<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 23, 2000
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
UBIQUITEL OPERATING COMPANY
(Exact name of Registrant as Specified in its Charter)
DELAWARE 4812 23-3024747
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation Classification Code Number) Identification No.)
or Organization)
---------------
(FOR THE CO-REGISTRANT, PLEASE SEE
"CO-REGISTRANT INFORMATION" ON THE FOLLOWING PAGE)*
<TABLE>
<S> <C>
DONALD A. HARRIS
CHIEF EXECUTIVE OFFICER AND PRESIDENT
UBIQUITEL OPERATING COMPANY
1 BALA PLAZA, SUITE 402 1 BALA PLAZA, SUITE 402
BALA CYNWYD, PENNSYLVANIA 19004 BALA CYNWYD, PENNSYLVANIA 19004
(610) 660-9510 (610) 660-9510
(Address, Including Zip Code, and Telephone Number, (Name, Address, Including Zip Code, and Telephone
Including Area Code, of Registrant's Principal Executive Number, Including Area Code, of Agent for Service)
Offices)
</TABLE>
---------------
COPIES OF COMMUNICATIONS TO:
ANDREW E. BALOG, ESQ.
GREENBERG TRAURIG, P.A.
1221 BRICKELL AVENUE
MIAMI, FLORIDA 33131
TELEPHONE NO.: (305) 579-0500
FACSIMILE NO.: (305) 579-0717
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. / /
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================== ================= ================ ================= ============
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS AMOUNT OFFERING PRICE OFFERING REGISTRATION
OF SECURITIES TO BE REGISTERED TO BE REGISTERED PER UNIT(1) PRICE(1) FEE(2)
---------------------------------------------------- ----------------- ---------------- ----------------- ------------
<S> <C> <C> <C> <C>
14.0% Senior Subordinated Discount Notes due
2010(3)....................................... $ 300,000,000 46.58% $139,742,285 $36,892
---------------------------------------------------- ----------------- ---------------- ----------------- ------------
Guarantee of 14.0% Senior Subordinated Discount
Notes due 2010(4)............................. $ 300,000,000 -- -- --
---------------------------------------------------- ----------------- ---------------- ----------------- ------------
Total.......................................... $36,892
---------------------------------------------------- ----------------- ---------------- ----------------- ------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457 of the Securities Act of 1933.
(2) Calculated pursuant to Rule 457(f)(2) of the Securities Act of 1933.
(3) The 14.0% Senior Subordinated Discount Notes due 2010 were initially
sold at a substantial discount from their principal amount at maturity.
The registration fee with respect to the 14.0% Senior Subordinated
Discount Notes due 2010 was calculated based on their approximate
accreted value as of June 15, 2000.
(4) Pursuant to Rule 457(n) of the Securities Act of 1933, no additional
registration fee is being paid in respect of the guarantee. The
guarantee will not be traded separately.
THE CO-REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
CO-REGISTRANTS SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT
THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE
WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
*The Co-Registrant named on the following page is the parent of the
Registrant and the guarantor of the notes to be registered hereby.
================================================================================
<PAGE>
CO-REGISTRANT INFORMATION
<TABLE>
<CAPTION>
(STATE OR OTHER
JURISDICTION OF
(EXACT NAME OF CO-REGISTRANT (PRIMARY STANDARD INDUSTRIAL INCORPORATION OR (I.R.S. EMPLOYER
AS SPECIFIED IN ITS CHARTER) CLASSIFICATION NUMBER) ORGANIZATION) IDENTIFICATION NO.)
------------------------------- --------------------------------- ------------------------- --------------------------
<S> <C> <C> <C>
UbiquiTel Inc. 4812 Delaware 23-3017909
</TABLE>
The address, including zip code and telephone number, including area
code, of the Co-Registrant's principal executive offices is 1 Bala Plaza,
Suite 402, Bala Cynwyd, Pennsylvania 19004, (610) 660-9510.
The name, address, including zip code and telephone number,
including area code, of the agent for service for the Co-Registrant is Donald
A. Harris, President and Chief Executive Officer of UbiquiTel Operating
Company, 1 Bala Plaza, Suite 402, Bala Cynwyd, Pennsylvania 19004, (610)
660-9510.
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE __, 2000
PROSPECTUS
$300,000,000
[UBIQUITEL LOGO]
OFFER TO EXCHANGE
ALL OUTSTANDING 14.0% SENIOR SUBORDINATED DISCOUNT NOTES DUE 2010
FOR
REGISTERED 14.0% SENIOR SUBORDINATED DISCOUNT NOTES DUE 2010
THE REGISTERED NOTES
The terms of the registered notes that we are offering in exchange for
the outstanding notes are substantially identical to the terms of the
outstanding notes, except that certain transfer restrictions and registration
rights relating to the outstanding notes will not apply to the registered notes.
MATERIAL TERMS OF THE EXCHANGE OFFER
- The exchange offer will expire at 5:00 p.m., New York City
time, on ____________, 2000, unless extended.
- The exchange offer is subject to customary conditions,
including the conditions that the exchange offer not violate
applicable law or any applicable interpretation of the staff
of the Securities and Exchange Commission.
- You may withdraw tenders of outstanding notes at any time
before the exchange offer expires.
- We will exchange all outstanding notes that are validly
tendered and not withdrawn before the exchange offer expires.
- We will issue the registered notes promptly after the exchange
offer expires.
- We believe that the exchange of outstanding notes will not be
a taxable event for federal income tax purposes, but you
should read "Certain U.S. Federal Tax Considerations" on page
153 for more information.
- We will not receive any proceeds from the exchange offer.
- All broker-dealers must comply with the registration and
prospectus delivery requirements of the Securities Act of
1933. Each broker-dealer that receives registered notes for
its own account pursuant to the exchange offer must
acknowledge that it will deliver a prospectus in connection
with any resale of the registered notes. The letter of
transmittal accompanying this prospectus states that by so
acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This prospectus, as it may
be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of registered notes
received in exchange for outstanding notes where such
outstanding notes were acquired by the broker-dealer as a
result of market-making activities or other trading
activities. We have agreed that for a period of one year after
consummating the exchange offer we will make this prospectus
available to any broker-dealer for use in connection with any
such resale.
- No public market currently exists for the registered notes. We
do not intend to apply for listing of the registered notes on
any securities exchange or to arrange for them to be quoted on
any quotation system.
BEFORE PARTICIPATING IN THE EXCHANGE OFFER, PLEASE REFER TO THE SECTION
IN THIS PROSPECTUS ENTITLED "RISK FACTORS" BEGINNING ON PAGE 16.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE REGISTERED NOTES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Forward-Looking Statements........................................................................................1
Prospectus Summary................................................................................................2
Risk Factors.....................................................................................................16
Use of Proceeds..................................................................................................31
Capitalization...................................................................................................32
Unaudited Pro Forma Condensed Consolidated Financial Data........................................................33
Selected Historical Consolidated Financial and Operating Data....................................................41
Management's Discussion and Analysis of Financial Condition and Results of Operations............................43
Business.........................................................................................................52
The Sprint PCS Agreements........................................................................................73
Description of the Senior Credit Facility........................................................................84
Management.......................................................................................................86
Principal Stockholders...........................................................................................94
Certain Transactions.............................................................................................96
Regulation of the Wireless Telecommunications Industry..........................................................100
Description of Capital Stock....................................................................................104
The Exchange Offer..............................................................................................110
Description of the Registered Notes.............................................................................120
Certain U.S. Federal Tax Considerations.........................................................................153
Plan of Distribution............................................................................................159
Where You Can Find More Information.............................................................................159
Legal Matters...................................................................................................160
Experts.........................................................................................................160
Index to Consolidated Financial Statements......................................................................F-1
</TABLE>
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus contains statements about future events and
expectations, which are "forward-looking statements." Any statement in this
prospectus that is not a statement of historical fact may be deemed to be a
forward-looking statement. These statements include:
- estimates of current and future population for our markets;
- 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; 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.
These 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. For a
discussion of some of these factors, see "Risk Factors" beginning on page 16.
You are cautioned not to place undue reliance on any forward-looking statements,
which speak only as of the date of this prospectus. We undertake no obligation
to review or confirm analysts' expectations or estimates or to release publicly
any revisions to any forward-looking statements to reflect events or
circumstances after the date of this prospectus or to reflect the occurrence of
unanticipated events.
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION THAT WE BELIEVE IS ESPECIALLY
IMPORTANT CONCERNING OUR BUSINESS AND THE EXCHANGE OFFER. IT DOES NOT CONTAIN
ALL OF THE INFORMATION THAT MAY BE IMPORTANT TO YOUR INVESTMENT DECISION. YOU
SHOULD READ THE ENTIRE PROSPECTUS, INCLUDING "RISK FACTORS" AND OUR FINANCIAL
STATEMENTS AND RELATED NOTES, BEFORE DECIDING TO PARTICIPATE IN THE EXCHANGE
OFFER.
UNLESS INDICATED OTHERWISE, "UBIQUITEL," "WE," "US" AND "OUR" REFERS TO
UBIQUITEL OPERATING COMPANY, AND ITS PARENT AND SUBSIDIARIES. "UBIQUITEL PARENT"
REFERS ONLY TO OUR CORPORATE PARENT, UBIQUITEL INC. UBIQUITEL PARENT HAS NO
OPERATIONS SEPARATE FROM ITS INVESTMENT IN UBIQUITEL OPERATING COMPANY, AND
UBIQUITEL PARENT HAS FULLY AND UNCONDITIONALLY GUARANTEED THE OBLIGATIONS UNDER
THE REGISTERED NOTES. ACCORDINGLY, WE HAVE PROVIDED OUR FINANCIAL INFORMATION IN
THIS PROSPECTUS ON A CONSOLIDATED BASIS.
WHO WE ARE
OVERVIEW
We are the exclusive provider of Sprint PCS digital wireless
personal communications services, generally known as PCS, to four midsize and
smaller markets in the western and midwestern United States. Through our
management agreement with Sprint PCS, we have the exclusive right to provide
100% digital, 100% PCS products and services under the Sprint and Sprint PCS
brand names in our markets which include a total population of approximately
7.7 million residents. We are among 18 companies, which we believe are
unrelated to each other and to Sprint PCS, that have entered into management
agreements with Sprint PCS to provide Sprint PCS products and services in
markets throughout the United States. Sprint PCS, together with its
affiliates including us, operates the largest all-digital, all-PCS nationwide
wireless network in the United States, already covering more than 190 million
residents in more than 330 metropolitan markets. However, Sprint PCS does not
currently offer PCS services in every state in the United States.
The majority of our network will cover portions of California,
Nevada, Washington, Idaho, Montana, Utah, Indiana and Kentucky. We have
commenced limited operations in one of our markets, which together with our
recent acquisition of the Spokane, Washington market from Sprint PCS, cover
approximately 500,000 residents. We currently have approximately 9,000
subscribers. We expect to cover approximately 55% of the resident population
in our markets by the end of 2001 and expect to cover approximately 63% upon
completion of our build-out.
We are a development stage company with very limited operations and
revenues, significant losses and substantial future capital requirements.
From our inception on September 29, 1999 through December 31, 1999, we
incurred losses of approximately $2.0 million. On a pro forma basis, after
giving effect to various transactions described in "Unaudited Pro Forma
Condensed Consolidated Financial Data," loss available to common stockholders
from our inception through December 31, 1999 would have been approximately
$45.5 million and loss available to common stockholders would have been
approximately $20.4 million for the three months ended March 31, 2000. We
expect to continue to incur significant operating losses and to generate
significant negative cash flow from operating activities until at least 2003
while we develop and construct our PCS network and build our customer base.
BUSINESS STRATEGY
Our business strategy includes the following elements:
- Capitalize on affiliation with Sprint PCS;
- Capitalize on experienced management team;
- Execute optimal network build-out plan;
2
<PAGE>
- Utilize strategic third party relationships in our network
build-out;
- Implement effective operating structure with a focus on
customer service; and
- Focus on midsize and smaller markets.
BACKGROUND
UbiquiTel Operating Company was organized on November 9, 1999 as a
limited liability company under the laws of Delaware and converted into a
corporation under the laws of Delaware on March 16, 2000. UbiquiTel Parent was
organized on September 29, 1999 as a corporation under the laws of Delaware.
Each of our address and telephone number are 1 Bala Plaza, Suite 402, Cynwyd,
Pennsylvania 19004, (610) 660-9510.
3
<PAGE>
SUMMARY FINANCIAL DATA
(In thousands)
UBIQUITEL
The selected summary financial data presented below for the period
from September 29, 1999 (inception) through December 31, 1999, are derived
from the audited consolidated financial statements of UbiquiTel Inc. and
subsidiaries. The selected summary financial data presented below as of and
for the three-month period ended March 31, 2000 have been derived from
unaudited consolidated financial statements of UbiquiTel Inc. and its
subsidiaries, which have been prepared on the same basis as UbiquiTel Inc.
and subsidiaries audited financial statements and, in the opinion of
UbiquiTel, include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial position and
results of operations for these periods. The results of operations for the
three months ended March 31, 2000 are not necessarily indicative of the
results for the full year. The data set forth below should be read in
conjunction with UbiquiTel Inc.'s consolidated financial statements and
accompanying notes and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this prospectus.
<TABLE>
<CAPTION>
FROM
SEPTEMBER 29, THREE MONTHS
1999 (INCEPTION) ENDED
TO DECEMBER 31, 1999 MARCH 31, 2000
-------------------- --------------
(UNAUDITED)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues...................................................... $ -- $ 69
Expenses:
General and administrative expenses excluding non-cash
compensation charges............................................ 554 907
Non-cash compensation expense for general and administrative
matters......................................................... 1,395 --
Amortization of deferred stock compensation expense granted to
employees for general and administrative matters................ -- 119
Interest expense (income)......................................... 29 (35)
-------------------- --------------
Loss before extraordinary item...................................... $ (1,978) $ (922)
==================== ==============
<CAPTION>
AS OF
MARCH 31, 2000
----------------
(UNAUDITED)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................................................... $33,729
Total assets.................................................................. 52,363
Long-term debt................................................................ 5,812
Total stockholders' equity.................................................... 37,487
</TABLE>
4
<PAGE>
SPOKANE DISTRICT
The selected summary financial data presented below for each of the
three years in the period ended December 31, 1999 are derived from the
audited financial statements of the Spokane District (wholly owned by Sprint
Spectrum L.P. through April 15, 2000), the predecessor of UbiquiTel Inc. and
subsidiaries. The selected summary financial data presented below as of March
31, 2000 and for the three-month periods ended March 31, 1999 and March 31,
2000 have been derived from unaudited financial statements of the Spokane
District, which have been prepared on the same basis as the Spokane
District's audited financial statements and, in the opinion of Sprint
Spectrum L.P.'s management, include all adjustments, consisting only of
normal recurring accruals, necessary for a fair presentation of the financial
position and results of operations for these periods. The results of
operations for the three months ended March 31, 2000 are not necessarily
indicative of the results that may be expected for the full year. The data
set forth below should be read in conjunction with the Spokane District's
financial statements and accompanying notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere
in this prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------- ----------------------
1997 1998 1999 1999 2000
---------- --------- --------- -------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues........................................ $ 1,246 $ 3,280 $ 5,625 $ 1,136 $ 1,574
Expenses:
Costs of services and equipment.................. 2,903 3,970 5,046 747 779
Selling, general and administrative expense...... 8,168 4,470 5,419 997 1,214
Depreciation..................................... 2,968 3,112 3,471 828 931
---------- --------- --------- -------- ---------
Expenses in excess of net revenues.................. $ 12,793 $ 8,272 $ 8,311 $ 1,436 $ 1,350
---------- --------- --------- -------- ---------
---------- --------- --------- -------- ---------
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 2000
--------------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C>
BALANCE SHEET DATA:
Total assets purchased............................................................... $19,025
</TABLE>
5
<PAGE>
UBIQUITEL ON A PRO FORMA BASIS
The unaudited selected summary pro forma financial data presented
below for the period ended December 31, 1999 and the three months ended March
31, 2000, and as of March 31, 2000, gives effect to various transactions
described in "Unaudited Pro Forma Condensed Consolidated Financial Data." The
data set forth below should he read in conjunction with UbiquiTel Inc.'s and
the Spokane District's financial statements and accompanying notes,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Unaudited Pro Forma Condensed Consolidated Financial Data"
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED
1999 MARCH 31, 2000
------------ --------------
(UNAUDITED)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.................................................... $ 5,625 $ 1,643
Operating loss.................................................. (11,059) (2,507)
Loss available to common stockholders........................... (45,451) (20,401)
OTHER DATA:
Deficiency of earnings to fixed charges......................... $ (45,451) $ (22,124)
</TABLE>
<TABLE>
<CAPTION>
AS OF
MARCH 31, 2000
--------------
(UNAUDITED)
<S> <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................................... $ 295,736
Total assets.................................................... 363,340
Total liabilities and stockholders' equity...................... 363,340
</TABLE>
6
<PAGE>
THE EXCHANGE OFFER
The following is a summary of the principal terms of the exchange
offer. A more detailed description is contained in this prospectus under the
section entitled "The Exchange Offer." The term "registered notes" refers to
the Registered 14.0% Senior Subordinated Discount Notes due 2010 being
offered in the exchange offer. The term "outstanding notes" refers to our
currently outstanding 14.0% Senior Subordinated Discount Notes due 2010 that
are exchangeable for the registered notes. The term "indenture" refers to the
indenture that applies to both the outstanding notes and the registered notes.
<TABLE>
<S> <C>
The Exchange Offer................. We are offering to exchange $1,000 principal
amount of registered notes and integral
multiples of $1,000 in excess thereof which
have been registered under the Securities
Act for each $1,000 principal amount of
outstanding notes and integral multiples of
$1,000 in excess thereof. We issued the
outstanding notes on April 11, 2000 in a
private offering. In order to be exchanged,
an outstanding note must be properly
tendered and accepted before expiration of
the exchange offer. All outstanding notes
that are validly tendered and not validly
withdrawn will be exchanged. We will issue
the registered notes promptly after the
expiration of the exchange offer.
As of the date of this prospectus, there is
outstanding $300 million principal amount of
outstanding notes. Outstanding notes may be
tendered for exchange in whole or in part
for minimum denominations of $1,000
principal amount and integral multiples of
$1,000 in excess thereof.
Registration Rights Agreement...... Simultaneously with the sale of the
outstanding notes on April 11, 2000, we
entered into a registration rights agreement
under which we committed to conduct the
exchange offer. You are entitled under the
registration rights agreement to exchange
your outstanding notes for registered notes
with substantially identical terms. The
exchange offer is intended to satisfy these
rights. After the exchange offer is
complete, except as set forth in the next
paragraph, you will no longer be entitled to
any exchange or registration rights with
respect to your outstanding notes.
The registration rights agreement requires
us to file a registration statement for a
continuous offering in accordance with Rule
415 under the Securities Act for your
benefit if:
- we are not permitted to consummate
the exchange offer because the
exchange offer is not permitted by
applicable law or SEC policy;
7
<PAGE>
- you are ineligible to participate
in the exchange offer and indicate
that you wish to have your
outstanding notes registered under
the Securities Act; or
- you may not resell registered notes
you have acquired in the exchange
offer to the public without
delivering a prospectus and this
prospectus (including any amendment
or supplement thereto) is not
appropriate or available for
resales by you.
Resales of the Registered Notes.... We believe that registered notes to be
issued in the exchange offer in exchange for
the outstanding notes may be offered for
resale, resold and otherwise transferred by
you without compliance with the registration
and prospectus delivery provisions of the
Securities Act if you meet the following
conditions:
(1) the registered notes are acquired
by you in the ordinary course of
your business;
(2) you are not engaging in and do not
intend to engage in a distribution
of the registered notes;
(3) you do not have an arrangement or
understanding with any person to
participate in the distribution of
the registered notes; and
(4) you are not an affiliate of ours,
as that term is defined in Rule 405
under the Securities Act.
However, the SEC has not considered this
exchange offer in the context of a no-action
letter and we cannot be sure that the staff
of the SEC would make the same determination
with respect to the exchange offer as in
other circumstances. Furthermore, if you do
not meet the above conditions, you may incur
liability under the Securities Act if you
transfer any registered note without
delivering a prospectus meeting the
requirements of the Securities Act. We do
not assume, or indemnify you against, that
liability.
Each broker-dealer that receives registered
notes for its own account in the exchange
offer in exchange for outstanding notes
which that broker-dealer acquired as a
result of market-making activities or other
trading activities must acknowledge that it
will comply with the prospectus delivery
requirements of the Securities Act in
connection with any resale of the registered
notes. Broker-dealers who acquired
outstanding notes directly from us and not
as a result of market-making activities or
other trading activities may not participate
in the
8
<PAGE>
exchange offer and must comply with the
prospectus delivery requirements of the
Securities Act in order to resell the
outstanding notes.
Expiration Date.................... The exchange offer will expire at 5:00 p.m.,
New York City time, on , 2000, unless
we decide to extend the exchange offer.
Withdrawal......................... You may withdraw the tender of your
outstanding notes at any time prior to 5:00
p.m., New York City time, on the expiration
date.
Conditions to the Exchange Offer... The only conditions to completing the
exchange offer are that the exchange offer
not violate applicable law or any applicable
interpretation of the staff of the SEC and
no injunction, order or decree has been
issued, or any action or proceeding has been
instituted or threatened that would
reasonably be expected to prohibit, prevent
or materially impair our ability to proceed
with the exchange offer.
If any of these conditions exist prior to
the expiration date, we may take the
following actions:
- refuse to accept any outstanding
notes and return all previously
tendered outstanding notes;
- extend the duration of the exchange
offer; or
- waive such conditions to the extent
permissible under applicable law.
Procedures for Tendering
Outstanding Notes............... We issued the outstanding notes as global
securities in fully registered form without
coupons. Beneficial interests in the
outstanding notes which are held by direct
or indirect participants in The Depository
Trust Company through certificateless
depositary interests are shown on, and
transfers of the outstanding notes can be
made only through, records maintained in
book-entry form by DTC with respect to its
participants.
If you are a holder of an outstanding note
held in the form of a book-entry interest
and you wish to tender your outstanding
notes for exchange pursuant to the exchange
offer, you must transmit to American Stock
Transfer & Trust Company, as exchange agent,
on or prior to the expiration of the
exchange offer either:
- a written or facsimile copy of a
properly completed and executed
letter of transmittal and all other
required documents to the address
set forth on the cover page of the
letter of transmittal; or
9
<PAGE>
- a computer-generated message
transmitted by means of DTC's
Automated Tender Offer Program
system and forming a part of a
confirmation of book-entry transfer
in which you acknowledge and agree
to be bound by the terms of the
letter of transmittal.
The exchange agent must also receive on or
prior to the expiration of the exchange
offer either:
- a timely confirmation of book-entry
transfer of your outstanding notes
into the exchange agent's account
at DTC, in accordance with the
procedure for book-entry transfers
described in this prospectus under
the heading "The Exchange
Offer--Book-Entry Transfer," or
- the documents necessary for
compliance with the guaranteed
delivery procedures described
below.
A letter of transmittal accompanies this
prospectus. By executing the letter of
transmittal or delivering a
computer-generated message through DTC's
Automated Tender Offer Program system, you
will represent to us that, among other
things:
(1) the registered notes to be acquired
by you in the exchange offer are
being acquired in the ordinary
course of your business;
(2) you do not have an arrangement or
understanding with any person to
participate in the distribution of
the registered notes;
(3) you do not have an arrangement or
understanding with any person to
participate in the distribution of
the registered notes; and
(4) you are not an affiliate of ours.
Procedures for Tendering
Certificated Outstanding Notes.. If you are a holder of book-entry interests
in the outstanding notes, you are entitled
to receive, in limited circumstances, in
exchange for your book-entry interests,
certificated notes which are in equal
principal amounts to your book-entry
interests. See "The Exchange
Offer--Procedures for Tendering--Book-Entry
Interests." No certificated notes are issued
and outstanding as of the date of this
prospectus. If you acquire certificated
outstanding notes prior to the expiration of
the exchange offer, you must tender your
certificated outstanding notes in accordance
with the
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procedures described in this prospectus under
the heading "The Exchange Offer-- Procedures
for Tendering--Certificated Outstanding Notes."
Special Procedures for Beneficial
Owners.......................... If you are the beneficial owner of
outstanding notes and they are registered in
the name of a broker, dealer, commercial
bank, trust company or other nominee, and
you wish to tender your outstanding notes,
you should promptly contact the person in
whose name your initial notes are registered
and instruct that person to tender on your
behalf. If you wish to tender on your own
behalf, you must, prior to completing and
executing the letter of transmittal and
delivering your outstanding notes, either
make appropriate arrangements to register
ownership of the outstanding notes in your
name or obtain a properly completed bond
power from the person in whose name your
outstanding notes are registered. The
transfer of registered ownership may take
considerable time and it may not be possible
to complete prior to the expiration date.
Guaranteed Delivery Procedures..... If you wish to tender your outstanding notes
and your outstanding notes are not
immediately available or you cannot deliver
your outstanding notes, the letter of
transmittal or any other documents required
by the letter of transmittal to the exchange
agent, or you cannot complete the procedure
for book-entry transfer, then prior to the
expiration date you must tender your
outstanding notes according to the
guaranteed delivery procedures set forth in
"The Exchange Offer--Procedures for
Tendering--Guaranteed Delivery Procedures."
Acceptance of Outstanding Notes and
Delivery of Registered Notes.... Except under the circumstances described
above under "Conditions to the Exchange
Offer," we will accept for exchange any and
all outstanding notes which are properly
tendered in the exchange offer before 5:00
p.m., New York City time, on the expiration
date. We will deliver the registered notes
promptly following the expiration date. If
we do not accept any of your outstanding
notes for exchange we will return them to
you as promptly as practicable after the
expiration or termination of the exchange
offer without any expense to you.
Interest and Accretion on the
Registered Notes and the
Outstanding Notes............... Cash interest will not be paid on the
registered notes prior to April 15, 2005.
Prior to that date, in lieu of cash
interest, the registered notes will accrete
in value at a rate of approximately 14.0%,
per annum, compounded semi-annually. At that
time, interest will begin to accrue and will
be payable in cash semi-annually on April 15
and October 15 of each year commencing on
October
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15, 2005. Interest will not be paid on
outstanding notes that are tendered and
accepted for exchange.
Exchange Agent..................... American Stock Transfer & Trust Company is
serving as the exchange agent in connection
with the exchange offer.
Use of Proceeds.................... We will not receive any cash proceeds from
the issuance of the registered notes in the
exchange offer.
Consequences of Failure to
Exchange........................ Outstanding notes that are not tendered or
that are tendered but not accepted will
continue to be subject to the existing
restrictions on transfer provided in the
outstanding notes and in the indenture.
U.S. Federal Tax Considerations.... The exchange of the outstanding notes
generally will not be a taxable exchange for
federal income tax purposes.
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TERMS OF THE REGISTERED NOTES
Issuer............................. UbiquiTel Operating Company.
Registered Notes Offered........... $300,000,000 aggregate principal amount of
Registered 14.0% Senior Subordinated
Discount Notes due 2010. The registered
notes will evidence the same debt as the
outstanding notes and will be issued under,
and entitled to the benefits of, the same
indenture. The terms of the registered notes
are the same as the terms of the outstanding
notes in all material respects except that
the registered notes:
- have been registered under the
Securities Act;
- do not include rights to
registration under the
Securities Act; and
- do not contain transfer
restrictions applicable to the
outstanding notes.
Maturity Date...................... April 15, 2010.
Interest and Accretion............. The registered notes will accrete in value
at a rate of 14.0% per annum until April 15,
2005, compounded semi-annually. At that
time, interest will begin to accrue and will
be payable in cash semi-annually on April 15
and October 15 of each year, commencing on
October 15, 2005. The yield to maturity of
the registered notes is 14.0% (computed on a
semi-annual bond-equivalent basis)
calculated from April 11, 2000.
Guarantees......................... Our obligations under the registered notes
will be fully and unconditionally guaranteed
by UbiquiTel Parent and all of UbiquiTel
Operating Company's existing and future
restricted subsidiaries, other than
UbiquiTel Leasing Company, which was
incorporated on March 17, 2000. The
guarantees will be subordinate in right of
payment to all existing and future senior
indebtedness of the guarantors. The
guarantees will rank equal in right of
payment to other existing and future senior
subordinated indebtedness of the guarantors
and senior in right of payment to all of the
existing and future obligations of the
guarantors that are expressly subordinated
in right of payment to the guarantees.
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Ranking............................ The registered notes will be our general
unsecured obligations and will rank equally
in right of payment to all of our existing
and future senior subordinated indebtedness
and senior in right of payment to existing
and future obligations that are expressly
subordinated in right of payment to the
registered notes. The registered notes will
rank junior to all existing and future
Senior Indebtedness, as defined in the
indenture governing the registered notes.
Optional Redemption................ We may redeem the registered notes at our
option, in whole or in part, at any time on
or after April 15, 2005 at the redemption
prices set forth under the heading
"Description of the Registered
Notes--Optional Redemption," plus accrued
and unpaid interest, if any, and liquidated
damages, if any, thereon to the date of
redemption.
In addition, at any time prior to April 15,
2003, we may redeem up to 35% of the
principal amount of the registered notes
originally issued with the net cash proceeds
of specified sales of common equity. In that
case, the redemption price will be equal to
114% of the accreted value as of the date of
redemption, plus liquidated damages, if any,
thereon, to the redemption date. At least
65% of the aggregate principal amount of the
registered notes originally issued must
remain outstanding following each such
redemption.
Change in Control.................. Upon certain change of control events, we
may be required to repurchase all or any
part of the registered notes. The repurchase
will be in cash at a price equal to 101% of
the accreted value thereof (if the date of
repurchase is prior to April 15, 2005) and
101% of the aggregate principal amount
thereof (if the date of repurchase is on or
after April 15, 2005), plus accrued and
unpaid interest and liquidated damages, if
any, on the registered notes, to the date of
repurchase.
A change of control may be deemed to be a
default under our credit facilities. For
this and other reasons, we cannot assure
that in the event of a change of control we
would have sufficient funds to purchase all
registered notes tendered.
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<PAGE>
Certain Covenants.................. The indenture contains covenants that limit,
among other things, our ability to:
- pay dividends, redeem capital stock
and make other restricted payments
or investments;
- incur additional indebtedness or
issue preferred equity interests;
- incur any indebtedness that is
subordinate in right of payment to
our Senior Indebtedness and senior
in any respect to the registered
notes;
- merge, consolidate or sell our
assets;
- create liens on assets; and
- enter into transactions with
affiliates or related persons.
All of these limitations are subject to a
number of important qualifications described
under the headings "Description of the
Registered Notes--Selected
Covenants--Merger, Consolidation or Sale of
Assets."
</TABLE>
RISK FACTORS
We urge you to read carefully the risk factors beginning on page 16 for
a discussion of factors you should consider before exchanging your outstanding
notes for registered notes.
15
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN ADDITION
TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE PARTICIPATING IN
THE EXCHANGE OFFER. THE CAUTIONARY STATEMENTS SET FORTH BELOW AND ELSEWHERE
IN THIS PROSPECTUS SHOULD BE READ IN CONJUNCTION WITH ACCOMPANYING
FORWARD-LOOKING STATEMENTS INCLUDED UNDER "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," "BUSINESS" AND
ELSEWHERE HEREIN. UNLESS INDICATED OTHERWISE, THE OUTSTANDING NOTES AND THE
REGISTERED NOTES ARE COLLECTIVELY REFERRED TO AS THE "NOTES" IN THE FOLLOWING
RISK FACTORS.
RISKS PARTICULAR TO OUR RELATIONSHIP WITH SPRINT PCS
IF WE FAIL TO COMPLETE THE BUILD-OUT OF OUR PCS NETWORK BY THE DATES DESCRIBED
IN OUR MANAGEMENT AGREEMENT, SPRINT MAY TERMINATE THE AGREEMENT AND PURCHASE
OUR OPERATING ASSETS AT A DISCOUNT TO MARKET VALUE WITHOUT FURTHER
STOCKHOLDER APPROVAL, AND WE WOULD NO LONGER BE ABLE TO OFFER SPRINT PCS
SERVICES
Our agreements with Sprint PCS require that we provide network
coverage to a minimum network coverage area within specified time frames. We
may amend our agreements with Sprint PCS in the future to expand our network
coverage. A failure to meet our build-out requirements for any one of our
individual markets would constitute a breach of our management agreement with
Sprint PCS that could lead to a termination. If the management agreement is
terminated, we will no longer be able to offer Sprint PCS products and
services, and we may be required to sell our operating assets to Sprint PCS.
This sale may take place without further approval of UbiquiTel Parent's
stockholders and for a price equal to 72% of our entire business value. Our
entire business value includes the value of our right to use the spectrum
licenses in our markets, our business operations and other assets. The
provisions of our management agreement that allow Sprint PCS to purchase our
operating assets at a discount may limit our ability to sell our business and
may reduce the value a buyer would be willing to pay for our business. See
"The Sprint PCS Agreements--Management Agreement--Rights on Termination."
WE MAY ENCOUNTER DIFFICULTIES IN COMPLETING THE BUILD-OUT OF OUR NETWORK, WHICH
COULD INCREASE COSTS AND DELAY COMPLETION OF OUR BUILD-OUT
As part of our build-out, we must successfully lease or otherwise
retain rights to a sufficient number of radio communications and network
control sites, complete the purchase and installation of equipment, build out
the physical infrastructure and test the network. Some of the radio
communications sites are likely to require us to obtain zoning variances or
other local governmental or third party approvals or permits. Additionally,
we must retain rights to a sufficient number of tower sites, which requires
us to obtain local regulatory approvals. The local governmental authorities
in various locations in our markets have, at times, placed moratoriums on the
construction of additional towers and radio communications sites. We may also
have to make changes to our radio base station network design as a result of
difficulties in the site acquisition process. Additionally, the Federal
Communications Commission requires that our PCS network must not interfere
with the operations of microwave radio systems, and Sprint PCS may be
required to relocate incumbent microwave operations to enable us to complete
our build-out. Any failure to construct our portion of the Sprint PCS network
on a timely basis may affect our ability to provide services in our markets
on a schedule consistent with our current business plan, limit our network
capacity or reduce the number of new Sprint PCS subscribers. Any significant
delays could have a material adverse effect on our business.
IF WE FAIL TO MEET THE TECHNICAL STANDARDS DESCRIBED IN OUR MANAGEMENT
AGREEMENT, SPRINT MAY TERMINATE THE AGREEMENT AND PURCHASE OUR OPERATING
ASSETS AT A DISCOUNT TO MARKET VALUE WITHOUT FURTHER STOCKHOLDER APPROVAL,
AND WE WOULD NO LONGER BE ABLE TO OFFER SPRINT PCS SERVICES
Our agreements with Sprint PCS require us to build our PCS network in
accordance with Sprint PCS' technical requirements. Sprint PCS can, at any time
with at least 30 days' prior notice to us, adjust the technical requirements for
the network. A failure to meet these technical requirements would constitute a
breach of our management agreement with Sprint PCS that could lead to a
termination. If the management agreement is terminated, we will no longer be
able to offer Sprint PCS products and services, and we may be required to sell
our
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<PAGE>
operating assets to Sprint PCS. This sale may take place without further
approval of UbiquiTel Parent's stockholders and for a price equal to 72% of
our entire business value. The provisions of our management agreement that
allow Sprint PCS to purchase our operating assets at a discount may limit our
ability to sell our business and may reduce the value a buyer would be
willing to pay for our business. See "The Sprint PCS Agreements--The
Management Agreement--Rights on Termination."
THE TERMINATION OF OUR MANAGEMENT AGREEMENT WITH SPRINT PCS OR SPRINT PCS'
FAILURE TO PERFORM ITS OBLIGATIONS UNDER THE AGREEMENT WOULD SEVERELY
RESTRICT OUR ABILITY TO CONDUCT OUR BUSINESS AND, IF OUR MANAGEMENT AGREEMENT
IS TERMINATED, SPRINT PCS MAY PURCHASE OUR OPERATING ASSETS AT A DISCOUNT TO
MARKET VALUE WITHOUT FURTHER STOCKHOLDER APPROVAL
Since we do not own any licenses to operate a wireless network, our
ability to offer Sprint PCS products and services and our PCS network's
operation are dependent on our agreements with Sprint PCS not being
terminated. Our agreements with Sprint PCS can be terminated for breach of
any material terms. We are also dependent on Sprint PCS' ability to perform
its obligations under our agreements. The termination of our management
agreement with Sprint PCS, or the failure of Sprint PCS to perform its
obligations under our management agreement, would severely restrict our
ability to conduct our business. If our management agreement is terminated,
we may be required to sell our operating assets to Sprint PCS. This sale may
take place without further approval of UbiquiTel Parent's stockholders and
for a price equal to 72% of our entire business value. The provisions of our
management agreement that allow Sprint PCS to purchase our operating assets
at a discount may limit our ability to sell our business and may reduce the
value a buyer would be willing to pay for our business. See "The Sprint PCS
Agreements--The Management Agreement--Rights on Termination."
WE MAY NOT RECEIVE AS MUCH SPRINT PCS TRAVEL REVENUE AS WE ANTICIPATE BECAUSE
SPRINT PCS CAN CHANGE THE RATE WE RECEIVE OR FEWER PEOPLE MAY TRAVEL ON OUR
NETWORK
We are paid a fee from Sprint PCS for every minute that a Sprint PCS
subscriber based outside of our markets uses the Sprint PCS network in our
markets, which we refer to as travel revenue. Similarly, we pay a fee to
Sprint PCS for every minute that a Sprint PCS subscriber based in our markets
uses the Sprint PCS network outside our markets, which we refer to as travel
fees. We anticipate that travel revenue will represent approximately 10% of
our projected revenue in 2000, and will continue to represent a substantial
portion of our revenue in the future. Under our agreements with Sprint PCS,
in October 2000, Sprint PCS can change the current fee we receive or pay for
each Sprint PCS travel minute. The unilateral change by Sprint PCS in the
travel revenue we are paid could substantially decrease our revenues and net
income. In addition, Sprint PCS customers from our markets may spend more
time in other Sprint PCS coverage areas than we anticipate and Sprint PCS
customers from outside our markets may spend less time in our markets or may
use our services less than we anticipate, which will reduce our travel
revenue. As a result, we may receive less Sprint PCS travel revenue than we
anticipate or we may have to pay more Sprint PCS travel fees than the travel
revenue we collect. For more information, see "Business--Travel and Roaming."
THE INABILITY TO USE SPRINT PCS' SUPPORT SERVICES COULD DISRUPT OUR BUSINESS AND
INCREASE OUR OPERATING COSTS
We rely on Sprint PCS' internal support systems, including customer
care, customer activation, billing and other administrative support. Our
operations could be disrupted if Sprint PCS is unable to maintain and expand
these office services, or to efficiently outsource those services and systems
through third party vendors.
The rapid expansion of Sprint PCS' business is expected to require
that Sprint PCS continue to enhance its internal support systems. Sprint PCS'
ability to provide adequate capacity for billing and other systems is
dependent on a number of factors, including forecasts of customer growth,
customer usage pattern and software releases from third-party vendors. We
cannot assure that Sprint PCS will be able to successfully add system
capacity or that its internal support systems will be adequate. It is likely
that problems with Sprint PCS' internal support systems could cause:
- delays or problems in our own operations or service;
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<PAGE>
- delays or difficulty in gaining access to customer and
financial information;
- a loss of Sprint PCS customers; and
- an increase in the costs of those services.
Our services agreement with Sprint PCS provides that, upon nine
months' prior written notice, Sprint PCS may terminate any service that we
purchase from Sprint PCS. If Sprint PCS terminates a service for which we
have not developed a cost-effective alternative or increases the amount it
charges us for these services, our operating costs may increase beyond our
expectations and our operations may be interrupted or restricted.
IF SPRINT PCS DOES NOT COMPLETE THE CONSTRUCTION OF ITS NATIONWIDE PCS NETWORK,
WE MAY NOT BE ABLE TO ATTRACT AND RETAIN CUSTOMERS
Sprint PCS currently intends to cover a significant portion of the
population of the United States, Puerto Rico and the U.S. Virgin Islands by
creating a nationwide PCS network through its own construction efforts and
those of its affiliates. Sprint PCS is still constructing its nationwide
network and does not offer PCS services, either on its own network or through
its roaming agreements, in every city in the United States. Sprint PCS has
entered into, and anticipates entering into, management agreements similar to
ours with companies in other markets under its nationwide PCS build-out
strategy. Our results of operations are dependent on Sprint PCS' national
network and, to a lesser extent, on the networks of its other affiliates.
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.
OUR ROAMING ARRANGEMENTS MAY NOT BE COMPETITIVE WITH OTHER WIRELESS SERVICE
PROVIDERS, WHICH MAY RESTRICT OUR ABILITY TO ATTRACT AND RETAIN CUSTOMERS
We rely on roaming arrangements with other wireless service
providers for coverage in some areas. Some risks related to these
arrangements are as follows:
- the quality of the service provided by another provider during
a roaming call may not approximate the quality of the service
provided by the Sprint PCS network;
- the price of a roaming call may not be competitive with prices
of other wireless companies for roaming calls;
- customers may have to use a more expensive dual-band/dual-mode
handset with diminished standby and talk time capacities;
- customers must end a call in progress and initiate a new call
when leaving the Sprint PCS network and entering another
wireless network; and
- Sprint PCS customers may not be able to use Sprint PCS'
advanced features, such as voicemail notification, while
roaming.
If Sprint PCS customers are not able to roam instantaneously or
efficiently onto other wireless networks, we may lose current Sprint PCS
subscribers and our Sprint PCS services will be less attractive to new
customers.
SPRINT PCS MAY MAKE BUSINESS DECISIONS THAT WOULD NOT BE IN OUR BEST INTEREST
Under our management agreement, Sprint PCS has a substantial amount
of control over the conduct of our business. Conflicts between us and Sprint
PCS may arise, and because Sprint PCS owes us no duties except as set forth
in the management agreement, these conflicts may not be resolved in our
favor. Accordingly, Sprint PCS may make decisions that adversely affect our
business, such as the following:
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<PAGE>
- 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;
- Sprint PCS could change the per minute rate for Sprint PCS
travel revenue it must pay to us, the per minute charge we
must pay to Sprint PCS for travel fees, and the costs for
Sprint PCS to perform support services;
- we must obtain Sprint PCS' consent to sell non-Sprint PCS
approved equipment, which consent could be withheld;
- Sprint PCS may alter its network and technical requirements,
which could result in increased equipment and build-out costs;
- Sprint PCS may request that we build-out additional areas
within our markets, which if undertaken, could result in less
return on investment or a reduction of our license population
if we decline to build the requested area;
- if Sprint PCS terminates our management agreement because we
fail to meet the build-out of our network or the technical
standards as required under our management agreement, Sprint
PCS may force us to sell our operating assets at a discount to
market value without further approval of UbiquiTel Parent's
stockholders, which may limit our ability to sell our business
and may reduce the value a buyer would be willing to pay for
our business; and
- Sprint or Sprint PCS could make other business decisions which
could adversely affect the Sprint and Sprint PCS brand names,
products or services.
PROVISIONS OF OUR MANAGEMENT AGREEMENT WITH SPRINT PCS MAY DIMINISH OUR VALUE
AND RESTRICT THE SALE OF OUR BUSINESS
Under certain circumstances and without further approval of
UbiquiTel Parent's stockholders, Sprint PCS may purchase our operating assets
or capital stock for a percentage of our "entire business value," which
includes the value of the spectrum licenses, business operations and other
assets more fully described in "The Sprint PCS Agreements--The Management
Agreement--Rights on Termination." In addition, Sprint PCS must approve any
change of control of our ownership and consent to any assignment of our
management agreement with Sprint PCS. Sprint PCS has a right of first refusal
if we decide to sell our operating assets to a third party. We are also
subject to a number of restrictions on the transfer of our business including
a prohibition on the sale of us or our operating assets to competitors of
Sprint or Sprint PCS. These restrictions and other restrictions in our
management agreement with Sprint PCS may limit our ability to sell the
business, may reduce the value a buyer would be willing to pay for our
business and may operate to reduce our entire business value.
IF SPRINT PCS DOES NOT MAINTAIN CONTROL OVER ITS LICENSED SPECTRUM, OUR
MANAGEMENT AGREEMENT WITH SPRINT PCS MAY BE TERMINATED
Sprint PCS, not us, owns the licenses necessary to provide wireless
services in our markets. The Federal Communications Commission requires that
licensees like Sprint PCS maintain control of their licensed systems and not
delegate control to third party operators or managers like us. If the Federal
Communications Commission were to determine that our management agreement
with Sprint PCS needs to be modified to increase the level of licensee
control, we have agreed with Sprint PCS to use our best efforts to modify the
agreement to comply with applicable law. If we cannot agree with Sprint PCS
to modify the agreement, it may be terminated. If the agreement is
terminated, we would no longer be a part of the Sprint PCS network and it
would be extremely difficult to conduct our business.
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THE FEDERAL COMMUNICATIONS COMMISSION MAY NOT RENEW THE SPRINT PCS LICENSES,
WHICH WOULD PREVENT US FROM PROVIDING WIRELESS SERVICES
We do not own any licenses to operate wireless networks. We are
dependent on Sprint PCS' licenses, which are subject to renewal and
revocation. Sprint PCS' licenses in our markets will expire in 2004 through
2007, but may be renewed for additional 10-year terms. The Federal
Communications Commission has adopted specific standards that apply to
wireless personal communications services license renewals which, in the
event of a comparative proceeding with competing applications, includes the
award of a renewal expectancy to Sprint PCS upon its showing of "substantial
service" during the past license term. Any failure by Sprint PCS or us to
comply with these standards could cause nonrenewal of the Sprint PCS licenses
for our markets. Additionally, if Sprint PCS does not demonstrate to the
Federal Communications Commission that Sprint PCS has met the 5-year and
10-year construction requirements for each of its wireless personal
communications services licenses, it can lose the affected licenses and be
ineligible to regain them.
WE RELY ON THE USE OF THE SPRINT PCS BRAND NAME AND LOGO TO MARKET OUR SERVICES,
AND A LOSS OF USE OF THIS BRAND AND LOGO OR A DECREASE IN THE MARKET VALUE OF
THIS BRAND AND LOGO WOULD HINDER OUR ABILITY TO MARKET OUR PRODUCTS
The Sprint PCS brand and logo is highly recognizable. If we lose our
rights to use the Sprint PCS brand and logo under our trademark and service
mark license agreements, we would lose the advantages associated with
marketing efforts conducted by Sprint PCS. If we lose the rights to use this
brand and logo, customers may not recognize our brand readily and we may have
to spend significantly more money on advertising to create brand recognition.
See "The Sprint PCS Agreements--The Trademark and Service Mark License
Agreements."
OUR RELATIONSHIP WITH SPRINT PCS OR ITS SUCCESSOR MAY BE ADVERSELY AFFECTED BY
THE PROPOSED MERGER OF SPRINT AND MCI WORLDCOM, WHICH COULD RESTRICT OUR
ABILITY TO OPERATE SUCCESSFULLY
Sprint and MCI WorldCom have announced that the boards of directors
of both companies have approved a definitive merger agreement whereby the two
companies would merge to form a new company called WorldCom. Although the
companies have approved the merger, the completion of the merger is still
subject to various conditions, including the approvals of the shareholders of
both companies, the Federal Communications Commission, the Justice
Department, various state governmental bodies and foreign antitrust
authorities. If the merger is completed, the results of the merger may alter
the nature of our relationship with Sprint PCS, which could restrict our
ability to operate successfully. Also, any negative impact on Sprint as a
result of the merger could have a negative impact on us as a Sprint PCS
affiliate.
IF SPRINT PCS DOES NOT RENEW OUR MANAGEMENT AGREEMENT, OUR ABILITY TO CONDUCT
OUR BUSINESS WOULD BE SEVERELY RESTRICTED
Our management agreement with Sprint PCS is not perpetual. Sprint
PCS can choose not to renew the agreement at the expiration of the 20-year
initial term or any ten-year renewal term. Our agreement with Sprint PCS
terminates in all events in 50 years. If Sprint PCS decides not to renew the
management agreement or terminates it in accordance with its terms, we would
no longer be a part of the Sprint PCS network and it would severely restrict
our ability to conduct our business.
OTHER RISKS PARTICULAR TO US
WE MAY HAVE A CONTINGENT LIABILITY ARISING OUT OF A POSSIBLE VIOLATION OF
SECTION 5 OF THE SECURITIES ACT OF 1933 IN CONNECTION WITH UBIQUITEL PARENT'S
INITIAL PUBLIC OFFERING OF ITS COMMON STOCK
On or about May 17, 2000, UbiquiTel established a website with three
hyperlinks to an independent unaffiliated website that included specific
articles regarding UbiquiTel and UbiquiTel Parent's initial public offering
of its common stock. One of the hyperlinks accessed the prospectus summary
contained in the prospectus forming a part of the registration statement
relating to UbiquiTel Parent's initial public offering, while each of the
other hyperlinks accessed a press release regarding UbiquiTel Parent's
initial public offering. The hyperlinks were
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operational for only nine days, and were disabled on May 26, 2000. The
information contained on one or more of the hyperlinks may have constituted a
prospectus that did not meet the requirements of the Securities Act, in which
case the existence of any of the hyperlinks may have caused UbiquiTel Parent
to violate Section 5 of the Securities Act. If the existence of any of the
hyperlinks caused a violation of Section 5 of the Securities Act, we believe
that only purchasers in UbiquiTel Parent's initial public offering, which was
completed on June 12, 2000, who read the information contained in the
hyperlinks would have the right, for a period of one year from the date of
their purchase of UbiquiTel Parent's common stock, to bring an action for
rescission or for damages resulting from their purchase of common stock. We
cannot assure you, however, that if such violation occurred this right would
be limited to those purchasers. We do not believe that the existence of any
of the hyperlinks caused a violation of Section 5, and if any such claim were
asserted, we would contest the matter vigorously. Accordingly, we do not
believe that our exposure, if any, resulting from the existence of any of
these hyperlinks would be material to our results of operations or financial
condition.
WE HAVE A LIMITED OPERATING HISTORY AND IF WE DO NOT SUCCESSFULLY MANAGE OUR
ANTICIPATED RAPID GROWTH, WE MAY NOT BE ABLE TO COMPLETE OUR ENTIRE PCS
NETWORK BY OUR TARGET DATE, IF AT ALL
As of the date of this prospectus, we have commenced limited
operations. 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 employees, and train and manage
our employees, including engineering, marketing and sales personnel. We will
require expenditures of significant funds for the development, construction,
testing and deployment of our PCS network before expanding commercial PCS
operations. These activities are expected to place significant demands on our
managerial, operational and financial resources.
The management of our anticipated growth will require, among other
things:
- continued development of our operational and administrative
systems;
- stringent control of costs of network build-out;
- integration of our network infrastructure with the rest of the
Sprint PCS network;
- increased marketing activities;
- the ability to attract and retain qualified management,
technical and sales personnel; and
- the training of new personnel.
Failure to successfully manage our expected rapid growth and
development could impair our ability to achieve profitability and expand the
coverage in our markets.
WE MAY NEED MORE CAPITAL THAN WE CURRENTLY PROJECT TO BUILD-OUT OUR PORTION OF
THE SPRINT PCS NETWORK; AND IF WE FAIL TO OBTAIN REQUIRED ADDITIONAL CAPITAL,
WE MAY NOT HAVE SUFFICIENT FUNDS TO COMPLETE OUR BUILD-OUT IN ACCORDANCE WITH
THE TERMS OF OUR MANAGEMENT AGREEMENT WITH SPRINT PCS AND SPRINT PCS MAY
TERMINATE OUR MANAGEMENT AGREEMENT AND PURCHASE OUR OPERATING ASSETS AT A
DISCOUNT TO MARKET VALUE WITHOUT FURTHER STOCKHOLDER APPROVAL
The build-out of our portion of the Sprint PCS network will require
substantial capital. Additional funds could be required for a variety of
reasons, including unanticipated expenses or operating losses. Additional
funds may not be available. Even if those funds are available, we may not be
able to obtain them on a timely basis, or on terms acceptable to us or within
limitations permitted by the covenants under our senior credit facility or
the covenants under the indenture that governs the notes. Failure to obtain
additional funds, should the need for them develop, could result in the delay
or abandonment of our development and expansion plans. If we do not have
sufficient funds to complete our build-out, we may be in breach of our
management agreement with Sprint PCS and under our debt agreements. If Sprint
PCS terminates our management agreement as result of this breach, we may be
required to sell our operating assets to Sprint PCS at a discount to market
value without further approval of UbiquiTel Parent's stockholders. The
provisions in our management agreement that allow Sprint PCS to purchase
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our operating assets at a discount may limit our ability to sell our business
and may reduce the value a buyer would be willing to pay for our business.
BECAUSE WE DEPEND HEAVILY ON OUTSOURCING, THE INABILITY OF THIRD PARTIES TO
FULFILL THEIR CONTRACTUAL OBLIGATIONS TO US MAY DISRUPT OUR SERVICES OR THE
BUILD-OUT OF OUR PORTION OF THE SPRINT PCS NETWORK
Because we outsource portions of our business, we depend heavily on
third-party vendors, suppliers, consultants, contractors and local telephone
companies. We have retained those persons to:
- design and engineer our systems;
- construct radio communications sites, network control centers
and towers;
- lease radio communications sites;
- install transmission lines; and
- deploy our wireless personal communications services network
systems.
We lease a portion of the radio communications sites for our
wireless systems through master lease agreements with communication site
management companies such as SpectraSite. SpectraSite, in turn, has separate
leasing arrangements with each of the owners of the sites. If SpectraSite or
other similar firms were to become insolvent or were to breach those
arrangements, we may lose access to those radio communications sites and
experience extended service interruption in the areas serviced by those
sites. We have retained LCC International and other consultants and
contractors to assist in the design and engineering of our systems, construct
radio communications sites, network control centers and towers, lease radio
communications sites and deploy our PCS network systems and we will be
significantly dependent upon them in order to fulfill our build-out
obligations. The failure by any of our vendors, suppliers, consultants,
contractors or local telephone companies to fulfill their contractual
obligations to us could materially delay construction and adversely affect
the operations of our portion of the Sprint PCS network.
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
In April 2000, we issued 300,000 units consisting of the outstanding
notes and warrants to purchase 3,579,000 shares of UbiquiTel Parent's common
stock, which yielded gross proceeds to us of $152.3 million. In March 2000,
we signed a $250.0 million senior credit facility, and made borrowings of
$75.0 million under the credit facility in April 2000. As a result, we have a
substantial amount of long-term debt. See "Description of the Senior Credit
Facility" and "Description of the Registered Notes."
The substantial amount of our debt will have a number of important
consequences for our operations, 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 senior credit
facility, will be at variable rates of interest, which could
result in higher interest expense in the event of increases in
market interest rates;
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- due to the liens on substantially all of our assets and the
assets of our subsidiaries that secure our debt, lenders may
control our assets or subsidiaries upon a default; and
- we may be more highly leveraged than some of our competitors,
which may put us at a competitive disadvantage.
Our ability to make payments on our debt depends upon our future
operating performance which is subject to general economic and competitive
conditions and to financial, business and other factors, many of which we
cannot control. If the cash flow from our operating activities is
insufficient, we may take actions, such as delaying or reducing capital
expenditures, attempting to restructure or refinance our debt, selling assets
or operations or seeking additional equity capital. Any or all of these
actions may not be sufficient to allow us to service our debt obligations.
Further, we may be unable to take any of these actions on satisfactory terms,
in a timely manner or at all. The senior credit facility and the indenture
that governs the notes limit our ability to take several of these actions.
Under our current business plan, we expect to incur substantial debt before
achieving break-even cash flow.
WE MAY NOT RECEIVE THE FUNDS UNDER OUR SENIOR CREDIT FACILITY, WHICH COULD
PREVENT US FROM MEETING OUR NETWORK BUILD-OUT OBLIGATIONS UNDER OUR
AGREEMENTS WITH SPRINT PCS
We signed our $250.0 million senior credit facility in March 2000.
Concurrently with our sale of the outstanding notes, we borrowed $75.0
million of term loans under the credit facility, which were funded into an
escrow account. The escrow account will remain the property of our lenders
and will not be released to us if an event of default has occurred under the
credit agreement. Additionally, the escrow funds will not be released until
specified conditions have been satisfied. These conditions include, among
others, evidence that we have used all of the proceeds from our sale of the
outstanding notes and from UbiquiTel Parent's initial public offering of its
common stock to pay fees and expenses in connection with those offerings, to
fund the build-out of our network or for other general corporate and working
capital purposes. Additional borrowings under our senior credit facility must
be placed into escrow until the conditions to release our initial borrowing
of $75.0 million have been satisfied. Accordingly, there can be no assurance
that we will receive the proceeds from the senior credit facility. If we fail
to receive these funds, we may not be able to meet our network build-out
obligations under our agreements with Sprint PCS.
IF WE DEFAULT UNDER OUR SENIOR CREDIT FACILITY, OUR LENDER MAY DECLARE OUR DEBT
IMMEDIATELY DUE AND PAYABLE AND SPRINT PCS MAY FORCE US TO SELL OUR ASSETS
WITHOUT STOCKHOLDER APPROVAL
Our $250.0 million senior credit facility requires that we comply
with specified financial ratios and other performance covenants. If we fail
to comply with these covenants or we default on our obligations under our
senior credit facility, our lender may accelerate the maturity of our debt.
If our lender accelerates our debt, Sprint PCS has the option to purchase our
operating assets at a discount to market value and assume our obligations
under the senior credit facility, without further approval of UbiquiTel
Parent's stockholders. If Sprint PCS does not exercise this option, our
lender may sell our assets to third parties without approval of UbiquiTel
Parent's stockholders. If Sprint PCS provides notice to our lender that we
are in breach of our management agreement with Sprint PCS and, as a result,
our obligations under the credit agreement are accelerated and Sprint PCS
does not elect to operate our business, our lender may designate a third
party to operate our business without the approval of UbiquiTel Parent's
stockholders.
OUR INDEBTEDNESS PLACES RESTRICTIONS ON US WHICH MAY LIMIT OUR OPERATING
FLEXIBILITY AND OUR ABILITY TO PAY DIVIDENDS
The indenture that governs the notes and the credit agreement that
governs our senior credit facility impose material operating and financial
restrictions on us. These restrictions, subject to ordinary course of
business exceptions, may limit our ability to engage in some transactions,
including the following:
- designated types of mergers or consolidations;
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- paying dividends or other distributions to UbiquiTel Parent's
stockholders;
- making investments;
- selling assets;
- repurchasing UbiquiTel Parent's common stock;
- changing lines of business;
- borrowing additional money; and
- entering into transactions with affiliates.
These restrictions could limit our ability to obtain debt financing,
repurchase stock, refinance or pay principal or interest on our outstanding
debt, consummate acquisitions for cash or debt or react to changes in our
operating environment.
WE MAY NOT BE ABLE TO RESPOND EFFECTIVELY TO THE SIGNIFICANT COMPETITION IN THE
WIRELESS COMMUNICATIONS SERVICES INDUSTRY OR KEEP PACE WITH OUR COMPETITORS
IN THE INTRODUCTION OF NEW PRODUCTS, SERVICES AND EQUIPMENT, WHICH COULD
IMPAIR OUR ABILITY TO ATTRACT NEW CUSTOMERS
Our dependence on Sprint PCS to develop competitive products and
services and the requirement that we obtain Sprint PCS' consent to sell
non-Sprint PCS approved equipment may limit our ability to keep pace with our
competitors in the introduction of new products, services and equipment.
Additionally, 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 customers
away from us.
WE MAY NOT BE ABLE TO COMPETE WITH LARGER, MORE ESTABLISHED WIRELESS PROVIDERS
WHO HAVE RESOURCES TO COMPETITIVELY PRICE THEIR PRODUCTS AND SERVICES, WHICH
COULD RESULT IN A REDUCTION OF OUR SUBSCRIBERS
We will compete in some of our markets with more than three wireless
providers, some of which have an infrastructure in place and have been
operational for a number of years. Some of our competitors:
(1) have substantially greater financial, technological, marketing
and sales and distribution resources than us;
(2) have more extensive coverage in specific areas of our markets
and have broader regional coverage than us; and
(3) may market other services, such as traditional telephone
service, cable television access and access to the Internet,
with their wireless communications services.
We may be unable to compete successfully with these larger
competitors who have substantially greater resources or who offer more
services than we do to a larger subscriber base, which could result in a
reduction in new subscribers.
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WE MAY NOT BE ABLE TO RESPOND TO THE RECENT TREND IN THE CONSOLIDATION OF THE
WIRELESS COMMUNICATIONS INDUSTRY, OR COMPETE WITH POTENTIAL ACQUIRORS FOR
ACQUISITIONS, WHICH COULD RESULT IN A REDUCTION OF OUR SUBSCRIBERS, DECLINE
IN PRICES FOR OUR PRODUCTS AND SERVICES
There has been a recent trend in the wireless communications
industry towards consolidation of wireless service providers through joint
ventures, mergers and acquisitions. We expect this consolidation to lead to
larger competitors over time. Several large competitors already exist, such
as AT&T Wireless with over 12 million subscribers and the recent partnership
of Bell Atlantic-GTE and Vodafone AirTouch with over 19 million subscribers.
We may not be able to respond to pricing pressures that may result from a
consolidation in our industry, which could result in a reduction of new
subscribers and cause market prices for our products and services to decline
in the future. Also, if we expand our operations through acquisitions, we
will compete with other potential acquirors, some of which may have greater
financial or operational resources than us.
WE MAY HAVE DIFFICULTY IN OBTAINING HANDSETS AND EQUIPMENT, WHICH ARE IN SHORT
SUPPLY, WHICH COULD CAUSE DELAYS AND INCREASED COSTS IN THE BUILD-OUT OF OUR
NETWORK
We currently purchase all handsets and equipment through Sprint PCS.
The demand for the equipment we require to construct our portion of the
Sprint PCS network is considerable, and manufacturers of this equipment have
substantial order backlogs. In addition, the demand for specific types of
handsets is strong and the manufacturers of those handsets may have to
distribute their limited supply or products among the manufacturers' numerous
customers. If Sprint PCS modifies its handset logistics and delivery plan or
if we are not able to continue to rely on Sprint PCS' relationships with
suppliers and vendors, some of which provide us with vendor discounts on
equipment, we could have difficulty obtaining specific types of handsets and
equipment in a timely manner and our equipment costs could increase. As a
result, we could suffer delays in the build-out of our portion of the Sprint
PCS network, disruptions in service and a reduction in subscribers.
THE TECHNOLOGY WE USE HAS LIMITATIONS AND COULD BECOME OBSOLETE, WHICH WOULD
REQUIRE US TO IMPLEMENT NEW TECHNOLOGY AT SUBSTANTIALLY INCREASED COSTS AND
LIMIT OUR ABILITY TO COMPETE EFFECTIVELY
We intend to employ digital wireless communications technology
selected by Sprint PCS for its nationwide 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. We also expect to face competition from other existing communications
technologies such as specialized mobile radio, known as SMR, and enhanced
specialized mobile radio, known as ESMR, and domestic and global mobile
satellite service. SMR and ESMR systems can provide services that may be
competitive with those offered by PCS and are often less expensive to build
than PCS systems. In addition, we expect that in the future providers of
wireless communications services will compete more directly with providers of
traditional telephone services, energy companies, utility companies and cable
operators who expand their services to offer communications services.
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 subscribers who do not need to speak to
the caller. See "Business--Technology."
OUR SERVICES MAY NOT BE BROADLY USED AND ACCEPTED BY CONSUMERS, WHICH COULD
REDUCE THE AMOUNT OF OUR NEW SUBSCRIBER REVENUE
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. Our inability to establish and successfully
market PCS services could have a material adverse effect on our financial
condition and results of operations.
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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 at least 2003
while we develop and construct our PCS network and build our customer base.
Our operating profitability will depend upon many factors, including, among
others, our ability to market our services successfully, achieve our
projected market penetration and manage customer turnover rates effectively.
If we do not achieve and maintain operating profitability and positive cash
flow from operating activities on a timely basis, we may not be able to meet
our debt service requirements.
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.
SOME OF UBIQUITEL PARENT'S STOCKHOLDERS HAVE OTHER INVESTMENTS IN
TELECOMMUNICATIONS BUSINESSES, WHICH MAY RESULT IN A CONFLICT OF INTEREST
WITH US
Some of UbiquiTel Parent's principal stockholders as well as some of
our directors affiliated with these stockholders have investments in, or
serve on boards of, other telecommunications businesses. As a result,
conflicts of interest may arise from these investments and other
directorships. Additionally, these stockholders may invest in other
telecommunications businesses that compete with us. Our interests may
conflict with the interests of these companies, and any conflicts may not be
resolved in our favor
UBIQUITEL PARENT'S CERTIFICATE OF INCORPORATION AND BYLAWS INCLUDE PROVISIONS
THAT MAY DISCOURAGE A CHANGE OF CONTROL TRANSACTION
Some provisions of UbiquiTel Parent's certificate of incorporation
and bylaws and the provisions of Delaware law could have the effect of
delaying, deferring or preventing an acquisition of us. For example,
UbiquiTel Parent has a staggered board of directors, the members of which may
only be removed for cause, authorized but unissued shares of preferred stock
which could be used to fend off a takeover attempt, UbiquiTel Parent's
stockholders may not take actions by written consent and are limited in their
ability to make proposals at stockholder meetings.
OUR PLAN OF COVERAGE FOR OUR MARKETS MAY BE INADEQUATE TO PROFITABLY OPERATE OUR
BUSINESS
Our projected build-out plan for our markets does not cover all
areas of our markets. As a result, our plan may not adequately serve the
needs of the potential customers in our markets or attract enough subscribers
to operate our business successfully. To correct this potential problem, we
may have to cover a greater percentage of our markets than we anticipate,
which we may be unable to do profitably.
RISKS PARTICULAR TO OUR INDUSTRY
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
rate of customer turnover may be the result of several factors, including
network coverage, reliability issues such as blocked calls, dropped calls,
handset problems, non-use of phones, change of employment, the 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. A high rate of customer turnover
could adversely affect our competitive position, results of operations and
our costs of, or losses incurred in, obtaining new subscribers, especially
because we subsidize some of the costs of initial purchases of handsets by
customers.
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USE OF HAND-HELD PHONES MAY POSE HEALTH RISKS, WHICH COULD RESULT IN A REDUCTION
IN SUBSCRIBERS AND INCREASED EXPOSURE TO LITIGATION
Media reports have suggested that certain radio frequency emissions
from wireless handsets may be linked to various health concerns, including
cancer, and may interfere with various electronic medical devices, including
hearing aids and pacemakers. The actual or perceived risk of radio frequency
emissions from portable telephones could adversely affect us through a
reduced subscriber growth rate, a reduction in subscribers, reduced network
usage per subscriber, reduced financing available to the mobile
communications industry and increased exposure to potential litigation.
REGULATION BY GOVERNMENT AGENCIES AND TAXING AUTHORITIES 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 telecommunication systems are
regulated to varying degrees by the Federal Communications Commission, the
Federal Trade Commission, the Federal Aviation Administration, the
Environmental Protection Agency, the Occupational Safety and Health
Administration 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 costs of
doing business. For example, changes in tax laws or the interpretation of
existing tax laws by state and local authorities could subject us to
increased income, sales, gross receipts or other tax costs or require us to
alter the structure of our relationship with Sprint PCS.
OUR BUSINESS IS SEASONAL AND WORSE THAN EXPECTED FOURTH QUARTER RESULTS MAY
CAUSE OUR STOCK PRICE TO DROP AND SIGNIFICANTLY REDUCE OUR OVERALL RESULTS OF
OPERATIONS
The wireless industry is heavily dependent on fourth quarter
results. Among other things, the industry relies on significantly higher
customer additions and handset sales in the fourth quarter as compared to the
other three fiscal quarters. The price of our common stock may drop and our
overall results of operations could be significantly reduced if we have a
worse than expected fourth quarter for any reason, including the following:
- our inability to match or beat pricing plans offered by
competitors;
- the failure to adequately promote Sprint PCS' products,
services and pricing plans;
- our inability to obtain an adequate supply or selection of
handsets;
- a downturn in the economy of some or all of our markets; or
- a poor holiday shopping season.
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.
RISKS RELATING TO THE NOTES
BECAUSE THE NOTES ARE SUBORDINATED TO OTHER DEBT THAT ENCUMBERS OUR ASSETS, YOU
MAY NOT BE FULLY REPAID IF WE BECOME INSOLVENT
If we become insolvent, we may not have sufficient assets to make
payments on amounts due on any or all of the notes or the parental guarantee.
The right to payment on the notes will be subordinated to all of our existing
and future senior debt, including our $250.0 million senior credit facility.
Similarly, each subsidiary guarantee of the notes will be subordinated to all
existing and future senior debt of the applicable guarantor. If we become
bankrupt, liquidate, dissolve, reorganize or undergo a similar proceeding,
our or such guarantor's assets will be available to pay obligations on the
notes or the applicable guarantee only after all outstanding senior debt of
such
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party has been paid in full. In addition, an event of a default under our
senior debt may prohibit us and the guarantors of the notes from paying the
notes or the guarantees of the notes.
BECAUSE THE NOTES AND GUARANTEE WILL BE UNSECURED, YOU MAY NOT BE FULLY REPAID
UNDER THE NOTES OR GUARANTEE IF WE BECOME INSOLVENT
Because the guarantee of the notes will be unsecured, if we become
insolvent, you may be repaid only after our senior debt is satisfied. Our
senior debt is secured by liens on substantially all of our assets and those
of our current and any future subsidiaries. If we were to default on our
senior debt, the lenders could foreclose on the collateral regardless of any
default with respect to the notes. These assets would first be used to repay
in full all amounts outstanding under our senior debt.
Our agreements with Sprint PCS and the infrastructure equipment used
in our network create the value of our assets. These asset are highly
specialized and, taken individually, have limited marketability, particularly
as a result of some of the provisions in our agreement with Sprint PCS.
Therefore, in a foreclosure sale, these assets are likely to be sold as an
entirety, and the lender may not realize enough money to satisfy all senior
debt.
THE GUARANTEE BY UBIQUITEL PARENT MAY HAVE LIMITED PRACTICAL VALUE
UbiquiTel Parent will unconditionally guarantee, on a senior
subordinated basis, all payments of principal, premium, if any, and
liquidated damages, if any, on the notes. However, since at present UbiquiTel
Parent's only significant asset is the capital stock of UbiquiTel Operating
Company (and such asset has been pledged to the lenders under our $250.0
million senior credit facility), if we should he unable to meet our payment
obligations with respect to the notes, it is unlikely that UbiquiTel Parent
would be able to do so.
HOLDERS OF OUR SENIOR DEBT WILL CONTROL ENFORCEMENT OF THE PLEDGES OF ANY OF OUR
SUBSIDIARIES' STOCK WHICH MAY AFFECT THE TRUSTEE'S ABILITY TO INDEPENDENTLY
PURSUE REMEDIES ON BEHALF OF HOLDERS OF THE NOTES
The holders of the senior debt are given the exclusive right to
control all decisions relating to the enforcement of remedies under the
senior debt pledge agreement with respect to the stock of our current and
future subsidiaries. As a result, you will not be able to force a sale of the
collateral securing the notes or otherwise independently pursue the remedies
of a secured creditor under the pledge agreement securing the notes until the
senior debt has been repaid in full. Our senior debtholders may have
interests that are different from yours and our senior debtholders may elect
not to pursue their remedies under the pledge agreement at a time when it
would be advantageous for you to do so.
BECAUSE FEDERAL AND STATE STATUTES MAY ALLOW COURTS TO VOID THE GUARANTEE OF THE
NOTES, YOU MAY NOT HAVE THE RIGHT TO RECEIVE ANY MONEY PURSUANT TO THE
GUARANTEE
Although the guarantee of the notes provides you with a direct claim
against the assets of the guarantor, creditors of a bankrupt guarantor may
challenge the guarantee. If a challenge to the guarantee were upheld, then
the guarantee would be invalid and unenforceable, junior to all creditors,
including trade creditors, of the guarantor.
The creditors of a bankrupt guarantor could challenge the guarantee
on the grounds that the guarantee constituted a fraudulent conveyance under
bankruptcy law. If a court were to rule that the guarantee did constitute a
fraudulent conveyance, then the court could void the obligations under the
guarantee or subordinate the guarantee to other debt of the guarantor or take
other action detrimental to holders of the notes. In addition, the guarantee
could be subject to the claim that, since the guarantee was incurred for our
benefit, and only indirectly for the benefit of our parent that provided the
guarantee, the obligations of the guarantor were incurred for less than fair
consideration.
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OUR DEBT INSTRUMENTS CONTAIN PROVISIONS AND REQUIREMENTS THAT COULD LIMIT OUR
ABILITY TO PURSUE BORROWING OPPORTUNITIES
The restrictions to be contained in the indenture governing the
notes, and the restrictions contained in our senior debt, may limit our
ability to implement our business plan, finance future operations, respond to
changing business and economic conditions, secure additional financing, if
needed, and engage in opportunistic transactions. Our senior debt also
restricts our ability and the ability of our future subsidiaries to do the
following:
- create liens;
- make certain payments, including payments of dividends and
distributions in respect of capital stock;
- consolidate, merge and sell assets;
- engage in certain transactions with affiliates; and
- fundamentally change our business.
In addition, our senior debt requires us to maintain certain ratios, including:
- leverage ratios;
- an interest coverage ratio; and
- a fixed charges ratio,
and to satisfy certain tests, including tests relating to:
- minimum covered population;
- minimum number of subscribers to our services; and minimum
annualized revenues.
We may not satisfy the financial ratios and tests under our senior
debt due to events that are beyond our control. If we fail to satisfy any of
the financial ratios and tests, we could be in default under our senior debt
or may be limited in our ability to access additional funds under our senior
debt, which could result in our being unable to make payments on the notes.
BECAUSE THE NOTES HAVE BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT, YOU WILL HAVE
TO INCLUDE INTEREST IN YOUR TAXABLE INCOME BEFORE YOU RECEIVE CASH
The notes have been issued at a substantial discount from their
principal amount at maturity. Original issue discount, i.e., the difference
between the stated redemption price at maturity of the notes, including all
cash payments of principal and interest, and the issue price of the notes,
will accrue from the issue date of the notes and will be included in your
gross income for federal income tax purposes before you receive the cash
payment of such interest. United States federal income tax law may postpone
or limit our interest deduction for original issue discount. See "Certain
U.S. Federal Tax Considerations."
IF THE ORIGINAL ISSUE DISCOUNT ON THE NOTES IS SUFFICIENTLY HIGH, WE MAY NOT BE
ABLE TO DEDUCT A PORTION OF OUR BORROWING EXPENSE
If the yield to maturity of the notes exceeds the sum of the
relevant "applicable federal rate" published by the Internal Revenue Service
for the month in which the notes are issued and 6%, and if the notes are
"applicable high yield discount obligations" for federal income tax purposes,
as described below under "Certain U.S. Federal Tax Considerations--U.S.
Holders; Applicable High Yield Discount Obligations," the deduction otherwise
available to us for original issue discount on the notes would be permanently
disallowed to the extent the original issue discount is attributable to the
yield to maturity of the notes in excess of the sum of the applicable federal
rate and 6%.
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THE BANKRUPTCY LAWS MAY REDUCE YOUR CLAIM IN THE EVENT OF OUR INSOLVENCY
If a bankruptcy case were commenced by or against us under the
United States Bankruptcy Code after the issuance of the notes, your claim
with respect to the principal amount of the notes may be limited to an amount
equal to the sum of the initial offering price and that portion of the
original issue discount that is not deemed to constitute unmatured interest
for purposes of the United State Bankruptcy Code. Any original issue discount
that had not amortized as of the date of the bankruptcy filing could
constitute unmatured interest for purposes of the United States Bankruptcy
Code. To the extent that the United States Bankruptcy Code differs from the
Internal Revenue Code in determining the method of amortization of original
issue discount, you may recognize taxable gain or loss upon payment of your
claim in bankruptcy.
IF AN EVENT CONSTITUTING A CHANGE IN CONTROL OF US OCCURS, WE MAY BE UNABLE TO
FULFILL OUR OBLIGATION TO PURCHASE YOUR NOTES
Our senior debt prohibits us from purchasing any of the notes before
their stated maturity. Under the indenture governing the notes, upon a change
in control we will, subject to certain contractual limitations, be required
to make an offer to repurchase all of the notes. In the event we become
subject to a change in control at a time when we are prohibited from
purchasing the notes, we may seek the consent of the holders of our senior
debt to purchase the notes or attempt to refinance the debt that contains the
prohibition. If we do not obtain a consent or repay the senior debt, our
failure to purchase the tendered notes would constitute an event of default
under the indenture, which would in turn result in a default under the senior
debt. Even if we obtain the consent, we cannot assure you that we will have
sufficient resources to repurchase the notes following the change in control.
THE REGISTERED NOTES MAY NOT HAVE AN ACTIVE MARKET AND THE PRICE MAY BE
VOLATILE, SO YOU MAY BE UNABLE TO SELL YOUR REGISTERED NOTES AT THE PRICE YOU
DESIRE OR AT ALL
We cannot ensure that a liquid market will develop for the
registered notes, that you will be able to sell any of the registered notes
at a particular time if at all or that the prices that you receive when you
sell will be favorable. Prior to this offering, there has been no public
market for the outstanding notes. The initial purchasers of the outstanding
notes have advised us that they intend to make a market in the registered
notes, but they are not obligated to do so. The initial purchasers may
discontinue any market-making in the registered notes at any time in their
sole discretion. We do not intend to apply (and are not obligated to apply)
for listing of the registered notes on any securities exchange or any
automated quotation system. Therefore, we cannot assure you as to the
liquidity of any trading market for the registered notes. Future trading
prices of the registered notes will depend on many factors, including our
operating performance and financial condition, prevailing interest rates and
the market for similar securities.
SOME PERSONS WHO PARTICIPATE IN THIS EXCHANGE OFFER MUST DELIVER A PROSPECTUS IN
CONNECTION WITH RESALES OF THE REGISTERED NOTES
Based on no-action letters issued by the staff of the SEC to third
parties, we believe that you may offer for resale, resell or otherwise
transfer the registered notes without compliance with the registration and
prospectus delivery requirements of the Securities Act. However, in some
instances described in this prospectus under "The Exchange Offer," you will
remain obligated to comply with the prospectus delivery requirements of the
Securities Act to transfer your registered notes. In these instances, if you
transfer any registered note without delivering a prospectus meeting the
requirements of the Securities Act or without an exemption from registration
of your registered notes under the Securities Act, you may incur liability
under this Act. We do not and will not assume, or indemnify you against, this
liability.
30
<PAGE>
USE OF PROCEEDS
We will not receive any proceeds from the exchange offer. In
consideration for issuing the registered notes as contemplated in this
prospectus, we will receive in exchange the outstanding notes in like
principal amount. The outstanding notes surrendered in exchange for the
registered notes will be retired and cancelled and cannot be reissued. The
issuance of the registered notes will not result in any increase in our
indebtedness.
31
<PAGE>
CAPITALIZATION
The following table shows the cash and cash equivalents position and
our total capitalization as of March 31, 2000, and as adjusted to reflect:
- our acquisition of the Spokane, Washington PCS network and
related assets from Sprint PCS;
- receipt of gross proceeds of $152.3 million from issuance of
the outstanding notes and the issuance of related warrants;
- receipt of gross proceeds of $100.0 million from UbiquiTel
Parent's initial public offering;
- initial borrowings of $75.0 million in term loans under our
$250.0 million senior credit facility;
- exercise of a warrant to purchase 4,978,150 shares of
UbiquiTel Parent's common stock, which was issued in
connection with our senior subordinated note;
- repayment of our senior subordinated note;
- conversion of UbiquiTel Parent's preferred stock into common
stock;
- cancellation of UbiquiTel Parent's non-voting common stock;
- payments to preferred stockholders upon closing of UbiquiTel
Parent's initial public offering; and
- issuance of shares of preferred stock to preferred
stockholders convertible into 77,002 shares of UbiquiTel
Parent's common stock and 136,758 shares of UbiquiTel Parent's
common stock to UbiquiTel Parent's founding stockholders to
maintain a specific percentage stock ownership in connection
with the outstanding notes.
<TABLE>
<CAPTION>
AS OF MARCH 31, 2000
--------------------------------
ACTUAL AS ADJUSTED
------------- --------------
<S> <C> <C>
(IN THOUSANDS)
(UNAUDITED)
Cash and cash equivalents..................................................... $ 33,729 $ 220,736
Cash, restricted.............................................................. - 75,000(1)
------------- --------------
Total cash and cash equivalents............................................ $ 33,729 $ 295,736
============= ==============
Long-term debt:
Senior credit facility..................................................... $ 0 $ 75,000(1)
Senior subordinated debt................................................... 5,812(2) 0
Senior subordinated discount notes......................................... 0 136,297(3)
------------- --------------
Total long-term debt.................................................... $ 5,812 $ 211,297
Redeemable warrants........................................................... 2,758 570
Stockholders' equity:
Convertible preferred stock................................................ 19 -
Non-voting common stock.................................................... 16 -
Voting common stock and additional paid-in capital......................... 51,314 162,604(4)
Accumulated deficit........................................................ (13,862) (17,437)
------------- --------------
Total stockholders' equity.............................................. 37,487 145,167
------------- --------------
Total capitalization.................................................... $ 46,057 $ 357,034
============= ==============
</TABLE>
---------------------
(1) This amount was funded into an escrow account and will not be released
to us until specified conditions have been satisfied. See "Risk
Factors-Other Risks Particular to Us."
(2) Actual reflects the $5.8 million of the senior subordinated note
allocated to long-term debt.
(3) As adjusted reflects the $136.3 million of the $152.3 million of gross
proceeds from the outstanding notes allocated to long-term debt.
(4) Of such amount, $16.3 million represents the value assigned to the
warrants and $0.6 million represents the value assigned to the shares
of preferred stock issued in connection with the outstanding notes.
32
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
We derived unaudited pro forma condensed consolidated financial and
operating data as of and for the three months ended March 31, 2000 and for
the year ended December 31, 1999 from our historical consolidated financial
statements and from other financial data included elsewhere in this
prospectus. Our financial results have been adjusted based on currently
available information and assumptions that we believe are reasonable to give
effect to the following transactions as if each transaction had occurred as
of January 1, 1999 for the purpose of the pro forma statements of operations
and as of March 31, 2000 for the purpose of the pro forma balance sheet:
- our acquisition of the Spokane, Washington PCS network and
related assets from Sprint PCS;
- receipt of gross proceeds of $152.3 million from issuance of
the outstanding notes and the issuance of related warrants;
- receipt of gross proceeds of $100.0 million from UbiquiTel
Parent's initial public offering;
- initial borrowings of $75.0 million in term loans under our
$250.0 million senior credit facility;
- exercise of a warrant to purchase 4,978,150 shares of
UbiquiTel Parent's common stock, which was issued in
connection with our senior subordinated note;
- repayment of our senior subordinated note;
- conversion of preferred stock into UbiquiTel Parent's common
stock;
- cancellation of UbiquiTel Parent's non-voting common stock;
- payments to preferred stockholders upon closing of UbiquiTel
Parent's initial public offering; and
- issuance of shares of preferred stock to preferred
stockholders convertible into 77,002 shares of UbiquiTel
Parent's common stock and 136,758 shares of UbiquiTel Parent's
common stock to founding stockholders to maintain a specified
percentage stock ownership in connection with the outstanding
notes.
We provide the following unaudited pro forma condensed consolidated
financial statements and related notes for informational purposes only. The
accompanying data do not purport to represent what our results of operations
would have been if the pro forma transactions had been completed on the dates
indicated, nor do they purport to indicate our future financial position or
results of operations.
The data shown below should be read in conjunction with
"Capitalization," "Selected Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and the
consolidated financial statements and accompanying notes included elsewhere
in this prospectus.
33
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
THREE MONTHS ENDED MARCH 31, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL HISTORICAL PRO FORMA AS
UBIQUITEL SPOKANE ADJUSTMENTS ADJUSTED
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net revenues............................ $ 69 $ 1,574 $ - $ 1,643
Costs of services and equipment......... - 779 - 779
---------- ---------- ----------- ---------
Gross profit............................ 69 795 - 864
Operating expenses:
Selling, general and administrative
excluding non-cash compensation
charges........................... 907 1,214 - 2,121
Amortization of deferred stock
compensation expense granted to
employees for general and
administrative matters............ 119 - - 119
Depreciation and amortization........ - 931 200(1) 1,131
---------- ---------- ----------- ---------
Operating loss.......................... (957) (1,350) (200) (2,507)
Interest income (expense), net....... 35 - (8,698)(2) (8,663)
---------- ---------- ----------- ---------
Loss before extraordinary item.......... (922) (1,350) (8,898) (11,170)
Less: preferred stock dividend......... (9,231) - - (9,231)
---------- ---------- ----------- ---------
Loss available to common stockholders... (10,153) (1,350) (8,898) (20,401)
Extraordinary item-write-off of deferred
financing costs on early extinguishment
of debt.............................. (1,723) - - (1,723)
---------- ---------- ----------- ---------
Net loss available to common stockholders $(11,876) $(1,350) $(8,898) $(22,124)
========== ========== =========== =========
Pro forma basic and diluted net loss per
common share......................... $(0.24) $(0.35)
========== =========
Pro forma weighted average common shares
outstanding.......................... 50,264 62,764
========== =========
Other Data:
Deficiency of earnings to fixed charges (22,124)(3)
=========
</TABLE>
34
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000
(DOLLARS IN THOUSANDS)
For the purpose of determining the pro forma effect of transactions
described above on our consolidated statement of operations for the three months
ended March 31, 2000, the following adjustments have been made:
(1) Represents the amortization of intangible asset recorded from the
Spokane acquisition consisting of goodwill and customer lists in the
amount of $15,975 over a period of 20 years which is the initial term
of the Sprint PCS management agreement.
(2) Represents additional interest expense based on the following:
<TABLE>
<S> <C>
Accrued interest and prepayment premium on senior subordinated debt.................. $ 80
Interest expense on $75,000 drawdown from senior credit facility assuming an
interest rate of 10%.............................................................. 1,875
Unused commitment fee of 1.375% on senior credit facility assuming only minimum
drawdowns......................................................................... 601
Amortization of deferred financing fees from senior credit facility over a period of
8.5 years......................................................................... 209
Amortization of deferred financing costs relating to the outstanding notes over
10 years.......................................................................... 203
Interest expense on the outstanding notes............................................ 5,330
Amortization of the discount on the outstanding notes over 10 years.................. 400
---------
$ 8,698
=========
</TABLE>
(3) Earnings were insufficient to cover fixed charges on a pro forma basis
by $22,124. For purposes of computing a ratio of earnings to fixed
charges, fixed charges consist of interest expense, amortization of
expenses related to indebtedness and preferred dividends. Earnings
consist of loss from continuing operations plus fixed charges.
Excluded from the pro forma results of operations is a non-recurring
charge of $2,188 for the remaining discount on the senior subordinated note
upon the early extinguishment of the debt. This charge will be reflected as
an extraordinary item in the 2000 financial statements.
35
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL HISTORICAL PRO FORMA AS
UBIQUITEL SPOKANE ADJUSTMENTS ADJUSTED
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net revenues............................ $ - $ 5,625 $ - $ 5,625
Costs of services and equipment......... - 5,046 - 5,046
---------- --------- --------- ---------
Gross profit............................ - 579 - 579
Operating expenses:
Selling, general and administrative
excluding non-cash compensation
charges........................... 554 5,419 - 5,973
Non-cash compensation for general
and administrative matters........ 1,395 - - 1,395
Depreciation and amortization........ - 3,471 799(1) 4,270
---------- --------- --------- ---------
Operating loss.......................... (1,949) (8,311) (799) (11,059)
Interest expense..................... 29 - 34,354(2) 34,383
---------- --------- --------- ---------
Net loss................................ (1,978) (8,311) (35,153) (45,442)
Less: preferred stock dividends......... (9) - - (9)
---------- --------- --------- ---------
Loss available to common stockholders... $(1,987) $(8,311) $(35,153) $(45,451)
========== ========= ========= =========
Pro forma basic and diluted loss per
common share......................... $(0.04) $(0.72)
========== =========
Pro forma weighted average common
shares outstanding................... 50,264 62,764
========== =========
Other Data:
Deficiency of earnings to fixed
charges (45,451)(3)
=========
</TABLE>
36
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
For the purpose of determining the pro forma effect of transactions
described above on our consolidated statement of operations for the year ended
December 31, 1999, the following adjustments have been made:
(1) Represents the amortization of intangible asset recorded from the
Spokane acquisition consisting of goodwill and customer lists in the
amount of $15,975 over a period of 20 years for goodwill which is the
initial term of the Sprint PCS management agreement and five years for
customer lists which is based on management's expectation to build-out
the Spokane market.
(2) Represents additional interest expense based on the following:
<TABLE>
<S> <C>
Accrued interest and prepayment premium on senior subordinated debt................ $ 91
Interest expense on $75,000 drawdown from senior credit facility assuming an
interest rate of 10%............................................................ 7,500
Unused commitment fee of 1.375% on senior credit facility assuming only minimum
drawdowns....................................................................... 2,200
Amortization of deferred financing fees from senior credit facility over a period
of 8.5 years.................................................................... 835
Amortization of deferred financing costs relating to the outstanding notes over
10 years........................................................................ 811
Interest expense on the outstanding notes.......................................... 21,319
Amortization of the discount on the outstanding notes over 10 years................ 1,598
----------
$ 34,354
==========
</TABLE>
(3) Earnings were insufficient to cover fixed charges on a pro forma basis
by $45,451. For purposes of computing a ratio of earnings to fixed
charges, fixed charges consist of interest expense, amortization of
expenses related to indebtedness and preferred dividends. Earnings
consist of loss from continuing operations plus fixed charges.
Excluded from the pro forma results of operations is a non-recurring
charge of $2,188 for the remaining discount on the senior subordinated note upon
the early extinguishment of the debt. This charge will be reflected as an
extraordinary item in the 2000 financial statements.
37
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
UBIQUITEL INC. AND SUBSIDIARIES
AS OF MARCH 31, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL HISTORICAL PRO FORMA AS
UBIQUITEL SPOKANE(1) ADJUSTMENTS ADJUSTED
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents................... $ 33,729 $ - $ 187,007(2) $ 220,736
Cash, restricted............................ - - 75,000(3) 75,000
Prepaid expenses and other assets........... 2,067 93 (937) 1,223
Property and equipment...................... 9,022 18,932 - 27,954
Deferred financing costs, net............... 7,363 - 14,907(4) 22,270
Intangible assets........................... - - 15,975(5) 15,975
Other assets................................ 182 - - 182
----------- ---------- ---------- ---------
TOTAL ASSETS.......................... $ 52,363 $ 19,025 $ 291,952 $ 363,340
=========== ========== ========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable and accrued expenses....... $ 6,306 $ - $ - $ 6,306
Senior credit facility...................... - - 75,000(6) 75,000
Senior subordinated debt.................... 5,812 - (5,812)(7) -
Senior subordinated discount notes.......... - - 136,297(8) 136,297
Redeemable warrants......................... 2,758 - (2,188)(9) 570
STOCKHOLDERS' EQUITY:
Convertible preferred stock................. 19 - (19)(10) -
Common stock and additional paid-in-capital. 51,330 - 111,274(11) 162,604
Accumulated deficit......................... (13,862) - (3,575)(12) (17,437)
Sprint Spectrum L.P.'s equity in assets to
be sold.................................. - 19,025 (19,025)(13) -
----------- ---------- ---------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY.................................. $ 52,363 $ 19,025 $ 291,952 $ 363,340
=========== ========== ========== =========
</TABLE>
38
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2000
(DOLLARS IN THOUSANDS)
For the purpose of determining the pro forma effect of transactions
described above on our consolidated balance sheet as of March 31, 2000 the
following adjustments have been made:
(1) The historical balance sheet of the Spokane, Washington District does
not reflect an amount for liabilities and stockholders' equity. The
financial statements provided by the Spokane predecessor were
abbreviated financial statements and identify only the assets to be
sold. Sprint Spectrum L.P.'s equity in assets to be sold is an assumed
amount. As indicated in Note 4 of the notes to the unaudited pro forma
condensed consolidated balance sheet, the purchase price for the
Spokane acquisition was approximately $35,000 and is reflected in the
pro forma adjustments excluding this offering.
(2) Represents the following adjustments to cash and cash equivalents:
<TABLE>
<S> <C>
Proceeds from outstanding notes....................................................... $ 152,277
Cash used to pay Spokane purchase price............................................... (35,000)
Cash used to pay origination fees and expenses for senior credit facility............. (7,100)
Cash used to pay fees and expenses for the outstanding notes.......................... (7,177)
Cash used to pay prepayment premium on senior subordinated debt....................... (80)
Cash used to retire outstanding senior subordinated debt.............................. (8,000)
Proceeds of UbiquiTel Parent's initial public offering................................ 100,000
Cash used to pay estimated fees and expenses net of amounts prepaid................... (6,913)
Cash used for payments to preferred stockholders upon closing UbiquiTel Parent's
initial public offering............................................................ (1,000)
------------
$ 187,007
============
</TABLE>
(3) Represents the proceeds from the initial drawdown of $75,000 of the
senior credit facility to be held in escrow until specific conditions
have been satisfied as defined in the agreement.
(4) Represents the adjustments to deferred financing fees as follows:
<TABLE>
<S> <C>
Write-off of unamortized deferred financing fees related to senior subordinated debt.... $ (307)
Estimated origination fees and expenses related to senior credit facility............... 7,100
Expenses related to the outstanding notes............................................... 7,177
Additional warrants issued in connection with the outstanding notes..................... 321
Issuance of shares of preferred stock to preferred stockholders convertible into 77,002
shares of UbiquiTel Parent's common stock to maintain a specific percentage stock
ownership upon the issuance of the warrants related to the outstanding notes......... 616
------------
$ 14,907
============
</TABLE>
(5) The preliminary allocation of the purchase price for the acquisition of
the Spokane, Washington PCS network assets, which is based on our
initial determination of relative values, is reflected as follows and
is expected to be finalized in 2000:
<TABLE>
<CAPTION>
ALLOCATION
------------
<S> <C>
Prepaid expenses..................................................................... $ 93
Property and equipment, net.......................................................... 18,932
Intangible assets including goodwill (20 year amortization) and customer lists
(5 year amortization)............................................................. 15,975
---------
$35,000
=========
</TABLE>
39
<PAGE>
The amortization period of 20 years for goodwill is based on the
initial term of the Sprint PCS management agreement. The amortization
period of 5 years for customer lists is based on management's
expectation to build out the Spokane market.
(6) Represents initial drawdown of the senior credit facility of $75,000.
(7) Represents retirement of senior subordinated debt.
(8) Represents value ascribed to the outstanding notes from the gross
proceeds of $152,277. The remaining $15,980 was ascribed to the
warrants and is reflected in stockholders' equity.
(9) Represents exercise of a warrant to purchase 4,978,150 shares of
UbiquiTel Parent's common stock issued in connection with the senior
subordinated debt.
(10) Represents conversion of convertible preferred stock to common stock in
connection with UbiquiTel Parent's initial public offering.
(11) Represents adjustments to stockholders' equity as follows:
<TABLE>
<S> <C>
Proceeds of UbiquiTel Parent's initial public offering................................. $ 100,000
Estimated fees and expenses of UbiquiTel Parent's initial public offering.............. (7,850)
Conversion of preferred stock to common stock.......................................... 19
Exercise of warrants issued in connection with senior subordinated debt............... 2,188
Warrants issued with the outstanding notes............................................ 15,980
Additional warrants issued in connection with the outstanding notes................... 321
Issuance of shares of preferred stock to preferred stockholders convertible into
77,002 shares of UbiquiTel Parent's common stock to maintain a specific percentage
stock ownership in connection with the outstanding notes........................... 616
------------
$ 111,274
============
</TABLE>
(12) Represents fees and expenses incurred as follows:
<TABLE>
<S> <C>
Write-off of unamortized deferred financing fees related to the senior subordinated $ (307)
debt................................................................................
Write-off of unamortized discount relating to senior subordinated debt................. (2,188)
Expenses relating to prepayment of senior subordinated debt............................ (80)
Payments to preferred stockholders upon closing of UbiquiTel Parent's initial public
offering............................................................................ (1,000)
------------
$ (3,575)
============
</TABLE>
(13) Represents the elimination of Sprint Spectrum L.P.'s assumed equity in
assets to be sold.
40
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OPERATING DATA
UBIQUITEL
- In the table below, we provide you with selected historical
consolidated financial and operating data for, the period from
commencement of operations on September 29, 1999 to December
31, 1999, and balance sheet data as of December 31, 1999,
which are derived from and should be read in conjunction with
the audited consolidated financial statements of UbiquiTel
Inc. and subsidiaries included elsewhere in this prospectus;
and
- selected historical consolidated financial and operating data
for the three months ended March 31, 2000 and balance sheet
data as of March 31, 2000, which are derived from and should
be read in conjunction with the unaudited consolidated
financial statements of UbiquiTel Inc. and subsidiaries
included elsewhere in this prospectus.
In our opinion, the unaudited interim financial statements have been
prepared on the same basis as the audited financial statements and include all
adjustments, which consist only of normal recurring adjustments, necessary to
present fairly the financial position and the results of operations for the
interim periods. Financial and operating results for the three months ended
March 31, 2000 are not necessarily indicative of the results that may be
expected for the full year.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
PERIOD FROM THREE MONTHS
SEPTEMBER 29, 1999 ENDED
(INCEPTION) TO MARCH 31, 2000
DECEMBER 31, 1999, (UNAUDITED)
-----------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues..................................................... $ - $ 69
Operating expenses:
General and administrative expenses excluding non-cash 554 907
compensation charges.......................................
Non-cash compensation expense for general and administrative 1,395 -
matters....................................................
Amortization of deferred stock compensation expense granted to
employees for general and administrative matters........... - 119
------------ -----------
Operating loss................................................... (1,949) (957)
Interest expense (income)..................................... 29 (35)
------------ -----------
Loss before extraordinary item................................... (1,978) (922)
Extraordinary item-write-off of deferred financing costs on
early extinguishment of debt............................... - (1,723)
Preferred stock dividends plus accretion...................... (9) (9,231)
------------ -----------
Net loss available to common stockholders........................ $ (1,987) $ (11,876)
============ ===========
Pro forma basic and diluted net loss per share of common stock(1) $ (0.04) $ (0.24)
============ ===========
BALANCE SHEET DATA:
Cash and cash equivalents..................................... $ 23,959 $ 33,729
Total assets.................................................. 30,191 52,363
Long-term debt................................................ 5,812 5,812
Total stockholders' equity.................................... 15,478 37,487
</TABLE>
(1) Basic and diluted net loss per share of UbiquiTel Parent's common stock
is computed by dividing net loss by the weighted average number of
common shares outstanding after giving effect to the conversion of
preferred stock into common stock upon UbiquiTel Parent's initial
public offering and the exercise of warrants to purchase 4,978,150
shares of its common stock which were issued in connection with the
outstanding notes.
41
<PAGE>
SPOKANE DISTRICT
The selected financial data presented below under the caption
"Statement of Operations Data" for each of the three years in the period
ended December 31, 1999, and under the caption "Balance Sheet Data" as of
December 31, 1999 and 1998, are derived from the condensed financial
statements of the Spokane District (wholly owned by Sprint Spectrum L.P.
through April 15, 2000), the predecessor of UbiquiTel Inc. and subsidiaries.
The selected financial data presented below as of March 31, 2000 and for the
three-month periods ended March 31, 2000 and 1999 have been derived from
unaudited condensed financial statements of the Spokane District which have
been prepared on the same basis as the Spokane District's audited financial
statements and, in the opinion of Sprint Spectrum L.P.'s management, include
all adjustments, consisting only of normal recurring accruals, necessary for
a fair presentation of the financial position and results of operations for
these periods. The results of operations for the three months ended March 31,
2000 are not necessarily indicative of the results that may be expected for
the full year. The Spokane District did not launch operations until December
16, 1996. As a result, we have not presented financial data for 1996 because
revenues were less than $10,000. The data set forth below should be read in
conjunction with the Spokane District's financial statements and accompanying
notes included elsewhere in this prospectus and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------- ------------------
1997 1998 1999 1999 2000
-------- --------- --------- -------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues..................................... $ 1,246 $ 3,280 $ 5,625 $ 1,136 $ 1,574
Expenses:
Costs of services and equipment............... 2,903 3,970 5,046 747 779
Selling, general and administrative expense... 8,168 4,470 5,419 997 1,214
Depreciation.................................. 2,968 3,112 3,471 828 931
-------- --------- --------- -------- -------
Expenses in excess of net revenues............... $ 12,793 $ 8,272 $ 8,311 $ 1,436 $ 1,350
======== ========= ========= ======== =======
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
1998 1999 AS OF MARCH 31, 2000
-------- --------- --------------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total assets purchased........................ $19,551 $19,784 $19,025
</TABLE>
42
<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. We are a development stage
company and intend to significantly expand our operations. Accordingly, we do
not believe the discussion and analysis of our historical financial condition
and results of operations set forth below are indicative nor should they be
relied upon as an indicator of our future performance.
OVERVIEW
In October 1998, a limited liability company whose sole member was
The Walter Group, entered into a management agreement with Sprint PCS whereby
it 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 the
Reno/Tahoe market. The Walter Group is an international wireless
telecommunications consulting and service company based in Seattle,
Washington. The limited liability company subsequently changed its name to
UbiquiTel L.L.C. During the period from October 1998 to October 1999,
UbiquiTel L.L.C. attempted unsuccessfully to obtain financing for the
build-out of the Reno/Tahoe market. In November 1999, UbiquiTel L.L.C.
assigned the management and related agreements to us. UbiquiTel L.L.C. had no
operations or financial transactions prior to the assignment of these
agreements to us.
In December 1999, we amended our management agreement with Sprint
PCS to expand or markets to include a total of 7.7 million residents in the
western and midwestern United States.
In March 2000, we entered into a new $250.0 million senior credit
facility.
In April 2000, we completed a private sale of 300,000 units
consisting of the outstanding notes and warrants to purchase, in the
aggregate, 3,579,000 shares of UbiquiTel Parent's common stock after giving
effect to a two-for-one stock split. We received gross proceeds of
approximately $152.3 million from the sale of the units.
In April 2000, we acquired Sprint PCS' Spokane, Washington PCS
network and related assets for $35.0 million cash. We acquired switching
equipment, transmitting and receiving equipment at 41 radio communications
sites, ancillary equipment, prepaid expenses, goodwill and customer lists. We
did not acquire any customer related assets or liabilities such as accounts
receivable or accrued liabilities. The Spokane market did not launch
operations until December 16, 1996, and had no significant revenues until
1997.
In June 2000, we completed UbiquiTel Parent's initial public
offering of 12,500,000 shares of its common stock. We received gross proceeds
of $100.0 million from the initial public offering.
We have currently commenced limited operations in one of our
markets, which together with the Spokane, Washington market, cover
approximately 500,000 residents. We currently have approximately 9,000
subscribers. We expect to cover approximately 55% of the resident population
in our markets by the end of 2001 and expect to cover approximately 63% by
June 30, 2004 upon completion of our build-out. We anticipate that the net
proceeds of UbiquiTel Parent's initial public offering of common stock, when
combined with the proceeds from its sale of preferred stock and our sale of
the outstanding notes and the availability of borrowings under our senior
credit facility, will be adequate to fund our anticipated network build-out
plan, anticipated capital expenditures, working capital requirements,
operating losses and other cash needs through anticipated break-even cash
flow from operations in 2003.
We are a development stage company with very limited operations and
revenues, significant losses and substantial capital requirements. From our
inception on September 29, 1999 through December 31, 1999, we incurred losses
of approximately $2.0 million. On a pro forma basis, after giving effect to
various transactions
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described in "Unaudited Pro Forma Condensed Consolidated Financial Data,"
loss available to common stockholders from our inception through December 31,
1999 would have been approximately $45.5 million and loss available to common
stockholders would have been approximately $20.4 million for the three months
ended March 31, 2000. We expect to continue to incur significant operating
losses and to generate significant negative cash flow from operating
activities until at least 2003 while we develop and construct our PCS network
and build our customer base.
As a Sprint PCS affiliate, we do not own the licenses to operate our
network and instead, we pay Sprint PCS for the use of its licenses. Under our
management agreement with Sprint PCS, Sprint PCS is entitled to receive 8.0%
of all collected revenue from Sprint PCS subscribers based in our markets and
fees from wireless service providers other than Sprint PCS when their
subscribers roam into our network. We are responsible for building, owning
and managing the portion of the Sprint PCS Network located in our markets
under the Sprint and Sprint PCS brand names. We believe that our markets are
important to Sprint PCS' strategy of providing PCS service nationwide. Sprint
PCS paid approximately $90.0 million for the PCS licenses in our markets and
will incur additional expenses for microwave clearing. However, Sprint PCS is
still constructing its nationwide network and does not offer PCS services,
either on its own network or through its roaming agreements, in every city in
the United States. Sprint PCS has entered into, and anticipates entering
into, management agreements similar to ours with companies in other markets
under its nationwide PCS build-out strategy. Our results of operations are
dependent on Sprint PCS' network and, to a lesser extent, on the networks of
its affiliates.
Under our long-term management agreement with Sprint PCS, we expect
to purchase our network and subscriber equipment under Sprint PCS' vendor
contracts that reflect its volume discounts. In addition, we will have access
to Sprint PCS' national marketing support and will be able to take advantage
of Sprint PCS' retail distribution agreements with national retailers such as
Circuit City, Kmart and OfficeMax and an exclusive PCS distribution agreement
with RadioShack. We intend to offer national plans designed by Sprint PCS as
well as specialized local plans tailored to our markets' demographics. As
part of our marketing process, we may offer our handsets at a price less than
our cost. We expect to continue to employ these discounts in an effort to
grow our subscriber base. For the foreseeable future, we expect that the cost
of handsets will exceed our handset revenues.
As a Sprint PCS affiliate, we will purchase a full suite of support
services from Sprint PCS. Initially, the charges for these services 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 support services will be
lower than if we developed and provided the services ourselves. We will have
access to these services during the term of our Sprint PCS management
agreement unless Sprint PCS provides us at least nine months advance notice
of its intention to terminate any particular service. 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; and roaming clearinghouse services. If Sprint PCS terminates
any of these services or increases the amount it charges us for any of these
services, our operating costs may increase and our operations may be
interrupted or restricted.
In addition to the benefits and services provided through our
agreement with Sprint PCS, we will also utilize the services of third parties
such as Lucent Technologies, LCC International and SpectraSite Communications
to successfully complete the build-out and support the operations of our
network. As a result of this outsourcing, we are substantially dependent on
Sprint PCS and the other third parties for the build-out and operation of our
network. If we fail to complete the build-out on schedule or meet Sprint PCS'
program requirements, we would be in breach of our management agreement with
Sprint PCS that could result in its termination. If the management agreement
is terminated, we will no longer be able to offer Sprint PCS products and
services, and we may be required to sell our operating assets to Sprint PCS
at a discount to market value and without further stockholder approval.
Sprint and MCI WorldCom announced on October 5, 1999 that they have
agreed to merge to form a new company called WorldCom. The merger is subject
to various conditions, including the approvals of the shareholders of both
companies, the Federal Communications Commission, the Justice Department and
various state government
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bodies and foreign antitrust authorities. Until the merger actually occurs,
we will not know what effect it will have on Sprint's business. Any negative
impact on Sprint could have a negative impact on us as a Sprint PCS affiliate.
RESULTS OF OPERATIONS
PROSPECTIVE INCOME STATEMENT
REVENUES. We will derive our revenues from four general sources that
are described in order of their significance:
- Subscriber Revenue. Subscriber revenue consists of monthly
recurring service charges and monthly non-recurring charges
for local, long distance, travel and roaming airtime usage in
excess of the pre-subscribed usage plan. Our customers'
charges are dependent on their rate plans, based on the number
of minutes included in their plan. We intend to use the Sprint
PCS billing platform and rate plans which are designed to
offer simple and understandable options. We have limited
flexibility to change the pricing on these rate plans, and
must obtain Sprint PCS' final approval. We expect subscriber
revenue to constitute the majority of our revenues in the
future. We do not earn revenue for the activation of new
customers.
- Sprint PCS Travel Revenue. Sprint PCS travel revenue is
generated when a Sprint PCS subscriber based outside our
markets uses our portion of the Sprint PCS network. We
anticipate that travel revenue will represent a substantial
portion of our future revenue. Under our agreements with
Sprint PCS, in October 2000, Sprint PCS can change the current
fee we receive for each Sprint PCS travel minute. The change
by Sprint PCS in the travel revenue we are paid could
substantially decrease our revenues.
- Non-Sprint PCS Roaming Revenue. Non-Sprint PCS roaming revenue
is generated when a non-Sprint PCS subscriber uses our portion
of the Sprint PCS network. We must have roaming arrangements
with other wireless providers in order to permit roaming for
our subscribers and for the non-Sprint PCS subscribers.
- Product Sales Revenue. Product sales revenue is generated from
the sale of handsets and accessories. We record and retain
100% of the revenue from the sale of handsets and accessories,
net of an allowance for returns, as product sales revenue.
We recognize 100% of revenues from Sprint PCS' subscribers based in our
markets, proceeds from the sale of handsets and accessories and fees from Sprint
PCS when their customers travel into our portion of the Sprint PCS network.
Under our management agreement with Sprint PCS, Sprint PCS receives 8% of all
collected revenue from Sprint PCS subscribers based in our markets and fees from
wireless service providers other than Sprint PCS when their subscribers roam
into our portion of the Sprint PCS network. We report the amount retained by
Sprint PCS as an operating expense.
OPERATING EXPENSES. We expect that our operating expenses will
principally include network operations, sales and marketing and general and
administrative expenses, some of which will be incurred through our management
and services agreements with Sprint PCS and others of which we will incur
directly.
- Network Operations Expenses. Network operations expenses
include radio communications site lease costs, utilities,
network control maintenance, network control site leases,
engineering personnel, transport facilities, interconnect
charges and handset and equipment costs. Sprint PCS can adjust
the program requirements at any time so long as it gives us at
least 30 days prior notice which may increase our network
operations expense. We will also be charged travel fees by
Sprint PCS and roaming fees by other wireless carriers when
our customers make a wireless call on networks outside our
markets. We also include as an expense the 8% of all collected
revenue to which Sprint PCS is entitled.
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- Selling, General and Administrative Expenses. Selling expenses
relate to our distribution channels, sales representatives,
sales support personnel, our retail stores, advertising
programs and residual commissions. General and administrative
expenses include our corporate executive payroll, compensation
and benefits, insurance and facilities, receivable related bad
debt, and local market finance and administration expenses.
The fees we pay to Sprint PCS for the use of their support
services, including billing and collections services, customer
care and subscriber activation are also included in this
expense category. If Sprint PCS terminates a service or
increases the amount it charges us for a support service, our
operating costs may increase.
DEPRECIATION AND AMORTIZATION EXPENSE. We expect to depreciate our
property and equipment using the straight-line method over five to ten years.
Amortization of intangible asset from our Spokane acquisition in the amount of
$16.0 million will be amortized over a period of 20 years.
INTEREST EXPENSE. We will accrue interest at a rate of 14.0% per annum
on the notes through April 15, 2005 and will pay interest semiannually in cash
thereafter. Interest on our senior credit facility will accrue at our option at
the prime rate or the federal funds rate plus specified margins or the reserve
adjusted London interbank offered rate. Interest expense will also include the
amortized amount of deferred financing fees relating to our senior credit
facility and notes. We expect our interest expense to increase in the future as
we borrow under our senior credit facility to fund our network build-out and
operating losses. See "Description of the Senior Credit Facility."
HISTORICAL INCOME STATEMENTS
UBIQUITEL
THREE MONTHS ENDED MARCH 31, 2000
During the three months ended March 31, 2000 we earned nominal revenues
attributable to travel airtime. We continued developing our PCS business in
portions of Nevada and California.
We incurred a net loss of $11.9 million, of which $8.8 million is
attributable to UbiquiTel Parent's issuance of Series B preferred stock at a
price less than its initial public offering price of $8.00 per share of common
stock.
We incurred general and administrative expenses of $906,679, including
nominal amounts payable to Sprint PCS, during the period in addition to a
non-cash expense related to amortization of deferred stock compensation expense
of $118,643. We are a development stage company and we believe general and
administrative expenses incurred during this period are not indicative of future
general and administrative expenses.
During the period we replaced a $25.0 million credit facility with
Paribas with a $250.0 million facility with Paribas. We wrote off $1.7
million in deferred financing costs in connection with the original facility
and recognized this as an extraordinary item.
During the period we incurred interest expense of approximately
$348,000 consisting of the commitment fee on our $25.0 million facility and
interest on the long-term debt. We received approximately $383,000 in
interest income, resulting in net interest income of approximately $35,000.
We are a development stage company and have incurred an aggregate
loss since inception of $13.9 million. The operating results during this
three month period are not indicative of the anticipated results of
operations that we expect to achieve following commencement of our commercial
operations.
Amortization of deferred stock compensation related to options
granted to employees for general and administrative matters totaled
approximately $118,643 for the period, based on the fair market value of the
common stock underlying options granted during the period.
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FROM SEPTEMBER 29, 1999 (INCEPTION) TO DECEMBER 31, 1999
From September 29, 1999 (inception) through December 31, 1999, our
operating activities were focused primarily on developing a PCS business in
portions of Nevada, including Reno, Carson City, Lake Tahoe and the
transportation corridor west along I-80 to Auburn, California. During this
period we did not generate any revenues and, as a result, have incurred
operating losses since inception. During this period, total cumulative
expenses of approximately $2.0 million were incurred. These expenses related
to non-cash compensation for general and administrative matters, salaries and
benefits, professional fees and interest expense. The operating results
during this period are not indicative of the anticipated results of
operations which we expect to achieve, following commencement of commercial
operations, as a Sprint PCS affiliate.
Non-cash compensation for general and administrative matters totaled
approximately $1.4 million for the period. This expense was determined using
the provisions of Accounting Principles Board Opinion No. 25 "Accounting for
Stock Issued to Employees" and was based on the fair market value of the
common stock issued on November 1, 1999.
SPOKANE DISTRICT
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31,
1999
Net service revenues increased by $0.5 million or 48.2% to $1.4
million in first quarter 2000 compared to first quarter 1999. Net service
revenues primarily consisted of subscriber revenue from monthly service
charges. The increase is primarily attributable to an increased number of
subscribers.
Net equipment revenues decreased by approximately $20,000 or 11.8%
to $161,000 in first quarter 2000 compared to first quarter 1999. Net
equipment revenues primarily consisted of sales of handset and accessory
equipment. The decrease is primarily due to lower retail sales prices for
handsets partially offset by increased subscriber additions.
Costs of services increased by $0.1 million or 57.4% in first
quarter 2000 compared to first quarter 1999. As a percentage of net service
revenues, these costs represented approximately 29% of revenues in first
quarter 2000 compared to approximately 27% of revenues in 1999. Costs of
services as a percentage of net service revenues have remained relatively
steady.
Cost of equipment decreased by $0.1 million or 23.8% to $0.4 million
in first quarter 2000 compared to first quarter 1999. As a percentage of net
equipment revenues, these costs represented approximately 232% of revenues in
first quarter 2000 compared to approximately 268% of revenues in 1999. As
part of Sprint Spectrum L.P.'s marketing plan, handsets are normally sold at
prices below Sprint Spectrum L.P.'s cost. The decrease in cost of equipment
as a percentage of net equipment revenues is primarily attributable to
decreases in handset costs somewhat offset by lower handset sales prices.
Selling, general and administrative expenses increased by $0.2
million or 21.7% to $1.2 million in first quarter 2000 compared to first
quarter 1999. As a percentage of revenues, these expenses represented
approximately 77% of revenues in first quarter 2000 compared to approximately
88% in 1999. The increase is primarily attributable to increased activity
offset somewhat by increased efficiencies.
Depreciation expense increased by $0.1 million or 12.5% to $0.9
million in first quarter 2000 compared to first quarter 1999. This increase
is primarily attributable to an increase in the asset base.
Expenses in excess of net revenues decreased by approximately
$86,000 or 6.0% to $1.4 million in first quarter 2000 compared to first
quarter 1999. This decrease is a result of increased costs and expenses more
than offset by increased revenue.
Management notes the 2000 operations reflect the operation of the
Spokane District by Sprint PCS. Historical results are not necessarily
indicative of future operations that we will manage.
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FISCAL YEAR ENDED DECEMBER 31, 1999 COMPARED TO FISCAL YEAR ENDED
DECEMBER 31, 1998
Net service revenues increased by $2.2 million or 83.8% to $4.8
million in 1999 compared to 1998. Net service revenues primarily consisted of
subscriber revenue from monthly service charges. The increase is primarily
attributable to an increased number of subscribers.
Net equipment revenues increased by approximately $0.2 million or
25.0% to $0.9 million in 1999 compared to 1998. Net equipment revenues
primarily consisted of sales of handsets and accessory equipment. The
increase is primarily attributable to increased subscriber additions
partially offset by lower retail sales prices for handsets.
Costs of services increased by $0.6 million or 36.2% to $2.3 million
in 1999 compared to 1998. As a percentage of net service revenues, these
costs represented approximately 49% of revenues in 1999 compared to
approximately 67% of revenues in 1998. The increase in costs is primarily
attributable to the increase in revenues somewhat offset by increased
efficiencies.
Cost of equipment increased by $0.5 million or 20.1% to $2.7 million
in 1999 compared to 1998. As a percentage of net equipment revenues, these
costs represented approximately 312% of revenues in 1999 compared to
approximately 325% of revenues in 1998. As part of Sprint Spectrum L.P.'s
marketing plan, handsets are normally sold at prices below Sprint Spectrum
L.P.'s cost. The decrease in cost of equipment as a percentage of net
equipment revenues is primarily attributable to decreases in handset costs
somewhat offset by lower retail sales prices.
Selling, general and administrative expenses increased by $0.9
million or 21.2% to $5.4 million in 1999 compared to 1998. As a percentage of
revenues, these expenses represented approximately 96% of revenues in 1999
compared to approximately 136% in 1998. The increase is primarily
attributable to increased activity offset somewhat by increased efficiencies.
Depreciation expense increased by $0.4 million or 11.5% to $3.5
million in 1999 compared to 1998. This increase is primarily attributable to
an increase in the asset base.
Expenses in excess of net revenues increased by approximately $40
thousand or 0.5% to $8.3 million in 1999 compared to 1998. This increase is a
result of increased costs and expenses offset by increased revenues.
Management notes the 1999 operations reflect the operation of the
Spokane District by Sprint PCS. Historical results are not necessarily
indicative of future operations that we will manage.
FISCAL YEAR ENDED DECEMBER 31, 1998 COMPARED TO FISCAL YEAR ENDED
DECEMBER 31, 1997
Net service revenues increased by $1.9 million or 281.1% to $2.6
million in 1998 compared to 1997. Net service revenues primarily consisted of
subscriber revenue from monthly service charges. The increase is primarily
attributable to an increased number of subscribers.
Net equipment revenues increased by approximately $0.1 million or
21.9% to $0.7 million in 1998 compared to 1997. Net equipment revenues
primarily consisted of sales of handsets and accessory equipment. The
increase is primarily attributable to increased subscriber additions
partially offset by lower retail sales prices for handsets.
Costs of services increased by $0.4 million or 25.7% to $1.7 million
in 1998 compared to 1997. As a percentage of net service revenues, these
costs represented approximately 67% of revenues in 1998 compared to
approximately 202% of revenues in 1997. The increase in costs is primarily
attributable to the increase in revenues somewhat offset by increased
efficiencies.
Cost of equipment increased by $0.7 million or 46.7% to $1.5 million
in 1998 compared to 1997. As a percentage of net equipment revenues, these
costs represented approximately 325% of revenues in 1998 compared
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to approximately 270% of revenues in 1997. As part of Sprint Spectrum L.P.'s
marketing plan, handsets are normally sold at prices below Sprint Spectrum
L.P.'s cost. The increase in cost of equipment as a percentage of net
equipment revenues is primarily attributable to lower retail sales prices of
handsets in 1998.
Selling, general and administrative expenses decreased by $3.7
million or 45.3% to $4.5 million in 1998 compared to 1997. As a percentage of
revenues, these expenses represented approximately 136% of revenues in 1998
compared to approximately 655% in 1997. The decrease is primarily
attributable to the end of start-up activities offset somewhat by increased
revenue generating activity.
Depreciation expense increased by $0.1 million or 4.8% to $3.1
million in 1998 compared to 1997. This increase is primarily attributable to
an increase in the asset base.
Expenses in excess of net revenues decreased by $4.5 million or
35.3% to $8.3 million in 1998 compared to 1997. This decrease is a result of
increased revenues and decreased selling, general and administrative expenses
somewhat offset by increased costs of services and equipment.
Management notes the 1998 operations reflect the operation of the
Spokane District by Sprint PCS. Historical results are not necessarily
indicative of future operations that we will manage.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, our activities have consisted principally of
raising capital, consummating and supporting our agreements with Sprint PCS,
developing the initial design of our PCS network and adding to our management
team. We have relied on the proceeds from equity and debt financing, rather
than revenues, as our primary sources of capital. Specifically, operations
during this development phase have been funded through equity infusions of
$42.0 million in the form of preferred stock, the incurrence of subordinated
indebtedness of $8.0 million as well as availability under our prior $25.0
million credit facility, which has been replaced by our $250.0 million senior
credit facility. See "Description of the Senior Credit Facility."
Completion of our PCS network will require substantial capital. Our
build-out plan includes the installation of three switches and over 500 radio
communications sites by the end of 2001. In addition, we will develop
approximately 20 company-owned Sprint PCS stores and associated
administrative systems within the same time period. We have commenced limited
operations in one of our markets, which together with the Spokane, Washington
market, cover approximately 500,000 residents. We expect to cover
approximately 55% of the resident population in our markets by the end of
2001 and expect to cover approximately 63% upon the completion of our
build-out. We anticipate that the net proceeds of UbiquiTel Parent's initial
public offering of common stock, when combined with the proceeds from its
sale of preferred stock and our sale of the outstanding notes and the
availability of borrowings under our $250.0 million senior credit facility,
will be adequate to fund our anticipated network build-out plan, anticipated
capital expenditures, working capital requirements, operating losses and
other cash needs through anticipated break-even cash flow from operations in
2003. The actual funds required to build-out our PCS network and fund
operating losses and working capital needs may vary materially from these
estimates, and additional funds could be required in the event of unforeseen
delays, cost overruns, unanticipated expenses, engineering design changes and
other technological risks. If we expand more rapidly than currently
anticipated, or if our working capital needs exceed our current expectations,
we will need to raise additional capital from equity or debt sources. We
cannot be sure that we will be able to obtain the additional financing to
satisfy our cash requirements or to implement our growth strategy on
acceptable terms or at all. If we cannot obtain such financing on terms
acceptable to us, we may be forced to curtail our planned business expansion
and may be unable to fund our ongoing operations.
Net cash used by operating activities was approximately $2.2 million
for the three months ended March 31, 2000 and an aggregate of $2.4 million
from inception to March 31, 2000. Cash used in operating activities for the
period was attributable to operating losses and working capital needs. Net
cash used in investing activities was approximately $5.4 million during the
three months ended March 31, 2000. The expenditures were related primarily to
the purchase of equipment needed to begin construction on our portion of the
Sprint PCS Network. Net cash
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provided by financing activities was approximately $17.4 million, consisting
primarily of the preferred stock issued during the period.
On March 31, 2000, we signed a new senior secured credit agreement
with Paribas. The new senior credit facility consists of a revolving loan of
up to $55.0 million, a term loan A of $120.0 million and a term loan B of
$75.0 million. Until the earlier to occur of the syndication of the senior
credit facility, or August 2000, Paribas may re-allocate the amounts among
the revolving loan, term loan A and term loan B at their discretion.
Concurrently with the closing of the outstanding notes, we borrowed $75.0
million of term loans, which were funded into an escrow account. The escrow
account will remain the property of our lenders and will not be released to
us if an event of default has occurred under the credit agreement.
Additionally, the escrow account will not be released to us until specified
conditions have been satisfied. These conditions include, among others,
evidence that we have used all of the proceeds from our sale of the
outstanding notes and from UbiquiTel Parent's initial public offering of
common stock to pay fees and expenses in connection with those offerings, to
fund the build-out of our network or for other general corporate and working
capital purposes. Additional borrowings under our senior credit facility must
be placed into escrow until the conditions to release our initial borrowing
of $75.0 million have been satisfied. Our senior credit facility contains
financial and other covenants customary for the wireless industry, and is
secured by a first priority lien on UbiquiTel Parent's assets and a pledge by
it of the capital stock in UbiquiTel Operating Company. Scheduled
amortization payments of principal for the term loans under the senior credit
facility begin on June 30, 2004.
On April 11, 2000, we issued 300,000 units consisting of the
outstanding notes and warrants to purchase 3,579,000 shares of UbiquiTel
Parent's common stock. The outstanding notes mature on April 15, 2010 and are
limited to an aggregate principal amount at maturity of $300.0 million. The
outstanding notes generated gross proceeds to us of $152.3 million. The
outstanding notes are general, unsecured obligations subordinated in right of
payment to all senior debt, including obligations under our senior secured
credit facility. The outstanding notes accrue interest at a rate of 14.0% per
annum, computed on a semi-annual basis, calculated from April 11, 2000. The
outstanding notes will not bear interest payable in cash prior to April 15,
2005, and will bear interest payable semi-annually in cash on each of April
and October 15, beginning October 15, 2005.
The indenture that governs the outstanding notes and the credit
agreement that governs our senior credit facility impose material operating
and financial restrictions on us. These restrictions, subject to ordinary
course of business exceptions, may limit our ability to engage in some
transactions, such as making investments, selling assets and borrowing
additional money. These restrictions could limit our ability to obtain debt
financing, refinance or pay principal or interest on outstanding debt or make
acquisitions for cash or debt. Also, we will have to dedicate a substantial
portion of our cash flow from operations to the payment of interest on, and
principal of, our debt, which will reduce funds available for other purposes.
On June 12, 2000, we completed UbiquiTel Parent's initial public
offering of 12,500,000 shares of its common stock. We received gross proceeds
of $100.00 million from the initial public offering.
As part of our management agreement, Sprint PCS requires us to
build-out portions of our network by various dates including December 31,
2000, March 31, 2001, September 30, 2001 and June 1, 2005. See "The Sprint
PCS Agreements--The Management Agreement--Network build-out." We expect our
PCS network build-out will require approximately $239.0 million of capital
expenditures by the end of 2003. The table below identifies our planned
capital expenditures through 2003.
<TABLE>
<CAPTION>
ESTIMATED CAPITAL
EXPENDITURES
YEAR (IN MILLIONS)
---- -------------
<S> <C>
2000......................................................................... $120.0
2001......................................................................... 61.0
2002......................................................................... 25.0
2003......................................................................... 33.0
</TABLE>
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On March 31, 2000, we had working capital of $29.5 million,
calculated by subtracting current liabilities of $6.3 million from current
assets of $35.8 million.
Currently, we have limited sources of revenue to meet our
anticipated capital requirements. We expect the primary sources of funding to
be the proceeds provided by this offering, our sale of the outstanding notes
and borrowings available under our $250.0 million senior credit facility.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
We are exposed to certain market risks which are inherent in our
financial instruments. These instruments arise from transactions entered into
in the normal course of business. We are currently subject to interest rate
risk on our existing credit facility. Our fixed rate debt will consist
primarily of the accreted balance of our notes. Our variable rate debt will
consist of borrowings made under our $250.0 million senior credit facility.
Our primary market risk exposure will relate to:
- the interest rate risk on long-term and short-term borrowings;
- our ability to refinance the 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 may decide, from time to time, 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, but are not obligated to do so.
At December 31, 1999, as adjusted to give effect to UbiquiTel
Parent's initial public offering of common stock, its sale of preferred
stock, our sale of the outstanding notes, our $250.0 million senior credit
facility and expected borrowings thereunder, and in each case the use of
proceeds therefrom, only the borrowings under our senior credit facility bear
interest at variable rates. Assuming $75.0 million of borrowings at variable
rates and assuming a two percentage point increase in the average interest
rate under these borrowings, it is estimated that our interest expense for
the year ended December 31, 1999, would have increased by approximately $1.5
million. In the event of an adverse change in interest rates, management
would likely take actions that would mitigate our exposure to interest rate
risk, through interest rate swaps or otherwise; however, due to the
uncertainty of the actions that would be taken and their possible effects,
this analysis assumes no such action. Further, this analysis does not
consider the effects of the change in the level of overall economic activity
that could exist in such an environment.
INFLATION
Management believes that inflation has not had, and will not have, a
material adverse effect on our results of operations.
SEASONALITY
Our business is seasonal because the wireless industry is heavily
dependent on fourth quarter results. Among other things, the industry relies
on significantly higher customer additions and handset sales in the fourth
quarter as compared to the other three fiscal quarters. The factors
contributing to this trend include the increasing use of retail distribution,
which is dependent on year-end holiday shopping, the timing of new product
and service offerings, competitive pricing pressures and aggressive marketing
and promotions during the holiday season.
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BUSINESS
OVERVIEW
We are the exclusive provider of Sprint PCS digital wireless
personal communications services to four midsize and smaller markets in the
western and midwestern United States. Through our management agreement with
Sprint PCS, we have the exclusive right to provide 100% digital, 100% PCS
products and services under the Sprint and Sprint PCS brand names in our
markets which include a total population of approximately 7.7 million
residents. We are among 18 companies, which we believe are unrelated to each
other and to Sprint PCS, that have entered into affiliation agreements with
Sprint PCS to provide Sprint PCS products and services throughout the United
States. Sprint PCS, together with its affiliates including us, operates the
largest all-digital, all-PCS nationwide wireless network in the United States
based on covered population, already covering more than 190 million residents
in more than 330 metropolitan markets. Sprint PCS has PCS licenses to cover
more than 270 million people across all 50 states, Puerto Rico and the U.S.
Virgin Islands. However, Sprint PCS does not currently offer PCS services in
every state in the United States.
We believe that our strategic relationship with Sprint PCS provides
us with a significant competitive advantage because of its strong brand name
recognition, quality products and services, established distribution
channels, long-standing equipment vendor relationships and all digital
nationwide coverage. We further believe that our relationship with Sprint PCS
will allow us to establish high quality, branded wireless services more
quickly, at a lower cost and with lower initial capital requirements than
would otherwise be possible.
We have commenced limited operations in one of our markets, which
together with our recent acquisition of the Spokane, Washington market from
Sprint PCS, cover approximately 500,000 residents. We currently have
approximately 9,000 subscribers. We expect to cover approximately 55% of the
resident population in our markets by the end of 2001 and expect to cover
approximately 63% upon completion of our build-out. We anticipate that the
net proceeds of UbiquiTel Parent's initial public offering, when combined
with the proceeds from the sale of its preferred stock and the outstanding
notes and the availability of borrowings under our senior credit facility,
will be adequate to fund our anticipated network build-out plan, capital
expenditures, working capital requirements, operating losses and other cash
needs through anticipated break-even cash flow from operations in 2003.
We have assembled an experienced management team to execute our
network build-out and business strategy. Our senior management team has an
average of over ten years of experience in the wireless communications
industry with companies such as Comcast Cellular Communications, PacTel
Cellular and Frontier Cellular Communications. Donald A. Harris, our Chairman
of the Board, President and Chief Executive Officer, previously was president
of Comcast Cellular Communications and managed much of its network build-out
in Pennsylvania, New Jersey and Delaware with a covered population of over 8
million residents.
In October 1998, UbiquiTel L.L.C., whose sole member was The Walter
Group, entered into an agreement with Sprint PCS for the exclusive rights to
market Sprint's 100% digital, 100% PCS products and services to the residents
in the Reno/Tahoe Nevada market. The Walter Group is an international
wireless telecommunications consulting and service company based in Seattle,
Washington. UbiquiTel L.L.C. had no financial transactions from its inception
on August 24, 1998 to September 29, 1999. On September 29, 1999, UbiquiTel
Inc. was incorporated. In November 1999, UbiquiTel L.L.C. assigned all of its
material contracts including the rights to the Sprint PCS agreements to
UbiquiTel Inc., which were then subsequently assigned to UbiquiTel Operating
Company, which was formed in November 1999. On December 28, 1999, UbiquiTel
Inc. amended its agreement with Sprint PCS to expand our markets to include
Northern California, Spokane/Montana, Southern Idaho/Utah/Nevada and Southern
Indiana/Kentucky which together with Reno/Tahoe contain approximately 7.7
million residents.
The description of our business and other descriptions in this
prospectus contain product names, trade names and trademarks of other
companies.
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WIRELESS INDUSTRY GROWTH
Since the introduction of commercial cellular service in 1983, the
wireless communications industry has experienced dramatic growth. The number
of wireless subscribers for cellular, wireless personal communications
services and enhanced specialized mobile radio service has increased from an
estimated 340,213 at the end of 1985 to an estimated 86.0 million as of
December 31, 1999, according to the Cellular Telecommunications Industry
Association, an international association for the wireless industry. The
following chart sets forth statistics for the domestic wireless telephone
industry as a whole, as published by the Cellular Telecommunications Industry
Association.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1994 1995 1996 1997 1998 1999
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
WIRELESS INDUSTRY STATISTICS(1)
Total service revenues (in billions)........ $14.2 $19.1 $23.6 $27.5 $33.1 $40.0
Wireless subscribers at end of period 24.1 33.8 44.0 55.3 69.2 86.0
(in millions)...............................
Subscriber growth........................... 50.8% 40.0% 30.4% 25.6% 25.1% 24.3%
Average local monthly bill(2)............... $56.21 $51.00 $47.70 $42.78 $39.43 $41.24
</TABLE>
-----------
(1) Reflects domestic commercial cellular, enhanced specialized mobile
radio service and wireless personal communications services providers.
(2) Does not include revenue from roaming and long distance.
Paul Kagan Associates, Inc., an independent media and
telecommunications research firm, estimates in its publication, Kagan's Wireless
Industry Projections-January 14, 2000, that the number of domestic wireless
users will increase to approximately 107 million by the end of 2000 and 202
million by the end of 2005. This growth is expected to be driven largely by a
substantial projected increase in wireless personal communications services
users, who are forecast to account for approximately 21% of total wireless users
in 2000 and 41% in 2005, representing a significant increase from approximately
10% as of the end of 1998. Paul Kagan Associates 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 38% in
2000 to 69% in 2005. The foregoing market statistics may not reflect the future
growth rates of the wireless communications industry generally nor our growth
rate specifically.
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 service and pricing versatility; and
- increased awareness of the productivity, convenience and
privacy benefits associated with the services offered by
wireless personal communications services providers.
We also believe that the rapid growth in the use of laptop 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 services.
SPRINT PCS
Sprint is a diversified telecommunications service provider whose
principal activities include long distance service, local service, wireless
telecommunications 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
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licenses to provide service nationwide using a single frequency and a single
technology. The Sprint PCS network uses code division multiple access or CDMA
technology nationwide.
Sprint launched the first commercial PCS service in the United
States in November 1995. Since then, Sprint PCS has experienced rapid
subscriber growth, providing service to more than 5.7 million customers as of
December 31, 1999. In the fourth quarter of 1999, Sprint PCS added more than
one million new subscribers, representing the largest single quarter of
customer growth ever recorded by a wireless provider in the United States.
During 1999, Sprint PCS added more than 3.1 million new subscribers. Sprint
PCS, together with its affiliates, operates the largest all-digital, all-PCS
nationwide wireless network in the United States, already serving more than
330 metropolitan markets including more than 4,000 cities and communities
across the country. Sprint PCS has licensed PCS coverage of more than 270
million people in all 50 states, Puerto Rico and the U.S. Virgin Islands.
However, Sprint PCS does not currently offer PCS services in every state in
the United States. The graph below illustrates Sprint PCS' subscriber growth
from the beginning of 1997 through the end of 1999. These statistics may not
reflect Sprint PCS' future subscriber growth nor our subscriber growth.
SPRINT PCS HISTORICAL SUBSCRIBERS
(in thousands)
[GRAPH]
Sprint PCS currently provides nationwide service through:
- operation of its own digital network;
- strategic affiliations with other companies, such as us,
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.
Sprint PCS has adopted a strategy to rapidly extend its 100%
digital, 100% PCS network by entering into agreements with independent
wireless companies, such as UbiquiTel, to construct and manage Sprint PCS
markets and market Sprint PCS services. Through these affiliations, Sprint
PCS services will be available in key cities contiguous to current and future
Sprint PCS markets. Sprint PCS' affiliates are an integral part of its plan
to provide nationwide seamless coverage.
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OUR MARKETS
Our network will cover portions of California, Nevada, Washington,
Idaho, Montana, Wyoming, Utah, Oregon, Arizona, Indiana, Kentucky, Illinois
and Tennessee for a combined population of approximately 7.7 million
residents. These markets are attractive for the following reasons:
- FEWER COMPETITORS/UNTAPPED MARKET PENETRATION. Because the
national wireless providers have focused on the largest
metropolitan markets, we believe that our markets have lower
wireless penetration rates as compared to the national average
of 32% as of year end 1999. As of December 31, 1999, three or
fewer wireless service providers, other than us, operated in
areas that comprise over 75% of the residents in our markets.
By comparison, less than 10% of the resident population in the
50 most populated markets in the United States are served by
four or fewer wireless service providers. We further believe
that offering a high quality, all digital nationwide product
in our markets will allow us to achieve greater market
penetration with less pricing competition than in larger
markets. However, we can provide no assurance that other
national wireless providers will not choose to focus on our
markets in the future.
- CONTIGUOUS TO MAJOR EXISTING SPRINT PCS MARKETS. Our markets
are contiguous to major Sprint PCS markets with a combined
license population of over 22 million. Some of the major
contiguous markets include San Francisco and Sacramento,
California; Seattle and Tacoma, Washington; Salt Lake City and
Provo, Utah; Las Vegas, Nevada; Indianapolis, Indiana; St.
Louis, Missouri; Nashville, Tennessee; Louisville, Kentucky;
and Cincinnati and Dayton, Ohio. We believe that having a
large established base of Sprint PCS customers in close
proximity to our markets will facilitate brand awareness,
create an extended seamless coverage area and generate Sprint
PCS travel revenue as existing Sprint PCS customers travel
into our markets.
- IMPORTANT TRANSPORTATION CORRIDORS. Our markets include the
most important and, in some cases, the only transportation
corridors that link the population centers within a particular
market. Our network will cover over 2,200 highway miles,
including major interstates such as I-80 and I-90. Over 45
million vehicle miles are traveled daily on the major highway
miles we expect to cover in our markets. We anticipate that
our coverage of important transportation corridors will
further increase our travel and roaming revenue. However, the
lower population densities along these corridors results in a
higher build-out cost per resident than other areas of our
markets.
- POPULAR VACATION AND TOURIST DESTINATIONS. Our markets contain
popular vacation and tourist destinations, including various
national parks and ski resorts such as Yellowstone National
Park and Glacier National Park, and Lake Tahoe and Sun Valley
resorts with over 20 million visitors per year. As a result,
we anticipate that we will receive significant Sprint PCS
travel and roaming revenue from tourists.
- FAVORABLE DEMOGRAPHICS. Our markets have attractive
demographic characteristics for wireless services, including
an overall average population growth rate that is over 60%
higher than the national average. In addition, there are at
least 20 colleges and universities located within our markets,
including 12 schools with student populations greater than
10,000 each such as Utah State University (Logan), Indiana
University (Bloomington) and the University of Nevada.
RENO/TAHOE/NORTHERN CALIFORNIA
This market has a resident population of approximately 1.7 million.
Limited commercial service was launched in areas directly adjacent to Sacramento
in February 2000, and we expect to launch Reno/Lake Tahoe by the third quarter
of 2000. We expect to complete the majority of the network build-out of this
market by the end of 2001 at which time we will cover approximately 72% of the
resident population in our license area. Distinguishing characteristics with
respect to this market include:
- Contiguous to major Sprint PCS markets including:
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- Sacramento, San Francisco, the San Francisco Bay
Area, California;
- Stockton, Fresno, and Central, California;
- Portland, Eugene and Salem, Oregon; and
- Planned coverage in Medford and Klamath Falls,
Oregon.
- Licensed area includes over 750 (300 under expected coverage)
highway miles along important corridors such as I-5 and I-80.
- Over 13.3 million vehicle miles are traveled daily on the
major highways within our expected coverage area.
- Over 6.0 million tourists visit the Reno/Lake Tahoe area
annually.
- Largest concentration of ski areas in North America (15 alpine
and 13 cross-country ski areas), including Heavenly Valley and
Squaw Valley.
- Several Lake Tahoe casino, recreation and resort destinations.
- Two major universities in the coverage area with a combined
student population of over 25,000 including:
- University of Nevada, Reno (12,000 students); and
- California State University, Chico (13,470 students).
SPOKANE/MONTANA
This market includes a total resident population of approximately 1.8
million residents. In April 2000, we completed our acquisition of the Spokane
market from Sprint PCS for $35.0 million. This market is operational in the
greater Spokane, Washington and Coeur d'Alene, Idaho metropolitan areas. We are
implementing plans to rapidly expand the Spokane coverage area to include the
important communities of Pullman, Washington, Moscow and Lewiston, Idaho and the
I-90 corridor west towards Seattle by the first quarter of 2001. We will
complete our network build-out requirements by selectively expanding our
coverage to include markets in Montana and Wyoming. At the completion of our
build-out in this market, we expect to cover approximately 65% of the resident
population in our licensed area. Distinguishing characteristics with respect to
this market include:
- Contiguous to major Sprint PCS markets including:
- Seattle, Tacoma and Olympia, Washington;
- Portland, Oregon; and
- Planned coverage in the eastern Washington cities of
Yakima, Tri-Cities (Kennewick, Pasco and Richland)
and Walla Walla.
- Licensed area includes over 1,400 (350 under expected
coverage) highway miles along important corridors such as I-90
and I-15.
- Over 6.1 million vehicle miles are traveled daily on the major
highways within our expected coverage area.
- Approximately 5.9 million tourists visit the national parks
and resorts in this market.
- Popular ski and summer resort areas include Big Sky, Big
Mountain and Schweitzer.
- Home to the National Parks of Yellowstone and Glacier.
- Four major universities in the coverage area with a combined
student population of over 52,000 including:
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- University of Montana, Missoula (12,200 students);
- Montana State, Bozeman (11,750 students);
- Washington State University, Pullman (16,700
students); and
- University of Idaho, Moscow (12,000 students).
SOUTHERN IDAHO/UTAH/NEVADA
This market includes a total resident population of approximately 1.5
million residents. We expect to launch commercial services in the Logan and
Brigham City, Utah market by the first quarter of 2001 and in the Boise, Idaho
and St. George, Utah market by the second quarter of 2001. We expect to complete
the majority of the build-out of this market by the end of 2001. Upon completion
of our build-out in this market, we expect to cover approximately 72% of the
resident population in our licensed area. Distinguishing characteristics with
respect to this market include:
- Contiguous to major Sprint PCS markets including:
- Salt Lake City, Ogden and Provo, Utah; and
- Las Vegas, Nevada.
- Licensed area includes over 1,070 (790 under expected
coverage) highway miles along important corridors such as I-15
and I-84.
- Approximately 14.0 million vehicle miles are traveled daily on
the major highways within our expected coverage area.
- Approximately 8.5 million tourists visit the national parks
and resorts in this market.
- Home to national parks such as Zion, Bryce and Grand Teton.
- Popular ski areas include Sun Valley, Jackson Hole and
Snowbasin (2002 Winter Olympics site).
- Rapidly growing metropolitan area of Boise, home to many high
tech employers such as Micron and Hewlett Packard.
- Three major universities in the coverage area with a combined
student population of over 42,000 including:
- Utah State University, Logan (14,400 students);
- Idaho State University, Pocatello (12,700 students);
and
- Boise State University, Boise (15,400 students).
SOUTHERN INDIANA/KENTUCKY
This market includes a total resident population of approximately 2.7
million residents. We expect to launch commercial services in the Evansville,
Terre Haute and Bloomington, Indiana markets by the second quarter of 2001. Over
the next two quarters, we expect to continue the expansion of our coverage area
along major highways and thoroughfares throughout our license areas in southern
Indiana and Kentucky. We expect to complete the majority of the build-out of
this market by the end of 2001. Upon completion of our build-out in this market,
we expect to cover approximately 50% of the resident population in our licensed
area. Distinguishing characteristics with respect to this market include:
- Contiguous to major Sprint PCS markets including:
- Indianapolis, Indiana;
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- Dayton, Columbus and Cincinnati, Ohio;
- Louisville and Lexington, Kentucky;
- Nashville, Tennessee; and
- St. Louis, Missouri.
- Licensed area includes over 850 (840 under expected coverage)
highway miles along important corridors such as I-70, I-64,
I-24, I-65 and I-74 as well as state routes 150, 41, 50 and
60.
- Over 12.3 million vehicle miles are traveled daily on the
major highways within our expected coverage area.
- Strong industrial economy with major employers including
General Electric, General Motors, International Paper, Toyota
Motor, ALCOA, Whirlpool and AK Steel.
- Three major universities in the coverage area with a combined
student population of over 61,000 including:
- Indiana University, Bloomington (35,600 students);
- Indiana State University, Terre Haute (11,000
students); and
- Western Kentucky University (14,700 students).
BUSINESS STRATEGY
CAPITALIZE ON OUR AFFILIATION WITH SPRINT PCS
In all of our markets, we plan to capitalize upon the extensive
benefits of our Sprint PCS affiliation. This affiliation includes the following
benefits:
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 markets and 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 DISTRIBUTION CHANNELS. We will have use of all the national
distribution channels used by Sprint, including over 350 retail outlets in our
markets. These channels include:
- exclusive PCS offering in RadioShack (over 150 outlets);
- other major national third-party retailers such as Circuit
City, OfficeMax and Kmart (over 200 outlets);
- 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 markets with
immediate nationwide traveling coverage using the Sprint PCS network and other
wireless networks with which Sprint PCS has roaming agreements. Sprint PCS,
together with its affiliates, operates the largest all-digital, all-PCS
nationwide wireless network in the United States, already
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serving more than 190 million residents in more than 330 metropolitan
markets. Sprint PCS has PCS licenses to serve more than 270 million people
across all 50 states, Puerto Rico and the U.S. Virgin Islands. However,
Sprint PCS does not currently offer PCS services in every state in the United
States.
COST-EFFECTIVE SUPPORT SERVICES FROM SPRINT PCS. Our affiliation
with Sprint PCS provides us with the option to use Sprint PCS' established
support services, including customer activation, billing and customer care.
Using this option, we can accelerate the launch of our commercial PCS
operations and reduce our capital expenditures and operating costs compared
to establishing and operating our own systems. Sprint PCS has indicated it
intends to provide these services to us at its internal costs which reflect
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 if
doing so proves to be more cost effective.
APPROVED SPRINT PCS NETWORK DESIGN. We will leverage Sprint PCS'
extensive experience with designing and implementing a digital PCS network
build-out. Sprint PCS sets our network standards, reviews our network
build-out plans, and certifies our systems before we commence operations. As
a result, the risk of a poor network design is dramatically reduced.
PURCHASING 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. Sprint PCS' purchasing power
also influences new technology development by its vendors and provides Sprint
PCS and its affiliates, like us, with preferential access to handsets and
other equipment.
SPRINT PCS LICENSES AND LONG-TERM COMMITMENT. Sprint PCS has funded
the purchase of the licenses covering our markets at a cost of approximately
$90 million and will incur 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. Moreover, our affiliation with Sprint
PCS is for a 50-year term, including an initial 20-year term with three
10-year automatic renewal periods unless either party provides two years'
prior notice to the other party of its intent to terminate the agreement.
EXECUTE OPTIMAL NETWORK BUILD-OUT PLAN
We utilize a rigorous financial model to analyze every aspect of our
100% digital, 100% PCS network build-out. Accordingly, we have targeted the
more densely populated areas within our markets for network build-out as well
as areas expected to generate significant Sprint PCS travel and other roaming
revenue such as the major transportation corridors and tourist destinations.
Through our strategic relationships, we are constructing a
state-of-the-art, high quality, all digital PCS network which includes a high
density of radio communications sites. We believe that our high quality
network will allow our system to handle more customers with fewer dropped
calls and better clarity than our competitors. By leasing radio
communications sites on facilities shared with one or more other wireless
providers, we expect to rapidly deploy a cost effective PCS network. We
estimate that over 75% of our sites will be located on shared facilities.
UTILIZE OTHER STRATEGIC THIRD PARTY RELATIONSHIPS IN NETWORK
BUILD-OUT
We have entered into other strategic relationships with various
third parties to benefit from their specialized expertise and economies of
scale in order to build-out our portion of the Sprint PCS Network more
quickly and with lower initial capital and staffing requirements than would
otherwise be possible. Specifically, we have relationships with:
- LUCENT TECHNOLOGIES. Lucent Technologies is an international
equipment supplier in the development and deployment of code
division multiple access networks. We have selected Lucent
Technologies as our equipment vendor in the
Reno/Tahoe/Northern California market. We have also engaged
Lucent to perform overall program management for network
development in all of our markets. As program manager, Lucent
is responsible for the coordination, scheduling, tracking and
controlling of the
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network build-out, including oversight of radio communications
site network design, site acquisition, construction, radio
communications site equipment installation, integration and
optimization. The term of the agreement with Lucent is
approximately 24 months. During these 24 months, or such
shorter or longer period needed to complete the build-out, we
will pay Lucent a monthly fee for each of the two program
managers assigned to us.
- LCC INTERNATIONAL. LCC International is an engineering and
site development firm specializing in the use of radio
frequency design techniques and software tools in the
deployment of cellular and PCS networks worldwide. We have
engaged LCC International to provide radio base station
network design and optimization, site acquisition including
leasing, zoning, permitting and regulatory compliance, fixed
network design service and switch design and operation
services in each of our markets. The term of our agreement
with LCC International is initially five years through
September 2004 and is automatically renewable for one
additional five year term, followed by additional and
successive terms of one year, unless terminated by either us
or LCC International upon providing the other party written
notice at least 90 days in advance of the conclusion of the
initial or any renewal term. Either party may terminate the
agreement in the event of a material breach of the agreement
by the other party if the breaching party has not cured the
breach within 30 days of receiving written notice. We pay LCC
International fixed fees.
- SPECTRASITE COMMUNICATIONS. SpectraSite Communications is a
telecommunications site development and management firm. The
company designs, builds, owns, operates and maintains towers
for sending and receiving microwave, cellular, PCS, paging and
specialized mobile radio technologies for broadcast,
telephone, communications and utility companies in the United
States and Canada. We recently entered into a new master site
agreement with SpectraSite Communications for its existing
towers as well as towers that it may construct for us on
build-to-suit sites that we identify from time to time under a
master design and build agreement between us. Under the master
design and build agreement, SpectraSite Communications has the
right of first refusal to construct and acquire build-to-suit
sites and we are entitled to engage SpectraSite Communications
to handle any construction necessary to install our network
equipment on shared facilities that we license or sublicense
from SpectraSite Communications or any third party. The master
design and build agreement has a term of five years unless
services have been performed in markets totaling a covered
population of ten million. Under the master site agreement, we
intend to license space on build-to-suit sites or sublicense
space on SpectraSite Communications' existing towers to house
our network equipment. Each time we license or sublicense
tower space from SpectraSite Communications, we will enter
into a separate site agreement, which will have an initial
term of ten years for build-to-suit sites and five years for
non-build-to-suit sites. The initial term for each site
agreement will be automatically renewable for three additional
five year terms unless SpectraSite Communications no longer
has rights to the tower space or we provide written notice to
SpectraSite Communications of our intention not to renew
within 90 days of the expiration of the then current term of
the site agreement. We will be able to terminate a site
agreement during its initial term if we pay SpectraSite
Communications liquidated damages equal to the rent due for
the remainder of the initial term for non-build-to-suit sites
or the lesser of rent due for the balance of the initial term
or the total construction costs for build-to-suit sites. We
will pay SpectraSite fixed monthly rent during the initial
five year term of each master site agreement in annual
installments beginning at the inception of each agreement.
During any renewal term, our base rent shall increase each
year on the anniversary date of the renewal term by an amount
equal to 3% of the base rent payable for the immediately
preceding year. SpectraSite Communications has preferential
access to more than 2,400 existing towers throughout the
United States. We will evaluate the available inventory for
possible shared facilities sites for our network equipment.
IMPLEMENT EFFECTIVE OPERATING STRUCTURE WITH A FOCUS ON CUSTOMER
SERVICE
Our organization and management structure is based on a
decentralized, local market-focused model. We will rely on Sprint PCS to
provide the majority of our support services, including customer activation,
billing and customer care, while focusing our resources on the management of
each market rather than the development of
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these ancillary services. We will place experienced management teams at the
local level with the authority to tailor operations and sales and marketing
programs to each market.
We place particular emphasis on customer service to ensure high
customer satisfaction. Our local sales force will actively seek feedback from
existing customers from the day of activation through the life of that
customer in order to respond effectively and expeditiously to that customer's
needs. The Sprint PCS customer care platform located in each of our retail
stores will enable our sales and customer care representatives to provide an
additional level of customer service by rapidly diagnosing and resolving any
problems a customer may experience with their equipment or service. By
providing extensive and frequent interaction with our customers we expect to
reduce customer turnover and overall customer acquisition costs. Our local
sales and customer service associates will be measured and compensated by
their ability to provide superior customer service.
FOCUS ON MIDSIZE AND SMALLER MARKETS
We believe that midsize and smaller markets receive a lower level of
attention from the major wireless providers as they focus on the larger
markets. As of December 31, 1999, three or fewer wireless service providers,
other than us, operated in areas that comprise over 75% of the residents in
our markets. By comparison, less than 10% of the resident population in the
50 most populated markets in the United States are served by four or fewer
wireless service providers. We believe that an opportunity exists for us to
provide a high quality, digital product to these markets with less
competition than frequently seen in the larger markets. We will capitalize on
this opportunity through our own internal build-out as well as through the
pursuit of future acquisitions or affiliations.
NETWORK BUILD-OUT
Pursuant to our management agreement with Sprint PCS, we have agreed
upon a minimum build-out plan which includes specific coverage and deployment
schedules for the network planned within our markets. We plan to meet or
exceed the minimum build-out requirements by focusing on achievable
objectives.
Our strategy is to provide service to the population centers in our
markets and the interstates and primary roads connecting these areas. We plan
to initiate service only in areas that provide financial returns that meet
stringent internal requirements and where we are capable of providing
coverage which meets the needs of our target markets.
As described earlier, to achieve our build-out as rapidly and
efficiently as possible, we have entered into outsourcing or other
relationships with Lucent Technologies, LCC International and SpectraSite
Communications.
The following table lists the location, the basic trading areas,
commonly referred to as "BTAs", megahertz of spectrum, estimated total
residents and percent coverage for each of our markets under our Sprint PCS
management agreement. The estimated total residents does not represent
expected customers but rather our total potential customers within each
market. However, our network build-out plan focuses on providing service to
the residents in the most densely populated and strategic areas of our
markets which is represented by the estimated percent coverage.
We have commenced limited operations in the Reno/Tahoe/Northern
California market. Together with the Spokane market, we currently provide
service to over 9,000 subscribers.
<TABLE>
<CAPTION>
ESTIMATED
TOTAL ESTIMATED
MEGAHERTZ RESIDENTS PERCENT
LOCATION BTA NO.(1) OF SPECTRUM(2) (000'S)(3) COVERAGE(4)
------------------------------------------- ---------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
RENO/TAHOE/NORTHERN CALIFORNIA
Chico-Oroville, CA.................... 79 30 225
Eureka, CA............................ 134 30 148
Redding, CA........................... 371 30 284
</TABLE>
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<TABLE>
<CAPTION>
ESTIMATED
TOTAL ESTIMATED
MEGAHERTZ RESIDENTS PERCENT
LOCATION BTA NO.(1) OF SPECTRUM(2) (000'S)(3) COVERAGE(4)
------------------------------------------- ---------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Reno, NV.............................. 372 30 584
Sacramento, CA........................ 389* 30 313
Yuba City-Marysville, CA.............. 485* 30 142
---------- -------------- ----------- -------------
Subtotal.............................. 1,696 72%
SPOKANE/MONTANA
Billings, MT.......................... 41 30 315
Bozeman, MT........................... 53 30 81
Butte, MT............................. 64 30 68
Great Falls, MT....................... 171 30 167
Helena, MT............................ 188 30 70
Kalispell, MT......................... 224 30 76
Lewiston-Moscow, ID................... 250 30 127
Missoula, MT.......................... 300 30 172
Spokane, WA........................... 425 30 754
---------- -------------- ----------- -------------
Subtotal.............................. 1,830 65%
SOUTHERN IDAHO/UTAH/NEVADA
Boise-Nampa, ID....................... 50 30 562
Idaho Falls, ID....................... 202 30 218
Las Vegas, NV......................... 245* 30 22
Logan, UT............................. 258 30 104
Pocatello, ID......................... 353 30 106
Provo-Orem, UT........................ 365* 30 12
St. George, UT........................ 392 30 137
Salt Lake City-Ogden, UT.............. 399* 30 105
Twin Falls, ID........................ 451 30 164
---------- -------------- ----------- -------------
Subtotal.............................. 1,430 72%
SOUTHERN INDIANA/KENTUCKY
Anderson, IN.......................... 15* 30 44
Bloomington-Bedford, IN............... 47 30 241
Bowling Green-Glasgow, KY............. 52 30 249
Cincinnati, OH........................ 81* 10 17
Clarksville, Hopkinsville, TN/KY...... 83 30 254
Columbus, IN.......................... 93 30 157
Evansville, IN........................ 135 30 518
Indianapolis, IN...................... 204* 30 86
Louisville, KY........................ 263* 30 252
Madisonville, KY...................... 273 30 47
Owensboro, KY......................... 338 30 165
Paducah-Murray-Mayfield, KY........... 339 30 234
Richmond, IN.......................... 373 30 105
Terre Haute, IN....................... 442* 30 246
Vincennes-Washington, IN.............. 457 30 96
---------- -------------- ----------- -------------
Subtotal.............................. 2,711 50%
----------- -------------
TOTAL.................................. 7,667 63%
----------- -------------
</TABLE>
-----------
* Denotes partial portion of BTA.
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(1) A basic trading area, or BTA, is a collection of counties surrounding a
metropolitan area in which there is a commercial community of interest.
The BTA number indicated in the table is assigned to that market by the
Federal Communications Commission for the purpose of issuing licenses
for wireless services.
(2) Spectrum licensed to Sprint PCS or related parties of which we have
exclusive access.
(3) Estimated total residents is based on 1990 Census data for each BTA
within a given market extrapolated through the first quarter of 2000
based on estimated population growth rates. Estimated BTA residents may
not add-up due to rounding.
(4) Estimated percent coverage is the ratio of estimated covered residents
(based on our actual or projected network coverage in markets upon
completion of our network build-out) to estimated total residents for
each of our four markets.
More than 75% of our radio communications sites will be shared
facilities on existing structures, which will result in higher radio
communications site lease expenses. These higher lease expenses will be
offset in part by certain operating expense savings resulting from shared
facilities. Shared facilities will also substantially reduce our capital
expenditures and time to market.
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 after comprehensive and reliable coverage and
service can be maintained in a particular 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" calling plans offer bundled minute options that include local, long
distance and traveling on the entire Sprint PCS network.
PRODUCTS AND SERVICES
We will offer established products and services throughout our
markets under the Sprint and Sprint PCS brand names. Our products and
services are designed to mirror the service offerings of Sprint PCS and to
integrate with the Sprint PCS network. The Sprint PCS product offering
includes the following features:
100% DIGITAL WIRELESS NETWORK WITH NATIONWIDE SERVICE
We are part of the largest 100% digital wireless personal
communications services network in the country. Sprint PCS and its
affiliates, cover more than 190 million people in more than 330 metropolitan
areas across the country. Although Sprint PCS does not currently offer PCS
services in every state in the United States, this provides an extended
coverage area for our customers, allowing access to Sprint PCS services
throughout the Sprint PCS network. Dual-band/dual-mode handsets allow roaming
on wireless networks where Sprint PCS has roaming agreements.
SPRINT PCS WIRELESS WEB
We will support the recently announced Sprint PCS Wireless Web offer
in our portion of the Sprint PCS network. The Sprint PCS Wireless Web allows
customers with data capable handsets to connect their portable computers or
personal digital assistants to the Internet. Sprint PCS customers with data
capable handsets have the ability to receive periodic information updates
such as stock prices, sports scores and weather reports. Sprint PCS customers
with web-browser enabled handsets also have the ability to connect to and
browse specially designed text-based Internet sites on an interactive basis.
Sprint PCS has agreements with Internet providers including Yahoo!,
Bloomberg.com, CNN.com, Amazon.com, FOXSports.com, GetThere.com,
AmeriTrade.com, MapQuest.com and weather.com to provide services for the
Sprint PCS Wireless Web. Sprint PCS offers various pricing options including
a fixed number of updates or a bundle of data minutes as add-ons to existing
Sprint PCS "Free and Clear" calling plans or a bundle of minutes for a set
price that can be used for either data or voice.
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ADVANCED HANDSETS
We will offer two types of handsets, a single band/single mode and a
dual-band/dual mode, with various advanced features and technology. Our code
division multiple access single-band/single-mode handsets, weighing
approximately five to seven ounces, offer up to five days of standby time and
approximately four hours of talk time. Our dual-band/dual-mode handsets allow
customers to make and receive calls on both PCS and cellular frequency bands
with the applicable digital or analog technology. These handsets allow
roaming on cellular networks where Sprint PCS digital service is not
available. All handsets are co-branded with the vendor and the Sprint and
Sprint PCS brand names and are equipped with preprogrammed features such as
caller ID, call waiting, phone books, speed dial and last number redial.
PRIVACY AND SECURITY
Sprint PCS provides voice transmissions encoded into a digital
format with a significantly lower risk of cloning and eavesdropping than on
other analog or digital based systems. Sprint PCS customers using
dual-band/dual-mode handsets in analog mode do not have the benefit of
digital security.
IMPROVED VOICE QUALITY
We believe the Sprint PCS code division multiple access technology
offers significantly improved voice quality, more powerful error correction,
less susceptibility to call fading and enhanced interference rejection, all
of which results in fewer dropped calls.
CUSTOMER SERVICE
Sprint PCS provides toll free customer care services to customers
based in our markets under our Sprint PCS services agreement. Sprint PCS
offers customer care 24 hours a day, seven days a week. All Sprint PCS
handsets are preprogrammed with a speed dial feature that allows customers to
easily reach customer care at any time. In addition to these services
provided through our agreement with Sprint PCS, we will also provide local
customer service at each of our retail stores.
SIMPLE ACTIVATION
Customers can purchase a Sprint PCS handset at a retail location and
activate their service and program the handset by calling Sprint PCS customer
care.
OTHER SERVICES
Sprint PCS' research and development lab is continuously working
with technology and equipment providers to develop new products and services.
We will work with Sprint PCS to develop and adopt complimentary service
offerings to introduce in our markets.
TRAVELING AND ROAMING
SPRINT PCS TRAVELING
Sprint PCS traveling includes both inbound Sprint PCS traveling,
when a Sprint PCS subscriber based outside of our markets uses our portion of
the Sprint PCS network, and outbound Sprint PCS traveling, when a Sprint PCS
subscriber based in our markets uses the Sprint PCS network outside of our
markets. Sprint PCS pays us a per minute fee for inbound Sprint PCS
traveling. Similarly, we pay a per minute fee to Sprint PCS for outbound
Sprint PCS traveling. Pursuant to our management agreement with Sprint PCS,
Sprint PCS has the discretion to change the per minute rate for Sprint PCS
traveling fees. Because we serve smaller markets adjacent to larger
metropolitan areas, we believe inbound Sprint PCS traveling will exceed
outbound Sprint PCS traveling. See "Risk Factors-Risks Particular to Our
Relationship with Sprint PCS-We may not receive as much Sprint PCS travel
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revenue as we anticipate because Sprint PCS can change the rate we receive or
fewer people may travel on our network."
NON-SPRINT PCS ROAMING
Non-Sprint PCS roaming includes both inbound non-Sprint PCS roaming,
when a non-Sprint PCS subscriber uses our portion of the Sprint PCS network,
and outbound non-Sprint PCS roaming, when a Sprint PCS subscriber based in
our markets uses a non-Sprint PCS network. Pursuant to roaming agreements
between Sprint PCS and other wireless service providers, when another
wireless service provider's subscriber uses our portion of the Sprint PCS
network, we earn inbound non-Sprint PCS roaming revenue. These wireless
service providers must pay fees for their subscribers' use of our portion of
the Sprint PCS Network, and as part of our management agreement with Sprint
PCS, we are entitled to 92% of these fees. Currently, pursuant to our
services agreement with Sprint PCS, Sprint PCS bills these wireless service
providers for these fees. When another wireless service provider provides
service to one of the Sprint PCS subscribers based in our markets, we pay
outbound non-Sprint PCS roaming fees directly to that provider. Sprint PCS,
pursuant to our current services agreement with Sprint PCS, then bills the
Sprint PCS subscriber for use of that provider's network at rates specified
in his or her contract and pays us 100% of this outbound non-Sprint PCS
roaming revenue collected from that subscriber on a monthly basis. As a
result, we retain the collection risk for outbound non-Sprint PCS roaming
fees incurred by the subscribers based in our markets.
MARKETING STRATEGY
Our marketing and sales strategy will use Sprint PCS' proven
strategies and developed national distribution channels that have helped
generate the highest incremental wireless penetration of any cellular or PCS
provider in the United States. In the fourth quarter of 1999, Sprint added
approximately one million net new subscribers, the largest single quarter of
customer growth ever reported by a wireless provider in the United States. In
1999, Sprint PCS added more than 3.1 million new wireless subscribers. These
statistics may not reflect Sprint PCS' future growth rate nor our growth
rate. We plan to enhance Sprint PCS' proven strategies with strategies
tailored to our specific markets.
BRAND EQUITY
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.
PRICING
We will use the Sprint PCS pricing strategy to offer customers in
our markets 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 code division multiple access
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 pricing plans:
- include minutes in any Sprint PCS market (with no traveling
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; and
- provide a limited-time money back guarantee on Sprint PCS
phones.
In addition, Sprint PCS' national "Free and Clear" calling plans,
which offer simple, affordable plans for every consumer and business
customer, include free long distance calling from anywhere on its nationwide
network.
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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 our markets. We will use local
radio, television and newspaper advertising to sell our products and services
in each of our markets. We intend to build a local sales force to execute our
marketing strategy 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 350 retail locations in our markets.
ADVERTISING AND PROMOTIONS
Sprint PCS promotes its products through the use of national as well
as regional television, radio, print, outdoor and other advertising
campaigns. We benefit from the national advertising at minimal costs to us.
We have the right to use any promotion or advertising materials developed by
Sprint PCS and only have to pay the incremental cost of using those
materials, such as the cost of local radio and television advertisement
placements, advertisement production and material costs and incremental
printing costs. We also benefit from any advertising or promotion of Sprint
PCS products and services by third party retailers in our markets, such as
RadioShack, Circuit City, OfficeMax and Best Buy. We must pay the cost of
specialized Sprint PCS print advertising by third party retailers. Sprint PCS
also runs numerous promotional campaigns that provide customers with benefits
such as additional features at the same rate or free minutes of use for
limited time periods. We will offer these promotional campaigns to potential
customers in our markets.
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
markets.
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 PCS RETAIL STORES
We plan to operate company-owned Sprint PCS branded retail stores
throughout our markets. These stores will be located in major traffic centers
within our markets, providing us with a 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, activation,
bill collection and customer service. We plan to open approximately 20 new
stores by the end of 2001 when we are commercially active in all our markets
and continue adding stores as market conditions require.
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 currently has over 150 stores in our
markets.
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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 Kmart, Staples, Circuit City, OfficeMax, Montgomery Ward,
Office Depot, Ritz Camera, Target and Heileg-Meyers. These retailers
currently have over 200 retail stores in our markets.
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 1000 companies. Once a representative reaches an agreement with
the corporate headquarters, we service the offices of that corporation
located in our markets. Our direct sales force will target the employees of
these corporations in our markets and cultivate other local business clients.
We will be required to submit monthly reports to Sprint PCS that
track sales to these accounts. Sprint PCS determines how revenue unit credit
is attributed to national accounts in our markets.
We must follow an activation and fulfillment process for our
national accounts that are established by Sprint PCS, which includes
procedures for transmitting, activating and filling orders. These procedures
also address:
- administrative requirements,
- transfer of services among Sprint PCS markets,
- equipment return policies,
- customer proposal support, and
- credit policies.
Sprint PCS has established specific roles and responsibilities for
the national accounts program. These roles and responsibilities set forth how
compensation is determined for national sales and area sales, specific
strategies for closing sales and account management. Sprint PCS also
establishes criteria for determining national sales and area sales based on
dollar revenues and metropolitan areas in the defined area.
INBOUND TELEMARKETING
Sprint PCS will provide inbound telemarketing sales when customers
call from our markets. 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
markets who purchase products and services over the Sprint PCS Internet site
will be customers of our PCS network.
TECHNOLOGY
GENERAL
In the commercial mobile wireless communication industry there are
two principal services licensed by the Federal Communications Commission for
transmitting two-way, real time voice and data signals: "cellular" and
wireless "personal communications services." In addition, enhanced
specialized mobile radio service, a relatively new but not yet widely used
technology, also allows for interconnected two-way real time voice and data
services.
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The Federal Communications Commission licenses these services on a geographic
basis, using distinct radio spectrum bands. Cellular service, which uses a
portion of the 800 MHz spectrum, was the original form of widely-used
commercial mobile wireless voice communications. Cellular systems were
originally analog-based, but over the last several years cellular operators
have been providing digital service, usually as a complement to analog
service in most of the major metropolitan markets. In 1994, the Federal
Communications Commission allocated the 1850 -1990 MHz band for wireless high
capacity, commonly referred to as broadband, personal communications services
to be provided utilizing digital technology.
Both analog and digital mobile wireless communications systems,
whether wireless broadband personal communications services or cellular
service, are divided into multiple geographic coverage areas, known as
"cells." In both wireless personal communications services and cellular
systems, each cell contains a transmitter, a receiver and signaling
equipment, known as the radio communications site. The radio communications
site is connected by microwave or traditional telephone lines to a switch
that uses computers to control the operation of the cellular or digital
wireless personal communications services system. The switch:
- controls the transfer of calls from radio communications site
to radio communications site as a subscriber's handset
travels;
- coordinates calls to and from handsets;
- allocates calls among the radio communications sites within
the system; and
- connects calls to the local wireline telephone system or to a
long distance carrier.
Wireless communications providers establish interconnection
agreements with local telephone companies and long distance telephone
companies, thereby integrating their system with the existing communications
system. Because the signal strength of a transmission between a handset and a
radio communications site declines as the handset moves away from the radio
communications site, the switching office and the radio communications 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 radio communications site where the signal strength is
stronger.
Digital wireless broadband personal communications services differ
from traditional analog cellular service principally in that digital wireless
broadband personal communications services systems use frequencies in a
higher spectrum band and employ advanced digital technology. Analog-based
systems send signals in which the transmitted signal resembles the input
signal, the caller's voice. Digital systems convert voice or data signals
into a stream of digits that permit a single radio channel to carry multiple
simultaneous transmissions. Digital systems also achieve greater frequency
re-use than analog systems resulting in greater capacity than analog systems.
This enhanced capacity, along with enhancements in digital protocols, allows
digital-based wireless technologies, whether using wireless broadband
personal communications services or cellular service frequencies, to provide
greater call privacy and stronger data transmission, such as facsimile,
electronic mail and connecting laptop computers with computer/data networks.
Moreover, digital technology also permits the provision of enhanced services
such as caller ID.
Digital wireless signal transmission is accomplished through the use
of various forms of frequency management technology or "air interface
protocols." The Federal Communications Commission has not mandated a
universal air interface protocol for wireless personal communications
services systems. Digital wireless personal communications systems operate
under one of three principal air interface protocols, code division multiple
access, commonly referred to as CDMA, time division multiple access, commonly
referred to as TDMA, or global system for mobile communications, a form of
time division multiple access commonly referred to as GSM. Each of these
three digital technologies is incompatible with the other two. Thus, for
example, a subscriber of a system that utilizes code division multiple access
technology is unable to use his or her code division multiple access handset
when traveling in an area not served by code division multiple access-based
wireless personal communications services operators, unless the customer
carries a dual-band/dual-mode handset that permits the customer to default to
an analog cellular system in that area. The same issue exists in the case of
users of time division multiple access or global system for mobile
communications systems. Many of the digital wireless personal communications
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services operators now have dual-mode or tri-mode handsets available to their
customers. Because not all areas of the country are served by each of the
three digital modes, these handsets will remain necessary for segments of the
subscriber base.
CODE DIVISION MULTIPLE ACCESS TECHNOLOGY
Sprint PCS' national network and its affiliates' networks all use
digital code division multiple access technology. We believe that code
division multiple access provides important system performance benefits such
as:
GREATER CAPACITY
We believe, based on studies by code division multiple access
manufacturers, that code division multiple access systems can provide system
capacity that is approximately seven to ten times greater than that of
current analog technology and approximately three times greater than time
division multiple access and global system for mobile communications systems.
PRIVACY AND SECURITY
One of the benefits of code division multiple access technology is
that it combines a constantly changing coding scheme with a low power signal
to enhance call security and privacy.
SOFT HAND-OFF
Code division multiple access systems transfer calls throughout the
code division multiple access network using a technique referred to as a soft
hand-off, which connects a mobile customer's call with a new radio
communications site while maintaining a connection with the radio
communications site currently in use. Code division multiple access networks
monitor the quality of the transmission received by multiple radio
communications sites simultaneously to select a better transmission path and
to ensure that the network does not disconnect the call in one cell unless
replaced by a stronger signal from another radio communications site. Analog,
time division multiple access and global system for mobile communications
networks use a "hard hand-off" and disconnect the call from the current radio
communications site as it connects with a new one without any simultaneous
connection to both radio communications sites.
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. Unlike time division multiple access and
global system for mobile communications based systems, code division multiple
access based systems can reuse the same subset of allocated frequencies in
every cell, substantially reducing the need for costly frequency reuse
patterning and constant frequency plan management.
LONGER BATTERY LIFE
Due to their greater efficiency in power consumption, code division
multiple access handsets can provide longer standby time and more talk time
availability when used in the digital mode than handsets using alternative
digital or analog technologies.
While code division multiple access has the inherent benefits
discussed above, time division multiple access networks are generally less
expensive when overlaying existing analog systems since the time division
multiple access spectrum usage is more compatible with analog spectrum
planning. In addition, global system for mobile communications technology
allows multi-vendor equipment to be used in the same network to a larger
extent than code division multiple access platforms. This, along with the
fact that the global system for mobile communications technology is currently
more widely used throughout the world than code division multiple access,
provides economies of scale for handset and equipment purchases. A standards
process is also underway which will allow wireless handsets to support
analog, time division multiple access and global system for mobile
communications technologies in a single unit. Currently, there are no plans
to have code division multiple access
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handsets that support either the time division multiple access or global
system for mobile communications technologies.
COMPETITION
We will compete throughout our markets with both incumbent cellular
and new PCS providers. The cellular providers in our markets serve different
geographic segments, with AirTouch (recently acquired by Vodafone) and AT&T
Wireless Services covering our three western regional markets, and GTE and
BellSouth servicing the midwestern market of Southern Indiana/Kentucky.
Competition from PCS providers is significantly more fragmented,
with a number of different operators competing with incompatible
air-interface technologies. In the Reno/Tahoe/Northern California market,
Pacific Bell Wireless is the principle PCS competitor operating with GSM
air-interface technology. In the metropolitan area of Spokane, our network
competes with the GSM operator VoiceStream and the CDMA operator GTE. In
Montana, regional operators Three River Wireless and Black Foot compete with
small CDMA networks. PCS competitors in the Southern Idaho/Utah market
consist primarily of the GSM operator VoiceStream with a small start-up CDMA
carrier South Central Communications operating in St. George and southern
Utah. In the Southern Indiana/Kentucky market, CDMA operator Ameritech and
GSM operators OmniPoint (recently acquired by VoiceStream) and PowerTel
compete for different markets.
We also face competition from resellers in each of our markets,
which provide wireless services to customers but do not hold Federal
Communications Commission licenses or own facilities. Instead, the resellers
buy blocks of wireless telephone numbers and capacity from a licensed carrier
and resell services through their own distribution network to the public. The
Federal Communications Commission currently requires all cellular and
wireless personal communications services licensees to permit resale of
carrier services to a reseller.
In addition, we compete with existing communications technologies
such as paging, enhanced specialized mobile radio service dispatch and
conventional telephone companies in our markets. Potential users of wireless
personal communications services systems may find their communications needs
satisfied by other current and developing technologies. One or two-way paging
or beeper services that feature voice messaging and data display as well as
tone-only service may be adequate for potential customers who do not need to
speak to the caller.
In the future, we expect to face increased competition from entities
providing similar services using the same, similar or other communications
technologies, including satellite-based telecommunications and wireless cable
systems and other traditional telephone networks. While some of these
technologies and services are currently operational, others are being
developed or may be developed in the future.
Many of our competitors have significantly greater financial and
technical resources and subscriber bases than we do. Some of our competitors
also have well established infrastructures, marketing programs and brand
names. In addition, some of our competitors may be able to offer regional
coverage in areas not served by the Sprint PCS network, or, because of their
calling volumes or relationships with other wireless providers, may be able
to offer regional roaming rates that are lower than those we will offer.
Wireless personal communications services operators will likely compete with
us in providing some or all of the services available through the Sprint PCS
network and may provide services that we do not. Additionally, we expect that
existing cellular providers will continue to upgrade their systems to provide
digital wireless communication services competitive with Sprint PCS.
Recently, there has been a trend in the wireless communications industry
towards consolidation of wireless service providers through joint ventures,
mergers and acquisitions. We expect this consolidation to lead to larger
competitors over time. These larger competitors may have substantial
resources or may be able to offer a variety of services to a large customer
base.
Over the past several years the Federal Communications Commission
has auctioned, and will continue to auction, large amounts of wireless
spectrum that could be used to compete with Sprint PCS services. Indeed, the
Federal Communications Commission has recently reclaimed certain 700 MHz band
spectrum previously allocated for UHF television broadcast use and has
scheduled an auction of licenses for traditional telephone network systems in
large geographic areas for later this year. Based upon increased competition,
we anticipate that market prices for
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two-way wireless services generally will decline in the future. We will
compete to attract and retain customers principally on the basis of:
- the strength of the Sprint and Sprint PCS brand names,
services and features;
- the national presence of Sprint PCS;
- the location of our markets;
- our 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 and technologies 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 will use the Sprint and Sprint PCS brand names, the Sprint diamond
design logo and other service marks of Sprint in connection with marketing
and providing wireless services within our markets. Under the terms of the
trademark and service mark license agreements with Sprint and Sprint PCS, we
do not pay a royalty fee for the use of the Sprint and Sprint PCS brand names
and Sprint service marks.
Except in instances that are noncompetitive and other than in
connection with the national distribution agreements, Sprint PCS has agreed
not to grant to any other person a right or license to use the licensed marks
in our markets. In all other instances, Sprint PCS reserves the right to use
the licensed marks in providing its services within or without our markets.
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" for
more information on this topic.
EMPLOYEES
As of May 15, 2000, we employed 48 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 headquarters are located in Bala Cynwyd, Pennsylvania and we
lease space in a number of locations, primarily for our base stations and
switching centers. As of May 15, 2000, our material leased properties were as
listed below:
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<TABLE>
<CAPTION>
PURPOSE LOCATION SQUARE FEET LEASE TERM
------------------ ------------------------- ----------- -----------
<S> <C> <C> <C>
Office Space lease 1 Bala Plaza, Suite 402 6,000 10 years
Bala Cynwyd, Pennsylvania
Switch lease 5355 Capital Court 5,760 10 years
Unit Number 102
Reno, Nevada
</TABLE>
LEGAL PROCEEDINGS
We are not a party to any pending legal proceedings that we believe
would, if adversely determined, individually or in the aggregate, have a
material adverse effect on our financial condition or results of operations.
ENVIRONMENTAL COMPLIANCE
We anticipate that our environmental compliance expenditures will
primarily result from the operation of standby power generators for our
telecommunications equipment and compliance with various environmental rules
during network build-out and operations. The expenditures are expected to
arise in connection with standards compliance or permits which are usually
related to generators, batteries or fuel storage. Our environmental
compliance expenditures are not expected to be material to our operations in
the future.
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THE SPRINT PCS AGREEMENTS
The following is a summary of the material terms and provisions of
the Sprint PCS agreements and the consent and agreement modifying the Sprint
PCS management agreement. We have filed the Sprint PCS agreements and the
consent and agreement as exhibits to the registration statement of which this
prospectus is a part and urge you to review them carefully.
OVERVIEW OF SPRINT PCS RELATIONSHIP AND AGREEMENTS
Under long-term agreements with Sprint PCS, we will exclusively
market PCS services under the Sprint and Sprint PCS brand names in our
markets. Sprint PCS owns the spectrum licenses and we are granted use of
these licenses through our agreements with Sprint PCS. The agreements with
Sprint PCS require us to interface with the Sprint PCS national wireless
network by building our PCS network to operate on the PCS frequencies
licensed to Sprint PCS. The Sprint PCS agreements also give us access to
Sprint PCS' equipment discounts, travel revenue from Sprint PCS customers
traveling into our markets, and various other support 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 and will
automatically renew for three additional successive 10-year terms for a total
term of 50 years, unless we or Sprint PCS provide the other with two years'
prior written notice to terminate the agreements or unless we are in material
default of our obligations under the agreements.
We have four major agreements with Sprint PCS:
- 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 Paribas, the lender
under our $250.0 million senior credit facility. This consent replaced an
existing consent and agreement between the parties that had modified our
management agreement in substantially the same manner for the benefit of
Paribas under our previous $25.0 million credit facility.
THE MANAGEMENT AGREEMENT
Under our management agreement with Sprint PCS, we have agreed to:
- construct and manage a network in our markets in compliance
with Sprint PCS' PCS licenses and the terms of the management
agreement;
- share with Sprint the costs associated with its relocation of
interfering microwave sources in our markets;
- distribute during the term of the management agreement Sprint
PCS products and services;
- use Sprint PCS' and our own distribution channels in our
markets;
- conduct advertising and promotion activities in our markets;
and
- manage that portion of Sprint PCS' customer base assigned to
our markets.
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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 markets. Sprint PCS is
prohibited from owning, operating, building or managing another wireless
mobility communications network in our markets 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 markets and, as required by the Federal Communications
Commission, to permit resale of the Sprint PCS products and services in our
markets. 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
markets 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 on a minimum build-out plan which includes specific coverage and
deployment schedules for the network planned within our service area as
depicted in the table below. The aggregate coverage will result in network
coverage of approximately 55% of the population in our markets of 7.7 million
by the end of 2001. We have agreed to operate our PCS network to provide for
a seamless handoff of a call initiated in our markets to a neighboring Sprint
PCS network.
<TABLE>
<CAPTION>
PHASE 0 PHASE 1 PHASE 2 PHASE 3
MARKET SEPTEMBER 21, 2000 DECEMBER 31, 2000 MARCH 31, 2001 SEPTEMBER 30, 2001
------------------------------ -------------------- -------------------- -------------- ------------------
<S> <C> <C> <C> <C>
Reno/Tahoe/Northern California Reno, NV Yuba City/Marysville, Eureka, CA
Sparks, NV CA
Carson City, NV Oroville, CA
Lake Tahoe, NV Chico, CA
Red Bluff, CA
Redding,CA
Spokane/Montana Pullman, WA Newport, WA
Lewiston, ID Sandpoint, ID
Moscow, ID
Southern Idaho/Utah/Nevada Logan, UT Boise, ID Twin Falls, ID
Brigham, UT Nampa, ID Pocatello, ID
Caldwell, ID Idaho Falls, ID
Mountain Home, ID Rexburg, ID
Jackson, WY St. Anthony, ID
Ketchum, ID
Cedar City, UT
St. George, UT
Mesquite, NV
Southern Indiana/Kentucky Terre Haute, IN Vincennes, IN
Bloomington, IN Washington, IN
Bedford, IN Petersburg, IN
Evansville, IN Jasper, IN
Owensboro, KY Cannelton, IN
Rockport, IN
Bedford, IN
Mitchell, IN
New Castle, IN
Rushville, IN
Connersville, IN
Liberty, IN
Clarkesville, TN
</TABLE>
The management agreement also includes minimum build-out plan
requirements for select cities in the Spokane/Montana market, with a launch
date of June 1, 2005.
PRODUCTS AND SERVICES. The management agreement identifies the
products and services that we can offer in our markets. These services
include, but are not limited to, Sprint PCS consumer and business products
and
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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 long distance service, Internet access,
handsets, and prepaid phone cards with Sprint, Sprint PCS and other Sprint
PCS affiliates. If we decide to sell the same services of third parties, we
must give Sprint PCS an opportunity to provide the services on the same terms
and conditions. We cannot offer traditional telephone services based on
wireless technology specifically designed for the competitive local telephone
market in areas where Sprint owns the local telephone company unless we name
the Sprint-owned local telephone company 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 markets. As a participant in these
sales programs, our responsibilities include assisting Sprint PCS' national
sales team in our markets in connection with implementing national sales
programs, negotiating customer contracts and managing customer accounts. We
must use Sprint's long distance service for calls made from within designated
portions of our markets to areas outside those designated portions and to
connect our network to the national platforms Sprint PCS uses to provide some
of its services under our services agreement. We must pay Sprint PCS the same
price for this service that Sprint PCS pays to Sprint, along with an
additional administrative fee.
SERVICE PRICING, ROAMING, TRAVEL 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 offered only
in our markets, subject to Sprint PCS' approval. We are entitled to receive a
weekly fee from Sprint PCS equal to 92% of "collected revenues" for all
obligations under the management agreement, adjusted by the cost of customer
services provided by Sprint PCS. "Collected revenues" include revenue from
Sprint PCS subscribers based in our markets and inbound non-Sprint PCS
roaming. Sprint PCS will receive 8% of the collected revenues. Outbound
non-Sprint PCS roaming revenue, inbound and outbound Sprint PCS travel fees,
proceeds from the sales of handsets and accessories, proceeds from sales not
in the ordinary course of business, and amounts collected with respect to
taxes are not considered collected revenues. Except in the case of taxes, we
will retain 100% of these revenues. Many Sprint PCS subscribers purchase
bundled pricing plans that allow Sprint PCS traveling anywhere on the Sprint
PCS network without incremental Sprint PCS travel charges. However, we will
earn Sprint PCS travel revenue for every minute that a Sprint PCS subscriber
from outside our markets enters our markets and uses our services. We will
earn revenue from Sprint PCS based on a per minute rate established by Sprint
PCS when Sprint PCS' or its affiliates' subscribers travel on our portion of
the Sprint PCS network. Similarly, we will pay the same rate for every minute
Sprint PCS subscribers who are based in our markets use the Sprint PCS
network outside our markets. 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 markets. Sprint PCS'
service area includes the urban markets around our markets. 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, travel, roaming and interservice area
calls, customer service standards, national and regional distribution and
national accounts programs. Some of these technical standards relate to
network up-time, dropped calls, blocked call attempts and call origination
and termination failures. We are required to build a network that meets
minimum transport requirements established by Sprint PCS for links between
our cell sites and switches. These requirements are measured in milliseconds.
We are also required to have minimal loss and echo return loss on our
telephone lines. We must meet substantially high network up-time percentage
in excess of 95%. Also, we must meet a less than 5% dropped call rate and
ratio of blocked call attempts to total call attempts as well as a less than
12% ratio of call origination to termination failures. Sprint PCS can adjust
the program requirements at any time so long as it gives us at least 30 days
prior notice. We have the right to appeal to Sprint PCS' management
adjustments which could cause an unreasonable increase in cost to us if the
adjustment:
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- causes us to incur a cost exceeding 5% of the sum of our
equity plus our outstanding long term debt, or
- causes our long-term 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 ten-day period or comply with the program adjustment,
Sprint PCS has the termination rights described below.
We are not currently required to meet the customer service standards
because we have elected to use Sprint PCS' established support services which
include customer service. Under our services agreement with Sprint PCS,
Sprint PCS may terminate, upon nine months' advance written notice, customer
service. We would then be required to establish and operate our own customer
service center to, among other things, handle customer inquiries 24 hours a
day, 365 days a year, and activate handsets and accounts and handle billing
and collections within stringent time guidelines established by Sprint PCS,
which may range from 24 to 72 hours.
NON-COMPETITION. We may not offer Sprint PCS products and services
outside our markets without the prior written approval of Sprint PCS. Within
our markets 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
markets, we may not use the spectrum to offer Sprint PCS products and
services without prior written consent from Sprint PCS. Additionally, if
customers from our markets travel to other geographic areas, we must route
those customers' incoming and outgoing calls according to Sprint PCS' roaming
and inter-service area requirements, without regard to any wireless networks
that we or our affiliates operate.
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.
CHANGE OF CONTROL. Sprint PCS must consent to a change of control of
us, but this consent cannot be unreasonably withheld.
ASSIGNMENT. We cannot assign the Sprint PCS agreements to any person
without the prior consent of Sprint PCS, except that we can assign the
agreements to any affiliate of ours that is not a significant competitor of
Sprint PCS in the telecommunications business.
RIGHTS OF FIRST REFUSAL. Sprint PCS has rights of first refusal to
buy our assets, without further approval of UbiquiTel Parent's stockholders,
upon a proposed sale of all or substantially all of our assets that are used
in connection with the operation or management of the Sprint PCS network in
our markets.
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
- our failure to obtain the financing necessary for the
build-out of our PCS network and for our working capital
needs.
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However, Sprint PCS' rights of termination have been modified by the
consent and agreement and are discussed more particularly under "Consent and
Agreement." 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 October 15, 2000.
TRANSFER OF SPRINT PCS NETWORK. Sprint PCS can sell, transfer or
assign its wireless personal communications services network to a third party
if the third party agrees to be bound by the terms of the Sprint PCS
agreements.
RIGHTS ON TERMINATION. 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
80% of our Entire Business Value (as defined in the management
agreement);
- if Sprint PCS is the licensee for 20 MHz or more of the
spectrum on the date of the management agreement, require
Sprint PCS to assign to us, subject to governmental approval,
up to 10 MHz of licensed spectrum for an amount equal to the
greater of:
- the original cost to Sprint PCS of the license plus
any microwave relocation costs paid by Sprint PCS; or
- 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, without further approval of UbiquiTel Parent's
stockholders, 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:
- the original cost to Sprint PCS of the license plus
any microwave relocation costs paid by Sprint; or
- 10% of our Entire Business Value;
- take any action as Sprint PCS deems necessary to cure our
breach of the management agreement, including assuming
responsibility for, and operating, our PCS network; or
- sue us for damages or submit the matter to arbitration and
thereby not terminate the management agreement.
RIGHTS ON 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 20 MHz or more of the
spectrum on the date of the management agreement, require
Sprint PCS to assign to us, subject to governmental approval,
up to 10 MHz of licensed spectrum for an amount equal to the
greater of:
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- the original cost to Sprint PCS of the license plus
any microwave relocation costs paid by Sprint PCS; or
- 10% of our Entire Business Value.
If we give Sprint PCS timely notice of non-renewal, or we 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, without further approval
of UbiquiTel Parent's stockholders, 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:
- the original cost to Sprint PCS of the license plus
any microwave relocation costs paid by Sprint PCS; or
- 10% of our Entire Business Value.
If 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, each of whom must be an expert in valuing wireless
telecommunications companies. The three appraisers will determine the Entire
Business Value on a going concern basis using the following guidelines:
- the Entire Business Value will be based on the price a willing
buyer would pay a willing seller for the entire on-going
business;
- the appraisers will use then-current customary means of
valuing a wireless telecommunications business;
- the appraisers will value the business as it is conducted
under the Sprint and Sprint PCS brands and the Sprint PCS
agreements;
- where Sprint PCS may, or is required to, purchase our
operating assets the appraisers will value the business as if
we own the spectrum and frequencies that we actually use.
Where we may, or are required to, purchase a portion of Sprint
PCS' licensed spectrum, the business will be valued as if we
already own that portion of the spectrum and frequencies that
we are going to purchase; and
- the valuation will not include any value for the business not
directly related to the Sprint PCS products and services.
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, managers, officers, employees, agents and representatives 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, managers, officers, employees,
agents and representatives 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.
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THE SERVICES AGREEMENT
The services agreement outlines various support 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. Sprint may require us to purchase certain services where
necessary to comply with legal or regulatory requirements (for example, where
provision of 911 emergency service is mandatory). We have chosen to initially
buy services such as billing, customer care and activation from Sprint PCS.
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 provided under the services agreement in
connection with any other business or outside our markets. We may discontinue
use of any service upon three months' prior written notice. We will have
access to these services during the term of our Sprint PCS management
agreement unless Sprint PCS provides us at least nine months' advance notice
of its intention to terminate any particular service.
We have agreed with Sprint PCS to indemnify each other as well as
officers, directors, employees and certain other related parties and their
officers, directors and employees for violations of law or the services
agreement except for any liabilities resulting from the indemnitee's
negligence or willful misconduct. The services agreement also provides that
no party to the agreement will be liable to the other party for special,
indirect, incidental, exemplary, consequential or punitive damages, or loss
of profits arising from the relationship of the parties or the conduct of
business under, or breach of, the services agreement except as may otherwise
be required by the indemnification provisions. The services agreement
automatically terminates upon termination of the management agreement and
neither party may terminate the services agreement for any reason other than
the termination of the management agreement.
THE TRADEMARK AND SERVICE MARK LICENSE AGREEMENTS
We have non-transferable, royalty-free licenses to use the Sprint
and Sprint PCS brand names and "diamond" symbol, and several other U.S.
trademarks and service marks such as "The Clear Alternative to Cellular" and
"Experience the Clear Alternative to Cellular Today" 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 markets 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.
THE CONSENT AND AGREEMENT
OVERVIEW
Sprint PCS has entered into a consent and agreement that modifies
our management agreement for the benefit of Paribas, the lender under our
$250.0 million credit facility. The consent replaced an existing consent and
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agreement between the parties that had modified our management agreement in
substantially the same manner for the benefit of Paribas under our previous
$25.0 million credit facility. The consent generally provides, among other
things, the following.
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 our capital stock.
Sprint PCS has agreed to acknowledge the grant of these security
interests and to waive its right or the right of any of its affiliates to
challenge or contest the validity of the interests.
AGREEMENT NOT TO TERMINATE SPRINT PCS AGREEMENTS UNTIL DEBT
OBLIGATIONS 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, and including its right to terminate the agreements and withhold
payments (other than rights of setoff) until our obligations under the credit
agreement with Paribas are satisfied in full.
NO COMPETITION UNTIL DEBT OBLIGATIONS ARE REPAID. Sprint PCS has
agreed that it will not permit any person other than us or a successor
manager to be a manager or operator for Sprint PCS in our markets until our
obligations under the credit facility are satisfied in full. Similarly,
Sprint PCS has agreed that it will not own, operate, build or manage another
wireless mobility communications network in our markets unless it is
permitted under the management agreement or the management agreement is
terminated in accordance with the consent, and, in each case, until our
obligations under the credit facility are satisfied in full. While the credit
facility is outstanding, Sprint PCS may, however, sell PCS services through
its national accounts, permit resellers and build new geographical areas
within our markets for which we have chosen not to exercise our rights of
first refusal, all as provided in the management agreement.
ASSIGNMENTS AND CHANGE OF CONTROL TO PARIBAS. Sprint PCS has agreed
not to apply the restrictions on assignment of the Sprint PCS agreements and
changes in control of our ownership to Paribas. 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 Paribas, or is not otherwise
permitted under the consent.
REDIRECTION OF PAYMENTS FROM SPRINT PCS TO PARIBAS. Sprint PCS has
agreed to make all payments due from Sprint PCS to us under the Sprint PCS
agreements directly to Paribas if Paribas so requests and provides Sprint PCS
with notice that an event of default has occurred and is continuing under the
credit facility. Payments to Paribas would cease upon the cure of the event
of default or certain time limitations.
NOTICE OF DEFAULTS. Sprint PCS has agreed to provide to Paribas 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 our credit agreement with Paribas.
Paribas has agreed to provide Sprint PCS with a copy of any written notice
sent to us or UbiquiTel Parent regarding an event of default or default under
the credit agreement with Paribas.
RIGHT TO CURE. Under the terms of the consent, Paribas has the
right, but not the obligation, to cure a breach by us of our management
agreement with Sprint PCS. Additionally, Sprint PCS has the right, but not
the obligation, to cure certain defaults by us of our obligations under the
credit agreement with Paribas.
RIGHTS UPON DEFAULT
Besides modifying the rights and remedies available to Sprint PCS
upon an event of termination under your management agreement, the consent
grants Paribas certain rights in the event that we default on our obligations
under the credit facility. Paribas' rights and remedies vary based on whether:
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- we have defaulted on our obligations under the credit facility
but no event of termination has occurred under the management
agreement; or
- we have breached the management agreement with Sprint PCS.
The consent generally permits, without approval of UbiquiTel
Parent's stockholders the appointment of a person to run our business under
the Sprint PCS agreements on an interim basis and establishes a process for
the 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.
CREDIT AGREEMENT DEFAULT WITHOUT A MANAGEMENT AGREEMENT BREACH. If
we default on our obligations to Paribas under the credit facility, and there
is no default under our management agreement with Sprint PCS, then Paribas
may 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 BY PARIBAS OF SPRINT PCS OR A THIRD PARTY DESIGNEE TO
OPERATE BUSINESS. If Paribas appoints Sprint PCS to operate the business,
Sprint PCS must accept the appointment within 14 days or designate another
person to operate the business. Sprint PCS' designee may be an affiliate of
Sprint PCS (other than us) or another person acceptable to Paribas. Sprint
PCS or its designee must agree to operate the business for up to six months.
At the end of the six months, the period may be extended by Paribas 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). During the
initial six-month period, Sprint PCS may not receive reimbursement for
amounts expended to cure a breach until our obligations to Paribas under the
credit facility have been satisfied in full. If the term is extended beyond
the initial six-month period, we will be required to reimburse Sprint PCS or
its 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 stockholders' equity value plus the outstanding amount of our
long term debt. Sprint PCS or its designated person is not required to incur
expenses beyond this 5% limit. At the end of the initial six-month interim
term, Paribas has the right to appoint a successor to the interim manager
subject to the requirements set forth below.
APPOINTMENT OF THIRD PARTY BY PARIBAS TO OPERATE BUSINESS. If
Paribas 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 Paribas;
- meet the requirements for a successor manager specified in the
consent, and not be challenged by Sprint PCS for failing to
meet these requirements within 20 days after Paribas 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
markets, 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 credit agreement with Paribas,
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 business under the Sprint
PCS agreements (if Paribas consents);
- operate our PCS business as an interim manager for up to six
months; or
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- appoint a Sprint PCS affiliate or another person that is
acceptable to Paribas to operate our PCS 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, Paribas may do so.
ELECTION OF SPRINT PCS TO SERVE 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). During the initial six month period, Sprint PCS may
not receive reimbursement for amounts expended to cure a breach until our
obligations to Paribas under the credit facility have been satisfied in full.
If the term is extended beyond the initial six month period, we will be
required to reimburse Sprint PCS or its third party designee for amounts
previously expended and to be incurred as interim manager to cure a default
up to an aggregate amount that is equal to 5% of the sum of our shareholder's
equity value plus the outstanding amount of our long term debt. Sprint PCS or
its third party designee is not required to incur expenses beyond this 5%
limit. At the end of the initial six month period, Sprint PCS, subject to the
approval of Paribas, has the right to appoint a successor to the interim
manager.
APPOINTMENT OF THIRD PARTY BY PARIBAS TO OPERATE BUSINESS. If Sprint
PCS gives Paribas notice of a breach of the management agreement, our
obligations under the credit agreement are accelerated and Sprint PCS does
not agree to operate the business or is unable to find a designee, then
Paribas may designate a third party to operate the business. Paribas has this
same right if Sprint PCS or its designee is not replaced within 30 days of
the end of its term as interim manager. The third party selected by Paribas
must:
- agree to serve for six months unless terminated by Sprint PCS
or Paribas;
- meet the requirements for a successor manager specified in the
consent and not be challenged by Sprint PCS for failing to
meet the requirements within 20 days after Paribas 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 Paribas' discretion, so long as the third party continues to
satisfy the requirements to be a successor manager and does not breach the
terms of the Sprint PCS agreements.
PURCHASE AND SALE OF OPERATING ASSETS
The consent establishes a process for the sale of our operating
assets, without approval of UbiquiTel Parent's stockholders, in the event
that we default on our obligations to Paribas under the credit facility and
Paribas accelerates the maturity of those obligations.
SPRINT PCS' RIGHT TO PURCHASE ON ACCELERATION OF DEBT. Upon notice
of an acceleration, Sprint PCS has the right, without approval of UbiquiTel
Parent's stockholders, to purchase our operating assets or capital stock
under the following terms:
- The purchase price will be the greater of:
- 72% of our Entire Business Value; or
- the aggregate amount of our obligations under the
credit agreement;
- Sprint PCS must notify Paribas of its intention to exercise
the purchase right within 60 days of receipt of the notice of
acceleration;
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- Once Sprint PCS has given notice of its intention to exercise
the purchase right, Paribas is prohibited from enforcing its
security interests until the earlier of 120 days after the
acceleration or until Sprint PCS rescinds its intention to
purchase;
- If, after the 120-day period after the acceleration date, we
receive a written offer to purchase our operating assets or
capital stock that we confirm in writing to be acceptable to
us, Sprint PCS has the right to purchase our operating assets
or our stock on terms and conditions at least as favorable to
us as the offer we receive. Sprint PCS must agree to purchase
the operating assets or capital stock within 14 business days
of its receipt of the offer, on acceptable conditions, and in
an amount of time acceptable to us and Paribas;
- Upon completion of the sale to Sprint PCS and satisfaction in
full of our obligations under the credit agreement, Paribas
must release its security interests.
SALE OF OPERATING ASSETS OR CAPITAL STOCK TO THIRD PARTIES. If Sprint
PCS does not purchase the operating assets or capital stock, following an
acceleration by Paribas of our obligations under the credit agreement,
Paribas may sell our operating assets or stock. In that event, Paribas has
two options:
- to sell the assets or stock to an entity that meets the
requirements of a qualified successor under the Sprint PCS
agreements; or
- to sell the assets or stock to any third party, subject to
specified conditions.
SALE OF ASSETS OR CAPITAL STOCK TO QUALIFIED SUCCESSOR. Paribas may sell
the operating assets or capital stock 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 and listed on Schedule 13 to the consent;
- the person has reasonably demonstrated its credit worthiness
and can demonstrate the ability to service the indebtedness
and meet the requirements of the build-out plan; and
- the person agrees to be bound by the Sprint PCS agreements.
Paribas is required to provide Sprint PCS with information necessary to
determine if a buyer meets the requirements to succeed us as manager. Sprint
PCS has 20 days after its receipt of this information to object to the
qualifications of the proposed successor manager. If Sprint PCS does not
object to the buyer's qualifications, the buyer can purchase the assets and
assume our rights and responsibilities under the Sprint PCS agreements. The
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 OR CAPITAL STOCK TO NON-SUCCESSOR. Paribas may sell,
without stockholder approval, our assets or stock to a party that does not
meet the requirements to succeed us. 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 territories under
specified terms;
- if the buyer controls, is controlled by or is under common
control with an entity that owns a license to provide wireless
service to at least 50% of the population in a basic trading
area where the buyer proposes to purchase the spectrum from
Sprint PCS, the buyer may only buy 5 MHz of spectrum;
- the price to purchase the spectrum is equal to the sum of the
original cost of the license to Sprint PCS pro rated on a
population and a spectrum basis, plus the cost paid by Sprint
PCS for microwave relocation costs attributable to clearing in
the spectrum ultimately acquired by the buyer of our assets
and the amount of carrying costs attributable to the license
and microwave relocation costs from the date of the 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
mobile identification number 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 mobile
identification number 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 the buyer's wireless
services at most favored nation pricing.
DEFERRAL OF COLLECTED REVENUES. For a period of up to two years after an
acceleration by Paribas of UbiquiTel Operating Company's obligations under
the credit facility, Sprint PCS may only retain one-half of the amount of
collected revenues from our operation of the Sprint PCS Network in our
territories that it would otherwise be entitled to under the management
agreement. The balance must be forwarded to us, or to Paribas if Paribas has
elected to redirect payments as provided in the consent. If Sprint PCS is not
serving as the interim manager at the end of the first year following the
acceleration, then Sprint PCS will retain all of the collected revenues to
which it is entitled under the management agreement (the remainder to be paid
to Sprint PCS under an unsecured deferred note).
RIGHT TO PURCHASE DEBT OBLIGATIONS. Following the acceleration of
UbiquiTel Operating Company's obligations under the credit facility, and
until the 60-day anniversary of the filing of a bankruptcy petition, Sprint
PCS has the right to purchase the obligations to Paribas under the credit
facility.
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DESCRIPTION OF THE SENIOR CREDIT FACILITY
On March 31, 2000, we entered into a $250.0 million senior secured
credit facility with Paribas.
The credit facility provides for:
- an aggregate of $120,000,000 of senior secured A term loans,
which may be drawn at any time until April 2002, and which
mature in October 2007;
- an aggregate of $75,000,000 of senior secured B term loans,
which were drawn down in full on April 11, 2000 and funded
into an escrow account, and which mature in October 2008; and
- a $55,000,000 senior secured revolving credit facility which
matures in October 2007 and includes a $5,000,000 subfacility
for the issuance of letters of credit.
The $75,000,000 million of senior secured B term loans that were
funded into an escrow account will remain the property of our lenders and
will not be released to us if an event of default has occurred under the
credit agreement. Additionally, these funds will not be released to us until
specified conditions have been satisfied. These conditions include, among
others, evidence that we have used all of the proceeds from our sale of the
outstanding notes and from UbiquiTel Parent's initial public offering of its
common stock to pay fees and expenses in connection with those offerings, to
fund the build-out of our network or for other general corporate and working
capital purposes. Additional borrowings under our senior credit facility must
be placed into escrow until the conditions to release our initial borrowing
of $75,000,000 have been satisfied.
We must repay the A term loans, if borrowed, in 14 consecutive
quarterly installments, beginning in June 2004. The amount of each of the first
four installments is $2,500,000, the amount of each of the next four
installments is $3,750,000, the amount of each of the next four installments is
$16,250,000, and the amount of each of the last two installments is $15,000,000.
We must repay the B term loans in eighteen consecutive quarterly
installments, beginning in June 2004. The amount of each of the first 12
installments is $187,500, the amount of each of the next four installments is
$2,812,500, and the amount of each of the last two installments is $30,750,000.
The amount that we can borrow and that can be outstanding under the
revolving credit facility reduces in eight quarterly reductions, beginning in
December 2005. The amount of each of the reductions is $6,875,000.
Until the earlier to occur of the syndication of the senior credit
facility, or August 2000, Paribas may re-allocate the amounts among the A term
loans, B term loans and revolving credit facility at their discretion. If these
amounts are re-allocated by Paribas, the installment payments set forth above
will also be subject to re-allocation.
Interest on the A term loans accrues, at our option, either at:
- the reserve adjusted London interbank offered rate, plus a
margin of between 3.75% and 2.25%; or
- the higher of The Chase Manhattan Bank's prime rate or the
federal funds rate plus 0.5%, plus a margin of between 2.0%
and 1.0%.
Interest on the B term loans and the revolving credit loans accrues, at
our option, either at:
- the reserve adjusted London interbank offered rate, plus an
applicable margin of between 4.25% and 2.75%, depending on the
level of our ratio of debt to earnings before interest, taxes,
depreciation and amortization; or
- the higher of The Chase Manhattan Bank's prime rate or the
federal funds rate plus 0.5%, plus an applicable margin of
between 2.5% and 1.5%, depending on the level of our ratio of
debt to earnings before interest, taxes, depreciation and
amortization.
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Interest on any overdue amounts will accrue at a rate per annum
equal to 2.0% plus the rate otherwise applicable to that amount.
The credit facility requires that we pay commitment fees to the
lender. Initially, the commitment fee is based on a percentage of the undrawn
amounts of the revolving credit facility and the A term loan facility. The
commitment fees are payable quarterly in arrears and a separate agent's fee
is payable to the administrative agent.
The commitment fee is:
- if 67% or more of the total amount of the facilities is drawn,
the commitment fee is 0.75% of the undrawn amount;
- if less than or equal to 67% and greater than 33% of the total
amount of the facilities is drawn, the commitment fee is
1.125% of the undrawn amount; or
- if less than or equal to 33% of the total amount of the
facilities is drawn, the commitment fee is 1.375% of the
undrawn amount.
We paid origination fees of $7.0 million in connection with the credit
facility.
We must repay the term loans, and the commitments under the revolving
credit facility will be reduced, in an aggregate amount equal to:
- 50% of excess cash flow in each fiscal year;
- 100% of the net proceeds of specified asset sales outside the
ordinary course of business, in excess of a $1.0 million
yearly threshold;
- 100% of the net cash proceeds of specified incurrences of
indebtedness; and
- 100% of the net cash proceeds of specified issuances of equity
securities, other than proceeds from UbiquiTel Parent's
initial public offering.
UbiquiTel Parent has guaranteed all of our obligations under the credit
facility. Our obligations under the credit facility are secured by security
interests in substantially all of our assets, and by UbiquiTel Parent's pledge
of all of our capital stock.
The credit facility contains customary covenants, including covenants
limiting indebtedness, dividends and distributions on, and redemptions and
repurchases of, capital stock and other similar payments, and the acquisition
and disposition of assets. The credit facility also requires that we comply with
specified financial covenants, including interest coverage ratios and
indebtedness to total capital ratios and other covenants, including a
requirement to cover a specified percentage of the population in our market
areas. We are currently in compliance with all covenants under the credit
facility.
The credit facility provides for customary events of default, including
cross-defaults, judgment defaults and events of bankruptcy. In case of an event
of default, our lender may declare our debt due and payable.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND OTHER KEY EMPLOYEES
The following table presents information with respect to our executive
officers, directors and other key employees.
EXECUTIVE OFFICERS AND DIRECTORS:
<TABLE>
<CAPTION>
NAME AGE POSITION
--------------------------------------------------- --- ---------------------------------------------------
<S> <C> <C>
Donald A. Harris.............................. 47 Chairman of the Board, President and Chief
Executive Officer
Dean E. Russell............................... 48 Chief Operating Officer
Paul F. Judge................................. 34 Senior Vice President-Corporate Development and
Finance
Andrew W. Buffmire............................ 53 Senior Vice President-Business Development
Robert A. Berlacher........................... 45 Director
Peter Lucas................................... 45 Director
Eve M. Trkla.................................. 37 Director
Joseph N. Walter.............................. 47 Director
OTHER KEY EMPLOYEES:
Debra A. Gerstenberg.......................... 36 Vice President of Human Resources
David L. Zylka................................ 39 Vice President of Engineering
</TABLE>
DONALD A. HARRIS has served as President and Chief Executive Officer
and as a director since our inception and was appointed Chairman of the Board
in May 2000. Mr. Harris has more than 17 years of experience in the
telecommunications industry, and is the former president of Comcast Cellular
Communications, Inc., and a former senior vice president of Comcast
Corporation. He also participated in Comcast's efforts on the board of
Nextel. Mr. Harris managed the build-out of and had operating responsibility
for Comcast's cellular operations in Pennsylvania, New Jersey and Delaware
with over 8 million residents. Mr. Harris was also responsible for Comcast's
PCS experimental trials. Prior to joining Comcast in February, 1992, Mr.
Harris was Vice President/General Manager of PacTel Cellular's Los Angeles
office, the then largest traditional cellular operation in the United States.
He also held several senior management positions with PacTel including Vice
President of Corporate Development, and President and Chief Executive Officer
of the San Francisco Cellular Partnership. Mr. Harris began his career in the
cellular communications industry as a consultant with McKinsey & Company. Mr.
Harris is a graduate of the United States Military Academy at West Point, and
holds a Masters Degree in Business Administration from Columbia University.
DEAN E. RUSSELL has been our Chief Operating Officer since November
1999. He is responsible for overseeing all of the functional areas of our
operations including sales and marketing, network and field operations, and
human resources. Prior to joining us, Mr. Russell was part of the executive
management team of Education Management Corporation from October 1997 to
November 1999. He held various positions with Education Management
Corporation including Director of Operations for the Art Institute of Fort
Lauderdale and President of the Art Institute International at San Francisco.
Previously, Mr. Russell was the General Sales Manager for Comcast Cellular
Communications, Inc. in Atlantic City and Cape May County in New Jersey from
October 1995 to October 1997. Prior to joining Comcast Cellular
Communications, Inc., Mr. Russell served in the United States Army for 20
years before retiring as a Lieutenant Colonel. Mr. Russell has 26 years of
leadership experience including hands on experience managing diverse
operations. Mr. Russell holds a Bachelor of Science Degree in engineering
from the United States Military Academy at West Point and a Masters of
Education Degree from the University of Georgia and a Masters of Business
Administration in International Business from Long Island University.
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PAUL F. JUDGE has been our Senior Vice President of Corporate
Development and Finance since our inception. He is responsible for
acquisition of new markets, business and financial planning, and management
of strategic relationships. Mr. Judge is one of our founders and has more
than 13 years of experience in the wireless telecommunications industry. From
August 1992 until joining us, Mr. Judge served as Director of The Walter
Group, Inc., where he served as a senior member of the consulting firm which
specializes in management services for telecommunications and information
management companies. Before joining The Walter Group, Mr. Judge contributed
to the formation and analysis of telecommunications trade policy within the
Department of Commerce, as well as participated in the development of the
OmniTracs satellite communications system today operated by Qualcomm. Mr.
Judge holds a Bachelor of Science in Business Administration from Pepperdine
University and a Masters of Business Administration in International Business
Finance from George Washington University.
ANDREW W. BUFFMIRE joined the Company in May 2000 as Senior Vice
President Business Development. He is responsible for the development and
negotiation of strategic business transactions. Prior to joining us, Mr.
Buffmire was a Director in the Sprint PCS Affiliates Program. He joined
Sprint PCS in January of 1996 during its initial development stage. At Sprint
PCS he led the state related regulatory compliance, network infra-structure
and interconnection negotiations for the market entry of Sprint PCS and
provided legal counsel for various aspects of the network build-out. Before
joining Sprint PCS, Mr. Buffmire was an attorney in private legal practice in
Salt Lake City, Utah for 16 years, with the exception of two years
(1985-1987), when he was the founder, general counsel and registered
principal of an NASD registered investment banking firm. Mr. Buffmire
interned with the Commission of the European Economic Community (EU) in
Brussels, Belgium. He has a Bachelor of Arts Degree in International
Relations from the University of Southern California, a Juris Doctor Degree
from the University of Utah and a Master of Laws degree from the London
School of Economics and Political Science.
ROBERT A. BERLACHER has been a director since our inception. Mr.
Berlacher is President of LIP Advisors, Inc., the General Partner of
Lancaster Investment Partners, LP, a technology, telecommunications and
healthcare investment partnership based in King of Prussia, Pennsylvania. Mr.
Berlacher is also a co-founder and director of EGE Holdings, Ltd., a holding
company with ownership interests in investment banking, money management and
venture capital. While co-founding EGE Holdings, Ltd., Mr. Berlacher was also
a Managing Director of Boenning & Scattergood, Inc. from January 1997 to
September 1999, and was a Managing Director and shareholder of Pacific Growth
Equities, Inc. from March 1995 to January 1997. Mr. Berlacher graduated from
Cornell University in 1976 with a Bachelor of Science degree in Business
Administration-Finance.
PETER LUCAS has been a director since our inception. Mr. Lucas
served as Chief Financial Officer of WesTower Corporation, a public provider
of telecommunications sites and wireless network services, from April 1997 to
September 1999. Mr. Lucas also served as Chief Financial Officer of Cotton
Valley Resources Corporation, a Dallas-based public oil and gas company, from
August 1995 to April 1997. Mr. Lucas received a Bachelor of Commerce degree
from the University of Alberta.
EVE M. TRKLA has been a director since our inception. Ms. Trkla is
the Co-Founder, Senior Managing Director and Chief Financial Officer of
Brookwood Financial Partners, L.P. and its affiliated companies, Brookwood
Securities Partners, L.P., Brookwood Management Partners, L.P. and Brookwood
Capital Partners, L.P. Ms. Trkla oversees the financial administration of
Brookwood and its affiliates and the origination, evaluation, structuring and
acquisition of real estate and private company investments. Brookwood is a
Boston-based private investment and merchant-banking firm which specializes
in acquiring and managing real estate and in providing equity and bridge
financing to private companies. Since its founding in 1993, Brookwood and its
affiliated entities have acquired real estate and corporate assets with a
realized and current value in excess of $400 million. Prior to co-founding
Brookwood, Ms. Trkla was the Senior Credit Officer at The First National Bank
of Ipswich, where she created and managed the credit administration function
for this $130 million community bank. Ms. Trkla spent the first eight years
of her career at the First National Bank of Boston as a lender specializing
in large corporate acquisition finance. Ms. Trkla is a 1984 CUM LAUDE
graduate of Princeton University.
JOSEPH N. WALTER has been a director since our inception. Mr. Walter
founded The Walter Group, Inc., an international consulting and project
management firm specializing in telecommunications companies, in 1988 and
currently serves as its Chairman and Chief Executive Officer. In January
2000, The Walter Group sold its
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consulting and project management group to Wireless Facilities, Inc. The
Walter Group continues to maintain investments in a variety of
telecommunications-based companies. Prior to establishing The Walter Group,
Mr. Walter served as Senior Vice President for McCaw Cellular Communications,
Inc. and was responsible for the corporate headquarters group of the company.
During his tenure at McCaw Cellular, Mr. Walter was also responsible for
establishing McCaw Space Technologies, Inc. and McCaw Government Services,
Inc. He served with McCaw Cellular from 1983 to 1988. Mr. Walter holds
undergraduate degrees in biological science and social ecology from the
University of California, Irvine and a Masters in Business Administration
from the University of Washington.
DEBRA A. GERSTENBERG has been our Vice President of Human Resources
since January 2000. She reports to our Chief Operating Officer and is
responsible for implementing and directing the functions of employee
relations, compensation, benefits, training, equal employment opportunity,
staffing and payroll. Prior to joining us, Ms. Gerstenberg worked for the
wireless division of Southwestern Bell Corporation from July 1999 to January
2000 as the Director of Human Resources for their Philadelphia Region. She
provided human resources support to the President with full responsibility
for the strategic and operational management of the human resources function.
Prior to the acquisition of Comcast Cellular Communications by Southwestern
Bell, she held various senior human resource management positions at Comcast
Cellular from February 1995 to July 1999, including Director of Human
Resources. Her previous experience included various human resource management
positions as well as customer service and training management positions in
the banking industry. Ms. Gerstenberg attended the University of Delaware's
School of Human Resources in Newark, Delaware.
DAVID L. ZYLKA has been our Vice President of Engineering since
January 2000. He reports to our Chief Operating Officer and is responsible
for the quality and technical performance of all network operations. Mr.
Zylka has 10 years experience in the telecommunications industry. From
January 1999 to December 1999, he served as the Vice President of Engineering
for Frontier Cellular Communications in Rochester, NY where he developed and
executed a $59 million CDMA network expansion plan. Before he joined Frontier
Cellular Communications, Mr. Zylka held various positions at Comcast Cellular
Communications in Philadelphia, Pennsylvania from May 1991 to November 1998,
including Vice President of Systems Performance. He was responsible for the
operational and performance engineering for the Comcast Cellular network. Mr.
Zylka holds a Bachelor of Science in Electrical Engineering from the United
States Military Academy at West Point and a Masters of Science in Information
Systems Management from Golden Gate University.
BOARD OF DIRECTORS
The board of directors is currently fixed at nine members. The five
directors currently comprising our board of directors were all elected
pursuant to our stockholders agreement. Currently there are four vacancies on
the board. By September 11, 2000, we expect to fill the vacancies with at
least three outside directors and one designee of DLJ Merchant Banking
pursuant to the terms of our stockholders agreement. We expect the outside
directors to be experienced leaders in the telecommunications and business
communities with direct experience managing and advising public companies. As
of June 12, 2000, the closing of UbiquiTel Parent's initial public offering,
our stockholders agreements were terminated and our directors were divided
into three classes. Mr. Lucas and two of the additional directors to be named
to the board will serve as the Class I directors, and their terms will expire
at our 2001 annual stockholders' meeting. Ms. Trkla and two of the three
additional directors to be named to the board will serve as the Class II
directors, and their terms will expire at our 2002 annual stockholders'
meeting. Messrs. Harris, Berlacher and Walter will serve as the Class III
directors, and their terms will expire at our 2003 annual stockholders'
meeting. At each annual meeting, the successors to the directors whose terms
expire will be elected to serve three-year terms.
By September 11, 2000, the board of directors will establish an
audit committee, one of whose members shall be the designee of DLJ Merchant
Banking pursuant to our stockholders agreement, and a compensation committee.
The audit committee will be responsible for recommending to the
board of directors the engagement of our independent auditors and reviewing
with the independent auditors the scope and results of the audits, our
internal accounting controls, audit practices and the professional services
furnished by the independent auditors.
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<PAGE>
The compensation committee will be responsible for reviewing and
approving all compensation arrangements for our officers, and is also
responsible for administering the equity incentive plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee during the year ended December 31, 1999,
consisted of the board of directors. During 1999, Donald A. Harris served as
both an executive officer and a director and has continued to serve in those
capacities in 2000. Mr. Harris participated in deliberations of the board of
directors concerning compensation of executive officers. 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 MATTERS
Our certificate of incorporation and bylaws limit the liability of
directors to the maximum extent permitted by Delaware law. The limitation on
our directors' liability may not apply to liabilities arising under the
federal securities laws. Our certificate of incorporation and bylaws provide
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. Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to our directors
and executive officers pursuant to our certificate of incorporation and
bylaws, we have been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
At present, there is no pending litigation or proceeding involving
any of our directors, officers, employees or agents 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.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
SECURITIES
UNDERLYING
ANNUAL COMPENSATION OPTION
------------------- AWARDS ALL OTHER
SALARY ($) BONUS ($) (# OF SHARES) COMPENSATION ($)
<S> <C> <C> <C> <C>
Donald A. Harris...................... 19,231(1) -- 2,550,000(2) 1,193,505(3)
Chairman of the Board, President and
Chief Executive Officer
</TABLE>
------------------
(1) Mr. Harris' annualized salary was $200,000 for 1999. However, he did
not begin to draw any salary until December 1999.
(2) In December 1999, we granted Mr. Harris stock options to purchase up to
2,550,000 shares of UbiquiTel Parent's common stock at an exercise
price of $0.50 per share. Subject to earlier vesting upon a change of
control, the options vest in three equal annual installments beginning
on November 29, 2000.
(3) Of such amount, $993,505 represents non-cash compensation expense
recorded by us in connection with issuing shares of our non-voting
common stock to Mr. Harris under the founders stock agreement. The
remaining $200,000 represents a payment by us to Mr. Harris for
services rendered prior to our incorporation.
In November 1999, we entered into an employment agreement with our
President and Chief Executive Officer that provides for an annual base salary
of $200,000 for a three year term. See "Employment Agreements." Our Chief
Operating Officer will receive an annual base salary of $165,000 in 2000. Our
Senior Vice President-Corporate Development and Finance will receive an
annual base salary of $125,000 in 2000. We are currently conducting a search
for a Chief Financial Officer and expect to provide annual compensation
customary for a position of this type within our industry.
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<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth each grant of stock options to
acquire shares of UbiquiTel Parent's common stock made during the fiscal year
ended December 31, 1999 to each of the named executive officers. No stock
appreciation rights were granted to these individuals during that year.
OPTION GRANTS IN 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
(IN THOUSANDS)
EXCEPT PER SHARE DATA
----------------------------------------------------------------------
NUMBER OF % OF TOTAL POTENTIAL POTENTIAL REALIZABLE VALUE
SECURITIES OPTIONS REALIZABLE AT ASSUMED ANNUAL RATES
UNDERLYING GRANTED TO EXERCISE OFFERING VALUE OF STOCK PRICE APPRECIATION
UNEXERCISED EMPLOYEES OR BASE PRICE TO OFFERING FOR OPTION TERM(4)
OPTIONS IN FISCAL PRICE PUBLIC EXPIRATION PRICE TO ------------------------
NAME GRANTED(1) YEAR ($)/(SH)(2) ($)/(SH)(3) DATE PUBLIC(3) 5%($) 10%($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Donald A. Harris... 2,550,000 80% $0.50 $8.00 11/29/09 $19,125,000 $24,761,112 $31,579,404
</TABLE>
---------------
(1) Subject to earlier vesting upon a change of control, the options
granted to Mr. Harris vest annually in three equal installments
beginning November 29, 2000.
(2) Prior to UbiquiTel Parent's initial public offering, there had been no
public market for its common stock. The exercise price of each of these
options is equal to the fair market value of its common stock on the
date of grant as determined by our board of directors.
(3) Potential realizable value is based on the product of UbiquiTel
Parent's initial public offering price minus the exercise price
multiplied by the number of shares underlying the options.
(4) Potential realizable value is based on the assumption that the common
stock price appreciates at the annual rate shown, compounded annually,
from the date of grant until the end of the option term. The amounts
have been calculated based on the assumed appreciation rates shown in
the table, assuming a per share market price equal to UbiquiTel
Parent's initial public offering price of $8.00 per share. The actual
value, if any, a named executive officer may realize will depend on the
excess of the stock price over the exercise price on the date the
option is exercised, if the executive were to sell the shares on the
date of exercise, so there is no assurance that the value realized will
be equal to or near the potential realizable value as calculated in
this table.
AGGREGATED 1999 FISCAL YEAR-END OPTION VALUES
The following table provides summary information regarding options
held by each of our named executive officers as of December 31, 1999. There
was no public market for the common stock as of December 31, 1999.
Accordingly, the value of unexercised in-the-money options is based on
UbiquiTel Parent's initial public offering price of $8.00 per share less the
exercise price payable for such shares.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR-END(#) FISCAL YEAR-END
NAME EXERCISE(#) REALIZED (EXERCISABLE/UNEXERCISABLE) (EXERCISABLE/UNEXERCISABLE)
---- ------------ -------- --------------------------- ---------------------------
<S> <C> <C> <C> <C>
Donald A. Harris...... - - 0/2,550,000 $0/$19,125,000
</TABLE>
OPTION GRANTS IN FISCAL YEAR 2000
None of our executive officers or directors have been granted stock
options or stock appreciation rights in fiscal 2000 through the date of this
prospectus, except for 75,000 options priced at UbiquiTel Parent's initial
public offering price of $8.00 per share granted to Andrew W. Buffmire.
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<PAGE>
COMPENSATION OF DIRECTORS
Currently, we do not compensate our directors. We do reimburse
directors for their expenses of attendance at board meetings. Upon the
closing of this offering, each of our independent directors who is not an
employee of ours or a board designee of one of our current stockholders will
receive an annual fee of $12,000 for serving on our board, plus a $1,000 fee
for each regularly scheduled meeting he or she attends and a $1,000 fee for
each special meeting and each committee meeting he or she attends. In
addition, each of these directors, upon joining our board, receives an option
to purchase 20,000 shares of UbiquiTel Parent's common stock at an exercise
price equal to the fair market value of the stock on the date of grant. These
options will typically vest over three years.
EMPLOYMENT AGREEMENTS
In November 1999, we entered into an employment agreement with
Donald A. Harris, our Chairman of the Board, President and Chief Executive
Officer. Mr. Harris' employment agreement is for a three-year term and
provides for an annual base salary of $200,000, with a guaranteed annual
increase of 5% over the next two years. In addition to his base salary, Mr.
Harris is eligible to receive bonuses in such amounts and at such times as
determined by the disinterested members of our Board of Directors. Under the
employment agreement, we granted Mr. Harris stock options to purchase
2,550,000 shares of UbiquiTel Parent's common stock at a purchase price of
$0.50 per share. Mr. Harris' stock options vest in three equal installments
over a period of three years. In the event of a defined change of control,
all of these options will become fully exercisable.
The employment agreement provides that Mr. Harris' employment may be
terminated by us with or without cause, as defined in the agreement, at any
time or by Mr. Harris for any reason at any time upon thirty days' written
notice to us. If Mr. Harris' employment is terminated by us without cause, he
is entitled to receive one year's base salary and benefits, and all his
unvested stock options will immediately vest on the date of termination. If
Mr. Harris's employment is terminated by us for cause, he is not entitled to
any compensation or benefits other than unpaid salary and benefits and
unreimbursed expenses incurred by him through the date of termination. If Mr.
Harris voluntarily terminates his employment, he is entitled to unpaid salary
and benefits and unreimbursed expenses incurred by him through the date of
termination. Under the employment agreement, Mr. Harris agreed not to compete
in the business of wireless telecommunications either directly or indirectly
in our present and future markets during his employment and for a period of
one year after his employment is terminated. In addition, Mr. Harris agreed
not to disclose any of our confidential information and not to solicit any of
our customers or employees during his employment and for a period of one year
after his employment is terminated.
2000 EQUITY INCENTIVE PLAN
Our board of directors has adopted, and our stockholders have
approved, the UbiquiTel Inc. 2000 Equity Incentive Plan. Under the equity
incentive plan, stock options and other equity-based awards may be granted to
our and our subsidiaries' directors, officers, selected employees and
consultants. A committee of our board of directors administers the equity
incentive plan.
The committee may grant stock options, stock appreciation rights and
other equity-based awards to eligible persons. In no event, however, may the
committee grant awards relating to more than 4,080,000 shares of UbiquiTel
Parent's common stock pursuant to the equity incentive plan. Shares subject
to awards that expire or are terminated or canceled prior to exercise or
payment, or forfeited or reacquired by us pursuant to rights reserved upon
issuance, may be issued again under the equity incentive plan. Awards paid in
cash are not counted against the number of shares that may be issued under
the equity incentive plan.
Awards may be satisfied by the delivery of either authorized but
unissued common stock or issued common stock held as treasury shares. The
committee may grant one or more types of awards in any combination to a
particular participant in a particular year. Subject to earlier termination
by our board of directors, the equity incentive plan will remain in effect
until all awards have been satisfied in stock or in cash or terminated under
the terms of the equity incentive plan and all restrictions imposed on stock
in connection with its issuance under the equity incentive plan have lapsed.
Except in the case of an award of stock to a participant as additional
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<PAGE>
compensation for services to us or our subsidiaries, each award will be
confirmed by, and is subject to the terms of, an agreement executed by the
participant and us.
Following is a description of each type of award or grant in respect
of UbiquiTel Parent's common stock that may be made under the equity
incentive plan.
STOCK OPTIONS
Stock options may be incentive stock options that comply with the
requirements of Section 422 of the Internal Revenue Code or nonqualified
stock options that do not comply with Section 422 of the Internal Revenue
Code. The board will determine the exercise price and other terms and
conditions of options.
The exercise price for an option may be paid in shares of common
stock valued at their then fair market value if the shares have been held by
the optionee for at least six months. To the extent permitted by the board,
the exercise price for an option may be paid in shares of common stock that
have not been held for six months, or in any other manner.
STOCK APPRECIATION RIGHTS AND LIMITED STOCK APPRECIATION RIGHTS
A stock appreciation right is a right to receive, without payment to
us, a number of shares of stock, cash or a combination thereof, as determined
by a formula. A limited stock appreciation right is a right to receive,
without payment to us, cash in amount determined by a formula upon specified
change in control events. Stock appreciation rights may be granted in
conjunction with all or any part of a stock option or independently. Upon the
exercise of a stock appreciation right, the participant will be entitled to
receive, for each share of common stock to which the exercised stock
appreciation right relates, the excess of the fair market value per share of
common stock on the date of exercise over the grant price of the stock
appreciation right. Stock appreciation rights shall have such terms and
conditions as may be established by the board. Upon the exercise of a limited
stock appreciation right, the participant will be entitled to receive a cash
payment, for each share of common stock to which the exercised limited stock
appreciation right relates, equal to the excess of the defined change of
control value over the grant price of the limited stock appreciation right.
OTHER STOCK-BASED AWARDS
The committee has the authority under the equity incentive plan to
make other awards that are valued in whole or in part by reference to, or are
payable in or otherwise based upon, shares of common stock, including awards
valued by reference to our performance or the performance of our
subsidiaries. The committee will determine the participants to whom and the
times at which these awards will be made, the number of shares of common
stock to be awarded and all other terms and conditions of the awards.
If, with respect to the common stock, there is any recapitalization,
reclassification, stock dividend, stock split, combination of stock or other
similar change in stock, the number of shares of common stock issuable or
issued under the equity incentive plan, including stock subject to
restrictions, options or achievement of performance objectives, shall be
adjusted in proportion to the change in the number of outstanding shares of
common stock. In the event of any of these adjustments, the board will
adjust, to the extent appropriate, the purchase price of any option, the
performance objectives of any award and the stock issuable pursuant to any
award to provide participants with the same relative rights before and after
the adjustment.
In the event of a defined change of control, all outstanding
options, including incentive options, stock appreciation rights and limited
stock appreciation rights granted pursuant to the equity incentive plan, will
become fully exercisable, all restrictions or limitations on any award under
the equity incentive plan will lapse, and all performance criteria and other
conditions relating to the payment of awards will be deemed achieved or
waived by us without further action.
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<PAGE>
The equity incentive plan may be amended or terminated at any time
by our board of directors, except that no amendment may be made without
stockholder approval if such approval is necessary to comply with any tax or
regulatory requirement.
The equity incentive plan is not subject to any provision of ERISA
and is not qualified under Section 401(a) of the Internal Revenue Code.
We have granted an aggregate of 1,215,000 non-qualified options
pursuant to our equity incentive plan of which 650,000 were granted in 1999
and the balance of 565,000 were granted in January 2000. We granted an
additional 2,550,000 non-qualified options in 1999.
NONCOMPETITION AGREEMENTS
In connection with the granting of any stock options or equity-based
awards under our equity incentive plan to any of our employees, each employee
is required to enter into a noncompetition agreement. These agreements will
provide that for so long as the employee works for us, and for a period of
one year 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 one
year 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
markets;
- 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.
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 also pursue any other remedies
provided by law or in equity.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The table below sets forth information regarding the beneficial
ownership of UbiquiTel Parent's common stock as of May 31, 2000, by the
following individuals or groups:
- each person or entity who is known by us to own beneficially
more than 5.0% of UbiquiTel Parent's common stock;
- each of our named executive officers;
- each of our directors; and
- all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of
the Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of UbiquiTel Parent's
common stock that are subject to warrants or stock options that are presently
exercisable or exercisable within 60 days of May 31, 2000 are deemed to be
outstanding and beneficially owned by the person holding the warrants or
stock options for the purpose of computing the percentage of ownership of
that person, but are not treated as outstanding for the purpose of computing
the percentage of any other person.
Unless indicated otherwise below, the address of our directors and
officers is c/o UbiquiTel Inc., 1 Bala Plaza, Suite 402, Bala Cynwyd,
Pennsylvania 19004. Except as indicated below, the persons named in the table
have sole voting and investment power with respect to all shares of common
stock beneficially owned by them.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED OWNERSHIP(11)
------------------------------------------------------------- -------------------- -----------------
<S> <C> <C>
Eve M. Trkla(1)..................................... 9,338,000 14.9%
Brookwood UbiquiTel Investors, LLC
Peter Lucas(2)...................................... 5,402,700 8.6
CBT Wireless Investments, L.L.C.
BET Associates, L.P.(3)............................. 4,978,150 7.9
Donaldson, Lufkin & Jenrette Merchant Banking Partners II, 4,297,696 6.8
L.P.(4)..........................................
Donald A. Harris(5)................................. 4,029,802 6.4
New Ventures, L.L.C.(6)............................. 4,002,000 6.4
SpectraSite Communications, Inc.(7)................. 3,335,000 5.3
Stephen C. Marcus(8)................................ 3,001,800 4.8
Joseph N. Walter(9)................................. 2,614,034 4.2
The Walter Group, Inc.
Robert A. Berlacher(10)............................. 2,701,050 4.3
Lancaster Investment Partners....................
Paul F. Judge....................................... 819,324 1.3
All officers and directors as a group (7 persons)... 7,550,176 12.0
</TABLE>
-----------
(1) The address of Brookwood UbiquiTel Investors, LLC, is 55 Tozer Road,
Beverly, Massachusetts 01915. Ms. Trkla, a director of ours, is a
principal of Brookwood UbiquiTel Investors and may be deemed to be the
beneficial owner of the shares held by Brookwood UbiquiTel Investors,
LLC. Ms. Trkla disclaims beneficial ownership of such shares.
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<PAGE>
(2) The address of CBT Wireless Investments, L.L.C., is 1733 H Street,
#330-141, Blaine, Washington 98230. Peter Lucas, a director of ours,
serves as the general manager of CBT Wireless Investment and has
investment power over its shares as to which Mr. Lucas disclaims
beneficial ownership.
(3) The address of BET Associates, L.P., is 3103 Philmont Avenue,
Huntington Valley, Pennsylvania 19006.
(4) The address of DLJ Merchant Banking Partners II, L.P. is 277 Park
Avenue, New York, New York 10172. A board designee of DLJ Merchant
Banking Partners II, L.P. is yet to be named pursuant to the terms of
our stockholder agreement.
(5) Includes 240,000 shares held by the Harris Family Trust as to which
shares Mr. Harris disclaims beneficial ownership. Mr. Harris serves as
our Chairman of the Board, President and Chief Executive Officer and as
a director.
(6) The address of New Ventures, L.L.C., is 211 North Union Street, Suite
300, Alexandria, Virginia 22314.
(7) The address of SpectraSite Communications is 160 Regency Forest Drive,
Suite 400, Cary, North Carolina 27511.
(8) The address of Stephen Marcus is 915 Exeter Crest, Villanova,
Pennsylvania 19085.
(9) The address of The Walter Group, Inc., is 120 Lakeside Avenue, Suite
310, Seattle, Washington 98122-6578. Joseph N. Walter, a director of
ours, is a principal of The Walter Group, Inc. and may be deemed to
beneficially owner of the shares held by The Walter Group, Inc. Mr.
Walter disclaims beneficial ownership of such shares.
(10) Includes 2,001,000 shares held of record by Lancaster Investment
Partners, L.P. Robert A. Berlacher, a director of ours, is President of
LIP Advisors, Inc., the general partner of Lancaster Investor Partners,
L.P. The address of Mr. Berlacher and Lancaster Investment Partners,
L.P. is 1150 First Avenue, Suite 600, King of Prussia, Pennsylvania
19406.
(11) Based on 62,763,604 outstanding shares of common stock, after giving
effect to UbiquiTel Parent's initial public offering in June 2000.
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<PAGE>
CERTAIN TRANSACTIONS
UbiquiTel and its management and security holders and their
respective affiliates engage in a variety of transactions between or among
each other in the ordinary course of their respective businesses. All of
these related party transactions that are material to UbiquiTel are described
below. As a general rule, we have not retained an independent third party to
evaluate these transactions, and there has been no independent committee of
our board of directors to evaluate these transactions. Notwithstanding this
fact, we believe that the terms and conditions of these transactions,
including the fees or other amounts paid by us, took into account
transactions of a similar nature entered into by us with unaffiliated third
parties and/or market transactions of a similar nature entered into by
unaffiliated third parties. There can be no assurance that we could not have
obtained more favorable terms from an unaffiliated third party.
COMMON STOCK ISSUANCES
The following tables set forth, as of May 31, 2000, all shares of
UbiquiTel Parent's voting and non-voting common stock that have been issued
to our stockholders. All of these amounts have been adjusted to give effect
to the two-for-one stock split that was effected in connection with UbiquiTel
Parent's initial public offering.
ISSUANCES OF VOTING COMMON STOCK IN NOVEMBER 1999 AND APRIL 2000:
<TABLE>
<CAPTION>
TOTAL
NAME NUMBER OF SHARES PURCHASE PRICE
---- ---------------------- ------------------
<S> <C> <C>
The Walter Group, Inc........................................ 2,614,034 $1,281
Donald A. Harris............................................. 2,028,802 994
James Parsons................................................ 905,158 444
Paul F. Judge................................................ 819,324 402
US Bancorp................................................... 603,440 296
---------------------- ------------------
Totals.................................................... 6,970,758 $3,417
---------------------- ------------------
</TABLE>
These amounts include shares that were issued in April 2000, at no
additional costs, to our founding stockholders to maintain certain specified
stock percentages. These additional shares were issued as a result of our
contractual obligations under a founders stock agreement. See "--Stockholders'
Agreements" below.
ISSUANCES OF NON-VOTING COMMON STOCK IN NOVEMBER 1999:
<TABLE>
<CAPTION>
TOTAL
NAME NUMBER OF SHARES PURCHASE PRICE
---- ---------------------- ------------------
<S> <C> <C>
The Walter Group............................................. 12,000,320 $6,000
James Parsons................................................ 4,155,200 2,078
Donald A. Harris............................................. 9,313,280 4,657
US Bancorp................................................... 2,770,240 1,385
Paul F. Judge................................................ 3,760,960 1,880
---------------------- ------------------
Totals.................................................... 32,000,000 $16,000
---------------------- ------------------
</TABLE>
The shares of non-voting common stock were issued to the holders
pursuant to the terms of a founders stock agreement. All outstanding shares
of UbiquiTel Parent's non-voting common stock were canceled as of June 12,
2000, the closing of UbiquiTel Parent's initial public offering, for nominal
value. The holders of these shares of non-voting common stock were not
entitled to equity participation rights, such as rights to receive dividends
or other distributions in the event we are sold, merged or liquidated.
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<PAGE>
PREFERRED STOCK ISSUANCES
The following tables set forth, as of May 31, 2000, shares of
UbiquiTel Parent's preferred stock that have been issued to our stockholders
that are deemed to beneficially own, as of April 12, 2000, more than 5% of
UbiquiTel Parent's common stock, or who serve as our executive officers or
directors. All shares of preferred stock were converted into shares of
UbiquiTel Parent's common stock on June 12, 2000, the closing of UbiquiTel
Parent's initial public offering. The amounts listed below in the tables have
been adjusted to reflect the number of shares of UbiquiTel Parent's common
stock, after giving effect to the two-for-one stock split, that the preferred
stock was automatically converted into as a result of UbiquiTel Parent's
initial public offering.
ISSUANCES OF SERIES A PREFERRED STOCK IN NOVEMBER 1999:
<TABLE>
<CAPTION>
TOTAL
NAME NUMBER OF SHARES PURCHASE PRICE
---- -------------------- -------------------
<S> <C> <C>
Brookwood UbiquiTel Investors, L.L.C......................... 9,338,000 $4,669,000
CBT Wireless Investments, L.L.C.............................. 5,402,700 2,701,350
New Ventures, L.L.C.......................................... 4,002,000 2,001,000
Stephen C. Marcus............................................ 3,001,800 1,500,900
SpectraSite Communications, Inc.............................. 3,335,000 1,667,500
Donald A. Harris............................................. 2,001,000 1,000,500
Lancaster Investment Partners................................ 2,001,000 1,000,500
Robert A. Berlacher.......................................... 700,050 350,025
-------------------- -------------------
Totals.................................................... 29,781,550 $14,890,775
-------------------- -------------------
</TABLE>
Our director, Ms. Trkla, is affiliated with Brookwood UbiquiTel
Investors, L.L.C. Our director, Peter Lucas, is affiliated with CBT Wireless
Investments, L.L.C. Our director, Mr. Berlacher, is affiliated with Lancaster
Investment Partners.
ISSUANCES OF SERIES B PREFERRED STOCK IN FEBRUARY 2000 AND APRIL 2000:
<TABLE>
<CAPTION>
TOTAL
NAME NUMBER OF SHARES PURCHASE PRICE
---- -------------------- ------------------
<S> <C>
DLJ Merchant Banking......................................... 4,297,696 $25,000,000
</TABLE>
This amount includes shares that were issued in April 2000, at no
additional cost, to DLJ Merchant Banking, to maintain certain specified stock
percentages. These additional shares were issued as a result of our
contractual obligations under a preferred stock purchase agreement with DLJ
Merchant Banking. These anti-dilution rights granted to DLJ Merchant Banking
expired upon the closing of UbiquiTel Parent's initial public offering.
TERMS OF PREFERRED STOCK
The holders of UbiquiTel Parent's preferred stock were entitled to
the number of votes equal to the number of shares of common stock into which
they could have been converted. The holders of UbiquiTel Parent's preferred
stock were also entitled to receive dividends at a rate of 7% per year and
dividends accrued if not paid. No dividends were paid to the holders of the
preferred stock prior to the completion of UbiquiTel Parent's initial public
offering. Upon completion of UbiquiTel Parent's initial public offering, the
shares of preferred stock automatically converted into UbiquiTel Parent's
common stock on a one-for-one basis and the following cash dividends were
paid to satisfy outstanding dividend arrearages to the holders of preferred
stock that are listed in the tables above as follows:
97
<PAGE>
<TABLE>
<CAPTION>
NAME AMOUNT OF CASH DIVIDEND
---- ---------------------------
<S> <C>
Brookwood UbiquiTel Investors, L.L.C..................................... $143,338
CBT Wireless Investments, L.L.C.......................................... 81,892
New Ventures, L.L.C...................................................... 61,431
Stephen C. Marcus........................................................ 45,479
SpectraSite Communications, Inc.......................................... 51,192
Donald A. Harris......................................................... 30,715
Lancaster Investment Partners............................................ 30,715
Robert A. Berlacher...................................................... 10,606
DLJ Merchant Banking..................................................... 493,836
</TABLE>
STOCKHOLDERS' AGREEMENTS
In connection with the issuance of UbiquiTel Parent's common stock
to founders in November 1999, we entered into a founders stock agreement. The
founders stock agreement provides, among other things, that the founding
stockholders will become vested in shares of UbiquiTel Parent's voting common
stock to maintain certain specified percentages of voting common stock. As a
result of the founders stock agreement, our founding stockholders vested, at
no additional costs to the founding stockholders, in a total of 136,758
shares of UbiquiTel Parent's voting common stock in April 2000. These shares
are reflected in the tables set forth above. Our founding stockholders have
also entered into a co-sale agreement, which provides certain co-sale rights
if a founding stockholder desires to sell UbiquiTel Parent's shares.
In connection with the issuance of UbiquiTel Parent's preferred
stock, we entered into stockholders' agreements. The stockholders' agreements
include provisions relating to the election of our directors, as well as
tag-along, bring-along, preemptive and first offer rights.
All of these agreements terminated upon the closing of UbiquiTel
Parent's initial public offering.
REGISTRATION RIGHTS AGREEMENTS
We have also granted registration rights to all of the persons who
were stockholders of UbiquiTel Parent prior to its initial public offering.
Under these agreements, we are required to register shares of common stock
upon request. The registration rights agreements survived the closing of
UbiquiTel Parent's initial public offering. See "Description of Capital
Stock--Registration Rights."
WARRANTS
In December 1999, we borrowed $8.0 million from BET Associates and
issued BET Associates a warrant to purchase 2,489,175 shares of UbiquiTel
Parent's common stock. On April 12, 2000, BET Associates exercised the
warrant for a purchase price of $24,891 and was issued 2,489,175 shares of
UbiquiTel Parent's common stock, which were converted into 4,978,150 shares
as a result of a two-for-one stock split in connection with UbiquiTel
Parent's initial public offering. We agreed to certain repurchase provisions
relating to the common stock issued to BET Associates under the warrant. The
repurchase provisions terminated upon the closing of UbiquiTel Parent's
initial public offering.
Upon the closing of our note offering, we issued to Donaldson,
Lufkin & Jenrette Securities Corporation warrants to purchase shares of
UbiquiTel Parent's common stock. These warrants were cancelled prior to the
closing of UbiquiTel Parent's initial public offering and we issued new
warrants to Donaldson, Lufkin & Jenrette Securities Corporation to purchase
up to 86,183 shares of UbiquiTel Parent's common stock at an exercise price
equal to the initial public offering price of $8.00 per share. These warrants
will be exercisable at any time after the first anniversary of UbiquiTel
Parent's initial public offering and expire on the fifth anniversary of
UbiquiTel Parent's initial public offering.
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LOAN WITH STOCKHOLDER
In December 1999, we borrowed $8.0 million from BET Associates. The
note evidencing the borrowing of $8.0 million provided that interest at 12%
would be payable quarterly, commencing April 1, 2000, and would mature on
December 28, 2007. We paid the note in full from the proceeds of our sale of
senior subordinated discount notes on April 11, 2000. The prepayment of the
BET Associates note included unpaid interest of $276,000, and a prepayment
fee of $80,000.
CONTRACTUAL ARRANGEMENTS WITH STOCKHOLDERS
We have a master lease-agreement with SpectraSite Communications.
SpectraSite Communications did not receive any payments under our agreement
during 1999. We recently entered into a new master site agreement with
SpectraSite Communications for its existing towers as well as towers that it
may construct for us on build-to-suit sites that we identify from time to
time under a master design and build agreements between us. Under the master
design and build agreement, SpectraSite Communications has the right of first
refusal to construct and acquire build-to-suit sites and we are entitled to
engage SpectraSite Communications to handle any construction necessary to
install our network equipment on shared facilities that we license or
sublicense from SpectraSite Communications or any third party. The master
design and build agreement has a term of five years unless services have been
performed in markets totaling a covered population of ten million. Under the
master site agreement, we intend to license space on build-to-suit sites or
sublicense space on SpectraSite Communication's existing towers to house our
network equipment. See "Business--Business Strategy--Utilize Other Strategic
Third Party Relationships in Network Build-out--SpectraSite Communications"
for a description of the general terms of the master site agreement. For the
three months ended March 31, 2000, UbiquiTel accrued fees of $773,000 due to
SpectraSite.
We received consulting services from The Walter Group in 1999. We
paid The Walter Group $148,000 for these consulting services in 1999. In
January, 2000, The Walter Group sold certain of its assets to Wireless
Facilities Inc., a wireless engineering and consulting firm. As a result,
consulting services that we previously received from The Walter Group are now
provided by Wireless Facilities, Inc., which is not affiliated with any of
our directors, officers or principal stockholders.
OTHER FEES PAID TO STOCKHOLDERS
An affiliate of Donaldson, Lufkin & Jenrette entered into a
commitment letter with us in February 2000 to provide up to $125.0 million of
senior subordinated increasing rate notes. The commitment letter provided
that the affiliate of Donaldson, Lufkin & Jenrette would be paid a fee upon
the closing of our notes offering. We paid the commitment fee of $531,250 on
April 11, 2000. Donaldson, Lufkin & Jenrette was also one of the initial
purchasers under our sale of units of warrants and notes in April 2000, for
which they received approximately $4.5 million for performing these services.
Donaldson, Lufkin & Jenrette Securities Corporation was the lead manager of
UbiquiTel Parent's initial public offering and received underwriting
compensation of approximately $6.3 million.
During 1999, we paid Mr. Parsons $911,000 and we paid US Bancorp
$604,000 for services provided to us in connection with obtaining,
negotiating and closing of the sale of our preferred stock in November 1999.
We also paid a fee of $1.0 million to an entity affiliated with Mr. Parsons
in April 2000 in connection with the closing of our $250.0 million senior
credit facility.
ASSIGNMENT OF SPRINT PCS AGREEMENT TO US
In October 1998, a limited liability company whose sole member was
The Walter Group entered into a management agreement with Sprint PCS whereby
it became the Sprint PCS affiliate with the exclusive right to provide PCS
services under the Sprint and Sprint PCS brand names in the Reno/Tahoe
market. The limited liability company subsequently changed its name to
UbiquiTel L.L.C. During the period from October 1998 to October 1999,
UbiquiTel L.L.C. attempted unsuccessfully to obtain financing for the
build-out of the Reno/Tahoe market. In November 1999, UbiquiTel L.L.C.
assigned the management and related agreements to us. UbiquiTel L.L.C. had no
operations or financial transactions prior to the assignment of these
agreements to us.
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REGULATION OF THE WIRELESS TELECOMMUNICATIONS INDUSTRY
The Federal Communications Commission, commonly referred to as 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 total
attributable interest (20% or greater interest in any license)
in broadband PCS, cellular and SMR licenses totaling more than
45 MHz in all geographic areas except rural areas. In rural
areas, the so-called "spectrum cap" is 55 MHz.
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 (and 15 MHz licensees resulting from
disaggregation of MHz spectrum blocks) 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 the forfeiture of the affected license and an inability to
regain the license. 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. If
the agreements cannot be modified, they may be terminated. As a result, it
would be extremely difficult for us to conduct our business. In addition to
revoking licenses, the FCC could impose monetary penalties on us.
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 provided "substantial service"
during its license term and substantially complied with all applicable laws
and FCC rules and policies. The FCC's
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rules define "substantial service" in this context as service that is sound,
favorable and substantially above the level of mediocre service that might
minimally warrant renewal. The Federal Communications Commission's renewal
expectancy and procedures make it likely that Sprint PCS will retain its PCS
licenses managed by us in the foreseeable future.
INTERCONNECTION
The FCC has the authority to order interconnection between
commercial mobile radio service providers and any other common carrier. The
FCC has ordered local telephone companies to provide reciprocal compensation
to commercial mobile radio service providers for the termination of traffic.
Using these 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 telephone
companies. We will seek to negotiate interconnection agreements on a regional
or state-wide basis where possible. If an agreement cannot be reached, under
certain circumstances, parties to interconnection negotiations can submit
outstanding disputes to state authorities for arbitration. Negotiated
interconnection agreements are subject to state approval. The Federal
Communications Commission rules and rulings, as well as the state arbitration
proceedings, will directly impact the nature and cost of the facilities
necessary for interconnection of the Sprint PCS systems with local, national
and international telecommunications networks. They will also determine the
nature and amount of revenues we and Sprint PCS can receive for terminating
calls originating on the networks of local telephone companies and other
telecommunications carriers.
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, although wireless carriers
will still face a statutory obligation to provide their interstate services
on a non-discriminatory basis. 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 telephone
companies and most commercial mobile radio service 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. Initially, the FCC required that most commercial mobile radio
service providers be able to deliver calls from their networks to ported
numbers anywhere in the country by December 31, 1998. In response to a
Cellular Telephone Industry Association petition for forbearance, the FCC has
extended until November 24, 2002 the deadline to implement local number
portability. The FCC has required that commercial mobile radio service
providers must be able to offer their own customers number portability in
their switches in the 100 largest metropolitan areas, including the ability
to support nationwide roaming, by March 31, 2000. Additionally, carriers were
required to request number portability capability in the 100 largest
metropolitan areas by June 30, 1999. Commencing in 1999, all carriers were
required to begin contributing to the Local Number Portability fund.
The FCC has adopted rules permitting broadband PCS and other
commercial mobile radio service providers to provide traditional telephone
services based on wireless technology and other fixed services that would
directly compete with the wireline services of local telephone companies. The
FCC currently is undertaking a rulemaking proceeding in which it is
considering actions to help ensure that competitive telecommunications
providers have reasonable and non-discriminatory access to rights-of-way,
buildings, rooftops and facilities in multiple tenant environments. In June
1996, the FCC adopted rules requiring broadband PCS and other commercial
mobile radio service providers to implement enhanced emergency 911
capabilities within 18 months after the effective date of the FCC's rules.
The FCC revised these rules to extend the compliance deadline for phase I
(requiring carriers to transmit a caller's phone number and general location
to a Public Safety Answering Point until January 1, 1999 and for phase II
(requiring more precise location information be provided to the Public Safety
Answering Point until October 1, 2001. Carriers are required to begin selling
and activating Automatic Location Identification capable handsets no later
than March 1, 2001. Further waivers of the enhanced emergency 911 capability
requirements may be obtained by individual carriers by filing a waiver
request. Congress recently enacted
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legislation that extends to wireless carriers the same level of immunity from
lawsuits that is enjoyed by traditional telephone companies regarding their
transmission of emergency calls. Wireless carriers also face certain
statutory and regulatory requirements regarding accessibility of wireless
services to persons with disabilities.
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
granted a blanket extension of that deadline until June 30, 2000, because the
Communications Assistance for Law Enforcement Act compliant equipment is not
yet available. The Communications Assistance for Law Enforcement Act provides
that a telecommunications carrier meeting industry Communications Assistance
for Law Enforcement Act standards shall have safe harbor for purposes of
compliance with the act. Toward the end of 1997 telecommunications industry
standard-setting organizations agreed to a joint standard to implement the
act's capability requirements, known as J-STD-025. Although we will be able
to offer traditional electronic surveillance capabilities to law enforcement,
it, as well as the other participants in the wireless industry, may not meet
the requirements of J-STD-025 by June 30, 2000, given hardware changes that
are yet to be developed and implemented by switch manufacturers. For
commercial mobile radio service carriers, implementation of a packet-mode
capability and six Department of Justice/Federal Bureau of Investigation
"punch list" capabilities must be completed by September 30, 2001.
In addition, the FCC is considering petitions from numerous parties
to establish and implement technical compliance standards pursuant to the
Communications Assistance for Law Enforcement Act requirements. The
capability and capacity requirements of the Communications Assistance for Law
Enforcement Act are likely to impose some additional switching and network
costs upon us, Sprint PCS and other wireless entities. However, it is
possible that some of these costs will be reduced or delayed if current law
enforcement or legislative initiatives are adopted and implemented during
2000 or thereafter.
OTHER FEDERAL REGULATIONS
Wireless systems must comply with certain FCC and Federal Aviation
Administration regulations regarding the siting, lighting and construction of
transmitter towers and antennas. In addition, certain FCC environmental
regulations may cause certain radio communications site locations to become
subject to regulation under the National Environmental Policy Act. The FCC is
required to implement the act by requiring carriers to meet certain land use
and radio frequency standards.
REVIEW OF UNIVERSAL SERVICE REQUIREMENTS
The FCC and the states are required to establish a "universal
service" program to ensure that affordable, quality telecommunications
services are available to all Americans. Sprint PCS is required to contribute
to the federal universal service program as well as existing state programs.
The FCC has determined that the Sprint PCS' "contribution" to the federal
universal service program is a variable percentage of "end-user
telecommunications revenues." Although many states are likely to adopt a
similar assessment methodology, the states are free to calculate
telecommunications service provider contributions in any manner they choose
as long as the process is not inconsistent with the FCC's rules. At the
present time it is not possible to predict the extent of the Sprint PCS total
federal and state universal service assessments or its ability to recover
from the universal service fund.
PARTITIONING; DISAGGREGATION
The FCC has modified its rules to allow broadband PCS licensees to
partition their market areas and/or to disaggregate their assigned spectrum
and to transfer partial market areas or spectrum assignments to eligible
third parties.
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WIRELESS FACILITIES SITING
States and localities are not permitted to regulate the placement of
wireless facilities so as to "prohibit" the provision of wireless services or
to "discriminate" among providers of such services. In addition, so long as a
wireless system complies with the FCC's rules, states and localities are
prohibited from using radio frequency health effects as a basis to regulate
the placement, construction or operation of wireless facilities. These rules
are designed to make it possible for us, Sprint PCS and other wireless
entities to acquire necessary tower sites in the face of local zoning
opposition and delays. The FCC is considering numerous requests for
preemption of local actions affecting wireless facilities siting.
EQUAL ACCESS
Wireless providers are not required to provide equal access to
common carriers for toll services. This enables us and Sprint PCS to generate
additional revenues by reselling the toll services of Sprint PCS and other
long-distance carriers from whom we can obtain favorable volume discounts.
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. The FCC may
grant such petition if the state demonstrates that:
- market conditions fail to protect subscribers from unjust and
unreasonable rates or rates that are unjustly or unreasonably
discriminatory; or
- when commercial mobile radio service is a replacement for
traditional 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. These standards and rulings have prevented states from delaying
the entry of wireless personal communications services and other wireless
carriers into their jurisdictions via certifications and similar
requirements, and from delaying or inhibiting aggressive or flexible wireless
price competition after entry.
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DESCRIPTION OF CAPITAL STOCK
The following summarizes all of the material terms and provisions of
the capital stock of UbiquiTel Parent. It does not purport to be complete,
however, and is qualified in its entirety by the actual terms and provisions
contained in UbiquiTel Parent's amended and restated certificate of
incorporation.
AUTHORIZED CAPITAL STOCK
UbiquiTel Parent's authorized capital stock consists of:
- 100,000,000 shares of common stock, par value $0.001 per
share, of which 62,763,604 shares are outstanding; and
- 10,000,000 shares of preferred stock, par value $0.001 per
share, of which no shares are outstanding.
STOCK RESERVED FOR ISSUANCE
UbiquiTel Parent has reserved 3,765,000 shares of common stock for
issuance upon exercise of outstanding stock options and 4,813,987 shares for
issuance upon exercise of outstanding warrants. It has not reserved any
shares of preferred stock for issuance.
COMMON STOCK
The holders of UbiquiTel Parent's common stock are entitled to one
vote for each share held of record on all matters submitted to a vote of our
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 UbiquiTel Parent's 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 10,000,000 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;
- liquidation preferences; and
- terms of redemption.
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If our board of directors decides to issue any preferred stock, it
may discourage or make more difficult a merger, tender offer, business
combination or proxy contest, assumption of control by a holder of a large
block of our securities or the removal of incumbent management, even if these
events were favorable to the interests of stockholders. The board of
directors, without stockholder approval, may issue preferred stock with
voting and conversion rights and dividend and liquidation preferences which
may adversely affect the holders of common stock.
WARRANTS
We currently have outstanding warrants to purchase in the aggregate
4,813,987 shares of UbiquiTel Parent's common stock.
PARIBAS WARRANTS
We issued warrants to purchase 1,148,804 shares of UbiquiTel
Parent's common stock to Paribas in connection with our prior $25.0 million
credit facility. These warrants are exercisable at a price of $.005 per share
and may be exercised at any time on or before December 28, 2009. Holders of
these warrants are entitled to dividends that are paid with respect to the
common stock even if the warrants have not yet been exercised. We have the
option to repurchase all of the warrants held by Paribas or all of the shares
of common stock issued upon the exercise of these warrants beginning on the
sixth anniversary of the date the warrants were issued. If we exercise this
right, we must repurchase the warrants or shares at price equal to 120% of
the market price of UbiquiTel Parent's common stock as of the date we
repurchase the warrants or shares.
UNIT WARRANTS
As part of our units offering, we issued and sold warrants to
purchase an aggregate of 4,234,804 shares of UbiquiTel Parent's common stock
pursuant to a warrant agreement between UbiquiTel Parent and American Stock
Transfer & Trust Company, as the warrant agent. We recently amended the
warrant agreement to cancel 655,804 of such warrants subject to the warrant
agreement, which were originally issued to Donaldson, Lufkin & Jenrette
Securities Corporation. Warrants to purchase 86,183 shares of UbiquiTel
Parent's common stock were reissued to Donaldson, Lufkin & Jenrette
Securities Corporation pursuant to a new warrant agreement as described below
under "-DLJ Warrants."
The holders of the unit warrants are entitled, in the aggregate, to
purchase 3,579,000 shares of UbiquiTel Parent's common stock, representing
approximately 5% of the issued and outstanding shares of UbiquiTel Parent's
common stock on a fully diluted basis, assuming exercise of the Paribas
warrants, the DLJ warrants described below and all options outstanding or
that have or may be issued under UbiquiTel Parent's equity incentive plan.
The unit warrants become exercisable at any time after April 15, 2001 for a
period of ten years from the date of issuance. The unit warrants currently
trade in the Private Offerings and Resales trading through Automated Linkages
(PORTAL) market.
Each of the warrants, when exercised, will entitle the holder to
receive 11.93 fully paid and non-assessable shares of UbiquiTel Parent's
common stock, at an exercise price of $11.37 per share, subject to adjustment
from time to time in several circumstances including the following:
(1) the payment by us of dividends and other distributions on
UbiquiTel Parent's common stock;
(2) subdivision, combinations and reclassifications of UbiquiTel
Parent's common stock;
(3) the issuance to all holders of common stock of such rights,
options or warrants entitling them to subscribe for UbiquiTel
Parent's common stock or securities convertible into, or
exchangeable or exercisable for, UbiquiTel Parent's common
stock at a price which is less than the fair market value per
share of UbiquiTel Parent's common stock;
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(4) certain distributions to all holders of UbiquiTel Parent's
common stock of any of our assets or debt securities or any
rights or warrants to purchase any such securities, excluding
those rights and warrants referred to in clause (3) above;
(5) the issuance of shares of UbiquiTel Parent's common stock for
consideration per share less than the then fair market value
per share of UbiquiTel Parent's common stock at the time of
issuance of such convertible or exchangeable security,
excluding securities issued in transactions referred to in
clauses (1) through (4) above, or (6) below; and
(6) the issuance of securities convertible into or exchangeable
for UbiquiTel Parent's common stock for a conversion or
exchange price plus consideration received upon issuance less
than the then fair market value per share of UbiquiTel
Parent's common stock at the time of issuance of such
convertible or exchangeable security, excluding securities
issued in transactions referred to in (1) through (4) above.
The events described above are subject to certain exceptions described
in the warrant agreement including:
- issuances of options, convertible securities or common stock
to employees, directors or consultants of us or any of our
subsidiaries pursuant to a plan approved by our board of
directors;
- rights to purchase common stock pursuant to a plan for
reinvestment of dividends or interest; and
- issuances of common stock, options or convertible securities
in connection with mergers and acquisitions with
non-affiliated third parties.
We are required, under the terms of a warrant registration rights
agreement to:
- file a shelf registration statement on or before June 26, 2000
covering the resale of the unit warrants, the issuance of the
common stock issuable upon exercise of the unit warrants and
the resale of the common stock issuable upon exercise of the
unit warrants;
- use our reasonable best efforts to cause the shelf
registration statement to be declared effective under the
Securities Act on or before October 8, 2000; and
- keep the shelf registration statement continuously effective
until the date on which all of the unit warrants or shares of
common stock issuable thereunder have been sold pursuant to
the shelf registration statement or the unit warrants have
expired.
If we fail to file the registration statement, or fail to cause the
registration statement to become effective, or fail to maintain its
effectiveness as specified above, a registration default shall be deemed to
have occurred and we will be required to pay liquidated damages to each
holder of a unit warrant. The liquidated damages payable to each holder of a
warrant will be in an amount equal to $0.03 per week per unit 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 unit 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.
DLJ WARRANTS
In connection with the notes offering, we issued to Donaldson,
Lufkin & Jenrette Securities Corporation warrants to purchase an aggregate of
655,804 shares of UbiquiTel Parent's common stock. We recently canceled those
warrants and issued new warrants to Donaldson, Lufkin & Jenrette Securities
Corporation to purchase an aggregate of 86,183 shares at an exercise price
equal to UbiquiTel Parent's initial public offering price of $8.00 per share.
These warrants will be exercisable after the first anniversary of the
consummation of UbiquiTel Parent's initial public offering and will expire
upon the fifth anniversary of UbiquiTel Parent's initial public offering.
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The number of shares into which the warrants are exercisable and the
exercise price are subject to adjustment in the event of:
(1) the payment by us of dividends and other distributions on
UbiquiTel Parent's common stock;
(2) subdivisions, combinations and reclassifications of UbiquiTel
Parent's common stock;
(3) the issuance to all holders of common stock of such rights,
options or warrants entitling them to subscribe for our common
stock or securities convertible into, or exchangeable or
exercisable for, UbiquiTel Parent's common stock at a price
which is less than the fair market value per share of
UbiquiTel Parent's common stock; and
(4) certain distributions to all holders of UbiquiTel Parent's
common stock of any of our assets or debt securities or any
rights or warrants to purchase any such securities, excluding
those rights and warrants referred to in clause (3) above.
The events described above will be subject to certain exceptions
described in the warrant agreement under which the DLJ warrants will be
issued, including issuances of options, convertible securities or common
stock to employees, directors or consultants of us or any of our subsidiaries
pursuant to a plan approved by our board of directors; rights to purchase
common stock pursuant to a plan for reinvestment of dividends or interest;
and issuances of common stock, options or convertible securities in
connection with mergers and acquisitions with non-affiliated third parties.
The warrant agreement under which the DLJ warrants were issued also
provides for registration rights with respect to the warrants and common
stock issuable thereunder. UbiquiTel Parent is required to file a shelf
registration statement with respect thereto within 75 days after the issuance
of the DLJ warrants, and is required to keep such shelf registration
statement effective for a period of up to five years, subject to limited
exceptions.
REGISTRATION RIGHTS
We have granted registration rights to all of the persons who were
stockholders of UbiquiTel Parent prior to its initial public offering under a
registration rights agreement. Under these agreements, we are required to
register their shares of common stock, upon request. In addition, if we
register any of our securities under the Securities Act for our own account
or for the account of another person, these stockholders are entitled to
notice of the registration and are entitled to include their shares of common
stock in the registration subject to limitations in the case of an
underwritten offering. These stockholders have agreed to waive their
registration rights in connection with any registration statements that we
file on behalf of the holders of the unit warrants or the senior subordinated
discount notes. In most circumstances, we will be required to pay the expense
of registering these stockholders' shares.
ANTITAKEOVER EFFECTS OF DELAWARE LAW
UbiquiTel Parent is subject to the provisions of Section 203 of the
Delaware 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 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. The existence of this provision
may have an antitakeover effect with respect transactions not approved in
advance by the board of directors, including discouraging attempts that might
result in a premium over the market price for shares of common stock held by
stockholders.
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PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS THAT MAY PREVENT
TAKEOVERS
UbiquiTel Parent's amended and restated certificate of incorporation
contains provisions that may delay, defer or prevent a change in control of
us and make removal of our management more difficult.
UbiquiTel Parent's amended and restated certificate of incorporation
provides 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. The certificate of incorporation also provides that
only the board of directors may fix the number of directors. UbiquiTel
Parent's bylaws provide that a stockholder may nominate directors only if the
stockholder delivers written notice to us not less than 45 days or more than
75 days before the first anniversary of the date on which we first mailed our
proxy materials for the preceding year's annual meeting. If the date of the
annual meeting is advanced more than 30 days before or delayed more than 30
days after the anniversary of the preceding year's annual meeting, then we
must receive the stockholder's notice not after the later of the ninetieth
day before the annual meeting or the tenth day after the day the public
announcement of the date of the annual meeting is made.
UbiquiTel Parent's amended and restated certificate of incorporation
provides that any newly created directorship resulting from an increase in
the number of directors or a vacancy on the board of directors may be filled
only by vote of a majority of the remaining directors then in office, even if
less than a quorum. Under no circumstances will our stockholders fill any
newly created directorships. Directors elected to fill vacancy or by reason
of an increase in the number of directors will hold office until the annual
meeting of stockholders at which the term of office of the class to which
they have been elected expires. Directors may be removed from office only for
cause and only by the affirmative vote of 80% of the then outstanding shares
of stock entitled to vote on the matter.
UbiquiTel Parent's amended and restated certificate of incorporation
provides that any action required or permitted to be taken by UbiquiTel
Parent's stockholders may be taken only at a duly called annual or special
meeting of the stockholders, and may not be taken by written consent of the
stockholders. Special meetings may be called only by the Chairman of the
board of directors, if there is one, the President or by a majority of the
board of directors. 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 UbiquiTel Parent's
outstanding voting securities, would be unable to call a special meeting of
the stockholders and would further be unable in most situations to obtain
unanimous written consent of the stockholders. As a result, any meeting as to
matters they endorse, including the election of new directors or the approval
of a merger, would have to wait for the next duly called stockholders meeting.
UbiquiTel Parent's bylaws provide that a stockholder may raise new
business at an annual stockholder meeting only if the stockholder delivers
written notice to UbiquiTel Parent not after the later of ninety days prior
to the date of the annual meeting or the tenth day after the day the public
announcement of the date of the annual meeting is made. The stockholder's
notice must provide UbiquiTel Parent with certain information concerning the
nature of the new business, and must disclose certain information about the
stockholder and the stockholder's interest, if any, in the proposed business
matter.
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 bylaws, unless the corporation's certificate
of incorporation or bylaws, 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 or bylaws
described above. Except as otherwise provided by law, holders of our common
stock are not entitled to vote on any amendment to our certificate of
incorporation that changes the powers, preferences, rights or other terms of
an outstanding series of our preferred stock, if the holders of the affected
series of preferred stock are entitled to vote on the proposed amendment. The
bylaws may be amended or repealed by the board of directors, except if the
bylaw provisions affect provisions of the certificate of incorporation or
bylaws described above, then the affirmative vote of the holders of at least
80% of the then outstanding voting stock is required. The 80% stockholder
vote would be in addition to any separate vote that each
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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.
The foregoing provisions, together with the ability of the board of
directors to issue preferred stock without further stockholder action, may
delay or frustrate the removal of incumbent directors or the completion of
transactions that would be beneficial, in the short term, to UbiquiTel
Parent's stockholders. The provisions may also discourage or make more
difficult a merger, tender offer, other business combination or proxy
contest, the assumption of control by a holder of a large block of UbiquiTel
Parent's securities or the removal of incumbent management, even if these
events would be favorable to the interests of UbiquiTel Parent's stockholders.
UbiquiTel Parent's amended and restated certificate of incorporation
requires it to indemnify our directors and officers to the fullest extent
permitted by law. In addition, as permitted by Delaware law, the certificate
of incorporation provides that no director will be liable to us or UbiquiTel
Parent's stockholders for monetary damages for breach of certain fiduciary
duties as a director. The effect of this provision is to restrict our rights
and the rights of UbiquiTel Parent's stockholders in derivative suits to
recover monetary damages against a director for breach of certain fiduciary
duties as a director, except that a director will be personally liable for:
- acts or omissions not in good faith for which involve
intentional misconduct or a knowing violation of law;
- the payment of dividends or the redemption or purchase of
stock in violation of Delaware law;
- any breach of the duty of loyalty to us or our stockholders;
or
- any transaction from which the director derived an improper
personal benefit.
CERTAIN PROVISIONS OF THE SPRINT PCS AGREEMENTS
Pursuant to our management agreements with the Sprint PCS, under
specific circumstances and without further stockholder approval, Sprint PCS
may purchase our operating assets or capital stock for 72% or 80% of the
"entire business value" of UbiquiTel, which includes the value of our right
to use the spectrum licenses, our business operations and other assets more
fully described in "The Sprint PCS Agreements--The Management Agreement." In
addition, Sprint PCS must approve any change of control of our ownership and
consent to any assignment of our management agreements with Sprint PCS.
Sprint PCS has a right of first refusal if we decide to sell our operating
assets to a third party. We are also subject to a number of restrictions on
the transfer of our business including a prohibition on the sale of UbiquiTel
or our operating assets to competitors of Sprint or Sprint PCS. These
restrictions and other restrictions in our management agreements with Sprint
PCS may limit our ability to sell the business and may have a substantial
anti-takeover effect.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for UbiquiTel Parent's common stock
is American Stock Transfer & Trust Company.
LISTING
UbiquiTel Parent's common stock is listed on the Nasdaq National
Market under the symbol "UPCS."
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
As a condition to the sale of the outstanding notes, we and the initial
purchasers of the outstanding notes entered into the registration rights
agreement. Under the registration rights agreement, we agreed to:
- file with the SEC an exchange offer registration statement
under the Securities Act with respect to the registered notes
no later than June 26, 2000;
- use our best efforts to cause the exchange offer registration
statement to be declared effective under the Securities Act no
later than October 8, 2000; and
- keep the exchange offer open for a period not less than 20
business days (or longer if required by applicable law) after
the date notice of the exchange offer is mailed to holders of
the outstanding notes; and
- cause the exchange offer to be consummated no later than the
30th business day after it is declared effective under the
Securities Act.
The exchange offer being made by this prospectus is intended to satisfy
our obligations under the registration rights agreement. You may be entitled to
"shelf" registration rights. In accordance with the registration rights
agreement, we are required to file a shelf registration covering your
outstanding notes for a continuous offering in accordance with Rule 415 of the
Securities Act if:
- we are not permitted to consummate the exchange offer because
the exchange offer is not permitted by applicable law or SEC
policy; or
- any holder of outstanding notes which are Transfer Restricted
Securities notifies us before the 20th business day following
the consummation of the exchange offer that:
- it is prohibited by law or SEC policy from
participating in the exchange offer;
- it may not resell the registered notes acquired by it
in the exchange offer to the public without
delivering a prospectus, and the prospectus
(including any amendment or supplement thereto)
contained in the exchange offer registration
statement is not appropriate or available for such
resales by it; or
- it is a broker-dealer and holds notes acquired
directly from us or any of our affiliates.
In the event that we are obligated to file a shelf registration
statement, we will be required to keep the shelf registration statement
effective until the later of two years from the date the shelf registration is
declared effective by the SEC or the date on which all of the outstanding notes
have been sold thereunder.
For purposes of the registration rights agreement, "Transfer Restricted
Securities" means each note until the earlier of:
(1) the date on which such note is exchanged in the exchange offer
and entitled to be resold to the public by the holder thereof
without complying with the prospectus delivery requirements of
the Securities Act;
(2) the date on which such note has been disposed of in accordance
with the shelf registration statement;
(3) the date on which such note is disposed of by a broker-dealer
pursuant to the "Plan of Distribution" contemplated by the
exchange offer registration statement (including delivery of
the prospectus contained therein);
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(4) the date on which such note is distributed to the public
pursuant to Rule 144 under the Securities Act.
The registration rights agreement provides that:
(1) if we fail to file an exchange offer registration statement
with the SEC on or before June 26, 2000;
(2) if the exchange offer registration statement is not declared
effective before October 8, 2000;
(3) if the exchange offer is not consummated on or before the 30th
business day after the exchange offer registration statement
is declared effective;
(4) if obligated to file the shelf registration statement and we
fail to file the shelf registration statement with the SEC on
or before the 30th day after such filing obligation arises;
(5) if obligated to file a shelf registration statement and the
shelf registration statement is not declared effective on or
before the 60th day after the obligation to file a shelf
registration statement arises; or
(6) if the exchange offer registration statement or the shelf
registration statement, as the case may be, is declared
effective but thereafter ceases to be effective or useable in
connection with resales of the Transfer Restricted Securities,
for such time of non-effectiveness or non-usability (each, a
"Registration Default"),
then we will pay to each holder of Transfer Restricted Securities
affected thereby liquidated damages ("Liquidated Damages") in an amount
equal to $0.05 per week per $1,000 in principal amount of the Transfer
Restricted Securities 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. The amount of the Liquidated Damages shall increase by an
additional $0.05 per week per $1,000 in principal amount of Transfer
Restricted Securities with respect to each subsequent 90 day period
until all Registration Defaults have been cured, up to a maximum amount
of Liquidated Damages of $0.50 per week per $1,000 in principal amount
of Transfer Restricted Securities. We will not be required to pay
Liquidated Damages for more than one Registration Default at any given
time. Following the cure of all Registration Defaults, the accrual of
Liquidated Damages will cease.
We will pay all accrued Liquidated Damages to holders entitled thereto
by wire transfer to the accounts specified by them or by mailing checks to their
registered address if no such accounts have been specified.
EFFECT OF THE EXCHANGE OFFER
Based on no-action letters issued by the staff of the SEC to third
parties, we believe that you may offer for resale, resell and otherwise transfer
the registered notes issued to you under the exchange offer without further
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that you can represent that:
- you are acquiring the registered notes in the ordinary course
of your business;
- you are not engaging in and do not intend to engage in a
distribution of the registered notes;
- you have no arrangements or understandings with any person to
participate in the exchange offer for the purpose of
distributing the registered notes; and
- you are not an "affiliate" (as defined in Rule 405 of the
Securities Act) of ours.
If you are not able to make these representations, you are a
"Restricted Holder." As a Restricted Holder, you will not be able to
participate in the exchange offer, may not rely on the SEC staff positions
set forth in the
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Exxon Capital Holdings Corporation no-action letter and similar no-action
letters and may only sell your outstanding notes as part of a registration
statement containing the selling security holder information required by Item
507 or 508 of SEC Regulation S-K, as applicable, or under an exemption from
the registration requirements of the Securities Act.
In addition, each broker-dealer, other than a Restricted Holder,
that receives registered notes for its own account in exchange for
outstanding notes which were acquired by such broker-dealer as a result of
market-making or other trading activities (a "Participating Broker-Dealer")
may be a statutory underwriter and must acknowledge in the letter of
transmittal that it will deliver a prospectus meeting the requirements of the
Securities Act upon any resale of such registered notes. The letter of
transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. Based upon interpretations by the SEC
staff, we believe that a Participating Broker-Dealer may offer for resale,
resell and otherwise transfer registered notes issued under the exchange
offer upon compliance with the prospectus delivery requirements, but without
compliance with the registration requirements, of the Securities Act. This
prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer as part of their resales. We have
agreed that, for a period of one year after the completion of the exchange
offer, we will make this prospectus available to any broker-dealer for use by
the broker-dealer in any resale. For more information, please see the section
in this prospectus entitled "Plan of Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE
To the extent outstanding notes are tendered and accepted in the
exchange offer, the principal amount of outstanding notes will decrease with
a resulting decrease in the liquidity in the market for the outstanding
notes. In addition, following completion of the exchange offer, except as
provided in the registration rights agreement, you will not have any further
registration rights and your outstanding notes will continue to be subject to
certain restrictions on transfer. Accordingly, if you do not participate in
the exchange offer, your ability to sell your outstanding notes could be
adversely affected. You may suffer adverse consequences if you fail to
exchange your outstanding notes.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions contained in this
prospectus and in the letter of transmittal, we will accept for exchange any
and all outstanding notes that are validly tendered and not withdrawn prior
to 5:00 p.m., New York City time, on the expiration date. We will issue
$1,000 principal amount at maturity of registered notes in exchange for each
$1,000 principal amount at maturity of outstanding notes accepted in the
exchange offer. You may tender some or all of your outstanding notes under
the exchange offer. However, outstanding notes may be tendered only in
minimum denominations of $1,000 principal amount and integral multiples of
$1,000 in excess thereof. As of the date of this prospectus, an aggregate of
$300,000,000 in principal amount at maturity of the outstanding notes is
outstanding. This prospectus, together with the accompanying letter of
transmittal, is first being sent on or about ________, 2000, to the nominee
of The Depository Trust Company ("DTC" or the "Depository") and to others
believed to have beneficial ownership in the outstanding notes.
The form and terms of the registered notes will be substantially
identical to the form and terms of the outstanding notes, except that:
- the offering of the registered notes has been registered under
the Securities Act;
- the registered notes will not be subject to transfer
restrictions; and
- the registered notes will be issued free of any covenants
regarding registration rights and free of any provision for
Liquidated Damages.
The registered notes will evidence the same debt as the outstanding
notes and will be issued under the same indenture.
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You do not have any appraisal or dissenters rights under law or the
indenture in the exchange offer. We intend to conduct the exchange offer in
accordance with the applicable requirements of the Exchange Act. Outstanding
notes which are not tendered for, or are tendered but not accepted in
connection with, the exchange offer will remain outstanding.
We will be deemed to have accepted validly tendered outstanding
notes when, as and if we have given oral notice, promptly confirmed in
writing, or written notice of the acceptance to the exchange agent. The
exchange agent will act as agent for the tendering holders for the purpose of
receiving the registered notes from us.
If we do not accept for exchange any tendered outstanding notes
because of an invalid tender, the occurrence of other events described in
this prospectus or otherwise, certificates for any such unaccepted
outstanding notes will be returned to you, without expense, as promptly as
practicable after the expiration date.
If you tender outstanding notes in the exchange offer, you will not
be required to pay brokerage commissions or fees or, subject to the
instructions in the letter of transmittal, transfer taxes relating to the
exchange of outstanding notes under the exchange offer. We will pay all
charges and expenses, other than underwriting discounts and commissions and
transfer taxes, as part of the exchange offer. See "--Fees and Expenses."
EXPIRATION DATE, EXTENSIONS, TERMINATION
The term "expiration date" means 5:00 p.m., New York City time, on
___________, 2000, unless we, in our sole discretion, extend the exchange
offer, in which case the term "expiration date" shall mean the latest date
and time to which the exchange offer is extended.
We have the right, subject to applicable law, in our reasonable
discretion, at any time and from time to time, (1) to extend the exchange
offer or (2) to terminate the exchange offer, if any of the conditions set
forth below under "--Conditions" shall not have been satisfied by giving oral
or written notice of such extension or termination to the exchange agent. Any
such extension or termination will be followed as promptly as practicable by
a public announcement.
Any such termination or extension will be followed promptly by oral
or written notice to the exchange agent (any such oral notice to be promptly
confirmed in writing) and by making a public announcement, and such
announcement in the case of an extension will be made no later than 9:00 am..
New York City time, on the next business day after the previously scheduled
expiration date. Without limiting the manner in which we may choose to make
any public announcement, and subject to applicable laws, we shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement, other than by issuing a timely release to an appropriate news
agency.
PROCEDURES FOR TENDERING
BOOK-ENTRY INTERESTS
The outstanding notes were issued as global securities in fully
registered form without interest Coupons. Beneficial interests in the global
securities, held by direct or indirect participants in DTC, are shown on, and
transfers of these interests are effected only through, records maintained in
book-entry form by DTC with respect to its participants.
If you hold your outstanding notes in the form of book-entry
interests and you wish to tender your outstanding notes for exchange pursuant
to the exchange offer, you must transmit to the exchange agent on or prior to
the expiration date either:
(1) written or facsimile copy of a properly completed and duly
executed letter of transmittal, including all other documents
required by such letter of transmittal, to the exchange agent
at the address set forth on the cover page of the letter of
transmittal; or
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(2) computer-generated message transmitted by means of DTC's
Automated Tender Offer Program system and received by the
exchange agent and forming a part of a confirmation of
book-entry transfer, in which you acknowledge and agree to be
bound by the terms of the letter of transmittal.
In addition, in order to deliver outstanding notes held in the form of
book-entry interests:
(A) a timely confirmation of book-entry transfer of such notes
into the exchange agent's account at DTC pursuant to the
procedure for book-entry transfers described below under
"--Book-Entry Transfer" must be received by the exchange agent
prior to the expiration date; or
(B) you must comply with the guaranteed delivery procedures
described below.
THE METHOD OF DELIVERY OF OUTSTANDING NOTES AND THE LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR
ELECTION AND RISK. INSTEAD OF DELIVERY BY MAIL, WE RECOMMEND THAT YOU USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. YOU
SHOULD NOT SEND THE LETTER OF TRANSMITTAL OR OUTSTANDING NOTES TO US. YOU MAY
REQUEST YOUR BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY, OR NOMINEE TO
EFFECT THE ABOVE TRANSACTIONS FOR YOU.
CERTIFICATED OUTSTANDING NOTES
Only registered holders of certificated outstanding notes may tender
those notes in the exchange offer. If your outstanding notes are certificated
notes and you wish to tender those notes for exchange pursuant to the exchange
offer, you must transmit to the exchange agent on or prior to the expiration
date. a written or facsimile copy of a properly completed and duly executed
letter of transmittal, including all other required documents, to the address
set forth below under "--Exchange Agent." In addition, in order to validly
tender your certificated outstanding notes:
(1) the certificates representing your outstanding notes must be
received by the exchange agent prior to the expiration date,
or
(2) you must comply with the guaranteed delivery procedures
described below.
PROCEDURES APPLICABLE TO ALL HOLDERS
If you validly tender outstanding notes and you do not withdraw the
tender prior to the expiration date, you will have made an agreement with us in
accordance with the terms and subject to the conditions set forth in this
prospectus and in the letter of transmittal.
If your outstanding notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and you wish to tender
your notes, you should contact the registered holder promptly and instruct the
registered holder to tender on your behalf. If you wish to tender on your own
behalf, you must, prior to completing and executing the letter of transmittal
and delivering your outstanding notes, either make appropriate arrangements to
register ownership of the outstanding notes in your name or obtain a properly
completed bond power from the registered holder. The transfer of registered
ownership may take considerable time.
Signatures on a letter of transmittal or a notice of withdrawal must be
guaranteed by an eligible institution unless:
(A) outstanding notes tendered in the exchange offer are tendered
either:
(1) "Special Delivery Instructions" on the letter of
transmittal; or
(2) for the account of an eligible institution; and
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(B) the box entitled "Special Registration Instructions" on the
letter of transmittal has not been completed.
If signatures on a letter of transmittal or a notice of withdrawal are
required to be guaranteed, the guarantee must be by a financial institution,
which includes most banks, savings and loan associations and brokerage houses,
that is a participant in the Securities Transfer Agents Medallion Program. the
New York Stock Exchange Medallion Program or the Stock Exchanges Medallion
Program.
If the letter of transmittal is signed by a person other than you, your
outstanding notes must be endorsed or accompanied by a properly completed bond
power and signed by you as your name appears on those outstanding notes.
If the letter of transmittal or any outstanding notes or bond powers
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, those persons should so indicate when signing. Unless we waive this
requirement, in this instance you must submit with the letter of transmittal
proper evidence satisfactory to us of their authority to act on your behalf.
We will determine, in our sole discretion, all questions regarding the
validity, form, eligibility, including time of receipt, acceptance and
withdrawal of tendered outstanding notes. This determination will be final and
binding. We reserve the absolute right to reject any and all outstanding notes
not properly tendered or any outstanding notes our acceptance of which would, in
the opinion of our counsel, be unlawful. We also reserve the right to waive any
defects, irregularities or conditions of tender as to particular outstanding
notes. Our interpretation of the terms and conditions of the exchange offer,
including the instructions in the letter of transmittal, will be final and
binding on all parties.
You must cure any defects or irregularities in connection with tenders
of your outstanding notes within the time period we will determine unless we
waive that defect or irregularity. Although we intend to notify you of defects
or irregularities with respect to your tender of outstanding notes, neither we,
the exchange agent nor any other person will incur any liability for failure to
give this notification. Your tender will not be deemed to have been made and
your notes will be returned to you if:
(1) you improperly tender your outstanding notes;
(2) you have not cured any defects or irregularities in your
tender; and
(3) we have not waived those defects, irregularities or improper
tender.
The exchange agent will return your outstanding notes, unless otherwise
provided in the letter of transmittal, as soon as practicable following the
expiration of the exchange offer.
By tendering, you will represent to us that, among other things:
(1) the registered notes to be acquired by you in the exchange
offer are being acquired in the ordinary course of your
business;
(2) you are not engaging in and do not intend to engage in a
distribution of the registered notes to be acquired by you in
the exchange offer;
(3) you do not have an arrangement or understanding with any
person to participate in the distribution of the registered
notes to be acquired by you in the exchange offer; and
(4) you are not an "affiliate" of ours, as defined under Rule 405
of the Securities Act.
In all cases, issuance of registered notes for outstanding notes that
are accepted for exchange in the exchange offer will be made only after timely
receipt by the exchange agent of certificates for your outstanding
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notes or a timely book-entry confirmation of your outstanding notes into the
exchange agent's account at DTC, a properly completed and duly executed
letter of transmittal, or a computer-generated message instead of the letter
of transmittal, and all other required documents. If any tendered outstanding
notes are not accepted for any reason set forth in the terms and conditions
of the exchange offer or if outstanding notes are submitted for a greater
principal amount than you desire to exchange, the unaccepted or non-exchanged
outstanding notes, or outstanding notes in substitution therefor, will be
returned without expense to you. In addition, in the case of outstanding
notes tendered by book-entry transfer into the exchange agent's account at
DTC pursuant to the book-entry transfer procedures described below, the
non-exchanged outstanding notes will be credited to your account maintained
with DTC, as promptly as practicable after the expiration or termination of
the exchange offer.
GUARANTEED DELIVERY PROCEDURES
If you desire to tender your outstanding notes and your outstanding
notes are not immediately available or one of the situations described in the
immediately preceding paragraph occurs, you may tender if:
(1) you tender through an eligible financial institution;
(2) on or prior to 5:00 p.m., New York City time, On the
expiration date, the exchange agent receives from an eligible
institution, a written or facsimile copy of a properly
completed and duly executed letter of transmittal and notice
of guaranteed delivery, substantially in the form provided by
us; and
(3) the certificates for all certificated outstanding notes, in
proper form for transfer, or a book-entry confirmation, and
all other documents required by the letter of transmittal, are
received by the exchange agent within three NYSE trading days
after the date of execution of the notice of guaranteed
delivery.
The notice of guaranteed delivery may be sent by facsimile
transmission, mail or hand delivery. The notice of guaranteed delivery must set
forth:
(1) your name and address;
(2) the amount of outstanding notes you are tendering; and
(3) a statement that your tender is being made by the notice of
guaranteed delivery and that you guarantee that within three
New York Stock Exchange trading days after the execution of
the notice of guaranteed delivery, the eligible institution
will deliver the following documents to the exchange agent:
(A) the certificates for all certificated outstanding
notes being tendered, in proper form for transfer or
a book-entry confirmation of tender;
(B) a written or facsimile copy of the letter of
transmittal, or a book-entry confirmation instead of
the letter of transmittal; and
(C) any other documents required by the letter of
transmittal.
BOOK-ENTRY TRANSFER
The exchange agent will establish an account with respect to the
book-entry interests at DTC for purposes of the exchange offer promptly after
the date of this prospectus. You must deliver your book-entry interest by
book-entry transfer to the account maintained by the exchange agent at DTC.
Any financial institution that is a participant in DTC's systems may make
book-entry delivery of book-entry interests by causing DTC to transfer the
book-entry interests into the exchange agent's account at DTC in accordance
with DTC's procedures for transfer.
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If one of the following situations occur:
(1) you cannot deliver a book-entry confirmation of book-entry
delivery of your book-entry interests into the exchange
agent's account at DTC; or
(2) you cannot deliver all other documents required by the letter
of transmittal to the exchange agent prior to the expiration
date.
then you must tender your book-entry interests according to the guaranteed
delivery procedures discussed above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of outstanding notes may
be withdrawn at any time prior to 5:00 p.m., New York City time, on the
expiration date.
To withdraw a tender of outstanding notes in the exchange offer, a
written or facsimile transmission notice of withdrawal must be received by the
exchange agent at its address listed in this prospectus prior to 5:00 p.m., New
York City time, on the expiration date. Any notice of withdrawal must:
- specify the name of the person having deposited the
outstanding notes to be withdrawn;
- identify the outstanding notes to be withdrawn, including the
certificate number or numbers and principal amount of such
outstanding notes;
- be signed by the holder in the same manner as the original
signature on the letter of transmittal by which the
outstanding notes were tendered, including any required
signature guarantees, or he accompanied by documents of
transfer sufficient to have the trustee with respect to the
outstanding notes register the transfer of the outstanding
notes into the name of the person withdrawing the tender; and
- specify the name in which any outstanding notes are to be
registered if different from that of the person that deposited
the outstanding notes to be withdrawn.
If the outstanding notes have been delivered under the book-entry
procedure set forth above under "--Procedures for Tendering," any notice of
withdrawal must specify the name and number of the participant's account at DTC
to be credited with the withdrawn outstanding notes.
We will determine, in our sole discretion, all questions as to the
validity, form and eligibility, including time of receipt, of withdrawal
notices. Our determination shall be final and binding on all parties. Any
outstanding notes withdrawn will be deemed not to have been validly tendered for
purposes of the exchange offer and registered notes will not be issued in
exchange for such withdrawn outstanding notes unless the withdrawn outstanding
notes are validly retendered. Properly withdrawn outstanding notes may be
retendered by following one of the procedures described above under
"--Procedures for Tendering" at any time prior to the expiration date.
Any outstanding notes that are tendered but not accepted due to
withdrawal, rejection of tender or termination of the exchange offer will be
returned as soon as practicable to the holder without cost to the holder (or, in
the case of outstanding notes tendered by book-entry transfer into the exchange
agent's account at the book-entry transfer facility under the book-entry
transfer procedures described above, these outstanding notes will be credited to
an account maintained with such book-entry transfer facility for the outstanding
notes).
CONDITIONS
Notwithstanding any other term of the exchange offer, we are not
required to accept for exchange any outstanding notes, and may terminate the
exchange offer as provided in this prospectus before the acceptance of any
outstanding notes, if:
- the exchange offer will violate applicable law or any
applicable interpretation of the SEC staff;
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- the outstanding notes are not tendered in accordance with the
exchange offer;
- you do not represent that you are acquiring the registered
notes in the ordinary course of your business, that you are
not engaging in and do not intend to engage in a distribution
of the registered notes, and that you have no arrangement or
understanding with any person to participate in a distribution
of the registered notes; or
- any action or proceeding is instituted or threatened by any
governmental agency with respect to the exchange offer which
would reasonably be expected to impair our ability to proceed
with the exchange offer.
These conditions are for our sole benefit and we may assert them
regardless of the circumstances giving rise to any condition or we may waive
them in whole or in part at any time and from time to time in our reasonable
discretion. Our failure at any time to exercise any of the foregoing rights
shall not he deemed a waiver of the right and each right shall be deemed an
ongoing right which may be asserted at any time and from time to time.
If we determine in our reasonable judgment that any of the conditions
are not satisfied, we may (1) refuse to accept any outstanding notes and return
all tendered outstanding notes to the tendering holders (or, in the case of
outstanding notes delivered by book-entry transfer within DTC, credit any
outstanding notes to the account maintained within DTC by the participant in DTC
which delivered the notes), (2) extend the exchange offer and retain all
outstanding notes tendered prior to the expiration of the exchange offer,
subject, however, to the rights of holders to withdraw the tenders of
outstanding notes (see "Withdrawal of Tenders" above) or (3) waive the
unsatisfied conditions with respect to the exchange offer and accept all
properly tendered outstanding notes which have not been withdrawn. If a waiver
constitutes a material change to the exchange offer, we will promptly disclose
the waiver by means of a prospectus supplement that will be distributed to the
registered holders, and we will extend the exchange offer for a period of five
to ten business days, depending upon the significance of the waiver and the
manner of disclosure to the registered holders, if the exchange offer would
otherwise expire during such five to ten business day period.
EXCHANGE AGENT
American Stock Transfer & Trust Company has been appointed as exchange
agent for the exchange offer. Delivery of letters of transmittal and any other
required documents, questions, requests for assistance, and requests for
additional copies of this prospectus or of the letter of transmittal should be
directed to the exchange agent as follows:
<TABLE>
<S> <C>
BY REGISTERED OR CERTIFIED MAIL, BY FACSIMILE (ELIGIBLE INSTITUTION ONLY):
OVERNIGHT COURIER OR HAND DELIVERY:
(718) 234-5001
American Stock Transfer & Trust Company Attention: Exchange Department
40 Wall Street
New York, New York 10005 Confirmed by Telephone: (718) 921-8200
Attention: Exchange Department
(Originals of all documents submitted by
facsimile should be sent promptly by hand,
overnight courier or registered or certified
mail.)
</TABLE>
Delivery to other than the above address or facsimile number will not
constitute a valid delivery of your outstanding notes.
FEES AND EXPENSES
We will pay expenses of soliciting tenders. The principal
solicitation is being made by mail; however, additional solicitation may be
made by facsimile, telephone or in person by our officers and regular
employees.
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We have not retained any dealer-manager as part of the exchange
offer and will not make any payments to brokers, dealers or others soliciting
acceptance of the exchange offer. We will, however, pay the exchange agent
reasonable and customary fees for services and will reimburse it for its
reasonable out-of-pocket expenses under the exchange offer. We will also pay
the reasonable fees and expenses of one firm acting as counsel for the
holders of the outstanding notes. Expenses include fees and expenses of the
exchange agent and trustee, accounting and legal fees and printing costs,
among others.
TRANSFER TAXES
You must pay all transfer taxes, if any, applicable to the exchange
of outstanding notes under the exchange offer. If satisfactory evidence of
payment of the taxes or exemption therefrom is not submitted with the letter
of transmittal, the amount of the transfer t axes will be billed directly to
you.
ACCOUNTING TREATMENT
The registered notes will be recorded at the same carrying value as
the outstanding notes on the date of the exchange. Accordingly, we will
recognize no gain or loss for accounting purposes. The expenses of the
exchange offer and the unamortized expenses relating to the issuance of the
outstanding notes will be amortized over the term of the registered notes.
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DESCRIPTION OF THE REGISTERED NOTES
You can find the definitions of many of the terms used in this
description under the subheading "Selected Definitions." In this description,
the words "we", "our" or "us" refer only to UbiquiTel Operating Company and
not to any of our subsidiaries or guarantors.
We will issue the registered notes under the indenture for the
outstanding notes dated as April 11, 2000 among us, the guarantors referred
to below, and American Stock Transfer & Trust Company, as trustee.
Any outstanding notes that remain outstanding after the completion
of the exchange offer, together with the registered notes issued in exchange
for the outstanding notes, will be treated as a single class of debt
securities under the indenture. Unless otherwise indicated, the outstanding
notes and the registered notes to be issued in the exchange offer are
collectively referred to as the "notes" in this summary description. The
terms of the notes include those stated in the indenture and those made part
of the indenture by reference to the Trust Indenture Act of 1939, as amended.
The indenture will be qualified as an indenture under the Trust Indenture Act.
The following description is a summary of the material provisions of
the indenture. It does not restate the indenture in its entirety. We urge you
to read the indenture because it defines your rights as a holder of the
notes. We have filed a copy of the indenture as an exhibit to the
registration statement which includes this prospectus.
PRINCIPAL, MATURITY AND INTEREST
We issued $300.0 million aggregate principal amount of outstanding
notes in denominations and integral multiples of $1,000, maturing on April
15, 2010. The outstanding notes were issued at a discount and generated
approximately $152.3 million of gross proceeds to us. We will issue up to the
same amount of registered notes. The notes will mature on April 15, 2010.
Cash interest will not be paid on the notes prior to April 15, 2005.
Prior to that date, in lieu of cash interest, the notes will accrete in value
at a rate of approximately 14.0% per annum, compounded semi-annually, to an
aggregate principal amount of $300.0 million on April 15, 2005. Beginning on
that date, interest will accrue at a rate of 14.0% per annum, payable in cash
semiannually in arrears on April 15 and October 15 of each year, commencing
on October 15, 2005, to holders of record of such notes at the close of
business on the April 1 and October 1 preceding such interest payment dates.
Cash interest will accrue from the most recent interest payment date to which
interest has been paid or duly provided for or, if no interest has been paid
or duly provided for, from April 15, 2005. Cash interest will be computed on
a basis of a 360-day year of twelve 30-day months. Accretion of original
issue discount will be computed on a basis of a 360-day year of twelve 30-day
months, compounded semi-annually.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
If a registered holder of notes has given wire transfer instructions
to us, we will make all principal and interest payments on the notes in
accordance with those instructions. We will make all other payments on the
notes at the office or agency of the paying agent and registrar within the
City and State of New York unless we decide to pay interest by mailing checks
to the registered holders.
PAYING AGENT AND REGISTRAR FOR THE NOTES
We must appoint a paying agent to which the notes may he presented
for payment, and a registrar where notes may be presented for transfer or
exchange. The trustee will initially act as paying agent and registrar. We
may change the paying agent or registrar without prior notice to the holders,
and we or any of our subsidiaries may act as paying agent or registrar.
TRANSFER AND EXCHANGE
A holder may transfer or exchange notes in accordance with the
indenture. The registrar and the trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and we may
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require a holder to pay any taxes and fees required by law or permitted by
the indenture. We are not required to transfer or exchange any note that has
been selected for redemption. Also, we are not required to transfer or
exchange any note for a period of 15 days before a selection of notes to be
redeemed.
The registered holder of a note will be treated as the owner of it for
all purposes.
GUARANTEES
UbiquiTel Parent and all of our current and future domestic Restricted
Subsidiaries, other than UbiquiTel Leasing Company, will be guarantors of the
notes. UbiquiTel Leasing Company is a wholly-owned limited purpose subsidiary of
UbiquiTel Operating Company formed on March 17, 2000 solely for the purpose of
holding site and tower leases and will be prohibited by the indenture from
amending its certificate of incorporation to change the nature and purpose of
the business it is legally permitted to conduct. In the event that UbiquiTel
Leasing Company amends its certificate of incorporation to change the nature and
purpose of its business, or if UbiquiTel Leasing Company becomes a guarantor
under the Credit Facilities, it will become a guarantor of the notes.
The guarantors will be liable for the entire amount due under the notes
and the indenture. The obligations of each guarantor will be limited as
necessary to prevent the guarantee from constituting a fraudulent conveyance
under applicable law.
A guarantor (other than UbiquiTel Parent) may not sell or otherwise
dispose of all or substantially all of its assets, or consolidate with or merge
with or into another person, other than us or another guarantor, unless:
- immediately after giving effect to that transaction, no
default exists; and
- either:
- the acquiring person assumes all the obligations of
the guarantor to note holders; or
- the net proceeds of the transactions are applied in
accordance with the asset sale provisions of the
indenture that are described below.
A guarantee, other than the guarantee of UbiquiTel Parent, will be
released:
- in connection with any sale of all of the Capital Stock of a
guarantor (including the guarantee of any wholly-owned
subsidiary of such guarantor) to a person (including by way of
merger or consolidation) that is not (either before or after
giving effect to such transaction) a subsidiary of us, if the
net proceeds of that transaction are applied (or we certify in
an officer's certificate delivered to the trustee that such
net proceeds will be applied within the time period specified)
in accordance with the asset sale provisions of the indenture;
or
- if we properly designate any Restricted Subsidiary that is a
guarantor as an Unrestricted Subsidiary.
SUBORDINATION AND RANKING
THE NOTES
The notes:
- are our general unsecured obligations;
- are subordinated in right of payment to all of our existing
and future Senior Indebtedness, which includes most of our
Indebtedness other than taxes and trade payables;
- will be equal in right of payment to all of our future senior
subordinated Indebtedness;
- will be senior in right of payment to all of our future
subordinated Indebtedness; and
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- are unconditionally guaranteed on a senior subordinated basis
by the guarantors.
THE GUARANTEES
The Guarantees:
- are general unsecured obligations of each guarantor;
- are subordinated in right of payment to all existing and
future Senior Indebtedness of the guarantors, which includes
most of their Indebtedness other than taxes and trade
payables;
- will be equal in right of payment with any future senior
subordinated Indebtedness of each guarantor; and
- will be senior in right of payment to any future subordinated
Indebtedness of each guarantor.
The subordination provisions mean that the holders of Senior
Indebtedness will be entitled to receive payment in full of all obligations due
them before the holders of notes will be entitled to receive any payment on the
notes or the guarantees, including, without limitation, principal, premium (if
any), interest and liquidated damages (if any) payable pursuant to the terms of
the notes (including upon acceleration or redemption thereof):
- in a liquidation or dissolution proceeding;
- in a bankruptcy, reorganization, insolvency, receivership or
similar proceeding;
- in an assignment for the benefit of creditors; or
- in any other marshalling of assets and liabilities.
In addition, until the Senior Indebtedness is paid in full, any payment
or distribution to which the holders of notes would be entitled will be made to
holders of Senior Indebtedness.
We may not make any payment on the notes, and a guarantor may not make
any payment on its guarantee, if (i) a default in the payment when due, whether
at maturity, upon any redemption, by acceleration or otherwise of any principal
of, interest on, unpaid drawings for letters of credit issued in respect of, or
regularly accruing fees with respect to, Senior Indebtedness, or (ii) the bank
lenders under our Credit Facilities give the trustee under the indenture a
payment blockage notice. Those lenders are permitted to give that notice at any
time we have failed to honor our obligations under the Credit Facilities. If our
Credit Facilities have been paid off and we have other borrowings that we treat
as Designated Senior Indebtedness, then the holders of that Indebtedness may
give a payment blockage notice if we fail to meet our obligations under it.
We must resume payment on the notes following a payment blockage notice
only:
- in the case of a payment default, when it is cured or waived
(and, if applicable, any acceleration is rescinded); and
- in case of a nonpayment default, the earlier of the date when
it is cured or waived or 179 days after the date on which the
payment blockage notice is received, unless the maturity of
any Designated Senior Indebtedness has been accelerated.
No new payment blockage notice may be delivered unless and until 360
days have elapsed since the delivery of the prior payment blockage notice. No
non-payment default that existed or was continuing on the date of delivery of
any payment blockage notice shall be, or be made, the basis for a subsequent
payment blockage notice unless such default shall have been waived or cured
for a period of not less than 90 days (it being acknowledged that any
subsequent action, or any breach of any financial covenants for a period
commencing after the date of
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commencement of such payment blockage period that, in either case, would give
rise to an event of default pursuant to any provisions under which an event
of default previously existed or was continuing shall constitute a new event
of default for this purpose).
Despite the provisions described above that prohibit payments to
holders of notes under the circumstances described, we and our guarantors
could still make those payments by delivering Equity Interests such as our
Capital Stock or Capital Stock of a guarantor, or by delivering debt that is
subordinated at least to the same extent as the notes and has a Weighted
Average Life to Maturity at least equal to the remaining Weighted Average
Life to Maturity of the notes.
If the trustee or any holder of notes receives a prohibited payment
on the notes and actually knew that the payment was prohibited, the trustee
or holder must hold the payment in trust for the benefit of the holders of
Senior Indebtedness and deliver it to them upon request.
We must promptly notify holders of Senior Indebtedness if payment on
the notes is accelerated because of a default. We and the guarantors may not
make any payment on the notes or the guarantees until five business days
after the holders of the Senior Indebtedness receive the notice. Thereafter,
we and the guarantors may make payments on the notes only if the
subordination provisions of the indenture permit payment at the time.
The subordination provisions described above may cause holders of
the notes to recover nothing at all, or to recover less than holders of
Senior Indebtedness.
Assuming we had completed the offering of the notes and entered into
our new senior credit facility and applied the net proceeds as intended, as
of March 31, 2000, we and the guarantors would have had total Senior
Indebtedness of approximately $75.0 million. The indenture will permit us and
the guarantors to incur additional Senior Indebtedness.
OPTIONAL REDEMPTION
Prior to April 15, 2003, we may on any one or more occasions redeem
up to 35% of the Accreted Value of the notes originally issued under the
indenture with the net cash proceeds of one or more public offerings of our
common stock (or the public offering of UbiquiTel Parent's common stock, to
the extent proceeds are contributed to us, but excluding the net proceeds of
the recently completed initial public offering of UbiquiTel Parent's common
stock). The redemption price is $1,140 for each $1,000 of Accreted Value of
notes redeemed.
We will not be permitted to make these redemptions unless:
- at least 65% of the Accreted Value of the notes originally
issued under the indenture remains outstanding immediately
after the occurrence of such redemption, excluding notes held
by us and our subsidiaries; and
- the redemption must occur within 45 days of the date we
receive the money from the public offering.
- We are not otherwise permitted to redeem notes prior to April
15, 2005.
On or after April 15, 2005, we may redeem all or a part of the notes
by giving notice between 30 and 60 days before the redemption. The redemption
price will be the amount shown in the table.
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<PAGE>
<TABLE>
<CAPTION>
REDEMPTION PRICE
PER $1,000 OF
YEAR BEGINNING PRINCIPAL AMOUNT
-------------- ----------------
<S> <C>
April 15, 2005......................................... $1,070.00
April 15, 2006......................................... 1,046.67
April 15, 2007......................................... 1,023.33
April 15, 2008 and thereafter.......................... 1,000.00
</TABLE>
Notwithstanding the foregoing, our Credit Facilities currently
prohibit us from redeeming the notes.
NO MANDATORY REDEMPTION OR SINKING FUND PAYMENTS
We are not required to make mandatory redemption or sinking fund
payments on the notes.
SELECTION AND NOTICE
If we redeem less than all of the notes, the trustee will select notes
for redemption as follows:
- if the notes are listed, in compliance with the requirements
of the principal national securities exchange on which they
are then listed, or
- if the notes are not listed, on a pro rata basis, by lot or
any other method the trustee considers fair and appropriate.
We must pay the redemption price on the redemption date that we choose.
On that date, interest and accretion will stop accruing on notes called for
redemption.
REPURCHASE AT THE OPTION OF HOLDERS
REPURCHASE IF A CHANGE OF CONTROL OCCURS
Within 30 days following any change of control, we must mail a notice
to each holder of notes describing the change of control and offering to
repurchase notes on a specified date within 30 to 60 days after we mail that
notice, or such later date as is necessary to comply with the requirements under
the Securities Exchange Act of 1934, as amended, or of any national securities
exchange on which the notes are then listed. The repurchase price will be:
- $1,010 per $1,000 of Accreted Value of the notes, if the
repurchase occurs before April 15, 2005, or
- $1,010 per $1,000 of principal amount of the notes, plus any
accrued interest we may owe, if the purchase occurs on or
after April 15, 2005.
In repurchasing notes, we will comply with applicable securities laws
and regulations even if they conflict with the indenture. That compliance will
not cause us to be in default under any conflicting provisions of the indenture.
We will not be required to repurchase notes if:
- the law does not permit us to purchase them; or
- they have not been properly tendered by the repurchase date.
Within 90 days following a change of control, we must either repay all
of our Senior indebtedness or obtain consents from the holders of Senior
Indebtedness permitting us to repurchase the notes. We must publicly announce
the results of the change of control repurchase offer as soon as possible after
the repurchase occurs.
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Except for these change of control provisions, we are not required
to repurchase notes if an acquisition, restructuring, recapitalization,
merger or similar transaction occurs that does not constitute a change of
control under the indenture.
We will not be required to make a change of control offer if a third
party makes and consummates the offer on the same terms required of us.
A change of control will occur if:
- we sell substantially all of our and our Restricted
Subsidiaries' assets;
- we adopt a plan for our liquidation or dissolution;
- any person or group of persons, other than Principals or any
of their Affiliates, become the beneficial owner of more than
50% of the voting power of our stock; or
- a majority of our board of directors no longer consists of
continuing directors, which are directors who were serving on
April 11, 2000, or who were nominated to serve as a director
by a majority of the continuing directors at the time.
REPURCHASE IF ASSET SALES OCCUR
We will not permit any asset sales of our assets or assets of any of
our Restricted Subsidiaries unless:
- we or the Restricted Subsidiary receives consideration at the
time of the asset sale at least equal to the fair market value
of the assets or Equity Interests issued or sold, as
determined by our board of directors and certified to the
trustee by one of our officers, and
- at least 75% of the consideration is cash or Cash Equivalents.
For purposes of this provision, the following are considered
to be cash:
- any liabilities of us or any Restricted Subsidiary
that are assumed by the transferee by an agreement
that releases us or the Restricted Subsidiary from
further liability other than contingent liabilities
and liabilities that are subordinate to the notes,
and
- cash that we or our Restricted Subsidiary receives
from converting into cash any securities, notes or
other obligations that we or our Restricted
Subsidiary receives from the asset sale within 30
days after receipt.
An asset sale is:
- the sale of Equity Interests in any of our subsidiaries,
except a sale to us or any Wholly-Owned Restricted Subsidiary;
and
- a sale, lease or other transfer of any assets except the
following:
- the sale or lease of equipment, inventory, accounts
receivable or other assets in the ordinary course of
business,
- dispositions of cash or cash equivalents,
- transactions involving assets that have a fair market
value of less than $1.0 million,
- transfers of assets to us or any Wholly-Owned
Restricted Subsidiary, and
- Restricted Payments and Permitted Investments that
are permitted under the restricted payment covenant
that we describe below.
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Within 360 days after we receive net proceeds from an asset sale, we
may apply them as follows:
- to repay Senior Indebtedness and, if the Senior Indebtedness
repaid is revolving credit Indebtedness, to correspondingly
reduce the amount the lenders have committed to lend us;
- to acquire all or substantially all of the assets of, or a
majority of the voting stock of, a Permitted Business,
provided, that in the event of the acquisition of at least a
majority of the voting stock of a Permitted Business, such
Permitted Business becomes a Restricted Subsidiary of us;
- to make a capital expenditure that is useful or to be used in
a Permitted Business; or
- to acquire other long-term assets to be used in a Permitted
Business.
Pending our use of net proceeds for these purposes, we may temporarily
reduce revolving credit borrowings or otherwise invest them in any manner that
is permitted by the indenture.
Any net proceeds from asset sales that we do not apply or invest as
provided above will be excess proceeds. When the amount of excess proceeds is
greater than $10.0 million, we will make an offer to all holders of notes to
purchase or redeem the maximum amount of notes that may be purchased with the
excess proceeds. The offer price will be the Accreted Value of the notes, if the
repurchase occurs before April 15, 2005, or the principal amount of the notes,
plus any accrued interest we may owe, if the repurchase occurs on or after April
15, 2005.
If any excess proceeds remain after consummation of the offer, we may
use them for any purpose permitted by the indenture. We are required to include
in the offer the holders of any Indebtedness that ranks equally with the notes
and contains similar provisions about excess proceeds. In that case, the trustee
under the indenture will select on a pro rata basis the notes and other
Indebtedness to be purchased. Upon completion of each offer, the amount of
excess proceeds is reset at zero. In making these offers, we will comply with
applicable securities laws and regulations even if they conflict with the
indenture. That compliance will not cause us to be in default under any
conflicting provisions of the indenture.
Our Credit Facilities prohibit us from purchasing notes, and also
provides that certain change of control or asset sale events would constitute a
default. Our future agreements relating to Senior Indebtedness may contain
similar restrictions and provisions. If a change of control or asset sale occurs
at a time when we are prohibited from purchasing notes. we could ask our senior
lenders to allow us to purchase notes, or we could attempt to refinance the
borrowings that contain the prohibition. If we do not succeed we will remain
prohibited from purchasing notes. In that case, our failure to purchase tendered
notes would constitute an event of default under the indenture which would, in
turn, constitute a default under our Senior Indebtedness. If that occurs the
subordination provisions in the indenture would likely restrict us from making
payments to the holders of notes.
SELECTED COVENANTS
LIMITATION ON RESTRICTED PAYMENTS
Prior to and including April 15, 2003, we cannot, directly or
indirectly make any restricted payments. We will be considered to have made a
restricted payment if we or our Restricted Subsidiaries:
(1) declare or pay any dividend on, or make any distribution to,
the holders of, any shares of our or any of our Restricted
Subsidiaries' Equity Interests (including, without limitation,
any payment in connection with any merger or consolidation
involving us or any of our Restricted Subsidiaries), or to the
direct or indirect holders of our or any of our Restricted
Subsidiaries' Equity Interests, other than dividends or
distributions payable solely in our Equity Interests, other
than Disqualified Stock;
(2) purchase, redeem or otherwise acquire or retire for value, or
permit any Restricted Subsidiary to, directly or indirectly,
purchase, redeem or otherwise acquire or retire for value
(including without
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limitation, in each case, in connection with any merger or
consolidation involving us or any Restricted Subsidiary), any
of our or our direct or indirect parent's 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, 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) being
referred to as a "Restricted Payment"). After April 15, 2003,
we cannot, directly or indirectly, make any Restricted
Payment, and will not permit any Restricted Subsidiary to make
any Restricted Payment, unless, at the time thereof, and after
giving effect thereto,
(a) no Default or Event of Default shall have occurred
and be continuing or would occur as a consequence
thereof;
(b) we 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 Indebtedness, pursuant to clause (a) or (b)
of the first paragraph of the covenant described
below under the caption "--Limitation on Incurrence
of Indebtedness and Issuance of Preferred Stock"; and
(c) after giving effect to such Restricted Payment on a
pro forma basis, the aggregate amount of all
Restricted Payments made on or after the Closing Date
shall not exceed
(i) the amount of (x) 100% of our Operating Cash
Flow after April 15, 2003 through the end of
the latest full fiscal quarter for which
consolidated financial statements of us 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
us after April 15, 2003 through the end of
the latest full fiscal quarter for which
consolidated financial statements of us are
available preceding the date of such
Restricted Payment, treated as a single
accounting period, plus
(ii) 100% of the aggregate net cash proceeds
received by us after the Closing Date as a
contribution to our common equity capital or
from the issuance or sale of our Equity
Interests, other than Disqualified Stock, or
from the issuance or sale of convertible or
exchangeable Disqualified Stock or
convertible or exchangeable debt securities
of us that have been converted into or
exchanged for such Equity Interests, other
than Equity Interests, Disqualified Stock or
debt securities sold to a subsidiary of us;
PROVIDED, HOWEVER, that for purposes of this
clause (c)(ii), the aggregate net proceeds
received by us from the initial public
offering of the common stock of UbiquiTel
Parent will be excluded form the
calculation, plus
(iii) the aggregate net cash proceeds received by
us or any Restricted Subsidiary from the
sale, disposition or repayment, other than
to us or a Restricted Subsidiary, of any
Restricted Investment made after the Closing
Date 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.
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So long as no Default or Event of Default shall have occurred and be
continuing or would be caused thereby, the foregoing limitations do not
prevent us from:
(1) paying a dividend on our Equity Interests within 60 days after
the declaration thereof if, on the date when the dividend was
declared, we could have paid such dividend in accordance with
the provisions of the indenture;
(2) repurchasing our Equity Interests, from our former employees,
consultants or directors or any of our subsidiaries for
consideration not to exceed $1.0 million in the aggregate in
any fiscal year and any unused portion in any twelve month
period may be carried forward to one or more future periods;
provided that the aggregate amount of all such repurchases
made pursuant to this clause (2) does not exceed $5.0 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 in exchange for, or with the net
cash proceeds of a substantially concurrent sale of (other
than to one of our subsidiaries):
(a) our Equity Interests, other than Disqualified Stock,
or
(b) Indebtedness that is at least as subordinated in
right of payment to the notes as the Indebtedness
being purchased;
(4) the repurchase, redemption or other acquisition of our Equity
Interests, or out of the proceeds of a capital contribution or
a substantially concurrent offering of, our Equity Interests,
other than Disqualified Stock;
(5) the payment of any dividend or distribution by one of our
Wholly-Owned Restricted Subsidiaries to the holders of its
common Equity Interests on a pro rata basis;
(6) so long as UbiquiTel Parent holds all of our outstanding
Capital Stock, the payment of dividends or the making of loans
or advances to UbiquiTel Parent not to exceed $500,000 in any
fiscal year, for the purposes of paying franchise taxes or
other expenses of UbiquiTel Parent; and
(7) make Investments in any Person, provided that the fair market
value thereof, measured on the date each such Investment was
made or returned, as applicable, when taken together with all
other Investments made pursuant to this clause (7), does not
exceed the sum of $25.0 million, plus the aggregate amount of
the net reduction in Investments in any Person made pursuant
to this clause (7) on and after the Issue Date resulting from
dividends, repayments of loans or other transfers of property,
in each case to us or any Wholly-Owned Restricted Subsidiary
from such Person, except to the extent that any such net
reduction amount is included in the amount calculated pursuant
to clause (c) of the preceding paragraph or any other clause
of this paragraph; provided, however, that at the time of such
Investment, no Default or Event of Default shall have occurred
and be continuing (or result therefrom); provided further,
however, that such Investment shall be included in the
calculation of the amount of Restricted Payments made after
the Closing Date pursuant to clause (c) of the preceding
paragraph.
In addition, if any Person in which an Investment is made, which
Investment constitutes a Restricted Payment when made, thereafter becomes a
Restricted Subsidiary, all such Investments previously made in such Person
shall no longer be counted as Restricted Payments for purposes of calculating
the aggregate amount of Restricted Payments pursuant to clause (c) of the
second preceding paragraph to the extent such Investments would otherwise be
so counted.
For purposes of clause (3) above, the net proceeds received by us
from the issuance or sale of our Equity Interests either upon the conversion
of, or exchange for, Indebtedness of us or any Restricted Subsidiary shall be
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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 us upon such conversion or exchange, less any payment on account
of fractional shares, minus (b) all expenses incurred in connection with such
issuance or sale. In addition, for purposes of clause (3) and (4) above, the
net proceeds received by us from the issuance or sale of our Capital Stock
upon the exercise of any options or warrants of us or any Restricted
Subsidiary shall be deemed to be an amount equal to (a) the additional cash
consideration, if any, received by us upon such exercise, minus (b) all
expenses incurred in connection with such issuance or sale.
For purposes of this "Limitation on Restricted Payments" covenant,
if a particular Restricted Payment involves a non-cash payment, including a
distribution of assets, then such Restricted Payment shall be deemed to be an
amount equal to the cash portion of such Restricted Payment, if any, plus an
amount equal to the fair market value of the non-cash portion of such
Restricted Payment, as determined by our board of directors, whose good-faith
determination shall be conclusive and evidenced by a board resolution and, in
the case of fair market value of such noncash portion in excess of $5.0
million, accompanied by an opinion of an accounting, appraisal or investment
banking firm of national standing. Not later than the date of making any
Restricted Payment, we shall deliver to the trustee an officers' certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by this "Limitation on Restricted
Payments" covenant were computed, together with a copy of any board
resolution, fairness opinion or appraisal required by the indenture.
The amount of any Investment outstanding at any time shall be deemed
to be equal to the amount of such Investment on the date made, less the
return of capital, repayment of loans and re-turn on capital, including
interest and dividends, in each case, received by us or one of our Restricted
Subsidiaries in cash, up to the amount of such Investment on the date made.
LIMITATION ON INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
We cannot, and shall not permit any Restricted Subsidiary to, incur any
Indebtedness, including Acquired Debt, and we cannot issue any Disqualified
Stock and will not permit any of our Restricted Subsidiaries to issue any shares
of Preferred Stock, unless immediately after giving effect to the incurrence of
such Indebtedness, including Acquired. Debt, or the issuance of such
Disqualified Stock or Preferred 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 April 15, 2005 and (2) less than 6.0 to 1.0, if on
or after April 15, 2005 or (b) in the case of any incurrence of Indebtedness
prior to April 15, 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 Indebtedness"):
(1) the incurrence by us and our subsidiaries of Existing
Indebtedness;
(2) the incurrence by us and the guarantors of Indebtedness
represented by the notes and the guarantees;
(3) the incurrence by us and any guarantor of Indebtedness under
Credit Facilities; provided that the aggregate principal
amount of all Indebtedness of us and the guarantors
outstanding under the Credit Facilities at any time
outstanding, after giving effect to such incurrence, does not
exceed an amount equal to $250.0 million less the aggregate
amount of all net proceeds of asset sales applied by us or any
of our subsidiaries since the date of the Indenture to
permanently repay Indebtedness under the Credit Facilities
pursuant to the covenant described above under the caption
"--Repurchase at the Option of Holders--Repurchase if Asset
Sales Occur";
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(4) the incurrence by us or any of our 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
our business in an aggregate principal amount not to exceed
$5.0 million at any time outstanding;
(5) the incurrence by us or any of our Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net
proceeds of which are used to refund, refinance or replace,
Indebtedness, other than intercompany Indebtedness, that was
permitted by the Indenture to be incurred under the first
paragraph of this covenant or clauses (1), (2) or (11) of this
paragraph;
(6) the incurrence by us or any of our Restricted Subsidiaries of
intercompany Indebtedness between or among us and any of our
Wholly-Owned Restricted Subsidiaries that are guarantors;
provided, however, that:
(a) if we or any guarantor is the obligor on such
Indebtedness, such Indebtedness must be expressly
subordinated to the prior payment in full in cash of
all obligations with respect to the notes, in the
case of us, or the guarantee of such guarantor, in
the case of a guarantor; and
(b) (1) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being
held by a Person other than us or one of our
Wholly-Owned Restricted Subsidiaries and (2) any sale
or other transfer of any such Indebtedness to a
Person that is not either us or one of our
Wholly-Owned Restricted Subsidiaries, shall be
deemed, in each case, to constitute an incurrence of
such Indebtedness by us or such Restricted
Subsidiary, as the case may be, that was not
permitted by this clause (6);
(7) the incurrence by us or any of our Restricted Subsidiaries of
Hedging Obligations that are incurred for the purpose of
fixing or hedging interest rate risk with respect to any
floating rate Indebtedness that is permitted by the terms of
the Indenture to be outstanding, provided that the notional
amount of any such Hedging Obligation does not exceed the
amount of Indebtedness to which such Hedging Obligation
relates;
(8) the guarantee by us or any of the guarantors of Indebtedness
of us or a Restricted Subsidiary that was permitted to be
incurred by another provision of this covenant;
(9) 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; and
(10) the incurrence by us or any of our Restricted Subsidiaries of
Indebtedness (a) in respect of bid, performance or advance
payment bonds, standby letters of credit and appeal or surety
bonds entered into in the ordinary course of business and not
in connection with the borrowing of money, or (b) arising from
agreements providing for indemnification, adjustment of
purchase price or similar obligations incurred in connection
with the disposition of any business, assets or Restricted
Subsidiary in compliance with the terms of the indenture;
(11) the incurrence by us or any of our Restricted Subsidiaries of
additional Indebtedness (which may, but need not be, incurred
in whole or in Part under the Credit Facilities) 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 (11), not to
exceed $50.0 million; and
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(12) the incurrence by us of any Indebtedness under any unsecured
deferred promissory note payable to Sprint PCS pursuant to the
deferral of collected revenues provisions of the Consent and
Agreement between Sprint PCS and the lenders under our Credit
Facilities.
For purposes of determining compliance with this "Limitation on
Incurrence of Indebtedness and Issuance of Preferred Stock" covenant, in the
event that an item of proposed Indebtedness meets the criteria of more than
one of the categories of Permitted Indebtedness described in clauses (1)
through (12) above, or is entitled to be incurred pursuant to the first
paragraph of this covenant, we will be permitted to classify such item of
Indebtedness on the date of its incurrence or later reclassify all or a
portion of such item of Indebtedness, in any manner that complies with this
covenant; provided, that Indebtedness outstanding under the Credit Facilities
on the date of the indenture will be deemed to have been incurred on such
date in reliance on the exception provided in clause (3) of the definition of
Permitted Indebtedness.
NO SENIOR SUBORDINATED DEBT
The indenture will provide that we and the guarantors will not incur
any Indebtedness that pursuant to its terms is subordinate or junior in right
of payment to any Senior Indebtedness or any Permitted Indebtedness described
in clause (4) of the second paragraph under "--Limitation on Incurrence of
Indebtedness and Issuance of Preferred Stock," and senior in any respect in
right of payment to the notes or the guarantees; provided that the foregoing
limitation shall not apply to distinctions between categories of Senior
Indebtedness of us or a guarantor that exist by reason of any Liens or
guarantees arising or created in respect of some but not all such Senior
Indebtedness.
LIENS
We will not, and will not permit any Restricted Subsidiary to, create,
incur, assume or otherwise cause or suffer to exist or become effective any Lien
of any kind securing Indebtedness that is equal in right of payment with the
notes or the applicable guarantee, as the case may be, or is subordinated
Indebtedness, upon any of their property or assets, now owned or hereafter
acquired, unless all payments due under the indenture and the notes are secured
equally and ratably with, or prior to, in the case of subordinated Indebtedness,
the obligations so secured until such time as such obligations are no longer
secured by such Lien; provided that this restriction will not apply to Permitted
Liens.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
We will not, and will not permit any of our 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 us or any of our Restricted Subsidiaries, or with
respect to any other interest or participation in, or measured
by, its profits, or pay any Indebtedness owed to us or any of
our Restricted Subsidiaries;
(2) make loans or advances to us or any of our Restricted
Subsidiaries; or
(3) transfer any of its properties or assets to us or any of our
Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness or the Credit Facilities as in effect on
the date of the indenture and any amendments, modifications,
restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such
amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacement or refinancings are no
more restrictive, taken as a whole, with respect to such
dividend and other payment restrictions than those contained
in such Existing Indebtedness, as in effect on the date of the
indenture;
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(2) the indenture, the notes and the guarantees;
(3) applicable law;
(4) any instrument governing Indebtedness or Capital Stock of a
Person acquired by us or any of our Restricted Subsidiaries as
in effect at the time of such acquisition, except to the
extent such Indebtedness was incurred in connection with or in
contemplation of such acquisition, which encumbrance or
restriction is not applicable to any Person, or the properties
or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that,
in the case of Indebtedness, such Indebtedness was permitted
by the terms of the indenture to be incurred;
(5) customary non-assignment provisions in leases entered into in
the ordinary course of business;
(6) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions on the
property so acquired of the nature described in clause (3) of
the preceding paragraph;
(7) any agreement for the sale or other disposition of a
Restricted Subsidiary that restricts distributions by such
Restricted Subsidiary pending its sale or other disposition;
(8) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such
Permitted Refinancing Indebtedness are no more restrictive in
any material respect, taken as a whole, than those contained
in the agreements governing the Indebtedness being refinanced;
(9) Liens securing Indebtedness otherwise permitted to be incurred
pursuant to the provisions of the covenant described above
under the caption "--Liens" that limit the right of us or any
of our Restricted Subsidiaries to dispose of the assets
subject to such Lien;
(10) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements, asset or stock
purchase agreements and other similar agreements entered into
in the ordinary course of business; and
(11) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course
of business.
MERGER, CONSOLIDATION OR SALE OF ASSETS
We 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 our properties and assets substantially as an entirety
to, any Person, and shall not permit any of our 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 us and our 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 us with or a merger of us with or into any
other Person, we shall be the surviving Person of such merger
or consolidation, or (B) the Person formed by any
consolidation with or merger with or into us, or to which our
properties and assets or the properties and assets of us and
our 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
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District of Columbia and shall expressly assume by a
supplemental indenture executed and delivered to the
indenture and, in each case, the indenture, as so
supplemented, shall remain in full force and effect;
(2) immediately before and immediately after giving effect to such
transaction or series of transactions on a pro forma basis
including any Indebtedness incurred or anticipated to he
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) we 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 us immediately preceding the
transaction and (B) be permitted to incur at least $1.00 of
additional Indebtedness pursuant to clause (a) of the covenant
described above under the caption "Limitation on Incurrence of
Indebtedness and Issuance of Preferred Stock"; provided,
however, that the foregoing requirements shall not apply to
any transaction or series of transactions involving the sale,
assignment, conveyance, transfer or other disposition of the
properties and assets by any Wholly-Owned Restricted
Subsidiary to any other Wholly-Owned Restricted Subsidiary, or
the merger or consolidation of any Wholly-Owned Restricted
Subsidiary with or into any other Wholly-Owned Restricted
Subsidiary. The indenture will also provide that we may not,
directly or indirectly, lease all or substantially all of its
properties or assets, in one or more related transactions, to
any other Person.
In connection with any consolidation, merger, sale, assignment,
conveyance, transfer or other disposition contemplated by the foregoing
provisions, we shall deliver, or cause to be delivered, to the trustee, in
form and substance reasonably satisfactory to the trustee, an officers'
certificate stating that such consolidation, merger, sale, assignment,
conveyance, transfer, or other disposition and the supplemental indenture in
respect thereof, required under clause (1)(B) of the preceding paragraph,
comply with the requirements of the indenture and an opinion of counsel. Each
such officers' certificate shall set forth the manner of determination of our
compliance with clause (3) of the preceding paragraph.
For all purposes of the indenture and the notes, including the
provisions described in the two immediately preceding paragraphs and the
"Limitation on Incurrence of Indebtedness and Issuance of Preferred Stock"
and "Designation of Restricted and Unrestricted Subsidiaries" covenants,
subsidiaries of any Surviving Entity will, upon such transaction or series of
transactions, become Restricted Subsidiaries or Unrestricted Subsidiaries as
provided pursuant to the "Designation of Restricted and Unrestricted
Subsidiaries" covenant and all Indebtedness of the Surviving Entity and its
subsidiaries that was not Indebtedness of us and our 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 us under the indenture, and the
predecessor company shall be released from all its obligations and covenants
under the indenture and the notes.
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TRANSACTIONS WITH AFFILIATES
We will not, and will not permit any of our 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 us or the relevant Restricted Subsidiary than
those that would have been obtained in a comparable
transaction by us or such Restricted Subsidiary with an
unrelated Person; and
(2) We deliver to the trustee:
(a) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate
consideration in excess of $1.0 million, a resolution
of the board of directors set forth in an officers'
certificate certifying that such Affiliate
Transaction complies with this covenant and that such
Affiliate Transaction has been approved by a majority
of the disinterested members of the board of
directors; and
(b) with respect to any Affiliate Transaction or series
of related Affiliate Transactions involving aggregate
consideration in excess of $5.0 million, an opinion
as to the fairness to the holders of notes of such
Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment
banking firm of national standing.
The following items shall not be deemed to be Affiliate Transactions
and, therefore, will not he subject to the provisions of the prior paragraph:
(1) any employment, severance, stock option and other employee
benefit agreement entered into by us or any of our Restricted
Subsidiaries in the ordinary course of business;
(2) transactions between or among us and/or our Restricted
Subsidiaries;
(3) agreements in effect on the Issue Date, provided that each
amendment to any such agreement shall be subject to the
limitations of this covenant;
(4) payment of reasonable directors fees, expenses and
indemnification to Persons who are not otherwise Affiliates of
us; and
(5) Restricted Payments that are permitted by the provisions of
the indenture described above under the caption "--Limitation
on Restricted Payments."
ADDITIONAL GUARANTEES
If we or any of our Restricted Subsidiaries acquires or creates
another domestic Restricted Subsidiary after the date of the indenture, then
that newly acquired or created domestic Restricted Subsidiary must become a
guarantor and (1) execute a supplemental indenture satisfactory to the
trustee making the Restricted Subsidiary a party to the indenture, (2)
execute an endorsement of guarantee, and (3) deliver an opinion of counsel to
the trustee within 10 business days of the date on which it was acquired or
created.
DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
The board of directors may designate any Restricted Subsidiary as an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, all
outstanding Investments owned by us and our 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
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Payments under paragraph (c) of the covenant described above under the
caption "--Limitation on Restricted Payments" or Permitted investments, as
applicable. All such outstanding Investments will be valued at their fair
market value at the time of such designation. That designation will only be
permitted if such Restricted Payment would be permitted at that time and if
such Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary. The board of directors may redesignated any Unrestricted
Subsidiary to be a Restricted Subsidiary if the redesignation would not cause
a Default.
SALE AND LEASEBACK TRANSACTIONS
We will not, and will not permit any of our Restricted Subsidiaries
to, enter into any sale and leaseback transaction; provided that we or any
Restricted Subsidiary that is a guarantor may enter into a sale and leaseback
transaction if:
(1) We or that guarantor, as applicable, could have (a) incurred
Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction under the
tests in (a) and (b), if applicable, of the covenant described
above under the caption "--Limitation on Incurrence of
Indebtedness and Issuance of Preferred Stock" and (b) incurred
a Lien to secure such Indebtedness pursuant to the covenant
described above under the caption "--Liens";
(2) the gross cash proceeds of that sale and leaseback transaction
are at least equal to the fair market value, as determined in
good faith by the board of directors and set forth in an
officers' certificate delivered to the trustee, of the
property that is the subject of such sale and leaseback
transaction; and
(3) the transfer of assets in that sale and leaseback transaction
is permitted by, and we apply the proceeds of such transaction
in compliance with, the covenant described above under the
caption "--Repurchase at the Option of Holders--Repurchase if
Asset Sales Occur."
LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS IN WHOLLY OWNED
RESTRICTED SUBSIDIARIES
We will not, and will not permit any of our Restricted Subsidiaries to,
transfer, convey, sell, lease or otherwise dispose of any Equity Interests in
any Wholly Owned Restricted Subsidiary of us to any Person, other than us or a
Wholly Owned Restricted Subsidiary of us, 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 net cash proceeds from such transfer, conveyance, sale,
lease or other disposition are applied in accordance with the
covenant described above under the caption "Repurchase at the
Option of Holders--Repurchase if Asset Sales Occur."
In addition, we will not permit any Wholly Owned Restricted Subsidiary
of us 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 us or a Wholly Owned Restricted Subsidiary of us.
BUSINESS ACTIVITIES
We will not, and will not permit any Restricted Subsidiary to, engage
in any business other than Permitted Businesses, except to the extent that would
not be material to us and our subsidiaries, taken as a whole.
PAYMENTS FOR CONSENT
We will not, and will not permit any of our subsidiaries to,
directly or indirectly, pay or cause to he paid any consideration to or for
the benefit of any holder of notes for or as an inducement to any consent,
waiver or amendment of any of the terms or provisions of the indenture or the
notes unless such consideration is offered to be
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paid and is paid to all holders of the notes that consent, waiver or agree to
amend in the time frame set forth in the solicitation documents relating to
such consent, waiver or agreement.
REPORTS
Whether or not required by the Securities and Exchange Commission,
so long as any notes arc outstanding, we will furnish to the holders of
notes, within 15 days of the time periods specified in the Securities and
Exchange Commission's rules and regulations:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Securities and
Exchange Commission on Forms 10-0 and 10-K if we were required
to file such Forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
and, with respect to the annual information only, a report on
the annual financial statements by our certified independent
accountants; and
(2) all current reports that would be required to be filed with
the Securities and Exchange Commission on Form 8-K if we were
required to file such reports.
If we have designated any of our subsidiaries as Unrestricted
Subsidiaries, then the quarterly and annual financial information required by
the preceding paragraph shall include a reasonably detailed presentation, either
on the face of the financial statements or in the footnotes thereto, and in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, of the financial condition and results of operations of us and our
Restricted Subsidiaries separate from the financial condition and results of
operations of our Unrestricted Subsidiaries.
In addition, whether or not required by the Securities and Exchange
Commission, we will file a copy of all of the information and reports
referred to in clauses (1) and (2) above with the Securities and Exchange
Commission for public availability within the time periods specified in the
Securities and Exchange Commission's rules and regulations, unless the
Securities and Exchange Commission will not accept such a filing, and make
such information available to securities analysts and prospective investors
upon request.
EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on the
notes, whether or not prohibited by the subordination
provisions of the indenture;
(2) default in payment when due of the principal of, or premium,
if any, on the notes, whether or not prohibited by the
subordination provisions of the indenture;
(3) failure by us or any of our Restricted Subsidiaries to comply
with the provisions described under the captions "--Repurchase
at the Option of Holders--Repurchase if Change of Control
Occurs," "--Repurchase at the Option of Holders--Repurchase if
Asset Sales Occur," and "--Selected Covenants--Merger,
Consolidation or Sale of Assets."
(4) failure by us or any of our Restricted Subsidiaries for 60
days after written notice to comply with any of the other
agreements in the indenture has been given to us by (a) the
trustee under the indenture, or (b) the holders of at least
25% in aggregate principal amount of the then outstanding
notes;
(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 us or any of
our Restricted Subsidiaries, or the payment of which is
guaranteed by us or any of our Restricted
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Subsidiaries, whether such Indebtedness or guarantee now
exists, or is created after the date of the Indenture, if
that default:
(a) is caused by a failure to pay principal at final
stated maturity of such Indebtedness (a "Payment
Default"); or
(b) results in the acceleration of such Indebtedness
prior to its stated maturity;
and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default
or the maturity of which has been so accelerated, aggregates
$7.5 million or more;
(6) failure by us or any of our Restricted Subsidiaries to pay
final judgments aggregating in excess of $7.5 million, which
judgments are not paid, discharged or stayed for a period of
60 days;
(7) except as permitted by the indenture, any guarantee of
UbiquiTel Parent or any Significant Subsidiary 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
UbiquiTel Parent or any guarantor that is a Significant
Subsidiary, or any Person acting on behalf of any such
guarantor, shall deny or disaffirm its obligations under its
guarantee;
(8) certain events of bankruptcy or insolvency with respect to us
or any of our Significant Restricted Subsidiaries;
(9) (a) if any Credit Facility is not in existence, any event
occurs that causes, subject to any applicable grace period of
waiver, an Event of Termination under any of the Sprint
Agreements or (b) if any Credit Facility is in existence,
Spring shall have commenced to exercise any remedy under the
Sprint Agreements (other than Section 11.6.3 of the Management
Agreement) by reason of the occurrence of an Event of
Termination; and
(10) if on or prior to July 31, 2000, UbiquiTel Parent has not
received at least $100 million of gross proceeds from either
(a) the completion of its proposed initial public offering of
its common stock or (b) the issuance of equity in a private
placement, and in each case, has contributed all net proceeds
therefrom, except up to $1.25 million, to UbiquiTel Operating
Company.
In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, wit Ii respect to us, any Restricted Subsidiary
that is a Significant Subsidiary or any group of Restricted Subsidiaries
that, taken together, would constitute a Significant Subsidiary, all
outstanding notes will become due and payable immediately without further
action or notice. If any other Event of Default occurs and is continuing, the
trustee or the holders of at least 25% in principal amount of the then
outstanding notes may declare to be immediately due and payable (i) if prior
to April 15, 2005, the Accreted Value or (ii) if on or after April 15, 2005,
the principal amount, in each case, of all notes then outstanding, plus
accrued and unpaid interest to the date of acceleration. In order to effect
such acceleration, the trustee or holders of at least 25% in principal amount
of the outstanding notes shall deliver notice in writing to us and the
trustee specifying the respective Event of Default and that such notice is a
"notice of acceleration" (the "Acceleration Notice"), and the same (1) shall
become immediately due and payable or (2) if there are any amounts
outstanding under the Credit Facilities, shall become immediately due and
payable upon the first to occur of an acceleration under the Credit
Facilities or five Business Days after receipt by us and the agent under the
Credit Facilities of such Acceleration Notice, but only if such Event of
Default is then continuing.
Holders of the notes may not enforce the indenture or the notes
except as provided in the indenture. Subject to certain limitations, holders
of a majority in principal amount of the then outstanding notes may direct
the trustee in its exercise of any trust or power. The trustee may withhold
from holders of the notes notice of any continuing Default or Event of
Default, except a Default or Event of Default relating to the payment of
principal, premium, liquidated damages or interest, if it determines that
withholding notice is in their interest.
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The holders of a majority in aggregate principal amount of the notes
then outstanding by notice to the trustee may on behalf of the holders of all
of the notes waive any existing Default or Event of Default and its
consequences under the indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the notes.
In the case of any Event of Default occurring by reason of any
willful action or inaction taken or not taken by or on behalf of us with the
intention of avoiding payment of the premium that we would have had to pay if
we then had elected to redeem the notes pursuant to the optional redemption
provisions of the indenture, an equivalent premium shall also become and be
immediately due and payable to the extent permitted by law upon the
acceleration of the notes, If an Event of Default occurs prior to April 15,
2005, by reason of any willful action or inaction taken or not taken by or on
behalf of us with the intention of avoiding the prohibition on redemption of
the notes prior to April 15, 2005, then the premium specified in the
indenture shall also become immediately due and payable to the extent
permitted by law upon the acceleration of the notes.
We are required to deliver to the trustee annually a statement
regarding compliance with the indenture. Upon becoming aware of any Default
or Event of Default, we are required to deliver to the trustee a statement
specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of us or
any guarantor, as such, shall have any liability for any obligations of us or
the guarantors under the notes, the indenture or the guarantees or for any
claim based on, in respect of, or by reason of, such obligations or their
creation. Each holder of notes by accepting a note waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the notes. The waiver may not be effective to waive liabilities
under the federal securities laws.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
We may. at our option and at any time, elect to have all of our
obligations discharged with respect to the outstanding notes and all obligations
of the guarantors discharged with respect to their guarantees ("Legal
Defeasance") except for:
(1) the rights of holders of outstanding notes to receive payments
in respect of the principal of. premium, if any, liquidated
damages, if any, and interest on such notes when such payments
are due from the trust referred to below;
(2) Our obligations with respect to the notes concerning issuing
temporary notes, registration of notes, mutilated, destroyed,
lost or stolen notes and the maintenance of an office or
agency for payment and money for security payments held in
trust;
(3) the rights, powers, trusts, duties and immunities of the
trustee, and our obligations in connection therewith; and
(4) the Legal Defeasance provisions of the indenture.
In addition, we may, at our option and at any time, elect to have the
obligations of us and the guarantors. released with respect to certain covenants
that are described in the indenture ("Covenant Defeasance") and thereafter any
omission to comply with those covenants shall not constitute a Default or Event
of Default with respect to the notes. In the event Covenant Defeasance occurs,
certain events, not including non-payment, bankruptcy, receivership,
rehabilitation arid insolvency events, described under "Events of Default" will
no longer constitute an Event of Default with respect to the notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
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(1) We must irrevocably deposit with the trustee, in trust, for
the benefit of the holders of the notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof,
in such amounts as will be sufficient, in the opinion of a
nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest on the
outstanding notes on the stated maturity or on the applicable
redemption date, as the case may be, and we must specify
whether the notes are being defeased to maturity or to a
particular redemption date;
(2) in the case of Legal Defeasance, we shall have delivered to
the trustee an opinion of counsel reasonably acceptable to the
trustee confirming that (a) we have received from, or there
has been published by, the Internal Revenue Service a ruling
or (b) since the date of the indenture, there has been a
change in the applicable federal income tax law, in either
case to the effect that, and based thereon such opinion of
counsel shall confirm that. the holders of the outstanding
notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and
will be subject to federal income tax on the same amounts, in
the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, we shall have delivered to
the trustee an opinion of counsel reasonably acceptable to the
trustee confirming that the holders of the outstanding notes
will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be
continuing either: (a) on the date of such deposit other than
a Default or Event of Default resulting from the borrowing of
funds to be applied to such deposit; or (b) insofar as Events
of Default from bankruptcy or insolvency events are concerned,
at any time in the period ending on the 91st day after the
date of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not result
in a breach or violation of. or constitute a default under any
material agreement or instrument, other than the indenture, to
which we or any of our Restricted Subsidiaries is a party or
by which we or any of our Restricted Subsidiaries is bound;
(6) we must have delivered to the trustee an opinion of counsel to
the effect that, assuming no intervening bankruptcy of us
between the date of deposit and the 91st day following the
deposit and assuming that no holder is an "insider" of us
under applicable bankruptcy law, after the 91st day following
the deposit, the trust funds will not be subject to the effect
of any applicable bankruptcy, insolvency, reorganization or
similar laws affecting creditors' rights generally;
(7) we must deliver to the trustee an officers' certificate
stating that the deposit was not made by us with the intent of
preferring the holders of notes over our other creditors with
the intent of defeating, hindering, delaying or defrauding
creditors of us or others; and
(8) we must deliver to the trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent
relating to the Legal Defeasance or the Covenant Defeasance
have been complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the
indenture, the notes or the guarantees may be amended or supplemented with
the consent of the holders of at least a majority in aggregate principal
amount at maturity of the then outstanding notes, including, without
limitation, consents obtained in connection with a purchase of, or tender
offer or exchange offer for, notes, and any existing default or compliance
with any provision of the indenture or the notes may be waived with the
consent of the holders of a majority in aggregate principal
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amount at maturity of the then outstanding notes including, without
limitation, consents obtained in connection with a purchase of, or tender
offer or exchange offer for, notes.
Without the consent of each holder adversely affected, an amendment
or waiver may not, with respect to any notes held by a non-consenting holder:
(1) reduce the Accreted Value of the then outstanding senior
subordinated discount notes if prior to April 15, 2005 or the
aggregate of the principal amount of notes if after April 15,
2005 whose holders must consent to an amendment, supplement or
waiver;
(2) reduce the principal of or change the fixed maturity of any
note or alter the provisions with respect to the redemption of
the notes, other than provisions relating to the covenants
described above under the captions "--Repurchase at the Option
of Holders-- Repurchase if Change of Control Occurs" and
"--Repurchase if Asset Sales Occur";
(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, liquidated damages, if any,
or interest on the notes, except a rescission of acceleration
of the notes by the holders of at least a majority in
aggregate principal amount of the notes and a waiver of the
payment default that resulted from such acceleration;
(5) make any note payable in money other than that stated in the
notes;
(6) make any change in the provisions of the indenture relating to
waivers of past Defaults or the rights of holders of notes to
receive payments of principal of or premium, if any,
liquidated damages, if any, or interest on the notes;
(7) waive a redemption payment with respect to any note. other
than a payment required by one of the covenants described
above under the captions "--Repurchase at the Option of
Holders--Repurchase if Change of Control Occurs" and
"--Repurchase if Asset Sales Occur"; or
(8) make any change in the preceding amendment and waiver
provisions.
Notwithstanding the preceding, without the consent of any holder of
notes, we and the trustee may amend or supplement the indenture 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 our obligations to holders of
notes in the case of a merger or consolidation or sale of all
or substantially all of our assets;
(4) to make any change that would provide any additional rights or
benefits to the holders of notes or that does not adversely
affect the legal rights under the indenture of any holder;
(5) to comply with requirements of the Securities and Exchange
Commission in order to effect or maintain the qualification of
the Indenture under the Trust Indenture Act;
(6) to add a guarantor under the indenture; or
(7) to evidence and provide the acceptance of the appointment of a
successor trustee under the indenture.
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CONCERNING THE TRUSTEE
If the trustee becomes a creditor of us or any guarantor, the
indenture limits its right to obtain payment of claims in certain cases, or
to realize on certain property received in respect of my such claim as
security or otherwise. The trustee will he permitted to engage in other
transactions; however, if it acquires any conflicting interest it must
eliminate such conflict within 90 days, apply to the Securities and Exchange
Commission for permission to continue or resign.
The holders of a majority in principal amount of the then
outstanding notes will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the trustee,
subject to certain exceptions. The indenture provides that in case an Event
of Default shall occur and be continuing, the trustee will be required, in
the exercise of its power, to use the degree of care of a prudent man in the
conduct of his own affairs. Subject to such provisions, the trustee will be
under no obligation to exercise any of its rights or powers under the
indenture at the request of any holder of notes, unless such holder shall
have offered to the trustee security and indemnity satisfactory to it against
any loss, liability or expense.
CERTAIN DEFINITIONS
Set forth below are many of the defined terms used in the indenture.
Reference is made to the indenture for a full disclosure of all such terms,
as well as any other capitalized terms used herein for which no definition is
provided.
"ACCRETED VALUE" of any outstanding 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 or prior to
the date of determination and (b) for the shorter period, if
any, from the end of the immediately preceding six-month or
shorter period, as the case may be, to the date of
determination, plus
(3) accrued and unpaid interest to the date such Accreted Value is
paid (without duplication of any amount set forth in (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.
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"ACQUIRED DEBT" means, with respect to any specified Person:
(1) indebtedness of any other Person existing at the time such
other Person is merged with or into or became a subsidiary of
such specified Person, whether or not such Indebtedness is
incurred in connection with, or in `contemplation of, such
other Person merging with or into, or becoming a subsidiary
of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired
by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise. For purposes of this definition, the terms
"controlling," "controlled by" and "under common control with" shall have
correlative meanings.
"ANNUALIZED OPERATING CASH FLOW" means Operating Cash Flow, for the
latest two full fiscal quarters on which consolidated financial statements of us
are available multiplied by two.
"ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction
means, at the time of determination, the present value of the obligation of
the lessee for net rental payments during the remaining term of the lease
included in such sale and leaseback transaction including any period for
which such lease has been extended or may, at the option of the lessor, be
extended. Such present value shall be calculated using a discount rate equal
to the rate of interest implicit in such transaction, determined in
accordance with GAAP.
"BENEFICIAL OWNER" has the meaning assigned to such tern in Rule
13d-3 and Rule 13d-5 under the Securities Exchange Act of 1934, except that
in calculating the beneficial ownership of any particular "person," as such
term is used in Section 13(d)(3) of the Securities Exchange Act of 1934,
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.
"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.
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other
equivalents, however designated, of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests, whether general or
limited; and
(4) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"CASH EQUIVALENTS" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured
by the United States government or any agency or
instrumentality thereof. provided that the full faith and
credit of the United States is pledged in support thereof,
having maturities of less than one year from the date of
acquisition;
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(3) certificates of deposit and eurodollar time deposits with
maturities of less than one year from the date of acquisition,
bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case, with any domestic
commercial bank having capital and surplus in excess of $500
million and a Thompson Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses
(2) and (3) above entered into with any financial institution
meeting the qualifications specified in clause (3) above;
(5) commercial paper having the highest rating obtainable from
Moody's Investors Service, Inc. or Standard & Poor's
Corporation and in each case maturing prior to one year after
the date of acquisition; and
(6) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses
(1) through (5) of this definition.
"CLOSING DATE" means April 11, 2000, the date on which the notes were
originally issued under the indenture.
"CONSOLIDATED DEBT" means the aggregate amount of Indebtedness of us
and our 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 us as of our most recently completed
fiscal quarter 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 hankers' acceptance
financing and net costs (including amortization of discounts) associated with
interest rate swap and similar agreements and with foreign currency hedge,
change and similar agreements and (4) the product of (a) all dividend
payments, whether or not in cash, on any series of Preferred Stock of such
Person or any of its Restricted Subsidiaries, other than dividend payments on
Capital Stock payable solely in Capital Stock of such Person (other than
Disqualified Stock) or to such Person or its Restricted Subsidiaries, times
(b) a fraction, the numerator of which is one and the denominator of which is
one minus the then current combined federal, state and local statutory tax
rate of such Person, expressed as a decimal, in each case, on a consolidated
basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, with respect to any specified
Person for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis, determined
in accordance with GAAP; provided that:
(1) the Net Income, but not loss, of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity
method of accounting shall be included only to the extent of
the amount of dividends or distributions paid in cash to the
specified Person or a Wholly-owned Restricted Subsidiary
thereof;
(2) the Net Income of any Restricted Subsidiary shall be excluded
to the extent that the declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of that
Net Income is not at the date of determination permitted
without any prior governmental approval that has not been
obtained or, directly or indirectly, by operation of the terms
of its charter or any agreement,
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instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Restricted
Subsidiary or its stockholders;
(3) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such
acquisition shall be excluded; and
(4) the cumulative effect of a change in accounting principles
shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any
date, the sum of:
(1) the consolidated equity of the common stockholders of such
Person and its consolidated subsidiaries as of such date; plus
(2) the respective amounts reported on such Person's balance sheet
as of such date with respect to any series of Preferred Stock,
other than Disqualified Stock, that by its terms is not
entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of
the year of such declaration and payment, but only to the
extent of any cash received by such Person upon issuance of
such Preferred Stock.
"CREDIT FACILITIES" means the Credit Agreement, dated as of March
31, 2000, among UbiquiTel Parent, UbiquiTel Operating Company, various banks
and Paribas as agent, together with the related documents (including without
limitation, any guarantee agreements and security documents), as such
agreements may be amended, restated, modified, renewed, refunded, replaced or
refinanced in whole or in part from time to time, including any agreement
extending the maturity of, refinancing, replacing or otherwise restructuring
(including increasing the amount of available borrowings thereunder or adding
our subsidiaries as additional borrowers or guarantors thereunder) all or any
portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.
"DEFAULT" means any event that is, or with the passage of time or
the giving of notice or both would be, an Event of Default.
"DESIGNATED SENIOR INDEBTEDNESS" means (a) Indebtedness under the
Credit Facilities, whether outstanding on the date of issuance of a payment
blockage notice or thereafter incurred, and (b) after payment of all
obligations under the Credit Facilities, any other Senior Indebtedness
permitted to be incurred under the indenture which, at the time of
determination, has an aggregate principal amount of at least $25.0 million
and that has been designated by us in writing to the trustee as "Designated
Senior Indebtedness."
"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 us 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: we may not repurchase or redeem any such Capital Stock pursuant
to such provisions unless such repurchase or redemption complies with the
covenant described above under the caption "--Selected Covenants--Limitation
on Restricted Payments."
"EQUITY INTERESTS" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock, hut excludes any debt security that is
convertible into, or exchangeable for, Capital Stock.
"EVENT OF TERMINATION" means any of the events described in (1)
Section 11.3 of the Management Agreement; (2) Section 13.2 of the Trademark
Agreement; or (3) Section 13.2 of the Spectrum Trademark Agreement.
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"EXISTING INDEBTEDNESS" means the aggregate principal amount of
Indebtedness of us and our Restricted Subsidiaries in existence on the date
of the indenture, until such amounts are repaid.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant
segment of the accounting profession, which are in effect from time to time.
"GOVERNMENT SECURITIES" means (1) any security which is (a) a direct
obligation of the United States of America for the payment of which the full
faith and credit of the United States of America is pledged or (b) an
obligation of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation of the
United States of America, which, in either case, is not callable or
redeemable at the option of the issuer thereof, and (2) any depository
receipt issued by a bank, as defined in the Securities Act, as custodian with
respect to any Government Securities and held by such bank for the account of
the holder of such depository receipt. or with respect to any specific
payment of principal of or interest on any Government Securities which is so
specified and 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.
"HEDGING OBLIGATIONS" means, with respect to any Person. the
obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements
and interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such
Person against fluctuations in interest rates.
"INDEBTEDNESS" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent, in respect of:
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments
or letters of credit, or reimbursement agreements in respect
thereof;
(3) banker's acceptances;
(4) representing Capital Lease Obligations;
(5) the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued
expense or trade payable; or
(6) representing any Hedging Obligations;
if and to the extent any of the preceding, other than letters of credit and
Hedging Obligations, should appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person, whether or not such Indebtedness is assumed by
the specified Person, and, to the extent not otherwise included, the guarantee
by such Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the Accreted Value thereof, in the case of any Indebtedness
issued with original issue discount; and
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(2) the principal amount thereof, in the case of any other
Indebtedness.
"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 we or any Restricted Subsidiary sells or otherwise disposes of any
Equity Interests of any direct or indirect Restricted Subsidiary of us such
that, after giving effect to any such sale or disposition, such Person is no
longer a Restricted Subsidiary of us, we shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair
market value of the Equity Interests of such Restricted Subsidiary not sold
or disposed of in an amount determined as provided in the final paragraph of
the covenant described above under the caption "--Selected
Covenants--Limitation on Restricted Payments." The acquisition by us or any
Restricted Subsidiary of a Person that holds an Investment in a third Person
shall be deemed to he an Investment by us or such Restricted Subsidiary in
such third Person in an amount equal to the fair market value of the
Investment held by the acquired Person in such third Person in an amount
determined as provided in the final paragraph of the covenant described above
under the Caption "--Selected Covenants--Limitation or Restricted Payments."
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law, including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (other than precautionary filings
made with respect to operating leases and sales of receivables), or
equivalent statutes, of any jurisdiction, other than any lease properly
classified as an operating lease under GAAP or intellectual property
licensing agreements.
"NET INCOME" means, with respect to any Person, the net income
(loss) of such Person and its Restricted Subsidiaries, determined in
accordance with GAAP and before any reduction in respect of Preferred Stock
dividends, excluding, however:
(1) any gain, but not loss, together with any related provision
for taxes on such gain, but not loss, realized in connection
with: (a) any asset sale; or (b) the disposition of any
securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Restricted Subsidiaries; and
(2) any extraordinary gain, but not loss, together with any
related provision for taxes on such extraordinary gain, but
not loss.
"NON-RECOURSE DEBT" means Indebtedness:
(1) as to which neither us nor any of our Restricted Subsidiaries
(a) provides credit support of any kind, including any
undertaking, agreement or instrument that would constitute
Indebtedness, (b) is directly or indirectly liable as a
guarantor or otherwise, or (c) constitutes the lender;
(2) no default with respect to which, including any rights that
the holders thereof may have to take enforcement action
against an Unrestricted Subsidiary, would permit upon notice,
lapse of time or both any holder of any other Indebtedness,
other than the notes, of us or any of our Restricted
Subsidiaries to declare a default on such other Indebtedness
or cause the payment thereof to be accelerated or payable
prior to its stated maturity; and
(3) as to which the lenders have been notified in writing that
they will not have any recourse to the stock or assets of us
or any of our Restricted Subsidiaries.
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"OPERATING CASH FLOW" means, with respect to any Person for any
fiscal quarter, (a) Consolidated Net Income, plus (i) depreciation, (ii)
amortization, (iii) other non-cash charges, other than any such non-cash
items to the extent that it represents an accrual of or reserve for cash
expenditures in any future period or constituting an extraordinary or
non-recurring item, (iv) Consolidated Interest Expense, and (v) all income
taxes of such Person paid or accrued in accordance with GAAP for such Person,
other than income taxes attributable to extraordinary or non-recurring gains
or losses, minus (b) all non-cash items increasing Consolidated Net Income
for such period, other than any such non-cash item to the extent that it will
result in the receipt of cash payments in any future period, 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 a) have been a Restricted Subsidiary at any time
during such fiscal quarter and (3) if such Person or any Restricted
Subsidiary of such Person 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.
"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.
"PERMITTED INVESTMENTS" means:
(1) any Investment in us or in a Wholly-owned Restricted
Subsidiary of us that is a guarantor;
(2) any Investment in Cash Equivalents;
(3) any Investment by us or any Restricted Subsidiary of us in a
Person, if as a result of such Investment:
(a) such Person becomes a Wholly-Owned Restricted
Subsidiary of us; or
(b) such Person is merged, consolidated or amalgamated
with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, us or a
Wholly-Owned Restricted Subsidiary of us;
(4) any Investment made as a result of the receipt of non-cash
consideration from an asset sale that was made pursuant to and
in compliance with the covenant described above under the
caption "--Repurchase at the Option of Holders--Repurchase if
Asset Sales Occur";
(5) any acquisition of assets solely in exchange for the issuance
of our Equity Interests, other than Disqualified Stock;
(6) 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 (6) since the date of the indenture, not to
exceed $5.0 million;
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(7) guarantees of Indebtedness of a Wholly Owned Restricted
Subsidiary given by us or another Wholly Owned Restricted
Subsidiary and guarantees of our Indebtedness given by any
Restricted Subsidiary, in each case, not otherwise in
violation of the terms of the Indenture;
(8) accounts receivable created or acquired in the ordinary course
of our business or any Subsidiary and Investments arising from
transactions by us or any Subsidiary with trade creditors or
customers in the ordinary course of business, including any
such Investment received pursuant to any plan or
reorganization or similar arrangement pursuant to bankruptcy
or insolvency of such trade creditors or customers or
otherwise in settlement of a claim;
(9) investments in prepaid expenses, negotiable instruments held
for collection, and lease, utility and workers' compensation,
performance and other similar deposits; and
(10) exchange of our Preferred Stock into Capital Stock or our
non-voting Capital Stock into voting Capital Stock, all in
accordance with the terms of our certificate of incorporation
as in effect on the date of the indenture.
"PERMITTED LIENS" means:
(1) Liens on the assets of us and any guarantor securing
Indebtedness and other obligations under the Credit Facilities
that were permitted by the terms of the indenture to be
incurred;
(2) Liens in favor of us or the guarantors;
(3) Liens on property of a Person existing at the time such Person
is merged with or into or consolidated with us or any
Restricted Subsidiary; 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 us or the
Restricted Subsidiary;
(4) Liens on property existing at the time of acquisition thereof
by us or any Restricted Subsidiary of us, provided that such
Liens were in existence prior to the contemplation of such
acquisition;
(5) Liens and deposits made to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or
other obligations of a like nature incurred in the ordinary
course of business;
(6) Liens to secure Indebtedness, including Capital Lease
Obligations, permitted by clause (4) of the second paragraph
of the covenant entitled "Limitation on Incurrence of
Indebtedness and Issuance of Preferred Stock" covering only
the assets acquired with such Indebtedness;
(7) Liens existing on the date of the indenture;
(8) Liens 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;
(9) Liens for security for payment of workers' compensation or
other insurance or arising under workers' compensation laws or
similar legislation;
(10) Liens relating to zoning restrictions, easements, licenses,
reservations, title defects, rights of others for rights of
way, utilities, sewers, electric lines, telephone or telegraph
lines, and other similar purposes, provisions, covenants,
conditions, waivers, restrictions on the use of property or
irregularities of title and, with respect to leasehold
interests, mortgages, obligations, liens and
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other encumbrances incurred, created, assumed or permitted to
exist and arising by, through or under a landlord or owner of
the leased property, with or without consent of the lessee,
none of which materially impairs the use of any parcel of
property material to the operation of our business or any
subsidiary or the value of such property for the purpose of
such business;
(11) Liens arising by operation of law in favor of landlords,
carriers, warehousemen, bankers, mechanics, materialmen,
laborers, employees or suppliers, incurred in the ordinary
course of business for sums which are not yet delinquent or
are being contested in good faith by negotiations or by
appropriate proceedings which suspend the collection thereof;
(12) Liens arising from leases, subleases, licenses or other
similar rights granted to third Persons not interfering with
the ordinary course of our business or our subsidiaries;
(13) any Lien securing reimbursement obligations with respect to
letters of credit that encumber documents and other property
relating to such letters of credit; and
(14) Liens incurred in the ordinary course of business of us or any
Restricted Subsidiary with respect to obligations that do not
exceed $5.0 million at any one time outstanding.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of us or
any of our Restricted Subsidiaries issued in exchange for, or the net proceeds
of which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of us or any of our Restricted Subsidiaries, other than
intercompany Indebtedness; provided that:
(1) the principal amount, or accreted value, if applicable, of
such Permitted Refinancing Indebtedness does not exceed the
principal amount of, or accreted value, if applicable, plus
the amount of any premium required to be paid in connection
with such refinancing pursuant to the terms of the
Indebtedness refinanced or the amount of any premium
reasonably determined by us as necessary to accomplish such
refinancing, plus accrued interest on, the Indebtedness so
extended, refinanced, renewed, replaced, defeased or refunded,
plus the amount of reasonable expenses incurred in connection
therewith;
(2) such Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted
Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of
payment to the notes, such Permitted Refinancing Indebtedness
has a final maturity date later than the final maturity date
of, and is subordinated in right of payment to, the notes on
terms at least as favorable to the holders of notes as those
contained in the documentation governing the Indebtedness
being extended, refinanced, renewed, replaced, defeased or
refunded; and
(4) such Indebtedness is incurred either by us or by our
Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or
refunded.
"PERSON" means any individual, corporation, partnership, limited
liability company, joint venture, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"PREFERRED STOCK" of any Person means any Capital Stock of such
Person that has preferential rights to any other Capital Stock of such Person
with respect to dividends or redemptions or upon liquidation.
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"PRINCIPALS" means Donaldson, Lufkin & Jenrette Securities Corporation,
BET Associates, L.P., The Walter Group, Inc., Donald A. Harris, James Parsons,
Paul F. Judge, US Bancorp, Brookwood UbiquiTel Investors, LLC, CBT Wireless
Investments, L.L.C., SpectraSite Communications and New Ventures, L.L.C.
"RESTRICTED INVESTMENT" means any Investment that is not a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"SENIOR INDEBTEDNESS" means:
(1) all Indebtedness outstanding under Credit Facilities and all
Hedging Obligations with respect thereto, whether incurred on
the date of the indenture or thereafter;
(2) any other Indebtedness incurred by us and the guarantors,
unless the instrument under which such Indebtedness is
incurred expressly provides that it is on a parity with or
subordinated in right of payment to the notes or the
guarantees, as the case may be; and
(3) all obligations with respect to items listed in the preceding
clauses (1) and (2) (including any interest accruing
subsequent to the filing of a petition in bankruptcy at the
rate provided for in the documentation with respect thereto,
whether or not such interest is an allowed claim under
applicable law).
Notwithstanding anything to the contrary in the preceding, Senior
Indebtedness will not include (whether or not constituting Indebtedness as
defined in the indenture):
(1) any liability for federal, state, local or other taxes owed or
owing by us;
(2) any Indebtedness of us to any of our subsidiaries or other
Affiliates (other than Indebtedness owing under the Credit
Facilities);
(3) any trade payables;
(4) Indebtedness represented by Disqualified Stock;
(5) Indebtedness which is, by its express terms, subordinated in
right of payment to any other Indebtedness of us; or
(6) the portion of any Indebtedness that is incurred in violation
of the indenture to the extent so incurred, provided, however,
that any portion of Indebtedness incurred by us under the
Credit Facilities in violation of the second paragraph of the
covenant described under the caption "Limitation on Incurrence
of Indebtedness and Issuance of Preferred Stock" solely as the
result of a Default or Event of Default having occurred and
continuing or caused by such incurrence shall only be excluded
from the definition of Senior indebtedness in the event that
the Trustee or holders of at least 25% of the aggregate
principal amount of the notes then outstanding shall have
delivered a notice to the administrative agent for the lenders
under the Credit Facilities of such Default or Event of
Default prior to such incurrence.
"SIGNIFICANT SUBSIDIARY" means any subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act of 1933, as such regulation is in
effect on the date hereof.
"SPRINT AGREEMENTS" means the (1) Sprint PCS Management Agreement
between Sprint Spectrum L.P., WirelessCo, L.P. and UbiquiTel Holdings, Inc.,
dated as of October 15, 1998 as amended on October 15, 1998 and in December
1999, and any exhibits, schedules or addendum thereto, as such may be further
amended, modified or
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supplemented from time to time (the "Management Agreement"); (2) Sprint PCS
Services Agreement between Sprint Spectrum L.P. and UbiquiTel Holdings, Inc.,
dated as of October 15, 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 UbiquiTel Holdings, Inc., dated as of
October 15, 1998, and any exhibits, schedules or addendum thereto, as such
may be amended, modified or supplemented from time to lime (the "Trademark
Agreement"); and (4) Sprint Spectrum Trademark and Service Mark License
Agreement between Sprint Spectrum L.P. and UbiquiTel Holdings, Inc., dated as
of October 15, 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.
"TELECOMMUNICATIONS ASSETS" means, with respect to any Person, any
asset that is utilized by such Person, directly or indirectly, for the
design, development, construction, installation, integration, operation,
management or provision of PCS telecommunications equipment, inventory,
technology, systems and/or services. Telecommunications Assets shall include
stock, joint venture or partnership interests of an entity where
substantially all of the assets of the entity consist of Telecommunications
Assets.
"TOTAL INVESTED CAPITAL" means at any time of determination, the sum
of, without duplication, (i) the total amount of equity contributed to us as
of the Closing Date (being $42.0 million), plus (ii) the aggregate net cash
proceeds received by us 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 Indebtedness or from the
exercise of options, warrants or rights to purchase Capital Stock (other than
Disqualified Stock)), subsequent to the Closing Date, other than to a
Restricted Subsidiary, plus (iii) 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 (iv) an
amount equal to the net Investment (as of the date of determination) we
and/or any of our Restricted Subsidiaries has made in any subsidiary that has
been designated as an Unrestricted Subsidiary after the Closing Date upon its
redesignation as a Restricted Subsidiary in accordance with the covenant
described under "--Selected Covenants----Designation of Restricted and
Unrestricted Subsidiaries," plus (v) Consolidated Debt, minus (vi) the
aggregate amount of all Restricted Payments declared or made on or after the
Closing Date.
"UNRESTRICTED SUBSIDIARY" means any subsidiary of us that is
designated by the board of directors as an Unrestricted Subsidiary pursuant
to a board resolution, but only to the extent that such subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with us or any Restricted Subsidiary of us
unless the terms of any such agreement, contract arrangement
or understanding are no less favorable to us or such
Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of us;
(3) is a Person with respect to which neither us nor any of our
Restricted Subsidiaries has any direct or indirect obligation
(a) to subscribe for additional Equity Interests or (b) to
maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating
results;
(4) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of us or any of
our Restricted Subsidiaries; and
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(5) has at least one director on its board of directors that is
not a director or executive officer of us or any of our
Restricted Subsidiaries and has at least one executive officer
that is not a director or executive officer of us or any of
our Restricted Subsidiaries.
Any designation of a subsidiary of us as an Unrestricted Subsidiary
shall be evidenced to the trustee by filing with the trustee a certified copy
of the board resolution giving effect to such designation and an officers'
certificate certifying that such designation complied with the preceding
conditions and was permitted by the covenant described above under the
caption "--Selected Covenants--Limitation on Restricted Payments." If, at any
time, any Unrestricted Subsidiary would fail to meet the preceding
requirements as an Unrestricted Subsidiary, it shall thereafter cease to he
an Unrestricted Subsidiary for purposes of the indenture and any Indebtedness
of such subsidiary shall be deemed to be incurred by a Restricted Subsidiary
of us as of such date and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption
"--Selected Covenants--Limitation on Incurrence of Indebtedness and Issuance
of Preferred Stock," we shall be in default of such covenant. Our board of
directors 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 us of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if (1) such Indebtedness is permitted under the
covenant described under the caption "--Selected Covenants--Limitation on
Incurrence of Indebtedness and Issuance of Preferred Stock," calculated on a
pro forma basis as if such designation had occurred at the beginning of the
four-quarter reference period; and (2) no Default or Event of Default would
be in existence following such designation.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount
of each then remaining installment, sinking fund, serial
maturity or other required payments of principal, including
payment at final maturity, in respect thereof, by (b) the
number of years, calculated to the nearest one-twelfth, that
will elapse between such date and the making of such payment;
by
(2) the then outstanding principal amount of such Indebtedness.
"WHOLLY-OWNED RESTRICTED SUBSIDIARY" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which, other than directors' qualifying shares,
shall at the time be owned by such Person or by one or more Wholly-Owned
Restricted Subsidiaries of such Person and one or more Wholly-Owned
Restricted Subsidiaries of such Person.
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CERTAIN U.S. FEDERAL TAX CONSIDERATIONS
This general discussion of certain U.S. federal income and estate
tax considerations with respect to the acquisition, ownership and disposition
of a registered note acquired in exchange for an outstanding note applies to
you if you acquired the outstanding note for cash on its original issuance at
its issue price and if you hold the outstanding note and the registered note
as capital assets within the meaning of Section 1221 of the Internal Revenue
Code of 1986, as amended.
This discussion is based upon the Internal Revenue Code, Treasury
regulations, Internal Revenue Service rulings and pronouncements and judicial
decisions now in effect, each of which is subject to change at any time by
legislative, administrative, or judicial action, possibly with retroactive
effect. The discussion does not discuss every aspect of U.S. federal income
and estate taxation that may be relevant to a particular taxpayer in light of
its personal circumstances or to persons who are otherwise subject to special
tax treatment. For example, special rules not discussed here may apply to you
if you are:
- a bank or a broker-dealer;
- an insurance company;
- a pension or other employee benefit plan;
- a tax exempt organization or entity;
- a U.S. expatriate;
- a trader in securities that elects market-to-market accounting
treatment;
- a person holding registered notes as a part of a hedging or
conversion transaction or a straddle;
- a hybrid entity or an owner of interests therein; or
- a holder whose functional currency is not the U.S. dollar.
In addition, this discussion does not address the effect of any
applicable foreign, state, local or other tax laws. We have not sought and
will not seek any rulings from the Internal Revenue Service concerning the
tax consequences of the acquisition, ownership or disposition of a registered
note and, accordingly, we cannot assure you that the Internal Revenue Service
will not successfully challenge the tax consequences described below. WE URGE
YOU TO CONSULT YOUR TAX ADVISOR WITH RESPECT TO THE U.S. FEDERAL INCOME AND
ESTATE TAX CONSIDERATIONS RELEVANT TO HOLDING AND DISPOSING OF A REGISTERED
NOTE AS WELL AS ANY TAX CONSIDERATIONS APPLICABLE UNDER THE LAWS OF ANY
FOREIGN, STATE, LOCAL OR OTHER TAXING JURISDICTION.
EXCHANGE OF NOTES
Your exchange of an outstanding note for a registered note pursuant
to the exchange offer should not be a taxable event for U.S. federal income
tax purposes. Accordingly, you should have the same adjusted basis, holding
period, issue price, adjusted issue price, stated redemption price at
maturity, yield and accrual periods for a registered note acquired pursuant
to the exchange offer as you had in the outstanding note immediately before
the exchange. The tax consequences of ownership and disposition of a
registered note should be the same as the tax consequences of the ownership
and disposition of the outstanding note surrendered in exchange for it.
Accordingly, in the following discussion, the U.S. federal income
tax consequences with respect to a registered note assume that the registered
note is treated, for U.S. federal income tax purposes, as the same note as
the outstanding note for which it was issued and that the registered note has
the same adjusted basis, holding period, issue price, adjusted issue price,
stated redemption price at maturity, yield and accrual periods as the
outstanding
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note had in your hands immediately before the exchange, and that any amounts
that accrue or are paid or payable on an outstanding note are treated as
accruing or as paid or payable on the registered note.
U.S. HOLDERS
If you are a "U.S. Holder," as defined below, this section applies
to you. Otherwise, the section "Non-U.S. Holders" applies to you. You are a
U.S. Holder if you are the beneficial owner of a registered note and you are:
- a citizen or resident of the United States, including an
individual deemed to be a resident alien under the
"substantial presence" test of Section 7701(b) of the Code;
- a corporation or partnership, including an entity treated as a
corporation or partnership for U.S. federal income tax
purposes, created or organized in the United States or under
the law of the United States or of any state thereof or the
District of Columbia, unless, in the case of a partnership,
Treasury regulations provide otherwise;
- an estate whose income is includible in gross income for U.S.
federal income tax purposes regardless of its source; or
- a trust whose administration is subject to the primary
supervision of a U.S. court and which has one or more U.S.
persons who have the authority to control all substantial
decisions of the trust. Notwithstanding the preceding clause,
to the extent provided in Treasury regulations, certain trusts
in existence on August 20, 1996, and treated as U.S. persons
prior to that date that elect to continue to be treated as
U.S. persons, shall also be considered U.S. persons.
ORIGINAL ISSUE DISCOUNT. Because the outstanding notes were issued
at a substantial discount from their principal amount at maturity and because
there would not be any payment of interest on the outstanding notes until
October 15, 2005, the outstanding notes were issued with original issue
discount, referred to as "OID," in an amount equal to the excess of the
"stated redemption price at maturity" over the "issue price" of the
outstanding notes. The "stated redemption price at maturity" of the
outstanding notes is the sum of all payments to be made on the outstanding
notes other than "qualified stated interest." The term "qualified stated
interest" means, generally, stated interest that is unconditionally payable
at least annually at a single fixed or variable rate. Because no interest is
to be paid on the outstanding or the registered notes before 2005, none of
the interest to be paid on the outstanding or the registered notes is
qualified stated interest. Accordingly, all payments on the outstanding and
the registered notes, both principal and interest, are treated as part of the
outstanding notes' stated redemption price at maturity. The "issue price" of
an outstanding note is equal to the portion of the "issue price" of the unit
that originally was issued (which constituted an "investment unit" for U.S.
federal income tax purposes consisting of an outstanding note and the
associated warrants) allocable to the outstanding note based upon the
relative fair market values of the outstanding note and the associated
warrants comprising the unit. Because the unit was issued for money, the
"issue price" of the unit was the first price at which a substantial amount
of the units was sold for money. For purposes of determining the issue price
of the units, sales to bond houses, brokers, or similar persons or
organizations acting in the capacity as underwriters, placement agents or
wholesalers are ignored. Under Treasury regulations, we have allocated the
issue price of the units between the outstanding notes and the associated
warrants. That allocation will be binding on all holders of units, unless a
holder explicitly discloses (on a form prescribed by the IRS and attached to
the holder's timely-filed U.S. federal income tax return for the taxable year
that includes the acquisition date of the unit) that its allocation of the
issue price of a unit is different from the issuer's allocation. Our
allocation is not, however, binding on the IRS. Based on our allocation, the
issue price of each outstanding note was $394.97.
As noted above, a U.S. Holder of a registered note should be subject
to the rules on OID in the same manner as if the registered note were a
continuation of the outstanding note for which it is issued. In that event, a
registered note would have the same adjusted basis, holding period, issue
price, adjusted issue price, stated redemption price at maturity, yield and
accrual periods as the outstanding note had in your hands immediately before
the exchange, and any amounts that accrue or are paid or payable on an
outstanding note are treated as accruing or as paid or payable on the
registered note. Under the rules on OID, a U.S. Holder of a registered note,
in
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general, must include in income OID calculated on a constant-yield accrual
method prescribed by Treasury regulations in advance of the receipt of some
or all of the related cash payments. The amount of OID included in income by
an initial U.S. Holder of a registered note is the sum of the "daily
portions" of OID with respect to that note for each day during the taxable
year or portion of the taxable year in which the U.S. Holder holds that note.
This amount is referred to as "accrued OID." The daily portion is determined
by allocating to each day in any accrual period a PRO RATA portion of the OID
allocable to that accrual period. The accrual period for the registered notes
may be of any length selected by the U.S. Holder and may vary in length over
the term of the registered notes, provided that each accrual period is no
longer than one year and each scheduled payment of principal or interest
occurs on the first day or the final day of an accrual period. The amount of
OID allocable to any accrual period is equal to:
- the product of the registered note's adjusted issue price at
the beginning of the accrual period and the registered note's
yield to maturity (determined on the basis of compounding at
the close of each accrual period, properly adjusted for the
length of the accrual period) over
- the qualified stated interest allocable to the accrual period
(which, in the case of the registered notes, will be zero).
OID allocable to the final accrual period is the difference
between the amount payable at maturity of the registered note
and the registered note's "adjusted issue price" at the
beginning of the final accrual period. Special rules will
apply in calculating OID for an initial short accrual period.
The "adjusted issue price" of a registered note at the
beginning of any accrual period is equal to its issue price
increased by the accrued OID for each prior accrual period for
the outstanding and the registered note and reduced by any
payments made on the outstanding and the registered note on or
before the first day of the accrual period.
Interest payments on a registered note will not be includible in gross
income by a U.S. Holder but instead will constitute a nontaxable reduction in
the holder's adjusted tax basis in the registered note, as described below under
"Certain U.S. Federal Tax Considerations -- U.S. Holders; Sale, Exchange or
Retirement of Notes."
APPLICABLE HIGH-YIELD DISCOUNT OBLIGATIONS. The registered notes
will be treated as "applicable high-yield discount obligations" for federal
income tax purposes if:
- the yield to maturity of the outstanding notes, computed as of
the issue date of the outstanding notes, equals or exceeds the
sum of (i) the "applicable federal rate" in effect for the
month in which the outstanding notes were issued and (ii) 5%,
and
- the outstanding notes bore "significant OID."
In general, OID on an outstanding note will be significant if the
aggregate amount includible in gross income on the outstanding note before
the close of any accrual period ending more than five years after the issue
date of the outstanding note exceeds the sum of the aggregate amount of
interest to be paid on the outstanding note before the close of that accrual
period plus the product of the issue price of the outstanding note and the
yield to maturity of the outstanding note.
If the registered notes are considered to be applicable high yield
discount obligations, the Company will not be allowed to deduct OID accrued
on the outstanding or registered notes until the Company actually pays the
OID.
Moreover, if and to the extent that the yield to maturity of the
outstanding and registered notes exceeds the sum of the applicable federal
rate and 6%, the deduction for OID on the outstanding and registered notes
will be permanently disallowed to the extent the OID is attributable to the
yield to maturity of the outstanding and registered notes in excess of the
sum of the applicable federal rate and 6% (regardless of whether the Company
actually pays that OID). For purposes of the dividends-received deduction
generally available to corporations, payments of that excess yield will be
treated as dividends to the extent they are deemed to have been paid out of
the Company's current or accumulated earnings and profits as determined for
U.S. federal income tax purposes. U.S.
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Holders that are corporations should consult their tax advisors as to
applicability of the dividends-received deduction.
The relevant applicable federal rate for semiannual compounding for
April 2000, the month the outstanding notes were issued, was 6.39%, and
because the yield on the outstanding notes was 17.81% and the amount of OID
on the outstanding notes was "significant", our deduction for a portion of
the OID on the outstanding and the registered notes will be deferred until it
is paid, and our deduction for the remaining portion of the OID will not be
deductible at any time and will be treated as a dividend to you to the extent
it is paid out of our current or accumulated earnings and profits.
SALE, EXCHANGE OR RETIREMENT OF NOTES. Upon a sale, exchange or
retirement of a registered note, a U.S. Holder will recognize gain or loss to
the extent of the difference between the sum of the cash and the fair market
value of any property received for the registered note and the U.S. Holder's
adjusted tax basis in the registered note. A U.S. Holder's tax basis in a
registered note will equal the portion of the issue price of the investment
unit consisting of the outstanding note and the associated warrants allocated
to the note, as described in "--Original Issue Discount," increased by any
OID included in the holder's income on the outstanding note and the
registered note prior to the disposition of the registered note and reduced
by any payments received on the outstanding and the registered note. Any gain
or loss recognized by a U.S. Holder upon a sale, exchange or retirement of a
registered note will be capital gain or loss and will be long-term capital
gain or loss if the registered note has been held for more than one year.
LIQUIDATED DAMAGES; CHANGE OF CONTROL REDEMPTION. We intend to take
the position that the likelihood of payment of Liquidated Damages described
above under "Description of the Registered Notes -- Registration Rights;
Liquidated Damages" and that the likelihood of payment of a redemption
premium upon the occurrence of certain events described above under
"Description of the Registered Notes --Repurchase at the Option of Holders;
Repurchase if a Change of Control Occurs" is remote within the meaning of the
applicable Treasury regulations and that therefore any of those payments, if
made, would be taxable to a U.S. Holder as ordinary interest income in
accordance with the U.S. Holder's regular method of income tax accounting.
The Internal Revenue Service may take a different position, however, which
could affect the timing of a U.S. Holder's income with respect to the
Liquidated Damages or the redemption premium upon the occurrence of any of
the designated events.
INFORMATION REPORTING; BACKUP WITHHOLDING. We are required to
furnish to record holders of the registered notes, other than corporations
and other exempt holders, and to the Internal Revenue Service, information
with respect to interest paid and OID accrued on the registered notes.
Certain U.S. Holders may be subject to backup withholding at the
rate of 31% with respect to interest and OID paid on a registered note or
with respect to proceeds received from a disposition of a registered note.
Generally, backup withholding applies only if:
- the payee fails to furnish a correct taxpayer identification
number to the payor in the manner required or fails to
demonstrate that it otherwise qualifies for an exemption;
- the Internal Revenue Service notifies the payor that the
taxpayer identification number furnished by the payee is
incorrect;
- the payee has failed to report properly the receipt of a
"reportable payment" on one or more occasions, and the
Internal Revenue Service has notified the payor that
withholding is required; or
- the payee fails (in certain circumstances) to provide a
certified statement, signed under penalties of perjury, that
the taxpayer identification number furnished is the correct
number and that the holder is not subject to backup
withholding.
Backup withholding is not an additional tax but, rather, is a method of
tax collection. A U.S. Holder will be entitled to credit any amount withheld
under the backup withholding rules against its actual tax liability, provided
the required information is furnished to the Internal Revenue Service.
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NON-U.S. HOLDERS
- a nonresident alien individual;
- a corporation or partnership (or an entity treated as a
corporation or partnership) created or organized in or under
the law of a country (or a political subdivision thereof)
other than the United States; or
- a foreign estate or trust, which generally is an estate or
trust that is not a U.S. Holder.
INTEREST AND OID. In general, interest paid to, and OID paid to or
accrued by, a Non-U.S. Holder of a registered note will not be subject to U.S.
withholding tax if it qualifies for the portfolio interest exemption, and it
will not otherwise be subject to U.S. federal income tax if it is not U.S. trade
or business income of the Non-U.S. Holder. Interest and OID on a registered note
qualify for the portfolio interest exemption if (i) the Non-U.S. Holder of the
registered note (a) does not own, actually and constructively, 10% or more of
the total combined voting power of all classes of our stock entitled to vote,
(b) is not a controlled foreign corporation related, directly or indirectly, to
us through stock ownership and (c) is not a bank receiving interest on an
extension of credit made pursuant to a loan agreement made in the ordinary
course of its trade or business and (ii) either (a) the Non-U.S. Holder
certifies, under penalties of perjury, to us or the paying agent, as the case
may be, that it is a Non-U.S. Holder and provides its name and address or (b) a
securities clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its trade or business (a
"Financial Institution") and holds the registered note on behalf of the Non-U.S.
Holder certifies, under penalties of perjury, that it or a Financial Institution
between it and the Non-U.S. Holder has received such a certificate and furnishes
the payor with a copy thereof. Recently adopted Treasury regulations that
generally will be effective for payments made on or after January 1, 2001
provide alternative methods for satisfying the certification requirement
described in (ii) above. The new regulations generally will require, in the case
of a registered note held by a foreign partnership, that the certificate
described in (ii) above must be provided by the foreign partners rather than by
the foreign partnership.
OID (the aggregate amount of which includes all stated interest on the
outstanding and registered notes, as described in "Certain U.S. Federal Tax
Considerations--U.S. Holders--Original Issue Discount) accrued by a Non-U.S.
Holder that constitutes U.S. trade or business income will be subject to U.S.
federal income tax on a net income basis at graduated rates in the same manner
that a U.S. taxpayer is subject to tax and will be exempt from the withholding
tax described above. In the case of a Non-U.S. Holder that is a corporation,
U.S. trade or business income under certain circumstances also will be subject
to an additional branch profits tax at a 30% rate (or, if applicable, a lower
treaty rate). The gross amount of OID paid to a Non-U.S. Holder that does not
qualify for the portfolio interest exemption and that is not U.S. trade or
business income will be subject to withholding of U.S. federal income tax at the
rate of 30%, unless a U.S. income tax treaty reduces or eliminates withholding.
To claim the benefit of a tax treaty or to claim an exemption from withholding
because income is U.S. trade or business income, a Non-U.S. Holder must provide
a properly executed Form W-8BEN or W-8ECI (or a successor form), as applicable,
prior to the payment of the income. These forms generally must be updated
periodically. Under the new regulations, a Non-U.S. Holder who is claiming the
benefits of a tax treaty may be required to obtain a U.S. TIN and to provide
certain documentary evidence issued by a foreign governmental authority to prove
residence in the foreign country. Special procedures are provided in the new
regulations for payments through qualified intermediaries. A holder of a
registered note should consult its own tax adviser regarding the effect, if any,
of the new regulations on it.
TAXABLE DISPOSITION OF A REGISTERED NOTE. Subject to the discussion
below of backup withholding, you generally will not be subject to U.S. federal
income tax on any gain recognized upon a sale, exchange, retirement or other
taxable disposition of a registered note. However, you will be subject to
federal income tax on the gain if:
- the gain is U.S. trade or business income (in which case, if
you are a foreign corporation (or a foreign entity treated as
a corporation), you may also be subject to the branch profits
tax at a 30% rate (or, if applicable, a lower treaty rate)),
or
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- you are a non-resident alien individual, you are present in
the United States for 183 or more days in the taxable year of
disposition and either (a) you have a "tax home" in the United
States for U.S. federal income tax purposes of (b) the gain is
attributable to an office or other fixed place of business you
maintain in the United States;
A Non-U.S. Holder's tax basis in a registered note will be equal to the portion
of the holder's tax basis in a unit that is allocated to the original note and
the original warrant comprising as described in "Certain U.S. Federal Tax
Consequences - U.S. Holders Original Issue Discount."
FEDERAL ESTATE TAX. In the case of an individual who is not a citizen
of the United States and who is not domiciled in the United States at the time
of death, a registered note that is owned, or treated as owned, at the time of
death will not be subject to U.S. federal estate tax, unless (except as an
applicable estate tax treaty provides to the contrary) the individual owned,
actually and constructively, 10% or more of the total combined voting power of
all classes of our stock entitled to vote or the income on the note was U.S.
trade or business income.
In the case of an individual who is not a citizen of the United States
but who is domiciled in the United States at the time of death, a registered
note will be subject to U.S. federal estate tax, regardless of whether the
individual is not a resident of the United States, except as an applicable
estate tax treaty provides to the contrary.
INFORMATION REPORTING; BACKUP WITHHOLDING. We must report annually
to the IRS and to each Non-U.S. Holder any OID (the aggregate amount of which
includes all stated interest on the outstanding and registered notes, as
described in "Certain U.S. Federal Tax Considerations--U.S. Holders--Original
Issue Discount) that is subject to U.S. withholding tax or that is exempt
from withholding pursuant to a tax treaty or the portfolio interest
exception. Copies of these information returns also may be made available
under the provisions of a specific treaty or agreement to the tax authorities
of the country in which the Non-U.S. Holder resides. Information reporting
and backup withholding (at a rate of 31%) do not apply to interest or OID
paid to a Non-U.S. Holder if the holder makes the requisite certification or
otherwise establishes an exemption provided that neither we nor our paying
agent has actual knowledge that the holder is not a Non-U.S. Holder or that
the conditions of any other exemption are not, in fact, satisfied.
The payment of the proceeds from the disposition of a registered
note to or through the U.S. office of any broker, U.S. or foreign, is subject
to information reporting and possible backup withholding unless the owner
certifies under penalties of perjury that it is not a U.S. Holder or
otherwise establishes an exemption provided that the broker does not have
actual knowledge that the holder is not a Non-U.S. Holder or that the
conditions of any other exemption are not, in fact, satisfied.
The proceeds of a disposition of a registered note by a Non-U.S.
Holder to or through a foreign office of a broker will not be subject to
backup withholding. However, information reporting will apply in the case of
a "U.S. related broker" unless the broker has documentary evidence in its
files of the Non-U.S. Holder's foreign status and has no actual knowledge to
the contrary or unless the Non-U.S. Holder otherwise establishes an
exemption. A broker is a "U.S. related broker" if the broker is a United
States person, a controlled foreign corporation for U.S. federal income tax
purposes, a foreign person 50% or more of whose income from all sources for a
designated period is from activities that are effectively connected with the
conduct of trade or business within the United States or, with respect to
payments made on or after January 1, 2001, a foreign partnership that, at any
time during its taxable year, is owned 50% or more (by income or capital
interest) by United States persons or is engaged in the conduct of trade or
business in the United States. The new regulations provide certain
presumptions under which a Non-U.S. Holder will be subject to backup
withholding and information reporting unless the Non-U.S. Holder provides a
certification as to its status as a Non-U.S. Holder.
Any amounts withheld under the backup withholding rules from a
payment to a Non-U.S. Holder will be allowed as a refund or as a credit
against the Non-U.S. Holder's U.S. federal income tax liability, provided the
requisite procedures are followed.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives registered notes in exchange for
outstanding notes for its own account pursuant to the exchange offer must
acknowledge that it will deliver a prospectus in connection with any resale
of such registered notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of registered notes received in exchange for outstanding notes
where such outstanding notes were acquired as a result of market-making
activities or other trading activities. We have agreed that we will make this
prospectus, as amended or supplemented, available to any broker-dealer for
use in connection with any such resale for a period of one year after
consummation of the exchange offer.
We will not receive any proceeds from any sale of registered notes
by broker-dealers. Registered notes received by broker-dealers for their own
account pursuant to the exchange offer may be sold from time to time in one
or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the registered notes or a
combination of such methods of resale, at market prices prevailing at the
time of resale, at prices related to such prevailing market prices or
negotiated prices. Any such resale may be made directly to purchasers or to
or through brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer and/or the purchasers
of any such registered notes. Any broker-dealer that effects any resale of
registered notes that were received by it for its own account pursuant to the
exchange offer and any broker or dealer that participates in a distribution
of such registered notes may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit on any such resale of registered
notes and any commissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The letter
of transmittal states that by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of one year after consummation of the exchange offer,
we will promptly send additional copies of this prospectus and any amendment
or supplement to this prospectus to any broker-dealer that requests such
documents in the letter of transmittal. We have agreed to pay all expenses
incident to the exchange offer (including the expenses of one counsel for the
holders of the outstanding notes) other than commissions or concessions of
any brokers or dealers and will indemnify the holders of the outstanding
notes (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
WHERE YOU CAN FIND MORE INFORMATION
UbiquiTel Parent is, and as a result of the exchange offer, we will
be subject to the periodic reporting and other informational requirements of
the Exchange Act. Each of us will file annual, quarterly and special reports
and other information with the SEC. In addition, we have agreed under the
indenture that governs the outstanding notes and the registered notes that,
whether or not we are required to do so by the rules and regulations of the
SEC, for so long as any of the outstanding notes or registered notes remain
outstanding, we will furnish to the holders of any of those securities and
file with the SEC, unless the SEC will not accept such a filing, (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the SEC on Forms 10-Q and 10-K if we 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 our certified independent public
accountants and (ii) all reports that would be required to be filed with the
SEC on Form 8-K if we were required to file such reports. In addition, for so
long as any of the outstanding notes or registered notes remain outstanding,
we have agreed to make available to any prospective purchaser or beneficial
owner of any of those securities in connection with any sale thereof the
information required by Rule 144A(d)(4) under the Securities Act.
We have filed a registration statement on Form S-4 with the SEC to
register under the Securities Act the registered notes. This prospectus
constitutes a part of that registration statement. As allowed by the SEC's
rules, this prospectus does not contain all the information set forth in the
registration statement, certain parts of which have been omitted in
accordance with the rules and regulations of the SEC. Please refer to the
registration statement and related exhibits and schedules filed therewith for
further information with respect to us and the registered notes
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offered hereby. Statements contained herein concerning the provisions of any
document are not necessarily complete and, in each instance, reference is
made to the copy of such document filed as an exhibit to the registration
statement or otherwise filed by us with the SEC and each such statement is
qualified in its entirety by such reference.
You may read and copy any document we file at the SEC's public
reference rooms located at 450 5th Street, N.W., Washington, D.C. 20549, at
Seven World Trade Center, 13th Floor, New York, New York 10048 and at
Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available
to the public from commercial document retrieval services and at the web site
maintained by the SEC at: http://www.sec.gov. This information is available
without charge upon written or oral request to:
UbiquiTel Operating Company
1 Bala Plaza, Suite 402
Bala Cynwyd, Pennsylvania 19004
Attention: Investor Relations
(610) 660-9510
You should rely only on the information provided in this prospectus
or any prospectus supplement. We have not authorized anyone else to provide
you with different information. We may not make an offer of the registered
notes in any state where the offer is not permitted. The delivery of this
prospectus does not, under any circumstances, mean that there has not been a
change in our affairs since the date of this prospectus. It also does not
mean that the information in this prospectus is correct after this date.
LEGAL MATTERS
The validity of the registered notes offered hereby will be passed
upon by Greenberg Traurig, P.A., Miami, Florida.
EXPERTS
The audited consolidated balance sheet of UbiquiTel Inc. and
Subsidiaries as of December 31, 1999, and the related consolidated statements
of operations, stockholders' equity, and cash flows for the period from
inception (September 29, 1999) to December 31, 1999 included in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving such reports.
The financial statements of the Spokane District (wholly owned by
Sprint Spectrum L.P.) as of December 31, 1999 and 1998, and for each of the
three years in the period ended December 31, 1999, appearing in this
registration statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein,
and are included in reliance upon such report given on the authority of such
firm as experts in accounting and auditing.
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UBIQUITEL INC. AND SUBSIDIARIES AND PREDECESSORS
(A DEVELOPMENT STAGE ENTERPRISE)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
UBIQUITEL INC. AND SUBSIDIARIES-CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Public Accountants....................................................... F-2
Consolidated Balance Sheets as of December 31, 1999 and March 31, 2000 (unaudited)............. F-3
Consolidated Statements of Operations for the period from inception to December 31, 1999 and
for the three months ended March 31, 2000 (unaudited)........................................ F-4
Consolidated Statements of Stockholders' Equity for the period from inception to December 31,
1999 and for the three months ended March 31, 2000 (unaudited)............................... F-5
Consolidated Statements of Cash Flows for the period from inception to December 31, 1999 and
for the three months ended March 31, 2000 (unaudited)........................................ F-6
Notes to Consolidated Financial Statements..................................................... F-8
SPOKANE DISTRICT-FINANCIAL STATEMENTS
Report of Independent Auditors................................................................. F-27
Statements of Assets to be Sold as of December 31, 1999 and 1998 and March 31, 2000 (unaudited) F-28
Statements of Revenues and Expenses for the years ended December 31, 1999, 1998 and 1997 and
for the three months ended March 31, 2000 and 1999 (unaudited)............................... F-29
Notes to Statements of Assets to be Sold and Statements of Revenues and Expenses............... F-30
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To UbiquiTel Inc.:
We have audited the accompanying consolidated balance sheet of
UbiquiTel Inc. and Subsidiaries (a Delaware Corporation, formerly known as
UbiquiTel Holdings, Inc. (see Note 16)) as of December 31, 1999, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the period from inception (September 29, 1999) to December 31,
1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards
generally accepted in the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
UbiquiTel Inc. and Subsidiaries as of December 31, 1999, and the results of
their operations and their cash flows for the period from inception
(September 29, 1999) to December 31, 1999 in conformity with accounting
principles generally accepted in the United States.
Arthur Andersen LLP
New York, New York
March 8, 2000 (except for Notes 15 and 16 which are dated April 12, 2000)
F-2
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, 1999 MARCH 31, 2000
----------------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ................................................ $ 23,959,190 $ 33,729,232
Accounts receivable ...................................................... -- 12,181
Inventory ................................................................ -- 49,649
Due from Sprint PCS ...................................................... -- 514,500
Prepaid expenses and other assets ........................................ 35,636 1,490,343
------------ ------------
Total current assets .................................................. 23,994,826 35,795,905
PROPERTY AND EQUIPMENT ...................................................... -- 1,765,949
CONSTRUCTION IN PROGRESS .................................................... 4,085,942 7,255,779
DEFERRED FINANCING COSTS, net ............................................... 2,110,642 7,362,835
OTHER ASSETS ................................................................ -- 182,390
------------ ------------
Total assets ............................................................. $ 30,191,410 $ 52,362,858
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses .................................... $ 577,216 $ 1,356,443
Due to shareholders ...................................................... 1,663,441 1,213,747
Due to Lucent Technologies, Inc. ......................................... 3,883,419 2,488,463
Due to SpectraSite Communications, Inc. .................................. -- 773,330
Accrued interest ......................................................... 10,521 --
Dividends payable ........................................................ 9,030 473,671
------------ ------------
Total current liabilities ............................................. 6,143,627 6,305,654
------------ ------------
LONG-TERM DEBT .............................................................. 5,811,869 5,811,869
------------ ------------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE WARRANTS ......................................................... 2,758,154 2,758,154
------------ ------------
STOCKHOLDERS' EQUITY:
Series A convertible preferred stock, par value,
$0.001 per share; 90,000,000 shares authorized;
17,008,500 shares issued and outstanding ............................... 17,009 17,009
Series B convertible preferred stock, par value,
$0.001 per share; 35,000,000 shares authorized;
2,110,347 shares issued and outstanding ................................ -- 2,110
300,000,000 shares of voting common stock, par value,
$0.0005 authorized; 6,834,000 shares issued and
outstanding ............................................................ 3,417 3,417
32,000,000 shares of nonvoting common stock, par value, $0.0005 authorized;
all shares are issued
and outstanding ........................................................ 16,000 16,000
Additional paid-in-capital ................................................ 17,428,425 51,310,958
Accumulated deficit during the development stage .......................... (1,987,091) (13,862,313)
------------ ------------
Total stockholders' equity ............................................ 15,477,760 37,487,181
------------ ------------
Total liabilities and stockholders' equity ................................ $ 30,191,410 $ 52,362,858
============ ============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF
THESE CONSOLIDATED BALANCE SHEETS.
F-3
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM CUMULATIVE FROM THE
INCEPTION THREE MONTHS PERIOD FROM INCEPTION
(SEPTEMBER 29, 1999) ENDED (SEPTEMBER 29, 1999)
TO DECEMBER 31, 1999 MARCH 31, 2000 TO MARCH 31, 2000
-------------------- -------------- -----------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
REVENUES ........................... $ -- $ 68,519 $ 68,519
COST OF REVENUES ................... -- -- --
------------- ------------- -------------
Gross profit ..................... -- 68,519 68,519
OPERATING EXPENSES
General and administrative
expenses excluding non-cash
compensation charges ............ 554,430 906,679 1,461,109
Non-cash compensation for general
and administrative matters ...... 1,394,729 -- 1,394,729
Amortization of deferred stock
compensation expense granted to
employees for general and
administrative matters .......... -- 118,643 118,643
------------- ------------- -------------
Operating loss ................... (1,949,159) (956,803) (2,905,962)
INTEREST (EXPENSE) INCOME, NET ..... (28,902) 35,101 6,199
------------- ------------- -------------
Loss before Extraordinary Item ... (1,978,061) (921,702) (2,899,763)
LESS: PREFERRED STOCK DIVIDENDS
PLUS ACCRETION .................. (9,030) (9,230,641) (9,239,671)
------------- ------------- -------------
LOSS AVAILABLE TO COMMON
STOCKHOLDERS .................... (1,987,091) (10,152,343) (12,139,434)
EXTRAORDINARY ITEM-WRITEOFF OF
DEFERRED FINANCING COSTS ON
EARLY EXTINGUISHMENT OF DEBT .... -- (1,722,879) (1,722,879)
------------- ------------- -------------
NET LOSS AVAILABLE TO COMMON
STOCKHOLDERS .................... $(1,987,091) $(11,875,222) $(13,862,313)
============= ============= =============
PRO FORMA NET LOSS AND LOSS PER
SHARE:
HISTORICAL NET LOSS BEFORE INCOME
TAXES ........................... $(1,987,091) $(11,875,222) $(13,862,313)
PRO FORMA INCOME TAX EFFECTS ..... -- -- --
------------- ------------- -------------
PRO FORMA NET LOSS ................. $(1,987,091) $(11,875,222) $(13,862,313)
============= ============= =============
PRO FORMA BASIC AND DILUTED LOSS
PER SHARE ....................... $(0.04) $(0.24) $(0.28)
PRO FORMA COMMON SHARES OUTSTANDING 50,263,604 50,263,604 50,263,604
============= ============= =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
F-4
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL TOTAL
------------------ ------------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT EQUITY
------ ------ ------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, September 29,
1999 (at inception)..... - $ - - $ - $ - $ - $ -
Issuance of voting common
stock................... - - 6,834,000 3,417 - - 3,417
Issuance of non-voting
common stock............ - - 32,000,000 16,000 - - 16,000
Issuance of Series A
convertible preferred
stock, net of offering 17,008,500 17,009 - - 15,294,936 - 15,311,945
costs...................
Non-cash compensation for
general and
administrative matters.. - - - - 1,394,729 - 1,394,729
Non-cash compensation for
general and
administrative matters.. - - - - 738,760 - 738,760
Net loss.................. - - - - - (1,987,091) (1,987,091)
------------- ------- ------------ -------- ------------ ----------- -----------
BALANCE, 17,008,500 17,009 38,834,000 19,417 17,428,425 (1,987,091) 15,477,760
December 31, 1999.........
Issuance of Series B
convertible preferred
stock plus accretion.... 2,110,347 2,110 - - 33,763,890 - 33,766,000
Amortization of deferred
stock compensation expense
granted to employees for
general and administrative
matters................. - - - - 118,643 - 118,643
Net loss.................. - - - - - (11,875,222) (11,875,222)
------------- ------- ------------ -------- ------------ ------------ -----------
BALANCE,
March 31, 2000 (unaudited) 19,118,847 $19,119 38,834,000 $19,417 $51,310,958 $(13,862,313) $37,487,181
============= ======= ============ ======== ============ ============ ===========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
F-5
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM CUMULATIVE FROM THE
INCEPTION THREE MONTHS PERIOD FROM INCEPTION
(SEPTEMBER 29, 1999) ENDED (SEPTEMBER 29, 1999)
TO DECEMBER 31, 1999 MARCH 31, 2000 TO MARCH 31, 2000
-------------------- -------------- ---------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ......................................... $(1,978,061) $ (921,702) $(2,899,763)
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization of deferred
financing costs ............................ 18,381 81,096 99,477
Depreciation ................................. -- 24,671 24,671
Non-cash compensation for
general and administrative matters ......... 1,394,729 -- 1,394,729
Non-cash compensation from stock
option granted to employee ................. -- 118,643 118,643
Changes in operating assets and
liabilities:
Accounts receivable .......................... -- (12,181) (12,181)
Inventory .................................... -- (49,649) (49,649)
Due from Sprint PCS .......................... -- (514,500) (514,500)
Other assets ................................. -- (182,390) (182,390)
Prepaid expenses ............................. (35,636) (517,435) (553,071)
Accounts payable and accrued
expenses ................................... 373,534 (232,638) 140,896
Accrued interest ............................. 10,521 (10,521) --
----------- ----------- -----------
Net cash used in operating
activities ............................. (216,532) (2,216,606) (2,433,138)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ......................... (10,400) (5,400,852) (5,411,252)
----------- ----------- -----------
Net cash used in investing
activities ............................... (10,400) (5,400,852) (5,411,252)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of senior
subordinated notes and detachable warrants...... 8,000,000 -- 8,000,000
Deferred financing cost .......................... (734,000) (6,762,500) (7,496,500)
Proceeds from issuance of
convertible preferred stock .................... 17,008,500 25,000,000 42,008,500
Proceeds from issuance of common stock ........... 19,417 -- 19,417
Offering costs ................................... (107,795) (850,000) (957,795)
----------- ----------- -----------
Net cash provided by financing
activities ................................. 24,186,122 17,387,500 41,573,622
----------- ----------- -----------
</TABLE>
F-6
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM CUMULATIVE FROM THE
INCEPTION THREE MONTHS PERIOD FROM INCEPTION
(SEPTEMBER 29, 1999) ENDED (SEPTEMBER 29, 1999)
TO DECEMBER 31, 1999 MARCH 31, 2000 TO MARCH 31, 2000
-------------------- -------------- ---------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
NET INCREASE IN CASH AND CASH
EQUIVALENTS .................................... 23,959,190 9,770,042 33,729,232
CASH AND CASH EQUIVALENTS, beginning
of period ..................................... -- 23,959,190 --
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of period ......... $23,959,190 $33,729,232 $33,729,232
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid for interest ........................... $ -- $ 374,684 $ 374,684
Cash paid for income taxes ....................... -- -- --
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Network assets acquired but not paid ......... 4,075,542 3,635,147 3,635,147
Extraordinary item--write-off of
deferred financing charge .................. -- 1,722,879 1,722,879
Deferred financing costs incurred
but not paid ............................... 825,000 1,118,668 1,118,668
Preferred stock dividends .................... 9,030 464,641 464,641
IPO costs incurred but not paid .............. -- 497,717 497,717
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
F-7
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF BUSINESS
UbiquiTel Inc. and Subsidiaries (the "Company") was formed for the
purpose of becoming the exclusive provider of Sprint Personal Communications
Services ("PCS") in midsize and smaller markets in the west and midwestern
United States.
In October 1998, UbiquiTel L.L.C. (a Washington State Limited Liability
Company), whose sole member was The Walter Group entered into an agreement with
Sprint PCS for no consideration given for the exclusive rights to market
Sprint's 100% digital, 100% PCS products and services to the approximately 1
million residents in the Reno/Tahoe Nevada market. UbiquiTel L.L.C. had no
financial transactions from its inception (August 24, 1998) to September 29,
1999. On September 29, 1999, UbiquiTel Inc. (formerly "UbiquiTel Holdings,
Inc."), a Delaware Corporation, was incorporated. On November 1, 1999, the
Founders' Agreement was executed and common stock was issued to a group of five
shareholders referred to as "the Founders" including The Walter Group. In
November 1999, UbiquiTel L.L.C. assigned all of its material contracts including
the rights to the Sprint PCS agreements to UbiquiTel Inc. On December 28, 1999,
UbiquiTel Inc. amended its agreement with Sprint PCS to expand the Company's
markets to the Northern California, Spokane/Montana, Southern Idaho/Utah/Nevada
and Southern Indiana/Kentucky markets which together with the Reno/Tahoe markets
contain approximately 7.7 million residents.
On November 9, 1999, UbiquiTel Operating Company, Inc. (a Delaware
Corporation, formerly a Delaware Limited Liability Company), was formed to serve
as the operating company for UbiquiTel Inc. Also, on March 17, 2000, UbiquiTel
Leasing Company, (a Delaware Corporation) was formed to serve as the leasing
company for UbiquiTel Inc.
The consolidated financial statements contain the financial information
of UbiquiTel Inc., its subsidiaries, UbiquiTel Operating Company and UbiquiTel
Leasing Company and its predecessor UbiquiTel L.L.C. collectively ("the
Company"). UbiquiTel L.L.C., did not have any operations or financial
transactions for the period from its inception of August 24, 1998 through
December 31, 1999 and no other assets or liabilities existed other than assets
and contingencies under the contracts assigned to UbiquiTel Inc.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
UNAUDITED INTERIM FINANCIAL INFORMATION
The financial information as of March 31, 2000 and for the three months
ended March 31, 2000 is unaudited, but includes all adjustments, consisting only
of normal recurring adjustments, that are considered necessary for fair
presentation of the Company's financial position at March 31, 2000, and the
Company's operations and cash flows for the three months ended March 31, 2000 in
accordance with accounting principles generally accepted in the United States.
Operating results for the three months ended March 31, 2000 are not necessarily
indicative of results that may be expected for the entire year.
DEVELOPMENT STAGE ENTERPRISE
The Company was established on September 29, 1999 (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
in the Reno/Tahoe market. From inception through March 31, 2000, the Company has
not generated significant revenues and has incurred expenses of $4,703,559
including an extraordinary item of in the amount of $1,722,879, resulting in an
accumulated deficit during the development stage of $13,862,313 as of March 31,
2000 after the preferred stock dividends and effects of a beneficial conversion
on Series B Convertible Preferred Stock.
F-8
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and short-term investments with
original maturities of three months or less.
PREPAID EXPENSES AND OTHER ASSETS
Prepaid expenses and other assets include costs incurred in connection
with the Company's initial public offering (Note 16). As of December 31, 1999
and March 31, 2000 (unaudited) these costs amounted to $0 and $937,273,
respectively.
PROPERTY AND EQUIPMENT
Property and equipment are reported at cost less accumulated
depreciation. Costs incurred to design and construct the wireless network in a
market are classified as construction in progress. When the wireless network for
a particular market is completed and placed into service, the related costs are
transferred from construction in progress to property and equipment. Repair and
maintenance costs are charged to expense as incurred; significant renewals and
betterments are capitalized.
Property and equipment are depreciated using the straight-line method
based on estimated useful lives of the assets.
Assets lives are as follows:
<TABLE>
<S> <C>
Network equipment............................. 5-10 years
Computer equipment............................ 5 years
Furniture and office equipment................ 5-7 years
</TABLE>
Leasehold improvements are depreciated over the shorter of the
remaining term of the lease or the estimated useful life of the improvement.
CONSTRUCTION IN PROGRESS
Construction in progress includes equipment engineering and site
development cost in connection with the build out of the Company's PCS network.
The Company will capitalize interest on its construction in progress activities.
The capitalized interest will be recorded as part of the asset to which it
relates and will be amortized over the remaining estimated useful life. At
December 31, 1999 and March 31, 2000 (unaudited), no interest costs were
capitalized.
ADVERTISING COSTS
Adverting costs are expensed as incurred. The Company did not incur
advertising expense for the period from inception to December 31, 1999 and for
three months ended March 31, 2000.
DEFERRED FINANCING COSTS
Costs incurred in connection with obtaining the Company's senior
subordinated notes and $250.0 million senior secured credit facility are
deferred and will be amortized into interest expense over the term of the
respective financing using the effective interest method. For the period from
inception (September 29, 1999) to December 31, 1999 and for the three months
ended March 31, 2000 (unaudited), amortization amounted to $18,381 and $81,096
respectively, and was included in interest expense.
F-9
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company accounts for income taxes in accordance with the provisions
of Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 requires an asset and liability approach which
requires the recognition of deferred tax assets and deferred tax liabilities for
the expected future tax consequences of temporary differences between the
carrying amounts and the tax bases of assets and liabilities. Valuation
allowances will be established when necessary to reduce deferred tax assets to
the amount expected to be realized.
EXTRAORDINARY ITEM
On March 31, 2000, the Company finalized and executed a new $250.0
million senior secured credit facility and terminated the old $25.0 million
credit facility. Deferred financing costs of $1,722,879 relating to the old
facility were expensed as an extraordinary item during the three month period
ended March 31, 2000.
UNAUDITED PRO FORMA NET LOSS PER SHARE
The Company computes net loss per common share in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
128") and SEC Staff Accounting Bulletin No. 98 ("SAB 98"). Under the provisions
of SFAS 128 and SAB 98, unaudited pro forma basic and diluted net loss per
common share is computed by dividing the net loss available to common
shareholders for the period by the weighted average number of shares of common
stock outstanding after giving effect to the conversion of preferred stock into
common stock upon an initial public offering and the exercise of warrants to
purchase 4,978,150 shares of common stock which was issued in connection with
the senior subordinated note. In accordance with SFAS 128, incremental potential
common shares from stock options has been excluded in the calculation of diluted
loss per share since the effect would be antidilutive. Accordingly, the number
of weighted average shares outstanding as well as the amount of net loss per
share are the same for basic and diluted per share calculations for the period
reflected in the accompanying financial statement.
REVENUE RECOGNITION
The Company will recognize revenue as services are performed. Sprint
PCS will handle the Company's billings and collections and will retain 8% of
collected service revenues from Sprint PCS subscribers based in the Company's
markets and from non-Sprint PCS subscribers who roam onto the Company's network.
The amount retained by Sprint PCS will be recorded as an operating expense.
Revenues generated from the sale of handsets and accessories and from traveling
services provided to Sprint PCS customers who are not based in the Company's
markets are not subject to the 8% service revenue fee for Sprint.
Sprint PCS will pay the Company a Sprint PCS traveling fee for each
minute that a Sprint PCS subscriber based outside the Company's markets travels
on to the Company's portion of the Sprint PCS Network. Revenue from these
services will be recognized as the services are performed. Similarly, the
Company will pay traveling fees to Sprint PCS, when a Sprint PCS subscriber
based in the Company's markets travels on to the Sprint PCS Network outside of
the Company's markets. These costs will be included as cost of sales when
incurred. Traveling fees of $0 and $68,519 were earned for the period from
inception to December 31, 1999 and for the three months ended March 31, 2000
(unaudited), respectively.
Product revenues consisting of proceeds from sales of handsets and
accessories will be recorded net of allowance for sales returns. There were no
product revenues or related costs for the period from inception to December 31,
1999 and for the three months ended March 31, 2000 (unaudited).
F-10
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of"
("SFAS 121"). SFAS 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.
RISKS AND UNCERTAINTIES
The Company's profitability is dependent upon successful implementation
of the Company's business strategy and development of a sufficient subscriber
base. The Company will continue to incur significant expenditures in connection
with expanding and improving its operations. If these and the other risks
included under "Risk Factors" in the Company's Registration Statement on Form
S-1 are not properly managed and resolved the results could have a material
adverse impact on the Company's financial statements.
CONCENTRATION OF RISK
The Company maintains cash and cash equivalents in accounts with a
financial institution in excess of the amount insured by the Federal Deposit
Insurance Corporation. The Company monitors the financial stability of this
institution regularly and management does not believe there is a significant
credit risk associated with deposits in excess of Federally insured amounts.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998 and June 1999, the Financial Accounting Standards Board,
commonly referred to as FASB, issued Statements of Financial Accounting
Standards, No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133") and No. 137, "Accounting for Derivative Instruments and
Hedging Activities-Deferral of the Effective Date of FASB Statement No. 133."
These statements require companies to record derivatives on the balance sheet as
assets or liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for depending on
the use of the derivative and whether it qualifies for hedging accounting. SFAS
133 will be effective for the Company's fiscal year ending December 31, 2001.
Management believes that the adoption of these statements will not have a
significant impact on the Company's consolidated financial results.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities, at the date of the financial statements
and the reported amount of expenses during the reporting period. Actual results
could differ from those estimates.
COMPREHENSIVE INCOME
No statement of comprehensive income has been included in the
accompanying financial statements since the Company does not have any other
comprehensive income to report.
F-11
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. SPRINT AGREEMENTS
As of December 28, 1999, the Company signed four major agreements with
Sprint and Sprint PCS. They are 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. These agreements
allow the Company to exclusively offer Sprint PCS services in the Company's four
markets-Reno/Tahoe/Northern California; Spokane/Montana; Southern
Idaho/Utah/Nevada; and Southern Indiana/Kentucky.
The management agreement has an initial term of 20 years with three
10-year renewals. It can be terminated if either party provides the other with
two years' prior written notice or unless the Company is in material default of
its obligations. The key clauses within the management agreement are summarized
as follows:
(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 markets. Sprint PCS is prohibited from
owning, operating, building or managing another wireless
mobility communications network in the Company's markets
while the management agreement is in place.
(b) NETWORK BUILD-OUT. The management agreement specifies the
terms of the Sprint PCS affiliation, including the
required network build-out plan. The Company has agreed
on a minimum build-out plan which includes specific
coverage and deployment schedules for the network planned
within its service area and sets a target date for
completion of June 1, 2005.
(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 markets. 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 traveling and sales of handsets
and accessories and proceeds from sales not in the ordinary
course of business.
(e) TRAVELING. The Company will earn travel revenues when a
Sprint PCS customer from outside of the Company's markets
travels onto the Company's network. Similarly, the Company
will pay Sprint PCS when the Company's own subscribers use
the Sprint PCS nationwide network outside the Company's
markets.
(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 markets.
(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 markets.
F-12
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. SPRINT AGREEMENTS (CONTINUED)
(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 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.
4. LONG-TERM DEBT
Long-term debt outstanding as of December 31, 1999 and March 31, 2000
(unaudited) is as follows:
<TABLE>
<S> <C>
12% Senior Subordinated Note....................... $ 8,000,000
Less: Discount..................................... (2,188,131)
-----------
Long-term debt............................... $ 5,811,869
===========
</TABLE>
On November 12, 1999, the Company signed a commitment letter for a
Purchase Agreement with BET Associates, which included an $8,000,000 senior
subordinated note. The Purchase Agreement was finalized and executed on December
28, 1999. The note bears stated interest at 12% payable quarterly and matures on
December 28, 2007. The first interest payment is due April 1, 2000 for the
period from the closing date through March 31, 2000.
BET Associates also received a warrant to purchase 4,978,150 shares of
voting common stock at a par value of $0.0005 per share and an exercise price of
$0.005 per share with an exercise period of ten years. Of the $8,000,000 in
proceeds received under the purchase agreement, $2,188,131 was allocated to the
detachable warrants based on the fair value of the warrants on the date of
issuance as determined using the Black-Scholes Model (Note 8). The Company also
paid a commitment fee of $160,000 that will be amortized over the term of the
loan.
F-13
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT (CONTINUED)
The proceeds of the note are available to fund capital expenditures
related to the construction of the Company's PCS network for the Reno/Tahoe
markets. The loan agreement requires the Company to adhere to specific financial
covenants including limitation on capital expenditures. The Company is required
to prepay the notes with cash received from the sale of assets or stock or from
additional financings. The notes may be prepaid if the Company completes a
private or public offering of debt or equity of at least $100 million plus a
premium of 1% of the principal amount paid.
On November 15, 1999, the Company signed a commitment letter for a $25
million Senior Secured Credit Agreement (the "Facility"), with Paribas, as
Administrative Agent, and certain banks and other financial institutions party
thereto. The Facility was finalized and executed on December 29, 1999 (the
"Facility Effective Date"). The Facility provided for (i) a $12.5 million Term
Loan Commitment ("Term Loans") which may be drawn in installments at any time
after the Facility Effective Date through the second anniversary of the Facility
Effective Date and (ii) a $12.5 million Revolving Loan Commitment ("Revolving
Loans") which may be drawn in installments after the date the Term Loans has
been repaid through the sixth anniversary of the Facility Effective Date. No
amounts have been drawn under this Facility.
Upon acceptance and delivery of this Facility, the Company incurred
financing costs of $1,264,000. In addition, the Company issued Paribas
detachable warrants to purchase 1,148,804 shares of non-voting common stock at a
par value of $0.0005 per share and an exercise price of $0.005 per share with an
exercise period of ten years. The fair value of the warrants of $570,023 have
been determined using the Black-Scholes Model (Note 8).
On February 22, 2000, UbiquiTel Operating Company, the wholly owned
subsidiary of UbiquiTel Inc. received a commitment letter from Paribas, as
Administrative Agent, and certain banks and other financial institutions party
thereto for a $250.0 million senior secured credit facility. UbiquiTel Inc. has
guaranteed the credit facility which was finalized and executed on March 31,
2000 and replaces the previous $25.0 million facility. The credit facility
consists of a revolving loan of up to $55.0 million, a term loan A of $120.0
million and a term loan B of $75.0 million.
The revolving loan and term loan A will mature in October 2007 and the
term loan B will mature in October 2008. The revolving loans are required to be
repaid beginning in February 2002, in eighteen quarterly consecutive
installments. The term loans A and B are required to be repaid beginning in June
2004 in fourteen and eighteen consecutive quarterly installment, respectively.
The amount of each of the quarterly consecutive installment increases
incrementally in accordance with the credit facility agreement. The amount that
can be borrowed and outstanding under the revolving loans reduces in eight
quarterly reductions of $6.875 million beginning with December 2005.
UbiquiTel Operating Company may borrow funds as either a base rate loan
with an interest rate of prime plus 2.00% for the revolving loans and term loan
A and prime plus 2.50% for term loan B or a Eurodollar Loan with an interest
rate of the London Interbank Offered Rate, commonly referred to as LIBOR, plus
3.25% for the revolving loans and term loan A and plus 3.75% for term loan B. In
addition, an unused credit facility fee ranging from 0.75% to 1.375% will be
charged quarterly on the average unused portion of the facility.
Initial borrowings of $75.0 million under the term loan B were made on
April 11, 2000. This amount was funded into an escrow account that is controlled
by Paribas and will not be released until specified conditions have been
satisfied. These conditions include, among others, the closing of the
acquisition of the Spokane PCS assets, receipt of $100.0 million in additional
equity financing by July 31, 2000, and evidence that the company has used all
the proceeds from the Notes. Additional borrowings are subject to these escrow
arrangements and will not be provided until the initial borrowings of $75.0
million has been released.
In conjunction with the closing of this facility, the company incurred
financing fees of $7,056,168 which are being amortized over the term of the
credit facility. Deferred financing fees of $1,722,879 relating to the old
credit facility have been expensed at March 31, 2000 (unaudited) as an
extraordinary item.
F-14
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT (CONTINUED)
The facility contains customary credit covenants including covenants
limiting indebtedness, dividends and distributions on, and redemptions and
repurchases of, capital stock and other similar payments and various financial
maintenance covenants. The credit facility also contains covenants relating to
the population covered by the Company's network and number of customers and
customary representations, warranties, indemnities, conditions precedent to
borrowing, and events of default.
Proceeds under the Facility are available to fund capital expenditures
related to the construction of the Company's PCS network, the acquisition of
related businesses, working capital needs of the Company, and customer
acquisition costs.
5. 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 Statement of Financial Accounting Standards No. 107,
"Disclosure about Fair Value of Financial Instruments" ("SFAS 107"). 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.
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
----------- -----------
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents............................ $ 23,959,190 $ 33,729,232
Accounts payable and accrued expenses................ 6,124,076 5,831,983
Accrued interest..................................... 10,521 -
Long-term debt....................................... 5,811,869 5,811,869
</TABLE>
The carrying amounts of cash and cash equivalents, accounts payable and
accrued expenses, and accrued interest are a reasonable estimate of their fair
value due to the short-term nature of the instruments. Long-term debt consists
of the senior subordinated notes.
6. UNAUDITED PRO FORMA BASIC AND DILUTED NET LOSS PER SHARE
Unaudited pro forma basic loss per share amounts are computed by
dividing the net loss by the weighted average number of shares of common stock
outstanding after giving effect to the conversion of preferred stock into common
stock upon an initial public offering and the exercise of warrants to purchase
4,978,150 shares of common stock which was issued in connection with the senior
subordinated note. Diluted loss per share is computed by dividing the net loss
by the weighted average number of shares of common stock outstanding after
giving effect to the conversion of preferred stock into common stock upon an
initial public offering and the exercise of warrants to purchase 4,978,150
shares of common stock which was issued in connection with the senior
subordinated note plus the effects of any potentially dilutive securities. In
the accompanying statements of operations, diluted loss per share does not
include the effects of potentially dilutive securities for all periods presented
as they would have been anti-dilutive in years in which a loss is reported.
The following summarizes the securities outstanding at December 31,
1999 and March 31, 2000 (unaudited) which are excluded from the loss per share
calculation as amounts would have an anti-dilutive effect.
F-15
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. UNAUDITED PRO FORMA BASIC AND DILUTED NET LOSS PER SHARE (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
----------- -----------
(UNAUDITED)
<S> <C> <C>
Stock options........................................ 3,200,000 3,520,000
Warrants............................................. 1,148,804 1,148,804
--------- ---------
Total................................................ 4,348,804 4,668,804
========= =========
</TABLE>
7. STOCKHOLDERS' EQUITY
COMMON STOCK
On November 1, 1999, the Company issued 6,834,000 shares of voting
common stock to a group collectively referred to as the Founders at a par value
of $0.0005 per share as compensation for the Founders' efforts prior to that
time and for the assignment of the Sprint PCS Reno/Tahoe agreement. The fair
value at the time of issuance was $0.50 per share. In accordance with Accounting
Principles Board No. 25 "Accounting for Stock Issued to Employees", the Company
recorded compensation of $1,394,729 which is presented as non-cash compensation
for general and administrative matters in the Company's Statement of Operations.
For stock issued to non-employees the company recorded a charge to additional
paid in capital of $738,760 as the founders were involved in raising equity
capital for the Company.
The holders of voting 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 voting common stock are entitled to
receive ratably such dividend as may be declared by the board of directors out
of funds legally available. Holders of shares of voting common stock have no
preemptive, conversion, redemption, subscription or similar rights. If the
Company liquidates, dissolves, or winds up, the holders of shares of voting
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. The vested, nonvoting common stock are identical in
all respects to the voting common stock except that holders of shares of
nonvoting common stock shall not have the right to vote on any matters submitted
to a vote by the Company's stockholders.
On November 1, 1999, the Company issued 32,000,000 non-vested shares of
non-voting common stock to the Founders at a par value of $0.0005 per share.
These shares were issued to retain the Founders 13.4% ownership interest in the
event the Company issues additional stock and equity securities. Any non-voting
common stock that vests will automatically be converted to voting common stock.
At December 31, 1999 and March 31, 2000 (unaudited) none of the non-voting
common stock was vested. Upon completion of the initial public offering, any
remaining non-vested shares of non-voting common stock will be forfeited.
CONVERTIBLE SERIES A AND SERIES B PREFERRED STOCK
On September 30, 1999, the Company entered into an escrow agreement
with a group of investors intending to subscribe for and purchase a total of
$17,000,000 of the Company's Series A Preferred Stock. The investors agreed to
deposit its subscription amount in escrow pursuant to which the subscription
payments would be held until the closing of the purchase of the Series A
Preferred.
F-16
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. STOCKHOLDERS' EQUITY (CONTINUED)
On November 23, 1999, the Company entered into a Series A Preferred
Stock Agreement (the "Agreement") for a total of 17,008,500 shares of Series A
Preferred Stock at a purchase price of $1.00 per share. Subject to the terms of
the Agreement, $1,000,000 of Series A Preferred Stock was purchased on November
23, 1999 when the Company had firm commitments for at least $33 million in
senior and subordinated debt financing, (see Note 4) and the balance of
$16,008,500 of Series A Preferred Stock was purchased on December 23, 1999,
prior to the execution of the senior and subordinated debt financing which
occurred by December 31, 1999. Each share of the Series A Preferred Stock is
convertible at any time after the date of issuance into common stock at an
initial conversion price of $0.50 as adjusted for the 2-for-1 stock split
subject to adjustments as defined in the Agreement. In addition, upon the
closing of a qualified initial public offering, as defined in the Agreement, all
outstanding shares of Series A Preferred Stock will automatically convert into
voting common stock at the then effective conversion price.
On February 25, 2000, DLJ Merchant Banking Partners II, L.P. ("DLJ"),
an affiliate of Donaldson, Lufkin & Jenrette, one of the Company's underwriters,
entered into a Securities Purchase Agreement whereby it purchased 2,110,347
shares of 7% Convertible Series B Preferred Stock at a purchase price of $11.84
per share, or $25 million in aggregate. Each share of Series B Preferred Stock
is convertible at any time after the date of issuance into common stock at the
then effective conversion price. DLJ also committed to purchase 11,837,024
shares of Convertible Series B Preferred Stock at a purchase price of $8.46 per
share, or $100 million in aggregate, in the event the Company does not
consummate the initial public offering. In accordance with the EITF 98-5 upon
issuance of the Series B Preferred Stock the Company had a beneficial conversion
resulting in a discount of $8,766,000 which is recognized as a return to the
preferred shareholder during the three month period ended March 31, 2000.
DIVIDENDS
Holders of Series A and B Convertible Preferred Stock are entitled to
receive cumulative dividends at a rate of 7% per annum out of any assets of the
Company. The cumulative accrued dividends at March 31, 2000 (unaudited) are
$473,671.
The discount of $8,766,000 resulting from the allocation of the
proceeds from the Series B Convertible Preferred Stock to the beneficial
conversion feature is included in preferred stock dividends for the three months
ended March 31, 2000 (unaudited).
8. REDEEMABLE WARRANTS
At December 31, 1999 and March 31, 2000 (unaudited), the Company had
outstanding warrants to purchase 4,978,150 shares of voting common stock and
1,148,804 shares of non-voting common stock. The warrants to purchase 4,978,150
shares of voting common stock were issued to BET Associates in connection with
the issuance of the $8.0 million 12% senior subordinated note. The voting stock
warrants contain repurchase provisions similar to those of the non-voting stock
warrants, but the repurchase provisions will expire upon the completion of an
initial public offering.
The warrants to purchase 1,148,804 shares of non-voting common stock
were issued to Paribas in connection with the $25.0 million credit facility. All
warrants are exercisable at $0.005 per share and have a ten-year life. Holders
of the warrants are entitled to dividends that are paid with respect to the
non-voting common stock even if the warrants have not yet been exercised.
Additionally, beginning on the earlier of the fifth anniversary of the date the
warrants were issued or the date the Company experiences a change in control,
the holder of the warrants may require the Company to repurchase at market value
the warrants or any shares of non-voting common stock that were issued to the
holder upon the exercise of the warrants. The Company also has the option to
repurchase all of the warrants or all of the shares of non-voting common stock
issued upon the exercise of the warrants beginning on the sixth anniversary of
the date the warrants were issued. If the Company exercises this right, it must
repurchase the warrants or shares at a price equal to 120% of the market price
of the non-voting common stock as of the date the Company repurchases the
warrants or shares.
F-17
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. REDEEMABLE WARRANTS (CONTINUED)
The Company's accounting for these warrants at the time of issuance was
as follows:
- The fair market value of the warrants was $2,758,154 and was
determined by using the Black-Scholes model with the following
assumptions:
- risk free interest rate of 6.4%,
- expected dividend yield of 0%,
- expected life of five years, and
- expected volatility of 70%
9. STOCK OPTION PLAN
On November 29, 1999, the Company entered into an employment
agreement with its Chief Executive Officer. Under the employment agreement,
the company granted stock options for 2,550,000 shares of common stock at a
purchase price of $0.50 per share which the Company believes was the fair
market value of the stock at that time. The options vest in three equal
installments over a period of three years.
In 1999, the Company granted an aggregate of 650,000 non-qualified
options to three employees pursuant to its 2000 Stock Equity Incentive Plan.
These options have an exercise price of $0.50 per share and vest over four
years.
In January 2000, the Company issued an aggregate of 320,000
non-qualified options to employees pursuant to its 2000 Stock Equity
Incentive Plan. 260,000 of these options had an exercise price that was
approximately $7.50 less per share than the fair market value of the common
stock on the date of grant. Accordingly, the Company will recognize
compensation expense of approximately $1,965,600 over the 48 month vesting
period for these options. During the three months ended March 31, 2000
(unaudited), the Company amortized $118,643 of this expense. The remaining
60,000 options will have an exercise price equal to the initial public
offering price per share.
In February 2000, the board of directors approved the 2000 Equity
Incentive Plan (the "Plan"). The purpose of the Plan is to attract, retain
and reward key employees, consultants and non-employee directors. A committee
consisting of members from the board of directors administers the Plan. The
committee may grant stock options, stock appreciation rights and other
equity-based awards to eligible persons, as defined in the Plan. The plan
authorized up to 4,080,000 shares of common stock for issuance under the Plan
and does not include awards paid in cash.
At December 31, 1999 and March 31, 2000 (unaudited), the following
is a summary of the options granted and outstanding:
F-18
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARCH 31, 2000
DECEMBER 31, 1999 (UNAUDITED)
---------------------------- ----------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------- -------------- --------- --------------
<S> <C> <C> <C> <C>
Outstanding at beginning of period ... -- $-- 3,200,000 $0.50
Granted ........................ 3,200,000 0.50 320,000 1.91
Exercised ...................... -- -- -- --
Forfeited ...................... -- -- -- --
--------- -------------- --------- --------------
Outstanding at end of period ......... 3,200,000 $0.50 3,520,000 $0.63
========= =========
Options exercisable at end of period . -- -- -- --
========= =========
Weighted average fair value of options
granted during period ............. $0.19 $6.77
</TABLE>
F-19
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. STOCK OPTION PLAN (CONTINUED)
The following table summarizes information about stock options
outstanding at March 31, 2000 (unaudited):
<TABLE>
<CAPTION>
OPTIONS OPTIONS WEIGHTED-
OUTSTANDING AT WEIGHTED-AVERAGE EXERCISABLE AT AVERAGE
RANGE OF MARCH 31, 2000 REMAINING WEIGHTED-AVERAGE MARCH 31, 2000 EXERCISE
EXERCISE PRICES (UNAUDITED) CONTRACTUAL LIFE EXERCISE PRICE (UNAUDITED) PRICE
--------------- -------------- ---------------- ---------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
$0.50 3,200,000 8.7 Years $0.50 - $0.50
$0.50-$8.00 320,000 8.0 Years $1.91 - $1.91
</TABLE>
The Company applies Accounting Principles Board No. 25, "Accounting
for Stock Issued to Employees," in accounting for its stock option grants to
employees and directors. Except for the 260,000 options grants discussed
above, no compensation cost has been recognized related to such grants in the
accompanying Statements of Operations for the period from inception through
December 31, 1999 and for the three months ended March 31, 2000 (unaudited).
Had compensation cost for these grants been determined consistent with
Statement of Financial Accounting Standard No. 123, "Accounting for
Stock-Based Compensation," the Company's net loss and basic and diluted loss
per share at December 31, 1999 and March 31, 2000 (unaudited) would have
increased as indicated in the following pro forma amounts:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
(UNAUDITED)
-------------------------------------------
<S> <C> <C>
Net loss:
As reported........................................ $ (1,987,091) $ (11,875,222)
Pro forma.......................................... $ (2,005,033) $ (11,886,236)
Pro forma basic and diluted loss per share:
As reported........................................ $ (0.04) $ (0.24)
Pro forma.......................................... $ (0.04) $ (0.24)
</TABLE>
The fair value of all of the option grants was estimated on the date of grant
using the Black-Scholes model with the following weighted-average assumptions
used for grants:
- weighted-average risk free interest rates ranging from 5.78%
to 6.34%,
- expected dividend yields of 0%,
- expected lives ranging from 1.5 years to 2.0 years and
- expected volatility of 70%.
F-20
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. INCOME TAXES
Income tax expense (benefit) for the period from inception to December
31, 1999 differed from the amount computed by applying the statutory U.S.
Federal income tax rate of 34% to the loss recorded as a result of the
following:
<TABLE>
<S> <C>
Computed "expected" tax expense....................................................... $(675,611)
State tax, net of Federal benefit..................................................... (43,716)
Equity participation compensation expense............................................. 508,161
Increase in valuation allowance....................................................... 211,166
----------------
Total income tax expense (benefit)............................................... $ 0
================
</TABLE>
Since inception, the Company has generated losses for both book and
tax purposes. The Company has not recorded potential income tax benefits that
may be received and apply current losses to future years in which the Company
has taxable income. Under accounting rules, these benefits can only be
recorded when it is more likely than not that these benefits will be
realized. Since the Company has a limited operating history, an assessment
cannot be determined.
At December 31, 1999, we have net operating loss carryforwards for
federal and state income tax purposes totaling approximately $583,332, which
will expire in 2014. These carryforwards may be limited due to changes in
ownership in accordance with IRS guidelines.
Net deferred tax asset consists of the following amounts of deferred
tax assets and liabilities as of December 31, 1999:
<TABLE>
<S> <C>
Deferred tax asset.................................................................... $ 211,166
Less: Valuation allowance for deferred tax assets..................................... $(211,166)
----------
Net deferred tax asset........................................................... -0-
==========
</TABLE>
11. COMMITMENTS
(a) CAPITAL EXPENDITURE
The Company expects to incur capital expenditures of approximately $120
million in 2000.
(b) LEASES
The Company is obligated under a month-to-month operating lease
agreement for office space with a 30-day termination notice. In addition, the
Company is obligated under an operating lease agreement for three cell sites.
Future minimum annual lease payments under these operating lease agreements for
the next five years and in the aggregate at December 31, 1999 are as follows:
<TABLE>
YEARS ENDING DECEMBER 31:
<S> <C>
2000..................................................................................... $62,880
2001..................................................................................... 62,880
2002..................................................................................... 62,880
2003..................................................................................... 62,880
2004..................................................................................... 62,880
Thereafter............................................................................... 628,880
--------
Total future minimum annual lease payments.......................................... $943,280
========
</TABLE>
F-21
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. COMMITMENTS (CONTINUED)
Rental expense for all operating leases was $10,400 and $19,950 for
the period from inception through December 31, 1999 and the three months
ended March 31, 2000 (unaudited), respectively.
(c) EMPLOYMENT AGREEMENTS
In November 1999, the Company entered into an employment agreement
with its President and Chief Executive Officer. The employment agreement is
for a three-year term and provides for an annual base salary of $200,000,
with a guaranteed annual increase of 5% over the next two years. In addition
to his base salary, the President and Chief Executive Officer is eligible to
receive bonuses in such amounts and at such times as determined by the
disinterested members of the Board of Directors.
Under the employment agreement, the Company granted stock options to
the purchase up to 2,550,000 shares of common stock at a purchase price of
$0.50 per share. The stock options vest in three equal installments over a
period of three years. The employment agreement provides that the President's
employment may be terminated by the Company with or without cause, as defined
in the agreement, at any time or by the President for any reason at any time
upon thirty days' written notice to the Company. If his employment is
terminated by the Company without cause, he is entitled to receive one year's
base salary and benefits, and all his unvested stock options will immediately
vest on the date of termination. If his employment is terminated by the
Company for cause, he is not entitled to any compensation or benefits other
than unpaid salary and benefits and unreimbursed expenses incurred by him
through the date of termination. If he voluntarily terminates his employment,
he is entitled to unpaid salary and benefits and unreimbursed expenses
incurred by him through the date of termination and vested stock options. The
employment agreement also provides that the President will not compete in the
business of wireless telecommunications either directly or indirectly in the
Company's present and future markets and not disclose any of the Company's
confidential information and not solicit any of the Company's customers or
employees during his employment and for a period of one year after his
employment is terminated.
12. DEFERRED FINANCING COSTS
During 1999, the Company incurred fees of $320,000 and $1,809,023 to
secure commitments from lenders related to the 12% senior subordinated note
and the $25.0 million credit facility, respectively. The Company has
classified these charges as deferred financing costs and is amortizing these
costs using the effective interest rate method and the straight-line method,
respectively.
On March 31, 2000, the Company replaced the old $25.0 million
facility with a new $250.0 million senior secured credit facility (Note 4).
An amount of $1,722,879 related to the extinguishment of the old facility was
expensed as an extraordinary item during the first quarter. Costs to secure
the new facility of $7,056,168 are included in deferred financing and will be
amortized on a straight-line basis over the term of the new facility.
Amortization of deferred financing charges amounted to $18,381 and
$81,096 at December 31, 1999 and March 31, 2000 (unaudited), respectively,
and is included in interest expense.
F-22
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. RELATED PARTY TRANSACTIONS
In 1999 and during the three months ended March 31, 2000
(unaudited), certain shareholders of the Company provided services in
connection with obtaining, negotiating and closing the preferred stock
offering and $250.0 million senior secured credit facility. Fees incurred for
those services amounted to $1,515,000 and $1,000,000, respectively.
In 1999 and the three months ended March 31, 2000 (unaudited), the
Company paid the Walter Group, a shareholder, approximately $148,000 and
$12,896, respectively, for consulting services.
On October 28, 1999, the Company entered into an agreement with a
shareholder, SpectraSite Communications Inc., that owns and operates
communications towers. During 1999, no services were provided to the Company.
For the three months ended March 31, 2000 (unaudited), the Company incurred
costs of $773,330 for capital expenditures made during the period.
14. LITIGATION
On March 9, 2000, a former employee filed a lawsuit alleging breach
of employment contract, tortious interference with contract, fraud,
constructive discharge and specific performance of a contract and is seeking
actual and punitive damages aggregating in excess of $20 million. The Company
will vigorously contest these charges. It is management's opinion that it is
too early in this process to determine the ultimate outcome of this matter.
15. WHOLLY-OWNED OPERATING SUBSIDIARY SUMMARIZED FINANCIAL INFORMATION
On April 11, 2000, UbiquiTel Operating Company, a wholly owned
subsidiary of UbiquiTel Inc., issued 14% Senior Subordinated Discount Notes
("the Notes") with a maturity value of $300,000,000 and Warrants to purchase
3,579,000 shares of common stock of UbiquiTel Inc. at an exercise price of
$11.37 per share under Rule 144A of the Securities Act of 1933. The notes
were issued at a discount and generated approximately $152,300,000 in gross
proceeds. The proceeds will be used to partially fund capital expenditures
relating to the network build-out, operating losses, working capital, the
acquisition of the Sprint PCS Spokane, Washington assets, repayment of the
$8,000,000 12% Senior Subordinated Note and the related prepayment fee and
other general corporate purposes. The notes have a ten-year maturity and will
accrete in value until April 15, 2005 at an interest rate of 14%. Interest
will become payable semiannually beginning on October 15, 2005. Up to 35% of
the notes will be redeemable on or prior to April 15, 2003 from net proceeds
of one or more public equity offerings, other than UbiquiTel Inc. expected
initial public offering. Any remaining notes will be redeemable on or after
April 15, 2005.
Donaldson, Lufkin and Jenrette Securities Corporation served as one
of the Initial Purchasers of the Notes and received a fee of 3.5% of the
gross proceeds and warrants to purchase 86,183 shares of UbiquiTel Inc.
common stock at an exercise price of $8.00 per share.
F-23
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. WHOLLY-OWNED OPERATING SUBSIDIARY SUMMARIZED FINANCIAL INFORMATION
(CONTINUED)
UbiquiTel Inc. has unconditionally guaranteed the obligations under the
Notes. Separate audited financial statements for UbiquiTel Operating Company as
issuer of the debt are not provided because it is wholly owned by UbiquiTel Inc.
and the guarantees are full and unconditional. UbiquiTel Inc. has no operations
separate from its investment in UbiquiTel Operating Company. The summarized
financial information of UbiquiTel Operating Company as of December 31, 1999 and
March 31, 2000 (unaudited) and for the period from November 9, 1999 (inception)
to December 31, 1999, and for the three months ended March 31, 2000
(unaudited) and the cumulative period from November 9, 1999 (inception) to
March 31, 2000 (unaudited) is presented below:
<TABLE>
<CAPTION>
SUMMARIZED BALANCE SHEET DATA
DECEMBER 31, MARCH 31,
1999 2000
----------- -----------
(UNAUDITED)
<S> <C> <C>
Assets:
Cash and other current assets........................ $23,994,826 $34,858,642
Property and equipment............................... -- 1,765,949
Construction in progress............................. 4,085,942 7,255,778
Other Assets......................................... -- 182,390
Deferred financing costs............................. 2,110,642 7,362,835
----------- -----------
Total assets..................................... $30,191,410 $51,425,594
=========== ===========
Liabilities and Equity:
Accounts payable and accrued expenses................ $ 373,575 $ 1,930,389
Due to Lucent Technologies........................... 3,883,419 2,488,463
Due to related parties............................... 813,441 987,077
Accrued interest..................................... 10,521 --
Advances from parent................................. 19,584,045 43,137,837
Senior subordinated debt............................. 5,811,869 5,811,869
----------- -----------
Total liabilities................................ 30,476,870 54,355,635
Equity and Accumulated Deficit....................... (285,460) (2,930,041)
----------- -----------
Total liabilities and equity..................... $30,191,410 $51,425,594
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD FROM CUMULATIVE FOR THE
NOVEMBER 9, 1999 PERIOD FROM
(INCEPTION) THREE MONTHS INCEPTION
TO ENDED (NOVEMBER 9, 1999)
DECEMBER 31, 1999 MARCH 31, 2000 TO MARCH 31, 2000
----------------- -------------- ------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenues....................................... $ -- $ 68,519 $ 68,519
Less:
General and administrative expenses
including non-cash compensation charges...... 257,558 1,025,322 1,282,880
Interest expense (income)...................... 28,902 (35,101) (6,199)
Extraordinary item -- loss on early
extinguishment of debt....................... -- 1,722,879 1,722,879
----------- ----------- -----------
Net Loss....................................... $ 286,460 $ 2,644,581 $ 2,931,041
=========== =========== ===========
</TABLE>
The Company had previously secured commitments from affiliates of each
of the Initial Purchasers to provide up to $125.0 million of senior subordinated
increasing rate notes. The commitment expired on April 11, 2000 upon the closing
of the Senior Subordinated Discount Note offering. A commitment fee of $625,000
was paid to the Initial Purchasers, of which $531,250 was paid to an affiliate
of Donaldson, Lufkin and Jenrette.
F-24
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. SUBSEQUENT EVENTS
In February 2000, the stockholders of the company approved the Board of
Directors decision to change the company's name to UbiquiTel Inc.
The Company has filed a registration statement for equity financing
through an initial public offering. Donaldson, Lufkin & Jenrette Securities
Corporation is the lead underwriter of this offering and will receive a
customary underwriting fee. The Company plans to utilize the proceeds from the
aforementioned offerings to fund the build-out of its expanded network,
operating losses, working capital and other general corporate purposes. The
Company may have a contingent liability arising out of a possible violation of
Section 5 of the Securities Act of 1933 in connection with the existence of
three hyperlinks on the website to an independent unaffiliated website that
included specific articles regarding the Company and the initial public
offering. The Company does not believe that the existence of this hyperlink
caused a violation of Section 5, and if any such claim were asserted, the
Company would contest the matter, vigorously. Accordingly, the Company does not
believe that its exposure, if any, resulting from the existence of this
hyperlink would be material to its results of operations or financial condition.
F-25
<PAGE>
UBIQUITEL INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. SUBSEQUENT EVENTS (CONTINUED)
In January 2000, the Company signed an agreement to purchase from
Sprint PCS the Spokane, Washington market's PCS networks and related assets for
approximately $35 million. The Company closed this transaction on April 15,
2000.
On April 11, 2000, upon the closing of the 14% Senior Subordinated
Discount Notes, the Company issued DLJ Merchant Banking 38,501 additional shares
of preferred stock to maintain a specified percentage stock ownership. Each
share of preferred stock will be converted automatically into two shares of
voting common stock upon the closing of the initial public offering after the
effect of the 2-for-1 stock split.
The Founders Agreement provides that the Founders non-voting common
stock will vest and convert to voting common stock to retain their ownership
interest in the event the Company issues additional shares. As a result of the
terms of the Founders Agreement, in April 2000, an aggregate amount of 136,758
shares of founders non-voting common stock vested and converted to voting common
stock. The Founders Agreement will terminate upon the earlier of the completion
of an initial public offering, the sale to DLJ Merchant Banking of additional
preferred stock for $100.0 million, or the closing of a private or public equity
financing of at least $100.0 million or November 23, 2000.
In April 2000, the board of directors approved a 2-for-1 stock split
effective immediately prior to the initial public offering. All common stock
shares data and equity securities data except for the convertible preferred
stock have been retroactively adjusted to reflect this change.
F-26
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners of Sprint Spectrum L.P.
We have audited the accompanying statements of assets to be sold of the
Spokane District (as described in NOTE 1), which are wholly owned by Sprint
Spectrum L.P. (the Company), as of December 31, 1999 and 1998 and the related
statements of revenues and expenses for each of the three years in the period
ended December 31, 1999. These statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall statements' presentation. We
believe that our audits provide a reasonable basis for our opinion.
As described in NOTE 2, the accompanying statements were prepared for
inclusion in the Registration Statement on Form S-4 of UbiquiTel for purposes of
complying with the rules and regulations of the Securities and Exchange
Commission in lieu of the full financial statements required by Rule 3-05 of
Regulation S-X for the pending transaction between UbiquiTel and the Company.
The statements are not intended to be a complete presentation of the Spokane
District's financial position or results of its operations.
In our opinion, the statements referred to above present fairly, in all
material respects, the assets to be sold of the Spokane District as of December
31, 1999 and 1998, and the related revenues and expenses for each of the three
years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
Ernst & Young LLP
Kansas City, Missouri
February 29, 2000
F-27
<PAGE>
SPOKANE DISTRICT
(WHOLLY OWNED BY SPRINT SPECTRUM L.P.)
STATEMENTS OF ASSETS TO BE SOLD
<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
----------- --------------------------
2000 1999 1998
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Assets:
Property, plant and equipment
Network equipment............................. $29,246,217 $29,038,828 $25,246,441
Other......................................... 235,232 231,661 185,586
Construction work in progress................. 166,960 211,167 349,480
----------- ----------- -----------
Total property, plant and equipment............. 29,648,409 29,481,656 25,781,507
Less: accumulated depreciation................ 10,716,627 9,785,334 6,314,486
----------- ----------- -----------
Net property, plant and equipment............... 18,931,782 19,696,322 19,467,021
Prepaid lease expense............................... 92,776 87,416 83,767
----------- ----------- -----------
Total assets to be sold............................. $19,024,558 $19,783,738 $19,550,788
=========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
F-28
<PAGE>
SPOKANE DISTRICT
(WHOLLY OWNED BY SPRINT SPECTRUM L.P.)
STATEMENTS OF REVENUES AND EXPENSES
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31 YEAR ENDED DECEMBER 31
----------------------- -----------------------------------
2000 1999 1999 1998 1997
---------- ---------- ---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Net service revenues.................. $1,413,116 $953,630 $4,761,949 $2,590,169 $ 679,586
Net equipment revenues................ 160,767 182,327 862,978 690,479 566,595
---------- ---------- ---------- ---------- -----------
1,573,883 1,135,597 5,624,927 3,280,648 1,246,181
Expenses:
Cost of services...................... 406,447 258,240 2,349,770 1,724,964 1,372,305
Cost of equipment..................... 372,691 489,257 2,696,646 2,245,459 1,530,300
Selling, general and administrative... 1,213,514 997,380 5,419,104 4,470,494 8,167,807
Depreciation.......................... 931,293 827,503 3,470,848 3,111,511 2,968,406
---------- ---------- ---------- ---------- -----------
2,923,945 2,572,380 13,936,368 11,552,428 14,038,818
---------- ---------- ---------- ---------- -----------
Expenses in excess of net revenues....... $1,350,062 $1,436,423 $8,311,441 $8,271,780 $12,792,637
========== ========== ========== ========== ===========
</TABLE>
SEE ACCOMPANYING NOTES.
F-29
<PAGE>
SPOKANE DISTRICT
(WHOLLY OWNED BY SPRINT SPECTRUM L.P.)
NOTES TO STATEMENTS OF ASSETS TO BE SOLD AND
STATEMENTS OF REVENUES AND EXPENSES YEARS ENDED DECEMBER 31,
1999, 1998 AND 1997
1. ASSET PURCHASE AGREEMENT
On December 28, 1999, Sprint Spectrum L.P. (the Company) and UbiquiTel
Inc. (UbiquiTel) entered into an Asset Purchase Agreement (the Agreement)
whereby the Company will sell to UbiquiTel certain assets and UbiquiTel will
assume certain leases as stipulated in the Agreement. Under the Agreement, the
Company agrees to sell to UbiquiTel the assets related to its wireless mobile
telephone services in the Spokane, Washington district (the Spokane District),
which are wholly owned by the Company. The assets to be sold to UbiquiTel
primarily consist of property, plant and equipment including network assets and
retail stores located in the Spokane District. Not included in the Agreement are
PCS licenses currently owned by the Company or the existing subscriber base and
related accounts receivable balances, the ownership of which will remain with
the Company. UbiquiTel will assume certain operating leases within the Spokane
District; however, no deferred revenue, commission or other similar liabilities
will be assumed. Under the terms of the Agreement, this transaction is expected
to close on or before April 15, 2000.
Following the close of the pending transaction, UbiquiTel will operate
the Spokane District as a Sprint PCS market through a management agreement with
the Company. Under the terms of this agreement, UbiquiTel will sell wireless
mobile telephone services under the Sprint PCS brand name in exchange for a fee.
Also as part of the agreement, the Company will continue to provide network
monitoring, customer service, billing and collection services to UbiquiTel.
F-30
<PAGE>
SPOKANE DISTRICT
(WHOLLY OWNED BY SPRINT SPECTRUM L.P.)
NOTES TO STATEMENTS OF ASSETS TO BE SOLD AND STATEMENTS OF REVENUES AND EXPENSES
(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
2. BASIS OF PRESENTATION
Historically, financial statements have not been prepared for the
Spokane District as it has no separate legal status or existence. The
accompanying statements of assets to be sold and statements of revenues and
expenses of the Spokane District have been prepared for inclusion in the
Registration Statement on Form S-4 of UbiquiTel for purposes of complying with
the rules and regulations of the Securities and Exchange Commission in lieu of
the full financial statements required by Rule 3-05 of Regulation S-X for the
pending transaction between UbiquiTel and the Company. These statements have
been derived from the historical accounting records of the Company and include
revenues and expenses directly attributable to the Spokane District. Certain
operating expenses that are indirectly attributable to the Spokane District have
been allocated using the methods set forth below. As a result, the statements
may not be indicative of the financial position or operating results of the
Spokane District had it been operated as a separate, stand-alone company.
The unaudited interim financial information presented herein has been
prepared according to accounting principles generally accepted in the United
States. In management's opinion, the information presented herein reflects all
adjustments (consisting only of normal recurring accruals) necessary to present
fairly the interim financial position and results of operations of the Spokane
District.
PROPERTY, PLANT & EQUIPMENT
The property, plant and equipment balances included in the accompanying
statements of assets to be sold are assets specifically identified within the
Spokane District and that are to be purchased by UbiquiTel pursuant to the
Agreement.
REVENUES
The service revenues included in the statements of revenues and
expenses are those specifically related to subscribers of the Spokane District.
Allocations have been made of certain unbilled revenue and bad debt accruals
that are recorded by the Company at levels above the district level. These
allocations are based on average subscribers of the Spokane District relative to
total subscribers of the Company.
The equipment revenues included in the statements of revenues and
expenses are those specifically related to equipment sales occurring in the
Company's retail stores located in the Spokane District. Also included are
revenues from equipment sales to third-party retailers located within the
Spokane District.
COST OF SERVICES AND EQUIPMENT
The cost of services expense in the statements of revenues and expenses
includes those expenses directly attributable to the Spokane District. In
addition, allocations have been made of cost of services incurred at levels
above the district level. These allocations are based on the Spokane District's
directly attributable cost of services relative to the total Company directly
attributable cost of services.
The cost of equipment included in the statements of revenues and
expenses are those specifically related to equipment sold in the Company's
retail stores located in the Spokane District. Also included is the cost of
equipment from equipment sales to third-party retailers located within the
Spokane District.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Direct selling, general and administrative expenses are those costs
that were incurred as a result of providing wireless mobile telephone services
in the Spokane District and which will no longer be incurred by the Company
subsequent to consummation of the pending transaction with UbiquiTel.
F-31
<PAGE>
SPOKANE DISTRICT
(WHOLLY OWNED BY SPRINT SPECTRUM L.P.)
NOTES TO STATEMENTS OF ASSETS TO BE SOLD AND STATEMENTS OF REVENUES AND EXPENSES
(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
2. BASIS OF PRESENTATION (CONTINUED)
Selling, general and administrative expenses of the Company that are
indirectly associated with the Spokane District's operations were allocated to
the Spokane District's statements of revenues and expenses based on reasonable
allocation methods as discussed below. Management believes these allocation
methodologies are reasonable and represent the most appropriate methods of
determining the expenses of the Spokane District.
Sales and marketing expenses included in allocated selling, general and
administrative expenses represent costs of the Company that have been identified
as indirectly attributable to the Spokane District. Such allocations have been
based on the amount of covered population in the Spokane District relative to
the Company's total covered population.
Included in allocated selling, general and administrative expenses are
costs related to the provisioning of customer care activities. These expenses
represent customer care costs of the Company that have been identified as
indirectly attributable to the Spokane District. Such allocations have been
based on the number of subscribers of the Spokane District relative to the
Company's total subscribers.
DEPRECIATION EXPENSE
The depreciation expense included in the statements of revenues and
expenses is specifically related to the assets identified with the Spokane
District which will be purchased by UbiquiTel pursuant to the Agreement.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
The Company recognizes operating revenues as services are rendered or
as equipment is delivered to customers. Operating revenues are recorded net of
an estimate for uncollectible accounts.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. The cost of property,
plant and equipment is generally depreciated on a straight-line basis over
estimated economic useful lives ranging from seven to 20 years. Repair and
maintenance costs are expensed as incurred.
ADVERTISING
Advertising costs are expensed when the advertisement occurs. Total
advertising expense amounted to $1,034,861 in 1999, $813,563 in 1998 and
$785,492 in 1997.
USE OF ESTIMATES
The statements of assets to be sold and statements of revenues and
expenses are prepared in conformity with accounting principles generally
accepted in the United States. These principles require management to make
estimates and assumptions that affect the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Also, as discussed in Note 2, the statements of revenues and expenses
include allocations and estimates that are not necessarily indicative of the
costs and expenses that would have resulted if the Spokane District had been
operated as a separate stand-alone company.
F-32
<PAGE>
SPOKANE DISTRICT
(WHOLLY OWNED BY SPRINT SPECTRUM L.P.)
NOTES TO STATEMENTS OF ASSETS TO BE SOLD AND STATEMENTS OF REVENUES AND EXPENSES
(CONTINUED)
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
4. OPERATING LEASES
The Spokane District's minimum rental commitments at year-end 1999 for
all non-cancelable operating leases, consisting mainly of leases for cell and
switch sites, are as follows:
<TABLE>
<S> <C>
2000.......................................... $ 262,186
2001.......................................... 136,436
2002.......................................... 126,925
2003.......................................... 129,511
2004.......................................... 133,581
Thereafter.................................... 1,816,302
</TABLE>
The table excludes renewal options related to certain cell and switch
site leases. These renewal options generally have five-year terms and may be
exercised from time to time. The Spokane District's gross rental expense totaled
$592,539 in 1999, $588,657 in 1998 and $530,512 in 1997.
5. CASH FLOWS
The Spokane District's primary requirements for cash have been to fund
operating losses and capital expenditures associated with the network build-out.
Capital expenditures of the Spokane District were $166,753 and $785,463
(unaudited) for the three months ended March 31, 2000 and 1999, and $5,050,843,
$3,368,870 and $19,604,854 for the years ended December 31, 1999, 1998 and 1997,
respectively.
6. IMPACT OF YEAR 2000 (UNAUDITED)
During 1999, the Company completed its remediation and testing of
systems related to its Year 2000 readiness. As a result of those efforts, the
Company experienced no significant disruptions in the mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company is not
aware of any material problems resulting from Year 2000 issues, either with its
equipment, its internal systems, or the equipment and services of third parties.
The Company and UbiquiTel will continue to monitor the mission critical computer
applications of the Spokane District and those of the Spokane District's
suppliers and vendors throughout the year 2000 to ensure that any latent Year
2000 matters that may arise are addressed promptly.
7. SUBSEQUENT EVENT (UNAUDITED)
The transaction described in Note 1, whereby the Company was to sell to
UbiquiTel certain assets and UbiquiTel was to assume certain leases as
stipulated in the Agreement, closed on April 15, 2000.
F-33
<PAGE>
===============================================================================
[UBIQUITEL LOGO]
UBIQUITEL OPERATING COMPANY
OFFER TO EXCHANGE
$300,000,000
ALL OUTSTANDING
14.0% SENIOR SUBORDINATED DISCOUNT NOTES
DUE 2010
FOR
REGISTERED
14.0% SENIOR SUBORDINATED DISCOUNT NOTES
DUE 2010
======================================
PROSPECTUS
======================================
____________, 2000
===============================================================================
We have not authorized any dealer, sales representative or any other
person to give any information or to make any representations not contained in
this prospectus or the accompanying letter of transmittal. This prospectus and
the accompanying letter of transmittal do not offer to sell or buy any
securities in any jurisdiction where it is unlawful.
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Certificate of Incorporation of UbiquiTel Operating Company
("UbiquiTel") provides that the liability of the directors and officers of
UbiquiTel to UbiquiTel or any of its stockholders for monetary damages arising
from a breach of their fiduciary duty as directors and officers shall be
limited to the fullest extent permitted by the General Corporation Law of
Delaware. This limitation does not apply with respect to any action in which a
director or officer would be liable under Section 174 of the General
Corporation Law of Delaware, nor does it apply with respect to any liability
in which a director or officer:
- breached his duty of loyalty to UbiquiTel or its stockholders;
- did not act in good faith or, in failing to act, did not act
in good faith;
- acted in a manner involving intentional misconduct or a
knowing violation of law or, in failing to act, shall have
acted in a manner involving intentional misconduct or a
knowing violation of law; or
- derived an improper personal benefit.
UbiquiTel's bylaws provide that UbiquiTel may indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
UbiquiTel) by reason of the fact that he is or was a director, officer,
employee, or agent of UbiquiTel, or is or was serving at the request of
UbiquiTel as a director, officer, employee or agent of another corporation,
partnership , joint venture, trust or other enterprise, against expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with such action, suit, or
proceeding. The power to indemnify applies only if such person acted in good
faith and in a manner he reasonably believed to be in the best interest, or
not opposed to the best interest, of UbiquiTel and with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.
The power to indemnify applies to actions brought by or in the right
of UbiquiTel as well, but only to the extent of defense and settlement
expenses and not to any satisfaction of a judgment or settlement of the claim
itself and with the further limitation that in such actions no indemnification
shall be made in respect of any claim, issue or matter as to which such person
has been adjudged to be liable to UbiquiTel unless the court, in its
discretion, believes that in light of all the circumstances indemnification
should apply. To the extent that any present or former director of UbiquiTel
has been successful on the merits or otherwise in defense of any action, suit
or proceeding referred to above, or in defense of any claim, issue or matter
therein, he shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
UbiquiTel has purchased directors' and officers' liability insurance
covering its directors and officers in amounts customary for similarly
situated companies.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
--------- -------------------------------------------------------------------
<S> <C>
*** 1.1 Purchase Agreement dated April 4, 2000 between UbiquiTel Inc.,
UbiquiTel Operating Company and Donalson, Lufkin & Jenrette
Securities Corporation, Paribas Corporation and PNC Capital
Markets, Inc. (10.19)
** 3.1 Certificate of Incorporation of UbiquiTel Operating Company.
** 3.2 Bylaws of UbiquiTel Operating Company.
*** 4.1 Indenture dated as of April 11, 2000 between UbiquiTel
Operating Company, UbiquiTel Inc. and American Stock Transfer
& Trust Company. (10.20)
*** 4.2 Registration Rights Agreement made as of April 11, 2000 by and
among UbiquiTel Operating Company, UbiquiTel Inc. and
Donalson, Lufkin & Jenrette Securities Corporation, Paribas
Corporation and PNC Capital Markets, Inc. (10.22)
*** 4.3 Form of Registered Note (included in Exhibit 4.1).
*** 4.4 Note Guarantee of UbiquiTel Inc. (10.28)
*** 4.5 Credit Agreement dated as of December 29, 1999 by and between
UbiquiTel Holdings, Inc., UbiquiTel LLC, the financial
institutions party thereto from time to time and Paribas, as
agent, for a $25,000,000 credit facility. (10.10)
*** 4.6 Credit Agreement dated as of March 31, 2000 by and between
UbiquiTel Inc., UbiquiTel Operating Company, the financial
institutions party thereto from time to time and Paribas, as
agent, for a $250,000,000 credit facility. (10.18)
** 5.1 Opinion of Greenberg Traurig, P.A.
+***10.1 Sprint PCS Management Agreement, as amended, dated as of
October 15, 1998 by and between Sprint Spectrum, LP,
WirelessCo, LP and UbiquiTel, LLC. (10.1)
+***10.2 Sprint PCS Services Agreement dated as of October 15, 1998 by
and between Sprint Spectrum, LP and UbiquiTel, LLC. (10.2)
***10.3 Sprint Trademark and Service Mark License Agreement dated as
of October 15, 1998 by and between Sprint Communications
Company, LP and UbiquiTel, LLC. (10.3)
***10.4 Sprint Spectrum Trademark and Service Mark License Agreement
dated as of October 15, 1998 by and between Sprint Spectrum,
LP and UbiquiTel, LLC. (10.4)
+***10.5 Asset Purchase Agreement dated as of December 28, 1999, as
amended, by and between Sprint Spectrum, LP, Sprint Spectrum
Equipment Company, LP, Sprint Spectrum Realty Company, LP, Cox
Communications PCS, LP, Cox PCS Leasing Co., LP, Cox PCS
Assets, LLC and UbiquiTel Holdings, Inc. (10.5)
***10.6 Registration Rights Agreement made as of November 23, 1999 by
and among UbiquiTel Holdings, Inc. and the shareholder
signatories thereto. (10.6)
***10.7 Amended and Restated Registration Rights Agreement made as of
February 16, 2000 by and among UbiquiTel Holdings, Inc. and
the shareholder signatories thereto. (10.7)
***10.8 Shareholders' Agreement dated as of February 16, 2000 by and
among UbiquiTel Holdings, Inc., DLJ Merchant Banking Partners
II, L.P. and the several shareholders named therein. (10.8)
***10.9 Stockholders' Voting Agreement dated November 23, 1999 by and
among UbiquiTel Holdings, Inc. and the shareholder signatories
thereto. (10.9)
***10.10 Amended and Restated Consent and Agreement dated as of April
5, 2000 by and between Sprint Spectrum, LP, Sprint
Communications Company, LP, WirelessCo, LP, Cox Communications
PCS, LP, Cox PCS License, LLC and Paribas. (10.11)
II-2
<PAGE>
***10.11 Warrant Agreement dated as of December 28, 1999 by and between
UbiquiTel Holdings, Inc. and Paribas North America, Inc.
(10.12)
***10.12 Series A Preferred Stock Purchase Agreement dated as of
November 23, 1999 by and between UbiquiTel Holdings, Inc., The
Walter Group, Donald A. Harris, Paul F. Judge, James Parsons,
U.S. Bancorp and the individuals listed on Exhibit A thereto.
(10.13)
***10.13 Purchase Agreement dated as of December 28, 1999 among
UbiquiTel, L.L.C., UbiquiTel Holdings, Inc. and BET
Associates, L.P. relating to $8,000,000 principal amount of
UbiquiTel, L.L.C. 12% Senior Subordinated Notes due 2007 and
Warrants to Purchase 9.75% of the Shares of Common Stock of
UbiquiTel Holding Co. (10.14)
***10.14 Preferred Stock Purchase Agreement dated February 16, 2000
between UbiquiTel Holdings, Inc. and DLJ Merchant Banking
Partners II, L.P. (10.15)
***10.15 Form of 2000 Equity Incentive Plan. (10.16)
***10.16 Employment Agreement dated as of November 29, 1999 by and
between UbiquiTel Holdings, Inc. and Donald A. Harris. (10.17)
***10.17 Warrant Agreement dated as of April 11, 2000 between UbiquiTel
Inc. and American Stock Transfer & Trust Company. (10.21)
***10.18 Warrant Registration rights Agreement made as of April 11,
2000 by and among UbiquiTel Inc. and Donaldson, Lufkin &
Jenrette Securities Corporation, Paribas Corporation and PNC
Capital Markets, Inc. (10.23)
***10.19 Founders Stock Agreement dated as of November 1, 1999 by and
among UbiquiTel Holdings, Inc. and James Parsons, Donald A.
Harris, Paul F. Judge, The Walter Group, Inc. and US Bancorp.
(10.24)
***10.20 Agreement between LCC International, Inc. and UbiquiTel
Holdings, Inc., as amended, dated as of September 24, 1999.
(10.25)
***10.21 Agreement between Lucent Technologies, Inc. and UbiquiTel
Holdings, Inc., dated as of December 21, 1999. (10.26)
***10.22 Master Site Agreement between SpectraSite Communications, Inc.
and UbiquiTel Leasing Company, dated as of May 11, 2000.
(10.27)
***10.23 Master Design and Build Agreement between SpectraSite
Communications, Inc. and UbiquiTel Leasing Company, dated as
of may 23, 2000. (10.30)
*10.24 First Amendment, dated as of June 12, 2000, to Warrant
Agreement dated as of April 11, 2000 between UbiquiTel Inc.
and American Stock Transfer & Trust Company.
*10.25 Warrant Agreement dated as of June 12, 2000 by and between
UbiquiTel Inc. and Donaldson, Lufkin & Jenrette Securities
Corporation.
*10.26 Registration Rights Agreement dated as of June 12, 2000 by and
between UbiquiTel Inc. and Donaldson, Lufkin & Jenrette
Securities Corporation.
**21.1 Subsidiaries of UbiquiTel Operating Company.
**23.1 Consent of Arthur Andersen LLP.
**23.2 Consent of Ernst & Young LLP.
**23.3 Consent of Greenberg Traurig, LLP (contained in legal opinion
filed as Exhibit 5.1).
**24.1 Powers of Attorney (included on signature pages).
*25.1 Statement of Eligibility of Trustee.
*99.1 Form of Letter of Transmittal with respect to Exchange Offer.
II-3
<PAGE>
*99.2 Form of Notice of Guaranteed Delivery.
*99.3 Form of Tender Instruction Letters.
*99.4 Form of Exchange Agent Agreement.
</TABLE>
---------------------
* To be filed by Amendment.
** Filed herewith.
*** Incorporated by reference to the exhibit shown in parentheses and filed
with the Registration Statement on Form S-1 of UbiquiTel Inc.
(No. 333-32236).
+ Confidential treatment has been granted on portions of these documents.
(b) Financial Statement Schedules:
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 22. UNDERTAKINGS
1. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the 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, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
2. The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
The registrant undertakes that every prospectus (i) that is filed
pursuant to the immediately preceding paragraph, or (ii) that purports to meet
the requirements of section 10(a)(3) of the Securities Act and is used in
connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act, 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. The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to items 4, 10(b), 11 or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
4. The undersigned hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, UbiquiTel
Operating Company has duly caused this Registration Statement to be signed on
its behalf by the undersigned, hereunto duly authorized, in the City of Bala
Cynwyd, State of Pennsylvania, on the 23rd day of June, 2000.
UBIQUITEL OPERATING COMPANY
By: /s/ Donald A. Harris
--------------------------------------
Donald A. Harris
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Donald A. Harris and Paul F.
Judge his true and lawful attorneys-in-fact, each acting alone, with full
powers of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments, including any
post-effective amendments, to this Registration Statement, and to file the
same, with exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all
that said attorneys-in-fact or their substitutes, each acting alone, 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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Donald A. Harris Chairman of the Board, President June 23, 2000
--------------------------------------------------- and Chief Executive Officer
Donald A. Harris (Principal Executive Officer)
/s/ Paul F. Judge Senior Vice President June 23, 2000
--------------------------------------------------- Corporate Development and
Paul F. Judge Finance (Principal Financial
Officer and Accounting Officer)
/s/ Peter Lucas Director June 23, 2000
---------------------------------------------------
Peter Lucas
/s/ Robert Berlacher Director June 23, 2000
---------------------------------------------------
Robert Berlacher
/s/ Eve M. Trkla Director June 23, 2000
---------------------------------------------------
Eve M. Trkla
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Director June 23, 2000
---------------------------------------------------
Joseph N. Walter
</TABLE>
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, UbiquiTel
Inc. has duly caused this Registration Statement to be signed on its behalf by
the undersigned, hereunto duly authorized, in the City of Bala Cynwyd, State
of Pennsylvania, on the 23rd day of June, 2000.
UBIQUITEL INC.
By: /s/ Donald A. Harris
--------------------------------------
Donald A. Harris
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Donald A. Harris and Paul F.
Judge his true and lawful attorneys-in-fact, each acting alone, with full
powers of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments, including any
post-effective amendments, to this Registration Statement, and to file the
same, with exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all
that said attorneys-in-fact or their substitutes, each acting alone, 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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Donald A. Harris Chairman of the Board, President June 23, 2000
--------------------------------------------------- and Chief Executive Officer
Donald A. Harris (Principal Executive Officer)
/s/ Paul F. Judge Senior Vice President June 23, 2000
--------------------------------------------------- Corporate Development and
Paul F. Judge Finance (Principal Financial
Officer and Accounting Officer)
/s/ Peter Lucas Director June 23, 2000
---------------------------------------------------
Peter Lucas
/s/ Robert Berlacher Director June 23, 2000
---------------------------------------------------
Robert Berlacher
/s/ Eve M. Trkla Director June 23, 2000
---------------------------------------------------
Eve M. Trkla
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Director June 23, 2000
---------------------------------------------------
Joseph N. Walter
</TABLE>
II-8
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
----------- ----------------------------------------------------------------
<S> <C>
3.1 Certificate of Incorporation of UbiquiTel Operating Company.
3.2 Bylaws of UbiquiTel Operating Company.
5.1 Opinion of Greenberg Traurig, P.A.
21.1 Subsidiaries of UbiquiTel Operating Company.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Ernst & Young LLP.
</TABLE>
