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As filed with the Securities and Exchange Commission on November 29, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________
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AirGate PCS, Inc. Delaware 4812 58-2422929
(Exact name of registrant as (State or other jurisdiction (Primary Standard Industry (I.R.S. Employer
specified in its charter) of incorporation or Classification Code Number) Identification No.)
organization)
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Harris Tower Thomas M. Dougherty
Suite 1700 AirGate PCS, Inc.
233 Peachtree Street, N.E. Harris Tower
Atlanta, Georgia 30303 Suite 1700
(404) 525-7272 233 Peachtree Street NE
(Address, including zip code, and Atlanta, Georgia 30303
telephone number, including area code, (404) 525-7272
of registrant's principal executive offices) (Name, address, including
zip code, and telephone number,
including area code, of agent
for service)
______________
Copies to:
Mary M. Sjoquist, Esq.
Joseph G. Passaic, Jr., Esq.
Patton Boggs LLP
2550 M Street, NW
Washington, DC 20037
(202) 457-6000
______________
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: [X]
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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Title of Each Class of Amount to be Proposed Maximum Amount of Registration Fee
Securities to be Registered Registered(2) Aggregate Offering Price(3)
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Common Stock, par value $.01 per share(1) 644,400 $ 6,444.00 $ 1.79
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(1) Shares issuable upon exercise of warrants to purchase common stock expiring
October 1, 2009.
(2) In accordance with Rule 416 under the Securities Act of 1933, common stock
registered hereby also includes such indeterminate number of shares as may
be distributable from time to time pursuant to anti-dilution provisions.
(3) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o).
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(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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Prospectus
, 1999
[logo]
644,400 Shares of Common Stock Issuable Upon Exercise of Warrants
We are offering 644,400 shares of common stock issuable by us from time to time
upon exercise of warrants sold by us in our units offering, which was completed
on September 30, 1999. The warrants became separately transferable from the
units on October 21, 1999. Each warrant entitles the holder to purchase, prior
to the expiration date, 2.148 shares of our common stock at an exercise price of
$.01 per share.
The exact number of shares of common stock offered under this prospectus may be
subject to adjustment to prevent dilution of the warrant value. This prospectus
includes such additional shares of common stock, which as of this date is
indeterminable, that we may have to issue and sell to avoid dilution of the
warrants.
The warrants will expire on October 1, 2009. All expenses of this offering,
other than commissions and discounts of broker-dealers and market makers, will
be paid by us.
Our common stock is traded on the Nasdaq National Market under the symbol
"PCSA." On November 23, 1999, the closing price of our common stock was $36.625
per share.
This investment involves risk. See "Risk Factors" beginning on page 4.
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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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TABLE OF CONTENTS
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Prospectus Summary...................................................... 1
Risk Factors............................................................ 4
Forward-Looking Statements.............................................. 14
Use of Proceeds......................................................... 16
Price Range of Common Stock and Dividend Policy......................... 16
Selected Financial Data................................................. 17
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................. 19
Industry Background..................................................... 27
Business................................................................ 29
The Sprint PCS Agreements............................................... 45
Description of Certain Indebtedness..................................... 60
Management.............................................................. 66
Principal Stockholders.................................................. 75
Certain Transactions.................................................... 77
Regulation of the Wireless Telecommunications Industry.................. 78
Description of Capital Stock............................................ 82
Plan of Distribution.................................................... 88
Legal Matters........................................................... 88
Experts................................................................. 88
Available Information................................................... 88
Index to Consolidated Financial Statements.............................. F-1
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This prospectus includes product names, trade names and trademarks of other
companies.
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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 one of the
largest Sprint PCS affiliates 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 September 30, 1999, Sprint PCS, together with its affiliates,
operated PCS systems in 4,000 cities and communities 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 currently provide roaming coverage along the Interstate 85
corridor in South Carolina, between Atlanta, Georgia and Charlotte, North
Carolina. 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 significant 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, 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,
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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.
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The Offering
Common Stock Offered............. 644,400 shares of common stock issuable upon
exercise of warrants issued in our units
offering.
Common Stock Outstanding......... 11,969,734 shares.
Nasdaq National Market Symbol.... "PCSA"
Risk Factors..................... See "Risk Factors" beginning on page 4 for
a discussion of the material factors that you
should consider before purchasing shares of
common stock.
Number of Warrants Previously
Issued........................... 300,000 warrants were issued in our units
offering.
Exercise......................... Each warrant entitles the holder to purchase,
prior to the expiration date, 2.148 shares of
our common stock at an exercise price of
$0.01 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.
Separation....................... The warrants were separated from the units on
October 21, 1999.
Expiration....................... October 1, 2009.
Transfer Restrictions............ Upon effectiveness of the registration
statement, of which this prospectus is a
part, and through such time as it continues
to be effective, holders, who are not our
affiliates, will not be subject to resale
restrictions on the shares of common stock
received upon the exercise of their warrants.
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RISK FACTORS
You should carefully consider the following risk factors in addition to the
other information contained in this prospectus before you exercise your warrants
to purchase shares of our common stock.
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 23 employees as of September 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, other than roaming
coverage, 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.
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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, 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
Technologies Inc., will be at variable rates of interest, which could
result in higher interest expense in the event of increases in market
interest rates; and
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. 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 September 30, 1999, our outstanding long-term debt would have totaled
$165.7 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.
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 borrowed $13.5 million to date from Lucent. The remaining $140.0
million which we expect to borrow 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 our 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 tower company. If our master collocation
agreement with that tower company 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
6
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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.
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
7
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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 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.
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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
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 currently have "key man" life
insurance for our chief executive officer.
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
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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 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 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 stockholders.
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."
10
<PAGE>
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 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 beneficial
ownership of our common stock
11
<PAGE>
Our current management and directors beneficially own approximately 29% of
our outstanding common stock on a diluted basis as of November 23, 1999.
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, Sprint 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.
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 during this offering by our management and our affiliates and upon
exercise of the warrants and subsequent sale of the shares of common stock
underlying the warrants. The occurrence of such sales, or the perception that
such sales could occur, could materially and adversely affect the market price
of our common stock. All of our stockholders prior to our initial public
offering of common stock, Lucent, members of our senior management and our
directors have entered into written "lock-up" agreements pursuant to which each
has agreed that, until March 25, 2000 not to, among other things, sell their
shares. As a result, upon the expiration of the lock-up agreements 180 days
after the date of this prospectusand any other restrictions that are applicable,
an additional 3,596,996 shares of our common stock will be eligible for sale
subject, in most cases, to volume and other restrictions under federal
securities laws. In addition, up to 644,400 shares of common stock may be issued
upon exercise of the warrants pursuant to this prospectus for an exercise price
of $0.01 per share. Upon exercise of the warrants, the shares of common stock
issued will be freely tradeable, subject to restrictions on sales of securities
under the federal securities laws for persons who are our affiliates.
On the separation date 644,400 shares underlying the warrants issued in the
units offering will be freely tradeable.
You may not receive a return on investment through dividend payments
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
12
<PAGE>
through cash dividends on the shares of common stock purchased pursuant to the
exercise of your warrants.
We have the right to suspend the use of this prospectus which will restrict
the ability of holders to exercise their warrants
The warrant holders will not be able to exercise their warrants to purchase
our common stock during a period in which we elected to suspend the
effectiveness of the shelf registration statement of which this prospectus is a
part, any amendment made to the shelf registration statement. Under the warrant
agreement pursuant to which the warrants were issued, we have the right to
suspend the effectiveness of the shelf registration statement and, therefore,
the use of this prospectus, for a limited period of time.
13
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains statements about future events and expectations,
which are "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended. 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;
. our substantial amount debt and our ability to service such debt and
comply with all the covenants in the loan documents;
. 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 technology becoming obsolete;
. our competition; and
14
<PAGE>
. our ability to attract and retain skilled personnel.
See additional discussion under "Risk Factors" beginning on page 4.
15
<PAGE>
USE OF PROCEEDS
The net proceeds to be received from the exercise of the warrants, assuming
all warrants are exercised, after deducting estimated offering expenses, will be
approximately $6,444. We intend to use the net proceeds from the exercise of the
warrants for general corporate purposes including working capital.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
Our common stock is traded on the Nasdaq National Market under the symbol
PCSA. The following table sets forth, for the periods indicated, the range of
high and low bid prices for our common stock as reported on the Nasdaq National
Market.
<TABLE>
<CAPTION>
Price Range of
Common Stock
-------------------
High Low
<S> <C> <C>
Year Ended September 30, 1999:
Fourth Quarter (From September 28, 1999) $28.00 $23.00
Year Ended September 30, 2000 $54.25 $23.00
First Quarter (through November 23, 1999)
</TABLE>
On November 23, 1999, the reported last sales price of the common stock was
$36.625 per share.
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.
16
<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 subsidiary 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 and for the nine month periods ended
September 30, 1998 and 1999, are derived from the consolidated financial
statements of AirGate PCS, Inc. and subsidiary 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 as of September 30, 1999 and December 31, 1998
and for the nine month periods ended September 30, 1999 and 1998 and for the
years ended December 31, 1998 and 1997, the related notes and the independent
auditors' report.
<TABLE>
<CAPTION>
Period From
Inception,
June 15, For the Nine Month
1995, to Periods Ended
December 31, For the Years Ended December 31, September 30,
------------ -------------------------------- -------------
1995 1996 1997 1998 1998 1999
<S> <C> <C> <C> <C> <C> <C>
(In thousands except per share data)
Statement of Operations Data:
Operating expenses:
General and administrative................. $(1,458) $(1,252) $(1,101) $(2,597) $(1,552) $(5,619)
Depreciation and amortization.............. (18) (19) (998) (1,204) (1,028) ( 622)
------- ------- ------- ------- ------- --------
Operating loss............................. (1,476) (1,271) (2,099) (3,801) (2,580) (6,241)
--------
Interest expense........................... (217) (582) (817) (1,392) (1,015) (9,358)
------- ------- ------- ------- ------- ========
Net loss................................... $(1,693) $(1,853) $(2,916) $(5,193) $(3,595) $(15,599)
======= ======= ======= ======= ======= ========
Other Data:
Operating loss before fixed charges........ $(1,476) $(1,271) $(2,099) $(3,801) $(2,580) $ (6,241)
======= ======= ======= ======= ======= ========
Basic and diluted net loss per share
of common stock (1)........................ $ (0.50) $ (0.55) $ (0.86) $ (1.54) $ (1.06) $ (4.57)
======= ======= ======= ======= ======= ========
</TABLE>
____________________
(Footnotes on the following page)
17
<PAGE>
<TABLE>
<CAPTION>
As of December 31, As of September 30
-------------------------------------- ------------------
1995 1996 1997 1998 1998 1999
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:...................
Cash and cash equivalents............ $ 256 $ 6 $ 147 $ 2,296 $ 1,926 $258,900
Total assets......................... 21,643 2,196 13,871 15,450 12,120 317,320
Long-term debt(2).................... -- -- 11,745 7,700 7,700 165,667
Stockholders' equity (deficit)....... (1,272) (3,025) (1,750) (5,350) (3,753) 127,846
</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) Includes current maturities.
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<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 significant revenues. 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 September 30, 1999, we have incurred $45.0 million of capital
expenditures related to the build-out of our PCS network. We currently provide
roaming coverage along the Interstate 85 corridor in South Carolina, between
Atlanta, Georgia and Charlotte, North Carolina. 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.
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<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:
20
<PAGE>
. allows us to avoid the costs of building the tower and buying or leasing
the land;
. 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.
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<PAGE>
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
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
consolidated 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 nine month period ended September 30, 1999:
On October 21, 1999, the Company changed its fiscal year from the year
ending December 31 to the year ending September 30 effective September 30, 1999.
From December 31, 1998 through September 30, 1999, we were focused on raising
capital to continue our PCS network build-out.
Revenues
As a development stage enterprise, we had no commercial operations for any
period, resulting in no revenues or costs of service being recorded. In November
1999, we began offering roaming coverage along the Interstate 85 corridor in
South Carolina, between Atlanta, Georgia and Charlotte, North Carolina. We
expect to generate revenue from Sprint PCS customers and customers of other
wireless carriers with whom Sprint PCS has roaming agreements as they use our
PCS network along the Interstate 85 corridor.
22
<PAGE>
General and Administrative Expenses
From January 1, 1999 through September 30, 1999, we were focused on raising
capital to continue our PCS network build-out. We incurred expenses of $5.6
million during the nine month period ended September 30, 1999 compared to $1.6
million for the nine month period ended September 30, 1998, an increase of $4.0
million. The increase is primarily comprised of all cell site lease payments
related to our PCS network build-out, additional salaries, employee bonus
accruals, relocation liabilities and non-cash compensation of vested stock
options.
Depreciation and Amortization
For the nine months ended September 30, 1999, depreciation and amortization
expense was $0.6 million compared to $1.0 million for the nine months ended
September 30, 1998. Through August 1998 we were amortizing the purchase price
for FCC licenses held by our predecessor. We incurred capital expenditures of
$31.9 million in the nine months ended September 30, 1999 related to the
continued build-out of our PCS network which included approximately $1.1 million
of capitalized interest compared to capital expenditures of $2.4 million in the
nine months ended September 30, 1998 of which no interest was capitalized as the
network build-out commenced August 1998. Depreciation will begin and will
continue to increase as our network equipment is placed into service.
Interest Expense, net
For the nine months ended September 30, 1999, interest expense was $9.4
million, net of capitzalized interest of $1.1 million, an increase $8.4 million
over the $1.0 million in interest expense for the nine months ended September
30, 1998. Interest expense for the 1999 period included a $8.7 million charge to
record the fair value of warrants and the beneficial conversion feature related
to the convertible promissory notes issued to the affiliates of Weiss, Peck,
Greer Venture Partners and the affiliates of JAFCO America Ventures Inc.
Capitalized interest of $1.1 million for the nine months ended September 30,
1999 was higher due to increased capital expenditures compared to no capitalized
interest for the nine months ended September 30, 1998. Future interest expense
will include the accretion on the 13.5% senior subordinated discount notes and
recognition of the remaining discount associated with the fair market value of
the warrants.
Net Loss
For the nine months ended September 30, 1999, the net loss was $15.6
million as compared to $3.6 million for the same period in 1998. The net loss
increased $12.0 million, resulting primarily from the items discussed above. Net
losses will continue to increase as we build-out our PCS network.
Liquidity and Capital Resources
As of September 30, 1999, we had $258.9 million in cash and cash
equivalents, as compared to $2.3 million in cash and cash equivalents at
December 31, 1998. Our net working capital was $229.7 million at September 30,
1999 versus negative working capital of $13.7 million at December 31, 1998.
23
<PAGE>
Net Cash Used in Operating Activities
The $2.5 million in cash used in operating activities was the result of our
net loss for the nine months ended September 30, 1999 which was partially offset
by an increase in accounts payable and amortization and the recognition of the
beneficial conversion feature related to the note discounts.
Net Cash Used in Investing Activities
The $15.7 million in cash used by investing activities represents capital
expenditures related to our network build-out with an additional $16.2 million
aquired through accounts payable for a total of $31.9 million of capital
expenditures for the nine months ended September 30, 1999.
Net Cash Provided by Financing Activities
The $274.8 million in cash provided by financing activities consisted
primarily of $131.0 million gross proceeds with respect to the completion of our
initial public offering of common stock, $156.1 gross proceeds relating to our
offering of senior subordinated discount notes, as described below, and
increased borrowings pursuant to the Lucent financing partially offset by equity
and debt issuance costs.
Liquidity
We closed our offering of equity and debt funding on September 30, 1999.
The total equity amount raised was $131.0 million, or $120.5 million in net
proceeds. Concurrently, we closed our offering of $300 million principal amount
at maturity 13 1/2% senior subordinated discount notes due 2009. The gross
proceeds from the offering of senior subordinated discount notes was $156.1
million or $149.4 million in net proceeds. The senior subordinated discount
notes will require cash payments of interest beginning on April 1, 2005.
In addition, on August 16, 1999, we entered into a $153.5 million credit
agreement with Lucent. The credit agreement provides for a $13.5 million senior
secured term loan which matures on June 6, 2007, which is the first installment
of the loan or Tranche 1. The second installment or Tranche 2 under the credit
agreement is for a $140.0 million senior secured term loan that matures on
September 30, 2008. Mandatory quarterly payments of principal are required
beginning December 31, 2002 for Tranche 1 and March 21, 2004 for Tranche 2
initially in the amount of 3.75% of the loan balance then outstanding and
increasing thereafter. Management expects that the proceeds of our concurrent
initial public offering of common stock and the offering of senior subordinated
discount notes together with the Lucent financing will fund our capital
expenditures including the completion of our network build-out and working
capital requirements through 2002.
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.
24
<PAGE>
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 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 commercial 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
In the normal course of business, our operations are exposed 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. Our primary market risk exposure relates to:
(i) the interest rate risk on our long-term and short term borrowings; (ii) our
ability to refinance our senior subordinated discount notes at maturity at
market rates; and (iii) the impact of interest rate movements on our ability to
meet interest expense requirements and financial covenants under our debt
instruments.
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.
25
<PAGE>
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 September 30,
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
2000 2001 2002 2003 2004 Thereafter
(Dollars in thousands)
Senior subordinated discount notes............. $178,193 $206,819 $235,446 $268,796 $300,000 --
Fixed interest rate............................ 13.5% 13.5% 13.5% 13.5% 13.5% 13.5%
Principal payments............................. -- -- -- -- -- $300,000
Lucent financing............................... $ 13,500 $ 72,560 $152,994 $150,969 $127,775 --
Variable interest rate (1)..................... 9.25% 9.25% 9.25% 9.25% 9.25% 9.25%
Principal payments............................. -- -- -- $ 2,025 $ 2,025 $127,775
</TABLE>
_________________
(1) 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
. 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.
26
<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.
27
<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.
28
<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 one of the
largest Sprint PCS affiliates 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 4.7 million customers as of September 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
September 30, 1999, Sprint PCS, together with its affiliates, operated PCS
systems in 4,000 cities and communities 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 third quarter of 1999.
<TABLE>
<CAPTION>
1997 1998 1999
-------------------------------- ------------------------------ --------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
(In thousands)
Total subscribers........ 192 347 570 887 1,114 1,370 1,750 2,586 3,350 3,967 4,690
</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.
29
<PAGE>
We are one of the largest affiliates 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.
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 September 30, 1999,
Sprint PCS, together with its affiliates, operated PCS systems in 4,000 cities
and communities in 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
30
<PAGE>
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.
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.
31
<PAGE>
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.
. 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.
. Mark A. Roth, our vice president of the interior region, has more than 10
years of wireless communications experience. Mr. Roth has served as a
divisional head for Arch Communications, responsible for managing over
$80 million in revenue. More recently, Mr. Roth was Senior Vice President
of Sales and Distribution for Conxus Communications.
Fully financed plan. The net proceeds received from our concurrent
offerings of common stock and units, which consisted of senior subordinated
discount notes and warrants, together with the amount of borrowings available
under the Lucent financing, total approximately $408.9 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.
32
<PAGE>
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.
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.
33
<PAGE>
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.
34
<PAGE>
The following table lists the location and population of each of the
markets that comprise our territory under our agreements with Sprint PCS:
Territory (BTAs)* State Population (1)
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
=========
- ---------------
* 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
In November 1999, we began offering roaming coverage along the Interstate
85 corridor in South Carolina, between Atlanta, Georgia and Charlotte, North
Carolina. 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.
35
<PAGE>
<TABLE>
<CAPTION>
Expected Covered Residents
Commercial Launch Cumulative as a Percentage of
Date by Quarter Markets Included Covered Residents Total Residents
<S> <C> <C> <C>
First quarter 2000 Anderson and Greenville-Spartanburg, 1,535,986 22%
South Carolina; Asheville and Hickory,
North Carolina
Second and third quarters 2000 Augusta and Savannah, Georgia; 4,363,458 63%
Charleston, Columbia, Myrtle Beach, and
Orangeburg, South Carolina; Goldsboro,
Roanoke Rapids, Rocky Mount and
Wilmington, North Carolina
Fourth quarter 2000 Florence, Greenwood and Sumter, South 5,003,320 74%
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 September 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.
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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 offers in over 4,000
cities and communities in the United States as of September 30, 1999, 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 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.
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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 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. 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.
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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 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.
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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, 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.
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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.
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.
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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 markets its PCS services 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.
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
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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 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 September 30, 1999, we employed 23 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 consist of a 10,052 square foot leased
office space located at Harris Tower, 233 Peachtree Street, N.E., Suite 1700,
Atlanta, Georgia 30303. We also lease a 40,000 square foot office located at
Pelham 85 Business Center, Greenville, South Carolina, and lease a 24,000
square foot office located at 411 Huger Street, Columbia, South Carolina. We
believe our properties are in good operating condition and are currently
suitable and adequate for our business operations.
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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. The Sprint PCS agreements and a consent and agreement are
exhibits to the registration statement of which this prospectus is a part. We
urge you to carefully review the Sprint PCS agreements and the consent and
agreement.
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;
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. 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.
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.
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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 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.
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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; 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;
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. 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 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.
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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 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
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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 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;
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. 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;
. 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
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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.
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.
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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 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
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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 cannot 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 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 stockholder's equity value plus the outstanding amount of
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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 stockholders have 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;
. 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
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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;
. 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
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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 5MHz 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.
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:
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. 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.
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.
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.
At the time we request a borrowing under the Lucent financing, we may
select one of two types of interest rates:
. we may choose a Eurodollar borrowing, on which interest accrues at a rate
determined by reference to an adjusted LIBOR plus 3.75%, only so long as no
Event of Default exists. Adjusted LIBOR is a LIBOR rate adjusted by a
multiple determined by a reserve requirement published by the Board of
Governors of the Federal Reserve System.
. alternatively, we may choose an alternative base rate borrowing on which
interest accrues at a rate determined by reference to the greater of:
. the Federal Funds effective rate, as defined in the credit agreement, plus
0.50%; or
. the prime rate of either the Chase Manhattan Bank, or, if the
administrative agent is a commercial bank, the administrative agent, plus
2.75%.
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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
alternative base rate borrowings.
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 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;
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. 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;
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. 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;
. 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; or
. we change control of our ownership.
We have paid Lucent the expenses related to the Lucent financing and an
origination fee. In addition, in connection with the Lucent financing we issued
warrants to Lucent to purchase shares of common stock representing 128,860
shares of common stock on the closing date of our initial public offering at an
exercise price of $20.40 per share. See "Description of Capital Stock--
Warrants."
Senior Subordinated Discount Notes
In our units offering, we offered $300.0 million aggregate principal amount
at maturity of 13 1/2% senior subordinated discount notes maturing in 2009 and
warrants. Accompanying each senior subordinated discount note was a warrant
exercisable for 2.148 shares of common stock at an exercise price of $0.01. The
senior subordinated discount notes and the warrants became separately
transferable at the request of the underwriter on October 21, 1999. See
"Description of Units--Warrants." No cash interest payments will be made on the
senior subordinated discount notes prior to April 1, 2005. The aggregate
accreted value of the senior subordinated discount notes will increase from
approximately $156.1 million at issuance at a rate of 13 1/2% per annum to a
final accreted value equal to their aggregate principal amount of $300.0 million
on October 1, 2004. Accretion is computed on a basis of a 360-day year of twelve
30 day months, compounded semi-annually. Commencing April 1, 2005, cash interest
will be payable to holders of the senior subordinated discount notes at a rate
of 13 1/2% per annum, semi-annually in arrears on each April 1 and October 1.
The cash interest, computed on a basis of a 360-day year of twelve 30-day
months, accrue from the most recent interest payment date or, if no interest has
been paid or duly provided for, from October 1, 2004. The senior subordinated
discount notes are not subject to any sinking fund.
The senior subordinated discount notes are guaranteed by our existing
subsidiary, AGW Leasing Company, Inc., and may be guaranteed by additional
subsidiaries of ours in the future. In addition,
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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 October 1, 2004 or, if the
repurchase were on or after October 1, 2004, at an aggregate price of 101% of
the aggregate principal amount thereof plus accrued and unpaid interest thereon.
We have the right to redeem all or part of the senior subordinated
discount notes on or after October 1, 2004 at redemption prices beginning at
106.750% in 2004 and decreasing gradually to 100.000% 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 113.500% 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
contains 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;
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. 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;
. 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, the unenforceability of the pledge agreement against us for any
reason, the failure of any lien purported to be created on the collateral
under the pledge agreement to be a valid and perfected lien with the
priority required under the pledge agreement, or assertion by us that such
lien is not valid or perfected or lacks such priority;
. 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.
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
September 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. As of November 15, 1999,
all outstanding principal and interest due under the note has been paid.
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MANAGEMENT
Directors and Executive Officers
The following table presents information with respect to our directors and
executive officers.
Name Age Position
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
Barry Schiffman............. 53 Chairman of the Board and Director
Gill Cogan.................. 46 Director
Robert Ferchat.............. 65 Director
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
Mark A. Roth................ 43 Vice President Interior Region
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
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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 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.
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.
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.
Robert A. Ferchat previously served as the chairman of the board of
directors, president and chief executive officer of BCE Mobile Communications
from November 1994 to January 1999. During Mr. Ferchat's tenure, BCE Mobile
witnessed dramatic growth as he was instrumental in successfully launching BCE
Mobile's PCS network in Canada. Prior to joining BCE, Mr. Ferchat served as
chairman, president and chief executive officer of TMI Communications from 1992
to 1994. Mr. Ferchat also served as chairman of Atomic Energy of Canada Limited
from 1990 to 1992. Mr. Ferchat previously held a number of senior management
positions with Northern Telecom International and Northern Telecom Canada.
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.
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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 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.
Mark A. Roth joined AirGate PCS in July, 1999 and has more than 10 years of
wireless communications experience. Prior to joining AirGate, Mr. Roth was with
Arch Communications from 1992 to July 1998. Mr. Roth has served as a divisional
head in 1998 for Arch Communications, and was responsible for managing over $80
million in revenue. More recently, Mr. Roth was Senior Vice President of Sales
and Distribution for Conxus Communications.
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. Robert
Ferchat and a director to be appointed by the board of directors 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, 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 is one vacancy on the board. We anticipate that the
remaining vacancy will be filled in the near future by the board of directors.
The audit committee consists of Gill Cogan, Barry Schiffman and Robert A.
Ferchat. The compensation committee consists of Gill Cogan, Barry Schiffman and
Robert A. Ferchat.
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
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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 September 30, 1999,
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.
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 $100,000 during the year ended
September 30, 1999.
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Summary Compensation Table(1)
<TABLE>
<CAPTION> Long Term
Annual Compensation Compensation Awards Payouts
------------------------------------ --------------------------- ---------
Other
Annual Restricted Securities
Compen- Stock Underlying LTIP All Other
sation Awards Options/SARs Payouts Compensation
Name and Principal Position Year Salary ($) Bonus ($) ($)4 ($)(5) (#)(6) ($) ($)
- --------------------------- ----- ----------- ---------- -------- ---------- ------------ --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Thomas D. Dougherty (2) 1999 $ 82,500 21,875 ------ ------ 300,000 ------ -------
President and Chief 1998 ------- ------ ------ ------ ------- ------ -------
Executive Officer
Thomas D. Body III (3) 1999 120,000 ------ ------ ------ 75,000 ------ -------
Vice President 1998 120,000 ------ ------ ------ ------- ------ -------
W. Chris Blane 1999 120,000 ------ ------ ------ 75,000 ------ -------
Vice President of Business 1998 120,000 ------ ------ ------ ------- ------ -------
Development
Alan B. Catherall 1999 120,000 ------ ------ ------ 90,000 ------
Chief Financial 1998 ------- ------ ------ ------ ------- ------
Officer
Robert E. Gourlay 1999 120,000 ------ ------ ------ 75,000 ------ -------
Vice President of 1998 120,000 ------ ------ ------ ------- ------ -------
Marketing
Shelley L. Spencer 1999 120,000 ------ ------ ------ 115,000 ------ -------
Vice President of Law and 1998 120,000 ------ ------ ------ ------- ------ -------
Secretary
Jack R. Kimzey (7) 1999 33,750 33,750 ------ ------ ------- ------ $16,000
Chief Executive Officer 1998 67,500 ------ ------ ------ ------- ------ -------
</TABLE>
(1) Due to the change in our fiscal year from a fiscal year end of December 31
to September 30 the compensation reported for each person listed in the
table during both 1998 and 1999 includes an overlap of compensation for the
period between September 30, 1998 through December 31, 1998.
(2) Mr. Dougherty became our Chief Executive Officer on April 15, 1999.
(3) Mr. Body served as Chief Executive Officer from January 1998 to October
1998.
(4) There were no (a) perquisites over the lesser of $50,000 or 10% of the
individual's total salary and bonus for the last year, (b) payments of
above-market preferential earnings on deferred compensation, (c) payments
of earnings with respect to long-term incentive plans prior to settlement
or maturation, (d) tax payment reimbursements, or (e) preferential
discounts on stock.
(5) For 1999, the Company had no employee restricted stock plans in existence.
(6) A discussion of the shares subject to options granted to Mr. Dougherty, Mr.
Body, Mr. Blane, Mr. Catherall, Mr. Gourlay and Ms. Spencer, including
exercise price and option vesting is set forth in this prospectus under "--
1999 Stock Option Plan."
(7) Mr. Kimzey served as Chief Executive Officer from October 1998 to February
1999. Mr. Kimzey resigned in February 1999. From February 15, 1999 to
April 15, 1999 Mr. Kimzey was employed as a consultant and received
$16,000.
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Compensation of Directors
Currently, we do not compensate our directors with directors fees, however,
we have granted director Robert A. Ferchat 10,000 options to purchase common
stock. See "Management--1999 Stock Option Plan" In addition, 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. Mr. Dougherty was awarded options
exercisable for 300,000 shares of common stock. Under the agreement, Mr.
Dougherty vested 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. The options that vested on April 15, 1999 are not
exercisable until April 15, 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 entered into employment agreements with W. Chris Blane, Thomas D. Body
III, Robert E. Gourlay, David C. Roberts, and Shelley L. Spencer as of the
completion of the common stock offering. Each of these employees may be
terminated with or without cause at any time. The agreements 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 have also entered into an employment agreement with
Mark A. Roth. Under his agreement, Mr. Roth 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. We expect to enter into an employment agreement with
Alan B. Catherall with similar terms.
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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. On July 28, 1999, we made an initial
granted of options to purchase 1,075,000 shares of common stock with an exercise
price of $14.00 per share to our existing officers and employees. As of
November 29, 1999, we have granted options to purchase 1,170,000 shares of
common stock. The following table presents information with respect to the
options granted to executive officers whose salary and bonus exceeded $100,000
during the year ended September 30, 1999.
<TABLE>
<CAPTION>
Potential realized
Value at Assumed
Annual Rates of Stock Price
Appreciation for Option
Term (1)
Number of Securities % of Total ------------------------------
Underlying Options Exercise Expiration
Name Options Granted Price Date 5% 10%
- ---------------------------- ----------------------- ------------ ---------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas M. Dougherty......... 300,000 25.6% $14.00 04/2009 $2,641,357 $6,693,718
W. Chris Blane.............. 75,000 6.4 14.00 07/2009 660,339 1,673,430
Thomas D. Body III.......... 75,000 6.4 14.00 07/2009 660,339 1,673,430
Alan B. Catherall........... 90,000 7.7 14.00 07/2009 792,407 2,008,115
Robert E. Gourlay........... 75,000 6.4 14.00 07/2009 660,339 1,673,430
Shelley L. Spencer.......... 115,000 9.8 14.00 07/2009 1,012,520 2,565,925
</TABLE>
___________________
(1) The amounts represent certain assumed rates of appreciation. Actual gains,
if any, on stock option exercises and common stock holdings are dependent on
the future performance of the common stock and overall stock market
conditions. There can be no assurance that the amounts reflected in this
table will be realized.
The option plan is will be administered by our board of directors which may
subject to the provisions of the option plan, 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.
Year-End Option Values. The following table sets forth information concerning
the value as of September 30, 1999 of options held by the executive officers
named in the Summary Compensation Table set forth above.
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<PAGE>
<TABLE>
<CAPTION>
Number of Value of
Securities Underlying Unexercised
Unexercised Options In-the-Money Options
at Fiscal Year-End (1) at Fiscal Year-End (1)(2)
---------------------- -------------------------
Name Exercisable/Unexercisable Exercisable/Unexercisable
- ---- -------------------------- -------------------------
<S> <C> <C>
Thomas M. Dougherty --/300,000 $--/$3,262,500
W. Chris Blane --/75,000 $--/$815,625
Thomas D. Body III --/75,000 $--/$815,625
Alan B. Catherall --/90,000 $--/$978,750
Robert E. Gourlay --/75,000 $--/$815,625
Shelley L. Spencer --/115,000 $--/$1,250,625
</TABLE>
________
(1) No options were exercised by any of the named executive officers as of
September 30, 1999.
(2) The value of the unexercised in the money options were calculated by
multiplying the number of shares of common stock underlying the options by the
difference between $24.875, which was the closing market price of our common
stock on September 30, 1999, and the option exercise price of $14.00.
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. Mr. Ferchat's options will vest 50% on the
completion of his first year as a director; the remaining 50% will vest on the
completion of his second year as a director.
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.
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 our company 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 our
company AirGate, the board of directors may similarly provide the employee with
the right to exercise all options.
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Noncompetition Agreement
In connection with the granting of options under the option plan, most
employees 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 following table presents certain information regarding the beneficial
ownership of common stock, as of November 23, 1999, 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
Shares Beneficially of Outstanding
Name and Address of Beneficial Owner(1) Owned(2) Common Stock
<S> <C> <C>
Essex Investment Management
Company, LLC(3)........................ 1,683,425 14.1%
125 High Street
Boston, Massachusetts 02110
Weiss, Peck & Greer Venture
Partners affiliated funds.............. 1,675,842 15.5(9)
555 California Street, Suite 3130
San Francisco, California 94104
JAFCO America Ventures, Inc.
affiliated funds....................... 511,686 4.3
505 Hamilton Ave, Suite 310
Palo Alto, California 94301
Robert E. Gourlay & Associates, LP..... 191,451 1.6
8734 Oakthorpe Drive
Charlotte, North Carolina 28277
Thomas M. Dougherty.................... -- --
W. Chris Blane(4)...................... 325,537 2.7
Alan B. Catherall...................... 1,000 *
Robert E. Gourlay(5)................... 191,451 1.6
Barry Schiffman(6)..................... 511,686 4.3
Gill Cogan(7).......................... 1,675,842 14.0
Shelley L. Spencer(8).................. 87,331 *
Thomas D. Body III..................... 320,537 2.7
David C. Roberts....................... 140,339 1.2
Robert A. Ferchat...................... -- --
</TABLE>
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<PAGE>
All executive officers and directors as
a group
(11 persons)........................... 3,253,723 28.4
- -------------------------
(Footnotes on following page)
* Less than one percent.
(1) Except as indicated below, the address for 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) Based upon information contained in a Schedule 13G filed with the SEC on
November 9, 1999.
(4) Includes 305,000 shares directly held by Mr. Blane, 16,537 held by Mr.
Blane's spouse and 4,000 held by his children.
(5) Includes 191,451 shares that Mr. Gourlay is deemed to beneficially own as a
general partner of Robert E. Gourlay & Associates, LP.
(6) 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.
(7) Includes 1,675,842 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.
(8) Includes 86,931 shares directly held by Ms. Spencer and 400 shares held by
her spouse.
(9) Includes 214,413 shares of common stock underlying the warrants issued to
the Weiss, Peck & Greer Venture Partners affiliated funds.
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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 were converted into
shares of our common stock concurrently with the 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 are exerciseable after the common stock
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 were converted
into shares of our common stock concurrently 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 entered into
registration rights agreements with the Weiss, Peck and Greer Venture Partners
affiliated funds and the JAFCO America Ventures, Inc. affiliated funds.
During the nine months ended September 30, 1999, we made $45,000 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.
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<PAGE>
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 metropolitan areas
and 55 MHz in rural areas.
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.
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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 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. The FCC has adopted rules requiring
broadband PCS and other CMRS providers to implement enhanced emergency 911
capabilities. The compliance deadline for phase 1 was January 1, 1999, and for
phase II will be October 1, 2001 for digital CMRS carriers to ensure access for
customers using devices for the hearing-impaired. The FCC recently adopted
rules allowing carriers to implement handset based enhanced 911 service. If
such technology is used at least 50 percent of all new handsets
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<PAGE>
must be capable of automatic location identification by October 1, 2001. Under
certain circumstances, 100% of the new handsets will need automatic location
identification by October 1, 2001. 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 multiple tenant buildings under
just, reas onable 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 uncontested requirements of J-STD-025 by
June 30, 2000, given hardware changes that are yet to be developed and
implemented by switch manufacturers. Compliance with contested portions of the
J-STD-025 standard and "punch-list" capability adopted by the FCC will be
required by September 30, 2001.
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.
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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.
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 November 24, 1999,
there were 11,969,734 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.
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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 Warrants
Weiss Peck & Greer affiliated entities 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 warrants
may be exercised to purchase 214,413 shares of common stock at a per share
exercise price of $12.75. We agreed to register the shares of common stock
underlying the warrants under the terms of a registration rights agreement
entered into with Weiss, Peck & Greer. The warrants held by Weiss, Peck & Greer
are subject to a lock-up agreement and may not be sold, transferred or exercised
until after March 25, 2000.
Lucent Warrants
We also issued warrants to Lucent in consideration for the financing we
received from Lucent. The warrants are exercisable for 128,860 shares of our
common stock at an exercise price of $20.40 per share 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. We entered into a registration rights agreement with Lucent that
provides for the registration of the shares of common stock purchased by Lucent
upon exercise of their warrants, however, Lucent may not sell their warrants or
any shares of common stock received upon exercise of their warrants until after
the lock-up agreement with us expires on March 25, 2000.
Warrants Issued in Units Offering
We have issued warrants to purchase an aggregate of 644,000 shares of our
common stock pursuant to a warrant agreement by and among us, AGW Leasing
Company, Inc., and Bankers Trust Company, as 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. The warrant agreement is an exhibit to the
registration statement of which this prospectus is a part.
General. Each warrant, when exercised, entitles the holder to receive
2.148 fully paid and non-assessable shares of our common stock, at an exercise
price of $0.01 per share, subject to adjustment. The number of shares of common
stock underlying the warrants is subject to adjustment in the cases referred to
below. The warrants became separated from the units and are freely transferable
as of the separation date or October 21, 1999. Unless exercised, the warrants
will automatically expire at 5:00 p.m. New York City time on the expiration
date, October 1, 2009.
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
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<PAGE>
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, we will deliver or
cause to be delivered, to or upon the written order of such holder, stock
certificates representing the number of whole shares of common stock underlying
the warrants 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 shares of 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 of 1933, 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 the shares of common stock be issued on exercise of the warrants reside.
No fractional shares of common stock will be issued upon exercise of the
warrants. We 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 shares
less a corresponding fraction of the exercise price.
The holders of the warrants have no right to vote on matters submitted to
our stockholders and have no right to receive dividends. The holders of the
warrants are not entitled to share in our assets of in the event of our
liquidation, dissolution or the winding up of corporate business. 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.
In the event of a taxable distribution to holders of our common stock that
results in an adjustment to the number of shares of common stock 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.
Adjustments. The number of shares of common stock purchasable upon
exercise of warrants arewill be subject to adjustment in several circumstances.
No adjustment need be made 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.
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.
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<PAGE>
Registration of the Warrant Shares. We also are required, under the
terms of the warrant agreement, to (1) file a shelf registration statement by
November 29, 1999 to register the common stock underlying the warrants, (2) use
our reasonable best efforts to cause the shelf registration statement to be
declared effective by the Securities and Exchange Commission on or before
January 29, 2000 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.
Liquidated Damages. The warrant agreement provides that if we fail to
(1) file a shelf registration statement with respect to the common stock
underlying the warrants by November 29, 1999, (2) use our reasonable best
efforts to have the Securities and Exchange Commission declare the shelf
registration statement effective on or before January 29, 2000, or (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, then in each case above (each such event referred to in clauses (1)
through (3) above a "Registration Default"), we will be required to pay
liquidated damages to each holder of a warrant which shall accrue from the first
such Registration Default.
The liquidated damages paid to each holder of a warrant will be in an
amount equal to $0.03 per week per warrant 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 $0.02 per week per warrant with respect to
each subsequent 90-day period, up to a maximum amount equal to $0.07 per week
per warrant. The provision for liquidated damages will continue until such
Registration Default has been cured. We will not be required to pay liquidated
damages for more than one Registration Default at any given time.
Liquidated damages accrued as of April 1 or October 1 of each year will be
payable on such date. All accrued liquidated damages shall be paid by us to
holders entitled to liquidated damages in accordance with the warrant agreement.
Delaware Law and Certain Charter and By-Law Provisions
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. 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
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<PAGE>
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 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
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<PAGE>
election of new directors or the approval of a merger, would have to wait
for the next duly called stockholders meeting.
Delaware law provides that the affirmative vote of a majority of the
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
Our common stock has been approved for quotation and is traded on the
Nasdaq National Market under the symbol "PCSA."
Registration Rights
As of September 30, 1999, Lucent and entities affiliated with Weiss,
Peck & Greerwill hold warrants exercisable for an aggregate of 343,273 shares of
our common stock. Lucent and Weiss, Peck & Greer entities arewill 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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PLAN OF DISTRIBUTION
All or a portion of the common stock offered by this prospectus may be
delivered upon exercise of the warrants by the warrant holder. Subject to a
suspension period, the warrant holder may exercise their warrant(s) at anytime
at a per share exercise price of $.01 per underlying share of common stock. The
costs of registering, issuing and maintaining an effective registration
statement for the shares of common stock underlying the warrants have been and
will be borne by us. For additional information regarding the distribution of
the shares of common stock underlying the warrants see "Description of Capital
Stock -- Warrants".
LEGAL MATTERS
Certain legal matters in connection with the sale of the shares of
common stock upon exercise of the warrants will be passed upon for AirGate by
Patton Boggs LLP, Washington D.C.
EXPERTS
The consolidated financial statements of AirGate PCS, Inc. and
subsidiary and predecessors as of September 30, 1999 and December 31, 1998, and
for the nine month periods ended September 30, 1999 and 1998, the years ended
December 31, 1998 and 1997 and for the period from inception, June 15, 1995, to
September 30, 1999, 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.
AVAILABLE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Commission. You may read and copy any document we file at
the following locations:
. At the Public Reference Room of the Commission, Room 1024-Judiciary
Plaza, 450 Fifth Street, N.W., Washington, DC 20549 or by calling at 1-
800-SEC-0300;
. At the public reference facilities at the Commission's regional offices
at Seven World Trade Center, 13/th/ Floor, New York, New York 10048 or
Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661;
. By writing to the Commission, Public Reference Section, Judiciary Plaza,
450 Fifth Street, N.W., Washington, DC 20549;
. At the offices of the National Association of Securities Dealers, Inc.,
Reports Section, 1735 K Street, N.W., Washington, DC 20006; or
. From the Commission's web site at www.sec.gov.
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Some of these locations may charge a prescribed or modest fee for copies.
We have filed with the Commission a Registration Statement on Form S-1
(together with any amendments or supplements thereto, the "Registration
Statement") under the Securities Act of 1933, as amended, with respect to the
shares of common stock offered hereby. As permitted by the Commission, this
prospectus, which consitutes a part of the Registration Statement, does not
contain all the information included in the Registration Statement. Such
additional information may be obtained from the number locations described
above. Statements contained in this prospectus as to the contents of any
contract or other document are not necessarily complete. You should refer to
the contract or other documents for all the details.
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<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
(a Development Stage Enterprise)
<TABLE>
<CAPTION>
<S> <C>
Independent Auditors' Report ............................................................... F-2
Consolidated Balance Sheets as of September 30, 1999 and December 31, 1998 ................. F-3
Consolidated Statements of Operations for the nine month periods ended
September 30, 1999 and 1998, the years ended December 31, 1998 and 1997
and for the period from inception, June 15, 1995 to September 30, 1999 ................ F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the nine month periods
ended September 30, 1999 and 1998, the years ended December 31, 1998
and 1997 and for the period from inception, June 15, 1995 to
September 30, 1999 ................................................................... F-5
Consolidated Statements of Cash Flows for the nine month periods ended
September 30, 1999 and 1998, the years ended December 31, 1998 and 1997
and for the period from inception, June 15, 1995 to September 30, 1999 ............... F-6
Notes to the Consolidated Financial Statements ............................................ F-8
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
AirGate PCS, Inc.:
We have audited the accompanying consolidated balance sheets of AirGate
PCS, Inc. and subsidiary and predecessors (a development stage enterprise) as of
September 30, 1999 and December 31, 1998, and the related consolidated
statements of operations, stockholders' equity (deficit), and cash flows for the
nine month periods ended September 30, 1999 and 1998, the years ended December
31, 1998 and 1997 and for the period from inception, June 15, 1995 to September
30, 1999. 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 subsidiary and predecessors (a development stage enterprise) as of
September 30, 1999 and December 31, 1998 and the results of their operations and
their cash flows for the nine month periods ended September 30, 1999 and 1998,
the years ended December 31, 1998 and 1997 and for the period from inception,
June 15, 1995 to September 30, 1999, in conformity with generally accepted
accounting principles.
KPMG LLP
Atlanta, Georgia
November 19, 1999
F-2
<PAGE>
<TABLE>
<CAPTION>
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
(a Development Stage Enterprise)
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share and per share amounts)
September 30, December 31,
1999 1998
--------------- ---------------
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 258,900 $ 2,296
Due from AirGate Wireless, LLC (note 5) 751 378
Prepaid expenses 1,596 100
--------------- ----------------
Total current assets 261,247 2,774
Property and equipment, net (note 4) 44,206 12,545
Financing costs 11,622 --
Other assets 245 131
--------------- ----------------
$ 317,320 $ 15,450
=============== ================
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable $ 2,216 $ 1,449
Accrued expenses 20,178 --
Accrued interest 1,413 686
Notes payable (note 6(a)) -- 6,000
Notes payable to stockholders (note 6(b)) -- 4,965
Current maturities of long-term debt (note 6(c)) 7,700 3,381
--------------- ----------------
Total current liabilities 31,507 16,481
Long-term debt, excluding current maturities (note 6(c)) 157,967 4,319
--------------- ----------------
Total liabilities 189,474 20,800
--------------- ----------------
Stockholders' equity (deficit) (note 8):
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;
11,957,201 and 3,382,518 shares issued
and outstanding at September 30, 1999
and December 31, 1998, respectively 120 34
Additional paid-in-capital 157,880 6,271
Deficit accumulated during the development stage (27,254) (11,655)
Unearned stock option compensation (2,900) --
--------------- ----------------
Total stockholders' equity (deficit) 127,846 (5,350)
Commitments and Contingencies
(notes 2, 6, 10, 12 and 13) -- --
--------------- ----------------
$ 317,320 $ 15,450
=============== ================
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
(a Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Period from
Nine Month Periods Inception,
Ended Years Ended June 15, 1995
September 30, December 31, to September 30,
1999 1998 1998 1997 1999
---------- ---------- ---------- --------- -----------------
<S> <C> <C> <C> <C> <C>
Operating expenses:
General and administrative expenses $ (5,619) $ (1,552) $ (2,597) $ (1,101) $ (12,027)
Depreciation and amortization (622) (1,028) (1,204) (998) (2,861)
---------- ---------- ---------- --------- --------------
Operating loss (6,241) (2,580) (3,801) (2,099) (14,888)
Interest expense (9,358) (1,015) (1,392) (817) (12,366)
---------- ---------- ---------- --------- --------------
Net loss $ (15,599) $ (3,595) $ (5,193) $ (2,916) $ (27,254)
========== ========== ========== ========= ==============
Basic and diluted net loss per
share of common stock $ (4.57) $ (1.06) $ (1.54) $ (0.86)
========== ========== ========== =========
Weighted-average outstanding common shares 3,414,276 3,382,518 3,382,518 3,382,518
---------- ---------- ---------- ---------
Weighted-average potentially
dilutive equivalents:
Common stock options 42,157 -- -- --
Stock purchase warrants 29,187 -- -- --
Convertible promissory notes 433,249 -- -- --
---------- ---------- ---------- ---------
Weighted-average outstanding common
shares including dilutive equivalents 3,918,869 3,382,518 3,382,518 3,382,518
========== ========== ========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
(a Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
Nine month periods ended September 30, 1999 and 1998, the years ended December
31, 1998 and 1997 and for the period from inception, June 15 1995, to September 30, 1999
Deficit
accumulated
Common stock Additional during the
------------------------- paid-in development
Shares Amount capital stage
------ ------ ----------- ----------------
<S> <C> <C> <C> <C>
Balance at June 15, 1995 (inception) -- $ -- $ -- $ --
Loan conversions -- -- 420 --
Net loss -- -- -- (1,693)
---------- -------- ----------- ------------
Balance at December 31, 1995 -- -- 420 (1,693)
Loan conversions -- -- 101 --
Net loss -- -- -- (1,853)
---------- --------- ----------- ------------
Balance at December 31, 1996 -- -- 521 (3,546)
Loan conversions -- -- 4,684 --
Cash distributions -- -- (493) --
Net loss -- -- -- (2,916)
---------- --------- ----------- ------------
Balance at December 31, 1997 -- -- 4,712 (6,462)
Formation of AirGate PCS, Inc. (note 1(a)) 3,382,518 34 (34) --
Distribution of AirGate Wireless, LLC
(note 8(e)) -- -- 1,593 --
Net loss -- -- -- (3,595)
---------- --------- ----------- ------------
Balance at September 30, 1998 3,382,518 34 6,271 (10,057)
Net loss -- -- -- (1,598)
---------- --------- ----------- ------------
Balance at December 31, 1998 3,382,518 34 6,271 (11,655)
Issuance of stock purchase warrants in
connection with issuance of convertible
notes payable to stockholders and Lucent
Financing (notes 8(b)(i) and 8(b)(ii)) -- -- 2,369 --
Beneficial conversion feature of convertible
notes payable to stockholders (note 8(a)(ii)) -- -- 6,979 --
Unearned compensation related to grant of
compensatory stock options (note 8(c)) -- -- 3,225 --
Stock option compensation (note 8(c)) -- -- --
Issuance of common stock, net of offering
costs (note 8(a)(iii)) 7,705,000 77 120,391 --
Issuance of warrants in connection with high
yield debt offering (note 8(b)(iii)) -- -- 10,948 --
Conversion of notes payable to stockholders
(note 8(a)(ii)) 869,683 9 7,697 --
Net loss -- -- -- (15,599)
---------- --------- ----------- ------------
Balance at September 30, 1999 11,957,201 $ 120 $ 157,880 $ (27,254)
========== ========= =========== =============
<CAPTION>
Unearned stock Total
option stockholders'
compensation equity (deficit)
------------------ ----------------
<S> <C> <C>
Balance at June 15, 1995 (inception) $ -- $ --
Loan conversions -- 420
Net loss -- (1,693)
----------------- ---------------
Balance at December 31, 1995 -- (1,273)
Loan conversions -- 101
Net loss -- (1,853)
---------------- --------------
Balance at December 31, 1996 -- (3,025)
Loan conversions -- 4,684
Cash distributions -- (493)
Net loss -- (2,916)
---------------- --------------
Balance at December 31, 1997 -- (1,750)
Formation of AirGate PCS, Inc. (note 1(a)) -- --
Distribution of AirGate Wireless, LLC
(note 8(e)) -- 1,593
Net loss -- (3,595)
---------------- --------------
Balance at September 30, 1998 -- (3,752)
Net loss -- (1,598)
---------------- --------------
Balance at December 31, 1998 -- (5,350)
Issuance of stock purchase warrants in
connection with issuance of convertible
notes payable to stockholders and Lucent
Financing (notes 8(b)(i) and 8(b)(ii)) -- 2,369
Beneficial conversion feature of convertible
notes payable to stockholders (note -- 6,979
8(a)(ii))
Unearned compensation related to grant of
compensatory stock options (note 8(c)) (3,225) --
Stock option compensation (note 8(c)) 325 325
Issuance of common stock, net of offering
costs (note 8(a)(iii)) -- 120,468
Issuance of warrants in connection with high
yield debt offering (note 8(b)(iii)) -- 10,948
Conversion of notes payable to stockholders
(note 8(a)(ii)) -- 7,706
Net loss -- (15,599)
---------------- ---------------
Balance at September 30, 1999 $ (2,900) $ 127,846
================ ===============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
(a Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
Period from
Nine Month Periods Years Inception,
ended ended June 15, 1995
September 30, December 31, to September 30,
1999 1998 1998 1997 1999
------------ --------- ----------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (15,599) $ (3,595) (5,193) $ (2,916) $ (27,254)
Adjustments to reconcile net loss to net cash
(used in) provided by operating activities:
Depreciation and amortization 622 1,028 1,204 998 2,861
Loss on sale of fixed assets 19 -- -- -- 19
Interest expense associated with accretion
of discount and beneficial conversion feature 8,707 -- -- -- 8,707
Stock option compensation 325 -- -- -- 325
(Increase) decrease in:
Due from AirGate Wireless, LLC (373) -- (378) -- (751)
Prepaid expenses (1,496) (212) (95) ( 5) (1,596)
Other assets (114) -- (131) 2,087 2,102
Increase (decrease) in:
Accounts payable 767 1,002 1,411 18 2,203
Accrued expenses 3,942 -- -- -- 3,942
Accrued interest 727 788 1,007 588 3,171
---------- --------- ------- --------- ----------
Net cash (used in) provided by
operating activities (2,473) (989) (2,175) 770 (6,271)
---------- --------- ------- --------- ----------
Cash flows from investing activities:
Capital expenditures (15,706) (2,432) (5,176) -- (20,943)
Purchase of FCC licenses -- -- -- (2,936) (2,936)
---------- --------- ------- --------- ----------
Net cash used in investing activities (15,706) (2,432) (5,176) (2,936) (23,879)
---------- --------- ------- --------- ----------
Cash flows from financing activities:
Proceeds from issuance of notes payable and related
warrants to Lucent 18,500 -- 5,000 2,800 26,300
Payment on notes payable to Lucent (10,000) -- -- -- (10,000)
Proceeds from issuance of warrants and high yield
debt in units offering 156,057 -- -- -- 156,057
Financing cost on Lucent Financing and units
offering (11,622) -- -- -- (11,622)
Proceeds from issuance of common stock 130,985 -- -- -- 130,985
Offering costs (10,517) -- -- -- (10,517)
Payment of note payable to bank (1,000) -- -- -- (1,000)
Proceeds from issuance of convertible notes payable
to stockholders and related warrants 2,530 5,200 5,200 -- 30,190
Payments on notes payable to stockholders (150) -- (700) -- (20,850)
Cash distributions -- -- -- (493) (493)
---------- --------- ------- --------- ----------
Net cash provided by financing
activities 274,783 5,200 9,500 2,307 289,050
---------- --------- ------- --------- ----------
Net increase in cash and
cash equivalents 256,604 1,779 2,149 141 258,900
Cash and cash equivalents at beginning of period 2,296 147 147 6 --
---------- --------- ------- --------- ----------
Cash and cash equivalents at end of period $ 258,900 $ 1,926 2,296 $ 147 $ 258,900
========== ========= ======= ========= ==========
Supplemental disclosure of cash flow information -
cash paid for interest $ 503 $ 930 1,279 $ 930 $ 2,209
========== ========= ======= ========= ==========
(continued)
</TABLE>
F-6
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
(a Development Stage Enterprise)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Month Periods Years Period from
ended ended Inception,
September 30, December 31, June 15, 1995
1999 1998 1998 1997 September 30, 1999
----------- ------------ ------------ ---------- -----------------
<S> <C> <C> <C> <C> <C>
Supplemental disclosure of noncash investing and
financing activities:
Assets acquired through debt financing:
FCC licenses $ -- $ -- -- $ 11,745 $ 11,745
Site acquisition and engineering costs -- 7,700 7,700 -- 7,700
Convertible notes payable to stockholders and
accrued interest converted to equity 7,706 -- -- 4,864 12,911
Grant of compensatory stock options 3,225 -- -- -- 3,225
Beneficial conversion feature of convertible notes
payable to stockholders 6,979 -- -- -- 6,979
Network assets acquired and not yet paid for 16,236 -- -- -- 16,236
Distribution of FCC licenses:
Accrued interest -- (894) (894) -- (894)
Long-term debt -- (11,745) (11,745) -- (11,745)
FCC licenses -- 12,846 12,846 -- 12,846
Line of credit -- (1,800) (1,800) -- (1,800)
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999 and December 31, 1998
(1) Business, Basis of Presentation and Summary of Significant Accounting
Policies
(a) Business and Basis of Presentation
AirGate PCS, Inc. and subsidiary 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. and its wholly-owned subsidiary, AGW Leasing Company, Inc.,
and their predecessor entities (AirGate, LLC, AirGate Wireless, LLC, and AirLink
II, LLC) for all periods presented. All significant intercompany accounts and
transactions have been eliminated in consolidation.
From inception (June 15, 1995) 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 Sprint and Sprint PCS (the "Sprint Agreements") to build,
construct and manage a PCS network that will support the offering of Sprint PCS
services. 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
AirGate PCS, Inc.
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 its 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 or achieve breakeven cash flow, among other factors, could have an
adverse effect on the Company's financial position and results of operations.
(b) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, demand deposits, money market
accounts, and investments in commercial paper rated A-1/P-1 or better with
original maturities of three months or less.
F-8
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999 and December 31, 1998
(c) 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. Asset lives used by the Company are as
follows:
Useful life
-----------
Network assets................................... 10 years
Computer equipment............................... 3 years
Furniture, fixtures, and office equipment........ 5 years
Construction in progress includes expenditures for the purchase of capital
equipment, design services, construction services, and testing of the Company's
network. The Company capitalizes interest on its construction in progress
activities. Interest capitalized for the nine month period ending September 30,
1999 totaled $1.1 million. Capitalized interest on construction activities in
prior periods was not material. When the network assets are placed in service,
the Company transfers the assets from construction in progress to network assets
and depreciates those assets over their estimated useful life.
(d) Financing Costs
Costs incurred in connection with the Lucent Financing and the Company's
issuance of senior subordinated discount notes were deferred and will be
amortized into interest expense over the term of the respective financing using
the effective interest rate method.
(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 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 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 amount 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 rate 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.
(f) Net Loss Per Share
The Company computes net loss per common share in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share" and SEC
Staff Accounting Bulletin No. 98. Basic and diluted net loss per share of common
stock is computed by dividing net loss for each period by the weighted-average
outstanding common shares. No conversion of common stock equivalents has been
assumed in the calculation since the effect would be antidilutive. As a result,
the number of weighted-average outstanding common shares as well as the amount
of net loss per share are the same for basic and diluted net loss per share
calculations for all periods presented.
F-9
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999 and December 31, 1998
(g) Revenue Recognition
The Company will recognize revenue as services are rendered. 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.
(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 Long-
Lived Assets to be Disposed Of." SFAS No. 121 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) Advertising Costs
The company expenses advertising costs when the advertisement occurs. Total
advertising expense was approximately $90,000 in 1999 with no advertising
expense in prior periods.
(j) Derivative Instruments and Hedging Activities
On July 8, 1999, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 137, "Deferral of the Effective Date of SFAS 133." SFAS No. 137 defers the
effective date of SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," to all fiscal quarters of all fiscal years beginning after
June 15, 2000. The Company is currently evaluating the impact of adoption of
SFAS No. 133. The adoption is not expected to have a material effect on the
Company's consolidated results of operations, financial position, or cash flows.
(k) 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.
(l) Start-Up Activities
In April 1998, the American Institute of Certified Public Accountants ("AICPA")
issued Statement of Position No. 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.
F-10
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999 and December 31, 1998
(m) Change of Fiscal Year
On October 21, 1999, the Company changed its fiscal year from a calendar year
ending on December 31 to a fiscal year ending on September 30 effective
September 30, 1999.
(n) Comprehensive Income
No statements of comprehensive income have been included in the accompanying
consolidated financial statements since the Company does not have any "Other
Comprehensive Income" to report.
(2) Sprint Agreements
In July 1998, the Company signed four major agreements with Sprint and Sprint
PCS. They are the management agreement, the services agreement, the trademark
and service license agreement with Sprint and the trademark and service license
agreement with Sprint PCS. These agreements allow the Company to exclusively
offer Sprint PCS services in the Company's territory.
The management agreement has an initial term of 20 years with three 10-year
renewals, the first renewal being automatic. The key clauses within the
management agreement refer to exclusivity, network build-out, products and
services offered for sale, service pricing, roaming, advertising and promotion,
program requirements including technical and customer care standards, non-
competition, inability to use non-Sprint PCS brands and rights of first refusal.
(a) Exclusivity. The Company is designated as the only person or entity
that can manage or operate a PCS network for Sprint PCS in the
Company's territory. Sprint PCS is prohibited from owning, operating,
building or managing another wireless mobility communications network
in the Company's territory while the management agreement is in place.
(b) Network build-out. In the management agreement, the Company has agreed
to cover a specified percentage of the population at coverage levels
ranging from 39% to 86% within each of the 21 markets that comprise
the Company's territory by specified dates beginning on March 31, 2000
and ending on December 31, 2000. The aggregate coverage of all markets
will result in network coverage of approximately 65% of the 6.8
million in population within the Company's territory by December 31,
2000.
(c) Products and services offered for sale. The management agreement
identifies the products and services that can be offered for sale in
the Company's territory. The Company cannot offer wireless local loop
services specifically designed for the competitive local market in
areas where Sprint owns the local exchange carrier unless the Sprint
owned local exchange carrier is named as the exclusive distributor or
Sprint PCS approves the terms and conditions.
(d) Service pricing. The Company must offer Sprint PCS subscriber pricing
plans designated for national offerings. The Company is permitted to
establish local price plans for Sprint PCS products and services only
offered in the Company's market. Sprint PCS will retain 8% of the
Company's collected service revenues but will remit 100% of revenues
derived from roaming and sales of handsets and accessories and
proceeds from sales not in the ordinary course of business.
(e) Roaming. The Company will earn roaming revenues when a Sprint PCS
customer from outside of the Company's territory roams onto the
Company's network. There are established
F-11
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999 and December 31, 1998
rates for Sprint PCS' or affiliates' subscribers roaming and
similarly, the Company will pay Sprint PCS when the Company's own
subscribers use the Sprint PCS nationwide network outside the
Company's territory.
(f) Advertising and Promotion. Sprint PCS is responsible for all national
advertising and promotion of Sprint PCS products and services. The
Company is responsible for advertising and promotion in the Company's
territory.
(g) Program requirements including technical and customer care standards.
The Company will comply with Sprint PCS' program requirements for
technical standards, customer service standards, national and regional
distribution and national accounts programs.
(h) Non-competition. The Company may not offer Sprint PCS products and
services outside the Company's territory.
(i) Inability to use non-Sprint PCS brands. The Company may not market,
promote advertise, distribute, lease or sell any of the Sprint PCS
products 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.
(j) Rights of first refusal. Sprint PCS has certain rights of first
refusal to buy the Company's assets upon a proposed sale.
The management agreement can be terminated as a result of a number of events
including an uncured breach of the management agreement or bankruptcy of either
party to the agreement. In the event that the management agreement is not
renewed or terminated, certain formulas apply to the valuation and disposition
of the Company's assets.
The services agreement outlines various support services such as activation,
billing and customer care that will be provided to the Company by Sprint PCS.
These services are available to the Company at established rates. Sprint PCS can
change any or all of the service rates one time in each twelve month period. The
Company may discontinue the use of any service upon three months written notice.
Sprint PCS has agreed that the services presently offered will be available
until at least December 31, 2001. After that date, Sprint PCS may discontinue a
service provided that it gives nine months written notice. The services
agreement automatically terminates upon termination of the management agreement.
The trademark and service mark license agreements with Sprint and Sprint PCS
provide the Company with non-transferable, royalty free licenses to use the
Sprint and Sprint PCS brand names, the "diamond" symbol and several other
trademarks and service marks. The Company's use of the licensed marks is subject
to adherence to quality standards determined by Sprint and Sprint PCS. Sprint
and Sprint PCS can terminate the trademark and service mark license agreements
if the Company files for bankruptcy, materially breaches the agreement or if the
management agreement is terminated.
(3) Development Stage Enterprise
AirGate, LLC, the first predecessor entity of AirGate PCS, Inc., was established
on June 15, 1995 (inception). The Company has devoted most of its efforts to
date on activities such as preparing business plans, raising capital, and
planning the build-out of its PCS network. From inception through September 30,
1999, the Company has not generated any revenues and has incurred expenses of
$27.3 million,
F-12
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999 and December 31, 1998
resulting in an accumulated deficit during the development stage of $27.3
million as of September 30, 1999.
(4) Property and Equipment
Property and equipment consists of the following at September 30, 1999 and
December 31, 1998 (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Network assets........................................... $ 7,700 $ 7,700
Computer equipment....................................... 89 74
Furniture, fixtures, and office equipment................ 87 25
------- -------
Total network assets and equipment................ 7,876 7,799
Less accumulated depreciation and amortization........... (971) (392)
------- -------
Total network assets and equipment, net........... 6,905 7,407
Construction in progress (network build-out)............. 37,301 5,138
------- -------
Property and equipment, net....................... $44,206 $12,545
======= =======
</TABLE>
(5) 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 $373,000 during the nine month period ended September 30, 1999 and
$378,000 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 within twelve months.
F-13
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999 and December 31, 1998
(6) Notes Payable and Long-Term Debt
(a) Notes payable consist of the following at September 30, 1999 and December
31, 1998 (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Note payable to bank; interest at prime plus .5% due monthly (8.25% at
December 31, 1998); matures on November 9, 1999;
guaranteed by affiliates......................................................... $ -- $ 1,000
Secured promissory note, dated November 25, 1998, interest at
9.25%; interest and principal due at the earlier of: (1)
the first drawdown on the Lucent Financing or (2) June 30, 1999.................. -- 5,000
------- -------
$ -- $ 6,000
======= =======
</TABLE>
(b) Notes payable to stockholders consist of the following at September 30, 1999
and December 31, 1998 (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Notes payable to stockholders dated June 11, 1996; interest at 8%; payable
based upon the occurrence of an equity financing or October 15, 1999 ............ $ -- $ 150
Convertible notes payable to stockholders dated August 8, 1998; interest at 8%;
principal and interest due on September 18, 1999 (notes 8(a)(ii)
and 8(b)(i))..................................................................... -- 4,815
------- -------
$ -- $ 4,965
======= =======
</TABLE>
(c) Long-term debt consists of the following at September 30, 1999 and December
31, 1998 (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Unsecured promissory note dated July 22, 1998; interest at 14%; principal and
interest payments of $1,120 due quarterly commencing March 1, 1999 until
December 1, 2000.................................................................. $ 7,700 $ 7,700
Lucent Financing dated August 16, 1999; variable interest of LIBOR + 3.75% (9.25% at
September 30, 1999); interest due quarterly; (net of unaccreted original issue
discount of $642, see note 8(b)(ii)).............................................. 12,858 --
Senior Subordinated Discount Notes due 2009; interest at 13.5%; interest
accretes until October 1, 2004 after which quarterly interest payments
are required beginning April 1, 2005 (net of unaccreted original issue
discount of $10,948, see note 8(b)(iii)).......................................... 145,109 --
-------- -------
Total long-term debt.............................................................. 165,667 7,700
Less current maturities of long-term debt ............................................. 7,700 3,381
-------- -------
Long-term debt, excluding current maturities..................................... $157,967 $ 4,319
======== =======
</TABLE>
F-14
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999 and December 31, 1998
Unsecured Promissory Note
On August 31, 1999, the Company entered into a loan modification agreement with
the holder to defer the initial principal and interest payments due on the
Company's $7.7 million unsecured promissory note from March 1, 1999 to October
15, 1999. On November 15, 1999, the Company entered into an additional loan
modification to defer the maturity date to November 15, 1999. On November 15,
1999, the Company paid all outstanding principal and interest due under the
unsecured promissory note.
Lucent Financing
On August 16, 1999, the Company entered into a $153.5 million Credit Agreement
with Lucent. The Credit Facility provides for (i) a $13.5 million senior secured
term loan (the "Tranche I Term Loan") which matures on June 6, 2007, and (ii) a
$140.0 million senior secured term loan (the "Tranche II Term Loan") which
matures on September 30, 2008. Mandatory quarterly payments of principal are
required beginning December 31, 2002 for the Tranche I Term Loan and March 31,
2004 for the Tranche II Term Loan initially in the amount of 3.75% of the loan
balance then outstanding and increasing thereafter. In connection with this
financing, the Company issued to Lucent warrants to purchase common stock that
were exercisable upon issuance (see note 8(b)(ii)). Additionally, the Company
incurred origination fees and expenses of $5.0 million which have been recorded
as financing cost and will be amortized to interest expense using the effective
interest method.
The Lucent Financing contains numerous financial and operating covenants
including the maintenance of certain financial ratios. As of September 30, 1999,
management believes that the Company is in compliance with all covenants
governing the Lucent Financing.
Senior Subordinated Discount Notes
On September 30, 1999, the Company received proceeds of $156.1 million from the
issuance of 300,000 units, each unit consisting of $1,000 principal amount at
maturity of 13.5% senior subordinated discount notes due 2009 and one warrant to
purchase 2.148 shares of common stock at a price of $0.01 per share (see note
8(b)(iii)) pursuant to a registration statement filed on Form S-1 declared
effective by the Securities and Exchange Commission on September 27, 1999. The
aggregate principal amount outstanding as of September 30, 1999 of the senior
subordinated discount notes was $145.1 million (net of original issue discount
of $10.9 million (note 8(b)(iv)) which will accrete to the full aggregate
principal amount of $300.0 million by October 1, 2004. The Company incurred
expenses, underwriting discounts and commissions of $6.6 million related to the
units offering which have been recorded as financing costs and will be amortized
to interest expense using the effective interest method.
The senior subordinated discount notes contain certain covenants relating to
limitations on the Company's ability to, among other acts, sell assets, incur
additional indebtedness, and make certain payments. As of September 30, 1999,
management believes that the Company is in compliance with all covenants
governing the senior subordinated discount notes.
F-15
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999 and December 31, 1998
Aggregate minimum annual principal payments due on all issues of long-term debt
for the next five years at September 30, 1999 and thereafter are as follows
(dollars in thousands):
Years ending September 30,
--------------------------
2000........................................... $ 7,700
2001........................................... --
2002........................................... --
2003........................................... 2,025
2004........................................... 2,025
Thereafter .................................... 165,507
-------
Total .................................... 177,257
Less unaccreted original issue discounts ...... (11,590)
-------
Total long-term debt.................. $165,667
=======
(7) Fair Value of Financial Instruments
Fair value estimates, assumptions, and methods used to estimate the fair value
of the Company's financial instruments are made in accordance with the
requirements of SFAS No. 107, "Disclosure about Fair Value of Financial
Instruments." The Company has used available information to derive its
estimates. However, because these estimates are made as of a specific point in
time, they are not necessarily indicative of amounts the Company could realize
currently. The use of different assumptions or estimating methods may have a
material effect on the estimated fair value amounts (dollars in thousands).
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------------------- --------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Cash and cash equivalents $258,900 $258,900 $2,296 $2,296
Accounts payable 2,216 2,216 1,449 1,449
Accrued expenses 20,178 20,178 -- --
Notes payable -- -- 6,000 6,000
Notes payable to stockholders -- -- 4,965 4,965
Long-term debt 165,667 165,667 7,700 7,700
</TABLE>
(a) Cash and cash equivalents, accounts payable, and accrued expenses
The carrying amounts of these items are a reasonable estimate of their fair
value due to the short-term nature of the instruments.
F-16
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999 and December 31, 1998
(b) Notes payable and long-term debt
Long-term debt is comprised of the senior subordinated discount notes and
various notes payable to stockholders. The fair value of the senior subordinated
discount notes is stated at quoted market value. As there is no active market
for the remaining notes, management believes that the carrying amount of the
notes payable is a reasonable estimate of their fair value.
(8) Stockholders' Equity (Deficit)
(a) Common stock
(i) Stock splits
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,
which was effective July 28, 1999, 0.900-for-one which was effective September
15, 1999, and 0.965-for-one which was effective September 27, 1999. All share
and stockholders' equity amounts have been restated for all periods presented
for these stock splits.
(ii) Conversion of Notes Payable to Stockholders to Common Stock
On September 30, 1999, $4.8 million plus an additional $2.5 million of
convertible notes payable to stockholders and accrued interest were converted
into 869,683 shares of common stock at the applicable conversion price of $8.84
per share, a 48% discount from the initial public offering price. The amount
related to the fair value of the beneficial conversion feature of $7.0 million
as of the date of issuance (May 1999) has been recorded as additional
paid-in-capital and recognized as interest expense from the date of issuance to
the expected date of conversion (August 1999) in accordance with EITF Issue
98-5.
(iii) Initial Public Offering
On September 30, 1999, the Company sold 7,705,000 shares of its common stock at
a price of $17.00 per share in its initial public offering pursuant to a
registration statement filed on Form S-1 declared effective by the Securities
and Exchange Commission on September 27, 1999. Proceeds from the initial public
offering were $131.0 million. The Company incurred expenses, underwriting
discounts and commissions related to the initial public offering of $10.5
million, which have been reflected as a reduction of the offering proceeds.
(b) Common Stock Purchase Warrants
(i) Warrants Issued to Stockholders
In August 1998, the Company issued stock purchase warrants to stockholders in
consideration for: (1) loans made by the stockholders to the Company which have
been converted to additional paid-in capital, (2) guarantees of certain bank
loans provided by the stockholders, and (3) in connection with the $4.8 million
in financing provided by the stockholders.
In connection with a refinancing of the convertible notes payable to
stockholders in May 1999, the Company cancelled the August 1998 warrants and
issued new warrants to Weiss, Peck and Greer Venture Partners Affiliated Funds
to purchase shares of common stock for an aggregate amount up to
F-17
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999 and December 31, 1998
$2.7 million at an exercise price 25% less than the price of a share of common
stock sold in the initial public offering, or $12.75 per share. The warrants for
214,413 shares were exercisable upon issuance and may be exercised for two years
from the date of issuance. The Company allocated $1.7 million of the proceeds
from this refinancing to the fair value of the warrants and recorded a discount
on the related debt, which was recognized as interest expense from the date of
issuance (May 1999) to the expected date of conversion (August 1999).
(ii) Lucent Financing
On August 16, 1999, the Company issued stock purchase warrants to Lucent in
consideration of the Lucent Financing. The base price of the warrants equals
120% of the price of one share of common stock at the closing of the initial
public offering, or $20.40 per share, and the warrants are exercisable for an
aggregate of 128,860 shares of the Company's common stock. The 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
has terminated the remaining unused portion of the commitments under the Lucent
Financing. The Company has allocated $658,000 of the proceeds from the Lucent
Financing to the fair value of the warrants and has recorded a discount on the
associated credit facility, which will be recognized as interest expense over
the period from the date of issuance to the maturity date using the effective
interest method. Through September 30, 1999 the Company has recognized $16,500
of interest expense related to this discount.
(iii) Senior Subordinated Discount Notes
On September 30, 1999, as part of the Company's senior subordinated discount
note offering, the Company issued warrants to purchase 2.148 shares of common
stock for each unit at a price of $0.01 per share. The warrants will be
exercisable upon the effective date of the registration statement registering
such warrants, for an aggregate of 644,400 shares of common stock and expire
October 1, 2009 (note 6). The Company has allocated $10.9 million of the
proceeds from the units offering to the fair value of the warrants and recorded
a discount on the notes, which will be recognized as interest expense over the
period from issuance to the maturity date using the effective interest method.
(iv) Outstanding Warrants
The following table summarizes the common stock purchase warrants outstanding as
of September 30, 1999:
<TABLE>
<CAPTION>
Common Weighted-
shares average exercise
Date issued represented price per share Expiration date
- ------------- ----------- --------------- ---------------
<S> <C> <C> <C>
May 18, 1999 214,413 $12.75 May 18, 2001
August 16, 1999 128,860 20.40 Earlier of August 15, 2004 or August 15,
2001 based on certain events
September 30, 1999 644,400 0.01 October 1, 2009
------- ------
Total 987,673 $ 5.33
======= ======
</TABLE>
(c) Stock Option Plan
On July 28, 1999, the Board of Directors approved an incentive stock option
plan, whereby 2.0 million shares of common stock were reserved for issuance to
current and future employees. A total of
F-18
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999 and December 31, 1998
1,075,000 of these options were granted as nonqualified stock options on July
28, 1999 at an exercise price of $14.00 per share. These options vest at various
terms up to a 5 year period beginning at the grant date and expire ten years
from the date of grant. Unearned compensation of $3.2 million was recorded for
the difference between the initial public offering price of $17.00 per share and
the exercise price at the date of grant of $14.00 per share and is being
recognized over the period in which the related employee services are rendered.
Stock option compensation expense of $325,000 was recognized during the nine
month period ended September 30, 1999. There were no forfeitures, cancellations,
or exercises of stock options during 1999.
Of the 1,075,000 options outstanding, with a weighted-average exercise price of
$14.00 per share, 225,000 were exercisable. The fair value of the stock options
granted during the nine month period ended September 30, 1999 was estimated on
the date of grant to be $10.41 per share using the Black-Scholes option pricing
model, using the following assumptions: expected volatility of 60%, risk-free
interest rate of 6.0%, and an expected life of 10 years.
The Company applies the provisions of APB Opinion No. 25 and related
interpretations in accounting for its stock option plan. Had compensation costs
for the Company's stock option plan been determined in accordance with SFAS No.
123, the Company's net loss and basic and diluted net loss per share of common
stock for the nine month period ended September 30, 1999 would have increased to
the pro forma amounts indicated below as this is the only period presented in
which stock options were outstanding (dollars in thousands, except for per share
amounts):
September 30,
1999
-------------
Net loss:
As reported $ (15,599)
Pro forma (15,699)
Basic and diluted net loss per
share of common stock:
As reported $ (4.57)
Pro forma (4.60)
(d) 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 stockholder
approval. The Company has no present plans to issue any preferred stock.
(e) 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 $12.8 million, $11.7 million, $1.8 million and $894,000
at August 4, 1998, respectively.
F-19
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999 and December 31, 1998
(9) 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 predecessor.
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 periods ended September 30, 1999 and
December 31, 1998 differed from the amounts computed by applying the statutory
U.S. Federal income tax rate of 34% to loss before income taxes as a result of
the following (dollars in thousands):
<TABLE>
<CAPTION>
For the periods ended
---------------------
September 30, December 31,
1999 1998
---- ----
<S> <C> <C>
Computed "expected" tax benefit $ (5,304) $(1,765)
(Increase) decrease in income tax benefit resulting from:
Expenses related to LLC predecessors 7 569
State income tax benefit, net of Federal effect (325) (187)
Increase in valuation allowance 3,869 1,893
Benefit derived from contribution of tax assets -- (415)
Nondeductible interest expense 1,916 --
Other, net (163) (95)
--------- --------
Total income tax expense (benefit) $ -- $ --
========= =========
</TABLE>
F-20
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999 and December 31, 1998
The income tax effect of temporary differences that give rise to significant
portions of the Company's deferred income tax assets and liabilities as of
September 30, 1999 and December 31 1998 are presented below (dollars in
thousands):
As of
-----
September 30, December 31,
1999 1998
---- ----
Deferred income tax assets:
Net operating loss carryforwards $ 1,784 $ 302
Capitalized start-up costs 3,669 1,382
Accrued expenses 10 28
Property and equipment, principally due to
differences in depreciation and amortization 299 181
------- ------
Gross deferred income tax assets 5,762 1,893
Less valuation allowance (5,762) (1,893)
------- ------
Net deferred income tax assets $ -- $ --
======= ======
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. In assessing the realizability of
deferred income tax assets, management considers whether it is more likely than
not that some portion of the deferred income tax assets will 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 has provided a valuation allowance
against all of its deferred income tax assets because the realization of those
deferred tax assets is uncertain.
The valuation allowance for deferred income tax assets as of September 30, 1999
and December 31, 1998 was $5.8 million and $1.9 million, respectively. The net
change in the total valuation allowance for the periods ended September 30, 1999
and December 31, 1998 was an increase of $3.9 million and $1.9 million,
respectively.
At September 30, 1999, the Company has net operating loss carryforwards for
Federal income tax purposes of approximately $4.5 million, which will expire in
various amounts beginning in the year 2018. Approximately $4.5 million of the
net operating loss carryforwards that the Company may use to offset taxable
income in future years is limited as a result of an ownership change, as defined
under Internal Revenue Code Section 382, which occurred effective with the
Company's initial public offering of stock on September 30, 1999.
(10) Year 2000 (unaudited)
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
F-21
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999 and December 31, 1998
relating to 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 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 any of these other third-party vendors 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 believes 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.
(11) Condensed Consolidating Financial Statements
AGW Leasing Company, Inc. ("AGW") is a wholly-owned subsidiary of AirGate PCS,
Inc. AGW has fully and unconditionally guaranteed the Company's senior
subordinated discount notes. AGW is the Company's only subsidiary and was formed
to hold the real estate interests for the Company's PCS network. AGW also was a
registrant under the Company's registration statement declared effective by the
Securities and Exchange Commission on September 27, 1999. The Company has not
presented separate financial statements and other disclosures for AGW because
management has determined that such information is not material to investors.
The unaudited condensed consolidating financial statements as of September 30,
1999 and for the nine-months then ended are as follows (dollars in thousands):
F-22
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999 and December 31, 1998
<TABLE>
<CAPTION>
AirGate PCS, Inc. AGW Leasing
and Predecessors Company, Inc. Eliminations Consolidation
---------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 258,900 $ - $ - $ 258,900
Property and equipment, net 44,206 - - 44,206
Other assets 15,593 - (1,379) 14,214
------------ ----------- ---------- -----------
Total assets $ 318,699 $ - $ (1,379) $ 317,320
============ =========== ========== ===========
Accounts payable and accrued expenses $ 22,394 $ - $ - $ 22,394
Accrued interest and current
maturities of long-term debt 9,113 1,379 (1,379) 9,113
Long-term debt 157,967 - - 157,967
------------ ----------- ---------- -----------
Total liabilities 189,474 1,379 (1,379) 189,474
------------ ----------- ---------- -----------
Common stock 120 - - 120
Additional
paid-in-capital 157,880 - - 157,880
Deficit accumulated during the development stage (25,875) (1,379) - (27,254)
Unearned stock option compensation (2,900) - - (2,900)
------------ ----------- ---------- -----------
Total liabilities and stockholders' equity $ 318,699 $ - $ (1,379) 317,320
============ =========== ========== ===========
Total expenses (14,220) (1,379) - (15,599)
Net loss $ (14,220) $ (1,379) $ - $ (15,599)
=========== =========== ========== ===========
</TABLE>
(12) Commitments
(a) Leases
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 at September 30, 1999, are as follows (dollars in thousands):
Years ending September 30,
2000 .......................................................... $ 6,003
2001 .......................................................... 6,571
2002 .......................................................... 6,646
2003 .......................................................... 6,529
2004 .......................................................... 5,580
Thereafter............................................. 2,786
-------
Total future minimum annual lease payments........ $34,115
=======
F-23
<PAGE>
AIRGATE PCS, INC. AND SUBSIDIARY AND PREDECESSORS
(a Development Stage Enterprise)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
September 30, 1999 and December 31, 1998
Rental expense for all operating leases was $1.4 million for the nine months
ended September 30, 1999, $115,000 for the nine months ended September 30, 1998
and $294,000 and $44,000 for the years ended December 31, 1998 and 1997,
respectively.
(b) Employment Agreements
The Company has entered into employment agreements with certain employees which
provide that the employee will not compete in the business of wireless
telecommunications in the Company's territory for a specified period after the
termination date. The employment agreements define employment terms including
salary, bonus and benefits to be provided to the respective employees.
(13) Subsequent Events
(a) On October 21, 1999, the Company changed its fiscal year from a calendar
year ending December 31 to a fiscal year ending on September 30 effective
September 30, 1999. The Company filed a Current Report on Form 8-K with the
Securities and Exchange Commission on November 4, 1999 to effect the change in
the Company's fiscal year.
(b) On October 21, 1999, the Company's Board of Directors authorized the
issuance of 12,533 additional shares of common stock to the affiliates of Weiss,
Peck & Greer Venture Partners and the affiliates of JAFCO America Ventures, Inc.
pursuant to a previously authorized promissory note issued by the Company. The
shares were authorized for issuance in consideration for interest that accrued
from the period June 30, 1999 to September 28, 1999 on promissory notes issued
to the affiliates of Weiss, Peck & Greer Venture Partners and the affiliates of
JAFCO America Ventures Inc. The promissory notes were converted into shares of
common stock at a price 48% less than the price of a share of common stock sold
in the Company's initial public offering. The amount related to the fair value
of the beneficial conversion feature of $111,000 will be recorded as additional
paid-in-capital and recognized as interest expense in accordance with EITF Issue
98-5.
(c) On October 21, 1999, the Company's Board of Directors granted options to
purchase 95,000 shares of common stock to a director and certain employees
pursuant to the 1999 Stock Option Plan. Of these options, 45,000 options have an
exercise price equal to the fair market value on the date of grant ($43.60 per
share), 40,000 options have an exercise price of $14.00 per share (compensatory
options), and 10,000 options granted to a director have an exercise of $2.00 per
share (compensatory options). These options vest at various terms over a five
year period beginning at the grant date. Unearned compensation of $1.6 million
will be recorded by the Company, which represents the difference between the
exercise price and the fair market value of the options at the date of grant and
will be recognized as compensation expense in the period in which the related
employee services are rendered.
F-24
<PAGE>
___, 1999
LOGO
644,440 Shares of Common Stock Issuable Upon Exercise of Warrants
PROSPECTUS
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 December __, 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>
Part II
Information Not Required in the Prospectus
Item 13. Other Expenses of Issuance and Distribution
AirGate PCS, Inc. (the "Registrant") estimates that expenses 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.
Securities and Exchange Commission registration fee..... $ 1.79
Printing and engraving expenses......................... 75,000*
Accountants' fees and expenses.......................... 70,000*
Legal fees and expenses................................. 85,000*
Fees and expenses for qualifications under state
securities laws (including legal fees).................. 5,000*
Miscellaneous........................................... 10,000*
----------
Total............................................. $ 245,002*
==========
* estimated fees
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), the 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
such person is not entitled to be indemnified by the
The 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 or her against such liabilities
under the Certificate of Incorporation.
In addition to indemnification provided to the Registrant's officers and
directors in the Certificate of Incorporation and under the laws of Delaware,
the Registrant 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 the Registrant and its stockholders. The
Registrant has 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
<PAGE>
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 the Registrant. 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 the
Registrant or to any fiduciary obligation owed with respect to the Registrant
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 the Registrant); (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 or she 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 the Registrant.
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 the
Registrant to render a written opinion as to whether and the extent of
indemnification that the indemnified person is entitled, which will be binding
on the Registrant. 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 the Registrant for losses, claims, damages, expenses or
liabilities as well as other equitable considerations upon the determination of
a court of competent jurisdiction that indemnification is not available. The
amount contributed by the Registrant 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 the Registrant's securities, the relative benefits received
by the Registrant and indemnified person will be deemed to be in the same
respective proportions of the net proceeds from the offering (less expenses)
received by the Registrant and the indemnified person. The relative fault of
the Registrant 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
II-2
<PAGE>
information supplied by the Registrant 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 public
offering of the Registrant 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 the Registrant is also obligated under a claim and upon
written notice to the indemnified person, the Registrant is 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, the Registrant 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.
Item 15. Recent Sales of Unregistered Securities
In accordance with Item 701 of Regulation S-K, the following information is
presented with respect to the securities sold by the Registrant within the past
three years which were not registered under the Securities Act.
(i) The 1998 Financing
(a) Between August and September 1998, the Registrant 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. The Registrant 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
II-3
<PAGE>
(ii) The 1999 Financings
(a) In March, April and May 1999 the Registrant 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
(iii) The May 1999 Refinancing
(a) In May 1999, the Registrant 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 the Registrant'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 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
II-4
<PAGE>
(iv) 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.
II-5
<PAGE>
Item 16. Exhibits
The exhibits and financial statement schedules filed as a part of the
Registration Statement are as follows:
(a) List of Exhibits
3.1 Amended and Restated Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1 to the registration statement on
Form S-1, Registration Nos. 333-79189-02 and 333-79189-01)
3.2 Amended and Restated Bylaws of the Registrant (incorporated by reference to
Exhibit 3.2 to the registration statement on Form S-1, Registration Nos.
333-79189-02 and 333-79189-01)
4.1 Specimen of Common Stock Certificate of the Registrant (incorporated by
reference to Exhibit 4.1 to the registration statement on Form S-1,
Registration Nos. 333-79189-02 and 333-79189-01)
4.2 Form of warrant issued in units offering (included in Exhibit 10.15)
4.3 Form of Weiss, Peck & Greer warrants (incorporated by reference to Exhibit
4.3 to the registration statement on Form S-1, Registration Nos.
333-79189-02 and 333-79189-01) 4.4 Form of Lucent warrants (incorporated by
reference to Exhibit 4.4 to the registration statement on Form S-1,
Registration Nos. 333-79189-02 and 333-79189-01)
4.5 Indenture for senior subordinated discount notes (including the form of
pledge agreement) between AirGate PCS, Inc. and Bankers Trust Company, as
trustee, dated September 30, 1999
4.6 Form of unit (included in exhibit 10.15)
5.1 Opinion of Patton Boggs LLP regarding legality of the common stock
10.1 Sprint PCS Management Agreement between SprintCom, Inc. and AirGate
Wireless, L.L.C. (incorporated by reference to Exhibit 10.1 to the
registration statement on Form S-1, Registration Nos. 333-79189-02 and
333-79189-01)
10.2 Sprint PCS Services Agreement between Sprint Spectrum L.P. and AirGate
Wireless, L.L.C. (incorporated by reference to Exhibit 10.2 to the
registration statement on Form S-1, Registration Nos. 333-79189-02 and
333-79189-01)
II-6
<PAGE>
10.3 Sprint Spectrum Trademark and Service Mark License Agreement
(incorporated by reference to Exhibit 10.3 to the registration statement
on Form S-1, Registration Nos. 333-79189-02 and 333-79189-01)
10.4 Sprint Trademark and Service Mark License Agreement (incorporated by
reference to Exhibit 10.4 to the registration statement on Form S-1,
Registration Nos. 333-79189-02 and 333-79189-01)
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. (incorporated by reference to Exhibit 10.5 to the
registration statement on Form S-1, Registration Nos. 333-79189-02 and
333-79189-01)
10.6 Compass Telecom, L.L.C. Construction Management Agreement (incorporated
by reference to Exhibit 10.6 to the registration statement on Form S-1,
Registration Nos. 333-79189-02 and 333-79189-01)
10.7 Commercial Real Estate Lease dated August 7, 1998 between AirGate and
Perry Company of Columbia, Inc. to lease a warehouse facility.
(incorporated by reference to Exhibit 10.7 to the registration statement
on Form S-1, Registration Nos. 333-79189-02 and 333-79189-01)
10.8 Form of Indemnification Agreements (incorporated by reference to Exhibit
10.8 to the registration statement on Form S-1, Registration Nos.
333-79189-02 and 333-79189-01)
10.9 Employment Agreement dated April 9, 1999 between AirGate and Mr. Thomas
M. Dougherty (incorporated by reference to Exhibit 10.9 to the
registration statement on Form S-1, Registration Nos. 333-79189-02 and
333-79189-01)
10.10 Form of Executive Employment Agreements (incorporated by reference to
Exhibit 10.10 to the registration statement on Form S-1, Registration
Nos. 333-79189-02 and 333-79189-01)
10.11* 1999 Stock Option Plan
10.12 Credit Agreement with Lucent (including the pledge agreement and
intercreditor agreement) (incorporated by reference to Exhibit 10.12 to
the registration statement on Form S-1, Registration Nos. 333-79189-02
and 333-79189-01)
10.13 Consent and Agreement (incorporated by reference to Exhibit 10.13 to the
registration statement on Form S-1, Registration Nos. 333-79189-02 and
333-79189-01)
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. dated November 20, 1998.
(incorporated by reference to Exhibit 10.14 to the registration statement
on Form S-1, Registration Nos. 333-79189-02 and 333-79189-01)
II-7
<PAGE>
10.15 Warrant Agreement for units offering (including form of warrant in units
offering and form of unit) between AirGate PCS, Inc. and Bankers Trust
Company, as warrant agent, dated September 30, 1999.
21.1 Subsidiaries of the Registrant (incorporated by reference to Exhibit 21.1
to the registration statement on Form S-1, Registration Nos. 333-79189-02
and 333-79189-01)
23.1 Consent of KPMG LLP
23.2 Consent of Patton Boggs LLP (included in Exhibit 5.1)
24.1 Powers of Attorney (located on the signature page hereto)*
27.1 Financial Data Schedule
_______________
* To be filed by amendment
II-8
<PAGE>
(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.
Item 17. Undertakings
The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) to include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)
((S) 230.424(b) of this chapter) if, in the aggregate, the
changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) 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.
II-9
<PAGE>
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the County of Fulton, State of
Georgia, on November 29, 1999.
Airgate PCS, Inc.
By: /s/ Thomas M. Dougherty
-------------------------------
Name: Thomas M. Dougherty
Title: Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Thomas M. Dougherty and Shelley L. Spencer in
their own capacity, as his or her true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for such person and in such
person's name, place and stead, in any and all capacities, to sign any and all
amendments to this Registration Statement and any registration statement for the
same offering covered by this Registration Statement that is to be effective
upon filing pursuant to Rule 462(b) under the Securities Act of 1933, and all
post-effective amendments thereto, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he or she might or
could do in person, hereby ratifying and confirming all that said attorneys-in-
fact and agents, or his or her substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Name Title Date
---- ----- ----
/s/ Thomas M. Dougherty Chief Executive Officer and November 29, 1999
- -----------------------
Thomas M. Dougherty Director (Principal Executive
Officer)
/s/ Alan B. Catherall Chief Financial Officer November 29, 1999
- -----------------------
Alan B. Catherall (Principal Financial and
Accounting Officer)
/s/ W. Chris Blane Vice President and Director November 29, 1999
- -----------------------
W. Chris Blane
/s/ Thomas D. Body III Vice President and Director November 29, 1999
- -----------------------
Thomas D. Body III
Director November , 1999
- -----------------------
Barry Schiffman
<PAGE>
/s/ Gill Cogan Director November 29, 1999
- -----------------------
Gill Cogan
Director November , 1999
- -----------------------
Robert Ferchat
<PAGE>
EXHIBIT 4.5
================================================================================
AirGate PCS, Inc.
AGW Leasing Company, Inc.
======================
$300,000,000 AGGREGATE PRINCIPAL AMOUNT AT MATURITY
13 1/2% SENIOR SUBORDINATED DISCOUNT NOTES DUE 2009
======================
===============
INDENTURE
DATED AS OF SEPTEMBER 30, 1999
===============
Bankers Trust Company
Trustee
================================================================================
<PAGE>
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture
Act Section Section Indenture
<S> <C>
310 (a)(1)............................................................... 7.10
(a)(2)............................................................... 7.10
(a)(3)............................................................... N.A.
(a)(4)............................................................... N.A.
(a)(5)............................................................... 7.10
(b).................................................................. 7.3; 7.10
(c).................................................................. N.A.
311 (a).................................................................. 7.11
(b).................................................................. 7.11
(c).................................................................. N.A.
312 (a).................................................................. 2.5
(b).................................................................. 10.3
(c).................................................................. 10.3
313 (a).................................................................. 7.6
(b)(1)............................................................... 7.6
(b)(2)............................................................... 7.6; 7.7
(c).................................................................. 7.6;10.2
(d).................................................................. 7.6
314 (a).................................................................. 4.3;10.5
(b).................................................................. N.A.
(c)(1)............................................................... 10.4
(c)(2)............................................................... 10.4
(c)(3)............................................................... N.A.
(d).................................................................. N.A.
(e).................................................................. 10.5
(f).................................................................. N.A.
315 (a).................................................................. 7.1
(b).................................................................. 7.5,10.2
(c).................................................................. 7.1
(d).................................................................. 7.1
(e).................................................................. 6.11
316 (a)(last sentence)................................................... 2.9
(a)(1)(A)............................................................ 6.5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Trust Indenture
Act Section Section Indenture
<S> <C>
316 (a)(1)(B)............................................................ 6.4
(a)(2)............................................................... 2.13
(b).................................................................. 6.7
(c).................................................................. N.A.
317 (a)(1)............................................................... 6.8
(a)(2)............................................................... 6.9
(b).................................................................. 2.4
318 (a).................................................................. 10.1
(b).................................................................. N.A.
(c).................................................................. 10.1
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE......................................... 1
SECTION 1.1 DEFINITIONS.......................................................... 1
SECTION 1.2 OTHER DEFINITIONS.................................................... 23
SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.................... 24
SECTION 1.4 RULES OF CONSTRUCTION................................................ 24
ARTICLE II THE NOTES.......................................................................... 25
SECTION 2.1 FORM AND DATING...................................................... 25
SECTION 2.2 EXECUTION AND AUTHENTICATION......................................... 26
SECTION 2.3 REGISTRAR AND PAYING AGENT........................................... 27
SECTION 2.4 PAYING AGENT TO HOLD MONEY IN TRUST.................................. 28
SECTION 2.5 HOLDER LISTS......................................................... 28
SECTION 2.6 BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITIES.......................... 28
SECTION 2.7 REPLACEMENT NOTES.................................................... 32
SECTION 2.8 OUTSTANDING NOTES.................................................... 32
SECTION 2.9 TREASURY NOTES....................................................... 33
SECTION 2.10 TEMPORARY NOTES...................................................... 33
SECTION 2.11 CANCELLATION......................................................... 34
SECTION 2.12 DEFAULTED INTEREST................................................... 34
SECTION 2.13 RECORD DATE.......................................................... 34
SECTION 2.14 COMPUTATION OF INTEREST.............................................. 34
SECTION 2.15 CUSIP NUMBER......................................................... 35
ARTICLE III REDEMPTION AND PREPAYMENT.......................................................... 35
SECTION 3.1 NOTICES TO TRUSTEE................................................... 35
SECTION 3.2 SELECTION OF NOTES TO BE REDEEMED.................................... 35
SECTION 3.3 NOTICE OF REDEMPTION................................................. 36
SECTION 3.4 EFFECT OF NOTICE OF REDEMPTION....................................... 37
SECTION 3.5 DEPOSIT OF REDEMPTION OR PURCHASE PRICE.............................. 37
SECTION 3.6 NOTES REDEEMED IN PART............................................... 38
SECTION 3.7 OPTIONAL REDEMPTION.................................................. 38
SECTION 3.8 MANDATORY REDEMPTION................................................. 39
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 3.9 REPURCHASE OFFERS................................................... 39
ARTICLE IV COVENANTS........................................................................ 42
SECTION 4.1 PAYMENT OF NOTES....................................................... 42
SECTION 4.2 MAINTENANCE OF OFFICE OR AGENCY........................................ 42
SECTION 4.3 COMMISSION REPORTS..................................................... 43
SECTION 4.4 COMPLIANCE CERTIFICATE................................................. 43
SECTION 4.5 TAXES.................................................................. 44
SECTION 4.6 STAY, EXTENSION AND USURY LAWS......................................... 44
SECTION 4.7 LIMITATION ON RESTRICTED PAYMENTS...................................... 45
SECTION 4.8 DIVIDENDS AND OTHER PAYMENT
RESTRICTIONS AFFECTING SUBSIDIARIES.................................... 50
SECTION 4.9 LIMITATION ON INCURRENCE OF INDEBTEDNESS
AND ISSUANCE OF PREFERRED STOCK........................................ 51
SECTION 4.10 ASSET SALES............................................................ 54
SECTION 4.11 TRANSACTIONS WITH AFFILIATES........................................... 56
SECTION 4.12 LIENS.................................................................. 57
SECTION 4.13 SALE AND LEASEBACK TRANSACTIONS........................................ 58
SECTION 4.14 OFFER TO PURCHASE UPON CHANGE OF CONTROL............................... 58
SECTION 4.15 CORPORATE EXISTENCE.................................................... 59
SECTION 4.16 LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS IN WHOLLY OWNED
RESTRICTED SUBSIDIARIES................................................ 60
SECTION 4.17 BUSINESS ACTIVITIES.................................................... 60
SECTION 4.18 PAYMENT FOR CONSENTS................................................... 60
SECTION 4.19 NO SENIOR SUBORDINATED DEBT............................................ 61
SECTION 4.20 ADDITIONAL GUARANTEES.................................................. 61
SECTION 4.21 DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES................ 61
SECTION 4.22 FURTHER INSTRUMENTS AND ACTS........................................... 62
ARTICLE V SUCCESSORS........................................................................... 62
SECTION 5.1 MERGER, CONSOLIDATION OR SALE OF ASSETS................................ 62
SECTION 5.2 SUCCESSOR CORPORATION SUBSTITUTED...................................... 64
ARTICLE VI DEFAULTS AND REMEDIES................................................................ 64
SECTION 6.1 EVENTS OF DEFAULT................................................. 64
SECTION 6.2 ACCELERATION...................................................... 67
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 6.3 OTHER REMEDIES....................................................... 67
SECTION 6.4 WAIVER OF PAST DEFAULTS.............................................. 68
SECTION 6.5 CONTROL BY MAJORITY.................................................. 68
SECTION 6.6 LIMITATION ON SUITS.................................................. 69
SECTION 6.7 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT........................ 69
SECTION 6.8 COLLECTION SUIT BY TRUSTEE........................................... 69
SECTION 6.9 TRUSTEE MAY FILE PROOFS OF CLAIM..................................... 70
SECTION 6.10 PRIORITIES........................................................... 70
SECTION 6.11 UNDERTAKING FOR COSTS................................................ 71
ARTICLE VII TRUSTEE............................................................................ 71
SECTION 7.1 DUTIES OF TRUSTEE.................................................... 71
SECTION 7.2 RIGHTS OF TRUSTEE.................................................... 73
SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE......................................... 73
SECTION 7.4 TRUSTEE'S DISCLAIMER................................................. 74
SECTION 7.5 NOTICE OF DEFAULTS................................................... 74
SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES........................... 74
SECTION 7.7 COMPENSATION AND INDEMNITY........................................... 75
SECTION 7.8 REPLACEMENT OF TRUSTEE............................................... 76
SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC..................................... 77
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION........................................ 77
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST AIRGATE.................... 77
ARTICLE VIII LEGAL DEFEASANCE AND COVENANT DEFEASANCE........................................... 78
SECTION 8.1 OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE............. 78
SECTION 8.2 LEGAL DEFEASANCE AND DISCHARGE....................................... 78
SECTION 8.3 COVENANT DEFEASANCE.................................................. 78
SECTION 8.4 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE........................... 79
SECTION 8.5 DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS....................................... 81
SECTION 8.6 REPAYMENT TO AIRGATE................................................. 81
SECTION 8.7 REINSTATEMENT........................................................ 82
ARTICLE IX AMENDMENT, SUPPLEMENT AND WAIVER................................................... 82
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 9.1 WITHOUT CONSENT OF HOLDERS OF THE NOTES.................................. 82
SECTION 9.2 WITH CONSENT OF HOLDERS OF NOTES......................................... 83
SECTION 9.3 COMPLIANCE WITH TRUST INDENTURE ACT...................................... 85
SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS........................................ 85
SECTION 9.5 NOTATION ON OR EXCHANGE OF NOTES......................................... 85
SECTION 9.6 TRUSTEE TO SIGN AMENDMENTS, ETC.......................................... 86
ARTICLE X GUARANTEES............................................................................. 86
SECTION 10.1 GUARANTEES............................................................... 86
SECTION 10.2 EXECUTION AND DELIVERY OF GUARANTEE...................................... 88
SECTION 10.3 SEVERABILITY............................................................. 88
SECTION 10.4 SENIORITY OF GUARANTEES.................................................. 88
SECTION 10.5 LIMITATION OF GUARANTORS' LIABILITY...................................... 89
SECTION 10.6 GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS....................... 89
SECTION 10.7 RELEASES FOLLOWING SALE OF ASSETS........................................ 90
SECTION 10.8 RELEASE OF A GUARANTOR................................................... 91
SECTION 10.9 BENEFITS ACKNOWLEDGED.................................................... 91
SECTION 10.10 FUTURE GUARANTORS........................................................ 92
ARTICLE XI SUBORDINATION.......................................................................... 92
SECTION 11.1 AGREEMENT TO SUBORDINATE................................................. 92
SECTION 11.2 LIQUIDATION; DISSOLUTION; BANKRUPTCY..................................... 92
SECTION 11.3 DEFAULT ON DESIGNATED SENIOR DEBT........................................ 93
SECTION 11.4 PAYMENT PERMITTED IF NO DEFAULT.......................................... 94
SECTION 11.5 NOTICE OF ACCELERATION OF SECURITIES..................................... 95
SECTION 11.6 WHEN DISTRIBUTION MUST BE PAID OVER...................................... 95
SECTION 11.7 NOTICE BY AIRGATE........................................................ 96
SECTION 11.8 SUBROGATION.............................................................. 96
SECTION 11.9 RELATIVE RIGHTS.......................................................... 96
SECTION 11.10 SUBORDINATION MAY NOT BE IMPAIRED BY AIRGATE............................. 97
SECTION 11.11 DISTRIBUTION OR NOTICE TO REPRESENTATIVE................................. 97
SECTION 11.12 RIGHTS OF TRUSTEE AND PAYING AGENT....................................... 97
SECTION 11.13 AUTHORIZATION TO EFFECT SUBORDINATION.................................... 98
SECTION 11.14 ARTICLE APPLICABLE TO PAYING AGENTS...................................... 98
ARTICLE XII MISCELLANEOUS.......................................................................... 99
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 12.1 TRUST INDENTURE ACT CONTROLS................................................... 99
SECTION 12.2 NOTICES........................................................................ 99
SECTION 12.3 COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.................. 101
SECTION 12.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. ........................... 101
SECTION 12.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. ................................ 101
SECTION 12.6 RULES BY TRUSTEE AND AGENTS.................................................... 102
SECTION 12.7 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS....... 102
SECTION 12.8 GOVERNING LAW.................................................................. 102
SECTION 12.9 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.................................. 102
SECTION 12.10 SUCCESSORS..................................................................... 102
SECTION 12.11 SEVERABILITY................................................................... 103
SECTION 12.12 COUNTERPART ORIGINALS.......................................................... 103
SECTION 12.13 TABLE OF CONTENTS, HEADINGS, ETC............................................... 103
</TABLE>
<PAGE>
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF GUARANTEE
Exhibit C FORM OF PLEDGE AGREEMENT
Exhibit D FORM OF INTERCREDITOR AGREEMENT
Exhibit E FORM OF UNIT CERTIFICATE
ix
<PAGE>
Indenture, dated as of September 30, 1999, by and among AirGate PCS,
Inc., a Delaware corporation ("AirGate"), AGW Leasing Company, Inc., a Delaware
corporation (a "Guarantor"), and Bankers Trust Company, a New York banking
corporation, as trustee (the "Trustee").
AirGate, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the holders of
AirGate's 13 1/2% Senior Subordinated Discount Notes due 2009 (the "Notes"):
ARTICLE I
DEFINITIONS AND INCORPORATION
BY REFERENCE
SECTION 1.1 DEFINITIONS.
"Accreted Value" of any outstanding Note as of or to any date of
determination means an amount equal to the sum of (1) the issue price of such
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 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 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 Note (a)
for each six-month or shorter period ending April 1 or October 1 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 (2)
above), minus all amounts theretofore paid in respect of such Note, which
amounts are considered as part of the "stated redemption price at maturity" of
such 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
<PAGE>
(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.
"Agent" means any Registrar, Paying Agent or co-registrar.
"AirGate" or the "Company" means AirGate PCS, Inc., a Delaware
corporation.
"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.
"Asset Sale" means:
(3) 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 Section 4.14 and/or Section 5.1 and not by Section 4.10; and
(4) 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:
(5) any single transaction or series of related transactions
that: (i) involves assets having a fair market value of less than $1.0 million;
or (ii) results in net proceeds to AirGate and its Restricted Subsidiaries of
less than $1.0 million;
(6) a transfer of assets between or among AirGate and its Wholly
Owned Restricted Subsidiaries;
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(7) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary to AirGate or to another Wholly Owned Restricted Subsidiary;
(8) a Restricted Payment that is permitted by Section 4.7; and
(9) 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 (e), AirGate shall deliver to the Trustee an Officer's Certificate
certifying that such exchange complies with this clause (e).
"Asset Sale Offer" means an offer, required to be made by AirGate when
the aggregate amount of Excess Proceeds exceeds the amount specified in the
third paragraph of Section 4.10 to all Holders and to holders of other
Indebtedness that is pari passu with the Notes containing provisions similar to
those set forth in this Indenture with respect to offers to purchase or redeem
with the proceeds of sales of assets, to purchase the maximum principal amount
of Notes and such other pari passu Indebtedness that may be purchased out of the
Excess Proceeds.
"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.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"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 of Directors" means the board of directors of AirGate or any
authorized committee of such board of directors.
"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
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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.
"Business Day" means any day other than a Legal Holiday.
"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:
(10) in the case of a corporation, corporate stock;
(11) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents, however
designated, of corporate stock;
(12) in the case of a partnership or limited liability company,
partnership or membership interests, whether general or limited; and
(13) 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:
(14) United States dollars;
(15) 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;
(16) 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,
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(17) repurchase obligations with a term of not more than seven
days for underlying securities of the types described in clauses (b) and (c)
above entered into with any financial institution meeting the qualifications
specified in clause (c) above;
(18) 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
(19) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (a) through (e) of
this definition.
"Cedel" means Cedel Bank, societe anonyme.
"Certificated Notes" means Notes that are in the form of Exhibit A
attached hereto (but without including the text referred to in footnote 1
thereto).
"Change of Control" means the occurrence of any of the following:
(20) 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;
(21) the adoption of a plan relating to the liquidation or
dissolution of AirGate;
(22) 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;
(23) the first day on which a majority of the members of the
Board of Directors of AirGate are not Continuing Directors; or
(24) AirGate consolidates with, or merges with or into, a 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.
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"Closing Date" means September 30, 1999, the date on which the
Notes were originally issued under this Indenture.
"Commission" means the Securities and Exchange Commission.
"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:
(25) 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;
(26) 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
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Subsidiary of that Net Income is not at the date of determination permitted
without any prior governmental approval that has not been obtained or, directly
or indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to that Restricted Subsidiary or its stockholders;
(27) 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;
(28) 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
(29) 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:
(30) the consolidated equity of the common stockholders of
such Person and its consolidated Subsidiaries as of such date; plus
(31) 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:
(32) was a member of such Board of Directors on the date of
this Indenture; or
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(33) 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.
"Corporate Trust Office of the Trustee" shall be at the address of
the Trustee specified in Section 12.2 hereof or such other address as to which
the Trustee may give notice to the Company.
"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.
"Depositary" means, with respect to the Notes issuable or issued
in whole or in part in global form, the Person specified in Section 2.3 hereof
as the Depositary with respect to the Notes, until a successor shall have been
appointed and become such pursuant to Section 2.6 of this Indenture, and,
thereafter, "Depositary" shall mean or include such successor.
"Designated Senior Debt" means (a) Indebtedness under the Lucent
Financing and (b) any other Senior Debt that has been designated by AirGate in
writing to the Trustee as "Designated Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms,
or by the terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof, or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature. Notwithstanding the preceding sentence, any
Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require AirGate to repurchase such Capital
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 Section 4.7.
"DTC" means The Depository Trust Company (55 Water Street, New
York, New York).
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"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.
"Euroclear" means Morgan Guaranty Trust Company of New York, the
Brussels office, and all successors thereto, as operator of the Euroclear
system.
"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.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Existing Indebtedness" means the $150,000 in aggregate principal
amount of Indebtedness of AirGate and its Restricted Subsidiaries in existence
on the date of this 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.
"Global Notes" means the Notes that are in the form of Exhibit A
hereto (including the text referred to in footnote 1 thereto).
"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
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Government Securities which is so specified and held, provided that, except as
required by law, such custodian is not authorized to make any deduction from the
amount payable to the holder of such depository receipt from any amount received
by the custodian in respect of the Government Securities or the specific payment
of principal or interest evidenced by such depository receipt.
"Guarantee" means any guarantee of the Notes by any Guarantor
pursuant to this Indenture.
"Guarantors" means each of AGW Leasing Company, Inc. and any
future Subsidiary that guarantees the Notes in accordance with the provisions of
this Indenture and their respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under:
(34) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements; and
(35) other agreements or arrangements designed to protect
such Person against fluctuations in interest rates.
"Holder" means a Person in whose name a Note is registered.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent, in respect of:
(36) borrowed money;
(37) evidenced by bonds, Notes, debentures or similar
instruments or letters of credit, or reimbursement agreements in respect
thereof;
(38) banker's acceptances;
(39) representing Capital Lease Obligations;
(40) 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
(41) representing any Hedging Obligations;
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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:
(42) the accreted value thereof, in the case of any
Indebtedness issued with original issue discount; and
(43) the principal amount thereof, together with any
interest thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Indirect Participant" means a Person who holds an interest
through a Participant.
"Intercreditor Agreement" means that certain Intercreditor
Agreement, dated as of September 30, 1999, among the Trustee, Lucent
Technologies, Inc., as administrative agent under the Lucent Financing, State
Street Bank and Trust Company, as collateral agent under the Lucent Financing
and AGW Leasing Company, Inc., and consented to by AirGate, substantially in the
form of Exhibit D attached hereto.
"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 Section 4.7.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York, the city in which the principal
Corporate Trust Office of the Trustee is
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located or at a place of payment are authorized by law, regulation or executive
order to remain closed. If a payment date is a Legal Holiday, payment shall be
made at that place on the next succeeding day that is not a Legal Holiday, and
no interest shall accrue for the intervening period.
"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., the several lending institutions that from
time to time are 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:
(44) any gain, but not loss, together with any related
provision for taxes on such gain (but not loss), realized in connection with:
(i) any Asset Sale; or (ii) 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
(45) 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
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AirGate or any Restricted Subsidiary, as the case may be, after such Asset Sale,
including, without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale.
"Non-Recourse Debt" means Indebtedness:
(46) as to which neither AirGate nor any of its Restricted
Subsidiaries (i) provides credit support of any kind, including any undertaking,
agreement or instrument that would constitute Indebtedness, (ii) is directly or
indirectly liable as a guarantor or otherwise, or (iii) constitutes the lender;
(47) no default with respect to which, including any rights
that the holders thereof may have to take enforcement action against an
Unrestricted Subsidiary, would permit upon notice, lapse of time or both any
holder of any other Indebtedness, other than the Notes, of AirGate or any of its
Restricted Subsidiaries to declare a default on such other Indebtedness or cause
the payment thereof to be accelerated or payable prior to its stated maturity;
and
(48) 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.
"Notes" has the meaning set forth in the introductory paragraphs
hereto.
"Note Custodian" means the Trustee when serving as custodian for
the Depositary with respect to the Notes in global form, or any successor entity
thereto.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person.
"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.
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"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.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to AirGate or any Subsidiary of AirGate.
"Participant" means, with respect to DTC, Euroclear or Cedel, a
Person who has an account with DTC, Euroclear or Cedel, respectively (and, with
respect to DTC, shall include Euroclear and Cedel).
"Paying Agent" means any Person authorized by AirGate to pay the
principal of, and premium, if any, or interest on any Notes on behalf of
AirGate.
"Permitted Business" means the business primarily involved in 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:
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(49) any Investment in AirGate or in a Wholly Owned
Restricted Subsidiary of AirGate that is a Guarantor,
(50) any Investment in Cash Equivalents;
(51) any Investment by AirGate or any Restricted Subsidiary
of AirGate in a Person, if as a result of such Investment:
(1) such Person becomes a Wholly Owned Restricted
Subsidiary of AirGate; or
(2) 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;
(52) 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 Section 4.10;
(53) any acquisition of assets solely in exchange for the
issuance of Equity Interests, other than Disqualified Stock, of AirGate;
(54) investments, the payment of which consists only of
Equity Interests, other than Disqualified Stock; and
(55) 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 (g) since the date of this
Indenture, not to exceed $5.0 million.
"Permitted Junior Securities" means Equity Interests in AirGate or
its Subsidiaries or debt securities of AirGate or its Subsidiaries that are
subordinated to all Senior Debt (and any debt securities issued in exchange for
Senior Debt) to substantially the same extent as, or to a greater extent than,
the Notes are subordinated to Senior Debt.
"Permitted Liens" means:
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(56) Liens on the assets of AirGate and any Guarantor
securing Indebtedness and other Obligations under Credit Facilities that were
permitted by the terms of this Indenture to be incurred;
(57) Liens in favor of AirGate or the Guarantors;
(58) Liens on property of a Person existing at the time such
Person is merged with or into or consolidated with AirGate or any Restricted
Subsidiary of AirGate; provided that such Liens 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;
(59) 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;
(60) 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;
(61) Liens to secure Indebtedness, including Capital Lease
Obligations, permitted by clause (4) of the second paragraph of Section 4.9
covering only the assets acquired with such Indebtedness;
(62) Liens existing on the date of this Indenture;
(63) Liens on Assets of Guarantors to secure Senior Debt of
such Guarantor that was permitted by this Indenture to be incurred;
(64) 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
(65) 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
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extend, refinance, renew, replace, defease or refund other Indebtedness of
AirGate or any of its Restricted Subsidiaries, other than intercompany
Indebtedness; provided that:
(66) 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;
(67) 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;
(68) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Notes, such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and is subordinated in right of payment
to, the Notes on terms at least as favorable to the holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and
(69) 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.
"Pledge Agreement" means that certain Pledge Agreement, dated as
of September 30, 1999, by and between AirGate and the Trustee, substantially in
the form attached hereto as Exhibit C.
"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.
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"Responsible Officer" means, when used with respect to the
Trustee, any officer assigned to the Corporate Trust Office of the Trustee,
including any managing director, principal, vice president, assistant vice
president, assistant treasurer, assistant secretary or any other officer of the
Trustee customarily performing functions similar to those performed by any of
the above designated officers and having direct responsibility for the
administration of this Indenture, and also, with respect to a particular matter,
any other officer or whom such matter is referred because of such officer's
knowledge of and familiarity with the particular subject.
"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.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means:
(70) all Indebtedness outstanding under Credit Facilities
and all Hedging Obligations with respect thereto; and
(71) all Obligations with respect to the items listed in the
preceding clause (a).
Notwithstanding anything to the contrary in the preceding, Senior
Debt will not include:
(72) any liability for federal, state, local or other taxes
owed or owing by AirGate;
(73) any Indebtedness of AirGate to any of its Subsidiaries
or other Affiliates;
(74) any trade payables; or
(75) any Indebtedness that is incurred in
violation of this 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 by the Commission, as such Regulation is in effect on the date
hereof.
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"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
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 Notes, including without limitation, principal of, premium, if any, and
interest, if any, payable pursuant to the terms of the Notes (including upon the
acceleration of redemption thereof), together with and including any amounts
received or receivable upon the exercise of rights of recission or other rights
of action (including claims for damages) or otherwise.
"Subsidiary" means, with respect to any Person:
(76) 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
(77) any partnership (i) the sole general partner or the
managing general partner of which is such Person or a Subsidiary of such Person
or (ii) 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
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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.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S)
77aaa-77bbbb), as amended, as in effect on the date hereof.
"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
the issuance of the Notes pursuant to this Indenture 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 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 Section 4.21, plus (vi) Consolidated
Debt minus (vii) the aggregate amount of all Restricted Payments declared or
made on or after the Closing Date.
"Trustee" has the meaning set forth in the recitals to this
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:
(78) has no Indebtedness other than Non-Recourse Debt;
(79) is not party to any agreement, contract, arrangement or
understanding with AirGate or any Restricted Subsidiary of AirGate unless the
terms of any such agreement, contract, arrangement or understanding are no less
favorable to AirGate or such Restricted Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of AirGate;
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(80) is a Person with respect to which neither AirGate nor
any of its Restricted Subsidiaries has any direct or indirect obligation (i) to
subscribe for additional Equity Interests or (ii) to maintain or preserve such
Person's financial condition or to cause such Person to achieve any specified
levels of operating results;
(81) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of AirGate or any of its Restricted
Subsidiaries; and
(82) 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 Section 4.7. 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 this 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 Section 4.9, AirGate shall be in default of Section 4.9. 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
Section 4.9, calculated on a pro forma basis as if such designation had occurred
at the beginning of the four-quarter reference period; and (2) no Default or
Event of Default would be in existence following such designation.
"Voting Stock" of any Person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the election of the
Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:
(83) the sum of the products obtained by multiplying (i) 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 (ii) the number of years, calculated to the nearest one-
twelfth, that will elapse between such date and the making of such payment; by
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(84) 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.
SECTION 1.2 OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Affiliate Transaction" ................................................4.11
"Agent Members"..........................................................2.6
"Change of Control Offer" ..............................................4.14
"Change of Control Payment" ............................................4.14
"Change of Control Payment Date" .......................................4.14
"Covenant Defeasance" ...................................................8.3
"Custodian" .............................................................6.1
"Event of Default" ..................................................... 6.1
"Excess Proceeds" ..................................................... 4.10
"Excess Proceeds Offer...................................................3.9
"Excess Proceeds Offer Triggering Event"................................4.10
"Legal Defeasance" ......................................................8.2
"Offer Amount" ..........................................................3.9
"Offer Period" ..........................................................3.9
"Payment Blockage Notice"...............................................11.3
"Payment Default" ...................................................... 6.1
"Permitted Debt" ........................................................4.9
"Purchase Date" ........................................................ 3.9
"Registrar" ............................................................ 2.3
"Representative"........................................................11.3
"Repurchase Offer" ..................................................... 3.9
"Restricted Payment" ....................................................4.7
"Surviving Entity".......................................................5.1
</TABLE>
SECTION 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
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Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in, and made a part of, this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes and any Guarantee;
"indenture security holder" means a Holder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee;
"obligor" on the Notes means AirGate and any successor
obligor upon the Notes or any Guarantor.
All other terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by the Commission
rule under the TIA have the meanings so assigned to them therein.
SECTION 1.4 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein;
(2) an accounting term not otherwise defined herein has
the meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in
the plural include the singular;
(5) unless otherwise specified, any reference to
Section or Article refers to such Section or Article of this
Indenture;
(6) provisions apply to successive events and
transactions; and
(7) references to sections of or rules under the
Securities Act or the Exchange Act shall be deemed to include
substitute, replacement or successor sections or rules adopted by
the Commission from time to time.
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ARTICLE II
THE NOTES
SECTION 1.5 FORM AND DATING.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A attached hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes
initially shall be issued only in denominations of $1,000 and integral multiples
thereof.
The terms and provisions contained in the Notes shall constitute, and
are hereby expressly made, a part of this Indenture and AirGate and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby. However, to the extent any provision of
any Note conflicts with the express provisions of this Indenture, the provisions
of this Indenture shall govern and be controlling.
(1) The Notes shall be issued initially in the form of one or
more Global Notes substantially in the form attached as Exhibit A hereto, which
shall be deposited on behalf of the purchasers of the Notes represented thereby
with the Trustee as custodian for the Depositary, and registered in the name of
the Depositary or a nominee of the Depositary, duly executed by AirGate and
authenticated by the Trustee as hereinafter provided. Initially, the Notes shall
constitute a part of units consisting of Notes together with warrants to
purchase common stock of the Company, which units shall be represented by one or
more unit certificates substantially in the form attached as Exhibit F hereto.
Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate amount of outstanding Notes from time to time endorsed thereon and
that the aggregate amount of outstanding Notes represented thereby may from time
to time be reduced or increased, as appropriate, to reflect exchanges,
redemptions and transfers of interests. Any endorsement of a Global Note to
reflect the amount of any increase or decrease in the amount of outstanding
Notes represented thereby shall be made by the Trustee or the Note Custodian, at
the direction of the Trustee, in accordance with instructions given by the
Holder thereof as required by Section 2.6 hereof.
Except as set forth in Section 2.6 hereof, the Global Notes may be
transferred, in whole and not in part, only to another nominee of the Depositary
or to a successor of the Depositary or its nominee.
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(2) This Section 2.1(b) shall apply only to Global Notes
deposited with or on behalf of the Depositary.
AirGate shall execute and the Trustee shall, in accordance with this
Section 2.1(b), authenticate and deliver the Global Notes that (i) shall be
registered in the name of the Depositary or the nominee of the Depositary and
(ii) shall be delivered by the Trustee to the Depositary or pursuant to the
Depositary's instructions or held by the Trustee as custodian for the
Depositary.
Participants shall have no rights either under this Indenture with
respect to any Global Note held on their behalf by the Depositary or by the Note
Custodian as custodian for the Depositary or under such Global Note, and the
Depositary may be treated by AirGate, the Trustee and any agent of AirGate or
the Trustee as the absolute owner of such Global Note for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent AirGate,
the Trustee or any agent of AirGate or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its Participants, the operation of
customary practices of such Depositary governing the exercise of the rights of
an owner of a beneficial interest in any Global Note.
(a) Notes issued in certificated form shall be substantially in
the form of Exhibit A attached hereto (but without including the text referred
to in footnote 1 thereto).
SECTION 1.6 EXECUTION AND AUTHENTICATION.
An Officer shall sign the Notes for AirGate by manual or facsimile
signature. AirGate's seal shall be reproduced on the Notes and may be in
facsimile form.
If an Officer whose signature is on a Note no longer holds that office
at the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature
of the Trustee. The signature shall be conclusive evidence that the Note has
been authenticated under this Indenture.
The Trustee shall, upon a written order of AirGate signed by one
Officer directing the Trustee to authenticate the Notes and certifying that all
conditions precedent to the issuance of the Notes contained herein have been
complied with, authenticate Notes for original issue up to the aggregate
principal amount stated in paragraph 4 of the Notes. The aggregate principal
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<PAGE>
amount of Notes outstanding at any time may not exceed such amount except as
provided in Section 2.8 hereof.
The Trustee may appoint an authenticating agent acceptable to AirGate
to authenticate Notes. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Notes whenever the Trustee may do so. Each
reference in this Indenture to authentication by the Trustee includes
authentication by such agent. An authenticating agent has the same rights as an
Agent to deal with Holders or AirGate or an Affiliate of AirGate.
SECTION 1.7 REGISTRAR AND PAYING AGENT.
AirGate shall maintain (i) an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and (ii) an
office or agency where Notes may be presented for payment to a Paying Agent. The
Registrar shall keep a register of the Notes and of their transfer and exchange.
AirGate may appoint one or more co-registrars and one or more additional paying
agents. The term "Registrar" includes any co-registrar and the term "Paying
Agent" includes any additional paying agent. AirGate may change any Paying Agent
or Registrar without notice to any Holder. AirGate shall notify the Trustee in
writing of the name and address of any Agent not a party to this Indenture. If
AirGate fails to appoint or maintain another entity as Registrar or Paying
Agent, the Trustee shall act as such. AirGate or any of its Subsidiaries may act
as Paying Agent or Registrar.
AirGate shall notify the Trustee and the Trustee shall notify the
Holders of the Notes of the name and address of any Agent not a party to this
Indenture. AirGate or any Guarantor may act as Paying Agent or Registrar.
AirGate shall enter into an appropriate agency agreement with any Agent not a
party to this Indenture, which shall incorporate the provisions of the TIA. The
agreement shall implement the provisions of this Indenture that relate to such
Agent. AirGate shall notify the Trustee of the name and address of any such
Agent. If AirGate fails to maintain a Registrar or Paying Agent, or fails to
give the foregoing notice, the Trustee shall act as such, and shall be entitled
to appropriate compensation in accordance with Section 7.7 hereof.
AirGate initially appoints the Trustee to act as the Registrar and
Paying Agent.
AirGate initially appoints DTC to act as the Depositary with
respect to the Global Notes.
SECTION 1.8 PAYING AGENT TO HOLD MONEY IN TRUST.
AirGate shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium, if any, or interest on the Notes, and
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<PAGE>
shall notify the Trustee of any Default by AirGate in making any such payment.
While any such Default continues, the Trustee may require a Paying Agent to pay
all money held by it to the Trustee. AirGate at any time may require a Paying
Agent to pay all money held by it to the Trustee. Upon payment over to the
Trustee, the Paying Agent (if other than AirGate or a Subsidiary) shall have no
further liability for the money. If AirGate or a Subsidiary acts as Paying
Agent, it shall segregate and hold in a separate trust fund for the benefit of
the Holders all money held by it as Paying Agent. Upon the occurrence of events
specified in Section 6.1(ix), (x) and (xi) hereof, the Trustee shall serve as
Paying Agent for the Notes.
SECTION 1.9 HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA (S) 312(a). If the Trustee is
not the Registrar, AirGate shall furnish to the Trustee at least seven (7)
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders,
including the aggregate principal amount of the Notes held by each Holder
thereof, and AirGate shall otherwise comply with TIA (S) 312(a).
SECTION 1.10 BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITIES.
(1) Each Global Note shall (i) be registered in the name
of the Depositary for such Global Notes or the nominee of such Depositary, (ii)
be delivered to the Trustee as custodian for such Depositary and (iii) bear
legends as set forth in Section 2.6(g).
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Note held on their behalf by the Depositary, or the Trustee as its custodian, or
under the Global Note, and the Depositary may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Note for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee, from giving effect to any written certification, proxy
or other authorization furnished by the Depositary or impair, as between the
Depositary and its Agent Members, the operation of customary practices governing
the exercise of the rights of a Holder of any Note.
(2) Transfers of a Global Note shall be limited to
transfers of such Global Note in whole, but not in part, to the Depositary, its
successors or their respective nominees. Interests of beneficial owners in a
Global Note may be transferred in accordance with the rules and procedures of
the Depositary. In addition, Certificated Notes shall be transferred to all
beneficial owners in exchange for their beneficial interests if (i) the
Depositary notifies the Company that it is unwilling or unable to continue as
Depositary for the Global Notes or the
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Depositary ceases to be a "clearing agency" registered under the Exchange Act
and a successor depositary is not appointed by the Company within ninety (90)
days of such notice or (ii) an Event of Default of which a Responsible Officer
of the Trustee has actual notice has occurred and is continuing and the
Registrar has received a request from the Depositary to issue such Certificated
Notes.
(3) In connection with the transfer of the entire Global Note to
beneficial owners pursuant to clause (b) of this Section, such Global Note shall
be deemed to be surrendered to the Trustee for cancellation, and the Company
shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depositary in exchange for its beneficial
interest in such Global Note an equal aggregate principal amount of Certificated
Notes of authorized denominations.
(4) The registered holder of a Global Note may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interest through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
(5) A Certificated Note may not be transferred or exchanged for
a beneficial interest in a Global Note.
(6) If at any time:
(1) the Depositary for the Notes notifies AirGate
that the Depositary is unwilling or unable to continue as
Depositary for the Global Notes and a successor Depositary for
the Global Notes is not appointed by AirGate within ninety (90)
days after delivery of such notice; or
(2) AirGate, at its sole discretion, notifies the
Trustee in writing that it elects to cause the issuance of
Certificated Notes under this Indenture,
then AirGate shall execute, and the Trustee shall, upon receipt of an
authentication order in accordance with Section 2.2 hereof, authenticate and
deliver, Certificated Notes in an aggregate principal amount equal to the
principal amount of the Global Notes in exchange for such Global Notes.
(7) Each Global Security shall bear the following legends on the
face thereof:
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UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK),
TO THE COMPANY OR ITS AGENT FOR REGISTRATION OR TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE
& CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON
IS MADE TO CEDE & CO. OR TO SUCH OTHER AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE.
(8) At such time as all beneficial interests in Global Notes
have been exchanged for Certificated Notes, redeemed, repurchased or cancelled,
all Global Notes shall be returned to or retained and cancelled by the Trustee
in accordance with Section 2.11 hereof. At any time prior to such cancellation,
if any beneficial interest in a Global Note is exchanged for Certificated Notes,
redeemed, repurchased or cancelled, the principal amount of Notes represented by
such Global Note shall be reduced accordingly and an endorsement shall be made
on such Global Note, by the Trustee or the Note Custodian, at the direction of
the Trustee, to reflect such reduction.
(9) General Provisions Relating to Transfers and Exchanges.
-------------------------------------------------------
(1) To permit registrations of transfers and
exchanges, AirGate shall execute and the Trustee shall
authenticate Global Notes and Certificated Notes at the
Registrar's request.
(2) No service charge shall be made to a Holder for
any registration of transfer or exchange, but AirGate may require
payment of a sum sufficient to cover any stamp or
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transfer tax or similar governmental charge payable in connection
therewith (other than any such stamp or transfer taxes or similar
governmental charge payable upon exchange or transfer pursuant to
Sections 2.2, 2.10, 3.6, 4.10, 4.14, 9.5 and 10.1 hereto).
(3) All Global Notes and Certificated Notes issued
upon any registration of transfer or exchange of Global Notes or
Certificated Notes shall be the valid obligations of AirGate,
evidencing the same debt, and entitled to the same benefits under
this Indenture, as the Global Notes or Certificated Notes
surrendered upon such registration of transfer or exchange.
(4) The Registrar shall not be required: (A) to issue,
to register the transfer of or to exchange Notes during a period
beginning at the opening of fifteen (15) days before the day of
any selection of Notes for redemption under Section 3.2 hereof
and ending at the close of business on the day of selection, (B)
to register the transfer of or to exchange any Note so selected
for redemption in whole or in part, except the unredeemed portion
of any Note being redeemed in part, or (C) to register the
transfer of or to exchange a Note between a record date and the
next succeeding interest payment date.
(5) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and AirGate may deem
and treat the Person in whose name any Note is registered as the
absolute owner of such Note for the purpose of receiving payment
of principal of and interest on such Notes and for all other
purposes, and neither the Trustee, any Agent nor AirGate shall be
affected by notice to the contrary.
(6) The Trustee shall authenticate Global Notes and
Certificated Notes in accordance with the provisions of Section
2.2 hereof.
SECTION 1.11 REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or AirGate and
the Trustee receives evidence to their satisfaction of the destruction, loss or
theft of any Note, AirGate shall
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issue and the Trustee, upon the written order of AirGate signed by an Officer of
AirGate, shall authenticate a replacement Note if the Trustee's requirements are
met. If required by the Trustee or AirGate, an indemnity bond must be supplied
by the Holder that is sufficient in the judgment of the Trustee and AirGate to
protect AirGate, the Trustee, any Agent and any authenticating agent from any
loss that any of them may suffer if a Note is replaced. AirGate and the Trustee
may charge for their expenses in replacing a Note.
Every replacement Note is an additional obligation of AirGate and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 1.12 OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section 2.8 as not outstanding. Except as set forth in Section 2.9 hereof, a
Note does not cease to be outstanding because AirGate or an Affiliate of AirGate
holds the Note.
If a Note is replaced pursuant to Section 2.7 hereof, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.1 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than AirGate, a Subsidiary or an Affiliate
of any thereof) holds, on a redemption date or maturity date, money sufficient
to pay Notes payable on that date, then on and after that date such Notes shall
be deemed to be no longer outstanding and shall cease to accrue interest.
SECTION 1.13 TREASURY NOTES.
In determining whether the Holders of the required Accreted Value or
aggregate principal amount, as the case may be, of Notes have concurred in any
direction, waiver or consent, Notes owned by AirGate, or by any Affiliate of
AirGate shall be considered as though not outstanding, except that for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Notes shown on the Trustee's register as
being owned shall be so disregarded. Notwithstanding the foregoing, Notes that
are to be acquired by AirGate or an Affiliate of AirGate pursuant to an exchange
offer, tender offer or
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other agreement shall not be deemed to be owned by such entity until legal title
to such Notes passes to such entity.
SECTION 1.14 TEMPORARY NOTES.
Until Certificated Notes are ready for delivery, AirGate may
prepare and the Trustee shall authenticate temporary Notes upon a written order
of AirGate signed by two Officers of AirGate. Temporary Notes shall be
substantially in the form of Certificated Notes but may have variations that
AirGate considers appropriate for temporary Notes. Without unreasonable delay,
AirGate shall prepare and the Trustee shall upon receipt of a written order of
AirGate signed by two Officers authenticate Certificated Notes in exchange for
temporary Notes.
Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
SECTION 1.15 CANCELLATION.
AirGate at any time may deliver to the Trustee for cancellation
any Notes previously authenticated and delivered hereunder or which AirGate may
have acquired in any manner whatsoever, and all Notes so delivered shall be
promptly cancelled by the Trustee. All Notes surrendered for registration of
transfer, exchange or payment, if surrendered to any Person other than the
Trustee, shall be delivered to the Trustee. The Trustee and no one else shall
cancel all Notes surrendered for registration of transfer, exchange, payment,
replacement or cancellation. Subject to Section 2.7 hereof, AirGate may not
issue new Notes to replace Notes that it has redeemed or paid or that have been
delivered to the Trustee for cancellation. All cancelled Notes held by the
Trustee shall be destroyed and certification of their destruction delivered to
AirGate, unless by a written order, signed by an Officer of AirGate, AirGate
shall direct that cancelled Notes be returned to it.
SECTION 1.16 DEFAULTED INTEREST.
If AirGate defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, which date shall be at the earliest
practicable date but in all events at least five (5) Business Days prior to the
payment date, in each case at the rate provided in the Notes and in Section 4.1
hereof. AirGate shall fix or cause to be fixed each such special record date and
payment date, and shall promptly thereafter, notify the Trustee of any such
date. At least fifteen (15) days before the special record date, AirGate (or the
Trustee, in the name and at the expense of AirGate) shall mail or cause to be
mailed to Holders a notice that states the special record date, the related
payment date and the amount of such interest to be paid.
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SECTION 1.17 RECORD DATE.
The record date for purposes of determining the identity of
Holders entitled to vote or consent to any action by vote or consent authorized
or permitted under this Indenture shall be determined as provided for in TIA
(S) 316 (c).
SECTION 1.18 COMPUTATION OF INTEREST.
Interest on the Notes shall be computed on the basis of a 360-day
year comprised of twelve 30-day months.
SECTION 1.19 CUSIP NUMBER.
AirGate in issuing the Notes may use a "CUSIP" number, and if it
does so, the Trustee shall use the CUSIP number in notices of redemption or
exchange as a convenience to Holders; provided that any such notice may state
that no representation is made as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Notes and that reliance may be placed
only on the other identification numbers printed on the Notes. AirGate shall
promptly notify the Trustee of any change in the CUSIP number.
ARTICLE III
REDEMPTION AND PREPAYMENT
SECTION 1.20 NOTICES TO TRUSTEE.
If AirGate elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.7 hereof, it shall furnish to the Trustee, at
least forty-five (45) days before a redemption date, an Officers' Certificate
setting forth (i) the Section of this Indenture pursuant to which the redemption
shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be
redeemed and (iv) the redemption price.
If AirGate is required to make an offer to purchase Notes pursuant
to Section 4.10 or 4.14 hereof, it shall furnish to the Trustee, at least
forty-five (45) days before the scheduled purchase date, an Officers'
Certificate setting forth (i) the section of this Indenture pursuant to which
the offer to purchase shall occur, (ii) the terms of the offer, (iii) the
principal amount of Notes to be purchased, (iv) the purchase price, (v) the
purchase date and (vi) further setting forth a statement to the effect that (a)
AirGate or one its Subsidiaries has effected an Asset Sale and there are Excess
Proceeds aggregating more than $10.0 million or (b) a Change of Control has
occurred, as applicable.
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AirGate will also provide the Trustee with any additional
information that the Trustee reasonably requests in connection with any
redemption or offer.
SECTION 1.21 SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time, the
Trustee shall select the Notes to be redeemed among the Holders in compliance
with the requirements of the principal national securities exchange, if any, on
which the Notes are listed or, if the Notes are not so listed, on a pro rata
basis, by lot or by such method as the Trustee shall deem fair and appropriate
(and in a manner that complies with applicable legal requirements); provided
that no 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 Notes to be redeemed at its registered
address. Notices of redemption may not be conditional. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion of the original Note will be
issued in the name of the Holder thereof upon cancellation of the original Note.
Notes called for redemption become due on the date fixed for redemption. On and
after the redemption date, interest ceases to accrue on Notes or portions of
them called for redemption. The Trustee shall make the selection from the Notes
outstanding and not previously called for redemption and shall promptly notify
AirGate in writing of the Notes selected for redemption. The Trustee may select
for redemption portions (equal to $1,000 or any integral multiple thereof) of
the principal of the Notes that have denominations larger than $1,000.
SECTION 1.22 NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.9, at least 30 days but not
more than 60 days before a redemption date, AirGate shall mail or cause to be
mailed by first class mail, a notice of redemption to each Holder whose Notes
are to be redeemed.
The notice shall identify the Notes to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) if any Note is being redeemed in part, the portion
of the principal amount of such Notes to be redeemed and that,
after the redemption date, upon surrender of such Note, a new Note
or Notes in principal amount equal to the unredeemed portion shall
be issued upon cancellation of the original Note;
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(4) the name, telephone number and address of the
Paying Agent;
(5) that Notes called for redemption must be
surrendered to the Paying Agent to collect the redemption price;
(6) that, unless AirGate defaults in making such
redemption payment, interest, if any, on Notes called for
redemption ceases to accrue on and after the redemption date;
(7) the paragraph of the Notes and/or Section of this
Indenture pursuant to which the Notes called for redemption are
being redeemed; and
(8) that no representation is made as to the
correctness or accuracy of the CUSIP number, if any, listed in
such notice or printed on the Notes.
At AirGate's request, the Trustee shall give the notice of
redemption in AirGate's name and at AirGate's expense; provided, however, that
AirGate shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in the notice as provided
in the preceding paragraph. The notice mailed in the manner herein provided
shall be conclusively presumed to have been duly given whether or not the Holder
receives such notice. In any case, failure to give such notice by mail or any
defect in the notice to the Holder of any Note shall not affect the validity of
the proceeding for the redemption of any other Note.
SECTION 1.23 EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.3
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price plus accrued and unpaid interest, if
any, to such date. A notice of redemption may not be conditional.
SECTION 1.24 DEPOSIT OF REDEMPTION OR PURCHASE PRICE.
On or before 10:00 a.m. (New York City time) on each redemption
date or the date on which Notes must be accepted for purchase pursuant to
Section 4.10 or 4.14, AirGate shall deposit with the Trustee or with the Paying
Agent (other than AirGate or an Affiliate of AirGate) money sufficient to pay
the redemption price of and accrued and unpaid interest, if any, on all Notes to
be redeemed or purchased on that date. The Trustee or the Paying Agent shall
promptly return to AirGate any money deposited with the Trustee or the Paying
Agent by AirGate in excess of the amounts necessary to pay the redemption price
of (including any applicable premium), and accrued interest, if any, on, all
Notes to be redeemed or purchased.
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If Notes called for redemption or tendered in an Asset Sale Offer or
Change of Control Offer are paid or if AirGate has deposited with the Trustee or
Paying Agent money sufficient to pay the redemption or purchase price of, and
unpaid and accrued interest, if any, on, all Notes to be redeemed or purchased,
on and after the redemption or purchase date, interest, if any, shall cease to
accrue on the Notes or the portions of Notes called for redemption or tendered
and not withdrawn in an Asset Sale Offer or Change of Control Offer (regardless
of whether certificates for such securities are actually surrendered). If a Note
is redeemed or purchased on or after an interest record date but on or prior to
the related interest payment date, then any accrued and unpaid interest, if any,
shall be paid to the Person in whose name such Note was registered at the close
of business on such record date. If any Note called for redemption shall not be
so paid upon surrender for redemption because of the failure of AirGate to
comply with the preceding paragraph, interest shall be paid on the unpaid
principal from the redemption or purchase date until such principal is paid, and
to the extent lawful on any interest not paid on such unpaid principal, in each
case, at the rate provided in the Notes and in Section 4.1 hereof.
SECTION 1.25 NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, AirGate shall
issue and, upon AirGate's written request, the Trustee shall authenticate for
the Holder at the expense of AirGate a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
SECTION 1.26 OPTIONAL REDEMPTION.
(1) Except as set forth in the next paragraph, the Notes
will not be redeemable at AirGate's option prior to October 1, 2004. Thereafter,
the Notes will be subject to redemption at any time at the option of AirGate, in
whole or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) 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 October 1 of the
years indicated below:
Year Percentage
2004 ................................ 106.750%
2005 ................................ 104.500%
2006 ................................ 102.250%
2007 and thereafter ................. 100.000%
(2) Notwithstanding the foregoing, until September 30, 2002
AirGate may on any one or more occasions redeem up to 35% of the Accreted Value
of the
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Notes originally issued under this Indenture at a redemption price of 113.500%
of the Accreted Value thereof, with the net cash proceeds of one or more Equity
Offerings; provided that (i) at least 65% of the Accreted Value of the Notes
originally issued under this Indenture remains outstanding immediately after the
occurrence of such redemption, excluding Notes held by AirGate and its
Subsidiaries; and (ii) such redemption shall occur within 60 days of the date of
the closing of such Equity Offering.
SECTION 1.27 MANDATORY REDEMPTION.
Except as set forth under Sections 3.9, 4.10 and 4.14 hereof, AirGate
shall not be required to make mandatory redemption or sinking fund payments with
respect to the Notes.
SECTION 1.28 REPURCHASE OFFERS.
In the event that AirGate shall be required to commence an offer to
all Holders to repurchase Notes (a "Repurchase Offer") pursuant to Section 4.10
hereof, an "Excess Proceeds Offer," or pursuant to Section 4.14 hereof, a
"Change of Control Offer," AirGate shall follow the procedures specified below.
A Repurchase Offer shall commence no earlier than 20 days and no
later than 60 days after a Change of Control (unless AirGate is not required to
make such offer pursuant to Section 4.14 hereof) or an Excess Proceeds Offer
Triggering Event (as defined in Section 4.10), as the case may be, and remain
open for a period of twenty (20) Business Days following its commencement and no
longer, except to the extent that a longer period is required by applicable law
(the "Offer Period"). No later than five (5) Business Days after the termination
of the Offer Period (the "Purchase Date"), AirGate shall purchase the Accreted
Value or aggregate principal amount, as the case may be, of Notes required to be
purchased pursuant to Section 4.10 hereof, in the case of an Excess Proceeds
Offer, or Section 4.14 hereof, in the case of a Change of Control Offer (the
"Offer Amount") or, if less than the Offer Amount has been tendered, all Notes
tendered in response to the Repurchase Offer. Payment for any Notes so purchased
shall be made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest, if
any, shall be paid to the Person in whose name a Note is registered at the close
of business on such record date, and no additional interest, if any, shall be
payable to Holders who tender Notes pursuant to the Repurchase Offer.
Upon the commencement of a Repurchase Offer, AirGate shall send,
by first class mail, a notice to the Trustee and each of the Holders, with a
copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to such Repurchase
Offer. The Repurchase Offer shall be made to all Holders. The notice, which
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shall govern the terms of the Repurchase Offer, shall describe the transaction
or transactions that constitute the Change of Control or Excess Proceeds Offer
Triggering Event, as the case may be and shall state:
(a) that the Repurchase Offer is being made pursuant
to this Section 3.9 and Section 4.10 or 4.14
hereof, as the case may be, and the length of time
the Repurchase Offer shall remain open;
(b) the Offer Amount, the purchase price and the
Purchase Date;
(c) that any Note not tendered or accepted for payment
shall continue to accrete or accrue interest;
(d) that, unless AirGate defaults in making such
payment, any Note accepted for payment pursuant to
the Repurchase Offer shall cease to accrete or
accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased
pursuant to a Repurchase Offer shall be required
to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the
reverse of the Note duly completed, or transfer by
book-entry transfer, to AirGate, the Depositary,
or the Paying Agent at the address specified in
the notice not later than the close of business on
the last day of the Offer Period;
(f) that Holders shall be entitled to withdraw their
election if AirGate, the Depositary or the Paying
Agent, as the case may be, receives, not later
than the expiration of the Offer Period, a
telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the
principal amount of the Note the Holder delivered
for purchase and a statement that such Holder is
withdrawing his election to have such Note
purchased;
(g) that, if the Accreted Value or aggregate principal
amount, as the case may be, of Notes surrendered
by Holders exceeds the Offer Amount, the Trustee
shall select the Notes to be purchased on a pro
rata basis (with such adjustments as may be deemed
appropriate by the Trustee so that only Notes in
denominations of $1,000, or integral multiples
thereof, shall be purchased); and
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(h) that Holders whose Notes were purchased only in
part shall be issued new Notes equal in principal
amount to the unpurchased portion of the Notes
surrendered (or transferred by book-entry
transfer).
On or before 10:00 a.m. (New York City time) on each Purchase
Date, AirGate shall irrevocably deposit with the Trustee or Paying Agent (other
than AirGate or an Affiliate of AirGate) in immediately available funds the
aggregate purchase price equal to the Offer Amount, together with accrued and
unpaid interest, if any, thereon, to be held for payment in accordance with the
terms of this Section 3.9. On the Purchase Date, AirGate shall, to the extent
lawful, (i) accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Repurchase
Offer, or if less than the Offer Amount has been tendered, all Notes tendered,
(ii) deliver or cause the Paying Agent or depositary, as the case may be, to
deliver to the Trustee Notes so accepted and (iii) deliver to the Trustee an
Officers' Certificate stating that such Notes or portions thereof were accepted
for payment by AirGate in accordance with the terms of this Section 3.9.
AirGate, the Depositary or the Paying Agent, as the case may be, shall promptly
(but in any case not later than three (3) Business Days after the Purchase Date)
mail or deliver to each tendering Holder an amount equal to the purchase price
of the Notes tendered by such Holder and accepted by AirGate for purchase, plus
any accrued and unpaid interest, if any, thereon, and AirGate shall promptly
issue a new Note, and the Trustee, at the written request of AirGate, shall
authenticate and mail or deliver at the expense of AirGate such new Note, to
such Holder, equal in principal amount to any unpurchased portion of such
Holder's Notes surrendered. Any Note not so accepted shall be promptly mailed or
delivered by AirGate to the Holder thereof. AirGate shall publicly announce in a
newspaper of general circulation or in a press release provided to a nationally
recognized financial wire service the results of the Repurchase Offer on the
Purchase Date.
Other than as specifically provided in this Section 3.9, any purchase
pursuant to this Section 3.9 shall be made pursuant to the provisions of
Sections 3.1 through 3.6 hereof.
ARTICLE IV
COVENANTS
SECTION 1.29 PAYMENT OF NOTES.
(1) AirGate shall pay or cause to be paid the principal of,
premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes. Principal, premium, if any, and interest, shall be
considered paid for all purposes hereunder on the date the Paying Agent, if
other than AirGate or a Subsidiary thereof, holds, as of 10:00 a.m. (New York
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City time), money deposited by AirGate in immediately available funds and
designated for and sufficient to pay all such principal, premium, if any, and
interest then due.
(2) AirGate shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal at the
rate equal to 1% per annum in excess of the then applicable interest rate on the
Notes to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest (without regard to any applicable grace period) at the same rate to the
extent lawful.
SECTION 1.30 MAINTENANCE OF OFFICE OR AGENCY.
AirGate shall maintain in the Borough of Manhattan, the City of New
York an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee or Registrar) where Notes may be surrendered for registration of
transfer or for exchange and where notices and demands to or upon AirGate in
respect of the Notes and this Indenture may be served. AirGate shall give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time AirGate shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Trustee.
AirGate may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve AirGate of
its obligation to maintain an office or agency in the Borough of Manhattan, the
City of New York for such purposes. AirGate shall give prompt written notice to
the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency.
AirGate hereby designates the Corporate Trust Office of the Trustee as
one such office or agency of AirGate in accordance with Section 2.3 hereof.
SECTION 1.31 COMMISSION REPORTS.
Whether or not required by the rules and regulations of the
Commission, so long as any Notes are outstanding, AirGate shall furnish to the
Holders of Notes (i) 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 thereon by AirGate's
certified independent accountants and (ii) all current reports that would be
required to be filed with the Commission on
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Form 8-K if AirGate were required to file such reports. In addition, whether or
not required by the rules and regulations of the Commission, AirGate shall file
a copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) within the
time periods that would have been applicable had AirGate been subject to such
rules and regulations and make such information available to securities analysts
and prospective investors upon request. AirGate shall at all times comply with
TIA (S) 314(a).
The financial information to be distributed to Holders of Notes shall
be filed with the Trustee and mailed to the Holders at the expense of AirGate at
their addresses appearing in the register of Notes maintained by the Registrar,
within 90 days after the end of AirGate's fiscal years and within 45 days after
the end of each of the first three quarters of each such fiscal year.
AirGate shall provide the Trustee with a sufficient number of copies
of all reports and other documents and information and, if requested by AirGate,
the Trustee will deliver such reports to the Holders under this Section 4.3.
SECTION 1.32 COMPLIANCE CERTIFICATE.
AirGate shall deliver to the Trustee, within 90 days after the end of
each fiscal year, an Officers' Certificate stating that a review of the
activities of AirGate and its Subsidiaries during the preceding fiscal year has
been made under the supervision of the signing Officers with a view to
determining whether each has kept, observed, performed and fulfilled its
obligations under this Indenture (including, with respect to any Restricted
Payments made during such year, the basis upon which the calculations required
by Section 4.7 hereof were computed, which calculations may be based on
AirGate's latest available financial statements), and further stating, as to
each such Officer signing such certificate, that, to the best of his or her
knowledge, each entity has kept, observed, performed and fulfilled each and
every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions of this
Indenture (or, if a Default or Event of Default shall have occurred, describing
all such Defaults or Events of Default of which he or she may have knowledge and
what action AirGate is taking or proposes to take with respect thereto) and
that, to the best of his or her knowledge, no event has occurred and remains in
existence by reason of which payments on account of the principal of, premium,
if any, or interest on the Notes is prohibited or if such event has occurred, a
description of the event and what action AirGate is taking or proposes to take
with respect thereto.
So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, in connection with the
year-end financial statements delivered pursuant to Section 4.3 hereof, AirGate
shall use its best efforts to deliver a written statement of AirGate's
independent public accountants (who shall be a firm of established national
reputation) that in making the examination necessary for certification of such
financial statements, nothing
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has come to their attention that would lead them to believe that AirGate has
violated any provisions of Article IV or Article V hereof or, if any such
violation has occurred, specifying the nature and period of existence thereof,
it being understood that such accountants shall not be liable directly or
indirectly to any Person for any failure to obtain knowledge of any such
violation. In the event that such written statement of AirGate's independent
public accountants cannot be obtained, AirGate shall deliver an Officers'
Certificate certifying that it has used its best efforts to obtain such
statements and was unable to do so.
AirGate shall, so long as any of the Notes are outstanding, deliver to
the Trustee, forthwith upon any Officer becoming aware of any Default or Event
of Default, an Officers' Certificate specifying such Default or Event of Default
and what action AirGate is taking or proposes to take with respect thereto.
SECTION 1.33 TAXES.
AirGate shall pay, and shall cause each of its Subsidiaries to pay,
prior to delinquency all material taxes, assessments and governmental levies,
except such as are contested in good faith and by appropriate proceedings and
with respect to which appropriate reserves have been taken in accordance with
GAAP or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Notes.
SECTION 1.34 STAY, EXTENSION AND USURY LAWS.
AirGate covenants (to the extent that it may lawfully do so) that it
shall not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, that may affect the covenants or
the performance of this Indenture; and AirGate and each of the Guarantors (to
the extent that it may lawfully do so) hereby expressly waives all benefit or
advantage of any such law, and covenants that it shall not, by resort to any
such law, hinder, delay or impede the execution of any power herein granted to
the Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
SECTION 1.35 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;
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(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 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, after giving effect thereto,
(2) no Default or Event of Default shall have occurred and
be continuing;
(3) 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 Section 4.9 hereof; and
(4) 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:
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(1) 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 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
(2) the aggregate Net Proceeds, including the fair
market value of property other than cash, as determined:
(1) 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
(2) 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
(3) the aggregate Net Proceeds, including the
fair market value of property other than cash, as
determined:
(1) 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
(2) in the case of any property other than
cash with a value equal to or greater than $25 million, by an
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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
(4) 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 Section 4.7 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). 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 this Indenture;
(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 Notes, including premium,
if any, and accrued and unpaid interest, with the proceeds of, or
in exchange for:
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(5) 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
(6) Indebtedness that is at least as subordinated in right
of payment to the Notes, including premium, if any, and accrued and unpaid
interest, as the Indebtedness being purchased, with Restricted Payments pursuant
to this clause not being counted as Restricted Payments for purposes of clause
(c) above;
(1) 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 common stock, other than Disqualified Stock, of AirGate or options,
warrants or other rights to acquire such Equity Interests; or
(2) 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 this Section
4.7 to the extent such Investments would otherwise be so counted.
For purposes of clauses (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
clauses (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 Section 4.7, if a particular Restricted Payment
involves a noncash payment, including a distribution of assets, then such
Restricted Payment shall be deemed to be
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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 Section 4.7
were computed, together with a copy of any fairness opinion or appraisal
required by this 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.
SECTION 1.36 DIVIDENDS 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:
(4) Existing Indebtedness or Credit Facilities as in effect on
the date of this Indenture and any amendments, modifications,
restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacement or refinancings are no more restrictive, taken
as a whole, with respect to such dividend and other payment
restrictions
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than those contained in such Existing Indebtedness, as in effect on the
date of this Indenture;
(5) this Indenture and the Notes;
(6) applicable law;
(7) 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 this
Indenture to be incurred;
(8) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
(9) 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 of this
Section 4.8;
(10) 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;
(11) 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;
(12) Liens securing Indebtedness otherwise permitted to be incurred
pursuant to the provisions of Section 4.12 hereof that limit the right of
AirGate or any of its Restricted Subsidiaries to dispose of the assets
subject to such Lien;
(13) 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
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(14) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the ordinary
course of business.
SECTION 1.37 LIMITATION ON INCURRENCE OF INDEBTEDNE 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 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
this Indenture to repay Indebtedness under a Credit Facility pursuant
to Section 4.10 hereof;
(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
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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;
(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 first paragraph of this Section 4.9 or clause (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:
(2) 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 Notes, in the case of AirGate, or the Guarantee
of such Guarantor, in the case of a Guarantor; and
(3) (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);
(1) 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 this Indenture to
be outstanding;
(2) 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;
(3) 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);
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(4) 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;
(5) 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 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;
(6) 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
(7) the incurrence by AirGate of any Indebtedness under the
promissory note executed by AirGate pursuant to Section 6(d)(ii) of
the Consent and Agreement, dated August 16, 1999, among Lucent
Technologies Inc., Sprint Spectrum L.P., SprintCom, Inc., Sprint
Communications Company, L.P. and WirelessCo, L.P. and acknowledged by
AirGate and AirGate's stockholders.
For purposes of determining compliance with this Section 4.9, in the
event that an item of proposed Indebtedness meets the criteria of more than one
of the categories of Permitted Debt described in clauses (1) through (13) above,
or is entitled to be incurred pursuant to the first paragraph of this Section
4.9, 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 Section 4.9.
SECTION 1.38 ASSET SALES.
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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
(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:
(2) any liabilities, as shown on AirGate's or such
Restricted Subsidiary's most recent balance sheet, of AirGate or any Restricted
Subsidiary, other than contingent liabilities and liabilities that are by their
terms subordinated to the Notes or any Guarantee, that are assumed by the
transferee of any such assets pursuant to a customary novation agreement that
releases AirGate or such Restricted Subsidiary from further liability; and
(3) any securities, Notes or other obligations
received by AirGate or any such Restricted Subsidiary from such transferee that
are contemporaneously, subject to ordinary settlement periods, converted by
AirGate or such Restricted Subsidiary into cash, to the extent of the cash
received in that conversion.
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.
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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 this 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 (an "Excess Proceeds
Triggering Event"), AirGate will make an Asset Sale Offer. 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 this Indenture. If the
aggregate principal amount of Notes and such other pari passu Indebtedness
tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes and such other pari passu Indebtedness to be
purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the
amount of Excess Proceeds shall be reset at zero.
AirGate will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with each
repurchase of Notes pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with the Asset Sale
provisions of this 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 this Indenture by virtue of such conflict.
SECTION 1.39 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:
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(2) 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
(3) 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 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 Section 4.7; and
(5) sales of Equity Interests, other than Disqualified Stock, to
Affiliates of AirGate.
SECTION 1.40 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 pari passu with the 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 this Indenture and the Notes are secured equally and ratably with, or
prior to, in the case of subordinated Indebtedness, the obligations so secured
until such time as such obligations are no longer secured by such Lien; provided
that this restriction will not apply to Permitted Liens.
SECTION 1.41 SALE AND LEASEBACK TRANSACTIONS.
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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 Section 4.9 hereof and (b) incurred a Lien
to secure such Indebtedness pursuant to Section 4.12 hereto;
(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, Section 4.10 hereof.
SECTION 1.42 OFFER TO PURCHASE UPON CHANGE OF CONTROL.
Upon the occurrence of a Change of Control, each Holder will have the
right to require AirGate to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the Accreted Value thereof on the date of purchase (if such date of
purchase is prior to October 1, 2004) or 101% of the aggregate principal amount
thereof plus accrued and unpaid interest thereon, if any, to the date of
purchase (if such date of purchase is on or after October 1, 2004) (the "Change
of Control Payment"). Within 30 days following any Change of Control, AirGate
will mail a notice to each Holder describing the transaction or transactions
that constitute the Change of Control and offering to repurchase Notes on the
date specified in such notice, which date shall be no earlier than 30 days and
no later than 60 days from the date such notice is mailed (the "Change of
Control Payment Date"), pursuant to the procedures required by Section 3.9
hereof and described in such notice. AirGate shall comply with the requirements
of Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of the Notes as a result of a Change of Control.
On the Change of Control Payment Date, AirGate shall, to the
extent lawful, (a) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (b) deposit with the Paying
Agent an amount equal to the Change of Control
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Payment in respect of all Notes or portions thereof so tendered and (c) deliver
or cause to be delivered to the Trustee the Notes so accepted together with an
Officers' Certificate stating the Accreted Value or aggregate principal amount,
as applicable, of Notes or portions thereof being purchased by AirGate. The
Paying Agent will promptly mail to each Holder of Notes so tendered the Change
of Control Payment for such Notes, and the Trustee will promptly authenticate
and mail (or cause to be transferred by book entry) to each Holder a new Note
equal in principal amount to any unpurchased portion of the Notes surrendered,
if any; provided that each such new Note will be in a principal amount of $1,000
or an integral multiple thereof. 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 Change of Control provisions described above will be applicable
whether or not any other provisions of this Indenture are applicable. Except as
described above with respect to a Change of Control, this Indenture does not
contain provisions that permit the Holders to require that AirGate repurchase or
redeem the Notes in the event of a takeover, recapitalization or similar
transaction.
AirGate shall 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
herein applicable to a Change of Control Offer made by AirGate and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
To the extent that the provisions of any securities laws or
regulations conflict with the Change of Control provisions of this 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 this Indenture by virtue of such conflict.
SECTION 1.43 CORPORATE EXISTENCE.
Subject to Section 4.14 and Article V hereof, as the case may be,
AirGate shall do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence and the corporate, partnership
or other existence of each of its Subsidiaries in accordance with the respective
organizational documents (as the same may be amended from time to time) of
AirGate or any such Subsidiary and the rights (charter and statutory), licenses
and franchises of AirGate and its Subsidiaries; provided that AirGate shall not
be required to preserve any such right, license or franchise, or the corporate,
partnership or other existence of any of its Subsidiaries, if the Board of
Directors of AirGate shall determine that the preservation thereof is no longer
desirable in the conduct of the business of AirGate and its Subsidiaries, taken
as a whole, and that the loss thereof is not adverse in any material respect to
the Holders.
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SECTION 1.44 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 Section
4.10.
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.
SECTION 1.45 BUSINESS ACTIVITIES.
AirGate shall not, and shall not permit any Restricted Subsidiary to,
engage in any business other than a Permitted Business, except to such extent as
would not be material to AirGate and its Restricted Subsidiaries taken as a
whole.
SECTION 1.46 PAYMENT FOR CONSENTS.
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 for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of this Indenture or the Notes
unless such consideration is offered to be paid and is paid to all Holders that
consent, waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
SECTION 1.47 NO SENIOR SUBORDINATED DEBT.
Neither AirGate nor the Guarantors will 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 of
Section 4.9 and senior in any respect in right of payment to the Notes or the
Guarantees; provided that the foregoing limitation shall not apply
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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.
SECTION 1.48 ADDITIONAL GUARANTEES.
If AirGate or any of its Restricted Subsidiaries acquires or creates
another Restricted Subsidiary after the date of this Indenture, then that newly
acquired or created Restricted Subsidiary must become a Guarantor and (i)
execute a supplemental indenture satisfactory to the Trustee making such
Restricted Subsidiary a party to this Indenture, (ii) execute an endorsement of
Guarantee substantially in the form of Exhibit B attached hereto and (iii)
deliver an Opinion of Counsel to the Trustee, in each case within 10 Business
Days of the date on which it was acquired or created. If any of the Capital
Stock of such Guarantor is directly owned by AirGate, then AirGate shall pledge
all of the Capital Stock of such Guarantor owned by AirGate pursuant to the
terms of the Pledge Agreement.
SECTION 1.49 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 Section 4.7 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.
SECTION 1.50 FURTHER INSTRUMENTS AND ACTS.
Upon request by the Trustee, AirGate shall execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purposes of this Indenture.
ARTICLE V
SUCCESSORS
SECTION 1.51 MERGER, CONSOLIDATION OR SALE OF ASSETS.
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AirGate shall not, in any transaction or series of related
transactions, merge or consolidate with or into, or sell, assign, convey,
transfer or otherwise dispose of its properties and assets substantially as an
entirety to, any Person, and shall not permit any of its Restricted Subsidiaries
to enter into any such transaction or series of transactions if such transaction
or series of transactions, in the aggregate, would result in a sale, assignment,
conveyance, transfer or other disposition of the properties and assets of
AirGate and its Restricted Subsidiaries, taken as a whole, substantially as an
entirety to any Person, unless, at the time and after giving effect thereto:
(1) either: (A) if the transaction or series of transactions
is a consolidation of AirGate with or a merger of AirGate with or into
any other Person, AirGate shall be the surviving Person of such merger
or consolidation, or (B) the Person formed by any consolidation with
or merger with or into AirGate, or to which the properties and assets
of AirGate or AirGate and its Restricted Subsidiaries, taken as a
whole, as the case may be, substantially as an entirety are sold,
assigned, conveyed or otherwise transferred (any such surviving Person
or transferee Person referred to in this clause (B) being the
"Surviving Entity"), shall be a corporation, partnership, limited
liability company or trust organized and existing under the laws of
the United States of America, any state thereof or the District of
Columbia and shall expressly assume by a supplemental indenture
executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of AirGate under the Notes and this
Indenture and, in each case, this 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 first paragraph of Section 4.9 hereof; 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
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consolidation of any Restricted Subsidiary with or into any other
Restricted Subsidiary. 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 this Section 5.1,
AirGate shall deliver, or cause to be delivered, to the Trustee, in form and
substance reasonably satisfactory to the Trustee, an Officers' Certificate,
which shall set forth the manner of determination of AirGate's compliance with
clause (3) of this Section 5.1 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 this Indenture and an Opinion of
Counsel.
For all purposes of this Indenture and the Notes, including the
provisions described in the two immediately preceding paragraphs and Sections
4.9 and 4.21 hereof, Subsidiaries of any Surviving Entity will, upon such
transaction or series of transactions, become Restricted Subsidiaries or
Unrestricted Subsidiaries as provided pursuant to Section 4.21 hereof and all
Indebtedness of the Surviving Entity and its Subsidiaries that was not
Indebtedness of AirGate and its Subsidiaries immediately prior to such
transaction or series of transactions shall be deemed to have been incurred upon
such transaction or series of transactions.
The Surviving Entity shall succeed to, and be substituted for, and may
exercise every right and power of AirGate under this Indenture, and the
predecessor company shall be released from all its obligations and covenants
under this Indenture and the Notes.
SECTION 1.52 SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of AirGate in accordance with Section 5.1 hereof, the successor corporation
formed by such consolidation or into or with which AirGate is merged or to which
such sale, assignment, transfer, lease, conveyance or other disposition is made
shall succeed to, and be substituted for (so that from and after the date of
such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to AirGate), and shall exercise every right
and power of AirGate under this Indenture with the same effect as if such
successor Person had been named as AirGate herein.
ARTICLE VI
DEFAULTS AND REMEDIES
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SECTION 1.53 EVENTS OF DEFAULT
Each of the following constitutes an "Event of Default":
(1) default for 30 days in the payment when
due of interest on the Notes, whether or not
prohibited by Article XI hereof;
(2) default in payment when due of principal
of or premium, if any, on the Notes, whether or
not prohibited by Article XI hereof;
(3) failure by AirGate or any of its
Restricted Subsidiaries to comply with the
provisions described under Sections 4.10 and 4.14
hereof;
(4) failure by AirGate or any of its
Restricted Subsidiaries for 60 days after notice
from the Trustee or the Holders of at least 25% in
principal amount of the Notes then outstanding to
comply with the provisions of any other agreement
in this 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 hereof, which 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,
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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,
the unenforceability of the Pledge Agreement
against AirGate for any reason, the failure of any
Lien on the Collateral (as defined in the Pledge
Agreement) purported to be created under the
Pledge Agreement to be a valid and perfected Lien
with the priority required under the Pledge
Agreement or assertion by AirGate that such Lien
is not valid or perfected or lacks such priority;
(8) except as permitted by this 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) AirGate or any of its Restricted
Subsidiaries or any group of Subsidiaries that,
taken as a whole, would constitute a Significant
Subsidiary, pursuant to or within the meaning of
any Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order
for relief against it in an involuntary case,
(c) consents to the appointment of a
Custodian of it or for all or substantially
all of its property,
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(d) makes a general assignment for the
benefit of its creditors, or
(e) generally is not paying its debts
as they become due;
(10) a court of competent jurisdiction enters
an order or decree under any Bankruptcy Law that:
(a) is for relief against AirGate or
any of its Restricted Subsidiaries in an
involuntary case;
(b) appoints a Custodian of AirGate or
any of its Restricted Subsidiaries or for all
or substantially all of the property of the
Company or any of its Restricted
Subsidiaries; or
(c) orders the liquidation of AirGate
or any of its Restricted Subsidiaries and the
order or decree remains unstayed and in
effect for 60 consecutive days; or
(11) any event occurs that causes, subject to
any applicable grace period, an Event of
Termination under any of the Sprint Agreements.
The term "Custodian" means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.
SECTION 1.54 ACCELERATION.
If any Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes may
declare all the Notes to be due and payable immediately. Upon such declaration,
the principal of (or, if prior to October 1, 2004, the Accreted Value of),
premium, if any, and accrued and unpaid interest on the Notes shall be due and
payable immediately. Notwithstanding the foregoing, in the case of an Event of
Default as described in clause (ix) or (x) of Section 6.1 hereof, all
outstanding Notes will become due and payable without further action or notice.
Holders may not enforce this Indenture or the Notes except as provided in this
Indenture.
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
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of the premium that AirGate would have had to pay if AirGate then had elected to
redeem the Notes pursuant to Section 3.7(a) hereof, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
October 1, 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 Notes prior to October 1, 2004, then the amount payable in
respect of such Notes for purposes of this paragraph shall be equal to 113.500%
of the Accreted Value, if any, to the date of payment.
SECTION 1.55 OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. All remedies are cumulative
to the extent permitted by law.
Pursuant to Section 4.4, AirGate is required to deliver to the Trustee
annually a statement regarding compliance with this Indenture, and AirGate is
required upon becoming aware of any Default or Event of Default, to deliver to
the Trustee a statement specifying such Default or Event of Default.
SECTION 1.56 WAIVER OF PAST DEFAULTS.
The Holders of a majority in Accreted Value or aggregate principal
amount, as the case may be, of the Notes then outstanding by notice to the
Trustee may on behalf of the Holders of all of the Notes waive any existing
Default or Event of Default and its consequences under this Indenture except a
continuing Default or Event of Default in the payment of interest on, or the
principal of, the Notes (other than as a result of an acceleration), which shall
require the consent of all of the Holders of the Notes then outstanding.
SECTION 1.57 CONTROL BY MAJORITY.
The Holders of a majority in Accreted Value or aggregate principal
amount, as the case may be, of the then outstanding Notes may direct the time,
method and place of conducting any proceeding for exercising any remedy
available to the Trustee or exercising any trust power conferred on it. However,
(i) the Trustee may refuse to follow any direction that conflicts with
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law or this Indenture, that the Trustee determines may be unduly prejudicial to
the rights of other Holders or that may involve the Trustee in personal
liability, and (ii) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction. In case an Event of
Default shall occur (which shall not be cured), the Trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Notwithstanding any provision to the contrary in
this Indenture, the Trustee is under no obligation to exercise any of its rights
or powers under this Indenture at the request of any Holder, unless such Holder
shall offer to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
SECTION 1.58 LIMITATION ON SUITS.
A Holder may pursue a remedy with respect to this Indenture or the
Notes only if:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default or the Trustee receives such notice from AirGate;
(2) the Holders of at least 25% in Accreted Value or
aggregate principal amount, as the case may be, of the then outstanding Notes
make a written request to the Trustee to pursue the remedy;
(3) such Holder or Holders offer and, if requested, provide
to the Trustee indemnity satisfactory to the Trustee against any loss, liability
or expense;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested, the provision
of indemnity; and
(5) during such 60-day period the Holders of a majority in
Accreted Value or aggregate principal amount, as the case may be, of the then
outstanding Notes do not give the Trustee a direction inconsistent with the
request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
SECTION 1.59 RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal, premium, if any, and interest on or
after the respective due dates expressed in the Note (including in connection
with an offer to purchase), or to bring suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of such Holder.
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SECTION 1.60 COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.1(i) or (ii) hereof
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against AirGate for the whole amount
of principal of, premium and interest remaining unpaid on the Notes and interest
on overdue principal and, to the extent lawful, interest and such further amount
as shall be sufficient to cover the costs and expenses of collection, including
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel.
SECTION 1.61 TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders allowed in any judicial proceedings relative to AirGate (or any other
obligor upon the Notes), its creditors or its property and shall be entitled and
empowered to collect, receive and distribute any money or other securities or
property payable or deliverable upon the conversion or exchange of the Notes or
on any such claims and any Custodian in any such judicial proceeding is hereby
authorized by each Holder to make such payments to the Trustee, and in the event
that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.7 hereof. To
the extent that the payment of any such compensation, expenses, disbursements
and advances of the Trustee, its agents and counsel, and any other amounts due
the Trustee under Section 7.7 hereof out of the estate in any such proceeding,
shall be denied for any reason, payment of the same shall be secured by a Lien
on, and shall be paid out of, any and all distributions, dividends, money,
securities and other properties that the Holders may be entitled to receive in
such proceeding whether in liquidation or under any plan of reorganization or
arrangement or otherwise. Nothing herein contained shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder, or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding.
SECTION 1.62 PRIORITIES.
If the Trustee collects any money pursuant to this Article VI, it
shall pay out the money in the following order:
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First: to the Trustee, its agents and attorneys for amounts due under
Section 7.7 hereof, including payment of all reasonable compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: to holders of Senior Debt for amounts due;
Third: to Holders of Notes for amounts due and unpaid on the Notes for
principal, premium, if any, and interest ratably, without preference or priority
of any kind, according to the amounts due and payable on the Notes for
principal, premium, if any, and interest respectively;
Fourth: without duplication, to the Holders for any other Obligations
owing to the Holders under this Indenture and the Notes; and
Fifth: to AirGate or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders pursuant to this Section 6.10.
SECTION 1.63 UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.7 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE VII
TRUSTEE
SECTION 1.64 DUTIES OF TRUSTEE.
(1) If an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
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(2) Except during the continuance of an Event of
Default:
(1) the duties of the Trustee shall be
determined solely by the express provisions of
this Indenture or the TIA and the Trustee need
perform only those duties that are specifically
set forth in this Indenture or the TIA and no
others, and no implied covenants or obligations
shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its
part, the Trustee may conclusively rely, as to the
truth of the statements and the correctness of the
opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming
to the requirements of this Indenture. However,
the Trustee shall examine the certificates and
opinions to determine whether or not they conform
to the requirements of this Indenture.
(3) The Trustee may not be relieved from liabilities for
its own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) this paragraph does not limit the
effect of paragraph (b) of this Section 7.1;
(2) the Trustee shall not be liable for
any error of judgment made in good faith by an
officer of the Trustee, unless it is proved that
the Trustee was negligent in ascertaining the
pertinent facts; and
(3) the Trustee shall not be liable
with respect to any action it takes or omits to
take in good faith in accordance with a direction
received by it pursuant to Section 6.5 hereof.
(4) Whether or not therein expressly so provided,
every provision of this Indenture that in any way relates to the Trustee is
subject to paragraphs (a), (b) and (c) of this Section 7.1.
(5) No provision of this Indenture shall require the
Trustee to expend or risk its own funds or incur any liability. The Trustee
shall be under no obligation to exercise any of its rights and powers under this
Indenture at the request of any Holders, unless such
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Holder shall have offered to the Trustee security and indemnity satisfactory to
it against any loss, liability or expense.
(6) The Trustee shall not be liable for interest on any
money received by it except as the Trustee may agree in writing with AirGate.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 1.65 RIGHTS OF TRUSTEE.
(1) The Trustee may conclusively rely on any document
believed by it to be genuine and to have been signed or presented by the proper
Person. The Trustee need not investigate any fact or matter stated in the
document.
(2) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. Prior to taking,
suffering or admitting any action, the Trustee may consult with counsel of the
Trustee's own choosing and may request an Opinion of Counsel which shall be full
and complete authorization and protection from liability in respect of any
action taken, suffered or omitted by it hereunder in good faith and in reliance
thereon.
(3) The Trustee may act through its attorneys and agents
and shall not be responsible for the misconduct or negligence of any agent
appointed with due care.
(4) The Trustee shall not be liable for any action it takes
or omits to take in good faith that it believes to be authorized or within the
rights or powers conferred upon it by this Indenture.
(5) Unless otherwise specifically provided in this
Indenture, any demand, request, direction or notice from AirGate or a Guarantor
shall be sufficient if signed by an Officer of AirGate or such Guarantor.
(6) The Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the request or
direction of any of the Holders unless such Holders shall have offered to the
Trustee reasonable security or indemnity satisfactory to the Trustee against the
costs, expenses and liabilities that might be incurred by it in compliance with
such request or direction.
SECTION 1.66 INDIVIDUAL RIGHTS OF TRUSTEE.
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The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with AirGate or any Affiliate
of AirGate with the same rights it would have if it were not Trustee. However,
in the event that the Trustee acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Commission for permission
to continue as Trustee or resign. Any Agent may do the same with like rights and
duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 1.67 TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for AirGate's use of the proceeds from the Notes or any money paid
to AirGate or upon AirGate's direction under any provision of this Indenture, it
shall not be responsible for the use or application of any money received by any
Paying Agent other than the Trustee, and it shall not be responsible for any
statement or recital herein or any statement in the Notes or any other document
in connection with the sale of the Notes or pursuant to this Indenture other
than its certificate of authentication.
SECTION 1.68 NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to an officer of the Trustee, the Trustee shall mail to Holders a notice
of the Default or Event of Default within 90 days after it occurs. Except in the
case of a Default or Event of Default in payment of principal of, premium, if
any, or interest on any Note, the Trustee may withhold the notice if and so long
as the Trustee in good faith determines that withholding the notice is in the
interests of the Holders.
SECTION 1.69 REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each September 1 beginning with the September 1
following the date of this Indenture, and for so long as Notes remain
outstanding, the Trustee shall mail to the Holders a brief report dated as of
such reporting date that complies with TIA (S) 313(a) (but if no event described
in TIA (S) 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA (S)
313(b). The Trustee shall also transmit by mail all reports as required by TIA
(S) 313(c).
A copy of each report at the time of its mailing to the Holders shall
be mailed to AirGate and filed with the Commission and each stock exchange on
which AirGate has informed the Trustee in writing the Notes are listed in
accordance with TIA (S) 313(d). AirGate shall promptly notify the Trustee when
the Notes are listed on any stock exchange and of any delisting thereof.
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SECTION 1.70 COMPENSATION AND INDEMNITY.
AirGate shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. AirGate shall reimburse the Trustee promptly upon
request for all reasonable disbursements, advances and expenses incurred or made
by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
AirGate shall indemnify the Trustee (which for purposes of this
Section 7.7 shall include its officers, directors, employees and agents) against
any and all losses, liabilities or expenses incurred by it arising out of or in
connection with the acceptance or administration of its duties under this
Indenture, the Pledge Agreement and the Intercreditor Agreement, including the
costs and expenses of enforcing this Indenture, the Pledge Agreement and the
Intercreditor Agreement against AirGate (including this Section 7.7) and
defending itself against any claim (whether asserted by AirGate or any Holder or
any other person) or liability in connection with the exercise or performance of
any of its powers or duties hereunder and under the Pledge Agreement and the
Intercreditor Agreement except to the extent any such loss, liability or expense
may be attributable to its negligence or bad faith. The Trustee shall notify
AirGate promptly of any claim for which it may seek indemnity. Failure by the
Trustee to so notify AirGate shall not relieve AirGate of its obligations
hereunder or under the Pledge Agreement.and the Intercreditor Agreement AirGate
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and AirGate shall pay the reasonable fees and
expenses of such counsel. AirGate need not pay for any settlement made without
its consent, which consent shall not be unreasonably withheld.
The obligations of AirGate under this Section 7.7 shall survive the
satisfaction and discharge of this Indenture or the resignation or removal of
the Trustee.
To secure AirGate's payment obligations in this Section 7.7, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal or
interest, if any, on particular Notes. Such Lien shall survive the satisfaction
and discharge of this Indenture and the resignation or removal of the Trustee.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1 (ix), (x) or (xi) hereof occurs, the expenses
and the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA (S) 313(b)(2) to
the extent applicable.
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SECTION 1.71 REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.8.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying AirGate. The Holders of a majority in
principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and AirGate in writing. AirGate may remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10 hereof;
(2) the Trustee is adjudged a bankrupt or an insolvent or
an order for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(3) a Custodian or public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, AirGate shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount or Accreted Value as then applicable, of the
then outstanding Notes may appoint a successor Trustee to replace the successor
Trustee appointed by AirGate.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, AirGate, or the
Holders of at least 10% in principal amount or Accreted Value as the applicable,
of the then outstanding Notes may petition any court of competent jurisdiction
for the appointment of a successor Trustee.
If the Trustee, after written request by any Holder who has been a
Holder for at least six months, fails to comply with Section 7.10 hereof, such
Holder may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to AirGate. Thereupon, the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and the duties of the Trustee under
this Indenture. The successor Trustee shall mail a notice of its succession to
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the Holders. The retiring Trustee shall promptly transfer all property held by
it as Trustee to the successor Trustee, provided that all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.7 hereof. Notwithstanding replacement of the Trustee pursuant to this Section
7.8, AirGate's obligations under Section 7.7 hereof shall continue for the
benefit of the retiring Trustee.
SECTION 1.72 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee or any Agent consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee or any Agent, as applicable.
SECTION 1.73 ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities. The Trustee and its direct parent shall at all times have a
combined capital surplus of at least $50.0 million as set forth in its most
recent annual report of condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA (S)(S) 310(a)(l), (2) and (5). The Trustee is subject to
TIA (S) 310(b).
SECTION 1.74 PREFERENTIAL COLLECTION OF CLAIMS
AGAINST AIRGATE.
The Trustee is subject to TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
ARTICLE VIII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1.75 OPTION TO EFFECT LEGAL DEFEASANCE OR
COVENANT DEFEASANCE.
AirGate may, at the option of its Boards of Directors evidenced by a
resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.2 or 8.3 hereof be
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applied to all outstanding Notes upon compliance with the conditions set forth
below in this Article VIII.
SECTION 1.76 LEGAL DEFEASANCE AND DISCHARGE.
Upon AirGate's exercise under Section 8.1 hereof of the option
applicable to this Section 8.2, AirGate shall, subject to the satisfaction of
the conditions set forth in Section 8.4 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that AirGate shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.5 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all of its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of AirGate, shall execute proper instruments acknowledging
the same), except for the following provisions which shall survive until
otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive payments in respect of the principal of, premium,
if any, and interest, if any, on such Notes when such payments are due from the
trust referred to in Section 8.4(a); (b) AirGate's obligations with respect to
such Notes under Sections 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.10 and 4.2 hereof; (c)
the rights, powers, trusts, duties and immunities of the Trustee, including
without limitation thereunder, under Section 7.7, 8.5 and 8.7 hereof and
AirGate's obligations in connection therewith and (d) the provisions of this
Article VIII. Subject to compliance with this Article VIII, AirGate may exercise
its option under this Section 8.2 notwithstanding the prior exercise of its
option under Section 8.3 hereof.
SECTION 1.77 COVENANT DEFEASANCE.
Upon AirGate's exercise under Section 8.1 hereof of the option
applicable to this Section 8.3, AirGate shall, subject to the satisfaction of
the conditions set forth in Section 8.4 hereof, be released from its obligations
under the covenants contained in Sections 4.7, 4.8, 4.9, 4.10, 4.11, 4.12, 4.13,
4.14, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20, 4.21 and 5.1 hereof with respect to
the outstanding Notes on and after the date the conditions set forth below are
satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall thereafter
be deemed not "outstanding" for the purposes of any direction, waiver, consent
or declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall not
be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes, AirGate or any of
its Subsidiaries may omit to comply with and shall have no liability in respect
of any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision
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herein or in any other document and such omission to comply shall not constitute
a Default or an Event of Default under Section 6.1 hereof, but, except as
specified above, the remainder of this Indenture and such Notes shall be
unaffected thereby. In addition, upon AirGate's exercise under Section 8.1
hereof of the option applicable to this Section 8.3, subject to the satisfaction
of the conditions set forth in Section 8.4 hereof, Sections 6.1(iii) and (iv)
hereof shall not constitute Events of Default.
SECTION 1.78 CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.2 or 8.3 hereof to the outstanding 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, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as shall be
sufficient, in the written opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium and interest on
the outstanding Notes on the stated maturity or on the applicable redemption
date, as the case may be, and AirGate must specify whether the Notes are being
defeased to maturity or to a particular redemption date;
(2) in the case of an election under Section 8.2 hereof,
AirGate shall have delivered to the Trustee an Opinion of Counsel confirming
that (A) AirGate has received from, or there has been published by, the Internal
Revenue Service a ruling or (B) since the date hereof, there has been a change
in the applicable federal income tax law, in either case to the effect that, and
based thereon such opinion of counsel shall confirm that, the Holders of the
outstanding Notes shall not recognize income, gain or loss for federal income
tax purposes as a result of such Legal Defeasance and shall 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 an election under Section 8.3 hereof,
AirGate shall have delivered to the Trustee an Opinion of Counsel in the United
States to the effect that the Holders of the outstanding Notes shall not
recognize income, gain or loss for federal income tax purposes as a result of
such Covenant Defeasance and shall 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 on the date of such deposit (other than a Default or Event of
Default resulting from
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the borrowing of funds to be applied to such deposit) or insofar as Events of
Default from bankruptcy or insolvency events are concerned, at any time in the
period ending on the 91st day after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute a default under this Indenture
or any other material agreement or instrument to which AirGate or any of its
Subsidiaries is a party or by which AirGate or any of its Subsidiaries is bound;
(6) AirGate shall have delivered to the Trustee an Opinion
of Counsel to the effect that after the 91st day following the deposit, the
trust funds shall not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(7) AirGate shall have delivered to the Trustee an
Officers' Certificate stating that the deposit was not made by AirGate with the
intent of preferring the Holders over the other creditors of AirGate or with the
intent of defeating, hindering, delaying or defrauding creditors of AirGate or
others; and
(8) AirGate shall have delivered to the Trustee an
Officers' Certificate and an opinion of counsel, each stating that all
conditions precedent provided for relating to the Legal Defeasance or the
Covenant Defeasance have been complied with as contemplated by this Section 8.4.
SECTION 1.79 DEPOSITED MONEY AND GOVERNMENT SECURITIES
TO BE HELD IN TRUST; OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.6 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.5, the
"Trustee") pursuant to Section 8.4 hereof in respect of the outstanding Notes
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Notes and this Indenture, to the payment, either directly or
through any Paying Agent (including AirGate or any Subsidiary acting as Paying
Agent) as the Trustee may determine, to the Holders of such Notes of all sums
due and to become due thereon in respect of principal, premium, if any, and
interest, but such money need not be segregated from other funds except to the
extent required by law.
AirGate shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the cash or non-callable Government
Securities deposited pursuant to Section 8.4 hereof or the principal and
interest received in respect thereof other than
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any such tax, fee or other charge which by law is for the account of the Holders
of the outstanding Notes.
Anything in this Article VIII to the contrary notwithstanding, the
Trustee shall deliver or pay to AirGate from time to time upon the written
request of AirGate and be relieved of all liability with respect to any money or
non-callable Government Securities held by it as provided in Section 8.4 hereof
which, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee (which may be the opinion delivered under Section 8.4(a) hereof), are in
excess of the amount thereof that would then be required to be deposited to
effect an equivalent Legal Defeasance or Covenant Defeasance.
SECTION 1.80 REPAYMENT TO AIRGATE.
Any money deposited with the Trustee or any Paying Agent, or then held
by AirGate, in trust for the payment of the principal of, premium, if any, or
interest, if any, on any Note and remaining unclaimed for one year after such
principal, and premium, if any, or interest has become due and payable shall be
paid to AirGate on its written request or (if then held by AirGate) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as an
unsecured general creditor, look only to AirGate for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to such trust money,
and all liability of AirGate as trustee thereof, shall thereupon cease;
provided, however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of AirGate cause to be published
once, in the New York Times and The Wall Street Journal (national edition),
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such notification
or publication, any unclaimed balance of such money then remaining shall be
repaid to AirGate.
SECTION 1.81 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.2 or
8.3 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the obligations of AirGate under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.2 or 8.3 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.2 or 8.3 hereof,
as the case may be; provided, however, that, if AirGate makes any payment of
principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, AirGate shall be subrogated to the rights of
the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
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ARTICLE IX
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 1.82 WITHOUT CONSENT OF HOLDERS OF THE NOTES.
Notwithstanding Section 9.2 of this Indenture, without the consent of
any Holder, AirGate and the Trustee may amend or supplement this Indenture, the
Pledge Agreement, the Intercreditor Agreement, any Guarantee or the Notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or
in place of certificated Notes;
(3) to provide for the assumption of AirGate's obligations
to the Holders 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 or that does not adversely affect the legal
rights hereunder of any Holder; or
(5) to comply with requirements of the Commission in order
to effect or maintain the qualification of this Indenture under the TIA.
Upon the written request of AirGate accompanied by a resolution of its
Board of Directors of AirGate authorizing the execution of any such amended or
supplemental indenture, and upon receipt by the Trustee of the documents
described in Section 9.6 hereof, the Trustee shall join with AirGate in the
execution of any amended or supplemental indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
SECTION 1.83 WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.2, this Indenture, the
Pledge Agreement, the Intercreditor Agreement, any Guarantee or the Notes may be
amended or supplemented with
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the consent of the Holders of at least a majority in aggregate Accreted Value of
the Notes then outstanding if before October 1, 2004 or in aggregate principal
amount of the then outstanding Notes if after October 1, 2004 (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer, for Notes), and any existing default or
compliance with any provision of this Indenture, the Pledge Agreement, the
Intercreditor Agreement, any Guarantee or the Notes may be waived with the
consent of the Holders of a majority in aggregate Accreted Value of the then
outstanding Notes if before October 1, 2004 or in aggregate principal amount of
the then outstanding Notes if after October 1, 2004 (including, without
limitation, consents obtained in connection with a purchase of, or a tender
offer or exchange offer for, Notes).
Upon the request of AirGate accompanied by a resolution of its Board
of Directors authorizing the execution of any such amended or supplemental
indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders as aforesaid, and upon receipt by the
Trustee of the documents described in Section 9.6 hereof, the Trustee shall join
with AirGate in the execution of such amended or supplemental indenture unless
such amended or supplemental indenture affects the Trustee's own rights, duties
or immunities under this Indenture or otherwise, in which case the Trustee may,
but shall not be obligated to, enter into such amended or supplemental
indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.2 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof. After an amendment, supplement or waiver under this Section 9.2 becomes
effective, AirGate shall mail to the Holders of each Note affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
AirGate to mail such notice, or any defect therein, shall not, however, in any
way impair or affect the validity of any such amended or supplemental indenture
or waiver.
Subject to Sections 6.2, 6.4 and 6.7 hereof, the Holders of a majority
in aggregate Accreted Value of the Notes then outstanding may amend or waive
compliance in a particular instance by AirGate with any provision of this
Indenture, the Pledge Agreement, the Intercreditor Agreement, any Guarantee or
the Notes. However, without the consent of each Holder adversely affected, an
amendment or waiver may not (with respect to any Note held by a non-consenting
Holder):
(1) reduce the aggregate Accreted Value of the then
outstanding Notes, if before October 1, 2004, or the aggregate principal amount
of the then outstanding Notes, if after October 1, 2004, whose Holders must
consent to an amendment, supplement or waiver;
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(2) reduce the principal of or change the fixed maturity of
any Note or alter the provisions with respect to the redemption of the Notes
(other than provisions relating to Sections 4.10 and 4.14 hereof);
(3) reduce the rate of or change the time for payment of
interest on any Note;
(4) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Notes (except a rescission
of acceleration of the Notes by the Holders of at least a majority in aggregate
principal amount of the Notes and a waiver of the payment default that resulted
from such acceleration);
(5) make any Note payable in money other than that stated
in the Notes;
(6) make any change in the provisions of this Indenture
relating to waivers of past Defaults or the rights of Holders to receive
payments of principal of or premium, if any, or interest on the Notes;
(7) waive a redemption or repurchase payment with respect
to any Note (other than a payment required by Section 4.10 or 4.14 hereof); or
(8) make any change in the amendment and waiver provisions
of this Article IX.
In addition, any amendment to, or waiver of, the provisions of the
Pledge Agreement or this Indenture relating to the security interests created by
the Pledge Agreement that adversely affects the rights of the Holders will
require the consent of the Holders of at least 75% in aggregate Accreted Value
of Notes then outstanding if before October 1, 2004 or in aggregate principal
amount of the then outstanding Notes if after October 1, 2004.
SECTION 1.84 COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall be
set forth in an amended or supplemental indenture that complies with the TIA as
then in effect.
SECTION 1.85 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Note is a continuing consent by the Holder and every
subsequent Holder of that Note or portion of the Note that evidences the same
debt as the consenting Holder's Note, even if
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notation of the consent is not made on the Note. However, any such Holder or
subsequent Holder may revoke the consent as to its Note if the Trustee receives
written notice of revocation before the date the waiver, supplement or amendment
becomes effective. When an amendment, supplement or waiver becomes effective in
accordance with its terms, it thereafter binds every Holder.
AirGate may, but shall not be obligated to, fix a record date for
determining which Holders consent to such amendment, supplement or waiver. If
AirGate fixes a record date, the record date shall be fixed at (i) the later of
30 days prior to the first solicitation of such consent or the date of the most
recent list of Holders furnished for the Trustee prior to such solicitation
pursuant to Section 2.5 hereof or (ii) such other date as AirGate shall
designate.
SECTION 1.86 NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. AirGate in exchange
for all Notes may issue and the Trustee shall authenticate new Notes that
reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
SECTION 1.87 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental indenture
authorized pursuant to this Article IX if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
AirGate and the Guarantors may not sign an amendment or supplemental indenture
until their respective Boards of Directors approve it. In signing or refusing to
sign any amended or supplemental indenture the Trustee shall be entitled to
receive and (subject to Section 7.1 hereof) shall be fully protected in relying
upon an Officers' Certificate and an Opinion of Counsel stating that the
execution of such amended or supplemental indenture is authorized or permitted
by this Indenture, that it is not inconsistent herewith, and that it will be
valid and binding upon AirGate in accordance with its terms.
ARTICLE X
GUARANTEES
SECTION 1.88 GUARANTEES.
(1) Each Guarantor hereby jointly and severally, fully,
unconditionally and irrevocably guarantees the Notes and obligations of AirGate
hereunder and
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thereunder, and guarantees to each Holder of a Note authenticated and delivered
by the Trustee and to the Trustee on behalf of such Holder, that: (a) the
principal of and premium, if any and interest on the Notes shall be paid in full
when due, whether at Stated Maturity, by acceleration, call for redemption or
otherwise (including, without limitation, the amount that would become due but
for the operation of the automatic stay under Section 362(a) of the Federal
Bankruptcy Code), together with interest on the overdue principal, if any, and
interest on any overdue interest, to the extent lawful, and all other
obligations of AirGate to the Holders or the Trustee hereunder or thereunder
shall be paid in full or performed, all in accordance with the terms hereof and
thereof; and (b) in case of any extension of time of payment or renewal of any
Notes or of any such other obligations, the same shall be paid in full when due
or performed in accordance with the terms of the extension or renewal, whether
at Stated Maturity, by acceleration or otherwise. Each of the Guarantees shall
be a guarantee of payment and not of collection.
(2) Each Guarantor hereby agrees that its obligations
hereunder shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Notes with respect
to any provisions hereof or thereof, the recovery of any judgment against the
Company, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a Guarantor.
(3) Each Guarantor hereby waives the benefits of diligence,
presentment, demand for payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require a proceeding first
against the Company or any other Person, protest, notice and all demands
whatsoever and covenants that the Guarantee of such Guarantor shall not be
discharged as to any Note except by complete performance of the obligations
contained in such Note and such Guarantee or as provided for in this Indenture.
Each of the Guarantors hereby agrees that, in the event of a default in payment
of principal or premium, if any or interest on such Note, whether at its Stated
Maturity, by acceleration, call for redemption, purchase or otherwise, legal
proceedings may be instituted by the Trustee on behalf of, or by, the Holder of
such Note, subject to the terms and conditions set forth in this Indenture,
directly against each of the Guarantors to enforce such Guarantor's Guarantee
without first proceeding against the Company or any other Guarantor. Each
Guarantor agrees that if, after the occurrence and during the continuance of an
Event of Default, the Trustee or any of the Holders are prevented by applicable
law from exercising their respective rights to accelerate the maturity of the
Notes, to collect interest on the Notes, or to enforce or exercise any other
right or remedy with respect to the Notes, such Guarantor shall pay to the
Trustee for the account of the Holders, upon demand therefor, the amount that
would otherwise have been due and payable had such rights and remedies been
permitted to be exercised by the Trustee or any of the Holders.
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(4) If any Holder or the Trustee is required by any court
or otherwise to return to AirGate or any Guarantor, or any custodian, trustee,
liquidator or other similar official acting in relation to either AirGate or any
Guarantor, any amount paid by any of them to the Trustee or such Holder, the
Guarantee of each of the Guarantors, to the extent theretofore discharged, shall
be reinstated in full force and effect. This paragraph (d) shall remain
effective notwithstanding any contrary action which may be taken by the Trustee
or any Holder in reliance upon such amount required to be returned. This
paragraph (d) shall survive the termination of this Indenture except as
otherwise provided in the Intercreditor Agreement.
(5) Each Guarantor further agrees that, as between each
Guarantor, on the one hand, and the Holders and the Trustee, on the other hand,
(x) the maturity of the obligations guaranteed hereby may be accelerated as
provided in Article VI hereof for the purposes of the Guarantee of such
Guarantor, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the obligations guaranteed hereby, and (y) in
the event of any acceleration of such obligations as provided in Article VI
hereof, such obligations (whether or not due and payable) shall forthwith become
due and payable by each Guarantor for the purpose of the Guarantee of such
Guarantor.
SECTION 1.89 EXECUTION AND DELIVERY OF GUARANTEE.
To evidence its Guarantee set forth in Section 10.1, each Guarantor
agrees that a notation of such Guarantee substantially in the form attached
hereto as Exhibit B shall be endorsed on each Note authenticated and delivered
by the Trustee. Such notation of Guarantee shall be signed on behalf of such
Guarantor by an officer of such Guarantor (or, if an officer is not available,
by a board member or director) on behalf of such Guarantor by manual or
facsimile signature. In case the officer, board member or director of such
Guarantor who shall have signed such notation of Guarantee shall cease to be
such officer, board member or director before the Note on which such Guarantee
is endorsed shall have been authenticated and delivered by the Trustee, such
Note nevertheless may be authenticated and delivered as though the Person who
signed such notation of Guarantee had not ceased to be such officer, board
member or director.
Each Guarantor agrees that its Guarantee set forth in Section 10.1
shall remain in full force and effect and apply to all the Notes notwithstanding
any failure to endorse on each Note a notation of such Guarantee. The delivery
of any Note by the Trustee, after the authentication thereof hereunder, shall
constitute due delivery of any Guarantee set forth in this Indenture on behalf
of the Guarantors.
SECTION 1.90 SEVERABILITY.
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In case any provision of any Guarantee shall be invalid, illegal or
unenforceable, the validity, legality, and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 1.91 SENIORITY OF GUARANTEES.
The obligations of each Guarantor under its Guarantee pursuant to this
Article X shall be junior and subordinated to any Senior Debt of such Guarantor
on the same basis as the Notes are junior and subordinated to Senior Debt of
AirGate. For the purposes of the foregoing sentence, the Trustee and the Holders
shall have the right to receive and/or retain payments by any of the Guarantors
only at such times as they may receive and/or retain payments in respect of the
Notes pursuant to this Indenture, including Article XI hereof. The obligations
of each Guarantor under its Guarantee pursuant to this Article X shall be 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.
SECTION 1.92 LIMITATION OF GUARANTORS' LIABILITY.
Each Guarantor and by its acceptance hereof each Holder confirms that
it is the intention of all such parties that the Guarantee of such Guarantor not
constitute a fraudulent transfer or conveyance for purposes of the Federal
Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent
Transfer Act or any similar federal or state law or the provisions of its local
law relating to fraudulent transfer or conveyance. To effectuate the foregoing
intention, the Trustee, the Holders and Guarantors hereby irrevocably agree that
the obligations of such Guarantor under its Guarantee shall be limited to the
maximum amount that will not, after giving effect to all other contingent and
fixed liabilities of such Guarantor and after giving effect to any collections
from, rights to receive contribution from or payments made by or on behalf of
any other Guarantor in respect of the obligations of such other Guarantor under
its Guarantee, result in the obligations of such Guarantor under its Guarantee
constituting a fraudulent transfer or conveyance.
SECTION 1.93 GUARANTORS MAY CONSOLIDATE, ETC., ON
CERTAIN TERMS.
Except as otherwise provided in Section 10.7 hereof, a Guarantor may
not sell or otherwise dispose of all or substantially all of its assets, or
consolidate with or merge with or into (whether or not such Guarantor is the
surviving Person) another Person unless:
(1) immediately after giving effect to such transactions, no
Default or Event of Default exists; and
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(2) either:
(1) 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 under this Indenture pursuant to a supplemental
indenture and appropriate collateral documents satisfactory to
the Trustee and the Capital Stock of such Person is pledged
pursuant to the Pledge Agreement if such Person is directly owned
by AirGate; or
(2) the Net Proceeds of any such sale or other
disposition of a Guarantor are applied in accordance with the
provisions of Section 4.10 hereof.
In case of any such consolidation, merger, sale or conveyance and upon
the assumption by the successor Person, by supplemental indenture, executed and
delivered to the Trustee and satisfactory in form to the Trustee, of the
Guarantee and the due and punctual performance of all of the covenants and
conditions of this Indenture to be performed by the Guarantor, such successor
Person shall succeed to and be substituted for the Guarantor with the same
effect as if it had been named herein as a Guarantor. All the Guarantees so
issued shall in all respects have the same legal rank and benefit under this
Indenture as the Guarantees theretofore and thereafter issued in accordance with
the terms of this Indenture as though all such Guarantees had been issued at the
date of the execution hereof.
Except as set forth in Articles IV and V hereof, and notwithstanding
clauses (1) and (2) above, nothing contained in this Indenture or in any of the
Notes shall prevent any consolidation or merger of a Guarantor with or into
AirGate or another Guarantor, or shall prevent any sale or conveyance of the
property of a Guarantor as an entirety or substantially as an entirety to
AirGate or another Guarantor.
SECTION 1.94 RELEASES FOLLOWING SALE OF ASSETS.
Any Guarantor shall be released and relieved of any obligations under
this Guarantee, (1) in connection with any sale or other disposition by AirGate
or any Subsidiary of AirGate of all or substantially all of the assets of that
Guarantor (including by way of merger or consolidation) to a Person that is not
(either before or after giving effect to such transaction) a Subsidiary, if
AirGate or the Guarantor applies the Net Proceeds of that sale or other
disposition in accordance with the provisions of Section 4.10 hereof; or (2) in
connection with any sale of all of the Capital Stock of a Guarantor by AirGate
or any Subsidiary of AirGate to a Person that is not (either before or after
giving effect to such transaction) a Subsidiary, if AirGate applies the Net
Proceeds of that sale in accordance with the provisions of Section 4.10 thereof.
Upon
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delivery to the Trustee of an Officers' Certificate and an Opinion of Counsel to
the effect that such sale or other disposition was made by AirGate in accordance
with the provisions of this Indenture, including without limitation Section 4.10
hereof, the Trustee shall execute any documents reasonably required in order to
evidence the release of any Guarantor from its obligations under its Guarantee.
Any Guarantor not released from its obligations under this Guarantee
shall remain liable for the full amount of principal of and interest on the
Notes and for the other obligations of any Guarantor under this Indenture as
provided in this Article X.
SECTION 1.95 RELEASE OF A GUARANTOR.
(a) Any Guarantor that is designated by the Board of
Directors of the Company as an Unrestricted Subsidiary in accordance with the
terms of this Indenture shall, at such time, be deemed automatically and
unconditionally released and discharged of its obligations under its Guarantee
without any further action on the part of the Trustee or any Holder. The Trustee
shall execute an appropriate instrument evidencing such release upon receipt of
the Company's request for such release accompanied by an Officers' Certificate
certifying as to the compliance with this Section 10.8. Any Guarantor not so
released shall remain liable for the full amount of principal of and interest on
the Notes as provided in its Guarantee.
(b) AGW Leasing Company, Inc. shall be released and
discharged of its obligations under its Guarantee upon the foreclosure of the
security interest in the Capital Stock of AGW Leasing Company, Inc. securing
Obligations under the Lucent Financing (i) upon the occurrence of the later of
(A) the date that one hundred percent (100%) of such Capital Stock of AGW
Leasing Company, Inc. is sold pursuant to such foreclosure and (B) the date that
the Lien securing the Obligations under the Lucent Financing in all of the
Capital Stock of AGW Leasing Company, Inc. has been released, AGW Leasing
Company, Inc. has been released from all other Obligations relating to the
Lucent Financing and all Liens granted in connection therewith have been
released and (ii) so long as the Capital Stock of AGW Leasing Company, Inc. is
not sold pursuant to such foreclosure sale directly or indirectly (A) the
administrative agent or the collateral agent, or any of their respective
successors, under the Lucent Financing, (B) any holder of Obligations under the
Lucent Financing or (C) any affiliate of any of the foregoing, unless prior
notice of such foreclosure is given to the Trustee.
SECTION 1.96 BENEFITS ACKNOWLEDGED.
Each Guarantor acknowledges that it will receive direct and indirect
benefits from the financing arrangements contemplated by this Indenture and that
its guarantee and waivers pursuant to its Guarantee are knowingly made in
contemplation of such benefits.
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SECTION 1.97 FUTURE GUARANTORS.
Each future Restricted Subsidiary shall become a Guarantor. Within ten
(10) days of becoming a Restricted Subsidiary, (a) such Subsidiary shall execute
and deliver to the Trustee a supplemental indenture making such Subsidiary a
party to this Indenture and (b) if any of the Capital Stock of such Guarantor is
directly owned by AirGate, AirGate shall pledge all of the Capital Stock of such
Guarantor owned by AirGate pursuant to the terms of the Pledge Agreement.
ARTICLE XI
SUBORDINATION
SECTION 1.98 AGREEMENT TO SUBORDINATE.
AirGate and each Guarantor agree, and each Holder by accepting a Note
agrees, that the Indebtedness evidenced by each Note and each Guarantee is
subordinated in right of payment, to the extent and in the manner provided
herein, to the prior payment in full of all Senior Debt (whether outstanding on
the date hereof or hereafter created, incurred, assumed or guaranteed), and that
the subordination is for the benefit of the holders of Senior Debt.
SECTION 1.99 LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon (a) any distribution to creditors of AirGate or any Guarantor in a
liquidation or dissolution of AirGate or any Guarantor or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to
either AirGate or its property or any Guarantor or its property or (b) an
assignment for the benefit of creditors or any marshalling of AirGate's or any
Guarantor's assets and liabilities:
(1) the holders of Senior Debt shall be entitled to
receive payment in full of all Obligations due in respect of such
Senior Debt (including interest after the commencement of any
such proceeding, whether or not allowed, at the rate specified in
the applicable Senior Debt) before Holders shall be entitled to
receive any payment on account of any Obligations on the Notes
(except that Holders may receive and retain Permitted Junior
Securities and payments made from the trust described in Section
8.4 hereof); and
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(2) until all Obligations with respect to Senior Debt
(as provided in clause (i) above) are paid in full, any
distribution to which Holders would be entitled but for this
Article XI shall be made to holders of Senior Debt (except that
Holders may receive and retain Permitted Junior Securities and
payments made from the trust described in Section 8.4 hereof), as
their interests may appear to the extent necessary to make
payment in full on all Obligations with respect to Senior Debt
remaining unpaid, after giving effect to all concurrent payments
or distributions to the holders of Senior Debt.
The consolidation of AirGate or any Guarantor with, or the merger of
AirGate or any Guarantor into, another Person or the liquidation or dissolution
of AirGate or any Guarantor following the conveyance, transfer or lease of its
properties and assets substantially as an entirety to another Person upon the
terms and conditions set forth in Article V shall not be deemed a dissolution,
winding up, liquidation, reorganization, assignment for the benefit of creditors
or marshaling of assets and liabilities of AirGate or such Guarantor for the
purposes of this Section if the Person formed by such consolidation or into
which AirGate or such Guarantor is merged or the Person which acquires by
conveyance, transfer or lease such properties and assets substantially as an
entirety, as the case may be, shall, as a part of such consolidation, merger,
conveyance, transfer or lease, comply with the conditions set forth in Article V
and, in the case of AirGate, such other Person shall assume AirGate's
obligations hereunder in accordance with Article V hereof.
SECTION 1.100 DEFAULT ON DESIGNATED SENIOR DEBT.
Neither AirGate nor any Guarantor shall (1) make any payment or
distribution to the Trustee or any Holder upon or in respect of Obligations with
respect to the Notes or (2) acquire from the Trustee or any Holder any Notes for
cash or property (in each case other than payments in Permitted Junior
Securities and payments made from the trust previously established as described
in Section 8.4 hereof) if:
(1) a default in the payment of any principal, premium, if
any, interest or other amount with respect to any Designated Senior Debt occurs
and is continuing beyond any applicable grace period in the agreement, indenture
or other document governing such Designated Senior Debt (whether upon maturity,
as a result of acceleration or otherwise); or
(2) any other default occurs and is continuing with respect
to any Designated Senior Debt that permits holders of such Designated Senior
Debt to accelerate its maturity, and AirGate and the Trustee receive written
notice of such default (a "Payment Blockage Notice") from a majority of the
holders, or from the trustee, agent or other
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representative (the "Representative") of the holders, of any such Designated
Senior Debt. If the Trustee receives any such notice, a subsequent notice
received within 360 days thereafter shall not be effective for purposes of this
Section. 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 cured or waived for a period of not less than 90 days.
Notwithstanding anything herein to the contrary, AirGate and the
Guarantors may and shall resume payments on and distributions in respect of the
Obligations on the Notes upon the earlier of:
(1) in the case of a default referred to in clause (a)
of this Section 11.3, the date upon which the default is cured or
waived or ceases to exist, or
(2) in the case of a default referred to in clause (b)
of this Section 11.3, 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.
SECTION 1.101 PAYMENT PERMITTED IF NO DEFAULT.
Nothing contained in this Article XI or elsewhere in this Indenture, in
any of the Notes or in any Guarantee shall prevent AirGate or any Guarantors, as
applicable, at any time except during the pendency of any case, proceedings,
dissolution, liquidation or other winding up, assignment for the benefit of
creditors or other marshaling of assets and liabilities of AirGate or any
Guarantor referred to in Section 11.2 or under the conditions described in
Section 11.3, from making payments at any time of principal of and premium or
interest on the Notes or under a Guarantee, as applicable.
SECTION 1.102 NOTICE OF ACCELERATION OF SECURITIES.
If payment of the Notes is accelerated because of an Event of Default,
AirGate shall promptly notify holders of Senior Debt of such acceleration.
SECTION 1.103 WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that any Holder receives any payments of any Obligations
with respect to the Notes at a time when such payment is prohibited by Section
11.3 hereof, such payment shall be held by such Holder in trust for the benefit
of, and, upon written request of the Representative
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of the holders of Senior Debt, shall be paid forthwith over and delivered to,
the holders of Senior Debt of AirGate or any Guarantor under any indenture or
other agreement (if any) pursuant to which such Senior Debt may have been
issued, as their interest may appear, for application to the payment of all
Obligations with respect to Senior Debt remaining unpaid to the extent necessary
to pay such Obligations in full in accordance with their terms, after giving
effect to any concurrent payment or distribution to or for the holders of Senior
Debt.
If a distribution is made to any Holder that because of this Article XI
should not have been made to it, such Holder who receives the distribution shall
hold it in trust for the benefit of, and upon written request of the
Representative of the holders of Senior Debt pay it over to, the holders of
Senior Debt under any indenture or other agreement (if any) pursuant to which
such Senior Debt may have been issued, as their interest may appear, for
application to the payment of all Obligations with respect to Senior Debt
remaining unpaid to the extent necessary to pay such Obligations in full in
accordance with their terms, after giving effect to any concurrent payment or
distribution to or for the holders of Senior Debt.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform only such obligations on the part of the Trustee as are specifically set
forth in this Article XI, and no implied covenants or obligations with respect
to the holders of Senior Debt shall be read into this Indenture against the
Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt, and shall not be liable to any such holders if the
Trustee shall pay over or distribute to or on behalf of Holders or AirGate or
any other person money or assets to which any holders of Senior Debt shall be
entitled by virtue of this Article XI except if such payment is made as a result
of the willful misconduct or gross negligence of the Trustee.
SECTION 1.104 NOTICE BY AIRGATE.
AirGate shall promptly notify the Trustee and the Paying Agent of any
facts known to AirGate that would cause a payment of any Obligations with
respect to the Notes to violate this Article XI, but failure to give such notice
shall not affect the subordination of the Notes to Senior Debt as provided in
this Article XI.
SECTION 1.105 SUBROGATION.
After all Senior Debt is paid in full and until the Notes are paid in
full, Holders shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of Senior Debt
to receive payments or distributions applicable to Senior Debt to the extent
that payments or distributions otherwise payable to the Holders have been
applied to the payment of Senior Debt. For the purposes of such subrogation, no
such payments or distributions to the holders of the Senior Debt by or on behalf
of AirGate to which the Holders or the Trustee would otherwise be entitled
except for the provisions of this Article XI, and no
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payments pursuant to the provisions of this Article XI to the holders of Senior
Debt by the Holders or the Trustee, or by or on behalf of the Holders by virtue
of this Article XI which otherwise would have been made to the Holders shall, as
between AirGate and the Holders of the Notes, be deemed to be a payment by
AirGate to or on account of the Senior Debt, it being understood that the
provisions of this Article XI are and are intended solely for the purpose of
defining the relative rights of the Holders on the one hand, and the holders of
the Senior Debt, on the other hand.
SECTION 1.106 RELATIVE RIGHTS.
This Article XI defines the relative rights of Holders and holders of
Senior Debt. Nothing in this Indenture shall:
(1) impair, as between AirGate and the Guarantors and
Holders, the obligation of AirGate or any Guarantor, which are absolute and
unconditional, to pay principal of and interest on the Notes and any other
amounts due under the Indenture or the Notes in accordance with their terms;
(2) affect the relative rights of Holders and creditors of
AirGate or any Guarantor other than their rights in relation to holders of
Senior Debt; or
(3) prevent the Trustee or any Holder from exercising its
available remedies upon a Default or Event of Default, subject to the rights of
holders and owners of Senior Debt to receive distributions and payments
otherwise payable to Holders pursuant to this Article XI.
If AirGate fails because of this Article XI to pay principal of or
interest on a Note on the due date, such failure shall still constitute a
Default or Event of Default.
SECTION 1.107 SUBORDINATION MAY NOT BE IMPAIRED BY AIRGATE.
No right of any holder of Senior Debt to enforce the subordination of the
Indebtedness evidenced by the Notes shall be impaired by any act or failure to
act by AirGate or any Holder or by the failure of AirGate, the Trustee or any
Holder to comply with this Indenture.
SECTION 1.108 DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Debt, the distribution may be made and the notice given to their
Representative.
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Upon any payment or distribution of assets of either AirGate or any
Guarantor referred to in this Article XI, the Trustee and the Holders shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction or upon any certificate of such Representative of the Senior Debt
or of the liquidating trustee or agent or other person making any distribution
to the Trustee or to the Holders for the purpose of ascertaining the persons
entitled to participate in such distribution, the holders of the Senior Debt and
other Indebtedness of AirGate, the amount thereof or payable thereon, the amount
or amounts paid or distributed thereon and all other facts pertinent thereto or
to this Article XI.
SECTION 1.109 RIGHTS OF TRUSTEE AND PAYING AGENT.
AirGate shall give prompt written notice to the Trustee of any fact known
to AirGate which would prohibit the making of any payment to or by the Trustee
in respect of the Notes pursuant to the provisions of this Article XI.
Regardless of anything to the contrary contained in this Article XI or elsewhere
in this Indenture, the Trustee shall not be charged with knowledge of the
existence of any default or event of default with respect to any Senior Debt or
of any other facts which would prohibit the making of any payment to or by the
Trustee unless and until a Responsible Officer of the Trustee shall have
received notice in writing from AirGate, or from a holder of Senior Debt or a
Representative therefor, together with proof satisfactory to the Trustee of such
holding of Senior Debt or of the authority of such Representative, and, prior to
the receipt of any such written notice, the Trustee shall be entitled to assume
(in the absence of actual knowledge to the contrary) that no such facts exist.
In the event that the Trustee determines in good faith that any evidence
is required with respect to the right of any Person as a holder of Senior Debt
to participate in any payment or distribution pursuant to this Article XI, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amounts of Senior Debt held by such
Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article XI and if such evidence is not furnished the Trustee
may defer any payment to such Person pending judicial determination as to the
right of such Person to receive such payment.
The Trustee in its individual or any ther capacity may hold Senior Debt
with the same rights it would have if it were not Trustee. Any Agent may do the
same with like rights.
SECTION 1.110 AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of Notes by such Holder's acceptance thereof authorizes and
directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article XI, and appoints the Trustee such Holder's attorney-in-fact for any and
all such purposes.
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SECTION 1.111 ARTICLE APPLICABLE TO PAYING AGENTS.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article in addition to or in place of the Trustee.
ARTICLE XII
MISCELLANEOUS
SECTION 1.112 TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts with
the duties imposed by TIA (S) 318(c), the imposed duties shall control.
SECTION 1.113 NOTICES.
Any notice or communication by AirGate, the Guarantors or the Trustee to
the others is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested), telecopier
or overnight air courier guaranteeing next day delivery, to the others address:
If to AirGate:
AirGate PCS, Inc.
Harris Tower
Suite 1700
233 Peachtree Street, N.E.
Atlanta, Georgia 30303
Telecopier No.: (404) 525-7922
Attention: President and Legal Department
With a copy to:
Patton Boggs LLP
2550 M Street, N.W.
Washington, D.C. 20037
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Telecopier No.: (202) 457-6315
Attention: Mary M. Sjoquist, Esq.
If to the Trustee:
Bankers Trust Company
Four Albany Street - 4/th/ Floor
New York, New York 10006
Telecopier No.: (212) 250-6961
Attention: Corporate Trust and Agency Group,
Corporate Market Services
AirGate or the Trustee, by notice to the others may designate additional
or different addresses for subsequent notices or communications.
All notices and communications (other than those sent to Holders) shall
be deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when receipt acknowledged, if telecopied; and the next
Business Day after timely delivery to the courier, if sent by overnight air
courier promising next Business Day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail or by overnight air courier promising next Business Day delivery to its
address shown on the register kept by the Registrar. Any notice or communication
shall also be so mailed to any Person described in TIA ' 313(c), to the extent
required by the TIA. Failure to mail a notice or communication to a Holder or
any defect in it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If AirGate mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
SECTION 1.114 COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA ' 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. AirGate, the Trustee,
the Registrar and anyone else shall have the protection of TIA (S) 312(c).
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SECTION 1.115 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by AirGate to the Trustee to take any
action under this Indenture (other than the initial issuance of the Notes),
AirGate shall furnish to the Trustee upon request:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.5 hereof) stating that, in the opinion of the signers, all conditions
precedent and covenants, if any, provided for in this Indenture relating to the
proposed action have been satisfied; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth in
Section 12.5 hereof) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
SECTION 1.116 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA (S) 314(a)(4)) shall comply with the provisions of TIA (S)
314(e) and shall include:
(1) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he or
she has made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition has
been satisfied; and
(4) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been satisfied.
SECTION 1.117 RULES BY TRUSTEE AND AGENTS.
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<PAGE>
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 1.118 NO PERSONAL LIABILITY OF DIRECTORS,
OFFICERS, EMPLOYEES AND STOCKHOLDERS.
No director, officer, employee, incorporator or stockholder of AirGate,
as such, shall have any liability for any obligations of AirGate or any
Guarantor under the Notes, this Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes.
SECTION 1.119 GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE GUARANTEES, IF ANY.
SECTION 1.120 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of AirGate or its Subsidiaries or of any other Person. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 1.121 SUCCESSORS.
All agreements of AirGate and the Guarantors in this Indenture and the
Notes and the Guarantees, as applicable, shall bind their respective successors
and assigns. All agreements of the Trustee in this Indenture shall bind its
successors and assigns.
SECTION 1.122 SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 1.123 COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
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<PAGE>
SECTION 1.124 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
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<PAGE>
SIGNATURES
----------
Dated as of September 30, 1999 AIRGATE PCS, INC.
By:_________________________________
Name: Thomas M. Dougherty
Title: President and Chief Executive
Officer
AGW LEASING COMPANY, INC.
By:_________________________________
Name: Thomas M. Dougherty
Title: President and Chief Executive
Officer
BANKERS TRUST COMPANY,
as Trustee
By: ________________________________
Name:
Title:
<PAGE>
EXHIBIT A
FORM OF NOTE
<PAGE>
EXHIBIT A
FORM OF NOTE
(Face of Senior Subordinated Discount Note)
13 1/2% Senior Subordinated Discount Notes due 2009
[Unless and until it is exchanged in whole or in part for Senior
Subordinated Discount Notes in definitive form, this Senior Subordinated
Discount Note may not be transferred except as a whole by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the Depositary or
another nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary. Unless this
certificate is presented by an authorized representative of The Depository Trust
Company (55 Water Street, New York, New York) ("DTC"), to the issuer or its
agent for registration of transfer, exchange or payment, and any certificate
issued is registered in the name of Cede & Co. or such other name as may be
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or such other entity as may be requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL in as much as the registered owner
hereof, Cede & Co., has an interest herein.]/1/
[THE SENIOR SUBORDINATED DISCOUNT NOTES EVIDENCED BY THIS CERTIFICATE
ARE INITIALLY ISSUED AS PART OF AN ISSUANCE OF UNITS (THE "UNITS"), EACH OF
WHICH CONSISTS OF $1,000 PRINCIPAL AMOUNT AT MATURITY OF THE 13 1/2% SENOR
SUBORDINATED DISCOUNT NOTES DUE 2009 OF AIRGATE PCS, INC. (THE "SENIOR
SUBORDINATED DISCOUNT NOTES") AND ONE WARRANT (A "WARRANT" AND, COLLECTIVELY,
THE "WARRANTS") INITIALLY ENTITLING THE HOLDER THEREOF TO PURCHASE 2.148 SHARES,
PAR VALUE $0.01 PER SHARE, OF AIRGATE PCS, INC. AT AN EXERCISE PRICE OF $.01 PER
SHARE]/2/
[PRIOR TO THE EARLIEST TO OCCUR OF (I) 180 DAYS AFTER THE CLOSING OF
THE OFFERING OF THE UNITS, (II) THE OCCURRENCE OF A CHANGE OF CONTROL OR AN
EVENT OF DEFAULT (AS DEFINED IN THE INDENTURE GOVERNING THE SENIOR SUBORDINATED
DISCOUNT NOTES) AND (III) SUCH DATE AS DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION IN ITS SOLE DISCRETION SHALL DETERMINE, THE SENIOR SUBORDINATED
DISCOUNT
_____________________
/1/ This paragraph should be included only if the Senior Subordinated Discount
Note is issued in global form.
/2/ This paragraph should be included only if the Senior Subordinated Discount
Note is issued prior to the Separation Date.
<PAGE>
NOTES EVIDENCED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED
SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH THE
WARRANTS (THE EARLIEST OF (I) - (III) TO OCCUR, THE "SEPARATION DATE").]/2/
No. ___ $_____________
CUSIP NO. 009367AA1
AIRGATE PCS, INC.
promises to pay to ___________________ or registered assigns, the principal sum
of ____________ Dollars on ______, 2009.
Interest Payment Dates: April 1 and October 1, beginning April 1, 2005
Record Dates: March 15 and September 15
AIRGATE PCS, INC.
By: __________________________
Name:
Title:
This is one of the
Senior Subordinated Discount Notes referred to in the
within-mentioned Indenture:
Dated: ____________
BANKERS TRUST COMPANY,
as Trustee
By: _______________________________
A-2
<PAGE>
(Back of Senior Subordinated Discount Note)
______% Senior Subordinated Discount Notes due 2009
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1) INTEREST. AirGate PCS, Inc., a Delaware corporation, or its successor
("AirGate"), promises to pay interest on the principal amount of this
Senior Subordinated Discount Note at the rate of _____% per annum. AirGate
will pay interest in United States dollars (except as otherwise provided
herein) semi-annually in arrears on _______ and ______, commencing on
_______, 2005, or if any such day is not a Business Day, on the next
succeeding Business Day (each an "Interest Payment Date"). Interest on the
Senior Subordinated Discount Notes shall accrue from the most recent date
to which interest has been paid or, if no interest has been paid, from
October 1, 2004; provided that if there is no existing Default or Event of
Default in the payment of interest, and if this Senior Subordinated
Discount Note is authenticated between a record date referred to on the
face hereof and the next succeeding Interest Payment Date (but after
October 1, 2004), interest shall accrue from such next succeeding Interest
Payment Date, except in the case of the original issuance of Senior
Subordinated Discount Notes, in which case interest shall accrue from the
date of authentication. AirGate shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue principal
at the rate equal to 1% per annum in excess of the then applicable interest
rate on the Senior Subordinated Discount Notes to the extent lawful; it
shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue installments of interest (without
regard to any applicable grace period) at the same rate to the extent
lawful. Interest shall be computed on the basis of a 360-day year comprised
of twelve 30-day months.
2) METHOD OF PAYMENT. AirGate will pay interest on the Senior Subordinated
Discount Notes (except defaulted interest) on the applicable Interest
Payment Date to the Persons who are registered Holders of Senior
Subordinated Discount Notes at the close of business on the March 15 or
September 15 next preceding the Interest Payment Date, even if such Senior
Subordinated Discount Notes are cancelled after such record date and on or
before such Interest Payment Date, except as provided in Section 2.12 of
the Indenture with respect to defaulted interest. The Senior Subordinated
Discount Notes shall be payable as to principal, premium and interest at
the office or agency of AirGate maintained for such purpose within or
without the City and State of New York, or, at the option of AirGate,
payment of interest may be made by check mailed to the Holders at their
addresses set forth in the register of Holders; provided that payment by
wire transfer of immediately available funds shall be required with respect
to principal of, premium, if
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<PAGE>
any, and interest on, all Global Notes and all other Senior Subordinated
Discount Notes the Holders of which shall have provided written wire
transfer instructions to AirGate and the Paying Agent. Such payment shall
be in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts.
3) PAYING AGENT AND REGISTRAR. Initially, Bankers Trust Company, the Trustee
under the Indenture, shall act as Paying Agent and Registrar. AirGate may
change any Paying Agent or Registrar without notice to any Holder. AirGate
or any of its Subsidiaries may act in any such capacity.
4) INDENTURE. AirGate issued the Senior Subordinated Discount Notes under an
Indenture dated as of September 30, 1999 ("Indenture") among AirGate, AGW
Leasing Company, Inc. and the Trustee. The terms of the Senior Subordinated
Discount Notes include those stated in the Indenture and those made a part
of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code (S)(S) 77aaa-77bbbb) (the "TIA"). The Senior
Subordinated Discount Notes are subject to all such terms, and Holders are
referred to the Indenture and such Act for a statement of such terms. The
Senior Subordinated Discount Notes are general unsecured Obligations of
AirGate limited to $300,000,000 in aggregate principal amount, plus
amounts, if any, sufficient to pay premium and interest on outstanding
Senior Subordinated Discount Notes as set forth in Paragraph 2 hereof.
5) OPTIONAL REDEMPTION. Except as set forth in the next paragraph, the Senior
Subordinated Discount Notes shall not be redeemable at AirGate's option
prior to October 1, 2004. Thereafter, the Senior Subordinated Discount
Notes shall be subject to redemption at the option of AirGate, in whole or
in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth
below together with accrued and unpaid interest thereon to the applicable
redemption date, if redeemed during the twelve-month period beginning on
October 1 of the years indicated below:
Year Percentage
2004..............................106.750%
2005..............................104.500%
2006..............................102.250%
2007 and thereafter...............100.000%
Notwithstanding the foregoing, during the first 36 months after the
Issue Date AirGate may on one or more occasions redeem up to 35% of the
Accreted Value of the Senior Subordinated Discount Notes, in whole but not
in part, at the option of AirGate at a redemption price of 113.500% of the
Accreted Value thereof, with the net cash pro-
A-4
<PAGE>
ceeds of one or more Equity Offerings; provided that such redemption shall
occur within 60 days of the date of the closing of such Equity Offering.
6) MANDATORY REDEMPTION. Except as set forth in paragraph 7 below, AirGate
shall not be required to make mandatory redemption or sinking fund payments
with respect to the Senior Subordinated Discount Notes.
7) REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder will have
the right to require AirGate to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Senior Subordinated
Discount Notes pursuant to the offer described below (the "Change of
Control Offer") at an offer price in cash equal to 101% of the Accreted
Value thereof on the date of purchase (if such date of purchase is prior to
October 1, 2004) or 101% of the aggregate principal amount thereof plus
accrued and unpaid interest thereon to the date of purchase (if such date
of purchase is on or after October 1, 2004). Within thirty days following
any Change of Control, AirGate will mail a notice to each Holder describing
the transaction or transactions that constitute the Change of Control
setting forth the procedures governing the Change of Control Offer
required by the Indenture.
(b) When the aggregate amount of Excess Proceeds exceeds $10.0
million, AirGate will be required to make an offer to all Holders and to
holders of such other Indebtedness that is pari passu with the Senior
Subordinated Discount Notes (an "Asset Sale Offer") to purchase the maximum
principal amount of Senior Subordinated Discount Notes and such other
Indebtedness that is pari passu with the Senior Subordinated Discount Notes
that may be purchased out of the Excess Proceeds, at an offer price in cash
in an amount equal to 100% of the Accreted Value thereof on the date of
purchase (if such date of purchase is prior to October 1, 2004) or 100% of
the principal amount thereof plus accrued and unpaid interest to the date
of purchase (if such date of purchase is on or after October 1, 2004), in
each case in accordance with the procedures set forth in the Indenture or
such other governing document in the case of Indebtedness pari passu with
the Senior Subordinated Discount Notes. To the extent that the aggregate
amount of Senior Subordinated Discount Notes and such other Indebtedness
that is pari passu with the Senior Subordinated Discount Notes tendered
pursuant to an Asset Sale Offer is less than the Excess Proceeds, AirGate
may use any remaining Excess Proceeds for any purpose not otherwise
prohibited by the Indenture. If the aggregate principal amount of Senior
Subordinated Discount Notes and such other Indebtedness that is pari passu
with the Senior Subordinated Discount Notes surrendered by holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Senior
Subordinated Discount Notes and such other Indebtedness that is pari passu
with the Senior Subordinated
A-5
<PAGE>
Discount Notes to be purchased on a pro rata basis. Upon completion of such
offer to purchase, the amount of Excess Proceeds shall be reset at zero.
(c) Holders of the Senior Subordinated Discount Notes that are the
subject of an offer to purchase will receive a Change of Control Offer or
Asset Sale Offer from AirGate prior to any related purchase date and may
elect to have such Senior Subordinated Discount Notes purchased by
completing the form titled "Option of Holder to Elect Purchase" appearing
below.
8) NOTICE OF REDEMPTION. Notice of redemption shall be mailed at least 30 days
but not more than 60 days before the redemption date to each Holder whose
Senior Subordinated Discount Notes are to be redeemed at its registered
address. Senior Subordinated Discount Notes in denominations larger than
$1,000 may be redeemed in part but only in whole multiples of $1,000,
unless all of the Senior Subordinated Discount Notes held by a Holder are
to be redeemed. On and after the redemption date, interest ceases to accrue
on the Senior Subordinated Discount Notes or portions thereof called for
redemption.
9) DENOMINATIONS, TRANSFER, EXCHANGE. The Senior Subordinated Discount Notes
are in registered form without coupons in initial denominations of $1,000
and integral multiples of $1,000. The transfer of the Senior Subordinated
Discount Notes may be registered and the Senior Subordinated Discount Notes
may be exchanged as provided in the Indenture. The Registrar and the
Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and AirGate may require a Holder to pay
any taxes and fees required by law or permitted by the Indenture. AirGate
need not exchange or register the transfer of any Senior Subordinated
Discount Note or portion of a Senior Subordinated Discount Note selected
for redemption, except for the unredeemed portion of any Senior Discount
Subordinated Note being redeemed in part. Also, it need not exchange or
register the transfer of any Senior Subordinated Discount Notes for a
period of 15 days before a selection of Senior Subordinated Discount Notes
to be redeemed or during the period between a record date and the
corresponding Interest Payment Date.
10) PERSONS DEEMED OWNERS. The registered holder of a Senior Subordinated
Discount Note may be treated as its owner for all purposes.
11) AMENDMENT, SUPPLEMENT AND WAIVER. Subject to the following paragraphs, the
Indenture and 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 before October 1, 2004 or in aggregate principal amount of
the then outstanding Senior Subordinated Discount Notes if after October 1,
2004 (including, without limitation, consents obtained in
A-6
<PAGE>
connection with a purchase of or, tender offer or exchange offer for Senior
Subordinated Discount Notes), and any existing Default or Event of 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 if before October 1, 2004 or in aggregate
principal amount of the then outstanding Senior Subordinated Discount Notes
if after October 1, 2004 (including consents obtained in connection with a
tender offer or exchange offer for Senior Subordinated Discount Notes).
Without the consent of any Holder, AirGate and the Trustee may amend
or supplement the Indenture or the Senior Subordinated Discount Notes to
cure any ambiguity, defect or inconsistency, to provide for uncertificated
Senior Subordinated Discount Notes in addition to or in place of
certificated Senior Subordinated Discount Notes, to provide for the
assumption of AirGate's or a Guarantor's obligations to Holders in the case
of a merger or consolidation or a sale of all or substantially all of
AirGate's assets, to make any change that would provide any additional
rights or benefits to the Holders or that does not adversely affect the
legal rights under the Indenture of any such Holder, to comply with the
requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the TIA or to allow any Subsidiary to
guarantee the Senior Subordinated Discount Notes.
Without the consent of each Holder adversely affected, an amendment or
waiver to the Indenture or the Senior Subordinated Discount Notes may not,
with respect to any Senior Subordinated Discount Notes held by a non-
consenting Holder, (i) reduce the principal amount of Senior Subordinated
Discount Notes whose Holders must consent to an amendment, supplement or
waiver, (ii) 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, except for
provisions relating to Sections 4.10 and 4.14 of the Indenture, (iii)
reduce the rate of or change the time for payment of interest on any Senior
Subordinated Discount Note, (iv) 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
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, (v)
make any Senior Subordinated Discount Note payable in money other than that
stated in the Senior Subordinated Discount Notes, (vi) make any change in
the provisions of the Indenture relating to waivers of past Defaults or the
rights of Holders to receive payments of principal of or premium, if any,
or interest on the Senior Subordinated Discount Notes, (vii) waive a
redemption payment with respect to any Senior Subordinated Discount Note,
other than a payment required by Sections
A-7
<PAGE>
4.10 and 4.14 of the Indenture, and (viii) make any change in the preceding
amendment and waiver provisions.
Without the consent of at least 75% in aggregate principal amount of
Senior Subordinated Discount Notes then outstanding, AirGate and the
Trustee may not make 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.
12) DEFAULTS AND REMEDIES. Events of Default include: (i) 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; (ii) 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; (iii) failure
by AirGate or any Restricted Subsidiary to comply with the provisions
described in Sections 4.10 and 4.14 of the Indenture; (iv) failure by
AirGate or any Restricted Subsidiary for 60 days after notice to comply
with any of the other provisions of the Indenture; (v) 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, which default (A)(1) is caused by a failure to pay any
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 (2) results in the
acceleration of such Indebtedness prior to its express maturity and (B) 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; (vi) 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; (vii) certain events of bankruptcy or insolvency with
respect to AirGate or any of its Restricted Subsidiaries; (viii) a breach
by AirGate of a 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; (ix) 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; and (x) any event occurs
that causes, subject to any applicable grace period, an Event of
Termination under any of the Sprint Agreements.
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<PAGE>
If any 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. Notwithstanding the
foregoing, in the case of an Event of Default arising from certain events
of bankruptcy or insolvency, with respect to AirGate or 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. Holders 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 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.
13) TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for
AirGate, the Guarantors or their respective Affiliates, and may otherwise
deal with AirGate, the Guarantors or their respective Affiliates, as if it
were not the Trustee.
14) NO RECOURSE AGAINST OTHERS. No director, officer, employee, incorporator or
stockholder, of AirGate or any Subsidiary Guarantor, as such, shall have
any liability for any obligations of AirGate or any Subsidiary Guarantor
under the Senior Subordinated Discount Notes or the Indenture or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each Holder by accepting a Senior Subordinated Discount Note
waives and releases all such liability. The waiver and release are part of
the consideration for the issuance of the Senior Subordinated Discount
Notes.
15) AUTHENTICATION. This Senior Subordinated Discount Note shall not be valid
until authenticated by the manual signature of the Trustee or an
authenticating agent.
16) ABBREVIATIONS. Customary abbreviations may be used in the name of a Holder
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants
by the entireties), JT TEN (= joint tenants with right of survivorship and
not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
17) CUSIP NUMBERS. Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, AirGate has caused CUSIP
numbers to be printed on the Senior Subordinated Discount Notes and the
Trustee may use CUSIP numbers in notices of redemption as a convenience to
the Holders. No representation is
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<PAGE>
made as to the accuracy of such numbers either as printed on the Senior
Subordinated Discount Notes or as contained in any notice of redemption and
reliance may be placed only on the other identification numbers placed
thereon.
AirGate shall furnish to any Holder upon written request and without
charge a copy of the Indenture. Requests may be made to:
AirGate PCS, Inc.
Harris Tower
Suite 1700
233 Peachtree Street, N.E.
Atlanta, Georgia 30303
Telecopy: (404) 525-7922
Attention: President and Legal Department
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<PAGE>
ASSIGNMENT FORM
To assign this Senior Subordinated Discount Note, fill in the form
below: (I) or (we) assign and transfer this Senior Subordinated Discount Note to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Senior Subordinated Discount Note on the books of AirGate. The
agent may substitute another to act for him.
________________________________________________________________________________
Date: ___________________
Your Signature: ____________________________
(Sign exactly as your name
appears on the face of this
Senior Subordinated
Discount Note)
Signature guarantee:
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<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Senior Subordinated Discount Note
purchased by AirGate pursuant to Section 4.10 or 4.14 of the Indenture, check
the box below:
[_] Section 4.10 [_] Section 4.14
If you want to elect to have only part of the Senior Subordinated
Discount Note purchased by AirGate pursuant to Section 4.10 or Section 4.14 of
the Indenture, state the amount you elect to have purchased: $_____________
Date: ___________________ Your Signature:___________________________
(Sign exactly as your name
appears on the Senior
Subordinated Discount Note)
Tax Identification No.: __________________
Signature guarantee:
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<PAGE>
SCHEDULE OF EXCHANGES OF SENIOR SUBORDINATED DISCOUNT NOTES(1)
The following exchanges of a part of this Global Note for other Senior
Subordinated Discount Notes have been made:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Principal Amount of Signature of authorized
Amount of decrease in Amount of increase in this Global Note officer of Trustee or
Principal Amount of Principal Amount of following such decrease Senior Subordinated
Date of Exchange this Global Note this Global Note (or increase) Discount Note Custodian
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
______________________
(1) This should be included only if the Senior Subordinated Discount Note is
issued in global form.
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<PAGE>
EXHIBIT B
FORM OF GUARANTEE
<PAGE>
EXHIBIT B
FORM OF GUARANTEE
The Guarantor listed below (hereinafter referred to as the
"Guarantor," which term includes any successors or assigns under that certain
Indenture, dated as of September 30, 1999, by and among AirGate PCS, Inc., a
Delaware corporation ("AirGate), AGW Leasing Company, Inc., a Delaware
corporation, and the Trustee (as amended and supplemented from time to time, the
"Indenture"), has guaranteed the Notes and the obligations of AirGate under the
Indenture, which include (i) the due and punctual payment of the principal of,
premium, if any, and interest on the ____% Senior Subordinated Discount Notes
due 2009 (the "Notes") of AirGate, whether at stated maturity, by acceleration
or otherwise, the due and punctual payment of interest on the overdue principal
and premium, if any, and (to the extent permitted by law) interest on any
interest, if any, on the Notes, and the due and punctual performance of all
other obligations of AirGate to the Holders or the Trustee all in accordance
with the terms set forth in Article X of the Indenture, (ii) in case of any
extension of time of payment or renewal of any Notes or any such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise, and (iii) the payment of any and all
costs and expenses (including reasonable attorneys' fees) incurred by the
Trustee or any Holder in enforcing any rights under this Guarantee or the
Indenture.
The obligations of the Guarantor to the Holders and to the Trustee
pursuant to this Guarantee and the Indenture are expressly set forth in Article
X of the Indenture and reference is hereby made to such Indenture for the
precise terms of this Guarantee.
No stockholder, employee, officer, director or incorporator, as such,
past, present or future of the Guarantor shall have any liability under this
Guarantee by reason of his or its status as such stockholder, employee, officer,
director or incorporator.
This is a continuing Guarantee and shall remain in full force and
effect and shall be binding upon the Guarantor and its successors and assigns
until full and final payment of all of AirGate's obligations under the Notes and
Indenture or until released in accordance with the Indenture and shall inure to
the benefit of the successors and assigns of the Trustee and the Holders, and,
in the event of any transfer or assignment of rights by any Holder or the
Trustee, the rights and privileges herein conferred upon that party shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions hereof. This is a Guarantee of payment and
not of collectibility.
This Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication on the Note upon which this Guarantee is noted
shall have
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been executed by the Trustee under the Indenture by the manual signature of one
of its authorized officers.
The Obligations of each Guarantor under its Guarantee shall be limited
to the extent necessary to insure that it does not constitute a fraudulent
conveyance under applicable law.
THE TERMS OF ARTICLE X OF THE INDENTURE ARE INCORPORATED HEREIN BY
REFERENCE.
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
Dated as of ____________________________ [NAME OF GUARANTOR]
By:_____________________
Name:
Title:
(SEAL)
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EXHIBIT C
FORM OF PLEDGE AGREEMENT
[Document No. 197989]
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EXHIBIT C
FORM OF PLEDGE AGREEMENT
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PLEDGE AGREEMENT
by and between
AIRGATE PCS, INC.
and
BANKERS TRUST COMPANY,
as Trustee
Dated as of September ___, 1999
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TABLE OF CONTENTS
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Page
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ARTICLE I DEFINED TERMS................................................................... 1
Section 1.1 Definitions.............................................................. 1
Section 1.2 Other Definitional Provisions............................................ 5
ARTICLE II GRANT OF SECURITY INTEREST...................................................... 5
ARTICLE III REPRESENTATIONS AND WARRANTIES.................................................. 6
Section 3.1 Existence, Good Standing, Power and Authority and Authorization.......... 6
Section 3.2 Enforceability........................................................... 6
Section 3.3 No Conflict.............................................................. 6
Section 3.4 No Consents.............................................................. 7
Section 3.5 Title, No Other Liens.................................................... 7
Section 3.6 Perfected First Priority Liens........................................... 7
Section 3.7 Chief Executive Office................................................... 7
Section 3.8 Pledged Securities....................................................... 7
Section 3.9 Partnership and Limited Liability Company Interests...................... 8
ARTICLE IV COVENANTS....................................................................... 8
Section 4.1 Maintenance of Perfected Security Interest; Further Assurances........... 8
Section 4.2 Changes in Locations, Name, etc.......................................... 10
Section 4.3 Notices.................................................................. 10
Section 4.4 Pledged Securities; Distributions, Transfers, etc........................ 10
Section 4.5 Agreement Not to Issue Uncertificated Securities........................ 12
Section 4.6 Partnership and Limited Liability Company Interests...................... 12
Section 4.7 Amendment of Organizational Documents and By-Laws........................ 12
ARTICLE V REMEDIAL PROVISIONS............................................................. 13
Section 5.1 Pledged Securities....................................................... 13
Section 5.2 Proceeds to be Turned Over To Trustee.................................... 14
Section 5.3 Application of Proceeds.................................................. 14
</TABLE>
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<TABLE>
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Section 5.4 Code and Other Remedies.................................................. 14
Section 5.5 Waiver; Deficiency....................................................... 16
ARTICLE VI THE TRUSTEE..................................................................... 16
Section 6.1 Trustee's Appointment as Attorney-in-Fact, etc.......................... 16
Section 6.2 Duty of Trustee......................................................... 17
Section 6.3 Execution of Financing Statements....................................... 18
Section 6.4 Authority of Trustee.................................................... 18
ARTICLE VII MISCELLANEOUS.................................................................. 18
Section 7.1 Amendments in Writing................................................... 18
Section 7.2 Notices................................................................. 18
Section 7.3 No Waiver by Course of Conduct, Cumulative Remedies..................... 19
Section 7.4 Enforcement Expenses, Indemnification................................... 19
Section 7.5 Reinstatement........................................................... 20
Section 7.6 Successors and Assigns.................................................. 20
Section 7.7 Intercreditor Agreement................................................. 20
Section 7.8 Counterparts............................................................ 20
Section 7.9 Severability............................................................ 21
Section 7.10 Section Headings........................................................ 21
Section 7.11 Integration............................................................. 21
Section 7.12 GOVERNING LAW........................................................... 21
Section 7.13 Submission To Jurisdiction; Waivers..................................... 21
Section 7.14 Acknowledgments......................................................... 22
Section 7.15 WAIVER OF JURY TRIAL.................................................... 22
Section 7.16 Releases................................................................ 22
</TABLE>
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PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of September ___, 1999, by and between
AIRGATE PCS, INC., a Delaware corporation (the "Grantor"), and BANKERS TRUST
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COMPANY, as Trustee (in such capacity, the "Trustee") under that certain
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Indenture, dated as of September ___, 1999 (as amended, supplemented or
otherwise modified from time to time, the "Indenture"), by and among Grantor,
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AGW Leasing Company, Inc. and the Trustee.
WITNESSETH:
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WHEREAS, pursuant to the Indenture, Grantor has agreed to pledge the
equity interests owned by Grantor in certain of Grantor's subsidiaries to secure
Grantor's obligations under the Indenture and certain other obligations as
described below upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and to induce the
Trustee to enter into the Indenture and to induce the Holders to purchase their
respective Notes (as defined below), Grantor hereby agrees with the Trustee, for
the ratable benefit of the Holders, as follows:
ARTICLE I
DEFINED TERMS
Section 1.1 Definitions. (a) Unless otherwise defined herein,
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terms defined in the Indenture and used herein shall have the meanings given to
them in the Indenture.
(1) The following terms shall have the following meanings:
"Agreement": this Pledge Agreement, as the same may be amended,
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supplemented or otherwise modified from time to time.
"Capital Stock": Capital Stock (as defined in the Indenture) and
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any and all warrants, rights or options to purchase any of the foregoing.
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"Collateral": as defined in Section 2.
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"Collateral Account": any collateral account established by the
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Trustee as provided in Section 5.1 or 5.4.
"Issuers": the collective reference to each Subsidiary of
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Grantor in which the Grantor directly owns any Capital Stock and which
Subsidiary is also a Restricted Subsidiary.
"New York UCC": the Uniform Commercial Code as from time to time
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in effect in the State of New York.
"Pledged LLC Interests": in each case, whether now existing or
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hereafter acquired, all of Grantor's right, title and interest in and to:
(a) the equity interests of each Issuer that is a limited
liability company, but not Grantor's obligations from time to time as a
holder of interests in any such Issuer (unless the Trustee or its designee,
on behalf of the Trustee and the Holders, shall elect to become a holder of
equity interests in any such Issuer in connection with its exercise of
remedies pursuant to the terms hereof);
(b) any and all moneys due and to become due to Grantor now or
in the future by way of a distribution made to Grantor in its capacity as a
holder of equity interests in any such Issuer or otherwise in respect of
Grantor's interest as a holder of equity interests in any such Issuer;
(c) any other property of any such Issuer to which Grantor now
or in the future may be entitled in respect of its equity interests in any
such Issuer by way of distribution, return of capital or otherwise;
(d) any other claim or right which Grantor now has or may in the
future acquire in respect of its equity interests in any such Issuer;
(e) all certificates, options or rights of any nature whatsoever
that may be issued or granted by any such Issuer with respect to the equity
interests of such Issuer to Grantor while this Agreement is in effect; and
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(f) to the extent not otherwise included, all Proceeds of any or
all of the foregoing.
"Pledged Partnership Interests": in each case, whether now
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existing or hereafter acquired, all of Grantor's right, title and interest
in and to:
(a) the partnership interests of each Issuer that is a
partnership, but not Grantor's obligations from time to time as a general
or limited partner, as the case may be, in any such Issuer (unless the
Trustee or its designee, on behalf of the Trustee and the Holders, shall
elect to become a general or limited partner, as the case may be, in any
such Issuer in connection with its exercise of remedies pursuant to the
terms hereof);
(b) any and all moneys due and to become due Grantor now or in
the future by way of a distribution made to Grantor in its capacity as a
general partner or limited partner, as the case may be, in any such Issuer
or otherwise in respect of Grantor's interest as a general partner or
limited partner, as the case may be, in any such Issuer;
(c) any other property of any such Issuer to which Grantor now
or in the future may be entitled in respect of its interests as a general
partner or limited partner, as the case may be, in any such Issuer by way
of distribution, return of capital or otherwise;
(d) any other claim or right which Grantor now has or may in the
future acquire in respect of its general or limited partnership interests
in any such Issuer;
(e) the partnership agreement or other organizational documents
of any such Issuer;
(f) all certificates, options or rights of any nature whatsoever
that may be issued or granted by any such Issuer with respect to the
partnership interests of such Issuer to Grantor while this Agreement is in
effect; and
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(g) to the extent not otherwise included, all Proceeds of any or
all of the foregoing.
"Pledged Securities": the collective reference to the Pledged
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Partnership Interests, the Pledged LLC Interests and the Pledged Stock,
together with any Proceeds thereof.
"Pledged Stock": any shares, stock certificates, options or
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rights of any nature whatsoever in respect of the Capital Stock (other than
Pledged LLC Interests and Pledged Partnership Interests) of any Issuer that
may be issued or granted to, or held by, Grantor while this Agreement is in
effect.
"Proceeds": all "proceeds" as such term is defined in Section 9-
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306(l) of the UCC and, in any event, shall include, without limitation, all
dividends or other income from the Pledged Securities, collections thereon
or distributions or payments with respect thereto.
"Restricted Subsidiary": means any Subsidiary of Grantor that is
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not an Unrestricted Subsidiary.
"Secured Obligations": all obligations, liabilities and
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indebtedness of the Grantor or any Restricted Subsidiary, now existing or
hereafter incurred, arising under or in connection with the Indenture, the
Notes, any Guarantee or this Agreement, whether direct or indirect,
absolute or contingent, due or to become due, including, without
limitation, all principal, interest, premiums, penalties, fees,
indemnifications, reimbursements and damages arising under the Indenture,
the Notes, any Guarantee or this Agreement (including, without limitation,
interest accrued at the then applicable rate provided in the Indenture and
the Notes after the maturity of the principal obligations owing thereunder
and interest accruing at the then applicable rate provided in the Indenture
and the Notes after the filing of any petitions in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating
to the Grantor or any Restricted Subsidiary, whether or not a claim for
post-filing or post-petition interest is allowed in such proceeding).
"Securities Act": the Securities Act of 1933, as amended.
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"UCC": the Uniform Commercial Code in effect in the State of New
---
York from time to time.
"Unrestricted Subsidiary": means any Subsidiary of the Grantor
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that is designated by the Board of Directors as an Unrestricted Subsidiary
pursuant to a Board Resolution.
Section 1.2 Other Definitional Provisions. (a) The words "hereof,"
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"herein," "hereto" 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 Schedule references are to this
Agreement unless otherwise specified.
(1) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(2) Where the context requires, terms relating to the Collateral
or any part thereof, when used in relation to Grantor, shall refer to Grantor's
Collateral or the relevant part thereof
ARTICLE II
GRANT OF SECURITY INTEREST
Grantor hereby assigns and transfers to the Trustee, and hereby grants
to the Trustee, for the ratable benefit of the Holders, a security interest in,
all of the following property now owned or at any time hereafter acquired by
Grantor or in which Grantor now has or at any time in the future may acquire any
right, title or interest (collectively the "Collateral"), as collateral security
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for the prompt and complete payment and performance when due (whether at the
stated maturity, by acceleration or otherwise) of the Secured Obligations:
(3) all Pledged Securities; and
(4) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing;
provided that Collateral shall not in any event include any Capital Stock issued
by AGW Leasing Company, Inc.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
To induce the Trustee to enter into the Indenture and to induce the
Holders to purchase their respective Notes, Grantor hereby represents and
warrants to the Trustee and each Holder as of the date hereof and as of the date
of each acquisition of any Pledged Securities by Grantor and the pledge of
such Pledged Securities hereunder that:
Section 1.3 Existence, Good Standing, Power and Authority and
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Authorization. Grantor is duly organized, validly existing and in good standing
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in the jurisdiction of its organization. Grantor has the corporate power and
authority and the legal right to execute and deliver, to perform its obligations
under, and to grant the security interests in the Collateral pursuant to, this
Agreement and has taken all necessary corporate action to authorize its
execution, delivery and performance of, and grant of the security interests in
the Collateral pursuant to, this Agreement.
Section 1.4 Enforceability. This Agreement constitutes a legal,
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valid and binding obligation of the Grantor, enforceable in accordance with its
terms, except in each case as enforceability may be affected by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally and general equitable
principles (whether considered in a proceeding in equity or at law).
Section 1.5 No Conflict. The execution, delivery and performance
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of this Agreement will not violate any provision of any law, rule or regulation
applicable to Grantor or any material agreement, instrument or other contractual
obligation of the Grantor and will not result in the creation or imposition of
any Lien on any of the properties or revenues of the Grantor pursuant to any
such law, rule or regulation or agreement, instrument or other contractual
obligation of the Grantor, except the security interest created by this
Agreement.
Section 1.6 No Consents. No consent or authorization of, filing
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with, or other act by or in respect of, any arbitrator or governmental authority
and no consent of any other Person (including, without limitation, any equity
holder or
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creditor of the Grantor), is required in connection with the execution,
delivery, performance, validity or enforceability of this Agreement.
Section 1.7 Title, No Other Liens. Except for the security interest
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granted to the Trustee for the ratable benefit of the Holders pursuant to this
Agreement and the other Liens permitted to exist on the Collateral by the
Indenture to secure Obligations under the Credit Facilities, Grantor owns each
item of the Collateral free and clear of any and all Liens or claims of others.
No effective financing statement or other public notice with respect to all or
any part of the Collateral is on file or of record in any public office, except
such as have been filed in favor of the Trustee for the ratable benefit of the
Holders pursuant to this Agreement or as have been filed with respect to Liens
permitted by the Indenture to secure Obligations under the Credit Facilities.
Section 1.8 Perfected First Priority Liens. The security interests
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granted pursuant to this Agreement (a) constitute valid perfected security
interests in all of the Collateral in favor of the Trustee, for the ratable
benefit of the Holders, as collateral security for such Grantor's Secured
Obligations, enforceable in accordance with the terms hereof against all
creditors of Grantor and any Persons purporting to purchase any Collateral from
Grantor and (b) are prior to all other Liens on the Collateral except for Liens
permitted by the Indenture to secure Obligations under the Credit Facilities.
Section 1.9 Chief Executive Office. On the date hereof, Grantor's
----------------------
jurisdiction of organization and the location of such Grantor's chief executive
office or sole place of business are specified on Schedule 1.
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Section 1.10 Pledged Securities. (a) The shares of Pledged Stock
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pledged by such Grantor hereunder constitute all the issued and outstanding
shares of all classes of the Capital Stock of each Issuer in which Grantor has
any right, title or interest.
(1) All the shares of the Pledged Stock, Pledged Partnership
Interests and the Pledged LLC Interests pledged by Grantor have been duly and
validly issued and, to the extent applicable, are fully paid and nonassessable.
(2) The Pledged Partnership Interests pledged by Grantor
constitute all the issued and outstanding partnership interests of each Issuer
that is a partnership in which Grantor has any right, title or interest.
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(3) The Pledged LLC Interests pledged by Grantor constitute all
the issued and outstanding equity interests of each Issuer that is a limited
liability company in which Grantor has any right, title or interest.
(4) Grantor is the owner of, and has title to, the Pledged
Securities pledged by it hereunder, free of any and all Liens or options, puts,
calls, warrants or other rights of third Persons in favor of, or claims of, any
other Person, except the security interest created by this Agreement and Liens
permitted by the Indenture to secure Obligations under the Credit Facilities.
Section 1.11 Partnership and Limited Liability Company Interests.
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None of the Pledged Securities of any Issuer which is a partnership or a limited
liability company (i) is dealt in or traded on a securities exchange or in a
securities market, (ii) by its terms expressly provide that it is a security
governed by Article 8 of the Uniform Commercial Code in effect in the State of
New York, the jurisdiction of formation of the Issuer and any other applicable
jurisdiction (collectively, the "Applicable UCC"), (iii) is an investment
company security, (iv) is held in a securities account or (v) constitutes a
"security" or a "financial asset" as such terms are defined in Article 8 of the
Applicable UCC.
ARTICLE IV
COVENANTS
Grantor covenants and agrees with the Trustee and the Holders that,
from and after the date of this Agreement until the Secured Obligations shall
have been paid in full:
Section 1.12 Maintenance of Perfected Security Interest; Further
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Assurances. (a) Grantor shall maintain the security interest created by this
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Agreement as a perfected security interest having at least the priority
described in Section 3.6 and shall defend such security interest against the
claims and demands of all Persons whomsoever except for holders of Liens
permitted by the Indenture to secure Obligations under the Credit Facilities.
(1) Grantor shall notify the Trustee promptly upon acquiring any
rights in any Pledged Securities of any Issuer and Grantor shall forth with (and
without the necessity for any request or demand by the Trustee or any Holder)
pledge and deliver the certificates representing such Pledged Securities, as
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applicable, to the Trustee, in the same manner as described in Section 4.1
hereof, shall promptly thereafter deliver to the Trustee a certificate executed
by an authorized officer of the Grantor describing such Collateral and
certifying that the same has been duly pledged with the Trustee hereunder, shall
deliver any legal opinions reasonably requested by the Trustee with respect to
the validity, perfection and priority of the security interest in such Pledged
Securities and shall immediately take all actions required under this Agreement
with respect to any Capital Stock owned by Grantor which constitutes Collateral.
Grantor will furnish to the Trustee from time to time statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as the Trustee may reasonably request, all in
reasonable detail.
(2) At any time and from time to time, upon the written request
of the Trustee, and at the sole expense of Grantor, Grantor will promptly and
duly execute and deliver, and have recorded, such further instruments and
documents and take such further actions as the Trustee may reasonably request
for the purpose of obtaining or preserving the full benefits of this Agreement
and of the rights and powers herein granted, including, without limitation, the
filing of any financing or continuation statements under the Uniform Commercial
Code (or other similar laws) in effect in any jurisdiction with respect to the
security interests created hereby. If any amount payable to Grantor under or in
connection with any of the Pledged Securities with respect to the equity
interests of Grantor in the Issuer thereof shall be or become evidenced by any
promissory note, other instrument or chattel paper, such note, instrument or
chattel paper in excess of $50,000 individually or $100,000 in the aggregate
shall be promptly upon receipt thereof by Grantor delivered to the Trustee, duly
endorsed in a manner satisfactory to the Trustee, to be held as Pledged
Securities pursuant to this Agreement.
(3) Concurrently with the delivery to the Trustee of each
certificate representing one or more shares of Pledged Securities to the
Trustee, Grantor shall deliver an undated stock power covering such certificate,
duly executed in blank by Grantor.
Section 1.13 Changes in Locations, Name, etc. Grantor will not,
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except upon 20 days' prior written notice to the Trustee and upon delivery to
the Trustee of all additional executed financing statements and other documents
reason ably requested by the Trustee to maintain the validity, perfection and
priority of the security interests provided for herein:
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(1) change the location of its chief executive
office or sole place of business from that referred to in Section 3.7; or
(2) change its name, identity or corporate
structure to such an extent that any financing statement filed by the
Trustee in connection with this Agreement would become misleading.
Section 1.14 Notices. Grantor will advise the Trustee promptly, in
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reasonable detail, of:
(1) any Lien (other than security interests created hereby or
Liens permitted under the Indenture to secure Obligations under the Credit
Facilities) on any of the Collateral; and
(2) the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereby.
Section 1.15 Pledged Securities; Distributions, Transfers, etc. (a)
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If Grantor shall become entitled to receive or shall receive any certificate
(including, without limitation, any certificate representing a stock dividend or
a distribution in connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any reorganization), option
or rights (other than cash dividends permitted to be made under the Indenture)
in respect of the Capital Stock of any Issuer, whether in addition to, in
substitution of, as a conversion of, or in exchange for, any shares of the
Pledged Stock, the Pledged Partnership Interests or the Pledged LLC Interests or
otherwise in respect thereof, Grantor shall accept the same as the agent of the
Trustee and the Holders, hold the same in trust for the Trustee and the Holders
and deliver the same forthwith to the Trustee in the exact form received, duly
indorsed by Grantor to the Trustee, if required, together with an undated stock
power covering such certificate duly executed in blank by Grantor and with, if
the Trustee so requests, signature guaranteed, to be held by the Trustee,
subject to the terms hereof, as additional collateral security for the Secured
Obligations. Any sums paid upon or in respect of the Pledged Securities upon the
partial or total liquidation or dissolution of any Issuer, or in redemption of,
or in exchange for any Pledged Securities, shall be paid over to the Trustee to
be held by it hereunder as additional collateral security for the Obligations,
and in case any distribution of capital shall be made on or in respect of the
Pledged Securities or any property shall
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be distributed upon or with respect to the Pledged Securities, in each case
pursuant to the recapitalization or reclassification of the capital of any
Issuer or pursuant to the reorganization thereof, the property so distributed
shall, unless otherwise subject to a perfected security interest in favor of the
Trustee, be delivered to the Trustee to be held by it hereunder as additional
collateral security for the Secured Obligations. If any sums of money or
property so paid or distributed in respect of the Pledged Securities shall be
received by Grantor, Grantor shall, until such money or property is paid or
delivered to the Trustee, hold such money or property in trust for the Trustee
and the Holders, segregated from other funds of Grantor, as additional
collateral security for the Secured Obligations.
(1) Except as otherwise permitted by the Indenture, such Grantor
will not (i) vote to enable, or take any other action to permit, any Issuer to
issue any stock or other equity securities of any nature or to issue any other
securities convertible into or granting the right to purchase or exchange for
any stock or other equity securities of any nature of any Issuer except the
issuance to Grantor of equity securities which constitute Collateral, (ii) sell,
assign, transfer, exchange, or otherwise dispose of, or grant any option with
respect to, the Pledged Securities or Proceeds thereof (except pursuant to a
transaction expressly permitted by the Indenture), (iii) create, incur or permit
to exist any Lien or option in favor of, or any claim of any Person with respect
to, any of the Pledged Securities or Proceeds thereof, or any interest therein,
except for the security interests created by this Agreement and the Liens
permitted by the Indenture to secure the Obligations under the Credit Facilities
or (iv) enter into any agreement or undertaking restricting the right or ability
of Grantor to sell, assign or transfer any of the Pledged Securities or Proceeds
thereof except agreements evidencing the Lien on any of the Pledged Securities
or Proceeds thereof to secure the Obligations under the Credit Facilities (so
long as the Lien created by this Agreement is permitted thereby).
(2) Grantor shall cause each Issuer to agree that (i) it will be
bound by the terms of this Agreement relating to the Pledged Securities issued
by it and will comply with such terms insofar as such terms are applicable to
it, (ii) it will notify the Trustee promptly in writing of the occurrence of any
of the events described in Section 4.4(a) with respect to the Pledged Securities
issued by it and (iii) the terms of Sections 5.1(c) shall apply to it, mutatis
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mutandis, with respect to all actions that may be required of it pursuant to
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Section 5.1(c) with respect to the Pledged Securities issued by it.
(3) With respect to the Pledged LLC Interests and the Pledged
Partnership Interests, (i) perform and comply in all material respects with all
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terms and provisions of each limited liability company agreement and each
partnership agreement then in effect with respect thereto and required to be
performed or complied with by it and (ii) enforce each partnership agreement and
limited liability company agreement then in effect in accordance in all material
respects with its terms.
Section 1.16 Agreement Not to Issue Uncertificated Securities. All
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of the capital stock forming the Pledged Stock is and will be in certificated
form (as contemplated by Article 8 of the UCC), and Grantor will not seek to
convert all or any part of such Pledged Stock into uncertificated form (as
contemplated by Article 8 of the UCC).
Section 1.17 Partnership and Limited Liability Company Interests.
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Grantor will not permit any of the equity interests of any Issuer which is a
partnership or a limited liability company to (i) be dealt in or traded on a
securities exchange or in a securities market, (ii) by its terms expressly
provide that it is a security governed by Article 8 of the Applicable UCC, (iii)
be an investment company security, (iv) be held in a securities account or (v)
constitute a "security" or a "financial asset" as such terms are defined in
Article 8 of the Applicable UCC. Grantor will cause each Issuer which is a
partnership or a limited liability company to execute and deliver to the Trustee
concurrently with the pledge of such Issuer's equity interests hereunder an
Acknowledgment and Consent in the form of Exhibit A hereto.
Section 1.18 Amendment of Organizational Documents and By-Laws.
-------------------------------------------------
Grantor will not consent to, cause or permit any modification or amendment to
the organizational documents or by-laws of any Issuer if any such amendment or
modification could reasonably be expected to materially lessen the rights
granted to the Trustee for the benefit of the Holders under this Agreement.
ARTICLE V
REMEDIAL PROVISIONS
Section 1.19 Pledged Securities. (a) Unless an Event of Default
------------------
shall have occurred and be continuing and except as provided in Section 4.4(a)
of this Agreement, Grantor shall be permitted to receive all cash dividends paid
in respect of the Pledged Stock and all distributions in respect of the Pledged
Partnership Interests and Pledged LLC Interests, to the extent permitted in the
Indenture,
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<PAGE>
and to exercise all voting and corporate rights with respect to the Pledged
Securities; provided, however, that no vote shall be cast or corporate right
-------- -------
exercised or other action taken which could reasonably be expected to materially
impair the Collateral or which could reasonably be expected to be inconsistent
with or result in any violation of any provision of the Indenture or this
Agreement.
(1) If an Event of Default shall occur and be
continuing, (i) the Trustee shall have the right to receive any and all
dividends, payments or other Proceeds paid in respect of the Pledged Securities
and make application thereof to the Secured Obligations in such order as the
Trustee may determine, and (ii) any or all of the Pledged Securities may be
registered in the name of the Trustee or its nominee, and the Trustee or its
nominee may thereafter exercise (x) all voting, corporate and other rights
pertaining to such Pledged Securities at any meeting of shareholders of the
relevant Issuer or Issuers or otherwise and (y) any and all rights of
conversion, exchange and subscription and any other rights, privileges or
options pertaining to such Pledged Securities as if it were the absolute owner
thereof (including, without limitation, the right to exchange at its discretion
any and all of the Pledged Securities upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the corporate
structure of any Issuer, or upon the exercise by Grantor or the Trustee of any
right, privilege or option pertaining to such Pledged Securities, and in
connection therewith, the right to deposit and deliver any and all of the
Pledged Securities with any committee, depositary, transfer agent, registrar or
other designated agency upon such terms and conditions as the Trustee may
determine), all without liability except to account for property actually
received by it and except to the extent resulting from the gross negligence or
willful misconduct of the Trustee but the Trustee shall have no duty to Grantor
to exercise any such right, privilege or option and shall not be responsible for
any failure to do so or delay in so doing.
(2) Grantor hereby authorizes and instructs each
Issuer of any Pledged Securities pledged by Grantor hereunder to (i) comply with
any instruction received by it from the Trustee in writing that (x) states that
an Event of Default has occurred and is continuing and (y) is otherwise in
accordance with the terms of this Agreement, without any other or further
instructions from Grantor, and Grantor agrees that each Issuer shall be fully
protected in so complying, and (ii) upon the occurrence and during the
continuance of an Event of Default, unless otherwise expressly permitted hereby,
pay any dividends or other payments with respect to the Pledged Securities
directly to the Trustee.
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<PAGE>
Section 1.20 Proceeds to be Turned Over To Trustee. If an Event of
-------------------------------------
Default shall occur and be continuing, all Proceeds received by Grantor
consisting of cash, checks and other similar items shall be held by Grantor in
trust for the Trustee and the Holders, segregated from other funds of Grantor,
and shall, forthwith upon receipt by Grantor, be turned over to the Trustee in
the exact form received by Grantor (duly indorsed by Grantor to the Trustee, if
required). All Proceeds received by the Trustee hereunder shall be held by the
Trustee in a Collateral Account maintained under its sole dominion and control.
All Proceeds while held by the Trustee in a Collateral Account (or by such
Grantor in trust for the Trustee and the Holders) shall continue to be held as
collateral security for all the Secured Obligations and shall not constitute
payment thereof until applied as provided in Section 5.3.
Section 1.21 Application of Proceeds. At such intervals as may be
-----------------------
agreed upon by Grantor and the Trustee, or, if an Event of Default shall have
occurred and be continuing, the Trustee may apply all or any part of Proceeds
received by it constituting Collateral, whether or not held in any Collateral
Account, in payment of the Obligations in such order as the Trustee may
determine.
Section 1.22 Code and Other Remedies. If an Event of Default shall
-----------------------
occur and be continuing, the Trustee, on behalf of the Holders, may exercise, in
addition to all other rights and remedies granted to them in this Agreement and
in any other instrument or agreement securing, evidencing or relating to the
Secured Obligations, all rights and remedies of a secured party under the UCC or
any other applicable law. Without limiting the generality of the foregoing, the
Trustee, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon Grantor or any other Person (all and each of which demands,
defenses, advertisements and notices are hereby waived), may without any
obligation to do so, and shall upon the request of the Holders of at least a
majority in Accreted Value or aggregate principal amount of the Notes as
applicable in accordance with Section 9.2 of the Indenture, in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, lease, assign, give
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, at any exchange, broker's
board or office of the Trustee or any Holder or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
The Trustee shall not be responsible
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<PAGE>
for any losses or diminution in value of the Collateral. The Trustee or any
Holder shall have the right upon any such public sale or sales, and, to the
extent permitted by law, upon any such private sale or sales, to purchase the
whole or any part of the Collateral so sold, free of any right or equity of
redemption in Grantor, which right or equity is waived and released upon
consummation of such sale. Grantor recognizes that the Trustee or the Holders
may be unable to effect a public sale of all or a part of the 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 Collateral for their own account, for investment
and without a view to the distribution or resale thereof. Grantor understands
that private sales so made may be at prices and other terms less favorable than
if the Collateral were sold at public sales, and agrees that neither the Trustee
nor any Holder has any obligation to delay the sale of the Collateral for the
period of time necessary to permit the Trustee to register the Collateral for
sale under the Securities Act or such state laws. Grantor agrees that private
sales under the foregoing circumstances shall be deemed to have been made in a
commercially reasonable manner. The Trustee shall apply the net proceeds of any
action taken by it pursuant to this Section 5.6, after deducting all reasonable
costs and expenses of every kind incurred in connection therewith or incidental
to the care or safekeeping of any of the Collateral or in any way relating to
the Collateral or the rights of the Trustee and the Holders hereunder,
including, without limitation, reasonable attorneys' fees and disbursements, to
the payment in whole or in part of the Secured Obligations, in such order as the
Trustee may elect and as permitted by law, and only after such application and
after the payment by the Trustee of any other amount required by any provision
of law, including, without limitation, Section 9-504(l)(c) of the UCC, need the
Trustee account for the surplus, if any, to Grantor. To the extent permitted by
applicable law, Grantor waives all claims, damages and demands it may acquire
against the Trustee or any Holder arising out of the exercise by them of any
rights hereunder, except to the extent arising out of gross negligence or
willful misconduct of the Trustee or such Holder. If any notice of a proposed
sale or other disposition of Collateral shall be required by law, such notice
shall be deemed reasonable and proper if given at least 10 days before such sale
or other disposition.
Section 1.23 Waiver; Deficiency. Grantor waives and agrees not to
------------------
assert any rights or privileges which it may acquire under Section 9-112 of the
UCC. Grantor shall remain liable for any deficiency if the proceeds of any sale
or other disposition of the Collateral are insufficient to pay its Secured
Obligations and the fees and disbursements of any attorneys employed by the
Trustee or any Holder to collect such deficiency.
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<PAGE>
ARTICLE VI
THE TRUSTEE
Section 1.24 Trustee's Appointment as Attorney-in-Fact, etc. (a)
----------------------------------------------
Grantor hereby irrevocably constitutes and appoints the Trustee and any officer
or agent thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of Grantor and in the name of Grantor or in its own name, for the purpose
of carrying out the terms of this Agreement, to take any and all appropriate
action and to execute any and all documents and instruments which may be
necessary or desirable to accomplish the purposes of this Agreement, and,
without limiting the generality of the foregoing, Grantor hereby gives the
Trustee the power and right, on behalf of Grantor, without notice to or assent
by Grantor, to do any or all of the following, in each case, subject to the last
sentence of this Section 6.1(a):
(1) pay or discharge taxes and Liens levied or
placed on or threatened against the Collateral; and
(2) execute, in connection with any sale provided
for in Section 5.4, any indorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.
Anything in this Section 6.1(a) to the contrary notwithstanding, the
Trustee agrees that it will not exercise any rights under the power of attorney
provided for in this Section 6.1(a) unless an Event of Default shall have
occurred and be continuing.
(2) If any Grantor fails to perform or comply with any of its
agreements contained herein, the Trustee, at its option, but without any
obligation so to do, may perform or comply, or otherwise cause performance or
compliance, with such agreement.
(3) The reasonable out-of-pocket expenses and indemnities of the
Trustee (including the reasonable fees and expenses of its counsel) incurred in
connection with actions undertaken as provided in this Section 6.1, together
with interest thereon at a rate per annum equal to the rate per annum at which
interest
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<PAGE>
would then be payable on past due Obligations under the Notes from the date of
payment by the Trustee to the date reimbursed by the Grantor, shall be payable
by Grantor to the Trustee on demand.
(4) Grantor hereby ratifies all that said attorneys shall
lawfully do or cause to be done by virtue hereof. All powers, authorizations and
agencies contained in this Agreement are coupled with an interest and are
irrevocable until this Agreement is terminated and the security interests
created hereby are released in accordance with the terms hereof.
Section 1.25 Duty of Trustee. The Trustee's sole duty with respect
---------------
to the custody, safekeeping and physical preservation of the Collateral in its
possession, under Section 9-207 of the UCC or otherwise, shall be to deal with
it in the same manner as the Trustee deals with similar property for its own
account except that after the occurrence and continuance of an Event of Default,
the Trustee shall have no obligations to invest funds held in the Collateral
Account and may hold the same as demand deposits. Neither the Trustee, any
Holder nor any of their respective officers, directors, employees or agents
shall be liable for failure to demand, collect or realize upon any of the
Collateral or for any delay in doing so or shall be under any obligation to sell
or otherwise dispose of any Collateral upon the request of Grantor or any other
Person or to take any other action whatsoever with regard to the Collateral or
any part thereof. The powers conferred on the Trustee and the Holders hereunder
are solely to protect the Trustee's and the Holders' interests in the Collateral
and shall not impose any duty upon the Trustee or any Holder to exercise any
such powers. The Trustee and the Holders shall be accountable only for amounts
that they actually receive as a result of the exercise of such powers, and
neither they nor any of their officers, directors, employees or agents shall be
responsible to Grantor for any act or failure to act hereunder, except for their
own gross negligence or willful misconduct.
Section 1.26 Execution of Financing Statements. Pursuant to Section
---------------------------------
9-402 of the UCC and any other applicable law, Grantor authorizes the Trustee to
file or record financing statements and other filing or recording documents or
instruments with respect to the Collateral without the signature of Grantor in
such form and in such offices as the Trustee reasonably determines appropriate
to perfect the security interests of the Trustee under this Agreement. A
photographic or other reproduction of this Agreement shall be sufficient as a
financing statement or other filing or recording document or instrument for
filing or recording in any jurisdiction.
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<PAGE>
Section 1.27 Authority of Trustee. Grantor acknowledges that the
--------------------
rights and responsibilities of the Trustee under this Agreement with respect to
any action taken by the Trustee or the exercise or non-exercise by the Trustee
of any option, voting right, request, judgment or other right or remedy provided
for herein or resulting or arising out of this Agreement shall, as between the
Trustee and the Holders, be governed by the Indenture, but, as between the
Trustee and the Grantor, the Trustee shall be conclusively presumed to be acting
as agent for the Holders with full and valid authority so to act or refrain from
acting, and Grantor shall not be under any obligation, or entitlement to make
any inquiry respecting such authority.
ARTICLE VII
MISCELLANEOUS
Section 1.28 Amendments in Writing. None of the terms or provisions
---------------------
of this Agreement may be waived, amended, supplemented or otherwise modified
except in accordance with subsection 9.1 and subsection 9.2 of the Indenture.
Section 1.29 Notices. All notices, requests and demands to or upon
-------
the Trustee or Grantor hereunder shall be effected in the manner provided for in
subsection 12.2 of the Indenture.
Section 1.30 No Waiver by Course of Conduct, Cumulative Remedies.
---------------------------------------------------
Neither the Trustee nor any Holder shall by any act (except by a written
instrument pursuant to Section 7.1), delay, indulgence, omission or otherwise.
be deemed to have waived any right or remedy hereunder or to have acquiesced in
any Default or Event of Default. No failure to exercise, nor any delay in
exercising, on the part of the Trustee or any Holder, 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.
A waiver by the Trustee or any Holder of any right or remedy hereunder on any
one occasion shall not be construed as a bar to any right or remedy which the
Trustee or such Holder would otherwise have on any future occasion. The rights
and remedies herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any other rights or remedies provided by
law.
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<PAGE>
Section 1.31 Enforcement Expenses, Indemnification. (a) Grantor
-------------------------------------
agrees to pay or reimburse each Holder and the Trustee for all its reasonable
out-of-pocket costs and expenses incurred in collecting against Grantor or
otherwise enforcing or in the case of the Trustee only, preserving any rights
under this Agreement or at its option performing or complying with any of the
agreements of the Trustee contained herein, including, without limitation, the
reasonable fees and reasonable disbursements of counsel (including the allocated
fees and expenses of in-house counsel) to each Holder and of counsel to the
Trustee.
(1) Grantor agrees to pay, and to save the Trustee and the
Holders harmless from, any and all liabilities with respect to, or resulting
from any delay in paying, any and all stamp, excise, sales or other taxes which
may be payable or determined to be payable with respect to any of the Collateral
or in connection with any of the transactions contemplated by this Agreement.
(2) Grantor agrees to pay, and to save the Trustee and the
Holders harmless from, any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement except liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the gross negligence or willful
misconduct of such party.
(3) The agreements in this Section 7.4 shall survive repayment
of the Secured Obligations and all other amounts payable under the Indenture or
the resignation or replacement of the Trustee.
Section 1.32 Reinstatement. If after receipt of any payment of, or
-------------
proceeds of, any of the Collateral applied to the payment of, any of the Secured
Obligations, the Trustee or any Holder is required to surrender or return such
payment or proceeds to any Person for any reason, then the Secured Obligations
intended to be satisfied by such payment or proceeds shall be reinstated and
continue and this Agreement shall continue in full force and effect as if such
payment or proceeds had not been received by the Trustee or any Holder. This
Section 7.5 shall
(1) remain effective notwithstanding any contrary
action that may be taken by the Trustee or any Holder in reliance upon such
payment or proceeds; and
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<PAGE>
(2) survive the termination or revocation of this
Agreement.
Section 1.33 Successors and Assigns. This Agreement shall be
----------------------
binding upon the successors and assigns of Grantor and shall inure to the
benefit of the Trustee and the Holders and their respective permitted successors
and assigns; provided that Grantor may not assign, transfer or delegate any of
--------
its rights or obligations under this Agreement except as permitted by the
Indenture.
Section 1.34 Intercreditor Agreement. Notwithstanding any provision
-----------------------
of this Agreement to the contrary (a) all rights of the Trustee and the Holders
hereunder with respect to the exercise of remedies against any of the Collateral
are subject to the terms of the Intercreditor Agreement and (b) all obligations
of Grantor hereunder to turn over possession of any Collateral to the
Trustee will be satisfied to the extent possession of any such Collateral is
turned over to either Senior Agent pursuant to any Senior Security Documents (as
such terms are defined in the Intercreditor Agreement) so long as any Senior
Loan Obligations (as defined in the Intercreditor Agreement) remain outstanding.
Section 1.35 Counterparts. This Agreement may be executed by one or
------------
more of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument.
Section 1.36 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.
Section 1.37 Section Headings. The Section headings used in this
----------------
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
Section 1.38 Integration. This Agreement and the Indenture
-----------
represent the agreement of the Grantor, the Trustee and the Holders with respect
to the subject matter hereof, and there are no promises, undertakings,
representations or warranties by the Trustee or any Holder relative to subject
matter hereof not expressly set forth or referred to herein or in the Indenture.
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<PAGE>
Section 1.39 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
-------------
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
Section 1.40 Submission To Jurisdiction; Waivers. Grantor hereby
-----------------------------------
irrevocably and unconditionally:
(1) 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 appellate courts from any thereof;
(2) consents that any such action or proceeding may be brought
in such courts 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;
(3) 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 Grantor at
its address referred to in Section 7.2 or at such other address of which the
Trustee shall have been notified in the manner described in Section 7.2;
(4) 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; and
(5) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding referred
to in this Section any special, indirect, punitive or consequential damages (as
opposed to direct or actual damages other than damages waived hereunder).
Section 1.41 Acknowledgments. Grantor hereby acknowledges that:
---------------
(1) it has been advised by counsel in the negotiation, execution
and delivery of this Agreement;
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<PAGE>
(2) neither the Trustee nor any Holder has any fiduciary
relationship with or fiduciary duty to Grantor arising out of or in connection
with this Agreement, and the relationship between the Grantor, on the one hand,
and the Trustee and Holders, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
(3) no joint venture is created hereby or by the Indenture or
otherwise exists by virtue of the transactions contemplated hereby among the
Holders or among the Grantor and the Holders.
Section 1.42 WAIVER OF JURY TRIAL. EACH OF GRANTOR AND THE
--------------------
TRUSTEE BY ITS ACCEPTANCE HEREOF HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND
FOR ANY COUNTERCLAIM THEREIN.
Section 1.43 Releases. (a) At such time as the Notes and the other
--------
Secured Obligations shall have been paid in full, the Collateral shall
automatically be released from the Liens created hereby, and this Agreement and
all obligations (other than those expressly stated to survive such termination)
of the Trustee and Grantor hereunder shall automatically terminate, all without
delivery of any instrument or performance of any act by any party, and all
rights to the Collateral shall revert to the Grantor. At the request and sole
expense of Grantor following any such termination, the Trustee shall deliver to
Grantor any Collateral held by the Trustee hereunder, and execute and deliver to
Grantor such documents as Grantor shall reasonably request to evidence such
termination and release.
(1) If any of the Collateral shall be sold, transferred or
otherwise disposed of by Grantor in a transaction permitted by the Indenture, or
if any Issuer shall become an Unrestricted Subsidiary pursuant to the terms of
the Indenture, then the Trustee, at the request and sole expense of Grantor,
shall execute and deliver to Grantor all releases or other documents reasonably
necessary or desirable for the release of the Liens created hereby on such
Collateral so sold, transferred or otherwise disposed of or for the release of
the Liens created hereby on the Pledged Securities issued by such Issuer.
Notwithstanding the foregoing, no such release of any Collateral shall
be effected unless any lien on such Collateral securing any Senior Debt shall
also be released.
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<PAGE>
IN WITNESS WHEREOF, each of the undersigned has caused this Agreement
to be duly executed and delivered as of the date first above written.
AIRGATE PCS, INC.
By:_____________________________
Title:
BANKERS TRUST COMPANY, as Trustee
By:_____________________________
Title
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<PAGE>
EXHIBIT A
ACKNOWLEDGMENT AND CONSENT
The undersigned hereby acknowledges receipt of a copy of the Pledge Agreement
dated as of ________________________, 1999, made by AirGate PCS, Inc. in favor
of Bankers trust Company, as Trustee, as amended, restated or otherwise modified
from time to time (the "Pledge Agreement"). All capitalized terms used herein
but not otherwise defined herein shall have the meanings assigned thereto in the
Pledge Agreement. The undersigned agrees for the benefit of the Trustee and the
Holders that it will not take any action or fail to take any action that will
permit any Pledged LLC Interests or Pledged Partnership Interests issued by the
undersigned to become "securities" within the meaning of Article 8 of the
Applicable UCC.
[ISSUER]
By:_____________________________
Title:
Address for Notices:
________________________________
________________________________
________________________________
Telex:
Facsimile:
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<PAGE>
Schedule I to
-------------
Pledge Agreement
----------------
Chief Executive Office
----------------------
Chief Executive Office: Harris Tower
Suite 1700
233 Peachtree, N.E.
Atlanta, Georgia 30303
Jurisdiction of Organization: Delaware
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<PAGE>
EXHIBIT D
FORM OF INTERCREDITOR AGREEMENT
<PAGE>
EXHIBIT D
FORM OF INTERCREDITOR AGREEMENT
INTERCREDITOR AGREEMENT
-----------------------
INTERCREDITOR AGREEMENT, dated as of September 30, 1999, among BANKERS
TRUST COMPANY, a New York banking corporation, as Trustee (the "Trustee") under
-------
the Indenture dated as of September 30, 1999 by and among AirGate PCS, Inc., a
Delaware corporation ("AirGate"), AGW Leasing Company, Inc., a Delaware
-------
corporation ("AGW") 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"), and
--------------------
State Street Bank and Trust Company, a Massachusetts banking corporation, as
Collateral Agent for the Senior Secured Lenders under the Senior Loan Documents
(in such capacity, the "Collateral Agent") and AGW.
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; and
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.
(1) The following terms shall have the following meanings:
<PAGE>
"Agreement": this Intercreditor Agreement.
---------
"Common Collateral": the collective reference to the capital
-----------------
stock or other equity interests issued by the Pledged Subsidiaries and
any and 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 Subordinated 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
Subsidiary 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
D-2
<PAGE>
pledge of the capital stock or other equity interests of each Pledged
Subsidiary and AGW and the proceeds related thereto as collateral
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
-----------------------
Guarantee (as defined in 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 Note Documents": the collective reference to the
---------------------------
Indenture, the Subordinated Notes issued thereunder, the Subordinated
Guarantees and the Subordinated Security Documents.
"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
Subordinated 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 Agreement,
any Guarantee (as defined in the Indenture) or any other Subordinated
Security Document, in each case whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs,
expenses
D-3
<PAGE>
or otherwise (including, without limitation, all fees and
disbursements of counsel to the Trustee and fees, expenses and
indemnities of the Trustee that are required to be paid by AirGate
pursuant to the terms of the Indenture, this Agreement, any Guarantee
(as defined in the Indenture) or any other Subordinated Security
Document).
"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.
(2) 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.
(3) 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.
D-4
<PAGE>
(1) 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
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.
(2) 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 Subordinated Obligations
-----
pursuant to Section 6.10 of the Indenture 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.
(3) In the event that:
D-5
<PAGE>
(1) all of the Senior Loan Obligations have been paid in
full and the commitments under the Senior Credit Agreement have
been terminated or expired,
(2) after giving effect thereto any Common Collateral
remains that remains pledged pursuant to the Subordinated Security
Documents, and
(3) at such time there are Subordinated Obligations
outstanding, 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.
(4) 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, upon receipt of a certificate from the
Administrative Agent with respect to the matters set forth below, shall deliver
an appropriate instrument prepared by the Administrative Agent which shall be
satisfactory to the Trustee 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
D-6
<PAGE>
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.
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 Common Collateral and the
Subordinated 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 Subordinated Note 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
D-7
<PAGE>
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:
If to the Administrative
Agent: LUCENT TECHNOLOGIES INC.
283 King George Road
Warren, New Jersey 07059
Attention: Assistant Treasurer, Customer Finance
Telecopy: (908) 559-1711
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
Four Albany Street - 4/th/ Floor
New York, New York 10006
Attention: Corporate Trust and Agency
Group, Corporate Market Services
Telecopy: (212) 250-6961
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
D-8
<PAGE>
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.
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.
(1) 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.
(2) 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
D-9
<PAGE>
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 .
D-10
<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:
Consented:
AIRGATE PCS, INC., as Borrower and Issuer
By:______________________
Title:
D-11
<PAGE>
EXHIBIT E
FORM OF UNIT CERTIFICATE
<PAGE>
EXHIBIT E
FORM OF UNIT CERTIFICATE
NO. _____ CUSIP NO. 009367 AB 9
AIRGATE PCS, INC.
AGW LEASING COMPANY, INC.
__________ UNITS
[THIS GLOBAL UNIT IS COMPOSED OF THE ATTACHED GLOBAL SENIOR
SUBORDINATED DISCOUNT NOTE AND GLOBAL WARRANT CERTIFICATE. THE GLOBAL UNIT, THE
GLOBAL SENIOR SUBORDINATED DISCOUNT NOTE AND THE GLOBAL WARRANT CERTIFICATE ARE
COLLECTIVELY REFERRED TO HEREIN AS THE "SECURITIES."]/1/
----------
THIS CERTIFICATE REPRESENTS _______ UNITS OF AIRGATE, PCS, INC. EACH
UNIT CONSISTS OF $1,000 AGGREGATE PRINCIPAL AMOUNT AT MATURITY OF AIRGATE PCS,
INC.'S _____% SENIOR SUBORDINATED DISCOUNT NOTES DUE 2009 AND ONE WARRANT TO
PURCHASE ________ SHARES OF COMMON STOCK OF AIRGATE PCS, INC. [THE SENIOR
SUBORDINATED DISCOUNT NOTES AND WARRANTS CONSTITUTING A PART OF THE UNITS
REPRESENTED BY THIS CERTIFICATE ARE REPRESENTED BY THE NOTES AND WARRANT
CERTIFICATES ATTACHED HERETO.]/2/
[THE SECURITIES ARE GLOBAL SECURITIES WITHIN THE MEANING OF THE
INDENTURE GOVERNING THE SENIOR SUBORDINATED DISCOUNT NOTES REPRESENTED BY THE
GLOBAL SENIOR SUBORDINATED DISCOUNT NOTE (THE "INDENTURE") AND THE WARRANT
---------
AGREEMENT GOVERNING THE WARRANTS REPRESENTED BY THE GLOBAL WARRANT CERTIFICATE
(THE "WARRANT AGREEMENT") AND
-----------------
-----------------------
/1/ This bracketed language should be included only if the Unit certificate is
issued in global form.
/2/ This bracketed language should be included only if the Units represented by
the Unit certificate are issued in definitive form.
<PAGE>
ARE REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY OR A
SUCCESSOR DEPOSITARY. THE SECURITIES ARE NOT EXCHANGEABLE FOR SECURITIES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE
EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND THE
WARRANT AGREEMENT, AND NO TRANSFER OF THE SECURITIES (OTHER THAN A TRANSFER
OF THE SECURITIES AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE
DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER
NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND THE WARRANT AGREEMENT.]/1/
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER
---
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUIRED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]/1/
[THE SENIOR SUBORDINATED DISCOUNT NOTES AND THE WARRANTS CONSTITUTING
A PART OF THE UNITS REPRESENTED BY THIS GLOBAL UNIT WILL TRADE SEPARATELY UPON
THE EARLIEST TO OCCUR OF: (I) 180 DAYS AFTER THE CLOSING OF THE OFFERING OF THE
UNITS, (II) THE OCCURRENCE OF A CHANGE OF CONTROL OR AN EVENT OF DEFAULT ON THE
SENIOR SUBORDINATED DISCOUNT NOTES AND (III) SUCH DATE AS DONALDSON, LUFKIN &
JENRETTE SECURITIES CORPORATION IN ITS SOLE DISCRETION SHALL DETERMINE.]/3/
- ------------------------
/3/ This paragraph should be included only if the Unit certificate is issued
prior to the Separation Date.
E-2
<PAGE>
AIRGATE PCS, INC.
By:_________________
Name:
Title:
AGW LEASING COMPANY, INC.
By:_________________
Name:
Title:
Date: September ____, 1999
E-3
<PAGE>
November 29, 1999
AirGate PCS, Inc.
233 Peachtree Street, N.E.
Harris Tower
Suite 1700
Atlanta, Georgia 30303
Re: AirGate PCS, Inc.
Registration Statement on Form S-1
Ladies and Gentlemen:
We have acted as special counsel to AirGate PCS, Inc., a Delaware
corporation (the "Company") in connection with a Registration Statement on Form
S-1 (the "Registration Statement") pertaining to the registration of 644,400
shares of Company common stock, par value $0.01 per share (the "Common Stock")
to be issued by the Company from time to time upon exercise of the warrants
("Warrants") which were sold by the Company in its $150 million units offering.
We have examined such documents and records as we deemed appropriate,
including the following:
(i) The Company's Amended and Restated Certificate of Incorporation.
(ii) The Company's Amended and Restated Bylaws.
(iii) Resolutions duly adopted by the Board of Directors of the Company
authorizing the filing of the Registration Statement.
In the course of our examination, we have assumed the legal capacity of all
natural persons, the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified
<PAGE>
AirGate PCS, Inc.
November 29, 1999
Page 2
or photostatic copies and the authenticity of the originals of such latter
documents. In making our examination of documents executed by parties other than
the Company, we have assumed that such parties had the power, corporate or
other, to enter into and perform all obligations thereunder and have also
assumed the due authorization by all requisite action, corporate or other, and
execution and delivery by such parties of such documents and the validity,
binding effect and enforceability thereof on such parties.
Based upon the foregoing, we are of the opinion that the issuance of the
Common Stock has been duly authorized and when issued and delivered in
accordance with the terms of the Warrant Agreement and the Warrants, will be
validly issued, fully paid and non-assessable.
We express no opinion as to the laws of any jurisdiction other than the
State of Delaware and the federal laws of the United States of America. We
hereby consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to our firm under the caption "Legal Matters"
contained in the Prospectus included therein.
Very truly yours,
PATTON BOGGS LLP
By: /s/ Mary M. Sjoquist
---------------------------------------
Mary M. Sjoquist
<PAGE>
________________________________________________________________________________
AirGate PCS, Inc.
Warrants to Purchase
644,400 Shares of Common Stock
WARRANT AGREEMENT
Dated as of September 30, 1999
Bankers Trust Company
Warrant Agent
________________________________________________________________________________
<PAGE>
WARRANT AGREEMENT, dated as of September 30, 1999, by and among
AirGate PCS, Inc., a Delaware corporation ("AirGate" or the "Company"), and
Bankers Trust Company, a New York banking corporation, as warrant agent (the
"Warrant Agent").
WHEREAS, the Company proposes to issue warrants (the "Warrants") to
initially purchase up to an aggregate of 644,400 shares of Common Stock, par
value $.01 per share (the "Common Stock"), of the Company (the Common Stock
issuable on exercise of the Warrants being referred to herein as the "Warrant
Shares"), in connection with the offering (the "Offering") by AirGate, of
300,000 Units (the "Units"), each consisting of $1,000 principal amount at
maturity of AirGate's 13 1/2% Senior Subordinated Discount Notes due 2009 (the
"Notes") and one Warrant, each Warrant initially representing the right to
purchase 2.148 Warrant Shares.
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act in connection with the
issuance of Warrant Certificates (as defined) and other matters as provided
herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. CERTAIN DEFINITIONS.
As used in this Agreement, the following terms shall have the
following respective meanings:
"Accreted Value" of any outstanding Note as of or to any date of
determination means an amount equal to the sum of (1) the issue price of such
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 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 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 Note (a)
for each six-month or shorter period ending October 1 or April 1 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 (2)
above), minus all amounts theretofore paid in respect of such Note, which
amounts are considered as part of the "stated redemption price at maturity" of
such 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.
"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person shall mean
the possession,
<PAGE>
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such specified Person, whether through the ownership
of voting securities, by agreement or otherwise; provided that beneficial
ownership of 10% or more of the voting securities of a Person shall be deemed to
be control.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Warrant, the rules and
procedures of the Depositary, Euroclear and Cedel Bank that apply to such
transfer or exchange.
"Business Day" means any day other than a Legal Holiday.
"Cedel Bank" means Cedel Bank, SA.
"Closing Date" means the date hereof.
"Commission" means the Securities and Exchange Commission.
"Depositary" means, with respect to the Warrants issuable or issued in
whole or in part in global form, the Person specified in Section 3.3 hereof as
the Depositary with respect to the Warrants, and any and all successors thereto
appointed as Depositary hereunder and having become such pursuant to the
applicable provision of the Indenture.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, and all successors thereto, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Global Warrants" means, individually and collectively, each of the
Global Warrants substantially in the form of Exhibit A hereto issued in
accordance with Section 3.1(b) and 3.5 hereof.
"Global Warrant Legend" means the legend set forth in Section
3.5(f)(i), which is required to be placed on all Global Warrants issued under
this Warrant Agreement.
"Holder" means a person who is listed as the record owner of Warrants,
Warrant Shares and any other securities issued or issuable with respect to the
Warrants or the Warrant Shares by way of a stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization.
"Indenture" means the indenture, dated the date hereof, by and among
the Company, AGW Leasing Company, Inc. and Bankers Trust Company, as trustee
relating to the Notes.
"Indirect Participant" means a Person who holds a beneficial interest
in a Global Warrant through a Participant.
2
<PAGE>
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Offering" means the concurrent offering by the Company of the
Company's Common Stock, and Units.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Warrant Agent in form and substance reasonably
acceptable to the Warrant Agent. The counsel may be an employee of or counsel to
the Company, any subsidiary of the Company or the Warrant Agent.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof, including any
subdivision or ongoing business of any such entity or substantially all of the
assets of any such entity, subdivision or business.
"Prospectus" means the prospectus included in a Registration Statement
at the time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments and all material incorporated by reference
into such Prospectus.
"Registration Statement" means "registration statement, "as such term
is defined in Section 2(a)(8) of the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Separation Date" means the earliest of (i) 180 days after the
closing of the Offering, (ii) the occurrence of a Change of Control or an Event
of Default (each as defined in the Indenture) and (iii) such date as Donaldson,
Lufkin & Jenrette Securities Corporation in its sole discretion shall determine.
"Shelf Registration" means a shelf registration statement filed
pursuant to Rule 415 under the Securities Act relating to the Warrant Shares.
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"Trustee" means the trustee under the Indenture.
"Underwriting Agreement" means that certain underwriting agreement,
dated as of September 27, 1999, by and among the Company, AGW Leasing Company,
Inc. and the underwriters party thereto pursuant to which the Company agrees to
sell units, of which the Warrants form a part, to the underwriters.
SECTION 2. APPOINTMENT OF WARRANT AGENT.
The Company hereby appoints the Warrant Agent to act as agent for the
Company in accordance with the instructions set forth hereinafter in this
Agreement and the Warrant Agent hereby accepts such appointment.
SECTION 3. ISSUANCE OF WARRANTS; WARRANT CERTIFICATES.
3.1 Form and Dating.
(a) General.
The Warrants shall be substantially in the form of Exhibit A hereto
(the "Warrant Certificates") and shall be issued initially, together with Notes,
as Units, substantially in the form of Exhibit B hereto. The Warrants may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Warrant shall be dated the date of the countersignature.
The terms and provisions contained in the Warrants shall constitute,
and are hereby expressly made, a part of this Warrant Agreement. The Company
and the Warrant Agent, by their execution and delivery of this Warrant
Agreement, expressly agree to such terms and provisions and to be bound thereby.
However, to the extent any provision of any Warrant conflicts with the express
provisions of this Warrant Agreement, the provisions of this Warrant Agreement
shall govern and be controlling.
(b) Global Warrants.
Warrants issued in global form shall be substantially in the form of
Exhibit A attached hereto (including the Global Warrant Legend thereon and the
"Schedule of Exchanges of Interests in the Global Warrant" attached thereto).
Warrants issued in definitive form shall be substantially in the form of Exhibit
A attached hereto (but without the Global Warrant Legend thereon and without the
"Schedule of Exchanges of Interests in the Global Warrant" attached thereto).
Each Global Warrant shall represent such of the outstanding Warrants as shall be
specified therein and each shall provide that it shall represent the number of
outstanding Warrants from time to time endorsed thereon and that the number of
outstanding Warrants represented thereby may from time to time be reduced or
increased, as appropriate, to reflect exchanges and redemptions. Any
endorsement of a Global Warrant to reflect the amount of any increase or
decrease in the number of outstanding Warrants represented thereby shall be made
by the Warrant Agent in accordance with instructions given by the Holder thereof
as required by Section 3.5 hereof.
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(c) Euroclear and Cedel Procedures Applicable, if Necessary.
The provisions of the "Operating Procedures of the Euroclear System"
and "Terms and Conditions Governing Use of Euroclear" and the "General Terms and
Conditions of Cedel Bank" and "Customer Handbook" of Cedel Bank shall be
applicable to transfers of beneficial interests, if any, in the Global Warrant
that are held by Participants through Euroclear or Cedel Bank.
3.2 Execution.
An Officer shall sign the Warrants for the Company by manual or
facsimile signature.
If the Officer whose signature is on a Warrant no longer holds that
office at the time a Warrant is countersigned, the Warrant shall nevertheless be
valid.
A Warrant shall not be valid until countersigned by the manual
signature of the Warrant Agent. The signature shall be conclusive evidence that
the Warrant has been properly issued under this Warrant Agreement.
The Warrant Agent shall, upon a written order of the Company signed by
an Officer (a "Warrant Countersignature Order"), countersign Warrants for
original issue up to the number stated in the preamble hereto.
The Warrant Agent may appoint an agent acceptable to the Company to
countersign Warrants. Such an agent may countersign Warrants whenever the
Warrant Agent may do so. Each reference in this Warrant Agreement to a
countersignature by the Warrant Agent includes a countersignature by such agent.
Such an agent has the same rights as the Warrant Agent to deal with the Company
or an Affiliate of the Company.
3.3 Warrant Registrar.
The Company shall maintain an office or agency where Warrants may be
presented for registration of transfer or for exchange ("Warrant Registrar").
The Warrant Registrar shall keep a register of the Warrants and of their
transfer and exchange. The Company may appoint one or more co-Warrant
Registrars. The term "Warrant Registrar" includes any co-Warrant Registrar.
The Company may change any Warrant Registrar without notice to any Holder. The
Company shall notify the Warrant Agent in writing of the name and address of any
agent not a party to this Warrant Agreement. If the Company fails to appoint or
maintain another entity as Warrant Registrar, the Warrant Agent shall act as
such. The Company or any of its subsidiaries may act as Warrant Registrar.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Warrants.
The Company initially appoints the Warrant Agent to act as the Warrant
Registrar with respect to the Global Warrants.
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3.4 Holder Lists.
The Warrant Agent shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders. If the Warrant Agent is not the Warrant Registrar, the Company
shall promptly furnish to the Warrant Agent at such times as the Warrant Agent
may request in writing, a list in such form and as of such date as the Warrant
Agent may reasonably require of the names and addresses of the Holders.
3.5 Transfer and Exchange.
(a) Transfer and Exchange of Global Warrants.
A Global Warrant may not be transferred as a whole except by the
Depositary to a nominee of the Depositary, by a nominee of the Depositary to the
Depositary or to another nominee of the Depositary, or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. All Global Warrants will be exchanged by the Company for Definitive
Warrants if (i) the Company delivers to the Warrant Agent notice from the
Depositary that it is unwilling or unable to continue to act as Depositary or
that it is no longer a clearing agency registered under the Exchange Act and, in
either case, a successor Depositary is not appointed by the Company within 120
days after the date of such notice from the Depositary,(ii) the Company in its
sole discretion determines that the Global Warrants (in whole but not in part)
should be exchanged for Definitive Warrants which the Company will provide to
the Warrant Agent and delivers a written notice to such effect to the Warrant
Agent or (iii) an event of default under the Indenture of which an officer of
the Warrant Agent has actual notice has occurred and is continuing and the
Warrant Registrar has received a request from DTC to issue Definitive Warrants.
Upon the occurrence of either of the preceding events in (i), (ii) or (iii)
above, Definitive Warrants shall be issued in such names as the Depositary shall
instruct the Warrant Agent. Global Warrants also may be exchanged or replaced,
in whole or in part, as provided in Sections 3.6 and 3.7 hereof. A Global
Warrant may not be exchanged for another Warrant other than as provided in this
Section 3.5(a), however, beneficial interests in a Global Warrant may be
transferred and exchanged as provided in Section 3.5(b) or (c) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global
Warrants.
The transfer and exchange of beneficial interests in the Global
Warrants shall be effected through the Depositary, in accordance with the
provisions of this Warrant Agreement and the Applicable Procedures. Transfers
of beneficial interests in the Global Warrants also shall require compliance
with either subparagraph (i) or (ii) below, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Warrant.
Beneficial interests in any Global Warrant may be transferred to Persons
who take delivery thereof in the form of a beneficial interest in a Global
Warrant. No written orders or instructions shall be required to be
delivered to the Warrant Registrar to effect the transfers described in
this Section 3.5(b)(i).
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(ii) All Other Transfers and Exchanges of Beneficial Interests
in Global Warrants. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 3.5(b)(i) above, the
transferor of such beneficial interest must deliver to the Warrant
Registrar either (A) (1) a written order from a Participant or an Indirect
Participant given to the Depositary in accordance with the Applicable
Procedures directing the Depositary to credit or cause to be credited a
beneficial interest in another Global Warrant in an amount equal to the
beneficial interest to be transferred or exchanged and (2) instructions
given in accordance with the Applicable Procedures containing information
regarding the Participant account to be credited with such increase or (B)
(1) a written order from a Participant or an Indirect Participant given to
the Depositary in accordance with the Applicable Procedures directing the
Depositary to cause to be issued a Definitive Warrant in an amount equal to
the beneficial interest to be transferred or exchanged and (2) instructions
given by the Depositary to the Warrant Registrar containing information
regarding the Person in whose name such Definitive Warrant shall be
registered. Upon satisfaction of all of the requirements for transfer or
exchange of beneficial interests in Global Warrants contained in this
Agreement and the Warrants or otherwise applicable under the Securities
Act, the Warrant Agent shall adjust the principal amount of the relevant
Global Warrant(s) pursuant to Section 3.5(g) hereof.
(c) Transfer and Exchange of Beneficial Interests for Definitive
Warrants.
(i) Beneficial Interests in Global Warrants to Definitive
Warrants. If any holder of a beneficial interest in an Global Warrant
proposes to exchange such beneficial interest for a Definitive Warrant or
to transfer such beneficial interest to a Person who takes delivery thereof
in the form of a Definitive Warrant, then, upon satisfaction of the
conditions set forth in Section 3.5(b)(ii) hereof, the Warrant Agent shall
cause the amount of the applicable Global Warrant to be reduced accordingly
pursuant to Section 3.5(g) hereof, and the Company shall execute and
deliver to the Warrant Agent a Definitive Warrant and the Warrant Agent
shall countersign and deliver to the Person designated in the instructions
the Definitive Warrant in the appropriate principal amount. Any Definitive
Warrant issued in exchange for a beneficial interest pursuant to this
Section 3.5(c)(i) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Warrant Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Warrant Agent
shall deliver such Definitive Warrants to the Persons in whose names such
Warrants are so registered.
(d) Transfer and Exchange of Definitive Warrants for Beneficial
Interests.
(i) Definitive Warrants to Beneficial Interests in Global
Warrants. A Holder of a Definitive Warrant may exchange such Warrant for a
beneficial interest in a Global Warrant or transfer such Definitive
Warrants to a Person who takes delivery thereof in the form of a beneficial
interest in a Global Warrant at any time. Upon receipt of a request for
such an exchange or transfer, the Warrant Agent shall cancel the applicable
Definitive Warrant and increase or cause to be increased the amount of one
of the Global Warrants.
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(e) Transfer and Exchange of Definitive Warrants for Definitive
Warrants.
Upon request by a Holder of Definitive Warrants and such Holder's
compliance with the provisions of this Section 3.5(e), the Warrant Registrar
shall register the transfer or exchange of Definitive Warrants. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Warrant Registrar the Definitive Warrants duly endorsed or
accompanied by a written instruction of transfer in form satisfactory to the
Warrant Registrar duly executed by such Holder or by its attorney, duly
authorized in writing. In addition, the requesting Holder shall provide any
additional certifications, documents and information, as applicable, required
pursuant to the following provisions of this Section 3.5(e).
(i) Definitive Warrants to Definitive Warrants. A Holder of
Definitive Warrants may transfer such Warrants to a Person who takes
delivery thereof in the form of a Definitive Warrant. Upon receipt of a
request to register such a transfer, the Warrant Registrar shall register
the Definitive Warrants pursuant to the instructions from the Holder
thereof.
(f) Legends.
The following legends shall appear on the face of all Global Warrants
and Definitive Warrants issued under this Warrant Agreement unless specifically
stated otherwise in the applicable provisions of this Warrant Agreement.
(i) Global Warrant Legend. Each Global Warrant shall bear a
legend in substantially the following form:
"THIS GLOBAL WARRANT IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
WARRANT AGREEMENT GOVERNING THIS WARRANT) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY
PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE WARRANT AGENT MAY MAKE
SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 3.5 OF THE
WARRANT AGREEMENT, (II) THIS GLOBAL WARRANT MAY BE EXCHANGED IN WHOLE BUT
NOT IN PART PURSUANT TO SECTION 3.5(a) OF THE WARRANT AGREEMENT, (III) THIS
GLOBAL WARRANT MAY BE DELIVERED TO THE WARRANT AGENT FOR CANCELLATION
PURSUANT TO SECTION 3.8 OF THE WARRANT AGREEMENT AND (IV) THIS GLOBAL
WARRANT MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF THE COMPANY."
(ii) Unit Legend. Each Warrant issued prior to the Separation
Date shall bear a legend in substantially the following form:
"THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED
AS PART OF AN ISSUANCE OF UNITS (THE "UNITS"), EACH
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OF WHICH CONSIST OF $1,000 PRINCIPAL AMOUNT AT MATURITY OF THE __% SENIOR
SUBORDINATED DISCOUNT NOTES DUE 2009 OF AIRGATE PCS, INC. (THE "NOTES") AND
WARRANTS (THE "WARRANTS") INITIALLY ENTITLING THE HOLDER THEREOF TO
PURCHASE SHARES OF COMMON STOCK, PAR VALUE $0.01 PER SHARE, OF AIRGATE PCS,
INC.
"PRIOR TO THE EARLIEST OF (I) 180 DAYS AFTER THE CLOSING OF THE
OFFERING OF THE UNITS, (II) THE OCCURRENCE OF A CHANGE OF CONTROL OR AN
EVENT OF DEFAULT (EACH AS DEFINED IN THE INDENTURE GOVERNING THE NOTES) AND
(III) SUCH DATE AS DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION IN
ITS SOLE DISCRETION SHALL DETERMINE, THE WARRANTS EVIDENCED BY THIS
CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE
TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE NOTES."
(g) Cancellation and/or Adjustment of Global Warrants.
At such time as all beneficial interests in a particular Global
Warrant have been exercised or exchanged for Definitive Warrants or a particular
Global Warrant has been exercised, redeemed, repurchased or canceled in whole
and not in part, each such Global Warrant shall be returned to or retained and
canceled by the Warrant Agent in accordance with Section 3.8 hereof. At any time
prior to such cancellation, if any beneficial interest in a Global Warrant is
exercised or exchanged for or transferred to a Person who will take delivery
thereof in the form of a beneficial interest in another Global Warrant or for
Definitive Warrants, the amount of Warrants represented by such Global Warrant
shall be reduced accordingly and an endorsement shall be made on such Global
Warrant by the Warrant Agent or by the Depositary at the direction of the
Warrant Agent to reflect such reduction; and if the beneficial interest is being
exchanged for or transferred to a Person who will take delivery thereof in the
form of a beneficial interest in another Global Warrant, such other Global
Warrant shall be increased accordingly and an endorsement shall be made on such
Global Warrant by the Warrant Agent or by the Depositary at the direction of the
Warrant Agent to reflect such increase.
(h) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Warrant Agent shall countersign Global
Warrants and Definitive Warrants upon the Company's order or at the Warrant
Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Warrant or to a holder of a Definitive Warrant for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith.
(iii) All Global Warrants and Definitive Warrants issued upon any
registration of transfer or exchange of Global Warrants or Definitive
Warrants shall be the
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duly authorized, executed and issued warrants for Common Stock of the
Company, not subject to any preemptive rights, and entitled to the same
benefits under this Warrant Agreement, as the Global Warrants or Definitive
Warrants surrendered upon such registration of transfer or exchange.
(iv) Prior to due presentment for the registration of a transfer
of any Warrant, the Warrant Agent and the Company may deem and treat the
Person in whose name any Warrant is registered as the absolute owner of
such Warrant for all purposes and neither the Warrant Agent nor the Company
shall be affected by notice to the contrary.
(v) The Warrant Agent shall countersign Global Warrants and
Definitive Warrants in accordance with the provisions of Section 3.2
hereof.
(i) Facsimile Submissions to Warrant Agent.
All certifications, certificates and Opinions of Counsel required to
be submitted to the Warrant Registrar pursuant to this Section 3.5 to effect a
registration of transfer or exchange may be submitted by facsimile with the
original to follow immediately thereafter.
The Warrant Registrar shall not be responsible for confirming the
truth or accuracy of representations made in any such certifications or
certificates. As to any Opinions of Counsel delivered pursuant to this Section
3.5, the Warrant Registrar may rely upon, and be fully protected in relying
upon, such opinions.
3.6 Replacement Warrants.
If any mutilated Warrant is surrendered to the Warrant Agent or the
Company and the Warrant Agent receives evidence to its satisfaction of the
destruction, loss or theft of any Warrant, the Company shall issue and the
Warrant Agent, upon receipt of a Warrant Countersignature Order, shall
countersign a replacement Warrant if the Warrant Agent's requirements are met.
If required by the Warrant Agent or the Company, an indemnity bond must be
supplied by the Holder that is sufficient in the judgment of the Warrant Agent
and the Company to protect the Company, the Warrant Agent, any Agent and any
agent for purposes of the countersignature from any loss that any of them may
suffer if a Warrant is replaced. The Company may charge for its expenses in
replacing a Warrant.
Every replacement Warrant is an additional warrant of the Company and
shall be entitled to all of the benefits of this Warrant Agreement equally and
proportionately with all other Warrants duly issued hereunder.
3.7 Temporary Warrants.
Until certificates representing Warrants are ready for delivery, the
Company may prepare and the Warrant Agent, upon receipt of a Warrant
Countersignature Order, shall issue temporary Warrants. Temporary Warrants
shall be substantially in the form of certificated Warrants
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but may have variations that the Company considers appropriate for temporary
Warrants and as shall be reasonably acceptable to the Warrant Agent. Without
unreasonable delay, the Company shall prepare and the Warrant Agent shall
countersign definitive Warrants in exchange for temporary Warrants.
Holders of temporary Warrants shall be entitled to all of the
benefits of this Warrant Agreement.
3.8 Cancellation.
Subject to Section 3.5(g) hereof, the Company at any time may deliver
Warrants to the Warrant Agent for cancellation. The Warrant Registrar and
Warrant Paying Agent shall forward to the Warrant Agent any Warrants surrendered
to them for registration of transfer, exchange or exercise. The Warrant Agent
and no one else shall cancel all Warrants surrendered for registration of
transfer, exchange, exercise, replacement or cancellation and shall destroy
canceled Warrants (subject to the record retention requirement of the Exchange
Act). Certification of the destruction of all canceled Warrants shall be
delivered to the Company. The Company may not issue new Warrants to replace
Warrants that have been exercised or that have been delivered to the Warrant
Agent for cancellation.
SECTION 4. SEPARATION OF WARRANTS; TERMS OF WARRANTS; EXERCISE OF WARRANTS.
(a) The Notes and Warrants will not be separately transferable until
the Separation Date. Subject to the terms of this Agreement, each Holder shall
have the right, which may be exercised during the period commencing at the
opening of business on the Separation Date and until 5:00 p.m., New York City
time on October 1, 2009 (the "Exercise Period"), to receive from the Company
the number of fully paid and nonassessable Warrant Shares which the Holder may
at the time be entitled to receive on exercise of such Warrants and payment of
the exercise price (the "Exercise Price") (i) by tendering Notes having an
aggregate principal amount at maturity, plus accrued and unpaid interest, if any
thereon to the date of exercise (or, if such exercise takes place prior to
October 1, 2004, an Accreted Value on the date of exercise) or (ii) in cash, by
wire transfer or by certified or official check payable to the order of the
Company, in each case, equal to the Exercise Price then in effect for such
Warrant Shares; provided that Holders shall be able to exercise their Warrants
only if a Registration Statement relating to the Warrant Shares 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 the applicable securities laws of the states
in which the various Holders of the Warrants or other persons to whom it is
proposed that the Warrant Shares be issued on exercise of the Warrants reside.
Each Warrant not exercised prior to 5:00 p.m., New York City time, on October 1,
2009 (the "Expiration Date") shall become void and all rights thereunder and all
rights in respect thereof under this agreement shall cease as of such time. No
adjustments as to dividends will be made upon exercise of the Warrants.
(b) In order to exercise all or any of the Warrants represented by a
Warrant Certificate, the holder thereof must deliver to the Warrant Agent at its
corporate trust office set forth
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in Section 15 hereof the Warrant Certificate and the form of election to
purchase on the reverse thereof duly filled in and signed, which signature shall
be medallion guaranteed by an institution which is a member of a Securities
Transfer Association recognized signature guarantee program, and upon payment to
the Warrant Agent for the account of the Company of the Exercise Price, which is
set forth in the form of Warrant Certificate attached hereto as Exhibit A, as
adjusted as herein provided, for the number of Warrant Shares in respect of
which such Warrants are then exercised. Payment of the aggregate Exercise Price
shall be made (i) in cash, by wire transfer or by certified or official bank
check payable to the order of the Company or (ii) by tendering Notes in the
manner provided in Section 4(a) hereof.
(c) Subject to the provisions of Section 5 hereof, upon compliance
with clause (b) above, the Warrant Agent shall deliver or cause to be delivered
with all reasonable dispatch, to or upon the written order of the Holder and in
such name or names as the Holder may designate, a certificate or certificates
for the number of whole Warrant Shares issuable upon the exercise of such
Warrants, together with cash as provided in Section 9 hereof; provided that if
any consolidation, merger or lease or sale of assets is proposed to be effected
by the Company as described in Section 8(l) hereof, or a tender offer or an
exchange offer for shares of Common Stock shall be made, upon such surrender of
Warrants and payment of the Exercise Price as aforesaid, the Warrant Agent
shall, as soon as possible, but in any event not later than two Business Days
thereafter, deliver or cause to be delivered the full number of Warrant Shares
issuable upon the exercise of such Warrants in the manner described in this
sentence or other securities or property to which such Holder is entitled
hereunder, together with cash as provided in Section 9 hereof. Such certificate
or certificates shall be deemed to have been issued and any person so designated
to be named therein shall be deemed to have become a Holder of record of such
Warrant Shares as of the date of the surrender of such Warrants and payment of
the Exercise Price.
(d) The Warrants shall be exercisable, at the election of the Holders
thereof, either in full or from time to time in part. If less than all the
Warrants represented by a Definitive Warrant are exercised, such Definitive
Warrant shall be surrendered and a new Definitive Warrant of the same tenor and
for the number of Warrants which were not exercised shall be executed by the
Company and delivered to the Warrant Agent and the Warrant Agent shall
countersign the new Definitive Warrant, registered in such name or names as may
be directed in writing by the Holder, and shall deliver the new Definitive
Warrant to the Person or Persons entitled to receive the same. The Warrant Agent
shall make such notations on the Schedule of Exchange of Interests of Global
Warrants to each Global Warrant as are required to reflect any change in the
number of Warrants represented by such Global Warrant resulting from any
exercise in accordance with the terms hereof.
(e) All Warrant Certificates surrendered upon exercise of Warrants
shall be cancelled by the Warrant Agent. Such cancelled Warrant Certificates
shall then be disposed of by the Warrant Agent in a manner satisfactory to the
Company. The Warrant Agent shall account promptly to the Company with respect
to Warrants exercised and concurrently pay to the Company all monies received by
the Warrant Agent for the purchase of the Warrant Shares through the exercise of
such Warrants.
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(f) The Warrant Agent shall keep copies of this Agreement and any
notices given or received hereunder available for inspection by the Holders
during normal business hours at its office. The Company shall supply the
Warrant Agent from time to time with such numbers of copies of this Agreement as
the Warrant Agent may request.
SECTION 4A. SHELF REGISTRATION AND PROCEDURES
(a) The Company shall (i) cause the Shelf Registration to be filed
with the Commission in no event later than 60 days after the Closing Date (such
60/th/ day being the "Filing Deadline") and (ii) use its reasonable best efforts
to cause such Shelf Registration to become effective as promptly as reasonably
practical, but in no event later than 120 days after the Closing Date (such
120/th/ day being the "Effectiveness Deadline").
(b) In connection with the preparation and filing of the initial
Shelf Registration, the Company shall as promptly as practicable furnish to
Donaldson, Lufkin & Jenrette Securities Corporation copies, as proposed to be
filed, of the Registration Statement and any Prospectus included therein and any
amendments or supplements to such Registration Statement and Prospectus, in each
with respect to only those proposed filings during the period prior to the
Effectiveness Deadline, which documents will be subject to the review and
comment of Donaldson, Lufkin & Jenrette Securities Corporation for a period of
at least five Business Days. The Company will not file any such initial
Registration Statement or Prospectus or any amendment or supplement to such
Registration Statement or Prospectus, in each with respect to only those
proposed filings during the period prior to the Effectiveness Deadline, to which
Donaldson, Lufkin & Jenrette Securities Corporation shall reasonably object
within five Business Days after the receipt of copies thereof. An objection by
Donaldson, Lufkin & Jenrette Securities Corporation shall be deemed reasonable
if such Registration Statement, amendment, Prospectus or supplement, as
applicable, as proposed to be filed, contains an untrue statement of a material
fact or omits to state a material fact necessary to make the statements therein
not misleading or fails to comply with the applicable requirements of the
Securities Act;
(c) To the extent necessary to ensure that the Shelf Registration is
available for the exercise of the Warrants by the Holders thereof entitled to
the benefits of this Section 4A, the Company shall use its best efforts to keep
any Shelf Registration required by this Section 4A continuously effective,
supplemented, amended and current as required by and subject to the provisions
of Section 4A(e) hereof and in conformity with the requirements of this
Agreement, the Securities Act and the policies, rules and regulations of the
Commission as amended from time to time until the later of the date on which (a)
all of the Warrants have been exercised or (b) the Warrants have expired.
(d) [Intentionally left blank]
(e) In connection with any Registration Statement and any related
Prospectus required by this Agreement, the Company shall:
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(i) use its reasonable best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 4A of this Agreement. Upon
the occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain an untrue
statement of material fact or omit to state any material fact necessary to
make the statements therein not misleading or (B) not to be effective and
usable for the exercise of Warrants during the period required by this
Agreement, the Company shall file promptly an appropriate amendment to such
Registration Statement curing such defect, and, if Commission review is
required, use its reasonable best efforts to cause such amendment to be
declared effective as soon as practicable.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as may
be necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 hereof; cause the Prospectus to be
supplemented by any required Prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the Securities Act, and to comply
fully with Rules 424, 430A and 462, as applicable, under the Securities Act
in a timely manner; and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with the
intended method or methods of exercise by the Holders of Warrants thereof
set forth in such Registration Statement or supplement to the Prospectus;
(iii) advise each Holder promptly and, if requested by such
Person, confirm such advice in writing, (A) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to any applicable Registration Statement or any post-effective
amendment thereto, when the same has become effective, (B) of the issuance
by the Commission of any stop order suspending the effectiveness of the
Registration Statement under the Securities Act or of the suspension by any
state securities commission of the qualification of the Warrant Shares for
offering or sale in any jurisdiction, or the initiation of any proceeding
for any of the preceding purposes, (C) of the existence of any fact or the
happening of any event that makes any statement of a material fact made in
the Registration Statement, the Prospectus, any amendment or supplement
thereto or any document incorporated by reference therein untrue, or that
requires the making of any additions to or changes in the Registration
Statement in order to make the statements therein not misleading, or that
requires the making of any additions to or changes in the Prospectus in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading. If at any time the Commission
shall issue any stop order suspending the effectiveness of the Registration
Statement, or any state securities commission or other regulatory authority
shall issue an order suspending the qualification or exemption from
qualification of the Warrant Shares or the exercise of the Warrants under
state securities or Blue Sky laws, the Company shall use its best efforts
to obtain the withdrawal or lifting of such order at the earliest possible
time;
(iv) subject to Section 4A(e)(i), if any fact or event
contemplated by Section 4A(e)(iii)(C) above shall exist or have occurred,
prepare a supplement or post-
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<PAGE>
effective amendment to the Registration Statement or related Prospectus or
any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Warrant
Shares, the Prospectus will not contain an untrue statement of a material
fact or omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading;
(v) advise each Holder promptly if the Company, pursuant to
this Section, decides to suspend the use of any prospectus (and shall not
be required to amend or supplement the Shelf Registration, 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 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, any
related prospectus or any document incorporated therein by reference as
then amended or supplemented or proposed to be filed would, in the good
faith judgment of the Company, 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) the Company determines in its good faith
judgment that the disclosure of such event at such time would have a
material adverse effect on its business, operations or prospects or (B) the
disclosure otherwise relates to a material business transaction or
development which has not yet been publicly disclosed;
(vi) deliver to each Holder without charge a copy of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto;
(vii) provide a CUSIP number for all Warrant Shares not later
than the effective date of a Registration Statement covering such Warrant
Shares and provide the Trustee under the Indenture with printed
certificates for the Warrant Shares which are in a form eligible for
deposit with the Depository Trust Company; and
(viii) otherwise use their its best efforts to comply with all
applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to any applicable
Registration Statement, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be audited
covering a twelve-month period beginning after the effective date of the
Registration Statement (as such term is defined in paragraph (c) of Rule
158 under the Securities Act.
(f) Restrictions on Holders. Each Holder agrees by acquisition of
-----------------------
Warrant Shares that, upon receipt of the notice referred to in Section
4A(e)(iii)(B) or any notice from the Company of the existence of any fact of the
kind described in Section 4A(e)(iii)(C) hereof or the determination by the
Company of any event described in Section 4A(e)(vi) (in each case, a "Suspension
Notice"), such Holder will forthwith discontinue the exercise of Warrants
pursuant to the applicable Registration Statement until (i) such Holder has
received copies of the supplemented or amended Prospectus contemplated by
Section 4A(e)(iv) hereof, or (ii) such Holder is advised in
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<PAGE>
writing by the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings that are incorporated
by reference in the Prospectus (in each case, the "Recommencement Date"). Each
Holder receiving a Suspension Notice hereby agrees that it will either (i)
destroy any Prospectuses, other than permanent file copies, then in such
Holder's possession which have been replaced by the Company with more recently
dated Prospectuses or (ii) deliver to the Company (at the Company's expense) all
copies, other than permanent file copies, then in such Holder's possession of
the Prospectus covering such Warrant Shares that was current at the time of
receipt of the Suspension Notice. The time period regarding the effectiveness of
such Registration Statement set forth in Section 4A hereof shall be extended by
a number of days equal to the number of days in the period from and including
the date of delivery of the Suspension Notice to the date of delivery of the
Recommencement Date.
(g) Liquidated Damages. The Company and the underwriters party to the
------------------
Underwriting Agreement agree that the Holders will suffer damages if the Company
fails to fulfill its obligations pursuant to paragraphs (a), (c) and (e) of
Section 4A of this Warrant Agreement and that it would not be possible to
ascertain the extent of such damages. Accordingly, in the event of such failure
by the Company to fulfill such obligations, the Company hereby agrees to pay
liquidated damages ("Liquidated Damages") to each Holder under the circumstances
and to the extent set forth below:
(i) if the Shelf Registration has not been filed with the
Commission within 60 days after the Closing Date;
(ii) if the Shelf Registration has not been declared effective
by the Commission within 120 days after the Closing Date; or
(iii) if the Shelf Registration has been declared effective by
the Commission and such Shelf Registration ceases to be effective or usable
at any time, subject to Section 4A(e)(vi), until the later of the date on
which (A) all of the Warrants have been exercised or (B) the Warrants have
expired (the "Effectiveness Period"), without being succeeded on the same
day immediately by a post-effective amendment to such Registration
Statement that cures such failure and that is itself immediately declared
effective on the same day;
(any of the foregoing, a "Registration Default") then the Company shall pay
Liquidated Damages to each Holder in an amount equal to $0.03 per week per
Warrant 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 $0.02 per week per Warrant with respect to each subsequent 90-day
period, up to a maximum amount of Liquidated Damages equal to $0.07 per week per
Warrant. The provision for Liquidated Damages will continue until such
Registration Default has been cured. The Company will not be required to pay
Liquidated Damages for more than one Registration Default at any given time. A
Registration Default under clause (i) above shall be cured on the date that the
Shelf Registration is filed with the Commission; a Registration Default under
clause (ii) above shall be cured on the date that the Shelf Registration is
declared effective by the Commission; a Registration Default under
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<PAGE>
clause (iii) above shall be cured on the earlier of (A) the date that the post-
effective amendment curing the deficiency in the Shelf Registration is declared
effective or (B) the Effectiveness Period expires.
(h) Payment of Liquidated Damages. The Company shall notify the
-----------------------------
Warrant Agent within one Business Day after each and every date on which a
Registration Default occurs (an "Event Date"). Liquidated Damages shall accrue
from the most recent date to which Liquidated Damages have been paid or, if no
Liquidated Damages have been paid, from the date hereof. Liquidated Damages
accrued as of April 1 or October 1 of each year (each a "Payment Date") will be
payable on such Payment Date. The Company shall pay Liquidated Damages on the
applicable Payment Date to the Persons who are Holders of Warrants at the close
of business on the March 15 or September 15 next preceding the Payment Date.
Liquidated Damages shall be payable at the office of the Warrant Agent or, at
the option of the Company, payment of Liquidated Damages may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
provided that payment by wire transfer of immediately available funds shall be
required with respect to the Liquidated Damages on all Warrants the Holders of
which shall have provided written wire transfer instructions to the Company and
the Warrant Agent. Such payment shall be in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts.
SECTION 5. PAYMENT OF TAXES.
The Company will pay all documentary stamp taxes attributable to the
initial issuance of Warrant Shares upon the exercise of Warrants; provided that
the Company shall not be required to pay any tax or taxes which may be payable
in respect of any transfer involved in the issue of any Warrant Certificates or
any certificates for Warrant Shares in a name other than that of the registered
holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and
the Company shall not be required to issue or deliver such Warrant Certificates
unless or until the person or persons requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to the
satisfaction of the Company that such tax has been paid.
SECTION 6. RESERVATION OF WARRANT SHARES.
(a) The Company will at all times reserve and keep available, free
from preemptive rights, out of the aggregate of its authorized but unissued
Common Stock or its authorized and issued Common Stock held in its treasury, for
the purpose of enabling it to satisfy any obligation to issue Warrant Shares
upon exercise of Warrants, the maximum number of shares of Common Stock which
may then be deliverable upon the exercise of all outstanding Warrants.
(b) The Company or, if appointed, the transfer agent for the Common
Stock (the "Transfer Agent") and every subsequent transfer agent for any shares
of the Company's capital stock issuable upon the exercise of any of the rights
of purchase aforesaid will be irrevocably authorized and directed at all times
to reserve such number of authorized shares as shall be required for such
purpose. The Company will keep a copy of this Agreement on file with the
Transfer Agent and with every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the
17
<PAGE>
exercise of the rights of purchase represented by the Warrants. The Warrant
Agent is hereby irrevocably authorized to requisition from time to time from
such Transfer Agent the stock certificates required to honor outstanding
Warrants upon exercise thereof in accordance with the terms of this Agreement.
The Company will supply such Transfer Agent with duly executed certificates for
such purposes and will provide or otherwise make available any cash which may be
payable as provided in Section 9 hereof. The Company will furnish such Transfer
Agent a copy of all notices of adjustments, and certificates related thereto,
transmitted to each Holder pursuant to Section 10 hereof.
(c) Before taking any action which would cause an adjustment pursuant
to Section 8 hereof to reduce the Exercise Price below the then par value (if
any) of the Warrant Shares, the Company will take any corporate action which
may, in the opinion of its counsel (which may be counsel employed by the
Company), be necessary in order that the Company may validly and legally issue
fully paid and nonassessable Warrant Shares at the Exercise Price as so
adjusted.
(d) The Company covenants that all Warrant Shares which may be issued
upon exercise of Warrants will, upon issue, be fully paid, nonassessable, free
of preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issuance thereof.
SECTION 7. OBTAINING STOCK EXCHANGE LISTINGS.
The Company will from time to time take all action which may be
necessary so that the Warrant Shares, immediately upon their issuance upon the
exercise of Warrants, will be listed on the principal securities exchanges,
automated quotation systems or other markets within the United States of
America, if any, on which other shares of Common Stock are then listed, if any.
SECTION 8. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES ISSUABLE.
The Exercise Price and the number of Warrant Shares issuable upon the
exercise of each Warrant are subject to adjustment from time to time upon the
occurrence of the events enumerated in this Section 8. For purposes of this
Section 8, "Common Stock" means shares now or hereafter authorized of any class
of common stock of the Company and any other stock of the Company, however
designated, that has the right (subject to any prior rights of any class or
series of preferred stock) to participate in any distribution of the assets or
earnings of the Company without limit as to per share amount.
(a) Adjustment for Change in Capital Stock.
If the Company (i) pays a dividend or makes a distribution on its
Common Stock in shares of its Common Stock, (ii) subdivides its outstanding
shares of Common Stock into a greater number of shares, (iii) combines its
outstanding shares of Common Stock into a smaller number of shares, (iv) makes a
distribution on its Common Stock in shares of its capital stock other than
Common Stock or (v) issues by reclassification of its Common Stock any shares of
its capital stock, then the Exercise Price in effect immediately prior to such
action shall be proportionately adjusted
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<PAGE>
so that the Holder of any Warrant thereafter exercised may receive the aggregate
number and kind of shares of capital stock of the Company which he would have
owned immediately following such action if such Warrant had been exercised
immediately prior to such action.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If, after an adjustment, a Holder of a Warrant upon exercise of it may receive
shares of two or more classes of capital stock of the Company, the Company shall
determine, in good faith, the allocation of the adjusted Exercise Price between
the classes of capital stock. After such allocation, the exercise privilege and
the Exercise Price of each class of capital stock shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Stock in this
Section 8. Such adjustment shall be made successively whenever any event listed
above shall occur.
(b) Adjustment for Rights Issue.
If the Company distributes any rights, options or warrants to all
holders of its Common Stock entitling them for a period expiring within 45 days
after the record date mentioned below to purchase shares of Common Stock at a
price per share less than the Fair Value (as defined herein) per share on that
record date, the Exercise Price shall be adjusted in accordance with the
formula:
N x P
O + -----
M
E' = E x ---------
O + N
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
O = the number of shares of Common Stock outstanding on the
record date.
N = the number of additional shares of Common Stock issued
pursuant to such rights, options or warrants.
P = the aggregate price per share of the additional shares.
M = the Fair Value per share of Common Stock on the record date.
The adjustment shall be made successively whenever any such rights,
options or warrants are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
rights, options or warrants. If at the end of the period during which such
rights, options or warrants are exercisable, not all rights, options or
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<PAGE>
warrants shall have been exercised, the Exercise Price shall be immediately
readjusted to what it would have been if "N" in the above formula had been the
number of shares actually issued.
(c) Adjustment for Other Distributions.
If the Company distributes to all holders of its Common Stock any of
its assets or debt securities or any rights or warrants to purchase debt
securities of the Company, the Exercise Price shall be adjusted in accordance
with the formula:
M - F
E' = E x -----
M
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
M = the Fair Value per share of Common Stock on the record date
mentioned below.
F = the fair market value on the record date of the assets,
securities, rights or warrants to be distributed in respect
of one share of Common Stock as determined in good faith by
the Board of Directors of the Company (the "Board of
Directors").
The adjustment shall be made successively whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive the distribution.
This Section 8(c) does not apply to cash dividends or cash
distributions paid out of consolidated current or retained earnings as shown on
the books of the Company prepared in accordance with generally accepted
accounting principles. Also, this Section 8(c) does not apply to rights,
options or warrants referred to in Section 8(b) hereof.
(d) Adjustment for Common Stock Issue.
If the Company issues shares of Common Stock for a consideration per
share less than the Fair Value per share on the date the Company fixes the
offering price of such additional shares, the Exercise Price shall be adjusted
in accordance with the formula:
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<PAGE>
P
O + ---
M
E' = E x -------
A
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares outstanding immediately prior to the
issuance of such additional shares.
P = the aggregate consideration received for the issuance of
such additional shares.
M = the Fair Value per share on the date of issuance of such
additional shares.
A = the number of shares outstanding immediately after the
issuance of such additional shares.
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
This subsection (d) does not apply to:
(1) any of the transactions described in subsections (a), (b),
(c) and (i) of this Section 8,
(2) the exercise of Warrants, or the conversion or exchange of
other securities convertible or exchangeable for Common Stock the issuance
of which caused an adjustment to be made under Section 8(e),
(3) Common Stock issued to the Company's employees (or employees
of its subsidiaries) under bona fide employee benefit plans adopted by the
Board of Directors and approved by the holders of Common Stock when
required by law, if such Common Stock would otherwise be covered by this
subsection (d) (but only to the extent that the aggregate number of shares
excluded hereby and issued after the date of this Warrant
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<PAGE>
Agreement shall not exceed 5% of the Common Stock outstanding at the time
of the adoption of each such plan, exclusive of anti-dilution adjustments
thereunder),
(4) Common Stock issuable upon the exercise of warrants issued
to the holders of Common Stock.
(5) Common Stock issued to shareholders of any person which
merges into the Company, or with a subsidiary of the Company, in proportion
to their stock holdings of such person immediately prior to such merger,
upon such merger, provided that if such person is an Affiliate of the
Company, the Board of Directors shall have obtained a fairness opinion from
a nationally recognized investment banking, appraisal or valuation firm,
which is not an Affiliate of the Company, stating that the consideration
received in such merger is fair to the Company from a financial point of
view, or
(6) the issuance of shares of Common Stock pursuant to rights,
options or warrants which were originally issued in a Non-Affiliate Sale
(as defined below) together with one or more other securities as part of a
unit at a price per unit.
(e) Adjustment for Convertible Securities Issue.
If the Company issues any securities convertible into or exchangeable
for Common Stock (other than securities issued in transactions described in
subsections (b) and (c) of this Section 8) for a consideration per share of
Common Stock initially deliverable upon conversion or exchange of such
securities less than the Fair Value per share on the date of issuance of such
securities, the Exercise Price shall be adjusted in accordance with this
formula:
P
O + ---
M
E' = E x ------
O + D
where:
E' = the adjusted Exercise Price.
E = the then current Exercise Price.
O = the number of shares outstanding immediately prior to the
issuance of such securities.
P = the aggregate consideration received for the issuance of
such securities.
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<PAGE>
M = the Fair Value per share on the date of issuance of such
securities.
D = exchange for such securities at the initial conversion or
exchange rate. the maximum number of shares deliverable upon
conversion or in
The adjustment shall be made successively whenever any such issuance
is made, and shall become effective immediately after such issuance.
If all of the Common Stock deliverable upon conversion or exchange of
such securities have not been issued when such securities are no longer
outstanding, then the Exercise Price shall promptly be readjusted to the
Exercise Price which would then be in effect had the adjustment upon the
issuance of such securities been made on the basis of the actual number of
shares of Common Stock issued upon conversion or exchange of such securities.
This subsection (e) does not apply to convertible securities issued to
shareholders of any person which merges into the Company, or with a subsidiary
of the Company, in proportion to their stock holdings of such person immediately
prior to such merger, upon such merger, provided that if such person is an
Affiliate of the Company, the Board of Directors shall have obtained a fairness
opinion from a nationally recognized investment banking, appraisal or valuation
firm, which is not an Affiliate of the Company, stating that the consideration
received in such merger is fair to the Company from a financial point of view.
(f) Consideration Received.
For purposes of any computation respecting consideration received
pursuant to subsections (d), and (e) of this Section 8, the following shall
apply:
(i) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided that in
no case shall any deduction be made for any commissions, discounts or other
expenses incurred by the Company for any underwriting of the issue or
otherwise in connection therewith;
(ii) in the case of the issuance of shares of Common Stock for
a consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors (irrespective of the
accounting treatment thereof), whose determination shall be conclusive, and
described in a Board resolution which shall be filed with the Warrant
Agent;
(iii) in the case of the issuance of securities convertible into
or exchangeable for shares, the aggregate consideration received therefor
shall be deemed to be the consideration received by the Company for the
issuance of such securities plus the additional minimum consideration, if
any, to be received by the Company upon the conversion or exchange thereof
(the consideration in each case to be determined in the same manner as
provided in clauses (i) and (ii) of this subsection); and
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<PAGE>
(iv) in the case of the issuance of shares of Common Stock
pursuant to rights, options or warrants which rights, options or warrants
were originally issued together with one or more other securities as part
of a unit at a price per unit, the consideration shall be deemed to be the
fair value of such rights, options or warrants at the time of issuance
thereof as determined in good faith by the Board of Directors whose
determination shall be conclusive and described in a Board resolution which
shall be filed with the Warrant Agent plus the additional minimum
consideration, if any, to be received by the Company upon the exercise,
conversion or exchange thereof (as determined in the same manner as
provided in clauses (i) and (ii) of this subsection).
(g) Fair Value.
In Sections 8(d) and (e) hereof, the "Fair Value" per security at any
date of determination shall be (1) in connection with a sale by the Company to a
party that is not an Affiliate of the Company 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 by the Company to an Affiliate of the Company,
(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, 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 the Company, 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. Notwithstanding the foregoing, any sale to Donaldson, Lufkin
& Jenrette Securities Corporation (or any successor thereto) pursuant to an
underwritten public offering registered under the Securities Act shall be deemed
to be and treated as a Non-Affiliate Sale.
In Sections 8(b) and (c) hereof, the "Fair Value" per security at any
date of determination shall be (a) the last price per security at which such
security was sold by the Company 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, 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 the Company, 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.
For purposes of this Section 8(g), "Disinterested Director" means, in
connection with any issuance of securities that gives rise to a determination of
the Fair Value thereof, each member of the Board of Directors who is not an
officer, employee, director or other Affiliate of the party to whom the Company
is proposing to issue the securities giving rise to such determination.
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<PAGE>
For purposes of this Section 8(g), "Affiliate" of any specified Person
means (A) any other Person directly or indirectly controlling or controlled by
or under direct or indirect common control with such specified Person and (B)
any director, officer or employee of such specified person. For purposes of
this definition "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with") 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.
(h) When De Minimis Adjustment May Be Deferred.
No adjustment in the Exercise Price need be made unless the adjustment
would require an increase or decrease of at least 1% in the Exercise Price. Any
adjustments that are not made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 8 shall be made
to the nearest cent or to the nearest 1/100th of a share, as the case may be, it
being understood that no such rounding shall be made under subsection (p).
(i) When No Adjustment Required.
No adjustment need be made for a transaction referred to Section 8(a),
(b), (c), (d), (e) or (f) hereof, if Warrant Holders are to participate (without
being required to exercise their Warrants) in the transaction on a basis and
with notice that the Board of Directors determines to be fair and appropriate in
light of the basis and notice on which holders of Common Stock participate in
the transaction. No adjustment need be made for (i) rights to purchase Common
Stock pursuant to a Company plan for reinvestment of dividends or interest,(ii)
a change in the par value or no par value of the Common Stock, or (iii) the
adoption of a plan commonly referred to as a "Stockholders' Rights Plan" which
provides for the issuance of rights to acquire shares of capital stock upon the
occurrence of some event that is not within the control of the rights holders,
or the issuance of rights under such plan; provided that the issuance of capital
stock pursuant to such rights shall require adjustment to the Exercise Price and
number of shares of Common Stock purchasable upon the exercise of each Warrant
as set forth in this Agreement. To the extent the Warrants become convertible
into cash, no adjustment need be made thereafter as to the cash. Interest will
not accrue on the cash.
(j) Notice of Adjustment.
Whenever the Exercise Price is adjusted, the Company shall provide the
notices required by Section 10 hereof.
(k) Voluntary Reduction. The Company from time to time may reduce the
Exercise Price by any amount for any period of time, if the period is at least
20 days and if the reduction is irrevocable during the period; provided that in
no event may the Exercise Price be less than the par value of a share of Common
Stock. Whenever the Exercise Price is reduced, the Company shall mail to
Warrant Holders a notice of the reduction. The Company shall mail the notice at
least 15 days before the date the reduced Exercise Price takes effect. The
notice shall state
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<PAGE>
the reduced Exercise Price and the period in which it will be in effect. A
reduction of the Exercise Price does not change or adjust the Exercise Price
otherwise in effect for purposes of Section 8(a), (b), (c), (d), (e) and (f)
hereof.
(l) Notice of Certain Transactions.
If (i) the Company takes any action that would require an adjustment
in the Exercise Price pursuant to Section 8(a), (b), (c), (d), (e) or (f) hereof
and if the Company does not arrange for Warrant Holders to participate pursuant
to Section 8(i) hereof, (ii) the Company takes any action that would require a
supplemental Warrant Agreement pursuant to Section 8(m) hereof or (iii) there is
a liquidation or dissolution of the Company, then the Company shall mail to
Warrant Holders a notice stating the proposed record date for a dividend or
distribution or the proposed effective date of a subdivision, combination,
reclassification, consolidation, merger, transfer, lease, liquidation or
dissolution. The Company shall mail the notice at least 15 days before such
date. Failure to mail the notice or any defect in it shall not affect the
validity of the transaction.
(m) Reorganization of Company.
Immediately after the date hereof, if the Company consolidates or
merges with or into, or transfers or leases all or substantially all its assets
to, any person, upon consummation of such transaction the Warrants shall
automatically become exercisable for the kind and amount of securities, cash or
other assets which the Holder of a Warrant would have owned immediately after
the consolidation, merger, transfer or lease if the Holder had exercised the
Warrant immediately before the effective date of the transaction. Concurrently
with the consummation of such transaction, the corporation formed by or
surviving any such consolidation or merger if other than the Company, or the
person to which such sale or conveyance shall have been made, shall enter into a
supplemental Warrant Agreement so providing and further providing for
adjustments which shall be as nearly equivalent as may be practical to the
adjustments provided for in this Section 8(m). The successor Company shall mail
to Warrant Holders a notice describing the supplemental Warrant Agreement. If
the issuer of securities deliverable upon exercise of Warrants under the
supplemental Warrant Agreement is an affiliate of the formed, surviving,
transferee or lessee corporation, that issuer shall join in the supplemental
Warrant Agreement. If this Section 8(m) applies, Sections 8(a), (b), (c), (d),
(e) and (f) hereof do not apply.
(n) Company Determination Final.
Any determination that the Company or the Board of Directors must make
pursuant to Section 8(a), (c), (d), (e), (f), (g), (h) or (i) hereof is
conclusive.
(o) Warrant Agent's Disclaimer.
The Warrant Agent has no duty to determine when an adjustment under
this Section 8 should be made, how it should be made or what it should be. The
Warrant Agent has no duty to determine whether any provisions of a supplemental
Warrant Agreement under Section 8(m) hereof are correct. The Warrant Agent
makes no representation as to the validity or value of any securities
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<PAGE>
or assets issued upon exercise of Warrants. The Warrant Agent shall not be
responsible for the Company's failure to comply with this Section 8.
(p) When Issuance or Payment May Be Deferred.
In any case in which this Section 8 shall require that an adjustment
in the Exercise Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event (i)
issuing to the Holder of any Warrant exercised after such record date the
Warrant Shares and other capital stock of the Company, if any, issuable upon
such exercise over and above the Warrant Shares and other capital stock of the
Company, if any, issuable upon such exercise on the basis of the Exercise Price
and (ii) paying to such Holder any amount in cash in lieu of a fractional share
pursuant to Section 9 hereof; provided that the Company shall deliver to such
Holder a due bill or other appropriate instrument evidencing such Holder's right
to receive such additional Warrant Shares, other capital stock and cash upon the
occurrence of the event requiring such adjustment.
(q) Adjustment in Number of Shares.
Upon each adjustment of the Exercise Price pursuant to this Section 8,
each Warrant outstanding prior to the making of the adjustment in the Exercise
Price shall thereafter evidence the right to receive upon payment of the
adjusted Exercise Price that number of shares of Common Stock (calculated to the
nearest hundredth) obtained from the following formula:
E
N' = N x ---
E
where:
N' = the adjusted number of Warrant Shares issuable upon exercise
of a Warrant by payment of the adjusted Exercise Price.
N = the number or Warrant Shares previously issuable upon
exercise of a Warrant by payment of the Exercise Price prior
to adjustment.
E' = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
(r) Form of Warrants.
Irrespective of any adjustments in the Exercise Price or the number or
kind of shares purchasable upon the exercise of the Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement.
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<PAGE>
SECTION 9. FRACTIONAL INTERESTS.
The Company shall not be required to issue fractional Warrant Shares
on the exercise of Warrants. If more than one Warrant shall be presented for
exercise in full at the same time by the same Holder, the number of full Warrant
Shares which shall be issuable upon the exercise thereof shall be computed on
the basis of the aggregate number of Warrant Shares purchasable on exercise of
the Warrants so presented. If any fraction of a Warrant Share would, except for
the provisions of this Section 9, be issuable on the exercise of any Warrants
(or specified portion thereof), the Company shall pay an amount in cash equal to
the Fair Value per Warrant Share, as determined on the day immediately preceding
the date the Warrant is presented for exercise, multiplied by such fraction,
computed to the nearest whole U.S. cent.
SECTION 10. NOTICES TO WARRANT HOLDERS.
(a) Upon any adjustment of the Exercise Price pursuant to Section 8
hereof, the Company shall promptly thereafter (i) cause to be filed with the
Warrant Agent a certificate of a firm of independent public accountants of
recognized standing selected by the Board of Directors of the Company (who may
be the regular auditors of the Company) setting forth the Exercise Price after
such adjustment and setting forth in reasonable detail the method of calculation
and the facts upon which such calculations are based and setting forth the
number of Warrant Shares (or portion thereof) issuable after such adjustment in
the Exercise Price, upon exercise of a Warrant and payment of the adjusted
Exercise Price, which certificate shall be conclusive evidence of the
correctness of the matters set forth therein, and (ii) cause to be given to each
of the registered holders of Warrants at the address appearing on the Warrant
register for each such registered holder written notice of such adjustments by
first-class mail, postage prepaid. Where appropriate, such notice may be given
in advance and included as a part of the notice required to be mailed under the
other provisions of this Section 10.
(b) In case:
(i) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for or
purchase shares of Common Stock or of any other subscription rights or
warrants;
(ii) the Company shall authorize the distribution to all
holders of shares of Common Stock of evidences of its indebtedness or
assets (other than dividends or cash distributions paid out of consolidated
current or retained earnings as shown on the books of the Company prepared
in accordance with generally accepted accounting principles or dividends
payable in shares of Common Stock or distributions referred to in Section
8(a) hereof);
(iii) of any consolidation or merger to which the Company is a
party and for which approval of any stockholders of the Company is
required, or of the conveyance or transfer of the properties and assets of
the Company substantially as an entirety, or of any reclassification or
change of Common Stock issuable upon exercise of the Warrants (other
28
<PAGE>
than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination), or
a tender offer or exchange offer for shares of Common Stock;
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(v) the Company proposes to take any action (other than actions
of the character described in Section 8(a) hereof) which would require an
adjustment of the Exercise Price pursuant to Section 8 hereof;
then the Company shall cause to be filed with the Warrant Agent and shall cause
to be given to each of the registered holders of Warrants at his or her address
appearing on the Warrant register, at least 20 days (or 10 days in any case
specified in clauses (i) or (ii) above) prior to the applicable record date
hereinafter specified, or promptly in the case of events for which there is no
record date, by first-class mail, postage prepaid, a written notice stating (x)
the date as of which the holders of record of shares of Common Stock to be
entitled to receive any such rights, options, warrants or distribution are to be
determined, (y) the initial expiration date set forth in any tender offer or
exchange offer for shares of Common Stock, or (z) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up is expected to become effective or consummated, and the date as of which it
is expected that holders of record of shares of Common Stock shall be entitled
to exchange such shares for securities or other property, if any, deliverable
upon such reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up. The failure to give the notice required
by this Section 10 or any defect therein shall not affect the legality or
validity of any distribution, right, option, warrant, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any action.
(c) Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the Holders of Warrants the
right to vote or to consent or to receive notice as stockholders in respect of
the meetings of stockholders or the election of directors of the Company or any
other matter, or any rights whatsoever as stockholders of the Company.
SECTION 11. MERGER, CONSOLIDATION OR CHANGE OF NAME OF WARRANT AGENT.
(a) Any corporation into which the Warrant Agent may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor warrant agent under
the provisions of Section 13 hereof. In case at the time such successor to the
Warrant Agent shall succeed to the agency created by this Agreement, and in case
at that time any of the Warrant Certificates shall have been
29
<PAGE>
countersigned but not delivered, any such successor to the Warrant Agent may
adopt the countersignature of the original Warrant Agent; and in case at that
time any of the Warrant Certificates shall not have been countersigned, any
successor to the Warrant Agent may countersign such Warrant Certificates either
in the name of the predecessor Warrant Agent or in the name of the successor to
the Warrant Agent; and in all such cases such Warrant Certificates shall have
the full force and effect provided in the Warrant Certificates and in this
Agreement.
(b) In case at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrant Certificates shall have been
countersigned but not delivered, the Warrant Agent whose name has been changed
may adopt the countersignature under its prior name, and in case at that time
any of the Warrant Certificates shall not have been countersigned, the Warrant
Agent may countersign such Warrant Certificates either in its prior name or in
its changed name, and in all such cases such Warrant Certificates shall have the
full force and effect provided in the Warrant Certificates and in this
Agreement.
SECTION 12. WARRANT AGENT.
The Warrant Agent undertakes the duties and obligations imposed by
this Agreement upon the following terms and conditions, by all of which the
Company and the Holders of Warrants, by their acceptance thereof, shall be
bound:
(a) The statements contained herein and in the Warrant Certificates
shall be taken as statements of the Company and the Warrant Agent assumes no
responsibility for the correctness of any of the same except such as describe
the Warrant Agent or action taken or to be taken by it. The Warrant Agent
assumes no responsibility with respect to the distribution of the Warrant
Certificates except as herein otherwise provided.
(b) The Warrant Agent shall not be responsible for any failure of the
Company to comply with any of the covenants contained in this Agreement or in
the Warrant Certificates to be complied with by the Company.
(c) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any holder of
any Warrant Certificate in respect of any action taken, suffered or omitted by
it hereunder in good faith and in accordance with the opinion or the advice of
such counsel.
(d) The Warrant Agent shall incur no liability or responsibility to
the Company or to any holder of any Warrant Certificate for any action taken in
reliance on any Warrant Certificate, certificate of shares, notice, resolution,
waiver, consent, order, certificate, or other paper, document or instrument
believed by it to be genuine and to have been signed, sent or presented by the
proper party or parties.
(e) The Company agrees to pay to the Warrant Agent reasonable
compensation (which shall include the reasonable fees and expenses of its
counsel) for all services rendered by the Warrant Agent in the execution of this
Agreement, to reimburse the Warrant Agent for all expenses, taxes and
governmental charges and other charges of any kind and nature incurred by the
Warrant Agent in the execution of this Agreement. The Company shall indemnify
the Warrant Agent against
30
<PAGE>
any and all losses, liabilities or expenses incurred by it arising out of or in
connection with the acceptance or administration of its duties under this
Warrant Agreement, including the costs and expenses of enforcing this Warrant
Agreement against the Company and defending itself against any claim (whether
asserted by the Company or any Holder or any other person) or liability in
connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent any such loss, liability or expense may be
attributable to its gross negligence or wilful misconduct. The Warrant Agent
shall notify the Company promptly of any claim for which it may seek indemnity.
Failure by the Warrant Agent to so notify the Company shall not relieve the
Company of its obligations hereunder. The Company shall defend the claim and the
Warrant Agent shall cooperate in the defense. The Warrant Agent may have
separate counsel and the Company shall pay the reasonable fees and expenses of
such counsel. The Company need not pay for any settlement made without its
consent, which consent shall not be unreasonably withheld.
(f) The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to involve
expense unless the Company or one or more registered holders of Warrants shall
furnish the Warrant Agent with reasonable security and indemnity for any costs
and expenses which may be incurred, but this provision shall not affect the
power of the Warrant Agent to take such action as it may consider proper,
whether with or without any such security or indemnity. All rights of action
under this Agreement or under any of the Warrants may be enforced by the Warrant
Agent without the possession of any of the Warrant Certificates or the
production thereof at any trial or other proceeding relative thereto, and any
such action, suit or proceeding instituted by the Warrant Agent shall be brought
in its name as Warrant Agent and any recovery of judgment shall be for the
ratable benefit of the registered holders of the Warrants, as their respective
rights or interests may appear.
(g) The Warrant Agent, and any stockholder, director, officer or
employee of it, may buy, sell or deal in any of the Warrants or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Warrant Agent under this
Agreement. Nothing herein shall preclude the Warrant Agent from acting in any
other capacity for the Company or for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent for the
Company, and its duties shall be determined solely by the provisions hereof.
The Warrant Agent shall not be liable for anything which it may do or refrain
from doing in connection with this Agreement except for its own negligence or
bad faith.
(i) The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of any Warrant Certificate to make or cause to be
made any adjustment of the Exercise Price or number of the Warrant Shares or
other securities or property deliverable as provided in this Agreement, or to
determine whether any facts exist which may require any of such adjustments, or
with respect to the nature or extent of any such adjustments, when made, or with
respect to the method employed in making the same. The Warrant Agent shall not
be accountable with respect to the validity or value or the kind or amount of
any Warrant Shares or of any securities or property which may at any time be
issued or delivered upon the exercise of any Warrant or with respect to
31
<PAGE>
whether any such Warrant Shares or other securities will when issued be validly
issued and fully paid and nonassessable, and makes no representation with
respect thereto.
SECTION 13. CHANGE OF WARRANT AGENT.
If the Warrant Agent shall become incapable of acting as Warrant
Agent, the Company shall appoint a successor to such Warrant Agent. If the
Company shall fail to make such appointment within a period of 30 days after it
has been notified in writing of such incapacity by the Warrant Agent or by the
registered holder of a Warrant Certificate, then the registered holder of any
Warrant may apply to any court of competent jurisdiction for the appointment of
a successor to the Warrant Agent. Pending appointment of a successor to such
Warrant Agent, either by the Company or by such a court, the duties of the
Warrant Agent shall be carried out by the Company. The Holders of a majority of
the unexercised Warrants shall be entitled at any time to remove the Warrant
Agent and appoint a successor to such Warrant Agent. Such successor to the
Warrant Agent need not be approved by the Company or the former Warrant Agent.
After appointment, the successor to the Warrant Agent shall be vested with the
same powers, rights, duties and responsibilities as if it had been originally
named as Warrant Agent without further act or deed; provided that the former
Warrant Agent shall deliver and transfer to the successor to the Warrant Agent
any property at the time held by it hereunder and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Failure
to give any notice provided for in this Section 13, however, or any defect
therein, shall not affect the legality or validity of the appointment of a
successor to the Warrant Agent.
SECTION 14. REPORTS.
(a) Whether or not required by the rules and regulations of the
Commission, so long as any Warrants are outstanding, the Company shall furnish
to the Warrant Agent and the Holders of Warrants (i) 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 the Company 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 thereon by the Company's certified independent accountants and (ii) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports. In addition, whether or
not required by the rules and regulations of the Commission, the Company shall
file a copy of all such information and reports with the Commission for public
availability (unless the Commission shall not accept such a filing) and make
such information available to securities analysts and prospective investors upon
request.
(b) The Company shall provide the Warrant Agent with a sufficient
number of copies of all such reports that the Warrant Agent may be required to
deliver to the Holders of the Warrants under this Section 14.
32
<PAGE>
SECTION 15. NOTICES TO COMPANY AND WARRANT AGENT.
Any notice or demand authorized by this Agreement to be given or made
by the Warrant Agent or by the registered holder of any Warrant to or on the
Company shall be sufficiently given or made when received if deposited in the
mail, first class or registered, postage prepaid, addressed (until another
address is filed in writing by the Company with the Warrant Agent) as follows:
AirGate PCS, Inc.
Harris Tower
Suite 1700
233 Peachtree Street, N.E.
Atlanta, Georgia 30303
Telecopier No.: (404) 525-7922
Attention: President and Legal Department
With a copy to:
Patton Boggs LLP
2550 M Street, N.W.
Washington, D.C. 20037
Telecopier No.: (202) 457-6315
Attention: Mary M. Sjoquist, Esq.
In case the Company shall fail to maintain such office or agency or
shall fail to give such notice of the location or of any change in the location
thereof, presentations may be made and notices and demands may be served at the
principal office of the Warrant Agent.
Any notice pursuant to this Agreement to be given by the Company or by
the registered holder(s) of any Warrant to the Warrant Agent shall be
sufficiently given when and if deposited in the mail, first-class or registered,
postage prepaid, addressed (until another address is filed in writing by the
Warrant Agent with the Company) to the Warrant Agent as follows:
Bankers Trust Company
Four Albany Street - 4/th/ Floor
New York, New York 10006
Telecopier No.: (212) 250-6961
Attention: Corporate Trust and Agency Group,
Corporate Market Services
SECTION 16. SUPPLEMENTS AND AMENDMENTS.
The Company and the Warrant Agent may from time to time supplement or
amend this Agreement without the approval of any Holders of Warrants in order to
cure any ambiguity or
33
<PAGE>
to correct or supplement any provision contained herein which may be defective
or inconsistent with any other provision herein, or to make any other provisions
in regard to matters or questions arising hereunder which the Company and the
Warrant Agent may deem necessary or desirable and which shall not in any way
adversely affect the interests of the Holders of Warrants. Any amendment or
supplement to this Agreement that has an adverse effect on the interests of the
Holders of Warrants shall require the written consent of the Holders of a
majority of the then outstanding Warrants (excluding Warrants held by the
Company or any of its affiliates). The consent of each Holder of Warrants
affected shall 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 this Agreement).
SECTION 17. SUCCESSORS.
All the covenants and provisions of this Agreement by or for the
benefit of the Company or the Warrant Agent shall bind and inure to the benefit
of their respective successors and assigns hereunder including, without
limitation and without the need for an express assignment, subsequent Holders.
SECTION 18. TERMINATION.
This Agreement shall terminate at 5:00 p.m., New York City time on
September ____, 2009. Notwithstanding the foregoing, this Agreement will
terminate on any earlier date if all Warrants have been exercised. The
provisions of Section 12 shall survive such termination.
SECTION 19. GOVERNING LAW.
This Agreement and each Warrant Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of New York and for all
purposes shall be construed in accordance with the internal laws of said State.
SECTION 20. BENEFITS OF THIS AGREEMENT.
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company, the Warrant Agent and the registered holders
of Warrants any legal or equitable right, remedy or claim under this Agreement;
but this Agreement shall be for the sole and exclusive benefit of the Company,
the Warrant Agent and the registered holders of Warrants. The Company agrees
that the Holders of the Warrants shall be third-party beneficiaries to the
agreements made hereunder by the Company and each Holder shall have the right to
enforce such agreements directly to the extent it deems enforcement necessary or
advisable to protect its rights hereunder.
SECTION 21. COUNTERPARTS.
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
34
<PAGE>
[Signature Page Follows]
35
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, as of the day and year first above written.
AirGate PCS, Inc.
By:_____________________________________
Name:
Title:
Bankers Trust Company, as Warrant Agent
By:_____________________________________
Name:
Title:
<PAGE>
EXHIBIT A
[Form of Warrant Certificate]
[Face]
Unit Legend. Each Warrant issued prior to the Separation Date shall
bear the following legend (the "Unit Legend") on the face thereof:
THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS PART OF AN
ISSUANCE OF UNITS (THE "UNITS"), EACH OF WHICH CONSIST OF $1,000 PRINCIPAL
AMOUNT AT MATURITY OF THE __% SENIOR SUBORDINATED DISCOUNT NOTES DUE 2009 OF
AIRGATE PCS, INC. (THE "NOTES") AND _______ WARRANTS (THE "WARRANTS") INITIALLY
ENTITLING THE HOLDER THEREOF TO PURCHASE ___ SHARES OF COMMON STOCK, PAR VALUE
$0.01 PER SHARE, OF AIRGATE PCS, INC.
PRIOR TO THE EARLIEST OF (I) 180 DAYS AFTER THE CLOSING OF THE OFFERING OF THE
UNITS, (II) THE OCCURRENCE OF A CHANGE OF CONTROL OR AN EVENT OF DEFAULT (EACH
AS DEFINED IN THE INDENTURE GOVERNING THE NOTES) AND (III) SUCH DATE AS
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION IN ITS SOLE DISCRETION SHALL
DETERMINE, THE WARRANTS EVIDENCED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OR
EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER
WITH, THE NOTES.
[THIS GLOBAL WARRANT IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
WARRANT AGREEMENT GOVERNING THIS WARRANT) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY
PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE WARRANT AGENT MAY MAKE
SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 3.5 OF THE
WARRANT AGREEMENT, (II) THIS GLOBAL WARRANT MAY BE EXCHANGED IN WHOLE BUT
NOT IN PART PURSUANT TO SECTION 3.5(a) OF THE WARRANT AGREEMENT, (III) THIS
GLOBAL WARRANT MAY BE DELIVERED TO THE WARRANT AGENT FOR CANCELLATION
PURSUANT TO SECTION 3.8 OF THE WARRANT AGREEMENT AND (IV) THIS GLOBAL
WARRANT MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF THE COMPANY.]/1/
_________________
/1/ This paragraph should be included only if the Warrant is issued in global
form.
A-1
<PAGE>
No. ___________ ___Warrants
CUSIP No. ________
A-2
<PAGE>
Warrant Certificate
AIRGATE PCS, INC.
This Warrant Certificate certifies that Cede & Co., or its registered
assigns, is the registered holder of Warrants expiring September ____, 2009 (the
"Warrants") to purchase Common Stock, par value $.01 (the "Common Stock"), of
AirGate PCS, Inc., a Delaware corporation (the "Company"). Each Warrant
entitles the registered holder upon exercise at any time from 9:00 a.m. on the
Separation Date referred to below (the "Exercise Date") until 5:00 p.m. New
York City time on September ____, 2009, to receive from the Company ____ fully
paid and nonassessable shares of Common Stock (the "Warrant Shares") at the
initial exercise price (the "Exercise Price") of $0.01 per share payable upon
surrender of this Warrant Certificate and payment of the Exercise Price at the
office or agency of the Warrant Agent, but only subject to the conditions set
forth herein and in the Warrant Agreement referred to on the reverse hereof.
The Exercise Price and number of Warrant Shares issuable upon exercise of the
Warrants are subject to adjustment upon the occurrence of certain events set
forth in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York City time on
September ____, 2009, and to the extent not exercised by such time such Warrants
shall become void.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by
the Warrant Agent, as such term is used in the Warrant Agreement.
This Warrant Certificate shall be governed by and construed in
accordance with the internal laws of the State of New York.
A-3
<PAGE>
IN WITNESS WHEREOF, AirGate PCS, Inc. and AGW Leasing Company, Inc.
have caused this Warrant Certificate to be signed below.
Dated: September __, 1999
AirGate PCS, Inc.
By:_____________________________________
Name:
Title:
Countersigned:
Bankers Trust Company
as Warrant Agent
By:_________________________________
Authorized Signature
A-4
<PAGE>
[Reverse of Warrant Certificate]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring at 5:00 p.m. New York City time on
September ___, 2009 entitling the holder on exercise to receive shares of Common
Stock, and are issued or to be issued pursuant to a Warrant Agreement dated as
of September ___, 1999 (the "Warrant Agreement"), duly executed and delivered by
the Company to Bankers Trust Company, as warrant agent (the "Warrant Agent"),
which Warrant Agreement is hereby incorporated by reference in and made a part
of this instrument and is hereby referred to for a description of the rights,
limitation of rights, obligations, duties and immunities thereunder of the
Warrant Agent, the Company and the holders (the words "holders" or "holder"
meaning the registered holders or registered holder) of the Warrants. A copy of
the Warrant Agreement may be obtained by the holder hereof upon written request
to the Company.
Warrants may be exercised at any time on or after the Separation Date
and on or before 5:00 p.m. New York City time on September ___, 2009; provided
that holders shall be able to exercise their Warrants only if a Registration
Statement relating to the exercise of the Warrants is then in effect, or the
exercise of such Warrants is exempt from the registration requirements of the
Securities Act of 1933, as amended (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 various holders of the Warrants or
other persons to whom it is proposed that the Warrant Shares be issued on
exercise of the Warrants reside. In order to exercise all or any of the Warrants
represented by this Warrant Certificate, the holder must deliver to the Warrant
Agent at its New York corporate trust office set forth in Section 15 of the
Warrant Agreement this Warrant Certificate and the form of election to purchase
on the reverse hereof duly filled in and signed, which signature shall be
medallion guaranteed by an institution which is a member of a Securities
Transfer Association recognized signature guarantee program, and upon payment to
the Warrant Agent for the account of the Company of the Exercise Price, as
adjusted as provided in the Warrant Agreement, for the number of Warrant Shares
in respect of which such Warrants are then exercised. No adjustment shall be
made for any dividends on any Common Stock issuable upon exercise of this
Warrant.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price set forth on the face hereof may, subject to certain
conditions, be adjusted. If the Exercise Price is adjusted, the Warrant
Agreement provides that the number of shares of Common Stock issuable upon the
exercise of each Warrant shall be adjusted. No fractions of a share of Common
Stock will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the Warrant
Agent by the registered holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant
A-5
<PAGE>
Certificate or Warrant Certificates of like tenor evidencing in the aggregate a
like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
A-6
<PAGE>
[Form of Election to Purchase]
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive _____________ shares of
Common Stock and herewith tenders payment for such shares to the order of
AIRGATE PCS, INC., in the amount of $__________ in accordance with the terms
hereof. The undersigned requests that a certificate for such shares be
registered in the name of _______________, whose address is __________________
and that such shares be delivered to ___________, whose address is
____________________________. If said number of shares is less than all of the
shares of Common Stock purchasable hereunder, the undersigned requests that a
new Warrant Certificate representing the remaining balance of such shares be
registered in the name of ______________________, whose address is
_________________, and that such Warrant Certificate be delivered to whose
address is ____________________.
________________________________________
Signature
Date:
________________________________________
Signature Guaranteed
Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Warrant Agent, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be determined by the Warrant Agent in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
A-7
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS
OF GLOBAL WARRANTS/2/
The following exchanges of a part of this Global Warrant have been made:
<TABLE>
<CAPTION>
Amount of
decrease in Amount of
Number of increase in Number of Signature of
warrants in Number of Warrants in this Global authorized
Date of this Global Warrants in this Warrant following such officer of
Exchange Warrant Global Warrant decrease or increase Warrant Agent
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
__________________
/2/ To be included only on Global Warrants.
A-8
<PAGE>
EXHIBIT B
[Form of Unit Certificate]
NO. _____ CUSIP NO. 009367 AB 9
AIRGATE PCS, INC.
AGW LEASING COMPANY, INC.
__________ UNITS
[THIS GLOBAL UNIT IS COMPOSED OF THE ATTACHED GLOBAL SENIOR
SUBORDINATED DISCOUNT NOTE AND GLOBAL WARRANT CERTIFICATE. THE GLOBAL UNIT, THE
GLOBAL SENIOR SUBORDINATED DISCOUNT NOTE AND THE GLOBAL WARRANT CERTIFICATE ARE
COLLECTIVELY REFERRED TO HEREIN AS THE "SECURITIES."]/1/
----------
THIS CERTIFICATE REPRESENTS _______ UNITS OF AIRGATE, PCS, INC. EACH
UNIT CONSISTS OF $1,000 AGGREGATE PRINCIPAL AMOUNT AT MATURITY OF AIRGATE PCS,
INC.'S 13 1/2% SENIOR SUBORDINATED DISCOUNT NOTES DUE 2009 AND ONE WARRANT TO
PURCHASE 2.148 SHARES OF COMMON STOCK OF AIRGATE PCS, INC. [THE SENIOR
SUBORDINATED DISCOUNT NOTES AND WARRANTS CONSTITUTING A PART OF THE UNITS
REPRESENTED BY THIS CERTIFICATE ARE REPRESENTED BY THE NOTES AND WARRANT
CERTIFICATES ATTACHED HERETO.]/2/
[THE SECURITIES ARE GLOBAL SECURITIES WITHIN THE MEANING OF THE
INDENTURE GOVERNING THE SENIOR SUBORDINATED DISCOUNT NOTES REPRESENTED BY THE
GLOBAL SENIOR SUBORDINATED DISCOUNT NOTE (THE "INDENTURE") AND THE WARRANT
---------
AGREEMENT GOVERNING THE WARRANTS REPRESENTED BY THE GLOBAL WARRANT CERTIFICATE
(THE "WARRANT AGREEMENT") AND ARE REGISTERED IN THE NAME OF A DEPOSITARY OR A
-----------------
NOMINEE OF A DEPOSITARY OR A SUCCESSOR DEPOSITARY. THE SECURITIES ARE NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITARY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE AND THE WARRANT AGREEMENT, AND NO TRANSFER OF THE SECURITIES (OTHER
THAN A TRANSFER OF THE SECURITIES AS A WHOLE BY
________________
/1/ This bracketed language should be included only if the Unit certificate is
issued in global form.
/2/ This bracketed language should be included only if the Units represented by
the Unit certificate are issued in definitive form.
B-1
<PAGE>
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY
TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND THE WARRANT
AGREEMENT.]/1/
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER
---
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUIRED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]/1/
[THE SENIOR SUBORDINATED DISCOUNT NOTES AND THE WARRANTS CONSTITUTING
A PART OF THE UNITS REPRESENTED BY THIS GLOBAL UNIT WILL TRADE SEPARATELY UPON
THE EARLIEST TO OCCUR OF: (I) 180 DAYS AFTER THE CLOSING OF THE OFFERING OF THE
UNITS, (II) THE OCCURRENCE OF A CHANGE OF CONTROL OR AN EVENT OF DEFAULT ON THE
SENIOR SUBORDINATED DISCOUNT NOTES AND (III) SUCH DATE AS DONALDSON, LUFKIN &
JENRETTE SECURITIES CORPORATION IN ITS SOLE DISCRETION SHALL DETERMINE.]/3/
AIRGATE PCS, INC.
By:________________________
Name:
Title:
AGW LEASING COMPANY, INC.
_________________
/3/ This paragraph should be included only if the Unit certificate is issued
prior to the Separation Date.
B-2
<PAGE>
By:______________________
Name:
Title:
Date: September ____, 1999
B-3
<PAGE>
Independent Accountants' Consent
The Board of Directors
AirGate PCS, Inc.:
We consent to the use of our report dated November 19, 1999 related to the
consolidated financial statements of AirGate PCS, Inc. and subsidiary and
predecessors included herein, and to the reference to our firm under the
headings "Selected Financial Data" and "Experts" in this Registration Statement
and the related prospectus.
Atlanta, Georgia
November 29, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 SEP-30-1999
<PERIOD-START> JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1998 SEP-30-1999
<CASH> 2,296 258,900
<SECURITIES> 0 0
<RECEIVABLES> 478 751
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 2,774 261,247
<PP&E> 12,937 45,177
<DEPRECIATION> (392) (971)
<TOTAL-ASSETS> 15,450 317,320
<CURRENT-LIABILITIES> 16,480 31,507
<BONDS> 4,319 157,967
0 0
0 0
<COMMON> 0 120
<OTHER-SE> (5,350) 127,726
<TOTAL-LIABILITY-AND-EQUITY> 15,450 317,320
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 3,800 6,241
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,392 9,358
<INCOME-PRETAX> (5,192) (15,599)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (5,192) (15,599)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (5,192) (15,599)
<EPS-BASIC> (1.54) (4.57)
<EPS-DILUTED> (1.54) (4.57)
</TABLE>
