products and services in the markets connecting these major cities.
The build-out of the network in our territory will bridge existing Sprint PCS
markets. We believe connecting existing Sprint PCS markets is important to
Sprint PCS' strategy to provide seamless, nationwide PCS service.
Our contiguous markets with a population of 6.8 million have attractive
demographic characteristics.
. According to the Charleston metropolitan area Chamber of Commerce, South
Carolina beaches are a major national tourism destination. Myrtle Beach,
Charleston, Savannah and Hilton Head Island have over 27 million visitors
annually. In addition, the Outer Banks of North Carolina is a popular
vacation spot for Virginia and Washington, D.C. residents.
. Our territory includes over 2,750 highway miles. Over 36 million vehicle
miles are traveled daily on the 1,320 interstate miles of highway.
. It is estimated that our markets will have a population growth rate 16%
higher than that of the United States as a whole over the 5 years ending
December 31, 2000.
. There are at least 27 colleges and universities located in our territory,
including the University of South Carolina and Clemson University.
35
<PAGE>
The following table lists the location and population of each of the markets
that comprise our territory under our agreements with Sprint PCS:
<TABLE>
<CAPTION>
Territory (BTAs)* State Population (1)
<S> <C> <C>
Greenville-Spartanburg South Carolina 853,000
Savannah Georgia 715,000
Charleston South Carolina 638,000
Columbia South Carolina 628,000
Augusta Georgia 568,000
Asheville-Hendersonville North Carolina 568,000
Anderson South Carolina 329,000
Hickory-Lenoir-Morganton North Carolina 320,000
Wilmington North Carolina 304,000
Florence South Carolina 257,000
Greenville-Washington North Carolina 241,000
Goldsboro-Kinston North Carolina 233,000
Rocky Mount-Wilson North Carolina 213,000
New Bern North Carolina 167,000
Myrtle Beach South Carolina 157,000
Sumter South Carolina 154,000
Jacksonville North Carolina 150,000
Orangeburg South Carolina 119,000
The Outer Banks(2) North Carolina 80,000
Roanoke Rapids North Carolina 80,000
Greenwood South Carolina 73,000
---------
Total 6,847,000
=========
</TABLE>
- ---------------------
* Basic Trading Areas
(1) Based on estimates compiled by Paul Kagan Associates, Inc. in 1997, except
with respect to the Outer Banks.
(2) The Outer Banks territory covered by our agreements with Sprint PCS does
not comprise a complete BTA. The population information related to the
Outer Banks territory is based on estimates by AirGate.
Network Build-Out Plan
We expect to commence commercial operations in the first quarter of 2000,
covering approximately 1.5 million people, or 22% of the population in our
territory. By the end of the fourth quarter of 2000, we expect to be capable of
providing service to more than 5.0 million residents, or 74% of the population
in our territory. Our strategy is to provide service to major urban and
suburban areas and to cover interstates and primary roads connecting these
areas. We plan to initiate service only in areas where we are capable of
providing population coverage comparable to or more extensive than that of our
wireless competitors.
In order to complete our network build-out, we will need to acquire leasehold
interests in or purchase and construct approximately 566 cell sites. The table
below indicates the expected launch dates and network coverage that we expect
will be operational and the population covered by those cell sites through the
fourth quarter of 2000.
36
<PAGE>
<TABLE>
<CAPTION>
Expected Covered Residents
Commercial Launch Cumulative as a Percentage of
Date by Quarter Markets Included Covered Residents Total Residents
<C> <S> <C> <C>
First quarter 2000 Anderson and Greenville- 1,535,986 22%
Spartanburg, South
Carolina; Asheville and
Hickory, North Carolina
Second and third quarters 2000 Augusta and Savannah, 4,363,458 63%
Georgia; Charleston,
Columbia, Myrtle Beach,
and Orangeburg, South
Carolina; Goldsboro,
Roanoke Rapids, Rocky
Mount and Wilmington,
North Carolina
Fourth quarter 2000 Florence, Greenwood and 5,003,320 74%
Sumter, South Carolina;
Greenville--Washington,
Jacksonville, New Bern,
and the Outer Banks,
North Carolina
</TABLE>
This build-out plan exceeds the network build-out requirements under our
management agreement with Sprint PCS. We believe that the above schedule is
achievable based on our management's prior experience in network build-outs,
the proven digital PCS technology we will use to build our PCS network and the
established standards of Sprint PCS. As of June 30, 1999, we had signed or
negotiated master or generic lease agreements covering over 400 sites in our
territory. We expect more than 85% of our cell sites to be collocated on
facilities shared with one or more wireless providers. For sites where
collocation leases are utilized, zoning, permitting and surveying approvals and
licenses have already been secured thereby minimizing our start-up costs and
accelerating access to the markets.
Sprint PCS developed the initial build-out plan for our PCS network. We have
based our network build-out on this design and have further enhanced it to
better provide coverage for our territory. We have completed the radio
frequency design for the entire build-out of our digital PCS network. This
process includes cell site design, frequency planning and network optimization
for our market. Radio frequency engineering also allocates voice channels and
assigns frequencies to cell sites taking into consideration both PCS and
microwave interference issues. Under the management agreement, Sprint PCS is
responsible for the microwave clearing efforts and costs in our territory. All
relevant microwave paths have been cleared by Sprint PCS to allow us to provide
service in our territory.
Lucent and Compass Telecom Services LLC will oversee the deployment of our
digital PCS network. Lucent will provide the installation and optimization
services for their equipment and Compass will provide project and construction
services and employ local construction firms to build the cell sites. We may
also hire firms to identify and obtain the required property for our PCS
network. These firms will secure all zoning, permitting and surveying approvals
and licenses.
Sources and Uses
The following table highlights our projected sources and uses of capital from
July 1, 1999 through December 31, 2002.
<TABLE>
<CAPTION>
Amount
(In millions)
<S> <C>
Sources:
Gross proceeds from the common stock offering.................. $95.0
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
Amount
(In millions)
<S> <C>
Gross proceeds from the units offering(1)...................... 150.0
Lucent financing(2)............................................ 143.5
------
Total sources................................................ $388.5
======
Uses:
Capital expenditures........................................... $196.7
Working capital and operating losses........................... 93.2
Debt service(3)................................................ 38.4
Fees and expenses(4)........................................... 18.7
------
Total uses................................................... 347.0
Cash on hand at December 31, 2002............................ 41.5
------
Total uses and cash on hand at December 31, 2002............. $388.5
======
</TABLE>
- ---------------------
(1) The senior subordinated discount notes will be issued in an aggregate
principal amount and bear a rate of interest, which, together with the
warrants, will be sufficient to generate gross proceeds at issuance of
$150.0 million.
(2) Our financing from Lucent provides for up to $153.5 million of borrowings,
$10.0 million of which was provided to us prior to July 1, 1999. We
borrowed an additional $3.5 million on August 20, 1999 and expect
additional drawings totaling $140.0 million between October 1, 2000 and
December 31, 2002 to fund approximately $110.0 million of equipment
purchases to complete our network build-out and $33.5 million for general
corporate purposes.
(3) Debt service payments are composed of:
<TABLE>
<CAPTION>
Amount
(In millions)
<S> <C>
Cash interest payments...................................... $ 29.7
Repayment of third-party unsecured promissory note.......... 7.7
Repayment of bank credit facility........................... 1.0
------
Total..................................................... $ 38.4
======
</TABLE>
(4) Fees and expenses include estimated offering expenses and underwriting
discounts and commissions for both the common stock offering and units
offering and origination and other fees related to the Lucent financing.
Products and Services
We will offer established Sprint PCS products and services throughout our
territory. Our products and services are designed to mirror the service
offerings of Sprint PCS and to integrate seamlessly with the Sprint PCS
nationwide network. The wireless services that Sprint PCS currently offers in
over 286 metropolitan markets, including more than 4,000 cities and
communities, provide customers with affordable, reliable 100% digital, 100% PCS
services. The Sprint PCS service package we will offer includes the following:
100% digital wireless mobility. Our primary service is wireless mobility
coverage. Our PCS network will be part of the largest 100% digital, 100% PCS
network in the nation. We will offer customers in our territory enhanced voice
clarity, advanced features, and simple, affordable Sprint
38
<PAGE>
PCS Free and Clear pricing plans. These plans include free long distance and
wireless airtime minutes for use throughout the Sprint PCS network at no
additional charge. Our basic wireless service includes voice mail, caller ID,
enhanced call waiting, three-way calling, call forwarding, distinctive ringing
and call blocking.
Nationwide service. Sprint PCS customers in our territory will be able to use
Sprint PCS services throughout our contiguous markets and seamlessly throughout
the Sprint PCS network. Dual-band/dual-mode handsets allow roaming on wireless
networks where Sprint PCS is not available and with which Sprint PCS has
roaming agreements.
Advanced handsets. CDMA handsets weighing approximately eight ounces will
offer two days of standby time and approximately four hours of talk time. We
will also offer dual-band/dual-mode handsets that allow customers to make and
receive calls on both PCS and cellular frequency bands and both digital or
analog technology. These handsets allow roaming on cellular networks where
Sprint PCS digital service is not available. All handsets will be equipped with
preprogrammed features such as speed dial and last number redial, and will be
sold under the Sprint and Sprint PCS brand names.
Extended battery life. CDMA handsets offer significantly extended battery
life relative to earlier technologies, providing two days of standby battery
life. Handsets operating on a digital system are capable of saving battery life
while turned on but not in use, improving efficiency and extending the
handset's use.
Improved voice quality. We believe the Sprint PCS CDMA technology offers
significantly improved voice quality, compared to existing analog and TDMA
networks, more powerful error correction, less susceptibility to call fading
and enhanced interference rejection, all of which result in fewer dropped
calls. See "--CDMA Technology" for a discussion of the reasons CDMA technology
offers improved voice quality.
Privacy and security. Sprint PCS provides secure voice transmissions encoded
into a digital format to prevent eavesdropping and unauthorized cloning of
subscriber identification numbers.
Easy activation. Customers can purchase a shrink-wrapped Sprint PCS handset
off the shelf at a retail location and activate their service by calling
customer service, which can program the handset over the air. We believe over-
the-air activation will reduce the training requirements for salespersons at
the retail locations.
Customer care. Sprint PCS will provide customer care services to customers in
our territory under our services agreement. Sprint PCS offers customer care 24
hours a day, seven days a week. Customers can call the Sprint PCS toll-free
customer care number from anywhere on the national Sprint PCS network. All
Sprint PCS phones are preprogrammed with a speed dial feature that allows
customers to easily reach customer care at any time.
In addition to these services, we may also offer wireless local loop services
in our territory. Wireless local loop is a wireless substitute for the
landline-based telephones in homes and businesses. We also believe that new
features and services will be developed on the Sprint PCS nationwide network to
take advantage of CDMA technology. As a leading wireless provider, Sprint PCS
conducts ongoing research and development to produce innovative services that
give Sprint PCS a competitive advantage. We intend to offer a portfolio of
products and services developed by Sprint PCS to accommodate the growth in, and
the unique requirements of, high speed data traffic and
39
<PAGE>
demand for video services. We plan to provide, when available, a number of
applications for wireless data services including facsimile, Internet access,
wireless local area networks and point-of-sale terminal connections.
Marketing Strategy
Our marketing and sales strategy will use Sprint PCS' proven strategies and
developed national distribution channels that have helped generate the highest
incremental wireless penetration of any cellular or PCS provider in the United
States. In the fourth quarter of 1998, Sprint added approximately 830,000 net
new subscribers, the largest single quarter of customer growth ever reported by
a wireless provider in the United States. In the first quarter of 1999, Sprint
PCS added approximately 763,000 net new wireless subscribers, the second
largest quarter ever recorded by a wireless carrier in the United States. We
plan to enhance Sprint PCS' proven strategies with strategies tailored to our
specific territory.
Use Sprint PCS' brand equity and marketing. We will feature exclusively and
prominently the nationally recognized Sprint and Sprint PCS brand names in our
marketing effort. From the customers' point of view, they will use our PCS
network and the Sprint PCS national network seamlessly as a unified national
network. We will build on Sprint PCS' national distribution channels and
advertising programs.
Pricing. Our use of the Sprint PCS pricing strategy will offer customers in
our territory simple, easy-to-understand service plans. Sprint PCS' consumer
pricing plans are typically structured with competitive monthly recurring
charges, large local calling areas, service features such as voicemail,
enhanced caller ID, call waiting and three-way calling, and competitive per-
minute rates. Lower per-minute rates relative to analog cellular providers are
possible in part because the CDMA system that both we and Sprint PCS employ has
greater capacity than current analog cellular systems, enabling us to market
high usage customer plans at lower prices. All of Sprint PCS' current national
plans:
.include minutes in any Sprint PCS market with no roaming charges;
.are feature-rich and generally require no annual contracts or hidden
charges;
.offer a wide selection of phones to meet the needs of consumers and
businesses;
.provide a limited-time money back guarantee on Sprint PCS phones; and
.provide the first incoming minute free.
In addition, Sprint PCS' national Free and Clear plans, which offer simple,
affordable plans for every consumer and business customer, include free long
distance calling from anywhere on its nationwide network.
Local focus. Our local focus will enable us to supplement Sprint PCS'
marketing strategies with our own strategies tailored to each of our specific
markets. This will include attracting local businesses to enhance our
distribution and drawing on our management team's experience in the
southeastern United States. We will use local radio, television and newspaper
advertising to sell our products and services in each of our markets. We intend
to establish a large local sales force to execute our marketing strategy
through 12 company-owned Sprint PCS stores and to employ a direct sales force
targeted to business sales. In addition, Sprint PCS' existing agreements with
national retailers provide us with access to over 250 retail locations in our
territory. We expect that Sprint-owned local exchange carriers will provide
local telephone service to approximately 30% of the
40
<PAGE>
population in our territory by the end of the year 2000 which will provide us
with an additional distribution channel through which we can market to an
established base of Sprint customers. Many of these local exchange carriers
have store fronts for Sprint customers to pay their bills, which we can use to
sell Sprint PCS products and services.
Advertising and promotions. Sprint PCS uses national as well as regional
television, radio, print, outdoor and other advertising campaigns to promote
its products. We benefit from this national advertising in our territory at no
additional cost to us. Sprint PCS also runs numerous promotional campaigns
which provide customers with benefits such as additional features at the same
rate or free minutes of use for limited time periods. We are able to purchase
promotional materials related to these programs from Sprint PCS at their cost.
Sponsorships. Sprint PCS is a sponsor of numerous selective, broad-based
national, regional and local events. These sponsorships provide Sprint PCS with
brand name and product recognition in high profile events, provide a forum for
sales and promotional events and enhance our promotional efforts in our
territory.
Bundling of services. We intend to take advantage of the complete array of
communications services offered by bundling Sprint PCS services with other
Sprint products, such as long distance and Internet access.
Sales and Distribution
Our sales and distribution plan mirrors Sprint PCS' proven multiple channel
sales and distribution plan. Key elements of our sales and distribution plan
consist of the following:
Sprint store within a RadioShack store. Sprint has an exclusive arrangement
with RadioShack to install a "store within a store," making Sprint PCS the
exclusive brand of PCS sold through RadioShack stores. RadioShack has 175
stores in our territory.
Other national third party retail stores. In addition to RadioShack, we will
benefit from the distribution agreements established by Sprint PCS with other
national retailers which currently include Best Buy, Circuit City, Office
Depot, The Good Guys, Dillards, The Sharper Image, Montgomery Ward, OfficeMax,
Ritz Camera and certain May Company department stores. These retailers provide
an additional 75 retail stores in our territory.
Sprint PCS stores. We intend to own and operate 12 Sprint PCS stores. These
stores will be located in major metropolitan markets within our territory,
providing us with the strong local presence and a high degree of visibility. We
will train our sales representatives to be informed and persuasive advocates
for Sprint PCS' services. Following the Sprint PCS model, these stores will be
designed to facilitate retail sales, bill collection and customer service.
National accounts and direct selling. We will participate in Sprint PCS'
national accounts program. Sprint PCS has a national accounts team which
focuses on the corporate headquarters of Fortune 500 companies. Once a
representative reaches an agreement with the corporate headquarters, we service
the offices of that corporation located in our territory. Our direct sales
force will target the employees of these corporations in our territory and
cultivate other local business clients.
Inbound telemarketing. Sprint PCS will provide inbound telemarketing sales
when customers call from our territory. As the exclusive provider of Sprint PCS
products and services in our market,
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we will use the national Sprint 1-800-480-4PCS number campaigns that generate
call-in leads. These leads are then handled by Sprint PCS' inbound
telemarketing group.
Electronic commerce. Sprint PCS launched an Internet site in December 1998
which contains information on Sprint PCS products and services. A visitor to
Sprint PCS' Internet site can order and pay for a handset and select a rate
plan. Customers visiting the site can review the status of their account,
including the number of minutes used in the current billing cycle. Customers
in our territory who purchase products and services over the Sprint PCS
Internet site will be customers of our PCS network.
CDMA Technology
Sprint PCS' nationwide network and its affiliates' networks all use digital
CDMA technology. CDMA technology is fundamental to accomplishing our business
objective of providing high volume, high quality airtime at a low cost. We
believe that CDMA provides important system performance benefits.
Voice quality. CDMA systems offer more powerful error correction, less
susceptibility to fading and reduced interference than analog systems. Using
enhanced voice coding techniques, CDMA systems achieve voice quality that is
comparable to that of the typical wireline telephone. This CDMA vocoder
technology also employs adaptive equalization which filters out annoying
background noise more effectively than existing wireline, analog cellular or
other digital PCS phones.
Greater capacity. CDMA technology allows a greater number of calls within
one allocated frequency and reuses the entire frequency spectrum in each cell.
CDMA systems are expected to provide capacity gains of up to seven times over
the current analog system and up to three times greater than TDMA and GSM
systems. We believe that, by the end of 1999, a new voice coding technology
will be available for CDMA networks which is expected to increase the capacity
of the system by approximately 40%. This new voice coding standard, referred
to as Enhanced Variable Rate Coding, or EVRC, will allow the network to
support additional capacity while maintaining the high level of voice quality
associated with digital networks. We will utilize the EVRC technology
throughout our PCS network to gain the capacity increases. Additional capacity
improvements are expected for CDMA networks over the next two years as new
third generation standards are approved and implemented that will allow for
high-speed data and an even greater increase in the voice traffic capacity.
CDMA technology is designed to provide flexible or "soft" capacity that
permits a system operator to temporarily increase the number of telephone
calls that can be handled within a cell. When capacity limitations in analog,
TDMA and GSM systems are reached, additional callers in a given cell must be
given a busy signal. Using CDMA technology, the system operator can allow a
small degradation in voice quality to provide temporary increases in capacity.
This reduces blocked calls and increase the probability of a successful cell-
to-cell hand-off.
Soft hand-off. CDMA systems transfer calls throughout the network using a
technique referred to as a soft hand-off, which connects a mobile customer's
call with a new cell site while maintaining a connection with the cell site
currently in use. CDMA networks monitor the quality of the transmission
received by both cell sites simultaneously to select a better transmission
path and to ensure that the network does not disconnect the call in one cell
until it is clearly established in a new one. As a result, fewer calls are
dropped compared to analog, TDMA and GSM networks which use a "hard hand-off"
and disconnect the call from the current cell site as it connects with a new
one.
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Integrated services. CDMA systems permit us to offer advanced features,
including voice mail, caller ID, enhanced call waiting, three-way calling, call
forwarding and paging and text-messaging. These advanced features may also be
offered by companies utilizing competing technologies.
Privacy and security. One of the benefits of CDMA technology is that it
combines a constantly changing coding scheme with a low power signal to enhance
security and privacy. Vendors are currently developing additional encryption
capabilities which will further enhance overall network security.
Simplified frequency planning. Frequency planning is the process used to
analyze and test alternative patterns of frequency use within a wireless
network to minimize interference and maximize capacity. Currently, cellular
service providers spend considerable money and time on frequency planning.
Because TDMA and GSM based systems have frequency reuse constraints similar to
present analog systems, frequency reuse planning for TDMA and GSM based systems
is expected to be comparable to planning for the current analog systems. With
CDMA technology, however, the same subset of allocated frequencies can be
reused in every cell, substantially reducing the need for costly frequency
reuse patterning and constant frequency plan management.
Longer battery life. Due to their greater efficiency in power consumption,
CDMA handsets will provide two days of standby time and approximately four
hours of talk time availability. This generally exceeds the battery life of
handsets using alternative digital or analog technologies.
Benefits of other technologies. While CDMA has the inherent benefits
discussed above, TDMA networks are generally less expensive when overlaying
existing analog systems since the TDMA spectrum usage is more compatible with
analog spectrum planning. In addition, the GSM technology standard, unlike
CDMA, supports a more robust interoperability standard which allows multi-
vendor equipment to be used in the same network. This, along with the fact that
the GSM technology is currently more widely deployed throughout the world than
CDMA, provides economies of scale for handset and equipment purchases. A
standards process is also underway which will allow wireless handsets to
support analog, TDMA and GSM technologies in a single unit. Currently, there
are no plans to have CDMA handsets that support either the TDMA or GSM
technologies.
Competition
We will compete in our territory with the incumbent cellular providers and
new PCS providers. The cellular providers in our territory serve different
geographic segments of our territory in our territory, with no cellular carrier
providing complete coverage throughout our territory. Of the PCS providers,
only two will provide service comparable to ours in our territory. These are
BellSouth Mobility DCS and Triton PCS. Bell South Mobility DCS has deployed a
PCS network that uses GSM technology. This competitor is dependent on its
roaming agreements with other wireless carriers to provide service beyond its
licensed areas. Triton PCS is deploying a PCS network that uses TDMA
technology. Triton PCS has reported that it will market its PCS under the
SunCom name and as a member of the AT&T wireless network. In addition, we
compete with wireless providers using ESMR technology such as Nextel and
Southern LINC, a subsidiary of The Southern Company. Our ability to compete
effectively with these other providers will depend on a number of factors,
including the continued success of CDMA technology in providing better call
quality and clarity as compared to analog and digital cellular systems, our
competitive pricing with various options suiting individual customer's calling
needs, and the continued expansion and improvement of the Sprint PCS nationwide
network, customer care system, and handset options.
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Most of our competitors are current cellular providers and joint ventures of
current and potential wireless communications service providers, many of which
have financial resources and customer bases greater than ours. Many of our
competitors have access to more licensed spectrum than the 10 MHz licensed to
Sprint PCS in our territory. Cellular service providers have licenses covering
25 MHz of spectrum, and two competing PCS providers have licenses to use 30 MHz
in our territory. Some of our competitors also have established
infrastructures, marketing programs, and brand names. In addition, certain
competitors may be able to offer coverage in areas not served by our PCS
network, or, because of their calling volumes or their affiliations with, or
ownership of, wireless providers, may be able to offer roaming rates that are
lower than those we offer. PCS operators will likely compete with us in
providing some or all of the services available through the Sprint PCS network
and may provide services that we do not. Additionally, we expect that existing
cellular providers, some of whom have been operational for a number of years
and have significantly greater financial and technical resources and customer
bases than us, will continue to upgrade their systems to provide digital
wireless communication services competitive with Sprint PCS.
We also face competition from "resellers" which provide wireless service to
customers but do not hold FCC licenses or own facilities. Instead, the reseller
buys blocks of wireless telephone numbers and capacity from a licensed carrier
and resells service through its own distribution network to the public. Thus, a
reseller is both a customer of a wireless licensee's services and also a
competitor of that and other licensees. The FCC requires all cellular and PCS
licensees to permit resale of carrier service to a reseller.
In addition, we will compete with paging, dispatch and conventional mobile
telephone companies in our markets. Potential users of PCS systems may find
their communications needs satisfied by other current and developing
technologies. One or two-way paging or beeper services that feature voice
messaging and data display as well as tone-only service may be adequate for
potential customers who do not need to speak to the caller.
In the future, we expect to face increased competition from entities
providing similar services using other communications technologies, including
satellite-based telecommunications and wireless cable systems. While some of
these technologies and services are currently operational, others are being
developed or may be developed in the future.
Over the past several years the FCC has auctioned and will continue to
auction large amounts of wireless spectrum that could be used to compete with
PCS. Based upon increased competition, we anticipate that market prices for
two-way wireless services generally will decline in the future. We will compete
to attract and retain customers principally on the basis of services and
features, the size and location of our service areas, network coverage and
reliability, customer care and pricing. Our ability to compete successfully
will also depend, in part, on our ability to anticipate and respond to various
competitive factors affecting the industry, including new services that may be
introduced, changes in consumer preferences, demographic trends, economic
conditions and discount pricing strategies by competitors.
Intellectual Property
The Sprint diamond design logo is a service mark registered with the United
States Patent and Trademark Office. The service mark is owned by Sprint. We
expect, pursuant to the trademark and
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service mark license agreements, to use, royalty-free, the Sprint and Sprint
PCS brand names and the Sprint diamond design logo and certain other service
marks of Sprint in connection with marketing, offering and providing licensed
services to end-users and resellers, solely within our territory.
Except in certain instances, Sprint PCS has agreed not to grant to any other
person a right or license to provide or resell, or act as agent for any person
offering, licensed services under the licensed marks. In all other instances,
Sprint PCS reserves for itself and its affiliates the right to use the licensed
marks in providing its services, subject to its exclusivity obligations
described above, whether within or without our territory.
The trademark license agreements contain numerous restrictions with respect
to the use and modification of any of the licensed marks. See "The Sprint PCS
Agreements--The Trademark and Service Mark License Agreements."
Employees
As of June 30, 1999, we employed 12 full-time employees. None of our
employees are represented by a labor union. We believe that our relations with
our employees are good.
Properties
Our principal executive offices are located at Harris Tower, 233 Peachtree
Street, N.E., Suite 1700, Atlanta, Georgia 30303. We believe our property is in
good operating condition and is currently suitable and adequate for our
business operations.
Legal Proceedings
We are not aware of any pending legal proceedings against us which,
individually or in the aggregate, if adversely determined, would have a
material adverse effect on our financial condition or results of operations.
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THE SPRINT PCS AGREEMENTS
The following is a summary of the material terms and provisions of the Sprint
PCS agreements and the consent and agreement modifying the Sprint PCS
management agreement. We have filed the Sprint PCS agreements and will file a
consent and agreement as exhibits to the registration statement of which this
prospectus is a part and urge you to review them carefully.
Overview of Sprint PCS Relationship and Agreements
Under long-term agreements with Sprint PCS, we will exclusively market PCS
services under the Sprint and Sprint PCS brand names in our territory. The
agreements with Sprint PCS require us to interface with the Sprint PCS wireless
network by building our PCS network to operate on the 10 MHz of PCS frequencies
licensed to Sprint PCS in the 1900 MHz range. The Sprint PCS agreements also
give us access to Sprint PCS' equipment discounts, roaming revenue from Sprint
PCS customers traveling into our territory, and various other back office
services. Our relationship and agreements with Sprint PCS provide strategic
advantages, including avoiding the need to fund up-front spectrum acquisition
costs and the costs of establishing billing and other customer services
infrastructure. The management agreement has an initial term of 20 years with
three 10-year renewals which will lengthen the contract to a total term of 50
years. The agreements will automatically renew for the first 10-year renewal
period unless we are in material default on our obligations under the
agreements. The agreements will automatically renew for two additional 10-year
terms unless we or Sprint PCS provide the other with two years' prior written
notice to terminate the agreements.
We have four major agreements with Sprint and Sprint PCS (collectively the
"Sprint PCS Agreements"):
. the management agreement;
. the services agreement;
. the trademark and service mark license agreement with Sprint; and
. the trademark and service mark license agreement with Sprint PCS.
In addition, Sprint PCS has entered into a consent and agreement that
modifies our management agreement for the benefit of Lucent and the holders of
any refinancing of the Lucent financing.
The Management Agreement
Under our management agreement with Sprint PCS, we have agreed to:
. construct and manage a network in our territory in compliance with Sprint
PCS' PCS licenses and the terms of the management agreement;
. distribute during the term of the management agreement, Sprint PCS
products and services;
. use Sprint PCS' and our own distribution channels in our territory;
. conduct advertising and promotion activities in our territory; and
. manage that portion of Sprint PCS' customer base assigned to our
territory.
Sprint PCS will supervise our PCS network operations and has the right to
unconditional access to our PCS network.
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Exclusivity. We are designated as the only person or entity that can manage
or operate a PCS network for Sprint PCS in our territory. Sprint PCS is
prohibited from owning, operating, building or managing another wireless
mobility communications network in our territory while our management agreement
is in place and no event has occurred that would permit the agreement to
terminate. Sprint PCS is permitted under our agreement to make national sales
to companies in our territory and, as required by the FCC, to permit resale of
the Sprint PCS products and services in our territory. If Sprint PCS decides to
expand the geographic size of our build-out, Sprint PCS must provide us with
written notice of the proposed expansion. We have 90 days to determine whether
we will build out the proposed area. If we do not exercise this right, Sprint
PCS can build out the territory or permit another third party to do so.
Network build-out. The management agreement specifies the terms of the Sprint
PCS affiliation, including the required network build-out plan. We have agreed
to cover a specified percentage of the population at coverage levels ranging
from 39% to 86% within each of the 21 markets which make up our territory by
specified dates beginning by March 31, 2000 and ending on December 31, 2000.
The aggregate coverage will result in network coverage of approximately 65% of
the population in our territory of 6.8 million by December 31, 2000. We have
agreed to operate our PCS network, if technically feasible and commercially
reasonable, to provide for a seamless handoff of a call initiated in our
territory to a neighboring Sprint PCS network.
Products and services. The management agreement identifies the products and
services that we can offer in our territory. These services include, but are
not limited to, Sprint PCS consumer and business products and services
available as of the date of the agreement, or as modified by Sprint PCS. We are
allowed to sell wireless products and services that are not Sprint PCS products
and services if those additional products and services do not cause
distribution channel conflicts or, in Sprint PCS' sole determination, consumer
confusion with Sprint PCS' products and services. We may cross-sell services
such as Internet access, handsets, and prepaid phone cards with Sprint, Sprint
PCS and other Sprint PCS affiliates. If we decide to use third parties to
provide these services, we must give Sprint PCS an opportunity to provide the
services on the same terms and conditions. We cannot offer wireless local loop
services specifically designed for the competitive local exchange market in
areas where Sprint owns the local exchange carrier unless we name the Sprint-
owned local exchange carrier as the exclusive distributor or Sprint PCS
approves the terms and conditions.
We will participate in the Sprint PCS sales programs for national sales to
customers, and will pay the expenses and receive the compensation from national
accounts located in our territory. We must use Sprint's long distance service
which we can buy at the best prices offered to comparably situated Sprint
customers.
Service pricing, roaming and fees. We must offer Sprint PCS subscriber
pricing plans designated for regional or national offerings, including Sprint
PCS' Free and Clear plans. We are permitted to establish our own local price
plans for Sprint PCS' products and services only offered in our territory,
subject to Sprint PCS' approval. Sprint PCS will retain 8% of collected
revenues received by Sprint PCS for Sprint PCS products and services from
customers in our territory. This amount excludes roaming revenues, sales of
handsets and accessories, proceeds from sales not in the ordinary course of
business and amounts collected with respect to taxes. Except in the case of
taxes, we will retain 100% of these revenues. Although many Sprint PCS
subscribers will purchase a bundled pricing plan that allows roaming anywhere
on the Sprint PCS and affiliates' network without incremental roaming charges,
we will earn roaming revenues from every minute that a "foreign" subscriber's
call is carried on our PCS network. We will earn revenues from Sprint PCS based
on an
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established per minute rate for Sprint PCS' or its affiliates' subscribers
roaming in our territory. Similarly, we will pay for every minute our own
subscribers use the Sprint PCS nationwide network outside our territory. The
analog roaming rate onto a non-Sprint PCS provider's network is set under
Sprint PCS' third party roaming agreements.
Advertising and promotions. Sprint PCS is responsible for all national
advertising and promotion of the Sprint PCS products and services. We are
responsible for advertising and promotion in our territory. Sprint PCS' service
area includes the urban markets around our territory. Sprint PCS will pay for
advertising in these markets. Given the proximity of those markets to ours, we
expect considerable spill-over from Sprint PCS' advertising in surrounding
urban markets.
Program requirements. We will comply with Sprint PCS' program requirements
for technical standards, customer service standards, national and regional
distribution and national accounts programs. Sprint PCS can adjust the program
requirements from time to time. We have the right to appeal to Sprint PCS'
management adjustments which could cause an unreasonable increase in cost to us
if the adjustment: (1) causes us to incur a cost exceeding 5% of the sum of our
equity plus our outstanding long term debt, or (2) causes our operating
expenses to increase by more than 10% on a net present value basis. If Sprint
PCS denies our appeal, then we have 10 days after the denial to submit the
matter to arbitration. If we do not submit the matter to arbitration within the
10-day period or comply with the program adjustment, Sprint PCS has the
termination rights described below.
Non-competition. We may not offer Sprint PCS products and services outside
our territory without the prior written approval of Sprint PCS. Within our
territory we may offer, market or promote telecommunications products and
services only under the Sprint PCS brands, our own brand, brands of related
parties of ours or other products and services approved under the management
agreement, except that no brand of a significant competitor of Sprint PCS or
its related parties may be used for those products and services. To the extent
we have or obtain licenses to provide PCS services outside our territory, we
may not use the spectrum to offer Sprint PCS products and services without
prior written consent from Sprint PCS.
Inability to use non-Sprint PCS brand. We may not market, promote, advertise,
distribute, lease or sell any of the Sprint PCS products and services on a non-
branded, "private label" basis or under any brand, trademark or trade name
other than the Sprint PCS brand, except for sales to resellers or as otherwise
permitted under the trademark and service mark license agreements.
Rights of first refusal. Sprint PCS has certain rights of first refusal to
buy our assets upon a proposed sale of all or substantially all of our assets.
Termination of management agreement. The management agreement can be
terminated as a result of:
. termination of Sprint PCS' PCS licenses;
. an uncured breach under the management agreement;
. bankruptcy of a party to the management agreement;
. the management agreement not complying with any applicable law in any
material respect;
. the termination of either of the trademark and service mark license
agreements;
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. our failure to obtain the financing necessary for the build-out of our
PCS network and for our working capital needs; provided, however, that
Sprint PCS has agreed that the Lucent financing, the issuance of the
senior subordinated discount notes and the offering of common stock will
meet the financing requirements of the management agreement; or
. the unauthorized transfer or assignment of ownership interest by certain
individuals identified in the management agreement for a period of five
years from the date of the management agreement, if we do not initiate
immediate legal action to prevent the transfer.
The termination or non-renewal of the management agreement triggers certain
of our rights and those of Sprint PCS. The right of either party to require the
other to purchase or sell the operating assets, as discussed below, may not be
exercised, except in limited circumstances in the case of Sprint PCS, until
July 22, 2000.
If we have the right to terminate the management agreement because of an
event of termination caused by Sprint PCS, generally we may:
. require Sprint PCS to purchase all of our operating assets used in
connection with our PCS network for an amount equal to at least 80% of
our Entire Business Value as defined below;
. if Sprint PCS is the licensee for 20 MHz or more of the spectrum on the
date we terminate the management agreement, require Sprint PCS to assign
to us, subject to governmental approval, up to 10MHz of licensed spectrum
for an amount equal to the greater of (1) the original cost to Sprint PCS
of the license plus any microwave relocation costs paid by Sprint PCS or
(2) 9% of our Entire Business Value; or
. sue Sprint PCS for damages or submit the matter to arbitration and
thereby not terminate the management agreement.
If Sprint PCS has the right to terminate the management agreement because of
an event of termination caused by us, generally Sprint PCS may:
. require us to sell our operating assets to Sprint PCS for an amount equal
to 72% of our Entire Business Value;
. require us to purchase, subject to governmental approval, the licensed
spectrum for an amount equal to the greater of (1) the original cost to
Sprint PCS of the license plus any microwave relocation costs paid by
Sprint or (2) 10% of our Entire Business Value;
. take any action as Sprint PCS deems necessary to cure our breach of the
management agreement, including assuming responsibility for, and
operating, our PCS network; or
. sue us for damages or submit the matter to arbitration and thereby not
terminate the management agreement.
Non-renewal. If Sprint PCS gives us timely notice that it does not intend to
renew the management agreement, we may:
. require Sprint PCS to purchase all of our operating assets used in
connection with our PCS network for an amount equal to 80% of our Entire
Business Value; or
. if Sprint PCS is the licensee for 20MHz or more of the spectrum on the
date we terminate the management agreement, require Sprint PCS to assign
to us, subject to governmental approval, up to 10MHz of licensed spectrum
for an amount equal to the greater of (1) the original cost
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to Sprint PCS of the license plus any microwave relocation costs paid by
Sprint PCS or (2) 10% of our Entire Business Value.
If we give Sprint PCS timely notice of non-renewal, or we both give notice of
non-renewal, or the management agreement can be terminated for failure to
comply with legal requirements or regulatory considerations, Sprint PCS may:
. purchase all of our operating assets for an amount equal to 80% of our
Entire Business Value; or
. require us to purchase, subject to governmental approval, the licensed
spectrum for an amount equal to the greater of (1) the original cost to
Sprint PCS of the license plus any microwave relocation costs paid by
Sprint PCS or (2) 10% of our Entire Business Value.
Determination of Entire Business Value. If the Entire Business Value is to be
determined, we and Sprint PCS will each select one independent appraiser and
the two appraisers will select a third appraiser. The three appraisers will
determine the Entire Business Value on a going concern basis using the
following guidelines:
. the Entire Business Value is based on the price a willing buyer would
pay a willing seller for the entire on-going business;
. then-current customary means of valuing a wireless telecommunications
business will be used;
. the business is conducted under the Sprint and Sprint PCS brands and the
Sprint PCS agreements;
. that we own the spectrum and frequencies presently owned by Sprint PCS
and subject to the Sprint PCS Agreements; and
. the valuation will not include any value for businesses not directly
related to the Sprint PCS products and services, and such businesses
will not be included in the sale.
The rights and remedies of Sprint PCS outlined in the management agreement
resulting from an event of termination of the management agreement have been
materially amended by the consent and agreement as discussed below. However, at
such time that there is no outstanding debt covered under the consent and
agreement, such amendments to the rights and remedies of Sprint PCS reflected
in the consent and agreement will not be in effect.
Insurance. We are required to obtain and maintain with financially reputable
insurers who are licensed to do business in all jurisdictions where any work is
performed under the management agreement and who are reasonably acceptable to
Sprint PCS, workers' compensation insurance, commercial general liability
insurance, business automobile insurance, umbrella excess liability insurance
and "all risk" property insurance.
Indemnification. We have agreed to indemnify Sprint PCS and its directors,
employees and agents and related parties of Sprint PCS and their directors,
employees and agents against any and all claims against any of the foregoing
arising from our violation of any law, a breach by us of any representation,
warranty or covenant contained in the management agreement or any other
agreement between us and Sprint PCS, our ownership of the operating assets or
the actions or the failure to act of anyone employed or hired by us in the
performance of any work under this agreement, except we will not indemnify
Sprint PCS for any claims arising solely from the negligence or willful
misconduct of Sprint PCS. Sprint PCS has agreed to indemnify us and our
directors, employees and agents against all claims against any of the foregoing
arising from Sprint PCS' violation of any law
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and from Sprint PCS' breach of any representation, warranty or covenant
contained in this agreement or any other agreement between Sprint PCS and us,
except Sprint PCS will not indemnify us for any claims arising solely from our
negligence or willful misconduct.
The Services Agreement
The services agreement outlines various back office services provided by
Sprint PCS and available to us at established rates. Sprint PCS can change any
or all of the service rates one time in each 12 month period. Some of the
available services include: billing, customer care, activation, credit checks,
handset logistics, home locator record, voice mail, prepaid services, directory
assistance, operator services, roaming fees, roaming clearinghouse fees,
interconnect fees and inter-service area fees. Sprint PCS offers three packages
of available services. Each package identifies which services must be purchased
from Sprint PCS and which may be purchased from a vendor or provided in-house.
Essentially, services such as billing, activation and customer care must all be
purchased from Sprint PCS or none may be purchased from Sprint PCS. We have
chosen to initially buy these services from Sprint PCS but may develop an
independent capability with respect to these services over time. Sprint PCS may
contract with third parties to provide expertise and services identical or
similar to those to be made available or provided to us. We have agreed not to
use the services received under the services agreement in connection with any
other business or outside our territory. We may discontinue use of any service
upon three months' prior written notice. Sprint PCS has agreed that the
services presently offered will be available until at least December 31, 2001.
Sprint PCS may discontinue a service after December 31, 2001 provided that
Sprint PCS provides us with nine months' prior notice.
We have agreed with Sprint PCS to indemnify each other as well as officers,
directors, employees and certain other related parties and their officers,
directors and employees for violations of law or the services agreement except
for any liabilities resulting from the indemnitee's negligence or willful
misconduct. The services agreement also provides that no party to the agreement
will be liable to the other party for special, indirect, incidental, exemplary,
consequential or punitive damages, or loss of profits arising from the
relationship of the parties or the conduct of business under, or breach of, the
services agreement except as may otherwise be required by the indemnification
provisions. The services agreement automatically terminates upon termination of
the management agreement and neither party may terminate the services agreement
for any reason other than the termination of the management agreement.
The Trademark and Service Mark License Agreements
We have non-transferable, royalty-free licenses to use the Sprint and Sprint
PCS brand names and "diamond" symbol, and several other U.S. trademarks and
service marks such as "The Clear Alternative to Cellular" and "Clear Across the
Nation" on Sprint PCS products and services. We believe that the Sprint and
Sprint PCS brand names and symbols enjoy a very high degree of awareness,
providing us an immediate benefit in the market place. Our use of the licensed
marks is subject to our adherence to quality standards determined by Sprint and
Sprint PCS and use of the licensed marks in a manner which would not reflect
adversely on the image of quality symbolized by the licensed marks. We have
agreed to promptly notify Sprint and Sprint PCS of any infringement of any of
the licensed marks within our territory of which we become aware and to provide
assistance to Sprint and Sprint PCS in connection with Sprint's and Sprint PCS'
enforcement of their respective rights. We have agreed with Sprint and Sprint
PCS to indemnify each other for losses incurred in connection with a material
breach of the trademark license agreements. In addition, we have agreed
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to indemnify Sprint and Sprint PCS from any loss suffered by reason of our use
of the licensed marks or marketing, promotion, advertisement, distribution,
lease or sale of any Sprint or Sprint PCS products and services other than
losses arising solely out of our use of the licensed marks in compliance with
certain guidelines.
Sprint and Sprint PCS can terminate the trademark and service mark license
agreements if we file for bankruptcy, materially breach the agreement or our
management agreement is terminated. We can terminate the trademark and service
mark license agreements upon Sprint's or Sprint PCS' abandonment of the
licensed marks or if Sprint or Sprint PCS files for bankruptcy, or the
management agreement is terminated.
Consent and Agreement for the Benefit of the Lucent Financing
Sprint PCS has entered into a consent and agreement with Lucent, which we
have acknowledged, that modifies Sprint PCS' rights and remedies under our
management agreement for the benefit of Lucent and any refinancing of the
Lucent financing (the "Lucent Consent").
The Lucent Consent generally provides, among other things, the following:
. Sprint PCS' consent to the pledge of our subsidiary stock and grant of a
security interest in all our assets including the Sprint PCS Agreements;
. that the Sprint PCS Agreements may not be terminated by Sprint PCS until
the financing from Lucent is satisfied in full pursuant to the terms of
the Lucent Consent, unless our stock or assets are sold to a purchaser
who does not continue to operate the business as a Sprint PCS network,
which sale requires the approval of the Administrative Agent;
. a prohibition on competing Sprint PCS networks in our territory;
. for Sprint PCS to maintain 10 MHz of PCS spectrum in all our markets;
. for redirection of payments from Sprint PCS to the Administrative Agent
under specified circumstances;
. for Sprint PCS and the Administrative Agent to provide to each other
notices of default;
. the ability to appoint an interim replacement, including Sprint PCS, to
operate our PCS network under the Sprint PCS Agreements after an
acceleration of our financing from Lucent or an event of termination
under the Sprint PCS Agreements;
. the ability of the Administrative Agent or Sprint PCS to assign the
Sprint PCS Agreements and sell our assets to a qualified purchaser other
than a major competitor of Sprint PCS or Sprint;
. the ability to purchase spectrum from Sprint PCS and sell our assets to
any qualified purchaser; and
. the ability of Sprint PCS to purchase our assets or our debt.
Consent to security interest and pledge of stock. Sprint PCS has consented to
the grant of the following:
. a first priority security interest in all our assets including the
Sprint PCS Agreements;
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. a lien upon all of our assets and property including our rights under
the Sprint PCS Agreements; and
. a first priority security interest in the capital stock and equity
interests of our subsidiary and future subsidiaries.
Sprint PCS has agreed to acknowledge the grant of these security interests
and to waive its right to challenge or contest the validity of the interests.
Agreement not to terminate Sprint PCS Agreements until the obligations under
the Lucent financing are repaid. Sprint PCS has agreed not to exercise its
rights or remedies under the Sprint PCS Agreements, except its right to cure
some defaults, including its right to terminate the Sprint PCS Agreements and
withhold payments, other than rights of setoff, until the Lucent financing is
satisfied in full pursuant to the terms of the Lucent Consent. Sprint PCS has
agreed that until the Lucent financing is satisfied in full pursuant to the
terms of the Lucent Consent, the failure of a party related to us to pay any
amount under any agreement with Sprint PCS, other than the Sprint PCS
Agreements, or its related parties will not constitute a breach of the Sprint
PCS Agreements.
No competition until obligations under the Lucent financing are
repaid. Sprint PCS has agreed that it will not permit any person other than
AirGate or a successor manager to be a manager or operator for Sprint PCS in
our territory until the Lucent financing is satisfied in full pursuant to the
terms of the Lucent Consent. Consistent with our management agreement, while
the Lucent financing is outstanding, Sprint PCS can sell PCS services through
its national accounts, permit resellers and build new geographical areas within
our territory for which we have chosen not to exercise our rights of first
refusal. Similarly, Sprint PCS has agreed that it will not own, operate, build
or manage another wireless mobility communications network in our territory
unless it is permitted under the management agreement or the management
agreement is terminated in accordance with the Lucent Consent, and, in each
case, our senior debt is satisfied in full pursuant to the terms of the Lucent
Consent.
Maintain 10 MHz of spectrum. Sprint PCS has agreed to own at least 10 MHz of
PCS spectrum in our territory until the first of the following events occurs:
. the obligations under the Lucent financing are satisfied in full
pursuant to the terms of the Lucent Consent;
. the sale of spectrum is completed under the Lucent Consent, as discussed
below;
. the sale of operating assets is completed under the Lucent Consent, as
discussed below; or
. the termination of our management agreement.
Restrictions on assignment and change of control do not apply to lenders and
the Administrative Agent. Sprint PCS has agreed not to apply the restrictions
on assignment of the Sprint PCS Agreements and changes in control of our
ownership to the lenders of the Lucent financing or the Administrative Agent.
The assignment and change of control provisions in the Sprint PCS Agreements
will apply if the assignment or change of control is to someone other than the
Administrative Agent or a lender of the Lucent financing, or is not permitted
under the Lucent Consent.
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Redirection of payments from Sprint PCS to the Administrative Agent. Sprint
PCS has agreed to make all payments due from Sprint PCS to us under the Sprint
PCS Agreements directly to the Administrative Agent if the Administrative Agent
provides Sprint PCS with notice that an event of default has occurred and is
continuing under the Lucent financing. Payments to the Administrative Agent
would cease upon the cure of the event of default.
Notice of defaults. Sprint PCS has agreed to provide to the Administrative
Agent a copy of any written notice it sends us regarding an event of
termination or an event that if not cured, or if notice is provided, would be
an event of termination under the Sprint PCS Agreements. Sprint PCS also has
acknowledged that notice of an event of termination under the Sprint PCS
Agreements constitutes an event of default under the Lucent financing. The
Administrative Agent is, or will be, required to provide Sprint PCS a copy of
any written notice sent to us regarding an event of default or default under
the Lucent financing instruments.
Right to cure. Sprint PCS and the Administrative Agent have the right, but
not the obligation, to cure a default under the Sprint PCS Agreements. During
the first six months as interim manager Sprint PCS' right to reimbursement of
any expenses incurred in connection with the cure are subordinated to the
satisfaction in full, pursuant to the terms of the Lucent Consent of the
obligations under the Lucent financing.
Modification of termination rights. The Lucent Consent modifies the rights
and remedies under the management agreement provided in an event of termination
and grants the provider of the Lucent financing certain rights in the event of
a default under the instruments governing the senior debt. The rights and
remedies of Lucent vary based on whether we have:
. defaulted under our debt obligations but no event of termination has
occurred under the management agreement; or
. breached the management agreement.
The Lucent Consent generally permits the appointment of a person to run our
business under the Sprint PCS Agreements on an interim basis and establishes a
process for sale of the business. The person designated to operate our business
on an interim basis is permitted to collect a reasonable management fee. If
Sprint PCS or a related party is the interim operator, the amount of the fee
shall not exceed the amount of direct expenses of its employees to operate the
business plus out-of-pocket expenses. Sprint PCS shall collect its fee by
setoff against the amounts owed to us under the Sprint PCS Agreements with
them. In the event of an acceleration of obligations under the Lucent financing
and for up to two years thereafter, Sprint PCS shall retain only one-half of
the 8% of collected revenues that it would otherwise be entitled to retain.
Sprint PCS may retain the full 8% after the second anniversary of the date of
acceleration if Sprint PCS has not been appointed to run our business on an
interim basis or earlier if our business is sold to a third party. We or the
Administrative Agent, as the case may be, shall be entitled to receive the
remaining one-half of the collected revenues that Sprint PCS would otherwise
have retained. The amount advanced to us or the Administrative Agent shall be
evidenced by an interest-bearing promissory note. The promissory note shall
mature on the earlier of (1) the date a successor manager is qualified and
assumes our rights and obligations under the Sprint PCS Agreements or (2) the
date on which our operating assets or equity are purchased by a third party.
Default under the Lucent financing without a management agreement breach. If
we default on our obligations under the Lucent financing and there is no
default under our management agreement
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with Sprint PCS, Sprint PCS has agreed to permit the Administrative Agent to
elect to take any of the following actions:
. allow us to continue to operate the business under the Sprint PCS
Agreements;
. appoint Sprint PCS to operate the business on an interim basis; or
. appoint a person other than Sprint PCS to operate the business on an
interim basis.
Appointment of Sprint PCS or third party designee by Administrative Agent to
operate business. If the Administrative Agent appoints Sprint PCS to operate
the business, Sprint PCS must accept the appointment within 14 days or
designate to operate the business another person who also is an affiliate of
Sprint PCS or is acceptable to the Administrative Agent. Sprint PCS or its
designated person must agree to operate the business for up to six months. At
the end of the six months, the period may be extended by the Administrative
Agent for an additional six months or an additional 12 months if the aggregate
population served by all of Sprint PCS' affiliates is less than 40 million. If
the term is extended beyond the initial six month period, the Administrative
Agent will be required to reimburse Sprint PCS or its designated person for
amounts previously expended and to be incurred as interim manager to cure a
default up to an aggregate amount that is equal to 5% of the sum of our
stockholders' equity value plus the outstanding amount of our long term debt.
Sprint PCS or its designated person is not required to incur expenses beyond
this 5% limit. At the end of the initial six-month interim term, the
Administrative Agent has the right to appoint a successor to AirGate subject to
the requirements set forth below.
Appointment of third party by Administrative Agent to operate business. If
the Administrative Agent appoints a person other than Sprint PCS to operate the
business on an interim basis the third party must:
. agree to serve for six months unless terminated by Sprint PCS or the
Administrative Agent for cause;
. meet the requirements for a successor to an affiliate and not be
challenged by Sprint PCS for failing to meet these requirements within
20 days after the Administrative Agent provides Sprint PCS with
information on the third party; and
. agree to comply with the terms of the Sprint PCS Agreements.
The third party is required to operate the Sprint PCS network in our
territory but is not required to assume our existing liabilities. If the third
party materially breaches the Sprint PCS Agreements, this breach will be
treated as an event of default under the management agreement with Sprint PCS.
Management agreement breach. If we breach the Sprint PCS Agreements and this
breach causes a default under the Lucent financing, Sprint PCS has the right to
designate who will operate our business on an interim basis. Sprint PCS has the
right to:
. allow us to continue to operate the PCS business under the Sprint PCS
Agreements if approved by the Administrative Agent;
. operate our PCS business on an interim basis; or
. appoint a person other than Sprint PCS that is acceptable to the
Administrative Agent, which acceptance can not be unreasonably withheld
and must be given for another Sprint PCS affiliate, to operate our PCS
business on an interim basis.
When a debt default is caused by a breach of our management agreement with
Sprint PCS, the Administrative Agent only has a right to designate who will
operate our business on an interim basis
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if Sprint PCS elects not to operate the business or designate a third party to
operate the business on an interim basis.
Election of Sprint PCS to serve as interim manager or designate a third party
to operate business. If Sprint PCS elects to operate the business on an interim
basis or designate a third party to operate the business on an interim basis,
Sprint PCS or the third party may operate the business for up to six months at
the discretion of Sprint PCS. At the end of the six months, the period may be
extended for an additional six months or an additional 12 months if the
aggregate population served by us and all other affiliates of Sprint PCS is
less than 40 million. If the term is extended beyond the initial six month
period, the Administrative Agent will be required to reimburse Sprint PCS or
its third party designee for amounts previously expended and to be incurred as
interim manager to cure a default up to an aggregate amount that is equal to 5%
of the sum of our shareholder's equity value plus the outstanding amount of our
long term debt. Sprint PCS or its third party designee is not required to incur
expenses beyond this 5% limit. At the end of the initial six-month interim
term, Sprint PCS, subject to the approval of the Administrative Agent has the
right to appoint a successor interim manager to operate our business.
Appointment of third party by Administrative Agent to operate business. If
Sprint PCS gives the Administrative Agent notice of a breach of the management
agreement, the debt repayment is accelerated, and Sprint PCS does not agree to
operate the business or is unable to find a designee, the Administrative Agent
may designate a third party to operate the business. The Administrative Agent
has this same right if Sprint PCS or the third party designated by Sprint PCS
resigns and is not replaced within 30 days. The third party selected by the
Administrative Agent must:
. agree to serve for six months unless terminated by Sprint PCS for cause
by the Administrative Agent;
. meet the requirements for a successor to an affiliate and not be
challenged by Sprint PCS for failing to meet the requirements within 20
days after the Administrative Agent provides Sprint PCS with information
on the third party; and
. agree to comply with the terms of the Sprint PCS Agreements.
The third party may continue to operate the business after the six month
period at the Administrative Agent's discretion, so long as the third party
continues to satisfy the requirements to be a successor to an affiliate. The
third party is required to operate the Sprint PCS network in our territory, but
is not required to assume our existing liabilities.
Purchase and sale of operating assets. The Lucent Consent establishes a
process for the sale of our operating assets in the event of a default and
acceleration under the Lucent financing. Our stockholder has approved the sale
of our operating assets pursuant to the terms of the Lucent Consent.
Sprint PCS' right to purchase on acceleration of amounts outstanding under
the Lucent financing. Subject to the requirements of applicable law, so long as
our equipment financing with Lucent or any refinancing thereof remains
outstanding, Sprint PCS has the right to purchase our operating assets upon
notice of an acceleration of the Lucent financing under the following terms:
. in addition to the purchase price requirements of the management
agreement, the purchase price must include the payment or assumption in
full, pursuant to the terms of the Lucent Consent, of the Lucent
financing;
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. Sprint PCS must notify the Administrative Agent of its intention to
exercise the purchase right within 60 days of receipt of the notice of
acceleration;
. the Administrative Agent is prohibited for a period of at least 120 days
after the acceleration or until Sprint PCS rescinds its intention to
purchase from enforcing its security interest if Sprint PCS has given
notice of its intention to exercise the purchase right;
. if we receive a written offer that is acceptable to us to purchase our
operating assets within a specified period after the acceleration,
Sprint PCS has the right to purchase our operating assets on terms and
conditions at least as favorable to us as the offer we receive. Sprint
PCS must agree to purchase the operating assets within 14 business days
of its receipt of the offer, on acceptable conditions, and in an amount
of time acceptable to us; and
. upon completion of the sale to Sprint PCS, the Administrative Agent must
release the security interests upon satisfaction in full pursuant to the
terms of the Lucent Consent of the obligations under the Lucent
financing.
If the Administrative Agent acquires our operating assets, Sprint PCS has the
right for 60 days to notify the Administrative Agent that it wants to purchase
the operating assets for an amount not less than the sum of the aggregate
amount paid by the lenders under the Lucent financing for the operating assets
plus an aggregate amount sufficient to satisfy in full the obligations under
the Lucent financing pursuant to the terms of the Lucent Consent. If Sprint PCS
purchases the operating assets under these provisions, the Administrative Agent
must release the security interests.
If the Administrative Agent receives an offer to purchase the operating
assets, Sprint PCS has the right to purchase the operating assets on terms and
conditions at least as favorable as the terms and conditions in the proposed
offer within 14 days of Sprint PCS' receipt of notice of the offer, and so long
as the conditions of Sprint PCS' offer and the amount of time to complete the
purchase is acceptable to the Administrative Agent.
Sale of operating assets to third parties. If Sprint PCS does not purchase
the operating assets, following an acceleration of the obligations under the
Lucent financing, the Administrative Agent may sell the operating assets.
Subject to the requirements of applicable law, the Administrative Agent has two
options:
. to sell the assets to an entity that meets the requirements to be our
successor under the Sprint PCS Agreements; or
. to sell the assets to any third party, subject to specified conditions.
Sale of assets to qualified successor. Subject to the requirements of
applicable law, the Administrative Agent may sell the operating assets and
assign the agreements to entities that meet the following requirements to
succeed us:
. the person has not materially breached a material agreement with Sprint
PCS or its related parties that has resulted in the exercise of a
termination right or in the initiation of judicial or arbitration
proceedings during the past three years;
. the person is not named by Sprint PCS as a prohibited successor;
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. the person has reasonably demonstrated its credit worthiness and can
demonstrate the ability to service the indebtedness and meet the
requirements in the build-out plan; and
. the person agrees to be bound by the Sprint PCS Agreements.
The Administrative Agent is required to provide Sprint PCS with information
necessary to determine if a buyer meets the requirements to succeed us. Sprint
PCS has 20 days after its receipt of this information to object to the
qualifications of the buyer to succeed us. If Sprint PCS does not object to the
buyer's qualifications, subject to the requirements of applicable law, the
buyer can purchase the assets and assume our rights and responsibilities under
the Sprint PCS Agreements. The Lucent Consent will remain in full force and
effect for the benefit of the buyer and its lenders. The buyer also has a
period to cure any defaults under our Sprint PCS Agreements.
Sale of assets to non-successor. Subject to the requirements of applicable
law, the Administrative Agent may sell our assets to a party that does not meet
the requirements to succeed AirGate. If such a sale is made:
.Sprint PCS may terminate the Sprint PCS Agreements;
. the buyer may purchase from Sprint PCS 5, 7.5 or 10 MHz of the PCS
spectrum licensed to Sprint PCS in our territory under specified terms;
. if the buyer controls, is controlled by or is under common control with
an entity that owns a license to provide wireless service to at least 50%
of the population in a basic trading area where the buyer proposes to
purchase the spectrum from Sprint PCS, the buyer may only buy 5 MHz of
spectrum;
. the price to purchase the spectrum is equal to the sum of the original
cost of the license to Sprint PCS pro rated on a population and a
spectrum basis, plus the cost paid by Sprint PCS for microwave clearing
in the spectrum ultimately acquired by the buyer of our assets and the
amount of carrying costs attributable to the license and microwave
clearing costs from the date of the Lucent Consent until the closing of
the sale, based on a rate of 12% per annum;
. the buyer will receive from Sprint PCS the customers with the MIN
assigned to the market area covered by the purchased spectrum except for
customers of national accounts and resellers;
. with limited exceptions, Sprint PCS will not solicit for six months the
customers transferred to the buyer with the MIN assigned to the market
area;
. the buyer and Sprint PCS will enter into a mutual roaming agreement with
prices equal to the lesser of the most favored pricing provided by buyer
to third parties roaming in the geographic area and the national average
paid by Sprint PCS to third parties; and
. Sprint PCS will have the right to resell buyer's wireless services at
most favored nations pricing.
Right to purchase debt obligations. Following an acceleration under the
Lucent financing and until the 60-day anniversary of the filing of a petition
of bankruptcy, Sprint PCS has the right to purchase our obligations under the
Lucent financing at a purchase price equal to the amount of the obligations
other than interest accrued and fees and expenses that are deemed to be
unreasonable.
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Modification and amendment of Lucent Consent. If Sprint PCS modifies or
amends the form of consent and agreement it enters into with a lender to
another Sprint PCS affiliate that serves an area with population exceeding 5.0
million, then Sprint PCS agrees to give the Administrative Agent written notice
of the amendments and to amend the Lucent Consent in the same manner at the
Administrative Agent's request; provided, however, that Sprint PCS is not
required to amend the Lucent Consent to:
. incorporate selected changes designated by the Administrative Agent
unless Sprint PCS consents to making only the selected changes; or
. incorporate changes made for the benefit of a lender because of
circumstances related to a particular Sprint PCS affiliate other than
AirGate.
The following circumstances would not be considered related to a particular
Sprint PCS affiliate and, subject to the preceding sentence, could result in
amendment of the Lucent Consent:
. any form of recourse to Sprint PCS or similar form of credit
enhancement;
. any change in Sprint PCS's right to purchase our operating assets or
capital stock under the management agreement or Sprint PCS's right to
purchase the obligations under the Lucent financing;
. any change to our right or the right of the Administrative Agent or our
lenders under the Lucent financing to sell the collateral or purchase
spectrum from Sprint PCS;
. any change in the ownership status, terms of usage or the amount of
spectrum that may be purchased by us from Sprint PCS;
. any material change in the flow of certain revenues between Sprint PCS
and us;
. any changes to the obligations required to be assumed by, or
qualifications for, or appointment of, anyone other than AirGate who can
be appointed to operate our business on an interim basis under the
management agreement or purchase the business and continue to operate
under the management agreement;
. any changes to the consent and agreements terms on confidentiality, non-
compete or eligible buyers of the business;
. any clarifications of FCC compliance issues;
. any issuance of legal opinions; and
. any changes to the requirements of this section.
Termination of Lucent Consent. The Lucent Consent will terminate upon the
first to occur of:
. repayment in full of all our obligations under the Lucent financing and
termination of the Lucent financing; and
. termination of the Sprint PCS Agreements.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
The Lucent Financing
We have entered into a credit agreement with Lucent Technologies Inc.
pursuant to which Lucent has agreed to provide a credit facility in the amount
of up to $153.5 million. The Lucent financing will be used to purchase
equipment from Lucent and for general corporate purposes. Our debt under this
facility is senior debt that ranks senior in right of payment to the senior
subordinated discount notes and is secured by a first priority security
interest in substantially all of our assets. The Lucent financing is guaranteed
by our subsidiary and will be guaranteed by our future subsidiaries.
The Lucent financing provides for (1) $13.5 million in senior secured debt
("Tranche 1"), which was drawn on August 20, 1999 and which matures June 6,
2007 and (2) $140.0 million in senior secured debt ("Tranche 2"), which is
available to be drawn from time to time for three years commencing on October
1, 2000 and which matures September 30, 2008.
The principal amount of each tranche amortizes in 19 quarterly installments
according to a graduated schedule. Amortization of Tranche 1 will begin in
December 2002, with final maturity occurring June 6, 2007. Amortization of
Tranche 2 will begin in March 2004, and final maturity will occur September 30,
2008.
The availability of funding under Tranche 2 is subject to the following
conditions, all of which will have been satisfied on or before the closing of
the offering:
. the payment of all fees then due related to the Lucent financing;
. the approval by the administrative agent under the Lucent credit
agreement of any adverse changes to our most recent business and
financing plan provided to Lucent at the closing of the Lucent financing
which would have a material adverse effect;
. if all other conditions have not been satisfied or waived by November 16,
1999, receipt by Lucent from the appropriate Sprint PCS entities of
certification that the PCS licenses and interconnection agreements
required for us to operate our network have been obtained, remain in
effect and are not subject to impairment, and that the Sprint PCS
entities are in compliance with those licenses and interconnection
agreements;
. the successful completion of the concurrent common stock and units
offerings with proceeds of not less than $215.0 million in the aggregate
of which not less than $85.0 million is equity;
. the execution of the indenture for the senior subordinated discount
notes;
. the execution of an intercreditor agreement;
. the absence of any suit or proceeding that might result in a material
adverse change in our business or that would affect the enforceability of
the loan documents;
. the payment of all insurance premiums due and compliance with the other
insurance requirements under the Lucent financing;
. the representations and warranties in the loan documents continuing to be
true and correct and the absence of a default under the loan documents;
and
. our compliance with and the continued effectiveness of our agreements
with Sprint PCS and our supply agreement with Lucent.
Each draw under Tranche 2 is subject to the conditions that the
representations and warranties continue to be true and correct, and that there
is no event of default under the loan documents.
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The Lucent financing is secured by the following:
. a perfected first priority lien on substantially all of our assets and
the assets of our present and future subsidiaries;
. collateral assignment of the Sprint PCS Agreements; and
. a pledge of all of the capital stock of our subsidiary and future
subsidiaries.
We may select the rate at which interest accrues on all loans under the
Lucent financing. We may choose a "Eurodollar Loan," which accrues at LIBOR,
adjusted for applicable reserves, only so long as no Event of Default exists,
plus 3.75%. Alternatively, we may choose an "ABR Loan," which accrues at the
higher of either The Chase Manhattan Bank's prime rate, or, if the
administrative agent is a commercial bank, the administrative agent's prime
rate, or the Federal Funds Effective Rate, as defined in the credit agreement,
plus 0.50%, plus, in each case, 2.75%. Interest on any overdue amounts will
accrue at a rate per annum equal to, in the case of overdue principal, 2.50%
plus the rate otherwise applicable, or, in the case of all other amounts
overdue, 2.50% plus the rate then applicable to ABR Loans.
The terms of the Lucent financing require us to pay quarterly commitment
fees, which accrue as follows:
. at the rate of 1.50% per annum on the average daily undrawn amount of the
Tranche 1 commitments during the period from and including June 6, 1999
to, but excluding, June 30, 2000;
. at the rate of 3.75% per annum, or 1.50% per annum after 30% of the
Tranche 2 commitments has been borrowed, on the average daily undrawn
amount of the Tranche 2 commitments from the closing date of the Lucent
financing to, but excluding, January 1, 2001; and
. at the rate of 4.50% per annum, or 1.50% per annum after 30% of the
Tranche 2 commitments have been borrowed, on the average daily undrawn
amount of the Tranche 2 commitment from January 1, 2001 to September 30,
2003.
The commitment fees with respect to the Tranche 1 loans and the Tranche 2 loans
are payable quarterly in arrears, and a separate agent's fee is payable to the
administrative agent and the collateral agent.
The Tranche 1 and Tranche 2 loans will be prepaid, and the outstanding
commitments will be reduced, in an aggregate amount equal to:
. 60% of the excess cash flow, or 50% of excess cash flow if we meet
specified financial tests of each fiscal year commencing with the fiscal
year ending December 31, 2002;
. 100% of the net proceeds of asset sales outside of the ordinary course of
business, subject to exceptions, or insurance proceeds, to the extent not
reinvested in property or assets within a required period of time; and
. upon prepayment of any indebtedness incurred under a vendor financing
arrangement or other bank or credit facility, other than those facilities
outstanding at the date of the closing of the Lucent financing facility,
and several other exceptions, the product of the aggregate principal
amount of loans outstanding under the Lucent financing facility and a
fraction, the numerator of which is the amount of indebtedness prepaid
and the denominator of which is the aggregate
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principal amount of such indebtedness outstanding excluding the Lucent
financing and the senior subordinated discount notes then outstanding.
The Lucent financing contains various covenants that restrict the ability of
us and our subsidiaries to, among other things:
. incur additional indebtedness except for the senior subordinated discount
notes and certain other limited indebtedness;
. grant liens;
. make guarantees;
. enter into hedging agreements;
. engage in mergers, acquisitions, investments, consolidations,
liquidations, dissolutions and asset sales;
. pay dividends and redeem equity; and
. prepay certain indebtedness, including the senior subordinated discount
notes.
The Lucent financing contains financing and operating covenants including,
among other things:
. ratio of total debt to total capitalization;
. ratio of total debt to annualized earnings before interest, taxes,
depreciation and amortization, referred to as EBITDA;
. ratio of senior secured debt to total capitalization;
. ratio of senior secured debt to annualized EBITDA;
. ratio of EBITDA to fixed charges;
. minimum population coverage by our PCS network in order to incur
additional indebtedness;
. minimum subscribers in order to incur additional indebtedness;
. minimum revenue; and
. maximum capital expenditures.
We would default on the Lucent financing if among other things:
. we fail to make the payments due under the Lucent financing;
. we fail to comply with a covenant under any document under the Lucent
financing;
. we default on the Sprint PCS Agreements or certain of our rights under
the Sprint PCS Agreements are terminated or materially impaired;
. our supply agreement with Lucent or our loan documents shall cease to be,
or are asserted by us not to be, in full force and effect;
. any representation or warranty under the Lucent financing is determined
to be materially incorrect in any material respect when made;
. an involuntary proceeding is commenced or an involuntary petition is
filed under bankruptcy or similar laws;
. we voluntarily commence a proceeding or file a petition under bankruptcy
or similar laws;
. we become unable, admit in writing our inability or fail generally to pay
a certain amount of our debts as they become due;
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. one or more judgments for the payment of money in an aggregate amount of
a certain amount is rendered against us or any subsidiary and shall
remain undischarged for a certain period of time;
. we become liable under ERISA in an aggregate amount exceeding $5.0
million in any year or $10.0 million for all periods;
. any lien on a material portion of collateral created under the loan
documents ceases to be a valid and perfected lien on that collateral;
. there is any termination or other condition that causes the loan
documents to not be in full force and effect;
. we fail to perform any term under the guaranty of our Lucent financing
and such failure adversely affects the lenders;
. we default on certain other indebtedness;
. we change control of our ownership; or
. prior to the completion of this offering any entity other than Lucent
that manufactures equipment or provides services subject to our supply
agreement with Lucent owns more than 3% of our capital stock.
We have paid Lucent the expenses related to the Lucent financing and will pay
the origination fees upon closing. In addition, in connection with the Lucent
financing we issued warrants to Lucent to purchase shares of common stock
representing 1% of the outstanding common stock on a fully diluted basis on the
closing date of our initial public offering at an exercise price of 120% of the
initial public offering price of our common stock. See "Description of Capital
Stock--Warrants."
Senior Subordinated Discount Notes
Upon the closing of the units offering, we will have approximately $150.0
million of gross proceeds at issuance of senior subordinated discount notes
outstanding. See "Description of Units--Senior Subordinated Discount Notes."
Other Long-Term Debt
In July 1998, AirGate Wireless, LLC issued an unsecured promissory note to a
third party to purchase certain site acquisition and engineering costs. At June
30, 1999, the principal amount of this unsecured promissory note was $7.7
million. The note bears interest at 14% and originally provided for quarterly
payments of principal and interest beginning on March 1, 1999 and ending on
December 1, 2000. In May 1999, the note was amended to provide for quarterly
payments of principal and interest beginning on August 31, 1999 or the first
day following the close of the first fiscal quarter of the closing of our
concurrent offerings of common stock and units, consisting of senior
subordinated discount notes and warrants, in an amount equal to or greater than
$130.0 million with the final payment due on August 31, 2001. In August 1999,
the note was amended to provide for quarterly payments beginning on October 15,
1999 with the final payment due on October 15, 2001. It is our intention to
repay this promissory note with the proceeds from our concurrent offerings of
common stock and units.
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<PAGE>
MANAGEMENT
Directors and Executive Officers
The following table presents information with respect to our directors and
executive officers.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Thomas M. Dougherty............. 55 Director, President and Chief Executive
Officer
W. Chris Blane.................. 46 Director and Vice President of New Business
Development
Thomas D. Body III.............. 61 Director and Vice President of Strategic
Planning
Robert E. Gourlay............... 45 Vice President of Marketing
David C. Roberts................ 36 Vice President of Engineering and Network
Operations
Shelley L. Spencer.............. 36 Vice President of Law and Secretary
Alan B. Catherall............... 45 Chief Financial Officer
Gill Cogan...................... 46 Director
Barry Schiffman................. 53 Chairman of the Board and Director
</TABLE>
Thomas M. Dougherty joined AirGate in April 1999. Mr. Dougherty, our
president and chief executive officer, has more than 16 years of experience in
the telecommunications industry, and is a former senior executive of Sprint
PCS. As the president of a major region for Sprint PCS, Mr. Dougherty was
responsible for Sprint PCS market launches in eighteen major metropolitan areas
covering approximately 75 million people, including Chicago, Illinois; Houston,
Texas; Atlanta, Georgia; and Charlotte, North Carolina. Mr. Dougherty served as
Executive Vice President and Chief Operating Officer of Chase
Telecommunications, a personal communications services carrier, from 1996 to
1997. Mr. Dougherty served as President and Chief Operating Officer of Cook
Inlet BellSouth PCS, L.P., a start-up wireless communications company, from
1995 to 1996. Prior to October 1995, Mr. Dougherty was Vice President and Chief
Operating Officer of BellSouth Mobility DCS Corporation. Before entering the
telecommunications industry, Mr. Dougherty held various senior marketing and
operational positions with Coca-Cola. Mr. Dougherty holds a B.S. and MBA from
Georgia State University.
W. Chris Blane has more than twenty years of wireless telecommunications
experience in the Southeast. In 1978, he founded and developed American
Mobilphone Paging, Inc. In 1981, Mr. Blane was named president of Maxicom,
Inc., a cellular licensee in Atlanta, Memphis, Tampa, Birmingham and Mobile.
From 1984 to 1988, he served as president of Cellular One in Birmingham
directing operation of the company's cellular network in the Birmingham and
Montgomery MSAs. In 1989, Mr. Blane was appointed President of Metrex
Corporation which constructed the first fiber optic competitive access network
in Atlanta and ultimately merged with MFS Communications Co., now WorldCom. In
1995, Mr. Blane joined AirGate's affiliate, AirLink II, as it prepared for the
C block PCS auction. Mr. Blane holds a B.S. degree in Architecture from Georgia
Institute of Technology.
Thomas D. Body III has over twenty years of wireless telecommunications
experience in the Southeast. From 1979 to 1981, he served as chief executive
officer of American Mobilphone Paging, Inc. and from 1981 to 1988, as an
officer and director for Maxicom, Inc., the non-wireline cellular licensee for
the Atlanta, Birmingham, Memphis, Tampa and Mobile markets. As a founder and
partner of CellularOne in Birmingham and Montgomery, Alabama, Mr. Body was
instrumental in the design, construction, development and success of the
company's cellular networks. In 1989, he was appointed chairman of Metrex
Corporation where he oversaw development of the first fiber optic competitive
access network in the Atlanta market, which subsequently merged with MFS
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<PAGE>
Communications Co., now WorldCom. Mr. Body then served as chairman and CEO of
MFS-Atlanta as the company built the first large area sonet network in the
country. After leaving MFS-Atlanta, he then served as a consultant to MFS until
1994. Mr. Body joined AirGate's affiliate, AirLink II, as it prepared for the C
block PCS auction. Mr. Body holds a B.B.A. degree in Real Estate/Risk
Management from the University of Georgia.
Robert E. Gourlay has twenty-two years of wireless communications experience
in the Southeast dating to his service with Motorola in 1976. From 1976 to
1989, Mr. Gourlay served as area sales manager of Motorola's Communications
division for the State of Georgia. From 1989 to 1993, Mr. Gourlay served as the
southeastern manager of sales and operations for Motorola Inc.'s Cellular
Infrastructure Division bearing responsibility for product sales, engineering,
deployment and implementation of cellular infrastructure equipment throughout
the Southeast. Mr. Gourlay was also directly involved in Motorola Inc.'s
evaluation and deployment of wireless technologies including CDMA, TDMA, NAMPS,
IS-41 and analog. In 1993 Mr. Gourlay co-founded Encompass, Inc. where he
served as senior vice president and co-authored the company's business plan to
enter the PCS industry via the auction process. Mr. Gourlay was instrumental in
raising the initial venture capital to fund AirGate. In 1995, Mr. Gourlay
joined AirGate's affiliate, AirLink II. Mr. Gourlay holds a B.S. Degree in
Management Science from the University of South Carolina and an MBA from
Georgia State University.
David C. Roberts is a fifteen-year veteran of the wireless telecommunications
industry having served in various engineering and management positions for
Motorola, Inc. From 1990 to 1993, Mr. Roberts served as engineering manager for
Motorola Cellular Infrastructure. In that capacity, he worked out of Motorola
Inc.'s Atlanta regional office where he had overall responsibility for wireless
engineering in the Southeast. In 1993 Mr. Roberts co-founded Encompass, Inc.
where he served in an engineering management capacity and was instrumental in
developing the company's business plan and strategy for entering the PCS
industry. In 1995, Mr. Roberts joined AirGate's affiliate, AirLink II, in
preparation for the C block PCS auction. Mr. Roberts holds a B.S. degree in
Electrical Engineering Technology from the Southern College of Technology.
Shelley L. Spencer has twelve years of legal experience, six of which were
spent in private practice with the telecommunications practice of Swidler &
Berlin, Chtd. From 1989 to 1995, while at Swidler & Berlin, Ms. Spencer
specialized in representing wireless telecommunications companies before the
FCC, Congress and in corporate structuring and commercial transactions. In
1995, Ms. Spencer joined AirGate's affiliate, AirLink II, as it prepared for
the C block PCS auction. Ms. Spencer holds a B.A. from Baldwin-Wallace College
and a J.D. from Georgetown University Law Center.
Alan B. Catherall became AirGate's Chief Financial Officer in March 1998
under a contract between AirGate and Tatum CFO Partners. As a partner in Tatum
CFO Partners since 1996, Mr. Catherall has served as chief financial officer or
provided consulting services for a variety of clients. Before joining Tatum CFO
Partners, Mr. Catherall was chief financial officer of Syncordia Services, a
joint venture of MCI and British Telecom, from 1994 to 1996. Syncordia, founded
in 1991, provided telecommunications outsourcing services to enterprises in
support of their global communications. From 1989 to 1994, Mr. Catherall served
as vice president of finance and administration for MCI's Business Markets
Unit. In this position, Mr. Catherall had overall responsibility for all
financial, real estate, procurement and administration activities. From 1988 to
1989, Mr. Catherall was vice president of finance for Lex Computer Systems, a
company providing computer solutions to medium sized companies. Mr. Catherall
has a B.S. in Economics from the
65
<PAGE>
University of Manchester and an MBA from Loyola College in Baltimore. He is a
member of AICPA and the Institute of Chartered Accountants in the U.K.
Gill Cogan is managing partner of Weiss, Peck & Greer Venture Partners and
has served in such capacity since 1992. He is a director of Electronics for
Imaging, Inc., and several privately held companies. Mr. Cogan holds a BS
degree in theoretical physics and an MBA from UCLA.
Barry Schiffman is president, chief investment officer and member of the
board of JAFCO America Ventures, Inc. and has held such position since 1996.
Mr. Schiffman has more than 14 years of industry experience in investing in
high-growth information technology companies. From 1994 and until he joined
JAFCO, he was a general partner at Weiss, Peck & Greer Venture Partners. Mr.
Schiffman holds a bachelor's degree in industrial and systems engineering from
Georgia Institute of Technology and an MBA from Stanford University, Graduate
School of Business.
Board of Directors
The seven directors comprising the board of directors are divided into three
classes. Barry Schiffman and Gill Cogan constitute Class I and will stand for
election at the annual meeting of stockholders to be held in 2000. The two
directors who will fill the current vacancies on the board will constitute
Class II and will stand for election at the annual meeting of stockholders to
be held in 2001. Thomas M. Dougherty, Thomas D. Body III and W. Chris Blane
constitute Class III and will stand for election at the annual meeting of
stockholders to be held in 2002. After the initial term following the offering,
directors in each class will serve for a term of three years, or until his or
her successor has been elected and qualified and will be compensated at the
discretion of the board of directors. Executive officers are ordinarily elected
annually and serve at the discretion of the board of directors.
Currently there are two vacancies on the board. Immediately after the closing
of this offering, we expect to fill one of the vacancies in Class II. In
addition, we anticipate that the remaining vacancy will be filled shortly
thereafter. We expect the outside directors to be experienced leaders in the
telecommunications and business communities with direct experience managing and
advising public companies.
The audit committee consists of Gill Cogan, Barry Schiffman and Thomas M.
Dougherty. The compensation committee consists of Gill Cogan, Barry Schiffman
and Thomas D. Body III.
The audit committee is responsible for recommending to the board of directors
the engagement of our independent auditors and reviewing with the independent
auditors the scope and results of the audits, our internal accounting controls,
audit practices and the professional services furnished by the independent
auditors.
The compensation committee is responsible for reviewing and approving all
compensation arrangements for our officers, and is also responsible for
administering the stock option plan.
Compensation Committee Interlocks and Insider Participation
The compensation committee during the year ended December 31, 1998, consisted
of the board of directors. None of the executive officers served as a director
or member of the compensation committee or other board committee performing
equivalent functions of another corporation, one of whose executive officers
served on our board of directors.
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<PAGE>
Limitation on Liability and Indemnification
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Our certificate of incorporation
provides that we shall indemnify our directors and executive officers and may
indemnify our other officers and employees and agents and other agents to the
fullest extent permitted by law. Our certificate of incorporation also permits
us to secure insurance on behalf of any officer, director, employee or other
agent for any liability arising out of his or her actions in such capacity,
regardless or whether the certificate of incorporation would permit
indemnification.
We have entered into agreements to indemnify our directors and officers in
addition to indemnification provided for in our certificate of incorporation.
These agreements, among other things, indemnify our directors and officers for
certain expenses, including attorneys' fees, judgments, fines and settlement
amounts incurred by any such person in any action or proceeding, including any
action by us or in our right, arising out of such person's services as a
director or officer of ours, any subsidiary of ours, or any other company or
enterprise to which the person provides services at our request. In addition,
we intend to obtain directors' and officers' insurance providing
indemnification for certain of our directors, officers and employees for
certain liabilities. We believe that these provisions, agreements and insurance
are necessary to attract and retain qualified directors and officers.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of ours where indemnification will be
required or permitted. We are not aware of any threatened litigation or
proceeding that might result in a claim for such indemnification.
Executive Compensation
The following table presents summary information with respect to the
compensation paid to our Chief Executive Officer and each of our other
executive officers whose salary and bonus exceeded $100,000 during the year
ended December 31, 1998.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
---------------------
Name and Principal Position Year Salary
<S> <C> <C>
Thomas D. Body III....................................... 1998 $ 120,000
Chief Executive Officer(1)
W. Chris Blane........................................... 1998 120,000
Vice President of New Business Development
Robert E. Gourlay........................................ 1998 120,000
Vice President of Marketing
Shelley L. Spencer....................................... 1998 120,000
Vice President of Law and Secretary
Jack R. Kimzey........................................... 1998 68,000
Chief Executive Officer(2)
Edward C. Horner......................................... 1998 159,000
Chief Operating Officer(3)
</TABLE>
- ---------------------
(1) Mr. Body served as acting Chief Executive Officer from January 1998 to
October 1998.
(2) Mr. Kimzey served as Chief Executive Officer from October 1998 to February
1999. Mr. Kimzey resigned in February 1999.
(3) Mr. Horner served as Chief Operating Officer from January 1998 to December
15, 1998. Mr. Horner resigned in December 1998.
67
<PAGE>
Compensation of Directors
Currently, we do not compensate our directors. We do reimburse directors for
their expenses of attendance at board meetings.
Employment Agreements
We entered into an employment agreement with Thomas M. Dougherty, the Chief
Executive Officer. Mr. Dougherty's employment agreement is for a five-year term
and provides for an annual base salary of $180,000, with a minimum guaranteed
annual increase of $20,000 over the next four years, until April 15, 2004. In
addition to his base salary, Mr. Dougherty is eligible to receive an annual
bonus up to 50% of his base salary. Under the employment agreement, Mr.
Dougherty is entitled to an award of stock options equal to 2% of the number of
fully diluted shares of common stock outstanding following our concurrent
offerings, subject to possible upward adjustment by the board of directors if
the number of shares of the common stock authorized for issuance to employees
is more than 10% of fully diluted shares of common stock. Under the agreement,
Mr. Dougherty would vest in 25% of the awarded stock options on April 15, 1999,
with the remaining 75% of the options vesting in 15 equal quarterly
installments beginning June 30, 2000. If Mr. Dougherty voluntarily terminates
his employment prior to April 15, 2000, he will not be entitled to any of the
shares underlying the stock options. The exercise price of the stock options
granted to Mr. Dougherty is $14.00 per share. In addition, Mr. Dougherty is
eligible to participate in all employee benefit plans and policies.
The employment agreement provides that Mr. Dougherty's employment may be
terminated with or without cause, as defined in the agreement, at any time. If
Mr. Dougherty is terminated without cause, he is entitled to receive (1) six
months base salary, plus one month's salary for each year employed, (2) all
stock options vested on the date of termination and (3) six months of health
and dental benefits. Mr. Dougherty is not entitled to any compensation or
benefits upon voluntary termination or termination for cause. Under the
employment agreement, Mr. Dougherty agreed to a restriction on his present and
future employment. Mr. Dougherty agreed not to compete in the business of
wireless telecommunications either directly or indirectly in our territory
during his employment and for a period of 18 months after his employment is
terminated.
Pursuant to a requirement set forth in our management agreement with Sprint
PCS, we intend to enter into employment agreements with W. Chris Blane, Thomas
D. Body III, Robert E. Gourlay, David C. Roberts and Shelley L. Spencer prior
to or concurrently with the completion of the offering. Each of these employees
may be terminated with or without cause at any time. The agreements are
expected to provide that each employee, upon termination will not compete in
the business of wireless telecommunications in our territory or have another
primary business for a period of five years from the date of the execution of
our management agreement with Sprint PCS on July 22, 1998. These employment
restrictions on having another primary business will not apply when at least
one-third of the corporate officers of Sprint and/or Sprint PCS terminate their
employment for any reason within one year following a change of control, as
defined in the management agreement. In the event that an employee is
terminated without cause, we will continue to pay the employee salary for the
remaining term of the agreement or until the non-compete provision expires or
is waived by Sprint PCS. In addition to these agreements, we will also enter
into an employment agreement with Alan B. Catherall. Under his agreement, Mr.
Catherall will agree not to compete in the business of wireless
telecommunications either directly or indirectly in our territory during his
employment and for a period of 18 months after his employment is terminated.
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<PAGE>
1999 Stock Option Plan
The 1999 Stock Option Plan has been adopted by our board of directors and
stockholders. The option plan permits the granting of both incentive stock
options and nonqualified stock options to employees. The aggregate number of
shares of common stock that may be issued pursuant to options granted under the
option plan shall be 2,000,000, including the options granted to Mr. Dougherty
pursuant to his employment agreement, subject to adjustment in the event of
certain changes in the outstanding shares of common stock. On July 28, 1999, we
granted options to purchase 1,075,000 shares of common stock with an exercise
price of $14.00 per share to directors, officers and employees. The following
table presents information with respect to the options granted to directors and
executive officers.
<TABLE>
<CAPTION>
Number of Securities
Underlying % of Total Exercise Expiration Value at
Name Options Options Granted Price Date Date of Grant(1)
<S> <C> <C> <C> <C> <C>
Thomas M. Dougherty..... 300,000 27.9% $14.00 04/2009 $300,000
W. Chris Blane.......... 75,000 7.0 14.00 07/2009 75,000
Thomas D. Body III...... 75,000 7.0 14.00 07/2009 75,000
Robert E. Gourlay....... 75,000 7.0 14.00 07/2009 75,000
David C. Roberts........ 75,000 7.0 14.00 07/2009 75,000
Shelley L. Spencer...... 115,000 10.7 14.00 07/2009 115,000
Alan B. Catherall....... 90,000 8.4 14.00 07/2009 90,000
</TABLE>
- ---------------------
(1) Value at date of grant is based on the product of the public offering price
of $15.00 per share, the midpoint of the range set forth on the cover page
of the common stock prospectus, minus the exercise price, multiplied by the
number of securities underlying the options granted.
The option plan will be administered by our board of directors or by a
compensation committee appointed by our board of directors, which will be
authorized, subject to the provisions of the option plan, to grant awards and
establish rules and regulations as it deems necessary for the proper
administration of the option plan and to make whatever determinations and
interpretations it deems necessary or advisable.
An incentive option may not have an exercise price less than the fair market
value of the common stock on the date of grant or an exercise period that
exceeds ten years from the date of grant and is subject to certain other
limitations which allow the option holder to qualify for favorable tax
treatment. Nonqualified options may have an exercise price of less than, equal
to or greater than the fair market value of the underlying common stock on the
date of grant but, like incentive options, are limited to an exercise period of
no longer than ten years.
Options granted under the option plan will become exercisable according to a
schedule. Employees who have worked for us for 12 months prior to the date
their options were granted will be able to exercise 25% of their options
beginning on July 22, 2000. This percentage will increase in 6.25 percent
increments up to 100% at 60 months of employment. Employees who have not worked
for us for 12 months prior to the date their options were granted, other than
Mr. Dougherty, will be able to exercise 25% of their options 12 months after
the date of grant. This percentage will increase in five percent increments up
to 100% at 57 months of employment.
The exercise price of an option may be paid in cash or by check.
An option will not be not transferable except by will or by the laws of
descent or distribution or unless determined otherwise by our board of
directors.
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<PAGE>
Unless previously exercised, a vested option granted under the option plan
will terminate automatically:
. 12 months after the employee's termination of employment or by reason of
disability;
. six months after the employee's death; and
. three months after an employee's voluntary termination of employment.
A vested option will also terminate automatically upon termination of
employment for cause.
In the event of a change in control of AirGate where the acquiror does not
assume the options or provide for substitute options, the board of directors
may provide the employee with the right to exercise options, including those
not exercisable at the time of the change in control. Only one-half of the
options not yet vested may, however, be exercised in the event of a change in
control. In the case of the liquidation or dissolution of AirGate, the board of
directors may similarly provide the employee with the right to exercise all
options.
Noncompetition Agreement
In connection with the granting of options under the option plan, each
employee granted options must enter into a noncompetition agreement. These
agreements provide that for so long as the employee works for us, and for a
period of two years after the employee's termination for any reason, the
employee may not disclose in any way any confidential information. The
agreements also provide that for so long as the employee works for us and for a
period of 18 months after the employee's termination for any reason, the
employee is prohibited from:
. engaging in the same business or in a similar capacity in our territory;
. soliciting business in competition with us; and
. hiring any of our employees or directly or indirectly causing any of our
employees to leave their employment to work for another employer.
For so long as the shares underlying the options are not registered with the
Securities and Exchange Commission, in the event of a breach of the
noncompetition agreement by an employee, we have the option to repurchase any
and all shares held by the employee at the employee's exercise price. We may,
at any time, pursue any other remedies provided by law or in equity.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The Amended and Restated Limited Liability Company Agreement of AirGate, LLC,
the parent company of AirGate, provides that the shares of common stock of
AirGate shall be distributed to the members of AirGate, LLC in proportion to
each member's membership interest immediately prior to completion of AirGate's
initial public offering.
The following table presents certain information regarding the beneficial
ownership of common stock, as of September 15, 1999, and assumes that the
number of shares of AirGate common stock held by AirGate, LLC has been
distributed to the members of AirGate, LLC in accordance with its limited
liability company agreement, with respect to:
. each person who, to our knowledge, is the beneficial owner of 5% or more
of the outstanding common stock;
. each of the directors;
. each of the executive officers; and
. all executive officers and directors as a group.
<TABLE>
<CAPTION>
Number of Percentage of Percentage of
Shares Beneficially Ownership Ownership
Name and Address(1) Owned(2) Prior to Offering After Offering(3)(10)
<S> <C> <C> <C>
Maxicom PCS L.L.C.(4)... 1,533,444 43.7% 12.2%
Weiss, Peck & Greer
Venture Partners
affiliated funds....... 1,354,077 38.6 16.0(5)
555 California Street,
Suite 3130
San Francisco,
California 94104
JAFCO America Ventures,
Inc. affiliated funds.. -- -- 4.5
505 Hamilton Ave, Suite
310
Palo Alto, California
94301
Robert E. Gourlay &
Associates, LP......... 198,475 5.7 1.6
8734 Oakthorpe Drive
Charlotte, North
Carolina 28277
Thomas M. Dougherty..... -- -- --
W. Chris Blane(4)....... 1,533,444 43.7 12.2
Robert E. Gourlay(6).... 198,475 5.7 1.6
Barry Schiffman(7)...... -- -- 4.5
Gill Cogan(8)........... 1,354,077 38.6 16.0(9)
Shelley L. Spencer...... 90,120 2.6 *
Thomas D. Body III(4)... 1,533,444 43.7 12.2
David C. Roberts........ 126,238 3.6 1.0
Alan B. Catherall....... -- -- --
All executive officers
and directors as a
group (9 persons)...... 3,302,336 94.2 41.5
</TABLE>
- ---------------------
(Footnotes on following page)
71
<PAGE>
* Less than one percent.
(1) Except as otherwise indicated below, the address for Maxicom PCS L.L.C. and
each executive officer and director is Harris Tower 233 Peachtree Street,
N.E., Suite 1700, Atlanta, Georgia 30303.
(2) Beneficial ownership is determined in accordance with Rule 13d-3 of the
Securities Exchange Act. A person is deemed to be the beneficial owner of
any shares of common stock if such person has or shares voting power or
investment power with respect to such common stock, or has the right to
acquire beneficial ownership at any time within 60 days of the date of the
table. As used herein, "voting power" is the power to vote or direct the
voting of shares and "investment power" is the power to dispose or direct
the disposition of shares.
(3) Includes 985,641 shares reflecting conversion of the promissory notes
issued to the Weiss, Peck & Greer Venture Partners affiliated funds and the
JAFCO America Ventures, Inc. affiliated funds.
(4) Maxicom PCS L.L.C. is controlled by Messrs. W. Chris Blane and Thomas D.
Body III. Therefore, Messrs. Blane and Body may be deemed to beneficially
own the shares held by Maxicom PCS L.L.C.
(5) Includes 243,001 shares of common stock underlying the warrants issued to
the Weiss, Peck & Greer Venture Partners affiliated funds.
(6) Includes 222,203 shares that Mr. Gourlay is deemed to beneficially own as a
general partner of Robert E. Gourlay & Associates, LP.
(7) Includes shares Mr. Schiffman is deemed to beneficially own as president,
chief investment officer and member of the board of JAFCO America Ventures,
Inc. Mr. Schiffman's address is 505 Hamilton Avenue, Suite 310, Palo Alto,
California 94301.
(8) Includes 1,504,744 shares of common stock that Mr. Cogan is deemed to
beneficially own as managing partner of Weiss, Peck & Greer Venture
Partners. Mr. Cogan disclaims beneficial ownership of such shares except to
the extent of his pecuniary interest in Weiss, Peck & Greer Venture
Partners affiliated funds. Mr. Cogan's address is 555 California Street,
Suite 3130, San Francisco, California 94104.
(9) Includes 243,001 shares underlying the warrants issued to the Weiss, Peck &
Greer Venture Partners affiliated funds which Mr. Cogan is deemed to own as
managing partner of Weiss, Peck & Greer Venture Partners. Mr. Cogan
disclaims beneficial ownership of such shares except to the extent of his
pecuniary interest in Weiss, Peck & Greer Venture Partners affiliated
funds.
(10) Subject to a downward adjustment as a result of shares of our common stock
underlying warrants being issued in the units offering and subsequent
exercise of those warrants.
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<PAGE>
CERTAIN TRANSACTIONS
From our inception through May 1999, we received financing from affiliates of
Weiss, Peck & Greer Venture Partners and affiliates of JAFCO America Ventures,
Inc. Mr. Cogan, one of our directors, is managing partner of Weiss, Peck &
Greer Venture Partners. Another director, Mr. Schiffman, is President, chief
investment officer and a member of the board of JAFCO America Ventures, Inc. In
August 1998, we issued $1.8 million of subordinated promissory notes to the
Weiss, Peck & Greer Venture Partners affiliated funds. In September 1998, we
issued $3.0 million of subordinated promissory notes to the JAFCO America
Ventures, Inc. affiliated funds. All of these notes provided for the conversion
of the notes into preferred or common stock upon the satisfaction of certain
conditions or repayment of the notes one year after their issuance. Repayment
of the notes was subordinated to senior secured debt we received in November
1998 from Lucent. We also issued warrants to purchase the preferred stock to
the Weiss, Peck & Greer Venture Partners affiliated funds and to the JAFCO
America Ventures, Inc. related funds in consideration for their financing. The
warrants were to be exercised on the earlier of five years from the date of
issuance or an initial public offering. In March, April and May 1999, we
received an additional $1.25 million of financing from the Weiss, Peck & Greer
Venture Partners affiliated funds and $1.25 million of additional financing
from the JAFCO America Ventures, Inc. affiliated funds pursuant to subordinated
notes. In May 1999, we consolidated the promissory notes issued to the Weiss,
Peck & Greer Venture Partners affiliated funds in 1998 and 1999 for a total of
$3.167 million into two subordinated promissory notes that will be converted
into shares of our common stock concurrently with completion of our concurrent
offerings at a price 48% less than the price of a share of the common stock
sold in the common stock offering. The warrants held by the Weiss, Peck & Greer
Venture Partners affiliated funds were terminated. In May 1999, we issued
warrants to the Weiss, Peck & Greer Venture Partners affiliated funds to
purchase shares of common stock for an aggregate price of up to $2.73 million
exercisable at a 25% discount to the price of a share of common stock sold in
the common stock offering. The warrants may be exercised after an initial
public offering for two years from the date of grant. In May 1999, we
consolidated the promissory notes issued to the JAFCO America Ventures, Inc.
affiliated funds for a total of $4.394 million into subordinated promissory
notes that will be converted into shares of our common stock concurrent with
the completion of our concurrent offerings at a price 48% less than the price
of a share of common stock sold in the common stock offering. The warrants held
by the JAFCO America Ventures, Inc. affiliated funds were terminated. In
connection with the issuance of these convertible notes, the warrants and
Weiss, Peck & Greer Venture Partners affiliated funds' existing ownership
interest, we intend to enter into registration rights agreements with the
Weiss, Peck and Greer Venture Partners affiliated funds and the JAFCO America
Ventures, Inc. affiliated funds.
The affiliated funds of Weiss, Peck & Greer Venture Partners also have
guaranteed repayment of loans made to AirGate Wireless, LLC in principal
amounts of $1.0 million and $1.8 million by NationsBank and Silicon Valley
Bank, respectively. The combined principal amount of these two loans is $2.8
million. The loan from NationsBank for $1.0 million has been assigned to us.
The $1.8 million loan from Silicon Valley will remain at AirGate Wireless, LLC.
During the year ended December 31, 1998, we made $60,000 in lease payments to
an affiliate of two of our directors, W. Chris Blane and Thomas D. Body III.
The lease related to the office space of our previous corporate headquarters
and was terminated as of June 30, 1999. We believe that the terms of that lease
arrangement were comparable to terms that we could have obtained with an
unrelated party.
In addition, as of June 30, 1999, Robert E. Gourlay, an executive officer,
held a note payable issued by us in the amount of $68,919. The note bears
interest at the annual rate of 8% and is payable at the option of Mr. Gourlay
upon consummation of an equity offering or October 15, 1999.
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REGULATION OF THE WIRELESS TELECOMMUNICATIONS INDUSTRY
The FCC regulates the licensing, construction, operation, acquisition and
interconnection arrangements of wireless telecommunications systems in the
United States.
The FCC has promulgated, and is in the process of promulgating, a series of
rules, regulations and policies to, among other things:
. grant or deny licenses for PCS frequencies;
. grant or deny PCS license renewals;
. rule on assignments and/or transfers of control of PCS licenses;
. govern the interconnection of PCS networks with other wireless and
wireline carriers;
. establish access and universal service funding provisions;
. impose fines and forfeitures for violations of any of the FCC's rules;
and
. regulate the technical standards of PCS networks.
The FCC currently prohibits a single entity from having a combined
attributable interest, of 20% or greater interest in any license, in broadband
PCS, cellular and SMR licenses totaling more than 45 MHz in any geographic
area.
Transfers and Assignments of PCS Licenses
The FCC must give prior approval to the assignment of, or transfers
involving, substantial changes in ownership or control of a PCS license. Non-
controlling interests in an entity that holds a PCS license or operates PCS
networks generally may be bought or sold without prior FCC approval. In
addition, a recent FCC order requires only post-consummation notification of
certain pro forma assignments or transfers of control.
Conditions of PCS Licenses
All PCS licenses are granted for 10-year terms conditioned upon timely
compliance with the FCC's build-out requirements. Pursuant to the FCC's build-
out requirements, all 30 MHz broadband PCS licensees must construct facilities
that offer coverage to one-third of the population within 5 years and to two-
thirds of the population within 10 years, and all 10 MHz broadband PCS
licensees must construct facilities that offer coverage to at least one-quarter
of the population within 5 years or make a showing of "substantial service"
within that 5 year period. Rule violations could result in license revocations.
The FCC also requires licensees to maintain a certain degree of control over
their licenses. The Sprint PCS agreements reflect an alliance that the parties
believe meets the FCC requirements for licensee control of licensed spectrum.
If the FCC were to determine that our agreements with Sprint PCS need to be
modified to increase the level of licensee control, the Sprint PCS agreements
may be modified to cure any purported deficiency regarding licensee control of
the licensed spectrum.
PCS License Renewal
PCS licensees can renew their licenses for additional 10 year terms. PCS
renewal applications are not subject to auctions. However, under the FCC's
rules, third parties may oppose renewal applications and/or file competing
applications. If one or more competing applications are filed, a renewal
application will be subject to a comparative renewal hearing. The FCC's rules
afford PCS renewal applicants involved in comparative renewal hearings with a
"renewal expectancy." The
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renewal expectancy is the most important comparative factor in a comparative
renewal hearing and is applicable if the PCS renewal applicant has: (1)
provided "substantial service" during its license term; and (2) substantially
complied with all applicable laws and FCC rules and policies. The FCC's rules
define "substantial service" in this context as service that is sound,
favorable and substantially above the level of mediocre service that might
minimally warrant renewal.
Interconnection
The FCC has the authority to order interconnection between CMRS providers and
any other common carrier. The FCC has ordered local exchange carriers to
provide reciprocal compensation to CMRS providers for the termination of
traffic. Using these new rules, we will negotiate interconnection agreements
for the Sprint PCS network in our market area with all of the major regional
Bell operating companies, GTE and several smaller independent local exchange
carriers. Interconnection agreements are negotiated on a state-wide basis. If
an agreement cannot be reached, parties to interconnection negotiations can
submit outstanding disputes to state authorities for arbitration. Negotiated
interconnection agreements are subject to state approval.
Other FCC Requirements
In June 1996, the FCC adopted rules that prohibit broadband PCS providers
from unreasonably restricting or disallowing resale of their services or
unreasonably discriminating against resellers. Resale obligations will
automatically expire on November 24, 2002. The FCC is also considering whether
wireless providers should be required to offer unbundled communications
capacity to resellers who intend to operate their own switching facilities.
The FCC also adopted rules in June 1996 that require local exchange and most
CMRS carriers, to program their networks to allow customers to change service
providers without changing telephone numbers, which is referred to as service
provider number portability. The FCC requires most CMRS carriers to implement
wireless service provider number portability where requested in the top 100
metropolitan areas by November 24, 2002. Most CMRS carriers are required to
implement nationwide roaming by November 24, 2002 as well. The FCC currently
requires most CMRS providers to be able to deliver calls from their networks to
ported numbers anywhere in the country, and to contribute to the Local Number
Portability Fund.
The FCC has adopted rules permitting broadband PCS and other CMRS providers
to provide wireless local loop and other fixed services that would directly
compete with the wireline services of LECs. In June 1996, the FCC adopted rules
requiring broadband PCS and other CMRS providers to implement enhanced
emergency 911 capabilities within 18 months after the effective date of the
FCC's rules. In December 1997, the FCC revised these rules to extend the
compliance deadline for phase 1 until October 1, 1998 and for phase II until
October 1, 2001 for digital CMRS carriers to ensure access for customers using
devices for the hearing-impaired. The FCC recently extended the phase 1
compliance deadline to January 1, 1999. Further waivers of the enhanced
emergency 911 capability requirements may be obtained by individual carriers by
filing a waiver request.
On June 10, 1999, the FCC initiated a regulatory proceeding seeking comment
from the public on a number of issues related to competitive access to
multiple-tenant buildings, including the following:
. the FCC's tentative conclusion that the Communications Act of 1934, as
amended, requires utilities to permit telecommunications carriers access
to rooftop and other rights-of-way in
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multiple tenant buildings under just, reasonable and nondiscriminatory
rates, terms and conditions; and
. whether building owners that make access available to a
telecommunications carrier should be required to make access available to
all other telecommunications carriers on a nondiscriminatory basis, and
whether the FCC has the authority to impose such a requirement.
This proceeding could affect the availability and pricing of sites for our
antennae and those of our competitors.
Communications Assistance for Law Enforcement Act
The Communications Assistance for Law Enforcement Act, enacted in 1994 to
preserve electronic surveillance capabilities authorized by Federal and state
law, requires telecommunications carriers to meet certain "assistance
capability requirements" by October 25, 1998. However, the FCC recently granted
a blanket extension of that deadline until June 30, 2000, because CALEA
compliant equipment is not yet available. CALEA provides that a
telecommunications carrier meeting industry CALEA standards shall have safe
harbor for purposes of compliance with CALEA. Toward the end of 1997
telecommunications industry standard-setting organizations agreed to a joint
standard to implement CALEA's capability requirements, known as J-STD-025.
Although we will be able to offer traditional electronic surveillance
capabilities to law enforcement, it, as well as the other participants in the
wireless industry, may not meet the requirements of J-STD-025 by June 30, 2000,
given hardware changes that are yet to be developed and implemented by switch
manufacturers.
In addition, the FCC is considering petitions from numerous parties to
establish and implement technical compliance standards pursuant to CALEA
requirements.
Other Federal Regulations
Wireless systems must comply with certain FCC and FAA regulations regarding
the siting, lighting and construction of transmitter towers and antennas. In
addition, certain FCC environmental regulations may cause certain cell site
locations to become subject to regulation under the National Environmental
Policy Act. The FCC is required to implement the Act by requiring carriers to
meet certain land use and radio frequency standards.
Review of Universal Service Requirements
The FCC and the states are required to establish a "universal service"
program to ensure that affordable, quality telecommunications services are
available to all Americans. Sprint PCS is required to contribute to the federal
universal service program as well as existing state programs. The FCC has
determined that the Sprint PCS' "contribution" to the federal universal service
program is a variable percentage of "end-user telecommunications revenues."
Although many states are likely to adopt a similar assessment methodology, the
states are free to calculate telecommunications service provider contributions
in any manner they choose as long as the process is not inconsistent with the
FCC's rules. At the present time it is not possible to predict the extent of
the Sprint PCS total federal and state universal service assessments or its
ability to recover from the universal service fund.
Partitioning; Disaggregation
The FCC has modified its rules to allow broadband PCS licensees to partition
their market areas and/or to disaggregate their assigned spectrum and to
transfer partial market areas or spectrum assignments to eligible third
parties.
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Wireless Facilities Siting
States and localities are not permitted to regulate the placement of wireless
facilities so as to "prohibit" the provision of wireless services or to
"discriminate" among providers of such services. In addition, so long as a
wireless system complies with the FCC's rules, states and localities are
prohibited from using radio frequency health effects as a basis to regulate the
placement, construction or operation of wireless facilities. The FCC is
considering numerous requests for preemption of local actions affecting
wireless facilities siting.
Equal Access
Wireless providers are not required to provide equal access to common
carriers for toll services. However, the FCC is authorized to require unblocked
access to toll carriers subject to certain conditions.
State Regulation of Wireless Service
Section 332 of the Communications Act preempts states from regulating the
rates and entry of commercial mobile radio service providers. However, states
may petition the FCC to regulate such providers and the FCC may grant such
petition if the state demonstrates that (1) market conditions fail to protect
subscribers from unjust and unreasonable rates or rates that are unjustly or
unreasonably discriminatory, or (2) when commercial mobile radio service is a
replacement for landline telephone service within the state. To date, the FCC
has granted no such petition. To the extent we provide fixed wireless service,
we may be subject to additional state regulation.
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DESCRIPTION OF CAPITAL STOCK
General
The following summarizes all of the material terms and provisions of our
capital stock. We have 30,000,000 shares of authorized capital stock, including
25,000,000 shares of common stock, par value $0.01 per share, and 5,000,000
shares of preferred stock, par value $0.01 per share. As of September 15, 1999,
there were 3,506,617 shares of common stock and no shares of preferred stock
issued and outstanding.
Common Stock
The holders of 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 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 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 5,000,000 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:
. number of shares to be issued;
. dividend rights;
. dividend rates;
. right to convert the preferred shares into a different type of security;
. voting rights attributable to the preferred shares;
. right to set aside a certain amount of assets for payment relating to the
preferred shares; and
. 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
AirGate. This is because the terms of the preferred stock would 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.
Warrants
Weiss Peck & Greer affiliated entities and Lucent hold warrants to purchase
shares of our common stock. The warrants held by Weiss Peck & Greer were issued
in consideration for financing provided to us by Weiss Peck & Greer. The terms
of these warrants are described in greater detail under "Certain Transactions"
and "Shares Eligible For Future Sale."
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The warrants issued to Lucent in consideration for the Lucent financing may
be exercised to purchase common stock in an amount equal to one percent of the
outstanding common stock, on a fully diluted basis, on the closing date of our
initial public offering. The exercise price of the warrants is 120% of the
initial public offering price of our common stock. The warrants expire on the
earlier of August 15, 2004 or August 15, 2001, if, as of such date, we have
paid in full all outstanding amounts under the Lucent financing and have
terminated the remaining unused portion of the commitments under the Lucent
financing.
As part of our units offering, we will be offering warrants to purchase an
aggregate of 375,575 shares of our common stock, or 3% of the issued and
outstanding shares of our common stock on a fully diluted basis assuming
exercise of all outstanding warrants. The terms and conditions of the warrants
issued in the units offering are described in this prospectus under
"Description of Units--Warrants" and in the warrant agreement we will file as
an exhibit to the registration statement of which this prospectus is a part.
Delaware Law and Certain Charter and By-Law Provisions
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law (the "DGCL"). Subject to certain exceptions, Section 203
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 mergers, 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 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. See
"Management--Board of Directors." 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 will 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 will require a stockholder who desires to raise new
business to provide us 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 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:
. comparison of the proposed consideration to be received by stockholders
in relation to the then current market price of AirGate's capital stock,
the estimated current value of AirGate in
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a freely negotiated transaction and the estimated future value of AirGate
as an independent entity; and
. the impact of a transaction on our employees, suppliers and clients and
its effect on the communities in which we operate.
The provisions described above could make it more difficult for a third party
to acquire control of AirGate and, furthermore, could discourage a third party
from making any attempt to acquire control of AirGate.
Our certificate of incorporation provides that any action required or
permitted to be taken by the stockholders of AirGate 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 the
outstanding voting securities of AirGate, 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.
The DGCL provides that the affirmative vote of a majority of the shares
entitled to vote on any matter is required to amend a corporation's certificate
of incorporation or by-laws, unless the corporation's certificate of
incorporation or by-laws, as the case may be, requires a greater percentage.
Our 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 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.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is American Stock
Transfer & Trust Company.
Listing
Application has been made to list the shares of common stock on the Nasdaq
National Market under the symbol "PCSA."
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DESCRIPTION OF UNITS
Each unit being offered by us will consist of $1,000 principal amount at
maturity of % senior subordinated discount notes due 2009 and one warrant to
purchase shares of our common stock, par value $0.01 per share, at an exercise
price of $.01 per share. The senior subordinated discount notes and the
warrants will not be separately transferable until the separation date, which
shall be the earliest to occur of:
. 180 days after the closing of the units offering;
. the occurrence of a change of control or an event of default on the senior
subordinated discount notes; and
. such date as Donaldson, Lufkin & Jenrette Securities Corporation in its
sole discretion shall determine.
Upon exercise, the holders of the warrants would be entitled, in the
aggregate, to purchase common stock representing approximately 3% of the issued
and outstanding shares of our common stock on a fully diluted basis, assuming
exercise of all outstanding warrants.
Senior Subordinated Discount Notes
Concurrently with this offering of our common stock, we are offering $
million aggregate principal amount at maturity of % senior subordinated
discount notes maturing in 2009 and warrants in our units offering. Each senior
subordinated discount note will have a warrant exercisable for shares of common
stock at an exercise price of $.01. The combination of the senior subordinated
discount note and warrant is a unit. See "Description of Units--Warrants." No
cash interest payments will be made on the senior subordinated discount notes
prior to , 2005. The aggregate accreted value of the senior subordinated
discount notes will increase from approximately $150.0 million at issuance at a
rate of % per annum to a final accreted value equal to their aggregate
principal amount of $ million on , 2004. Accretion will be computed on a
basis of a 360-day year of twelve 30 day months, compounded semi-annually.
Commencing , 2005, cash interest will be payable to holders of the senior
subordinated discount notes at a rate of % per annum, semi-annually in
arrears on each and . The cash interest, computed on a basis of a 360-
day year of twelve 30-day months, will accrue from the most recent interest
payment date or, if no interest has been paid or duly provided for, from ,
2005. The senior subordinated discount notes are not subject to any sinking
fund.
The senior subordinated discount notes will be guaranteed by our existing
subsidiary, AGW Leasing Company, Inc., and may be guaranteed by additional
subsidiaries of ours in the future. In addition, pursuant to a pledge
agreement, the senior subordinated discount notes will be secured by a
subordinated pledge of all of the capital stock of our future, directly owned
subsidiaries.
Holders of the senior subordinated discount notes will have the right to
require us to repurchase all or part of the senior subordinated discount notes
at a premium upon the occurrence of events constituting a change in control of
AirGate. Any such repurchases would be for cash at an aggregate price of 101%
of the accreted value of the senior subordinated discount notes to be
repurchased, if the repurchase were prior to , 2004 or, if the repurchase
were on or after , 2004, at an aggregate price of 101% of the aggregate
principal amount thereof plus accrued and unpaid
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interest thereon. Under the indenture governing the senior subordinated
discount notes, a change of control includes:
. sale or other disposition of substantially all of our and our
subsidiaries' assets;
. our adoption of a plan of liquidation or dissolution;
. consummation of a transaction in which a person becomes the beneficial
owner of more than 50% of our voting stock;
. continuing directors ceasing to comprise a majority of our board of
directors; and
. a merger or consolidation of AirGate in which our voting stock is
converted into or exchanged for cash, securities or other property,
unless our voting stock is converted into or exchanged for a majority of
the outstanding shares of one of the other parties to the merger or
consolidation.
We will have the right to redeem all or part of the senior subordinated
discount notes on or after , 2004 at redemption prices beginning at % in
2004 and decreasing gradually to 100% in 2007 and thereafter, in each case
together with accrued and unpaid interest, if any. During the first 36 months
after the units offering, we may use the net proceeds from an equity offering
to redeem up to 35% of the accreted value of the senior subordinated discount
notes originally issued at a redemption price of % of the accreted value,
provided that at least 65% of the accreted value of the senior subordinated
discount notes originally issued remains outstanding immediately after the
redemption.
The indenture governing the senior subordinated discount notes will contain
covenants that, among other things, will limit our ability and the ability of
our subsidiary and future subsidiaries to:
. pay dividends, redeem capital stock or make other restricted payments or
investments;
. incur additional indebtedness or issue preferred stock;
. create liens on assets;
. merge, consolidate or dispose of assets;
. dispose of less than all of the equity in a wholly owned subsidiary;
. engage in any business other than PCS telecommunications and related or
ancillary businesses;
. enter into transactions with affiliates; and
. enter into sale and leaseback transactions.
Events of default under the senior subordinated discount notes include:
. default for 30 days in the payment when due of interest on the senior
subordinated discount notes;
. default in payment when due of the principal of or premium, if any, on
the senior subordinated discount notes;
. our failure, or the failure of any of our subsidiaries, to comply with
provisions of the senior subordinated discount notes indenture relating
to change of control and with limitations on asset sales;
. our failure, or the failure of any of our subsidiaries, to comply with
any other provisions of the indenture or the pledge agreement relating to
the senior subordinated discount notes;
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. our default, or default by any of our subsidiaries, with respect to other
debt of $5.0 million or more, which default either is caused by failure
to pay the principal or premium thereof or results in acceleration of the
other debt;
. our failure, or failure of any of our subsidiaries, to pay within 60 days
a final judgment exceeding $5.0 million;
. breach by us of any material representation or warranty or agreement in
the pledge agreement, repudiation by us of our obligations under the
pledge agreement or the unenforceability of the pledge agreement against
us for any reason;
. a judicial determination rendering any of the guarantees unenforceable or
a guarantor's denial or disaffirmance of its obligations under the
guarantee;
. bankruptcy or insolvency of AirGate or any of our subsidiaries; and
. the occurrence of any event that causes, subject to any applicable grace
period, an event of termination under the Sprint PCS Agreements.
In the case of an event of default arising from certain events of bankruptcy
or insolvency, all outstanding senior subordinated discount notes would become
due and payable immediately. If any other event of default occurs and is
continuing, the trustee for the senior subordinated discount note holders or
the holders of at least 25% in accreted value or principal amount, as the case
may be, of the then outstanding senior subordinated discount notes may declare
the notes to be due and payable immediately.
Warrants
The warrants issued in the units offering will be issued pursuant to a
warrant agreement between AirGate and Bankers Trust Company, as the warrant
agent. We will file a copy of the warrant agreement as an exhibit to our
registration statement, which includes this prospectus.
At the completion of the units offering, the holders of the warrants will be
entitled, in the aggregate, to purchase 375,575 shares of our common stock,
representing approximately 3% of the issued and outstanding shares of our
common stock on a fully diluted basis, assuming exercise of all outstanding
warrants. Each warrant, when exercised, will entitle the holder to receive
fully paid and non-assessable shares of our common stock, at an exercise price
of $.01 per share, subject to adjustment from time to time upon the occurrence
of the following:
(1) the payment by us of dividends and other distributions on our common
stock other than in our common stock;
(2) subdivision, combinations and reclassifications of our common stock;
(3) the issuance to all holders of common stock of such rights, options or
warrants entitling them to subscribe for our common stock or securities
convertible into, or exchangeable or exercisable for, our common stock
at a price which is less than the fair market value per share or our
common stock;
(4) certain distributions to all holders of our common stock or any of our
assets or debt securities or any rights or warrants to purchase any
such securities, excluding those rights and warrants referred to in
clause (3) above;
(5) the issuance of shares of our common stock for consideration per share
less than the then fair market value per share of our common stock at
the time of issuance of such convertible or exchangeable security,
excluding securities issued in transactions referred to in clauses (1)
through (4) above, or (6) below;
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(6) the issuance of securities convertible into or exchangeable for our
common stock for a conversion or exchange price plus consideration
received upon issuance less than the then fair market value per share
of our common stock at the time of issuance of such convertible or
exchangeable security, excluding securities issued in transactions
referred to in (1) through (4) above; and
(7) certain other events that could have the effect of depriving holders of
the warrants of the benefit of all or a portion of the purchase rights
evidenced by the warrants. No adjustment need be made for any of the
foregoing transactions if warrant holders are to participate in the
transaction on a basis and with notice that the board of directors is
determined to be fair and appropriate in light of the basis and notice
and on which other holders of the common stock participate in the
transaction.
The warrants will not be separately transferable until the separation date
which shall be the earliest to occur of:
. 180 days after the closing of the units offerings;
. the occurrence of a change of control or an event of default under the
senior subordinated discount notes; and
. such date as Donaldson, Lufkin & Jenrette Securities Corporation in its
sole discretion shall determine.
The shares of common stock underlying the warrants will not be initially
registered under the Securities Act. Until such time, if any, as a registration
statement with respect to resale of the warrant shares is declared effective,
the warrant shares will be subject to certain restrictions on transfer.
Pursuant to the terms of a warrant agreement, we will register the warrants
offered in the units offering through the filing of a shelf registration
statement with the SEC within 60 days of the date of the units prospectus. We
will use our best efforts to have the shelf registration statement declared
effective by the SEC within 120 days of the date of the units prospectus and
keep the shelf registration statement continuously effective, until the later
of the date on which (a) all of the warrants have been exercised or (b) the
warrants expire. Holders of warrants will be able to exercise their warrants
only if a registration statement relating to the common stock underlying the
warrants is then in effect, or the exercise of such warrants is exempt from the
registration requirements of the Securities Act, and such securities are
qualified for sale or exempt from qualification under securities laws of the
states in which the various holders of warrants or other persons to whom it is
proposed that underlying shares of common stock are to be issued on exercise of
the warrants reside.
The holders of the warrants will have no right to vote on matters submitted
to our stockholders and will have no right to receive dividends. The holders of
the warrants will not be entitled to share in our assets in the event of
liquidation, dissolution or the winding up of AirGate. In the event a
bankruptcy or reorganization is commenced by or against us, a bankruptcy court
may hold that unexercised warrants are executory contracts which may be subject
to rejection by us with approval of the bankruptcy court, and the holders of
the warrants may, even if sufficient funds are available, receive nothing or a
lesser amount as a result of any such bankruptcy case then they would be
entitled to if they had exercised their warrants prior to the commencement of
any such case.
84
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for the common stock. Future
sales of substantial amounts of common stock in the public market could
adversely affect market prices of the common stock prevailing from time to
time. Furthermore, because only a limited number of shares will be available
for sale shortly after the consummation of our concurrent offerings due to
certain contractual and legal restrictions on resale, as described below, sales
of substantial amounts of common stock in the public market after the
restrictions lapse could adversely affect the prevailing market price of the
common stock and our ability to raise equity capital in the future.
Upon completion of our concurrent offerings, we will have outstanding an
aggregate of 10,825,591 shares of common stock, assuming no exercise of the
underwriters' over-allotment option and based upon the number of shares
outstanding as of September 15, 1999. Of these shares, all of the shares sold
in the common stock offering will be freely tradeable without restriction or
further registration under the Securities Act, except that any shares purchased
by our affiliates may generally only be sold in compliance with the limitations
of Rule 144 described below.
Sales of Restricted Shares; Options
All of the shares of common stock sold in the common stock offering will be
freely tradeable under the Securities Act, unless purchased by our
"affiliates," as the Securities Act defines that term. In general, under Rule
144 as currently in effect, a person or persons whose shares are aggregated,
including an affiliate, who has beneficially owned restricted stock for at
least one year is entitled to sell, within any three-month period, a number of
such shares that does not exceed the greater of:
.one percent of the then outstanding shares of common stock, or
. the average weekly trading volume in the common stock during the four
calendar weeks preceding the date on which notice of such sale is filed.
In addition, under Rule 144(k), a person who is not an affiliate and has not
been an affiliate for at least three months prior to the sale and who has
beneficially owned shares of restricted stock for at least two years may resell
such shares without compliance with the foregoing requirements. In meeting the
one and two year holding periods described above, a holder of restricted stock
can include the holding periods of a prior owner who was not an affiliate.
Additional shares of common stock are available for future grants under our
stock option plan. See "Management--1999 Stock Option Plan." We intend to file
one or more registration statements on Form S-8 under the Securities Act to
register all shares of common stock subject to outstanding stock options and
common stock issuable pursuant to our stock option plans that do not qualify
for an exemption under Rule 701 from the registration requirements of the
Securities Act. We expect to file these registration statements as soon as
practicable following the closing of our concurrent offerings, and such
registration statements are expected to become effective upon filing. Shares
covered by these registration statements will thereupon be eligible for sale in
the public markets subject to the lock-up agreements, to the extent applicable.
Sales of Warrant Shares
All of the shares of common stock underlying the warrants issued in the units
offering will be freely tradeable under the Securities Act, unless purchased by
our affiliates as the Securities Act defines that term, no later than 180 days
after the closing of the units offering.
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<PAGE>
Lock-up Agreements
We and all of our current stockholders, Lucent, members of our senior
management and our directors have agreed, pursuant to lock-up agreements that,
during the period beginning from the date of this prospectus and continuing and
including the date 180 days after the date of this prospectus, they will not,
directly or indirectly offer, pledge, sell, contract to sell, grant any option,
right or warrant to purchase, or otherwise dispose of any shares of common
stock, including but not limited to any common stock or securities convertible
into or exercisable or exchangeable for common stock which may be deemed to be
beneficially owned in accordance with the rules and regulations of the
Securities and Exchange Commission or enter into any swap or other agreement
that transfers, in whole or in part, the economic consequence of ownership of
common stock, or make any demand for, or exercise and right with respect to,
the registration of common stock or any securities convertible into or
exercisable or exchangeable for common stock, without the prior written consent
of Donaldson, Lufkin & Jenrette Securities Corporation.
Following the 180 day lock-up period, 2,339,718 shares of common stock will
become eligible for sale, subject to compliance with Rule 144 of the Securities
Act as described above.
Registration Rights
At the completion of our common stock offering, Lucent and entities
affiliated with Weiss, Peck & Greer will hold warrants exercisable for an
aggregate of 368,190 shares of our common stock. Lucent and Weiss, Peck & Greer
entities will be entitled to several types of registration rights with respect
to the shares issuable upon exercise of the warrants as provided under the
terms of separate registration rights agreements. These agreements provide for
demand registration rights and, subject to a number of limitations, for
inclusion of the shares on future registration statements that we file.
Registration of shares of common stock pursuant to the registration rights
agreements will result in those shares becoming freely tradeable without
restriction under the Securities Act. We will bear registration expenses
incurred in connection with the above registrations except that, in some
circumstances, the parties seeking to register shares will bear the
registration expenses if the registration statement does not become effective
as a result of the withdrawal of the request for registration by the
stockholder that initiated the request.
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<PAGE>
U.S. FEDERAL TAX CONSEQUENCES OF OUR COMMON STOCK TO
NON-U.S. HOLDERS
This is a general discussion of certain United States federal tax
consequences of the acquisition, ownership, and disposition of our common stock
by a holder that, for U.S. federal income tax purposes, is not a U.S. person as
we define that term below. A holder of our common stock who is not a U.S.
person is a non-U.S. holder. We assume in this discussion that you will hold
our common stock issued pursuant to the offering as a capital asset (generally,
property held for investment). We do not discuss all aspects of U.S. federal
taxation that may be important to you in light of your individual investment
circumstances, such as special tax rules that would apply to you, for example,
if you are a dealer in securities, financial institution, bank, insurance
company, tax-exempt organization, partnership or owner of more than 5% of our
common stock. Our discussion is based on current provisions of the Internal
Revenue Code of 1986, as amended, Treasury regulations, judicial opinions,
published positions of the U.S. Internal Revenue Service and other applicable
authorities, all as in effect on the date of this prospectus and all of which
are subject to differing interpretations or change, possibly with retroactive
effect. We have not sought, and will not seek, any ruling from the IRS with
respect to the tax consequences discussed in this prospectus, and there can be
no assurance that the IRS will not take a position contrary to the tax
consequences discussed below or that any position taken by the IRS would not be
sustained. We urge you to consult your tax advisor about the U.S. federal tax
consequences of acquiring, holding, and disposing of our common stock, as well
as any tax consequences that may arise under the laws of any foreign, state,
local, or other taxing jurisdiction.
For purposes of this discussion, a U.S. person means any one of the
following:
. a citizen or resident of the U.S.;
. a corporation, partnership, or other entity created or organized in the
U.S. or under the laws of the U.S. or of any political subdivision of
the U.S.;
. an estate, the income of which is includible in gross income for U.S.
federal income tax purposes regardless of its source; or
. a trust, the administration of which is subject to the primary
supervision of a U.S. court and that has one or more U.S. persons who
have the authority to control all substantial decisions of the trust.
Dividends
Dividends paid to a non-U.S. holder will generally be subject to withholding
of U.S. federal income tax at the rate of 30%. If, however, the dividend is
effectively connected with the conduct of a trade or business in the U.S. by
the non-U.S. holder, the dividend will be subject to U.S. federal income tax
imposed on net income on the same basis that applies to U.S. persons generally,
and, for corporate holders under certain circumstances, the branch profits tax.
Non-U.S. holders should consult any applicable income tax treaties that may
provide for a reduction of, or exemption from withholding taxes. For purposes
of determining whether tax is to be withheld at a reduced rate as specified by
a treaty, we generally will presume that dividends we pay on or before
December 31, 2000, to an address in a foreign country are paid to a resident of
that country.
Under recently finalized U.S. Treasury Department regulations, which in
general apply to dividends that we pay after December 31, 2000, to obtain a
reduced rate of withholding under a
87
<PAGE>
treaty, a non-U.S. holder generally will be required to provide certification
as to that non-U.S. holder's entitlement to treaty benefits. These regulations
also provide special rules to determine whether, for purposes of applying a
treaty, dividends that we pay to a non-U.S. holder that is an entity should be
treated as paid to holders of interests in that entity.
Gain on Disposition
A non-U.S. holder will generally not be subject to United States federal
income tax, including by way of withholding, on gain recognized on a sale or
other disposition of our common stock unless any one of the following is true:
. the gain is effectively connected with the conduct of a trade or
business in the U.S. by the non-U.S. holder;
. the non-U.S. holder is a nonresident alien individual present in the
U.S. for 183 or more days in the taxable year of the disposition and
certain other requirements are met;
. the non-U.S. holder is subject to tax pursuant to provisions of the U.S.
federal income tax law applicable to certain U.S. expatriates; and
. we are or have been during certain periods a "United States real
property holding corporation" for U.S. federal income tax purposes.
If we are or have been a United States real property holding corporation, a
non-U.S. holder will generally not be subject to U.S. federal income tax on
gain recognized on a sale or other disposition of our common stock provided
that:
. the non-U.S. holder does not hold, and has not held during certain
periods, directly or indirectly, more than 5% of our outstanding common
stock; and
. our common stock is and continues to be traded on an established
securities market for U.S. federal income tax purposes.
We believe that our common stock will be traded on an established securities
market for this purpose in any quarter during which it is listed on the Nasdaq
National Market.
If we are or have been during certain periods a U.S. real property holding
corporation and the above exception does not apply, a non-U.S. holder will be
subject to U.S. federal income tax with respect to gain realized on any sale or
other disposition of our common stock as well as to a withholding tax,
generally at a rate of 10% of the proceeds. Any amount withheld pursuant to a
withholding tax will be creditable against a non-U.S. holder's U.S. federal
income tax liability.
Gain that is effectively connected with the conduct of a trade or business in
the U.S. by the non-U.S. holder will be subject to the U.S. federal income tax
imposed on net income on the same basis that applies to U.S. persons generally,
and, for corporate holders under certain circumstances, the branch profits tax,
but will generally not be subject to withholding. Non-U.S. holders should
consult any applicable income tax treaties that may provide for different
rules.
United States Federal Estate Taxes
Our common stock that is owned or treated as owned by an individual who is
not a citizen or resident of the U.S., as specially defined for U.S. federal
estate tax purposes, on the date of that
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<PAGE>
person's death will be included in his or her estate for U.S. federal estate
tax purposes, unless an applicable estate tax treaty provides otherwise.
Information Reporting and Backup Withholding
Generally, we must report annually to the IRS and to each non-U.S. holder the
amount of dividends that we paid to a holder, and the amount of tax that we
withheld on those dividends. This information may also be made available to the
tax authorities of a country in which the non-U.S. holder resides.
Under current U.S. Treasury Department regulations, U.S. information
reporting requirements and backup withholding tax will generally not apply to
dividends that we pay on our common stock to a non-U.S. holder at an address
outside the U.S. Payments of the proceeds of a sale or other taxable
disposition of our common stock by a U.S. office of a broker are subject to
both backup withholding at a rate of 31% and information reporting, unless the
holder certifies as to its non-U.S. holder status under penalties of perjury or
otherwise establishes an exemption. Information reporting requirements, but not
backup withholding tax, will also apply to payments of the proceeds of a sale
or other taxable disposition of our common stock by foreign offices of U.S.
brokers or foreign brokers with certain types of relationships to the U.S.,
unless the broker has documentary evidence in its records that the holder is a
non-U.S. holder and certain other conditions are met or the holder otherwise
established an exemption.
Backup withholding is not an additional tax. Any amounts that we withhold
under the backup withholding rules will be refunded or credited against the
non-U.S. holder's U.S. federal income tax liability if certain required
information is furnished to the IRS.
The U.S. Treasury Department has promulgated final regulations regarding the
withholding and information reporting rules discussed above. In general, those
regulations do not significantly alter the substantive withholding and
information reporting requirements but unify current certification procedures
and forms and clarify reliance standards. The final regulations are generally
effective for payments made after December 31, 2000, subject to transition
rules.
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<PAGE>
UNDERWRITING
We and the underwriters named below have entered into an underwriting
agreement covering the common stock to be offered in this offering. Donaldson,
Lufkin & Jenrette Securities Corporation, Credit Suisse First Boston
Corporation and The Robinson-Humphrey Company, LLC are acting as
representatives of the underwriters. Each underwriter has agreed to purchase
the number of shares of common stock set forth opposite its name in the
following table.
<TABLE>
<CAPTION>
Underwriters: Number of Shares
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation........
Credit Suisse First Boston Corporation.....................
The Robinson-Humphrey Company, LLC.........................
---------
Total.................................................... 6,333,333
=========
</TABLE>
The underwriting agreement provides that if the underwriters take any of the
shares set forth in the table above, then they must take all of these shares.
No underwriter is obligated to take any shares allocated to a defaulting
underwriter except under limited circumstances.
The underwriters are offering the shares of common stock, subject to the
prior sale of such shares, and when, as and if such shares are delivered to and
accepted by them. The underwriters will initially offer to sell shares to the
public at the initial public offering price set forth on the cover page of this
prospectus. The underwriters may also sell shares to securities dealers at a
discount of up to $ per share from the initial public offering price. Any
such securities dealers may resell shares to certain other brokers or dealers
at a further discount of up to $ per share. After the initial public
offering, the underwriters may change the public offering price and other
selling terms. The underwriters do not intend to confirm sales to any accounts
over which they exercise discretionary authority.
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have the option to buy up to an additional
949,999 shares of common stock from AirGate to cover such sales. They may
exercise this option during the 30-day period from the date of this prospectus.
If any shares are purchased with this option, the underwriters will purchase
shares in approximately the same proportion as set forth in the table above.
The following table shows the per share and total underwriting discounts and
commissions that AirGate will pay to the underwriters. These amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.
<TABLE>
<CAPTION>
Paid by AirGate
-------------------------
No exercise Full exercise
<S> <C> <C>
Per share......................................... $ $
---- ----
Total........................................... $ $
==== ====
</TABLE>
We estimate that the total expenses of this offering, excluding underwriting
discounts and commissions, will be $1.0 million.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933.
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<PAGE>
At our request, the underwriters have reserved shares of common stock for
sale at the initial public offering price to directors, officers, employees and
retirees of AirGate who have expressed an interest in participating in the
offering. We expect these persons to purchase no more than 5% of the common
stock offered in the offering. The number of shares available for sale to the
general public will be reduced to the extent such persons purchase such
reserved shares. The underwriters will offer unpurchased reserved shares to the
general public on the same basis as the other offered shares.
We and all of our current stockholders, Lucent, members of senior management
and directors have agreed that, for a period of 180 days from the date of this
prospectus, we will not, without the prior written consent of Donaldson, Lufkin
& Jenrette Securities Corporation, do either of the following:
. offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock; or
. enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any common
stock.
In addition, during such period, except for the registration of shares
underlying options in our stock option plan and the shelf registration
statement for shares underlying warrants issued in the units offering, we have
also agreed not to file any registration statement with respect to, and each of
our executive officers and directors and several of our stockholders have
agreed not to make any demand for, or exercise any right with respect to, the
registration of any shares of common stock or any securities convertible into
or exercisable or exchangeable for common stock without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation.
Either of the foregoing transaction restrictions will apply regardless of
whether a covered transaction is to be settled by the delivery of common stock
or such other securities, in cash or otherwise. Further, the shares of common
stock underlying the warrants issued in the units offering will become freely
tradeable no later than 180 days after the closing of the units offering.
Application has been made to list the common stock on the Nasdaq National
Market under the symbol "PCSA." In order to meet the requirements for listing
the common stock on the Nasdaq National Market, the underwriters have
undertaken to sell lots of 100 to a minimum of 400 beneficial owners.
Other than in the United States, no action has been taken by AirGate or the
underwriters that would permit a public offering of the shares of common stock
included in this offering in any jurisdiction where action for that purpose is
required. The shares included in this offering may not be offered or sold,
directly or indirectly, nor may this prospectus or any other offering material
or advertisement in connection with the offer and sale of any such shares be
distributed or published in any jurisdiction, except under circumstances that
will result in compliance with the applicable rules and regulations of such
jurisdiction. This prospectus is not an offer to sell or a solicitation of an
offer to buy any shares of common stock included in this offering in any
jurisdiction where that would not be permitted or legal.
We expect that delivery of the shares will be made to investors on or about
, 1999.
The underwriters may purchase and sell shares of common stock in the open
market in connection with this offering. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the underwriters of a greater
number of shares than they are required to purchase in the offering.
Stabilizing transactions
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<PAGE>
consist of certain bids or purchases made for the purpose of preventing or
slowing a decline in the market price of the common stock while the offering is
in progress. The underwriters may also impose a penalty bid, which means that
an underwriter must repay to the other underwriters a portion of the
underwriting discount received by it. An underwriter may be subject to a
penalty bid if the representatives of the underwriters, while engaging in
stabilizing or short covering transactions, repurchase shares sold by or for
the account of that underwriter. These activities may stabilize, maintain or
otherwise affect the market price of the common stock. As a result, the price
of the common stock may be higher than the price that otherwise might exist in
the open market. If the underwriters commence these activities, they may
discontinue them at any time. The underwriters may carry out these transactions
on the Nasdaq National Market, in the over-the-counter market or otherwise.
Donaldson, Lufkin & Jenrette Securities Corporation and Credit Suisse First
Boston Corporation are also acting as underwriters under our concurrent
offering of units, for which they will receive underwriting discounts and
commissions customary for performing such services. In addition, Donaldson,
Lufkin & Jenrette Securities Corporation served as our financial advisor in the
negotiation of our financing with Lucent, for which Donaldson, Lufkin &
Jenrette Securities Corporation is entitled to receive fees customary for
performing such services.
Pricing of this Offering
Prior to this offering, there has been no public market for our common stock.
Consequently, the initial public offering price for our common stock was
determined by negotiation among us and the representatives of the underwriters.
Among the factors considered in determining the public offering price were:
. prevailing market conditions;
. our results of operations in recent periods;
. the present stage of our development;
. the market capitalization and stages of development of other companies
which the representatives of the underwriters believe to be comparable to
us; and
. estimates of our business potential.
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<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the sale of the shares of common
stock offered hereby will be passed upon for AirGate by Patton Boggs LLP,
Washington D.C. and for the underwriters by Skadden, Arps, Slate, Meagher &
Flom (Illinois), Chicago, Illinois.
EXPERTS
The consolidated financial statements of AirGate PCS, Inc. and subsidiaries
and predecessors as of December 31, 1998 and 1997, and for each of the years in
the three-year period ended December 31, 1998 and for the period from
inception, June 15, 1995, to December 31, 1998, have been included herein and
in the registration statement in reliance upon the report of KPMG LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing. The report of
KPMG LLP contains an explanatory paragraph that states that AirGate has
incurred recurring losses from operations and has a working capital and an
accumulated deficit that raise substantial doubt about its ability to continue
as a going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of that uncertainty.
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 with respect to our concurrent offerings of common stock
and units, consisting of senior subordinated discount notes and warrants. This
prospectus does not contain all of the information set forth in the
registration statement. For further information about us and our securities,
see the registration statement and its exhibits. This prospectus contains a
description of the material terms and features of all material contracts,
reports or exhibits to the registration statement required to be disclosed.
However, as the descriptions are summaries of the contracts, reports or
exhibits, we urge you to refer to the copy of each material contract, report
and exhibit attached to the registration statement. Copies of the registration
statement, including exhibits, may be examined without charge in the Public
Reference Section of the Securities and Exchange Commission, 450 Fifth Street,
N.W. Room 1024, Washington, DC 20549, and the Securities and Exchange
Commission's Regional Offices located at 500 West Madison Street, Suite 1400,
Chicago, IL 60601, and 7 World Trade Center, 13th Floor, New York, NY 10048 or
on the Internet at http://www.sec.gov. You can get information about the
operation of the Public Reference Room by calling the Securities and Exchange
Commission at 1-800-SEC-0300. Copies of all or a portion of the registration
statement can be obtained from the Public Reference Section of the Securities
and Exchange Commission upon payment of prescribed fees.
As a result of this offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act of 1934 and will be
required to file periodic reports, proxy statements and other information with
the Securities and Exchange Commission.
93
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AIRGATE PCS, INC. AND SUBSIDIARIES AND PREDECESSORS
(A Development Stage Enterprise)
<TABLE>
<S> <C>
Independent Auditors' Report............................................. F-2
Consolidated Balance Sheets as of December 31, 1998 and 1997............. F-3
Consolidated Statements of Operations for the years ended December 31,
1998, 1997 and 1996 and for the period from inception, June 15, 1995, to
December 31, 1998....................................................... F-4
Consolidated Statements of Stockholder's Deficit for the years ended
December 31, 1998, 1997 and 1996 and for the period from inception, June
15, 1995, to December 31, 1998.......................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1998, 1997 and 1996 and for the period from inception, June 15, 1995, to
December 31, 1998....................................................... F-6
Notes to Consolidated Financial Statements............................... F-7
Unaudited Consolidated Balance Sheet as of June 30, 1999................. F-21
Unaudited Consolidated Statements of Operations for the six-month periods
ended June 30, 1999 and 1998............................................ F-22
Unaudited Consolidated Statements of Cash Flows for the six-month periods
ended June 30, 1999 and 1998............................................ F-23
Notes to Unaudited Consolidated Financial Statements..................... F-24
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
AirGate PCS, Inc.:
We have audited the accompanying consolidated balance sheets of AirGate PCS,
Inc. and subsidiaries and predecessors (a development stage enterprise) as of
December 31, 1998 and 1997, and the related consolidated statements of
operations, stockholder's deficit, and cash flows for each of the years in the
three-year period ended December 31, 1998 and for the period from inception,
June 15, 1995, to December 31, 1998. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of AirGate
PCS, Inc. and subsidiaries and predecessors (a development stage enterprise) as
of December 31, 1998 and 1997, and the results of their operations and their
cash flows for each of the years in the three-year period ended December 31,
1998 and for the period from inception, June 15, 1995, to December 31, 1998 in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that AirGate PCS, Inc. and subsidiaries and predecessors (a
development stage enterprise) will continue as a going concern. As discussed in
note 2 to the consolidated financial statements, AirGate PCS, Inc. and
subsidiaries and predecessors have incurred recurring losses from operations
and have a working capital and an accumulated deficit that raise substantial
doubt about their ability to continue as a going concern. Management's plans in
regard to these matters are also described in note 2. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
KPMG LLP
April 28, 1999, except for notes 13(g) 13(h) and 13(i) which are as of July 9,
July 28, and September 15, 1999, respectively
Atlanta, Georgia
F-2
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARIES AND PREDECESSORS
(a Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of December 31,
-------------------------
1998 1997
------------ -----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents......................... $ 2,295,614 $ 146,939
Due from AirGate Wireless, LLC (note 6)........... 378,260 --
Prepaid expenses.................................. 100,333 4,713
------------ -----------
Total current assets............................ 2,774,207 151,652
FCC licenses, net (note 5).......................... -- 13,702,577
Property and equipment, net (note 4)................ 12,545,365 16,967
Other assets........................................ 130,915 --
------------ -----------
$ 15,450,487 $13,871,196
============ ===========
Liabilities and Stockholder's Deficit
Current liabilities:
Accounts payable.................................. $ 1,449,255 $ 37,883
Accrued interest.................................. 686,707 573,746
Notes payable (note 7(a))......................... 6,000,000 2,800,000
Notes payable to affiliates (note 7(b))........... 4,965,000 465,000
Current maturities of long-term debt (note 7(c)).. 3,380,523 --
------------ -----------
Total current liabilities....................... 16,481,485 3,876,629
Long-term debt, excluding current maturities (note
7(c)).............................................. 4,319,477 11,745,066
------------ -----------
Total liabilities............................... 20,800,962 15,621,695
------------ -----------
Stockholder's deficit (notes 8, 9 and 13):
Preferred stock, par value $.01 per share;
5,000,000 shares authorized; no shares issued and
outstanding...................................... -- --
Common stock, par value $.01 per share; 25,000,000
shares authorized; 3,506,617 shares issued and
outstanding at December 31, 1998 ................ 35,066 --
Additional paid-in capital........................ 6,268,879 4,711,429
Deficit accumulated during the development stage.. (11,654,420) (6,461,928)
------------ -----------
Total stockholder's deficit..................... (5,350,475) (1,750,499)
------------ -----------
Commitments and contingencies (notes 7, 8, 11 and
13)
Total liabilities and stockholder's deficit..... $ 15,450,487 $13,871,196
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARIES AND PREDECESSORS
(a Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period from
Inception,
Years Ended December 31, June 15, 1995,
------------------------------------- to December 31,
1998 1997 1996 1998
----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C>
Operating expenses:
General and
administrative
expenses.............. $(2,596,534) $(1,101,054) $(1,252,027) $ (6,407,615)
Depreciation and
amortization.......... (1,203,945) (997,761) (18,965) (2,238,671)
----------- ----------- ----------- ------------
Operating loss...... (3,800,479) (2,098,815) (1,270,992) (8,646,286)
Interest expense........ (1,392,013) (817,164) (582,349) (3,008,134)
----------- ----------- ----------- ------------
Net loss............ $(5,192,492) $(2,915,979) $(1,853,341) $(11,654,420)
=========== =========== =========== ============
Basic and diluted net
loss per share of
common stock........... $ (1.48) $ (0.83) $ (0.53)
=========== =========== ===========
Weighted average common
shares outstanding..... $ 3,506,617 $ 3,506,617 $ 3,506,617
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARIES AND PREDECESSORS
(a Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIT
<TABLE>
<CAPTION>
Years ended December 31, 1998, 1997, and 1996 and the period
from inception,
June 15, 1995, to December 31, 1998
-----------------------------------------------------------------
Deficit
accumulated
Common stock Additional during the Total
----------------------- paid-in development stockholder's
Shares Amount capital stage deficit
---------- ---------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance at June 15, 1995
(inception)............ -- $ -- $ -- $ -- $ --
Loan conversions (note
9(b)).................. -- -- 420,119 -- 420,119
Net loss................ -- -- -- (1,692,608) (1,692,608)
---------- ---------- ---------- ------------ -----------
Balance at December 31,
1995................... -- -- 420,119 (1,692,608) (1,272,489)
Loan conversions (note
9(b)).................. -- -- 100,710 -- 100,710
Net loss................ -- -- -- (1,853,341) (1,853,341)
---------- ---------- ---------- ------------ -----------
Balance at December 31,
1996................... -- -- 520,829 (3,545,949) (3,025,120)
Loan conversions (note
9(b)).................. -- -- 4,683,544 -- 4,683,544
Cash distribution (note
9(c)).................. -- -- (492,944) -- (492,944)
Net loss................ -- -- -- (2,915,979) (2,915,979)
---------- ---------- ---------- ------------ -----------
Balance at December 31,
1997................... -- -- 4,711,429 (6,461,928) (1,750,499)
Formation of AirGate
PCS, Inc. (note 1(a)).. 3,506,617 35,066 (35,066) -- --
Distribution of AirGate
Wireless, LLC (note
9(a)).................. -- -- 1,592,516 -- 1,592,516
Net loss................ -- -- -- (5,192,492) (5,192,492)
---------- ---------- ---------- ------------ -----------
Balance at December 31,
1998................... 3,506,617 $ 35,066 $6,268,879 $(11,654,420) $(5,350,475)
========== ========== ========== ============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARIES AND PREDECESSORS
(a Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
Years ended December 31, Inception,
--------------------------------------- June 15, 1995,
1998 1997 1996 to December 31, 1998
------------ ----------- ------------ --------------------
<S> <C> <C> <C> <C>
Cash flows from
operating activities:
Net loss................ $ (5,192,492) $(2,915,979) $ (1,853,341) $(11,654,420)
Adjustments to reconcile
net loss to net cash
(used in) provided by
operating activities:
Depreciation and
amortization......... 1,203,945 997,761 18,965 2,238,671
(Increase) decrease
in:
Due from AirGate
Wireless, LLC...... (378,260) -- -- (378,260)
FCC deposit......... -- -- 20,000,000 --
Prepaid expenses.... (95,620) (4,713) -- (100,333)
Other assets........ (130,915) 2,086,869 1,039,752 2,216,461
Increase (decrease)
in:
Accounts payable.... 1,411,372 18,495 (95,596) 1,436,445
Accrued interest.... 1,006,577 587,449 640,636 2,443,779
------------ ----------- ------------ ------------
Net cash (used in)
provided by
operating
activities....... (2,175,393) 769,882 19,750,416 (3,797,657)
------------ ----------- ------------ ------------
Cash flows from
investing activities:
Capital expenditures.. (5,175,932) -- -- (5,237,399)
Purchase of FCC
licenses............. -- (2,936,267) -- (2,936,267)
------------ ----------- ------------ ------------
Net cash used in
investing
activities....... (5,175,932) (2,936,267) -- (8,173,666)
------------ ----------- ------------ ------------
Cash flows from
financing activities:
Proceeds from notes
payable.............. 5,000,000 2,800,000 -- 7,800,000
Proceeds from notes
payable to
affiliates........... 5,200,000 -- -- 25,620,119
Payments on notes
payable to
affiliates........... (700,000) -- (20,000,000) (20,700,000)
Cash distribution..... -- (492,944) -- (492,944)
------------ ----------- ------------ ------------
Net cash provided
by (used in)
financing
activities....... 9,500,000 2,307,056 (20,000,000) 12,227,175
------------ ----------- ------------ ------------
Net increase
(decrease) in
cash and cash
equivalents...... 2,148,675 140,671 (249,584) 255,852
Cash and cash
equivalents at
beginning of period.... 146,939 6,268 255,852 --
------------ ----------- ------------ ------------
Cash and cash
equivalents at end of
period................. $ 2,295,614 $ 146,939 $ 6,268 $ 255,852
============ =========== ============ ============
Supplemental disclosure
of cash flow
information--cash paid
for interest........... $ 1,279,052 $ 930,125 $ -- $ --
============ =========== ============ ============
Supplemental disclosure
of noncash investing
and financing
activities:
Assets acquired through
assumption of debt:
FCC licenses.......... $ -- $11,745,066 $ -- $ --
Site acquisition and
engineering costs.... 7,700,000 -- -- --
Notes payable and
accrued interest
converted to equity.. -- (4,683,544) (100,710) (420,119)
============ =========== ============ ============
Distribution of AirGate
Wireless, LLC:
Accrued interest...... $ (893,616) $ -- $ -- $ --
Long-term debt........ (11,745,066) -- -- --
FCC licenses, net..... 12,846,166 -- -- --
Line of credit........ (1,800,000) -- -- --
============ =========== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARIES AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and 1997
(1) Business, Basis of Presentation and Summary of Significant Accounting
Policies
(a) Business and Basis of Presentation
AirGate PCS, Inc. and subsidiaries and predecessors (collectively, the
"Company") were formed for the purpose of becoming a leading provider of
wireless Personal Communication Services (PCS). AirGate PCS, Inc. was formed in
August 1998 to become a provider of PCS services exclusively licensed to use
the Sprint PCS brand name in 21 markets located in the southeastern United
States. The consolidated financial statements included herein include the
accounts of AirGate PCS, Inc., formed August 1998, and its wholly owned
subsidiaries (AirGate Wireless, Inc., formed October 1998, and AGW Leasing
Company, Inc., formed December 1998) from their formation in August 1998 and
their predecessor entities (AirGate, LLC, formed July 1995, AirGate Wireless,
LLC, formed June 1996, and AirLink II, LLC, formed July 1995), for all periods
presented, except that AirGate Wireless, LLC has been excluded effective August
4, 1998 as described below. AirGate, LLC is the parent, and owns 100% of the
outstanding common stock of AirGate PCS, Inc. The financial position and
results of operations of these predecessor entities have been included because
of common ownership and management. All significant intercompany accounts and
transactions have been eliminated in consolidation.
From inception through August 1998, the predecessor entities' operating
activities focused on developing a PCS business in the southeastern United
States. These activities included the purchase of four Federal Communications
Commission ("FCC") PCS licenses. In July 1998, the Company decided to pursue a
different PCS business opportunity and signed a series of agreements with
SprintCom, Inc. (the "Sprint Agreements") to build, construct and manage a PCS
network that will support the offering of Sprint PCS services. To date, the
Company has not paid any consideration for the use of the Sprint PCS licenses.
As a result of this change in business strategy, AirGate Wireless, LLC, which
consists solely of the FCC licenses and related liabilities, was not
transferred to its successor entity, AirGate PCS, Inc. by AirGate, LLC because
its asset and liabilities will not be included in the continuing operations of
the Company.
The PCS market is characterized by significant risks as a result of rapid
changes in technology, increasing competition and the cost associated with the
build-out of a PCS network. The Company's continuing operations are dependent
upon Sprint's ability to perform is obligations under the Sprint Agreements and
the ability of the Company to raise sufficient capital to fund operating
losses, to meet debt service requirements, and to complete the build-out of the
PCS network. Additionally, the Company's ability to attract and maintain a
sufficient customer base is critical to achieving breakeven cash flow. Changes
in technology, increased competition, or the inability to obtain required
financing, among other factors, could have an adverse effect on the Company's
financial position and results of operations.
(b) Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly
liquid investments with original maturities of three months or less to be cash
equivalents. Cash and cash equivalents includes amounts on deposit with
commercial banks including a money market account.
F-7
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARIES AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
(c) FCC Licenses
FCC licenses are stated at cost less accumulated amortization. Amortization
is provided using the straight-line method over the estimated useful lives of
ten years.
(d) Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation and
amortization. Depreciation is provided using the straight-line method over the
estimated useful lives of the assets. Capitalized interest on construction
activity during 1998 was not material. Asset lives are as follows:
<TABLE>
<CAPTION>
Asset Useful life
----- -----------
<S> <C>
Site acquisition and engineering costs........................ 10 years
Computer equipment............................................ 3 years
Furniture, fixtures, and office equipment..................... 5 years
</TABLE>
(e) Income Taxes
Prior to the formation of AirGate PCS, Inc. in August 1998, the predecessors
of AirGate PCS, Inc. were operated as limited liability companies. As a result,
income taxes were passed through to and were the responsibility of the
stockholders of the predecessors.
The Company uses the asset and liability method of accounting for income
taxes. Deferred income tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis and net operating loss and tax credit carryforwards. Deferred income tax
assets and liabilities are measured using enacted tax rates expected to apply
to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred income tax assets
and liabilities of a change in tax rates is recognized in the statement of
operations in the period that includes the enactment date.
The Company has not provided any pro forma income tax information for periods
prior to August 1998 because such information would not be significant to the
accompanying consolidated financial statements.
(f) Net Loss Per Share
The Company has presented net loss per common share pursuant to SFAS No. 128,
"Earnings per Share." Basic net loss per share of common stock is computed by
dividing net loss by the weighted average number of common shares outstanding.
Diluted net loss per share has not been presented separately, as the potential
common shares are anti-dilutive for each of the periods presented.
(g) Revenue Recognition
The Company will recognize revenue as services are performed. An affiliation
fee of 8% will be withheld by Sprint on collected service revenues and recorded
as an operating expense. Revenues generated from the sale of handsets and
accessories and from roaming services provided to customers traveling onto our
PCS network are not subject to the 8% affiliation fee.
F-8
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARIES AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
(h) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
The Company accounts for long-lived assets in accordance with the provisions
of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of. This Statement requires that long-lived
assets and certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future net cash
flows expected to be generated by the asset. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying amount or fair
value less costs to sell.
(i) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent liabilities at the dates of the consolidated balance sheets and
expenses during the reporting periods to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
(j) Start-Up Activities
In April 1998, the AICPA issued Statement of Position 98-5, "Reporting on the
Costs of Start-Up Activities." This statement became effective January 1, 1999
and requires that costs of start-up activities and organization costs be
expensed as incurred. The Company has expensed all costs of start-up activities
and organization costs. The adoption of this statement will not have an effect
on the Company's financial position or results of operations.
(2) Liquidity
Since inception, the Company has been engaged in preparing business plans,
raising capital and planning and designing the build-out of its PCS network. As
a result, the Company has not generated any revenues and losses from inception
through December 31, 1998 have amounted to $11,654,420.
Despite these negative cash flows, the Company has been able to secure
financing from a variety of sources to support its development to date. These
sources have included both equity and debt financing.
Significant amounts of additional financing will be required to build-out the
PCS network and commence commercial operations. Based on the Company's current
business plan, it is estimated that more than $347 million will be required to
fund capital expenditures, principal payments on short and long-term debt, and
losses from operations until the Company reaches breakeven cash flow.
While there is no assurance that funding will be available to execute these
plans, the Company is actively seeking financing and is exploring a number of
alternatives in this regard.
F-9
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARIES AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
(3) Development Stage Enterprise
AirGate, LLC, the first predecessor entity of the Company, was established on
June 15, 1995 (inception). The Company has devoted most of its efforts to date
to activities such as preparing business plans, raising capital, and planning
the build-out of its PCS network. From inception through December 31, 1998, the
Company has not generated any revenues and has incurred expenses of
$11,654,420, resulting in an accumulated deficit during the development stage
of $11,654,420 as of December 31, 1998.
(4) Property and Equipment
Property and equipment consists of the following at December 31, 1998 and
1997:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Site acquisition and engineering costs............ $12,838,340 $ --
Computer equipment................................ 74,487 48,404
Furniture, fixtures, and office equipment......... 24,572 13,063
----------- -----------
Total property and equipment.................... 12,937,399 61,467
Less accumulated depreciation and amortization.... 392,034 44,500
----------- -----------
Property and equipment, net..................... $12,545,365 $ 16,967
=========== ===========
</TABLE>
Site acquisition and engineering costs consists of construction costs, switch
site improvements, RF engineering services, and site acquisitions and
engineering costs incurred related to the network design and build-out.
(5) FCC Licenses, Net
In April 1997, the Company participated in the FCC's auction of certain PCS
licenses. In connection with this auction, AirGate Wireless, LLC, a predecessor
to AirGate PCS, Inc., acquired four F Block PCS licenses for $14,681,333
consisting of $2,936,267 in cash and installment plan notes payable to the FCC
of $11,745,066. These FCC licenses are being amortized using the straight-line
method over an estimated useful life of 10 years. In July 1998, the Company
decided to pursue a different PCS business opportunity. As a result, upon
formation of AirGate PCS, Inc. in August 1998, AirGate Wireless, LLC, which
consists solely of the FCC licenses and related liabilities has been removed
from the consolidated financial statements because its assets and liabilities
were not transferred to AirGate PCS, Inc. and will not be included in the
continuing operations of the Company. FCC licenses consist of the following at
December 31, 1997:
<TABLE>
<CAPTION>
1997
-----------
<S> <C>
FCC licenses.................................................. $14,681,333
Less accumulated amortization................................. 978,756
-----------
FCC licenses, net........................................... $13,702,577
===========
</TABLE>
F-10
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARIES AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
(6) Due From AirGate Wireless, LLC
AirGate Wireless, LLC, a predecessor entity, which consists solely of the FCC
Licenses and related liabilities, was not transferred to AirGate PCS, Inc., its
successor entity, because its assets and liabilities will not be included in
the continuing operations of the Company. The Company made interest payments
totaling $378,260 during 1998 related to these liabilities on behalf of AirGate
Wireless, LLC. The Company has established an amount due from AirGate Wireless,
LLC which is expected to be paid with proceeds from the sale of the FCC
licenses by AirGate Wireless, LLC.
(7) Notes Payable and Long-Term Debt
(a) Notes Payable consist of the following at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Note payable to bank under revolving line of
credit facility; interest at prime plus 1% due
monthly (10.25% at December 31, 1997); matures on
May 1, 1999; guaranteed by affiliates (note
9(a))............................................ $ -- $ 1,800,000
Note payable to bank; interest at prime plus .5%
due monthly (8.25% and 9.75% at December 31, 1998
and 1997, respectively); principal due in a
single payment on May 9, 1999; guaranteed by
affiliates (see note 13(f))...................... 1,000,000 1,000,000
Secured promissory note, dated November 25, 1998,
interest at 9.5%; interest and principal due at
the earlier of: (1) the first drawdown on the
vendor equipment financing or (2) June 30, 1999.. 5,000,000 --
----------- -----------
$ 6,000,000 $ 2,800,000
=========== ===========
</TABLE>
In November 1998, an equipment vendor loaned $5 million to the Company under
a secured promissory note. The proceeds of the loan are intended to finance the
purchase of products and services from the vendor and to satisfy short-term
working capital needs of the Company, approved by the vendor consisting of
engineering, network construction, switch site improvements, network equipment
and collocation expenses. The $5 million secured promissory note payable to the
vendor is secured by all assets of the Company.
Additionally, the Company entered into a secured equipment loan note for $10
million with the equipment vendor which may be used solely to finance the
purchase of its products and services. At December 31, 1998, no amounts were
outstanding related to the equipment loan note.
F-11
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARIES AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
(b) Notes Payable to Affiliates consist of the following at December 31, 1998
and 1997:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Notes payable to affiliates dated June 11, 1996;
interest at 8%; payable based upon the occurrence
of an equity financing or June 11, 1999 (see note
13(h)) .......................................... $ 150,000 $ 150,000
Notes payable to affiliates dated June 11, 1996;
interest at 8%; due and payable at maturity;
matures in conjunction with a merger or sale of
the Company or June 11, 1999..................... -- 135,000
Note payable to an affiliate dated September 27,
1996; interest at 8%; due and payable at
maturity; payable or convertible on August 8,
1998............................................. -- 180,000
Convertible promissory notes payable to affiliates
dated August 8, 1998; interest at 8%; principal
and interest due on September 18, 1999 (see notes
9(d) and 13(d)).................................. 4,815,000 --
----------- -----------
$ 4,965,000 $ 465,000
=========== ===========
</TABLE>
The convertible promissory notes payable to affiliates have a face value of
$4,815,000 at December 31, 1998 and mature at September 18, 1999, unless
converted earlier. The notes are convertible into preferred or common stock at
any time at the option of the holder and automatically convert upon the closing
of the first equity financing in which AirGate PCS, Inc. sells shares of its
equity securities for an aggregate consideration of at least $70,000,000 and at
a premoney valuation of AirGate PCS, Inc. of at least $50,000,000 (see note
13(d)).
In March and April 1999, the Company received an additional $1.5 million of
short-term financing in the form of convertible notes from affiliates. All
notes bear interest at 8%, are payable upon demand and automatically convert
into shares of common stock at a 48% discount upon the Initial Public Offering
of AirGate PCS, Inc.
(c) Long-Term Debt consists of the following at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
FCC installment plan notes dated April 28, 1997;
interest payments at 6.25% due in eight equal
quarterly payments beginning July 31, 1998 and
ending April 30, 2000; principal and interest
payments of $469,207 are due quarterly beginning
July 28, 1999 until January 28, 2007............ $ -- $11,745,066
Unsecured promissory note dated July 22, 1998;
interest at 14%; principal and interest payments
of $1,120,170 due quarterly commencing March 1,
1999 and ending December 1, 2000 (see note
13(e)).......................................... 7,700,000 --
----------- -----------
Total long-term debt........................... 7,700,000 11,745,066
Less current maturities.......................... 3,380,523 --
----------- -----------
Long-term debt, excluding current maturities... $ 4,319,477 $11,745,066
=========== ===========
</TABLE>
F-12
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARIES AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
As of December 31, 1998, management believes the Company is in compliance
with all outstanding debt covenants. Failure of the Company to obtain
additional financing during 1999 on a timely basis could result in the
inability of the Company to meet its future debt service requirements.
Aggregate minimum annual principal payments due on long-term debt for the
next two years at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
Years ending
December 31,
------------
<S> <C>
1999........................................................... $3,380,523
2000........................................................... 4,319,477
----------
Total long-term debt......................................... $7,700,000
==========
</TABLE>
(8) Commitments
(a) Lease Commitments
The Company is obligated under noncancelable operating lease agreements for
office space and cell sites. Future minimum annual lease payments under these
noncancelable operating lease agreements for the next five years and in the
aggregate are as follows:
<TABLE>
<CAPTION>
Year ending
December 31,
------------
<S> <C>
1999.......................................................... $ 594,736
2000.......................................................... 641,622
2001.......................................................... 612,217
2002.......................................................... 465,345
2003.......................................................... 365,422
Thereafter.................................................... 548,346
----------
Total future minimum annual lease payments.................. $3,227,688
==========
</TABLE>
The Company made lease payments to a related party for office space. A
written lease agreement does not exist; however, the payments are $6,000 per
month and $60,000 was paid to this related party for the year ended December
31, 1998. The Company believes that the terms of this related party lease
arrangement are comparable to terms that the Company could have obtained with
an unrelated third party.
Rental expense for all operating leases was $292,842, $44,134, and $24,291
for the years ended December 31, 1998, 1997, and 1996, respectively.
The Company has entered into a Master Site Lease Agreement with BellSouth
Personal Communications, Inc. whereby the Company has the right to lease tower
space for the Company's communications and network equipment. The Company paid
$100,000 in August 1998 to BellSouth for reimbursement of preparation and
processing of the tower sites. In addition, the Company has paid $80,000
through December 31, 1998 in prepaid rent in order to exercise its right of
first refusal to lease four tower sites. Future minimum annual lease payments
under this arrangement, excluding one-time site cost reimbursements not to
exceed $10,000 per site, as of December 31, 1998 are as follows:
F-13
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARIES AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
<TABLE>
<S> <C>
1999............................................................. $ 80,000
2000............................................................. 80,000
2001............................................................. 80,000
2002............................................................. 80,000
2003............................................................. 80,000
Thereafter....................................................... 480,000
--------
Total future minimum annual lease payments..................... $880,000
========
</TABLE>
(b) Employment Commitment
On April 9, 1999, the Company entered into an employment agreement with
Thomas Dougherty, the Company's new president and chief executive officer. This
agreement included a stock option grant, which allows Mr. Dougherty the option
to purchase a total number of shares equal to approximately 2.0% of the fully
diluted common shares of AirGate PCS, Inc. Additionally, if the Company
successfully completes an Initial Public Offering or private placement offering
in which at least $50,000,000 in new equity funds are raised before April 15,
2000, the Company agrees to award an additional option to Mr. Dougherty so
that, after such financing he will continue to hold stock options equal to 2%
of the number of shares outstanding. See note 13(h).
(9) Stockholder's Deficit
(a) Distribution of AirGate Wireless, LLC
In July 1998, the Company decided to pursue a different PCS business
opportunity. As a result, upon formation of AirGate PCS, Inc. on August 4,
1998, AirGate Wireless, LLC, which consists solely of the FCC licenses and
related liabilities, has been removed from the consolidated financial
statements because its assets and liabilities were not transferred to AirGate
PCS, Inc. and will not be included in the continuing operations of the Company.
These assets and liabilities included the FCC licenses, net, FCC installment
plan notes payable, a revolving line of credit with a commercial bank, and
related accrued interest with carrying values of $12,846,166, $11,745,066,
$1,800,000, and $893,616 at August 4, 1998, respectively.
(b) Loan Conversions
During the years ended December 31, 1997, 1996 and the period from inception,
June 15, 1995, to December 31, 1995, $4,683,544, $110,710 and $420,119,
respectively, of notes payable to affiliates including accrued interest were
converted to additional paid-in capital in accordance with the respective terms
of the note agreements.
(c) Cash Distribution
During the years ended December 31, 1997 and 1996 and the period from
inception, June 15, 1995, to December 31, 1995, the affiliates agreed to
convert outstanding notes to additional paid-in capital as described under loan
conversions above. During the year ended December 31, 1997, in connection with
the purchase of FCC licenses, the Company received a refund of $492,944 from
the FCC which the Company paid to the affiliates in the form of a cash
distribution.
F-14
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARIES AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
(d) Stock Purchase Warrants
In August 1998, the Company issued stock purchase warrants to affiliates in
consideration for: (1) loans made by the affiliates to the Company which have
been converted to additional paid-in capital, (2) guarantees of certain bank
loans provided by the affiliates, and (3) in connection with the $4,815,000 in
convertible debt financing provided by the affiliates. The warrants enabled the
holders to purchase either preferred stock or common stock. The number of
shares available for purchase under the terms of the warrants are based upon a
predetermined formula which is contingent on the amount of financing provided
or guaranteed and the price per share received by the Company in the next
financing round. The exercise price under the terms of the warrants would equal
the price per share received by the Company in the next financing round and the
warrants were exercisable for five years. All of these warrants were cancelled
in connection with the debt consolidation described in note 13(d).
The Company has not reflected the fair value of the warrants as a charge to
interest expense because such amount was not significant.
(e) Preferred Stock
The Company's articles of incorporation authorize the Company's Board of
Directors to issue up to 5 million shares of preferred stock without
shareholder approval. The Company has no present plans to issue any preferred
stock.
(10) Income Taxes
Prior to the formation of AirGate PCS, Inc. in August 1998, the predecessors
of the Company were operated as limited liability companies. As a result,
income taxes were passed through to and were the responsibility of the
stockholders of the predecessors.
The Company has not provided any pro forma income tax information for periods
prior to August 1998 because such information would not be significant to the
accompanying consolidated financial statements.
The provision for income taxes includes income taxes currently payable and
those deferred because of temporary differences between the financial statement
and tax bases of assets and liabilities that will result in taxable or
deductible amounts in the future and any increase or decrease in the valuation
allowance for deferred income tax assets.
Income tax expense (benefit) for the year ended December 31, 1998 differed
from the amount computed by applying the statutory U.S. Federal income tax rate
of 34% to loss before income taxes as a result of the following:
<TABLE>
<CAPTION>
1998
-----------
<S> <C>
Computed "expected" tax expense............................. $(1,765,447)
Expense related to LLC predecessors......................... 568,939
State and local income taxes, net of Federal income tax
effect..................................................... (187,416)
Increase in valuation allowance............................. 1,893,093
Benefit derived from contribution of tax assets............. (414,993)
Other, net.................................................. (94,176)
-----------
Total income tax expense (benefit)........................ $ --
===========
</TABLE>
F-15
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARIES AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
The income tax effects of temporary differences that give rise to the
Company's deferred income tax assets as of December 31, 1998 are as follows:
<TABLE>
<CAPTION>
1998
-----------
<S> <C>
Deferred income tax assets:
Net operating loss carryforwards.......................... $ 302,085
Capitalized start-up costs................................ 1,381,634
Accrued expenses.......................................... 28,702
Property and equipment due to differences in depreciation
and amortization......................................... 180,672
-----------
Gross deferred income tax asset......................... 1,893,093
Less valuation allowance.................................. (1,893,093)
-----------
Net deferred income tax asset........................... $ --
===========
</TABLE>
In assessing the realizability of deferred income tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred income tax assets will not be realized. The ultimate realization of
deferred income tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become
deductible. Management considers the projected future taxable income and tax
planning strategies in making this assessment.
The increase in deferred income tax assets and the increase in the valuation
allowance for the net deferred income tax assets for the year ended December
31, 1998 was $1,893,093. Deferred income tax assets and liabilities are
recognized for differences between the financial statement carrying amounts and
the tax basis of assets and liabilities which result in future deductible or
taxable amounts and for net operating loss and tax credit carryforwards. A
valuation allowance has been provided because the realization of deferred
income tax assets is uncertain.
As of December 31, 1998, the Company has net operating loss carryforwards of
approximately $750,000, which will expire in the year 2018.
(11) Year 2000
The year 2000 issue arises as the result of computer programs having been
written, and systems having been designed, using two digits rather than four to
define the applicable year. Consequently, such software has the potential to
recognize a date using the "00" as the year 1900, rather than the year 2000.
This could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
The Company believes that its own computer systems and software are year 2000
compliant. To the extent that the Company implements its own computer systems
and software in the future, the Company will assess year 2000 compliance prior
to their implementation. The Company has not incurred any costs relating to the
year 2000 compliance. In the process of designing and constructing its PCS
network, the Company has entered into material agreements with several third-
party vendors. The Company relies on these vendors for all important operating,
computer and non-information
F-16
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARIES AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
technology systems. Therefore, the Company is highly dependent on Sprint PCS
and other vendors for remediation of their network elements, computer systems,
software applications and other business systems. The Company will purchase
critical back office services from Sprint PCS such as billing, customer care,
home location registration, intelligent network capabilities and directory and
operator assistance. The Company's network infrastructure equipment will be
contractually provided by a third-party vendor with whom the Company has a
material relationship. If either Sprint PCS or this third-party vendor fail to
become year 2000 compliant, the Company's ability to commence operations may be
materially delayed. The Company has contacted its third-party vendors and
believe that they will be year 2000 compliant. However, the Company has no
contractual or other right to compel compliance by them.
The Company does not expect to commence operations until the first quarter of
2000. Because of its reliance on third-party vendors, the Company believes that
the impact of issues relating to year 2000 compliance, if any, would result in
a delay in launching commercial PCS operations and not a disruption in service.
Therefore, the Company has not developed a contingency plan and does not expect
to do so.
(12) Condensed Consolidating Financial Statements
The condensed consolidating financial statements for AirGate PCS, Inc. and
predecessors and its wholly owned guarantor subsidiary, AGW Leasing Company,
Inc. as of December 31, 1998 and for the year then ended are as follows:
<TABLE>
<CAPTION>
AirGate PCS, Inc. AGW Leasing
and Predecessors Company, Inc. Eliminations Consolidated
----------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Cash.................... $ 2,295,613 1 -- 2,295,614
Property and equipment,
net.................... 12,545,365 -- -- 12,545,365
Other assets............ 609,509 -- (1) 609,508
----------- ------- ------ -----------
Total assets.......... $15,450,487 1 (1) 15,450,487
=========== ======= ====== ===========
Notes payable........... $14,345,523 -- -- 14,345,523
Other liabilities....... 2,135,962 -- -- 2,135,962
Long term debt.......... 4,319,477 -- -- 4,319,477
----------- ------- ------ -----------
Total liabilities..... 20,800,962 -- -- 20,800,962
----------- ------- ------ -----------
Common stock............ 35,066 -- -- 35,066
Additional paid-in
capital................ 6,268,879 1 (1) 6,268,879
Accumulated deficit..... (11,654,420) -- -- (11,654,420)
----------- ------- ------ -----------
Total liabilities and
stockholders'
deficit.............. $15,450,487 1 (1) 15,450,487
=========== ======= ====== ===========
Total expenses.......... (5,192,492) -- -- (5,192,492)
Net loss.............. $(5,192,492) -- -- (5,192,492)
=========== ======= ====== ===========
</TABLE>
(13) Subsequent Events (Unaudited)
(a) On May 14, 1999, the Board of Directors amended the Articles of
Incorporation to increase the number of authorized shares of common stock from
20,000 to 20,000,000 shares and the number of authorized shares of preferred
stock from 5,000 to 5,000,000 shares.
F-17
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARIES AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
(b) In May 1999, the Company received an additional $1.0 million of short-
term financing in the form of convertible notes from affiliates. All notes bear
interest at 8%, are payable upon demand, and automatically convert into shares
of common stock at a 48% discount upon the Initial Public Offering of AirGate
PCS, Inc.
(c) The Company filed a registration statement for an equity and debt
financing in May 1999. The Company selected Donaldson, Lufkin & Jenrette
Securities Corporation to lead an initial public offering to raise $95 million
in equity financing and approximately $150 million in gross proceeds from the
issuance of senior subordinated discount notes due 2009. The Company plans to
utilize the proceeds from the aforementioned offerings to build-out its PCS
network, to fund the Company's anticipated operating losses while completing
the network build-out and to pay-off $8.7 million in debt.
(d) In May 1999, the Company consolidated the convertible notes payable to
affiliates issued to the Weiss, Peck & Greer Venture Partners affiliated funds
in 1998 and 1999 for a total of $3.167 million into two subordinated promissory
notes that will be converted into shares of common stock concurrently with
completion of the Initial Public Offering at a 48% discount upon the Initial
Public Offering. The stock purchase warrants issued by the Company in August
1998 (see note 9(d)) and held by the Weiss, Peck & Greer Venture Partners
affiliated funds were terminated. In May 1999, the Company issued new warrants
to the Weiss, Peck & Greer Venture Partners affiliated funds to purchase shares
of common stock for an aggregate price of up to $2.73 million at a price 25%
less than the price of a share of common stock sold in the Initial Public
Offering. These warrants for 243,001 shares may be exercised for two years from
the date of issuance. The Company expects to allocate $1.7 million to the fair
value of the warrants and record a discount on the convertible notes payable
which will be recognized as interest expense over the period from the date of
issuance to the expected date of conversion (August 1999) using a $7.80 per
share conversion price, assuming an Initial Public Offering price of $15 per
share.
In May 1999, the Company consolidated the convertible notes payable to
affiliates issued to the JAFCO America Ventures, Inc. affiliated funds in 1998
and 1999 for a total of $4.394 million into two subordinated promissory notes
that will be converted into shares of common stock concurrently with the
completion of the Initial Public Offering at a 48% discount upon the Initial
Public Offering. The stock purchase warrants issued by the Company in August
1998 (see note 9(d)) and held by the JAFCO America Ventures, Inc. affiliated
funds were terminated.
The notes described in the previous two paragraphs, which were issued with an
"in the money" conversion feature, will be accounted for in accordance with
EITF Issue 98-5. The amount related to the fair value of the beneficial
conversion feature of $7.0 million will be allocated to additional paid-in
capital with a like amount recognized as interest expense over the period from
the date of issuance to the expected date of conversion (August 1999).
If the Initial Public Offering is not completed, the Company is required to
repay these new convertible notes one year after their issuance, subject to the
prior repayment of the senior debt.
(e) The Company obtained a loan modification agreement to defer the initial
principal and interest payment due on the Company's $7.7 million long-term debt
arrangement from March 1, 1999, to October 15, 1999.
F-18
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARIES AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
December 31, 1998 and 1997
(f) The Company obtained a loan modification agreement for its $1 million
note payable to bank to extend the maturity date from May 9, 1999 to November
9, 1999.
(g) On July 9, 1999 the Board of Directors effected a 39,134-for-one stock
split on the Company's common stock and amended the Certificate of
Incorporation of AirGate PCS, Inc. to increase the number of authorized shares
of common stock from 20,000,000 to 25,000,000 shares. Common stock and
additional paid-in capital have been restated retroactively for all periods
presented to reflect this split.
(h) On July 28, 1999 the Board of Directors effected a reverse stock split of
0.996-for-one on the Company's common stock. Common stock and additional paid-
in capital have been restated retroactively for all periods presented to
reflect this split. Additionally, the Board of Directors approved an incentive
stock option plan, whereby 2 million shares were reserved for issuance to
current and future employees. A total of 1,075,000 of these options were
granted at an exercise price of $14 per share. These options vest at various
terms over a five year period beginning at the grant date. Unearned
compensation will be recorded for the difference between the initial public
offering price and the exercise price at the date of grant and will be
recognized as compensation expense as these options vest.
Included in these option grants were a total of 300,000 options granted to
Thomas Dougherty. The options vest quarterly over a five year period beginning
April 15, 2000.
Additionally, the Company obtained a note modification deferring the maturity
date of the $150,000 in notes payable to affiliates from June 11, 1999 to
October 15, 1999.
(i) In August 1999, the Company entered into a credit agreement with Lucent
Technologies, Inc. pursuant to which Lucent has agreed to provide a credit
facility of up to $153.5 million. In connection with this financing, the
Company issued stock purchase warrants to Lucent. The warrants may be exercised
to purchase common stock in an amount equal to one percent of the outstanding
common stock, on a fully diluted basis, on the closing date of the earlier of
the initial public offering or a private offering of common stock or common
stock equivalents with gross proceeds in excess of $130.0 million. If an
offering does not occur on or prior to December 31, 1999, the amount of common
stock underlying the warrants shall be equal to one percent of the outstanding
common stock, on a fully diluted basis. The base price of the warrants equals
either 120% of the initial public offering price or 120% of the then current
market value of one share of common stock. These warrants expire on the earlier
of August 15, 2004 or August 15, 2001, if, as of such date, the Company has
paid in full all outstanding amounts under the Lucent financing and have
terminated the remaining unused portion of the commitments under the current
financing. The Company expects to allocate $567,000 to the fair value of the
warrants and record a discount on the note payable, which will be recognized as
interest expense over the period from date of issuance to the maturity date.
On September 15, 1999 the Board of Directors effected a reverse stock split
of 0.900-for-one on the Company's common stock. Common stock and additional
paid-in capital have been restated retroactively for all periods presented to
reflect this split.
F-19
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARIES AND PREDECESSORS
(a Development Stage Enterprise)
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
As of
June 30,
1999
------------
<S> <C>
Assets
Current assets:
Cash and cash equivalents...................................... $ 2,909,561
Due from AirGate Wireless, LLC................................. 750,998
------------
Total current assets......................................... 3,660,559
Property and equipment, net...................................... 16,531,890
Site lease deposits.............................................. 530,000
Offering costs................................................... 336,880
Other assets..................................................... 130,915
------------
$ 21,190,244
============
Liabilities and Stockholder's Deficit
Current liabilities:
Accounts payable............................................... $ 1,392,178
Accrued interest............................................... 1,465,060
Notes payable.................................................. 1,000,000
Notes payable to affiliates, net .............................. 3,146,312
Current maturities of long-term debt........................... 5,465,997
------------
Total current liabilities.................................... 12,469,547
Long-term debt, excluding current maturities..................... 12,234,003
------------
Total liabilities............................................ 24,703,550
------------
Stockholder's deficit:
Preferred stock, par value $.01 per share; 5,000,000 shares
authorized; no shares issued and outstanding.................. --
Common stock, par value $.01 per share; 25,000,000 shares
authorized; 3,506,617 shares issued and outstanding at June
30, 1999...................................................... 35,066
Additional paid-in capital..................................... 15,871,000
Deficit accumulated during the development stage............... (19,419,372)
------------
Total stockholder's deficit.................................. (3,513,306)
------------
Total liabilities and stockholder's deficit................ $ 21,190,244
============
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
F-20
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARIES AND PREDECESSORS
(a Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Six-Month
Periods Ended June 30,
------------------------
1999 1998
----------- -----------
<S> <C> <C>
Operating expenses:
General and administrative expenses............... $(1,798,567) $(1,099,724)
Depreciation and amortization..................... (409,274) (745,845)
----------- -----------
Operating loss.................................. (2,207,841) (1,845,569)
Interest expense.................................... (5,557,112) (509,775)
----------- -----------
Net loss........................................ $(7,764,953) $(2,355,344)
=========== ===========
Basic and diluted net loss per share of common
stock.............................................. $ (2.21) $ (0.67)
=========== ===========
Weighted average common shares outstanding.......... $ 3,506,617 $ 3,506,617
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
F-21
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARIES AND PREDECESSORS
(a Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Six-Month
Periods Ended June 30,
------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................ $(7,764,953) $(2,355,344)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization..................... 409,274 745,845
Accretion of discount on convertible notes to
interest expense................................. 5,037,434 --
(Increase) decrease in:
Due from AirGate Wireless, LLC.................. (372,738) --
Prepaid expenses................................ 100,333 (2,668)
Site lease deposits............................. (530,000) --
Increase (decrease) in:
Accounts payable................................ (57,077) (2,566)
Accrued interest................................ 994,353 397,047
----------- -----------
Net cash used in operating activities......... (2,183,374) (1,217,686)
----------- -----------
Cash flows from investing activities--capital
expenditures....................................... (4,395,799) (31,459)
----------- -----------
Cash flows from financing activities:
Proceeds from notes payable to affiliates....... 2,530,000 1,065,000
Proceeds from notes payable..................... 5,000,000 --
Offering costs.................................. (336,880) --
----------- -----------
Net cash provided by financing activities..... 7,193,120 1,065,000
----------- -----------
Net increase (decrease) in cash and cash
equivalents.................................. 613,947 (184,145)
Cash and cash equivalents at beginning of period.... 2,295,614 146,939
----------- -----------
Cash and cash equivalents at end of period.......... $ 2,909,561 $ (37,206)
=========== ===========
Supplemental disclosure of cash flow information--
cash paid for interest............................. $ 503,063 $ 221,139
=========== ===========
Supplemental disclosure of noncash financing
activities:
Consolidation of accrued interest into notes
payable:
Accrued interest.................................. $ (216,000) $ --
Notes payable to affiliates....................... 216,000 --
=========== ===========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
F-22
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARIES AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1999 and 1998
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited consolidated financial statements represent the
accounts of AirGate PCS, Inc. and subsidiaries and predecessors (collectively,
the "Company"). These unaudited consolidated financial statements have been
prepared in accordance with instructions for preparing interim financial
information and, therefore, do not include all information and footnotes
necessary for a fair presentation of financial position, results of operations,
and cash flows in conformity with generally accepted accounting principles. All
adjustments, consisting of normal recurring accruals, which, in the opinion of
management, are necessary to a fair presentation of financial position and
results of operations have been included. The accompanying unaudited
consolidated financial statements should be read in conjunction with the
Company's audited consolidated financial statements and related notes appearing
elsewhere herein.
(2) Development Stage Enterprise
AirGate, LLC, the first predecessor entity of the Company, was established on
June 15, 1995 (inception). The Company has devoted most of its efforts to date
to activities such as preparing business plans, raising capital, and planning
the build-out of its PCS network. From inception through June 30, 1999, the
Company has not generated any revenues and has incurred expenses of
$(19,419,372), resulting in an accumulated deficit during the development stage
of $(19,419,372) as of June 30, 1999.
(3) Net Loss Per Share
The Company has presented net loss per common share pursuant to SFAS No. 128,
"Earnings per Share." Basic net loss per share of common stock is computed by
dividing net loss by the weighted average number of common shares outstanding.
Diluted net loss per share has not been presented separately, as the potential
common shares are anti-dilutive for each of the periods presented.
F-23
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARIES AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999 and 1998
(Unaudited)
(4) Condensed Consolidating Financial Statements
The condensed consolidating financial statements for AirGate PCS, Inc. and
predecessors and its wholly owned guarantor subsidiary, AGW Leasing Company,
Inc. as of June 30, 1999 and for the six-month period then ended are as
follows:
<TABLE>
<CAPTION>
AirGate PCS, Inc. AGW Leasing
and Predecessors Company, Inc. Eliminations Consolidated
----------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Cash.................... $ 2,909,560 1 -- 2,909,561
Property and equipment,
net.................... 16,631,890 -- -- 16,531,890
Other assets............ 2,279,075 -- (530,282) 1,748,793
----------- -------- -------- -----------
Total Assets............ $21,720,525 1 (530,282) 21,190,244
=========== ======== ======== ===========
Notes payable........... $ 9,612,309 -- -- 9,612,309
Other liabilities....... 2,857,238 530,281 (530,281) 2,857,238
Long term debt.......... 12,234,003 -- -- 12,234,003
----------- -------- -------- -----------
Total liabilities....... 24,703,550 530,281 (530,281) 24,703,550
=========== ======== ======== ===========
Common stock............ 35,066 -- -- 35,066
Additional paid-in
capital................ 15,871,000 1 (1) 15,871,000
Accumulated deficit..... (18,889,091) (530,281) -- (19,419,372)
----------- -------- -------- -----------
Total liabilities and
stockholders' deficit.. $21,720,525 1 (530,282) 21,190,244
=========== ======== ======== ===========
Total expenses.......... (7,234,672) (530,281) -- (7,764,953)
Net loss................ $(7,234,672) (530,281) -- (7,764,953)
=========== ======== ======== ===========
</TABLE>
(5) Stockholder's Deficit and Debt Transactions
(a) On May 14, 1999, the Board of Directors amended the Articles of
Incorporation to increase the number of authorized shares of common stock from
20,000 to 20,000,000 shares and the number of authorized shares of preferred
stock from 5,000 to 5,000,000 shares.
F-24
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARIES AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999 and 1998
(Unaudited)
(b) In May 1999, the Company received an additional $1.0 million of short-
term financing in the form of convertible notes from affiliates. All notes bear
interest at 8%, are payable upon demand, and automatically convert into shares
of common stock at a 48% discount upon the Initial Public Offering of AirGate
PCS, Inc.
(c) The Company filed a registration statement for an equity and debit
financing in May 1999. The Company selected Donaldson, Lufkin & Jenrette
Securities Corporation to lead an initial public offering to raise $95 million
in equity financing and approximately $150 million in gross proceeds from the
issuance of senior subordinated discount notes due 2009. The Company plans to
utilize the proceeds from the aforementioned offerings to build-out its PCS
network, to fund the Company's anticipated operating losses while completing
the network build-out, and to pay-off $8.7 million of debt.
(d) In May 1999, the Company consolidated the convertible notes payable to
affiliates issued to the Weiss, Peck & Greer Venture Partners affiliated funds
in 1998 and 1999 for a total of $3.167 million into two subordinated promissory
notes that will be converted into shares of common stock concurrently with
completion of the Initial Public Offering at a 48% discount upon the Initial
Public Offering. The stock purchase warrants issued by the Company in August
1998 and held by the Weiss, Peck & Greer Venture Partners affiliated funds were
terminated. In May 1999, the Company issued new warrants to the Weiss, Peck &
Greer Venture Partners affiliated funds to purchase shares of common stock for
an aggregate price of up to $2.75 million at a price 25% less than the price of
a share of common stock sold in the Initial Public Offering. These warrants for
243,001 shares may be exercised for two years from the date of issuance. The
Company has allocated $1.7 million to the fair value of the warrants and
recorded the associated discount on the convertible notes payable as interest
expense over the period from issuance to the expected date of conversion
(August 1999) using a $7.80 per share conversion price, assuming an Initial
Public Offering price of $15 per share.
In May 1999, the Company consolidated the convertible notes payable to
affiliates issued to the JAFCO America Ventures, Inc. affiliated funds for a
total of $4.394 million into two subordinated promissory notes that will be
converted into shares of common stock concurrently with the completion of the
Initial Public Offering at a 48% discount upon the Initial Public Offering. The
stock purchase warrants issued by the Company in August 1998 and held by the
JAFCO America Ventures, Inc. affiliated funds were terminated.
The notes described in the previous two paragraphs, which were issued with an
"in the money" conversion feature, have been accounted for in accordance with
EITF Issue 98-5. The amount related to the fair value of the beneficial
conversion feature of $7.0 million has been allocated to additional paid-in
capital with a like amount recognized as interest expense over the period from
issuance to the date of conversion (August 1999).
If the Initial Public Offering is not completed, the Company is required to
repay all of these new convertible notes one year after their issuance, subject
to the prior repayment of the senior debt.
(e) The Company obtained a loan modification agreement for its $1 million
note payable to bank to extend the maturity date from May 9, 1999 to November
9, 1999.
F-25
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARIES AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
June 30, 1999 and 1998
(Unaudited)
(f) The Company obtained a loan modification agreement to defer the initial
principal and interest payments due on the Company's $7.7 million long-term
debt arrangement from March 1, 1999, to October 15, 1999.
(6) Subsequent Events
(a) On July 9, 1999 the Board of Directors effected a 39,134-for-one stock
split on the Company's common stock and amended the Certificate of
Incorporation of AirGate PCS, Inc. to increase the number of authorized shares
of common stock from 20,000,000 to 25,000,000 shares. Common stock and
additional paid-in capital have been restated retroactively for all periods
presented to reflect this split.
(b) On July 28, 1999 the Board of Directors effected a reverse stock split of
0.996-for-one on the Company's common stock. Common stock and additional paid-
in capital have been restated retroactively for all periods presented to
reflect this split. Additionally, the Board of Directors approved an incentive
stock option plan, whereby 2 million shares were reserved for issuance to
current and future employees. A total of 1,075,000 of these options were
granted at an exercise price of $14 per share. These options vest at various
terms over a five year period beginning at the grant date. Unearned
compensation will be recorded for the difference between the initial public
offering price and the exercise price at the date of grant and will be
recognized as compensation expense as these options vest.
Additionally, the Company obtained a note modification deferring the maturity
date of the $150,000 in notes payable to affiliates from June 11, 1999 to
October 15, 1999.
(c) In August 1999, the Company entered into a credit agreement with Lucent
Technologies, Inc. pursuant to which Lucent has agreed to provide a credit
facility of up to $153.5 million. In connection with this financing, the
Company issued stock purchase warrants to Lucent. The warrants may be exercised
to purchase common stock in an amount equal to one percent of the outstanding
common stock, on a fully diluted basis, on the closing date of the earlier of
the initial public offering or a private offering of common stock or common
stock equivalents with gross proceeds in excess of $130.0 million. If an
offering does not occur on or prior to December 31, 1999, the amount of common
stock underlying the warrants shall be equal to one percent of the outstanding
common stock, on a fully diluted basis. The base price of the warrants equals
either 120% of the initial public offering price or 120% of the then current
market value of one share of common stock. These warrants expire on the earlier
of August 15, 2004 or August 15, 2001, if, as of such date, the Company has
paid in full all outstanding amounts under the Lucent financing and have
terminated the remaining unused portion of the commitments under the current
financing. The Company expects to allocate $567,000 to the fair value of the
warrants and record a discount on the note payable, which will be recognized as
interest expense over the period from date of issuance to the maturity date.
On September 15, 1999 the Board of Directors effected a reverse stock split
of 0.900-for-one on the Company's common stock. Common stock and additional
paid-in capital have been restated retroactively for all periods presented to
reflect this split.
F-26
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 1999
6,333,333 Shares of Common Stock
-----------------------------------------------
PROSPECTUS
-----------------------------------------------
Donaldson, Lufkin & Jenrette
Credit Suisse First Boston
The Robinson-Humphrey Company
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor
any of the sales made hereunder after the date of this prospectus shall create
an implication that the information contained herein or our affairs have not
changed since the date hereof.
Until , 1999 (25 days after the date of this prospectus), all dealers that
effect transactions in these securities may be required to deliver a
prospectus. This is in addition to the dealer's obligation to deliver a
prospectus when acting as an underwriter in this offering or when selling
previously unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+We will amend and complete the information in this prospectus. Although we +
+are permitted by U.S. federal securities laws to offer these securities using +
+this prospectus, we may not sell them or accept your offer to buy them until +
+the documentation filed with the SEC relating to these securities has been +
+declared effective by the SEC. This prospectus is not an offer to sell these +
+securities or our solicitation of your offer to buy these securities in any +
+state or other jurisdiction where that would not be permitted or legal. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION -- September 16, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Prospectus
, 1999
[AirGate PCS Logo]
$
Units Consisting of
% Senior Subordinated Discount Notes Due 2009 and
Warrants to Purchase Shares of AirGate PCS, Inc. Common Stock
- --------------------------------------------------------------------------------
AirGate PCS, Inc.:
. AirGate PCS, Inc.
Harris Tower
Suite 1700
233 Peachtree Street, N.E.
Atlanta, Georgia 30303
(404) 525-7272
The Units:
. Each consisting of $1,000 principal amount at maturity of % senior
subordinated discount notes due 2009 and one warrant to purchase shares of
common stock, par value $.01 per share, of AirGate PCS, Inc.
The Senior Subordinated Discount Notes:
. Maturity: , 2009.
. Interest Payments: We are selling the senior subordinated discount notes at
a substantial discount from their principal amount at maturity, and no cash
interest will accrue on the senior subordinated discount notes prior to
, 2004. Thereafter, we will pay interest on and commencing ,
2005.
. Subsidiary Guarantees: Our existing subsidiary AGW Leasing Company, Inc. and
all of our future restricted subsidiaries will unconditionally guarantee the
senior subordinated discount notes on a senior subordinated basis.
. Security: The senior subordinated discount notes are secured by a pledge of
all the capital stock of our future, directly owned subsidiaries. These
pledges will be subordinate to pledges under our senior debt.
The Warrants:
. Each warrant will entitle the holder to purchase shares of common stock of
AirGate PCS, Inc. at an exercise price of $.01 per share, subject to
adjustment under some circumstances. Upon exercise, the holders of warrants
would be entitled, in the aggregate, to purchase common stock of AirGate
PCS, Inc. representing approximately 3% of the issued and outstanding
shares of common stock of AirGate PCS, Inc. on a fully diluted basis on the
date hereof, assuming exercise of all outstanding warrants.
. The warrants will be exercisable on or after the separation date and will
expire on , 2009.
<TABLE>
------------------------------------------------
<S> <C> <C>
Per Note Total
------------------------------------------------
Price: % $
Underwriting discount:
Proceeds to AirGate:
------------------------------------------------
</TABLE>
This investment involves risk. See "Risk Factors" beginning on page 7.
- --------------------------------------------------------------------------------
Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
- --------------------------------------------------------------------------------
Donaldson, Lufkin & Jenrette
Credit Suisse First Boston
<PAGE>
Alternate Unit Offering Pages
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary..............
Risk Factors.................... 4
Forward-looking Statements......
Use of Proceeds.................
Capitalization..................
Selected Financial Data.........
Management's Discussion and
Analysis of Financial Condition
and Results of Operations......
Industry Background.............
Business........................
The Sprint PCS Agreements.......
Description of Certain Indebted-
ness...........................
Management......................
Principal Stockholders..........
Certain Transactions............
Regulation of the Wireless
Telecommunications Industry....
</TABLE>
<TABLE>
<CAPTION>
Page
<S> <C>
Description of Units............ 8
Description of Notes............
Description of Warrants.........
Description of Provisions
Applicable to the Units........
Description of Capital Stock....
Shares Eligible for Sale........
United States Federal Income Tax
Consequences................... 54
Tax Consequences to Non-U.S.
Holders of Common Stock........
Underwriting.................... 59
Legal Matters................... 60
Experts.........................
Available Information...........
Index to Consolidated Financial
Statements..................... F-1
</TABLE>
----------------
The prospectus includes product names, trade names and trademarks of other
companies.
<PAGE>
Alternate Unit Offering Pages
The Offering
The Units
Issuer...................... AirGate PCS, Inc.
Securities Offered..... units, each consisting of $1,000 principal
amount at maturity of % senior subordinated
discount notes due 2009 and one warrant to
purchase shares of our common stock representing
in the aggregate approximately 3% of the issued
and outstanding shares of our common stock on a
fully diluted basis on the date hereof assuming
exercise of all outstanding warrants. The senior
subordinated discount notes and the warrants will
not be separately transferable until the
separation date, which shall be the earliest to
occur of:
. 180 days after the closing of this offering;
. the occurrence of a change of control or an
event of default on the senior subordinated
discount notes; and
. such date as Donaldson, Lufkin & Jenrette
Securities Corporation in its sole discretion
shall determine.
Issue Price............ $ per unit.
Use of Proceeds........ We will use:
. the net proceeds from the sale of the units,
which consist of both senior subordinated
discount notes and warrants;
. the net proceeds from the concurrent sale of
our common stock; and
. the financing provided by Lucent
to fund the following:
. capital expenditures, including the build-out
of our PCS network;
. operating losses;
. working capital requirements; and
. debt service payments, including the
repayment of existing debt.
See "Use of Proceeds."
The Senior Subordinated Discount Notes
Senior Subordinated
Discount Notes.........
$ million aggregate principal amount at
maturity of % senior subordinated discount
notes, due 2009. We will issue the senior
subordinated discount notes and warrants at a
price to investors that will yield gross proceeds
to us at issuance of $150.0 million.
Maturity Date............... , 2009.
1
<PAGE>
Alternate Unit Offering Pages
Accretion...................
The aggregate accreted value of the senior
subordinated discount notes will increase from
approximately $150.0 million at issuance at a
rate of %, compounded semi-annually, to a final
accreted value equal to their aggregate principal
amount of $ million at , 2004.
Interest Rate...............
The senior subordinated discount notes will
accrue interest at the rate of % per annum,
payable semi-annually in cash in arrears on
and of each year, commencing , 2005. The
senior subordinated discount notes will accrue
additional interest in the event we fail to
register the common stock underlying the warrants
with the Securities and Exchange Commission or
fail to have such registration statement declared
effective by the Securities and Exchange
Commission within the time limits described under
"Description of Notes--Additional Interest."
Subsidiary Guarantees....... The senior subordinated discount notes will be
guaranteed on a senior subordinated basis by our
current subsidiary, AGW Leasing Company, Inc.,
and all of our future restricted subsidiaries.
See "Description of Notes--Brief Description of
the Senior Subordinated Discount Notes and the
Guarantees--The Guarantees" and "Description of
Notes--Subsidiary Guarantees."
Ranking..................... The senior subordinated discount notes will be:
. subordinated in right of payment to all of
our existing and future senior
indebtedness;
. equal in right of payment to all of our
existing and future senior subordinated
indebtedness; and
. senior in right of payment to all of our
existing and future subordinated
indebtedness.
The guarantees will be unsecured obligations of
the guarantors and will be:
. subordinated in right of payment to all
existing and future senior indebtedness of
each guarantor;
. equal in right of payment to all existing
and future senior subordinated indebtedness
of each guarantor; and
. senior in right of payment to all existing
and future subordinated indebtedness of
each guarantor.
See "Description of Notes--Brief Description of
the Senior Subordinated Discount Notes and the
Guarantees."
2
<PAGE>
Alternate Unit Offering Pages
Security.................... The senior subordinated discount notes will be
secured by a subordinated pledge of the capital
stock of all of our future, directly owned
subsidiaries. The pledge to secure the senior
subordinated discount notes will be junior to the
pledge to secure our senior debt.
See "Description of Notes--Security."
Optional Redemption......... On or after , 2004, we may redeem all or part
of the senior subordinated discount notes at
redemption prices set forth under "Description of
Notes--Optional Redemption," together with
accrued and unpaid interest, if any, to the date
of redemption.
During the first 36 months after the offering of
the senior subordinated discount notes, we may
use the net proceeds from an equity offering to
redeem up to 35% of the accreted value of the
senior subordinated discount notes originally
issued at a redemption price of % of the
accreted value as of the date of redemption,
provided that at least 65% of the accreted value
of the senior subordinated discount notes
originally issued remains outstanding immediately
after the redemption. See "Description of Notes--
Optional Redemption."
Change of Control........... If we experience a change of control, we will be
required to make an offer to repurchase your
senior subordinated discount notes at a price
equal to 101% of the accreted value, if before
, 2004, or 101% of the aggregate principal
amount thereafter, as applicable, together with
accrued and unpaid interest, if any, to the date
of repurchase. See "Description of Notes--
Repurchase at the Option of Holders--Change in
Control."
Restrictive Covenants....... The indenture governing the senior subordinated
discount notes will contain covenants that, among
other things, will limit our ability and the
ability of our subsidiary and certain of our
future subsidiaries to:
. incur additional indebtedness or issue
preferred stock;
. pay dividends, redeem capital stock or make
other restricted payments or investments;
. create liens on assets;
. merge, consolidate or dispose of assets;
. enter into certain transactions with
affiliates; and
. enter into sale and leaseback transactions.
See "Description of Notes--Selected Covenants."
3
<PAGE>
Alternate Unit Offering Pages
Original Issue Discount.....
The senior subordinated discount notes are being
issued with original issue discount for U.S.
federal income tax purposes. Thus, although
interest will not be payable on the senior
subordinated discount notes prior to , 2005,
U.S. holders will be required to include original
issue discount amounts in gross income for U.S.
federal income tax purposes over the term of the
senior subordinated discount notes in advance of
receipt of cash payments to which such income is
attributable. See "United States Federal Income
Tax Consequences."
The Warrants
Number of Warrants
Offered................ warrants which will entitle the holders to
purchase an aggregate of 375,575 shares of our
common stock, representing approximately 3% of
the issued and outstanding shares of common stock
on a fully diluted basis, assuming exercise of
all outstanding warrants.
Exercise............... Each warrant will entitle the holder to
purchase on or after the separation date, but
prior to the expiration date, shares of our common
stock at an exercise price of $.01 per share,
subject to adjustment from time to time upon the
occurrence of some changes with respect to us,
including:
. some distributions of our shares;
. issuances of options or convertible securities
by us;
. dividends and distributions by us; and
. changes in the terms in our options and
convertible securities.
A warrant does not entitle its holder to receive
any dividends paid on our shares of common stock.
Expiration............. September , 2009.
Transfer Restrictions....... Until such time, if any, as a registration
statement with respect to resale of the warrant
shares is declared effective, the warrant shares
will be subject to restrictions on transfer. We
do not intend to list the warrants on any
securities exchange. See "Risk Factors--Risks
Relating to the Warrants--Your ability to
transfer the shares of common stock underlying
the warrants may be restricted" and "Risk
Factors--Risks Relating to the Warrants--You will
not be able to exercise your warrants and sell
the underlying shares of common stock without an
effective registration statement or exemption
from the registration requirement."
Registration of Warrant
Shares................. We are required, pursuant to the terms of a
warrant agreement, to (1) file a shelf
registration statement with the
4
<PAGE>
Alternate Unit Offering Pages
Securities and Exchange Commission within 60 days
of the date of this prospectus to register the
common stock underlying the warrants, (2) use our
reasonable best efforts to have the shelf
registration statement declared effective by the
Securities and Exchange Commission within 120
days of the date of this prospectus and (3) keep
the shelf registration statement continuously
effective until the later of the date on which
(a) all of the warrants have been exercised or
(b) the warrants expire.
The closing of our offering of units, consisting of senior subordinated
discount notes and warrants, and our concurrent offering of common stock, under
a separate prospectus, are conditioned on each other.
Risk Factors
Investment in the units involves a high degree of risk. See "Risk Factors"
beginning on page 7 for a discussion of the material factors which should be
considered by prospective investors in evaluating an investment in the units.
5
<PAGE>
Alternate Unit Offering Pages
The Concurrent Common Stock Offering
Common Stock Offered...........
6,333,333 shares
Common Stock to be Outstanding
After the Offering............
10,825,591 shares
Proposed Nasdaq National Market
Symbol......................... "PCSA"
This summary of the common stock offering includes 985,641 shares of common
stock issuable upon the consummation of the common stock offering due to the
conversion of outstanding promissory notes and related accrued interest. See
"Certain Transactions."
Unless otherwise indicated, the share information in this prospectus
excludes:
. up to 949,999 shares that may be issued to the underwriters to cover
over-allotments issued in connection with the common stock offering.
. 2,000,000 shares of common stock reserved for issuance under our 1999
Stock Option Plan including employee grants of 1,075,000 shares effected
on July 28, 1999. See "Management--1999 Stock Option Plan."
. 243,001 shares of common stock issuable upon the exercise of outstanding
warrants at an exercise price of 75% of the initial offering price of our
common stock. See "Certain Transactions."
. 125,189 shares of common stock issuable upon the exercise of outstanding
warrants at an exercise price of 120% of the initial offering price of
our common stock. See "Description of Capital Stock--Warrants."
. 375,575 shares of common stock issuable upon the exercise of warrants to
be issued in the concurrent units offering.
All references to shares of common stock in this prospectus reflect a 39,134-
for-1 split of our common stock which was effective as of July 9, 1999 and
reverse stock splits of 0.996-for-1 of our common stock which was effective
July 28, 1999, and 0.900-for-1 of our common stock which was effective
September 15, 1999.
6
<PAGE>
Alternate Unit Offering Pages
RISK FACTORS
Investment in the units involves a high degree of risk. In addition to the
other information in this prospectus, the following factors should be
considered carefully in evaluating an investment in the units. The cautionary
statements set forth below and elsewhere in this prospectus should be read in
conjunction with accompanying forward-looking statements included under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere herein.
Risks Related to the Offering
Because the senior subordinated discount notes are subordinated to other debt
that encumbers our assets, you may not be fully repaid if we become insolvent
If we become insolvent, we may not have sufficient assets to make payments
on amounts due on any or all of the senior subordinated discount notes or the
subsidiary guarantees. The right to payment on the senior subordinated discount
notes will be subordinated to all of our existing and future senior debt,
including our financing with Lucent. Similarly, each subsidiary guarantee of
the senior subordinated discount notes will be subordinated to all existing and
future senior debt of the applicable guarantor. If we become bankrupt,
liquidate, dissolve, reorganize or undergo a similar proceeding, our or such
guarantor's assets will be available to pay obligations on the senior
subordinated discount notes or the applicable guarantee only after all
outstanding senior debt of such party has been paid in full. In addition, an
event of a default under our senior debt may prohibit us and the guarantors of
the senior subordinated discount notes from paying the senior subordinated
discount notes or the guarantees of the senior subordinated discount notes.
Because the subsidiary guarantees will be unsecured, you may not be fully
repaid under the guarantees if we become insolvent
Because the guarantees of the senior subordinated discount notes will be
unsecured, if we become insolvent, you may be repaid only after our senior debt
is satisfied. Our senior debt is secured by liens on substantially all of our
assets and those of our subsidiary and future subsidiaries. If we were to
default on our senior debt, the lenders could foreclose on the collateral
regardless of any default with respect to the senior subordinated discount
notes. These assets would first be used to repay in full all amounts
outstanding under our senior debt.
Our agreements with Sprint PCS and the infrastructure equipment used in our
network creates the value of our assets. These assets are highly specialized
and, taken individually, have limited marketability, particularly as a result
of some of the provisions in our agreements with Sprint PCS. Therefore, in a
foreclosure sale, these assets are likely to be sold as an entirety, and the
lender may not realize enough money to satisfy all senior debt.
Holders of our senior debt will control enforcement of the pledges of any of
our subsidiaries' stock which may affect the trustee's ability to independently
pursue remedies on behalf of holders of senior subordinated discount notes
The holders of the senior debt are given the exclusive right to control all
decisions relating to the enforcement of remedies under the senior debt pledge
agreement with respect to the stock of our current and future subsidiaries,
pursuant to the intercreditor agreement. As a result, you will not be able to
force a sale of the collateral securing the senior subordinated discount notes
or otherwise
7
<PAGE>
Alternate Unit Offering Pages
independently pursue the remedies of a secured creditor under the pledge
agreement securing the senior subordinated discount notes until the senior debt
has been repaid in full. Our senior debtholders may have interests that are
different from yours and our senior debtholders may elect not to pursue their
remedies under the pledge agreement at a time when it would be advantageous for
you to do so.
Because federal and state statutes may allow courts to void the guarantees of
the senior subordinated discount notes, you may not have the right to receive
any money pursuant to the guarantees
Although the guarantees of the senior subordinated discount notes provide you
with a direct claim against the assets of the applicable guarantor, creditors
of a bankrupt guarantor may challenge the guarantee. If a challenge to a
guarantee were upheld, then the applicable guarantee would be invalid and
unenforceable, junior to all creditors, including trade creditors, of that
guarantor.
The creditors of a bankrupt guarantor could challenge a guarantee on the
grounds that the guarantee constituted a fraudulent conveyance under bankruptcy
law. If a court were to rule that the guarantee did constitute a fraudulent
conveyance, then the court could void the obligations under the guarantee or
subordinate the guarantee to other debt of the guarantor or take other action
detrimental to holders of the senior subordinated discount notes. In addition,
any of the guarantees could be subject to the claim that, since the guarantee
was incurred for our benefit, and only indirectly for the benefit of our
subsidiary that provided the guarantee, the obligations of the applicable
guarantor were incurred for less than fair consideration.
Our debt instruments contain provisions and requirements that could limit our
ability to pursue borrowing opportunities
The restrictions to be contained in the indenture governing the senior
subordinated discount notes, and the restrictions contained in our senior debt,
may limit our ability to implement our business plan, finance future
operations, respond to changing business and economic conditions, secure
additional financing, if needed, and engage in opportunistic transactions. Our
senior debt also will restrict our ability and the ability of our subsidiary
and our future subsidiaries to do the following:
. create liens;
. make certain payments, including payments of dividends and distributions
in respect of capital stock;
. consolidate, merge and sell assets;
. engage in certain transactions with affiliates; and
. fundamentally change our business.
In addition, our senior debt will require us to maintain certain ratios,
including:
. leverage ratios;
. an interest coverage ratio; and
. a fixed charges ratio,
and to satisfy certain tests, including tests relating to:
. minimum covered population in order to incur additonal indebtedness;
. minimum number of subscribers to our services in order to incur
additonal indebtedness; and
. minimum aggregate service revenue per subscriber.
8
<PAGE>
Alternate Unit Offering Pages
We may not satisfy the financial ratios and tests under our senior debt due
to events that are beyond our control. If we fail to satisfy any of the
financial ratios and tests, we could be in default under our senior debt or may
be limited in our ability to access additional funds under our senior debt,
which could result in our being unable to make payments on the senior
subordinated discount notes.
Because the senior subordinated discount notes will be issued with original
issue discount, you will have to include interest in your taxable income before
you receive cash
The senior subordinated discount notes will be issued at a substantial
discount from their principal amount at maturity. Original issue discount,
i.e., the difference between the stated redemption price at maturity of the
senior subordinated discount notes, including all cash payments of principal
and interest, and the issue price of the senior subordinated discount notes,
will accrue from the issue date of the senior subordinated discount notes and
will be included in your gross income for federal income tax purposes before
you receive the cash payment of such interest. United States federal income tax
law may postpone or limit our interest deduction for original issue discount.
See "United States Federal Income Tax Consequences."
The bankruptcy laws may reduce your claim in the event of our insolvency
If a bankruptcy case were commenced by or against us under the United States
Bankruptcy Code after the issuance of the senior subordinated discount notes,
your claim with respect to the principal amount of the senior subordinated
discount notes may be limited to an amount equal to the sum of the initial
offering price and that portion of the original issue discount that is not
deemed to constitute unmatured interest for purposes of the United States
Bankruptcy Code. Any original issue discount that had not amortized as of the
date of the bankruptcy filing could constitute unmatured interest for purposes
of the United States Bankruptcy Code. To the extent that the United States
Bankruptcy Code differs from the Internal Revenue Code in determining the
method of amortization of original issue discount, you may recognize taxable
gain or loss upon payment of your claim in bankruptcy.
If an event constituting a change in control of AirGate occurs, we may be
unable to fulfill our obligation to purchase your senior subordinated discount
notes
Our senior debt prohibits us from purchasing any of the senior subordinated
discount notes before their stated maturity. Under the indenture governing the
senior subordinated discount notes, upon a change in control we will, subject
to certain contractual limitations, be required to make an offer to repurchase
all of the senior subordinated discount notes. In the event we become subject
to a change in control at a time when we are prohibited from purchasing the
senior subordinated discount notes, we may seek the consent of the holders of
our senior debt to purchase the senior subordinated discount notes or attempt
to refinance the debt that contains the prohibition. If we do not obtain a
consent or repay the senior debt, our failure to purchase the tendered senior
subordinated discount notes would constitute an event of default under the
indenture, which would in turn result in a default under the senior debt. Even
if we obtain the consent, we cannot assure you that we will have sufficient
resources to repurchase the senior subordinated discount notes following the
change in control.
9
<PAGE>
Alternate Unit Offering Pages
The units, senior subordinated discount notes, warrants, and the common stock
underlying the warrants may not have an active market and the price may be
volatile, so you may be unable to sell your securities at the price you desire
or at all
We cannot ensure that a liquid market will develop for the units, senior
subordinated discount notes, warrants, and the common stock underlying the
warrants, that you will be able to sell any of such securities at a particular
time if at all or that the prices that you receive when you sell will be
favorable. Prior to this offering, there has been no public market for the
units, senior subordinated discount notes, warrants or common stock underlying
the warrants. The underwriters have told us that they intend to make a market
in the units, senior subordinated discount notes, warrants and the common stock
underlying the warrants, but they are not obligated to do so. The underwriters
may discontinue any marketmaking in the securities at any time in their sole
discretion. Future trading prices of the securities will depend on many
factors, including our operating performance and financial condition,
prevailing interest rates and the market for similar securities.
Risks Relating to the Warrants
Our current management and directors may be able to control the outcome of
significant matters presented to stockholders as a result of their ownership
position following the completion of this offering
Upon completion of the offerings of common stock and units, our current
management and directors will beneficially own approximately 41% of our
outstanding common stock on a diluted basis, or approximately 38% if the
underwriters' over-allotment option granted in connection with the common stock
offering is exercised in full. These percentages may decrease depending on the
number of shares of common stock underlying the warrants issued in the units
offering and the exercise of such warrants. Consequently, such persons, as a
group, may be able to control the outcome of matters submitted for stockholder
action including the election of members to our board of directors and the
approval of significant change in control transactions. This may have the
effect of delaying or preventing a change in control. See "Management" and
"Principal Stockholders."
The price of our common stock may be volatile
The market price of our common stock could be subject to significant
fluctuations in response to variations in quarterly operating results,
announcements of technological innovations or new products and services by us
or our competitors, our failure to achieve operating results consistent with
securities analysts' projections, the operating and stock price performance of
other companies that investors may deem comparable to us and other events or
factors. Factors such as announcements of the introduction of new or enhanced
services or related products by us or our competition, announcements of joint
development efforts or corporate partnerships in the wireless
telecommunications market, market conditions in the technology,
telecommunications and other emerging growth sectors, and rumors relating to us
or our competitors may also have a significant impact on the market price of
our common stock.
The stock market has experienced extreme price volatility. Under these market
conditions, stock prices of many emerging growth and development stage
companies have often fluctuated in a manner unrelated or disproportionate to
the operating performance of such companies. Since we are a development stage
company, our common stock may be subject to greater price volatility than the
stock market as a whole.
Purchasers in this offering may experience dilution
If the portion of the issue price of a unit allocated to a warrant share is
higher than the net tangible book value per share of the outstanding common
stock immediately after the common stock
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offering, the purchasers in this offering will experience dilution. By way of
example, common stock purchased in our concurrent initial public offering will
have a post-offering net tangible book value per share of $6.34 less than the
price paid for the share, assuming the midpoint of the range set forth on the
cover page of the common stock prospectus.
Possible future sales of our common stock by management and other affiliates
and exercise of the warrants could cause the market price of our common stock
to decrease
A substantial number of shares of our common stock could be sold into the
public market after the common stock offering. The occurrence of such sales, or
the perception that such sales could occur, could materially and adversely
affect our stock price and could impair our ability to obtain capital through
an offering of equity securities. The shares of common stock being sold in the
common stock offering will be freely transferable under the securities laws
immediately after issuance, except for any shares sold to our "affiliates." All
of our stockholders, members of our senior management and our directors have
agreed pursuant to written "lock-up" agreements that, for a period of 180 days
from the date of this prospectus, they will not, among other things, sell their
shares. As a result, upon the expiration of the lock-up agreements 180 days
after the date of this prospectus, an additional 2,339,718 shares of our common
stock will be eligible for sale subject, in most cases, to volume and other
restrictions under federal securities laws. On the separation date the shares
underlying the warrants issued in the units offering will be freely tradeable.
You may not receive a return on investment in the warrants through either
dividends paid on our common stock or the exercise of your warrants and sale of
your shares
We do not anticipate paying any cash dividends on our common stock in the
foreseeable future. Instead, we intend to retain future earnings to fund our
growth. Therefore, you will not receive a return on your investment in the
common stock underlying our warrants by exercising them and receiving a payment
of dividends on our common stock. In addition, you may not realize a return on
your investment even if you sell the shares underlying the warrants.
Your ability to transfer the shares of common stock underlying the warrants
may be restricted
Under a warrant agreement, we have agreed to file a registration statement
with the Securities and Exchange Commission to register the common stock
underlying the warrants to be issued in this offering and to use our reasonable
best efforts to ensure that this registration statement becomes effective.
The Securities and Exchange Commission has broad discretion in determining
when and whether registration statements become effective. If we are unable to
have a registration statement declared effective within the time allotted, your
ability to sell shares of common stock underlying the warrants will be
restricted, and we will be obligated to pay additional interest on the senior
subordinated discount notes.
You will not be able to exercise your warrants and sell the underlying shares
of common stock without an effective registration statement or exemption from
the registration requirement
Holders of warrant shares will be able to sell their warrant shares only if a
registration statement relating to such securities is then in effect, or if
such transaction is exempt from the registration requirements of the Securities
Act, and such securities are qualified for sale or exempt from qualification
under the applicable securities laws of the states in which the purchaser of
such securities resides.
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DESCRIPTION OF UNITS
Each unit being offered hereby will consist of $1,000 principal amount at
maturity of % senior subordinated discount notes and one warrant to purchase
shares of our common stock, par value $0.01 per share, at an exercise price of
$.01 per share. The senior subordinated discount notes and the warrants will
not be separately transferable until the separation date, which shall be the
earliest to occur of:
. 180 days after the closing of this offering;
. the occurrence of a change of control or an event of default on the
senior subordinated discount notes; and
. such date as Donaldson, Lufkin & Jenrette Securities Corporation in its
sole discretion shall determine.
Upon exercise, the holders of the warrants would be entitled, in the aggregate,
to purchase common stock representing approximately 3% of the issued and
outstanding shares of our common stock on a fully diluted basis, assuming
exercise of all outstanding warrants issued in connection with this offering.
DESCRIPTION OF NOTES
You can find the definitions of many of the terms used in this description
under the subheading "Certain Definitions." In this description, the word
"AirGate" refers only to AirGate PCS, Inc. and not to any of its Subsidiaries.
AirGate will issue the senior subordinated discount notes under an Indenture
(the "Indenture") among itself, the Guarantors and Bankers Trust Company, as
trustee (the "Trustee"). The terms of the senior subordinated discount notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act"). The
Indenture will be qualified as an indenture under the Trust Indenture Act. The
intercreditor agreement and the pledge agreement each referred to under the
subcaption "Security" also define the terms of the pledges that will be made in
connection with the senior subordinated discount notes.
The following description is a summary of the material provisions of the
Indenture, the pledge agreement and the intercreditor agreement. We urge you to
read the Indenture, the pledge agreement and the intercreditor agreement
because they define your rights as a holder of these senior subordinated
discount notes. We have filed a copy of the Indenture as an exhibit to the
registration statement which includes this prospectus.
Brief Description of the Senior Subordinated Discount Notes and the Guarantees
The Senior Subordinated Discount Notes
These senior subordinated discount notes:
. are general obligations of AirGate;
. are secured by a senior subordinated pledge of the capital stock of
AirGate's future, directly owned Subsidiaries;
. are subordinated in right of payment to all existing and future Senior
Debt of AirGate;
. are equal in right of payment to all existing and future senior
subordinated indebtedness of AirGate;
. are senior in right of payment to all existing and future subordinated
indebtedness of AirGate; and
. are unconditionally guaranteed on a senior subordinated basis by the
Guarantors.
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The senior subordinated discount notes will be effectively subordinated to
all liabilities of AirGate's Subsidiaries.
The Guarantees
These senior subordinated discount notes are guaranteed by AGW Leasing
Company, Inc. and all future Restricted Subsidiaries.
The Guarantees of these senior subordinated discount notes:
. are general obligations of each Guarantor;
. are subordinated in right of payment to all existing and future Senior
Debt of such Guarantor;
. are equal in right of payment with all existing and future senior
subordinated Indebtedness of each Guarantor; and
. are senior in right of payment to all existing and future subordinated
Indebtedness of each Guarantor.
Assuming we had completed the offering of these senior subordinated discount
notes and applied the net proceeds as intended, as of August 31, 1999, AirGate
and the Guarantors would have had total Senior Debt of approximately $13.5
million. The Indenture will permit us and the Guarantors to incur additional
Senior Debt.
As of the date of the Indenture, all of our Subsidiaries will be "Restricted
Subsidiaries." However, under the circumstances described below under the
subheading "Selected Covenants--Designation of Restricted and Unrestricted
Subsidiaries," we will be permitted to designate Subsidiaries meeting
particular requirements as "Unrestricted Subsidiaries." Unrestricted
Subsidiaries will not be subject to many of the restrictive covenants in the
Indenture. Unrestricted Subsidiaries will not guarantee these senior
subordinated discount notes.
The guarantees will be released upon the circumstances described under "--
Guarantees."
Principal, Maturity and Interest
AirGate will issue senior subordinated discount notes with a maximum
aggregate principal amount of $ million. The senior subordinated discount
notes will mature on , 2009.
Cash interest will not be paid or accrue on the senior subordinated discount
notes prior to , 2005, and will be payable at a rate of % per annum,
semi-annually in arrears on and of each year, commencing , 2005
to holders of record of such senior subordinated discount notes at the close of
business on the and next preceding the Interest Payment Date (each a
"Regular Record Date"). Cash interest will accrue 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 , 2004. Cash interest
will be computed on a basis of a 360-day year of twelve 30-day months.
Accretion of original issue discount will be computed on a basis of a 360-day
year of twelve 30 day months, compounded semi-annually. Certain of AirGate's
existing and proposed debt agreements restrict the ability of AirGate's
Subsidiaries to pay dividends to enable AirGate to pay interest on the senior
subordinated discount notes.
The senior subordinated discount notes will be issued at a substantial
discount from the aggregate stated principal amount thereof. For federal income
tax purposes, significant amounts of
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original issue discount, taxable as ordinary income will be recognized by
holders of the senior subordinated discount notes annually as long as they hold
the senior subordinated discounts notes, including in advance of the receipt of
cash interest payments thereon. See "United States Federal Income Tax
Consequences."
The senior subordinated discount notes are not subject to any sinking fund.
The principal of, premium, if any, and interest on the senior subordinated
discount notes will be payable, and the senior subordinated discount notes will
be exchangeable and transferable, at the office or agency of AirGate in the
City of New York maintained for such purposes, which initially will be the
office of the Trustee located at Four Albany Street--4th Floor, New York, New
York 10006, Attn: Corporate Trust and Agency Group, Corporate Market Services.
The senior subordinated discount notes will be issued only in registered form
without coupons and only in denominations of $1,000 and any integral multiple
thereof. No service charge will be made for any registration of transfer or
exchange or redemption of senior subordinated discount 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.
Additional Interest
The Indenture will provide that if we fail to (1) file a shelf registration
statement with respect to the common stock underlying the warrants (the "Shelf
Registration Statement") within 60 days after the date of this prospectus, (2)
use its reasonable best efforts to have the Securities and Exchange Commission
declare the Shelf Registration Statement effective within 120 days after the
date of this prospectus, or (3) keep the Shelf Registration Statement
continuously effective, subject to some conditions, until the later of the date
on which, (a) all of the warrants have been exercised or, (b) the warrants have
expired, then in each case above (each such event referred to in clauses (1)
through (3) above a "Registration Default"), AirGate or the Guarantors will be
required to pay additional interest to each holder of a senior subordinated
discount note which shall accrue from the first such Registration Default.
The additional interest paid to each holder of a senior subordinated discount
note will be in an amount equal to $0.05 per week for $1,000 in Accreted Value
of senior subordinated discount notes held by such holder for each week or
portion thereof that the Registration Default continues for the first 90-day
period immediately following the occurrence of such Registration Default. This
amount will increase by an additional $0.05 per week per $1,000 in Accreted
Value of the senior subordinated discount notes with respect to each subsequent
90-day period, up to a maximum amount of additional interest equal to $0.35 per
week per $1,000 of Accreted Value of the senior subordinated discount notes.
The provision for additional interest will continue until such Registration
Default has been cured. Neither AirGate nor the Guarantors will be required to
pay additional interest for more than one Registration Default at any given
time.
Additional interest accrued as of any interest payment date will be payable
on such date. All accrued additional interest shall be paid by AirGate or the
Guarantors to holders entitled to such additional interest in the same manner
in which interest is payable to holders under the provisions in the Indenture
relating to the payment of interest.
Methods of Receiving Payments on the Senior Subordinated Discount Notes
If a holder of senior subordinated discount notes has given wire transfer
instructions to us, we will make all principal, premium and interest payments
on those senior subordinated discount notes
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in accordance with those instructions. All other payments on these senior
subordinated discount notes will be made at the office or agency of the Paying
Agent and Registrar within the City and State of New York unless we elect to
make interest payments by check mailed to the holders of senior subordinated
discount notes at their address set forth in the register of holders.
Paying Agent and Registrar for the Senior Subordinated Discount Notes
The Trustee will initially act as Paying Agent and Registrar. We may change
the Paying Agent or Registrar without prior notice to the holders of the senior
subordinated discount notes, and we or any of our Subsidiaries may act as
Paying Agent or Registrar.
Transfer and Exchange
A Holder of senior subordinated discount 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 senior subordinated discount note selected for redemption.
Also, we are not required to transfer or exchange any senior subordinated
discount note for a period of 15 days before a selection of senior subordinated
discount notes to be redeemed.
The registered holder of a senior subordinated discount note will be treated
as the owner of it for all purposes.
Guarantees
The Guarantors will jointly and severally guarantee our obligations on a
senior subordinated basis under these senior subordinated discount notes. Each
Guarantee will be:
. subordinated in right of payment to all existing and future senior
Indebtedness of each Guarantor;
. equal in right of payment to all existing and future senior subordinated
Indebtedness of each Guarantor; and
. senior in right of payment to all existing and future subordinated
Indebtedness of each Guarantor.
The obligations of each Guarantor under its Guarantee will be limited as
necessary to prevent that Guarantee from constituting a fraudulent conveyance
under applicable law. See "Risk Factors--Risks Related to the Offering--Because
federal and state statutes may allow courts to void the guarantees of the
senior subordinated discount notes, you may not have the right to receive any
money pursuant to the guarantees."
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:
. immediately after giving effect to that transaction, no Default or Event
of Default exists; and
. either:
. 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
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. 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:
. if we designate the Guarantor as an Unrestricted Subsidiary;
. 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
. 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 "--Selected Covenants--Asset Sales."
In addition, the Guarantee of AGW Leasing Company, Inc. will be released upon
the foreclosure of the security interest in the capital stock of such Guarantor
on the latest to occur of (1) the date all of such stock is sold and (2) the
date that the applicable senior Guarantee is released and all other obligations
of AGW Leasing Company, Inc. to the holders of the Senior Debt are released,
if certain other conditions are met.
Security
The senior subordinated discount notes will be secured by a pledge of the
Capital Stock of all of our future direct Subsidiaries.
Representatives of the holders of Senior Debt, the Trustee, the Collateral
Agent and AGW Leasing Company, Inc. will enter into an intercreditor agreement
defining the terms of the pledges that secure these senior subordinated
discount notes and the Senior Debt. These pledges will secure the payment and
performance when due of all of the Obligations of AirGate under the Senior Debt
and all Obligations of AirGate under the Indenture and these senior
subordinated discount notes as provided in the respective pledge agreements.
The security interest created by the pledge agreement in favor of the Trustee
will be junior to the security interest in favor of Senior Debt. The
intercreditor agreement provides that the holders of Senior Debt will be
entitled to control virtually all decisions relating to the exercise of
remedies under the pledge agreements. As a result, the holders of senior
subordinated discount notes will not be able to force a sale of Collateral or
otherwise exercise many of the remedies available to a secured creditor without
the concurrence of the holders of Senior Debt. See "Risk Factors--Risks Related
to the Offering--Holders of our senior debt will control enforcement of the
exercise of remedies under the pledge agreements, which may affect the
Trustee's ability to independently pursue remedies on behalf of holders of the
senior subordinated discount notes."
So long as no default or event of default under the Senior Debt or senior
subordinated discount notes shall have occurred and be continuing, and subject
to certain terms and conditions, we will be entitled to receive all cash
dividends, interest and other payments made upon or with respect to the
Collateral pledged by us and to exercise any voting and other consensual rights
pertaining to the Collateral pledged by us.
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Upon the occurrence and during the continuance of a Default or Event of
Default,
. all rights of AirGate to exercise such voting or other consensual rights
shall cease, and all such rights shall become vested in the Senior Debt's
collateral agent, which, to the extent permitted by law, shall have the
sole right to exercise such voting and other consensual rights;
. all rights of AirGate to receive all cash dividends, interest and other
payments made upon or with respect to the Collateral will cease and such
cash dividends, interest and other payments will be paid to the Senior
Debt's collateral agent; and
. the Senior Debt's collateral agent may sell the Collateral or any part
thereof in accordance with the terms of the intercreditor agreement and
the Senior Debt pledge agreement. All funds distributed under the pledge
agreements and received by the Senior Debt's collateral agent for the
benefit of the Senior Debt and the holders of the senior subordinated
discount notes will be distributed by the Senior Debt's collateral agent
in accordance with the provisions of the intercreditor agreement.
The Senior Debt's collateral agent will determine the circumstances and
manner in which the Collateral shall be disposed of and whether to foreclose on
the Collateral following the existence of a Default or Event of Default. The
Senior Debt's collateral agent will follow any instructions given to it by the
representative of the holders of Senior Debt.
The pledges will be released upon the full and final payment and performance
of all our Obligations under the Indenture and the senior subordinated discount
notes.
Subordination
The payment of principal of and premium, if any, and interest on the senior
subordinated discount notes will be subordinated in right of payment, as set
forth in the Indenture, to the prior payment in full of all Senior Debt.
If AirGate fails to make any payment on the senior subordinated discount
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 senior
subordinated discount notes to receive payment upon an acceleration of the
maturity will be 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 unsecured senior
subordinated obligations. As such, the rights of holders of senior subordinated
discount notes to receive payment by a Guarantor pursuant to its Guarantee will
be 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 senior subordinated discount notes apply
equally to a Guarantor and the obligations of such Guarantor under its
Guarantee.
The terms of the subordination provisions described below will not apply to
payments from money or the proceeds of U.S. Government obligations deposited in
trust prior to the occurrence of
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an event prohibiting payment of or on the senior subordinated discount notes
and held in trust by the Trustee for the payment of principal of an interest on
the senior subordinated discount 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 will be entitled to receive payment in full in cash or
cash equivalents 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 senior
subordinated discount notes will be 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 in cash or cash equivalents, any
distribution to which the holders of senior subordinated discount notes would
be entitled shall be made to the holders of Senior Debt, except that holders of
senior subordinated discount 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 senior subordinated discount 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, 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.
The Indenture will further require that AirGate promptly notify holders of
Designated Senior Debt if payment of the senior subordinated discount 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 senior subordinated discount notes may recover less ratably than
creditors of AirGate who are holders of Senior Debt.
Optional Redemption
During the first 36 months after the Issue Date, AirGate may on any one or
more occasions redeem up to 35% of the Accreted Value of the senior
subordinated discount notes originally issued
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under the Indenture at a redemption price of % of the Accreted Value thereof,
with the net cash proceeds of one or more Equity Offerings; provided that
. at least 65% of the Accreted Value of senior subordinated discount notes
originally issued under the Indenture remains outstanding immediately
after the occurrence of such redemption, excluding senior subordinated
discount notes held by AirGate and its Subsidiaries; and
. the redemption must occur within 60 days of the date of the closing of
such Equity Offering.
Except pursuant to the preceding paragraph, the senior subordinated discount
notes will not be redeemable at AirGate's option prior to , 2004.
After , 2004, AirGate may redeem all or a part of these senior
subordinated discount 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, if redeemed during the twelve-month period beginning on of
the years indicated below:
<TABLE>
<CAPTION>
Percentage of
Principal Amount
Year at Maturity
<S> <C>
2004........................ %
2005........................ %
2006........................ %
2007 and thereafter......... 100.00%
</TABLE>
Notwithstanding the foregoing, AirGate's outstanding Senior Debt currently
prohibits AirGate from redeeming any senior subordinated discount notes.
Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, each Holder of senior subordinated discount
notes will have the right to require AirGate to repurchase all or any part,
equal to $1,000 or an integral multiple thereof, of that Holder's senior
subordinated discount 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 Accreted Value of senior subordinated
discount notes repurchased on any purchase date prior to , 2004 or 101% of
the aggregate principal amount thereof, plus accrued and unpaid interest
thereon, if any, to the date of purchase if on or after , 2004. Within ten
days following any Change of Control, AirGate will mail a notice to each Holder
of senior subordinated discount notes describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
senior subordinated discount 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 senior
subordinated discount 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.
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On the Change of Control Payment Date, AirGate will, to the extent lawful:
. accept for payment all senior subordinated discount notes or portions
thereof properly tendered pursuant to the Change of Control Offer;
. deposit with the Paying Agent an amount equal to the Change of Control
Payment in respect of all senior subordinated discount notes or portions
thereof so tendered; and
. deliver or cause to be delivered to the Trustee the senior subordinated
discount notes so accepted together with an Officers' Certificate stating
the aggregate principal amount or Accreted Value, as applicable, of
senior subordinated discount notes or portions thereof being purchased by
AirGate.
The Paying Agent will promptly mail to each holder of senior subordinated
discount notes so tendered the Change of Control Payment for such senior
subordinated discount notes, and the Trustee will promptly authenticate and
mail or cause to be transferred by book entry to each Holder a new senior
subordinated discount note equal in principal amount to any unpurchased portion
of the senior subordinated discount notes surrendered, if any; provided that
each such new senior subordinated discount note will be in a principal amount
of $1,000 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 senior subordinated discount 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 will be 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 senior subordinated discount
notes to require that AirGate repurchase or redeem the senior subordinated
discount notes in the event of a takeover, recapitalization or similar
transaction.
AirGate's outstanding Senior Debt currently prohibits AirGate from purchasing
any senior subordinated discount 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 senior subordinated discount
notes, AirGate could seek the consent of its senior lenders to the purchase of
senior subordinated discount 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 senior
subordinated discount notes. In such case, AirGate's failure to purchase
tendered senior subordinated discount 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 senior subordinated
discount 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
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made by AirGate and purchases all senior subordinated discount 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 senior subordinated discount notes to
require AirGate to repurchase such senior subordinated discount 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 may be uncertain.
Selection and Notice
If less than all of the senior subordinated discount notes are to be redeemed
at any time, the Trustee will select senior subordinated discount notes for
redemption as follows:
. if the senior subordinated discount notes are listed, in compliance with
the requirements of the principal national securities exchange on which
the senior subordinated discount notes are listed; or
. if the senior subordinated discount 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 senior subordinated discount notes of $1,000 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 senior
subordinated discount notes to be redeemed at its registered address. Notices
of redemption may not be conditional.
If any senior subordinated discount note is to be redeemed in part only, the
notice of redemption that relates to that senior subordinated discount note
shall state the portion of the principal amount thereof to be redeemed. A new
senior subordinated discount note in principal amount equal to the unredeemed
portion of the original senior subordinated discount note will be issued in the
name of the holder thereof upon cancellation of the original senior
subordinated discount note. Senior subordinated discount notes called for
redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on senior subordinated discount
notes or portions of them called for redemption.
Selected Covenants
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 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 85% 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 senior
subordinated discount 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, senior subordinated discount 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.
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 senior subordinated discount notes and all
holders of other Indebtedness that is equal in right of payment with the senior
subordinated discount 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 senior subordinated
discount 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 Accreted Value or 100% of the principal
amount, plus accrued and unpaid interest, if any, to the date of purchase, as
applicable, 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 senior subordinated discount notes and such other pari
passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of
Excess Proceeds, the Trustee shall select the senior subordinated discount
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
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connection with each repurchase of senior subordinated discount 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.
Limitation on Restricted Payments
Prior to and including December 31, 2002, AirGate shall not, 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, or permit
any Restricted Subsidiary to, directly or indirectly, 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,
or permit any Restricted Subsidiary to, directly or indirectly, 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 senior subordinated
discount notes; or
(4) make, or permit any Restricted Subsidiary, directly or indirectly, to
make, any Restricted 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"). After December 31, 2002, AirGate shall not, directly
or indirectly, make any Restricted Payment, and shall not permit any
Restricted Subsidiary to make any Restricted Investment, 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, other than Permitted Debt,
pursuant to clause (a) or (b) of 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 December
31, 2002 through the end of the latest full fiscal quarter for
which consolidated financial
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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 December 31, 2002 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
(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, other than shares of Equity Interests or
options warrants or other rights to purchase Equity Interests or
shares issuable upon exercise thereof, 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, 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. 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) paying 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;
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(2) repurchasing 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 senior subordinated discount 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 is at least as subordinated in right of payment
to the senior subordinated discount notes, including premium, if
any, and accrued and unpaid interest, as the Indebtedness being
purchased, with Restricted Payments pursuant to this clause not
being counted as Restricted Payments for purposes of clause (c)
above;
(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; or
(5) 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.
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
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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
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, (a)
the Consolidated Debt to Annualized Operating Cash Flow Ratio would be (1) less
than 7.0 to 1.0, if prior to September 1, 2005 and (2) less than 6.0 to 1.0, if
on or after September 1, 2005 or (b) in the case of any incurrence of
Indebtedness prior to September 1, 2005 only, Consolidated Debt would be equal
to or less than 70% of Total Invested Capital.
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"):
(1) the incurrence by AirGate and its Subsidiaries of Existing
Indebtedness;
(2) the incurrence by AirGate and the Guarantors of Indebtedness
represented by the senior subordinated discount 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 repay
Indebtedness under a Credit Facility pursuant to the covenant described
above under the caption "--Selected Covenants--Asset Sales";
(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;
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(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 leases of real
property, must be expressly subordinated to the prior payment in
full in cash of all Obligations with respect to the senior
subordinated discount 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;
(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;
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(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 (12) 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.
No Senior Subordinated Debt
The Indenture will provide 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
senior subordinated discount 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.
Liens
AirGate will not, and will not permit any Guarantor to, create, incur, assume
or otherwise cause or suffer to exist or become effective any Lien of any kind
securing Indebtedness that is equal in right of payment with the senior
subordinated discount notes or the applicable Guarantee, as the case may be, or
is subordinated Indebtedness, upon any of their property or assets, now owned
or hereafter acquired, unless all payments due under the Indenture and the
senior subordinated discount notes are secured equally and ratably with, or
prior to, in the case of subordinated Indebtedness, the obligations so secured
until such time as such obligations are no longer secured by such Lien;
provided that this restriction will not apply to Permitted Liens.
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,
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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;
(2) the Indenture and the senior subordinated discount notes;
(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 securing Indebtedness otherwise permitted to be incurred pursuant
to the provisions of the covenant described above under the caption "--
Liens" that limit the right of AirGate or any of its Restricted
Subsidiaries to dispose of the assets subject to such Lien;
(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 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:
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(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 senior subordinated discount 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
(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 clause (a) 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 to any other Restricted Subsidiary, or the merger or
consolidation of any Restricted Subsidiary with or into any other
Restricted Subsidiary. The Indenture will also provide 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 senior subordinated discount 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
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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 senior subordinated discount notes.
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; 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 holders of
senior subordinated discount 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 entered into by AirGate or any of its
Restricted Subsidiaries in the ordinary course of business and
consistent with the past practice 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 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, 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
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become a Guarantor and execute a supplemental indenture satisfactory to the
Trustee and deliver an Opinion of Counsel to the Trustee 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.
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 tests in (a) and (b), if
applicable, 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 "--Liens";
(2) the gross cash proceeds of that sale and leaseback transaction are at
least equal to the fair market value, as determined in good faith by
the Board of Directors and set forth in an Officers' Certificate
delivered to the Trustee, of the property that is the subject of such
sale and leaseback transaction; and
(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 "--
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) the cash Net Proceeds from such transfer, conveyance, sale, lease or
other disposition are applied in accordance with the covenant described
above under the caption "--Asset Sales."
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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 senior subordinated discount notes for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of the Indenture
or the senior subordinated discount notes unless such consideration is offered
to be paid and is paid to all holders of the senior subordinated discount 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 Commission, so long as any senior subordinated
discount notes are outstanding, AirGate will furnish to the Holders of senior
subordinated discount notes, within the time periods specified in the
Commission's rules and regulations:
(1) all quarterly and annual financial information that would be required
to be contained in a filing with the Commission on Forms 10-Q and 10-K
if AirGate were required to file such Forms, 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 certified independent
accountants; and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if AirGate were required to file such reports.
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 within the time periods
specified in the Commission's rules and regulations, unless the Commission will
not accept such a filing, and make such information available to securities
analysts and prospective investors upon request.
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 senior
subordinated discount notes, whether or not prohibited by the
subordination provisions of the Indenture;
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(2) default in payment when due of the principal of or premium, if any, on
the senior subordinated discount 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," "Selected Covenants--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 or the pledge agreement;
(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 $5.0 million or more;
(6) failure by AirGate or any of its Restricted Subsidiaries to pay final
judgments aggregating in excess of $5.0 million, which judgments are
not paid, discharged or stayed for a period of 60 days;
(7) breach by AirGate of any material representation or warranty or
agreement in the pledge agreement, the repudiation by AirGate of any of
its obligations under the pledge agreement or the unenforceability of
the pledge agreement against AirGate for any reason;
(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 or
any of its Restricted Subsidiaries; 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 senior
subordinated discount 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 senior subordinated discount notes may declare all the
senior subordinated discount notes to be due and payable immediately.
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Holders of the senior subordinated discount notes may not enforce the
Indenture or the senior subordinated discount notes except as provided in the
Indenture. Subject to certain limitations, Holders of a majority in principal
amount of the then outstanding senior subordinated discount notes may direct
the Trustee in its exercise of any trust or power. The Trustee may withhold
from holders of the senior subordinated discount 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 senior
subordinated discount notes then outstanding by notice to the Trustee may on
behalf of the holders of all of the senior subordinated discount 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 senior subordinated discount 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 senior subordinated discount 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 senior subordinated discount notes. If an
Event of Default occurs prior to , 2004, 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 senior subordinated discount
notes prior to , 2004, 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 senior subordinated discount 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 senior subordinated discount notes, the Indenture, the
Guarantees, the pledge agreements or for any claim based on, in respect of, or
by reason of, such obligations or their creation. Each holder of senior
subordinated discount notes by accepting a senior subordinated discount note
waives and releases all such liability. The waiver and release are part of the
consideration for issuance of the senior subordinated discount 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 senior subordinated
discount notes and all obligations of the Guarantors discharged with respect to
their Guarantees ("Legal Defeasance") except for:
(1) the rights of holders of outstanding senior subordinated discount notes
to receive payments in respect of the principal of, premium, if any,
and interest on such senior subordinated discount notes when such
payments are due from the trust referred to below;
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(2) AirGate's obligations with respect to the senior subordinated discount
notes concerning issuing temporary senior subordinated discount notes,
registration of senior subordinated discount notes, mutilated,
destroyed, lost or stolen senior subordinated discount 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 senior subordinated discount
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 senior subordinated discount notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) AirGate must irrevocably deposit with the Trustee, in trust, for the
benefit of the holders of the senior subordinated discount 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
senior subordinated discount notes on the stated maturity or on the
applicable redemption date, as the case may be, and AirGate must
specify whether the senior subordinated discount 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 senior subordinated discount 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 senior subordinated
discount 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;
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(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 senior subordinated discount 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 or
the senior subordinated discount notes may be amended or supplemented with the
consent of the holders of at least a majority in aggregate Accreted Value of
the senior subordinated discount notes then outstanding if prior to ,
2004, or the aggregate principal amount of the senior subordinated discount
note if after , 2004, including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, senior
subordinated discount notes, and any existing default or compliance with any
provision of the Indenture or the senior subordinated discount notes may be
waived with the consent of the holders of a majority in aggregate Accreted
Value of the then outstanding senior subordinated discount notes including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, senior subordinated discount notes.
Without the consent of each holder adversely affected, an amendment or waiver
may not, with respect to any senior subordinated discount notes held by a non-
consenting holder:
(1) reduce the Accreted Value of the then outstanding senior subordinated
discount notes if prior to , 2004 or the aggregate of the
principal amount of senior subordinated discount notes if after ,
2004 whose holders must consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any senior
subordinated discount note or alter the provisions with respect to the
redemption of the senior subordinated discount notes, other than
provisions relating to the covenants described above under the captions
"--Repurchase at the Option of Holders--Change of Control" and "--
Selected Covenants--Asset Sales";
(3) reduce the rate of or change the time for payment of interest on any
senior subordinated discount note;
(4) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the senior subordinated discount notes,
except a rescission of acceleration of the
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senior subordinated discount notes by the holders of at least a majority
in aggregate principal amount of the senior subordinated discount notes
and a waiver of the payment default that resulted from such
acceleration;
(5) make any senior subordinated discount note payable in money other than
that stated in the senior subordinated discount notes;
(6) make any change in the provisions of the Indenture relating to waivers
of past Defaults or the rights of holders of senior subordinated
discount notes to receive payments of principal of or premium, if any,
or interest on the senior subordinated discount notes;
(7) waive a redemption payment with respect to any senior subordinated
discount 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 "--Selected Covenants--Asset Sales"; or
(8) make any change in the preceding amendment and waiver provisions.
In addition, any amendment to, or waiver of, the provisions of the Indenture
relating to the security interests created by the pledge agreement that
adversely affects the rights of the holders of the senior subordinated discount
notes will require the consent of the holders of at least 75% in aggregate
principal amount of senior subordinated discount notes then outstanding.
Notwithstanding the preceding, without the consent of any Holder of senior
subordinated discount notes, AirGate and the Trustee may amend or supplement
the Indenture or the senior subordinated discount notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated senior subordinated discount notes in
addition to or in place of certificated senior subordinated discount
notes;
(3) to provide for the assumption of AirGate's obligations to Holders of
senior subordinated discount notes in the case of a merger or
consolidation or sale of all or substantially all of AirGate's assets;
(4) to make any change that would provide any additional rights or benefits
to the holders of senior subordinated discount notes or that does not
adversely affect the legal rights under the Indenture of any holder; or
(5) to comply with requirements of the Commission in order to effect or
maintain the qualification of the Indenture under the Trust Indenture
Act.
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 senior
subordinated discount 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,
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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 senior subordinated discount notes, unless such
holder shall have offered to the Trustee security and indemnity satisfactory to
it against any loss, liability or expense.
Certain 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.
"Accreted Value" of any outstanding senior subordinated discount note as of
or to any date of determination means an amount equal to the sum of (1) the
issue price of such senior subordinated discount note as determined in
accordance with Section 1273 of the Internal Revenue Code plus (2) the
aggregate of the portions of the original issue discount, i.e., the excess of
the amounts considered as part of the "stated redemption price at maturity" of
such senior subordinated discount note within the meaning of Section 1273(a)(2)
of the Internal Revenue Code or any successor provisions, whether denominated
as principal or interest, over the issue price of such senior subordinated
discount note, that shall theretofore have accrued pursuant to Section 1272 of
the Internal Revenue Code, without regard to Section 1272(a)(7) of the Internal
Revenue Code, from the date of issue of such senior subordinated discount note
(a) for each six-month or shorter period ending or prior to the date
of determination and (b) for the shorter period, if any, from the end of the
immediately preceding six-month or shorter period, as the case may be, to the
date of determination, plus (3) accrued and unpaid interest to the date such
Accreted Value is paid (without duplication of any amount set forth in (ii)
above), minus all amounts theretofore paid in respect of such senior
subordinated discount note, which amounts are considered as part of the "stated
redemption price at maturity" of such senior subordinated discount note within
the meaning of Section 1273(a)(2) of the Internal Revenue Code or any successor
provisions whether such amounts paid were denominated principal or interest.
"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.
"Annualized Operating Cash Flow" means Operating Cash Flow, for the latest
two full fiscal quarters for which consolidated financial statements of AirGate
are available multiplied by two.
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"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights, other than sales of inventory and sales of obsolete equipment
in the ordinary course of business consistent with past 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
(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.
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"Capital Lease Obligation" means, at the time any determination thereof is to
be made, 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 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;
(5) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation 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;
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(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, an 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.
"Closing Date" means , 1999, the date on which the senior subordinated
discount notes were originally issued under the Indenture.
"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 Annualized Operating Cash Flow Ratio" means, as at any
date of determination, the ratio of (i) Consolidated Debt to (ii) the
Annualized Operating Cash Flow of AirGate as of the most recently completed
fiscal quarter of AirGate for which financial statements 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
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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;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall
be excluded;
(4) 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
(5) 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,
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 Facilities" means, with respect to AirGate or any Guarantor, one or
more debt facilities or commercial paper facilities, 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 Lucent
Financing in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced 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.
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"Designated Senior Debt" means, as has been designated by AirGate in writing
to the Trustee as "Designated Senior Debt," (a) the Credit Facilities and (b)
any other 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 senior subordinated discount 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 Stock upon the occurrence of a change of control or an
asset sale shall not constitute Disqualified Stock if the terms of such Capital
Stock provide that AirGate may not repurchase or redeem any such Capital Stock
pursuant to such provisions unless such repurchase or redemption complies with
the covenant described above under the caption "--Selected Covenants--
Limitation on Restricted Payments."
"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.
"Equity Offering" means any public or private offering of Capital Stock of
AirGate in which the gross proceeds to AirGate are at least $50.0 million;
provided, however, the underwritten public offering of AirGate common stock
sold pursuant to a prospectus dated as of the Closing Date shall not constitute
an Equity Offering.
"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 $150,000 in aggregate principal amount of
Indebtedness of AirGate and its Restricted Subsidiaries in existence on the
date of the Indenture, until such amounts are repaid.
"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
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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 a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
"Guarantors" means each of AGW Leasing Company, Inc. and any future
subsidiary that executes a Guarantee 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 specified Person, any indebtedness
of such Person, whether or not contingent, in respect of:
(1) borrowed money;
(2) evidenced by bonds, senior subordinated discount notes, debentures or
similar instruments or letters of credit, or reimbursement agreements
in respect thereof;
(3) banker's acceptances;
(4) representing Capital Lease Obligations;
(5) the balance deferred and unpaid of the purchase price of any property,
except any such balance that constitutes an accrued expense or trade
payable; or
(6) representing any Hedging Obligations;
if and to the extent any of the preceding, other than letters of credit and
Hedging Obligations, would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person, whether or not such Indebtedness is assumed by
the specified Person, and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued with
original issue discount; and
(2) the principal amount thereof, together with any interest thereon that
is more than 30 days past due, in the case of any other Indebtedness.
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"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, 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.
"Lucent Financing" means the Credit Agreement dated as of August 16, 1999
among AirGate PCS, Inc. as Borrower, the Lenders party thereto, State Street
Bank and Trust Company as Collateral Agent and Lucent Technologies Inc. as
Administrative Agent, as such may be amended, restated, modified, renewed,
refunded, replaced or refinanced in whole or in part 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
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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 senior subordinated discount
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 payable under
the documentation governing any Indebtedness.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board, the President or 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 fiscal quarter, (i) AirGate's
Consolidated Net Income (Loss) plus (ii) depreciation, amortization and other
non-cash charges in respect thereof for such fiscal quarter, plus (iii) all
amounts deducted in calculating Consolidated Net Income (Loss) for such fiscal
quarter 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. For purposes of calculating Operating Cash Flow for the fiscal
quarter 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 Annualized 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 fiscal
quarter, (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 fiscal quarter 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 fiscal quarter, 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 fiscal
quarter.
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"Paying Agent" means any Person authorized by AirGate to pay the principal
of, and premium, if any, or interest on any senior subordinated discount notes
on behalf of AirGate.
"Permitted Business" means the business primarily involved in the ownership,
design, construction, development, acquisition, installation, integration,
management and/or provision of Telecommunications Assets or 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 "--
Selected Covenants--Asset Sales";
(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; and
(7) 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 (7) 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 senior subordinated discount notes are subordinated to Senior Debt.
"Permitted Liens" means:
(1) Liens on the assets of AirGate and any Guarantor securing Indebtedness
and other Obligations under Credit Facilities that were permitted by
the terms of the Indenture to be incurred;
(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
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Liens were in existence prior to the contemplation of such merger or
consolidation and 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 were in existence prior to the contemplation of such acquisition;
(5) Liens and deposits made to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds 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;
(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; and
(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.
"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;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the senior
subordinated discount notes, such Permitted Refinancing Indebtedness
has a final maturity date later than the final maturity date of, and
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is subordinated in right of payment to, the senior subordinated discount
notes on terms at least as favorable to the holders of senior
subordinated discount 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,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"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.
"Restricted Investment" means any Investment that is not a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Senior Debt" means:
(1) all Indebtedness outstanding under Credit Facilities and all Hedging
Obligations with respect thereto; 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.
"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.
"Sprint Agreements" means the (1) 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 (the "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) 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 (the "Trademark
Agreement"); and (4) Sprint Trademark and Service mark License Agreement
between
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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 (the "Spectrum Trademark Agreement").
"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
senior subordinated discount notes, including without limitation, principal of,
premium, if any, and interest, if any, payable pursuant to the terms of the
senior subordinated discount notes (including upon the acceleration of
redemption thereof), together with and including any amounts received or
receivable upon the exercise of rights of recission 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.
"Telecommunications Assets" means, with respect to any Person, any asset that
is utilized by such Person, directly or indirectly, for the design,
development, construction, installation, integration, operation, management or
provision of PCS telecommunications equipment, inventory, technology, systems
and/or services. Telecommunications Assets shall include stock, joint venture
or partnership interests of an entity where substantially all of the assets of
the entity consist of Telecommunications Assets.
"Total Invested Capital" means at any time of determination, the sum of,
without duplication, (i) the total amount of equity contributed to AirGate as
of the Closing Date (being $7.6 million), plus (ii) the aggregate net cash
proceeds received by AirGate from the common stock offering concurrent with
this offering, plus (iii) the aggregate net cash proceeds received by AirGate
from capital contributions or any other issuance or sale of Capital Stock
(other than Disqualified Stock but including Capital Stock issued upon the
conversion of convertible Debt or from the exercise of options, warrants or
rights to purchase Capital Stock (other than Disqualified Stock), including
cash payments under the Committed Capital Contribution, subsequent to the
Closing Date, other than to a Restricted Subsidiary, plus (iv) the aggregate
net repayment of any Investment made after the Closing Date and constituting a
Restricted Payment in an amount equal to the lesser of (a) the return of
capital with respect to such Investment and (b) the initial amount of such
Investment, in either case, less the cost of the disposition of such
Investment, plus (v) an amount equal to the Consolidated
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Net Investment (as of the date of determination) AirGate and/or any of the
Restricted Subsidiaries has made in any Subsidiary that has been designated as
an Unrestricted Subsidiary after the Closing Date upon its redesignation as a
Restricted Subsidiary in accordance with the covenant described under "--
Selected Covenants--Designation of Restricted and Unrestricted Subsidiaries,"
plus (vi) Consolidated Debt minus (vii) the aggregate amount of all Restricted
Payments declared or made on or after the Closing Date.
"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;
(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 a certified copy
of 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.
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"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, 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.
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DESCRIPTION OF WARRANTS
AirGate will issue the warrants pursuant to a Warrant Agreement (the "Warrant
Agreement") by and among AirGate, AGW Leasing Company, Inc., and Bankers Trust
Company, as Warrant Agent (the "Warrant Agent"). The following description is a
summary of the material provisions of the Warrant Agreement. We urge you to
read the Warrant Agreement because it defines your rights as a holder of these
warrants. We have filed a copy of the Warrant Agreement as an exhibit to the
registration statement which includes this prospectus.
General
Each warrant, when exercised, will entitle the holder to receive fully paid
and non-assessable shares of AirGate common stock (the "Warrant Shares"), at an
exercise price of $.01 per share, subject to adjustment (the "Exercise Price").
The number of Warrant Shares is subject to adjustment in the cases referred to
below. The holders of the warrants would be entitled, in the aggregate, to
purchase shares of AirGate common stock representing approximately 3% of the
issued and outstanding shares of our common stock on a fully diluted basis on
the date hereof, assuming exercise of all outstanding warrants. The warrants
will be exercisable at any time on or after the separation date. Unless
exercised, the warrants will automatically expire at 5:00 p.m. New York City
time on , 2009 (the "Expiration Date").
The warrants may be exercised by surrendering the warrant certificates
evidencing the warrants to be exercised with the accompanying form of election
to purchase that is properly completed and executed, together with payment of
the Exercise Price. Payment of the Exercise Price may be made at the holder's
election (1) by tendering senior subordinated discount notes having an
aggregate Accreted Value or aggregate principal amount, as the case may be,
plus accrued and unpaid interest, if any, thereon, to the date of exercise
equal to the Exercise Price and (2) in cash in United States dollars by wire
transfer or by certified or official bank check to the order of AirGate. Upon
surrender of the warrant certificate and payment of the Exercise Price, AirGate
will deliver or cause to be delivered, to or upon the written order of such
holder, stock certificates representing the number of whole Warrant Shares to
which the Holder is entitled. If less than all of the warrants evidenced by a
warrant certificate are to be exercised, a new warrant certificate will be
issued for the remaining number of warrants. Holders of warrants will be able
to exercise their warrants only if a registration statement relating to the
Warrant Shares underlying the warrants is then in effect, or the exercise of
such warrants is exempt from the registration requirements of the Securities
Act, and such securities are qualified for sale or exempt from qualification
under securities laws of the states in which the various holders of warrants or
other persons to whom it is proposed that Warrant Shares be issued on exercise
of the warrants reside.
No fractional Warrant Shares will be issued upon exercise of the warrants.
AirGate will pay to the holder of the warrant at the time of exercise an amount
in cash equal to the current market value of any such fractional Warrant Shares
less a corresponding fraction of the Exercise Price.
The holders of the warrants will have no right to vote on matters submitted
to the stockholders of AirGate and will have no right to receive dividends. The
holders of the warrants will not be entitled to share in the assets of AirGate
in the event of liquidation, dissolution or the winding up of AirGate. In the
event a bankruptcy or reorganization is commenced by or against AirGate, a
bankruptcy court may hold that unexercised warrants are executory contracts
which may be subject to rejection by AirGate with approval of the bankruptcy
court, and the holders of the warrants may, even if sufficient funds are
available, receive nothing or a lesser amount as a result of any such
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bankruptcy case then they would be entitled to if they had exercised their
Warrants prior to the commencement of any such case.
In the event of a taxable distribution to holders of AirGate common stock
that results in an adjustment to the number of Warrant Shares or other
consideration for which a warrant may be exercised, the holders of the warrants
may, in certain circumstances, be deemed to have received a distribution
subject to United States federal income tax as a dividend. See "United States
Federal Income Tax Consequences--Tax Treatment of the Warrants."
Adjustments
The number of Warrant Shares purchasable upon exercise of warrants will be
subject to adjustment in several circumstances including the following:
. the payment by us of dividends and other distributions on our common
stock in shares of our common stock or otherwise;
. subdivision, combinations and reclassifications of our common stock,
. the issuance to all holders of common stock of rights, options or
warrants entitling them to subscribe for our common stock or securities
convertible into, or exchangeable or exercisable for, our common stock
at a price which is less than the fair market value per share or our
common stock;
. certain distributions to all holders of our common stock or any of our
assets or debt securities or any rights or warrants to purchase any
such securities, excluding those rights and warrants referred to in the
preceding bullet point;
. the issuance of shares of our common stock for consideration per share
less than the then Fair Market Value per share of our common stock at
the time of issuance of such convertible or exchangeable security,
excluding securities issued in transactions referred to in the first
four bullet points above, or the bullet point below and subject to
certain exceptions;
. the issuance of securities convertible into or exchangeable for our
common stock for a conversion or exchange price plus consideration
received upon issuance less than the then fair market value per share
of our common stock at the time of issuance of such convertible or
exchangeable security, excluding securities issued in transactions
referred to in the first four bullet points above; and
. other events that could have the effect of depriving holders of the
warrants of the benefit of all or a portion of the purchase rights
evidenced by the warrants.
No adjustment need be made for any of the foregoing transactions if
warrant holders are to participate in the transaction on a basis and
with notice that the Board of Directors is determined to be fair and
appropriate in light of the basis and notice and on which other holders
of the common stock participate in the transaction. In addition, no
adjustment need be made for the adoption of a plan being referred to as
a shareholder's rights plan or the issuance of rights and such a plan.
"disinterested director" as used in this section means, in connection with
any issuance of securities that gives rise to a determination of the fair
market value thereof, each member of the Board of Directors of AirGate who is
not an officer, employee, director or other Affiliate of the party to whom
AirGate is proposing to issue the securities giving rise to such determination.
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"fair market value" per security at any date of determination as used in this
section shall be (1) in connection with a sale to a party that is not an
Affiliate of AirGate in an arm's-length transaction (a "Non-Affiliate Sale"),
the price per security at which such security is sold and (2) in connection
with any sale to an Affiliate of AirGate, (a) the last price per security at
which such security was sold in a Non-Affiliate Sale within the three-month
period preceding such date of determination or (b) if clause (a) is not
applicable, the fair market value of such security determined in good faith by
(i) a majority of the Board of Directors of AirGate, including a majority of
the disinterested directors, and approved in a board resolution delivered to
the Warrant Agent or (ii) a nationally recognized investment banking, appraisal
or valuation firm, which is not an Affiliate of AirGate, in each case, taking
into account, among all other factors deemed relevant by the Board of Directors
or such investment banking, appraisal or valuation firm, the trading price and
volume of such security on any national securities exchange or automated
quotation system on which such security is traded.
In the case of certain consolidations or mergers of AirGate, or the sale of
all or substantially all of the assets of AirGate to another corporation, (1)
each warrant will thereafter be exercisable for the right to receive the kind
and amount of shares of stock or other securities or property to which such
holder would have been entitled as a result of such consolidation, merger or
sale had the warrants been exercised immediately prior thereto and (2) the
Person formed by or surviving any such consolidation or merger, (if other than
AirGate) or to which such sale shall have been made will assume the obligations
of AirGate under the Warrant Agreement.
Reservation of Shares
AirGate has authorized and reserved for issuance and will at all times
reserve and keep available such number of shares of AirGate common stock as
will be issuable upon the exercise of all outstanding warrants. Such shares of
AirGate common stock, when paid for and issued, will be duly and validly
issued, fully paid and non-assessable, free of preemptive rights and free from
all taxes, liens, charges and security interests with respect to the issuance
thereof.
Amendment
From time to time, AirGate and the Warrant Agent, without the consent of the
holders of the Warrants, may amend or supplement the Warrant Agreement for
several purposes, including curing defects or inconsistencies or making any
change that does not adversely affect the legal rights of any holder. Any
amendment or supplement to the Warrant Agreement that adversely affects the
legal rights of the holders of the warrants will require the written consent of
the holders of a majority of the then outstanding warrants, excluding warrants
held by AirGate or any of its Affiliates. The consent of each holder of the
warrants affected will be required for any amendment pursuant to which the
Exercise Price would be increased or the number of Warrant Shares purchasable
upon exercise of warrants would be decreased, other than pursuant to
adjustments provided in the Warrant Agreement.
Registration of the Warrant Shares
We also are required, under the terms of the Warrant Agreement, to (1) file a
Shelf Registration Statement within 60 days after the date of this prospectus,
(2) use our reasonable best efforts to cause the Shelf Registration Statement
to be declared effective under the Securities Act within 120
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days after the date of this prospectus and (3) keep the Shelf Registration
Statement continuously effective until the later of the date on which (a) all
of the warrants have been exercised or (b) the warrants have expired.
We may suspend the effectiveness of any Shelf Registration Statement or
amendment thereto, suspend the use of any prospectus and shall not be required
to amend or supplement the Shelf Registration Statement, any related prospectus
or any document incorporated therein by reference other than an effective
registration statement being used for an underwritten offering in the event
that, and for periods (each a "Suspension Period") not to exceed 60 consecutive
days and no more than two times in any calendar year if (1) an event or
circumstance occurs and is continuing as a result of which the Shelf
Registration Statement, any related prospectus or any document incorporated
therein by reference as then amended or supplemented or proposed to be filed
would, in our good faith judgment, contain an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, and (2) (A) we determine in our good faith judgment that the
disclosure of such event at such time would have a material adverse effect on
our business, operations, or prospects or (B) the disclosure otherwise relates
to a material business transaction or development which has not yet been
publicly disclosed.
Each holder of Warrant Shares that sells such Warrant Shares pursuant to the
Shelf Registration Statement generally will be required to be named as a
selling securityholder in the related prospectus and to deliver a prospectus to
the purchaser, will be subject to certain of the civil liability provisions
under the Securities Act in connection with such shares and will be bound by
certain provisions of the Warrant Agreement which are applicable to such
holder, including certain indemnification obligations. In addition, each holder
of Warrant Shares will be required to deliver information to be used in
connection with the Shelf Registration Statement in order to have its Warrant
Shares included in the Shelf Registration Statement.
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DESCRIPTION OF PROVISIONS APPLICABLE TO THE UNITS
The units initially will be in the form of one or more registered global
units (collectively, the "Global Units"). Upon issuance, the Global Units will
be deposited with the Trustee, as custodian for the Depository Trust Company
("DTC"), in New York, New York and registered in the name of DTC or its nominee
for credit to the accounts of DTC's Direct and Indirect Participants, as
defined below. On the separation date, the Global Unit will be exchanged for
Global Senior Subordinated Discount Notes and Global Warrants, each as defined
below.
The warrants will be in the form of one or more registered global warrants
(collectively, the "Global Warrants"). The Global Units, Global Warrants and
the Global Senior Subordinated Discount Notes are referred to herein
collectively as the "Global Securities." The Global Warrants will be deposited
upon issuance with the Warrant Agent as custodian for DTC, in New York, New
York, and registered in the name of DTC or its nominee, in each case for credit
to an account of a Direct or Indirect Participant in DTC as described below.
Transfer of beneficial interests in any Global Securities will be subject to
the applicable rules and procedures of DTC and its Direct or Indirect
Participants, including, if applicable, those of Euroclear and Cedel, which may
change from time to time.
The Global Securities may be transferred, in whole and not in part, only to
another nominee of DTC or to a successor of DTC or its nominee in certain
limited circumstances. Beneficial interests in the Global Securities may be
exchanged for senior subordinated discount notes or warrants, as the case may
be, in certificated form in limited circumstances. See "--Transfers of
Interests in Global Securities for Certificated Securities."
Initially, the Trustee will act as Paying Agent and Registrar. The senior
subordinated discount notes may be presented for registration of transfer and
exchange at the offices of the Registrar.
Depositary Procedures
DTC has advised AirGate that DTC is a limited-purpose trust company created
to hold securities for its participating organizations (collectively, the
"Direct Participants") and to facilitate the clearance and settlement of
transactions in those securities between Direct Participants through electronic
book-entry changes in accounts of Participants. The Direct Participants include
securities brokers and dealers, including the underwriters, banks, trust
companies, clearing corporations and certain other organizations, including the
Euroclear System ("Euroclear") and Cedel Bank, societe anonyme ("Cedel").
Access to DTC's system is also available to other entities that clear through
or maintain a direct or indirect, custodial relationship with a Direct
Participant (collectively, the "Indirect Participants").
DTC has advised AirGate that, pursuant to DTC's procedures, (1) upon deposit
of the Global Securities, DTC will credit the accounts of the Direct
Participants designated by the underwriters with portions of the principal
amount of the Global Securities that have been allocated to them by the
underwriters, and (2) DTC will maintain records of the ownership interests of
such Direct Participants in the Global Securities and the transfer of ownership
interests by and between Direct Participants. DTC will not maintain records of
the ownership interests of, or the transfer of ownership interests by and
between, Indirect Participants or other owners of beneficial interests in the
Global Securities. Direct Participants and Indirect Participants must maintain
their own records of the
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ownership interests of, and the transfer of ownership interests by and between,
Indirect Participants and other owners of beneficial interests in the Global
Securities.
Investors in the Global Securities may hold their interests therein directly
through DTC if they are Direct Participants in DTC or indirectly through
organizations that are Direct Participants in DTC.
The laws of some states in the United States require that certain persons
take physical delivery in definitive, certificated form, of securities that
they own. This may limit or curtail the ability to transfer beneficial
interests in a Global Security to such persons. Because DTC can act only on
behalf of Direct Participants, which in turn act on behalf of Indirect
Participants and others, the ability of a person having a beneficial interest
in a Global Security to pledge such interest to persons or entities that are
not Direct Participants in DTC, or to otherwise take actions in respect of such
interests, may be affected by the lack of physical certificates evidencing such
interests. For certain other restrictions on the transferability of the Global
Securities see "--Transfers of Interests in Global Securities for Certificated
Securities".
Except as described in "--Transfers of Interests in Global Securities for
Certificated Securities", owners of beneficial interests in the Global
Securities will not have senior subordinated discount notes or warrants
registered in their names, will not receive physical delivery of senior
subordinated discount notes or warrants in certificated form and will not be
considered the registered owners or holders thereof under the Indenture or
Warrant Agreement for any purpose.
Under the terms of the Indenture and the Warrant Agreement AirGate and the
Trustee will treat the persons in whose names the senior subordinated discount
notes or warrants, as the case may be, are registered, including senior
subordinated discount notes and warrants represented by Global Securities, as
the owners thereof for the purpose of receiving payments and for any and all
other purposes whatsoever. Payments in respect of the principal, premium and
interest on Global Senior Subordinated Discount Notes registered in the name of
DTC or its nominee will be payable by the Trustee to DTC or its nominee as the
registered holder under the Indenture. Consequently, neither AirGate, the
Trustee nor any agent of AirGate or the Trustee has or will have any
responsibility or liability for (1) any aspect of DTC's records or any Direct
Participant's or Indirect Participant's records or any Direct Participant's or
Indirect Participant's records relating to or payments made on account of
beneficial ownership interests in the Global Senior Subordinated Discount Notes
or for maintaining, supervising or reviewing any of DTC's records or any Direct
Participant's or Indirect Participant's records relating to the beneficial
ownership interests in any Global Senior Subordinated Discount Note or (2) any
other matter relating to the actions and practices of DTC or any of its Direct
Participants or Indirect Participants.
DTC has advised AirGate that its current payment practice, for payments of
principal, interest and the like, with respect to securities such as the senior
subordinated discount notes is to credit the accounts of the relevant Direct
Participants with such payment on the payment date in amounts proportionate to
such Direct Participant's respective ownership interests in the Global Senior
Subordinated Discount Notes as shown on DTC's records. Payments by Direct
Participants and Indirect Participants to the beneficial owners of the senior
subordinated discount notes will be governed by standing instructions and
customary practices between them and will not be the responsibility of DTC, the
Trustee or AirGate. Neither AirGate nor the Trustee will be liable for any
delay by DTC or its Direct Participants or Indirect Participants in identifying
the beneficial owners of the senior subordinated discount notes and warrants,
and AirGate and the Trustee may conclusively rely on and will be protected in
relying on instructions from DTC or its nominee as the registered owner of the
senior subordinated discount notes and warrants for all purposes.
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The Global Securities will trade in DTC's Same-Day Funds Settlement System
and, therefore, transfers between direct Participants in DTC will be effected
in accordance with DTC's procedures, and will be settled in immediately
available funds. Transfers between Indirect Participants, other than Indirect
Participants who hold an interest in the senior subordinated discount notes or
warrants through Euroclear or Cedel, who hold an interest through a Direct
Participant will be effected in accordance with the procedures of such Direct
Participant but generally will settle in immediately available funds. Transfers
between and among Indirect Participants who hold interests in the senior
subordinated discount notes or warrants through Euroclear and Cedel will be
effected in the ordinary way in accordance with their respective rules and
operating procedures.
Subject to compliance with the transfer restrictions applicable to the senior
subordinated discount notes or warrants described herein, cross-market
transfers between Direct Participants in DTC, on the one hand, and Indirect
Participants who hold interests in the senior subordinated discount notes or
warrants through Euroclear or Cedel, on the other hand, will be effected by
Euroclear's or Cedel's respective Nominee through DTC in accordance with DTC's
rules on behalf of Euroclear or Cedel; however, delivery of instructions
relating to crossmarket transactions must be made directly to Euroclear or
Cedel, as the case may be, by the counterparty in accordance with the rules and
procedures of Euroclear or Cedel and within their established deadlines, i.e.,
Brussels time for Euroclear and UK time for Cedel. Indirect Participants who
hold interest in the senior subordinated discount notes or warrants through
Euroclear and Cedel may not deliver instructions directly to Euroclear's or
Cedel's Nominee. Euroclear or Cedel will, if the transaction meets its
settlement requirements, deliver instructions to its respective Nominee to
deliver or receive interests on Euroclear's or Cedel's behalf in the relevant
Global Security in DTC, and make or receive payment in accordance with normal
procedures for same-day fund settlement applicable to DTC.
Because of time zone differences, the securities accounts of an Indirect
Participant who holds an interest in the senior subordinated discount notes or
warrants through Euroclear or Cedel purchasing an interest in a Global Security
from a Direct Participant in DTC will be credited, and any such crediting will
be reported to Euroclear or Cedel during the European business day immediately
following the settlement date of DTC in New York. Although recorded in DTC's
accounting records as of DTC's settlement date in New York, Euroclear and Cedel
customers will not have access to the cash amount credited to their accounts as
a result of a sale of an interest in a Global Security to a DTC Participant
until the European business day for Euroclear or Cedel immediately following
DTC's settlement date.
DTC has advised AirGate that it will take any action permitted to be taken by
a holder of senior subordinated discount notes or warrants only at the
direction of one or more Direct Participants to whose account interests in the
Global Security are credited and only in respect of such portion of the
Accreted Value or aggregate Accreted Value or principal amount, as the case may
be of the senior subordinated discount notes or number of warrants to which
such Direct Participant or Direct Participants has or have given direction.
However, if there is an Event of Default under the senior subordinated discount
notes, DTC reserves the right to exchange Global Securities, without the
direction of one or more of its Direct Participants, for legended securities in
certificated form, and to distribute such certificated forms of securities to
its Direct Participants. See "--Transfers of Interests in Global Securities for
Certificated Securities."
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures to
facilitate transfers of interests in the Global Securities among Direct
Participants, including Euroclear and Cedel, they are under no obligation to
perform or to continue to perform such procedures, and such
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procedures may be discontinued at any time. None of AirGate, the underwriters
or the Trustee shall have any responsibility for the performance by DTC,
Euroclear or Cedel or their respective Direct and Indirect Participants of
their respective obligations under the rules and procedures governing any of
their operations.
The information in this section concerning DTC, Euroclear and Cedel and their
book-entry systems has been obtained from sources that AirGate believes to be
reliable, but AirGate takes no responsibility for the accuracy thereof.
Transfers of Interests in Global Securities for Certificated Securities
An entire Global Security may be exchanged for definitive senior subordinated
discount notes or warrants, as the case may be, in registered, certificated
form without interest coupons ("Certificated Senior Subordinated Discount
Notes") if:
(1) DTC
(a) notifies AirGate that it is unwilling or unable to continue as
depositary for the Global Securities and AirGate thereupon fails
to appoint a successor depositary within 90 days or
(b) has ceased to be a clearing agency registered under the Exchange
Act,
(2) AirGate, at its option, notifies the Trustee in writing that it
elects to cause the issuance of Certificated Securities or
(3) there shall have occurred and be continuing a Default or an Event of
Default with respect to the senior subordinated discount notes.
In any such case, AirGate will notify the Trustee in writing that, upon
surrender by the Direct and Indirect Participants of their interest in such
Global Securities, Certificated Securities will be issued to each person that
such Direct and Indirect Participants and the DTC identify as being the
beneficial owners of the related senior subordinated discount notes and
warrants.
Beneficial interests in Global Securities held by any Direct or Indirect
Participant may be exchanged for Certificated Securities upon request to DTC,
by such Direct Participant, for itself or on behalf of an Indirect Participant,
to the Trustee in accordance with customary DTC procedures. Certificated
Securities delivered in exchange for any beneficial interest in any Global
Security will be registered in the names, and issued in any approved
denominations, requested by DTC on behalf of such Direct or Indirect
Participants, in accordance with DTC's customary procedures.
Neither AirGate nor the Trustee will be liable for any delay by the holder of
any Global Security or DTC in identifying the beneficial owners of senior
subordinated discount notes or warrants, as the case may be, and AirGate and
the Trustee may conclusively rely on, and will be protected in relying on,
instructions from the holder of the Global Security or DTC for all purposes.
Same Day Settlement and Payment
The Indenture will require that payments in respect of the senior
subordinated discount notes represented by the Global Senior Subordinated
Discount Notes, including principal, premium, if any, and interest, including
additional interest, be made by wire transfer of immediately available same day
funds to the accounts specified by the holder of interests in such Global
Senior Subordinated Discount Notes. With respect to Certificated Senior
Subordinated Discount Notes, AirGate will make
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all payments of principal, premium, if any, and interest, including additional
interest, by wire transfer of immediately available same day funds to the
accounts specified by the holders thereof or, if no such account is specified,
by mailing a check to each such holder's registered address. AirGate expects
that secondary trading in the Certificated Senior Subordinated Discount Notes
will also be settled in immediately available funds.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of United States federal income tax
consequences of the acquisition, ownership and disposition of units, which
consist of senior subordinated discount notes and warrants. Unless otherwise
stated, this discussion is limited to the tax consequences to those persons who
purchase the units on their original issue and who hold such senior
subordinated discount notes and/or warrants as capital assets within the
meaning of Section 1221 of the Internal Revenue Code of 1986, as amended (the
"Code"). The discussion does not purport to address tax consequences to holders
who may be subject to special tax rules because of their status, such as
financial institutions, insurance companies, tax-exempt organizations and
broker-dealers, or because of how they hold the senior subordinated discount
notes and warrants, such as if the senior subordinated discount notes and
warrants are held as part of a straddle, hedge, conversion transaction, or
other integrated investment. In addition, this discussion does not address U.S.
federal alternative minimum tax consequences or any aspect of state, local or
foreign taxation. This discussion is based upon the Code, the Treasury
regulations promulgated thereunder and administrative and judicial
interpretation thereof, all or which are subject to change possibly on a
retroactive basis.
For purposes of this discussion, a U.S. holder is any United States citizen
or resident, corporation or partnership or other entity created or organized on
or under the laws of the United States or any state thereof, estate the income
of which is subject to United State federal income taxation regardless of its
source, or trust if a United States court exercises primary jurisdiction over
its administration and one or more United States persons have the authority to
control all of its substantial decisions. A foreign holder is any holder other
than a U.S. holder.
Prospective purchasers of the units are urged to consult their tax advisors
concerning the United States federal income tax consequences to them to
acquiring, owning and disposing of the senior subordinated discount notes and
warrants, as well as the application of state, local and foreign income and
other tax laws.
Allocation of Issue Price
Each unit will be treated by us as an investment unit, consisting of a senior
subordinated discount note and a warrant. The issue price of a unit will be the
first price at which a substantial amount of the units are sold to purchasers
for money, excluding sales to bond houses, brokers, or similar persons acting
in the capacity of an underwriter, placement agent or wholesaler.
The issue price of a unit will be allocated between the senior subordinated
discount note and the warrant, based on our best judgment of the relative fair
market values of each such component of the units on the issue date. This
allocation will be used to determine the holders' income tax basis in the
warrants and the issue price of the senior subordinated discount notes, as
discussed below. Our allocation will not binding on the IRS, which may
challenge such allocation. A holder of a unit is bound by our allocation unless
the holder discloses that it plans to use an allocation that is inconsistent
with our allocation and attaches a statement to that effect to the holder's
timely filed federal income tax return for the holder's taxable year that
includes the acquisition date of the unit.
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Characterization of the Senior Subordinated Discount Notes
We will treat the senior subordinated discount notes as indebtedness for
federal income tax purposes, and the following discussion assumes that such
treatment will be respected.
Tax Consequences to U.S. Holders
Taxation of interest. The senior subordinated discount notes will be treated
as issued with original issue discount ("OID"). Thus, all U.S. holders,
regardless of their method of accounting for tax purposes, will be required to
include OID in income as it accrues. OID generally will be treated as interest
income to the U.S. holder and will accrue on a yield-to-maturity basis over the
life of the senior subordinated discount notes, as discussed below. The rate at
which OID accrues on the life of the senior subordinated discount notes will
not necessarily equal the stated rate of interest on the senior subordinated
discount notes payable beginning in 2005. U.S. holders will not be required to
include in income the actual cash receipt of interest payments beginning in
2005.
The amount of OID with respect to a senior subordinated discount note will be
an amount equal to the excess of the stated redemption price at maturity of
such senior subordinated discount note over the issue price of such senior
subordinated discount note. The stated redemption price at maturity of each
senior subordinated discount note will include all cash payments, including
principal and interest, required to be made under the senior subordinated
discount note through maturity. The issue price of a senior subordinated
discount note will be the portion of the issue price of the unit allocated to
the senior subordinated discount note as discussed above.
The amount of OID accruing to a holder with respect to any senior
subordinated discount note will be the sum of the "daily portions" of OID with
respect to such senior subordinated discount note for each day during the
taxable year in which such holder owns such senior subordinated discount note
("accrued OID"). The daily portion is determined by allocating to each day in
any "accrual period" a pro rata portion of the OID allocable to that accrual
period. An accrual period may be of any length and may vary in length over the
term of a senior subordinated discount note provided that each accrual period
is no longer than one year and each scheduled payment of principal or interest
occurs either on the final day or on the first day of an accrual period.
Accrual periods for the senior subordinated discount notes will occur every six
months with the final accrual period expected to end on the date of maturity.
The amount of OID accruing during any six-month accrual period with respect
to a senior subordinated discount note will be equal to the following amount:
(1) the "adjusted issue price" of such senior subordinated discount note at the
beginning of that accrual period, multiplied by (2) the yield to maturity of
such senior subordinated discount note (taking into account the length of the
accrual period). OID allocable to the final accrual period is the difference
between the amount payable at maturity and the adjusted issue price at the
beginning of the final accrual period. If all accrual periods are of equal
length, except for an initial short accrual period, the amount of OID allocable
to the initial short accrual period may be computed under any reasonable
method. The adjusted issue price of a senior subordinated discount note at the
beginning of its first accrual period will be equal to its issue price.
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The adjusted issue price at the beginning of any subsequent accrual period
will be equal to:
. the adjusted issue price at the beginning of the preceding accrual
period, increased by,
. the amount of OID accrued during the preceding accrual period, and
included in the gross income of any holder, and decreased by,
. any payments made on the senior subordinated discount note during the
preceding accrual period.
AirGate may redeem the senior subordinated discount notes at any time on or
after a certain date, and, in certain circumstances, may redeem or repurchase
all or a portion of the senior subordinated discount notes any time prior to
the maturity date. For purposes of calculating OID on the senior subordinated
discount notes, the Treasury regulations will treat AirGate as having exercised
its option to redeem the senior subordinated discount notes if the exercise of
that option would lower the yield on the senior subordinated discount notes.
Because AirGate's exercise of the option to redeem would increase, rather than
decrease, the yield on the senior subordinated discount notes, it will not be
treated as having exercised the option under these rules.
Sale, exchange or retirement of the senior subordinated discount notes. Upon
the sale, exchange or retirement of senior subordinated discount notes, a U.S.
holder will recognize gain or loss equal to the difference between the amount
realized upon the sale, exchange or retirement and the U.S. holder's adjusted
tax basis in the senior subordinated discount notes. An original U.S. holder's
adjusted tax basis in the senior subordinated discount notes generally will be
the U.S. holder's cost therefor, increased by the amount of OID previously
accrued on the senior subordinated discount notes through the sale, exchange or
retirement date and decreased by the amount of all prior cash payments received
with respect to the senior subordinated discount notes. Gain or loss recognized
by a U.S. holder on the sale, exchange, or retirement of the senior
subordinated discount notes will be capital gain or loss. An individual who
disposes of senior subordinated discount notes that he or she holds as a
capital asset for more than one year qualifies for long term capital gains tax
rate. Effective 2001, the 20% rate drops to 18% or the 10% rate drops to 8% for
capital assets acquired after the year 2000 and held for more than five years.
To take advantage of the lower rate, individuals may elect to treat pre-2001
property as sold and repurchased at fair market value on January 1, 2001.
Tax Consequences to Foreign Holders
Assuming that the interest income received by a foreign holder is not
effectively connected with the foreign holder's conduct of a trade or business
in the United States, a foreign holder generally will not be subject to United
States federal income or withholding tax on such interest so long as the
foreign holder (1) is not actually or constructively a "10 percent shareholder"
of AirGate or a "controlled foreign corporation" with respect to which AirGate
is a "related person" within the meaning of the Code, and (2) provides an
appropriate statement, signed under penalties of perjury, certifying that the
beneficial owner of the senior subordinated discount note is a foreign person
and providing that foreign person's name and address. If the foregoing
conditions are not satisfied, then interest paid on the senior subordinated
discount notes will be subject to United States withholding tax at a rate of 30
percent, unless such rate is reduced or eliminated pursuant to an applicable
tax treaty.
Any capital gain a foreign holder realized on the sale, exchange, retirement
or other taxable disposition of a senior discount note will be exempt from
United States federal income and withholding tax, provided that:
(a) the gain is not effectively connected with the foreign holder's conduct
of a trade or business in the United States;
(b) in the case of a foreign holder that is an individual, the foreign holder
is not present in the United States for 183 days or more in the taxable
year; and
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(c) the foreign holder is not subject to tax pursuant to the provisions of
U.S. tax law applicable to certain expatriates.
If the interest, gain or other income a foreign holder recognizes on a senior
subordinated discount note is effectively connected with the foreign holder's
conduct of a trade or business in the United States, the foreign holder,
although exempt from the withholding tax previously discussed if an appropriate
statement is furnished, generally will be subject to United States federal
income tax on the interest, gain or other income at regular federal income tax
rates. In addition, if the foreign holder is a foreign corporation, it may be
subject to a branch profits tax equal to 30 percent of its "effectively
connected earnings and profits," as adjusted for certain items, unless it
qualifies for a lower rate under an applicable tax treaty.
If interest on the senior subordinated discount notes is exempt from
withholding of United States federal income tax under the rules described
above, the senior subordinated discount notes will not be included in the
estate of a deceased foreign holder for United States federal estate tax
purposes.
Information Reporting and Backup Withholding
AirGate will be required to report annually to the IRS, and to each holder of
record, the amount of OID accrued on the senior subordinated discount notes and
the amount of interest withheld for federal income taxes, if any, for each
calendar year, except as to exempt holders, generally, corporations, tax-exempt
organizations, qualified pension and profit-sharing trusts, individual
retirement accounts, or nonresident aliens who provide certification as to
their status. Each holder, other than holders who are not subject to the
reporting requirements will be required to provide to AirGate, under penalties
of perjury, a certificate containing the holder's name, address, correct
federal taxpayer identification number and a statement that the holder is not
subject to backup withholding. Should a nonexempt holder fail to provide the
required certificate, AirGate will be required to withhold 31% of the interest
otherwise payable to the holder and to remit the withheld amount to the IRS as
a credit against the holder's federal income tax liability.
In the case of payments of interest to foreign holders, temporary Treasury
regulations provide that the 31% backup withholding tax and certain information
reporting will not apply to such payments with respect to which the requisite
certification, as described above for the exemption from the 30% withholding
tax, has been received or an exemption has otherwise been established; provided
that neither AirGate nor its payment agent has actual knowledge that the holder
is a United States person or that the conditions of any other exemption are not
in fact satisfied. Under temporary Treasury regulations, these information
reporting and backup withholding requirements will apply, however, to the gross
proceeds paid to a foreign holder on the disposition of the senior subordinated
discount notes by or through a United States office of a United States or
foreign broker, unless the holder certifies to the broker under penalties of
perjury as to its name, address and status as a foreign person or the holder
otherwise establishes an exemption. Information reporting requirements, but not
backup withholding, will also apply to a payment of the proceeds of a
disposition of, the senior subordinated discount notes by or through a foreign
office of a United States broker or foreign brokers with certain types of
relationships to the United States unless such broker has documentary evidence
in its file that the holder of the senior subordinated discount notes is not a
United States person, and such broker has no actual knowledge to the contrary,
or the holder establishes an exception. Neither information reporting nor
backup withholding generally will apply to a payment of the proceeds of a
disposition of the senior subordinated discount notes by or through a foreign
office of a foreign broker not subject to the preceding sentence.
The Treasury Department recently promulgated final regulations regarding the
withholding and information reporting rules relating to foreign holders
discussed above. In general, the final
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regulations do not significantly alter the substantive withholding and
information reporting requirements but rather unify current certification
procedures and forms and clarify reliance standards. The final regulations are
generally effective for payments made after December 31, 2000, subject to
certain transition rules. Foreign holders should consult their own tax advisors
with respect to the impact, if any, of the new final regulations.
Applicable High-Yield Discount Obligations
We expect the senior subordinated discount notes to have "significant OID"
and we expect the yield of the senior subordinated discount notes to be at
least five percentage points above the applicable federal rate. Therefore, we
expect that the senior subordinated discount notes will be classified as
applicable high yield discount obligations and AirGate will not be able to
deduct for tax purposes any OID required to be accrued on the senior
subordinated discount notes until such interest is actually paid. In addition,
if the senior subordinated discount notes are classified as applicable high
yield discount obligations and the yield on the senior subordinated discount
notes is more than six percentage points above the applicable federal rate,
then:
. a portion of such interest corresponding to the yield in excess of six
percentage points above the applicable federal rate would not be
deductible by AirGate at any time, and
. a U.S. corporate holder may be entitled to treat the interest that would
not be deductible as a dividend to the extent of the earnings and profits
of AirGate, which may then qualify for the dividends received deduction.
In such event, U.S. corporate holders should consult their tax advisers
concerning the availability of the dividends received deduction.
Characterization of the Warrants
We will treat the warrants as warrants for federal income tax purposes rather
than as equity or stock, and the following discussion assumes that such
treatment will be respected.
Tax Treatment of the Warrants
A U.S. holder of a warrant will recognize gain or loss upon the sale or other
taxable disposition, including a redemption or repurchase by Airgate, of a
warrant in an amount equal to the difference between the amount of cash and
fair market value of property received and the holder's adjusted tax basis in
the warrant. An initial holder's tax basis in a warrant will be the portion of
the initial offering price of a unit allocable to a warrant, as described
above, adjusted as described below. Such gain or loss generally will be capital
gain or loss if the gain or loss from a taxable disposition of common stock
received upon exercise of a warrant in the hands of the holder would be capital
gain or loss, and will be long-term capital gain or loss if the holder has held
the warrant for more than one year at the time of disposition.
The exercise of a warrant will not result in a taxable event to the holder of
a warrant, except with respect to the receipt of cash in lieu of a fractional
share of common stock. The receipt of cash in lieu of a fractional share of
common stock will be taxable as if the fractional share had been issued and
then redeemed for cash. As a result, a holder would recognize gain or loss in
an amount equal to the difference between the amount of cash received for the
fractional share and the holder's tax basis, if any, in the fractional share.
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A U.S. holder's federal income tax basis in the common stock received upon
exercise of a warrant pursuant to the payment of the exercise price, including
any fractional share interest, will be equal to the sum of the holder's federal
income tax basis in the warrant immediately prior to exercise plus the amount
of any cash paid upon exercise. The holder's holding period for the common
stock, including any fractional share interest, would begin on the day after
the date of exercise.
Upon the expiration of an unexercised warrant, a holder will generally
recognize a capital loss equal to the adjusted tax basis of such warrant. Such
loss generally will be a long-term capital loss if the holder has held the
warrant for more than one year.
An adjustment in the exercise price or conversion ratio with respect to the
warrants made pursuant to the anti-dilution provisions of the warrants may, in
certain circumstances, result in constructive distributions to the holders of
the warrants which could be taxable as dividends to the holders under section
305 of the Code. A holder's federal income tax basis in a warrant would
generally be increased by the amount of any such dividend.
TAX CONSEQUENCES TO NON-U.S. HOLDERS OF COMMON STOCK
Dividends
Dividends paid to a non-U.S. holder will generally be subject to withholding
of U.S. federal income tax at the rate of 30%. If, however, the dividend is
effectively connected with the conduct of a trade or business in the U.S. by
the non-U.S. holder, the dividend will be subject to U.S. federal income tax
imposed on net income on the same basis that applies to U.S. persons generally,
and, for corporate holders under certain circumstances, the branch profits tax.
Non-U.S. holders should consult any applicable income tax treaties that may
provide for a reduction of, or exemption from, withholding taxes. For purposes
of determining whether tax is to be withheld at a reduced rate as specified by
a treaty, we generally will presume that dividends we pay on or before December
31, 2000, to an address in a foreign country are paid to a resident of that
country.
Under recently finalized U.S. Treasury Department regulations, which in
general apply to dividends that we pay after December 31, 2000, to obtain a
reduced rate of withholding under a treaty, a non-U.S. holder generally will be
required to provide certification as to that non-U.S. holder's entitlement to
treaty benefits. These regulations also provide special rules to determine
whether, for purposes of applying a treaty, dividends that we pay to a non-U.S.
holder that is an entity should be treated as paid to holders of interests in
that entity.
Gain on Disposition
A non-U.S. holder will generally not be subject to United States federal
income tax, including by way of withholding, on gain recognized on a sale or
other disposition of our common stock unless any one of the following is true:
. the gain is effectively connected with the conduct of a trade or business
in the U.S. by the non-U.S. holder;
. the non-U.S. holder is a nonresident alien individual present in the U.S.
for 183 or more days in the taxable year of the disposition and certain
other requirements are met;
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. the non-U.S. holder is subject to tax pursuant to provisions of the U.S.
federal income tax law applicable to certain U.S. expatriates; or
. we are or have been during certain periods a "United States real property
holding corporation" for U.S. federal income tax purposes.
If we are or have been a United States real property holding corporation, a
non-U.S. holder will generally not be subject to U.S. federal income tax on
gain recognized on a sale or other disposition of our common stock provided
that:
. the non-U.S. holder does not hold, and has not held during certain
periods, directly or indirectly, more than 5% of our outstanding common
stock; and
. our common stock is and continues to be traded on an established
securities market for U.S. federal income tax purposes.
We believe that our common stock will be traded on an established securities
market for this purpose in any quarter during which it is listed on the Nasdaq
National Market.
If we are or have been during certain periods a U.S. real property holding
corporation and the above exception does not apply, a non-U.S. holder will be
subject to U.S. federal income tax with respect to gain realized on any sale or
other disposition of our common stock as well as to a withholding tax,
generally at a rate of 10% of the proceeds. Any amount withheld pursuant to a
withholding tax will be creditable against a non-U.S. holder's U.S. federal
income tax liability.
Gain that is effectively connected with the conduct of a trade or business in
the U.S. by the non-U.S. holder will be subject to the U.S. federal income tax
imposed on net income on the same basis that applies to U.S. persons generally,
and, for corporate holders under certain circumstances, the branch profits tax,
but will generally not be subject to withholding. Non-U.S. holders should
consult any applicable income tax treaties that may provide for different
rules.
United States Federal Estate Taxes
Our common stock that is owned or treated as owned by an individual who is
not a citizen or resident of the U.S., as specially defined for U.S. federal
estate tax purposes, on the date of that person's death will be included in his
or her estate for U.S. federal estate tax purposes, unless an applicable estate
tax treaty provides otherwise.
Information Reporting and Backup Withholding
Generally, we must report annually to the IRS and to each non-U.S. holder the
amount of dividends that we paid to a holder, and the amount of tax that we
withheld on those dividends. This information may also be made available to the
tax authorities of a country in which the non-U.S. holder resides.
Under current U.S. Treasury Department regulations, U.S. information
reporting requirements and backup withholding tax will generally not apply to
dividends that we pay on our common stock to a non-U.S. holder at an address
outside the U.S. Payments of the proceeds of a sale or other taxable
disposition of our common stock by a U.S. office of a broker are subject to
both backup withholding at a rate of 31% and information reporting, unless the
holder certifies as to its non-U.S.
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holder status under penalties of perjury or otherwise establishes an exemption.
Information reporting requirements, but not backup withholding tax, will also
apply to payments of the proceeds of a sale or other taxable disposition of our
common stock by foreign offices of U.S. brokers or foreign brokers with certain
types of relationships to the U.S., unless the broker has documentary evidence
in its records that the holder is a non-U.S. holder and certain other
conditions are met or the holder otherwise established an exemption.
Backup withholding is not an additional tax. Any amounts that we withhold
under the backup withholding rules will be refunded or credited against the
non-U.S. holder's U.S. federal income tax liability if certain required
information is furnished to the IRS.
The U.S. Treasury Department has promulgated final regulations regarding the
withholding and information reporting rules discussed above. In general, those
regulations do not significantly alter the substantive withholding and
information reporting requirements but unify current certification procedures
and forms and clarify reliance standards. The final regulations are generally
effective for payments made after December 31, 2000, subject to transition
rules.
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UNDERWRITING
We, each of the subsidiary guarantors and the underwriters named below, have
entered into an underwriting agreement covering the units to be offered in this
offering. Donaldson, Lufkin & Jenrette Securities Corporation and Credit Suisse
First Boston Corporation are acting as underwriters. Each underwriter has
agreed to purchase from us the number of units set forth opposite its name in
the following table.
<TABLE>
<CAPTION>
Number
of
Underwriters Units
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation...............
Credit Suisse First Boston Corporation............................
----------
Total........................................................... $
==========
</TABLE>
The underwriting agreement provides that if the underwriters take any of the
units set forth in the table above, then they must take all of these units. No
underwriter is obligated to take any units allocated to a defaulting
underwriter except under limited circumstances.
The underwriters initially propose to offer the units in part directly to the
public at the initial public offering price set forth on the cover page of this
prospectus and in part to certain dealers, including the underwriters, at such
price less a concession not in excess of % of the principal amount of the
senior subordinated discount notes. The underwriters may allow, and such
dealers may re-allow, to certain other dealers a concession not in excess of %
of the principal amount of the senior subordinated discount notes. After the
initial offering of the units, the public offering price and other selling
terms may be changed by the underwriters at any time without notice. The
underwriters do not intend to confirm sales to any accounts over which they
exercise discretionary authority.
We and each of the subsidiary guarantors have jointly and severally agreed to
indemnify the underwriters against certain liabilities, including liabilities
under the Securities Act, or to contribute to payments that the underwriters
may be required to make in respect thereof.
We and all of our current stockholders, Lucent, members of senior management
and directors have agreed that, for a period of 180 days from the date of this
prospectus, we will not, without the prior written consent of Donaldson, Lufkin
& Jenrette Securities Corporation, do either of the following:
. offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock; or
. enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any common
stock.
In addition, during such period, except for the registration of shares
underlying options in our stock option plan and the Shelf Registration
Statement, we have also agreed not to file any registration statement with
respect to, and each of our executive officers and directors our stockholders
have agreed not to make any demand for, or exercise any right with respect to,
the registration of any shares of common stock or any securities convertible
into or exercisable or exchangeable for common stock without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation. Further, the
shares of common stock underlying warrants issued in the units offering will
become freely tradeable no later than 180 days after the closing of the units
offering.
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There is no existing market for the units. We cannot assure you as to the
liquidity of any market that may develop for the units, the ability of the
holders of the units to sell their units, senior subordinated discount notes or
warrants or the price at which holders would be able to sell their units,
senior subordinated discount notes or warrants. Future trading prices of the
units, senior subordinated discount notes and warrants will depend on many
factors, including, among other things, prevailing interest rates, AirGate's
operating results and the market for similar securities. AirGate has been
advised by the underwriters that the underwriters intend to make a market in
the units, senior subordinated discount notes and warrants, subject to the
limits imposed by the Securities Act and the Exchange Act, however, they are
not obligated to do so, and may discontinue such market making at any time
without notice.
Other than in the United States, no action has been taken by AirGate or the
underwriters that would permit a public offering of the units, senior
subordinated discount notes or warrants included in this offering in any
jurisdiction where action for that purpose is required. The units, senior
subordinated discount notes or warrants included in this offering may not be
offered or sold, directly or indirectly, nor may this prospectus or any other
offering material or advertisement in connection with the offer and sale of any
such units, senior subordinated discount notes or warrants be distributed or
published in any jurisdiction, except under circumstances that will result in
compliance with the applicable rules and regulations of such jurisdiction. This
prospectus is not an offer to sell or a solicitation of an offer to buy any
units, senior subordinated discount notes or warrants included in this offering
in any jurisdiction where that would not be permitted or legal.
We expect that delivery of the units will be made to investors on or about
, 1999.
The underwriters may purchase and sell units in the open market in connection
with this offering. These transactions may include short sales, stabilizing
transactions and purchases to cover positions created by short sales. Short
sales involve the sale by the underwriters of a greater number of units than
they are required to purchase in the offering. Stabilizing transactions consist
of certain bids or purchases made for the purpose of preventing or slowing a
decline in the market price of the units while the offering is in progress. The
underwriters may also impose a penalty bid, which means that an underwriter
must repay to the other underwriters a portion of the underwriting discount
received by it. An underwriter may be subject to a penalty bid if the
representatives of the underwriters, while engaging in stabilizing or short
covering transactions, repurchase units sold by or for the account of that
underwriter. These activities may stabilize, maintain or otherwise affect the
market price of the units. As a result, the price of the units may be higher
than the price that otherwise might exist in the open market. If the
underwriters commence these activities, they may discontinue them at any time.
The underwriters may carry out these transactions in the over-the-counter
market or otherwise.
Pricing of the Common Stock Offering
Prior to the common stock offering, there has been no public market for our
common stock. Consequently, the initial public offering price for our common
stock was determined by negotiation among us and the representatives of the
underwriters of our common stock. Among the factors considered in determining
the public offering price in our common stock offering were:
. prevailing market conditions;
. our results of operations in recent periods;
. the present stage of our development;
71
<PAGE>
Alternate Unit Offering Pages
. the market capitalization and stages of development of other companies
which the representatives of the underwriters believe to be comparable to
us; and
. estimates of our business potential.
An application has been made to list the common stock on the Nasdaq National
Market under the symbol "PCSA." We do not intend to list the units, senior
subordinated discount notes or warrants on any exchange.
Donaldson, Lufkin & Jenrette Securities Corporation and Credit Suisse First
Boston Corporation are also acting as underwriters under our concurrent
offering of common stock, for which they will receive underwriting discounts
and commissions customary for performing such services. In addition, Donaldson,
Lufkin & Jenrette Securities Corporation served as our financial advisor in the
negotiation of our financing from Lucent, for which Donaldson, Lufkin &
Jenrette Securities Corporation is entitled to receive fees customary for
performing such services.
LEGAL MATTERS
The validity of the units offered hereby will be passed upon for AirGate by
Patton Boggs LLP, Washington, D.C. Certain legal matters in connection with
this offering will be passed upon for the underwriters by Skadden, Arps, Slate,
Meagher & Flom (Illinois), Chicago, Illinois.
72
<PAGE>
Alternate Unit Offering Pages
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 1999
[LOGO]
$
Units Consisting of
% Senior Subordinated Discount Notes Due 2009 and
Warrants to Purchase Shares of Common Stock of
AirGate PCS, Inc.
----------------
PROSPECTUS
----------------
Donaldson, Lufkin & Jenrette
Credit Suisse First Boston
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor
any sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or the affairs of AirGate
have not changed since the date hereof.
Until , 1999 (90 days after the date of this prospectus), all dealers that
effect transactions in these securities may be required to deliver a
prospectus. This is in addition to the dealer's obligation to deliver a
prospectus when acting as an underwriter in this offering or when selling
previously unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
<PAGE>
Part II
Information Not Required in the Prospectus
Item 13. Other Expenses of Issuance and Distribution
AirGate PCS, Inc. and AGW Leasing Company, Inc. (the "Registrants") estimate
that expenses (other than underwriting discounts and commissions) in connection
with the offering described in this Registration Statement will be as set forth
in the following table. All amounts shown are estimates except for the
Securities and Exchange Commission registration fee, the NASD filing fee and
the Nasdaq National Market listing fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................ $ 75,801
National Association of Securities Dealers, Inc. filing fee........ 27,767
Nasdaq National Market listing fees................................ 76,625
Printing and engraving expenses.................................... 350,000
Accountants' fees and expenses..................................... 250,000
Legal fees and expenses............................................ 350,000
Fees and expenses for qualifications under state securities laws
(including legal fees)............................................ 10,000
Transfer agent fees................................................ 5,000
Miscellaneous...................................................... 854,807
----------
Total............................................................ $2,000,000
==========
</TABLE>
Item 14. Indemnification of Directors and Officers
In accordance with General Corporation Law of the State of Delaware (being
Chapter 1 of Title 8 of the Delaware Code), each Registrant's Certificate of
Incorporation provides as follows:
Each Registrant's Certificate of Incorporation provides that the Registrant
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the Registrant to procure a judgment in its favor by reason of the fact that
such person acted in any of the capacities set forth above, against expenses
(including attorney's fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if such person
acted under similar standards, provided that the Registrant receives a written
undertaking by or on behalf of the director or officer to repay such amount if
it is ultimately determined that that such person is not entitled to be
indemnified by the Registrant.
Each Registrant's Certificate of Incorporation further provides that to the
extent that a director or officer of the Registrant has been successful in the
defense of any action, suit or proceeding referred to above or in the defense
of any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorney's fees) actually and reasonably incurred by him or
her in connection therewith, that indemnification provided for by the
Certificate of Incorporation shall not be deemed exclusive of any other rights
to which the indemnified party may be entitled; and that the Registrant is
empowered to purchase and maintain insurance on behalf of a director or officer
of the Registrant against any liability asserted against him or here in any
such capacity, or arising out of such person's status as such, whether or not
the Registrant would have the power to indemnify him against such liabilities
under the Certificate of Incorporation.
II-1
<PAGE>
In addition to indemnification provided to our officers and directors in the
Certificate of Incorporation and under the laws of Delaware, AirGate PCS, Inc.
has entered into indemnification agreements with certain officers and directors
to provide further assurances and protection from liability that they may incur
in their respective positions and duties in connection with the public offering
or as a fiduciary of AirGate PCS, Inc. and its shareholders. We have agreed to
indemnify and hold harmless, to the extent permitted under Delaware law, each
person and affiliated person (generally, any director, officer, employee,
controlling person, agent, or fiduciary of the indemnified person), provided
that the indemnified person was acting or serving at our request in his
capacity as either an officer, director, employee, controlling person,
fiduciary or other agent or affiliate of AirGate PCS, Inc. Under the
indemnification agreements, each person is indemnified against any and all
losses, claims, damages, expenses and liabilities, joint or several, (including
attorney's fees, expenses and amount in settlement) that occur in connection
with any threatened, pending or completed action, suit, proceeding, alternative
dispute resolution mechanism or hearing, inquiry or investigation that such
indemnified person believes in good faith may lead to the institution of such
action, under the Securities Act of 1933, Securities Exchange Act of 1934 or
other federal or state statutory law or regulation, at common law or otherwise,
which relate directly or indirectly to the registration, purchase, sale or
ownership of any securities of AirGate PCS, Inc. or to any fiduciary obligation
owed with respect to AirGate PCS, Inc. and its stockholders. As a condition to
receiving indemnification, indemnified persons are required to give us notice
in writing of any claim for which indemnification may be sought under this
agreement.
The agreement provides that an indemnified person may receive indemnification
against (1) expenses (including attorney's fees and other costs, expenses and
obligations incurred), judgments, fines and penalties; (2) amounts paid in
settlement (approved by AirGate PCS, Inc.); (3) federal, state, local taxes
imposed as a result of receipt of any payments under the indemnification
agreement; and (4) all interest, assessments and other charges paid or payable
in connection with any expenses, costs of settlement or taxes. An indemnified
person will be indemnified against expenses to the extent that he is successful
on the merits or otherwise, including dismissal of an action without prejudice,
in defense of any action, suit, proceeding, inquiry or investigation. Expenses
that the indemnified person have or will incur in connection with a suit or
other proceeding may be received in advance within 10 days of written demand to
AirGate PCS, Inc.
Prior to receiving indemnification or being advanced expenses, a committee,
consisting of either members of the board of directors or any person appointed
by the board of directors, must make a determination of whether the indemnified
person is entitled to indemnification under Delaware law. If there is a change
in control (as defined in the indemnification agreement) that occurs without
majority approval of the board of directors, then the committee will consist of
independent legal counsel selected by the indemnified person and approved by
AirGate PCS, Inc. to render a written opinion as to whether and the extent of
indemnification that the indemnified person is entitled, which will be binding
on AirGate PCS, Inc. Under the indemnification agreement, an indemnified person
may appeal a determination by the committee's determination not to grant
indemnification or advance expenses by commencing a legal proceeding. Failure
of the committee to make a indemnification determination or the termination of
any claim by judgment, order, settlement, plea of nolo contendere, or
conviction does not create a presumption that either (1) the indemnified person
did not meet a particular standard of conduct or belief or (2) that the court
has determined that indemnification is not available.
Under the indemnification agreement, an indemnified person is entitled to
contribution from us for losses, claims, damages, expenses or liabilities as
well as other equitable considerations upon the
II-2
<PAGE>
determination of a court of competent jurisdiction that indemnification is not
available. The amount contributed by AirGate PCS, Inc. will be in proportion,
as appropriate, to reflect the relative benefits received by us and the
indemnified person or, if such contribution is not permitted under Delaware
law, then the relative benefit will be considered with the relative fault of
both parties. In connection with the registration of AirGate PCS, Inc.'s
securities, the relative benefits received by AirGate PCS, Inc. and indemnified
person will be deemed to be in the same respective proportions of the net
proceeds from the offering (less expenses) received by AirGate PCS, Inc. and
the indemnified person. The relative fault of AirGate PCS, Inc. and the
indemnified person is determined by reference to the whether the untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by AirGate PCS, Inc. or
the indemnified person and their relative intent, knowledge, access to
information and opportunity to correct such statement or omission.
Contribution paid takes into account the equitable considerations, if any,
instead of a pro rata or per capital allocation. In connection with the
offering of AirGate PCS, Inc. securities, an indemnified person will not be
required to contribute any amount in excess of the lessor of (1) the proportion
of the total of such losses, claims, damages, or liabilities indemnified
against equal to the proportion of the total securities sold under the
registration statement sold by the indemnified person or (2) the proceeds
received by the indemnified person from the sale of securities under the
registration statement. Contribution will not be available if such person is
found guilty of fraudulent misrepresentation, as defined in the agreement.
In the event that AirGate PCS, Inc. is also obligated under a claim and upon
written notice to the indemnified person, we are entitled to assume defense of
the claim and select counsel which is approved by the indemnified person. Upon
receipt of the indemnified person's approval, AirGate PCS, Inc. will directly
incur the legal expenses and as a result will have the right to conduct the
defense as it sees fit in its sole discretion, including the right to settle
any claim against any indemnified party, without consent of the indemnified
person.
The underwriting agreements to be filed as Exhibits 1.1 and 1.2 to the
Registration Statement provides for indemnification by the underwriters of
AirGate PCS, Inc. and its directors and certain officers, and by AirGate PCS,
Inc. of the underwriters, for certain liabilities arising under the Securities
Act or otherwise.
Item 15. Recent Sales of Unregistered Securities
In accordance with Item 701 of Regulation S-K, the following information is
presented with respect to securities sold by the Registrants within the past
three years which were not registered under the Securities Act.
(i) September 1996 Note
(a) On September 27, 1996, AirGate, L.L.C. (the "LLC") sold a $180,000 8%
note, due and payable or convertible on August 8, 1998. This note was rolled
into the 1998 Financing outlined below.
(b) The note was sold to a related party who qualified as an accredited
investor under Regulation D promulgated under the Securities Act.
(c) The note was sold for $180,000.
(d) The notes were offered and sold in reliance upon an exemption from
registration under Section 4(2) of the Securities Act.
II-3
<PAGE>
(e) Not applicable
(f) Not applicable
(ii) The 1998 Financing
(a) Between August and September 1998, AirGate PCS, Inc. sold $4,815,000 of
8% Convertible Promissory Notes. $3 million of the notes was due on September
18, 1999, while $1.815 million was due on August 20, 1999, unless converted.
The notes are convertible into Series A preferred stock or common stock upon
the satisfaction of certain conditions. AirGate PCS, Inc. also issued warrants
to purchase the preferred stock to the purchasers of the notes, which warrants
were to be exercised on the earlier of five years from the date of issuance or
an initial public offering. These notes were rolled into the May 1999
Refinancing.
(b) The notes and warrants were sold to two related party venture funds and
their affiliates who qualified as accredited investors within the meaning of
Regulation D under the Securities Act.
(c) The notes and the warrants were sold for a total aggregate consideration
of $4,815,000.
(d) The notes were offered and sold in reliance upon an exemption from
registration under Section 4(2) of the Securities Act.
(e) Not applicable
(f) Not applicable
(iii) The 1999 Financings
(a) In March, April and May 1999 AirGate PCS, Inc. sold an aggregate of $2.5
million of 8% subordinated notes.
(b) The notes and warrants were sold to two related party venture funds,
Weiss, Peck and Greer Venture Partners affiliated funds and JAFCO America
Ventures, Inc. affiliated funds, who qualified as accredited investors within
the meaning of Regulation D under the Securities Act.
(c) The notes were sold for a total aggregate consideration of $2.5 million.
(d) The notes were offered and sold in reliance upon an exemption from
registration under Section 4(2) of the Securities Act.
(e) Not applicable
(f) Not applicable
(iv) The May 1999 Refinancing
(a) In May 1999, AirGate PCS, Inc. consolidated the promissory notes issued
to the two related party venture funds in the 1998 financing and the March,
April and May 1999 financings totaling $7.325 million into promissory notes
that will be converted into shares of AirGate PCS, Inc.'s common stock
concurrently with the completion of the offering contemplated hereby at a price
48% less than the price of a share of common stock sold in the offering. The
warrants held by these funds
II-4
<PAGE>
were terminated. In addition, the Registrant issued warrants to Weiss, Peck and
Greer Venture Partners affiliated funds to purchase shares of common stock for
an aggregate price of up to $2.73 million at a price 25% less than the price of
a share of common stock sold in this offering.
(b) The promissory notes and the warrants were issued to two related party
venture funds, Weiss, Peck and Greer Venture Partners affiliated funds and
JAFCO America Ventures, Inc. affiliated funds, who qualified as accredited
investors within the meaning of Regulation D under the Securities Act.
(c) The aggregate consideration received in exchange for the promissory notes
and the warrant was the refinancing of $7.561 million of promissory notes and
the cancellation of warrants held by each venture fund.
(d) The notes and the warrant were offered and sold in reliance upon an
exemption from registration under Section 4(2) of the Securities Act.
(e) Not applicable
(f) Not applicable
(v) The August 1999 Lucent Financing
(a) In connection with the Lucent financing in August 1999, AirGate issued
warrants to Lucent representing in the aggregate of 1% of the number of fully-
diluted shares of common stock outstanding on the closing of our initial public
offering.
(b) The warrants were sold to Lucent Technologies Inc., which qualifies as an
accredited investor for purposes of Regulation D under the Securities Act.
(c) The warrants were issued to Lucent as inducement to Lucent to enter into
a credit agreement with no additional consideration.
(d) The warrants were offered and sold in reliance of an exemption from
registration under Section 4(2) of the Securities Act.
(e) Not applicable.
(f) Not applicable.
Item 16. Exhibits
The exhibits and financial statement schedules filed as a part of the
Registration Statement are as follows:
(a) List of Exhibits
<TABLE>
<S> <C>
1.1* Form of Equity Underwriting Agreement
1.2** Form of Unit Underwriting Agreement
3.1* Amended and Restated Certificate of Incorporation of AirGate PCS, Inc.
3.2* Amended and Restated Bylaws of AirGate PCS, Inc.
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C>
4.1* Specimen of Common Stock Certificate of AirGate PCS, Inc.
4.2** Form of warrants issued in units offering
4.3* Form of Weiss, Peck and Greer warrants
4.4 Form of Lucent warrants
4.5** Form of Indenture for senior subordinated discount notes
5.1* Opinion of Patton Boggs LLP regarding legality of the common stock being offered
5.2** Opinion of Patton Boggs LLP regarding legality of the units being offered
10.1*+ Sprint PCS Management Agreement between SprintCom, Inc. and AirGate Wireless, L.L.C.
10.2* Sprint PCS Services Agreement between Sprint Spectrum L.P. and AirGate Wireless, L.L.C.
10.3* Sprint Spectrum Trademark and Service Mark License Agreement
10.4* Sprint Trademark and Service Mark License Agreement
10.5*+ Master Site Agreement dated August 6, 1998 between AirGate and BellSouth Carolinas PCS, L.P.,
BellSouth Personal Communications, Inc. and BellSouth Mobility PCS.
10.6*+ Compass Telecom, L.L.C. Construction Management Agreement
10.7* Commercial Real Estate Lease dated August 7, 1998 between AirGate and Perry Company of
Columbia, Inc. to lease a warehouse facility.
10.8* Form of Indemnification Agreement
10.9* Employment Agreement dated April 9, 1999 between AirGate and Mr. Thomas M. Dougherty
10.10* Form of Executive Employment Agreement
10.11* Form of 1999 Stock Option Plan
10.12+ Credit Agreement with Lucent (including the form of pledge agreement and form of intercreditor
agreement)
10.13 Consent and Agreement
10.14* Assignment of Sprint PCS Management Agreement, Sprint Spectrum Services Agreement and
Trademark and Service Mark Agreements from AirGate Wireless, L.L.C. to AirGate Wireless, Inc.
date November 20, 1998.
10.15** Form of Warrant Agreement for units offering
21.1* Subsidiaries of AirGate PCS, Inc.
23.1 Consent of KPMG LLP
23.2* Consent of Patton Boggs LLP (included in Exhibits 5.1 and 5.2)
24.1* Powers of Attorney
25.1* Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of Trustee, on
Form T-1, in connection with the units offering
27.1* Financial Data Schedule
</TABLE>
- ---------------------
* Previously filed
**To be filed by amendment
+Confidential treatment requested on portions of these documents
(b) Financial Statement Schedule
No financial statement schedules are filed because the required information
is not applicable or is included in the consolidated financial statements or
related notes.
II-6
<PAGE>
Item 17. Undertakings
Each of the Registrants hereby undertakes:
(1) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of such Registrant pursuant to the foregoing
provisions, or otherwise, such Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by such Registrant of expenses incurred
or paid by a director, officer or controlling person of such Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, such Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(2) To provide to the underwriter at the closing specified in the
underwriting agreements certificates in such denominations and registered
in such names as required by the underwriter to permit prompt delivery to
each purchaser.
(3) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(4) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-7
<PAGE>
Pursuant to the requirements of the Securities Act, AirGate PCS, Inc. has
duly caused this Amendment No. 5 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the County of
Fulton, State of Georgia, on September 16, 1999.
Airgate PCS, Inc.
/s/ Thomas M. Dougherty
By: _________________________________
Name: Thomas M. Dougherty
Title: Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 5 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Thomas M. Dougherty Chief Executive Officer September 16, 1999
______________________________________ and Director (Principal
Thomas M. Dougherty Executive Officer)
/s/ Alan B. Catherall* Chief Financial Officer September 16, 1999
______________________________________ (Principal Financial and
Alan B. Catherall Accounting Officer)
/s/ W. Chris Blane* Vice President and September 16, 1999
______________________________________ Director
W. Chris Blane
/s/ Thomas D. Body III* Vice President and September 16, 1999
______________________________________ Director
Thomas D. Body III
/s/ Barry Schiffman* Director September 16, 1999
______________________________________
Barry Schiffman
/s/ Gill Cogan* Director September 16, 1999
______________________________________
Gill Cogan
/s/ Thomas M. Dougherty September 16, 1999
*By: _________________________________
Thomas M. Dougherty
Attorney-in-Fact
</TABLE>
<PAGE>
Pursuant to the requirements of the Securities Act, AGW Leasing Company, Inc.
has duly caused this Amendment No. 5 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the County of
Fulton, State of Georgia, on September 16, 1999.
AGW Leasing Company, Inc.
/s/ Thomas M. Doughtery
By: _________________________________
Name: Thomas M. Dougherty
Title: Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 5 to the Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Thomas M. Dougherty Chief Executive Officer September 16, 1999
______________________________________ and Director (Principal
Thomas M. Dougherty Executive Officer)
/s/ Alan B. Catherall* Chief Financial Officer September 16, 1999
______________________________________ (Principal Financial and
Alan B. Catherall Accounting Officer)
/s/ W. Chris Blane* Vice President and September 16, 1999
______________________________________ Director
W. Chris Blane
/s/ Thomas D. Body III* Vice President and September 16, 1999
______________________________________ Director
Thomas D. Body III
/s/ Barry Schiffman* Director September 16, 1999
______________________________________
Barry Schiffman
/s/ Gill Cogan* Director September 16, 1999
______________________________________
Gill Cogan
/s/ Thomas M. Dougherty September 16, 1999
*By: _________________________________
Thomas M. Dougherty
Attorney-in-Fact
</TABLE>
<PAGE>
Exhibit 4.4
FORM OF WARRANT CERTIFICATE
AIRGATE PCS, INC.
No. _____
WARRANTS TO PURCHASE SHARES OF COMMON STOCK
This certifies that [LUCENT TECHNOLOGIES INC.] or its registered
assigns, is the owner of [___________] Warrants, each of which represents the
right to purchase from AIRGATE PCS, INC., a Delaware corporation (the
"Company"), one share of the Common Stock, par value $0.01 per share, of the
-------
Company at an exercise price (the "Exercise Price") of [$___] per share of
--------------
Common Stock (subject to adjustment as provided in the Warrant Agreement
referred to below), upon surrender hereof at the office of the Company, with the
Subscription Form on the reverse hereof duly executed, with signature guaranteed
as therein specified and simultaneous payment in full by wire transfer, in cash
or by certified or official bank or bank cashier's check payable to the order of
the Company. Notwithstanding the foregoing, if the shares of Common Stock (or
other securities) issuable upon exercise of the Warrants are registered under
the Exchange Act, the Exercise Price may be paid by surrendering additional
Warrants to the Company having an aggregate Spread equal to the aggregate
Exercise Price of the Warrants being exercised. At any time beginning on or
after the Issuance Date and ending on or before the Expiration Date, any
outstanding Warrants may be exercised on any Business Day; provided that the
Warrant Registration Statement is, at the time of exercise, effective and
available for the exercise of Warrants or the exercise of such Warrants is
exempt from the registration requirements of the Securities Act.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of August 16, 1999 (the "Warrant Agreement"), between
-----------------
the Company and Lucent Technologies Inc., and a Warrant Registration Rights
Agreement dated as of August 16, 1999 (the "Warrant Registration Rights
---------------------------
Agreement") between the Company and Lucent Technologies Inc., and is subject to
- ---------
the Certificate of Incorporation and Bylaws of the Company and to the terms and
provisions contained therein, to all of which terms and provisions the Holder of
this Warrant Certificate consents by acceptance hereof. The terms of the
Warrant Agreement and the Warrant Registration Rights Agreement are incorporated
herein by this reference and made a part hereof. Reference is hereby made to
the Warrant Agreement and the Warrant Registration Rights Agreement for a full
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Company and the Holders of the Warrants. The
summary of the terms of the Warrant Agreement and the Warrant Registration
Rights Agreement contained in this Warrant Certificate is qualified in its
entirety by express reference to the Warrant Agreement and the Warrant
Registration Rights Agreement. All terms used in this Warrant Certificate that
are defined in the Warrant Agreement and the Warrant Registration Rights
Agreement shall have the meanings assigned to them in such agreements.
Copies of the Warrant Agreement and the Warrant Registration Rights
Agreement are on file at the office of the Company and may be obtained by
writing to the Company at the following address:
-1-
<PAGE>
AirGate PCS, Inc.
Harris Tower, Suite 1700
233 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: President
If the Company merges or consolidates with or into, or sells all or
substantially all of its property and assets to, another Person and the
consideration received by holders of shares of Common Stock consists solely of
cash, the Holders of Warrants shall be entitled to receive distributions on the
date of such event on an equal basis with holders of shares of Common Stock (or
other securities issuable upon exercise of the Warrants) as if the Warrants had
been exercised immediately prior to such event (less the Exercise Price). Upon
receipt of such payment, if any, the rights of a Holder shall terminate and
cease and such Holder's Warrants shall expire.
The number of shares of Common Stock purchasable upon the exercise of
each Warrant and the Exercise Price per share are subject to adjustment as
provided in the Warrant Agreement. Except as stated in the immediately
preceding paragraph, in the event the Company merges or consolidates with, or
sells all or substantially all of its assets to, another Person, each Warrant
will, upon exercise, entitle the Holder thereof to receive the number of shares
of capital stock or other securities or the amount of money and other property
which the holder of a share of Common Stock (or other securities or property
issuable upon exercise of a Warrant) is entitled to receive upon completion of
such merger, consolidation or sale.
As to any final fraction of a share which the same Holder of one or
more Warrant Certificates would otherwise be entitled to purchase upon exercise
thereof in the same transaction, the Company may pay the cash value thereof
determined as provided in the Warrant Agreement.
Subject to Article VI of the Warrant Agreement, all shares of Common
Stock issuable by the Company upon the exercise of Warrants shall be validly
issued, fully paid and not subject to any calls for funds, and the Company shall
pay any taxes and other governmental charges that may be imposed under the laws
of the United States of America or any political subdivision or taxing authority
thereof or therein in respect of the issue or delivery thereof upon exercise of
Warrants (other than income taxes imposed on the Holders). The Company shall
not be required, however, to pay any tax or other charge imposed in connection
with any transfer involved in the issue of any certificate for shares of Common
Stock (including other securities or property issuable upon the exercise of the
Warrants) or payment of cash to any Person other than the Holder of a Warrant
Certificate surrendered upon the exercise of a Warrant and in case of such
transfer or payment, the Company shall not be required to issue any share
certificate or pay any cash until such tax or charge has been paid or it has
been established to the Company's satisfaction that no such tax or charge is
due.
Subject to the restrictions on and conditions to transfer set forth in
Articles II and VIII of the Warrant Agreement, this Warrant Certificate and all
rights hereunder are transferable by the registered Holder hereof, in whole or
in part, on the register of the Company maintained by the Company at its chief
executive office, upon surrender of this Warrant Certificate duly endorsed, or
accompanied by a written instrument of transfer in form satisfactory to the
-2-
<PAGE>
Company duly executed, with signatures guaranteed as specified in the attached
Form of Assignment, by the registered Holder hereof or his attorney duly
authorized in writing and by such other documentation required pursuant to the
Warrant Agreement and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer. Upon any partial transfer, the
Company will sign and issue and deliver to such Holder a new Warrant Certificate
or Certificates with respect to any portion not so transferred. Each taker and
Holder of this Warrant Certificate, by taking and holding the same, consents and
agrees that prior to the registration of transfer as provided in the Warrant
Agreement, the Company may treat the Person in whose name the Warrants are
registered as the absolute owner hereof for any purpose and as the Person
entitled to exercise the rights represented hereby, any notice to the contrary
notwithstanding. Accordingly, the Company shall not, except as ordered by a
court of competent jurisdiction as required by law, be bound to recognize any
equitable or other claim to or interest in the Warrants on the part of any
Person other than such registered Holder, whether or not it shall have express
or other notice thereof.
This Warrant Certificate may be exchanged at the office of the Company
for Warrant Certificates representing the same aggregate number of Warrants,
each new Warrant Certificate to represent such number of Warrants as the Holder
hereof shall designate at the time of such exchange.
Prior to the valid exercise of the Warrants represented hereby, the
Holder of this Warrant Certificate, as such, shall not be entitled to any rights
of a shareholder of the Company, including, without limitation, the right to
vote or to consent to any action of the shareholders, to receive any
distributions, to exercise any pre-emptive right or to receive any notice of
meetings of shareholders, and shall not be entitled to receive any notice of any
proceedings of the Company except as provided in the Warrant Agreement.
This Warrant Certificate shall be void and all rights evidenced hereby
shall cease on the earlier of (i) August 15, 2004, or (ii) August 15, 2001 if as
of such date, the Company has paid in full all outstanding amounts under the
Credit Agreement and has terminated the remaining unused portion of the
commitments thereunder, unless sooner terminated by the liquidation,
-3-
<PAGE>
dissolution or winding-up of the Company or as otherwise provided in the Warrant
Agreement upon the consolidation or merger of the Company with, or sale of the
Company to, another Person or unless such date is extended as provided in the
Warrant Agreement.
AIRGATE PCS, INC.
By: ______________________________
Name:
Title:
Dated: _______________
-4-
<PAGE>
FORM OF REVERSE OF WARRANT CERTIFICATE
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
To: AirGate PCS, Inc.
Attention:
The undersigned irrevocably exercises ________ of the Warrants
represented by this Warrant Certificate and herewith makes payment of $ _______
(such payment being by wire transfer, in cash or by certified or official bank
or bank cashier's check payable to the order or at the direction of AirGate PCS,
Inc. or, if the shares of Common Stock (or other securities) issuable upon
exercise of the Warrants are registered under the Exchange Act, the exercise
price may be paid by surrendering additional Warrants to the Company having an
aggregate Spread equal to the aggregate exercise price of the Warrants being
exercised) all at the Exercise Price and on the terms and conditions specified
in this Warrant Certificate and in the Warrant Agreement and surrenders this
Warrant Certificate and all right, title and interest therein to and directs
that the shares of Common Stock, par value $0.01 per share, of AirGate PCS, Inc.
deliverable upon the exercise of such Warrants be registered or placed in the
name and at the address specified below and delivered thereto.
Check One
---------
|_| Payment made by wire transfer, in cash, or by certified or official
bank or bank cashier's check.
or
--
|_| The shares of Common Stock (or other securities) issuable upon
exercise of the Warrants are registered under the Exchange Act and
payment is being made by surrendering Warrants having an aggregate
Spread equal to the aggregate Exercise Price of the Warrants being
exercised.
Dated: _____________________________________
(Signature of Owner)
_____________________________________
(Street Address)
_____________________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
_______________________________
-5-
<PAGE>
Securities and/or check or other property to be issued or delivered to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
-6-
<PAGE>
FORM OF ASSIGNMENT
In consideration of monies or other valuable consideration received
from the Assignee(s) named below, the undersigned registered Holder of this
Warrant Certificate hereby sells, assigns, and transfers unto the Assignee(s)
named below (including the undersigned with respect to any Warrants constituting
a part of the Warrants evidenced by this Warrant Certificate not being assigned
hereby) all of the right of the undersigned under this Warrant Certificate, with
respect to the number of Warrants set forth below:
Name(s) of Assignee(s): _____________________________________
Address: __________________________________________________
No. of Warrants: ___________________________________________
Please insert social security or other identifying number of assignee(s):
and does hereby irrevocably constitute and appoint ________________________ the
undersigned's attorney to make such transfer on the books of __________________
maintained for the purposes, with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES]
In connection with any transfer of Warrants, the undersigned confirms
that without utilizing any general solicitation or general advertising that:
[Check One]
|_| (a) these Warrants are being transferred in compliance with the exemption
from registration under the U.S. Securities Act of 1933, as amended,
provided by Rule 144A thereunder.
or
--
|_| (b) these Warrants are being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Warrant Certificate and the
Warrant Agreement.
or
--
|_| (c) these Warrants are being transferred pursuant to an effective
registration statement under the U.S. Securities Act of 1933, as
amended.
If none of the foregoing boxes is checked, the Company shall not be obligated to
register the Warrants in the name of any Person other than the Holder hereof
unless and until the
-7-
<PAGE>
conditions to any such transfer of registration set forth herein and in Article
VIII of the Warrant Agreement shall have been satisfied.
Dated:
_______________________________
(Signature of Owner)
_______________________________
(Street Address)
_______________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
___________________________
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing the
Warrant(s) for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the U.S. Securities
Act of 1933, as amended, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding AirGate PCS, Inc. as the undersigned has requested pursuant to Rule
144A or has determined not to request such information and that it is aware that
the transferor is relying upon the undersigned's foregoing representations in
order to claim the exemption from registration provided by Rule 144A.
Dated:________________
________________________________________
[NOTE: To be executed by an executive officer]
-8-
<PAGE>
================================================================================
CREDIT AGREEMENT
dated as of August 16, 1999
among
AIRGATE PCS, INC.,
as Borrower,
THE LENDERS PARTY HERETO,
STATE STREET BANK AND TRUST COMPANY,
as Collateral Agent
And
LUCENT TECHNOLOGIES INC.,
as Administrative Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I DEFINITIONS.................................................................... 1
SECTION 1.01. Defined Terms......................................................... 1
SECTION 1.02. Classification of Loans and Borrowings................................ 18
SECTION 1.03. Terms Generally....................................................... 19
SECTION 1.04. Accounting Terms; GAAP................................................ 19
ARTICLE II LOANS.......................................................................... 19
SECTION 2.01. Commitments........................................................... 19
SECTION 2.02. Loans and Borrowings.................................................. 19
SECTION 2.03. Requests for Borrowings............................................... 20
SECTION 2.04. Funding of Borrowings................................................. 21
SECTION 2.05. Interest Elections.................................................... 22
SECTION 2.06. Termination, Reduction and Increase of Commitments.................... 23
SECTION 2.07. Repayment of Loans; Evidence of Debt.................................. 24
SECTION 2.08. Amortization of Loans................................................. 25
SECTION 2.09. Prepayment of Loans................................................... 25
SECTION 2.10. Fees.................................................................. 26
SECTION 2.11. Interest.............................................................. 27
SECTION 2.12. Alternate Rate of Interest............................................ 27
SECTION 2.13. Increased Costs....................................................... 28
SECTION 2.14. Break Funding Payments; Prepayment Fees............................... 29
SECTION 2.15. Taxes................................................................. 29
SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of Setoffs............ 31
SECTION 2.17. Mitigation Obligations; Replacement of Lenders........................ 33
ARTICLE III REPRESENTATIONS AND WARRANTIES................................................. 33
SECTION 3.01. Organization; Powers.................................................. 33
SECTION 3.02. Authorization; Enforceability......................................... 34
SECTION 3.03. Governmental Approvals; No Conflicts.................................. 34
SECTION 3.04. Financial Condition; No Material Adverse Change....................... 34
SECTION 3.05. Properties; Licenses.................................................. 34
SECTION 3.06. Litigation and Environmental Matters.................................. 35
SECTION 3.07. Compliance with Laws, Agreements and Licenses......................... 35
</TABLE>
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TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 3.08. No Default............................................................ 35
SECTION 3.09. Investment and Holding Company Status................................. 36
SECTION 3.10. Taxes................................................................. 36
SECTION 3.11. ERISA................................................................. 36
SECTION 3.12. Disclosure............................................................ 36
SECTION 3.13. Subsidiaries.......................................................... 36
SECTION 3.14. Insurance............................................................. 37
SECTION 3.15. Labor Matters......................................................... 37
SECTION 3.16. Supply Agreement...................................................... 37
SECTION 3.17. No Burdensome Restrictions............................................ 37
SECTION 3.18. Security Documents.................................................... 37
SECTION 3.19. Year 2000 Compliance.................................................. 38
SECTION 3.20. Sprint Affiliation Agreements......................................... 38
ARTICLE IV CONDITIONS..................................................................... 39
SECTION 4.01. Tranche 1 Loans....................................................... 39
SECTION 4.02. Tranche 2 Loans....................................................... 41
SECTION 4.03. Conditions for Each Loan.............................................. 43
ARTICLE V AFFIRMATIVE COVENANTS.......................................................... 44
SECTION 5.01. Financial Statements and Other Information............................ 44
SECTION 5.02. Notices of Material Events............................................ 46
SECTION 5.03. Information Regarding Collateral...................................... 46
SECTION 5.04. Existence; Conduct of Business........................................ 47
SECTION 5.05. Payment of Obligations................................................ 47
SECTION 5.06. Maintenance of Properties............................................. 47
SECTION 5.07. Insurance............................................................. 47
SECTION 5.08. Books and Records; Inspection Rights.................................. 49
SECTION 5.09. Compliance with Laws and Agreements................................... 49
SECTION 5.10. Use of Proceeds....................................................... 49
SECTION 5.11. Additional Subsidiaries............................................... 49
SECTION 5.12. Further Assurances.................................................... 49
SECTION 5.13. Casualty and Condemnation............................................. 50
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 5.14. Certain Intercompany Agreements....................................... 51
SECTION 5.15. Interconnection and Co-location Agreements............................ 51
SECTION 5.16. Sprint Affiliation Agreements......................................... 51
ARTICLE VI NEGATIVE COVENANTS............................................................. 52
SECTION 6.01. Indebtedness.......................................................... 52
SECTION 6.02. Liens................................................................. 53
SECTION 6.03. Fundamental Changes................................................... 54
SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions; Asset Sales 55
SECTION 6.05. Hedging Agreements.................................................... 57
SECTION 6.06. Restricted Payments................................................... 57
SECTION 6.07. Transactions with Affiliates; Subordination Agreement................. 57
SECTION 6.08. Restrictive Agreements................................................ 57
SECTION 6.09. Prepayment of Indebtedness............................................ 58
SECTION 6.10. Amendment of Material Documents....................................... 58
SECTION 6.11. Management and Service Fee Agreements................................. 58
SECTION 6.12. Limitation on Sale-Leaseback Transactions............................. 58
SECTION 6.13. Covered POPS.......................................................... 58
SECTION 6.14. PCS Subscribers....................................................... 59
SECTION 6.15. Ratio of Total Debt to Total Capitalization........................... 60
SECTION 6.16. Ratio of Total Debt to EBITDA......................................... 61
SECTION 6.17. Ratio of Senior Secured Debt to Total Capitalization.................. 61
SECTION 6.18. Ratio of Senior Secured Debt to EBITDA................................ 63
SECTION 6.19. [Reserved.]........................................................... 63
SECTION 6.20. Ratio of EBITDA to Fixed Charges...................................... 63
SECTION 6.21. Capital Expenditures.................................................. 63
SECTION 6.22. Minimum Revenue....................................................... 64
SECTION 6.23. [Reserved]............................................................ 65
SECTION 6.24. Sprint Affiliation Agreements......................................... 65
SECTION 6.25. Indenture............................................................. 65
ARTICLE VII EVENTS OF DEFAULT.............................................................. 65
</TABLE>
-iii-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE VIII THE AGENTS..................................................................... 68
ARTICLE IX MISCELLANEOUS.................................................................. 71
SECTION 9.01. Notices............................................................... 71
SECTION 9.02. Waivers; Amendments................................................... 71
SECTION 9.03. Expenses; Indemnity; Damage Waiver.................................... 72
SECTION 9.04. Successors and Assigns................................................ 74
SECTION 9.05. Survival.............................................................. 76
SECTION 9.06. Counterparts; Integration; Effectiveness.............................. 76
SECTION 9.07. Severability.......................................................... 77
SECTION 9.08. Right of Setoff....................................................... 77
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process............ 77
SECTION 9.10. WAIVER OF JURY TRIAL.................................................. 78
SECTION 9.11. Headings.............................................................. 79
SECTION 9.12. Confidentiality....................................................... 79
SECTION 9.13. Interest Rate Limitation.............................................. 79
</TABLE>
-iv-
<PAGE>
SCHEDULES:
- ---------
Schedule 1.01 - Sprint Affiliation Agreements
Schedule 2.01 - Commitments
Schedule 2.02 - Working Capital Costs
Schedule 3.06 - Litigation
Schedule 3.12 - Subsidiaries
Schedule 3.13 - Assets and Indebtedness of AGW
Schedule 3.14 - Insurance
Schedule 3.20 - Amendments to Sprint Affiliation Agreements
Schedule 6.01 - Existing Indebtedness
Schedule 6.02 - Existing Liens
Schedule 6.04 - Investments
Schedule 6.08 - Existing Restrictions
EXHIBITS:
- --------
Exhibit A -- Form of Assignment and Acceptance
Exhibit B -- Form of Guaranty Agreement
Exhibit C -- Form of Pledge Agreement
Exhibit D-1 -- Form of Security Agreement
Exhibit D-2 -- Form of Guarantor Security Agreement
Exhibit E -- Form of Borrowing Request
Exhibit F -- Form of Intercreditor Agreement
<PAGE>
CREDIT AGREEMENT, dated as of August 16, 1999, among AIRGATE PCS,
INC., a Delaware corporation (the "Borrower"), the several lending institutions
--------
that from time to time are party to this Credit Agreement (each a "Lender" and
------
collectively, the "Lenders"), STATE STREET BANK AND TRUST COMPANY, a
-------
Massachusetts banking corporation, in its capacity as collateral agent (the
"Collateral Agent") on behalf of the Secured Parties and LUCENT TECHNOLOGIES
- -----------------
INC., a Delaware corporation, in its capacity as administrative agent (the
"Administrative Agent") on behalf of the Lenders.
- ---------------------
W I T N E S S E T H:
--------------------
WHEREAS, the Borrower has requested that the Lenders enter into
certain financing arrangements with the Borrower pursuant to which the Lenders
may make loans and provide other financial accommodations to the Borrower;
WHEREAS, the Lenders are willing to make such loans and provide such
financial accommodations on the terms and conditions set forth herein;
WHEREAS, the Administrative Agent is willing to administer such loans
on behalf of the Lenders and in accordance with the terms and conditions set
forth herein;
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS
-----------
SECTION 1.01. Defined Terms. As used in this Agreement, the
-------------
following terms have the meanings specified below:
"ABR", when used in reference to any Loan or Borrowing, refers to
---
whether such Loan, or the Loans comprising such Borrowing, are bearing interest
at a rate determined by reference to the Alternate Base Rate.
"Adjusted LIBOR Rate" means, with respect to any Eurodollar Borrowing
-------------------
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to (a) the LIBOR Rate for such Interest
Period multiplied by (b) the Statutory Reserve Rate.
"Administrative Agent" means Lucent Technologies Inc., in its capacity
--------------------
as administrative agent for the Lenders hereunder.
"Administrative Questionnaire" means an Administrative Questionnaire
----------------------------
in a form supplied by the Administrative Agent.
<PAGE>
"Affiliate" means, with respect to a specified Person, another Person
---------
that directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"Agents" means the Administrative Agent and the Collateral Agent.
------
"Agreement" means this Credit Agreement, as amended, supplemented or
---------
modified from time to time.
"AGW" means AGW Leasing Company, Inc., a Delaware corporation.
---
"Alternate Base Rate" means, for any day, a rate per annum equal to
-------------------
the greater of (a) the Prime Rate in effect on such day or (b) the Federal Funds
Effective Rate in effect on such day plus 1/2 of 1% per annum. Any change in
the Alternate Base Rate due to a change in the Prime Rate shall be effective
from and including the effective date of such change in the Prime Rate.
"Assignment and Acceptance" means an assignment and acceptance entered
-------------------------
into by a Lender and an assignee (with the consent of any party whose consent is
required by Section 9.04), and accepted by the Administrative Agent,
substantially in the form of Exhibit A.
"Availability Period" means the Tranche 1 Availability Period and the
-------------------
Tranche 2 Availability Period, as applicable.
"Availability Termination Date" means (i) with respect to Tranche 1,
-----------------------------
June 30, 2000 and (ii) with respect to Tranche 2, September 30, 2003.
"Board" means the Board of Governors of the Federal Reserve System of
-----
the United States of America.
"Borrower" means AirGate PCS, Inc., a Delaware corporation.
--------
"Borrowing" means a Loan or group of Loans of the same Class and Type,
---------
made, converted or continued on the same date and, in the case of Eurodollar
Loans, as to which a single Interest Period is in effect.
"Borrowing Request" means a request by the Borrower for a Borrowing in
-----------------
accordance with Section 2.03 substantially in the form of Exhibit E.
"Business Day" means any day that is not a Saturday, Sunday or other
------------
day on which commercial banks in New York City are authorized or required by law
to remain closed; provided that, when used in connection with a Eurodollar Loan,
--------
the term "Business Day" shall also exclude any day on which banks are not open
------------
for dealings in dollar deposits in the London interbank market.
"Capital Expenditures" means, for any period, (a) the additions to
--------------------
property, plant and equipment and other capital expenditures (including all
systems and development expenditures related to the build-out of PCS networks)
of the Borrower and its consolidated
2
<PAGE>
Subsidiaries that are (or would be) set forth in a consolidated statement of
cash flows of the Borrower for such period prepared in accordance with GAAP;
provided that no consideration paid for or expenditure related to the
- --------
acquisition of any License and no capitalized interest shall be treated as a
Capital Expenditure and (b) Capital Lease Obligations incurred by the Borrower
and its consolidated Subsidiaries during such period.
"Capital Lease Obligations" of any Person means the obligations of
-------------------------
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Cash Interest Expense" means for any period, the sum of (a) the
---------------------
amount of Interest Expense for such period, excluding any portion thereof that
constitutes Deferred Interest plus (b) any cash payments made during such period
in respect of any obligation that constituted Deferred Interest in a previous
period.
"Change in Control" means (a) the consummation of any transaction,
-----------------
including, without limitation, any merger or consolidation, the result of which
is the acquisition of ownership, directly or indirectly, beneficially or of
record, by any Person or group (within the meaning of Sections 13(d) and 14(a)
under the Exchange Act), other than such Person or group approved by the
Required Lenders of equity interests or shares (or other securities convertible
into shares) representing 35% or more of the aggregate ordinary voting power of
the Borrower (each such Person or group, a "Controlling Person"); (b) 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 the Borrower and the Subsidiaries taken as a
whole; (c) the adoption of a plan relating to the liquidation or dissolution of
the Borrower; (d) occupation of a majority of the seats (other than vacant
seats) on the Board of Directors of the Borrower by Persons who were not
directors of the Borrower as of the date of this Agreement; or who were not
nominated for election or elected to such Board of Directors with the approval
of a majority of the directors then still in office who were directors on such
date or whose nomination for election was previously so approved; (e) AirGate,
LLC or its members failing to own, directly or indirectly, beneficially and of
record, at least 100% of the equity interests or shares of the Borrower at any
time prior to the initial public offering of common stock of the Borrower.
"Change in Law" means (a) the adoption of any law, rule or regulation
-------------
of any Governmental Authority after the date of this Agreement, (b) any change
in any law, rule or regulation or in the interpretation or application thereof
by any Governmental Authority after the date of this Agreement or (c) compliance
by any Lender (or, for purposes of Section 2.13(b), by any lending office of
such Lender or by such Lender's holding company, if any) with any request,
guideline or directive (whether or not having the force of law) of any
Governmental Authority made or issued after the date of this Agreement.
"Class", when used in reference to any Loan or Borrowing, refers to
-----
whether such Loan, or the Loans comprising such Borrowing, are Tranche 1 Loans
or Tranche 2 Loans and,
3
<PAGE>
when used in reference to any Commitment, refers to whether such Commitment is a
Tranche 1 Commitment or a Tranche 2 Commitment.
"Closing Date" means the date that this Agreement is signed by the
------------
parties hereto.
"Code" means the Internal Revenue Code of 1986, as amended from time
----
to time.
"Collateral" means any and all "Collateral", as defined in any
----------
applicable Security Document.
"Collateral Agent" means State Street Bank and Trust Company, in its
----------------
capacity as collateral agent for the Secured Parties (as defined in the Security
Documents) under the Security Documents.
"Commitment" means the Tranche 1 Commitment and the Tranche 2
----------
Commitment, as applicable.
"Commitment Fee" means the commitment fee payable by the Borrower
--------------
pursuant to Section 2.10(a).
"Communications Act" means the Communications Act of 1934, and any
------------------
similar or successor federal statute, and the rules and regulations of the FCC
thereunder.
"Consent" means the Consent and Agreement dated August 16, 1999 among
-------
Lucent, Sprint Spectrum L.P., SprintCom, Inc., Sprint Communications Company,
L.P. and WirelessCo, L.P. and acknowledged by the Borrower.
"Contractual Obligation" means, as to any Person, any provision of any
----------------------
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Contributed Capital" means, at any time, the aggregate amount which
-------------------
shall have been received by the Borrower as a contribution to its capital or as
consideration for the issuance of equity interests in the Borrower, provided
--------
that Contributed Capital shall exclude the proceeds of any intercompany loans or
transfers.
"Control" means the possession, directly or indirectly, of the power
-------
to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or otherwise.
"Controlling" and "Controlled" have meanings correlative thereto.
----------- ----------
"Cooperation Agreement" has the meaning set forth in Section 4.01(j).
---------------------
"Covered POPS" means, at any time, the aggregate number of POPS within
------------
the geographic area subject to the Sprint Affiliation Agreements for which the
Borrower and its Subsidiaries own or operate facilities that provide service and
have achieved substantial completion.
4
<PAGE>
"Default" means any event or condition which constitutes an Event of
-------
Default or which upon notice, lapse of time, or both, would, unless cured or
waived, constitute an Event of Default.
"Deferred Interest" means, for any period, any portion of the Interest
-----------------
Expense of the Borrower and its consolidated Subsidiaries for such period that
is not payable in cash during such period but will be payable in cash in a
future period, including accreted interest in respect of original issue discount
and interest payments deferred pursuant to pay-in-kind or similar arrangements;
provided that interest expense accrued in such period that is payable in cash
- --------
within six months after the end of such period shall not constitute "Deferred
Interest".
"dollars" or "$" refers to lawful money of the United States of
------- -
America.
"EBITDA" means, for any period, the consolidated net income (or loss)
------
of the Borrower and its consolidated Subsidiaries for such period plus, to the
extent deducted in determining such consolidated net income (or loss) for such
period, the sum (without duplication) of (a) income tax expense, (b) interest
expense, (c) depreciation and amortization expense, and (d) extraordinary,
unusual or non-recurring losses or charges and (e) any non-cash losses or
charges minus, to the extent added in determining such consolidated net income
-----
(or loss) for such period, (i) interest income, (ii) extraordinary, unusual or
non-recurring gains and any other non-cash gains and (iii) income attributable
to investments in any entity (other than consolidated Subsidiaries) except to
the extent the Borrower or a wholly-owned Subsidiary actually received such
income in the form of cash dividends or other similar cash distributions.
"Effective Date" means the date on which the conditions specified in
--------------
Section 4.02 are satisfied (or waived in accordance with Section 9.02).
"Environmental Laws" means all laws, statutes, rules, regulations,
------------------
codes, ordinances, orders, decrees, judgments, injunctions, notices or binding
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, the management, release or threatened
release of any Hazardous Material or to health and safety matters, including
without limitation the Comprehensive Environmental Response, Compensation and
Liability Act, the Resource Conservation and Recovery Act, the Clean Air Act,
the Federal Water Pollution Control Act, the Solid Waste Disposal Act, the Toxic
Substances Control Act and the Safe Drinking Water Act.
"Environmental Liability" means any liability, contingent or otherwise
-----------------------
(including any liability for damages, costs of environmental remediation, fines,
penalties or indemnities), of the Borrower or any Subsidiary directly or
indirectly resulting from or based upon (a) violation of any Environmental Law,
(b) the generation, use, handling, transportation, storage, treatment or
disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials,
(d) the release or threatened release of any Hazardous Materials into the
environment or (e) any contract, agreement or other consensual arrangement
pursuant to which liability is assumed or imposed with respect to any of the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
5
<PAGE>
"ERISA Affiliate" means any trade or business (whether or not
---------------
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code or, solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA Event" means (a) any "reportable event", as defined in Section
-----------
4043 of ERISA or the regulations issued thereunder with respect to a Plan (other
than an event for which the 30-day notice period is waived); (b) the existence
with respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by the Borrower or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by the Borrower or any ERISA Affiliate from the PBGC or a plan
administrator of any notice relating to an intention to terminate any Plan or
Plans or to appoint a trustee to administer any Plan; (f) the incurrence by the
Borrower or any of its ERISA Affiliates of any liability with respect to the
withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the
receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"Eurodollar", when used in reference to any Loan or Borrowing, refers
----------
to whether such Loan, or the Loans comprising such Borrowing, are bearing
interest at a rate determined by reference to the Adjusted LIBOR Rate.
"Event of Default" has the meaning assigned to such term in Article
----------------
VII.
"Excess Cash Flow" means, for any period, the sum (without
----------------
duplication) of:
(a) the consolidated net income or net loss of Borrower and its
Subsidiaries; plus
----
(b) the aggregate amount of all non-cash charges deducted in arriving
at net income or net loss; minus
-----
(c) the aggregate amount of all scheduled repayments and voluntary and
mandatory prepayments of Indebtedness of the Borrower and its Subsidiaries
for borrowed money (excluding (i) payments on revolving credit facilities
if such amounts remain available to be reborrowed, (ii) mandatory
prepayments of the Loans pursuant to Section 2.09(b), (c) or (d), and (iii)
repayments and prepayments of Indebtedness pursuant to refinancings
permitted under Section 6.01(f) or (h); minus
-----
(d) the aggregate of cash Capital Expenditures; minus
-----
(e) any net increases in working capital and any net decreases in
deferred revenues; plus
----
6
<PAGE>
(f) any net decreases in working capital and any net increases in
deferred revenues; plus
----
(g) any cash payments received by the Borrower or its Subsidiaries
from termination of interest rate swaps to the extent not included in net
income or net loss; minus
-----
(h) all cash payments made by the Borrower or its Subsidiaries in
connection with termination of interest rate swaps to the extent not
included in net income or net loss; plus
----
(i) any extraordinary, unusual or non-recurring gains excluded from
the calculation of net income or net loss, except to the extent such gains
are non-cash gains; minus
-----
(j) any extraordinary, unusual or non-recurring losses excluded from
the calculation of net income or net loss, except to the extent such losses
are non-cash losses; minus
-----
(k) any gains attributable to any sale, transfer or other disposition
of any property or asset of the Borrower or any Subsidiary to the extent
included in any prepayment made pursuant to Section 2.09(b).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations promulgated thereunder, as amended, modified,
succeeded, or replaced from time to time.
"Excluded Taxes" means, with respect to the Administrative Agent or
--------------
the Collateral Agent, any Lender or any other recipient of any payment to be
made by or on account of any obligation of the Borrower hereunder, (a) net
income, net profit or franchise taxes imposed by the United States of America,
or by the jurisdiction under the laws of which such recipient is organized or in
which its principal office is located or, in the case of any Lender, in which
its applicable lending office is located or by any Governmental Authority of or
in any of the foregoing, (b) any branch profits taxes imposed by the United
States of America or any similar tax imposed by any other jurisdiction in which
the Borrower, the Administrative Agent, the Collateral Agent, any Lender, or any
other recipient of any payment to be made by or on account of any obligation of
the Borrower hereunder, as applicable, is located or organized or by any
Governmental Authority of or in any of the foregoing, (c) in the case of a
Foreign Lender (other than an assignee pursuant to a request by the Borrower
under Section 2.17(b)), any withholding tax that is imposed on amounts payable
to such Foreign Lender at the time such Foreign Lender becomes a party to this
Agreement (or designates a new lending office), except to the extent that such
Foreign Lender (or its assignor, if any) was entitled, at the time of
designation of a new lending office (or assignment), to receive additional
amounts from the Borrower with respect to such withholding tax pursuant to
Section 2.15(a), and (d) any Taxes that are attributable to the failure of a
Lender, the Administrative Agent, the Collateral Agent or any other recipient of
any payment to be made by or on account of any obligation of the Borrower
hereunder, as applicable, to fully comply with the certification requirements
described in Sections 2.15(e) or 9.4(f).
7
<PAGE>
"Facility" means the senior secured facility in an aggregate original
--------
principal amount of $153,500,000 created pursuant to this Agreement and the
other Loan Documents.
"FCC" means the Federal Communications Commission, or any other
---
similar or successor agency of the Federal government administering the
Communications Act.
"Federal Funds Effective Rate" means, for any day, the weighted
----------------------------
average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Financial Officer" means the chief financial officer, principal
-----------------
accounting officer, treasurer or controller of the Borrower.
"Fixed Charges" means, for any period, Cash Interest Expense for such
-------------
period plus the aggregate amount of all scheduled payments of principal of all
Indebtedness of the Borrower and its consolidated subsidiaries.
"Foreign Lender" means any Lender that is not a "United States person"
--------------
as defined in Section 7701(a)(30) of the Code.
"GAAP" means generally accepted accounting principles in the United
----
States of America in effect from time to time.
"Governmental Authority" means the government of the United States of
----------------------
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.
"Guarantee" of or by any Person (the "guarantor") means any
--------- ---------
obligation, contingent or otherwise, of the guarantor guaranteeing or having the
economic effect of guaranteeing any Indebtedness or other obligation of any
other Person (the "primary obligor") in any manner, whether directly or
---------------
indirectly, and including any obligation of the guarantor, direct or indirect,
(a) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness or other obligation or to purchase (or to advance or
supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring
the owner of such Indebtedness or other obligation of the payment thereof, (c)
to maintain working capital, equity capital or any other financial statement
condition or liquidity of the primary obligor so as to enable the primary
obligor to pay such Indebtedness or other obligation or (d) as an account party
in respect of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation; provided, that the term Guarantee shall not include
--------
endorsements for collection or deposit in the ordinary course of business.
8
<PAGE>
"Guarantor Security Agreement" means the Guarantor Security Agreement
----------------------------
by and between AGW and the Collateral Agent, substantially in the form of
Exhibit D-2.
"Guaranty Agreement" means the Guaranty Agreement among the
------------------
Subsidiaries and the Administrative Agent, substantially in the form of Exhibit
B.
"Hazardous Materials" means all explosive or radioactive substances
-------------------
or wastes and all hazardous or toxic substances, wastes or other pollutants,
including petroleum or petroleum distillates, asbestos or asbestos containing
materials, polychlorinated biphenyls, radon gas, infectious or medical wastes
and all other substances or wastes of any nature regulated pursuant to any
Environmental Law.
"Hedging Agreement" means any interest rate protection agreement,
-----------------
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.
"Indebtedness" of any Person means, without duplication, whether or
------------
not contingent; (a) all obligations of such Person for borrowed money or with
respect to deposits or advances of any kind from a third party or, (b) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, (c) all obligations of such Person upon which interest charges are
customarily paid (other than lease payments which are not Capital Lease
Obligations and current accounts payable incurred in the ordinary course of
business) to the extent interest is so accruing, (d) all obligations of such
Person under conditional sale or other title retention agreements relating to
property acquired by such Person, (e) all obligations of such Person in respect
of the deferred purchase price of property or services (excluding current
accounts payable incurred in the ordinary course of business), (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such Person, whether or not the Indebtedness
secured thereby has been assumed, (g) all Guarantees by such Person of
Indebtedness of others, (h) all Capital Lease Obligations of such Person, (i)
all obligations of such Person as an account party in respect of letters of
credit and letters of guaranty, (j) all obligations of such Person in respect of
bankers' acceptances, (k) net obligations under Hedging Agreements of such
Person, and (l) the maximum redemption price of any shares in the capital of
such Person which are subject to mandatory redemption or redemption at the
option of the holder at any time prior to the Tranche 2 Maturity Date. The
Indebtedness of any Person shall include the Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.
"Indemnified Taxes" means Taxes other than Excluded Taxes.
-----------------
"Indenture" means the Indenture to be entered into by the Borrower and
---------
the Trustee for the holders of the senior subordinated discount notes issued
thereunder.
"Intellectual Property" means any patent or any trademark, trade name,
---------------------
copyright or service mark registrations, or any pending applications for the
same.
9
<PAGE>
"Intercreditor Agreement" means the Intercreditor Agreement to be
-----------------------
entered into among the Administrative Agent, the Collateral Agent and Bankers
Trust Company contemporaneonsly the execution of the Indenture, substantially in
the form of Exhibit F.
"Interest Election Request" means a request by the Borrower to convert
-------------------------
or continue a Borrowing in accordance with Section 2.05.
"Interest Expense" means, for any period, the interest expense of the
----------------
Borrower and its consolidated Subsidiaries for such period (excluding
amortization of debt discounts and other non-cash interest expense, but
including Deferred Interest), including the portion of any rents payable under
capital leases allocable to interest expense, all as determined on a
consolidated basis in accordance with GAAP.
"Interest Payment Date" means (a) with respect to any ABR Loan, the
---------------------
last day of each March, June, September and December and (b) with respect to any
Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing
of which such Loan is a part and, in the case of a Eurodollar Borrowing with an
Interest Period of more than three months' duration, each day prior to the last
day of such Interest Period that occurs at intervals of three months' duration
after the first day of such Interest Period.
"Interest Period" means, with respect to any Eurodollar Borrowing, the
---------------
period commencing on the date of such Borrowing and ending on the numerically
corresponding day in the calendar month that is one, two, three or six months
thereafter, as the Borrower may elect; provided that (i) if any Interest Period
--------
would end on a day other than a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day and (ii) any Interest Period
that commences on the last Business Day of a calendar month (or on a day for
which there is no numerically corresponding day in the last calendar month of
such Interest Period) shall end on the last Business Day of the last calendar
month of such Interest Period. For purposes hereof, the date of a Borrowing
initially shall be the date on which such Borrowing is made and thereafter shall
be the effective date of the most recent conversion or continuation of such
Borrowing.
"Lenders" means each Person identified as a Lender on Schedule 2.01
-------
and any other Person that shall have become a party hereto pursuant to an
Assignment and Acceptance, other than any such Person that ceases to be a party
hereto pursuant to an Assignment and Acceptance.
"LIBOR Rate" means, with respect to any Eurodollar Borrowing for any
----------
Interest Period, the rate appearing on Page 3750 of the Dow Jones Market Service
(or on any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the "LIBOR Rate" with respect to
----------
10
<PAGE>
such Eurodollar Borrowing for such Interest Period shall be the rate at which
dollar deposits of $5,000,000 and for a maturity comparable to such Interest
Period are offered by the principal London office of the Administrative Agent
or, in the event the Administrative Agent is not a bank, The Chase Manhattan
Bank in immediately available funds in the London interbank market at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.
"Licenses" means any and all licenses (excluding PCS Licenses),
--------
permits, easements, public and private rights-of-way and other access
agreements, registrations, municipal/local and other government approvals,
consents or other authority necessary for the Borrower and its Subsidiaries (as
applicable) to operate and manage the Network.
"Lien" means, with respect to any asset of the Borrower or any
----
Subsidiary, as applicable, (a) any mortgage, deed of trust, lien, pledge,
hypothecation, encumbrance, charge or security interest in, on or of such asset,
(b) the interest of a vendor or a lessor under any conditional sale agreement,
capital lease or title retention agreement (or any financing lease having
substantially the same economic effect as any of the foregoing) relating to such
asset and (c) in the case of securities, any purchase option, call or similar
right of a third party with respect to such securities.
"Like Kind Exchange" means the transfer by the Borrower or a
------------------
Subsidiary (other than AGW) of property or equipment with a fair market value of
less than $5 million to a Person who is not an Affiliate of the Borrower in
exchange for property or equipment that is used or useful in the business of the
Borrower and its Subsidiaries and has a fair market value at least equal to the
fair market value of the property or equipment so transferred.
"Loan Documents" means this Agreement, the Guaranty Agreement and the
--------------
Security Documents and any notes or other instruments or agreements issued or
executed pursuant to any of the foregoing.
"Loans" means Tranche 1 Loans and Tranche 2 Loans.
-----
"Lucent" means Lucent Technologies Inc.
------
"Management Agreement Breach" has the meaning assigned to such term in
---------------------------
the Consent as in effect on the Closing Date.
"Material Adverse Change" means any change that has, or would have, a
-----------------------
Material Adverse Effect.
"Material Adverse Effect" means a material adverse effect on (a) the
-----------------------
business, assets, operations or condition, financial or otherwise, of the
Borrower and the Subsidiaries taken as a whole, (b) the ability of the Borrower
or its Subsidiaries to perform any of their material obligations under any Loan
Document or (c) the material rights of or benefits available to the Lenders
under any Loan Document.
"Material Indebtedness" means Indebtedness (other than the Loans), or
---------------------
obligations in respect of one or more Hedging Agreements, of any of the Borrower
and/or its
11
<PAGE>
Subsidiaries in an aggregate principal amount exceeding US$5,000,000.
For purposes of determining Material Indebtedness, the "principal amount" of the
obligations of the Borrower or any Subsidiary in respect of any Hedging
Agreement at any time shall be the maximum aggregate amount (giving effect to
any netting agreements) that the Borrower or such Subsidiary would be required
to pay if such Hedging Agreement were terminated at such time.
"Maturity Date" means (i) for Tranche 1 Loans, June 6, 2007 and (ii)
-------------
for Tranche 2 Loans, September 30, 2008.
"Moody's" means Moody's Investors Service, Inc.
-------
"Mortgage" means a mortgage, deed of trust, assignment of leases and
--------
rents, leasehold mortgage or other security document granting a Lien on any
Mortgaged Property to secure the Obligations. Each Mortgage shall be in form
and substance reasonably satisfactory to the Collateral Agent.
"Mortgaged Property" means each parcel of real property and
------------------
improvements thereto with respect to which a Mortgage is granted pursuant to
Section 5.11 or 5.12.
"Multiemployer Plan" means a multiemployer plan as defined in Section
------------------
4001(a)(3) of ERISA.
"Net Proceeds" means, with respect to any event (a) the cash proceeds
------------
received in respect of such event including (i) any cash received in respect of
any non-cash proceeds, but only as and when received, (ii) in the case of a
casualty, insurance proceeds, and (iii) in the case of a condemnation or similar
event, condemnation awards and similar payments, net of (b) the sum of (i) all
reasonable fees and out-of-pocket expenses paid by the Borrower and the
Subsidiaries to third parties (other than Affiliates) in connection with such
event, (ii) in the case of a sale or other disposition of an asset (including
pursuant to a casualty or condemnation), the amount of all payments required to
be made by the Borrower and the Subsidiaries as a result of such event to repay
Indebtedness (other than Loans) secured by such asset or otherwise subject to
mandatory prepayment as a result of such event, (iii) in the case of an
underwritten offering of securities, the amount of all underwriting discounts
and commissions, and (iv) the amount of all taxes paid (or reasonably estimated
to be payable) by the Borrower and the Subsidiaries, and the amount of any
reserves established by the Borrower and the Subsidiaries to fund contingent
liabilities reasonably estimated to be payable, in each case during the year
that such event occurred or the next succeeding year and that are directly
attributable to such event (as determined reasonably and in good faith by the
chief financial officer of the Borrower).
"Network" means the wireless PCS telecommunications network to be
-------
operated and managed by the Borrower and its Subsidiaries pursuant to the Sprint
Management Agreement.
"Note" means the Secured Promissory Note in the principal amount of
----
$10,000,000 issued by the Borrower on June 15, 1999 in favor of Lucent.
"Obligations" means any and all Loans and all other obligations,
-----------
liabilities and indebtedness of every kind, nature and description owing by the
Borrower, the Guarantors or any
12
<PAGE>
Subsidiary to the Administrative Agent, the Collateral Agent or any Lender
and/or their Affiliates under any Loan Document or any Hedging Agreement with
any Person who is a Lender or Affiliate thereof at the time such Hedging
Agreement is entered into, including without limitation principal, interest,
charges, fees, penalties, indemnifications, reimbursements, damages, costs and
expenses, however evidenced, whether as principal, surety, endorser, guarantor
or otherwise, in each case arising under this Agreement, the Guarantees, any
other Loan Document, whether now existing or hereafter arising, whether arising
before, during or after the term of this Agreement or after the commencement of
any case with respect to the Borrower, a Guarantor or any Subsidiary under the
United States Bankruptcy Code or any similar statute (including, without
limitation, the payment of interest and other amounts which would accrue and
become due but for the commencement of such case), whether direct or indirect,
absolute or contingent, joint or several, due or not due, primary or secondary,
liquidated or unliquidated, secured or unsecured, and however acquired.
"Other Taxes" means any and all present or future stamp or documentary
-----------
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made under any Loan Document or from the execution, delivery or
enforcement of, or otherwise with respect to, any Loan Document.
"Payment Date" means each of (a) the last day of each March, June,
------------
September or December beginning (i) December of 2002 in the case of Tranche 1
Loans and (ii) March of 2004 in the case of Tranche 2 Loans, and (b) the
Maturity Date.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
----
defined in ERISA and any successor entity performing similar functions.
"PCS" means personal communications services.
---
"PCS License" means any license obtained by or on behalf of SprintCom,
-----------
Inc. and/or its Affiliates to provide PCS for the service areas which will be
managed by the Borrower pursuant to the Sprint Management Agreement from time to
time.
"PCS Subscribers" means customers receiving PCS provided by the
---------------
Network.
"Permitted Encumbrances" means:
----------------------
(a) Liens imposed by law for taxes, assessments or other governmental
charges that are not yet due or are being contested in compliance with
Section 5.05;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's
and other like Liens imposed by law, arising in the ordinary course of
business and securing obligations that are not overdue by more than 30 days
or are being contested in compliance with Section 5.05;
(c) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other
social security laws or regulations;
13
<PAGE>
(d) any interest or title of a lessor in any property subject to any
lease otherwise permitted by the Loan Documents;
(e) deposits to secure the performance of bids, trade contracts,
leases, statutory obligations, surety and appeal bonds, performance bonds
and other obligations of a like nature, in each case in the ordinary course
of business;
(f) easements, zoning restrictions, rights-of-way and similar
encumbrances on real property imposed by law or arising in the ordinary
course of business that do not secure any monetary obligations and do not
materially detract from the value of the affected property or interfere
with the ordinary conduct of business of the Borrower or any Subsidiary;
and
(g) (i) leases or subleases granted to others with respect to
interests in towers owned or leased by AGW and (ii) other leases or
subleases granted to others with respect to real property owned or leased
by AGW so long as the annual aggregate rent received by or on behalf of AGW
for each such lease or sublease does not exceed $5,000 per fiscal year;
provided that the term "Permitted Encumbrances" shall not include any Lien
- --------
securing Indebtedness.
"Permitted Investments" means:
---------------------
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are backed
by the full faith and credit of the United States of America), in each case
maturing within one year from the date of acquisition thereof;
(b) investments in commercial paper maturing within 270 days from the
date of acquisition thereof and having, at such date of acquisition, the
highest credit rating obtainable from S&P or from Moody's;
(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within 180 days from the date of acquisition thereof
and overnight bank deposits issued or guaranteed by or placed with, and
money market deposit accounts issued or offered by, any domestic office of
any commercial bank organized under the laws of the United States of
America or any State thereof which has a combined capital and surplus of
not less than $500,000,000;
(d) fully collateralized repurchase agreements with a term of not
more than 30 days for securities described in clause (a) above and entered
into with a financial institution satisfying the criteria described in
clause (c) above; and
(e) money market funds at least 95% of the assets of which constitute
Permitted Investments of the kinds described in clauses (a)-(d) above and
Strategic
14
<PAGE>
Cash Management program funds offered by DLJ Investment Management Corp. or
comparable funds offered by similar banks or institutions.
"Permitted Refinancing" has the meaning set forth in Section 6.01(j).
---------------------
"Person" means any natural person, individual, corporation, limited
------
liability company, limited liability partnership, trust, business trust, joint
venture, association, company, sole proprietorship, unincorporated association,
joint stock corporation, partnership, Governmental Authority or other entity.
"Plan" means any employee pension benefit plan (other than a
----
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 302 of ERISA, and in respect of which the Borrower or
any ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Pledge Agreement" means the Pledge Agreement between or among the
----------------
Borrower and the Administrative Agent and/or the Collateral Agent, substantially
in the form of Exhibit C.
"POPS" means, with respect to any geographic area, the population of
----
such geographic area as measured by the population data maintained for the year
1998 by Equifax/NDS and as used in Schedule 2.1 to the Sprint Management
Agreement.
"Prime Rate" means the rate of interest per annum publicly announced
----------
from time to time by The Chase Manhattan Bank (or, if the Administrative Agent
is a commercial bank, by the Administrative Agent) as its prime rate in effect
at its principal office in New York City; each change in the Prime Rate shall be
effective from and including the date such change is publicly announced as being
effective.
"Real Estate Assets" has the meaning set forth in Section 3.05(b).
------------------
"Register" has the meaning set forth in Section 9.04.
--------
"Related Parties" means, with respect to any specified Person, such
---------------
Person's Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person's Affiliates.
"Required Lenders" means (a) at any time that Lucent and its
----------------
Affiliates, if any, who are Lenders have Loans and unused Commitments
representing in excess of 50% of the sum of all Loans outstanding and unused
Commitments at such time, each of (i) Lucent and such Affiliates who are Lenders
at such time and (ii) other Lenders having Loans and unused Commitments
representing in excess of 50% of the sum of all Loans outstanding and held by,
and unused Commitments of, such other Lenders (exclusive of Lucent) at such time
and (b) at any other time, Lenders having Loans and unused Commitments
representing in excess of 50% of the sum of all Loans outstanding and unused
Commitments at such time.
15
<PAGE>
"Requirement of Law" means, as to any Person, the certificate of
------------------
incorporation or formation and by-laws, the partnership agreement, the operating
agreement or other organizational or governing documents of such Person, and any
law, statute, code, ordinance, treaty, rule or regulation, or determination,
judgment, writ, injunction, requirement, decree or order of an arbitrator or a
court of other Governmental Authority, in each case applicable to or binding
upon such Person or any of its property or to which such Person or any of its
property is bound or subject.
"Restricted Payment" means (a) any dividend or other distribution
------------------
(whether in cash, securities or other property) with respect to any equity
interest in or shares of any class of capital stock of the Borrower or any
Subsidiary, or (b) any payment (whether in cash, securities or other property),
including any sinking fund or similar deposit, on account of the purchase,
redemption, retirement, acquisition, cancellation or termination of any equity
interest in or shares of any class of capital stock of the Borrower or any
Subsidiary or any option, warrant or other right to acquire any such equity
interest in or shares of capital stock of the Borrower or any Subsidiary.
"S&P" means Standard & Poor's.
---
"Secured Parties" means each of the Lenders, the Administrative Agent
---------------
and the Collateral Agent.
"Security Agreement" means the Security Agreement by and between the
------------------
Borrower and the Collateral Agent, substantially in the form of Exhibit D-1.
"Security Documents" means the Mortgages, the Pledge Agreement, the
------------------
Security Agreement, the Guarantor Security Agreement, the Consent, the
Intercreditor Agreement and each other security agreement or other instrument or
document executed and delivered pursuant to Section 5.11 or 5.12 to secure the
Obligations.
"Senior Secured Debt" means, at any time, Total Debt of the Borrower
-------------------
at such time for which the Borrower's payment or performance obligations
thereunder are secured by any assets, rights or other tangible or intangible
property of the Borrower or any Subsidiary, excluding any portion thereof which
by its terms is subordinate in right of payment to the prior payment in full of
the Loans and permitted by Section 6.01(h).
"Sprint Affiliation Agreements" means the agreements entered into
-----------------------------
between the Borrower and Sprint PCS and/or its Affiliate(s) which are set forth
on Schedule 1.01.
"Sprint Management Agreement" means that certain Sprint PCS Management
---------------------------
Agreement between SprintCom, Inc. and Borrower, dated as of July 22, 1998.
"Statutory Reserve Rate" means a fraction (expressed as a decimal),
----------------------
the numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which any commercial banks subject to regulation by
the Board are subject with respect to the Adjusted LIBOR Rate, for eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in
16
<PAGE>
Regulation D of the Board). Such reserve percentages shall include those
imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to
constitute eurocurrency funding and to be subject to such reserve requirements
without benefit of or credit for proration, exemptions or offsets that may be
available from time to time to any Lender under such Regulation D or any
comparable regulation. The Statutory Reserve Rate shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"subsidiary" means, with respect to any Person (the "parent") at any
---------- ------
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or, in the
case of a partnership, more than 50% of the general partnership interests are,
as of such date, owned, controlled or held, or (b) that is, as of such date,
otherwise Controlled, by the parent or one or more subsidiaries of the parent or
by the parent and one or more subsidiaries of the parent.
"Subsidiary" means any subsidiary of the Borrower.
----------
"Supply Agreement" means that certain PCS Procurement and Services
----------------
Contract dated July 31, 1998 between the Borrower and Lucent, as amended,
supplemented or modified from time to time.
"Taxes" means any and all present or future taxes, levies, imposts,
-----
duties, deductions, charges or withholdings imposed by any Governmental
Authority.
"Total Capitalization" means, at any time, the sum of (a) Total Debt
--------------------
outstanding on such date plus (b) Contributed Capital on such date determined in
----
accordance with GAAP plus (c) if positive, the retained earnings of the Borrower
----
on such date determined in accordance with GAAP minus (e) the aggregate amount
-----
of Restricted Payments to the extent such Restricted Payments have not already
reduced retained earnings (directly or through net income).
"Total Debt" means, at any time, (a) the accreted value of all
----------
Indebtedness of the Borrower and its consolidated Subsidiaries for borrowed
money, in the case of any such Indebtedness issued with original issue discount,
and (b) the outstanding principal amount of all Indebtedness of the Borrower and
its consolidated Subsidiaries for borrowed money (including Capital Lease
Obligations) at such time, and including any capitalized interest with respect
to such Indebtedness, in the case of such Indebtedness other than Indebtedness
issued with original issue discount, minus (c) at any time prior to January 1,
-----
2005 all Indebtedness outstanding included in clause (a) of this definition of
Total Debt; provided that interest on such Indebtedness accretes and is not
payable in cash any time prior to January 1, 2005, in each case as determined on
a consolidated basis in accordance with GAAP.
"Tranche 1 Availability Period" means the period commencing on the
-----------------------------
Closing Date and ending on June 30, 2000.
17
<PAGE>
"Tranche 1 Commitment" means, with respect to each Lender, the
--------------------
commitment, if any, of such Lender to make Tranche 1 Loans hereunder, expressed
as an amount representing the maximum principal amount of the Tranche 1 Loans to
be made by such Lender hereunder, as such commitment may be (a) reduced from
time to time pursuant to Section 2.06 and (b) reduced or increased from time to
time pursuant to assignments by or to such Lender pursuant to Section 9.04. The
initial amount of each Lender's Tranche 1 Commitment is set forth on Schedule
2.01, or in the Assignment and Acceptance pursuant to which such Lender shall
have assumed its Tranche 1 Commitment, as applicable. The initial aggregate
amount of the Lenders' Tranche 1 Commitments is $13,500,000.
"Tranche 1 Loan" means a Tranche 1 Loan made pursuant to Section 2.01.
--------------
"Tranche 2 Availability Period" means the period commencing on October
-----------------------------
1, 2000 and ending on September 30, 2003.
"Tranche 2 Commitment" means, with respect to each Lender, the
--------------------
commitment, if any, of such Lender to make Tranche 2 Loans hereunder during the
Tranche 2 Availability Period, expressed as an amount representing the maximum
principal amount of the Tranche 2 Loans to be made by such Lender hereunder, as
such commitment may be (a) reduced from time to time pursuant to Section 2.06
and (b) reduced or increased from time to time pursuant to assignments by or to
such Lender pursuant to Section 9.04. The initial amount of each Lender's
Tranche 2 Commitment is set forth on Schedule 2.01, or in the Assignment and
Acceptance pursuant to which such Lender shall have assumed its Tranche 2
Commitment, as applicable. The initial aggregate amount of the Lenders' Tranche
2 Commitments is $140,000,000.
"Tranche 2 Loan" means a Tranche 2 Loan made pursuant to Section 2.01.
--------------
"Transactions" means the execution, delivery and performance by the
------------
Borrower and any Subsidiary of the Loan Documents to which it is to be a party,
the borrowing of Loans and the use of the proceeds thereof.
"Type", when used in reference to any Loan or Borrowing, refers to
----
whether the rate of interest on such Loan, or on the Loans comprising such
Borrowing, is determined by reference to the Adjusted LIBOR Rate or the
Alternate Base Rate.
"Withdrawal Liability" means liability to a Multiemployer Plan as a
--------------------
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.
"Year 2000 Problem" has the meaning set forth in Section 3.18.
-----------------
SECTION 1.02. Classification of Loans and Borrowings. For purposes of
--------------------------------------
this Agreement, Loans may be classified and referred to by Class (e.g., a
----
"Tranche 1 Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type
----
(e.g., a "Eurodollar Tranche 1 Loan"). Borrowings also may be classified and
----
referred to by Class (e.g., a "Tranche 1 Borrowing") or by Type (e.g., a
---- ----
"Eurodollar Borrowing") or by Class and Type (e.g., a "Eurodollar Tranche 1
----
Borrowing").
18
<PAGE>
SECTION 1.03. Terms Generally. The definitions of terms herein shall
---------------
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits and Schedules shall be construed to refer to Articles and
Sections of, and Exhibits and Schedules to, this Agreement and (e) the words
"asset" and "property" shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties,
including cash, securities, accounts, contract rights, licenses and intellectual
property.
SECTION 1.04. Accounting Terms; GAAP. Except as otherwise
----------------------
expressly provided herein, all terms of an accounting or financial nature shall
be construed in accordance with GAAP, as in effect from time to time; provided
--------
that, if the Borrower notifies the Administrative Agent that the Borrower
requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on
the operation of such provision (or if the Administrative Agent notifies the
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.
ARTICLE II
LOANS
-----
SECTION 2.01. Commitments. Subject to the terms and conditions
-----------
set forth in this Agreement, each Lender severally agrees to make Loans to the
Borrower from time to time during the applicable Availability Period in the
amount of its pro rata share of such Loans as the Borrower may request under
Section 2.02, in an aggregate principal amount not to exceed such Lender's pro
rata share of the Commitments, as described in Schedule 2.01. Amounts repaid in
respect of Loans may not be reborrowed.
SECTION 2.02. Loans and Borrowings.
--------------------
(a) Each Loan shall be made as part of a Borrowing consisting of
Loans of the same Class and Type made by the Lenders ratably in accordance
with their respective Commitments of the applicable Class. The failure of any
Lender to make any Loan required to be made by it shall not relieve any other
Lender of its obligations hereunder; provided that the
--------
19
<PAGE>
Commitments of the Lenders are several and no Lender shall be responsible for
any other Lender's failure to make Loans as required.
(b) Subject to Section 2.12, each Borrowing shall be comprised
entirely of ABR Loans or Eurodollar Loans as the Borrower may request in
accordance herewith. Each Lender at its option may make any Eurodollar Loan by
causing any domestic or foreign branch or Affiliate of such Lender to make such
Loan; provided that any exercise of such option shall not affect the obligation
--------
of the Borrower to repay such Loan in accordance with the terms of this
Agreement.
(c) The proceeds of the Facility shall be utilized solely (i) to
finance the costs of equipment and services purchased by the Borrower from
Lucent under the Supply Agreement, (ii) to repay the outstanding principal
amount under the Note, and (iii) for general corporate purposes. None of the
proceeds will be used, directly or indirectly, for the purpose of purchasing or
carrying any margin security or for the purposes of reducing or retiring any
indebtedness which was originally incurred to purchase or carry any margin
security or for any other purpose which might cause any of the Loans to be
considered a "purpose credit" within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System, as amended. Borrowings of more than one
Type and Class may be outstanding at the same time; provided that there shall
--------
not at any time be more than a total of eight Eurodollar Borrowings outstanding.
(d) Notwithstanding any other provision of this Agreement, the
Borrower shall not be entitled to request, or to elect to convert or continue,
any Borrowing as a Eurodollar Borrowing if the Interest Period requested with
respect thereto would end after the Maturity Date.
SECTION 2.03. Requests for Borrowings. To request a Borrowing, the
-----------------------
Borrower shall notify the Administrative Agent of such request by telephone (a)
at any time Lucent is a Lender, not later than 12:00 (noon), New York City time,
four Business Days before the date of the proposed Borrowing, or (b) at any time
that Lucent is not a Lender (i) in the case of Eurodollar Borrowing, not later
than 12:00 (noon), New York City time, three Business Days before the date of
the proposed Borrowing or (ii) in the case of an ABR Borrowing, not later than
12:00 (noon), New York City time on the Business Day before the date of the
proposed Borrowing; provided that the Borrower may make no more than one request
--------
for a Borrowing in any single calendar month (it being understood that all
Borrowings made by the Borrower on the same date shall be treated as a single
request for a Borrowing for purposes of this limitation). Each such telephonic
Borrowing Request shall be irrevocable and shall be confirmed promptly by hand
delivery or telecopy to the Administrative Agent of a written Borrowing Request
signed by the Borrower. Each such telephonic and written Borrowing Request shall
specify the following information in compliance with Section 2.02:
(i) whether the requested Borrowing is to be a Tranche 1 Borrowing
or a Tranche 2 Borrowing;
(ii) the aggregate amount of such Borrowing and the use of proceeds
therefrom (and, if such proceeds are to be used to finance the cost of
equipment, such written Borrowing Request shall attach copies of invoices issued
by Lucent and/or third party vendors for which such proceeds are to be used);
20
<PAGE>
(iii) the date of such Borrowing, which shall be a Business Day;
(iv) whether such Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing;
(v) in the case of a Eurodollar Borrowing, the initial Interest
Period to be applicable thereto, which shall be a period contemplated by
the definition of the term "Interest Period"; and
(vi) the location and number of the account or accounts to which
funds are to be disbursed, which shall comply with the requirements of
Section 2.04.
If no election as to the Type of Borrowing is specified, then the requested
Borrowing shall be an ABR Borrowing. If no Interest Period is specified with
respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed
to have selected an Interest Period of one month's duration. Promptly following
receipt of a Borrowing Request in accordance with this Section, the
Administrative Agent shall advise each Lender of the details thereof and of the
amount of such Lender's Loan to be made as part of the requested Borrowing.
SECTION 2.04. Funding of Borrowings.
---------------------
(a) Each Lender shall make each Loan to be made by it hereunder on
the proposed date thereof by wire transfer of immediately available funds by
12:00 noon, New York City time, to the account of the Administrative Agent most
recently designated by it for such purpose by notice to the Lenders. The
Administrative Agent will make such Loans available to the Borrower by promptly
crediting the amounts so received, in like funds, to an account of the Borrower
maintained with the Administrative Agent (or a bank designated by the
Administrative Agent) in New York City and designated by the Borrower in the
applicable Borrowing Request. Notwithstanding the foregoing, if the proceeds of
any Borrowing are to be used to make any payment to or for the account of Lucent
or any Affiliate thereof (i) if Lucent or any Affiliate thereof is a Lender,
then Lucent or such Affiliate may make its Loan or Loans or portions thereof by
crediting the amount thereof against the payment obligations to Lucent or any
such Affiliate and shall be deemed to have made a Loan in the amount of such
credit and (ii) the Administrative Agent will make the Loans of the other
Lenders available to the Borrower by promptly crediting the amounts so received
from such other Lenders, in immediately available funds, to the account
designated by Lucent, to the extent of the proceeds of such Loans designated to
be used to make payments to Lucent or any of its Affiliates (after giving effect
to any credits pursuant to clause (i) above) and the balance, if any, of such
proceeds shall be made available to the Borrower as provided in the preceding
sentence.
(b) Unless the Administrative Agent shall have received notice from
a Lender prior to the proposed date of any Borrowing that such Lender will not
make available to the Administrative Agent such Lender's share of such
Borrowing, the Administrative Agent may assume that such Lender has made such
share available on such date in accordance with paragraph (a) of this Section
and may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. In such event, if a Lender has not in fact made its share
of the applicable Borrowing available to the Administrative Agent, then the
applicable Lender and
21
<PAGE>
the Borrower severally agree to pay to the Administrative Agent forthwith on
demand such corresponding amount with interest thereon, for each day from and
including the date such amount is made available to the Borrower to but
excluding the date of payment to the Administrative Agent, at (i) in the case of
such Lender, the greater of the Federal Funds Effective Rate and a rate
determined by the Administrative Agent in accordance with banking industry rules
on interbank compensation or (ii) in the case of the Borrower, the interest rate
applicable to ABR Loans. If such Lender pays such amount to the Administrative
Agent, then such amount shall constitute such Lender's Loan included in such
Borrowing.
SECTION 2.05. Interest Elections
------------------
(a) Each Borrowing initially shall be of the Type specified in the
applicable Borrowing Request and, in the case of a Eurodollar Borrowing, shall
have an initial Interest Period as specified in such Borrowing Request.
Thereafter, the Borrower may elect to convert such Borrowing to a different Type
or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may
elect Interest Periods therefor, all as provided in this Section. The Borrower
may elect different options with respect to different portions of the affected
Borrowing, in which case each such portion shall be allocated ratably among the
Lenders holding the Loans comprising such Borrowing, and the Loans comprising
each such portion shall be considered a separate Borrowing.
(b) To make an election pursuant to this Section, the Borrower shall
notify the Administrative Agent of such election by telephone by the time that a
Borrowing Request would be required under Section 2.03 if the Borrower were
requesting a Borrowing of the Type resulting from such election to be made on
the effective date of such election. Each such telephonic Interest Election
Request shall be irrevocable and shall be confirmed promptly by hand delivery or
telecopy to the Administrative Agent of a written Interest Election Request in a
form approved by the Administrative Agent and signed by the Borrower.
(c) Each telephonic and written Interest Election Request shall
specify the following information in compliance with Section 2.02 and paragraph
(f) of this Section:
(i) the Borrowing to which such Interest Election Request applies
and, if different options are being elected with respect to different
portions thereof, the portions thereof to be allocated to each resulting
Borrowing (in which case the information to be specified pursuant to
clauses (iii) and (iv) below shall be specific for each resulting
Borrowing);
(ii) the effective date of the election made pursuant to such
Interest Election Request, which shall be a Business Day;
(iii) whether the resulting Borrowing is to be an ABR Borrowing or a
Eurodollar Borrowing; and
(iv) if the resulting Borrowing is a Eurodollar Borrowing, the
Interest Period to be applicable thereto after giving effect to such
election, which shall be a period contemplated by the definition of the
term "Interest Period".
22
<PAGE>
If any such Interest Election Request requests a Eurodollar Borrowing but does
not specify an Interest Period, then the Borrower shall be deemed to have
selected an Interest Period of one month's duration.
(d) Promptly following receipt of an Interest Election Request, the
Administrative Agent shall advise each Lender of the details thereof and of such
Lender's portion of each resulting Borrowing.
(e) If the Borrower fails to deliver a timely Interest Election
Request with respect to a Eurodollar Borrowing prior to the end of the Interest
Period applicable thereto, then, unless such Borrowing is repaid as provided
herein, at the end of such Interest Period such Borrowing shall be converted to
an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of
Default has occurred and is continuing then, so long as an Event of Default is
continuing (i) no outstanding Borrowing may be converted to or continued as a
Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be
converted to an ABR Borrowing at the end of the Interest Period applicable
thereto.
(f) A Borrowing of any Class may not be converted to or continued as a
Eurodollar Borrowing if after giving effect thereto (i) the Interest Period
therefor would commence before and end after a date on which any principal of
the Loans of such Class is scheduled to be repaid and (ii) the sum of the
aggregate principal amount of outstanding Eurodollar Borrowings of such Class
with Interest Periods ending on or prior to such scheduled repayment date plus
the aggregate principal amount of outstanding ABR Borrowings of such Class would
be less than the aggregate principal amount of Loans of such Class required to
be repaid on such scheduled repayment date.
SECTION 2.06. Termination, Reduction and Increase of Commitments.
--------------------------------------------------
(a) Unless previously terminated, (i) the Tranche 1 Commitments and,
(ii) the Tranche 2 Commitments shall terminate on the applicable Availability
Termination Date.
(b) The Commitment(s) of each Lender shall be reduced on the date of
each Tranche 1 Loan or Tranche 2 Loan made by such Lender by an amount equal to
such Loans.
(c) In the event that a prepayment would be required pursuant to
paragraph (b), (c) or (d) of Section 2.09, the Commitments shall be reduced by
an amount equal to the excess, if any, of the amount of the required prepayment
over the aggregate principal amount of Loans then outstanding, if any.
(d) The Borrower may at any time without premium or penalty terminate,
or from time to time reduce, the Commitments of any Class; provided that each
--------
reduction of the Commitments of any Class pursuant to this paragraph (d) shall
be in an amount that is not less than $1,000,000.
(e) The Borrower shall notify the Administrative Agent of any election
to terminate or reduce the Commitments under paragraph (d) of this Section at
least three Business Days prior to the effective date of such termination or
reduction, specifying such election and the effective date thereof. Promptly
following receipt of any such notice, the Administrative Agent
23
<PAGE>
shall advise the Lenders of the contents thereof. Each notice delivered by the
Borrower pursuant to this Section shall be irrevocable. Any termination or
reduction of the Commitments of any Class shall be permanent. Each reduction of
the Commitments of any Class pursuant to paragraph (c) or (d) of this Section
shall be made ratably among the Lenders of such Class in accordance with their
respective Commitments of such Class. In the event of any reduction of
Commitments under paragraph (c) or (d) above at a time when Commitments of more
than one Class remain in effect, such reduction shall be applied so that the
aggregate amount of such reduction is allocated between the Tranche 1
Commitments and Tranche 2 Commitments pro rata based on the aggregate amount of
the Commitments of each such Class then in effect.
SECTION 2.07. Repayment of Loans; Evidence of Debt.
------------------------------------
(a) The Borrower hereby unconditionally promises to pay to the
Administrative Agent for the account of each Lender the then unpaid principal
amount of each Loan of such Lender as provided in Section 2.08.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the Borrower to such
Lender resulting from each Loan made by such Lender, including the amounts of
principal and interest payable and paid to such Lender from time to time
hereunder.
(c) The Administrative Agent shall maintain accounts in which it shall
record (i) the amount of each Loan made hereunder, the Class and Type thereof
and the Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) the amount of any sum received by the Administrative
Agent hereunder for the account of the Lenders and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraph
(b) or (c) of this Section shall be prima facie evidence of the existence and
----- -----
amounts of the obligations recorded therein; provided that the failure of any
--------
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Borrower to repay
the Loans in accordance with the terms of this Agreement.
(e) Any Lender may request that Loans of any Class made by it be
evidenced by a promissory note. In such event, the Borrower shall prepare,
execute and deliver to such Lender a promissory note payable to the order of
such Lender (or, if requested by such Lender, to such Lender and its registered
assigns) and in a form approved by the Administrative Agent. Thereafter, the
Loans evidenced by such promissory note and interest thereon shall at all times
(including after assignment pursuant to Section 9.04) be represented by one or
more promissory notes in such form payable to the order of the payee named
therein (or, if such promissory note is a registered note, to such payee and its
registered assigns).
SECTION 2.08. Amortization of Loans.
---------------------
(a) Subject to adjustment pursuant to paragraph (c) of this Section,
the Borrower shall repay all outstanding Tranche 1 and Tranche 2 Borrowings in
nineteen consecutive quarterly installments payable on each applicable Payment
Date, each such installment to be in
24
<PAGE>
an aggregate principal amount equal to the product of the sum of all Tranche 1
Loans and Tranche 2 Loans made to the Borrower hereunder and (i) for the first
eight payments, 3.75%, (ii) for the next four payments, 5.0%, (iii) for the next
six payments, 7.143%, and (iv) for the final payment on the applicable Maturity
Date 7.142%.
(b) To the extent not previously paid, all Loans shall be due and
payable on the applicable Maturity Date.
(c) Any prepayment of a Borrowing of any Class shall be applied to
reduce the subsequent scheduled repayments of the Borrowings of such Class to be
made pursuant to this Section in reverse chronological order.
SECTION 2.09. Prepayment of Loans.
-------------------
(a) The Borrower may at any time and from time to time prepay any
Borrowing in whole or in part, without premium or penalty subject to the
requirements of this Section and the payment of any applicable fees pursuant to
Section 2.14, upon not less than 30 days' prior written notice to the
Administrative Agent. Partial prepayment made pursuant to this Section 2.09(a)
shall be in an aggregate principal amount of $1,000,000 and multiples thereof.
(b) If and on each occasion that any Net Proceeds are received by or
on behalf of the Borrower or any Subsidiary in respect of any sale, transfer or
other disposition (including pursuant to a sale and leaseback transaction but
excluding issuances of capital stock of the Borrower) of any property or asset
of the Borrower or any Subsidiary (other than dispositions: (V) in the form of a
Like Kind Exchange, provided that the Borrower shall deliver to the
Administrative Agent an officer's certificate certifying that such exchange is a
Like Kind Exchange hereunder, (W) the aggregate Net Proceeds of which are less
than $1,000,000 in any single calendar year, (X) of inventory or used, obsolete
or surplus equipment in the ordinary course of business, (Y) between the
Borrower and its wholly-owned Subsidiaries (other than AGW, excluding transfers
or assignment of interests in real property to AGW by the Borrower or another
Subsidiary) and (Z) of investments described in clauses (i) or (iii) of Section
6.04), or any casualty or other damage to, or any taking under force of eminent
domain or by condemnation or similar proceeding of, any property or assets of
the Borrower or any Subsidiary, the Borrower shall, to the extent such Net
Proceeds are not reinvested in property or assets used or useful in the business
of the Borrower and its Subsidiaries within 180 days of receipt thereof, prepay
Borrowings outstanding (or if no Borrowings are then outstanding, reduce the
Commitments) in an aggregate amount equal to such Net Proceeds.
(c) Upon the prepayment of any Indebtedness incurred pursuant to a
vendor financing arrangement (other than such Indebtedness incurred pursuant to
Section 6.01(d) or 6.01(i)) or other bank or credit facility of (or Guaranteed
by) the Borrower or any Subsidiary (other than prepayments permitted by Section
6.09(b) or prepayments of Borrower's Indebtedness to Nations Bank and [ * ]
in the aggregate principal amounts of $1,000,000 and $7,700,000, respectively),
the Borrower shall, within three Business Days after such prepayment, prepay
Borrowings in aggregate principal amount equal to the product of
- ------------------------
*Portions of the specified exhibit has been omitted pursuant to a request for
confidential treatment and filed separately with the commission.
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<PAGE>
(x) the aggregate principal amount of Loans outstanding and (y) a fraction, the
numerator of which is the aggregate principal amount of such Indebtedness so
prepaid and the denominator of which is the aggregate principal amount of
Indebtedness of (or Guaranteed by) the Borrower or any Subsidiary (excluding (i)
Indebtedness in respect of the Loans and (ii) Indebtedness in respect of the
senior subordinated discount notes issued pursuant to the Indenture or any
Permitted Refinancing thereof) outstanding (immediately prior to such prepayment
of Indebtedness). Upon a prepayment of Indebtedness in connection with a
Permitted Refinancing of such Indebtedness, the Borrower shall prepay
Borrowings, within three Business Days of such Permitted Refinancing, in an
amount equal to amount by which the aggregate principal amount of Indebtedness
incurred pursuant to such Permitted Refinancing exceeds the outstanding
principal amount of the Indebtedness prepaid including accrued interest and
premiums (as determined immediately prior to the Permitted Refinancing) in
connection therewith.
(d) Following the end of each fiscal year of the Borrower, commencing
with the fiscal year beginning in 2002, the Borrower shall prepay Borrowings in
an aggregate amount equal to sixty percent (60%) of Excess Cash Flow for such
fiscal year, or, if Borrower's ratio of Total Debt to Total Capitalization is
.65 to 1 or less for the most recent period for which quarterly or annual
financial statements are available, Borrower shall prepay Borrowings in an
aggregate amount equal to fifty percent (50%) of such Excess Cash Flow. Each
prepayment pursuant to this subsection shall be made within 90 days after the
end of the year for which Excess Cash Flow is calculated.
(e) All prepayments pursuant to this Section 2.09 shall be applied, at
the option of the Lenders, to principal payments in the inverse order of their
maturity or on a pro rata basis to all principal payments then outstanding.
SECTION 2.10. Fees.
----
(a) The Borrower agrees to pay to the Administrative Agent for the
account of each Lender a Commitment Fee, which shall accrue (i) at the rate of
1.50% per annum on the average daily undrawn amount of the Tranche 1 Commitment
of such Lender during the period from and including June 6, 1999 to but
excluding the applicable Availability Termination Date, (ii) at the rate of
3.75% per annum (or 1.50% per annum after thirty percent of the aggregate
Tranche 2 Commitments shall have been borrowed) on the average daily undrawn
amount of each Tranche 2 Commitment of such Lender during the period from and
including the Closing Date to but excluding January 1, 2001, and (iii) at the
rate of 4.50% per annum (or 1.50% per annum after thirty percent of the
aggregate Tranche 2 Commitments shall have been borrowed) on the average daily
undrawn amount of each Tranche 2 Commitment of such Lender during the period
from and including January 1, 2001 until the Tranche 2 Availability Termination
Date. Accrued Commitment Fees shall be payable in arrears on the last day of
March, June, September and December of each year and on the applicable
Availability Termination Date, commencing on the first such date to occur after
the date of this Agreement. All Commitment Fees shall be computed on the basis
of a 360-day year and shall be payable for the actual number of days elapsed
(including the first day but excluding the last day). All fees payable under
this subsection (a) shall be paid on the dates due, in immediately available
funds, to the Administrative Agent for distribution, in the case of Commitment
Fees, to each Lender entitled thereto. Commitment Fees paid shall not be
refundable under any circumstances.
26
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(b) The Borrower agrees to pay to the Administrative Agent and the
Collateral Agent the fees and expenses set forth in the Cooperation Agreement.
SECTION 2.11. Interest.
--------
(a) The Loans comprising each ABR Borrowing shall bear interest at the
Alternate Base Rate plus 2.75 percent, and the Loans comprising each Eurodollar
Borrowing shall bear interest at the Adjusted LIBOR Rate plus 3.75 percent.
(b) Notwithstanding the foregoing, if any principal of or interest on
any Loan or any fee or other amount payable by the Borrower hereunder is not
paid when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of any Loan, 2.5% plus
the rate otherwise applicable to such Loan as provided in the preceding
paragraphs of this Section, or (ii) in the case of any other amount, 2.5% plus
the rate then applicable to ABR Loans as provided in paragraph (a) of this
Section; provided that, to the extent that the amount of any interest to be
--------
capitalized and added to the principal amount of any Loan of any Lender would,
when aggregated with any Loan to be made by such Lender on the applicable
Interest Payment Date, exceed the amount of such Lender's Commitment on such
Interest Payment Date, such interest shall not be capitalized and added to
principal on such date and shall be payable as provided herein.
(c) Accrued interest on each Loan shall be payable in arrears on each
Interest Payment Date for such Loan and at the maturity thereof; provided that
--------
(i) interest accrued pursuant to paragraph (b) of this Section shall be payable
on demand, (ii) in the event of any repayment or prepayment of any Loan, accrued
interest on the principal amount repaid or prepaid shall be payable on the date
of such repayment or prepayment and (iii) in the event of any conversion of any
Loan prior to the end of the current Interest Period therefor, accrued interest
on such Loan shall be payable on the effective date of such conversion.
(d) All interest hereunder shall be computed on the basis of a year of
360 days, except that interest computed by reference to the Alternate Base Rate
at times when the Alternate Base Rate is based on the Prime Rate shall be
computed on the basis of a year of 365 days (or 366 days in a leap year), and in
each case shall be payable for the actual number of days elapsed (including the
first day but excluding the last day). The applicable Alternate Base Rate or
Adjusted LIBOR Rate shall be determined by the Administrative Agent, and such
determination shall be conclusive absent manifest error.
SECTION 2.12. Alternate Rate of Interest. If prior to the
--------------------------
commencement of any Interest Period for a Eurodollar Borrowing:
(a) the Administrative Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Adjusted LIBOR Rate for such Interest Period; or
(b) the Administrative Agent is advised by the Required Lenders that
the Adjusted LIBOR Rate for such Interest Period will not adequately and fairly
reflect the
27
<PAGE>
cost to such Lenders of making or maintaining their Loans included in such
Borrowing for such Interest Period;
then the Administrative Agent shall give notice thereof to the Borrower and the
Lenders by telephone or telecopy as promptly as practicable thereafter and,
until the Administrative Agent notifies the Borrower and the Lenders that the
circumstances giving rise to such notice no longer exist, (i) any Interest
Election Request that requests the conversion of any Borrowing to, or
continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective
and (ii) if any Borrowing Request requests a Eurodollar Borrowing, such
Borrowing shall be made as an ABR Borrowing and the Loans comprising such ABR
Borrowing shall bear interest at the Alternate Base Rate plus the applicable
margin set forth in Section 2.11(a) above.
SECTION 2.13. Increased Costs.
---------------
(a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of, or
credit extended by, any Lender (except any such reserve requirement reflected in
the Adjusted LIBOR Rate); or
(ii) impose on any Lender or the London interbank market any other
condition affecting this Agreement or Eurodollar Loans made by such Lender;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Eurodollar Loan (or of maintaining its
obligation to make any such Loan) or to reduce the amount of any sum received or
receivable by such Lender hereunder (whether of principal, interest or
otherwise), then the Borrower will pay to such Lender such additional amount or
amounts as will compensate such Lender for such additional costs incurred or
reduction suffered provided that such amount or amounts shall not include any
Excluded Taxes..
(b) If any Lender determines that any Change in Law regarding capital
requirements has or would have the effect of reducing the rate of return on such
Lender's capital or on the capital of such Lender's holding company, if any, as
a consequence of this Agreement or the Loans made by such Lender to a level
below that which such Lender or such Lender's holding company could have
achieved but for such Change in Law (taking into consideration such Lender's
policies and the policies of such Lender's holding company with respect to
capital adequacy), then from time to time the Borrower will pay to such Lender
such additional amount or amounts as will compensate such Lender or such
Lender's holding company for any such reduction suffered.
(c) A certificate of a Lender setting forth the amount or amounts
necessary to compensate such Lender or its holding company, as the case may be,
as specified in paragraph (a) or (b) of this Section and the basis therefor
shall be delivered to the Borrower by the applicable Lender and shall be
conclusive absent manifest error. The Borrower shall pay such Lender the amount
shown as due on any such certificate within 10 days after receipt thereof.
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<PAGE>
(d) Failure or delay on the part of any Lender to demand compensation
pursuant to this Section shall not constitute a waiver of such Lender's right to
demand such compensation; provided that the Borrower shall not be required to
compensate a Lender pursuant to this Section for any increased costs or
reductions incurred more than 180 days prior to the date that such Lender
notifies the Borrower of the Change in Law giving rise to such increased costs
or reductions and of such Lender's intention to claim compensation therefor;
provided further that, if the Change in Law giving rise to such increased costs
or reductions is retroactive, then the 180-day period referred to above shall be
extended to include the period of retroactive effect thereof.
SECTION 2.14. Break Funding Payments; Prepayment Fees.
---------------------------------------
(a) In the event of (i) the payment of any principal of any Eurodollar
Loan on any day other than the last day of an Interest Period, (ii) the
conversion of any Loan other than on the last day of the Interest Period
applicable thereto, (iii) the failure to borrow, convert, continue or prepay any
Loan on the date specified in any notice delivered pursuant hereto, or (iv) the
assignment of any Eurodollar Loan other than on the last day of the Interest
Period applicable thereto as a result of a request by the Borrower pursuant to
Section 2.17, then, in any such event, the Borrower shall compensate each Lender
for the loss, cost and expense attributable to such event. In the case of a
Eurodollar Loan, such loss, cost or expense to any Lender shall be deemed to
include an amount determined by such Lender to be the excess, if any, of (i) the
amount of interest which would have accrued on the principal amount of such Loan
had such event not occurred, at the Adjusted LIBOR Rate that would have been
applicable to such Loan, for the period from the date of such event to the last
day of the then current Interest Period therefor (or, in the case of a failure
to borrow, convert or continue, for the period that would have been the Interest
Period for such Loan), over (ii) the amount of interest which would accrue on
such principal amount for such period at the interest rate which such Lender
would bid were it to bid, at the commencement of such period, for dollar
deposits of a comparable amount and period from other banks in the Eurodollar
market (determined as if such Lender were a commercial bank if it is not a
commercial bank).
(b) A certificate of any Lender setting forth any amount or amounts
that such Lender is entitled to receive pursuant to paragraph (a) of this
Section shall be delivered to the Borrower and shall be conclusive absent
manifest error. The Borrower shall pay such Lender the amount shown as due on
any such certificate within 30 days after receipt thereof.
SECTION 2.15. Taxes.
-----
(a) Any and all payments by or on account of any obligation of the
Borrower hereunder or under any other Loan Document shall be made free and clear
of and without deduction for any Indemnified Taxes or Other Taxes; provided
--------
that if the Borrower shall be required to deduct any Indemnified Taxes or Other
Taxes from such payments, then (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section) the Administrative
Agent or Lender receives an amount equal to the sum it would have received had
no such deductions been made, (ii) the Borrower shall make such deductions and
(iii) the Borrower shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.
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<PAGE>
(b) In addition, the Borrower shall timely pay any Other Taxes not
required to be deducted or withheld as set forth in paragraph (a) above to the
relevant Governmental Authority in accordance with applicable law.
(c) The Borrower shall indemnify the Administrative Agent and each
Lender, within 15 days after written demand therefor (which written demand shall
set forth in reasonable detail the amount or amounts to be indemnified and the
method of calculating such amount or amounts), for the full amount of any
Indemnified Taxes or Other Taxes paid by the Administrative Agent and/or any
Lender on or with respect to any payment by or on account of any obligation of
the Borrower hereunder or under any other Loan Document (including Indemnified
Taxes or Other Taxes imposed or asserted on or attributable to amounts payable
under this Section) and any penalties, interest and reasonable expenses arising
therefrom or with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority; provided, that the Administrative Agent or such Lender,
--------
as applicable, shall cooperate with the Borrower, at the Borrower's sole cost
and expense, in good faith to recover any such Indemnified Taxes or Other Taxes
that the Administrative Agent or such Lender, as applicable, and the Borrower
agree were incorrectly or illegally imposed or asserted by the relevant
Governmental Authority. A certificate as to the amount of such payment or
liability delivered to the Borrower by a Lender, or by the Administrative Agent
on its own behalf or on behalf of a Lender, shall be conclusive absent
demonstrable error.
(d) As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the Administrative Agent the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment.
(e) Each Foreign Lender that is entitled to an exemption from or
reduction of withholding tax under the law of the jurisdiction in which the
Borrower is located, or any treaty to which such jurisdiction is a party, with
respect to payments under this Agreement or any other Loan Document shall
deliver to the Borrower (with a copy to the Administrative Agent), at the time
or times prescribed by applicable law or at the time a lapse in time or change
in circumstances of such Foreign Lender renders previously delivered
documentation obsolete or inaccurate in any material respect, such properly
completed and executed documentation prescribed by applicable law or reasonably
requested by the Borrower as will permit such payments to be made without
withholding or at a reduced rate of withholding. The documentation referred to
in the preceding sentence of this paragraph (e) shall include: (i) in the case
of a Foreign Lender that is a bank under Section 881(c)(3)(A) of the Code (x)
two duly completed copies of either Internal Revenue Service Form 1001 or 4224
or applicable successor form, as the case may be, and (y) one duly completed
copy of Internal Revenue Service Form W-8 or W-9 or applicable successor form,
as the case may be, and (ii) in the case of a Foreign Lender that is not a bank
under Section 881(c)(3)(A) of the Code, (x) a certificate (an "Exemption
Certificate") of a duly authorized officer of such Foreign lender certifying
that such Foreign Lender is entitled to receive payments under the Loan
Documents without deduction or withholding of United States federal income taxes
because such Foreign Lender is not (A) a "bank" within the meaning of Section
881(c)(3)(A) of the Code, (B) a "10 percent shareholder" of the Borrower within
the meaning of section 881(c)(3)(B) of the Code or (C) a controlled
30
<PAGE>
foreign corporation receiving interest from a related person within the meaning
of section 881(c)(3)(C) of the Code and (y) two duly completed copies of
Internal Revenue Form W-8 (or applicable successor form) to establish an
exemption from United States withholding tax.
(f) If the Administrative Agent or any Lender determines in its
reasonable discretion that it is entitled to receive a refund, credit or other
tax benefit in respect of Taxes with respect to which it has received additional
amounts from the Borrower pursuant to paragraph (a) above or as to which it has
been indemnified by the Borrower pursuant to paragraph (b) or (c) above, the
Administrative Agent or such Lender, as applicable, shall notify the Borrower
and shall, within 45 days (or such shorter period of time as may be prescribed
by applicable law for a timely application) after receipt of a request by the
Borrower, apply for such refund, credit or other tax benefit at the Borrower's
expense. The Administrative Agent or such Lender, as applicable, shall in good
faith prepare or amend any filings, returns or other documentation required to
obtain such refund, credit or other tax benefit and the Borrower shall have no
right to participate therein. If the Administrative Agent or such Lender, as
applicable, receives a refund, credit or other tax benefit pursuant to this
paragraph (f), the Administrative Agent or such Lender, as applicable, shall
promptly pay such amount to the Borrower together with any interest received
thereon.
SECTION 2.16. Payments Generally; Pro Rata Treatment; Sharing of
--------------------------------------------------
Setoffs.
-------
(a) The Borrower shall make each payment required to be made by it
hereunder or under any other Loan Document (whether of principal, interest or
fees, or of amounts payable under Section 2.13, 2.14 or 2.15, or otherwise)
prior to 12:00 noon, New York City time, on the date when due, in immediately
available funds, without setoff or counterclaim. Any amounts received after such
time on any date may, in the discretion of the Administrative Agent, be deemed
to have been received on the next succeeding Business Day for purposes of
calculating interest thereon. All such payments shall be made to the
Administrative Agent to an account or accounts designated by the Administrative
Agent at a bank in New York, New York, except that payments pursuant to Sections
2.13, 2.14(a), 2.15 and 9.03 shall be made directly to the Persons entitled
thereto and payments pursuant to other Loan Documents shall be made to the
Persons specified therein. The Administrative Agent shall distribute any such
payments received by it for the account of any other Person to the appropriate
recipient promptly following receipt thereof. If any payment under any Loan
Document shall be due on a day that is not a Business Day, the date for payment
shall be extended to the next succeeding Business Day, and, in the case of any
payment accruing interest, interest thereon shall be payable for the period of
such extension. All payments under each Loan Document shall be made in dollars.
(b) If at any time insufficient funds are received by and available to
the Administrative Agent to pay fully all amounts of principal, interest and
fees then due hereunder, such funds shall be applied (i) first, towards payment
of interest and fees then due hereunder, ratably among the parties entitled
thereto in accordance with the amounts of interest and fees then due to such
parties, and (ii) second, towards payment of principal then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
principal then due to such parties.
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(c) If any Lender shall, by exercising any right of setoff or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Loans resulting in such Lender receiving payment of a
greater proportion of the aggregate amount of its Loans and accrued interest
thereon than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value)
participations in the Loans of other Lenders to the extent necessary so that the
benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective Loans; provided that (i) if any such participations are
--------
purchased and all or any portion of the payment giving rise thereto is
recovered, such participations shall be rescinded and the purchase price
restored to the extent of such recovery, without interest, and (ii) the
provisions of this paragraph shall not be construed to apply to any payment made
by the Borrower pursuant to and in accordance with the express terms of this
Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans to any assignee or
participant, other than to the Borrower or any Subsidiary or Affiliate thereof
(as to which the provisions of this paragraph shall apply). The Borrower
consents to the foregoing and agrees, to the extent it may effectively do so
under applicable law, that any Lender acquiring a participation pursuant to the
foregoing arrangements may exercise against the Borrower rights of setoff and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of the Borrower in the amount of such participation.
(d) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Administrative
Agent for the account of the Lenders hereunder that the Borrower will not make
such payment, the Administrative Agent may assume that the Borrower has made
such payment on such date in accordance herewith and may, in reliance upon such
assumption, distribute to the Lenders the amount due. In such event, if the
Borrower has not in fact made such payment, then each of the Lenders severally
agrees to repay to the Administrative Agent forthwith on demand the amount so
distributed to such Lender with interest thereon, for each day from and
including the date such amount is distributed to it to but excluding the date of
payment to the Administrative Agent, at the greater of the Federal Funds
Effective Rate and a rate determined by the Administrative Agent in accordance
with banking industry rules on interbank compensation.
(e) Without limiting the generality of paragraph (a) above, the
Borrower's obligations to make each payment required to be made by it hereunder
or under any other Loan Document (whether of principal, interest, fees or
otherwise) shall be absolute and unconditional and shall not be subject to any
delay, reduction, setoff, defense or recoupment for any reason, including any
failure of the Network or any part thereof, or any dispute with, breach of
representation or warranty by or claim against any supplier, manufacturer,
installer, vendor or distributor, including Lucent. The provisions of this
paragraph shall not be construed to constitute a waiver by the Borrower of any
rights that the Borrower may have under the Supply Agreement or (except for
rights that the Borrower may have been able to assert hereunder if not for the
preceding sentence) any other rights at law or in equity with respect to any
item purchased from Lucent by the Borrower or its Affiliates.
32
<PAGE>
SECTION 2.17. Mitigation Obligations; Replacement of Lenders.
----------------------------------------------
(a) If any Lender requests compensation under Section 2.13, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.15,
then such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i) would eliminate
or reduce amounts payable pursuant to Section 2.13 or 2.15, as the case may be,
in the future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender or the
Borrower. The Borrower hereby agrees to pay all reasonable costs and expenses
incurred by any Lender in connection with any such designation or assignment;
provided that if such costs and expenses would exceed the increased costs or
additional amounts to be eliminated or avoided by such designation or
assignment, then such Lender shall not be required to make such designation or
assignment and the Borrower shall not be required to pay such costs and
expenses.
(b) If any Lender requests compensation under Section 2.13, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.15,
or if any Lender defaults in its obligation to fund Loans hereunder then the
Borrower may, at its sole expense and effort, upon notice to such Lender and the
Administrative Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 9.04), all its interests, rights and obligations under this Agreement to
an assignee (which assignee shall be reasonably acceptable to the Borrower if
such assignment is required because the Borrower is required to pay additional
amounts pursuant to Section 2.15) that shall assume such obligations (which
assignee may be another Lender, if a Lender accepts such assignment); provided
--------
that (i) the Borrower shall have received the prior written consent of the
Administrative Agent, which consent shall not unreasonably be withheld or
delayed and (ii) such Lender shall have received payment of an amount equal to
the outstanding principal of its Loans, accrued interest thereon, accrued fees
and all other amounts payable to it hereunder, from the assignee (to the extent
of such outstanding principal and accrued interest and fees) or the Borrower (in
the case of all other amounts). A Lender shall not be required to make any such
assignment and delegation if, prior thereto, as a result of a waiver by such
Lender or otherwise, the circumstances entitling the Borrower to require such
assignment and delegation cease to apply.
ARTICLE III
Representations and Warranties
------------------------------
The Borrower represents and warrants to the Lenders that:
SECTION 3.01. Organization; Powers. Each of the Borrower and its
--------------------
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, has all requisite power and
authority, including all Licenses, to carry on its business as now conducted
and, except where the failure to do so, individually or in
33
<PAGE>
the aggregate, could not reasonably be expected to result in a Material Adverse
Effect, is qualified to do business in, and is in good standing in, every
jurisdiction where such qualification is required.
SECTION 3.02. Authorization; Enforceability. The Transactions to
-----------------------------
be entered into by the Borrower are within the Borrower's corporate powers and
have been duly authorized by all necessary corporate and, if required,
stockholder action. This Agreement has been duly executed and delivered by the
Borrower and constitutes, and each other Loan Document to which the Borrower is
to be a party, when executed and delivered by the Borrower, will constitute, a
legal, valid and binding obligation of the Borrower, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally and subject to
general principles of equity, regardless of whether considered in a proceeding
in equity or at law.
SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions
------------------------------------
(a) do not require any consent or approval of, registration or filing with, or
any other action by, any Governmental Authority, except (i) such as have been
obtained or made and are in full force and effect, and (ii) filings necessary to
perfect Liens created under the Loan Documents, (b) will not violate any
applicable law or regulation or the charter, by-laws or other organizational
documents of the Borrower or its Subsidiaries or any order of any Governmental
Authority, (c) will not violate or result in a default under any material
indenture, agreement or other instrument binding upon the Borrower or its
Subsidiaries or any of their assets, or give rise to a right thereunder to
require any payment to be made by the Borrower or any of its Subsidiaries, and
(d) will not result in the creation or imposition of any Lien on any asset of
the Borrower, except Liens created under the Loan Documents.
SECTION 3.04. Financial Condition; No Material Adverse Change.
-----------------------------------------------
(a) The Borrower has heretofore furnished to each Lender its
consolidated balance sheet and statements of income, stockholders equity and
cash flows as of and for the fiscal year ended December 31, 1998. Such financial
statements present fairly, in all material respects, the financial position and
results of operations and cash flows of the Borrower and its consolidated
Subsidiaries as of the dates and for the periods indicated therein in accordance
with GAAP.
(b) Since the date of the most recent financial statements provided to
the Administrative Agent, there has been no Material Adverse Change.
SECTION 3.05. Properties; Licenses.
--------------------
(a) Each of the Borrower and its Subsidiaries has good title in all
personal property material to its business, subject to Liens permitted pursuant
to Section 6.02.
(b) Each of the Borrower and its Subsidiaries has title in fee simple
to, or valid leasehold interests in, all real property material to its business
(including Mortgaged Properties), subject to liens permitted pursuant to Section
6.02. Except as set forth on Schedule 3.05(b) and except as otherwise consented
to in writing by the Administrative Agent, all such interests in real property
other than the Mortgaged Properties (the "Real Estate Assets") are held by AGW.
------------------
34
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As of the Closing Date, the Borrower and its Subsidiaries, individually or
jointly, own or lease only that real property (including the Real Estate Assets)
described in Schedule 3.05(b).
(c) The Borrower and each of its Subsidiaries owns, or is licensed to
use, all Intellectual Property material to its business, and the use thereof
does not infringe upon the rights of any other Person, except for any such
infringements that, individually or in the aggregate, could not reasonably be
expected to result in a Material Adverse Effect. As of the Closing Date, except
as set forth in Schedule 3.05(c), neither the Borrower nor any of its
Subsidiaries has any right, title or other interest in, or license to use, any
Intellectual Property.
(d) As of the Closing Date, neither the Borrower nor any of its
Subsidiaries has received notice of, or has knowledge of, any pending or
contemplated condemnation proceeding affecting any Mortgaged Property owned in
fee simple by the Borrower or any Subsidiary or any sale or disposition thereof
in lieu of condemnation, and such Mortgaged Property is not subject to any right
of first refusal, option or other contractual right to purchase such Mortgaged
Property or interest therein.
(e) To the best of Borrower's knowledge, each PCS License required to
operate the Network has been obtained by and duly issued to SprintCom, Inc.
and/or its Affiliates by the FCC or other relevant Governmental Authority is in
full force and effect and there are no grounds for any revocation, early
termination or suspension of, or similar action with respect to, any PCS
License.
SECTION 3.06. Litigation and Environmental Matters.
------------------------------------
(a) Except as described in Schedule 3.06, there are no actions, suits or
proceedings by or before any arbitrator or Governmental Authority pending
against or, to the knowledge of the Borrower, threatened against or affecting
the Borrower or its Subsidiaries (i) as to which there is a reasonable
possibility of an adverse determination and that, if adversely determined, could
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect or (ii) that involve any of the Loan Documents or the
Transactions.
(b) Except with respect to matters that, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect, none of the Borrower or any of its Subsidiaries (i) has failed to comply
with any Environmental Law or to obtain, maintain or comply with any permit,
license or other approval required under any Environmental Law, (ii) has become
subject to any Environmental Liability, (iii) has received notice of any claim
with respect to any Environmental Liability or (iv) knows of any basis for any
Environmental Liability.
SECTION 3.07. Compliance with Laws, Agreements and Licenses. Each of
---------------------------------------------
the Borrower and its Subsidiaries is in compliance with all laws, regulations
and orders of any Governmental Authority (including the FCC) applicable to it or
its property and all indentures, agreements and other instruments (including all
Licenses) binding upon it or its property, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect.
SECTION 3.08. No Default. No Default has occurred and is continuing.
----------
35
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SECTION 3.09. Investment and Holding Company Status. None of the
-------------------------------------
Borrower or any of its Subsidiaries is (a) an "investment company" as defined
in, or subject to regulation under, the Investment Company Act of 1940 or (b) a
"holding company" as defined in, or subject to regulation under, the Public
Utility Holding Company Act of 1935.
SECTION 3.10. Taxes. The Borrower and each of its Subsidiaries has
-----
timely filed or caused to be filed all federal and state income tax returns and
all other material tax returns and reports required to have been filed and has
paid or caused to be paid all federal and state income taxes and all other
material Taxes required to have been paid by it, except for (a) Taxes that are
being contested in good faith by appropriate proceedings and for which such
party has set aside on its books adequate reserves or (b) local tax returns and
reports to the extent that the failure to do so could not reasonably be expected
to result in a Material Adverse Effect.
SECTION 3.11. ERISA. No ERISA Event has occurred or is reasonably
-----
expected to occur that, when taken together with all other such ERISA Events for
which liability is reasonably expected to occur, would reasonably be expected to
result in a Material Adverse Effect. As of the Closing Date, there are not any
Plans. With respect to any Plans created after the Closing Date, the present
value of all accumulated benefit obligations under each such Plan (based on the
assumptions used for purposes of Statement of Financial Accounting Standards No.
87) did not, as of the date of the most recent financial statements reflecting
such amounts, exceed by more than $2,000,000 the fair market value of the assets
of such Plan, and the present value of all accumulated benefit obligations of
all underfunded Plans (based on the assumptions used for purposes of Statement
of Financial Accounting Standards No. 87) did not, as of the date of the most
recent financial statements reflecting such amounts, exceed by more than
$5,000,000 the fair market value of the assets of all such underfunded Plans.
SECTION 3.12. Disclosure. The Borrower has disclosed to the Lenders all
----------
agreements, instruments and corporate or other restrictions to which any of the
Borrower or its Subsidiaries is subject, and all other matters known to any of
them, that, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect. None of the reports, financial statements,
certificates or other information, taken as a whole furnished by or on behalf of
the Borrower and its Subsidiaries to the Administrative Agent or any Lender in
connection with the negotiation of this Agreement or any other Loan Document or
delivered hereunder or thereunder (as modified or supplemented by other
information so furnished) contains any material misstatement of fact or omits to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading in any material
respect; provided, that with respect to projections of financial information,
the Borrower represents only that such information was prepared in good faith
based upon assumptions believed by the Borrower to be reasonable at the time.
SECTION 3.13. Subsidiaries.
------------
(a) As of the Closing Date, the Borrower does not have any Subsidiary
other than AGW. All equity interests in or outstanding shares of capital stock
of AGW are owned directly by the Borrower.
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(b) AGW has not engaged in any business or activity other than owning,
leasing and permitting the Borrower to use the Real Estate Assets, and
activities incidental thereto. Except as set forth on Schedule 3.13, AGW does
not own and has not otherwise acquired any assets (other than Real Estates
Assets) and has not incurred any Indebtedness (other than pursuant to the
Guaranty Agreement and the Security Documents) or other liability (other than
liabilities for franchise taxes and similar liabilities incidental to its
existence and liabilities incurred in connection with owning or leasing the Real
Estate Assets).
SECTION 3.14. Insurance. Schedule 3.14 sets forth a description of all
---------
insurance maintained by or on behalf of the Borrower and its Subsidiaries as of
the Closing Date. The insurance maintained by or on behalf of the Borrower and
its Subsidiaries meets the requirements set forth in Section 5.07 and all
premiums in respect of such insurance have been paid or are not yet due.
SECTION 3.15. Labor Matters. As of the Closing Date, there are no
-------------
strikes, lockouts or slowdowns against the Borrower and its Subsidiaries pending
or, to the knowledge of the Borrower and its Subsidiaries, threatened. With such
exceptions as could not reasonably be expected to have a Material Adverse
Effect, the hours worked by and payments made to employees of the Borrower and
its Subsidiaries have not been in violation of the Fair Labor Standards Act or
any other applicable Federal, state, local or foreign law dealing with such
matters. All payments due from the Borrower and its Subsidiaries, or for which
any claim may be made against the Borrower and its Subsidiaries, on account of
wages and employee health and welfare insurance and other benefits, have been
paid or accrued as a liability on the books of the such party. The consummation
of the Transactions will not give rise to any right of termination or right of
renegotiation on the part of any union under any collective bargaining agreement
to which the Borrower and its Subsidiaries is bound.
SECTION 3.16. Supply Agreement. The Borrower (i) is in compliance in
----------------
all material respects with the terms and conditions of the Supply Agreement and
(ii) has not terminated, nor taken any action which could result in the
termination of, the Supply Agreement.
SECTION 3.17. No Burdensome Restrictions. No Requirement of Law or
--------------------------
Contractual Obligation (other than, in the case of clause (b) below, any
restriction under Sections 6.04 and 6.06 hereof) applicable to the Borrower or
any of its Subsidiaries could reasonably be expected to (a) have a Material
Adverse Effect or (b) limit the ability of any Subsidiary to pay dividends or to
make distributions or advances to the Borrower or any other Subsidiary except as
contemplated by Section 6.08.
SECTION 3.18. Security Documents.
------------------
(a) The Pledge Agreement is effective to create in favor of the
Collateral Agent, for the ratable benefit of the Secured Parties (as defined in
the Pledge Agreement), a legal, valid and enforceable security interest in the
Collateral (as defined in the Pledge Agreement) and, when the stock certificates
and other instruments evidencing such Collateral are delivered to the Collateral
Agent, the Pledge Agreement shall constitute a fully perfected first priority
Lien on, and security interest in, all right, title and interest of the pledgors
thereunder in such Collateral, in each case prior and superior in right to any
other Person.
37
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(b) The Security Agreement and the Guarantor Security Agreement are
effective to create in favor of the Collateral Agent, for the ratable benefit of
the Secured Parties, legal, valid and enforceable security interests in the
Collateral (as defined in each of the Security Agreement and the Guarantor
Security Agreement) and, when financing statements in appropriate form are filed
in the appropriate offices, each Lien created by each of the Security Agreement
and the Guarantor Security Agreement shall constitute a fully perfected (to the
extent such lien can be perfected by such filing) Lien on, and security interest
in, all right, title and interest of the grantors thereunder in such Collateral
(other than the Intellectual Property), in each case prior and superior in right
to any other Person, other than with respect to Liens expressly permitted by
each of the Security Agreement, the Guarantor Security Agreement or this
Agreement.
(c) Each Mortgage, if any, is effective to create in favor of the
Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid
and enforceable Lien on all of the Borrower's or any of its Subsidiaries' right,
title and interest in and to the Mortgaged Property thereunder and the proceeds
thereof, and when filed in the appropriate filing offices, each such Mortgage
shall constitute a fully perfected Lien on, and security interest in, all right,
title and interest of such party in such Mortgaged Property and the proceeds
thereof, in each case prior and superior in right to any other Person, other
than with respect to the rights of Persons pursuant to Liens expressly permitted
by such Mortgage or this Agreement.
SECTION 3.19. Year 2000 Compliance. The Borrower and each of its
--------------------
Subsidiaries has [to the extent it reasonably deemed necessary] (a) initiated a
review and assessment of all areas within its business and operations (including
those affected by suppliers and vendors) that could be adversely affected by the
risk that computer applications used by it (or its suppliers and vendors) may be
unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999 (the "Year 2000
---------
Problem"), (b) developed a plan and timetable for addressing the Year 2000
- -------
Problem on a timely basis, and (c) implemented such plan in accordance with such
timetable in all material respects. Each of the Borrower and its Subsidiaries
reasonably believe that all computer applications (including those of suppliers
and vendors other than Lucent) that are material to its business, condition
(financial or otherwise), operations, properties, results of operations, value
or prospects, will on a timely basis be able to perform properly date-sensitive
functions for all dates prior to, on and after January 1, 2000, except where
such inability to perform would not have a Material Adverse Effect.
SECTION 3.20. Sprint Affiliation Agreements. The Sprint Affiliation
-----------------------------
Agreements and any assignments thereof, true and complete copies of which have
been furnished to the Administrative Agent, have been duly authorized, executed
and delivered by all parties thereto, as of the Closing Date have not been
amended or otherwise modified except as set forth in Schedule 3.20, and are in
full force and effect and are binding upon and enforceable against all parties
thereto in accordance with their terms. To the extent any Sprint Affiliation
Agreement was not originally executed by the Borrower, but rather by an
Affiliate of the Borrower, such Sprint Affiliation Agreement has been assigned
to the Borrower, all third party consents required with respect to such
assignment have been obtained and each of the Borrower and the SprintCom, Inc.
Affiliate or Affiliates a party to such assignment are bound by the terms of
such assignment. There has occurred no (i) default which could reasonably be
expected to have a
38
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Material Adverse Effect, (ii) Management Agreement Breach or (iii) Event of
Termination, in each case under any Sprint Affiliation Agreement by any party
thereto.
ARTICLE IV
Conditions
----------
SECTION 4.01. Tranche 1 Loans. The obligations of each Lender to make
---------------
the first Tranche 1 Loan hereunder shall not become effective until the date on
which each of the following conditions is satisfied (or waived in accordance
with Section 9.02):
(a) The Administrative Agent (or its counsel) shall have received
from each party hereto either (i) a counterpart of this Agreement signed on
behalf of such party or (ii) written evidence satisfactory to the
Administrative Agent (which may include telecopy transmission of a signed
signature page of this Agreement) that such party has signed a counterpart
of this Agreement.
(b) The Administrative Agent shall have received a favorable written
opinion (addressed to the Administrative Agent and the Lenders and dated the
Closing Date) of each of (i) Patton Boggs LLP, counsel for the Borrower and
the Subsidiaries, substantially in the form reasonably acceptable to the
Administrative Agent, and (ii) local counsel for the Borrower and its
Subsidiaries, in a form reasonably acceptable to the Administrative Agent,
covering such other matters relating to the Borrower and its Subsidiaries,
the Loan Documents or the Transactions as the Administrative Agent shall
reasonably request.
(c) The Administrative Agent shall have received such documents and
certificates as the Administrative Agent or its counsel may reasonably
request relating to the organization, existence and good standing the
Borrower and each of its Subsidiaries, the authorization of the Transactions
and any other legal matters relating to the Borrower and each of its
Subsidiaries, the Loan Documents or the Transactions, all in form and
substance reasonably satisfactory to the Administrative Agent and its
counsel.
(d) The Administrative Agent shall have received a certificate, dated
the Closing Date and signed by the President, a Vice President or a
Financial Officer of the Borrower, confirming compliance with the conditions
set forth in Section 4.03.
(e) Each of the Administrative Agent and the Collateral Agent shall have
received counterparts of (i) the Guaranty Agreement signed on behalf of each
Subsidiary and (ii) any subordination agreements and/or pledge agreements,
if any, required in order to comply with Section 6.07(b).
(f) The Collateral Agent shall have received (i) counterparts of the
Pledge Agreement signed on behalf of the Borrower, (ii) stock certificates
representing all the equity interests in or outstanding shares of capital
stock of each Subsidiary owned by or on behalf of the Borrower, (iii) all
promissory notes evidencing Indebtedness owed to the Borrower or any
Subsidiary and (iv) stock powers and instruments of transfer, endorsed in
blank, with respect to such stock certificates and promissory notes.
39
<PAGE>
(g) The Collateral Agent shall have received (i) counterparts of the
Security Agreement signed on behalf of the Borrower, (ii) counterparts of
the Guarantor Security Agreement signed on behalf of AGW, (iii) evidence
satisfactory to the Collateral Agent that all documents and instruments,
including Uniform Commercial Code financing statements, required by law or
reasonably requested by the Collateral Agent to be filed, registered or
recorded to create or perfect the Liens intended to be created under each of
the Security Agreement and the Guarantor Security Agreement have been so
filed, registered or recorded and arrangements satisfactory to the
Administrative Agent shall have been made for the filing, registering or
recording thereof on or prior to the Closing Date and (iv) all Mortgages
required to be entered into pursuant to the terms hereof.
(h) The Collateral Agent shall have received (i) the results of a
search of the Uniform Commercial Code (or equivalent) filings made with
respect to the Borrower and its Subsidiaries in the jurisdictions requested
by the Administrative Agent and/or the Collateral Agent (ii) copies of the
financing statements (or similar documents) disclosed by such search and
(iii) evidence reasonably satisfactory to the Collateral Agent that the
Liens indicated by such financing statements (or similar documents) are
permitted by Section 6.02 or have been released.
(i) The Borrower shall be in compliance in all material respects with
the terms of each of the Supply Agreement and the Sprint Affiliation
Agreements, each of which shall be valid and in full force and effect.
(j) The Borrower and Lucent shall have entered into a cooperation
agreement, in form and substance satisfactory to Lucent, whereby the
Borrower agrees to cooperate in the marketing and syndication of the Loans
by Lucent (the"Cooperation Agreement").
----------------------
(k) Except as specified in Schedule 3.06, there shall exist no action,
suit, investigation or proceeding pending or to the knowledge of the
Borrower threatened in any court or before any arbitrator or government
instrumentality that might be expected to result in a Material Adverse
Change, or that purports to affect the legality, validity or enforceability
of the Loan Documents or the Transactions contemplated thereby or any
Lender's rights thereunder.
(l) The Borrower and its Subsidiaries (as applicable) shall have paid
all filing and recording fees and taxes relating to the Collateral due and
owing as of the Closing Date.
(m) The Borrower shall have printed a preliminary prospectus that will
be distributed to potential investors, with respect to the offering by the
Borrower to the public of no less than $215 million of unsecured debt
subordinated to the Loans or equity of which not less than $85 million will
be equity substantially on terms and conditions set forth in the
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission on August 2, 1999 including the preliminary prospectuses filed
in connection therewith.
(n) On or prior to the Closing Date, the Administrative Agent and the
Collateral Agent shall have received all outstanding fees and other amounts
due and
40
<PAGE>
payable to them from the Borrower as of the Closing Date, including, to the
extent invoiced, reimbursement or payment of all out of pocket expenses
required to be reimbursed or paid by the Borrower hereunder, pursuant to
the Cooperation Agreement or under any other Loan Document.
(o) The Consent shall have been executed by the parties thereto, on
terms and conditions satisfactory to the Administrative Agent.
(p) The Administrative Agent and the Collateral Agent shall each have
received evidence of the Borrower's satisfaction of the insurance
requirements set forth in Section 5.07.
(q) Borrower shall have paid all outstanding amounts due under the Note,
including principal, interest and any applicable fees, or made
arrangements, satisfactory to Lucent, for the payment of such amounts.
(r) The Administrative Agent shall have received from the SprintCom,
Inc. Affiliate(s) which holds the PCS Licenses, a certificate signed on
behalf of such Affiliate and dated the Closing Date which certifies (i)
that all of PCS Licenses required to operate the Network have been obtained
and remain in effect, such Affiliate is in compliance in all material
respects with the terms of each PCS License, no law or regulation has
impaired the use of such PCS Licenses and such Affiliate has not received
from the FCC or any other relevant party any notice that such party intends
to terminate, amend or modify any of the PCS Licenses; and (ii) that to its
knowledge except as set forth in the certificate all interconnection
agreements necessary to operate the Network have been obtained and are in
full force and effect and SprintCom, Inc. is in compliance in all material
respects with the terms and conditions set forth therein. No law or
regulation has impaired the use of any such agreement and such Affiliate
has not received from any relevant party any notice that such party intends
to terminate, amend or modify any such agreement.
SECTION 4.02. Tranche 2 Loans. The obligations of each Lender to
---------------
make the first Tranche 2 Loan hereunder shall not become effective until the
date on which the conditions specified in Section 4.03 and each of the following
conditions is satisfied (or waived in accordance with Section 9.02), it being
understood that such date may occur at any time on or after the Closing Date;
provided that no Default then exists (the "Effective Date").
(a) The Administrative Agent and the Collateral Agent shall have
received all outstanding fees and other amounts due and payable to them
from the Borrower as of the Effective Date, including, to the extent
invoiced, reimbursement or payment of all out of pocket expenses required
to be reimbursed or paid by the Borrower hereunder, pursuant to the
Cooperation Agreement or under any other Loan Document..
(b) The Administrative Agent shall be satisfied with any Material
Adverse Changes to the Borrower's business and financing plan provided to
the Administrative Agent on the Closing Date.
41
<PAGE>
(c) The Borrower shall have received not less than $215,000,000 in cash
proceeds from the issuance of equity (on terms consistent with the
prospectus referred to in Section 4.01(m)) and/or debt obligations
(pursuant to the Indenture), of which not less than $85,000,000 shall be
equity.
(d) The Administrative Agent and/or the Lenders, and the Trustee for the
holders of the senior subordinated discount notes issued pursuant to the
Indenture shall have entered into the Intercreditor Agreement.
(e) The Indenture shall have been executed by the parties thereto on
terms and conditions satisfactory to the Administrative Agent.
(f) If the Effective Date is more than three (3) months after the
Closing Date, the Administrative Agent shall have received from the
appropriate Affiliate(s) of SprintCom, Inc., a certificate meeting the
requirements of Section 4.01(r) signed on behalf of such Affiliate and
dated the Effective Date.
(g) The first Tranche I Loan has been made.
(h) The Administrative Agent shall have received a favorable written
opinion (addressed to the Administrative Agent and the Lenders and dated
the Effective Date) of each of (i) counsel for the Borrower and the
Subsidiaries, substantially in the form reasonably acceptable to the
Administrative Agent, and (ii) local counsel for the Borrower and its
Subsidiaries, in a form reasonably acceptable to the Administrative Agent,
covering such other matters relating to the Borrower and its Subsidiaries,
the Loan Documents or the Transactions as the Administrative Agent shall
reasonably request.
(i) The Administrative Agent shall have received such documents and
certificates as the Administrative Agent or its counsel may reasonably
request relating to the organization, existence and good standing the
Borrower and each of its Subsidiaries, the authorization of the
Transactions and any other legal matters relating to the Borrower and each
of its Subsidiaries, the Loan Documents or the Transactions, all in form
and substance reasonably satisfactory to the Administrative Agent and its
counsel.
(j) The Administrative Agent shall have received a certificate, dated
the Effective Date and signed by the President, a Vice President or a
Financial Officer of the Borrower, confirming compliance with the
conditions set forth in Section 4.03.
(k) The Administrative Agent shall have received counterparts of any
subordination agreements and/or pledge agreements, if any, required in
order to comply with Section 6.07(b).
(l) The Collateral Agent shall have received (i) all promissory notes
evidencing Indebtedness owed to the Borrower or any Subsidiary, (ii) all
stock certificates representing all the equity interests in or outstanding
shares of capital stock of each Subsidiary owned by or on behalf of the
Borrower or any Subsidiary and (iii) stock powers and instruments of
transfer, endorsed in blank, with respect to such stock certificates and
promissory notes.
42
<PAGE>
(m) The Borrower shall be in compliance in all material respects with
the terms of each of the Supply Agreement and the Sprint Affiliation
Agreements, each of which shall be valid and in full force and effect.
(n) Except as specified in Schedule 3.06, there shall exist no action,
suit, investigation or proceeding pending or to the knowledge of the
Borrower threatened in any court or before any arbitrator or government
instrumentality that might be expected to result in a Material Adverse
Change, or that purports to affect the legality, validity or enforceability
of the Loan Documents or the Transactions contemplated thereby or any
Lender's rights thereunder.
(o) The Borrower and its Subsidiaries (as applicable) shall have paid
all filing and recording fees and taxes relating to the Collateral due and
owing as of the Effective Date.
(p) The Administrative Agent and the Collateral Agent shall each have
received evidence of the Borrower's compliance with, as of the Effective
Date, the insurance requirements set forth in Section 5.07.
If the Borrower so requests, the Administrative Agent shall notify the Borrower
and the Lenders of the Effective Date, and such notice shall be conclusive and
binding. The Borrower may request a Tranche 2 Borrowing on or after the
occurrence of the Effective Date and during the Tranche 2 Availability Period;
provided that the conditions set forth in Section 4.03 must also be satisfied as
- --------
of such date.
SECTION 4.03. Conditions for Each Loan. The obligations of the Lenders
------------------------
to make any Loan hereunder, including the first Loan under Tranche 1 or Tranche
2, shall not become effective until the date on which each of the following
conditions is satisfied (or waived in accordance with Section 9.02):
(a) The representations and warranties of the Borrower and its
Subsidiaries set forth in the Loan Documents shall be true and correct in
all material respects on and as of the date of such Loan except to the
extent a representation and warranty expressly relates solely to an earlier
date in which case such representation and warranty shall have been true
and correct in all material respects on such earlier date; and
(b) At the time of and immediately after giving effect to such Loan no
Default or Event of Default shall have occurred and be continuing.
Each Loan shall be deemed to constitute a representation and warranty by the
Borrower on the date thereof as to the matters specified in this Section.
43
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ARTICLE V
Affirmative Covenants
---------------------
Until the Commitments have expired or been terminated and the
principal of and interest on each Loan and all fees payable hereunder shall have
been paid in full, the Borrower covenants and agrees with the Lenders that:
SECTION 5.01. Financial Statements and Other Information. The Borrower
------------------------------------------
will furnish to the Administrative Agent with copies for each Lender:
(a) within 90 days after the end of each fiscal year of the Borrower,
its audited consolidated balance sheet and related statements of
operations, stockholders' equity and cash flows as of the end of and for
such year, setting forth in each case in comparative form the figures for
the previous fiscal year, all reported on by KPMG, LLP or other independent
public accountants of recognized national standing (without a "going
concern" or like qualification or exception and without any qualification
or exception as to the scope of such audit) to the effect that such
consolidated financial statements present fairly in all material respects
the financial condition and results of operations of the Borrower and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied;
(b) within 45 days after the end of each of the first three fiscal
quarters of each fiscal year of the Borrower, its consolidated balance
sheet and related statements of operations, stockholders' equity and cash
flows as of the end of and for such fiscal quarter and the then elapsed
portion of the fiscal year, setting forth in each case in comparative form
the figures for the corresponding period or periods of (or, in the case of
the balance sheet, as of the end of) the previous fiscal year, all
certified by one of its Financial Officers as presenting fairly in all
material respects the financial condition and results of operations of the
Borrower and its consolidated Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied, subject to normal year-end audit
adjustments and the absence of footnotes;
(c) concurrently with any delivery of the Borrower's financial
statements under clause (a) or (b) above, a certificate of a Financial
Officer of the Borrower (i) certifying as to whether a Default has occurred
and, if a Default has occurred, specifying the details thereof and any
action taken or proposed to be taken with respect thereto, (ii) setting
forth reasonably detailed calculations demonstrating compliance with
Sections 6.13 through 6.22, (iii) certifying the number of Covered POPS and
the number of PCS Subscribers as of the end of the most recent fiscal
quarter, (iv) setting forth any new locations of real property owned in fee
simple or leased by AGW or the Borrower acquired since the date of the last
certificate delivered pursuant to this clause (c) and (v) stating whether
any change in GAAP or in the application thereof has occurred since the
date of the Borrower's most recent audited financial statements referred to
in Section 3.04 and, if any such change has occurred, specifying the effect
of such change on the financial statements accompanying such certificate;
44
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(d) concurrently with any delivery of financial statements under clause
(a) above, an auditor's report from the accounting firm that reported on
such financial statements and a certificate issued by such firm stating
whether it obtained knowledge during the course of its examination of such
financial statements of any Default (which certificate may be limited to
the extent required by accounting rules or guidelines);
(e) promptly after the same become available, annual operating budgets
broken down on a quarterly basis with the same format and scope as those
provided to Lucent prior to the date of this Agreement, and prompt written
notice explaining in detail any material amendment or modification of or
departure from any such budget so delivered;
(f) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by
the Borrower or any Subsidiary with the Securities and Exchange Commission,
or any Governmental Authority succeeding to any or all of the functions of
said Commission, or with any national securities exchange, or distributed
by the Borrower to its shareholders generally, as the case may be;
(g) promptly following any request therefor, such other information
regarding the operations, business affairs and financial condition of the
Borrower or any Subsidiary, or compliance with the terms of any Loan
Document, as the Administrative Agent or any Lender may reasonably request;
(h) as soon as available, but in no event later than 90 days after the
beginning of each fiscal year of the Borrower, the annual business plan of
Borrower for the current fiscal year and updated projections through the
Maturity Date reflecting, among other things, changes caused by actual
results of prior periods and changes in such business plan;
(i) promptly, and in any case within 10 Business Days, after any
additional subsidiary of the Borrower is acquired or formed, notice of the
name and jurisdiction of organization of such subsidiary, the Borrower's
direct or indirect ownership interest therein and all actions taken or to
be taken in order to comply with Section 5.11 with respect to such
subsidiary;
(j) Within 30 days after the end of each quarter through March 31, 2000,
the Borrower shall deliver to the Administrative Agent (with sufficient
copies for each Lender) a certificate signed by a Financial Officer setting
forth in reasonable detail the efforts of the Borrower with respect to (a)
reprogramming any computer programs used in the conduct of its business to
insure proper functioning of such programs on and after January 1, 2000 and
(b) seeking certifications from any vendors, customers or other Persons
with whom the Borrower has a business relationship in which such vendors,
customers or Persons certify that they are taking the steps necessary to
avoid a Year 2000 Problem. The Borrower shall take all actions reasonably
necessary to assure that there will be no Material Adverse Effect as a
result of a Year 2000 Problem.
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SECTION 5.02. Notices of Material Events. The Borrower will furnish
--------------------------
to the Administrative Agent and each Lender prompt written notice upon obtaining
knowledge of the following:
(a) any amendment, modification, revocation, or termination of any
Sprint Affiliation Agreement or any PCS License or any agreement relating
thereto, if any, or receipt by the Borrower from SprintCom, Inc. and/or its
Affiliate of any written notice that a Management Agreement Breach or an
Event of Termination, or an event that if not cured or if notice is
provided would constitute a Management Agreement Breach or an Event of
Termination, has occurred under the Sprint Management Agreement;
(b) the occurrence of any Default;
(c) the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting the
Borrower or any Subsidiary that, if adversely determined, could reasonably
be expected to result in a Material Adverse Effect;
(d) the occurrence of any ERISA Event that, alone or together with any
other ERISA Events that have occurred, could reasonably be expected to
result in liability of the Borrower and its Subsidiaries in an aggregate
amount exceeding $5,000,000;
(e) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
a Financial Officer or other executive officer of the Borrower setting forth the
details of the event or development requiring such notice and any action taken
or proposed to be taken with respect thereto.
SECTION 5.03. Information Regarding Collateral.
--------------------------------
(a) The Borrower will furnish to the Collateral Agent prompt written
notice of any change (i) in the Borrower's or any Subsidiary's corporate name or
in any trade name used to identify it in the conduct of its business or in the
ownership of its properties, (ii) in the location of the Borrower's or any
Subsidiary's chief executive office, its principal place of business, any office
in which it maintains books or records relating to Collateral owned by it or any
office or facility at which Collateral (other than antennae or any related base
stations) owned by it is located (including the establishment of any such new
office or facility), (iii) in the Borrower's or any Subsidiary's identity or
corporate structure or (iv) in the Borrower's or any Subsidiary's Federal
Taxpayer Identification Number; provided that only quarterly notices pursuant to
5.01(c) hereof shall be required with respect to new locations of real property
owned in fee simple or leased by AGW or the Borrower used for the purpose of the
installation or relocation of antennae or any related base stations. The
Borrower agrees not to effect or permit any change referred to in the preceding
sentence unless all filings have been made under the Uniform Commercial Code or
otherwise as requested by the Administrative Agent that are required in order
for the Collateral Agent to continue at all times following such change to have
a valid, legal and perfected security interest in all the Collateral as required
by the Security Agreement. The
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Borrower also agrees promptly to notify the Collateral Agent if any material
portion of the Collateral is damaged or destroyed.
(b) Each year, at the time of delivery of annual financial statements
for the Borrower with respect to the preceding fiscal year pursuant to clause
(a) of Section 5.01, the Borrower shall deliver to the Collateral Agent a
certificate of a Financial Officer certifying that the Borrower provided all of
the information required pursuant to Section 5.03(a) during the preceding fiscal
year.
SECTION 5.04. Existence; Conduct of Business.
------------------------------
(a) The Borrower will, and will cause each of the Subsidiaries to, do or
cause to be done all things necessary to (a) preserve, renew and keep in full
force and effect its legal existence and the rights, Licenses, privileges and
franchises material to the conduct of its business and to comply with the terms
and conditions thereof; provided that the foregoing shall not prohibit any
--------
merger, consolidation, liquidation or dissolution or disposition permitted under
Section 6.03.
(b) On and after the Closing Date, all equity interests or outstanding
shares of capital stock of each Subsidiary shall be owned directly by the
Borrower. The only business or activity of AGW shall be the ownership of Real
Estate Assets and activities incidental thereto. Except as permitted by this
Agreement, no Subsidiary shall own or acquire any assets (other than, with
respect to AGW, Real Estate Assets) or incur any Indebtedness (other than
pursuant to the Guaranty Agreement and the Security Documents) or other
liability (other than liabilities for franchise taxes and similar liabilities
incidental to its existence and liabilities incurred in connection with owning
and leasing Real Estate Assets). No Subsidiary shall sell, assign or otherwise
transfer any asset held by it, except as permitted in accordance with the terms
of this Agreement.
SECTION 5.05. Payment of Obligations. The Borrower will, and will
----------------------
cause each of the Subsidiaries to, pay its Indebtedness and other material
obligations, including Tax liabilities and other amounts owed to Governmental
Authorities, before the same shall become delinquent or in default, except where
(a) the validity or amount thereof is being contested in good faith by
appropriate proceedings, (b) the Borrower or such Subsidiary has set aside on
its books adequate reserves with respect thereto in accordance with GAAP, (c)
such contest effectively suspends collection of the contested obligation and the
enforcement of any Lien securing such obligation and (d) the failure to make
payment pending such contest could not reasonably be expected to result in a
Material Adverse Effect.
SECTION 5.06. Maintenance of Properties. The Borrower will, and will
-------------------------
cause each of the Subsidiaries to, keep and maintain all property material to
the conduct of its business in good working order and condition, ordinary wear
and tear excepted.
SECTION 5.07. Insurance.
---------
(a) The Borrower will, and will cause each of the Subsidiaries to,
maintain, with financially sound and reputable insurance companies, insurance in
such amounts and against such risks (including fire, business interruption and
other risks insured by extended coverage) as
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are customarily maintained by companies engaged in the same or similar
businesses operating in the same or similar locations, including public
liability insurance against claims for personal injury, death or property damage
occurring upon, about or in connection with the use of any properties owned,
occupied or controlled by it as well as such other insurance as may be required
by law.
(b) All polices of casualty insurance maintained by or for the benefit
of the Borrower or any Subsidiary shall be endorsed or otherwise amended to
include a "standard" or "New York" lender's loss payable endorsement, in favor
of and satisfactory to the Collateral Agent, which endorsement shall provide
that if the insurance carrier shall have received written notice from the
Administrative Agent or the Collateral Agent of the occurrence of a Default, or
if the proceeds payable thereunder are in an amount exceeding $1,000,000, then
the insurance carrier shall pay all proceeds otherwise payable to the Borrower
or any Subsidiary under such policies directly to the Collateral Agent subject
to Section 5.13. All such policies also shall provide that neither the Borrower,
the Administrative Agent, the Collateral Agent nor any other party shall be a
coinsurer thereunder and shall contain a "Replacement Cost Endorsement", without
any deduction for depreciation, "mortgagee's interest"/"breach of warranty
coverage" and such other provisions as the Administrative Agent or the
Collateral Agent may reasonably require from time to time to protect the
interests of the Lenders. To the extent obtainable on commercially reasonable
terms from the Borrower's insurers, each such policy also shall provide that it
shall not be canceled, modified or not renewed (i) by reason of nonpayment of
premium except upon not less than 10 days' prior written notice thereof by the
insurer to the Administrative Agent and the Collateral Agent (giving the
Administrative Agent and the Collateral Agent the right to cure defaults in the
payment of premiums) or (ii) for any other reason except upon not less than 30
days' prior written notice thereof by the insurer to the Administrative Agent
and the Collateral Agent. The Borrower shall deliver to the Administrative Agent
and the Collateral Agent, prior to any cancellation, modification or nonrenewal
of any such policy of insurance, a copy of a renewal or replacement policy (or
other evidence of renewal of a policy previously delivered to the Administrative
Agent and the Collateral Agent) together with evidence satisfactory to the
Administrative Agent and the Collateral Agent of payment of the premium
therefor.
(c) If at any time the area in which any Mortgaged Property is located
is designated (i) a "flood hazard area" in any Flood Insurance Rate Map
published by the Federal Emergency Management Agency (or any successor agency),
the Borrower shall obtain flood insurance in such total amount as the
Administrative Agent, the Collateral Agent or the Required Lenders may from time
to time require, and otherwise comply with the National Flood Insurance Program
as set forth in the Flood Disaster Protection Act of 1973, as amended from time
to time, or (ii) a "Zone 1" area, the Borrower shall obtain earthquake insurance
in such total amount as the Administrative Agent, the Collateral Agent or the
Required Lenders may from time to time require.
(d) With respect to any Mortgaged Property, the Borrower shall carry and
maintain comprehensive general liability insurance including the "broad form CGL
endorsement" and coverage on an occurrence basis against claims made for
personal injury (including bodily injury, death and property damage), naming the
Collateral Agent as an additional insured, in scope and form reasonably
satisfactory to the Collateral Agent.
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(e) The Borrower shall notify the Administrative Agent and the
Collateral Agent immediately whenever any separate insurance concurrent in form
or contributing in the event of loss with that required to be maintained under
this Section is taken out by the Borrower or any Subsidiary; and shall promptly
deliver to the Administrative Agent and the Collateral Agent a duplicate
original copy of such policy or policies.
SECTION 5.08. Books and Records; Inspection Rights. The Borrower will,
------------------------------------
and will cause each of its Subsidiaries to, keep proper books of record and
account in which true, complete and correct (in all material respects) entries
are made of all dealings and transactions in relation to its business and
activities. The Borrower will, and will cause each of the Subsidiaries to,
permit any representatives designated by either the Administrative Agent or any
Lender, upon reasonable prior notice, to visit and inspect its properties, to
examine and make extracts from its books and records, and to discuss its
affairs, finances and condition with its officers and independent accountants,
all at such reasonable times and as often as reasonably requested.
SECTION 5.09. Compliance with Laws and Agreements. The Borrower will,
-----------------------------------
and will cause each of the Subsidiaries to, comply with all laws, rules,
regulations and orders of any Governmental Authority (including the FCC)
applicable to it or its property and all of the terms and conditions contained
in indentures, agreements (including, without limitation, the Supply Agreement
and the Indenture), and other instruments binding upon it or its property,
except where the failure to do so, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 5.10. Use of Proceeds. The proceeds of the Loans will be used
---------------
only as permitted by Section 2.02.
SECTION 5.11. Additional Subsidiaries. If any additional Subsidiary
-----------------------
shall be formed or acquired after the Closing Date, the Borrower will notify the
Administrative Agent and each Lender thereof and (i) the Borrower will cause
such Subsidiary to become a party to the Guaranty Agreement, the Guarantor
Security Agreement and any other security document the Administrative Agent and
the Collateral Agent reasonably require within three Business Days after such
Subsidiary is formed or acquired and promptly take all actions required to
create and perfect Liens on such Subsidiary's assets intended to be created by
the Loan Documents to secure the Obligations as the Collateral Agent or the
Administrative Agent shall reasonably request and (ii) the Borrower will cause
all equity interests in or shares of capital stock of such Subsidiary and
promissory notes evidencing all Indebtedness of such Subsidiary, in each case to
the extent owned by or on behalf of the Borrower or any Subsidiary, to be
pledged pursuant to the Guarantor Security Agreement within three Business Days
after such Subsidiary is formed or acquired.
SECTION 5.12. Further Assurances.
------------------
(a) The Borrower will, and will cause each Subsidiary to, execute any
and all further documents, financing statements, agreements and instruments, and
take all such further actions (including the filing and recording of financing
statements, fixture filings, mortgages, deeds of trust and other documents),
which may be required under any applicable law unless otherwise consented to by
the Agent, or which the Administrative Agent or the Required Lenders
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may reasonably request, to effectuate the transactions contemplated by the Loan
Documents or to grant, preserve, protect or perfect the Liens created or
intended to be created by the Security Documents or the validity or priority of
any such Lien as contemplated by the Loan Documents, all at the expense of the
Borrower; provided that neither Borrower nor AGW shall be required to take any
such actions with respect to any of the real property owned or leased by AGW or
subleased by the Borrower from AGW except for sites to install Network switches.
The Borrower also agrees to provide to the Administrative Agent, upon its
reasonable request, evidence reasonably satisfactory to the Administrative Agent
as to the perfection and priority of the Liens created or intended to be created
by the Security Documents. Such Liens will be created under the Security
Documents and other security agreements, instruments and documents in form and
substance satisfactory to the Collateral Agent, and the Borrower shall deliver
or cause to be delivered to the Administrative Agent and each Lender all such
instruments and documents (including legal opinions, title insurance policies
and Lien searches) as the Collateral Agent shall reasonably request to evidence
compliance with this Section. Notwithstanding anything contained herein to the
contrary, the Borrower shall assign or transfer to AGW, and/or obtain leasehold
mortgages or landlord waivers in favor of the Collateral Agent with respect to,
all of the Borrower's interests in real property listed on Schedule 3.05(b), in
each case within ninety (90) days of the date hereof.
(b) If any material assets (including, but not limited to, Intellectual
Property and any Real Estate Assets or improvements thereto or any interest
therein and excluding Real Estate Assets of AGW and related subleases to the
Borrower other than those used as sites to install Network switches) are
acquired by the Borrower or any Subsidiary after the Closing Date (other than
assets constituting Collateral under the Pledge Agreement, the Security
Agreement or the Guarantor Security Agreement as of the Closing Date), the
Borrower will notify the Administrative Agent thereof, and, if requested by the
Administrative Agent or the Required Lenders, the Borrower will cause such
assets to be subjected to a Lien securing the Obligations to the extent
permitted by law and will take, and cause the Subsidiaries to take, such actions
as shall be necessary or reasonably requested by the Collateral Agent to grant
and perfect such Liens, including actions described in paragraph (a) of this
Section, all at the expense of the Borrower or such Subsidiary; provided that
--------
the provisions of this paragraph (b) shall not apply to any asset so long as
such asset is subject to a Lien permitted by clause (d) of Section 6.02.
(c) Except as otherwise provided for in Section 2.15, obligations to the
Lenders, the Administrative Agent and the Collateral Agent shall be absolute and
unconditional and shall not be subject to any delay, reduction, set-off,
defense, counterclaim or recoupment for any reason, including any failure of the
Collateral or the Network, or any part thereof, or any representation or service
of any supplier, manufacturer, installer, vendor or distributor, including,
without limitation, Lucent.
SECTION 5.13. Casualty and Condemnation.
-------------------------
(a) The Borrower will furnish to the Administrative Agent, the Collateral Agent
and the Lenders prompt written notice of any casualty or other insured
damage to any portion of the Network, any Mortgaged Property or other
material portion of Collateral or the commencement of any action or
proceeding for the taking of the Network, any Mortgaged
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Property or other Collateral or any part thereof or interest therein under power
of eminent domain or by condemnation or similar proceeding.
(b) If any event described in paragraph (a) of this Section results in
Net Proceeds (whether in the form of insurance proceeds, condemnation award or
otherwise), the Collateral Agent is authorized to collect such Net Proceeds and,
if received by the Borrower or any Subsidiary, such Net Proceeds shall be paid
over to the Collateral Agent within two Business Days following the receipt of
such Net Proceeds; provided that if the aggregate Net Proceeds in respect of
--------
such event are less than $1,000,000, such Net Proceeds shall be paid over to the
Borrower unless a Default has occurred and is continuing. All such Net Proceeds
retained by or paid over to the Collateral Agent shall be held by the Collateral
Agent and released from time to time to pay the costs of repairing, restoring or
replacing the affected property in accordance with the terms of the applicable
Security Documents, subject to the provisions of the applicable Security
Documents regarding application of such Net Proceeds during a Default.
(c) If any Net Proceeds retained by or paid over to the Collateral Agent
as provided above continue to be held by the Collateral Agent on the date that
is 180 days after the occurrence of the event resulting in such Net Proceeds,
then such Net Proceeds shall be applied to prepay Borrowings as provided in
Section 2.09(b).
SECTION 5.14. Certain Intercompany Agreements. If, on or after the
-------------------------------
Closing Date, any Subsidiary conducts any material business or acquires any
material assets, the Borrower shall, if requested by the Administrative Agent or
the Required Lenders, enter into and cause such Subsidiary to enter into
agreements reasonably satisfactory to the Required Lenders providing for any
taxes and other expenses of such Subsidiary to be equitably allocated so that
the Borrower does not bear any such taxes or expenses that are not fairly
attributable to the Borrower.
SECTION 5.15. Interconnection and Co-location Agreements. The
------------------------------------------
Borrower shall have and maintain, directly or through an Affiliate of SprintCom,
Inc., all interconnection, interexchange and co-location agreements necessary to
operate the Network.
SECTION 5.16. Sprint Affiliation Agreements. The Borrower shall, and
-----------------------------
shall cause its Subsidiaries to, at its expense:
(a) Perform and observe all of the material terms and provisions of the
Sprint Affiliation Agreements to be performed or observed by it, maintain the
Sprint Affiliation Agreements in full force and effect and enforce the Sprint
Affiliation Agreements in accordance with their terms except as otherwise
contemplated by Section 6.10.
(b) Furnish to the Administrative Agent promptly upon receipt thereof
copies of all notices, requests and other documents received which involve
matters that would be of Material Adverse Effect to the Lenders which involve
the inability of the Borrower to perform in any material respect in each case
under or pursuant to any Sprint Affiliation Agreement, and from time to time (i)
furnish to the Administrative Agent such information and reports regarding the
Sprint Affiliation Agreements as the Administrative Agent may reasonably request
and (ii) upon the reasonable request of the Administrative Agent, make to
SprintCom, Inc., Sprint
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Spectrum L.P. and Sprint Communications Company, L.P. such demands and requests
for information and reports or for action as the Borrower is entitled to make
under the Sprint Affiliation Agreements.
ARTICLE VI
Negative Covenants
------------------
Until the Commitments have expired or terminated and the principal of
and interest on each Loan and all fees payable hereunder have been paid in
full, the Borrower covenants and agrees with the Lenders that:
SECTION 6.01. Indebtedness. Without the prior written consent of the
------------
Administrative Agent, the Borrower will not, nor will it permit any Subsidiary
to, create, incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness created under the Loan Documents;
(b) subject to Section 6.04, Indebtedness of the Borrower to any
Subsidiary and of any Subsidiary (other than AGW except with respect to (i)
intercompany obligations related to leases of real property and (ii)
Indebtedness permitted by Section 6.01(h)) to the Borrower or any other
Subsidiary;
(c) subject to Section 6.04, Guarantees by the Borrower of Indebtedness
of any Subsidiary and by any Subsidiary of Indebtedness of the Borrower;
(d) Indebtedness of the Borrower or any Subsidiary (other than AGW)
incurred to finance the acquisition, construction or improvement of
any fixed or capital assets, including Capital Lease Obligations and any
Indebtedness assumed in connection with the acquisition of any such assets
or secured by a Lien on any such assets prior to the acquisition thereof,
and extensions, renewals and replacements of any such Indebtedness that do
not increase the outstanding principal amount thereof; provided that (i)
--------
such Indebtedness is incurred prior to or within 90 days after such
acquisition or the completion of such construction or improvement, (ii) any
such Indebtedness incurred in connection with any particular acquisition,
construction or improvement shall not exceed the cost of such acquisition,
construction or improvement, and (iii) the aggregate principal amount of
all Indebtedness permitted by this clause (d) shall not exceed $10,000,000
at any time outstanding;
(e) obligations of the Borrower under Hedging Agreements permitted
pursuant to Section 6.05;
(f) Indebtedness of the Borrower outstanding on the date hereof and set
forth on Schedule 6.01;
(g) prior to the Effective Date, with respect to the Borrower,
Indebtedness in an amount equal to the purchase price of goods and services
under the Supply Agreement deferred pursuant to the terms thereof or the
interest rate or other fees applicable thereto;
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(h) Indebtedness of the Borrower under senior subordinated discount
notes which are subordinated to the Loans and issued pursuant to the
Indenture and unsecured Guarantees of such Indebtedness which are
subordinated to the Loans and issued pursuant to the Indenture;
(i) other unsecured Indebtedness of the Borrower in an aggregate
principal amount (at any time outstanding) not exceeding $10,000,000 minus
the aggregate principal amount of Indebtedness permitted pursuant to clause
(d) then outstanding;
(j) Indebtedness incurred in connection with the refinancing of
Indebtedness permitted by clause 6.01 (d), (f), (h), (i) and (j) above so
long as the Indebtedness incurred in connection with such refinancing (i)
has a scheduled maturity date that is on or after the scheduled maturity
date of the Indebtedness being refinanced, (ii) has a weighted average life
to maturity that is equal to or longer than the remaining weighted average
life to maturity of the Indebtedness being refinanced, determined
immediately prior to giving effect to such repayment. (iii) does not
include any provisions that may require mandatory prepayment thereof prior
to scheduled maturity, other than scheduled prepayments taken into
consideration in determining compliance with clause (ii) above and other
provisions that are not materially more burdensome than any such provisions
included in the Indebtedness being refinanced, (iv) is issued or incurred
by the same Person that issued or incurred the Indebtedness being
refinanced and is not Guaranteed or secured by any Lien unless the
Indebtedness being refinanced was Guaranteed or secured (in which case such
Indebtedness shall not be Guaranteed by any Person that did not Guarantee
the Indebtedness being refinanced and shall not be secured by a Lien on any
asset that did not secure the Indebtedness being refinanced) and (v) is
subordinated to the Obligations on terms no less favorable than the terms
on which the Indebtedness being refinanced was so subordinated, if such
refinanced Indebtedness is subordinated and (vi) has an aggregate principal
amount which is equal to or larger than that of the Indebtedness being
refinanced; provided, that with respect to Indebtedness permitted under
clause (f) above the Borrower may, notwithstanding clause (vi) above,
obtain refinancing in an aggregate principal amount which is less than the
outstanding principal amount of the Indebtedness being refinanced (subject
to the approval of the Required Lenders, with such approval not to be
unreasonably withheld) if the amount of such refinancing is no less than
ninety percent (90%) of the principal amount of the outstanding
Indebtedness which is being replaced; provided, further, that Indebtedness
--------
incurred hereunder which has an aggregate principal amount that is larger
than that of the Indebtedness being refinanced shall not be permitted by
this clause (j) unless a prepayment of the Loans is made in accordance with
Section 2.09 hereof (each refinancing undertaken in accordance with this
clause (j) shall be referred to herein as a "Permitted Refinancing");
(k) deposits or advances of any kind from a third party in the ordinary
course of business; and
(l) Indebtedness of the Borrower incurred under the Deferred Amount Note
issued pursuant to the Consent.
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SECTION 6.02. Liens. The Borrower will not, and will not permit any
-----
Subsidiary to, create, incur, assume or permit to exist any Lien on any property
or asset now owned or hereafter acquired by it, or assign or sell any income or
revenues (including accounts receivable) or rights in respect of any thereof,
except:
(a) Liens created under the Loan Documents;
(b) Permitted Encumbrances;
(c) any Lien on any property or asset of the Borrower or any Subsidiary
(other than AGW) existing on the date hereof and set forth in Schedule
6.02; provided that (i) such Lien shall not apply to any other property or
--------
asset of the Borrower or any Subsidiary and (ii) such Lien shall secure
only those obligations which it secures on the date hereof and extensions
and renewals thereof that do not increase the outstanding principal amount
thereof or the interest rate or other fees applicable thereto, and
Permitted Refinancings thereof in accordance with Section 6.01(j);
(d) any Lien existing on any property or asset prior to the acquisition
thereof by the Borrower or any Subsidiary (other than AGW) or existing on
any property or asset of any Person that becomes a Subsidiary after the
date hereof prior to the time such Person becomes a Subsidiary; provided
--------
that (i) such Lien is not created in contemplation of or in connection with
such acquisition or such Person becoming a Subsidiary, as the case may be,
(ii) such Lien shall not apply to any other property or assets of the
Borrower or any Subsidiary and (iii) such Lien shall secure only those
obligations which it secures on the date of such acquisition or the date
such Person becomes a Subsidiary, as the case may be, and extensions,
renewals and replacements thereof that do not increase the outstanding
principal amount thereof;
(e) Liens on fixed or capital assets acquired, constructed or improved
by the Borrower or any Subsidiary (other than AGW); provided that (i) such
--------
Liens secure only Indebtedness permitted under Section 6.01(d) (other than
Indebtedness that is expressly required by such clause to be unsecured),
(ii) such Liens and the Indebtedness secured thereby are incurred prior to
or within 90 days after such acquisition or the completion of such
construction or improvement, (iii) the Indebtedness secured thereby does
not exceed 100% of the cost of acquiring, constructing or improving such
fixed or capital assets and (iv) such Liens shall not apply to any other
property or assets of the Borrower or any Subsidiary;
(f) Liens on the stock of Subsidiaries other than AGW which secure
Indebtedness permitted under Section 6.01(h); and
(g) judgment liens in respect of judgments that do not constitute an
Event of Default under clause (k) of Article VII.
SECTION 6.03. Fundamental Changes.
-------------------
(a) Except as permitted by Section 6.04, the Borrower will not, nor will
it permit any Subsidiary to, merge into or consolidate with any other Person, or
permit any other Person to
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merge into or consolidate with it, or sell, transfer, lease or otherwise dispose
of (in one transaction or in a series of transactions) all or substantially all
of its assets, or all or substantially all of the equity or capital stock of any
of its Subsidiaries (in each case, whether now owned or hereafter acquired), or
liquidate or dissolve, except that, if at the time thereof and immediately after
giving effect thereto no Default shall have occurred and be continuing any
Subsidiary may (i) merge into the Borrower in a transaction in which the
Borrower is the surviving corporation, (ii) merge into any other Subsidiary in a
transaction in which the surviving entity is a Subsidiary, (iii) sell, transfer,
lease or otherwise dispose of its assets to the Borrower or to another
Subsidiary or (iv) liquidate or dissolve if the Borrower determines in good
faith that such liquidation or dissolution is in the best interests of the
Borrower and is not materially disadvantageous to the Lenders; provided that any
--------
such merger involving a Person that is not a wholly-owned Subsidiary immediately
prior to such merger shall not be permitted unless also permitted by Section
6.04.
(b) Without the prior written consent of the Required Lenders, the
Borrower will not, and will not permit any of its Subsidiaries to, engage to any
material extent in any business other than the operation and management of PCS
and similar wireless telecommunications services and the subscriber equipment
related thereto.
(c) The Borrower will not permit AGW to engage in any business other
than the ownership of the Real Estate Assets, and activities incidental thereto.
(d) The Borrower will not create or acquire any Subsidiary after the
Closing Date.
SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions;
----------------------------------------------------------
Asset Sales.
- -----------
(a) Except as permitted by Section 6.03, the Borrower will not, and will
not permit any of its Subsidiaries to, purchase, hold or acquire (including
pursuant to any merger with any Person that was not a wholly-owned Subsidiary
prior to such merger) any capital stock, evidences of indebtedness or other
securities (including any option, warrant or other right to acquire any of the
foregoing) of, make or permit to exist any loans or advances to, Guarantee any
obligations of, or make or permit to exist any investment or any other interest
in, any other Person, or purchase or otherwise acquire (in one transaction or a
series of transactions) any assets of any other Person constituting a business
unit, except:
(i) Permitted Investments (other than by AGW);
(ii) investments by the Borrower and its Subsidiaries in the equity or
capital stock of their Subsidiaries; provided that any such equity
--------
or shares of capital stock shall be pledged pursuant to the Pledge
Agreement;
(iii) loans or advances made by the Borrower to any Subsidiary and loans
or advances made by any Subsidiary (other than AGW except with respect to
intercompany obligations related to real property leases) to the Borrower
or any other Subsidiary (other than AGW); provided that any such loans and
--------
advances shall be evidenced by a promissory note and delivered, immediately
after execution thereof, to the Collateral Agent, along with appropriate
transfer documents executed in blank; provided, further,
-------- -------
55
<PAGE>
that upon request from the Collateral Agent, the Borrower and its
Subsidiary shall execute a subordination agreement, in form and substance
satisfactory to the Collateral Agent, with respect to such loans or
advances, pledged pursuant to the Security Agreement;
(iv) Guarantees by the Borrower of Indebtedness of any Subsidiary and by
any Subsidiary (other than AGW except for Indebtedness permitted by Section
6.01(h)) of Indebtedness of the Borrower or any other Subsidiary;
(v) promissory notes received by the Borrower or any Subsidiary in
connection with any sales of assets permitted under paragraph (b) below;
provided that, such promissory notes shall be delivered, immediately after
--------
execution thereof, to the Collateral Agent, along with appropriate transfer
documents executed in blank;
(vi) investments received in connection with the bankruptcy or
reorganization of, or settlement of delinquent accounts and disputes with,
customers and suppliers, in each case in the ordinary course of business;
(vii) investments set forth on Schedule 6.04(a);
(viii) payroll, travel and similar advances made in the ordinary course
of business; and
(ix) other investments in which the only consideration paid by the
Borrower or any Subsidiary consists of capital stock of the Borrower.
(b) Except as permitted by Section 6.03, the Borrower will not, and will
not permit any of its Subsidiaries to, sell, transfer, lease or otherwise
dispose of any asset, including any capital stock (but excluding issuances of
capital stock of the Borrower), except:
(i) sales of inventory, used, obsolete or surplus equipment and Permitted
Investments in the ordinary course of business;
(ii) transfers constituting investments permitted by paragraph (a)(i) and
(ii) of this Section or Restricted Payments permitted by Section 6.06;
(iii) Like Kind Exchanges;
(iv) sales, transfers and dispositions to the Borrower or a Subsidiary
(other than AGW except with respect to sales, transfers and assignments of
interests in real property); and
(v) sales, transfers and dispositions of assets (other than those of
AGW), the Net Proceeds with respect to which are applied in accordance with
Section 2.09(b);
provided further that all sales, transfers, leases and other dispositions
- ----------------
permitted hereby (other than pursuant to clauses (iii) and (iv) above) shall be
made for fair market value and at least 80% of the consideration received
therefor shall consist of cash.
56
<PAGE>
SECTION 6.05. Hedging Agreements. The Borrower will not, and will not
------------------
permit any of its Subsidiaries to, enter into any Hedging Agreement, other than
Hedging Agreements entered into in the ordinary course of business to hedge or
mitigate risks to which the Borrower or any Subsidiary is exposed in the conduct
of its business or the management of its liabilities.
SECTION 6.06. Restricted Payments. The Borrower will not, nor will it
-------------------
permit any Subsidiary to, declare or make, or agree to pay or make, directly or
indirectly, any Restricted Payment (or incur any obligation to do so), except
(i) the Subsidiaries may declare and pay dividends ratably to their
equityholders or shareholders with respect to their equity or capital stock,
(ii) the Borrower and its Subsidiaries may redeem stock from their former
employees and directors and (iii) the Borrower and its Subsidiaries may declare
and pay dividends payable in common stock.
SECTION 6.07. Transactions with Affiliates; Subordination Agreement.
------------------------------------------------------
(a) The Borrower will not, nor will it permit any Subsidiary to, sell,
lease or otherwise transfer any property or assets to, or purchase, lease or
otherwise acquire any property or assets from, or otherwise engage in any other
transactions with, the Borrower or any of its other Affiliates, except (i)
transactions that are at prices and on terms and conditions not less favorable
to the Borrower or such Subsidiary than could be obtained on an arm's-length
basis from unrelated third parties, (ii) transactions between or among the
Borrower and the Subsidiaries not involving any other Affiliate, (iii) any
Restricted Payment permitted by Section 6.06, and (iv) transactions undertaken
pursuant to Sections 5.14.
(b) The Borrower will not, and will not permit any of its Subsidiaries to,
create, incur, assume or permit to exist any Indebtedness otherwise permitted
under this Agreement owing to or for the benefit of any Affiliate of the
Borrower or any Subsidiary (other than AGW), unless (i) such Affiliate shall
have become a party to a subordination agreement, in form and substance
satisfactory to the Administrative Agent and shall have agreed to subordinate
such Indebtedness (or such other obligation or liability) as provided therein
and (ii) in the case of any such Indebtedness, such Indebtedness is evidenced by
one or more promissory notes or similar instruments that are pledged in favor of
the Collateral Agent pursuant to a security agreement in the form of Exhibit
D-2; provided that the foregoing shall not prohibit Guarantees permitted by
--------
clause (c) of Section 6.01 or Indebtedness permitted by clause (b) of Section
6.01.
SECTION 6.08. Restrictive Agreements. The Borrower will not,
----------------------
nor will it permit any Subsidiary to, directly or indirectly, enter into, incur
or permit to exist any agreement or other arrangement that prohibits, restricts
or imposes any condition upon (a) the ability of the Borrower or any Subsidiary
to create, incur or permit to exist any Lien upon any of its property or assets,
or (b) the ability of any Subsidiary to pay dividends or other distributions
with respect to any shares of its equity or capital stock or to make or repay
loans or advances to the Borrower or any other Subsidiary or to Guarantee
Indebtedness of the Borrower or any other Subsidiary; provided that (i) the
--------
foregoing shall not apply to restrictions and conditions imposed by law or by
any Loan Document, (ii) the foregoing shall not apply to restrictions and
conditions existing on the date hereof identified on Schedule 6.08 (but shall
apply to any extension or renewal of, or any amendment or modification expanding
the scope of, any such restriction or condition),
57
<PAGE>
(iii) clause (a) of the foregoing shall not apply to restrictions or conditions
imposed by any agreement relating to secured Indebtedness permitted by this
Agreement if such restrictions or conditions apply only to the property or
assets securing such Indebtedness, (iv) the foregoing shall not apply to the
terms of the Indebtedness permitted under Section 6.01(h) and (v) clause (a) of
the foregoing shall not apply to customary provisions in leases and other
contracts restricting the assignment thereof.
SECTION 6.09. Prepayment of Indebtedness. The Borrower will
--------------------------
not, and will not permit any Subsidiary to, voluntarily prepay any obligation in
respect of any Indebtedness (other than the Loans) of the Borrower or any
Subsidiary except the prepayment of (a) Indebtedness (other than by AGW)
resulting in a prepayment of Loans pursuant to Section 2.09, (b) Indebtedness
owing under a revolving credit facility to the extent that (i) the commitments
of the lenders to make loans thereunder remain in effect after giving effect
to such prepayment and (ii) the borrower thereunder does not voluntarily
reduce the principal amount available under such revolving credit facility
within six months of any such prepayment; (c) Indebtedness to NationsBank and
[ * ] in the aggregate principal amounts of $1,000,000 and $7,700,000,
respectively, (d) Indebtedness prepaid in connection with a Permitted
Refinancing of such Indebtedness, (e) Indebtedness owed to Robert E. Gourlay,
David C. Roberts and Larry W. Foster in the aggregate principal amounts of
$65,000, $55,000 and $30,000, respectively, and (f) Indebtedness of the Borrower
or Subsidiary permitted by Sections 6.01(d) or 6.01(i); provided, however, the
-------- -------
Borrower will not, and will not permit any Subsidiary, to prepay or defease its
obligations with respect to the senior subordinated discount notes described in
the Indenture except for prepayments permitted by clause (d).
SECTION 6.10. Amendment of Material Documents. The Borrower
-------------------------------
will not permit any Sprint Affiliation Agreement nor any other material
agreement, document or instrument to which it is a party to be amended, modified
or terminated in a manner which could reasonably be expected to have a Material
Adverse Effect on the Lenders, nor shall the Borrower waive, or permit any
Subsidiary to waive, any of its rights thereunder in a manner which materially
adversely affects the Lenders; provided, that the unilateral regulatory action
--------
by the FCC affecting any PCS License will not constitute a breach of this
covenant; provided further, that amendments, modifications and terminations of
-------- -------
the Sprint Affiliation Agreements are subject to the additional restrictions set
forth in Section 6.24.
SECTION 6.11. Management and Service Fee Agreements. The Borrower
--------------------------------------
will not, and will not permit any of its Subsidiaries to, enter into any
management or service fee agreements, other than the Sprint Affiliation
Agreements which would involve material management of the Borrower's or any
Subsidiary's business by a third party.
SECTION 6.12. Limitation on Sale-Leaseback Transactions. The
-----------------------------------------
Borrower will not, nor will it permit any Subsidiary to, directly or indirectly,
sell, transfer or otherwise dispose of any asset pursuant to any arrangement
whereby the Borrower or any Subsidiary shall rent or lease such asset or another
asset to be used for the same or similar purposes (any such arrangement, a
"Sale-Leaseback Transaction").
- ---------------------------
- -----------------
* Portions of the specified exhibit has been omitted pursuant to a request for
confidential treatment and filed separately with the commission.
58
<PAGE>
SECTION 6.13. Covered POPS. The Borrower will not, and will not
------------
permit any Subsidiary to, incur any Indebtedness at any time during any period
set forth below if the number of Covered POPS at the time such Indebtedness is
incurred is less than the number set forth below opposite such date:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Number
--------------------- ------
<S> <C>
September 30, 2000 4,000,000
December 31, 2000 4,316,569
March 31, 2001 4,375,592
June 30, 2001 4,434,516
September 30, 2001 4,493,639
December 31, 2001 4,552,662
March 31, 2002 4,552,682
June 30, 2002 4,552,882
September 30, 2002 4,628,588
December 31, 2002 4,653,909
<CAPTION>
Fiscal Year Ending Number
------------------ ------
<S> <C>
December 31, 2003 4,742,447
December 31, 2004 5,079,614
December 31, 2005 5,138,362
December 31, 2006 5,197,662
December 31, 2007 5,257,620
<CAPTION>
Fiscal Quarter Ending Number
--------------------- ------
<S> <C>
March 31, 2008 5,270,664
June 30, 2008 5,283,808
September 30, 2008 5,296,952
</TABLE>
SECTION 6.14. PCS Subscribers. The Borrower will not, and will not
---------------
permit any Subsidiary to, incur any Indebtedness at any time during any period
set forth below if the number of PCS Subscribers at the time such Indebtedness
is incurred is less than the number set forth below opposite such date:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Number
--------------------- ------
<S> <C>
June 30, 2000 5,698
September 30, 2000 21,500
December 31, 2000 43,089
March 31, 2001 60,000
June 30, 2001 80,000
September 30, 2001 100,000
December 31, 2001 130,000
</TABLE>
59
<PAGE>
<TABLE>
<S> <C>
March 31, 2002 158,042
June 30, 2002 173,536
September 30, 2002 190,752
December 31, 2002 225,184
<CAPTION>
Fiscal Year Ending Number
------------------ ------
<S> <C>
December 31, 2003 305,287
December 31, 2004 379,889
December 31, 2005 444,796
December 31, 2006 503,106
December 31, 2007 552,294
<CAPTION>
Fiscal Quarter Ending Number
--------------------- ------
<S> <C>
March 31, 2008 562,708
June 30, 2008 573,122
September 30, 2008 583,536
</TABLE>
SECTION 6.15. Ratio of Total Debt to Total Capitalization. The Borrower
-------------------------------------------
will not permit the ratio of (i) Total Debt on any of the dates set forth below
to (ii) Total Capitalization on such date, to exceed the ratio set forth below
opposite such date:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
On or after October 1, 1999
but prior to October 1, 2000 18%
On or after October 2, 2000
but prior to April 1, 2001 30%
On or after April 2, 2001
but prior to July 1, 2001 38%
On or after July 1, 2001
but prior to October 1, 2001 42%
On or after October 1, 2001
but prior to April 2002 42%
On or after April 1, 2002
but prior to July 1, 2002 44%
On or after July 1, 2002
but prior to January 1, 2003 45%
</TABLE>
60
<PAGE>
<TABLE>
<S> <C>
On or after January 1, 2003
but prior to January 1, 2004 43%
On or after January 1, 2004
but prior to January 1, 2005 38%
On or after January 1, 2005,
but prior to January 1, 2006 82%
Thereafter 81%
</TABLE>
SECTION 6.16. Ratio of Total Debt to EBITDA. The Borrower will not
-----------------------------
permit the ratio of (i) Total Debt outstanding on any of the dates set forth
below to (ii) EBITDA for the two most recent fiscal quarters multiplied by two,
to exceed the ratio set forth below opposite such date:
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
On or after January 1, 2003 but
prior to January 1, 2004 6.90
On or after January 1, 2004 but
prior to January 1, 2005 3.30
On or after January 1, 2005 but
prior to January 1, 2006 5.90
On or after January 1, 2006 but
prior to January 1, 2007 4.20
On or after January 1, 2007 but
prior to January 1, 2008 3.00
On or after January 1, 2008 but
prior to April 1, 2008 2.90
On or after April 1, 2008 but
prior to July 1, 2008 2.80
On or after July 1, 2008 but
prior to October 1, 2008 2.70
</TABLE>
SECTION 6.17. Ratio of Senior Secured Debt to Total Capitalization. The
----------------------------------------------------
Borrower shall not permit the ratio of (i) Senior Secured Debt outstanding on
any date during any period set forth below to (ii) Total Capitalization on such
date, to exceed the ratio set forth below opposite such period:
61
<PAGE>
<TABLE>
<CAPTION>
Date Ratio
---- -----
<S> <C>
On or after October 1, 1999 but
prior to October 1, 2000 18%
On or after October 1, 2000 but
prior to April 1, 2001 30%
On or after April 1, 2001 but prior
to July 1, 2001 38%
On or after July 1, 2000 but prior
to October 1, 2001 42%
On or after October 1, 2001 but
prior to April 1, 2002 42%
On or after April 1, 2002 but prior
to July 1, 2002 44%
On or after July 1, 2002 but prior
to January 1, 2003 45%
On or after January 1, 2003 but
prior to January 1, 2004 43%
On or after January 1, 2004 but
prior to January 1, 2005 38%
On or after January 1, 2005 but
prior to January 1, 2006 35%
On or after January 1, 2006 but
prior to January 1, 2007 29%
On or after January 1, 2007 but
prior to January 1, 2008 20%
On or after January 1, 2008 but
prior to April 1, 2008 20%
On or after April 1, 2008 but prior
to July 1, 2008 18%
On or after July 1, 2008 but prior
to October 1, 2008 16%
</TABLE>
62
<PAGE>
SECTION 6.18. Ratio of Senior Secured Debt to EBITDA. The Borrower
--------------------------------------
shall not permit the ratio of (i) Senior Secured Debt outstanding on any date
during any period set forth below to (ii) EBITDA for the two most recent fiscal
quarters multiplied by two, to exceed the ratio set forth opposite such period:
<TABLE>
<CAPTION>
Fiscal year Ending Ratio
------------------ -----
<S> <C>
December 31, 2003 6.90
December 31, 2004 3.30
December 31, 2005 2.80
December 31, 2006 1.80
December 31, 2007 1.30
Thereafter 1.00
</TABLE>
SECTION 6.19. [Reserved.].
-----------
SECTION 6.20. Ratio of EBITDA to Fixed Charges. The Borrower will not
--------------------------------
permit the ratio of (i) EBITDA for any of the periods set forth below to (ii) to
Fixed Charges for such period, to exceed the ratio set forth below opposite such
period:
<TABLE>
<CAPTION>
Fiscal year Ending Ratio
------------------ -----
<S> <C>
December 31, 2003 1.00
December 31, 2004 1.00
December 31, 2005 1.00
December 31, 2006 1.25
December 31, 2007 1.40
<CAPTION>
Fiscal Quarter Ending Ratio
--------------------- -----
<S> <C>
March 31, 2008 1.45
June 30, 2008 1.50
September 30, 2008 1.55
</TABLE>
SECTION 6.21. Capital Expenditures. The Borrower shall not permit Capital
--------------------
Expenditures for any period set forth below to exceed the value set forth below
opposite such period:
63
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ending Amount
------------------ ------------
<S> <C>
December 31, 1999 $ 64,500,000
December 31, 2000 $125,000,000
December 31, 2001 $ 50,000,000
December 31, 2002 $ 40,000,000
December 31, 2003 $ 30,000,000
December 31, 2004 $ 25,000,000
December 31, 2005 $ 25,000,000
December 31, 2006 $ 24,000,000
December 31, 2007 $ 23,000,000
<CAPTION>
Fiscal Quarter Ending Amount
--------------------- ------------
<S> <C>
March 31, 2008 $ 5,750,000
June 30, 2008 $ 5,750,000
September 30, 2008 $ 5,750,000
</TABLE>
; provided however, that, to the extent the amount of Capital Expenditures
permitted to be made in any fiscal year pursuant to this Section 6.21 exceeds
the aggregate amount of Capital Expenditures actually made during such Fiscal
Year, such excess may be carried forward to any succeeding fiscal year to the
extent not applied in prior fiscal years.
SECTION 6.22. Minimum Revenue. The Borrower shall not permit the net
---------------
service revenues of the Borrower and its consolidated Subsidiaries determined on
a consolidated basis in accordance with GAAP, for any period set forth below to
be less than the number set forth below opposite such date:
<TABLE>
<CAPTION>
Fiscal Quarter Ending Revenue
--------------------- -----------
<S> <C>
June 30, 2000 $ 381,000
September 30, 2000 $ 2,138,000
December 31, 2000 $ 4,800,000
March 31, 2001 $ 8,453,000
June 30, 2001 $11,110,000
September 30, 2001 $13,000,000
December 31, 2001 $16,000,000
March 31, 2002 $21,460,000
June 30, 2002 $23,947,000
September 30, 2002 $26,309,000
December 31, 2002 $30,039,000
</TABLE>
64
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ending Revenue
------------------ ------------
<S> <C>
December 31, 2003 $147,015,000
December 31, 2004 $189,118,000
December 31, 2005 $228,658,000
December 31, 2006 $263,435,000
December 31, 2007 $294,020,000
<CAPTION>
Fiscal Quarter Ending Revenue
--------------------- -----------
<S> <C>
March 31, 2008 $70,358,000
June 30, 2008 $79,953,000
September 30, 2008 $83,151,000
</TABLE>
SECTION 6.23. [Reserved].
-----------
SECTION 6.24. Sprint Affiliation Agreements. Sprint Affiliation
------------------------------
Agreements. The Borrower shall not:
(a) Sell, assign (by operation of law or otherwise) or otherwise dispose of
or create or suffer to exist any lien, security interest or other charge or
encumbrance upon or with respect to the Sprint Affiliation Agreements or any
portion thereof to any person or entity, except for the assignment and security
interest contemplated by this Agreement.
(b) Cancel or terminate the Sprint Affiliation Agreements or agree in
writing to any cancellation or termination thereof.
(c) Consent to, waive, approve or agree in writing to any amendment or
other modification of the Sprint Affiliation Agreements, except where such
action would not materially adversely affect the Lenders.
(d) Waive any default under or breach of the Sprint Affiliation Agreements,
except where such action would not materially adversely affect the Lenders.
SECTION 6.25. Indenture. The Borrower shall not, at any time, designate
---------
Indebtedness other than that created pursuant to the Loan Documents to be
"Designated Senior Debt" as defined in the Indenture.
ARTICLE VII
-----------
Events of Default
-----------------
If any of the following events ("Events of Default") shall occur:
-----------------
(a) the Borrower shall fail to pay any principal of any Loan when and as
the same shall become due and payable, whether at the due date thereof or
at a date fixed for prepayment thereof or otherwise;
65
<PAGE>
(b) the Borrower shall fail to pay any interest on any Loan or any fee
or any other amount (other than an amount referred to in clause (a) of this
Article) payable under this Agreement, when and as the same shall become
due and payable, and such failure shall continue unremedied for a period of
five Business Days;
(c) any representation or warranty made or deemed made by or on behalf
of the Borrower or any Subsidiary in or in connection with any Loan
Document or any amendment or modification thereof or waiver thereunder
shall prove to have been incorrect in any material respect in the case of
representations and warranties not qualified as to materiality and, in the
case of representations, warranties qualified as to materiality, in any
respect when made or deemed made, or any representation or warranty made or
deemed made by or on behalf of the Borrower or any Subsidiary in any
report, certificate, financial statement or other document furnished
pursuant to or in connection with any Loan Document or any amendment or
modification thereof or waiver thereunder shall prove to have been
incorrect in any material respect when made or deemed made;
(d) the Borrower shall fail to observe or perform any covenant,
condition or agreement contained in Sections 5.02(a), 5.02(b), 5.04 (a) or
5.10 or in Article VI;
(e) the Borrower or any Subsidiary shall fail to observe or perform any
covenant, condition or agreement contained in any Loan Document (other than
those specified in clause (a), (b) or (d) of this Article), and such
failure shall continue unremedied for a period of 30 days after notice
thereof from the Administrative Agent to the Borrower (which notice will be
given at the request of any Lender);
(f) the Borrower or any Subsidiary shall fail to make any payment
(whether of principal or interest and regardless of amount) in respect of
any Material Indebtedness, when and as the same shall become due and
payable;
(g) any event or condition occurs that results in any Material
Indebtedness becoming due prior to its scheduled maturity or that enables
or permits (with or without the giving of notice, the lapse of time or
both) the holder or holders of any Material Indebtedness or any trustee or
agent on its or their behalf to cause any Material Indebtedness to become
due, or to require the prepayment, repurchase, redemption or defeasance
thereof, prior to its scheduled maturity; provided that this clause (g)
--------
shall not apply to secured Indebtedness that becomes due as a result of the
voluntary sale or transfer of the property or assets securing such
Indebtedness;
(h) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed seeking (i) liquidation, reorganization, winding
up, adjustment, protection, composition of it or its debts or other relief
in respect of the Borrower or any Subsidiary or its debts, or of a
substantial part of its assets, under any Federal, state or foreign
bankruptcy, insolvency, receivership or similar law now or hereafter in
effect or (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Borrower or any
Subsidiary or for a substantial part of its assets, and, in any such case,
such proceeding or petition shall continue unstayed or undismissed for 30
days or an order or decree approving or ordering any of the foregoing shall
be entered;
66
<PAGE>
(i) the Borrower or any Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking liquidation, reorganization,
winding up, adjustment, protection, composition of it or its debts or other
relief under any Federal, state or foreign bankruptcy, insolvency,
receivership or similar law now or hereafter in effect, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or petition described in clause (h) of this Article, (iii) apply
for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for it or for a substantial
part of its assets, (iv) file an answer admitting the material allegations
of a petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors or (vi) take any action for the
purpose of effecting any of the foregoing;
(j) the Borrower or any Subsidiary shall become unable, admit in writing
its inability or fail generally to pay its debts as they become due;
(k) one or more judgments for the payment of money in an aggregate
amount in excess of $5,000,000 shall be rendered against the Borrower or
any Subsidiary or any combination thereof and the same shall remain
undischarged for a period of 60 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally taken by a
judgment creditor to attach or levy upon any assets of the Borrower or any
Subsidiary to enforce any such judgment;
(l) an ERISA Event shall have occurred that, when taken together with
all other ERISA Events that have occurred, would reasonably be expected to
result in liability of the Borrower and its Subsidiaries in an aggregate
amount exceeding (i) $5,000,000 in any year or (ii) $10,000,000 for all
periods;
(m) any Lien purported to be created under any Security Document shall
cease to be, or shall be asserted by the Borrower or any Subsidiary not to
be, a valid and perfected Lien on any material portion of the Collateral,
with the priority required by the applicable Security Document, except (i)
as a result of the sale or other disposition of the applicable Collateral
in a transaction permitted under the Loan Documents or (ii) as a result of
the Collateral Agent's failure to maintain possession of any stock
certificates, promissory notes or other instruments delivered to it under
the Pledge Agreement;
(n) there shall occur a Change in Control with respect to the Borrower
or any Subsidiary;
(o) there shall have occurred any "Management Agreement Breach" or
"Event of Termination" under the Sprint Management Agreement;
(p) the Supply Agreement or any Loan Document shall cease to be or shall
be asserted by the Borrower or any Subsidiary not to be in full force and
effect (unless such agreement is terminated and released in accordance with
its terms) or any Guarantor fails to perform any of the terms of the
Guaranty Agreement and such failure adversely affects the Lenders;
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(q) at anytime prior to the Borrower's initial public offering, any
entity (other than Lucent) that manufactures equipment or provides services
similar to those that are the subject of the Supply Agreement shall own,
directly or indirectly, equity interests in the Borrower in excess of three
percent of the total equity interests (on a fully diluted basis) of the
Borrower;
then, and in every such event (other than an event with respect to the Borrower
described in clause (h) or (i) of this Article), and at any time thereafter
during the continuance of such event, the Administrative Agent may, and at the
request of the Required Lenders shall, by notice to the Borrower, take either or
both of the following actions, at the same or different times: (i) terminate
the Commitments, and thereupon the Commitments shall terminate immediately, and
(ii) declare the Loans then outstanding to be due and payable in whole (or in
part, in which case any principal not so declared to be due and payable may
thereafter be declared to be due and payable), and thereupon the principal of
the Loans so declared to be due and payable, together with accrued interest
thereon and all fees and other obligations of the Borrower accrued hereunder,
shall become due and payable immediately, without presentment, demand, protest
or other notice of any kind, all of which are hereby waived by the Borrower; and
in case of any event with respect to the Borrower described in clause (h) or (i)
of this Article, the Commitments shall automatically terminate and the principal
of the Loans then outstanding, together with accrued interest thereon and all
fees and other obligations of the Borrower accrued hereunder, shall
automatically become due and payable, without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower. All
rights, powers and remedies of the Administrative Agent, the Collateral Agent
and the Lenders in connection with the Loan Documents may be exercised at any
time and from time to time after the occurrence of an Event of Default so long
as such Event of Default is continuing, are cumulative and not exclusive, and
shall be in addition to any other rights, power or remedies provided by law or
equity.
ARTICLE VIII
The Agents
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Each of the Lenders hereby irrevocably appoints the Administrative
Agent and the Collateral Agent as its agents and authorizes each of them to
enter into, and to take such actions on its behalf and to exercise such powers
as are delegated to each such Agent by the terms of the Loan Documents, together
with such actions and powers as are reasonably incidental thereto.
Any Person serving as an Agent hereunder shall have the same rights
and powers in its capacity as a Lender as any other Lender and may exercise the
same as though it were not an Agent, and such Person may accept deposits from,
lend money to and, may generally engage in any kind of business with the
Borrower or any Subsidiary or other Affiliate thereof as if it were not an Agent
hereunder.
Neither Agent shall have any duties or obligations except those
expressly set forth in the Loan Documents. Without limiting the generality of
the foregoing, (a) neither Agent shall be subject to any fiduciary or other
implied duties, regardless of whether a Default has occurred
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and is continuing, (b) neither Agent shall have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated by the Loan Documents that such Agent
is required to exercise as directed in writing by the Required Lenders (or such
other number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 9.02), and (c) except as expressly set
forth in the Loan Documents, neither Agent shall have any duty to disclose, and
shall not be liable for the failure to disclose, any information relating to the
Borrower or any of its Subsidiaries that is communicated to or obtained by such
Agent or any of its Affiliates in any capacity. Neither Agent shall be liable
for any action taken or not taken by it with the consent or at the request of
the Required Lenders (or such other number or percentage of the Lenders as shall
be necessary under the circumstances as provided in Section 9.02) or in the
absence of its own gross negligence or willful misconduct. Except as prohibited
by law, neither Agent shall be liable for any indirect, consequential, special
or punitive damages (as opposed to direct or actual damages other than damages
waived hereunder) arising out of, in connection with, or as a result of, this
Agreement or any agreement or instrument contemplated hereby, the Transactions,
any Loan or the use of proceeds thereof. Each Agent shall be deemed not to have
knowledge of any Default unless and until written notice thereof is given to the
Administrative Agent by the Borrower or a Lender, and neither Agent shall be
responsible for or have any duty to ascertain or inquire into (i) any statement,
warranty or representation made in or in connection with any Loan Document, (ii)
the contents of any certificate, report or other document delivered thereunder
or in connection therewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth in any Loan
Document, (iv) the validity, enforceability, effectiveness or genuineness of any
Loan Document or any other agreement, instrument or document, or (v) the
satisfaction of any condition set forth in Article IV or elsewhere in any Loan
Document, other than to confirm receipt of items expressly required to be
delivered to such Agent.
Each Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. Each Agent also may rely
upon any statement made to it orally or by telephone and believed by it to be
made by the proper Person, and shall not incur any liability for relying
thereon. Each Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts. Neither Agent shall be
obligated to take any legal or other action hereunder which might in its
judgment involve or cause it to incur any expense or liability unless it shall
have been furnished with acceptable indemnification.
Each Agent may perform any and all its duties and exercise its rights
and powers by or through any one or more sub-agents appointed by such Agent.
Each Agent and any such sub-agent may perform any and all its duties and
exercise its rights and powers through their respective Related Parties. The
exculpatory provisions of the preceding paragraphs shall apply to any such sub-
agent and to the Related Parties of each Agent and any such sub-agent, and shall
apply to their respective activities in connection with the syndication of the
credit facilities provided for herein as well as activities as an Agent.
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Subject to the appointment and acceptance of a successor Agent as
provided in this paragraph, an Agent may resign at any time by notifying the
Lenders and the Borrower. Upon any such resignation, the Required Lenders shall
have the right to appoint a successor with the approval of the Borrower (not to
be unreasonably withheld or delayed). If no successor shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within 30 days after the retiring Agent gives notice of its resignation, then
the retiring Agent may, on behalf of the Lenders, appoint a successor Agent
which shall be a bank with an office in New York, New York, or an Affiliate of
any such bank. Upon the acceptance of its appointment as an Agent hereunder by
a successor, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. The fees
payable by the Borrower to a successor Agent shall be the same as those payable
to its predecessor unless otherwise agreed between the Borrower and such
successor Agent. After an Agent's resignation hereunder, the provisions of this
Article and Section 9.03 shall continue in effect for the benefit of such
retiring Agent, its sub-agents and their respective Related Parties in respect
of any actions taken or omitted to be taken by any of them while it was acting
as an Agent.
Each Lender acknowledges that it has, independently and without
reliance upon either Agent or any other Lender and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon either Agent or any other Lender
and based on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement, any other Loan Document or related agreement
or any document furnished hereunder or thereunder.
The Lenders agree to indemnify the Agents in their capacity as such
(to the extent not reimbursed by the Borrower and without limiting the
obligation of the Borrower to do so), ratably according to their respective
participation in the Commitments on the date on which indemnification is sought
(or, if indemnification is sought after the date upon which the Commitments
shall have terminated and the Loans shall have been paid in full, ratably in
accordance with their respective participations in the Commitments immediately
prior to such date), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever which may at any time (including, without
limitation, at any time following the payment of the Loans) be imposed on,
incurred by or asserted against the Agents in any way relating to or arising out
of, the Commitments, this Agreement, any of the other Loan Documents or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agents
under or in connection with any of the foregoing; provided that no Lender shall
be liable for the payment of any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from any Agent's gross negligence or willful misconduct.
The agreements in this Section shall survive the payment of the Loans and all
other amounts payable hereunder.
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ARTICLE IX
Miscellaneous
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SECTION 9.01. Notices. Except in the case of notices and other
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communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing and shall be
delivered by hand or overnight courier service, mailed by certified or
registered mail or sent by telecopy, as follows:
(a) if to the Borrower, to AirGate PCS, Inc., Harris Tower, Suite 1700,
233 Peachtree Street, N.E., Atlanta, Georgia 30303, Attention: President,
Telecopy No.: (404) 525-7922, with, in the case of a notice of Default, a
copy to AirGate PCS, Inc., 6511 Griffith Road, Laytonsville, Maryland
20882, Attention: Corporate Counsel, Telecopy No. (301) 540-7930;
(b) if to the Collateral Agent, to State Street Bank and Trust Company,
2 Avenue de Lafayette, 6th Floor, Boston, Massachusetts 02111-1724,
Attention: Patrick E. Thebado, Assistant Vice President, Telecopy No.:
(617) 662-1460
(c) if to the Administrative Agent, to Lucent Technologies Inc., 283
King George Road, Warren, New Jersey 07059, Attention: Assistant Treasurer,
Customer Finance, Telecopy No.: (908) 559-1711;
(d) if to Lucent Technologies Inc., in its capacity as a Lender, to
Lucent Technologies Inc., 283 King George Road, Warren, New Jersey 07059,
Attention: Assistant Treasurer, Customer Finance Telecopy No.: (908) 559-
1711;
(e) if to an Administrative Agent (if other than Lucent) at such address
and number as is provided to the Borrower and the Lenders upon appointment
of such Administrative Agent; and
(f) if to any other Lender, to it at its address (or telecopy number)
set forth in its Administrative Questionnaire.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date delivered by
hand, overnight courier service or telecopy.
SECTION 9.02. Waivers; Amendments.
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(a) No failure or delay by the Administrative Agent, the Collateral
Agent or any Lender in exercising any right or power hereunder or under any Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The rights and remedies of
the Administrative Agent, the Collateral Agent and the Lenders hereunder and
under the other
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Loan Documents are cumulative and are not exclusive of any rights or remedies
that they would otherwise have. No waiver of any provision of any Loan Document
or consent to any departure by the Borrower or any Subsidiary therefrom shall in
any event be effective unless the same shall be permitted by paragraph (b) of
this Section, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. Without limiting the
generality of the foregoing, the making of a Loan shall not be construed as a
waiver of any Default, regardless of whether the Administrative Agent, the
Collateral Agent or any Lender may have had notice or knowledge of such Default
at the time.
(b) Neither this Agreement nor any other Loan Document nor any provision
hereof or thereof may be waived, amended or modified except, in the case of this
Agreement, pursuant to an agreement or agreements in writing entered into by the
Borrower and the Required Lenders or, in the case of any other Loan Document,
pursuant to an agreement or agreements in writing entered into by the
Administrative Agent or the Collateral Agent, as applicable, and the Borrower
and/or the Subsidiary that are parties thereto, in each case with the consent of
the Required Lenders; provided that no such agreement shall (i) increase the
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Commitment of any Lender without the written consent of such Lender, (ii) reduce
the principal amount of any Loan or reduce the rate of interest thereon, or
reduce any fees payable hereunder, without the written consent of each Lender
affected thereby, (iii) postpone the scheduled date of payment of the principal
amount of any Loan, or any interest thereon, or any fees payable hereunder, or
reduce the amount of, waive or excuse any such payment, or postpone the
scheduled date of expiration of any Commitment, without the written consent of
each Lender affected thereby, (iv) change Section 2.16(b) or (c) in a manner
that would alter the pro rata sharing of payments required thereby, without the
written consent of each Lender, (v) change any of the provisions of this Section
or the definition of "Required Lenders" or any other provision of any Loan
Document specifying the number or percentage of Lenders required to waive, amend
or modify any rights thereunder or make any determination or grant any consent
thereunder, without the written consent of each Lender; (vi) release any
Subsidiary from its Guarantee under the Guarantee Agreement (except as expressly
provided in the Guarantee Agreement), or limit its liability in respect of such
Guarantee, without the written consent of each Lender or (vii) release all or
any substantial part of the Collateral from the Liens of the Security Documents
(except as expressly provided in the Security Documents), without the written
consent of each Lender or (viii) change any provisions of any Loan Document in a
manner that by its terms adversely affects the rights in respect of payments due
to Lenders holding Loans of any Class differently than those holding Loans of
any other Class, without the written consent of Lenders holding a majority in
interest of the outstanding Loans and unused Commitments of each affected Class,
in addition to the written consent of the Required Lenders; provided further
----------------
that no such agreement shall amend, modify or otherwise affect the rights or
duties of the Administrative Agent or the Collateral Agent hereunder without its
prior written consent.
SECTION 9.03. Expenses; Indemnity; Damage Waiver.
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(a) The Borrower shall pay (i) all reasonable out-of-pocket expenses
incurred by the Administrative Agent and the Collateral Agent, including the
reasonable fees, charges and disbursements of counsel for and any consultants
and appraisers retained by the Administrative Agent and the Collateral Agent, in
connection with Lucent's due diligence investigation related
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to the extension of credit hereunder and the negotiation, preparation,
execution and delivery of the Loan Documents (whether or not the transactions
contemplated hereby or thereby shall be consummated), including without
limitation expenses relating to the extension of credit pursuant to the Note and
the Obligations repaid to Lucent with the proceeds of the Note; provided that
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the aggregate amount of expenses that the Borrower shall be obligated to pay
pursuant to this clause (i) shall be subject to the limitations separately
agreed between the Borrower and Lucent, if any, (ii) all reasonable out-of-
pocket expenses incurred by the Administrative Agent and the Collateral Agent,
including the fees, charges and disbursements of any counsel for such agent in
connection with the administration of the Loan Documents, or any amendments,
modifications or waivers of the provisions thereof, (iii) all out-of-pocket
expenses incurred by each Lender, the Administrative Agent and the Collateral
Agent, including the fees, charges and disbursement of counsel for such party,
in connection with the enforcement or protection of such party's rights in
connection with the Loan Documents, including its rights under this Section, or
in connection with enforcement the Loans made hereunder, including all such out-
of-pocket expenses incurred during any workout, restructuring or negotiations in
respect of such Loans and (iv) all reasonable out-of-pocket expenses incurred by
the Administrative Agent in connection with the syndication of the Loans,
subject to the terms of the Cooperation Agreement.
(b) The Borrower shall indemnify each Lender, the Administrative Agent
and the Collateral Agent, and each Related Party of any of the foregoing Persons
(each such Person being called an "Indemnitee") against, and hold each
----------
Indemnitee harmless from, any and all losses, claims, damages, liabilities and
related expenses, including the fees, charges and disbursements of any counsel
for any Indemnitee, incurred by or asserted against any Indemnitee arising out
of, in connection with, or as a result of (i) the execution or delivery of any
Loan Document or any other agreement or instrument contemplated hereby, the
performance by the parties to the Loan Documents of their respective obligations
thereunder or the consummation of the Transactions or any other transactions
contemplated hereby, (ii) any Loan or the use of the proceeds therefrom, (iii)
any actual or alleged presence or release of Hazardous Materials on or from any
Mortgaged Property or any other property owned or operated by the Borrower or
any of its Subsidiaries, or any Environmental Liability related in any way to
the Borrower or any of its Subsidiaries, or (iv) any actual or prospective
claim, litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Indemnitee is a party thereto; provided that such indemnity shall not, as to
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any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee.
(c) To the extent that the Borrower fails to pay any amount required
to be paid by it to the Administrative Agent or the Collateral Agent, as
applicable, under paragraph (a) or (b) of this Section, each Lender severally
agrees to pay to the Administrative Agent or the Collateral Agent, as
applicable, such Lender's pro rata share (determined as of the time that the
applicable unreimbursed expense or indemnity payment is sought) of such unpaid
amount; provided that the unreimbursed expense or indemnified loss, claim,
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damage, liability or related expense, as the case may be, was incurred by or
asserted against the Administrative Agent or the Collateral Agent, as
applicable, in its capacity as such. For purposes hereof, a Lender's "pro rata
share" shall be determined based upon its share of the sum of the total
outstanding Loans and unused Commitments at the time.
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(d) To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages other than damages waived hereunder) arising out of,
in connection with, or as a result of, this Agreement or any agreement or
instrument contemplated hereby, the Transactions, any Loan or the use of the
proceeds thereof.
(e) All amounts due under this Section shall be payable not later than
30 days after written demand therefor. Notwithstanding the foregoing, any
amounts otherwise payable by the Borrower pursuant to clause (i) of paragraph
(a) of this Section shall accrue until, and be due and payable on, the earlier
of (i) the Closing Date and (ii) the termination by the Borrower of the
Commitments to pursue negotiations with another vendor. Any deferral of amounts
payable by the Borrower pursuant to the preceding sentence shall not relieve the
Borrower of its liability for such amounts or prevent the accrual thereof.
SECTION 9.04. Successors and Assigns.
----------------------
(a) The provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that the Borrower may not assign or otherwise transfer
any of its rights or obligations hereunder without the prior written consent of
each Lender (and any attempted assignment or transfer by the Borrower without
such consent shall be null and void). Nothing in this Agreement, expressed or
implied, shall be construed to confer upon any Person (other than the parties
hereto, their respective successors and assigns permitted hereby and, to the
extent expressly contemplated hereby, the Related Parties of each of the
Administrative Agent, the Collateral Agent and the Lenders) any legal or
equitable right, remedy or claim under or by reason of this Agreement.
(b) Any Lender may assign to one or more Eligible Assignees (as
defined in the Consent) all or a portion of its rights and obligations under
this Agreement (including all or a portion of its Commitment and the Loans at
the time owing to it); provided that (i) in the case of an assignment to a
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Person which is a competitor (or an Affiliate thereof) of the Borrower or any of
its Subsidiaries, in the Borrower's good faith judgment, the Borrower must give
its prior written consent to such assignment (which consent shall not be
unreasonably withheld), (ii) except in the case of an assignment to a Lender or
an Affiliate of a Lender or an assignment of the entire remaining amount of the
assigning Lender's Commitment or Loans, the amount of the Commitment or Loans of
the assigning Lender subject to each such assignment (determined as of the date
the Assignment and Acceptance with respect to such assignment is delivered to
the Administrative Agent) shall not be less than $5,000,000 unless the Borrower
otherwise consents, (iii) each partial assignment shall be made as an assignment
of a proportionate part of all the assigning Lender's rights and obligations
under this Agreement, except that this clause (iii) shall not be construed to
prohibit the assignment of (A) a proportionate part of all the assigning
Lender's rights and obligations in respect of one Class of Commitments or Loans
or (B) a proportionate part of the assigning Lender's outstanding Loans of any
Class without assigning any Commitment of such Class, (iv) the parties to each
assignment shall execute and deliver to the Administrative Agent an Assignment
and Acceptance, together with a processing and recordation fee of $3,500, and
(v) the assignee, if it shall not be a Lender, shall deliver to the
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Administrative Agent an Administrative Questionnaire; and provided further
----------------
that any consent of the Borrower otherwise required under this paragraph shall
not be required if an Event of Default has occurred and is continuing. Subject
to acceptance and recording thereof pursuant to paragraph (d) of this Section,
from and after the effective date specified in each Assignment and Acceptance
the assignee thereunder shall be a party hereto and, to the extent of the
interest assigned by such Assignment and Acceptance, have the rights and
obligations of a Lender under this Agreement, and the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Acceptance, be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all of the assigning Lender's
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Sections 2.13,
2.14, 2.15 and 9.03). Any assignment or transfer by a Lender of rights or
obligations under this Agreement that does not comply with this paragraph shall
be treated for purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with paragraph (e) of
this Section.
(c) The Administrative Agent, acting for this purpose as an agent of
the Borrower, shall maintain at one of its offices a copy of each Assignment and
Acceptance delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Commitment of, and principal amount of the
Loans owing to, each Lender pursuant to the terms hereof from time to time (the
"Register"). The entries in the Register shall be conclusive, and the Borrower,
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the Administrative Agent, the Collateral Agent and the Lenders may treat each
Person whose name is recorded in the Register pursuant to the terms hereof as a
Lender hereunder for all purposes of this Agreement, notwithstanding notice to
the contrary. The Register shall be available for inspection by the Borrower,
the Collateral Agent and any Lender, at any reasonable time and from time to
time upon reasonable prior notice.
(d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder) and any written consent to such assignment required by paragraph (b)
of this Section, the Administrative Agent shall accept such Assignment and
Acceptance and record the information contained therein in the Register. No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrower, the
Administrative Agent or the Collateral Agent, sell participations to one or more
banks or other entities (a "Participant") in all or a portion of such Lender's
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rights and obligations under this Agreement (including all or a portion of its
Commitment and the Loans owing to it); provided that (i) such Lender's
--------
obligations under this Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations and (iii) the Borrower, the Administrative Agent, the
Collateral Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement. Any agreement or instrument pursuant to which
a Lender sells such a participation shall provide that such Lender shall retain
the sole right to enforce the Loan Documents and to approve any amendment,
modification or waiver of any provision of the Loan Documents; provided that
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such agreement or instrument may provide that such Lender will not, without the
consent of the Participant, agree to any amendment, modification or waiver
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described in the first proviso to Section 9.02(b) that affects such Participant.
Subject to paragraph (f) of this Section, the Borrower agrees that each
Participant shall be entitled to the benefits and subject to the limitations of
Sections 2.13, 2.14 and 2.15 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to paragraph (b) of this Section.
To the extent permitted by law, each Participant also shall be entitled to the
benefits of Section 9.08 as though it were a Lender, provided such Participant
agrees to be subject to Section 2.16(c) as though it were a Lender.
Notwithstanding anything in this Section 9.04 to the contrary, no Participant
shall be entitled to receive any greater amounts under this Agreement than the
Lender selling such participation would have been entitled to receive had no
participation been sold.
(f) A Participant that would be a Foreign Lender if it were a Lender
shall not be entitled to the benefits of Section 2.15 unless the Borrower is
notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Borrower, to comply with Sections 2.15 and 2.17
as though it were a Lender. Each Participant that would be a Foreign Lender if
it were a Lender shall only be indemnified for increased costs or additional
amounts pursuant to Section 2.13 or 2.15 if and to the extent that the Lender
that sold such participation is entitled to make a claim on the Borrower for
such increased costs or additional amounts.
(g) Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
such Lender, including any pledge or assignment to secure obligations to a
Federal Reserve Bank, and this Section shall not apply to any such pledge or
grant of a security interest; provided that no such pledge or grant of a
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security interest shall release a Lender from any of its obligations hereunder
or substitute any such pledgee or grantee for such Lender as a party hereto.
SECTION 9.05. Survival. All covenants, agreements,
--------
representations and warranties made by the Borrower or any Subsidiary in the
Loan Documents and in the certificates or other instruments delivered in
connection with or pursuant to this Agreement or any other Loan Document shall
be considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of the Loan Documents and the making of any
Loans, regardless of any investigation made by any such other party or on its
behalf and notwithstanding that the Administrative Agent, the Collateral Agent
or any Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder, and
shall continue in full force and effect as long as the principal of or any
accrued interest on any Loan or any fee or any other amount payable under this
Agreement is outstanding and unpaid and so long as the Commitments have not
expired or terminated. The provisions of Sections 2.13, 2.14, 2.15 and 9.03 and
Article VIII shall survive and remain in full force and effect regardless of the
consummation of the transactions contemplated hereby, the repayment of the
Loans, the expiration or termination of the Commitments or the termination of
this Agreement or any provision hereof.
SECTION 9.06. Counterparts; Integration; Effectiveness. This
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Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This Agreement,
the other Loan Documents and any separate letter agreements with respect to the
Borrower's agreement to cooperate with Lucent with respect to marketing, selling
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or syndicating Loans and Commitments or with respect to fees payable to Lucent
the Administrative Agent or the Collateral Agent constitute the entire contract
among the parties relating to the subject matter hereof and supersede any and
all previous agreements and understandings, oral or written, relating to the
subject matter hereof. Except as provided in Section 4.01, this Agreement shall
become effective when it shall have been executed by the Administrative Agent
and the Collateral Agent and when the Administrative Agent shall have received
counterparts hereof which, when taken together, bear the signatures of each of
the other parties hereto, and thereafter shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
Delivery of an executed counterpart of a signature page of this Agreement by
telecopy shall be effective as delivery of a manually executed counterpart of
this Agreement.
SECTION 9.07. Severability. Any provision of this Agreement held
------------
to be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction. The parties shall endeavor in good faith negotiations to replace
the invalid, illegal or unenforceable provision with valid provisions the
economic effect of which is as close as possible to that of the invalid, illegal
or unenforceable provision.
SECTION 9.08. Right of Setoff. If an Event of Default shall have
---------------
occurred and be continuing, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other obligations at any time
owing by such Lender or Affiliate to or for the credit or the account of the
Borrower against any of and all the obligations of the Borrower now or hereafter
existing under this Agreement held by such Lender, irrespective of whether or
not such Lender shall have made any demand under this Agreement and although
such obligations may be unmatured. The rights of each Lender under this Section
are in addition to other rights and remedies (including other rights of setoff)
which such Lender may have.
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of
--------------------------------------------------
Process.
-------
(a) This Agreement shall be construed in accordance with and governed
by the law of the State of New York, excluding (to the greatest extent
permissible by law) any rule of law that would cause the application of the laws
of any jurisdiction other than the State of New York.
(b) The Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Supreme Court
of the State of New York sitting in New York County and of the United States
District Court of the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to any
Loan Document, or for recognition or enforcement of any judgment, and each of
the parties hereto hereby irrevocably and unconditionally agrees that all claims
in respect of any such action or proceeding may be heard and determined in such
New York State court or, to the extent permitted by law, in such Federal court.
Each of the parties hereto agrees that a final
77
<PAGE>
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement or any other Loan Document shall
affect any right that the Administrative Agent, the Collateral Agent or any
Lender may otherwise have to bring any action or proceeding relating to this
Agreement or any other Loan Document against the Borrower or any of its
Subsidiaries or its properties in the courts of any jurisdiction.
(c) The Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or any other Loan Document in any
court referred to in paragraph (b) of this Section. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
(d) The Borrower irrevocably and unconditionally consents to the
appointment of CT Corporation System, with an office at 1633 Broadway, New York,
New York 10019, as its process agent (together with any successor process agent,
the "Process Agent") upon which service of process in New York, New York, may be
-------------
served in any legal action or proceeding instituted in such courts. To the
extent permitted by applicable law, the Borrower agrees that service of process
may be made personally or by mailing or delivering a copy of the summons and
complaint or other legal process in any legal action or proceeding to the
Borrower, in care of the applicable Process Agent and such agent is hereby
authorized to accept, receive and acknowledge the same for and on behalf of the
Borrower, and to admit service with respect thereto. Service upon the applicable
Process Agent shall be deemed in every respect effective service of process upon
the Borrower and shall be legal and binding upon the Borrower for all purposes
notwithstanding any failure to mail copies of such legal process to the
Borrower, or any failure on the part of the Borrower, to receive the same. The
Borrower further agrees that it will not revoke the appointment of the
applicable Process Agent so long as any of the Loans remain outstanding or until
the appointment, which appointment the Borrower similarly agrees not to revoke,
of a successor Process Agent and such successor's acceptance of such
appointment. The Borrower agrees that it will at all times continuously maintain
the applicable Process Agent to receive service of process in the State of New
York on behalf of itself, and, in the event that for any reason such Process
Agent shall cease to be the applicable Process Agent, the Borrower shall
promptly appoint a successor Process Agent for service of process in the State
of New York and shall promptly deliver to the Administrative Agent a copy of
such successor Process Agent's acceptance or acknowledgment of that appointment.
The Borrower will take any and all reasonable action, including, the filing of
any and all documents and instruments, that may be necessary to continue the
appointment of the applicable Process Agent in full force and effect. Each other
party to this Agreement irrevocably consents to service of process in the manner
provided for notices in Section 9.01. Nothing in this Agreement will affect the
right of any party to this Agreement to serve process in any other manner
permitted by law.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES,
--------------------
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY
78
<PAGE>
(WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.
SECTION 9.11. Headings. Article and Section headings and the Table of
--------
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 9.12. Confidentiality. Each of the Borrower, the
---------------
Administrative Agent, the Collateral Agent and the Lenders agrees to maintain
the confidentiality of the Information (as defined below), except that
Information may be disclosed (a) to its and its Affiliates' directors, officers,
employees and agents, including accountants, legal counsel and other advisors
(it being understood that the Persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep
such Information confidential), (b) to the extent requested by any regulatory
authority, (c) to the extent required by applicable laws or regulations or by
any subpoena or similar legal process, (d) to any other party to this Agreement,
(e) in connection with the exercise of any remedies hereunder or any suit,
action or proceeding relating to this Agreement or any other Loan Document or
the enforcement of rights hereunder or thereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section, to any
assignee of or Participant in, or any prospective assignee of or Participant in,
any of its rights or obligations under this Agreement, (g) with the consent of
the Borrower, the Administrative Agent, the Collateral Agent or the Lenders, as
applicable, (h) to the extent such Information (i) becomes publicly available
other than as a result of a breach of this Section or (ii) becomes available to
any party to this Agreement on a nonconfidential basis from a source other than
any other party to this Agreement. For the purposes of this Section,
"Information" means all information received from any party to this Agreement
- ------------
relating to such party or its business, other than any such information that is
available to the receiving party on a nonconfidential basis prior to disclosure
by the disclosing party; provided that such information is clearly identified at
--------
the time of delivery as confidential. Any Person required to maintain the
confidentiality of Information as provided in this Section shall be considered
to have complied with its obligation to do so if such Person has exercised the
same degree of care to maintain the confidentiality of such Information as such
Person would accord to its own confidential information.
SECTION 9.13. Interest Rate Limitation. Notwithstanding anything
------------------------
herein to the contrary, if at any time the interest rate applicable to any Loan,
together with all fees, charges and other amounts which are treated as interest
on such Loan under applicable law (collectively the "Charges"), shall exceed the
-------
maximum lawful rate (the "Maximum Rate") which may be contracted for, charged,
------------
taken, received or reserved by the Lender(s) holding such Loan in accordance
with applicable law, the rate of interest payable in respect of such Loan
hereunder, together with all Charges payable in respect thereof, shall be
limited to the Maximum Rate and, to the extent lawful, the interest and Charges
that would have been payable in respect of such
79
<PAGE>
Loan but were not payable as a result of the operation of this Section shall be
cumulated and the interest and Charges payable to such Lender in respect of
other Loans or periods shall be increased (but not above the Maximum Rate
therefor) until such cumulated amount, together with interest thereon at the
Federal Funds Effective Rate to the date of repayment, shall have been received
by such Lender.
[Signatures follow on next page.]
80
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
AIRGATE PCS, INC.,
by
[SIG]
________________________
Name: Thomas M. Dougherty
Title: President and Chief Executive Officer
LUCENT TECHNOLOGIES INC.,
as Administrative Agent and as Lender,
by
[SIG]
________________________
Name:
Title:
STATE STREET BANK AND TRUST COMPANY,
as Collateral Agent
by
[SIG]
________________________
Name: Patrick E. Thebado
Title: Assistant Vice President
<PAGE>
Schedule 1.01
Sprint Affiliation Agreements
-----------------------------
Sprint PCS Management Agreement between SprintCom, Inc. and AirGate
Wireless, LLC dated July 22, 1998.*
Sprint PCS Services Agreement between Sprint Spectrum L.P. and AirGate
Wireless, L.L.C. dated July 22, 1998*.
Sprint Trademark and Service Mark License Agreement between Sprint
Communications Company, L.P. and AirGate Wireless, L.L.C. dated July 22,
1998.*
Sprint Spectrum Trademark and Service Mark License Agreement between Sprint
Spectrum L.P. and AirGate Wireless, L.L.C. dated July 22, 1998.*
- ------------------------
* (assigned to AirGate Wireless, Inc. on November 20, 1998 with the consent of
SprintCom, Inc., Sprint Communications Company, L.P., and Sprint Spectrum L.P.)
<PAGE>
Schedule 2.01
Commitments
-----------
<TABLE>
<CAPTION>
Lender Tranche 1 Tranche 2
------ --------- ---------
Commitment Commitment
---------- ----------
Amount Amount
------ ------
<S> <C> <C>
Lucent Technologies Inc. $13,500,000 $140,000,000
</TABLE>
<PAGE>
Schedule 3.05(b)
Real Property
-------------
Borrower's interests in real property:
*411 Huger Street, Columbia, S.C. (switch site under renovation)
*485 Columbia Industrial Blvd., Augusta, GA (former potential switch site)
*4925 LaCross Road, Suite 104, North Charleston, SC 29401
*Harris Tower, 233 Peachtree Street, N.E., Suite 1700, Atlanta, Georgia 30303
AGW's interests in real property:
*See spread sheet entitled Lease List attached hereto
*111 Smith Hines Road, Suite D, Greenville, SC
*4201 Congress Street, Suite 440, Charlotte, NC
*1492 highway 17 North, Mount Pleasant, SC
*765 Haywood Road, Greenville, SC
*1854 Henderson Road, Asheville, N.C.
Real property jointly held by the Borrower and AGW:
* Real property that constitutes any part of the Real Estate Assets appears
with an asterisk.
<PAGE>
Schedule 3.05(c)
Intellectual Property
---------------------
Borrower: None, other than those rights provided for in the Sprint PCS
Affiliation Agreements set forth on Schedule 1.01.
AGW: None.
<PAGE>
Schedule 3.06
Litigation
----------
None.
<PAGE>
Schedule 3.13
Assets and Indebtedness of AGW
------------------------------
Assets (other than the Real Estate Assets):
None.
Indebtedness (other than pursuant to the Guaranty or the Security Documents):
None
<PAGE>
Schedule 3.14
Insurance
---------
See attached
<PAGE>
Schedule 3.20
Amendments to Sprint Affiliation Agreements
-------------------------------------------
Addendum I to Sprint PCS Management Agreement dated July 22, 1998.
Addendum II to Sprint PCS Management Agreement dated May 24, 1999.
Addendum III to Sprint PCS Management Agreement dated August 2, 1999.
SprintCom, Inc. has certain rights set forth in the Sprint Affiliation
Agreements to amend and modify certain programs and requirements upon notice to
the Borrower.
<PAGE>
Schedule 6.01
Existing Indebtedness
---------------------
1) Secured Promissory Note to Lucent Technologies Inc. in the principal amount
of $10,000,000 issued by the Borrower on June 15, 1999.
2) +Convertible Promissory Note to Weiss Peck & Greer Venture Associates III,
L.P. in the principal amount of $1,437,655 issued by the Borrower on
May 18, 1999.
3) +Convertible Promissory Note to WPG Enterprise Funds II, L.P. in the
principal amount of $1,728,986 issued by the Borrower on May 18, 1999.
4) +Convertible Promissory Note to JAFCO, Ltd. in the principal amount of
$175,760 issued by the Borrower on May 18, 1999.
5) +Convertible Promissory Note to JAFCO G-6(A) Investment Enterprise
Partnership in the principal amount of $106,896 issued by the Borrower
on May 18, 1999.
6) +Convertible Promissory Note to JAFCO G-6(B) Investment Enterprise
Partnership in the principal amount of $106,896 issued by the Borrower
on May 18, 1999.
7) +Convertible Promissory Note to JAFCO G-7(A) Investment Enterprise
Partnership in the principal amount of $244,624 issued by the Borrower on
May 18, 1999.
8) +Convertible Promissory Note to JAFCO G-7(B) Investment Enterprise
Partnership in the principal amount of $244,624 issued by the Borrower
on May 18, 1999.
9) +Convertible Promissory note to JAFCO USIT Fund III, L.P. in the principal
amount of $3,515,200 issued by the Borrower on May 18, 1999.
10) **Promissory Note to SprintCom, Inc. in the principal amount of $7,700,000,
as amended, issued by the Borrower on July 22, 1998.
11) **Promissory Note to NationsBank, N.A. in the principal amount of
$1,000,000, issued by AirGate Wireless, L.L.C. on May 9, 1997 and
assigned to the Borrower.
12) **Promissory Note to Robert E. Gourlay, as amended, in the principal amount
of $65,000 issued by AirGate, L.L.C. on June 11, 1996 and assumed by the
Borrower.
13) **Promissory Note to David C. Roberts, as amended, in the principal amount
of $55,000 issued by AirGate, L.L.C. on June 11, 1996 and assumed by the
Borrower.
14) **Promissory Note to Larry W. Foster, as amended, in the principal amount
of $30,000 issued by AirGate, L.L.C. on June 11, 1996 and assumed by the
Borrower.
- ----------------------------
+ Convertible into equity at the IPO.
** to be repaid with proceeds from concurrent common stock offering and
offering of senior subordinated discount notes.
<PAGE>
Schedule 6.02
Existing Liens
--------------
Liens/interests granted to Lucent Technologies Inc. pursuant to the
conditions for the $10,000,000 promissory note to Lucent Technologies Inc.
issued by the Borrower on June 15, 1999.
<PAGE>
Schedule 6.04(a)
Permitted Investments
---------------------
Promissory Note from AirGate Wireless, L.L.C. to AirGate Wireless, Inc. in
the principal amount of $343,855.52 dated October 27, 1998.
Promissory Note from AirGate Wireless, L.L.C. to AirGate Wireless, Inc. in
the principal amount of $310,971.25 dated April 27, 1999.
<PAGE>
Schedule 6.08
Existing Restrictions
---------------------
None.
<PAGE>
EXHIBIT C
---------
PLEDGE AGREEMENT
(AirGate PCS, Inc.)
THIS PLEDGE AGREEMENT, dated as of August 16, 1999 (this "Pledge
------
Agreement"), is made by AIRGATE PCS, INC., a Delaware corporation (the
- ---------
"Pledgor"), in favor of STATE STREET BANK AND TRUST COMPANY, a Massachusetts
-------
banking corporation, as collateral agent for the Lenders (as defined below) (in
such capacity, "Collateral Agent" and "Pledgee").
---------------- -------
W I T N E S S E T H:
-------------------
WHEREAS, Pledgor is the sole owner of all of the shares of the capital
stock of AGW Leasing Company, Inc. ("AGW Leasing");
-----------
WHEREAS, Pledgor has entered into that certain Credit Agreement, of
even date herewith, among the several lending institutions from time to time
party thereto (the "Lenders"), Collateral Agent and Administrative Agent (the
-------
"Credit Agreement"); and
- -----------------
WHEREAS, to secure the due and prompt payment and performance by
Pledgor of the Obligations under the Credit Agreement, the Lenders have required
the Pledgor to execute and deliver this Pledge Agreement to the Pledgee and to
pledge hereunder the security hereinafter referred to;
NOW, THEREFORE, the parties hereby agree as follows:
SECTION 1. Definitions; Interpretation. (a) Defined Terms. Capitalized
--------------------------- -------------
terms which are used herein without definition and which are defined in the
Credit Agreement shall have the same meaning herein as in the Credit Agreement,
and the following terms shall have the following meanings:
"AGW Leasing" shall have the meaning ascribed in the preamble hereto.
-----------
"AGW Leasing By-Laws" shall mean the By-Laws of AGW Leasing, dated as
-------------------
of December 16, 1998, as the same may, from time to time, be amended.
"Administrative Agent" shall have the meaning ascribed thereto in the
--------------------
recitals hereof.
"Collateral Agent" shall have the meaning ascribed thereto in preamble
----------------
hereto.
"Credit Agreement" shall have the meaning ascribed thereto in the
----------------
recitals hereto.
"Lenders" shall have the meaning ascribed thereto in the recitals
-------
hereto.
<PAGE>
"Obligations" shall have the same meaning ascribed thereto in the
-----------
Credit Agreement.
"Person" means any natural person, individual, corporation, limited
------
liability company, limited liability partnership, trust, business trust,
joint venture, association, company, sole proprietorship, unincorporated
association, joint stock corporation, partnership, Governmental Authority
or other entity.
"Pledge Agreement" shall have the meaning ascribed thereto in the
----------------
preamble hereto.
"Pledged Collateral" has the meaning ascribed thereto in Section 2
------------------
hereof.
"Pledged Stock" has the meaning ascribed thereto in Section 2 hereof.
-------------
"Pledgee" shall have the meaning ascribed in the preamble hereto.
-------
"Pledgor" shall have the meaning ascribed thereto in the preamble
-------
hereto.
"Requirement of Law" has the meaning ascribed thereto in the Credit
------------------
Agreement.
"Securities Act" shall mean the Securities Act of 1933.
--------------
"Security Interest" has the meaning ascribed thereto in Section 2
-----------------
hereof.
"Termination Date" shall mean the date on which all of the Obligations
----------------
have been paid in full and the Commitment of the Lenders to make Loans
under the Credit Agreement shall have expired or been terminated.
(b) Terms Generally. The definitions of terms herein shall apply
---------------
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including"
shall be deemed to be followed by the phrase "without limitation". The word
"will" shall be construed to have the same meaning and effect as the word
"shall". Unless the context requires otherwise (i) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as
from time to time amended, supplemented or otherwise modified (subject to
any restrictions on such amendments, supplements or modifications set forth
herein), (ii) any reference herein to any Person shall be construed to
include such Person's successors and assigns, (iii) the words "herein",
"hereof" and "hereunder", and words of similar import, shall be construed
to refer to this Pledge Agreement in its entirety and not to any particular
provision hereof, (iv) all references herein to Articles, Sections,
Exhibits and Schedules shall be construed to refer to Articles and Sections
of, and Exhibits and Schedules to, this Pledge Agreement and (v) the words
"asset" and "property" shall be construed to have the same meaning and
effect and to refer to any and all tangible and intangible assets and
properties, including cash, securities, accounts, contract rights, licenses
and intellectual property.
2
<PAGE>
(c) Accounting Terms; GAAP. Except as otherwise expressly provided
----------------------
herein, all terms of an accounting or financial nature shall be construed
in accordance with GAAP, as in effect from time to time; provided that, if
--------
Pledgor notifies Pledgee that Pledgor requests an amendment to any
provision hereof to eliminate the effect of any change occurring after the
date hereof in GAAP or in the application thereof on the operation of such
provision (or if Pledgee requests of Pledgor an amendment to any provision
hereof for such purpose), regardless of whether any such notice is given
before or after such change in GAAP or in the application thereof, then
such provision shall be interpreted on the basis of GAAP as in effect and
applied immediately before such change shall have become effective until
such notice shall have been withdrawn or such provision amended in
accordance herewith.
SECTION 2. Grant of Security Interest. As collateral security for the
--------------------------
prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations, the Pledgor hereby
delivers, pledges with, and sets over, transfers, assigns and hypothecates and
grants a general first priority continuing security interest (the "Security
--------
Interest") and lien in favor of the Pledgee in all right, title and interest of
- --------
the Pledgor, whether now owned or hereafter acquired, in the equity interests of
AGW Leasing (collectively referred to as the "Pledged Collateral"), including:
------------------
(a) all of the capital stock of AGW Leasing (the "Pledged Stock"),
-------------
currently represented by certificate No. 2;
(b) all additional shares of capital stock of AGW Leasing hereafter
issued to or acquired by the Pledgor in any manner;
(c) all shares of capital stock of AGW Leasing which the Pledgor
receives by reason of any stock split, bonus, dividend, distribution or
other form of issue, with respect to or arising from any of the stock
described in subsection (a) or (b) above;
(d) all warrants, options or rights to acquire, or securities
convertible into, any capital stock of AGW Leasing, now existing or
hereafter issued to or acquired by the Pledgor;
(e) all dividends or distributions of cash or other property declared,
paid or payable upon the Pledged Stock or any other stock or securities
described above;
(f) all increases and profits of the foregoing and all proceeds,
replacements and substitutions thereof; and
(g) all proceeds of the foregoing including, without limitation, all
securities or other property acquired with any proceeds.
Concurrently herewith the Pledgor has delivered to Pledgee, the
certificate representing the Pledged Stock, together with stock powers in
form and substance satisfactory to the Pledgee duly executed in blank,
regarding the Pledged Collateral. The Pledgor will hold in trust for the
Pledgee and forthwith cause to be delivered to the
3
<PAGE>
Pledgee or its designated agent any certificates or other instruments
representing Pledged Collateral hereafter coming into existence.
SECTION 3. Representations and Warranties of the Pledgor. The Pledgor
---------------------------------------------
represents and warrants that, except as otherwise disclosed by the Pledgor to
the Pledgee:
(a) Title; No Other Liens. All of the shares of stock described in
---------------------
Section 2 are fully paid, non-assessable and validly issued. Except for the
Security Interest, the Pledgor owns each item of the Pledged Collateral
free and clear of any and all liens or claims of others; no security
agreement, financing statement or other public notice with respect to all
or any part of the Pledged Collateral is on file or of record in any public
office, except for the Security Interest;
(b) Perfected First Priority Security Interest. Upon delivery of the
------------------------------------------
Pledged Stock and any other instruments and certificates representing
Pledged Collateral, the Security Interest and lien constitutes and will
continue to constitute a valid, perfected first priority security interest
in such Pledged Collateral in favor of the Pledgee, enforceable as such
against all creditors of and purchasers from the Pledgor;
(c) Power and Authority. The Pledgor has full power and authority to
-------------------
pledge any or all of its rights and interests in the Pledged Collateral,
and the Pledgor has full power and authority to execute and deliver this
Pledge Agreement and to perform its obligations hereunder and this Pledge
Agreement constitutes the valid and legally binding obligation of the
Pledgor, enforceable in accordance with its terms and conditions (except as
such enforcement may be limited by applicable bankruptcy, insolvency,
moratorium or similar state or federal laws affecting enforcement of
creditors' rights and remedies generally and except for the enforceability
of provisions providing for injunctive relief, specific performance or
other equitable remedies, regardless of whether such enforcement is sought
in a proceeding in equity or at law);
(d) No Conflict. The execution and delivery by the Pledgor of, and
-----------
performance by the Pledgor of its obligations under, this Pledge Agreement
do not and will not result in any violation of or conflict with the terms
of:
(i) Any Requirement of Law applicable to AGW Leasing or the
Pledgor; or
(ii) Any other material agreement, indenture, instrument or
license applicable to or binding upon AGW Leasing or the Pledgor and
not covered by clause (i) above;
(e) Pledged Stock. As of the date hereof, the Pledged Stock
-------------
constitutes all of the issued and outstanding capital stock of AGW Leasing
and the Pledge of Collateral will at all times constitute all of the issued
and outstanding capital stock of the AGW Leasing;
4
<PAGE>
(f) Options, Etc. There is no option, warrant, call or other right or
------------
commitment of any character giving any Person the right to purchase any of
the Pledged Stock or other Pledged Collateral from the Pledgor or AGW
Leasing;
(g) Stock Powers. The instruments of transfer delivered with the
------------
Pledged Collateral are duly executed;
(h) Voting Rights. There are no restrictions on the voting rights
-------------
associated with the Pledged Collateral or upon the transfer of any of the
Pledged Collateral (other than the restrictions contained in this Pledge
Agreement) that have not been waived by the party having the right to
enforce such restrictions; and
(i) No Consent. No consent of, and no authorization, approval or other
----------
action by, and no notice to or filing with, any (A) Governmental Authority
is required either (i) for the grant by the Pledgor of the security
interest or pledge granted hereby or for the execution, delivery or
performance of this Pledge Agreement by the Pledgor, (ii) for the
perfection or maintenance of the pledge and security interest created
hereby in the Pledged Stock (including the first priority nature of such
pledge or security interest) or (iii) for the exercise by the Pledgee of
its rights provided for in this Pledge Agreement or the remedies in respect
of the Pledged Collateral pursuant to this Pledge Agreement (except as may
be required in connection with the disposition of any portion of the
Pledged Collateral by laws affecting the offering and sale of securities
generally), other than consents, authorizations, approvals and other
actions which have already been obtained (copies of which have been
delivered to Pledgee) and (B) third party is required to effect the pledge
of the Pledged Stock.
SECTION 4. Covenants of the Pledgor. The Pledgor covenants and agrees
------------------------
with the Pledgee that, from and after the date hereof, the Pledgor:
(a) Adverse Claims. Shall warrant and defend the Pledged Collateral
--------------
against the claims and demands of all other parties and keep the Pledged
Collateral free from all security interests or other encumbrances, except
as otherwise permitted under this Pledge Agreement;
(b) Assignment. Shall not sell, transfer, assign, deliver, convey or
----------
otherwise dispose of any Pledged Collateral or any interest therein or
right thereunder or grant to any Person any option, warrant or other right
to acquire any of the Pledged Collateral or any interest therein or right
thereunder, except as otherwise permitted hereunder or under the Credit
Agreement;
(c) Pledge. Shall not pledge, hypothecate, grant a security interest
------
or lien in or otherwise encumber in any manner any of the Pledged
Collateral except to the Trustee for the holders of the senior subordinated
discount notes issued under the Indenture (as defined in the Credit
Agreement);
(d) AGW Leasing By-Laws. Shall not, except upon the Pledgee's request
-------------------
or with the Pledgee's prior written consent, cause, permit or consent to
any amendment or modification to the AGW Leasing By-Laws or the articles of
incorporation of AGW
5
<PAGE>
Leasing; provided however, that if such amendment does not materially lessen
the rights granted to Pledgee by this Pledge Agreement, only prior notice to
Pledgee shall be required;
(e) Certificates, Etc. Shall not, except as permitted under Section
-----------------
6.01(b), Section 6.04(a) and Section 6.06 of the Credit Agreement, or upon
the Pledgee's request or with the Pledgee's prior written consent, seek or
take delivery of any additional certificate, instrument or other written
document constituting or evidencing any Pledged Collateral, and if the
Pledgor receives any such certificate, instrument or document (including,
but not limited to, instruments evidencing intercompany obligations related
to real property leases), the Pledgor shall immediately notify the Pledgee
thereof and immediately deliver such certificate, instrument or document to
the Pledgee, duly endorsed as the Pledgee requests or accompanied by an
appropriate instrument of transfer executed in blank; and
(f) Taxes. Shall pay or reimburse the Pledgee for all taxes,
-----
assessments and other charges of every nature that may be imposed, levied
or assessed on the Pledgee in respect of the Pledged Collateral other than
taxes on net income or any tax in lieu thereof, subject to Section 2.15 of
the Credit Agreement.
SECTION 5. Voting Rights. During the term of this Pledge Agreement, so
-------------
long as there shall not occur and be continuing any Event of Default, the
Pledgor shall have the right to vote the Pledged Collateral on all corporate
questions for all purposes not inconsistent with the terms of this Pledge
Agreement or the Credit Agreement. Upon the occurrence of an Event of Default so
long as such Event of Default shall be continuing, the Pledgee shall thereafter
have, at its discretion, the option to exercise all voting powers and other
corporate rights pertaining to the Pledged Collateral. The Pledgee may, upon or
at any time after the occurrence of an Event of Default so long as such Event of
Default shall be continuing, at its option, transfer or register the Pledged
Collateral or any part thereof into its own or its nominee's name.
SECTION 6. Distributions and Other Income from Pledged Collateral.
(a) Any and all:
(i) Cash distributions paid in respect of the Pledged
Collateral;
(ii) Distributions paid or payable other than in cash in
respect of the Pledged Collateral; and
(iii) Instruments, securities and other property received,
receivable or otherwise distributed in respect of, upon the
subdivision or combination of, or in exchange for, any Pledged
Collateral,
shall constitute Pledged Collateral, and shall forthwith be paid or delivered
directly to the Pledgee to hold as Pledged Collateral; provided, however, that
-------- -------
if no Event of Default shall have occurred and be continuing, the Pledgor shall
be entitled to receive and retain any and all cash distributions and interest
paid in respect of the Pledged Collateral to the extent such payments are not
prohibited by the Credit Agreement.
6
<PAGE>
(b) Any and all distributions paid or payable in cash in respect of
any Pledged Collateral in connection with a partial or total liquidation or
dissolution, and any and all cash paid, payable or otherwise distributed in
respect to redemption of, or in exchange for, any Pledged Collateral, shall
be paid or delivered directly to the Pledgee, which, at the Pledgee's sole
election, shall be held as Pledged Collateral or applied to the Obligations
in such order and manner as the Pledgee determines.
(c) If, notwithstanding the foregoing, the Pledgor receives any
distribution or other property that should have been paid or delivered
directly to the Pledgee as provided in this Section 6, or that was paid to
the Pledgor in violation of Section 6 hereof, the Pledgor shall:
(i) Receive such distribution or property, as the case may be,
in trust for the benefit of the Pledgee;
(ii) Segregate such distribution or property from the other
property or funds of the Pledgor; and
(iii) Deliver such distribution or property immediately to the
Pledgee in the form received (with any necessary endorsement).
SECTION 7. Remedies.
--------
(a) Generally. During the existence of an Event of Default, the
---------
Pledgee shall have, and may exercise with respect to the Pledged
Collateral, in such order and manner as it determines, all rights and
remedies of a secured party under the Uniform Commercial Code and under any
other applicable law, as well as those rights granted herein and in any
other agreement now or hereafter in effect between the Pledgor and the
Pledgee. Without limiting the generality of the foregoing, during the
existence of an Event of Default, the Pledgee may sell or otherwise dispose
of all or any part of the Pledged Collateral upon prior notice to the
Pledgor, by public or private sale, in one or more transactions, and in
such order as the Pledgee determines. Proceeds realized from such sales and
dispositions shall be applied first to the Pledgee's costs and expenses in
connection therewith and then to the Obligations in such order as the
Pledgee determines.
(b) Private Sales. The Pledgor recognizes that the Pledgee may be
-------------
unable to effect a public sale of all or a part of the Pledged Collateral
by reason of certain provisions contained in the Securities Act and the
securities laws of various states, and may be compelled to resort to one or
more private sales to a restricted group of purchasers that will be obliged
to agree, among other things, to acquire the Pledged Collateral for their
own account, for investment and without a view to the distribution or
resale thereof. The Pledgor understands that private sales so made may be
at prices and other terms less favorable than if the Pledged Collateral
were sold at public sales, and agrees that the Pledgee has no obligation to
delay the sale of the Pledged Collateral for the period of time necessary
to permit the Pledgee to register the Pledged Collateral for sale under the
Securities Act or such state laws. The Pledgor agrees that private sales
7
<PAGE>
under the foregoing circumstances shall be deemed to have been made in a
commercially reasonable manner.
(c) Notice of Sale. Without in any way requiring notice to be given in
--------------
the following time and manner, the Pledgor agrees that any notice by the
Pledgee of a sale, disposition or other intended action hereunder or in
connection herewith, whether required by the Uniform Commercial Code or
otherwise, shall constitute reasonable notice to the Pledgor if such notice
is:
(i) Mailed by registered or certified mail, return receipt
requested, postage prepaid;
(ii) Delivered personally against receipt;
(iii) Sent by a recognized overnight delivery service; or
(iv) Sent via telecopy, telex or cable,
in each case at least ten days prior to such action, to the
Pledgor's address specified in Section 10(f) hereof.
(d) Right to Purchase the Pledged Collateral. The Pledgee shall have
----------------------------------------
the right upon any such public sale and, to the extent permitted by law,
upon any such private sale, to purchase the whole or any part of the
Pledged Collateral so sold, free of any right or equity of redemption in
the Pledgor, which right or equity is hereby waived and released.
(e) Costs. All costs and expenses incurred by the Pledgee in enforcing
-----
this Pledge Agreement, in realizing upon or protecting any Pledged
Collateral and in enforcing and collecting any Obligations or any guaranty
thereof (including, if the Pledgee retains counsel for advice, suit,
appeal, insolvency or other proceedings under the federal Bankruptcy Code
or otherwise, or for any of the above purposes, the actual attorneys' and
paralegals' fees incurred by the Pledgee), shall constitute part of the
Obligations, and all such costs and expenses are secured by the Pledged
Collateral, as well as by all other property serving as security for the
Obligations.
(f) Transfer of Pledged Collateral. During the existence of an Event
------------------------------
of Default, the Pledgee is authorized to transfer the Pledged Collateral or
any part thereof into its own name or that of its nominee on the books of
AGW Leasing so that the Pledgee or its nominee may appear of record as the
sole owner thereof.
(g) No Limitation on the Pledgee's Rights. The rights of the Pledgee
-------------------------------------
hereunder shall not be conditioned or contingent upon the pursuit by the
Pledgee of any right or remedy against the Pledgor or against any other
Person that may be or become liable in respect of all or any part of the
Obligations or against any collateral security therefor, guarantee thereof
or right of offset with respect thereto.
(h) Duties of the Pledgor. During the existence of any Event of
---------------------
Default, the Pledgor shall:
8
<PAGE>
(i) Use its best efforts to assist and cooperate in obtaining
all approvals that are then required by applicable law or contract
for or in connection with any transaction contemplated by the UCC;
(ii) Consent to (and not challenge) the transfer of control or
assignment of the Pledged Collateral to a receiver, trustee, transfer
or similar official or to any purchaser of any of the Pledged
Collateral pursuant to any public or private sale, judicial sale,
foreclosure or exercise of other remedies available to the Pledgee
as permitted herein and by applicable law;
(iii) Assist and cooperate (and use its best efforts to cause
others to assist and cooperate) with the Pledgee to ensure that AGW
Leasing continues:
(A) To operate in the normal course of business;
(B) To fulfill all of its legal, regulatory and
contractual obligations; and
(C) To otherwise be properly and professionally managed;
such assistance and cooperation may include the employment of one or
more qualified and independent consultants and/or professional
managers acceptable to the Pledgee to assist in the interim operations
of AGW Leasing, all of which the Pledgor agrees not to challenge;
(iv) At the request of the Pledgee, cooperate in effecting the
transfer of any and all of the Pledged Collateral to a transferee
acceptable to the Pledgee; and
(v) Not accept (or permit AGW Leasing to accept) any offer to
buy all or any part of the Pledged Collateral or AGW Leasing
operations pursuant to this Section 7 without the Pledgee's prior
written consent.
SECTION 8. Further Assurances; Waivers; Etc.
--------------------------------
(a) Further Assurances. At any time and from time to time, upon the
------------------
written request of the Pledgee, and at the sole expense of the Pledgor
(including all costs for lien searches and filing fees of every kind), the
Pledgor shall promptly and duly execute and deliver such further
instruments and documents and take such further actions as the Pledgee may
reasonably request for the purpose of obtaining or preserving the full
benefits of this Pledge Agreement and of the rights and powers herein
granted, including, but not limited to, the filing of any financing
statements, assignments, continuations or other documents under the Uniform
Commercial Code in effect in any jurisdiction with respect to the Liens
created hereby. The Pledgor hereby authorizes the Pledgee to file any such
financing or continuation statement without the signature of the Pledgor to
the extent permitted by applicable law. A photocopy or other reproduction
of this Pledge Agreement shall be sufficient as a financing statement for
filing in any jurisdiction. If any amount payable under or in connection
with any of the Pledged Collateral shall be or become evidenced by any
instrument, such instrument shall be promptly delivered to the
9
<PAGE>
Pledgee, duly endorsed in a manner reasonably satisfactory to the Pledgee,
to be held as Pledged Collateral pursuant to this Pledge Agreement.
(b) Authorizations. The Pledgor authorizes the Pledgee, without notice
--------------
or demand and without affecting any obligation hereunder in accordance with
the terms of the Loan Documents, from time to time:
(i) To renew, extend, increase, accelerate or otherwise change
the time of payment or the terms of, or the interest on, the
Obligations or any part thereof;
(ii) To take from any Person and hold collateral (other than
the Pledged Collateral) for the payment of the Obligations or any
part thereof, and to exchange, enforce or release such collateral or
any part thereof;
(iii) To accept and hold any endorsement or guaranty of the
Obligations or any part thereof and to release or substitute any such
endorser or guarantor or any Person that has given any security
interest in any other collateral as security for the payment of the
Obligations or any part thereof or any other party in any way
obligated to pay the Obligations or any part thereof; and
(iv) To direct the order or manner of the disposition of the
Pledged Collateral and any and all other collateral for any of the
Obligations and the enforcement of any and all endorsements and
guaranties relating to the Obligations or any part thereof as the
Pledgee, in its sole discretion, may determine.
(c) Attorney-in-Fact. The Pledgor hereby appoints the Pledgee as the
----------------
Pledgor's attorney-in-fact (without requiring the Pledgee) and authorizes
Pledgee to act as Pledgor's attorney-in-fact, from time to time, upon the
occurrence of an Event of Default and during the continuance thereof:
(i) To perform all acts that the Pledgee deems appropriate in
accordance with this Pledge Agreement to perfect and continue its
interests hereunder in the Pledged Collateral;
(ii) To protect, preserve and realize upon the Pledged
Collateral; and
(iii) To execute such orders and receipts for payment of the
Pledged Collateral in accordance with this Pledge Agreement as the
Pledgee deems appropriate in its sole discretion.
The foregoing power of attorney is coupled with an interest and shall be
irrevocable and is given to secure performance by Pledgor of the Obligations.
Subject to the terms of this Pledge Agreement, effective upon the occurrence of
an Event of Default and during the continuance thereof, the Pledgee may demand,
collect and sue on the Pledged Collateral (in either its or the Pledgor's name,
at the Pledgee's sole option), and enforce, compromise, settle or discharge the
Pledged Collateral, without discharging the Obligations or any part thereof and
whether or not
10
<PAGE>
any such action results in the imposition of any penalty. The Pledgor authorizes
and directs AGW Leasing to make any payments in respect of the Pledged
Collateral as the Pledgee may direct, effective upon the occurrence of an Event
of Default and during the continuance thereof, and hereby releases AGW Leasing
from any liability to the Pledgor for making such payments.
(d) Performance by the Pledgee. Upon the Pledgor's failure to perform
--------------------------
any of its duties hereunder, the Pledgee may, but shall not be obligated
to, perform any or all such duties, and the cost thereof shall constitute
Obligations and be secured by the Pledged Collateral.
(e) Care of the Pledged Collateral. The Pledgee shall be deemed to
------------------------------
have exercised reasonable care in the custody and preservation of the
Pledged Collateral in its possession if such Pledged Collateral is accorded
treatment substantially equal to the care that the Pledgee accords its own
property, it being understood that the Pledgee shall not have
responsibility for:
(i) Ascertaining or taking action with respect to any matter
relative to any Pledged Collateral, whether or not the Pledgee has
or is deemed to have knowledge of such matters; or
(ii) Taking any step to preserve rights against any Person with
respect to any of the Pledged Collateral.
The Pledgor shall have the sole responsibility for taking any and all steps to
preserve rights against any and all Persons to any of the Pledged Collateral,
whether or not in the Pledgee's possession. The Pledgee shall not be
responsible for loss or damage resulting from the Pledgee's failure to enforce
or collect any of the Pledged Collateral or to collect any moneys due or to
become due thereunder.
(f) Waivers. The Pledgor waives notice of any action taken by the
-------
Pledgee, other than those actions taken by Pledgee for which notice is
required under this Pledge Agreement.
(g) Reinstatement. If after receipt of any payment of, or proceeds of,
-------------
any of the Pledged Collateral applied to the payment of, any of the
Obligations, the Pledgee is required to surrender or return such payment or
proceeds to any Person for any reason, then the Obligations intended to be
satisfied by such payment or proceeds shall be reinstated and continue and
this Pledge Agreement shall continue in full force and effect as if such
payment or proceeds had not been received by the Pledgee. This Section 8(g)
shall:
(i) Remain effective notwithstanding any contrary action that
may be taken by the Pledgee in reliance upon such payment or
proceeds; and
(ii) Survive the termination or revocation of this Pledge
Agreement.
(h) Consequential Damages. To the extent permitted by applicable law,
---------------------
the Pledgor shall not assert, and hereby waives, any claim against Pledgee,
or any Affiliate thereof, on any theory of liability, for special,
indirect, consequential or punitive damages
11
<PAGE>
(as opposed to direct or actual damages other than damages waived
hereunder) arising out of, in connection with, or as a result of, this
Pledge Agreement or any agreement or instrument contemplated hereby, the
Transactions, any Loan or the use of the proceeds thereof.
SECTION 9. Termination. When all of the Obligations shall have been
-----------
paid in full and the Commitment of the Lenders to make Loans have expired or
been terminated, this Pledge Agreement shall terminate, and the Pledgee shall
forthwith assign, transfer and deliver to the Pledgor, against its receipt, the
Pledged Collateral then held by the Pledgee hereunder and release the lien of
the Pledge hereunder and release Pledgor from its obligations hereunder.
SECTION 10. Miscellaneous.
-------------
(a) Severability. Any provision of this Pledge Agreement that is
------------
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or make unenforceable such provision in any other jurisdiction.
The parties shall endeavor in good faith negotiations to replace the
invalid, illegal or unenforceable provision with valid provisions the
economic effect of which is as close as possible to that of the invalid,
illegal or unenforceable provision.
(b) Amendments, Waivers, Etc. None of the terms or provisions of this
------------------------
Pledge Agreement may be waived, amended, supplemented or otherwise modified
except by a written instrument executed by the Pledgor and the Pledgee;
provided that any provision of this Pledge Agreement may be waived by the
--------
Pledgee in writing.
(c) No Waiver. The Pledgee shall not by any act (except by a written
---------
instrument pursuant to Section 10(b) hereof), delay, indulgence, omission
or otherwise (including any failure to exercise any right, remedy or option
under this Pledge Agreement) be deemed to have waived any right or remedy
hereunder or to have acquiesced in any Event of Default or any breach of
any of the terms and conditions hereof. No failure to exercise, nor any
delay in exercising, on the part of the Pledgee, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any
other or further exercise thereof or the exercise of any other right, power
or privilege. No waiver by the Pledgee shall affect its right to require
strict performance of this Pledge Agreement. A waiver by the Pledgee of any
right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy that the Pledgee would otherwise have on any
future occasion.
(d) Cumulative Remedies. The rights and remedies herein provided are
-------------------
cumulative, may be exercised singly or concurrently and are not exclusive
of any right or remedy provided by law.
(e) Successors and Assigns. This Pledge Agreement shall be binding
----------------------
upon and inure to the benefit of the parties hereto and their respective
successors and assigns
12
<PAGE>
permitted by the Credit Agreement, except that Pledgor may not assign or
otherwise transfer any of its rights or obligations hereunder without the
prior written consent of each Lender (and any attempted assignment or
transfer by Pledgor without such consent shall be null and void).
(f) Notices. Except as otherwise specified herein, all notices,
-------
requests, demands, consents, instructions or other communications hereunder
shall be duly given or made if sent in writing and shall be deemed to have
been duly given or made:
(i) If sent by fax, upon the transmittal thereof;
(ii) If sent by nationally recognized overnight courier, on the
following Business Day; and
(iii) If sent by first-class mail, on the fifth Business Day
following the deposit thereof in the mails, postage prepaid,
in each case addressed to the Person to which such notice is requested or
permitted to be given or made hereunder at the following address (or such other
address as may hereafter be designated, in writing, by the relevant Person in
accordance with this Section 10(f)):
(A) If to the Pledgee:
-----------------
State Street Bank and Trust Company
2 Avenue de Lafayette, 6th Floor
Boston, Massachusetts 02111-1724
Telephone No.: (617) 662-1726
Telecopier No.: (617) 662-1460
Attention: Patrick E. Thebado, Assistant Vice President
With a copy to:
Lucent Technologies Inc.
600 Mountain Avenue
Murray Hill, New Jersey 07974
Telephone No.: (908) 582-8754
Telecopier No.: (908) 582-8048
Attention: Corporate Counsel
(B) If to the Pledgor:
-----------------
Harris Tower, Suite 1700
233 Peachtree Street, N.E.
Atlanta, Georgia 30303
Telephone No.: (404) 522-8004
Telecopier No.: (404) 552-0130
Attention: Chief Executive Officer
13
<PAGE>
With a copy to:
AirGate PCS Inc.
6511 Griffith Road
Laytonville, MD 20882
Telephone No.: (301) 540-6222
Telecopier No.: (301) 540-7930
Attention: General Counsel and Secretary
(g) Integration. This Pledge Agreement represents the agreement of the
-----------
Pledgor with respect to the subject matter hereof, and there is no promise,
undertaking, representation or warranty by the Pledgee relative to the
subject matter hereof not expressly set forth or referred to herein.
(h) Governing Law. This Pledge Agreement shall for all purposes be
-------------
governed by, and construed and interpreted in accordance with, the laws of
the State of New York, excluding (to the greatest extent permissible by
law) any rule of law that would cause the application of the laws of any
jurisdiction other than the State of New York.
(i) Submission To Jurisdiction; Waivers. The Pledgor hereby
-----------------------------------
irrevocably and unconditionally:
(i) Submits for itself and its property in any legal action or
proceeding relating to this Agreement, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive
general jurisdiction of the courts of the State of New York, the
courts of the United States of America for the Southern District of
New York, and the appellate courts from any thereof;
(ii) Consents that any such action or proceeding may be brought
in any such court and waives any objection that it may now or
hereafter have to the venue of any such action or proceeding in any
such court or that such action or proceeding was brought in an
inconvenient court and agrees not to plead or claim the same;
(iii) Agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to the Pledgor at its address set forth in Section 10(f)
hereof or at such other address of which the Pledgee shall have been
notified pursuant thereto; and
(iv) Agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or
shall limit the right to sue in any other jurisdiction.
(j) Waiver of Jury Trial. The Pledgor and, by its acceptance hereof,
--------------------
the Pledgee, hereby irrevocably and unconditionally waive trial by jury in
any legal action or proceeding relating to the AGW Leasing By-laws or any
counterclaim arising therefrom.
14
<PAGE>
(k) Acknowledgements. The Pledgor hereby acknowledges that:
----------------
(i) It has been advised by counsel in the negotiation,
execution and delivery of this Pledge Agreement;
(ii) The Pledgee has no fiduciary relationship to the Pledgor;
and
(iii) No joint venture exists between the Pledgor and the Pledgee.
(l) Security Documents. This Pledge Agreement shall be a Security
------------------
Document (as defined in the Credit Agreement).
[Signatures follow on next page.]
15
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Pledge Agreement to be
duly executed and delivered as of the date first above written.
AIRGATE PCS, INC.,
a Delaware corporation
By:
----------------------------------------
Thomas Dougherty
President and Chief Executive Officer
STATE STREET BANK AND TRUST COMPANY,
a Massachusetts banking corporation,
as Collateral Agent for the Lenders
By:
----------------------------------------
Patrick E. Thebado
Assistant Vice President
16
<PAGE>
Exhibit F
---------
INTERCREDITOR AGREEMENT
-----------------------
INTERCREDITOR AGREEMENT, dated as of _________ ___, 1999, among
BANKERS TRUST COMPANY, as Trustee (the "Trustee"), under the Indenture dated as
-------
of _________ ___, 1999 by and between AirGate PCS, Inc. ("AirGate") as and the
-------
Trustee; Lucent Technologies Inc., as Administrative Agent under the Credit
Agreement (capitalized terms having the definitions set forth in Section 1
below; in such capacity, the "Administrative Agent"), State Street Bank and
--------------------
Trust Company, as Collateral Agent for the Senior Secured Lenders under the
Pledge Agreement (in such capacity, the "Collateral Agent") and AGW Leasing
Company, Inc., a Delaware corporation.
W I T N E S S E T H:
-------------------
WHEREAS, AirGate intends to make secured borrowings under the Credit
Agreement;
WHEREAS, AirGate intends to issue Subordinated Notes under the
Indenture;
WHEREAS, AirGate has pledged certain collateral to secure its
obligations under each of the foregoing agreements;
WHEREAS, the parties hereto desire to set forth their relative rights
in respect of such shared collateral and the security interests granted therein;
NOW, THEREFORE, in consideration of the premises, the parties hereto
hereby agree as follows:
1. Definitions. (a) Unless otherwise defined herein, terms defined
-----------
in the Credit Agreement and the Senior Loan Documents have the meanings given to
them in such documents.
(b) The following terms shall have the following meanings:
"Agreement": this Intercreditor Agreement.
---------
"AGW": AGW Leasing Company, Inc., a Delaware corporation.
---
"Common Collateral": the collective reference to the capital
-----------------
stock or other equity interests issued by the Pledged Subsidiaries and
any and
<PAGE>
all property related thereto, in each case from time to time subject
to a security interest to secure payment or performance of the Senior
Loan Obligations and the Trustee Obligations.
"Credit Agreement": the Credit Agreement, dated as of August 16,
----------------
1999, among the Senior Agents, the Senior Lenders and AirGate; for the
purposes hereof, "Credit Agreement" shall also be deemed to refer to
any credit agreement or similar document entered into by AirGate and
any lenders to replace the Credit Agreement in whole or in part to the
extent permitted by the Indenture.
"Indenture": the Indenture, dated as of the date hereof by and
---------
between AirGate and the Trustee; for the purposes hereof, "Indenture"
shall also be deemed to refer to any indenture entered into by AirGate
and any trustee to replace the Indenture, in whole or in part, to the
extent permitted by the Credit Agreement.
"Pledged Subsidiaries": means each Subsidiary of AirGate (other
--------------------
than AGW) in which AirGate owns directly any equity interest.
"Senior Agents": the Administrative Agent and the Collateral
-------------
Agent.
"Senior Guarantees": the collective reference to each guarantee
-----------------
of the Senior Loan Obligations by a Subsidiary executed by such Subsid
iary pursuant to the Credit Agreement and "Subsidiary Guarantee" shall
--------------------
mean any one of such guarantees.
"Senior Lenders": the lenders parties from time to time to the
--------------
Credit Agreement in their capacity as lenders thereunder, and their
respective successors and assigns.
"Senior Loan Documents": the collective reference to the Credit
---------------------
Agreement and each other "Loan Document" as defined therein.
"Senior Loan Obligations": the Obligations.
-----------------------
"Senior Security Documents": the collective reference to the
-------------------------
Pledge Agreement and any and all other documents providing for the
pledge of the capital stock or other equity interests of each Pledged
Subsidiary and AGW and the proceeds related thereto as collateral
2
<PAGE>
security in connection with the Credit Agreement and the other Loan
Documents.
"Senior Secured Lenders": each of the Senior Agents and each of
----------------------
the Senior Lenders.
"Subordinated Guarantees": the collective reference to each
-----------------------
Guaranty (as defined in the Indenture) of the Trustee Obligations
executed by a Subsidiary pursuant to the Indenture each of which is
subordinated to the Senior Loan Obligations in accordance with the
terms of the Indenture and "Subordinated Guarantee" shall mean any one
----------------------
of such Guarantees.
"Subordinated Notes": the collective reference to the senior
------------------
subordinated discount notes issued under the Indenture.
"Subordinated Obligations": the collective reference to the
------------------------
Obligations (as defined in the Indenture) with respect to the Subordi
nated Notes and shall include, without limitation, the unpaid
principal of and interest owing under the Indenture and the
Subordinated Notes issued thereunder and all other obligations and
liabilities of AirGate or any Subsidiary thereunder (including,
without limitation, interest accrued at the then applicable rate
provided in the Indenture and the Subordinated Notes issued thereunder
after the maturity of the principal obligations owing thereunder and
interest accruing at the then applicable rate provided in the
Indenture and the Subordinated Notes issued thereunder after the
filing of any petitions in bankruptcy, or the commencement of any
insolvency, reorganization or like proceeding, relating to AirGate,
whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding), whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter
incurred, which may arise under, out of, or in connection with, the
Indenture, the Subordinated Notes issued thereunder, this Agree ment,
any Guaranty (as defined in the Indenture) or any other Subordi nated
Security Document, in each case whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs,
expenses or otherwise (including, without limitation, all fees and
disbursements of counsel to the Trustee that are required to be paid
by AirGate pursuant to the terms of the Indenture, this Agreement, any
Guaranty (as defined in the Indenture) or any other Subordinated
Security Document).
3
<PAGE>
"Subordinated Security Documents": the collective reference to
-------------------------------
any and all documents providing for the pledge of the capital stock or
other equity interests of each Pledged Subsidiary and the property
related thereto as collateral security in connection with the
Indenture and the Subordinated Notes issued under the Indenture.
"Subsidiary": shall have the meaning set forth in the Credit
----------
Agreement as in effect on the date hereof.
"Trustee Documents": the collective reference to the Indenture,
-----------------
the Subordinated Notes issued thereunder and the Subordinated Security
Documents.
(c) Unless the context requires otherwise (i) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth in the
Credit Agreement or in the Indenture), (ii) any reference herein to any Person
shall be construed to include such Person's successors and assigns and (iii) the
words "hereof", "herein" and "hereunder" and words of similar import when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and section and paragraph references are
to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. Rights in Common Collateral. (a) Notwithstanding anything to the
---------------------------
contrary contained in any filing or agreement to which the Trustee, the Senior
Secured Lenders or AirGate now or hereafter may be a party and irrespective of
the time, order or method of attachment or perfection of the security interests
created by the Senior Security Documents or the Subordinated Security Documents,
the rules for determining priority under the Uniform Commercial Code or any
other law governing the relative priorities of secured creditors, any security
interest in any Common Collateral in favor of or for the benefit of the Senior
Secured Lenders pursuant to the Senior Security Documents has and shall have
priority, to the extent of any unpaid Senior Loan Obligations, over any security
interest in such Common Collateral in favor of or for the benefit of the Trustee
pursuant to the Subordinated Security Documents.
(b) So long as the Senior Loan Obligations have not been paid in
full or the commitments under the Credit Agreement have not been terminated or
4
<PAGE>
expired (i) the Trustee will not institute any action or proceeding to enforce
any of its rights or remedies with respect to any Common Collateral, including,
without limitation, any action of foreclosure upon any Common Collateral and
(ii) the Senior Secured Lenders shall have the exclusive right to enforce rights
and exercise remedies with respect to the Common Collateral under the Senior
Security Documents and the Trustee shall have no right to consent to, require
notice of (except as provided herein or in the applicable Uniform Commercial
Code) or be consulted with respect to, the enforcement of such rights or the
exercise of such remedies by the Senior Secured Lenders with respect thereto
subject to clause 2(c) below.
(c) Any money, property, securities or other distributions of any
nature whatsoever received from the sale, disposition or other realization upon
a foreclosure or other exercise of remedies with respect to the Common
Collateral upon the occurrence and continuance of an Event of Default (as
defined in the Credit Agreement or the Indenture) by any Senior Secured Lender
or the Trustee, of all or any part of the Common Collateral, regardless of
whether such money, property, securities or other distributions are received
during the pendency of or in connection with any bankruptcy, insolvency or other
like proceeding or otherwise, shall be delivered to the Collateral Agent in the
form received, duly indorsed to such party, if required, and applied by the
Collateral Agent in the following order:
First, to the payment in full of all costs and expenses (including,
-----
without limitation, attorneys' fees and disbursements) paid or incurred by
the Senior Secured Lenders in connection with such realization on the
Common Collateral or the protection of any of their rights and interests
therein;
Second, to the payment in full of all Senior Loan Obligations in the
------
order prescribed by Section 2.16(b) of the Credit Agreement;
Third, to the Trustee for application to the Trustee Obligations to
-----
the full extent thereof at such time; and
Fourth, to pay AirGate or the appropriate designee thereof or as a
------
court of competent jurisdiction may direct, any surplus then remaining.
(d) In the event that:
(i) all of the Senior Loan Obligations have been paid in
full and the commitments under the Senior Credit Agreement have
been terminated or expired,
5
<PAGE>
(ii) after giving effect thereto any Common Collateral
remains that remains pledged pursuant to the Subordinated
Security Documents, and
(iii) at such time there are Trustee Obligations out
standing, then the Trustee shall have the right to enforce the
provisions of the Subordinated Security Documents in respect of
the Common Collateral without any consent of, notice to or
consultation with any Senior Secured Lender.
(e) THE BORROWER, EACH OF THE SENIOR AGENTS (ON THEIR OWN BEHALF
AND ON BEHALF OF THE SENIOR LENDERS) AND THE TRUSTEE HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING
TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.
3. Release of AGW Guarantee. If the Senior Secured Lenders foreclose
------------------------
upon the security interest of the Senior Secured Lenders in all of the equity
interests of AGW, the Trustee shall deliver an appropriate instrument evidencing
the release of AGW (in the event the capital stock of AGW is so foreclosed upon)
from its Subordinated Guarantee (to the same extent as the release of the Senior
Guarantee described in clause (ii) below) (A) upon the occurrence of the later
of (i) the date that one hundred percent (100%) of the capital stock of AGW has
been sold pursuant to such foreclosure and (ii) the date that the Lien securing
the Senior Loan Obligations in all of the capital stock of AGW has been
released, AGW has been released from all other Loan Documents (including,
without limitation, the Senior Guarantee) to which it is a party and all Liens
granted in connection therewith have been released and (B) so long as the
capital stock of AGW is not sold pursuant to such foreclosure sale directly or
indirectly to any Senior Agent, any Lender or any Affiliate of any of the
foregoing unless prior notice of such foreclosure sale is given to the Trustee.
AGW hereby agrees, and the Senior Agents and the Trustee hereby agree, that to
the extent that any sale of the capital stock of AGW is rescinded, revoked or
otherwise terminated or cancelled in whole or in part and/or any proceeds of
such capital stock of AGW must be returned or required to be repaid to any
purchaser of such stock, then such Subordinated Guarantee and such Senior
Guarantee shall be reinstated and continued in full force and effect.
Notwithstanding the foregoing, neither the Trustee nor any holder of any
Subordinated Note waives or shall be deemed to have waived any right (other than
any claim against AGW under the Subordinated Guarantee of AGW to the extent such
Subordinated Guarantee is released pursuant to this paragraph 3) to which any of
them would otherwise be entitled under applicable law.
6
<PAGE>
4. Provisions Define Relative Rights. This Agreement is intended
---------------------------------
solely for the purpose of defining the relative rights of the Senior Lenders,
the Senior Agent and the Trustee with respect to the Lender Priority Collateral
and the Subordi nated Guarantee of AGW, and no other Person shall have any
right, benefit or other interest under this Agreement. Notwithstanding anything
to the contrary contained herein, this Agreement shall not modify or amend the
rights and obligations of AirGate or any subsidiary of AirGate under any Senior
Loan Document or any Trustee Document.
5. Termination of Agreement; Acknowledgments. The rights of the
-----------------------------------------
Senior Secured Lenders under this Agreement shall terminate when the Senior Loan
Obligations have been paid in full in cash and all commitments to extend credit
under the Credit Agreement have terminated or expired. The Senior Agents
acknowledge on behalf of the Senior Secured Lenders that the Senior Loan
Obligations shall be deemed "paid in full in cash" for all purposes of this
Agreement when the Senior Secured Lenders have received payment in cash of all
principal, interest and other amounts then outstanding under the Senior Loan
Obligations. The Senior Agents agree that, within five Business Days after
payment in cash of all principal, interest and other amounts then outstanding
under the Senior Loan Obligations and termination or expiration of all
commitments to extend credit under the Credit Agreement, they will, upon the
request of the Trustee, provide a written acknowledgment of such payment to the
Trustee, which acknowledgment shall also acknowledge that the Senior Secured
Lenders have no further rights under this Agreement or in respect of the Common
Collateral securing the Senior Loan Obligations. Concurrent with such
acknowledgment, the Senior Agents will deliver to the Trustee if any of the
Subordinated Obligations shall be outstanding, any items of such Common
Collateral held in the possession of either of the Senior Agents, provided that
if no Subordinated Obligations shall be outstanding, the Senior Agents will
deliver any such items of Collateral to AirGate. The Collateral Agent
acknowledges that prior to such delivery it holds such items of Common
Collateral for the Trustee in accordance with the terms of this Agreement, for
purposes of perfecting the Trustee's security interest therein.
6. Notices. All notices, requests and demands to or upon the parties
-------
to be effective shall be in writing (or by telex, fax or similar electronic
transfer confirmed in writing) and shall be deemed to have been duly given or
made (a) when delivered by hand or (b) if given by mail, five days after being
deposited in the mails by certified mail, return receipt requested, or (c) if by
telex, fax or similar electronic transfer, when sent and receipt has been
confirmed, addressed as follows:
7
<PAGE>
If to the Administrative Agent: LUCENT TECHNOLOGIES INC.
283 King George Road
Warren, New Jersey 07059
Attention: _______________________________
Telecopy: ________________________________
If to the Collateral Agent: STATE STREET BANK AND TRUST COMPANY
2 Avenue de Lafayette, 6/th/ Floor
Boston, Massachusetts 02111-1724
Attention: Patrick E. Thebado,
Assistant Vice President
Telecopy: (617) 662-1460
If to the Trustee: BANKERS TRUST COMPANY
-------------------------------------------
-------------------------------------------
-------------------------------------------
If to the Borrower: AIRGATE PCS, INC.
Harris Tower, Suite 1700
233 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: President
Telecopy: (404) 525-7922
The parties hereto may change their addresses and transmission numbers for
notices by notice in the manner provided in this Section.
7. Counterparts. This Agreement may be executed by one or more of
------------
the parties on any number of separate counterparts, and all of said counterparts
taken together shall be deemed to constitute one and the same instrument. A set
of the counterparts of this Agreement signed by all the parties shall be lodged
with the Collateral Agent and the Trustee.
8. Severability. Any provision of this Agreement which is prohibited
------------
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
8
<PAGE>
9. Integration. This Agreement represents the entire agreement of
-----------
the Senior Secured Lenders and the Trustee with respect to the subject matter
hereof and there are no promises or representations by any of them relative to
the subject matter hereof not reflected herein.
10. Amendments in Writing. None of the terms or provisions of this
---------------------
Agreement may be waived, amended, supplemented or otherwise modified except by a
written instrument executed by the Senior Agents and the Trustee; provided that
the penultimate sentence of paragraph 3 of this Agreement may not be amended or
otherwise modified without the consent of AGW.
11. Successors and Assigns. (a) This Agreement shall be binding upon
----------------------
and inure to the benefit of each of the Senior Secured Lenders, AGW and the
Trustee and their successors and assigns.
(b) Upon a successor administrative agent or collateral agent
becoming the Administrative Agent or the Collateral Agent, respectively, under
the Credit Agreement, such successor Administrative Agent or Collateral Agent,
as the case may be, automatically shall become a Senior Agent hereunder with all
the rights and powers of such party hereunder, and bound by the provisions
hereof, without the need for any further action on the part of any party hereto.
(c) Upon a successor trustee becoming the Trustee under the
Indenture, such successor Trustee automatically shall become the Trustee
hereunder with all the rights and powers of the Trustee hereunder, and bound by
the provisions hereof, without the need for any further action on the part of
any party hereto.
12. Governing Law; Jurisdiction. This Agreement shall be governed by,
---------------------------
and construed and interpreted in accordance with, the law of the State of New
York, excluding (to the greatest extent permissible by law) any rule of law that
would cause the application of the laws of any jurisdiction other than the State
of New York. Each party hereto agrees that all judicial proceedings brought
against it arising out of or relating to this Agreement or its obligations
hereunder may be brought in any federal court of competent jurisdiction in the
State, County and City of New York, and accepts generally and unconditionally
the nonexclusive jurisdiction and venue of such courts.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
LUCENT TECHNOLOGIES INC., as
Administrative Agent
By: _______________________________
Title:
STATE STREET BANK AND
TRUST COMPANY, as Collateral Agent
By: _______________________________
Title:
BANKERS TRUST COMPANY, as Trustee
By: _______________________________
Title:
AGW LEASING COMPANY, INC.
By: _______________________________
Title:
10
<PAGE>
Consented:
AIRGATE PCS, INC., as Borrower and Issuer
By: _______________________________
Title:
11
<PAGE>
Exhibit 10.13
CONSENT AND AGREEMENT
(Lucent / AirGate PCS)
This Consent and Agreement (this "Consent and Agreement") is entered into
---------------------
as of August 16, 1999, between SPRINT SPECTRUM L.P., a Delaware limited
partnership ("Sprint Spectrum"), SPRINTCOM, INC., a Kansas corporation
---------------
("SprintCom"), SPRINT COMMUNICATIONS COMPANY, L.P., a Delaware limited
- -----------
partnership ("Sprint Communications"), WIRELESSCO, L.P., a Delaware limited
---------------------
partnership ("WirelessCo" and together with Sprint Spectrum, SprintCom and
----------
Sprint Communications, the "Sprint Parties"), and LUCENT TECHNOLOGIES INC., as
--------------
administrative agent (together with any successors thereof in accordance with
the Credit Agreement hereinafter described, the "Administrative Agent") for the
--------------------
lenders under that certain Credit Agreement among AIRGATE PCS, INC. (the
"Affiliate"), the Administrative Agent and the lenders from time to time party
- ----------
thereto (the "Lenders").
-------
Affiliate has entered into a Sprint PCS Management Agreement dated and
effective as of July 22, 1998, 1999 (the "Management Agreement") with Sprint
--------------------
Spectrum and SprintCom providing for the design, construction and management of
the Service Area Network (as therein defined). Affiliate has also entered into
the Sprint PCS Services Agreement (as it may be amended, modified, or
supplemented from time to time, the "Services Agreement") and the Sprint
------------------
Trademark and Service Mark License Agreement and the Sprint Spectrum Trademark
and Service Mark License Agreement (together, as they may be amended, modified,
or supplemented from time to time, the "License Agreements") (the Management
------------------
Agreement, the Services Agreement and the License Agreements and all other
agreements between Affiliate or its subsidiaries, on the one hand and the Sprint
Parties or any subsidiary of Sprint Corporation on the other hand (whether
entered into prior to, on, or after the date hereof) that relate to the Service
Area Network as they may be amended, modified, or supplemented from time to
time, collectively, the "Sprint Agreements").
-----------------
Affiliate has entered into or concurrently herewith is entering into that
certain Credit Agreement dated as of August 16, 1999 with the Administrative
Agent and the Lenders (such Credit Agreement, as it may be amended,
supplemented, restated, replaced or otherwise modified from time to time, the
"Credit Agreement"), to provide financing for a portion of the costs of the
- -----------------
design and construction of the Service Area Network and for certain other
purposes. The Credit Agreement and each note, security agreement, pledge
agreement, guaranty and any and all other agreements, documents or instruments
entered into in connection with any of the foregoing, as the same may from time
to time be amended, supplemented, restated, replaced or otherwise modified from
time to time, shall collectively be referred to as the "Loan Documents."
--------------
As a condition to the availability of credit to Affiliate under the Credit
Agreement, the Administrative Agent and the Lenders have required the execution
and delivery of this Consent and Agreement by the Sprint Parties and have
required that Affiliate acknowledge, consent and agree to all terms and
provisions of this Consent and Agreement.
<PAGE>
Sprint Spectrum and SprintCom hold, directly or indirectly, certain of the
licenses for the service areas managed by Affiliate as contemplated in the
Management Agreement. As used in this Consent and Agreement, the term "Sprint
-------
PCS" shall refer in each particular instance or application to Sprint Spectrum
- ----
and/or SprintCom, based on which of the two entities owns the License in that
portion of the Service Area to which the subject of the instance or application
applies.
All capitalized terms in this Consent and Agreement shall have the same
meanings ascribed to them in the Management Agreement unless otherwise provided
in this Consent and Agreement; provided, that the terms "Default", "Event of
---------
Default" and "Obligations" shall have the meanings ascribed to them in the
Credit Agreement.
Accordingly, each Sprint Party and the Administrative Agent, on behalf of
itself and for the Lenders, hereby agrees as follows:
SECTION 1. Consent to Security Interest. In connection with the
----------------------------
transactions contemplated by the Credit Agreement and the other Loan Documents,
Affiliate has granted or will grant to the Administrative Agent, for the benefit
of the Lenders, a first priority security interest in and lien upon
substantially all of its assets and property, tangible and intangible, whether
now owned or hereafter acquired or arising, and all proceeds and products
thereof and accessions thereto, including without limitation the rights of
Affiliate in, to and under the Sprint Agreements. The foregoing security
interests, liens and pledges are referred to collectively as the "Security
--------
Interests" and the foregoing assets and property in which the Administrative
- ---------
Agent, for the benefit of the Lenders, has been or will be granted a first
priority security interest in and lien are referred to collectively as the
"Collateral". Each Sprint Party (i) acknowledges notice of the Credit
- -----------
Agreement, (ii) consents to the granting of the Security Interests in the
Collateral to the Administrative Agent, for the benefit of the Lenders, and
(iii) agrees that (a) neither it nor any subsidiary of Sprint Corporation will
challenge or contest that the Security Interests are valid, enforceable and duly
perfected first priority security interests and liens in and to the Collateral,
(b) neither it nor any subsidiary of Sprint Corporation will argue that any such
Security Interest is subject to avoidance, limitation or subordination under any
legal or equitable theory or cause of action, and (c) so long as the Management
Agreement is in effect, it will not sell, transfer or assign all or part of the
Licenses that Affiliate has the right to use; provided, however, that
-------- -------
notwithstanding the foregoing, a Sprint Party may at any time sell, transfer or
assign all or part of the Licenses that Affiliate has the right to use in
accordance with a transaction allowed under Section 17.15.5 of the Management
----------------
Agreement, so long as the buyer, transferee or assignee, as the case may be,
agrees to be bound by the terms of this Consent and Agreement as such terms
relate to such Licenses.
Each Sprint Party acknowledges and agrees that (i) Sections 17.15.1 and
----------------
17.15.2 of the Management Agreement do not apply to the assignment of
- -------
Affiliate's rights under the Sprint Agreements to the Administrative Agent or
the Lenders under the Loan Documents or in connection with a transaction
permitted pursuant to this Consent and Agreement to any other Person pursuant to
the Loan Documents or to any other assignment in connection with any transaction
permitted pursuant to this Consent and Agreement and (ii) Section 17.15.3 of the
---------------
Management Agreement shall not apply to any Change of Control of Affiliate in
connection with
-2-
<PAGE>
the exercise by the Administrative Agent of any of its rights or remedies under
the Loan Documents, including without limitation in connection with the sale of
the membership interests of Affiliate to any Person or to any other Change of
Control of Affiliate; provided, however, Section 17.15.3 of the
----------------- ---------------
Management Agreement shall apply to any such transaction if such transaction is
not with the Administrative Agent or the Lenders or is not a transaction
permitted pursuant to this Consent and Agreement. It is understood that any
assignment described in this Section 1 to the Administrative Agent or the
---------
Lenders is hereby consented to by the Sprint Parties; provided, that any
--------
subsequent assignment by the Administrative Agent or the Lenders shall be in
accordance with the terms of this Consent and Agreement.
SECTION 2. Payments. Upon receipt of the Administrative Agent's written
--------
instructions, each Sprint Party agrees to make all payments (if any) to be made
by it under the Sprint Agreements, subject to its rights of setoff or recoupment
with respect to such payments as permitted under Section 10.6 of the Management
------------
Agreement, to Affiliate directly to the Administrative Agent, or otherwise as
the Administrative Agent shall direct; provided, that during the period that
--------
Sprint PCS is making such payments directly to the Administrative Agent or its
designee pursuant to this Section 2, Sprint PCS' setoff and recoupment rights
---------
under such Section 10.6 shall not be limited to undisputed amounts. The
------------
Administrative Agent hereby agrees that the Administrative Agent will not give
any such written instructions for it to receive such payments directly from a
Sprint Party unless an Event of Default has occurred under the Credit Agreement
and is continuing. Such written instructions to make payments directly to the
Administrative Agent shall be effective only so long as an Event of Default is
continuing, and the Administrative Agent will revoke such instructions promptly
following the cure of such Event of Default. Any payments made by any Sprint
Party directly to, or at the direction of, the Administrative Agent shall fully
satisfy any obligation of such Sprint Party to make payments to Affiliate under
the Sprint Agreements to the extent of such payments.
SECTION 3. Notice and Effect of Event of Default, Management Agreement
-----------------------------------------------------------
Breach and Event of Termination. The Administrative Agent agrees to provide to
- -------------------------------
Sprint PCS a copy of any written notice that Administrative Agent sends to
Affiliate, promptly after sending such notice, that a Default or an Event of
Default has occurred and is continuing, and Sprint PCS agrees to provide to the
Administrative Agent a copy of any written notice that Sprint PCS sends to
Affiliate, promptly after sending such notice, that an Event of Termination or
an event that if not cured, or if notice is provided, will constitute an Event
of Termination (each of an Event of Termination and an event that if not cured
would constitute an Event of Termination, a "Management Agreement Breach") has
---------------------------
occurred. Sprint Spectrum and SprintCom acknowledge that the Administrative
Agent has informed them that an Event of Termination constitutes an Event of
Default under the Loan Documents, and Sprint Spectrum and SprintCom further
acknowledge that the Management Agreement does not prohibit Affiliate from
curing such an Event of Default.
SECTION 4. Event of Default without a Management Agreement Breach.
------------------------------------------------------
(a) Affiliate Remains as Manager or Interim Manager Appointed. Upon
---------------------------------------------------------
and during the continuation of an Event of Default when no Management
Agreement Breach as to which Sprint PCS has given the Administrative Agent
notice exists on the original
-3-
<PAGE>
date of occurrence of such Event of Default, the Administrative Agent may,
by prior written notice to Sprint PCS, (i) allow Affiliate to continue to
act as the Manager under the Sprint Agreements, (ii) appoint Sprint
Spectrum to act as "Interim Manager" under the Sprint Agreements, or (iii)
---------------
appoint a Person other than Sprint Spectrum to act as Interim Manager under
the Sprint Agreements. If the Administrative Agent initially allows
Affiliate to continue to act as the Manager under the Sprint Agreements,
the Administrative Agent may later, during a continuation of an Event of
Default, remove the Affiliate as Manager and take the action described
above in clauses (ii) and (iii). The date on which a Person begins serving
as Interim Manager shall be the "Commencement Date."
------------------
(b) Sprint Spectrum or Sprint Spectrum Designee as Interim Manager.
--------------------------------------------------------------
If the Administrative Agent appoints Sprint Spectrum as Interim Manager,
within 14 days after its appointment Sprint Spectrum shall accept the
position or designate another Person (a "Sprint Spectrum Designee") to act
------------------------
as Interim Manager under the Sprint Agreements. The Administrative Agent
shall accept Sprint Spectrum and any Sprint Spectrum Designee that is then
acting as an Other Manager (other than Affiliate) to act as Interim Manager
under the Sprint Agreements. Any Sprint Spectrum Designee that is not an
Other Manager must be acceptable to the Administrative Agent, which
acceptance will not be unreasonably withheld. If, within 30 days after the
Administrative Agent gives Sprint Spectrum notice of its appointment as
Interim Manager, Sprint Spectrum or a Sprint Spectrum Designee does not
agree to act as Interim Manager, then the Administrative Agent shall have
the right to appoint an Administrative Agent Designee as Interim Manager in
accordance with Section 4(c). At the discretion of the Administrative
------------
Agent, Sprint Spectrum or the Sprint Spectrum Designee shall serve as
Interim Manager for up to six months from the Commencement Date.
Upon the expiration of its initial six-month period as Interim Manager
under the Sprint Agreements, Sprint Spectrum or the Sprint Spectrum
Designee will agree, at the written request of the Administrative Agent, to
serve as Interim Manager for up to six months from such expiration date
until the Administrative Agent gives Sprint Spectrum or the Sprint Spectrum
Designee at least 30 days' written notice of its desire to terminate the
relationship; provided, that the extended period will be for 12 months
--------
rather than six months (for a complete term of 18 months) in the event, as
of the date of the initial appointment, the aggregate number of pops that
Affiliate and all Other Managers have the right to serve under their
respective management agreements with the Sprint Parties is less than 40
million (such six or 12 month period, the "Extension Period"). If Sprint
----------------
Spectrum's or the Sprint Spectrum Designee's term as Interim Manager is
extended, then the Administrative Agent agrees that Sprint Spectrum or the
Sprint Spectrum Designee's right to be reimbursed by the Affiliate
promptly for all amounts previously expended by Sprint Spectrum or the
Sprint Spectrum Designee under Section 11.6.3 of the Management Agreement
--------------
(which expenditures were incurred in accordance with Section 9 of this
---------
Consent and Agreement) shall no longer be subordinated to the Obligations
as provided in Section 9 in this Consent and Agreement, and Sprint Spectrum
---------
or the Sprint Spectrum Designee's right to be reimbursed by Affiliate for
any expenses it incurs pursuant to its rights under Section 11.6.3 of the
--------------
Management Agreement as provided in
-4-
<PAGE>
the Management Agreement (which expenditures were incurred in accordance
with Section 9 of this Consent and Agreement) shall not be subject to the
---------
subordination to the Obligations as provided in Section 9 of this Consent
---------
and Agreement; provided, that Sprint Spectrum or the Sprint Spectrum
Designee's right to be reimbursed for amounts expended under Section 11.6.3
--------------
of the Management Agreement that exceed in an aggregate amount 5% of
Affiliate's shareholder's or member's equity or capital account plus
Affiliate's long-term debt (i.e., notes that on their face are scheduled to
mature more than one year from the date issued), as reflected on
Affiliate's books (the "Reimbursement Limit") shall remain subordinated to
-------------------
the Obligations as provided in Section 9 of this Consent and Agreement.
---------
Notwithstanding any other provision in this Section 4(b) to the contrary,
------------
Sprint Spectrum or the Sprint Spectrum Designee shall not be required to
continue to serve as Interim Manager during the Extension Period at any
time after 30 days following delivery by it to the Administrative Agent of
written notice that Sprint Spectrum or the Sprint Spectrum Designee needs
to expend amounts under Section 11.6.3 of the Management Agreement that
--------------
Sprint Spectrum or the Sprint Spectrum Designee reasonably believes will
not be reimbursed based on the projected Collected Revenues for the
remainder of the Extension Period or reimbursed by the Lenders. If it
becomes necessary for Sprint Spectrum or the Sprint Spectrum Designee to
expend any amount that it believes will not be reimbursed or that exceeds
the Reimbursement Limit, Sprint Spectrum or the Sprint Spectrum Designee is
not required to incur such expense.
Upon the termination or expiration of the term of Sprint Spectrum or
the Sprint Spectrum Designee as Interim Manager, the Administrative Agent
shall have the right to appoint a successor Interim Manager in accordance
with Section 4(c).
------------
(c) Administrative Agent Designee as Interim Manager. If the
------------------------------------------------
Administrative Agent elects to appoint a Person other than Sprint Spectrum
to act as Interim Manager under the Sprint Agreements (an "Administrative
--------------
Agent Designee") as permitted under Sections 4(a)(iii) and 4(b), such
-------------- ----------------- ----
Administrative Agent Designee must (i) agree to serve as Interim Manager
for six months unless terminated earlier by Sprint PCS because of a
material breach by the Administrative Agent Designee of the terms of the
Sprint Agreements that is not timely cured or by the Administrative Agent
in its discretion, (ii) meet the applicable "Successor Manager
-----------------
Requirements" set forth below in Section 13, and (iii) agree to comply with
------------ ----------
the terms of the Sprint Agreements but will not be required to assume the
existing liabilities of Affiliate. In the case of a proposed
Administrative Agent Designee, Sprint PCS shall provide to the
Administrative Agent, within 10 Business Days after the request therefor, a
detailed description of all information reasonably requested by Sprint PCS
to enable Sprint PCS to determine if a proposed Administrative Agent
Designee satisfies the Successor Manager Requirements. Sprint PCS agrees
to inform Administrative Agent within 20 days after it receives such
information respecting such proposed Administrative Agent Designee from the
Administrative Agent whether such designee satisfies the Successor Manager
Requirements. If Sprint PCS does not so inform the Administrative Agent
within such 20-day period, then Sprint PCS shall be deemed to agree, for
all purposes of this Consent and Agreement, that such proposed designee
satisfies the Successor Manager
-5-
<PAGE>
Requirements. A Person that satisfies the Successor Manager Requirements
(or is deemed to satisfy such requirements) qualifies under the Management
Agreement to become a Successor Manager, unless the Administrative Agent
Designee materially breaches the terms of a Sprint Agreement while acting
as Interim Manager or no longer meets the Successor Manager Requirements.
The Administrative Agent Designee may continue to serve as Interim Manager
after the initial six-month period at the Administrative Agent's
discretion, so long as the Administrative Agent Designee continues to
satisfy the Successor Manager Requirements and it does not materially
breach the terms of the Sprint Agreements. If the Administrative Agent
Designee materially breaches any Sprint Agreement while acting as Interim
Manager, then Sprint PCS and the Administrative Agent have the rights set
forth in Section 5; provided, that Sprint PCS may not allow Affiliate to
--------- --------
act as the Manager of the Sprint Agreements without the Administrative
Agent's consent.
SECTION 5. Event of Default Created by a Management Agreement Breach.
---------------------------------------------------------
(a) Affiliate Remains as Manager or Interim Manager Appointed. Upon
---------------------------------------------------------
an Event of Default created by a Management Agreement Breach (so long as at
such time an Event of Default not created by a Management Agreement Breach
as to which Administrative Agent has given Sprint PCS notice is not in
existence), Sprint PCS may by prior written notice to Administrative Agent
(i) allow Affiliate to continue to act as the Manager under the Sprint
Agreements if approved by the Administrative Agent, (ii) act as Interim
Manager under the Sprint Agreements (in the case of Sprint Spectrum) or
appoint Sprint Spectrum as Interim Manager (in the case of SprintCom), or
(iii) appoint a Sprint Spectrum Designee to act as Interim Manager under
the Sprint Agreements as provided in paragraph (b) below. If Sprint PCS
initially allows Affiliate to continue to act as the Manager under the
Sprint Agreements, Sprint PCS may later remove the Affiliate as Manager and
take the action described above in clauses (ii) and (iii). The
Administrative Agent shall have no right to appoint an Interim Manager when
an Event of Default is caused by a Management Agreement Breach (unless an
Event of Default not created by a Management Agreement Breach is in
existence), unless Sprint PCS elects not to act as Interim Manager or to
appoint a Sprint Spectrum Designee.
(b) Sprint Spectrum or Sprint Spectrum Designee as Interim Manager.
--------------------------------------------------------------
If Sprint Spectrum acts as Interim Manager or designates a Sprint Spectrum
Designee to act as Interim Manager under the Sprint Agreements, the Interim
Manager shall serve as Interim Manager for up to six months from the
Commencement Date, at the discretion of Sprint Spectrum. The
Administrative Agent shall accept Sprint Spectrum and any Sprint Spectrum
Designee that is then acting as an Other Manager (other than Affiliate) to
act as Interim Manager under the Sprint Agreements. Any Sprint Spectrum
Designee that is not then acting as an Other Manager must be acceptable to
the Administrative Agent, which acceptance will not be unreasonably
withheld.
Upon the expiration of its initial six-month period as Interim Manager
under the Sprint Agreements, Sprint Spectrum or the Sprint Spectrum
Designee will agree to serve as Interim Manager for the Extension Period
until the Administrative Agent gives Sprint
-6-
<PAGE>
Spectrum or the Sprint Spectrum Designee at least 30 days written notice
of its desire to terminate the relationship. If Sprint Spectrum's or the
Sprint Spectrum Designee's term as Interim Manager is extended, then the
Administrative Agent agrees that Sprint Spectrum or the Sprint Spectrum
Designee's right to be reimbursed by the Affiliate promptly for all amounts
previously expended by Sprint Spectrum or the Sprint Spectrum Designee
under Section 11.6.3 of the Management Agreement (which expenditures were
--------------
incurred in accordance with Section 9 of this Consent and Agreement) shall
---------
no longer be subordinated to the Obligations as provided in Section 9 of
---------
this Consent and Agreement, and Sprint Spectrum or the Sprint Spectrum
Designee's right to be reimbursed by the Affiliate for any expenses it
incurs pursuant to its rights under Section 11.6.3 of the Management
--------------
Agreement as provided in the Management Agreement (which expenditures were
incurred in accordance with Section 9 of this Consent and Agreement) shall
---------
not be subject to subordination to the Obligations as provided in Section 9
---------
of this Consent and Agreement; provided, that Sprint Spectrum or the Sprint
Spectrum Designee's right to be reimbursed for amounts expended under
Section 11.6.3 of the Management Agreement in an aggregate amount that
--------------
exceed the Reimbursement Limit shall remain subordinated to the Obligations
as provided in Section 9 of this Consent and Agreement. Notwithstanding any
other provision in this Section 5(b) to the contrary, Sprint Spectrum or
------------
the Sprint Spectrum Designee shall not be required to continue to serve as
Interim Manager during the Extension Period at any time after 30 days
following delivery by it to the Administrative Agent of written notice that
Sprint Spectrum or the Sprint Spectrum Designee needs to expend amounts
under Section 11.6.3 of the Management Agreement that Sprint Spectrum or
--------------
the Sprint Spectrum Designee reasonably believes will not be reimbursed
based on the projected Collected Revenues for the remainder of the
Extension Period or reimbursed by the Lenders. If it becomes necessary for
Sprint Spectrum or the Sprint Spectrum Designee to expend any amount that
it believes will not be reimbursed or that exceeds the Reimbursement Limit,
Sprint Spectrum or the Sprint Spectrum Designee is not required to incur
such expense.
Upon the termination or expiration of the term of Sprint Spectrum or
the Sprint Spectrum Designee as Interim Manager and with the consent of the
Administrative Agent (which consent shall not be unreasonably withheld or
delayed), Sprint Spectrum shall have the right to appoint a successor
Interim Manager in accordance with Section 5(a).
------------
(c) Administrative Agent Designee as Interim Manager. Notwithstanding
------------------------------------------------
anything in paragraph (a) above to the contrary, if, after Acceleration (as
defined in Section 6(a) of this Consent and Agreement) and within 30 days
after Sprint PCS gives the Administrative Agent notice of a Management
Agreement Breach, Sprint Spectrum does not agree to act as Interim Manager
or does not obtain the consent of a Sprint Spectrum Designee to act as
Interim Manager under the Sprint Agreements, or if Sprint Spectrum or the
Sprint Spectrum Designee gives the Administrative Agent notice of its
resignation as Interim Manager and Sprint Spectrum fails to appoint a
successor in accordance with Section 5(b) within 30 days after such
------------
resignation, the Administrative Agent may appoint an Administrative Agent
Designee to act as Interim Manager. Such Administrative Agent Designee
must (i) agree to serve as Interim Manager for six months unless terminated
earlier by Sprint PCS because of a material breach by the
-7-
<PAGE>
Administrative Agent of the terms of the Sprint Agreements or by the
Administrative Agent in its discretion, (ii) meet the applicable Successor
Manager Requirements, and (iii) agree to comply with the terms of the
Sprint Agreements. In the case of a proposed Administrative Agent Designee,
Sprint PCS shall provide to the Administrative Agent, within 10 Business
Days after the request therefor, a detailed description of all information
reasonably requested by Sprint PCS to enable Sprint PCS to determine if a
proposed Administrative Agent Designee satisfies the Successor Manager
Requirements. Sprint PCS agrees to inform Administrative Agent within 20
days after it receives such information respecting such proposed
Administrative Agent Designee from the Administrative Agent whether such
designee satisfies the Successor Manager Requirements. If Sprint PCS does
not so inform the Administrative Agent within such 20-day period, then
Sprint PCS shall be deemed to agree, for all purposes of this Consent and
Agreement, that such proposed designee satisfies the Successor Manager
Requirements. A Person that satisfies the Successor Manager Requirements
qualifies under the Management Agreement to become a Successor Manager,
unless the Administrative Agent Designee materially breaches the terms of a
Sprint Agreement while acting as Interim Manager or no longer meets the
Successor Manager Requirements. The Administrative Agent Designee may
continue to serve as Interim Manager after the initial six-month period at
the Administrative Agent's discretion, so long as the Administrative Agent
Designee continues to satisfy the Successor Manager Requirements and it
does not materially breach the terms of the Sprint Agreements. If the
Administrative Agent Designee materially breaches any Sprint Agreement
while acting as Interim Manager, then Sprint PCS and the Administrative
Agent have the rights set forth in Section 5; provided, that Sprint PCS may
not allow Affiliate to act as the Manager of the Sprint Agreements without
the Administrative Agent's consent.
SECTION 6. Purchase and Sale of the Operating Assets. Upon the occurrence
-----------------------------------------
and during the continuation of an Event of Default, the following provisions
shall govern the purchase and sale of the Operating Assets:
(a) Acceleration of the Obligations Under the Loan Documents. In the
--------------------------------------------------------
event the Lenders accelerate the maturity of the Obligations under the Loan
Documents (an "Acceleration" and, the date thereof, an "Acceleration
------------ ------------
Date"), the Administrative Agent shall give written notice thereof to
----
Sprint PCS. Upon receipt of notice of Acceleration, Sprint PCS shall have
the right, to which right Affiliate, by executing this Consent and
Agreement, expressly agrees, to purchase the Operating Assets from
Affiliate for an amount equal to the greater of (i) 72% of the Entire
Business Value (as defined in the Management Agreement) of Affiliate,
valued in accordance with the procedure set forth in Section 11.7 of the
Management Agreement (with the assumption that the deemed ownership of the
Disaggregated License under Section 11.7.3 of the Management Agreement
includes the transfer of the Sprint PCS customers as contemplated by
Section 11.4 of the Management Agreement), and (ii) the aggregate amount of
the Obligations. Sprint PCS shall, within 60 days of receipt of notice of
Acceleration, give Affiliate and the Administrative Agent notice of its
intent to exercise the purchase right. In the event Sprint PCS gives the
Administrative Agent written notice of its intent to purchase the Operating
Assets, the Administrative Agent agrees that it shall not enforce its
Security
-8-
<PAGE>
Interests in the Collateral until the earlier to occur of (i)
expiration of the period consisting of 120 days after the Acceleration
Date (or such later date that shall be provided for in the purchase
agreement and acceptable to the Administrative Agent in its discretion to
close the purchase of the Operating Assets) or (ii) receipt by
Administrative Agent and Affiliate from Sprint PCS of written notice that
Sprint PCS has determined not to proceed with the closing of the purchase
of the Operating Assets for any reason. If after the 120-day period after
the Acceleration Date the Affiliate receives any purchase offer for the
Operating Assets that is confirmed in writing by Affiliate to be acceptable
to Affiliate, Sprint PCS shall have the right subject to the consent of the
Administrative Agent, to purchase the Operating Assets, on terms and
conditions at least as favorable to the Affiliate as the terms and
conditions proposed in such offer so long as within 14 Business Days after
Sprint PCS's receipt of such other offer Sprint PCS offers to purchase the
Operating Assets and so long as the conditions of Sprint PCS's offer and
the amount of time it will take Sprint PCS to effect such purchase is
acceptable to the Affiliate and Administrative Agent. Any such offer shall
be confirmed in writing by the third party offeror. In the event Sprint
PCS exercises its rights under this Section 6(a), (i) the Affiliate shall
------------
sell the Operating Assets to Sprint PCS, (ii) the Administrative Agent and
the Lenders shall consent to such purchase and sale provided that the
proceeds thereof shall be sufficient to repay the aggregate amount of the
Obligations, and (iii) Sprint PCS shall make all payments to be made under
this Section 6(a) to Administrative Agent for its application against the
Obligations. The purchase right of the Sprint Parties under this Section
-------
6(a) shall be in substitution of the purchase rights of the Sprint Parties
----
under Section 11.6.1 of the Management Agreement. If Sprint PCS
---------------
purchases the Operating Assets as permitted under this Section 6(a), the
------------
Administrative Agent will release the Security Interests in the Collateral
upon payment in full of the aggregate amount of the Obligations and the
termination of all commitments to advance credit under the Credit
Agreement.
(b) Sale of Operating Assets to Third Parties. If the Sprint Parties
-----------------------------------------
do not purchase the Operating Assets from Affiliate after an Acceleration
as described above in Section 6(a), the Collateral may be sold as follows:
------------
(i) Sale to Successor Manager. The Collateral may be sold by
-------------------------
the Administrative Agent (in its sole discretion) in the exercise of
certain of its rights and remedies as a secured party under the Loan
Documents or by Affiliate, at the discretion of the Administrative Agent,
to a person that satisfies the Successor Manager Requirements. Sprint PCS
shall provide to the Administrative Agent, with a copy to Affiliate, within
10 Business Days after the request therefor, a detailed description of all
information reasonably requested by Sprint PCS to enable Sprint PCS to
determine if a proposed buyer satisfies the Successor Manager Requirements.
Sprint PCS agrees to inform the Administrative Agent and Affiliate within
20 days after it receives such information respecting such proposed buyer
from the Administrative Agent whether such designee satisfies the Successor
Manager Requirements. If Sprint PCS does not so inform the Administrative
Agent within such 20-day period, then Sprint PCS shall be deemed to agree,
for all purposes of this Consent and Agreement, that such proposed designee
satisfies the Successor Manager Requirements. If the proposed buyer
satisfies
-9-
<PAGE>
the Successor Manager Requirements (or is deemed to satisfy such
requirements) and wishes to become a "Successor Manager", the buyer must
-----------------
agree to be bound by the Sprint Agreements; provided, that buyer shall have
--------
no responsibility or liability for any liability to any Person other than a
Sprint Party and Related Party of Sprint PCS arising out of Affiliate's
operations prior to the date buyer becomes bound by the Sprint Agreements.
In such case the Sprint Agreements shall remain in full force and effect
with the buyer as Successor Manager and this Consent and Agreement shall
remain in full force and effect for the benefit of the Successor Manager
and any Person providing senior secured debt financing to such Successor
Manager if required by such Person. Sprint PCS agrees, with respect to any
past failure of Affiliate to perform any obligation under the Sprint
Agreements, that the Successor Manager shall have the same amount of time
to perform such obligation that Affiliate had under the Sprint Agreements,
with the performance period commencing on the date on which the buyer
becomes a Successor Manager. Sprint PCS shall permit the performance
period set forth in the Management Agreement to be extended for such period
of time that Sprint PCS believes is reasonable to allow Successor Manager
to perform such unperformed obligations.
(ii) Sale to Other than Successor Manager. The Collateral may
------------------------------------
be sold pursuant to the exercise by the Administrative Agent or the Lenders
of their rights and remedies under the Loan Agreements or by the Affiliate,
at the discretion of the Administrative Agent (subject to requirements of
applicable law) to a person that does not satisfy the Successor Manager
Requirements or to a person that does not wish to become a Successor
Manager, but only under the following conditions:
(A) the Sprint Parties may terminate the Sprint Agreements
with such buyer following the closing of such purchase (and the
Administrative Agent and the buyer shall have no rights thereto or
thereunder with respect to events occurring after the closing of such
purchase);
(B) the buyer may purchase the Disaggregated License as
described below in Section 6(b)(iv) and with the Disaggregated License
----------------
having the characteristics described in the definition thereof; and
(C) the purchase agreement with the buyer contains the
requirements set forth in Section 6(c) of this Consent and Agreement.
------------
(iii) Confidentiality Agreement. Before any potential buyer
-------------------------
is provided Confidential Information respecting the potential purchase of
any of the Collateral (which buyer shall be entitled to receive), the
potential buyer shall execute a confidentiality agreement in the form
attached as Exhibit A with such changes thereto as may be reasonably
---------
requested by the parties to the agreement; provided, however, in the event
--------
the potential buyer does not satisfy the Successor Manager Requirements or
has notified the Affiliate, Sprint PCS or the Administrative Agent that it
does not intend to be a Successor Manager, Confidential Information that
constitutes or relates to any technical, marketing, financial, strategic or
other information concerning any of the
-10-
<PAGE>
Sprint Parties and that does not pertain to the business of Affiliate shall
not be permitted to be provided to such potential buyer.
(iv) Sale of Disaggregated Licenses. Sprint PCS will sell
------------------------------
Disaggregated Licenses as follows when required under Section 6(b)(ii)(B):
-------------------
(A) If a buyer wishes to purchase spectrum in connection
with its purchase of the Operating Assets, it will purchase such spectrum
from the Affiliate and Sprint PCS as follows. The buyer will purchase
from the Affiliate or its Related Parties any licenses that Affiliate or
such Related Parties own (the "Affiliate's Licenses"). If the Affiliate's
--------------------
Licenses were not being used to operate the Service Area Network, Sprint
PCS will reimburse the buyer for the microwave relocation costs incurred to
clear the spectrum bought from the Affiliate or its Related Parties that
the buyer will need to use to operate the Service Area Network as
constructed on the date that the buyer purchases the Operating Assets. If
the buyer does not meet the FCC requirements to buy the Affiliate's
Licenses, the buyer will seek a waiver from the FCC of the restrictions
that prohibit the buyer's ownership of such licenses. While any such FCC
application is pending and while the buyer is clearing the microwave from
the Affiliate's spectrum, the buyer may continue to use Sprint PCS'
Spectrum on which the Service Area Network operates. Sprint PCS will sell
its Disaggregated Licenses as described in Sections 6(b)(iv)(B),
6(b)(iv)(C) and 6(b)(iv)(D) only in those BTAs in which (1) the Affiliate
or its Related Parties do not own a license or the obligation to sell the
license is unenforceable, (2) the FCC will not approve the transfer of the
Affiliate's License to the buyer, or (3) Sprint PCS determines that it does
not wish to reimburse the buyer for the cost of the microwave relocation.
(B) If the buyer, an entity with respect to which such
buyer directly or indirectly through one or more persons owns the total
voting power or at least 50% of the total voting power or at least 50% of
the total equity (a "controlled entity"), an entity that directly or
-----------------
indirectly through one or more persons has a parent entity that owns at
least 50% of the voting power or at least 50% of the total equity of both
the buyer and the common controlled entity (a "common controlled entity"),
------------------------
owns a license to provide wireless service to at least 50% of the pops in a
BTA with respect to which such buyer proposes to purchase Spectrum (each a
"Restricted Party" with respect to such BTA), the buyer may buy only 5 MHz
-----------------
of Spectrum from Sprint PCS for such BTA.
(C) If the buyer is not a Restricted Party for a BTA with
respect to which such buyer proposes to purchase Spectrum, and either does
not satisfy the Successor Manager Requirements (other than those set forth
in Section 13(b) of this Consent and Agreement) or does not wish to be a
-------------
Successor Manager, then the buyer may buy 5 MHz, 7.5 MHz or 10 MHz of
Spectrum from Sprint PCS as the buyer determines in its sole discretion.
(D) If Sprint PCS sells a Disaggregated License to a buyer
as required under this Section 6(b)(iv), the buyer must pay a price equal
to the sum of (1) the original cost of the applicable License to Sprint PCS
pro rated on a pops and spectrum
-11-
<PAGE>
basis, plus (2) the microwave relocation costs paid by Sprint PCS
attributable to clearing the Spectrum in the Disaggregated License, plus
(3) the amount of carrying costs to Sprint PCS attributable to such
original cost and microwave relocation costs from the date of this Consent
and Agreement to and including the date on which the Disaggregated License
is transferred to the buyer, based on a rate of 12 percent per annum.
(c) No Direct Solicitation of Customers. Upon the sale of the
-----------------------------------
Collateral or the Disaggregated License in accordance with this Consent and
Agreement pursuant to Section 6(b)(ii), then the Sprint Parties agree to
----------------
transfer to the buyer thereof the customers with a MIN assigned to the
Service Area covered by the Disaggregated License, but Sprint PCS shall
retain the customers of a national account and any resellers who are then
party to a resale agreement with Sprint PCS. Each Sprint Party agrees to
take all actions reasonably requested by the buyer of the Collateral to
fully transfer to such purchaser such customers. Each Sprint Party agrees
that neither it nor any of its Related Parties will directly or indirectly
solicit, for six months after the date of transfer, the customers with a
MIN assigned to the Service Area covered by the Disaggregated License;
provided, that Sprint PCS retains the customers of a national account and
--------
any resellers that have entered into a resale agreement with Sprint PCS,
Sprint PCS may advertise nationally, regionally and locally, and engage
direct marketing firms to solicit customers generally. If the buyer
continues to operate the purchased assets as a wireless network in the same
geographic area on a network that is technologically compatible with Sprint
PCS's network, the buyer and Sprint PCS shall each agree to provide roaming
services to the other (in the case of Sprint PCS, the roaming services
shall be provided to those customers of buyer in the geographic area
serviced by the Disaggregated License roaming nationally and, in the case
of buyer, the roaming services shall be provided to those customers of
Sprint PCS roaming in the geographic area covered by the Disaggregated
License) pursuant to a roaming agreement to be entered into between buyer
and Sprint PCS and to be mutually agreed upon so long as such agreement is
based on Sprint PCS's then standard roaming agreement used by Sprint PCS in
the industry and the price that each party shall pay the other party for
roaming services provided to the first party shall be a price equal to the
lesser of: (1) MFN Pricing provided by buyer to third parties roaming in
the geographic area serviced by the Disaggregated License; and (2) the
national average paid by Sprint PCS to third parties for Sprint PCS's
customers to roam in such third parties' geographic areas (including Other
Managers). Such obligations with respect to roaming shall continue until
such roaming agreement is terminated pursuant to its terms. The buyer
shall agree in writing that if it continues to operate the purchased assets
as a wireless network in the same geographic area on a network that is
technologically compatible with Sprint PCS's network, the buyer shall, to
the extent required by law, provide resale to Sprint PCS in the geographic
area covered by the Disaggregated License at the MFN Pricing that buyer
charges third parties who purchase resale from buyer; provided, however, if
--------
buyer is not offering resale to any other customers then pricing of resale
provided to Sprint PCS shall be as mutually agreed; and provided, further,
-------- -------
however, whether or not buyer is required by law to offer such resale,
buyer shall offer such resale (on the terms described in this sentence) to
national customers of Sprint PCS.
-12-
<PAGE>
(d) Deferral of Portion of Collected Revenues. (i) Under Section
------------------------------------------ -------
10.1.1 of the Management Agreement, Sprint PCS retains 8% of the Collected
------
Revenues on a weekly basis (the "Retained Amount"). Following an
---------------
Acceleration and for up to two years after such Acceleration, Sprint PCS
shall retain only one half of the Retained Amount, and the remaining one
half of the Retained Amount shall be advanced to Affiliate (or, if so
directed by the Administrative Agent pursuant to Section 2 hereof, to the
---------
Administrative Agent) at the time the weekly fee provided under Section
-------
10.1.1 of the Management Agreement is paid; provided, that after the first
------ --------
anniversary of the Acceleration Date, Sprint PCS shall retain the entire
Retained Amount if Sprint PCS is not serving as the Interim Manager.
(ii) The portion of the Retained Amount advanced to Affiliate
(or, if so directed by the Administrative Agent pursuant to Section 2
---------
hereof, to the Administrative Agent) (the "Deferred Amount") shall be
---------------
evidenced by a promissory note executed by Affiliate contemporaneously with
this Consent and Agreement in the form of Exhibit B hereto (the "Deferred
--------- --------
Amount Note").
-----------
(A) Amounts will be drawn on the Deferred Amount Note each time
Sprint PCS advances a Deferred Amount to Affiliate or the
Administrative Agent.
(B) The Deferred Amount Note will bear interest at a rate equal
to the greatest of (I) the average interest rate of Affiliate's
secured debt, (II) the average rate of Affiliate's unsecured debt, and
(III) Sprint PCS' cost of capital.
(C) The Deferred Amount Note shall mature on the earlier of (I)
the date on which a Successor Manager is qualified and assumes
Affiliate's rights and obligations under the Sprint Agreements, and
(II) the date on which the Operating Assets are purchased by a third-
party buyer, or on which a stock or other equity acquisition, merger,
consolidation or other transaction resulting in the indirect transfer
of the Operating Assets to a third-party buyer (an "Indirect
--------
Transfer") is consummated.
--------
(iii) In the event a Successor Manager assumes any of the
obligations of Affiliate under the Sprint Agreements, such Successor
Manager shall also assume the obligations under the Deferred Amount Note.
In the event that the Operating Assets are sold to a third party buyer or
an Indirect Transfer is consummated, the obligations of Affiliate under the
Deferred Amount Note shall be subordinate to the Affiliate's obligations to
its secured lenders.
(iv) After the two-year anniversary of the Acceleration, or
earlier if a Successor Manager is appointed or if Sprint PCS is not serving
as the Interim Manager, Sprint PCS will again retain the full Retained
Amount.
-13-
<PAGE>
SECTION 7. No Limits on Remedies. Nothing contained in this Consent and
---------------------
Agreement shall limit any rights of the Administrative Agent or Lenders to
Accelerate. Except as expressly provided herein, nothing contained in this
Consent and Agreement shall limit any rights or remedies that the Administrative
Agent or the Lenders may have under the Loan Documents or applicable law. The
Administrative Agent may not sell, lease, assign, convey or otherwise dispose of
the Collateral other than as permitted under this Consent and Agreement.
SECTION 8. Rights and Obligations of Interim Manager. The Interim Manager
-----------------------------------------
may collect a reasonable management fee for its services; provided, that if
--------
Sprint Spectrum or a Related Party of Sprint PCS acts as Interim Manager, such
management fee shall not exceed the direct expenses relating to Sprint Spectrum
or such Related Party employees for the actual time spent by such employees when
performing the function of Interim Manager and Sprint Spectrum's or such Related
Party's out-of-pocket expenses. Such direct expenses shall include such
employees' salaries and benefits, and the out-of-pocket and accrued expenses
allocated to such employees. If Sprint Spectrum is the Interim Manager, the
management fee will be paid out of the 92% Management Fee that Sprint PCS pays
under the Management Agreement, and will be in addition to the fees it receives
under the Services Agreement. Sprint PCS shall collect such management fee by
setoff against the fees and any other amounts payable to Affiliate under the
Sprint Agreements. The Interim Manager will be required to operate the Service
Area Network in accordance with the terms of the Sprint Agreements and will be
subject to all of the requirements and obligations of such agreements, but will
not be required to assume the existing liabilities of Affiliate.
SECTION 9. Rights to Cure. Neither the provisions of this Consent and
--------------
Agreement nor any action of either Administrative Agent or Sprint PCS shall
require either Administrative Agent, any Lender or Sprint PCS to cure any
default of Affiliate under the Sprint Agreements or to perform under the Sprint
Agreements, but shall only give it the option to do so except to the extent
otherwise required by this Consent and Agreement. Sprint PCS may exercise its
rights under Section 11.6.3 of the Management Agreement upon an Event of
--------------
Termination, whether such situation arises while Affiliate, Sprint Spectrum, an
Administrative Agent Designee or a Sprint Spectrum Designee is acting as Interim
Manager and notwithstanding any other provision of this Consent and Agreement;
provided, that the right to reimbursement for any expenses incurred in
- --------
connection with such cure shall be unsecured and until such time as the
Obligations have been paid in full in cash and all commitments to advance credit
under the Credit Agreement have terminated or expired, the Person or Persons
entitled thereto shall not receive such reimbursement, except as specifically
provided in Section 4(b) or Section 5(b) of this Consent and Agreement. Sprint
------------ ------------
PCS shall not be permitted to deduct or setoff from its payments to Affiliate
any such amounts it is not entitled to receive under this Section and shall not
take any action of any type to attempt to collect such reimbursement and the
failure to be so reimbursed shall not constitute a Management Agreement Breach.
In the event that Sprint PCS receives any payments or distributions that it is
not entitled to receive under this Section, such payments shall be held in trust
for, and promptly turned over to, the parties entitled thereto. If Sprint PCS
has designated a third party to take action under Section 11.6.3 of the
--------------
Management Agreement, before taking any such action such third party shall enter
into an agreement with Administrative Agent providing that such third party
agrees to the provisions of this Section 9 as if it were a party hereto. Until
---------
such time as the Obligations have been paid in full in cash and all
-14-
<PAGE>
commitments to advance credit under the Credit Agreement have terminated or
expired, Sprint PCS shall not be entitled to exercise any other remedies under
the Sprint Agreements, including, without limitation, the remedy of terminating
the Sprint Agreements (except to the extent permitted under Sections 6(b)(ii)(A)
--------------------
and 12 of this Consent and Agreement) or the remedy of withholding any payment
- ------
set forth in Section 10 of the Management Agreement (subject to Sprint PCS's
----------
rights of setoff or recoupment with respect to such payments as permitted under
Sections 2, 4(b) and 5(b) of this Consent and Agreement). Until such time as the
- -------------------------
Obligations have been paid in full in cash and all commitments to advance credit
under the Credit Agreement have terminated or expired, notwithstanding anything
to the contrary contained in Section 2.3 of the Management Agreement, in no
-----------
event shall any Person other than Affiliate or a Successor Manager be a manager
or operator for Sprint PCS with respect to the Service Area and neither Sprint
PCS nor any of its Related Parties shall own, operate, build or manage another
wireless mobility communications network in the Service Area, except to the
extent provided in Sections 2.3(a), (b), (c) or (d) of the Management Agreement
--------------- --- --- ---
and except to the extent that the Sprint Agreements are terminated in accordance
with Section 6(b)(ii)(A) of this Agreement. The Administrative Agent
-------------------
acknowledges and agrees that Sprint PCS shall also have the right to cure an
Event of Default or to assist Affiliate in curing an Event of Default but only
to the extent Affiliate has the right to so cure under the Loan Documents, as
applicable (it being understood that the act of Sprint PCS curing an Event of
Default shall not constitute an independent Event of Default unless the act
itself would otherwise constitute a Default (e.g. a sale of assets not otherwise
permitted by the Loan Documents)), including but not limited to Sprint PCS's
providing Affiliate the funds necessary to operate or meet certain financial
covenants in the Loan Documents. The Administrative Agent shall have the right
to cure any Management Agreement Breach.
SECTION 10. Sprint PCS's Right to Purchase Obligations or Operating
-------------------------------------------------------
Assets. (a) Following the Acceleration Date and until the 60-day anniversary of
- ------
the filing of a bankruptcy petition by or with respect to Affiliate, Sprint PCS
shall have the right to purchase the Obligations under, and as defined in, the
Credit Agreement, by repaying the Obligations in full in cash. In the event
that Sprint PCS purchases the Obligations within 60 days immediately following
the earlier of (i) the Acceleration Date and (ii) the date of the filing of a
bankruptcy petition by or with respect to Affiliate, Sprint PCS may in lieu of
purchasing the total amount of the Obligations, purchase all Obligations other
than the accrued interest with respect thereto for a purchase price equal to the
amount of the Obligations other than such accrued interest and any fees and
expenses that are unreasonable, in which case, such accrued interest and
unreasonable fees and expenses shall remain due and owing by Affiliate to the
Lenders.
(b) In the event that the Administrative Agent acquires the Operating
Assets, Sprint PCS shall have the right to purchase the Operating Assets from
the Administrative Agent during the limited period of time provided in and
otherwise in accordance with this Section 10(b) by paying to the Administrative
-------------
Agent in cash an amount equal to the sum of the aggregate amount paid (by credit
against the Obligations or otherwise) by the Administrative Agent or the Lenders
for the Operating Assets, plus the aggregate amount of any remaining unpaid
Obligations. Administrative Agent shall give Sprint PCS notice of any
acquisition of the Operating Assets by the Administrative Agent promptly
following the date of final consummation of such acquisition (the "Acquisition
-----------
Notice"). Sprint PCS shall, within 60 days of receipt of a valid Acquisition
- ------
Notice, give the Administrative Agent notice of its intent to
-15-
<PAGE>
exercise its purchase right under this Section 10(b). In the event Sprint PCS
-------------
gives the Administrative Agent written notice of its intent to purchase the
Operating Assets, the Administrative Agent agrees that it shall provide Sprint
PCS the right to purchase the Operating Assets until the earlier to occur of (i)
expiration of the period consisting of 120 days after Sprint PCS' receipt of a
valid Acquisition Notice (or such later date that shall be provided for in the
purchase agreement and acceptable to the Administrative Agent in its sole
discretion to close the purchase of the Operating Assets) or (ii) receipt by
Administrative Agent from Sprint PCS of written notice that Sprint PCS has
determined not to proceed with the closing of the purchase of the Operating
Assets. If Sprint PCS at any time purchases the Operating Assets as permitted
under this Section 10, the Administrative Agent will release the Security
----------
Interests in the Collateral upon payment in full of the aggregate amount of the
Obligations. Notwithstanding the foregoing, in the event that a bankruptcy
petition is filed by or with respect to Affiliate, Sprint PCS shall again have
the right to purchase the Operating Assets from the Administrative Agent by
repaying the Obligations in full in cash, by giving the Administrative Agent
notice of its intent to exercise such purchase right no later than 60 days
following the date of filing of such bankruptcy petition.
(c) If at any time during the period described in Section 10(a) or
-------------
10(b) above or thereafter the Administrative Agent receives any purchase offer
- -----
for the Operating Assets or the Obligations, as applicable, that is acceptable
to the Administrative Agent, the Administrative Agent shall exercise reasonable
efforts to obtain the consent of the offeror to deliver a copy of such offer to
Sprint PCS and Sprint PCS shall have the right to purchase the Operating Assets
or the Obligations, as applicable, on terms and conditions at least as favorable
to the Administrative Agent as the terms and conditions proposed in such offer
so long as within 14 Business Days after Sprint PCS's receipt of such other
offer Sprint PCS offers to purchase the Operating Assets or the Obligations, as
applicable, and so long as the conditions of Sprint PCS's offer and the amount
of time it will take Sprint PCS to effect such purchase is acceptable to the
Administrative Agent and the Lenders.
(d) If Sprint PCS at any time purchases the entirety of the
Obligations as provided in this Section 10, the Administrative Agent shall
assign and transfer or cause the Lenders to assign and transfer to Sprint PCS
all rights and interests in, to and under all of the Loan Documents, including
but not limited to all security interests, liens, financing statements,
guaranties and other credit enhancements related to such Loan Documents, and all
rights and claims thereunder (collectively referred to as the "Loan Document
-------------
Rights"). If Sprint PCS purchases less than all the Obligations (as permitted
- ------
in the second sentence of Section 10(a) above), then the Administrative Agent
-------------
shall assign and transfer or cause the Lenders to assign and transfer to Sprint
PCS all Loan Document Rights, except that if Sprint PCS receives payment in full
of all Obligations due under the Loan Documents (including the amount it did not
pay the Administrative Agent, as permitted in the second sentence of Section
-------
10(a) above), it shall pay such amount to the Administrative Agent unless the
- -----
Administrative Agent has already received payment of such amount.
SECTION 11. Foreclosure. Upon the Administrative Agent or any Lender or
-----------
any other Person that meets the Successor Manager Requirements acquiring the
Operating Assets and the Sprint Agreements, then such Person shall be entitled
to exercise any and all rights of Affiliate
-16-
<PAGE>
under the Sprint Agreements in accordance with the terms of the Sprint
Agreements and each Sprint Party will thereupon comply in all respects with such
exercise by such Person and perform its obligations under the Sprint Agreements
and this Consent and Agreement for the benefit of such Person. Each Sprint Party
agrees that the Administrative Agent or any Lender may (but shall not be
obligated to), subject to and in accordance with the terms of this Consent and
Agreement, assign its rights and interests acquired in the Operating Assets and
the Sprint Agreements to any buyer or transferee thereof and, in the event the
buyer wishes to become a party to the Sprint Agreements and such buyer satisfies
the Successor Manager Requirements, such buyer shall be bound by the Sprint
Agreements; provided, that buyer shall have no responsibility or liability to
--------
any Person other than a Sprint Party and a Related Party of a Sprint Party
arising out of Affiliate's operations prior to the date buyer becomes bound by
the Sprint Agreements. In such case the Sprint Agreements shall remain in full
force and effect with the buyer as Successor Manager and this Consent and
Agreement shall remain in full force and effect for the benefit of the Successor
Manager and any Person providing senior secured debt financing to such Successor
Manager if required by such Person. Sprint PCS agrees, with respect to any past
failure of Affiliate to perform any obligation under the Sprint Agreements, that
the Successor Manager shall have the same amount of time to perform such
obligation that Affiliate had under the Sprint Agreements, with the performance
period commencing on the date on which the buyer becomes a Successor Manager.
Sprint PCS shall permit the performance period set forth in the Management
Agreement to be extended for such period of time that Sprint PCS believes is
reasonable to allow Successor Manager to perform such unperformed obligations.
SECTION 12. Trademarks and Service Marks. In the event the
----------------------------
Administrative Agent forecloses on its security interest in the License
Agreements and transfers the License Agreements to a Person who does not meet
the Successor Manager Requirements, then Sprint PCS shall have the right to
terminate the License Agreements and cause the Administrative Agent to release
its security interest in the License Agreements immediately prior to such
transfer.
SECTION 13. Interim Manager and Successor Manager Requirements. To
--------------------------------------------------
qualify as an Interim Manager or a Successor Manager, the Person must satisfy
each of the following "Successor Manager Requirements," as applicable:
------------------------------
(a) The Person must not during the three-year period immediately
preceding the date of determination have materially breached any material
agreement with Sprint Spectrum or its Related Parties that resulted in the
exercise of a termination right or in the initiation of judicial or
arbitration proceedings;
(b) The Person must not be one of the Persons identified on Schedule
--------
13 (a "Schedule 13 Person"); provided, that no Other Manager under any
-- ------------------
Sprint PCS Management Agreement may be identified on Schedule 13;
(c) In the case of a Successor Manager, the Person must meet a
reasonable Person's credit criteria (taking into consideration the
circumstances), it being understood that such criteria is satisfied if the
financial projections contained in the business plan
-17-
<PAGE>
such Person submits to Sprint PCS shows the ability to service its
indebtedness and meet the build-out requirements contained in the Build-out
Plan; and
(d) The Person must agree to be bound by the terms of the Sprint
Agreements as if an original party thereto; provided, in the case of an
--------
Interim Manager, the Person must also execute a separate confidentiality
agreement in the form attached as Exhibit A with such changes thereto as
---------
may be reasonably requested by the parties to the agreement, but the Person
is not required to assume the existing liabilities of the Affiliate.
The Administrative Agent, each Lender and each of their wholly-owned
subsidiaries or entities who wholly-own such entities shall be deemed to satisfy
Sections 13(a), (b) and (c) of the preceding "Successor Management
- -------------- --- --- --------------------
Requirements".
SECTION 14. Management Agreement. Sprint PCS agrees that it will not
--------------------
exercise its right under the Management Agreement to purchase the Operating
Assets or to sell the Disaggregated License to Affiliate if before, or after
giving effect to such exercise, there would exist a Default or Event of Default
under the Credit Agreement, unless Sprint PCS pays the aggregate amount of the
Obligations as a condition of the exercise of such right and the Credit
Agreement shall have been terminated in connection with such payment. Sprint
PCS agrees that until the Obligations have been paid in full in cash and all
commitments to advance credit under the Credit Agreement have terminated or
expired, a failure to pay any amount by any Related Party of the Affiliate under
any agreement with Sprint PCS or any of its Related Parties (other than the
Management Agreement, the Services Agreement or the License Agreements) shall
not constitute a Management Agreement Breach for any purpose. Subject to
regulatory approval in connection with any such sale, Sprint PCS agrees that it
shall always maintain the ability to sell the Disaggregated License in
accordance with this Consent and Agreement. Sprint PCS shall own at least 10
MHz of Spectrum in the Service Area until the first to occur of the following
events: (i) the Obligations have been paid in full in cash and all commitments
to advance credit under the Credit Agreement have terminated or expired, (ii)
the sale by Sprint PCS of the Spectrum pursuant to this Consent and Agreement
shall be effected, (iii) the sale of the Operating Assets pursuant to this
Consent and Agreement, and (iv) the termination of the Management Agreement.
Sprint PCS acknowledges that the financing provided pursuant to the Loan
Documents, the senior subordinated discount notes to be issued under that
certain Indenture pursuant to the terms and conditions set forth in the
Registration Statement on Form S-1 filed by Affiliate on May 24, 1999, with the
Securities and Exchange Commission, as such Registration Statement may be
amended from time to time, between Affiliate and Bankers Trust Company, as
trustee thereunder, and the initial public offering of common stock of Affiliate
contemplated by the registration statement of Affiliate filed with the
Securities and Exchange Commission on May 24, 1999, as amended, comply with
Section 1.7 of the Management Agreement, as amended by Addendum II and Addendum
- -----------
III of the Management Agreement ("Section 1.7"), and that Section 11.3.6 of the
----------- --------------
Management Agreement shall no longer be applicable with respect to such
financing so long as the amounts and deadlines set forth in Section 1.7 are
satisfied. Notwithstanding anything to the contrary contained in Section 12.2
------------
of the Management Agreement, the Administrative Agent, the Lenders, and any
Successor Manager or buyer of the Operating Assets or Disaggregated License
shall be permitted to disclose Confidential Information (as defined in the
Management Agreement) (i) to the extent required by law, rule or
-18-
<PAGE>
regulation, (ii) to any regulator or any regulatory body regulating such entity,
(iii) to any rating agency in connection with requirements applicable to such
Person and (iv) to the lawyers and accountants for any such Persons.
SECTION 15. Administrative Agent and Eligible Assignees. The
-------------------------------------------
Administrative Agent and each Lender must be an Eligible Assignee. "Eligible
--------
Assignee" shall mean and include a commercial bank, financial institution, other
- --------
"accredited investor" (as defined in Regulation D of the Securities Act) other
than individuals, or a "qualified institutional buyer" as defined in rule 144A
-----------------------------
of the Securities Act; provided, that prior to the 61st day after the filing of
--------
a bankruptcy petition by or with respect to Affiliate in no event may any Person
that is engaged in or that controls, is controlled by or is under common control
with any Person engaged in, the telecommunications service business in the
United States (other than Sprint Corporation and its subsidiaries), be an
Eligible Assignee, it being understood that no small business investment
corporation that is ultimately owned by an Eligible Assignee that is subject to
Regulation Y shall be deemed to be controlled by or under common control with
such Eligible Assignee; and provided further, that after the filing of such
----------------
bankruptcy petition in no event may a Schedule 13 Person be an Eligible
Assignee.
SECTION 16. Sprint Party Representations. Each Sprint Party represents
----------------------------
and warrants to the Administrative Agent, as of the Closing Date (a) its
execution, delivery and performance of this Consent and Agreement has been duly
authorized by all necessary corporate and partnership action, and does not and
will not require any further consents or approvals that have not been obtained,
or violate any provision of any law, regulation, order, judgment, injunction or
similar matters or materially breach any agreement presently in effect with
respect to or binding on it; provided, that the transfer of Spectrum as
--------
contemplated under this Consent and Agreement will require regulatory approval
(which each Sprint Party agrees to use its commercially reasonable efforts to
obtain); (b) this Consent and Agreement is a legal, valid and binding obligation
of such Person enforceable against it in accordance with its terms, except that
(i) such enforceability may be limited by applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be limited by
equitable defenses and by the discretion of the court before which any
proceeding may be brought; (c) the Sprint Agreements are in full force and
effect and have not been amended, supplemented or modified; (d) as of the date
of execution hereof, to the knowledge of the Sprint Parties, no Event of
Termination has occurred and is continuing (without regard to any requirement of
the delivery of written notice necessary to the occurrence of an Event of
Termination under Section 11.3 of the Management Agreement); (e) on the date the
Management Agreement was executed Sprint PCS owned, and on the date hereof
Sprint PCS owns, 10 MHz or more of Spectrum in the Service Area; and (f) the
only existing agreements or arrangements between Affiliate, on the one hand, and
Sprint Corporation or any of its subsidiaries, on the other hand, are the
Management Agreement, the Services Agreement, the License Agreements, the
promissory note dated as of July 22, 1998, made by AirGate Wireless, L.L.C. in
favor of SprintCom in the face amount of $7.7 million and the sublease, dated as
of June 24, 1999, by and between SprintCom and AirGate Wireless, L.L.C.
-19-
<PAGE>
SECTION 17. Administrative Agent Representations. The Administrative
------------------------------------
Agent represents and warrants to Sprint PCS, as of the Closing Date (a) its
execution, delivery and performance of this Consent and Agreement has been duly
authorized by all necessary corporate action, and does not and will not require
any further consents or approvals that have not been obtained, or violate any
provision of any law, regulation, order, judgment, injunction or similar matters
or materially breach any agreement presently in effect with respect to or
binding on it; (b) this Consent and Agreement is a legal, valid and binding
obligation of the Administrative Agent enforceable against it in accordance with
its terms, except that (i) such enforceability may be limited by applicable
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws affecting the enforcement of creditors' rights generally, and (ii)
the remedy of specific performance and injunctive and other forms of equitable
relief may be limited by equitable defenses and by the discretion of the court
before which any proceeding may be brought; (c) at the time of the execution
hereof, Administrative Agent is the only Lender; and (d) as of the date of
execution hereof, to the knowledge of the Administrative Agent, no Event of
Default has occurred and is continuing.
SECTION 18. Successors and Assigns. This Consent and Agreement shall be
----------------------
binding upon the successors and assigns of the parties hereto and shall inure,
together with the rights and remedies of the parties hereunder, to the benefit
of their respective successors and assigns. In the event the Sprint PCS Network
is sold in accordance with the Management Agreement, the buyer thereof will
assume the obligations of the Sprint Parties hereunder and under all the other
Sprint Agreements other than the Sprint Trademark and Service Mark License
Agreement; provided, however, the buyer of the Sprint PCS Network shall enter
--------
into an agreement with Affiliate on substantially the same terms as the Sprint
Trademark and Service Mark License Agreement with respect to such buyers'
trademarks, service marks, brands, etc. In the event a Successor Manager
becomes a party to the Sprint Agreements as provided in this Agreement, this
Consent and Agreement shall remain in full force and effect for the benefit of
the Successor Manager and any Person providing senior secured debt financing to
such Successor Manager if required by such Person.
SECTION 19. Amendment. Neither this Consent and Agreement nor any
---------
provision herein may be waived except pursuant to an agreement or agreements in
writing entered into by Sprint PCS, the Administrative Agent and Affiliate, and
neither this Consent and Agreement nor any provision herein may be amended or
modified except pursuant to an agreement or agreements in writing entered into
by Sprint PCS, the Administrative Agent and Affiliate. The Administrative Agent
and each Lender (and its successors and assigns) shall be bound by any
modification or amendment authorized by this Section 19. No amendment or waiver
----------
or effective amendment or waiver entered into in violation of this Section 19
----------
shall be valid; provided, however, that no consent of Affiliate shall be
necessary for any amendment or modification to this Consent and Agreement made
pursuant to and in accordance with Section 25 hereof.
----------
SECTION 20. APPLICABLE LAW. THIS CONSENT AND AGREEMENT SHALL BE
--------------
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
-20-
<PAGE>
SECTION 21. Notices. Notices and other communications provided for in
-------
this Consent and Agreement shall be in writing and shall be delivered by hand or
overnight courier service, mailed or sent by telecopy, as follows:
(a) if to Sprint PCS, to it at:
Sprint Spectrum L.P.
4900 Main, 12th Floor
Kansas City, Missouri, 64112
Telephone No.: (816) 559-1000
Telecopier No.: (816) 559-1290
Attention: Chief Executive Officer
with a copy to:
4900 Main, 11th Floor
Kansas City, Missouri, 64112
Telephone No.: (816) 559-1000
Telecopier No.: (816) 559-2591
Attention: General Counsel
(b) if to the Administrative Agent, to it at:
283 King George Road
Building A
Warren, New Jersey 07059
Telephone No.: (908) 559-8294
Telecopier No.: (908) 559-1711
Attention: Assistant Treasurer, Customer Finance
(c) if to Affiliate, to it at:
Harris Tower
233 Peachtree Street, NE, Suite 1700
Atlanta, Georgia 30303
Telephone No.: (404) 522-8004
Telecopier No.: (404) 522-1030
Attention: General Counsel
All notices and other communications given to any party hereto in accordance
with the provisions of this Consent and Agreement shall be deemed to have been
given on the date of receipt if delivered by hand or overnight courier service
or sent by telecopy, or on the date five
-21-
<PAGE>
(5) business days after dispatch by certified or registered mail if mailed, in
each case delivered, sent or mailed (properly addressed) to such party as
provided in this Section 21 or in accordance with the latest unrevoked direction
----------
from such party given in accordance with this Section 21.
----------
SECTION 22. Counterparts. This Consent and Agreement may be executed in
------------
two or more counterparts, each of which shall constitute an original but all of
which when taken together shall constitute but one contract.
SECTION 23. Severability. Any provision of this Consent and Agreement
------------
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. The parties
shall endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provision with valid provisions the economic effect of which is as
close as possible to that of the invalid, illegal or unenforceable provision.
SECTION 24. Termination. This Consent and Agreement shall terminate
-----------
and be of no further force and effect upon the first to occur of the following:
(i) the Obligations are paid in full and the Credit Agreement is terminated; and
(ii) the Sprint Agreements terminate.
SECTION 25. Amendments to Form Consent and Agreement. As of the date
----------------------------------------
this Consent and Agreement is executed, it contains provisions substantially
similar to the provisions of every other executed Consent and Agreement entered
into by Sprint PCS with creditors of Other Managers. If Sprint PCS modifies or
amends the form of Consent and Agreement it enters into with another lender,
then Sprint PCS agrees to give the Administrative Agent written notice of such
modifications and amendments and, at the request of Administrative Agent, to
amend this Consent and Agreement in the same manner; provided, that: (a) Sprint
--------
PCS will not modify this Consent and Agreement to incorporate changes made for
the benefit of a lender because of circumstances related to a particular Other
Manager, subject to the limitations set forth below; (b) the Administrative
Agent must agree to make all (or none) of the changes made for the other lender
and the Other Manager, unless Sprint PCS agrees to allow the Administrative
Agent to make only some of the changes; and (c) Sprint PCS is only required to
make changes to this Consent and Agreement based on changes made to the form of
Consent and Agreement executed in connection with loans to Other Managers that
are syndicated or intended to be syndicated (i.e., loans sold or participated,
or intended to be sold or participated, in whole or in part to at least three
financial institutions or investment funds) (a "Syndication Consent") until the
-------------------
later to occur of: (i) five Syndication Consents are executed, and (ii) loans to
Other Managers are syndicated where the pops in the Service Areas of such Other
Managers, in the aggregate, exceed 10 million; provided, however, that in the
-----------------
event any Syndicated Consent executed after such later date relates to a
transaction where the pops in the Service Area of the Other Manager exceed 5
million, Sprint PCS agrees to give the Administrative Agent the right to so
amend this Consent and Agreement, subject to the provisions of clauses (a) and
(b) above.
For purposes of subsection (a) in the preceding paragraph, Sprint PCS will
not deem the following changes to be made because of circumstances related to a
particular Other Manager: (i)
-22-
<PAGE>
any form of recourse to Sprint PCS or other similar form of credit enhancement;
(ii) any change in Sprint PCS's right to purchase Operating Assets or
Obligations; (iii) any change in the Affiliate's, Administrative Agent's or
Lenders' right to sell the Collateral or purchase the Disaggregated License
(including, without limitation, any rights of first refusal and the purchase
price of the Disaggregated License); (iv) any change in the ownership status,
terms of usage or amount of Disaggregated License utilized by Affiliate; (v) any
material change in the flow of revenues between Sprint Spectrum and Affiliate
excluding changes related to the pricing of direct or indirect fees, but
including any subordination of direct or indirect fees or other amounts or costs
due under the Sprint Agreements or hereunder to Sprint PCS; (vi) any change to
obligations required to be assumed by, or qualifications for, any Interim or
Successor Manager, including changes in the time period or terms under which
Sprint PCS agrees to remain as Interim Manager; (vii) any changes in
confidentiality, non-compete or Eligible Assignee language, including changes to
Schedule 13; (viii) any clarifications of FCC compliance issues; (ix) the
- -----------
issuance of legal opinions; (x) any change in the circumstances under, or
procedures by which, an Interim Manager or Successor Manager is appointed; or
(xi) any change to this Section 25.
----------
[The remainder of this page is intentionally left blank.]
-23-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Consent and
Agreement to be executed by their respective authorized officers as of the date
and year first above written.
SPRINT SPECTRUM L.P.
By: _________________________________________
Bernard A. Bianchino
Chief Business Development Officer
SPRINTCOM, INC.
By: _________________________________________
Bernard A. Bianchino
Vice President
WIRELESSCO, L.P.
By: _________________________________________
Bernard A. Bianchino
Chief Business Development Officer
SPRINT COMMUNICATIONS COMPANY, L.P.
By: _________________________________________
Thomas E. Weigman, Senior Vice President,
Consumer Market Strategy and Communications
LUCENT TECHNOLOGIES INC.
for itself and as Administrative Agent
By: _________________________________________
Name:
Title:
-24-
<PAGE>
Acknowledgment, Consent and Agreement of Affiliate
--------------------------------------------------
__________The undersigned Affiliate (i) has reviewed this Consent and Agreement,
(ii) acknowledges, consents and agrees to the terms and provisions of this
Consent and Agreement, and (iii) agrees to be bound by the terms and provisions
of this Consent and Agreement, including, without limitation, such terms and
provisions that affect Affiliate, its assets or its rights under the Management
Agreement. Without limiting the generality of the foregoing: (i) Affiliate
acknowledges and agrees that the right to appoint an Interim Manager is intended
to allow the right and ability to preserve and/or protect the Collateral or its
value and the Service Area Network or its value and (ii) Affiliate acknowledges
and agrees that in the event of the sale of the Collateral by the Administrative
Agent, the value of the Collateral may be dependent on the right of the Person
purchasing the Collateral to assume or be a party to the Sprint Agreements and
acknowledges that any sale of the Collateral in accordance with Sections 6 and
--------------
10 hereof, the other provisions of this Consent and Agreement and, to the extent
- --
not inconsistent with this Consent and Agreement, the Loan Documents is agreed
to be a commercially reasonable disposition of the Collateral by Administrative
Agent.
AIRGATE PCS, INC.
By: ________________________________________
Thomas M. Dougherty,
President and Chief Executive Officer
-25-
<PAGE>
Acknowledgement, Consent and Agreement of Affiliate's Stockholder
-----------------------------------------------------------------
The undersigned, being the sole stockholder of Affiliate, agrees that
such stockholder (i) has reviewed this Consent and Agreement, (ii) acknowledges,
consents and agrees to the terms and provisions of this Consent and Agreement,
particularly as they modify the price (as set forth in the Management Agreement)
pursuant to which Sprint PCS may purchase the Operating Assets under Sections 6
----------
and 10 hereof, and as they require the Affiliate and its Related Parties to sell
- ------
Affiliate's Licenses under Section 6 hereof, and (iii) agrees to take such
---------
action as is necessary to cause the Affiliate and its Related Parties to comply
with the terms and provisions of this Consent and Agreement.
AIRGATE, L.L.C.
By:
------------------------------------
Shelley L. Spencer, Manager
-26-
<PAGE>
EXHIBIT 23.1
Independent Accountants' Consent
The Board of Directors
AirGate PCS, Inc.:
We consent to the use of our report dated April 28, 1999, except for notes
13(g), 13(h), and 13(i), which are as of July 9, 1999, July 28, 1999 and
September 15, 1999, respectively, related to the consolidated financial
statements of AirGate PCS, Inc. and subsidiaries and predecessors included
herein, and to the reference to our firm under the headings "Experts" and
"Selected Financial Data" in this Registration Statement and the related
prospectuses.
Our report dated April 28, 1999, except for notes 13(g), 13(h), and 13(i), which
are as of July 9, 1999, July 28, 1999 and September 15, 1999, respectively,
contains an explanatory paragraph that states the Company has incurred recurring
losses from operations and has a working capital and an accumulated deficit that
raise substantial doubt about its ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of that uncertainty.
/s/ KPMG LLP
Atlanta, Georgia
September 16, 1999
